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 811-10263 ----------- AB Funds Trust ---------------------------------------------------------------- (Exact name of registrant as specified in charter) 2401 Cedar Springs Road Dallas, TX 75201-1407 ---------------------------------------------------------------- (Address of principal executive offices) (Zip code) Rodney R. Miller, Esq. Annuity Board of the Southern Baptist Convention 2401 Cedar Springs Road Dallas, TX 75201-1407 ---------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 214-720-1171 ------------ Date of fiscal year end: December 31, 2004 ----------------- Date of reporting period: June 30, 2004 ------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. [AB FUNDS LOGO] [AB FUNDS TRUST LOGO] Semi-Annual Report JUNE 30, 2004 (UNAUDITED) BLENDED FUNDS: - FLEXIBLE INCOME FUND - GROWTH & INCOME FUND - CAPITAL OPPORTUNITIES FUND - GLOBAL EQUITY FUND - FLEXIBLE INCOME FUND I - GROWTH & INCOME FUND I - CAPITAL OPPORTUNITIES FUND I - GLOBAL EQUITY FUND I SELECT FUNDS: - MONEY MARKET FUND - LOW-DURATION BOND FUND - MEDIUM-DURATION BOND FUND - EXTENDED-DURATION BOND FUND - EQUITY INDEX FUND - VALUE EQUITY FUND - GROWTH EQUITY FUND - SMALL CAP EQUITY FUND - INTERNATIONAL EQUITY FUND AB Funds Trust Annuity Board of the Southern Baptist Convention ("Annuity Board") SBC Financial Services, Inc. ("SBC Financial") SBC Trust Services, Inc. ("SBC Trust") PFPC Distributors, Inc. ("PFPC") NOTICE CONCERNING YOUR PRIVACY RIGHTS This notice will provide you with information concerning our policies with respect to nonpublic personal information that we collect about you in connection with the following financial products and services provided and/or serviced by the entities listed above: individual retirement accounts ("IRAs") and/or personal mutual fund accounts. The confidentiality of your information is important to us as we recognize that you depend on us to keep your information confidential, as described in this notice. We collect nonpublic personal information about you with regard to your IRA and/or personal mutual fund accounts from the following sources: - Information we receive from you on applications or other forms; - Information about your transactions with us, our affiliates or others (including our third-party service providers); - Information we receive from others such as service providers, broker-dealers and your personal agents or representatives; and - Information you and others provide to us in correspondence sent to us, whether written, electronic or by telephone. We may disclose such nonpublic personal financial information about you to one or more of our affiliates. An affiliate of an organization means any entity that controls, is controlled by, or is under common control with that organization. For example, the Annuity Board, SBC Financial and SBC Trust are affiliates of one another. AB Funds Trust, Annuity Board, SBC Financial, SBC Trust and PFPC do not sell your personal information to nonaffiliated third parties. We may also disclose any of the personal information that we collect about you to nonaffiliated third parties as permitted by law. For example, we may provide your information to nonaffiliated companies that provide account services or that perform marketing services on our behalf and to other financial institutions with whom we have joint marketing agreements. We restrict access to nonpublic personal information about you to those of our employees who need to know that information in order for us to provide and/or service products or services to you. We also maintain physical, electronic, and procedural safeguards to guard your personal information. These procedures will continue to remain in effect after you cease to receive financial products and services from us. If you have any questions concerning our customer information policy, please contact a customer service representative at 1-800-262-0511. TABLE OF CONTENTS <Table> Letter from the President 2 From the Chief Investment Officer 4 Blended Funds: Flexible Income 5 Growth & Income 7 Capital Opportunities 9 Global Equity 11 Financial Statements 14 Flexible Income I 22 Growth & Income I 24 Capital Opportunities I 26 Global Equity I 28 Financial Statements 30 Select Funds: Money Market 36 Low-Duration Bond 40 Medium-Duration Bond 48 Extended-Duration Bond 64 Equity Index 69 Value Equity 76 Growth Equity 86 Small Cap Equity 89 International Equity 109 Financial Statements 118 Notes to Financial Statements 144 Fund Management 163 Proxy Voting 164 </Table> This report has been prepared for shareholders of AB Funds Trust. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current prospectus, which contains more complete information about the Funds. Investors are reminded to read the prospectus carefully before investing. 1 LETTER FROM THE PRESIDENT August 2004 [O. S. HAWKINS PHOTO] [JOHN JONES PHOTO] Dear Shareholder: We are pleased to bring you the AB Funds Trust shareholder report for the first six months of 2004. During the June meeting of the Southern Baptist Convention, the messengers voted to change the name of the Annuity Board to GuideStone Financial Resources of the Southern Baptist Convention and to expand its markets to include evangelical churches and ministry orgranizations. While the name change requires two successive annual votes, the recommendation to expand the Board's markets begins immediately. In order to maximize the efforts to provide an even stronger base for clients and shareholders, Dr. O. S. Hawkins will focus more of his time in strengthening relationships with existing clients and building relationships to reach other evangelistic churches and ministry organizations. John R. Jones, who serves as Senior Vice President for AB Funds Trust and Executive Vice President and Chief Operating Officer for the Annuity Board, will assume the responsibilities of President of AB Funds Trust. Mr. Jones is a Chartered Financial Analyst and provided leadership to the Annuity Board's investment program prior to assuming his present duties. This is a very exciting time for AB Funds Trust from an investment performance and expanded market opportunity standpoint. The financial markets continued an upward progression during the first half of 2004, albeit at a slower pace than the previous year. The AB Funds Trust funds have been well positioned to take advantage of the investment opportunities within the global markets. The Funds have performed well in relation to their respective benchmarks as our disciplined and discriminating approach to investment management continues to reward our investors. We continue to be proponents of investors' establishing a disciplined investment strategy suited to specific objectives, time horizon and risk tolerance. Staying committed to a consistent, well thought out plan will provide you with the best opportunity to meet your long term financial goals. The mutual fund industry continues to be faced with an increasing level of regulatory scrutiny. This review by regulators, legislators and the fund industry itself has resulted in some positive steps designed to prevent individual investors from causing harm to shareholders' investments through activities such as late day trading, market timing, and excessive trading. This oversight, combined with previously enacted compliance rules and legislation such as Sarbanes-Oxley, will provide added protection to investors in mutual funds. Despite the current scrutiny of the mutual funds industry, we remain committed to our belief that mutual funds are one of the best ways for investors to reach their long term financial goals. We firmly believe that every decision we make and every action we take must be in the best interest of our shareholders in order to maintain your trust and confidence. Thank you for choosing to invest in AB Funds Trust. Not Part of the Semi-Annual Report 2 Sincerely, /s/ O. S. Hawkins /s/ John Jones O. S. Hawkins and John R. Jones Past performance is no guarantee of future results. Share prices will fluctuate and there may be a gain or loss when shares are redeemed. Not Part of the Semi-Annual Report 3 FROM THE CHIEF INVESTMENT OFFICER [RODRIC E. CUMMINS PHOTO] Rodric E. Cummins, CFA The 2nd quarter provided mixed results for investors despite continued strong economic and corporate earnings growth. Compared to the robust gains in financial assets over the previous year, investors moved cautiously during the quarter as evidence is mounting that the economic cycle is maturing towards a later stage phase of development. U.S. stock markets advanced modestly during the quarter, resulting in solid returns for equity investors thus far in 2004. The S&P 500 Index returned 1.72% for the quarter, bringing the year-to-date return to 3.44%. In contrast to 2003, large capitalization, high-quality growth stocks provided among the best returns in the equity markets, as the Russell 1000 Growth Index posted a return of 1.94% during the quarter. International stocks (measured by the MSCI ACWI Ex-U.S. Index) posted a return of -.90% for the quarter, reflecting the negative impact on returns from previously strong emerging market countries. International stocks returned 3.82% year-to-date. During the second quarter, bond market investors did not fare as well as stock investors as interest rates moved higher across all maturities. The highly anticipated move by the Federal Reserve to begin what is expected to be the first of many interest rate hikes happened as expected on June 30. This was the first increase in the federal funds rate in four years. The Lehman Brothers Aggregate Bond Index posted a return of -2.44% for the quarter, resulting in a return of .16% year-to-date. OUTLOOK The U.S. economy is being fueled by massive quantities of monetary and fiscal stimulus which were injected into the financial system over the past several years. The economy responded in 2003 with an initial surge in growth, with normal moderation over the past two quarters. Likewise, corporate earnings, and thus stock prices, have surged in response to economic activity and strong productivity gains. (This has been the primary driver of stock prices over the past 15 months, with the S&P 500 Index up 37.44% since March 2003.) In more recent periods, strong earnings growth driven by cost-cutting and productivity gains from early stages of economic recovery have given way to robust improvements in sales growth driven by top-line demand. This is a positive indication that the fundamental underpinning for continued growth seems to be solidly in place, absent further exogenous shocks that may lead to increased geo-political tensions or economic weakness. History indicates that post-recessionary growth can be very strong, as we have witnessed thus far in this cycle. Such economic growth normally goes unabated until indications of inflationary pressures begin to surface, at which time the Federal Reserve begins a process of monetary tightening in an attempt to balance inflationary pressures with sustainable levels of economic growth. Many investment professionals believe we are beginning to enter into that very stage of the economic cycle. As a result, while conditions for economic growth remain favorable, we may continue to see equity investors move with caution for fear that the tail-wind of economic stimulus enjoyed over recent periods is turning into a head-wind of higher interest rates. Such an environment may lead to more moderate stocks returns in the coming periods compared to the past 12 months. Bonds markets have been under pressure for the past 12 months in anticipation of higher interest rates. Current bond prices already reflect a strong measure of future interest rate increases. Investors in fixed-income securities must continue to balance the attractiveness of relatively high yields from longer term fixed income securities with the continued threat of rising inflationary pressures, improving economic growth and a monetary policy designed to strike harmony between the two. Not Part of the Semi-Annual Report 4 FLEXIBLE INCOME FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 6.05% 5.81% 5.84% Since Inception (8/27/01 -- 6/30/04) 3.57% 3.35% 3.63% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Aug 27 2001 10000 10000 Aug 2001 9940 9926 Sep 2001 9789 9818 Oct 2001 9947 9948 Nov 2001 10068 10105 Dec 2001 10079 10142 Jan 2002 10072 10107 Feb 2002 10079 10109 Mar 2002 10133 10175 Apr 2002 10133 10162 May 2002 10156 10177 Jun 2002 10033 10075 Jul 2002 9842 9956 Aug 2002 9911 9990 Sep 2002 9719 9789 Oct 2002 9880 9986 Nov 2002 10018 10107 Dec 2002 9968 10050 Jan 2003 9920 9981 Feb 2003 9920 9968 Mar 2003 9944 9990 Apr 2003 10153 10216 May 2003 10362 10401 Jun 2003 10419 10456 Jul 2003 10410 10476 Aug 2003 10491 10544 Sep 2003 10563 10611 Oct 2003 10692 10745 Nov 2003 10724 10783 Dec 2003 10898 10973 Jan 2004 10973 11044 Feb 2004 11066 11128 Mar 2004 11082 11133 Apr 2004 10957 10988 May 2004 10982 11012 Jun 2004 11049 11067 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Index ex-U.S. and the Merrill Lynch 1-3 Year Treasury Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Merrill Lynch 1-3 Year Treasury Index is composed of all U.S. Treasury Notes and Bonds with maturities greater than or equal to one year and less than three years. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 5 FLEXIBLE INCOME FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ---------- ------------ AFFILIATED MUTUAL FUNDS -- 99.0% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 224,395 $ 3,498,322 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 1,492,782 22,899,273 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 1,362,373 18,269,422 AB Funds Trust -- Low-Duration Bond Fund (Retirement Class)(inf) 15,897,633 205,874,352 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 2,935,785 2,935,785 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 228,930 3,596,484 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 1,445,932 23,236,122 ------------ TOTAL AFFILIATED MUTUAL FUNDS (Cost $233,869,400) 280,309,760 ------------ </Table> <Table> <Caption> PAR ---------- U.S. TREASURY OBLIGATIONS -- 1.0% U.S. Treasury Bill 0.95%, 07/22/04++++ $ 90,000 89,954 U.S. Treasury Note 2.50%, 05/31/06 2,860,000 2,851,289 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $2,934,866) 2,941,243 ------------ TOTAL INVESTMENTS -- 100.0% (Cost $236,804,266) 283,251,003 LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% (99,102) ------------ NET ASSETS -- 100.0% $283,151,901 ============ </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 6 GROWTH & INCOME FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 11.96% 11.57% 11.43% Since Inception (8/27/01 -- 6/30/04) 4.53% 4.27% 4.59% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Aug 27 2001 10000 10000 Aug 2001 9854 9843 Sep 2001 9410 9443 Oct 2001 9643 9657 Nov 2001 9920 9923 Dec 2001 9953 9960 Jan 2002 9901 9899 Feb 2002 9901 9881 Mar 2002 10049 10028 Apr 2002 9953 9938 May 2002 9960 9951 Jun 2002 9664 9673 Jul 2002 9234 9324 Aug 2002 9345 9419 Sep 2002 8916 8999 Oct 2002 9160 9306 Nov 2002 9442 9571 Dec 2002 9319 9430 Jan 2003 9216 9305 Feb 2003 9201 9288 Mar 2003 9216 9296 Apr 2003 9642 9731 May 2003 10044 10118 Jun 2003 10131 10195 Jul 2003 10092 10145 Aug 2003 10265 10301 Sep 2003 10375 10433 Oct 2003 10651 10706 Nov 2003 10738 10803 Dec 2003 11070 11148 Jan 2004 11218 11302 Feb 2004 11359 11457 Mar 2004 11384 11458 Apr 2004 11136 11174 May 2004 11185 11215 Jun 2004 11342 11360 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Index ex-U.S. and the Lehman Brothers Aggregate Bond Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchased by foreigners. The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 7 GROWTH & INCOME FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ----------- -------------- AFFILIATED MUTUAL FUNDS -- 99.1% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 1,718,130 $ 26,785,641 AB Funds Trust -- Extended- Duration Bond Fund (Retirement Class)(inf) 8,329,093 119,272,617 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 12,223,819 187,513,382 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 12,355,221 165,683,515 AB Funds Trust -- Low- Duration Bond Fund (Retirement Class)(inf) 13,128,201 170,010,207 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 15,205,691 15,205,691 AB Funds Trust -- Medium- Duration Bond Fund (Retirement Class)(inf) 19,837,221 268,199,226 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 1,970,017 30,948,962 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 11,967,971 192,325,296 -------------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $998,997,363) 1,175,944,537 -------------- </Table> <Table> <Caption> PAR ----------- U.S. TREASURY OBLIGATIONS -- 0.9% U.S. Treasury Bill 0.95%, 07/22/04++++ $ 760,000 759,612 U.S. Treasury Bond 6.50%, 02/15/10 8,695,000 9,800,222 -------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $10,580,765) 10,559,834 -------------- TOTAL INVESTMENTS -- 100.0% (Cost $1,009,578,128) 1,186,504,371 OTHER ASSETS LESS LIABILITIES -- 0.0% 128,234 -------------- NET ASSETS -- 100.0% $1,186,632,605 ============== </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 8 CAPITAL OPPORTUNITIES FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 17.61% 17.08% 17.25% Since Inception (8/27/01 -- 6/30/04) 3.65% 3.32% 3.70% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Aug 27 2001 10000 10000 Aug 2001 9759 9736 Sep 2001 9081 9087 Oct 2001 9314 9301 Nov 2001 9759 9751 Dec 2001 9832 9836 Jan 2002 9714 9707 Feb 2002 9663 9632 Mar 2002 9972 9927 Apr 2002 9751 9695 May 2002 9722 9671 Jun 2002 9288 9222 Jul 2002 8655 8668 Aug 2002 8722 8728 Sep 2002 8067 8073 Oct 2002 8435 8506 Nov 2002 8802 8871 Dec 2002 8530 8582 Jan 2003 8362 8409 Feb 2003 8278 8328 Mar 2003 8300 8343 Apr 2003 8820 8893 May 2003 9293 9341 Jun 2003 9415 9455 Jul 2003 9515 9545 Aug 2003 9721 9733 Sep 2003 9736 9790 Oct 2003 10164 10219 Nov 2003 10255 10346 Dec 2003 10682 10787 Jan 2004 10846 10968 Feb 2004 11003 11133 Mar 2004 11003 11092 Apr 2004 10783 10824 May 2004 10870 10906 Jun 2004 11074 11087 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Index ex-U.S. and the Lehman Brothers Aggregate Bond Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 9 CAPITAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ---------- ------------ AFFILIATED MUTUAL FUNDS -- 99.5% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 2,212,490 $ 34,492,711 AB Funds Trust -- Extended-Duration Bond Fund (Retirement Class)(inf) 3,352,240 48,004,075 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 14,735,266 226,038,979 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 14,005,316 187,811,285 AB Funds Trust -- Low-Duration Bond Fund (Retirement Class)(inf) 5,278,558 68,357,324 AB Funds Trust -- Medium-Duration Bond Fund (Retirement Class)(inf) 7,667,907 103,670,100 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 15,145,303 15,145,303 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 2,405,461 37,789,789 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 14,267,165 229,273,337 ------------ TOTAL AFFILIATED MUTUAL FUNDS (Cost $815,533,076) 950,582,903 ------------ <Caption> PAR ---------- U.S. TREASURY OBLIGATIONS -- 0.5% U.S. Treasury Bill 0.95%, 07/22/04++++ $ 855,000 854,564 U.S. Treasury Bond 6.50%, 02/15/10 3,270,000 3,685,649 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $4,559,089) 4,540,213 ------------ TOTAL INVESTMENTS -- 100.0% (Cost $820,092,165) 955,123,116 OTHER ASSETS LESS LIABILITIES -- 0.0% 41,623 ------------ NET ASSETS -- 100.0% $955,164,739 ============ </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 10 GLOBAL EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 23.54% 23.22% 23.29% Since Inception (8/27/01 -- 6/30/04) 2.51% 2.34% 2.59% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Aug 27 2001 10000 10000 Aug 2001 9654 9629 Sep 2001 8747 8736 Oct 2001 8968 8950 Nov 2001 9587 9569 Dec 2001 9704 9701 Jan 2002 9527 9505 Feb 2002 9424 9376 Mar 2002 9896 9811 Apr 2002 9542 9440 May 2002 9475 9381 Jun 2002 8899 8773 Jul 2002 8080 8036 Aug 2002 8109 8064 Sep 2002 7252 7214 Oct 2002 7732 7742 Nov 2002 8161 8186 Dec 2002 7760 7772 Jan 2003 7543 7561 Feb 2003 7394 7429 Mar 2003 7424 7451 Apr 2003 8021 8085 May 2003 8536 8578 Jun 2003 8685 8723 Jul 2003 8909 8930 Aug 2003 9140 9145 Sep 2003 9073 9134 Oct 2003 9632 9696 Nov 2003 9729 9849 Dec 2003 10241 10375 Jan 2004 10422 10578 Feb 2004 10587 10752 Mar 2004 10557 10672 Apr 2004 10362 10421 May 2004 10489 10541 Jun 2004 10730 10754 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index and the Morgan Stanley Capital International All Country World Index ex-U.S. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 11 GLOBAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE ------------- ----------- ------------ AFFILIATED MUTUAL FUNDS -- 99.9% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 2,578,864 $ 40,204,484 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 17,670,743 271,069,205 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 16,447,651 220,563,003 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 15,686,222 15,686,222 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 3,028,696 47,580,814 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 17,058,678 274,132,955 ------------ TOTAL AFFILIATED MUTUAL FUNDS (Cost $737,840,563) 869,236,683 ------------ </Table> <Table> <Caption> PAR ---------- U.S. TREASURY OBLIGATION -- 0.1% U.S. Treasury Bill 0.95%, 07/22/04++++ (Cost $1,294,282) $1,295,000 1,294,339 ------------ TOTAL INVESTMENTS -- 100.0% (Cost $739,134,845) 870,531,022 OTHER ASSETS LESS LIABILITIES -- 0.0% 46,634 ------------ NET ASSETS -- 100.0% $870,577,656 ============ </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 12 (This page intentionally left blank) 13 STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) <Table> <Caption> FLEXIBLE GROWTH & CAPITAL GLOBAL JUNE 30, 2004 INCOME FUND INCOME FUND OPPORTUNITIES FUND EQUITY FUND ------------- ------------ -------------- ------------------ ------------ ASSETS Investments in securities of affiliated issuers at value $280,309,760 $1,175,944,537 $950,582,903 $869,236,683 Investments in securities of unaffiliated issuers at value 2,941,243 10,559,834 4,540,213 1,294,339 ------------ -------------- ------------ ------------ Total investments (1) 283,251,003 1,186,504,371 955,123,116 870,531,022 Receivables: Dividends 1,500 9,123 8,521 8,412 Interest 6,036 212,698 79,984 -- Fund shares sold 330 20,735 10,154 71,782 Variation margin 3,450 39,100 43,700 52,900 Prepaid expenses and other assets 27,094 28,616 27,094 26,708 ------------ -------------- ------------ ------------ Total Assets 283,289,413 1,186,814,643 955,292,569 870,690,824 ------------ -------------- ------------ ------------ LIABILITIES Payables: Fund shares redeemed 90,908 21,777 1,509 1,144 Accrued expenses: Advisory fee payable 16,711 106,270 82,026 69,914 Distribution fee payable 1,086 1,296 760 943 Other accrued expenses payable 28,762 52,685 43,535 41,041 Other liabilities 45 10 -- 126 ------------ -------------- ------------ ------------ Total Liabilities 137,512 182,038 127,830 113,168 ------------ -------------- ------------ ------------ NET ASSETS $283,151,901 $1,186,632,605 $955,164,739 $870,577,656 ============ ============== ============ ============ NET ASSETS CONSIST OF: Paid-in-capital $231,198,019 $ 988,878,400 $810,155,602 $736,523,487 Undistributed net investment income 3,376,710 6,767,603 3,118,433 1,351,571 Accumulated net realized gain on investments 2,124,678 13,988,262 6,772,281 1,200,197 Net unrealized appreciation (depreciation) on investments and futures transactions 46,452,494 176,998,340 135,118,423 131,502,401 ------------ -------------- ------------ ------------ NET ASSETS $283,151,901 $1,186,632,605 $955,164,739 $870,577,656 ============ ============== ============ ============ NET ASSET VALUE: $0.001 par value, unlimited shares authorized Net assets applicable to the Retail Class $ 22,323,573 $ 26,887,806 $ 15,895,644 $ 19,678,933 ------------ -------------- ------------ ------------ Retail shares outstanding 2,342,934 2,833,448 1,590,715 1,880,173 ------------ -------------- ------------ ------------ Net asset value, offering price and redemption price per Retail share $ 9.53 $ 9.49 $ 9.99 $ 10.47 ============ ============== ============ ============ Net assets applicable to the Retirement Class $260,828,328 $1,159,744,799 $939,269,095 $850,898,723 ------------ -------------- ------------ ------------ Retirement shares outstanding 19,789,468 84,386,352 66,531,887 59,554,885 ------------ -------------- ------------ ------------ Net asset value, offering and redemption price per Retirement share $ 13.18 $ 13.74 $ 14.12 $ 14.29 ============ ============== ============ ============ - --------------- (1) Investments in securities of affiliated issuers at cost $233,869,400 $ 998,997,363 $815,533,076 $737,840,563 Investments in securities of unaffiliated issuers at cost 2,934,866 10,580,765 4,559,089 1,294,282 ------------ -------------- ------------ ------------ Total investments at cost $236,804,266 $1,009,578,128 $820,092,165 $739,134,845 ============ ============== ============ ============ </Table> See Notes to Financial Statements. 14 STATEMENTS OF OPERATIONS (UNAUDITED) <Table> <Caption> FLEXIBLE GROWTH & CAPITAL GLOBAL FOR THE SIX MONTHS ENDED JUNE 30, 2004 INCOME FUND INCOME FUND OPPORTUNITIES FUND EQUITY FUND - -------------------------------------- ----------- ----------- ------------------ ----------- INVESTMENT INCOME Income distributions received from affiliated funds $1,410,945 $ 7,066,513 $ 3,611,894 $ 1,452,937 Interest 27,621 183,963 66,168 5,864 ---------- ----------- ----------- ----------- Total Investment Income 1,438,566 7,250,476 3,678,062 1,458,801 ---------- ----------- ----------- ----------- EXPENSES Investment advisory fees 140,834 589,172 471,096 426,769 Transfer agent fees Retail shares 10,830 16,530 12,868 12,455 Retirement shares 8,109 8,502 8,345 8,459 Custodian fees 4,329 11,843 9,840 8,866 Distribution fees -- Retail shares 6,354 7,405 4,417 5,590 Accounting and administration fees 41,215 97,330 85,547 80,950 Professional fees 17,400 17,156 17,151 17,151 Blue sky fees Retail shares 7,751 7,451 7,145 6,964 Retirement shares 1,075 930 962 943 Shareholder reporting fees Retail shares 6,056 13,886 8,910 8,054 Retirement shares 1,001 1,264 1,051 1,104 Trustee fees 802 3,211 2,503 2,200 Line of credit facility fees 802 3,212 2,503 2,200 Other expenses 7,004 7,003 7,004 6,990 ---------- ----------- ----------- ----------- Total Expenses 253,562 784,895 639,342 588,695 Expenses waived (See Footnote 3c) (49,136) 10,116 (3,133) (13,558) Fees paid indirectly (133) (191) (140) (141) ---------- ----------- ----------- ----------- Net expenses 204,293 794,820 636,069 574,996 ---------- ----------- ----------- ----------- NET INVESTMENT INCOME 1,234,273 6,455,656 3,041,993 883,805 ---------- ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investment securities of affiliated issuers 755,468 2,979,652 2,094,691 204,266 Net realized loss on investment securities of unaffiliated issuers (37,688) (134,077) (13,471) -- Net realized gain on futures transactions 28,695 679,930 737,598 1,129,240 ---------- ----------- ----------- ----------- Net realized gain 746,475 3,525,505 2,818,818 1,333,506 ---------- ----------- ----------- ----------- Change in net unrealized appreciation (depreciation) on investment securities of affiliated issuers 1,729,904 18,558,272 27,762,003 37,730,277 Change in net unrealized appreciation (depreciation) on investment securities of unaffiliated issuers (509) (92,698) (38,704) 23 Change in net unrealized appreciation (depreciation) on futures transactions (16,580) (381,056) (440,319) (597,457) ---------- ----------- ----------- ----------- Net change in unrealized appreciation (depreciation) 1,712,815 18,084,518 27,282,980 37,132,843 ---------- ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN 2,459,290 21,610,023 30,101,798 38,466,349 ---------- ----------- ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,693,563 $28,065,679 $33,143,791 $39,350,154 ========== =========== =========== =========== </Table> See Notes to Financial Statements. 15 STATEMENTS OF CHANGES IN NET ASSETS <Table> <Caption> FLEXIBLE INCOME FUND GROWTH & INCOME FUND ----------------------------- ------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR 06/30/04 ENDED 12/31/03 06/30/04 ENDED 12/31/03 ------------ -------------- -------------- -------------- (UNAUDITED) (UNAUDITED) INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 1,234,273 $ 5,478,241 $ 6,455,656 $ 23,456,542 Net realized gain (loss) on investment securities and futures transactions 746,475 8,559,615 3,525,505 35,021,999 Net change in unrealized appreciation (depreciation) on investment securities and futures transactions 1,712,815 10,589,629 18,084,518 125,109,667 ------------ ------------ -------------- -------------- Net increase (decrease) in net assets resulting from operations 3,693,563 24,627,485 28,065,679 183,588,208 ------------ ------------ -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME Retail shares -- (402,711) -- (763,570) Retirement shares -- (4,176,812) -- (28,642,469) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS Retail shares -- (658,891) -- (621,863) Retirement shares -- (6,235,277) -- (21,625,383) ------------ ------------ -------------- -------------- Total dividends and distributions -- (11,473,691) -- (51,653,285) ------------ ------------ -------------- -------------- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 5,956,161 (19,531,754) 15,836,480 (25,912,931) ------------ ------------ -------------- -------------- Total increase (decrease) in net assets 9,649,724 (6,377,960) 43,902,159 106,021,992 ------------ ------------ -------------- -------------- NET ASSETS: Beginning of the Period 273,502,177 279,880,137 1,142,730,446 1,036,708,454 ------------ ------------ -------------- -------------- End of the Period $283,151,901 $273,502,177 $1,186,632,605 $1,142,730,446 ============ ============ ============== ============== </Table> See Notes to Financial Statements. 16 <Table> <Caption> CAPITAL OPPORTUNITIES FUND GLOBAL EQUITY FUND ------------------------------- ------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR 06/30/04 ENDED 12/31/03 06/30/04 ENDED 12/31/03 ------------ -------------- -------------- -------------- (UNAUDITED) (UNAUDITED) $ 3,041,993 $ 12,343,331 $ 883,805 $ 5,570,257 2,818,818 14,442,437 1,333,506 2,845,134 27,282,980 158,534,721 37,132,843 188,562,224 ------------ ------------ ------------ ------------ 33,143,791 185,320,489 39,350,154 196,977,615 ------------ ------------ ------------ ------------ -- (267,521) -- (110,878) -- (14,672,538) -- (5,053,675) -- (190,056) -- -- -- (8,979,773) -- -- ------------ ------------ ------------ ------------ -- (24,109,888) -- (5,164,553) ------------ ------------ ------------ ------------ 8,414,438 (3,431,171) 11,847,242 (1,281,018) ------------ ------------ ------------ ------------ 41,558,229 157,779,430 51,197,396 190,532,044 ------------ ------------ ------------ ------------ 913,606,510 755,827,080 819,380,260 628,848,216 ------------ ------------ ------------ ------------ $955,164,739 $913,606,510 $870,577,656 $819,380,260 ============ ============ ============ ============ </Table> See Notes to Financial Statements. 17 FINANCIAL HIGHLIGHTS <Table> <Caption> FLEXIBLE INCOME FUND ----------------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ---------------------------------------------------- ---------------------- FOR THE SIX FOR THE FOR THE FOR THE SIX FOR THE MONTHS YEAR FOR THE YEAR PERIOD MONTHS YEAR ENDED ENDED ENDED 08/27/01* TO ENDED ENDED 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 ----------- -------- ------------ ------------ ----------- -------- (UNAUDITED) (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.41 $ 9.12 $ 9.83 $ 10.00 $ 13.00 $ 12.40 ------- ------- ------- ------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.04 0.21 0.23 0.10 0.06 0.31 Capital gain distributions received from affiliated funds -- 0.02 0.10 0.06 -- 0.02 Realized and unrealized gain (loss) on investments securities and futures transactions -- net 0.08 0.59 (0.45) (0.08) 0.12 0.82 ------- ------- ------- ------- -------- -------- Total from investment operations 0.12 0.82 (0.12) 0.08 0.18 1.15 ------- ------- ------- ------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) -- (0.20) (0.42) (0.22) -- (0.22) Distributions from capital gains -- (0.33) (0.17) (0.03) -- (0.33) ------- ------- ------- ------- -------- -------- Total dividends and distributions -- (0.53) (0.59) (0.25) -- (0.55) ------- ------- ------- ------- -------- -------- NET ASSET VALUE -- END OF PERIOD $ 9.53 $ 9.41 $ 9.12 $ 9.83 $ 13.18 $ 13.00 ======= ======= ======= ======= ======== ======== TOTAL RETURN (2) 1.28% 9.06% (1.27%) 0.72% 1.39% 9.33% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.35% 0.35% 0.32% 0.48% 0.13% 0.13% Expenses -- including expense reduction (3)(4) 0.35% 0.35% 0.32% 0.48% 0.13% 0.13% Expenses -- before waivers and expense reductions (3)(4) 0.45% 0.46% 0.43% 66.47% 0.16% 0.20% Investment income -- net (1)(3) 0.69% 1.90% 2.82% 6.69% 0.90% 2.01% Investment income -- excluding waivers and expense reduction (1)(3) 0.59% 1.79% 2.71% (59.30%) 0.87% 1.94% Portfolio turnover rate (2) 5.85% 13.44% 13.56% 4.02% 5.85% 13.44% Net Assets -- end of the period (000's) $22,324 $19,674 $16,234 $ 325 $260,828 $253,828 ======= ======= ======= ======= ======== ======== <Caption> FLEXIBLE INCOME FUND ----------------------- RETIREMENT CLASS ----------------------- FOR THE FOR THE YEAR PERIOD ENDED 08/27/01* TO 12/31/02 12/31/01 -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 13.15 $ 13.29 -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.38 0.17 Capital gain distributions received from affiliated funds 0.10 0.06 Realized and unrealized gain (loss) on investments securities and futures transactions -- net (0.62) (0.12) -------- -------- Total from investment operations (0.14) 0.11 -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) (0.44) (0.22) Distributions from capital gains (0.17) (0.03) -------- -------- Total dividends and distributions (0.61) (0.25) -------- -------- NET ASSET VALUE -- END OF PERIOD $ 12.40 $ 13.15 ======== ======== TOTAL RETURN (2) (1.10%) 0.79% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.13% 0.13% Expenses -- including expense reduction (3)(4) 0.13% 0.13% Expenses -- before waivers and expense reductions (3)(4) 0.17% 0.18% Investment income -- net (1)(3) 2.86% 3.67% Investment income -- excluding waivers and expense reduction (1)(3) 2.82% 3.62% Portfolio turnover rate (2) 13.56% 4.02% Net Assets -- end of the period (000's) $263,646 $286,628 ======== ======== </Table> - --------------- * Commencement of operations. (1) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (2) Non-annualized. (3) Annualized. (4) Does not include expenses of the investment companies in which the Fund invests. (5) Includes dividends paid from the short-term portion of capital gain distributions received from affiliated funds. The Flexible Income Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.36%, 0.64% and 1.00% in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.01, $0.08 and $0.05 in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. The Growth & Income Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.37%, 0.72% and 1.18% in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.05, $0.09 and $0.05 in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. See Notes to Financial Statements. 18 <Table> <Caption> GROWTH & INCOME FUND ------------------------------------------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ------------------------------------------------ ---------------------------------------------------- FOR THE SIX FOR THE FOR THE FOR THE FOR THE SIX FOR THE MONTHS YEAR YEAR PERIOD MONTHS FOR THE FOR THE PERIOD ENDED ENDED ENDED 08/27/01* TO ENDED YEAR ENDED YEAR ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- -------- ------------ ----------- ---------- ---------- ------------ (UNAUDITED) (UNAUDITED) $ 9.28 $ 8.34 $ 9.72 $10.00 $ 13.41 $ 11.82 $ 13.44 $ 13.74 ------- ------- ------- ------ ---------- ---------- ---------- ---------- 0.07 0.16 0.21 0.07 0.08 0.29 0.36 0.14 -- 0.15 0.12 0.06 -- 0.15 0.12 0.06 0.14 1.23 (0.96) (0.18) 0.25 1.78 (1.33) (0.27) ------- ------- ------- ------ ---------- ---------- ---------- ---------- 0.21 1.54 (0.63) (0.05) 0.33 2.22 (0.85) (0.07) ------- ------- ------- ------ ---------- ---------- ---------- ---------- -- (0.33) (0.40) (0.19) -- (0.36) (0.42) (0.19) -- (0.27) (0.35) (0.04) -- (0.27) (0.35) (0.04) ------- ------- ------- ------ ---------- ---------- ---------- ---------- -- (0.60) (0.75) (0.23) -- (0.63) (0.77) (0.23) ------- ------- ------- ------ ---------- ---------- ---------- ---------- $ 9.49 $ 9.28 $ 8.34 $ 9.72 $ 13.74 $ 13.41 $ 11.82 $ 13.44 ======= ======= ======= ====== ========== ========== ========== ========== 2.26% 18.52% (6.59%) (0.52%) 2.46% 18.79% (6.37%) (0.47%) 0.45% 0.45% 0.37% 0.48% 0.13% 0.13% 0.13% 0.13% 0.45% 0.45% 0.37% 0.48% 0.13% 0.13% 0.13% 0.13% 0.49% 0.54% 0.45% 6.53% 0.13% 0.13% 0.13% 0.17% 0.82% 2.00% 2.64% 4.44% 1.12% 2.22% 2.68% 2.87% 0.78% 1.91% 2.56% (1.61%) 1.12% 2.22% 2.68% 2.83% 3.03% 10.38% 12.04% 4.27% 3.03% 10.38% 12.04% 4.27% $26,888 $22,650 $17,009 $1,334 $1,159,745 $1,120,080 $1,019,700 $1,156,044 ======= ======= ======= ====== ========== ========== ========== ========== </Table> See Notes to Financial Statements. 19 FINANCIAL HIGHLIGHTS CONTINUED <Table> <Caption> CAPITAL OPPORTUNITIES FUND ---------------------------------------------------- RETAIL CLASS ---------------------------------------------------- FOR THE SIX FOR THE FOR THE MONTHS YEAR FOR THE PERIOD ENDED ENDED YEAR ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- ------------ ------------ (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.67 $ 8.01 $ 9.73 $ 10.00 ------- ------- ------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.02 0.11 0.12 0.03 Capital gain distributions received from affiliated funds -- 0.07 0.06 0.03 Realized and unrealized gain (loss) on investments securities and futures transactions -- net 0.30 1.82 (1.50) (0.22) ------- ------- ------- -------- Total from investment operations 0.32 2.00 (1.32) (0.16) ------- ------- ------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) -- (0.20) (0.21) (0.11) Distributions from capital gains -- (0.14) (0.19) --+ ------- ------- ------- -------- Total dividends and distributions -- (0.34) (0.40) (0.11) ------- ------- ------- -------- NET ASSET VALUE -- END OF PERIOD $ 9.99 $ 9.67 $ 8.01 $ 9.73 ======= ======= ======= ======== TOTAL RETURN (2) 3.31% 24.93% (13.56%) (1.64%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.55% 0.52% 0.42% 0.48% Expenses -- including expense reduction (3)(4) 0.55% 0.52% 0.42% 0.48% Expenses -- before waivers and expense reductions (3)(4) 0.58% 0.62% 0.55% 43.03% Investment income -- net (1)(3) 0.26% 1.20% 1.54% 3.87% Investment income -- excluding waivers and expense reduction (1)(3) 0.23% 1.10% 1.41% (38.68%) Portfolio turnover rate (2) 1.64% 7.75% 10.33% 3.42% Net Assets -- end of the period (000's) $15,896 $13,585 $ 9,859 $ 331 ======= ======= ======= ======== <Caption> CAPITAL OPPORTUNITIES FUND ------------------------------------------------ RETIREMENT CLASS ------------------------------------------------ FOR THE SIX FOR THE FOR THE FOR THE MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- -------- ------------ (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 13.62 $ 11.17 $ 13.37 $ 13.71 -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.05 0.19 0.22 0.08 Capital gain distributions received from affiliated funds -- 0.07 0.06 0.03 Realized and unrealized gain (loss) on investments securities and futures transactions -- net 0.45 2.56 (2.05) (0.34) -------- -------- -------- -------- Total from investment operations 0.50 2.82 (1.77) (0.23) -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) -- (0.23) (0.24) (0.11) Distributions from capital gains -- (0.14) (0.19) --+ -------- -------- -------- -------- Total dividends and distributions -- (0.37) (0.43) (0.11) -------- -------- -------- -------- NET ASSET VALUE -- END OF PERIOD $ 14.12 $ 13.62 $ 11.17 $ 13.37 ======== ======== ======== ======== TOTAL RETURN (2) 3.67% 25.23% (13.25%) (1.68%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.13% 0.13% 0.13% 0.13% Expenses -- including expense reduction (3)(4) 0.13% 0.13% 0.13% 0.13% Expenses -- before waivers and expense reductions (3)(4) 0.13% 0.14% 0.14% 0.17% Investment income -- net (1)(3) 0.66% 1.54% 1.72% 1.76% Investment income -- excluding waivers and expense reduction (1)(3) 0.66% 1.53% 1.71% 1.72% Portfolio turnover rate (2) 1.64% 7.75% 10.33% 3.42% Net Assets -- end of the period (000's) $939,269 $900,021 $745,968 $883,648 ======== ======== ======== ======== </Table> - --------------- * Commencement of operations. (1) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (2) Non-annualized. (3) Annualized. (4) Does not include expenses of the investment companies in which the Fund invests. (5) Includes dividends paid from the short-term portion of capital gain distributions received from affiliated funds. + Amount represents less than $0.01 per share. The Capital Opportunities Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.19%, 0.36% and 0.62% in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.02, $0.04 and $0.03 in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. The Global Equity Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.03% in the fiscal period ending December 31, 2001. Net investment income per share was unaffected. See Notes to Financial Statements. 20 <Table> <Caption> GLOBAL EQUITY FUND - --------------------------------------------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS -------------------------------------------------- ------------------------------------------------ FOR THE SIX FOR THE FOR THE FOR THE FOR THE SIX FOR THE FOR THE FOR THE MONTHS YEAR YEAR PERIOD MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- ---------- ------------ ----------- -------- -------- ------------ (UNAUDITED) (UNAUDITED) $ 10.00 $ 7.65 $ 9.70 $ 10.00 $ 13.64 $ 10.40 $ 13.14 $ 13.57 ------- ------- ------- -------- -------- -------- -------- -------- -- 0.05 0.04 0.02 0.01 0.10 0.08 0.03 -- -- --+ -- -- -- --+ -- 0.47 2.36 (2.00) (0.29) 0.64 3.23 (2.71) (0.43) ------- ------- ------- -------- -------- -------- -------- -------- 0.47 2.41 (1.96) (0.27) 0.65 3.33 (2.63) (0.40) ------- ------- ------- -------- -------- -------- -------- -------- -- (0.06) (0.06) (0.03) -- (0.09) (0.08) (0.03) -- -- (0.03) --+ -- -- (0.03) --+ ------- ------- ------- -------- -------- -------- -------- -------- -- (0.06) (0.09) (0.03) -- (0.09) (0.11) (0.03) ------- ------- ------- -------- -------- -------- -------- -------- $ 10.47 $ 10.00 $ 7.65 $ 9.70 $ 14.29 $ 13.64 $ 10.40 $ 13.14 ======= ======= ======= ======== ======== ======== ======== ======== 4.70% 31.53% (20.25%) (2.75%) 4.77% 31.99% (20.04%) (2.96%) 0.42% 0.43% 0.35% 0.48% 0.13% 0.13% 0.13% 0.13% 0.42% 0.43% 0.35% 0.48% 0.13% 0.13% 0.13% 0.13% 0.48% 0.48% 0.44% 66.34% 0.13% 0.14% 0.14% 0.17% (0.07%) 0.53% 0.53% 1.57% 0.22% 0.82% 0.68% 0.61% (0.13%) 0.48% 0.44% (64.29%) 0.22% 0.81% 0.67% 0.57% 0.42% 4.17% 6.33% 2.70% 0.42% 4.17% 6.33% 2.70% $19,679 $17,973 $12,805 $ 207 $850,899 $801,407 $616,043 $810,507 ======= ======= ======= ======== ======== ======== ======== ======== </Table> See Notes to Financial Statements. 21 FLEXIBLE INCOME FUND I TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> INSTITUTIONAL CLASS* BENCHMARK INDEX** -------------------- ----------------- Since Inception (7/1/03 -- 6/30/04) 5.92% 5.84% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Jul 1 2003 10000 10000 Jul 2003 9970 10019 Aug 2003 10050 10084 Sep 2003 10120 10148 Oct 2003 10230 10276 Nov 2003 10270 10312 Dec 2003 10440 10494 Jan 2004 10511 10562 Feb 2004 10592 10643 Mar 2004 10613 10647 Apr 2004 10511 10508 May 2004 10532 10531 Jun 2004 10592 10584 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since July 1, 2003 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Index ex-U.S. and the Merrill Lynch 1-3 Year Treasury Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Merrill Lynch 1-3 Year Treasury Index is composed of all U.S. Treasury Notes and Bonds with maturities greater than or equal to one year and less than three years. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 22 FLEXIBLE INCOME FUND I SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- --------- ----------- AFFILIATED MUTUAL FUNDS -- 98.6% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 39,356 $ 367,587 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 248,769 2,403,109 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 167,275 1,915,295 AB Funds Trust -- Low-Duration Bond Fund (Institutional Class)(inf) 2,286,011 21,602,801 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 308,344 308,344 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 31,224 377,192 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 234,709 2,445,666 ----------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $28,914,670) 29,419,994 ----------- </Table> <Table> <Caption> PAR --------- U.S. TREASURY OBLIGATIONS -- 1.3% U.S. Treasury Bill 0.95%, 07/22/04++++ $ 20,000 19,990 U.S. Treasury Note 2.50%, 05/31/06 365,000 363,888 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $383,051) 383,878 ----------- TOTAL INVESTMENTS -- 99.9% (Cost $29,297,721) 29,803,872 OTHER ASSETS LESS LIABILITIES -- 0.1% 28,669 ----------- NET ASSETS -- 100.0% $29,832,541 =========== </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 23 GROWTH & INCOME FUND I TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> INSTITUTIONAL CLASS* BENCHMARK INDEX** -------------------- ----------------- Since Inception (7/1/03 -- 6/30/04) 11.70% 11.43% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Jul 1 2003 10000 10000 Jul 2003 9930 9951 Aug 2003 10100 10104 Sep 2003 10200 10234 Oct 2003 10480 10501 Nov 2003 10570 10597 Dec 2003 10893 10935 Jan 2004 11037 11086 Feb 2004 11181 11238 Mar 2004 11211 11239 Apr 2004 10965 10961 May 2004 11017 11001 Jun 2004 11170 11143 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since July 1, 2003 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Index ex-U.S. and the Lehman Brothers Aggregate Bond Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchased by foreigners. The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 24 GROWTH & INCOME FUND I SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- --------- ------------ AFFILIATED MUTUAL FUNDS -- 99.1% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 263,240 $ 2,458,657 AB Funds Trust -- Extended-Duration Bond Fund (Institutional Class)(inf) 1,236,212 10,903,389 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 1,774,979 17,146,298 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 1,323,134 15,149,889 AB Funds Trust -- Low-Duration Bond Fund (Institutional Class)(inf) 1,640,943 15,506,910 AB Funds Trust -- Medium-Duration Bond Fund (Institutional Class)(inf) 2,685,603 24,573,267 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 1,495,460 1,495,460 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 234,286 2,830,180 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 1,693,232 17,643,480 ------------ TOTAL AFFILIATED MUTUAL FUNDS (Cost $103,665,901) 107,707,530 ------------ </Table> <Table> <Caption> PAR --------- U.S. TREASURY OBLIGATIONS -- 0.9% U.S. Treasury Bill 0.95%, 07/22/04++++ $ 80,000 79,959 U.S. Treasury Bond 6.50%, 02/15/10 825,000 929,866 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,009,993) 1,009,825 ------------ TOTAL INVESTMENTS -- 100.0% (Cost $104,675,894) 108,717,355 LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% (6,935) ------------ NET ASSETS -- 100.0% $108,710,420 ============ </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 25 CAPITAL OPPORTUNITIES FUND I TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> INSTITUTIONAL CLASS* BENCHMARK INDEX** -------------------- ----------------- Since Inception (7/1/03 -- 6/30/04) 17.20% 17.25% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Jul 1 2003 10000.00 10000.00 Jul 2003 10060.00 10095.00 Aug 2003 10280.00 10294.00 Sep 2003 10290.00 10353.00 Oct 2003 10740.00 10808.00 Nov 2003 10850.00 10942.00 Dec 2003 11302.00 11409.00 Jan 2004 11475.00 11599.00 Feb 2004 11648.00 11774.00 Mar 2004 11638.00 11730.00 Apr 2004 11404.00 11447.00 May 2004 11506.00 11534.00 Jun 2004 11720.00 11725.00 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since July 1, 2003 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Index ex-U.S. and the Lehman Brothers Aggregate Bond Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 26 CAPITAL OPPORTUNITIES FUND I SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- --------- ----------- AFFILIATED MUTUAL FUNDS -- 99.4% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 241,082 $ 2,251,704 AB Funds Trust -- Extended-Duration Bond Fund (Institutional Class)(inf) 353,910 3,121,488 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 1,521,812 14,700,707 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 1,066,742 12,214,196 AB Funds Trust -- Low-Duration Bond Fund (Institutional Class)(inf) 470,653 4,447,670 AB Funds Trust -- Medium-Duration Bond Fund (Institutional Class)(inf) 736,990 6,743,458 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 1,142,810 1,142,810 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 203,597 2,459,447 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 1,435,600 14,958,953 ----------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $55,247,099) 62,040,433 ----------- </Table> <Table> <Caption> PAR --------- U.S. TREASURY OBLIGATIONS -- 0.6% U.S. Treasury Bill 0.95%, 07/22/04++++ $ 80,000 79,959 U.S. Treasury Bond 6.50%, 02/15/10 260,000 293,049 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $372,001) 373,008 ----------- TOTAL INVESTMENTS -- 100.0% (Cost $55,619,100) 62,413,441 OTHER ASSETS LESS LIABILITIES -- 0.0% 19,070 ----------- NET ASSETS -- 100.0% $62,432,511 =========== </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 27 GLOBAL EQUITY FUND I TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> INSTITUTIONAL CLASS* BENCHMARK INDEX** -------------------- ----------------- Since Inception (7/1/03 -- 6/30/04) 22.80% 23.29% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- Jul 1 2003 10000.00 10000.00 Jul 2003 10200.00 10238.00 Aug 2003 10460.00 10484.00 Sep 2003 10380.00 10472.00 Oct 2003 11010.00 11116.00 Nov 2003 11130.00 11291.00 Dec 2003 11716.00 11894.00 Jan 2004 11927.00 12128.00 Feb 2004 12109.00 12327.00 Mar 2004 12079.00 12235.00 Apr 2004 11857.00 11948.00 May 2004 12008.00 12085.00 Jun 2004 12280.00 12329.00 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since July 1, 2003 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index and the Morgan Stanley Capital International All Country World Index ex-U.S. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 28 GLOBAL EQUITY FUND I SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ------- ----------- AFFILIATED MUTUAL FUNDS -- 99.6% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 142,908 $ 1,334,758 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 928,533 8,969,630 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 637,356 7,297,727 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 773,110 773,110 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 130,336 1,574,459 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 873,356 9,100,365 ----------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $24,597,577) 29,050,049 ----------- </Table> <Table> <Caption> PAR ------- U.S. TREASURY OBLIGATION -- 0.3% U.S. Treasury Bill 0.95%, 07/22/04++++ (Cost $74,958) $75,000 74,962 ----------- TOTAL INVESTMENTS -- 99.9% (Cost $24,672,535) 29,125,011 OTHER ASSETS LESS LIABILITIES -- 0.1% 16,163 ----------- NET ASSETS -- 100.0% $29,141,174 =========== </Table> - --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 29 STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) <Table> <Caption> FLEXIBLE GROWTH & CAPITAL GLOBAL JUNE 30, 2004 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I - ------------- ------------- ------------- -------------------- ------------- ASSETS Investments in securities of affiliated issuers at value $29,419,994 $107,707,530 $62,040,433 $29,050,049 Investments in securities of unaffiliated issuers at value 383,878 1,009,825 373,008 74,962 ----------- ------------ ----------- ----------- Total investments (1) 29,803,872 108,717,355 62,413,441 29,125,011 Receivables: Dividends 227 1,072 742 407 Interest 773 20,183 6,361 -- Fund shares sold 21,976 -- 8,640 8,202 Variation margin 460 3,860 3,450 2,760 Receivable from advisor 1,570 -- -- 1,733 Prepaid expenses and other assets 12,951 12,952 12,950 12,952 ----------- ------------ ----------- ----------- Total Assets 29,841,829 108,755,422 62,445,584 29,151,065 ----------- ------------ ----------- ----------- LIABILITIES Payables: Fund shares redeemed -- 25,951 -- -- Accrued expenses: Advisory fee payable -- 6,123 1,173 -- Other accrued expenses payable 9,288 12,928 11,900 9,891 ----------- ------------ ----------- ----------- Total Liabilities 9,288 45,002 13,073 9,891 ----------- ------------ ----------- ----------- NET ASSETS $29,832,541 $108,710,420 $62,432,511 $29,141,174 =========== ============ =========== =========== NET ASSETS CONSIST OF: Paid-in-capital $28,559,659 $102,803,001 $54,811,190 $24,448,109 Undistributed net investment income 521,510 983,503 349,537 66,672 Accumulated net realized gain on investments 244,290 875,382 471,675 168,968 Net unrealized appreciation (depreciation) on investments and futures transactions 507,082 4,048,534 6,800,109 4,457,425 ----------- ------------ ----------- ----------- NET ASSETS $29,832,541 $108,710,420 $62,432,511 $29,141,174 =========== ============ =========== =========== NET ASSET VALUE: $0.001 par value, unlimited shares authorized Net assets applicable to the Institutional Class $29,832,541 $108,710,420 $62,432,511 $29,141,174 ----------- ------------ ----------- ----------- Institutional shares outstanding 2,852,244 9,983,165 5,421,196 2,393,245 ----------- ------------ ----------- ----------- Net asset value, offering price and redemption price per Institutional share $ 10.46 $ 10.89 $ 11.52 $ 12.18 =========== ============ =========== =========== - --------------- (1) Investments in securities of affiliated issuers at cost $28,914,670 $103,665,901 $55,247,099 $24,597,577 Investments in securities of unaffiliated issuers at cost 383,051 1,009,993 372,001 74,958 ----------- ------------ ----------- ----------- Total investments at cost $29,297,721 $104,675,894 $55,619,100 $24,672,535 =========== ============ =========== =========== </Table> See Notes to Financial Statements. 30 STATEMENTS OF OPERATIONS (UNAUDITED) <Table> <Caption> FLEXIBLE GROWTH & CAPITAL GLOBAL FOR THE SIX MONTHS ENDED JUNE 30, 2004 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I - -------------------------------------- ------------- ------------- -------------------- ------------- INVESTMENT INCOME Income distributions received from affiliated funds $227,088 $1,038,329 $ 387,131 $ 85,041 Interest 3,194 15,774 4,731 284 -------- ---------- ---------- ---------- Total Investment Income 230,282 1,054,103 391,862 85,325 -------- ---------- ---------- ---------- EXPENSES Investment advisory fees 14,651 52,051 31,005 13,956 Transfer agent fees 3,788 7,445 7,436 3,810 Custodian fees 1,777 3,495 3,277 2,449 Accounting and administration fees 4,778 15,800 9,563 4,451 Professional fees 17,400 17,151 17,151 17,400 Registration fees 237 581 436 186 Shareholder reporting fees 687 1,029 801 801 Trustee fees 82 234 161 70 Line of credit facility fees 82 234 161 70 Other expenses 7,063 7,060 7,060 7,061 -------- ---------- ---------- ---------- Total Expenses 50,545 105,080 77,051 50,254 Expenses waived and reimbursed (See Footnote 3c) (25,919) (18,643) (25,896) (27,342) Fees paid indirectly (112) (80) (122) (108) -------- ---------- ---------- ---------- Net expenses 24,514 86,357 51,033 22,804 -------- ---------- ---------- ---------- NET INVESTMENT INCOME 205,768 967,746 340,829 62,521 -------- ---------- ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investment securities of affiliated issuers 98,429 80,111 99,481 142,663 Net realized loss on investment securities of unaffiliated issuers (4,872) (23,499) (3,093) -- Net realized gain (loss) on futures transactions 10,070 35,859 51,477 (3,655) -------- ---------- ---------- ---------- Net realized gain 103,627 92,471 147,865 139,008 -------- ---------- ---------- ---------- Change in net unrealized appreciation (depreciation) on investment securities of affiliated securities 105,559 820,183 1,672,025 1,037,694 Change in net unrealized appreciation (depreciation) on investment securities of unaffiliated securities 469 (1,445) 202 2 Change in net unrealized appreciation (depreciation) on futures transactions (2,801) (11,008) (23,463) (9,242) -------- ---------- ---------- ---------- Net change in unrealized appreciation (depreciation) 103,227 807,730 1,648,764 1,028,454 -------- ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN 206,854 900,201 1,796,629 1,167,462 -------- ---------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $412,622 $1,867,947 $2,137,458 $1,229,983 ======== ========== ========== ========== </Table> - --------------- * Commencement of operations. See Notes to Financial Statements. 31 STATEMENTS OF CHANGES IN NET ASSETS <Table> <Caption> FLEXIBLE INCOME FUND I GROWTH & INCOME FUND I ----------------------------- ----------------------------- FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD MONTHS ENDED 07/01/03* TO MONTHS ENDED 07/01/03* TO 06/30/04 12/31/03 06/30/04 12/31/03 ------------ -------------- ------------ -------------- (UNAUDITED) (UNAUDITED) INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 205,768 $ 508,142 $ 967,746 $ 1,408,910 Net realized gain on investment securities and futures transactions 103,627 301,451 92,471 1,189,355 Net change in unrealized appreciation (depreciation) on investment securities and futures transactions 103,227 403,855 807,730 3,240,804 ----------- ----------- ------------ ----------- Net increase in net assets resulting from operations 412,622 1,213,448 1,867,947 5,839,069 ----------- ----------- ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME -- (334,618) -- (1,741,769) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS -- (22,765) -- (62,749) ----------- ----------- ------------ ----------- Total dividends and distributions -- (357,383) -- (1,804,518) ----------- ----------- ------------ ----------- NET INCREASE FROM CAPITAL SHARE TRANSACTIONS 784,366 27,779,488 34,860,039 67,947,883 ----------- ----------- ------------ ----------- Total increase in net assets 1,196,988 28,635,553 36,727,986 71,982,434 ----------- ----------- ------------ ----------- NET ASSETS: Beginning of the Period 28,635,553 -- 71,982,434 -- ----------- ----------- ------------ ----------- End of the Period $29,832,541 $28,635,553 $108,710,420 $71,982,434 =========== =========== ============ =========== </Table> - --------------- * Commencement of operations. See Notes to Financial Statements. 32 <Table> <Caption> CAPITAL OPPORTUNITIES FUND I GLOBAL EQUITY FUND I - --------------------------------- ----------------------------- FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD MONTHS ENDED 07/01/03* TO MONTHS ENDED 07/01/03* TO 06/30/04 12/31/03 06/30/04 12/31/03 ------------ -------------- ------------ -------------- (UNAUDITED) (UNAUDITED) $ 340,829 $ 769,770 $ 62,521 $ 192,616 147,865 534,802 139,008 46,618 1,648,764 5,151,345 1,028,454 3,428,971 ----------- ----------- ----------- ----------- 2,137,458 6,455,917 1,229,983 3,668,205 ----------- ----------- ----------- ----------- -- (900,689) -- (192,660) -- (76,286) -- (16,658) ----------- ----------- ----------- ----------- -- (976,975) -- (209,318) ----------- ----------- ----------- ----------- 2,806,535 52,009,576 2,233,152 22,219,152 ----------- ----------- ----------- ----------- 4,943,993 57,488,518 3,463,135 25,678,039 ----------- ----------- ----------- ----------- 57,488,518 -- 25,678,039 -- ----------- ----------- ----------- ----------- $62,432,511 $57,488,518 $29,141,174 $25,678,039 =========== =========== =========== =========== </Table> See Notes to Financial Statements. 33 FINANCIAL HIGHLIGHTS <Table> <Caption> FLEXIBLE INCOME FUND I GROWTH & INCOME FUND I ----------------------------- ----------------------------- INSTITUTIONAL CLASS ------------------------------------------------------------- FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD MONTHS ENDED 07/01/03* TO MONTHS ENDED 07/01/03* TO 06/30/04 12/31/03 06/30/04 12/31/03 ------------ -------------- ------------ -------------- (UNAUDITED) (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 10.31 $ 10.00 $ 10.62 $ 10.00 ------- ------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.07# 0.18 0.10 0.21 Capital gain distributions received from affiliated funds -- 0.10 -- 0.17 Realized and unrealized gain (loss) on investments securities and futures transactions -- net 0.08# 0.16 0.17 0.51 ------- ------- -------- ------- Total from investment operations 0.15 0.44 0.27 0.89 ------- ------- -------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) -- (0.12) -- (0.26) Distributions from capital gains -- (0.01) -- (0.01) ------- ------- -------- ------- Total dividends and distributions -- (0.13) -- (0.27) ------- ------- -------- ------- NET ASSET VALUE -- END OF PERIOD $ 10.46 $ 10.31 $ 10.89 $ 10.62 ======= ======= ======== ======= TOTAL RETURN (2) 1.46% 4.40% 2.54% 8.94% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.17% 0.17% 0.17% 0.17% Expenses -- including expense reduction (3)(4) 0.17% 0.17% 0.17% 0.17% Expenses -- before waivers and expense reductions (3)(4) 0.35% 0.51% 0.21% 0.28% Investment income -- net (1)(3) 1.42% 4.16% 1.90% 4.76% Investment income -- excluding waivers and expense reduction (1)(3) 1.24% 3.82% 1.86% 4.65% Portfolio turnover rate (2) 10.29% 8.01% 4.45% 4.51% Net Assets -- end of the period (000's) $29,833 $28,636 $108,710 $71,982 ======= ======= ======== ======= </Table> - --------------- * Commencement of operations. # Calculated using the average shares outstanding method. (1) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (2) Non-annualized. (3) Annualized. (4) Does not include expenses of the investment companies in which the Fund invests. (5) Includes dividends paid from the short-term portion of capital gain distributions received from affiliated funds. The Flexible Income Fund I has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.49% in the fiscal period ending December 31, 2003. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.05 in the fiscal period ending December 31, 2003. The Growth & Income Fund I has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.52% in the fiscal period ending December 31, 2003. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.05 in the fiscal period ending December 31, 2003. The Capital Opportunities Fund I has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.26% in the fiscal period ending December 31, 2003. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.03 in the fiscal period ending December 31, 2003. See Notes to Financial Statements. 34 <Table> <Caption> CAPITAL OPPORTUNITIES FUND I GLOBAL EQUITY FUND I - ---------------------------------- ----------------------------- INSTITUTIONAL CLASS - ------------------------------------------------------------------ FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD MONTHS ENDED 07/01/03* TO MONTHS ENDED 07/01/03* TO 06/30/04 12/31/03 06/30/04 12/31/03 ------------ -------------- ------------ -------------- (UNAUDITED) (UNAUDITED) $ 11.11 $ 10.00 $ 11.62 $ 10.00 ------- ------- ------- ------- 0.06 0.15 0.03 0.09 -- 0.09 -- -- 0.35 1.07 0.53 1.63 ------- ------- ------- ------- 0.41 1.31 0.56 1.72 ------- ------- ------- ------- -- (0.18) -- (0.09) -- (0.02) -- (0.01) ------- ------- ------- ------- -- (0.20) -- (0.10) ------- ------- ------- ------- $ 11.52 $ 11.11 $ 12.18 $ 11.62 ======= ======= ======= ======= 3.69% 13.02% 4.82% 17.16% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.26% 0.31% 0.37% 0.50% 1.13% 3.24% 0.46% 1.69% 1.04% 3.10% 0.26% 1.36% 3.15% 2.95% 3.53% 0.89% $62,433 $57,489 $29,141 $25,678 ======= ======= ======= ======= </Table> See Notes to Financial Statements. 35 MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* CITIGROUP 3-MONTH INDEX** ----------------- -------------------- ------------- ------------------------- One Year 0.70% 0.89% 0.42% 0.96% Since Inception (8/27/01 -- 6/30/04) 1.31% 1.38% 1.04% 1.50% </Table> 7-DAY AVERAGE YIELD AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* ----------------- -------------------- ------------- 0.76% 0.98% 0.53% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS CITIGROUP 3-MONTH INDEX** ---------------- ------------------------- Aug 27 2001 10000.00 10000.00 Aug 2001 10008.00 10008.00 Sep 2001 10033.00 10036.00 Oct 2001 10057.00 10063.00 Nov 2001 10079.00 10084.00 Dec 2001 10094.00 10102.00 Jan 2002 10108.00 10117.00 Feb 2002 10122.00 10131.00 Mar 2002 10138.00 10146.00 Apr 2002 10153.00 10161.00 May 2002 10167.00 10176.00 Jun 2002 10180.00 10190.00 Jul 2002 10194.00 10205.00 Aug 2002 10207.00 10220.00 Sep 2002 10220.00 10234.00 Oct 2002 10232.00 10248.00 Nov 2002 10243.00 10261.00 Dec 2002 10255.00 10274.00 Jan 2003 10265.00 10285.00 Feb 2003 10273.00 10294.00 Mar 2003 10282.00 10305.00 Apr 2003 10290.00 10315.00 May 2003 10298.00 10325.00 Jun 2003 10306.00 10334.00 Jul 2003 10312.00 10343.00 Aug 2003 10318.00 10352.00 Sep 2003 10324.00 10359.00 Oct 2003 10330.00 10368.00 Nov 2003 10336.00 10376.00 Dec 2003 10342.00 10384.00 Jan 2004 10348.00 10392.00 Feb 2004 10354.00 10400.00 Mar 2004 10360.00 10408.00 Apr 2004 10366.00 10416.00 May 2004 10372.00 10424.00 Jun 2004 10378.00 10433.00 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Citigroup 3-Month Index. *These performance figures reflect expense waivers by the Fund's investment advisor. Without these waivers, performance would have been lower. Performance figures shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Not Part of the Semi-Annual Report 36 MONEY MARKET FUND **The Citigroup 3-Month (formerly the Salomon Brothers 90-Day Treasury Bill) Index is composed of the monthly return equivalents of yield averages that are not marked to market. The 3-Month Treasury Bill Index consists of the last three 3-month Treasury bill issues. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. An investment in the Fund is not insured or guaranteed by the FDIC or any other governmental agency. Although the Fund seeks to maintain a value of $1.00 per share, it is possible to lose money. Not Part of the Semi-Annual Report 37 MONEY MARKET FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 PAR VALUE - ------------- ----------- ------------ AGENCY OBLIGATIONS -- 4.5% Federal Home Loan Bank 1.38%, 03/28/05 $10,000,000 $ 10,000,000 1.43%, 04/04/05 8,000,000 8,000,000 Federal Home Loan Mortgage Corporation 1.20%, 09/09/04 5,434,000 5,421,321 1.29%, 03/23/05 9,000,000 9,000,000 Federal National Mortgage Association 1.55%, 12/08/04 9,000,000 9,000,000 ------------ TOTAL AGENCY OBLIGATIONS (Cost $41,421,321) 41,421,321 ------------ CERTIFICATES OF DEPOSIT -- 15.3% American Express Centurion Bank 1.05%, 07/20/04++ 25,000,000 25,000,000 Banco Santander Puerto Rico 1.19%, 08/13/04 21,800,000 21,800,000 Bank of New York 1.21%, 07/20/04 1,065,000 1,064,905 Societe Generale NY 1.44%, 05/09/05 10,000,000 9,998,720 Swedbank Securities, Inc. 1.44%, 03/01/05 17,000,000 16,998,308 Washington Mutual Bank FA 1.22%, 07/19/04 40,000,000 40,000,000 Westdeutsche Landesbank NY 1.40%, 08/05/04 25,000,000 25,000,000 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $139,861,933) 139,861,933 ------------ COMMERCIAL PAPER -- 55.2% Atomium Funding Corporation 1.26%, 07/12/04 14,590,000 14,584,383 1.26%, 07/20/04 8,670,000 8,664,234 Banco Santander Puerto Rico 1.26%, 07/26/04 24,735,000 24,713,357 Citigroup Global Markets Holdings, Inc. 1.33%, 08/17/04 35,035,000 34,974,165 Concord Minutemen Captial Co. LLC 1.15%, 07/06/04 43,000,000 42,993,162 CXC LLC 1.50%, 09/13/04 38,040,000 37,922,710 General Electric Capital International Funding 1.12%, 07/08/04 14,000,000 13,996,951 Goldman Sachs Group, Inc. 1.27%, 07/12/04 45,000,000 44,982,537 Liberty Lighthouse Funding Co. 1.24%, 07/19/04 9,500,000 9,494,110 MBNA Credit Card Master Trust Emerald Certificates 1.13%, 07/28/04 17,685,000 17,670,078 </Table> <Table> <Caption> PAR VALUE ----------- ------------ National Rural Utilities Cooperative Finance Corporation 1.22%, 07/19/04 $34,000,000 $ 33,979,260 Regency Markets No. 1 LLC 1.30%, 07/21/04 6,980,000 6,974,959 Rio Tinto (Commercial Paper), Ltd. 1.30%, 07/09/04 15,000,000 14,995,667 San Paolo IMI US Financial Co. 1.44%, 07/01/04 21,841,000 21,841,000 Scaldis Capital LLC 1.47%, 09/15/04 18,370,000 18,312,992 Silver Tower US Funding 1.16%, 07/12/04 15,000,000 14,994,683 Sydney Capital Corporation 1.25%, 07/19/04 10,660,000 10,653,338 Toronto-Dominion Holdings 1.27%, 07/29/04 45,000,000 44,955,550 UBS Finance (Delaware) LLC 1.42%, 07/01/04 45,000,000 45,000,000 Victory Receivables Corporation 1.18%, 07/09/04 43,000,000 42,988,725 ------------ TOTAL COMMERCIAL PAPER (Cost $504,691,861) 504,691,861 ------------ MASTER NOTES -- 5.7% Merrill Lynch Mortgage Capital, Inc. 1.63%, 07/01/04++ 15,410,000 15,410,000 Morgan Stanley Mortgage Capital 1.67%, 07/01/04++ 37,000,000 37,000,000 ------------ TOTAL MASTER NOTES (Cost $52,410,000) 52,410,000 ------------ VARIABLE RATE OBLIGATIONS -- 19.3% Bank of America NA 1.05%, 07/01/04++ 30,000,000 30,000,000 1.05%, 07/01/04++ 11,000,000 11,000,000 General Electric Capital Corporation 1.30%, 08/03/04++ 1,500,000 1,501,194 1.67%, 09/15/04++ 30,868,000 30,881,421 John Hancock Global Funding II 1.48%, 09/13/04 144A++ 10,000,000 10,000,000 1.57%, 09/13/04 144A++ 10,000,000 10,002,686 1.74%, 09/27/04 144A++ 6,000,000 6,002,520 1.73%, 09/30/04 144A++ 17,000,000 17,025,514 Merrill Lynch and Co., Inc. 1.46%, 07/13/04++ 4,000,000 4,008,177 1.19%, 08/17/04++ 2,900,000 2,899,978 Metlife Global Funding 1.36%, 07/28/04 144A++ 10,000,000 10,000,000 </Table> See Notes to Financial Statements. 38 <Table> <Caption> PAR VALUE ----------- ------------ Metropolitan Life Global Funding I 1.24%, 07/08/04 144A++ $25,000,000 $ 25,030,503 Racers Trust 1.28%, 07/22/04 144A++ 3,675,000 3,675,000 Shipley Group LP 1.25%, 07/01/04++ 1,500,000 1,500,000 Wells Fargo & Co. 1.62%, 09/24/04++ 5,000,000 5,001,464 Westpac Banking Corporation 1.10%, 09/13/04++ 8,250,000 8,250,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $176,778,457) 176,778,457 ------------ TOTAL INVESTMENTS -- 100.0% (Cost $915,163,572) 915,163,572 LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% (361,031) ------------ NET ASSETS -- 100.0% $914,802,541 ============ </Table> See Notes to Financial Statements. 39 LOW-DURATION BOND FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> MERRILL LYNCH 1-3 RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* YEAR TREASURY INDEX** ----------------- -------------------- ------------- --------------------- One Year 0.58% 0.80% 0.40% 0.50% Since Inception (8/27/01 -- 6/30/04) 3.64% 3.63% 3.36% 3.59% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> MERRILL LYNCH 1-3 YEAR TREASURY RETIREMENT CLASS INDEX** ---------------- ------------------------------- Aug 27 2001 10000.00 10000.00 Aug 2001 10023.00 10025.00 Sep 2001 10150.00 10190.00 Oct 2001 10256.00 10286.00 Nov 2001 10217.00 10264.00 Dec 2001 10196.00 10268.00 Jan 2002 10242.00 10288.00 Feb 2002 10288.00 10338.00 Mar 2002 10208.00 10268.00 Apr 2002 10334.00 10383.00 May 2002 10381.00 10425.00 Jun 2002 10402.00 10512.00 Jul 2002 10459.00 10641.00 Aug 2002 10550.00 10677.00 Sep 2002 10633.00 10765.00 Oct 2002 10661.00 10790.00 Nov 2002 10663.00 10757.00 Dec 2002 10778.00 10859.00 Jan 2003 10800.00 10857.00 Feb 2003 10866.00 10902.00 Mar 2003 10890.00 10922.00 Apr 2003 10918.00 10943.00 May 2003 10991.00 10984.00 Jun 2003 11006.00 11001.00 Jul 2003 10888.00 10941.00 Aug 2003 10910.00 10948.00 Sep 2003 11034.00 11048.00 Oct 2003 10984.00 11007.00 Nov 2003 10995.00 11001.00 Dec 2003 11042.00 11065.00 Jan 2004 11076.00 11087.00 Feb 2004 11136.00 11140.00 Mar 2004 11171.00 11175.00 Apr 2004 11080.00 11067.00 May 2004 11065.00 11057.00 Jun 2004 11069.00 11056.00 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Merrill Lynch 1-3 Year Treasury Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Merrill Lynch 1-3 Year Treasury Index is composed of all U.S. Treasury Notes and Bonds with maturities greater than or equal to one year and less than three years. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 40 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 PAR VALUE - ------------- ----------- -------------- AGENCY OBLIGATIONS -- 17.5% Federal Home Loan Bank 1.20%, 07/01/04 $ 7,400,000 $ 7,400,000 1.17%, 07/16/04 50,000,000 49,975,728 Federal Home Loan Mortgage Corporation 1.30%, 07/01/04 15,200,000 15,200,000 2.25%, 12/04/06 4,550,000 4,449,641 2.85%, 02/23/07 4,125,000 4,075,034 3.88%, 11/10/08 5,300,000 5,267,601 4.75%, 12/08/10 2,165,000 2,150,670 Federal National Mortgage Association 1.25%, 07/01/04 600,000 600,000 1.13%, 07/14/04 40,000,000 39,983,677 1.23%, 09/01/04 8,700,000 8,680,295 3.13%, 05/04/07 1,375,000 1,362,133 Small Business Administration 6.95%, 11/10/16 2,087,444 2,238,068 -------------- TOTAL AGENCY OBLIGATIONS (Cost $141,163,923) 141,382,847 -------------- ASSET-BACKED SECURITIES -- 6.0% Aames Mortgage Trust 1.69%, 10/15/29 STEP 35,982 35,998 Amresco Independence Funding, Inc. 3.50%, 06/15/26 144A 1,343,918 1,337,114 Bayview Financial Acquisition Trust 7.01%, 05/25/29 144A 509,757 516,798 Bear Stearns Asset-Backed Securities, Inc. 4.62%, 03/25/44 2,407,678 2,386,986 Business Loan Express 3.00%, 01/01/25 144A++ 850,622 840,255 Capital Auto Receivables Asset Trust 3.58%, 10/16/06++++ 2,400,000 2,427,874 Chase Funding Mortgage Loan Asset-Backed Certificates 5.04%, 12/25/23 492,233 492,958 1.42%, 02/25/21++ 844,007 844,206 Citibank Credit Card Master Trust I 1.25%, 08/15/06 PO (omg) 2,600,000 2,599,374 Conseco Finance Securitizations Corporation 1.61%, 12/15/29++ 348,909 348,870 8.07%, 12/01/30 274,212 274,889 CS First Boston Mortgage Securities Corporation 1.63%, 05/25/43 STEP 144A@ 423,771 423,752 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Daimler Chrysler Auto Trust 6.16%, 01/08/06 $ 1,263,913 $ 1,273,173 2.25%, 08/08/07 3,000,000 2,981,481 Daimler Chrysler Master Owner Trust 1.30%, 05/15/07++ 3,000,000 3,001,206 Green Tree Financial Corporation 6.06%, 04/01/18 430,616 433,117 6.04%, 11/01/29 44,650 44,541 Home Equity Mortgage Trust 1.70%, 07/25/33++ 728,630 727,754 Honda Auto Receivables Owner Trust 2.30%, 10/18/07 3,050,000 3,027,233 3.30%, 06/15/08 2,980,000 2,976,274 Long Beach Mortgage Loan Trust 1.62%, 06/25/33++ 1,027,971 1,029,296 Nissan Auto Receivables Owner Trust 5.35%, 10/15/06 1,425,928 1,431,840 4.80%, 02/15/07 3,121,484 3,153,843 PBG Equipment Trust 6.27%, 01/20/12 144A 950,804 980,322 Quest Trust 1.29%, 06/25/34 144A@++ 1,600,000 1,596,941 Residential Asset Securities Corporation 1.53%, 09/25/31++ 681,176 681,538 Residential Funding Mortgage Securities II 1.43%, 07/25/18++ 1,025,250 1,025,029 Sears Credit Account Master Trust 7.00%, 07/15/08 115,208 115,467 5.25%, 10/16/08 454,167 457,001 Sequoia Mortgage Trust 2.35%, 10/25/24++ 1,305,714 1,306,106 SLM Student Loan Trust 1.22%, 01/25/11++ 612,463 612,385 1.55%, 12/17/12++ 2,346,475 2,346,472 Structured Asset Investment Loan Trust 1.40%, 04/25/33++ 756,096 755,958 1.43%, 07/25/33++ 717,400 717,369 SVO Timeshare Mortgage Corporation 5.47%, 10/20/13 144A@ 3,015,925 3,094,208 The Money Store Business Loan Backed Certificates 1.90%, 04/15/28++ 588,838 557,323 </Table> See Notes to Financial Statements. 41 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- TMS SBA Loan Trust 1.86%, 04/15/24++ $ 533,846 $ 505,547 1.75%, 01/15/25++ 618,534 592,735 2.23%, 01/25/25++ 371,121 369,336 -------------- TOTAL ASSET-BACKED SECURITIES (Cost $48,266,528) 48,322,569 -------------- COMMERCIAL PAPER -- 8.1% ASB Bank, Ltd. 1.49%, 09/22/04 3,000,000 2,989,881 Barclays U.S. Funding Corporation 1.11%, 08/25/04 800,000 798,390 CDC Commercial Paper, Inc. 1.12%, 08/19/04 1,500,000 1,499,980 1.12%, 08/24/04 800,000 798,373 Danske Corporation 1.27%, 09/20/04 100,000 99,673 European Investment Bank 1.03%, 07/02/04 2,900,000 2,899,917 General Electric Capital Corporation 1.27%, 09/01/04 900,000 897,878 1.30%, 09/08/04 8,700,000 8,676,654 HBOS Treasury Services PLC 1.35%, 09/07/04 900,000 897,627 1.34%, 09/09/04 8,700,000 8,676,232 1.61%, 06/30/06++ 1,200,000 1,200,124 KFW International Finance, Inc. 1.10%, 08/10/04 8,800,000 8,788,611 1.11%, 08/20/04 1,800,000 1,796,913 Rabobank USA Finance Corporation 1.24%, 09/13/04 700,000 697,952 Svenska Handelsbanken NY 1.08%, 07/28/04 1,400,000 1,398,869 1.09%, 08/03/04 800,000 799,116 1.25%, 09/01/04 7,400,000 7,382,170 Toyota Motor Credit Corporation 1.63%, 11/03/04 6,200,000 6,165,641 UBS Finance (Delaware) LLC 1.20%, 07/21/04 8,700,000 8,694,224 -------------- TOTAL COMMERCIAL PAPER (Cost $65,161,831) 65,158,225 -------------- <Caption> SHARES ----------- COMMON STOCK -- 0.0% UTILITIES MCI, Inc.*+++ (Cost $1,353,751) 24,152 340,543 -------------- <Caption> PAR VALUE ----------- -------------- CORPORATE BONDS -- 10.0% Alcoa, Inc. 1.64%, 12/06/04++ $ 930,000 $ 930,826 American Electric Power Co., Inc. 6.13%, 05/15/06 800,000 840,182 AOL Time Warner, Inc. 5.63%, 05/01/05+++ 2,210,000 2,264,582 ASIF Global Financing XXIII 3.90%, 10/22/08 144A+++ 420,000 415,291 AT&T Wireless Services, Inc. 7.35%, 03/01/06+++ 732,000 781,422 Bank of America Corporation 3.25%, 08/15/08 360,000 347,913 Bank One Corporation 2.63%, 06/30/08+++ 360,000 339,336 Bear Stearns Co., Inc. 6.50%, 05/01/06+++ 550,000 582,438 BellSouth Corporation 5.00%, 10/15/06+++ 750,000 777,303 Cadbury Schweppes US Finance LLC 3.88%, 10/01/08 144A 790,000 775,733 Capital One Bank 8.25%, 06/15/05 360,000 377,513 Cendant Corporation 6.88%, 08/15/06+++ 720,000 769,700 Centerior Energy Corporation 7.67%, 07/01/04 1,500,000 1,500,000 Citigroup, Inc. 5.50%, 08/09/06+++ 480,000 501,676 3.50%, 02/01/08 1,600,000 1,579,301 Clear Channel Communications, Inc. 6.00%, 11/01/06+++ 730,000 766,697 Conagra Foods, Inc. 7.50%, 09/15/05 370,000 389,344 Countrywide Home Loans, Inc. 3.50%, 12/19/05+++ 620,000 625,116 DaimlerChrysler NA Holding Corporation 6.90%, 09/01/04 3,200,000 3,222,217 6.40%, 05/15/06 910,000 958,192 Devon Energy Corporation 2.75%, 08/01/06 790,000 778,834 Dominion Resources, Inc. 7.63%, 07/15/05 840,000 882,631 Ford Motor Credit Co. 7.50%, 03/15/05+++ 1,300,000 1,343,532 6.88%, 02/01/06 2,500,000 2,623,221 6.50%, 01/25/07 1,490,000 1,566,503 FPL Group Capital, Inc. 3.25%, 04/11/06 765,000 767,676 </Table> See Notes to Financial Statements. 42 <Table> <Caption> PAR VALUE ----------- -------------- General Electric Capital Corporation 6.80%, 11/01/05+++ $ 740,000 $ 780,015 9.83%, 12/15/08 350,000 422,898 General Motors Acceptance Corporation 5.25%, 05/16/05 3,200,000 3,272,345 6.13%, 02/01/07+++ 1,490,000 1,555,728 Golden West Financial Corporation 4.13%, 08/15/07 310,000 313,966 Household Finance Corporation 5.75%, 01/30/07+++ 730,000 767,319 4.13%, 12/15/08 700,000 690,696 IBM Corporation 1.54%, 09/10/04++ 1,200,000 1,200,074 International Lease Finance Corporation 4.00%, 01/17/06 580,000 590,743 Kellogg Co. 6.00%, 04/01/06 725,000 761,217 2.88%, 06/01/08 970,000 929,362 Lehman Brothers Holdings, Inc. 6.25%, 05/15/06 940,000 992,259 Liberty Media Corporation 3.50%, 09/25/06+++ 790,000 788,984 Masco Corporation 6.75%, 03/15/06 730,000 774,401 MBNA America Bank NA 6.50%, 06/20/06+++ 730,000 773,101 MCI Escrow Bonds 0.00%, 01/15/11+ 3,900,000 0 MCI, Inc. 5.91%, 05/01/07 237,000 230,483 6.69%, 05/01/09+++ 237,000 219,818 7.74%, 05/01/14 203,000 182,193 Merrill Lynch & Co., Inc. 6.13%, 05/16/06 920,000 974,101 Morgan Stanley Warehouse Facility 1.59%, 07/06/05@ 9,900,000 9,899,999 National Rural Utilities Cooperative Finance Corporation 6.00%, 05/15/06 700,000 736,962 New York Life Global Funding 1.35%, 02/26/07 144A++ 1,400,000 1,399,754 Nisource Finance Corporation 7.63%, 11/15/05 750,000 795,858 Pacific Gas & Electric Co. 1.81%, 04/03/06++ 3,100,000 3,102,099 PP&L Capital Funding, Inc. 7.75%, 04/15/05 800,000 829,282 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Premium Asset Trust 1.62%, 11/27/04 144A@++ $ 2,000,000 $ 2,001,660 SBC Communications, Inc. 5.75%, 05/02/06+++ 930,000 973,578 SLM Corporation 3.50%, 09/30/06+++ 1,700,000 1,709,642 1.29%, 01/25/07++ 1,200,000 1,200,984 3.63%, 03/17/08 120,000 118,444 Southtrust Bank NA 1.61%, 03/19/07++ 1,200,000 1,200,596 Sprint Capital Corporation 7.13%, 01/30/06 3,000,000 3,175,932 6.00%, 01/15/07 920,000 964,011 TCI Communications, Inc. 6.88%, 02/15/06+++ 840,000 887,524 Time Warner, Inc. 6.13%, 04/15/06 830,000 869,862 US Central Credit Union 2.75%, 05/30/08 610,000 582,982 Verizon Global Funding Corporation 6.75%, 12/01/05+++ 810,000 853,993 6.13%, 06/15/07+++ 875,000 933,127 Verizon Wireless Capital LLC 1.35%, 05/23/05 144A++ 1,400,000 1,399,041 Washington Mutual Bank FA 1.52%, 07/25/06++ +++ 1,500,000 1,508,210 Washington Mutual, Inc. 7.50%, 08/15/06+++ 780,000 845,784 Weyerhaeuser Co. 5.50%, 03/15/05 441,000 450,403 World Savings Bank FSB 1.32%, 03/02/06++(omg) 1,400,000 1,400,147 -------------- TOTAL CORPORATE BONDS (Cost $82,413,873) 80,766,756 -------------- FOREIGN BONDS -- 5.6% CANADA -- 0.6% Alcan, Inc. 1.62%, 12/08/04 144A++ 3,100,000 3,100,084 British Columbia Government 5.38%, 10/29/08 305,000 321,398 Ontario Province 3.50%, 09/17/07+++ 775,000 771,516 Quebec Province 7.00%, 01/30/07+++ 305,000 331,924 -------------- 4,524,922 -------------- FRANCE -- 0.5% France Telecom 8.20%, 03/01/06 720,000 772,241 French Treasury Note BTAN 3.50%, 01/12/09 (E) 2,800,000 3,401,571 -------------- 4,173,812 -------------- </Table> See Notes to Financial Statements. 43 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- GERMANY -- 1.2% Bundesobligation 4.00%, 02/16/07 (E) $ 3,575,000 $ 4,454,416 3.50%, 10/10/08 (E) 1,250,000 1,522,958 3.25%, 04/17/09 (E) 2,875,000 3,449,406 -------------- 9,426,780 -------------- ITALY -- 0.3% Republic of Italy 5.00%, 12/15/04 (J) 37,000,000 346,624 2.75%, 12/15/06 2,375,000 2,341,883 -------------- 2,688,507 -------------- JAPAN -- 0.5% ASIF II 1.20%, 01/26/05 (J) 405,000,000 3,732,615 Citigroup, Inc. 1.28%, 12/28/04 (J) 16,000,000 147,426 -------------- 3,880,041 -------------- NETHERLANDS -- 0.2% Deutsche Telekom International Finance BV 8.25%, 06/15/05 740,000 778,233 Telefonica Europa BV 7.35%, 09/15/05 780,000 822,274 -------------- 1,600,507 -------------- SUPRANATIONAL -- 0.1% European Investment Bank 0.88%, 11/08/04 (J) 60,000,000 551,507 -------------- UNITED KINGDOM -- 2.2% Holmes Financing PLC 1.29%, 01/15/08++ 2,600,000 2,602,543 Permanent Financing PLC 1.56%, 09/10/07++ 2,800,000 2,800,137 United Kingdom Treasury Bond 5.00%, 09/07/14 (U) 7,000,000 12,602,114 Vodafone Group PLC 3.95%, 01/30/08 230,000 229,965 -------------- 18,234,759 -------------- TOTAL FOREIGN BONDS (Cost $45,236,849) 45,080,835 -------------- MORTGAGE-BACKED SECURITIES -- 15.9% Asset Securitization Corporation 7.32%, 01/13/30 760,392 776,097 Bank of America Mortgage Securities 6.50%, 10/01/19 2,056,490 2,096,225 Bear Stearns Adjustable Rate Mortgage Trust 4.80%, 01/25/34 2,209,260 2,201,776 6.87%, 12/25/40++ 50,684 50,571 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Countrywide Alternative Loan Trust 6.00%, 10/25/32 $ 1,217,398 $ 1,231,035 Countrywide Home Loans, Inc. 4.88%, 07/25/19 144A@ 1,989,187 2,017,720 6.50%, 08/25/29 893,210 911,909 3.07%, 06/19/31++ 285,602 287,876 Credit-Based Asset Servicing and Securitization LLC 1.62%, 02/25/30++ 685,143 685,344 CS First Boston Mortgage Securities Corporation 1.70%, 02/25/32++ 165,289 165,341 Federal Home Loan Mortgage Corporation 9.50%, 10/01/04 3,788 3,832 9.50%, 12/01/04 4,940 4,997 9.50%, 01/01/05 5,707 5,773 9.50%, 06/01/05 10,947 11,298 5.75%, 07/28/05++ 1,618,031 1,671,007 10.00%, 12/01/05 6 6 8.00%, 03/01/06 174 181 7.00%, 05/01/06 3,919 4,007 8.75%, 08/01/06 3,345 3,375 8.50%, 12/01/07 16,633 17,652 8.50%, 01/01/08 12,880 13,642 8.00%, 05/01/08 20,409 20,870 8.50%, 06/01/08 16,200 16,595 8.75%, 07/01/08 12,030 12,934 8.00%, 01/01/09 7,157 7,521 7.50%, 03/01/09 72,383 73,795 5.50%, 04/01/09 1,302,624 1,343,544 6.00%, 06/01/09 567,991 594,827 6.00%, 07/01/10 1,099,993 1,151,965 16.25%, 07/01/11 1,409 1,671 15.25%, 08/01/11 2,761 3,219 3.50%, 08/15/15 1,800,000 1,813,616 5.00%, 11/15/16 7,561,175 7,708,303 10.75%, 02/01/19 122,101 134,826 4.29%, 09/01/23++ 1,005,680 1,014,294 3.58%, 07/01/27++ 145,731 148,623 2.11%, 06/01/28++ 660,309 656,899 7.38%, 03/01/31++ 136,043 137,202 1.64%, 02/15/33++ 3,157,672 3,163,566 6.00%, 04/01/33 3,507,181 3,593,101 3.50%, 12/15/33 1,800,000 1,813,372 Federal Housing Authority 7.43%, 09/01/22 14,321 14,888 Federal National Mortgage Association 6.00%, 08/01/08 468,692 490,551 6.50%, 11/01/08 620,565 657,003 5.50%, 06/01/09 887,001 915,818 5.50%, 07/01/09 649,183 670,274 3.49%, 12/01/09 1,644,432 1,685,800 3.00%, 08/25/09 4,010,000 4,011,116 </Table> See Notes to Financial Statements. 44 <Table> <Caption> PAR VALUE ----------- -------------- 3.50%, 09/25/09 $ 3,500,000 $ 3,524,183 5.50%, 04/01/13 693,052 712,772 5.75%, 04/25/16 4,300,000 4,445,813 3.48%, 08/01/22++ 723,393 737,499 3.55%, 02/01/24++ 1,550,646 1,607,256 5.07%, 03/01/24++ 149,561 149,408 3.35%, 12/01/24 CONV++ 314,219 318,361 9.00%, 05/01/25 500,705 564,217 9.00%, 07/01/25 334,388 376,456 1.55%, 09/25/30 690,306 689,389 5.09%, 12/01/30++ 109,238 109,024 6.66%, 02/01/31++ 214,087 219,977 4.74%, 09/01/31++ 336,430 346,869 3.31%, 03/25/32 843,279 812,520 5.19%, 10/01/32++ 1,183,744 1,190,469 4.32%, 03/11/33++ 1,587,294 1,603,796 4.34%, 04/01/33++ 2,902,678 2,909,002 4.30%, 06/01/33++ 789,132 794,265 5.50%, 06/01/33 44,662 44,577 5.50%, 07/01/33 50,276 50,181 4.33%, 10/01/33++ 3,547,261 3,557,586 5.50%, 10/01/33 260,494 260,000 4.32%, 12/01/33++ 1,124,154 1,123,473 5.00%, 05/01/34 4,194,482 4,056,640 5.00%, 06/01/34 1,797,816 1,738,735 6.20%, 04/01/40++ 1,252,780 1,271,625 FFCA Secured Lending Corporation 7.27%, 02/18/11 144A 1,218,384 1,258,318 First Republic Mortgage Loan Trust 3.85%, 06/25/30 817,172 826,762 Government National Mortgage Association 8.25%, 03/15/06 4,052 4,224 8.25%, 05/15/06 8,095 8,459 7.00%, 10/15/07 3,249 3,388 7.00%, 11/15/07 74,072 77,247 7.00%, 12/15/07 52,076 54,309 7.00%, 01/15/08 528 563 7.00%, 05/15/08 13,955 14,878 7.00%, 06/15/08 8,230 8,773 7.00%, 07/15/08 141,333 150,678 7.00%, 08/15/08 86,948 92,697 7.00%, 09/15/08 190,958 203,586 7.00%, 09/18/08 102,813 109,612 7.00%, 11/15/08 191,685 204,361 6.00%, 12/15/08 504,102 528,756 7.00%, 04/15/09 43,674 46,589 6.00%, 02/15/11 788,911 828,512 13.50%, 02/15/11 4,061 4,661 7.00%, 05/12/12 120,687 128,691 7.00%, 05/15/12 297,865 317,620 4.38%, 06/20/17++ 49,596 49,668 4.38%, 06/20/21++ 26,638 26,711 4.63%, 10/20/27++ 238,417 240,372 </Table> <Table> <Caption> PAR VALUE ----------- -------------- 8.50%, 10/15/29 $ 150,058 $ 164,697 8.50%, 01/15/30 98,789 108,370 1.85%, 02/16/30++ 837,229 844,846 8.50%, 03/15/30 37,491 41,127 8.50%, 04/15/30 288,819 316,830 8.50%, 05/15/30 350,254 384,224 8.50%, 06/15/30 176,935 194,096 8.50%, 07/15/30 454,181 498,252 8.50%, 08/15/30 87,975 96,508 8.50%, 09/15/30 23,424 25,696 8.50%, 10/15/30 47,742 52,372 8.50%, 11/15/30 232,193 254,712 8.50%, 12/15/30 288,426 316,399 8.50%, 01/15/31 117,940 129,359 1.45%, 01/16/31++ 1,415,852 1,414,523 8.50%, 02/15/31 141,657 155,373 3.75%, 05/20/34++ 2,875,002 2,874,045 4.23%, 06/20/34++(omg) 3,875,000 3,799,922 GS Mortgage Securities Corporation II 4.34%, 01/10/40 IO 144A(omg) 43,459,665 1,611,602 6.04%, 08/15/18 144A 550,996 583,095 IFC SBA Loan-Backed ADJ Rate Certificate 2.00%, 01/15/24 144A++ 803,337 771,204 LB-UBS Commercial Mortgage Trust 3.98%, 08/15/33 IO 144A(omg) 38,255,000 1,527,499 Mellon Residential Funding Corporation 6.75%, 01/25/13 13,093 13,080 MLCC Mortgage Investors, Inc. 1.62%, 03/15/25 STEP 1,522,816 1,527,082 Morgan Stanley Capital I 6.22%, 06/30/30 1,190,600 1,218,373 Residential Accredit Loans, Inc. 6.00%, 12/25/16 581,959 589,509 1.70%, 01/25/33++ 2,434,882 2,437,653 Residential Funding Mortgage Securities I 6.50%, 03/25/32 392,285 398,400 5.50%, 09/25/33 2,937,265 2,996,100 Sequoia Mortgage Trust 1.68%, 10/20/27++ 1,592,188 1,595,323 1.73%, 10/20/33++ 1,165,598 1,167,625 Structured Adjustable Rate Mortgage Loan Trust 4.92%, 03/25/34++ 3,267,788 3,284,127 Structured Asset Securities Corporation 7.50%, 06/28/31 302,747 303,600 1.46%, 08/25/33++ 518,394 518,479 4.99%, 12/25/33++ 3,555,650 3,600,693 </Table> See Notes to Financial Statements. 45 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- Wachovia Bank Commercial Mortgage Trust 4.45%, 06/15/35 IO 144A(omg) $11,077,962 $ 887,247 Washington Mutual 3.59%, 01/25/41 669,908 673,367 Washington Mutual Mortgage Securities Corporation 3.69%, 07/25/31++ 457,921 465,184 Washington Mutual MSC Mortgage Pass-Through Certificates 3.68%, 03/25/32++ 824,165 831,685 Wells Fargo Mortgage-Backed Securities Trust 3.41%, 06/25/34++ 3,700,000 3,683,721 3.40%, 07/25/34++ 3,700,000 3,688,728 -------------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $129,071,321) 128,464,112 -------------- MUNICIPAL BONDS -- 0.8% Honolulu, Hawaii City & County, Series B General Obligation Bond (MBIA Insured) (Non-Callable) 5.00%, 07/01/12 1,200,000 1,293,240 Missouri Higher Education Loan Authority, Revenue Bond (GTD STD LNS Insured) (Callable 04/01/05 @ $100) 2.04%, 07/25/08++ 691,366 691,366 New York City, New York Municipal Water Finance Authority Water & Sewer System, Series C Revenue Bond (Callable @ $100) 5.00%, 06/15/35 3,200,000 3,097,184 Texas State Public Finance Authority, Series B Revenue Bonds (Non-Callable) 2.63%, 06/15/06 1,365,000 1,356,414 -------------- TOTAL MUNICIPAL BONDS (Cost $6,687,344) 6,438,204 -------------- <Caption> SHARES VALUE ----------- -------------- SHORT-TERM INVESTMENTS -- 35.7% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 29,464,479 $ 29,464,479 Northern Institutional Liquid Assets Portfolio sec. 258,366,313 258,366,314 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $287,830,792) 287,830,793 -------------- <Caption> PAR ----------- U.S. TREASURY OBLIGATIONS -- 36.2% U.S. Treasury Bills 0.94%, 07/01/04 $ 8,000,000 8,000,000 0.99%, 07/15/04+++ 34,500,000 34,486,786 1.05%, 07/22/04 15,000,000 14,990,375 1.14%, 09/02/04++++ 505,000 503,931 1.18%, 09/02/04 60,000 59,873 1.19%, 09/02/04 40,000 39,915 1.26%, 09/16/04 180,000 179,523 1.30%, 09/16/04 50,000 49,867 1.32%, 09/16/04 130,000 129,655 1.39%, 09/16/04 110,000 109,708 -------------- 58,549,633 -------------- U.S. Treasury Bonds 10.38%, 11/15/09+++ 2,700,000 2,787,434 10.00%, 05/15/10+++ 5,315,000 5,675,012 12.75%, 11/15/10+++ 12,315,000 14,018,423 10.38%, 11/15/12+++ 12,925,000 15,786,685 -------------- 38,267,554 -------------- U.S. Treasury Notes 1.50%, 02/28/05++++ +++ 470,000 469,211 1.13%, 06/30/05+++ 4,000,000 3,964,532 1.50%, 07/31/05+++ 10,360,000 10,294,038 2.00%, 08/31/05+++ 28,550,000 28,496,498 1.63%, 09/30/05+++ 11,170,000 11,090,592 1.63%, 10/31/05+++ 65,000 64,441 5.75%, 11/15/05+++ 2,890,000 3,022,648 1.88%, 11/30/05+++ 10,250,000 10,182,340 1.88%, 12/31/05+++ 17,200,000 17,062,280 1.88%, 01/31/06+++ 5,010,000 4,963,818 2.25%, 04/30/06+++ 24,065,000 23,908,024 2.50%, 05/31/06+++ 48,810,000 48,661,325 6.50%, 10/15/06 975,000 1,052,810 2.63%, 11/15/06+++ 6,950,000 6,903,852 3.50%, 11/15/06+++ 12,045,000 12,204,512 2.25%, 02/15/07+++ 12,300,000 12,064,098 -------------- 194,405,019 -------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $293,309,104) 291,222,206 -------------- TOTAL INVESTMENTS -- 135.8% (Cost $1,100,495,316) 1,095,007,090 -------------- </Table> See Notes to Financial Statements. 46 <Table> <Caption> NUMBER OF CONTRACTS VALUE ----------- -------------- WRITTEN OPTIONS -- 0.0% CALL SWAPTIONS -- 0.0% 3-Month LIBOR, Strike Price $3.80, Expires 10/07/04 (2,170) $ (3,885) 3-Month LIBOR, Strike Price $4.00, Expires 10/31/05 (640) (17,056) -------------- PUT SWAPTIONS -- 0.0% 3-Month LIBOR, Strike Price $6.00, Expires 10/07/04 (2,170) (14,994) 3-Month LIBOR, Strike Price $7.00, Expires 10/31/05 (640) (35,373) -------------- TOTAL WRITTEN OPTIONS (Cost $(595,524)) (71,308) -------------- LIABILITIES IN EXCESS OF OTHER ASSETS -- (35.8%) (288,715,154) -------------- NET ASSETS -- 100.0% $ 806,220,628 ============== </Table> Interest rate swap agreements outstanding at June 30, 2004: <Table> <Caption> UNREALIZED EXPIRATION NOTIONAL APPRECIATION/ DESCRIPTION DATE VALUE (DEPRECIATION) - ----------- ---------- ----------- -------------- BRITISH POUNDS Receive fixed rate payments of 4.25% and pay variable rate payments on the six month LIBOR floating rate(c) 03/17/05 23,500,000 $(198,855) EURODOLLARS Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(b) 03/15/07 15,600,000 203,511 U.S. DOLLARS Receive variable rate payments on the three month LIBOR floating rate and pay fixed rate payments of 5.00%(a) 12/15/14 (1,100,000) 28,601 --------- $ 33,257 ========= </Table> See Notes to Financial Statements. 47 MEDIUM-DURATION BOND FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> LEHMAN BROTHERS RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* AGGREGATE BOND INDEX** ----------------- -------------------- ------------- ---------------------- One Year 1.72% 1.84% 1.41% 0.32% Since Inception (8/27/01 -- 6/30/04) 6.23% 6.11% 5.91% 5.68% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> LEHMAN BROTHERS AGGREGATE BOND RETIREMENT CLASS INDEX** ---------------- ------------------------------ 08/27/01 10000.00 10000.00 08/31/01 10051.00 10056.00 09/30/01 10123.00 10173.00 10/31/01 10364.00 10386.00 11/30/01 10223.00 10243.00 12/31/01 10149.00 10177.00 01/31/02 10253.00 10260.00 02/28/02 10387.00 10359.00 03/31/02 10223.00 10187.00 04/30/02 10422.00 10384.00 05/31/02 10479.00 10473.00 06/30/02 10453.00 10563.00 07/31/02 10466.00 10691.00 08/31/02 10685.00 10871.00 09/30/02 10774.00 11047.00 10/31/02 10752.00 10997.00 11/30/02 10833.00 10994.00 12/31/02 11079.00 11221.00 01/31/03 11165.00 11231.00 02/28/03 11315.00 11386.00 03/31/03 11312.00 11377.00 04/30/03 11461.00 11471.00 05/31/03 11671.00 11685.00 06/30/03 11674.00 11662.00 07/30/03 11295.00 11270.00 08/31/03 11403.00 11345.00 09/30/03 11721.00 11645.00 10/31/03 11638.00 11536.00 11/30/03 11704.00 11564.00 12/31/03 11811.00 11682.00 01/31/04 11898.00 11776.00 02/29/04 12014.00 11903.00 03/31/04 12105.00 11992.00 04/30/04 11831.00 11680.00 05/31/04 11802.00 11634.00 06/30/04 11875.00 11700.00 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Lehman Brothers Aggregate Bond Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 48 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 PAR VALUE - ------------- ----------- -------------- AGENCY OBLIGATIONS -- 18.1% Federal Home Loan Bank 1.20%, 07/01/04 $ 3,700,000 $ 3,700,000 1.04%, 07/16/04 3,440,000 3,438,509 1.17%, 07/16/04 28,800,000 28,786,020 2.75%, 05/15/06 3,000,000 2,990,958 2.75%, 11/15/06+++ 3,000,000 2,969,624 2.88%, 02/15/07 700,000 692,283 6.50%, 08/15/07 2,500,000 2,716,633 4.50%, 09/16/13 50,000 47,952 5.25%, 06/18/14 410,000 411,882 Federal Home Loan Mortgage Corporation 1.30%, 07/01/04 8,000,000 8,000,000 1.07%, 07/06/04 1,600,000 1,599,762 1.04%, 07/26/04 3,520,000 3,517,445 2.27%, 04/28/06 5,000,000 4,945,975 2.25%, 12/04/06 2,000,000 1,955,886 2.85%, 02/23/07 5,700,000 5,630,956 4.88%, 03/15/07 1,000,000 1,038,577 3.00%, 07/09/08 2,000,000 1,935,736 3.38%, 04/15/09+++ 130,000 125,317 4.25%, 05/04/09+++ 4,000,000 3,969,624 6.63%, 09/15/09+++ 1,500,000 1,659,392 7.00%, 03/15/10 1,600,000 1,804,694 Federal National Mortgage Association 1.13%, 07/14/04 40,000,000 39,983,678 1.04%, 07/21/04 3,400,000 3,398,147 1.23%, 09/01/04 7,600,000 7,582,786 1.03%, 09/08/04++++ 835,000 832,896 3.66%, 02/25/09 4,600,000 4,511,928 3.85%, 04/14/09 4,000,000 3,944,308 6.63%, 09/15/09 2,500,000 2,765,555 Financing Corporation Principle STRIPS 5.74%, 11/30/17(omg) 1,130,000 531,182 5.86%, 04/05/19(omg) 620,000 265,250 Resolution Funding Corporation STRIPS 5.51%, 01/15/17(omg) 5,176,000 2,628,181 -------------- TOTAL AGENCY OBLIGATIONS (Cost $147,021,907) 148,381,136 -------------- ASSET-BACKED SECURITIES -- 4.3% Amortizing Residential Collateral Trust 1.58%, 04/25/32++ 293,174 293,312 AQ Finance NIM Trust 1.95%, 12/25/07 144A@++ 407,778 410,071 1.52%, 01/25/09 144A++ 281,803 281,537 8.74%, 03/25/35 144A@++ 70,818 71,106 Argent Securities, Inc. 1.46%, 10/25/20++ 783,596 784,119 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Bayview Financial Acquisition Trust 1.68%, 11/25/31 144A++ $ 1,779,000 $ 1,779,988 Centex Home Equity 1.60%, 09/26/33++ 1,788,593 1,790,129 Chase Funding Net Interest Margin 5.00%, 12/17/33 144A@ 132,300 131,556 6.88%, 06/27/36 144A@ 75,983 75,960 Chesapeake Funding LLC 1.40%, 08/07/08++ 3,100,000 3,105,027 Citibank Credit Card Issuance Trust 2.17%, 02/09/09++ 670,000 679,839 CitiFinancial Mortgage Securities, Inc. 1.59%, 08/25/33 STEP 2,119,371 2,120,347 Conseco Finance Securitizations Corporation 6.77%, 09/01/32 1,989,805 2,043,472 6.85%, 02/01/33 IO@(omg) 13,554,000 720,508 5.16%, 05/01/33 206,533 208,859 Countrywide Home Equity Loan Trust 1.50%, 04/15/28++ 357,850 357,535 1.50%, 06/15/29++ 2,335,108 2,332,131 Daimler Chrysler Master Owner Trust 1.30%, 05/15/07++ 910,000 910,366 EQCC Trust 1.60%, 10/25/31++ 582,910 584,128 Fleet Home Equity Loan Trust 1.49%, 05/30/31++ 1,233,856 1,232,205 HFC Home Equity Loan Asset-Backed Certificates 1.63%, 10/20/32++ 1,032,771 1,033,846 1.83%, 10/20/32++ 1,440,255 1,443,727 Household Mortgage Loan Trust 1.61%, 06/20/33++ 1,317,815 1,320,188 Long Beach Asset Holdings Corporation 7.26%, 06/15/35 144A@ 87,283 87,992 Madison Avenue Manufactured Housing Contract 1.65%, 09/25/08++ 2,177,282 2,174,883 Merrill Lynch Mortgage Investors, Inc. 1.62%, 08/25/09++ 137,996 138,161 Metropolitan Asset Funding, Inc. 1.76%, 04/25/29 STEP 144A 173,499 173,518 </Table> See Notes to Financial Statements. 49 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- New Century Home Equity Loan Trust 7.22%, 11/25/27 $ 183,976 $ 186,099 Nextcard Credit Card Master Note Trust 6.83%, 12/15/06++ 910,000 137,069 Novastar NIM Trust 7.39%, 07/01/07 144A@ 94,879 94,862 Provident Bank Home Equity Loan Trust 1.57%, 08/25/31++ 629,219 629,330 Quest Trust 1.29%, 06/25/34 144A@++ 1,400,000 1,397,323 Residential Asset Mortgage Products, Inc. 1.34%, 03/25/34 STEP 3,414,224 3,412,500 Residential Funding Mortgage Securities II 8.09%, 03/25/20 79,437 79,456 7.18%, 12/25/22 180,583 180,329 Sail Net Interest Margin Notes 6.75%, 11/27/33 144A@ 134,528 134,073 Salomon Brothers Mortgage Securities VII 1.54%, 03/30/28++ 193,149 193,194 1.58%, 09/24/32 STEP 193,029 193,115 Saxon Asset Securities Trust 1.62%, 06/25/33 STEP 185,384 185,750 Structured Asset Securities Corporation 1.75%, 02/25/33++ 1,179,418 1,182,590 SVO Timeshare Mortgage Corporation 5.47%, 10/20/13 144A 525,357 538,994 -------------- TOTAL ASSET-BACKED SECURITIES (Cost $35,913,479) 34,829,194 -------------- CERTIFICATES OF DEPOSIT -- 0.7% Wells Fargo Bank NA 1.09%, 07/07/04 (Cost $5,500,000) 5,500,000 5,500,000 -------------- COMMERCIAL PAPER -- 6.5% General Electric Capital Corporation 1.30%, 09/08/04 7,500,000 7,479,875 1.46%, 09/14/04 800,000 797,622 HBOS Treasury Services PLC 1.35%, 09/07/04 7,600,000 7,579,960 KFW International Finance, Inc. 1.10%, 08/10/04 5,200,000 5,193,271 1.91%, 08/10/04 7,700,000 7,690,034 1.11%, 08/23/04 7,600,000 7,584,938 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Nestle Capital Corporation 1.11%, 08/25/04 $ 1,200,000 $ 1,197,584 1.13%, 08/30/04 600,000 598,636 1.24%, 09/14/04 400,000 398,811 Royal Bank of Scotland PLC 1.24%, 09/13/04 1,800,000 1,799,651 Shell Finance UK PLC 1.35%, 08/27/04 4,600,000 4,590,168 Spintab AB 1.26%, 09/08/04 5,300,000 5,285,473 Swedbank 1.15%, 09/01/04 2,900,000 2,893,013 Total Capital SA 1.07%, 07/23/04 600,000 599,604 -------------- TOTAL COMMERCIAL PAPER (Cost $53,693,947) 53,688,640 -------------- CORPORATE BONDS -- 13.9% Ace Capital Trust II 9.70%, 04/01/30+++ 60,000 79,111 Ace INA Holdings, Inc. 8.20%, 08/15/04 550,000 553,903 8.30%, 08/15/06 550,000 603,589 5.88%, 06/15/14 250,000 253,396 AES Corporation (The) 10.00%, 07/15/05 144A 68,660 70,548 9.50%, 06/01/09+++ 42,000 45,098 9.38%, 09/15/10+++ 10,000 10,713 AGCO Corporation 9.50%, 05/01/08 67,000 73,365 Allied Waste North America 8.88%, 04/01/08+++ 265,000 291,500 American Standard, Inc. 7.38%, 02/01/08+++ 170,000 184,450 AmerisourceBergen Corporation 8.13%, 09/01/08 80,000 86,600 AMFM, Inc. 8.00%, 11/01/08 1,600,000 1,818,152 Anthem Insurance Cos., Inc. 9.13%, 04/01/10 144A@ 100,000 122,797 ANZ Capital Trust I 4.48%, 01/29/49 144A 350,000 340,454 5.36%, 12/29/49 144A+++ 800,000 766,690 Apache Corporation 6.25%, 04/15/12+++ 340,000 370,369 Assurant, Inc. 6.75%, 02/15/34 144A 575,000 570,835 Astoria Financial Corporation 5.75%, 10/15/12 450,000 450,380 AT&T Wireless Services, Inc. 7.88%, 03/01/11 100,000 113,896 8.13%, 05/01/12 135,000 156,312 8.75%, 03/01/31 150,000 183,407 Bank One Corporation 4.13%, 09/01/07 1,100,000 1,113,577 </Table> See Notes to Financial Statements. 50 <Table> <Caption> PAR VALUE ----------- -------------- Bank United Corporation 8.88%, 05/01/07 $ 125,000 $ 141,411 BellSouth Capital Funding 7.88%, 02/15/30 460,000 534,567 BellSouth Corporation 6.88%, 10/15/31 10,000 10,450 Boeing Co. (The) 6.63%, 02/15/38 210,000 215,150 Calpine Corporation 7.75%, 04/15/09 96,000 61,440 8.50%, 02/15/11+++ 519,000 341,243 Cendant Corporation 6.25%, 01/15/08+++ 150,000 160,088 CenterPoint Energy Resources Corporation 7.88%, 04/01/13 50,000 56,035 5.95%, 01/15/14 1,025,000 1,009,496 Charter Communications Operating LLC 8.00%, 04/30/12 144A@+++ 250,000 243,125 Chesapeake Energy Corporation 9.00%, 08/15/12 61,000 68,930 Cincinnati Bell, Inc. 7.25%, 07/15/13 100,000 94,000 Citigroup, Inc. 5.00%, 03/06/07+++ 2,200,000 2,283,447 Cleveland Electric Illuminating Co. (The) 5.65%, 12/15/13 144A 60,000 58,492 7.88%, 11/01/17 2,050,000 2,370,654 CNA Financial Corporation 6.50%, 04/15/05 100,000 102,676 6.75%, 11/15/06 180,000 190,653 6.95%, 01/15/18 40,000 40,356 7.25%, 11/15/23 50,000 50,331 Comcast Cable Communications Holdings, Inc. 8.38%, 03/15/13 300,000 352,745 9.46%, 11/15/22 525,000 676,477 Comcast Cable Communications, Inc. 8.38%, 05/01/07 650,000 726,913 6.75%, 01/30/11+++ 740,000 799,585 ConocoPhillips 8.75%, 05/25/10 230,000 278,317 7.00%, 03/30/29 255,000 282,854 ConocoPhillips Holding Co. 6.95%, 04/15/29 1,060,000 1,170,611 Cox Communications, Inc. 7.13%, 10/01/12+++ 75,000 82,326 4.63%, 06/01/13+++ 170,000 157,201 5.50%, 10/01/15+++ 55,000 53,009 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Credit Suisse First Boston USA, Inc. 4.63%, 01/15/08 $ 600,000 $ 611,671 CSC Holdings, Inc. 7.63%, 04/01/11 530,000 533,975 6.75%, 04/15/12 144A+++ 60,000 57,900 DaimlerChrysler NA Holding Corporation 7.40%, 01/20/05 1,700,000 1,746,254 7.30%, 01/15/12+++ 550,000 601,178 6.50%, 11/15/13+++ 210,000 215,676 Delta Air Lines, Inc. 6.42%, 07/02/12+++ 400,000 414,000 6.72%, 01/02/23 745,532 767,846 Devon Energy Corporation 7.95%, 04/15/32 725,000 839,988 Devon Financing Corporation ULC 6.88%, 09/30/11 60,000 65,413 Dex Media West LLC/Dex Media Finance Co. 8.50%, 08/15/10 144A+++ 100,000 109,500 Dominion Resources, Inc. 4.13%, 02/15/08 70,000 69,953 5.13%, 12/15/09 230,000 233,162 5.70%, 09/17/12 310,000 315,820 Dryden Investor Trust 7.16%, 07/23/08@ 1,639,251 1,741,081 Dynegy Holdings, Inc. 8.75%, 02/15/12+++ 910,000 869,050 Eastman Kodak Co. 7.25%, 11/15/13+++ 120,000 122,225 Echostar DBS Corporation 4.36%, 10/01/08 144A++ 103,000 107,635 5.75%, 10/01/08 144A+++ 500,000 495,625 9.13%, 01/15/09 69,000 75,986 El Paso Corporation 8.34%, 02/28/21 CONV(omg)+++ 990,000 478,913 8.05%, 10/15/30+++ 600,000 492,000 7.80%, 08/01/31+++ 1,150,000 928,624 7.75%, 01/15/32+++ 1,030,000 831,725 El Paso Natural Gas Co. 8.38%, 06/15/32 210,000 201,600 EOP Operating LP 7.75%, 11/15/07 100,000 111,060 Firstar Bank NA 7.13%, 12/01/09 170,000 191,674 FirstEnergy Corporation 5.50%, 11/15/06 600,000 621,056 6.45%, 11/15/11 170,000 176,506 7.38%, 11/15/31+++ 1,700,000 1,777,202 Ford Motor Co. 6.63%, 10/01/28 700,000 614,713 6.38%, 02/01/29 675,000 572,064 </Table> See Notes to Financial Statements. 51 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- Ford Motor Credit Co. 6.70%, 07/16/04 $ 1,000,000 $ 1,001,435 7.38%, 10/28/09+++ 100,000 106,840 7.88%, 06/15/10+++ 590,000 642,722 7.38%, 02/01/11 320,000 337,964 7.00%, 10/01/13+++ 1,850,000 1,870,663 Fresenius Medical Care Capital Trust II 7.88%, 02/01/08 230,000 243,225 GATX Financial Corporation 6.00%, 11/19/08 325,000 330,538 General Electric Capital Corporation 5.45%, 01/15/13+++ 1,710,000 1,736,712 General Electric Co. 5.00%, 02/01/13 90,000 88,728 General Motors Acceptance Corporation 5.25%, 05/16/05 1,100,000 1,124,869 2.40%, 10/20/05++ 1,700,000 1,714,452 7.25%, 03/02/11 310,000 325,784 8.00%, 11/01/31 675,000 693,539 Georgia-Pacific Corporation 8.13%, 05/15/11 4,000 4,440 9.50%, 12/01/11+++ 46,000 54,280 9.38%, 02/01/13 4,000 4,600 8.88%, 05/15/31 64,000 68,640 Greenpoint Financial Corporation 3.20%, 06/06/08 350,000 337,087 HCA, Inc. 6.75%, 07/15/13+++ 1,100,000 1,128,710 Host Marriott LP 9.50%, 01/15/07 500,000 548,750 9.25%, 10/01/07+++ 32,000 35,440 Household Finance Corporation 8.00%, 07/15/10 780,000 906,211 7.00%, 05/15/12 690,000 763,364 6.38%, 11/27/12+++ 110,000 116,821 IMC Global, Inc. 10.88%, 06/01/08 119,000 138,933 10.88%, 08/01/13 50,000 59,875 Indiana Michigan Power Co. 6.88%, 07/01/04 2,000,000 2,000,000 Insight Midwest LP/Insight Capital, Inc. 10.50%, 11/01/10 179,000 196,005 International Paper Co. 5.50%, 01/15/14 135,000 132,402 iStar Financial, Inc. 5.70%, 03/01/14 144A@+++ 525,000 495,409 J.P. Morgan Chase & Co. 6.63%, 03/15/12+++ 320,000 346,543 JPM Capital Trust II 7.95%, 02/01/27+++ 700,000 754,881 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Kansas City Southern Railway 9.50%, 10/01/08 $ 119,000 $ 129,859 Kellogg Co. 6.60%, 04/01/11 500,000 549,186 Lamar Media Corporation 7.25%, 01/01/13 100,000 102,250 Lear Corporation 7.96%, 05/15/05 86,000 89,693 Lehman Brothers Holdings, Inc. 8.25%, 06/15/07 100,000 112,523 4.00%, 01/22/08 70,000 69,916 Liberty Media Corporation 3.02%, 09/17/06++ +++ 1,390,000 1,416,105 3.75%, 02/15/30 CONV 40,000 26,350 Liberty Mutual Group 5.75%, 03/15/14 144A+++ 250,000 241,703 7.00%, 03/15/34 144A+++ 75,000 73,107 Lockheed Martin Corporation 8.50%, 12/01/29 190,000 239,033 Lyondell Chemical Co. 9.88%, 05/01/07+++ 500,000 525,000 MacDermid, Inc. 9.13%, 07/15/11 111,000 124,320 Manor Care, Inc. 8.00%, 03/01/08 130,000 144,463 MeadWestvaco Corporation 6.85%, 04/01/12+++ 295,000 316,928 Mediacom LLC/Mediacom Capital Corporation 9.50%, 01/15/13+++ 500,000 485,000 Merrill Lynch & Co., Inc. 3.38%, 09/14/07+++ 420,000 416,100 Millennium America, Inc. 7.00%, 11/15/06 50,000 51,625 9.25%, 06/15/08+++ 30,000 32,400 Nabisco, Inc. 7.55%, 06/15/15 1,530,000 1,761,382 Nextel Communications, Inc. 9.38%, 11/15/09 250,000 268,438 9.50%, 02/01/11 160,000 180,000 5.95%, 03/15/14 250,000 231,250 Niagara Mohawk Power Corporation 7.75%, 10/01/08 1,340,000 1,509,760 Omnicare, Inc. 8.13%, 03/15/11 239,000 256,925 Oncor Electric Delivery Co. 6.38%, 01/15/15 140,000 147,718 Pacific Energy Partners LP 7.13%, 06/15/14 144A 70,000 71,400 Pacific Gas & Electric Co. 1.81%, 04/03/06++ 1,700,000 1,701,151 6.05%, 03/01/34 460,000 434,092 Patrons' Legacy 5.65%, 01/17/17 144A@ 640,000 631,348 </Table> See Notes to Financial Statements. 52 <Table> <Caption> PAR VALUE ----------- -------------- Peabody Energy Corporation 6.88%, 03/15/13+++ $ 165,000 $ 167,888 Pemex Project Funding Master Trust 9.13%, 10/13/10 1,075,000 1,236,250 Penney (JC) Co., Inc. 8.00%, 03/01/10+++ 176,000 197,560 PHH Corporation 7.13%, 03/01/13 200,000 218,777 Pioneer Natural Resources Co. 7.50%, 04/15/12 133,000 150,838 Plains Exploration & Production Co. 7.13%, 06/15/14 144A 100,000 102,250 Pliant Corporation 11.13%, 06/15/09 STEP 144A+++ 250,000 211,875 Popular North America, Inc. 6.13%, 10/15/06 200,000 211,039 4.25%, 04/01/08+++ 300,000 300,093 3.88%, 10/01/08+++ 250,000 244,984 PP&L Capital Funding Trust I 7.29%, 05/18/06 1,400,000 1,470,487 PP&L Capital Funding, Inc. 7.75%, 04/15/05 700,000 725,622 Premium Asset Trust 1.62%, 11/27/04 144A@++ 2,000,000 2,001,659 Pride International, Inc. 7.38%, 07/15/14 144A 130,000 131,950 Prudential Funding LLC 6.60%, 05/15/08 144A 600,000 654,866 PVNGS II Funding Corporation, Inc. 8.00%, 12/30/15 1,800,000 2,010,014 Qwest Capital Funding, Inc. 7.25%, 02/15/11+++ 200,000 172,000 Qwest Corporation 5.63%, 11/15/08 600,000 589,500 9.13%, 03/15/12 144A 250,000 271,250 7.50%, 06/15/23 500,000 443,750 Rabobank Capital Funding II 5.26%, 12/29/49 144A++ 1,100,000 1,066,407 Raytheon Co. 6.00%, 12/15/10 20,000 21,145 5.50%, 11/15/12 10,000 10,108 5.38%, 04/01/13 115,000 114,873 Ryland Group, Inc. 9.75%, 09/01/10 136,000 151,640 Safeco Corporation 4.20%, 02/01/08 450,000 458,871 Sara Lee Corporation 6.25%, 09/15/11 240,000 259,793 3.88%, 06/15/13 150,000 136,220 Schuler Homes, Inc. 9.38%, 07/15/09 38,000 41,895 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Simon Property Group LP 7.38%, 01/20/06 $ 900,000 $ 960,729 SLM Corporation 2.82%, 04/01/09++ 1,100,000 1,078,946 Sonat, Inc. 7.63%, 07/15/11+++ 460,000 412,850 Southern California Edison Co. 6.38%, 01/15/06 500,000 523,036 Southern Natural Gas Co. 8.88%, 03/15/10 130,000 142,675 8.00%, 03/01/32+++ 400,000 378,000 Sovereign Bancorp, Inc. 10.50%, 11/15/06 150,000 171,943 Sovereign Bank 5.13%, 03/15/13 50,000 47,612 4.38%, 08/01/13++ 425,000 420,121 Sprint Capital Corporation 4.78%, 08/17/06 STEP 910,000 928,075 6.00%, 01/15/07 340,000 356,265 6.13%, 11/15/08 310,000 326,158 8.38%, 03/15/12 300,000 345,299 6.88%, 11/15/28 575,000 554,310 SPX Corporation 7.50%, 01/01/13 75,000 77,250 Systems 2001 Asset Trust LLC 6.66%, 09/15/13 144A 1,006,410 1,086,012 Target Corporation 5.88%, 03/01/12+++ 560,000 592,898 TCI Communications Financing III 9.65%, 03/31/27 2,610,000 3,083,740 Tenet Healthcare Corporation 7.38%, 02/01/13+++ 170,000 154,700 Tennessee Valley Authority 6.75%, 11/01/25 1,420,000 1,582,012 7.13%, 05/01/30+++ 3,360,000 3,917,176 Time Warner Entertainment Co. LP 8.38%, 03/15/23 100,000 116,991 8.38%, 07/15/33 320,000 375,709 Time Warner, Inc. 6.88%, 05/01/12+++ 110,000 119,046 7.70%, 05/01/32 1,310,000 1,435,384 Triton PCS, Inc. 8.75%, 11/15/11+++ 500,000 415,000 TXU Energy Co. 7.00%, 03/15/13+++ 150,000 163,611 Tyson Foods, Inc. 7.25%, 10/01/06 100,000 107,762 8.25%, 10/01/11 400,000 460,053 Unilever Capital Corporation 7.13%, 11/01/10 760,000 860,886 Union Pacific Corporation 6.65%, 01/15/11+++ 260,000 284,360 </Table> See Notes to Financial Statements. 53 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- Unisys Corporation 6.88%, 03/15/10+++ $ 128,000 $ 132,480 United Air Lines, Inc. 9.21%, 01/21/17@# 200,000 80,605 9.56%, 10/19/18@# 300,000 153,581 United Telephone Co. of Kansas 6.89%, 07/01/08@ 500,000 527,305 Ventas Realty LP 8.75%, 05/01/09 70,000 75,950 9.00%, 05/01/12 20,000 22,000 Verizon Global Funding Corporation 6.88%, 06/15/12 160,000 174,834 4.38%, 06/01/13+++ 390,000 358,594 Verizon New York, Inc. 6.88%, 04/01/12 275,000 295,275 Verizon Wireless Capital LLC 1.35%, 05/23/05 144A++ 1,200,000 1,199,178 Vintage Petroleum, Inc. 8.25%, 05/01/12 250,000 266,250 Washington Mutual, Inc. 8.25%, 04/01/10 250,000 291,440 Waste Management, Inc. 7.75%, 05/15/32 980,000 1,119,210 Wells Fargo & Co. 5.00%, 11/15/14 900,000 871,560 Wells Fargo Bank NA 6.45%, 02/01/11 1,260,000 1,375,621 Westlake Chemical Corporation 8.75%, 07/15/11 35,000 38,150 Westport Resources Corporation 8.25%, 11/01/11 144A 20,000 22,725 8.25%, 11/01/11 40,000 45,450 Weyerhaeuser Co. 6.00%, 08/01/06 200,000 210,525 6.75%, 03/15/12+++ 410,000 444,681 6.88%, 12/15/33 215,000 221,061 Williams Cos., Inc. 7.50%, 01/15/31+++ 270,000 245,700 7.75%, 06/15/31 200,000 184,000 8.75%, 03/15/32+++ 1,130,000 1,135,650 Xerox Corporation 7.13%, 06/15/10+++ 250,000 256,250 XTO Energy, Inc. 7.50%, 04/15/12 83,000 93,794 6.25%, 04/15/13 215,000 224,033 -------------- TOTAL CORPORATE BONDS (Cost $110,162,003) 113,829,801 -------------- FOREIGN BONDS -- 9.8% AUSTRALIA -- 0.1% QBE Insurance Group, Ltd. 5.65%, 07/01/23 144A++ 700,000 667,053 TXU Australia Holdings Partnership LP 6.15%, 11/15/13 144A 200,000 208,725 -------------- 875,778 -------------- BAHAMAS -- 0.0% Teekay Shipping Corporation 8.88%, 07/15/11+++ 206,000 228,918 -------------- BERMUDA -- 0.7% Arch Capital Group, Ltd. 7.35%, 05/01/34 550,000 555,317 Intelsat, Ltd. 6.50%, 11/01/13+++ 110,000 97,340 </Table> <Table> <Caption> PAR VALUE ----------- -------------- Tyco International Group SA 6.38%, 02/15/06 $ 100,000 $ 105,031 5.80%, 08/01/06 800,000 834,724 6.13%, 11/01/08+++ 90,000 95,840 6.75%, 02/15/11 550,000 598,420 6.00%, 11/15/13 144A+++ 2,920,000 3,007,153 -------------- 5,293,825 -------------- BRAZIL -- 1.0% Federal Republic of Brazil 2.06%, 04/15/06++ 704,000 694,639 14.50%, 10/15/09+++ 900,000 1,048,500 12.00%, 04/15/10 410,000 438,700 2.13%, 04/15/12++ 141,177 118,886 2.19%, 04/15/12 414,119 350,707 8.00%, 04/15/14 2,380,726 2,186,622 10.13%, 05/15/27 800,000 716,000 11.00%, 08/17/40+++ 2,275,000 2,147,031 -------------- 7,701,085 -------------- BULGARIA -- 0.2% Republic of Bulgaria 2.00%, 07/28/11++ 629,800 629,976 8.25%, 01/15/15 144A 260,000 302,250 8.25%, 01/15/15 480,000 561,722 -------------- 1,493,948 -------------- CANADA -- 0.5% Abitibi-Consolidated, Inc. 8.55%, 08/01/10 32,000 33,902 5.02%, 06/15/11 144A++ +++ 10,000 10,075 Bombardier Capital Funding LP 6.13%, 05/14/07(E) 250,000 292,788 Bombardier, Inc. 6.30%, 11/01/04 144A+++ 125,000 106,353 7.45%, 05/01/34 144A+++ 200,000 165,111 Cascades, Inc. 7.25%, 02/15/13+++ 199,000 199,000 </Table> See Notes to Financial Statements. 54 <Table> <Caption> PAR VALUE ----------- -------------- Conoco Funding Co. 7.25%, 10/15/31 $ 315,000 $ 360,731 General Motors Nova Scotia Finance Co. 6.85%, 10/15/08 1,670,000 1,752,465 Hydro Quebec 6.30%, 05/11/11+++ 430,000 468,958 Rogers Cable, Inc. 5.50%, 03/15/14 144A+++ 550,000 488,709 Rogers Wireless, Inc. 6.38%, 03/01/14@ 100,000 92,500 Sun Media Corporation 7.63%, 02/15/13 50,000 51,250 Western Oil Sands, Inc. 8.38%, 05/01/12 95,000 103,550 -------------- 4,125,392 -------------- CAYMAN ISLANDS -- 0.1% ACE, Ltd. 6.00%, 04/01/07 350,000 369,943 Mizuho Financial Group (Cayman), Ltd. 5.00%, 04/15/14 144A 500,000 492,400 -------------- 862,343 -------------- COLOMBIA -- 0.1% Republic of Colombia 10.50%, 07/09/10 60,000 64,500 11.75%, 02/25/20 605,000 663,988 -------------- 728,488 -------------- DOMINICAN REPUBLIC -- 0.0% Dominican Republic 9.50%, 09/27/06 210,000 150,150 -------------- FRANCE -- 0.1% Compagnie Generale de Geophysique SA 10.63%, 11/15/07+++ 43,000 46,010 France Telecom 9.00%, 03/01/11+++ 450,000 522,147 Legrand SA 8.50%, 02/15/25 250,000 258,750 Vivendi Universal SA 6.25%, 07/15/08 90,000 95,880 -------------- 922,787 -------------- GERMANY -- 3.8% Bundesobligation 3.25%, 04/17/09(E) 620,000 743,872 Deutsche Bundesrepublik 3.75%, 01/04/09(E) 10,010,000 12,307,516 5.25%, 07/04/10(E) 3,500,000 4,574,234 4.50%, 01/04/13(E) 5,300,000 6,590,982 5.50%, 01/04/31(E) 4,890,000 6,470,771 -------------- 30,687,375 -------------- IRELAND -- 0.0% Eircom Funding 8.25%, 08/15/13 130,000 135,850 -------------- </Table> <Table> <Caption> PAR VALUE ----------- -------------- ITALY -- 0.1% Republic of Italy 5.00%, 12/15/04(J) $14,000,000 $ 131,155 Telecom Italia Capital SA 5.25%, 11/15/13 144A+++ 325,000 315,122 -------------- 446,277 -------------- JAPAN -- 0.3% ASIF II 1.20%, 01/26/05(J) 229,000,000 2,110,540 Citigroup, Inc. 1.28%, 12/28/04(J) 9,000,000 82,927 -------------- 2,193,467 -------------- LUXEMBOURG -- 0.0% Gaz Capital SA 8.63%, 04/28/34 144A+++ 150,000 146,063 -------------- MALAYSIA -- 0.1% Petronas Capital, Ltd. 7.88%, 05/22/22 144A+++ 430,000 477,168 -------------- MEXICO -- 1.2% America Movil SA de CV 4.13%, 03/01/09 144A+++ 950,000 894,643 5.50%, 03/01/14 144A+++ 350,000 323,291 Mexican Fixed Rate Bonds 8.00%, 12/19/13(M) 17,200,000 1,260,556 Telefonos de Mexico SA de CV 8.25%, 01/26/06 650,000 698,147 United Mexican States 7.50%, 01/14/12 750,000 810,000 8.30%, 08/15/31 400,000 420,000 7.50%, 04/08/33 5,892,000 5,718,185 -------------- 10,124,822 -------------- NETHERLANDS -- 0.2% Deutsche Telekom International Finance BV 5.25%, 07/22/13+++ 595,000 580,278 8.75%, 06/15/30 700,000 854,447 TPSA Finance BV 7.75%, 12/10/08 144A 375,000 415,253 -------------- 1,849,978 -------------- PANAMA -- 0.2% Republic of Panama 8.25%, 04/22/08+++ 520,000 564,200 9.63%, 08/08/11+++ 110,000 122,375 10.75%, 05/15/20 397,000 446,625 9.38%, 01/16/23 550,000 563,750 -------------- 1,696,950 -------------- </Table> See Notes to Financial Statements. 55 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- PERU -- 0.1% Republic of Peru 9.13%, 02/21/12 $ 150,000 $ 154,500 8.38%, 05/03/16 280,000 261,800 5.00%, 03/07/17++ 118,300 103,239 5.00%, 03/07/17 144A++ 546,000 466,830 8.75%, 11/21/33 60,000 52,980 -------------- 1,039,349 -------------- PHILIPPINES -- 0.0% Republic of Philippines 9.88%, 01/15/19 65,000 65,000 -------------- RUSSIA -- 0.6% Ministry Finance of Russia 3.00%, 05/14/08 1,440,000 1,263,984 Russian Federation 8.25%, 03/31/10 70,000 76,209 5.00%, 03/31/30 STEP 4,250,000 3,890,875 -------------- 5,231,068 -------------- SOUTH KOREA -- 0.0% Export-Import Bank of Korea 5.25%, 02/10/14 144A 235,000 225,795 Korea Assset Funding, Ltd. 3.22%, 02/10/09 144A@++ 96,549 96,549 -------------- 322,344 -------------- SUPRANATIONAL -- 0.2% European Investment Bank 0.88%, 11/08/04(J) 21,000,000 193,027 International Bank for Reconstruction & Development 4.75%, 12/20/04(J) 135,000,000 1,264,322 -------------- 1,457,349 -------------- </Table> <Table> <Caption> PAR VALUE ----------- -------------- UNITED KINGDOM -- 0.2% BP Capital Markets PLC 2.75%, 12/29/06+++ $ 740,000 $ 731,010 British Telecommunications PLC 8.88%, 12/15/30 150,000 185,588 HSBC Capital Funding LP 4.61%, 12/29/49 144A@++ +++ 1,090,000 990,853 -------------- 1,907,451 -------------- VENEZUELA -- 0.0% Petrozuata Finance, Inc. 8.22%, 04/01/17 144A+++ 140,000 131,600 -------------- TOTAL FOREIGN BONDS (Cost $78,489,051) 80,294,825 -------------- MORTGAGE-BACKED SECURITIES -- 33.0% ABN Amro Mortgage Corporation 8.33%, 06/25/33 IO@(omg) 1,110,963 163,079 ARC Net Interest Margin Trust 7.75%, 01/27/32 144A@ 5,027 5,027 7.75%, 07/27/32 144A@ 22,462 22,594 Bear Stearns Adjustable Rate Mortgage Trust 5.64%, 02/25/33++ 759,221 761,760 3.52%, 06/25/34 2,900,000 2,763,155 Bear Stearns Alt-A Trust 1.62%, 02/25/34 STEP 930,594 932,339 Bear Stearns Commercial Mortgage Services Corporation 11.03%, 03/13/40 IO 144A@++(omg) 7,600,000 448,411 Chevy Chase Funding LLC 1.47%, 07/25/34++ 2,739,559 2,742,884 Commerical Mortgage Asset Trust 7.55%, 01/17/10++ 440,000 497,051 Credit-Based Asset Servicing and Securitization 1.59%, 08/25/33++ 751,280 752,200 CS First Boston Mortgage Securities Corporation 13.18%, 04/25/33 IO@(omg) 314,847 21,361 3.51%, 05/25/33 IO@(omg) 276,824 28,211 14.81%, 06/25/33 IO@(omg) 269,978 19,011 10.43%, 07/25/33 IO@(omg) 1,105,403 198,887 16.83%, 07/25/33 IO@++(omg) 1,510,935 17,048 17.03%, 08/25/33 IO@++(omg) 1,669,584 13,755 1.63%, 03/25/34++ 890,863 892,271 Federal Home Loan Mortgage Corporation 8.00%, 10/01/07 1,373 1,384 5.50%, 08/15/14 1,900,418 1,947,764 7.00%, 11/01/14 329,103 349,190 7.00%, 04/01/15 196,320 208,303 8.00%, 06/01/15 12,720 12,816 7.00%, 12/01/15 161,492 171,362 6.00%, 04/15/16 753,711 770,328 8.50%, 06/01/16 33,204 36,630 8.50%, 06/01/18 25,796 28,457 5.50%, 07/01/19 TBA 600,000 612,937 0.09%, 04/15/22 PO STRIP@(omg) 94,124 93,888 8.00%, 08/01/24 21,663 23,703 7.50%, 11/01/29 67,113 72,328 7.50%, 12/01/29 103,992 112,072 7.50%, 02/01/31 144,390 155,541 11.57%, 08/15/31 IO@(omg) 1,099,912 154,493 </Table> See Notes to Financial Statements. 56 <Table> <Caption> PAR VALUE ----------- -------------- 7.50%, 11/01/31 $ 89,113 $ 95,978 5.00%, 07/01/34 TBA 3,500,000 3,377,500 6.50%, 07/01/34 TBA 29,000,000 30,214,375 7.00%, 07/01/34 TBA 1,000,000 1,054,375 Federal Housing Administration 7.43%, 10/01/18 432,260 434,421 Federal National Mortgage Association 6.50%, 04/26/06 500,000 523,512 6.50%, 09/01/08 308,106 326,196 31.03%, 10/25/08 IO@++(omg) 906,708 142,446 6.50%, 12/01/08 30,999 32,213 6.50%, 05/01/09 80,050 84,816 6.50%, 08/01/09 423,305 448,160 6.50%, 03/25/11 3,018,873 3,050,858 8.00%, 06/01/15 145,587 155,555 8.00%, 06/15/15 110,721 118,302 8.00%, 07/01/15 341,347 364,719 8.00%, 09/01/15 203,562 217,500 6.00%, 10/25/15 1,152,263 1,172,794 6.00%, 05/01/16 493,256 514,695 6.00%, 07/01/16 121,616 126,901 6.00%, 02/01/17 878,418 916,317 5.00%, 12/01/17 271,575 272,498 5.50%, 02/01/18 455,570 467,029 4.50%, 07/01/19 TBA 4,500,000 4,395,938 5.00%, 08/01/19 TBA 19,000,000 18,952,500 (0.51%), 08/25/21 IO@(omg) 680 15,597 (2.44%), 10/25/21 IO@(omg) 1,240 25,168 17.97%, 01/25/22@++ 613,908 740,142 4.36%, 03/25/22++ 852,832 863,292 9.50%, 05/01/22 16,882 19,033 3.06%, 07/01/22 89,008 90,625 7.00%, 09/25/22 404,075 404,525 7.00%, 12/25/22 638,894 640,343 6.00%, 01/01/23 371,329 383,329 9.50%, 07/01/24 35,240 39,663 3.07%, 07/01/27++ 87,682 89,351 3.07%, 11/01/27 CONV++ 188,934 192,529 6.50%, 06/01/28 6,323 6,594 6.50%, 12/25/28 355,730 361,435 8.00%, 10/01/30 259,224 281,855 1.71%, 10/18/30++ 202,002 202,960 3.07%, 01/01/31++ 68,848 70,143 6.17%, 05/01/31++ 159,162 160,756 6.50%, 12/01/31 482,143 502,807 10.99%, 12/25/31 IO@(omg) 989,507 129,388 6.00%, 01/01/32 277,335 283,722 6.00%, 03/01/32 826,840 846,299 8.00%, 03/01/32 29,675 32,095 6.00%, 04/01/32 1,676,901 1,714,962 6.50%, 05/01/32 70,177 73,123 3.07%, 06/01/32++ 90,634 92,275 3.06%, 08/01/32++ 100,552 102,372 </Table> <Table> <Caption> PAR VALUE ----------- -------------- 5.36%, 08/01/32++ $ 1,165,552 $ 1,202,992 3.06%, 05/01/33++ 186,181 189,570 4.50%, 08/01/33 3,613,673 3,384,525 6.00%, 07/01/34 TBA 5,200,000 5,307,250 6.50%, 07/01/34 19,000,000 19,777,823 4.63%, 08/01/35++ 639,561 660,359 3.07%, 11/01/35++ 89,713 91,724 4.14%, 05/01/36++ 1,089,253 1,124,855 4.58%, 07/01/36++ 1,615,854 1,668,576 3.07%, 12/01/37++ 354,075 362,092 3.07%, 01/01/38++ 185,859 190,086 3.07%, 11/01/40++ 199,619 204,196 FFCA Secured Lending Corporation 29.54%, 07/18/20 IO 144A@++(omg) 3,781,393 179,616 Financial Asset Securitization, Inc. 7.25%, 07/25/27 107,110 106,990 First Nationwide Trust 8.50%, 09/25/31 125,424 126,765 First Union Commercial Mortgage Securities, Inc. 7.38%, 04/18/07 6,184,754 6,632,390 First Union National Bank Commercial Mortgage Trust 7.20%, 09/15/10 1,500,000 1,681,233 GMAC Commercial Mortgage Securities, Inc. 6.87%, 08/15/07 534,303 572,400 Government National Mortgage Association 7.00%, 10/15/25 98,538 105,169 7.00%, 01/15/26 87,153 92,937 7.00%, 07/15/27 567,077 604,158 6.00%, 09/20/27 528,078 529,061 7.00%, 12/15/27 6,714 7,153 7.00%, 01/15/28 73,007 77,700 7.00%, 03/15/28 778,449 829,413 (8.94%), 06/20/28 IO@(omg) 283,728 4,927 7.00%, 07/15/28 106,276 113,107 7.50%, 07/15/28 94,196 101,674 6.50%, 08/15/28 107,708 112,835 7.00%, 08/15/28 120,827 128,593 7.50%, 08/15/28 101,683 109,754 6.50%, 09/15/28 362,888 380,162 6.00%, 09/20/28 409,905 412,451 7.00%, 10/15/28 177,329 188,726 7.50%, 12/15/28 32,727 35,325 6.00%, 02/20/29 259,892 262,305 7.50%, 03/15/29 186,173 201,017 7.50%, 11/15/29 177,712 191,825 4.00%, 11/20/29++ 481,070 483,690 7.50%, 02/15/30 29,956 32,323 8.50%, 08/15/30 21,278 23,342 </Table> See Notes to Financial Statements. 57 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- 6.50%, 08/20/30 $ 298,485 $ 301,634 8.50%, 11/20/30 157,246 171,867 7.50%, 02/15/31 67,132 72,353 6.50%, 08/15/31 754,752 789,565 7.50%, 08/15/31 483,170 520,748 6.50%, 10/15/31 1,174,376 1,228,606 6.00%, 11/15/31 1,755,739 1,801,864 6.50%, 11/15/31 828,771 866,998 6.00%, 12/15/31 828,118 849,874 6.00%, 01/15/32 1,377,471 1,414,415 6.00%, 02/15/32 1,652,945 1,696,369 6.50%, 02/15/32 1,565,987 1,638,202 7.50%, 02/15/32 47,898 51,626 31.72%, 02/16/32@++ 573,674 751,948 6.00%, 04/15/32 1,546,941 1,588,429 6.50%, 04/15/32 1,442,627 1,509,168 7.50%, 04/15/32 406,351 437,976 6.50%, 06/15/32 4,600,966 4,813,125 6.50%, 07/15/32 741,342 775,537 6.50%, 08/15/32 3,084,195 3,226,455 6.50%, 09/15/32 2,270,493 2,375,219 6.00%, 10/15/32 1,566,964 1,608,130 6.00%, 11/15/32 2,102,192 2,157,655 6.00%, 12/15/32 846,150 868,379 6.50%, 12/15/32 94,357 98,709 6.00%, 01/15/33 848,007 870,285 6.00%, 02/15/33 653,232 670,393 6.50%, 03/15/33 828,924 867,158 6.50%, 04/15/33 5,500,421 5,754,128 6.00%, 05/15/33 7,706,250 7,908,701 6.50%, 05/15/33 775,644 811,421 6.00%, 06/15/33 842,876 865,019 5.00%, 07/22/33 20,000,000 19,375,000 5.00%, 08/15/33 1,888,602 1,833,479 5.00%, 09/15/33 2,308,713 2,241,328 5.00%, 10/15/33 697,061 676,716 6.00%, 10/15/33 2,615,252 2,683,957 6.50%, 10/15/33 888,209 929,178 6.00%, 12/15/33 2,876,717 2,952,291 5.00%, 07/01/34 TBA 1,100,000 1,065,625 5.50%, 07/01/34 TBA 15,000,000 14,971,875 6.00%, 07/01/34 TBA 15,000,000 15,356,251 Impac CMB Trust 1.58%, 08/25/32++ 1,214,073 1,215,176 1.76%, 03/25/33++ 751,528 754,509 Indymac ARM Trust 6.36%, 09/28/31++ 188,859 190,735 JP Morgan Chase Commercial Mortgage Securities Corporation 11.73%, 01/15/38 IO 144A@++(omg) 8,300,000 409,244 LB-UBS Commercial Mortgage Trust 6.26%, 06/15/36 IO 144A@++(omg) 5,355,144 279,176 3.33%, 04/15/37 IO 144A@++(omg) 6,500,000 259,541 Lomas & Nettleton Financial Corporation 9.50%, 10/01/14 7,967 8,000 Merrill Lynch Mortgage Investors, Inc. 5.32%, 05/25/32++ 202,415 206,244 MLCC Mortgage Investors, Inc. 1.59%, 03/25/28++ 407,496 410,138 1.69%, 03/25/28++ 1,140,988 1,144,558 1.63%, 01/01/49++ 855,164 858,290 Nomura Asset Securities Corporation 7.07%, 04/13/36 470,051 485,390 7.12%, 04/13/36 2,000,000 2,116,332 Prudential Commercial Mortgage Trust 4.08%, 02/11/36 IO 144A@++(omg) 8,500,000 594,589 Residential Asset Mortgage Products, Inc. 1.33%, 07/25/41 2,113,645 2,115,449 Residential Asset Securitization Trust 1.75%, 04/25/33++ 676,551 677,080 Sequoia Mortgage Trust 1.66%, 02/20/33++ 1,229,981 1,233,363 Structured Asset Securities Corporation 7.50%, 07/25/16 302,746 303,600 Trizec Hahn Office Properties Trust 1.52%, 04/15/11 144A++ 2,866,022 2,838,072 Washington Mutual 17.63%, 01/25/08 IO@++(omg) 1,663,666 23,912 17.91%, 05/25/08 IO@(omg) 3,221,888 14,590 17.71%, 06/25/08 IO@++(omg) 5,033,491 52,826 4.68%, 02/25/33++ 370,087 376,152 3.59%, 01/25/41++ 468,936 471,357 2.63%, 06/25/42++ 830,129 839,138 2.63%, 08/25/42++ 1,152,314 1,163,493 17.66%, 01/01/49 IO@++(omg) 3,858,224 26,226 -------------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $268,102,303) 269,860,146 -------------- MUNICIPAL BONDS -- 1.5% Florida State Board of Education, Series A General Obligation Bond (Callable 06/01/12 @ $101) 5.00%, 06/01/32 1,200,000 1,178,676 </Table> See Notes to Financial Statements. 58 <Table> <Caption> PAR VALUE ----------- -------------- Las Vegas Valley, Nevada Water District, Series A General Obligation Bond (FGIC Insured) (Callable 12/01/12 @ $100) 5.00%, 06/01/32 $ 1,000,000 $ 982,230 Massachusetts State Special Obligation, Series A Revenue Bond (FGIC Insured) (Callable 06/01/12 @ $100) 5.00%, 06/01/21 2,945,000 3,018,272 Massachusetts State Water Resources Authority, Series J Revenue Bond (FSA Insured) (Callable 08/01/12 @ $100) 5.00%, 08/01/32 1,250,000 1,224,100 Minnesota State General Obligation Bond (Callable 10/01/11 @ $100) 5.00%, 10/01/20 200,000 206,104 New York State Urban Development Corporation, Series A Revenue Bond (Callable 03/15/12 @ $100) 5.13%, 03/15/22 1,500,000 1,526,115 South Carolina Transportation Infrastructure Bank, Series A Revenue Bond (AMBAC Insured) (Callable 10/01/11 @ $100) 5.00%, 10/01/23 2,700,000 2,730,834 Virginia State Housing Development Authority, Commonwealth Mortgage, Series H Revenue Bond (MBIA Insured) (Callable 07/01/11 @ $100) 5.38%, 07/01/36 1,000,000 1,007,800 -------------- TOTAL MUNICIPAL BONDS (Cost $11,675,257) 11,874,131 -------------- <Caption> NUMBER OF CONTRACTS VALUE ----------- -------------- OPTIONS -- 0.1% CALL OPTIONS -- 0.1% 90-Day LIBOR Futures, Strike Price $93.25, Expires 09/21/05(U) 133 $ 427,519 90-Day LIBOR Futures, Strike Price $94.25, Expires 12/15/04(U) 70 89,020 -------------- 516,539 -------------- CALL SWAPTIONS -- 0.0% 3-Month LIBOR, Strike Price $5.75, Expires 04/27/09 280 111,471 -------------- PUT SWAPTIONS -- 0.0% 3-Month LIBOR, Strike Price $6.25, Expires 04/27/09 280 182,610 -------------- TOTAL OPTIONS (Cost $841,816) 810,620 -------------- <Caption> SHARES ----------- RIGHTS -- 0.0% United Mexican States Recovery Rights Series C* 1,100,000 24,750 United Mexican States Recovery Rights Series D* 1,100,000 24,750 United Mexican States Recovery Rights Series E* 1,100,000 19,800 -------------- TOTAL RIGHTS (Cost $0) 69,300 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- SHORT-TERM INVESTMENTS -- 31.2% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 89,801,493 $ 89,801,493 Northern Institutional Liquid Assets Portfoliosec. 165,211,217 165,211,217 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $255,012,710) 255,012,710 -------------- <Caption> PAR ----------- U.S. TREASURY OBLIGATIONS -- 17.3% U.S. Treasury Bills 0.99%, 07/15/04+++ $41,800,000 41,783,987 1.14%, 09/02/04++++ 175,000 174,630 1.19%, 09/02/04++++ 40,000 39,915 1.19%, 09/16/04++++ 30,000 29,920 1.26%, 09/16/04++++ 200,000 199,470 1.32%, 09/16/04++++ 60,000 59,841 1.39%, 09/16/04++++ 390,000 388,966 -------------- 42,676,729 -------------- </Table> See Notes to Financial Statements. 59 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE ----------- -------------- U.S. Treasury Bonds 7.88%, 02/15/21+++ $ 7,900,000 $ 10,200,260 8.13%, 05/15/21+++ 8,300,000 10,969,621 5.50%, 08/15/28+++ 250,000 253,350 5.38%, 02/15/31+++ 7,680,000 7,748,106 -------------- 29,171,337 -------------- U.S. Treasury Inflationary Index Bonds 3.38%, 01/15/07++++ 850,000 1,080,562 3.88%, 01/15/09+++ 330,000 421,811 4.25%, 01/15/10 1,120,000 1,432,630 1.88%, 07/15/13+++ 1,150,000 1,163,095 3.88%, 04/15/29+++ 11,038,000 16,098,628 -------------- 20,196,726 -------------- U.S. Treasury Notes 1.63%, 04/30/05+++ 2,300,000 2,294,252 3.25%, 08/15/08+++ 690,000 681,672 2.63%, 03/15/09+++ 1,370,000 1,303,962 3.88%, 05/15/09+++ 5,400,000 5,419,828 4.00%, 06/15/09+++ 6,740,000 6,799,770 5.00%, 02/15/11+++ 900,000 942,329 5.00%, 08/15/11+++ 30,000 31,328 4.25%, 08/15/13+++ 1,700,000 1,660,025 4.25%, 11/15/13+++ 2,780,000 2,706,700 -------------- 21,839,866 -------------- U.S. Treasury STRIPS 4.63%, 05/15/12(omg)+++ 5,000,000 3,489,920 4.57%, 02/15/15(omg)+++ 2,600,000 1,842,448 5.23%, 05/15/16(omg) 3,500,000 1,898,344 5.14%, 11/15/16(omg)+++ 900,000 471,731 5.32%, 05/15/17(omg) 5,850,000 2,976,024 5.35%, 05/15/17(omg)+++ 2,000,000 1,014,896 5.57%, 05/15/20(omg)+++ 11,500,000 4,815,763 5.64%, 11/15/21(omg)+++ 13,480,000 5,146,691 5.67%, 11/15/22(omg) 2,800,000 1,002,411 5.69%, 02/15/23(omg) 90,000 31,773 5.70%, 02/15/25(omg)+++ 6,350,000 1,996,574 5.71%, 08/15/25(omg) 1,900,000 579,682 5.63%, 05/15/26(omg)+++ 1,500,000 435,965 6.76%, 11/15/26(omg)+++ 3,600,000 1,014,962 5.72%, 11/15/26(omg)+++ 1,700,000 482,424 5.71%, 08/15/27(omg) 150,000 40,899 -------------- 27,240,507 -------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $143,109,614) 141,125,165 -------------- TOTAL INVESTMENTS -- 136.4% (Cost $1,109,522,087) 1,115,275,668 -------------- SECURITIES SOLD SHORT -- (0.4)% Federal Home Loan Mortgage Corporation 5.00%, 07/01/34 TBA (Cost $3,335,391) (3,500,000) (3,377,500) -------------- <Caption> NUMBER OF CONTRACTS VALUE ----------- -------------- WRITTEN OPTIONS -- (0.2)% CALL OPTIONS -- 0.0% 10-Year U.S. Treasury Note Futures, Strike Price $115.00, Expires 08/27/04 (229) (7,156) U.S. Treasury Bond, Strike Price $110.00, Expires 08/27/04 (47) (18,359) -------------- (25,515) -------------- CALL SWAPTIONS -- (0.1)% 3-Month LIBOR, Strike Price $4.00, Expires 07/03/06 (1,380) (41,607) 3-Month LIBOR, Strike Price $4.00, Expires 09/23/05 (1,700) (42,945) 3-Month LIBOR, Strike Price $4.00, Expires 10/07/04 (260) (133) 3-Month LIBOR, Strike Price $5.50, Expires 01/07/05 (900) (319,860) 3-Month LIBOR, Strike Price $5.97, Expires 10/04/04 (890) (578,464) 3-Month LIBOR, Strike Price $6.00, Expires 10/19/04 (260) (169,939) -------------- (1,152,948) -------------- PUT OPTIONS -- (0.0)% 10-Year U.S. Treasury Note Futures, Strike Price $103.00, Expires 11/26/04 (29) (1,314) -------------- PUT SWAPTIONS -- (0.1)% 3-Month LIBOR, Strike Price $5.97, Expires 10/04/04 (890) (6,043) 3-Month LIBOR, Strike Price $6.00, Expires 07/03/06 (1,380) (341,288) 3-Month LIBOR, Strike Price $6.00, Expires 10/07/04 (260) (5,460) 3-Month LIBOR, Strike Price $6.00, Expires 10/19/04 (260) (2,473) </Table> See Notes to Financial Statements. 60 <Table> <Caption> NUMBER OF CONTRACTS VALUE ----------- -------------- 3-Month LIBOR, Strike Price $7.00, Expires 01/07/05 (900) $ (3,538) 3-Month LIBOR, Strike Price $7.00, Expires 09/23/05 (330) (15,460) -------------- (374,262) -------------- TOTAL WRITTEN OPTIONS (Cost $(2,880,308)) (1,554,039) -------------- LIABILITIES IN EXCESS OF OTHER ASSETS -- (35.8%) (292,952,313) -------------- NET ASSETS -- 100.0% $ 817,391,816 ============== </Table> See Notes to Financial Statements. 61 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED Swap agreements outstanding at June 30, 2004: <Table> <Caption> UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- BRITISH POUNDS Receive fixed rate payments of 4.25% and pay variable rate payments on the six month LIBOR floating rate(c) 03/16/05 $ 2,800,000 $ (23,245) Receive fixed rate payments of 4.25% and pay variable rate payments on the six month LIBOR floating rate(c) 03/17/05 28,200,000 (238,627) Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(g) 03/17/05 2,400,000 (27,837) --------------- (289,709) --------------- EURODOLLARS Receive fixed rate payments of 4.50% and pay variable rate payments on the six month LIBOR floating rate(h) 06/18/07 13,700,000 595,841 Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(g) 03/15/07 1,800,000 23,482 Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(h) 03/15/07 1,300,000 16,828 Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(d) 03/15/07 1,500,000 19,468 Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(d) 12/21/07 11,800,000 16,179 Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(a) 12/21/07 10,400,000 14,990 Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 5.00%(f) 06/17/12 (10,900,000) (700,308) Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 5.50%(e) 12/15/31 (7,000,000) (662,601) </Table> <Table> <Caption> UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 5.00%(g) 06/17/12 (19,700,000) $ (1,265,694) --------------- (1,941,815) --------------- U.S. DOLLARS Receive fixed rate payments of 5.00% and pay variable rate payments on the three month LIBOR floating rate(a) 12/15/14 $ 78,500,000 (2,041,102) Receive fixed rate payments of 4.00% and pay variable rate payments on the three month LIBOR floating rate(b) 12/15/09 13,800,000 (407,747) Receive fixed rate payments of 4.00% and pay variable rate payments on the three month LIBOR floating rate(b) 12/15/06 7,900,000 41,449 Receive fixed rate payments of 1.30% and pay floating par in event of default on United Mexican States, 11.50% due 05/15/26(a) 01/27/05 1,000,000 6,320 Receive variable rate payments on the three month LIBOR floating rate and pay fixed rate payments of 5.00%(h) 06/16/24 (19,100,000) 1,474,878 Receive payments based on the return of the Lehman Brothers ERISA- eligible CMBA Index and pay variable rate payments on the one month LIBOR floating rate less 0.65% basis points spread(c) 09/30/04 5,200,000 (12,007) Receive floating par in event of default on Radioshack Corporation, 7.375% due 05/15/11 and pay fixed rate payments of 0.37%(b) 12/20/08 (300,000) 203 Receive floating par in event of default on Emerson Electric Co., 4.625% due 10/15/12 and pay fixed rate payments of 0.22%(c) 12/20/08 (300,000) 248 </Table> See Notes to Financial Statements. 62 <Table> <Caption> UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- Receive floating par in event of default on Devon Financing Corporation, 6.875% due 09/30/11 and pay fixed rate payments of 0.35%(h) 12/20/08 $ (500,000) $ 5,650 Receive floating par in event of default on Anadarko Petroleum Corporation, 5.00% due 10/01/12 and pay fixed rate payments of 0.27%(h) 12/20/08 (300,000) 989 Receive floating par in event of default on Carnival Corporation, 6.15% due 04/15/08 and pay fixed rate payments of 0.44%(b) 12/20/08 (300,000) 1,432 Receive floating par in event of default on Countrywide Home Loan, 6.25% due 04/15/09 and pay fixed rate payments of 0.42%(c) 12/20/08 (300,000) 951 </Table> <Table> <Caption> UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- Receive floating par in event of default on Occidental Petroleum, 6.75% due 01/15/12 and pay fixed rate payments of 0.28%(h) 12/20/08 $ (300,000) $ 568 Receive floating par in event of default on Kroger Co., 6.75% due 04/15/12 and pay fixed rate payments of 0.53%(c) 12/20/08 (300,000) 693 --------------- (927,475) --------------- $ (3,158,999) =============== </Table> See Notes to Financial Statements. 63 EXTENDED-DURATION BOND FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- -------------------- ------------- ----------------- One Year (0.87%) (0.82%) (1.08%) (2.49%) Since Inception (8/27/01 -- 6/30/04) 7.84% 7.83% 7.48% 7.25% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- 8/27/01 10000.00 10000.00 08/31/01 10097.00 10111.00 09/30/01 9943.00 10027.00 10/31/01 10364.00 10516.00 11/30/01 10281.00 10202.00 12/31/01 10248.00 10063.00 01/31/02 10349.00 10202.00 02/28/02 10439.00 10300.00 03/31/02 10143.00 9948.00 04/30/02 10251.00 10208.00 05/31/02 10390.00 10286.00 06/30/02 10290.00 10350.00 07/31/02 10295.00 10443.00 08/31/02 10680.00 10927.00 09/30/02 10896.00 11259.00 10/31/02 10574.00 10965.00 11/30/02 10777.00 11066.00 12/31/02 11275.00 11521.00 01/31/03 11332.00 11530.00 02/28/03 11646.00 11868.00 03/31/03 11597.00 11774.00 04/30/03 11995.00 12039.00 05/31/03 12579.00 12691.00 06/30/03 12503.00 12515.00 07/30/03 11590.00 11432.00 08/31/03 11768.00 11671.00 09/30/03 12394.00 12285.00 10/31/03 12193.00 12013.00 11/30/03 12393.00 12099.00 12/31/03 12537.00 12266.00 01/31/04 12712.00 12477.00 02/29/04 12948.00 12711.00 03/31/04 13087.00 12885.00 04/30/04 12390.00 12198.00 05/31/04 12289.00 12108.00 06/30/04 12395.00 12203.00 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Lehman Brothers Long-Term Government Bond Index and the Lehman Brothers Long-Term Credit Bond Index. The Lehman Brothers Long-Term Government Index is composed of all bonds covered by the Lehman Brothers Government Bond Index with maturities of 10 years or greater. The Lehman Brothers Long-Term Credit Index is composed of a subset of the Lehman Brothers Credit Bond Index covering all corporate, publicly issued, fixed-rate, nonconvertible U.S. debt issues rated at least Baa with at least $50 million principal outstanding and maturity greater than 10 years. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 64 EXTENDED-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 PAR VALUE - ------------- -------------- ------------ AGENCY OBLIGATIONS -- 2.8% Federal Home Loan Mortgage Corporation 4.63%, 02/15/07(E) $ 1,250,000 $ 1,577,910 Federal National Mortgage Association 6.54%, 10/29/07(N)(omg)+++ 4,815,000 2,469,206 5.25%, 01/15/09+++ 250,000 262,136 2.29%, 02/19/09(G) 2,500,000 1,423,041 5.50%, 03/15/11+++ 6,000,000 6,284,436 ------------ TOTAL AGENCY OBLIGATIONS (Cost $11,470,085) 12,016,729 ------------ ASSET-BACKED SECURITIES -- 0.4% Community Program Loan Trust 4.50%, 04/01/29 (Cost $1,653,538) 1,950,000 1,712,144 ------------ </Table> <Table> <Caption> PAR VALUE -------------- ------------ CORPORATE BONDS -- 14.7% Agilysys, Inc. 9.50%, 08/01/06 $ 500,000 $ 537,630 American Airlines, Inc. 6.98%, 04/01/11+++ 72,112 71,268 8.61%, 10/01/11+++ 850,000 773,546 Arrow Electronics, Inc. 6.88%, 07/01/13+++ 250,000 261,578 Atlas Air, Inc. 7.20%, 01/02/19 465,848 437,346 Bausch & Lomb, Inc. 7.13%, 08/01/28 1,500,000 1,509,276 Boise Cascade Corporation 7.35%, 02/01/16 450,000 458,438 Borden, Inc. 7.88%, 02/15/23 1,200,000 1,122,000 Chesapeake Energy Corporation 7.75%, 01/15/15 150,000 157,125 6.88%, 01/15/16 144A 825,000 808,500 Comcast Corporation 5.50%, 03/15/11+++ 500,000 505,474 Commonwealth Edison Co. 4.75%, 12/01/11 538,000 531,242 Constellation Energy Group, Inc. 4.55%, 06/15/15 750,000 669,643 Continental Airlines, Inc. 6.65%, 09/15/19 2,342,287 2,187,614 6.70%, 06/15/21 433,876 404,887 COX Communications, Inc. 6.75%, 03/15/11+++ 250,000 269,924 Cummins, Inc. 7.13%, 03/01/28+++ 425,000 405,875 Dana Corporation 6.50%, 03/01/09+++ 250,000 261,250 Delphi Corporation 7.13%, 05/01/29 2,500,000 2,485,245 Delta Air Lines, Inc. 8.30%, 12/15/29+++ 500,000 210,000 Devon Energy Corporation 4.95%, 08/15/08 CONV 963,000 991,890 Dillard's, Inc. 7.75%, 07/15/26 890,000 845,500 7.00%, 12/01/28 500,000 460,000 El Paso Corporation 7.00%, 05/15/11+++ 400,000 352,000 EOP Operating LP 7.25%, 06/15/28 500,000 519,434 First Industrial LP 7.60%, 07/15/28 1,000,000 1,044,684 Foot Locker, Inc. 8.50%, 01/15/22 1,000,000 1,062,500 Ford Motor Co. 6.63%, 10/01/28 1,500,000 1,317,243 6.38%, 02/01/29 1,500,000 1,271,253 General Motors Acceptance Corporation 6.88%, 08/28/12 250,000 254,708 Georgia-Pacific Corporation 7.75%, 11/15/29 2,950,000 2,846,749 HCA, Inc. 6.30%, 10/01/12 1,500,000 1,503,156 7.58%, 09/15/25 1,000,000 982,783 7.05%, 12/01/27 500,000 459,141 Health Care Property Investors, Inc. 6.00%, 03/01/15 1,500,000 1,509,046 Highwoods Properties, Inc. 7.50%, 04/15/18 1,500,000 1,533,077 IMC Global, Inc. 7.38%, 08/01/18 500,000 492,500 7.30%, 01/15/28 750,000 716,250 International Paper Co. 6.88%, 11/01/23 300,000 312,409 Kinder Morgan, Inc. 7.25%, 03/01/28+++ 500,000 533,026 Midamerican Energy Holdings Co. 5.88%, 10/01/12 1,000,000 1,017,055 Motorola, Inc. 6.75%, 02/01/06+++ 250,000 262,989 5.80%, 10/15/08+++ 500,000 522,335 7.63%, 11/15/10 500,000 563,648 6.50%, 11/15/28 500,000 485,742 Nisource Finance Corporation 6.15%, 03/01/13+++ 1,000,000 1,037,797 Pemex Project Funding Master Trust 8.63%, 02/01/22+++ 1,000,000 1,045,000 Penney (JC) Co., Inc. 7.95%, 04/01/17 500,000 558,125 Phillips Van-Huesen Corporation 7.75%, 11/15/23 450,000 456,750 </Table> See Notes to Financial Statements. 65 EXTENDED-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE -------------- ------------ Pioneer Natural Resources Co. 7.20%, 01/15/28 $ 2,500,000 $ 2,670,080 Preston Corporation 7.00%, 05/01/11 CONV 250,000 226,563 Provident Cos., Inc. 7.25%, 03/15/28 500,000 468,426 Pulte Homes, Inc. 7.30%, 10/24/05 1,000,000 1,053,977 7.88%, 06/15/32 1,500,000 1,643,564 6.38%, 05/15/33 1,000,000 920,561 Qwest Corporation 6.88%, 09/15/33 2,250,000 1,884,375 Raytheon Co. 6.40%, 12/15/18 2,600,000 2,713,902 7.20%, 08/15/27 250,000 272,850 7.00%, 11/01/28 750,000 801,642 Southern California Edison Co. 6.65%, 04/01/29 250,000 255,202 Southern Natural Gas Co. 7.35%, 02/15/31 1,750,000 1,575,000 Sprint Capital Corporation 6.88%, 11/15/28 3,450,000 3,325,858 Swift Energy Co. 7.63%, 07/15/11 150,000 152,250 Tennessee Gas Pipeline Co. 7.00%, 10/15/28+++ 750,000 660,000 Trinet Corporate Realty Trust, Inc. 7.70%, 07/15/17 1,000,000 1,047,500 Union Pacific Resources Group 7.15%, 05/15/28 250,000 274,871 UnumProvident Corporation 6.75%, 12/15/28 1,500,000 1,353,276 Weyerhaeuser Co. 7.13%, 07/15/23 500,000 529,595 7.38%, 03/15/32+++ 250,000 272,697 Williams Cos., Inc. 7.50%, 01/15/31 1,250,000 1,137,500 Xerox Capital Trust I 8.00%, 02/01/27+++ 1,500,000 1,376,250 ------------ TOTAL CORPORATE BONDS (Cost $59,991,657) 63,640,590 ------------ FOREIGN BONDS -- 11.0% BRAZIL -- 0.8% Federal Republic of Brazil 8.25%, 01/20/34+++ 4,750,000 3,605,250 ------------ CANADA -- 3.8% British Columbia Generic Residual 5.45%, 06/09/14 STRIP(C)(omg) 11,500,000 5,056,312 6.01%, 09/05/20 STRIP(C)(omg) 1,750,000 515,570 Canada Generic Residual 5.56%, 06/01/25 STRIP(C)(omg) 4,110,000 982,476 Canadian Government 4.50%, 09/01/07(C) 4,475,000 3,427,468 Macmillan Bloedel, Ltd. 7.70%, 02/15/26 500,000 548,173 Ontario Generic Residual 6.03%, 07/13/22 STRIP(C)(omg) 3,900,000 1,009,360 6.01%, 03/08/29 STRIP(C)(omg) 7,000,000 1,184,113 Saskatchewan Residual 5.50%, 04/10/14 STRIP(C)(omg) 7,500,000 3,278,016 6.05%, 02/04/22 STRIP(C)(omg) 3,000,000 781,801 ------------ 16,783,289 ------------ CAYMAN ISLANDS -- 0.2% Enersis SA 7.40%, 12/01/16 625,000 603,512 Vale Overseas, Ltd. 8.25%, 01/17/34 100,000 87,500 ------------ 691,012 ------------ HONG KONG -- 0.6% Bangkok Bank Public Co. 9.03%, 03/15/29 144A 2,500,000 2,609,117 ------------ </Table> <Table> <Caption> PAR VALUE -------------- ------------ MALAYSIA -- 0.4% Telekom Malaysia BHD 7.88%, 08/01/25 144A $ 225,000 $ 244,310 Tenaga Nasional BHD 7.50%, 11/01/25 144A 1,500,000 1,518,307 ------------ 1,762,617 ------------ MEXICO -- 0.3% Petroleos Mexicanos 8.63%, 12/01/23 144A 1,000,000 1,035,000 TFM SA de CV 11.75%, 06/15/09 STEP+++ 185,000 181,300 ------------ 1,216,300 ------------ NORWAY -- 0.9% Norway Government 6.75%, 01/15/07(K) 24,000,000 3,762,552 ------------ PHILIPPINES -- 0.3% Bangko Sentral Pilipinas 8.60%, 06/15/27 500,000 415,000 Philippine Long Distance Telephone Co. 8.35%, 03/06/17 500,000 437,500 Quezon Power (Philippines), Ltd. 8.86%, 06/15/17 465,000 392,925 ------------ 1,245,425 ------------ SINGAPORE -- 0.9% ASIF Global Financing XXVII 2.38%, 02/26/09 144A(G) 6,700,000 3,825,957 ------------ </Table> See Notes to Financial Statements. 66 <Table> <Caption> PAR VALUE -------------- ------------ SUPRANATIONAL -- 2.6% EUROFIMA 6.50%, 08/22/11(A) 710,000 $ 504,820 European Bank for Reconstruction & Development 6.15%, 02/10/28(A)(omg) 15,000,000 2,514,183 Inter-American Development Bank 19.66%, 05/11/09(B)(omg) 7,500,000 1,002,099 International Bank for Reconstruction & Development 6.58%, 08/20/07(N)(omg) 13,625,000 7,088,483 ------------ 11,109,585 ------------ VENEZUELA -- 0.2% Cerro Negro Finance, Ltd. 7.90%, 12/01/20 144A $ 500,000 450,000 Petrozuata Finance, Inc. 8.37%, 10/01/22 144A 450,000 362,250 ------------ 812,250 ------------ TOTAL FOREIGN BONDS (Cost $43,102,636) 47,423,354 ------------ MORTGAGE-BACKED SECURITIES -- 0.5% Federal Home Loan Mortgage Corporation 5.00%, 12/01/31 318,306 308,253 Federal National Mortgage Association 5.00%, 07/25/23 2,000,000 2,042,459 ------------ TOTAL MORTGAGE-BACKED SECURITIES (Cost $2,062,100) 2,350,712 ------------ MUNICIPAL BONDS -- 10.5% Chicago, Illinois Board of Education, General Obligation Bond (FGIC Insured) (Non-Callable) 5.56%, 12/01/22(omg) 10,700,000 3,963,494 Chicago, Illinois Wastewater Transmission, Series A Revenue Bond (MBIA Insured) (Non-Callable) 5.41%, 01/01/22(omg) 5,000,000 1,946,050 Clark County, Washington School District, Series C General Obligation bond (FGIC SCH BD GTY Insured) (Non-Callable) 5.25%, 12/01/19(omg) 3,600,000 1,632,672 </Table> <Table> <Caption> PAR VALUE -------------- ------------ Clovis, California Unified School District, Series A General Obligation Bond (FGIC Insured) (Non-Callable) 5.69%, 08/01/25(omg) $ 9,775,000 $ 3,015,782 Cook County, Illinois Community Consolidated School District, General Obligation Bond (FGIC Insured) (Non-Callable) 5.25%, 12/01/19(omg) 1,890,000 855,868 Coppell, Texas Independent School District, General Obligation Bond (PSF-GTD Insured) (Non-Callable) 5.51%, 08/15/23(omg) 2,195,000 774,023 De Soto ,Texas Independent School District, General Obligation Bond (PSF-GTD Insured) (Non-Callable) 5.15%, 08/15/18(omg) 2,275,000 1,114,864 </Table> <Table> <Caption> PAR VALUE -------------- ------------ De Soto, Texas Independent School District, General Obligation Bond (PSF-GTD Insured) (Non-Callable) 5.23%, 08/15/19(omg) $ 2,590,000 $ 1,197,797 Galveston County, Texas, General Obligation Bond (FGIC Insured) (Non- Callable) 5.69%, 02/01/26(omg) 2,500,000 745,375 Granbury, Texas Independent School District, General Obligation Bond (PSF-GTD Insured) (Non-Callable) 5.30%, 08/01/20(omg) 1,000,000 432,130 Houston, Texas Water & Sewer System, Series A Revenue Bond (FSA Insured) (Non-Callable) 5.63%, 12/01/24(omg) 10,000,000 3,266,300 5.78%, 12/01/26(omg) 7,300,000 2,077,069 Indianapolis, Indiana Local Public Improvement Bond Bank, Series E Revenue Bond (AMBAC Insured) (Non-Callable) 5.45%, 02/01/22(omg) 2,550,000 1,006,791 </Table> See Notes to Financial Statements. 67 EXTENDED-DURATION BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> PAR VALUE -------------- ------------ McKeesport, Pennsylvania Area School District, Series C General Obligation Bond (AMBAC Insured) (Non-Callable) 5.62%, 10/01/26(omg) $ 2,090,000 $ 604,156 Metropolitan Pier & Exposition Authority, Illinois Dedicated State Tax, Series A Revenue Bond (MBIA Insured) (Non-Callable) 5.49%, 12/15/23(omg) 5,850,000 2,018,016 Metropolitan Pier & Exposition Authority, Illinois Dedicated State Tax, Series A Revenue Bond (MBIA Insured) (Non-Callable) 5.57%, 12/15/22(omg) 16,225,000 5,997,572 Metropolitan Pier & Exposition Authority, Illinois Dedicated State Tax, Series A Revenue Bond (MBIA Insured) (Non-Callable) 5.62%, 12/15/24(omg) 4,695,000 1,512,119 Rocklin, California Unified School District, General Obligation Bond (FGIC Insured) (Non-Callable) 5.59%, 08/01/24(omg) 2,375,000 790,068 San Jose, California Unified School District, Santa Clara County, Series A General Obligation Bond (FGIC Insured) (Non-Callable) 5.15%, 08/01/18(omg) 2,055,000 1,020,164 San Mateo, California Unified High School District, Series C General Obligation Bond (FGIC Insured) (Non-Callable) 5.82%, 09/01/28(omg) 4,000,000 1,010,120 Union Elementary School District, California, Series A General Obligation Bond (FGIC Insured) (Non-Callable) 5.24%, 09/01/19(omg) 1,750,000 812,280 </Table> <Table> <Caption> PAR VALUE -------------- ------------ Washington State, Motor Vehicle Fuel Tax, Series 03-C General Obligation Bond, (MBIA Insured) (Non-Callable) 5.55%, 06/01/23(omg) $ 10,000,000 $ 3,605,600 Will County, Illinois Community United School District No. 365, General Obligation Bond (FSA Insured) (Non-Callable) 5.55%, 11/01/23(omg) 17,825,000 6,190,265 ------------ TOTAL MUNICIPAL BONDS (Cost $47,357,235) 45,588,575 ------------ <Caption> SHARES -------------- SHORT-TERM INVESTMENTS -- 13.6% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 10,980,819 10,980,819 Northern Institutional Liquid Assets Portfolio sec. 47,928,087 47,928,087 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $58,908,906) 58,908,906 ------------ <Caption> PAR -------------- U.S. TREASURY OBLIGATIONS -- 56.6% U.S. Treasury Bonds 8.00%, 11/15/21+++ $167,212,000 219,217,607 6.38%, 08/15/27+++ 17,000,000 19,193,408 5.38%, 02/15/31+++ 6,495,000 6,552,598 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $249,508,502) 244,963,613 ------------ TOTAL INVESTMENTS -- 110.1% (Cost $474,054,659) 476,604,623 LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.1%) (43,773,890) ------------ NET ASSETS -- 100.0% $432,830,733 ============ </Table> See Notes to Financial Statements. 68 EQUITY INDEX FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> S&P 500(R) RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- ---------- One Year 18.72% 18.81% 18.62% 19.11% Since Inception (8/27/01 -- 6/30/04) (0.03%) (0.15%) (0.15%) 0.34% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS S&P 500(R) INDEX** ---------------- ------------------ 08/27/01 10000 10000 08/31/01 9585 9570 09/30/01 8817 8796 10/31/01 8985 8964 11/30/01 9666 9652 12/31/01 9745 9736 01/31/02 9589 9594 02/28/02 9378 9409 03/31/02 9726 9764 04/30/02 9116 9171 05/31/02 9041 9104 06/30/02 8428 8456 07/31/02 7757 7796 08/31/02 7801 7847 09/30/02 6955 6994 10/31/02 7569 7610 11/30/02 8046 8057 12/31/02 7543 7585 01/31/03 7347 7386 02/28/03 7240 7275 03/31/03 7322 7347 04/30/03 7916 7952 05/31/03 8321 8372 06/30/03 8415 8478 07/30/03 8574 8628 08/31/03 8739 8796 09/30/03 8643 8703 10/31/03 9126 9195 11/30/03 9190 9276 12/31/03 9658 9762 01/31/04 9843 9942 02/29/04 9971 10080 03/31/04 9817 9928 04/30/04 9664 9771 05/31/04 9811 9906 06/30/04 9990 10098 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the S&P 500(R) Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The S&P 500(R) Index is an unmanaged index (with no defined investment objective) of common stocks, includes reinvestment of dividends, and is a registered trademark of McGraw-Hill Co., Inc. The S&P 500(R) Index includes 500 of the largest stocks (in terms of market value) in the United States. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 69 EQUITY INDEX FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ---------- ------------ COMMON STOCK -- 96.7% AUTO & TRANSPORTATION -- 2.6% Burlington Northern Santa Fe Corporation 15,500 $ 543,585 Cooper Tire & Rubber Co. 3,100 71,300 CSX Corporation 9,000 294,930 Dana Corporation 6,200 121,520 Delphi Corporation 23,400 249,912 Delta Air Lines, Inc.*+++ 5,200 37,024 FedEx Corporation 12,500 1,021,125 Ford Motor Co.+++ 76,527 1,197,648 General Motors Corporation+++ 23,600 1,099,524 Genuine Parts Co. 7,300 289,664 Goodyear Tire & Rubber Co. (The)*+++ 7,300 66,357 Harley-Davidson, Inc.+++ 12,300 761,862 Navistar International Corporation*+++ 2,900 112,404 Norfolk Southern Corporation 16,400 434,928 Paccar, Inc. 7,375 427,676 Southwest Airlines Co. 33,000 553,410 Union Pacific Corporation 10,800 642,060 United Parcel Service, Inc. Class B 47,100 3,540,507 Visteon Corporation+++ 5,418 63,228 ------------ 11,528,664 ------------ </Table> <Table> <Caption> SHARES VALUE ---------- ------------ CONSUMER DISCRETIONARY -- 12.4% Alberto-Culver Co. 3,750 $ 188,025 Allied Waste Industries, Inc.* 13,300 175,294 Apollo Group, Inc. Class A* 7,400 653,346 AutoNation, Inc.*+++ 11,200 191,520 AutoZone, Inc.* 3,500 280,350 Avon Products, Inc. 19,700 908,958 Bed Bath & Beyond, Inc.* 12,600 484,470 Best Buy Co., Inc. 13,550 687,527 Big Lots, Inc.* 4,800 69,408 Black & Decker Corporation+++ 3,300 205,029 Carnival Corporation 26,500 1,245,500 Cendant Corporation 42,700 1,045,296 Cintas Corporation 7,200 343,224 Circuit City Stores, Inc. -- Circuit City Group+++ 8,300 107,485 Clear Channel Communications, Inc. 25,700 949,615 Convergys Corporation* 6,000 92,400 Costco Wholesale Corporation 19,200 788,544 Darden Restaurants, Inc. 6,750 138,713 Dillard's, Inc. Class A 3,500 78,050 Dollar General Corporation+++ 13,800 269,928 Donnelley (R.R.) & Sons Co. 9,100 300,482 Eastman Kodak Co. 12,000 323,760 eBay, Inc.* 27,500 2,528,625 Electronic Arts, Inc.* 12,700 692,785 Family Dollar Stores, Inc. 7,200 219,024 Federated Department Stores, Inc. 7,500 368,250 Gannett Co., Inc. 11,400 967,290 Gap, Inc. (The)+++ 37,600 911,800 Gillette Co. (The) 42,000 1,780,800 Hasbro, Inc. 7,400 140,600 Hilton Hotels Corporation 16,000 298,560 Home Depot, Inc. (The) 92,950 3,271,840 International Flavors & Fragrances, Inc. 3,900 145,860 Interpublic Group Cos., Inc.* 17,500 240,275 Jones Apparel Group, Inc. 5,300 209,244 Kimberly-Clark Corporation 21,000 1,383,480 Knight-Ridder, Inc. 3,300 237,600 Kohl's Corporation* 14,300 604,604 Leggett & Platt, Inc. 8,000 213,680 Limited Brands 19,700 368,390 Liz Claiborne, Inc. 4,608 165,796 Lowe's Cos., Inc. 32,900 1,728,895 Marriott International, Inc. Class A 9,500 473,860 Mattel, Inc. 17,700 323,025 May Department Stores Co. (The) 12,200 335,378 Maytag Corporation+++ 3,300 80,883 McDonald's Corporation 52,600 1,367,600 McGraw Hill Co., Inc. (The) 8,000 612,560 Meredith Corporation 2,100 115,416 Monster Worldwide, Inc.* 4,900 126,028 New York Times Co. Class A 6,200 277,202 Newell Rubbermaid, Inc. 11,500 270,250 Nike, Inc. Class B 11,000 833,250 Nordstrom, Inc. 5,800 247,138 Office Depot, Inc.* 13,100 234,621 Omnicom Group, Inc. 7,900 599,531 Penney (JC) Co., Inc. 11,800 445,568 RadioShack Corporation 6,700 191,821 Reebok International, Ltd.+++ 2,500 89,950 Robert Half International, Inc.+++ 7,200 214,344 Sabre Holdings Corporation 5,800 160,718 Sears, Roebuck & Co. 8,900 336,064 Snap-On, Inc. 2,400 80,520 Stanley Works (The)+++ 3,400 154,972 Staples, Inc. 20,800 609,648 Starbucks Corporation*+++ 16,600 721,768 Starwood Hotels & Resorts Worldwide, Inc. 8,700 390,195 Target Corporation 38,200 1,622,354 Tiffany & Co. 6,100 224,785 Time Warner, Inc.* 190,700 3,352,506 TJX Cos., Inc. 20,700 499,698 Toys "R" Us, Inc.* 8,900 141,777 Tribune Co. 13,700 623,898 Univision Communications, Inc. Class A* 13,500 431,055 VF Corporation 4,600 224,020 Wal-Mart Stores, Inc. 179,300 9,459,867 Waste Management, Inc. 24,300 744,795 </Table> See Notes to Financial Statements. 70 <Table> <Caption> SHARES VALUE ---------- ------------ Wendy's International, Inc. 4,800 $ 167,232 Whirlpool Corporation 2,900 198,940 Yahoo!, Inc.* 56,300 2,045,379 Yum! Brands, Inc.* 12,100 450,362 ------------ 55,483,300 ------------ CONSUMER STAPLES -- 6.2% Albertson's, Inc.+++ 15,400 408,716 Campbell Soup Co. 17,200 462,336 Clorox Co. 8,900 478,642 Coca-Cola Co. (The) 101,800 5,138,864 Coca-Cola Enterprises, Inc.+++ 19,700 571,103 Colgate-Palmolive Co. 22,200 1,297,590 ConAgra Foods, Inc. 22,100 598,468 CVS Corporation 16,600 697,532 General Mills, Inc. 15,800 750,974 Heinz (H.J.) Co. 14,700 576,240 Hershey Foods Corporation 10,800 499,716 Kellogg Co. 17,200 719,820 Kroger Co.* 31,000 564,200 McCormick & Co., Inc. 5,700 193,800 Pepsi Bottling Group, Inc. 10,800 329,832 PepsiCo, Inc. 71,340 3,843,799 Procter & Gamble Co. 107,500 5,852,300 Safeway, Inc.* 18,700 473,858 Sara Lee Corporation 33,000 758,670 Supervalu, Inc. 5,600 171,416 Sysco Corporation 26,700 957,729 Walgreen Co. 42,800 1,549,788 Winn-Dixie Stores, Inc.+++ 5,900 42,480 Wrigley (W.M.), Jr. Co. 9,400 592,670 ------------ 27,530,543 ------------ </Table> <Table> <Caption> SHARES VALUE ---------- ------------ FINANCIAL SERVICES -- 21.5% ACE, Ltd. 11,800 $ 498,904 AFLAC, Inc. 21,300 869,253 Allstate Corporation (The) 29,352 1,366,336 AMBAC Financial Group, Inc. 4,500 330,480 American Express Co. 53,400 2,743,692 American International Group, Inc. 109,092 7,776,078 AmSouth Bancorporation 14,700 374,409 AON Corporation 13,200 375,804 Apartment Investment & Management Co. Class A REIT 3,900 121,407 Automatic Data Processing, Inc. 24,700 1,034,436 Bank of America Corporation 85,220 7,211,316 Bank of New York Co., Inc. (The) 32,500 958,100 Bank One Corporation 47,000 2,397,000 BB&T Corporation 23,500 868,795 Bear Stearns Cos., Inc. (The) 4,400 370,964 Block (H&R), Inc. 7,300 348,064 Capital One Financial Corporation 10,000 683,800 Charter One Financial, Inc. 9,361 413,663 Chubb Corporation 7,900 538,622 Cigna Corporation+++ 5,900 405,979 Cincinnati Financial Corporation+++ 7,035 306,163 Citigroup, Inc. 216,230 10,054,695 Comerica, Inc. 7,200 395,136 Countrywide Financial Corporation 11,704 822,206 Deluxe Corporation+++ 2,100 91,350 Dow Jones & Co., Inc. 3,454 155,775 E*TRADE Financial Corporation* 15,300 170,595 Equifax, Inc. 5,700 141,075 Equity Office Properties Trust REIT+++ 16,900 459,680 Equity Residential Properties Trust REIT 11,700 347,841 Fannie Mae 40,500 2,890,080 Federated Investors, Inc. Class B 4,500 136,530 Fifth Third Bancorp 23,494 1,263,507 First Data Corporation 36,517 1,625,737 First Horizon National Corporation 5,200 236,444 Fiserv, Inc.* 8,200 318,898 Franklin Resources, Inc. 10,500 525,840 Freddie Mac 28,800 1,823,040 Golden West Financial Corporation 6,400 680,640 Goldman Sachs Group, Inc. 20,200 1,902,032 Hartford Financial Services Group, Inc. 12,200 838,628 Huntington Bancshares, Inc. 9,600 219,840 Janus Capital Group, Inc. 10,000 164,900 Jefferson-Pilot Corporation 5,800 294,640 JP Morgan Chase & Co. 87,290 3,384,233 KeyCorp 17,200 514,108 Lehman Brothers Holdings, Inc. 11,600 872,900 Lincoln National Corporation 7,500 354,375 Loews Corporation 7,800 467,688 M & T Bank Corporation 5,000 436,500 Marsh & McLennan Cos., Inc. 21,900 993,822 Marshall & Ilsley Corporation 9,300 363,537 MBIA, Inc. 6,000 342,720 MBNA Corporation 53,450 1,378,476 Mellon Financial Corporation 17,800 522,074 Merrill Lynch & Co., Inc. 40,200 2,169,996 MetLife, Inc. 31,600 1,132,860 MGIC Investment Corporation+++ 4,100 311,026 Moody's Corporation 6,300 407,358 Morgan Stanley 46,000 2,427,420 National City Corporation 28,300 990,783 North Fork Bancorporation, Inc.+++ 7,200 273,960 Northern Trust Corporation 9,200 388,976 Paychex, Inc. 15,800 535,304 Plum Creek Timber Co., Inc. REIT 7,700 250,866 </Table> See Notes to Financial Statements. 71 EQUITY INDEX FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ---------- ------------ PNC Financial Services Group, Inc. 11,800 $ 626,344 Principal Financial Group 13,300 462,574 Progressive Corporation (The) 9,100 776,230 ProLogis REIT 7,600 250,192 Providian Financial Corporation*+++ 12,200 178,974 Prudential Financial, Inc. 22,000 1,022,340 Regions Financial Corporation 9,200 336,260 Ryder System, Inc. 2,700 108,189 Safeco Corporation 5,800 255,200 Schwab (Charles) Corporation (The) 57,050 548,251 Simon Property Group, Inc. REIT 8,700 447,354 SLM Corporation 18,400 744,280 SouthTrust Corporation 13,800 535,578 Sovereign Bancorp, Inc. 12,800 282,880 St. Paul Travelers Cos., Inc. 27,856 1,129,282 State Street Corporation 14,000 686,560 Sungard Data Systems, Inc.* 12,100 314,600 SunTrust Banks, Inc. 11,800 766,882 Synovus Financial Corporation 12,700 321,564 T Rowe Price Group, Inc. 5,300 267,120 Torchmark Corporation 4,700 252,860 Union Planters Corporation 7,950 236,990 UnumProvident Corporation+++ 12,400 197,160 US Bancorp 79,300 2,185,508 Wachovia Corporation 55,000 2,447,500 Washington Mutual, Inc. 36,200 1,398,768 Wells Fargo & Co. 70,530 4,036,432 XL Capital, Ltd. Class A 5,800 437,668 Zions Bancorporation 3,700 227,365 ------------ 95,552,261 ------------ HEALTHCARE -- 13.2% Abbott Laboratories 65,200 2,657,552 Aetna, Inc. 6,400 544,000 Allergan, Inc. 5,500 492,360 AmerisourceBergen Corporation 4,672 279,292 Amgen, Inc.* 53,128 2,899,195 Anthem, Inc.*+++ 5,800 519,448 Bard (C.R.), Inc. 4,400 249,260 Bausch & Lomb, Inc.+++ 2,200 143,154 Baxter International, Inc. 25,600 883,456 Becton Dickinson & Co. 10,600 549,080 Biogen Idec, Inc.*+++ 14,230 900,048 Biomet, Inc.+++ 10,600 471,064 Boston Scientific Corporation* 34,900 1,493,720 Bristol-Myers Squibb Co.+++ 81,300 1,991,850 Cardinal Health, Inc. 18,000 1,260,900 Caremark Rx, Inc.* 19,100 629,154 Chiron Corporation* 7,900 352,656 Express Scripts, Inc.*+++ 3,300 261,459 Forest Laboratories, Inc.* 15,500 877,765 Genzyme Corporation -- General Division* 9,500 449,635 Gilead Sciences, Inc.* 9,000 603,000 Guidant Corporation 13,100 732,028 HCA, Inc. 20,300 844,277 Health Management Associates, Inc. Class A+++ 10,200 228,684 Hospira, Inc* 6,550 180,780 Humana, Inc.* 6,800 114,920 IMS Health, Inc. 9,800 229,712 Johnson & Johnson 124,090 6,911,813 King Pharmaceuticals, Inc.* 10,100 115,645 Lilly (Eli) & Co. 47,200 3,299,752 Manor Care, Inc. 3,700 120,916 McKesson Corporation 12,200 418,826 Medco Health Solutions, Inc.* 11,376 426,600 Medimmune, Inc.* 10,400 243,360 Medtronic, Inc. 50,700 2,470,104 Merck & Co., Inc. 92,900 4,412,750 Millipore Corporation* 2,100 118,377 Mylan Laboratories, Inc.+++ 11,200 226,800 Pfizer, Inc. 319,083 10,938,164 Quest Diagnostics, Inc.+++ 4,300 365,285 Schering-Plough Corporation 61,500 1,136,520 St. Jude Medical, Inc.* 7,400 559,810 Stryker Corporation 16,700 918,500 Tenet Healthcare Corporation* 19,450 260,825 UnitedHealth Group, Inc. 25,800 1,606,050 Watson Pharmaceuticals, Inc.* 4,600 123,740 WellPoint Health Networks, Inc.* 6,500 728,065 Wyeth 55,800 2,017,728 Zimmer Holdings, Inc.* 10,220 901,404 ------------ 59,159,483 ------------ </Table> <Table> <Caption> SHARES VALUE ---------- ------------ INTEGRATED OILS -- 4.6% Amerada Hess Corporation 3,800 $ 300,922 ChevronTexaco Corporation 44,740 4,210,481 ConocoPhillips 28,650 2,185,709 ExxonMobil Corporation 273,444 12,143,648 Marathon Oil Corporation 14,407 545,161 Occidental Petroleum Corporation 16,400 793,924 Unocal Corporation 11,000 418,000 ------------ 20,597,845 ------------ MATERIALS & PROCESSING -- 3.4% Air Products & Chemicals, Inc. 9,500 498,275 Alcoa, Inc. 36,400 1,202,292 Allegheny Technologies, Inc.+++ 3,400 61,370 American Standard Cos., Inc.* 9,000 362,790 Archer-Daniels-Midland Co. 27,227 456,869 Ashland, Inc. 2,900 153,149 Avery Dennison Corporation 4,600 294,446 Ball Corporation+++ 2,396 172,632 Bemis Co. 4,500 127,125 Boise Cascade Corporation+++ 3,700 139,268 Dow Chemical Co. (The) 39,100 1,591,370 Du Pont (E.I.) de Nemours & Co. 41,855 1,859,199 Eastman Chemical Co.+++ 3,200 147,936 </Table> See Notes to Financial Statements. 72 <Table> <Caption> SHARES VALUE ---------- ------------ Ecolab, Inc. 10,700 $ 339,190 Engelhard Corporation 5,200 168,012 Fluor Corporation+++ 3,500 166,845 Freeport-McMoRan Copper & Gold, Inc. Class B+++ 7,400 245,310 Georgia-Pacific Corporation 10,700 395,686 Great Lakes Chemical Corporation+++ 2,100 56,826 Hercules, Inc.*+++ 4,600 56,074 International Paper Co. 20,300 907,410 Louisiana-Pacific Corporation+++ 4,500 106,425 Masco Corporation 18,300 570,594 MeadWestvaco Corporation 8,383 246,376 Monsanto Co. 11,060 425,810 Newmont Mining Corporation+++ 18,500 717,060 Nucor Corporation+++ 3,300 253,308 Pactiv Corporation* 6,400 159,616 Phelps Dodge Corporation 3,900 302,289 PPG Industries, Inc. 7,200 449,928 Praxair, Inc. 13,580 541,978 Rohm & Haas Co. 9,400 390,852 Sealed Air Corporation*+++ 3,500 186,445 Sherwin-Williams Co. (The) 6,000 249,300 Sigma-Aldrich Corporation 2,900 172,869 Temple-Inland, Inc. 2,300 159,275 United States Steel Corporation+++ 4,700 165,064 Vulcan Materials Co. 4,300 204,465 Weyerhaeuser Co. 10,100 637,512 Worthington Industries, Inc.+++ 3,600 73,908 ------------ 15,415,148 ------------ OTHER -- 4.5% 3M Co. 32,700 2,943,327 Brunswick Corporation 4,000 163,200 Eaton Corporation 6,300 407,862 General Electric Co. 441,300 14,298,120 Honeywell International, Inc. 35,900 1,315,017 ITT Industries, Inc. 3,900 323,700 Johnson Controls, Inc. 7,992 426,613 Textron, Inc. 5,800 344,230 ------------ 20,222,069 ------------ OTHER ENERGY -- 1.8% Anadarko Petroleum Corporation 10,500 615,300 Apache Corporation 13,648 594,370 Baker Hughes, Inc. 13,900 523,335 BJ Services Co.* 6,700 307,128 Burlington Resources, Inc. 16,600 600,588 Calpine Corporation*+++ 17,400 75,168 Devon Energy Corporation 10,000 660,000 Dynegy, Inc. Class A*+++ 15,800 67,308 El Paso Corporation 26,800 211,184 EOG Resources, Inc.+++ 4,900 292,579 Halliburton Co.+++ 18,400 556,784 Kerr-McGee Corporation+++ 6,230 334,987 Nabors Industries, Ltd.* 6,200 280,364 Noble Corporation* 5,600 212,184 </Table> <Table> <Caption> SHARES VALUE ---------- ------------ Rowan Cos., Inc.*+++ 4,400 $ 107,052 Schlumberger, Ltd. 24,600 1,562,347 Sunoco, Inc.+++ 3,200 203,584 Transocean, Inc.* 13,400 387,796 Valero Energy Corporation 5,400 398,304 Williams Cos., Inc. 21,700 258,230 ------------ 8,248,592 ------------ PRODUCER DURABLES -- 4.8% Agilent Technologies, Inc.* 20,100 588,528 American Power Conversion Corporation 8,400 165,060 Andrew Corporation* 6,700 134,067 Applied Materials, Inc.* 70,500 1,383,210 Boeing Co. (The) 35,300 1,803,477 Caterpillar, Inc. 14,300 1,135,992 Centex Corporation 5,200 237,900 Cooper Industries, Ltd. Class A 3,900 231,699 Crane Co. 2,500 78,475 Cummins, Inc.+++ 1,800 112,500 Danaher Corporation 12,900 668,865 Deere & Co. 10,400 729,456 Dover Corporation 8,500 357,850 Emerson Electric Co. 17,600 1,118,480 Goodrich Corporation 4,900 158,417 Grainger (W.W.), Inc. 3,800 218,500 Illinois Tool Works, Inc.+++ 13,000 1,246,570 Ingersoll-Rand Co. Class A 7,200 491,832 KB HOME 2,000 137,260 KLA-Tencor Corporation* 8,200 404,916 Lexmark International, Inc.* 5,400 521,262 Lockheed Martin Corporation 18,800 979,104 Molex, Inc.+++ 7,950 255,036 Northrop Grumman Corporation 15,056 808,507 Novellus Systems, Inc.* 6,200 194,928 Pall Corporation 5,200 136,188 Parker Hannifin Corporation 5,000 297,300 Pitney Bowes, Inc. 9,700 429,225 Power-One, Inc.*+++ 3,500 38,430 Pulte Homes, Inc. 5,304 275,967 Rockwell Collins, Inc. 7,400 246,568 Tektronix, Inc. 3,500 119,070 Teradyne, Inc.*+++ 8,100 183,870 Thermo Electron Corporation* 6,910 212,413 Thomas & Betts Corporation+++ 2,500 68,075 Tyco International, Ltd.+++ 83,884 2,779,916 United Technologies Corporation 21,500 1,966,820 Waters Corporation* 5,000 238,900 Xerox Corporation*+++ 33,500 485,750 ------------ 21,640,383 ------------ TECHNOLOGY -- 15.0% ADC Telecommunications, Inc.*+++ 33,800 95,992 Adobe Systems, Inc.+++ 10,000 465,000 Advanced Micro Devices, Inc.*+++ 14,800 235,320 </Table> See Notes to Financial Statements. 73 EQUITY INDEX FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ---------- ------------ Affiliated Computer Services, Inc. Class A* 5,700 $ 301,758 Altera Corporation* 15,700 348,854 Analog Devices, Inc. 15,700 739,156 Apple Computer, Inc.* 15,900 517,386 Applera Corporation-Applied Biosystems Group 8,400 182,700 Applied Micro Circuits Corporation* 13,000 69,160 Autodesk, Inc.+++ 4,780 204,632 Avaya, Inc.*+++ 18,548 292,873 BMC Software, Inc.* 9,300 172,050 Broadcom Corporation Class A* 13,100 612,687 CIENA Corporation*+++ 23,700 88,164 Cisco Systems, Inc.* 282,700 6,699,990 Citrix Systems, Inc.* 7,100 144,556 Computer Associates International, Inc.+++ 24,500 687,470 Computer Sciences Corporation* 7,800 362,154 Compuware Corporation* 16,100 106,260 Comverse Technology, Inc.* 8,200 163,508 Corning, Inc.* 57,400 749,644 Dell, Inc.* 105,500 3,779,010 Electronic Data Systems Corporation 20,300 388,745 EMC Corporation* 102,200 1,165,080 Gateway, Inc.*+++ 15,600 70,200 General Dynamics Corporation 8,300 824,190 Hewlett-Packard Co. 127,502 2,690,292 Intel Corporation 270,500 7,465,800 International Business Machines Corporation 70,500 6,214,575 Intuit, Inc.* 8,000 308,640 Jabil Circuit, Inc.* 8,400 211,512 JDS Uniphase Corporation*+++ 60,200 228,158 Linear Technology Corporation 12,900 509,163 LSI Logic Corporation*+++ 16,000 121,920 Lucent Technologies, Inc.*+++ 179,176 677,285 Maxim Integrated Products, Inc. 13,500 707,670 Mercury Interactive Corporation* 3,900 194,337 Micron Technology, Inc.*+++ 25,500 390,405 Microsoft Corporation 451,400 12,891,984 Motorola, Inc. 98,000 1,788,500 National Semiconductor Corporation*+++ 15,000 329,850 NCR Corporation* 4,000 198,360 Network Appliance, Inc.* 14,500 312,185 Novell, Inc.* 16,200 135,918 Nvidia Corporation*+++ 6,900 141,450 Oracle Corporation* 217,200 2,591,196 Parametric Technology Corporation*+++ 11,200 56,000 Peoplesoft, Inc.* 15,300 283,050 PerkinElmer, Inc. 5,300 106,212 PMC-Sierra, Inc.*+++ 7,400 106,190 QLogic Corporation*+++ 3,900 103,701 Qualcomm, Inc. 33,900 2,474,022 Raytheon Co. 18,700 668,899 Rockwell Automation, Inc. 7,800 292,578 Sanmina-SCI Corporation* 21,800 198,380 Scientific-Atlanta, Inc. 6,400 220,800 Siebel Systems, Inc.* 21,000 224,280 Solectron Corporation*+++ 40,200 260,094 Sun Microsystems, Inc.*+++ 139,100 603,694 Symantec Corporation*+++ 13,000 569,140 Symbol Technologies, Inc. 9,850 145,189 Tellabs, Inc.*+++ 17,400 152,076 Texas Instruments, Inc. 72,400 1,750,632 Unisys Corporation* 13,900 192,932 Veritas Software Corporation* 18,075 500,678 Xilinx, Inc. 14,500 482,995 ------------ 66,967,281 ------------ </Table> <Table> <Caption> SHARES VALUE ---------- ------------ UTILITIES -- 6.7% AES Corporation (The)* 26,600 $ 264,138 Allegheny Energy, Inc.*+++ 5,300 81,673 Alltel Corporation 12,900 652,998 Ameren Corporation+++ 7,600 326,496 American Electric Power Co., Inc. 16,500 528,000 AT&T Corporation 33,185 485,497 AT&T Wireless Services, Inc.* 114,064 1,633,396 BellSouth Corporation 76,700 2,011,074 Centerpoint Energy, Inc.+++ 12,800 147,200 CenturyTel, Inc.+++ 5,800 174,232 Cinergy Corporation 7,500 285,000 Citizens Communications Co.* 12,000 145,200 CMS Energy Corporation*+++ 6,800 62,084 Comcast Corporation Class A* 93,815 2,629,634 Consolidated Edison, Inc.+++ 10,100 401,576 Constellation Energy Group, Inc. 7,000 265,300 Dominion Resources, Inc.+++ 13,700 864,196 DTE Energy Co.+++ 7,300 295,942 Duke Energy Corporation 38,300 777,107 Edison International+++ 13,600 347,752 Entergy Corporation 9,652 540,609 Exelon Corporation 27,624 919,603 FirstEnergy Corporation 13,784 515,659 FPL Group, Inc. 7,700 492,415 KeySpan Corporation+++ 6,700 245,890 Kinder Morgan, Inc. 5,200 308,308 Nextel Communications, Inc. Class A* 46,400 1,237,024 Nicor, Inc.+++ 1,800 61,146 NiSource, Inc. 11,000 226,820 Peoples Energy Corporation+++ 1,600 67,440 PG&E Corporation*+++ 17,500 488,950 Pinnacle West Capital Corporation 3,800 153,482 PPL Corporation 7,400 339,660 Progress Energy, Inc.+++ 10,300 453,715 Public Service Enterprise Group, Inc.+++ 9,900 396,297 </Table> See Notes to Financial Statements. 74 <Table> <Caption> SHARES VALUE ---------- ------------ Qwest Communications International, Inc.* 74,600 $ 267,814 SBC Communications, Inc. 138,534 3,359,450 Sempra Energy 9,600 330,528 Southern Co. (The) 30,800 897,820 Sprint Corporation (FON Group)+++ 59,600 1,048,960 TECO Energy, Inc.+++ 7,900 94,721 TXU Corporation 13,500 546,885 Verizon Communications, Inc. 115,834 4,192,032 Xcel Energy, Inc.+++ 16,700 279,057 ------------ 29,842,780 ------------ TOTAL COMMON STOCK (Cost $385,735,355) 432,188,349 ------------ SHORT-TERM INVESTMENTS -- 8.5% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 13,661,276 13,661,276 Northern Institutional Liquid Assets Portfolio sec. 24,439,518 24,439,517 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $38,100,793) 38,100,793 ------------ </Table> <Table> <Caption> PAR VALUE --------- ------------ U.S. TREASURY OBLIGATIONS -- 0.2% U.S. Treasury Bills 0.95%, 07/22/04++++ $ 955,000 $ 954,513 0.96%, 07/22/04++++ 30,000 29,983 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $984,454) 984,496 ------------ TOTAL INVESTMENTS -- 105.4% (Cost $424,820,602) 471,273,638 LIABILITIES IN EXCESS OF OTHER ASSETS -- (5.4%) (24,263,468) ------------ NET ASSETS -- 100.0% $447,010,170 ============ </Table> See Notes to Financial Statements. 75 VALUE EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RUSSELL 1000(R) VALUE RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- --------------------- One Year 23.70% 23.85% 23.36% 21.13% Since Inception (8/27/01 -- 6/30/04) 3.38% 3.87% 3.39% 3.60% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS RUSSELL 1000(R) VALUE INDEX** ---------------- ----------------------------- 08/27/01 10000 10000 08/31/01 9711 9702 09/30/01 9027 9019 10/31/01 8948 8942 11/30/01 9408 9462 12/31/01 9621 9684 01/31/02 9529 9610 02/28/02 9535 9625 03/31/02 10031 10081 04/30/02 9747 9735 05/31/02 9734 9784 06/30/02 9157 9222 07/31/02 8273 8365 08/31/02 8366 8428 09/30/02 7382 7491 10/31/02 7807 8046 11/30/02 8306 8553 12/31/02 7950 8181 01/31/03 7783 7983 02/28/03 7514 7770 03/31/03 7528 7783 04/30/03 8138 8468 05/31/03 8755 9015 06/30/03 8885 9128 07/30/03 9041 9264 08/31/03 9196 9408 09/30/03 9088 9316 10/31/03 9643 9886 11/30/03 9791 10020 12/31/03 10402 10638 01/31/04 10627 10825 02/29/04 10838 11057 03/31/04 10736 10960 04/30/04 10545 10692 05/31/04 10688 10801 06/30/04 10991 11057 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Russell 1000(R) Value Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Russell 1000(R) Value Index is a large-cap index consisting of those Russell 1000(R) index securities with a less-than-average growth orientation. Companies in this index tend to exhibit lower price-to-book and price-earnings-ratios, higher dividend yields and lower forecasted growth values than the growth universe. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 76 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ----------- -------------- COMMON STOCK -- 96.4% AUTO & TRANSPORTATION -- 3.5% American Axle & Manufacturing Holdings, Inc. 43,400 $ 1,578,024 AMR Corporation*+++ 125,000 1,513,750 Autoliv, Inc. 5,600 236,320 BorgWarner, Inc. 2,500 109,425 Burlington Northern Santa Fe Corporation 399,900 14,024,492 CNF, Inc. 2,100 87,276 CSX Corporation 12,700 416,179 Dana Corporation 65,300 1,279,880 Delphi Corporation 857,600 9,159,168 FedEx Corporation 4,200 343,098 Ford Motor Co.+++ 104,095 1,629,087 General Motors Corporation+++ 111,700 5,204,103 Genuine Parts Co. 10,300 408,704 Lear Corporation 4,100 241,859 Navistar International Corporation* 1,700 65,892 Norfolk Southern Corporation 45,500 1,206,660 Oshkosh Truck Corporation 200 11,462 Paccar, Inc. 10,350 600,197 Southwest Airlines Co. 9,850 165,185 Tidewater, Inc. 14,000 417,200 TRW Automotive Holdings Corporation* 1,400 26,390 Union Pacific Corporation 122,400 7,276,680 Yellow Roadway Corporation* 2,800 111,608 -------------- 46,112,639 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- CONSUMER DISCRETIONARY -- 10.6% Activision, Inc.* 1,400 $ 22,260 Alberto-Culver Co. 650 32,591 Allied Waste Industries, Inc.* 9,500 125,210 American Eagle Outfitters, Inc.* 300 8,673 AnnTaylor Stores Corporation* 1,300 37,674 AutoNation, Inc.* 10,400 177,840 Barnes & Noble, Inc.* 2,900 98,542 Belo Corporation Class A 2,300 61,755 Big Lots, Inc.* 4,100 59,286 BJ's Wholesale Club, Inc.* 4,100 102,500 Black & Decker Corporation+++ 44,600 2,770,998 Blockbuster, Inc. Class A+++ 1,500 22,770 Borders Group, Inc. 4,600 107,824 Brink's Co. (The) 200 6,850 Brinker International, Inc.* 500 17,060 Carnival Corporation+++ 183,400 8,619,800 Cendant Corporation+++ 655,130 16,037,582 ChoicePoint, Inc.*+++ 18,300 835,578 Circuit City Stores, Inc. -- Circuit City Group+++ 238,800 3,092,460 Citadel Broadcasting Corporation* 1,700 24,769 Claire's Stores, Inc. 400 8,680 Clear Channel Communications, Inc. 17,625 651,244 Columbia Sportswear Co.* 100 5,462 Convergys Corporation* 8,500 130,900 Costco Wholesale Corporation 25,500 1,047,285 Cox Radio, Inc. Class A* 1,300 22,594 Darden Restaurants, Inc. 5,300 108,915 Dillard's, Inc. Class A+++ 72,800 1,623,440 DIRECTV Group, Inc. (The)* 4,232 72,367 Donnelley (R.R.) & Sons Co. 12,800 422,656 Eastman Kodak Co.+++ 331,400 8,941,172 EchoStar Communications Corporation Class A* 17,582 540,647 Entercom Communications Corporation* 1,100 41,030 Federated Department Stores, Inc. 17,400 854,340 Foot Locker, Inc. 5,000 121,700 Gannett Co., Inc. 16,100 1,366,085 Gemstar-TV Guide International, Inc.* 8,900 42,720 Gillette Co. (The) 4,500 190,800 Harte-Hanks, Inc. 450 10,985 Hasbro, Inc. 9,125 173,375 Hearst-Argyle Television, Inc. 1,800 46,404 Hilton Hotels Corporation 3,300 61,578 Home Depot, Inc. (The) 11,000 387,200 IKON Office Solutions, Inc. 7,100 81,437 InterActiveCorp* 10,461 315,295 International Flavors & Fragrances, Inc. 800 29,920 International Speedway Corporation Class A 200 9,728 Interpublic Group Cos., Inc.* 8,100 111,213 ITT Educational Services, Inc.* 38,300 1,456,166 Jones Apparel Group, Inc. 131,800 5,203,464 Kimberly-Clark Corporation 17,200 1,133,136 Kmart Holding Corporation* 2,800 201,040 Knight-Ridder, Inc. 3,900 280,800 Lamar Advertising Co.* 1,000 43,350 Laureate Education, Inc.* 400 15,296 Lee Enterprises, Inc. 2,700 129,627 Leggett & Platt, Inc. 7,100 189,641 Liberty Media Corporation Class A* 83,100 747,069 Liberty Media International, Inc. Class A*+++ 2,880 106,848 Limited Brands 23,100 431,970 Liz Claiborne, Inc. 6,600 237,468 Manpower, Inc. 2,800 142,156 Marriott International, Inc. Class A 1,400 69,832 Mattel, Inc. 227,500 4,151,875 </Table> See Notes to Financial Statements. 77 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- May Department Stores Co. (The) 17,200 $ 472,828 Maytag Corporation 2,100 51,471 McClatchy Co. Class A 1,100 77,165 McDonald's Corporation 696,400 18,106,399 Media General, Inc. Class A 700 44,954 Metro-Goldwyn-Mayer, Inc. 2,400 29,040 Mohawk Industries, Inc.* 1,500 109,995 Neiman-Marcus Group, Inc. Class A 2,500 139,125 New York Times Co. Class A 800 35,768 Newell Rubbermaid, Inc. 219,600 5,160,600 Nordstrom, Inc. 2,100 89,481 Office Depot, Inc.* 209,300 3,748,563 Omnicom Group, Inc. 1,700 129,013 Outback Steakhouse, Inc.+++ 400 16,544 Penney (JC) Co., Inc. 14,400 543,744 Pier 1 Imports, Inc.+++ 2,800 49,532 Polo Ralph Lauren Corporation+++ 2,100 72,345 Radio One, Inc. Class D* 2,500 40,025 RadioShack Corporation 21,500 615,545 Reebok International, Ltd. 2,700 97,146 Regal Entertainment Group Class A+++ 2,100 38,010 Regis Corporation 1,500 66,885 Rent-A-Center, Inc.* 1,300 38,909 Republic Services, Inc. 25,700 743,758 Sabre Holdings Corporation 8,200 227,222 Saks, Inc.+++ 7,500 112,500 Sears, Roebuck & Co.+++ 180,200 6,804,352 Service Corporation International* 18,000 132,660 Servicemaster Co. 7,100 87,472 Sirius Satellite Radio, Inc.*+++ 73,100 225,148 Snap-On, Inc. 3,400 114,070 Stanley Works (The)+++ 200,900 9,157,022 Staples, Inc. 29,700 870,507 Starwood Hotels & Resorts Worldwide, Inc. 7,800 349,830 Tech Data Corporation* 3,400 133,042 Time Warner, Inc.* 210,600 3,702,348 Toys "R" Us, Inc.* 12,600 200,718 Tribune Co. 14,700 669,438 Univision Communications, Inc. Class A*+++ 5,395 172,262 VeriSign, Inc.* 4,500 89,550 VF Corporation 5,000 243,500 Viad Corporation* 2,900 78,329 Waste Management, Inc. 271,157 8,310,962 Wendy's International, Inc. 248,900 8,671,676 West Corporation* 200 5,230 Whirlpool Corporation+++ 39,000 2,675,400 -------------- 137,771,015 -------------- CONSUMER STAPLES -- 3.9% Albertson's, Inc.+++ 114,100 3,028,214 Campbell Soup Co. 6,800 182,784 Clorox Co. 2,600 139,828 </Table> <Table> <Caption> SHARES VALUE ----------- -------------- Coca-Cola Co. (The) 13,300 $ 671,384 Coca-Cola Enterprises, Inc. 13,900 402,961 Colgate-Palmolive Co. 5,300 309,785 ConAgra Foods, Inc. 477,400 12,927,991 CVS Corporation 20,800 874,016 Dean Foods Co.* 9,250 345,118 Del Monte Foods Co.* 10,800 109,728 General Mills, Inc. 17,100 812,763 Heinz (H.J.) Co. 186,700 7,318,640 Hershey Foods Corporation 2,300 106,421 Hormel Foods Corporation 4,400 136,840 J.M. Smucker Co. (The) 3,400 156,094 Kellogg Co. 6,100 255,285 Kraft Foods, Inc. Class A 15,800 500,544 Kroger Co.* 43,600 793,520 McCormick & Co., Inc. 2,000 68,000 Pepsi Bottling Group, Inc. 900 27,486 PepsiAmericas, Inc. 4,200 89,208 PepsiCo, Inc. 5,400 290,952 Pilgrim's Pride Corporation 900 26,046 Procter & Gamble Co. 13,350 726,774 Rite Aid Corporation*+++ 2,600 13,572 Safeway, Inc.* 311,200 7,885,808 Sara Lee Corporation+++ 479,415 11,021,751 Smithfield Foods, Inc.* 5,000 147,000 SUPERVALU, Inc. 29,400 899,934 Tootsie Roll Industries, Inc. 1,439 46,768 Tyson Foods, Inc. Class A 12,981 271,952 Wrigley (W.M.), Jr. Co. 600 37,830 -------------- 50,624,997 -------------- FINANCIAL SERVICES -- 30.5% A.G. Edwards, Inc. 4,700 159,941 Accenture, Ltd. Class A* 47,900 1,316,292 ACE, Ltd. 231,800 9,800,504 AFLAC, Inc. 2,900 118,349 Alleghany Corporation* 312 89,544 Allied Capital Corporation+++ 7,600 185,592 Allmerica Financial Corporation* 3,100 104,780 Allstate Corporation (The) 379,900 17,684,345 AMB Property Corporation REIT 4,900 169,687 AMBAC Financial Group, Inc. 4,850 356,184 American Capital Strategies, Ltd. 2,700 75,654 American Financial Group, Inc.+++ 2,200 67,254 American International Group, Inc. 45,133 3,217,080 American National Insurance Co. 500 46,165 AmeriCredit Corporation* 9,300 181,629 </Table> See Notes to Financial Statements. 78 <Table> <Caption> SHARES VALUE ----------- -------------- AmSouth Bancorporation 20,800 $ 529,776 Annaly Mortgage Management, Inc. REIT+++ 7,000 118,720 AON Corporation 18,600 529,542 Apartment Investment & Management Co. Class A REIT 5,600 174,328 Archstone-Smith Trust REIT 11,600 340,228 Arden Realty, Inc. REIT 3,900 114,699 Arthur J. Gallagher & Co. 300 9,135 Associated Banc-Corp+++ 27,300 808,899 Assurant, Inc. 50,200 1,324,276 Assured Guaranty, Ltd.* 35,100 594,945 Astoria Financial Corporation 47,200 1,726,576 Automatic Data Processing, Inc. 4,900 205,212 AvalonBay Communities, Inc. REIT 4,200 237,384 Bank of America Corporation 412,742 34,926,227 Bank of Hawaii Corporation 3,200 144,704 Bank of New York Co., Inc. (The) 39,900 1,176,252 Bank One Corporation 66,300 3,381,300 Banknorth Group, Inc. 10,200 331,296 BB&T Corporation 32,829 1,213,688 Bear Stearns Cos., Inc. (The) 26,900 2,267,939 BOK Financial Corporation* 1,057 41,508 Boston Properties, Inc. REIT 4,900 245,392 BRE Properties, Inc. Class A REIT 3,000 104,250 Camden Property Trust REIT 2,400 109,920 Capital One Financial Corporation 4,000 273,520 Capitol Federal Financial+++ 1,300 38,870 CBL & Associates Properties, Inc. REIT 700 38,500 Centerpoint Properties Corporation REIT 1,400 107,450 Charter One Financial, Inc. 13,208 583,662 Checkfree Corporation* 1,700 51,000 Chelsea Property Group, Inc. REIT 1,500 97,830 Chubb Corporation 101,300 6,906,634 Cigna Corporation+++ 108,900 7,493,409 Cincinnati Financial Corporation 8,815 383,629 CIT Group, Inc. 12,500 478,625 Citigroup, Inc. 1,042,000 48,452,999 City National Corporation 2,400 157,680 CNA Financial Corporation* 1,500 44,385 Colonial Bancgroup, Inc. 7,500 136,275 Comerica, Inc. 184,100 10,103,408 Commerce Bancshares, Inc. 3,436 157,867 Compass Bancshares, Inc. 7,200 309,600 Conseco, Inc.* 8,500 169,150 </Table> <Table> <Caption> SHARES VALUE ----------- -------------- Countrywide Financial Corporation 16,500 $ 1,159,125 Crescent Real Estate Equities Co. REIT 254,800 4,107,376 Cullen/Frost Bankers, Inc. 3,000 134,250 Deluxe Corporation+++ 3,000 130,500 Developers Diversified Realty Corporation REIT 6,000 212,220 Doral Financial Corporation 49,800 1,718,100 Duke Realty Corporation REIT 8,400 267,204 E*TRADE Financial Corporation* 9,300 103,695 Equifax, Inc. 2,600 64,350 Equity Office Properties Trust REIT 23,885 649,672 Equity Residential Properties Trust REIT 16,600 493,518 Erie Indemnity Co. Class A 1,700 79,526 Everest Re Group, Ltd. 19,300 1,550,948 Fair Isaac & Co., Inc. 600 20,028 Fannie Mae 6,000 428,160 Federal Realty Investors Trust REIT 3,000 124,770 Federated Investors, Inc. Class B 500 15,170 Fidelity National Financial, Inc. 9,479 353,946 Fifth Third Bancorp 4,300 231,254 First American Corporation+++ 4,600 119,094 First Horizon National Corporation+++ 7,300 331,931 FirstMerit Corporation+++ 5,000 131,850 Franklin Resources, Inc. 8,300 415,664 Freddie Mac 137,700 8,716,410 Fremont General Corporation 1,000 17,650 Friedman, Billings, Ramsey Group, Inc. Class A REIT+++ 35,000 692,650 Fulton Financial Corporation 7,240 145,886 General Growth Properties, Inc. REIT 116,800 3,453,776 Genworth Financial, Inc. Class A* 7,400 169,830 Golden West Financial Corporation 5,000 531,750 Goldman Sachs Group, Inc. 18,100 1,704,296 Greenpoint Financial Corporation 6,500 258,050 Hartford Financial Services Group, Inc.+++ 328,000 22,546,719 HCC Insurance Holdings, Inc. 2,800 93,548 Health Care Property Investors, Inc. REIT 7,800 187,512 Health Care REIT, Inc. 3,000 97,500 Hibernia Corporation Class A 9,200 223,560 </Table> See Notes to Financial Statements. 79 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- Hospitality Properites Trust REIT 4,000 $ 169,200 Host Marriott Corporation REIT* 19,000 234,840 HRPT Properties Trust REIT 10,500 105,105 Hudson United Bancorp 2,700 100,656 Huntington Bancshares, Inc. 13,600 311,440 Independence Community Bank Corporation 30,978 1,127,599 IndyMac Bancorp, Inc. 1,800 56,880 Instinet Group, Inc.* 6,900 36,432 International Bancshares Corporation 2,100 85,155 iStar Financial, Inc. REIT+++ 6,500 260,000 Janus Capital Group, Inc. 14,200 234,158 Jefferies Group, Inc.+++ 3,000 92,760 Jefferson-Pilot Corporation 8,300 421,640 JP Morgan Chase & Co. 573,322 22,227,694 KeyCorp 279,750 8,361,728 Kimco Realty Corporation REIT 5,700 259,350 Lehman Brothers Holdings, Inc. 16,342 1,229,736 Leucadia National Corporation 3,100 154,070 Liberty Property Trust REIT+++ 5,000 201,050 Lincoln National Corporation 10,300 486,675 Loews Corporation 8,800 527,648 M & T Bank Corporation 4,500 392,850 Macerich Co. (The) REIT+++ 3,500 167,545 Mack-Cali Realty Corporation REIT 3,600 148,968 Markel Corporation* 300 83,250 Marshall & Ilsley Corporation 13,100 512,079 MBIA, Inc. 8,550 488,376 MBNA Corporation 45,700 1,178,603 Mellon Financial Corporation 17,400 510,342 Mercantile Bankshares Corporation 4,700 220,054 Mercury General Corporation 1,500 74,475 Merrill Lynch & Co., Inc. 192,267 10,378,573 MetLife, Inc. 23,800 853,230 MGIC Investment Corporation+++ 109,300 8,291,498 Mills Corporation (The) REIT 14,000 653,800 Morgan Stanley 131,500 6,939,255 National City Corporation 122,800 4,299,228 National Commerce Financial Corporation 12,100 393,250 Nationwide Financial Services Class A 3,300 124,113 New Plan Excel Realty Trust REIT+++ 5,900 137,824 New York Community Bancorp, Inc.+++ 15,654 307,288 North Fork Bancorporation, Inc.+++ 73,800 2,808,090 </Table> <Table> <Caption> SHARES VALUE ----------- -------------- Northern Trust Corporation 8,100 $ 342,468 Nuveen Investments, Inc. Class A 400 10,720 Odyssey Re Holdings Corporation+++ 700 16,800 Old Republic International Corporation 10,750 254,990 Pan Pacific Retail Properties, Inc. REIT 2,400 121,248 People's Bank+++ 2,250 70,088 Plum Creek Timber Co., Inc. REIT 10,862 353,884 PMI Group, Inc. (The) 5,700 248,064 PNC Financial Services Group, Inc. 16,700 886,436 Popular, Inc. 18,900 808,353 Principal Financial Group 18,900 657,342 Progressive Corporation (The) 10,800 921,240 ProLogis REIT 10,689 351,882 Protective Life Corporation 4,100 158,547 Provident Financial Group, Inc.+++ 2,500 98,650 Providian Financial Corporation* 12,400 181,908 Prudential Financial, Inc. 26,000 1,208,220 Public Storage, Inc. REIT 4,800 220,848 Radian Group, Inc. 3,600 172,440 Raymond James Financial, Inc. 3,600 95,220 Rayonier, Inc. REIT 2,940 130,683 Reckson Associates Realty Corporation REIT 4,000 109,840 Regency Centers Corporation REIT 1,500 64,350 Regions Financial Corporation 78,700 2,876,485 Reinsurance Group of America, Inc.+++ 1,700 69,105 RenaissanceRe Holdings, Ltd. 30,000 1,618,500 Rouse Co. (The) REIT 6,100 289,750 Ryder System, Inc. 2,100 84,147 Safeco Corporation 8,200 360,800 Schwab (Charles) Corporation (The) 7,000 67,270 Shurgard Storage Centers, Inc. Class A REIT+++ 2,700 100,980 Simon Property Group, Inc. REIT 9,200 473,064 Sky Financial Group, Inc. 5,500 136,015 SL Green Realty Corporation REIT 2,300 107,640 SLM Corporation 188,600 7,628,870 South Financial Group, Inc. 3,500 99,190 SouthTrust Corporation 19,500 756,795 Sovereign Bancorp, Inc. 18,100 400,010 St. Paul Travelers Cos., Inc. 72,445 2,936,921 Stancorp Financial Group, Inc. 1,700 113,900 </Table> See Notes to Financial Statements. 80 <Table> <Caption> SHARES VALUE ----------- -------------- State Street Corporation 10,200 $ 500,208 Student Loan Corporation+++ 200 27,300 Sungard Data Systems, Inc.* 2,100 54,600 SunTrust Banks, Inc.+++ 72,300 4,698,777 Synovus Financial Corporation 112,200 2,840,904 TCF Financial Corporation+++ 500 29,025 Thornburg Mortgage, Inc. REIT+++ 4,800 129,360 Torchmark Corporation 6,600 355,080 Transatlantic Holdings, Inc. 1,100 89,089 Trizec Properties, Inc. REIT 5,200 84,552 Union Planters Corporation 11,200 333,872 UnionBanCal Corporation 3,300 186,120 United Dominion Realty Trust, Inc. REIT 7,600 150,328 Unitrin, Inc. 1,600 68,160 UnumProvident Corporation 17,500 278,250 US Bancorp 575,926 15,872,521 Valley National Bancorp 5,536 139,950 Ventas, Inc. REIT 2,200 51,370 Vornado Realty Trust REIT 5,700 325,527 W Holding Co., Inc. 1,800 30,906 W.R. Berkley Corporation 3,875 166,431 Wachovia Corporation 322,050 14,331,225 Washington Federal, Inc. 4,634 111,216 Washington Mutual, Inc. 449,714 17,376,949 Webster Financial Corporation 3,100 145,762 Weingarten Realty Investors REIT 400 12,512 WellChoice, Inc.*+++ 900 37,260 Wells Fargo & Co. 196,272 11,232,647 Westcorp+++ 900 40,905 WFS Financial, Inc.* 200 9,902 Whitney Holding Corporation 2,400 107,208 Wilmington Trust Corporation 3,900 145,158 XL Capital, Ltd. Class A+++ 156,400 11,801,944 Zions Bancorporation 5,300 325,685 -------------- 395,236,050 -------------- HEALTHCARE -- 6.3% Aetna, Inc. 6,200 527,000 AmerisourceBergen Corporation 47,546 2,842,300 Andrx Corporation*+++ 1,600 44,688 Anthem, Inc.* 56,431 5,053,960 Bausch & Lomb, Inc. 1,200 78,084 Baxter International, Inc. 289,200 9,980,292 Biogen Idec, Inc.* 1,000 63,250 Bristol-Myers Squibb Co.+++ 377,600 9,251,200 Caremark Rx, Inc.* 11,800 388,692 Community Health Systems, Inc.* 1,500 40,155 Conventry Health Care, Inc.* 11,500 562,350 Dade Behring Holdings, Inc.* 300 14,256 Eyetech Pharmaceuticals, Inc.* 100 4,292 HCA, Inc. 16,600 690,394 Health Management Associates, Inc. Class A 1,600 35,872 Health Net, Inc.*+++ 331,800 8,792,700 Henry Schein, Inc.* 300 18,942 Hospira, Inc* 9,200 253,920 Humana, Inc.* 9,500 160,550 ICOS Corporation*+++ 1,600 47,744 Invitrogen Corporation* 1,600 115,184 IVAX Corporation*+++ 121,000 2,902,790 Johnson & Johnson 41,000 2,283,700 King Pharmaceuticals, Inc.* 14,300 163,735 Laboratory Corporation of America Holdings* 400 15,880 Manor Care, Inc. 1,000 32,680 McKesson Corporation 36,200 1,242,746 Medco Health Solutions, Inc.* 135,717 5,089,388 Medtronic, Inc. 52,800 2,572,416 Merck & Co., Inc. 179,800 8,540,500 Millennium Pharmaceuticals, Inc.* 8,400 115,920 Omnicare, Inc.+++ 1,100 47,091 PacifiCare Health Systems, Inc.* 3,900 150,774 Pfizer, Inc. 64,600 2,214,488 Protein Design Labs, Inc.* 4,600 87,998 Respironics, Inc.*+++ 11,900 699,125 Schering-Plough Corporation 418,400 7,732,032 Tenet Healthcare Corporation* 27,500 368,775 Triad Hospitals, Inc.*+++ 2,900 107,967 Universal Health Services, Inc. Class B 1,300 59,657 </Table> <Table> <Caption> SHARES VALUE ----------- -------------- Watson Pharmaceuticals, Inc.* 4,700 $ 126,430 WebMD Corporation*+++ 7,300 68,036 WellPoint Health Networks, Inc.* 1,000 112,010 Wyeth 226,000 8,172,160 -------------- 81,872,123 -------------- INTEGRATED OILS -- 8.5% Amerada Hess Corporation 42,600 3,373,494 BP PLC ADR+++ 234,068 12,539,023 ChevronTexaco Corporation 273,298 25,720,075 ConocoPhillips 390,988 29,828,474 ExxonMobil Corporation 395,400 17,559,714 Marathon Oil Corporation 216,900 8,207,496 Murphy Oil Corporation 4,800 353,760 Occidental Petroleum Corporation 260,500 12,610,805 Unocal Corporation 15,600 592,800 -------------- 110,785,641 -------------- MATERIALS & PROCESSING --6.5% Air Products & Chemicals, Inc. 13,400 702,830 Alcoa, Inc. 231,100 7,633,233 Archer-Daniels-Midland Co. 34,489 578,725 Ashland, Inc. 4,200 221,802 </Table> See Notes to Financial Statements. 81 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- Ball Corporation 1,700 $ 122,485 Bemis Co. 6,300 177,975 Boise Cascade Corporation 5,200 195,728 Bowater, Inc.+++ 3,300 137,247 Cabot Corporation+++ 23,100 940,170 Dow Chemical Co. (The) 51,844 2,110,051 Du Pont (E.I.) de Nemours & Co. 59,200 2,629,664 Eastman Chemical Co.+++ 155,700 7,198,011 Energizer Holdings, Inc.* 2,700 121,500 Engelhard Corporation 35,800 1,156,698 Florida Rock Industries, Inc. 1,300 54,821 Fluor Corporation+++ 3,000 143,010 Forest City Enterprises, Inc. Class A 1,800 95,400 Georgia-Pacific Corporation 165,971 6,137,608 Harsco Corporation 1,600 75,200 Hughes Supply, Inc. 8,800 518,584 International Paper Co. 206,700 9,239,490 International Steel Group, Inc.* 900 26,775 Jacobs Engineering Group, Inc.* 700 27,566 Lafarge North America, Inc. 2,000 86,600 Louisiana-Pacific Corporation 6,400 151,360 Lubrizol Corporation 27,100 992,402 Lyondell Chemical Co.+++ 294,300 5,117,877 Martin Marietta Materials, Inc. 2,900 128,557 Masco Corporation 25,900 807,562 MeadWestvaco Corporation 11,947 351,122 Monsanto Co. 261,400 10,063,900 Newmont Mining Corporation 8,500 329,460 Nucor Corporation+++ 74,400 5,710,944 Owens-Illinois, Inc.* 6,500 108,940 Packaging Corporation of America 3,600 86,040 Pactiv Corporation* 266,500 6,646,510 Phelps Dodge Corporation 22,400 1,736,224 PPG Industries, Inc. 10,100 631,149 Praxair, Inc. 13,700 546,767 Precision Castparts Corporation 1,800 98,442 Rohm & Haas Co. 9,500 395,010 RPM International, Inc. 61,300 931,760 Scotts Co. (The) Class A* 1,000 63,880 Sealed Air Corporation* 800 42,616 Sherwin-Williams Co. (The) 76,200 3,166,110 Sigma-Aldrich Corporation 3,100 184,791 Smurfit-Stone Container Corporation* 14,900 297,255 Sonoco Products Co. 5,800 147,900 Southern Peru Copper Corporation 400 16,532 Temple-Inland, Inc. 3,300 228,525 Timken Co. 2,000 52,980 United States Steel Corporation+++ 13,000 456,560 Valspar Corporation 3,000 151,170 Vulcan Materials Co. 6,000 285,300 Weyerhaeuser Co. 76,000 4,797,120 Worthington Industries, Inc. 600 12,318 -------------- 85,068,256 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- OTHER -- 1.7% Allete, Inc. 5,200 $ 173,160 Brunswick Corporation 2,300 93,840 Carlisle Cos., Inc. 1,800 112,050 Eaton Corporation 8,900 576,186 General Electric Co. 551,800 17,878,320 Hillenbrand Industries, Inc. 2,500 151,125 Honeywell International, Inc. 50,800 1,860,804 ITT Industries, Inc. 3,500 290,500 Johnson Controls, Inc. 8,500 453,730 SPX Corporation 4,200 195,048 Teleflex, Inc. 2,100 105,315 Textron, Inc. 7,000 415,450 Wesco Financial Corporation 100 36,200 -------------- 22,341,728 -------------- OTHER ENERGY -- 3.0% Anadarko Petroleum Corporation 98,800 5,789,680 Apache Corporation 19,282 839,731 Arch Coal, Inc. 2,000 73,180 Burlington Resources, Inc. 20,700 748,926 Chesapeake Energy Corporation+++ 14,300 210,496 CONSOL Energy, Inc.+++ 2,000 72,000 Cooper Cameron Corporation* 49,500 2,410,650 Devon Energy Corporation 14,219 938,454 Diamond Offshore Drilling, Inc.+++ 1,700 40,511 Dynegy, Inc. Class A* 16,700 71,142 El Paso Corporation+++ 37,872 298,431 ENSCO International, Inc. 3,900 113,490 EOG Resources, Inc. 6,900 411,999 Equitable Resources, Inc. 3,700 191,327 Kerr-McGee Corporation+++ 61,375 3,300,134 Massey Energy Co. 4,500 126,945 National-Oilwell, Inc.* 1,800 56,682 Newfield Exploration Co.* 1,700 94,758 Noble Energy, Inc. 3,400 173,400 NRG Energy, Inc.* 4,600 114,080 Patterson-UTI Energy, Inc. 400 13,364 Peabody Energy Corporation 3,800 212,762 Pioneer Natural Resouces Co. 7,100 249,068 Pogo Producing Co. 3,000 148,200 Premcor, Inc.* 2,300 86,250 Pride International, Inc.*+++ 3,500 59,885 Reliant Energy, Inc.*+++ 319,973 3,465,308 Rowan Cos., Inc.*+++ 3,100 75,423 Sunoco, Inc. 4,500 286,290 </Table> See Notes to Financial Statements. 82 <Table> <Caption> SHARES VALUE ----------- -------------- Tesoro Petroleum Corporation*+++ 26,100 $ 720,360 Texas Genco Holdings, Inc.+++ 900 40,581 Transocean, Inc.*+++ 319,500 9,246,330 Valero Energy Corporation 46,000 3,392,960 Varco International, Inc.* 5,000 109,450 Williams Cos., Inc. 463,400 5,514,460 -------------- 39,696,707 -------------- PRODUCER DURABLES -- 5.6% AGCO Corporation* 5,300 107,961 Agilent Technologies, Inc.* 2,500 73,200 Alliant Techsystems, Inc.* 800 50,672 American Power Conversion Corporation 4,700 92,355 American Tower Corporation Class A*+++ 12,700 193,040 AMETEK, Inc. 1,200 37,080 Andrew Corporation* 5,400 108,054 Boeing Co. (The) 157,300 8,036,457 Briggs & Stratton Corporation 300 26,505 Caterpillar, Inc. 4,800 381,312 Centex Corporation 3,800 173,850 Crane Co.+++ 3,100 97,309 Crown Castle International Corporation* 20,800 306,800 Cummins, Inc.+++ 2,300 143,750 Deere & Co. 8,500 596,190 Diebold, Inc. 4,300 227,341 Dover Corporation 2,300 96,830 DR Horton, Inc. 6,250 177,500 Emerson Electric Co. 198,600 12,621,030 Goodrich Corporation 7,000 226,310 Grainger (W.W.), Inc. 4,200 241,500 Hovnanian Enterprises, Inc. Class A* 500 17,355 Hubbell, Inc. Class B 3,600 168,156 Illinois Tool Works, Inc. 900 86,301 KB HOME+++ 34,600 2,374,598 Lennar Corporation Class A 4,500 201,240 Lockheed Martin Corporation 22,200 1,156,176 MDC Holdings, Inc. 600 38,166 Mettler Toledo International, Inc.* 1,100 54,054 Molex, Inc.+++ 1,400 44,912 Northrop Grumman Corporation 239,270 12,848,799 Novellus Systems, Inc.* 2,200 69,168 Pall Corporation 6,800 178,092 Parker Hannifin Corporation 7,100 422,166 Pentair, Inc. 5,900 198,476 Pitney Bowes, Inc. 97,300 4,305,525 Polycom, Inc.*+++ 59,500 1,333,395 Pulte Homes, Inc. 3,600 187,308 Roper Industries, Inc. 300 17,070 Ryland Group, Inc. 1,200 93,840 Standard-Pacific Corporation 1,900 93,670 </Table> <Table> <Caption> SHARES VALUE ----------- -------------- Steelcase, Inc. Class A 2,900 $ 40,600 Tektronix, Inc. 700 23,814 Thermo Electron Corporation* 4,300 132,182 Toll Brothers, Inc.*+++ 1,600 67,712 Tyco International, Ltd.+++ 359,800 11,923,772 United Defense Industries, Inc.* 6,300 220,500 United Technologies Corporation 130,750 11,961,010 Xerox Corporation*+++ 43,000 623,500 -------------- 72,896,603 -------------- TECHNOLOGY -- 5.3% 3Com Corporation* 23,100 144,375 ADC Telecommunications, Inc.*+++ 14,200 40,328 Adobe Systems, Inc. 28,153 1,309,115 Advanced Fibre Communications, Inc.* 3,400 68,680 Advanced Micro Devices, Inc.*+++ 9,700 154,230 Affiliated Computer Services, Inc. Class A* 2,200 116,468 Amphenol Corporation Class A* 1,100 36,652 Apple Computer, Inc.* 11,200 364,448 Applera Corporation-Applied Biosystems Group 11,900 258,825 Applied Micro Circuits Corporation* 9,600 51,072 Arrow Electronics, Inc.* 63,500 1,703,070 Autodesk, Inc.+++ 36,400 1,558,284 Avnet, Inc.* 7,100 161,170 Avocent Corporation*+++ 400 14,696 AVX Corporation+++ 1,900 27,455 BearingPoint, Inc.* 7,900 70,073 BMC Software, Inc.* 9,400 173,900 Cadence Design Systems, Inc.*+++ 7,100 103,873 Ceridian Corporation*+++ 3,100 69,750 CIENA Corporation*+++ 30,791 114,543 Computer Associates International, Inc.+++ 7,100 199,226 Computer Sciences Corporation* 176,100 8,176,323 Compuware Corporation* 22,700 149,820 Comverse Technology, Inc.* 5,200 103,688 Conexant Systems, Inc.* 12,300 53,259 Corning, Inc.* 206,400 2,695,584 Electronic Data Systems Corporation+++ 339,700 6,505,255 EMC Corporation* 28,900 329,460 Fairchild Semicoductor International, Inc.* 3,200 52,384 Foundry Networks, Inc.* 2,400 33,768 General Dynamics Corporation 44,700 4,438,710 Harris Corporation 1,300 65,975 </Table> See Notes to Financial Statements. 83 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- Hewlett-Packard Co. 738,150 $ 15,574,964 Ingram Micro, Inc. Class A* 6,200 89,714 International Business Machines Corporation 59,100 5,209,665 International Rectifier Corporation* 700 28,994 Intersil Corporation Class A 4,300 93,138 L-3 Communications Holdings, Inc. 2,800 187,040 LSI Logic Corporation* 12,400 94,488 Lucent Technologies, Inc.*+++ 253,400 957,852 Maxtor Corporation* 8,500 56,355 Micron Technology, Inc.*+++ 18,100 277,111 Microsoft Corporation 247,200 7,060,032 Motorola, Inc. 193,300 3,527,725 NCR Corporation* 1,200 59,508 Network Associates, Inc.* 1,600 29,008 Oracle Corporation* 23,500 280,355 PanAmSat Corporation*+++ 1,700 39,474 Peoplesoft, Inc.* 16,600 307,100 PerkinElmer, Inc. 3,600 72,144 QLogic Corporation* 900 23,931 Raytheon Co. 59,800 2,139,046 Reynolds & Reynolds Co. (The) Class A 300 6,939 Rockwell Automation, Inc. 3,800 142,538 Sandisk Corporation* 1,600 34,704 Sanmina-SCI Corporation* 15,176 138,102 Scientific-Atlanta, Inc. 9,100 313,950 Seagate Technology, Inc. +* 4,600 0 Siebel Systems, Inc.* 5,900 63,012 Storage Technology Corporation* 52,200 1,513,800 Sun Microsystems, Inc.* 196,700 853,678 Sybase, Inc.* 5,700 102,600 Tellabs, Inc.*+++ 14,500 126,730 TIBCO Software, Inc.* 2,300 19,435 Unisys Corporation* 18,700 259,556 UTStarcom, Inc.* 700 21,175 Vishay Intertechnology, Inc.* 7,000 130,060 Western Digital Corporation* 8,900 77,074 -------------- 69,255,456 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- UTILITIES -- 11.0% AGL Resources, Inc. 3,800 $ 110,390 Allegheny Energy, Inc.* 6,100 94,001 Alliant Energy Corporation 55,900 1,457,872 Alltel Corporation 18,200 921,284 Amdocs, Ltd.*+++ 16,600 388,938 Ameren Corporation 10,800 463,968 American Electric Power Co., Inc.+++ 265,100 8,483,200 Aqua America, Inc.+++ 5,525 110,776 AT&T Corporation 354,260 5,182,824 AT&T Wireless Services, Inc.* 67,000 959,440 BellSouth Corporation 199,100 5,220,402 Cablevision Systems Corporation Class A*+++ 1,375 27,019 Centerpoint Energy, Inc.+++ 264,900 3,046,350 CenturyTel, Inc.+++ 92,700 2,784,708 Cinergy Corporation 10,600 402,800 Citizens Communications Co.* 17,000 205,700 Comcast Corporation Class A* 284,763 7,981,907 Consolidated Edison, Inc.+++ 14,200 564,592 Constellation Energy Group, Inc. 10,000 379,000 Cox Communications, Inc. Class A*+++ 15,500 430,745 Dominion Resources, Inc. 19,319 1,218,643 DPL, Inc. 7,500 145,650 DTE Energy Co.+++ 65,800 2,667,532 Duke Energy Corporation 234,300 4,753,947 Edison International 19,300 493,501 Energy East Corporation 8,700 210,975 Entergy Corporation 196,500 11,005,965 Exelon Corporation 187,874 6,254,325 FirstEnergy Corporation 311,212 11,642,441 FPL Group, Inc. 10,900 697,055 Great Plains Energy, Inc. 4,100 121,770 Hawaiian Electric Industries+++ 4,800 125,280 KeySpan Corporation+++ 120,100 4,407,670 Kinder Morgan, Inc. 4,800 284,592 MDU Resources Group, Inc. 6,950 167,009 National Fuel Gas Co.+++ 4,300 107,500 Nextel Communications, Inc. Class A* 12,200 325,252 NiSource, Inc. 57,600 1,187,712 Northeast Utilities 70,800 1,378,476 NSTAR 3,100 148,428 NTL, Inc.*+++ 4,100 236,242 OGE Energy Corporation 5,200 132,444 Oneok, Inc. 32,700 719,073 Pepco Holdings, Inc. 10,198 186,419 PG&E Corporation* 23,600 659,384 Pinnacle West Capital Corporation 5,400 218,106 PPL Corporation 134,400 6,168,960 Progress Energy, Inc. 14,600 643,130 Progress Energy, Inc. Contingent Value Obligation*+ 3,100 1,209 Public Service Enterprise Group, Inc. 14,000 560,420 Puget Energy, Inc. 5,900 129,269 Questar Corporation 40,000 1,545,600 Qwest Communications International, Inc.* 87,500 314,125 SBC Communications, Inc. 195,900 4,750,575 SCANA Corporation+++ 44,400 1,614,828 Sempra Energy 80,300 2,764,729 Southern Co. (The) 43,600 1,270,940 </Table> See Notes to Financial Statements. 84 <Table> <Caption> SHARES VALUE ----------- -------------- Sprint Corporation (FON Group) 65,700 $ 1,156,320 TECO Energy, Inc.+++ 11,100 133,089 Telephone & Data Systems, Inc. 1,600 113,920 TXU Corporation 94,600 3,832,246 UGI Corporation 3,000 96,300 UnitedGlobalCom, Inc. Class A*+++ 4,400 31,944 US Cellular Corporation*+++ 500 19,275 Vectren Corporation 4,500 112,905 Verizon Communications, Inc. 757,124 27,400,317 Westar Energy, Inc.+++ 34,000 676,940 Western Gas Resources, Inc. 3,200 103,936 Wisconsin Energy Corporation 7,000 228,270 WPS Resources Corporation 2,200 101,970 Xcel Energy, Inc.+++ 23,640 395,024 -------------- 142,877,548 -------------- TOTAL COMMON STOCK (Cost $1,091,537,113) 1,254,538,763 -------------- SHORT-TERM INVESTMENTS -- 13.4% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 48,032,689 48,032,689 Northern Institutional Liquid Assets Portfolio sec. 126,956,118 126,956,118 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $174,988,807) 174,988,807 -------------- </Table> <Table> <Caption> PAR VALUE ---------- -------------- U.S. TREASURY OBLIGATIONS -- 0.3% U.S. Treasury Bills 0.95%, 07/22/04++++ $3,940,000 $ 3,937,990 1.07%, 07/22/04++++ 135,000 134,916 -------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $4,072,732) 4,072,906 -------------- TOTAL INVESTMENTS -- 110.1% (Cost $1,270,598,652) 1,433,600,476 LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.1%) (131,589,929) -------------- NET ASSETS -- 100.0% $1,302,010,547 ============== </Table> See Notes to Financial Statements. 85 GROWTH EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RUSSELL 1000(R) GROWTH RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- ---------------------- One Year 19.47% 19.55% 19.05% 17.88% Since Inception (8/27/01 -- 6/30/04) (1.32%) (1.21%) (1.57%) (1.98%) </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS RUSSELL 1000(R) GROWTH INDEX** ---------------- ------------------------------ 08/27/01 10000 10000 08/31/01 9492 9481 09/30/01 8506 8535 10/31/01 8945 8982 11/30/01 9837 9845 12/31/01 9812 9827 01/31/02 9642 9653 02/28/02 9266 9253 03/31/02 9642 9573 04/30/02 8858 8791 05/31/02 8619 8579 06/30/02 7954 7785 07/31/02 7345 7357 08/31/02 7351 7379 09/30/02 6566 6614 10/31/02 7207 7220 11/30/02 7646 7612 12/31/02 7050 7087 01/31/03 6874 6915 02/28/03 6861 6883 03/31/03 7043 7011 04/30/03 7577 7529 05/31/03 7966 7905 06/30/03 8060 8014 07/30/03 8286 8214 08/31/03 8506 8418 09/30/03 8336 8328 10/31/03 8864 8795 11/30/03 8845 8888 12/31/03 9134 9195 01/31/04 9272 9383 02/29/04 9353 9442 03/31/04 9309 9267 04/30/04 9247 9159 05/31/04 9460 9330 06/30/04 9630 9447 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Russell 1000(R) Growth Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Russell 1000(R) Growth Index is a large-cap index consisting of those Russell 1000(R) Index securities with greater-than-average growth orientation. Companies in this index tend to exhibit higher price-to-book and price-earnings-ratios, lower dividend yields and higher forecasted growth values than the value universe. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 86 GROWTH EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ----------- -------------- COMMON STOCK -- 94.8% AUTO & TRANSPORTATION -- 3.5% FedEx Corporation 130,965 $ 10,698,531 Harley-Davidson, Inc.+++ 478,000 29,607,320 United Parcel Service, Inc. Class B 141,300 10,621,521 -------------- 50,927,372 -------------- CONSUMER DISCRETIONARY -- 23.7% Amazon.com, Inc.* 494,300 26,889,920 Apollo Group, Inc. Class A* 300,000 26,487,000 Avon Products, Inc. 102,000 4,706,280 Bed Bath & Beyond, Inc.* 271,173 10,426,602 Coach, Inc.* 95,000 4,293,050 eBay, Inc.* 652,040 59,955,078 Electronic Arts, Inc.* 126,239 6,886,337 Estee Lauder Cos., Inc. (The) Class A 47,500 2,317,050 Kohl's Corporation* 143,600 6,071,408 Lowe's Cos., Inc. 490,507 25,776,143 McDonald's Corporation 83,100 2,160,600 Nike, Inc. Class B 207,461 15,715,171 Pixar, Inc.*+++ 142,800 9,926,028 Scripps Co. (E.W.) Class A 78,900 8,284,500 Starbucks Corporation*+++ 775,600 33,723,088 Tiffany & Co. 470,850 17,350,823 Tribune Co. 119,900 5,460,246 Wal-Mart Stores, Inc. 493,378 26,030,623 Weight Watchers International, Inc.*+++ 92,800 3,632,192 XM Satellite Radio Holdings, Inc. Class A*+++ 415,305 11,333,673 Yahoo!, Inc.*+++ 973,800 35,378,154 -------------- 342,803,966 -------------- CONSUMER STAPLES -- 6.1% Colgate-Palmolive Co. 107,200 6,265,840 CVS Corporation+++ 80,771 3,393,997 PepsiCo, Inc. 396,196 21,347,041 Procter & Gamble Co. 385,668 20,995,766 Sysco Corporation 275,000 9,864,250 Walgreen Co. 562,000 20,350,020 Wrigley (W.M.), Jr. Co. 100,700 6,349,135 -------------- 88,566,049 -------------- FINANCIAL SERVICES -- 13.3% Accenture, Ltd. Class A* 155,000 4,259,400 AFLAC, Inc.+++ 382,100 15,593,501 American Express Co. 60,000 3,082,800 American International Group, Inc. 77,400 5,517,072 Automatic Data Processing, Inc. 139,479 5,841,381 Capital One Financial Corporation 222,100 15,187,198 Citigroup, Inc. 445,333 20,707,984 Countrywide Financial Corporation 162,829 11,438,737 Fannie Mae 57,000 4,067,520 Fifth Third Bancorp 110,800 5,958,824 Franklin Resources, Inc. 71,950 3,603,256 Goldman Sachs Group, Inc. 67,943 6,397,513 M & T Bank Corporation 34,500 3,011,850 Merrill Lynch & Co., Inc. 370,737 20,012,383 Moody's Corporation+++ 98,600 6,375,476 Progressive Corporation (The) 334,595 28,540,953 Schwab (Charles) Corporation (The) 963,785 9,261,974 SLM Corporation 334,330 13,523,649 St. Paul Travelers Cos., Inc. 102,195 4,142,985 UCBH Holdings, Inc.+++ 15,736 621,887 Wachovia Corporation 84,800 3,773,600 Willis Group Holdings, Ltd.+++ 55,800 2,089,710 -------------- 193,009,653 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- HEALTHCARE -- 19.1% Allergan, Inc. 120,600 $ 10,796,112 Amgen, Inc.* 548,300 29,920,731 Biogen Idec, Inc.* 32,500 2,055,625 Boston Scientific Corporation* 218,217 9,339,688 Genentech, Inc.* 1,241,730 69,785,225 Genzyme Corporation* 164,600 7,790,518 Gilead Sciences, Inc.*+++ 45,000 3,015,000 Johnson & Johnson 170,000 9,469,000 Lilly (Eli) & Co. 152,700 10,675,257 Medtronic, Inc. 577,529 28,137,213 Pfizer, Inc. 660,000 22,624,800 Quest Diagnostics, Inc.+++ 60,685 5,155,191 St. Jude Medical, Inc.*+++ 103,096 7,799,212 Stryker Corporation 223,600 12,298,000 Teva Pharmaceutical Industries, Ltd. ADR+++ 312,200 21,007,938 UnitedHealth Group, Inc. 314,790 19,595,678 Zimmer Holdings, Inc.* 79,839 7,041,800 -------------- 276,506,988 -------------- INTEGRATED OILS -- 0.2% ExxonMobil Corporation 70,000 3,108,700 -------------- MATERIALS & PROCESSING -- 0.1% Monsanto Co. 42,238 1,626,163 -------------- OTHER -- 3.6% 3M Co. 136,000 12,241,360 General Electric Co. 1,127,754 36,539,230 Honeywell International, Inc. 102,092 3,739,630 -------------- 52,520,220 -------------- OTHER ENERGY -- 1.2% Baker Hughes, Inc. 137,300 5,169,345 BJ Services Co.* 98,400 4,510,656 Schlumberger, Ltd. 85,000 5,398,350 XTO Energy, Inc.+++ 100,000 2,979,000 -------------- 18,057,351 -------------- </Table> See Notes to Financial Statements. 87 GROWTH EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- PRODUCER DURABLES -- 3.8% Applied Materials, Inc.* 538,550 $ 10,566,351 Caterpillar, Inc. 146,741 11,657,105 Danaher Corporation+++ 43,550 2,258,068 Ingersoll-Rand Co. Class A 45,000 3,073,950 Lennar Corporation Class A 124,406 5,563,436 Tyco International, Ltd.+++ 469,912 15,572,884 United Technologies Corporation 70,000 6,403,600 -------------- 55,095,394 -------------- TECHNOLOGY -- 19.9% Cisco Systems, Inc.* 1,373,400 32,549,580 Dell, Inc.* 1,322,266 47,363,568 General Dynamics Corporation 51,827 5,146,421 Intel Corporation 723,200 19,960,320 Juniper Networks, Inc.*+++ 105,000 2,579,850 Maxim Integrated Products, Inc. 397,500 20,836,950 Microsoft Corporation 1,332,098 38,044,719 Motorola, Inc. 669,912 12,225,894 Network Appliance, Inc.*+++ 768,200 16,539,346 Novell, Inc.*+++ 115,300 967,367 Oracle Corporation* 721,300 8,605,109 Qualcomm, Inc. 646,790 47,202,734 Red Hat, Inc.*+++ 386,100 8,868,717 SAP AG ADR+++ 49,200 2,057,052 Seagate Technology, Inc.+* 5,600 0 Symantec Corporation*+++ 83,700 3,664,386 Texas Instruments, Inc. 38,172 922,999 Veritas Software Corporation* 169,200 4,686,840 Xilinx, Inc. 434,600 14,476,526 -------------- 286,698,378 -------------- UTILITIES -- 0.3% Vodafone Group PLC ADR+++ 225,000 4,972,500 -------------- TOTAL COMMON STOCK (Cost $1,162,861,077) 1,373,892,734 -------------- FOREIGN STOCK -- 0.3% SWITZERLAND Roche Holding AG(S) (Cost $5,251,882) 49,007 4,852,178 -------------- SHORT-TERM INVESTMENTS -- 12.6% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 64,354,159 64,354,159 Northern Institutional Liquid Assets Portfolio sec. 118,514,334 118,514,334 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $182,868,493) 182,868,493 -------------- <Caption> PAR ----------- U.S. TREASURY OBLIGATION -- 0.3% U.S. Treasury Bill 0.95%, 07/22/04++++ (Cost $4,812,332) $ 4,815,000 4,812,543 -------------- TOTAL INVESTMENTS -- 108.0% (Cost $1,355,793,784) 1,566,425,948 LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.0%) (116,448,412) -------------- NET ASSETS -- 100.0% $1,449,977,536 ============== </Table> See Notes to Financial Statements. 88 SMALL CAP EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RUSSELL 2000(R) RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- --------------- One Year 30.37% 30.45% 30.03% 33.37% Since Inception (8/27/01 -- 6/30/04) 6.68% 6.87% 6.46% 8.98% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> RETIREMENT CLASS RUSSELL 2000(R) INDEX** ---------------- ----------------------- 08/27/01 10000 10000 08/31/01 9770 9748 09/30/01 8317 8436 10/31/01 8845 8929 11/30/01 9541 9621 12/31/01 10084 10214 01/31/02 10000 10108 02/28/02 9656 9831 03/31/02 10543 10621 04/30/02 10497 10718 05/31/02 10122 10242 06/30/02 9587 9734 07/31/02 8125 8264 08/31/02 8148 8243 09/30/02 7445 7651 10/31/02 7682 7896 11/30/02 8363 8601 12/31/02 7842 8122 01/31/03 7636 7897 02/28/03 7429 7659 03/31/03 7506 7757 04/30/03 8233 8493 05/31/03 9021 9404 06/30/03 9220 9574 07/30/03 9663 10173 08/31/03 10168 10640 09/30/03 9923 10443 10/31/03 10773 11320 11/30/03 11125 11722 12/31/03 11469 11960 01/31/04 11867 12480 02/29/04 11951 12591 03/31/04 11974 12709 04/30/04 11484 12061 05/31/04 11630 12253 06/30/04 12020 12769 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Russell 2000(R) Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Russell 2000(R) Index is a small-cap equity index comprised of the 2,000 smallest companies in the Russell 3000(R) Index, which represents approximately 8% of the total market capitalization of the Russell 3000(R) Index. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Not Part of the Semi-Annual Report 89 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 SHARES VALUE - ------------- ----------- ------------- COMMON STOCK -- 95.0% AUTO & TRANSPORTATION -- 5.7% AAR Corporation* 2,300 $ 26,105 Aftermarket Technology Corporation* 400 6,600 Airtran Holdings, Inc.*+++ 28,400 401,576 Alaska Air Group, Inc.*+++ 2,200 52,514 Alexander & Baldwin, Inc. 3,500 117,075 America West Holdings Corporation Class B*+++ 2,500 22,700 Arctic Cat, Inc. 1,000 27,530 Arkansas Best Corporation+++ 49,400 1,626,248 ArvinMeritor, Inc. 5,800 113,506 Atlantic Coast Airlines Holdings, Inc.*+++ 34,900 200,326 Autoliv, Inc. 29,700 1,253,340 Aviall, Inc.* 2,000 38,020 Bandag, Inc.+++ 900 40,077 Central Freight Lines, Inc.* 36,500 292,000 Coachmen Industries, Inc.+++ 1,200 19,188 Collins & Aikman Corporation*+++ 3,200 17,888 Continental Airlines, Inc. Class B* 5,500 62,535 Cooper Tire & Rubber Co. 5,500 126,500 Covenant Transport, Inc. Class A* 39,100 668,219 Dana Corporation 23,700 464,520 Delta Air Lines, Inc.* 8,900 63,368 Dura Automotive Systems, Inc. Class A* 26,300 240,645 ExpressJet Holdings, Inc.*+++ 115,800 1,405,812 Florida East Coast Industries, Inc. 1,700 65,705 Frontier Airlines, Inc.*+++ 1,900 20,672 General Maritime Corporation*+++ 38,300 1,050,952 Genesee & Wyoming, Inc. Class A* 1,200 28,440 Gentex Corporation 12,600 499,968 Goodyear Tire & Rubber Co. (The)*+++ 12,700 115,443 Greenbrier Cos., Inc.* 500 9,525 Gulfmark Offshore, Inc.*+++ 32,500 512,850 Hayes Lemmerz International, Inc.*+++ 26,400 398,640 Heartland Express, Inc. 200 5,472 Hub Group, Inc.* 100 3,410 Kansas City Southern*+++ 2,600 40,300 Kirby Corporation* 900 35,010 Laidlaw International, Inc.*+++ 98,200 1,272,672 Landstar Systems, Inc.* 200 10,574 Marten Transport, Ltd.* 700 13,055 Mesa Air Group, Inc.* 300 2,427 Modine Manufacturing Co. 2,000 63,700 Monaco Coach Corporation 33,000 929,610 Northwest Airlines Corporation*+++ 6,200 68,944 Offshore Logistics, Inc.* 1,700 47,804 Old Dominion Freight Line, Inc.* 20,475 603,603 OMI Corporation+++ 55,600 661,640 Overnite Corporation 12,400 364,560 Overseas Shipholding Group, Inc. 2,200 97,086 P.A.M. Transportation Services, Inc.*+++ 20,000 382,000 Pacer International, Inc.* 84,100 1,555,850 Pinnacle Airlines Corporation* 38,300 432,790 Polaris Industries, Inc. 11,800 566,400 Quality Distribution, Inc.*+++ 10,600 116,918 Quixote Corporation 100 2,005 RailAmerica, Inc.*+++ 2,200 32,120 Republic Airways Holdings, Inc.* 300 4,275 Sauer-Danfoss, Inc. 700 11,949 SCS Transportation, Inc.* 450 11,876 Seabulk International, Inc.* 500 4,125 Skywest, Inc. 20,900 363,869 Standard Motor Products, Inc.+++ 1,000 14,730 Stoneridge, Inc.*+++ 28,300 481,100 Strattec Security Corporation* 200 13,686 Superior Industries International, Inc.+++ 8,100 270,945 Swift Transportation Co., Inc.* 41,200 739,540 TBC Corporation* 1,700 40,460 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Teekay Shipping Corporation 32,400 $ 1,211,112 Tenneco Automotive, Inc.*+++ 3,500 46,305 Tower Automotive, Inc.*+++ 4,800 17,472 U.S. Xpress Enterprises, Inc. Class A* 300 4,719 USF Corporation 2,300 80,799 UTI Worldwide, Inc. 24,200 1,275,098 Visteon Corporation 57,100 666,357 Wabash National Corporation* 1,000 27,550 Werner Enterprises, Inc. 67,900 1,432,690 Yellow Roadway Corporation* 25,300 1,008,458 ------------- 25,023,552 ------------- CONSUMER DISCRETIONARY -- 18.1% 4Kids Entertainment, Inc.*+++ 1,100 26,312 Aaron Rents, Inc. 59,800 1,981,772 ABM Industries, Inc.+++ 3,100 60,357 Action Performance Companies, Inc.+++ 8,300 125,081 Activision, Inc.* 67,050 1,066,095 Administaff, Inc.* 19,100 317,060 Advance Auto Parts, Inc.* 24,000 1,060,320 Advanced Marketing Services, Inc.+++ 1,100 14,201 Advisory Board Co. (The)* 16,800 598,080 Advo, Inc.+++ 49,850 1,641,062 Aeropostale, Inc.*+++ 20,050 539,546 </Table> See Notes to Financial Statements. 90 <Table> <Caption> SHARES VALUE ----------- ------------- Alderwoods Group, Inc.* 3,300 $ 40,260 Alloy, Inc.*+++ 2,700 16,605 AMC Entertainment, Inc.*+++ 98,100 1,507,797 Amerco, Inc.* 500 11,875 American Greetings Corporation Class A*+++ 5,300 122,854 American Woodmark Corporation+++ 400 23,940 Angelica Corporation+++ 700 17,577 Applica, Inc.* 1,600 14,240 Arbitron, Inc.* 23,000 839,960 Asbury Automotive Group, Inc.* 900 13,500 Ask Jeeves, Inc.*+++ 12,000 468,360 Atari, Inc.*+++ 600 1,446 Banta Corporation 400 17,764 Bassett Furniture Industries, Inc.+++ 6,900 150,144 Beasley Broadcasting Group, Inc. Class A* 12,600 188,496 Big Lots, Inc.* 29,300 423,678 Blair Corporation 700 20,230 Blue Nile, Inc.* 100 3,761 Blyth, Inc. 2,000 68,980 Bob Evans Farms, Inc. 28,100 769,378 Boca Resorts, Inc. Class A* 1,800 35,676 Bombay Co., Inc. (The)* 1,400 8,582 Bon-Ton Stores, Inc. 300 4,398 Bowne & Co., Inc. 14,700 232,995 Brightpoint, Inc.* 1,600 22,000 Brink's Co. (The) 36,300 1,243,275 Brown Shoe Co., Inc. 1,500 61,395 Buckle, Inc. (The) 18,000 508,500 Burlington Coat Factory Warehouse Corporation 10,700 206,510 California Pizza Kitchen, Inc.*+++ 8,100 155,196 Callaway Golf Co. 40,100 454,734 Carmike Cinemas, Inc.* 13,200 520,740 Catalina Marketing Corporation*+++ 42,300 773,667 Cato Corporation Class A 1,600 35,920 CBRL Group, Inc. 3,500 107,975 CDI Corporation+++ 200 6,920 CEC Entertainment, Inc.* 22,950 677,255 Central Garden & Pet Co.* 20,600 736,862 Central Parking Corporation+++ 1,500 28,035 Century Business Services, Inc.* 5,300 23,108 Charming Shoppes, Inc.* 81,700 729,581 Charter Communications, Inc. Class A*+++ 22,500 88,200 Chemed Corporation+++ 1,000 48,500 CKE Restaurants, Inc.*+++ 47,300 630,509 Claire's Stores, Inc. 19,500 423,150 Clark, Inc.*+++ 33,800 626,990 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- CNET Networks, Inc.*+++ 24,900 $ 275,643 Conn's, Inc.* 100 1,576 Consolidated Graphics, Inc.*+++ 300 13,215 Copart, Inc.*+++ 21,100 563,370 Corinthian Colleges, Inc.*+++ 44,950 1,112,063 Cornell Cos., Inc.*+++ 1,100 14,960 Corporate Executive Board Co. 28,700 1,658,573 Corrections Corporation of America* 1,400 55,286 Cost Plus, Inc.* 11,200 363,440 CoStar Group, Inc.*+++ 14,250 654,503 Courier Corporation+++ 350 14,609 Cross Country Healthcare, Inc.*+++ 1,600 29,040 Crown Media Holdings, Inc. Class A*+++ 500 4,260 CSK Auto Corporation* 500 8,570 CSS Industries, Inc. 600 21,024 Cumulus Media, Inc. Class A* 48,900 822,009 Dave & Buster's, Inc.*+++ 900 16,911 Deb Shops, Inc. 400 9,624 Department 56, Inc.*+++ 1,100 16,940 DiamondCluster International, Inc.* 52,900 459,701 Dillard's, Inc. Class A 51,000 1,137,300 Dollar Thrifty Automotive Group, Inc.* 28,600 784,784 DoubleClick, Inc.* 23,300 181,041 Dover Motorsports, Inc.+++ 1,300 5,200 Dress Barn, Inc.* 900 15,408 EarthLink, Inc.*+++ 54,200 560,970 Education Management Corporation* 83,400 2,740,523 Electronics Boutique Holdings Corporation*+++ 19,000 500,460 Emmis Communications Corporation Class A* 28,800 604,224 Empire Resorts, Inc.* 300 4,215 Entercom Communications Corporation* 18,000 671,400 Entravision Communications Corporation Class A* 1,900 14,592 Ethan Allen Interiors, Inc.+++ 19,800 711,018 Exponent, Inc.* 500 13,435 Finish Line, Inc. (The) Class A* 200 6,034 Fisher Communications, Inc.*+++ 100 5,033 Forrester Research, Inc.* 200 3,730 Fossil, Inc.* 12,600 343,350 FreeMarkets, Inc.* 2,600 16,952 FTI Consulting, Inc.* 3,000 49,500 Furniture Brands International, Inc. 3,800 95,190 G & K Services, Inc. Class A 1,500 60,285 GameStop Corporation*+++ 1,000 15,220 Gaylord Entertainment Co.* 2,500 78,475 </Table> See Notes to Financial Statements. 91 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- Genesco, Inc.*+++ 1,100 $ 25,993 Geo Group, Inc. (The)* 700 14,280 Getty Images, Inc.*+++ 36,000 2,160,000 Gildan Activewear, Inc.* 11,500 330,050 Global Imaging Systems, Inc.*+++ 3,200 117,312 Goody's Family Clothing, Inc. 37,400 387,838 Gray Television, Inc. 3,700 51,393 Group 1 Automotive, Inc.* 1,600 53,136 Guitar Center, Inc.* 7,700 342,419 Gymboree Corporation* 70,500 1,082,880 Hancock Fabrics, Inc. 1,600 20,400 Handleman Co. 24,200 560,472 Hartmarx Corporation* 1,900 11,970 Haverty Furniture Cos., Inc. 1,500 26,220 Hiedrick & Struggles International, Inc.* 25,600 759,808 Hollinger International, Inc. 1,600 26,864 Hollywood Entertainment Corporation* 12,600 168,336 Hooker Furniture Corporation 400 8,068 Hot Topic, Inc.*+++ 5,600 114,744 Hudson Highland Group, Inc.* 100 3,066 IHOP Corporation+++ 1,800 64,368 Information Holdings, Inc.*+++ 200 5,474 Insight Communications Co., Inc.*+++ 1,800 16,668 Insight Enterprises, Inc.* 2,800 49,728 Insurance Auto Auctions, Inc.*+++ 700 11,900 Internap Network Services Corporation* 6,800 8,228 Jack in the Box, Inc.* 3,000 89,100 Jakks Pacific, Inc.*+++ 2,100 43,659 Jarden Corporation* 250 8,998 Jo-Ann Stores, Inc.* 1,595 46,893 Journal Communications, Inc. Class A 1,000 18,830 Journal Register Co.* 1,500 30,000 K2, Inc.*+++ 2,300 36,110 Kellwood Co.+++ 23,300 1,014,715 Kelly Services, Inc. Class A 1,400 41,720 Kirkland's, Inc.* 200 2,386 La-Z-Boy, Inc. 4,400 79,112 Landry's Restaurants, Inc. 1,800 53,802 Lawson Products, Inc. 400 15,260 Leapfrog Enterprises, Inc.* 100 1,989 Libbey, Inc. 21,200 588,512 Liberty Corporation 9,600 450,720 Life Time Fitness, Inc.* 9,200 193,200 Lin TV Corporation Class A*+++ 76,600 1,623,920 Linens 'N Things, Inc.* 3,100 90,861 Lithia Motors, Inc. Class A 1,200 29,736 LKQ Corporation* 600 11,118 Lodgenet Entertainment Corporation*+++ 52,500 866,250 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Lone Star Steakhouse & Saloon, Inc. 1,300 $ 35,347 Marcus Corporation+++ 1,600 27,600 MarineMax, Inc.* 900 25,812 Martha Stewart Living Omnimedia, Inc.*+++ 600 5,400 Marvel Enterprises, Inc.*+++ 26,100 509,472 MAXIMUS, Inc.* 1,600 56,736 Maxwell Shoe Co., Inc. Class A* 1,200 27,888 Medical Staffing Network Holdings, Inc.*+++ 1,000 6,440 Memberworks, Inc.*+++ 500 14,810 Men's Warehouse, Inc.* 2,400 63,336 Midas, Inc.*+++ 500 8,700 Midway Games, Inc.*+++ 300 3,456 Monro Muffler Brake, Inc.* 50 1,213 Movado Group, Inc.+++ 1,300 22,425 Movie Gallery, Inc.+++ 34,700 678,385 MPS Group, Inc.* 6,300 76,356 MSC Industrial Direct Co., Inc. Class A 24,600 807,864 National Presto Industries, Inc. 400 16,492 Nautilus Group, Inc.+++ 2,400 46,824 Navigant Consulting, Inc.*+++ 33,000 707,520 Navigant International, Inc.*+++ 1,200 21,348 Neoforma, Inc.*+++ 600 7,284 NetRatings, Inc.*+++ 300 4,887 Nexstar Broadcasting Group, Inc. Class A* 72,900 800,442 Nu Skin Enterprises, Inc. Class A+++ 900 22,788 O'Charley's, Inc.*+++ 1,500 25,785 Oshkosh B'gosh, Inc.+++ 300 7,491 Oxford Industries, Inc. 5,000 217,800 Pantry, Inc.*+++ 300 6,540 Papa John's International, Inc.*+++ 500 14,770 Paxson Communications Corporation*+++ 1,400 4,550 Payless ShoeSource, Inc.*+++ 5,700 84,987 PC Connection, Inc.* 600 3,948 Pegasus Solutions, Inc.*+++ 1,100 14,443 Pep Boys-Manny, Moe & Jack 11,200 283,920 Perry Ellis International, Inc.* 500 12,630 PF Chang's China Bistro, Inc.*+++ 4,500 185,175 Phillips-Van Heusen Corporation 2,000 38,500 PLATO Learning, Inc.* 700 6,937 Playtex Products, Inc.*+++ 48,400 378,488 priceline.com, Inc.* 700 18,851 Prime Hospitality Corporation* 3,200 33,984 Primedia, Inc.*+++ 11,000 30,580 Princeton Review, Inc.* 300 2,271 Pulitzer, Inc. 700 34,230 </Table> See Notes to Financial Statements. 92 <Table> <Caption> SHARES VALUE ----------- ------------- Quiksilver, Inc.*+++ 38,700 $ 921,447 R.H. Donnelley Corporation* 1,900 83,106 Radio One, Inc. Class D* 42,100 674,021 Rare Hospitality International, Inc.* 10,450 260,205 RC2 Corporation* 500 17,750 Reader's Digest Association, Inc. (The) 2,700 43,173 Red Robin Gourmet Burgers, Inc.*+++ 10,000 273,700 Regent Communications, Inc.* 1,600 9,904 Rent-A-Center, Inc.* 53,050 1,587,787 Rent-Way, Inc.*+++ 700 6,300 Resources Connection, Inc.*+++ 27,700 1,083,347 Retail Ventures, Inc.* 700 5,418 Revlon, Inc. Class A*+++ 12,200 35,990 Rush Enterprises, Inc. Class B* 100 1,290 Russ Berrie & Co., Inc. 700 13,601 Russell Corporation 18,600 334,056 Ryan's Restaurant Group, Inc.* 36,100 570,380 Saga Communications, Inc. Class A* 66,100 1,206,325 Scholastic Corporation* 2,500 74,875 School Specialty, Inc.*+++ 1,200 43,572 SCP Pool Corporation+++ 55,550 2,499,749 Shoe Carnival, Inc.* 400 6,004 ShopKo Stores, Inc.* 2,400 33,936 Sina Corporation*+++ 8,600 283,714 Sinclair Broadcast Group, Inc. Class A 20,200 207,454 Sitel Corporation* 144,600 610,212 Six Flags, Inc.*+++ 19,200 139,392 Skechers USA, Inc. Class A*+++ 1,600 20,800 Sonic Automotive, Inc. 2,300 50,945 SOURCECORP, Inc.* 1,300 35,776 Spanish Broadcasting Systems, Inc. Class A*+++ 32,800 305,368 Speedway Motorsports, Inc. 600 20,064 Spherion Corporation* 5,000 50,700 Sports Authority, Inc. (The)* 1,077 38,664 Stage Stores, Inc.*+++ 34,500 1,299,270 Stanley Furniture Co., Inc.+++ 100 4,211 Stanley Works (The)+++ 15,500 706,490 Steak n Shake Co. (The)* 200 3,644 Stein Mart, Inc.* 20,300 330,078 Steinway Musical Intruments, Inc.* 600 21,054 Steven Madden, Ltd.*+++ 1,000 19,970 Stewart Enterprises, Inc. Class A* 9,000 73,260 Strayer Education, Inc. 6,500 725,205 Stride Rite Corporation 43,700 482,011 Sturm Ruger & Co., Inc.+++ 100 1,211 Systemax, Inc.* 800 5,360 Take-Two Interactive Software, Inc.* 700 21,448 Tech Data Corporation* 13,200 516,516 Teletech Holdings, Inc.* 900 7,893 Tempur-Pedic International, Inc.* 38,600 540,786 Tetra Tech, Inc.* 32,600 532,032 THQ, Inc.*+++ 27,800 636,620 Timberland Co. Class A* 16,500 1,065,735 Tommy Hilfiger Corporation* 35,100 531,414 Too, Inc.* 2,900 48,430 Topps Co. (The)+++ 11,200 108,640 Toro Co. 8,700 609,609 Tractor Supply Co.* 10,900 455,838 Trans World Entertainment Corporation* 1,900 19,038 Triarc Cos., Inc. Class B 600 6,102 Tuesday Morning Corporation* 15,600 452,400 Tupperware Corporation+++ 1,000 19,430 UniFirst Corporation 800 23,272 United Auto Group, Inc. 1,600 49,040 United Natural Foods, Inc.* 50,800 1,468,628 United Online, Inc.*+++ 19,000 334,590 United Stationers, Inc.* 2,700 107,244 Urban Outfitters, Inc.*+++ 3,900 237,549 Vail Resorts, Inc.* 1,600 30,656 Valassis Communications, Inc.* 1,900 57,893 Valuevision Media, Inc. Class A* 500 6,510 Vans, Inc.* 19,000 390,450 Volt Information Sciences, Inc.* 700 22,057 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Warnaco Group, Inc. (The)* 1,300 $ 27,651 Waste Connections, Inc.* 300 8,898 Water Pik Technologies, Inc.* 800 13,248 Watson Wyatt & Co. Holdings+++ 900 23,985 West Corporation* 37,200 972,780 West Marine, Inc.*+++ 17,650 473,903 Weyco Group, Inc. 200 6,858 Wolverine World Wide, Inc. 40,000 1,050,000 Young Broadcasting, Inc. Class A*+++ 59,100 777,165 Zale Corporation* 38,500 1,049,510 ------------- 80,362,878 ------------- CONSUMER STAPLES -- 1.6% 7-Eleven, Inc.* 9,000 160,650 American Italian Pasta Co. Class A+++ 26,600 810,768 Arden Group, Inc. Class A 50 4,481 Cal-Maine Foods, Inc. 600 8,400 Casey's General Stores, Inc. 2,200 40,260 Chiquita Brands International, Inc.* 40,100 838,892 Coca-Cola Bottling Co.+++ 100 5,789 Duane Reade, Inc.*+++ 2,000 32,660 Farmer Brothers Co. 600 16,098 Flowers Foods, Inc. 2,950 77,143 </Table> See Notes to Financial Statements. 93 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- Great Atlantic & Pacific Tea Co., Inc.*+++ 1,400 $ 10,724 Hain Celestial Group, Inc.* 2,100 38,010 Ingles Markets, Inc. Class A+++ 900 10,053 Interstate Bakeries Corporation 3,800 41,230 J & J Snack Foods Corporation* 500 20,415 J.M. Smucker Co. (The) 698 32,023 John B. Sanfillippo & Son* 18,700 499,664 Lance, Inc. 2,000 30,800 Long's Drug Stores Corporation 2,500 59,675 M & F Worldwide Corporation* 800 10,960 Nash Finch Co.+++ 1,000 25,030 National Beverage Corporation+++ 400 3,972 Nature's Sunshine Products, Inc.+++ 600 8,544 NBTY, Inc.* 19,000 558,410 Omega Protein Corporation* 500 4,850 Pathmark Stores, Inc.*+++ 39,500 300,990 Performance Food Group Co.* 11,400 302,556 Ralcorp Holdings, Inc.* 2,400 84,480 Riviana Foods, Inc. 500 13,085 Ruddick Corporation 45,900 1,030,455 Sanderson Farms, Inc. 350 18,767 Seaboard Corporation 30 14,939 Sensient Technologies Corporation 3,900 83,772 Smart & Final, Inc.* 1,000 12,020 SUPERVALU, Inc. 39,400 1,206,033 Weis Markets, Inc. 900 31,545 Wild Oats Markets, Inc.*+++ 28,900 406,623 Winn-Dixie Stores, Inc. 6,900 49,680 ------------- 6,904,446 ------------- </Table> <Table> <Caption> SHARES VALUE ----------- ------------- FINANCIAL SERVICES -- 20.2% 1st Source Corporation 1,000 $ 24,980 21st Century Insurance Group 1,800 23,292 A.G. Edwards, Inc. 34,000 1,157,020 ABC Bancorp 800 16,272 Acadia Realty Trust REIT 2,000 27,480 Accredited Home Lenders Holding Co.* 26,500 745,975 ACE Cash Express, Inc.* 18,100 464,989 Advanta Corporation Class B+++ 1,600 36,672 Affiliated Managers Group, Inc.*+++ 10,500 528,885 Affordable Residential Communities 2,100 34,860 Alabama National Bancorp 1,000 55,470 Alexandria Real Estate Equities, Inc. REIT 1,400 79,492 Alfa Corporation+++ 2,800 39,200 Alliance Data Systems Corporation* 89,300 3,772,924 Amcore Financial, Inc.+++ 2,100 63,336 American Equity Investment Life Holding Co.+++ 44,700 444,765 American Financial Realty Trust REIT 9,100 130,039 American Home Mortgage Investment Corporation REIT+++ 1,692 43,874 American Physicians Capital, Inc.*+++ 700 16,205 AmericanWest Bancorporation*+++ 890 17,044 AmerUs Group Co. 3,300 136,620 AMLI Residential Properties Trust REIT 2,100 61,614 Anchor Bancorp, Inc.+++ 21,700 573,748 Anthracite Capital, Inc. REIT+++ 4,200 50,316 Anworth Mortgage Asset Corporation REIT 3,700 43,956 Apollo Investment Corporation* 5,200 71,604 Arbor Realty Trust, Inc. REIT 600 11,970 Arch Capital Group, Ltd.* 15,800 630,104 Argonaut Group, Inc.*+++ 48,600 895,698 Ashford Hospitality Trust, Inc. 1,700 14,195 Asset Acceptance Capital Corporation*+++ 8,900 151,300 Associated Banc-Corp 25,650 760,010 Assured Guaranty, Ltd.* 69,800 1,183,110 Asta Funding, Inc. 100 1,740 Astoria Financial Corporation 34,800 1,272,984 Baldwin & Lyons, Inc. Class B+++ 625 16,775 Bancfirst Corporation+++ 300 17,925 Bancorp Bank (The)* 400 7,084 Bancorpsouth, Inc. 6,400 144,192 Banctrust Financial Group, Inc.+++ 700 12,264 Bank Mutual Corporation 43,868 478,161 Bank of Granite Corporation+++ 1,100 23,001 Bank of Hawaii Corporation 27,800 1,257,116 BankAtlantic Bancorp, Inc. Class A+++ 3,200 59,040 BankUnited Financial Corporation Class A* 13,700 353,460 Banner Corporation 800 23,248 Bedford Property Investors, Inc. REIT 1,200 35,088 Berkshire Hills Bancorp, Inc. 7,200 267,120 BISYS Group, Inc. (The)*+++ 10,000 140,600 BKF Capital Group, Inc. 200 5,810 Boston Private Financial Holdings, Inc.+++ 8,000 185,280 Brandywine Realty Trust REIT 3,400 92,446 Bristol West Holdings, Inc. 300 5,457 Brookfield Properties Corporation REIT 13,200 379,500 Brookline Bancorp, Inc. 4,900 71,883 </Table> See Notes to Financial Statements. 94 <Table> <Caption> SHARES VALUE ----------- ------------- Bryn Mawr Bank Corporation+++ 400 $ 9,100 BSB Bancorp, Inc. 700 24,885 Camden National Corporation 600 19,842 Capital Automotive REIT 2,600 76,258 Capital Bancorp, Ltd.+++ 400 10,404 Capital City Bank Group, Inc.+++ 650 25,734 Capital Corporation of the West+++ 400 15,536 Capital Lease Funding, Inc.* 1,900 19,760 Capital Southwest Corporation 100 7,903 Capital Trust, Inc. Class A 500 13,360 Capstead Mortgage Corporation REIT+++ 1,200 16,140 CarrAmerica Realty Corporation REIT 4,500 136,035 Cascade Bancorp 100 1,848 Cash America International, Inc. 900 20,700 Cathay General Bancorp, Inc.+++ 546 36,418 CB Bancshares, Inc. 330 30,756 CB Richard Ellis Group, Inc. Class A* 54,300 1,037,130 CCC Information Services Group*+++ 100 1,679 Cedar Shopping Centers, Inc. 1,400 16,086 Central Coast Bancorp*+++ 770 14,091 Central Pacific Financial Corporation+++ 1,300 35,750 Century Bancorp, Inc. Class A 300 9,867 Ceres Group, Inc.* 2,500 15,350 Certegy, Inc. 15,000 582,000 CharterMac 3,300 64,878 Chemical Financial Corporation 1,980 73,042 Chittenden Corporation+++ 3,055 107,383 Citizens Banking Corporation+++ 3,600 111,780 Citizens First Bancorp, Inc. 700 16,667 Citizens, Inc.* 2,400 19,680 City Bank Lynwood 600 19,212 City Holdings Co.+++ 1,200 37,896 Clifton Savings Bancorp, Inc. 800 9,448 CNA Surety Corporation* 1,300 14,235 Colonial Bancgroup, Inc. 67,800 1,231,926 Colonial Properties Trust REIT+++ 1,600 61,648 Columbia Bancorp 400 11,688 Columbia Banking System, Inc.+++ 1,165 25,863 Commerce Group, Inc.+++ 26,000 1,283,620 Commercial Capital Bancorp, Inc.* 1,133 19,680 Commercial Federal Corporation 3,400 92,140 Commercial Net Lease Realty, Inc. REIT 4,300 73,960 Community Bank System, Inc. 2,100 47,859 Community Banks, Inc.+++ 842 24,730 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Community First Bankshares, Inc.+++ 1,600 $ 51,504 Community Trust Bancorp, Inc. 889 27,115 CompuCredit Corporation* 1,600 27,680 Cornerstone Realty Income Trust, Inc. REIT+++ 4,200 36,834 Corporate Office Properties Trust REIT+++ 2,800 69,580 Correctional Properties Trust REIT 900 26,325 Corus Bankshares, Inc. 1,300 53,443 Cousins Properties, Inc. REIT 1,800 59,310 Crawford & Co. Class B 1,100 5,423 Credit Acceptance Coporation*+++ 700 10,549 CVB Financial Corporation+++ 35,617 775,738 Delphi Financial Group, Inc. Class A 13,000 578,500 Digital Insight Corporation*+++ 15,850 328,571 Dime Community Bancshares 2,600 45,448 Direct General Corporation+++ 14,600 470,996 Donegal Group, Inc. Class A 500 10,020 Doral Financial Corporation 26,550 915,975 Downey Financial Corporation 1,600 85,200 Eastgroup Properties REIT+++ 1,700 57,239 eFunds Corporation* 4,000 70,000 Electro Rent Corporation 11,500 120,405 EMC Insurance Group, Inc. 200 4,672 Enstar Group, Inc.*+++ 300 15,984 Entertainment Properties Trust REIT 2,000 71,480 Equity Inns, Inc. REIT 33,300 309,357 Equity One, Inc. REIT 1,140 20,611 Essex Property Trust, Inc. REIT+++ 1,500 102,525 Euronet Worldwide, Inc.* 7,000 161,910 Farmers Capital Bank Corporation 500 17,875 FBL Financial Group, Inc. Class A 1,000 28,260 Federal Agricultural Mortgage Corporation* 700 16,751 FelCor Lodging Trust, Inc. REIT* 4,100 49,610 Fidelity Bankshares, Inc.+++ 800 28,360 Financial Federal Corporation* 1,400 49,364 Financial Institutions, Inc. 700 17,290 First Bancorp+++ 600 20,058 First Bancorp Puerto Rico 200 8,150 First Busey Corporation+++ 400 11,696 First Charter Corporation+++ 2,500 54,475 First Citizens BancShares, Inc. Class A 500 61,000 First Commonwealth Financial Corporation+++ 5,800 75,226 First Community Bancorp+++ 1,100 42,284 </Table> See Notes to Financial Statements. 95 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- First Communtiy Bancshares, Inc.+++ 850 $ 28,475 First Federal Capital Corporation+++ 1,700 47,311 First Financial Corporation+++ 1,100 35,090 First Financial Bancorp+++ 2,900 51,388 First Financial Bankshares, Inc.+++ 1,050 44,027 First Financial Holdings, Inc. 100 2,881 First Indiana Corporation 1,000 19,050 First Industrial Realty Trust, Inc. REIT+++ 3,400 125,392 First Merchants Corporation 1,586 41,157 First Midwest Bancorp, Inc. 2,200 77,462 First National Bankshares of Florida, Inc. 3,190 60,451 First Niagara Financial Group, Inc. 7,063 84,756 First Oak Brook Bancshares, Inc.+++ 550 16,665 First of Long Island Corporation (The) 300 13,854 First Place Financial Corporation+++ 9,700 180,129 First Republic Bank+++ 20,800 896,064 First Sentinal Bancorp, Inc. 1,700 34,935 First State Bancorporation+++ 600 18,432 FirstFed Financial Corporation* 1,400 58,240 Flagstar Bancorp, Inc.+++ 37,900 753,452 Flushing Financial Corporation 7,650 135,023 FNB Corporation 1,900 38,760 FNB Corporation Virginia+++ 600 17,292 FPIC Insurance Group, Inc.* 700 17,283 Franklin Bank Corporation* 900 14,238 Fremont General Corporation+++ 57,200 1,009,580 Frontier Financial Corporation+++ 900 31,446 Gabelli Asset Management, Inc. Class A 300 12,750 Gables Residential Trust REIT+++ 2,400 81,552 GATX Corporation 44,200 1,202,240 GB&T Bancshares, Inc.+++ 625 14,938 German American Bancorp 700 11,760 Getty Realty Corporation REIT 1,300 32,708 Glacier Bancorp, Inc. 850 23,945 Glenborough Realty Trust, Inc. REIT 2,300 42,205 Glimcher Realty Trust REIT+++ 1,900 42,028 Global Payments, Inc. 33,300 1,499,165 Gold Banc Corporation, Inc. 1,900 29,450 Government Properties Trust, Inc. 1,600 16,720 Great American Financial Resources, Inc. 600 9,540 Great Southern Bancorp, Inc.+++ 400 11,700 Greater Bay Bancorp+++ 3,900 112,710 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Greenhill & Co., Inc.* 200 $ 4,182 Hancock Holding Co. 2,300 66,838 Hanmi Financial Corporation 62 1,829 Harbor Florida Bancshares, Inc. 1,400 38,514 Harleysville Group, Inc.+++ 1,100 20,735 Healthcare Realty Trust, Inc. REIT 3,600 134,928 Heartland Financial USA, Inc.+++ 750 13,763 Henry (Jack) & Associates, Inc. 47,200 948,720 Heritage Property Investment Trust REIT 2,300 62,238 Hibernia Corporation Class A 42,500 1,032,750 Highland Hospitality Corporation 2,900 29,145 Highwoods Properties, Inc. REIT 4,500 105,750 Hilb, Rogal & Hamilton Co. 600 21,408 Home Properties, Inc. REIT 2,700 105,246 Homestore, Inc.* 7,900 31,521 Horace Mann Educators Corporation 3,600 62,928 Horizon Financial Corporation 900 17,910 Hudson River Bancorp, Inc. 2,500 42,675 Humboldt Bancorp+++ 1,300 27,183 Hypercom Corporation* 1,400 11,830 IBERIABANK Corporation 500 29,590 Impac Mortgage Holdings, Inc. REIT+++ 5,200 117,104 Independence Community Bank Corporation 23,200 844,480 Independence Holding Co. 200 6,800 Independent Bank Corporation 769 19,533 Independent Bank Corp. 600 17,370 IndyMac Bancorp, Inc.+++ 34,800 1,099,680 Infinity Property & Casualty Corporation 72,600 2,395,799 Innkeepers USA Trust REIT 2,700 27,837 Integra Bank Corporation 1,300 28,639 Interactive Data Corporation* 2,700 47,034 Intercept, Inc.*+++ 1,400 22,932 Interchange Financial Service 900 22,392 International Bancshares Corporation 53 2,141 Intersections, Inc.*+++ 16,000 383,840 Investment Technology Group, Inc.*+++ 3,700 47,323 Investors Financial Services Corporation+++ 32,500 1,416,349 Investors Real Estate Trust REIT+++ 3,400 35,292 iPayment, Inc.* 10,000 410,000 IPC Holdings, Ltd. 27,300 1,008,189 Irwin Financial Corporation+++ 1,500 39,600 ITLA Capital Corporation* 400 16,228 </Table> See Notes to Financial Statements. 96 <Table> <Caption> SHARES VALUE ----------- ------------- Jackson Hewitt Tax Service, Inc.* 22,700 $ 397,250 Jefferies Group, Inc.+++ 44,900 1,388,307 John H. Harland Co. 13,700 402,095 Jones Lang LaSalle, Inc.* 23,300 631,430 K-Fed Bancorp* 400 5,100 Kansas City Life Insurance Co.+++ 300 12,627 Keystone Property Trust REIT 2,300 55,269 Kilroy Realty Corporation REIT 2,400 81,840 KNBT Bancorp, Inc. 2,500 41,750 Knight Trading Group, Inc.* 120,300 1,205,406 Koger Equity, Inc. REIT* 2,200 50,864 Kramont Realty Trust REIT+++ 2,000 32,000 La Quinta Corporation REIT* 15,700 131,880 LaBranche & Co., Inc. 40,100 337,642 Lakeland Bancorp, Inc.+++ 1,120 18,077 Lakeland Financial Corporation+++ 500 16,750 Landamerica Financial Group, Inc.+++ 23,700 922,641 LaSalle Hotel Properties REIT 2,300 56,120 Lexington Corporate Properties Trust REIT 4,000 79,640 LTC Properties, Inc. REIT+++ 1,200 19,920 Luminent Mortgage Capital, Inc. REIT 3,000 36,000 Macatawa Bank Corporation+++ 736 20,233 MAF Bancorp, Inc. 2,274 97,054 Maguire Properties, Inc. 2,800 69,356 Main Street Banks, Inc. 700 19,670 MainSource Financial Group, Inc. 819 16,626 Manufactured Home Communities, Inc. REIT 700 23,233 Markel Corporation* 5,400 1,498,499 Marlin Business Services, Inc.* 100 1,503 MB Financial, Inc. 900 33,129 MBT Financial Corporation+++ 1,100 20,042 MCG Capital Corporation+++ 2,700 41,526 Mercantile Bank Corporation+++ 252 9,185 MeriStar Hospitality Corporation REIT* 7,300 49,932 Metris Cos., Inc.*+++ 65,800 571,802 MFA Mortgage Investments, Inc. REIT 6,300 56,070 Mid-America Apartment Communities, Inc. REIT 1,500 56,835 Mid-State Bancshares+++ 2,000 47,020 Midland Co. 800 23,720 Midwest Banc Holdings, Inc.+++ 600 13,380 Mission West Properties, Inc. REIT 1,500 18,165 Mony Group, Inc.* 4,200 131,460 Municipal Mortgage & Equity LLC+++ 29,300 683,276 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- National Health Investors, Inc. REIT 1,900 $ 51,661 National Penn Bancshares, Inc.+++ 2,050 60,967 National Processing, Inc.* 200 5,750 National Western Life Insurance Co. Class A* 200 30,710 Nationwide Health Properties, Inc. REIT+++ 5,500 103,950 Navigators Group, Inc.* 700 20,223 NBC Capital Corporation+++ 600 16,194 NBT Bancorp, Inc.+++ 2,700 60,318 NCO Group, Inc.* 2,300 61,387 NDCHealth Corporation+++ 29,200 677,440 NetBank, Inc. 14,500 158,485 New Century Financial Corporation+++ 24,050 1,126,021 NewAlliance Bancshares, Inc.*+++ 142,600 1,990,695 Newcastle Investment Corporation REIT 2,800 83,860 Northwest Bancorp, Inc.+++ 1,600 36,640 Novastar Financial, Inc. REIT 1,800 68,328 NYMAGIC, Inc. 300 7,920 Oak Hill Financial, Inc. 200 6,300 OceanFirst Financial Corporation+++ 6,900 165,255 Ohio Casualty Corporation*+++ 26,800 539,484 Old National Bancorp 5,500 136,565 Omega Financial Corporation+++ 600 20,658 Omega Healthcare Investors, Inc. REIT 3,900 39,156 Oriental Financial Group, Inc. 34,300 928,501 Origen Financial, Inc. 700 5,565 Pacific Capital Bancorp 2,233 62,814 Park National Corporation 700 89,397 Parkway Properties, Inc. REIT 900 40,005 PartnerRe, Ltd. 12,600 714,798 Partners Trust Financial Group, Inc. 500 9,800 Penn-America Group, Inc. 800 11,200 Pennfed Financial Services, Inc. 400 13,600 Pennrock Financial Services Corporation 500 15,100 Pennsylvania Real Estate Investment Trust 2,651 90,797 Peoples Bancorp, Inc. 840 22,336 Peoples Holding Co.+++ 650 22,464 PFF Bancorp, Inc. 24,380 907,911 Philadelphia Consolidated Holding Corporation* 1,200 72,084 Phoenix Cos., Inc.+++ 7,900 96,775 PICO Holdings, Inc.* 700 13,383 Piper Jaffray Cos.* 16,900 764,387 </Table> See Notes to Financial Statements. 97 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- Platinum Underwriters Holdings, Ltd. 27,800 $ 845,954 PMA Capital Corporation Class A 2,300 20,700 PMI Group, Inc. (The) 33,100 1,440,511 Portal Software, Inc.*+++ 31,900 115,797 Portfolio Recovery Associates, Inc.*+++ 15,400 424,578 Post Properties, Inc. REIT+++ 3,300 96,195 Prentiss Properties Trust REIT 3,700 124,024 Presidential Life Corporation 1,800 32,436 PRG-Schultz International, Inc.*+++ 98,100 536,607 Price Legacy Corporation REIT+++ 1,825 33,690 PrivateBancorp, Inc.+++ 21,400 587,644 ProAssurance Corporation*+++ 2,200 75,042 Prosperity Bancshares, Inc. 1,300 31,655 Provident Bancorp, Inc. 700 7,980 Provident Bankshares Corporation 2,676 77,176 Provident Financial Holdings, Inc. 450 10,643 Provident Financial Services, Inc. 5,000 87,750 Providian Financial Corporation*+++ 43,500 638,145 PS Business Parks, Inc. REIT 1,300 52,312 Quaker City Bancorp, Inc. 100 5,494 R&G Financial Corporation Class B 35,700 1,180,242 Radian Group, Inc. 5,100 244,290 RAIT Investment Trust REIT 1,900 46,835 Ramco-Gershenson Properties REIT+++ 1,200 29,076 Raymond James Financial, Inc. 42,450 1,122,803 Realty Income Corporation REIT 3,300 137,709 Redwood Trust, Inc. REIT+++ 1,300 72,384 RenaissanceRe Holdings, Ltd. 20,100 1,084,395 Republic Bancorp, Inc. 12,089 168,037 Republic Bancorp, Inc. Class A 635 12,821 Rewards Network, Inc.*+++ 17,400 156,600 Riggs National Corporation 1,300 27,456 RLI Corporation 1,600 58,400 Royal Bancshares of Pennsylvania, Inc. Class A+++ 314 7,787 Ryder System, Inc. 17,300 693,211 S&T Bancorp, Inc.+++ 1,900 60,762 S.Y. Banc Corporation 400 9,364 Safety Insurance Group, Inc.+++ 800 17,136 Sanders Morris Harris Group, Inc. 1,000 14,750 Sandy Spring Bancorp, Inc.+++ 900 31,275 Santander Bancorp 400 9,888 Saul Centers, Inc. REIT+++ 900 28,899 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Saxon Capital, Inc.* 2,400 $ 54,792 SCBT Financial Corporation+++ 620 18,693 Scottish Re Group, Ltd.+++ 23,100 537,075 Seacoast Banking Corporation of Florida 540 11,302 Seacoast Financial Services Corporation+++ 2,500 86,500 Second Bancorp, Inc. 700 21,903 Security Bank Corporation 400 13,900 Selective Insurance Group, Inc. 2,200 87,736 Senior Housing Properties Trust REIT 4,500 75,555 Signature Bank* 300 7,128 Silicon Valley Bancshares* 15,500 614,575 Simmons First National Corporation Class A+++ 1,200 31,236 Sotheby's Holdings, Inc. Class A* 20,200 322,392 Southern Community Financial Corporation 1,000 10,440 Southside Bancshares, Inc.+++ 735 15,435 Southwest Bancorp of Texas, Inc.+++ 13,400 591,208 Southwest Bancorp, Inc.+++ 900 16,425 Sovran Self Storage, Inc. REIT+++ 1,200 45,816 State Auto Financial Corporation 600 18,432 State Bancorp, Inc.+++ 641 15,666 State Financial Services Corporation Class A 500 14,830 Sterling Bancorp+++ 575 15,882 Sterling Bancshares, Inc. 3,700 52,503 Sterling Financial Corporation 1,275 33,188 Sterling Financial Corporation Washington* 1,859 59,246 Stewart Information Services Corporation 1,400 47,278 Stifel Financial Corporation* 500 13,600 Summit Properties, Inc. REIT 2,300 58,972 Sun Bancorp, Inc. NJ* 656 13,947 Sun Communities, Inc. REIT+++ 1,300 48,945 Susquehanna Bancshares, Inc.+++ 3,810 95,860 SWS Group, Inc. 1,300 19,890 Tager Factory Outlet Center REIT 800 31,280 Taubman Centers, Inc. REIT 2,200 50,358 Taylor Capital Group, Inc. 300 6,525 Texas Capital Bancshares, Inc.*+++ 29,700 493,020 Texas Regional Banchshares, Inc. Class A 1,100 50,501 TierOne Corporation+++ 41,500 892,665 Tompkins Trustco, Inc. 640 30,400 Triad Guaranty, Inc.* 800 46,560 Trico Bancshares+++ 900 17,010 </Table> See Notes to Financial Statements. 98 <Table> <Caption> SHARES VALUE ----------- ------------- Trustmark Corporation 3,900 $ 112,788 U.S. Restaurant Properties, Inc. REIT+++ 1,900 28,861 UCBH Holdings, Inc.+++ 32,200 1,272,544 UICI*+++ 58,600 1,395,265 UMB Financial Corporation+++ 1,300 67,106 Umpqua Holdings Corporation+++ 2,348 49,285 Union Bankshares Corporation 600 18,960 United Bankshares, Inc.+++ 3,100 100,750 United Community Banks, Inc. 800 20,144 United Community Financial Corporation+++ 2,300 29,900 United Fire & Casualty Co.+++ 600 34,650 United Rentals, Inc.*+++ 3,600 64,404 Universal American Financial Corporation* 2,200 24,156 Universal Health Realty Income Trust REIT+++ 1,000 28,700 Unizan Financial Corporation+++ 1,800 46,980 Urstadt Biddle Properties, Inc. Class A REIT 1,800 26,658 USB Holding Co., Inc.+++ 840 19,253 USI Holdings Corporation* 400 6,320 Value Line, Inc. 100 3,551 Vesta Insurance Group, Inc. 800 5,176 Virginia Financial Group, Inc.+++ 600 20,610 W Holding Co., Inc. 45,600 782,952 Washington Real Estate Investment Trust REIT+++ 2,200 64,636 Washington Trust Bancorp, Inc.+++ 1,100 28,567 Waypoint Financial Corporation 2,515 69,389 Webster Financial Corporation 19,500 916,890 WesBanco, Inc. 1,500 43,695 West Coast Bancorp 1,200 25,728 Westamerica Bancorporation 1,100 57,695 Westcorp 43,500 1,977,074 Western Sierra Bancorp* 400 12,388 Westfield Financial, Inc. 200 4,068 WFS Financial, Inc.* 11,000 544,610 Wilshire Financial Sevices Group 1,100 10,219 Winston Hotels, Inc. REIT 1,900 19,665 Wintrust Financial Corporation+++ 23,500 1,186,985 WSFS Financial Corporation 500 24,335 Yardville National Bancorp 700 17,500 Zenith National Insurance Corporation+++ 19,000 923,400 ------------- 89,494,629 ------------- </Table> <Table> <Caption> SHARES VALUE ----------- ------------- HEALTHCARE -- 9.7% Abaxis, Inc.*+++ 13,100 $ 248,638 Abgenix, Inc.*+++ 3,700 43,364 Accelrys, Inc.* 2,000 19,720 Advanced Medical Optics, Inc.* 18,800 800,316 Albany Molecular Research, Inc.*+++ 1,700 21,981 Align Technology, Inc.* 11,750 223,250 Alliance Imaging, Inc.* 1,000 4,570 Allscripts Healthcare Solutions, Inc.* 900 7,056 Alpharma, Inc. Class A 18,800 385,024 America Service Group, Inc.*+++ 13,300 462,175 American Dental Partners, Inc.* 25,700 460,030 American Healthways, Inc.*+++ 34,250 911,735 American Medical Security Group, Inc.* 900 24,525 American Pharmaceutical Partners, Inc.*+++ 12,100 367,598 Amerigroup Corporation*+++ 8,200 403,440 Analogic Corporation+++ 400 16,972 Andrx Corporation*+++ 17,100 477,603 Animas Corporation* 100 1,865 Applera Corporation -- Celera Genomics Group* 6,100 70,211 Apria Healthcare Group, Inc.* 7,300 209,510 Atherogenics, Inc.* 1,400 26,642 Atrix Laboratories, Inc.*+++ 20,500 702,740 Barrier Therapeutics, Inc.* 100 1,402 Bausch & Lomb, Inc. 8,400 546,588 Beverly Enterprises, Inc.*+++ 800 6,880 Bio-Rad Laboratories, Inc. Class A* 14,300 841,698 Bradley Pharmaceuticals, Inc.*+++ 38,200 1,065,780 Caraco Pharm Labs, Inc.* 100 964 Cardiac Science, Inc.* 2,300 5,635 Cell Genesys, Inc.*+++ 3,700 38,443 Centene Corporation* 8,500 327,675 Charles River Laboratories International, Inc.* 11,600 566,892 Chattem, Inc.* 400 11,548 CIMA Labs, Inc.* 200 6,746 Conmed Corporation* 2,500 68,500 Corgentech, Inc.*+++ 11,200 180,544 Cubist Pharmaceuticals, Inc.* 700 7,770 CuraGen Corporation*+++ 1,600 9,616 Cytokinetics, Inc.* 100 1,485 Datascope Corporation 1,000 39,690 DaVita, Inc.* 100,200 3,089,165 Digene Corporation*+++ 16,200 591,786 DJ Orthopedics, Inc.* 100 2,300 E-Z-Em, Inc. 500 9,190 Enzon, Inc.*+++ 21,900 279,444 Epix Medical, Inc.*+++ 11,100 234,210 Eresearch Technology, Inc.*+++ 10,000 280,000 Eyetech Pharmaceuticals, Inc.*+++ 5,200 223,184 </Table> See Notes to Financial Statements. 99 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- First Health Group Corporation* 2,400 $ 37,464 First Horizon Pharmaceutical Corporation*+++ 200 3,780 Flamel Technologies ADR* 9,400 231,522 Gen-Probe, Inc*+++ 13,300 629,356 Genesis Healthcare Corporation* 1,700 49,368 Gentiva Health Services, Inc.*+++ 200 3,252 Guilford Pharmaceuticals, Inc.*+++ 1,200 5,700 Haemonetics Corporation* 600 17,790 Hanger Orthopedic Group, Inc.* 1,800 21,096 Healthcare Services Group, Inc. 100 1,530 Hologic, Inc.*+++ 1,200 27,900 Hooper Holmes, Inc. 3,500 20,090 Human Genome Sciences, Inc.* 10,800 125,604 I-Flow Corporation*+++ 11,900 141,134 Immunicon Corporation* 100 786 IMPAC Medical Systems, Inc.*+++ 28,100 411,103 Incyte Corporation*+++ 2,500 19,100 Indevus Pharmaceuticals, Inc.* 300 1,845 Intuitive Surgical, Inc.* 15,300 290,700 Invacare Corporation 2,200 98,384 Inverness Medical Innovations, Inc.*+++ 500 10,950 Kindred Healthcare, Inc.*+++ 2,200 57,970 KV Pharmaceutical Co. Class A* 13,487 311,415 Landauer, Inc. 300 13,398 Ligand Pharmaceuticals, Inc. Class B*+++ 61,900 1,075,822 Magellan Health Services, Inc.* 27,500 919,875 Matria Healthcare, Inc.* 200 5,014 Maxygen, Inc.*+++ 1,900 20,083 Medarex, Inc.*+++ 4,300 31,347 Medcath Corporation* 500 10,000 Medicines Co.* 14,250 434,768 Medicis Pharmaceutical Corporation Class A+++ 9,100 363,545 MedSource Technologies, Inc.* 800 5,680 Mentor Corporation 400 13,716 Merit Medical Systems, Inc.* 21,100 336,123 Microtek Medical Holdings, Inc.* 2,700 13,824 Molecular Devices Corporation* 300 5,334 Molina Healthcare, Inc.*+++ 18,100 691,058 National Healthcare Corporation 100 2,801 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- NeighborCare, Inc.*+++ 21,400 $ 670,462 Neose Technologies, Inc.*+++ 100 833 Neurocrine Biosciences, Inc.*+++ 5,300 274,805 NitroMed, Inc.* 200 1,202 Ocular Sciences, Inc.* 300 11,400 Omnicare, Inc. 13,600 582,216 Omnicell, Inc.*+++ 24,000 350,640 Option Care, Inc. 300 4,578 Orthodontic Centers of America, Inc.*+++ 3,500 28,665 Orthofix International NV* 14,500 619,585 Oscient Pharmaceuticals Corporation* 5,100 26,061 Owens & Minor, Inc. 38,500 997,150 PacifiCare Health Systems, Inc.* 16,800 649,488 Par Pharmaceutical Cos., Inc.* 22,200 781,662 PAREXEL International Corporation* 600 11,880 Pediatrix Medical Group, Inc.* 16,200 1,131,570 Per-Se Technologies, Inc.*+++ 26,600 386,764 Perrigo Co. 3,700 70,189 Praecis Pharmaceuticals, Inc.*+++ 4,400 16,720 Protein Design Labs, Inc.*+++ 30,500 583,465 Province Healthcare Co.* 59,200 1,015,280 ProxyMed, Inc.* 200 3,372 PSS World Medical, Inc.*+++ 48,300 540,960 Quidel Corporation* 200 1,178 Radiation Therapy Services, Inc.* 14,100 200,220 RehabCare Group, Inc.* 21,700 577,871 Res-Care, Inc.* 56,300 715,010 Respironics, Inc.* 27,500 1,615,625 Santarus, Inc.*+++ 15,900 234,525 Savient Pharmaceuticals, Inc.*+++ 38,700 95,976 Seattle Genetics, Inc.* 1,400 9,842 Select Medical Corporation 13,800 185,196 Serologicals Corporation*+++ 500 9,995 Sierra Health Services, Inc.*+++ 18,000 804,600 Sola International, Inc.* 2,700 46,521 Specialty Laboratories, Inc.*+++ 300 2,688 Stericycle, Inc.* 22,200 1,148,628 Steris Corporation* 32,400 730,944 Sunrise Senior Living, Inc.*+++ 1,300 50,882 Sybron Dental Specialties, Inc.* 1,000 29,850 Tanox, Inc.*+++ 15,500 295,585 Taro Pharmaceuticals Industries, Ltd.*+++ 7,600 330,600 Techne Corporation* 700 30,415 Thoratec Corporation*+++ 10,300 110,519 Transkaryotic Therapies, Inc.*+++ 100 1,496 United Surgical Partners International, Inc.*+++ 9,300 367,071 US Oncology, Inc.* 62,500 920,000 </Table> See Notes to Financial Statements. 100 <Table> <Caption> SHARES VALUE ----------- ------------- Valeant Pharmaceuticals International 1,700 $ 34,000 VCA Antech, Inc.*+++ 48,400 2,169,288 Ventana Medical Systems* 7,600 361,228 Vertex Pharmaceuticals, Inc.* 3,300 35,772 Viasys Healthcare, Inc.* 2,600 54,366 Vicuron Pharmaceuticals, Inc.* 2,000 25,120 VISX, Inc.*+++ 31,300 836,336 Vital Signs, Inc. 500 14,520 WellCare Health Plans, Inc.* 3,200 54,400 West Pharmaceutical Services, Inc. 600 25,380 Wilson Greatbatch Technologies, Inc.* 7,800 218,010 Wright Medical Group, Inc.* 9,600 341,760 XOMA, Ltd.*+++ 80,000 358,400 Zoll Medical Corporation*+++ 8,425 295,549 ------------- 42,884,640 ------------- INTEGRATED OILS -- 0.0% Giant Industries, Inc.* 900 19,800 Petrocorp, Inc. Escrow Shares*+ 500 0 ------------- 19,800 ------------- </Table> <Table> <Caption> SHARES VALUE ----------- ------------- MATERIALS & PROCESSING -- 9.8% Aaon, Inc.* 100 $ 2,019 Acuity Brands, Inc. 19,400 523,800 Agrium, Inc. 54,600 794,430 Airgas, Inc. 31,000 741,210 AK Steel Holding Corporation*+++ 4,100 21,607 Albany International Corporation Class A 2,200 73,832 Albemarle Corporation+++ 2,700 85,455 Alico, Inc. 300 12,045 Amcol International Corporation 1,500 28,425 Ameron International Corporation 700 23,891 Anchor Glass Container Corporation 43,100 583,143 Apogee Enterprises, Inc. 2,300 23,920 Aptargroup, Inc. 3,000 131,070 Arch Chemicals, Inc. 14,400 415,008 Avatar Holdings, Inc.*+++ 400 16,640 Barnes Group, Inc. 33,900 982,422 Bluegreen Corporation* 900 12,420 Brady Corporation Class A 800 36,880 Brookfield Homes Corporation 32,900 861,651 Brush Engineered Materials, Inc.* 1,400 26,460 Buckeye Technologies, Inc.* 2,500 28,750 Building Materials Holding Corporation 1,100 20,823 Calgon Carbon Corporation+++ 2,800 18,760 Cambrex Corporation 2,200 55,506 Caraustar Industries, Inc.*+++ 39,700 560,167 Carpenter Technology Corporation 28,200 960,210 Ceradyne, Inc.* 400 14,308 Chesapeake Corporation+++ 1,600 42,688 Chicago Bridge & Iron Co. NV+++ 27,000 751,950 CIRCOR International, Inc.+++ 38,000 774,820 Cleveland-Cliffs, Inc.*+++ 400 22,556 Comfort Systems USA, Inc.* 3,200 20,448 Commercial Metals Co. 36,000 1,168,200 Compass Minerals International, Inc. 1,300 25,194 CompX International, Inc.* 100 1,500 Corn Products International, Inc. 29,900 1,391,845 Crompton Corporation 9,600 60,480 Crown Holdings, Inc.* 6,200 61,814 Cytec Industries, Inc. 18,300 831,735 Delta & Pine Land Co. 1,300 28,535 Deltic Timber Corporation+++ 700 26,880 DHB Industries, Inc.*+++ 74,300 1,127,874 Dycom Industries, Inc.* 900 25,200 Eagle Materials, Inc.+++ 1,400 99,428 ElkCorp 31,600 756,504 EMCOR Group, Inc.* 1,300 57,174 Engelhard Corporation 32,900 1,062,999 Ennis, Inc. 1,400 27,300 Exide Technologies* 10,600 216,770 Ferro Corporation 30,400 811,072 FMC Corporation* 15,000 646,650 Georgia Gulf Corporation 1,100 39,446 Gibraltar Steel Corporation 800 26,256 Glatfelter 2,400 33,792 Grace (W.R.) & Co.* 5,500 34,100 GrafTech International, Ltd.* 15,600 163,176 Granite Construction, Inc. 2,800 51,044 Great Lakes Chemical Corporation 4,200 113,652 Greif, Inc. Class A 33,000 1,394,250 Griffon Corporation* 1,900 42,332 H.B. Fuller Co.+++ 30,400 863,360 Hecla Mining Co.*+++ 5,000 28,500 Hercules, Inc.* 23,600 287,684 IMCO Recycling, Inc.* 600 7,932 Infrasource Services, Inc.* 500 6,130 Insituform Technolgies, Inc. Class A*+++ 1,500 24,405 Integrated Electical Services, Inc.* 1,700 13,685 Interface, Inc. Class A* 3,700 32,301 Jacuzzi Brands, Inc.* 5,700 45,942 Kaydon Corporation 1,400 43,302 Layne Christensen Co.* 400 6,620 Lennox International, Inc.+++ 3,300 59,730 LNR Property Corporation+++ 20,200 1,095,850 </Table> See Notes to Financial Statements. 101 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- Lone Star Technologies, Inc.* 500 $ 13,780 Longview Fibre Co. 4,300 63,339 Louisiana-Pacific Corporation 57,300 1,355,145 LSI Industries, Inc. 1,675 19,263 Maverick Tube Corporation*+++ 18,700 491,062 Metal Management, Inc.* 1,500 29,715 Metals USA, Inc.* 1,700 30,396 Methanex Corporation+++ 83,400 1,102,631 Millennium Chemicals, Inc. 5,400 93,528 Minerals Technologies, Inc. 1,700 98,600 Mobile Mini, Inc.*+++ 31,100 883,551 Mueller Industries, Inc. 17,800 637,240 Myers Industries, Inc. 1,875 26,438 NCI Building Systems, Inc.* 22,900 745,395 NewMarket Corporation*+++ 1,100 23,617 NL Industries, Inc. 400 5,800 NN, Inc. 1,400 17,794 NS Group, Inc.* 1,500 24,660 Octel Corporation 1,000 26,330 Olin Corporation+++ 123,920 2,183,469 OM Group, Inc.*+++ 2,400 79,224 Omnova Solutions, Inc.* 2,000 12,200 Oregon Steel Mills, Inc.* 2,200 32,428 Owens-Illinois, Inc.* 38,400 643,584 Penn Engineering & Manufacturing Corporation 800 17,152 Perini Corporation* 400 4,268 PolyOne Corporation* 7,600 56,544 Pope & Talbot, Inc.+++ 1,300 25,701 Potlatch Corporation 2,500 104,100 Quaker Chemical Corporation 500 13,810 Quanex Corporation+++ 12,000 584,400 Quanta Services, Inc.*+++ 3,000 18,660 Reading International, Inc. Class A* 1,200 10,440 Reliance Steel & Aluminum Co.+++ 29,400 1,185,408 Rock-Tenn Co. Class A 48,400 820,380 RTI International Metals, Inc.*+++ 1,800 28,710 Ryerson Tull, Inc. 900 14,292 Schnitzer Steel Industries, Inc. Class A+++ 1,550 52,638 Schulman (A.), Inc. 15,900 341,691 Shaw Group, Inc. (The)*+++ 93,700 949,181 Silgan Holdings, Inc. 400 16,124 Southern Peru Copper Corporation 23,200 958,856 Spartech Corporation 35,500 920,870 Standard Register Co.+++ 36,500 434,350 Steel Dynamics, Inc.*+++ 38,000 1,087,940 Steel Technologies, Inc. 800 17,664 Stepan Co. 400 10,460 Stillwater Mining Co.*+++ 2,700 40,527 Sunterra Corporation* 1,500 18,900 Tarragon Realty Investors, Inc. REIT*+++ 525 7,744 Terra Industries, Inc.* 3,300 18,579 Texas Industries, Inc.+++ 1,800 74,106 Titanium Metals Corporation* 100 9,255 Trammell Crow Co.*+++ 81,300 1,146,330 Tredegar Corporation 48,500 782,305 U.S. Concrete, Inc.* 1,800 12,690 Universal Forest Products, Inc.+++ 1,200 38,700 URS Corporation* 6,500 178,100 USEC, Inc.+++ 7,000 61,390 USG Corporation*+++ 2,700 47,466 Valence Technology, Inc.*+++ 3,000 10,290 Valhi, Inc. 840 9,551 Valmont Industries, Inc. 30,400 696,160 Washington Group International, Inc.* 2,100 75,369 Watsco, Inc.+++ 39,200 1,100,344 Wausau-Mosinee Paper Corporation+++ 3,600 62,280 WCI Communities, Inc.*+++ 43,600 972,716 WD-40 Co. 700 20,958 Wellman, Inc.+++ 2,700 21,951 Wheeling-Pittsburgh Corporation* 300 6,258 York International Corporation 3,400 139,638 ------------- 43,372,392 ------------- </Table> <Table> <Caption> SHARES VALUE ----------- ------------- OTHER -- 0.3% Brunswick Corporation 10,600 $ 432,480 GenCorp, Inc.+++ 3,300 44,187 Kaman Corporation Class A+++ 23,400 327,366 Lancaster Colony Corporation 2,000 83,280 Ritchie Bros. Auctioneers, Inc. 17,200 500,692 Sequa Corporation Class A* 500 29,235 Trinity Industries, Inc.+++ 3,100 98,549 Walter Industries, Inc.+++ 2,000 27,240 ------------- 1,543,029 ------------- OTHER ENERGY -- 4.4% Berry Petroleum Co. Class A 1,100 32,351 Cabot Oil & Gas Corporation 1,700 71,910 Callon Petroleum Co.* 500 7,130 Calpine Corporation* 34,700 149,904 Capstone Turbine Corporation* 1,700 3,700 Cimarex Energy Co.* 3,500 105,805 Clayton Williams Energy, Inc.* 100 2,390 Comstock Resources, Inc.* 400 7,784 Denbury Resources, Inc.* 28,400 594,980 Dril-Quip, Inc.* 500 9,350 Edge Petroleum Corporation* 200 3,400 Encore Acquisition Co.* 1,700 47,430 Energy Partners, Ltd.*+++ 2,000 30,600 Evergreen Resources, Inc.*+++ 11,000 444,400 Forest Oil Corporation* 3,800 103,816 Global Industries, Ltd.* 6,800 38,896 </Table> See Notes to Financial Statements. 102 <Table> <Caption> SHARES VALUE ----------- ------------- Global Power Equipment Group, Inc.* 2,300 $ 18,446 Gulf Island Fabrication, Inc. 100 2,163 Hanover Compressor Co.*+++ 6,400 76,160 Harvest Natural Resources, Inc.* 45,100 672,441 Helmerich & Payne, Inc. 74,900 1,958,634 Holly Corporation+++ 800 29,920 Hornbeck Offshore Services, Inc.*+++ 58,300 761,981 Houston Exploration Co.*+++ 28,800 1,492,992 Hydril Co.*+++ 15,500 488,250 Key Energy Services, Inc.* 10,900 102,896 KFX, Inc.*+++ 30,900 235,458 Lufkin Industries, Inc.+++ 600 19,188 Magnum Hunter Resources, Inc.*+++ 63,400 658,092 Matrix Service Co.* 700 6,405 McMoRan Exploration Co.*+++ 500 7,790 Meridian Resource Corporation* 4,400 30,536 Newpark Resources, Inc.* 2,900 17,980 Oceaneering International, Inc.* 2,100 71,925 Oil States International, Inc.* 1,700 26,010 Parker Drilling Co.* 7,900 30,178 Patina Oil & Gas Corporation 34,700 1,036,489 Patterson-UTI Energy, Inc. 17,400 581,334 Plains Exploration & Production Co.* 5,220 95,787 Prima Energy Corporation* 100 3,957 Range Resources Corporation 10,900 159,140 Reliant Energy, Inc.*+++ 65,100 705,033 Remington Oil & Gas Corporation* 300 7,080 Resource America, Inc. Class A 700 16,520 RPC, Inc. 700 11,053 Seacor Holdings, Inc.* 1,500 65,895 Spinnaker Exploration Co.* 1,200 47,256 St. Mary Land & Exploration Co.+++ 2,400 85,560 Stone Energy Corporation* 1,500 68,520 Sunoco, Inc.+++ 20,900 1,329,658 Superior Energy Services, Inc.* 85,300 857,265 Swift Energy Co.* 2,300 50,738 Syntroleum Corporation* 1,000 6,620 Tesoro Petroleum Corporation*+++ 58,600 1,617,360 Tetra Technologies, Inc.* 12,050 323,543 Texas Genco Holdings, Inc.+++ 19,200 865,728 Todco Class A* 1,000 15,470 Transmontaigne, Inc.* 1,800 9,684 Universal Compression Holdings, Inc.* 14,400 441,792 Veritas DGC, Inc.*+++ 45,300 1,048,695 Vintage Petroleum, Inc. 4,200 71,274 W-H Energy Services, Inc.* 69,600 1,364,160 Whiting Petroleum Corporation* 700 17,605 ------------- 19,264,507 ------------- </Table> <Table> <Caption> SHARES VALUE ----------- ------------- PRODUCER DURABLES -- 8.0% Advanced Energy Industries, Inc.*+++ 33,200 $ 521,904 Applied Films Corporation*+++ 700 20,314 Applied Industrial Technologies, Inc. 1,400 42,168 Arris Group, Inc.*+++ 1,500 8,910 Artesyn Technologies, Inc.*+++ 1,200 10,800 Astec Industries, Inc.* 800 15,064 Audiovox Corporation Class A* 700 11,816 Axcelis Technologies, Inc.* 1,700 21,148 Baldor Electric Co. 33,800 789,230 BE Aerospace, Inc.*+++ 27,400 207,692 Beazer Homes USA, Inc.+++ 1,100 110,341 Belden, Inc.+++ 58,000 1,242,940 Blount International, Inc. Class A* 100 1,273 Briggs & Stratton Corporation 13,200 1,166,220 Brooks Automation, Inc.* 15,000 302,250 C & D Technologies, Inc. 2,100 37,443 C-COR.net Corporation* 1,400 14,406 Cable Design Technologies Corporation*+++ 1,800 19,080 Cascade Corporation 900 28,125 Cherokee International Corporation*+++ 52,800 602,448 Cohu, Inc.+++ 1,800 34,272 Credence Systems Corporation*+++ 400 5,520 CTS Corporation+++ 66,600 803,196 Curtiss-Wright Corporation+++ 1,300 73,047 Cymer, Inc.*+++ 27,700 1,037,088 DDi Corporation* 1,100 9,053 Dominion Homes, Inc.*+++ 300 6,930 Ducommun, Inc.* 600 12,828 DuPont Photomasks, Inc.* 600 12,198 Electro Scientific Industries, Inc.* 2,300 65,113 Enpro Industries, Inc.* 1,700 39,066 Entegris, Inc.*+++ 40,700 470,899 ESCO Technologies, Inc.* 500 26,680 Esterline Technologies Corporation* 1,800 53,154 Faro Technologies, Inc.* 16,200 415,854 Federal Signal Corporation 21,400 398,254 FEI Co.*+++ 25,300 604,923 Flanders Corporation* 300 2,481 Flowserve Corporation* 37,500 935,250 FSI International, Inc.* 200 1,562 Gardner Denver, Inc.* 1,600 44,640 General Cable Corporation*+++ 3,000 25,650 </Table> See Notes to Financial Statements. 103 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- Genlyte Group, Inc.* 1,000 $ 62,880 Gorman-Rupp Co. 600 16,302 Headwaters, Inc.* 12,000 311,160 Heico Corporation+++ 1,500 27,375 Heico Corporation Class A 100 1,395 HNI Corporation 19,400 821,202 IDEX Corporation 2,050 70,418 Imagistics International, Inc.* 22,400 792,960 Intevac, Inc.*+++ 32,700 290,049 Ionics, Inc.*+++ 1,500 42,375 JLG Industries, Inc.+++ 16,800 233,352 Joy Global, Inc. 9,600 287,424 Kadant, Inc.* 29,000 670,770 KB HOME 16,300 1,118,669 Kennametal, Inc. 25,000 1,145,000 Kimball International, Inc. Class B 78,200 1,153,450 Kulicke & Soffa Industries, Inc.*+++ 49,900 546,904 Lindsay Manufacturing Co.+++ 100 2,402 Littelfuse, Inc.* 200 8,482 M/I Homes, Inc. 1,000 40,600 Magnetek, Inc.* 2,000 16,680 Mastec, Inc.*+++ 2,000 10,860 Meritage Corporation* 100 6,880 Mettler Toledo International, Inc.* 21,200 1,041,768 Milacron, Inc.+++ 3,200 12,800 MKS Instruments, Inc.* 500 11,410 Moog, Inc. Class A* 2,200 81,642 MTC Technologies, Inc.* 19,900 513,818 MTS Systems Corporation 1,600 37,520 NACCO Industries, Inc. Class A+++ 7,900 750,500 NVR, Inc.*+++ 2,500 1,210,500 Orbital Sciences Corporation*+++ 50,500 697,405 Orleans Homebuilders, Inc.* 100 1,927 Palm Harbor Homes, Inc.*+++ 46,600 826,218 Paxar Corporation*+++ 2,400 46,848 Photon Dynamics, Inc.*+++ 18,400 645,288 Photronics, Inc.*+++ 158,600 3,003,884 Plantronics, Inc.* 15,400 648,340 Polycom, Inc.* 38,200 856,062 Powell Industries, Inc.*+++ 600 10,248 Power-One, Inc.* 52,600 577,548 Powerwave Technologies, Inc.* 4,700 36,190 Rayovac Corporation* 18,600 522,660 Regal-Beloit Corporation+++ 1,800 40,068 Robbins & Myers, Inc.+++ 900 20,205 Rofin-Sinar Technologies, Inc.* 1,200 30,468 Roper Industries, Inc. 6,800 386,920 Rudolph Technologies, Inc.* 100 1,819 Ryland Group, Inc. 15,500 1,212,100 Skyline Corporation+++ 600 24,390 Smith (A.O.) Corporation+++ 25,300 804,287 Sonic Solutions*+++ 11,900 252,875 Standex International Corporation+++ 16,100 437,920 Stewart & Stevenson Services, Inc. 2,400 43,008 Symmetricom, Inc.*+++ 600 5,340 Technical Olympic USA, Inc.+++ 700 15,596 Technitrol, Inc.* 2,900 63,510 Tecumseh Products Co. Class A 1,400 57,666 Teledyne Technologies, Inc.* 34,400 688,688 Tennant Co. 23,400 969,930 Terex Corporation* 8,000 273,040 Thomas & Betts Corporation 4,900 133,427 Thomas Industries, Inc. 1,200 39,840 TRC Cos., Inc.* 300 5,004 Triumph Group, Inc.* 1,300 41,509 Ultratech, Inc.* 300 4,884 Veeco Instruments, Inc.*+++ 200 5,162 Watts Water Technologies, Inc. Class A 2,000 53,900 Woodhead Industries, Inc. 900 13,914 Woodward Governor Co. 800 57,688 Zygo Corporation* 800 8,952 ------------- 35,153,505 ------------- </Table> <Table> <Caption> SHARES VALUE ----------- ------------- TECHNOLOGY -- 12.9% Actel Corporation* 29,900 $ 553,150 ActivCard Corporation*+++ 3,500 25,410 Acxiom Corporation+++ 17,000 422,110 Adaptec, Inc.* 9,100 76,986 Advanced Digital Information Corporation* 29,200 283,240 Aeroflex, Inc.* 25,400 363,982 Agile Software Corporation* 52,100 455,875 Agilysys, Inc. 2,400 33,096 Akamai Technologies, Inc.*+++ 24,500 439,775 Aladdin Knowledge Systems* 14,300 235,235 Alliance Semiconductor Corporation* 1,700 10,115 Altiris, Inc.*+++ 8,800 242,968 Anaren, Inc.* 600 9,804 Anixter International, Inc. 17,300 588,719 Ansys, Inc.* 200 9,400 Anteon International Corporation* 8,400 274,008 Ariba, Inc.* 16,800 33,264 Arrow Electronics, Inc.*+++ 45,100 1,209,581 Ascential Software Corporation*+++ 51,600 825,084 Asiainfo Holdings, Inc.*+++ 1,800 9,504 Aspen Technology, Inc.*+++ 37,600 272,976 Autodesk, Inc. 27,900 1,194,398 Avid Technology, Inc.* 7,300 398,361 Avnet, Inc.* 47,900 1,087,330 Avocent Corporation* 7,400 271,876 Benchmark Electronics, Inc.* 1,700 49,470 BioVeris Corporation* 400 3,328 </Table> See Notes to Financial Statements. 104 <Table> <Caption> SHARES VALUE ----------- ------------- Black Box Corporation 15,600 $ 737,256 Blackboard, Inc.* 2,500 50,125 Borland Software Corporation* 59,700 506,853 Brocade Communications Systems, Inc.* 4,000 23,920 CACI International, Inc. Class A* 14,200 574,248 Captaris, Inc.* 900 5,814 Catapult Communications Corporation* 400 9,200 Celestica, Inc.*+++ 27,000 538,650 Checkpoint Systems, Inc.* 3,100 55,583 Cherokee, Inc. 200 5,018 ChipPAC, Inc. Class A*+++ 52,100 326,667 CIBER, Inc.*+++ 60,800 499,776 Cognizant Technology Solutions Corporation* 14,300 363,363 Coherent, Inc.*+++ 1,400 41,790 CommScope, Inc.*+++ 34,400 737,880 CompuCom Systems, Inc.* 2,000 9,080 Computer Network Technology Corporation*+++ 6,100 36,539 Comtech Telecommunications* 300 6,768 Concord Communications, Inc.*+++ 23,500 268,135 Corvis Corporation*+++ 32,500 45,825 CSG Systems International, Inc.* 1,400 28,980 Cubic Corporation+++ 8,100 169,533 Digi International, Inc.* 400 4,288 Digimarc Corporation* 600 8,010 Digital River, Inc.* 700 22,841 Ditech Communications Corporation* 15,700 366,438 DRS Technologies, Inc.* 1,641 52,348 E.piphany, Inc.* 5,700 27,531 Eagle Broadband, Inc.* 16,000 15,840 EDO Corporation 300 7,236 Electronics for Imaging, Inc.* 28,550 806,823 Embarcadero Technologies, Inc.* 24,800 306,528 EMS Technologies, Inc.* 200 3,886 Emulex Corporation*+++ 67,600 967,356 Enterasys Networks, Inc.* 7,600 16,036 Epicor Software Corporation* 30,500 428,525 EPIQ Systems, Inc.* 5,100 73,950 Equinix, Inc.*+++ 19,900 675,406 ESS Technology, Inc.*+++ 19,800 212,058 Exar Corporation* 2,400 35,184 Extreme Networks, Inc.*+++ 2,400 13,248 F5 Networks, Inc.*+++ 18,100 479,288 Filenet Corporation* 22,200 700,854 Finisar Corporation*+++ 1,500 2,970 FLIR Systems, Inc.*+++ 12,700 697,230 FormFactor, Inc.*+++ 26,550 596,048 Gateway, Inc.* 13,400 60,300 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Genesis Microchip, Inc.* 1,300 $ 17,901 Herley Industries, Inc.*+++ 600 11,724 Hummingbird, Ltd.* 14,200 320,494 Hutchinson Technology, Inc.*+++ 2,200 54,098 Hyperion Solutions Corporation*+++ 12,100 529,012 iGate Corporation* 400 1,592 Imation Corporation 3,000 127,830 Inet Technolgies, Inc.* 55,800 695,826 InFocus Corporation* 54,800 465,800 Infonet Services Corporation Class B* 205,700 359,975 Informatica Corporation* 151,400 1,155,182 Ingram Micro, Inc. Class A* 56,600 819,002 Integrated Circuit Systems, Inc.* 40,500 1,099,980 Integrated Device Technology, Inc.*+++ 118,200 1,635,887 Integrated Silicon Solutions, Inc.* 2,500 30,525 Intergraph Corporation* 700 18,102 International Rectifier Corporation* 7,500 310,650 Internet Capital Group, Inc.* 3,200 24,768 Internet Security Systems, Inc.*+++ 17,500 268,450 Intervideo, Inc.* 100 1,294 Interwoven, Inc.*+++ 34,975 353,248 Iomega Corporation+++ 1,600 8,928 IXYS Corporation* 100 788 JDA Software Group, Inc.*+++ 31,400 413,538 Keane, Inc.* 1,700 23,273 Kemet Corporation* 7,200 87,984 Keynote Systems, Inc.* 600 8,250 Komag, Inc.*+++ 2,000 27,940 KVH Industries, Inc.*+++ 13,300 169,309 Lattice Semiconductor Corporation* 45,300 317,553 Lawson Software, Inc.*+++ 50,100 354,708 LeCroy Corporation* 700 12,607 Macromedia, Inc.* 42,900 1,053,195 Macrovision Corporation* 19,500 488,085 Mantech International Corporation Class A* 500 9,385 Manugistics Group, Inc.*+++ 2,600 8,502 Mapinfo Corporation* 1,400 14,840 MatrixOne, Inc.*+++ 82,900 572,839 McData Corporation Class A* 9,800 52,724 Mentor Graphics Corporation*+++ 37,100 573,937 Merix Corporation* 800 9,072 Methode Electronics, Inc. Class A 3,000 38,910 Micrel, Inc.* 24,700 300,105 Microsemi Corporation* 44,900 638,029 Microtune, Inc.* 700 3,269 </Table> See Notes to Financial Statements. 105 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- Monolithic System Technology, Inc.* 100 $ 753 Motive, Inc.* 17,900 184,728 MRO Software, Inc.*+++ 47,500 646,475 MRV Communications, Inc.*+++ 8,100 22,194 MSC.Software Corporation*+++ 1,400 12,530 National Instruments Corporation+++ 27,550 844,408 NETIQ Corporation* 4,800 63,360 Netscout Systems, Inc.* 300 1,977 Network Equipment Technologies, Inc.* 500 4,080 Newport Corporation* 47,300 764,841 Novatel Wireless, Inc.* 1,000 26,500 NU Horizons Electronics Corporation* 20,850 187,650 O2Micro International, Ltd.* 26,300 447,889 Omnivision Technologies, Inc.*+++ 7,200 114,840 ON Semiconductor Corporation* 500 2,510 Open Solutions, Inc.* 10,900 272,282 Open Text Corporation*+++ 21,400 682,660 Oplink Communications, Inc.* 4,000 7,680 Optical Communication Products, Inc.* 700 1,708 OSI Systems, Inc.*+++ 400 7,972 Overland Storage, Inc.* 300 3,987 palmOne, Inc.*+++ 3,475 120,826 Parametric Technology Corporation* 92,700 463,500 Park Electrochemical Corporation 1,400 35,350 PC-Tel, Inc.* 400 4,720 PDF Solutions, Inc.* 45,000 381,150 Pec Soulutions, Inc.* 800 9,544 Pegasystems, Inc.*+++ 100 875 Pericom Semiconductor Corporation*+++ 9,900 106,029 Perot Systems Corporation Class A* 4,700 62,369 Pinnacle Systems, Inc.* 2,700 19,305 Pixelworks, Inc.*+++ 29,900 458,068 Planar Systems, Inc.*+++ 44,100 590,499 Plexus Corporation* 43,900 592,650 Power Intergrations, Inc.*+++ 11,600 288,840 ProcureNet, Inc.*+ 7,600 0 Progress Software Corporation* 200 4,334 Quantum Corporation*+++ 8,400 26,040 Quest Software, Inc.*+++ 22,200 286,380 Radisys Corporation*+++ 300 5,571 Redback Networks, Inc.*+++ 2,588 16,589 REMEC, Inc.*+++ 55,600 351,392 Retek, Inc.* 52,200 320,508 RF Micro Devices, Inc.*+++ 33,800 253,500 Safeguard Scientifics, Inc.*+++ 92,600 212,980 SafeNet, Inc.* 38,400 1,062,912 Salesforce.com, Inc.*+++ 1,900 30,533 SBS Technologies, Inc.* 700 11,249 ScanSoft, Inc.* 1,500 7,425 Semtech Corporation* 28,600 673,244 Serena Software, Inc.*+++ 43,450 829,461 Silicon Graphics, Inc.*+++ 21,800 47,960 Silicon Storage Technology, Inc.* 39,300 404,790 Simpletech, Inc.*+++ 700 2,387 Sirf Technology Holdings, Inc.*+++ 100 1,307 Skyworks Solutions, Inc.*+++ 117,000 1,021,410 SonicWALL, Inc.* 2,100 18,060 Spectrasite, Inc.*+++ 20,600 890,332 SPSS, Inc.* 100 1,797 SRA International, Inc. Class A* 10,200 431,664 SS&C Technologies, Inc. 16,200 302,940 Standard Microsystems Corporation*+++ 33,600 783,552 Stellent, Inc.*+++ 600 5,124 Supertex, Inc.* 25,000 408,500 SupportSoft, Inc.* 37,300 323,764 Sycamore Networks, Inc.*+++ 14,600 61,758 SYKES Enterprises, Inc.* 49,300 372,708 SYNNEX Corporation* 500 7,850 Sypris Solutions, Inc. 500 9,595 Talx Corporation+++ 800 19,544 Tekelec* 32,600 592,342 </Table> <Table> <Caption> SHARES VALUE ----------- ------------- Terremark Worldwide, Inc.* 6,100 $ 5,185 TIBCO Software, Inc.* 66,800 564,460 Tier Technologies, Inc.*+++ 29,500 287,330 Trimble Navigation, Ltd.* 21,400 594,706 Triquint Semiconductor, Inc.* 4,700 25,662 TriZetto Group, Inc.* 300 2,010 Ulticom, Inc.*+++ 55,200 645,840 UNOVA, Inc.* 3,700 74,925 Verisity, Ltd.* 34,200 205,200 Verity, Inc.*+++ 70,200 948,402 Vignette Corporation* 11,200 18,592 Vishay Intertechnology, Inc.* 35,600 661,448 Vitesse Semiconductor Corporation* 37,600 183,488 WatchGuard Technologies, Inc.* 1,200 8,664 webMethods, Inc.* 91,400 783,298 Zhone Technologies, Inc.*+++ 3,725 14,528 Zoran Corporation*+++ 31,600 579,860 ------------- 57,327,229 ------------- UTILITIES -- 4.3% AirGate PCS, Inc.* 600 10,980 Alaska Communications Systems Group, Inc.* 800 4,880 American States Water Co.+++ 1,300 30,212 Aquila, Inc.*+++ 16,300 58,028 </Table> See Notes to Financial Statements. 106 <Table> <Caption> SHARES VALUE ----------- ------------- Arch Wireless, Inc. Class A* 1,500 $ 42,735 Atmos Energy Corporation 4,400 112,640 Avista Corporation+++ 35,100 646,542 Black Hills Corporation 2,700 85,050 Boston Communications Group, Inc.* 600 6,150 California Water Service Group+++ 1,300 35,815 Cascade Natural Gas Corporation+++ 900 19,863 Centennial Communications Corporation*+++ 33,200 237,380 Centerpoint Energy, Inc.+++ 46,800 538,200 Central Vermont Public Service Corporation 1,000 20,490 CH Energy Group, Inc.+++ 1,300 60,372 Cincinnati Bell, Inc.* 20,400 90,576 Cleco Corporation+++ 4,000 71,920 CMS Energy Corporation*+++ 13,600 124,168 Commonwealth Telephone Enterprises, Inc.* 900 40,293 Connecticut Water Service, Inc.+++ 700 17,962 CT Communications, Inc. 1,600 24,080 D & E Communications, Inc.+++ 1,100 14,762 Dobson Communications Corporation*+++ 155,700 507,582 Duquesne Light Holdings, Inc. 5,800 111,998 El Paso Electric Co.* 4,000 61,760 Empire District Electric Co.+++ 2,100 42,231 Energen Corporation 23,100 1,108,569 Energy East Corporation 24,800 601,400 EnergySouth, Inc. 400 16,008 General Communication, Inc. Class A* 3,800 30,172 Golden Telecom, Inc. 500 14,070 Idacorp, Inc.+++ 27,900 753,300 Intrado, Inc.*+++ 19,600 315,364 ITC Deltacom, Inc.* 500 2,785 Laclede Group, Inc.+++ 1,700 46,597 LCC International, Inc.* 89,200 437,080 Mediacom Communications Corporation* 2,700 21,114 MGE Energy, Inc. 1,500 48,945 Middlesex Water Co. 733 14,206 New Jersey Resources Corporation 2,300 95,634 Nicor, Inc. 3,700 125,689 NII Holdings, Inc. Class B*+++ 39,450 1,329,071 Northeast Utilities 68,600 1,335,642 Northwest Natural Gas Co. 2,300 70,150 NSTAR 11,400 545,832 NUI Corporation+++ 1,300 18,980 Otter Tail Corporation+++ 2,200 59,092 Peoples Energy Corporation 3,100 130,665 Pepco Holdings, Inc.+++ 72,300 1,321,644 Piedmont Natural Gas Co., Inc.+++ 15,800 674,660 PNM Resources, Inc.+++ 28,450 590,907 Price Communications Corporation* 3,390 50,036 Primus Telecommunications Group, Inc.*+++ 161,100 818,388 PTEK Holdings, Inc.* 54,500 628,385 SCANA Corporation+++ 30,500 1,109,285 Shenandoah Telecommunications Co.+++ 500 13,500 Sierra Pacific Resources*+++ 9,800 75,558 SJW Corporation 500 17,000 South Jersey Industries, Inc.+++ 1,100 48,400 Southern Union Co.*+++ 4,905 103,397 Southwest Gas Corporation 2,900 69,977 Southwest Water Co.+++ 1,366 17,102 Southwestern Energy Co.* 2,300 65,941 SureWest Communications+++ 200 6,320 Talk America Holdings, Inc.* 2,200 16,874 Telephone & Data Systems, Inc. 5,300 377,360 Time Warner Telecom, Inc. Class A*+++ 4,100 17,179 Triton PCS Holdings, Inc. Class A* 3,200 13,952 UIL Holdings Corporation+++ 1,000 48,690 Unisource Energy Corporation+++ 25,100 623,735 Westar Energy, Inc. 26,800 533,588 Western Wireless Corporation Class A* 22,500 650,475 WGL Holdings, Inc. 4,100 117,752 Wisconsin Energy Corporation 19,900 648,939 ------------- 18,796,078 ------------- TOTAL COMMON STOCK 420,146,685 (Cost $360,800,321) ------------- SHORT-TERM INVESTMENTS -- 34.6% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 21,268,462 21,268,462 Northern Institutional Liquid Assets Portfolio sec. 131,399,269 131,399,269 ------------- TOTAL SHORT-TERM INVESTMENTS 152,667,731 (Cost $152,667,731) ------------- <Caption> PAR ----------- U.S. TREASURY OBLIGATION -- 0.5% U.S. Treasury Bill 0.95%, 07/22/04++++ (Cost $1,988,897) $ 1,990,000 $ 1,988,985 ------------- </Table> See Notes to Financial Statements. 107 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- ------------- MUTUAL FUNDS -- 0.2% Gladstone Capital Corporation 600 $ 12,090 IShares Russell 2000 Value 2,770 477,271 IShares Russell 2000 3,850 454,262 ------------- TOTAL MUTUAL FUNDS 943,623 (Cost $908,505) ------------- RIGHTS -- 0.0% FINANCIAL SERVICES Leucadia National Corporation*+ (Cost $0) 700 0 ------------- TOTAL INVESTMENTS -- 130.3% 575,747,024 (Cost $516,365,454) (133,941,441) LIABILITIES IN EXCESS OF OTHER ASSETS -- (30.3%) ------------- $ 441,805,583 NET ASSETS -- 100.0% ============= </Table> See Notes to Financial Statements. 108 INTERNATIONAL EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/04 - -------------------------------------------------------------------------------- <Table> <Caption> RETIREMENT INSTITUTIONAL RETAIL MSCI AC WORLD CLASS* CLASS* CLASS* FREE EX-U.S. INDEX** ---------- ------------- ------ -------------------- One Year 29.04% 29.28% 28.73% 32.03% Since Inception (8/27/01 -- 6/30/04) 6.01% 6.16% 5.47% 5.82% </Table> Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.absbc.org. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. [LINE GRAPH] <Table> <Caption> MSCI ALL COUNTRY WORLD FREE EX- RETIREMENT CLASS U.S. INDEX** ---------------- ------------------------------- Aug 27 2001 10000 10000 Aug 2001 9777 9707 Sep 2001 8731 8675 Oct 2001 9014 8918 Nov 2001 9460 9325 Dec 2001 9539 9445 Jan 2002 9203 9039 Feb 2002 9375 9104 Mar 2002 9891 9594 Apr 2002 9994 9651 May 2002 10149 9748 Jun 2002 9728 9324 Jul 2002 8773 8414 Aug 2002 8765 8413 Sep 2002 7939 7519 Oct 2002 8274 7922 Nov 2002 8541 8302 Dec 2002 8400 8033 Jan 2003 8061 7750 Feb 2003 7887 7592 Mar 2003 7687 7439 Apr 2003 8348 8148 May 2003 8870 8661 Jun 2003 9148 8895 Jul 2003 9426 9131 Aug 2003 9731 9401 Sep 2003 9913 9663 Oct 2003 10487 10288 Nov 2003 10652 10511 Dec 2003 11408 11313 Jan 2004 11576 11493 Feb 2004 11822 11783 Mar 2004 11937 11851 Apr 2004 11584 11474 May 2004 11549 11500 Jun 2004 11804 11745 </Table> The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Morgan Stanley Capital International All Country World Index ex-U.S. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Morgan Stanley Capital International All Country World Index ex-U.S. is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Foreign securities may involve additional risks, social and political instability, reduced market liquidity and currency volatility. Not Part of the Semi-Annual Report 109 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) <Table> <Caption> JUNE 30, 2004 PAR VALUE - ------------- ----------- -------------- FOREIGN CONVERTIBLE BONDS -- 0.0% SWITZERLAND Credit Suisse Group Finance, Ltd. 6.00%, 12/23/05(S) (Cost $168,698) 241,000 $ 255,740 -------------- <Caption> SHARES ----------- FOREIGN COMMON STOCK -- 96.5% AUSTRALIA -- 4.2% Amcor, Ltd.+++ 855,614 4,154,276 Australia and New Zealand Banking Group, Ltd. 47,363 603,115 BHP Billiton, Ltd.+++ 92,956 811,359 Brambles Industries, Ltd.+++ 45,100 188,501 Coles Myer, Ltd. 822,970 4,924,497 Commonwealth Bank of Australia+++ 73,200 1,661,295 Insurance Australia Group, Ltd.+++ 99,900 347,953 James Hardie Industries NV 70,900 296,334 John Fairfax Holdings, Ltd.+++ 495,000 1,286,171 Lend Lease Corporation, Ltd.+++ 474,509 3,397,991 National Australia Bank, Ltd.+++ 262,853 5,463,821 Orica, Ltd.+++ 88,676 932,755 Promina Group, Ltd. 78,500 218,733 QBE Insurance Group, Ltd.+++ 74,793 666,892 Quantas Airways, Ltd. 656,700 1,610,254 Rinker Group, Ltd.+++ 34,306 192,376 Telstra Corporation, Ltd. 1,415,414 4,959,481 Wesfarmers, Ltd.+++ 17,200 352,258 WMC Resources, Ltd. 678,500 2,325,411 Woodside Petroleum, Ltd.+++ 696,000 8,082,200 Woolworths, Ltd.+++ 50,500 401,034 -------------- 42,876,707 -------------- AUSTRIA -- 0.1% Bank Austria Creditanstalt AG 3,096 181,557 Erste Bank Der Oesterreichischen Sparkassen AG 2,900 455,501 -------------- 637,058 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- BELGIUM -- 1.8% Colruyt NV+++ 56,600 $ 6,989,526 Electrabel SA+++ 6,959 2,230,964 Fortis 178,482 3,943,646 UCB SA+++ 112,500 5,248,812 -------------- 18,412,948 -------------- BRAZIL -- 0.6% All America Latina Logistica SA GDR* 2,000 59,500 Aracruz Celulose SA ADR+++ 10,300 336,398 Brasil Telecom Participacoes SA ADR+++ 18,000 552,600 Cia Energetica de Minas Gerais 3,000,000 44,753 Companhia de Concessoes Rodoviarias 8,100 91,540 Companhia Energetica de Minas Gerais ADR+++ 7,000 105,140 Companhia Siderurgica Nacional SA ADR+++ 16,000 194,560 Companhia Vale do Rio Doce ADR+++ 45,900 1,807,365 Gerdau SA ADR+++ 25,000 303,000 Gol Linhas Aereas Inteligentes SA ADR*+++ 5,300 90,100 Natura Cosmeticos SA* 6,000 96,461 Petroleo Brasileiro SA (Preference Shares) ADR 31,000 781,200 Petroleo Brasileiro SA ADR 61,688 1,731,582 Tele Celular Sul Participacoes SA ADR+++ 5,000 64,500 Tele Norte Leste Participacoes SA ADR+++ 6,000 76,380 Telesp Celular Participacoes SA ADR*+++ 23,000 181,240 -------------- 6,516,319 -------------- CANADA -- 1.6% Alcan, Inc.+++ 25,500 1,049,860 Bombardier, Inc. Class B 274,300 822,440 First Quantum Minerals, Ltd.* 63,700 672,277 Great-West Lifeco, Inc. 9,300 334,335 Inco, Ltd.*+++ 28,100 971,136 InterOil Corporation CDI* 90,000 191,844 InterOil Corporation NPV* 7,000 151,303 Manulife Financial Corporation+++ 128,200 5,168,160 National Bank Of Canada+++ 12,300 394,481 Suncor Energy, Inc. 95,000 2,409,808 Talisman Energy, Inc. 61,400 1,332,642 TELUS Corporation+++ 24,100 362,017 Thomson Corporation (The) 59,900 2,200,415 -------------- 16,060,718 -------------- CHILE -- 0.2% AFP Provida SA ADR 22,900 580,286 Banco Santander Chile SA ADR 9,000 240,300 Distribucion y Servicio SA ADR 22,200 337,440 Embotelladora Andina SA ADR Class A+++ 30,100 364,511 Embotelladora Andina SA ADR Class B+++ 40,000 450,800 Enersis SA ADR+++ 30,000 178,800 -------------- 2,152,137 -------------- </Table> See Notes to Financial Statements. 110 <Table> <Caption> SHARES VALUE ----------- -------------- CHINA -- 0.5% Aluminum Corporation of China, Ltd.+++ 508,000 $ 271,917 Byd Co., Ltd. Series H+++ 109,000 322,117 China Petroleum & Chemical Corporation Class H+++ 1,260,000 460,396 China Telecom Corporation, Ltd. Class H 2,394,000 836,387 Datang International Power Generation Co., Ltd. Class H+++ 318,000 246,660 Jiangsu Expressway Co., Ltd. Class H+++ 1,434,100 689,489 Ping An Insurance Group Co. of China, Ltd. Class H*+++ 269,000 365,573 Sinotrans, Ltd. Class H+++ 3,112,600 1,117,373 Travelsky Technology, Ltd. Class H+++ 542,000 354,394 -------------- 4,664,306 -------------- CROATIA -- 0.1% Pliva DD GDR+++ 61,400 911,790 -------------- CZECH REPUBLIC -- 0.0% Cesky Telecom AS GDR+++ 17,200 210,021 Komercni Banka AS 2,107 236,499 -------------- 446,520 -------------- DENMARK -- 0.7% Novo-Nordisk AS Class B+++ 127,100 6,543,021 TDC AS 8,900 289,176 -------------- 6,832,197 -------------- ECUADOR -- 0.1% La Cemento Nacional GDR 26,250 551,250 -------------- EGYPT -- 0.2% MobiNil - Egyptian Mobile Services 75,995 914,771 Orascom Construction Industries* 72,933 1,081,868 Orascom Telecom Holding* 350 6,453 -------------- 2,003,092 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- ESTONIA -- 0.2% Hansabank, Ltd. 208,000 $ 1,746,134 -------------- FINLAND -- 0.6% Nokia OYJ+++ 224,600 3,240,855 UPM-Kymmene OYJ+++ 158,800 3,021,707 -------------- 6,262,562 -------------- FRANCE -- 8.3% Accor SA 20,000 844,111 Air Liquide SA 10,023 1,657,261 Assurances Generales de France+++ 27,100 1,646,251 BNP Paribas SA 58,600 3,603,993 Bouygues SA+++ 69,200 2,316,966 Carrefour SA+++ 114,396 5,550,488 Compagnie de Saint-Gobain+++ 119,234 5,943,349 Compagnie Generale des Etablissements Michelin Class B 2,700 149,301 Essilor International SA Compagnie Generale D'Optique 6,400 417,748 France Telecom SA+++ 271,197 7,067,560 Groupe Danone 16,000 1,395,739 L'Oreal SA 90,215 7,205,741 Lafarge SA 41,219 3,675,925 Lafarge SA Coupons*+ 13,100 0 Lagardere SCA 39,618 2,475,131 Pinault-Printemps-Redoute SA+++ 34,998 3,595,904 Renault SA 13,200 1,005,341 Sanofi-Synthelabo SA+++ 90,200 5,717,543 Schneider Electric SA 14,100 962,381 Societe BIC SA 14,600 649,773 Societe Generale Class A 64,749 5,502,558 Societe Television Francaise 1+++ 123,000 3,874,381 Thomson+++ 45,970 906,615 Total SA 78,181 14,905,117 Valeo SA 36,307 1,512,921 Vivendi Universal SA*+++ 102,887 2,854,043 -------------- 85,436,141 -------------- GERMANY -- 3.7% Adidas-Salomon AG+++ 16,165 1,929,935 Allianz AG 11,500 1,245,660 BASF AG 29,393 1,573,124 Bayer AG 134,271 3,871,647 Bayerische Hypo-und Vereinsbank AG 217,678 3,871,925 Bayerische Motoren Werke AG+++ 55,400 2,451,423 Continental AG+++ 38,300 1,847,131 DaimlerChrysler AG 47,200 2,205,151 Deutsche Bank AG 4,800 377,142 Deutsche Boerse AG 28,779 1,462,532 E.ON AG+++ 40,900 2,950,823 Infineon Technologies AG 50,400 676,350 Metro AG 27,700 1,312,997 Muenchener Rueckversicherungs AG+++ 9,900 1,073,194 RWE AG 129,160 6,073,550 SAP AG 5,300 878,637 Schering AG 50,180 2,956,721 Siemens AG+++ 19,850 1,427,535 ThyssenKrupp AG 400 6,818 -------------- 38,192,295 -------------- GREECE -- 0.1% Piraeus Bank SA 75,000 875,987 -------------- </Table> See Notes to Financial Statements. 111 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- HONG KONG -- 4.0% China Mengniu Dairy Co., Ltd.* 192,000 $ 125,542 China Mobile (Hong Kong), Ltd. 963,500 2,915,280 China Resources Power Holdings Co.* 1,303,600 735,383 CLP Holdings, Ltd.+++ 1,150,000 6,295,674 CNOOC, Ltd.+++ 9,532,000 4,032,873 Esprit Holdings, Ltd.+++ 81,000 362,432 Hang Lung Properties, Ltd.+++ 1,293,000 1,666,023 Hang Seng Bank, Ltd.+++ 29,700 380,779 Hong Kong & China Gas Co., Ltd. 4,850,000 7,990,269 Hongkong Electric Holdings, Ltd.+++ 552,500 2,287,975 Hongkong Land Holdings, Ltd.+++ 48,000 74,880 Hutchison Whampoa, Ltd.+++ 556,000 3,795,867 Jardine Matheson Holdings, Ltd. 177,200 1,949,200 Johnson Electric Holdings, Ltd.+++ 446,500 455,098 Li & Fung, Ltd. 516,000 754,173 Sun Hung Kai Properties, Ltd.+++ 44,000 361,035 Swire Pacific, Ltd. Class A+++ 426,500 2,761,385 Wharf Holdings, Ltd.+++ 1,308,000 3,756,404 -------------- 40,700,272 -------------- HUNGARY -- 0.3% Matav Rt 110,747 443,269 Matav Rt. ADR 34,200 685,026 Mol Magyar Olaj-es Gazipari Rt. 8,664 344,888 Mol Magyar Olaj-es Gazipari Rt. GDR 24,681 895,920 OTP Bank Rt. 22,464 458,829 -------------- 2,827,932 -------------- INDIA -- 0.8% Andhra Bank, Ltd. 680,000 630,082 Asian Paints (India) Ltd. 100,000 680,805 Bharat Heavy Electricals, Ltd. 18,196 198,622 Bharti Televentures. Ltd.* 192,049 569,777 Cadila Healthcare, Ltd. 9,785 90,082 GAIL India, Ltd. GDR+++ 89,500 1,976,159 Grasim Industries, Ltd. 2,420 53,243 Infosys Technologies, Ltd. 3,356 403,151 Maruti Udyog Ltd. 54,417 476,467 National Aluminium Co., Ltd. 40,968 119,718 Oil & Natural Gas Corporation, Ltd. 21,772 297,989 Ranbaxy Laboratories, Ltd. 7,004 138,549 Ranbaxy Laboratories, Ltd. GDR+++ 83,500 1,651,630 Reliance Industries, Ltd. 11,767 109,953 Satyam Computer Services, Ltd. 25,519 169,544 Sun Pharmaceuticals Industries, Ltd. 56,000 446,051 Tata Motors, Ltd. 53,554 442,876 -------------- 8,454,698 -------------- INDONESIA -- 0.6% Bank Rakyat Indonesia* 4,418,000 787,041 PT Bank Mandiri Persero TBK 7,640,723 954,836 PT Ramayana Lestari Sentosa TBK* 1,604,700 759,470 PT Telekomunikasi Indonesia TBK* 2,811,100 2,212,405 PT Unilever Indonesia TBK 2,652,000 1,107,057 -------------- 5,820,809 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- IRELAND -- 0.5% Allied Irish Banks PLC 120,500 $ 1,866,296 CRH PLC 128,462 2,717,510 Irish Life & Permanent PLC 59,300 912,663 -------------- 5,496,469 -------------- ISRAEL -- 0.3% Bank Hapoalim, Ltd. 126,300 335,883 Check Point Software Technologies, Ltd.*+++ 33,200 896,068 Lipman Electronic Engineering, Ltd.*+++ 4,700 242,520 Orbotech, Ltd.* 12,420 252,747 Teva Pharmaceutical Industries, Ltd. ADR+++ 15,900 1,069,911 -------------- 2,797,129 -------------- ITALY -- 2.8% Banca Intesa SpA 2,608,702 10,188,132 Ente Nazionale Idrocarburi SpA+++ 408,513 8,111,314 Mediaset SpA 444,723 5,069,841 Telecom Italia Mobile SpA 307,800 1,745,098 Telecom Italia SpA 1,409,325 3,112,096 UniCredito Italiano SpA 152,800 754,770 -------------- 28,981,251 -------------- JAPAN -- 22.3% Advantest Corporation 46,800 3,135,298 Aeon Co., Ltd.+++ 54,500 2,187,692 Aiful Corporation 4,605 480,694 Bank of Fukuoka, Ltd. (The)+++ 370,000 2,193,924 Bridgestone Corporation 196,000 3,682,353 Canon, Inc. 275,400 14,512,671 Dai Nippon Printing Co., Ltd.+++ 28,000 447,271 Daiwa House Industry Co., Ltd. 195,000 2,262,475 Denso Corporation+++ 325,500 7,577,052 East Japan Railway Co. 90 504,789 Eisai Co., Ltd. 211,800 6,094,964 FamilyMart Co., Ltd. 37,000 1,207,167 </Table> See Notes to Financial Statements. 112 <Table> <Caption> SHARES VALUE ----------- -------------- Fanuc, Ltd. 86,500 $ 5,160,748 Fuji Photo Film Co., Ltd. 146,000 4,576,089 Fujisawa Pharmaceutical Co., Ltd.+++ 170,000 4,027,402 Furukawa Electric Co., Ltd.+++ 103,000 439,885 Hirose Electric Co., Ltd. 41,000 4,505,247 Hitachi, Ltd. 506,000 3,482,619 Honda Motor Co., Ltd. 106,700 5,143,582 Hoya Corporation 7,600 795,418 Ito-Yokado Co., Ltd. 85,000 3,637,905 Japan Airlines Corporation 102,000 326,243 Kansai Electric Power Co., Inc. (The) 49,000 893,195 Kao Corporation 263,000 6,339,092 Keyence Corporation 19,700 4,493,727 Konica Corporation 69,000 952,335 Kyocera Corporation+++ 23,400 1,985,831 Matsushita Electric Industrial Co., Ltd.+++ 437,686 6,213,404 Millea Holdings, Inc. 770 11,431,975 Misawa Homes Holdings, Inc.*+++ 45,000 141,044 Mitsubishi Corporation+++ 74,000 718,875 Mitsubishi Estate Co., Ltd.+++ 852,100 10,573,646 Mitsubishi Heavy Industries, Ltd. 142,000 385,208 Mitsubishi Motors Corporation*+++ 180,000 293,635 Mitsubishi Tokyo Financial Group, Inc. 1,049 9,709,847 Mitsui Fudosan Co., Ltd. 55,000 659,304 Mitsui Sumitomo Insurance Co., Ltd. 186,000 1,747,239 Mizuho Financial Group, Inc.+++ 87 394,675 Murata Manufacturing Co., Ltd. 76,700 4,372,213 NEC Corporation 348,000 2,449,379 NEC Electronics Corporation+++ 7,300 448,243 Nidec Corporation+++ 4,400 450,827 Nikko Cordial Corporation 570,000 2,763,415 Nikon Corporation+++ 50,000 562,709 Nintendo Co., Ltd.+++ 8,200 950,648 Nippon Express Co., Ltd. 376,000 2,205,380 Nippon Telegraph & Telephone Corporation 500 2,671,493 Nippon Yusen Kabushiki Kaisha+++ 277,000 1,276,919 Nissan Motor Co., Ltd. 185,000 2,056,592 Nitto Denko Corporation+++ 16,800 859,130 Nomura Holdings, Inc. 210,000 3,108,189 NTT DoCoMo, Inc. 1,125 2,010,494 Omron Corporation 20,000 468,313 ORIX Corporation+++ 37,500 4,295,926 Ricoh Co., Ltd. 83,000 1,764,744 Rohm Co., Ltd. 33,800 4,045,530 Sankyo Co. Ltd. 41,000 888,650 Secom Co., Ltd.+++ 70,000 2,970,261 Sekisui House, Ltd. 113,000 1,254,117 Sharp Corporation 144,000 2,300,252 Shimamura Co., Ltd. 5,500 476,836 Shin-Etsu Chemical Co., Ltd.+++ 157,500 5,629,382 Shionogi & Co., Ltd.+++ 87,000 1,495,780 SMC Corporation 8,400 908,399 Sompo Japan Insurance, Inc. 54,900 561,000 Sony Corporation+++ 106,100 3,996,435 Sumitomo Chemical Co., Ltd.+++ 452,000 2,108,491 Sumitomo Mitsui Financial Group, Inc.+++ 228 1,562,975 Suzuki Motor Corporation 105,000 1,849,517 T&D Holdings, Inc. 50,800 2,537,323 Takeda Chemical Industries, Ltd. 281,200 12,344,297 TDK Corporation 11,100 842,304 Tokyo Electron, Ltd. 34,600 1,940,631 Tokyo Gas Co., Ltd.+++ 154,000 546,194 Tostem Inax Holding Corporation 22,000 474,820 Toyota Motor Corporation 200,200 8,109,646 UFJ Holdings, Inc. 237 1,046,914 Uni-Charm Corporation+++ 8,800 438,730 West Japan Railway Co. 483 1,947,670 Yahama Corporation 109,000 1,788,113 Yamato Transport Co., Ltd. 54,000 881,400 -------------- 228,974,801 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- LUXEMBOURG -- 0.0% SES Global 48,900 $ 413,484 Tenaris SA ADR+++ 2,000 65,500 -------------- 478,984 -------------- MALAYSIA -- 0.5% Commerce Asset Holdings BHD 347,900 444,946 Malayan Banking BHD 144,200 383,268 Maxis Communications BHD 239,600 554,863 MK Land Holdings BHD 841,300 555,701 OYL Industries BHD 109,000 1,039,803 Public Bank BHD 868,850 1,426,233 Transmile Group BHD 420,000 751,579 -------------- 5,156,393 -------------- MEXICO -- 1.1% America Movil SA de CV ADR Series L 64,200 2,334,954 Cemex SA de CV 200,666 1,162,273 Cemex SA de CV ADR 91,545 2,663,959 Coca-Cola Femsa SA de CV ADR+++ 10,000 221,900 Desarrolladora Homex SA de CV ADR* 4,500 77,895 Grupo Mexico SA de CV Series B 12,000 37,406 </Table> See Notes to Financial Statements. 113 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- Grupo Televisa SA ADR 27,642 $ 1,251,353 Kimberly-Clark de Mexico SA de CV Class A 55,000 149,744 Telefonos de Mexico SA de CV ADR Class L 52,800 1,756,656 Urbi Desarrollos Urbanos SA* 50,000 160,843 Wal-Mart de Mexico SA de CV Series V 383,698 1,137,819 -------------- 10,954,802 -------------- NETHERLANDS -- 4.6% ABN AMRO Holding NV 250,426 5,478,154 Aegon NV 248,567 2,996,969 Akzo Nobel NV 41,000 1,507,951 ING Groep NV 283,857 6,699,870 Koninklijke Numico NV+++ 13,600 436,991 Koninklijke Philips Electronics NV+++ 18,500 498,102 Reed Elsevier NV+++ 388,074 5,448,607 Royal Dutch Petroleum Co. 249,088 12,782,758 Royal Dutch Petroleum Co. (New York Shares) 12,100 625,207 Royal KPN NV 374,400 2,851,513 TPG NV 104,600 2,389,970 Unilever NV 28,000 1,911,112 VNU NV 130,823 3,799,283 -------------- 47,426,487 -------------- NEW ZEALAND -- 0.5% Telecom Corporation of New Zealand, Ltd. 1,323,332 4,941,438 -------------- NORWAY -- 0.5% DNB NOR ASA 66,000 450,379 Norsk Hydro ASA+++ 38,300 2,489,237 Norske Skogindustrier ASA 19,100 340,309 Statoil ASA 144,000 1,828,175 Yara International ASA* 28,000 226,214 -------------- 5,334,314 -------------- PERU -- 0.0% Compania de Minas Buenaventura SA ADR 15,300 338,130 -------------- PHILIPPINES -- 0.0% Bank of the Philippine Islands 375,760 287,734 SM Prime Holdings, Inc. 1,848,800 200,831 -------------- 488,565 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- PORTUGAL -- 0.6% Banco Comercial Portugues SA Series R 512,672 $ 1,197,584 Electricidade de Portugal SA 441,404 1,235,177 Portugal Telecom SGPS SA 307,779 3,321,451 Sonae SGPS SA 291,577 319,272 -------------- 6,073,484 -------------- RUSSIA -- 0.6% LUKOIL ADR+++ 18,889 1,987,122 Mining and Metallurgical Co. Norilsk Nickel ADR+++ 13,700 760,350 Mobile Telesystems ADR 16,200 1,976,400 Vimpel-Communications ADR*+++ 3,200 308,640 Wimm-Bill-Dann Foods OJSC ADR*+++ 55,400 772,830 YUKOS ADR+++ 7,057 224,413 -------------- 6,029,755 -------------- SINGAPORE -- 0.8% DBS Group Holdings, Ltd. 185,000 1,546,634 Oversea-Chinese Banking Corporation, Ltd. 346,000 2,430,608 Singapore Telecommunications, Ltd. 2,767,000 3,614,473 United Overseas Bank, Ltd. 47,000 365,642 Venture Corporation, Ltd.+++ 42,000 438,910 -------------- 8,396,267 -------------- SOUTH AFRICA -- 1.6% ABSA Group, Ltd.+++ 85,781 704,226 Alexander Forbes, Ltd. 400,000 656,123 Anglo American PLC 208,068 4,256,984 AngloGold Ashanti, Ltd.+++ 5,092 165,975 AngloGold Ashanti, Ltd. ADR+++ 53,389 1,716,990 Gold Fields, Ltd. 21,010 220,880 Impala Platinum Holdings, Ltd. 4,184 317,222 Iscor, Ltd. 55,929 347,517 Liberty Life Association of Africa 31,516 258,733 Massmart Holdings, Ltd. 66,250 348,726 MTN Group, Ltd.+++ 519,446 2,383,067 Nedcor, Ltd.+++ 34,076 338,442 Sanlam, Ltd. 347,518 492,279 Sasol, Ltd. 136,127 2,105,808 Standard Bank Group, Ltd. 204,960 1,418,694 Telkom SA, Ltd. 16,400 210,008 VenFin, Ltd. 199,900 639,706 -------------- 16,581,380 -------------- SOUTH KOREA -- 2.8% Daelim Industrial Co., Ltd. 14,130 442,671 Hankook Tire Co., Ltd. 90,805 793,709 Hyundai Mobis 20,570 913,233 Hyundai Motor Co., Ltd. 28,770 1,106,730 Kookmin Bank 83,511 2,594,587 Kookmin Bank ADR+++ 41,379 1,298,473 Korea Electric Power Corporation 52,300 841,869 Korea Electric Power Corporation ADR+++ 153,000 1,401,480 KT Corporation 27,670 925,526 KT Corporation ADR 18,650 336,446 </Table> See Notes to Financial Statements. 114 <Table> <Caption> SHARES VALUE ----------- -------------- KT Freetel 24,000 $ 416,443 POSCO 9,420 1,214,695 POSCO ADR+++ 14,400 482,544 S-Oil Corporation 28,730 1,198,430 S1 Corporation 39,280 917,836 Samsung Electronics Co., Ltd. 10,010 4,132,212 Samsung Electronics Co., Ltd. GDR 100 20,575 Samsung Electronics Co., Ltd. GDR 144A 13,859 2,860,557 Samsung Electronics Co., Ltd. (Non-Voting Shares) GDR 144A+++ 10,109 1,325,412 Samsung Fire & Marine Insurance Co., Ltd. 18,700 1,195,958 Samsung SDI Co., Ltd. 960 100,943 Shinhan Financial Group Co., Ltd. 36,730 534,023 Shinsegae Co., Ltd. 5,420 1,303,990 SK Telecom Co., Ltd. 9,420 1,548,940 SK Telecom Co., Ltd. ADR 44,355 931,011 Tae Young Corporation 10,000 308,524 -------------- 29,146,817 -------------- SPAIN -- 3.6% Acerinox SA 15,439 878,896 ACS, Actividades de Construccion y Servicios, S.A.* 98,289 1,656,227 Banco Bilbao Vizcaya Argentaria SA+++ 209,700 2,801,341 Banco Santander Central Hispano SA 367,608 3,815,041 Endesa SA+++ 131,800 2,540,012 Iberdrola SA+++ 325,880 6,878,952 Inditex SA 233,400 5,355,595 Repsol YPF SA+++ 116,337 2,547,743 Telefonica SA 719,240 10,632,007 -------------- 37,105,814 -------------- SWEDEN -- 1.6% Assa Abloy AB Class B 35,474 453,258 Autoliv, Inc. AB+++ 24,291 1,014,147 ForeningsSparbanken AB 57,600 1,101,083 Hennes & Mauritz AB Class B 144,200 3,723,230 Nordea Bank AB 400,000 2,874,330 Sandvik AB 50,900 1,736,544 Scania AB Class B+++ 14,300 485,972 Skandia Forsakrings AB+++ 741,893 3,072,775 Volvo AB Class B 52,224 1,816,378 -------------- 16,277,717 -------------- </Table> <Table> <Caption> SHARES VALUE ----------- -------------- SWITZERLAND -- 4.4% ABB, Ltd. 85,254 $ 466,297 Adecco SA 8,276 412,346 Ciba Specialty Chemicals, Inc. 16,700 1,202,763 Compagnie Financiere Richemont AG Class A 102,849 2,685,374 Credit Suisse Group 87,717 3,116,741 Holcim, Ltd. 45,217 2,458,701 Logitech International SA* 19,600 892,047 Nestle SA 51,565 13,751,764 Novartis AG 138,567 6,112,925 Roche Holding AG 39,421 3,903,069 Serono SA Class B+++ 794 500,212 STMicroelectronics NV+++ 38,500 847,385 Swiss Reinsurance 41,584 2,701,101 Swisscom AG+++ 7,070 2,337,097 Syngenta AG 5,892 493,980 Synthes, Inc. 5,420 617,778 UBS AG 18,004 1,268,647 Zurich Financial Services AG 11,900 1,878,972 -------------- 45,647,199 -------------- TAIWAN -- 1.3% Asustek Computer, Inc. 90,000 204,667 Cathay Financial Holding Co., Ltd. 288,000 517,955 Cathay Financial Holding Co., Ltd. GDR*+++ 11,009 195,861 China Steel Corporation 11,000 10,398 China Steel Corporation GDR 144A 53,700 1,015,258 Chinatrust Financial Holding Co., Ltd. 596,580 665,034 Chunghwa Telecom Co., Ltd. 151,000 260,345 Compal Electronics, Inc. 1,485,000 1,611,251 Far EasTone Telecommunications Co., Ltd. 141,000 129,096 Far EasTone Telecommunications Co., Ltd. GDR* 7,000 96,136 Faraday Technology Corporation 237,500 444,783 Formosa Plastics Corporation 74,200 104,771 HON HAI Precision Industry Co., Ltd. 191,000 709,721 MediaTek, Inc. 31,000 246,968 Nan Ya Plastics Corporation 185,500 244,282 Phoenixtec Power Co., Ltd.* 481,605 472,442 Quanta Computer, Inc. 113,000 240,175 Taiwan Semiconductor Manufacturing Co., Ltd. ADR+++ 2,734,242 5,196,027 United Microelectronics Corporation* 429,984 319,548 Yang Ming Marine Transport Corporation 265,000 244,203 Yuanta Core Pacific Securities Co., Ltd. 240,000 149,822 -------------- 13,078,743 -------------- </Table> See Notes to Financial Statements. 115 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) CONTINUED <Table> <Caption> SHARES VALUE ----------- -------------- kw THAILAND -- 0.5% Advanced Info Service Public Co., Ltd. 503,800 $ 1,121,335 Airports of Thailand PCL*+++ 714,500 900,006 BEC World PCL 211,600 93,159 Kiatnakin Finance Public Co., Ltd. 397,600 352,525 PTT Exploration and Production Public Co., Ltd. 197,900 1,297,229 PTT Public Co., Ltd. 193,600 729,226 Siam Cement Public Co., Ltd. 65,200 389,111 Siam Commercial Bank Public Co., Ltd. 340,200 384,842 -------------- 5,267,433 -------------- TURKEY -- 0.1% Akbank TAS 67,176,856 246,707 Hurriyet Gazetecilik Ve Matbaacilik AS 59,348,558 162,969 Migros Turk TAS 120,225,000 583,302 Turkiye Garanti Bankasi AS* 93,412,676 278,538 Turkiye IS Bankasi Class C 61,703,254 224,527 -------------- 1,496,043 -------------- UNITED KINGDOM -- 16.8% Antofagasta PLC 98,400 1,678,306 ARM Holdings PLC 110,000 239,382 AstraZeneca PLC+++ 240,012 10,850,374 Aviva PLC 189,663 1,957,096 BAE Systems PLC 344,480 1,369,686 Barclays PLC 46,200 393,574 BG Group PLC 2,385,118 14,695,576 BHP Billiton PLC+++ 187,223 1,624,142 BOC Group PLC+++ 244,028 4,084,686 Boots Group PLC+++ 582,534 7,268,203 BP PLC 1,171,021 10,342,153 Brambles Industries PLC 638,524 2,466,460 British Sky Broadcasting PLC 132,505 1,494,652 Centrica PLC 636,500 2,591,386 Compass Group PLC 384,370 2,345,589 GKN PLC 503,116 2,285,563 GlaxoSmithKline PLC 422,548 8,551,801 GUS PLC 262,761 4,028,950 HBOS PLC 639,042 7,909,506 HSBC Holdings PLC 135,200 2,010,518 Intercontinental Hotels Group PLC 429,474 4,536,805 Johnson Matthey PLC 125,000 2,088,924 Johnston Press PLC 42,300 434,568 Kingfisher PLC 743,000 3,857,018 Lloyds TSB Group PLC 1,006,544 7,881,020 Misys PLC 564,300 2,026,248 National Grid Transco PLC 188,700 1,456,092 Next PLC 182,903 4,720,011 Pearson PLC 381,415 4,634,361 Prudential PLC 49,800 428,532 </Table> <Table> <Caption> SHARES VALUE ----------- -------------- Reckitt Benckiser PLC 198,120 $ 5,608,523 Reed Elsevier PLC 389,445 3,785,544 Rio Tinto PLC 173,177 4,164,387 Rolls-Royce Group PLC 377,968 1,725,607 Royal Bank of Scotland Group PLC 290,856 8,376,177 Scottish Power PLC 145,700 1,053,604 Shell Transport & Trading Co. PLC 683,300 5,012,418 Smith & Nephew PLC 319,360 3,437,309 Smiths Group PLC 128,500 1,739,603 Standard Chartered PLC 77,100 1,255,591 Tesco PLC 409,200 1,975,798 Unilever PLC+++ 295,500 2,899,159 Vodafone Group PLC 4,408,550 9,653,843 Wolseley PLC* 30,000 465,162 Xstrata PLC 110,000 1,470,204 -------------- 172,874,111 -------------- VENEZUELA -- 0.0% Compania Anonima Nacional Telefonos de Venezuela ADR 5,001 100,770 -------------- TOTAL FOREIGN COMMON STOCK (Cost $840,960,458) 991,826,168 -------------- FOREIGN PREFERRED STOCK -- 0.3% BRAZIL -- 0.1% Companhia de Tecidos do Norte de Minas -- Coteminas 4,986,860 362,300 Investimentos Itau SA 273,245 317,624 -------------- 679,924 -------------- JAPAN -- 0.2% SMFG Finance, Ltd. 18,000,000 396,737 SMFG Finance, Ltd. 144A 78,000,000 1,719,196 -------------- 2,115,933 -------------- TOTAL FOREIGN PREFERRED STOCK (Cost $1,406,894) 2,795,857 -------------- SHORT-TERM INVESTMENTS -- 18.6% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 30,225,352 30,225,352 Northern Institutional Liquid Assets Portfolio sec. 160,344,201 160,344,201 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $190,569,553) 190,569,553 -------------- TOTAL INVESTMENTS -- 115.4% (Cost $1,033,105,603) 1,185,447,318 LIABILITIES IN EXCESS OF OTHER ASSETS -- (15.4%) (158,420,571) -------------- NET ASSETS -- 100.0% $1,027,026,747 ============== </Table> See Notes to Financial Statements. 116 SCHEDULE OF INVESTMENTS ABBREVIATIONS AND FOOTNOTES <Table> INVESTMENT ABBREVIATIONS: ADR -- American Depository Receipt CONV -- Convertible GDR -- Global Depository Receipt IO -- Interest Only (Principal amount shown is notional) PO -- Principal Only REIT -- Real Estate Investment Trust STEP -- Stepped Coupon Bonds (1) STRIP -- Stripped Security TBA -- To be announced. 144A -- Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. INVESTMENT FOOTNOTES: ++++ -- All or a portion of the security was held as collateral for open futures, options and/or swap contracts. @ -- Illiquid. * -- Non-income producing security. # -- Security in default. + -- Security is valued at fair value. sec. -- Security purchased with the cash proceeds from securities loaned. ++ -- Variable rate security (1). (omg) -- Interest rates shown reflect the effective yields as of June 30, 2004. (inf) -- Affiliated fund. +++ -- Security either partially or fully on loan. FOREIGN BOND FOOTNOTES: (A) -- Par is denominated in Australian Dollars. (B) -- Par is denominated in Brazilian Reals. (C) -- Par is denominated in Canadian Dollars. (E) -- Par is denominated in European Euros. (G) -- Par is denominated in Singapore Dollars. (J) -- Par is denominated in Japanese Yen. (K) -- Par is denominated in Norwegian Krone. (M) -- Par is denominated in Mexican Pesos. (N) -- Par is denominated in New Zealand Dollars. (S) -- Par is denominated in Swiss Francs. (U) -- Par is denominated in British Pounds. SWAP AGREEMENT FOOTNOTES: (a) -- Counterparty to contract is Goldman Sachs Capital Markets, LP. (b) -- Counterparty to contract is UBS AG. (c) -- Counterparty to contract is Morgan Stanley Capital Services. (d) -- Counterparty to contract is Barclays Capital. (e) -- Counterparty to contract is Lehman Brothers Special Financing, Inc. (f) -- Counterparty to contract is Citibank NA London. (g) -- Counterparty to contract is JPMorgan Chase Bank. (h) -- Counterparty to contract is Merrill Lynch Capital Services, Inc. </Table> (1) Interest rates shown reflect the rates currently in effect. Maturity date for money market instruments is the date of the next interest rate reset. 117 STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) <Table> <Caption> MONEY LOW-DURATION MEDIUM-DURATION JUNE 30, 2004 MARKET FUND BOND FUND BOND FUND - ------------- ------------ -------------- --------------- ASSETS Investments in securities of unaffiliated issuers at value $915,163,572 $1,065,542,611 $1,025,474,175 Investments in securities of affiliated issuers at value -- 29,464,479 89,801,493 ------------ -------------- -------------- Total investments (1)(2) 915,163,572 1,095,007,090 1,115,275,668 Cash 4,107 -- 637,353 Cash collateral for futures -- -- 45,600 Foreign currency (3) -- 795,762 5,630,145 Receivables: Dividends and reclaims -- 26,484 50,323 Interest 947,889 3,586,571 5,439,418 Interest on swaps -- -- 20,870 Investment securities sold -- 14,314,295 61,365,111 Maturities -- 169,334 34,681 Fund shares sold 12,495,277 116 1,189 Variation margin -- 378,321 329,438 Securities lending 128 28,928 24,926 Unrealized appreciation on foreign currency exchange contracts -- 128,344 59,827 Unrealized appreciation on swap agreements -- 232,112 2,220,169 Prepaid expenses and other assets 33,402 28,792 29,415 ------------ -------------- -------------- Total Assets 928,644,375 1,114,696,149 1,191,164,133 ------------ -------------- -------------- LIABILITIES Cash overdraft -- 505,226 -- Securities sold short, at value (proceeds $3,335,391) -- -- 3,377,500 Options written at value (4) -- 71,308 1,554,039 Unrealized depreciation on foreign currency exchange contracts -- 297,600 361,912 Unrealized depreciation on swap agreements -- 198,855 5,379,168 Collateral held for securities on loan at value -- 258,366,313 165,211,217 Payables: Investment securities purchased -- 48,538,120 197,037,809 Fund shares purchased 13,254,836 36,247 9,322 Interest on swaps -- 19,883 251,227 Variation margin -- 1,125 106,859 Distributions 223,109 -- -- Securities lending 38 8,650 7,443 Accrued expenses Advisory fee payable 118,568 97,063 100,874 Distribution fee payable 821 1,832 1,872 Service fee payable 133,606 115,658 117,993 Other accrued expenses 110,856 217,641 254,529 Other liabilities -- -- 553 ------------ -------------- -------------- Total Liabilities 13,841,834 308,475,521 373,772,317 ------------ -------------- -------------- NET ASSETS $914,802,541 $ 806,220,628 $ 817,391,816 ============ ============== ============== NET ASSETS CONSIST OF: Paid-in-capital $914,800,772 $ 805,292,730 $ 803,220,651 Undistributed net investment income (loss) -- 2,155,807 1,522,263 Accumulated net realized gain (loss) on investments, foreign currency transactions and derivative transactions 1,769 3,787,609 7,475,214 Net unrealized appreciation (depreciation) on investments, foreign currency translations and derivative transactions -- (5,015,518) 5,173,688 ------------ -------------- -------------- NET ASSETS $914,802,541 $ 806,220,628 $ 817,391,816 ============ ============== ============== NET ASSET VALUE: $0.001 par value, unlimited shares authorized Net assets applicable to the Retail Class $ 9,948,300 $ 22,372,504 $ 22,920,358 ------------ -------------- -------------- Retail shares outstanding 9,950,396 2,359,857 2,489,224 ------------ -------------- -------------- Net asset value, offering price and redemption price per Retail share $ 1.00 $ 9.48 $ 9.21 ============ ============== ============== Net assets applicable to the Retirement Class $843,445,820 $ 727,542,141 $ 746,880,918 ------------ -------------- -------------- Retirement shares outstanding 843,407,471 56,169,806 55,266,248 ------------ -------------- -------------- Net asset value, offering price and redemption price per Retirement share $ 1.00 $ 12.95 $ 13.51 ============ ============== ============== Net assets applicable to the Institutional class $ 61,408,421 $ 56,305,983 $ 47,590,540 ------------ -------------- -------------- Institutional shares outstanding 61,408,399 5,959,395 5,200,154 ------------ -------------- -------------- Net asset value, offering price and redemption price per Institutional share $ 1.00 $ 9.45 $ 9.15 ============ ============== ============== - --------------- (1) Investments in securities of unaffiliated issuers at cost $915,163,572 $1,071,030,837 $1,019,720,594 Investments in securities of affiliated issuers at cost -- 29,464,479 89,801,493 ------------ -------------- -------------- Total investments at cost $915,163,572 $1,100,495,316 $1,109,522,087 ============ ============== ============== (2) Includes securities loaned of: -- $ 283,690,978 $ 172,488,781 ============ ============== ============== (3) Foreign currency at cost -- $ 791,275 $ 5,588,033 ============ ============== ============== (4) Premiums received on options written -- $ (595,524) $ (2,880,308) ============ ============== ============== (5) Net of $124,528 accrued foreign capital gains taxes on appreciated securities. </Table> See Notes to Financial Statements. 118 <Table> <Caption> EXTENDED-DURATION EQUITY VALUE GROWTH SMALL CAP INTERNATIONAL BOND FUND INDEX FUND EQUITY FUND EQUITY FUND EQUITY FUND EQUITY FUND ----------------- ------------ -------------- -------------- ------------ -------------- $465,623,804 $457,612,362 $1,385,567,787 $1,502,071,789 $554,478,562 $1,155,221,966 10,980,819 13,661,276 48,032,689 64,354,159 21,268,462 30,225,352 ------------ ------------ -------------- -------------- ------------ -------------- 476,604,623 471,273,638 1,433,600,476 1,566,425,948 575,747,024 1,185,447,318 198,068 -- -- -- -- -- -- -- -- -- -- -- -- -- -- 341 -- 1,130,311 7,310 440,905 1,858,014 623,164 196,083 2,581,997 4,199,395 -- -- -- -- 6,025 -- -- -- -- -- -- -- 956,826 6,129,960 11,932,016 6,748,589 1,243,425 -- -- -- -- -- -- 848 9,019 241,907 39,439 194,612 52,509 -- 41,400 147,875 221,900 93,400 -- 22,659 4,182 22,783 16,690 21,375 59,146 -- -- -- -- -- 24,820 -- -- -- -- -- -- 34,430 27,805 30,848 30,642 28,859 29,205 ------------ ------------ -------------- -------------- ------------ -------------- 481,067,333 472,753,775 1,442,031,863 1,579,290,140 583,029,942 1,190,574,756 ------------ ------------ -------------- -------------- ------------ -------------- -- -- -- -- 20 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 625,548 -- -- -- -- -- -- 47,928,087 24,439,518 126,956,118 118,514,334 131,399,269 160,344,201 -- 966,368 12,052,187 9,441,002 9,306,878 1,504,864 5,775 166,797 52 150,413 36 20,730 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 6,773 1,228 6,769 4,982 6,113 17,678 102,714 41,885 435,794 472,958 56,814 260,646 2,205 1,503 1,804 1,592 1,992 1,799 61,161 63,245 190,140 211,444 62,421 149,124 129,885 63,061 378,373 514,963 390,101 623,356 -- -- 79 916 715 63 ------------ ------------ -------------- -------------- ------------ -------------- 48,236,600 25,743,605 140,021,316 129,312,604 141,224,359 163,548,009 ------------ ------------ -------------- -------------- ------------ -------------- $432,830,733 $447,010,170 $1,302,010,547 $1,449,977,536 $441,805,583 $1,027,026,747 ============ ============ ============== ============== ============ ============== $419,158,881 $406,239,066 $1,169,873,088 $1,556,727,689 $363,827,221 $ 951,817,236 2,300,262 1,545,669 2,070,724 (2,027,914) (499,856) 7,392,117 8,822,867 (7,304,611) (33,096,472) (315,620,126) 18,794,590 (83,867,485)(5) 2,548,723 46,530,046 163,163,207 210,897,887 59,683,628 151,684,879 ------------ ------------ -------------- -------------- ------------ -------------- $432,830,733 $447,010,170 $1,302,010,547 $1,449,977,536 $441,805,583 $1,027,026,747 ============ ============ ============== ============== ============ ============== $ 27,230,064 $ 18,507,519 $ 22,425,837 $ 19,771,386 $ 24,918,913 $ 22,151,171 ------------ ------------ -------------- -------------- ------------ -------------- 3,087,726 1,970,305 2,160,628 2,067,294 2,085,574 1,957,231 ------------ ------------ -------------- -------------- ------------ -------------- $ 8.82 $ 9.39 $ 10.38 $ 9.56 $ 11.95 $ 11.32 ============ ============ ============== ============== ============ ============== $376,218,625 $394,899,155 $1,204,132,337 $1,346,064,949 $390,540,941 $ 952,643,494 ------------ ------------ -------------- -------------- ------------ -------------- 26,267,576 25,323,389 74,928,038 87,767,474 24,860,987 71,065,337 ------------ ------------ -------------- -------------- ------------ -------------- $ 14.32 $ 15.59 $ 16.07 $ 15.34 $ 15.71 $ 13.41 ============ ============ ============== ============== ============ ============== $ 29,382,044 $ 33,603,496 $ 75,452,373 $ 84,141,201 $ 26,345,729 $ 52,232,082 ------------ ------------ -------------- -------------- ------------ -------------- 3,329,417 3,597,444 7,238,192 8,708,003 2,180,925 4,563,611 ------------ ------------ -------------- -------------- ------------ -------------- $ 8.82 $ 9.34 $ 10.42 $ 9.66 $ 12.08 $ 11.45 ============ ============ ============== ============== ============ ============== $463,073,840 $411,159,326 $1,222,565,963 $1,291,439,625 $495,096,992 $1,002,880,251 10,980,819 13,661,276 48,032,689 64,354,159 21,268,462 30,225,352 ------------ ------------ -------------- -------------- ------------ -------------- $474,054,659 $424,820,602 $1,270,598,652 $1,355,793,784 $516,365,454 $1,033,105,603 ============ ============ ============== ============== ============ ============== $212,523,007 $ 31,761,164 $ 141,465,606 $ 131,061,955 $133,015,949 $ 167,116,832 ============ ============ ============== ============== ============ ============== -- -- -- $ 345 -- $ 1,128,144 ============ ============ ============== ============== ============ ============== -- -- -- -- -- -- ============ ============ ============== ============== ============ ============== </Table> See Notes to Financial Statements. 119 STATEMENTS OF OPERATIONS (UNAUDITED) <Table> <Caption> MONEY LOW-DURATION MEDIUM-DURATION FOR THE SIX MONTHS ENDED JUNE 30, 2004 MARKET FUND BOND FUND BOND FUND - -------------------------------------- ----------- ------------ --------------- INVESTMENT INCOME Dividends $ -- $ 60,019 $ 6,226 Income distributions received from affiliated funds -- 93,245 294,850 Interest 5,116,240 10,358,012 13,108,411 Securities Lending 484 150,060 104,002 Less foreign taxes withheld -- -- -- ---------- ------------ ------------ Total Investment Income 5,116,724 10,661,336 13,513,489 ---------- ------------ ------------ EXPENSES Investment advisory fees 913,230 1,640,236 1,774,294 Transfer agent fees: Retail shares 11,574 9,115 10,177 Retirement shares 10,633 8,337 8,359 Institutional shares 2,678 2,224 2,229 Custodian fees 11,269 36,527 78,045 Distribution fees -- Retail shares 4,468 11,093 11,445 Shareholder servicing fees: Retail shares 6,733 16,692 17,217 Retirement shares 781,277 688,642 706,808 Accounting and administration fees 168,727 176,994 194,463 Professional fees 21,650 23,217 25,724 Blue sky fees: Retail shares 8,262 7,013 7,081 Retirement shares 1,014 1,088 1,020 Shareholder reporting fees: Retail shares 6,396 3,679 5,034 Retirement shares 1,993 1,027 1,027 Institutional shares 2,522 1,829 2,059 Trustee fees 2,682 2,330 2,357 Line of credit facility fees 2,682 2,330 2,357 Other expenses 13,599 16,481 20,699 ---------- ------------ ------------ Total expenses 1,971,389 2,648,854 2,870,395 Expenses waived (See footnote 3c) 4,512 (220,976) (342,839) Fees paid indirectly (1,757) (9,744) (14,217) ---------- ------------ ------------ Net expenses 1,974,144 2,418,134 2,513,339 ---------- ------------ ------------ NET INVESTMENT INCOME (LOSS) 3,142,580 8,243,202 11,000,150 ---------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investment securities (net of capital gains taxes of $391,252 for International Equity) 11,270 1,635,753 792,429 Futures transactions -- 1,248,699 2,415,408 Swap agreements -- (29,061) (766,992) Option contracts -- -- 22,663 Foreign currency transactions -- 261,215 (237,413) ---------- ------------ ------------ Net realized gain 11,270 3,116,606 2,226,095 ---------- ------------ ------------ Net change in unrealized appreciation (depreciation) on: Investment securities (net of estimated deferred capital gains taxes of $178,288 for International Equity) -- (10,696,181) (10,944,183) Futures transactions -- (302,870) (1,143,893) Swap agreements -- 50,668 948,298 Option contracts -- 434,798 1,088,530 Foreign currency translations -- 1,045,215 720,705 ---------- ------------ ------------ Net change in unrealized appreciation (depreciation) -- (9,468,370) (9,330,543) ---------- ------------ ------------ Net increase from payments by affiliates and net gains (losses) realized on the disposal of investments in violation of restrictions (See Footnote 9) -- -- -- ---------- ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) 11,270 (6,351,764) (7,104,448) ---------- ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,153,850 $ 1,891,438 $ 3,895,702 ========== ============ ============ </Table> See Notes to Financial Statements. 120 <Table> <Caption> EXTENDED-DURATION EQUITY VALUE GROWTH SMALL CAP INTERNATIONAL BOND FUND INDEX FUND EQUITY FUND EQUITY FUND EQUITY FUND EQUITY FUND ----------------- ----------- ----------- ----------- ----------- ------------- $ 23,625 $ 3,402,027 $13,843,116 $ 4,604,888 $ 1,834,550 $16,032,875 29,443 44,039 159,607 226,519 87,477 112,504 12,566,432 4,358 17,892 20,946 162,633 12,593 84,321 14,904 88,798 57,562 86,565 191,146 (118) 32,058 (10,533) (4,896) (1,646) (1,716,429) ------------ ----------- ----------- ----------- ----------- ----------- 12,703,703 3,497,386 14,098,880 4,905,019 2,169,579 14,632,689 ------------ ----------- ----------- ----------- ----------- ----------- 1,070,067 273,877 4,273,965 5,848,900 2,344,731 4,888,440 9,745 10,180 10,076 11,225 12,483 9,165 8,174 8,146 8,154 8,103 8,131 8,148 2,200 2,098 2,217 2,174 2,147 2,109 16,798 12,948 52,203 30,339 83,347 363,768 13,777 8,912 10,562 9,331 12,036 10,770 20,734 13,401 15,869 14,023 18,090 16,189 362,326 366,827 1,121,661 1,246,464 363,186 891,470 92,089 92,150 258,268 275,140 115,502 243,019 22,551 20,962 20,962 20,960 22,232 23,751 7,177 7,004 7,282 7,130 7,738 6,785 1,053 1,011 979 1,007 994 1,012 4,298 4,978 5,242 7,857 7,127 4,828 949 1,051 1,051 746 1,082 1,051 1,602 2,059 2,628 2,283 2,628 1,946 1,304 1,156 3,342 3,764 1,045 2,600 1,304 1,156 3,340 3,763 1,045 2,600 10,341 17,310 16,101 18,503 11,838 20,761 ------------ ----------- ----------- ----------- ----------- ----------- 1,646,489 845,226 5,813,902 7,511,712 3,015,382 6,498,412 (28,587) 8,364 (105,741) (548,798) (291,545) (710,075) (256) (308) (50,862) (29,981) (54,402) (113,335) ------------ ----------- ----------- ----------- ----------- ----------- 1,617,646 853,282 5,657,299 6,932,933 2,669,435 5,675,002 ------------ ----------- ----------- ----------- ----------- ----------- 11,086,057 2,644,104 8,441,581 (2,027,914) (499,856) 8,957,687 ------------ ----------- ----------- ----------- ----------- ----------- 5,439,246 733,151 48,622,537 8,371,991 32,383,515 34,236,130 -- 591,378 1,954,613 3,509,246 (64,352) -- -- -- -- -- -- -- -- -- -- -- -- -- 496,626 -- -- (132,336) -- (1,176,048) ------------ ----------- ----------- ----------- ----------- ----------- 5,935,872 1,324,529 50,577,150 11,748,901 32,319,163 33,060,082 ------------ ----------- ----------- ----------- ----------- ----------- (22,065,477) 11,212,459 12,258,174 66,018,555 (12,993,087) (8,353,721) -- (359,176) (1,049,294) (1,471,036) (170,611) -- -- -- -- -- -- -- -- -- -- -- -- -- (32,558) -- -- 126,807 -- 187,487 ------------ ----------- ----------- ----------- ----------- ----------- (22,098,035) 10,853,283 11,208,880 64,674,326 (13,163,698) (8,166,234) ------------ ----------- ----------- ----------- ----------- ----------- -- -- -- -- -- -- ------------ ----------- ----------- ----------- ----------- ----------- (16,162,163) 12,177,812 61,786,030 76,423,227 19,155,465 24,893,848 ------------ ----------- ----------- ----------- ----------- ----------- $ (5,076,106) $14,821,916 $70,227,611 $74,395,313 $18,655,609 $33,851,535 ============ =========== =========== =========== =========== =========== </Table> See Notes to Financial Statements. 121 STATEMENTS OF CHANGES IN NET ASSETS <Table> <Caption> MONEY MARKET FUND ---------------------------- FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED 6/30/2004 12/31/2003 ------------ ------------ (UNAUDITED) INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income (loss) $ 3,142,580 $ 7,917,399 Net realized gain (loss) on investment securities, foreign currency transactions and futures transactions 11,270 (9,501) Net change in unrealized appreciation (depreciation) on investment securities, foreign currency translations, and futures contracts -- -- Net increase from payments by affiliates and net gains (losses) realized on the disposal of investments in violation of restrictions (See Footnote 9) -- -- ------------ ------------ Net increase (decrease) in net assets resulting from operations 3,153,850 7,907,898 ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME Retail shares (19,172) (62,904) Retirement shares (2,851,678) (7,530,068) Institutional shares (271,730) (324,427) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS Retail shares -- (6) Retirement shares -- (625) Institutional shares -- (46) ------------ ------------ Total dividends and distributions (3,142,580) (7,918,076) ------------ ------------ NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (9,678,941) (3,852,148) ------------ ------------ Total increase (decrease) in net assets (9,667,671) (3,862,326) ------------ ------------ NET ASSETS: Beginning of the Period 924,470,212 928,332,538 ------------ ------------ End of the Period $914,802,541 $924,470,212 ============ ============ </Table> See Notes to Financial Statements. 122 <Table> <Caption> LOW-DURATION BOND FUND MEDIUM-DURATION BOND FUND EXTENDED-DURATION BOND FUND --------------------------- --------------------------- --------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED ENDED 6/30/2004 12/31/2003 6/30/2004 12/31/2003 6/30/2004 12/31/2003 ------------ ------------ ------------ ------------ ------------ ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) $ 8,243,202 $ 19,241,404 $ 11,000,150 $ 26,791,900 $ 11,086,057 $ 24,282,452 3,116,606 10,188,347 2,226,095 26,929,299 5,935,872 22,325,951 (9,468,370) (10,158,617) (9,330,543) (1,627,903) (22,098,035) 1,495,624 -- -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ 1,891,438 19,271,134 3,895,702 52,093,296 (5,076,106) 48,104,027 ------------ ------------ ------------ ------------ ------------ ------------ (176,255) (753,411) (306,948) (1,202,395) (882,415) (2,080,490) (4,572,352) (19,321,186) (7,334,101) (30,152,221) (7,724,276) (19,969,955) (533,708) (1,326,256) (722,694) (1,916,722) (989,688) (1,595,527) -- (311,062) -- (676,622) -- (1,897,839) -- (7,418,102) -- (15,323,780) -- (16,743,684) -- (746,547) -- (1,396,423) -- (1,971,125) ------------ ------------ ------------ ------------ ------------ ------------ (5,282,315) (29,876,564) (8,363,743) (50,668,163) (9,596,379) (44,258,620) ------------ ------------ ------------ ------------ ------------ ------------ 6,168,440 22,756,445 10,955,644 15,046,016 5,411,288 5,730,852 ------------ ------------ ------------ ------------ ------------ ------------ 2,777,563 12,151,015 6,487,603 16,471,149 (9,261,197) 9,576,259 ------------ ------------ ------------ ------------ ------------ ------------ 803,443,065 791,292,050 810,904,213 794,433,064 442,091,930 432,515,671 ------------ ------------ ------------ ------------ ------------ ------------ $806,220,628 $803,443,065 $817,391,816 $810,904,213 $432,830,733 $442,091,930 ============ ============ ============ ============ ============ ============ </Table> See Notes to Financial Statements. 123 STATEMENTS OF CHANGES IN NET ASSETS CONTINUED <Table> <Caption> EQUITY INDEX FUND ---------------------------- FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED 6/30/2004 12/31/2003 ------------ ------------ (UNAUDITED) INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income (loss) $ 2,644,104 $ 4,853,926 Net realized gain (loss) on investment securities, foreign currency transactions and futures transactions 1,324,529 979,184 Net change in unrealized appreciation (depreciation) on investment securities, foreign currency translations, and futures contracts 10,853,283 86,942,011 Net increase from payments by affiliates and net gains (losses) realized on the disposal of investments in violation of restrictions (See Footnote 9) -- -- ------------ ------------ Net increase in net assets resulting from operations 14,821,916 92,775,121 ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME Retail shares (105,945) (278,397) Retirement shares (1,280,357) (3,723,527) Institutional shares (222,746) (403,725) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS Retail shares -- -- Retirement shares -- -- Institutional shares -- -- ------------ ------------ Total dividends and distributions (1,609,048) (4,405,649) ------------ ------------ NET INCREASE FROM CAPITAL SHARE TRANSACTIONS 1,326,018 31,213,504 ------------ ------------ Total increase in net assets 14,538,886 119,582,976 ------------ ------------ NET ASSETS: Beginning of the Period 432,471,284 312,888,308 ------------ ------------ End of the Period $447,010,170 $432,471,284 ============ ============ </Table> See Notes to Financial Statements. 124 <Table> <Caption> VALUE EQUITY FUND GROWTH EQUITY FUND SMALL CAP EQUITY FUND INTERNATIONAL EQUITY FUND ------------------------------- ------------------------------- --------------------------- ----------------------------- FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED ENDED 6/30/2004 12/31/2003 6/30/2004 12/31/2003 6/30/2004 12/31/2003 6/30/2004 12/31/2003 -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) $ 8,441,581 $ 16,662,980 $ (2,027,914) $ (894,042) $ (499,856) $ (1,056,272) $ 8,957,687 $ 10,923,644 50,577,150 6,646,141 11,748,901 (78,550,785) 32,319,163 34,880,333 33,060,082 (31,492,027) 11,208,880 270,278,957 64,674,326 392,733,277 (13,163,698) 84,238,319 (8,166,234) 280,933,691 -- -- -- -- -- -- -- -- -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ 70,227,611 293,588,078 74,395,313 313,288,450 18,655,609 118,062,380 33,851,535 260,365,308 -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ (143,324) (369,825) -- -- -- -- -- (265,273) (5,671,689) (15,815,795) -- -- -- -- -- (11,108,069) (610,977) (922,077) -- -- -- -- -- (797,069) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ (6,425,990) (17,107,697) -- -- -- -- -- (12,170,411) -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ (3,578,439) 7,472,571 (7,287,410) 2,816,736 17,512,753 36,835,939 1,687,105 25,094,925 -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ 60,223,182 283,952,952 67,107,903 316,105,186 36,168,362 154,898,319 35,538,640 273,289,822 -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ 1,241,787,365 957,834,413 1,382,869,633 1,066,764,447 405,637,221 250,738,902 991,488,107 718,198,285 -------------- -------------- -------------- -------------- ------------ ------------ -------------- ------------ $1,302,010,547 $1,241,787,365 $1,449,977,536 $1,382,869,633 $441,805,583 $405,637,221 $1,027,026,747 $991,488,107 ============== ============== ============== ============== ============ ============ ============== ============ </Table> See Notes to Financial Statements. 125 FINANCIAL HIGHLIGHTS <Table> <Caption> MONEY MARKET FUND -------------------------------------------------------------- RETAIL CLASS -------------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income -- 0.01 0.01 0.01 Realized and unrealized gain (loss) on investments -- net -- -- -- -- ------ ------ ------- ------- Total from investment operations -- 0.01 0.01 0.01 ------ ------ ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -- (0.01) (0.01) (0.01) Distributions from capital gains -- --+ --+ -- Return of capital -- -- -- -- ------ ------ ------- ------- Total dividends and distributions -- (0.01) (0.01) (0.01) ------ ------ ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ======= ======= TOTAL RETURN (1) 0.21% 0.57% 1.38% 0.81% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.72% 0.73% 0.65% 0.75% Expenses -- including expense reduction (2) 0.72% 0.73% 0.65% 0.75% Expenses -- before waivers and expense reduction (2) 1.09% 0.91% 0.77% 16.37% Investment income -- net (2) 0.43% 0.61% 1.35% 1.98% Investment income (loss) -- excluding waivers and expense reduction (2) 0.06% 0.43% 1.23% (13.64%) Portfolio turnover rate (1) N/A N/A N/A N/A Net Assets -- end of the period (000's) $9,948 $8,035 $16,538 $ 788 ====== ====== ======= ======= </Table> - --------------- * Commencement of operations. (1) Non-annualized. (2) Annualized. + Amount represents less than $0.01 per share. See Notes to Financial Statements. 126 <Table> <Caption> MONEY MARKET FUND ------------------------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS ----------------------------------------------------------- ----------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- ------------ ------------ ------------ -------------- (UNAUDITED) (UNAUDITED) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- ------- ------- ------ ------- -- 0.01 0.02 0.01 -- 0.01 0.02 0.01 -- -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------ ------- -- 0.01 0.02 0.01 -- 0.01 0.02 0.01 -------- -------- -------- -------- ------- ------- ------ ------- -- (0.01) (0.02) (0.01) -- (0.01) (0.02) (0.01) -- --+ --+ -- -- --+ --+ -- -- -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------ ------- -- (0.01) (0.02) (0.01) -- (0.01) (0.02) (0.01) -------- -------- -------- -------- ------- ------- ------ ------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======= ======= ====== ======= 0.35% 0.85% 1.60% 0.94% 0.44% 1.04% 1.80% 0.66% 0.45% 0.45% 0.45% 0.44% 0.27% 0.27% 0.25% 0.25% 0.45% 0.45% 0.44% 0.44% 0.27% 0.27% 0.25% 0.25% 0.45% 0.45% 0.50% 0.49% 0.27% 0.28% 0.55% 90.37% 0.70% 0.84% 1.58% 2.72% 0.88% 0.91% 1.75% 2.60% 0.70% 0.84% 1.52% 2.67% 0.88% 0.90% 1.45% (87.52%) N/A N/A N/A N/A N/A N/A N/A N/A $843,446 $853,062 $906,302 $996,380 $61,408 $63,373 $5,493 $ 25 ======== ======== ======== ======== ======= ======= ====== ======= </Table> See Notes to Financial Statements. 127 FINANCIAL HIGHLIGHTS <Table> <Caption> LOW-DURATION BOND FUND -------------------------------------------------------------- RETAIL CLASS -------------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.54 $ 9.79 $ 9.86 $ 10.00 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.09 0.21# 0.33# 0.22 Realized and unrealized gain (loss) on investments -- net (0.07) -- 0.22 (0.06) ------- ------- ------- ------- Total from investment operations 0.02 0.21 0.55 0.16 ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.08) (0.33) (0.47) (0.22) Distributions from capital gains -- (0.13) (0.15) (0.08) Return of capital -- -- -- -- ------- ------- ------- ------- Total dividends and distributions (0.08) (0.46) (0.62) (0.30) ------- ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 9.48 $ 9.54 $ 9.79 $ 9.86 ======= ======= ======= ======= TOTAL RETURN (1) 0.16% 2.20% 5.70% 1.54% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.83% 0.85% 0.79% 0.85% Expenses -- including expense reduction (2) 0.83% 0.84% 0.79% 0.85% Expenses -- before waivers and expense reduction (2) 0.90% 0.87% 0.93% 74.57% Investment income -- net (2) 1.83% 2.18% 3.35% 4.18% Investment income (loss) -- excluding waivers and expense reduction (2) 1.76% 2.15% 3.21% (69.54%) Portfolio turnover rate (1) 164.53% 178.67% 181.96% 79.53% Net Assets -- end of the period (000's) $22,373 $22,452 $20,985 $ 3,458 ======= ======= ======= ======= </Table> - --------------- * Commencement of operations. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. As a result of recent changes in generally accepted accounting principles, the Low-Duration Bond Fund has reclassified periodic payments made under interest rate swap agreements, previously included within interest income, as a component of realized gain (loss) in the statement of operations. The effect of this reclassification was to increase the net investment income ratio for the period ending June 30, 2004 by 0.01% with no change to net investment income per share. For consistency, similar reclassifications have been made to prior year amounts, resulting in an increase to the net investment income ratio of 0.01% in the fiscal year ending December 31, 2003, with no change to net investment income per share. Reporting periods prior to December 31, 2003 were not impacted by these reclassifications. See Notes to Financial Statements. 128 <Table> <Caption> LOW-DURATION BOND FUND ------------------------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS ----------------------------------------------------------- ----------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- ------------ ------------ ------------ -------------- (UNAUDITED) (UNAUDITED) $ 13.00 $ 13.16 $ 13.06 $ 13.10 $ 9.51 $ 9.76 $ 9.85 $ 10.00 -------- -------- -------- -------- ------- ------- ------- ------- 0.13 0.32# 0.46# 0.21 0.11 0.22# 0.37# 0.15 (0.10) -- 0.27 0.05 (0.08) 0.03 0.19 -- -------- -------- -------- -------- ------- ------- ------- ------- 0.03 0.32 0.73 0.26 0.03 0.25 0.56 0.15 -------- -------- -------- -------- ------- ------- ------- ------- (0.08) (0.35) (0.48) (0.22) (0.09) (0.37) (0.50) (0.22) -- (0.13) (0.15) (0.08) -- (0.13) (0.15) (0.08) -- -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------- ------- (0.08) (0.48) (0.63) (0.30) (0.09) (0.50) (0.65) (0.30) -------- -------- -------- -------- ------- ------- ------- ------- $ 12.95 $ 13.00 $ 13.16 $ 13.06 $ 9.45 $ 9.51 $ 9.76 $ 9.85 ======== ======== ======== ======== ======= ======= ======= ======= 0.24% 2.45% 5.71% 1.96% 0.33% 2.61% 5.89% 1.54% 0.61% 0.61% 0.62% 0.61% 0.45% 0.45% 0.46% 0.45% 0.61% 0.61% 0.61% 0.61% 0.45% 0.45% 0.45% 0.45% 0.67% 0.67% 0.72% 0.72% 0.49% 0.50% 0.78% 57.60% 2.05% 2.43% 3.50% 4.47% 2.21% 2.30% 3.71% 4.73% 1.99% 2.37% 3.39% 4.36% 2.17% 2.25% 3.38% (52.42%) 164.53% 178.67% 181.96% 79.53% 164.53% 178.67% 181.96% 79.53% $727,542 $727,265 $763,987 $812,387 $56,306 $53,726 $ 6,320 $ 25 ======== ======== ======== ======== ======= ======= ======= ======= </Table> See Notes to Financial Statements. 129 FINANCIAL HIGHLIGHTS <Table> <Caption> MEDIUM-DURATION BOND FUND ------------------------------------------------ RETAIL CLASS ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- -------- ------------ (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.30 $ 9.53 $ 9.70 $ 10.00 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.12 0.29# 0.42# 0.17 Realized and unrealized gain (loss) on investments -- net (0.09) 0.31 0.41 (0.04) ------- ------- ------- ------- Total from investment operations 0.03 0.60 0.83 0.13 ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.12) (0.54) (0.63) (0.23) Distributions from capital gains -- (0.29) (0.37) (0.20) Return of capital -- -- -- --++ ------- ------- ------- ------- Total dividends and distributions (0.12) (0.83) (1.00) (0.43) ------- ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 9.21 $ 9.30 $ 9.53 $ 9.70 ======= ======= ======= ======= Total Return (1) 0.37% 6.33% 8.90% 1.30% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.90% 0.90% 0.90% 0.92% Expenses -- including expense reduction (2) 0.90% 0.90% 0.90% 0.90% Expenses -- before waivers and expense reduction (2) 0.96% 0.96% 1.03% 58.64% Investment income -- net (2) 2.43% 3.03% 4.37% 4.49% Investment income (loss) -- excluding waivers and expense reduction (2) 2.37% 2.97% 4.24% (53.25%) Portfolio turnover rate (1) 200.63% 457.74% 542.94% 247.20% Net Assets -- end of the period (000's) $22,920 $22,640 $19,289 $ 123 ======= ======= ======= ======= </Table> - --------------- * Commencement of operations. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. ++ Amount represents less than $0.01 per share. As a result of recent changes in generally accepted accounting principles, the Medium-Duration Bond Fund has reclassified periodic payments made under interest rate swap agreements, previously included within interest income, as a component of realized gain (loss) in the statement of operations. The effect of this reclassification was to increase the net investment income ratio for the period ending June 30, 2004 by 0.15% and net investment income per share by $0.01. For consistency, similar reclassifications have been made to prior year amounts, resulting in an increase to the net investment income ratio of 0.01%, 0.04% and 0.01% in the fiscal years ending December 31, 2003, 2002 and 2001, respectively, with no change to net investment income per share. See Notes to Financial Statements. 130 <Table> <Caption> MEDIUM-DURATION BOND FUND - ----------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS - -------------------------------------------------------- ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE SIX FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- ----------- ------------ ----------- -------- -------- ------------ (UNAUDITED) (UNAUDITED) $ 13.58 $ 13.54 $ 13.37 $ 13.60 $ 9.24 $ 9.47 $ 9.65 $ 10.00 -------- -------- -------- -------- ------- ------- ------- ------- 0.18 0.46# 0.62# 0.22 0.13 0.28# 0.46# 0.16 (0.12) 0.43 0.57 (0.02) (0.08) 0.36 0.40 (0.08) -------- -------- -------- -------- ------- ------- ------- ------- 0.06 0.89 1.19 0.20 0.05 0.64 0.86 0.08 -------- -------- -------- -------- ------- ------- ------- ------- (0.13) (0.56) (0.65) (0.23) (0.14) (0.58) (0.67) (0.23) -- (0.29) (0.37) (0.20) -- (0.29) (0.37) (0.20) -- -- -- --++ -- -- -- --++ -------- -------- -------- -------- ------- ------- ------- ------- (0.13) (0.85) (1.02) (0.43) (0.14) (0.87) (1.04) (0.43) -------- -------- -------- -------- ------- ------- ------- ------- $ 13.51 $ 13.58 $ 13.54 $ 13.37 $ 9.15 $ 9.24 $ 9.47 $ 9.65 ======== ======== ======== ======== ======= ======= ======= ======= 0.54% 6.62% 9.15% 1.49% 0.55% 6.80% 9.25% 0.89% 0.62% 0.62% 0.63% 0.64% 0.50% 0.50% 0.51% 0.52% 0.62% 0.62% 0.62% 0.62% 0.50% 0.50% 0.50% 0.50% 0.70% 0.71% 0.77% 0.77% 0.53% 0.55% 0.82% 92.28% 2.70% 3.37% 4.62% 4.62% 2.82% 2.96% 4.77% 4.99% 2.62% 3.28% 4.47% 4.47% 2.79% 2.91% 4.45% (86.79%) 200.63% 457.74% 542.94% 247.20% 200.63% 457.74% 542.94% 247.20% $746,881 $741,743 $767,926 $827,774 $47,591 $46,521 $ 7,218 $ 25 ======== ======== ======== ======== ======= ======= ======= ======= </Table> See Notes to Financial Statements. 131 FINANCIAL HIGHLIGHTS <Table> <Caption> EXTENDED-DURATION BOND FUND ------------------------------------------------ RETAIL CLASS ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- -------- ------------ (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.22 $ 9.63 $ 9.83 $ 10.00 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.23 0.52# 0.62 0.32 Realized and unrealized gain (loss) on investments -- net (0.34) 0.50 0.29 (0.13) ------- ------- ------- ------- Total from investment operations (0.11) 1.02 0.91 0.19 ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.29) (0.76) (0.87) (0.32) Distributions from capital gains -- (0.67) (0.24) (0.04) Return of capital -- -- -- -- ------- ------- ------- ------- Total dividends and distributions (0.29) (1.43) (1.11) (0.36) ------- ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 8.82 $ 9.22 $ 9.63 $ 9.83 ======= ======= ======= ======= Total Return (1) (1.22%) 10.95% 9.93% 1.91% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 1.01% 0.93% 0.91% 1.06% Expenses -- including expense reduction (2) 1.01% 0.93% 0.91% 1.05% Expenses -- before waivers and expense reduction (2) 0.96% 0.94% 1.03% 28.96% Investment income -- net (2) 4.79% 5.25% 6.18% 6.14% Investment income (loss) -- excluding waivers and expense reduction (2) 4.84% 5.24% 6.06% (21.77%) Portfolio turnover rate (1) 8.14% 121.20% 45.17% 21.95% Net Assets -- end of the period (000's) $27,230 $27,978 $24,812 $ 8,553 ======= ======= ======= ======= </Table> - --------------- * Commencement of operations. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 132 <Table> <Caption> EXTENDED-DURATION BOND FUND - ----------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS - -------------------------------------------------------- ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD SIX MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- ----------- ------------ ----------- -------- -------- ------------ (UNAUDITED) (UNAUDITED) $ 14.78 $ 14.62 $ 14.37 $ 14.38 $ 9.23 $ 9.64 $ 9.84 $ 10.00 -------- -------- -------- -------- ------- ------- ------ ------- 0.37 0.83# 0.90 0.32 0.26 0.54# 0.65 0.24 (0.53) 0.77 0.47 0.03 (0.36) 0.51 0.29 (0.03) -------- -------- -------- -------- ------- ------- ------ ------- (0.16) 1.60 1.37 0.35 (0.10) 1.05 0.94 0.21 -------- -------- -------- -------- ------- ------- ------ ------- (0.30) (0.77) (0.88) (0.32) (0.31) (0.79) (0.90) (0.33) -- (0.67) (0.24) (0.04) -- (0.67) (0.24) (0.04) -- -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------ ------- (0.30) (1.44) (1.12) (0.36) (0.31) (1.46) (1.14) (0.37) -------- -------- -------- -------- ------- ------- ------ ------- $ 14.32 $ 14.78 $ 14.62 $ 14.37 $ 8.82 $ 9.23 $ 9.64 $ 9.84 ======== ======== ======== ======== ======= ======= ====== ======= (1.13%) 11.19% 10.03% 2.48% (1.17%) 11.32% 10.27% 2.13% 0.73% 0.73% 0.73% 0.74% 0.59% 0.59% 0.64% 0.66% 0.73% 0.73% 0.73% 0.73% 0.59% 0.59% 0.64% 0.65% 0.75% 0.75% 0.82% 0.84% 0.58% 0.60% 0.88% 90.75% 5.06% 5.46% 6.29% 6.32% 5.21% 5.49% 6.47% 6.62% 5.04% 5.44% 6.20% 6.21% 5.22% 5.48% 6.23% (83.48%) 8.14% 121.20% 45.17% 21.95% 8.14% 121.20% 45.17% 21.95% $376,219 $385,110 $401,198 $404,278 $29,382 $29,004 $6,506 $ 26 ======== ======== ======== ======== ======= ======= ====== ======= </Table> See Notes to Financial Statements. 133 FINANCIAL HIGHLIGHTS <Table> <Caption> EQUITY INDEX FUND ------------------------------------------------ RETAIL CLASS ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- -------- ------------ (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.14 $ 7.26 $ 9.63 $ 10.00 -------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.05 0.10# 0.13 0.02 Realized and unrealized gain (loss) on investments -- net 0.25 1.93 (2.31) (0.28) -------- -------- -------- ------- Total from investment operations 0.30 2.03 (2.18) (0.26) -------- -------- -------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.05) (0.15) (0.16) (0.06) Distributions from capital gains -- -- (0.03) (0.05) Return of capital -- -- -- -- -------- -------- -------- ------- Total dividends and distributions (0.05) (0.15) (0.19) (0.11) -------- -------- -------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 9.39 $ 9.14 $ 7.26 $ 9.63 ======== ======== ======== ======= TOTAL RETURN (1) 3.33% 28.09% (22.71%) (2.65%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.45% 0.45% 0.45% 0.45% Expenses -- including expense reduction (2) 0.45% 0.45% 0.45% 0.45% Expenses -- before waivers and expense reduction (2) 0.69% 0.73% 0.81% 28.52% Investment income -- net (2) 1.15% 1.28% 1.21% 0.95% Investment income (loss) -- excluding waivers and expense reduction (2) 0.91% 1.00% 0.85% (27.12%) Portfolio turnover rate (1) 1.05% 1.87% 3.17% 2.81% Net Assets -- end of the period (000's) $ 18,508 $ 17,395 $ 12,890 $ 367 ======== ======== ======== ======= </Table> - --------------- * Commencement of operations. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 134 <Table> <Caption> EQUITY INDEX FUND ----------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS -------------------------------------------------- ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD SIX MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ---------- --------- --------- ------------ ----------- -------- -------- ------------ (UNAUDITED) (UNAUDITED) $ 15.12 $ 11.93 $ 15.64 $ 16.15 $ 9.08 $ 7.22 $ 9.58 $ 10.00 --------- --------- --------- --------- -------- -------- -------- -------- 0.09 0.18# 0.17 0.05 0.06 0.12# 0.14 0.03 0.43 3.16 (3.69) (0.46) 0.26 1.91 (2.29) (0.34) --------- --------- --------- --------- -------- -------- -------- -------- 0.52 3.34 (3.52) (0.41) 0.32 2.03 (2.15) (0.31) --------- --------- --------- --------- -------- -------- -------- -------- (0.05) (0.15) (0.16) (0.05) (0.06) (0.17) (0.18) (0.06) -- -- (0.03) (0.05) -- -- (0.03) (0.05) -- -- -- -- -- -- -- -- --------- --------- --------- --------- -------- -------- -------- -------- (0.05) (0.15) (0.19) (0.10) (0.06) (0.17) (0.21) (0.11) --------- --------- --------- --------- -------- -------- -------- -------- $ 15.59 $ 15.12 $ 11.93 $ 15.64 $ 9.34 $ 9.08 $ 7.22 $ 9.58 ========= ========= ========= ========= ======== ======== ======== ======== 3.45% 28.03% (22.59%) (2.55%) 3.56% 28.19% (22.57%) (3.14%) 0.40% 0.40% 0.40% 0.40% 0.25% 0.25% 0.25% 0.25% 0.40% 0.40% 0.40% 0.40% 0.25% 0.25% 0.25% 0.25% 0.39% 0.44% 0.51% 0.53% 0.22% 0.28% 0.60% 86.25% 1.20% 1.33% 1.21% 0.98% 1.35% 1.46% 1.40% 1.19% 1.21% 1.29% 1.10% 0.85% 1.38% 1.43% 1.05% (84.81%) 1.05% 1.87% 3.17% 2.81% 1.05% 1.87% 3.17% 2.81% $ 394,899 $ 382,067 $ 295,261 $ 401,471 $ 33,603 $ 33,009 $ 4,737 $ 28 ========= ========= ========= ========= ======== ======== ======== ======== </Table> See Notes to Financial Statements. 135 FINANCIAL HIGHLIGHTS <Table> <Caption> VALUE EQUITY FUND ------------------------------------------------ RETAIL CLASS ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ----------- -------- -------- ------------ (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.90 $ 7.75 $ 9.61 $ 10.00 -------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.07 0.11# 0.15 0.03 Realized and unrealized gain (loss) on investments -- net 0.48 2.23 (1.82) (0.35) -------- -------- -------- ------- Total from investment operations 0.55 2.34 (1.67) (0.32) -------- -------- -------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.07) (0.19) (0.19) (0.07) Distributions from capital gains -- -- -- -- Return of capital -- -- --+ -- -------- -------- -------- ------- Total dividends and distributions (0.07) (0.19) (0.19) (0.07) -------- -------- -------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 10.38 $ 9.90 $ 7.75 $ 9.61 ======== ======== ======== ======= TOTAL RETURN (1) 5.53% 30.46% (17.48%) (3.23%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 1.15% 1.15% 1.15% 1.15% Expenses -- including expense reduction (2) 1.14% 1.13% 1.11% 1.15% Expenses -- before waivers and expense reduction (2) 1.19% 1.20% 1.29% 65.50% Investment income -- net (2) 1.08% 1.33% 1.38% 1.12% Investment income (loss) -- excluding waivers and expense reduction (2) 1.03% 1.26% 1.20% (63.23%) Portfolio turnover rate (1) 31.19% 53.74% 70.42% 21.09% Net Assets -- end of the period (000's) $ 22,426 $ 19,680 $ 13,987 $ 168 ======== ======== ======== ======= </Table> - --------------- * Commencement of operations. + Amount represents less than $0.01 per share. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 136 <Table> <Caption> VALUE EQUITY FUND ------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS ---------------------------------------------------- ------------------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE SIX MONTHS YEAR YEAR PERIOD SIX MONTHS YEAR YEAR PERIOD ENDED ENDED ENDED 08/27/01* TO ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ---------- ----------- --------- ------------ ----------- -------- -------- ------------ (UNAUDITED) (UNAUDITED) $ 15.28 $ 11.85 $ 14.57 $ 15.21 $ 9.94 $ 7.77 $ 9.64 $ 10.00 ----------- ----------- --------- ----------- -------- -------- -------- -------- 0.10 0.21# 0.21 0.06 0.08 0.14# 0.16 0.06 0.76 3.43 (2.73) (0.64) 0.49 2.26 (1.80) (0.35) ----------- ----------- --------- ----------- -------- -------- -------- -------- 0.86 3.64 (2.52) (0.58) 0.57 2.40 (1.64) (0.29) ----------- ----------- --------- ----------- -------- -------- -------- -------- (0.07) (0.21) (0.20) (0.06) (0.09) (0.23) (0.23) (0.07) -- -- -- -- -- -- -- -- -- -- --+ -- -- -- --+ -- ----------- ----------- --------- ----------- -------- -------- -------- -------- (0.07) (0.21) (0.20) (0.06) (0.09) (0.23) (0.23) (0.07) ----------- ----------- --------- ----------- -------- -------- -------- -------- $ 16.07 $ 15.28 $ 11.85 $ 14.57 $ 10.42 $ 9.94 $ 7.77 $ 9.64 =========== =========== ========= =========== ======== ======== ======== ======== 5.66% 30.84% (17.37%) (3.79%) 5.69% 31.09% (17.22%) (2.88%) 0.90% 0.90% 0.90% 0.90% 0.76% 0.76% 0.76% 0.76% 0.89% 0.88% 0.87% 0.90% 0.75% 0.75% 0.72% 0.76% 0.92% 0.94% 0.98% 1.00% 0.74% 0.78% 1.06% 81.37% 1.32% 1.59% 1.57% 1.29% 1.47% 1.62% 1.77% 1.60% 1.29% 1.53% 1.46% 1.19% 1.48% 1.59% 1.43% (79.01%) 31.19% 53.74% 70.42% 21.09% 31.19% 53.74% 70.42% 21.09% $ 1,204,132 $ 1,152,116 $ 938,583 $ 1,159,209 $ 75,452 $ 69,991 $ 5,265 $ 77 =========== =========== ========= =========== ======== ======== ======== ======== </Table> See Notes to Financial Statements. 137 FINANCIAL HIGHLIGHTS <Table> <Caption> GROWTH EQUITY FUND -------------------------------------------------------------- RETAIL CLASS -------------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.08 $ 7.03 $ 9.81 $ 10.00 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.03) (0.02) (0.02) --+ Realized and unrealized gain (loss) on investments -- net 0.51 2.07 (2.76) (0.19) Net increase from payments by affiliates and net gains (losses) realized on the disposal of investments in violation of restrictions (See Footnote 9) -- -- -- -- ------- ------- ------- ------- Total from investment operations 0.48 2.05 (2.78) (0.19) ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -- -- -- -- Distributions from capital gains -- -- -- -- ------- ------- ------- ------- Total dividends and distributions -- -- -- -- ------- ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 9.56 $ 9.08 $ 7.03 $ 9.81 ======= ======= ======= ======= TOTAL RETURN (1)(3) 5.29% 29.16% (28.34%) (1.90%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 1.24% 1.17% 1.15% 1.15% Expenses -- including expense reduction (2) 1.24% 1.15% 1.12% 1.15% Expenses -- before waivers and expense reduction (2) 1.41% 1.33% 1.36% 47.77% Investment income (loss) -- net (2) (0.54%) (0.33%) (0.28%) (0.32%) Investment income (loss) -- excluding waivers and expense reduction (2) (0.71%) (0.51%) (0.52%) (46.94%) Portfolio turnover rate (1) 26.05% 77.02% 41.41% 8.71% Net Assets -- end of the period (000's) $19,771 $18,099 $12,503 $ 309 ======= ======= ======= ======= </Table> - --------------- * Commencement of operations. + Amount represents less than $0.01 per share. (1) Non-annualized. (2) Annualized. (3) In 2004, one of the Growth Equity Fund's sub-advisers fully reimbursed the fund for a loss on a transaction not meeting the fund's investment guidelines, which otherwise would have reduced total return by 0.04% for each class of shares. (See Footnote 9) See Notes to Financial Statements. 138 <Table> <Caption> GROWTH EQUITY FUND ------------------------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS ----------------------------------------------------------- ----------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- ------------ ------------ ------------ -------------- (UNAUDITED) (UNAUDITED) $ 14.55 $ 11.23 $ 15.63 $ 15.93 $ 9.16 $ 7.07 $ 9.83 $ 10.00 ---------- ---------- ---------- ---------- ------- ------- ------ ------- (0.02) (0.01) (0.01) (0.01) (0.01) (0.01) 0.01 --+ 0.81 3.33 (4.39) (0.29) 0.51 2.10 (2.77) (0.17) -- -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ------- ------- ------ ------- 0.79 3.32 (4.40) (0.30) 0.50 2.09 (2.76) (0.17) ---------- ---------- ---------- ---------- ------- ------- ------ ------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ------- ------- ------ ------- -- -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ------- ------- ------ ------- $ 15.34 $ 14.55 $ 11.23 $ 15.63 $ 9.66 $ 9.16 $ 7.07 $ 9.83 ========== ========== ========== ========== ======= ======= ====== ======= 5.43% 29.56% (28.15%) (1.88%) 5.46% 29.56% (28.08%) (1.70%) 0.99% 0.92% 0.90% 0.90% 0.87% 0.81% 0.78% 0.78% 0.99% 0.90% 0.88% 0.90% 0.87% 0.79% 0.75% 0.78% 1.07% 1.01% 1.02% 1.05% 0.89% 0.85% 1.14% 83.19% (0.29%) (0.07%) (0.05%) (0.11%) (0.17%) (0.03%) 0.09% 0.02% (0.37%) (0.18%) (0.19%) (0.26%) (0.19%) (0.09%) (0.30%) (82.39%) 26.05% 77.02% 41.41% 8.71% 26.05% 77.02% 41.41% 8.71% $1,346,065 $1,285,223 $1,049,709 $1,354,301 $84,141 $79,547 $4,553 $ 29 ========== ========== ========== ========== ======= ======= ====== ======= </Table> See Notes to Financial Statements. 139 FINANCIAL HIGHLIGHTS <Table> <Caption> SMALL CAP EQUITY FUND -------------------------------------------------------------- RETAIL CLASS -------------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 11.41 $ 7.83 $ 10.09 $ 10.00 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment loss (0.03) (0.04) (0.04) --+ Realized and unrealized gain (loss) on investments -- net 0.57 3.62 (2.22) 0.09 ------- ------- ------- ------- Total from investment operations 0.54 3.58 (2.26) 0.09 ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -- -- -- -- Distributions from capital gains -- -- -- -- ------- ------- ------- ------- Total dividends and distributions -- -- -- -- ------- ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 11.95 $ 11.41 $ 7.83 $ 10.09 ======= ======= ======= ======= TOTAL RETURN (1) 4.73% 45.72% (22.40%) 0.90% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 1.49% 1.50% 1.50% 1.50% Expenses -- including expense reduction (2) 1.47% 1.44% 1.43% 1.50% Expenses -- before waivers and expense reduction (2) 1.66% 1.70% 1.82% 123.38% Investment income -- net (2) (0.47%) (0.59%) (0.44%) (0.28%) Investment income (loss) -- excluding waivers and expense reduction (2) (0.66%) (0.85%) (0.83%) (122.16%) Portfolio turnover rate (1) 79.43% 130.80% 160.46% 91.89% Net Assets -- end of the period (000's) $24,919 $22,520 $12,878 $ 115 ======= ======= ======= ======= </Table> - --------------- * Commencement of operations. + Amount represents less than $0.01 per share. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 140 <Table> <Caption> SMALL CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS ----------------------------------------------------------- ----------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- ------------ ------------ ------------ -------------- (UNAUDITED) (UNAUDITED) $ 14.99 $ 10.25 $ 13.18 $ 13.07 $ 11.52 $ 7.88 $10.12 $ 10.00 -------- -------- -------- -------- ------- ------- ------ ------- (0.02) (0.04) (0.02) (0.01) (0.01) (0.03) (0.01) --+ 0.74 4.78 (2.91) 0.12 0.57 3.67 (2.23) 0.12 -------- -------- -------- -------- ------- ------- ------ ------- 0.72 4.74 (2.93) 0.11 0.56 3.64 (2.24) 0.12 -------- -------- -------- -------- ------- ------- ------ ------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------ ------- -- -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------ ------- $ 15.71 $ 14.99 $ 10.25 $ 13.18 $ 12.08 $ 11.52 $ 7.88 $ 10.12 ======== ======== ======== ======== ======= ======= ====== ======= 4.80% 46.24% (22.23%) 0.84% 4.86% 46.19% (22.13%) 1.20% 1.24% 1.25% 1.25% 1.25% 1.17% 1.18% 1.18% 1.18% 1.22% 1.19% 1.19% 1.25% 1.15% 1.12% 1.11% 1.18% 1.38% 1.43% 1.51% 1.52% 1.22% 1.27% 1.60% 76.30% (0.22%) (0.34%) (0.19%) (0.13%) (0.15%) (0.26%) (0.12%) 0.12% (0.38%) (0.58%) (0.51%) (0.40%) (0.22%) (0.41%) (0.61%) (75.00%) 79.43% 130.80% 160.46% 91.89% 79.43% 130.80% 160.46% 91.89% $390,541 $357,703 $232,992 $321,743 $26,346 $25,415 $4,869 $ 81 ======== ======== ======== ======== ======= ======= ====== ======= </Table> See Notes to Financial Statements. 141 FINANCIAL HIGHLIGHTS <Table> <Caption> INTERNATIONAL EQUITY FUND -------------------------------------------------------------- RETAIL CLASS -------------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- (UNAUDITED) PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 10.95 $ 8.19 $ 9.43 $ 10.00 ------- ------- ------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.09 0.10# 0.06 (0.01)# Realized and unrealized gain (loss) on investments -- net 0.28 2.80 (1.21) (0.53) ------- ------- ------- --------- Total from investment operations 0.37 2.90 (1.15) (0.54) ------- ------- ------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -- (0.14) (0.09) (0.03) Distributions from capital gains -- -- -- -- Return of capital -- -- --+ -- ------- ------- ------- --------- Total dividends and distributions -- (0.14) (0.09) (0.03) ------- ------- ------- --------- NET ASSET VALUE -- END OF THE PERIOD $ 11.32 $ 10.95 $ 8.19 $ 9.43 ======= ======= ======= ========= TOTAL RETURN (1) 3.38% 35.47% (12.18%) (5.40%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 1.33% 1.36% 1.37% 1.45% Expenses -- including expense reduction (2) 1.31% 1.34% 1.34% 1.45% Expenses -- before waivers and expense reduction (2) 1.54% 1.50% 1.64% 256.83% Investment income -- net (2) 1.52% 1.14% 0.88% (0.32%) Investment income (loss) -- excluding waivers and expense reduction (2) 1.29% 0.98% 0.58% (255.70%) Portfolio turnover rate (1) 20.57% 33.24% 30.13% 20.05% Net Assets -- end of the period (000's) $22,151 $20,434 $14,078 $ 51 ======= ======= ======= ========= </Table> - --------------- * Commencement of operations. + Amount represents less than $0.01 per share. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 142 <Table> <Caption> INTERNATIONAL EQUITY FUND ------------------------------------------------------------------------------------------------------------------------- RETIREMENT CLASS INSTITUTIONAL CLASS ----------------------------------------------------------- ----------------------------------------------------------- FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD MONTHS ENDED ENDED ENDED 08/27/01* TO MONTHS ENDED ENDED ENDED 08/27/01* TO 06/30/04 12/31/03 12/31/02 12/31/01 06/30/04 12/31/03 12/31/02 12/31/01 ------------ ------------ ------------ -------------- ------------ ------------ ------------ -------------- (UNAUDITED) (UNAUDITED) $ 12.96 $ 9.66 $ 11.09 $ 11.66 $ 11.06 $ 8.26 $ 9.50 $ 10.00 -------- -------- -------- -------- ------- ------- ------ ------- 0.11 0.15# 0.11 0.01 0.10 0.08# 0.11 --+ 0.34 3.31 (1.43) (0.55) 0.29 2.90 (1.22) (0.47) -------- -------- -------- -------- ------- ------- ------ ------- 0.45 3.46 (1.32) (0.54) 0.39 2.98 (1.11) (0.47) -------- -------- -------- -------- ------- ------- ------ ------- -- (0.16) (0.11) (0.03) -- (0.18) (0.13) (0.03) -- -- -- -- -- -- -- -- -- -- --+ -- -- -- --+ -- -------- -------- -------- -------- ------- ------- ------ ------- -- (0.16) (0.11) (0.03) -- (0.18) (0.13) (0.03) -------- -------- -------- -------- ------- ------- ------ ------- $ 13.41 $ 12.96 $ 9.66 $ 11.09 $ 11.45 $ 11.06 $ 8.26 $ 9.50 ======== ======== ======== ======== ======= ======= ====== ======= 3.47% 35.81% (11.94%) (4.61%) 3.53% 36.06% (11.72%) (4.69%) 1.15% 1.15% 1.15% 1.15% 0.97% 0.97% 0.96% 0.96% 1.13% 1.13% 1.12% 1.15% 0.95% 0.95% 0.93% 0.96% 1.29% 1.31% 1.35% 1.37% 1.11% 1.14% 1.43% 88.97% 1.69% 1.39% 1.00% 0.28% 1.87% 0.86% 1.29% 0.11% 1.53% 1.21% 0.77% 0.06% 1.71% 0.67% 0.79% (87.90%) 20.57% 33.24% 30.13% 20.05% 20.57% 33.24% 30.13% 20.05% $952,643 $920,664 $698,704 $795,363 $52,232 $50,390 $5,416 $ 27 ======== ======== ======== ======== ======= ======= ====== ======= </Table> See Notes to Financial Statements. 143 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF THE FUNDS AB Funds Trust (the "Trust") was organized as a Delaware business trust on March 2, 2000. The Trust has established seventeen series (each a "Fund" and together, the "Funds"). Each Fund is a diversified, open-end management investment company and registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The Flexible Income Fund, Growth & Income Fund, Capital Opportunities Fund and Global Equity Fund are each referred to as a "Blended Fund" and together are referred to as the "Blended Funds." The Flexible Income Fund I, Growth & Income Fund I, Capital Opportunities Fund I and Global Equity Fund I are each referred to as an "Institutional Blended Fund" and together are referred to as the "Institutional Blended Funds." The remaining Funds are each referred to as a "Select Fund" and are together referred to as the "Select Funds." The Low- Duration Bond Fund, Medium-Duration Bond Fund and Extended-Duration Bond Fund are together referred to as the "Bond Funds." The Equity Index Fund, Value Equity Fund, Growth Equity Fund, Small Cap Equity Fund, and International Equity Fund are together referred to as the "Equity Funds." The Money Market Fund is referred to as the "Money Market Fund." There are three classes of shares issued by the Trust -- the Retail Class, Retirement Class and Institutional Class. The Blended Funds consist of a Retail Class and Retirement Class. The Institutional Blended Funds consist of an Institutional Class only. The Select Funds consist of a Retail Class, a Retirement Class and an Institutional Class. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee (class specific expense) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Each Fund is a separate mutual fund with its own investment objective, strategies and risks. The Select Funds invest directly in particular types of fixed income obligations, stocks and other investments. The Blended Funds and Institutional Blended Funds primarily invest in a different mix of the Select Funds to meet a specified investment strategy. The Blended Funds and Institutional Blended Funds are commonly referred to as "Fund of Funds". 2. SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are in conformity with generally accepted accounting principles in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. a. VALUATION OF SECURITIES The Funds (except the Money Market Fund) each value securities traded on national securities exchanges or included in national market systems at the last quoted sale price, or official close price, on the principal exchange on which they were traded, or, in the absence of any sale, or official close price, at the closing bid price. Securities which are primarily traded on foreign exchanges are generally valued at the closing values of such securities on their respective exchanges, except that when an occurrence subsequent to the time when the foreign security is valued is likely to have changed such value, then the fair value of those securities will be determined through procedures established by or under the direction of the Board of Trustees. Non-exchange traded securities for which an over-the-counter quotation is readily available are valued at the last quoted bid price. Debt securities, excluding asset-backed and mortgage-backed securities, are valued at the mean of the last bid and asked prices available. Asset-backed and mortgage-backed securities are valued at the last bid price. Options and warrants for which the primary market is a national securities exchange are valued at the last sale price on the exchange on which they are traded, or, in the absence of any sale, at the closing bid price. Options and warrants not traded on a national securities exchange are valued at the last 144 quoted bid price. Short-term securities maturing in more than 60 days from the valuation date are valued at the mean of the last bid and asked prices; those maturing in 60 days or less are valued at amortized cost. Futures contracts are valued at the closing settlement price on the exchange on which they are primarily traded. Forward foreign exchange contracts are valued based upon closing exchange rates from each respective foreign market. Swap agreements are valued daily based upon the terms specific to each agreement with its counterparty. To the extent available, valuations of portfolio securities are provided by independent pricing services approved by the Board of Trustees. Debt securities are valued on the basis of broker quotations or valuations provided by a pricing service which may use a matrix, formula or other objective method that takes into consideration market indices, matrices, yield curves and other specific adjustments. Certain fixed income securities are valued by the sub- adviser using various methodologies. Securities for which market quotations are not readily available are valued at fair value according to methods established in good faith by the Board of Trustees. The Money Market Fund uses the amortized cost method to determine the value of its portfolio securities, which approximates market value. The Blended Funds and Institutional Blended Funds value their investments in the underlying Select Funds daily at the closing net asset value of each respective Select Fund. b. REPURCHASE AGREEMENTS Each Fund may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at a mutually agreed upon date and price. It is the Fund's policy that repurchase agreements are fully collateralized by U.S. Treasury and Government Agency securities. All collateral is held by the Fund's custodian bank or a bank with which the custodian bank has entered into a subcustodian agreement, or is segregated in the Federal Reserve Book Entry System. In connection with transactions in repurchase agreements, if the seller defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. c. DERIVATIVE FINANCIAL INSTRUMENTS The Funds may engage in various portfolio strategies to seek to increase its return by hedging its portfolio against adverse movements in the equity, debt and currency markets. Losses may arise due to changes in the value of the contract if the counterparty does not perform under the contract. The Funds, in their normal course of business, may enter into contracts that contain a variety of representations and warranties, and which provide general indemnifications. The Funds' exposure may include future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. FINANCIAL FUTURES CONTRACTS -- The Funds (except the Money Market Fund) may purchase or sell financial futures contracts and the options on such futures contracts for the purpose of hedging risk on existing securities, the intended purchase of securities or to gain market exposure on cash balances. Financial futures contracts are contracts for the delivery of securities at a specified future date at an agreed upon price or yield. Upon entering into a contract, the Funds deposit and maintain as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Funds agree to pay to or receive from the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such payments or receipts are known as variation margin and are recorded by the Funds as unrealized gains or losses until the contract is closed or settled. Risks of entering into futures contracts include the possibility that there will be an imperfect price correlation between the futures and the underlying securities. Second, it is possible that a lack of liquidity for futures contracts could exist in the secondary market, resulting in an inability to close a futures position prior to its maturity date. Third, the purchase of a futures contract involves the risk that a fund could lose more than the original margin deposit required to initiate a futures transaction. 145 OPTIONS -- Certain Funds are authorized to write and purchase put and call options. The risk in writing a call option is that the Funds give up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Funds may incur a loss if the market price of the security decreases and the option is exercised. The risk in purchasing an option is that the Funds pay a premium whether or not the option is exercised. The Funds also have the additional risk of being unable to enter into a closing transaction at an acceptable price if a liquid secondary market does not exist. The Funds also may write over-the-counter options where completing the obligation depends upon the credit standing of the other party and this party's ability to perform. Option contracts also involve the risk that they may not work as intended due to unanticipated developments in market conditions or other causes. Options purchased are recorded as an asset and written options are recorded as liabilities to the extent of premiums paid or received. Each Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of the premium received or paid. Certain Funds may write swaption contracts to manage exposure to fluctuations in interest rates and to enhance portfolio yield. Swaption contracts written by the Funds represent an option that gives the purchaser the right, but not the obligation, to enter into a previously agreed upon swap contract on a future date. If a written call swaption is exercised, the writer will enter a swap and is obligated to pay the fixed rate and receive a floating rate in exchange. If a written put swaption is exercised, .the writer will enter a swap and is obligated to pay the floating rate and receive a fixed rate in exchange. Swaptions are marked to market daily based upon quotations from market makers. When a Fund writes a swaption, the premium received is recorded as a liability and is subsequently adjusted to the current market value of the swaption. Entering into a swaption contract involves, to varying degrees, the elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities, associated with both option contracts and swap contracts. The Funds bear the market risk arising from any change in index values or interest rates. FORWARD FOREIGN EXCHANGE CONTRACTS -- Certain Funds may enter into forward foreign currency exchange contracts to hedge against adverse exchange rate fluctuation to the U.S. dollar or between different foreign currencies in connection with either specific security transactions or portfolio positions. Each contract is valued daily and the change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the opening value and the closing value of the contract. The Funds could be exposed to risk if the counterparties to the contracts are unable to meet the terms of the contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. FOREIGN CURRENCY OPTIONS AND FUTURES -- The International Equity Fund and the Bond Funds may also enter into futures contracts on foreign currencies and related options on transactions as a short or long hedge against possible variations in foreign exchange rates. TBAS -- The Bond Funds may enter into "TBA" (to be announced) purchase commitments to purchase securities for a fixed price at a future date, typically not exceeding 45 days. TBAs may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date. This risk is in addition to the risk of decline in each Fund's other assets. Unsettled TBAs are valued at the current market value of the underlying securities, according to the procedures described under "Valuation of Securities" above. 146 SWAP AGREEMENTS -- Each Select Fund may enter into swap agreements. The Equity Funds may enter into equity swap contracts, the Bond Funds may enter into interest rate and credit default swaps, the International Equity and Bond Funds may enter into currency swaps and each Select Fund may enter into total return swaps. Swap agreements are the exchange of one security or asset for another. A swap may be entered into in order to, among other things, change the maturity of a fund's portfolio, to protect a fund's value from changes in interest rates, to expose a fund to a different security or market, or to help a fund achieve a strategy relative to an index or other benchmark. By entering into a swap agreement, a fund is exposed to the risk of unanticipated movements in interest rates or in the value of an underlying security or index, or that the counterparty will not fulfill its obligation under the agreement. Credit default swaps involve the payment of amounts based on a specified rate multiplied by a notional amount as well as upon an event of default. In connection with these agreements, securities may be set aside as collateral by the Fund's custodian. d. FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. e. FEDERAL INCOME TAXES Each Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Each Fund is treated as a separate entity for federal income tax purposes. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Funds. f. DIVIDENDS TO SHAREHOLDERS The Money Market Fund declares a dividend daily and payable monthly equal to its net investment income for that day. The Bond Funds declare and pay dividends from net investment income monthly. The Equity Index Fund, Value Equity Fund and Growth Equity Fund declare and pay dividends from net investment income semi-annually. The Small Cap Equity Fund, International Equity Fund, the Blended Funds and the Institutional Blended Funds declare and pay dividends from net investment income annually. The Funds declare and pay distributions from capital gains, if available, annually. Distributions to shareholders are recorded on the ex-dividend date. g. SECURITY TRANSACTIONS, INCOME AND REALIZED GAINS AND LOSSES Security transactions are accounted for on the date securities are purchased or sold (the trade date). Dividend income is recognized on the ex-dividend date and interest income is accrued daily, including the amortization of market premium and the accretion of market discount. Realized gains and losses from security transactions are identified on an identified cost basis. 147 h. EXPENSES Expenses arising in connection with a Fund are charged directly to that Fund. Expenses common to all Funds of the Trust are generally allocated to each Fund in proportion to their relative net assets. Each class of shares bears its pro-rata portion of expenses attributable to its class, except that each class separately bears expenses related specifically to that class, such as printing, transfer agent, service and distribution fees. 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES a. INVESTMENT ADVISORY FEES Pursuant to a separate investment advisory agreement, SBC Financial Services, Inc. ("SBCFS" or "Investment Advisor") acts as the Investment Advisor to the Funds. As Investment Advisor it supervises the investments of the Funds and for such services is paid a fee. SBCFS and the Trust have entered into sub-advisory agreements with various sub-advisers to manage each Select Fund's investments. Under the general supervision of SBCFS, the sub-advisers make the day-to-day investment decisions for the Select Funds and for such services each sub-adviser receives a fee from the Funds. The advisory fees paid to SBCFS and aggregate sub-advisory fees paid to the sub-advisers, listed at the end of this report, are computed daily based upon the net assets of each Fund. The actual advisory and sub-advisory fees accrued during the period ended June 30, 2004, based upon average daily net assets, were as follows: <Table> <Caption> FUND ADVISORY FEES SUB-ADVISER FEES - ---- ------------- ---------------- Flexible Income .10% -- Growth & Income .10% -- Capital Opportunities .10% -- Global Equity .10% -- Flexible Income I .10% -- Growth & Income I .10% -- Capital Opportunities I .10% -- Global Equity I .10% -- Money Market .14% .07% Low-Duration Bond .20% .21% Medium-Duration Bond .23% .21% Extended-Duration Bond .27% .22% Equity Index .14% (.02%)* </Table> <Table> <Caption> FUND ADVISORY FEES SUB-ADVISER FEES - ---- ------------- ---------------- Value Equity .43% .24% Growth Equity .48% .35% Small Cap Equity .30% .78% International Equity .47% .50% </Table> * Ratio is negative due to a prior period overaccrual. This had no effect on the Fund's net asset value. For the period ended June 30, 2004, advisory fees and waivers for each Fund were as follows: <Table> <Caption> GROSS NET ADVISORY ADVISORY FEE WAIVERS FEE ------------ --------- ------------ Flexible Income $ 139,322 $ (49,136) $ 90,186 Growth & Income 581,032 10,116 591,148 Capital Opportunities 465,566 (3,133) 462,433 Global Equity 421,673 (13,558) 408,115 Flexible Income I 14,485 (25,919) (11,434) Growth & Income I 50,844 (18,643) 32,201 Capital Opportunities I 30,090 (25,896) 4,194 Global Equity I 13,477 (27,342) (13,865) Money Market 623,669 4,512 628,181 Low-Duration Bond 802,361 (220,976) 581,385 Medium-Duration Bond 936,151 (342,839) 593,312 Extended-Duration Bond 591,953 (28,587) 563,366 Equity Index 305,785 8,364 314,149 Value Equity 2,739,430 (105,741) 2,633,689 Growth Equity 3,388,348 (548,798) 2,839,550 Small Cap Equity 648,674 (291,545) 357,129 International Equity 2,376,411 (710,075) 1,666,336 </Table> b. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Board of Trustees has adopted Shareholder Service Plans for the Retirement and Retail Class of each Select Fund ("Service Plans") and a separate Plan of Distribution for the Retail Class of each Select Fund and Blended Fund pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan"). Under the Service Plans, the Retail Class and Retirement Class of each Select Fund are authorized to pay fees to parties that provide services for and maintain shareholder accounts. The Retail Class and the Retirement Class of each Select Fund are authorized to pay service fees of 0.15% and 0.19% of average daily net assets, respectively. Under the 12b-1 Plan, the assets of each Select Fund and Blended Fund may be used to 148 compensate the Annuity Board of the Southern Baptist Convention, the Distributor or others for certain expenses relating to the distribution of shares of the Funds to investors. Under the 12b-1 Plan, the maximum amount payable as a percentage of average daily net assets on an annual basis is 0.10% by the Retail Class of each Select Fund and 0.06% by the Retail Class of each Blended Fund. c. EXPENSE LIMITATION SBCFS has agreed, through April 30, 2005, to waive fees and reimburse expenses of the Retail Class, Retirement Class and the Institutional Class of each Fund (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, the annual percentage rate of each class's average daily net assets as follows: <Table> <Caption> RETAIL RETIREMENT INSTITUTIONAL FUND CLASS CLASS CLASS - ---- ------ ---------- ------------- Flexible Income .35% .13% -- Growth & Income .45% .13% -- Capital Opportunities .55% .13% -- Global Equity .42% .13% -- Flexible Income I -- -- .17% Growth & Income I -- -- .17% Capital Opportunities I -- -- .17% Global Equity I -- -- .17% Money Market .72% .46% .27% Low-Duration Bond .85% .61% .45% Medium-Duration Bond .90% .62% .50% Extended-Duration Bond 1.05% .73% .65% Equity Index .45% .40% .25% Value Equity 1.15% .90% .76% Growth Equity 1.24% .99% .87% Small Cap Equity 1.50% 1.25% 1.18% International Equity 1.35% 1.15% .97% </Table> Each Fund in turn agrees to reimburse SBCFS for any operating expenses in excess of the expense limitation paid, waived or assumed by SBCFS for that Fund during the limitation period, provided SBCFS would not be entitled to reimbursement for any amount that would cause operating expenses to exceed the expense limitation during the year in which the reimbursement would be made, and provided further that no amount will be reimbursed by the Fund more than three years after the year in which it was incurred or waived by SBCFS. At June 30, 2004, the amounts subject to possible future reimbursement under the expense limitation agreement are as follows: <Table> <Caption> RETAIL RETIREMENT INSTITUTIONAL CLASS CLASS CLASS ------- ---------- ------------- Flexible Income $36,593 $ 278,319 NA Growth & Income 31,631 16,183 NA Capital Opportunities 24,346 108,197 NA Global Equity 23,304 151,021 NA Flexible Income I NA NA $60,358 Growth & Income I NA NA 55,663 Capital Opportunities I NA NA 63,268 Global Equity I NA NA 64,155 Money Market 46,688 63,724 10,427 Low-Duration Bond 25,989 1,110,971 28,729 Medium-Duration Bond 19,464 1,660,659 16,879 Extended-Duration Bond -- 258,815 -- Equity Index 94,544 284,403 3,615 Value Equity 21,493 852,775 -- Growth Equity 58,027 2,903,119 24,183 Small Cap Equity 76,427 1,345,297 27,249 International Equity 68,716 3,407,394 91,574 </Table> During the period ended June 30, 2004, SBCFS received the following reimbursements: <Table> <Caption> RETAIL RETIREMENT INSTITUTIONAL CLASS CLASS CLASS ------ ---------- ------------- Growth & Income -- $15,310 NA Money Market -- 21,554 -- Extended-Duration Bond $7,767 -- $1,371 Equity Index -- 34,918 6,279 Value Equity -- -- 8,328 </Table> D. BROKERAGE SERVICE AND OTHER ARRANGEMENTS The Investment Advisor directs the sub-advisers to place security trades with designated brokers who have agreed to pay certain custody, transfer agency or other operating expenses through the use of Brokerage Service Arrangements on behalf of the Equity Funds. The amount of 149 expenses paid through Brokerage Service Arrangements for the period ended June 30, 2004 were as follows: <Table> <Caption> EXPENSES PAID THROUGH BROKERAGE FUND SERVICE ARRANGEMENTS - ---- -------------------- Value Equity $ 50,515 Growth Equity 29,535 Small Cap Equity 53,852 International Equity 113,224 </Table> In addition, the Funds have entered into arrangements with its custodian whereby interest earned on uninvested cash balances was used to offset a portion of each Fund's expenses. During the period ended June 30, 2004, expenses reduced were as follows: <Table> <Caption> REDUCTION TO FUND EXPENSES - ---- ------------ Flexible Income $ 133 Growth & Income 191 Capital Opportunities 140 Global Equity 141 Flexible Income I 112 Growth & Income I 80 Capital Opportunities I 122 Global Equity I 108 Money Market 1,757 Low-Duration Bond 9,744 Medium-Duration Bond 14,217 Extended-Duration Bond 256 Equity Index 308 Value Equity 347 Growth Equity 446 Small Cap Equity 550 International Equity 111 </Table> E. ADMINISTRATOR, TRANSFER AGENT AND DISTRIBUTOR Certain employees of PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of The PNC Financial Services Group, Inc., are officers of the Funds. PFPC serves as Administrator and Transfer agent of the Funds. For its services as Administrator, PFPC is entitled to receive fees, computed daily and paid monthly, based upon the average daily net assets of each Fund. The fees currently range between .008% and .0375% of average net assets, excluding out of pocket expenses. For its services as Transfer Agent, PFPC receives a fee based mainly upon the number of accounts serviced. Certain minimum fees and transaction charges may apply. For the period ended June 30, 2004, PFPC received $2,254,564 in aggregate fees and expenses for services rendered under the various agreements described above. PFPC Distributors, Inc. ("PDI"), also an indirect, wholly-owned subsidiary of The PNC Financial Services Group, Inc., serves as the Distributor for the Funds. The Funds do not pay any fees to PDI in its capacity as distributor. 4. SECURITIES LENDING Through an agreement with Northern Trust (the Funds' custodian) the Select Funds may lend portfolio securities to certain brokers, dealers and other financial institutions that pay the Select Funds a negotiated fee. The Select Funds receive cash, letters of credit or U.S. Government securities as collateral against the loaned securities in an amount at least equal to the market value of the loaned securities. The Funds continue to own the loaned securities and the securities remain in the investment portfolio. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. Cash collateral has been invested in a short-term money market fund of Northern Trust. At June 30, 2004, the market values of loaned securities and collateral received were as follows: <Table> <Caption> MARKET VALUE OF MARKET VALUE OF FUND SECURITIES LOANED COLLATERAL - ---- ----------------- --------------- Low-Duration Bond $283,690,978 $289,101,448 Medium-Duration Bond 172,488,781 175,125,353 Extended-Duration Bond 212,523,007 215,064,836 Equity Index 31,761,164 32,378,313 Value Equity 141,465,606 143,997,537 Growth Equity 131,061,955 132,589,178 Small Cap Equity 133,015,949 135,627,825 International Equity 167,116,832 174,882,607 </Table> 5. INVESTMENT TRANSACTIONS For the period ended June 30, 2004, the cost of purchases and proceeds from sales and maturities (other than short- 150 term and U.S. Government obligations) aggregated for each Fund are as follows: <Table> <Caption> SALE AND MATURITY PURCHASES PROCEEDS ------------ ----------------- Flexible Income $ 8,000,000 $ 4,100,000 Growth & Income 28,250,000 10,500,000 Capital Opportunities 17,850,000 8,700,000 Global Equity 21,000,000 3,500,000 Flexible Income I 1,777,066 1,169,400 Growth & Income I 34,961,617 1,055,000 Capital Opportunities I 3,272,400 687,000 Global Equity I 2,887,262 949,300 Low-Duration Bond 277,229,482 314,644,921 Medium-Duration Bond 172,647,898 157,331,380 Extended-Duration Bond 43,880,437 68,907,172 Equity Index 7,235,799 4,474,720 Value Equity 383,636,252 386,882,312 Growth Equity 351,123,932 372,984,407 Small Cap Equity 338,460,683 324,644,386 International Equity 205,826,310 201,289,611 </Table> For the period ended June 30, 2004, the cost of purchases and proceeds from sales and maturities of long-term U.S. Government obligations aggregated for each Fund are as follows: <Table> <Caption> SALE AND MATURITY PURCHASES PROCEEDS -------------- ----------------- Flexible Income $ 13,347,075 $ 12,109,302 Growth & Income 23,090,572 24,400,712 Capital Opportunities 6,176,760 6,385,595 Flexible Income I 1,873,922 1,801,073 Growth & Income I 3,708,715 3,405,077 Capital Opportunities I 1,225,493 1,179,166 Low-Duration Bond 678,079,945 711,501,941 Medium-Duration Bond 1,153,296,293 1,169,091,771 Extended-Duration Bond 82,752,093 52,936,006 </Table> FUTURES CONTRACTS Investments in securities as of June 30, 2004 included securities that were valued and pledged as collateral to cover initial margin deposits. The market value of this collateral and open futures contracts is as follows: <Table> <Caption> MARKET VALUE OF OPEN PURCHASE NOTIONAL MARKET NET UNREALIZED GAIN COLLATERAL (SALE) CONTRACTS VALUE ON FUTURES (LOSS) ON FUTURES --------------- ---------------- ---------------- ------------------- FLEXIBLE INCOME FUND September 2004 S&P 500 $ 89,954 3 $ 855,300 $ 5,757 ========= GROWTH & INCOME FUND September 2004 S&P 500 $ 759,612 34 9,693,400 $ 72,097 ========= CAPITAL OPPORTUNITIES FUND September 2004 S&P 500 $ 854,564 38 10,833,800 $ 87,472 ========= GLOBAL EQUITY FUND September 2004 S&P 500 $1,294,339 46 13,114,600 $ 106,224 ========= FLEXIBLE INCOME FUND I September 2004 S&P 500 E-Mini $ 19,990 2 114,040 $ 931 ========= GROWTH & INCOME FUND I September 2004 S&P 500 E-Mini $ 79,959 17 969,340 $ 7,073 ========= CAPITAL OPPORTUNITIES FUND I September 2004 S&P 500 E-Mini $ 79,959 15 855,300 $ 5,768 ========= GLOBAL EQUITY FUND I September 2004 S&P 500 E-Mini $ 74,962 12 684,240 $ 4,949 ========= </Table> 151 <Table> <Caption> MARKET VALUE OF OPEN PURCHASE NOTIONAL MARKET NET UNREALIZED GAIN COLLATERAL (SALE) CONTRACTS VALUE ON FUTURES (LOSS) ON FUTURES --------------- ---------------- ---------------- ------------------- LOW-DURATION BOND FUND December 2004 3-Month EURIBOR $ 124,317 67 $ 19,890,791 $ (14,782) December 2004 90-Day Euro $ 129,655 80 19,497,000 (186,000) December 2005 90-Day Euro $ 145,423 16 3,840,400 6,498 June 2005 90-Day Euro $ 158,533 105 25,365,375 12,656 June 2006 90-Day Euro $ 144,817 16 3,824,400 6,546 March 2005 90-Day Euro $ 89,761 84 20,376,300 3,150 March 2006 90-Day Euro $ 145,097 16 3,831,800 6,546 September 2004 10-Year U.S. Treasury Note $ 61,132 (71) 7,762,297 (129,345) September 2004 2-Year U.S. Treasury Note $1,742,392 796 167,595,312 557,408 September 2004 5-Year U.S. Treasury Note $ 571,467 (284) 30,867,250 (222,375) September 2004 90-Day Euro $ 61,237 40 9,798,000 (59,500) September 2004 Euro-Bobl $ 83,034 99 13,285,438 27,265 September 2005 90-Day Euro $ 153,385 21 5,055,750 (9,596) --------- $ (1,529) ========= MEDIUM-DURATION BOND FUND December 2004 3-Month EURIBOR $ 126,380 39 11,578,221 $ (8,605) December 2004 90-Day Euro $ 31,922 12 2,924,550 (30,600) December 2004 90-Day LIBOR $ 65,673 28 6,016,555 (43,143) December 2008 90-Day Euro $ 7,339 7 1,650,863 (700) June 2005 3-Month EURIBOR $ 3,224 1 295,372 (1,716) June 2007 90-Day Euro $ 259,226 100 23,748,750 66,250 June 2008 90-Day Euro $ 7,354 7 1,654,363 (1,313) March 2005 90-Day Euro $ 288,503 166 40,267,450 (37,503) March 2005 90-Day LIBOR $ 32,802 14 3,005,103 7,652 March 2009 90-Day Euro $ 7,333 7 1,649,550 (350) September 2004 10-Year U.S. Treasury Note $ 230,891 (119) 13,010,047 (233,227) September 2004 10-Year UK GILT $ 159,197 76 14,584,739 116,144 September 2004 20-Year U.S. Treasury Bond $ 190,968 (162) 17,232,750 (270,564) September 2004 5-Year U.S. Treasury Note $ 577,764 311 33,801,813 174,004 September 2004 90-Day LIBOR $ 21,145 9 1,937,157 (25,616) September 2004 Euro-Bobl $ 128,374 90 12,077,671 18,157 September 2004 Euro-Bobl $ 57,127 39 5,233,657 11,417 September 2004 Euro-Bund $ 294,519 196 26,982,103 151,793 September 2008 90-Day Euro $ 7,346 7 1,652,525 (963) --------- $(108,883) ========= EQUITY INDEX FUND September 2004 S&P 500 $ 984,496 36 10,263,600 $ 77,009 ========= VALUE EQUITY FUND September 2004 Russell 1000 $ 264,850 9 2,741,400 $ 23,346 September 2004 S&P 500 $3,808,056 119 33,926,900 138,036 --------- $ 161,382 ========= </Table> 152 <Table> <Caption> MARKET VALUE OF OPEN PURCHASE NOTIONAL MARKET NET UNREALIZED GAIN COLLATERAL (SALE) CONTRACTS VALUE ON FUTURES (LOSS) ON FUTURES --------------- ---------------- ---------------- ------------------- GROWTH EQUITY FUND September 2004 S&P 500 $4,812,543 193 $ 55,024,300 $ 265,728 ========= SMALL CAP EQUITY FUND September 2004 Russell 1000 $ 978,189 30 8,885,250 $ 240,545 September 2004 S&P 500 $1,010,796 31 8,838,100 61,514 --------- $ 302,059 ========= </Table> FORWARD FOREIGN CURRENCY CONTRACTS As of June 30, 2004, the following Funds have forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. The terms of the open contracts are as follows: <Table> <Caption> AMOUNT OF FOREIGN AMOUNT OF FOREIGN NET UNREALIZED CURRENCY TO BE CURRENCY TO BE CURRENCY TO BE CURRENCY TO BE APPRECIATION/ FUND/EXPIRATION DATE DELIVERED DELIVERED RECEIVED RECEIVED (DEPRECIATION) - ----------------------------- ---------------- ----------------- ---------------- ----------------- -------------- LOW-DURATION BOND FUND 7/20/2004 European Euro 700,000 US Dollars 861,331 $ 9,088 7/21/2004 Japanese Yen 78,843,000 US Dollars 719,058 (2,259) 7/22/2004 US Dollars 134,491 Swedish Krona 1,869,283 113,797 7/23/2004 European Euro 2,806,899 US Dollars 3,365,053 (52,102) 7/23/2004 European Euro 7,553,827 US Dollars 8,952,887 (243,239) 7/28/2004 British Pounds 1,106,457 US Dollars 2,007,237 5,459 --------- $(169,256) ========= MEDIUM-DURATION BOND FUND 8/10/2004 European Euro 13,424,287 US Dollars 15,977,782 $(360,045) 7/20/2004 European Euro 4,180,000 US Dollars 5,143,377 54,266 7/21/2004 Japanese Yen 37,821,000 US Dollars 344,932 (1,084) 7/28/2004 British Pounds 39,591 US Dollars 71,917 291 8/17/2004 Mexican Peso 15,246,158 US Dollars 1,318,790 5,270 7/30/2004 European Euro 660,192 US Dollars 802,824 (783) --------- $(302,085) ========= INTERNATIONAL EQUITY 7/20/2004 Japanese Yen 156,427,030 Canadian Dollars 1,946,820 $ 21,694 7/30/2004 British Pounds 11,535,000 US Dollars 11,535,000 (532,283) 8/6/2004 Canadian Dollars 1,874,723 US Dollars 1,361,000 (37,543) 8/12/2004 Swiss Francs 500,758 US Dollars 386,000 (14,274) 8/25/2004 Swiss Francs 1,987,830 US Dollars 1,560,000 (29,613) 9/4/2004 Japanese Yen 82,588,914 US Dollars 746,000 (11,284) 9/7/2004 Swiss Francs 2,450,230 US Dollars 1,961,000 758 --------- $(602,545) ========= </Table> 153 OPTIONS WRITTEN Transactions in options written for the period ended June 30, 2004, were as follows: <Table> <Caption> NUMBER OF PREMIUMS LOW-DURATION BOND FUND CONTRACTS RECEIVED - ---------------------- --------- ---------- Options written, 12/31/03 5,620 $ 595,524 ------ ---------- Options written -- -- Option expired -- -- Options closed -- -- ------ ---------- Options written, 06/30/04 5,620 $ 595,524 ====== ========== </Table> <Table> <Caption> NUMBER OF PREMIUMS MEDIUM-DURATION BOND FUND CONTRACTS RECEIVED - ------------------------- --------- ---------- Options written, 12/31/03 10,147 $2,778,035 ------ ---------- Options written 867 387,711 Option expired (1,260) (254,958) Options closed (39) (30,480) ------ ---------- Options written, 06/30/04 9,715 $2,880,308 ====== ========== </Table> 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the period ended June 30, 2004 and the year ended December 31, 2003, are as follows: <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- FLEXIBLE INCOME FUND SHARES VALUE SHARES VALUE - -------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 345,823 $ 3,283,359 256,101 $ 2,445,310 Retirement Class 1,560,169 20,481,195 2,999,652 38,722,374 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 12 115 110,248 1,037,416 Retirement Class -- 130 800,930 10,412,089 SHARES REDEEMED: Retail Class (93,453) (887,218) (56,429) (541,956) Retirement Class (1,289,858) (16,921,420) (5,542,161) (71,606,987) ---------- ------------ -------------- --------------- Net increase (decrease) 522,693 $ 5,956,161 (1,431,659) $ (19,531,754) ========== ============ ============== =============== </Table> 154 <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- GROWTH & INCOME FUND SHARES VALUE SHARES VALUE - -------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 489,962 $ 4,618,774 335,318 $ 3,061,096 Retirement Class 3,424,861 46,698,316 9,190,592 118,949,665 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 354 3,284 148,121 1,373,027 Retirement Class -- -- 3,751,332 50,267,852 SHARES REDEEMED: Retail Class (98,541) (924,639) (80,573) (707,318) Retirement Class (2,538,882) (34,559,255) (15,705,780) (198,857,253) ---------- ------------ -------------- --------------- Net increase (decrease) 1,277,754 $ 15,836,480 (2,360,990) $ (25,912,931) ========== ============ ============== =============== </Table> <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- CAPITAL OPPORTUNITIES FUND SHARES VALUE SHARES VALUE - -------------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 1,169,419 $ 11,591,121 250,222 $ 2,262,504 Retirement Class 2,191,855 30,531,188 5,903,866 74,733,730 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class -- -- 47,212 455,568 Retirement Class -- -- 1,739,145 23,652,360 SHARES REDEEMED: Retail Class (984,001) (9,770,049) (122,322) (1,106,643) Retirement Class (1,724,505) (23,937,822) (8,385,067) (103,428,690) ---------- ------------ -------------- --------------- Net increase (decrease) 652,768 $ 8,414,438 (566,944) $ (3,431,171) ========== ============ ============== =============== </Table> <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- GLOBAL EQUITY FUND SHARES VALUE SHARES VALUE - ------------------ ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 140,892 $ 1,450,195 148,557 $ 1,304,684 Retirement Class 2,726,264 38,071,591 5,255,047 63,303,472 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class -- -- 11,098 110,871 Retirement Class -- -- 371,322 5,053,687 SHARES REDEEMED: Retail Class (57,296) (590,086) (37,275) (319,476) Retirement Class (1,941,269) (27,084,458) (6,113,995) (70,734,256) ---------- ------------ -------------- --------------- Net increase (decrease) 868,591 $ 11,847,242 (365,246) $ (1,281,018) ========== ============ ============== =============== </Table> <Table> <Caption> FOR THE PERIOD 07/01/03 (COMMENCEMENT OF OPERATIONS) FOR THE SIX MONTHS ENDED 06/30/04 THROUGH 12/31/03 --------------------------------- --------------------------------- FLEXIBLE INCOME FUND I SHARES VALUE SHARES VALUE - ---------------------- ------------- --------------- -------------- --------------- SHARES SOLD 242,082 $ 2,520,230 2,963,771 $ 29,681,126 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS -- -- 34,697 357,383 SHARES REDEEMED (166,359) (1,735,864) (221,947) (2,259,021) ---------- ------------ -------------- --------------- Net increase 75,723 $ 784,366 2,776,521 $ 27,779,488 ========== ============ ============== =============== </Table> 155 <Table> <Caption> FOR THE PERIOD 07/01/03 (COMMENCEMENT OF OPERATIONS) FOR THE SIX MONTHS ENDED 06/30/04 THROUGH 12/31/03 ---------------------------------- --------------------------------- GROWTH & INCOME FUND I SHARES VALUE SHARES VALUE - ---------------------- -------------- --------------- -------------- --------------- SHARES SOLD 3,474,109 $ 37,745,806 6,980,068 $ 70,055,135 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS --- -- 170,077 1,804,518 (266,019) SHARES REDEEMED (2,885,767) (375,070) (3,911,770) -------------- --------------- -------------- --------------- 3,208,090 $ 34,860,039 6,775,075 $ 67,947,883 Net increase ============== =============== ============== =============== </Table> <Table> <Caption> FOR THE PERIOD 07/01/03 (COMMENCEMENT OF OPERATIONS) FOR THE SIX MONTHS ENDED 06/30/04 THROUGH 12/31/03 ---------------------------------- --------------------------------- CAPITAL OPPORTUNITIES FUND I SHARES VALUE SHARES VALUE - ---------------------------- -------------- --------------- -------------- --------------- SHARES SOLD 424,000 $ 4,809,053 5,287,084 $ 53,184,082 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS -- -- 88,095 976,975 SHARES REDEEMED (177,025) (2,002,518) (200,958) (2,151,481) -------------- --------------- -------------- --------------- Net increase 246,975 $ 2,806,535 5,174,221 $ 52,009,576 ============== =============== ============== =============== </Table> <Table> <Caption> FOR THE PERIOD 07/01/03 (COMMENCEMENT OF OPERATIONS) FOR THE SIX MONTHS ENDED 06/30/04 THROUGH 12/31/03 ---------------------------------- --------------------------------- GLOBAL EQUITY FUND I SHARES VALUE SHARES VALUE - -------------------- -------------- --------------- -------------- --------------- SHARES SOLD 359,726 $ 4,312,382 2,324,815 $ 23,434,827 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS --- -- 18,045 209,318 (176,290) SHARES REDEEMED (2,079,230) (133,051) (1,424,993) -------------- --------------- -------------- --------------- 183,436 $ 2,233,152 2,209,809 $ 22,219,152 Net increase ============== =============== ============== =============== </Table> <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 ---------------------------------- --------------------------------- MONEY MARKET FUND SHARES VALUE SHARES VALUE - ----------------- -------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 5,758,492 $ 5,758,492 3,800,874 $ 3,800,874 Retirement Class 1,398,213,235 1,398,213,235 3,475,735,151 3,475,735,152 Institutional Class 23,334,055 23,334,054 88,426,471 88,426,471 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 18,924 18,924 62,338 62,338 Retirement Class 1,617,859 1,617,859 4,666,721 4,666,721 Institutional Class 256,683 256,683 310,135 310,135 SHARES REDEEMED: Retail Class (3,864,298) (3,864,298) (12,365,637) (12,365,637) Retirement Class (1,409,457,706) (1,409,457,706) (3,533,632,077) (3,533,632,077) Institutional Class (25,556,184) (25,556,184) (30,856,125) (30,856,125) -------------- --------------- -------------- --------------- Net decrease (9,678,940) $ (9,678,941) (3,852,149) $ (3,852,148) ============== =============== ============== =============== </Table> 156 <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- LOW-DURATION BOND FUND SHARES VALUE SHARES VALUE - ---------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 124,847 $ 1,191,611 370,361 $ 3,629,836 Retirement Class 4,244,459 55,371,415 12,488,144 165,022,970 Institutional Class 951,411 9,073,662 9,852,397 96,600,779 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 18,398 175,320 109,633 1,061,162 Retirement Class 351,562 4,572,352 2,037,432 26,739,288 Institutional Class 56,201 533,708 215,429 2,072,803 SHARES REDEEMED: Retail Class (136,019) (1,297,407) (270,351) (2,642,616) Retirement Class (4,355,218) (56,794,585) (16,633,651) (220,077,046) Institutional Class (698,077) (6,657,636) (5,065,621) (49,650,731) ---------- ------------ -------------- --------------- Net increase 557,564 $ 6,168,440 3,103,773 $ 22,756,445 ========== ============ ============== =============== </Table> <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- MEDIUM-DURATION BOND FUND SHARES VALUE SHARES VALUE - ------------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 1,152,604 $ 10,882,825 567,749 $ 5,488,636 Retirement Class 4,808,555 65,764,075 16,034,944 221,272,485 Institutional Class 1,207,601 11,270,501 8,179,822 79,295,587 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 33,470 310,573 196,599 1,867,741 Retirement Class 539,590 7,334,101 3,312,192 45,476,001 Institutional Class 78,370 722,694 351,398 3,313,145 SHARES REDEEMED: Retail Class (1,131,393) (10,684,036) (354,296) (3,428,706) Retirement Class (4,699,431) (64,201,304) (21,454,483) (296,969,385) Institutional Class (1,119,760) (10,443,785) (4,259,150) (41,269,488) ---------- ------------ -------------- --------------- Net increase 869,606 $ 10,955,644 2,574,775 $ 15,046,016 ========== ============ ============== =============== </Table> 157 <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- EXTENDED-DURATION BOND FUND SHARES VALUE SHARES VALUE - --------------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 345,406 $ 3,241,968 546,676 $ 5,402,567 Retirement Class 4,382,103 65,432,402 13,108,503 198,325,568 Institutional Class 999,145 9,347,092 4,850,745 48,928,974 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 97,176 881,155 416,507 3,973,266 Retirement Class 527,549 7,724,276 2,448,979 36,713,639 Institutional Class 109,152 989,688 375,173 3,566,652 SHARES REDEEMED: Retail Class (387,795) (3,625,618) (506,408) (5,012,043) Retirement Class (4,689,634) (69,993,555) (16,949,095) (258,599,321) Institutional Class (922,399) (8,586,120) (2,757,539) (27,568,450) ---------- ------------ -------------- --------------- Net increase 460,703 $ 5,411,288 1,533,541 $ 5,730,852 ========== ============ ============== =============== </Table> <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- EQUITY INDEX FUND SHARES VALUE SHARES VALUE - ----------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 106,434 $ 986,816 186,065 $ 1,502,533 Retirement Class 1,688,406 26,029,064 5,647,274 73,655,508 Institutional Class 338,064 3,143,461 4,461,868 36,455,381 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 11,342 105,931 32,121 278,529 Retirement Class 82,550 1,280,357 260,606 3,723,527 Institutional Class 23,977 222,746 45,263 403,725 SHARES REDEEMED: Retail Class (51,635) (474,101) (88,596) (708,958) Retirement Class (1,709,798) (26,281,296) (5,386,315) (71,239,038) Institutional Class (398,472) (3,686,960) (1,529,027) (12,857,703) ---------- ------------ -------------- --------------- Net increase 90,868 $ 1,326,018 3,629,259 $ 31,213,504 ========== ============ ============== =============== </Table> 158 <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- VALUE EQUITY FUND SHARES VALUE SHARES VALUE - ----------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 238,008 $ 2,417,858 239,944 $ 2,063,770 Retirement Class 2,355,744 37,165,338 8,378,960 110,320,265 Institutional Class 1,040,746 10,686,516 11,711,145 101,805,688 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 13,839 142,817 40,211 369,031 Retirement Class 355,146 5,671,689 1,121,254 15,815,795 Institutional Class 58,631 607,420 94,136 913,660 SHARES REDEEMED: Retail Class (78,942) (803,878) (97,837) (831,105) Retirement Class (3,167,580) (50,223,059) (13,311,092) (175,057,679) Institutional Class (901,466) (9,243,140) (5,442,301) (47,926,854) ---------- ------------ -------------- --------------- Net increase (decrease) (85,874) $ (3,578,439) 2,734,420 $ 7,472,571 ========== ============ ============== =============== </Table> <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- GROWTH EQUITY FUND SHARES VALUE SHARES VALUE - ------------------ ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 167,885 $ 1,572,704 365,073 $ 2,947,648 Retirement Class 3,560,711 53,607,172 12,352,654 155,965,573 Institutional Class 1,095,111 10,341,656 13,561,260 111,472,774 SHARES REDEEMED: Retail Class (93,317) (865,667) (151,376) (1,217,720) Retirement Class (4,143,147) (61,893,314) (17,498,144) (220,165,499) Institutional Class (1,071,619) (10,049,961) (5,521,123) (46,186,040) ---------- ------------ -------------- --------------- Net increase (decrease) (484,376) $ (7,287,410) 3,108,344 $ 2,816,736 ========== ============ ============== =============== </Table> <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- SMALL CAP EQUITY FUND SHARES VALUE SHARES VALUE - --------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 330,076 $ 3,905,411 462,903 $ 4,701,696 Retirement Class 3,299,795 51,398,019 10,543,219 135,857,768 Institutional Class 357,839 4,307,349 3,640,755 35,234,158 SHARES REDEEMED: Retail Class (217,430) (2,532,586) (135,569) (1,346,215) Retirement Class (2,303,178) (35,022,997) (9,413,284) (116,448,337) Institutional Class (382,606) (4,542,443) (2,053,288) (21,163,131) ---------- ------------ -------------- --------------- Net increase 1,084,496 $ 17,512,753 3,044,736 $ 36,835,939 ========== ============ ============== =============== </Table> 159 <Table> <Caption> FOR THE SIX MONTHS ENDED 06/30/04 FOR THE YEAR ENDED 12/31/03 --------------------------------- --------------------------------- INTERNATIONAL EQUITY FUND SHARES VALUE SHARES VALUE - ------------------------- ------------- --------------- -------------- --------------- SHARES SOLD: Retail Class 166,271 $ 1,870,500 163,727 $ 1,560,959 Retirement Class 2,930,105 39,049,885 14,644,611 157,879,504 Institutional Class 665,529 7,602,459 8,174,211 75,814,682 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class -- -- 24,358 265,255 Retirement Class -- -- 861,759 11,108,069 Institutional Class -- -- 72,461 797,069 SHARES REDEEMED: Retail Class (74,751) (840,912) (40,947) (379,887) Retirement Class (2,901,849) (38,481,007) (16,770,240) (180,433,081) Institutional Class (659,529) (7,513,820) (4,344,837) (41,517,645) ---------- ------------ -------------- --------------- Net increase 125,776 $ 1,687,105 2,785,103 $ 25,094,925 ========== ============ ============== =============== </Table> 7. BANK BORROWINGS The Trust, on behalf of and for the benefit of the Funds, has a credit agreement with Bank of America, N.A., dated October 21, 2003, whereby each Fund is permitted to have bank borrowings for temporary or emergency purposes to fund Shareholder redemptions. The agreement permits borrowings up to $50 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Bank prime rate minus two percent or the Wall Street Journal LIBOR One Month Floating Rate plus 0.50%. Each Fund also pays a facility fee equal to its pro rata share of the amount of the credit facility at a rate of 0.12% per annum. Each Fund had no borrowings outstanding during the period ended June 30, 2004. 8. FEDERAL INCOME TAXES Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for futures and options transactions, foreign currency transactions, paydowns, losses deferred due to wash sales, investments in passive foreign investment companies and excise tax regulations. Distributions during the period January 1, 2003, through December 31, 2003 were characterized as follows for tax purposes: <Table> <Caption> ORDINARY LONG-TERM TOTAL FUND INCOME CAPITAL GAIN DISTRIBUTION - ---- ----------- ------------ ------------ Flexible Income $ 4,674,701 $ 6,798,990 $11,473,691 Growth & Income 29,857,219 21,796,066 51,653,285 Capital Opportunities 15,708,591 8,401,297 24,109,888 Global Equity 5,164,553 -- 5,164,553 Flexible Income I 357,383 -- 357,383 Growth & Income I 1,782,721 21,797 1,804,518 Capital Opportunities I 943,918 33,057 976,975 Global Equity I 194,633 14,685 209,318 Money Market 7,918,076 -- 7,918,076 Low-Duration Bond 25,512,205 4,364,359 29,876,564 Medium-Duration Bond 43,170,685 7,497,478 50,668,163 Extended-Duration Bond 23,645,972 20,612,648 44,258,620 Equity Index 4,405,649 -- 4,405,649 Value Equity 17,107,697 -- 17,107,697 International Equity 12,170,411 -- 12,170,411 </Table> 160 At December 31, 2003, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNREALIZED UNDISTRIBUTED UNDISTRIBUTED APPRECIATION ORDINARY LONG-TERM (DEPRECIATION) FUND INCOME CAPITAL GAIN ON INVESTMENTS - ---- ------------- ------------- -------------- Flexible Income $ 2,174,476 $ 1,693,516 $ 44,392,327 Growth & Income 609,194 11,665,555 157,413,777 Capital Opportunities 384,626 4,173,190 107,307,530 Global Equity 467,766 704,936 93,531,313 Flexible Income I 315,912 148,653 395,695 Growth & Income I 31,498 788,541 3,219,433 Capital Opportunities I 28,523 336,951 5,118,389 Global Equity I 31,120 17,181 3,414,781 Money Market -- (9,501) -- Low-Duration Bond (1,119,835) 983,584 4,455,026 Medium-Duration Bond 1,929,110 2,498,799 14,211,297 Extended-Duration Bond 1,508,138 3,467,336 23,368,863 Equity Index 510,613 (6,794,336) 33,841,959 Value Equity 193,281 (69,996,687) 138,139,244 Growth Equity -- (319,588,772) 138,443,306 Small Cap Equity -- (10,518,709) 69,841,462 International Equity 1,013,245 (104,894,370) 145,239,101 </Table> For federal income tax purposes, capital loss carryovers, and their expiration dates, were as follows as of December 31, 2003: <Table> <Caption> EXPIRING EXPIRING EXPIRING FUND 12/31/2009 12/31/2010 12/31/2011 TOTAL - ---- ----------- ------------ ------------ ------------ Money Market -- -- $ 9,501 $ 9,501 Equity Index -- $ 6,794,336 -- 6,794,336 Value Equity $17,975,158 52,021,529 -- 69,996,687 Growth Equity 65,899,400 125,035,753 123,296,507 314,231,660 Small Cap Equity -- 10,518,709 -- 10,518,709 International Equity 11,896,098 57,870,668 35,127,604 104,894,370 </Table> For federal income tax purposes, post-October loss deferrals, which will reverse in 2004, were as follows as of December 31, 2003: <Table> <Caption> FUND CAPITAL FX AND PFIC TOTAL - ---- ---------- ----------- ---------- Low-Duration Bond -- $332,238 $ 332,238 Growth Equity $5,357,112 -- 5,357,112 International Equity -- 40,566 40,566 </Table> At June 30, 2004, the net unrealized appreciation from investments for those securities having an excess of value over cost and net unrealized depreciation from investments for those securities having an excess of cost over value (based on cost for federal income tax purposes) was as follows: <Table> <Caption> NET UNREALIZED APPRECIATION/ APPRECIATED DEPRECIATED FUND (DEPRECIATION) SECURITIES SECURITIES - ---- -------------- ------------ ------------ Flexible Income $ 46,121,723 $ 46,121,723 -- Growth & Income 175,879,352 175,900,340 $ (20,988) Capital Opportunities 135,030,951 135,049,869 (18,918) Global Equity 131,261,613 131,261,613 -- Flexible Income I 501,741 1,274,002 (772,261) Growth & Income I 4,039,069 6,888,581 (2,849,512) Capital Opportunities I 6,791,659 7,757,052 (965,393) Global Equity I 4,452,476 4,452,476 -- Low-Duration Bond (5,542,767) 2,257,512 (7,800,279) Medium-Duration Bond 5,297,876 15,059,823 (9,761,947) Extended-Duration Bond 1,272,069 13,032,384 (11,760,315) Equity Index 45,056,245 102,605,239 (57,548,994) Value Equity 152,564,949 202,263,352 (49,698,403) Growth Equity 207,339,716 247,790,510 (40,450,794) Small Cap Equity 58,140,580 71,754,392 (13,613,812) International Equity 142,762,660 191,861,618 (49,098,958) </Table> The differences between book basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales and on investments in passive foreign investment companies. At June 30, 2004, the aggregate cost for federal income tax purposes was as follows (excluding foreign currency and derivative related items): <Table> <Caption> FEDERAL FUND TAX COST - ---- -------------- Flexible Income $ 237,129,280 Growth & Income 1,010,625,019 Capital Opportunities 820,092,165 Global Equity 739,269,409 Flexible Income I 29,302,131 Growth & Income I 104,678,286 Capital Opportunities I 55,621,782 Global Equity I 24,672,535 Money Market 915,163,572 Low-Duration Bond 1,100,549,857 Medium-Duration Bond 1,109,977,792 Extended-Duration Bond 475,332,554 Equity Index 426,217,393 Value Equity 1,281,035,527 Growth Equity 1,359,086,232 Small Cap Equity 517,606,444 International Equity 1,042,684,658 </Table> At December 31, 2003, capital contributions, accumulated undistributed net investment income and accumulated net realized gain (loss) from investments have been adjusted for current period permanent book/tax differences which 161 arose principally from differing book/tax treatments of foreign currency transactions. The following amounts were reclassified within the capital accounts: <Table> <Caption> ACCUMULATED NET REALIZED GAIN (LOSS) ON INVESTMENTS, CURRENCY ACCUMULATED TRANSLATIONS AND PAID IN UNDISTRIBUTED DERIVATIVE FUND CAPITAL INCOME TRANSACTIONS - ---- ----------- ------------- ---------------- Flexible Income I $ (4,195) $ 4,195 -- Growth & Income I (4,921) 4,921 -- Capital Opportunities I (4,921) 4,921 -- Global Equity I (4,195) 4,195 -- Low-Duration Bond -- 1,923,472 $(1,923,472) Medium-Duration Bond (256,575) 5,123,746 (4,867,171) Extended-Duration Bond (1,041,513) 512,369 529,144 Equity Index -- 12,468 (12,468) Value Equity 1 125,411 (125,412) Growth Equity (893,724) 894,042 (318) Small Cap Equity (1,001,599) 1,040,616 (39,017) International Equity -- (265,363) 265,363 </Table> Net investment income, net realized gain (loss) on investments and net assets were not affected by these reclassifications. 9. INVESTMENT NOT MEETING INVESTMENT GUIDELINES During the period ended June 30, 2004, one of the Growth Equity Fund's sub-advisers purchased a security that did not meet the Fund's investment guidelines. The security was subsequently sold at a loss of $615,013, for which the Fund was fully reimbursed by the sub-adviser. 10. SWAP INCOME RECLASSIFICATION As a result of a recent FASB Emerging Issues Task Force consensus and subsequent related SEC staff guidance, the Low-Duration and Medium-Duration Bond Funds have reclassified periodic payments made under interest rate swap agreements, previously included within interest income, as a component of realized gain (loss) in the statement of operations. For consistency, similar reclassifications have been made to amounts appearing in the previous year's statement of changes in net assets and the per share amounts in prior year financial highlights. Prior year net investment income ratios in the financial highlights have also been modified accordingly. This reclassification increased net investment income and decreased net realized gains by $52,329 and $45,384 for the periods ending June 30, 2004 and December 31, 2003, respectively, for the Low-Duration Bond Fund. This reclassification increased net investment income and decreased net realized gains by $609,920 and $117,068 for the periods ended June 30, 2004 and December 31, 2003, respectively, for the Medium-Duration Bond Fund. These reclassifications had no effect on the Fund's net asset value, either in total or per share, or its total increase (decrease) in net assets from operations during any period. 11. RECLASSIFICATION OF SHORT TERM CAPITAL GAIN DISTRIBUTIONS RECEIVED The Blended Funds have reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. Prior year net investment income ratios and per share amounts in the financial highlights have also been modified accordingly. These reclassifications had no effect on the Fund's net asset value, either in total or per share, or its total increase (decrease) in net assets from operations during any period. This reclassification decreased net investment income and increased net realized gains for the year ended December 31, 2003 by the following amounts: <Table> <Caption> FUND AMOUNT - ---- ---------- Flexible Income $ 986,958 Growth & Income 3,857,611 Capital Opportunities 1,488,537 Flexible Income I 138,023 Growth & Income I 343,695 Capital Opportunities I 134,706 </Table> 162 FUND MANAGEMENT (UNAUDITED) Information pertaining to the Trustees and officers of the Trust is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 262-0511. <Table> <Caption> - -------------------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND TERM OF OFFICE COMPLEX OTHER TRUSTEESHIPS/ NAME, (DOB), ADDRESS AND AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN DIRECTORSHIPS POSITION(S) WITH TRUST TIME SERVED(1) DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE - ------------------------ -------------- ----------------------- ---------- ------------------- - -------------------------------------------------------------------------------------------------------------------------------- DISINTERESTED TRUSTEES - -------------------------------------------------------------------------------------------------------------------------------- Mr. Michael R. Buster (11/18/57) Since 2002 Executive Pastor, Prestonwood 17 None 3656 Bridle Road Baptist Church, Prosper, TX 75078 1989 - Present. Trustee - -------------------------------------------------------------------------------------------------------------------------------- Mr. Earl B. Patrick (6/3/44) Since 2000 President and Chief Operating 17 Earl B. Patrick, Inc. -- Jim Stewart Realtors, Inc. Officer, Jim Stewart, President, Director JSR 500 N. Valley Mills Drive Realtors, Inc. d/b/a Coldwell Building Waco, TX 76710 Banker Jim Stewart, Realtors, Partnership -- Managing Trustee 1975 - Present. Partner JSR Land Partnership -- Managing Partner Meadowlake Center -- General Partner, Waco Assn. Of Realtors -- Director, Baylor Foundation -- Director, All Peoples -- Director, Face to Face Ministries, Inc. -- Director - -------------------------------------------------------------------------------------------------------------------------------- Mr. Joseph A. Mack (11/22/39) Since 2002 Director, Office of Public 17 None 3400 Wilmot Ave. Policy, South Carolina Columbia, SC 29205 Baptist Convention, Trustee 1999 - Present. - -------------------------------------------------------------------------------------------------------------------------------- Mr. James Ray Taylor (10/19/33) Since 2002 Retired 12/31/1994, 17 None 3009 Tanglewood Park West Trustee -- Annuity Board, Fort Worth, Texas 76109 1990 - 2000. Trustee - -------------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES(2) - -------------------------------------------------------------------------------------------------------------------------------- Gerald B. Jones (5/24/32) Since 2000 Owner Jones Motorcars, Inc. 17 Annuity Board -- Trustee, Jones Motorcars, Inc. 1957 - Present. Bank of Arkansas -- Director, 3535 N. College Avenue 1996 - Present. Fayetteville, AR 72703-5108 Trustee - -------------------------------------------------------------------------------------------------------------------------------- George Tous Van Nijkerk (8/12/39) Since 2000 Administrative Services 17 Annuity Board -- Trustee 2401 Cedar Springs Road Director, Providence Baptist Dallas, Texas 75201-1498 Church, 1991 - 2004. Trustee Executive Director of Administration, Christ Baptist Church, February 2004 - Present. - -------------------------------------------------------------------------------------------------------------------------------- OFFICER(S) WHO ARE NOT TRUSTEES - -------------------------------------------------------------------------------------------------------------------------------- Jeffrey P. Billinger (12/5/46) Since 2000 Executive Officer and N/A N/A 2401 Cedar Springs Road Treasurer, Annuity Board of Dallas, TX 75201-1407 the Southern Baptist Vice President and Treasurer Convention, 1995 - Present. - -------------------------------------------------------------------------------------------------------------------------------- Rodric E. Cummins (6/28/57) Since 2000 Executive Officer and Chief N/A N/A 2401 Cedar Springs Road Investment Officer, Annuity Dallas, TX 75201-1407 Board of the Southern Baptist Vice President and Investment Convention, 1998 - Present. Officer - -------------------------------------------------------------------------------------------------------------------------------- John R. Jones (12/6/53) Since 2000 Executive Vice President and N/A N/A 2401 Cedar Springs Road Chief Operating Officer, Dallas, TX 75201-1407 Annuity Board of the Southern President Baptist Convention, 1995 - Present. - -------------------------------------------------------------------------------------------------------------------------------- Rodney R. Miller (5/23/53) Since 2000 General Counsel, Legal and N/A N/A 2401 Cedar Springs Road Compliance, Annuity Board of Dallas, TX 75201-1407 the Southern Baptist Vice President and Secretary Convention, 1995 - Present. - -------------------------------------------------------------------------------------------------------------------------------- </Table> (1) Each Trustee and officer serves for an indefinite term, until his/her successor is elected. (2) Messrs. Tous Van Nijkerk and Jones serve as trustees and are to be "interested persons" of the Trust as the term is defined in the Investment Company Act of 1940, as amended. 163 PROXY VOTING A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities are available without charge, by calling 800-262-0511, by visiting our web site at www.absbc.org or by visiting the SEC's website at www.sec.gov. After August 31, 2004, information about how the Funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 will be available without charge, by calling 800-262-0511, by visiting our web site at www.absbc.org or by visiting the SEC's website at www.sec.gov. 164 [AB FUNDS LOGO] 2401 Cedar Springs Rd., Dallas, TX 75201-1498 1.800.262.0511 - www.absbc.org Funds distributed by PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 Serving Those Who Serve the Lord "...with the integrity of our hearts and the skillfulness of our hands." Psalm 78:72 Rev. 8/04 2239 7392 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. 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. (registrant) AB Funds Trust -------------------------------------------------------------------- By (Signature and Title)* /s/ John R. Jones ------------------------------------------------------- John R. Jones, President (principal executive officer) Date August 19, 2004 --------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ John R. Jones ------------------------------------------------------- John R. Jones, President (principal executive officer) Date August 19, 2004 --------------------------------------------------------------------------- By (Signature and Title)* /s/ Jeffrey P. Billinger ------------------------------------------------------- Jeffrey P. Billinger, Vice President and Treasurer (principal financial officer) Date August 19, 2004 --------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.