UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
AMENDMENT NO. 1
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, 2003
Date of reporting period: December 31, 2003
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.
[AB FUNDS LOGO]
[AB FUNDS TRUST LOGO]
Annual Report
DECEMBER 31, 2003
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 3
Blended Funds:
Flexible Income 7
Growth & Income 10
Capital Opportunities 13
Global Equity 16
Financial Statements 20
Flexible Income I 28
Growth & Income I 30
Capital Opportunities I 32
Global Equity I 34
Financial Statements 36
Select Funds:
Money Market 40
Low-Duration Bond 44
Medium-Duration Bond 53
Extended-Duration Bond 69
Equity Index 75
Value Equity 83
Growth Equity 94
Small Cap Equity 98
International Equity 119
Financial Statements 130
Notes to Financial Statements 147
Report of Independent Auditors 166
Fund Management 167
Investment Sub-advisers 169
</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
February 16, 2004
[O. S. HAWKINS PHOTO]
Dear Shareholder:
We are pleased to bring you the AB Funds Trust annual report for 2003. This
report reflects a welcome change in the investment climate for investors
compared to recent years. We are pleased that through investment in AB Funds
Trust, our shareholders participated in the broad advance in both the bond and
stock markets.
The year 2003 reminds all investors of the importance of being properly
positioned when market turns occur. History proves that post-recessionary
rallies can be swift and strong, and this past year was no exception. We are
proponents of investing in capital markets with a long-term strategic
perspective and as a means of meeting specific long-term financial goals. While
we stress the importance of reviewing an investment plan periodically, we also
emphasize the importance of establishing a plan and staying with it through good
and bad markets so that when market rallies occur investors are positioned to
take advantage. Equity investors that did so in 2003 were richly rewarded.
While we celebrate bringing investment success to our shareholders this year, we
are disappointed in certain developments within the financial services industry.
The issues of market timing and late trading strike at the heart of the mutual
fund industry. These issues must and undoubtedly will be resolved, but in so
doing will likely change the way investors relate to mutual funds in the future.
AB Funds Trust adheres to the highest ethical and professional standards in our
industry. We have shared with you in previous correspondence our position on
these issues and our resolve to review our policies, procedures and activities
to ensure our business practices protect the interests of you, our shareholder.
This report reflects our unwavering commitment to integrity in financial
reporting so that you may stay fully informed of your investments. We hope that
you will find the information valuable. If you have questions regarding its
content, please call us at 1-800-262-0511 or visit our web site at
www.absbc.org. Our customer service specialists are ready to serve you.
Thank you for choosing to invest in AB Funds Trust.
Sincerely,
/s/ O. S. Hawkins
O. S. Hawkins
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 Annual Report
2
FROM THE CHIEF INVESTMENT OFFICER
[RODRIC E. CUMMINS PHOTO]
Rodric E. Cummins, CFA
The cyclical rally in stock investments that began early
in 2003 continued through the fourth quarter in response
to the surprisingly strong U.S. economy. The combination
of low interest rates, huge monetary and fiscal stimulus,
tax refunds and a weakening currency propelled the U.S.
economy into the most robust period of growth in 20 years.
This backdrop, coupled with uncertainty and very low
expectations from investors at the beginning of the year,
set the stage for impressive equity advances in 2003.
Investors that maintained well-diversified equity
portfolios participated in returns for the year that were
strong across all broadly defined global equity markets.
U.S. small-cap stocks led all major asset classes by a
wide margin. Additionally, international stocks received a
large boost from emerging market regions and a weakening
U.S. dollar. Small-cap stocks (as represented by the
Russell 2000(R) Index) gained 14.52% during the fourth
quarter and 47.25% for the year. International stocks (as
represented by the MSCI ACWI(R) Free Ex-U.S.) returned
17.08% during the quarter and 40.83% for the year. By
comparison, the S&P 500(R) Index posted a 12.18% return
for the fourth quarter and 28.71% for the year.
ASSET CLASS PERFORMANCE COMPARISON
The following graph illustrates the performance of the major asset classes
during 2003.
[ASSET CLASS BAR CHART]
<Table>
<Caption>
4TH QTR 1 YEAR
------- ------
S&P 500(R)(1) 12.18 28.71
Russell 2000(R)(2) 14.52 47.25
MSCI ACWI(R) Free Ex-US(3) 17.08 40.83
LB Aggregate(4) 0.32 4.10
</Table>
(1)The S&P 500(R) Index is a capitalization-weighted index that includes a
representative sample of 500 leading companies in leading industries of the U.S.
economy. The index focuses on the large-cap segment of the market.
(2)The Russell 2000(R) Index is a small-cap index consisting of the smallest
2000 companies in the Russell 3000(R) Index, representing approximately 8% of
the Russell 3000(R) Index total market capitalization.
(3)The MSCI ACWI(R) (All Country World Index) Free Ex-US is a free
float-adjusted market capitalization index that is designed to measure equity
market performance in the global developed and emerging markets excluding the
US.
(4)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.
Not Part of the Annual Report
3
Fixed income investments also enjoyed another solid year of positive returns
despite a generally small rise in interest rates in the U.S. The Lehman Brothers
Aggregate Bond Index posted a return of 0.32% during the fourth quarter,
bringing the calendar year performance to 4.10%. Bonds were boosted by the
corporate sector as an improving economy and stronger profit growth resulted in
reduced credit spreads. Also, the bond market received a lift from the high
yield and emerging market debt sectors, both of which posted equity-like returns
for the year.
OUTLOOK
Financial markets discount existing conditions and react to changes in those
conditions. The widespread pessimism that dominated the investment climate one
year ago has rightfully given way to optimism that has boosted the fortunes of
equity investors. This rapid change in market sentiment accounts in large part
for the investment returns in 2003 that were far above forecasts, the historical
norm or future sustainability. The economy's surprising performance reflects the
powerful effects of unprecedented monetary and fiscal stimulus, the economy's
resilience, and the strong U.S. global leadership position.
Economic growth and corporate profits in 2004 are expected to moderate from the
post-recessionary surge experienced over the past year; however, the fundamental
underpinning for continued growth seems to be solidly in place.
Bond investors are concerned about inflationary pressures resulting from
aggressive monetary policies and improving economic growth. The Federal Reserve
("Fed") has set explicit targets of stronger economic growth and increased
inflation, both of which are archenemies of fixed-income securities. If the Fed
is successful in its pursuit, bond investors will likely experience investment
returns far lower than those experienced in recent years.
U.S. ECONOMY -- GROSS DOMESTIC PRODUCT
As measured by GDP, the U.S. economy has generated positive growth for eight
consecutive quarters through period ending 3Q03. Third quarter GDP grew at an
8.2% annual rate, which was the highest measure of economic expansion since the
4Q83. The economy responded to both aggressive monetary and fiscal policy.
Economic growth has been broad based -- derived from both consumer and business
spending.
[U.S. ECONOMY GRAPH]
<Table>
<Caption>
REAL GROSS DOMESTIC PRODUCT
---------------------------
12/90 -3.20
-2.00
2.30
9/91 1.00
2.20
3.80
3.80
9/92 3.10
5.40
-0.10
2.50
9/93 1.80
6.20
3.40
5.70
9/94 2.20
5.00
1.50
0.80
9/95 3.10
3.20
2.90
6.80
9/96 2.00
4.60
4.40
5.90
9/97 4.20
2.80
6.10
2.20
9/98 4.10
6.70
3.00
2.00
9/99 5.20
7.10
2.60
4.80
9/00 0.60
1.10
-0.60
-1.60
9/01 -0.30
2.70
5.00
1.30
9/02 4.00
12/02 1.30
3/03 2.00
6/03 3.10
9/03 8.20
</Table>
Gross Domestic Product ("GDP") is one of, if not the most widely used economic
measures for the overall U.S. economy. GDP measures the total market value of
all final goods and services produced within the U.S. during a specific period.
The index is the percent change from quarter to quarter of GDP and is often
presented as an annualized rate. Generally, it is viewed as positive for the
equity markets as GDP expands reflecting an environment of economic growth and
profitability. The converse is true when GDP is contracting.
Data Source: Bloomberg
U.S. EQUITY MARKET
Following three consecutive years of negative returns, the U.S. equity market,
as measured by the S&P 500(R) Index, posted a strong return of 28.71% in 2003.
The rebound in the U.S. equity market reflected the improvements in the economic
environment and corporate earnings.
[LINE GRAPH]
<Table>
<Caption>
S&P 500 INDEX(R) (TOTAL RETURN)
-------------------------------
12/72 18.98
12/73 -14.66
12/74 -26.47
12/75 37.20
12/76 23.84
12/77 -7.18
12/78 6.56
12/79 18.44
12/80 32.42
12/81 -4.91
12/82 21.41
12/83 22.51
12/84 6.27
12/85 32.16
12/86 18.47
12/87 5.23
12/88 16.81
12/89 31.49
12/90 -3.17
12/91 30.55
12/92 7.67
12/93 9.99
12/94 1.31
12/95 37.43
12/96 23.07
12/97 33.36
12/98 28.58
12/99 21.04
12/00 -9.11
12/01 -11.88
12/02 -22.10
12/03 28.71
</Table>
The S&P 500(R) Index is used as a measure for the performance of large-cap, U.S.
stocks.
Not Part of the Annual Report
4
S&P 500(R) INDEX PRICE/EARNINGS RATIO (P/E)
The P/E ratio for the S&P 500(R) Index indicates that stock valuations are not
inexpensive based on historical standards.
[LINE GRAPH]
<Table>
<Caption>
S&P 500(R) INDEX P/E RATIO AVERAGE
-------------------------- -------
1/31/1977 10.829 15.6557
2/28/1977 10.554 15.6557
3/31/1977 10.038 15.6557
4/29/1977 10.02 15.6557
5/31/1977 9.782 15.6557
6/30/1977 10.027 15.6557
7/29/1977 9.772 15.6557
8/31/1977 9.526 15.6557
9/30/1977 9.319 15.6557
10/31/1977 8.90 15.6557
11/30/1977 9.104 15.6557
12/30/1977 8.939 15.6557
1/31/1978 8.362 15.6557
2/28/1978 8.141 15.6557
3/31/1978 8.193 15.6557
4/28/1978 8.913 15.6557
5/31/1978 8.922 15.6557
6/30/1978 8.698 15.6557
7/31/1978 9.179 15.6557
8/31/1978 9.396 15.6557
9/29/1978 9.026 15.6557
10/31/1978 8.191 15.6557
11/30/1978 8.303 15.6557
12/29/1978 8.183 15.6557
1/31/1979 8.48 15.6557
2/28/1979 8.174 15.6557
3/30/1979 8.209 15.6557
4/30/1979 8.198 15.6557
5/31/1979 7.976 15.6557
6/29/1979 7.708 15.6557
7/31/1979 7.761 15.6557
8/31/1979 8.168 15.6557
9/28/1979 7.83 15.6557
10/31/1979 7.272 15.6557
11/30/1979 7.586 15.6557
12/31/1979 7.367 15.6557
1/31/1980 7.784 15.6557
2/29/1980 7.755 15.6557
3/31/1980 6.753 15.6557
4/30/1980 7.045 15.6557
5/30/1980 7.384 15.6557
6/30/1980 7.322 15.6557
7/31/1980 7.773 15.6557
8/29/1980 7.814 15.6557
9/30/1980 8.021 15.6557
10/31/1980 8.159 15.6557
11/28/1980 9.024 15.6557
12/31/1980 8.622 15.6557
1/30/1981 8.216 15.6557
2/27/1981 8.303 15.6557
3/31/1981 8.53 15.6557
4/30/1981 8.333 15.6557
5/29/1981 8.328 15.6557
6/30/1981 8.736 15.6557
7/31/1981 8.404 15.6557
8/31/1981 7.90 15.6557
9/30/1981 7.561 15.6557
10/30/1981 7.837 15.6557
11/30/1981 8.123 15.6557
12/31/1981 7.716 15.6557
1/29/1982 7.582 15.6557
2/26/1982 7.114 15.6557
3/31/1982 7.069 15.6557
4/30/1982 7.352 15.6557
5/28/1982 7.067 15.6557
6/30/1982 7.145 15.6557
7/30/1982 6.988 15.6557
8/31/1982 7.792 15.6557
9/30/1982 8.124 15.6557
10/29/1982 9.044 15.6557
11/30/1982 9.369 15.6557
12/31/1982 9.653 15.6557
1/31/1983 9.982 15.6557
2/28/1983 10.199 15.6557
3/31/1983 10.714 15.6557
4/29/1983 11.484 15.6557
5/31/1983 11.35 15.6557
6/30/1983 11.807 15.6557
7/29/1983 11.434 15.6557
8/31/1983 11.576 15.6557
9/30/1983 11.519 15.6557
10/31/1983 11.357 15.6557
11/30/1983 11.79 15.6557
12/30/1983 11.187 15.6557
1/31/1984 11.05 15.6557
2/29/1984 10.047 15.6557
3/30/1984 9.836 15.6557
4/30/1984 9.865 15.6557
5/31/1984 9.252 15.6557
6/29/1984 8.881 15.6557
7/31/1984 8.705 15.6557
8/31/1984 9.612 15.6557
9/28/1984 9.319 15.6557
10/31/1984 9.30 15.6557
11/30/1984 9.14 15.6557
12/31/1984 9.362 15.6557
1/31/1985 10.054 15.6557
2/28/1985 10.147 15.6557
3/29/1985 10.097 15.6557
4/30/1985 10.041 15.6557
5/31/1985 10.59 15.6557
6/28/1985 10.877 15.6557
7/31/1985 10.799 15.6557
8/30/1985 10.675 15.6557
9/30/1985 10.579 15.6557
10/31/1985 11.04 15.6557
11/29/1985 11.748 15.6557
12/31/1985 12.351 15.6557
1/31/1986 12.367 15.6557
2/28/1986 13.241 15.6557
3/31/1986 13.822 15.6557
4/30/1986 13.659 15.6557
5/30/1986 14.385 15.6557
6/30/1986 14.433 15.6557
7/31/1986 13.577 15.6557
8/29/1986 14.53 15.6557
9/30/1986 12.947 15.6557
10/31/1986 13.643 15.6557
11/28/1986 13.911 15.6557
12/31/1986 13.418 15.6557
1/30/1987 15.168 15.6557
2/27/1987 15.685 15.6557
3/31/1987 16.29 15.6557
4/30/1987 15.972 15.6557
5/29/1987 16.074 15.6557
6/30/1987 16.506 15.6557
7/31/1987 17.186 15.6557
8/31/1987 17.806 15.6557
9/30/1987 17.512 15.6557
10/30/1987 13.745 15.6557
11/30/1987 12.511 15.6557
12/31/1987 12.87 15.6557
1/29/1988 13.315 15.6557
2/29/1988 13.814 15.6557
3/31/1988 12.573 15.6557
4/29/1988 12.594 15.6557
5/31/1988 12.574 15.6557
6/30/1988 12.489 15.6557
7/29/1988 12.371 15.6557
8/31/1988 11.867 15.6557
9/30/1988 11.471 15.6557
10/31/1988 11.731 15.6557
11/30/1988 11.459 15.6557
12/30/1988 11.202 15.6557
1/31/1989 11.924 15.6557
2/28/1989 11.513 15.6557
3/31/1989 11.283 15.6557
4/28/1989 14.042 15.6557
5/31/1989 14.326 15.6557
6/30/1989 13.948 15.6557
7/31/1989 15.346 15.6557
8/31/1989 15.475 15.6557
9/29/1989 12.704 15.6557
10/31/1989 12.433 15.6557
11/30/1989 12.65 15.6557
12/29/1989 13.218 15.6557
1/31/1990 12.342 15.6557
2/28/1990 12.419 15.6557
3/30/1990 13.325 15.6557
4/30/1990 12.984 15.6557
5/31/1990 14.162 15.6557
6/29/1990 14.716 15.6557
7/31/1990 14.612 15.6557
8/31/1990 13.206 15.6557
9/28/1990 12.643 15.6557
10/31/1990 12.566 15.6557
11/30/1990 13.298 15.6557
12/31/1990 13.725 15.6557
1/31/1991 14.25 15.6557
2/28/1991 15.192 15.6557
3/28/1991 15.215 15.6557
4/30/1991 15.227 15.6557
5/31/1991 15.776 15.6557
6/28/1991 14.877 15.6557
7/31/1991 15.578 15.6557
8/30/1991 15.92 15.6557
9/30/1991 16.097 15.6557
10/31/1991 16.297 15.6557
11/29/1991 15.643 15.6557
12/31/1991 17.947 15.6557
1/31/1992 17.499 15.6557
2/28/1992 17.558 15.6557
3/31/1992 17.969 15.6557
4/30/1992 18.48 15.6557
5/29/1992 18.539 15.6557
6/30/1992 18.092 15.6557
7/31/1992 18.836 15.6557
8/31/1992 18.557 15.6557
9/30/1992 18.562 15.6557
10/30/1992 18.567 15.6557
11/30/1992 18.736 15.6557
12/31/1992 18.918 15.6557
1/29/1993 18.99 15.6557
2/26/1993 17.811 15.6557
3/31/1993 18.162 15.6557
4/30/1993 17.497 15.6557
5/28/1993 17.414 15.6557
6/30/1993 17.526 15.6557
7/30/1993 17.385 15.6557
8/31/1993 17.742 15.6557
9/30/1993 17.571 15.6557
10/29/1993 17.734 15.6557
11/30/1993 17.837 15.6557
12/31/1993 17.995 15.6557
1/31/1994 18.477 15.6557
2/28/1994 17.399 15.6557
3/31/1994 16.665 15.6557
4/29/1994 16.819 15.6557
5/31/1994 16.454 15.6557
6/30/1994 16.046 15.6557
7/29/1994 16.544 15.6557
8/31/1994 16.733 15.6557
9/30/1994 16.284 15.6557
10/31/1994 16.05 15.6557
11/30/1994 15.107 15.6557
12/30/1994 15.221 15.6557
1/31/1995 15.604 15.6557
2/28/1995 15.306 15.6557
3/31/1995 15.599 15.6557
4/28/1995 15.954 15.6557
5/31/1995 15.689 15.6557
6/30/1995 15.964 15.6557
7/31/1995 16.267 15.6557
8/31/1995 15.581 15.6557
9/29/1995 16.229 15.6557
10/31/1995 16.182 15.6557
11/30/1995 16.561 15.6557
12/29/1995 16.901 15.6557
1/31/1996 17.404 15.6557
2/29/1996 17.677 15.6557
3/29/1996 17.934 15.6557
4/30/1996 18.204 15.6557
5/31/1996 18.331 15.6557
6/28/1996 18.41 15.6557
7/31/1996 17.492 15.6557
8/30/1996 17.486 15.6557
9/30/1996 18.379 15.6557
10/31/1996 18.879 15.6557
11/29/1996 19.726 15.6557
12/31/1996 19.443 15.6557
1/31/1997 20.666 15.6557
2/28/1997 20.813 15.6557
3/31/1997 19.89 15.6557
4/30/1997 21.188 15.6557
5/30/1997 22.504 15.6557
6/30/1997 23.469 15.6557
7/31/1997 25.327 15.6557
8/29/1997 24.099 15.6557
9/30/1997 25.349 15.6557
10/31/1997 24.502 15.6557
11/28/1997 25.688 15.6557
12/31/1997 22.249 15.6557
1/30/1998 22.44 15.6557
2/27/1998 28.363 15.6557
3/31/1998 29.845 15.6557
4/30/1998 30.162 15.6557
5/29/1998 29.574 15.6557
6/30/1998 24.656 15.6557
7/31/1998 24.352 15.6557
8/31/1998 20.609 15.6557
9/30/1998 22.008 15.6557
10/30/1998 24.025 15.6557
11/30/1998 25.786 15.6557
12/31/1998 27.918 15.6557
1/29/1999 28.998 15.6557
2/26/1999 27.599 15.6557
3/31/1999 28.584 15.6557
4/30/1999 29.294 15.6557
5/28/1999 29.10 15.6557
6/30/1999 30.709 15.6557
7/30/1999 29.754 15.6557
8/31/1999 28.661 15.6557
9/30/1999 28.146 15.6557
10/29/1999 29.935 15.6557
11/30/1999 29.543 15.6557
12/31/1999 31.493 15.6557
1/31/2000 29.85 15.6557
2/29/2000 27.57 15.6557
3/31/2000 29.976 15.6557
4/28/2000 28.61 15.6557
5/31/2000 27.162 15.6557
6/30/2000 28.455 15.6557
7/31/2000 27.907 15.6557
8/31/2000 28.704 15.6557
9/30/2000 26.876 15.6557
10/31/2000 26.095 15.6557
11/30/2000 23.997 15.6557
12/31/2000 24.204 15.6557
1/31/2001 24.592 15.6557
2/28/2001 22.65 15.6557
3/31/2001 21.32 15.6557
4/30/2001 22.918 15.6557
5/31/2001 22.837 15.6557
6/30/2001 22.642 15.6557
7/31/2001 23.084 15.6557
8/31/2001 22.335 15.6557
9/30/2001 20.649 15.6557
10/31/2001 21.447 15.6557
11/30/2001 24.37 15.6557
12/31/2001 24.711 15.6557
1/31/2002 24.395 15.6557
2/28/2002 25.199 15.6557
3/31/2002 26.25 15.6557
4/30/2002 24.38 15.6557
5/31/2002 24.46 15.6557
6/30/2002 23.20 15.6557
7/31/2002 21.54 15.6557
8/30/2002 21.50 15.6557
9/30/2002 19.23 15.6557
10/31/2002 19.98 15.6557
11/30/2002 20.54 15.6557
12/31/2002 19.42 15.6557
1/31/2003 18.38 15.6557
2/28/2003 17.657 15.6557
3/31/2003 17.91 15.6557
4/30/2003 19.50 15.6557
5/31/2003 19.59 15.6557
6/30/2003 19.78 15.6557
7/31/2003 19.89 15.6557
8/31/2003 19.88 15.6557
9/30/2003 19.63 15.6557
10/31/2003 20.72 15.6557
11/30/2003 20.50 15.6557
12/31/2003 21.51 15.6557
</Table>
P/E is the ratio of a stock's price divided by its earnings per share. In this
case, the P/E ratio is represented for the entire index. The ratio, or multiple,
reflects the price an investor is willing to pay for a dollar of expected
earnings per share.
Data Source: Stockval and Barra
FEDERAL RESERVE BANK
During 2003, the Federal Reserve Bank ("Fed") continued its aggressive monetary
stance in its efforts to stimulate a struggling economy and hold off deflation.
The Fed left the Fed Funds rate unchanged at 1.25% until June when it cut the
rate by .25% to 1.00%. In December, the Fed announced its plan to remain
"accommodative" for some time indicating future rate increases may be slow to
come. The year ended with the Fed Funds rate at 1.00% -- its lowest level in
over four decades.
[LINE GRAPH]
<Table>
<Caption>
FEDERAL FUNDS TARGET INTEREST RATE
----------------------------------
9/91 5.28
5.00
4.75
4.00
4.00
4.00
4.00
3.75
3.75
3.75
3.25
3.25
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
6/93 3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.25
3.50
3.75
4.25
4.25
4.25
4.75
4.75
4.75
5.50
5.50
5.50
6.00
6.00
6.00
6.00
6/95 6.00
5.75
5.75
5.75
5.75
5.75
5.50
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.25
5.50
5.50
5.50
6/97 5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.25
5.00
4.75
4.75
4.75
4.75
4.75
4.75
4.75
6/99 5.00
5.00
5.25
5.25
5.25
5.50
5.50
5.50
5.75
6.00
6.00
6.50
6.50
6.50
6.50
6.50
6.50
6.50
6.50
5.50
5.50
5.00
4.50
4.00
6/01 3.75
3.75
3.50
3.00
2.50
2.00
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.25
12/02 1.25
1/03 1.25
3/03 1.25
5/03 1.25
6/03 1.00
8/03 1.00
9/03 1.00
10/03 1.00
12/03 1.00
</Table>
The Federal Reserve Bank is the central bank of the U.S. with the responsibility
of implementing monetary policy. The federal funds rate is the rate banks with
excess reserves loan funds to banks needing additional reserves. The fed funds
rate is one tool the Fed can use in their efforts of controlling money supply.
It is viewed as a stimulus to the economy and to equity markets when the Fed
lowers the federal funds rate given money supply increases. Contrarily, the
opposite is true when the Fed increases the fed funds rate creating an
environment for money supply contraction.
Data Source: Bloomberg
CONSUMER CONFIDENCE
Consumer confidence fell to 61.5 in March, its lowest point of the year when the
U.S. invaded Iraq. Since March, the Conference Board index improved to higher
levels resulting from the improving economic landscape and the prospects for new
job creation. In November, the confidence level hit a 14 month high at 92.50
prior to dropping slightly to 91.70 in December.
[LINE GRAPH]
<Table>
<Caption>
CONSUMER CONFIDENCE INDEX
-------------------------
10/90 62.60
61.70
12/90 61.20
55.10
59.40
81.10
79.40
76.40
78.00
77.70
76.10
72.90
60.10
52.70
12/91 52.50
50.20
47.30
56.50
65.10
71.90
72.60
61.20
59.00
57.30
54.60
65.60
12/92 78.10
76.70
68.50
63.20
67.60
61.90
58.60
59.20
59.30
63.80
60.50
71.90
12/93 79.80
82.60
79.90
86.70
92.10
88.90
92.50
91.30
90.40
89.50
89.10
100.40
12/94 103.40
101.40
99.40
100.20
104.60
102.00
94.60
101.40
102.40
97.30
96.30
101.60
12/95 99.20
88.40
98.00
98.40
104.80
103.50
100.10
107.00
112.00
111.80
107.30
109.50
12/96 114.20
118.70
118.90
118.50
118.50
127.90
129.90
126.30
127.60
130.20
123.40
128.10
12/97 136.20
128.30
137.40
133.80
137.20
136.30
138.20
137.20
133.10
126.40
119.30
126.40
12/98 126.70
128.90
133.10
134.00
135.50
137.70
139.00
136.20
136.00
134.20
130.50
137.00
12/99 141.70
144.70
140.80
137.10
137.70
144.70
139.20
143.00
140.80
142.50
135.80
132.60
12/00 128.60
115.70
109.20
116.90
109.90
116.10
118.90
116.30
114.00
97.00
85.30
84.90
12/01 94.60
97.80
95.00
110.70
108.50
110.30
106.30
97.40
94.50
93.70
79.60
84.90
12/02 80.30
78.80
64.80
61.40
81.00
83.60
83.50
77.00
81.70
77.00
81.70
92.50
12/03 91.70
</Table>
The Consumer Confidence Index is computed on a monthly basis for the purpose of
measuring consumers' attitude toward the economy. The trend in this economic
measure is closely monitored given consumers comprise approximately two-thirds
of the U.S. economy. Generally, it is viewed as positive to the economy and
equity markets when the index increases. This reflects the fact that consumers
are positive regarding their economic outlook and that they are more willing to
spend money providing further economic stimulus.
Data Source: Bloomberg
U.S. UNEMPLOYMENT
The unemployment rate in the U.S. continued to climb through the first two
quarters of the year. Beginning the year at 5.8%, the unemployment rate elevated
to 6.30% in June, its highest level since July 1994. Following its peak,
unemployment steadily improved and ended the year at 5.70%. Although
unemployment is a lagging economic indicator, job creation resulting from the
economic recovery has been slow.
[LINE GRAPH]
<Table>
<Caption>
U.S. UNEMPLOYMENT RATE
----------------------
10/90 5.90
6.20
12/90 6.30
6.40
6.60
6.80
6.70
6.90
6.90
6.80
6.90
6.90
7.00
7.00
12/91 7.30
7.30
7.40
7.40
7.40
7.60
7.80
7.70
7.60
7.60
7.30
7.40
12/92 7.40
7.30
7.10
7.00
7.10
7.10
7.00
6.90
6.80
6.70
6.80
6.60
12/93 6.50
6.80
6.60
6.50
6.40
6.10
6.10
6.30
6.00
5.80
5.80
5.60
12/94 5.50
5.60
5.40
5.40
5.80
5.60
5.60
5.70
5.70
5.60
5.50
5.60
12/95 5.60
5.60
5.50
5.50
5.60
5.60
5.30
5.50
5.10
5.20
5.20
5.40
12/96 5.40
5.30
5.20
5.20
5.10
4.90
5.00
4.90
4.80
4.90
4.70
4.60
12/97 4.70
4.60
4.60
4.70
4.40
4.40
4.50
4.60
4.50
4.50
4.50
4.40
12/98 4.40
4.30
4.30
4.20
4.40
4.20
4.30
4.30
4.20
4.20
4.10
4.10
12/99 4.10
4.00
4.10
4.00
3.90
4.10
4.00
4.10
4.10
4.00
3.90
4.00
12/00 4.00
4.20
4.20
4.30
4.50
4.40
4.60
4.60
4.90
5.00
5.40
5.60
12/01 5.80
5.60
5.50
5.70
6.00
5.80
5.90
5.90
5.70
5.60
5.70
6.00
12/02 6.00
5.80
5.90
5.80
6.00
6.10
6.30
6.20
6.10
6.10
6.00
5.90
12/03 5.70
</Table>
The U.S. unemployment rate measures the numbers of persons unemployed as a
percentage of the labor force. Typically, unemployment tends to increase during
and be associated with difficult economic periods. Conversely, the unemployment
rate generally declines during and is accompanied by expansionary economic
times. Additionally, very low unemployment can place inflationary pressure on
the economy as labor markets become very competitive and expensive.
Data Source: Bloomberg
Not Part of the Annual Report
5
U.S. TREASURY YIELD CURVE
The U.S. Treasury yield curve maintained its upward sloping position during 2003
but shifted upward across all maturities with the exception of the short-end of
the yield curve. The majority of the increase in yields occurred between the
5-year and 10-year segment of the curve. Although inflation pressures remained
at bay, the increase in rates reflected the prospects for continued economic
growth.
[LINE GRAPH]
<Table>
12.0000/31/01 12.0000/31/02
3mo. 1.7200 1.1900
6mo. 1.7900 1.2040
2yr. 3.0220 1.5980
5yr. 4.3000 2.7340
10yr. 5.0490 3.8140
30yr. 5.4650 4.7790
Spread
3mo. -0.5306
6mo. -0.5861
2yr. -1.4241
5yr. -1.5663
10yr. -1.2351
30yr. -0.6861
</Table>
The Treasury yield curve illustrates the relationship between yields on
short-term, intermediate-term and long-term Treasury securities. Normally, the
shape of the yield curve is upward sloping with rates increasing from the short
end of the curve moving higher to the long end. The short end of the curve is
impacted more by monetary policy (demand for money) while inflationary
expectations and market forces impact the long end of the curve.
Data Source: Bloomberg
Not Part of the Annual Report
6
FLEXIBLE INCOME FUND
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the fourth quarter were 18%
U.S. equity, 7% non-U.S. equity, and 75% fixed income. The fund's composite
benchmark performance for the quarter was 3.41%.
The fund posted a positive return that was below its composite benchmark for the
fourth quarter. The fund's performance was materially impacted by its targeted
allocation of 75% to the Low-Duration Bond Fund which slightly added to the
fund's returns but negatively impacted its relative performance given the
Low-Duration Bond Fund slightly underperformed its respective benchmark during
the quarter. Allocations to each of the Equity Select Funds added to the fund's
return during the period reflecting the gain in both domestic and international
markets.
Not Part of the Annual Report
7
FLEXIBLE INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX**
----------------- ------------- -----------------
One Year 9.33% 9.06% 9.19%
Since Inception (8/27/01 -- 12/31/03) 3.73% 3.51% 4.03%
</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.
[LINE GRAPH]
<Table>
<Caption>
RETIREMENT CLASS BENCHMARK INDEX**
---------------- -----------------
8/27/01 10000.00 10000.00
8/31/01 9940.00 9926.00
9/30/01 9789.00 9818.00
10/31/01 9947.00 9948.00
11/30/01 10068.00 10105.00
12/31/01 10079.00 10142.00
1/31/02 10072.00 10107.00
2/28/02 10079.00 10109.00
3/31/02 10133.00 10175.00
4/30/02 10133.00 10162.00
5/31/02 10156.00 10177.00
6/30/02 10033.00 10075.00
7/31/02 9842.00 9956.00
8/31/02 9911.00 9990.00
9/30/02 9719.00 9789.00
10/31/02 9880.00 9986.00
11/30/02 10018.00 10107.00
12/31/02 9968.00 10050.00
1/31/03 9920.00 9981.00
2/28/03 9920.00 9968.00
3/31/03 9944.00 9990.00
4/30/03 10153.00 10216.00
5/31/03 10362.00 10401.00
6/30/03 10419.00 10456.00
7/30/03 10410.00 10476.00
8/31/03 10491.00 10544.00
9/30/03 10563.00 10611.00
10/31/03 10692.00 10745.00
11/30/03 10724.00 10783.00
12/31/03 10898.00 10973.00
</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 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 Free
ex-U.S. Index 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 Free ex-U.S. Index 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 Annual Report
8
FLEXIBLE INCOME FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ---------- ------------
AFFILIATED MUTUAL FUNDS -- 99.4%
AB Funds Trust -- Equity Index Fund
(Retirement Class)(inf) 156,730 $ 2,369,753
AB Funds Trust -- Growth Equity Fund
(Retirement Class)(inf) 1,558,967 22,682,975
AB Funds Trust -- International Equity
Fund (Retirement Class)(inf) 1,445,182 18,729,554
AB Funds Trust -- Low-Duration Bond
Fund (Retirement Class)(inf) 15,340,486 199,426,317
AB Funds Trust -- Money Market Fund
(Retirement Class)(inf) 2,175,235 2,175,235
AB Funds Trust -- Small Cap Equity
Fund (Retirement Class)(inf) 228,930 3,431,655
AB Funds Trust -- Value Equity Fund
(Retirement Class)(inf) 1,501,779 22,947,182
------------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $227,052,215) 271,762,671
------------
</Table>
<Table>
<Caption>
PAR
----------
U.S. TREASURY OBLIGATIONS -- 0.6%
U.S. Treasury Bill
0.89%, 01/22/04++++ $ 90,000 89,956
------------
U.S. Treasury Note
1.88%, 11/30/05 1,650,000 1,653,610
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,736,680) 1,743,566
------------
TOTAL INVESTMENTS -- 100.0%
(Cost $228,788,895) 273,506,237
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.0% (4,060)
------------
NET ASSETS -- 100.0% $273,502,177
============
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
9
GROWTH & INCOME FUND
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the fourth quarter were 37%
U.S. equity, 14% non-U.S. equity, and 49% fixed income. The fund's composite
benchmark performance for the quarter was 6.86%.
The fund generated a positive return but underperformed its composite benchmark
for the fourth quarter. The fund's 51% allocation to the Equity Select Funds
generated the majority of its return as both domestic and international equity
markets delivered positive returns during the quarter, while the fund's 49%
allocation to the Fixed Income Select Funds minimally impacted performance
during the quarter reflecting the flat returns in the bond markets. Allocations
to the Medium-Duration Bond Fund, Extended-Duration Bond Fund, Value Equity Fund
and the Small Cap Equity Fund benefited the fund's relative performance as they
outperformed their respective benchmarks during the quarter. Allocations to the
Low-Duration Bond Fund, the Growth Equity Fund and the International Equity Fund
detracted from relative performance by underperforming their respective
benchmarks for the quarter.
Not Part of the Annual Report
10
GROWTH & INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX**
----------------- ------------- -----------------
One Year 18.79% 18.52% 18.22%
Since Inception (8/27/01 -- 12/31/03) 4.42% 4.20% 4.74%
</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.
[LINE GRAPH]
<Table>
<Caption>
GROWTH & INC. RETIREMENT CLASS BENCHMARK INDEX**
------------------------------ -----------------
8/27/01 10000.00 10000.00
8/31/01 9854.00 9843.00
9/30/01 9410.00 9443.00
10/31/01 9643.00 9657.00
11/30/01 9920.00 9923.00
12/31/01 9953.00 9960.00
1/31/02 9901.00 9899.00
2/28/02 9901.00 9881.00
3/31/02 10049.00 10028.00
4/30/02 9953.00 9938.00
5/31/02 9960.00 9951.00
6/30/02 9664.00 9673.00
7/31/02 9234.00 9324.00
8/31/02 9345.00 9419.00
9/30/02 8916.00 8999.00
10/31/02 9160.00 9306.00
11/30/02 9442.00 9571.00
12/31/02 9319.00 9430.00
1/31/03 9216.00 9305.00
2/28/03 9201.00 9288.00
3/31/03 9216.00 9296.00
4/30/03 9642.00 9731.00
5/31/03 10044.00 10118.00
6/30/03 10131.00 10195.00
7/30/03 10092.00 10145.00
8/31/03 10265.00 10301.00
9/30/03 10375.00 10433.00
10/31/03 10651.00 10706.00
11/30/03 10738.00 10803.00
12/31/03 11070.00 11148.00
</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 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 Free
ex-U.S. Index 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 Free ex-U.S. Index 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 Annual Report
11
GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ----------- --------------
AFFILIATED MUTUAL FUNDS -- 98.9%
AB Funds Trust -- Equity
Index Fund (Retirement
Class)(inf) 1,647,129 $ 24,904,597
AB Funds Trust -- Extended-
Duration Bond Fund
(Retirement Class)(inf) 7,774,478 114,906,791
AB Funds Trust -- Growth
Equity Fund (Retirement
Class)(inf) 12,087,976 175,880,055
AB Funds Trust --
International Equity Fund
(Retirement Class)(inf) 12,580,682 163,045,642
AB Funds Trust -- Low-
Duration Bond Fund
(Retirement Class)(inf) 12,458,518 161,960,733
AB Funds Trust -- Medium-
Duration Bond Fund
(Retirement Class)(inf) 19,167,701 260,297,384
AB Funds Trust -- Money
Market Fund (Retirement
Class)(inf) 15,992,626 15,992,626
AB Funds Trust -- Small Cap
Equity Fund (Retirement
Class)(inf) 1,905,334 28,560,951
AB Funds Trust -- Value
Equity Fund (Retirement
Class)(inf) 12,099,826 184,885,335
--------------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $972,045,212) 1,130,434,114
--------------
</Table>
<Table>
<Caption>
PAR
-----------
U.S. TREASURY OBLIGATIONS -- 1.1%
U.S. Treasury Bills
0.75%, 01/22/04++++ $ 40,000 39,983
0.89%, 01/22/04++++ 630,000 629,690
0.93%, 01/22/04++++ 45,000 44,978
--------------
714,651
--------------
U.S. Treasury Note
4.75%, 11/15/08 10,660,000 11,415,367
--------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $12,058,251) 12,130,018
--------------
TOTAL INVESTMENTS -- 100.0%
(Cost $984,103,463) 1,142,564,132
OTHER ASSETS LESS
LIABILITIES -- 0.0% 166,314
--------------
NET ASSETS -- 100.0% $1,142,730,446
==============
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
12
CAPITAL OPPORTUNITIES FUND
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the quarter were 56% U.S.
equity, 20% non-U.S. equity, and 24% fixed income. The fund's composite
benchmark performance for the fourth quarter was 10.19%.
The fund generated a positive return but underperformed its composite benchmark
for the fourth quarter. With a 76% allocation to the Equity Select Funds, the
fund benefited from the strong performance in both domestic and international
equity markets. The fund's 24% allocation to the Fixed Income Select Funds
minimally impacted the fund's performance during the quarter reflecting the flat
returns in the bond markets. Allocations to the Medium-Duration Bond Fund,
Extended-Duration Bond Fund, Value Equity Fund, and Small Cap Equity Fund
benefited the fund's relative performance as these funds outperformed their
respective benchmarks during the quarter. Allocations to the Low-Duration Bond
Fund, the Growth Equity Fund and the International Equity Fund, detracted from
relative performance of the fund by underperforming their respective benchmarks
for the quarter.
Not Part of the Annual Report
13
CAPITAL OPPORTUNITIES FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX**
----------------- ------------- -----------------
One Year 25.23% 24.93% 25.70%
Since Inception (8/27/01 -- 12/31/03) 2.85% 2.60% 3.28%
</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.
[LINE GRAPH]
<Table>
<Caption>
RETIREMENT CLASS BENCHMARK INDEX**
---------------- -----------------
8/27/01 10000.00 10000.00
8/31/01 9759.00 9736.00
9/30/01 9081.00 9087.00
10/31/01 9314.00 9301.00
11/30/01 9759.00 9751.00
12/31/01 9832.00 9836.00
1/31/02 9714.00 9707.00
2/28/02 9663.00 9632.00
3/31/02 9972.00 9927.00
4/30/02 9751.00 9695.00
5/31/02 9722.00 9671.00
6/30/02 9288.00 9222.00
7/31/02 8655.00 8668.00
8/31/02 8722.00 8728.00
9/30/02 8067.00 8073.00
10/31/02 8435.00 8506.00
11/30/02 8802.00 8871.00
12/31/02 8530.00 8582.00
1/31/03 8362.00 8409.00
2/28/03 8278.00 8328.00
3/31/03 8300.00 8343.00
4/30/03 8820.00 8893.00
5/31/03 9293.00 9341.00
6/30/03 9415.00 9455.00
7/30/03 9515.00 9545.00
8/31/03 9721.00 9733.00
9/30/03 9736.00 9790.00
10/31/03 10164.00 10219.00
11/30/03 10255.00 10346.00
12/31/03 10682.00 10787.00
</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 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 Free
ex-U.S. Index 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 Free ex-U.S. Index 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 Annual Report
14
CAPITAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ---------- ------------
AFFILIATED MUTUAL FUNDS -- 99.5%
AB Funds Trust -- Equity Index Fund
(Retirement Class)(inf) 2,205,281 $ 33,343,845
AB Funds Trust -- Extended-Duration
Bond Fund (Retirement Class)(inf) 3,152,846 46,599,064
AB Funds Trust -- Growth Equity Fund
(Retirement Class)(inf) 14,263,883 207,539,502
AB Funds Trust -- International Equity
Fund (Retirement Class)(inf) 14,355,661 186,049,369
AB Funds Trust -- Low-Duration Bond
Fund (Retirement Class)(inf) 5,131,433 66,708,623
AB Funds Trust -- Medium-Duration Bond
Fund (Retirement Class)(inf) 7,265,479 98,665,206
AB Funds Trust -- Money Market Fund
(Retirement Class)(inf) 15,788,011 15,788,011
AB Funds Trust -- Small Cap Equity
Fund (Retirement Class)(inf) 2,339,236 35,065,142
AB Funds Trust -- Value Equity Fund
(Retirement Class)(inf) 14,325,829 218,898,666
------------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $801,369,604) 908,657,428
------------
<Caption>
PAR
----------
U.S. TREASURY OBLIGATIONS -- 0.5%
U.S. Treasury Bills
0.89%, 01/22/04++++ $ 855,000 854,580
0.92%, 01/22/04++++ 60,000 59,971
------------
914,551
------------
U.S. Treasury Note
4.75%, 11/15/08 3,710,000 3,972,890
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,867,613) 4,887,441
------------
TOTAL INVESTMENTS -- 100.0%
(Cost $806,237,217) 913,544,869
OTHER ASSETS LESS
LIABILITIES -- 0.0% 61,641
------------
NET ASSETS -- 100.0% $913,606,510
============
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
15
GLOBAL EQUITY FUND
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the quarter were 73% U.S.
equity, 26% non-U.S. equity, and 1% fixed income. The fund's composite benchmark
performance for the fourth quarter was 13.58%.
The fund posted a positive return but underperformed its composite benchmark for
the fourth quarter. The fund's return directly reflected a positive advance in
both domestic and international equity markets. The fund's relative performance
was positively impacted by its allocations to the Value Equity Fund and the
Small Cap Equity Fund, which outperformed their respective benchmarks for the
quarter. Primary detractors from relative performance during the quarter were
allocations to the Growth Equity Fund and the International Equity Fund, which
underperformed their respective benchmarks for the quarter.
Not Part of the Annual Report
16
GLOBAL EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX**
----------------- ------------- -----------------
One Year 31.99% 31.53% 33.48%
Since Inception (8/27/01 -- 12/31/03) 1.02% 0.85% 1.58%
</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.
[LINE GRAPH]
<Table>
<Caption>
RETIREMENT CLASS BENCHMARK INDEX**
---------------- -----------------
8/27/01 10000.00 10000.00
8/31/01 9654.00 9629.00
9/30/01 8747.00 8736.00
10/31/01 8968.00 8950.00
11/30/01 9587.00 9569.00
12/31/01 9704.00 9701.00
1/31/02 9527.00 9505.00
2/28/02 9424.00 9376.00
3/31/02 9896.00 9811.00
4/30/02 9542.00 9440.00
5/31/02 9475.00 9381.00
6/30/02 8899.00 8773.00
7/31/02 8080.00 8036.00
8/31/02 8109.00 8064.00
9/30/02 7252.00 7214.00
10/31/02 7732.00 7742.00
11/30/02 8161.00 8186.00
12/31/02 7760.00 7772.00
1/31/03 7543.00 7561.00
2/28/03 7394.00 7429.00
3/31/03 7424.00 7451.00
4/30/03 8021.00 8085.00
5/31/03 8536.00 8578.00
6/30/03 8685.00 8723.00
7/30/03 8909.00 8930.00
8/31/03 9140.00 9145.00
9/30/03 9073.00 9134.00
10/31/03 9632.00 9696.00
11/30/03 9729.00 9849.00
12/31/03 10241.00 10375.00
</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 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
Free ex-U.S. 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 Free ex-U.S. Index 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 Annual Report
17
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
----------------- ----------- ------------
AFFILIATED MUTUAL FUNDS -- 100.1%
AB Funds Trust -- Equity
Index Fund (Retirement
Class)(inf) 2,505,736 $ 37,886,732
AB Funds Trust -- Growth
Equity Fund (Retirement
Class)(inf) 17,060,373 248,228,427
AB Funds Trust --
International Equity Fund
(Retirement Class)(inf) 16,326,878 211,596,342
AB Funds Trust -- Money
Market Fund (Retirement
Class)(inf) 23,616,209 23,616,209
AB Funds Trust -- Small Cap
Equity Fund (Retirement
Class)(inf) 2,770,215 41,525,516
AB Funds Trust -- Value
Equity Fund (Retirement
Class)(inf) 16,850,911 257,481,918
------------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $726,669,301) 820,335,144
------------
</Table>
<Table>
<Caption>
PAR
----------
U.S. TREASURY OBLIGATIONS - 0.2%
U.S. Treasury Bills
0.78%, 01/22/04++++ $ 100,000 99,955
0.89%, 01/22/04++++ 1,160,000 1,159,430
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,259,351) 1,259,385
------------
TOTAL INVESTMENTS -- 100.3%
(Cost $727,928,652) 821,594,529
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.3%) (2,214,269)
------------
NET ASSETS -- 100.0% $819,380,260
============
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
18
(This page intentionally left blank)
19
STATEMENTS OF ASSETS AND LIABILITIES
<Table>
<Caption>
FLEXIBLE GROWTH & CAPITAL GLOBAL
DECEMBER 31, 2003 INCOME FUND INCOME FUND OPPORTUNITIES FUND EQUITY FUND
----------------- ------------ -------------- ------------------ ------------
ASSETS
Investments at value (1) $273,506,237 $1,142,564,132 $913,544,869 $821,594,529
Receivables:
Dividends 1,309 9,131 10,191 11,166
Interest 2,694 65,380 22,754 --
Fund shares sold 24,546 234,446 205,683 176,774
Variation margin 1,450 29,725 31,175 53,650
Receivable from administrator 78,495 -- -- --
Prepaid expenses and other assets 13,402 12,458 12,632 12,364
------------ -------------- ------------ ------------
Total Assets 273,628,133 1,142,915,272 913,827,304 821,848,483
------------ -------------- ------------ ------------
LIABILITIES
Payables:
Fund shares redeemed 1,404 35,149 101,995 2,361,628
Excise tax payable 78,495 -- -- --
Accrued expenses:
Advisory fee payable 16,093 100,685 77,676 67,277
Distribution fee payable 986 1,119 672 883
Other accrued expenses payable 28,978 47,873 40,451 38,435
------------ -------------- ------------ ------------
Total Liabilities 125,956 184,826 220,794 2,468,223
------------ -------------- ------------ ------------
NET ASSETS $273,502,177 $1,142,730,446 $913,606,510 $819,380,260
============ ============== ============ ============
NET ASSETS CONSIST OF:
Paid-in-capital $225,241,858 $ 973,041,920 $801,741,164 $724,676,245
Undistributed net investment income 2,142,437 311,947 76,440 467,766
Accumulated net realized gain (loss) on
investments 1,378,203 10,462,757 3,953,463 (133,309)
Net unrealized appreciation (depreciation) on
investments and futures transactions 44,739,679 158,913,822 107,835,443 94,369,558
------------ -------------- ------------ ------------
NET ASSETS $273,502,177 $1,142,730,446 $913,606,510 $819,380,260
============ ============== ============ ============
NET ASSET VALUE:
$0.001 par value, unlimited shares authorized
Net assets applicable to the Retail Class $ 19,674,579 $ 22,650,071 $ 13,585,322 $ 17,972,974
------------ -------------- ------------ ------------
Retail shares outstanding 2,090,552 2,441,673 1,405,297 1,796,577
------------ -------------- ------------ ------------
Net asset value, offering price and
redemption price per Retail share $ 9.41 $ 9.28 $ 9.67 $ 10.00
============ ============== ============ ============
Net assets applicable to the Retirement Class $253,827,598 $1,120,080,375 $900,021,188 $801,407,286
------------ -------------- ------------ ------------
Retirement shares outstanding 19,519,157 83,500,373 66,064,537 58,769,890
------------ -------------- ------------ ------------
Net asset value, offering and redemption
price per Retirement share $ 13.00 $ 13.41 $ 13.62 $ 13.64
============ ============== ============ ============
- ---------------
(1) Investments at cost $228,788,895 $ 984,103,463 $806,237,217 $727,928,652
============ ============== ============ ============
</Table>
See Notes to Financial Statements.
20
STATEMENTS OF OPERATIONS
<Table>
<Caption>
FLEXIBLE GROWTH & CAPITAL GLOBAL
FOR THE YEAR ENDED DECEMBER 31, 2003 INCOME FUND INCOME FUND OPPORTUNITIES FUND EQUITY FUND
- ------------------------------------ ----------- ------------ ------------------ ------------
INVESTMENT INCOME
Income distributions received from affiliated
funds # $ 5,825,153 $ 24,629,979 $ 13,310,757 $ 6,495,960
Interest 45,729 258,216 120,396 11,539
----------- ------------ ------------ ------------
Total Investment Income # 5,870,882 24,888,195 13,431,153 6,507,499
----------- ------------ ------------ ------------
EXPENSES
Investment advisory fees 276,634 1,068,038 815,010 698,550
Transfer agent fees
Retail shares 20,105 30,094 23,960 21,882
Retirement shares 17,590 18,351 17,899 18,067
Custodian fees 9,339 22,727 18,422 15,648
Distribution fees -- Retail shares 10,577 11,428 6,727 8,781
Accounting and administration fees 81,476 184,342 158,624 146,719
Professional fees 39,744 39,725 39,744 39,744
Registration fees 15,111 14,555 14,425 14,447
Shareholder reporting fees
Retail shares 16,639 36,721 24,053 19,320
Retirement shares 2,554 (1,188) (391) 238
Trustee fees 1,346 5,229 4,005 3,451
Line of credit facility fees 2,209 8,519 6,487 5,523
Excise tax 78,495 -- -- --
Other expenses 14,684 14,684 14,684 14,684
----------- ------------ ------------ ------------
Total Expenses 586,503 1,453,225 1,143,649 1,007,054
Expenses waived (192,838) (21,177) (55,595) (69,563)
Fees paid indirectly (1,024) (395) (232) (249)
----------- ------------ ------------ ------------
Net expenses 392,641 1,431,653 1,087,822 937,242
----------- ------------ ------------ ------------
NET INVESTMENT INCOME # 5,478,241 23,456,542 12,343,331 5,570,257
----------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investment securities # 8,405,491 33,666,365 12,523,263 500,051
Net realized gain on futures transactions 154,124 1,355,634 1,919,174 2,345,083
----------- ------------ ------------ ------------
Net realized gain # 8,559,615 35,021,999 14,442,437 2,845,134
----------- ------------ ------------ ------------
Change in net unrealized appreciation
(depreciation) on investment securities 10,545,964 124,515,880 157,837,538 187,588,730
Change in net unrealized appreciation
(depreciation) on futures transactions 43,665 593,787 697,183 973,494
----------- ------------ ------------ ------------
Net change in unrealized appreciation
(depreciation) 10,589,629 125,109,667 158,534,721 188,562,224
----------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN # 19,149,244 160,131,666 172,977,158 191,407,358
----------- ------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $24,627,485 $183,588,208 $185,320,489 $196,977,615
=========== ============ ============ ============
</Table>
- ---------------
# Balance has been reclassified. See Note 9.
See Notes to Financial Statements.
21
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FLEXIBLE INCOME FUND GROWTH & INCOME FUND
------------------------------- -------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED 12/31/03 ENDED 12/31/02 ENDED 12/31/03 ENDED 12/31/02
-------------- -------------- -------------- --------------
INCREASE/(DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income # $ 5,478,241 $ 8,059,012 $ 23,456,542 $ 29,354,167
Net realized gain (loss) on investment
securities and futures transactions # 8,559,615 5,783,406 35,021,999 35,438,102
Net change in unrealized appreciation
(depreciation) on investment securities
and futures transactions 10,589,629 (17,163,347) 125,109,667 (139,143,771)
------------ ------------ -------------- --------------
Net increase (decrease) in net assets
resulting from operations 24,627,485 (3,320,929) 183,588,208 (74,351,502)
------------ ------------ -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME
Retail shares (402,711) (703,267) (763,570) (742,069)
Retirement shares (4,176,812) (8,918,457) (28,642,469) (34,065,901)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
CAPITAL GAINS
Retail shares (658,891) (277,139) (621,863) (647,836)
Retirement shares (6,235,277) (3,345,180) (21,625,383) (27,969,982)
------------ ------------ -------------- --------------
Total dividends and distributions (11,473,691) (13,244,043) (51,653,285) (63,425,788)
------------ ------------ -------------- --------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS (19,531,754) 9,491,230 (25,912,931) 17,107,697
------------ ------------ -------------- --------------
Total increase (decrease) in net assets (6,377,960) (7,073,742) 106,021,992 (120,669,593)
------------ ------------ -------------- --------------
NET ASSETS:
Beginning of the Period 279,880,137 286,953,879 1,036,708,454 1,157,378,047
------------ ------------ -------------- --------------
End of the Period $273,502,177 $279,880,137 $1,142,730,446 $1,036,708,454
============ ============ ============== ==============
</Table>
- ---------------
# Balance has been reclassified. See Note 9.
See Notes to Financial Statements.
22
<Table>
<Caption>
CAPITAL OPPORTUNITIES FUND GLOBAL EQUITY FUND
------------------------------- -------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED 12/31/03 ENDED 12/31/02 ENDED 12/31/03 ENDED 12/31/02
-------------- -------------- -------------- --------------
$ 12,343,331 $ 14,072,783 $ 5,570,257 $ 4,857,408
14,442,437 13,008,299 2,845,134 (2,839,043)
158,534,721 (145,265,886) 188,562,224 (164,655,197)
------------ ------------- ------------ -------------
185,320,489 (118,184,804) 196,977,615 (162,636,832)
------------ ------------- ------------ -------------
(267,521) (250,945) (110,878) (97,128)
(14,672,538) (15,568,234) (5,053,675) (4,698,218)
(190,056) (221,031) -- (45,607)
(8,979,773) (12,144,045) -- (1,611,830)
------------ ------------- ------------ -------------
(24,109,888) (28,184,255) (5,164,553) (6,452,783)
------------ ------------- ------------ -------------
(3,431,171) 18,216,951 (1,281,018) (12,776,613)
------------ ------------- ------------ -------------
157,779,430 (128,152,108) 190,532,044 (181,866,228)
------------ ------------- ------------ -------------
755,827,080 883,979,188 628,848,216 810,714,444
------------ ------------- ------------ -------------
$913,606,510 $ 755,827,080 $819,380,260 $ 628,848,216
============ ============= ============ =============
</Table>
See Notes to Financial Statements.
23
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
FLEXIBLE INCOME FUND
------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
---------------------------------- -----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ --------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.12 $ 9.83 $ 10.00 $ 12.40 $ 13.15 $ 13.29
------- ------- ------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1) 0.21 0.23 0.10 0.31 0.38 0.17
Capital gain distributions received 0.02 0.10 0.06 0.02 0.10 0.06
Realized and unrealized gain (loss) on
investments securities and futures
transactions -- net 0.59 (0.45) (0.08) 0.82 (0.62) (0.12)
------- ------- ------- --------- -------- --------
Total from investment operations 0.82 (0.12) 0.08 1.15 (0.14) 0.11
------- ------- ------- --------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (5) (0.20) (0.42) (0.22) (0.22) (0.44) (0.22)
Distributions from capital gains (0.33) (0.17) (0.03) (0.33) (0.17) (0.03)
------- ------- ------- --------- -------- --------
Total dividends and distributions (0.53) (0.59) (0.25) (0.55) (0.61) (0.25)
------- ------- ------- --------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 9.41 $ 9.12 $ 9.83 $ 13.00 $ 12.40 $ 13.15
======= ======= ======= ========= ======== ========
TOTAL RETURN (2) 9.06% (1.27%) 0.72% 9.33% (1.10%) 0.79%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets of:
Expenses -- net (3)(4) 0.35% 0.32% 0.48% 0.13% 0.13% 0.13%
Expenses -- including expense reduction
(3)(4) 0.35% 0.32% 0.48% 0.13% 0.13% 0.13%
Expenses -- before waivers and expense
reductions (3)(4) 0.46% 0.43% 66.47% 0.20% 0.17% 0.18%
Investment income -- net (1)(3) 1.90% 2.82% 6.69% 2.01% 2.86% 3.67%
Investment income -- excluding waivers and
expense reduction (1)(3) 1.79% 2.71% (59.30%) 1.94% 2.82% 3.62%
Portfolio turnover rate (2) 13.44% 13.56% 4.02% 13.44% 13.56% 4.02%
Net Assets -- end of the period (000's) $19,674 $16,234 $ 325 $ 253,828 $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.
24
<Table>
<Caption>
GROWTH & INCOME FUND
---------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
---------------------------------- --------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ ---------- ---------- ------------
$ 8.34 $ 9.72 $10.00 $ 11.82 $ 13.44 $ 13.74
------- ------- ------ ---------- ---------- ----------
0.16 0.21 0.07 0.29 0.36 0.14
0.15 0.12 0.06 0.15 0.12 0.06
1.23 (0.96) (0.18) 1.78 (1.33) (0.27)
------- ------- ------ ---------- ---------- ----------
1.54 (0.63) (0.05) 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)
------- ------- ------ ---------- ---------- ----------
$ 9.28 $ 8.34 $ 9.72 $ 13.41 $ 11.82 $ 13.44
======= ======= ====== ========== ========== ==========
18.52% (6.59%) (0.52%) 18.79% (6.37%) (0.47%)
0.45% 0.37% 0.48% 0.13% 0.13% 0.13%
0.45% 0.37% 0.48% 0.13% 0.13% 0.13%
0.54% 0.45% 6.53% 0.13% 0.13% 0.17%
2.00% 2.64% 4.44% 2.22% 2.68% 2.87%
1.91% 2.56% (1.61%) 2.22% 2.68% 2.83%
10.38% 12.04% 4.27% 10.38% 12.04% 4.27%
$22,650 $17,009 $1,334 $1,120,080 $1,019,700 $1,156,044
======= ======= ====== ========== ========== ==========
</Table>
See Notes to Financial Statements.
25
<Table>
<Caption>
CAPITAL OPPORTUNITIES FUND
-----------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ -------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 8.01 $ 9.73 $ 10.00 $ 11.17 $ 13.37 $ 13.71
------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1) 0.11 0.12 0.03 0.19 0.22 0.08
Capital gain distributions received 0.07 0.06 0.03 0.07 0.06 0.03
Realized and unrealized gain (loss) on
investments securities and futures
transactions -- net 1.82 (1.50) (0.22) 2.56 (2.05) (0.34)
------- ------- ------- -------- -------- --------
Total from investment operations 2.00 (1.32) (0.16) 2.82 (1.77) (0.23)
------- ------- ------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (5) (0.20) (0.21) (0.11) (0.23) (0.24) (0.11)
Distributions from capital gains (0.14) (0.19) --++ (0.14) (0.19) --++
------- ------- ------- -------- -------- --------
Total dividends and distributions (0.34) (0.40) (0.11) (0.37) (0.43) (0.11)
------- ------- ------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 9.67 $ 8.01 $ 9.73 $ 13.62 $ 11.17 $ 13.37
======= ======= ======= ======== ======== ========
TOTAL RETURN (2) 24.93% (13.56%) (1.64%) 25.23% (13.25%) (1.68%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets of:
Expenses -- net (3)(4) 0.52% 0.42% 0.48% 0.13% 0.13% 0.13%
Expenses -- including expense reduction
(3)(4) 0.52% 0.42% 0.48% 0.13% 0.13% 0.13%
Expenses -- before waivers and expense
reductions (3)(4) 0.62% 0.55% 43.03% 0.14% 0.14% 0.17%
Investment income -- net (1)(3) 1.20% 1.54% 3.87% 1.54% 1.72% 1.76%
Investment income -- excluding waivers and
expense reduction (1)(3) 1.10% 1.41% (38.68%) 1.53% 1.71% 1.72%
Portfolio turnover rate (2) 7.75% 10.33% 3.42% 7.75% 10.33% 3.42%
Net Assets -- end of the period (000's) $13,585 $ 9,859 $ 331 $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.
26
<Table>
<Caption>
GLOBAL EQUITY FUND
--------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
------------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
----------- -------- ------------ -------- -------- ------------
$ 7.65 $ 9.70 $ 10.00 $ 10.40 $ 13.14 $ 13.57
------- ------- ------- -------- -------- --------
0.05 0.04 0.02 0.10 0.08 0.03
-- --++ -- -- --++ --
2.36 (2.00) (0.29) 3.23 (2.71) (0.43)
------- ------- ------- -------- -------- --------
2.41 (1.96) (0.27) 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)
------- ------- ------- -------- -------- --------
$ 10.00 $ 7.65 $ 9.70 $ 13.64 $ 10.40 $ 13.14
======= ======= ======= ======== ======== ========
31.53% (20.25%) (2.75%) 31.99% (20.04%) (2.96%)
0.43% 0.35% 0.48% 0.13% 0.13% 0.13%
0.43% 0.35% 0.48% 0.13% 0.13% 0.13%
0.48% 0.44% 66.34% 0.14% 0.14% 0.17%
0.53% 0.53% 1.57% 0.82% 0.68% 0.61%
0.48% 0.44% (64.29%) 0.81% 0.67% 0.57%
4.17% 6.33% 2.70% 4.17% 6.33% 2.70%
$17,973 $12,805 $ 207 $801,407 $616,043 $810,507
======= ======= ======= ======== ======== ========
</Table>
See Notes to Financial Statements.
27
FLEXIBLE INCOME FUND I
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the fourth quarter were 18%
U.S. equity, 7% non-U.S. equity, and 75% fixed income. The fund's composite
benchmark performance for the quarter was 3.41%.
The fund posted a positive return that was below its composite benchmark for the
fourth quarter. The fund's performance was materially impacted by its targeted
allocation of 75% to the Low-Duration Bond Fund which slightly added to the
fund's returns but negatively impacted its relative performance given the
Low-Duration Bond Fund slightly underperformed its respective benchmark during
the quarter. Allocations to each of the Equity Select Funds added to the fund's
return during the period reflecting the gain in both domestic and international
markets.
Not Part of the Annual Report
28
FLEXIBLE INCOME FUND I
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- --------- -----------
AFFILIATED MUTUAL FUNDS -- 99.0%
AB Funds Trust -- Equity Index Fund
(Institutional Class)(inf) 43,408 $ 394,144
AB Funds Trust -- Growth Equity Fund
(Institutional Class)(inf) 257,193 2,355,887
AB Funds Trust -- International Equity
Fund (Institutional Class)(inf) 183,928 2,034,240
AB Funds Trust -- Low-Duration Bond
Fund (Institutional Class)(inf) 2,153,376 20,478,608
AB Funds Trust -- Money Market Fund
(Institutional Class)(inf) 270,141 270,141
AB Funds Trust -- Small Cap Equity
Fund (Institutional Class)(inf) 29,449 339,248
AB Funds Trust -- Value Equity Fund
(Institutional Class)(inf) 248,698 2,472,053
-----------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $27,944,556) 28,344,321
-----------
</Table>
<Table>
<Caption>
PAR
---------
U.S. TREASURY OBLIGATIONS -- 1.1%
U.S. Treasury Bill
0.87%, 01/22/04++++ $ 10,000 9,995
-----------
U.S. Treasury Note
1.88%, 11/30/05 295,000 295,645
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $305,282) 305,640
-----------
TOTAL INVESTMENTS -- 100.1%
(Cost $28,249,838) 28,649,961
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.1%) (14,408)
-----------
NET ASSETS -- 100.0% $28,635,553
===========
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
29
GROWTH & INCOME FUND I
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the fourth quarter were 37%
U.S. equity, 14% non-U.S. equity, and 49% fixed income. The fund's composite
benchmark performance for the quarter was 6.86%.
The fund generated a positive return but underperformed its composite benchmark
for the fourth quarter. The fund's 51% allocation to the Equity Select Funds
generated the majority of its return as both domestic and international equity
markets delivered positive returns during the quarter, while the fund's 49%
allocation to the Fixed Income Select Funds minimally impacted performance
during the quarter reflecting the flat returns in the bond markets. Allocations
to the Medium-Duration Bond Fund, Extended-Duration Bond Fund, Value Equity Fund
and the Small Cap Equity Fund benefited the fund's relative performance as they
outperformed their respective benchmarks during the quarter. Allocations to the
Low-Duration Bond Fund, the Growth Equity Fund and the International Equity Fund
detracted from the relative performance by underperforming their respective
benchmarks for the quarter.
Not Part of the Annual Report
30
GROWTH & INCOME FUND I
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- --------- -----------
AFFILIATED MUTUAL FUNDS -- 99.0%
AB Funds Trust -- Equity Index Fund
(Institutional Class)(inf) 191,949 $ 1,742,896
AB Funds Trust -- Extended-Duration
Bond Fund (Institutional Class)(inf) 780,555 7,204,527
AB Funds Trust -- Growth Equity Fund
(Institutional Class)(inf) 1,191,324 10,912,525
AB Funds Trust -- International Equity
Fund (Institutional Class)(inf) 948,071 10,485,668
AB Funds Trust -- Low-Duration Bond
Fund (Institutional Class)(inf) 1,062,499 10,104,369
AB Funds Trust -- Medium-Duration Bond
Fund (Institutional Class)(inf) 1,745,304 16,126,608
AB Funds Trust -- Money Market Fund
(Institutional Class)(inf) 888,105 888,105
AB Funds Trust -- Small Cap Equity
Fund (Institutional Class)(inf) 174,438 2,009,522
AB Funds Trust -- Value Equity Fund
(Institutional Class)(inf) 1,185,799 11,786,844
-----------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $68,039,618) 71,261,064
-----------
</Table>
<Table>
<Caption>
PAR
---------
U.S. TREASURY OBLIGATIONS -- 1.0%
U.S. Treasury Bills
0.88%, 01/22/04++++ $ 20,000 19,990
0.89%, 01/22/04++++ 50,000 49,975
-----------
69,965
-----------
U.S. Treasury Note
4.75%, 11/15/08 615,000 658,580
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $727,268) 728,545
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost $68,766,886) 71,989,609
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.0% (7,175)
-----------
NET ASSETS -- 100.0% $71,982,434
===========
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
31
CAPITAL OPPORTUNITIES FUND I
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the quarter were 56% U.S.
equity, 20% non-U.S. equity, and 24% fixed income. The fund's composite
benchmark performance for the fourth quarter was 10.19%.
The fund generated a positive return but underperformed its composite benchmark
for the fourth quarter. With a 76% allocation to the Equity Select Funds, the
fund benefited from the strong performance in both domestic and international
equity markets. The fund's 24% allocation to the Fixed Income Select Funds
minimally impacted the fund's performance during the quarter reflecting the flat
returns in the bond markets. Allocations to the Medium-Duration Bond Fund,
Extended-Duration Bond Fund, Value Equity Fund, and Small Cap Equity Fund
benefited the fund's relative performance as these funds outperformed their
respective benchmarks during the quarter. Allocations to the Low-Duration Bond
Fund, the Growth Equity Fund and the International Equity Fund, detracted from
relative performance of the fund by underperforming their respective benchmarks
for the quarter.
Not Part of the Annual Report
32
CAPITAL OPPORTUNITIES FUND I
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- --------- -----------
AFFILIATED MUTUAL FUNDS -- 99.4%
AB Funds Trust -- Equity Index Fund
(Institutional Class)(inf) 232,598 $ 2,111,990
AB Funds Trust -- Extended-Duration
Bond Fund (Institutional Class)(inf) 315,998 2,916,665
AB Funds Trust -- Growth Equity Fund
(Institutional Class)(inf) 1,420,607 13,012,756
AB Funds Trust -- International Equity
Fund (Institutional Class)(inf) 1,053,849 11,655,565
AB Funds Trust -- Low-Duration Bond
Fund (Institutional Class)(inf) 440,793 4,191,943
AB Funds Trust -- Medium-Duration Bond
Fund (Institutional Class)(inf) 674,154 6,229,179
AB Funds Trust -- Money Market Fund
(Institutional Class)(inf) 998,982 998,982
AB Funds Trust -- Small Cap Equity
Fund (Institutional Class)(inf) 200,495 2,309,703
AB Funds Trust -- Value Equity Fund
(Institutional Class)(inf) 1,381,328 13,730,403
-----------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $52,035,877) 57,157,186
-----------
</Table>
<Table>
<Caption>
PAR
---------
U.S. TREASURY OBLIGATIONS -- 0.6%
U.S. Treasury Bills
0.89%, 01/22/04++++ $ 60,000 59,971
2.12%, 01/22/04++++ 20,000 19,990
-----------
79,961
-----------
U.S. Treasury Note
4.75%, 11/15/08 235,000 251,652
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $330,808) 331,613
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost $52,366,685) 57,488,799
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.0% (281)
-----------
NET ASSETS -- 100.0% $57,488,518
===========
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
33
GLOBAL EQUITY FUND I
Utilizing investments in the underlying Select Funds, the fund's actual
allocations to the major asset classes at the end of the quarter were 73% U.S.
equity, 26% non-U.S. equity, and 1% fixed income. The fund's composite benchmark
performance for the fourth quarter was 13.58%.
The fund posted a positive return but underperformed its composite benchmark for
the fourth quarter. The fund's return directly reflected a positive advance in
both domestic and international equity markets. The fund's relative performance
was positively impacted by its allocations to the Value Equity Fund and the
Small Cap Equity Fund, which outperformed their respective benchmarks for the
quarter. Primary detractors from relative performance during the quarter were
allocations to the Growth Equity Fund and the International Equity Fund, which
underperformed their respective benchmarks for the quarter.
Not Part of The Annual Report
34
GLOBAL EQUITY FUND I
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ------- -----------
AFFILIATED MUTUAL FUNDS -- 99.8%
AB Funds Trust -- Equity Index Fund
(Institutional Class)(inf) 131,430 $ 1,193,385
AB Funds Trust -- Growth Equity Fund
(Institutional Class)(inf) 848,919 7,776,098
AB Funds Trust -- International Equity
Fund (Institutional Class)(inf) 601,017 6,647,252
AB Funds Trust -- Money Market Fund
(Institutional Class)(inf) 551,195 551,195
AB Funds Trust -- Small Cap Equity
Fund (Institutional Class)(inf) 115,742 1,333,351
AB Funds Trust -- Value Equity Fund
(Institutional Class)(inf) 817,516 8,126,110
-----------
TOTAL AFFILIATED MUTUAL FUNDS
(Cost $22,212,613) 25,627,391
-----------
</Table>
<Table>
<Caption>
PAR
-------
U.S. TREASURY OBLIGATION -- 0.2%
U.S. Treasury Bill
0.89%, 01/22/04++++
(Cost $54,971) $55,000 54,973
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost $22,267,584) 25,682,364
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.0% (4,325)
-----------
NET ASSETS -- 100.0% $25,678,039
===========
</Table>
- ---------------
++++ All or a portion of the security was held as collateral for open futures
contracts.
See Notes to Financial Statements.
35
STATEMENTS OF ASSETS AND LIABILITIES
<Table>
<Caption>
FLEXIBLE GROWTH & CAPITAL GLOBAL
DECEMBER 31, 2003 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I
- ----------------- ------------- ------------- -------------------- -------------
ASSETS
Investments at value (1) $28,649,961 $71,989,609 $57,488,799 $25,682,364
Receivables:
Dividends 211 697 856 487
Interest 484 3,772 1,441 --
Fund shares sold -- -- 3,012 --
Variation margin 290 1,595 1,885 1,160
Receivable from advisor 4,476 2,636 5,782 4,917
Receivable from administrator 12,047 -- -- 615
Prepaid expenses and other assets 5,902 5,899 5,900 5,900
----------- ----------- ----------- -----------
Total Assets 28,673,371 72,004,208 57,507,675 25,695,443
----------- ----------- ----------- -----------
LIABILITIES
Payables:
Fund shares redeemed 10,333 1,194 -- 1,448
Excise tax payable 12,047 -- -- 615
Accrued expenses:
Other accrued expenses payable 15,438 20,580 19,157 15,341
----------- ----------- ----------- -----------
Total Liabilities 37,818 21,774 19,157 17,404
----------- ----------- ----------- -----------
NET ASSETS $28,635,553 $71,982,434 $57,488,518 $25,678,039
=========== =========== =========== ===========
NET ASSETS CONSIST OF:
Paid-in-capital $27,775,293 $67,942,962 $52,004,655 $22,214,957
Undistributed net investment income 315,742 15,757 8,708 4,151
Accumulated net realized gain on investments 140,663 782,911 323,810 29,960
Net unrealized appreciation (depreciation) on
investments and futures transactions 403,855 3,240,804 5,151,345 3,428,971
----------- ----------- ----------- -----------
NET ASSETS $28,635,553 $71,982,434 $57,488,518 $25,678,039
=========== =========== =========== ===========
NET ASSET VALUE:
$0.001 par value, unlimited shares authorized
Net assets applicable to the Institutional Class $28,635,553 $71,982,434 $57,488,518 $25,678,039
----------- ----------- ----------- -----------
Institutional shares outstanding 2,776,521 6,775,075 5,174,221 2,209,809
----------- ----------- ----------- -----------
Net asset value, offering price and redemption
price per Institutional share $ 10.31 $ 10.62 $ 11.11 $ 11.62
=========== =========== =========== ===========
- ---------------
(1) Investments at cost $28,249,838 $68,766,886 $52,366,685 $22,267,584
=========== =========== =========== ===========
</Table>
See Notes to Financial Statements.
36
STATEMENTS OF OPERATIONS
<Table>
<Caption>
FLEXIBLE GROWTH & CAPITAL GLOBAL
JULY 1, 2003* THROUGH DECEMBER 31, 2003 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I
- --------------------------------------- ------------- ------------- -------------------- -------------
INVESTMENT INCOME
Income distributions received from affiliated
funds # $ 530,036 $1,454,528 $ 808,969 $ 211,794
Interest 2,320 10,779 4,736 202
---------- ---------- ---------- ----------
Total Investment Income # 532,356 1,465,307 813,705 211,996
---------- ---------- ---------- ----------
EXPENSES
Investment advisory fees 14,045 33,787 26,404 11,630
Transfer agent fees 3,732 7,364 6,155 3,763
Custodian fees 1,152 2,956 2,805 2,216
Accounting and administration fees 4,784 10,686 8,468 4,048
Professional fees 23,615 23,615 23,615 23,615
Registration fees 1,883 4,556 3,524 1,506
Shareholder reporting fees 2,224 2,970 2,951 2,224
Trustee fees 84 199 155 70
Line of credit facility fees 102 242 188 83
Excise tax 12,047 -- -- 615
Other expenses 7,086 7,089 7,090 7,089
---------- ---------- ---------- ----------
Total Expenses 70,754 93,464 81,355 56,859
Expenses waived and reimbursed (46,485) (37,020) (37,372) (37,428)
Fees paid indirectly (55) (47) (48) (51)
---------- ---------- ---------- ----------
Net expenses 24,214 56,397 43,935 19,380
---------- ---------- ---------- ----------
NET INVESTMENT INCOME # 508,142 1,408,910 769,770 192,616
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
Net realized gain on investment securities # 301,166 1,143,060 462,798 7,698
Net realized gain on futures transactions 285 46,295 72,004 38,920
---------- ---------- ---------- ----------
Net realized gain # 301,451 1,189,355 534,802 46,618
---------- ---------- ---------- ----------
Change in net unrealized appreciation
(depreciation) on investment securities 400,123 3,222,723 5,122,114 3,414,780
Change in net unrealized appreciation
(depreciation) on futures transactions 3,732 18,081 29,231 14,191
---------- ---------- ---------- ----------
Net change in unrealized appreciation
(depreciation) 403,855 3,240,804 5,151,345 3,428,971
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN # 705,306 4,430,159 5,686,147 3,475,589
---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,213,448 $5,839,069 $6,455,917 $3,668,205
========== ========== ========== ==========
</Table>
- ---------------
* Commencement of operations.
# Balance has been reclassified. See Note 9.
See Notes to Financial Statements.
37
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FLEXIBLE GROWTH & CAPITAL GLOBAL
JULY 1, 2003* THROUGH DECEMBER 31, 2003 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I
- --------------------------------------- ------------- ------------- -------------------- -------------
INCREASE/(DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income # $ 508,142 $ 1,408,910 $ 769,770 $ 192,616
Net realized gain on investment securities and
futures transactions # 301,451 1,189,355 534,802 46,618
Net change in unrealized appreciation
(depreciation) on investment securities and
futures transactions 403,855 3,240,804 5,151,345 3,428,971
----------- ----------- ----------- -----------
Net increase in net assets resulting from
operations 1,213,448 5,839,069 6,455,917 3,668,205
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME (334,618) (1,741,769) (900,689) (192,660)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL
GAINS (22,765) (62,749) (76,286) (16,658)
----------- ----------- ----------- -----------
Total dividends and distributions (357,383) (1,804,518) (976,975) (209,318)
----------- ----------- ----------- -----------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS 27,779,488 67,947,883 52,009,576 22,219,152
----------- ----------- ----------- -----------
Total increase in net assets 28,635,553 71,982,434 57,488,518 25,678,039
----------- ----------- ----------- -----------
NET ASSETS:
Beginning of the Period -- -- -- --
----------- ----------- ----------- -----------
End of the Period $28,635,553 $71,982,434 $57,488,518 $25,678,039
=========== =========== =========== ===========
</Table>
- ---------------
* Commencement of operations.
# Balance has been reclassified. See Note 9.
See Notes to Financial Statements.
38
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
CAPITAL
FLEXIBLE GROWTH & OPPORTUNITIES GLOBAL EQUITY
INCOME FUND I INCOME FUND I FUND I FUND I
-------------- -------------- -------------- --------------
INSTITUTIONAL CLASS
-----------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
07/01/03* TO 07/01/03* TO 07/01/03* TO 07/01/03* TO
12/31/03 12/31/03 12/31/03 12/31/03
-------------- -------------- -------------- --------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1) 0.18 0.21 0.15 0.09
Capital gain distributions received 0.10 0.17 0.09 --
Realized and unrealized gain (loss) on investments
securities and futures transactions -- net 0.16 0.51 1.07 1.63
------- ------- ------- -------
Total from investment operations 0.44 0.89 1.31 1.72
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (5) (0.12) (0.26) (0.18) (0.09)
Distributions from capital gains (0.01) (0.01) (0.02) (0.01)
------- ------- ------- -------
Total dividends and distributions (0.13) (0.27) (0.20) (0.10)
------- ------- ------- -------
NET ASSET VALUE -- END OF PERIOD $ 10.31 $ 10.62 $ 11.11 $ 11.62
======= ======= ======= =======
TOTAL RETURN (2) 4.40% 8.94% 13.02% 17.16%
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) 0.51% 0.28% 0.31% 0.50%
Investment income -- net (1)(3) 4.16% 4.76% 3.24% 1.69%
Investment income -- excluding waivers and expense
reduction (1)(3) 3.82% 4.65% 3.10% 1.36%
Portfolio turnover rate (2) 8.01% 4.51% 2.95% 0.89%
Net Assets -- end of the period (000's) $28,636 $71,982 $57,489 $25,678
======= ======= ======= =======
</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 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.
39
MONEY MARKET FUND
With the exception of the very short end of the Treasury yield curve, interest
rates increased across all maturities on the prospects of positive economic
growth and some concerns over future Fed action (i.e. raising rates) during
2004. The Fed, serving as the central bank of the United States, met on two
separate occasions during the fourth quarter -- on October 28th and December
9th. Confirming the expectations of the market, the Fed left the Fed Funds rate
unchanged at 1.00% after both Federal Open Market Committee meetings. In
response to stronger economic reports, the Fed shifted its bias in December from
a balanced bias with some concerns of disinflation to a balanced risk assessment
(i.e. balanced risk of inflation and deflation). The Fed continued to indicate
that monetary policy would remain "accommodative" for a considerable time
reflecting its continued focus on subdued inflation, unemployment levels and
excess capacity. During the fourth quarter and throughout 2003, money market
yields remained low reflecting the historically low interest rate environment.
The fund is comprised of a broad range of high quality, short-term money market
instruments and utilizes a disciplined approach for the purpose of maintaining a
constant $1.00 net asset value(1). During the fourth quarter, the fund slightly
underperformed its benchmark index, the Citigroup 3-month Treasury-Bill Index.
Expectations were for the Fed to remain on hold and keep rates unchanged for the
foreseeable future. A relatively long average weighted maturity in the 60-75 day
range was maintained for the purpose of capturing additional yield. At
quarter-end, the average weighted maturity of the fund was 69 days, slightly
longer than the previous quarter-end of 65 days. Shifts in sector exposure
during the quarter included a reduction in fixed agency obligation/discount
notes and an increase in commercial paper. Major categories of holdings at
period-end included commercial paper, corporate/bank floating rate notes and
fixed agency obligation/discount notes.
- ---------------
(1) 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. The current yield more
closely reflects the current earnings of the fund than total return.
Not Part of the Annual Report
40
MONEY MARKET FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
SALOMON BROTHERS
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* 90 DAY TREASURY BILL INDEX**
----------------- -------------------- ------------- ----------------------------
One Year 0.85% 1.04% 0.57% 1.07%
Since Inception
(8/27/01 -- 12/31/03) 1.44% 1.49% 1.17% 1.62%
</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.
[LINE GRAPH]
<Table>
<Caption>
SALOMON BROTHERS 90 DAY TREASURY
RETIREMENT CLASS BILL INDEX**
---------------- --------------------------------
08/27/01 10000 10000
08/31/01 10008 10008
09/30/01 10033 10036
10/31/01 10057 10063
11/30/01 10079 10084
12/31/01 10094 10102
01/31/02 10108 10117
02/28/02 10122 10131
03/31/02 10138 10146
04/30/02 10153 10161
05/31/02 10167 10176
06/30/02 10180 10190
07/31/02 10194 10205
08/31/02 10207 10220
09/30/02 10220 10234
10/31/02 10232 10248
11/30/02 10243 10261
12/31/02 10255 10274
01/31/03 10265 10285
02/28/03 10273 10294
03/31/03 10282 10305
04/30/03 10290 10315
05/31/03 10298 10325
06/30/03 10306 10334
07/30/03 10312 10343
08/31/03 10318 10352
09/30/03 10324 10359
10/31/03 10330 10368
11/30/03 10336 10376
12/31/03 10342 10384
</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 Salomon Brothers 90-Day
Treasury Bill 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 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.
Not Part of the Annual Report
41
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 PAR VALUE
- ----------------- ----------- ------------
AGENCY OBLIGATIONS -- 18.6%
Federal Home Loan Bank 4.88%,
04/16/04 $25,000,000 $ 25,255,431
Federal Home Loan Mortgage
Corporation
1.22%, 03/25/04 12,000,000 11,965,840
1.20%, 09/09/04 15,434,000 15,304,354
1.38%, 11/15/04 20,000,000 20,000,000
1.47%, 11/29/04 19,000,000 19,000,000
Federal National Mortgage
Association
5.13%, 02/13/04 10,000,000 10,044,072
1.08%, 03/03/04 11,000,000 10,979,540
5.63%, 05/14/04 5,000,000 5,077,587
3.00%, 06/15/04 10,000,000 10,079,940
1.50%, 12/03/04 15,000,000 15,000,000
1.55%, 12/08/04 9,000,000 9,000,000
Student Loan Mortgage
Association
4.75%, 04/23/04 19,750,000 19,960,944
------------
TOTAL AGENCY OBLIGATIONS
(Cost $171,667,708) 171,667,708
------------
CERTIFICATES OF DEPOSIT -- 9.7%
Citibank NA
1.09%, 03/10/04 25,000,000 25,000,000
Washington Mutual Bank FA
1.13%, 01/16/04 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 $90,000,000) 90,000,000
------------
COMMERCIAL PAPER -- 42.1%
Atomium Funding Corporation
1.12%, 01/09/04 15,123,000 15,119,236
Citigroup Global Markets
Holdings, Inc.
1.10%, 01/20/04++ 20,000,000 20,000,000
Countrywide Home Loans, Inc.
1.00%, 01/02/04 6,494,000 6,493,820
Dorada Finance, Inc.
1.10%, 01/15/04 15,000,000 14,993,583
Edison Asset Securitization
LLC
1.09%, 01/12/04 10,000,000 9,996,669
General Electric Capital
Corporation
1.10%, 02/12/04 10,000,000 9,987,167
1.10%, 02/17/04 32,000,000 31,954,044
HBOS Treasury Services PLC
1.09%, 03/17/04 43,000,000 42,901,052
K2 (USA) LLC
1.13%, 03/22/04 28,000,000 27,928,810
Morgan Stanley
1.08%, 01/26/04 5,000,000 4,996,250
</Table>
<Table>
<Caption>
PAR VALUE
----------- ------------
Natexis Banques Populaires US
Finance Co. LLC
1.08%, 03/18/04 $25,000,000 $ 24,942,250
Nordea North America, Inc.
1.08%, 01/06/04 23,000,000 22,996,550
Regency Markets No. 1 LLC
1.11%, 01/14/04 12,000,000 11,995,190
Scaldis Capital LLC
1.10%, 03/17/04 25,000,000 24,941,944
1.10%, 03/19/04 7,091,000 7,074,100
Silver Tower US Funding LLC
1.12%, 01/06/04 40,000,000 39,993,779
Thames Asset Global
Securitization
1.10%, 01/23/04 39,387,000 39,360,524
Yorktown Capital LLC
1.08%, 01/20/04 32,740,000 32,721,338
------------
TOTAL COMMERCIAL PAPER
(Cost $388,396,306) 388,396,306
------------
MASTER NOTES -- 6.5%
Merrill Lynch Mortgage
Capital, Inc.
1.13%, 01/02/04 25,000,000 25,000,000
Morgan Stanley Mortgage
Capital
1.17%, 01/02/04 35,000,000 35,000,000
------------
TOTAL MASTER NOTES
(Cost $60,000,000) 60,000,000
------------
VARIABLE RATE OBLIGATIONS -- 22.8%
American Express Centurion
Bank
1.15%, 01/13/04++ 25,000,000 25,000,000
Bear Stearns Cos., Inc.
1.15%, 03/05/04++ 7,000,000 7,000,000
Goldman Sachs Group, Inc.
1.14%, 03/08/04++ 30,000,000 30,000,000
John Hancock Global Funding
II
1.22%, 03/11/04 144A++ 10,000,000 10,006,370
1.27%, 03/15/04 144A++ 10,000,000 10,009,293
1.32%, 03/29/04 144A++ 6,000,000 6,007,730
Lehman Brothers Holdings,
Inc.
1.07%, 01/02/04++ 10,000,000 10,000,000
Merrill Lynch & Co., Inc.
1.55%, 03/18/04++ 8,000,000 8,007,285
Metlife Global Funding
1.15%, 01/28/04++ 10,000,000 10,000,000
National City Bank of Indiana
1.04%, 01/02/04++ 30,000,000 29,997,223
1.05%, 01/02/04++ 10,000,000 9,999,686
U.S. Bank NA
1.05%, 01/02/04++ 25,000,000 24,999,829
</Table>
See Notes to Financial Statements.
42
<Table>
<Caption>
PAR VALUE
----------- ------------
Wells Fargo Bank NA
1.04%, 01/01/04++ $20,000,000 $ 20,000,000
1.04%, 01/02/04++ 10,000,000 10,000,000
------------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $211,027,416) 211,027,416
------------
</Table>
<Table>
<Caption>
SHARES
-----------
MUTUAL FUND -- 0.0%
Northern Institutional
Liquid Assets Portfolio
sec.
(Cost $195,700) 195,700 195,700
--------------
TOTAL INVESTMENTS -- 99.7%
(Cost $921,287,130) 921,287,130
OTHER ASSETS LESS
LIABILITIES -- 0.3% 3,183,082
--------------
NET ASSETS -- 100.0% $ 924,470,212
==============
</Table>
See Notes to Financial Statements.
43
LOW-DURATION BOND FUND
Short-term Treasury yields increased during the fourth quarter, specifically in
October and November, reflecting the prospects of an improving economy resulting
from both monetary and fiscal stimulus. Given the inverse relationship between
yields and bond prices, the rise in interest rates dampened short-term bond
prices during the period; therefore, interest income was an important factor in
generating positive returns. Yields on the 2-year and 5-year Treasury Notes
increased 0.36% and 0.42%, respectively. In addition, the short-end of the yield
curve steepened as evidenced by the yield spread between the 2-year and the
5-year Treasury Notes which increased by 0.06% during the period. The theme for
the quarter was that investors sought yield-producing securities; therefore,
non-Treasury sectors, such as corporate bonds, were the better performers as the
demand for such securities elevated prices. Low-duration bonds provided modest
positive returns during the period as measured by the Merrill Lynch 1-3 Year
Treasury Index, which posted a quarterly return of 0.15% with all of the
positive performance being generated in the month of December.
The fund, comprised of high quality, fixed income securities primarily with
shorter maturities, produced a positive absolute return for the fourth quarter,
but slightly underperformed its all Treasury benchmark index, the Merrill Lynch
1-3 Year Treasury-Bill Index with most of the underperformance occurring during
December. Given the accumulated excess return generated in previous quarters,
the fund did outpace its benchmark for the calendar year 2003. During the
quarter, the Fund benefited from its exposure to non-Treasury sectors, such as
corporates and emerging market debt. Corporate bond spreads narrowed (pushing
bond prices higher) reflecting the improvement in the economy, corporate profits
and market liquidity. Emerging market bonds benefited from strong demand as
investors sought to take advantage of improving fundamentals and higher
incremental yields. The fund's performance was negatively impacted by yield
curve positioning. One of the three sub-advisers within the
fund -- BlackRock -- generated an excess return relative to the benchmark during
the quarter. At quarter-end, approximately 89% of the fund was rated
AAA/Government with major categories of holdings including Treasury/agency and
mortgages.
Not Part of the Annual Report
44
LOW-DURATION BOND FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
MERRILL LYNCH 1-3
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* YEAR TREASURY INDEX**
----------------- -------------------- ------------- ---------------------
One Year 2.45% 2.61% 2.20% 1.90%
Since Inception (8/27/01 -- 12/31/03) 4.31% 4.27% 4.02% 4.40%
</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.
[LINE GRAPH]
<Table>
<Caption>
MERRILL LYNCH 1-3 YEAR TREASURY
RETIREMENT CLASS INDEX**
---------------- -------------------------------
08/27/01 10000 10000
08/31/01 10023 10025
09/30/01 10150 10190
10/31/01 10256 10286
11/30/01 10217 10264
12/31/01 10196 10268
01/31/02 10242 10288
02/28/02 10288 10338
03/31/02 10208 10268
04/30/02 10334 10383
05/31/02 10381 10425
06/30/02 10402 10512
07/31/02 10459 10641
08/31/02 10550 10677
09/30/02 10633 10765
10/31/02 10661 10790
11/30/02 10663 10757
12/31/02 10778 10859
01/31/03 10800 10857
02/28/03 10866 10902
03/31/03 10890 10922
04/30/03 10918 10943
05/31/03 10991 10984
06/30/03 11006 11001
07/30/03 10888 10941
08/31/03 10910 10948
09/30/03 11034 11048
10/31/03 10984 11007
11/30/03 10995 11001
12/31/03 11042 11065
</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 Annual Report
45
LOW-DURATION BOND FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 PAR VALUE
- ----------------- ----------- --------------
AGENCY OBLIGATIONS -- 10.5%
Federal Home Loan Bank
1.06%, 01/16/04 $ 2,600,000 $ 2,598,983
1.03%, 01/23/04 3,300,000 3,297,933
Federal Home Loan Mortgage
Corporation
1.06%, 01/08/04 40,500,000 40,492,307
1.06%, 01/15/04 5,000,000 4,998,101
1.08%, 02/12/04 9,000,000 8,989,744
4.25%, 03/22/06 3,850,000 3,875,868
3.13%, 08/25/06 3,350,000 3,388,083
4.75%, 12/08/10 2,165,000 2,189,036
Federal National Mortgage
Association
1.08%, 01/28/04 1,700,000 1,698,721
1.01%, 02/03/04 400,000 399,630
1.07%, 02/11/04 2,100,000 2,097,665
1.03%, 03/31/04 500,000 498,698
4.45%, 05/03/05 3,325,000 3,365,113
6.63%, 10/15/07 3,200,000 3,611,402
6.00%, 05/15/08 30,000 33,287
Small Business
Administration
6.95%, 11/10/16 2,327,740 2,557,357
--------------
TOTAL AGENCY OBLIGATIONS
(Cost $83,786,162) 84,091,928
--------------
ASSET-BACKED SECURITIES -- 7.0%
Aames Mortgage Trust
1.56%, 01/15/04 131,232 131,332
Amresco Independence
Funding, Inc.
3.50%, 06/15/26 1,474,264 1,474,264
Bayview Financial
Acquisition Trust
7.01%, 05/25/29 652,409 670,694
Business Loan Express
3.00%, 01/15/04 935,505 904,809
Capital Auto Receivables
Asset Trust
3.58%, 10/16/06++++ 2,400,000 2,457,750
Chase Funding Mortgage Loan
Asset-Backed Certificates
5.04%, 05/30/05 1,200,000 1,207,603
Citibank Credit Card
Issuance Trust
2.50%, 04/07/08 3,950,000 3,961,299
Citibank Credit Card Master
Trust I
8.12%, 08/15/06 PO (omg) 2,600,000 2,581,343
Conseco Finance
Securitizations
Corporation
1.49%, 01/15/04 348,909 348,633
8.07%, 12/01/30 1,164,291 1,184,952
7.30%, 05/01/31 27,688 27,686
Daimler Chrysler Auto Trust
6.16%, 01/08/06 2,267,212 2,313,004
2.25%, 08/08/07 3,000,000 2,962,800
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Daimler Chrysler Master
Owner Trust
1.22%, 01/15/04 $ 3,000,000 $ 3,000,052
Ford Credit Auto Owner
Trust
4.83%, 02/15/05 593,970 596,394
Green Tree Financial
Corporation
6.06%, 04/01/18 969,100 982,056
6.04%, 11/01/29 48,903 50,923
Honda Auto Receivables
Owner Trust
2.30%, 10/18/07 3,050,000 3,054,766
Nissan Auto Receivables
Owner Trust
4.31%, 05/16/05 575,214 576,922
3.58%, 09/15/05 1,976,980 1,990,880
3.99%, 12/15/05 3,011,843 3,043,845
5.35%, 10/15/06 3,275,000 3,324,583
4.80%, 02/15/07 4,225,000 4,327,323
PBG Equipment Trust
6.27%, 01/20/12 1,162,388 1,211,114
Sears Credit Account Master
Trust
7.00%, 07/15/08 806,458 819,482
5.25%, 10/16/08 1,135,417 1,154,224
Sequoia Mortgage Trust
2.39%, 10/25/24 1,402,504 1,402,504
SLM Student Loan Trust
1.20%, 03/15/04 2,400,000 2,400,259
1.24%, 01/25/07 13,487 13,490
1.21%, 01/25/09 796,799 796,759
1.21%, 01/25/11 1,339,791 1,340,171
SVO Timeshare Mortgage
Corporation
5.47%, 10/20/13@ 3,655,045 3,790,965
The Money Store Business
Loan Backed Certificates
1.90%, 04/15/28 673,367 662,276
TMS SBA Loan Trust
1.86%, 04/15/24 601,941 583,173
1.75%, 01/15/25 703,088 665,240
2.23%, 01/25/25 421,853 419,617
--------------
TOTAL ASSET-BACKED SECURITIES
(Cost $56,030,417) 56,433,187
--------------
CERTIFICATES OF DEPOSIT -- 0.8%
Citibank NA
1.10%, 02/19/04
(Cost $6,300,000) 6,300,000 6,300,031
--------------
COMMERCIAL PAPER -- 2.3%
Danske Corporation
1.08%, 02/13/04 4,000,000 3,995,006
1.09%, 02/17/04 4,300,000 4,294,049
Lloyds TSB Bank PLC
1.06%, 01/22/04 500,000 499,695
Shell Finance (UK) PLC
1.10%, 03/16/04 800,000 798,298
</Table>
See Notes to Financial Statements.
46
<Table>
<Caption>
PAR VALUE
----------- --------------
UBS Finance (Delaware) LLC
1.08%, 02/25/04 $ 8,700,000 $ 8,686,394
Westpac Trust Securities,
Ltd.
1.08%, 02/05/04 300,000 299,701
--------------
TOTAL COMMERCIAL PAPER
(Cost $18,572,004) 18,573,143
--------------
CORPORATE BONDS -- 7.9%
Alcoa, Inc.
1.46%, 03/08/04 930,000 932,292
Allstate Corporation (The)
7.88%, 05/01/05 830,000 895,706
Allstate Financial Global
Funding
5.25%, 02/01/07 500,000 537,823
American Electric Power
Co., Inc.
6.13%, 05/15/06 730,000 787,160
American International
Group, Inc.
2.85%, 12/01/05 1,300,000 1,320,228
AOL Time Warner, Inc.
5.63%, 05/01/05 2,210,000 2,314,301
AT&T Corporation
7.25%, 11/15/06 780,000 863,226
AT&T Wireless Services,
Inc.
7.35%, 03/01/06 700,000 765,932
Bank One Corporation
6.50%, 02/01/06 1,242,000 1,348,832
Centerior Energy
Corporation
7.67%, 07/01/04 1,500,000 1,542,891
Citigroup, Inc.
6.75%, 12/01/05 1,600,000 1,739,002
Coca-Cola Co. (The)
4.00%, 06/01/05 1,240,000 1,281,048
ConocoPhillips
8.50%, 05/25/05 1,045,000 1,139,555
DaimlerChrysler NA Holding
Corporation
6.90%, 09/01/04 3,200,000 3,301,562
Devon Energy Corporation
2.75%, 08/01/06 800,000 800,865
Dominion Resources, Inc.
7.63%, 07/15/05 650,000 702,480
Ford Motor Credit Co.
7.50%, 03/15/05 500,000 527,858
6.88%, 02/01/06 3,190,000 3,406,362
FPL Group Capital, Inc.
3.25%, 04/11/06 1,465,000 1,491,563
General Dynamics
Corporation
2.13%, 05/15/06 1,205,000 1,198,698
General Electric Capital
Corporation
9.83%, 12/15/08 350,000 439,593
General Mills, Inc.
2.63%, 10/24/06 800,000 796,144
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
General Motors Acceptance
Corporation
1.88%, 01/20/04 $ 3,100,000 $ 3,100,815
6.75%, 01/15/06 650,000 698,138
IBM Corporation
1.30%, 03/10/04 1,200,000 1,201,408
International Paper Co.
8.13%, 07/08/05 680,000 741,023
Kellogg Co.
6.00%, 04/01/06 700,000 750,473
Lehman Brothers Holdings,
Inc.
6.25%, 05/15/06 1,300,000 1,413,101
Masco Corporation
6.75%, 03/15/06 700,000 763,475
Mellon Bank NA
6.50%, 08/01/05 1,000,000 1,070,043
Merrill Lynch and Co., Inc.
2.94%, 01/30/06 1,400,000 1,418,768
MetLife, Inc.
3.91%, 05/15/05 1,300,000 1,337,341
National Rural Utilities
Cooperative Finance
Corporation
3.00%, 02/15/06 1,120,000 1,134,563
Pemex Project Funding
Master Trust
8.50%, 02/15/08 350,000 400,750
Premium Asset Trust
1.47%, 02/27/04@ 2,000,000 2,005,056
Qwest Capital Funding, Inc.
5.88%, 08/03/04 3,000,000 3,022,500
SLM Corporation
1.33%, 01/26/04 1,200,000 1,202,138
3.63%, 03/17/08 120,000 119,603
Southtrust Bank NA
1.25%, 02/24/04 1,200,000 1,200,846
Sprint Capital Corporation
7.13%, 01/30/06 3,700,000 4,005,235
TCI Communications, Inc.
6.88%, 02/15/06 700,000 760,397
Time Warner, Inc.
6.13%, 04/15/06 700,000 754,052
Toyota Motor Credit
Corporation
2.80%, 01/18/06 1,060,000 1,079,716
US Bancorp
3.95%, 08/23/07 1,400,000 1,441,688
Verizon Wireless Capital
LLC
1.24%, 05/23/05@ 1,400,000 1,398,895
Washington Mutual Bank FA
1.51%, 07/25/06 1,500,000 1,509,554
</Table>
See Notes to Financial Statements.
47
LOW-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
Wells Fargo Co.
7.25%, 08/24/05 $ 1,270,000 $ 1,380,136
Worldcom, Inc. -- WorldCom
Group
7.38%, 01/15/11 144A# 3,900,000 1,316,250
--------------
TOTAL CORPORATE BONDS
(Cost $65,019,130) 63,359,085
--------------
FOREIGN BONDS -- 6.6%
BERMUDA -- 0.1%
Tyco International Group SA
6.38%, 06/15/05 860,000 909,450
--------------
CANADA -- 1.3%
Alcan, Inc.
1.43%, 12/08/04 (omg)@ 3,100,000 3,092,740
Canadian Government Bond
4.25%, 09/01/08 (C) 7,650,000 6,005,154
Quebec Province
6.50%, 01/17/06 1,190,000 1,284,618
--------------
10,382,512
--------------
CHILE -- 0.4%
Republic of Chile
5.63%, 07/23/07 750,000 806,370
7.13%, 01/11/12 2,300,000 2,631,429
--------------
3,437,799
--------------
CROATIA -- 0.1%
Croatia Government
2.19%, 02/02/04 954,546 954,598
--------------
FRANCE -- 0.2%
Total Fina Elf SA
7.00%, 10/05/05 1,470,000 1,593,396
--------------
GERMANY -- 1.2%
Bundesobligation
3.00%, 04/11/08 (E) 7,865,000 9,756,617
--------------
MALAYSIA -- 0.1%
Government of Malaysia
8.75%, 06/01/09 300,000 368,799
Petroliam Nasional BHD
7.13%, 10/18/06 350,000 389,583
--------------
758,382
--------------
MEXICO -- 0.8%
Grupo Televisa SA
8.63%, 08/08/05 350,000 385,438
United Mexican States
6.38%, 01/16/13 2,280,000 2,371,200
11.38%, 09/15/16 700,000 994,000
8.00%, 09/24/22 2,700,000 2,960,551
--------------
6,711,189
--------------
SOUTH AFRICA -- 0.1%
Republic of South Africa
9.13%, 05/19/09 600,000 724,500
--------------
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
SUPRANATIONAL -- 0.2%
International Bank for
Reconstruction and
Development
6.02%, 06/21/04 $ 1,200,000 $ 1,226,250
--------------
SWEDEN -- 0.8%
Swedish Government Bond
3.50%, 04/20/06 (W) 46,650,000 6,499,724
--------------
TUNISIA -- 0.4%
Banque Centrale de Tunisie
7.38%, 04/25/12 2,400,000 2,706,000
--------------
UNITED KINGDOM -- 0.9%
British Telecommunications
PLC
7.88%, 12/15/05 405,000 446,559
HBOS Treasury Services PLC
1.22%, 03/14/05 1,200,000 1,200,906
Holmes Financing PLC
1.30%, 01/15/08 2,600,000 2,599,948
Permanent Financing PLC
1.32%, 09/10/07 2,800,000 2,800,000
--------------
7,047,413
--------------
TOTAL FOREIGN BONDS
(Cost $50,043,911) 52,707,830
--------------
MORTGAGE-BACKED SECURITIES -- 17.8%
Asset Securitization
Corporation
7.32%, 01/13/30 946,164 979,026
Bear Stearns Adjustable
Rate Mortgage Trust
6.74%, 01/01/04 90,428 90,394
4.83%, 01/25/34 2,776,237 2,794,911
Countrywide Alternative
Loan Trust
6.00%, 10/25/32 2,106,587 2,162,245
Countrywide Home Loans,
Inc.
6.05%, 04/25/29 1,156,679 1,156,929
6.50%, 08/25/29 2,765,000 2,880,857
3.37%, 06/19/31 366,479 369,571
Credit-Based Asset
Servicing and
Securitization LLC
1.44%, 01/25/04 1,003,416 999,580
CS First Boston Mortgage
Securities Corporation
1.52%, 02/25/32 566,216 566,543
Federal Home Loan Mortgage
Corporation
2.39%, 01/01/04 752,578 745,052
3.70%, 01/01/04 166,941 172,848
9.50%, 10/01/04 9,385 9,621
9.50%, 12/01/04 12,171 12,477
9.50%, 01/01/05 13,987 14,339
9.50%, 06/01/05 17,303 18,213
5.75%, 07/28/05 2,221,745 2,280,252
10.00%, 12/01/05 1,409 1,431
</Table>
See Notes to Financial Statements.
48
<Table>
<Caption>
PAR VALUE
----------- --------------
8.00%, 03/01/06 $ 2,254 $ 2,364
7.00%, 05/01/06 5,258 5,412
8.75%, 08/01/06 5,243 5,325
6.50%, 08/15/07 572,426 586,063
8.50%, 12/01/07 21,290 22,666
8.50%, 01/01/08 17,016 18,100
8.00%, 05/01/08 27,193 28,233
8.50%, 06/01/08 19,920 20,688
8.25%, 07/01/08 4,036 4,253
8.75%, 07/01/08 15,497 16,708
8.00%, 01/01/09 8,738 9,276
7.50%, 03/01/09 101,736 105,163
5.50%, 04/01/09 1,617,226 1,688,066
6.00%, 06/01/09 699,530 735,981
6.00%, 07/01/10 1,380,501 1,452,436
6.50%, 06/01/11 1,471,505 1,560,229
16.25%, 07/01/11 2,581 3,077
15.25%, 08/01/11 2,898 3,406
6.00%, 09/01/13 326,899 343,343
6.00%, 10/01/13 309,542 325,113
6.00%, 11/01/13 2,000,155 2,100,769
6.00%, 06/01/14 440,101 461,418
5.00%, 11/15/16 8,493,717 8,756,066
10.75%, 02/01/19 144,729 160,606
4.60%, 09/01/23 1,173,737 1,193,699
7.33%, 03/01/31 170,428 174,390
6.00%, 04/01/33 4,665,054 4,822,787
3.50%, 12/15/33 1,800,000 1,832,544
Federal Housing Authority
7.43%, 09/01/22 40,610 43,239
Federal National Mortgage
Association
6.28%, 01/01/04 1,650,919 1,701,961
3.47%, 01/02/04 352,452 358,822
3.77%, 01/02/04 1,823,349 1,891,439
4.99%, 01/02/04 203,326 204,031
5.19%, 01/02/04 1,688,301 1,728,704
7.00%, 06/01/04 238 238
6.00%, 08/01/08 605,233 637,293
6.50%, 11/01/08 793,163 840,063
5.50%, 06/01/09 1,121,320 1,167,518
5.50%, 07/01/09 817,441 851,119
3.00%, 08/25/09 4,010,000 4,035,989
3.50%, 09/25/09 3,500,000 3,557,883
6.00%, 11/01/10 1,652,876 1,738,886
6.00%, 12/01/10 773,716 814,700
6.00%, 03/01/11 400,734 421,302
6.00%, 08/01/11 778,733 818,702
5.50%, 04/01/13 871,822 906,783
6.00%, 05/01/13 693,447 729,039
6.00%, 02/01/14 525,420 552,248
6.00%, 03/01/14 887,370 932,632
6.00%, 04/01/14 175,073 184,021
6.00%, 12/01/14 4,729,733 4,970,028
3.66%, 08/01/22 850,421 877,702
3.70%, 02/01/24 1,743,294 1,808,371
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
9.00%, 05/01/25 $ 561,243 $ 626,831
9.00%, 07/01/25 491,295 548,624
5.16%, 12/01/30 135,855 138,257
6.68%, 02/01/31 325,720 331,026
3.31%, 03/25/32 1,060,501 1,060,501
4.34%, 03/11/33 1,897,174 1,941,282
4.34%, 04/01/33 3,584,680 3,644,572
5.50%, 05/01/33 393,222 398,542
4.32%, 06/01/33 968,505 983,475
5.50%, 06/01/33 979,950 993,208
5.50%, 07/01/33 59,593 60,399
5.50%, 08/01/33 481,178 487,688
4.36%, 10/01/33 3,983,551 4,045,219
5.50%, 10/01/33 497,460 504,190
4.45%, 12/01/33 1,200,000 1,224,000
5.00%, 01/01/34 TBA 6,000,000 5,936,250
FFCA Secured Lending
Corporation
7.27%, 02/18/11 1,774,447 1,740,294
First Republic Mortgage
Loan Trust
3.97%, 06/25/30 1,090,118 1,096,427
Government National
Mortgage Association
5.63%, 01/01/04 297,494 306,344
1.35%, 01/16/04 1,726,979 1,726,126
1.78%, 01/16/04 1,099,858 1,109,786
8.25%, 08/15/04 2,089 2,127
8.25%, 03/15/06 5,348 5,640
8.25%, 05/15/06 11,946 12,624
7.00%, 10/15/07 3,678 3,919
7.00%, 11/15/07 90,810 96,758
7.00%, 12/15/07 60,073 64,009
7.00%, 01/15/08 2,112 2,267
7.00%, 05/15/08 29,417 31,584
7.00%, 06/15/08 9,234 9,915
7.00%, 07/15/08 179,624 192,855
7.00%, 08/15/08 124,428 133,593
7.00%, 09/15/08 220,767 237,029
7.00%, 09/18/08 145,605 156,330
7.00%, 11/15/08 248,506 266,810
6.00%, 12/15/08 630,571 666,857
7.00%, 04/15/09 53,022 56,890
6.00%, 02/15/11 981,352 1,038,385
13.50%, 02/15/11 4,275 4,949
7.00%, 05/12/12 443,383 476,070
4.38%, 06/20/17 55,995 57,161
4.38%, 06/20/21 35,018 35,719
7.00%, 08/15/28 52,680 56,235
7.00%, 11/15/28 259,595 277,115
7.00%, 07/15/29 43,953 46,875
8.50%, 10/15/29 173,824 189,137
8.50%, 01/15/30 119,705 130,178
8.50%, 03/15/30 42,969 46,729
8.50%, 04/15/30 292,164 317,727
8.50%, 05/15/30 592,011 643,810
</Table>
See Notes to Financial Statements.
49
LOW-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
8.50%, 06/15/30 $ 305,051 $ 331,742
8.50%, 07/15/30 766,274 877,941
8.50%, 08/15/30 135,167 146,992
8.50%, 09/15/30 26,167 28,457
8.50%, 10/15/30 82,850 90,098
8.50%, 11/15/30 367,209 399,338
8.50%, 12/15/30 414,146 450,381
7.00%, 01/15/31 65,577 69,911
8.50%, 01/15/31 118,473 128,806
7.00%, 02/15/31 69,697 74,303
8.50%, 02/15/31 260,084 282,767
7.00%, 04/15/31 142,302 151,706
7.00%, 06/15/31 273,812 291,906
7.00%, 07/15/31 254,344 271,156
7.00%, 08/15/31 1,348,650 1,437,775
7.00%, 09/15/31 593,684 632,999
7.00%, 10/15/31 100,008 106,617
7.00%, 12/15/31 182,121 194,156
7.00%, 02/15/32 108,064 115,163
7.00%, 04/15/32 48,090 51,249
7.00%, 05/15/32 316,717 337,524
7.00%, 07/15/32 951,871 1,014,403
7.00%, 09/15/32 245,955 262,113
7.00%, 10/15/32 862,829 919,511
6.75%, 10/16/40 3,514,464 3,671,327
GS Mortgage Securities
Corporation II
3.77%, 01/02/04(omg) 45,435,000 1,826,417
6.04%, 08/15/18 579,237 616,431
IFC SBA Loan-Backed
Adjustable Rate
Certificate
2.00%, 01/15/24++ 925,675 907,162
LB-UBS Commercial Mortgage
Trust
3.73%, 08/15/33(omg) 38,255,000 1,745,020
Mellon Residential Funding
Corporation
6.75%, 01/25/13 15,294 15,294
MLCC Mortgage Investors,
Inc.
1.49%, 01/15/04 1,659,320 1,660,117
Morgan Stanley Capital I
6.22%, 02/07/04 1,329,630 1,388,021
Residential Accredit Loans,
Inc.
6.00%, 12/25/16 899,844 923,183
Residential Funding
Mortgage Securities I
6.50%, 03/25/32 613,345 632,314
Salomon Brothers Mortgage
Securities IV
7.15%, 03/25/25 4,307,859 4,534,136
Security National Mortgage
Loan Trust
5.79%, 01/25/04@ 272,040 272,076
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Sequoia Mortgage Trust
1.55%, 10/20/27 $ 1,754,694 $ 1,739,914
1.60%, 10/20/33 1,298,505 1,290,893
Structured Asset Securities
Corporation
7.50%, 06/28/31 509,566 520,001
United Mortgage Securities
Corporation
4.03%, 01/01/04 905,619 909,318
Wachovia Asset
Securitization, Inc.
6.25%, 10/25/33 489,273 499,058
Wachovia Bank Commercial
Mortgage Trust
4.00%, 06/15/35(omg) 11,144,901 978,662
Washington Mutual
3.69%, 01/01/04 863,292 873,979
Washington Mutual Mortgage
Securities Corporation
3.87%, 07/25/31 539,594 544,349
Washington Mutual MSC
Mortgage Pass-Through
Certificates
3.90%, 03/25/32 973,374 979,019
--------------
TOTAL MORTGAGE-BACKED
SECURITIES
(Cost $141,346,999) 142,821,226
--------------
MUNICIPAL BONDS -- 1.6%
California State Department
of Water Resources,
Series E Revenue Bond
(Non-Callable)
3.59%, 05/01/04 975,000 980,714
Maine Educational Loan
Marketing Corporation,
Series A-2 Student Loan
Revenue Bond (GTD STD LNS
Insured) (Callable
01/20/2004 @ $100)
1.45%, 01/07/04 1,500,000 1,500,000
Missouri Higher Education
Loan Authority, Revenue
Bond (GTD STD LNS
Insured) (Callable
04/01/05 @ $100)
1.52%, 07/25/08 837,351 838,267
Panhandle -- Plains, Texas
Higher Education
Authority, Inc., Series
A-4 Student Loan Revenue
Bonds (GTD STD LNS
Insured) (Non-Callable)
1.21%, 10/01/31 3,200,000 3,200,000
</Table>
See Notes to Financial Statements.
50
<Table>
<Caption>
PAR VALUE
----------- --------------
Texas State Public Finance
Authority, Series B
Revenue Bonds
(Non-Callable)
2.63%, 06/15/06 $ 1,365,000 $ 1,368,044
Wisconsin State, Series B-6
General Revenue Bonds
(XLCA Insured)
(Non-Callable)
1.20%, 05/01/32 5,000,000 4,999,999
--------------
TOTAL MUNICIPAL BONDS
(Cost $12,863,369) 12,887,024
--------------
<Caption>
SHARES
-----------
SHORT-TERM INVESTMENTS -- 29.4%
AB Funds Trust -- Money
Market Fund (Retirement
Class)(inf) 36,116,421 $ 36,116,421
Northern Institutional
Liquid Assets Portfolio
sec. 200,386,436 200,386,436
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $236,502,857) 236,502,857
--------------
RIGHTS -- 0.0%
United Mexican States
Recovery Rights Series B,
06/30/04 2,700,000 27,000
United Mexican States
Recovery Rights Series C,
06/30/05 2,700,000 5,400
United Mexican States
Recovery Rights Series D,
06/30/06 2,700,000 5,400
United Mexican States
Recovery Rights Series E,
06/30/07 2,700,000 3,375
--------------
TOTAL RIGHTS
(Cost $0) 41,175
--------------
<Caption>
PAR
-----------
U.S. TREASURY OBLIGATIONS -- 42.8%
U.S. Treasury Bills
0.83%, 01/15/04 $ 2,400,000 $ 2,399,230
0.92%, 03/04/04++++ 20,000 19,972
0.93%, 03/04/04++++ 40,000 39,943
0.88%, 03/18/04++++ 100,000 99,824
0.89%, 03/18/04++++ 365,000 364,358
0.99%, 04/15/04 11,600,000 11,570,513
1.00%, 04/15/04 3,400,000 3,391,357
1.01%, 04/24/04 14,000,000 13,961,668
1.02%, 04/29/04 10,300,000 10,270,017
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
1.02%, 05/06/04 $ 5,600,000 $ 5,582,696
1.04%, 05/13/04 12,900,000 12,858,088
1.01%, 05/27/04 3,100,000 3,088,899
1.01%, 06/03/04 10,600,000 10,558,691
1.03%, 06/03/04 15,700,000 15,638,817
1.00%, 06/10/04 7,000,000 6,971,132
0.93%, 06/17/04 3,000,000 2,987,058
0.95%, 06/17/04 11,000,000 10,952,546
0.97%, 06/17/04 2,700,000 2,688,352
--------------
113,443,161
--------------
U.S. Treasury Bonds
9.13%, 05/15/09 1,250,000 1,287,208
10.38%, 11/15/09 2,700,000 2,909,358
10.00%, 05/15/10 1,700,000 1,892,977
10.38%, 11/15/12 5,750,000 7,337,765
--------------
13,427,308
--------------
U.S. Treasury Inflationary
Index Bonds
3.63%, 01/15/08 12,000,000 15,202,013
3.88%, 01/15/09 2,000,000 2,548,428
--------------
17,750,441
--------------
U.S. Treasury Notes
1.88%, 09/30/04 8,350,000 8,399,908
1.50%, 02/28/05++++ 12,770,000 12,803,432
1.63%, 03/31/05 10,155,000 10,193,091
1.63%, 04/30/05 5,870,000 5,889,494
6.75%, 05/15/05 19,825,000 21,259,220
1.25%, 05/31/05 7,450,000 7,432,545
1.13%, 06/30/05 6,000,000 5,969,766
1.50%, 07/31/05 11,155,000 11,149,779
2.00%, 08/31/05 24,750,000 24,917,260
1.63%, 09/30/05 11,170,000 11,169,129
1.63%, 10/31/05 2,620,000 2,616,728
5.75%, 11/15/05 2,890,000 3,103,817
1.88%, 11/30/05 20,115,000 20,159,012
1.88%, 12/31/05 10,475,000 10,485,234
5.63%, 02/15/06 2,020,000 2,177,576
2.00%, 05/15/06 11,360,000 11,365,771
2.38%, 08/15/06 1,095,000 1,101,246
6.50%, 10/15/06 975,000 1,086,326
2.63%, 11/15/06 8,000,000 8,073,128
3.50%, 11/15/06 19,550,000 20,213,644
--------------
199,566,106
--------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $342,231,699) 344,187,016
--------------
TOTAL INVESTMENTS -- 126.7%
(Cost $1,012,696,548) 1,017,904,502
--------------
</Table>
See Notes to Financial Statements.
51
LOW-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
NUMBER OF
CONTRACTS VALUE
----------- --------------
WRITTEN OPTIONS -- (0.1)%
CALL SWAPTIONS -- 0.0%
3-Month LIBOR, Strike
Price $3.80,
Expires 10/07/04 (2,170) $ (177,137)
3-Month LIBOR, Strike
Price $4.00,
Expires 10/31/05 (640) (73,389)
--------------
(250,526)
--------------
PUT SWAPTIONS -- (0.1%)
3-Month LIBOR, Strike
Price $7.00,
Expires 10/31/05 (640) (89,901)
3-Month LIBOR, Strike
Price $6.00,
Expires 10/07/04 (2,170) (165,679)
--------------
(255,580)
--------------
TOTAL WRITTEN OPTIONS
(Cost $(595,524)) (506,106)
--------------
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (26.6%) (213,955,331)
--------------
NET ASSETS -- 100.0% $ 803,443,065
==============
</Table>
Interest rate swap agreements outstanding at December 31, 2003:
<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 $(104,625)
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 90,042
U.S. DOLLARS
Receive variable rate
payments on the three
month LIBOR floating
rate and pay fixed
rate payments of
5.00%(a) 06/16/14 $(1,100,000) (9,141)
---------
$ (23,724)
=========
</Table>
See Notes to Financial Statements.
52
MEDIUM-DURATION BOND FUND
The broad bond market was characterized by several central themes during the
fourth quarter. First, the Treasury sector experienced a difficult period and
was the worst performing sector for the quarter. Treasury yields elevated across
most maturities as the Treasury yield-curve "priced-in" the prospects for
economic growth. Inflation has remained relatively at bay due to the
productivity gains; however, with the prospect for economic growth comes the
fear of the potential for inflation. The yield on the 10-year Treasury Note
increased 0.31% during the quarter. Given the inverse relationship between bond
yields and bond prices, Treasury prices were negatively impacted by the rising
interest rate environment. Secondly, credit sectors, such as corporate bonds,
performed well relative to Treasuries during the quarter as credit spreads
continued to tighten (i.e. yields declined and bond prices increased). Spreads
tightened as a result of the improving economic backdrop and the prospects for
better corporate earnings and improving credit quality. Another theme was that
the lower the quality, the better the return as investors were compensated for
risk. The lower-tier investment grade corporate bonds and non-benchmark sectors,
such as high yield (i.e. below investment grade) and emerging market debt, were
the best performing areas of the bond market. Following its first negative
performance quarter since the fourth quarter of 1999, the broad bond market, as
measured by the Lehman Brothers Aggregate Bond Index, squeaked-out a positive
quarterly return of 0.32% with the majority of positive performance taking place
in December. For the year, the broad bond market provided a relief from cash
returns; however, it performed below historical annual averages and well behind
the domestic and international equity markets.
The fund, a high quality, core fixed income portfolio, generated positive
absolute returns and outpaced its benchmark index, the Lehman Brothers Aggregate
Bond Index, during the fourth quarter with the excess return being generated
during October and November.* In addition, the fund outpaced its benchmark for
the calendar year 2003. For the quarter, the fund's performance benefited from
its exposure to and security selection within the corporate bond sector,
especially the lower-tier, investment grade securities. The fund's sub-advisers
maintained exposure to this sector to take advantage of the higher yield
premiums, strong investor demand and the improving fundamentals. Further
benefiting the fund was modest tactical exposure to the non-benchmark sectors of
high yield and emerging market debt. Both of these sectors weathered the rising
interest rate environment and generally experienced spread tightening and rising
bond prices. All three of the sub-advisers that manage the fund -- Goldman
Sachs, PIMCO and Western Asset Management -- generated excess returns relative
to the benchmark index during the quarter. At quarter-end, 79% of the fund was
rated AAA while the average credit quality of the fund remained at AA. As of
December 31, the fund's primary sector exposure was to Treasuries/agencies,
corporates and mortgages.
- ---------------
* Past performance is no guarantee of future results, share prices will
fluctuate, and you may have a gain or loss when you redeem shares. Performance
for all funds reflects fee waivers in effect. In the absence of fee waivers,
performance would have been lower. Unlike in a mutual fund, the performance of
an index assumes no taxes, transaction costs, management fees or other
expenses.
Not Part of the Annual Report
53
MEDIUM-DURATION BOND FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
LEHMAN BROTHERS
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* AGGREGATE BOND INDEX**
----------------- -------------------- ------------- ----------------------
One Year 6.62% 6.80% 6.33% 4.10%
Since Inception (8/27/01 -- 12/31/03) 7.35% 7.19% 7.03% 6.84%
</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.
[LINE GRAPH]
<Table>
<Caption>
LEHMAN BROTHERS AGGREGATE BOND
RETIREMENT CLASS INDEX**
---------------- ------------------------------
08/27/01 10000 10000
08/31/01 10051 10056
09/30/01 10123 10173
10/31/01 10364 10386
11/30/01 10223 10243
12/31/01 10149 10177
01/31/02 10253 10260
02/28/02 10387 10359
03/31/02 10223 10187
04/30/02 10422 10384
05/31/02 10479 10473
06/30/02 10453 10563
07/31/02 10466 10691
08/31/02 10685 10871
09/30/02 10774 11047
10/31/02 10752 10997
11/30/02 10833 10994
12/31/02 11079 11221
01/31/03 11165 11231
02/28/03 11315 11386
03/31/03 11312 11377
04/30/03 11461 11471
05/31/03 11671 11685
06/30/03 11674 11662
07/30/03 11295 11270
08/31/03 11403 11345
09/30/03 11721 11645
10/31/03 11638 11536
11/30/03 11704 11564
12/31/03 11811 11682
</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
54
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 PAR VALUE
- ----------------- ----------- --------------
AGENCY OBLIGATIONS -- 7.9%
Federal Home Loan Bank
1.03%, 01/23/04 $15,000,000 $ 14,990,604
4.50%, 09/16/13 400,000 394,845
Federal Home Loan Mortgage
Corporation
1.08%, 02/18/04 8,000,000 7,989,690
4.88%, 03/15/07 1,000,000 1,065,304
6.63%, 09/15/09 8,000,000 9,159,592
7.00%, 03/15/10 1,600,000 1,869,456
Federal National Mortgage
Association
1.01%, 02/03/04 12,000,000 11,988,889
1.00%, 02/04/04 2,000,000 1,998,111
1.07%, 02/11/04 4,700,000 4,694,775
1.09%, 03/24/04 525,000 523,840
1.10%, 03/24/04++++ 75,000 74,835
1.06%, 03/25/04 3,900,000 3,891,279
6.63%, 09/15/09 1,500,000 1,715,219
Financing Corporation
Principle STRIPS
5.52%, 11/30/17 (omg) 1,130,000 530,770
5.67%, 04/05/19 (omg) 620,000 264,779
Resolution Funding
Corporation STRIPS
5.34%, 01/15/17 (omg) 5,176,000 2,608,435
--------------
TOTAL AGENCY OBLIGATIONS
(Cost $62,249,628) 63,760,423
--------------
ASSET-BACKED SECURITIES -- 6.3%
Amortizing Residential
Collateral Trust
1.42%, 01/26/04 510,604 510,045
AQ Finance NIM Trust
1.37%, 01/25/04 144A++ 400,000 400,000
1.79%, 12/25/07 144A++@ 1,106,355 1,107,046
9.50%, 06/25/32 144A@ 11,376 11,376
8.74%, 03/25/35 144A@ 158,843 159,479
Bayview Financial
Acquisition Trust
1.52%, 01/26/04 144A++ 2,132,531 2,134,919
Capital One Multi-Asset
Execution Trust
4.32%, 04/15/09 310,000 316,155
Centex Home Equity
1.44%, 09/26/33++ 2,414,680 2,413,421
Chase Funding Net Interest
Margin
5.25%, 12/17/33 144A@ 230,000 229,701
6.88%, 06/27/36 144A@ 195,441 195,536
Chesapeake Funding LLC
1.42%, 08/07/08++ 3,100,000 3,106,676
Chevy Chase Funding LLC
1.47%, 01/25/04 144A++ 2,977,251 2,977,251
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Citibank Credit Card
Issuance Trust
2.16%, 02/07/04++ $ 670,000 $ 677,856
CitiFinancial Mortgage
Securities, Inc.
1.41%, 01/25/04 STEP 2,776,864 2,772,015
Citigroup Mortgage Loan
Trust, Inc.
1.72%, 09/25/35 STEP@ 2,000,000 2,000,000
1.52%, 12/18/49++ 1,900,000 1,900,000
Conseco Finance
Securitizations
Corporation
6.77%, 09/01/32 2,200,000 2,246,146
8.00%, 02/01/33 IO (omg)@ 14,418,000 860,574
5.16%, 05/01/33 315,541 319,155
Countrywide Home Equity
Loan Trust
1.42%, 01/15/04++ 446,164 445,587
Daimler Chrysler Master
Owner Trust
1.22%, 01/15/04++ 910,000 910,016
Embarcadero Aircraft
Securitization Trust
1.64%, 08/15/25 144A++@ 575,000 264,006
EQCC Trust
1.44%, 01/25/04++ 833,035 833,694
Fleet Home Equity Loan
Trust
1.36%, 05/30/31++ 1,435,674 1,431,886
Green Tree Home Improvement
Loan Trust
1.33%, 01/15/04 STEP 96,190 96,194
HFC Home Equity Loan
Asset-Backed Certificates
1.50%, 01/20/04++ 4,000,000 3,999,999
1.70%, 01/20/04++ 2,107,884 2,115,768
1.50%, 10/20/32++ 1,587,633 1,587,655
Household Mortgage Loan
Trust
1.48%, 01/20/04++ 1,800,062 1,800,098
Long Beach Asset Holdings
Corporation
7.26%, 06/15/35 144A@ 169,346 169,875
Madison Avenue Manufactured
Housing Contract
1.49%, 01/25/04++ 2,415,473 2,409,819
Merrill Lynch Mortgage
Investors, Inc.
1.46%, 08/25/09++ 309,800 309,487
Metropolitan Asset Funding,
Inc.
1.60%, 01/25/04 STEP 144A 276,576 276,525
NC Finance Trust
9.00%, 03/01/30 144A@ 65,728 65,687
</Table>
See Notes to Financial Statements.
55
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
New Century Home Equity
Loan Trust
7.22%, 11/25/27 $ 378,141 $ 386,390
Nextcard Credit Card Master
Note Trust
1.36%, 01/15/04 144A++ 17,910 17,838
3.59%, 12/15/06 144A++ 910,000 134,553
Novastar NIM Trust
7.39%, 07/01/07 144A@ 176,387 176,477
Option One Mortgage
Securities Corporation
NIM Trust
1.44%, 04/26/09 144A++ 114,902 114,908
8.83%, 06/26/32 144A@ 13,531 13,531
Provident Bank Home Equity
Loan Trust
1.41%, 08/25/31++ 803,455 801,909
Residential Asset
Securities Corporation
1.38%, 04/25/28++ 146,209 146,243
Residential Funding
Mortgage Securities II
8.09%, 03/25/20 584,528 593,556
7.18%, 12/25/22 278,121 277,726
Sail Net Interest Margin
Notes
6.75%, 11/27/33 144A@ 193,740 193,902
Salomon Brothers Mortgage
Securities VII
1.42%, 01/25/04++ 584,751 585,173
1.38%, 01/26/04 STEP 193,149 193,198
Saxon Asset Securities
Trust
1.44%, 06/25/33++ 292,719 292,861
Spiegel Credit Card Master
Note Trust
1.44%, 03/15/10++ 3,891,490 3,888,242
Structured Asset Securities
Corporation
1.57%, 02/25/33++ 1,830,509 1,833,926
SVO Timeshare Mortgage
Corporation
5.47%, 10/20/13 144A 636,688 660,365
--------------
TOTAL ASSET-BACKED SECURITIES
(Cost $52,856,216) 51,364,445
--------------
COMMERCIAL PAPER -- 5.8%
Danske Corporation
1.08%, 01/21/04 8,000,000 7,995,369
HBOS Treasury Services PLC
1.12%, 02/18/04 4,900,000 4,893,369
1.11%, 03/12/04 900,000 898,192
National Australia Funding
(Delaware), Inc.
1.08%, 02/10/04 5,400,000 5,393,520
Rabobank USA Finance
Corporation
1.08%, 02/24/04 8,000,000 7,987,476
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Royal Bank of Scotland PLC
1.08%, 01/27/04 $ 8,000,000 $ 7,993,913
UBS Finance (Delaware) LLC
1.06%, 01/20/04 1,100,000 1,099,377
1.06%, 01/21/04 4,200,000 4,197,568
1.08%, 02/25/04 1,100,000 1,098,280
Westpac Capital Corporation
1.09%, 01/28/04 300,000 299,763
Westpac Trust Securities,
Ltd.
1.10%, 02/12/04 5,300,000 5,293,541
--------------
TOTAL COMMERCIAL PAPER
(Cost $47,148,381) 47,150,368
--------------
CORPORATE BONDS -- 14.6%
Ace Capital Trust II
9.70%, 04/01/30 60,000 78,507
Ace INA Holdings, Inc.
8.20%, 08/15/04 550,000 571,514
8.30%, 08/15/06 550,000 622,590
Adelphia Communications
9.25%, 10/01/04# 250,000 232,500
9.38%, 11/15/09# 250,000 237,500
AES Corporation (The)
10.00%, 07/15/05 144A 112,824 115,363
9.50%, 06/01/09 42,000 46,778
9.38%, 09/15/10 10,000 11,138
AGCO Corporation
9.50%, 05/01/08 67,000 73,700
Allied Waste North America
8.88%, 04/01/08 265,000 298,125
Amerada Hess Corporation
7.13%, 03/15/33 550,000 560,150
American Axle &
Manufacturing, Inc.
9.75%, 03/01/09 103,000 109,438
American Standard, Inc.
7.38%, 02/01/08 170,000 188,700
American Tower Corporation
9.38%, 02/01/09 250,000 267,500
AmerisourceBergen
Corporation
8.13%, 09/01/08 170,000 192,525
AMFM, Inc.
8.00%, 11/01/08 1,275,000 1,482,188
Anthem Insurance Cos., Inc.
9.13%, 04/01/10 144A@ 100,000 125,869
ANZ Capital Trust I
4.48%, 01/29/49 144A@ 350,000 352,003
5.36%, 12/29/49 144A@ 800,000 800,398
Apache Corporation
6.25%, 04/15/12 340,000 378,591
Astoria Financial
Corporation
5.75%, 10/15/12 144A 450,000 458,320
</Table>
See Notes to Financial Statements.
56
<Table>
<Caption>
PAR VALUE
----------- --------------
AT&T Wireless Services,
Inc.
7.88%, 03/01/11 $ 100,000 $ 115,909
8.13%, 05/01/12 135,000 159,050
8.75%, 03/01/31 150,000 185,729
Avis Group Holdings, Inc.
11.00%, 05/01/09 161,000 174,300
Bank One Corporation
4.13%, 09/01/07 1,100,000 1,136,957
Bank United Corporation
8.88%, 05/01/07 250,000 295,541
BellSouth Capital Funding
7.88%, 02/15/30 460,000 560,228
BellSouth Corporation
6.88%, 10/15/31 10,000 10,984
Boeing Co. (The)
6.63%, 02/15/38 210,000 220,883
Calpine Corporation
7.75%, 04/15/09 96,000 74,400
8.50%, 02/15/11 519,000 413,254
Capital One Bank
6.50%, 06/13/13 400,000 420,106
Cendant Corporation
6.25%, 01/15/08 150,000 163,800
CenterPoint Energy
Resources Corporation
7.88%, 04/01/13 144A 125,000 141,750
5.95%, 01/15/14 144A@ 475,000 472,186
CenterPoint Energy, Inc.
5.88%, 06/01/08 144A 300,000 312,828
7.25%, 09/01/10 144A 100,000 108,402
Chesapeake Energy
Corporation
8.13%, 04/01/11 31,000 34,565
Citigroup, Inc.
5.00%, 03/06/07 2,200,000 2,337,312
Cleveland Electric
Illuminating Co. (The)
7.88%, 11/01/17 2,050,000 2,401,418
CNA Financial Corporation
6.50%, 04/15/05 125,000 129,901
6.75%, 11/15/06 130,000 138,680
6.95%, 01/15/18 40,000 40,186
7.25%, 11/15/23 50,000 50,177
Comcast Cable
Communications
8.38%, 05/01/07 650,000 754,263
6.75%, 01/30/11 740,000 824,974
Comcast Cable
Communications Holdings,
Inc.
8.38%, 03/15/13 450,000 551,704
ConocoPhillips
8.75%, 05/25/10 230,000 287,682
7.00%, 03/30/29 255,000 289,536
ConocoPhillips Holding Co.
6.95%, 04/15/29 1,060,000 1,205,885
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Continental Airlines, Inc.
6.70%, 06/15/21 $ 417,949 $ 409,239
Cox Communications, Inc.
7.13%, 10/01/12 75,000 86,650
4.63%, 06/01/13 170,000 164,205
5.50%, 10/01/15 55,000 55,444
Credit Suisse First Boston
USA, Inc.
4.63%, 01/15/08 600,000 625,174
6.13%, 11/15/11 500,000 545,221
CSC Holdings, Inc.
7.63%, 04/01/11 530,000 560,475
7.63%, 07/15/18 30,000 31,650
DaimlerChrysler NA Holding
Corporation
7.30%, 01/15/12 550,000 613,339
6.50%, 11/15/13 210,000 221,620
Delta Air Lines, Inc.
6.42%, 07/02/12 400,000 428,991
6.72%, 01/02/23 792,305 847,843
Devon Energy Corporation
7.95%, 04/15/32 725,000 876,924
Devon Financing Corporation
ULC
6.88%, 09/30/11 10,000 11,357
Dex Media West LLC/Dex
Media Finance Co.
8.50%, 08/15/10 144A 100,000 111,875
Dominion Resources, Inc.
4.13%, 02/15/08 70,000 71,403
5.13%, 12/15/09 230,000 240,439
5.70%, 09/17/12 310,000 327,299
Dryden Investor Trust
7.16%, 07/23/08 144A@ 1,775,052 1,917,346
Dynegy Holdings, Inc.
8.75%, 02/15/12 1,030,000 1,044,163
Eastman Kodak Co.
7.25%, 11/15/13 120,000 126,131
Echostar DBS Corporation
4.41%, 01/01/04 144A++ 103,000 107,764
5.75%, 10/01/08 144A@ 500,000 508,125
9.13%, 01/15/09 69,000 77,539
El Paso CGP Co.
7.75%, 06/15/10 1,000,000 948,750
El Paso Corporation
8.10%, 02/28/21 CONV(omg) 990,000 460,350
8.05%, 10/15/30 600,000 525,000
7.80%, 08/01/31 1,150,000 984,687
7.75%, 01/15/32 1,030,000 883,225
El Paso Natural Gas Co.
8.38%, 06/15/32 210,000 215,670
EOP Operating LP
7.75%, 11/15/07 100,000 114,734
Firstar Bank NA
7.13%, 12/01/09 170,000 196,153
</Table>
See Notes to Financial Statements.
57
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
FirstEnergy Corporation
6.45%, 11/15/11 $ 230,000 $ 238,823
7.38%, 11/15/31 1,050,000 1,077,978
Ford Motor Co.
6.63%, 10/01/28 550,000 507,400
6.38%, 02/01/29 675,000 603,951
Ford Motor Credit Co.
1.98%, 03/08/04++ 700,000 700,493
6.70%, 07/16/04 1,000,000 1,025,827
7.38%, 10/28/09 100,000 109,947
7.88%, 06/15/10 590,000 660,088
7.38%, 02/01/11 320,000 349,265
7.25%, 10/25/11 1,000,000 1,086,192
7.00%, 10/01/13 1,950,000 2,060,266
Forest Oil Corporation
7.75%, 05/01/14 115,000 122,188
Fort James Corporation
4.75%, 06/29/04(E) 500,000 635,406
Fresenius Medical Care
Capital Trust II
7.88%, 02/01/08 230,000 246,675
GATX Financial Corporation
6.00%, 11/19/08 400,000 397,494
General Electric Capital
Corporation
6.00%, 06/15/12 600,000 651,757
5.45%, 01/15/13 1,110,000 1,156,818
General Electric Co.
5.00%, 02/01/13 90,000 91,186
General Motors Acceptance
Corporation
2.41%, 10/20/05++ 1,700,000 1,713,664
7.25%, 03/02/11 310,000 340,582
6.88%, 09/15/11 100,000 107,875
General Motors Corporation
8.38%, 07/15/33 1,050,000 1,222,518
Georgia-Pacific Corporation
8.13%, 05/15/11 8,000 8,840
9.50%, 12/01/11 46,000 53,590
8.88%, 05/15/31 14,000 15,470
Greenpoint Financial
Corporation
3.20%, 06/06/08 144A 350,000 338,656
HCA, Inc.
6.75%, 07/15/13 1,100,000 1,168,607
Host Marriott LP
9.50%, 01/15/07 500,000 558,750
9.25%, 10/01/07 32,000 35,920
Household Finance
Corporation
8.00%, 07/15/10 780,000 935,335
7.00%, 05/15/12 690,000 788,124
6.38%, 11/27/12 110,000 120,883
IMC Global, Inc.
10.88%, 06/01/08 119,000 131,495
10.88%, 08/01/13 144A 50,000 55,000
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Indiana Michigan Power Co.
6.88%, 07/01/04 $ 2,000,000 $ 2,054,884
Insight Midwest LP/Insight
Capital, Inc.
10.50%, 11/01/10 179,000 195,558
International Paper Co.
5.50%, 01/15/14 135,000 135,760
J.P. Morgan Chase & Co.
6.63%, 03/15/12 670,000 749,664
JPM Capital Trust II
7.95%, 02/01/27 700,000 792,837
Kansas City Southern
Railway
9.50%, 10/01/08 99,000 110,385
Kellogg Co.
6.60%, 04/01/11 500,000 561,163
Lear Corporation
7.96%, 05/15/05 86,000 92,450
Lehman Brothers Holdings,
Inc.
6.63%, 04/01/04 550,000 557,218
8.25%, 06/15/07 100,000 116,651
4.00%, 01/22/08 70,000 71,462
Liberty Media Corporation
2.67%, 03/17/04++ 1,390,000 1,406,205
3.75%, 02/15/30 CONV 40,000 26,350
Lockheed Martin Corporation
8.50%, 12/01/29 190,000 249,730
Lyondell Chemical Co.
9.88%, 05/01/07 500,000 530,000
MacDermid, Inc.
9.13%, 07/15/11 111,000 124,875
Manor Care, Inc.
8.00%, 03/01/08 130,000 147,550
MeadWestvaco Corporation
6.85%, 04/01/12 375,000 413,148
Mediacom LLC/Mediacom
Capital Corporation
9.50%, 01/15/13 500,000 532,500
Merrill Lynch & Co., Inc.
3.38%, 09/14/07 420,000 425,793
Millennium America, Inc.
7.00%, 11/15/06 50,000 51,500
9.25%, 06/15/08 30,000 32,850
Moore North America
Finance, Inc.
7.88%, 01/15/11 144A 30,000 34,125
Nabisco, Inc.
7.55%, 06/15/15 1,530,000 1,834,865
News America Holdings
8.88%, 04/26/23 1,230,000 1,580,883
Nextel Communications, Inc.
9.38%, 11/15/09 250,000 273,750
9.50%, 02/01/11 160,000 181,600
</Table>
See Notes to Financial Statements.
58
<Table>
<Caption>
PAR VALUE
----------- --------------
Niagara Mohawk Power
Corporation
8.00%, 06/01/04 $ 500,000 $ 513,016
7.75%, 10/01/08 1,340,000 1,556,929
Nortek Holdings, Inc.
9.25%, 03/15/07 605,000 624,663
8.88%, 08/01/08 70,000 73,588
Northwest Airlines
Corporation
7.58%, 03/01/19 662,002 682,369
Omnicare, Inc.
8.13%, 03/15/11 239,000 262,303
Oncor Electric Delivery Co.
6.38%, 01/15/15 140,000 152,503
Patrons' Legacy
5.65%, 01/17/17 640,000 635,590
Peabody Energy Corporation
6.88%, 03/15/13 165,000 174,900
Pemex Project Funding
Master Trust
9.13%, 10/13/10 1,075,000 1,281,937
Penney (JC) Co., Inc.
8.00%, 03/01/10 176,000 202,620
PHH Corporation
7.13%, 03/01/13 350,000 392,768
Pioneer Natural Resources
Co.
7.50%, 04/15/12 133,000 153,103
Popular North America, Inc.
6.13%, 10/15/06 200,000 217,536
4.25%, 04/01/08 300,000 305,720
3.88%, 10/01/08 250,000 249,800
Premium Asset Trust
1.50%, 02/27/04 144A++@ 2,000,000 2,005,057
Prudential Funding LLC
6.60%, 05/15/08 144A@ 600,000 668,550
PVNGS II Funding
Corporation, Inc.
8.00%, 12/30/15 1,800,000 1,977,131
Qwest Capital Funding, Inc.
7.25%, 02/15/11 200,000 198,000
Qwest Corporation
5.63%, 11/15/08 500,000 497,500
8.88%, 03/15/12 144A 1,200,000 1,383,000
7.50%, 06/15/23 500,000 502,500
Rabobank Capital Funding II
5.26%, 12/29/49 144A@ 1,100,000 1,104,067
Raytheon Co.
6.00%, 12/15/10 20,000 21,405
5.50%, 11/15/12 10,000 10,162
5.38%, 04/01/13 115,000 115,405
Ryland Group, Inc.
9.75%, 09/01/10 136,000 155,040
Safeco Corporation
4.88%, 02/01/10 125,000 129,039
Sara Lee Corporation
6.25%, 09/15/11 400,000 444,850
Schuler Homes, Inc.
9.38%, 07/15/09 38,000 42,940
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Simon Property Group LP
7.38%, 01/20/06 $ 900,000 $ 988,840
Sonat, Inc.
7.63%, 07/15/11 460,000 428,375
Southern California Edison
Co.
6.38%, 01/15/06 500,000 532,500
7.63%, 01/15/10 300,000 346,500
Southern Natural Gas Co.
8.00%, 03/01/32 400,000 415,000
Sovereign Bancorp, Inc.
10.50%, 11/15/06 125,000 147,937
Sovereign Bank
5.13%, 03/15/13 300,000 298,501
4.38%, 08/01/13++ 250,000 252,127
Sprint Capital Corporation
6.00%, 01/15/07 140,000 149,651
6.13%, 11/15/08 310,000 330,838
7.63%, 01/30/11 350,000 392,980
8.38%, 03/15/12 100,000 117,016
6.88%, 11/15/28 550,000 538,594
System Energy Rescouces,
Inc.
7.43%, 01/15/11 1,164,449 1,201,293
Systems 2001 Asset Trust
LLC
6.66%, 09/15/13 144A 1,064,561 1,177,218
Target Corporation
5.88%, 03/01/12 560,000 608,775
TCI Communications
Financing III
9.65%, 03/31/27 2,610,000 3,158,099
TECO Energy, Inc.
10.50%, 12/01/07 144A 200,000 234,500
Tenet Healthcare
Corporation
7.38%, 02/01/13 120,000 121,200
Tennessee Valley Authority
6.75%, 11/01/25 1,420,000 1,643,394
7.13%, 05/01/30 3,360,000 4,043,846
Time Warner Entertainment
Co. LP
8.38%, 03/15/23 300,000 372,905
8.38%, 07/15/33 520,000 662,807
Time Warner, Inc.
6.88%, 05/01/12 110,000 124,023
7.70%, 05/01/32 1,310,000 1,534,693
Triton PCS, Inc.
8.75%, 11/15/11 500,000 495,000
TXU Energy Co.
7.00%, 03/15/13 150,000 166,242
Unilever Capital
Corporation
7.13%, 11/01/10 760,000 885,040
Union Pacific Corporation
6.65%, 01/15/11 260,000 290,368
Unisys Corporation
6.88%, 03/15/10 128,000 139,200
</Table>
See Notes to Financial Statements.
59
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
United Air Lines, Inc.
9.21%, 01/21/17#@ $ 200,000 $ 81,741
9.56%, 10/19/18#@ 300,000 126,380
United Telephone Co. of
Kansas
6.89%, 07/01/08@ 500,000 531,925
Ventas Realty LP/Ventas
Capital Corporation
8.75%, 05/01/09 50,000 55,125
9.00%, 05/01/12 20,000 22,300
Verizon Global Funding
Corporation
6.88%, 06/15/12 160,000 179,826
4.38%, 06/01/13 390,000 369,266
Verizon New York, Inc.
6.88%, 04/01/12 450,000 498,880
Verizon Wireless Capital
LLC
1.24%, 05/23/05 144A++@ 1,200,000 1,199,053
Vintage Petroleum, Inc.
8.25%, 05/01/12 250,000 273,125
Washington Mutual, Inc.
4.00%, 01/15/09 150,000 150,430
8.25%, 04/01/10 300,000 361,180
Waste Management, Inc.
7.75%, 05/15/32 980,000 1,158,510
Wells Fargo & Co.
5.00%, 11/15/14 900,000 897,988
Wells Fargo Bank NA
6.45%, 02/01/11 1,260,000 1,416,813
Westlake Chemical
Corporation
8.75%, 07/15/11 144A 20,000 22,000
Westport Resources
Corporation
8.25%, 11/01/11 144A 40,000 44,200
8.25%, 11/01/11 20,000 22,100
Weyerhaeuser Co.
6.00%, 08/01/06 200,000 214,287
6.75%, 03/15/12 410,000 447,996
6.88%, 12/15/33 215,000 221,663
Williams Cos., Inc.
7.50%, 01/15/31 1,020,000 1,037,850
7.75%, 06/15/31 200,000 207,750
8.75%, 03/15/32 1,130,000 1,282,549
Xerox Corporation
7.13%, 06/15/10 250,000 268,750
XTO Energy, Inc.
7.50%, 04/15/12 83,000 94,205
6.25%, 04/15/13 215,000 227,363
Zurich Capital Trust I
8.38%, 06/01/37 144A 475,000 547,109
--------------
TOTAL CORPORATE BONDS
(Cost $109,943,343) 118,647,408
--------------
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
FOREIGN BONDS -- 9.1%
AUSTRALIA -- 0.1%
QBE Insurance Group, Ltd.
5.65%, 07/01/23 144A++@ $ 400,000 $ 382,021
TXU Australia Holdings
Partnership LP
6.15%, 11/15/13 144A@ 225,000 229,749
--------------
611,770
--------------
BAHAMAS -- 0.0%
Teekay Shipping Corporation
8.88%, 07/15/11 206,000 234,840
--------------
BERMUDA -- 0.8%
Tyco International Group SA
6.38%, 02/15/06 100,000 107,000
5.80%, 08/01/06 800,000 850,000
6.13%, 11/01/08 90,000 96,750
6.75%, 02/15/11 800,000 878,000
6.38%, 10/15/11 890,000 955,638
6.00%, 11/15/13 144A@ 3,270,000 3,384,450
--------------
6,271,838
--------------
BRAZIL -- 0.8%
Federal Republic of Brazil
8.00%, 04/15/04 997,442 984,248
2.00%, 04/15/06++ 880,000 871,360
2.06%, 04/15/09++ 200,589 190,747
14.50%, 10/15/09 150,000 196,125
12.00%, 04/15/10 520,000 626,600
2.06%, 04/15/12++ 450,000 406,906
2.19%, 04/15/12++ 440,000 399,300
8.00%, 04/15/14 1,662,404 1,640,414
10.13%, 05/15/27 800,000 852,000
11.00%, 08/17/40 445,000 491,725
--------------
6,659,425
--------------
BULGARIA -- 0.1%
Republic of Bulgaria
1.94%, 07/28/11++ 636,500 626,749
8.25%, 01/15/15 144A 260,000 304,850
--------------
931,599
--------------
CANADA -- 0.7%
Abitibi-Consolidated, Inc.
8.55%, 08/01/10 32,000 35,690
Alcan, Inc.
5.20%, 01/15/14 1,400,000 1,417,841
Alliance Atlantis
Communications, Inc.
13.00%, 12/15/09 74,000 84,730
Anderson Exploration, Ltd.
6.75%, 03/15/11 50,000 55,529
Bombardier Capital Funding
LP
6.13%, 05/14/07(E) 250,000 327,409
Cascades, Inc.
7.25%, 02/15/13 144A 199,000 210,443
</Table>
See Notes to Financial Statements.
60
<Table>
<Caption>
PAR VALUE
----------- --------------
Conoco Funding Co.
7.25%, 10/15/31 $ 315,000 $ 372,944
General Motors Nova Scotia
Finance Co.
6.85%, 10/15/08 1,670,000 1,789,021
Hydro Quebec
6.30%, 05/11/11 860,000 971,650
Western Oil Sands, Inc.
8.38%, 05/01/12 85,000 97,219
--------------
5,362,476
--------------
CAYMAN ISLANDS -- 0.2%
ACE, Ltd.
6.00%, 04/01/07 350,000 379,377
G-Wing, Ltd.
3.82%, 11/06/11 144A++@ 658,622 652,273
PDVSA Finance, Ltd.
8.50%, 11/16/12 440,000 429,000
PRIME Capital Hurricane,
Ltd.
7.61%, 01/07/04++ 290,000 290,091
--------------
1,750,741
--------------
CHILE -- 0.0%
Codelco, Inc.
5.50%, 10/15/13 144A 200,000 203,416
--------------
COLOMBIA -- 0.1%
Republic of Colombia
10.50%, 07/09/10 60,000 67,560
11.75%, 02/25/20 605,000 732,050
--------------
799,610
--------------
DOMINICAN REPUBLIC -- 0.1%
Dominican Republic
9.50%, 09/27/06 640,000 532,394
9.04%, 01/23/13 144A 180,000 137,700
--------------
670,094
--------------
FRANCE -- 0.1%
Compagnie Generale de
Geophysique SA
10.63%, 11/15/07 79,000 84,135
France Telecom
9.00%, 03/01/11 450,000 541,371
Legrand SA
8.50%, 02/15/25 250,000 265,312
Vivendi Universal SA
6.25%, 07/15/08 144A 230,000 244,663
--------------
1,135,481
--------------
GERMANY -- 3.0%
Deutsche Bundesrepublik
3.75%, 01/04/09(E) 8,710,000 11,081,530
4.50%, 01/04/13(E) 5,300,000 6,824,753
5.50%, 01/04/31(E) 4,890,000 6,691,219
--------------
24,597,502
--------------
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
HONG KONG -- 0.1%
Hutchison Whampoa
International, Ltd.
7.45%, 11/24/33 144A@ $ 600,000 $ 627,212
--------------
IRELAND -- 0.0%
Eircom Funding
8.25%, 08/15/13 130,000 144,625
--------------
ITALY -- 0.1%
Telecom Italia Capital SA
5.25%, 11/15/13 144A 325,000 326,393
--------------
MALAYSIA -- 0.1%
Petronas Capital, Ltd.
7.88%, 05/22/22 144A 430,000 511,120
--------------
MEXICO -- 1.2%
Telefonos de Mexico SA de
CV
8.25%, 01/26/06 250,000 276,895
4.50%, 11/19/08 144A@ 750,000 754,890
United Mexican States
8.38%, 01/14/11 500,000 595,000
7.50%, 01/14/12 750,000 847,875
6.38%, 01/16/13 350,000 364,000
5.88%, 01/15/14 1,820,000 1,801,800
8.13%, 12/30/19 170,000 190,400
11.50%, 05/15/26 3,345,000 4,850,250
--------------
9,681,110
--------------
NETHERLANDS -- 0.2%
Deutsche Telekom
International Finance BV
5.25%, 07/22/13 595,000 602,425
8.75%, 06/15/30 700,000 897,394
Royal KPN NV
8.38%, 10/01/30 400,000 508,949
--------------
2,008,768
--------------
PANAMA -- 0.3%
Republic of Panama
1.94%, 01/17/04++ 572,715 500,820
8.25%, 04/22/08 520,000 574,600
9.63%, 08/08/11 110,000 127,600
10.75%, 05/15/20 517,000 622,985
9.38%, 01/16/23 420,000 459,900
--------------
2,285,905
--------------
PERU -- 0.1%
Republic of Peru
5.00%, 03/07/04 144A++ 564,000 524,520
4.50%, 03/08/04++ 170,000 152,723
9.13%, 02/21/12 10,000 11,200
9.88%, 02/06/15 240,000 279,600
5.00%, 03/07/17++ 122,200 114,064
8.75%, 11/21/33 40,000 40,200
--------------
1,122,307
--------------
</Table>
See Notes to Financial Statements.
61
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
PHILIPPINES -- 0.0%
Republic of Philippines
9.88%, 01/15/19 $ 85,000 $ 90,313
10.63%, 03/16/25 50,000 55,875
--------------
146,188
--------------
RUSSIA -- 0.4%
Ministry Finance of Russia
3.00%, 05/14/08 550,000 493,215
Russian Federation
8.25%, 03/31/10 STEP 70,000 78,418
5.00%, 03/31/30 STEP 2,490,000 2,393,513
--------------
2,965,146
--------------
SOUTH AFRICA -- 0.1%
Republic of South Africa
13.00%, 08/31/10(R) 5,130,000 939,222
--------------
SOUTH KOREA -- 0.0%
Korea Asset Funding, Ltd.
3.20%, 02/10/04 144A++ 166,375 166,165
--------------
UNITED KINGDOM -- 0.5%
BP Capital Markets PLC
2.75%, 12/29/06 740,000 741,684
British Telecommunications
PLC
8.88%, 12/15/30 550,000 721,779
HSBC Capital Funding LP
4.61%, 12/29/49 144A++@ 1,090,000 1,025,637
Standard Chartered Bank
8.00%, 05/30/31 144A@ 300,000 363,639
Telewest Communications PLC
9.88%, 02/01/10# 145,000 90,625
Tribeca Mortgage Fund I
1.92%, 02/18/04++ 775,000 774,991
XL Capital Europe PLC
6.50%, 01/15/12 140,000 153,478
--------------
3,871,833
--------------
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
VENEZUELA -- 0.0%
Petrozuata Finance, Inc.
8.22%, 04/01/17 144A $ 140,000 $ 128,800
--------------
TOTAL FOREIGN BONDS
(Cost $67,785,431) 74,153,586
--------------
MORTGAGE-BACKED
SECURITIES -- 30.6%
ARC Net Interest Margin
Trust
7.75%, 01/27/32 144A@ 57,902 58,191
7.75%, 07/27/32 144A@ 95,496 96,804
Bear Stearns Adjustable
Rate Mortgage Trust
5.65%, 02/25/33++ 1,081,634 1,089,515
Commercial Mortgage Pass-
Through Certificates
1.40%, 01/15/04 144A++ 330,008 329,993
Commerical Mortgage Asset
Trust
7.55%, 01/11/04++ 440,000 513,614
Credit-Based Asset
Servicing and
Securitization
1.43%, 08/25/33++ 942,781 943,050
CS First Boston Mortgage
Securities Corporation
6.00%, 01/25/33 841,007 854,466
80.19%, 04/25/33 IO(omg)@ 701,393 31,557
37.39%, 05/25/33 IO(omg)@ 450,601 4,444
5.50%, 06/25/33 IO@ 481,419 29,831
15.00%, 07/25/33
IO++(omg)@ 2,189,614 29,373
12.35%, 08/25/33
IO++(omg)@ 2,386,994 25,371
Federal Home Loan Mortgage
Corporation
8.00%, 10/01/07 1,873 1,898
5.50%, 08/15/14 2,000,000 2,068,310
7.00%, 11/01/14 439,765 469,445
7.00%, 04/01/15 288,722 308,208
8.00%, 06/01/15 17,994 18,233
7.00%, 12/01/15 210,545 224,675
6.00%, 04/15/16 1,065,040 1,094,552
8.50%, 06/01/16 34,373 37,594
5.75%, 03/15/18 1,515,112 1,532,335
8.50%, 06/01/18 33,012 36,106
6.50%, 02/17/21 311,347 312,119
0.37%, 04/15/22 PO
STRIP(omg)@ 117,970 116,855
6.00%, 11/01/22 1,002,670 1,041,569
11.44%, 03/15/24
IO++(omg)@ 91,622 98
8.00%, 08/01/24 25,812 28,121
7.50%, 11/01/29 88,791 95,383
7.50%, 12/01/29 137,678 147,899
6.00%, 07/15/30 2,000,000 2,072,526
6.50%, 08/15/30 1,743,410 1,770,383
7.50%, 02/01/31 220,269 236,544
7.50%, 11/01/31 134,592 144,538
7.00%, 01/01/34 TBA 1,000,000 1,057,812
Federal Housing
Administration
7.43%, 01/01/04++ 553,289 564,355
Federal National Mortgage
Association
3.17%, 01/01/04++ 100,760 101,445
4.64%, 01/01/04++ 1,849,501 1,881,442
4.67%, 01/01/04++ 742,552 755,340
1.57%, 01/18/04++ 294,784 296,190
6.50%, 04/26/06 500,000 533,641
6.50%, 09/01/08 373,178 395,243
6.50%, 12/01/08 40,340 42,456
6.50%, 05/01/09 95,663 101,568
6.50%, 08/01/09 542,951 575,055
6.50%, 03/25/11 3,245,133 3,329,859
5.50%, 09/25/13 1,818,239 1,836,738
8.00%, 06/01/15 180,788 193,954
</Table>
See Notes to Financial Statements.
62
<Table>
<Caption>
PAR VALUE
----------- --------------
8.00%, 06/15/15 $ 113,872 $ 122,164
8.00%, 07/01/15 350,807 376,355
8.00%, 09/01/15 266,897 286,334
6.00%, 10/25/15 1,951,312 1,999,655
6.00%, 05/01/16 718,444 754,385
6.00%, 07/01/16 160,929 168,979
6.00%, 11/01/16 876,239 920,635
5.50%, 01/17/17 TBA 12,000,000 12,431,255
5.50%, 11/01/17 74,180 76,952
5.50%, 01/01/18 TBA 600,000 621,563
4.00%, 08/01/18 2,912,382 2,841,705
4.00%, 09/01/18 8,530,455 8,323,438
8.00%, 09/25/19 159,591 159,946
9.48%, 08/25/21 IO(omg)@ 903 18,240
9.48%, 10/25/21 IO(omg)@ 1,422 25,900
19.77%, 01/25/22++@ 759,783 873,720
3.75%, 03/25/22++ 1,174,835 1,190,552
9.50%, 05/01/22 20,777 23,246
3.27%, 07/01/22++ 94,446 95,083
7.00%, 09/25/22 1,689,059 1,709,065
7.00%, 12/25/22 2,101,793 2,126,962
6.00%, 01/01/23 481,196 500,009
9.50%, 07/01/24 41,678 46,626
3.17%, 11/01/27 CONV++ 217,820 219,302
6.50%, 06/01/28 8,152 8,526
6.50%, 12/25/28 562,972 579,144
8.00%, 10/01/30 363,167 392,643
3.17%, 01/01/31++ 115,752 116,560
6.23%, 05/01/31++ 224,617 230,580
6.50%, 12/01/31 656,763 686,900
6.00%, 01/01/32 219,500 379,488
6.00%, 01/01/32 TBA 5,347,469 5,373,877
6.50%, 01/01/32 TBA 15,000,000 15,684,375
6.00%, 03/01/32 1,314,888 1,359,754
8.00%, 03/01/32 50,902 54,892
6.00%, 04/01/32 2,284,651 2,362,586
6.50%, 05/01/32 97,076 101,541
3.17%, 06/01/32++ 120,487 121,330
3.27%, 08/01/32++ 113,324 114,125
5.38%, 08/01/32++ 1,461,536 1,494,418
4.50%, 01/01/33 TBA 4,500,000 4,504,221
5.00%, 01/01/33 TBA 600,000 611,813
5.50%, 01/01/33 TBA 500,000 517,969
6.00%, 01/01/33 TBA 1,000,000 1,048,438
3.27%, 05/01/33++ 225,773 227,380
4.50%, 08/01/33 3,761,412 3,601,172
3.20%, 01/01/35++ 977,626 984,615
3.17%, 11/01/35++ 111,409 112,204
4.30%, 05/01/36++ 1,256,632 1,277,608
3.17%, 08/01/37++ 932,332 939,057
3.17%, 12/01/37++ 411,028 413,993
3.17%, 01/01/38++ 202,997 204,469
3.17%, 11/01/40++ 286,203 288,296
FFCA Secured Lending
Corporation
9.50%, 07/18/20 IO
144A++@ 4,027,717 278,315
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
Financial Asset
Securitization, Inc.
7.25%, 07/25/27 $ 294,429 $ 294,112
First Nationwide Trust
8.50%, 09/25/31 254,222 256,500
First Union Commercial
Mortgage Securities, Inc.
7.38%, 04/18/07 6,500,000 7,236,011
First Union National Bank
Commercial Mortgage Trust
7.20%, 09/15/10 1,500,000 1,739,218
GMAC Commercial Mortgage
Securities, Inc.
6.87%, 08/15/07 600,000 663,596
Government National
Mortgage Association
32.18%, 02/08/06++@ 729,479 981,220
7.00%, 10/15/25 128,359 137,462
7.00%, 01/15/26 111,644 119,380
7.00%, 07/15/27 749,362 800,368
6.00%, 09/20/27 2,460,741 2,493,184
7.00%, 12/15/27 9,497 10,143
7.00%, 01/15/28 94,539 100,919
7.00%, 03/15/28 1,036,465 1,107,112
18.81%, 06/20/28 IO(omg)@ 1,104,227 26,646
7.00%, 07/15/28 149,261 159,335
7.50%, 07/15/28 137,073 147,208
6.50%, 08/15/28 144,700 152,781
7.00%, 08/15/28 157,565 168,199
7.50%, 08/15/28 158,373 170,083
6.50%, 09/15/28 434,405 458,666
6.00%, 09/20/28 1,140,600 1,160,435
7.00%, 10/15/28 298,089 318,207
7.50%, 12/15/28 64,423 69,187
6.00%, 02/20/29 580,936 592,317
7.50%, 03/15/29 254,800 273,880
7.50%, 11/15/29 336,022 360,758
5.00%, 11/20/29++ 595,488 608,395
7.50%, 02/15/30 53,929 57,882
8.50%, 08/15/30 36,860 40,085
6.50%, 08/20/30 666,028 679,829
8.50%, 11/20/30 237,596 256,642
7.50%, 02/15/31 67,501 72,427
7.50%, 08/15/31 660,876 709,112
6.50%, 10/15/31 432,458 456,314
6.00%, 01/15/32 1,756,075 1,826,949
6.50%, 02/15/32 819,124 863,597
7.50%, 02/15/32 189,186 202,996
6.00%, 04/15/32 2,006,092 2,087,056
7.50%, 04/15/32 734,615 788,239
6.50%, 06/15/32 628,825 662,966
6.00%, 11/15/32 570,665 593,696
</Table>
See Notes to Financial Statements.
63
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
5.00%, 01/01/34 TBA $25,245,000 $ 25,008,327
6.00%, 01/01/34 TBA 29,230,000 30,371,781
6.50%, 01/01/34 TBA 29,650,000 31,243,687
Impac CMB Trust
1.42%, 07/25/31++ 684,546 685,117
1.42%, 08/25/32++ 1,767,719 1,769,116
1.60%, 03/25/33++ 1,032,690 1,035,079
Indymac ARM Trust
6.68%, 09/28/31++ 313,715 321,569
LB-UBS Commercial Mortgage
Trust
6.36%, 06/15/36 IO
144A++(omg)@ 5,389,980 298,962
Lehman Brothers Floating
Rate Commercial Mortgage
Trust
1.38%, 01/17/04 144A++ 311,284 311,243
Lomas & Nettleton Financial
Corporation
9.50%, 03/01/04 8,188 8,222
MASTR Asset Securitization
Trust
6.00%, 12/25/32 47,371 47,327
Merrill Lynch Mortgage
Investors, Inc.
5.32%, 05/25/32++ 350,802 351,547
MLCC Mortgage Investors,
Inc.
1.53%, 03/25/28++ 1,249,398 1,248,449
1.62%, 03/25/28++ 446,213 447,533
1.47%, 01/01/49++ 930,308 930,856
Nomura Asset Securities
Corporation
7.07%, 04/13/36 587,580 611,506
7.12%, 04/13/36 2,000,000 2,177,956
Residential Accredit Loans,
Inc.
6.50%, 01/25/32 769,505 774,276
Residential Asset Mortgage
Products, Inc.
1.57%, 01/25/04 144A++ 2,638,574 2,638,575
Residential Asset
Securitization Trust
1.57%, 04/25/33++ 1,197,706 1,198,202
Salomon Brothers Mortgage
Securities VII
1.52%, 01/25/04 STEP++ 17,854 17,865
1.00%, 10/25/23
IO++(omg)@ 548,983 732
Sequoia Mortgage Trust
1.53%, 02/20/33++ 1,330,158 1,323,650
Structured Asset Securities
Corporation
7.50%, 07/25/16 509,566 520,001
Trizec Hahn Office
Properties Trust
1.44%, 01/15/04 144A++ 2,866,022 2,827,439
Washington Mutual
2.74%, 01/01/04++ 2,980,234 2,997,316
3.69%, 01/01/04++ 604,304 611,785
24.73%, 05/25/08 IO(omg)@ 4,946,009 26,037
20.95%, 06/25/08
IO++(omg)@ 7,428,365 101,111
4.68%, 02/25/33++ 588,175 601,856
0.50%, 01/01/49
IO++(omg)@ 5,000,000 45,000
--------------
</Table>
<Table>
<Caption>
PAR VALUE
----------- --------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $245,691,359) $ 247,866,292
--------------
MUNICIPAL BONDS -- 2.2%
California State, Series A
Revenue Anticipation
Warrants (Non-Callable)
2.00%, 06/16/04 $ 2,300,000 2,304,669
Florida State Board of
Education, Series A
General Obligation Bond
(Callable 06/01/12 @
$101)
5.00%, 06/01/32 1,200,000 1,230,720
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 1,023,770
Massachusetts State Special
Obligation, Series A
Revenue Bond (FGIC
Insured) (Callable
06/01/12 @ $100)
5.00%, 06/01/21 2,945,000 3,084,740
Massachusetts State Water
Resources Authority,
Series J Revenue Bond
(FSA Insured) (Callable
08/01/12 @ $100)
5.00%, 08/01/32 1,250,000 1,274,388
Minnesota State General
Obligation Bond (Callable
10/01/11 @ $100)
5.00%, 10/01/20 200,000 211,410
Missouri Higher Education
Loan Authority, Series UU
Student Loan Revenue
Bonds (GTD STD LNS
Insured) (Non-Callable)
1.15%, 01/01/31++ 3,000,000 3,000,000
New York State Urban
Development Corporation,
Series A Revenue Bond
(Callable 03/15/12 @
$100)
5.13%, 03/15/22 1,500,000 1,564,590
</Table>
See Notes to Financial Statements.
64
<Table>
<Caption>
PAR VALUE
----------- --------------
South Carolina
Transportation
Infrastructure Bank,
Series A Revenue Bond
(AMBAC Insured) (Callable
10/01/11 @ $100)
5.00%, 10/01/23 $ 2,700,000 $ 2,803,275
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 1,026,310
--------------
TOTAL MUNICIPAL BONDS
(Cost $16,982,337) 17,523,872
--------------
<Caption>
NUMBER OF
CONTRACTS
-----------
OPTIONS -- 0.0%
PUT OPTIONS -- 0.0%
90-Day Eurodollar Futures,
Strike Price $94.75,
Expires
03/15/03 104 0
Euro-Bund Futures, Strike
Price $102.50, Expires
02/20/04 32 0
--------------
TOTAL OPTIONS
(Cost $1,412) 0
--------------
<Caption>
SHARES
-----------
SHORT-TERM INVESTMENTS -- 36.6%
AB Funds Trust -- Money
Market Fund (Retirement
Class)(inf) 123,445,446 123,445,446
Northern Institutional
Liquid Assets Portfolio
sec. 173,739,800 173,739,800
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $297,185,246) 297,185,246
--------------
RIGHTS -- 0.0%
United Mexican States
Recovery Rights Series B,
06/30/04 1,100,000 11,000
United Mexican States
Recovery Rights Series C,
06/30/05 1,100,000 2,200
United Mexican States
Recovery Rights Series D,
06/30/06 1,100,000 2,200
United Mexican States
Recovery Rights Series E,
06/30/07 1,100,000 1,375
--------------
TOTAL RIGHTS
(Cost $0) 16,775
--------------
<Caption>
PAR VALUE
----------- --------------
U.S. TREASURY OBLIGATIONS -- 24.0%
U.S. Treasury Bills
0.93%, 03/04/04++++ $ 200,000 $ 199,718
0.89%, 03/18/04++++ 905,000 903,408
1.00%, 04/08/04 21,300,000 21,249,392
1.02%, 06/03/04 12,000,000 11,953,236
0.99%, 06/10/04 8,400,000 8,365,358
0.96%, 06/17/04 10,000,000 9,956,860
--------------
52,627,972
--------------
U.S. Treasury Bonds
7.50%, 11/15/16 4,350,000 5,539,455
7.88%, 02/15/21 7,900,000 10,513,485
8.13%, 05/15/21 8,300,000 11,312,643
6.88%, 08/15/25 200,000 244,727
5.50%, 08/15/28 250,000 260,479
5.38%, 02/15/31 7,270,000 7,583,810
--------------
35,454,599
--------------
U.S. Treasury Inflationary
Index Bonds
3.38%, 01/15/07++++ 11,350,000 14,361,422
3.63%, 01/15/08 8,250,000 10,451,384
1.88%, 07/15/13 1,150,000 1,150,444
3.88%, 04/15/29 13,158,000 19,190,096
--------------
45,153,346
--------------
U.S. Treasury Notes
1.63%, 10/31/05 1,700,000 1,697,877
1.88%, 11/30/05 11,400,000 11,424,943
1.75%, 12/31/05 5,200,000 5,205,080
3.25%, 08/15/08 690,000 694,421
4.25%, 08/15/13 200,000 200,313
4.25%, 11/15/13 2,275,000 2,273,223
--------------
21,495,857
--------------
U.S. Treasury STRIPS
4.34%, 05/15/12(omg) 5,000,000 3,493,100
4.64%, 02/15/14(omg) 16,600,000 10,444,603
</Table>
See Notes to Financial Statements.
65
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
----------- --------------
4.29%, 02/15/15(omg) 1,600,000 $ 1,135,230
5.08%, 11/15/16(omg) 900,000 471,846
5.09%, 05/15/17(omg) 10,550,000 5,387,041
5.40%, 05/15/20(omg) 17,600,000 7,356,060
5.47%, 11/15/21(omg) 13,480,000 5,147,271
5.52%, 02/15/23(omg) 2,800,000 988,445
5.56%, 11/15/24(omg) 6,400,000 2,041,472
5.57%, 02/15/25(omg) 2,950,000 926,294
5.58%, 08/15/25(omg) 1,900,000 579,240
5.61%, 05/15/26(omg) $ 1,500,000 435,032
5.61%, 11/15/26(omg) 3,600,000 1,015,589
5.57%, 11/15/27(omg) 250,000 67,510
--------------
39,488,733
--------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $195,360,131) 194,220,507
--------------
TOTAL INVESTMENTS -- 137.1%
(Cost $1,095,203,484) 1,111,888,922
--------------
<Caption>
NUMBER OF
CONTRACTS
-----------
WRITTEN OPTIONS -- (0.3%)
CALL OPTIONS -- 0.0%
10-Year U.S. Treasury
Note Futures, Strike
Price $114.00, Expires
02/21/04 (37) (28,906)
--------------
CALL SWAPTIONS -- (0.2%)
3-Month LIBOR, Strike
Price $3.25, Expires
03/03/04 (550) (10,494)
3-Month LIBOR, Strike
Price $4.00, Expires
03/03/04 (670) (6,895)
3-Month LIBOR, Strike
Price $4.00, Expires
09/23/05 (1,700) (195,891)
</Table>
<Table>
<Caption>
NUMBER OF
CONTRACTS VALUE
----------- --------------
3-Month LIBOR, Strike
Price $4.00, Expires
07/03/06 (1,380) $ (149,316)
3-Month LIBOR, Strike
Price $5.50, Expires
01/07/05 (900) (525,600)
3-Month LIBOR, Strike
Price $5.97, Expires
10/04/04 (890) (762,240)
3-Month LIBOR, Strike
Price $6.00, Expires
10/19/04 (260) (224,089)
--------------
(1,874,525)
--------------
PUT SWAPTIONS -- (0.1%)
3-Month LIBOR, Strike
Price $5.97, Expires
10/04/04 (890) (68,352)
3-Month LIBOR, Strike
Price $6.00, Expires
10/19/04 (260) (21,193)
3-Month LIBOR, Strike
Price $7.00, Expires
01/07/05 (900) (42,498)
3-Month LIBOR, Strike
Price $7.00, Expires
09/23/05 (330) (42,527)
3-Month LIBOR, Strike
Price $6.00, Expires
07/03/06 (1,380) (492,080)
--------------
(666,650)
--------------
TOTAL WRITTEN OPTIONS
(Cost $(2,778,035)) (2,570,081)
--------------
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (36.8%) (298,414,628)
--------------
NET ASSETS -- 100.0% $ 810,904,213
==============
</Table>
See Notes to Financial Statements.
66
Swap agreements outstanding at December 31, 2003:
<Table>
<Caption>
UNREALIZED
EXPIRATION APPRECIATION/
DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION)
- ----------- ---------- -------------- ---------------
BRITISH POUNDS
Receive fixed rate
payments of 5.25%
and pay variable
rate payments on
the six month LIBOR
floating rate(a) 03/15/04 6,700,000 $ 36,102
Receive fixed rate
payments of 5.25%
and pay variable
rate payments on
the six month LIBOR
floating rate(b) 03/15/04 15,000,000 80,047
Receive fixed rate
payments of 4.25%
and pay variable
rate payments on
the six month LIBOR
floating rate(c) 03/16/05 3,200,000 (13,198)
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 (125,550)
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 (21,005)
Receive variable rate
payments on the six
month LIBOR
floating rate and
pay fixed rate
payments of
5.00%(a) 03/20/18 (5,600,000) 6,867
---------------
(36,737)
---------------
EURODOLLARS
Receive fixed rate
payments of 4.50%
and pay variable
rate payments on
the six month LIBOR
floating rate(h) 06/18/07 13,700,000 680,282
Receive fixed rate
payments of 3.50%
and pay variable
rate payments on
the six month LIBOR
floating rate(a) 09/15/05 16,600,000 93,427
Receive fixed rate
payments of 3.50%
and pay variable
rate payments on
the six month LIBOR
floating rate(d) 09/15/05 49,100,000 276,342
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) (738,733)
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) (660,850)
</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) 06/1/12 (19,700,000) $ (1,335,142)
---------------
(1,684,674)
---------------
JAPANESE YEN
Receive variable rate
payments on the six
month LIBOR
floating rate and
pay fixed rate
payments of
0.238%(c) 05/17/04 (2,660,000,000) (14,892)
Receive variable rate
payments on the six
month LIBOR
floating rate and
pay fixed rate
payments of
1.07%(c) 06/02/12 (540,000,000) 133,813
---------------
118,921
---------------
SWISS FRANCS
Receive fixed rate
payments of 1.50%
and pay variable
rate payments on
the three month
LIBOR floating
rate(g) 03/29/05 13,900,000 65,457
---------------
U.S. DOLLARS
Receive fixed rate
payments of 4.00%
and pay variable
rate payments on
the three month
LIBOR floating
rate(a) 06/16/09 $ 13,800,000 (27,158)
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 10,868
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) 1,091,202
Receive variable rate
payments on the
three month LIBOR
floating rate and
pay fixed rate
payments of
5.00%(a) 06/16/14 (900,000) (7,479)
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) 400
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) 418
</Table>
See Notes to Financial Statements.
67
MEDIUM-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<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) $ 203
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) 138
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) 407
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) (295)
</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) $ (420)
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) (294)
---------------
1,067,990
---------------
$ (469,043)
===============
</Table>
See Notes to Financial Statements.
68
EXTENDED-DURATION BOND FUND
Long-term bonds generally underperformed their mid- and short-duration
counterparts during the quarter as long-term rates increased, most notably in
October. Given that long-term bonds are more price sensitive to changes in
interest rates when compared to bonds with shorter maturities, their prices
generally increase more when compared to bonds with shorter maturities when
interest rates decline. The fourth quarter experienced a significant divergence
in returns between long-term government and long-term credit bonds. The
announcement of a robust economic growth rate in the third quarter followed by
solid economic activity in the fourth quarter served as a positive for corporate
bonds, but was not great news for Treasuries. For the quarter, long-duration
credit bonds, as measured by the Lehman Brothers Long-Term Credit Index,
returned 0.83%, while long-duration government bonds returned -1.14%, as
measured by the Lehman Brothers Long-Term Government Index.
The fund, primarily comprised of fixed income securities with longer maturities,
produced positive returns and materially outpaced its composite benchmark index
during the fourth quarter with the outperformance being generated in October and
November. Furthermore, the fund significantly outperformed its benchmark for the
calendar year 2003. The fund's allocation to corporate bonds continued to
decline during the quarter as valuations became increasingly less attractive. As
corporate spreads narrowed, the fund's relative performance versus the composite
benchmark was positively impacted by its exposure to and security selection
within the corporate bond sector. At the end of the fourth quarter, the fund
maintained an approximate 22% allocation to the corporate sector reflecting the
sub-advisers' efforts to take advantage of specific opportunities within the
sector. Loomis Sayles, one of two sub-advisers within the fund, outpaced the
composite benchmark for the fourth quarter. At quarter end, the fund maintained
an average credit quality of AA.
Not Part of the Annual Report
69
EXTENDED-DURATION BOND FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* BENCHMARK INDEX**
----------------- -------------------- ------------- -----------------
One Year 11.19% 11.32% 10.95% 6.46%
Since Inception (8/27/01 -- 12/31/03) 10.11% 10.11% 9.70% 9.09%
</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.
[LINE GRAPH]
<Table>
<Caption>
RETIREMENT CLASS BENCHMARK INDEX**
---------------- -----------------
8/27/01 10000 10000
8/31/01 10097 10111
9/30/01 9943 10027
10/31/01 10364 10516
11/30/01 10281 10202
12/31/01 10248 10063
1/31/02 10349 10202
2/28/02 10439 10300
3/31/02 10143 9948
4/30/02 10251 10208
5/31/02 10390 10286
6/30/02 10290 10350
7/31/02 10295 10443
8/31/02 10680 10927
9/30/02 10896 11259
10/31/02 10574 10965
11/30/02 10777 11066
12/31/02 11275 11521
1/31/03 11332 11530
2/28/03 11646 11868
3/31/03 11597 11774
4/30/03 11995 12039
5/31/03 12579 12691
6/30/03 12503 12515
7/30/03 11590 11432
8/31/03 11768 11671
9/30/03 12394 12285
10/31/03 12193 12013
11/30/03 12393 12099
12/31/03 12537 12266
</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 Annual Report
70
EXTENDED-DURATION BOND FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 PAR VALUE
- ----------------- -------------- ------------
AGENCY OBLIGATIONS -- 2.9%
Federal Home Loan Mortgage
Corporation
4.63%, 02/15/07(E) $ 2,250,000 $ 2,957,195
Federal National Mortgage
Association
6.09%, 10/29/07(N)(omg) 4,815,000 2,514,135
5.25%, 01/15/09 1,000,000 1,077,436
5.50%, 03/15/11 6,000,000 6,480,120
------------
TOTAL AGENCY OBLIGATIONS
(Cost $11,515,535) 13,028,886
------------
ASSET-BACKED SECURITIES -- 0.4%
Community Program Loan Trust
4.50%, 04/01/29
(Cost $1,649,840) 1,950,000 1,686,724
------------
CORPORATE BONDS -- 21.9%
Agilysys, Inc.
9.50%, 08/01/06 500,000 518,125
AIG SunAmerica Global
Finance IX
6.90%, 03/15/32 144A 5,250,000 6,002,245
American Airlines, Inc.
6.98%, 04/01/11 72,387 73,211
8.61%, 10/01/11 850,000 774,583
Arrow Electronics, Inc.
6.88%, 07/01/13 250,000 266,857
Atlas Air, Inc.
7.20%, 01/02/19 465,848 422,731
Bausch & Lomb, Inc.
7.13%, 08/01/28 1,500,000 1,530,000
BellSouth Corporation
6.88%, 10/15/31 2,250,000 2,471,405
Boise Cascade Corporation
7.35%, 02/01/16 450,000 457,707
Borden, Inc.
7.88%, 02/15/23 1,200,000 1,098,000
Chesapeake Energy
Corporation
7.75%, 01/15/15 150,000 163,500
6.88%, 01/15/16 144A 825,000 853,875
Citigroup, Inc.
6.63%, 01/15/28 1,000,000 1,090,425
5.88%, 02/22/33 5,000,000 4,930,964
Comcast Corporation
5.50%, 03/15/11 500,000 520,636
Commonwealth Edison Co.
4.75%, 12/01/11 605,000 608,426
Constellation Energy Group,
Inc.
4.55%, 06/15/15 750,000 690,963
Continental Airlines, Inc.
6.65%, 09/15/19 2,383,804 2,330,452
6.70%, 06/15/21 435,364 426,291
COX Communications, Inc.
6.75%, 03/15/11 250,000 283,639
</Table>
<Table>
<Caption>
PAR VALUE
-------------- ------------
Cummins, Inc.
7.13%, 03/01/28 $ 425,000 $ 397,375
Dana Corporation
6.50%, 03/01/09 250,000 266,563
Delphi Corporation
7.13%, 05/01/29 2,500,000 2,549,935
Delta Air Lines, Inc.
8.30%, 12/15/29 500,000 333,125
Devon Energy Corporation
4.95%, 08/15/08 CONV 963,000 988,279
Dillard's, Inc.
7.75%, 07/15/26 890,000 894,450
El Paso Corporation
7.00%, 05/15/11 400,000 371,000
EOP Operating LP
7.25%, 06/15/28 500,000 545,256
First Industrial LP
7.60%, 07/15/28 1,000,000 1,056,969
Foot Locker, Inc.
8.50%, 01/15/22 1,000,000 1,115,000
Ford Motor Co.
6.63%, 10/01/28 1,500,000 1,383,819
6.38%, 02/01/29 1,500,000 1,342,113
General Electric Capital
Corporation
6.75%, 03/15/32 3,200,000 3,554,562
General Motors Acceptance
Corporation
6.88%, 08/28/12 250,000 269,398
Georgia-Pacific Corporation
7.75%, 11/15/29 2,950,000 2,957,374
HCA, Inc.
6.30%, 10/01/12 1,500,000 1,549,115
7.58%, 09/15/25 1,000,000 1,046,314
7.05%, 12/01/27 500,000 492,856
Health Care Property
Investors, Inc.
6.00%, 03/01/15 1,500,000 1,551,470
Highwoods Properties, Inc.
7.50%, 04/15/18 1,500,000 1,640,115
Household Finance
Corporation
7.63%, 05/17/32 2,515,000 3,050,680
IMC Global, Inc.
7.38%, 08/01/18 500,000 427,500
7.30%, 01/15/28 750,000 618,750
International Paper Co.
6.88%, 11/01/23 300,000 321,282
Kinder Morgan, Inc.
7.25%, 03/01/28 500,000 557,925
Midamerican Energy Holdings
Co.
5.88%, 10/01/12 1,000,000 1,050,322
Missouri Pacific Railroad
4.25%, 01/01/05 90,000 91,748
</Table>
See Notes to Financial Statements.
71
EXTENDED-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
-------------- ------------
Motorola, Inc.
6.75%, 02/01/06 $ 250,000 $ 269,478
5.80%, 10/15/08 500,000 531,030
7.63%, 11/15/10 500,000 575,589
6.50%, 11/15/28 500,000 496,778
Nisource Finance Corporation
6.15%, 03/01/13 1,000,000 1,077,089
Pemex Project Funding Master
Trust
8.63%, 02/01/04 144A 1,000,000 1,112,500
Penney (JC) Co., Inc.
7.95%, 04/01/17 500,000 570,625
Phillips Van-Huesen
Corporation
7.75%, 11/15/23 450,000 461,250
Pioneer Natural Resources
Co.
7.20%, 01/15/28 2,500,000 2,684,183
Preston Corporation
7.00%, 05/01/11 CONV 250,000 228,125
Prologis Trust
7.63%, 07/01/17 1,000,000 1,199,414
Provident Cos., Inc.
7.25%, 03/15/28 500,000 500,945
Pulte Homes, Inc.
7.30%, 10/24/05 1,000,000 1,046,691
7.88%, 06/15/32 1,500,000 1,747,579
6.38%, 05/15/33 1,000,000 976,570
Raytheon Co.
6.40%, 12/15/18 2,600,000 2,737,517
7.20%, 08/15/27 250,000 274,181
7.00%, 11/01/28 750,000 805,984
Schering-Plough Corporation
6.50%, 12/01/33 2,800,000 2,924,420
SLM Corporation
5.63%, 08/01/33 3,730,000 3,550,826
Southern California Edison
Co.
7.25%, 03/01/26 500,000 515,000
6.65%, 04/01/29 250,000 261,250
Southern Natural Gas Co.
7.35%, 02/15/31 1,500,000 1,488,750
Sprint Capital Corporation
6.88%, 11/15/28 3,450,000 3,378,453
Swift Energy Co.
9.38%, 05/01/12 150,000 165,750
Tennessee Gas Pipeline Co.
7.00%, 10/15/28 750,000 716,250
Trinet Corporate Realty
Trust, Inc.
7.70%, 07/15/17 1,000,000 1,102,500
Union Pacific Resources
Group
7.15%, 05/15/28 250,000 282,530
UnumProvident Corporation
6.75%, 12/15/28 1,500,000 1,433,558
</Table>
<Table>
<Caption>
PAR VALUE
-------------- ------------
Weyerhaeuser Co.
7.13%, 07/15/23 $ 500,000 $ 527,717
7.38%, 03/15/32 144A 250,000 272,671
Wisconsin Electric Power
6.88%, 12/01/49 6,295,000 6,861,676
------------
TOTAL CORPORATE BONDS
(Cost $88,260,931) 96,714,209
------------
FOREIGN BONDS -- 13.2%
BRAZIL -- 0.8%
Federal Republic of Brazil
8.00%, 04/15/14 3,447,948 3,402,339
------------
CANADA -- 4.4%
British Columbia Generic
Residual
5.25%, 08/23/13
STRIP(C)(omg) 2,500,000 1,185,440
5.30%, 06/09/14
STRIP(C)(omg) 11,500,000 5,183,788
5.86%, 09/05/20
STRIP(C)(omg) 1,750,000 526,117
Canada Generic Residual
5.44%, 06/01/25
STRIP(C)(omg) 4,110,000 1,017,760
Canadian Government
4.50%, 09/01/07(C) 3,275,000 2,614,298
Macmillan Bloedel, Ltd.
7.70%, 02/15/26 500,000 553,976
Ontario Generic Residual
5.90%, 07/13/22
STRIP(C)(omg) 3,900,000 1,035,171
5.81%, 03/08/29
STRIP(C)(omg) 7,000,000 1,280,720
Rogers Cablesystems, Ltd.
9.65%, 01/15/14(C) 2,370,000 1,948,141
Saskatchewan Residual
5.30%, 04/10/14
STRIP(C)(omg) 7,500,000 3,395,241
5.86%, 02/04/22
STRIP(C)(omg) 3,000,000 816,738
------------
19,557,390
------------
CAYMAN ISLANDS -- 0.2%
Enersis SA
7.40%, 12/01/16 625,000 639,020
------------
HONG KONG -- 0.6%
Bangkok Bank Public Co.
9.03%, 03/15/29 144A 2,500,000 2,817,947
------------
ITALY -- 1.3%
Cartesio SRL
6.02%, 03/07/33 144A 5,780,000 5,680,873
------------
</Table>
See Notes to Financial Statements.
72
<Table>
<Caption>
PAR VALUE
-------------- ------------
MALAYSIA -- 0.4%
Telekom Malaysia BHD
7.88%, 08/01/25 144A $ 225,000 $ 258,591
Tenaga Nasional BHD
7.50%, 11/01/25 144A 1,500,000 1,623,690
------------
1,882,281
------------
MEXICO -- 0.3%
Petroleos Mexicanos
8.63%, 12/01/23 144A 1,000,000 1,102,500
TFM SA de CV
11.75%, 06/15/09 STEP 250,000 258,125
------------
1,360,625
------------
NETHERLANDS -- 0.6%
Telefonica Europe BV
8.25%, 09/15/30 2,005,000 2,540,223
------------
NORWAY -- 0.9%
Norway Government
6.75%, 01/15/07(K) 24,000,000 3,961,872
------------
PHILIPPINES -- 0.3%
Bangko Sentral Pilipinas
8.60%, 06/15/27 500,000 432,500
Philippine Long Distance
Telephone Co.
8.35%, 03/06/17 500,000 438,750
Quezon Power (Philippines),
Ltd.
8.86%, 06/15/17 472,500 394,538
------------
1,265,788
------------
SUPRANATIONAL -- 2.4%
EUROFIMA
6.50%, 08/22/11(A) 710,000 545,421
European Bank for
Reconstruction &
Development
6.06%, 02/10/28(A)(omg) 15,000,000 2,748,559
International Bank for
Reconstruction &
Development
6.21%, 08/20/07(N)(omg) 13,625,000 7,251,569
------------
10,545,549
------------
UNITED KINGDOM -- 0.8%
Vodafone Group PLC
7.88%, 02/15/30 3,000,000 3,699,050
------------
VENEZUELA -- 0.2%
Cerro Negro Finance, Ltd.
7.90%, 12/01/20 144A 500,000 435,000
Petrozuata Finance, Inc.
8.37%, 10/01/22 144A 450,000 384,750
------------
819,750
------------
TOTAL FOREIGN BONDS
(Cost $46,776,027) 58,172,707
------------
</Table>
<Table>
<Caption>
PAR VALUE
-------------- ------------
MORTGAGE-BACKED SECURITIES -- 0.5%
Federal Home Loan Mortgage
Corporation
5.00%, 12/01/31 $ 349,885 $ 345,605
Federal National Mortgage
Association
5.00%, 07/25/23 2,000,000 2,054,340
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $2,085,238) 2,399,945
------------
MUNICIPAL BONDS -- 7.2%
Chicago, Illinois Board of
Education, General
Obligation Bond (FGIC
Insured) (Non-Callable)
5.20%, 12/01/22(omg) 5,700,000 2,163,948
Chicago, Illinois,
Wastewater Transmission,
Series A Revenue Bond
(MBIA Insured)
(Non-Callable)
5.15%, 01/01/22(omg) 5,000,000 2,007,000
Clovis, California Unified
School District, Series A
General Obligation Bond
(FGIC Insured)
(Non-Callable)
5.31%, 08/01/25(omg) 9,775,000 3,162,995
Coppell, Texas Independent
School District, General
Obligation Bond (PSF-GTD
Insured) (Non-Callable)
5.17%, 08/15/23(omg) 2,195,000 808,331
Granbury, Texas Independent
School District, General
Obligation Bond (PSF-GTD
Insured) (Non-Callable)
4.87%, 08/01/20(omg) 1,000,000 451,290
Houston, Texas Water & Sewer
System, Series A Revenue
Bond (FSA LOC)
(Non-Callable)
5.33%, 12/01/26(omg) 7,300,000 2,193,212
Indianapolis, Indiana Local
Public Improvement Bond
Bank, Series E Revenue
Bond (AMBAC Insured)
(Non-Callable)
5.04%, 02/01/22(omg) 2,550,000 1,039,202
Lake County, Illinois
Community Consolidated
School District No. 073,
General Obligation Bond
(FGIC Insured)
(Non-Callable)
4.62%, 12/01/17(omg) 5,000,000 2,653,299
</Table>
See Notes to Financial Statements.
73
EXTENDED-DURATION BOND FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
PAR VALUE
-------------- ------------
McHenry & Kane Counties,
Illinois Community
Consolidated School
District No. 158, General
Obligation Bond (FGIC
Insured) (Non-Callable)
3.94%, 01/01/12(omg) $ 3,340,000 $ 2,447,719
Metropolitan Pier &
Exposition Authority,
Illinois Dedicated State
Tax, Series A Revenue Bond
(MBIA Insured)
(Non-Callable)
5.25%, 12/15/23(omg) 5,850,000 2,085,408
Metropolitan Pier &
Exposition Authority,
Illinois Dedicated State
Tax, Series A Revenue Bond
(MBIA Insured)
(Non-Callable)
5.20%, 12/15/22(omg) 16,225,000 6,147,328
Northern Illinois
University, Auxiliary
Facilities System, Revenue
Bond (FGIC Insured)
(Non-Callable)
4.10%, 10/01/13(omg) 1,225,000 825,932
San Jose, California Unified
School District, Santa
Clara County, Series A
General Obligation Bond
(FGIC Insured)
(Non-Callable)
4.67%, 08/01/18(omg) 2,055,000 1,050,352
Union Elementary School
District, California,
Series A General
Obligation Bond (FGIC
Insured)
(Non-Callable)
4.76%, 09/01/19(omg) 1,750,000 839,283
Washington State, Motor
Vehicle Fuel Tax, Series
03-C General Obligation
Bond, (MBIA Insured)
(Non-Callable)
5.16%, 06/01/23(omg) 10,000,000 3,728,399
------------
TOTAL MUNICIPAL BONDS
(Cost $30,043,754) $ 31,603,698
------------
</Table>
<Table>
<Caption>
SHARES VALUE
-------------- ------------
SHORT-TERM INVESTMENTS -- 3.6%
AB Funds Trust -- Money
Market Fund (Retirement
Class) (inf) 8,749,138 $ 8,749,138
Northern Institutional
Liquid Assets Portfolio
sec. 7,364,318 7,364,318
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $16,113,456) 16,113,456
------------
PREFERRED STOCK -- 0.4%
International Paper Capital
Trust
5.25%, 01/20/25 CONV
(Cost $1,785,750) 36,000 1,813,680
------------
<Caption>
PAR
--------------
U.S. TREASURY OBLIGATIONS -- 50.2%
U.S. Treasury Bonds
7.25%, 05/15/16 $ 12,950,000 16,158,673
8.00%, 11/15/21 151,287,000 204,367,557
------------
220,526,230
------------
U.S. Treasury Note
1.63%, 10/31/05 1,500,000 1,498,127
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $220,711,689) 222,024,357
------------
TOTAL INVESTMENTS -- 100.3%
(Cost $418,942,220) 443,557,662
LIABILITIES IN EXCESS
OF OTHER ASSETS -- (0.3%) (1,465,732)
------------
NET ASSETS -- 100.0% $442,091,930
============
</Table>
See Notes to Financial Statements.
74
EQUITY INDEX FUND
U.S. equity markets continued their ascent in the fourth quarter as improvements
on the economic front pushed stocks upward for the third consecutive quarter.
The broad market, as represented by the S&P 500(R) Index, advanced 12.18% in the
fourth quarter and ended the year up 28.71%, the first calendar year gain since
1999. All economic sectors within the index posted positive returns for the
quarter with the best performance coming from the materials, energy, industrials
and consumer discretionary sectors. Utilities, consumer staples and health care,
sectors generally categorized as defensive, lagged during the quarter.
The fund is a passively managed fund benchmarked against the S&P 500(R) Index.
The fund is comprised of domestic, large-cap equity stocks with both value and
growth-style orientations. The differential between the benchmark and the fund
is a result of both fund expenses and social restrictions within the portfolio.*
- ---------------
* S&P 500(R) is a trademark of The McGraw-Hill Companies, and has been licensed
for use by AB Funds Trust. The Equity Index Fund is not sponsored, endorsed,
sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of purchasing the Equity Index Fund.
Not Part of the Annual Report
75
EQUITY INDEX FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
S&P 500(R)
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX**
----------------- -------------------- ------------- ----------
One Year 28.03% 28.19% 28.09% 28.71%
Since Inception (8/27/01 -- 12/31/03) (1.47%) (1.66%) (1.56%) (1.02%)
</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.
[LINE GRAPH]
<Table>
<Caption>
RETIREMENT CLASS S&P 500(R) INDEX**
---------------- ------------------
8/27/01 10000 10000
8/31/01 9585 9570
9/30/01 8817 8796
10/31/01 8985 8964
11/30/01 9666 9652
12/31/01 9745 9736
1/31/02 9589 9594
2/28/02 9378 9409
3/31/02 9726 9764
4/30/02 9116 9171
5/31/02 9041 9104
6/30/02 8428 8456
7/31/02 7757 7796
8/31/02 7801 7847
9/30/02 6955 6994
10/31/02 7569 7610
11/30/02 8046 8057
12/31/02 7543 7585
1/31/03 7347 7386
2/28/03 7240 7275
3/31/03 7322 7347
4/30/03 7916 7952
5/31/03 8321 8372
6/30/03 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
</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 Annual Report
76
EQUITY INDEX FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ---------- ------------
COMMON STOCK -- 96.6%
AUTO & TRANSPORTATION -- 2.6%
Burlington Northern Santa Fe
Corporation 15,600 $ 504,660
Cooper Tire & Rubber Co. 3,100 66,278
CSX Corporation 9,000 323,460
Dana Corporation 6,200 113,770
Delphi Corporation 23,500 239,935
Delta Air Lines, Inc. 5,200 61,412
FedEx Corporation 12,500 843,750
Ford Motor Co. 76,727 1,227,632
General Motors Corporation 23,500 1,254,900
Genuine Parts Co. 7,300 242,360
Goodyear Tire & Rubber Co.
(The) 7,400 58,164
Harley-Davidson, Inc. 12,700 603,631
Navistar International
Corporation* 2,900 138,881
Norfolk Southern Corporation 16,400 387,860
Paccar, Inc. 4,850 412,832
Southwest Airlines Co. 33,000 532,620
Union Pacific Corporation 10,700 743,436
United Parcel Service, Inc.
Class B 47,100 3,511,305
Visteon Corporation 5,518 57,442
------------
11,324,328
------------
CONSUMER DISCRETIONARY -- 12.2%
Alberto-Culver Co. Class B 2,500 157,700
Allied Waste Industries, Inc.* 13,400 185,992
American Greetings Corporation
Class A* 2,800 61,236
Apollo Group, Inc. Class A* 7,400 503,200
AutoNation, Inc.* 11,500 211,255
AutoZone, Inc.* 3,700 315,277
Avon Products, Inc. 9,900 668,151
Bed Bath & Beyond, Inc.* 12,400 537,540
Best Buy Co., Inc. 13,550 707,852
Big Lots, Inc.* 4,900 69,629
Black & Decker Corporation 3,300 162,756
Carnival Corporation 26,400 1,048,872
Cendant Corporation* 42,500 946,475
Cintas Corporation 7,200 360,936
Circuit City Stores, Inc. --
Circuit City Group 8,800 89,144
Clear Channel Communications,
Inc. 25,800 1,208,214
Convergys Corporation* 6,000 104,760
Costco Wholesale Corporation* 19,200 713,856
Darden Restaurants, Inc. 6,950 146,228
Dillard's, Inc. Class A 3,500 57,610
Dollar General Corporation 14,100 295,959
Donnelley (R.R.) & Sons Co. 4,800 144,720
Eastman Kodak Co. 12,000 308,040
eBay, Inc.* 27,100 1,750,389
Electronic Arts, Inc.* 12,500 597,250
Family Dollar Stores, Inc. 7,200 258,336
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ------------
Federated Department Stores,
Inc. 7,600 $ 358,188
Gannett Co., Inc. 11,400 1,016,424
Gap, Inc. (The) 37,600 872,696
Gillette Co. (The) 42,400 1,557,352
Hasbro, Inc. 7,300 155,344
Hilton Hotels Corporation 15,900 272,367
Home Depot, Inc. (The) 95,350 3,383,972
International Flavors &
Fragrances, Inc. 3,900 136,188
Interpublic Group Cos., Inc. 17,400 271,440
Jones Apparel Group, Inc. 5,300 186,719
Kimberly-Clark Corporation 21,100 1,246,799
Knight-Ridder, Inc. 3,300 255,321
Kohl's Corporation* 14,300 642,642
Leggett & Platt, Inc. 8,000 173,040
Limited Brands 21,700 391,251
Liz Claiborne, Inc. 4,608 163,400
Lowe's Cos., Inc. 33,000 1,827,870
Marriott International, Inc.
Class A 9,700 448,140
Mattel, Inc. 18,000 346,860
May Department Stores Co.
(The) 12,100 351,747
Maytag Corporation 3,300 91,905
McDonald's Corporation 53,200 1,320,956
McGraw Hill Co., Inc. (The) 8,000 559,360
Meredith Corporation 2,100 102,501
Monster Worldwide, Inc.* 4,700 103,212
New York Times Co. Class A 6,200 296,298
Newell Rubbermaid, Inc. 11,500 261,855
Nike, Inc. Class B 11,000 753,060
Nordstrom, Inc. 5,800 198,940
Office Depot, Inc.* 13,100 218,901
Omnicom Group, Inc. 8,000 698,640
Penney (JC) Co., Inc. 11,400 299,592
RadioShack Corporation 6,900 211,692
Reebok International, Ltd. 2,500 98,300
Robert Half International,
Inc.* 7,200 168,048
Sabre Holdings Corporation 6,000 129,540
Sears, Roebuck & Co. 10,600 482,194
Snap-On, Inc. 2,400 77,376
Stanley Works (The) 3,400 128,758
Staples, Inc.* 20,800 567,840
Starbucks Corporation* 16,400 542,184
Starwood Hotels & Resorts
Worldwide, Inc. 8,500 305,745
Target Corporation 38,200 1,466,880
Tiffany & Co. 6,100 275,720
Time Warner, Inc.* 189,600 3,410,904
TJX Cos., Inc. 21,100 465,255
Toys "R" Us, Inc.* 8,900 112,496
Tribune Co. 13,100 675,960
Tupperware Corporation 2,400 41,616
Univision Communications, Inc.
Class A* 13,500 535,815
</Table>
See Notes to Financial Statements.
77
EQUITY INDEX FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
---------- ------------
VF Corporation 4,500 $ 194,580
Wal-Mart Stores, Inc. 181,400 9,623,269
Waste Management, Inc. 24,400 722,240
Wendy's International, Inc. 4,800 188,352
Whirlpool Corporation 2,900 210,685
Yahoo!, Inc.* 27,600 1,246,692
Yum! Brands, Inc.* 12,300 423,120
------------
52,879,618
------------
CONSUMER STAPLES -- 5.9%
Albertson's, Inc. 15,400 348,810
Campbell Soup Co. 17,200 460,960
Clorox Co. 8,800 427,328
Coca-Cola Co. (The) 102,800 5,217,100
Coca-Cola Enterprises, Inc. 19,100 417,717
Colgate-Palmolive Co. 22,500 1,126,125
ConAgra Foods, Inc. 22,500 593,775
CVS Corporation 16,600 599,592
General Mills, Inc. 15,700 711,210
Heinz (H.J.) Co. 14,800 539,164
Hershey Foods Corporation 5,500 423,445
Kellogg Co. 17,100 651,168
Kroger Co.* 31,200 577,512
McCormick & Co., Inc. 5,800 174,580
Pepsi Bottling Group, Inc. 11,000 265,980
PepsiCo, Inc. 71,940 3,353,843
Procter & Gamble Co. 54,400 5,433,472
Safeway, Inc.* 18,500 405,335
Sara Lee Corporation 33,100 718,601
Supervalu, Inc. 5,600 160,104
Sysco Corporation 27,100 1,008,933
Walgreen Co. 43,000 1,564,340
Winn-Dixie Stores, Inc. 5,900 58,705
Wrigley (W.M.), Jr. Co. 9,400 528,374
------------
25,766,173
------------
FINANCIAL SERVICES -- 21.8%
ACE, Ltd. 11,700 484,614
AFLAC, Inc. 21,500 777,870
Allstate Corporation (The) 29,452 1,267,025
AMBAC Financial Group, Inc. 4,500 312,255
American Express Co. 53,900 2,599,597
American International Group,
Inc. 109,292 7,243,873
AmSouth Bancorporation 14,700 360,150
AON Corporation 13,100 313,614
Apartment Investment &
Management Co. Class A
REIT 3,900 134,550
Automatic Data Processing,
Inc. 24,900 986,289
Bank of America Corporation 62,243 5,006,204
Bank of New York Co., Inc.
(The) 32,400 1,073,088
Bank One Corporation 46,900 2,138,171
BB&T Corporation 22,900 884,856
Bear Stearns Cos., Inc. (The) 4,100 327,795
Block (H&R), Inc. 7,500 415,275
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ------------
Capital One Financial
Corporation 9,700 $ 594,513
Charter One Financial, Inc. 9,361 323,423
Chubb Corporation 7,900 537,990
Cigna Corporation 5,900 339,250
Cincinnati Financial
Corporation 6,700 280,596
Citigroup, Inc. 216,230 10,495,803
Comerica, Inc. 7,400 414,844
Concord EFS, Inc.* 19,500 289,380
Countrywide Financial
Corporation 7,736 586,776
Deluxe Corporation 2,100 86,793
Dow Jones & Co., Inc. 3,454 172,182
Equifax, Inc. 5,800 142,100
Equity Office Properties Trust
REIT 16,800 481,320
Equity Residential Properties
Trust REIT 11,500 339,365
Fannie Mae 40,700 3,054,942
Federated Investors, Inc.
Class B 4,600 135,056
Fifth Third Bancorp 23,894 1,412,135
First Data Corporation 30,600 1,257,354
First Tennessee National
Corporation 5,300 233,730
Fiserv, Inc.* 8,100 320,031
FleetBoston Financial
Corporation 44,200 1,929,330
Franklin Resources, Inc. 10,500 546,630
Freddie Mac 29,200 1,702,944
Golden West Financial
Corporation 6,400 660,416
Goldman Sachs Group, Inc. 19,800 1,954,854
Hartford Financial Services
Group, Inc. 11,900 702,457
Huntington Bancshares, Inc. 9,600 216,000
Janus Capital Group, Inc. 10,100 165,741
Jefferson-Pilot Corporation 5,900 298,835
John Hancock Financial
Services, Inc. 12,100 453,750
JP Morgan Chase & Co. 85,490 3,140,048
KeyCorp 17,600 516,032
Lehman Brothers Holdings, Inc. 11,400 880,308
Lincoln National Corporation 7,500 302,775
Loews Corporation 7,800 385,710
Marsh & McLennan Cos., Inc. 22,200 1,063,158
Marshall & Ilsley Corporation 9,500 363,375
MBIA, Inc. 6,000 355,380
MBNA Corporation 53,550 1,330,718
Mellon Financial Corporation 18,000 577,980
Merrill Lynch & Co., Inc. 39,600 2,322,540
MetLife, Inc. 31,900 1,074,073
MGIC Investment Corporation 4,100 233,454
Moody's Corporation 6,200 375,410
Morgan Stanley 45,400 2,627,298
National City Corporation 25,500 865,470
North Fork Bancorporation,
Inc. 6,400 259,008
Northern Trust Corporation 9,200 427,064
</Table>
See Notes to Financial Statements.
78
<Table>
<Caption>
SHARES VALUE
---------- ------------
Paychex, Inc. 15,800 $ 587,760
Plum Creek Timber Co., Inc.
REIT 7,700 234,465
PNC Financial Services Group,
Inc. 11,600 634,868
Principal Financial Group 13,500 446,445
Progressive Corporation (The) 9,100 760,669
Prologis Trust REIT 7,500 240,675
Providian Financial
Corporation* 12,200 142,008
Prudential Financial, Inc. 22,700 948,179
Regions Financial Corporation 9,300 345,960
Ryder System, Inc. 2,700 92,205
Safeco Corporation 5,800 225,794
Schwab (Charles) Corporation
(The) 56,850 673,104
Simon Property Group, Inc.
REIT 8,000 370,720
SLM Corporation 18,900 712,152
SouthTrust Corporation 13,900 454,947
St. Paul Cos., Inc. 9,600 380,640
State Street Corporation 14,000 729,120
Sungard Data Systems, Inc.* 12,000 332,520
SunTrust Banks, Inc. 11,800 843,700
Synovus Financial Corporation 12,700 367,284
T Rowe Price Group, Inc. 5,200 246,532
Torchmark Corporation 4,700 214,038
Travelers Property Casualty
Corporation Class B 42,124 714,844
Union Planters Corporation 7,950 250,346
UnumProvident Corporation 12,400 195,548
US Bancorp 80,900 2,409,202
Wachovia Corporation 55,500 2,585,745
Washington Mutual, Inc. 37,700 1,512,524
Wells Fargo & Co. 70,930 4,177,068
XL Capital, Ltd. Class A 5,800 449,790
Zions Bancorporation 3,800 233,054
------------
94,065,473
------------
HEALTHCARE -- 13.2%
Abbott Laboratories 65,500 3,052,300
Aetna, Inc. 6,400 432,512
Allergan, Inc. 5,500 422,455
AmerisourceBergen Corporation 4,672 262,333
Amgen, Inc.* 54,128 3,345,110
Anthem, Inc.* 5,800 435,000
Bard (C.R.), Inc. 2,200 178,750
Bausch & Lomb, Inc. 2,200 114,180
Baxter International, Inc. 25,600 781,312
Becton Dickinson & Co. 10,600 436,084
Biogen Idec, Inc.* 13,730 504,989
Biomet, Inc. 10,700 389,587
Boston Scientific Corporation* 34,300 1,260,868
Bristol-Myers Squibb Co. 81,300 2,325,180
Cardinal Health, Inc. 18,200 1,113,112
Chiron Corporation* 7,900 450,221
Express Scripts, Inc.* 3,300 219,219
Forest Laboratories, Inc.* 15,300 945,540
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ------------
Genzyme Corporation -- General
Division* 9,400 $ 463,796
Guidant Corporation 13,000 782,600
HCA, Inc. 20,800 893,568
Health Management Associates,
Inc. Class A 10,100 242,400
Humana, Inc.* 6,800 155,380
IMS Health, Inc. 10,000 248,600
Johnson & Johnson 124,390 6,425,987
King Pharmaceuticals, Inc.* 10,100 154,126
Lilly (Eli) & Co. 47,100 3,312,543
Manor Care, Inc. 3,700 127,909
McKesson Corporation 12,200 392,352
Medco Health Solutions, Inc.* 11,376 386,670
Medimmune, Inc.* 10,400 264,160
Medtronic, Inc. 50,800 2,469,388
Merck & Co., Inc. 93,300 4,310,460
Millipore Corporation* 2,000 86,100
Pfizer, Inc. 319,983 11,305,000
Quest Diagnostics, Inc. 4,400 321,684
Schering-Plough Corporation 61,600 1,071,224
St. Jude Medical, Inc.* 7,200 441,720
Stryker Corporation 8,400 714,084
Tenet Healthcare Corporation* 19,450 312,173
UnitedHealth Group, Inc. 24,600 1,431,228
Watson Pharmaceuticals, Inc.* 4,500 207,000
WellPoint Health Networks,
Inc.* 6,400 620,736
Wyeth 55,800 2,368,710
Zimmer Holdings, Inc.* 10,120 712,448
------------
56,890,798
------------
INTEGRATED OILS -- 4.4%
Amerada Hess Corporation 3,800 202,046
ChevronTexaco Corporation 44,840 3,873,728
Conocophillips 28,550 1,872,024
Exxon Mobil Corporation 277,144 11,362,903
Marathon Oil Corporation 13,007 430,402
Occidental Petroleum
Corporation 16,100 680,064
Unocal Corporation 10,900 401,447
------------
18,822,614
------------
MATERIALS & PROCESSING -- 3.5%
Air Products & Chemicals, Inc. 9,500 501,885
Alcoa, Inc. 36,300 1,379,400
Allegheny Technologies, Inc. 3,400 44,948
American Standard Cos., Inc.* 3,100 312,170
Archer-Daniels-Midland Co. 27,127 412,873
Ashland, Inc. 2,900 127,774
Avery Dennison Corporation 4,600 257,692
Ball Corporation 2,396 142,730
Bemis Co. 2,200 110,000
Boise Cascade Corporation 3,600 118,296
Dow Chemical Co. (The) 38,600 1,604,602
Du Pont (E.I.) de Nemours &
Co. 41,755 1,916,137
Eastman Chemical Co. 3,200 126,496
Ecolab, Inc. 10,800 295,596
</Table>
See Notes to Financial Statements.
79
EQUITY INDEX FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
---------- ------------
Engelhard Corporation 5,300 $ 158,735
Fluor Corporation 3,400 134,776
Freeport-McMoRan Copper &
Gold, Inc. Class B 7,700 324,401
Georgia-Pacific Corporation 10,700 328,169
Great Lakes Chemical
Corporation 2,100 57,099
Hercules, Inc.* 4,600 56,120
International Paper Co. 20,100 866,511
Louisiana-Pacific Corporation* 4,400 78,672
Masco Corporation 19,400 531,754
MeadWestvaco Corporation 8,383 249,394
Monsanto Co. 10,960 315,429
Newmont Mining Corporation 18,100 879,841
Nucor Corporation 3,300 184,800
Pactiv Corporation* 6,600 157,740
Phelps Dodge Corporation* 3,700 281,533
PPG Industries, Inc. 7,100 454,542
Praxair, Inc. 13,680 522,576
Rohm & Haas Co. 9,300 397,203
Sealed Air Corporation* 3,600 194,904
Sherwin-Williams Co. (The) 6,100 211,914
Sigma-Aldrich Corporation 2,900 165,822
Temple-Inland, Inc. 2,300 144,141
United States Steel
Corporation 4,300 150,586
Vulcan Materials Co. 4,300 204,551
Weyerhaeuser Co. 9,200 588,800
Worthington Industries, Inc. 3,600 64,908
------------
15,055,520
------------
OTHER -- 4.3%
3M Co. 32,900 2,797,487
Brunswick Corporation 3,800 120,954
Eaton Corporation 3,200 345,536
General Electric Co. 421,000 13,042,580
Honeywell International, Inc. 36,100 1,206,823
ITT Industries, Inc. 3,900 289,419
Johnson Controls, Inc. 3,796 440,792
Textron, Inc. 5,700 325,242
------------
18,568,833
------------
OTHER ENERGY -- 1.5%
Anadarko Petroleum Corporation 10,500 535,605
Apache Corporation 6,774 549,371
Baker Hughes, Inc. 14,000 450,240
BJ Services Co.* 6,600 236,940
Burlington Resources, Inc. 8,300 459,654
Calpine Corporation* 17,300 83,213
Devon Energy Corporation 9,700 555,422
Dynegy, Inc. Class A 15,800 67,624
El Paso Corporation 25,500 208,845
EOG Resources, Inc. 4,800 221,616
Halliburton Co. 18,400 478,400
Kerr-McGee Corporation 4,230 196,653
Nabors Industries, Ltd.* 6,100 253,150
Noble Corporation* 5,600 200,368
Rowan Cos., Inc.* 3,900 90,363
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ------------
Schlumberger, Ltd. 24,500 $ 1,340,640
Sunoco, Inc. 3,200 163,680
Transocean, Inc.* 13,400 321,734
Williams Cos., Inc. 21,700 213,094
------------
6,626,612
------------
PRODUCER DURABLES -- 4.7%
Agilent Technologies, Inc.* 19,900 581,876
American Power Conversion
Corporation 8,300 202,935
Andrew Corporation* 6,400 73,664
Applied Materials, Inc.* 69,700 1,564,765
Boeing Co. (The) 35,300 1,487,542
Caterpillar, Inc. 14,600 1,212,092
Centex Corporation 2,600 279,890
Cooper Industries, Ltd. Class
A 3,900 225,927
Crane Co. 2,500 76,850
Cummins, Inc. 1,800 88,092
Danaher Corporation 6,400 587,200
Deere & Co. 10,100 657,005
Dover Corporation 8,500 337,875
Emerson Electric Co. 17,600 1,139,600
Goodrich Corporation 4,900 145,481
Grainger (W.W.), Inc. 3,800 180,082
IIIinois Tool Works, Inc. 12,900 1,082,439
Ingersoll-Rand Co. Class A 7,300 495,524
KB HOME 1,900 137,788
KLA-Tencor Corporation* 8,200 481,094
Lexmark International, Inc.* 5,400 424,656
Lockheed Martin Corporation 18,900 971,460
Molex, Inc. 7,950 277,376
Northrop Grumman Corporation 7,678 734,017
Novellus Systems, Inc.* 6,400 269,120
Pall Corporation 5,200 139,516
Parker Hannifin Corporation 5,000 297,500
Pitney Bowes, Inc. 9,800 398,076
Power-One, Inc.* 3,500 37,905
Pulte Homes, Inc. 2,552 238,918
Rockwell Collins, Inc. 7,400 222,222
Tektronix, Inc. 3,500 110,600
Teradyne, Inc.* 8,000 203,600
Thermo Electron Corporation* 6,810 171,612
Thomas & Betts Corporation 2,500 57,225
Tyco International, Ltd. 83,784 2,220,276
United Technologies
Corporation 19,700 1,866,969
Waters Corporation* 5,100 169,116
Xerox Corporation* 33,200 458,160
------------
20,306,045
------------
TECHNOLOGY -- 15.6%
ADC Telecommunications, Inc.* 33,700 100,089
Adobe Systems, Inc. 9,800 385,140
Advanced Micro Devices, Inc.* 14,600 217,540
Altera Corporation* 15,900 360,930
Analog Devices, Inc. 15,400 703,010
Apple Computer, Inc.* 15,200 324,824
</Table>
See Notes to Financial Statements.
80
<Table>
<Caption>
SHARES VALUE
---------- ------------
Applera Corporation-Applied
Biosystems Group 8,700 $ 180,177
Applied Micro Circuits
Corporation* 12,900 77,142
Autodesk, Inc. 4,680 115,034
Avaya, Inc.* 17,448 225,777
BMC Software, Inc.* 9,500 177,175
Broadcom Corporation Class A* 12,700 432,943
CIENA Corporation* 19,900 132,136
Cisco Systems, Inc.* 289,400 7,029,526
Citrix Systems, Inc.* 6,900 146,349
Computer Associates
International, Inc. 24,300 664,362
Computer Sciences Corporation* 7,900 349,417
Compuware Corporation* 16,100 97,244
Comverse Technology, Inc.* 8,100 142,479
Corning, Inc.* 55,700 580,951
Dell, Inc.* 107,300 3,643,908
Electronic Data Systems
Corporation 20,100 493,254
EMC Corporation* 100,800 1,302,336
Gateway, Inc.* 13,600 62,560
General Dynamics Corporation 8,300 750,237
Hewlett-Packard Co. 127,802 2,935,612
Intel Corporation 273,800 8,816,360
International Business
Machines Corporation 72,100 6,682,228
Intuit, Inc.* 8,300 439,153
Jabil Circuit, Inc.* 8,400 237,720
JDS Uniphase Corporation* 60,200 219,730
Linear Technology Corporation 13,100 551,117
LSI Logic Corporation* 15,900 141,033
Lucent Technologies, Inc.* 175,776 499,204
Maxim Integrated Products,
Inc. 13,800 687,240
Mercury Interactive
Corporation* 3,800 184,832
Micron Technology, Inc.* 25,600 344,832
Microsoft Corporation 453,300 12,483,881
Motorola, Inc. 97,600 1,373,232
National Semiconductor
Corporation* 7,800 307,398
NCR Corporation* 4,000 155,200
Network Appliance, Inc.* 14,500 297,685
Novell, Inc.* 15,700 165,164
Nvidia Corporation* 6,800 158,100
Oracle Corporation* 219,100 2,892,120
Parametric Technology
Corporation* 11,200 44,128
Peoplesoft, Inc.* 15,700 357,960
PerkinElmer, Inc. 5,300 90,471
PMC-Sierra, Inc.* 7,200 145,080
QLogic Corporation* 4,000 206,400
Qualcomm, Inc. 33,500 1,806,655
Raytheon Co. 17,400 522,696
Rockwell Automation, Inc. 7,800 277,680
Sanmina-SCI Corporation* 21,700 273,637
Scientific-Atlanta, Inc. 6,400 174,720
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ------------
Siebel Systems, Inc.* 20,800 $ 288,496
Solectron Corporation* 35,000 206,850
Sun Microsystems, Inc.* 137,000 615,130
Symantec Corporation* 12,900 446,985
Symbol Technologies, Inc. 9,650 162,989
Tellabs, Inc.* 17,500 147,525
Texas Instruments, Inc. 72,600 2,132,988
Unisys Corporation* 13,900 206,415
Veritas Software Corporation* 17,975 667,951
Xilinx, Inc.* 14,400 557,856
------------
67,598,993
------------
UTILITIES -- 6.9%
AES Corporation (The)* 26,100 246,384
Allegheny Energy, Inc.* 5,300 67,628
Alltel Corporation 13,100 610,198
Ameren Corporation 6,800 312,800
American Electric Power Co.,
Inc. 16,600 506,466
AT&T Corporation 33,085 671,626
AT&T Wireless Services, Inc.* 113,764 908,974
BellSouth Corporation 77,500 2,193,250
Centerpoint Energy, Inc. 12,800 124,032
CenturyTel, Inc. 6,000 195,720
Cinergy Corporation 7,500 291,075
Citizens Communications Co.* 11,900 147,798
CMS Energy Corporation 6,800 57,936
Comcast Corporation Class A* 94,415 3,103,421
Consolidated Edison, Inc. 9,500 408,595
Constellation Energy Group,
Inc. 7,000 274,120
Dominion Resources, Inc. 13,600 868,088
DTE Energy Co. 7,100 279,740
Duke Energy Corporation 38,000 777,100
Edison International 13,700 300,441
Entergy Corporation 9,552 545,706
Exelon Corporation 13,712 909,928
FirstEnergy Corporation 13,784 485,197
FPL Group, Inc. 7,700 503,734
KeySpan Corporation 6,700 246,560
Kinder Morgan, Inc. 5,200 307,320
Nextel Communications, Inc.
Class A* 46,100 1,293,566
Nicor, Inc. 1,800 61,272
NiSource, Inc. 11,000 241,340
Peoples Energy Corporation 1,500 63,060
PG&E Corporation* 17,400 483,198
Pinnacle West Capital
Corporation 3,800 152,076
PPL Corporation 7,400 323,750
Progress Energy, Inc. 10,300 466,178
Public Service Enterprise
Group, Inc. 9,900 433,620
Qwest Communications
International, Inc.* 74,100 320,112
SBC Communications, Inc. 138,834 3,619,402
Sempra Energy 9,500 285,570
Southern Co. (The) 30,700 928,675
</Table>
See Notes to Financial Statements.
81
EQUITY INDEX FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
---------- ------------
Sprint Corporation (FON Group) 37,900 $ 622,318
Sprint Corporation (PCS
Group)* 43,400 243,908
TECO Energy, Inc. 7,900 113,839
TXU Corporation 13,600 322,592
Verizon Communications, Inc. 115,734 4,059,949
Xcel Energy, Inc. 16,700 283,566
------------
29,661,828
------------
TOTAL COMMON STOCK
(Cost $382,326,286) 417,566,835
------------
SHORT-TERM INVESTMENTS -- 7.9%
AB Funds Trust -- Money Market
Fund (Retirement Class)(inf) 13,406,117 13,406,117
Northern Institutional Liquid
Assets Portfolio sec. 20,889,981 20,889,981
------------
TOTAL SHORT-TERM INVESTMENTS (Cost
$34,296,098) 34,296,098
------------
</Table>
<Table>
<Caption>
PAR VALUE
--------- ------------
U.S. TREASURY OBLIGATIONS -- 0.2%
U.S. Treasury Bills
0.89%, 01/22/04++++ $ 865,000 $ 864,575
0.90%, 01/22/04++++ 20,000 19,990
0.92%, 01/22/04++++ 70,000 69,966
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $954,502) 954,531
------------
TOTAL INVESTMENTS -- 104.7%
(Cost $417,576,886) 452,817,464
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (4.7%) (20,346,180)
------------
NET ASSETS -- 100.0% $432,471,284
============
</Table>
See Notes to Financial Statements.
82
VALUE EQUITY FUND
During the fourth quarter, large-cap value stocks outperformed large-cap growth
stocks as the Russell 1000(R) Value Index returned 14.19%, while its growth
counterpart, the Russell 1000(R) Growth Index, returned 10.41%. The strong
showing by value oriented stocks in the fourth quarter pushed the value index to
a 30.03% one-year return, slightly outpacing the growth index's 29.75% yearly
return. All sectors of the Russell 1000(R) Value Index delivered positive
returns during the quarter. The best performing sectors were autos &
transportation, materials & processing and producer durables. The financial
services sector, although not the best performer, was a large contributor to
overall index performance due to its large weighting in the index. Healthcare
and utilities lagged all other sectors during the quarter.
The fund is comprised of domestic, large-cap value oriented stocks. The fund
outperformed its benchmark, the Russell 1000(R) Value Index, during the fourth
quarter. Security selection in the financial services, integrated oils and
materials & processing sectors contributed to benchmark-relative performance. At
the sub-adviser level, Equinox delivered the strongest benchmark-relative
performance largely due to its overweight exposure and security selection in the
materials & processing sector and security selection in the financial services
sector.
Not Part of the Annual Report
83
VALUE EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RUSSELL 1000(R) VALUE
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX**
----------------- -------------------- ------------- ---------------------
One Year 30.84% 31.09% 30.46% 30.03%
Since Inception
(8/27/01 -- 12/31/03) 1.69% 2.26% 1.76% 2.67%
</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.
[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
</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 Annual Report
84
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ----------- --------------
COMMON STOCK -- 96.5%
AUTO & TRANSPORTATION -- 3.1%
American Axle &
Manufacturing Holdings,
Inc.* 33,800 $ 1,366,196
AMR Corporation* 149,500 1,936,025
ArvinMeritor, Inc. 3,800 91,656
Autoliv, Inc. 3,200 120,480
BorgWarner, Inc. 1,600 136,112
Burlington Northern Santa
Fe Corporation 381,200 12,331,820
CNF, Inc. 3,000 101,700
CSX Corporation 13,000 467,220
Dana Corporation 9,000 165,150
Delphi Corporation 913,100 9,322,751
Delta Air Lines, Inc. 80,400 949,524
FedEx Corporation 11,200 756,000
Ford Motor Co. 107,095 1,713,520
General Motors Corporation 28,200 1,505,880
Genuine Parts Co. 10,600 351,920
Hunt (J.B.) Transport
Services, Inc.* 1,900 51,319
Lear Corporation* 3,800 233,054
Navistar International
Corporation* 1,400 67,046
Norfolk Southern
Corporation 23,700 560,505
Paccar, Inc. 6,700 570,304
Southwest Airlines Co. 15,450 249,363
Swift Transportation Co.,
Inc.* 1,000 21,020
Tidewater, Inc. 55,600 1,661,328
Union Pacific Corporation 58,100 4,036,788
Werner Enterprises, Inc. 1,625 31,671
--------------
38,798,352
--------------
CONSUMER
DISCRETIONARY -- 10.5%
Alberto-Culver Co. Class B 2,300 145,084
Allied Waste Industries,
Inc.* 6,200 86,056
AutoNation, Inc.* 10,600 194,722
Avon Products, Inc. 12,100 816,629
Barnes & Noble, Inc.* 32,500 1,067,625
BearingPoint, Inc.* 7,000 70,630
Belo Corporation Class A 4,300 121,862
Big Lots, Inc.* 3,800 53,998
Black & Decker Corporation 39,900 1,967,868
Blockbuster, Inc. Class A 1,500 26,925
Blyth, Inc. 2,000 64,440
Borders Group, Inc. 3,800 83,296
Carnival Corporation 329,700 13,098,980
CBRL Group, Inc. 26,100 998,586
Cendant Corporation* 503,730 11,218,067
Circuit City Stores,
Inc. -- Circuit City
Group 155,100 1,571,163
Claire's Stores, Inc. 400 7,536
Clear Channel
Communications, Inc. 17,125 801,964
Convergys Corporation* 7,900 137,934
Costco Wholesale
Corporation* 28,200 1,048,476
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Cox Radio, Inc. Class A* 900 $ 22,707
Darden Restaurants, Inc. 1,900 39,976
Donnelley (R.R.) & Sons Co. 6,400 192,960
DoubleClick, Inc.* 1,700 17,374
Eastman Kodak Co. 384,100 9,859,847
Entercom Communications
Corporation* 200 10,592
Entravision Communications
Corporation Class A* 1,500 16,650
Estee Lauder Cos., Inc.
(The) Class A 400 15,704
Ethan Allen Interiors, Inc. 2,000 83,760
Federated Department
Stores, Inc. 11,400 537,282
Foot Locker, Inc. 8,600 201,670
Furniture Brands
International, Inc.* 2,800 82,124
Gannett Co., Inc. 16,400 1,462,224
Gemstar-TV Guide
International, Inc.* 11,300 57,065
Gillette Co. (The) 23,800 874,174
Harte-Hanks, Inc. 450 9,788
Hasbro, Inc. 8,525 181,412
Hearst-Argyle Television,
Inc. 1,800 49,608
Hilton Hotels Corporation 10,400 178,152
Hughes Electronics
Corporation* 21,833 361,335
IKON Office Solutions, Inc. 8,800 104,368
InterActiveCorp* 6,561 222,615
International Flavors &
Fragrances, Inc. 1,500 52,380
International Speedway
Corporation Class A 400 17,864
Interpublic Group Cos.,
Inc. 22,400 349,440
ITT Educational Services,
Inc.* 37,900 1,780,163
Jones Apparel Group, Inc. 131,600 4,636,268
Kimberly-Clark Corporation 21,600 1,276,344
Knight-Ridder, Inc. 4,300 332,691
La-Z-Boy, Inc. 3,200 67,136
Lamar Advertising Co.* 900 33,588
Lee Enterprises, Inc. 2,700 117,855
Leggett & Platt, Inc. 7,400 160,062
Liberty Media Corporation
Class A* 107,300 1,275,797
Limited Brands 26,900 485,007
Liz Claiborne, Inc. 33,100 1,173,726
Manpower, Inc. 42,700 2,010,316
Marriott International,
Inc. Class A 5,200 240,240
May Department Stores Co.
(The) 17,600 511,632
McClatchy Co. Class A 1,100 75,680
McDonald's Corporation 693,300 17,214,639
McGraw Hill Co., Inc. (The) 21,200 1,482,304
Media General, Inc. Class A 1,000 65,100
</Table>
See Notes to Financial Statements.
85
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- --------------
Meredith Corporation 800 $ 39,048
Metro-Goldwyn-Mayer, Inc.* 4,700 80,323
Michael's Stores, Inc. 700 30,940
Mohawk Industries, Inc.* 2,100 148,134
MSC Industrial Direct Co.,
Inc. Class A* 200 5,500
Neiman-Marcus Group, Inc.
Class A* 2,200 118,074
New York Times Co. Class A 3,100 148,149
Newell Rubbermaid, Inc. 6,000 136,620
News Corporation, Ltd.
(The) ADR 1 23
Nordstrom, Inc. 5,800 198,940
O'Reilly Automotive, Inc.* 600 23,016
Office Depot, Inc.* 209,600 3,502,416
Outback Steakhouse, Inc. 1,000 44,210
Penney (JC) Co., Inc. 16,500 433,620
Pier 1 Imports, Inc. 1,200 26,232
Polo Ralph Lauren
Corporation 2,400 69,120
Radio One, Inc. Class D* 2,700 52,110
RadioShack Corporation 78,000 2,393,040
Reader's Digest
Association, Inc. (The) 4,800 70,368
Reebok International, Ltd. 2,500 98,300
Regal Entertainment Group
Class A 1,800 36,936
Regis Corporation 1,200 47,424
Rent-A-Center, Inc.* 600 17,928
Republic Services, Inc. 9,300 238,359
Sabre Holdings Corporation 8,100 174,879
Saks, Inc.* 7,700 115,808
Scholastic Corporation* 1,600 54,464
Sears, Roebuck & Co. 183,200 8,333,768
Service Corporation
International* 18,200 98,098
Servicemaster Co. 18,200 212,030
Sirius Satellite Radio,
Inc.* 57,900 182,964
Snap-On, Inc. 3,500 112,840
Stanley Works (The) 87,300 3,306,051
Staples, Inc.* 24,607 671,771
Starwood Hotels & Resorts
Worldwide, Inc. 8,600 309,342
Talbots, Inc. 200 6,156
Tech Data Corporation* 3,300 130,977
Time Warner, Inc.* 263,300 4,736,767
Toys "R" Us, Inc.* 13,000 164,320
Tribune Co. 10,400 536,640
Univision Communications,
Inc. Class A* 595 23,616
Valassis Communications,
Inc.* 2,500 73,375
VeriSign, Inc.* 3,500 57,050
VF Corporation 11,700 505,908
Viad Corporation 2,800 70,000
Washington Post Co. Class B 200 158,280
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Waste Management, Inc. 273,257 $ 8,088,407
Wendy's International, Inc. 242,700 9,523,548
West Corporation* 100 2,323
Whirlpool Corporation 34,800 2,528,220
XM Satellite Radio
Holdings, Inc. Class A* 6,800 179,248
--------------
129,837,140
--------------
CONSUMER STAPLES -- 4.1%
Albertson's, Inc. 20,700 468,855
Campbell Soup Co. 7,600 203,680
Church and Dwight Co., Inc. 700 27,720
Clorox Co. 4,200 203,952
Coca-Cola Co. (The) 19,200 974,400
Coca-Cola Enterprises, Inc. 10,000 218,700
Colgate-Palmolive Co. 3,500 175,175
ConAgra Foods, Inc. 467,500 12,337,325
CVS Corporation 24,000 866,880
Dean Foods Co.* 9,450 310,622
Del Monte Foods Co.* 6,000 62,400
Dial Corporation (The) 2,300 65,481
Fresh Del Monte Produce,
Inc. 26,200 624,346
General Mills, Inc. 10,900 493,770
Heinz (H.J.) Co. 184,500 6,721,335
Hershey Foods Corporation 2,400 184,776
Hormel Foods Corporation 4,500 116,145
J.M. Smucker Co. (The) 3,000 135,870
Kellogg Co. 7,600 289,408
Kraft Foods, Inc. Class A 16,800 541,296
Kroger Co.* 45,900 849,609
McCormick & Co., Inc. 3,000 90,300
Pepsi Bottling Group, Inc. 1,700 41,106
PepsiAmericas, Inc. 3,600 61,632
PepsiCo, Inc. 11,900 554,778
Performance Food Group Co.* 900 32,553
Procter & Gamble Co. 28,475 2,844,083
Rite Aid Corporation* 6,600 39,864
Safeway, Inc.* 408,400 8,948,044
Sara Lee Corporation 444,715 9,654,763
Smithfield Foods, Inc.* 5,000 103,500
Supervalu, Inc. 74,400 2,127,096
Tootsie Roll Industries,
Inc. 1,300 46,800
Tyson Foods, Inc. Class A 12,681 167,896
Winn-Dixie Stores, Inc. 5,100 50,745
Wrigley (W.M.), Jr. Co. 1,700 95,557
--------------
50,730,462
--------------
FINANCIAL SERVICES -- 31.1%
ACE, Ltd. 276,900 11,469,198
Affiliated Computer
Services, Inc. Class A* 800 43,568
AFLAC, Inc. 11,400 412,452
AG Edwards, Inc 3,400 123,182
Alleghany Corporation* 212 47,170
Allied Capital Corporation 7,600 211,888
Allstate Corporation (The) 386,300 16,618,626
</Table>
See Notes to Financial Statements.
86
<Table>
<Caption>
SHARES VALUE
----------- --------------
AMB Property Corporation
REIT 4,600 $ 151,248
AMBAC Financial Group, Inc. 4,650 322,664
American Capital
Strategies, Ltd. 19,700 585,681
American Express Co. 17,900 863,317
American Financial Group,
Inc. 2,100 55,566
American International
Group, Inc. 68,433 4,535,739
American National Insurance
Co. 600 50,622
AmeriCredit Corporation* 6,000 95,580
AmSouth Bancorporation 21,400 524,300
Annaly Mortgage Management,
Inc. REIT 5,700 104,880
AON Corporation 15,500 371,070
Apartment Investment &
Management Co. Class A
REIT 5,700 196,650
Archstone-Smith Trust REIT 11,100 310,578
Arden Realty, Inc. REIT 3,500 106,190
Associated Banc-Corp 4,200 179,130
Astoria Financial
Corporation 59,700 2,220,840
Automatic Data Processing,
Inc. 2,000 79,220
AvalonBay Communities, Inc.
REIT 3,700 176,860
Bancorpsouth, Inc. 4,700 111,484
Bank of America Corporation 265,024 21,315,880
Bank of Hawaii Corporation 3,400 143,480
Bank of New York Co., Inc.
(The) 39,600 1,311,552
Bank One Corporation 145,400 6,628,786
Banknorth Group, Inc. 9,900 322,047
BB&T Corporation 33,929 1,311,017
Bear Stearns Cos., Inc.
(The) 16,100 1,287,195
BISYS Group, Inc. (The)* 500 7,440
Block (H&R), Inc. 50,300 2,785,111
BOK Financial Corporation* 1,027 39,765
Boston Properties, Inc.
REIT 4,200 202,398
BRE Properties, Inc. Class
A REIT 3,000 100,200
Camden Property Trust REIT 2,000 88,600
Capital One Financial
Corporation 4,400 269,676
Capitol Federal Financial 1,300 46,878
CarrAmerica Realty
Corporation REIT 3,200 95,296
Catellus Development
Corporation REIT 5,574 134,435
CBL & Associates
Properties, Inc. REIT 1,300 73,450
Centerpoint Properties
Corporation REIT 1,400 104,860
Charter One Financial, Inc. 21,508 743,101
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Checkfree Corporation* 28,800 $ 796,320
Chelsea Property Group,
Inc. REIT 1,500 82,215
Chubb Corporation 11,300 769,530
Cigna Corporation 117,600 6,762,000
Cincinnati Financial
Corporation 8,300 347,604
CIT Group, Inc. 12,100 434,995
Citigroup, Inc. 911,100 44,224,795
City National Corporation 2,500 155,300
CNA Financial Corporation* 1,400 33,740
Colonial Bancgroup, Inc. 7,500 129,900
Comerica, Inc. 184,600 10,348,676
Commerce Bancorp, Inc. 400 21,072
Commerce Bancshares, Inc. 3,737 183,185
Compass Bancshares, Inc. 41,200 1,619,572
Countrywide Financial
Corporation 10,000 758,500
Cousins Properties, Inc.
REIT 1,500 45,900
Crescent Real Estate
Equities Co. REIT 261,100 4,472,643
Cullen Frost Bankers, Inc. 3,100 125,767
Deluxe Corporation 24,500 1,012,585
Developers Diversified
Realty Corporation REIT 4,600 154,422
Downey Financial
Corporation 1,300 64,090
DST Systems, Inc.* 400 16,704
Duke Realty Corporation
REIT 8,200 254,200
E*TRADE Financial
Corporation* 10,400 131,560
Equifax, Inc. 1,600 39,200
Equity Office Properties
Trust REIT 24,485 701,495
Equity Residential
Properties Trust REIT 16,600 489,866
Erie Indemnity Co. Class A 1,500 63,570
Everest Re Group, Ltd. 32,300 2,732,580
Fannie Mae 37,900 2,844,774
Federal Realty Investors
Trust REIT 2,700 103,653
Fidelity National
Financial, Inc. 7,618 295,426
First American Corporation 4,100 122,057
First Bancorp Puerto Rico 800 31,640
First Midwest Bancorp, Inc. 2,800 90,748
First Tennessee National
Corporation 18,000 793,800
FirstMerit Corporation 4,700 126,759
FleetBoston Financial
Corporation 343,916 15,011,933
FNB Corporation 2,835 100,501
Franklin Resources, Inc. 10,000 520,600
Freddie Mac 140,600 8,199,792
Friedman, Billings, Ramsey
Group, Inc. Class A 68,200 1,574,056
</Table>
See Notes to Financial Statements.
87
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- --------------
Fulton Financial
Corporation 6,415 $ 140,553
General Growth Properties,
Inc. REIT 118,400 3,285,600
Global Payments, Inc. 100 4,712
Golden West Financial
Corporation 7,600 784,244
Goldman Sachs Group, Inc. 17,300 1,708,029
Greenpoint Financial
Corporation 7,200 254,304
Hartford Financial Services
Group, Inc. 324,300 19,143,429
HCC Insurance Holdings,
Inc. 2,300 73,140
Health Care Property
Investors, Inc. REIT 3,900 198,120
Healthcare Realty Trust,
Inc. REIT 2,600 92,950
Hibernia Corporation Class
A 57,500 1,351,825
Hospitality Properites
Trust REIT 3,600 148,608
Host Marriott Corporation
REIT* 16,900 208,208
HRPT Properties Trust REIT 8,700 87,783
Hudson City Bancorp, Inc. 2,600 99,268
Hudson United Bancorp 2,500 92,375
Huntington Bancshares, Inc. 13,900 312,750
Independence Community Bank
Corporation 3,000 107,910
IndyMac Bancorp, Inc. 3,100 92,349
Instinet Group, Inc.* 7,500 38,625
Interactive Data
Corporation* 1,100 18,216
International Bancshares
Corporation 1,600 75,440
iStar Financial, Inc. REIT 6,000 233,400
Janus Capital Group, Inc. 14,600 239,586
Jefferies Group, Inc. 2,300 75,946
Jefferson-Pilot Corporation 8,700 440,655
John Hancock Financial
Services, Inc. 17,600 660,000
JP Morgan Chase & Co. 725,522 26,648,423
KeyCorp 281,150 8,243,318
Kimco Realty Corporation
REIT 5,900 264,025
LaBranche & Co., Inc. 2,300 26,841
Legg Mason, Inc. 600 46,308
Lehman Brothers Holdings,
Inc. 14,842 1,146,099
Leucadia National
Corporation 2,700 124,470
Liberty Property Trust REIT 4,800 186,720
Lincoln National
Corporation 10,800 435,996
Loews Corporation 7,900 390,655
M & T Bank Corporation 4,100 403,030
Macerich Co. (The) REIT 3,500 155,750
Mack-Cali Realty
Corporation REIT 3,500 145,670
Markel Corporation* 300 76,053
Marshall & Ilsley
Corporation 13,800 527,850
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
MBIA, Inc. 8,750 $ 518,263
MBNA Corporation 79,800 1,983,030
Mellon Financial
Corporation 14,900 478,439
Mercantile Bankshares
Corporation 4,300 195,994
Mercury General Corporation 1,600 74,480
Merrill Lynch & Co., Inc. 219,167 12,854,145
MetLife, Inc. 20,700 696,969
MGIC Investment Corporation 134,700 7,669,818
Mills Corporation (The)
REIT 1,600 70,400
Mony Group, Inc.* 2,700 84,483
Morgan Stanley 130,500 7,552,035
National City Corporation 87,600 2,973,144
National Commerce Financial
Corporation 12,500 341,000
Nationwide Financial
Services Class A 3,400 112,404
New Plan Excel Realty Trust
REIT 5,900 145,553
New York Community Bancorp,
Inc. 5,891 224,152
North Fork Bancorporation,
Inc. 47,300 1,914,231
Northern Trust Corporation 10,900 505,978
Odyssey Re Holdings
Corporation 700 15,785
Old National Bancorp 3,852 88,018
Old Republic International
Corporation 73,950 1,875,372
Pan Pacific Retail
Properties, Inc. REIT 2,400 114,360
Park National Corporation 700 79,205
People's Bank 1,500 48,900
Plum Creek Timber Co., Inc.
REIT 11,162 339,883
PMI Group, Inc. (The) 5,400 201,042
PNC Financial Services
Group, Inc. 17,200 941,356
Popular, Inc. 5,700 256,158
Principal Financial Group 17,700 585,339
Prologis Trust REIT 9,889 317,338
Protective Life Corporation 3,900 131,976
Provident Financial Group,
Inc. 2,500 79,875
Providian Financial
Corporation* 9,400 109,416
Prudential Financial, Inc. 33,600 1,403,472
Public Storage, Inc. REIT 6,100 264,679
Radian Group, Inc. 5,200 253,500
Raymond James Financial,
Inc. 2,400 90,480
Realty Income Corporation
REIT 2,300 92,000
Regency Centers Corporation
REIT 1,600 63,760
Regions Financial
Corporation 87,900 3,269,880
</Table>
See Notes to Financial Statements.
88
<Table>
<Caption>
SHARES VALUE
----------- --------------
Reinsurance Group of
America, Inc. 1,500 $ 57,975
Rouse Co. (The) REIT 12,700 596,900
Ryder System, Inc. 3,500 119,525
Safeco Corporation 7,900 307,547
Shurgard Storage Centers,
Inc. Class A REIT 2,700 101,655
Simon Property Group, Inc.
REIT 8,000 370,720
Sky Financial Group, Inc. 5,600 145,264
SLM Corporation 86,000 3,240,480
SouthTrust Corporation 92,377 3,023,499
Sovereign Bancorp, Inc. 17,800 422,750
St. Paul Cos., Inc. 12,800 507,520
Stancorp Financial Group,
Inc. 1,800 113,184
State Street Corporation 18,100 942,648
Student Loan Corporation 200 29,200
Sungard Data Systems, Inc.* 1,300 36,023
SunTrust Banks, Inc. 15,000 1,072,500
Synovus Financial
Corporation 1,600 46,272
T Rowe Price Group, Inc. 1,800 85,338
TCF Financial Corporation 32,400 1,663,740
Thornburg Mortgage, Inc.
REIT 4,300 116,960
Torchmark Corporation 7,100 323,334
Transatlantic Holdings,
Inc. 1,200 96,960
Travelers Property Casualty
Corporation Class B 236,634 4,015,679
Trizec Properties, Inc.
REIT 5,000 77,000
Trustmark Corporation 3,000 87,810
Union Planters Corporation 11,500 362,135
UnionBanCal Corporation 12,300 707,742
United Bankshares, Inc. 2,300 71,760
United Dominion Realty
Trust, Inc. REIT 7,300 140,160
Unitrin, Inc. 2,800 115,948
UnumProvident Corporation 17,500 275,975
US Bancorp 532,326 15,852,668
Valley National Bancorp 4,416 128,947
Vornado Realty Trust REIT 4,900 268,275
W.R. Berkley Corporation 3,775 131,936
Wachovia Corporation 322,250 15,013,628
Washington Federal, Inc. 4,213 119,649
Washington Mutual, Inc. 313,114 12,562,134
Webster Financial
Corporation 24,600 1,128,156
Weingarten Realty Investors
REIT 2,800 124,180
WellChoice, Inc.* 1,200 41,400
Wells Fargo & Co. 190,372 11,211,007
Westamerica Bancorporation 1,500 74,550
Whitney Holding Corporation 2,400 98,376
Wilmington Trust
Corporation 4,000 144,000
XL Capital, Ltd. Class A 104,900 8,134,995
Zions Bancorporation 5,500 337,315
--------------
386,217,559
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
HEALTHCARE -- 5.9%
Aetna, Inc. 5,300 $ 358,174
AmerisourceBergen
Corporation 3,246 182,263
Andrx Corporation* 1,000 24,040
Anthem, Inc.* 5,131 384,825
Apogent Technologies, Inc.* 4,900 112,896
Bard (C.R.), Inc. 300 24,375
Bausch & Lomb, Inc. 3,000 155,700
Baxter International, Inc. 278,500 8,499,820
Becton Dickinson & Co. 3,200 131,648
Bristol-Myers Squibb Co. 347,700 9,944,220
Community Health Systems,
Inc.* 1,600 42,528
HCA, Inc. 6,200 266,352
Health Net, Inc.* 221,500 7,243,050
Henry Schein, Inc.* 900 60,822
Human Genome Sciences,
Inc.* 3,900 51,675
Humana, Inc.* 9,800 223,930
ICOS Corporation* 1,800 74,304
IMS Health, Inc. 146,500 3,641,990
Invitrogen Corporation* 2,300 161,000
IVAX Corporation* 121,000 2,889,480
King Pharmaceuticals, Inc.* 10,600 161,756
Laboratory Corporation of
America Holdings* 700 25,865
Manor Care, Inc. 4,500 155,565
McKesson Corporation 23,900 768,624
Medco Health Solutions,
Inc.* 9,217 313,286
Merck & Co., Inc. 114,500 5,289,900
Millennium Pharmeceuticals,
Inc.* 9,000 168,030
Neurocrine Biosciences,
Inc.* 1,100 59,994
Omnicare, Inc. 2,500 100,975
PacifiCare Health Systems,
Inc.* 2,400 162,240
Protein Design Labs, Inc.* 1,500 26,850
Renal Care Group, Inc.* 1,200 49,440
Respironics, Inc.* 11,900 536,571
Schering-Plough Corporation 497,100 8,644,569
Select Medical Corporation* 79,800 1,299,144
Steris Corporation* 200 4,520
Tenet Healthcare
Corporation* 452,400 7,261,020
Triad Hospitals, Inc.* 2,500 83,175
UnitedHealth Group, Inc. 47,900 2,786,822
Universal Health Services,
Inc. Class B 300 16,116
Valeant Pharmaceuticals
International 2,600 65,390
Varian Medical Systems,
Inc.* 37,100 2,563,610
Watson Pharmaceuticals,
Inc.* 14,200 653,200
WebMD Corporation* 2,700 24,273
WellPoint Health Networks,
Inc.* 500 48,495
</Table>
See Notes to Financial Statements.
89
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- --------------
Wyeth 165,400 $ 7,021,230
--------------
72,763,752
--------------
INTEGRATED OILS -- 8.6%
Amerada Hess Corporation 50,200 2,669,134
BP PLC ADR 224,468 11,077,496
ChevronTexaco Corporation 302,498 26,132,803
Conocophillips 415,588 27,250,104
Exxon Mobil Corporation 474,400 19,450,400
Marathon Oil Corporation 227,900 7,541,211
Murphy Oil Corporation 4,600 300,426
Occidental Petroleum
Corporation 279,900 11,822,976
Unocal Corporation 15,700 578,231
--------------
106,822,781
--------------
MATERIALS & PROCESSING --6.9%
Air Products & Chemicals,
Inc. 13,800 729,054
Airgas, Inc. 3,600 77,328
Alcoa, Inc. 264,500 10,051,000
Aptargroup, Inc. 2,100 81,900
Archer-Daniels-Midland Co. 31,589 480,785
Ashland, Inc. 11,400 502,284
Avery Dennison Corporation 900 50,418
Ball Corporation 500 29,785
Bemis Co. 2,900 145,000
Boise Cascade Corporation 3,900 128,154
Bowater, Inc. 3,100 143,561
Cabot Corporation 3,600 114,624
Cytec Industries, Inc.* 2,300 88,297
Dow Chemical Co. (The) 320,282 13,314,122
Du Pont (E.I.) de Nemours &
Co. 54,100 2,482,649
Eastman Chemical Co. 151,900 6,004,607
Energizer Holdings, Inc.* 3,600 135,216
Engelhard Corporation 26,100 781,695
Florida Rock Industries,
Inc. 1,000 54,850
Fluor Corporation 4,700 186,308
Forest City Enterprises,
Inc. Class A 1,800 85,518
Georgia-Pacific Corporation 287,971 8,832,071
Harsco Corporation 2,500 109,550
International Paper Co. 227,800 9,820,458
Jacobs Engineering Group,
Inc.* 400 19,204
Lafarge North America, Inc. 2,000 81,040
LNR Property Corporation 900 44,559
Louisiana-Pacific
Corporation* 10,800 193,104
Lubrizol Corporation 3,100 100,812
Lyondell Chemical Co. 228,000 3,864,600
Martin Marietta Materials,
Inc. 3,000 140,910
Masco Corporation 19,600 537,236
MeadWestvaco Corporation 12,247 364,348
Monsanto Co. 416,400 11,983,992
Newmont Mining Corporation 8,900 432,629
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Nucor Corporation 30,700 $ 1,719,200
Owens-Illinois, Inc.* 6,500 77,285
Packaging Corporation of
America 3,500 76,510
Pactiv Corporation* 139,200 3,326,880
Phelps Dodge Corporation* 2,800 213,052
PPG Industries, Inc. 10,300 659,406
Praxair, Inc. 13,800 527,160
Precision Castparts
Corporation 3,600 163,476
Rayonier, Inc. 3,040 126,199
Rohm & Haas Co. 9,600 410,016
RPM International, Inc. 61,400 1,010,644
Scotts Co. (The) Class A* 1,100 65,076
Sherwin-Williams Co. (The) 82,200 2,855,628
Sigma-Aldrich Corporation 2,400 137,232
Smurfit-Stone Container
Corporation* 14,900 276,693
Sonoco Products Co. 5,600 137,872
Southern Peru Copper
Corporation 500 23,580
Temple-Inland, Inc. 2,800 175,476
Timken Co. 1,700 34,102
United States Steel
Corporation 17,400 609,348
Valspar Corporation 2,900 143,318
Vulcan Materials Co. 5,500 261,635
Weyerhaeuser Co. 13,300 851,200
Worthington Industries,
Inc. 2,300 41,469
--------------
86,114,125
--------------
OTHER -- 0.5%
3M Co. 11,200 952,336
Brunswick Corporation 5,100 162,333
Carlisle Cos., Inc. 1,900 115,634
Eaton Corporation 4,500 485,910
Hillenbrand Industries,
Inc. 8,500 527,510
Honeywell International,
Inc. 50,600 1,691,558
ITT Industries, Inc. 300 22,263
Johnson Controls, Inc. 14,300 1,660,516
Lancaster Colony
Corporation 1,700 76,772
SPX Corporation* 3,900 229,359
Teleflex, Inc. 2,100 101,493
Textron, Inc. 7,000 399,420
Wesco Financial Corporation 100 35,200
--------------
6,460,304
--------------
OTHER ENERGY -- 2.8%
Anadarko Petroleum
Corporation 156,500 7,983,065
Apache Corporation 51,461 4,173,487
Baker Hughes, Inc. 51,400 1,653,024
Burlington Resources, Inc. 82,100 4,546,698
Calpine Corporation* 23,500 113,035
Chesapeake Energy
Corporation 2,000 27,160
Cooper Cameron Corporation* 300 13,980
</Table>
See Notes to Financial Statements.
90
<Table>
<Caption>
SHARES VALUE
----------- --------------
Devon Energy Corporation 14,019 $ 802,728
Diamond Offshore Drilling,
Inc. 1,600 32,816
Dynegy, Inc. Class A 16,800 71,904
El Paso Corporation 36,472 298,706
ENSCO International, Inc. 5,800 157,586
Equitable Resources, Inc. 3,800 163,096
Grant Prideco, Inc.* 400 5,208
Halliburton Co. 2,500 65,000
Helmerich & Payne, Inc. 3,000 83,790
Kerr-McGee Corporation 6,100 283,589
Key Energy Services, Inc.* 2,100 21,651
National-Oilwell, Inc.* 2,100 46,956
Newfield Exploration Co.* 1,500 66,810
Noble Energy, Inc. 2,100 93,303
Peabody Energy Corporation 1,900 79,249
Pioneer Natural Resources
Co.* 6,300 201,159
Pogo Producing Co. 3,800 183,540
Premcor, Inc.* 2,000 52,000
Pride International, Inc.* 3,700 68,968
Reliant Resources, Inc.* 275,273 2,026,009
Rowan Cos., Inc.* 2,400 55,608
Smith International, Inc.* 1,100 45,672
Sunoco, Inc. 48,300 2,470,545
Texas Genco Holdings, Inc. 900 29,250
Transocean, Inc.* 324,300 7,786,443
Valero Energy Corporation 13,200 611,688
Varco International, Inc.* 1,600 33,008
Westport Resources
Corporation* 1,400 41,804
Williams Cos., Inc. 31,500 309,330
XTO Energy, Inc. 4,466 126,388
--------------
34,824,253
--------------
PRODUCER DURABLES -- 6.6%
AGCO Corporation* 4,300 86,602
Agilent Technologies, Inc.* 27,200 795,328
Alliant Techsystems, Inc.* 500 28,880
American Power Conversion
Corporation 10,100 246,945
American Tower Corporation
Class A* 7,000 75,740
AMETEK, Inc. 1,100 53,086
Boeing Co. (The) 260,700 10,985,898
Caterpillar, Inc. 21,000 1,743,420
Centex Corporation 2,500 269,125
Crane Co. 26,800 823,832
Crown Castle International
Corporation* 62,000 683,860
Cummins, Inc. 2,100 102,774
Danaher Corporation 400 36,700
Deere & Co. 14,600 949,730
Diebold, Inc. 4,400 237,028
Donaldson Co., Inc. 4,900 289,884
Dover Corporation 10,000 397,500
DR Horton, Inc. 6,500 281,190
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Emerson Electric Co. 195,600 $ 12,665,100
Goodrich Corporation 7,200 213,768
Grainger (W.W.), Inc. 4,600 217,994
HON Industries, Inc. 2,000 86,640
Hovnanian Enterprises, Inc.
Class A* 600 52,236
Hubbell, Inc. Class B 3,000 132,300
IIIinois Tool Works, Inc. 114,200 9,582,522
KB HOME 10,100 732,452
Lennar Corporation Class A 3,100 297,600
Lexmark International,
Inc.* 33,200 2,610,848
Lockheed Martin Corporation 16,800 863,520
MDC Holdings, Inc. 1,000 64,500
Molex, Inc. 900 31,401
Northrop Grumman
Corporation 87,735 8,387,466
Novellus Systems, Inc.* 1,700 71,485
Pall Corporation 1,300 34,879
Parker Hannifin Corporation 7,200 428,400
Pentair, Inc. 2,700 123,390
Pitney Bowes, Inc. 93,600 3,802,032
Polycom, Inc.* 46,400 905,728
Pulte Homes, Inc. 3,000 280,860
Rockwell Collins, Inc. 5,300 159,159
Ryland Group, Inc. 1,500 132,960
Steelcase, Inc. Class A 2,500 35,900
Tektronix, Inc. 3,800 120,080
Thermo Electron
Corporation* 7,800 196,560
Toll Brothers, Inc.* 2,800 111,328
Tyco International, Ltd. 359,800 9,534,700
United Technologies
Corporation 119,050 11,282,369
Xerox Corporation* 37,900 523,020
--------------
81,768,719
--------------
TECHNOLOGY -- 5.2%
3Com Corporation* 22,100 180,557
Acxiom Corporation* 1,300 24,141
ADC Telecommunications,
Inc.* 27,000 80,190
Advanced Fibre
Communications, Inc.* 3,100 62,465
Advanced Micro Devices,
Inc.* 13,700 204,130
Analog Devices, Inc. 20,600 940,390
Apple Computer, Inc.* 22,300 476,551
Applera Corporation-Applied
Biosystems Group 1,900 39,349
Applied Micro Circuits
Corporation* 10,200 60,996
Arrow Electronics, Inc.* 4,600 106,444
Atmel Corporation* 13,800 82,938
Autodesk, Inc. 6,400 157,312
Avaya, Inc.* 25,400 328,676
Avnet, Inc.* 22,000 476,520
Avocent Corporation* 18,000 657,360
AVX Corporation 3,200 53,184
BMC Software, Inc.* 1,300 24,245
</Table>
See Notes to Financial Statements.
91
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- --------------
Brocade Communications
Systems, Inc.* 6,200 $ 35,836
Cadence Design Systems,
Inc.* 12,100 217,558
Ceridian Corporation* 3,600 75,384
CIENA Corporation* 13,891 92,236
Computer Associates
International, Inc. 65,900 1,801,706
Computer Sciences
Corporation* 141,000 6,236,430
Compuware Corporation* 21,700 131,068
Comverse Technology, Inc.* 4,600 80,914
Corning, Inc.* 233,200 2,432,276
Cypress Semiconductor
Corporation* 3,000 64,080
Electronic Data Systems
Corporation 253,200 6,213,528
Emulex Corporation* 1,400 37,352
Fairchild Semicoductor
International, Inc.* 3,400 84,898
General Dynamics
Corporation 15,000 1,355,850
Harris Corporation 2,800 106,260
Hewlett-Packard Co. 838,150 19,252,306
Imation Corporation 2,200 77,330
Ingram Micro, Inc. Class A* 6,500 103,350
Integrated Device
Technology, Inc.* 3,800 65,246
International Business
Machines Corporation 49,400 4,578,392
International Rectifier
Corporation* 33,200 1,640,412
Intersil Corporation Class
A 4,600 114,310
Intuit, Inc.* 38,100 2,015,871
Jabil Circuit, Inc.* 1,000 28,300
L-3 Communications
Holdings, Inc.* 2,200 112,992
LSI Logic Corporation* 13,600 120,632
Lucent Technologies, Inc.* 251,800 715,112
Maxtor Corporation* 7,500 83,250
Micron Technology, Inc.* 18,600 250,542
Motorola, Inc. 326,600 4,595,262
National Semiconductor
Corporation* 1,700 66,997
NCR Corporation* 5,200 201,760
Network Associates, Inc.* 1,000 15,040
Novell, Inc.* 12,400 130,448
PanAmSat Corporation* 43,300 933,548
Peoplesoft, Inc.* 12,000 273,600
PerkinElmer, Inc. 4,000 68,280
Raytheon Co. 110,600 3,322,424
Rockwell Automation, Inc. 10,100 359,560
Sanmina-SCI Corporation* 17,176 216,589
Scientific-Atlanta, Inc. 8,500 232,050
Seagate Technology, Inc.*+ 4,600 0
Siebel Systems, Inc.* 10,800 149,796
Solectron Corporation* 26,400 156,024
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Storage Technology
Corporation* 3,900 $ 100,425
Sun Microsystems, Inc.* 196,600 882,734
Symbol Technologies, Inc. 1,800 30,402
Tellabs, Inc.* 15,000 126,450
Texas Instruments, Inc. 27,800 816,764
Unisys Corporation* 4,800 71,280
Vishay Intertechnology,
Inc.* 9,700 222,130
--------------
65,050,432
--------------
UTILITIES -- 11.2%
AGL Resources, Inc. 3,900 113,490
Allete, Inc. 5,200 159,120
Alliant Energy Corporation 6,600 164,340
Alltel Corporation 18,900 880,362
Ameren Corporation 9,800 450,800
American Electric Power
Co., Inc. 259,500 7,917,345
AT&T Corporation 228,760 4,643,828
AT&T Wireless Services,
Inc.* 75,700 604,843
BellSouth Corporation 281,600 7,969,280
Cablevision Systems
Corporation Class A* 775 18,127
Centerpoint Energy, Inc. 258,900 2,508,741
CenturyTel, Inc. 8,700 283,794
Cinergy Corporation 10,700 415,267
Citizens Communications
Co.* 17,300 214,866
Comcast Corporation Class
A* 260,563 8,564,706
Consolidated Edison, Inc. 13,600 584,936
Constellation Energy Group,
Inc. 10,100 395,516
Cox Communications, Inc.
Class A* 72,100 2,483,845
Dominion Resources, Inc. 19,519 1,245,898
DPL, Inc. 7,700 160,776
DTE Energy Co. 72,600 2,860,440
Duke Energy Corporation 230,500 4,713,725
Duquesne Light Holdings,
Inc. 4,600 84,364
Edison International 17,300 379,389
Energy East Corporation 8,900 199,360
Entergy Corporation 191,900 10,963,247
Exelon Corporation 110,887 7,358,461
FirstEnergy Corporation 302,612 10,651,942
FPL Group, Inc. 11,200 732,704
Great Plains Energy, Inc. 4,200 133,644
Hawaiian Electric
Industries 2,300 108,951
IDT Corporation* 1,700 37,655
KeySpan Corporation 93,500 3,440,800
Kinder Morgan, Inc. 1,100 65,010
Level 3 Communications,
Inc.* 31,900 181,830
MDU Resources Group, Inc. 6,750 160,718
National Fuel Gas Co. 4,000 97,760
Nextel Communications, Inc.
Class A* 46,100 1,293,566
Nicor, Inc. 2,700 91,908
NII Holdings, Inc. Class B* 14,900 1,111,987
NiSource, Inc. 16,000 351,040
</Table>
See Notes to Financial Statements.
92
<Table>
<Caption>
SHARES VALUE
----------- --------------
Northeast Utilities 198,700 $ 4,007,779
NSTAR 3,200 155,200
NTL, Inc.* 4,600 320,850
OGE Energy Corporation 5,200 125,788
Oneok, Inc. 56,400 1,245,312
Peoples Energy Corporation 2,200 92,488
Pepco Holdings, Inc. 9,498 185,591
PG&E Corporation* 24,900 691,473
Philadelphia Suburban
Corporation 5,625 124,313
Piedmont Natural Gas Co.,
Inc. 1,900 82,574
Pinnacle West Capital
Corporation 5,100 204,102
PPL Corporation 134,600 5,888,750
Progress Energy, Inc. 13,000 588,380
Progress Energy, Inc.
Contingent Value
Obligation*+ 3,100 1,209
Public Service Enterprise
Group, Inc. 13,800 604,440
Puget Energy, Inc. 5,700 135,489
Questar Corporation 37,100 1,304,065
Qwest Communications
International, Inc.* 64,200 277,344
SBC Communications, Inc. 202,200 5,271,354
SCANA Corporation 6,700 229,475
Sempra Energy 103,200 3,102,192
Southern Co. (The) 43,900 1,327,975
Sprint Corporation (FON
Group) 278,300 4,569,686
TECO Energy, Inc. 11,400 164,274
Telephone & Data Systems,
Inc. 2,100 131,355
TXU Corporation 19,600 464,912
UGI Corporation 2,600 88,140
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
UnitedGlobalCom, Inc. Class
A* 4,600 $ 39,008
US Cellular Corporation* 600 21,300
Vectren Corporation 4,500 110,925
Verizon Communications,
Inc. 626,624 21,981,970
Western Gas Resources, Inc. 1,100 51,975
WGL Holdings, Inc. 3,000 83,370
Wisconsin Energy
Corporation 7,100 237,495
WPS Resources Corporation 2,200 101,706
Xcel Energy, Inc. 24,240 411,595
--------------
139,222,235
--------------
TOTAL COMMON STOCK
(Cost $1,047,866,578) 1,198,610,114
--------------
SHORT-TERM INVESTMENTS -- 13.7%
AB Funds Trust -- Money
Market Fund (Retirement
Class)(inf) 37,239,515 37,239,515
Northern Institutional
Liquid Assets Portfolio
sec. 132,608,734 132,608,734
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $169,848,249) 169,848,249
--------------
</Table>
<Table>
<Caption>
PAR
----------
U.S. TREASURY OBLIGATION -- 0.3%
U.S. Treasury Bill
0.89%, 01/22/04++++
(Cost $3,937,949) $3,940,000 3,938,064
--------------
TOTAL INVESTMENTS -- 110.5%
(Cost $1,221,652,776) 1,372,396,427
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (10.5%) (130,609,062)
--------------
NET ASSETS -- 100.0% $1,241,787,365
==============
</Table>
See Notes to Financial Statements.
93
GROWTH EQUITY FUND
During the fourth quarter, growth stocks underperformed value stocks across
every capitalization tier. In the large capitalization tier, the Russell 1000(R)
Growth Index underperformed its value counterpart, the Russell 1000(R) Value
Index, by 3.78% for the fourth quarter and 0.28% for the year. All sectors of
the Russell 1000(R) Growth Index delivered positive returns during the quarter.
The producer durables and materials & processing sectors were the best
performers, while the consumer discretionary and autos & transportation sectors
posted the weakest index performance.
The fund is comprised of domestic, large-cap growth oriented stocks. The fund
underperformed its benchmark, the Russell 1000(R) Growth Index, during the
fourth quarter. Security selection in the healthcare and autos and
transportation sectors detracted from benchmark-relative performance. At the
sub-adviser level, TCW delivered solid absolute and benchmark-relative returns
as a result of its strong security selection in the technology sector and, to a
slightly lesser extent, security selection in the consumer discretionary and
financial services sectors.
Not Part of the Annual Report
94
GROWTH EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RUSSELL 1000(R) GROWTH
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX**
----------------- -------------------- ------------- ----------------------
One Year 29.56% 29.56% 29.16% 29.75%
Since Inception
(8/27/01 -- 12/31/03) (3.79%) (3.67%) (4.03%) (3.51%)
</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.
[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
</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 Annual Report
95
GROWTH EQUITY FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ---------- --------------
COMMON STOCK -- 95.3%
AUTO & TRANSPORTATION -- 4.6%
FedEx Corporation 182,952 $ 12,349,260
Harley-Davidson, Inc. 602,100 28,617,813
Ryanair Holdings PLC ADR* 66,937 3,389,690
Southwest Airlines Co. 419,700 6,773,958
United Parcel Service, Inc.
Class B 160,900 11,995,095
--------------
63,125,816
--------------
CONSUMER DISCRETIONARY --19.3%
Amazon.com, Inc.* 494,300 26,019,952
Apollo Group, Inc. Class A* 193,000 13,124,000
Bed Bath & Beyond, Inc.* 189,000 8,193,150
eBay, Inc.* 650,700 42,028,713
Electronic Arts, Inc.* 314,918 15,046,782
Kohl's Corporation* 150,000 6,741,000
Krispy Kreme Doughnuts,
Inc.* 101,000 3,696,600
Lowe's Cos., Inc. 491,798 27,240,691
McDonald's Corporation 83,100 2,063,373
Nike, Inc. Class B 117,684 8,056,647
Pixar, Inc.* 142,800 9,894,612
Scripps Co. (E.W.) Class A 65,000 6,119,100
Starbucks Corporation* 807,900 26,709,174
Tiffany & Co. 492,834 22,276,097
Tribune Co. 80,000 4,128,000
Wal-Mart Stores, Inc. 425,900 22,593,995
Weight Watchers
International, Inc.* 97,000 3,721,890
Yahoo!, Inc.* 425,200 19,206,284
--------------
266,860,060
--------------
CONSUMER STAPLES -- 5.8%
Coca-Cola Co. (The) 200,400 10,170,300
Colgate-Palmolive Co. 162,500 8,133,125
PepsiCo, Inc. 172,400 8,037,288
Procter & Gamble Co. 191,705 19,147,495
Sysco Corporation 229,300 8,536,839
Walgreen Co. 705,400 25,662,452
--------------
79,687,499
--------------
FINANCIAL SERVICES -- 14.4%
Accenture, Ltd. Class A* 155,000 4,079,600
AFLAC, Inc. 416,200 15,058,116
American Express Co. 80,000 3,858,400
American International
Group, Inc. 77,400 5,130,072
Automatic Data Processing,
Inc. 60,000 2,376,600
Capital One Financial
Corporation 232,000 14,219,280
Citigroup, Inc. 425,333 20,645,664
Countrywide Financial
Corporation 126,400 9,587,440
Fannie Mae 226,229 16,980,749
Fifth Third Bancorp 36,300 2,145,330
First Data Corporation 286,000 11,751,740
Franklin Resources, Inc. 79,450 4,136,167
Goldman Sachs Group, Inc. 42,500 4,196,025
</Table>
<Table>
<Caption>
SHARES VALUE
---------- --------------
M & T Bank Corporation 22,000 $ 2,162,600
Mellon Financial Corporation 62,100 1,994,031
Merrill Lynch & Co., Inc. 320,159 18,777,325
Moody's Corporation 103,000 6,236,650
Progressive Corporation
(The) 384,295 32,123,219
Schwab (Charles) Corporation
(The) 963,785 11,411,214
SLM Corporation 340,491 12,829,701
--------------
199,699,923
--------------
HEALTHCARE -- 19.2%
Allergan, Inc. 116,000 8,909,960
Amgen, Inc.* 664,504 41,066,347
Boston Scientific
Corporation* 358,542 13,180,004
Cardinal Health, Inc. 32,600 1,993,816
Genentech, Inc.* 628,265 58,786,756
Johnson & Johnson 269,600 13,927,536
Lilly (Eli) & Co. 229,509 16,141,368
Medimmune, Inc.* 289,295 7,348,093
Medtronic, Inc. 396,900 19,293,309
Pfizer, Inc. 660,000 23,317,800
Quest Diagnostics, Inc. 60,685 4,436,680
St. Jude Medical, Inc.* 32,000 1,963,200
Stryker Corporation 133,200 11,323,332
Teva Pharmaceutical
Industries, Ltd. ADR 170,000 9,640,700
UnitedHealth Group, Inc. 314,790 18,314,482
WellPoint Health Networks,
Inc.* 30,000 2,909,700
Wyeth 160,000 6,792,000
Zimmer Holdings, Inc.* 79,839 5,620,666
--------------
264,965,749
--------------
INTEGRATED OILS -- 0.5%
BP PLC ADR 45,000 2,220,750
Exxon Mobil Corporation 130,000 5,330,000
--------------
7,550,750
--------------
MATERIALS & PROCESSING -- 0.3%
Air Products & Chemicals,
Inc. 71,000 3,750,930
--------------
OTHER -- 2.7%
3M Co. 99,000 8,417,970
General Electric Co. 924,625 28,644,883
--------------
37,062,853
--------------
OTHER ENERGY -- 0.6%
Baker Hughes, Inc. 160,000 5,145,600
BJ Services Co.* 61,000 2,189,900
Schlumberger, Ltd. 21,500 1,176,480
--------------
8,511,980
--------------
PRODUCER DURABLES -- 4.8%
Applied Materials, Inc.* 558,650 12,541,693
Caterpillar, Inc. 166,275 13,804,150
Danaher Corporation 31,500 2,890,125
Ingersoll-Rand Co. Class A 29,850 2,026,218
Lennar Corporation Class A 74,527 7,154,592
Lockheed Martin Corporation 160,276 8,238,186
</Table>
See Notes to Financial Statements.
96
<Table>
<Caption>
SHARES VALUE
---------- --------------
Nokia Corporation ADR 315,700 $ 5,366,900
Tyco International, Ltd. 54,355 1,440,408
United Technologies
Corporation 133,800 12,680,226
--------------
66,142,498
--------------
TECHNOLOGY -- 21.9%
Cisco Systems, Inc.* 2,347,807 57,028,233
Dell, Inc.* 1,323,927 44,960,561
EMC Corporation* 500,759 6,469,806
Hewlett-Packard Co. 125,500 2,882,735
Intel Corporation 1,590,310 51,207,982
Maxim Integrated Products,
Inc. 528,120 26,300,376
Microsoft Corporation 1,278,400 35,207,136
Network Appliance, Inc.* 768,200 15,771,146
Oracle Corporation* 721,300 9,521,160
Qualcomm, Inc. 485,790 26,198,655
Red Hat, Inc.* 325,000 6,100,250
SAP AG ADR 49,200 2,044,752
Seagate Technology, Inc.*+ 5,600 0
Veritas Software
Corporation* 85,000 3,158,600
Xilinx, Inc.* 434,600 16,836,404
--------------
303,687,796
--------------
UTILITIES -- 1.2%
Nextel Communications, Inc.
Class A* 260,190 7,300,931
SBC Communications, Inc. 95,000 2,476,650
Vodafone Group PLC ADR 255,000 6,385,200
--------------
16,162,781
--------------
TOTAL COMMON STOCK
(Cost $1,173,743,447) 1,317,208,635
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
---------- --------------
FOREIGN STOCK -- 0.7%
GERMANY
Bayerische Motoren Werke AG
(Cost $8,241,659) 202,515 $ 9,387,520
--------------
SHORT-TERM INVESTMENTS -- 6.9%
AB Funds Trust -- Money
Market Fund (Retirement
Class)(inf) 53,389,394 53,389,394
Northern Institutional
Liquid Assets Portfolio
sec. 42,718,010 42,718,010
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $96,107,404) 96,107,404
--------------
<Caption>
PAR
----------
U.S. TREASURY OBLIGATION -- 0.3%
U.S. Treasury Bill
0.90%, 01/22/04++++
(Cost $3,803,019) $3,805,000 3,803,131
--------------
<Caption>
SHARES
----------
WARRANTS -- 0.0%
TECHNOLOGY
Orbital Sciences
Corporation, Strike Price
$4.82, 8/31/04*
(Cost $0) 328 2,447
--------------
TOTAL INVESTMENTS -- 103.2%
(Cost $1,281,895,529) 1,426,509,137
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (3.2%)% (43,639,504)
--------------
NET ASSETS -- 100.0% $1,382,869,633
==============
</Table>
See Notes to Financial Statements.
97
SMALL CAP EQUITY FUND
Small-cap stocks continued to outperform large-cap stocks during the fourth
quarter as the Russell 2000(R) Index returned 14.52%, while its large-cap
counterpart, the Russell 1000(R) Index, returned 12.26%. For the year, the
Russell 2000(R) Index gained a record high 47.25%, while the Russell 1000(R)
Index increased 29.89%. Value stocks outpaced growth stocks in the small
capitalization tier during the quarter as the Russell 2000(R) Value Index
outperformed the Russell 2000(R) Growth Index by 3.69%. All sectors within the
Russell 2000(R) Index delivered strong returns for the quarter.
The fund is comprised of domestic, small-cap stocks with both value and growth
style orientations.(1) The fund outperformed its benchmark, the Russell 2000(R)
Index, during the fourth quarter. Security selection within the technology,
healthcare and financial services sectors benefited benchmark-relative
performance. At the sub-adviser level, HighRock delivered the strongest absolute
and benchmark-relative returns and was rewarded for its security selection in
the technology sector. High Rock also benefited from its overweight exposure and
security selection in the materials and processing sector.
- ---------------
(1) Small company stocks are generally riskier than large company stocks due to
greater volatility and less liquidity.
Not Part of the Annual Report
98
SMALL CAP EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RUSSELL 2000(R)
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX**
----------------- -------------------- ------------- ---------------
One Year 46.24% 46.38% 45.72% 47.25%
Since Inception (8/27/01 -- 12/31/03) 6.01% 6.21% 5.78% 7.92%
</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.
[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
</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.
Not Part of the Annual Report
99
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 SHARES VALUE
- ----------------- ----------- -------------
COMMON STOCK -- 95.3%
AUTO & TRANSPORTATION -- 5.2%
AAR Corporation 2,500 $ 37,375
Aftermarket Technology 1,300 17,836
Corporation*
Airtran Holdings, Inc.* 26,800 318,920
Alaska Air Group, Inc.* 2,100 57,309
Alexander & Baldwin, Inc. 3,700 124,653
America West Holdings 900 11,160
Corporation Class B*
American Axle & 14,000 565,880
Manufacturing Holdings,
Inc.*
AMR Corporation* 5,000 64,750
Arctic Cat, Inc. 1,100 27,170
Arkansas Best Corporation 2,000 62,780
ArvinMeritor, Inc. 19,600 472,752
Atlantic Coast Airlines 39,500 391,050
Holdings, Inc.*
Autoliv, Inc. 29,700 1,118,205
Aviall, Inc.* 2,800 43,428
Bandag, Inc. 1,000 41,200
BorgWarner, Inc. 6,600 561,462
Central Freight Lines, Inc.* 46,800 830,700
CNF, Inc. 11,600 393,240
Coachmen Industries, Inc. 1,300 23,543
Collins & Aikman 2,800 12,124
Corporation*
Continental Airlines, Inc. 5,900 95,993
Class B*
Cooper Tire & Rubber Co. 5,900 126,142
Covenant Transport, Inc. 100 1,901
Class A*
Dura Automotive Systems, 27,700 353,729
Inc. Class A*
EGL, Inc.* 200 3,512
ExpressJet Holdings, Inc.* 51,700 775,500
Fleetwood Enterprises, Inc.* 60,900 624,834
Florida East Coast 1,300 43,030
Industries, Inc.
Frontier Airlines, Inc.* 27,700 395,002
General Maritime 50,600 890,560
Corporation*
Genesee & Wyoming, Inc. 600 18,900
Class A*
Gentex Corporation 17,300 763,968
Goodyear Tire & Rubber Co. 13,600 106,896
(The)
Greenbrier Cos., Inc.* 500 8,375
Gulfmark Offshore, Inc.* 25,200 352,800
Heartland Express, Inc. 300 7,257
Hunt (J.B.) Transport 12,900 348,429
Services, Inc.*
Kansas City Southern* 14,600 209,072
Kirby Corporation* 1,400 48,832
Laidlaw International, Inc.* 85,200 1,178,316
Lear Corporation* 15,800 969,014
MAIR Holdings, Inc.* 900 6,552
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Marine Products Corporation* 10,500 $ 197,400
Maritrans, Inc. 300 5,013
Modine Manufacturing Co. 31,500 849,870
Monaco Coach Corporation* 2,300 54,740
Northwest Airlines 5,500 69,410
Corporation*
Offshore Logistics, Inc.* 13,600 333,472
Old Dominion Freight Line, 10,150 345,912
Inc.*
OMI Corporation* 106,200 948,366
Oshkosh Truck Corporation 300 15,309
Overseas Shipholding Group, 1,400 47,670
Inc.
P.A.M. Transportation 19,500 415,935
Services, Inc.*
Pacer International, Inc.* 27,900 564,138
Petroleum Helicopters, Inc.* 300 7,350
Quality Distribution, Inc.* 31,800 621,690
RailAmerica, Inc.* 2,700 31,860
Raytech Corporation* 500 1,660
Sauer-Danfoss, Inc. 900 14,580
SCS Transportation, Inc.* 1,050 18,459
Seabulk International, Inc.* 1,100 8,932
Skywest, Inc. 16,100 291,732
Standard Motor Products, 300 3,645
Inc.
Stoneridge, Inc.* 400 6,020
Strattec Security 100 6,091
Corporation*
Superior Industries 1,100 47,872
International, Inc.
TBC Corporation* 1,500 38,715
Teekay Shipping Corporation 14,800 844,044
Tenneco Automotive, Inc.* 3,800 25,422
Tower Automotive, Inc.* 5,100 34,833
U.S. Xpress Enterprises, 500 6,125
Inc. Class A*
USF Corporation 2,400 82,056
UTI Worldwide, Inc. 18,100 686,533
Visteon Corporation 11,800 122,838
Wabtec Corporation 41,000 698,640
Yellow Roadway Corporation* 30,296 1,095,806
-------------
21,046,289
-------------
CONSUMER DISCRETIONARY --20.0%
1-800-FLOWERS.COM, Inc. 20,900 231,154
Class A*
4Kids Entertainment, Inc.* 1,000 26,020
Aaron Rents, Inc. 59,350 1,194,716
ABM Industries, Inc. 39,700 691,177
Action Performance 26,400 517,440
Companies, Inc.
Activision, Inc.* 6,200 112,840
Advance Auto Parts, Inc.* 13,600 1,107,040
Advanced Marketing Services, 900 10,260
Inc.
Advisory Board Co. (The)* 15,500 541,105
Advo, Inc. 26,450 840,052
Aeropostale, Inc.* 14,200 389,364
</Table>
See Notes to Financial Statements.
100
<Table>
<Caption>
SHARES VALUE
----------- -------------
Alderwoods Group, Inc.* 3,300 $ 31,086
Alloy, Inc.* 75,800 394,918
Ambassadors International, 500 6,250
Inc.
AMC Entertainment, Inc.* 74,400 1,131,624
American Eagle Outfitters, 83,900 1,375,960
Inc.*
American Greetings 5,600 122,472
Corporation Class A*
American Woodmark 200 11,010
Corporation
AMN Healthcare Services, 37,400 641,784
Inc.*
Angelica Corporation 800 17,600
AnnTaylor Stores 3,500 136,500
Corporation*
Applica, Inc. 1,700 12,920
Arbitron, Inc.* 26,100 1,088,892
Asbury Automotive Group, 1,100 19,701
Inc.*
Ask Jeeves, Inc.* 8,300 150,396
Atari, Inc.* 200 840
Bally Total Fitness Holding 2,800 19,600
Corporation*
Banta Corporation 3,800 153,900
Barnes & Noble, Inc.* 23,400 768,690
Bassett Furniture 900 14,850
Industries, Inc.
Beasley Broadcasting Group, 10,900 179,087
Inc. Class A*
Big 5 Sporting Goods 100 2,095
Corporation*
Big Lots, Inc.* 42,400 602,504
BJ's Wholesale Club, Inc.* 53,200 1,221,472
Black & Decker Corporation 10,600 522,792
Blair Corporation 600 14,604
Bob Evans Farms, Inc. 3,200 103,872
Boca Resorts, Inc. Class A* 2,200 32,912
Bombay Co., Inc. (The)* 18,800 153,032
Borders Group, Inc. 23,300 510,736
Bowne & Co., Inc. 1,400 18,984
Boyds Collection, Ltd.* 1,300 5,525
Brink's Co. (The) 11,000 248,710
Brookstone, Inc.* 850 18,114
Brown Shoe Co., Inc. 21,000 796,530
Buckle, Inc. (The)* 29,400 651,210
Burlington Coat Factory 11,200 236,992
Warehouse Corporation
Callaway Golf Co. 73,500 1,238,475
Casella Waste Systems, Inc. 1,000 13,690
Class A*
Catalina Marketing 21,100 425,376
Corporation*
Cato Corporation Class A 1,500 30,750
CBRL Group, Inc. 8,800 336,688
CDI Corporation 800 26,200
CEC Entertainment, Inc.* 15,400 729,806
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Central European 40 $ 1,264
Distribution Corporation*
Central Garden & Pet Co.* 1,400 39,242
Central Parking Corporation 1,600 23,888
Century Business Services, 104,100 465,327
Inc.*
Charlotte Russe Holding, 300 4,158
Inc.*
Charming Shoppes, Inc.* 9,200 49,680
Charter Communications, Inc. 23,400 94,068
Class A*
Children's Place Retail 100 2,673
Stores, Inc.*
Choice Hotels International, 12,900 454,725
Inc.
Claire's Stores, Inc. 18,400 346,656
Clark, Inc.* 39,200 754,208
CNET Networks, Inc.* 15,600 106,392
Coinstar, Inc.* 33,400 603,204
Cole National Corporation* 500 10,000
Concord Camera Corporation* 900 8,325
Consolidated Graphics, Inc.* 1,000 31,580
Convergys Corporation* 39,000 680,940
Copart, Inc.* 6,100 100,650
Corinthian Colleges, Inc.* 19,100 1,061,196
Cornell Cos., Inc.* 1,100 15,015
Corporate Executive Board 39,400 1,838,798
Co.*
Corrections Corporation of 34,400 991,752
America*
Cost Plus, Inc.* 10,600 434,600
CoStar Group, Inc.* 10,250 427,220
Courier Corporation 150 5,771
Cross Country Healthcare, 13,300 198,436
Inc.*
Crown Media Holdings, Inc. 1,100 9,097
Class A*
CSK Auto Corporation* 1,000 18,770
CSS Industries, Inc. 400 12,404
Cumulus Media, Inc. Class A* 15,100 332,200
Dave & Buster's, Inc.* 1,000 12,680
Deb Shops, Inc. 300 6,450
Department 56, Inc.* 1,100 14,410
Dillard's, Inc. Class A 5,600 92,176
Dollar Thrifty Automotive 9,000 233,460
Group, Inc.*
Dorel Industries, Inc. Class 26,900 720,382
B*
DoubleClick, Inc.* 29,900 305,578
Dover Motorsports, Inc. 1,300 4,550
Dress Barn, Inc.* 43,700 655,063
EarthLink, Inc.* 1,400 14,000
Education Management 80,600 2,501,823
Corporation*
Elizabeth Arden, Inc.* 1,200 23,904
Emerson Radio Corporation* 500 1,880
Emmis Communications 700 18,935
Corporation Class A*
</Table>
See Notes to Financial Statements.
101
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
Entercom Communications 12,700 $ 672,592
Corporation*
Extended Stay America, Inc.* 6,400 92,672
Finish Line, Inc. (The) 16,400 491,508
Class A*
Finlay Enterprises, Inc.* 600 8,478
First Consulting Group, 39,200 220,696
Inc.*
Fisher Communications, Inc.* 200 10,200
Forrester Research, Inc.* 100 1,787
Fred's, Inc. 9,450 292,761
Friedman's, Inc. Class A 1,800 12,078
FTI Consulting, Inc.* 18,500 432,345
Furniture Brands 6,700 196,511
International, Inc.*
G & K Services, Inc. Class A 1,500 55,125
Galyan's Trading Co., Inc.* 300 3,612
GameStop Corporation* 900 13,869
Gaylord Entertainment Co.* 1,100 32,835
Genesco, Inc.* 77,900 1,178,627
Getty Images, Inc.* 36,800 1,844,784
Global Imaging Systems, 3,200 101,600
Inc.*
Goody's Family Clothing, 1,700 15,912
Inc.
Gray Television, Inc. 3,200 48,384
Group 1 Automotive, Inc.* 1,100 39,809
Guess?, Inc.* 700 8,449
Guitar Center, Inc.* 6,700 218,286
Hampshire Group, Ltd.* 200 6,274
Handleman Co. 37,700 773,981
Haverty Furniture Cos., Inc. 1,400 27,804
Hiedrick & Struggles 800 17,440
International, Inc.*
Hollywood Entertainment 64,200 882,750
Corporation*
Hooker Furniture Corporation 300 12,240
Hot Topic, Inc.* 22,200 654,012
Hudson Highland Group, Inc.* 300 7,155
IHOP Corporation 1,700 65,416
Information Holdings, Inc.* 11,200 247,520
Infospace, Inc.* 900 20,745
Insight Communications Co., 4,000 41,240
Inc.*
Insight Enterprises, Inc.* 27,500 517,000
Insurance Auto Auctions, 700 9,135
Inc.*
Integrated Alarm Services 54,800 465,800
Group, Inc.*
Inter Parfums, Inc. 100 2,259
Intertan, Inc.* 1,700 17,204
Jack in the Box, Inc.* 3,100 66,216
Jakks Pacific, Inc.* 2,200 28,952
Jarden Corporation* 550 15,037
Jo-Ann Stores, Inc.* 1,495 30,498
Journal Communications, Inc. 28,100 520,693
Class A
Journal Register Co.* 2,800 57,960
K-Swiss, Inc. Class A 22,000 529,320
K2, Inc.* 2,600 39,546
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Kellwood Co. 2,400 $ 98,400
Kelly Services, Inc. Class A 500 14,270
Kirkland's, Inc.* 16,700 294,922
Korn/Ferry International* 39,700 529,598
La-Z-Boy, Inc. 51,100 1,072,078
Landry's Restaurants, Inc. 2,000 51,440
Lawson Products, Inc. 400 13,272
Libbey, Inc. 500 14,240
Liberty Corporation 26,600 1,202,054
Lightbridge, Inc.* 600 5,460
Lin TV Corporation Class A* 78,300 2,020,923
Linens 'N Things, Inc.* 3,100 93,248
Lithia Motors, Inc. Class A* 600 15,126
Lodgenet Entertainment 51,200 935,936
Corporation*
Lone Star Steakhouse & 1,400 32,452
Saloon, Inc.
Mail-Well, Inc.* 1,300 5,993
Marcus Corporation 1,700 27,880
MarineMax, Inc.* 700 13,601
Marketwatch.Com, Inc.* 100 861
Martha Stewart Living 400 3,940
Omnimedia, Inc.*
Marvel Enterprises, Inc.* 20,600 599,666
MAXIMUS, Inc.* 23,700 927,381
Maxwell Shoe Co., Inc. Class 1,200 20,364
A*
Medical Staffing Network 38,300 419,385
Holdings, Inc.*
Memberworks, Inc.* 600 16,302
Men's Warehouse, Inc.* 2,800 70,028
Metro One 1,700 4,420
Telecommunications, Inc.*
Midas, Inc.* 1,300 18,590
Midway Games, Inc.* 1,700 6,596
Monro Muffler Brake, Inc.* 550 11,006
Movado Group, Inc. 700 19,761
Movie Gallery, Inc. 32,800 612,704
MPS Group, Inc.* 8,500 79,475
MSC Industrial Direct Co., 18,900 519,750
Inc. Class A*
National Presto Industries, 400 14,460
Inc.
Nautilus Group, Inc. 34,700 487,535
Navigant Consulting, Inc.* 30,600 577,116
Navigant International, 20,000 277,000
Inc.*
Neoforma, Inc.* 200 2,128
Netopia, Inc.* 27,000 393,660
NetRatings, Inc.* 500 5,715
Nexstar Broadcasting Group, 57,300 785,583
Inc. Class A*
NIC, Inc.* 600 4,818
Nu Skin Enterprises, Inc. 1,600 27,344
Class A
O'Charley's, Inc.* 500 8,975
Oneida, Ltd. 1,300 7,657
Oshkosh B'gosh, Inc. 200 4,292
</Table>
See Notes to Financial Statements.
102
<Table>
<Caption>
SHARES VALUE
----------- -------------
Oxford Industries, Inc. 1,100 $ 37,268
Panera Bread Co. Class A* 8,200 324,146
Pantry, Inc.* 500 11,350
Papa John's International, 16,900 564,122
Inc.*
Paxson Communications 900 3,465
Corporation*
Payless ShoeSource, Inc.* 6,100 81,740
PC Connection, Inc.* 400 3,348
PDI, Inc.* 300 8,043
Pegasus Communications 200 5,616
Corportion*
Pegasus Solutions, Inc.* 300 3,141
Pep Boys-Manny, Moe & Jack 4,300 98,341
Perry Ellis International, 300 7,734
Inc.*
PF Chang's China Bistro, 4,300 218,784
Inc.*
Phillips-Van Heusen 2,200 39,028
Corporation
Playtex Products, Inc.* 45,500 351,715
Prime Hospitality 3,300 33,660
Corporation*
Primedia, Inc.* 13,300 37,639
Pulitzer, Inc. 400 21,600
Quicksilver, Inc.* 72,000 1,276,560
R.H. Donnelley Corporation* 1,800 71,712
Radio One, Inc.* 27,700 541,535
Radio One, Inc. Class D* 35,000 675,500
Raindance Communications, 1,000 2,750
Inc.*
Rare Hospitality 8,850 216,294
International, Inc.*
RC2 Corporation* 800 16,600
Red Robin Gourmet Burgers, 9,500 289,180
Inc.*
Regent Communications, Inc.* 1,100 6,985
Register.com, Inc.* 700 3,675
Rent-A-Center, Inc.* 45,050 1,346,094
Rent-Way, Inc.* 1,900 15,561
Resources Connection, Inc.* 29,300 800,183
Restoration Hardware, Inc.* 1,700 8,075
Revlon, Inc. Class A* 900 2,016
Rex Stores Corporation* 600 8,496
Right Management 350 6,531
Consultants, Inc.*
Roto-Rooter, Inc. 800 36,880
Russ Berrie & Co., Inc. 800 27,120
Russell Corporation 30,700 539,092
Ryan's Family Steak Houses, 3,800 57,532
Inc.*
Saga Communications, Inc. 44,600 826,438
Class A*
Schawk, Inc. 400 5,452
School Specialty, Inc.* 1,300 44,213
SCP Pool Corporation* 51,750 1,691,190
Shoe Carnival, Inc.* 300 5,340
ShopKo Stores, Inc.* 51,800 789,950
Sina Corporation* 14,400 486,000
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Sinclair Broadcast Group, 18,800 $ 280,496
Inc. Class A*
Six Flags, Inc.* 23,600 177,472
Skechers USA, Inc. Class A* 1,300 10,595
Sohu.Com, Inc.* 4,700 141,047
Sonic Automotive, Inc. 2,100 48,132
SOURCECORP, Inc.* 1,400 35,882
Spanish Broadcasting 32,800 344,400
Systems, Inc. Class A*
Speedway Motorsports, Inc. 300 8,676
Spherion Corporation* 5,400 52,866
Sports Authority, Inc. 1,077 41,357
(The)*
Stage Stores, Inc.* 15,700 438,030
Stamps.com, Inc.* 3,300 20,460
Stanley Furniture Co., Inc. 8,600 270,900
Steak n Shake Co. (The)* 1,100 19,635
Stein Mart, Inc.* 1,700 14,008
Steinway Musical Intruments, 400 9,880
Inc.*
Steven Madden, Ltd.* 800 16,320
Stewart Enterprises, Inc. 8,700 49,416
Class A*
Strayer Education, Inc. 5,500 598,565
Stride Rite Corporation 36,200 411,956
Sturm Ruger & Co., Inc. 500 5,685
Systemax, Inc.* 800 5,328
Tech Data Corporation* 13,200 523,908
Teletech Holdings, Inc.* 1,800 20,340
Thomas Nelson, Inc. 200 3,866
THQ, Inc.* 2,800 47,348
Tommy Hilfiger Corporation* 55,400 820,474
Topps Co. (The) 23,400 240,084
Toro Co. 600 27,840
Tractor Supply Co.* 12,500 486,125
Trans World Entertainment 600 4,272
Corporation*
Triarc Cos., Inc. Class B 1,800 19,404
Tuesday Morning Corporation* 14,600 441,650
Tupperware Corporation 31,700 549,678
Tweeter Home Entertainment 1,700 16,065
Group, Inc.*
Ultimate Electronics, Inc.* 400 3,052
UniFirst Corporation 800 18,968
United Auto Group, Inc. 1,300 40,690
United Natural Foods, Inc.* 24,100 865,431
United Online, Inc.* 18,000 302,220
United Stationers, Inc.* 2,100 85,932
Universal Electronics, Inc.* 100 1,274
Urban Outfitters, Inc.* 5,900 218,595
Vail Resorts, Inc.* 1,700 28,900
Valueclick, Inc.* 5,500 49,940
Vans, Inc.* 1,400 15,974
Volt Information Sciences, 700 15,820
Inc.*
Wackenhut Corrections 29,600 674,880
Corporation*
</Table>
See Notes to Financial Statements.
103
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
Warnaco Group, Inc. (The)* 2,400 $ 38,280
Waste Connections, Inc.* 100 3,777
Watson Wyatt & Co. Holdings* 300 7,245
WESCO International, Inc.* 38,000 336,300
West Corporation* 39,400 915,262
West Marine, Inc.* 400 11,124
Wet Seal, Inc. Class A* 77,900 770,431
Whitehall Jewellers, Inc.* 600 5,922
Wilsons The Leather Experts, 1,500 5,235
Inc.*
Wireless Facilities, Inc.* 17,800 264,508
Wolverine World Wide, Inc. 1,900 38,722
World Fuel Services 200 6,790
Corporation
World Wrestling Federation 1,000 13,100
Entertainment, Inc.
Young Broadcasting, Inc. 12,500 250,500
Class A*
Zale Corporation* 19,500 1,037,400
-------------
80,900,495
-------------
CONSUMER STAPLES -- 1.9%
7-Eleven, Inc.* 24,000 385,200
American Italian Pasta Co. 20,000 838,000
Class A*
Arden Group, Inc. Class A 50 3,875
Casey's General Stores, Inc. 4,000 70,640
Chiquita Brands 39,800 896,694
International, Inc.*
Coca-Cola Bottling Co. 100 5,349
Duane Reade, Inc.* 1,100 18,612
Farmer Brothers Co. 100 31,125
Flowers Foods, Inc. 2,850 73,530
Fresh Del Monte Produce, 14,400 343,152
Inc.
Great Atlantic & Pacific Tea 500 4,200
Co., Inc.*
Hain Celestial Group, Inc.* 1,800 41,778
Ingles Markets, Inc. Class A 800 8,216
International Multifoods 1,600 28,800
Corporation*
Interstate Bakeries 4,000 56,920
Corporation
J & J Snack Foods 600 22,656
Corporation*
John B. Sanfillippo & Son* 500 25,520
Lance, Inc. 2,200 33,066
Long's Drug Stores 2,700 66,798
Corporation
M & F Worldwide Corporation* 900 12,024
Nash Finch Co. 800 17,872
National Beverage 13,100 213,530
Corporation*
Nature's Sunshine Products, 800 6,760
Inc.
NBTY, Inc.* 13,700 367,982
Omega Protein Corporation* 500 3,860
Pathmark Stores, Inc.* 40,000 304,000
Peet's Coffee & Tea, Inc.* 7,400 128,834
Pilgrim's Pride Corporation 2,200 35,926
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Ralcorp Holdings, Inc.* 21,500 $ 674,240
Riviana Foods, Inc. 400 10,956
Ruddick Corporation 46,000 823,400
Sanderson Farms, Inc. 100 4,030
Seaboard Corporation 30 8,460
Sensient Technologies 3,100 61,287
Corporation
Smart & Final, Inc.* 1,100 11,088
SunOpta, Inc.* 22,200 204,906
Supervalu, Inc. 39,400 1,126,446
Weis Markets, Inc. 1,000 36,300
Wild Oats Markets, Inc.* 25,100 324,543
Winn-Dixie Stores, Inc. 20,900 207,955
-------------
7,538,530
-------------
FINANCIAL SERVICES -- 18.1%
1st Source Corporation 1,100 23,661
21st Century Insurance Group 800 11,000
ABC Bancorp 900 14,373
Acadia Realty Trust REIT 1,400 17,500
Accredited Home Lenders 300 9,180
Holding Co.*
Advanta Corporation 7,700 100,023
Advanta Corporation Class B 1,800 22,896
Advent Software, Inc.* 800 13,944
Affiliated Managers Group, 5,500 382,745
Inc.*
AG Edwards, Inc 25,700 931,111
Alabama National Bancorp 400 21,020
Alexandria Real Estate 1,400 81,060
Equities, Inc. REIT
Alfa Corporation 2,700 34,722
Allegiant Bancorp, Inc. 1,200 33,660
Alliance Data Systems 94,500 2,615,759
Corporation*
Allmerica Financial 4,800 147,696
Corporation*
Amcore Financial, Inc. 2,200 59,444
American Home Mortgage 792 17,828
Investment Corporation
American Land Lease, Inc. 500 9,975
REIT
American Mortgage Acceptance 700 11,410
Co.
American National 400 10,592
Bankshares, Inc.
American Physicians Capital, 800 14,720
Inc.*
AmericanWest Bancorporation* 800 18,240
AmerUs Group Co. 23,900 835,783
AMLI Residential Properties 1,500 40,200
Trust REIT
Anchor Bancorp, Inc. 1,800 44,820
Anthracite Capital, Inc. 4,300 47,601
REIT
Anworth Mortgage Asset 3,500 48,755
Corporation REIT
Arch Capital Group, Ltd.* 15,800 629,788
</Table>
See Notes to Financial Statements.
104
<Table>
<Caption>
SHARES VALUE
----------- -------------
Argonaut Group, Inc. 21,200 $ 329,448
Associated Banc-Corp 17,100 729,315
Associated Estates Realty 1,500 10,965
REIT
Astoria Financial 34,800 1,294,559
Corporation
Baldwin & Lyons, Inc. Class 725 20,344
B
Bancfirst Corporation 300 17,611
Bancorpsouth, Inc. 34,300 813,596
Banctrust Financial Group, 600 9,612
Inc.
Bank Mutual Corporation 2,568 29,250
Bank of Granite Corporation 1,200 26,136
Bank of Hawaii Corporation 27,800 1,173,160
Bank of the Ozarks, Inc. 6,900 155,319
BankAtlantic Bancorp, Inc. 3,800 72,200
Class A
BankUnited Financial 13,500 348,165
Corporation Class A*
Banner Corporation 900 22,635
Barra, Inc.* 9,000 319,410
Bay View Capital Corporation 2,000 4,280
Bedford Property Investors, 1,200 34,356
Inc. REIT
Berkshire Hills Bancorp, 500 18,100
Inc.
BISYS Group, Inc. (The)* 54,400 809,472
Boston Private Financial 16,400 407,376
Holdings, Inc.
Boykin Lodging Co., Inc. 1,600 14,640
REIT
Brandywine Realty Trust REIT 2,500 66,925
Brookfield Properties 13,200 378,840
Corporation
Brookline Bancorp, Inc. 5,200 79,768
BRT Realty Trust REIT 300 8,655
Bryn Mawr Bank Corporation 300 7,347
BSB Bancorp, Inc. 700 27,650
C&F Financial Corporation 200 7,940
Camco Financial Corporation 700 12,131
Camden National Corporation 700 21,252
Capital Automotive REIT 2,200 70,400
Capital Bancorp, Ltd. 400 11,360
Capital City Bank Group, 550 25,295
Inc.
Capital Corporation of the 400 15,856
West*
Capstead Mortgage 900 15,102
Corporation REIT
Cash America International, 2,500 52,950
Inc.
Cathay General Bancorp, Inc. 646 35,969
CB Bancshares, Inc. 430 26,918
CCBT Financial Cos., Inc. 800 27,960
CCC Information Services 300 5,070
Group*
Center Bancorp, Inc. 400 7,864
Center Financial Corporation 300 8,175
Central Coast Bancorp* 700 12,698
Central Pacific Financial 600 18,024
Corporation
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Century Bancorp, Inc. Class 300 $ 10,638
A*
Certegy, Inc.* 13,900 455,920
CFS Bancorp, Inc. 900 13,356
CharterMac 2,100 44,373
Chemical Financial 2,180 79,330
Corporation
Chittenden Corporation 3,055 102,770
Citizens Banking Corporation 3,900 127,608
Citizens First Bancorp, Inc. 800 18,240
Citizens South Banking 800 11,160
Corporation
City Bank Lynwood 700 22,750
City Holdings Co. 600 21,000
City National Corporation 17,700 1,099,524
CNA Surety Corporation* 1,400 13,314
Coastal Bancorp, Inc. 400 16,444
Coastal Financial 220 3,881
Corporation
Colonial Bancgroup, Inc. 67,800 1,174,296
Colonial Properties Trust 1,600 63,360
REIT
Columbia Bancorp 200 6,390
Columbia Bancorp Oregon 200 3,450
Columbia Banking System, 1,200 25,992
Inc.
Commerce Group, Inc. 15,900 628,050
Commercial Bacshares, Inc. 200 6,712
Commercial Federal 4,000 106,840
Corporation
Commercial Net Lease Realty, 4,000 71,200
Inc. REIT
Community Bank System, Inc. 1,000 49,000
Community Banks, Inc. 510 20,048
Community First Bankshares, 1,300 37,622
Inc.
Community Trust Bancorp, 1,189 35,908
Inc.
CompuCredit Corporation* 500 10,640
Connecticut Bancshares, Inc. 800 41,232
Cornerstone Realty Income 5,200 45,552
Trust, Inc. REIT
Corporate Office Properties 2,600 54,600
Trust REIT
Correctional Properties 900 25,920
Trust REIT
Corus Bankshares, Inc. 1,400 44,184
Crawford & Co. Class B 900 6,354
Credit Acceptance 800 12,240
Corporation*
CRIIMI MAE, Inc. REIT* 1,100 11,473
CVB Financial Corporation 32,918 634,979
Delphi Financial Group, Inc. 13,200 475,200
Class A
Deluxe Corporation 28,600 1,182,038
Digital Insight Corporation* 15,250 379,725
Direct General Corporation 11,400 377,340
Donegal Group, Inc. Class A 300 6,606
Doral Financial Corporation 26,550 857,034
Downey Financial Corporation 10,300 507,790
E*TRADE Financial 41,900 530,035
Corporation*
</Table>
See Notes to Financial Statements.
105
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
Eastern Virginia Bankshares 300 $ 8,649
Eastgroup Properties REIT 1,600 51,808
eFunds Corporation* 11,500 199,525
Electro Rent Corporation* 48,300 644,322
EMC Insurance Group, Inc. 200 4,228
Enstar Group, Inc.* 100 4,705
Entertainment Properties 1,800 62,478
Trust REIT
Equity Inns, Inc. REIT 3,700 33,485
Equity One, Inc. REIT 2,640 44,563
ESB Financial Corporation 600 9,834
Essex Property Trust, Inc. 1,000 64,220
REIT
Evertrust Financial Group, 400 12,736
Inc.
Exchange National 300 10,845
Bancshares, Inc.
Factset Research Systems 15,000 573,150
Inc.
Farmers Capital Bank 400 13,604
Corporation
FBL Financial Group, Inc. 1,100 28,380
Class A
Federated Investors, Inc. 11,000 322,960
Class B
FelCor Lodging Trust, Inc. 4,400 48,752
REIT
Fidelity Bankshares, Inc. 1,200 37,680
Financial Federal 1,200 36,660
Corporation*
Financial Industries 700 9,870
Corporation
Financial Institutions, Inc. 800 22,584
First Albany Cos., Inc. 500 7,020
First American Corporation 39,100 1,164,007
First Bancorp 200 6,282
First Busey Corporation 300 8,100
First Charter Corporation 2,700 52,785
First Citizens Banc 100 2,840
Corporation
First Citizens BancShares, 600 72,918
Inc. Class A
First Commonwealth Financial 5,300 75,578
Corporation
First Community Bancorp 1,100 39,754
First Community Bancshares, 650 21,554
Inc.
First Defiance Financial 400 10,660
Corporation
First Essex Bancorp, Inc. 500 29,070
First Federal Capital 1,700 38,284
Corporation
First Finanacial Corporation 1,200 36,012
First Financial Bancorp 2,700 43,065
First Financial Bankshares, 1,050 43,785
Inc.
First Financial Holdings, 800 25,008
Inc.
First Indiana Corporation 1,000 18,750
First Industrial Realty 3,600 121,500
Trust, Inc. REIT
First M&F Corporation 300 11,370
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
First Merchants Corporation 1,686 $ 43,027
First National Corporation 720 21,607
First Niagara Financial 6,400 95,424
Group, Inc.
First Oak Brook Bancshares, 550 16,506
Inc.
First of Long Island 300 12,900
Corporation (The)
First Place Financial 1,100 21,483
Corporation
First Republic Bank 20,600 737,480
First Sentinal Bancorp, Inc. 1,900 40,014
First State Bancorporation 500 17,375
First United Corporation 500 12,185
Firstbank Corporation 420 13,087
FirstFed America Bancorp, 1,400 36,442
Inc.
FirstFed Financial 18,900 822,150
Corporation*
Flagstar Bancorp, Inc. 38,000 813,960
FloridaFirst Bancorp, Inc. 500 16,550
Flushing Financial 1,350 24,678
Corporation
FNB Corporation North 300 6,354
Carolina
FNB Corporation Virginia 700 20,790
Foothill Independent Bancorp 300 7,098
Fremont General Corporation 55,700 941,887
Frontier Financial 600 19,896
Corporation
GA Financial, Inc. 400 13,892
Gabelli Asset Management, 200 7,960
Inc. Class A
Gables Residential Trust 2,500 86,850
REIT
GATX Corporation 3,800 106,324
GB&T Bancshares, Inc. 100 2,363
Getty Realty Corporation 700 18,305
REIT
Glacier Bancorp, Inc. 1,140 36,936
Glenborough Realty Trust, 1,600 31,920
Inc. REIT
Glimcher Realty Trust REIT 1,400 31,332
Global Payments, Inc. 25,700 1,210,984
Gold Banc Corporation, Inc. 3,200 44,992
Great American Financial 600 9,732
Resources, Inc.
Great Lakes REIT 1,300 20,410
Great Southern Bancorp, Inc. 300 13,911
Greater Bay Bancorp 4,700 133,856
Greater Community Bancorp 305 5,176
Hancock Holding Co. 1,200 65,484
Hanmi Financial Corporation 800 15,816
Harbor Florida Bancshares, 700 20,797
Inc.
Harleysville Group, Inc. 2,700 53,703
Hawthorne Financial 900 25,182
Corporation*
HCC Insurance Holdings, Inc. 12,200 387,960
Health Care REIT, Inc. 4,500 162,000
HealthExtras, Inc.* 17,150 229,810
Heartland Financial USA, 450 8,370
Inc.
</Table>
See Notes to Financial Statements.
106
<Table>
<Caption>
SHARES VALUE
----------- -------------
Henry (Jack) & Associates, 38,800 $ 798,504
Inc.
Heritage Commerce 1,000 12,250
Corporation*
Heritage Property Investment 1,800 51,210
Trust REIT
Hibernia Corporation Class A 42,500 999,175
Highwoods Properties, Inc. 4,800 121,920
REIT
Home Properties, Inc. REIT 2,800 113,092
Homestore, Inc.* 7,800 36,894
Horace Mann Educators 3,500 48,895
Corporation*
Horizon Financial 1,000 17,510
Corporation
Hudson River Bancorp, Inc. 1,400 54,642
Humboldt Bancorp 1,100 19,272
Hypercom Corporation* 1,200 5,712
IBERIABANK Corporation 500 29,500
Impac Mortgage Holdings, 4,500 81,945
Inc. REIT
Independence Community Bank 23,200 834,504
Corporation
Independence Holding Co. 300 7,125
Independent Bank Corporation 369 10,465
Independent Bank Corporation 100 2,882
MA
IndyMac Bancorp, Inc. 34,800 1,036,692
Infinity Property & Casualty 10,650 351,983
Corporation
Innkeepers USA Trust REIT 2,400 20,088
Integra Bank Corporation 1,400 30,768
Intercept Group, Inc.* 1,500 16,935
Interchange Financial 700 17,710
Service
Investment Technology Group, 24,400 394,060
Inc.*
Investors Financial Services 31,600 1,213,756
Corporation
Investors Real Estate Trust 3,200 31,680
REIT
iPayment, Inc.* 9,700 329,800
IPC Holdings, Ltd. 19,700 767,118
Irwin Financial Corporation 18,600 584,040
ITLA Capital Corporation* 400 20,040
Jefferies Group, Inc. 27,600 911,352
John H. Harland Co. 13,800 376,740
Kansas City Life Insurance 300 13,860
Co.
Keystone Property Trust REIT 2,000 44,180
Kilroy Realty Corporation 2,300 75,325
REIT
Klamath First Bancorp, Inc. 600 15,924
Knight Trading Group, Inc.* 53,700 786,168
Koger Equity, Inc. REIT 1,700 35,581
Kramont Realty Trust REIT 1,900 34,390
La Quinta Corporation REIT* 12,500 80,125
LaBranche & Co., Inc. 8,900 103,863
Lakeland Bancorp, Inc. 520 8,351
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Lakeland Financial 500 $ 17,660
Corporation
Landamerica Financial Group, 17,500 914,550
Inc.
LaSalle Hotel Properties 2,000 37,100
REIT
Leucadia National 1 43
Corporation
Lexington Corporate 3,300 66,627
Properties Trust REIT
Local Financial Corporation* 1,600 33,344
LSB Bancshares, Inc. 800 13,920
LTC Properties, Inc. REIT 1,200 17,688
Macatawa Bank Corporation 225 6,370
MAF Bancorp, Inc. 2,474 103,661
Main Street Banks, Inc. 100 2,650
MainSource Financial Group, 546 16,746
Inc.
Manufactured Home 400 15,060
Communities, Inc. REIT
Markel Corporation* 5,500 1,394,304
MASSBANK Corporation 300 12,780
MB Financial, Inc. 900 32,760
MBT Financial Corporation 100 1,651
MCG Capital Corporation 2,500 48,750
McGrath RentCorp 300 8,175
Medallion Financial 1,300 12,337
Corporation
Mercantile Bank Corporation 50 1,825
Merchant Bancshares, Inc. 400 12,220
MeriStar Hospitality 5,200 33,852
Corporation REIT*
Metris Cos., Inc. 2,600 11,544
MFA Mortgage Investments, 5,300 51,675
Inc. REIT
Mid-America Apartment 1,500 50,370
Communities, Inc. REIT
Mid-State Bancshares 2,100 53,424
Midland Co. 600 14,172
Midwest Banc Holdings, Inc. 100 2,225
Mission West Properties, 1,300 16,835
Inc. REIT
MutualFirst Financial, Inc. 400 10,136
NASB Financial, Inc. 100 4,191
National Bankshares, Inc. 300 14,811
National Health Investors, 2,000 49,760
Inc. REIT
National Health Realty, Inc. 600 11,820
REIT
National Penn Bancshares, 1,150 36,938
Inc.
National Processing, Inc.* 700 16,485
National Western Life 200 30,970
Insurance Co. Class A*
Nationwide Health 5,300 103,615
Properties, Inc. REIT
Navigators Group, Inc.* 300 9,261
NBC Capital Corporation 400 10,668
NBT Bancorp, Inc. 2,600 55,744
NCO Group, Inc.* 12,900 293,733
</Table>
See Notes to Financial Statements.
107
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
NDCHealth Corporation 23,400 $ 599,508
NetBank, Inc. 58,900 786,315
New Century Financial 23,550 934,229
Corporation
Newcastle Investment 2,500 67,750
Corporation REIT
Northern States Financial 200 5,782
Corporation
Northwest Bancorp, Inc. 700 14,952
NYMAGIC, Inc. 200 5,484
Oak Hill Financial, Inc. 300 9,243
OceanFirst Financial 300 8,148
Corporation
Ocwen Financial Corporation* 3,500 31,010
Odyssey Re Holdings 18,300 412,665
Corporation
Ohio Casualty Corporation* 5,000 86,800
Old Republic International 16,350 414,636
Corporation
Omega Financial Corporation 700 26,943
Omega Healthcare Investors, 1,400 13,062
Inc. REIT
Pab Bankshares, Inc. 600 9,324
Pacific Capital Bancorp 1,200 44,184
Pacific Union Bank 400 10,212
Parkvale Financial 400 10,740
Corporation
Parkway Properties, Inc. 900 37,440
REIT
Partners Trust Financial 600 20,400
Group, Inc.
Patriot Bank Corporation 600 17,166
Penn-America Group, Inc. 800 10,616
Pennfed Financial Services, 300 10,050
Inc.
Pennsylvania Real Estate 251 9,111
Investment Trust
Peoples Bancorp, Inc. 940 27,739
Peoples Holding Co. 750 24,750
PFF Bancorp, Inc. 1,180 42,810
Philadelphia Consolidated 1,100 53,713
Holding Corporation*
Phoenix Cos., Inc. 8,500 102,340
PICO Holdings, Inc.* 600 9,402
Platinum Underwriters 6,200 186,000
Holdings, Ltd.
PMA Capital Corporation 1,900 9,728
Class A
PMI Group, Inc. (The) 33,100 1,232,312
Portal Software, Inc.* 63,900 430,047
Portfolio Recovery 17,100 454,005
Associates, Inc.*
Post Properties, Inc. REIT 2,900 80,968
Prentiss Properties Trust 3,000 98,970
REIT
Presidential Life 1,900 25,004
Corporation
PRG-Schultz International, 69,000 338,100
Inc.*
Price Legacy Corporation 1,700 6,477
REIT*
PrivateBancorp, Inc. 10,000 455,200
ProAssurance Corporation* 300 9,645
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Prosperity Bancshares, Inc. 500 $ 11,260
Provident Bankshares 2,100 61,824
Corporation
Provident Financial 300 10,881
Holdings, Inc.
Provident Financial 4,300 81,270
Services, Inc.
PS Business Parks, Inc. REIT 1,200 49,512
Quaker City Bancorp, Inc. 200 9,310
R&G Financial Corporation 24,300 967,140
Class B
RAIT Investment Trust REIT 1,900 48,640
Ramco-Gershenson Properties 1,000 28,300
REIT
Raymond James Financial, 28,300 1,066,910
Inc.
Reckson Associates Realty 4,500 109,350
Corporation REIT
Redwood Trust, Inc. REIT 1,200 61,020
RenaissanceRe Holdings, Ltd. 14,000 686,700
Republic Bancorp, Inc. 10,189 137,450
Republic Bancorp, Inc. Class 600 11,724
A
Republic Bancshares, Inc. 800 25,176
Rewards Network, Inc.* 66,000 703,560
Riggs National Corporation 1,400 23,142
RLI Corporation 1,600 59,936
Royal Bancshares of 406 10,353
Pennsylvania, Inc. Class A
Ryder System, Inc. 24,500 836,675
S&T Bancorp, Inc. 1,300 38,870
S.Y. Banc Corporation 100 2,056
S1 Corporation* 34,500 277,725
Safety Insurance Group, Inc. 900 15,399
Sanders Morris Harris Group, 1,000 12,400
Inc.
Sandy Spring Bancorp, Inc. 500 18,700
Santander Bancorp 400 9,740
Saul Centers, Inc. REIT 1,000 28,670
Saxon Capital, Inc.* 2,300 48,185
Seacoast Banking Corporation 540 9,374
of Florida
Seacoast Financial Services 2,400 65,784
Corporation
Second Bancorp, Inc. 700 18,480
Security Bank Corporation 200 6,300
Selective Insurance Group, 10,800 349,488
Inc.
Senior Housing Properties 4,100 70,643
Trust REIT
Silicon Valley Bancshares* 20,500 739,435
Simmons First National 1,300 36,270
Corporation Class A
Sizeler Property Investors 1,000 10,710
REIT
SL Green Realty Corporation 2,900 119,045
REIT
Sotheby's Holdings, Inc. 65,400 893,364
Class A*
</Table>
See Notes to Financial Statements.
108
<Table>
<Caption>
SHARES VALUE
----------- -------------
SoundView Technology Group, 1,480 $ 22,925
Inc.*
South Financial Group, Inc. 5,300 147,658
Southern Financial Bancorp, 430 18,520
Inc.
Southside Bancshares, Inc. 835 15,448
Southwest Bancorp of Texas, 13,700 532,245
Inc.
Southwest Bancorp, Inc. 1,000 17,880
Sovran Self Storage, Inc. 1,300 48,295
REIT
Stancorp Financial Group, 12,900 811,152
Inc.
State Auto Financial 1,200 28,068
Corporation
State Bancorp, Inc. 325 7,885
State Financial Services 500 13,280
Corporation Class A
Staten Island Bancorp, Inc. 4,800 108,000
Sterling Bancorp 375 10,688
Sterling Bancshares, Inc. 1,200 15,996
Sterling Financial 1,400 38,850
Corporation
Sterling Financial 1,310 44,841
Corporation Washington
Stewart Information Services 21,900 888,045
Corporation*
Summit Bancshares, Inc. 300 8,358
Summit Properties, Inc. REIT 2,300 55,246
Sun Bancorp, Inc. 300 5,688
Sun Bancorp, Inc. NJ* 625 16,500
Sun Communities, Inc. REIT 900 34,830
Susquehanna Bancshares, Inc. 3,600 90,036
SWS Group, Inc. 1,300 23,140
Tanger Factory Outlet Center 300 12,210
REIT
Taubman Centers, Inc. REIT 1,800 37,080
Taylor Capital Group, Inc. 300 7,989
Texas Capital Bancshares, 27,300 394,813
Inc.*
Texas Regional Banchshares, 300 11,100
Inc. Class A
TierOne Corporation* 2,000 45,920
Tompkins Trustco, Inc. 540 24,867
Town & Country Trust REIT 1,100 27,885
Transcontinental Realty 200 3,346
Investors, Inc. REIT*
Triad Guaranty, Inc.* 700 35,245
Trico Bancshares 500 15,780
Troy Financial Corporation 600 21,000
U.S. Restaurant Properties, 1,700 28,968
Inc. REIT
UCBH Holdings, Inc. 33,000 1,286,010
UICI* 31,800 422,304
UMB Financial Corporation 1,500 71,310
Umpqua Holdings Corporation 748 15,551
Union Bankshares Corporation 600 18,300
United Community Financial 2,700 30,807
Corporation
United Fire & Casualty Co. 700 28,252
United National Bancorp 1,700 60,741
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
United Rentals, Inc.* 46,600 $ 897,516
United Security Bancshares 100 2,728
Universal American Financial 2,100 20,811
Corporation*
Universal Health Realty 900 27,090
Income Trust REIT
Unizan Financial Corporation 2,000 40,500
Urstadt Biddle Properties, 1,900 26,885
Inc. Class A REIT
USB Holding Co., Inc. 940 18,227
Ventas, Inc. REIT 6,700 147,400
Virginia Financial Group, 200 7,104
Inc.
Warwick Community Bancorp, 300 10,320
Inc.
Washington Real Estate 1,400 40,880
Investment Trust REIT
Washington Trust Bancorp, 800 20,960
Inc.
Wayne Bancorp, Inc. 520 14,004
Waypoint Financial 2,715 58,888
Corporation
Webster Financial 19,500 894,270
Corporation
WesBanco, Inc. 1,600 44,304
West Coast Bancorp 1,400 29,876
Westcorp 13,300 486,115
Westfield Financial, Inc. 400 9,504
WFS Financial, Inc.* 100 4,246
Willow Grove Bancorp, Inc. 900 15,984
Winston Hotels, Inc. REIT 2,000 20,400
Wintrust Financial 24,400 1,100,440
Corporation
WSFS Financial Corporation 500 22,425
Yardville National Bancorp 700 18,018
Zenith National Insurance 24,600 800,730
Corporation
-------------
73,418,964
-------------
HEALTHCARE -- 10.2%
aaiPharma, Inc.* 11,100 278,832
Abgenix, Inc.* 7,400 92,204
Able Laboratories, Inc.* 10,700 193,349
Aclara Biosciences, Inc.* 700 2,555
Alaris Medical Systems, 18,100 275,301
Inc.*
Albany Molecular Research, 2,400 36,048
Inc.*
Alexion Pharmaceuticals, 1,800 30,636
Inc.*
Alkermes, Inc.* 12,500 168,750
Alliance Imaging, Inc.* 1,100 4,070
Alpharma, Inc. Class A 3,200 64,320
America Service Group, Inc.* 10,000 309,090
American Healthways, Inc.* 13,250 316,278
American Medical Security 400 8,968
Group, Inc.*
American Pharmaceutical 32,950 1,107,120
Partners, Inc.*
Amerigroup Corporation* 4,800 204,720
Andrx Corporation* 12,900 310,116
Angiotech Pharmaceuticals, 9,700 446,200
Inc.*
Aphton Corporation* 300 1,800
</Table>
See Notes to Financial Statements.
109
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
Applera 2,300 $ 31,993
Corporation -- Celera
Genomics Group*
Arena Pharmaceuticals, Inc.* 500 3,100
Arrow International, Inc. 10,500 262,290
Atrix Laboratories, Inc.* 24,300 584,172
Beverly Enterprises, Inc.* 700 6,013
Bio-Rad Laboratories, Inc. 12,400 715,108
Class A*
Biopure Corporation* 800 1,904
Biosite, Inc.* 17,800 515,310
Bradley Pharmaceuticals, 9,800 249,214
Inc.*
Bruker Biosciences, Inc.* 563 2,562
Cell Genesys, Inc.* 3,100 40,114
Centene Corporation* 8,500 238,085
Cerner Corporation* 100 3,785
Chattem, Inc.* 12,900 230,910
Chronimed, Inc.* 600 5,088
Conmed Corporation* 2,600 61,880
Cubist Pharmaceuticals, 1,200 14,592
Inc.*
CuraGen Corporation* 1,300 9,529
Curative Health Services, 200 2,760
Inc.*
D&K Healthcare Resources, 900 12,204
Inc.
Dade Behring Holdings, Inc.* 500 17,870
Datascope Corporation 1,000 35,850
DaVita, Inc.* 65,500 2,554,499
Decode Genetics, Inc.* 2,800 22,932
Digene Corporation* 8,900 356,890
DJ Orthopedics, Inc.* 200 5,360
Enzon, Inc.* 44,600 535,200
Epix Medical, Inc.* 12,500 203,500
First Horizon Pharmaceutical 600 6,720
Corporation*
Gene Logic, Inc.* 2,800 14,532
Genesis Healthcare 1,100 25,058
Corporation*
Gentiva Health Services, 300 3,792
Inc.*
GTC Biotherapeutics, Inc.* 300 957
Guilford Pharmaceuticals, 2,000 13,560
Inc.*
Haemonetics Corporation* 700 16,723
Hanger Orthopedic Group, 1,900 29,583
Inc.*
Health Net, Inc.* 23,500 768,450
Healthcare Services Group, 800 15,432
Inc.
Hologic, Inc.* 1,800 31,194
Humana, Inc.* 25,600 584,960
Icon PLC ADR* 5,000 218,000
ID Biomedical Corporation* 18,100 214,666
Immunogen, Inc.* 3,300 16,665
IMPAC Medical Systems, Inc.* 26,200 669,672
Incyte Corporation* 6,500 44,460
Intuitive Surgical, Inc.* 15,000 256,350
Invacare Corporation 1,300 52,481
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Inverness Medical 200 $ 4,356
Innovations, Inc.*
Invitrogen Corporation* 13,400 938,000
Kindred Healthcare, Inc.* 1,100 57,178
KV Pharmaceutical Co. Class 9,787 249,569
A*
Landauer, Inc. 200 8,156
Lexicon Genetics, Inc.* 3,400 20,026
Ligand Pharmaceuticals, Inc. 37,200 546,468
Class B*
Martek Biosciences 7,900 513,263
Corporation*
Matria Healthcare, Inc.* 700 14,791
Maxygen, Inc.* 1,800 19,134
Medarex, Inc.* 6,600 41,118
Medicines Co.* 19,850 584,781
Medicis Pharmaceutical 8,900 634,570
Corporation Class A
MedQuist, Inc.* 9,900 158,994
Meridian Diagnostics, Inc. 300 3,129
Merit Medical Systems, Inc.* 11,600 258,216
MIM Corporation* 300 2,109
Molina Healthcare, Inc.* 89,200 2,250,515
Myogen, Inc.* 12,200 174,460
Nabi Biopharmaceuticals, 1,700 21,607
Inc.*
NeighborCare, Inc.* 2,400 47,400
Neose Technologies, Inc.* 900 8,280
Neurocrine Biosciences, 4,200 229,068
Inc.*
Ocular Sciences, Inc.* 1,200 34,452
Odyssey HealthCare, Inc.* 14,125 413,298
Omnicare, Inc. 18,800 759,332
Omnicell, Inc.* 12,000 194,400
Option Care, Inc.* 109,500 1,169,460
Orthodontic Centers of 4,500 36,225
America, Inc.*
Orthofix International N.V.* 5,200 254,696
Owens & Minor, Inc. 45,300 992,523
PacifiCare Health Systems, 8,400 567,840
Inc.*
PAREXEL International 1,300 21,138
Corporation*
Pediatrix Medical Group, 13,700 754,733
Inc.*
Per-Se Technologies, Inc.* 66,000 1,007,160
Perrigo Co.* 27,100 426,012
Pharmaceutical Product 39,000 1,051,830
Development, Inc.*
Pharmaceutical Resources, 10,400 677,560
Inc.*
Pharmacopeia, Inc.* 2,100 29,841
Praecis Pharmaceuticals, 4,000 25,760
Inc.*
Priority Healthcare 15,800 380,938
Corporation Class B*
Protein Design Labs, Inc.* 32,200 576,380
Province Healthcare Co.* 37,200 595,200
PSS World Medical, Inc.* 52,700 636,089
QLT PhotoTherapeutics, Inc.* 26,100 491,985
</Table>
See Notes to Financial Statements.
110
<Table>
<Caption>
SHARES VALUE
----------- -------------
RehabCare Group, Inc.* 9,500 $ 201,970
Respironics, Inc.* 42,600 1,920,834
Savient Pharmaceuticals, 3,100 14,291
Inc.*
Select Medical Corporation* 20,200 328,856
Serologicals Corporation* 200 3,720
Sirna Therapeutics, Inc.* 100 520
Sola International, Inc.* 2,600 48,880
Specialty Laboratories, 100 1,679
Inc.*
Stericycle, Inc.* 20,700 966,690
Steris Corporation* 36,200 818,120
Sunrise Senior Living, Inc.* 1,400 54,236
Sybron Dental Specialties, 700 19,670
Inc.*
Taro Pharmaceuticals 10,400 670,800
Industries, Ltd.*
Theragenics Corporation* 2,700 14,769
Thoratec Corporation* 13,300 173,033
Transkaryotic Therapies, 900 14,049
Inc.*
United Surgical Partners 23,700 793,476
International, Inc.*
US Oncology, Inc.* 62,500 672,500
VCA Antech, Inc.* 50,800 1,573,784
Ventana Medical Systems* 2,500 98,500
Viasys Healthcare, Inc.* 2,700 55,620
Vicuron Pharmaceuticals, 13,500 251,775
Inc.*
VistaCare, Inc. Class A* 9,200 323,380
VISX, Inc.* 20,900 483,835
Vital Signs, Inc. 500 16,350
West Pharmaceutical 1,000 33,900
Services, Inc.
Wright Medical Group, Inc.* 7,200 219,168
Zoll Medical Corporation* 7,725 274,083
-------------
41,486,854
-------------
INTEGRATED OILS -- 0.0%
KCS Energy, Inc.* 1,900 20,045
Petrocorp, Inc.* 500 6,730
-------------
26,775
-------------
MATERIALS & PROCESSING -- 7.8%
Aaon, Inc.* 200 3,882
Aceto Corporation 8,600 219,644
Acuity Brands, Inc. 3,800 98,040
Agrium, Inc. 54,600 898,716
Airgas, Inc. 14,900 320,052
AK Steel Holding 8,700 44,370
Corporation*
Albany International 2,200 74,580
Corporation Class A
Albemarle Corporation 2,700 80,919
Alico, Inc. 300 10,428
Allegheny Technologies, Inc. 7,300 96,506
Amcol International 1,700 34,510
Corporation
Ameron International 600 20,814
Corporation
Ampco-Pittsburgh Corporation 400 5,468
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Anchor Glass Container 34,200 $ 547,200
Corporation*
Apogee Enterprises, Inc. 2,000 22,700
Arch Chemicals, Inc. 32,500 833,950
Armor Holdings, Inc.* 1,400 36,834
Avatar Holdings, Inc.* 500 18,470
Barnes Group, Inc. 700 22,617
Brady Corporation Class A 100 4,075
Brookfield Homes Corporation 1,300 33,501
Brush Engineered Materials, 1,200 18,372
Inc.*
Buckeye Technologies, Inc.* 2,400 24,120
Building Materials Holding 1,100 17,083
Corporation
Calgon Carbon Corporation 3,100 19,251
Cambrex Corporation 1,700 42,942
Caraustar Industries, Inc.* 58,100 801,780
Carpenter Technology 1,800 53,226
Corporation
Centex Construction 600 36,162
Products, Inc.
Century Aluminum Co.* 1,100 20,911
Chesapeake Corporation 8,600 227,728
Chicago Bridge & Iron Co. NV 13,100 378,590
CIRCOR International, Inc. 13,600 327,760
CLARCOR, Inc. 200 8,820
Cleveland-Cliffs, Inc.* 300 15,285
Commercial Metals Co. 79,600 2,419,840
Corn Products International, 3,300 113,685
Inc.
Crompton Corporation 3,900 27,963
Crown Holdings, Inc.* 14,900 134,994
Cytec Industries, Inc.* 22,000 844,580
Delta & Pine Land Co. 1,100 27,940
Deltic Timber Corporation 900 27,360
Dycom Industries, Inc.* 19,800 531,036
ElkCorp 100 2,670
EMCOR Group, Inc.* 5,600 245,840
Encore Wire Corporation* 400 7,084
Energy Conversion Devices, 200 1,806
Inc.*
Engelhard Corporation 32,900 985,355
Ennis Business Forms, Inc. 1,100 16,830
Ethyl Corporation* 1,300 28,431
Ferro Corporation 47,400 1,289,754
Georgia Gulf Corporation 900 25,992
Gibraltar Steel Corporation 400 10,060
Glatfelter 2,600 32,370
Grace (W.R.) & Co.* 5,900 15,163
GrafTech International, 5,600 75,600
Ltd.*
Granite Construction, Inc. 3,000 70,470
Great Lakes Chemical 21,000 570,990
Corporation
Greif, Inc. Class A 29,400 1,043,994
Griffon Corporation* 2,200 44,572
H.B. Fuller Co. 33,200 987,368
</Table>
See Notes to Financial Statements.
111
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
Hecla Mining Co.* 4,900 $ 40,621
Hercules, Inc.* 10,400 126,880
Hughes Supply, Inc. 2,100 104,202
Insituform Technolgies, Inc. 1,700 28,050
Class A*
Integrated Electical 1,000 9,250
Services, Inc.*
Interface, Inc. Class A* 3,900 21,567
Intertape Polymer Group, 21,800 277,514
Inc.*
Jones Lang LaSalle, Inc.* 2,800 58,044
Kaydon Corporation 12,800 330,752
Kronos Worldwide, Inc.* 100 2,220
Lennox International, Inc. 41,600 694,720
Liquidmetal Technologies, 400 1,136
Inc.*
LNR Property Corporation 18,800 930,788
Lone Star Technologies, 66,900 1,069,062
Inc.*
Longview Fibre Co. 4,600 56,810
Louisiana-Pacific 66,700 1,192,596
Corporation*
LSI Industries, Inc. 1,475 19,913
Lydall, Inc.* 700 7,133
MacDermid, Inc. 24,100 825,184
Material Sciences 700 7,077
Corporation*
Maverick Tube Corporation* 27,800 535,150
Mestek, Inc.* 300 5,778
Millennium Chemicals, Inc. 5,700 72,276
Minerals Technologies, Inc. 1,600 94,800
Mobile Mini, Inc.* 22,900 451,588
Modtech Holdings, Inc.* 300 2,523
Mueller Industries, Inc.* 2,300 79,028
Myers Industries, Inc. 1,775 21,513
NCI Building Systems, Inc.* 1,500 35,850
New England Business 600 17,700
Service, Inc.
NL Industries, Inc. 300 3,510
NN, Inc. 500 6,295
Noland Co. 100 4,150
NS Group, Inc.* 1,200 11,640
Octel Corporation 900 17,721
Olin Corporation 1,720 34,503
OM Group, Inc.* 6,000 157,140
Omnova Solutions, Inc.* 3,000 14,400
Owens-Illinois, Inc.* 38,400 456,576
Penn Engineering & 900 17,127
Manufacturing Corporation
Perini Corporation* 1,500 13,725
PolyOne Corporation 8,300 53,037
Pope & Talbot, Inc. 1,400 24,654
Potlatch Corporation 2,400 83,448
Quaker Chemical Corporation 200 6,150
Quanex Corporation 12,700 585,470
Quanta Services, Inc.* 6,600 48,180
Reliance Steel & Aluminum 2,200 73,062
Co.
Rock-Tenn Co. Class A 2,200 37,972
RPM International, Inc. 33,600 553,056
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
RTI International Metals, 1,700 $ 28,679
Inc.*
Ryerson Tull, Inc. 700 8,015
Schnitzer Steel Industries, 900 54,450
Inc. Class A
Schulman (A.), Inc. 19,600 417,872
Shaw Group, Inc. (The)* 5,200 70,824
Silgan Holdings, Inc.* 300 12,777
Spartech Corporation 30,700 756,448
Standard Register Co. 62,700 1,055,241
Steel Dynamics, Inc.* 39,700 932,553
Stepan Co. 500 12,825
Stillwater Mining Co.* 4,000 38,280
Tarragon Realty Investors, 500 8,255
Inc. REIT*
Texas Industries, Inc. 1,900 70,300
Timken Co. 16,000 320,960
Trammell Crow Co.* 2,800 37,100
Tredegar Corporation 2,200 34,166
Unifi, Inc.* 3,700 23,865
Universal Forest Products, 1,400 45,052
Inc.
URS Corporation* 1,400 35,014
USEC, Inc. 7,400 62,160
USG Corporation* 3,300 54,681
Valence Technology, Inc.* 2,900 11,165
Valhi, Inc. 2,440 36,502
Valmont Industries, Inc. 1,300 30,095
Washington Group 2,300 78,131
International, Inc.*
Watsco, Inc. 33,900 770,547
Wausau-Mosinee Paper 400 5,408
Corporation
WCI Communities, Inc.* 42,300 871,803
WD-40 Co. 500 17,680
Wellman, Inc. 65,400 667,734
Wilson Greatbatch 9,400 397,338
Technologies, Inc.*
Worthington Industries, Inc. 17,900 322,737
York International 3,300 121,440
Corporation
-------------
31,732,691
-------------
OTHER -- 0.5%
Brunswick Corporation 14,300 455,169
FMC Corporation* 3,200 109,216
GenCorp, Inc. 2,800 30,156
Jacuzzi Brands, Inc.* 25,300 179,377
Kaman Corporation Class A 23,000 292,790
Ritchie Bros. Auctioneers, 8,600 456,660
Inc.
Sequa Corporation Class A* 300 14,700
SPX Corporation* 8,900 523,409
Trinity Industries, Inc. 3,200 98,688
United Capital Corporation* 100 2,072
Walter Industries, Inc. 2,500 33,375
-------------
2,195,612
-------------
OTHER ENERGY -- 5.6%
Arch Coal, Inc. 3,300 102,861
Atwood Oceanics, Inc.* 13,100 418,414
</Table>
See Notes to Financial Statements.
112
<Table>
<Caption>
SHARES VALUE
----------- -------------
Berry Petroleum Co. Class A 10,000 $ 202,500
Brown (Tom), Inc.* 26,200 844,950
Cabot Oil & Gas Corporation 1,000 29,350
Cal Dive International, 12,200 294,142
Inc.*
Chesapeake Energy 14,900 202,342
Corporation
Cimarex Energy Co.* 3,800 101,422
Comstock Resources, Inc.* 1,600 30,880
Denbury Resources, Inc.* 30,800 428,428
Dril-Quip, Inc.* 600 9,780
Encore Acquisition Co.* 800 19,720
Energy Partners, Ltd.* 1,900 26,410
Evergreen Resources, Inc.* 19,700 640,447
Forest Oil Corporation* 57,100 1,631,346
Frontier Oil Corporation 400 6,888
FuelCell Energy, Inc.* 600 7,800
Global Industries, Ltd.* 6,400 32,960
Global Power Equipment 1,800 12,024
Group, Inc.*
Grant Prideco, Inc.* 19,000 247,380
Grey Wolf, Inc.* 74,700 279,378
Hanover Compressor Co.* 2,700 30,105
Harvest Natural Resources, 32,000 318,400
Inc.*
Helmerich & Payne, Inc. 42,100 1,175,853
Holly Corporation 100 2,750
Horizon Offshore, Inc.* 2,300 10,120
Houston Exploration Co.* 12,100 441,892
Hydril Co.* 15,100 361,343
Input/Output, Inc.* 4,000 18,040
Key Energy Services, Inc.* 36,950 380,955
KFX, Inc.* 600 4,530
Lufkin Industries, Inc. 500 14,395
Magnum Hunter Resources, 66,200 629,562
Inc.
Massey Energy Co. 37,700 784,160
Matrix Service Co.* 1,400 25,410
McMoRan Exploration Co.* 700 13,125
Meridian Resource 3,700 21,978
Corporation*
National-Oilwell, Inc.* 60,200 1,346,072
Newpark Resources, Inc.* 500 2,395
Nuevo Energy Co.* 38,800 937,796
Oceaneering International, 26,800 750,400
Inc.*
Oil States International, 700 9,758
Inc.*
Parker Drilling Co.* 7,800 19,890
Patina Oil & Gas Corporation 14,300 700,557
Patterson-UTI Energy, Inc.* 14,600 480,632
Penn Virginia Corporation 100 5,565
Petroleum Development 1,400 33,180
Corporation*
Plains Exploration & 2,420 37,244
Production Co.*
Range Resources Corporation 49,300 465,885
Reliant Resources, Inc.* 67,500 496,800
Resource America, Inc. Class 900 13,500
A
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Seacor Smit, Inc.* 1,500 $ 63,045
Spinnaker Exploration Co.* 2,200 70,994
St. Mary Land & Exploration 1,500 42,750
Co.
Stone Energy Corporation* 2,000 84,900
Sunoco, Inc. 28,800 1,473,120
Superior Energy Services, 41,800 392,920
Inc.*
Swift Energy Co.* 34,800 586,380
Tesoro Petroleum 74,000 1,078,180
Corporation*
Tetra Technologies, Inc.* 18,050 437,532
Texas Genco Holdings, Inc. 19,200 624,000
Transmontaigne, Inc.* 1,600 10,320
Universal Compression 1,500 39,240
Holdings, Inc.*
Varco International, Inc.* 21,000 433,230
Veritas DGC, Inc.* 37,700 395,096
Vintage Petroleum, Inc. 56,800 683,304
W-H Energy Services, Inc.* 69,300 1,122,660
-------------
22,639,385
-------------
PRODUCER DURABLES -- 8.5%
Actuant Corporation Class A* 1,900 68,780
Advanced Energy Industries, 43,600 1,135,780
Inc.*
Alamo Group, Inc. 500 7,630
American Tower Corporation 33,400 361,388
Class A*
Andrew Corporation* 8,177 94,117
Applied Films Corporation* 400 13,208
Applied Industrial 1,500 35,790
Technologies, Inc.
Arris Group, Inc.* 141,300 1,023,012
Artesyn Technologies, Inc.* 2,500 21,300
Astec Industries, Inc.* 1,300 15,951
Asyst Technologies, Inc.* 13,600 235,960
ATMI, Inc.* 13,800 319,332
Audiovox Corporation Class 500 6,420
A*
Axcelis Technologies, Inc.* 85,900 877,898
Beazer Homes USA, Inc. 9,100 888,706
Belden, Inc. 2,000 42,180
BHA Group Holdings, Inc. 400 10,060
Blount International, Inc. 200 1,574
Class A*
Briggs & Stratton 13,100 882,940
Corporation
Brooks Automation, Inc.* 14,600 352,882
C & D Technologies, Inc. 1,300 24,921
C-COR.net Corporation* 400 4,452
Cable Design Technologies 1,600 14,384
Corporation*
Cascade Corporation 900 20,070
Cohu, Inc. 54,800 1,049,420
Credence Systems 33,700 443,492
Corporation*
CTS Corporation 89,900 1,033,850
CUNO, Inc.* 100 4,503
Curtiss-Wright Corporation 1,500 67,515
Cymer, Inc.* 19,400 896,086
Dominion Homes, Inc.* 300 9,099
</Table>
See Notes to Financial Statements.
113
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
Ducommun, Inc.* 600 $ 13,410
DuPont Photomasks, Inc.* 1,100 26,554
Electro Scientific 2,500 59,500
Industries, Inc.*
Enpro Industries, Inc.* 1,800 25,110
ESCO Technologies, Inc.* 400 17,460
Esterline Technologies 1,900 50,673
Corporation*
Fairchild Corporation Class 1,000 5,040
A*
Federal Signal Corporation 31,200 546,624
FEI Co.* 23,900 537,750
Flowserve Corporation* 4,200 87,696
Franklin Electric Co., Inc. 200 12,098
Gardner Denver, Inc.* 1,400 33,418
General Cable Corporation* 700 5,705
Genlyte Group, Inc.* 1,000 58,380
Gorman-Rupp Co. 600 15,840
Graco, Inc. 6,500 260,650
Gundle SLT Enviromental, 500 10,380
Inc.*
Heico Corporation 1,000 18,200
HON Industries, Inc. 19,400 840,408
Hovnanian Enterprises, Inc. 6,900 600,714
Class A*
IDEX Corporation 18,400 765,256
Imagistics International, 23,800 892,500
Inc.*
Intevac, Inc.* 30,200 426,122
Ionics, Inc.* 1,600 50,960
JLG Industries, Inc. 44,600 679,258
Joy Global, Inc.* 8,500 222,275
Kadant, Inc.* 500 10,825
KB HOME 16,300 1,182,076
Keithley Instruments, Inc. 100 1,830
Kennametal, Inc. 3,000 119,250
Kimball International, Inc. 70,200 1,091,610
Class B
Lincoln Electric Holdings, 2,600 64,324
Inc.
Lindsay Manufacturing Co. 100 2,525
Littelfuse, Inc.* 200 5,764
LTX Corporation* 59,600 895,788
Manitowoc Co., Inc. 2,000 62,400
Mastec, Inc.* 1,800 26,658
MDC Holdings, Inc. 13,500 870,750
Meritage Corporation* 7,500 497,325
Metrologic Instruments, 200 5,400
Inc.*
Mettler Toledo 23,800 1,004,598
International, Inc.*
Milacron, Inc. 3,100 12,927
Mine Safety Appliances Co. 600 47,706
MKS Instruments, Inc.* 400 11,600
Moog, Inc. Class A* 1,600 79,040
MTC Technologies, Inc.* 17,200 554,184
MTS Systems Corporation 1,400 26,922
Mykrolis Corporation* 25,100 403,608
NACCO Industries, Inc. Class 7,900 706,892
A
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Nordson Corporation 600 $ 20,718
Orbital Sciences 48,600 584,172
Corporation*
Orleans Homebuilders, Inc.* 100 2,833
Palm Harbor Homes, Inc.* 5,300 94,711
Paxar Corporation* 25,200 337,680
Photon Dynamics, Inc.* 13,400 539,216
Photronics, Inc.* 52,100 1,037,832
Plantronics, Inc.* 47,200 1,541,080
Polycom, Inc.* 38,200 745,664
Powell Industries, Inc.* 600 11,490
Powerwave Technologies, 1,300 9,945
Inc.*
Rayovac Corporation* 12,200 255,590
Regal-Beloit Corporation 16,000 352,000
Robbins & Myers, Inc. 1,000 18,990
Rofin-Sinar Technologies, 900 31,104
Inc.*
Roper Industries, Inc. 3,600 177,336
Rudolph Technologies, Inc.* 100 2,454
Ryland Group, Inc. 12,900 1,143,456
SBA Communications 1,600 6,048
Corporation*
Semitool, Inc.* 1,000 10,721
Skyline Corporation 500 17,435
Smith (A.O.) Corporation 1,300 45,565
Sonic Solutions* 11,400 174,420
Standard-Pacific Corporation 16,600 805,930
Standex International 1,000 28,000
Corporation
Stewart & Stevenson 2,200 30,910
Services, Inc.
Symmetricom, Inc.* 1,300 9,464
Technical Olympic USA, Inc.* 200 5,506
Technitrol, Inc.* 3,400 70,516
Tecumseh Products Co. Class 1,500 72,645
A
Teledyne Technologies, Inc.* 34,400 648,440
Tennant Co. 400 17,320
Terayon Communication 5,900 26,550
Systems, Inc.*
Terex Corporation* 4,000 113,920
Thomas & Betts Corporation 3,600 82,404
Thomas Industries, Inc. 900 31,194
Tollgrade Communications, 100 1,753
Inc.*
TRC Cos., Inc.* 300 6,318
Triumph Group, Inc.* 1,300 47,320
Ultratech, Inc.* 8,200 240,834
United Defense Industries, 24,900 793,812
Inc.*
United Industrial 12,800 231,040
Corporation
Veeco Instruments, Inc.* 300 8,460
Vicor Corporation* 200 2,282
Watts Water Technologies, 1,200 26,640
Inc. Class A
William Lyon Homes, Inc.* 400 25,108
Woodhead Industries, Inc. 500 8,450
</Table>
See Notes to Financial Statements.
114
<Table>
<Caption>
SHARES VALUE
----------- -------------
Woodward Governor Co. 800 $ 45,464
Zygo Corporation* 1,400 23,086
-------------
34,472,509
-------------
TECHNOLOGY -- 14.0%
@Road, Inc.* 14,750 196,175
ActivCard Corporation* 2,900 22,852
Acxiom Corporation* 17,000 315,690
Adaptec, Inc.* 9,000 79,470
Adtran, Inc. 9,000 279,000
Aeroflex, Inc.* 22,052 257,788
Aether Systems, Inc.* 1,800 8,550
Agile Software Corporation* 39,300 389,070
Agilysys, Inc. 2,500 27,875
Alliance Semiconductor 2,000 14,220
Corporation*
Altiris, Inc.* 34,600 1,262,208
American Management Systems, 76,600 1,154,362
Inc.*
Analogic Corporation 600 24,600
Anaren, Inc.* 1,100 15,532
Anixter International, Inc.* 36,100 934,268
Anteon International 15,700 565,985
Corporation*
Arrow Electronics, Inc.* 23,500 543,790
Ascential Software 2,600 67,418
Corporation*
ASE Test, Ltd.* 30,850 461,825
Asiainfo Holdings, Inc.* 800 5,344
Aspen Technology, Inc.* 200 2,052
Autodesk, Inc. 52,200 1,283,076
Avid Technology, Inc.* 6,100 292,800
Avnet, Inc.* 47,900 1,037,514
Avocent Corporation* 5,400 197,208
Bel Fuse, Inc. Class B 800 26,104
Benchmark Electronics, Inc.* 2,200 76,582
Black Box Corporation 15,800 727,906
Borland Software 120,800 1,175,384
Corporation*
Business Objects SA ADR* 8,000 277,360
CACI International, Inc. 6,400 311,168
Class A*
Ceva, Inc.* 700 7,280
ChipPAC, Inc. Class A* 40,700 308,913
CIBER, Inc.* 2,100 18,186
Cirrus Logic, Inc.* 2,700 20,709
Citrix Systems, Inc.* 24,800 526,008
Cognizant Technology 7,150 326,326
Solutions Corporation*
Cognos, Inc.* 6,100 186,782
Coherent, Inc.* 1,200 28,560
CommScope, Inc.* 37,400 610,742
CompuCom Systems, Inc.* 2,100 11,004
Computer Horizons 2,700 10,611
Corporation*
Computer Network Technology 73,300 699,282
Corporation*
Corvis Corporation* 9,300 15,810
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Creo, Inc.* 44,100 $ 454,230
CSG Systems International, 45,600 569,544
Inc.*
Cubic Corporation 700 16,100
Cypress Semiconductor 44,000 939,840
Corporation*
Digital River, Inc.* 12,200 269,620
Digitalnet Holding, Inc.* 13,700 267,150
Ditech Communications 2,500 47,750
Corporation*
DRS Technologies, Inc.* 2,241 62,255
DSP Group, Inc.* 9,200 229,172
E.piphany, Inc.* 3,600 25,956
EDO Corporation 1,000 24,650
Electronics for Imaging, 23,150 602,363
Inc.*
Elron Electronic Industries* 21,400 242,612
Embarcadero Technologies, 20,700 330,165
Inc.*
EMS Technologies, Inc.* 900 18,486
Emulex Corporation* 22,900 610,972
Entrust, Inc.* 600 2,448
Epicor Software Corporation* 22,400 285,824
Equinix, Inc.* 11,100 313,020
ESS Technology, Inc.* 2,500 42,525
Exar Corporation* 1,500 25,620
Extreme Networks, Inc.* 2,900 20,909
F5 Networks, Inc.* 9,700 243,470
Filenet Corporation* 13,600 368,288
Finisar Corporation* 3,900 12,207
FLIR Systems, Inc.* 7,500 273,750
Formfactor, Inc.* 10,500 207,900
Gartner, Inc. Class A* 6,200 70,122
Gartner, Inc. Class B* 50,000 544,000
Gateway, Inc.* 19,600 90,160
Genesis Microchip, Inc.* 300 5,412
Gerber Scientific, Inc.* 1,900 15,124
Herley Industries, Inc.* 800 16,560
Hummingbird, Ltd.* 19,100 411,605
Hutchinson Technology, Inc.* 200 6,148
Identix, Inc.* 1,100 4,895
iGate Corporation* 1,800 14,130
Inet Technolgies, Inc.* 57,100 685,200
InFocus Corporation* 3,400 32,912
Infonet Services Corporation 6,200 10,540
Class B*
Informatica Corporation* 96,700 996,010
Ingram Micro, Inc. Class A* 28,400 451,560
Integrated Circuit Systems, 39,100 1,113,959
Inc.*
Integrated Silicon 2,500 39,175
Solutions, Inc.*
Intergraph Corporation* 300 7,176
Interland, Inc.* 1,240 8,097
Intermagnetics General 600 13,296
Corporation*
</Table>
See Notes to Financial Statements.
115
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
International Rectifier 10,100 $ 499,041
Corporation*
Internet Security Systems, 13,400 252,322
Inc.*
Interwoven, Inc.* 24,475 309,364
Invision Technologies Inc* 10,500 352,485
Iomega Corporation* 3,000 17,940
IXYS Corporation* 28,600 267,410
JDA Software Group, Inc.* 2,000 33,020
Keane, Inc.* 1,600 23,424
Kemet Corporation* 7,800 106,782
Keynote Systems, Inc.* 500 5,950
Komag, Inc.* 1,000 14,630
Lattice Semiconductor 78,300 757,944
Corporation*
Lawson Software, Inc.* 64,800 533,304
Lexar Media, Inc.* 19,000 331,170
Lionbridge Technologies, 22,600 217,186
Inc.*
Macromedia, Inc.* 43,800 781,392
Macrovision Corporation* 32,600 736,434
Magma Design Automation, 19,000 443,460
Inc.*
Mantech International 21,000 523,950
Corporation Class A*
Manufacturers' Services, 600 3,648
Ltd.*
Manugistics Group, Inc.* 1,800 11,250
MatrixOne, Inc.* 67,300 414,568
Mentor Graphics Corporation* 600 8,724
Mercury Computer Systems, 27,200 677,280
Inc.*
Methode Electronics, Inc. 2,600 31,798
Class A
Micrel, Inc.* 24,100 375,478
Microsemi Corporation* 18,700 459,646
MicroStrategy, Inc. Class A* 4,350 228,288
Mindspeed Technologies, 2,000 13,700
Inc.*
MRO Software, Inc.* 200 2,692
MRV Communications, Inc.* 9,400 35,344
MSC.Software Corporation* 1,400 13,230
National Instruments 27,700 1,259,519
Corporation
NCR Corporation* 12,500 485,000
Net2Phone, Inc.* 900 6,120
NETIQ Corporation* 4,800 63,600
Netscout Systems, Inc.* 600 4,560
NetScreen Technologies, 19,900 492,525
Inc.*
Network Equipment 1,100 12,100
Technologies, Inc.*
New Focus, Inc.* 58,500 293,670
Newport Corporation* 2,900 47,937
NU Horizons Electronics 56,950 558,110
Corporation*
NYFIX, Inc.* 700 5,565
Omnivision Technologies, 8,000 442,000
Inc.*
Oplink Communications, Inc.* 3,500 8,365
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
Optical Communication 500 $ 1,850
Products, Inc.*
OSI Systems, Inc.* 600 11,526
Palmone, Inc.* 1,475 17,331
Palmsource, Inc.* 495 10,786
Parametric Technology 2,000 7,880
Corporation*
Park Electrochemical 1,200 31,788
Corporation
Pegasystems, Inc.* 100 862
Pemstar, Inc.* 1,100 3,619
Pericom Semiconductor 1,900 20,254
Corporation*
Perot Systems Corporation 2,700 36,396
Class A*
Pinnacle Systems, Inc.* 16,100 137,333
Pixelworks, Inc.* 26,600 293,664
Plexus Corporation* 1,400 24,038
Pomeroy IT Solutions, Inc.* 900 13,266
Power Intergrations, Inc.* 5,400 180,684
ProcureNet, Inc.*+ 7,600 0
Quantum Corporation* 7,100 22,152
Radisys Corporation* 1,600 26,976
Radware, Ltd.* 13,300 362,425
Redback Networks, Inc.* 13,800 3,188
REMEC, Inc.* 83,500 702,235
RF Micro Devices, Inc.* 41,300 415,065
Richardson Electronics, Ltd. 600 7,374
Roxio, Inc.* 2,500 11,975
Safeguard Scientifics, Inc.* 165,700 669,428
SafeNet, Inc.* 24,400 750,788
Sanmina-SCI Corporation* 77,100 972,231
SBS Technologies, Inc.* 1,100 16,181
Scientific-Atlanta, Inc. 40,000 1,092,000
Seebeyond Technology 131,000 561,990
Corporation*
Semtech Corporation* 34,900 793,277
Serena Software, Inc.* 53,050 973,468
Silicon Graphics, Inc.* 18,400 25,208
Silicon Storage Technology, 2,400 26,400
Inc.*
Siliconix, Inc.* 300 13,710
Simpletech, Inc.* 300 1,803
Sipex Corporation* 2,100 16,191
Skyworks Solutions, Inc.* 187,100 1,627,769
SonicWALL, Inc.* 3,800 29,640
SRA International, Inc. 8,800 379,280
Class A*
Standard Microsystems 23,400 592,020
Corporation*
Stellent, Inc.* 900 8,856
Supertex, Inc.* 23,200 443,120
Support.Com, Inc.* 11,700 153,855
Sybase, Inc.* 38,700 796,446
Sycamore Networks, Inc.* 5,500 28,820
SYKES Enterprises, Inc.* 1,700 14,552
Synplicity, Inc.* 400 3,132
</Table>
See Notes to Financial Statements.
116
<Table>
<Caption>
SHARES VALUE
----------- -------------
Sypris Solutions, Inc. 400 $ 6,724
Systems & Computer 3,000 49,050
Technology Corporation*
Talx Corporation 200 4,606
Tekelec* 31,400 488,270
Three-Five Systems, Inc.* 700 3,668
TIBCO Software, Inc.* 151,200 1,023,624
Tier Technologies, Inc.* 1,300 10,621
Trident Microsystems, Inc.* 13,800 240,396
Trimble Navigation, Ltd.* 11,100 413,364
Triquint Semiconductor, 4,700 33,229
Inc.*
TTM Technologies, Inc.* 21,800 367,984
Tyler Technologies, Inc.* 300 2,889
Ulticom, Inc.* 54,300 523,995
UNOVA, Inc.* 4,200 96,390
Vastera, Inc.* 400 1,600
Verisity, Ltd.* 124,200 1,583,550
Verity, Inc.* 77,200 1,288,468
Verso Technologies, Inc.* 2,900 9,280
Viasat, Inc.* 400 7,656
Virage Logic Corporation* 200 2,034
WatchGuard Technologies, 1,000 5,820
Inc.*
White Electronics Designs 100 880
Corporation*
Wind River Systems, Inc.* 2,400 21,024
Zhone Technologies, Inc.* 925 4,570
Zoran Corporation* 17,200 299,108
-------------
56,829,853
-------------
UTILITIES -- 3.5%
Allegheny Energy, Inc.* 11,400 145,464
American States Water Co. 1,400 35,000
Aquila, Inc.* 16,600 56,274
Atmos Energy Corporation 4,500 109,350
Avista Corporation 35,500 643,260
Black Hills Corporation 2,900 86,507
California Water Service 1,100 30,140
Group
Cascade Natural Gas 1,000 21,090
Corporation
Central Vermont Public 1,100 25,850
Service Corporation
CH Energy Group, Inc. 1,300 60,970
Chesapeake Utilities 500 13,025
Corporation
Cincinnati Bell, Inc.* 68,600 346,430
Citizens Communications Co.* 21,800 270,756
Cleco Corporation 4,000 71,920
CMS Energy Corporation 13,700 116,724
Connecticut Water Service, 400 11,060
Inc.
CT Communications, Inc. 1,300 17,550
D & E Communications, Inc. 1,200 17,412
Dobson Communications 76,700 503,919
Corporation*
</Table>
<Table>
<Caption>
SHARES VALUE
----------- -------------
El Paso Electric Co.* 4,400 $ 58,740
Empire District Electric Co. 2,000 43,860
Energen Corporation 23,300 955,999
Energy East Corporation 24,800 555,520
EnergySouth, Inc. 400 14,000
General Communication, Inc. 4,000 34,800
Class A*
Hickory Tech Corporation 100 1,145
Idacorp, Inc. 3,500 104,720
Laclede Group, Inc. 1,700 48,535
McLeodUSA, Inc. Class A* 5,200 7,696
Middlesex Water Co. 633 12,850
New Jersey Resources 1,800 69,318
Corporation
NII Holdings, Inc. Class B* 6,950 518,679
Northeast Utilities 39,000 786,630
Northwest Natural Gas Co. 2,300 70,725
NSTAR 11,400 552,900
NUI Corporation 41,700 672,204
Oneok, Inc. 41,400 914,112
Otter Tail Corporation 1,700 45,441
PNM Resources, Inc. 19,100 536,710
Price Communications 3,600 49,428
Corporation*
Primus Telecommunications 60,900 619,962
Group, Inc.*
RCN Corporation* 1,700 1,360
SEMCO Energy, Inc. 2,500 12,250
Shenandoah 100 5,126
Telecommunications Co.
Sierra Pacific Resources* 10,600 77,804
SJW Corporation 200 17,850
South Jersey Industries, 1,100 44,550
Inc.
Southern Union Co.* 32,805 603,612
Southwest Gas Corporation 2,700 60,615
Southwest Water Co. 800 12,840
Southwestern Energy Co.* 38,900 929,710
Spectrasite, Inc.* 15,200 528,200
SureWest Communications 100 4,042
Time Warner Telecom, Inc. 3,600 36,468
Class A*
UIL Holdings Corporation 1,100 49,610
Unisource Energy Corporation 24,900 614,034
Westar Energy, Inc. 52,600 1,065,149
Western Wireless Corporation 16,700 306,612
Class A*
Wisconsin Energy Corporation 19,900 665,655
-------------
14,292,162
-------------
TOTAL COMMON STOCK
(Cost $314,514,055) 386,580,119
-------------
</Table>
See Notes to Financial Statements.
117
SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- -------------
SHORT-TERM INVESTMENTS -- 30.6%
AB Funds Trust -- Money 18,420,795 $ 18,420,795
Market Fund (Retirement
Class)(inf)
Northern Institutional 105,886,727 105,886,727
Liquid Assets Portfolio
sec.
-------------
TOTAL SHORT-TERM INVESTMENTS
124,307,522
(Cost $124,307,522)
-------------
<Caption>
PAR VALUE
----------- -------------
U.S. TREASURY OBLIGATIONS -- 0.5%
U.S. Treasury Bills
0.86%, 01/22/04++++ $ 250,000 249,875
0.89%, 01/22/04++++ 1,450,000 1,449,288
0.93%, 01/22/04++++ 130,000 129,936
0.94%, 01/22/04++++ 85,000 84,958
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,914,004) 1,914,057
-------------
<Caption>
SHARES
-----------
MUTUAL FUNDS -- 0.4%
IShares Russell 2000 13,375 $ 1,481,950
IShares Russell 2000 Value 130 20,852
-------------
TOTAL MUTUAL FUNDS
(Cost $1,194,263) 1,502,802
-------------
RIGHTS -- 0.0%
FINANCIAL SERVICES
Leucadia National 700 0
Corporation*
(Cost $0)
-------------
TOTAL INVESTMENTS -- 126.8%
(Cost $441,929,844) 514,304,500
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (26.8%) (108,667,279)
-------------
NET ASSETS -- 100.0% $ 405,637,221
=============
</Table>
See Notes to Financial Statements.
118
INTERNATIONAL EQUITY FUND
International equity markets produced solid returns in the fourth quarter as
investors reacted positively to strong corporate earnings and signs of
sustainable economic recovery in Europe and Japan. Currency movements also
contributed as the U.S. dollar weakened against most major currencies. Developed
international stocks outperformed U.S. stocks during the quarter as the MSCI
EAFE(R) Index advanced 17.08%, while its domestic equity counterpart, the S&P
500(R) Index, returned 12.18%. For the year, the MSCI EAFE(R) Index gained
38.59%, while the S&P 500(R) Index increased 28.71%. All sectors within the MSCI
EAFE(R) Index posted double-digit gains for the quarter, with the materials
sector generating the highest return. Once again, emerging markets outperformed
the developed world as the MSCI Emerging Markets Free(R) Index returned 17.78%
for the quarter and 55.82% for the year.
The fund is primarily comprised of international stocks located in developed
countries, and to a much lesser extent, in international stocks located in
emerging markets (economies not deemed to be developed).(1) The fund
underperformed its benchmark, the MSCI ACWI(R) Free ex-U.S., during the fourth
quarter. Overweight exposure and security selection in the information
technology sector detracted from benchmark-relative performance. Security
selection in the consumer discretionary sector also dampened relative returns.
At the sub-adviser level, Delaware delivered the strongest benchmark-relative
performance largely due to its security selection in the industrials and
financials sectors. Genesis outperformed the MSCI Emerging Markets Free(R) Index
primarily as a result of its overweight exposure in the utilities sector and
underweight exposure in the information technology sector.
- ---------------
(1) Foreign securities may involve additional risks, social and political
instability, reduced market liquidity and currency volatility.
Not Part of the Annual Report
119
INTERNATIONAL EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03
- --------------------------------------------------------------------------------
<Table>
<Caption>
RETIREMENT INSTITUTIONAL MSCI AC WORLD
CLASS* CLASS* RETAIL CLASS* FREE EX-U.S. INDEX**
---------- ------------- ------------- --------------------
One Year 35.81% 36.06% 35.47% 40.83%
Since Inception (8/27/01 -- 12/31/03) 5.77% 5.93% 5.16% 5.39%
</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.
[LINE GRAPH]
<Table>
<Caption>
MSCI ALL COUNTRY WORLD FREE EX-
RETIREMENT CLASS U.S. INDEX**
---------------- -------------------------------
8/27/01 10000.00 10000.00
8/31/01 9777.00 9707.00
9/30/01 8731.00 8675.00
10/31/01 9014.00 8918.00
11/30/01 9460.00 9325.00
12/31/01 9539.00 9445.00
1/31/02 9203.00 9039.00
2/28/02 9375.00 9104.00
3/31/02 9891.00 9594.00
4/30/02 9994.00 9651.00
5/31/02 10149.00 9748.00
6/30/02 9728.00 9324.00
7/31/02 8773.00 8414.00
8/31/02 8765.00 8413.00
9/30/02 7939.00 7519.00
10/31/02 8274.00 7922.00
11/30/02 8541.00 8302.00
12/31/02 8400.00 8033.00
1/31/03 8061.00 7750.00
2/28/03 7887.00 7592.00
3/31/03 7687.00 7439.00
4/30/03 8348.00 8148.00
5/31/03 8870.00 8661.00
6/30/03 9148.00 8895.00
7/30/03 9426.00 9131.00
8/31/03 9731.00 9401.00
9/30/03 9913.00 9663.00
10/31/03 10487.00 10288.00
11/30/03 10652.00 10511.00
12/31/03 11408.00 11313.00
</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 Morgan Stanley Capital
International All Country World Free ex-U.S. 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 Morgan Stanley Capital International All Country World Free ex-U.S. Index
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 Annual Report
120
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
<Table>
<Caption>
DECEMBER 31, 2003 PAR VALUE
- ----------------- ----------- --------------
FOREIGN CONVERTIBLE BONDS -- 0.0%
SWITZERLAND
Credit Suisse Group
Finance, Ltd.
6.00%, 12/23/05 (S)
(Cost $165,694) 241,000 $ 265,212
--------------
<Caption>
SHARES
-----------
FOREIGN COMMON STOCK -- 96.8%
AUSTRALIA -- 4.4%
Alumina, Ltd. 98,500 487,593
Amcor, Ltd. 687,796 4,280,491
Australia and New Zealand
Banking Group, Ltd. 67,863 904,002
BHP Billiton, Ltd. 353,311 3,245,000
Brambles Industries, Ltd. 45,100 179,417
Coca-Cola Amatil, Ltd. 83,000 389,601
Coles Myer, Ltd. 822,970 4,687,698
Commonwealth Bank of
Australia 94,000 2,085,773
Lend Lease Corporation,
Ltd. 474,509 3,593,059
National Australia Bank,
Ltd. 221,340 4,994,714
Orica, Ltd. 201,526 2,119,680
QBE Insurance Group, Ltd. 73,327 585,630
Quantas Airways, Ltd. 656,700 1,627,859
Telstra Corporation, Ltd. 1,415,414 5,140,252
Wesfarmers, Ltd. 17,200 343,292
WMC Resources, Ltd.* 98,500 417,829
Woodside Petroleum, Ltd. 696,000 7,761,128
Woolworths, Ltd. 50,500 448,980
--------------
43,291,998
--------------
BELGIUM -- 1.3%
Colruyt NV 56,600 5,454,390
Electrabel SA 6,959 2,187,415
Fortis 62,300 1,252,601
UCB SA 107,900 4,068,026
--------------
12,962,432
--------------
BRAZIL -- 0.8%
Aracruz Celulose SA ADR 5,800 203,232
Banco Bradesco SA ADR 11,000 290,510
Banco Itau Holding
Financeira SA ADR 18,587 906,488
Brasil Telecom
Participacoes SA ADR 24,000 907,200
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar ADR 14,800 372,220
Companhia Vale do Rio Doce
ADR 25,500 1,313,505
Compania Paranaense de
Energia ADR* 15,600 74,412
Gerdau SA ADR 13,000 262,860
Petroleo Brasileiro SA --
Petrobras ADR 54,477 1,592,907
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Petroleo Brasileiro SA --
Petrobras (Preference
Shares) ADR 40,000 $ 1,066,400
Tele Norte Leste
Participacoes SA ADR 11,000 169,730
Telesp Celular
Participacoes SA ADR* 23,000 151,340
Votorantim Celulose ADR 4,000 125,400
--------------
7,436,204
--------------
CANADA -- 1.6%
Abitibi-Consolidated, Inc. 94,400 757,538
Alcan, Inc. 14,500 679,640
BCE, Inc. 37,200 831,944
Bombardier, Inc. Class B 312,100 1,321,097
Great-West Lifeco, Inc. 8,900 313,368
Inco, Ltd.* 16,000 639,505
InterOil Corporation NPV* 9,000 219,385
InterOil Corporation CDI* 90,000 210,212
Manulife Financial
Corporation 128,200 4,151,804
National Bank Of Canada 12,300 410,619
Suncor Energy, Inc. 27,400 689,108
Talisman Energy, Inc. 36,000 2,048,149
TELUS Corporation 50,500 945,715
Thomson Corporation (The) 66,200 2,410,558
--------------
15,628,642
--------------
CHILE -- 0.4%
AFP Provida SA ADR 40,000 1,128,400
Banco Santander Chile SA 5,000 118,900
Compania de
Telecomunicaciones de
Chile SA ADR 10,000 149,500
Distribucion y Servicio SA
ADR 25,200 520,632
Embotelladora Andina SA ADR
Class A 30,100 316,050
Embotelladora Andina SA ADR
Class B 40,000 438,400
Empresa Nacional de
Electricidad SA ADR* 4,000 46,800
Enersis SA ADR 17,000 125,120
Lan Chile SA ADR 42,000 735,000
--------------
3,578,802
--------------
CHINA -- 0.3%
Beijing Datang Power
Generation Co., Ltd.
Class H 176,000 125,818
China Life Insurance Co.,
Ltd. 298,000 243,740
Jiangsu Expressway Co.,
Ltd. Class H 1,434,100 761,974
Sinotrans, Ltd. Class H 1,957,000 882,258
Travelsky Technology, Ltd.
Class H 677,000 728,135
--------------
2,741,925
--------------
</Table>
See Notes to Financial Statements.
121
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- --------------
CROATIA -- 0.1%
Pliva DD GDR 61,400 $ 1,013,714
--------------
CZECH REPUBLIC -- 0.1%
Cesky Telecom AS GDR 15,500 175,844
Komercni Banka AS 3,429 322,911
--------------
498,755
--------------
DENMARK -- 0.5%
Novo-Nordisk AS Class B 127,100 5,178,176
TDC AS 4,200 151,546
--------------
5,329,722
--------------
ECUADOR -- 0.0%
La Cemento Nacional GDR 26,250 479,063
--------------
EGYPT -- 0.2%
MobiNil - Egyptian Mobile
Services 57,695 704,412
Orascom Construction
Industries 72,933 857,806
--------------
1,562,218
--------------
ESTONIA -- 0.1%
Hansabank, Ltd. 52,000 1,403,633
--------------
FINLAND -- 0.6%
Nokia OYJ 201,500 3,484,567
UPM-Kymmene OYJ 133,600 2,547,972
--------------
6,032,539
--------------
FRANCE -- 9.3%
Accor SA 20,000 905,651
Air Liquide SA 7,912 1,397,175
Assurances Generales de
France 27,100 1,471,905
Aventis SA 96,500 6,378,153
BNP Paribas SA 58,600 3,689,849
Bouygues SA 113,092 3,954,226
Carrefour SA 114,396 6,279,659
Compagnie de Saint-Gobain 122,200 5,982,066
Essilor International SA
Compagnie Generale
D'Optique 14,100 729,188
France Telecom SA 123,738 3,536,709
Groupe Danone 8,000 1,305,752
L'Oreal SA 77,063 6,318,233
Lafarge SA 31,680 2,821,150
Pinault-Printemps-Redoute
SA 34,998 3,383,699
Renault SA 28,800 1,987,084
Sanofi-Synthelabo SA 148,100 11,152,333
Schneider Electric SA 15,500 1,014,695
Societe BIC SA 14,600 674,753
Societe Generale Class A 81,300 7,178,355
Societe Television
Francaise 1 80,000 2,793,138
Thomson 40,970 871,801
Total SA 81,881 15,223,587
Valeo SA 36,307 1,454,020
Vivendi Universal SA 86,200 2,095,199
--------------
92,598,380
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
GERMANY -- 5.3%
Adidas-Salomon AG 16,165 $ 1,841,195
Allianz AG 40,543 5,117,991
BASF AG 48,993 2,754,929
Bayer AG 134,271 3,932,609
Bayerische Hypo-und
Vereinsbank AG 118,771 2,747,553
Bayerische Motoren Werke AG 91,853 4,257,818
Continental AG 51,300 1,945,751
DaimlerChrysler AG 35,000 1,633,451
Deutsche Bank AG 16,600 1,375,656
Deutsche Boerse AG 13,188 721,115
E.ON AG 32,600 2,127,553
Epcos AG 3,700 83,539
Infineon Technologies AG 38,900 540,714
Metro AG 51,100 2,252,706
Muenchener
Rueckversicherungs AG 9,900 1,200,288
RWE AG 129,160 5,110,683
SAP AG 8,000 1,343,592
SAP AG ADR 700 29,092
Schering AG 22,600 1,144,538
Siemens AG 78,131 6,257,970
ThyssenKrupp AG 25,300 500,064
Volkswagen AG 94,978 5,289,201
--------------
52,208,008
--------------
GHANA -- 0.2%
Ashanti Goldfields Co.,
Ltd. GDR* 184,100 2,400,664
--------------
GREECE -- 0.3%
Commercial Bank of Greece 10,600 266,337
Hellenic
Tellecommunications
Organization SA 130,000 1,718,466
Piraeus Bank SA 75,000 915,742
--------------
2,900,545
--------------
HONG KONG -- 3.9%
Cheung Kong Holdings, Ltd. 89,000 707,887
China Mobile (Hong Kong),
Ltd. 1,476,100 4,534,621
China Resources Power
Holdings Co.* 1,212,000 565,910
Citic Pacific, Ltd. 200,000 510,073
CLP Holdings, Ltd. 1,150,000 5,480,705
CNOOC, Ltd. 1,243,500 2,434,592
Hang Lung Properties, Ltd. 423,000 542,126
Hang Seng Bank, Ltd. 37,600 493,998
Hong Kong & China Gas Co.,
Ltd. 4,850,000 7,402,815
Hongkong Electric Holdings,
Ltd. 552,500 2,184,779
Hongkong Land Holdings,
Ltd. 283,000 481,100
Hutchison Whampoa, Ltd. 261,000 1,924,655
Jardine Matheson Holdings,
Ltd. 263,600 2,398,760
</Table>
See Notes to Financial Statements.
122
<Table>
<Caption>
SHARES VALUE
----------- --------------
Johnson Electric Holdings,
Ltd. 542,000 $ 691,148
Legend Group, Ltd. 558,000 238,981
Li & Fung, Ltd. 516,000 883,971
Shangri-La Asia, Ltd. 463,000 435,352
Sun Hung Kai Properties,
Ltd. 235,485 1,948,827
Swire Pacific, Ltd. Class A 248,500 1,533,200
Wharf Holdings, Ltd. 1,308,000 3,622,289
--------------
39,015,789
--------------
HUNGARY -- 0.2%
Matav Rt. ADR 34,200 639,882
Mol Magyar Olaj-es Gazipari
Rt. 8,164 248,561
Mol Magyar Olaj-es Gazipari
Rt. GDR 24,681 702,421
OTP Bank Rt. 28,541 368,086
--------------
1,958,950
--------------
INDIA -- 1.1%
Andhra Bank, Ltd. 680,000 801,841
Asian Paints (India) Ltd. 100,000 736,767
Bajaj Auto, Ltd. GDR 11,584 281,491
Bharat Heavy Electricals,
Ltd. 22,900 254,949
Bharti Televentures. Ltd.* 343,115 790,387
Canara Bank, Ltd. 62,000 185,355
Dr. Reddy's Laboratories,
Ltd. 8,000 250,398
GAIL India, Ltd. GDR 92,700 3,086,909
HCL Technologies, Ltd. 52,782 354,464
HDFC Bank, Ltd. 20,100 161,527
Infosys Technologies, Ltd. 5,100 621,915
Maruti Udyog Ltd.* 29,068 239,743
Punjab National Bank 55,228 292,149
Ranbaxy Laboratories, Ltd.
GDR 83,500 2,129,250
Reliance Industries, Ltd. 16,300 204,710
Tata Motors, Ltd. GDR 62,278 617,387
--------------
11,009,242
--------------
INDONESIA -- 0.5%
Bank Rakyat Indonesia* 1,722,000 255,565
PT Astra International,
Inc. TBK 163,500 97,061
PT Bank Mandiri Persero TBK 4,186,223 497,029
PT Ramayana Lestari Sentosa
TBK 1,718,700 887,663
PT Telekomunikasi Indonesia
TBK 2,943,600 2,359,075
PT Unilever Indonesia TBK 3,000,000 1,291,184
--------------
5,387,577
--------------
IRELAND -- 0.5%
Allied Irish Banks PLC 105,000 1,674,067
CRH PLC 128,462 2,636,838
Irish Life & Permanent PLC 59,300 957,417
--------------
5,268,322
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
ISRAEL -- 0.2%
Bank Hapoalim, Ltd. 66,700 $ 163,904
Check Point Software
Technologies, Ltd.* 33,200 558,424
Orbotech, Ltd.* 24,000 574,080
Teva Pharmaceutical
Industries, Ltd. ADR 14,200 805,282
--------------
2,101,690
--------------
ITALY -- 2.7%
Assicurazioni Generali SpA 14,100 373,486
Banca Intesa SpA 2,487,368 9,726,087
Ente Nazionale Idrocarburi
SpA 411,913 7,772,728
Fiat SpA 182,183 1,397,165
Mediaset SpA 444,723 5,284,171
Telecom Italia Mobile SpA 307,800 1,673,332
UniCredito Italiano SpA 80,600 435,126
--------------
26,662,095
--------------
JAPAN -- 20.7%
Advantest Corporation 46,800 3,711,860
Aeon Co., Ltd. 64,000 2,143,884
Aiful Corporation 7,605 556,342
Bridgestone Corporation 169,000 2,272,362
Canon, Inc. 280,400 13,055,855
Chugai Pharmaceutical Co.,
Ltd. 26,600 382,482
Dai Nippon Printing Co.,
Ltd. 28,000 393,207
Daiwa House Industry Co.,
Ltd. 47,000 499,953
Daiwa Securities Group,
Inc. 61,000 414,939
Denso Corporation 310,100 6,105,356
Eisai Co., Ltd. 267,100 7,202,752
Fanuc, Ltd. 85,600 5,127,853
Fuji Photo Film Co., Ltd. 154,000 4,971,914
Fujisawa Pharmaceutical
Co., Ltd. 140,000 2,984,977
Hirose Electric Co., Ltd. 41,000 4,705,608
Hitachi, Ltd. 506,000 3,050,070
Honda Motor Co., Ltd. 177,100 7,865,969
Hoya Corporation 11,900 1,092,619
Ito-Yokado Co., Ltd. 141,000 4,433,797
Japan Airlines System
Corporation 102,000 269,348
Kansai Electric Power Co.,
Inc. (The) 49,000 858,654
Kao Corporation 230,000 4,678,548
Keyence Corporation 19,700 4,152,496
Matsushita Electric
Industrial Co., Ltd. 494,686 6,840,764
Millea Holdings, Inc. 525 6,858,263
Mitsubishi Corporation 86,000 911,598
Mitsubishi Estate Co., Ltd. 650,000 6,162,172
Mitsubishi Heavy
Industries, Ltd. 142,000 394,849
</Table>
See Notes to Financial Statements.
123
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- --------------
Mitsubishi Motors
Corporation* 180,000 $ 367,827
Mitsubishi Tokyo Financial
Group, Inc. 658 5,132,854
Mitsui Fudosan Co., Ltd. 88,000 794,849
Mitsui Sumitomo Insurance
Co., Ltd. 144,000 1,182,420
Murata Manufacturing Co.,
Ltd. 101,900 5,505,281
NEC Corporation 348,000 2,562,023
NEC Electronics Corporation 500 36,577
Nidec Corporation 7,000 668,191
Nikko Cordial Corporation 570,000 3,175,236
Nikon Corporation 42,000 633,312
Nintendo Co., Ltd. 16,600 1,548,941
Nippon Express Co., Ltd. 376,000 1,775,273
Nippon Steel Corporation 224,000 480,732
Nippon Telegraph &
Telephone Corporation 500 2,412,056
Nippon Yusen Kabushiki
Kaisha 277,000 1,253,569
Nissan Motor Co., Ltd. 456,800 5,217,162
Nitto Denko Corporation 26,200 1,393,487
Nomura Holdings, Inc. 159,000 2,707,614
NTT DoCoMo, Inc. 1,842 4,176,598
ORIX Corporation 37,500 3,100,214
Pioneer Corporation 28,000 773,351
Ricoh Co., Ltd. 22,000 434,170
Rohm Co., Ltd. 44,710 5,239,877
Sankyo Co. Ltd. 53,000 996,501
Secom Co., Ltd. 70,000 2,612,671
Sekisui House, Ltd. 113,000 1,167,220
Shimamura Co., Ltd. 5,500 373,612
Shin-Etsu Chemical Co.,
Ltd. 165,900 6,780,274
Shionogi & Co., Ltd. 87,000 1,620,342
SMC Corporation 8,400 1,045,591
Softbank Corp. 4,400 134,665
Sompo Japan Insurance, Inc. 43,900 360,884
Sony Corporation 58,000 2,007,838
Sumitomo Chemical Co., Ltd. 452,000 1,864,178
Suzuki Motor Corporation 105,000 1,553,886
Takeda Chemical Industries,
Ltd. 226,400 8,978,258
TDK Corporation 11,100 799,589
Tokyo Electron, Ltd. 35,700 2,711,561
Toray Industries, Inc. 167,000 698,106
Toyota Motor Corporation 189,600 6,404,330
UFJ Holdings, Inc. 343 1,648,269
Uni-Charm Corporation 5,400 265,541
Vodafone Holdings KK 652 1,746,049
West Japan Railway Co. 483 1,897,387
Yahoo Japan Corporation* 70 940,562
Yamanouchi Pharmaceutical
Co., Ltd. 168,700 5,241,868
Yamato Transport Co., Ltd. 22,000 259,065
--------------
204,778,352
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
JORDAN -- 0.0%
Arab Bank PLC 850 $ 365,656
--------------
LUXEMBOURG -- 0.1%
SES Global 48,900 493,441
--------------
MALAYSIA -- 0.6%
Commerce Asset Holdings BHD 347,900 375,366
Gamuda BHD 137,100 229,101
Hong Leong Bank BHD 273,500 374,263
Malayan Banking BHD 144,200 366,192
Malaysian Oxygen BHD 167,000 509,789
Maxis Communications BHD 295,700 587,509
MK Land Holdings BHD 105,000 63,553
OYL Industries BHD 109,000 1,046,974
Public Bank BHD 1,291,250 961,641
Public Bank (Foreign
Market) BHD 806,250 657,730
Road Builder M Holdings BHD 166,700 156,172
Transmile Group BHD 420,000 548,211
--------------
5,876,501
--------------
MEXICO -- 1.3%
America Movil SA de CV ADR
Series L 78,800 2,154,392
Cemex SA de CV 192,167 1,004,677
Cemex SA de CV ADR 91,714 2,402,907
Coca-Cola Femsa SA de CV
ADR* 37,500 796,500
Grupo Financiero Banorte SA
de CV Class O 10,000 34,706
Grupo Financiero BBVA
Bancomer SA de CV Series
B* 1,320,500 1,128,105
Grupo Mexico SA de CV
Series B 6,000 15,377
Grupo Televisa SA ADR 24,642 982,230
Kimberly-Clark de Mexico SA
de CV Class A 131,400 336,766
Telefonos de Mexico SA de
CV ADR Class L 94,600 3,124,639
Wal-Mart de Mexico SA de CV
Series C 120,000 320,897
Wal-Mart de Mexico SA de CV
Series V 259,698 740,228
--------------
13,041,424
--------------
NETHERLANDS -- 5.0%
ABN AMRO Holding NV 203,226 4,755,099
Aegon NV 248,567 3,677,713
Akzo Nobel NV 41,000 1,582,492
ASML Holding NV* 35,900 711,842
IHC Caland NV 33,700 1,827,825
ING Groep NV 238,747 5,568,153
Koninklijke Numico NV 13,600 375,853
Koninklijke Philips
Electronics NV 18,500 540,206
</Table>
See Notes to Financial Statements.
124
<Table>
<Caption>
SHARES VALUE
----------- --------------
Reed Elsevier NV 238,274 $ 2,960,392
Royal Dutch Petroleum Co. 270,388 14,256,078
Royal Dutch Petroleum Co.
(New York Shares) 12,100 633,919
Royal KPN NV* 278,000 2,146,014
TPG NV 93,600 2,192,422
Unilever NV 58,372 3,817,594
VNU NV 130,342 4,118,399
--------------
49,164,001
--------------
NEW ZEALAND -- 0.6%
Telecom Corporation of New
Zealand, Ltd. 1,563,823 5,513,538
--------------
NORWAY -- 0.6%
DnB NOR ASA 66,000 440,476
Norsk Hydro ASA 56,400 3,480,069
Norske Skogindustrier ASA 19,100 364,613
Statoil ASA 144,000 1,617,965
--------------
5,903,123
--------------
PERU -- 0.1%
Compania de Minas
Buenaventura SA ADR 21,900 619,332
--------------
PHILIPPINES -- 0.1%
Bank of the Philippine
Islands 347,800 291,295
Philippine Long Distance
Telephone Co.* 7,840 136,974
SM Prime Holdings, Inc. 996,000 116,607
--------------
544,876
--------------
POLAND -- 0.0%
Bank Pekao SA 6,789 195,894
Polski Koncern Naftowy
Orlen GDR 6,090 81,354
--------------
277,248
--------------
PORTUGAL -- 0.2%
Portugal Telecom SGPS SA 173,067 1,742,022
--------------
RUSSIA -- 0.6%
Gazprom ADR 4,635 120,047
LUKOIL ADR 22,594 2,101,242
Mining and Metallurgical
Co. Norilsk Nickel ADR 19,600 1,276,940
Mobile Telesystems ADR 20,000 1,656,000
Vimpel-Communications ADR* 2,000 147,000
Wimm-Bill-Dann Foods OJSC
ADR* 11,500 195,500
YUKOS ADR 7,757 330,448
--------------
5,827,177
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
SINGAPORE -- 1.3%
DBS Group Holdings, Ltd. 185,000 $ 1,601,307
DBS Group Holdings, Ltd.
ADR 144A 124,000 1,073,307
Oversea-Chinese Banking
Corporation, Ltd. 346,000 2,465,171
Singapore Airlines, Ltd. 56,000 369,310
Singapore
Telecommunications, Ltd. 3,246,800 3,747,117
United Overseas Bank, Ltd. 341,000 2,650,415
Venture Corporation, Ltd. 42,000 494,612
--------------
12,401,239
--------------
SOUTH AFRICA -- 1.3%
ABSA Group, Ltd. 77,300 488,003
Alexander Forbes, Ltd. 400,000 704,120
Anglo American PLC 198,084 4,243,596
AngloGold, Ltd. 5,400 254,014
FirstRand, Ltd. 142,600 190,561
Gold Fields, Ltd. 16,500 236,067
Impala Platinum Holdings,
Ltd. 3,770 327,581
Iscor, Ltd. 50,400 217,456
Massmart Holdings, Ltd. 20,200 92,300
MTN Group, Ltd.* 493,400 2,102,956
Nedcor, Ltd. 22,200 206,302
Old Mutual PLC 97,800 163,073
Pick'n Pay Stores, Ltd. 44,100 117,270
Sanlam, Ltd. 300,400 396,033
Sasol, Ltd. 138,900 1,976,854
Standard Bank Group, Ltd. 158,760 931,868
VenFin, Ltd.* 199,900 631,894
--------------
13,279,948
--------------
SOUTH KOREA -- 2.5%
Daewoo Shipbuilding &
Marine Engineering Co.,
Ltd.* 38,630 496,046
Hyundai Mobis 22,290 1,199,151
Hyundai Motor Co., Ltd. 35,450 1,502,497
Kia Motors Corporation 17,490 160,001
Kookmin Bank 72,901 2,731,876
Kookmin Bank ADR 37,179 1,406,853
Korea Electric Power
Corporation 52,300 939,337
KT Corporation 27,670 1,035,738
KT Corporation ADR 18,650 355,656
KT Freetel* 24,000 384,725
LG Chem, Ltd. 3,810 175,871
LG Electronics, Inc. 4,470 219,842
POSCO 4,780 653,915
POSCO ADR 5,100 173,247
S-Oil Corporation 37,700 885,942
S1 Corporation 39,280 774,721
Samsung Electronics Co.,
Ltd. 12,030 4,553,530
Samsung Electronics Co.,
Ltd. GDR 100 18,800
</Table>
See Notes to Financial Statements.
125
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
<Table>
<Caption>
SHARES VALUE
----------- --------------
Samsung Electronics Co.,
Ltd. GDR 144A 9,859 $ 1,865,887
Samsung Electronics Co.,
Ltd. (Non-Voting Shares)
GDR 144A 10,109 1,041,443
Samsung Fire & Marine
Insurance Co., Ltd. 21,250 1,221,674
Shinsegae Co., Ltd. 6,180 1,504,154
SK Telecom Co., Ltd. 5,030 840,092
SK Telecom Co., Ltd. ADR 33,055 616,476
Tae Young Corporation 10,000 344,104
--------------
25,101,578
--------------
SPAIN -- 3.3%
Acerinox SA 15,439 727,939
Acs, Actividades Cons y
Serv* 32,763 1,599,312
Banco Bilbao Vizcaya
Argentaria SA 303,112 4,186,524
Banco Santander Central
Hispano SA 367,608 4,353,985
Endesa SA 131,800 2,535,255
Iberdrola SA 205,800 4,067,717
Inditex SA 233,400 4,739,833
Repsol YPF SA 28,800 561,615
Telefonica SA 710,100 10,425,787
--------------
33,197,967
--------------
SWEDEN -- 1.8%
Assa Abloy AB Class B 79,374 943,182
Autoliv, Inc. AB 24,291 921,635
Electrolux AB Class B 91,900 2,018,012
ForeningsSparbanken AB 81,600 1,604,714
Hennes & Mauritz AB Class B 144,200 3,426,987
Nordea AB 400,000 2,995,011
Sandvik AB 50,900 1,754,367
Svenska Handelsbanken Class
A 24,900 508,707
Volvo AB Class B 121,724 3,721,775
--------------
17,894,390
--------------
SWITZERLAND -- 3.8%
ABB, Ltd. 85,254 432,216
Adecco SA 31,779 2,042,798
Ciba Specialty Chemicals,
Inc. 16,700 1,292,250
Compagnie Financiere
Richemont AG Class A 102,849 2,469,873
Credit Suisse Group 76,514 2,799,482
Holcim, Ltd. 39,565 1,842,688
Logitech International SA* 31,700 1,371,296
Nestle SA 32,600 8,145,057
Novartis AG 127,267 5,778,081
Roche Holding AG 28,862 2,911,287
Serono SA Class B 594 423,617
STMicroelectronics NV 38,500 1,039,885
Swiss Reinsurance 41,584 2,807,571
Swisscom AG 7,070 2,332,371
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Synthes-Stratec, Inc. 542 $ 536,412
UBS AG 25,504 1,746,666
--------------
37,971,550
--------------
TAIWAN -- 1.5%
Advanced Semiconductor
Engineering, Inc.* 185,000 190,177
Asustek Computer, Inc. 194,000 428,571
Cathay Financial Holding
Co., Ltd. 193,000 289,926
Cathay Financial Holding
Co., Ltd. GDR* 7,024 106,765
China Steel Corporation GDR
144A 52,700 875,489
Chinatrust Financial
Holding Co., Ltd. 1,982,580 1,991,340
Compal Electronics, Inc. 862,650 1,181,538
Faraday Technology
Corporation 237,500 538,660
First Financial Holding
Co., Ltd.* 2,304,000 1,608,389
Fubon Financial Holding
Co., Ltd. 347,000 332,180
HON HAI Precision Industry
Co., Ltd. 193,000 758,925
MediaTek, Inc. 47,400 445,378
Phoenixtec Power Co., Ltd. 322,605 378,194
Taiwan Semiconductor
Manufacturing Co., Ltd.* 2,547,640 4,765,099
United Microelectronics
Corporation* 997,984 855,415
Yageo Corporation* 368,000 163,676
Yang Ming Marine Transport
Corporation 185,000 183,638
--------------
15,093,360
--------------
THAILAND -- 0.5%
Advanced Info Service
Public Co., Ltd. 413,700 882,268
Bangkok Bank Public Co.,
Ltd.* 205,400 596,151
BEC World Public Co., Ltd. 56,200 320,555
Kasikornbank Public Co.,
Ltd.* 349,100 616,746
PTT Exploration and
Production Public Co.,
Ltd. 197,900 1,338,562
PTT Public Co., Ltd. 151,400 706,896
Siam Cement Public Co.,
Ltd. 21,400 149,067
Siam Commercial Bank Public
Co., Ltd.* 231,200 315,094
--------------
4,925,339
--------------
TURKEY -- 0.1%
Akbank TAS 56,554,924 295,857
Hurriyet Gazetecilik Ve
Matbaacilik AS* 38,897,548 138,425
Migros Turk TAS 48,090,000 687,978
</Table>
See Notes to Financial Statements.
126
<Table>
<Caption>
SHARES VALUE
----------- --------------
Tupras-Turkiye Petrol
Rafinerileri AS 6,308,296 $ 52,532
Turkiye IS Bankasi Class C* 54,710,068 221,955
--------------
1,396,747
--------------
UNITED KINGDOM -- 16.2%
Antofagasta PLC 148,800 2,810,260
ARM Holdings PLC* 110,000 253,039
AstraZeneca PLC 212,428 10,299,335
Aviva PLC 189,663 1,664,529
BAE Systems PLC 706,034 2,126,531
Barclays PLC 117,200 1,045,360
BG Group PLC 2,323,118 11,925,203
BHP Billiton PLC 204,063 1,781,522
BOC Group PLC 152,300 2,326,990
Boots Group PLC 582,534 7,205,937
BP PLC 810,479 6,572,507
Brambles Industries PLC 638,524 2,326,123
British Airways PLC* 326,782 1,360,104
Cadbury Schweppes PLC 300,000 2,203,236
Centrica PLC 636,500 2,404,208
Compass Group PLC 45,400 308,838
GKN PLC 503,116 2,404,753
GlaxoSmithKline PLC 334,968 7,675,460
GUS PLC 262,761 3,638,416
HBOS PLC 531,261 6,880,779
HSBC Holdings PLC 429,764 6,754,849
Intercontinental Hotels
Group PLC 429,474 4,067,089
Johnson Matthey PLC 125,000 2,195,180
Kingfisher PLC 1,263,173 6,297,659
Lloyds TSB Group PLC 954,644 7,656,153
National Grid Transco PLC 135,500 970,872
Next PLC 216,503 4,352,460
Pearson PLC 365,238 4,066,844
Prudential PLC 49,800 421,010
Reckitt Benckiser PLC 181,720 4,111,885
Reed Elsevier PLC 233,348 1,951,841
Rentokil Initial PLC 211,206 718,375
Rio Tinto PLC 143,877 3,974,188
Royal Bank of Scotland
Group PLC 96,900 2,855,254
Scottish Power PLC 145,700 970,924
Shell Transport & Trading
Co. PLC 854,326 6,354,564
Smith & Nephew PLC 189,633 1,592,976
Smiths Group PLC 151,700 1,795,057
Standard Chartered PLC 99,600 1,644,814
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------------
Tesco PLC 409,200 $ 1,888,102
Trinity Mirror PLC 83,800 846,836
Unilever PLC 295,500 2,754,723
Vodafone Group PLC 5,649,246 14,006,556
Xstrata PLC 110,000 1,240,579
--------------
160,701,920
--------------
VENEZUELA -- 0.0%
Compania Anonima Nacional
Telefonos de Venezuela
ADR 2,001 30,535
--------------
TOTAL FOREIGN COMMON STOCK
(Cost $799,884,877) 959,612,173
--------------
FOREIGN PREFERRED STOCK -- 0.3%
BRAZIL -- 0.1%
Caemi Mineracao e
Metalurgica SA 70,300 30,947
Companhia de Tecidos do
Norte de Minas --
Coteminas 4,986,860 377,687
Investimentos Itau SA 317,412 375,173
Telemar Norte Leste SA
Class A 2,000,000 39,931
--------------
823,738
--------------
JAPAN -- 0.2%
SMFG Finance, Ltd.
2.25%, 07/11/05 6,000,000 105,113
SMFG Finance, Ltd. 144A
2.25%, 07/11/05 78,000,000 1,366,474
--------------
1,471,587
--------------
TOTAL FOREIGN PREFERRED STOCK
(Cost $1,248,414) 2,295,325
--------------
SHORT-TERM INVESTMENTS -- 11.2%
AB Funds Trust -- Money
Market Fund
(Retirement Class)( 28,019,554 28,019,554
Northern Institutional
Liquid Assets Portfolio
sec. 83,255,194 83,255,194
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $111,274,748) 111,274,748
--------------
TOTAL INVESTMENTS -- 108.3%
(Cost $912,573,733) 1,073,447,458
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (8.3%) (81,959,351)
--------------
NET ASSETS -- 100.0% $ 991,488,107
==============
</Table>
See Notes to Financial Statements.
127
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 December 31,
2003.
(inf) -- Affiliated fund.
FOREIGN BOND FOOTNOTES:
(A) -- Par is denominated in Australian
Dollars.
(C) -- Par is denominated in Canadian Dollars.
(E) -- Par is denominated in European Euros.
(K) -- Par is denominated in Norwegian Krone.
(N) -- Par is denominated in New Zealand
Dollars.
(R) -- Par is denominated in South African
Rand.
(S) -- Par is denominated in Swiss Francs.
(W) -- Par is denominated in Swedish Kronas.
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) With the exception of Interest Only (IO) securities, the interest rates
shown reflect the rates currently in effect.
128
(This page intentionally left blank)
129
STATEMENTS OF ASSETS AND LIABILITIES
<Table>
<Caption>
MONEY LOW-DURATION MEDIUM-DURATION
DECEMBER 31, 2003 MARKET FUND BOND FUND BOND FUND
----------------- ------------ -------------- ---------------
ASSETS
Investments at value (1)(2) $921,287,130 $1,017,904,502 $1,111,888,922
Options purchased at value (3) -- -- --
Cash 294 1,283,464 2,585,060
Cash collateral for futures -- -- 301,150
Foreign currency (4) -- 89,135 4,870,495
Receivables:
Dividends and reclaims -- 17,641 82,467
Interest 1,302,095 4,013,168 5,360,485
Interest on swaps -- -- 387,769
Investment securities sold -- -- 11,386,719
Maturities -- 173,524 15,798
Fund shares sold 4,132,485 24,806 184,983
Variation margin -- 43,131 125,985
Securities lending 347 32,240 23,746
Unrealized appreciation on foreign currency exchange
contracts -- -- 888,060
Unrealized appreciation on swap agreements -- 90,042 2,475,973
Receivable from administrator -- -- --
Prepaid expenses and other assets 22,211 20,905 21,150
------------ -------------- --------------
Total Assets 926,744,562 1,023,692,558 1,140,598,762
------------ -------------- --------------
LIABILITIES
Cash overdraft -- -- --
Options written at value (5) -- 506,106 2,570,081
Unrealized depreciation on foreign currency exchange
contracts -- 1,070,417 2,032,280
Unrealized depreciation on swap agreements -- 113,766 2,945,016
Collateral held for securities on loan at value 195,700 200,386,436 173,739,800
Payables:
Investment securities purchased -- 17,638,687 146,100,231
Fund shares redeemed 1,472,574 60,891 1,176,430
Interest on swaps -- -- 639,532
Variation margin -- 24,125 23,063
Distributions 238,426 -- --
Securities lending 104 9,642 7,073
Excise tax payable -- -- --
Accrued expenses
Advisory fee payable 110,685 91,964 83,890
Distribution fee payable 683 1,924 1,914
Other accrued expenses 115,644 225,980 253,330
Service fee payable 140,534 119,555 121,909
Other liabilities -- -- --
------------ -------------- --------------
Total Liabilities 2,274,350 220,249,493 329,694,549
------------ -------------- --------------
NET ASSETS $924,470,212 $ 803,443,065 $ 810,904,213
============ ============== ==============
NET ASSETS CONSIST OF:
Paid-in-capital $924,479,713 $ 799,124,290 $ 792,265,007
Undistributed net investment income (loss) -- (805,080) (1,114,144)
Accumulated net realized gain (loss) on investments, foreign
currency transactions and derivative transactions (9,501) 671,003 5,249,119
Net unrealized appreciation (depreciation) on investments,
foreign currency translations and derivative transactions -- 4,452,852 14,504,231
------------ -------------- --------------
NET ASSETS $924,470,212 $ 803,443,065 $ 810,904,213
============ ============== ==============
NET ASSET VALUE:
$0.001 par value, unlimited shares authorized
Net assets applicable to the Retail Class $ 8,035,084 $ 22,452,421 $ 22,640,056
------------ -------------- --------------
Retail shares outstanding 8,037,278 2,352,631 2,434,543
------------ -------------- --------------
Net asset value, offering price and redemption price per
Retail share $ 1.00 $ 9.54 $ 9.30
============ ============== ==============
Net assets applicable to the Retirement Class $853,062,034 $ 727,264,623 $ 741,742,849
------------ -------------- --------------
Retirement shares outstanding 853,034,083 55,929,003 54,617,534
------------ -------------- --------------
Net asset value, offering price and redemption price per
Retirement share $ 1.00 $ 13.00 $ 13.58
============ ============== ==============
Net assets applicable to the Institutional class $ 63,373,094 $ 53,726,021 $ 46,521,308
------------ -------------- --------------
Institutional shares outstanding 63,373,845 5,649,860 5,033,943
------------ -------------- --------------
Net asset value, offering price and redemption price per
Institutional share $ 1.00 $ 9.51 $ 9.24
============ ============== ==============
- ---------------
(1) Investments at cost $921,287,130 $1,012,696,548 $1,095,202,072
============ ============== ==============
(2) Includes securities loaned of: $ 10,440,941 $ 278,262,422 $ 188,293,358
============ ============== ==============
(3) Premiums paid on options purchased -- -- $ 1,412
============ ============== ==============
(4) Foreign currency at cost -- $ 86,119 $ 4,713,968
============ ============== ==============
(5) Premiums received on options written -- $ (595,524) $ (2,778,035)
============ ============== ==============
(6) Net of $302,816 accrued foreign capital gains taxes on
appreciated securities.
</Table>
See Notes to Financial Statements.
130
<Table>
<Caption>
EXTENDED-DURATION EQUITY VALUE GROWTH SMALL CAP INTERNATIONAL
BOND FUND INDEX FUND EQUITY FUND EQUITY FUND EQUITY FUND EQUITY FUND
----------------- ------------ -------------- -------------- ------------ --------------
$443,557,662 $452,817,464 $1,372,396,427 $1,426,509,137 $514,304,500 $1,073,447,458
-- -- -- -- -- --
-- -- -- 2 8,000 --
-- -- -- -- -- --
-- -- -- -- -- 1,143,600
6,142 542,402 2,369,713 652,303 209,682 1,283,169
4,437,941 -- -- -- -- 287
-- -- -- -- -- --
3,750 -- 3,440,772 4,206,595 1,932,946 733,420
-- -- -- -- -- --
1,753,023 142,035 283,705 64,477 355,122 629,992
-- 26,100 78,750 113,100 -- --
18,211 3,142 22,182 12,224 19,701 25,759
-- -- -- -- -- 20,247
-- -- -- -- -- --
-- -- -- -- -- 7,501
17,506 16,145 22,867 24,576 15,927 20,110
------------ ------------ -------------- -------------- ------------ --------------
449,794,235 453,547,288 1,378,614,416 1,431,582,414 516,845,878 1,077,311,543
------------ ------------ -------------- -------------- ------------ --------------
-- -- -- -- -- 403
-- -- -- -- -- --
-- -- -- 126,811 -- 895,634
-- -- -- -- -- --
7,364,318 20,889,981 132,608,734 42,718,010 105,886,727 83,255,194
-- -- 3,273,535 4,439,719 3,408,275 698,213
15,393 28,927 3,224 257,740 1,392,206 6,798
-- -- -- -- -- --
-- -- -- -- 71,500 --
-- -- -- -- -- --
5,436 920 6,591 3,652 5,674 7,681
-- -- -- -- -- 7,501
93,978 31,569 395,618 464,234 29,732 206,917
2,343 1,431 1,603 1,491 1,823 1,660
137,664 60,778 355,058 496,429 354,183 597,889
66,076 62,398 182,688 204,695 58,537 145,546
17,097 -- -- -- -- --
------------ ------------ -------------- -------------- ------------ --------------
7,702,305 21,076,004 136,827,051 48,712,781 111,208,657 85,823,436
------------ ------------ -------------- -------------- ------------ --------------
$442,091,930 $432,471,284 $1,241,787,365 $1,382,869,633 $405,637,221 $ 991,488,107
============ ============ ============== ============== ============ ==============
$413,747,593 $404,913,048 $1,173,451,527 $1,564,015,099 $346,314,468 $ 950,130,131
810,584 510,613 55,133 -- -- (1,565,570)
2,886,995 (8,629,140) (83,673,622) (327,369,027) (13,524,573) (116,927,567)(6)
24,646,758 35,676,763 151,954,327 146,223,561 72,847,326 159,851,113
------------ ------------ -------------- -------------- ------------ --------------
$442,091,930 $432,471,284 $1,241,787,365 $1,382,869,633 $405,637,221 $ 991,488,107
============ ============ ============== ============== ============ ==============
$ 27,977,513 $ 17,394,809 $ 19,680,049 $ 18,099,443 $ 22,520,186 $ 20,434,341
------------ ------------ -------------- -------------- ------------ --------------
3,032,939 1,904,164 1,987,723 1,992,726 1,972,928 1,865,711
------------ ------------ -------------- -------------- ------------ --------------
$ 9.22 $ 9.14 $ 9.90 $ 9.08 $ 11.41 $ 10.95
============ ============ ============== ============== ============ ==============
$385,110,204 $382,067,335 $1,152,116,281 $1,285,222,737 $357,702,508 $ 920,664,172
------------ ------------ -------------- -------------- ------------ --------------
26,047,558 25,262,231 75,384,728 88,349,910 23,864,370 71,037,081
------------ ------------ -------------- -------------- ------------ --------------
$ 14.78 $ 15.12 $ 15.28 $ 14.55 $ 14.99 $ 12.96
============ ============ ============== ============== ============ ==============
$ 29,004,213 $ 33,009,140 $ 69,991,035 $ 79,547,453 $ 25,414,527 $ 50,389,594
------------ ------------ -------------- -------------- ------------ --------------
3,143,519 3,633,875 7,040,281 8,684,511 2,205,692 4,557,611
------------ ------------ -------------- -------------- ------------ --------------
$ 9.23 $ 9.08 $ 9.94 $ 9.16 $ 11.52 $ 11.06
============ ============ ============== ============== ============ ==============
$418,942,220 $417,576,886 $1,221,652,776 $1,281,895,529 $441,929,844 $ 912,573,733
============ ============ ============== ============== ============ ==============
$133,234,273 $ 24,818,321 $ 133,585,805 $ 70,392,278 $102,781,263 $ 82,411,268
============ ============ ============== ============== ============ ==============
-- -- -- -- -- --
============ ============ ============== ============== ============ ==============
-- -- -- -- -- 1,129,721
============ ============ ============== ============== ============ ==============
-- -- -- -- -- --
============ ============ ============== ============== ============ ==============
</Table>
See Notes to Financial Statements.
131
STATEMENTS OF OPERATIONS
<Table>
<Caption>
MONEY LOW-DURATION MEDIUM-DURATION
FOR THE YEAR ENDED DECEMBER 31, 2003 MARKET FUND BOND FUND BOND FUND
- ------------------------------------ ----------- ------------ ---------------
INVESTMENT INCOME
Dividends $ -- $ 25,696 $ 10,469
Income distributions received from affiliated funds -- 244,483 826,033
Interest 12,063,612 23,519,850 30,670,257
Securities Lending 16,569 243,105 138,273
Less foreign taxes withheld -- (3,645) (7,463)
----------- ------------ -----------
Total Investment Income 12,080,181 24,029,489 31,637,569
----------- ------------ -----------
EXPENSES
Investment advisory fees 1,921,028 3,260,161 3,495,262
Transfer agent fees:
Retail shares 23,906 19,950 22,392
Retirement shares 24,209 17,937 17,870
Institutional shares 4,660 4,107 4,163
Custodian fees 24,777 68,531 161,338
Distribution fees -- Retail shares 10,355 22,419 21,526
Shareholders servicing fees:
Retail shares 15,529 33,610 32,250
Retirement shares 1,693,164 1,412,914 1,425,312
Accounting and administration fees 354,726 350,111 378,517
Professional fees 47,928 51,048 55,873
Registration fees 16,146 16,934 16,077
Shareholder reporting fees
Retail shares 16,896 12,644 17,460
Retirement shares 6,685 (83) (224)
Institutional shares 3,168 2,265 2,655
Trustee fees 4,652 3,931 3,925
Line of credit facility fees 7,643 6,435 6,405
Excise tax -- -- --
Other expenses 18,019 20,929 35,213
----------- ------------ -----------
Total expenses 4,193,491 5,303,843 5,696,014
Expenses waived (22,759) (441,527) (714,302)
Fees paid indirectly (7,950) (28,847) (18,975)
----------- ------------ -----------
Net expenses 4,162,782 4,833,469 4,962,737
----------- ------------ -----------
NET INVESTMENT INCOME (LOSS) 7,917,399 19,196,020 26,674,832
----------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investment securities (9,501) 8,597,383 19,868,513
Futures transactions -- 1,331,879 4,196,582
Swap agreements -- 313,324 1,503,111
Option contracts -- 255,110 766,904
Foreign currency transactions -- (263,965) 711,257
----------- ------------ -----------
Net realized gain (loss) (9,501) 10,233,731 27,046,367
----------- ------------ -----------
Net change in unrealized appreciation (depreciation) on:
Investment securities (net of estimated deferred capital
gains taxes of $302,816 for International Equity) -- (8,810,016) (2,454,838)
Futures transactions -- (310,431) (266,877)
Swap agreements -- (193,956) 1,366
Option contracts -- 89,418 758,918
Foreign currency translations -- (933,632) 333,528
----------- ------------ -----------
Net change in unrealized appreciation (depreciation) -- (10,158,617) (1,627,903)
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) (9,501) 75,114 25,418,464
----------- ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,907,898 $ 19,271,134 $52,093,296
=========== ============ ===========
</Table>
See Notes to Financial Statements.
132
<Table>
<Caption>
EXTENDED-DURATION EQUITY VALUE GROWTH SMALL CAP INTERNATIONAL
BOND FUND INDEX FUND EQUITY FUND EQUITY FUND EQUITY FUND EQUITY FUND
----------------- ----------- ------------ ------------ ------------ -------------
$ 93,125 $ 6,159,323 $ 25,353,189 $ 9,384,945 $ 2,225,296 $ 21,217,545
85,386 99,302 356,289 479,696 155,103 207,314
27,341,788 8,944 41,835 40,998 14,209 17,652
109,504 25,512 165,563 102,252 145,227 301,409
(66,860) -- (23,954) (37,384) (3,995) (1,840,330)
----------- ----------- ------------ ------------ ------------ ------------
27,562,943 6,293,081 25,892,922 9,970,507 2,535,840 19,903,590
----------- ----------- ------------ ------------ ------------ ------------
2,182,598 605,659 7,250,743 9,266,183 3,269,081 7,786,604
20,528 19,644 18,703 20,864 20,375 15,901
17,552 17,671 17,381 17,751 17,641 17,506
4,071 3,987 4,162 4,128 4,065 4,012
32,783 32,944 99,454 68,229 153,320 600,031
27,264 14,590 15,956 15,004 16,110 15,922
40,867 21,865 23,913 22,487 24,120 23,856
760,631 631,246 1,897,553 2,186,978 510,308 1,438,725
187,062 156,618 432,061 482,499 182,370 380,021
49,764 46,708 46,708 46,708 49,152 51,596
14,883 16,261 14,840 13,327 17,178 15,488
13,930 14,199 13,266 16,832 15,321 5,997
1,735 2,455 (1,785) (785) 2,653 (183)
2,007 2,527 3,316 2,990 3,317 2,517
2,211 1,847 5,262 6,043 1,529 4,233
3,627 2,943 8,517 9,727 2,355 6,347
-- -- -- -- -- 7,501
18,211 31,987 22,695 29,688 21,287 44,182
----------- ----------- ------------ ------------ ------------ ------------
3,379,724 1,623,151 9,872,745 12,208,653 4,310,182 10,420,256
(95,841) (183,553) (437,954) (1,146,568) (523,923) (1,270,511)
(3,392) (443) (204,849) (197,536) (194,147) (169,799)
----------- ----------- ------------ ------------ ------------ ------------
3,280,491 1,439,155 9,229,942 10,864,549 3,592,112 8,979,946
----------- ----------- ------------ ------------ ------------ ------------
24,282,452 4,853,926 16,662,980 (894,042) (1,056,272) 10,923,644
----------- ----------- ------------ ------------ ------------ ------------
22,580,208 (745,965) 121,994 (87,957,167) 30,807,367 (31,992,796)
-- 1,725,149 6,524,147 9,406,382 4,072,966 --
-- -- -- -- -- --
-- -- -- -- -- --
(254,257) -- -- -- -- 500,769
----------- ----------- ------------ ------------ ------------ ------------
22,325,951 979,184 6,646,141 (78,550,785) 34,880,333 (31,492,027)
----------- ----------- ------------ ------------ ------------ ------------
1,484,743 86,383,798 268,266,788 390,310,628 83,505,102 282,022,294
-- 558,213 2,012,169 2,549,460 733,217 --
-- -- -- -- -- --
-- -- -- -- -- --
10,881 -- -- (126,811) -- (1,088,603)
----------- ----------- ------------ ------------ ------------ ------------
1,495,624 86,942,011 270,278,957 392,733,277 84,238,319 280,933,691
----------- ----------- ------------ ------------ ------------ ------------
23,821,575 87,921,195 276,925,098 314,182,492 119,118,652 249,441,664
----------- ----------- ------------ ------------ ------------ ------------
$48,104,027 $92,775,121 $293,588,078 $313,288,450 $118,062,380 $260,365,308
=========== =========== ============ ============ ============ ============
</Table>
See Notes to Financial Statements.
133
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
MONEY MARKET FUND
----------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
12/31/2003 12/31/2002
------------ ------------
INCREASE/(DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 7,917,399 $ 14,389,410
Net realized gain (loss) on investment securities and
futures transactions (9,501) 677
Net change in unrealized appreciation (depreciation) on
investment securities, foreign currency translations,
and futures contracts -- --
------------ ------------
Net increase in net assets resulting from operations 7,907,898 14,390,087
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME
Retail shares (62,904) (211,879)
Retirement shares (7,530,068) (14,080,267)
Institutional shares (324,427) (98,374)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS
Retail shares (6) (2,139)
Retirement shares (625) (122,219)
Institutional shares (46) (709)
------------ ------------
Total dividends and distributions (7,918,076) (14,515,587)
------------ ------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (3,852,148) (68,734,603)
------------ ------------
Total increase (decrease) in net assets (3,862,326) (68,860,103)
------------ ------------
NET ASSETS:
Beginning of the Period 928,332,538 997,192,641
------------ ------------
End of the Period $924,470,212 $928,332,538
============ ============
</Table>
See Notes to Financial Statements.
134
<Table>
<Caption>
LOW-DURATION BOND FUND MEDIUM-DURATION BOND FUND EXTENDED-DURATION BOND FUND
--------------------------- --------------------------- ---------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/2003 12/31/2002 12/31/2003 12/31/2002 12/31/2003 12/31/2002
------------ ------------ ------------ ------------ ------------ ------------
$ 19,196,020 $ 28,004,785 $ 26,674,832 $ 37,436,569 $ 24,282,452 $ 25,918,328
10,233,731 10,127,389 27,046,367 28,478,461 22,325,951 6,449,350
(10,158,617) 6,436,331 (1,627,903) 4,121,731 1,495,624 7,183,095
------------ ------------ ------------ ------------ ------------ ------------
19,271,134 44,568,505 52,093,296 70,036,761 48,104,027 39,550,773
------------ ------------ ------------ ------------ ------------ ------------
(753,411) (891,700) (1,202,395) (1,019,885) (2,080,490) (2,004,286)
(19,321,186) (28,377,608) (30,152,221) (37,167,512) (19,969,955) (23,749,846)
(1,326,256) (300,705) (1,916,722) (413,967) (1,595,527) (539,205)
(311,062) (314,466) (676,622) (749,228) (1,897,839) (608,575)
(7,418,102) (8,567,498) (15,323,780) (21,292,911) (16,743,684) (6,527,530)
(746,547) (95,235) (1,396,423) (282,811) (1,971,125) (159,603)
------------ ------------ ------------ ------------ ------------ ------------
(29,876,564) (38,547,212) (50,668,163) (60,926,314) (44,258,620) (33,589,045)
------------ ------------ ------------ ------------ ------------ ------------
22,756,445 (30,599,815) 15,046,016 (42,599,829) 5,730,852 13,696,928
------------ ------------ ------------ ------------ ------------ ------------
12,151,015 (24,578,522) 16,471,149 (33,489,382) 9,576,259 19,658,656
------------ ------------ ------------ ------------ ------------ ------------
791,292,050 815,870,572 794,433,064 827,922,446 432,515,671 412,857,015
------------ ------------ ------------ ------------ ------------ ------------
$803,443,065 $791,292,050 $810,904,213 $794,433,064 $442,091,930 $432,515,671
============ ============ ============ ============ ============ ============
</Table>
See Notes to Financial Statements.
135
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
EQUITY INDEX FUND
----------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
12/31/2003 12/31/2002
------------ ------------
INCREASE/(DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 4,853,926 $ 4,233,513
Net realized gain (loss) on investment securities and
futures transactions 979,184 (8,337,123)
Net change in unrealized appreciation (depreciation) on
investment securities, foreign currency translations,
and futures contracts 86,942,011 (86,488,833)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 92,775,121 (90,592,443)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME
Retail shares (278,397) (284,510)
Retirement shares (3,723,527) (3,810,917)
Institutional shares (403,725) (114,879)
DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS
Retail shares -- (51,388)
Retirement shares -- (723,900)
Institutional shares -- (18,967)
RETURN OF CAPITAL
Retail shares -- --
Retirement shares -- --
Institutional shares -- --
------------ ------------
Total dividends and distributions (4,405,649) (5,004,561)
------------ ------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 31,213,504 6,619,642
------------ ------------
Total increase (decrease) in net assets 119,582,976 (88,977,362)
------------ ------------
NET ASSETS:
Beginning of the Period 312,888,308 401,865,670
------------ ------------
End of the Period $432,471,284 $312,888,308
============ ============
</Table>
See Notes to Financial Statements.
136
<Table>
<Caption>
VALUE EQUITY FUND GROWTH EQUITY FUND SMALL CAP EQUITY FUND INTERNATIONAL EQUITY FUND
------------------------------- ------------------------------- --------------------------- ---------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/2003 12/31/2002 12/31/2003 12/31/2002 12/31/2003 12/31/2002 12/31/2003 12/31/2002
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
$ 16,662,980 $ 16,612,447 $ (894,042) $ (609,038) $ (1,056,272) $ (584,539) $ 10,923,644 $ 7,653,878
6,646,141 (63,914,069) (78,550,785) (170,669,128) 34,880,333 (38,839,206) (31,492,027) (58,572,782)
270,278,957 (153,063,309) 392,733,277 (221,901,627) 84,238,319 (31,682,156) 280,933,691 (46,113,641)
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
293,588,078 (200,364,931) 313,288,450 (393,179,793) 118,062,380 (71,105,901) 260,365,308 (97,032,545)
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
(369,825) (335,450) -- -- -- -- (265,273) (149,912)
(15,815,795) (15,700,497) -- -- -- -- (11,108,069) (7,393,223)
(922,077) (149,517) -- -- -- -- (797,069) (79,869)
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- (3,045) -- -- -- -- -- (4,136)
-- (134,245) -- -- -- -- -- (174,185)
-- (1,142) -- -- -- -- -- (1,573)
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
(17,107,697) (16,323,896) -- -- -- -- (12,170,411) (7,802,898)
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
7,472,571 15,069,203 2,816,736 105,305,231 36,835,939 (94,482) 25,094,925 27,592,506
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
283,952,952 (201,619,624) 316,105,186 (287,874,562) 154,898,319 (71,200,383) 273,289,822 (77,242,937)
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
957,834,413 1,159,454,037 1,066,764,447 1,354,639,009 250,738,902 321,939,285 718,198,285 795,441,222
-------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------
$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
============== ============== ============== ============== ============ ============ ============ ============
</Table>
See Notes to Financial Statements.
137
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
MONEY MARKET FUND
-----------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ -------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01 0.01 0.01 0.01 0.02 0.01
Realized and unrealized gain (loss)
on investments -- net -- -- -- -- -- --
------ ------- ------- -------- -------- --------
Total from investment operations 0.01 0.01 0.01 0.01 0.02 0.01
------ ------- ------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.01) (0.01) (0.01) (0.01) (0.02) (0.01)
Distributions from capital gains --++ --++ -- --++ --++ --
------ ------- ------- -------- -------- --------
Total dividends and distributions (0.01) (0.01) (0.01) (0.01) (0.02) (0.01)
------ ------- ------- -------- -------- --------
NET ASSET VALUE -- END OF THE PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ======= ======= ======== ======== ========
Total Return (1) 0.57% 1.38% 0.81% 0.85% 1.60% 0.94%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.73% 0.65% 0.75% 0.45% 0.45% 0.44%
Expenses -- including expense
reduction (2) 0.73% 0.65% 0.75% 0.45% 0.44% 0.44%
Expenses -- before waivers and
expense reduction (2) 0.91% 0.77% 16.37% 0.45% 0.50% 0.49%
Investment income -- net (2) 0.61% 1.35% 1.98% 0.84% 1.58% 2.72%
Investment income (loss) -- excluding
waivers and expense reduction (2) 0.43% 1.23% (13.64%) 0.84% 1.52% 2.67%
Portfolio turnover rate (1) N/A N/A N/A N/A N/A N/A
Net Assets -- end of the period (000's) $8,035 $16,538 $ 788 $853,062 $906,302 $996,380
====== ======= ======= ======== ======== ========
<Caption>
MONEY MARKET FUND
----------------------------------
INSTITUTIONAL CLASS
----------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01
-------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01 0.02 0.01
Realized and unrealized gain (loss)
on investments -- net -- -- --
------- ------ -------
Total from investment operations 0.01 0.02 0.01
------- ------ -------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.01) (0.02) (0.01)
Distributions from capital gains --++ --++ --
------- ------ -------
Total dividends and distributions (0.01) (0.02) (0.01)
------- ------ -------
NET ASSET VALUE -- END OF THE PERIOD $ 1.00 $ 1.00 $ 1.00
======= ====== =======
Total Return (1) 1.04% 1.80% 0.66%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.27% 0.25% 0.25%
Expenses -- including expense
reduction (2) 0.27% 0.25% 0.25%
Expenses -- before waivers and
expense reduction (2) 0.28% 0.55% 90.37%
Investment income -- net (2) 0.91% 1.75% 2.60%
Investment income (loss) -- excluding
waivers and expense reduction (2) 0.90% 1.45% (87.52%)
Portfolio turnover rate (1) N/A N/A N/A
Net Assets -- end of the period (000's) $63,373 $5,493 $ 25
======= ====== =======
</Table>
- ---------------
* Commencement of operations.
# Calculated using the average shares outstanding method.
(1) Non-annualized.
(2) Annualized.
+ Amount represents less than $0.01 per share.
See Notes to Financial Statements.
138
<Table>
<Caption>
LOW-DURATION BOND FUND
------------------------------------------------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS
------------------------------------ ------------------------------------ ------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ ---------- -------- ------------ ---------- -------- ------------
$ 9.79 $ 9.86 $ 10.00 $ 13.16 $ 13.06 $ 13.10 $ 9.76 $ 9.85 $ 10.00
------- ------- ------- -------- -------- -------- ------- ------- -------
0.21# 0.33# 0.22 0.32# 0.46# 0.21 0.22# 0.37# 0.15
-- 0.22 (0.06) -- 0.27 0.05 0.03 0.19 --
------- ------- ------- -------- -------- -------- ------- ------- -------
0.21 0.55 0.16 0.32 0.73 0.26 0.25 0.56 0.15
------- ------- ------- -------- -------- -------- ------- ------- -------
(0.33) (0.47) (0.22) (0.35) (0.48) (0.22) (0.37) (0.50) (0.22)
(0.13) (0.15) (0.08) (0.13) (0.15) (0.08) (0.13) (0.15) (0.08)
------- ------- ------- -------- -------- -------- ------- ------- -------
(0.46) (0.62) (0.30) (0.48) (0.63) (0.30) (0.50) (0.65) (0.30)
------- ------- ------- -------- -------- -------- ------- ------- -------
$ 9.54 $ 9.79 $ 9.86 $ 13.00 $ 13.16 $ 13.06 $ 9.51 $ 9.76 $ 9.85
======= ======= ======= ======== ======== ======== ======= ======= =======
2.20% 5.70% 1.54% 2.45% 5.71% 1.96% 2.61% 5.89% 1.54%
0.85% 0.79% 0.85% 0.61% 0.62% 0.61% 0.45% 0.46% 0.45%
0.84% 0.79% 0.85% 0.61% 0.61% 0.61% 0.45% 0.45% 0.45%
0.87% 0.93% 74.57% 0.67% 0.72% 0.72% 0.50% 0.78% 57.60%
2.17% 3.35% 4.18% 2.42% 3.50% 4.47% 2.29% 3.71% 4.73%
2.14% 3.21% (69.54%) 2.36% 3.39% 4.36% 2.24% 3.38% (52.42%)
178.67% 181.96% 79.53% 178.67% 181.96% 79.53% 178.67% 181.96% 79.53%
$22,452 $20,985 $ 3,458 $727,265 $763,987 $812,387 $53,726 $ 6,320 $ 25
======= ======= ======= ======== ======== ======== ======= ======= =======
</Table>
See Notes to Financial Statements.
139
<Table>
<Caption>
MEDIUM-DURATION BOND FUND
-----------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ -------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.53 $ 9.70 $ 10.00 $ 13.54 $ 13.37 $ 13.60
------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.29# 0.42# 0.17 0.46# 0.62# 0.22
Realized and unrealized gain (loss)
on investments -- net 0.31 0.41 (0.04) 0.43 0.57 (0.02)
------- ------- ------- -------- -------- --------
Total from investment operations 0.60 0.83 0.13 0.89 1.19 0.20
------- ------- ------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.54) (0.63) (0.23) (0.56) (0.65) (0.23)
Distributions from capital gains (0.29) (0.37) (0.20) (0.29) (0.37) (0.20)
Return of capital -- -- --++ -- -- --++
------- ------- ------- -------- -------- --------
Total dividends and distributions (0.83) (1.00) (0.43) (0.85) (1.02) (0.43)
------- ------- ------- -------- -------- --------
NET ASSET VALUE -- END OF THE PERIOD $ 9.30 $ 9.53 $ 9.70 $ 13.58 $ 13.54 $ 13.37
======= ======= ======= ======== ======== ========
Total Return (1) 6.33% 8.90% 1.30% 6.62% 9.15% 1.49%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.90% 0.90% 0.92% 0.62% 0.63% 0.64%
Expenses--including expense reduction
(2) 0.90% 0.90% 0.90% 0.62% 0.62% 0.62%
Expenses -- before waivers and
expense reduction (2) 0.96% 1.03% 58.64% 0.71% 0.77% 0.77%
Investment income -- net (2) 3.02% 4.33% 4.48% 3.36% 4.58% 4.61%
Investment income (loss) -- excluding
waivers and expense reduction (2) 2.96% 4.20% (53.26%) 3.27% 4.43% 4.46%
Portfolio turnover rate (1) 457.74% 542.94% 247.20% 457.74% 542.94% 247.20%
Net Assets -- end of the period (000's) $22,640 $19,289 $ 123 $741,743 $767,926 $827,774
======= ======= ======= ======== ======== ========
<Caption>
MEDIUM-DURATION BOND FUND
----------------------------------
INSTITUTIONAL CLASS
----------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01
-------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.47 $ 9.65 $ 10.00
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28# 0.46# 0.16
Realized and unrealized gain (loss)
on investments -- net 0.36 0.40 (0.08)
------- ------- --------
Total from investment operations 0.64 0.86 0.08
------- ------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.58) (0.67) (0.23)
Distributions from capital gains (0.29) (0.37) (0.20)
Return of capital -- -- --++
------- ------- --------
Total dividends and distributions (0.87) (1.04) (0.43)
------- ------- --------
NET ASSET VALUE -- END OF THE PERIOD $ 9.24 $ 9.47 $ 9.65
======= ======= ========
Total Return (1) 6.80% 9.25% 0.89%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.50% 0.51% 0.52%
Expenses--including expense reduction
(2) 0.50% 0.50% 0.50%
Expenses -- before waivers and
expense reduction (2) 0.55% 0.82% 92.28%
Investment income -- net (2) 2.95% 4.73% 4.98%
Investment income (loss) -- excluding
waivers and expense reduction (2) 2.90% 4.41% (86.80%)
Portfolio turnover rate (1) 457.74% 542.94% 247.20%
Net Assets -- end of the period (000's) $46,521 $ 7,218 $ 25
======= ======= ========
</Table>
- ---------------
* Commencement of operations.
# Calculated using the average shares outstanding method.
(1) Non-annualized.
(2) Annualized.
++ Amount represents less than $0.01 per share.
See Notes to Financial Statements.
140
<Table>
<Caption>
EXTENDED-DURATION BOND FUND
------------------------------------------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS
---------------------------------- ---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ -------- -------- ------------ -------- -------- ------------
$ 9.63 $ 9.83 $ 10.00 $ 14.62 $ 14.37 $ 14.38 $ 9.64 $ 9.84 $ 10.00
------- ------- ------- -------- -------- -------- ------- ------ -------
0.52# 0.62 0.32 0.83# 0.90 0.32 0.54# 0.65 0.24
0.50 0.29 (0.13) 0.77 0.47 0.03 0.51 0.29 (0.03)
------- ------- ------- -------- -------- -------- ------- ------ -------
1.02 0.91 0.19 1.60 1.37 0.35 1.05 0.94 0.21
------- ------- ------- -------- -------- -------- ------- ------ -------
(0.76) (0.87) (0.32) (0.77) (0.88) (0.32) (0.79) (0.90) (0.33)
(0.67) (0.24) (0.04) (0.67) (0.24) (0.04) (0.67) (0.24) (0.04)
-- -- -- -- -- -- -- -- --
------- ------- ------- -------- -------- -------- ------- ------ -------
(1.43) (1.11) (0.36) (1.44) (1.12) (0.36) (1.46) (1.14) (0.37)
------- ------- ------- -------- -------- -------- ------- ------ -------
$ 9.22 $ 9.63 $ 9.83 $ 14.78 $ 14.62 $ 14.37 $ 9.23 $ 9.64 $ 9.84
======= ======= ======= ======== ======== ======== ======= ====== =======
10.95% 9.93% 1.91% 11.19% 10.03% 2.48% 11.32% 10.27% 2.13%
0.93% 0.91% 1.06% 0.73% 0.73% 0.74% 0.59% 0.64% 0.66%
0.93% 0.91% 1.05% 0.73% 0.73% 0.73% 0.59% 0.64% 0.65%
0.94% 1.03% 28.96% 0.75% 0.82% 0.84% 0.60% 0.88% 90.75%
5.25% 6.18% 6.14% 5.46% 6.29% 6.32% 5.49% 6.47% 6.62%
5.24% 6.06% (21.77%) 5.44% 6.20% 6.21% 5.48% 6.23% (83.48%)
121.20% 45.17% 21.95% 121.20% 45.17% 21.95% 121.20% 45.17% 21.95%
$27,978 $24,812 $ 8,553 $385,110 $401,198 $404,278 $29,004 $6,506 $ 26
======= ======= ======= ======== ======== ======== ======= ====== =======
</Table>
See Notes to Financial Statements.
141
<Table>
<Caption>
EQUITY INDEX FUND
-----------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ -------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 7.26 $ 9.63 $ 10.00 $ 11.93 $ 15.64 $ 16.15
------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.10# 0.13 0.02 0.18# 0.17 0.05
Realized and unrealized gain (loss)
on investments -- net 1.93 (2.31) (0.28) 3.16 (3.69) (0.46)
------- ------- ------- -------- -------- --------
Total from investment operations 2.03 (2.18) (0.26) 3.34 (3.52) (0.41)
------- ------- ------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.15) (0.16) (0.06) (0.15) (0.16) (0.05)
Distributions from capital gains -- (0.03) (0.05) -- (0.03) (0.05)
Return of capital -- -- -- -- -- --
------- ------- ------- -------- -------- --------
Total dividends and distributions (0.15) (0.19) (0.11) (0.15) (0.19) (0.10)
------- ------- ------- -------- -------- --------
NET ASSET VALUE -- END OF THE PERIOD $ 9.14 $ 7.26 $ 9.63 $ 15.12 $ 11.93 $ 15.64
======= ======= ======= ======== ======== ========
Total Return (1) 28.09% (22.71%) (2.65%) 28.03% (22.59%) (2.55%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.45% 0.45% 0.45% 0.40% 0.40% 0.40%
Expenses -- including expense
reduction (2) 0.45% 0.45% 0.45% 0.40% 0.40% 0.40%
Expenses -- before waivers and
expense reduction (2) 0.73% 0.81% 28.52% 0.44% 0.51% 0.53%
Investment income -- net (2) 1.28% 1.21% 0.95% 1.33% 1.21% 0.98%
Investment income (loss) -- excluding
waivers and expense reduction (2) 1.00% 0.85% (27.12%) 1.29% 1.10% 0.85%
Portfolio turnover rate (1) 1.87% 3.17% 2.81% 1.87% 3.17% 2.81%
Net Assets -- end of the period (000's) $17,395 $12,890 $ 367 $382,067 $295,261 $401,471
======= ======= ======= ======== ======== ========
<Caption>
EQUITY INDEX FUND
----------------------------------
INSTITUTIONAL CLASS
----------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01
-------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 7.22 $ 9.58 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.12# 0.14 0.03
Realized and unrealized gain (loss)
on investments -- net 1.91 (2.29) (0.34)
------- ------- -------
Total from investment operations 2.03 (2.15) (0.31)
------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.17) (0.18) (0.06)
Distributions from capital gains -- (0.03) (0.05)
Return of capital -- -- --
------- ------- -------
Total dividends and distributions (0.17) (0.21) (0.11)
------- ------- -------
NET ASSET VALUE -- END OF THE PERIOD $ 9.08 $ 7.22 $ 9.58
======= ======= =======
Total Return (1) 28.19% (22.57%) (3.14%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.25% 0.25% 0.25%
Expenses -- including expense
reduction (2) 0.25% 0.25% 0.25%
Expenses -- before waivers and
expense reduction (2) 0.28% 0.60% 86.25%
Investment income -- net (2) 1.46% 1.40% 1.19%
Investment income (loss) -- excluding
waivers and expense reduction (2) 1.43% 1.05% (84.81%)
Portfolio turnover rate (1) 1.87% 3.17% 2.81%
Net Assets -- end of the period (000's) $33,009 $ 4,737 $ 28
======= ======= =======
</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>
VALUE EQUITY FUND
--------------------------------------------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS
---------------------------------- ------------------------------------ ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ ---------- -------- ------------ -------- -------- ------------
$ 7.75 $ 9.61 $ 10.00 $ 11.85 $ 14.57 $ 15.21 $ 7.77 $ 9.64 $ 10.00
------- ------- ------- ---------- -------- ---------- ------- ------- -------
0.11# 0.15 0.03 0.21# 0.21 0.06 0.14# 0.16 0.06
2.23 (1.82) (0.35) 3.43 (2.73) (0.64) 2.26 (1.80) (0.35)
------- ------- ------- ---------- -------- ---------- ------- ------- -------
2.34 (1.67) (0.32) 3.64 (2.52) (0.58) 2.40 (1.64) (0.29)
------- ------- ------- ---------- -------- ---------- ------- ------- -------
(0.19) (0.19) (0.07) (0.21) (0.20) (0.06) (0.23) (0.23) (0.07)
-- -- -- -- -- -- -- -- --
-- --++ -- -- --++ -- -- --++ --
------- ------- ------- ---------- -------- ---------- ------- ------- -------
(0.19) (0.19) (0.07) (0.21) (0.20) (0.06) (0.23) (0.23) (0.07)
------- ------- ------- ---------- -------- ---------- ------- ------- -------
$ 9.90 $ 7.75 $ 9.61 $ 15.28 $ 11.85 $ 14.57 $ 9.94 $ 7.77 $ 9.64
======= ======= ======= ========== ======== ========== ======= ======= =======
30.46% (17.48%) (3.23%) 30.84% (17.37%) (3.79%) 31.09% (17.22%) (2.88%)
1.15% 1.15% 1.15% 0.90% 0.90% 0.90% 0.76% 0.76% 0.76%
1.13% 1.11% 1.15% 0.88% 0.87% 0.90% 0.75% 0.72% 0.76%
1.20% 1.29% 65.50% 0.94% 0.98% 1.00% 0.78% 1.06% 81.37%
1.33% 1.38% 1.12% 1.59% 1.57% 1.29% 1.62% 1.77% 1.60%
1.26% 1.20% (63.23%) 1.53% 1.46% 1.19% 1.59% 1.43% (79.01%)
53.74% 70.42% 21.09% 53.74% 70.42% 21.09% 53.74% 70.42% 21.09%
$19,680 $13,987 $ 168 $1,152,116 $938,583 $1,159,209 $69,991 $ 5,265 $ 77
======= ======= ======= ========== ======== ========== ======= ======= =======
</Table>
See Notes to Financial Statements.
143
<Table>
<Caption>
GROWTH EQUITY FUND
-----------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
------------------------------------ --------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
---------- -------- ------------ ---------- ---------- ------------
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE -- BEGINNING
OF PERIOD $ 7.03 $ 9.81 $ 10.00 $ 11.23 $ 15.63 $ 15.93
------- ------- ------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.02) (0.02) --++ (0.01) (0.01) (0.01)
Realized and unrealized gain
(loss) on
investments -- net 2.07 (2.76) (0.19) 3.33 (4.39) (0.29)
------- ------- ------- ---------- ---------- ----------
Total from investment
operations 2.05 (2.78) (0.19) 3.32 (4.40) (0.30)
------- ------- ------- ---------- ---------- ----------
LESS DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income -- -- -- -- -- --
Distributions from capital
gains -- -- -- -- -- --
------- ------- ------- ---------- ---------- ----------
Total dividends and
distributions -- -- -- -- -- --
------- ------- ------- ---------- ---------- ----------
NET ASSET VALUE -- END OF THE
PERIOD $ 9.08 $ 7.03 $ 9.81 $ 14.55 $ 11.23 $ 15.63
======= ======= ======= ========== ========== ==========
Total Return (1) 29.16% (28.34%) (1.90%) 29.56% (28.15%) (1.88%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 1.17% 1.15% 1.15% 0.92% 0.90% 0.90%
Expenses -- including
expense reduction (2) 1.15% 1.12% 1.15% 0.90% 0.88% 0.90%
Expenses -- before waivers
and expense reduction (2) 1.33% 1.36% 47.77% 1.01% 1.02% 1.05%
Investment income -- net (2) (0.33%) (0.28%) (0.32%) (0.07%) (0.05%) (0.11%)
Investment income (loss) --
excluding waivers and
expense reduction (2) (0.51%) (0.52%) (46.94%) (0.18%) (0.19%) (0.26%)
Portfolio turnover rate (1) 77.02% 41.41% 8.71% 77.02% 41.41% 8.71%
Net Assets -- end of the
period (000's) $18,099 $12,503 $ 309 $1,285,223 $1,049,709 $1,354,301
======= ======= ======= ========== ========== ==========
<Caption>
GROWTH EQUITY FUND
------------------------------------
INSTITUTIONAL CLASS
------------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01
---------- -------- ------------
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE -- BEGINNING
OF PERIOD $ 7.07 $ 9.83 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.01) 0.01 --++
Realized and unrealized gain
(loss) on
investments -- net 2.10 (2.77) (0.17)
------- ------- -------
Total from investment
operations 2.09 (2.76) (0.17)
------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income -- -- --
Distributions from capital
gains -- -- --
------- ------- -------
Total dividends and
distributions -- -- --
------- ------- -------
NET ASSET VALUE -- END OF THE
PERIOD $ 9.16 $ 7.07 $ 9.83
======= ======= =======
Total Return (1) 29.56% (28.08%) (1.70%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.81% 0.78% 0.78%
Expenses -- including
expense reduction (2) 0.79% 0.75% 0.78%
Expenses -- before waivers
and expense reduction (2) 0.85% 1.14% 83.19%
Investment income -- net (2) (0.03%) 0.09% 0.02%
Investment income (loss) --
excluding waivers and
expense reduction (2) (0.09%) (0.30%) (82.39%)
Portfolio turnover rate (1) 77.02% 41.41% 8.71%
Net Assets -- end of the
period (000's) $79,547 $ 4,553 $ 29
======= ======= =======
</Table>
- ---------------
* Commencement of operations.
++ Amount represents less than $0.01 per share.
(1) Non-annualized.
(2) Annualized.
See Notes to Financial Statements.
144
<Table>
<Caption>
SMALL CAP EQUITY FUND
------------------------------------------------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS
---------------------------------- ---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ -------- -------- ------------ -------- -------- ------------
$ 7.83 $ 10.09 $ 10.00 $ 10.25 $ 13.18 $ 13.07 $ 7.88 $ 10.12 $ 10.00
------- ------- -------- -------- -------- -------- ------- ------- -------
(0.04) (0.04) --++ (0.04) (0.02) (0.01) (0.03) (0.01) --++
3.62 (2.22) 0.09 4.78 (2.91) 0.12 3.67 (2.23) 0.12
------- ------- -------- -------- -------- -------- ------- ------- -------
3.58 (2.26) 0.09 4.74 (2.93) 0.11 3.64 (2.24) 0.12
------- ------- -------- -------- -------- -------- ------- ------- -------
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- ------- ------- -------
-- -- -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- ------- ------- -------
$ 11.41 $ 7.83 $ 10.09 $ 14.99 $ 10.25 $ 13.18 $ 11.52 $ 7.88 $ 10.12
======= ======= ======== ======== ======== ======== ======= ======= =======
45.72% (22.40%) 0.90% 46.24% (22.23%) 0.84% 46.19% (22.13%) 1.20%
1.50% 1.50% 1.50% 1.25% 1.25% 1.25% 1.18% 1.18% 1.18%
1.44% 1.43% 1.50% 1.19% 1.19% 1.25% 1.12% 1.11% 1.18%
1.70% 1.82% 123.38% 1.43% 1.51% 1.52% 1.27% 1.60% 76.30%
(0.59%) (0.44%) (0.28%) (0.34%) (0.19%) (0.13%) (0.26%) (0.12%) 0.12%
(0.85%) (0.83%) (122.16%) (0.58%) (0.51%) (0.40%) (0.41%) (0.61%) (75.00%)
130.80% 160.46% 91.89% 130.80% 160.46% 91.89% 130.80% 160.46% 91.89%
$22,520 $12,878 $ 115 $357,703 $232,992 $321,743 $25,415 $ 4,869 $ 81
======= ======= ======== ======== ======== ======== ======= ======= =======
</Table>
See Notes to Financial Statements.
145
<Table>
<Caption>
INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------------
RETAIL CLASS RETIREMENT CLASS
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01
-------- -------- ------------ -------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 8.19 $ 9.43 $ 10.00 $ 9.66 $ 11.09 $ 11.66
------- ------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.10# 0.06 (0.01)# 0.15# 0.11 0.01
Realized and unrealized gain (loss)
on investments -- net 2.80 (1.21) (0.53) 3.31 (1.43) (0.55)
------- ------- -------- -------- -------- --------
Total from investment operations 2.90 (1.15) (0.54) 3.46 (1.32) (0.54)
------- ------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.14) (0.09) (0.03) (0.16) (0.11) (0.03)
Distributions from capital gains -- -- -- -- -- --
Return of capital -- --++ -- -- --++ --
------- ------- -------- -------- -------- --------
Total dividends and distributions (0.14) (0.09) (0.03) (0.16) (0.11) (0.03)
------- ------- -------- -------- -------- --------
------- ------- -------- -------- -------- --------
NET ASSET VALUE -- END OF THE PERIOD $ 10.95 $ 8.19 $ 9.43 $ 12.96 $ 9.66 $ 11.09
======= ======= ======== ======== ======== ========
Total Return (1) 35.47% (12.18%) (5.40%) 35.81% (11.94%) (4.61%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 1.36% 1.37% 1.45% 1.15% 1.15% 1.15%
Expenses -- including expense
reduction (2) 1.34% 1.34% 1.45% 1.13% 1.12% 1.15%
Expenses -- before waivers and
expense reduction (2) 1.50% 1.64% 256.83% 1.31% 1.35% 1.37%
Investment income -- net (2) 1.14% 0.88% (0.32%) 1.39% 1.00% 0.28%
Investment income (loss) -- excluding
waivers and expense reduction (2) 0.98% 0.58% (255.70%) 1.21% 0.77% 0.06%
Portfolio turnover rate (1) 33.24% 30.13% 20.05% 33.24% 30.13% 20.05%
Net Assets -- end of the period (000's) $20,434 $14,078 $ 51 $920,664 $698,704 $795,363
======= ======= ======== ======== ======== ========
<Caption>
INTERNATIONAL EQUITY FUND
----------------------------------
INSTITUTIONAL CLASS
----------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 08/27/01* TO
12/31/03 12/31/02 12/31/01
-------- -------- ------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE -- BEGINNING OF PERIOD $ 8.26 $ 9.50 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.08# 0.11 --++
Realized and unrealized gain (loss)
on investments -- net 2.90 (1.22) (0.47)
------- ------- -------
Total from investment operations 2.98 (1.11) (0.47)
------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (0.18) (0.13) (0.03)
Distributions from capital gains -- -- --
Return of capital -- --++ --
------- ------- -------
Total dividends and distributions (0.18) (0.13) (0.03)
------- ------- -------
------- ------- -------
NET ASSET VALUE -- END OF THE PERIOD $ 11.06 $ 8.26 $ 9.50
======= ======= =======
Total Return (1) 36.06% (11.72%) (4.69%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses -- net (2) 0.97% 0.96% 0.96%
Expenses -- including expense
reduction (2) 0.95% 0.93% 0.96%
Expenses -- before waivers and
expense reduction (2) 1.14% 1.43% 88.97%
Investment income -- net (2) 0.86% 1.29% 0.11%
Investment income (loss) -- excluding
waivers and expense reduction (2) 0.67% 0.79% (87.90%)
Portfolio turnover rate (1) 33.24% 30.13% 20.05%
Net Assets -- end of the period (000's) $50,390 $ 5,416 $ 27
======= ======= =======
</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.
146
NOTES TO FINANCIAL STATEMENTS
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".
Certain prior year amounts have been adjusted to conform with current year
presentation.
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
147
the last 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.
148
OPTIONS -- The 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.
The 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 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.
149
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.
150
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 December 31, 2003, 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% .03%
Value Equity .43% .27%
</Table>
<Table>
<Caption>
FUND ADVISORY FEES SUB-ADVISER FEES
- ---- ------------- ----------------
Growth Equity .48% .29%
Small Cap Equity .30% .79%
International Equity .47% .51%
</Table>
For the period ended December 31, 2003, advisory fees and waivers for each Fund
were as follows:
<Table>
<Caption>
GROSS NET ADVISORY
ADVISORY FEE WAIVERS FEE
------------ ----------- ------------
Flexible Income $ 273,519 $ (114,343) $ 159,176
Growth & Income 1,054,654 (21,177) 1,033,477
Capital Opportunities 803,747 (55,595) 748,152
Global Equity 687,853 (69,563) 618,290
Flexible Income I 13,907 (34,438) (20,531)
Growth & Income I 33,200 (37,020) (3,820)
Capital Opportunities
I 25,846 (37,372) (11,526)
Global Equity I 11,400 (36,813) (25,413)
Money Market 1,311,922 (22,759) 1,289,163
Low-Duration Bond 1,593,181 (441,527) 1,151,654
Medium-Duration Bond 1,839,564 (714,302) 1,125,262
Extended-Duration
Bond 1,203,470 (95,841) 1,107,629
Equity Index 510,356 (183,553) 326,803
Value Equity 4,511,177 (437,954) 4,073,223
Growth Equity 5,790,679 (1,146,568) 4,644,111
Small Cap Equity 901,742 (523,923) 377,819
International Equity 3,752,543 (1,263,010) 2,489,533
</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
compensate the Annuity Board, the Distributor or others for certain expenses
relating to the distribution of shares
151
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, 2004, 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>
During the period January 1, 2003 through April 30, 2003, SBCFS agreed to waive
fees and reimburse expenses of the Retail Class (excluding interest, taxes,
brokerage commissions and extraordinary expenses) which exceeded, in the
aggregate, the annual percentage rate of each class's average daily net assets
for the following Funds:
<Table>
<Caption>
RETAIL
FUND CLASS
- ---- ------
Flexible Income .48%
Growth & Income .48%
Global Equity .48%
Money Market .75%
International Equity 1.45%
</Table>
During the period January 1, 2003 through July 15, 2003, SBCFS agreed to waive
fees and reimburse expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses) which exceeded, in the aggregate, the annual
percentage rate of each class's average daily net assets for the following
Funds/Class:
<Table>
<Caption>
EXPENSE
FUND RATIO
- ---- -------
Capital Opportunities -- Retail Class .48%
Money Market -- Institutional Class .25%
International Equity -- Institutional
Class .96%
</Table>
During the period January 1, 2003 through October 31, 2003, SBCFS agreed to
waive fees and reimburse expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses) which exceeded, in the aggregate, the
annual percentage rate of each class's average daily net assets for the Growth
Equity Fund as follows:
<Table>
<Caption>
RETAIL RETIREMENT INSTITUTIONAL
FUND CLASS CLASS CLASS
- ---- ------ ---------- -------------
Growth Equity 1.15% .90% .78%
</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 expenses paid through Brokerage
Service Arrangements for the period ended December 31, 2003 were as follows:
<Table>
<Caption>
EXPENSES PAID
THROUGH BROKERAGE
FUND SERVICE ARRANGEMENTS
- ---- --------------------
Value Equity $198,121
Growth Equity 196,500
Small Cap Equity 193,693
International Equity 169,073
</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
152
expenses. During the period ended December 31, 2003, expenses reduced were as
follows:
<Table>
<Caption>
REDUCTION TO
FUND EXPENSES
- ---- ------------
Flexible Income $ 1,024
Growth & Income 395
Capital Opportunities 232
Global Equity 249
Flexible Income I 55
Growth & Income I 47
Capital Opportunities I 48
Global Equity I 51
Money Market 7,950
Low-Duration Bond 28,847
Medium-Duration Bond 18,975
Extended-Duration Bond 3,392
Equity Index 443
Value Equity 6,728
Growth Equity 1,036
Small Cap Equity 454
International Equity 726
</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 December 31, 2003, PFPC
received $3,978,572 in fees and expenses (net of waivers of $98,658) 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 December 31,
2003, the market values of loaned securities and collateral received were as
follows:
<Table>
<Caption>
MARKET VALUE OF MARKET VALUE OF
FUND SECURITIES LOANED COLLATERAL
- ---- ----------------- ---------------
Money Market $ 10,440,941 $ 10,646,830
Low-Duration Bond 278,262,422 281,449,299
Medium-Duration Bond 188,293,358 191,665,808
Extended-Duration Bond 133,234,273 135,859,041
Equity Index 24,818,321 25,487,050
Value Equity 133,585,805 137,009,843
Growth Equity 70,392,278 72,225,032
Small Cap Equity 102,781,263 106,633,119
International Equity 82,411,268 86,048,255
</Table>
5. INVESTMENT TRANSACTIONS
For the period ended December 31, 2003, the cost of purchases and proceeds from
sales and maturities (other
153
than short-term and U.S. Government obligations) aggregated for each Fund are as
follows:
<Table>
<Caption>
SALE AND MATURITY
FUND PURCHASES PROCEEDS
- ---- ------------ -----------------
Flexible Income $ 12,700,000 $ 41,272,612
Growth & Income 68,250,000 151,085,553
Capital Opportunities 45,250,000 73,615,223
Global Equity 28,000,000 37,844,308
Flexible Income I 28,485,835 830,000
Growth & Income I 65,199,205 650,000
Capital Opportunities
I 50,315,222 550,000
Global Equity I 21,644,308 200,000
Low-Duration 165,213,321 285,389,930
Medium-Duration 397,319,678 550,703,208
Extended-Duration 88,238,153 323,794,977
Equity Index 33,110,742 3,799,102
Value Equity 561,146,855 538,762,187
Growth Equity 850,858,533 844,684,983
Small Cap Equity 407,536,059 370,129,109
International Equity 279,163,464 262,113,190
</Table>
For the period ended December 31, 2003, 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
FUND PURCHASES PROCEEDS
- ---- -------------- -----------------
Flexible Income $ 23,827,663 $ 25,437,337
Growth & Income 39,942,613 36,731,457
Capital Opportunities 15,650,152 15,183,375
Flexible Income I 1,674,066 1,377,124
Growth & Income I 3,000,856 2,330,792
Capital Opportunities
I 1,222,220 965,048
Low-Duration 966,444,605 938,336,765
Medium-Duration 3,171,897,070 3,218,419,078
Extended-Duration 434,484,701 215,310,694
</Table>
FUTURES CONTRACTS
Investments in securities as of December 31, 2003, 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
March 2004 S&P 500 $ 89,956 2 $ 1,098,625 $ 22,337
==========
GROWTH & INCOME FUND
March 2004 S&P 500 $ 714,651 41 11,383,650 $ 453,153
==========
CAPITAL OPPORTUNITIES FUND
March 2004 S&P 500 $ 914,551 43 11,938,950 $ 527,791
==========
GLOBAL EQUITY FUND
March 2004 S&P 500 $1,259,385 74 20,546,100 $ 703,681
==========
FLEXIBLE INCOME FUND I
March 2004 S&P 500 E-Mini $ 9,995 2 111,060 $ 3,732
==========
GROWTH & INCOME FUND I
March 2004 S&P 500 E-Mini $ 69,965 11 610,830 $ 18,081
==========
CAPITAL OPPORTUNITIES FUND I
March 2004 S&P 500 E-Mini $ 79,961 13 721,890 $ 29,231
==========
GLOBAL EQUITY FUND I
March 2004 S&P 500 E-Mini $ 54,973 8 444,240 $ 14,191
==========
</Table>
154
<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 90-Day Euro $ 19,202 16 $ 3,913,600 $ 35,200
December 2005 90-Day Euro $ 75,631 64 15,414,400 12,000
March 2004 10-Year Euro-Bund $ 21,930 17 2,425,631 23,816
March 2004 10-Year U.S. Treasury Note $ 172,655 41 4,602,891 34,403
March 2004 2-Year U.S. Treasury Note $1,637,156 348 74,488,312 249,326
March 2004 5-Year U.S. Treasury Note $1,085,679 (110) 12,278,750 (110,679)
March 2007 90-Day Euro $ 170,118 79 18,815,825 57,275
----------
$ 301,341
==========
MEDIUM-DURATION BOND FUND
December 2004 3-Month EURIBOR $ 11,498 3 $ 920,472 $ 1,517
December 2004 90-Day LIBOR $ 74,531 28 5,966,683 (15,752)
June 2004 90-Day LIBOR $ 21,384 8 1,711,927 (9,199)
March 2004 10-Year Euro-Bund $ 532,908 299 42,662,563 654,395
March 2004 10-Year U.S. Treasury Note $1,312,938 583 65,450,859 422,181
March 2004 2-Year U.S. Treasury Note $ 153,199 82 17,551,844 65,256
March 2004 5-Year U.S. Treasury Note $ 165,881 (101) 11,274,125 (6,219)
March 2004 90-Day LIBOR $ 21,422 8 1,714,970 (9,400)
March 2004 U.S. Treasury Bond $ 87,688 67 7,323,938 (32,927)
March 2005 90-Day LIBOR $ 74,430 28 5,958,538 (70,752)
March 2007 90-Day Euro $ 205,282 69 16,434,075 50,025
September 2004 2005 90-Day LIBOR $ 24,002 9 1,921,487 (15,985)
September 2004 90-Day Euro $ 3,923 1 245,613 1,870
----------
$1,035,010
==========
EQUITY INDEX FUND
March 2004 S&P 500 $ 954,531 36 9,995,400 $ 436,185
==========
VALUE EQUITY FUND
March 2004 Russell 1000 $ 129,936 2 593,900 $ 20,013
March 2004 S&P 500 $3,808,128 106 29,430,900 1,190,663
----------
$1,210,676
==========
GROWTH EQUITY FUND
March 2004 S&P 500 $3,803,131 156 43,313,400 $1,736,764
==========
SMALL CAP EQUITY FUND
March 2004 Russell 1000 $ 941,262 27 7,522,200 $ 182,913
March 2004 S&P 500 $ 972,795 28 7,774,200 289,757
----------
$ 472,670
==========
</Table>
155
FORWARD FOREIGN CURRENCY CONTRACTS
As of December 31, 2003, 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
1/7/2004 European Euro 178,000 US Dollars 214,503 $ (9,030)
1/7/2004 Swedish Krona 47,059,717 US Dollars 6,092,661 (428,371)
1/8/2004 European Euro 2,453,938 US Dollars 2,846,569 (235,003)
1/8/2004 European Euro 5,280,214 US Dollars 6,283,455 (347,256)
1/12/2004 Canadian Dollars 7,814,580 US Dollars 5,982,522 $ (50,582)
2/10/2004 US Dollars 79,176 European Euro 63,000 (135)
-----------
$(1,070,377)
===========
MEDIUM-DURATION BOND
FUND
1/7/2004 European Euro 679,000 US Dollars 846,026 $ (6,664)
1/7/2004 European Euro 825,000 US Dollars 1,040,178 4,142
1/7/2004 European Euro 986,000 US Dollars 1,188,200 (50,020)
1/7/2004 European Euro 1,258,000 US Dollars 1,560,489 (19,310)
1/7/2004 US Dollars 841,024 European Euro 680,000 12,921
1/7/2004 US Dollars 5,577,043 European Euro 4,613,000 215,970
1/9/2004 European Euro 660,192 US Dollars 782,988 (46,035)
1/23/2004 British Pounds 297,000 US Dollars 512,983 (15,913)
2/10/2004 European Euro 6,004,282 US Dollars 6,938,069 (594,921)
2/10/2004 European Euro 12,983,424 US Dollars 14,989,623 (1,299,417)
2/10/2004 US Dollars 2,658,189 European Euro 2,301,463 229,233
2/10/2004 US Dollars 535,936 European Euro 464,014 46,217
2/10/2004 US Dollars 3,946,069 European Euro 3,416,510 340,295
3/11/2004 South African Rand 6,233,299 US Dollars 957,790 39,282
-----------
$(1,144,220)
===========
GROWTH EQUITY
3/17/2004 European Euro 3,693,892 US Dollars 4,567,497 $ (62,395)
3/17/2004 European Euro 3,339,076 US Dollars 4,120,754 (64,416)
-----------
$ (126,811)
===========
INTERNATIONAL EQUITY
1/20/2004 Japanese Yen 137,983,755 Canadian Dollars 1,688,288 $ 18,124
1/30/2004 British Pounds 7,805,000 US Dollars 13,183,269 (708,109)
3/4/2004 Japanese Yen 77,445,300 US Dollars 670,000 (52,133)
5/12/2004 Swiss Francs 2,244,287 British Pounds 999,193 (49,847)
5/26/2004 Swiss Francs 3,125,749 Japanese Yen 261,562,643 (80,889)
-----------
$ (872,854)
===========
</Table>
156
OPTIONS WRITTEN
Transactions in options written for the period ended December 31, 2003, were as
follows:
<Table>
<Caption>
NUMBER OF PREMIUMS
LOW-DURATION BOND FUND CONTRACTS RECEIVED
- ---------------------- --------- ----------
Options written, 12/31/02 -- $ --
------ ----------
Options written 9,052 1,251,554
Option expired (3,432) (656,030)
Options closed -- --
------ ----------
Options written, 12/31/03 5,620 $ 595,524
====== ==========
</Table>
<Table>
<Caption>
NUMBER OF PREMIUMS
MEDIUM-DURATION BOND FUND CONTRACTS RECEIVED
- ------------------------- --------- ----------
Options written, 12/31/02 5,490 $1,553,865
------ ----------
Options written 15,513 1,790,939
Option expired (9,636) (467,504)
Options closed (1,220) (99,265)
------ ----------
Options written, 12/31/03 10,147 $2,778,035
====== ==========
</Table>
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the period ended December 31, 2003
and the year ended December 31, 2002, are as follows:
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
FLEXIBLE INCOME FUND SHARES VALUE SHARES VALUE
- -------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 256,101 $ 2,445,310 1,670,545 $ 16,393,393
Retirement Class 2,999,652 38,722,374 3,611,419 46,311,965
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 110,248 1,037,416 107,505 980,449
Retirement Class 800,930 10,412,089 987,456 12,264,206
SHARES REDEEMED:
Retail Class (56,429) (541,956) (30,529) (292,173)
Retirement Class (5,542,161) (71,606,987) (5,132,185) (66,166,610)
--------------- ----------------- --------------- ----------------
Net increase (decrease) (1,431,659) $ (19,531,754) 1,214,211 $ 9,491,230
=============== ================= =============== ================
</Table>
157
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
GROWTH & INCOME FUND SHARES VALUE SHARES VALUE
- -------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 335,318 $ 3,061,096 1,804,916 $ 17,382,391
Retirement Class 9,190,592 118,949,665 10,191,589 126,341,627
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 148,121 1,373,027 165,812 1,385,998
Retirement Class 3,751,332 50,267,852 5,235,297 62,038,270
SHARES REDEEMED:
Retail Class (80,573) (707,318) (69,225) (640,608)
Retirement Class (15,705,780) (198,857,253) (15,192,703) (189,399,981)
--------------- ----------------- --------------- ----------------
Net increase (decrease) (2,360,990) $ (25,912,931) 2,135,686 $ 17,107,697
=============== ================= =============== ================
</Table>
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
CAPITAL OPPORTUNITIES FUND SHARES VALUE SHARES VALUE
- -------------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 250,222 $ 2,262,504 1,164,775 $ 11,131,515
Retirement Class 5,903,866 74,733,730 6,015,900 72,058,224
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 47,212 455,568 58,034 467,756
Retirement Class 1,739,145 23,652,360 2,467,745 27,712,780
SHARES REDEEMED:
Retail Class (122,322) (1,106,643) (26,707) (232,493)
Retirement Class (8,385,067) (103,428,690) (7,786,137) (92,920,831)
--------------- ----------------- --------------- ----------------
Net increase (decrease) (566,944) $ (3,431,171) 1,893,610 $ 18,216,951
=============== ================= =============== ================
</Table>
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
GLOBAL EQUITY FUND SHARES VALUE SHARES VALUE
- ------------------ --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 148,557 $ 1,304,684 1,668,192 $ 15,788,091
Retirement Class 5,255,047 63,303,472 4,934,351 56,608,076
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 11,098 110,871 18,489 142,735
Retirement Class 371,322 5,053,687 601,538 6,310,135
SHARES REDEEMED:
Retail Class (37,275) (319,476) (33,843) (271,873)
Retirement Class (6,113,995) (70,734,256) (7,942,881) (91,353,777)
--------------- ----------------- --------------- ----------------
Net decrease (365,246) $ (1,281,018) (754,154) $ (12,776,613)
=============== ================= =============== ================
</Table>
158
<Table>
<Caption>
FLEXIBLE INCOME FUND I GROWTH & INCOME FUND I
------------------------------------ -----------------------------------
FOR THE PERIOD 07/01/03 FOR THE PERIOD 07/01/03
(COMMENCEMENT OF OPERATIONS) (COMMENCEMENT OF OPERATIONS)
THROUGH 12/31/03 THROUGH 12/31/03
------------------------------------ -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- --------------- ----------------
SHARES SOLD 2,963,771 $ 29,681,126 6,980,068 $ 70,055,135
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS 34,697 357,383 170,077 1,804,518
SHARES REDEEMED (221,947) (2,259,021) (375,070) (3,911,770)
--------------- ----------------- --------------- ----------------
Net increase 2,776,521 $ 27,779,488 6,775,075 $ 67,947,883
=============== ================= =============== ================
</Table>
<Table>
<Caption>
CAPITAL OPPORTUNITIES FUND I GLOBAL EQUITY FUND I
------------------------------------ -----------------------------------
FOR THE PERIOD 07/01/03 FOR THE PERIOD 07/01/03
(COMMENCEMENT OF OPERATIONS) (COMMENCEMENT OF OPERATIONS)
THROUGH 12/31/03 THROUGH 12/31/03
------------------------------------ -----------------------------------
SHARES VALUE SHARES VALUE
--------------- ----------------- --------------- ----------------
SHARES SOLD 5,287,084 53,184,082 2,324,815 23,434,827
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS 88,095 976,975 18,045 209,318
SHARES REDEEMED (200,958) (2,151,481) (133,051) (1,424,993)
--------------- ----------------- --------------- ----------------
Net increase 5,174,221 $ 52,009,576 2,209,809 $ 22,219,152
=============== ================= =============== ================
</Table>
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
MONEY MARKET FUND SHARES VALUE SHARES VALUE
----------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 3,800,874 $ 3,800,874 18,106,642 $ 18,106,642
Retirement Class 3,475,735,151 3,475,735,152 2,391,998,542 2,391,998,542
Institutional Class 88,426,471 88,426,471 6,411,127 6,411,127
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 62,338 62,338 213,286 213,286
Retirement Class 4,666,721 4,666,721 9,311,070 9,311,070
Institutional Class 310,135 310,135 98,177 98,177
SHARES REDEEMED:
Retail Class (12,365,637) (12,365,637) (2,568,089) (2,568,089)
Retirement Class (3,533,632,077) (3,533,632,077) (2,491,264,245) (2,491,264,245)
Institutional Class (30,856,125) (30,856,125) (1,041,113) (1,041,113)
--------------- ----------------- --------------- ----------------
Net decrease (3,852,149) $ (3,852,148) (68,734,603) $ (68,734,603)
=============== ================= =============== ================
</Table>
159
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
LOW-DURATION BOND FUND SHARES VALUE SHARES VALUE
---------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 370,361 $ 3,629,836 1,793,207 $ 17,762,300
Retirement Class 12,488,144 165,022,970 10,218,265 134,402,258
Institutional Class 9,852,397 96,600,779 607,288 6,000,000
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 109,633 1,061,162 122,635 1,206,161
Retirement Class 2,037,432 26,739,288 2,813,339 36,945,105
Institutional Class 215,429 2,072,803 40,373 395,941
SHARES REDEEMED:
Retail Class (270,351) (2,642,616) (123,568) (1,220,973)
Retirement Class (16,633,651) (220,077,046) (17,206,689) (226,065,358)
Institutional Class (5,065,621) (49,650,731) (2,556) (25,249)
--------------- ----------------- --------------- ----------------
Net increase (decrease) 3,103,773 $ 22,756,445 (1,737,706) $ (30,599,815)
=============== ================= =============== ================
</Table>
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
MEDIUM-DURATION BOND FUND SHARES VALUE SHARES VALUE
------------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 567,749 $ 5,488,636 1,906,394 $ 18,677,236
Retirement Class 16,034,944 221,272,485 16,093,582 218,282,492
Institutional Class 8,179,822 79,295,587 689,176 6,727,106
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 196,599 1,867,741 183,456 1,767,411
Retirement Class 3,312,192 45,476,001 4,320,283 58,449,894
Institutional Class 351,398 3,313,145 72,704 696,779
SHARES REDEEMED:
Retail Class (354,296) (3,428,706) (78,013) (760,212)
Retirement Class (21,454,483) (296,969,385) (25,611,700) (346,415,094)
Institutional Class (4,259,150) (41,269,488) (2,609) (25,441)
--------------- ----------------- --------------- ----------------
Net increase (decrease) 2,574,775 $ 15,046,016 (2,426,727) $ (42,599,829)
=============== ================= =============== ================
</Table>
160
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
EXTENDED-DURATION BOND FUND SHARES VALUE SHARES VALUE
--------------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 546,676 $ 5,402,567 1,780,621 $ 17,558,639
Retirement Class 13,108,503 198,325,568 9,912,940 141,473,893
Institutional Class 4,850,745 48,928,974 602,410 6,000,000
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 416,507 3,973,266 272,045 2,612,870
Retirement Class 2,448,979 36,713,639 2,110,905 30,277,376
Institutional Class 375,173 3,566,652 72,741 698,808
SHARES REDEEMED:
Retail Class (506,408) (5,012,043) (346,633) (3,336,503)
Retirement Class (16,949,095) (258,599,321) (12,725,946) (181,561,981)
Institutional Class (2,757,539) (27,568,450) (2,630) (26,174)
--------------- ----------------- --------------- ----------------
Net increase 1,533,541 $ 5,730,852 1,676,453 $ 13,696,928
=============== ================= =============== ================
</Table>
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
EQUITY INDEX FUND SHARES VALUE SHARES VALUE
----------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 186,065 $ 1,502,533 1,723,247 $ 16,231,143
Retirement Class 5,647,274 73,655,508 4,534,401 59,262,983
Institutional Class 4,461,868 36,455,381 638,298 6,000,000
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 32,121 278,529 43,629 335,885
Retirement Class 260,606 3,723,527 359,710 4,534,816
Institutional Class 45,263 403,725 17,473 133,846
SHARES REDEEMED:
Retail Class (88,596) (708,958) (30,424) (244,278)
Retirement Class (5,386,315) (71,239,038) (5,822,653) (79,608,284)
Institutional Class (1,529,027) (12,857,703) (2,887) (26,469)
--------------- ----------------- --------------- ----------------
Net increase 3,629,259 $ 31,213,504 1,460,794 $ 6,619,642
=============== ================= =============== ================
</Table>
161
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
VALUE EQUITY FUND SHARES VALUE SHARES VALUE
----------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 239,944 $ 2,063,770 1,792,054 $ 16,791,746
Retirement Class 8,378,960 110,320,265 5,902,283 76,944,949
Institutional Class 11,711,145 101,805,688 682,607 6,440,400
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 40,211 369,031 40,519 338,252
Retirement Class 1,121,254 15,815,795 1,234,129 15,730,370
Institutional Class 94,136 913,660 17,310 145,231
SHARES REDEEMED:
Retail Class (97,837) (831,105) (44,669) (369,131)
Retirement Class (13,311,092) (175,057,679) (7,492,522) (100,715,917)
Institutional Class (5,442,301) (47,926,854) (30,628) (236,697)
--------------- ----------------- --------------- ----------------
Net increase 2,734,420 $ 7,472,571 2,101,083 $ 15,069,203
=============== ================= =============== ================
</Table>
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
GROWTH EQUITY FUND SHARES VALUE SHARES VALUE
------------------ --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 365,073 $ 2,947,648 1,802,792 $ 17,029,868
Retirement Class 12,352,654 155,965,573 17,230,594 217,156,015
Institutional Class 13,561,260 111,472,774 644,374 6,165,400
SHARES REDEEMED:
Retail Class (151,376) (1,217,720) (55,258) (429,932)
Retirement Class (17,498,144) (220,165,499) (10,369,145) (134,588,500)
Institutional Class (5,521,123) (46,186,040) (2,935) (27,620)
--------------- ----------------- --------------- ----------------
Net increase 3,108,344 $ 2,816,736 9,250,422 $ 105,305,231
=============== ================= =============== ================
</Table>
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
SMALL CAP EQUITY FUND SHARES VALUE SHARES VALUE
--------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 462,903 $ 4,701,696 1,677,766 $ 16,348,685
Retirement Class 10,543,219 135,857,768 8,191,337 98,180,698
Institutional Class 3,640,755 35,234,158 639,470 6,285,000
SHARES REDEEMED:
Retail Class (135,569) (1,346,215) (43,559) (364,433)
Retirement Class (9,413,284) (116,448,337) (9,860,076) (120,314,748)
Institutional Class (2,053,288) (21,163,131) (29,239) (229,684)
--------------- ----------------- --------------- ----------------
Net increase (decrease) 3,044,736 $ 36,835,939 575,699 $ (94,482)
=============== ================= =============== ================
</Table>
162
<Table>
<Caption>
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02
------------------------------------ -----------------------------------
INTERNATIONAL EQUITY FUND SHARES VALUE SHARES VALUE
------------------------- --------------- ----------------- --------------- ----------------
SHARES SOLD:
Retail Class 163,727 $ 1,560,959 1,716,277 $ 15,791,132
Retirement Class 14,644,611 157,879,504 9,250,407 97,896,260
Institutional Class 8,174,211 75,814,682 645,856 6,000,000
SHARES ISSUED IN REINVESTMENT OF
DIVIDENDS:
Retail Class 24,358 265,255 18,906 154,094
Retirement Class 861,759 11,108,069 787,451 7,567,407
Institutional Class 72,461 797,069 9,920 81,443
SHARES REDEEMED:
Retail Class (40,947) (379,887) (21,992) (188,156)
Retirement Class (16,770,240) (180,433,081) (9,425,678) (99,683,230)
Institutional Class (4,344,837) (41,517,645) (2,881) (26,444)
--------------- ----------------- --------------- ----------------
Net increase 2,785,103 $ 25,094,925 2,978,266 $ 27,592,506
=============== ================= =============== ================
</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 December
31, 2003.
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
163
December 31, 2003 were characterized as follows for tax purposes:
<Table>
<Caption>
ORDINARY LONG-TERM RETURN OF TOTAL
FUND INCOME CAPITAL GAIN CAPITAL DISTRIBUTION
- ---- ----------- ------------ --------- ------------
Flexible Income 2003 $ 4,674,701 $ 6,798,990 -- $11,473,691
2002 9,781,693 3,462,350 -- 13,244,043
Growth & Income 2003 29,857,219 21,796,066 -- 51,653,285
2002 37,309,441 26,116,347 -- 63,425,788
Capital Opportunities 2003 15,708,591 8,401,297 -- 24,109,888
2002 18,417,652 9,766,603 -- 28,184,255
Global Equity 2003 5,164,553 -- -- 5,164,553
2002 6,452,783 -- -- 6,452,783
Flexible Income I 2003 357,383 -- -- 357,383
Growth & Income I 2003 1,782,721 21,797 -- 1,804,518
Capital Opportunities
I 2003 943,918 33,057 -- 976,975
Global Equity I 2003 194,633 14,685 -- 209,318
Money Market 2003 7,918,076 -- -- 7,918,076
2002 14,515,587 -- -- 14,515,587
Low-Duration Bond 2003 25,512,205 4,364,359 -- 29,876,564
2002 36,617,084 1,930,128 -- 38,547,212
Medium-Duration Bond 2003 43,170,685 7,497,478 -- 50,668,163
2002 55,633,960 5,292,354 -- 60,926,314
Extended-Duration
Bond 2003 23,645,972 20,612,648 -- 44,258,620
2002 30,750,822 2,838,223 -- 33,589,045
Equity Index 2003 4,405,649 -- -- 4,405,649
2002 4,604,015 400,546 -- 5,004,561
Value Equity 2003 17,107,697 -- -- 17,107,697
2002 16,185,464 -- 138,432 16,323,896
International Equity 2003 12,170,411 -- -- 12,170,411
2002 7,623,004 -- 179,894 7,802,898
</Table>
At December 31, 2003, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED UNREALIZED
ORDINARY LONG-TERM APPRECIATION
FUND INCOME CAPITAL GAIN (DEPRECIATION)
- ---- ------------- ------------- --------------
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 0 (9,501) 0
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 0 (319,588,772) 138,443,306
Small Cap Equity 0 (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 December 31, 2003, 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 $ 44,392,327 $ 44,930,324 $ (537,997)
Growth & Income 157,413,777 163,466,741 (6,052,964)
Capital Opportunities 107,307,530 113,427,083 (6,119,553)
Global Equity 93,531,313 101,636,558 (8,105,245)
Flexible Income I 395,695 1,045,533 (649,838)
Growth & Income I 3,219,433 5,106,204 (1,886,771)
Capital Opportunities I 5,118,389 5,858,407 (740,018)
Global Equity I 3,414,781 3,414,781 0
Money Market 0 0 0
Low-Duration Bond 4,417,236 8,926,581 (4,509,345)
Medium-Duration Bond 15,748,862 23,870,439 (8,121,577)
Extended-Duration Bond 23,337,546 25,297,605 (1,960,059)
Equity Index 33,841,959 92,622,362 (58,780,403)
Value Equity 138,139,245 197,306,161 (59,166,916)
Growth Equity 138,570,117 170,633,071 (32,062,954)
Small Cap Equity 69,841,462 76,082,770 (6,241,308)
International Equity 145,386,326 192,390,644 (47,004,318)
</Table>
164
]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 December 31, 2003, 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 229,113,909
Growth & Income 985,150,354
Capital Opportunities 806,237,338
Global Equity 728,063,216
Flexible Income I 28,254,266
Growth & Income I 68,770,177
Capital Opportunities I 52,370,410
Global Equity I 22,267,584
Money Market 921,287,130
Low-Duration Bond 1,013,487,266
Medium-Duration Bond 1,096,140,060
Extended-Duration Bond 420,220,115
Equity Index 418,975,506
Value Equity 1,234,257,182
Growth Equity 1,287,939,020
Small Cap Equity 444,463,038
International Equity 928,061,132
</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 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
ACCUMULATED INVESTMENTS AND
PAID IN UNDISTRIBUTED CURRENCY
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.
At December 31, 2003, the Flexible Income, Flexible Income I, Global Equity I
and International Equity Funds were subject to an excise tax, which was
reimbursed by the Fund's Administrator.
9. 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 net realized gain on investment securities. 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>
165
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
AB Funds Trust:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of 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, 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 and International Equity Fund (constituting AB Funds
Trust, hereafter referred to as the "Trust") at December 31, 2003, and the
results of each of their operations for the year then ended, and the changes in
each of their net assets, and the financial highlights for the periods indicated
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
February 11, 2004
(Except for the reclassifications referred to in Note No. 9 to Financial
Statements,
for which the date is November 1, 2004)
166
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 - Present.
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
O.S. Hawkins (8/6/47) Since 2000 President and CEO, Annuity N/A N/A
2401 Cedar Springs Road Board of the Southern Baptist
Dallas, TX 75201-1407 Convention, 1997 - Present.
President
- --------------------------------------------------------------------------------------------------------------------------------
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
Senior Vice President Baptist Convention,
1995 - Present.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
167
FUND MANAGEMENT (UNAUDITED) (CONTINUED)
<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
- ------------------------ -------------- ----------------------- ---------- -------------------
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>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
</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.
168
INVESTMENT SUB-ADVISERS (Assets under management as of 12/31/03) (Unaudited)
AB Funds Trust employs a broad array of proven investment managers for the
benefit of their investors. Each manager is distinctive in their investment
management process and business approach.
<Table>
<Caption>
FIRM TOTAL ASSETS
FUND SUB-ADVISER ESTABLISHED MANAGED
- ---- --------------------------------------------------- ----------- ------------
MONEY MARKET BlackRock Institutional Management Corporation 1988 $ 309 B
LOW-DURATION BOND BlackRock Advisors, Inc. 1988 $ 309 B
Pacific Investment Management Company
LLC ("PIMCO") 1971 $ 373 B
Payden & Rygel 1984 $ 50 B
MEDIUM-DURATION BOND Goldman Sachs Asset Management 1984 $ 376 B
Pacific Investment Management Company
LLC ("PIMCO") 1971 $ 373 B
Western Asset Management Company 1971 $ 148 B
EXTENDED-DURATION BOND Loomis Sayles & Company, L. P. 1927 $ 54 B
STW Fixed Income Management Ltd. 1977 $ 9 B
EQUITY INDEX Northern Trust Investments, Inc. 1889 $ 420 B
VALUE EQUITY Barrow, Hanley Mewhinney & Straus, Inc. 1979 $ 33 B
Equinox Capital Management LLC 1989 $ 6 B
Northern Trust Investments, Inc. 1889 $ 420 B
Numeric Investors L. P. 1989 $ 7 B
GROWTH EQUITY RCM Capital Management, LLC 1970 $ 48 B
Marsico Capital Management, LLC. 1997 $ 31 B
Sands Capital Management, LLC 1992 $ 6 B
TCW Investment Management Company 1971 $ 90 B
SMALL CAP EQUITY Aronson+Johnson+Ortiz, LP 1984 $ 15 B
High Rock Capital LLC 1997 $ 1 B
Provident Investment Council, Inc. 1951 $ 6 B
TimesSquare Capital Management, Inc. 2000 $ 43 B
Northern Trust Investments, Inc 1889 $ 420 B
INTERNATIONAL EQUITY Alliance Capital Management, L.P. 1962 $ 485 B
Capital Guardian Trust Company 1931 $ 149 B
Delaware International Advisers Ltd. 1990 $ 21 B
Genesis Asset Managers Limited 1981 $ 7 B
Oechsle International Advisors, LLC 1986 $ 14 B
Philadelphia International Advisor, LP 1956 $ 4 B
Walter Scott & Partners Limited 1983 $ 8 B
CUSTODIAN FOR AB FUNDS TRUST ASSETS The Northern Trust Company 1889 $1.8 Tr
</Table>
You should consider the investment objectives, risks, charges and expenses of
each investment fund carefully before investing. To obtain a prospectus with
this and other information about AB Funds Trust call 1-800-262-0511, visit
www.absbc.org or write to AB Funds Trust, 2401 Cedar Springs, Dallas, TX
75201-1498. Read it carefully before you invest. Shares of AB Funds Trust are
distributed by PFPC Distributors, Inc., 760 Moore Road, King of Prussia, PA
19406.
169
[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. 2/04 2233
6754
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party.
(b) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, and
that relates to any element of the code of ethics description.
(c) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, that
relates to one or more of the items set forth in paragraph (b) of
this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Registrant's Board of Trustees has determined that it does not have an "audit
committee financial expert" serving on its Audit Committee. While Registrant
believes that each of the members of its Audit Committee has sufficient
knowledge of accounting principles and financial statements to serve on the
Audit Committee, none has the requisite experience to qualify as an "audit
committee financial expert," as such term is defined by the Securities and
Exchange Commission. The Board of Trustees intends to seek such a person for
election to the Board and its Audit Committee; however, the Registrant and its
Board of Trustees cannot specify a date for such election nor even assure that
such search and election will be successful.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services
that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal
years are $211,000 for 2002 and $257,550 for 2003.
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under
paragraph (a) of this Item are $0 for 2002 and $0 for 2003.
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $36,400 for 2002 and
$39,000 for 2003.
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other
than the services reported in paragraphs (a) through (c) of this
Item are $0 for 2002 and $0 for 2003.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. Pursuant to its charter, the Audit Committee
may choose to delegate the authority to grant pre-approvals to
one or more of its members, each acting on behalf of the Audit
Committee, provided, that the Audit Committee adopts policies
and procedures detailed as to the particular service and
designed to safeguard the continued independence of the
auditors, consistent with the requirements of the
Sarbanes-Oxley Act of 2002 and related SEC regulations, which
shall then be used in making such pre-approvals, and further
provided, that each delegated pre-approval shall be reported
to the Audit Committee during its next regularly scheduled
meeting. As of the end of the period covered by this report,
the Audit Committee has not adopted such policies and
procedures.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X are as follows:
(b) Not applicable.
(c) 100%
(d) Not applicable.
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the
most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees was zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that
provides ongoing services to the registrant for each of the last two
fiscal years of the registrant was $0.
(h) Not applicable. The Registrant's independent auditors do not
currently provide non-audit services to the Registrant's investment
adviser or any of its control affiliates that provide ongoing
services to the Registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
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.
Not applicable.
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) Code of ethics, or any amendment thereto, that is the subject
of disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to 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 November 1, 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 November 1, 2004
----------------------------------------------------------------------
By (Signature and Title)* /s/ Jeffrey P. Billinger
-------------------------------------------------------
Jeffrey P. Billinger, Vice President and Treasurer
(principal financial officer)
Date November 1, 2004
----------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.