UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811 - 07717
The Diversified Investors Strategic Variable Funds
--------------------------------------------------
(Exact name of Registrant as specified
in charter)
Address of Registrant: 4 Manhattanville Road
------------------------------------------------
Purchase, NY
------------------------------------------------
Name and address of agent for service: Joseph Carusone
-------------------------------------------------
4 Manhattanville Road
-------------------------------------------------
Purchase, NY 10577
-------------------------------------------------
Registrant's telephone number, including area code: (914) 697-8586
--------------------------------
Date of fiscal year end: December 31, 2003
------------------------
Date of reporting period: December 31, 2003
------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
THE DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
DIVERSIFIED INVESTORS VARIABLE FUNDS
DIVERSIFIED INVESTORS
STRATEGIC VARIABLE FUNDS
ANNUAL REPORT
December 31, 2003
Calvert |
|
International Equity |
|
High Yield Bond |
|
Aggressive Equity |
|-- Intermediate/Long
Special Equity | Horizon
| --------------------------
Equity Growth |
|
Growth & Income |-- Intermediate Horizon
| --------------------------
Value & Income |
|
Balanced |
|-- Short Horizon
Core Bond | --------------------------
|
Intermediate Govt. Bond |
|
High Quality Bond |
|
Money Market |
[DIVERSIFIED INVESTMENT ADVISORS Logo]
_________________________________________________
This report is not to be construed as an offering for sale of any contracts
participating in the Subaccounts (Series) of the Diversified Investors Variable
Funds or the Diversified Investors Strategic Variable Funds, or as a
solicitation of an offer to buy contracts unless preceded by or accompanied by a
current prospectus which contains complete information about charges and
expenses.
This is a combined annual report for the subaccounts of the Diversified
Investors Variable Funds and the Diversified Investors Strategic Variable Funds.
THE DIVERSIFIED INVESTORS VARIABLE FUNDS AND STRATEGIC VARIABLE FUNDS
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
DIVERSIFIED INVESTORS VARIABLE FUNDS:
Statements of Assets and Liabilities........................ 2
Statements of Operations.................................... 4
Statements of Changes in Net Assets -- December 31, 2003.... 6
Statements of Changes in Net Assets -- December 31, 2002.... 8
Notes to Financial Statements............................... 10
Financial Highlights........................................ 14
Report of Independent Auditors.............................. 20
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS:
Statements of Assets and Liabilities........................ 21
Statements of Operations.................................... 22
Statements of Changes in Net Assets -- December 31, 2003.... 23
Statements of Changes in Net Assets -- December 31, 2002.... 24
PORTFOLIO OF INVESTMENTS:
Short Horizon Strategic Variable Fund....................... 25
Intermediate Horizon Strategic Variable Fund................ 26
Intermediate Long Horizon Strategic Variable Fund........... 27
Notes to Financial Statements............................... 28
Report of Independent Auditors.............................. 33
DIVERSIFIED INVESTORS PORTFOLIOS:
Economic Overview........................................... 34
Statements of Assets and Liabilities........................ 40
Statements of Operations.................................... 42
Statements of Changes in Net Assets -- December 31, 2003.... 44
Statements of Changes in Net Assets -- December 31, 2002.... 46
PORTFOLIO OF INVESTMENTS:
Money Market Portfolio...................................... 48
High Quality Bond Portfolio................................. 50
Intermediate Government Bond Portfolio...................... 58
Core Bond Portfolio......................................... 61
Balanced Portfolio.......................................... 74
Value & Income Portfolio.................................... 91
Growth & Income Portfolio................................... 96
Equity Growth Portfolio..................................... 105
Mid-Cap Value Portfolio..................................... 110
Mid-Cap Growth Portfolio.................................... 113
Small-Cap Value Portfolio................................... 117
Special Equity Portfolio.................................... 120
Small-Cap Growth Portfolio.................................. 132
Aggressive Equity Portfolio................................. 135
High Yield Bond Portfolio................................... 138
International Equity Portfolio.............................. 148
Notes to Financial Statements............................... 156
Report of Independent Auditors.............................. 172
CALVERT SOCIAL BALANCED PORTFOLIO
ANNUAL REPORT............................................. I
</Table>
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
<Table>
<Caption>
MONEY HIGH INTERMEDIATE
MARKET QUALITY BOND GOVERNMENT BOND CORE BOND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ --------------- ------------ ------------
ASSETS:
Investment in the Funds, at value (Notes 1 and
2).......................................... $ 44,678,953 $25,700,155 $ 34,599,590 $ 63,608,609 $ 89,791,529
Investment in Calvert Social Balanced
Portfolio (Cost $41,071,539)................ -- -- -- -- --
Receivable for securities sold................ -- -- -- -- --
Receivable for units purchased................ 337,440 11,812 12,316 23,120 51,895
------------ ------------ ------------ ------------ ------------
Total assets.................................. 45,016,393 25,711,967 34,611,906 63,631,729 89,843,424
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable for units redeemed.................... 129,089 8,973 46,640 23,315 56,626
Accrued mortality and expense risk............ 34,456 25,225 34,777 62,468 87,339
------------ ------------ ------------ ------------ ------------
Total liabilities............................. 163,545 34,198 81,417 85,783 143,965
------------ ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO ANNUITY
CONTRACTHOLDERS............................. $ 44,852,848 $25,677,769 $ 34,530,489 $ 63,545,946 $ 89,699,459
============ ============ ============ ============ ============
Accumulation units............................ 2,380,101 1,792,768 1,731,895 2,165,116 2,659,711
============ ============ ============ ============ ============
Unit value.................................... $ 18.84 $ 14.32 $ 19.94 $ 29.35 $ 33.73
============ ============ ============ ============ ============
</Table>
See notes to financial statements.
2
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY YIELD BOND EQUITY CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------ ------------ ----------- ----------- ------------- -----------
$318,296,743 $130,762,503 $223,404,739 $105,834,288 $55,917,330 $ 4,095,733 $60,814,885 $ --
-- -- -- -- -- -- -- 36,581,213
-- -- -- -- -- -- -- 4,630
74,792 79,876 70,978 131,884 41,277 -- 46,040 16,998
------------ ------------ ------------ ------------ ----------- ----------- ----------- -----------
318,371,535 130,842,379 223,475,717 105,966,172 55,958,607 4,095,733 60,860,925 36,602,841
------------ ------------ ------------ ------------ ----------- ----------- ----------- -----------
163,614 80,379 131,050 82,497 76,635 11 79,521 21,628
305,183 125,710 216,298 102,491 54,849 3,984 57,806 35,747
------------ ------------ ------------ ------------ ----------- ----------- ----------- -----------
468,797 206,089 347,348 184,988 131,484 3,995 137,327 57,375
------------ ------------ ------------ ------------ ----------- ----------- ----------- -----------
$317,902,738 $130,636,290 $223,128,369 $105,781,184 $55,827,123 $ 4,091,738 $60,723,598 $36,545,466
============ ============ ============ ============ =========== =========== =========== ===========
7,055,567 5,922,680 5,092,408 3,633,570 4,268,033 269,658 3,737,216 1,403,970
============ ============ ============ ============ =========== =========== =========== ===========
$ 45.06 $ 22.06 $ 43.82 $ 29.11 $ 13.08 $ 15.17 $ 16.25 $ 26.03
============ ============ ============ ============ =========== =========== =========== ===========
</Table>
3
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
MONEY HIGH INTERMEDIATE
MARKET QUALITY BOND GOVERNMENT BOND CORE BOND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ --------------- --------------- ------------ ------------
INVESTMENT INCOME (LOSS):
Net investment income (loss) allocated
from Diversified Investors Portfolios
(Note 2):
Interest income........................... $ 653,732 $ 864,881 $ 1,317,855 $ 2,331,645 $ 1,263,543
Income from loaned securities -- net...... -- 518 7,433 11,693 6,338
Dividend income........................... -- -- -- -- 928,518
Expenses.................................. (130,019) (91,843) (155,619) (232,239) (412,649)
Dividend income from Calvert Social
Balanced Portfolio (Note 2):............ -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net investment income (loss) from
Portfolios and Calvert.................. 523,713 773,556 1,169,669 2,111,099 1,785,750
------------ ------------ ------------ ------------ ------------
EXPENSES(NOTE 4):
Mortality and expense risk................ 510,135 265,426 444,820 657,677 906,926
Less expenses reimbursed by TFLIC......... (67,872) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net expenses.............................. 442,263 265,426 444,820 657,677 906,926
------------ ------------ ------------ ------------ ------------
Net investment income (loss).............. 81,450 508,130 724,849 1,453,422 878,824
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON
SECURITIES, FUTURES, WRITTEN OPTIONS,
SHORT SALES AND FOREIGN CURRENCIES (NOTE
2):
Net realized gains (losses) on
securities.............................. 154 51,940 1,185,030 1,660,815 (526,325)
Net realized gains (losses) on futures,
written options and short sales......... -- -- -- (386,815) (80,596)
Net realized gains (losses) on foreign
currency transactions................... -- -- -- (468,351) (287,151)
Net change in unrealized appreciation
(depreciation) on securities............ -- (308,680) (1,684,576) (288,960) 12,815,747
Net change in unrealized appreciation on
futures, written options and short
sales................................... -- -- -- 225,280 67,959
Net change in unrealized depreciation on
translation of assets and liabilities
denominated in foreign currencies....... -- -- -- (365,095) (140,105)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gains (losses)
on securities, futures, written options,
short sales and foreign currencies...... 154 (256,740) (499,546) 376,874 11,849,529
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations.............................. $ 81,604 $ 251,390 $ 225,303 $ 1,830,296 $ 12,728,353
============ ============ ============ ============ ============
</Table>
See notes to financial statements.
4
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY YIELD BOND EQUITY CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ----------- ---------- ------------- ----------
$ 91,912 $ 10,999 $ 22,225 $ 11,882 $ 2,248 $ 434,528 $ -- $ --
16,849 4,990 12,992 31,987 17,930 -- 15,625 --
6,473,327 1,807,059 1,834,827 619,423 166,767 5,887 1,006,032 --
(1,307,653) (698,698) (1,222,026) (686,776) (475,183) (27,156) (443,798) --
-- -- -- -- -- -- -- 649,625
----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
5,274,435 1,124,350 648,018 (23,484) (288,238) 413,259 577,859 649,625
----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
3,026,356 1,214,008 2,081,234 889,509 521,710 49,815 563,393 364,636
-- -- (80,475) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
3,026,356 1,214,008 2,000,759 889,509 521,710 49,815 563,393 364,636
----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
2,248,079 (89,658) (1,352,741) (912,993) (809,948) 363,444 14,466 284,989
----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
(2,733,678) (2,315,051) (7,249,282) 7,939,862 4,454,796 271,377 (2,056,190) (366,181)
-- 48,881 -- 152,423 -- -- -- --
-- -- (52,468) -- -- -- 288,602 --
64,337,402 25,851,061 51,462,665 22,261,561 7,742,125 462,104 17,223,862 5,658,606
-- 22,244 -- 13,430 -- -- -- --
-- -- (28,944) -- -- -- (173,796) --
----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
61,603,724 23,607,135 44,131,971 30,367,276 12,196,921 733,481 15,282,478 5,292,425
----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------
63,851,803
$ $23,517,477 $42,779,230 $29,454,283 $11,386,973 $1,096,925 $15,296,944 $5,577,414
=========== =========== =========== =========== =========== ========== =========== ==========
</Table>
5
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
MONEY HIGH INTERMEDIATE
MARKET QUALITY BOND GOVERNMENT BOND CORE BOND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ------------ --------------- ------------ ------------
FROM OPERATIONS:
Net investment income (loss) from Portfolios
and Calvert................................ $ 81,450 $ 508,130 $ 724,849 $ 1,453,422 $ 878,824
Net realized gains (losses) on securities.... 154 51,940 1,185,030 1,660,815 (526,325)
Net realized gains (losses) on futures,
written options and short sales............ -- -- -- (386,815) (80,596)
Net realized gains (losses) on foreign
currency transactions...................... -- -- -- (468,351) (287,151)
Net change in unrealized appreciation
(depreciation) on securities............... -- (308,680) (1,684,576) (288,960) 12,815,747
Net change in unrealized appreciation on
futures, written options and short sales... -- -- -- 225,280 67,959
Net change in unrealized depreciation on
translation of assets and liabilities
denominated in foreign currencies.......... -- -- -- (365,095) (140,105)
------------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
operations................................. 81,604 251,390 225,303 1,830,296 12,728,353
------------- ----------- ------------ ------------ ------------
FROM UNIT TRANSACTIONS (NOTE 5):
Net proceeds from units issued............... 122,511,759 10,838,913 10,816,688 22,554,098 15,052,461
Net asset value of units redeemed............ (126,304,275) (7,258,587) (19,786,134) (15,662,931) (17,655,121)
------------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets from
unit transactions.......................... (3,792,516) 3,580,326 (8,969,446) 6,891,167 (2,602,660)
------------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets........ (3,710,912) 3,831,716 (8,744,143) 8,721,463 10,125,693
NET ASSETS:
Beginning of year............................ 48,563,760 21,846,053 43,274,632 54,824,483 79,573,766
------------- ----------- ------------ ------------ ------------
End of year.................................. $ 44,852,848 $25,677,769 $ 34,530,489 $ 63,545,946 $ 89,699,459
============= =========== ============ ============ ============
Units outstanding beginning of year.......... 2,581,398 1,543,946 2,181,036 1,933,347 2,746,878
Units issued during year..................... 6,504,045 757,650 542,800 774,067 487,099
Units redeemed during year................... (6,705,342) (508,828) (991,941) (542,298) (574,266)
------------- ----------- ------------ ------------ ------------
Units outstanding end of year................ 2,380,101 1,792,768 1,731,895 2,165,116 2,659,711
============= =========== ============ ============ ============
</Table>
See notes to financial statements.
6
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY YIELD BOND EQUITY CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------ ------------ ------------ ----------- ------------- -----------
$ 2,248,079 $ (89,658) $ (1,352,741) $ (912,993) $ (809,948) $ 363,444 $ 14,466 $ 284,989
(2,733,678) (2,315,051) (7,249,282) 7,939,862 4,454,796 271,377 (2,056,190) (366,181)
-- 48,881 -- 152,423 -- -- -- --
-- -- (52,468) -- -- -- 288,602 --
64,337,402 25,851,061 51,462,665 22,261,561 7,742,125 462,104 17,223,862 5,658,606
-- 22,244 -- 13,430 -- -- -- --
-- -- (28,944) -- -- -- (173,796) --
------------ ------------ ------------ ------------ ------------ ----------- ------------ -----------
63,851,803 23,517,477 42,779,230 29,454,283 11,386,973 1,096,925 15,296,944 5,577,414
------------ ------------ ------------ ------------ ------------ ----------- ------------ -----------
45,691,539 28,474,589 46,113,086 25,358,358 13,453,776 635,808 63,431,708 7,253,821
(51,086,300) (21,544,926) (31,248,041) (18,638,471) (11,362,699) (2,862,804) (65,530,260) (7,166,551)
------------ ------------ ------------ ------------ ------------ ----------- ------------ -----------
(5,394,761) 6,929,663 14,865,045 6,719,887 2,091,077 (2,226,996) (2,098,552) 87,270
------------ ------------ ------------ ------------ ------------ ----------- ------------ -----------
58,457,042 30,447,140 57,644,275 36,174,170 13,478,050 (1,130,071) 13,198,392 5,664,684
259,445,696 100,189,150 165,484,094 69,607,014 42,349,073 5,221,809 47,525,206 30,880,782
------------ ------------ ------------ ------------ ------------ ----------- ------------ -----------
$317,902,738 $130,636,290 $223,128,369 $105,781,184 $ 55,827,123 $ 4,091,738 $ 60,723,598 $36,545,466
============ ============ ============ ============ ============ =========== ============ ===========
7,207,058 5,579,094 4,727,738 3,405,431 4,103,500 435,401 3,862,561 1,400,341
1,168,198 1,461,839 1,173,248 1,022,300 1,165,293 46,609 5,099,198 305,625
(1,319,689) (1,118,253) (808,578) (794,161) (1,000,760) (212,352) (5,224,543) (301,996)
------------ ------------ ------------ ------------ ------------ ----------- ------------ -----------
7,055,567 5,922,680 5,092,408 3,633,570 4,268,033 269,658 3,737,216 1,403,970
============ ============ ============ ============ ============ =========== ============ ===========
</Table>
7
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2002
<Table>
<Caption>
MONEY HIGH INTERMEDIATE
MARKET QUALITY BOND GOVERNMENT BOND CORE BOND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ------------ --------------- ------------ ------------
FROM OPERATIONS:
Net investment income (loss) from Portfolios
and Calvert................................ $ 358,950 $ 630,889 $ 999,495 $ 1,944,356 $ 1,395,069
Net realized gains (losses) on securities.... 1,010 65,656 381,918 1,597,844 (7,101,871)
Net realized losses on futures, written
options and short sales.................... -- -- -- (688,448) (314,826)
Net realized gains (losses) on foreign
currency transactions...................... -- -- -- (2,272) (4,816)
Net change in unrealized appreciation
(depreciation) on securities............... -- 247,265 1,040,974 1,548,644 (4,662,517)
Net change in unrealized depreciation on
futures.................................... -- -- -- (299,558) (129,474)
Net change in unrealized depreciation on
translation of assets and liabilities
denominated in foreign currencies.......... -- -- -- (40,534) (40,741)
------------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................. 359,960 943,810 2,422,387 4,060,032 (10,859,176)
------------- ----------- ------------ ------------ ------------
FROM UNIT TRANSACTIONS (NOTE 5):
Net proceeds from units issued............... 116,181,033 10,394,949 18,892,520 18,226,715 14,612,644
Net asset value of units redeemed............ (115,617,562) (6,648,181) (11,046,051) (19,941,562) (29,622,715)
------------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets from
unit transactions.......................... 563,471 3,746,768 7,846,469 (1,714,847) (15,010,071)
------------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets........ 923,431 4,690,578 10,268,856 2,345,185 (25,869,247)
NET ASSETS:
Beginning of year............................ 47,640,329 17,155,475 33,005,776 52,479,298 105,443,013
------------- ----------- ------------ ------------ ------------
End of year.................................. $ 48,563,760 $21,846,053 $ 43,274,632 $ 54,824,483 $ 79,573,766
============= =========== ============ ============ ============
Units outstanding beginning of year.......... 2,552,095 1,273,673 1,782,182 1,999,667 3,239,258
Units issued during year..................... 6,198,010 752,463 979,079 675,629 476,939
Units redeemed during year................... (6,168,707) (482,190) (580,225) (741,949) (969,319)
------------- ----------- ------------ ------------ ------------
Units outstanding end of year................ 2,581,398 1,543,946 2,181,036 1,933,347 2,746,878
============= =========== ============ ============ ============
</Table>
See notes to financial statements.
8
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY YIELD BOND EQUITY CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------ ------------ ------------ ---------- ------------- -----------
$ 2,595,306 $ (382,540) $ (1,489,342) $ (899,735) $ (840,177) $ 423,748 $ (145,008) $ 538,617
(8,671,972) (21,126,836) (33,539,759) (8,555,095) (12,940,085) (231,607) (3,709,030) (395,288)
-- (109,236) -- (80,866) -- -- -- --
-- -- 832 (265) -- -- 662,288 --
(48,145,176) (11,093,629) (22,650,515) (15,308,088) (2,768,037) (129,430) (6,814,416) (5,006,165)
-- (22,464) -- (8,500) -- -- -- --
-- -- (58) (30) -- -- (196,689) --
------------ ------------ ------------ ------------ ------------ ---------- ------------ -----------
(54,221,842) (32,734,705) (57,678,842) (24,852,579) (16,548,299) 62,711 (10,202,855) (4,862,836)
------------ ------------ ------------ ------------ ------------ ---------- ------------ -----------
46,244,911 29,660,713 37,588,624 20,252,097 15,952,215 596,325 75,150,787 7,028,564
(81,136,100) (42,912,350) (69,340,895) (29,697,789) (19,209,802) (839,650) (80,913,667) (8,416,474)
------------ ------------ ------------ ------------ ------------ ---------- ------------ -----------
(34,891,189) (13,251,637) (31,752,271) (9,445,692) (3,257,587) (243,325) (5,762,880) (1,387,910)
------------ ------------ ------------ ------------ ------------ ---------- ------------ -----------
(89,113,031) (45,986,342) (89,431,113) (34,298,271) (19,805,886) (180,614) (15,965,735) (6,250,746)
348,558,727 146,175,492 254,915,207 103,905,285 62,154,959 5,402,423 63,490,941 37,131,528
------------ ------------ ------------ ------------ ------------ ---------- ------------ -----------
$259,445,696 $100,189,150 $165,484,094 $ 69,607,014 $ 42,349,073 $5,221,809 $ 47,525,206 $30,880,782
============ ============ ============ ============ ============ ========== ============ ===========
8,115,057 6,231,973 5,510,385 3,803,719 4,373,710 455,313 4,240,159 1,462,817
1,153,227 1,443,062 927,034 838,176 1,332,883 51,779 5,689,246 298,508
(2,061,226) (2,095,941) (1,709,681) (1,236,464) (1,603,093) (71,691) (6,066,844) (360,984)
------------ ------------ ------------ ------------ ------------ ---------- ------------ -----------
7,207,058 5,579,094 4,727,738 3,405,431 4,103,500 435,401 3,862,561 1,400,341
============ ============ ============ ============ ============ ========== ============ ===========
</Table>
9
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Diversified Investors Variable Funds ("DIVF") is a separate investment account
established on November 30, 1993, by Transamerica Financial Life Insurance
Company, Inc. ("TFLIC"), (formerly AUSA Life Insurance Company, Inc. ("AUSA")),
a wholly owned subsidiary of AEGON USA, Inc. ("AEGON"), under the laws of the
State of New York.
DIVF operates as a unit investment trust under the Investment Company Act of
1940, as amended (the "1940 Act"). DIVF holds assets that are segregated from
all of TFLIC's other assets and, at present, is used as an investment vehicle
under certain tax-deferred annuity contracts issued by TFLIC to fund retirement
plans maintained by certain not-for-profit and other organizations ("Group
Plans"). TFLIC is the legal holder of the assets in DIVF.
DIVF had no assets or operations until August 18, 1994 (commencement of
operations). There are currently thirteen subaccounts within DIVF which are
available to contractholders of Group Plans, and each invests only in a
corresponding portfolio of Diversified Investors Portfolios (the "Portfolios")
or the Calvert Social Balanced Portfolio, a series of Calvert Variable Series,
Inc. ("Calvert") (collectively, the "Funds"). The respective financial
statements of the Portfolios and Calvert are contained elsewhere in this report.
At December 31, 2003, each of the DIVF subaccount's investment in the
corresponding Portfolios was as follows:
<Table>
<Caption>
PERCENTAGE INVESTMENT
SUBACCOUNT IN PORTFOLIO
- ---------- ---------------------
Money Market................................................ 5.59
High Quality Bond........................................... 4.13
Intermediate Government Bond................................ 13.03
Core Bond................................................... 4.33
Balanced.................................................... 20.69
Value & Income.............................................. 14.48
Growth & Income............................................. 12.29
Equity Growth............................................... 11.31
Special Equity.............................................. 8.33
Aggressive Equity........................................... 15.06
High Yield Bond............................................. 1.45
International Equity........................................ 5.80
</Table>
2. SIGNIFICANT ACCOUNTING POLICIES
A. INVESTMENTS:
The investment by DIVF in the Portfolios reflects DIVF's proportionate interest
in the net assets of the Portfolios. The investment in shares of Calvert is
stated at net asset value. Valuation of securities held in each of the
Portfolios is discussed in Note 2A of the Portfolios' Notes to Financial
Statements which are included elsewhere in this report. A description of the
portfolio valuation policy for Calvert can be found in Note A of Calvert's Notes
to Financial Statements contained elsewhere in this report.
B. INVESTMENT INCOME:
Each DIVF subaccount is allocated its pro rata share of income and expenses of
the corresponding Portfolio. All of the investment income and expenses and
realized and unrealized gains and losses from the security transactions of the
corresponding Portfolios are allocated pro rata among the investors and are
recorded by the subaccounts on a daily basis.
For the Calvert subaccount, dividend income is recorded on the ex-dividend date
and realized gains and losses from the sale of investments are determined on the
basis of identified cost.
10
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FEDERAL INCOME TAXES:
The operations of DIVF form a part of, and are taxed with, the operations of
TFLIC. TFLIC does not expect, based upon current tax law, to incur any income
tax upon the earnings or realized capital gains attributable to DIVF. Based upon
this expectation, no charges are currently being deducted from DIVF for federal
income tax purposes.
D. OTHER:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. INVESTMENT TRANSACTIONS
Purchases and sales of shares in Calvert were $3,570,376 and $3,192,515
respectively.
The U.S. federal income tax basis of DIVF's investment in Calvert at December
31, 2003, was $41,071,539 and net unrealized depreciation for U.S. federal
income tax purposes was $4,490,326.
4. FEES AND TRANSACTIONS WITH AFFILIATES
Because certain subaccounts of DIVF purchase interests in the Portfolios, the
net assets of those DIVF subaccounts reflect the investment management fee
charged by Diversified Investment Advisors, Inc. (an affiliate of TFLIC), the
investment advisor, which provides investment advice and related services to the
Portfolios. Diversified is an indirect, wholly-owned subsidiary of AEGON USA,
Inc., a financial services holding company whose primary emphasis is life and
health insurance and annuity and investment products. AEGON USA is an indirect,
wholly-owned subsidiary of AEGON N.V., a Netherlands corporation which is a
publicly traded international insurance group.
TFLIC reserves the right to deduct an annual contract charge from a
Participant's Accumulation Account to reimburse TFLIC for administrative
expenses relating to the maintenance of the Variable Annuity Contracts. TFLIC
has no present intention to impose such a charge but may do so in the future.
Any such annual charge will not exceed $50.
Daily charges to DIVF for mortality and expense risks assumed by TFLIC were
computed at an annual rate of 1.10%; however, TFLIC reserves the right to charge
maximum fees of 1.25% upon written notice.
For the period January 1, 2003 through April 30, 2003, TFLIC had voluntarily
undertaken to reimburse fees of the Money Market and Equity Growth subaccounts
to the extent necessary, to limit all expenses (other than mortality and expense
risk charges) to 0.10% and 0.50%, respectively, of average net assets. For the
period May 1, 2003 through December 31, 2003, TFLIC terminated the waiver of
expenses. TFLIC reserved the right to raise these limits upon written notice. In
addition, due to the interest rate environment, TFLIC has elected to waive a
portion of its fees to maintain a positive yield on Money Market. TFLIC reserves
the right to terminate this waiver without notice.
5. GROUP PLAN ASSUMPTIONS
On December 31, 1993, TFLIC entered into an agreement with MONY Life Insurance
Company ("MONY") pursuant to which certain contracts issued by MONY to Group
Plans may be transferred through assumption reinsurance to TFLIC subject to
receipt of any necessary state insurance department approvals and
authorizations. The assumption reinsurance of any Group Plan to TFLIC will
result in the
11
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. GROUP PLAN ASSUMPTIONS (CONTINUED)
transfer of the applicable assets out of a corresponding MONY separate account
and into DIVF. There were no assets transferred for the year ended December 31,
2003. For the year ended December 31, 2002, assets transferred were as follows:
<Table>
<Caption>
SUBACCOUNTS 2002 AMOUNT
- ----------- -----------
Money Market................................................ $ 2,339
Intermediate Government Bond................................ 52,633
Core........................................................ --
Balanced.................................................... 83,566
Value & Income.............................................. 202,625
Equity Growth............................................... 271,149
Calvert..................................................... 1,916
--------
$614,228
========
</Table>
The amounts related to these assumptions are reflected in the proceeds from
units issued in the Statements of Changes in Net Assets.
6. GENERAL INDEMNIFICATION
In the normal course of business, the Funds enter into contracts that contain a
variety of representations and warranties which provide general
indemnifications. The Funds' maximum exposure under these arrangements is
unknown as this would involve 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.
12
(This page intentionally left blank)
13
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
-----------------------------
NET REALIZED TOTAL
UNIT NET AND INCOME (LOSS) UNIT
FOR THE VALUE, INVESTMENT UNREALIZED FROM VALUE,
YEAR BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
ENDED YEAR (LOSS) ON INVESTMENTS OPERATIONS YEAR
------- ------------ ----------- -------------- ------------- ------
MONEY MARKET SUBACCOUNT
12/31/2003...................... $18.81 $0.03 $ -- $ 0.03 $18.84
12/31/2002...................... 18.67 0.15 (0.01) 0.14 18.81
12/31/2001...................... 18.11 0.55 0.01 0.56 18.67
12/31/2000...................... 17.18 0.93 -- 0.93 18.11
12/31/1999...................... 16.45 0.73 -- 0.73 17.18
HIGH QUALITY BOND SUBACCOUNT
12/31/2003...................... 14.15 0.30 (0.13) 0.17 14.32
12/31/2002...................... 13.47 0.45 0.23 0.68 14.15
12/31/2001...................... 12.58 0.61 0.28 0.89 13.47
12/31/2000...................... 11.72 0.62 0.24 0.86 12.58
12/31/1999...................... 11.45 0.57 (0.30) 0.27 11.72
INTERMEDIATE GOVERNMENT BOND SUBACCOUNT
12/31/2003...................... 19.84 0.36 (0.26) 0.10 19.94
12/31/2002...................... 18.52 0.54 0.78 1.32 19.84
12/31/2001...................... 17.53 0.76 0.23 0.99 18.52
12/31/2000...................... 16.18 0.79 0.56 1.35 17.53
12/31/1999...................... 16.06 0.73 (0.61) 0.12 16.18
CORE BOND SUBACCOUNT
12/31/2003...................... 28.36 0.70 0.29 0.99 29.35
12/31/2002...................... 26.24 1.02 1.10 2.12 28.36
12/31/2001...................... 24.80 1.09 0.35 1.44 26.24
12/31/2000...................... 22.75 1.22 0.83 2.05 24.80
12/31/1999...................... 23.16 1.14 (1.55) (0.41) 22.75
BALANCED SUBACCOUNT
12/31/2003...................... 28.97 0.33 4.43 4.76 33.73
12/31/2002...................... 32.55 0.47 (4.05) (3.58) 28.97
12/31/2001...................... 34.75 0.57 (2.77) (2.20) 32.55
12/31/2000...................... 35.90 0.67 (1.82) (1.15) 34.75
12/31/1999...................... 32.46 0.52 2.92 3.44 35.90
</Table>
- ---------------
(1) Portfolio turnover of the Series Portfolio and Calvert Social Balanced
Portfolio.
(2) Reimbursement of fees occurs at the underlying fund level.
* Less than one penny per share.
14
<Table>
<Caption>
RATIO TO AVERAGE NET ASSETS
---------------------------------------------------------------------
EXPENSES
NET EXPENSES, INCLUDING
NET INVESTMENT INCLUDING EXPENSES
ASSETS, NET INCOME (LOSS) EXPENSES OF OF THE PORTFOLIO OR
END OF TOTAL INVESTMENT (NET OF THE PORTFOLIO CALVERT (NET OF PORTFOLIO
YEAR RETURN INCOME (LOSS) REIMBURSEMENTS) OR CALVERT REIMBURSEMENTS) TURNOVER(1)
------------ ------ ------------- --------------- ------------- ------------------- -----------
$ 44,852,848 0.16% 0.03% 0.17% 1.36% 1.22% N/A
48,563,760 0.75 0.60 0.78 1.38 1.20 N/A
47,640,329 3.09 2.80 2.97 1.37 1.20 N/A
39,923,021 N/A 5.12 5.30 1.31 1.13 N/A
36,438,704 N/A 4.17 4.35 1.18 1.00 N/A
25,677,769 1.20 2.10 2.10 1.48 1.48 50%
21,846,053 5.05 3.27 3.27 1.48 1.48 54
17,155,475 7.07 4.60 4.60 1.48 1.48 53
8,372,604 N/A 5.16 5.16 1.41 1.41 N/A
6,792,871 N/A 4.89 4.89 1.28 1.28 N/A
34,530,489 0.50 1.79 1.79 1.49 1.49 392
43,274,632 7.13 2.81 2.81 1.49 1.49 134
33,005,776 5.65 4.17 4.17 1.48 1.48 40
25,498,701 N/A 4.76 4.76 1.40 1.40 N/A
24,307,081 N/A 4.57 4.57 1.29 1.29 N/A
63,545,946 3.49 2.43 2.43 1.49 1.49(2) 922
54,824,483 8.08 3.78 3.78 1.49 1.49 462
52,479,298 5.81 4.22 4.22 1.48 1.48 547
40,806,446 N/A 5.21 5.21 1.41 1.41 N/A
38,929,480 N/A 4.96 4.96 1.27 1.27 N/A
89,699,459 16.43 1.05 1.06 1.61 1.60(2) 377
79,573,766 (11.00) 1.53 1.55 1.62 1.60(2) 289
105,443,013 (6.33) 1.72 1.72 1.59 1.59 312
123,166,730 N/A 1.88 1.88 1.52 1.52 N/A
139,222,045 N/A 1.56 1.58 1.42 1.40 N/A
</Table>
15
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
-----------------------------
NET REALIZED TOTAL
UNIT NET AND INCOME (LOSS) UNIT
FOR THE VALUE, INVESTMENT UNREALIZED FROM VALUE,
YEAR BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
ENDED YEAR (LOSS) ON INVESTMENTS OPERATIONS YEAR
------- ------------ ----------- -------------- ------------- ------
VALUE & INCOME SUBACCOUNT
12/31/2003...................... $36.00 $ 0.32 $ 8.74 $ 9.06 $45.06
12/31/2002...................... 42.95 0.34 (7.29) (6.95) 36.00
12/31/2001...................... 44.31 0.42 (1.78) (1.36) 42.95
12/31/2000...................... 40.87 0.48 2.96 3.44 44.31
12/31/1999...................... 38.07 0.35 2.45 2.80 40.87
GROWTH & INCOME SUBACCOUNT
12/31/2003...................... 17.96 (0.02) 4.12 4.10 22.06
12/31/2002...................... 23.46 (0.07) (5.43) (5.50) 17.96
12/31/2001...................... 30.54 (0.15) (6.93) (7.08) 23.46
12/31/2000...................... 37.40 (0.34) (6.52) (6.86) 30.54
12/31/1999...................... 28.83 (0.25) 8.82 8.57 37.40
EQUITY GROWTH SUBACCOUNT
12/31/2003...................... 35.00 (0.28) 9.10 8.82 43.82
12/31/2002...................... 46.26 (0.29) (10.97) (11.26) 35.00
12/31/2001...................... 58.57 (0.43) (11.88) (12.31) 46.26
12/31/2000...................... 70.56 (0.57) (11.42) (11.99) 58.57
12/31/1999...................... 51.55 (0.37) 19.38 19.01 70.56
SPECIAL EQUITY SUBACCOUNT
12/31/2003...................... 20.44 (0.27) 8.94 8.67 29.11
12/31/2002...................... 27.32 (0.25) (6.63) (6.88) 20.44
12/31/2001...................... 28.51 (0.30) (0.89) (1.19) 27.32
12/31/2000...................... 30.04 (0.28) (1.25) (1.53) 28.51
12/31/1999...................... 24.05 (0.19) 6.18 5.99 30.04
</Table>
- ---------------
(1) Portfolio turnover of the Series Portfolio and Calvert Social Balanced
Portfolio.
(2) Reimbursement of fees occurs at the underlying fund level.
* Less than one penny per share.
16
<Table>
<Caption>
RATIO TO AVERAGE NET ASSETS
---------------------------------------------------------------------
EXPENSES
NET EXPENSES, INCLUDING
NET INVESTMENT INCLUDING EXPENSES
ASSETS, NET INCOME (LOSS) EXPENSES OF OF THE PORTFOLIO OR
END OF TOTAL INVESTMENT (NET OF THE PORTFOLIO CALVERT (NET OF PORTFOLIO
YEAR RETURN INCOME (LOSS) REIMBURSEMENTS) OR CALVERT REIMBURSEMENTS) TURNOVER(1)
------------ ------ ------------- --------------- ------------- ------------------- -----------
$317,902,738 25.17% 0.82% 0.82% 1.57% 1.57% 70%
259,445,696 (16.18) 0.86 0.86 1.58 1.58 31
348,558,727 (3.07) 0.97 0.97 1.58 1.58 32
355,485,672 N/A 1.20 1.20 1.49 1.49 N/A
358,947,875 N/A 0.87 0.87 1.37 1.37 N/A
130,636,290 22.83 (0.08) (0.08) 1.73 1.73(2) 100
100,189,150 (23.44) (0.33) (0.32) 1.76 1.75(2) 115
146,175,492 (23.18) (0.61) (0.61) 1.73 1.73 153
199,091,314 N/A (0.96) (0.96) 1.64 1.64 N/A
227,107,875 N/A (0.83) (0.83) 1.52 1.52 N/A
223,128,369 25.20 (0.76) (0.71) 1.75 1.70 61
165,484,094 (24.34) (0.89) (0.74) 1.75 1.60 75
254,915,207 (21.02) (1.02) (0.87) 1.75 1.60 63
341,907,923 N/A (0.98) (0.84) 1.67 1.53 N/A
412,349,995 N/A (0.78) (0.64) 1.54 1.40 N/A
105,781,184 42.42 (1.13) (1.13) 1.95 1.95(2) 103
69,607,014 (25.18) (1.06) (1.06) 1.95 1.95 109
103,905,285 (4.17) (1.12) (1.12) 1.93 1.93 88
111,365,978 N/A (0.93) (0.93) 1.84 1.84 N/A
108,142,601 N/A (0.77) (0.77) 1.74 1.74 N/A
</Table>
17
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
-----------------------------
NET REALIZED TOTAL
UNIT NET AND INCOME (LOSS) UNIT
FOR THE VALUE, INVESTMENT UNREALIZED FROM VALUE,
YEAR BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
ENDED YEAR (LOSS) ON INVESTMENTS OPERATIONS YEAR
------- ------------ ----------- -------------- ------------- ------
AGGRESSIVE EQUITY SUBACCOUNT
12/31/2003...................... $10.32 $(0.20) $ 2.96 $ 2.76 $13.08
12/31/2002...................... 14.21 (0.20) (3.69) (3.89) 10.32
12/31/2001...................... 20.88 (0.29) (6.38) (6.67) 14.21
12/31/2000...................... 24.36 (0.42) (3.06) (3.48) 20.88
12/31/1999...................... 14.92 (0.24) 9.68 9.44 24.36
HIGH YIELD BOND SUBACCOUNT
12/31/2003...................... 11.99 1.07 2.11 3.18 15.17
12/31/2002...................... 11.87 0.95 (0.83) 0.12 11.99
12/31/2001...................... 11.41 0.98 (0.52) 0.46 11.87
12/31/2000...................... 12.00 0.96 (1.55) (0.59) 11.41
12/31/1999...................... 12.04 0.90 (0.94) (0.04) 12.00
INTERNATIONAL EQUITY SUBACCOUNT
12/31/2003...................... 12.30 0.00* 3.95 3.95 16.25
12/31/2002...................... 14.97 (0.04) (2.63) (2.67) 12.30
12/31/2001...................... 18.60 (0.07) (3.56) (3.63) 14.97
12/31/2000...................... 23.11 (0.05) (4.46) (4.51) 18.60
12/31/1999...................... 14.15 (0.03) 8.99 8.96 23.11
CALVERT SERIES SUBACCOUNT
12/31/2003...................... 22.05 0.20 3.78 3.98 26.03
12/31/2002...................... 25.38 0.37 (3.70) (3.33) 22.05
12/31/2001...................... 27.58 1.14 (3.34) (2.20) 25.38
12/31/2000...................... 28.73 1.04 (2.19) (1.15) 27.58
12/31/1999...................... 25.81 2.54 0.38 2.92 28.73
</Table>
- ---------------
(1) Portfolio turnover of the Series Portfolio and Calvert Social Balanced
Portfolio.
(2) Reimbursement of fees occurs at the underlying Series Portfolio level.
* Less than one penny per share.
18
<Table>
<Caption>
RATIO TO AVERAGE NET ASSETS
---------------------------------------------------------------------
EXPENSES
NET EXPENSES, INCLUDING
NET INVESTMENT INCLUDING EXPENSES
ASSETS, NET INCOME (LOSS) EXPENSES OF OF THE PORTFOLIO OR
END OF TOTAL INVESTMENT (NET OF THE PORTFOLIO CALVERT (NET OF PORTFOLIO
YEAR RETURN INCOME (LOSS) REIMBURSEMENTS) OR CALVERT REIMBURSEMENTS) TURNOVER(1)
------------ ------ ------------- --------------- ------------- ------------------- -----------
$ 55,827,123 26.74% (1.72)% (1.71)% 2.11% 2.10%(2) 165%
42,349,073 (27.38) (1.70) (1.69) 2.11 2.10(2) 87
62,154,959 (31.94) (1.82) (1.82) 2.10 2.10 98
92,859,052 N/A (1.65) (1.65) 2.02 2.02 N/A
64,560,754 N/A... (1.37) (1.36) 1.90 1.89 N/A
4,091,738 26.52 8.02 8.03 1.71 1.70(2) 136
5,221,809 1.01 8.04 8.05 1.71 1.70(2) 95
5,402,423 4.03 8.31 8.31 1.69 1.69 90
4,461,511 N/A 8.09 8.14 1.68 1.63 N/A
3,768,089 N/A 7.54 7.55 1.51 1.50 N/A
60,723,598 32.11 0.03 0.03 1.97 1.97(2) 23
47,525,206 (17.84) (0.26) (0.26) 1.98 1.98 25
63,490,941 (19.52) (0.45) (0.45) 1.99 1.99 28
69,227,248 N/A (0.25) (0.25) 1.86 1.86 N/A
72,858,064 N/A... (0.18) (0.18) 1.76 1.76 N/A
36,545,466 18.05 0.86 0.86 2.03 2.03 374
30,880,782 (13.12) 0.69 0.69 2.01 2.01 552
37,131,528 (7.98) 4.35 4.35 1.97 1.97 751
41,131,100 N/A 3.64 3.64 1.89 1.89 N/A
41,671,897 N/A 9.49 9.49 1.67 1.67 N/A
</Table>
19
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Transamerica Financial Life Insurance Company, Inc.
(formerly AUSA Life Insurance Company, Inc.) and the Contractholders of
Diversified Investors Variable Funds:
In our opinion, the accompanying statements of assets and liabilities 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
the Money Market, High Quality Bond, Intermediate Government Bond, Core Bond,
Balanced, Value & Income, Growth & Income, Equity Growth, Special Equity,
Aggressive Equity, High Yield Bond, International Equity, and Calvert
Subaccounts; (constituting the Diversified Investors Variable Funds, hereafter
referred to as the "Funds") at December 31, 2003, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented, 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 Funds' 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, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 26, 2004
20
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
ASSETS:
Investments, at value (cost $9,516,542, $24,446,845, and
$32,732,722, respectively)............................. $10,506,997 $25,774,915 $34,723,104
Receivable for units purchased........................... 4,614 20,570 38,665
----------- ----------- -----------
Total assets............................................. 10,511,611 25,795,485 34,761,769
----------- ----------- -----------
LIABILITIES:
Payable for securities purchased......................... 2,935 10,168 27,275
Payable for units redeemed............................... 1,679 10,402 11,390
Accrued investment advisory fees......................... 1,870 4,544 6,112
----------- ----------- -----------
Total liabilities........................................ 6,484 25,114 44,777
----------- ----------- -----------
NET ASSETS............................................... $10,505,127 $25,770,371 $34,716,992
=========== =========== ===========
ACCUMULATION UNITS....................................... 742,956 1,775,258 2,340,332
=========== =========== ===========
UNIT VALUE............................................... $ 14.14 $ 14.52 $ 14.83
=========== =========== ===========
NET ASSETS CONSIST OF:
Cost of accumulation units............................... $ 9,155,268 $22,750,725 $31,770,978
Undistributed net realized gains......................... 418,356 1,892,772 1,210,121
Accumulated net investment loss.......................... (58,952) (201,196) (254,489)
Unrealized appreciation on investments................... 990,455 1,328,070 1,990,382
----------- ----------- -----------
NET ASSETS............................................... $10,505,127 $25,770,371 $34,716,992
=========== =========== ===========
</Table>
See notes to financial statements.
21
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
INVESTMENT ADVISORY FEES................................. $(19,428) $ (43,954) $ (55,749)
-------- ---------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investments............... 252,006 (519,806) (403,627)
Net change in unrealized appreciation on investments..... 327,167 3,789,465 5,706,874
-------- ---------- ----------
Net realized and unrealized gains on investments......... 579,173 3,269,659 5,303,247
-------- ---------- ----------
Net increase in net assets resulting from operations..... $559,745 $3,225,705 $5,247,498
======== ========== ==========
</Table>
See notes to financial statements.
22
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
FROM OPERATIONS:
Investment advisory fees................................. $ (19,428) $ (43,954) $ (55,749)
Net realized gains (losses) on investments............... 252,006 (519,806) (403,627)
Net change in unrealized appreciation on investments..... 327,167 3,789,465 5,706,874
----------- ----------- -----------
Net increase in net assets resulting from operations..... 559,745 3,225,705 5,247,498
----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Proceeds from units issued............................... 4,194,952 6,755,492 11,219,203
Value of units redeemed.................................. (3,335,181) (4,345,206) (5,372,554)
----------- ----------- -----------
Net increase in net assets from unit transactions........ 859,771 2,410,286 5,846,649
----------- ----------- -----------
Total increase in net assets............................. 1,419,516 5,635,991 11,094,147
NET ASSETS:
Beginning of year........................................ 9,085,611 20,134,380 23,622,845
----------- ----------- -----------
End of year.............................................. $10,505,127 $25,770,371 $34,716,992
=========== =========== ===========
Units outstanding beginning of year...................... 680,929 1,600,072 1,906,765
Units issued during year................................. 305,372 505,206 836,726
Units redeemed during year............................... (243,345) (330,020) (403,159)
----------- ----------- -----------
Units outstanding end of year............................ 742,956 1,775,258 2,340,332
=========== =========== ===========
</Table>
See notes to financial statements.
23
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2002
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
FROM OPERATIONS:
Investment advisory fees................................. $ (15,282) $ (40,905) $ (49,698)
Net realized gains on investments........................ 20,863 308,516 338,375
Net change in unrealized appreciation (depreciation) on
investments............................................ 245,826 (2,000,733) (3,899,189)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. 251,407 (1,733,122) (3,610,512)
----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Proceeds from units issued............................... 5,681,476 6,287,461 8,392,723
Value of units redeemed.................................. (3,860,345) (6,113,761) (7,927,301)
----------- ----------- -----------
Net increase in net assets from unit transactions........ 1,821,131 173,700 465,422
----------- ----------- -----------
Total increase (decrease) in net assets.................. 2,072,538 (1,559,422) (3,145,090)
NET ASSETS:
Beginning of year........................................ 7,013,073 21,693,802 26,767,935
----------- ----------- -----------
End of year.............................................. $ 9,085,611 $20,134,380 $23,622,845
=========== =========== ===========
Units outstanding beginning of year...................... 541,638 1,586,623 1,873,995
Units issued during year................................. 435,133 483,470 629,181
Units redeemed during year............................... (295,842) (470,021) (596,411)
----------- ----------- -----------
Units outstanding end of year............................ 680,929 1,600,072 1,906,765
=========== =========== ===========
</Table>
See notes to financial statements.
24
SHORT HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
190,431 Diversified Investors Variable Funds -- Core Bond $ 5,589,083
Subaccount................................................
7,863 Diversified Investors Variable Funds -- Equity Growth 344,546
Subaccount................................................
6,147 Diversified Investors Variable Funds -- Growth & Income 135,588
Subaccount................................................
195,396 Diversified Investors Variable Funds -- High Quality Bond 2,798,656
Subaccount................................................
62,438 Diversified Investors Variable Funds -- High Yield Bond 947,477
Subaccount................................................
9,981 Diversified Investors Variable Funds -- International Equity 162,170
Subaccount................................................
5,411 Diversified Investors Variable Funds -- Money Market 101,972
Subaccount................................................
2,821 Diversified Investors Variable Funds -- Special Equity 82,138
Subaccount................................................
7,665 Diversified Investors Variable Funds -- Value & Income 345,367
Subaccount................................................
-----------
10,506,997
Total Investments -- 100.02% (Cost $9,516,542)..............
(1,870)
Liabilities less other assets -- (0.02%)....................
-----------
$10,505,127
NET ASSETS -- 100.00%.......................................
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2003 is $9,516,542.
The following amounts are based on cost for federal income tax purposes:
$ 990,456
Gross unrealized appreciation...............................
(1)
Gross unrealized depreciation...............................
-----------
$ 990,455
Net unrealized appreciation.................................
===========
</Table>
See notes to financial statements.
25
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
256,127 Diversified Investors Variable Funds -- Core Bond $ 7,517,260
Subaccount................................................
95,670 Diversified Investors Variable Funds -- Equity Growth 4,191,872
Subaccount................................................
75,024 Diversified Investors Variable Funds -- Growth & Income 1,654,803
Subaccount................................................
262,167 Diversified Investors Variable Funds -- High Quality Bond 3,755,022
Subaccount................................................
84,405 Diversified Investors Variable Funds -- High Yield Bond 1,280,819
Subaccount................................................
121,428 Diversified Investors Variable Funds -- International Equity 1,973,006
Subaccount................................................
10,944 Diversified Investors Variable Funds -- Money Market 206,229
Subaccount................................................
34,148 Diversified Investors Variable Funds -- Special Equity 994,114
Subaccount................................................
93,255 Diversified Investors Variable Funds -- Value & Income 4,201,790
Subaccount................................................
-----------
25,774,915
Total Investments -- 100.02% (Cost $24,446,845).............
(4,544)
Liabilities less other assets -- (0.02%)....................
-----------
$25,770,371
NET ASSETS -- 100.00%.......................................
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2003 is $24,446,845.
The following amounts are based on cost for federal income tax purposes:
$ 1,669,483
Gross unrealized appreciation...............................
(341,413)
Gross unrealized depreciation...............................
-----------
$ 1,328,070
Net unrealized appreciation.................................
===========
</Table>
See notes to financial statements.
26
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
207,829 Diversified Investors Variable Funds -- Core Bond $ 6,099,721
Subaccount................................................
178,692 Diversified Investors Variable Funds -- Equity Growth 7,829,544
Subaccount................................................
140,160 Diversified Investors Variable Funds -- Growth & Income 3,091,509
Subaccount................................................
207,490 Diversified Investors Variable Funds -- High Quality Bond 2,971,882
Subaccount................................................
67,565 Diversified Investors Variable Funds -- High Yield Bond 1,025,273
Subaccount................................................
226,800 Diversified Investors Variable Funds -- International Equity 3,685,140
Subaccount................................................
16,766 Diversified Investors Variable Funds -- Money Market 315,954
Subaccount................................................
63,756 Diversified Investors Variable Funds -- Special Equity 1,856,090
Subaccount................................................
174,179 Diversified Investors Variable Funds -- Value & Income 7,847,991
Subaccount................................................
-----------
34,723,104
Total Investments -- 100.02% (Cost $32,732,722).............
(6,112)
Liabilities less other assets -- (0.02%)....................
-----------
$34,716,992
NET ASSETS -- 100.00%.......................................
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2003 is $32,732,722.
The following amounts are based on cost for federal income tax purposes:
$ 2,442,962
Gross unrealized appreciation...............................
(452,580)
Gross unrealized depreciation...............................
-----------
$ 1,990,382
Net unrealized appreciation.................................
===========
</Table>
See notes to financial statements.
27
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Diversified Investors Strategic Variable Funds (the "Trust"), a New York
business trust, is registered under the Investment Company Act of 1940 (the
"1940 Act"), as amended, as an open-end management investment company. The Trust
is composed of three different series that are, in effect, separate investment
funds: Short Horizon Strategic Variable Fund, Intermediate Horizon Strategic
Variable Fund, and Intermediate Long Horizon Strategic Variable Fund
(collectively, the "Funds"). The Trust established and designated each of the
Funds as separate series on April 15, 1996. Each Fund seeks to achieve its
investment objective by investing all of its investable assets among the
Diversified Investors Variable Funds ("DIVF"). DIVF is a separate investment
account offering thirteen subaccounts, each with a different investment
objective. DIVF operates as a unit investment trust under the Investment Company
Act of 1940, as amended. The Trust had no assets or operations until January 2,
1997 (commencement of operations).
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
A. INVESTMENT VALUATION:
The value of each Fund's investment in a corresponding subaccount of DIVF is
valued at the unit value per share of each subaccount determined as of the close
of the New York Stock Exchange on the valuation date.
B. FEDERAL INCOME TAXES:
The operations of the Trust form a part of, and are taxed with, the operations
of Transamerica Financial Life Insurance Company ("TFLIC") (formerly AUSA Life
Insurance Company, Inc.), a wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"). TFLIC does not expect, based upon current tax law, to incur any
income tax upon the earnings or realized capital gains attributable to the
Trust. Based upon this expectation, no charges are currently being deducted from
the Trust for federal income tax purposes.
C. OPERATING EXPENSES:
The Trust accounts separately for the assets, liabilities and operations of each
Fund. Each Fund will indirectly bear its pro rata share of fees and expenses
incurred by DIVF.
D. OTHER:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of 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.
3. FEES AND TRANSACTIONS WITH AFFILIATES
The Trust has entered into an Investment Advisory Agreement with Diversified
Investment Advisors, Inc. (the "Advisor"), an indirect, wholly-owned subsidiary
of AEGON USA, Inc., under which the Advisor provides general investment advice
to each Fund. AEGON USA, Inc., is a financial services holding company whose
primary emphasis is life and health insurance and annuity and investment
products. AEGON USA is an indirect, wholly-owned subsidiary of AEGON N.V., a
Netherlands corporation which is a publicly traded international insurance
group. For providing these services and facilities and for bearing the related
expenses, the Advisor receives a monthly fee from each Fund at an annual rate
equal to 0.20% of the average daily net assets of each Fund.
28
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Advisor is also advisor to the DIVF's. In addition, TFLIC deducts a
mortality and expense risk charge at an annual rate equivalent to 1.10%, of the
average daily net assets from the DIVF's. (TFLIC reserves the right to charge
maximum fees of 1.25% upon notice.) Accordingly, the net assets and unit values
of the DIVF's will reflect the management fee and other expenses paid to the
Advisor, as well as the mortality and expense risk charge deducted by TFLIC.
TFLIC bears sales distribution expenses and any other expenses in excess of the
mortality and expense risk charge. TFLIC reserves the right to deduct an annual
contract charge from a Participant's Accumulation Account to reimburse TFLIC for
administrative expense relating to the maintenance of the Variable Annuity
Contracts. TFLIC has no present intention to impose such a charge but may do so
in the future. Any such annual charge will not exceed $50.
Certain trustees and officers of the Trust are also directors, officers or
employees of the Advisor or its affiliates. None of the non-independent trustees
so affiliated receive compensation for services as trustees of the Trust.
Similarly, none of the Trust's officers receive compensation from the Funds. The
independent trustees are also trustees of the affiliated funds for which they
receive fees.
4. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales for the year
ended December 31, 2003, were as follows:
<Table>
<Caption>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
Short Horizon Strategic Variable Fund....................... $ 11,432,029 $ 10,591,377
Intermediate Horizon Strategic Variable Fund................ 21,455,068 19,087,746
Intermediate Long Horizon Strategic Variable Fund........... 33,228,907 27,436,092
</Table>
5. GENERAL INDEMNIFICATION
In the normal course of business, the Funds enter into contracts that contain a
variety of representations and warranties which provide general
indemnifications. The Funds' maximum exposure under these arrangements is
unknown as this would involve 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.
6. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
--------------------------- TOTAL
INCOME
NET REALIZED (LOSS) UNIT
UNIT VALUE, NET AND UNREALIZED FROM VALUE,
FOR THE BEGINNING OF INVESTMENT GAINS (LOSSES) INVESTMENT END OF TOTAL NET ASSETS,
YEAR ENDED YEAR (LOSS) ON INVESTMENTS OPERATIONS YEAR RETURN END OF YEAR
- ---------- ------------ ---------- -------------- ---------- ------ ------ -----------
SHORT HORIZON STRATEGIC
VARIABLE FUND
12/31/2003 $13.34 $(0.03) $ 0.83 $ 0.80 $14.14 6.00% $10,505,127
12/31/2002 12.95 (0.03) 0.42 0.39 13.34 3.01 9,085,611
12/31/2001 12.38 (0.03) 0.60 0.57 12.95 4.60 7,013,073
12/31/2000 11.63 (0.02) 0.77 0.75 12.38 6.45 3,498,791
12/31/1999 11.50 (0.02) 0.15 0.13 11.63 1.13 2,523,200
<Caption>
RATIOS TO AVERAGE
NET ASSETS
---------------------
NET PORTFOLIO
FOR THE INVESTMENT TURNOVER
YEAR ENDED EXPENSES (LOSS) RATE
- ---------- -------- ---------- ---------
SHORT HORIZON STRATEGIC
VARIABLE FUND
12/31/2003 0.20% (0.20)% 109%
12/31/2002 0.20 (0.20) 55
12/31/2001 0.20 (0.20) 68
12/31/2000 0.20 (0.20) 87
12/31/1999 0.20 (0.20) 84
</Table>
29
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
--------------------------- TOTAL
INCOME
NET REALIZED (LOSS) UNIT
UNIT VALUE, NET AND UNREALIZED FROM VALUE,
FOR THE BEGINNING OF INVESTMENT GAINS (LOSSES) INVESTMENT END OF TOTAL NET ASSETS,
YEAR ENDED YEAR (LOSS) ON INVESTMENTS OPERATIONS YEAR RETURN END OF YEAR
- ---------- ------------ ---------- -------------- ---------- ------ ------ -----------
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
12/31/2003 $12.58 $(0.03) $ 1.97 $ 1.94 $14.52 15.42% $25,770,371
12/31/2002 13.67 (0.03) (1.06) (1.09) 12.58 (7.97) 20,134,380
12/31/2001 14.16 (0.03) (0.46) (0.49) 13.67 (3.46) 21,693,802
12/31/2000 14.35 (0.03) (0.16) (0.19) 14.16 (1.32) 18,239,055
12/31/1999 12.68 (0.03) 1.70 1.67 14.35 13.17 15,953,762
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
12/31/2003 12.39 (0.03) 2.47 2.44 14.83 19.69 34,716,992
12/31/2002 14.28 (0.03) (1.86) (1.89) 12.39 (13.24) 23,622,845
12/31/2001 15.34 (0.03) (1.03) (1.06) 14.28 (6.91) 26,767,935
12/31/2000 15.99 (0.03) (0.62) (0.65) 15.34 (4.07) 25,424,342
12/31/1999 13.48 (0.03) 2.54 2.51 15.99 18.62 20,592,888
<Caption>
RATIOS TO AVERAGE
NET ASSETS
---------------------
NET PORTFOLIO
FOR THE INVESTMENT TURNOVER
YEAR ENDED EXPENSES (LOSS) RATE
- ---------- -------- ---------- ---------
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
12/31/2003 0.20% (0.20)% 87%
12/31/2002 0.20 (0.20) 53
12/31/2001 0.20 (0.20) 92
12/31/2000 0.20 (0.20) 98
12/31/1999 0.20 (0.20) 81
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
12/31/2003 0.20 (0.20) 98
12/31/2002 0.20 (0.20) 49
12/31/2001 0.20 (0.20) 44
12/31/2000 0.20 (0.20) 59
12/31/1999 0.20 (0.20) 72
</Table>
7. INVESTMENTS IN AFFILIATES
The market value of investments in affiliates (as defined in the Investment
Company Act of 1940, "Affiliated Companies" are those in which the Trust is
under common control with an affiliated entity) at December 31, 2003 totaled
$10,506,997, $25,774,915 and $34,723,104, for the Short Horizon Strategic
Variable Fund, Intermediate Horizon Strategic Variable Fund, and Intermediate
Long Horizon Strategic Variable Fund, respectively.
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING SHARES SHARES ENDING PURCHASE SALE GAIN/(LOSS)
SHARES PURCHASED SOLD SHARES COST COST ON SALES
--------- --------- --------- ------- ----------- ----------- -----------
SHORT HORIZON STRATEGIC VARIABLE FUND
- -------------------------------------
INVESTMENTS:
Diversified Investors Variable Funds --
Core Bond Subaccount.................... 95,555 96,501 1,625 190,431 $ 2,848,419 $ 35,647 $ 12,077
Diversified Investors Variable
Funds -- Equity Growth Subaccount....... -- 8,273 410 7,863 324,218 15,693 1,767
Diversified Investors Variable
Funds -- Growth & Income Subaccount..... -- 6,263 116 6,147 122,924 2,228 274
Diversified Investors Variable
Funds -- High Quality Bond Subaccount... 127,443 68,062 109 195,396 977,930 1,222 345
Diversified Investors Variable
Funds -- High Yield Bond Subaccount..... 75,194 108 12,864 62,438 1,627 153,102 23,557
Diversified Investors Variable Funds --
Intermediate Government Bond
Subaccount.............................. 90,906 * 90,906 -- 1 1,607,158 221,170
Diversified Investors Variable Funds --
International Equity Subaccount......... -- 11,179 1,198 9,981 146,960 15,413 3,231
Diversified Investors Variable
Funds -- Money Market Subaccount........ 52,242 368,467 415,298 5,411 6,941,647 7,821,444 2,615
Diversified Investors Variable
Funds -- Special Equity Subaccount...... -- 2,847 26 2,821 66,674 580 167
Diversified Investors Variable
Funds -- Value & Income Subaccount...... 24,611 41 16,987 7,665 1,629 686,884 (13,197)
----------- ----------- ---------
$11,432,029 $10,339,371 $ 252,006
=========== =========== =========
</Table>
30
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INVESTMENTS IN AFFILIATES (CONTINUED)
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING SHARES SHARES ENDING PURCHASE SALE GAIN/(LOSS)
SHARES PURCHASED SOLD SHARES COST COST ON SALES
--------- --------- --------- ------- ----------- ----------- -----------
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
- --------------------------------------------
INVESTMENTS:
Diversified Investors Variable
Funds -- Aggressive Equity Subaccount... 58,379 -- 58,379 -- $ -- $ 966,255 $(320,419)
Diversified Investors Variable Funds --
Core Bond Subaccount.................... 176,521 103,691 24,085 256,127 3,047,990 567,738 119,701
Diversified Investors Variable
Funds -- Equity Growth Subaccount....... 39,805 55,978 113 95,670 2,200,681 6,178 (1,357)
Diversified Investors Variable
Funds -- Growth & Income Subaccount..... 88,819 4,010 17,805 75,024 82,985 605,030 (255,222)
Diversified Investors Variable
Funds -- High Quality Bond Subaccount... 140,310 121,857 -- 262,167 1,748,928 -- --
Diversified Investors Variable
Funds -- High Yield Bond Subaccount..... 169,818 3,819 89,232 84,405 56,178 1,071,713 129,795
Diversified Investors Variable Funds --
Intermediate Government Bond
Subaccount.............................. 51,325 * 51,325 -- 1 902,500 129,769
Diversified Investors Variable Funds --
International Equity Subaccount......... 116,220 11,239 6,031 121,428 151,596 86,638 2,825
Diversified Investors Variable
Funds -- Money Market Subaccount........ 2,676 712,546 704,278 10,944 13,423,496 13,267,610 479
Diversified Investors Variable
Funds -- Special Equity Subaccount...... 98,812 7,791 72,455 34,148 219,615 2,006,167 (337,768)
Diversified Investors Variable
Funds -- Value & Income Subaccount...... 83,370 13,097 3,212 93,255 523,598 127,723 12,391
----------- ----------- ---------
$21,455,068 $19,607,552 $(519,806)
=========== =========== =========
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
- -------------------------------------------------
INVESTMENTS:
Diversified Investors Variable
Funds -- Aggressive Equity Subaccount... 91,185 5,923 97,108 -- $ 60,696 $ 1,463,479 $(389,190)
Diversified Investors Variable Funds --
Core Bond Subaccount.................... 101,120 114,210 7,501 207,829 3,354,502 174,006 38,841
Diversified Investors Variable
Funds -- Equity Growth Subaccount....... 66,614 112,518 440 178,692 4,433,097 17,265 952
Diversified Investors Variable
Funds -- Growth & Income Subaccount..... 143,065 23,759 26,664 140,160 463,613 642,072 (118,751)
Diversified Investors Variable
Funds -- High Quality Bond Subaccount... 80,076 128,002 588 207,490 1,837,499 6,685 1,771
Diversified Investors Variable
Funds -- High Yield Bond Subaccount..... 159,148 7,626 99,209 67,565 109,957 1,185,726 147,278
Diversified Investors Variable Funds --
Intermediate Government Bond
Subaccount.............................. 60,126 2,393 62,519 -- 47,602 1,063,975 193,409
Diversified Investors Variable Funds --
International Equity Subaccount......... 194,496 36,017 3,713 226,800 470,740 53,461 3,940
Diversified Investors Variable
Funds -- Money Market Subaccount........ 2,943 1,071,285 1,057,462 16,766 20,182,300 19,921,702 988
</Table>
31
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INVESTMENTS IN AFFILIATES (CONTINUED)
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING SHARES SHARES ENDING PURCHASE SALE GAIN/(LOSS)
SHARES PURCHASED SOLD SHARES COST COST ON SALES
--------- --------- --------- ------- ----------- ----------- -----------
Diversified Investors Variable
Funds -- Special Equity Subaccount...... 162,056 23,655 121,955 63,756 588,692 3,112,417 (320,730)
Diversified Investors Variable
Funds -- Value & Income Subaccount...... 136,731 42,883 5,435 174,179 1,680,209 198,931 37,865
----------- ----------- ---------
$33,228,907 $27,839,719 $(403,627)
=========== =========== =========
</Table>
- ---------------
* Less than one share.
32
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and the Contractholders of Diversified Investors
Strategic Variable Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios 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 the Short Horizon Strategic
Variable Fund, Intermediate Horizon Strategic Variable Fund, and Intermediate
Long Horizon Strategic Variable Fund; (constituting the Diversified Investors
Strategic Variable Funds, hereafter referred to as the "Funds") at December 31,
2003, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented, 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 Funds' 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, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 26, 2004
33
ANNUAL ECONOMIC OVERVIEW
Despite a rocky start to 2003, the economic recovery clearly established itself
by the Fourth Quarter. Stock prices, which often anticipate such turnarounds,
posted positive returns for the last three quarters of the year, ending on a
decidedly optimistic note. In contrast, bonds had a more difficult time, and
with the exception of high yield bonds, most bond returns ended the year in the
low single digits.
As the year progressed, more and more economic indicators turned positive. Gross
Domestic Product surged by 8.2% in the Third Quarter, catching most economists
by surprise and setting the stage for what is hoped to be continued growth in
2004. The unemployment rate, while still higher than historical averages, had
been some cause for concern, but by year-end appeared to be improving due to
growing corporate profits and business spending. Additional factors aiding the
economy included continued tax cuts and a weaker dollar, which fell to a record
low against the Euro. Many on Wall Street had feared that foreign investors
would pull out of the U.S. Treasury market, but this fear had not materialized
and foreign investment in Treasuries actually increased.
Interest rates trended higher during the year, but still remain at historically
low levels. The Ten-year Treasury yield that began 2003 at 3.82% ended the year
at 4.25%. This represents a retreat from the spike in yields that occurred in
the summer when the Ten-year yield reached just over 4.6% and Treasuries sold
off sharply. While the Fed chose not to increase interest rates during the year,
many feel that such action is inevitable in 2004.
The stock market had three positive quarters in 2003, buoyed by the
ever-improving economic picture. The broad stock market, as measured by the S&P
500 Index, gained 28.7% for the year. Small-capitalization stocks had an even
stronger showing, with the Russell 2000 Index posting an impressive 47.3%
return. Large-cap international stocks did better than their domestic
counterparts, with the MSCI EAFE ex-US Index returning 40.0% for the
twelve-month period. Investors favored growth over value for most of 2003, which
is not unusual during the initial stages of an economic upturn.
After the corporate scandals of 2001 and 2002, many businesses had stronger
balance sheets and so reaped the full benefits of this year's economic upturn.
Corporate earnings continue to be strong, but the biggest gains for the year
came from lower quality companies with little to no earnings. Investors bought
stocks that had been beaten down most recently and were less enamored with more
established companies. Overall, however, the rally was in fact broad enough so
that stocks of all types participated.
Among bonds, risk was rewarded. As a measure of the broad bond market, the
Lehman Aggregate Bond Index posted a one-year return of 4.1%. Treasury
securities had the lowest returns for the year (2.4%). At the other end of the
spectrum were high yield bonds, which behaved more like equity securities and
gained 28.2% to prove it.
MONEY MARKET FUND
In that a money market fund's opportunities and rewards for deviating much from
the norm are usually limited, there were few ways to generate superior
performance during 2003. Nevertheless, in 2003, the portfolio manager shifted a
meaningful portion of the Fund's assets into high-quality, liquid U.S.
Government Agency securities to capitalize on two developments. First, spreads
on Agency securities widened markedly. Second, the market backups in interest
rates allowed for some opportune purchases of Agency callable, coupon and
discount note securities at yields significantly above the current federal funds
rate of 1%.
Throughout 2003 the portfolio's performance largely tracked the movement in the
Federal Reserve's U.S. federal-funds target rate, albeit with a lagged effect.
The Fund's yield trended down through 2003 as yields on new investments edged
downward, particularly in the wake of the Fed's June 25 interest rate cut.
HIGH QUALITY BOND FUND
The fund invests in debt issued by the U.S. Government and its agencies as well
as asset-backed and corporate fixed income securities, emphasizing short
duration and high quality securities. The primary driver of the
34
fund's return is the return of the Merrill Lynch 1-3 year benchmark. During
2003, the fund's performance held up even in the face of the increase of rising
rates, as evidenced by the two-year Treasury yield rising from 1.61% at the
beginning the year to 1.83% by December 31.
INTERMEDIATE GOVERNMENT BOND FUND
The fund invests almost exclusively in intermediate-term U.S. Government and
Agency fixed income securities as well as money market instruments with minimal
credit exposure. During 2003, Diversified Investment Advisors made a change in
the Fund's sub-advisors, replacing the incumbent with two sub-advisors that have
complementary investment styles. The new sub-advisory structure reduces the
fund's manager-specific risk while constraining the fund's duration relative to
the benchmark. The fund's returns during the year were negatively impacted by
the prior sub-advisor's second quarter performance including a
shorter-than-index duration position and a significant underweight to government
securities.
CORE BOND FUND
The fund's investment strategy expands on the more traditional investable fixed
income universe, creating a more diversified portfolio that includes some
exposure to below-investment grade ("high yield"), non-dollar, and emerging
market securities on an opportunistic basis. Positive effects on the fund's 2003
performance included an allocation to high yield and non-dollar sectors, credit
selection in the investment grade corporate sector, and allocations to high
quality spread product (ABS, CMBS, and Agencies). Portfolio performance was
adversely affected by an underweight position in both the corporate and mortgage
sectors and a yield curve flattening bias.
HIGH YIELD BOND FUND
In a reversal from recent years, the high yield market posted significant gains
during 2003. Because risk was rewarded throughout most of the year, the fund's
return closely matched that of its benchmark, the Merrill Lynch High Yield
Master II Index, particularly after the portfolio manager increased the fund's
exposure to lower rated issues as the economy continued to show signs of
strength, improving credit ratings and better earnings fundamentals. Sector
allocation decisions also added to performance, including an overweighted
position to the strong performing cable/satellite TV sector, which returned
46.0% for the year.
BALANCED FUND
The fund is managed by two sub-advisors: one overseeing the fund's equity
portion and one overseeing the fund's fixed income portion. The equity
sub-advisor uses a quantitative model that is designed to track the S&P 500
Index closely. This structured core approach was negatively impacted by the
volatility of the market and the surprising turnaround in investor sentiment.
The fund's fixed income sub-advisor uses an investment strategy that expands on
the more traditional investable fixed income universe, creating a more
diversified portfolio that includes some exposure to below-investment grade
("high yield"), non-dollar, and emerging market securities on an opportunistic
basis. Positive effects on the fixed income portion's 2003 performance included
an allocation to high yield and non-dollar sectors, credit selection in the
investment grade corporate sector, and allocations to high quality spread
product (ABS, CMBS, and Agencies). Fixed income performance was adversely
affected by an underweight position in both the corporate and mortgage sectors
and a yield curve flattening bias.
VALUE & INCOME FUND
The fund is managed by two sub-advisors with unique and complementary investment
approaches to value investing: deep value and relative value. During 2003,
Diversified replaced the relative value manager sub-advisor, due to the pending
retirement of the portfolio manager.
35
Sector allocation had a meaningful impact on the fund's performance,
particularly during the second half of the year. With respect to the Healthcare
sector, for instance, which trailed the market, investor concerns about weak
product pipelines, patent expirations and pricing pressures, caused
pharmaceuticals to trade down for much of 2003. Positions in Pfizer and Wyeth in
particular detracted from performance, while an underweighting to Merck helped.
Strong performance by hospital management holdings--HCA and Tenet
Healthcare--also helped. For the year, cyclical stocks led the market, fueled by
mounting evidence that the economy and corporate profits are improving. Indeed,
among the top contributors to fund performance were pro-cyclicals such as Sears
and Cooper Industries. Telecom equipment manufacturers Corning and Nortel, which
were also overweighted, also participated in the market's rally. Stock selection
in the Financials sector was disappointing in the second half of the year. For
instance, the Fund's position in Bank of America hurt performance; shares lagged
after the company's rich offer for FleetBoston was announced. Additionally, the
fund's avoidance of a number of capital markets-sensitive shares was a further
detractor.
GROWTH & INCOME FUND
Two sub-advisors, each of whom has a specific role, manage the fund. The
structured core component is managed using a quantitative model that is designed
to track the S&P 500 Index closely, while the enhanced component is designed to
add value over the benchmark. For 2003, the Fund's performance lagged the S&P
500 Index primarily because of the nature of the stock market rally, which
benefited low quality and low price stocks the most. Additionally, the fund's
model-driven core component was negatively impacted by the volatility of the
market and the surprising turnaround in investor sentiment. Positive
contributors to performance included strong stock selection in the Commercial
Services sector. Industry selection had less of an impact on total fund
performance. Top holdings throughout the year included Intel, Cendant, Citigroup
and Cisco. Specific stocks that detracted from performance included Newell
Rubbermaid, Avery Dennison and SBC Communications.
EQUITY GROWTH FUND
The fund is managed by three sub-advisors, each of whom has a specific role in
the fund. Total fund performance during 2003 was negatively impacted by the
nature of the stock market rally, which benefited low quality and low price
stocks the most. The valuation and quality bias discipline of the fund's core
sub-advisor did not fare well in the environment. Fortunately, some of this
performance shortfall was lessened due to the favorable stock picking decisions
of the non-core sub-advisors. Stock selection within Biotechnology and Software
were particularly additive to 2003 performance, with Cisco Systems and Intel
representing the largest individual contributors to return. Specific stocks that
detracted from performance included General Dynamics Corporation and Kraft
General Foods.
MID-CAP VALUE
The fund's sub-advisor invests in neglected, inefficiently priced stocks that
possess strong fundamentals. In-depth research resulted in several strong stock
selections during 2003 including United States Steel, shares of which rallied
strongly on the combined benefits of its acquisition of National Steel and
upward movement in steel prices. Everest Re Group, whose share price rebounded
from its recent weakness, moved to new highs in the second quarter after it
reported very strong first quarter earnings. These results reflected the
benefits of both the favorable pricing environment as well as effective cost
control. Stanley Works rallied on an upside surprise regarding third quarter
earnings, along with the accretive impact of the divestiture of their
residential entry doors business and two acquisitions.
The largest detractor from performance in 2003 was Royal Group Technologies,
whose margins in core building products were hurt by rising feedstock costs, and
who suffered losses in their window blind operation due to competition from
imports. Also negatively impacting performance were holdings in Big Lots, AFC
Enterprises, York International and Ikon Office Solutions.
36
MID-CAP GROWTH
The sub-advisor's investment philosophy is to seek quality growth companies,
sensitive to valuations. For the calendar year 2003, the fund posted a strong
absolute gain, yet it trailed the Russell Midcap Growth Index return, due
largely to performance in the second and third quarters. The relative
underperformance in 2003 was generally a result of market sentiment rewarding
companies with weak but improving fundamentals. Specifically, the sub-advisor's
underweight allocations to stocks in the Technology, Telecommunications and
Media ("TMT") groups held back relative returns, along with an overweight
position in Energy stocks. While the sub-advisor began to selectively add
exposure to the highly cyclical Semiconductor and Software groups mid year, the
major challenge was to identify quality growth stocks that did not discount high
and often unprecedented expectations. Stocks that more than tripled despite
challenging outlooks included very strong performances by Avaya Inc., PMC-Sierra
Inc. and UnitedGlobalCom Inc.
SMALL-CAP VALUE
The fund's sub-advisor uses normalized earnings to derive a stock's intrinsic
value, and then compares it to current market price to make portfolio decisions.
This emphasis on finding and investing in high quality companies meant that the
fund did not participate fully in the year's rally, as "low quality" companies
dominated. In addition, 2003 was clearly a micro-cap year. In this regard, the
sub-advisor's bias towards slightly larger, more liquid stocks detracted from
performance. The sub-advisor's industry selection was a significant positive
contributor to 2003 performance, but stock selection detracted, particularly
among specialty retailers. Individual holdings that added to performance
included Acuity Brands, Dendrite International and Rayonier while JLG
Industrials, Footstar and Payless Shoesource hampered returns.
SPECIAL EQUITY FUND
The fund is managed by five sub-advisors: two small-cap growth managers, two
small-cap value managers, and one small-cap core manager. The fund produced high
absolute returns for the year ended December 31, but trailed its Russell 2000
Index. This underperformance was primarily due to the low quality nature of the
stock market rally generally, in particular during the second quarter when the
fund's strong quality focus cost the relative performance. Industry selection
was a positive contributor to performance, with an overweighted position to the
outperforming Semiconductor sector and an underweighted position to Real Estate
and Chemicals. ITT Educational Services was the Fund's most additive holding for
the twelve months ended December 31, while Healthsouth and PEC Solutions
detracted from returns.
SMALL CAP GROWTH
The fund's sub-advisor seeks sustainable growth with reasonable valuations. The
fund did not participate to the fullest extent possible in this year's market
rally, as stocks generally considered to be of poor quality, e.g., those with
low returns on equity, outperformed the broad index during the year. In
addition, smallest stocks did the best, with the smallest 25% of stocks
returning considerably more on average than all other stocks in the index. The
portfolio's returns were hurt on a relative basis by poor stock selection in the
Consumer Services and Technology sectors as well as being underexposed to the
type of stocks that performed best; those with the smallest market
capitalizations and poorest earnings and balance sheet quality. The Technology
sector was the best performing sector within the Russell 2000 Growth Index,
returning over 65%, and the portfolio's relative underweight in this sector was
also a significant factor to the underperformance.
AGGRESSIVE EQUITY
Despite high absolute returns, the fund underperformed its benchmark for the
year as the market was dominated by the extraordinary performance from low
quality, low price securities. The fund's sub-advisor uses a quantitative model
that benefits from market trends, favoring companies with strong relative risk
adjusted returns and accelerating earnings growth. This approach did not perform
well during the earlier part
37
of 2003, but did prove helpful as the year progressed and such securities became
attractive from a risk adjusted relative return basis. Unfortunately, December
provided a two-week correction in these top-performing securities that led to
the eventual year-end underperformance. For the full year, industry selection
was a positive contributor to fund performance, but stock selection,
particularly among software and pharmaceuticals hampered returns.
INTERNATIONAL EQUITY
Optimism about a sustainable economic recovery in Europe and Japan coupled with
strong corporate earnings helped international equity markets produce very
strong returns for the year. The fund did benefit from the sub-advisor's stock
selection decisions in Japan, particularly within the Information Techology
sector, including holdings in Tokyo Electron, NEC Corp. and Yahoo Japan. Stock
selection in Materials was also additive, as was an underweighting to the
Consumer Staples sector, which underperformed. Finally, the fund's exposure to
emerging markets, the broad benchmark for which posted a 56% return, contributed
positively to performance for the year. Detractors from performance included
stock selection and underweighting in Financials, especially in the insurance
industry; stock selection and underweighting in the Discretionary sector,
specifically Inditex, Mitsubishi Motors and Sony; and stock selection in the
Industrials sector.
38
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39
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE VALUE &
MARKET BOND BOND BOND BALANCED INCOME
------------ ------------ ------------ -------------- ------------ --------------
ASSETS:
Securities, at cost............ $798,222,566 $642,896,569 $326,262,518 $1,642,694,609 $419,931,676 $1,956,775,436
============ ============ ============ ============== ============ ==============
Securities, at value, including
securities loaned (Note 4).... $798,222,566 $645,981,818 $327,608,620 $1,661,686,950 $458,893,796 $2,271,099,234
Repurchase agreements (cost
equals market)................ 774 3,547,162 5,865,247 87,077,526 22,111,141 77,231,817
Cash........................... 596 2,417 -- 37,118 4,402 15,749
Receivable for securities
sold.......................... -- 933 -- 116,790,967 12,362,308 440,275
Unrealized appreciation on
foreign currency forward
contracts..................... -- -- -- 3,173,812 185,665 --
Variation margin............... -- -- -- -- -- --
Interest receivable............ 1,583,992 4,605,369 3,609,480 18,339,131 1,653,185 4,985
Dividends receivable........... -- -- -- -- 368,349 3,754,377
Foreign tax reclaim
receivable.................... -- -- -- -- -- --
Receivable from Advisor........ -- -- -- -- 20,077 --
Receivable from securities
lending....................... -- 1,707 -- 29,338 4,154 16,687
------------ ------------ ------------ -------------- ------------ --------------
Total assets................... 799,807,928 654,139,406 337,083,347 1,887,134,842 495,603,077 2,352,563,124
------------ ------------ ------------ -------------- ------------ --------------
LIABILITIES:
Payable to Custodian........... -- -- 31,373 -- -- --
Collateral for securities
loaned........................ -- 31,159,620 53,416,536 160,419,929 29,454,439 151,980,023
Payable for securities
purchased..................... -- -- 18,000,047 239,157,696 28,743,092 1,536,951
Securities sold short, at value
(proceeds $5,063,319 and
$1,944,612, respectively)..... -- -- -- 5,117,122 1,952,593 --
Written options, at value
(premium $444,723 and $48,164,
respectively)................. -- -- -- 231,743 25,056 --
Unrealized depreciation on
foreign currency forward
contracts..................... -- -- -- 12,521,039 1,081,753 --
Payable to Advisor............. -- -- -- 549 -- --
Variation margin............... -- -- -- 369,185 35,075 --
Investment advisory fees....... 186,592 192,360 84,630 458,852 173,048 866,076
Accrued expenses............... 48,738 39,092 30,773 71,720 52,189 94,339
Contingent liability (Note
6)............................ -- -- -- -- -- --
------------ ------------ ------------ -------------- ------------ --------------
Total liabilities.............. 235,330 31,391,072 71,563,359 418,347,835 61,517,245 154,477,389
------------ ------------ ------------ -------------- ------------ --------------
NET ASSETS..................... $799,572,598 $622,748,334 $265,519,988 $1,468,787,007 $434,085,832 $2,198,085,735
============ ============ ============ ============== ============ ==============
NET ASSETS CONSIST OF:
Paid-in capital................ $799,572,598 $619,663,085 $264,173,886 $1,460,263,270 $396,188,539 $1,883,761,937
Net unrealized appreciation on
securities.................... -- 3,085,249 1,346,102 18,992,341 38,962,120 314,323,798
Net unrealized appreciation
(depreciation) on futures,
written options and short
sales......................... -- -- -- (1,446,390) (195,089) --
Net unrealized depreciation on
translation of assets and
liabilities in foreign
currencies.................... -- -- -- (9,022,214) (869,738) --
------------ ------------ ------------ -------------- ------------ --------------
NET ASSETS..................... $799,572,598 $622,748,334 $265,519,988 $1,468,787,007 $434,085,832 $2,198,085,735
============ ============ ============ ============== ============ ==============
<Caption>
GROWTH &
INCOME
--------------
ASSETS:
Securities, at cost............ $ 973,772,106
==============
Securities, at value, including
securities loaned (Note 4).... $1,101,712,881
Repurchase agreements (cost
equals market)................ 20,206,694
Cash........................... 3,203
Receivable for securities
sold.......................... --
Unrealized appreciation on
foreign currency forward
contracts..................... --
Variation margin............... 5,800
Interest receivable............ 1,816
Dividends receivable........... 1,184,749
Foreign tax reclaim
receivable.................... --
Receivable from Advisor........ --
Receivable from securities
lending....................... 30,132
--------------
Total assets................... 1,123,145,275
--------------
LIABILITIES:
Payable to Custodian........... --
Collateral for securities
loaned........................ 59,141,095
Payable for securities
purchased..................... --
Securities sold short, at value
(proceeds $5,063,319 and
$1,944,612, respectively)..... --
Written options, at value
(premium $444,723 and $48,164,
respectively)................. --
Unrealized depreciation on
foreign currency forward
contracts..................... --
Payable to Advisor............. --
Variation margin............... --
Investment advisory fees....... 558,929
Accrued expenses............... 55,919
Contingent liability (Note
6)............................ --
--------------
Total liabilities.............. 59,755,943
--------------
NET ASSETS..................... $1,063,389,332
==============
NET ASSETS CONSIST OF:
Paid-in capital................ $ 935,418,429
Net unrealized appreciation on
securities.................... 127,940,775
Net unrealized appreciation
(depreciation) on futures,
written options and short
sales......................... 30,128
Net unrealized depreciation on
translation of assets and
liabilities in foreign
currencies.................... --
--------------
NET ASSETS..................... $1,063,389,332
==============
</Table>
See notes to financial statements.
40
<Table>
<Caption>
EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD
GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY BOND
-------------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
$1,799,554,954 $210,927,308 $166,912,352 $ 90,054,940 $1,088,065,726 $ 79,777,582 $387,673,224 $243,589,525
============== ============ ============ ============ ============== ============ ============ ============
$1,999,739,813 $235,978,774 $183,114,360 $105,402,643 $1,368,186,393 $ 92,988,046 $448,437,981 $259,863,869
56,130,189 25,821,934 12,155,301 6,177,260 78,500,165 14,423,993 17,782,237 19,578,332
10,625 1,015,674 2,648 1,099 35,508 2,333 12,693 --
7,591,869 3,696,809 1,115,014 -- 7,147,105 33,656 5,566,632 462,094
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
2,704 1,287 922 304 5,493 549 2,561 5,627,558
1,320,489 197,011 124,000 77,028 767,428 41,139 23,069 74,343
3,922 720 -- -- -- -- -- --
-- 9,652 2,108 1,861 -- 2,570 3,026 10,076
16,912 5,511 2,891 876 38,664 2,013 14,547 --
-------------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
2,064,816,523 266,727,372 196,517,244 111,661,071 1,454,680,756 107,494,299 471,842,746 285,616,272
-------------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
-- -- -- -- -- -- -- --
75,729,565 36,445,993 29,139,322 8,553,351 170,584,121 13,953,530 88,458,027 --
12,030,949 13,940,670 1,504,146 2,135,079 12,461,733 9,871,447 11,674,955 2,747,070
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
253,771 -- -- -- -- -- -- --
677 -- -- -- 399 -- -- --
-- -- -- -- 61,200 -- -- --
1,083,532 116,479 95,747 64,408 898,789 57,936 323,295 132,768
81,329 31,111 30,155 20,775 73,389 21,743 53,459 35,660
-- -- -- -- -- -- -- --
-------------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
89,179,823 50,534,253 30,769,370 10,773,613 184,079,631 23,904,656 100,509,736 2,915,498
-------------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
$1,975,636,700 $216,193,119 $165,747,874 $100,887,458 $1,270,601,125 $ 83,589,643 $371,333,010 $282,700,774
============== ============ ============ ============ ============== ============ ============ ============
$1,775,704,598 $191,141,653 $149,545,866 $ 85,539,755 $ 990,377,398 $ 70,379,179 $310,568,253 $266,426,430
200,184,859 25,051,466 16,202,008 15,347,703 280,120,667 13,210,464 60,764,757 16,274,344
-- -- -- -- 103,060 -- -- --
(252,757) -- -- -- -- -- -- --
-------------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
$1,975,636,700 $216,193,119 $165,747,874 $100,887,458 $1,270,601,125 $ 83,589,643 $371,333,010 $282,700,774
============== ============ ============ ============ ============== ============ ============ ============
<Caption>
INTERNATIONAL
EQUITY
--------------
$ 912,166,196
==============
$1,052,801,050
78,815,866
16,979
164,284
676,503
--
56,557
595,206
579,344
--
16,420
--------------
1,133,722,209
--------------
--
80,552,348
1,410,215
--
--
1,935,257
--
--
670,844
119,649
--
--------------
84,688,313
--------------
$1,049,033,896
==============
$ 909,592,331
140,634,854
--
(1,193,289)
--------------
$1,049,033,896
==============
</Table>
41
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE VALUE & GROWTH &
MARKET BOND BOND BOND BALANCED INCOME INCOME
----------- ----------- ------------ ----------- ----------- ------------ ------------
INVESTMENT INCOME:
Interest income.............. $12,455,044 $19,195,982 $10,643,578 $49,309,905 $ 6,083,212 $ 594,802 $ 90,287
Securities lending income
(net)....................... -- 11,811 56,944 249,995 30,579 111,435 40,804
Dividend income.............. -- -- -- -- 4,473,650 42,467,206 14,800,812
Less: withholding taxes...... -- -- -- -- -- (79,247) --
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total income................. 12,455,044 19,207,793 10,700,522 49,559,900 10,587,441 43,094,196 14,931,903
----------- ----------- ----------- ----------- ----------- ------------ ------------
EXPENSES:
Investment advisory fees..... 2,243,100 1,883,795 1,139,280 4,439,027 1,788,590 8,137,894 5,427,473
Custody fees................. 183,809 124,587 76,457 419,978 207,397 374,681 244,928
Professional fees............ 36,764 32,833 29,958 42,594 32,397 53,278 38,902
Reports to shareholders...... 7,436 4,867 2,987 24,145 10,895 15,135 6,580
Miscellaneous fees........... 4,210 2,430 1,566 5,802 1,868 13,711 4,175
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total expenses............... 2,475,319 2,048,512 1,250,248 4,931,546 2,041,147 8,594,699 5,722,058
Expenses reimbursed by the
Advisor..................... -- -- -- (373) (53,018) -- --
----------- ----------- ----------- ----------- ----------- ------------ ------------
Net expenses................. 2,475,319 2,048,512 1,250,248 4,931,173 1,988,129 8,594,699 5,722,058
----------- ----------- ----------- ----------- ----------- ------------ ------------
NET INVESTMENT INCOME
(LOSS)...................... 9,979,725 17,159,281 9,450,274 44,628,727 8,599,312 34,499,497 9,209,845
----------- ----------- ----------- ----------- ----------- ------------ ------------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON
SECURITIES, FUTURES, WRITTEN
OPTIONS, SHORT SALES AND
FOREIGN CURRENCIES:
Net realized gains (losses)
on securities............... 2,502 1,053,699 9,090,837 33,834,691 (2,378,526) (14,947,882) (18,757,982)
Net realized gains (losses)
on futures, written options
and short sales............. -- -- -- (7,377,329) (381,773) -- 393,990
Net realized gains (losses)
on foreign currency
transactions................ -- -- -- (9,734,134) (1,376,703) -- --
Net change in unrealized
appreciation (depreciation)
on securities............... -- (6,996,509) (12,217,945) (7,048,140) 61,359,689 432,326,774 212,270,922
Net change in unrealized
appreciation on futures,
written options and short
sales....................... -- -- -- 4,245,398 320,215 -- 183,859
Net change in unrealized
depreciation on translation
of assets and liabilities in
foreign currencies.......... -- -- -- (8,285,094) (677,257) -- --
----------- ----------- ----------- ----------- ----------- ------------ ------------
Net realized and unrealized
gains (losses) on
securities, futures, written
options, short sales and
foreign currencies.......... 2,502 (5,942,810) (3,127,108) 5,635,392 56,865,645 417,378,892 194,090,789
----------- ----------- ----------- ----------- ----------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $ 9,982,227 $11,216,471 $ 6,323,166 $50,264,119 $65,464,957 $451,878,389 $203,300,634
=========== =========== =========== =========== =========== ============ ============
</Table>
See notes to financial statements.
42
<Table>
<Caption>
EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD
GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY BOND
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
$ 183,742 $ 35,327 $ 17,669 $ 11,410 $ 154,335 $ 13,598 $ 15,776 $22,567,878
104,146 18,134 18,610 6,900 420,624 16,452 121,670 --
14,853,365 1,365,389 393,135 1,080,814 8,215,955 307,253 1,197,881 332,864
(97,359) (5,095) (949) -- (5,068) (2,157) -- --
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
15,043,894 1,413,755 428,465 1,099,124 8,785,846 335,146 1,335,327 22,900,742
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
9,484,312 746,553 692,964 420,493 8,542,212 398,170 3,211,358 1,300,488
334,744 72,321 61,079 44,758 384,532 49,947 91,544 104,322
47,154 26,013 25,914 18,745 52,683 18,681 29,764 29,652
9,887 755 488 685 60,926 605 2,937 1,880
6,922 152 157 204 5,136 182 1,576 1,160
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
9,883,019 845,794 780,602 484,885 9,045,489 467,585 3,337,179 1,437,502
-- (62,667) (56,338) (47,121) (120) (54,016) (24,963) (17,678)
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
9,883,019 783,127 724,264 437,764 9,045,369 413,569 3,312,216 1,419,824
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
5,160,875 630,628 (295,799) 661,360 (259,523) (78,423) (1,976,889) 21,480,918
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
(53,877,311) 16,382,379 7,924,068 3,460,669 93,446,698 3,962,414 28,566,283 14,222,810
-- -- -- -- 1,993,411 -- -- --
(448,279) 12 -- -- -- -- -- --
409,432,264 26,563,475 16,015,678 16,155,804 300,788,244 12,202,135 56,018,993 23,379,451
-- -- -- -- 229,855 -- -- --
(253,185) -- -- -- -- -- -- --
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
354,853,489 42,945,866 23,939,746 19,616,473 396,458,208 16,164,549 84,585,276 37,602,261
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
$360,014,364 $43,576,494 $23,643,947 $20,277,833 $396,198,685 $16,086,126 $82,608,387 $59,083,179
============ =========== =========== =========== ============ =========== =========== ===========
<Caption>
INTERNATIONAL
EQUITY
-------------
$ 100,659
329,719
17,311,664
(1,974,565)
------------
15,767,477
------------
5,969,766
872,690
41,738
5,907
3,642
------------
6,893,743
--
------------
6,893,743
------------
8,873,734
------------
(29,216,895)
--
4,292,233
279,190,953
--
(2,877,612)
------------
251,388,679
------------
$260,262,413
============
</Table>
43
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE VALUE &
MARKET BOND BOND BOND BALANCED INCOME
--------------- ------------- ------------- -------------- ------------ --------------
FROM OPERATIONS:
Net investment income
(loss)................... $ 9,979,725 $ 17,159,281 $ 9,450,274 $ 44,628,727 $ 8,599,312 $ 34,499,497
Net realized gains
(losses) on securities... 2,502 1,053,699 9,090,837 33,834,691 (2,378,526) (14,947,882)
Net realized gains
(losses) on futures,
written options and short
sales.................... -- -- -- (7,377,329) (381,773) --
Net realized gains
(losses) on foreign
currency transactions.... -- -- -- (9,734,134) (1,376,703) --
Net change in unrealized
appreciation
(depreciation) on
securities............... -- (6,996,509) (12,217,945) (7,048,140) 61,359,689 432,326,774
Net change in unrealized
appreciation on futures,
written options and short
sales.................... -- -- -- 4,245,398 320,215 --
Net change in unrealized
depreciation on
translation of assets and
liabilities in foreign
currencies............... -- -- -- (8,285,094) (677,257) --
--------------- ------------- ------------- -------------- ------------ --------------
Net increase in net assets
resulting from
operations............... 9,982,227 11,216,471 6,323,166 50,264,119 65,464,957 451,878,389
--------------- ------------- ------------- -------------- ------------ --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital
invested................. 4,895,275,949 443,551,095 136,326,640 1,006,604,253 87,161,756 787,647,945
Value of capital
withdrawn................ (4,970,458,524) (271,034,250) (235,135,208) (587,705,969) (94,286,493) (594,600,404)
--------------- ------------- ------------- -------------- ------------ --------------
Net increase (decrease) in
net assets resulting from
capital transactions..... (75,182,575) 172,516,845 (98,808,568) 418,898,284 (7,124,737) 193,047,541
--------------- ------------- ------------- -------------- ------------ --------------
Net increase (decrease) in
net assets............... (65,200,348) 183,733,316 (92,485,402) 469,162,403 58,340,220 644,925,930
NET ASSETS:
Beginning of year......... 864,772,946 439,015,018 358,005,390 999,624,604 375,745,612 1,553,159,805
--------------- ------------- ------------- -------------- ------------ --------------
End of year............... $ 799,572,598 $ 622,748,334 $ 265,519,988 $1,468,787,007 $434,085,832 $2,198,085,735
=============== ============= ============= ============== ============ ==============
<Caption>
GROWTH &
INCOME
--------------
FROM OPERATIONS:
Net investment income
(loss)................... $ 9,209,845
Net realized gains
(losses) on securities... (18,757,982)
Net realized gains
(losses) on futures,
written options and short
sales.................... 393,990
Net realized gains
(losses) on foreign
currency transactions.... --
Net change in unrealized
appreciation
(depreciation) on
securities............... 212,270,922
Net change in unrealized
appreciation on futures,
written options and short
sales.................... 183,859
Net change in unrealized
depreciation on
translation of assets and
liabilities in foreign
currencies............... --
--------------
Net increase in net assets
resulting from
operations............... 203,300,634
--------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital
invested................. 426,163,342
Value of capital
withdrawn................ (365,696,147)
--------------
Net increase (decrease) in
net assets resulting from
capital transactions..... 60,467,195
--------------
Net increase (decrease) in
net assets............... 263,767,829
NET ASSETS:
Beginning of year......... 799,621,503
--------------
End of year............... $1,063,389,332
==============
</Table>
See notes to financial statements.
44
<Table>
<Caption>
EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD
GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY BOND
-------------- ------------ ------------ ------------ -------------- ----------- ------------ ------------
$ 5,160,875 $ 630,628 $ (295,799) $ 661,360 $ (259,523) $ (78,423) $ (1,976,889) $ 21,480,918
(53,877,311) 16,382,379 7,924,068 3,460,669 93,446,698 3,962,414 28,566,283 14,222,810
-- -- -- -- 1,993,411 -- -- --
(448,279) 12 -- -- -- -- -- --
409,432,264 26,563,475 16,015,678 16,155,804 300,788,244 12,202,135 56,018,993 23,379,451
-- -- -- -- 229,855 -- -- --
(253,185) -- -- -- -- -- -- --
-------------- ------------ ------------ ------------ -------------- ----------- ------------ ------------
360,014,364 43,576,494 23,643,947 20,277,833 396,198,685 16,086,126 82,608,387 59,083,179
-------------- ------------ ------------ ------------ -------------- ----------- ------------ ------------
842,583,806 152,858,411 117,035,920 74,205,600 619,304,338 60,627,113 219,225,766 164,492,103
(373,850,553) (27,871,166) (19,202,750) (11,516,201) (750,860,756) (9,645,051) (242,800,742) (148,960,043)
-------------- ------------ ------------ ------------ -------------- ----------- ------------ ------------
468,733,253 124,987,245 97,833,170 62,689,399 (131,556,418) 50,982,062 (23,574,976) 15,532,060
-------------- ------------ ------------ ------------ -------------- ----------- ------------ ------------
828,747,617 168,563,739 121,477,117 82,967,232 264,642,267 67,068,188 59,033,411 74,615,239
1,146,889,083 47,629,380 44,270,757 17,920,226 1,005,958,858 16,521,455 312,299,599 208,085,535
-------------- ------------ ------------ ------------ -------------- ----------- ------------ ------------
$1,975,636,700 $216,193,119 $165,747,874 $100,887,458 $1,270,601,125 $83,589,643 $371,333,010 $282,700,774
============== ============ ============ ============ ============== =========== ============ ============
<Caption>
INTERNATIONAL
EQUITY
--------------
$ 8,873,734
(29,216,895)
--
4,292,233
279,190,953
--
(2,877,612)
--------------
260,262,413
--------------
1,663,422,826
(1,531,539,691)
--------------
131,883,135
--------------
392,145,548
656,888,348
--------------
$1,049,033,896
==============
</Table>
45
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2002
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE VALUE &
MARKET BOND BOND BOND BALANCED INCOME
--------------- ------------- ------------ ------------- ------------- --------------
FROM OPERATIONS:
Net investment income
(loss).................... $ 13,605,046 $ 16,268,846 $ 12,019,762 $ 43,145,000 $ 11,093,817 $ 32,404,566
Net realized gains (losses)
on securities............. 17,391 1,328,948 3,260,207 29,137,981 (32,851,562) (49,366,130)
Net realized losses on
futures, written options
and short sales........... -- -- -- (12,591,733) (1,438,214) --
Net realized gains (losses)
on foreign currency
transactions.............. -- -- -- 3,328 (16,980) --
Net change in unrealized
appreciation
(depreciation) on
securities................ -- 4,727,239 9,226,645 27,277,439 (20,750,290) (255,253,221)
Net change in unrealized
depreciation on futures... -- -- -- (5,691,788) (596,810) --
Net change in unrealized
appreciation
(depreciation) on
translation of assets and
liabilities in foreign
currencies................ -- -- -- (744,806) (194,408) --
--------------- ------------- ------------ ------------- ------------- --------------
Net increase (decrease) in
net assets resulting from
operations................ 13,622,437 22,325,033 24,506,614 80,535,421 (44,754,447) (272,214,785)
--------------- ------------- ------------ ------------- ------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital
invested.................. 4,912,006,709 316,504,911 169,225,450 587,510,246 98,930,216 821,338,693
Value of capital
withdrawn................. (4,765,433,391) (230,317,882) (96,521,791) (429,894,202) (176,266,754) (649,666,149)
--------------- ------------- ------------ ------------- ------------- --------------
Net increase (decrease) in
net assets resulting from
capital transactions...... 146,573,318 86,187,029 72,703,659 157,616,044 (77,336,538) 171,672,544
--------------- ------------- ------------ ------------- ------------- --------------
Net increase (decrease) in
net assets................ 160,195,755 108,512,062 97,210,273 238,151,465 (122,090,985) (100,542,241)
NET ASSETS:
Beginning of year.......... 704,577,191 330,502,956 260,795,117 761,473,139 497,836,597 1,653,702,046
--------------- ------------- ------------ ------------- ------------- --------------
End of year................ $ 864,772,946 $ 439,015,018 $358,005,390 $ 999,624,604 $ 375,745,612 $1,553,159,805
=============== ============= ============ ============= ============= ==============
<Caption>
GROWTH &
INCOME
-------------
FROM OPERATIONS:
Net investment income
(loss).................... $ 6,917,502
Net realized gains (losses)
on securities............. (158,046,430)
Net realized losses on
futures, written options
and short sales........... (827,873)
Net realized gains (losses)
on foreign currency
transactions.............. --
Net change in unrealized
appreciation
(depreciation) on
securities................ (77,626,470)
Net change in unrealized
depreciation on futures... (153,731)
Net change in unrealized
appreciation
(depreciation) on
translation of assets and
liabilities in foreign
currencies................ --
-------------
Net increase (decrease) in
net assets resulting from
operations................ (229,737,002)
-------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital
invested.................. 463,944,648
Value of capital
withdrawn................. (403,351,910)
-------------
Net increase (decrease) in
net assets resulting from
capital transactions...... 60,592,738
-------------
Net increase (decrease) in
net assets................ (169,144,264)
NET ASSETS:
Beginning of year.......... 968,765,767
-------------
End of year................ $ 799,621,503
=============
</Table>
- ---------------
(1) Commencement of Operations, April 15, 2002.
See notes to financial statements.
46
<Table>
<Caption>
EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD
GROWTH VALUE GROWTH VALUE(1) EQUITY GROWTH(1) EQUITY BOND
-------------- ------------ ------------ ----------- --------------- ----------- ------------- ------------
$ 2,771,887 $ 165,808 $ (157,349) $ 30,765 $ 576,113 $ (39,083) $ (2,002,779) $ 18,084,908
(203,992,761) (2,203,548) (8,542,151) (635,185) (121,857,230) (1,198,826) (86,973,699) (8,656,105)
-- -- -- -- (1,145,022) -- -- --
4,214 -- -- -- (3,662) -- -- --
(133,263,844) (2,836,730) (272,411) (808,101) (202,240,665) 1,008,329 (18,621,085) (5,025,540)
-- -- -- -- (478,227) -- -- --
428 -- -- -- -- -- -- --
-------------- ------------ ------------ ----------- --------------- ----------- ------------- ------------
(334,480,076) (4,874,470) (8,971,911) (1,412,521) (325,148,693) (229,580) (107,597,563) 4,403,263
-------------- ------------ ------------ ----------- --------------- ----------- ------------- ------------
724,003,183 54,535,136 61,442,314 20,836,788 1,257,299,651 18,976,732 285,800,072 88,710,848
(473,578,357) (15,663,580) (23,762,594) (1,504,041) (1,249,415,940) (2,225,697) (238,482,043) (59,048,041)
-------------- ------------ ------------ ----------- --------------- ----------- ------------- ------------
250,424,826 38,871,556 37,679,720 19,332,747 7,883,711 16,751,035 47,318,029 29,662,807
-------------- ------------ ------------ ----------- --------------- ----------- ------------- ------------
(84,055,250) 33,997,086 28,707,809 17,920,226 (317,264,982) 16,521,455 (60,279,534) 34,066,070
1,230,944,333 13,632,294 15,562,948 -- 1,323,223,840 -- 372,579,133 174,019,465
-------------- ------------ ------------ ----------- --------------- ----------- ------------- ------------
$1,146,889,083 $ 47,629,380 $ 44,270,757 $17,920,226 $ 1,005,958,858 $16,521,455 $ 312,299,599 $208,085,535
============== ============ ============ =========== =============== =========== ============= ============
<Caption>
INTERNATIONAL
EQUITY
---------------
$ 5,546,189
(47,748,953)
--
8,106,486
(68,130,187)
--
(2,378,692)
---------------
(104,605,157)
---------------
2,216,447,729
(2,087,842,949)
---------------
128,604,780
---------------
23,999,623
632,888,725
---------------
$ 656,888,348
===============
</Table>
47
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
COMMERCIAL PAPER -- 33.8%
$ 2,699,000 CIT Group, Inc.,
1.06%, 03/23/04.............. $ 2,692,483
17,900,000 Countrywide Home Loan,
1.11%, 01/09/04.............. 17,895,585
6,930,000 DaimlerChrysler,
1.37%, 01/16/04.............. 6,926,044
4,434,000 Dexia Delaware LLC,
1.08%, 01/14/04.............. 4,432,271
469,000 Edison Asset Securitization
LLC -- 144A,
1.09%, 01/05/04.............. 468,943
9,395,000 Golden Funding Corp. -- 144A,
1.10%, 01/20/04.............. 9,389,546
8,033,000 Household Finance Corp.,
1.10%, 01/09/04.............. 8,031,036
3,000,000 Kellogg Company -- 144A,
1.18%, 01/15/04.............. 2,998,623
1,300,000 Lloyds Bank PLC,
1.10%, 01/22/04.............. 1,299,166
28,147,000 Lockhart Funding LLC -- 144A,
1.19%, 02/02/04.............. 28,117,226
19,375,000 Marsh & McLennan Companies,
Inc. -- 144A,
1.07%, 01/12/04.............. 19,368,666
24,090,000 National Rural Utilities
Cooperative Finance Corp.,
1.09%, 01/29/04.............. 24,069,671
11,250,000 Nestle Capital Corp.,
1.07%, 01/21/04.............. 11,243,313
30,000,000 Province of Quebec,
1.07%, 01/26/04.............. 29,977,708
10,240,000 Starfish Global Funding LLC --
144A,
1.10%, 01/14/04.............. 10,235,932
11,646,000 Starfish Global Funding LLC --
144A,
1.12%, 02/23/04.............. 11,626,797
13,300,000 Three Pillars Funding
Company -- 144A,
1.10%, 01/02/04.............. 13,299,594
16,121,000 Three Pillars Funding
Company -- 144A,
1.10%, 01/12/04.............. 16,115,582
34,275,000 Thunder Bay Funding, Inc. --
144A,
1.10%, 01/09/04.............. 34,266,622
17,798,000 Toronto Dominion Holdings,
1.08%, 01/23/04.............. 17,786,253
------------
TOTAL COMMERCIAL PAPER (Cost
$270,241,061)................ 270,241,061
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
DOMESTIC CERTIFICATES OF DEPOSIT -- 6.0%
$22,500,000 Tannehill Capital Company
LLC -- 144A, Variable Rate,
1.14%(**), 01/23/04.......... $ 22,499,863
25,500,000 Wells Fargo Bank N.A.,
1.08%, 01/09/04.............. 25,500,000
------------
TOTAL DOMESTIC CERTIFICATES OF
DEPOSIT (Cost $47,999,863)... 47,999,863
------------
DOMESTIC EURODOLLAR CERTIFICATES OF
DEPOSIT -- 6.3%
30,000,000 Barclays Bank PLC,
1.10%, 01/09/04.............. 30,000,033
20,000,000 HBOS Treasury Services PLC,
1.12%, 03/19/04.............. 20,000,000
------------
TOTAL DOMESTIC EURODOLLAR
CERTIFICATES OF DEPOSIT (Cost
$50,000,033)................. 50,000,033
------------
FOREIGN CERTIFICATE OF DEPOSIT -- 1.9%
15,000,000 Canadian Imperial Bank,
1.46%, 11/17/04 (Cost
$14,998,705)................. 14,998,705
------------
MEDIUM TERM CORPORATE NOTES -- 2.7%
13,000,000 Caterpillar Financial Service
Corp., Floating Rate,
1.25%(**), 07/09/04.......... 13,000,000
9,000,000 Goldman Sachs Group, Inc.
Floating Rate,
1.40%(**), 04/13/04.......... 9,000,000
------------
TOTAL MEDIUM TERM CORPORATE
NOTES (Cost $22,000,000)..... 22,000,000
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 15.7%
FANNIE MAE -- 12.1%
16,500,000 6.50%, 08/15/04................ 17,015,293
21,100,000 1.25%, 08/30/04................ 21,100,000
23,600,000 1.30%, 08/30/04................ 23,581,834
21,100,000 1.60%, 12/29/04................ 21,100,000
14,100,000 Floating Rate,
1.09%(**), 06/09/05.......... 14,094,661
------------
96,891,788
------------
FEDERAL HOME LOAN BANK -- 0.1%
947,000 1.06%, 02/04/04................ 946,052
------------
</Table>
See notes to financial statements.
48
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM US GOVERNMENT AGENCY SECURITIES
(CONTINUED)
FREDDIE MAC -- 3.5%
$14,100,000 1.40%, 10/03/04................ $ 14,100,000
14,100,000 Floating Rate,
1.11%(**), 10/07/05.......... 14,100,000
------------
28,200,000
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$126,037,840)................ 126,037,840
------------
SHORT TERM CORPORATE NOTES -- 33.4%
8,000,000 American Express Credit
Company, Floating Rate,
1.12%(**), 03/05/04.......... 8,000,000
22,000,000 American Express Credit
Company, Floating Rate,
1.12%(**), 05/13/04.......... 22,000,000
18,300,000 Bank Of America Corp., Floating
Rate,
1.26%(**), 07/02/04.......... 18,305,490
10,000,000 Bayerische Landesbank
Girozentrale, Floating Rate,
1.17%(**), 03/08/04.......... 10,000,482
5,000,000 Coca-Cola Enterprises, Inc.,
Floating Rate,
1.41%(**), 04/26/04.......... 5,004,019
25,000,000 Credit Suisse First Boston USA,
Inc., Floating Rate,
1.16%(**), 01/21/04.......... 25,000,000
14,300,000 First USA Bank, Floating Rate,
1.33%(**), 02/10/04.......... 14,303,634
24,000,000 FleetBoston Financial Corp.,
Floating Rate,
1.45%(**), 02/20/04.......... 24,006,736
10,300,000 General Electric Capital Corp.,
Inc., Floating Rate,
1.23%(**), 02/17/04.......... 10,300,000
18,000,000 Goldman Sachs Group, Inc.
Floating Rate,
1.24%(**), 05/03/04.......... 18,000,000
12,000,000 International Lease Finance
Corp., Floating Rate,
1.22%(**), 04/08/04.......... 12,000,000
12,500,000 International Lease Finance
Corp.,
5.35%, 05/03/04.............. 12,654,140
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM CORPORATE NOTES (CONTINUED)
$ 8,750,000 Keybank N.A., Floating Rate,
1.35%(**), 01/26/04.......... $ 8,751,136
14,000,000 Merrill Lynch & Company,
Floating Rate,
1.25%(**), 03/11/04.......... 14,000,000
15,000,000 National Rural Utilities Corp.,
Floating Rate,
1.32%(**), 03/10/04.......... 15,000,000
25,000,000 Paccar Financial Corp.,
Floating Rate,
1.23%(**), 03/04/04.......... 25,004,110
9,500,000 SBS Communications, Inc. --
144A,
4.18%, 06/05/04.............. 9,618,277
15,000,000 SLM Corp. -- 144A, Floating
Rate,
1.17%(**), 05/28/04.......... 14,997,040
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $266,945,064).... 266,945,064
------------
TOTAL SECURITIES (Cost
$798,222,566)................ 798,222,566
------------
REPURCHASE AGREEMENT -- 0.0%
774 With Investors Bank & Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $774
(Collateralized by Small
Business Administration,
4.63%, due 10/25/22, with a
value of $812) (Cost $774)... 774
------------
Total Investments -- 99.8%
(Cost $798,223,340).......... 798,223,340
Other assets less
liabilities -- 0.2% 1,349,258
------------
NET ASSETS -- 100.0%........... $799,572,598
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $798,223,340.
- ---------------
** Variable rate security. The rate shown was in effect at December 31, 2003.
See notes to financial statements.
49
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES -- 73.8%
BANKS -- 17.4%
$1,520,000 Abbey National First Capital,
8.20%, 10/15/04............... $ 1,598,307
1,000,000 Abbey National PLC, Series EMTN,
6.69%, 10/17/05............... 1,081,965
6,490,000 ABN AMRO Bank NV,
7.25%, 05/31/05............... 6,983,434
3,000,000 Bank of America Corp.,
7.75%, 08/15/04............... 3,113,433
1,000,000 Bank of America Corp.,
6.20%, 02/15/06............... 1,081,846
2,000,000 Bank of America Corp.,
5.25%, 02/01/07............... 2,140,450
1,000,000 Bank of America Corp.,
6.63%, 10/15/07............... 1,115,834
1,500,000 Bank of America Corp., Series
MTN1, Floating Rate,
1.42%(a), 08/26/05............ 1,505,181
4,100,000 Bank of Montreal -- Chicago,
6.10%, 09/15/05............... 4,362,740
3,000,000 Bank of Montreal -- Chicago,
7.80%, 04/01/07............... 3,411,408
3,000,000 Bank One Corp.,
7.63%, 08/01/05............... 3,266,421
1,000,000 Bayerische Landesbank,
4.13%, 01/14/05............... 1,024,458
4,000,000 Bayersiche Landesbank, Series
MTN,
2.50%, 03/30/06............... 4,051,984
2,000,000 Citigroup Global Markets, Series
MTNA, Floating Rate,
1.28%(b), 12/12/06............ 2,000,142
2,500,000 Deutsche Bank Financial,
6.70%, 12/13/06............... 2,781,655
7,000,000 Fifth Third Bank,
6.75%, 07/15/05............... 7,522,290
2,280,000 HSBC Bank PLC,
8.63%, 12/15/04............... 2,426,948
500,000 Inter-American Development Bank,
8.40%, 09/01/09............... 619,852
5,000,000 KFW International Finance,
Series DTC,
5.25%, 06/28/06............... 5,398,155
2,000,000 KFW International Finance,
Series DTC,
4.75%, 01/24/07(c)............ 2,147,016
5,000,000 LB Baden -- Wuerttemberg,
7.88%, 04/15/04............... 5,096,615
1,500,000 National Bank of Canada, Series
B,
8.13%, 08/15/04............... 1,562,573
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$1,000,000 National Westminster Bank,
7.38%, 10/01/09............... $ 1,171,178
5,000,000 RBSG Capital Corp.,
10.13%, 03/01/04.............. 5,065,190
4,000,000 SunTrust Banks, Inc., Series
BKNT, Floating Rate,
1.15%(b), 10/03/05............ 4,001,504
3,000,000 Svenska Handelsbanken,
8.13%, 08/15/07............... 3,485,679
3,000,000 Swiss Bank Corp.,
7.25%, 09/01/06............... 3,356,301
1,500,000 U.S. Bancorp,
7.63%, 05/01/05............... 1,614,770
3,000,000 U.S. Bancorp, Series MTNN,
Floating Rate,
1.32%(a), 09/16/05............ 3,004,560
2,145,000 U.S. Bank NA Minnesota, Series
BKNT,
7.30%, 08/15/05............... 2,325,431
3,500,000 U.S. Central Credit Union,
2.75%, 05/30/08............... 3,383,902
3,000,000 US Bank N.A., Floating Rate,
1.17%(b), 12/05/05............ 3,001,569
6,000,000 Wachovia Corp.,
7.55%, 08/18/05............... 6,543,348
2,000,000 Wells Fargo & Company, Floating
Rate,
1.26%(a), 06/12/06............ 2,003,726
4,000,000 Wells Fargo & Company, Floating
Rate,
1.26%(a), 09/15/06............ 4,005,264
1,000,000 Wells Fargo & Company, Series
MTNH,
6.75%, 10/01/06............... 1,108,566
------------
108,363,695
------------
BUSINESS SERVICES -- 0.4%
2,500,000 First Data Corp.,
6.75%, 07/15/05............... 2,688,230
------------
FINANCIAL SERVICES -- 8.1%
4,000,000 Associates Corp. N.A., Series
MTNH,
7.63%, 04/27/05............... 4,315,536
3,000,000 Bear Stearns Companies, Inc.,
Floating Rate,
1.70%(a), 07/15/05............ 3,022,044
5,000,000 Bear Stearns Companies, Inc.,
Series MTNB, Floating Rate,
1.42%(a), 06/19/06............ 5,017,370
1,000,000 Citigroup, Inc.,
3.50%, 02/01/08............... 1,004,693
</Table>
See notes to financial statements.
50
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$2,500,000 Citigroup, Inc., Floating Rate,
1.30%(a), 05/19/06............ $ 2,506,090
1,000,000 General Electric Capital Corp.,
Series MTNA,
8.70%, 03/01/07............... 1,171,167
8,000,000 Heller Financial, Inc.,
8.00%, 06/15/05............... 8,728,496
1,000,000 Heller Financial, Inc.,
6.38%, 03/15/06............... 1,091,405
2,000,000 Lehman Brothers Holdings, Inc.,
6.25%, 05/15/06............... 2,174,002
3,000,000 Lehman Brothers Holdings, Inc.,
8.25%, 06/15/07............... 3,499,533
2,000,000 Morgan Stanley,
7.75%, 06/15/05............... 2,171,562
2,500,000 Morgan Stanley,
6.10%, 04/15/06............... 2,706,748
3,000,000 Morgan Stanley, Series MTNE,
Floating Rate,
1.45%(a), 03/27/06............ 3,011,511
2,500,000 Toyota Motor Credit Corp.,
Series MTN, Floating Rate,
1.23%(b), 09/09/05............ 2,502,890
5,000,000 Wells Fargo Financial,
6.75%, 06/01/05............... 5,347,720
2,000,000 Wells Fargo Financial,
6.13%, 02/15/06............... 2,157,592
------------
50,428,359
------------
FOOD AND BEVERAGE -- 0.9%
1,000,000 General Mills, Inc.,
5.13%, 02/15/07............... 1,063,021
2,000,000 General Mills, Inc.,
3.88%, 11/30/07............... 2,027,098
2,430,000 Ralcorp Holdings, Inc.,
8.75%, 09/15/04............... 2,544,672
------------
5,634,791
------------
LEISURE AND RECREATION -- 0.5%
3,145,000 International Game Technology,
7.88%, 05/15/04............... 3,210,856
------------
MACHINERY -- 0.2%
1,500,000 Ingersoll-Rand Company,
5.80%, 06/01/04............... 1,526,843
------------
OIL, COAL AND GAS -- 1.0%
1,000,000 Conoco, Inc.,
5.90%, 04/15/04............... 1,012,854
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$4,760,000 Tosco Corp.,
7.25%, 01/01/07............... $ 5,337,069
------------
6,349,923
------------
PHARMACEUTICALS -- 1.3%
3,000,000 Abbott Laboratories,
5.63%, 07/01/06............... 3,237,801
4,000,000 Merck & Company, Inc.,
5.25%, 07/01/06(c)............ 4,278,036
767,127 Upjohn Company, Series A,
9.79%, 02/01/04............... 771,149
------------
8,286,986
------------
PRIVATE ASSET BACKED: AUTOMOBILES -- 6.4%
5,000,000 Capital One Auto Finance Trust,
Series 2001-A, Class A4,
5.40%, 05/15/08............... 5,214,880
2,000,000 Capital One Auto Finance Trust,
Series 2003-A , Class A3A,
1.83%, 10/15/07............... 1,996,944
3,250,000 Onyx Acceptance Auto Trust,
Series 2002-D, Class A4,
3.10%, 07/15/09............... 3,299,181
3,965,934 Provident Auto Lease ABS Trust,
Series 1999-1, Class A2,
7.03%, 01/14/12............... 4,151,738
876,821 Ryder Vehicle Lease Trust,
Series 2001-A, Class A4,
5.81%, 08/15/06............... 894,726
4,000,000 SSB Auto Loan Trust, Series
2002-1, Class A3,
2.37%, 09/15/06............... 4,037,157
4,250,000 Susquehanna Auto Lease Trust,
Series 2003-1, Class A3,
2.46%, 01/14/07............... 4,280,606
8,000,000 Volkswagen Auto Loan Enhanced
Trust, Series 2003-2, Class
A3,
2.27%, 10/22/07............... 8,021,610
4,725,000 Whole Auto Loan Trust, Series
2002-1, Class A3,
2.60%, 08/15/06............... 4,781,372
3,000,000 Whole Auto Loan Trust, Series
2003-1, Class A3B,
1.99%, 05/15/07............... 3,000,837
------------
39,679,051
------------
PRIVATE ASSET BACKED: BANKS -- 0.3%
2,000,000 HBOS Treasury Services
PLC -- 144A,
3.75%, 09/30/08............... 2,003,788
------------
</Table>
See notes to financial statements.
51
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: CREDIT CARDS -- 5.5%
$5,000,000 Citibank Credit Card Issuance
Trust, Series 2000-A3, Class
A3,
6.88%, 11/16/09............... $ 5,699,775
2,000,000 Citibank Credit Card Issuance
Trust, Series 2003-A6, Class
A6,
2.90%, 05/17/10............... 1,958,036
5,375,000 Citibank Omni-S Master Trust,
Series 2000-2, Class A,
6.75%, 09/16/09............... 5,785,195
5,250,000 Fleet Credit Card Master Trust
II, Series 2001-C, Class A,
3.86%, 03/15/07............... 5,345,093
1,700,000 Household Private Label Credit
Card Master Note Trust, Series
2002-2, Class A, Floating
Rate,
1.33%(a), 01/18/11............ 1,704,319
4,818,000 MBNA Master Credit Card Trust,
Series 1999-M, Class A,
6.60%, 04/16/07............... 5,039,231
5,000,000 Nordstrom Private Label Credit
Card, Series 2001-1A, Class A,
4.82%, 04/15/10............... 5,266,119
487,083 Sears Credit Account Master
Trust, Series 1996-3, Class A,
7.00%, 07/15/08............... 495,558
2,570,000 Standard Credit Card Master
Trust, Series 1994-2, Class A,
7.25%, 04/07/08............... 2,852,803
------------
34,146,129
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 8.4%
782,828 Caterpillar Financial Asset
Trust, Series 2001-A, Class
A3,
4.85%, 04/25/07............... 793,563
3,040,681 Caterpillar Financial Asset
Trust, Series 2002-A , Class
A3,
3.15%, 02/25/08............... 3,076,690
3,000,000 Caterpillar Financial Asset
Trust, Series 2003-A , Class
A3,
1.66%, 12/26/07............... 2,986,164
4,700,890 Community Program Loan Trust,
Series 1987-A, Class A4,
4.50%, 10/01/18............... 4,697,282
675,999 Copelco Capital Funding Corp.,
Series 1999-B, Class A4,
6.90%, 12/18/04............... 678,441
2,750,000 Distribution Financial Services
Trust, Series 2001-1, Class
A4,
5.67%, 01/17/17............... 2,837,996
3,000,000 First National Master Note
Trust, Series 2003-1, Class A,
Floating Rate,
1.26%(b), 08/15/08............ 3,008,436
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL SERVICES
(CONTINUED)
$2,000,000 Franklin Auto Trust, Series
2003-1, Class A4,
2.27%, 05/20/11............... $ 1,975,796
1,853,863 Interstar Millennium Trust,
Series 2003-3G, Class A2,
Floating Rate,
1.42%(b), 09/27/35............ 1,856,180
3,000,000 Marshall & Isley Auto Loan
Trust, Series 2002-1, Class
A3,
2.49%, 10/22/07............... 3,027,935
1,931,429 Morgan Stanley Capital I, Series
2003-T11, Class A1,
3.26%, 06/13/41............... 1,946,062
841,818 Morgan Stanley Capital, Series
1999-RM1, Class A1,
6.37%, 12/15/31............... 904,800
1,550,000 Morgan Stanley Dean Witter
Capital I, Series 2001-IQA,
Class A2,
5.33%, 12/18/32............... 1,656,355
378,228 Morgan Stanley Dean Witter
Capital I, Series 2002-HQ,
Class A1,
4.59%, 04/15/34............... 391,931
1,964,224 Morgan Stanley Dean Witter
Capital I, Series 2002-IQ2,
Class A1,
4.09%, 12/15/35............... 2,021,313
1,302,061 Morgan Stanley Dean Witter
Capital, Series 2001-TOP3,
Class A1,
5.31%, 07/15/33............... 1,362,898
761,254 Nations Credit Grantor Trust,
Series 1997, Class A,
6.75%, 08/15/13............... 800,843
4,000,000 Navistar Financial Corp. Owner
Trust, Series 2001-B, Class
A4,
4.37%, 11/17/08............... 4,104,039
3,000,000 Nelnet Student Loan Trust,
Series 2002-2, Class A3,
Floating Rate,
1.24%(a), 09/25/13............ 2,989,246
2,150,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A3,
5.98%, 06/15/08............... 2,304,077
3,550,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A5,
6.45%, 03/15/13............... 4,019,838
</Table>
See notes to financial statements.
52
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL SERVICES
(CONTINUED)
$4,609,134 Public Service New Hampshire
Funding, LLC, Series 2001-1,
Class A2,
5.73%, 11/01/10............... $ 4,967,758
------------
52,407,643
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 6.8%
719,300 Bank Boston Home Equity Loan
Trust, Series 1998-1, Class
A4,
6.42%, 01/25/21............... 731,679
1,601,067 Bear Stearns Commercial Mortgage
Securities, Inc., Series
1998-C1, Class A1,
6.34%, 06/16/30............... 1,719,132
1,198,777 Bear Stearns Commercial Mortgage
Securities, Inc., Series
1999-C1, Class A1,
5.91%, 02/14/31............... 1,282,918
1,795,688 Bear Stearns Commercial Mortgage
Securities, Inc., Series
2001-TOP4, Class A1,
5.06%, 11/15/16............... 1,891,128
970,865 Bear Stearns Commercial Mortgage
Securities, Inc., Series
2002-PBW1, Class A1,
3.97%, 11/11/35............... 980,015
3,000,000 Contimortgage Home Equity Loan
Trust, Series 1998-2, Class
A7,
6.57%, 03/15/23............... 3,057,031
1,324,070 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2001-CF2, Class A1,
5.26%, 02/15/34............... 1,356,879
4,696,556 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2003-C3, Class A1,
2.08%, 05/15/38............... 4,614,657
781,006 DLJ Commercial Mortgage Corp.,
Series 1998-CG1, Class A1A,
6.11%, 06/10/31............... 804,569
398,001 EQCC Home Equity Loan Trust,
Series 1998-1, Class A6F,
6.25%, 12/15/07............... 404,344
1,347,872 General Electric Capital
Commercial Mortgage Corp.,
Series 2001-2, Class A1,
5.26%, 08/11/33............... 1,414,184
921,648 General Electric Capital
Commercial Mortgage Corp.,
Series 2001-3, Class A1,
5.56%, 06/10/38............... 982,378
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY
(CONTINUED)
$ 758,160 General Electric Capital
Commercial Mortgage Corp.,
Series 2002-1, Class A1,
5.03%, 12/10/35............... $ 793,579
3,876,205 General Electric Capital
Commercial Mortgage Corp.,
Series 2002-3A, Class A1,
4.23%, 12/10/37............... 3,944,569
1,413,888 IMC Home Equity Loan Trust,
Series 1997-3, Class A7,
7.08%, 08/20/28............... 1,421,298
920,028 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2002-C2, Class A1,
4.33%, 12/12/34............... 936,877
2,357,367 LB-UBS Commercial Mortgage
Trust, Series 2003-C3, Class
A1,
2.60%, 05/15/27............... 2,332,414
1,364,739 Residential Asset Mortgage
Products, Inc., Series
2002-RZ3, Class A2,
3.08%, 07/25/26............... 1,369,708
3,400,000 Residential Asset Mortgage
Products, Inc., Series
2003-RS11, Class AI4,
4.26%, 07/25/29............... 3,404,250
2,000,000 Residential Asset Mortgage
Products, Inc., Series
2003-RZ1, Class AI2,
2.81%, 10/25/25............... 2,015,532
356,361 Residential Funding Mortgage
Securities II, Series
2001-HI3, Class AI1,
6.63%, 07/25/26............... 365,085
480,180 Travelers Mortgage Securities
Corp., Series 1, Class Z2,
12.00%, 03/01/14.............. 487,631
3,500,000 Vendee Mortgage Trust, Series
1996-1, Class 1K,
6.75%, 11/15/12............... 3,688,068
2,098,150 Wachovia Bank Commercial
Mortgage Trust, Series 2003-4,
Class A1,
3.00%, 04/15/35............... 2,104,182
------------
42,102,107
------------
PRIVATE ASSET BACKED: OTHER -- 8.6%
2,000,000 Asset Securitization Corp.,
Series 1997-D4, Class A1C,
7.42%, 04/14/29............... 2,086,719
</Table>
See notes to financial statements.
53
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: OTHER (CONTINUED)
$4,220,013 Bear Stearns Asset Backed
Securities, Inc., Series
2003-AC3, Class A1,
4.00%, 07/25/33............... $ 4,130,669
4,672,000 California Infrastructure PG&E
Corp., Series 1997-1, Class
A8,
6.48%, 12/26/09............... 5,194,054
4,891,133 California Infrastructure,
Series 1997-1, Class A6,
6.38%, 09/25/08............... 5,215,336
4,049,332 CIT Equipment Collateral, Series
2002-VT1, Class A3,
4.03%, 01/20/06............... 4,114,144
2,500,000 CIT Equipment Collateral, Series
2003-VT1, Class A3B,
1.63%, 04/20/07............... 2,486,746
3,000,000 CIT RV Trust, Series 1998-A,
Class A5,
6.12%, 11/15/13............... 3,116,082
5,000,000 CNH Equipment Trust, Series
2003-A, Class A3B,
1.89%, 07/16/07............... 4,996,012
2,000,000 CNH Wholesale Master Note Trust,
Series 2003-1, Class A,
1.36%, 08/15/08............... 1,999,280
6,665,000 Connecticut RRB Special Purpose
Trust CL&P, Series 2001-1,
Class A3,
5.73%, 03/30/09............... 7,172,057
483,739 Household Automotive Trust,
Series 2001-2, Class A3,
4.83%, 03/17/06............... 488,105
3,465,106 Household Automotive Trust,
Series 2002-1, Class A3,
3.75%, 09/18/06............... 3,515,868
2,000,000 Household Automotive Trust,
Series 2003-1, Class A3,
1.73%, 12/17/07............... 1,985,580
2,100,000 Illinois Power Special Purpose
Trust, Series 1998-1, Class
A6,
5.54%, 06/25/09............... 2,254,927
1,062,744 John Deere Owner Trust, Series
2001-A, Class A3,
3.26%, 10/17/05............... 1,070,868
3,656,237 PBG Equipment Trust, Series 1A,
Class A,
6.27%, 01/20/12............... 3,814,073
------------
53,640,520
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: RECEIVABLES -- 3.1%
$3,237,077 Alter Moneta Receivables, LLC,
Series 2003-1,
2.56%, 03/15/11............... $ 3,237,483
343,879 Chevy Chase Auto Receivables
Trust, Series 2001-2 , Class
A3,
3.80%, 11/15/05............... 345,355
4,000,000 Chevy Chase Auto Receivables
Trust, Series 2001-2, Class
A4,
4.44%, 04/16/07............... 4,098,626
3,000,000 Hyundai Auto Receivables Trust,
Series 2002-A, Class A3,
2.80%, 02/15/07............... 3,034,461
2,097,992 National City Auto Receivables
Trust, Series 2002-A, Class
A3,
4.04%, 07/15/06............... 2,124,938
4,000,000 Regions Auto Receivables Trust,
Series 2003-2, Class A3,
2.31%, 01/15/08............... 4,011,250
2,280,020 World Omni Auto Receivables
Trust, Series 2001-B, Class
A3,
3.79%, 11/21/05............... 2,299,132
------------
19,151,245
------------
PRIVATE ASSET BACKED: TRANSPORTATION -- 1.7%
2,294,486 Railcar Leasing, LLC, Series 1,
Class A1,
6.75%, 07/15/06............... 2,429,838
5,000,000 Railcar Leasing, LLC, Series 1,
Class A2,
7.13%, 01/15/13............... 5,576,600
2,437,338 Railcar Trust, Series 1992-1,
Class A,
7.75%, 06/01/04............... 2,487,790
------------
10,494,228
------------
PRIVATE ASSET BACKED: UTILITIES -- 1.2%
5,000,000 PECO Energy Transition Trust,
Series 1999-A, Class A6,
6.05%, 03/01/09............... 5,423,431
2,000,000 PECO Energy Transition Trust,
Series 2001-A, Class A1,
6.52%, 12/31/10............... 2,266,056
------------
7,689,487
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.0%
875,000 AvalonBay Communities,
6.63%, 01/15/05............... 917,177
3,000,000 AvalonBay Communities, Series
MTN,
6.58%, 02/15/04............... 3,016,992
1,000,000 Equity Residential Properties,
7.50%, 04/15/04............... 1,015,841
</Table>
See notes to financial statements.
54
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$1,000,000 Kimco Realty Corp., Series MTNB,
7.62%, 10/20/04............... $ 1,047,623
------------
5,997,633
------------
RETAIL: SUPERMARKETS -- 0.6%
3,500,000 Safeway, Inc.,
2.50%, 11/01/05............... 3,467,632
------------
UTILITIES: ELECTRIC -- 0.4%
2,500,000 Atlantic City Electric, Series
AMBC,
6.67%, 03/23/05............... 2,655,553
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $457,579,124)........... 459,924,699
------------
US TREASURY SECURITIES -- 5.3%
US TREASURY NOTES
4,000,000 1.25%, 05/31/05................. 3,990,628
10,000,000 1.63%, 09/30/05(c).............. 9,999,220
9,000,000 1.63%, 10/31/05(c).............. 8,988,759
10,000,000 1.88%, 11/30/05(c).............. 10,021,880
------------
TOTAL US TREASURY SECURITIES
(Cost $32,919,489)............ 33,000,487
------------
US GOVERNMENT AGENCY SECURITIES -- 10.3%
FANNIE MAE -- 4.2%
2,394,649 PL# 254062, 6.00%, 10/01/11..... 2,518,680
4,986,805 PL# 254758, 4.50%, 06/01/13..... 5,084,671
2,612,045 PL# 254805, 5.00%, 06/01/13..... 2,698,061
1,380,900 PL# 323743, 5.00%, 04/01/14..... 1,412,530
1,024,810 PL# 429168, 6.00%, 05/01/13..... 1,077,715
983,374 PL# 50903, 6.00%, 09/01/08...... 1,035,772
1,216,307 PL# 50973, 6.00%, 01/01/09...... 1,281,116
949,851 PL# 517699, 6.00%, 07/01/14..... 998,466
3,292,923 PL# 545038, 6.00%, 09/01/14..... 3,462,404
5,056,187 PL# 555154, 5.50%, 12/01/22..... 5,173,613
1,171,232 PL# 609771, 6.00%, 09/01/08..... 1,230,453
------------
25,973,481
------------
FEDERAL FARM CREDIT BANK -- 1.4%
8,500,000 2.50%, 11/15/05................. 8,595,829
------------
FREDDIE MAC -- 1.1%
7,000,000 3.25%, 11/15/04................. 7,119,077
508 PL# 306816, 7.00%, 01/01/18..... 510
------------
7,119,587
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD -- 1.2%
$ 12,214 PL# D06777, 7.50%, 03/01/08..... $ 12,957
408,486 PL# E00532, 6.50%, 02/01/13..... 432,973
688,622 PL# E00542, 6.50%, 04/01/13..... 729,803
1,544,415 PL# E00676, 5.50%, 06/01/14..... 1,606,337
2,248,601 PL# E89557, 5.50%, 04/01/17..... 2,333,005
2,260,309 PL# M90802, 4.00%, 03/01/08..... 2,302,046
------------
7,417,121
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.4%
2,565,598 PL# 436708, 5.75%, 12/15/22..... 2,670,270
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 2.0%
3,802,276 Fannie Mae, Series 1993-234,
Class PC,
5.50%, 12/25/08............... 3,959,247
734,602 Fannie Mae, Series 2003-28,
Class PA,
5.50%, 05/25/06............... 734,647
2,337,060 Freddie Mac, Series 2557, Class
MA,
4.50%, 07/15/16............... 2,390,286
3,410,219 Freddie Mac, Series 2640, Class
PA,
5.00%, 02/15/11............... 3,481,897
2,000,000 Freddie Mac, Series T-52, Class
AF2,
3.63%, 11/25/32............... 2,024,127
------------
12,590,204
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $64,191,731)............ 64,366,492
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 4.9%
3,000,000 Hydro Quebec, Series MTNB,
7.00%, 04/12/05............... 3,200,067
5,000,000 Hydro Quebec, Series MTNB,
6.52%, 02/23/06............... 5,449,640
3,500,000 Province of British Columbia,
4.63%, 10/03/06............... 3,692,441
5,000,000 Province of Manitoba,
4.25%, 11/20/06............... 5,209,150
3,000,000 Province of Ontario,
7.00%, 08/04/05............... 3,233,667
4,000,000 Province of Ontario,
6.00%, 02/21/06............... 4,312,808
4,000,000 Republic of Italy,
7.25%, 02/07/05............... 4,239,564
</Table>
See notes to financial statements.
55
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$1,000,000 Republic of Italy,
4.38%, 10/25/06............... $ 1,048,339
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$29,901,761).................. 30,385,676
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 5.0%
FANNIE MAE -- 2.0%
600,534 1.06%, 01/02/04(d).............. 600,534
6,000,000 1.05%, 01/14/04................. 5,997,725
6,000,000 1.03%, 01/28/04................. 5,995,387
------------
12,593,646
------------
FEDERAL HOME LOAN BANK -- 1.9%
6,000,000 1.02%, 01/21/04................. 5,996,617
6,000,000 1.04%, 02/27/04................. 5,990,167
------------
11,986,784
------------
FREDDIE MAC -- 1.1%
301,555 1.06%, 01/27/04(d).............. 301,555
6,490,000 1.05%, 02/12/04................. 6,482,050
------------
6,783,605
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $31,364,035)............ 31,364,035
------------
<Caption>
SHARES
------
REGULATED INVESTMENT COMPANIES -- 0.4%
1,055,441 American Aadvantage Select(d)... 1,055,441
326,742 Merrill Lynch Premier
Institutional Fund(d)......... 326,742
904,664 Merrimac Cash Fund --
Premium Class(d).............. 904,664
------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $2,286,847)............. 2,286,847
------------
<Caption>
PRINCIPAL
- ---------
SHORT TERM CORPORATE NOTES -- 1.3%
$ 301,555 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(d)........ 301,555
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
SHORT TERM CORPORATE NOTES (CONTINUED)
$ 301,555 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(d)........ $ 301,555
753,887 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(d)........ 753,887
603,109 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(d)........ 603,109
753,887 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(d)........ 753,887
1,206,219 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(d)........ 1,206,219
1,960,106 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(d)........ 1,960,106
452,332 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(d)........ 452,332
1,507,773 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(d)........ 1,507,773
------------
TOTAL SHORT TERM CORPORATE NOTES
(Cost $7,840,423)............. 7,840,423
------------
TIME DEPOSITS -- 2.6%
2,763,312 Bank of Montreal,
1.06%, 01/15/04(d)............ 2,763,312
1,206,219 Bank of Montreal,
1.06%, 02/17/04(d)............ 1,206,219
1,507,773 Bank of Novia Scotia,
1.08%, 03/10/04(d)............ 1,507,773
904,664 Citigroup, Inc.,
1.08%, 01/05/04(d)............ 904,664
452,332 Citigroup, Inc.,
1.09%, 02/06/04(d)............ 452,332
904,664 Credit Agricole Indosuez,
0.98%, 01/02/04(d)............ 904,664
904,664 Credit Agricole Indosuez,
1.08%, 01/28/04(d)............ 904,664
1,206,219 Den Danske Bank,
1.08%, 01/20/04(d)............ 1,206,219
</Table>
See notes to financial statements.
56
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
TIME DEPOSITS (CONTINUED)
$1,507,773 Royal Bank of Canada,
1.05%, 02/27/04(d)............ $ 1,507,773
753,887 Royal Bank of Scotland,
1.08%, 01/09/04(d)............ 753,887
301,555 Royal Bank of Scotland,
1.08%, 01/15/04(d)............ 301,555
2,261,660 Royal Bank of Scotland,
1.08%, 01/20/04(d)............ 2,261,660
753,887 Svenska Handlesbanken,
1.08%, 02/04/04(d)............ 753,887
301,555 Toronto Dominion Bank,
1.10%, 01/08/04(d)............ 301,555
452,332 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(d)............ 452,332
------------
TOTAL TIME DEPOSITS
(Cost $16,182,496)............ 16,182,496
------------
SHORT TERM COMMERCIAL PAPER -- 0.1%
329,108 General Electric Capital Corp.,
1.09%, 01/09/04(d)............ 329,108
301,555 General Electric Capital Corp.,
1.08%, 01/16/04(d)............ 301,555
------------
TOTAL SHORT TERM COMMERCIAL
PAPER (Cost $630,663)......... 630,663
------------
TOTAL SECURITIES
(Cost $642,896,569)........... 645,981,818
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
REPURCHASE AGREEMENTS -- 0.6%
$3,317,102 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $3,317,294
(Collateralized by Archer-
Daniels-Midland Company,
8.88%, due 04/15/11, with a
value of $693,244, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$680,505, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$1,081,279, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $270,549, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $657,867)(d)......... $ 3,317,102
230,060 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $230,066
(Collateralized by Small
Business Administration, rate
3.88%, due 07/25/26, with a
value of $241,563)............ 230,060
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $3,547,162)............. 3,547,162
------------
Total Investments -- 104.3%
(Cost $646,443,731)........... 649,528,980
Liabilities less other
assets -- (4.3)%.............. (26,780,646)
------------
NET ASSETS -- 100.0%............ $622,748,334
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $646,443,731.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............... $ 6,346,222
Gross unrealized depreciation............... (3,260,973)
-----------
Net unrealized appreciation................. $ 3,085,249
===========
</Table>
- ---------------
(a) Quarterly reset provision. The rate shown was in effect at December 31,
2003.
(b) Monthly reset provision. The rate shown was in effect at December 31, 2003.
(c) All or part of this security is on loan.
(d) Short term security purchased with cash collateral received for securities
loaned.
** Variable rate security. The rate shown was in effect at December 31, 2003.
See notes to financial statements.
57
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 56.2%
US TREASURY BONDS -- 1.0%
$ 2,402,000 12.00%, 05/15/05............... $ 2,747,571
------------
US TREASURY NOTES -- 55.2%
13,000,000 3.00%, 01/31/04................ 13,024,388
1,600,000 3.25%, 05/31/04................ 1,615,189
2,300,000 2.13%, 08/31/04................ 2,316,443
2,155,000 2.00%, 11/30/04................ 2,171,078
3,260,000 1.50%, 02/28/05................ 3,268,535
3,780,000 1.63%, 03/31/05................ 3,794,179
4,900,000 1.63%, 04/30/05................ 4,916,273
5,215,000 1.50%, 07/31/05(a)............. 5,212,559
24,500,000 6.50%, 08/15/05................ 26,438,955
4,775,000 5.63%, 02/15/06(a)............. 5,147,488
4,360,000 2.00%, 05/15/06(a)............. 4,362,215
2,785,000 4.63%, 05/15/06................ 2,952,537
2,315,000 2.38%, 08/15/06(a)............. 2,328,205
2,300,000 6.50%, 10/15/06................ 2,562,614
26,778,000 3.25%, 08/15/07(a)............. 27,322,985
1,615,000 3.00%, 11/15/07(a)............. 1,629,385
1,315,000 3.00%, 02/15/08(a)............. 1,321,524
1,355,000 2.63%, 05/15/08................ 1,335,046
2,000,000 3.13%, 09/15/08................ 1,999,454
1,700,000 4.75%, 11/15/08(a)............. 1,820,462
2,142,000 3.38%, 12/15/08(a)............. 2,157,230
24,787,000 3.88%, 02/15/13(a)............. 24,271,901
4,533,000 4.25%, 11/15/13(a)............. 4,529,460
------------
146,498,105
------------
TOTAL US TREASURY SECURITIES
(Cost $148,771,333).......... 149,245,676
------------
US GOVERNMENT AGENCY SECURITIES -- 33.9%
FANNIE MAE -- 21.0%
19,871,000 7.00%, 07/15/05................ 21,474,927
9,485,222 PL# 750693, 4.50%, 11/01/33.... 9,084,105
2,506,688 PL# 738406, 4.50%, 09/01/33.... 2,400,684
5,000,000 PL# 740345, 4.50%, 10/01/33.... 4,788,557
10,000,000 TBA, 5.50%, 01/01/19........... 10,362,500
7,700,000 TBA, 5.50%, 01/01/34........... 7,801,063
------------
55,911,836
------------
FREDDIE MAC -- 12.9%
18,420,000 7.00%, 07/15/05................ 19,908,833
13,191,000 5.50%, 07/15/06................ 14,221,072
------------
34,129,905
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$89,497,232)................. $ 90,041,741
------------
CORPORATE BONDS AND NOTES -- 15.3%
PRIVATE ASSET BACKED: AUTOMOBILES -- 6.1%
$ 3,000,000 Carmax Auto Owner Trust,
Series 2003-1, Class A4,
2.16%, 11/15/09.............. 2,959,859
3,117,000 Carmax Auto Owner Trust,
Series 2003-2, Class A4,
3.07%, 10/15/10.............. 3,144,820
10,000,000 WFS Financial Owner Trust,
Series 2003-1, Class A4,
2.74%, 09/20/10.............. 10,001,217
------------
16,105,896
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 3.8%
5,000,000 Bank One Issuance Trust,
Series 2003-A2, Class A2,
Floating Rate, 1.21%(c),
10/15/08..................... 5,008,468
5,000,000 Chase Credit Card Master Trust,
Series 2002-6, Class A,
Floating Rate,
1.22%,(c), 01/15/08.......... 5,008,052
------------
10,016,520
------------
PRIVATE ASSET BACKED: OTHER -- 1.4%
3,837,000 CNH Equipment Trust,
Series 2003-B, Class A4B,
3.38%, 02/15/11.............. 3,825,009
------------
PRIVATE ASSET BACKED: UTILITIES -- 1.8%
4,317,000 Detroit Edison Securitization
Funding LLC,
Series 2001-1, Class A3,
5.88%, 03/01/10.............. 4,693,777
------------
SPECIAL PURPOSE ENTITY -- 2.2%
5,589,969 Overseas Private Investment
Corp., Variable Rate,
5.14%(d), 08/15/07........... 5,949,930
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $40,263,882)........... 40,591,132
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.6%
FANNIE MAE -- 0.4%
1,029,489 1.06%, 01/02/04(b)............. 1,029,489
------------
FREDDIE MAC -- 0.2%
516,951 1.06%, 01/27/04(b)............. 516,951
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$1,546,440).................. 1,546,440
------------
</Table>
See notes to financial statements.
58
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
TIME DEPOSITS -- 10.4%
$ 4,737,111 Bank of Montreal,
1.06%, 01/15/04(b)........... $ 4,737,111
2,067,805 Bank of Montreal,
1.06%, 02/17/04(b)........... 2,067,805
2,584,757 Bank of Novia Scotia,
1.08%, 03/10/04(b)........... 2,584,757
1,550,854 Citigroup, Inc.,
1.08%, 01/05/04(b)........... 1,550,854
775,427 Citigroup, Inc.,
1.09%, 02/06/04(b)........... 775,427
1,550,854 Credit Agricole Indosuez,
0.98%, 01/02/04(b)........... 1,550,854
1,550,854 Credit Agricole Indosuez,
1.08%, 01/28/04(b)........... 1,550,854
2,067,806 Den Danske Bank,
1.08%, 01/20/04(b)........... 2,067,806
2,584,757 Royal Bank of Canada,
1.05%, 02/27/04(b)........... 2,584,757
1,292,378 Royal Bank of Scotland,
1.08%, 01/09/04(b)........... 1,292,378
516,951 Royal Bank of Scotland,
1.08%, 01/15/04(b)........... 516,951
3,877,135 Royal Bank of Scotland,
1.08%, 01/20/04(b)........... 3,877,135
1,292,378 Svenska Handlesbanken,
1.08%, 02/04/04(b)........... 1,292,378
516,951 Toronto Dominion Bank,
1.10%, 01/08/04(b)........... 516,951
775,427 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)........... 775,427
------------
TOTAL TIME DEPOSITS (Cost
$27,741,445)................. 27,741,445
------------
SHORT TERM CORPORATE NOTES -- 5.1%
516,951 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)....... 516,951
516,951 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)....... 516,951
1,292,378 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)....... 1,292,378
1,033,903 Fleet National Bank,
Floating Rate,
1.00%(**), 01/21/04(b)....... 1,033,903
1,292,378 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)....... 1,292,378
2,067,806 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)....... 2,067,806
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM CORPORATE NOTES (CONTINUED)
$ 3,360,184 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)....... $ 3,360,184
775,427 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)....... 775,427
2,584,757 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)....... 2,584,757
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $13,440,735)..... 13,440,735
------------
<Caption>
SHARES
------
REGULATED INVESTMENT COMPANIES -- 1.5%
1,809,330 American Aadvantage
Select(b).................... 1,809,330
560,130 Merrill Lynch Premier
Institutional Fund(b)........ 560,130
1,550,854 Merrimac Cash Fund -- Premium
Class(b)..................... 1,550,854
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$3,920,314).................. 3,920,314
------------
<Caption>
PRINCIPAL
---------
SHORT TERM COMMERCIAL PAPER -- 0.4%
$ 564,186 General Electric Capital Corp.,
1.09%, 01/09/04(b)........... 564,186
516,951 General Electric Capital Corp.,
1.08%, 01/16/04(b)........... 516,951
------------
TOTAL SHORT TERM COMMERCIAL
PAPER (Cost $1,081,137)...... 1,081,137
------------
TOTAL SECURITIES (Cost
$326,262,518)................ 327,608,620
------------
REPURCHASE AGREEMENTS -- 2.2%
5,686,465 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $5,686,794
(Collateralized by Archer-
Daniels-Midland Company,
8.88%, due 04/15/11, with a
value of $1,188,419, Den
Danske Bank -- 144A, 7.40%,
due 06/15/10, with a value of
$1,166,580, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$1,853,623, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $463,797, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $1,127,774)(b)...... 5,686,465
</Table>
See notes to financial statements.
59
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS (CONTINUED)
$ 178,782 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $178,787
(Collateralized by Small
Business Administration,
4.63%, due 09/25/16, with a
value of $187,721)........... $ 178,782
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $5,865,247)............ 5,865,247
------------
Total Investments -- 125.6%
(Cost $332,127,765).......... 333,473,867
Liabilities less other
assets -- (25.6)%............ (67,953,879)
------------
NET ASSETS -- 100.0%........... $265,519,988
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $332,298,632.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $1,309,518
Gross unrealized depreciation........... (134,283)
----------
Net unrealized appreciation............. $1,175,235
==========
</Table>
- ---------------
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
(c) Monthly reset provision. The rate shown was in effect at December 31,
2003.
(d) Variable rate security. The rate shown was in effect at December 31,
2003.
** Variable rate security. The rate shown was in effect at December 31,
2003.
See notes to financial statements.
60
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US TREASURY SECURITIES -- 20.6%
US TREASURY BONDS -- 8.5%
$ 6,130,000 10.38%, 11/15/12(a).......... $ 7,822,695
26,045,000 12.00%, 08/15/13(a).......... 35,992,992
17,425,000 8.13%, 08/15/19.............. 23,542,813
19,280,000 8.50%, 02/15/20.............. 26,934,025
10,975,000 8.00%, 11/15/21.............. 14,825,689
1,025,000 6.25%, 08/15/23.............. 1,168,621
8,715,000 6.75%, 08/15/26.............. 10,549,917
3,935,000 5.38%, 02/15/31(a)........... 4,104,854
--------------
124,941,606
--------------
US TREASURY NOTES -- 11.4%
28,565,000 2.00%, 08/31/05.............. 28,758,042
32,190,000 1.63%, 10/31/05(a)........... 32,149,795
15,660,000 1.88%, 11/30/05(a)........... 15,694,264
27,235,000 2.38%, 08/15/06(a)........... 27,390,348
3,500,000 2.63%, 11/15/06(a)........... 3,531,994
1,690,000 3.25%, 08/15/07.............. 1,724,395
50,245,000 3.38%, 12/15/08(a)........... 50,602,242
7,150,000 4.25%, 11/15/13.............. 7,144,416
--------------
166,995,496
--------------
US TREASURY STRIPS -- 0.7%
13,685,000 Zero coupon, 05/15/17........ 6,996,963
6,000,000 Zero coupon, 11/15/22........ 2,155,026
3,955,000 Zero coupon, 02/15/23........ 1,396,178
--------------
10,548,167
--------------
TOTAL US TREASURY SECURITIES
(Cost $302,893,980)........ 302,485,269
--------------
US GOVERNMENT AGENCY SECURITIES -- 34.0%
FANNIE MAE -- 15.4%
2,760,000 1.75%, 06/16/06.............. 2,719,202
4,905,000 2.75%, 08/11/06.............. 4,908,277
4,215,000 7.13%, 03/15/07.............. 4,779,093
7,310,000 5.75%, 02/15/08.............. 8,037,740
14,035,000 3.75%, 09/15/08.............. 14,040,895
3,700,000 6.63%, 09/15/09.............. 4,235,975
3,505,000 7.25%, 01/15/10.............. 4,137,684
25,125,000 7.13%, 06/15/10.............. 29,579,462
3,775,000 6.63%, 11/15/10.............. 4,343,477
16,465,000 6.00%, 05/15/11.............. 18,276,265
10,060,000 5.50%, 07/18/12.............. 10,307,506
6,355,000 4.38%, 07/17/13.............. 6,095,303
994,132 PL# 252571, 7.00%,
07/01/29................... 1,053,760
17,709 PL# 252716, 7.00%,
09/01/29................... 18,771
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 3,867 PL# 253264, 7.00%,
05/01/30................... $ 4,096
4,948 PL# 253346, 7.50%,
06/01/30................... 5,289
63,525 PL# 253479, 7.00%,
10/01/30................... 67,281
32,518 PL# 253698, 6.00%,
02/01/16................... 34,155
125,422 PL# 253990, 7.00%,
09/01/16................... 134,238
105,565 PL# 254008, 7.00%,
10/01/31................... 111,806
5,281 PL# 259141, 7.50%,
12/01/30................... 5,645
16,021 PL# 323250, 6.00%,
08/01/13................... 16,846
2,338,929 PL# 323842, 5.50%,
07/01/14................... 2,435,936
184,591 PL# 323967, 7.00%,
10/01/29................... 195,662
16,777 PL# 492742, 7.00%,
05/01/29................... 17,783
10,324 PL# 503916, 7.50%,
06/01/29................... 11,039
9,256 PL# 508415, 7.00%,
08/01/29................... 9,811
53,272 PL# 515946, 7.00%,
10/01/29................... 56,467
13,948 PL# 524164, 7.00%,
11/01/29................... 14,785
161,637 PL# 524657, 7.00%,
01/01/30................... 171,196
128,489 PL# 526053, 7.00%,
12/01/29................... 136,196
2,468 PL# 527717, 7.50%,
01/01/30................... 2,639
22,955 PL# 528107, 7.00%,
02/01/30................... 24,332
5,653 PL# 531092, 7.50%,
10/01/29................... 6,045
40,861 PL# 531497, 7.00%,
02/01/30................... 43,277
24,225 PL# 531735, 7.00%,
02/01/30................... 25,657
5,652 PL# 533841, 7.50%,
12/01/30................... 6,041
89,003 PL# 535030, 7.00%,
12/01/29................... 94,341
104,570 PL# 535103, 7.00%,
01/01/15................... 111,864
37,565 PL# 535159, 7.00%,
02/01/30................... 39,818
151,825 PL# 535195, 7.00%,
03/01/30................... 160,932
69,631 PL# 535277, 7.00%,
04/01/30................... 73,808
1,538,246 PL# 535675, 7.00%,
01/01/16................... 1,645,859
4,034 PL# 535722, 7.00%,
02/01/31................... 4,272
24,528 PL# 535723, 7.00%,
02/01/31................... 25,979
4,303,992 PL# 535735, 6.00%,
01/01/16................... 4,524,279
5,994 PL# 535811, 6.50%,
04/01/31................... 6,271
456,913 PL# 535880, 7.00%,
02/01/31................... 483,933
3,088 PL# 538314, 7.50%,
05/01/30................... 3,302
5,464 PL# 540211, 7.50%,
06/01/30................... 5,841
8,912 PL# 542999, 7.50%,
08/01/30................... 9,526
428,635 PL# 545194, 7.00%,
08/01/31................... 453,974
152,456 PL# 545477, 7.00%,
03/01/32................... 161,484
147,620 PL# 545815, 7.00%,
07/01/32................... 156,346
117,943 PL# 548822, 7.00%,
08/01/30................... 124,918
91,083 PL# 549659, 7.00%,
02/01/16................... 97,486
62,688 PL# 549962, 7.00%,
10/01/30................... 66,396
120,365 PL# 549975, 7.00%,
10/01/30................... 127,483
</Table>
See notes to financial statements.
61
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 57,490 PL# 550440, 7.00%,
02/01/16................... $ 61,531
2,908 PL# 550544, 7.50%,
09/01/30................... 3,108
10,321 PL# 552603, 7.00%,
10/01/30................... 10,931
163,351 PL# 554493, 7.00%,
10/01/30................... 173,011
137,837 PL# 555144, 7.00%,
10/01/32................... 145,989
4,009 PL# 558362, 7.50%,
11/01/30................... 4,286
1,870 PL# 558519, 7.50%,
11/01/30................... 1,999
25,489 PL# 559277, 7.00%,
10/01/30................... 26,996
138,370 PL# 559313, 7.00%,
12/01/30................... 146,553
6,647 PL# 559741, 7.50%,
01/01/31................... 7,105
64,386 PL# 560384, 7.00%,
11/01/30................... 68,194
3,818 PL# 560596, 7.50%,
01/01/31................... 4,082
8,769 PL# 561678, 7.50%,
12/01/30................... 9,374
5,591 PL# 564080, 7.50%,
12/01/30................... 5,977
47,368 PL# 564183, 7.00%,
12/01/30................... 50,169
5,991 PL# 564529, 7.50%,
12/01/30................... 6,404
28,205 PL# 566658, 7.00%,
02/01/31................... 29,872
6,666 PL# 575285, 7.50%,
03/01/31................... 7,125
24,077 PL# 577525, 6.00%,
05/01/16................... 25,289
420,773 PL# 579224, 6.00%,
04/01/16................... 441,953
54,599 PL# 580179, 7.00%,
10/01/16................... 58,437
11,556 PL# 580377, 7.50%,
04/01/31................... 12,353
58,395 PL# 584811, 7.00%,
05/01/31................... 61,847
515,895 PL# 585248, 7.00%,
06/01/31................... 546,403
9,251 PL# 589405, 7.50%,
06/01/31................... 9,889
66,479 PL# 589893, 7.00%,
06/01/31................... 70,409
4,866 PL# 592129, 7.50%,
06/01/31................... 5,202
5,844 PL# 593988, 7.50%,
07/01/31................... 6,247
58,835 PL# 598125, 7.00%,
09/01/16................... 62,971
16,532 PL# 606600, 7.00%,
10/01/31................... 17,509
77,351 PL# 610128, 7.00%,
10/01/31................... 81,924
55,044 PL# 611323, 7.00%,
10/01/16................... 58,913
38,331 PL# 611695, 5.50%,
12/01/16................... 39,781
26,357 PL# 617705, 6.00%,
04/01/32................... 27,264
159,394 PL# 632269, 7.00%,
05/01/32................... 168,817
392,335 PL# 634949, 7.00%,
05/01/32................... 415,568
17,060 PL# 647556, 7.00%,
01/01/30................... 18,083
76,849 PL# 650872, 7.00%,
07/01/32................... 81,400
99,597 PL# 744728, 4.00%,
10/01/18................... 97,211
31,900,000 TBA, 5.00%, 01/01/19......... 32,537,999
16,400,000 TBA, 5.50%, 01/01/19......... 16,994,500
5,200,000 TBA, 6.00%, 01/01/19......... 5,453,500
9,300,000 TBA, 6.50%, 01/01/19......... 9,858,000
2,600,000 TBA, 5.50%, 01/01/34......... 2,634,125
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 3,200,000 TBA, 6.00%, 01/01/34......... $ 3,308,000
26,300,000 TBA, 6.50%, 01/01/34......... 27,508,169
--------------
225,812,213
--------------
FANNIE MAE GOLD -- 2.6%
896,920 PL# A13289, 5.50%,
09/01/33................... 908,495
845,788 PL# E88749, 6.00%,
03/01/17................... 887,727
9,352,408 PL# E89336, 6.00%,
05/01/17................... 9,816,987
1,904,832 PL# E89561, 6.00%,
04/01/17................... 1,999,454
416,836 PL# E89787, 6.00%,
05/01/17................... 437,542
1,059,278 PL# E89913, 6.00%,
05/01/17................... 1,111,897
161,503 PL# E97469, 4.00%,
07/01/18................... 158,015
390,423 PL# E97486, 4.00%,
07/01/18................... 381,990
480,258 PL# E97540, 4.00%,
08/01/18................... 469,885
488,116 PL# E97585, 4.00%,
07/01/18................... 477,574
57,724 PL# E97834, 4.00%,
08/01/18................... 56,477
491,029 PL# E98155, 4.00%,
08/01/18................... 480,423
452,770 PL# E98221, 4.00%,
08/01/18................... 442,991
491,290 PL# E98354, 4.00%,
08/01/18................... 480,679
428,403 PL# E98552, 4.00%,
08/01/18................... 419,151
486,977 PL# E98751, 4.00%,
08/01/18................... 476,459
393,741 PL# E99169, 4.00%,
09/01/18................... 385,237
1,900,000 TBA, 5.50%, 01/01/19......... 1,968,875
1,300,000 TBA, 5.50%, 01/01/34......... 1,315,844
100,000 TBA, 6.00%, 01/01/34......... 103,344
6,600,000 TBA, 6.50%, 01/01/34......... 6,913,500
8,300,000 TBA, 5.00%, 01/01/34......... 8,193,660
--------------
37,886,206
--------------
FREDDIE MAC -- 7.8%
5,350,000 3.50%, 04/01/08.............. 5,337,444
24,000,000 3.88%, 11/10/08.............. 24,325,872
465,000 6.63%, 09/15/09.............. 532,401
4,635,000 4.38%, 02/04/10.............. 4,638,272
11,425,000 7.00%, 03/15/10.............. 13,349,084
14,145,000 6.88%, 09/15/10.............. 16,450,791
14,695,000 4.75%, 12/08/10.............. 14,858,144
25,450,000 4.50%, 12/16/10.............. 25,469,749
8,910,000 6.00%, 06/15/11.............. 9,904,169
--------------
114,865,926
--------------
FREDDIE MAC GOLD -- 5.7%
1,466,441 PL# A10807, 5.50%,
07/01/33................... 1,485,364
15,257,000 PL# A11986, 5.00%,
08/01/33................... 15,072,457
</Table>
See notes to financial statements.
62
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 790,988 PL# A12118,
5.00%, 08/01/33(e)......... $ 781,420
287,722 PL# A12350, 5.50%,
08/01/33................... 291,435
530,013 PL# A12533, 5.50%,
08/11/33................... 536,853
500,172 PL# A12800, 5.50%,
08/01/33................... 506,626
213,571 PL# A13331, 5.50%,
09/01/33................... 216,327
8,854,435 PL# A13669, 5.50%,
09/01/33................... 8,968,697
5,490,967 PL# C01623, 5.50%,
09/01/33................... 5,561,824
4,576,510 PL# C01648,
5.00%, 10/01/33(e)......... 4,521,155
14,468,151 PL# C01672, 6.00%,
10/01/33................... 14,962,302
7,651,608 PL# C57150, 6.00%,
05/01/31................... 7,912,711
178,736 PL# C63423, 6.00%,
02/01/32................... 184,835
13,258 PL# C67653, 7.00%,
06/01/32................... 14,032
394,386 PL# C67868, 7.00%,
06/01/32................... 417,411
69,657 PL# C67999, 7.00%,
06/01/32................... 73,724
535,349 PL# C68001, 7.00%,
06/01/32................... 566,604
427,163 PL# C90229, 7.00%,
08/01/18................... 453,209
11,366 PL# E84758, 5.50%,
07/01/16................... 11,790
621,533 PL# E86502, 5.50%,
12/01/16................... 644,680
11,591 PL# E86565, 5.50%,
12/01/16................... 12,022
1,533,839 PL# E88789, 6.00%,
04/01/17................... 1,610,032
314,638 PL# E88979, 5.50%,
04/01/17................... 326,449
1,883,957 PL# E90194, 6.00%,
06/01/17................... 1,977,542
2,666,532 PL# E90195, 6.00%,
06/01/17................... 2,798,991
1,898,443 PL# E91644, 5.50%,
10/01/17................... 1,969,704
480,482 PL# E91754, 5.50%,
10/01/17................... 498,518
2,362,081 PL# E91774, 5.50%,
10/01/17................... 2,450,745
182,114 PL# E91952, 5.50%,
10/01/17................... 188,950
496,263 PL# E91967, 5.50%,
10/01/17................... 514,891
403,352 PL# E91968, 5.50%,
10/01/17................... 418,492
647,134 PL# E92113, 5.50%,
10/01/17................... 671,425
5,731,512 PL# G01391, 7.00%,
04/01/32................... 6,066,119
1,015,602 PL# G01477, 6.00%,
12/01/32................... 1,050,258
--------------
83,737,594
--------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 2.4%
560,332 PL# 03173, 6.50%, 12/20/31... 590,115
6,442 PL# 434615, 7.00%,
11/15/29................... 6,873
832,522 PL# 435071, 7.00%,
03/15/31................... 887,799
125,156 PL# 462559, 7.00%,
02/15/28................... 133,642
149,788 PL# 483482, 6.50%,
09/15/28................... 158,201
78,096 PL# 493966, 7.00%,
06/15/29................... 83,313
146,054 PL# 494742, 7.00%,
04/15/29................... 155,809
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 4,512 PL# 530260, 7.00%,
02/15/31................... $ 4,812
5,466 PL# 538271, 7.00%,
11/15/31................... 5,829
239,812 PL# 538312, 6.00%,
02/15/32................... 249,565
894,629 PL# 543989, 7.00%,
03/15/31................... 954,030
7,603 PL# 547545, 7.00%,
04/15/31................... 8,108
1,394,988 PL# 550985, 7.00%,
10/15/31................... 1,487,610
4,302 PL# 551549, 7.00%,
07/15/31................... 4,588
199,223 PL# 552413, 7.00%,
02/15/32................... 212,373
184,259 PL# 552952, 6.00%,
12/15/32................... 191,753
462,847 PL# 553320, 6.00%,
06/15/33................... 481,592
5,851 PL# 557664, 7.00%,
08/15/31................... 6,239
516,291 PL# 557678, 7.00%,
08/15/31................... 550,571
6,625 PL# 561050, 7.00%,
05/15/31................... 7,065
5,217 PL# 561996, 7.00%,
07/15/31................... 5,563
70,479 PL# 563346, 7.00%,
09/15/31................... 75,159
586,442 PL# 563599, 7.00%,
06/15/32................... 625,151
533,350 PL# 564086, 7.00%,
07/15/31................... 568,762
70,810 PL# 564300, 6.00%,
08/15/31................... 73,664
679,069 PL# 564603, 6.50%,
08/15/31................... 716,520
39,314 PL# 564706, 7.00%,
07/15/31................... 41,925
388,883 PL# 569567, 7.00%,
01/15/32................... 414,552
694,316 PL# 569839, 6.50%,
06/15/32................... 732,230
4,222 PL# 579377, 7.00%,
04/15/32................... 4,501
1,367,469 PL# 581015, 7.00%,
02/15/32................... 1,457,731
101,153 PL# 581084, 7.00%,
02/15/32................... 107,829
160,664 PL# 581970, 6.50%,
04/15/32................... 169,437
95,559 PL# 582457, 6.00%,
10/15/32................... 99,445
598,826 PL# 582956, 7.00%,
02/15/32................... 638,353
511,533 PL# 585210, 6.00%,
03/15/33................... 532,250
1,082,219 PL# 587122, 7.00%,
06/15/32................... 1,153,652
75,611 PL# 587494, 7.00%,
06/15/32................... 80,602
7,019 PL# 589696, 7.00%,
05/15/32................... 7,482
636,363 PL# 592218, 6.00%,
12/15/32................... 662,245
654,176 PL# 592668, 6.50%,
04/15/33................... 689,910
1,537,784 PL# 593248, 6.00%,
10/15/32................... 1,600,327
19,762 PL# 593823, 6.00%,
10/15/32................... 20,566
157,242 PL# 595411, 6.00%,
09/15/32................... 163,637
277,216 PL# 598119, 6.50%,
02/15/33................... 292,359
511,968 PL# 598205, 6.00%,
05/15/33................... 532,703
345,727 PL# 598459, 6.00%,
11/15/32................... 359,789
23,611 PL# 599742, 6.00%,
10/15/32................... 24,571
178,930 PL# 603341, 6.00%,
12/15/32................... 186,207
827,815 PL# 603674, 6.00%,
05/15/33................... 861,342
</Table>
See notes to financial statements.
63
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 700,915 PL# 603922, 6.50%,
01/15/33................... $ 739,203
629,307 PL# 607812, 6.00%,
03/15/33................... 654,794
830,665 PL# 610913, 6.50%,
06/15/33................... 876,040
473,180 PL# 611537, 6.00%,
05/15/33................... 492,344
307,545 PL# 611880, 6.00%,
05/15/33................... 320,000
419,828 PL# 615382, 6.00%,
07/15/33................... 436,831
6,888,112 PL# 618874, 5.50%,
08/15/33................... 7,012,097
59,365 PL# 780802, 6.50%,
05/15/28................... 62,707
115,559 PL# 781113, 7.00%,
11/15/29................... 123,278
474,542 PL# 781148, 6.00%,
07/15/29................... 494,092
334,897 PL# 781276, 6.50%,
04/15/31................... 353,552
116,094 PL# 781287, 7.00%,
05/15/31................... 123,832
196,703 PL# 781324, 7.00%,
07/15/31................... 209,786
990,907 PL# 781328, 7.00%,
09/15/31................... 1,056,966
440,131 PL# 781330, 6.00%,
09/15/31................... 458,145
336,701 PL# 781548, 7.00%,
11/15/32................... 359,082
633,014 PL# 781561, 6.50%,
11/15/32................... 668,052
421,276 PL# 781566, 6.00%,
02/15/33................... 438,201
680,610 PL# 781577, 6.50%,
03/15/33................... 718,201
187,895 PL# 781584, 7.00%,
05/15/32................... 200,395
1,000,000 TBA, 5.50%, 01/01/34......... 1,016,875
--------------
35,892,824
--------------
RESOLUTION FUNDING STRIPS -- 0.1%
1,200,000 Zero coupon, 07/15/18........ 545,634
1,200,000 Zero coupon, 10/15/18........ 535,931
--------------
1,081,565
--------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $496,548,931)........ 499,276,328
--------------
CORPORATE BONDS AND NOTES -- 29.4%
AEROSPACE AND DEFENSE -- 0.4%
195,000 BE Aerospace -- 144A,
8.50%, 10/01/10............ 210,113
550,000 Lockheed Martin Corp.,
8.50%, 12/01/29............ 722,902
2,120,000 Lockheed Martin Corp.,
7.20%, 05/01/36............ 2,516,181
35,000 Northrop Grumman Corp.,
7.13%, 02/15/11............ 40,538
940,000 Northrop Grumman Corp.,
7.75%, 02/15/31............ 1,146,647
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
AEROSPACE AND DEFENSE (CONTINUED)
$ 1,530,000 Raytheon Company,
4.85%, 01/15/11............ $ 1,534,282
--------------
6,170,663
--------------
AIRLINES -- 0.1%
1,179,756 Continental Airlines, Inc.,
Series 974A,
6.90%, 01/02/18............ 1,165,972
--------------
AUTOMOBILES -- 0.7%
1,605,000 Daimler Chrysler AG Corp.,
7.45%, 03/01/27............ 1,712,895
2,095,000 Daimler Chrysler N.A.
Holding,
4.75%, 01/15/08............ 2,145,422
4,200,000 Daimler Chrysler N.A.
Holding,
4.05%, 06/04/08............ 4,175,577
2,750,000 Daimler Chrysler N.A.
Holding,
6.50%, 11/15/13............ 2,902,166
--------------
10,936,060
--------------
AUTOMOTIVE EQUIPMENT -- 0.1%
810,000 Collins & Aikman Products,
10.75%, 12/31/11........... 799,875
425,000 Dura Operating Corp., Series
B,
8.63%, 04/15/12............ 454,750
--------------
1,254,625
--------------
BANKS -- 2.3%
2,050,000 ANZ Capital Trust I -- 144A,
4.48%, perpetual........... 2,069,621
3,120,000 ANZ Capital Trust I -- 144A,
5.36%, perpetual........... 3,121,554
535,000 Bank of America Corp.,
7.40%, 01/15/11............ 628,344
3,550,000 Bank of America Corp.,
3.88%, 01/15/08(k)......... 3,622,651
3,300,000 Bank of America Corp.,
4.38%, 12/01/10............ 3,313,213
4,790,000 Barclays Bank PLC -- 144A,
Floating Rate, 8.55%(c),
perpetual(k)............... 5,895,042
350,000 HSBC Holdings PLC,
5.25%, 12/12/12............ 359,057
475,000 JP Morgan Chase & Company,
5.25%, 05/30/07............ 507,421
1,100,000 JP Morgan Chase & Company,
7.00%, 11/15/09............ 1,269,346
935,000 JP Morgan Chase & Company,
6.75%, 02/01/11............ 1,055,800
</Table>
See notes to financial statements.
64
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 800,000 Rabobank Capital
Funding II -- 144A,
5.26%, perpetual........... $ 802,958
500,000 Sovereign Bancorp,
10.50%, 11/15/06........... 591,747
2,275,000 Swedish Export Credit,
2.88%, 01/26/07............ 2,288,243
490,000 U.S. Bancorp, Series MTNN,
3.95%, 08/23/07............ 504,591
3,875,000 UBS Preferred Funding Trust
I, Variable Rate,
8.62%(l), perpetual........ 4,783,986
2,150,000 Wells Fargo Bank NA, Series
BKNT, Variable Rate,
7.80%(l), 06/15/10......... 2,321,456
--------------
33,135,030
--------------
BROADCAST SERVICES/MEDIA -- 1.7%
2,450,000 AOL Time Warner, Inc.,
7.63%, 04/15/31............ 2,837,281
2,695,000 British Sky Broadcasting,
6.88%, 02/23/09............ 3,029,083
1,720,000 Charter Communications
Holdings LLC,
10.75%, 10/01/09........... 1,586,700
245,000 Charter Communications
Holdings LLC,
11.13%, 01/15/11(a)........ 226,013
250,000 Comcast Cable Communications,
Inc.,
6.38%, 01/30/06............ 269,294
1,055,000 Comcast Cable Communications,
Inc.,
6.88%, 06/15/09............ 1,190,980
1,100,000 Comcast Corp.,
5.85%, 01/15/10............ 1,176,277
2,020,000 Continental Cablevision,
8.30%, 05/15/06............ 2,266,258
895,000 CSC Holdings, Inc.,
7.88%, 02/15/18............ 959,888
645,000 DirecTV Holdings,
8.38%, 03/15/13............ 751,425
550,000 News America Holdings,
8.88%, 04/26/23............ 706,899
825,000 News America Holdings,
7.63%, 11/30/28............ 958,516
725,000 TCI Communications, Inc.,
7.88%, 02/15/26............ 850,031
1,695,000 TCI Communications, Inc.,
7.13%, 02/15/28............ 1,843,701
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 620,000 Time Warner, Inc.,
6.88%, 06/15/18............ $ 683,725
865,000 Time Warner, Inc.,
9.15%, 02/01/23............ 1,122,291
610,000 Time Warner, Inc.,
6.95%, 01/15/28............ 653,841
2,420,000 Time Warner, Inc.,
6.63%, 05/15/29............ 2,496,249
685,000 Vivendi Universal SA -- 144A,
6.25%, 07/15/08............ 728,669
--------------
24,337,121
--------------
CHEMICALS -- 0.4%
555,000 Crown Euro Holdings SA,
9.50%, 03/01/11............ 631,313
500,000 Crown Euro Holdings SA,
10.88%, 03/01/13........... 590,625
970,000 Dow Chemical Company,
6.00%, 10/01/12............ 1,022,794
2,490,000 Dow Chemical Company,
7.38%, 11/01/29............ 2,792,716
100,000 Lyondell Chemical Company,
9.50%, 12/15/08............ 105,000
395,000 Nalco Company -- 144A,
7.75%, 11/15/11............ 424,625
--------------
5,567,073
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.4%
415,000 Ainsworth Lumber Company,
Ltd.,
13.88%, 07/15/07........... 479,325
775,000 Beazer Homes USA,
8.38%, 04/15/12............ 858,313
410,000 D.R. Horton, Inc.,
10.50%, 04/01/05........... 446,900
600,000 D.R. Horton, Inc.,
6.88%, 05/01/13............ 642,000
520,000 K. Hovnanian Enterprises,
6.50%, 01/15/14............ 520,650
1,020,000 NVR, Inc.,
5.00%, 06/15/10............ 1,004,700
1,800,000 Ryland Group,
8.00%, 08/15/06............ 1,970,999
165,000 Ryland Group,
5.38%, 06/01/08............ 170,775
375,000 Ryland Group,
9.13%, 06/15/11............ 430,313
--------------
6,523,975
--------------
</Table>
See notes to financial statements.
65
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER GOODS AND SERVICES -- 0.2%
$ 3,595,000 General Electric Company,
5.00%, 02/01/13............ $ 3,642,335
--------------
CONTAINERS AND PACKAGING -- 0.1%
1,125,000 Owens-Brockway Glass
Containers,
8.75%, 11/15/12............ 1,258,594
--------------
ELECTRONICS -- 0.2%
785,000 Flextronics International,
Ltd.,
6.50%, 05/15/13............ 816,400
175,000 L-3 Communications Corp.,
6.13%, 07/15/13............ 177,188
2,285,000 L-3 Communications
Corp. -- 144A,
6.13%, 01/15/14............ 2,302,137
--------------
3,295,725
--------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.1%
515,000 Allied Waste North America
Industries, Inc.,
7.88%, 04/15/13............ 560,062
285,000 Allied Waste North America
Industries, Inc.,
7.40%, 09/15/35............ 271,463
425,000 Allied Waste North America
Industries, Inc., Series B,
8.88%, 04/01/08............ 478,125
300,000 Allied Waste North America
Industries, Inc., Series B,
9.25%, 09/01/12............ 342,000
--------------
1,651,650
--------------
FINANCIAL SERVICES -- 4.7%
1,000,000 Bear Stearns Companies, Inc.,
2.88%, 07/02/08............ 968,916
3,490,000 Citigroup, Inc.,
5.75%, 05/10/06............ 3,758,109
8,300,000 Citigroup, Inc.,
3.50%, 02/01/08............ 8,338,951
3,095,000 Citigroup, Inc.,
7.25%, 10/01/10............ 3,612,314
865,000 Citigroup, Inc.,
5.88%, 02/22/33............ 853,057
2,790,000 Credit Suisse First Boston
USA, Inc.,
3.88%, 01/15/09............ 2,789,827
1,675,000 Credit Suisse First Boston
USA, Inc.,
6.13%, 11/15/11............ 1,826,490
2,000,000 General Electric Capital
Corp., Series MTNA,
6.50%, 12/10/07............ 2,239,850
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 4,710,000 General Electric Capital
Corp., Series MTNA,
6.13%, 02/22/11............ $ 5,189,092
3,560,000 General Electric Capital
Corp., Series MTNA,
5.88%, 02/15/12............ 3,832,258
550,000 General Electric Capital
Corp., Series MTNA,
6.75%, 03/15/32............ 610,941
710,000 General Motors Acceptance
Corp.,
7.25%, 03/02/11............ 780,044
3,395,000 General Motors Acceptance
Corp.,
6.88%, 09/15/11............ 3,662,339
270,000 Goldman Sachs Group, Inc.,
7.35%, 10/01/09............ 315,270
1,195,000 Goldman Sachs Group, Inc.,
6.88%, 01/15/11............ 1,358,972
880,000 Goldman Sachs Group, Inc.,
6.60%, 01/15/12............ 984,980
4,225,000 Goldman Sachs Group, Inc.,
5.25%, 10/15/13............ 4,273,680
1,135,000 Goldman Sachs Group, Inc.,
6.13%, 02/15/33............ 1,146,880
450,000 Household Finance Corp.,
7.20%, 07/15/06............ 500,781
1,200,000 Household Finance Corp.,
6.75%, 05/15/11............ 1,352,879
2,915,000 Household Finance Corp.,
6.38%, 10/15/11............ 3,214,921
2,825,000 Household Finance Corp.,
7.00%, 05/15/12............ 3,226,740
2,245,000 Household Finance Corp.,
4.75%, 07/15/13............ 2,187,600
850,000 Household Finance Corp.,
7.63%, 05/17/32............ 1,031,045
1,495,000 JP Morgan Chase & Company,
3.63%, 05/01/08............ 1,499,495
1,315,000 JP Morgan Chase & Company,
4.50%, 11/15/10............ 1,327,393
1,583,000 Lehman Brothers Holdings,
Inc.,
7.00%, 02/01/08............ 1,789,504
1,300,000 Morgan Stanley,
6.10%, 04/15/06............ 1,407,509
1,385,000 Morgan Stanley,
5.80%, 04/01/07............ 1,506,586
1,395,000 Morgan Stanley,
6.75%, 04/15/11............ 1,580,635
</Table>
See notes to financial statements.
66
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 545,000 SLM Corp., Series MTN,
3.63%, 03/17/08............ $ 543,198
1,600,000 SLM Corp., Series MTN,
5.63%, 08/01/33............ 1,523,142
--------------
69,233,398
--------------
FOOD AND BEVERAGE -- 0.9%
750,000 Cadbury Schweppes -- 144A,
5.13%, 10/01/13............ 746,530
1,000,000 Diageo Capital PLC,
3.50%, 11/19/07............ 1,009,528
915,000 Diageo Capital PLC,
3.38%, 03/20/08............ 909,909
1,100,000 General Mills, Inc.,
5.13%, 02/15/07............ 1,169,323
1,385,000 Kellogg Company, Series B,
6.60%, 04/01/11............ 1,554,422
6,750,000 Kraft Foods, Inc.,
5.63%, 11/01/11............ 7,123,369
--------------
12,513,081
--------------
FUNERAL SERVICES -- 0.0%
260,000 Service Corp. International,
7.70%, 04/15/09............ 278,850
--------------
INSURANCE -- 0.9%
540,000 American General Capital II,
8.50%, 07/01/30............ 704,681
510,000 Americo Life, Inc. -- 144A,
7.88%, 05/01/13............ 511,275
4,830,000 ASIF Global Financial
XXIII -- 144A,
3.90%, 10/22/08............ 4,880,122
1,150,000 ASIF Global
Financing -- 144A,
3.85%, 11/26/07............ 1,169,982
880,000 Fund American Companies,
Inc.,
5.88%, 05/15/13............ 892,259
625,000 MetLife, Inc.,
6.50%, 12/15/32............ 664,956
725,000 Pacific Life Corp. -- 144A,
6.60%, 09/15/33............ 768,227
1,980,000 Protective Life Secured
Trust, Series MTN,
3.70%, 11/24/08............ 1,975,895
1,135,000 Prudential Financial, Inc.,
Series MTNB,
5.75%, 07/15/33............ 1,075,710
1,100,000 Prudential Insurance
Company -- 144A,
6.38%, 07/23/06............ 1,198,967
--------------
13,842,074
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
MANUFACTURING -- 0.5%
$ 1,375,000 Briggs & Stratton Corp.,
8.88%, 03/15/11............ $ 1,622,500
295,000 Dresser, Inc.,
9.38%, 04/15/11............ 322,288
420,000 Tyco International Group SA,
6.38%, 06/15/05............ 444,150
1,025,000 Tyco International Group SA,
6.38%, 02/15/06............ 1,096,750
526,000 Tyco International Group SA,
5.80%, 08/01/06............ 558,875
2,140,000 Tyco International Group SA,
6.13%, 01/15/09(a)......... 2,300,499
255,000 Tyco International Group SA,
6.75%, 02/15/11............ 279,863
--------------
6,624,925
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.2%
370,000 HCA, Inc.,
6.95%, 05/01/12............ 397,349
370,000 HCA, Inc.,
6.25%, 02/15/13............ 379,389
1,080,000 HCA, Inc.,
7.50%, 11/06/33............ 1,129,644
350,000 United Surgical Partners,
Inc.,
10.00%, 12/15/11........... 399,000
--------------
2,305,382
--------------
METALS AND MINING -- 0.1%
1,275,000 Alcan, Inc.,
6.13%, 12/15/33............ 1,287,170
--------------
OIL AND GAS: PIPELINES -- 0.6%
1,425,000 Consolidated Natural Gas,
Series A,
5.00%, 03/01/14............ 1,419,075
955,000 Dynegy Holdings,
Inc. -- 144A,
10.13%, 07/15/13........... 1,103,025
365,000 El Paso Natural Gas,
8.38%, 06/15/32............ 374,855
490,000 El Paso Production
Holdings -- 144A,
7.75%, 06/01/13............ 485,100
965,000 Gulfterra Energy Partner,
6.25%, 06/01/10............ 1,008,425
134,000 Gulfterra Energy
Partner -- 144A,
10.63%, 12/01/12........... 166,830
1,085,000 Kinder Morgan Energy
Partners,
7.30%, 08/15/33............ 1,236,898
110,000 Kinder Morgan, Inc.,
7.25%, 03/01/28............ 122,743
</Table>
See notes to financial statements.
67
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES (CONTINUED)
$ 825,000 Tennessee Gas Pipeline,
7.50%, 04/01/17............ $ 855,938
370,000 Williams Companies, Inc.,
7.13%, 09/01/11............ 393,125
1,470,000 Williams Companies, Inc.,
8.13%, 03/15/12............ 1,639,050
--------------
8,805,064
--------------
OIL, COAL AND GAS -- 1.0%
1,225,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31............ 1,439,609
1,710,000 Anadarko Petroleum Corp,
5.38%, 03/01/07............ 1,829,416
1,205,000 Conoco Funding Company,
6.35%, 10/15/11............ 1,353,097
2,085,000 Conoco, Inc.,
6.95%, 04/15/29............ 2,371,952
605,000 Devon Energy Corp.,
7.95%, 04/15/32............ 731,778
2,160,000 EnCana Corp.,
4.75%, 10/15/13............ 2,134,423
950,000 Gazprom OAO,
9.63%, 03/01/13............ 1,053,008
1,240,000 Gazprom OAO -- 144A,
9.63%, 03/01/13............ 1,373,300
600,000 Hanover Equipment Trust,
Series B,
8.75%, 09/01/11............ 639,000
465,000 Massey Energy Company,
6.95%, 03/01/07............ 478,950
505,000 Occidental Petroleum,
8.45%, 02/15/29............ 664,016
700,000 Suncor Energy, Inc.,
5.95%, 12/01/34............ 697,792
250,000 Valero Energy Corp.,
7.50%, 04/15/32............ 279,487
--------------
15,045,828
--------------
PAPER AND FOREST PRODUCTS -- 0.4%
290,000 Boise Cascade Company,
6.50%, 11/01/10............ 302,932
920,000 Caraustar Industries, Inc.,
7.38%, 06/01/09............ 970,600
565,000 Georgia-Pacific Corp.,
8.88%, 02/01/10............ 646,925
1,735,000 Georgia-Pacific
Corp. -- 144A,
8.00%, 01/15/24............ 1,778,375
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PAPER AND FOREST PRODUCTS (CONTINUED)
$ 1,375,000 Weyerhaeuser Company,
6.95%, 10/01/27............ $ 1,423,286
1,220,000 Weyerhaeuser Company,
6.88%, 12/15/33............ 1,257,808
--------------
6,379,926
--------------
PHARMACEUTICALS -- 0.2%
1,100,000 Bristol-Myers Squibb,
6.88%, 08/01/97............ 1,208,621
1,775,000 Wyeth,
5.50%, 02/01/14............ 1,798,711
--------------
3,007,332
--------------
PRIVATE ASSET BACKED: AUTOMOBILES -- 0.6%
8,000,000 Daimler Chrysler Auto Trust,
Series 01-C, Class A4,
4.63%, 12/06/06............ 8,233,732
--------------
PRIVATE ASSET BACKED: BANKS -- 0.3%
3,466,491 Banc of America Funding
Corp., Series 2003-1, Class
A1,
6.00%, 05/20/33............ 3,510,628
1,304,540 Washington Mutual MSC, Series
2002-MS12, Class A,
6.50%, 05/25/32............ 1,346,261
--------------
4,856,889
--------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 1.2%
11,500,000 MBNA Credit Card Master Note
Trust, Series 2003-A6,
Class A6,
2.75%, 10/15/10............ 11,198,642
6,050,000 Sears Credit Account Master
Trust, Series 2002-5, Class
A, Floating Rate,
1.54%(d), 11/17/09......... 6,062,205
--------------
17,260,847
--------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 0.9%
9,800,000 Countrywide Alternative Loan
Trust,
5.00%, 02/15/04............ 9,836,750
2,980,000 Morgan Stanley Capital I,
Series 1999-FNV1, Class A2,
6.53%, 03/15/31............ 3,329,014
--------------
13,165,764
--------------
</Table>
See notes to financial statements.
68
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 4.2%
$ 1,908,222 Bear Stearns Commercial
Mortgage Securities, Series
2001, Class A1,
6.08%, 02/15/35............ $ 2,061,927
4,875,000 DLJ Commercial Mortgage
Corp., Series 2000-CKP1,
Class A1B,
7.18%, 08/10/10............ 5,527,293
6,150,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33............ 6,979,487
14,665,037 GSR Mortgage Loan Trust,
Series 2003-13, Class 1A1,
4.53%, 10/25/33............ 14,626,174
6,650,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIB2, Class A3,
6.43%, 04/15/35............ 7,423,118
7,425,000 LB Commercial Conduit
Mortgage Trust, Series
1998-C4, Class A1B,
6.21%, 10/15/35............ 8,192,573
6,900,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C3,
Class A2,
7.95%, 01/15/10............ 8,239,776
8,710,000 Wachovia Bank Commercial
Mortgage Trust, Series
2003-C8, Class A4,
4.96%, 11/15/35............ 8,763,304
--------------
61,813,652
--------------
PRIVATE ASSET BACKED: OTHER -- 1.3%
4,158,208 Impac Secured Assets Common
Owner Trust, Series 2003-2,
Class A2,
6.00%, 08/25/33............ 4,335,486
2,949,480 SLM Student Loan Trust,
Series 2002-1, Class A1,
Floating Rate,
1.19%(c), 10/25/10......... 2,953,226
3,712,493 Small Business
Administration, Series
2002-P10B, Class 1,
5.20%, 08/01/12............ 3,746,306
7,892,201 Structured Asset Securities
Corp., Series 2003-AL2,
Class A,
3.36%, 01/25/31............ 7,573,059
--------------
18,608,077
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: UTILITIES -- 0.6%
$ 8,000,000 Peco Energy Transition Trust,
Series 2000-A, Class A4,
7.65%, 03/01/10............ $ 9,417,665
--------------
REAL ESTATE -- 0.0%
505,000 EOP Operating LP,
7.50%, 04/19/29............ 566,864
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.3%
910,000 AvalonBay Communities, Series
MTN,
6.63%, 09/15/11............ 1,009,220
295,000 Host Marriott LP -- 144A,
7.13%, 11/01/13............ 302,375
315,000 Mandalay Resort Group, Series
B,
10.25%, 08/01/07........... 365,400
1,230,000 Mohegan Tribal Gaming,
6.38%, 07/15/09............ 1,276,125
825,000 Park Place Entertainment,
8.88%, 09/15/08............ 936,375
220,000 Park Place Entertainment,
7.00%, 04/15/13............ 235,950
--------------
4,125,445
--------------
RETAIL -- 0.1%
1,195,000 Wal-Mart Stores,
7.55%, 02/15/30............ 1,475,348
--------------
RETAIL: SUPERMARKETS -- 0.2%
1,025,000 Kroger Company,
6.75%, 04/15/12............ 1,137,544
1,300,000 Kroger Company,
6.20%, 06/15/12............ 1,396,590
400,000 Kroger Company, Series B,
7.70%, 06/01/29............ 468,474
--------------
3,002,608
--------------
SPECIAL PURPOSE ENTITY -- 0.2%
1,000,000 California Preferred Fund
Trust,
7.00%, perpetual........... 1,015,062
800,000 Camp Pendelton/
Quantico -- 144A,
5.94%, 10/01/43............ 801,744
1,825,000 Principal Life
Global -- 144A,
5.25%, 01/15/13............ 1,851,828
--------------
3,668,634
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.6%
1,390,000 British Telecom PLC, Variable Rate,
8.88%, 12/15/30(l)........... 1,824,133
</Table>
See notes to financial statements.
69
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 450,000 Crown Castle International
Corp. -- 144A,
7.50%, 12/01/13............ $ 454,500
345,000 Deutsche Telekom,
8.50%, 06/15/10(l)......... 417,785
1,325,000 Deutsche Telekom
International Corp.,
8.25%, 06/15/05(l)......... 1,437,894
2,015,000 Deutsche Telekom
International Finance,
8.75%, 06/15/30(l)......... 2,583,214
2,350,000 New England Telephone &
Telegraph,
7.88%, 11/15/29............ 2,817,775
970,000 New Jersey Bell Telephone,
7.85%, 11/15/29............ 1,152,982
80,000 Panamsat Corp.,
8.50%, 02/01/12............ 89,200
980,000 Qwest Capital Funding Corp.,
7.75%, 08/15/06............ 1,019,200
625,000 Qwest Capital Funding Corp.,
7.00%, 08/03/09............ 623,438
500,000 Qwest Corp. -- 144A,
9.13%, 03/15/12(l)......... 576,250
2,300,000 Verizon New Jersey, Inc.,
Series A,
5.88%, 01/17/12............ 2,446,892
900,000 Verizon Pennsylvania, Series
A,
5.65%, 11/15/11............ 945,743
5,205,000 Vodafone Group PLC,
5.00%, 12/16/13............ 5,195,557
2,290,000 WorldCom, Inc.,
6.40%, 08/15/05(f)......... 772,875
1,620,000 WorldCom, Inc.,
8.00%, 05/15/06(f)......... 546,750
140,000 WorldCom, Inc.,
7.50%, 05/15/11(f)......... 47,250
1,960,000 WorldCom, Inc.,
8.25%, 05/15/31(f)......... 661,500
--------------
23,612,938
--------------
TRANSPORTATION: FREIGHT -- 0.2%
1,350,000 Burlington Northern Santa Fe
Corp.,
7.29%, 06/01/36............ 1,606,859
1,705,000 Canadian National Railway
Company,
6.90%, 07/15/28............ 1,912,079
--------------
3,518,938
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TRANSPORTATION: SERVICES -- 0.1%
$ 540,000 Omi Corp. -- 144A,
7.63%, 12/01/13............ $ 547,425
605,000 Overseas Shipholding Group,
8.25%, 03/15/13............ 651,131
300,000 Overseas Shipholding Group,
8.75%, 12/01/13............ 330,375
--------------
1,528,931
--------------
UTILITIES -- 0.1%
325,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12........... 364,813
330,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10........... 402,600
--------------
767,413
--------------
UTILITIES: ELECTRIC -- 1.3%
1,665,000 AES Corp. -- 144A,
8.75%, 05/15/13............ 1,868,963
1,735,000 Calpine Corp. -- 144A,
8.50%, 07/15/10............ 1,700,300
1,235,000 Dominion Resources, Inc.,
Series E,
6.75%, 12/15/32............ 1,325,428
1,970,000 DTE Energy Corp.,
6.45%, 06/01/06............ 2,130,882
725,000 Edison Mission Energy,
7.73%, 06/15/09............ 694,188
1,485,000 First Energy Corp., Series C,
7.38%, 11/15/31............ 1,524,569
690,000 Midwest Generation LLC,
Series A,
8.30%, 07/02/09............ 720,213
920,000 Midwest Generation LLC,
Series B,
8.56%, 01/02/16............ 960,662
2,725,000 Ohio Edison -- 144A,
5.45%, 05/01/15............ 2,639,512
825,000 Oncor Electric Delivery,
6.38%, 01/15/15............ 898,680
925,000 Oncor Electric Delivery,
7.25%, 01/15/33............ 1,055,691
765,000 Progress Energy, Inc.,
7.00%, 10/30/31............ 821,888
</Table>
See notes to financial statements.
70
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
$ 1,800,000 SP PowerAssets, Ltd. -- 144A,
5.00%, 10/22/13............ $ 1,813,739
450,000 Virginia Electric & Power,
5.25%, 12/15/15............ 452,538
--------------
18,607,253
--------------
TOTAL CORPORATE BONDS AND
NOTES (Cost
$426,846,993).............. 432,492,851
--------------
MUNICIPAL BONDS -- 1.0%
CALIFORNIA -- 0.1%
1,575,000 California State Department
of Water Powersupply
Revenue Bond, Series E,
3.98%, 05/01/05............ 1,600,405
--------------
ILLINOIS -- 0.8%
13,000,000 Illinois State Pension,
General Obligation,
5.10%, 06/01/33............ 11,953,110
--------------
WISCONSIN -- 0.1%
1,125,000 Wisconsin State General
Revenue Bond, Series A,
5.70%, 05/01/26............ 1,143,619
--------------
TOTAL MUNICIPAL BONDS
(Cost $15,696,421)......... 14,697,134
--------------
FOREIGN GOVERNMENT OBLIGATIONS -- 14.4%
9,700,000 AID-Israel,
5.50%, 09/18/23............ 9,848,934
47,825,000 Bonos Y Obligation Del
Estado,
6.00%, 01/31/08(h)......... 66,397,223
41,195,000 Bundesobligation, Series 142,
3.00%, 04/11/08(h)......... 51,104,082
23,975,000 Canadian Government,
5.25%, 06/01/13(j)......... 19,408,422
27,090,000 French Treasury Note,
3.50%, 01/12/08(h)......... 34,348,123
51,780,000 Government of Sweden,
5.00%, 01/28/09(i)......... 7,484,328
32,255,000 Government of Sweden, Series
1037,
8.00%, 08/15/07(i)......... 5,114,504
625,000 Province of Quebec, Series A,
7.37%, 03/06/26(g)......... 752,109
1,120,000 Province of Quebec, Series
MTNA,
7.38%, 04/09/26............ 1,342,354
1,225,000 Province of Quebec, Series
NJ,
7.50%, 07/15/23............ 1,507,241
2,997,753 Republic of Colombia,
9.75%, 04/09/11............ 3,417,438
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 1,000,000 United Mexican States,
4.63%, 10/08/08............ $ 1,015,000
2,295,000 United Mexican States,
8.38%, 01/14/11............ 2,731,050
4,880,000 United Mexican States,
8.13%, 12/30/19............ 5,465,600
1,115,000 United Mexican States,
8.00%, 09/24/22............ 1,222,598
--------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $199,398,533)........ 211,159,006
--------------
PREFERRED CORPORATE BONDS & NOTES -- 0.2%
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
2,000,000 TCI Communications
Financing III,
9.65%, 03/31/27 (Cost
$2,153,389)................ 2,420,000
--------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 4.1%
FANNIE MAE -- 0.2%
3,091,748 1.06%, 01/02/04(b)........... 3,091,748
--------------
FEDERAL HOME LOAN BANK -- 3.8%
27,400,000 0.75%, 01/02/04.............. 27,399,429
28,425,000 1.02%, 01/14/04.............. 28,414,530
--------------
55,813,959
--------------
FREDDIE MAC -- 0.1%
1,552,502 1.06%, 01/27/04(b)........... 1,552,502
--------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY
SECURITIES
(Cost $60,458,209)......... 60,458,209
--------------
TIME DEPOSITS -- 5.7%
14,226,436 Bank of Montreal,
1.06%, 01/15/04(b)......... 14,226,436
6,210,009 Bank of Montreal,
1.06%, 02/17/04(b)......... 6,210,009
7,762,513 Bank of Novia Scotia,
1.08%, 03/10/04(b)......... 7,762,513
4,657,507 Citigroup, Inc.,
1.08%, 01/05/04(b)......... 4,657,507
2,328,754 Citigroup, Inc.,
1.09%, 02/06/04(b)......... 2,328,754
4,657,507 Credit Agricole Indosuez,
0.98%, 01/02/04(b)......... 4,657,507
4,657,507 Credit Agricole Indosuez,
1.08%, 01/28/04(b)......... 4,657,507
6,210,009 Den Danske Bank,
1.08%, 01/20/04(b)......... 6,210,009
</Table>
See notes to financial statements.
71
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
TIME DEPOSITS (CONTINUED)
$ 7,762,512 Royal Bank of Canada,
1.05%, 02/27/04(b)......... $ 7,762,512
3,881,256 Royal Bank of Scotland,
1.08%, 01/09/04(b)......... 3,881,256
1,552,502 Royal Bank of Scotland,
1.08%, 01/15/04(b)......... 1,552,502
11,643,768 Royal Bank of Scotland,
1.08%, 01/20/04(b)......... 11,643,768
3,881,256 Svenska Handlesbanken,
1.08%, 02/04/04(b)......... 3,881,256
1,552,503 Toronto Dominion Bank,
1.10%, 01/08/04(b)......... 1,552,503
2,328,754 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)......... 2,328,754
--------------
TOTAL TIME DEPOSITS
(Cost $83,312,793)......... 83,312,793
--------------
SHORT TERM CORPORATE NOTES -- 2.7%
1,552,502 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)..... 1,552,502
1,552,502 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)..... 1,552,502
3,881,256 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)..... 3,881,256
3,105,005 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)..... 3,105,005
3,881,256 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)..... 3,881,256
6,210,009 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)..... 6,210,009
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SHORT TERM CORPORATE NOTES (CONTINUED)
$10,091,265 Morgan Stanley, Floating
Rate,
1.05%(**), 06/14/04(b)..... $ 10,091,265
2,328,754 Morgan Stanley, Floating
Rate,
1.05%(**), 06/21/04(b)..... 2,328,754
7,762,512 Morgan Stanley, Floating
Rate,
1.05%(**), 09/10/04(b)..... 7,762,512
--------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $40,365,061)... 40,365,061
--------------
<Caption>
SHARES
------
REGULATED INVESTMENT COMPANIES -- 0.8%
5,433,758 American Aadvantage
Select(b).................. 5,433,758
1,682,176 Merrill Lynch Premier
Institutional Fund(b)...... 1,682,176
4,657,507 Merrimac Cash Fund -- Premium
Class(b)................... 4,657,507
--------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $11,773,441)......... 11,773,441
--------------
<Caption>
PRINCIPAL
---------
SHORT TERM COMMERCIAL PAPER -- 0.2%
$ 1,694,356 General Electric Capital
Corp.,
1.09%, 01/09/04(b)......... 1,694,356
1,552,502 General Electric Capital
Corp.,
1.08%, 01/16/04(b)......... 1,552,502
--------------
TOTAL SHORT TERM COMMERCIAL
PAPER (Cost $3,246,858).... 3,246,858
--------------
TOTAL SECURITIES
(Cost $1,642,694,609)...... 1,661,686,950
--------------
</Table>
See notes to financial statements.
72
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 5.9%
$17,077,526 With Goldman Sachs Group,
Inc., dated 12/31/03,
1.04%, due 01/02/04,
repurchase proceeds at
maturity $17,078,513
(Collateralized by
Archer-Daniels-Midland
Company, 8.88%, due
04/15/11, with a value of
$3,569,049, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$3,503,460, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value
of $5,566,779, Morgan
Stanley, 6.75%, due
04/15/11, with a value of
$1,392,872, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $3,386,917)(b).... $ 17,077,526
10,504,538 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $10,504,801
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 4.54%, due
02/01/33, with a value of
$11,029,765)............... 10,504,538
59,495,462 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $59,496,949
(Collateralized by U.S.
Treasury Bond, 8.00%, due
11/15/21, with a value of
$60,744,921)............... 59,495,462
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $87,077,526)......... 87,077,526
--------------
SECURITIES SOLD SHORT -- (0.3)%
5,200,000 Fannie Mae Gold, TBA,
5.00%, 01/01/04 (Proceeds
$5,063,319)................ (5,117,122)
--------------
<Caption>
CONTRACTS
---------
CALL OPTIONS WRITTEN -- 0.0%
9,625,000 Fannie Mae Gold Expiring
February 2004 @ 96.968,
5.00%, 02/05/04............ (40,618)
278 US Treasury Note (10 Year)
March Future, Expiring
February 2004 @ 110, zero
coupon, 02/21/04........... (191,125)
--------------
TOTAL CALL OPTIONS WRITTEN
(Premium $444,723)......... (231,743)
--------------
</Table>
<Table>
<Caption>
VALUE
--------------
Total Investments -- 118.7%
(Cost $1,724,264,093)...... $1,743,415,611
Liabilities less other
assets -- (18.7)%.......... (274,628,604)
--------------
NET ASSETS -- 100.0%......... $1,468,787,007
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $1,731,496,626.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.............. $ 27,928,917
Gross unrealized depreciation.............. (10,661,067)
------------
Net unrealized appreciation................ $ 17,267,850
============
</Table>
- ---------------
<Table>
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral
received for securities loaned.
(c) Quarterly reset provision. The rate shown was in
effect at December 31, 2003.
(d) Monthly reset provision. The rate shown was in
effect at December 31, 2003.
(e) Security is segregated as collateral for written
options and short sales.
(f) Bond is in default.
(g) Step bond. The rate shown was in effect at
December 31, 2003.
(h) Principal amount shown for this debt security is
denominated in Euros.
(i) Principal amount shown for this debt security is
denominated in Swedish Krona.
(j) Principal amount shown for this debt security is
denominated in Canadian dollars.
(k) Security is segregated as initial margin for
futures contracts.
(l) Variable Rate Security. Interest rate based on the
credit rating of the issuer. The rate shown was in
effect at December 31, 2003.
** Variable Rate Security. The rate shown was in
effect at December 31, 2003.
TBA To be assigned. Securities are purchased on a
forward commitment basis with approximate
principal amount (generally +/- 1.0%) and general
stated maturity date. The actual principal amount
and maturity date will be determined upon
settlement when the specific mortgage pools are
assigned.
</Table>
See notes to financial statements.
73
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 64.7%
ADVERTISING -- 0.2%
12,900 Interpublic Group of Companies,
Inc.*(a)..................... $ 201,240
7,600 Omnicom Group, Inc. ........... 663,708
------------
864,948
------------
AEROSPACE AND DEFENSE -- 0.9%
22,100 Boeing Company................. 931,294
8,100 General Dynamics Corp. ........ 732,159
2,800 Goodrich Corp. ................ 83,132
11,550 Lockheed Martin Corp. ......... 593,670
19,000 United Technologies Corp. ..... 1,800,630
------------
4,140,885
------------
AGRICULTURE -- 0.1%
10,900 Monsanto Company............... 313,702
------------
AIRLINES -- 0.0%
8,200 Southwest Airlines Company..... 132,348
------------
APPAREL: MANUFACTURING -- 0.3%
5,450 Jones Apparel Group, Inc. ..... 192,004
2,750 Liz Claiborne, Inc. ........... 97,515
15,250 Nike, Inc. -- Class B.......... 1,044,015
2,200 Reebok International,
Ltd.(a)...................... 86,504
------------
1,420,038
------------
APPAREL: RETAIL -- 0.4%
16,950 Limited Brands................. 305,609
53,950 The Gap, Inc.(a)............... 1,252,179
------------
1,557,788
------------
AUTOMOBILE: RETAIL -- 0.0%
10,750 AutoNation, Inc.*.............. 197,478
------------
AUTOMOBILES -- 0.2%
14,200 General Motors Corp.(a)........ 758,280
------------
AUTOMOTIVE EQUIPMENT -- 0.1%
2,400 Johnson Controls, Inc. ........ 278,688
------------
BANKS -- 5.6%
9,500 AmSouth Bancorp................ 232,750
50,950 Bank of America Corp. ......... 4,097,908
19,950 Bank of New York Company,
Inc. ........................ 660,744
30,250 Bank One Corp. ................ 1,379,098
5,650 BB&T Corp. .................... 218,316
6,048 Charter One Financial, Inc. ... 208,958
4,500 First Tennessee National
Corp. ....................... 198,450
27,250 FleetBoston Financial Corp. ... 1,189,463
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
4,300 Golden West Financial Corp. ... $ 443,717
5,650 Huntington Bancshares, Inc. ... 127,125
98,300 J.P. Morgan Chase & Company.... 3,610,558
10,350 KeyCorp........................ 303,462
5,700 Marshall & Ilsley Corp. ....... 218,025
10,900 Mellon Financial Corp. ........ 349,999
16,300 National City Corp. ........... 553,222
3,850 North Fork Bancorp, Inc. ...... 155,810
5,550 Northern Trust Corp. .......... 257,631
7,400 PNC Financial Services Group... 405,002
5,900 Regions Financial Corp. ....... 219,480
13,600 SouthTrust Corp. .............. 445,128
8,900 State Street Corp. ............ 463,512
7,400 SunTrust Banks, Inc. .......... 529,100
49,282 U.S. Bancorp................... 1,467,618
5,400 Union Planters Corp. .......... 170,046
67,050 Wachovia Corp. ................ 3,123,859
24,000 Washington Mutual, Inc. ....... 962,880
43,250 Wells Fargo & Company.......... 2,546,992
2,850 Zions Bancorp.................. 174,791
------------
24,713,644
------------
BROADCAST SERVICES/MEDIA -- 1.9%
56,100 Comcast Corp. -- Class A*...... 1,844,007
30,950 Delphi Corp. .................. 316,000
6,950 Gannett Company, Inc. ......... 619,662
7,650 McGraw-Hill Companies, Inc. ... 534,888
3,100 Meredith Corp. ................ 151,311
118,500 Time Warner, Inc.*............. 2,131,815
7,900 Tribune Company................ 407,640
18,050 Viacom, Inc. -- Class B........ 801,059
53,400 Walt Disney Company............ 1,245,822
------------
8,052,204
------------
BUSINESS SERVICES -- 0.5%
12,000 Concord EFS, Inc.*............. 178,080
4,000 Convergys Corp.*............... 69,840
6,850 Ecolab, Inc. .................. 187,485
13,250 First Data Corp. .............. 544,443
5,100 Fiserv, Inc.*.................. 201,501
3,950 Moody's Corp. ................. 239,173
15,400 Paychex, Inc. ................. 572,879
5,050 Robert Half International,
Inc.*........................ 117,867
------------
2,111,268
------------
</Table>
See notes to financial statements.
74
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
CHEMICALS -- 0.7%
6,250 Air Products and Chemicals,
Inc. ........................ $ 330,187
24,000 Dow Chemical Company........... 997,680
5,750 Engelhard Corp. ............... 172,213
2,200 Hercules, Inc.*................ 26,840
2,500 International Flavors &
Fragrances, Inc. ............ 87,300
7,400 PPG Industries, Inc. .......... 473,748
9,200 Praxair, Inc. ................. 351,440
6,500 Rohm And Haas Company.......... 277,615
2,300 Sigma-Aldrich Corp.(a)......... 131,514
------------
2,848,537
------------
COMMERCIAL SERVICES -- 0.3%
60,000 Cendant Corp.*................. 1,336,200
------------
COMPUTER SOFTWARE AND SERVICES -- 3.3%
9,750 Adobe Systems, Inc. ........... 383,175
3,200 Autodesk, Inc. ................ 78,656
15,850 Automatic Data Processing,
Inc. ........................ 627,818
9,950 BMC Software, Inc.*............ 185,568
10,550 Citrix Systems, Inc.*.......... 223,766
15,250 Computer Associates
International, Inc.(a)....... 416,935
1,950 Computer Sciences Corp.*....... 86,249
8,450 Compuware Corp.*............... 51,038
7,600 Electronic Arts, Inc.*......... 363,128
11,950 Electronic Data Systems
Corp.(a)..................... 293,253
6,500 Intuit, Inc.*.................. 343,915
1,900 Mercury Interactive
Corp.*(a).................... 92,416
275,350 Microsoft Corp. ............... 7,583,138
3,450 NVIDIA Corp.*(a)............... 80,213
136,650 Oracle Corp.*.................. 1,803,779
8,100 PeopleSoft, Inc.*.............. 184,680
26,200 Siebel Systems, Inc.*.......... 363,394
6,800 SunGard Data Systems, Inc.*.... 188,428
9,950 Unisys Corp.*.................. 147,758
25,950 VERITAS Software Corp.*........ 964,301
------------
14,461,608
------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.7%
15,450 Apple Computer, Inc.*.......... 330,167
65,700 Dell, Inc.*.................... 2,231,172
127,100 EMC Corp.*..................... 1,642,132
19,350 Gateway, Inc.*................. 89,010
79,387 Hewlett-Packard Company........ 1,823,519
44,000 International Business Machines
Corp. ....................... 4,077,919
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
COMPUTERS AND OFFICE EQUIPMENT (CONTINUED)
5,350 Lexmark International Group,
Inc.*........................ $ 420,724
19,050 Network Appliance, Inc.*(a).... 391,097
5,750 Pitney Bowes, Inc. ............ 233,565
79,750 Sun Microsystems, Inc.*........ 358,078
20,500 Xerox Corp.*(a)................ 282,900
------------
11,880,283
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.2%
750 American Standard Companies,
Inc.*........................ 75,525
1,700 Centex Corp.(a)................ 183,005
1,400 KB Home........................ 101,528
12,250 Masco Corp. ................... 335,772
700 Pulte Homes, Inc. ............. 65,534
2,850 Vulcan Materials Company....... 135,575
------------
896,939
------------
CONSUMER GOODS AND SERVICES -- 4.7%
1,600 Alberto-Culver Company -- Class
B............................ 100,928
53,150 Altria Group, Inc. ............ 2,892,423
5,900 Avon Products, Inc. ........... 398,191
5,750 Clorox Company................. 279,220
14,150 Colgate-Palmolive Company...... 708,208
6,950 Eastman Kodak Company(a)....... 178,407
7,400 FedEx Corp. ................... 499,500
4,450 Fortune Brands, Inc. .......... 318,131
256,750 General Electric Company....... 7,954,114
60,100 Gillette Company............... 2,207,473
21,000 Kimberly-Clark Corp. .......... 1,240,890
7,800 Leggett & Platt, Inc. ......... 168,714
33,600 Procter & Gamble Company....... 3,355,967
4,150 Sherwin-Williams Company....... 144,171
1,900 Whirlpool Corp. ............... 138,035
------------
20,584,372
------------
CONTAINERS AND PACKAGING -- 0.1%
1,300 Ball Corp. .................... 77,441
2,200 Bemis Company, Inc. ........... 110,000
7,800 Pactiv Corp.*.................. 186,420
4,850 Sealed Air Corp.*.............. 262,579
------------
636,440
------------
</Table>
See notes to financial statements.
75
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
DISTRIBUTION -- 0.0%
2,550 W.W. Grainger, Inc. ........... $ 120,845
------------
EDUCATION -- 0.1%
4,550 Apollo Group, Inc. -- Class
A*........................... 309,400
------------
ELECTRONICS -- 0.4%
11,000 Emerson Electric Company....... 712,249
4,750 Jabil Circuit, Inc.*........... 134,425
5,050 Molex, Inc. ................... 176,195
4,950 Rockwell Collins, Inc. ........ 148,649
30,350 Sanmina-SCI Corp.*............. 382,713
20,550 Solectron Corp.*............... 121,451
2,900 Tektronix, Inc.*............... 91,640
------------
1,767,322
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.2%
10,800 Allied Waste Industries,
Inc.*(a)..................... 149,904
17,600 Waste Management, Inc. ........ 520,960
------------
670,864
------------
FINANCIAL SERVICES -- 5.4%
34,100 American Express Company....... 1,644,643
3,900 Bear Stearns Companies,
Inc. ........................ 311,805
13,500 Capital One Financial
Corp.(a)..................... 827,415
34,050 Charles Schwab Corp. .......... 403,152
131,749 Citigroup, Inc. ............... 6,395,095
10,600 Countrywide Financial Corp. ... 804,010
1,950 Deluxe Corp. .................. 80,594
5,400 Equifax, Inc. ................. 132,300
25,250 Fannie Mae..................... 1,895,265
6,350 Franklin Resources, Inc. ...... 330,581
17,950 Freddie Mac.................... 1,046,844
12,200 Goldman Sachs Group, Inc.(a)... 1,204,506
7,500 H&R Block, Inc. ............... 415,275
11,200 Lehman Brothers Holdings,
Inc. ........................ 864,864
33,050 MBNA Corp. .................... 821,293
50,000 Merrill Lynch & Company,
Inc.(a)...................... 2,932,499
41,050 Morgan Stanley................. 2,375,564
7,500 Providian Financial Corp.*..... 87,300
14,000 Prudential Financial, Inc. .... 584,780
11,850 SLM Corp. ..................... 446,508
3,600 T. Rowe Price Group, Inc. ..... 170,676
------------
23,774,969
------------
FOOD AND BEVERAGE -- 2.5%
22,300 Anheuser-Busch Companies,
Inc. ........................ 1,174,764
17,350 Archer-Daniels-Midland
Company...................... 264,067
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
600 Brown-Forman Corp. -- Class
B............................ $ 56,070
10,750 Campbell Soup Company.......... 288,100
62,600 Coca-Cola Company.............. 3,176,949
4,500 Coca-Cola Enterprises, Inc. ... 98,415
23,000 ConAgra Foods, Inc. ........... 606,970
10,400 General Mills, Inc.(a)......... 471,120
9,050 H.J. Heinz Company............. 329,692
1,300 Hershey Foods Corp. ........... 100,087
10,050 Kellogg Company................ 382,704
3,700 McCormick & Company, Inc. ..... 111,370
6,700 Pepsi Bottling Group, Inc. .... 162,006
44,150 PepsiCo, Inc. ................. 2,058,273
22,250 Sara Lee Corp. ................ 483,048
17,000 Sysco Corp. ................... 632,910
5,900 Wm. Wrigley Jr. Company(a)..... 331,639
------------
10,728,184
------------
INSURANCE -- 2.9%
7,200 Ace, Ltd. ..................... 298,224
4,000 Aetna, Inc. ................... 270,320
13,350 AFLAC, Inc. ................... 483,003
18,600 Allstate Corp. ................ 800,171
3,100 Ambac Financial Group, Inc. ... 215,109
67,053 American International Group,
Inc. ........................ 4,444,272
7,850 Aon Corp. ..................... 187,929
4,650 Chubb Corp. ................... 316,665
8,300 CIGNA Corp. ................... 477,250
1,700 Cincinnati Financial Corp. .... 71,196
7,400 Hartford Financial Services
Group, Inc. ................. 436,822
8,650 Humana, Inc.*.................. 197,653
4,400 Jefferson-Pilot Corp. ......... 222,860
7,950 John Hancock Financial
Services, Inc. .............. 298,125
4,700 Lincoln National Corp. ........ 189,739
5,400 Marsh & McLennan Companies,
Inc. ........................ 258,606
4,300 MBIA, Inc. .................... 254,689
20,050 MetLife, Inc. ................. 675,084
2,750 MGIC Investment Corp. ......... 156,585
8,650 Principal Financial Group,
Inc. ........................ 286,056
9,100 Progressive Corp. ............. 760,669
3,850 SAFECO Corp. .................. 149,881
6,200 St. Paul Companies, Inc. ...... 245,830
</Table>
See notes to financial statements.
76
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
3,600 Torchmark Corp. ............... $ 163,944
26,496 Travelers Property Casualty
Corp. -- Class B............. 449,637
3,600 XL Capital, Ltd. -- Class
A(a)......................... 279,180
------------
12,589,499
------------
INTERNET SERVICES -- 1.6%
179,500 Cisco Systems, Inc.*........... 4,360,054
16,650 eBay, Inc.*.................... 1,075,424
4,450 Monster Worldwide, Inc.*(a).... 97,722
8,300 Novell, Inc.*.................. 87,316
12,350 Symantec Corp.*(a)............. 427,928
16,550 YAHOO!, Inc.*.................. 747,564
------------
6,796,008
------------
LEISURE AND RECREATION -- 0.3%
2,050 Brunswick Corp. ............... 65,252
6,300 Carnival Corp. ................ 250,299
4,100 Harrah's Entertainment,
Inc. ........................ 204,057
4,150 Hilton Hotels Corp. ........... 71,090
9,200 International Game
Technology................... 328,439
2,450 Marriott International, Inc. --
Class A...................... 113,190
5,100 Starwood Hotels & Resorts...... 183,447
------------
1,215,774
------------
MACHINERY -- 0.6%
8,800 Caterpillar, Inc. ............. 730,576
13,950 Deere & Company................ 907,448
5,200 Dover Corp. ................... 206,700
5,000 Ingersoll-Rand Company -- Class
A(a)......................... 339,400
8,200 Rockwell Automation, Inc. ..... 291,920
------------
2,476,044
------------
MANUFACTURING -- 1.7%
39,000 3M Company..................... 3,316,169
2,800 Cooper Industries,
Ltd. -- Class A.............. 162,204
6,250 Danaher Corp.(a)............... 573,438
1,950 Eaton Corp. ................... 210,561
22,100 Honeywell International,
Inc. ........................ 738,803
7,700 Illinois Tool Works, Inc.(a)... 646,107
2,350 ITT Industries, Inc. .......... 174,394
3,250 Parker-Hannifin Corp. ......... 193,375
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MANUFACTURING (CONTINUED)
4,150 Textron, Inc. ................. $ 236,799
50,550 Tyco International, Ltd. ...... 1,339,575
------------
7,591,425
------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.9%
5,500 Anthem, Inc.*(a)............... 412,500
700 Express Scripts, Inc.*(a)...... 46,501
16,350 IMS Health, Inc.(a)............ 406,461
3,100 McKesson Corp. ................ 99,696
6,958 Medco Health Solutions,
Inc.*........................ 236,502
34,600 UnitedHealth Group, Inc. ...... 2,013,028
7,900 WellPoint Health Networks,
Inc.*........................ 766,221
------------
3,980,909
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 2.5%
3,350 Allergan, Inc. ................ 257,314
1,600 Bausch & Lomb, Inc. ........... 83,040
16,900 Baxter International, Inc. .... 515,788
7,900 Becton, Dickinson and
Company...................... 325,006
7,450 Biomet, Inc.(a)................ 271,255
34,150 Boston Scientific Corp.*....... 1,255,354
1,300 C. R. Bard, Inc. .............. 105,625
5,550 Genzyme Corp.*................. 273,837
18,400 Guidant Corp. ................. 1,107,680
76,600 Johnson & Johnson.............. 3,957,155
32,000 Medtronic, Inc. ............... 1,555,520
4,400 St. Jude Medical, Inc.*........ 269,940
5,200 Stryker Corp. ................. 442,052
5,200 Zimmer Holdings, Inc.*......... 366,080
------------
10,785,646
------------
METALS AND MINING -- 0.4%
22,100 Alcoa, Inc. ................... 839,800
4,500 Freeport-McMoRan Copper & Gold,
Inc. -- Class B(a)........... 189,585
11,000 Newmont Mining Corp. .......... 534,710
2,100 Phelps Dodge Corp.*(a)......... 159,789
------------
1,723,884
------------
MOTOR VEHICLES -- 0.6%
111,650 Ford Motor Company(a).......... 1,786,400
7,750 Harley-Davidson, Inc.(a)....... 368,358
6,000 PACCAR, Inc. .................. 510,720
------------
2,665,478
------------
</Table>
See notes to financial statements.
77
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL AND GAS: PIPELINES -- 0.1%
3,700 Kinder Morgan, Inc. ........... $ 218,670
17,700 Williams Companies, Inc. ...... 173,814
------------
392,484
------------
OIL, COAL AND GAS -- 3.8%
3,500 Amerada Hess Corp. ............ 186,095
6,650 Anadarko Petroleum Corp. ...... 339,217
1,682 Apache Corp. .................. 136,410
3,900 BJ Services Company*........... 140,010
5,800 Burlington Resources, Inc. .... 321,204
38,800 ChevronTexaco Corp. ........... 3,351,932
28,213 ConocoPhillips................. 1,849,926
14,100 Devon Energy Corp. ............ 807,366
1,200 EOG Resources, Inc. ........... 55,404
170,750 Exxon Mobil Corp. ............. 7,000,749
4,500 Halliburton Company............ 117,000
2,400 Kerr-McGee Corp. .............. 111,576
8,200 Marathon Oil Corp. ............ 271,338
3,900 Nabors Industries, Ltd.*....... 161,850
1,650 Noble Corp.*................... 59,037
22,200 Occidental Petroleum Corp. .... 937,728
5,100 Sunoco, Inc. .................. 260,865
3,200 Transocean, Inc.*.............. 76,832
6,800 Unocal Corp. .................. 250,444
------------
16,434,983
------------
PAPER AND FOREST PRODUCTS -- 0.4%
1,600 Boise Cascade Corp. ........... 52,576
10,300 Georgia-Pacific Corp. ......... 315,901
12,350 International Paper Company.... 532,408
6,450 Louisiana-Pacific Corp.*....... 115,326
4,850 MeadWestvaco Corp. ............ 144,288
5,800 Weyerhauser Company............ 371,200
------------
1,531,699
------------
PHARMACEUTICALS -- 3.7%
41,000 Abbott Laboratories............ 1,910,600
21,200 Bristol-Myers Squibb Company... 606,320
29,200 Eli Lilly and Company.......... 2,053,636
3,700 Forest Laboratories, Inc.*..... 228,660
10,350 King Pharmaceuticals, Inc.*.... 157,941
58,450 Merck & Company, Inc. ......... 2,700,390
198,160 Pfizer, Inc. .................. 7,000,992
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
2,600 Watson Pharmaceuticals,
Inc.*........................ $ 119,600
34,700 Wyeth.......................... 1,473,014
------------
16,251,153
------------
PRINTING AND PUBLISHING -- 0.1%
800 Knight-Ridder, Inc. ........... 61,896
3,850 New York Times Company -- Class
A............................ 183,992
3,300 R.R. Donnelley & Sons
Company(a)................... 99,495
------------
345,383
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
10,250 Equity Office Properties
Trust........................ 293,662
7,550 Equity Residential............. 222,801
6,100 Simon Property Group, Inc. .... 282,674
------------
799,137
------------
RESEARCH AND DEVELOPMENT -- 0.6%
32,784 Amgen, Inc.*................... 2,026,051
3,300 Biogen Idec, Inc.*............. 121,374
4,750 Chiron Corp.*.................. 270,703
2,500 MedImmune, Inc.*............... 63,500
------------
2,481,628
------------
RETAIL -- 4.1%
10,250 Bed Bath & Beyond, Inc.*....... 444,338
18,700 Best Buy Company, Inc. ........ 976,888
4,000 Big Lots, Inc.*................ 56,840
19,000 Costco Wholesale Corp.*........ 706,420
15,850 CVS Corp. ..................... 572,502
8,050 Dollar General Corp. .......... 168,970
4,650 Family Dollar Stores, Inc. .... 166,842
10,550 Federated Department Stores,
Inc. ........................ 497,222
105,000 Home Depot, Inc. .............. 3,726,449
2,850 J.C. Penney Company, Inc.(a)... 74,898
20,350 Lowe's Companies, Inc. ........ 1,127,186
8,000 May Department Stores
Company(a)................... 232,560
3,650 Nordstrom, Inc.(a)............. 125,195
8,100 Office Depot, Inc.*(a)......... 135,351
9,500 RadioShack Corp. .............. 291,460
7,500 Sears, Roebuck & Company....... 341,175
27,900 Staples, Inc.*................. 761,670
3,850 Tiffany & Company.............. 174,020
5,400 TJX Companies, Inc. ........... 119,070
</Table>
See notes to financial statements.
78
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
9,800 Toys "R" Us, Inc.*(a).......... $ 123,872
111,320 Wal-Mart Stores, Inc. ......... 5,905,525
25,900 Walgreen Company............... 942,242
------------
17,670,695
------------
RETAIL: RESTAURANTS -- 0.8%
7,950 Darden Restaurants, Inc.(a).... 167,268
76,150 McDonald's Corp. .............. 1,890,805
23,450 Starbucks Corp.*............... 775,257
7,400 Wendy's International, Inc. ... 290,376
11,800 YUM! Brands, Inc.*............. 405,920
------------
3,529,626
------------
RETAIL: SUPERMARKETS -- 0.1%
19,100 Kroger Company*(a)............. 353,541
4,500 Safeway, Inc.*................. 98,595
4,750 SUPERVALU, Inc. ............... 135,803
4,400 Winn-Dixie Stores, Inc.(a)..... 43,780
------------
631,719
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.2%
12,000 Agilent Technologies, Inc.*.... 350,880
6,900 Applera Corp.-Applied
Biosystems Group............. 142,899
3,800 Pall Corp. .................... 101,954
7,000 PerkinElmer, Inc. ............. 119,490
5,200 Thermo Electron Corp.*......... 131,040
------------
846,263
------------
SEMICONDUCTORS -- 3.0%
22,800 Altera Corp.*.................. 517,560
10,600 Analog Devices, Inc.*.......... 483,890
68,200 Applied Materials, Inc.*....... 1,531,090
3,100 Broadcom Corp. -- Class A*..... 105,679
203,200 Intel Corp. ................... 6,543,039
8,050 Linear Technology Corp. ....... 338,664
9,850 LSI Logic Corp.*............... 87,370
19,200 Maxim Integrated Products,
Inc. ........................ 956,160
4,450 National Semiconductor
Corp.*....................... 175,375
4,000 Novellus Systems, Inc.*........ 168,200
2,800 QLogic Corp.*.................. 144,480
5,200 Teradyne, Inc.*................ 132,340
44,600 Texas Instruments, Inc. ....... 1,310,348
9,900 Xilinx, Inc.*.................. 383,526
------------
12,877,721
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.0%
7,900 ALLTEL Corp. .................. $ 367,982
17,010 AT&T Corp. .................... 345,303
27,300 AT&T Wireless Services,
Inc.*........................ 218,127
26,650 Avaya, Inc.*................... 344,851
73,150 BellSouth Corp. ............... 2,070,145
4,050 CenturyTel, Inc. .............. 132,111
18,700 CIENA Corp.*................... 124,168
8,400 Comverse Technology, Inc.*..... 147,756
30,000 Corning, Inc.*(a).............. 312,900
102,900 Lucent Technologies, Inc.*..... 292,236
60,550 Motorola, Inc. ................ 851,939
60,800 Nextel Communications, Inc. --
Class A*..................... 1,706,048
8,150 QUALCOMM, Inc. ................ 439,530
85,000 SBC Communications, Inc. ...... 2,215,950
9,550 Scientific-Atlanta, Inc. ...... 260,715
23,250 Sprint Corp. (FON Group)....... 381,765
6,500 Symbol Technologies, Inc. ..... 109,785
10,400 Tellabs, Inc.*................. 87,672
69,950 Verizon Communications,
Inc. ........................ 2,453,845
------------
12,862,828
------------
TOOLS -- 0.1%
2,200 Black & Decker Corp. .......... 108,504
1,700 Snap-on, Inc. ................. 54,808
2,650 Stanley Works.................. 100,356
------------
263,668
------------
TOYS -- 0.1%
11,200 Hasbro, Inc. .................. 238,336
18,800 Mattel, Inc. .................. 362,276
------------
600,612
------------
TRANSPORTATION -- 0.5%
29,250 United Parcel Service, Inc. --
Class B...................... 2,180,588
------------
TRANSPORTATION: FREIGHT -- 0.1%
9,400 Burlington Northern Santa Fe
Corp. ....................... 304,090
2,600 Union Pacific Corp. ........... 180,648
------------
484,738
------------
TRANSPORTATION: SERVICES -- 0.0%
3,000 Ryder System, Inc. ............ 102,450
------------
</Table>
See notes to financial statements.
79
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
UTILITIES: ELECTRIC -- 1.4%
23,900 Aes Corp.*..................... $ 225,616
4,500 Ameren Corp. .................. 207,000
9,840 American Electric Power
Company, Inc. ............... 300,218
4,700 American Power Conversion
Corp.(a)..................... 114,915
14,600 CenterPoint Energy, Inc. ...... 141,474
4,300 Cinergy Corp. ................. 166,883
2,400 Consolidated Edison, Inc. ..... 103,224
8,250 Constellation Energy Group,
Inc. ........................ 323,070
3,600 Dominion Resources, Inc. ...... 229,788
9,750 Duke Energy Corp. ............. 199,388
20,150 Edison International........... 441,890
5,650 Entergy Corp. ................. 322,785
8,350 Exelon Corp. .................. 554,105
8,300 FirstEnergy Corp. ............. 292,160
4,800 FPL Group, Inc. ............... 314,016
12,250 PG&E Corp.*.................... 340,183
4,700 PPL Corp. ..................... 205,625
2,650 Progress Energy, Inc. ......... 119,939
6,800 Public Service Enterprise
Group, Inc. ................. 297,840
20,500 Southern Company............... 620,124
8,100 TXU Corp. ..................... 192,132
10,350 Xcel Energy, Inc. ............. 175,743
------------
5,888,118
------------
UTILITIES: GAS -- 0.1%
4,000 KeySpan Corp. ................. 147,200
6,100 NiSource, Inc. ................ 133,834
650 Peoples Energy Corp. .......... 27,326
5,700 Sempra Energy.................. 171,342
------------
479,702
------------
TOTAL COMMON STOCKS (Cost
$244,202,158)................ 281,037,096
------------
REGULATED INVESTMENT COMPANIES -- 0.5%
997,683 American Aadvantage
Select(b).................... 997,683
308,862 Merrill Lynch Premier
Institutional Fund(b)........ 308,862
855,157 Merrimac Cash Fund -- Premium
Class(b)..................... 855,157
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$2,161,702).................. 2,161,702
------------
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 6.4%
US TREASURY BONDS -- 2.5%
$ 1,580,000 10.38%, 11/15/12(a)............ $ 2,016,290
2,540,000 12.00%, 08/15/13............... 3,510,163
885,000 9.25%, 02/15/16................ 1,270,564
1,200,000 8.13%, 08/15/19................ 1,621,313
1,475,000 8.50%, 02/15/20................ 2,060,565
165,000 5.38%, 02/15/31................ 172,122
------------
10,651,017
------------
US TREASURY NOTES -- 3.3%
2,575,000 2.00%, 08/31/05................ 2,592,402
10,190,000 1.63%, 10/31/05(a)............. 10,177,272
1,075,000 2.38%, 08/15/06(a)............. 1,081,132
375,000 2.63%, 11/15/06(a)............. 378,428
220,000 3.25%, 08/15/07................ 224,477
20,000 3.38%, 12/15/08................ 20,142
55,000 4.25%, 11/15/13................ 54,957
------------
14,528,810
------------
US TREASURY STRIPS -- 0.6%
4,895,000 Zero coupon, 05/15/17.......... 2,502,750
------------
TOTAL US TREASURY SECURITIES
(Cost $27,452,444)........... 27,682,577
------------
US GOVERNMENT AGENCY SECURITIES -- 13.3%
FANNIE MAE -- 6.5%
300,000 1.75%, 06/16/06................ 295,565
325,000 7.13%, 03/15/07................ 368,495
660,000 5.75%, 02/15/08................ 725,706
1,115,000 3.75%, 09/15/08................ 1,115,468
400,000 6.63%, 09/15/09................ 457,943
1,770,000 7.25%, 01/15/10................ 2,089,501
1,275,000 7.13%, 06/15/10................ 1,501,047
1,100,000 6.63%, 11/15/10................ 1,265,649
1,610,000 6.00%, 05/15/11................ 1,787,111
1,160,000 5.50%, 07/18/12................ 1,188,539
675,000 4.38%, 07/17/13................ 647,416
285,000 4.63%, 10/15/13................ 283,545
522,792 PL# 252345, 6.00%, 03/01/14.... 549,781
335,476 PL# 323842, 5.50%, 07/01/14.... 349,390
432,090 PL# 406815, 7.00%, 07/01/28.... 458,152
462,549 PL# 535675, 7.00%, 01/01/16.... 494,909
4,511 PL# 549906, 7.50%, 09/01/30.... 4,822
8,274 PL# 552549, 7.50%, 09/01/30.... 8,844
612,484 PL# 555531, 5.50%, 06/01/33.... 620,962
4,193 PL# 558384, 7.50%, 01/01/31.... 4,483
</Table>
See notes to financial statements.
80
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 6,299 PL# 561844, 7.50%, 11/01/30.... $ 6,734
37,926 PL# 564462, 6.50%, 03/01/32.... 39,682
103,136 PL# 566031, 6.00%, 03/01/16.... 108,328
5,270 PL# 568677, 7.50%, 01/01/31.... 5,633
9,440 PL# 572762, 7.50%, 03/01/31.... 10,090
36,069 PL# 575334, 6.00%, 04/01/16.... 37,884
83,403 PL# 577523, 6.00%, 05/01/16.... 87,601
17,306 PL# 578769, 6.00%, 05/01/16.... 18,177
270,979 PL# 579234, 6.00%, 04/01/16.... 284,619
32,736 PL# 582178, 7.50%, 06/01/31.... 34,992
143,991 PL# 582491, 6.00%, 05/01/16.... 151,239
25,063 PL# 594316, 6.50%, 07/01/31.... 26,221
7,260 PL# 602859, 6.50%, 10/01/31.... 7,596
98,724 PL# 614924, 7.00%, 12/01/16.... 105,664
40,577 PL# 618454, 5.50%, 12/01/16.... 42,113
8,951 PL# 620174, 6.50%, 12/01/31.... 9,364
214,162 PL# 627256, 6.50%, 03/01/32.... 224,078
44,837 PL# 649576, 6.00%, 12/01/32.... 46,380
99,567 PL# 748975, 4.00%, 10/01/18.... 97,182
3,600,000 TBA, 5.00%, 01/01/19........... 3,672,001
2,500,000 TBA, 5.50%, 01/01/19........... 2,590,626
1,900,000 TBA, 6.00%, 01/01/19........... 1,992,625
1,200,000 TBA, 6.50%, 01/01/19........... 1,272,000
700,000 TBA, 5.50%, 01/01/34........... 709,188
100,000 TBA, 6.00%, 01/01/34........... 103,375
2,400,000 TBA, 6.50%, 01/01/34........... 2,510,251
------------
28,410,971
------------
FANNIE MAE GOLD -- 1.1%
214,780 PL# E01172, 6.00%,
07/01/17(e).................. 225,449
477,170 PL# E89913, 6.00%,
05/01/17(e).................. 500,874
114,625 PL# E90603, 6.00%,
07/01/17(e).................. 120,319
284,442 PL# E90827, 5.50%, 08/01/17.... 295,119
188,551 PL# G01315, 7.00%, 09/01/31.... 199,558
2,100,000 TBA, 6.50%, 01/01/34........... 2,199,750
1,200,000 TBA, 5.00%, 01/14/34........... 1,184,626
------------
4,725,695
------------
FREDDIE MAC -- 2.8%
695,000 3.50%, 04/01/08................ 693,369
140,000 3.63%, 09/15/08................ 141,078
2,825,000 3.88%, 11/10/08................ 2,863,357
590,000 6.63%, 09/15/09................ 675,520
1,190,000 4.38%, 02/04/10................ 1,190,840
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC (CONTINUED)
$ 250,000 7.00%, 03/15/10................ $ 292,103
510,000 6.88%, 09/15/10................ 593,136
1,635,000 4.75%, 12/08/10................ 1,653,152
2,700,000 4.50%, 12/16/10................ 2,702,095
980,000 6.00%, 06/15/11................ 1,089,347
405,000 5.13%, 08/20/12................ 405,141
------------
12,299,138
------------
FREDDIE MAC GOLD -- 1.7%
1,662,916 PL# A11986, 5.00%, 08/01/33.... 1,642,803
1,390,461 PL# A12447, 6.00%, 08/01/33.... 1,437,951
315,082 PL# A12800, 5.50%, 08/01/33.... 319,148
608,799 PL# A13041, 6.00%,
09/01/33(e).................. 629,592
298,578 PL# A13802, 5.00%, 09/01/33.... 294,966
436,545 PL# C01615, 6.00%, 08/01/33.... 451,455
651,909 PL# C01623, 5.50%, 09/01/33.... 660,321
103,591 PL# C64741, 7.00%, 03/01/32.... 109,639
87,183 PL# E00513, 6.00%,
09/01/12(e).................. 91,616
489,785 PL# E01388, 4.00%, 05/01/18.... 479,206
60,454 PL# E84467, 6.00%,
07/01/16(e).................. 63,452
109,911 PL# E89080, 6.00%,
04/01/17(e).................. 115,371
140,711 PL# E89874, 6.00%,
05/01/17(e).................. 147,689
89,091 PL# E91210, 6.00%,
09/01/17(e).................. 93,516
19,995 PL# G01309, 7.00%, 08/01/31.... 21,162
470,259 PL# G01391, 7.00%, 04/01/32.... 497,713
276,983 PL# G01477, 6.00%, 12/01/32.... 286,434
100,000 TBA, 6.00%, 01/01/19........... 104,781
------------
7,446,815
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.9%
581,614 PL# 003161, 6.50%, 11/20/31.... 612,527
19,451 PL# 461836, 7.00%, 01/15/28.... 20,770
40,902 PL# 480112, 6.00%, 04/15/29.... 42,561
45,369 PL# 499445, 6.00%, 04/15/29.... 47,209
76,320 PL# 552851, 6.00%, 10/15/32.... 79,424
66,410 PL# 555283, 6.50%, 04/15/32.... 70,037
199,390 PL# 555581, 7.00%, 10/15/31.... 212,629
35,736 PL# 569839, 6.50%, 06/15/32.... 37,688
130,148 PL# 578249, 6.00%, 10/15/32.... 135,441
90,670 PL# 587784, 6.50%, 12/15/32.... 95,621
391,443 PL# 590257, 6.00%, 10/15/32.... 407,364
12,822 PL# 596647, 7.00%, 09/15/32.... 13,668
136,554 PL# 780914, 6.00%, 11/15/28.... 142,180
</Table>
See notes to financial statements.
81
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 593,071 PL# 781328, 7.00%, 09/15/31.... $ 632,608
1,200,000 TBA, 5.50%, 01/01/34........... 1,220,250
------------
3,769,977
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 0.2%
600,000 Fannie Mae Grantor Trust,
Series 2001-T2, Class B,
6.02%, 11/25/10.............. 658,737
------------
RESOLUTION FUNDING STRIPS -- 0.1%
250,000 Zero coupon, 07/15/18.......... 113,674
250,000 Zero coupon, 10/15/18.......... 111,652
------------
225,326
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$57,177,093)................. 57,536,659
------------
CORPORATE BONDS AND NOTES -- 11.1%
AEROSPACE AND DEFENSE -- 0.2%
20,000 BE Aerospace -- 144A,
8.50%, 10/01/10.............. 21,550
50,000 Lockheed Martin Corp.,
8.50%, 12/01/29.............. 65,718
430,000 Lockheed Martin Corp.,
7.20%, 05/01/36.............. 510,357
90,000 Northrop Grumman Corp.,
7.13%, 02/15/11.............. 104,241
20,000 Northrop Grumman Corp.,
7.75%, 02/15/31.............. 24,397
120,000 Raytheon Company,
4.85%, 01/15/11.............. 120,336
------------
846,599
------------
AIRLINES -- 0.0%
168,537 Continental Airlines, Inc.,
Series 974A,
6.90%, 01/02/18.............. 166,567
------------
AUTOMOBILES -- 0.3%
150,000 Daimler Chrysler AG Corp.,
7.45%, 03/01/27.............. 160,084
215,000 Daimler Chrysler NA Holding,
4.75%, 01/15/08.............. 220,175
500,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08.............. 497,092
245,000 Daimler Chrysler NA Holding,
6.50%, 11/15/13.............. 258,556
------------
1,135,907
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTOMOTIVE EQUIPMENT -- 0.0%
$ 90,000 Collins & Aikman Products,
10.75%, 12/31/11............. $ 88,875
70,000 Dura Operating Corp., Series B,
8.63%, 04/15/12.............. 74,900
------------
163,775
------------
BANKS -- 0.9%
220,000 ANZ Capital Trust I -- 144A,
4.48%, perpetual............. 222,106
335,000 ANZ Capital Trust I -- 144A,
5.36%, perpetual............. 335,167
130,000 Bank of America Corp.,
7.40%, 01/15/11.............. 152,682
155,000 Bank of America Corp.,
3.88%, 01/15/08.............. 158,172
5,000 Bank of America Corp.,
7.80%, 02/15/10.............. 5,953
425,000 Bank of America Corp.,
4.38%, 12/01/10.............. 426,702
510,000 Barclays Bank PLC -- 144A,
Floating Rate,
8.55%(c), perpetual.......... 627,655
175,000 Chase Manhattan Corp.,
7.13%, 06/15/09.............. 201,193
600,000 DEPFA ACS Bank,
3.63%, 10/29/08.............. 596,532
100,000 HSBC Holdings PLC,
5.25%, 12/12/12.............. 102,588
50,000 JP Morgan Chase & Company,
5.25%, 05/30/07.............. 53,413
110,000 JP Morgan Chase & Company,
6.75%, 02/01/11.............. 124,212
75,000 Sovereign Bancorp,
10.50%, 11/15/06............. 88,762
250,000 Swedish Export Credit,
2.88%, 01/26/07.............. 251,455
50,000 U.S. Bancorp, Series MTNN,
3.95%, 08/23/07.............. 51,489
385,000 UBS Preferred Funding Trust I,
Variable Rate,
8.62%(l), 10/29/49........... 475,312
100,000 Wells Fargo Bank N.A., Series
BKNT, Variable Rate,
7.80%(l), 06/15/10........... 107,975
------------
3,981,368
------------
BROADCAST SERVICES/MEDIA -- 0.7%
225,000 AOL Time Warner, Inc.,
7.63%, 04/15/31.............. 260,567
270,000 British Sky Broadcasting,
6.88%, 02/23/09.............. 303,470
</Table>
See notes to financial statements.
82
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/ MEDIA (CONTINUED)
$ 235,000 Charter Communications Holdings
LLC,
10.75%, 10/01/09............. $ 216,788
35,000 Charter Communications Holdings
LLC,
11.13%, 01/15/11(a).......... 32,288
570,000 Comcast Cable Communications,
Inc.,
6.88%, 06/15/09.............. 643,467
30,000 Comcast Corp.,
5.50%, 03/15/11.............. 31,238
235,000 Comcast Corp.,
7.05%, 03/15/33.............. 256,631
100,000 CSC Holdings, Inc.,
7.88%, 02/15/18.............. 107,250
60,000 DirecTV Holdings,
8.38%, 03/15/13.............. 69,900
75,000 News America Holdings,
8.88%, 04/26/23.............. 96,395
75,000 News America Holdings,
7.63%, 11/30/28.............. 87,138
83,000 TCI Communications, Inc.,
7.88%, 08/01/13.............. 98,418
75,000 TCI Communications, Inc.,
7.88%, 02/15/26.............. 87,934
30,000 Time Warner, Inc.,
7.25%, 10/15/17.............. 34,229
35,000 Time Warner, Inc.,
6.88%, 06/15/18.............. 38,597
110,000 Time Warner, Inc.,
6.95%, 01/15/28.............. 117,906
380,000 Time Warner, Inc.,
6.63%, 05/15/29.............. 391,973
70,000 Vivendi Universal SA -- 144A,
6.25%, 07/15/08.............. 74,463
------------
2,948,652
------------
CHEMICALS -- 0.1%
85,000 Crown Euro Holdings SA,
9.50%, 03/01/11.............. 96,688
50,000 Dow Chemical Company,
6.00%, 10/01/12.............. 52,721
325,000 Dow Chemical Company,
7.38%, 11/01/29.............. 364,511
15,000 Lyondell Chemical Company,
9.50%, 12/15/08.............. 15,750
45,000 Nalco Company -- 144A,
7.75%, 11/15/11.............. 48,375
------------
578,045
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES -- 0.2%
$ 65,000 Ainsworth Lumber Company, Ltd.,
13.88%, 07/15/07............. $ 75,075
85,000 Beazer Homes USA,
8.38%, 04/15/12.............. 94,138
75,000 D.R. Horton, Inc.,
10.50%, 04/01/05............. 81,750
55,000 K. Hovnanian Enterprises,
6.50%, 01/15/14.............. 55,069
110,000 NVR, Inc.,
5.00%, 06/15/10.............. 108,350
500,000 Ryland Group,
8.00%, 08/15/06.............. 547,499
20,000 Ryland Group,
5.38%, 06/01/08.............. 20,700
40,000 Ryland Group,
9.13%, 06/15/11.............. 45,900
------------
1,028,481
------------
CONSUMER GOODS AND SERVICES -- 0.1%
310,000 General Electric Company,
5.00%, 02/01/13.............. 314,082
------------
CONTAINERS AND PACKAGING -- 0.0%
130,000 Owens-Brockway Glass
Containers,
8.75%, 11/15/12.............. 145,438
------------
ELECTRONICS -- 0.1%
80,000 Flextronics International,
Ltd.,
6.50%, 05/15/13.............. 83,200
20,000 L-3 Communications Corp.,
6.13%, 07/15/13.............. 20,250
245,000 L-3 Communications Corp. --
144A,
6.13%, 01/15/14.............. 246,838
------------
350,288
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.1%
95,000 Allied Waste North America
Industries, Inc.,
7.88%, 04/15/13.............. 103,312
55,000 Allied Waste North America
Industries, Inc.,
7.40%, 09/15/35.............. 52,388
80,000 Allied Waste North America
Industries, Inc., Series B,
8.88%, 04/01/08.............. 90,000
45,000 Allied Waste North America
Industries, Inc., Series B,
9.25%, 09/01/12.............. 51,300
------------
297,000
------------
</Table>
See notes to financial statements.
83
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES -- 1.6%
$ 140,000 Citigroup, Inc.,
5.75%, 05/10/06.............. $ 150,755
300,000 Citigroup, Inc.,
3.50%, 02/01/08.............. 301,408
585,000 Citigroup, Inc.,
7.25%, 10/01/10.............. 682,779
205,000 Citigroup, Inc.,
5.88%, 02/22/33.............. 202,170
300,000 Credit Suisse First Boston USA,
Inc.,
3.88%, 01/15/09.............. 299,981
180,000 Credit Suisse First Boston USA,
Inc.,
6.13%, 11/15/11.............. 196,280
175,000 General Electric Capital Corp.,
Series MTNA,
6.50%, 12/10/07.............. 195,987
545,000 General Electric Capital Corp.,
Series MTNA,
6.13%, 02/22/11.............. 600,435
420,000 General Electric Capital Corp.,
Series MTNA,
5.88%, 02/15/12.............. 452,120
50,000 General Electric Capital Corp.,
Series MTNA,
6.75%, 03/15/32.............. 55,540
80,000 General Motors Acceptance
Corp.,
7.75%, 01/19/10.............. 90,796
165,000 General Motors Acceptance
Corp.,
7.25%, 03/02/11.............. 181,278
190,000 General Motors Acceptance
Corp.,
6.88%, 09/15/11.............. 204,962
40,000 Goldman Sachs Group, Inc.,
7.35%, 10/01/09.............. 46,707
205,000 Goldman Sachs Group, Inc.,
6.60%, 01/15/12.............. 229,455
425,000 Goldman Sachs Group, Inc.,
5.25%, 10/15/13.............. 429,897
135,000 Goldman Sachs Group, Inc.,
6.13%, 02/15/33.............. 136,413
50,000 Household Finance Corp.,
7.20%, 07/15/06.............. 55,642
275,000 Household Finance Corp.,
6.75%, 05/15/11.............. 310,035
50,000 Household Finance Corp.,
7.00%, 05/15/12.............. 57,110
390,000 Household Finance Corp.,
6.38%, 11/27/12.............. 428,585
200,000 Household Finance Corp.,
4.75%, 07/15/13.............. 194,886
75,000 Household Finance Corp.,
7.63%, 05/17/32.............. 90,975
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 75,000 JP Morgan Chase & Company,
3.63%, 05/01/08.............. $ 75,226
120,000 JP Morgan Chase & Company,
4.50%, 11/15/10.............. 121,131
190,000 Lehman Brothers Holdings, Inc.,
6.25%, 05/15/06.............. 206,530
55,000 Lehman Brothers Holdings, Inc.,
7.00%, 02/01/08.............. 62,175
75,000 Morgan Stanley,
6.10%, 04/15/06.............. 81,202
150,000 Morgan Stanley,
5.80%, 04/01/07.............. 163,168
180,000 Morgan Stanley,
6.75%, 04/15/11.............. 203,953
60,000 SLM Corp., Series MTN,
3.63%, 03/17/08.............. 59,802
150,000 SLM Corp., Series MTN,
5.63%, 08/01/33.............. 142,795
130,000 Wells Fargo Financial,
6.13%, 04/18/12.............. 142,579
------------
6,852,757
------------
FOOD AND BEVERAGE -- 0.3%
80,000 Cadbury Schweppes -- 144A,
5.13%, 10/01/13.............. 79,630
100,000 Diageo Capital PLC,
3.50%, 11/19/07.............. 100,953
95,000 Diageo Capital PLC,
3.38%, 03/20/08.............. 94,471
125,000 General Mills, Inc.,
5.13%, 02/15/07.............. 132,878
150,000 Kellogg Company, Series B,
6.60%, 04/01/11.............. 168,349
720,000 Kraft Foods, Inc.,
5.63%, 11/01/11.............. 759,826
------------
1,336,107
------------
FUNERAL SERVICES -- 0.0%
30,000 Service Corp. International,
7.70%, 04/15/09.............. 32,175
------------
INSURANCE -- 0.4%
40,000 American General Capital II,
8.50%, 07/01/30.............. 52,199
65,000 Americo Life, Inc. -- 144A,
7.88%, 05/01/13.............. 65,163
575,000 ASIF Global Financial XXIII --
144A,
3.90%, 10/22/08.............. 580,966
</Table>
See notes to financial statements.
84
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE (CONTINUED)
$ 125,000 ASIF Global Financing -- 144A,
3.85%, 11/26/07.............. $ 127,172
115,000 Fund American Companies, Inc.,
5.88%, 05/15/13.............. 116,602
50,000 MetLife, Inc.,
6.50%, 12/15/32.............. 53,197
100,000 New York Life
Insurance -- 144A,
5.88%, 05/15/33.............. 99,733
80,000 Pacific Life Corp. -- 144A,
6.60%, 09/15/33.............. 84,770
210,000 Protective Life Secured Trust,
Series MTN,
3.70%, 11/24/08.............. 209,565
125,000 Prudential Financial, Inc.,
Series MTNB,
5.75%, 07/15/33.............. 118,470
100,000 Prudential Insurance Company --
144A,
6.38%, 07/23/06.............. 108,997
------------
1,616,834
------------
MANUFACTURING -- 0.2%
165,000 Briggs & Stratton Corp.,
8.88%, 03/15/11.............. 194,700
90,000 Dresser, Inc.,
9.38%, 04/15/11.............. 98,325
135,000 Tyco International Group SA,
6.38%, 06/15/05.............. 142,763
110,000 Tyco International Group SA,
6.38%, 02/15/06.............. 117,700
274,000 Tyco International Group SA,
5.80%, 08/01/06.............. 291,124
35,000 Tyco International Group SA,
6.75%, 02/15/11.............. 38,413
------------
883,025
------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.1%
40,000 HCA, Inc.,
6.95%, 05/01/12.............. 42,957
40,000 HCA, Inc.,
6.25%, 02/15/13.............. 41,015
100,000 HCA, Inc.,
7.50%, 11/06/33.............. 104,596
55,000 United Surgical Partners, Inc.,
10.00%, 12/15/11............. 62,700
------------
251,268
------------
METALS AND MINING -- 0.0%
125,000 Alcan, Inc.,
6.13%, 12/15/33.............. 126,193
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES -- 0.3%
$ 275,000 Consolidated Natural Gas,
Series A,
5.00%, 03/01/14.............. $ 273,856
105,000 Dynegy Holdings, Inc. -- 144A,
10.13%, 07/15/13............. 121,275
100,000 El Paso Natural Gas,
8.38%, 06/15/32.............. 102,700
55,000 El Paso Production Holdings --
144A,
7.75%, 06/01/13.............. 54,450
60,000 Gulfterra Energy Partner,
6.25%, 06/01/10.............. 62,700
46,000 Gulfterra Energy
Partner -- 144A,
10.63%, 12/01/12............. 57,270
125,000 Kinder Morgan Energy Partners,
7.30%, 08/15/33.............. 142,500
50,000 Tennessee Gas Pipeline,
7.50%, 04/01/17.............. 51,875
40,000 Williams Companies, Inc.,
7.13%, 09/01/11.............. 42,500
155,000 Williams Companies, Inc.,
8.13%, 03/15/12.............. 172,825
------------
1,081,951
------------
OIL, COAL AND GAS -- 0.3%
100,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31.............. 117,519
230,000 Anadarko Petroleum Corp.,
5.38%, 03/01/07.............. 246,062
195,000 Conoco Funding Company,
6.35%, 10/15/11.............. 218,966
115,000 Conoco, Inc.,
6.95%, 04/15/29.............. 130,827
90,000 ConocoPhillips,
5.90%, 10/15/32.............. 90,551
75,000 Devon Energy Corp.,
7.95%, 04/15/32.............. 90,716
230,000 Encana Corp.,
6.30%, 11/01/11.............. 254,734
75,000 Hanover Equipment Trust, Series
B,
8.75%, 09/01/11.............. 79,875
50,000 Massey Energy Company,
6.95%, 03/01/07.............. 51,500
75,000 Suncor Energy, Inc.,
5.95%, 12/01/34.............. 74,763
------------
1,355,513
------------
</Table>
See notes to financial statements.
85
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PAPER AND FOREST PRODUCTS -- 0.2%
$ 30,000 Boise Cascade Company,
6.50%, 11/01/10.............. $ 31,338
90,000 Caraustar Industries, Inc.,
7.38%, 06/01/09.............. 94,950
65,000 Georgia-Pacific Corp.,
8.88%, 02/01/10.............. 74,425
190,000 Georgia-Pacific Corp. -- 144A,
8.00%, 01/15/24.............. 194,750
165,000 Weyerhaeuser Company,
5.25%, 12/15/09.............. 171,571
100,000 Weyerhaeuser Company,
6.75%, 03/15/12.............. 109,267
115,000 Weyerhaeuser Company,
7.13%, 07/15/23.............. 121,375
70,000 Weyerhaeuser Company,
6.88%, 12/15/33.............. 72,169
------------
869,845
------------
PHARMACEUTICALS -- 0.1%
125,000 Bristol-Myers Squibb,
6.88%, 08/01/97.............. 137,343
175,000 Wyeth,
5.50%, 02/01/14.............. 177,339
------------
314,682
------------
PRIVATE ASSET BACKED: AUTOMOBILES -- 0.4%
1,600,000 Daimler Chrysler Auto Trust,
Series 01-C, Class A4,
4.63%, 12/06/06.............. 1,646,746
------------
PRIVATE ASSET BACKED: BANKS -- 0.1%
429,730 Banc of America Funding Corp.,
Series 2003-1, Class A1,
6.00%, 05/20/33.............. 435,202
124,242 Washington Mutual MSC, Series
2002-MS12, Class A, 6.50%,
05/25/32..................... 128,215
------------
563,417
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 0.5%
1,250,000 Citibank Credit Card Issuance
Trust, Series 2003-A6, Class
A6,
2.90%, 05/17/10.............. 1,223,773
975,000 Sears Credit Account Master
Trust, Series 2002-5, Class
A, Floating Rate,
1.54%(d), 11/17/09........... 976,967
------------
2,200,740
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 0.4%
$ 800,000 Countrywide Alternative Loan
Trust,
5.00%, 02/15/19.............. $ 802,999
510,000 Morgan Stanley Capital I,
Series 1999-FNV1, Class A2,
6.53%, 03/15/31.............. 569,731
150,144 SLM, Series 2001-3, Class A1L,
Floating Rate,
1.20%(c), 04/25/10........... 150,407
------------
1,523,137
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 1.1%
363,471 Bear Stearns Commercial
Mortgage Securities, Series
2001, Class A1,
6.08%, 02/15/35.............. 392,748
900,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33.............. 1,021,387
1,090,000 GMAC Commercial Mortgage
Securities, Inc., Series
2000-C3, Class A2,
6.96%, 09/15/35.............. 1,242,157
639,732 GS Mortgage Securities Corp.,
Series 1998-C1, Class A3,
6.14%, 10/18/30.............. 690,327
680,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIB2, Class A3,
6.43%, 04/15/35.............. 759,056
665,000 Salomon Brothers Mortgage
Securities VII, 2000-C3,
Series A2,
6.59%, 12/18/33.............. 746,714
------------
4,852,389
------------
PRIVATE ASSET BACKED: OTHER -- 0.4%
378,019 Impac Secured Assets Common
Owner Trust, Series 2003-2,
Class A2,
6.00%, 08/25/33.............. 394,135
613,094 SLM Student Loan Trust, Series
2002-1, Class A1, Floating
Rate,
1.19%(c), 10/25/10........... 613,873
512,910 Small Business Administration,
Series 2002-P10B, Class 1,
5.20%, 08/01/12.............. 517,582
------------
1,525,590
------------
</Table>
See notes to financial statements.
86
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: UTILITIES -- 0.5%
$ 2,000,000 Peco Energy Transition Trust,
Series 2000-A, Class A4,
7.65%, 03/01/10.............. $ 2,354,416
------------
REAL ESTATE -- 0.0%
50,000 EOP Operating LP,
7.50%, 04/19/29.............. 56,125
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
30,000 Host Marriott LP -- 144A,
7.13%, 11/01/13.............. 30,750
35,000 Mandalay Resort Group, Series
B,
10.25%, 08/01/07............. 40,600
130,000 Mohegan Tribal Gaming,
6.38%, 07/15/09.............. 134,875
50,000 Park Place Entertainment,
8.88%, 09/15/08.............. 56,750
25,000 Park Place Entertainment,
7.00%, 04/15/13.............. 26,813
------------
289,788
------------
RETAIL -- 0.0%
130,000 Wal-Mart Stores,
7.55%, 02/15/30.............. 160,498
------------
RETAIL: SUPERMARKETS -- 0.1%
125,000 Kroger Company,
6.75%, 04/15/12.............. 138,725
200,000 Kroger Company,
6.20%, 06/15/12.............. 214,860
------------
353,585
------------
SPECIAL PURPOSE ENTITY -- 0.0%
175,000 Principal Life Global -- 144A,
5.25%, 01/15/13.............. 177,573
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.6%
135,000 British Telecom PLC, Variable
Rate,
8.88%, 12/15/30(l)........... 177,164
50,000 Crown Castle International
Corp. -- 144A,
7.50%, 12/01/13.............. 50,500
45,000 Deutsche Telekom, Variable
Rate,
8.50%, 06/15/10(l)........... 54,494
125,000 Deutsche Telekom International
Corp., Variable Rate,
8.25%, 06/15/05(l)........... 135,650
215,000 Deutsche Telekom International
Finance, Variable Rate,
8.75%, 06/15/30(l)........... 275,628
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 250,000 New England Telephone &
Telegraph,
7.88%, 11/15/29.............. $ 299,763
210,000 New Jersey Bell Telephone,
7.85%, 11/15/29.............. 249,615
25,000 Panamsat Corp.,
8.50%, 02/01/12.............. 27,875
245,000 Qwest Capital Funding Corp.,
7.75%, 08/15/06.............. 254,800
115,000 Qwest Capital Funding Corp.,
7.00%, 08/03/09.............. 114,713
130,000 Verizon Pennsylvania, Series A,
5.65%, 11/15/11.............. 136,607
410,000 Vodafone Group PLC,
5.00%, 12/16/13.............. 409,257
90,000 Vodafone Group PLC,
6.25%, 11/30/32.............. 92,163
630,000 WorldCom, Inc.,
6.40%, 08/15/05(f)........... 212,625
430,000 WorldCom, Inc.,
8.00%, 05/15/06(f)........... 145,125
20,000 WorldCom, Inc.,
8.25%, 05/15/10(f)........... 6,750
260,000 WorldCom, Inc.,
8.25%, 05/15/31(f)........... 87,750
------------
2,730,479
------------
TRANSPORTATION: FREIGHT -- 0.2%
230,000 Burlington Northern Santa Fe
Corp.,
7.29%, 06/01/36.............. 273,761
400,000 Canadian National Railway
Company,
6.90%, 07/15/28(k)........... 448,582
------------
722,343
------------
TRANSPORTATION: SERVICES -- 0.0%
55,000 Omi Corp. -- 144A,
7.63%, 12/01/13.............. 55,756
90,000 Overseas Shipholding Group,
8.25%, 03/15/13.............. 96,863
45,000 Overseas Shipholding Group,
8.75%, 12/01/13.............. 49,556
------------
202,175
------------
</Table>
See notes to financial statements.
87
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES -- 0.0%
$ 35,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12............. $ 39,288
35,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 42,700
------------
81,988
------------
UTILITIES: ELECTRIC -- 0.5%
185,000 AES Corp. -- 144A,
8.75%, 05/15/13.............. 207,663
185,000 Calpine Corp. -- 144A,
8.50%, 07/15/10.............. 181,300
50,000 Dominion Resources, Inc.,
Series E,
6.75%, 12/15/32.............. 53,661
290,000 DTE Energy Corp.,
6.45%, 06/01/06.............. 313,682
85,000 Edison Mission Energy,
7.73%, 06/15/09.............. 81,388
110,000 First Energy Corp., Series C,
7.38%, 11/15/31.............. 112,931
75,000 Midwest Generation LLC, Series
A,
8.30%, 07/02/09.............. 78,284
95,000 Midwest Generation LLC, Series
B,
8.56%, 01/02/16.............. 99,199
275,000 Ohio Edison -- 144A,
5.45%, 05/01/15.............. 266,373
25,000 Oncor Electric Delivery,
6.38%, 01/15/15.............. 27,233
150,000 Oncor Electric Delivery,
7.25%, 01/15/33.............. 171,193
160,000 Progress Energy, Inc.,
7.00%, 10/30/31.............. 171,898
150,000 SP PowerAssets, Ltd. -- 144A,
5.00%, 10/22/13.............. 151,145
50,000 Virginia Electric & Power,
5.25%, 12/15/15.............. 50,282
------------
1,966,232
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $47,558,090)........... 48,083,773
------------
MUNICIPAL BONDS -- 0.4%
CALIFORNIA -- 0.1%
250,000 California State Department of
Water Powersupply Revenue
Bond, Series E,
3.98%, 05/01/05.............. 254,033
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
MUNICIPAL BONDS (CONTINUED)
ILLINOIS -- 0.3%
$ 1,475,000 Illinois State Pension, General
Obligation,
5.10%, 06/01/33.............. $ 1,356,218
------------
WISCONSIN -- 0.0%
120,000 Wisconsin State General Revenue
Bond, Series A,
5.70%, 05/01/26.............. 121,986
------------
TOTAL MUNICIPAL BONDS (Cost
$1,844,613).................. 1,732,237
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 3.8%
5,085,000 Bundesobligation, Series 142,
3.00%, 04/11/08(h)........... 6,308,150
2,625,000 Canadian Government,
5.25%, 06/01/13(j)........... 2,125,010
3,900,000 French Treasury Note,
3.50%, 01/12/08.............. 4,944,913
7,695,000 Government of Sweden,
5.00%, 01/28/09(i)........... 1,112,242
75,000 Province of Quebec, Series A,
7.37%, 03/06/26(g)........... 90,253
145,000 Province of Quebec, Series
MTNA,
7.38%, 04/09/26.............. 173,787
90,000 Province of Quebec, Series NJ,
7.50%, 07/15/23.............. 110,736
533,562 Republic of Colombia,
9.75%, 04/09/11.............. 608,260
250,000 United Mexican States,
11.38%, 09/15/16............. 355,000
602,000 United Mexican States,
8.13%, 12/30/19.............. 674,240
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$15,378,415)................. 16,502,591
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.2%
FANNIE MAE -- 0.1%
567,671 1.06%, 01/02/04(b)............. 567,671
------------
FREDDIE MAC -- 0.1%
285,052 1.06%, 01/27/04(b)............. 285,052
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$852,723).................... 852,723
------------
TIME DEPOSITS -- 3.5%
2,612,093 Bank of Montreal,
1.06%, 01/15/04(b)........... 2,612,093
1,140,210 Bank of Montreal,
1.06%, 02/17/04(b)........... 1,140,210
</Table>
See notes to financial statements.
88
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
TIME DEPOSITS (CONTINUED)
$ 1,425,262 Bank of Novia Scotia,
1.08%, 03/10/04(b)........... $ 1,425,262
855,157 Citigroup, Inc.,
1.08%, 01/05/04(b)........... 855,157
427,579 Citigroup, Inc.,
1.09%, 02/06/04(b)........... 427,579
855,157 Credit Agricole Indosuez,
0.98%, 01/02/04(b)........... 855,157
855,157 Credit Agricole Indosuez,
1.08%, 01/28/04(b)........... 855,157
1,140,210 Den Danske Bank,
1.08%, 01/20/04(b)........... 1,140,210
1,425,262 Royal Bank of Canada,
1.05%, 02/27/04(b)........... 1,425,262
712,631 Royal Bank of Scotland,
1.08%, 01/09/04(b)........... 712,631
285,052 Royal Bank of Scotland,
1.08%, 01/15/04(b)........... 285,052
2,137,893 Royal Bank of Scotland,
1.08%, 01/20/04(b)........... 2,137,893
712,631 Svenska Handlesbanken,
1.08%, 02/04/04(b)........... 712,631
285,052 Toronto Dominion Bank,
1.10%, 01/08/04(b)........... 285,052
427,579 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)........... 427,579
------------
TOTAL TIME DEPOSITS (Cost
$15,296,925)................. 15,296,925
------------
SHORT TERM CORPORATE NOTES -- 1.7%
285,052 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)....... 285,052
285,052 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)....... 285,052
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM CORPORATE NOTES (CONTINUED)
$ 712,631 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)....... $ 712,631
570,105 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)....... 570,105
712,631 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)....... 712,631
1,140,210 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)....... 1,140,210
1,852,841 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)....... 1,852,841
427,579 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)....... 427,579
1,425,262 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)....... 1,425,262
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $7,411,363)...... 7,411,363
------------
SHORT TERM COMMERCIAL PAPER -- 0.1%
311,098 General Electric Capital Corp.,
1.09%, 01/09/04(b)........... 311,098
285,052 General Electric Capital Corp.,
1.08%, 01/16/04(b)........... 285,052
------------
TOTAL SHORT TERM COMMERCIAL
PAPER (Cost $596,150)........ 596,150
------------
TOTAL SECURITIES (Cost
$419,931,676)................ 458,893,796
------------
</Table>
See notes to financial statements.
89
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 5.1%
$ 3,135,576 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $3,135,757
(Collateralized by Archer-
Daniels-Midland Company,
8.88%, due 04/15/11, with a
value of $655,307, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$643,265, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$1,022,107, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $255,743, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $621,866)(b)........ $ 3,135,576
1,509,171 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $1,509,209
(Collateralized by Small
Business Administration,
4.38%, due 08/25/14, with a
value of $1,584,629)......... 1,509,171
17,466,394 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $17,466,831
(Collateralized by Fannie
Mae, 4.38%, due 03/01/33,
with a value of $16,663,532
and Fannie Mae Adjustable
Rate Mortgage, 5.34%, due
07/01/26, with a value of
$1,676,270).................. 17,466,394
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $22,111,141)........... 22,111,141
------------
SECURITIES SOLD SHORT -- (0.4)%
1,300,000 Fannie Mae Gold, TBA,
6.00%, 01/20/04.............. (1,362,156)
600,000 Fannie Mae Gold, TBA,
5.00%, 02/12/04.............. (590,437)
------------
TOTAL SECURITIES SOLD SHORT
(Proceeds $1,944,612)........ (1,952,593)
------------
<Caption>
CONTRACTS VALUE
--------- ------------
CALL OPTIONS WRITTEN -- 0.0%
1,050,000 Fannie Mae Gold Expiring
February 2004 @ 96.968, 5.00%
02/05/04..................... $ (4,431)
30 US Treasury Note (10 Year)
March Future, Expiring
February 2004 @ 110, zero
coupon, 02/21/04............. (20,625)
------------
TOTAL CALL OPTIONS WRITTEN
(Premium $48,164)............ (25,056)
------------
Total Investments -- 110.4%
(Cost $440,050,041).......... 479,027,288
Liabilities less other
assets -- (10.4)%............ (44,941,456)
------------
NET ASSETS -- 100.0%........... $434,085,832
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $453,240,633.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $31,961,556
Gross unrealized depreciation........... (4,197,252)
-----------
Net unrealized appreciation............. $27,764,304
===========
</Table>
- ---------------
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for securities
loaned.
(c) Quarterly reset provision. The rate shown was in effect at December 31,
2003.
(d) Monthly reset provision. The rate shown was in effect at December 31, 2003.
(e) Security is segregated as collateral for short sales and written options.
(f) Bond is in default.
(g) Step bond. The rate shown was in effect at December 31, 2003.
(h) Principal amount shown for this debt security is denominated in Euros.
(i) Principal amount shown for this debt security is denominated in Swedish
Krona.
(j) Principal amount shown for this debt security is denominated in Canadian
dollars.
(k) Security is segregated as initial margin for futures contracts.
(l) Variable Rate Security. Interest rate based on the credit rating of the
issuer. The rate shown was in effect at December 31, 2003.
* Non-income producing security.
** Variable Rate Security. The rate shown was in effect at December 31, 2003.
TBA To be assigned. Securities are purchased on a forward commitment basis with
approximate principal amount (generally +/-1.0%) and general stated maturity
date. The actual principal amount and maturity date will be determined upon
settlement when the specific mortgage pools are assigned.
See notes to financial statements.
90
VALUE AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 97.2%
AEROSPACE AND DEFENSE -- 0.8%
85,000 Northrop Grumman Corp.(a).... $ 8,126,000
90,000 United Technologies Corp. ... 8,529,300
--------------
16,655,300
--------------
APPAREL: MANUFACTURING -- 0.6%
293,100 V. F. Corp. ................. 12,673,644
--------------
AUTOMOTIVE EQUIPMENT -- 1.3%
70,000 Johnson Controls, Inc. ...... 8,128,400
142,725 Lear Corp.(a)................ 8,753,324
153,900 Magna International, Inc. --
Class A(a)................. 12,319,695
--------------
29,201,419
--------------
BANKS -- 12.4%
931,400 Bank of America Corp.(a)..... 74,912,501
850,000 Bank One Corp. .............. 38,751,500
50,000 Commerce Bancorp, Inc.(a).... 2,634,000
534,200 FleetBoston Financial
Corp. ..................... 23,317,830
93,600 Golden West Financial
Corp. ..................... 9,658,584
1,129,840 J.P. Morgan Chase & Company.. 41,499,023
397,300 National City Corp. ......... 13,484,362
386,900 Regions Financial Corp. ..... 14,392,680
560,000 Wachovia Corp. .............. 26,090,400
540,150 Washington Mutual, Inc. ..... 21,670,818
132,800 Wells Fargo & Company........ 7,820,592
--------------
274,232,290
--------------
BROADCAST SERVICES/MEDIA -- 5.0%
230,000 Clear Channel Communications,
Inc. ...................... 10,770,900
808,165 Comcast Corp. -- Class A*.... 26,564,384
365,000 Comcast Corp. -- Special
Class A*................... 11,417,200
878,000 Time Warner, Inc.*........... 15,795,220
775,000 Viacom, Inc. -- Class B...... 34,394,500
315,000 Westwood One, Inc.*.......... 10,776,150
--------------
109,718,354
--------------
BUSINESS SERVICES -- 0.7%
400,000 First Data Corp. ............ 16,436,000
--------------
CHEMICALS -- 1.3%
25,000 Ashland, Inc. ............... 1,101,500
328,100 Dow Chemical Company......... 13,639,117
186,600 Eastman Chemical Company..... 7,376,298
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
93,300 International Flavors &
Fragrances, Inc.(a)........ $ 3,258,036
82,500 Lubrizol Corp. .............. 2,682,900
--------------
28,057,851
--------------
COMPUTER SOFTWARE AND SERVICES -- 0.9%
750,000 Microsoft Corp. ............. 20,655,000
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.9%
1,582,400 Hewlett-Packard Company...... 36,347,728
61,000 International Business
Machines Corp. ............ 5,653,480
--------------
42,001,208
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.7%
100,000 American Standard Companies,
Inc.*...................... 10,070,000
98,200 Martin Marietta Materials,
Inc. ...................... 4,612,454
--------------
14,682,454
--------------
CONSUMER GOODS AND SERVICES -- 6.0%
1,014,400 Altria Group, Inc. .......... 55,203,648
250,000 Avon Products, Inc. ......... 16,872,500
350,000 Colgate-Palmolive Company.... 17,517,500
425,000 Loews Corp. -- Carolina
Group...................... 10,727,000
185,000 Procter & Gamble Company..... 18,477,800
166,100 Whirlpool Corp.(a)........... 12,067,165
--------------
130,865,613
--------------
DISTRIBUTION -- 0.5%
272,200 Avnet, Inc.*................. 5,895,852
324,105 Ingram Micro, Inc. -- Class
A*......................... 5,153,270
--------------
11,049,122
--------------
ELECTRONICS -- 1.0%
641,400 Flextronics International,
Ltd.*(a)................... 9,518,376
1,638,375 Solectron Corp.*............. 9,682,796
147,600 Thomas & Betts Corp. ........ 3,378,564
--------------
22,579,736
--------------
FINANCIAL SERVICES -- 9.0%
1,910,500 Citigroup, Inc. ............. 92,735,670
394,800 Fannie Mae................... 29,633,688
192,900 Freddie Mac.................. 11,249,928
209,800 Lehman Brothers Holdings,
Inc. ...................... 16,200,756
750,000 MBNA Corp. .................. 18,637,500
</Table>
See notes to financial statements.
91
VALUE AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
135,000 Merrill Lynch & Company,
Inc.(a).................... $ 7,917,750
361,400 Morgan Stanley............... 20,914,218
--------------
197,289,510
--------------
FOOD AND BEVERAGE -- 1.6%
335,000 Anheuser-Busch Companies,
Inc. ...................... 17,647,800
265,000 Dean Foods Company*.......... 8,710,550
195,000 PepsiCo, Inc. ............... 9,090,900
--------------
35,449,250
--------------
INSURANCE -- 8.5%
500,000 Ace, Ltd. ................... 20,710,000
731,300 Allstate Corp. .............. 31,460,526
707,700 American International Group,
Inc. ...................... 46,906,355
70,800 Axis Capital Holdings,
Ltd. ...................... 2,073,024
198,700 Chubb Corp. ................. 13,531,470
178,400 Jefferson-Pilot Corp. ....... 9,035,960
725,200 MetLife, Inc. ............... 24,417,484
97,000 PartnerRE, Ltd. ............. 5,630,850
201,710 RenaissanceRe Holdings,
Ltd.(a).................... 9,893,876
270,300 Torchmark Corp. ............. 12,309,462
564,300 Travelers Property Casualty
Corp. -- Class A........... 9,468,954
55,079 Travelers Property Casualty
Corp. -- Class B........... 934,691
--------------
186,372,652
--------------
INTERNET SERVICES -- 0.2%
190,000 Juniper Networks, Inc.*(a)... 3,549,200
--------------
LEISURE AND RECREATION -- 0.3%
140,000 Carnival Corp. .............. 5,562,200
52,200 Royal Caribbean Cruises,
Ltd.(a).................... 1,816,038
--------------
7,378,238
--------------
MANUFACTURING -- 2.3%
229,000 Cooper Industries, Ltd. --
Class A.................... 13,265,970
228,300 Owens-Illinois, Inc.*........ 2,714,487
182,100 Parker-Hannifin Corp. ....... 10,834,950
592,950 Smurfit-Stone Container
Corp.*..................... 11,011,082
240,000 Textron, Inc. ............... 13,694,400
--------------
51,520,889
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES -- 3.5%
225,000 Anthem, Inc.*(a)............. $ 16,875,000
475,000 HCA, Inc. ................... 20,406,000
252,100 Health Management Associates,
Inc. -- Class A(a)......... 6,050,400
750,000 Tenet Healthcare Corp.*...... 12,037,500
225,000 WellPoint Health Networks,
Inc.*...................... 21,822,750
--------------
77,191,650
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.7%
115,000 Alcon, Inc.(a)............... 6,962,100
175,000 Johnson & Johnson............ 9,040,500
--------------
16,002,600
--------------
METALS AND MINING -- 0.2%
125,000 Alcoa, Inc. ................. 4,750,000
--------------
MOTOR VEHICLES -- 0.8%
350,000 Harley-Davidson, Inc.(a)..... 16,635,500
--------------
OIL, COAL AND GAS -- 11.3%
206,500 Baker Hughes, Inc. .......... 6,641,040
375,000 BP PLC (ADR)................. 18,506,250
319,000 ChevronTexaco Corp. ......... 27,558,410
799,400 ConocoPhillips............... 52,416,658
125,000 Devon Energy Corp. .......... 7,157,500
1,384,800 Exxon Mobil Corp. ........... 56,776,800
375,000 Kerr-McGee Corp. ............ 17,433,750
250,000 Nabors Industries, Ltd.*..... 10,375,000
152,700 Noble Corp.*................. 5,463,606
100,000 Noble Energy, Inc.(a)........ 4,443,000
624,000 Occidental Petroleum
Corp.(a)................... 26,357,760
220,000 Valero Energy Corp. ......... 10,194,800
124,000 Weatherford International,
Ltd.*...................... 4,464,000
--------------
247,788,574
--------------
PAPER AND FOREST PRODUCTS -- 0.9%
41,800 International Paper
Company.................... 1,801,998
319,702 MeadWestvaco Corp. .......... 9,511,134
119,350 Temple-Inland, Inc. ......... 7,479,665
--------------
18,792,797
--------------
PHARMACEUTICALS -- 5.3%
89,000 Aventis S.A. (ADR)(a)........ 5,897,140
180,000 Bristol-Myers Squibb
Company.................... 5,148,000
265,400 GlaxoSmithKline PLC
(ADR)(a)................... 12,372,948
255,000 Merck & Company, Inc. ....... 11,781,000
</Table>
See notes to financial statements.
92
VALUE AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
1,455,400 Pfizer, Inc. ................ $ 51,419,282
696,400 Wyeth........................ 29,562,180
--------------
116,180,550
--------------
RESEARCH AND DEVELOPMENT -- 0.5%
54,900 Cephalon, Inc.*(a)........... 2,657,709
300,000 MedImmune, Inc.*............. 7,620,000
--------------
10,277,709
--------------
RETAIL -- 1.3%
215,700 Federated Department Stores,
Inc. ...................... 10,165,941
275,000 Home Depot, Inc. ............ 9,759,750
179,678 Sears, Roebuck & Company..... 8,173,552
--------------
28,099,243
--------------
RETAIL: SUPERMARKETS -- 1.4%
479,350 Kroger Company*.............. 8,872,769
519,925 Safeway, Inc.*............... 11,391,556
355,700 SUPERVALU, Inc. ............. 10,169,463
--------------
30,433,788
--------------
RUBBER PRODUCTS -- 0.2%
193,100 Cooper Tire & Rubber
Company.................... 4,128,478
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.3%
292,900 Applera Corp. -- Applied
Biosystems Group(a)........ 6,065,959
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 6.5%
35,960 AT&T Corp. .................. 729,988
300,000 BellSouth Corp. ............. 8,490,000
1,690,300 Corning, Inc.*(a)............ 17,629,829
4,707,566 Nortel Networks Corp.*....... 19,913,004
1,132,200 Qwest Communications
International, Inc.*....... 4,891,104
854,900 SBC Communications, Inc. .... 22,287,243
1,679,800 Sprint Corp. (FON
Group)(a).................. 27,582,316
751,800 Sprint Corp. (PCS
Group)*(a)................. 4,225,116
964,950 Tellabs, Inc.*............... 8,134,529
820,652 Verizon Communications,
Inc. ...................... 28,788,472
--------------
142,671,601
--------------
TRANSPORTATION: FREIGHT -- 4.7%
1,124,900 Burlington Northern Santa Fe
Corp. ..................... 36,390,515
398,100 CSX Corp. ................... 14,307,714
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION: FREIGHT (CONTINUED)
609,900 Norfolk Southern Corp. ...... $ 14,424,135
563,500 Union Pacific Corp. ......... 39,151,980
--------------
104,274,344
--------------
UTILITIES: ELECTRIC -- 4.0%
430,780 American Electric Power
Company, Inc. ............. 13,143,098
9,526 Cinergy Corp. ............... 369,704
374,800 Constellation Energy Group,
Inc. ...................... 14,677,168
79,400 Edison International......... 1,741,242
390,000 Entergy Corp. ............... 22,280,700
60,000 Exelon Corp. ................ 3,981,600
497,500 PPL Corp. ................... 21,765,625
305,800 Wisconsin Energy Corp. ...... 10,229,010
--------------
88,188,147
--------------
UTILITIES: GAS -- 0.6%
447,425 Sempra Energy................ 13,449,596
--------------
TOTAL COMMON STOCKS (Cost
$1,820,974,468)............ 2,135,298,266
--------------
REGULATED INVESTMENT COMPANIES -- 0.5%
5,147,881 American Aadvantage
Select(b).................. 5,147,881
1,593,675 Merrill Lynch Premier
Institutional Fund(b)...... 1,593,675
4,412,469 Merrimac Cash Fund -- Premium
Class(b)................... 4,412,469
--------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$11,154,025)............... 11,154,025
--------------
<Caption>
PRINCIPAL
---------
SHORT TERM COMMERCIAL PAPER -- 0.1%
$ 1,605,213 General Electric Capital
Corp.,
1.09%, 01/09/04(b)......... 1,605,213
1,470,823 General Electric Capital
Corp.,
1.08%, 01/16/04(b)......... 1,470,823
--------------
TOTAL SHORT TERM COMMERCIAL
PAPER (Cost $3,076,036).... 3,076,036
--------------
SHORT TERM CORPORATE NOTES -- 1.7%
1,470,823 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)..... 1,470,823
1,470,823 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)..... 1,470,823
3,677,058 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)..... 3,677,058
</Table>
See notes to financial statements.
93
VALUE AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SHORT TERM CORPORATE NOTES (CONTINUED)
$ 2,941,646 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)..... $ 2,941,646
3,677,058 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)..... 3,677,058
5,883,293 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)..... 5,883,293
9,560,350 Morgan Stanley, Floating
Rate,
1.05%(**), 06/14/04(b)..... 9,560,350
2,206,235 Morgan Stanley, Floating
Rate,
1.05%(**), 06/21/04(b)..... 2,206,235
7,354,116 Morgan Stanley, Floating
Rate,
1.05%(**), 09/10/04(b)..... 7,354,116
--------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $38,241,402)... 38,241,402
--------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.2%
FANNIE MAE -- 0.1%
2,929,087 1.06%, 01/02/04(b)........... 2,929,087
--------------
FREDDIE MAC -- 0.1%
1,470,823 1.06%, 01/27/04(b)........... 1,470,823
--------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY
SECURITIES (Cost
$4,399,910)................ 4,399,910
--------------
TIME DEPOSITS -- 3.6%
13,477,964 Bank of Montreal,
1.06%, 01/15/04(b)......... 13,477,964
5,883,293 Bank of Montreal,
1.06%, 02/17/04(b)......... 5,883,293
7,354,116 Bank of Novia Scotia,
1.08%, 03/10/04(b)......... 7,354,116
4,412,469 Citigroup, Inc.,
1.08%, 01/05/04(b)......... 4,412,469
2,206,235 Citigroup, Inc.,
1.09%, 02/06/04(b)......... 2,206,235
4,412,469 Credit Agricole Indosuez,
0.98%, 01/02/04(b)......... 4,412,469
4,412,469 Credit Agricole Indosuez,
1.08%, 01/28/04(b)......... 4,412,469
5,883,293 Den Danske Bank,
1.08%, 01/20/04(b)......... 5,883,293
7,354,116 Royal Bank of Canada,
1.05%, 02/27/04(b)......... 7,354,116
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
TIME DEPOSITS (CONTINUED)
$ 3,677,058 Royal Bank of Scotland,
1.08%, 01/09/04(b)......... $ 3,677,058
1,470,823 Royal Bank of Scotland,
1.08%, 01/15/04(b)......... 1,470,823
11,031,174 Royal Bank of Scotland,
1.08%, 01/20/04(b)......... 11,031,174
3,677,058 Svenska Handlesbanken,
1.08%, 02/04/04(b)......... 3,677,058
1,470,823 Toronto Dominion Bank,
1.10%, 01/08/04(b)......... 1,470,823
2,206,235 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)......... 2,206,235
--------------
TOTAL TIME DEPOSITS (Cost
$78,929,595)............... 78,929,595
--------------
TOTAL SECURITIES (Cost
$1,956,775,436)............ 2,271,099,234
--------------
REPURCHASE AGREEMENTS -- 3.5%
16,179,055 With Goldman Sachs Group,
Inc., dated 12/31/03,
1.04%, due 01/02/04,
repurchase proceeds at
maturity $16,179,990
(Collateralized by
Archer-Daniels-Midland
Company, 8.88%, due
04/15/11, with a value of
$3,381,277, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$3,319,138, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value
of $5,273,903, Morgan
Stanley, 6.75%, due
04/15/11, with a value of
$1,319,591, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $3,208,727)(b).... 16,179,055
28,963,894 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $28,964,618
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 3.981%, due
03/01/33, with a value of
$24,497,893 and Small
Business Administration,
4.38%, due 07/25/15, with a
value of $5,914,196)....... 28,963,894
</Table>
See notes to financial statements.
94
VALUE AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS (CONTINUED)
$32,088,868 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $32,089,670
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 4.60%, due
02/01/33, with a value of
$25,342,404 and Fannie Mae
Adjustable Rate Mortgage,
5.11%, due 06/01/32, with a
value of $8,350,908)....... $ 32,088,868
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $77,231,817)......... 77,231,817
--------------
Total Investments -- 106.8%
(Cost $2,034,007,253)...... 2,348,331,051
Liabilities less other
assets -- (6.8)%........... (150,245,316)
--------------
NET ASSETS -- 100.0%......... $2,198,085,735
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $2,046,600,509.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $343,975,506
Gross unrealized depreciation.......... (42,244,964)
------------
Net unrealized appreciation............ $301,730,542
============
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned
(ADR) American Depository Receipt.
See notes to financial statements.
95
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 98.6%
ADVERTISING -- 0.2%
23,300 Interpublic Group of
Companies, Inc.*(a)......... $ 363,480
15,100 Omnicom Group, Inc. .......... 1,318,683
--------------
1,682,163
--------------
AEROSPACE AND DEFENSE -- 3.6%
41,550 Boeing Company................ 1,750,917
15,450 General Dynamics Corp. ....... 1,396,526
4,100 Goodrich Corp. ............... 121,729
451,100 Lockheed Martin Corp. ........ 23,186,540
129,900 United Technologies Corp. .... 12,310,623
--------------
38,766,335
--------------
AGRICULTURE -- 0.1%
20,600 Monsanto Company.............. 592,868
--------------
AIRLINES -- 0.0%
15,650 Southwest Airlines Company.... 252,591
--------------
APPAREL: MANUFACTURING -- 0.2%
10,450 Jones Apparel Group, Inc. .... 368,154
4,900 Liz Claiborne, Inc. .......... 173,754
29,050 Nike, Inc. -- Class B......... 1,988,763
3,200 Reebok International,
Ltd.(a)..................... 125,824
--------------
2,656,495
--------------
APPAREL: RETAIL -- 0.3%
31,000 Limited Brands................ 558,930
101,600 The Gap, Inc.(a).............. 2,358,136
--------------
2,917,066
--------------
AUTOMOBILE: RETAIL -- 0.0%
20,200 AutoNation, Inc.*............. 371,074
--------------
AUTOMOBILES -- 0.2%
43,950 General Motors Corp.(a)....... 2,346,930
--------------
AUTOMOTIVE EQUIPMENT -- 0.0%
4,100 Johnson Controls, Inc. ....... 476,092
--------------
BANKS -- 9.9%
22,850 AmSouth Bancorp............... 559,825
315,991 Bank of America Corp.(a)...... 25,415,155
37,500 Bank of New York Company,
Inc. ....................... 1,242,000
55,300 Bank One Corp. ............... 2,521,127
10,700 BB &T Corp. .................. 413,448
10,908 Charter One Financial,
Inc. ....................... 376,871
5,500 First Tennessee National
Corp.(a).................... 242,550
50,050 FleetBoston Financial
Corp. ...................... 2,184,683
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
7,950 Golden West Financial
Corp. ...................... $ 820,361
10,300 Huntington Bancshares,
Inc. ....................... 231,750
180,700 J.P. Morgan Chase & Company... 6,637,111
21,500 KeyCorp....................... 630,380
9,600 Marshall & Ilsley Corp. ...... 367,200
430,550 Mellon Financial Corp. ....... 13,824,960
30,600 National City Corp. .......... 1,038,564
7,250 North Fork Bancorp, Inc. ..... 293,408
9,900 Northern Trust Corp. ......... 459,558
13,400 PNC Financial Services
Group....................... 733,382
10,800 Regions Financial Corp. ...... 401,760
25,750 SouthTrust Corp. ............. 842,798
270,650 State Street Corp. ........... 14,095,451
13,600 SunTrust Banks, Inc. ......... 972,400
87,900 U.S. Bancorp.................. 2,617,662
11,050 Union Planters Corp. ......... 347,965
454,150 Wachovia Corp. ............... 21,158,848
45,100 Washington Mutual, Inc. ...... 1,809,412
81,950 Wells Fargo & Company......... 4,826,036
5,300 Zions Bancorp................. 325,049
--------------
105,389,714
--------------
BROADCAST SERVICES/MEDIA -- 5.6%
109,800 Comcast Corp. -- Class A*..... 3,609,126
56,900 Delphi Corp. ................. 580,949
159,250 Gannett Company, Inc. ........ 14,198,730
905,157 Hughes Electronics Corp.*..... 14,980,347
14,550 McGraw-Hill Companies,
Inc. ....................... 1,017,336
5,700 Meredith Corp. ............... 278,217
217,950 Time Warner, Inc.*............ 3,920,921
335,350 Tribune Company(a)............ 17,304,059
34,150 Viacom, Inc. -- Class B....... 1,515,577
97,650 Walt Disney Company........... 2,278,175
--------------
59,683,437
--------------
BUSINESS SERVICES -- 1.0%
120,800 Cintas Corp.(a)............... 6,055,704
22,750 Concord EFS, Inc.*............ 337,610
9,100 Convergys Corp.*.............. 158,886
13,000 Ecolab, Inc. ................. 355,810
35,700 First Data Corp.(a)........... 1,466,913
8,650 Fiserv, Inc.*................. 341,762
4,800 Moody's Corp. ................ 290,640
</Table>
See notes to financial statements.
96
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (CONTINUED)
29,350 Paychex, Inc. ................ $ 1,091,820
14,850 Robert Half International,
Inc.*....................... 346,599
--------------
10,445,744
--------------
CHEMICALS -- 3.8%
11,200 Air Products and Chemicals,
Inc. ....................... 591,696
44,050 Dow Chemical Company.......... 1,831,159
394,200 E. I. du Pont de Nemours and
Company..................... 18,089,837
10,800 Engelhard Corp. .............. 323,460
8,200 International Flavors &
Fragrances, Inc. ........... 286,344
281,950 PPG Industries, Inc. ......... 18,050,439
17,000 Praxair, Inc. ................ 649,400
11,750 Rohm And Haas Company......... 501,843
4,150 Sigma-Aldrich Corp.(a)........ 237,297
--------------
40,561,475
--------------
COMMERCIAL SERVICES -- 1.9%
889,990 Cendant Corp.*(a)............. 19,820,077
--------------
COMPUTER SOFTWARE AND SERVICES -- 6.3%
262,350 Adobe Systems, Inc.(a)........ 10,310,354
2,200 Autodesk, Inc. ............... 54,076
28,900 Automatic Data Processing,
Inc. ....................... 1,144,729
426,400 BEA Systems, Inc.*(a)......... 5,244,720
10,750 BMC Software, Inc.*........... 200,488
19,500 Citrix Systems, Inc.*......... 413,595
45,250 Computer Associates
International, Inc.(a)...... 1,237,135
9,150 Computer Sciences Corp.*...... 404,705
45,800 Compuware Corp.*.............. 276,632
14,000 Electronic Arts, Inc.*........ 668,920
22,400 Electronic Data Systems
Corp.(a).................... 549,696
11,800 Intuit, Inc.*................. 624,338
3,650 Mercury Interactive
Corp.*(a)................... 177,536
1,203,800 Microsoft Corp. .............. 33,152,651
6,350 NVIDIA Corp.*(a).............. 147,638
251,350 Oracle Corp.*................. 3,317,820
14,600 PeopleSoft, Inc.*............. 332,880
55,500 Siebel Systems, Inc.*......... 769,785
12,850 SunGard Data Systems, Inc.*... 356,074
18,450 Unisys Corp.*................. 273,983
184,700 VERITAS Software Corp.*....... 6,863,451
--------------
66,521,206
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTERS AND OFFICE EQUIPMENT -- 2.7%
29,250 Apple Computer, Inc.*......... $ 625,073
125,100 Dell, Inc.*................... 4,248,396
242,000 EMC Corp.*.................... 3,126,640
36,350 Gateway, Inc.*................ 167,210
145,261 Hewlett-Packard Company....... 3,336,645
84,600 International Business
Machines Corp. ............. 7,840,727
12,600 Lexmark International Group,
Inc.*....................... 990,864
35,050 Network Appliance, Inc.*(a)... 719,577
10,900 Pitney Bowes, Inc. ........... 442,758
308,000 Seagate Technology*........... 5,821,200
143,450 Sun Microsystems, Inc.*....... 644,091
33,650 Xerox Corp.*(a)............... 464,370
--------------
28,427,551
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.8%
66,850 American Standard Companies,
Inc.*....................... 6,731,794
3,150 Centex Corp.(a)............... 339,098
3,800 KB Home....................... 275,576
22,050 Masco Corp. .................. 604,391
3,100 Pulte Homes, Inc. ............ 290,222
5,100 Vulcan Materials Company...... 242,607
--------------
8,483,688
--------------
CONSUMER GOODS AND SERVICES -- 7.0%
2,300 Alberto-Culver Company --
Class B..................... 145,084
99,750 Altria Group, Inc. ........... 5,428,395
11,200 Avon Products, Inc. .......... 755,888
333,550 Clorox Company................ 16,197,187
25,650 Colgate-Palmolive Company..... 1,283,783
13,800 Eastman Kodak Company(a)...... 354,246
191,000 Estee Lauder Companies,
Inc. -- Class A............. 7,498,660
13,950 FedEx Corp. .................. 941,625
11,200 Fortune Brands, Inc. ......... 800,688
491,350 General Electric Company...... 15,222,022
114,400 Gillette Company.............. 4,201,912
39,800 Kimberly-Clark Corp. ......... 2,351,782
9,450 Leggett & Platt, Inc. ........ 204,404
545,000 Newell Rubbermaid, Inc.(a).... 12,409,650
63,700 Procter & Gamble Company...... 6,362,356
4,400 R.J. Reynolds Tobacco
Holdings, Inc. ............. 255,860
</Table>
See notes to financial statements.
97
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
7,800 Sherwin-Williams Company...... $ 270,972
3,550 Whirlpool Corp. .............. 257,908
--------------
74,942,422
--------------
CONTAINERS AND PACKAGING -- 0.1%
5,600 Ball Corp. ................... 333,592
5,100 Bemis Company, Inc. .......... 255,000
7,300 Pactiv Corp.*................. 174,470
8,800 Sealed Air Corp.*............. 476,432
--------------
1,239,494
--------------
DISTRIBUTION -- 0.0%
4,750 W.W. Grainger, Inc. .......... 225,103
--------------
EDUCATION -- 0.1%
8,250 Apollo Group, Inc. -- Class
A*.......................... 561,000
--------------
ELECTRONICS -- 0.8%
99,432 Emerson Electric Company...... 6,438,222
12,300 Jabil Circuit, Inc.*.......... 348,090
8,000 Molex, Inc. .................. 279,120
14,700 Rockwell Collins, Inc. ....... 441,441
55,800 Sanmina-SCI Corp.*............ 703,638
37,800 Solectron Corp.*.............. 223,398
--------------
8,433,909
--------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.1%
16,000 Allied Waste Industries,
Inc.*(a).................... 222,080
27,350 Waste Management, Inc. ....... 809,560
--------------
1,031,640
--------------
FINANCIAL SERVICES -- 6.5%
63,700 American Express Company...... 3,072,251
7,450 Bear Stearns Companies,
Inc. ....................... 595,628
25,700 Capital One Financial
Corp.(a).................... 1,575,153
64,450 Charles Schwab Corp. ......... 763,088
526,559 Citigroup, Inc. .............. 25,559,173
20,066 Countrywide Financial
Corp. ...................... 1,522,006
3,300 Deluxe Corp. ................. 136,389
14,000 Equifax, Inc.(a).............. 343,000
45,600 Fannie Mae.................... 3,422,736
11,850 Franklin Resources, Inc. ..... 616,911
32,550 Freddie Mac................... 1,898,316
22,100 Goldman Sachs Group,
Inc.(a)..................... 2,181,933
14,200 H &R Block, Inc. ............. 786,254
21,350 Lehman Brothers Holdings,
Inc. ....................... 1,648,647
62,625 MBNA Corp. ................... 1,556,231
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
91,400 Merrill Lynch & Company,
Inc. ....................... $ 5,360,610
78,150 Morgan Stanley................ 4,522,541
14,650 Providian Financial Corp.*.... 170,526
285,200 Prudential Financial, Inc. ... 11,912,803
21,500 SLM Corp. .................... 810,120
6,650 T. Rowe Price Group, Inc. .... 315,277
--------------
68,769,593
--------------
FOOD AND BEVERAGE -- 1.9%
41,250 Anheuser-Busch Companies,
Inc. ....................... 2,173,050
29,955 Archer-Daniels-Midland
Company..................... 455,915
3,000 Brown-Forman Corp. -- Class
B........................... 280,350
20,400 Campbell Soup Company......... 546,720
117,250 Coca-Cola Company............. 5,950,437
8,500 Coca-Cola Enterprises,
Inc. ....................... 185,895
43,600 ConAgra Foods, Inc. .......... 1,150,604
19,300 General Mills, Inc.(a)........ 874,290
17,200 H.J. Heinz Company............ 626,596
2,450 Hershey Foods Corp. .......... 188,626
18,000 Kellogg Company............... 685,440
6,600 McCormick & Company, Inc. .... 198,660
18,800 Pepsi Bottling Group, Inc. ... 454,584
84,100 PepsiCo, Inc. ................ 3,920,742
36,100 Sara Lee Corp. ............... 783,731
31,200 Sysco Corp. .................. 1,161,576
10,800 Wm. Wrigley Jr. Company(a).... 607,068
--------------
20,244,284
--------------
INSURANCE -- 4.7%
13,350 Ace, Ltd. .................... 552,957
7,550 Aetna, Inc. .................. 510,229
24,100 AFLAC, Inc. .................. 871,938
33,700 Allstate Corp. ............... 1,449,773
5,100 Ambac Financial Group,
Inc. ....................... 353,889
127,500 American International Group,
Inc. ....................... 8,450,699
14,900 Aon Corp. .................... 356,706
162,800 Chubb Corp. .................. 11,086,679
15,800 CIGNA Corp. .................. 908,500
3,150 Cincinnati Financial Corp. ... 131,922
284,450 Hartford Financial Services
Group, Inc. ................ 16,791,083
15,850 Humana, Inc.*................. 362,173
7,800 Jefferson-Pilot Corp. ........ 395,070
</Table>
See notes to financial statements.
98
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
14,700 John Hancock Financial
Services, Inc. ............. $ 551,250
8,350 Lincoln National Corp. ....... 337,090
10,250 Marsh & McLennan Companies,
Inc. ....................... 490,873
7,150 MBIA, Inc. ................... 423,495
37,150 MetLife, Inc. ................ 1,250,841
5,050 MGIC Investment Corp. ........ 287,547
16,400 Principal Financial Group,
Inc. ....................... 542,348
17,300 Progressive Corp. ............ 1,446,107
7,050 SAFECO Corp. ................. 274,457
11,200 St. Paul Companies, Inc. ..... 444,080
5,750 Torchmark Corp. .............. 261,855
50,173 Travelers Property Casualty
Corp. -- Class B............ 851,436
6,750 XL Capital, Ltd. -- Class A... 523,463
--------------
49,906,460
--------------
INTERNET SERVICES -- 1.8%
342,750 Cisco Systems, Inc.*.......... 8,325,397
31,500 eBay, Inc.*................... 2,034,585
302,500 Monster Worldwide, Inc.*(a)... 6,642,900
15,750 Novell, Inc.*................. 165,690
23,350 Symantec Corp.*(a)............ 809,078
31,500 YAHOO!, Inc.*................. 1,422,855
--------------
19,400,505
--------------
LEISURE AND RECREATION -- 0.2%
5,600 Brunswick Corp. .............. 178,248
12,000 Carnival Corp. ............... 476,760
4,800 Harrah's Entertainment,
Inc. ....................... 238,896
19,550 Hilton Hotels Corp. .......... 334,892
17,500 International Game
Technology.................. 624,749
4,650 Marriott International,
Inc. -- Class A............. 214,830
9,350 Starwood Hotels & Resorts..... 336,320
--------------
2,404,695
--------------
MACHINERY -- 0.4%
16,200 Caterpillar, Inc. ............ 1,344,924
26,550 Deere & Company............... 1,727,077
9,650 Dover Corp. .................. 383,588
8,200 Ingersoll-Rand Company --
Class A(a).................. 556,616
16,850 Rockwell Automation, Inc. .... 599,860
--------------
4,612,065
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MANUFACTURING -- 2.9%
74,000 3M Company.................... $ 6,292,219
7,150 Cooper Industries,
Ltd. -- Class A............. 414,200
11,750 Danaher Corp.(a).............. 1,078,063
3,000 Eaton Corp. .................. 323,940
41,850 Honeywell International,
Inc. ....................... 1,399,046
214,250 Illinois Tool Works,
Inc.(a)..................... 17,977,717
4,350 ITT Industries, Inc. ......... 322,814
6,100 Parker-Hannifin Corp. ........ 362,950
7,650 Textron, Inc. ................ 436,509
92,700 Tyco International, Ltd.(a)... 2,456,550
--------------
31,064,008
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.1%
10,500 Anthem, Inc.*(a).............. 787,500
4,250 Express Scripts, Inc.*(a)..... 282,328
30,250 IMS Health, Inc.(a)........... 752,015
5,900 McKesson Corp. ............... 189,744
16,166 Medco Health Solutions,
Inc.*....................... 549,482
305,400 UnitedHealth Group, Inc. ..... 17,768,172
17,000 WellPoint Health Networks,
Inc.*....................... 1,648,830
--------------
21,978,071
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.9%
6,300 Allergan, Inc. ............... 483,903
31,250 Baxter International, Inc. ... 953,750
13,950 Becton, Dickinson and
Company..................... 573,903
390,000 Biomet, Inc.(a)............... 14,199,900
64,750 Boston Scientific Corp.*...... 2,380,210
2,400 C. R. Bard, Inc. ............. 195,000
9,950 Genzyme Corp.*................ 490,933
34,600 Guidant Corp. ................ 2,082,920
145,300 Johnson & Johnson............. 7,506,198
434,607 Medtronic, Inc. .............. 21,126,245
8,000 St. Jude Medical, Inc.*....... 490,800
9,100 Stryker Corp. ................ 773,591
9,550 Zimmer Holdings, Inc.*........ 672,320
--------------
51,929,673
--------------
METALS AND MINING -- 0.3%
39,900 Alcoa, Inc. .................. 1,516,199
8,550 Freeport-McMoRan Copper &
Gold, Inc. -- Class B....... 360,212
19,500 Newmont Mining Corp. ......... 947,895
5,250 Phelps Dodge Corp.*(a)........ 399,473
--------------
3,223,779
--------------
</Table>
See notes to financial statements.
99
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MOTOR VEHICLES -- 0.5%
206,600 Ford Motor Company(a)......... $ 3,305,600
14,700 Harley-Davidson, Inc.(a)...... 698,691
13,425 PACCAR, Inc. ................. 1,142,736
--------------
5,147,027
--------------
OIL AND GAS: PIPELINES -- 0.1%
6,600 Kinder Morgan, Inc. .......... 390,060
32,100 Williams Companies, Inc. ..... 315,222
--------------
705,282
--------------
OIL, COAL AND GAS -- 4.5%
6,450 Amerada Hess Corp. ........... 342,947
12,050 Anadarko Petroleum Corp. ..... 614,671
3,200 Apache Corp. ................. 259,520
7,150 BJ Services Company*.......... 256,685
10,600 Burlington Resources, Inc. ... 587,028
73,600 ChevronTexaco Corp. .......... 6,358,304
53,512 ConocoPhillips................ 3,508,782
140,900 Devon Energy Corp. ........... 8,067,933
2,250 EOG Resources, Inc. .......... 103,883
578,900 Exxon Mobil Corp. ............ 23,734,899
8,600 Halliburton Company........... 223,600
4,500 Kerr-McGee Corp. ............. 209,205
15,600 Marathon Oil Corp. ........... 516,204
7,300 Nabors Industries, Ltd.*...... 302,950
2,900 Noble Corp.*.................. 103,762
42,100 Occidental Petroleum Corp. ... 1,778,304
9,700 Sunoco, Inc. ................. 496,155
5,850 Transocean, Inc.*............. 140,459
16,100 Unocal Corp. ................. 592,963
--------------
48,198,254
--------------
PAPER AND FOREST PRODUCTS -- 0.9%
2,800 Boise Cascade Corp. .......... 92,008
19,650 Georgia-Pacific Corp.(a)...... 602,666
180,650 International Paper Company... 7,787,821
12,200 Louisiana-Pacific Corp.*...... 218,136
9,000 MeadWestvaco Corp. ........... 267,750
10,800 Weyerhauser Company........... 691,200
--------------
9,659,581
--------------
PHARMACEUTICALS -- 6.4%
497,400 Abbott Laboratories........... 23,178,840
39,950 Bristol-Myers Squibb
Company..................... 1,142,570
156,850 Eli Lilly and Company......... 11,031,261
7,050 Forest Laboratories, Inc.*.... 435,690
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
18,900 King Pharmaceuticals, Inc.*... $ 288,414
108,100 Merck & Company, Inc. ........ 4,994,220
659,443 Pfizer, Inc. ................. 23,298,120
5,900 Watson Pharmaceuticals,
Inc.*....................... 271,400
68,500 Wyeth......................... 2,907,825
--------------
67,548,340
--------------
PRINTING AND PUBLISHING -- 0.1%
1,650 Knight-Ridder, Inc. .......... 127,661
7,100 New York Times Company --
Class A..................... 339,309
5,900 R.R. Donnelley & Sons
Company(a).................. 177,885
--------------
644,855
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
18,700 Equity Office Properties
Trust....................... 535,755
14,050 Equity Residential............ 414,616
8,800 Simon Property Group, Inc. ... 407,792
--------------
1,358,163
--------------
RESEARCH AND DEVELOPMENT -- 0.5%
63,644 Amgen, Inc.*.................. 3,933,199
6,250 Biogen Idec, Inc.*............ 229,875
9,050 Chiron Corp.*................. 515,760
4,800 MedImmune, Inc.*.............. 121,920
--------------
4,800,754
--------------
RETAIL -- 6.5%
23,950 Bed Bath & Beyond, Inc.*...... 1,038,233
34,350 Best Buy Company, Inc. ....... 1,794,444
6,500 Big Lots, Inc.*............... 92,365
36,200 Costco Wholesale Corp.*....... 1,345,916
497,150 CVS Corp. .................... 17,957,057
24,050 Dollar General Corp. ......... 504,810
8,750 Family Dollar Stores, Inc. ... 313,950
408,500 Federated Department Stores,
Inc. ....................... 19,252,604
199,300 Home Depot, Inc. ............. 7,073,156
5,350 J.C. Penney Company,
Inc.(a)..................... 140,598
37,350 Lowe's Companies, Inc. ....... 2,068,817
14,700 May Department Stores
Company(a).................. 427,329
6,950 Nordstrom, Inc.(a)............ 238,385
15,050 Office Depot, Inc.*(a)........ 251,486
16,650 RadioShack Corp. ............. 510,822
14,150 Sears, Roebuck & Company...... 643,684
</Table>
See notes to financial statements.
100
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
54,300 Staples, Inc.*(a)............. $ 1,482,390
6,950 Tiffany & Company............. 314,140
10,000 TJX Companies, Inc. .......... 220,500
17,750 Toys "R" Us, Inc.*(a)......... 224,360
211,450 Wal-Mart Stores, Inc. ........ 11,217,422
49,300 Walgreen Company.............. 1,793,534
--------------
68,906,002
--------------
RETAIL: RESTAURANTS -- 0.6%
8,500 Darden Restaurants, Inc.(a)... 178,840
144,200 McDonald's Corp. ............. 3,580,486
44,650 Starbucks Corp.*.............. 1,476,129
14,000 Wendy's International,
Inc. ....................... 549,360
22,500 YUM! Brands, Inc.*............ 774,000
--------------
6,558,815
--------------
RETAIL: SUPERMARKETS -- 0.1%
34,850 Kroger Company*(a)............ 645,073
8,550 Safeway, Inc.*................ 187,331
12,950 SUPERVALU, Inc. .............. 370,241
8,000 Winn-Dixie Stores, Inc.(a).... 79,600
--------------
1,282,245
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.1%
22,050 Agilent Technologies, Inc.*... 644,741
11,250 Applera Corp. -- Applied
Biosystems Group............ 232,988
6,700 Pall Corp. ................... 179,761
12,850 PerkinElmer, Inc. ............ 219,350
8,900 Thermo Electron Corp.*........ 224,280
--------------
1,501,120
--------------
SEMICONDUCTORS -- 3.6%
45,000 Altera Corp.*................. 1,021,500
19,650 Analog Devices, Inc.*......... 897,023
126,850 Applied Materials, Inc.*...... 2,847,783
5,900 Broadcom Corp. -- Class A*.... 201,131
809,825 Intel Corp. .................. 26,076,364
15,100 Linear Technology Corp. ...... 635,257
10,400 LSI Logic Corp.*.............. 92,248
36,400 Maxim Integrated Products,
Inc. ....................... 1,812,720
8,300 National Semiconductor
Corp.*...................... 327,103
7,200 Novellus Systems, Inc.*....... 302,760
4,500 QLogic Corp.*................. 232,200
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
9,800 Teradyne, Inc.*............... $ 249,410
83,750 Texas Instruments, Inc. ...... 2,460,575
18,000 Xilinx, Inc.*................. 697,320
--------------
37,853,394
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.4%
14,500 ALLTEL Corp. ................. 675,410
30,630 AT&T Corp. ................... 621,789
51,700 AT&T Wireless Services,
Inc.*....................... 413,083
36,400 Avaya, Inc.*.................. 471,016
139,300 BellSouth Corp. .............. 3,942,190
7,450 CenturyTel, Inc. ............. 243,019
34,100 CIENA Corp.*.................. 226,424
24,250 Comverse Technology, Inc.*.... 426,558
53,900 Corning, Inc.*(a)............. 562,177
193,500 Lucent Technologies, Inc.*.... 549,540
112,000 Motorola, Inc. ............... 1,575,840
121,950 Nextel Communications, Inc. --
Class A*.................... 3,421,917
38,400 QUALCOMM, Inc. ............... 2,070,912
163,100 SBC Communications, Inc. ..... 4,252,017
13,350 Scientific-Atlanta, Inc. ..... 364,455
44,100 Sprint Corp. (FON Group)(a)... 724,122
12,100 Symbol Technologies, Inc. .... 204,369
21,150 Tellabs, Inc.*................ 178,295
130,750 Verizon Communications,
Inc. ....................... 4,586,709
--------------
25,509,842
--------------
TOOLS -- 0.0%
6,400 Black & Decker Corp. ......... 315,648
1,800 Snap-on, Inc. ................ 58,032
3,750 Stanley Works................. 142,013
--------------
515,693
--------------
TOYS -- 0.1%
22,050 Hasbro, Inc. ................. 469,224
35,850 Mattel, Inc. ................. 690,830
--------------
1,160,054
--------------
TRANSPORTATION -- 0.4%
54,950 United Parcel Service, Inc. --
Class B..................... 4,096,523
--------------
</Table>
See notes to financial statements.
101
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION: FREIGHT -- 0.1%
17,750 Burlington Northern Santa Fe
Corp. ...................... $ 574,213
4,750 Union Pacific Corp. .......... 330,030
--------------
904,243
--------------
TRANSPORTATION: SERVICES -- 0.0%
3,400 Ryder System, Inc. ........... 116,110
--------------
UTILITIES: ELECTRIC -- 1.1%
70,100 Aes Corp.*.................... 661,744
8,350 Ameren Corp. ................. 384,100
17,550 American Electric Power
Company, Inc. .............. 535,451
9,900 American Power Conversion
Corp.(a).................... 242,055
15,000 CenterPoint Energy, Inc. ..... 145,350
13,200 Cinergy Corp. ................ 512,292
4,500 Consolidated Edison, Inc. .... 193,545
15,500 Constellation Energy Group,
Inc. ....................... 606,980
6,700 Dominion Resources, Inc. ..... 427,661
17,900 Duke Energy Corp. ............ 366,055
37,050 Edison International.......... 812,506
10,350 Entergy Corp. ................ 591,296
15,850 Exelon Corp. ................. 1,051,805
15,700 FirstEnergy Corp. ............ 552,640
8,700 FPL Group, Inc. .............. 569,154
20,150 PG&E Corp.*................... 559,566
12,350 PPL Corp. .................... 540,313
11,750 Progress Energy, Inc. ........ 531,805
10,500 Public Service Enterprise
Group, Inc. ................ 459,900
38,850 Southern Company.............. 1,175,212
24,300 TXU Corp. .................... 576,396
19,750 Xcel Energy, Inc. ............ 335,355
--------------
11,831,181
--------------
UTILITIES: GAS -- 0.1%
7,200 KeySpan Corp. ................ 264,960
10,200 NiSource, Inc. ............... 223,788
1,700 Peoples Energy Corp.(a)....... 71,468
17,100 Sempra Energy................. 514,026
--------------
1,074,242
--------------
TOTAL COMMON STOCKS
(Cost $920,792,152)......... 1,048,732,927
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
REGULATED INVESTMENT COMPANIES -- 0.4%
2,003,233 American Aadvantage
Select(b)................... $ 2,003,233
620,158 Merrill Lynch Premier
Institutional Fund(b)....... 620,158
1,717,056 Merrimac Cash Fund -- Premium
Class(b).................... 1,717,056
--------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $4,340,447)........... 4,340,447
--------------
<Caption>
PRINCIPAL
- ---------
SHORT TERM COMMERCIAL PAPER -- 0.1%
$ 624,649 General Electric Capital
Corp.,
1.09%, 01/09/04(b).......... 624,649
572,352 General Electric Capital
Corp.,
1.08%, 01/16/04(b).......... 572,352
--------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $1,197,001)........... 1,197,001
--------------
SHORT TERM CORPORATE NOTES -- 1.4%
572,352 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)...... 572,352
572,352 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)...... 572,352
1,430,880 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)...... 1,430,880
1,144,704 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)...... 1,144,704
1,430,880 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)...... 1,430,880
2,289,409 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)...... 2,289,409
3,720,289 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)...... 3,720,289
858,528 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)...... 858,528
2,861,761 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)...... 2,861,761
--------------
TOTAL SHORT TERM CORPORATE
NOTES
(Cost $14,881,155).......... 14,881,155
--------------
</Table>
See notes to financial statements.
102
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- --------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.2%
FANNIE MAE -- 0.1%
$1,139,817 1.06%, 01/02/04(b)............ $ 1,139,817
--------------
FREDDIE MAC -- 0.1%
572,352 1.06%, 01/27/04(b)............ 572,352
--------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$1,712,169)................. 1,712,169
--------------
SHORT TERM US TREASURY SECURITY -- 0.0%
135,000 United States Treasury Bill,
0.85%, 03/25/04(c) (Cost
$134,733)................... 134,733
--------------
TIME DEPOSITS -- 2.9%
5,244,779 Bank of Montreal,
1.06%, 01/15/04(b).......... 5,244,779
2,289,409 Bank of Montreal,
1.06%, 02/17/04(b).......... 2,289,409
2,861,761 Bank of Novia Scotia,
1.08%, 03/10/04(b).......... 2,861,761
1,717,057 Citigroup, Inc.,
1.08%, 01/05/04(b).......... 1,717,057
858,528 Citigroup, Inc.,
1.09%, 02/06/04(b).......... 858,528
1,717,056 Credit Agricole Indosuez,
0.98%, 01/02/04(b).......... 1,717,056
1,717,056 Credit Agricole Indosuez,
1.08%, 01/28/04(b).......... 1,717,056
2,289,409 Den Danske Bank,
1.08%, 01/20/04(b).......... 2,289,409
2,861,761 Royal Bank of Canada,
1.05%, 02/27/04(b).......... 2,861,761
1,430,880 Royal Bank of Scotland,
1.08%, 01/09/04(b).......... 1,430,880
572,352 Royal Bank of Scotland,
1.08%, 01/15/04(b).......... 572,352
4,292,641 Royal Bank of Scotland,
1.08%, 01/20/04(b).......... 4,292,641
1,430,880 Svenska Handlesbanken,
1.08%, 02/04/04(b).......... 1,430,880
572,352 Toronto Dominion Bank,
1.10%, 01/08/04(b).......... 572,352
858,528 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b).......... 858,528
--------------
TOTAL TIME DEPOSITS (Cost
$30,714,449)................ 30,714,449
--------------
TOTAL SECURITIES (Cost
$973,772,106)............... 1,101,712,881
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- --------------
REPURCHASE AGREEMENTS -- 1.9%
$6,295,874 With Goldman Sachs Group,
Inc., dated 12/31/03, 1.04%,
due 01/02/04,
repurchase proceeds at
maturity $6,296,238
(Collateralized by
Archer-Daniels-Midland
Company, 8.88%, due
04/15/11, with a value of
$1,315,781, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$1,291,601, Honeywell
International, Inc., 6.88%,
due
10/03/05, with a value of
$2,052,272, Morgan Stanley,
6.75%, due 04/15/11,
with a value of $513,502,
and Lehman Brothers
Holdings, Inc., 3.50%, due
08/07/08,
with a value of
$1,248,635)(b).............. $ 6,295,874
4,120,226 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase
proceeds at maturity
$4,120,329 (Collateralized
by Small Business
Administration,
4.13%, due 07/25/27, with a
value of $4,326,237)........ 4,120,226
9,790,594 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase
proceeds at maturity
$9,790,839 (Collateralized
by Fannie Mae Adjustable
Rate Mortgage, 4.93%, due
7/01/32,
with a value of
$10,280,124)................ 9,790,594
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $20,206,694).......... 20,206,694
--------------
Total Investments -- 105.5%
(Cost $993,978,800)......... 1,121,919,575
Liabilities less other
assets -- (5.5)%............ (58,530,243)
--------------
NET ASSETS -- 100.0%.......... $1,063,389,332
==============
</Table>
See notes to financial statements.
103
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $1,022,951,511.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $106,192,130
Gross unrealized depreciation.......... (7,224,066)
------------
Net unrealized appreciation. .......... $ 98,968,064
============
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31, 2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for securities
loaned.
(c) Security is segregated as initial margin for futures contract.
See notes to financial statements.
104
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 97.8%
AEROSPACE AND DEFENSE -- 1.9%
61,900 Boeing Company............... $ 2,608,466
125,208 Lockheed Martin Corp. ....... 6,435,691
302,000 United Technologies Corp. ... 28,620,540
--------------
37,664,697
--------------
AGRICULTURE -- 0.2%
130,100 Monsanto Company............. 3,744,278
--------------
AIRLINES -- 0.7%
97,285 Ryanair Holdings PLC
(ADR)*(a).................. 4,926,512
505,200 Southwest Airlines Company... 8,153,928
--------------
13,080,440
--------------
APPAREL: MANUFACTURING -- 0.6%
162,500 Nike, Inc. --
Class B.................... 11,124,750
--------------
AUTOMOBILES -- 0.8%
326,714 Bayerische Motoren Werke
AG......................... 15,048,548
--------------
BANKS -- 0.1%
11,800 M&T Bank Corp. .............. 1,159,940
--------------
BROADCAST SERVICES/MEDIA -- 2.1%
88,100 Fox Entertainment Group,
Inc. --
Class A*................... 2,568,115
247,129 Hughes Electronics Corp.*.... 4,089,985
97,000 News Corp., Ltd.
(ADR)...................... 2,934,250
180,200 Time Warner, Inc.*........... 3,241,798
96,000 Tribune Company.............. 4,953,600
125,600 Univision Communications,
Inc. -- Class A*........... 4,985,064
415,500 Viacom, Inc. -- Class B...... 18,439,890
--------------
41,212,702
--------------
BUSINESS SERVICES -- 0.5%
106,200 First Data Corp.(a).......... 4,363,758
165,200 Paychex, Inc. ............... 6,145,440
--------------
10,509,198
--------------
CHEMICALS -- 0.3%
100,500 Air Products and Chemicals,
Inc. ...................... 5,309,415
--------------
COMMERCIAL SERVICES -- 0.5%
355,000 Accenture, Ltd. -- Class
A*......................... 9,343,600
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES -- 7.7%
619,316 Electronic Arts, Inc.*(a).... $ 29,590,918
2,047,970 Microsoft Corp. ............. 56,401,094
2,721,800 Oracle Corp.*................ 35,927,760
277,500 SAP AG (ADR)................. 11,532,900
485,500 VERITAS Software Corp.*...... 18,041,180
--------------
151,493,852
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 3.5%
1,500,308 Dell, Inc.*.................. 50,950,460
774,000 EMC Corp.*................... 10,000,080
391,000 Hewlett-Packard Company...... 8,981,270
--------------
69,931,810
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.6%
112,006 Lennar Corp. -- Class A(a)... 10,752,576
4,153 Lennar Corp. -- Class B...... 379,584
--------------
11,132,160
--------------
CONSUMER GOODS AND SERVICES -- 7.7%
205,400 Colgate-Palmolive Company.... 10,280,270
119,900 Estee Lauder Companies,
Inc. --
Class A.................... 4,707,274
274,668 FedEx Corp. ................. 18,540,090
2,639,428 General Electric Company..... 81,769,479
56,800 Kimberly-Clark Corp. ........ 3,356,312
336,401 Procter & Gamble Company..... 33,599,732
--------------
152,253,157
--------------
ELECTRONICS -- 0.1%
46,300 Emerson Electric Company..... 2,997,925
--------------
FINANCIAL SERVICES -- 9.0%
151,200 American Express Company..... 7,292,376
191,000 AmeriTrade Holding
Corp.*(a).................. 2,687,370
88,100 Capital One Financial
Corp.(a)................... 5,399,649
791,444 Citigroup, Inc. ............. 38,416,692
190,434 Countrywide Financial
Corp. ..................... 14,444,419
538,222 Fannie Mae................... 40,398,943
188,200 Franklin Resources, Inc. .... 9,797,692
89,000 Goldman Sachs Group, Inc. ... 8,786,970
493,271 Merrill Lynch & Company,
Inc.(a).................... 28,930,344
592,557 SLM Corp. ................... 22,327,548
--------------
178,482,003
--------------
</Table>
See notes to financial statements.
105
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 3.3%
298,961 Anheuser-Busch Companies,
Inc. ...................... $ 15,749,265
88,700 Campbell Soup Company........ 2,377,160
237,500 Coca-Cola Company............ 12,053,125
560,284 PepsiCo, Inc. ............... 26,120,441
237,000 Sysco Corp. ................. 8,823,510
--------------
65,123,501
--------------
INSURANCE -- 1.2%
135,500 AFLAC, Inc. ................. 4,902,390
223,700 American International Group,
Inc. ...................... 14,826,836
118,000 SAFECO Corp. ................ 4,593,740
--------------
24,322,966
--------------
INTERNET SERVICES -- 6.4%
3,270,159 Cisco Systems, Inc.*......... 79,432,162
264,000 eBay, Inc.*(a)............... 17,051,760
519,000 Novell, Inc.* ............... 5,459,880
75,800 Symantec Corp.*(a)........... 2,626,470
469,000 YAHOO!, Inc.*................ 21,184,730
--------------
125,755,002
--------------
LEISURE AND RECREATION -- 0.6%
142,558 Four Seasons Hotels,
Inc.(a).................... 7,291,842
100,600 Marriott International,
Inc. -- Class A............ 4,647,720
--------------
11,939,562
--------------
MACHINERY -- 1.2%
248,210 Caterpillar, Inc. ........... 20,606,394
55,250 Ingersoll-Rand Company --
Class A.................... 3,750,370
--------------
24,356,764
--------------
MANUFACTURING -- 1.9%
271,700 3M Company................... 23,102,651
64,000 Danaher Corp. ............... 5,872,000
227,700 Honeywell International,
Inc. ...................... 7,612,011
--------------
36,586,662
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.3%
175,600 Caremark Rx, Inc.*(a)........ 4,447,948
86,900 HCA, Inc. ................... 3,733,224
631,062 UnitedHealth Group, Inc. .... 36,715,187
--------------
44,896,359
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES -- 6.6%
961,042 Boston Scientific Corp.*..... $ 35,327,903
79,000 Genzyme Corp.*(a)............ 3,897,860
55,100 Guidant Corp. ............... 3,317,020
345,000 Johnson & Johnson............ 17,822,700
522,054 Medtronic, Inc. ............. 25,377,045
316,900 St. Jude Medical, Inc.* ..... 19,441,815
97,500 Stryker Corp.(a)............. 8,288,475
242,214 Zimmer Holdings, Inc.* ...... 17,051,866
--------------
130,524,684
--------------
MOTOR VEHICLES -- 0.2%
103,000 Harley-Davidson, Inc.(a)..... 4,895,590
--------------
OIL, COAL AND GAS -- 1.3%
345,000 Baker Hughes, Inc. .......... 11,095,200
273,200 BJ Services Company*(a)...... 9,807,880
114,200 EOG Resources, Inc. ......... 5,272,614
--------------
26,175,694
--------------
PHARMACEUTICALS -- 9.5%
169,400 Abbott Laboratories.......... 7,894,040
86,400 Bristol-Myers Squibb
Company.................... 2,471,040
157,500 Cardinal Health, Inc.(a)..... 9,632,700
359,896 Eli Lilly and Company........ 25,311,486
53,900 Forest Laboratories, Inc.*... 3,331,020
102,900 IVAX Corp.*.................. 2,457,252
2,596,139 Pfizer, Inc. ................ 91,721,592
278,300 Teva Pharmaceutical
Industries, Ltd.
(ADR)(a)................... 15,782,393
58,500 Watson Pharmaceuticals,
Inc.*...................... 2,691,000
628,700 Wyeth........................ 26,688,315
--------------
187,980,838
--------------
RESEARCH AND DEVELOPMENT -- 5.6%
702,414 Amgen, Inc.*................. 43,409,185
518,767 Genentech, Inc.*............. 48,541,028
279,600 Gilead Sciences, Inc.* ...... 16,255,944
44,300 Invitrogen Corp.*............ 3,101,000
--------------
111,307,157
--------------
RETAIL -- 7.7%
81,800 Best Buy Company, Inc. ...... 4,273,232
406,900 Home Depot, Inc. ............ 14,440,881
657,934 Lowe's Companies, Inc. ...... 36,442,964
94,300 RadioShack Corp. ............ 2,893,124
</Table>
See notes to financial statements.
106
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
106,300 Target Corp.(a).............. $ 4,081,920
426,253 Tiffany & Company............ 19,266,636
888,518 Wal-Mart Stores, Inc. ....... 47,135,880
622,900 Walgreen Company............. 22,661,102
--------------
151,195,739
--------------
RETAIL: RESTAURANTS -- 1.0%
202,400 McDonald's Corp. ............ 5,025,592
460,500 Starbucks Corp.* ............ 15,224,130
--------------
20,249,722
--------------
SEMICONDUCTORS -- 8.7%
234,500 Applied Materials, Inc.*..... 5,264,525
256,500 ASML Holding NV*............. 5,142,825
3,539,107 Intel Corp. ................. 113,959,245
48,300 KLA-Tencor Corp.*............ 2,833,761
460,626 Maxim Integrated Products,
Inc. ...................... 22,939,175
211,800 Microchip Technology,
Inc. ...................... 7,065,648
103,400 QLogic Corp.*................ 5,335,440
122,200 Teradyne, Inc.*(a)........... 3,109,990
245,500 Texas Instruments, Inc. ..... 7,212,790
--------------
172,863,399
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.3%
417,500 Avaya, Inc.*................. 5,402,450
137,500 Comverse Technology, Inc.*... 2,418,625
524,851 Nextel Communications,
Inc. --
Class A*................... 14,727,319
496,500 Nokia Oyj (ADR).............. 8,440,500
356,457 QUALCOMM, Inc. .............. 19,223,726
581,000 Vodafone Group PLC (ADR)..... 14,548,240
--------------
64,760,860
--------------
TRANSPORTATION -- 0.7%
196,500 United Parcel Service,
Inc. --
Class B.................... 14,649,075
--------------
TOTAL COMMON STOCKS
(Cost $1,731,887,190)...... 1,932,072,049
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
REGULATED INVESTMENT COMPANIES -- 0.3%
2,565,119 American Aadvantage
Select(b).................. $ 2,565,119
794,106 Merrill Lynch Premier
Institutional Fund(b)...... 794,106
2,198,673 Merrimac Cash Fund --
Premium Class(b)........... 2,198,673
--------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $5,557,898).......... 5,557,898
--------------
<Caption>
PRINCIPAL
---------
SHORT TERM COMMERCIAL PAPER -- 0.1%
$ 799,856 General Electric Capital
Corp.,
1.09%, 01/09/04(b)......... 799,856
732,891 General Electric Capital
Corp.,
1.08%, 01/16/04(b)......... 732,891
--------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $1,532,747).......... 1,532,747
--------------
SHORT TERM CORPORATE NOTES -- 1.0%
732,891 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)..... 732,891
732,891 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)..... 732,891
1,832,228 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)..... 1,832,228
1,465,782 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)..... 1,465,782
1,832,228 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)..... 1,832,228
2,931,564 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)..... 2,931,564
4,763,792 Morgan Stanley, Floating
Rate,
1.05%(**), 06/14/04(b)..... 4,763,792
1,099,336 Morgan Stanley, Floating
Rate,
1.05%(**), 06/21/04(b)..... 1,099,336
3,664,455 Morgan Stanley, Floating
Rate,
1.05%(**), 09/10/04(b)..... 3,664,455
--------------
TOTAL SHORT TERM CORPORATE
NOTES
(Cost $19,055,167)......... 19,055,167
--------------
</Table>
See notes to financial statements.
107
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.1%
FANNIE MAE -- 0.1%
$ 1,459,524 1.06%, 01/02/04(b)........... $ 1,459,524
--------------
FREDDIE MAC -- 0.0%
732,891 1.06%, 01/27/04(b)........... 732,891
--------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY
SECURITIES
(Cost $2,192,415).......... 2,192,415
--------------
TIME DEPOSITS -- 2.0%
6,715,885 Bank of Montreal,
1.06%, 01/15/04(b)......... 6,715,885
2,931,564 Bank of Montreal,
1.06%, 02/17/04(b)......... 2,931,564
3,664,455 Bank of Novia Scotia,
1.08%, 03/10/04(b)......... 3,664,455
2,198,673 Citigroup, Inc.,
1.08%, 01/05/04(b)......... 2,198,673
1,099,337 Citigroup, Inc.,
1.09%, 02/06/04(b)......... 1,099,337
2,198,673 Credit Agricole Indosuez,
0.98%, 01/02/04(b)......... 2,198,673
2,198,673 Credit Agricole Indosuez,
1.08%, 01/28/04(b)......... 2,198,673
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
TIME DEPOSITS (CONTINUED)
$ 2,931,564 Den Danske Bank,
1.08%, 01/20/04(b)......... $ 2,931,564
3,664,455 Royal Bank of Canada,
1.05%, 02/27/04(b)......... 3,664,455
1,832,228 Royal Bank of Scotland,
1.08%, 01/09/04(b)......... 1,832,228
732,891 Royal Bank of Scotland,
1.08%, 01/15/04(b)......... 732,891
5,496,683 Royal Bank of Scotland,
1.08%, 01/20/04(b)......... 5,496,683
1,832,228 Svenska Handlesbanken,
1.08%, 02/04/04(b)......... 1,832,228
732,891 Toronto Dominion Bank,
1.10%, 01/08/04(b)......... 732,891
1,099,337 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)......... 1,099,337
--------------
TOTAL TIME DEPOSITS
(Cost $39,329,537)......... 39,329,537
--------------
TOTAL SECURITIES
(Cost $1,799,554,954)...... 1,999,739,813
--------------
</Table>
See notes to financial statements.
108
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 2.8%
$ 8,061,801 With Goldman Sachs Group,
Inc., dated 12/31/03,
1.04%, due 01/02/04,
repurchase proceeds at
maturity $8,062,267
(Collateralized by
Archer-Daniels-Midland
Company, 8.88%, due
04/15/11, with a value of
$1,684,844, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$1,653,881, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value
of $2,627,913, Morgan
Stanley, 6.75%, due
04/15/11, with a value of
$657,534, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $1,598,865)(b).... $ 8,061,801
9,434,532 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $9,434,768
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 5.35%, due
01/01/32, with a value of
$9,906,259)................ 9,434,532
18,662,181 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $18,662,648
(Collateralized by Freddie
Mac Adjustable Rate
Mortgage, 3.97%, due
01/01/33, with a value of
$16,820,115 and Small
Business Administration,
4.63%, due 04/25/16, with a
value of $2,775,175)....... 18,662,181
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS (CONTINUED)
$19,971,675 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $19,972,174
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 5.29%, due
06/01/30, with a value of
$3,446,640 and Fannie Mae
Adjustable Rate Mortgage,
4.75%, due 02/01/33, with a
value of $17,523,828)...... $ 19,971,675
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $56,130,189)......... 56,130,189
--------------
Total Investments -- 104.1%
(Cost $1,855,685,143)...... 2,055,870,002
Liabilities less other
assets -- (4.1)%........... (80,233,302)
--------------
NET ASSETS -- 100.0%......... $1,975,636,700
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $1,919,175,700.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........ $ 169,545,072
Gross unrealized depreciation........ (32,850,770)
--------------
Net unrealized appreciation.......... $ 136,694,302
==============
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
(ADR) American Depository Receipt.
See notes to financial statements.
109
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 94.2%
AEROSPACE AND DEFENSE -- 1.8%
118,700 United Defense Industries,
Inc.*........................ $ 3,784,156
------------
AGRICULTURE -- 1.5%
96,400 Bunge, Ltd. ................... 3,173,488
------------
ASSET MANAGEMENT -- 1.5%
108,800 Brascan Corp. -- Class A(a).... 3,322,752
------------
AUTOMOTIVE EQUIPMENT -- 2.5%
27,600 Advanced Auto Parts, Inc.*..... 2,246,640
95,300 Genuine Parts Company.......... 3,163,960
------------
5,410,600
------------
BANKS -- 7.0%
160,956 Charter One Financial, Inc. ... 5,561,029
62,500 Greenpoint Financial Corp. .... 2,207,500
30,200 M&T Bank Corp. ................ 2,968,660
109,900 North Fork Bancorp, Inc. ...... 4,447,653
------------
15,184,842
------------
BROADCAST SERVICES/MEDIA -- 4.8%
106,340 Cablevision Systems New York
Group -- Class A*(a)......... 2,487,293
155,200 Cox Radio, Inc. -- Class A*.... 3,915,696
78,500 Tribune Company................ 4,050,600
------------
10,453,589
------------
BUSINESS SERVICES AND SUPPLIES -- 4.8%
92,700 Manpower, Inc.(a).............. 4,364,316
315,000 Moore Wallace, Inc.*........... 5,899,950
------------
10,264,266
------------
COMMERCIAL SERVICES -- 2.1%
163,500 ARAMARK Corp. -- Class B....... 4,483,170
------------
COMPUTER SOFTWARE AND SERVICES -- 4.0%
50,500 DST Systems, Inc.*............. 2,108,880
105,500 SkillSoft PLC (ADR)*........... 912,575
76,000 SunGard Data Systems, Inc.*.... 2,105,960
103,800 Synopsys, Inc.*(a)............. 3,504,288
------------
8,631,703
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 5.3%
44,600 American Standard Companies,
Inc.*........................ 4,491,220
66,000 Lafarge North America, Inc. ... 2,674,320
116,200 York International Corp. ...... 4,276,160
------------
11,441,700
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES -- 3.2%
69,300 Clorox Company................. $ 3,365,208
48,100 Fortune Brands, Inc. .......... 3,438,669
------------
6,803,877
------------
CONTAINERS AND PACKAGING -- 1.0%
91,000 Pactiv Corp.*.................. 2,174,900
------------
INSURANCE -- 8.1%
63,300 Chubb Corp. ................... 4,310,730
74,300 Everest Re Group, Ltd. ........ 6,285,780
54,300 MBIA, Inc. .................... 3,216,189
108,000 Willis Group Holdings, Ltd. ... 3,679,560
------------
17,492,259
------------
INTERNET SERVICES -- 1.2%
178,900 Network Associates, Inc.*...... 2,690,656
------------
LEISURE AND RECREATION -- 3.6%
52,300 MGM Mirage, Inc.*.............. 1,967,003
169,100 Royal Caribbean Cruises,
Ltd.(a)...................... 5,882,989
------------
7,849,992
------------
MANUFACTURING -- 0.9%
27,100 ITT Industries, Inc. .......... 2,011,091
------------
MEDICAL AND OTHER HEALTH SERVICES -- 7.0%
30,700 Anthem, Inc.*(a)............... 2,302,500
101,800 Omnicare, Inc. ................ 4,111,702
140,800 STERIS Corp.*.................. 3,182,080
56,600 WellPoint Health Networks,
Inc.*........................ 5,489,634
------------
15,085,916
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 2.6%
68,300 C. R. Bard, Inc. .............. 5,549,375
------------
METALS AND MINING -- 2.1%
45,900 Alcan, Inc. ................... 2,155,005
65,200 United States Steel Corp.(a)... 2,283,304
------------
4,438,309
------------
OIL, COAL AND GAS -- 4.4%
78,500 EnCana Corp.(a)................ 3,096,040
149,900 Halliburton Company............ 3,897,400
67,100 Weatherford International,
Ltd.*........................ 2,415,600
------------
9,409,040
------------
PAPER AND FOREST PRODUCTS -- 3.1%
203,500 Boise Cascade Corp. ........... 6,687,010
------------
</Table>
See notes to financial statements.
110
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS -- 1.6%
68,900 Schering AG (ADR)(a)........... $ 3,520,790
------------
RETAIL -- 1.4%
103,700 Dollar Tree Stores, Inc.*...... 3,117,222
------------
RETAIL: RESTAURANTS -- 2.8%
94,500 Brinker International,
Inc.*(a)..................... 3,133,620
86,700 YUM! Brands, Inc.*............. 2,982,480
------------
6,116,100
------------
RETAIL: SUPERMARKETS -- 1.1%
103,500 Safeway, Inc.*................. 2,267,685
------------
SEMICONDUCTORS -- 1.3%
951,600 Agere Systems, Inc. -- Class
B*........................... 2,759,640
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.3%
29,400 UNOVA, Inc.*................... 674,730
------------
TOOLS -- 2.8%
162,200 Stanley Works(a)............... 6,142,514
------------
TRANSPORTATION: FREIGHT -- 3.4%
93,500 CNF, Inc. ..................... 3,169,650
59,700 Union Pacific Corp. ........... 4,147,956
------------
7,317,606
------------
TRANSPORTATION: SERVICES -- 2.5%
48,800 Florida East Coast Industries,
Inc. ........................ 1,615,280
105,000 Yellow Roadway Corp.*(a)....... 3,797,850
------------
5,413,130
------------
UTILITIES: ELECTRIC -- 4.5%
154,300 PG&E Corp.*.................... 4,284,911
124,700 PPL Corp. ..................... 5,455,625
------------
9,740,536
------------
TOTAL COMMON STOCKS
(Cost $178,361,178).......... 203,412,644
------------
REGULATED INVESTMENT COMPANIES -- 1.2%
1,234,502 American Aadvantage
Select(b).................... 1,234,502
382,176 Merrill Lynch Premier
Institutional Fund(b)........ 382,176
1,058,145 Merrimac Cash Fund -- Premium
Class(b)..................... 1,058,145
------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $2,674,823)............ 2,674,823
------------
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM COMMERCIAL PAPER -- 0.3%
$ 384,943 General Electric Capital Corp.,
1.09%, 01/09/04(b)........... $ 384,943
352,715 General Electric Capital Corp.,
1.08%, 01/16/04(b)........... 352,715
------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $737,658).............. 737,658
------------
SHORT TERM CORPORATE NOTES -- 4.2%
352,715 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)....... 352,715
352,715 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)....... 352,715
881,787 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)....... 881,787
705,430 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)....... 705,430
881,787 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)....... 881,787
1,410,859 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)....... 1,410,859
2,292,646 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)....... 2,292,646
529,072 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)....... 529,072
1,763,574 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)....... 1,763,574
------------
TOTAL SHORT TERM CORPORATE
NOTES
(Cost $9,170,585)............ 9,170,585
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.5%
FANNIE MAE -- 0.3%
702,418 1.06%, 01/02/04(b)............. 702,418
------------
FREDDIE MAC -- 0.2%
352,715 1.06%, 01/27/04(b)............. 352,715
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $1,055,133)............ 1,055,133
------------
TIME DEPOSITS -- 8.8%
3,232,121 Bank of Montreal,
1.06%, 01/15/04(b)........... 3,232,121
1,410,859 Bank of Montreal,
1.06%, 02/17/04(b)........... 1,410,859
1,763,574 Bank of Novia Scotia,
1.08%, 03/10/04(b)........... 1,763,574
</Table>
See notes to financial statements.
111
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
TIME DEPOSITS (CONTINUED)
$ 1,058,145 Citigroup, Inc.,
1.08%, 01/05/04(b)........... $ 1,058,145
529,072 Citigroup, Inc.,
1.09%, 02/06/04(b)........... 529,072
1,058,145 Credit Agricole Indosuez,
0.98%, 01/02/04(b)........... 1,058,145
1,058,145 Credit Agricole Indosuez,
1.08%, 01/28/04(b)........... 1,058,145
1,410,859 Den Danske Bank,
1.08%, 01/20/04(b)........... 1,410,859
1,763,574 Royal Bank of Canada,
1.05%, 02/27/04(b)........... 1,763,574
881,787 Royal Bank of Scotland,
1.08%, 01/09/04(b)........... 881,787
352,715 Royal Bank of Scotland,
1.08%, 01/15/04(b)........... 352,715
2,645,361 Royal Bank of Scotland,
1.08%, 01/20/04(b)........... 2,645,361
881,787 Svenska Handlesbanken,
1.08%, 02/04/04(b)........... 881,787
352,715 Toronto Dominion Bank,
1.10%, 01/08/04(b)........... 352,715
529,072 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)........... 529,072
------------
TOTAL TIME DEPOSITS (Cost
$18,927,931)................. 18,927,931
------------
TOTAL SECURITIES (Cost
$210,927,308)................ 235,978,774
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 11.9%
$ 3,879,863 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $3,880,087
(Collateralized by Archer-
Daniels-Midland Company,
8.88%, due 04/15/11, with a
value of $810,856, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$795,955, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$1,264,723, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $316,448, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $769,478)(b)........ $ 3,879,863
21,942,071 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $21,942,620
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
3.96%, due 02/01/33, with a
value of $19,318,172 and
Small Business
Administration, 5.13%, due
01/25/22, with a value of
$3,721,003).................. 21,942,071
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $25,821,934)........... 25,821,934
------------
Total Investments -- 121.1%
(Cost $236,749,242).......... 261,800,708
Liabilities less other
assets -- (21.1)%............ (45,607,589)
------------
NET ASSETS -- 100.0%........... $216,193,119
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $236,943,870.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $25,171,244
Gross unrealized depreciation........... (314,406)
-----------
Net unrealized appreciation............. $24,856,838
===========
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
(ADR) American Depository Receipt.
See notes to financial statements.
112
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 94.8%
ADVERTISING -- 0.5%
20,000 Lamar Advertising Company*...... $ 746,400
------------
AEROSPACE AND DEFENSE -- 2.8%
35,000 Alliant Techsystems, Inc.*...... 2,021,600
90,000 Goodrich Corp. ................. 2,672,100
------------
4,693,700
------------
APPAREL: MANUFACTURING -- 1.0%
25,000 Nike, Inc. -- Class B........... 1,711,500
------------
BANKS -- 4.0%
30,000 Bank of Hawaii Corp. ........... 1,266,000
12,500 Golden West Financial Corp. .... 1,289,875
8,500 M&T Bank Corp. ................. 835,550
40,000 Mellon Financial Corp. ......... 1,284,400
32,500 Zions Bancorp................... 1,993,225
------------
6,669,050
------------
BROADCAST SERVICES/MEDIA -- 4.3%
82,500 Cox Radio, Inc. -- Class A*..... 2,081,475
17,500 E.W. Scripps Company -- Class
A............................. 1,647,450
30,000 Entercom Communications
Corp.*........................ 1,588,800
55,000 Westwood One, Inc.*............. 1,881,550
------------
7,199,275
------------
BUSINESS SERVICES -- 2.3%
75,000 BISYS Group, Inc.*.............. 1,116,000
52,500 Cintas Corp.(a)................. 2,631,825
------------
3,747,825
------------
CHEMICALS -- 2.5%
55,000 Air Products and Chemicals,
Inc. ......................... 2,905,650
25,000 Valspar Corp. .................. 1,235,500
------------
4,141,150
------------
COMMERCIAL SERVICES -- 1.2%
70,000 ARAMARK Corp. -- Class B........ 1,919,400
------------
COMPUTER SOFTWARE AND SERVICES -- 11.6%
45,000 Affiliated Computer Services,
Inc. -- Class A*(a)........... 2,450,700
80,000 Amdocs, Ltd.*................... 1,798,400
110,000 Citrix Systems, Inc.*........... 2,333,100
70,000 DST Systems, Inc.*(a)........... 2,923,200
35,000 Electronic Arts, Inc.*.......... 1,672,300
100,000 Macromedia, Inc.*............... 1,784,000
55,000 Mercury Interactive Corp.*(a)... 2,675,200
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES (CONTINUED)
60,000 Perot Systems Corp. -- Class
A*............................ $ 808,800
65,000 SunGard Data Systems, Inc.*..... 1,801,150
55,000 THQ, Inc.*(a)................... 930,050
------------
19,176,900
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.9%
15,000 American Standard Companies,
Inc.*......................... 1,510,500
------------
CONSUMER GOODS AND SERVICES -- 1.5%
65,000 Estee Lauder Companies, Inc. --
Class A....................... 2,551,900
------------
DISTRIBUTION -- 2.3%
35,000 CDW Corp.(a).................... 2,021,600
37,500 Fastenal Company(a)............. 1,872,750
------------
3,894,350
------------
ELECTRONICS -- 4.8%
315,000 Agere Systems, Inc. -- Class
A*............................ 960,750
12,500 Harman International Industries,
Inc. ......................... 924,750
85,000 Jabil Circuit, Inc.*............ 2,405,500
42,500 L-3 Communications Holdings,
Inc.*(a)...................... 2,182,800
50,000 Molex, Inc. -- Class A.......... 1,468,000
------------
7,941,800
------------
FINANCIAL SERVICES -- 1.1%
25,000 Chicago Mercantile
Exchange(a)................... 1,809,000
------------
FOOD AND BEVERAGE -- 2.4%
65,000 Dean Foods Company*............. 2,136,550
50,000 Performance Food Group
Company*(a)................... 1,808,500
------------
3,945,050
------------
INSURANCE -- 3.6%
30,000 Aetna, Inc. .................... 2,027,400
70,000 Willis Group Holdings, Ltd. .... 2,384,900
20,000 XL Capital, Ltd. -- Class A..... 1,551,000
------------
5,963,300
------------
INTERNET SERVICES -- 2.8%
240,000 Novell, Inc.*................... 2,524,800
60,000 Symantec Corp.*(a).............. 2,079,000
------------
4,603,800
------------
</Table>
See notes to financial statements.
113
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION -- 3.2%
110,000 Hilton Hotels Corp. ............ $ 1,884,300
35,000 Royal Caribbean Cruises,
Ltd.(a)....................... 1,217,650
60,000 Starwood Hotels & Resorts....... 2,158,200
------------
5,260,150
------------
MACHINERY -- 1.0%
25,000 Ingersoll-Rand Company -- Class
A............................. 1,697,000
------------
MANUFACTURING -- 3.9%
35,000 Danaher Corp.(a)................ 3,211,250
55,000 SPX Corp.*(a)................... 3,234,550
------------
6,445,800
------------
MEDICAL AND OTHER HEALTH SERVICES -- 4.4%
50,000 AdvancePCS*..................... 2,633,000
35,000 Anthem, Inc.*(a)................ 2,625,000
20,000 WellPoint Health Networks,
Inc.*......................... 1,939,800
------------
7,197,800
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.4%
10,000 Allergan, Inc. ................. 768,100
35,000 St. Jude Medical, Inc.*......... 2,147,250
17,500 Stryker Corp. .................. 1,487,675
20,000 Varian Medical Systems, Inc.*... 1,382,000
20,000 Zimmer Holdings, Inc.*.......... 1,408,000
------------
7,193,025
------------
OIL, COAL AND GAS -- 6.8%
13,500 Apache Corp. ................... 1,094,850
60,000 BJ Services Company*............ 2,154,000
47,500 Nabors Industries, Ltd.*........ 1,971,250
40,000 Noble Corp.*.................... 1,431,200
40,000 Smith International, Inc.*...... 1,660,800
37,500 Weatherford International,
Ltd.*......................... 1,350,000
58,600 XTO Energy, Inc. ............... 1,658,380
------------
11,320,480
------------
PHARMACEUTICALS -- 3.7%
32,100 AmerisourceBergen Corp.(a)...... 1,802,415
35,000 Angiotech Pharmaceuticals,
Inc.*......................... 1,610,000
30,000 MGI Pharma, Inc.*............... 1,234,500
25,000 Teva Pharmaceutical Industries,
Ltd. (ADR).................... 1,417,750
------------
6,064,665
------------
RESEARCH AND DEVELOPMENT -- 3.2%
52,000 Biogen Idec, Inc.*.............. 1,912,560
21,400 Cytyc Corp.*.................... 294,464
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RESEARCH AND DEVELOPMENT (CONTINUED)
35,000 Gilead Sciences, Inc.*.......... $ 2,034,900
20,000 Neurocrine Biosciences, Inc.*... 1,090,800
------------
5,332,724
------------
RETAIL -- 4.9%
70,000 Dollar Tree Stores, Inc.*....... 2,104,200
60,000 Linens 'n Things, Inc.*......... 1,804,800
90,000 TJX Companies, Inc. ............ 1,984,500
65,000 Williams-Sonoma, Inc.*(a)....... 2,260,050
------------
8,153,550
------------
RETAIL: RESTAURANTS -- 0.8%
40,000 Starbucks Corp.*................ 1,322,400
------------
SEMICONDUCTORS -- 5.0%
60,000 Emulex Corp.*(a)................ 1,600,800
45,000 Fairchild Semiconductor
International, Inc.*.......... 1,123,650
75,000 Intersil Corp. -- Class A....... 1,863,750
27,500 Marvell Technology Group,
Ltd.*......................... 1,043,075
80,000 Microchip Technology, Inc. ..... 2,668,800
------------
8,300,075
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.9%
50,000 Adtran, Inc. ................... 1,550,000
------------
TOYS -- 1.5%
65,000 Marvel Enterprises, Inc.*....... 1,892,150
35,000 Mattel, Inc. ................... 674,450
------------
2,566,600
------------
TRANSPORTATION -- 1.5%
65,000 Expeditors International of
Washington, Inc. ............. 2,447,900
------------
TOTAL COMMON STOCKS (Cost
$140,875,061)................. 157,077,069
------------
REGULATED INVESTMENT COMPANIES -- 1.3%
987,010 American Aadvantage Select(b)... 987,010
305,557 Merrill Lynch Premier
Institutional Fund(b)......... 305,557
846,008 Merrimac Cash Fund -- Premium
Class(b)...................... 846,008
------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $2,138,575)............. 2,138,575
------------
</Table>
See notes to financial statements.
114
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
SHORT TERM COMMERCIAL PAPER -- 0.4%
$ 307,769 General Electric Capital Corp.,
1.09%, 01/09/04(b)............ $ 307,769
282,003 General Electric Capital Corp.,
1.08%, 01/16/04(b)............ 282,003
------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $589,772)............... 589,772
------------
SHORT TERM CORPORATE NOTES -- 4.4%
282,003 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)........ 282,003
282,003 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)........ 282,003
705,007 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)........ 705,007
564,006 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)........ 564,006
705,007 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)........ 705,007
1,128,011 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)........ 1,128,011
1,833,018 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)........ 1,833,018
423,004 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)........ 423,004
1,410,014 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)........ 1,410,014
------------
TOTAL SHORT TERM CORPORATE NOTES
(Cost $7,332,073)............. 7,332,073
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.5%
FANNIE MAE -- 0.3%
561,598 1.06%, 01/02/04(b).............. 561,598
------------
FREDDIE MAC -- 0.2%
282,003 1.06%, 01/27/04(b).............. 282,003
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$843,601)..................... 843,601
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
TIME DEPOSITS -- 9.1%
$2,584,147 Bank of Montreal,
1.06%, 01/15/04(b)............ $ 2,584,147
1,128,011 Bank of Montreal,
1.06%, 02/17/04(b)............ 1,128,011
1,410,014 Bank of Novia Scotia,
1.08%, 03/10/04(b)............ 1,410,014
846,008 Citigroup, Inc.,
1.08%, 01/05/04(b)............ 846,008
423,004 Citigroup, Inc.,
1.09%, 02/06/04(b)............ 423,004
846,008 Credit Agricole Indosuez,
0.98%, 01/02/04(b)............ 846,008
846,008 Credit Agricole Indosuez,
1.08%, 01/28/04(b)............ 846,008
1,128,011 Den Danske Bank,
1.08%, 01/20/04(b)............ 1,128,011
1,410,014 Royal Bank of Canada,
1.05%, 02/27/04(b)............ 1,410,014
705,007 Royal Bank of Scotland,
1.08%, 01/09/04(b)............ 705,007
282,003 Royal Bank of Scotland,
1.08%, 01/15/04(b)............ 282,003
2,115,021 Royal Bank of Scotland,
1.08%, 01/20/04(b)............ 2,115,021
705,007 Svenska Handlesbanken,
1.08%, 02/04/04(b)............ 705,007
282,003 Toronto Dominion Bank,
1.10%, 01/08/04(b)............ 282,003
423,004 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)............ 423,004
------------
TOTAL TIME DEPOSITS (Cost
$15,133,270).................. 15,133,270
------------
TOTAL SECURITIES (Cost
$166,912,352)................. 183,114,360
------------
</Table>
See notes to financial statements.
115
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
REPURCHASE AGREEMENTS -- 7.3%
$3,102,031 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $3,102,210
(Collateralized by Archer-
Daniels-Midland Company,
8.88%, due 04/15/11, with a
value of $648,297, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$636,383, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$1,011,172, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $253,007, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $615,213)(b)......... $ 3,102,031
9,053,270 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $9,053,496
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.95%, due 01/01/32, with a
value of $9,505,934).......... 9,053,270
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $12,155,301)............ 12,155,301
------------
Total Investments -- 117.8%
(Cost $179,067,653)........... 195,269,661
Liabilities less other assets --
(17.8)%....................... (29,521,787)
------------
NET ASSETS -- 100.0%............ $165,747,874
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $179,896,027.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $17,421,878
Gross unrealized depreciation........... (2,048,244)
-----------
Net unrealized appreciation............. $15,373,634
===========
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
(ADR) American Depository Receipt.
See notes to financial statements.
116
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 96.9%
ADVERTISING -- 1.7%
84,125 Catalina Marketing Corp.*(a).... $ 1,695,960
------------
AGRICULTURE -- 3.6%
141,750 Delta and Pine Land Company..... 3,600,450
------------
BANKS -- 7.6%
94,200 Commercial Federal Corp. ....... 2,516,081
38,975 First Financial Bancorp. ....... 621,651
55,200 Provident Financial Services,
Inc. ......................... 1,043,280
55,400 Silicon Valley Bancshares*...... 1,998,278
31,225 UMB Financial Corp. ............ 1,484,437
------------
7,663,727
------------
BUSINESS SERVICES AND SUPPLIES -- 6.2%
209,600 CSG Systems International,
Inc.*......................... 2,617,904
230,850 Dendrite International, Inc.*... 3,617,419
------------
6,235,323
------------
CHEMICALS -- 5.4%
26,200 Cytec Industries, Inc.*......... 1,005,818
351,349 Millennium Chemicals, Inc. ..... 4,455,104
------------
5,460,922
------------
COMPUTER SOFTWARE AND SERVICES -- 1.4%
128,325 Gartner, Inc. -- Class A*....... 1,451,356
------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.1%
23,550 Black Box Corp.................. 1,084,949
------------
CONSUMER GOODS AND SERVICES -- 3.5%
72,925 American Greetings Corp. --
Class A*(a)................... 1,594,870
59,475 Blyth, Inc. .................... 1,916,284
------------
3,511,154
------------
FINANCIAL SERVICES -- 4.8%
63,825 Raymond James Financial,
Inc. ......................... 2,406,203
102,150 Waddell & Reed Financial,
Inc. -- Class A............... 2,396,439
------------
4,802,642
------------
INSURANCE -- 2.7%
228,450 Phoenix Companies, Inc.(a)...... 2,750,538
------------
INTERNET SERVICES -- 2.8%
284,900 Earthlink, Inc.*................ 2,849,000
------------
LEISURE AND RECREATION -- 3.7%
129,300 Speedway Motorsports, Inc. ..... 3,739,356
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MANUFACTURING -- 11.6%
197,450 Acuity Brands, Inc. ............ $ 5,094,209
28,125 Brady Corp. -- Class A.......... 1,146,094
83,225 Crane Company................... 2,558,336
58,250 Furniture Brands International,
Inc. ......................... 1,708,473
76,975 Tredegar Corp. ................. 1,195,422
------------
11,702,534
------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.2%
74,750 LifePoint Hospitals, Inc.*(a)... 2,201,388
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.3%
80,150 Haemonetics Corp.*.............. 1,914,784
83,250 Ocular Sciences, Inc.*.......... 2,390,107
------------
4,304,891
------------
OIL, COAL AND GAS -- 4.6%
89,000 Forest Oil Corp.*............... 2,542,730
71,650 Tidewater, Inc. ................ 2,140,902
------------
4,683,632
------------
PAPER AND FOREST PRODUCTS -- 3.1%
76,587 Rayonier, Inc. ................. 3,179,126
------------
PRINTING AND PUBLISHING -- 5.4%
107,225 Bowne & Company, Inc. .......... 1,453,971
254,475 Hollinger International,
Inc. ......................... 3,974,900
------------
5,428,871
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.1%
2,525 Avatar Holdings, Inc.*.......... 93,274
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.5%
52,850 Post Properties, Inc. .......... 1,475,572
------------
RETAIL -- 4.9%
372,000 Payless ShoeSource, Inc.*....... 4,984,800
------------
RUBBER PRODUCTS -- 1.1%
8,750 Bandag, Inc. ................... 360,500
17,550 Bandag, Inc. -- Class A......... 709,020
------------
1,069,520
------------
SECURITY SERVICES -- 4.0%
177,650 The Brink's Company............. 4,016,667
------------
SEMICONDUCTORS -- 1.9%
190,075 Axcelis Technologies, Inc.*..... 1,942,567
------------
SPORTING GOODS AND EQUIPMENT -- 2.7%
163,500 Callaway Golf Company(a)........ 2,754,975
------------
</Table>
See notes to financial statements.
117
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 5.0%
100,650 Belden, Inc. ................... $ 2,122,709
78,250 Commonwealth Telephone
Enterprises, Inc.*(a)......... 2,953,937
------------
5,076,646
------------
TOTAL COMMON STOCKS (Cost
$82,412,137).................. 97,759,840
------------
REGULATED INVESTMENT COMPANIES -- 0.6%
289,720 American Aadvantage Select(b)... 289,720
89,691 Merrill Lynch Premier
Institutional Fund(b)......... 89,691
248,331 Merrimac Cash Fund -- Premium
Class(b)...................... 248,331
------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $627,742)............... 627,742
------------
<Caption>
PRINCIPAL
- ---------
SHORT TERM COMMERCIAL PAPER -- 0.2%
$ 90,341 General Electric Capital Corp.,
1.09%, 01/09/04(b)............ 90,341
82,777 General Electric Capital Corp.,
1.08%, 01/16/04(b)............ 82,777
------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $173,118)............... 173,118
------------
SHORT TERM CORPORATE NOTES -- 2.1%
82,777 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)........ 82,777
82,777 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)........ 82,777
206,943 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)........ 206,943
165,554 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)........ 165,554
206,943 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)........ 206,943
331,108 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)........ 331,108
538,051 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)........ 538,051
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
SHORT TERM CORPORATE NOTES (CONTINUED)
$ 124,166 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)........ $ 124,166
413,886 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)........ 413,886
------------
TOTAL SHORT TERM CORPORATE NOTES
(Cost $2,152,205)............. 2,152,205
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.3%
FANNIE MAE -- 0.2%
164,847 1.06%, 01/02/04(b).............. 164,847
------------
FREDDIE MAC -- 0.1%
82,777 1.06%, 01/27/04(b).............. 82,777
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$247,624)..................... 247,624
------------
TIME DEPOSITS -- 4.4%
758,532 Bank of Montreal,
1.06%, 01/15/04(b)............ 758,532
331,108 Bank of Montreal,
1.06%, 02/17/04(b)............ 331,108
413,886 Bank of Novia Scotia,
1.08%, 03/10/04(b)............ 413,886
248,331 Citigroup, Inc.,
1.08%, 01/05/04(b)............ 248,331
124,166 Citigroup, Inc.,
1.09%, 02/06/04(b)............ 124,166
248,331 Credit Agricole Indosuez,
0.98%, 01/02/04(b)............ 248,331
248,331 Credit Agricole Indosuez,
1.08%, 01/28/04(b)............ 248,331
331,109 Den Danske Bank,
1.08%, 01/20/04(b)............ 331,109
413,886 Royal Bank of Canada,
1.05%, 02/27/04(b)............ 413,886
206,943 Royal Bank of Scotland,
1.08%, 01/09/04(b)............ 206,943
82,777 Royal Bank of Scotland,
1.08%, 01/15/04(b)............ 82,777
620,828 Royal Bank of Scotland,
1.08%, 01/20/04(b)............ 620,828
206,943 Svenska Handlesbanken,
1.08%, 02/04/04(b)............ 206,943
</Table>
See notes to financial statements.
118
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
TIME DEPOSITS (CONTINUED)
$ 82,777 Toronto Dominion Bank,
1.10%, 01/08/04(b)............ $ 82,777
124,166 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)............ 124,166
------------
TOTAL TIME DEPOSITS (Cost
$4,442,114)................... 4,442,114
------------
TOTAL SECURITIES
(Cost $90,054,940)............ 105,402,643
------------
REPURCHASE AGREEMENTS -- 6.1%
910,548 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $910,601
(Collateralized by
Archer-Daniels-Midland
Company, 8.88%, due 04/15/11,
with a value of $190,296, Den
Danske Bank -- 144A, 7.40%,
due 06/15/10, with a value of
$186,800, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$296,812, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $74,266, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $180,585)(b)......... 910,548
5,266,712 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $5,266,844
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
1.64%, due 11/25/30, with a
value of $5,530,157).......... 5,266,712
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $6,177,260)............. 6,177,260
------------
Total Investments -- 110.6%
(Cost $96,232,200)............ 111,579,903
Liabilities less other assets --
(10.6)%....................... (10,692,445)
------------
NET ASSETS -- 100.0%............ $100,887,458
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $96,484,383.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $15,358,097
Gross unrealized depreciation........... (262,577)
-----------
Net unrealized appreciation............. $15,095,520
===========
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31, 2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for securities
loaned.
See notes to financial statements.
119
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 95.5%
ADVERTISING -- 0.1%
92,600 aQuantive, Inc.*............. $ 949,150
17,300 R.H. Donnelley Corp.*........ 689,232
--------------
1,638,382
--------------
AEROSPACE AND DEFENSE -- 0.6%
219,900 AAR Corp.*................... 3,287,505
94,200 Curtiss-Wright Corp. -- Class
B.......................... 4,229,580
9,200 Ducommun, Inc.*.............. 205,620
4,700 Moog, Inc. -- Class A*....... 232,180
--------------
7,954,885
--------------
AIRLINES -- 0.5%
38,500 AirTran Holdings, Inc.*...... 458,150
68,800 American West Holdings
Corp. -- Class B*(a)....... 853,120
132,000 ExpressJet Holdings, Inc.*... 1,980,000
16,700 Mair Holdings, Inc.*......... 121,576
176,550 Pinnacle Airlines Corp*...... 2,452,280
--------------
5,865,126
--------------
APPAREL: MANUFACTURING -- 0.6%
258,850 Ashworth, Inc.*.............. 2,088,920
2,600 Gildan Activewear, Inc. --
Class A*................... 80,288
145,800 Guess?, Inc.*................ 1,759,806
24,400 K-Swiss, Inc. -- Class A..... 587,064
21,900 Kellwood Company............. 897,900
74,100 Oxford Industries, Inc. ..... 2,510,508
--------------
7,924,486
--------------
APPAREL: RETAIL -- 3.6%
240,440 Aeropostale, Inc.*........... 6,592,865
57,000 Brown Shoe Company, Inc. .... 2,162,010
410,050 Casual Male Retail Group,
Inc.*(a)................... 2,845,747
161,900 Charlotte Russe Holding,
Inc.*...................... 2,243,934
104,000 Claire's Stores, Inc. ....... 1,959,360
236,400 J. Jill Group, Inc.*......... 3,004,644
146,110 Jos. A. Bank Clothiers,
Inc.*(a)................... 5,068,556
222,010 Pacific Sunwear of
California, Inc.*.......... 4,688,851
356,000 Ross Stores, Inc.(a)......... 9,409,080
101,300 Shoe Carnival, Inc.*......... 1,803,140
161,700 Stage Stores, Inc.*.......... 4,511,430
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
APPAREL: RETAIL (CONTINUED)
52,000 The Men's Wearhouse, Inc.*... $ 1,300,520
26,800 Wilsons The Leather Experts,
Inc.*...................... 93,532
--------------
45,683,669
--------------
AUTOMOBILES -- 0.2%
41,100 American Axle & Manufacturing
Holdings, Inc.*............ 1,661,262
29,000 Oshkosh Truck Corp. ......... 1,479,870
--------------
3,141,132
--------------
AUTOMOTIVE EQUIPMENT -- 1.0%
32,800 Dura Automotive Systems,
Inc. -- Class A*........... 418,856
188,700 O'Reilly Automotive, Inc.*... 7,238,532
211,600 Spartan Motors, Inc. ........ 2,137,160
6,500 Standard Motor Products,
Inc. ...................... 78,975
86,800 TBC Corp.*................... 2,240,308
66,100 Tenneco Automotive, Inc.*.... 442,209
--------------
12,556,040
--------------
BANKS -- 6.8%
4,300 ABC Bancorp.................. 68,671
16,900 AMCORE Financial, Inc. ...... 456,638
3,900 AmericanWest Bancorp.*....... 88,920
1,400 BancFirst Corp. ............. 82,183
19,500 BancorpSouth, Inc. .......... 462,540
136,300 Bank of Bermuda, Ltd. ....... 6,126,685
4,300 Bank of Granite Corp. ....... 93,654
151,976 Banner Corp. ................ 3,822,196
3,100 Capital Corp. of the West*... 122,884
3,100 Capitol Bancorp, Ltd. ....... 88,040
2,300 CCBT Financial Companies,
Inc. ...................... 80,385
16,500 City Holding Company......... 577,500
14,500 Columbia Banking System,
Inc. ...................... 314,070
44,400 Commercial Capital Bancorp,
Inc.*...................... 950,604
97,300 Commercial Federal Corp. .... 2,598,883
55,700 Community First Bankshares,
Inc. ...................... 1,611,958
7,260 Community Trust Bancorp,
Inc. ...................... 219,252
14,200 Corus Bankshares, Inc. ...... 448,152
2,900 Dime Community Bancshares.... 89,204
26,500 First BanCorp................ 1,048,075
4,700 First Commonwealth Financial
Corp. ..................... 67,022
57,050 First Community Bancorp...... 2,061,787
</Table>
See notes to financial statements.
120
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
14,900 First Midwest Bancorp,
Inc. ...................... $ 482,909
4,000 First National Corp. ........ 120,040
9,600 First Place Financial
Corp. ..................... 187,488
7,400 First Republic Bank.......... 264,920
24,300 FirstFed Financial Corp.*.... 1,057,050
142,000 FirstMerit Corp. ............ 3,829,740
79,800 Flagstar Bancorp, Inc. ...... 1,709,316
18,600 Flushing Financial Corp. .... 340,008
70,300 Franklin Bank Corp.*......... 1,335,700
7,100 Frontier Financial Corp. .... 235,436
292,111 Hudson United Bancorp........ 10,793,501
5,000 Humboldt Bancorp(a).......... 87,600
11,000 Independent Bank Corp. ...... 311,960
32,700 IndyMac Bancorp, Inc.(a)..... 974,133
4,000 Interchange Financial
Services Corp. ............ 101,200
29,300 Irwin Financial Corp. ....... 920,020
6,300 ITLA Capital Corp.*.......... 315,630
17,800 Local Financial Corp.*....... 370,952
2,300 MASSBANK Corp. .............. 97,980
4,400 Mid-State Bancshares......... 111,936
60,300 Nara Bancorp, Inc. .......... 1,646,190
140,150 NetBank, Inc. ............... 1,871,003
6,800 OceanFirst Financial
Corp. ..................... 184,688
1,700 Old Second Bancorp, Inc. .... 84,150
16,170 Oriental Financial Group,
Inc. ...................... 415,569
5,100 Patriot Bank Corp. .......... 145,911
325,000 People's Bank(a)............. 10,595,000
2,250 People's Holding Company..... 74,250
9,900 PFF Bancorp, Inc. ........... 359,172
49,450 PrivateBancorp, Inc. ........ 2,250,964
41,400 Provident Bankshares
Corp. ..................... 1,218,816
8,800 Provident Financial Group,
Inc. ...................... 281,160
2,800 Provident Financial Holdings,
Inc. ...................... 101,556
31,600 R & G Financial Corp. --
Class B.................... 1,257,680
2,800 S&T Bancorp, Inc. ........... 83,720
3,700 Sandy Spring Bancorp,
Inc. ...................... 138,380
7,400 Second Bancorp, Inc. ........ 195,360
50,100 Silicon Valley Bancshares*... 1,807,107
7,000 Simmons First National
Corp. -- Class A........... 195,300
125,700 Sky Financial Group, Inc. ... 3,260,658
4,600 Southside Bancshares,
Inc. ...................... 85,100
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
3,300 State Bancorp, Inc. ......... $ 80,058
3,600 State Financial Services
Corp. -- Class A........... 95,616
6,625 Sterling Bancorp............. 188,813
3,200 Suffolk Bancorp.............. 110,496
30,800 Susquehanna Bancshares,
Inc. ...................... 770,308
226,650 Texas Capital Bancshares,
Inc.*...................... 3,277,812
53,800 Texas Regional Bancshares,
Inc. -- Class A............ 1,990,600
23,900 The Trust Company of N.
J. ........................ 948,352
14,600 Trustmark Corp. ............. 427,342
9,800 U.S.B. Holding Company,
Inc. ...................... 190,022
2,800 Union Bankshares Corp. ...... 85,400
16,500 United Community Financial
Corp. ..................... 188,265
3,100 WesBanco, Inc. .............. 85,839
6,800 West Coast Bancorp........... 145,112
114,140 Westamerica Bancorp.......... 5,672,758
2,400 Western Sierra Bancorp*...... 112,800
3,600 WSFS Financial Corp. ........ 161,460
--------------
85,909,609
--------------
BROADCAST SERVICES/MEDIA -- 1.9%
388,200 Cox Radio, Inc. -- Class
A*......................... 9,794,286
449,400 Emmis Communications Corp. --
Class A*................... 12,156,270
55,700 Sinclair Broadcast Group --
Class A*................... 831,044
53,000 Spanish Broadcasting System,
Inc. -- Class A*........... 556,500
13,200 World Wrestling
Entertainment, Inc. ....... 172,920
24,100 Young Broadcasting, Inc. --
Class A*................... 482,964
--------------
23,993,984
--------------
BUSINESS SERVICES AND SUPPLIES -- 2.5%
50,700 Administaff, Inc.*........... 881,166
25,500 Advisory Board Company*...... 890,205
417,000 American Management Systems,
Inc.*...................... 6,284,190
16,600 Angelica Corp. .............. 365,200
54,600 Dendrite International,
Inc.*...................... 855,582
135,200 Essex Corp.*................. 1,269,528
42,500 Exult, Inc.*(a).............. 302,600
113,700 Forrester Research, Inc.*.... 2,031,819
64,100 Gevity HR, Inc. ............. 1,425,584
</Table>
See notes to financial statements.
121
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES (CONTINUED)
135,700 Global Payments, Inc. ....... $ 6,394,184
127,600 Image Entertainment, Inc.*... 526,988
23,000 John H. Harland Company...... 627,900
17,400 Kforce, Inc.*................ 162,516
129,800 Labor Ready, Inc.*........... 1,700,380
132,100 MAXIMUS, Inc.*(a)............ 5,169,073
42,200 MemberWorks, Inc.*(a)........ 1,146,574
12,300 New England Business Service,
Inc. ...................... 362,850
12,400 Pomeroy IT Solutions,
Inc.*...................... 182,776
20,100 SOURCECORP, Inc.*............ 515,163
7,200 UniFirst Corp. .............. 170,712
--------------
31,264,990
--------------
CHEMICALS -- 1.2%
35,900 Airgas, Inc. ................ 771,132
20,400 Albemarle Corp. ............. 611,388
17,600 Arch Chemicals, Inc. ........ 451,616
18,600 Cytec Industries, Inc.*...... 714,054
15,600 Ethyl Corp.*................. 341,172
68,200 Hercules, Inc.*.............. 832,040
46,600 MacDermid, Inc. ............. 1,595,584
13,300 Octel Corp. ................. 261,877
281,230 Tetra Tech, Inc.*............ 6,991,378
69,100 Tetra Technologies, Inc.*.... 1,674,984
31,300 Trex Company, Inc.*.......... 1,188,774
--------------
15,433,999
--------------
COLLECTIBLES -- 0.0%
10,200 Department 56, Inc.*......... 133,620
--------------
COMMERCIAL SERVICES -- 0.2%
128,650 Providence Service Corp.*.... 2,081,557
--------------
COMPUTER SOFTWARE AND SERVICES -- 3.9%
82,800 Advanced Digital Information
Corp.*..................... 1,159,200
50,450 Altiris, Inc.*(a)............ 1,840,416
57,900 ANSYS, Inc.*................. 2,298,630
11,400 Captaris, Inc.*.............. 64,068
228,200 Checkpoint Systems, Inc.*.... 4,315,262
106,100 Citadel Security Software,
Inc.*(a)................... 403,180
529,800 ClickSoftware Technologies,
Ltd.*(a)................... 2,161,584
33,000 Computer Network Technology
Corp.*..................... 314,820
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES (CONTINUED)
8,300 Concord Communications,
Inc.*...................... $ 165,751
8,700 Covansys Corp.*.............. 95,700
12,000 Datastream Systems, Inc.*.... 94,200
450,860 Embarcadero Technologies,
Inc.*...................... 7,191,217
71,700 Epicor Software Corp.*....... 914,892
29,900 Evolving Systems, Inc.*(a)... 397,670
39,600 Hyperion Solutions Corp.*.... 1,193,544
8,500 Informatica Corp.*........... 87,550
2,500 Inter-Tel, Inc. ............. 62,450
135,800 Keane, Inc.*................. 1,988,112
81,200 Kintera, Inc.*............... 1,006,880
137,040 Macromedia, Inc.* ........... 2,444,794
4,000 ManTech International
Corp. -- Class A*.......... 99,800
87,150 Merge Technologies,
Inc.*(a)................... 1,537,326
128,300 Micromuse, Inc.*............. 885,270
171,900 MRO Software, Inc.*.......... 2,313,774
14,800 MTS Systems Corp. ........... 284,604
30,200 Omnicell, Inc.*.............. 489,240
109,650 OPNET Technologies, Inc.*.... 1,804,839
788,700 Parametric Technology
Corp.*..................... 3,107,478
180,800 Phoenix Technologies,
Ltd.*...................... 1,460,864
5,400 Progress Software Corp.*..... 110,484
18,100 Renaissance Learning,
Inc.*(a)................... 435,848
6,700 SERENA Software, Inc.*....... 122,945
14,000 SRA International, Inc. --
Class A*................... 603,400
26,200 SS&C Technologies, Inc....... 732,290
6,800 Sybase, Inc.*................ 139,944
33,800 Sykes Enterprises, Inc.*..... 289,328
100,000 Synopsys, Inc.*(a)........... 3,376,000
210,600 Synplicity, Inc.*............ 1,648,998
79,700 Transaction Systems
Architects, Inc. -- Class
A*......................... 1,803,611
23,900 Tyler Technologies, Inc.*.... 230,157
--------------
49,676,120
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.6%
94,600 Black Box Corp.(a)........... 4,358,222
11,400 Electronics For Imaging,
Inc.*(a)................... 296,628
32,400 Hutchinson Technology,
Inc.*(a)................... 995,976
34,300 Mercury Computer Systems,
Inc.*...................... 854,070
</Table>
See notes to financial statements.
122
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTERS AND OFFICE EQUIPMENT (CONTINUED)
16,000 RadiSys Corp.*............... $ 269,760
114,700 Silicon Storage Technology,
Inc.*...................... 1,261,700
--------------
8,036,356
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.3%
24,100 Brookfield Homes Corp. ...... 621,057
8,900 Centex Construction Products,
Inc. ...................... 536,403
206,600 Dycom Industries, Inc.*...... 5,541,012
35,500 Florida Rock Industries,
Inc. ...................... 1,947,175
6,700 Genlyte Group, Inc.*......... 391,146
112,300 Granite Construction,
Inc. ...................... 2,637,927
28,000 Integrated Electrical
Services, Inc. ............ 259,000
57,000 Lennox International,
Inc. ...................... 951,900
28,800 M/I Schottenstein Homes,
Inc. ...................... 1,124,640
45,600 Meritage Corp.*.............. 3,023,736
116,200 Simpson Manufacturing
Company, Inc.*............. 5,909,932
15,500 Universal Forest Products,
Inc. ...................... 498,790
23,500 USG Corp.*(a)................ 389,395
24,800 Walter Industries, Inc. ..... 331,080
207,000 WCI Communities, Inc.*....... 4,266,270
15,400 York International Corp. .... 566,720
--------------
28,996,183
--------------
CONSUMER GOODS AND SERVICES -- 1.9%
4,200 Central Garden & Pet
Company*................... 117,726
38,600 Chattem, Inc.*............... 690,940
32,400 Coinstar, Inc.*.............. 585,144
6,000 CSS Industries, Inc. ........ 186,060
10,400 DIMON, Inc. ................. 70,200
221,325 Jarden Corp.*................ 6,051,026
172,200 NBTY, Inc.*.................. 4,625,292
42,804 Regis Corp. ................. 1,691,614
195,090 Toro Company................. 9,052,176
59,900 Yankee Candle Company,
Inc.*...................... 1,637,067
--------------
24,707,245
--------------
CONTAINERS AND PACKAGING -- 0.1%
11,600 Chesapeake Corp. ............ 307,168
9,900 Greif, Inc. -- Class A....... 351,549
12,900 Silgan Holdings, Inc.*....... 549,411
--------------
1,208,128
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CORRECTIONAL FACILITIES -- 0.0%
5,600 Wackenhut Corrections
Corp.*..................... $ 127,680
--------------
DISTRIBUTION -- 2.5%
8,000 Building Materials Holding
Corp. ..................... 124,240
58,400 Handleman Company............ 1,198,952
144,020 Hughes Supply, Inc. ......... 7,146,272
20,600 Nu Skin Enterprises, Inc. --
Class A.................... 352,054
187,540 Tech Data Corp.*(a).......... 7,443,463
216,900 United Stationers, Inc.*..... 8,875,548
129,000 Universal Corp. ............. 5,697,930
26,600 Watsco, Inc. ................ 604,618
--------------
31,443,077
--------------
EDUCATION -- 2.5%
50,135 Bright Horizons Family
Solutions, Inc.*........... 2,105,670
329,000 DeVry, Inc.*(a).............. 8,267,770
399,530 ITT Educational Services,
Inc.*...................... 18,765,924
98,350 Sylvan Learning Systems,
Inc.*(a)................... 2,831,497
--------------
31,970,861
--------------
ELECTRONICS -- 1.9%
44,600 Artesyn Technologies,
Inc.*...................... 379,992
51,100 Benchmark Electronics,
Inc.*...................... 1,778,791
16,400 Daktronics, Inc.*............ 412,624
7,200 Excel Technology, Inc.*...... 236,592
279,300 Innovex, Inc.*............... 2,354,499
43,100 Methode Electronics, Inc. --
Class A.................... 527,113
12,400 Planar Systems, Inc.*........ 301,568
351,550 Plexus Corp.*................ 6,036,114
78,075 SRS Labs, Inc.*.............. 728,440
15,000 Stoneridge, Inc.*............ 225,750
108,900 Technitrol, Inc.*............ 2,258,586
390,700 Thomas & Betts Corp. ........ 8,943,122
--------------
24,183,191
--------------
ENGINEERING -- 0.1%
40,600 EMCOR Group, Inc.*........... 1,782,340
--------------
EQUIPMENT RENTAL AND LEASING -- 0.4%
140,000 Aaron Rents, Inc. ........... 2,818,200
125,600 Marlin Business Services,
Inc.*(a)................... 2,185,440
--------------
5,003,640
--------------
</Table>
See notes to financial statements.
123
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES -- 1.3%
21,400 Accredited Home Lenders
Holding Company*........... $ 654,840
126,500 American Capital Strategies,
Ltd.(a).................... 3,760,845
50,900 CompuCredit Corp.*........... 1,083,152
93,700 Financial Federal Corp.*..... 2,862,535
97,800 Investment Technology Group,
Inc.*...................... 1,579,470
28,000 Knight Trading Group,
Inc.*(a)................... 409,920
33,600 New Century Financial
Corp.(a)................... 1,332,912
134,300 Saxon Capital, Inc.*......... 2,813,585
105,400 World Acceptance Corp.*...... 2,098,514
--------------
16,595,773
--------------
FOOD AND BEVERAGE -- 1.8%
85,880 Adolph Coors Company -- Class
B(a)....................... 4,817,868
58,900 Chiquita Brands
International, Inc.*(a).... 1,327,017
213,540 Cott Corp.*.................. 5,981,255
46,600 Interstate Bakeries Corp. ... 663,118
112,750 Peet's Coffee & Tea, Inc.*... 1,962,978
60,000 Ralcorp Holdings, Inc.*...... 1,881,600
59,087 Riviana Foods, Inc. ......... 1,618,393
5,800 Sanderson Farms, Inc. ....... 233,740
192,600 Sensient Technologies
Corp. ..................... 3,807,702
--------------
22,293,671
--------------
FUNERAL SERVICES -- 0.1%
42,100 Alderwoods Group, Inc.*...... 396,582
194,500 Service Corp.
International*............. 1,048,355
--------------
1,444,937
--------------
INSURANCE -- 3.9%
2,200 AmerUs Group Company......... 76,934
116,400 Delphi Financial Group,
Inc. -- Class A(a)......... 4,190,400
10,100 FPIC Insurance Group,
Inc.*(a)................... 253,409
100,000 Fremont General Corp.(a)..... 1,691,000
109,800 Infinity Property & Casualty
Corp. ..................... 3,628,890
131,800 IPC Holdings, Ltd. .......... 5,132,292
58,500 LandAmerica Financial Group,
Inc. ...................... 3,057,210
38,600 National Western Life
Insurance Company -- Class
A*......................... 5,977,210
161,800 Platinum Underwriters
Holdings, Inc. ............ 4,854,000
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
66,150 ProAssurance Corp.*(a)....... $ 2,126,723
161,800 Reinsurance Group of America,
Inc. ...................... 6,253,570
53,500 RLI Corp. ................... 2,004,110
120,100 Scottish Re Group, Ltd. ..... 2,495,678
26,300 StanCorp Financial Group,
Inc. ...................... 1,653,744
49,100 Stewart Information Services
Corp. ..................... 1,991,005
26,600 UICI*........................ 353,248
374,800 Universal American Financial
Corp.*..................... 3,714,268
--------------
49,453,691
--------------
INTERNET SERVICES -- 4.4%
111,300 Akamai Technologies,
Inc.*(a)................... 1,196,475
57,500 Ask Jeeves, Inc.*(a)......... 1,041,900
945,830 CNET Networks, Inc.*......... 6,450,560
40,200 Corillian Corp.*............. 253,662
251,750 Digitas, Inc.*............... 2,346,310
15,500 eCollege.com, Inc. .......... 286,130
70,800 Equinix, Inc.*............... 1,996,560
32,800 eResearch Technology,
Inc.*(a)................... 833,776
245,720 F5 Networks, Inc.*........... 6,167,571
86,500 InfoSpace, Inc.*............. 1,993,825
430,380 Ixia*........................ 5,035,446
33,700 j2 Global Communications,
Inc.(a).................... 834,749
16,600 Keynote Systems, Inc.*....... 197,540
215,600 Lionbridge Technologies,
Inc.*...................... 2,071,916
156,050 Modem Media, Inc.*........... 1,274,929
39,500 Netegrity, Inc.*............. 407,245
26,600 NETFLIX, Inc.*(a)............ 1,454,754
300,670 NETGEAR, Inc.*(a)............ 4,807,713
66,300 RADWARE, Ltd.*............... 1,806,675
42,700 RSA Security, Inc.*(a)....... 606,340
357,500 Sapient Corp.*............... 2,002,000
279,300 Secure Computing Corp.*...... 5,002,263
9,400 SupportSoft, Inc.*........... 123,610
23,600 TheStreet.com, Inc.*......... 97,232
212,450 Tumbleweed Communications
Corp.*..................... 1,780,331
166,324 United Online, Inc.*(a)...... 2,792,580
248,400 ValueClick, Inc.*............ 2,255,472
21,300 Websense, Inc.*(a)........... 622,812
--------------
55,740,376
--------------
</Table>
See notes to financial statements.
124
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION -- 1.6%
233,320 Alliance Gaming Corp.*....... $ 5,751,338
81,000 Aztar Corp.*(a).............. 1,822,500
60,800 Choice Hotels International,
Inc.*...................... 2,143,200
237,700 Interstate Hotels & Resorts,
Inc.*...................... 1,271,695
66,500 La Quinta Corp.*............. 426,265
59,400 Multimedia Games, Inc.*(a)... 2,441,340
12,200 Navigant International,
Inc.*(a)................... 168,970
16,800 Polaris Industries,
Inc.(a).................... 1,488,144
252,050 Scientific Games Corp. --
Class A*................... 4,287,371
27,500 Shuffle Master, Inc.*(a)..... 952,050
--------------
20,752,873
--------------
MACHINERY -- 1.2%
109,400 Albany International Corp. --
Class A.................... 3,708,660
37,300 Applied Industrial
Technologies, Inc. ........ 889,978
16,800 Cascade Corp. ............... 374,640
22,900 Global Power Equipment Group,
Inc.*...................... 152,972
115,400 Intevac, Inc.*............... 1,628,294
160,200 Kadant, Inc.*................ 3,468,330
19,900 Middleby Corp. .............. 805,353
20,800 Presstek, Inc.*.............. 151,216
166,160 Terex Corp.*................. 4,732,237
--------------
15,911,680
--------------
MANUFACTURING -- 3.2%
40,120 Applied Films Corp.*......... 1,324,762
22,900 AptarGroup, Inc. ............ 893,100
42,100 Briggs & Stratton Corp.(a)... 2,837,540
46,600 C&D Technologies, Inc. ...... 893,322
63,300 Carlisle Companies, Inc. .... 3,852,438
28,700 Ceradyne, Inc.*.............. 977,522
13,500 Cognex Corp. ................ 381,240
268,230 Crane Company................ 8,245,390
110,500 Deswell Industries, Inc. .... 2,873,000
18,600 Griffon Corp.*............... 376,836
24,900 II-VI, Inc.*................. 642,420
68,400 Jacuzzi Brands, Inc.*........ 484,956
4,800 Kaydon Corp. ................ 124,032
20,300 Lincoln Electric Holdings,
Inc. ...................... 502,222
202,030 Merix Corp.*(a).............. 4,955,796
23,600 NN, Inc. .................... 297,124
5,500 Powell Industries, Inc.*..... 105,325
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MANUFACTURING (CONTINUED)
7,100 Quixote Corp. ............... $ 173,311
16,400 Rofin-Sinar Technologies,
Inc.*...................... 566,784
210,000 Rogers Corp.*................ 9,265,201
8,900 TTM Technologies, Inc.*...... 150,232
22,100 Valmont Industries, Inc. .... 511,615
--------------
40,434,168
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 5.6%
173,250 American Medical Security
Group, Inc.*............... 3,884,265
123,600 AMERIGROUP Corp.*(a)......... 5,271,540
30,300 AMN Healthcare Services,
Inc.*(a)................... 519,948
39,700 AmSurg Corp.*................ 1,504,233
47,500 CorVel Corp.*................ 1,786,000
5,200 Hanger Orthopedic Group,
Inc.*...................... 80,964
17,380 ICON PLC (ADR)*.............. 757,768
89,600 Inveresk Research Group,
Inc.*...................... 2,215,808
55,000 Kindred Healthcare, Inc.*.... 2,858,900
98,050 LabOne, Inc.*................ 3,183,684
238,935 Lincare Holdings, Inc.*(a)... 7,175,218
285,000 Owens & Minor, Inc. ......... 6,244,350
13,900 PDI, Inc.*................... 372,659
160,700 Per-Se Technologies, Inc.*... 2,452,282
127,500 Province Healthcare
Company*................... 2,040,000
9,800 Quality Systems, Inc.*....... 436,982
263,960 Triad Hospitals, Inc.*....... 8,781,949
362,800 Universal Health Services,
Inc. -- Class B(a)......... 19,489,615
196,200 US Oncology, Inc.*(a)........ 2,111,112
--------------
71,167,277
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.6%
113,700 Advanced Medical Optics,
Inc.*...................... 2,234,205
440,490 ALARIS Medical Systems,
Inc.*...................... 6,699,853
87,500 Biolase Technology,
Inc.*(a)................... 1,452,500
59,200 Candela Corp.*............... 1,076,256
1,900 Cerner Corp.*(a)............. 71,915
12,700 Closure Medical Corp.*....... 430,911
6,600 Cyberonics, Inc.*............ 211,266
68,900 Dade Behring Holdings,
Inc.*...................... 2,462,486
30,000 DJ Orthopedics, Inc.*........ 804,000
105,000 EPIX Medical, Inc.*.......... 1,709,400
204,890 Gen-Probe, Inc.*............. 7,472,337
</Table>
See notes to financial statements.
125
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES (CONTINUED)
114,350 I-Flow Corp.*(a)............. $ 1,590,609
55,600 IDEXX Laboratories,
Inc.*(a)................... 2,573,168
5,550 INAMED Corp.*................ 266,733
128,950 Intuitive Surgical, Inc.*.... 2,203,756
23,400 Kensey Nash Corp.*(a)........ 544,050
93,450 Laserscope*.................. 1,456,886
12,900 LCA-Vision, Inc.*............ 273,093
24,100 Luminex Corp. ............... 226,058
31,000 Mentor Corp. ................ 745,860
125,300 North America Scientific,
Inc.*...................... 1,315,650
211,150 OrthoLogic Corp.*............ 1,294,350
201,400 PolyMedica Corp.(a).......... 5,298,834
569,390 PSS World Medical, Inc.*..... 6,872,536
36,000 Synovis Life Technologies,
Inc.*(a)................... 732,240
79,400 Techne Corp.*................ 2,999,732
32,800 Therasense, Inc.*(a)......... 665,840
239,550 TriPath Imaging, Inc.*....... 1,868,490
32,950 Ventana Medical Systems,
Inc.*...................... 1,298,230
67,300 VISX, Inc.*.................. 1,557,995
--------------
58,409,239
--------------
METALS AND MINING -- 1.4%
34,000 AMCOL International Corp. ... 686,800
18,100 Brush Engineered Materials,
Inc.*...................... 277,111
24,600 Carpenter Technology
Corp. ..................... 727,422
14,900 Century Aluminum Company*.... 283,249
713,050 GrafTech International,
Ltd.*(a)................... 9,626,175
101,200 Hecla Mining Company*........ 838,948
8,500 Material Sciences Corp.*..... 85,935
171,400 Meridian Gold, Inc.*......... 2,504,154
23,300 Mueller Industries, Inc.*.... 800,588
28,300 RTI International Metals,
Inc.*...................... 477,421
19,700 Southern Peru Copper
Corp. ..................... 929,052
16,500 USEC, Inc. .................. 138,600
--------------
17,375,455
--------------
MOTOR VEHICLES -- 0.0%
3,800 Arctic Cat, Inc. ............ 93,860
--------------
OIL AND GAS: EQUIPMENT -- 0.7%
41,300 CARBO Ceramics, Inc. ........ 2,116,625
13,400 Dril-Quip, Inc.*............. 218,420
12,500 Gulf Island Fabrication,
Inc.*...................... 212,875
89,800 Maverick Tube Corp.*......... 1,728,650
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
OIL AND GAS: EQUIPMENT (CONTINUED)
175,450 Oil States International,
Inc.*...................... $ 2,445,773
229,350 Superior Energy Services,
Inc.*...................... 2,155,890
--------------
8,878,233
--------------
OIL, COAL AND GAS -- 1.7%
49,100 Cabot Oil & Gas Corp. ....... 1,441,085
75,750 Cal Dive International,
Inc.*...................... 1,826,333
5,100 Clayton Williams Energy,
Inc.*...................... 148,257
93,400 Comstock Resources, Inc.*.... 1,802,620
538,450 Grey Wolf, Inc.*............. 2,013,803
18,300 Headwaters, Inc.*............ 359,046
47,200 Nuevo Energy Company*........ 1,140,824
6,200 Oceaneering International,
Inc.*...................... 173,600
164,600 St. Mary Land & Exploration
Company.................... 4,691,100
90,800 Unit Corp.*.................. 2,138,340
149,600 Vintage Petroleum, Inc. ..... 1,799,688
6,900 Westmoreland Coal Company*... 120,750
141,900 Westport Resources Corp.*.... 4,237,134
11,400 World Fuel Services Corp. ... 387,030
--------------
22,279,610
--------------
PAPER AND FOREST PRODUCTS -- 0.6%
208,800 Boise Cascade Corp. ......... 6,861,168
18,700 Longview Fibre Company....... 230,945
22,500 Schweitzer-Mauduit
International, Inc. ....... 670,050
--------------
7,762,163
--------------
PHARMACEUTICALS -- 2.2%
76,200 Adolor Corp.*................ 1,525,524
110,000 Alexion Pharmaceuticals,
Inc.*...................... 1,872,200
133,300 AtheroGenics, Inc.*.......... 1,992,835
81,300 Bradley Pharmaceuticals,
Inc.*(a)................... 2,067,459
25,300 Connetics Corp.*............. 459,448
102,500 Discovery Laboratories
Inc*....................... 1,075,225
580,800 Durect Corp.*(a)............. 1,498,464
34,800 Kos Pharmaceuticals,
Inc.*(a)................... 1,497,792
8,700 Medicis Pharmaceuticals
Corp. -- Class A........... 620,310
88,750 Penwest Pharmaceuticals
Company*................... 1,533,600
63,000 Perrigo Company.............. 990,360
122,350 Pozen, Inc.*................. 1,247,970
98,210 Salix Pharmaceuticals,
Ltd.*(a)................... 2,226,421
</Table>
See notes to financial statements.
126
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
55,800 Savient Pharmaceuticals,
Inc.*...................... $ 257,238
32,700 Serologicals Corp.*.......... 608,220
29,600 Tanox, Inc.*................. 439,560
99,810 Taro Pharmaceutical
Industries, Ltd.*.......... 6,437,745
90,000 Vicuron Pharmaceuticals,
Inc.*...................... 1,678,500
--------------
28,028,871
--------------
PRINTING AND PUBLISHING -- 0.1%
14,100 Consolidated Graphics,
Inc.*...................... 445,278
17,400 Thomas Nelson, Inc. ......... 336,342
--------------
781,620
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.6%
71,400 Getty Realty Corp. .......... 1,867,110
157,700 The St. Joe Company.......... 5,880,633
--------------
7,747,743
--------------
REAL ESTATE INVESTMENT TRUSTS -- 2.1%
5,200 American Land Lease, Inc. ... 103,740
17,100 American Mortgage Acceptance
Company.................... 278,730
40,000 Anworth Mortgage Asset
Corp. ..................... 557,200
55,700 Arden Realty, Inc. .......... 1,689,938
20,300 Associated Estates Realty
Corp. ..................... 148,393
18,100 Bedford Property Investors,
Inc.(a).................... 518,203
22,800 Boykin Lodging Company....... 208,620
2,300 Camden Property Trust........ 101,890
19,300 Capital Automotive REIT...... 617,600
46,400 Chelsea Property Group,
Inc. ...................... 2,543,184
9,200 Cornerstone Realty Income
Trust, Inc. ............... 80,592
3,000 Correctional Properties
Trust...................... 86,400
53,100 Equity Inns, Inc. ........... 480,555
3,000 Essex Property Trust,
Inc. ...................... 192,660
38,000 FelCor Lodging Trust,
Inc.*...................... 421,040
27,800 Gables Residential Trust..... 965,772
9,600 Great Lakes REIT............. 150,720
12,900 Highwoods Properties,
Inc. ...................... 327,660
73,300 HRPT Properties Trust........ 739,597
32,200 Innkeepers USA Trust......... 269,514
12,900 Investors Real Estate
Trust...................... 127,710
19,700 Keystone Property Trust...... 435,173
26,200 Kilroy Realty Corp. ......... 858,050
28,400 Koger Equity................. 594,412
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
18,000 LTC Properties, Inc. ........ $ 265,320
128,400 Maguire Properties, Inc. .... 3,120,120
173,800 MeriStar Hospitality
Corp.*..................... 1,131,438
18,400 Mission West Properties,
Inc. ...................... 238,280
24,500 National Health Investors,
Inc. ...................... 609,560
9,600 Post Properties, Inc. ....... 268,032
55,700 PS Business Parks, Inc. ..... 2,298,182
85,200 RAIT Investment Trust........ 2,181,120
25,600 Shurgard Storage Centers,
Inc. -- Class A............ 963,840
19,500 Sizeler Property Investors,
Inc. ...................... 208,845
34,500 SL Green Realty Corp. ....... 1,416,225
23,000 Sovran Self Storage.......... 854,450
5,300 Urstadt Biddle Properties --
Class A.................... 74,995
20,100 Winston Hotels, Inc. ........ 205,020
--------------
26,332,780
--------------
REGISTERED INVESTMENT COMPANIES -- 0.6%
125,000 iShares Russell 2000 Growth
Index Fund(a).............. 7,406,250
--------------
RESEARCH AND DEVELOPMENT -- 1.2%
57,200 Albany Molecular Research,
Inc.*...................... 859,144
5,800 BioReliance Corp.*........... 277,356
107,100 Covance, Inc.*............... 2,870,280
5,500 Cytyc Corp.* ................ 75,680
31,500 Digene Corp.*................ 1,263,150
55,900 Encysive Pharmaceuticals,
Inc.*...................... 500,305
44,099 Enzo Biochem, Inc.*(a)....... 789,813
8,400 Exact Sciences Corp.*........ 85,008
17,900 Genencor International,
Inc.*...................... 281,925
72,100 Incyte, Inc.*................ 493,164
61,700 Inspire Pharmaceuticals,
Inc.*...................... 873,672
79,400 Martek Biosciences
Corp.*(a).................. 5,158,618
18,800 Maxygen, Inc.*............... 199,844
66,100 Telik, Inc*(a)............... 1,520,961
--------------
15,248,920
--------------
RETAIL -- 4.1%
537,050 Big Lots, Inc.*.............. 7,631,480
326,370 BJ'S Wholesale Club,
Inc.*(a)................... 7,493,455
17,100 Brookstone, Inc.*............ 364,401
190,700 Casey's General Stores,
Inc. ...................... 3,367,762
36,300 Cost Plus, Inc.*............. 1,488,300
</Table>
See notes to financial statements.
127
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
133,000 Duane Reade, Inc.*(a)........ $ 2,250,360
112,400 EZCORP, Inc.*(a)............. 955,400
6,700 Finlay Enterprises, Inc.*.... 94,671
95,300 Guitar Center, Inc.*......... 3,104,874
63,270 Hot Topic, Inc.*............. 1,863,934
150,200 Kirkland's, Inc.*............ 2,652,532
116,250 Movie Gallery, Inc.*(a)...... 2,171,550
10,300 Pantry, Inc.*................ 233,810
5,800 REX Stores Corp.*............ 82,128
452,300 Saks, Inc.*.................. 6,802,592
104,900 Shopko Stores, Inc.*(a)...... 1,599,725
16,200 Sonic Automotive, Inc. ...... 371,304
50,500 The Pep Boys -- Manny, Moe &
Jack....................... 1,154,935
151,700 Tractor Supply Company*...... 5,899,613
19,400 Trans World Entertainment
Corp.*(a).................. 138,128
100,200 Ultimate Electronics,
Inc.*...................... 764,526
31,600 Zale Corp.*.................. 1,681,120
--------------
52,166,600
--------------
RETAIL: RESTAURANTS -- 3.9%
439,900 Applebee's International,
Inc. ...................... 17,274,873
81,150 Buffalo Wild Wings, Inc.*.... 2,105,843
81,800 CEC Entertainment, Inc.*..... 3,876,502
73,007 Chicago Pizza & Brewery,
Inc.*...................... 1,089,264
31,900 Lone Star Steakhouse &
Saloon, Inc. .............. 739,442
100,000 Outback Steakhouse, Inc. .... 4,421,000
61,400 Papa John's International,
Inc.*(a)................... 2,049,532
97,650 RARE Hospitality
International, Inc.*....... 2,386,566
432,200 Ruby Tuesday, Inc. .......... 12,313,378
53,200 Ryan's Family Steak Houses,
Inc.*...................... 805,448
66,600 Sonic Corp.*................. 2,039,292
4,700 The Steak n Shake Company*... 83,895
--------------
49,185,035
--------------
RETAIL: SUPERMARKETS -- 0.2%
189,800 Wild Oats Markets, Inc.*..... 2,454,114
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RUBBER PRODUCTS -- 0.1%
32,300 Bandag, Inc. ................ $ 1,330,760
14,600 Cooper Tire & Rubber
Company.................... 312,148
--------------
1,642,908
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.8%
2,200 Dionex Corp.*................ 101,244
39,200 Metrologic Instruments,
Inc.*...................... 1,058,400
7,600 Molecular Devices Corp.*..... 144,324
445,170 PerkinElmer, Inc. ........... 7,599,052
11,700 Woodward Governor Company.... 664,911
--------------
9,567,931
--------------
SEMICONDUCTORS -- 5.5%
218,712 Actel Corp.*................. 5,270,959
150,900 Asyst Technologies, Inc.*.... 2,618,115
9,600 CEVA, Inc.*.................. 99,840
276,600 ChipPAC, Inc. -- Class A*.... 2,099,394
23,800 Cohu, Inc. .................. 455,770
37,800 DSP Group, Inc.*............. 941,598
151,000 Dupont Photomasks,
Inc.*(a)................... 3,645,140
330,800 ESS Technology, Inc.*........ 5,626,908
161,750 Exar Corp.*.................. 2,762,690
133,600 FSI International, Inc.*..... 985,968
300,000 Genus, Inc.*(a).............. 1,800,000
15,400 Integrated Device Technology,
Inc.*...................... 264,418
2,400 International Rectifier
Corp.*..................... 118,584
424,100 LogicVision, Inc.*........... 1,908,450
64,500 Microsemi Corp.*............. 1,585,410
174,940 MKS Instruments, Inc.*....... 5,073,260
106,650 Mykrolis Corp.*.............. 1,714,932
321,230 O2Micro International,
Ltd.*...................... 7,195,551
15,600 OmniVision Technologies,
Inc.*(a)................... 861,900
238,900 Pericom Semiconductor
Corp.*..................... 2,546,674
67,400 Photronics, Inc.*............ 1,342,608
278,000 PLX Technology, Inc.*........ 2,460,300
85,950 Power Integrations, Inc.*.... 2,875,887
199,000 Rudolph Technologies,
Inc.*...................... 4,883,460
24,200 Silicon Laboratories,
Inc.*(a)................... 1,045,924
14,800 Standard Microsystems
Corp.*..................... 374,440
89,850 Ultratech, Inc.*............. 2,638,895
4,200 Varian Semiconductor
Equipment Associates,
Inc.*...................... 183,498
75,600 Veeco Instruments,
Inc.*(a)................... 2,131,920
</Table>
See notes to financial statements.
128
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
7,900 Virage Logic Corp.*.......... $ 80,343
10,700 Vitesse Semiconductor
Corp.*..................... 62,809
193,050 Xicor, Inc.*................. 2,189,187
145,200 Zoran Corp.*(a).............. 2,525,028
--------------
70,369,860
--------------
SPORTING GOODS AND EQUIPMENT -- 0.8%
131,900 Callaway Golf Company(a)..... 2,222,515
182,400 Hibbett Sporting Goods,
Inc.*...................... 5,435,520
153,700 K2, Inc.*.................... 2,337,777
19,900 Nautilus Group, Inc.(a)...... 279,595
--------------
10,275,407
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.9%
78,200 Alvarion Ltd.*............... 903,210
22,900 Anaren, Inc.*................ 323,348
8,800 Anixter International,
Inc.*...................... 227,744
13,900 Applied Signal Technology,
Inc. ...................... 319,839
44,600 Aspect Communications
Corp.*..................... 702,896
24,800 Audiovox Corp. -- Class A*... 318,432
590,500 Cable Design Technologies
Corp.*..................... 5,308,595
42,700 Carrier Access Corp.*(a)..... 534,604
50,600 Centillium Communications,
Inc.*...................... 284,878
355,400 Cincinnati Bell, Inc.*....... 1,794,770
13,200 Commonwealth Telephone
Enterprises, Inc.*(a)...... 498,300
42,800 Comtech Telecommunications
Corp.*(a).................. 1,235,636
6,200 CT Communications, Inc. ..... 83,700
18,800 Digi International, Inc.*.... 180,480
62,400 Ditech Communications
Corp.*..................... 1,191,840
35,600 General Cable Corp.*......... 290,140
33,400 General Communication,
Inc. -- Class A*........... 290,580
22,800 Inet Technologies, Inc.*..... 273,600
49,000 Intervoice, Inc.*............ 581,630
8,200 Performance Technologies,
Inc.*...................... 116,850
47,600 Plantronics, Inc.*........... 1,554,140
47,000 Sonus Networks, Inc.*........ 355,320
18,900 SpectraLink Corp. ........... 362,313
10,200 SureWest Communications...... 412,284
35,800 TALK America Holdings,
Inc.*(a)................... 412,416
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
193,530 Tekelec*..................... $ 3,009,392
17,800 Ulticom, Inc.*............... 171,770
43,400 UNOVA, Inc.*................. 996,030
73,300 Western Wireless Corp. --
Class A.................... 1,345,788
--------------
24,080,525
--------------
TRANSPORTATION: FREIGHT -- 1.0%
217,000 EGL, Inc.*(a)................ 3,810,520
81,550 Forward Air Corp.*........... 2,242,625
188,900 Genesee & Wyoming, Inc. --
Class A*................... 5,950,350
31,000 Landstar System, Inc.*....... 1,179,240
--------------
13,182,735
--------------
TRANSPORTATION: SERVICES -- 1.4%
154,200 Dynamex, Inc.*............... 1,850,400
8,300 Greenbrier Companies,
Inc.*...................... 139,025
78,070 Petroleum Helicopters,
Inc.*...................... 2,107,890
190,990 Ryder System, Inc. .......... 6,522,308
6,600 SCS Transportation, Inc.*.... 116,028
109,500 USF Corp. ................... 3,743,805
150,500 Vitran Corp., Inc. -- Class
A.......................... 2,129,575
62,375 Werner Enterprises, Inc. .... 1,215,689
--------------
17,824,720
--------------
UTILITIES: ELECTRIC -- 0.7%
39,900 Avista Corp. ................ 722,988
78,300 Black Hills Corp. ........... 2,335,689
110,200 Cleco Corp. ................. 1,981,396
18,400 El Paso Electric Company*.... 245,640
148,800 PNM Resources, Inc. ......... 4,181,280
1,700 UIL Holdings Corp. .......... 76,670
--------------
9,543,663
--------------
UTILITIES: GAS -- 0.7%
11,900 Cascade Natural Gas Corp. ... 250,971
46,200 New Jersey Resources
Corp. ..................... 1,779,162
35,500 Peoples Energy Corp.(a)...... 1,492,420
77,700 Southern Union Company*...... 1,429,680
127,000 WGL Holdings, Inc. .......... 3,529,329
--------------
8,481,562
--------------
</Table>
See notes to financial statements.
129
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
WASTE MANAGEMENT AND RECYCLING -- 0.1%
30,000 Waste Connections, Inc.*..... $ 1,133,100
--------------
TOTAL COMMON STOCKS (Cost
$934,642,983).............. 1,214,763,650
--------------
REGULATED INVESTMENT COMPANIES -- 1.0%
5,778,041 American Aadvantage
Select(b).................. 5,778,041
1,788,759 Merrill Lynch Premier
Institutional Fund(b)...... 1,788,759
4,952,606 Merrimac Cash Fund -- Premium
Class(b)................... 4,952,606
--------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $12,519,406)......... 12,519,406
--------------
<Caption>
PRINCIPAL
---------
SHORT TERM COMMERCIAL PAPER -- 0.3%
$ 1,801,710 General Electric Capital
Corp.,
1.09%, 01/09/04(b)......... 1,801,710
1,650,869 General Electric Capital
Corp.,
1.08%, 01/16/04(b)......... 1,650,869
--------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $3,452,579).......... 3,452,579
--------------
SHORT TERM CORPORATE NOTES -- 3.4%
1,650,869 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)..... 1,650,869
1,650,869 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)..... 1,650,869
4,127,172 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)..... 4,127,172
3,301,738 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)..... 3,301,738
4,127,172 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)..... 4,127,172
6,603,475 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)..... 6,603,475
10,730,646 Morgan Stanley, Floating
Rate,
1.05%(**), 06/14/04(b)..... 10,730,646
2,476,303 Morgan Stanley, Floating
Rate,
1.05%(**), 06/21/04(b)..... 2,476,303
8,254,344 Morgan Stanley, Floating
Rate,
1.05%(**), 09/10/04(b)..... 8,254,344
--------------
TOTAL SHORT TERM CORPORATE
NOTES
(Cost $42,922,588)......... 42,922,588
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.4%
FANNIE MAE -- 0.3%
$ 3,287,641 1.06%, 01/02/04(b)........... $ 3,287,641
--------------
FREDDIE MAC -- 0.1%
1,650,869 1.06%, 01/27/04(b)........... 1,650,869
--------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY
SECURITIES (Cost
$4,938,510)................ 4,938,510
--------------
SHORT TERM US TREASURY SECURITY -- 0.1%
1,000,000 US Treasury Bill,
0.85%, 03/18/04(c) (Cost
$998,179).................. 998,179
--------------
TIME DEPOSITS -- 7.0%
15,127,822 Bank of Montreal,
1.06%, 01/15/04(b)......... 15,127,822
6,603,475 Bank of Montreal,
1.06%, 02/17/04(b)......... 6,603,475
8,254,344 Bank of Novia Scotia,
1.08%, 03/10/04(b)......... 8,254,344
4,952,606 Citigroup, Inc.,
1.08%, 01/05/04(b)......... 4,952,606
2,476,303 Citigroup, Inc.,
1.09%, 02/06/04(b)......... 2,476,303
4,952,606 Credit Agricole Indosuez,
0.98%, 01/02/04(b)......... 4,952,606
4,952,606 Credit Agricole Indosuez,
1.08%, 01/28/04(b)......... 4,952,606
6,603,475 Den Danske Bank,
1.08%, 01/20/04(b)......... 6,603,475
8,254,344 Royal Bank of Canada,
1.05%, 02/27/04(b)......... 8,254,344
4,127,172 Royal Bank of Scotland,
1.08%, 01/09/04(b)......... 4,127,172
1,650,869 Royal Bank of Scotland,
1.08%, 01/15/04(b)......... 1,650,869
12,381,516 Royal Bank of Scotland,
1.08%, 01/20/04(b)......... 12,381,516
4,127,172 Svenska Handlesbanken,
1.08%, 02/04/04(b)......... 4,127,172
</Table>
See notes to financial statements.
130
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
TIME DEPOSITS (CONTINUED)
$ 1,650,869 Toronto Dominion Bank,
1.10%, 01/08/04(b)......... $ 1,650,869
2,476,302 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)......... 2,476,302
--------------
TOTAL TIME DEPOSITS (Cost
$88,591,481)............... 88,591,481
--------------
TOTAL SECURITIES (Cost
$1,088,065,726)............ 1,368,186,393
--------------
REPURCHASE AGREEMENTS -- 6.2%
18,159,557 With Goldman Sachs Group,
Inc., dated 12/31/03,
1.04%, due 01/02/04,
repurchase proceeds at
maturity $18,160,606
(Collateralized by
Archer-Daniels-Midland
Company, 8.88%, due
04/15/11, with a value of
$3,795,183, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$3,725,439, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value
of $5,919,489, Morgan
Stanley, 6.75%, due
04/15/11, with a value of
$1,481,125, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $3,601,512)(b).... 18,159,557
2,147,343 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $2,147,397
(Collateralized by Small
Business Administration,
4.38%, due 12/25/26, with a
value of $2,254,710)....... 2,147,343
6,974,136 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $6,974,310
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 5.21%, due
04/01/32, with a value of
$7,322,843)................ 6,974,136
9,798,960 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $9,799,205
(Collateralized by Freddie
Mac Adjustable Rate
Mortgage, 6.11%, due
06/01/32, with a value of
$10,288,908)............... 9,798,960
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS (CONTINUED)
$10,882,945 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $10,883,217
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 4.11%, due
01/01/33, with a value of
$11,427,092)............... $ 10,882,945
30,537,224 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $30,537,987
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 5.58%, due
01/01/32, with a value of
$7,527,723 and Fannie Mae
Adjustable Rate Mortgage,
3.10%, due 11/01/33, with a
value of $24,536,363)...... 30,537,224
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $78,500,165)......... 78,500,165
--------------
Total Investments -- 113.9%
(Cost $1,166,565,891)...... 1,446,686,558
Liabilities less other
assets -- (13.9)%.......... (176,085,433)
--------------
NET ASSETS -- 100.0%......... $1,270,601,125
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $1,171,713,098.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $304,215,040
Gross unrealized depreciation.......... (29,241,580)
------------
Net unrealized appreciation............ $274,973,460
============
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
(c) Security is segregated as initial margin for futures contracts.
(ADR) American Depository Receipt.
See notes to financial statements.
131
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 96.3%
BANKS -- 10.6%
53,000 Brookline Bancorp, Inc. ....... $ 813,020
43,800 Downey Financial Corp. ........ 2,159,340
14,300 Franklin Bank Corp.*(a)........ 271,700
56,200 R & G Financial Corp. --
Class B...................... 2,236,760
15,100 Seacoast Financial Services
Corp. ....................... 413,891
32,600 South Financial Group, Inc. ... 908,236
55,700 Westcorp....................... 2,035,835
------------
8,838,782
------------
BROADCAST SERVICES/MEDIA -- 2.6%
37,000 Lin TV Corp. -- Class A*....... 954,970
137,800 Mediacom Communications
Corp.*....................... 1,194,726
------------
2,149,696
------------
BUSINESS SERVICES AND SUPPLIES -- 4.6%
47,300 Advisory Board Company*........ 1,651,243
68,400 Gevity HR, Inc. ............... 1,521,216
64,800 Rewards Network, Inc.*......... 690,768
------------
3,863,227
------------
COMPUTER SOFTWARE AND SERVICES -- 2.6%
153,000 Agile Software Corp.*.......... 1,514,700
24,700 Manhattan Associates,
Inc.*(a)..................... 682,708
------------
2,197,408
------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.1%
79,900 Integral Systems, Inc.*........ 1,719,448
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.3%
49,300 Integrated Electrical Services,
Inc. ........................ 456,025
32,600 WCI Communities, Inc.*(a)...... 671,886
------------
1,127,911
------------
ELECTRONICS -- 1.6%
30,800 Gentex Corp.................... 1,360,128
------------
FINANCIAL SERVICES -- 2.5%
95,900 CapitalSource, Inc.*(a)........ 2,079,112
------------
INSURANCE -- 2.5%
57,700 Delphi Financial Group,
Inc. -- Class A(a)........... 2,077,200
------------
INTERNET SERVICES -- 2.0%
116,400 Corillian Corp.*............... 734,484
41,200 eSpeed, Inc. -- Class A*....... 964,492
------------
1,698,976
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION -- 1.6%
36,500 Extended Stay America, Inc. ... $ 528,520
16,400 Four Seasons Hotels, Inc.(a)... 838,860
------------
1,367,380
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.1%
103,300 Align Technology, Inc.*........ 1,706,516
134,800 Conceptus, Inc.*(a)............ 1,431,576
28,500 North America Scientific,
Inc.*........................ 299,250
------------
3,437,342
------------
PHARMACEUTICALS -- 7.2%
53,500 Abgenix, Inc.*................. 666,610
75,400 Connetics Corp.*............... 1,369,264
5,400 CV Therapeutics, Inc.*......... 79,164
30,700 Medicis Pharmaceuticals
Corp. --
Class A...................... 2,188,910
123,800 Nektar Therapeutics*(a)........ 1,684,918
------------
5,988,866
------------
REAL ESTATE INVESTMENT TRUSTS -- 2.8%
35,500 RAIT Investment Trust.......... 908,800
28,500 Redwood Trust, Inc.(a)......... 1,449,225
------------
2,358,025
------------
RESEARCH AND DEVELOPMENT -- 11.0%
93,300 Axonyx, Inc.*(a)............... 454,371
114,300 Cubist Pharmaceuticals,
Inc.*........................ 1,389,888
50,100 Inspire Pharmaceuticals,
Inc.*........................ 709,416
10,408 IntraBiotics Pharmaceuticals,
Inc.*(a)..................... 167,569
87,500 Neurochem, Inc.*............... 2,064,212
6,500 Neurocrine Biosciences,
Inc.*........................ 354,510
25,100 NPS Pharmaceuticals,
Inc.*(a)..................... 771,574
131,700 Pain Therapeutics, Inc.*....... 915,315
60,700 Protein Design Labs,
Inc.*(a)..................... 1,086,530
198,100 XOMA, Ltd.*.................... 1,307,460
------------
9,220,845
------------
</Table>
See notes to financial statements.
132
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL -- 13.1%
52,700 Coach, Inc.*................... $ 1,989,425
47,400 Cost Plus, Inc.*............... 1,943,400
52,200 First Cash Financial Services,
Inc.*........................ 1,338,460
20,500 Guitar Center, Inc.*........... 667,890
101,800 PC Mall, Inc.*................. 1,644,070
29,600 Tractor Supply Company*........ 1,151,144
58,800 Urban Outfitters, Inc.*(a)..... 2,178,541
------------
10,912,930
------------
RETAIL: RESTAURANTS -- 4.8%
14,000 Krispy Kreme Doughnuts,
Inc.*(a)..................... 512,400
46,700..... RARE Hospitality International,
Inc.*........................ 1,141,348
31,700 Sonic Corp.*................... 970,654
31,500 The Cheesecake Factory,
Inc.*........................ 1,386,945
------------
4,011,347
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 3.6%
37,100 Cymer, Inc.*(a)................ 1,713,649
31,400 Varian, Inc.*.................. 1,310,322
------------
3,023,971
------------
SEMICONDUCTORS -- 9.9%
63,800 Asyst Technologies, Inc.*...... 1,106,930
60,800 Brooks Automation, Inc.*....... 1,469,536
112,200 O2Micro International, Ltd.*... 2,513,280
186,500 Skyworks Solutions, Inc.*...... 1,622,550
42,900 Tessera Technologies, Inc.*.... 806,949
17,000 Varian Semiconductor Equipment
Associates, Inc.*............ 742,730
------------
8,261,975
------------
SPORTING GOODS AND EQUIPMENT -- 2.7%
75,050 Hibbett Sporting Goods,
Inc.*........................ 2,236,490
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.2%
49,547 CIENA Corp.*................... 328,992
42,200 Tekelec*....................... 656,210
------------
985,202
------------
TRANSPORTATION: FREIGHT -- 1.9%
33,000 Heartland Express, Inc......... 798,270
31,400 Knight Transportation, Inc.*... 805,410
------------
1,603,680
------------
TOTAL COMMON STOCKS (Cost
$67,309,477)................. 80,519,941
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
REGULATED INVESTMENT COMPANIES -- 1.2%
472,635 American Aadvantage
Select(b).................... $ 472,635
146,318 Merrill Lynch Premier
Institutional Fund(b)........ 146,318
405,116 Merrimac Cash Fund -- Premium
Class(b)..................... 405,116
------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $1,024,069)............ 1,024,069
------------
<Caption>
PRINCIPAL
---------
SHORT TERM COMMERCIAL PAPER -- 0.3%
$ 147,377 General Electric Capital Corp.,
1.09%, 01/09/04(b)........... 147,377
135,039 General Electric Capital Corp.,
1.08%, 01/16/04(b)........... 135,039
------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $282,416).............. 282,416
------------
SHORT TERM CORPORATE NOTES -- 4.2%
135,039 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 06/10/04(b)....... 135,039
135,039 Bear Stearns Companies, Inc.,
Floating Rate,
1.14%(**), 09/08/04(b)....... 135,039
337,596 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)....... 337,596
270,077 Fleet National Bank, Floating
Rate,
1.00%(**), 01/21/04(b)....... 270,077
337,597 Goldman Sachs Group, Inc.,
Floating Rate,
1.06%(**), 01/05/04(b)....... 337,597
540,154 Goldman Sachs Group, Inc.,
Floating Rate,
1.04%(**), 01/30/04(b)....... 540,154
877,751 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)....... 877,751
202,558 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)....... 202,558
675,193 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)....... 675,193
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $3,511,004)...... 3,511,004
------------
</Table>
See notes to financial statements.
133
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.5%
FANNIE MAE -- 0.3%
$ 268,924 1.06%, 01/02/04(b)............. $ 268,924
------------
FREDDIE MAC -- 0.2%
135,039 1.06%, 01/27/04(b)............. 135,039
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$403,963).................... 403,963
------------
TIME DEPOSITS -- 8.7%
1,237,433 Bank of Montreal,
1.06%, 01/15/04(b)........... 1,237,433
540,155 Bank of Montreal,
1.06%, 02/17/04(b)........... 540,155
675,193 Bank of Novia Scotia,
1.08%, 03/10/04(b)........... 675,193
405,116 Citigroup, Inc.,
1.08%, 01/05/04(b)........... 405,116
202,558 Citigroup, Inc.,
1.09%, 02/06/04(b)........... 202,558
405,116 Credit Agricole Indosuez,
0.98%, 01/02/04(b)........... 405,116
405,116 Credit Agricole Indosuez,
1.08%, 01/28/04(b)........... 405,116
540,154 Den Danske Bank,
1.08%, 01/20/04(b)........... 540,154
675,193 Royal Bank of Canada,
1.05%, 02/27/04(b)........... 675,193
337,597 Royal Bank of Scotland,
1.08%, 01/09/04(b)........... 337,597
135,039 Royal Bank of Scotland,
1.08%, 01/15/04(b)........... 135,039
1,012,790 Royal Bank of Scotland,
1.08%, 01/20/04(b)........... 1,012,790
337,597 Svenska Handlesbanken,
1.08%, 02/04/04(b)........... 337,597
135,038 Toronto Dominion Bank,
1.10%, 01/08/04(b)........... 135,038
202,558 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)........... 202,558
------------
TOTAL TIME DEPOSITS (Cost
$7,246,653).................. 7,246,653
------------
TOTAL SECURITIES (Cost
$79,777,582)................. 92,988,046
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 17.3%
$ 1,485,425 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $1,485,511
(Collateralized by Archer-
Daniels-Midland Company,
8.88%, due 04/15/11, with a
value of $310,440, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$304,736, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$484,206, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $121,154, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $294,598)(b)........ $ 1,485,425
12,938,568 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $12,938,891
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
3.00%, due 07/20/31, with a
value of $13,585,496)........ 12,938,568
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $14,423,993)........... 14,423,993
------------
Total Investments -- 128.5%
(Cost $94,201,575)........... 107,412,039
Liabilities less other
assets -- (28.5)%............ (23,822,396)
------------
NET ASSETS -- 100.0%........... $ 83,589,643
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $94,467,286.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $13,688,386
Gross unrealized depreciation........... (743,633)
-----------
Net unrealized appreciation............. $12,944,753
===========
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
See notes to financial statements.
134
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 99.4%
AUTOMOTIVE EQUIPMENT -- 3.0%
138,000 Advanced Auto Parts, Inc.*..... $ 11,233,200
------------
BANKS -- 2.6%
250,001 New York Community
Bancorp, Inc.(a)............. 9,512,538
------------
COMPUTER SOFTWARE AND SERVICES -- 3.4%
319,000 Foundry Networks, Inc.*........ 8,727,840
178,000 Sybase, Inc.*.................. 3,663,240
------------
12,391,080
------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.6%
535,000 AU Optronics Corp. (ADR)(a).... 6,377,200
195,000 Lexar Media, Inc.*............. 3,398,850
------------
9,776,050
------------
ELECTRONICS -- 1.2%
58,000 Harman International
Industries, Inc.............. 4,290,840
------------
FINANCIAL SERVICES -- 4.0%
151,305 Capital One Financial
Corp.(a)..................... 9,273,483
95,000 Merrill Lynch & Company,
Inc.......................... 5,571,750
------------
14,845,233
------------
FOOD AND BEVERAGE -- 4.7%
296,000 Constellation Brands, Inc. --
Class A*..................... 9,747,280
240,000 Dean Foods Company............. 7,888,800
------------
17,636,080
------------
INSURANCE -- 2.6%
51,000 Arch Capital Group, Ltd.*...... 2,032,860
219,900 W.R. Berkley Corp.............. 7,685,505
------------
9,718,365
------------
INTERNET SERVICES -- 10.7%
332,000 Ask Jeeves, Inc.*(a)........... 6,015,840
300,000 Cisco Systems, Inc.*........... 7,287,001
217,000 eResearch Technology,
Inc.*(a)..................... 5,516,140
276,655 j2 Global Communications,
Inc.(a)...................... 6,852,744
78,000 NETFLIX, Inc.*(a).............. 4,265,820
195,000 RADWARE, Ltd.*................. 5,313,750
273,000 United Online, Inc.*........... 4,583,670
------------
39,834,965
------------
LEISURE AND RECREATION -- 1.0%
124,000 Station Casinos, Inc........... 3,798,120
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 5.9%
144,000 Caterpillar, Inc............... $ 11,954,880
282,000 Rockwell Automation, Inc....... 10,039,200
------------
21,994,080
------------
MANUFACTURING -- 1.0%
184,000 Rayovac Corp.*(a).............. 3,854,800
------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.6%
592,000 Select Medical Corp............ 9,637,760
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 10.5%
87,000 Advanced Neuromodulation
Systems, Inc.*............... 4,000,260
250,000 Cooper Companies, Inc.(a)...... 11,782,500
140,000 Guidant Corp................... 8,428,000
111,000 INAMED Corp.*.................. 5,334,660
137,000 Varian Medical Systems, Inc.... 9,466,700
------------
39,012,120
------------
METALS AND MINING -- 1.7%
467,000 GrafTech International,
Ltd.*........................ 6,304,500
------------
MOTOR VEHICLES -- 1.6%
200,000 Wabash National Corp.*......... 5,860,000
------------
OIL, COAL AND GAS -- 1.0%
132,000 XTO Energy, Inc................ 3,735,600
------------
PHARMACEUTICALS -- 5.6%
213,000 Pfizer, Inc.................... 7,525,290
140,000 Pharmaceutical Resources,
Inc.*........................ 9,121,000
88,000 Watson Pharmaceuticals,
Inc.*........................ 4,048,000
------------
20,694,290
------------
RESEARCH AND DEVELOPMENT -- 6.9%
259,000 Flamel Technologies S.A.
(ADR)*(a).................... 6,938,610
153,000 Invitrogen Corp.*(a)........... 10,710,000
119,500 Martek Biosciences Corp.*...... 7,763,915
------------
25,412,525
------------
RETAIL -- 5.2%
324,000 Foot Locker, Inc............... 7,597,800
319,000 Urban Outfitters, Inc.*(a)..... 11,818,950
------------
19,416,750
------------
SEMICONDUCTORS -- 7.2%
601,000 Amkor Technologies, Inc.*(a)... 10,944,210
282,000 Intel Corp..................... 9,080,400
</Table>
See notes to financial statements.
135
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
232,000 Ultratech, Inc.*............... $ 6,813,840
------------
26,838,450
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 8.1%
295,000 Ditech Communications Corp.*... 5,634,500
284,000 Nextel Communications, Inc. --
Class A*..................... 7,969,040
281,000 Polycom, Inc.*................. 5,485,120
300,000 UTStarcom, Inc.*(a)............ 11,121,000
------------
30,209,660
------------
TOYS -- 2.4%
304,000 Marvel Enterprises, Inc.*...... 8,849,440
------------
TRANSPORTATION: SERVICES -- 3.9%
308,000 J.B. Hunt Transport Services,
Inc.*........................ 8,319,080
172,000 Yellow Roadway Corp.*.......... 6,221,240
------------
14,540,320
------------
TOTAL COMMON STOCKS
(Cost $308,632,009).......... 369,396,766
------------
REGULATED INVESTMENT COMPANIES -- 1.8%
2,996,258 American Aadvantage
Select(b).................... 2,996,258
927,578 Merrill Lynch Premier
Institutional Fund(b)........ 927,578
2,568,221 Merrimac Cash Fund -- Premium
Class(b)..................... 2,568,221
------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $6,492,057)............ 6,492,057
------------
<Caption>
PRINCIPAL
---------
TIME DEPOSITS -- 12.4%
$ 7,844,677 Bank of Montreal,
1.06%, 01/15/04(b)........... 7,844,677
3,424,295 Bank of Montreal,
1.06%, 02/17/04(b)........... 3,424,295
4,280,369 Bank of Novia Scotia,
1.08%, 03/10/04(b)........... 4,280,369
2,568,221 Citigroup, Inc.,
1.08%, 01/05/04(b)........... 2,568,221
1,284,111 Citigroup, Inc.,
1.09%, 02/06/04(b)........... 1,284,111
2,568,221 Credit Agricole Indosuez,
0.98%, 01/02/04(b)........... 2,568,221
2,568,221 Credit Agricole Indosuez,
1.08%, 01/28/04(b)........... 2,568,221
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
TIME DEPOSITS (CONTINUED)
$ 3,424,295 Den Danske Bank,
1.08%, 01/20/04(b)........... $ 3,424,295
4,280,369 Royal Bank of Canada,
1.05%, 02/27/04(b)........... 4,280,369
2,140,184 Royal Bank of Scotland,
1.08%, 01/09/04(b)........... 2,140,184
856,074 Royal Bank of Scotland,
1.08%, 01/15/04(b)........... 856,074
6,420,553 Royal Bank of Scotland,
1.08%, 01/20/04(b)........... 6,420,553
2,140,184 Svenska Handlesbanken,
1.08%, 02/04/04(b)........... 2,140,184
856,074 Toronto Dominion Bank,
1.10%, 01/08/04(b)........... 856,074
1,284,111 Wells Fargo Bank, N.A.,
1.04%, 01/30/04(b)........... 1,284,111
------------
TOTAL TIME DEPOSITS
(Cost $45,939,959)........... 45,939,959
------------
SHORT TERM CORPORATE NOTES -- 6.0%
856,074 Bear Stearns Companies, Inc.,
Floating Rate, 1.14%(**),
06/10/04(b).................. 856,074
856,074 Bear Stearns Companies, Inc.,
Floating Rate, 1.14%(**),
09/08/04(b).................. 856,074
2,140,184 Canadian Imperial Bank of
Commerce, Floating Rate,
1.01%(**), 11/04/04(b)....... 2,140,184
1,712,148 Fleet National Bank, Floating
Rate, 1.00%(**),
01/21/04(b).................. 1,712,148
2,140,184 Goldman Sachs Group, Inc.,
Floating Rate, 1.06%(**),
01/05/04(b).................. 2,140,184
3,424,295 Goldman Sachs Group, Inc.,
Floating Rate, 1.04%(**),
01/30/04(b).................. 3,424,295
5,564,480 Morgan Stanley, Floating Rate,
1.05%(**), 06/14/04(b)....... 5,564,480
1,284,111 Morgan Stanley, Floating Rate,
1.05%(**), 06/21/04(b)....... 1,284,111
4,280,369 Morgan Stanley, Floating Rate,
1.05%(**), 09/10/04(b)....... 4,280,369
------------
TOTAL SHORT TERM CORPORATE
NOTES
(Cost $22,257,919)........... 22,257,919
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.7%
FANNIE MAE -- 0.5%
1,704,838 1.06%, 01/02/04(b)............. 1,704,838
------------
</Table>
See notes to financial statements.
136
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES (CONTINUED)
FREDDIE MAC -- 0.2%
$ 856,074 1.06%, 01/27/04(b)............. $ 856,074
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $2,560,912)............ 2,560,912
------------
SHORT TERM COMMERCIAL PAPER -- 0.5%
934,294 General Electric Capital Corp.,
1.09%, 01/09/04(b)........... 934,294
856,074 General Electric Capital Corp.,
1.08%, 01/16/04(b)........... 856,074
------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $1,790,368)............ 1,790,368
------------
TOTAL SECURITIES
(Cost $387,673,224).......... 448,437,981
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 4.8%
$ 9,416,812 With Goldman Sachs Group, Inc.,
dated 12/31/03, 1.04%, due
01/02/04, repurchase proceeds
at maturity $9,417,356
(Collateralized by Archer-
Daniels-Midland Company,
8.88%, due 04/15/11, with a
value of $1,968,029, Den
Danske Bank -- 144A, 7.40%,
due 06/15/10, with a value of
$1,931,862, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value of
$3,069,607, Morgan Stanley,
6.75%, due 04/15/11, with a
value of $768,501, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $1,867,599)(b)...... $ 9,416,812
8,365,425 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $8,365,634
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
5.28%, due 07/01/32, with a
value of $8,783,697)......... 8,365,425
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $17,782,237)........... 17,782,237
------------
Total Investments -- 125.6%
(Cost $405,455,461).......... 466,220,218
Liabilities less other
assets -- (25.6)%............ (94,887,208)
------------
NET ASSETS -- 100.0%........... $371,333,010
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $405,455,461.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $64,598,693
Gross unrealized depreciation........... (3,833,936)
-----------
Net unrealized appreciation............. $60,764,757
===========
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
(ADR) American Depository Receipt.
See notes to financial statements.
137
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 87.3%
ADVERTISING -- 1.1%
$ 1,370,000 Advanstar Communications,
Inc. -- 144A,
10.75%, 08/15/10............. $ 1,489,876
165,000 R.H. Donnelley Finance Corp.
I -- 144A,
8.88%, 12/15/10.............. 186,450
1,045,000 R.H. Donnelley Finance Corp.
I -- 144A,
10.88%, 12/15/12............. 1,244,856
240,000 R.H. Donnelley Financial Corp.,
10.88%, 12/15/12............. 285,900
------------
3,207,082
------------
AEROSPACE AND DEFENSE -- 0.3%
415,000 Armor Holdings, Inc. -- 144A,
8.25%, 08/15/13.............. 446,125
230,000 BE Aerospace -- 144A,
8.50%, 10/01/10.............. 247,825
140,000 K&F Industries, Series B,
9.63%, 12/15/10.............. 157,675
------------
851,625
------------
AGRICULTURAL EQUIPMENT -- 0.4%
250,000 AGCO Corp.,
9.50%, 05/01/08.............. 275,000
755,000 Case New Holland, Inc. -- 144A,
9.25%, 08/01/11.............. 849,375
------------
1,124,375
------------
AGRICULTURE -- 0.1%
345,000 Seminis Vegetable Seeds
-- 144A,
10.25%, 10/01/13............. 372,600
------------
AIRLINES -- 3.8%
120,000 American Airlines, Inc.,
8.61%, 04/01/11.............. 109,428
1,080,000 American Airlines, Series
2001-2,
7.80%, 10/01/06.............. 977,504
295,000 American Airlines, Series
2001-2,
7.86%, 10/01/11.............. 299,729
1,180,000 AMR Corp.,
9.00%, 08/01/12.............. 1,008,900
1,850,131 Continental Airlines, Inc.,
Series 2001-1,
7.03%, 06/15/11.............. 1,594,609
15,949 Continental Airlines, Inc.,
Series 1998-3,
7.08%, 11/01/04.............. 15,655
460,000 Continental Airlines, Inc.,
Series 1999-2,
7.43%, 09/15/04.............. 451,695
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
AIRLINES (CONTINUED)
$ 1,900,000 Delta Air Lines,
7.70%, 12/15/05.............. $ 1,802,625
500,000 Delta Air Lines,
7.90%, 12/15/09.............. 406,875
890,000 Delta Air Lines, Series 2000-1,
7.78%, 11/18/05.............. 819,842
161,333 Delta Air Lines, Series 2002-1,
7.78%, 01/02/12.............. 146,439
1,280,000 Dunlop Standard Aerospace
Holdings,
11.88%, 05/15/09............. 1,376,000
1,950,000 Northwest Airlines, Inc.,
9.88%, 03/15/07.............. 1,784,250
------------
10,793,551
------------
APPAREL: MANUFACTURING -- 2.3%
1,245,000 GFSI, Inc., Series B,
9.63%, 03/01/07.............. 1,153,181
1,055,000 J. Crew Operating Corp.,
10.38%, 10/15/07............. 1,082,694
1,325,000 Oxford Industries,
Inc. -- 144A,
8.88%, 06/01/11.............. 1,455,844
850,000 Perry Ellis International,
Inc. -- 144A,
8.88%, 09/15/13.............. 898,875
620,000 Phillips Van-Heusen Corp.,
8.13%, 05/01/13.............. 661,850
295,000 Tropical Sportswear
International, Series A,
11.00%, 06/15/08............. 240,425
875,000 William Carter, Series B,
10.88%, 08/15/11............. 1,015,000
------------
6,507,869
------------
APPAREL: RETAIL -- 0.5%
1,295,000 Mothers Work, Inc.,
11.25%, 08/01/10............. 1,445,544
------------
AUTOMOBILE: RENTAL -- 0.8%
1,810,000 Williams Scotsman, Inc.,
9.88%, 06/01/07.............. 1,841,675
285,000 Williams Scotsman, Inc.,
10.00%, 08/15/08............. 313,856
------------
2,155,531
------------
AUTOMOTIVE EQUIPMENT -- 3.0%
1,580,000 Collins & Aikman, Series B,
9.75%, 02/15/10.............. 1,698,500
1,620,000 Dana Corp.,
10.13%, 03/15/10............. 1,895,400
</Table>
See notes to financial statements.
138
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTOMOTIVE EQUIPMENT (CONTINUED)
$ 700,000 Dura Operating Corp., Series D,
9.00%, 05/01/09.............. $ 703,500
235,000 Keystone Automotive
Operations -- 144A,
9.75%, 11/01/13.............. 253,800
655,000 Metaldyne Corp. -- 144A,
10.00%, 11/01/13............. 664,825
365,000 Rexnord Corp.,
10.13%, 12/15/12............. 401,500
810,000 Tenneco Automotive,
Inc. -- 144A,
10.25%, 07/15/13............. 925,425
1,300,000 Tenneco Automotive, Inc.,
Series B,
11.63%, 10/15/09............. 1,410,500
545,000 TRW Automotive, Inc.,
11.00%, 02/15/13............. 644,463
------------
8,597,913
------------
BROADCAST SERVICES/MEDIA -- 7.4%
715,000 Adelphia Communications,
10.25%, 11/01/06(2).......... 668,525
305,000 Adelphia Communications --
Series B,
9.25%, 10/01/32(2)........... 283,650
120,000 Charter Communications Holdings
LLC,
8.25%, 04/01/07.............. 113,400
1,385,000 Charter Communications Holdings
LLC,
8.63%, 04/01/09.............. 1,215,338
1,080,000 Charter Communications Holdings
LLC,
10.00%, 04/01/09............. 966,600
425,000 Charter Communications Holdings
LLC,
10.75%, 10/01/09............. 392,063
1,650,000 Charter Communications Holdings
LLC,
10.25%, 01/15/10............. 1,485,000
1,720,000 Charter Communications Holdings
LLC, zero coupon,
01/15/11(1).................. 1,290,000
325,000 Charter Communications Holdings
LLC, zero coupon,
05/15/11(1).................. 219,375
1,495,000 Charter Communications Holdings
LLC,
10.00%, 05/15/11............. 1,308,125
495,000 CSC Holdings, Inc.,
9.88%, 02/15/13.............. 519,750
2,175,000 CSC Holdings, Inc.,
10.50%, 05/15/16............. 2,501,249
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 350,000 DirecTV Holdings,
8.38%, 03/15/13.............. $ 407,750
46,000 Echostar DBS Corp.,
9.13%, 01/15/09.............. 51,693
325,000 Entravision Communication
Corp.,
8.13%, 03/15/09.............. 349,375
70,000 Granite Broadcasting Corp.,
9.38%, 12/01/05.............. 70,175
1,640,000 Insight Communications, zero
coupon,
02/15/11(1).................. 1,410,400
570,000 LBI Media, Inc. -- 144A, zero
coupon,
10/15/13(1).................. 371,925
100,000 Nexstar Financial Holdings LLC,
Inc.,
12.00%, 04/01/08............. 113,250
1,205,000 Nexstar Financial Holdings LLC,
Inc., zero coupon,
04/01/13(1).................. 887,181
360,000 Nextmedia Operating, Inc.,
10.75%, 07/01/11............. 410,400
580,000 ONO Finance PLC,
13.00%, 05/01/09............. 606,825
900,000 ONO Finance PLC,
14.00%, 02/15/11............. 950,625
190,000 Paxson Communications, zero
coupon,
01/15/09(1).................. 167,675
1,000,000 Pegasus Communications Corp.,
Series B,
9.63%, 10/15/05.............. 925,000
250,000 Pegasus Communications Corp.,
Series B,
9.75%, 12/01/06.............. 226,875
765,000 Pegasus Satellite,
12.38%, 08/01/06............. 723,881
1,940,000 Pegasus Satellite -- 144A,
11.25%, 01/15/10............. 1,736,299
455,000 Young Broadcasting,
Inc. -- 144A,
8.75%, 01/15/14.............. 462,963
------------
20,835,367
------------
CHEMICALS -- 6.3%
260,000 Acetex Corp. -- 144A,
10.88%, 08/01/09............. 289,900
1,325,000 Avecia Group PLC,
11.00%, 07/01/09............. 1,199,125
365,000 Crown Euro Holdings SA,
9.50%, 03/01/11.............. 415,188
</Table>
See notes to financial statements.
139
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CHEMICALS (CONTINUED)
$ 1,990,000 Crown Euro Holdings SA,
10.88%, 03/01/13............. $ 2,350,687
655,000 Equistar Chemical/Funding,
10.63%, 05/01/11............. 727,050
720,000 Hercules, Inc.,
11.13%, 11/15/07............. 865,800
590,000 Huntsman Advanced Materials --
144A,
11.00%, 07/15/10............. 654,900
1,135,000 Huntsman Company, LLC -- 144A,
11.63%, 10/15/10............. 1,163,375
760,000 IMC Global, Inc. -- 144A,
10.88%, 08/01/13............. 836,000
1,675,000 IMC Global, Inc., Series B,
11.25%, 06/01/11............. 1,850,875
230,000 Lyondell Chemical Company,
9.50%, 12/15/08.............. 241,500
900,000 Lyondell Chemical Company,
11.13%, 07/15/12............. 1,003,500
550,000 Lyondell Chemical Company,
Series A,
9.63%, 05/01/07.............. 585,750
530,000 Methanex Corp.,
8.75%, 08/15/12.............. 593,600
733,000 Nalco Company -- 144A,
7.75%, 11/15/11.............. 787,975
883,000 Nalco Company -- 144A,
8.88%, 11/15/13.............. 940,395
225,000 Noveon, Inc., Series B,
11.00%, 02/28/11............. 262,125
2,100,000 OM Group Inc.,
9.25%, 12/15/11.............. 2,194,499
765,000 Rockwood Specialties Corp. --
144A,
10.63%, 05/15/11............. 856,800
210,000 Texas Petrochemical Corp.,
11.13%, 07/01/06(2).......... 68,250
------------
17,887,294
------------
COMMERCIAL SERVICES -- 0.0%
90,000 Coinmach Corp.,
9.00%, 02/01/10.............. 98,100
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
COMPUTER SOFTWARE AND SERVICES -- 0.7%
$ 610,000 Danka Business Systems,
11.00%, 06/15/10............. $ 608,475
443,000 Digitalnet, Inc.,
9.00%, 07/15/10.............. 481,763
825,000 Stratus Technologies,
Inc. -- 144A,
10.38%, 12/01/08............. 879,656
------------
1,969,894
------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.8%
1,800,000 Interface, Inc.,
10.38%, 02/01/10............. 1,912,500
865,000 Interface, Inc., Series B,
9.50%, 11/15/05.............. 843,375
2,100,000 Xerox Capital Trust I,
8.00%, 02/01/27.............. 2,073,750
325,000 Xerox Corp.,
9.75%, 01/15/09.............. 381,875
10,000 Xerox Corp.,
7.13%, 06/15/10.............. 10,750
------------
5,222,250
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.1%
1,405,000 Associated Materials, Inc.,
9.75%, 04/15/12.............. 1,545,500
1,085,000 Dayton Superior Corp. -- 144A,
10.75%, 09/15/08............. 1,117,550
15,000 Koppers, Inc. -- 144A,
9.88%, 10/15/13.............. 16,613
520,000 Owens Corning,
7.70%, 05/01/08(2)........... 228,800
560,000 Owens Corning,
7.50%, 08/01/18(2)........... 246,400
------------
3,154,863
------------
CONSUMER GOODS AND SERVICES -- 0.7%
520,000 Amscan Holdings, Inc.,
9.88%, 12/15/07.............. 540,150
385,000 Fedders North America,
9.38%, 08/15/07.............. 388,850
440,000 Home Interiors & Gifts,
10.13%, 06/01/08............. 447,150
295,000 Jostens Holding Corp. -- 144A,
zero coupon,
12/01/13(1).................. 186,588
300,000 Mobile Mini, Inc.,
9.50%, 07/01/13.............. 331,500
175,000 Norcraft Companies -- 144A,
9.00%, 11/01/11.............. 189,875
------------
2,084,113
------------
</Table>
See notes to financial statements.
140
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONTAINERS AND PACKAGING -- 1.5%
$ 390,000 Consolidated Container Company,
10.13%, 07/15/09............. $ 237,900
190,000 Graham Packaging, Series B,
8.75%, 01/15/08.............. 195,225
320,000 Graham Packaging, Series B,
10.75%, 01/15/09............. 332,000
240,000 Hexcel Corp.,
9.88%, 10/01/08.............. 271,800
155,000 Hexcel Corp.,
9.75%, 01/15/09.............. 163,138
300,000 Kappa Beheer BV,
10.63%, 07/15/09............. 322,500
1,150,000 Owens-Brockway Glass
Containers,
8.25%, 05/15/13.............. 1,240,562
640,000 Smurfit-Stone Container Corp.,
8.25%, 10/01/12.............. 697,599
415,000 Tekni-Plex, Inc. -- 144A,
8.75%, 11/15/13.............. 434,713
60,000 Tekni-Plex, Inc., Series B,
12.75%, 06/15/10............. 65,700
355,000 US Can Corp. -- 144A,
10.88%, 07/15/10............. 373,194
------------
4,334,331
------------
DISTRIBUTION -- 0.2%
485,000 Jafra Cosmetics International,
10.75%, 05/15/11............. 534,713
------------
ELECTRICAL EQUIPMENT -- 0.2%
400,000 Rayovac Corp.
8.50%, 10/01/13.............. 426,000
------------
ELECTRONICS -- 1.0%
650,000 Muzak Holdings LLC, zero
coupon,
03/15/10(1).................. 581,750
775,000 Muzak LLC,
10.00%, 02/15/09............. 829,250
1,380,000 Muzak LLC,
9.88%, 03/15/09.............. 1,340,325
------------
2,751,325
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.9%
455,000 Allied Waste North America
Industries, Inc., Series B,
9.25%, 09/01/12.............. 518,700
1,855,000 Synagro Technologies, Inc.,
9.50%, 04/01/09.............. 2,021,950
------------
2,540,650
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FOOD AND BEVERAGE -- 3.0%
$ 1,130,000 American Seafood Group LLC,
10.13%, 04/15/10............. $ 1,348,937
590,000 Burns, Philp Capital Pty.,
Ltd. -- 144A,
9.50%, 11/15/10.............. 643,100
815,000 Burns, Philp Capital Pty.,
Ltd. -- 144A,
10.75%, 02/15/11............. 892,425
395,000 Doane Pet Care Company,
10.75%, 03/01/10............. 410,800
765,000 Land O' Lakes, Inc. -- 144A,
9.00%, 12/15/10.............. 774,563
795,000 Luigino's, Inc.,
10.00%, 02/01/06............. 818,850
605,000 Merisant Company -- 144A,
9.50%, 07/15/13.............. 647,350
710,000 Michael Foods -- 144A,
8.00%, 11/15/13.............. 743,725
1,589,000 New World Pasta Company,
9.25%, 02/15/09.............. 421,085
300,000 Pinnacle Foods Holding -- 144A,
8.25%, 12/01/13.............. 312,000
1,000,000 Premier International Foods
PLC,
12.00%, 09/01/09............. 1,100,000
395,000 United Agriculture Products --
144A,
8.25%, 12/15/11.............. 407,838
------------
8,520,673
------------
LEISURE AND RECREATION -- 7.3%
350,000 Ameristar Casinos, Inc.,
10.75%, 02/15/09............. 404,250
420,000 AMF Bowling Worldwide,
13.00%, 09/01/08............. 473,025
40,000 Bally Total Fitness Holding --
144A,
10.50%, 07/15/11............. 40,400
245,000 Equinox Holdings, Ltd. -- 144A,
9.00%, 12/15/09.............. 254,188
295,000 Gaylord Entertainment
Company -- 144A,
8.00%, 11/15/13.............. 312,700
910,000 Hockey Company,
11.25%, 04/15/09............. 1,043,088
640,000 Hollywood Casino Shreveport,
13.00%, 08/01/06(2).......... 454,400
360,000 Imax Corp. -- 144A,
9.63%, 12/01/10.............. 380,250
1,695,000 Inn of the Mountain Gods --
144A,
12.00%, 11/15/10............. 1,809,413
</Table>
See notes to financial statements.
141
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
$ 855,000 Intrawest Corp. -- 144A,
7.50%, 10/15/13.............. $ 893,475
790,000 Kerzner International,
8.88%, 08/15/11.............. 867,025
2,210,000 Majestic Star Casino LLC -144A,
9.50%, 10/15/10.............. 2,276,299
350,000 MGM MIRAGE, Inc.,
9.75%, 06/01/07.............. 400,750
1,065,000 Penn National Gaming, Inc.,
Series B,
11.13%, 03/01/08............. 1,200,788
85,000 Royal Caribbean Cruises,
8.00%, 05/15/10.............. 93,075
2,000,000 Royal Caribbean Cruises,
8.75%, 02/02/11.............. 2,269,999
390,000 Royal Caribbean Cruises,
7.25%, 03/15/18.............. 382,200
1,595,000 Six Flags, Inc. -- 144A,
9.63%, 06/01/14.............. 1,674,750
515,000 Six Flags, Inc.,
9.75%, 06/15/07.............. 540,106
470,000 Six Flags, Inc.,
9.50%, 02/01/09.............. 494,675
150,000 Six Flags, Inc.,
8.88%, 02/01/10.............. 154,688
120,000 Six Flags, Inc.,
9.75%, 04/15/13.............. 126,900
1,785,000 Venetian Casino Resort/Las
Vegas Sands,
11.00%, 06/15/10............. 2,079,524
1,778,000 Waterford Gaming LLC -- 144A,
8.63%, 09/15/12.............. 1,893,570
------------
20,519,538
------------
MACHINERY -- 1.5%
725,000 Flowserve Corp.,
12.25%, 08/15/10............. 844,625
1,330,000 Terex Corp.,
9.25%, 07/15/11.............. 1,469,650
1,225,000 Terex Corp., Series B,
10.38%, 04/01/11............. 1,378,125
470,000 The Manitowoc Company, Inc.,
10.50%, 08/01/12............. 537,563
------------
4,229,963
------------
MANUFACTURING -- 1.0%
465,000 Avondale Mills, Inc.,
10.25%, 07/01/13............. 295,275
960,000 Dresser, Inc.,
9.38%, 04/15/11.............. 1,048,800
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MANUFACTURING (CONTINUED)
$ 160,000 Foamex LP,
10.75%, 04/01/09............. $ 153,200
245,000 Jacuzzi Brands, Inc. -- 144A,
9.63%, 07/01/10.............. 270,725
445,000 Louisiana Pacific Corp.,
10.88%, 11/15/08............. 531,775
380,000 Reddy Ice Group, Inc. -- 144A,
8.88%, 08/01/11.............. 404,700
720,000 Venture Holdings Trust, Series
B,
9.50%, 07/01/05(2)........... 21,600
------------
2,726,075
------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.6%
870,000 Ardent Health Services -- 144A,
10.00%, 08/15/13............. 952,650
270,000 Concentra Operating Corp.,
9.50%, 08/15/10.............. 292,950
565,000 Magellan Health
Services -- 144A,
9.38%, 11/15/07(2)........... 596,075
455,000 National Nephrology
Association -- 144A,
9.00%, 11/01/11.............. 478,888
670,000 Pacificare Health System,
10.75%, 06/01/09............. 793,950
450,000 Rotech Healthcare, Inc.,
9.50%, 04/01/12.............. 472,500
2,550,000 Tenet Healthcare Corp.,
7.38%, 02/01/13.............. 2,575,500
1,100,000 Vanguard Health Systems,
9.75%, 08/01/11.............. 1,199,000
------------
7,361,513
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 1.0%
120,000 Alliance Imaging,
10.38%, 04/15/11............. 127,800
1,375,000 Medquest, Inc., Series B,
11.88%, 08/15/12............. 1,509,063
1,010,000 Norcross Safety
Products -- 144A,
9.88%, 08/15/11.............. 1,113,525
------------
2,750,388
------------
OIL AND GAS: PIPELINES -- 5.2%
365,000 ANR Pipeline Company,
8.88%, 03/15/10.............. 412,450
2,065,000 Dynegy Holdings, Inc.,
6.88%, 04/01/11.............. 1,912,706
440,000 Dynegy Holdings, Inc.,
8.75%, 02/15/12.............. 446,050
195,000 Dynegy Holdings, Inc.,
7.63%, 10/15/26.............. 169,406
</Table>
See notes to financial statements.
142
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES (CONTINUED)
$ 2,325,000 Dynegy Holdings, Inc. -- 144A,
10.13%, 07/15/13............. $ 2,685,375
2,910,000 El Paso Corp.,
7.00%, 05/15/11.............. 2,699,025
215,000 Gulfterra Energy
Partner -- 144A,
10.63%, 12/01/12............. 267,675
642,000 Gulfterra Energy Partner,
Series B,
8.50%, 06/01/10.............. 731,880
380,000 Northwest Pipeline Corp.,
8.13%, 03/01/10.............. 423,700
275,000 Southern Natural Gas Company,
8.88%, 03/15/10.............. 310,750
1,100,000 Transmontaigne, Inc. -- 144A,
9.13%, 06/01/10.............. 1,185,250
2,090,000 Williams Companies, Inc.,
8.63%, 06/01/10.............. 2,356,475
975,000 Williams Companies, Inc.,
Series A,
6.75%, 01/15/06.............. 1,014,000
------------
14,614,742
------------
OIL, COAL AND GAS -- 2.6%
290,000 Comstock Resources, Inc.,
11.25%, 05/01/07............. 313,200
785,000 Continental Resources,
10.25%, 08/01/08............. 792,850
40,000 Grey Wolf, Inc.,
8.88%, 07/01/07.............. 41,400
35,000 Grey Wolf, Inc., Series C,
8.88%, 07/01/07.............. 36,225
355,000 Hanover Compress Company,
8.63%, 12/15/10.............. 370,975
200,000 Parker Drilling
Company -- 144A,
9.63%, 10/01/13.............. 209,000
375,000 Petrobras International
Finance,
9.13%, 07/02/13.............. 412,500
1,780,625 Port Arthur Finance Corp.,
12.50%, 01/15/09............. 2,123,395
295,000 Premcor Refining Group -- 144A,
7.75%, 02/01/12.............. 305,325
440,000 Ram Energy, Inc.,
11.50%, 02/15/08............. 332,200
1,295,000 Sesi LLC,
8.88%, 05/15/11.............. 1,418,025
1,265,000 Trico Marine Services, Inc.,
8.88%, 05/15/12.............. 929,775
------------
7,284,870
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PAPER AND FOREST PRODUCTS -- 1.9%
$ 1,005,000 Georgia-Pacific Corp.,
9.50%, 12/01/11.............. $ 1,170,825
1,385,000 Georgia-Pacific Corp.,
9.38%, 02/01/13.............. 1,599,675
465,000 Georgia-Pacific Corp.,
9.50%, 05/15/22.............. 485,925
525,000 Longview Fibre Company,
10.00%, 01/15/09............. 578,813
60,000 Millar Western Forest -- 144A,
7.75%, 11/15/13.............. 62,550
550,000 Tembec Industries, Inc.,
8.63%, 06/30/09.............. 569,250
1,000,000 Tembec Industries, Inc.,
8.50%, 02/01/11.............. 1,040,000
------------
5,507,038
------------
PHARMACEUTICALS -- 0.2%
425,000 Valeant
Pharmaceuticals -- 144A,
7.00%, 12/15/11.............. 439,875
------------
PRINTING AND PUBLISHING -- 1.8%
485,000 American Media Operation,
Series B,
10.25%, 05/01/09............. 519,556
1,195,000 Canwest Media, Inc.,
10.63%, 05/15/11............. 1,371,263
405,000 CBD Media/CBD Finance -- 144A,
8.63%, 06/01/11.............. 447,525
245,000 Dex Media East LLC,
9.88%, 11/15/09.............. 281,750
1,295,000 Dex Media West -- 144A,
9.88%, 08/15/13.............. 1,511,912
835,000 Liberty Group Operating,
9.38%, 02/01/08.............. 847,525
------------
4,979,531
------------
REAL ESTATE DEVELOPMENT AND MANAGEMENT
SERVICES -- 0.4%
500,000 CB Richard Ellis Service,
11.25%, 06/15/11............. 567,500
485,000 CBRE Escrow, Inc. -- 144A,
9.75%, 05/15/10.............. 540,775
------------
1,108,275
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.9%
760,000 Felcor Lodging LP,
9.50%, 09/15/08.............. 824,600
165,000 Host Marriott LP, Series G,
9.25%, 10/01/07.............. 185,213
</Table>
See notes to financial statements.
143
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$ 300,000 Host Marriott LP, Series I,
9.50%, 01/15/07.............. $ 335,250
1,085,000 Mandalay Resort Group, Series
B,
10.25%, 08/01/07............. 1,258,600
------------
2,603,663
------------
RESEARCH AND DEVELOPMENT -- 0.7%
1,710,000 Quintiles Transnational
Corp. -- 144A,
10.00%, 10/01/13............. 1,855,350
------------
RETAIL -- 0.8%
295,000 General Nutrition
Center -- 144A,
8.50%, 12/01/10.............. 303,850
1,100,000 Hollywood Entertainment,
9.63%, 03/15/11.............. 1,188,000
600,000 Payless Shoesource, Inc.,
8.25%, 08/01/13.............. 580,500
190,000 Shopko Stores,
9.25%, 03/15/22.............. 181,450
------------
2,253,800
------------
SEMICONDUCTORS -- 1.7%
644,000 AMI Semiconductor, Inc.,
10.75%, 02/01/13............. 771,190
65,000 Amkor Technology, Inc.,
9.25%, 02/15/08.............. 74,100
305,000 Amkor Technology, Inc.,
10.50%, 05/01/09............. 327,113
845,000 Chippac International, Ltd.,
Series B,
12.75%, 08/01/09............. 937,950
1,825,000 On Semiconductor Corp.,
13.00%, 05/15/08............. 2,130,687
645,000 SCG Holding & Semiconductor
Company,
12.00%, 08/01/09............. 696,600
------------
4,937,640
------------
SPECIAL PURPOSE ENTITY -- 4.9%
395,000 Bombardier
Recreational -- 144A,
8.38%, 12/15/13.............. 414,750
1,088,100 Caithness Coso Funding Corp.,
Series B,
9.05%, 12/15/09.............. 1,186,029
1,375,000 Chukchansi Economic Development
Authority -- 144A,
14.50%, 06/15/09............. 1,677,499
1,345,000 Couche -- Tard US -- 144A,
7.50%, 12/15/13.............. 1,415,613
587,585 Hollinger
Participation -- 144A,
12.13%, 11/15/10............. 700,695
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY (CONTINUED)
$ 1,035,000 Interline Brands, Inc.,
11.50%, 05/15/11............. $ 1,146,263
395,000 Kraton Polymers LLC -- 144A,
8.13%, 01/15/14.............. 412,775
1,350,000 MDP Acquisitions PLC,
9.63%, 10/01/12.............. 1,518,750
1,395,000 PCA LLC/PCA Finance Corp.,
11.88%, 08/01/09............. 1,534,499
855,000 Poster Financial Group -- 144A,
8.75%, 12/01/11.............. 908,438
475,000 Sensus Metering
Systems -- 144A,
8.63%, 12/15/13.............. 489,844
1,060,000 Tabletop Holdings,
Inc. -- 144A, zero coupon,
05/15/14(1).................. 588,300
1,575,000 Universal City Development --
144A,
11.75%, 04/01/10............. 1,850,624
------------
13,844,079
------------
SYNDICATED BANK LOANS -- 1.3%
800,000 Century Cable Holdings, Term
loan,
6.00%, 06/30/09.............. 741,000
1,091,902 Huntsman Company, LLC, Term A,
6.00%, 03/31/07.............. 1,028,571
826,689 Huntsman International, LLC,
Term B,
8.94%, 03/31/07.............. 778,741
981,772 IPCS, Term loan,
6.75%, 06/30/08(2)........... 723,566
500,000 Mirant Corp.,
8.63%, 07/17/49(2)........... 292,188
------------
3,564,066
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 8.4%
1,300,000 ACC Escrow Corp. -- 144A,
10.00%, 08/01/11............. 1,456,000
340,000 American Tower Corp.,
9.38%, 02/01/09.............. 363,800
1,575,000 Centennial Cellular/
Communications,
10.13%, 06/15/13............. 1,736,437
295,000 Centennial Communications,
10.75%, 12/15/08............. 312,700
440,000 Cincinnati Bell, Inc. -- 144A,
8.38%, 01/15/14.............. 475,200
190,000 Crown Castle International
Corp.,
10.75%, 08/01/11............. 214,700
</Table>
See notes to financial statements.
144
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 1,500,000 Embratel -- 144A,
11.00%, 12/15/08............. $ 1,545,000
355,000 General Cable Corp. -- 144A,
9.50%, 11/15/10.............. 381,625
705,000 Insight Midwest, L.P. / Insight
Capital, Inc.,
10.50%, 11/01/10............. 770,213
1,000,000 IWO Holdings, Inc.,
14.00%, 01/15/11............. 155,000
1,780,000 LCI International, Inc.,
7.25%, 06/15/07.............. 1,717,700
1,420,000 Level 3 Financing,
Inc. -- 144A,
10.75%, 10/15/11............. 1,508,750
975,000 Marconi Corp. PLC,
8.00%, 04/30/08.............. 992,505
450,000 Nextel Communications,
7.38%, 08/01/15.............. 486,000
875,000 Nextel Partners, Inc.,
12.50%, 11/15/09............. 1,019,375
995,000 Nextel Partners, Inc.,
11.00%, 03/15/10............. 1,104,450
65,000 Nextel Partners, Inc.,
11.00%, 03/15/10............. 72,150
89,717 NII Holdings, Ltd., zero
coupon,
11/01/09(1).................. 89,958
2,300,000 Nortel Networks Corp.,
4.25%, 09/01/08.............. 2,187,874
485,000 Qwest Capital Funding Corp.,
7.00%, 08/03/09.............. 483,788
985,000 Qwest Capital Funding Corp.,
7.90%, 08/15/10.............. 1,004,700
110,000 Qwest Corp.,
7.20%, 11/10/26.............. 108,900
1,865,000 Qwest Services Corp. -- 144A,
13.50%, 12/15/10............. 2,275,299
695,000 SBA Telecommunications/SBA
Communications Corp. -- 144A,
zero coupon,
12/15/11(1).................. 493,450
350,000 Telewest Communication PLC,
11.00%, 10/01/07(2).......... 229,250
1,165,000 Telewest Communication PLC,
zero coupon,
04/15/09(1).................. 611,625
202,000 Ubiquitel Operating Company,
zero coupon,
05/15/10(1).................. 152,510
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 415,000 US Unwired, Inc., Series B,
zero coupon,
11/01/09(1).................. $ 302,950
1,400,000 Western Wireless Corp.,
9.25%, 07/15/13.............. 1,484,000
------------
23,735,909
------------
TRANSPORTATION: SERVICES -- 0.6%
380,000 Hornbeck Offshore Services,
10.63%, 08/01/08............. 421,800
715,000 Omi Corp. -- 144A,
7.63%, 12/01/13.............. 724,831
115,000 Petroleum Helicopters,
9.38%, 05/01/09.............. 122,763
530,000 Quality Distribution Capital --
144A,
9.00%, 11/15/10.............. 557,162
------------
1,826,556
------------
UTILITIES -- 0.8%
635,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12............. 712,788
1,325,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 1,616,500
------------
2,329,288
------------
UTILITIES: ELECTRIC -- 4.6%
750,000 AES Corp.,
8.50%, 11/01/07.............. 765,000
553,000 AES Corp.,
9.38%, 09/15/10.............. 615,904
500,000 AES Corp.,
8.88%, 11/01/27.............. 452,500
62,824 AES Corp. -- 144A,
10.00%, 07/15/05............. 64,238
700,000 AES Corp. -- 144A,
8.75%, 05/15/13.............. 785,750
310,000 AES Corp. -- 144A,
9.00%, 05/15/15.............. 351,850
517,185 AES Eastern Energy, Series
99-A,
9.00%, 01/02/17.............. 572,726
1,460,000 Calpine Canada Energy
Financial,
8.50%, 05/01/08.............. 1,171,650
1,040,000 Calpine Corp.,
8.25%, 08/15/05.............. 1,011,400
1,065,000 Calpine Corp.,
7.63%, 04/15/06.............. 947,850
305,000 Calpine Corp.,
10.50%, 05/15/06............. 294,325
</Table>
See notes to financial statements.
145
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
$ 395,000 Calpine Corp.,
8.50%, 02/15/11.............. $ 314,519
290,000 Calpine Corp. -- 144A,
8.50%, 07/15/10.............. 284,200
1,365,000 Calpine Corp. -- 144A,
8.75%, 07/15/13.............. 1,337,700
540,000 Illinova Corp.,
7.50%, 06/15/09.............. 596,700
2,505,000 NRG Energy, Inc. -- 144A,
8.00%, 12/15/13.............. 2,645,905
415,000 Reliant Resources,
Inc. -- 144A,
9.25%, 07/15/10.............. 441,975
195,000 Reliant Resources,
Inc. -- 144A,
9.50%, 07/15/13.............. 209,625
------------
12,863,817
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $231,229,181).......... 246,751,639
------------
<Caption>
SHARES
------
COMMON STOCKS -- 1.2%
COMPUTER SOFTWARE AND SERVICES -- 0.2%
23,950 Digitalnet Holdings, Inc.*..... 467,025
------------
LEISURE AND RECREATION -- 0.2%
19,280 Six Flags, Inc. ............... 441,512
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.8%
1,752 FLAG Telecom Group, Ltd.*...... 165,792
9,710 NII Holdings, Inc. -- Class
B*........................... 724,657
20,340 NTL, Inc.*..................... 1,418,715
------------
2,309,164
------------
TOTAL COMMON STOCKS (Cost
$3,437,834).................. 3,217,701
------------
PREFERRED STOCKS -- 1.0%
BROADCAST SERVICES/MEDIA
26,730 CSC Holdings, Inc., Series M,
11.13% (Cost $2,737,790)..... 2,813,333
------------
CONVERTIBLE PREFERRED STOCKS -- 0.8%
OIL AND GAS: PIPELINES -- 0.3%
11,465 Williams Companies,
Inc. -- 144A,
5.50%........................ 746,658
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
OIL, COAL AND GAS -- 0.1%
2,400 Chesapeake Energy Corp.,
5.00%........................ $ 266,100
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.4%
24,775 Crown Castle International
Corp.,
6.25%........................ 1,114,875
160 Lucent Technology Capital Trust
I,
7.75%........................ 170,000
------------
1,284,875
------------
TOTAL CONVERTIBLE PREFERRED
STOCKS
(Cost $2,044,844)............ 2,297,633
------------
WARRANTS -- 0.0%
1,125 American Tower Corp., Expires
08/01/08*.................... 141,187
1,000 IPCS, Inc. -- 144A, Expires
07/15/10*.................... 0
1,000 IWO Holdings, Inc., Expires
01/15/11*.................... 0
84 New World Coffee, Expires
6/20/06*..................... 1
1,000 ONO Finance, Expires
03/16/11*.................... 0
250 Ubiquitel, Inc. -- 144A,
Expires 04/15/10*............ 0
------------
TOTAL WARRANTS
(Cost $75,402)............... 141,188
------------
<Caption>
PRINCIPAL
---------
CONVERTIBLE BONDS -- 1.6%
BROADCAST SERVICES/MEDIA -- 0.3%
$ 410,000 Charter Communications Holdings
LLC,
5.75%, 10/15/05.............. 389,500
320,000 Sinclair Broadcasting Group,
4.88%, 07/15/18.............. 353,200
------------
742,700
------------
LEISURE AND RECREATION -- 0.2%
405,000 Wynn Resorts -- 144A,
6.00%, 07/15/15.............. 601,425
------------
SEMICONDUCTORS -- 0.1%
190,000 Amkor Technologies, Inc.,
5.75%, 06/01/06.............. 192,850
------------
</Table>
See notes to financial statements.
146
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CONVERTIBLE BONDS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.0%
$ 1,805,000 American Tower Corp.,
6.25%, 10/15/09.............. $ 1,823,050
1,030,000 Nextel Communications,
6.00%, 06/01/11.............. 1,282,350
------------
3,105,400
------------
TOTAL CONVERTIBLE BONDS
(Cost $4,064,474)............ 4,642,375
------------
TOTAL SECURITIES
(Cost $243,589,525).......... 259,863,869
------------
REPURCHASE AGREEMENT -- 6.9%
19,578,332 With Investors Bank and Trust,
dated 12/31/03, 0.45%, due
01/02/04, repurchase proceeds
at maturity $19,578,821
(Collateralized by Fannie
Mae, 4.13%, due 02/01/33,
with a value of $17,194,234
and Small Business
Administration, 3.13%, due
09/25/26, with a value of
$3,363,015) (Cost
$19,578,332)................. 19,578,332
------------
Total Investments -- 98.8%
(Cost $263,167,857).......... 279,442,201
Assets less other
liabilities -- 1.2%.......... 3,258,573
------------
NET ASSETS -- 100.0%........... $282,700,774
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $263,720,135.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $21,048,884
Gross unrealized depreciation........... (5,326,818)
-----------
Net unrealized appreciation............. $15,722,066
===========
</Table>
- ---------------
* Non-income producing security.
(1) Represents a zero coupon bond which will convert to an interest bearing
security at a later date.
(2) Bond is in default.
See notes to financial statements.
147
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS -- 92.8%
AEROSPACE AND DEFENSE -- 0.2%
716,144 Bae Systems PLC....... $ 2,154,865 BRI
--------------
AIRLINES -- 0.1%
573,000 Japan Airlines System
Corp. .............. 1,513,524 JAP
--------------
AUTOMOBILES -- 4.1%
43,700 Bayerische Motoren
Werke AG............ 2,012,836 GER
164,000 DaimlerChrysler
AG(a)............... 7,605,559 GER
40,000 Honda Motor Company,
Ltd. ............... 1,777,114 JAP
612,000 Mitsubishi Motors
Corp.*(a)........... 1,250,961 JAP
784,000 Nissan Motor Company,
Ltd.(a)............. 8,956,655 JAP
127,600 Renault SA............ 8,795,843 FRA
491,000 Suzuki Motor Corp. ... 7,268,303 JAP
146,400 Toyota Motor Corp. ... 4,946,500 JAP
--------------
42,613,771
--------------
BANKS -- 11.8%
669,990 ABN AMRO Holding
N.V................. 15,662,162 NET
306,688 Australia & New
Zealand Banking
Group, Ltd. ........ 4,084,576 AUS
843,200 Banco Bilbao Vizcaya
Argentaria SA(a).... 11,635,477 SPA
504,600 Barclays PLC.......... 4,496,341 BRI
266,600 BNP Paribas, SA....... 16,771,589 FRA
57,238 Credit Suisse Group... 2,093,453 SWI
77,600 Deutsche Bank AG...... 6,219,541 GER
294,000 DNB NOR ASA........... 1,958,412 NOR
353,250 ForeningsSparbanken
AB.................. 6,953,934 SWE
169,500 Hang Seng Bank,
Ltd. ............... 2,227,103 HNG
513,100 HBOS PLC.............. 6,639,039 BRI
583,600 HSBC Holdings PLC..... 9,163,776 BRI
115,900 National Australia
Bank, Ltd.(a)....... 2,614,859 AUS
59,000 National Bank of
Canada(a)........... 1,968,340 CDA
434,400 Royal Bank of Scotland
Group PLC........... 12,787,461 BRI
27,600 Societe Generale...... 2,434,706 FRA
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
400,800 Standard Chartered
PLC................. $ 6,612,394 BRI
100,000 Svenska Handelsanken
AB -- Class A....... 2,045,075 SWE
111,500 UBS AG................ 7,633,406 SWI
--------------
124,001,644
--------------
BROADCAST SERVICES/MEDIA -- 1.3%
222,285 News Corp., Ltd. ..... 2,007,693 AUS
177,207 Singapore Press
Holdings, Ltd. ..... 1,972,329 SIN
380,152 Vivendi Universal
SA*................. 9,231,632 FRA
--------------
13,211,654
--------------
CHEMICALS -- 2.3%
31,350 L'Air Liquide SA...... 5,531,018 FRA
108,100 Nitto Denko Corp. .... 5,751,073 JAP
134,600 Norsk Hydro ASA....... 8,289,570 NOR
200 Norsk Hydro ASA
(ADR)............... 12,360 NOR
38,500 Shin-Etsu Chemical
Company, Ltd. ...... 1,573,922 JAP
617,000 Sumitomo Chemical
Company, Ltd. ...... 2,545,399 JAP
--------------
23,703,342
--------------
COMMERCIAL SERVICES -- 0.2%
338,300 Brambles Industries
PLC................. 1,231,207 BRI
145,000 Brambles Industries,
Ltd.(a)............. 576,726 AUS
--------------
1,807,933
--------------
COMPUTER SOFTWARE AND SERVICES -- 0.7%
37,100 SAP AG................ 6,255,608 GER
16,300 SAP AG (ADR).......... 677,428 GER
--------------
6,933,036
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.6%
85,000 Canon, Inc. .......... 3,958,839 JAP
135,000 Ricoh Company,
Ltd. ............... 2,664,971 JAP
--------------
6,623,810
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.9%
216,200 Bouygues SA(a)........ 7,552,460 FRA
184,500 CRH PLC............... 3,785,212 IRE
161,686 Holcim, Ltd. ......... 7,527,574 SWI
</Table>
See notes to financial statements.
148
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES (CONTINUED)
46,000 Rohm Company, Ltd. ... $ 5,392,570 JAP
425,000 Sekisui House,
Ltd. ............... 4,391,217 JAP
78,000 Tostem Inax Holding
Corp. .............. 1,507,000 JAP
--------------
30,156,033
--------------
CONSUMER GOODS AND SERVICES -- 2.9%
52,900 Hoya Corp. ........... 4,858,465 JAP
53,000 L'Oreal SA............ 4,341,389 FRA
253,000 Nikon Corp. .......... 3,816,017 JAP
77,000 Reckitt Benckiser
PLC................. 1,740,614 BRI
83,950 Sony Corp.(a)......... 2,906,986 JAP
313,000 Swire Pacific, Ltd. --
Class A............. 1,931,302 HNG
22,400 Uni-Charm Corp. ...... 1,101,811 JAP
61,200 Unilever NV........... 3,998,892 NET
602,600 Unilever PLC.......... 5,612,070 BRI
--------------
30,307,546
--------------
CONTAINERS AND PACKAGING -- 0.1%
204,400 Amcor, Ltd. .......... 1,271,830 AUS
--------------
DISTRIBUTION -- 0.5%
2,232,000 Li & Fung, Ltd. ...... 3,823,986 HNG
73,500 Wolseley PLC.......... 1,038,434 BRI
--------------
4,862,420
--------------
DIVERSIFIED SERVICES -- 1.2%
1,371,600 Bombardier, Inc. --
Class B(a).......... 5,802,066 CDA
264,800 Hutchison Whampoa,
Ltd. ............... 1,952,828 HNG
390,000 Mitsubishi Corp. ..... 4,135,150 JAP
36,300 TUI AG(a)............. 745,648 GER
--------------
12,635,692
--------------
ELECTRONICS -- 4.6%
38,422 Advantest Corp. ...... 3,048,227 JAP
44,100 Epcos AG*............. 986,453 GER
62,200 Fanuc, Ltd. .......... 3,727,123 JAP
37,300 Hirose Electric
Company, Ltd. ...... 4,282,154 JAP
1,939,000 Johnson Electric
Holdings, Ltd. ..... 2,472,768 HNG
6,500 Keyence Corp. ........ 1,370,497 JAP
184,600 Koninklijke (Royal)
Philips Electronics
NV.................. 5,385,452 NET
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
ELECTRONICS (CONTINUED)
45,500 Murata Manufacturing
Company, Ltd. ...... $ 2,458,886 JAP
1,590,000 NEC Corp. ............ 11,709,072 JAP
58,793 Samsung Electronics
(GDR)(a)............ 11,053,084 KOR
190,000 Venture Corp.,
Ltd. ............... 2,237,795 SIN
--------------
48,731,511
--------------
ENGINEERING -- 0.2%
1,580,000 Singapore Technologies
Engineering,
Ltd. ............... 1,898,121 SIN
--------------
FINANCIAL SERVICES -- 2.7%
34,300 ACOM Company, Ltd. ... 1,555,889 JAP
29,660 AIFUL Corp. .......... 2,170,379 JAP
279,000 Daiwa Securities
Group, Inc. ........ 1,898,367 JAP
470,000 DBS Group Holdings,
Ltd. ............... 4,068,665 SIN
26,656 Deutsche Boerse AG.... 1,461,247 GER
46,671 Muenchener
Rueckversicherungs-
Gesellschaft AG..... 5,596,228 GER
458,000 Nikko Cordial
Corp. .............. 2,552,044 JAP
251,000 Nomura Holdings,
Inc. ............... 4,275,481 JAP
62,080 Orix Corp. ........... 5,133,739 JAP
--------------
28,712,039
--------------
FOOD AND BEVERAGE -- 4.0%
275,000 Compass Group PLC..... 1,868,878 BRI
253,900 Diageo PLC............ 3,337,449 BRI
964,205 Foster's Group,
Ltd. ............... 3,268,510 AUS
39,200 Groupe Danone......... 6,392,339 FRA
61,500 Heineken Holding
NV -- Class A....... 2,102,637 NET
297,543 Heineken NV........... 11,320,154 NET
50,900 Koninklijke Numico
NV*................. 1,405,399 NET
49,243 Nestle SA............. 12,298,810 SWI
1,200 Nissin Food Products
Company, Ltd. ...... 29,905 JAP
--------------
42,024,081
--------------
INSURANCE -- 5.0%
60,400 Allianz AG............ 7,615,414 GER
61,300 Assicurazioni Generali
Spa................. 1,622,255 ITA
44,100 Great-West Lifeco,
Inc. ............... 1,551,736 CDA
357,572 ING Groep NV.......... 8,331,820 NET
</Table>
See notes to financial statements.
149
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
48,800 Manulife Financial
Corp. .............. $ 1,579,367 CDA
354 Millea Holdings,
Inc. ............... 4,625,723 JAP
709,000 Mitsui Sumitomo
Insurance Company,
Ltd. ............... 5,823,409 JAP
412,700 Prudential PLC........ 3,485,548 BRI
349,440 QBE Insurance Group,
Ltd.(a)............. 2,790,271 AUS
251,512 Sompo Japan Insurance,
Inc. ............... 2,068,155 JAP
189,903 Swiss Re.............. 12,816,765 SWI
--------------
52,310,463
--------------
INTERNET SERVICES -- 1.5%
22,400 Softbank Corp. ....... 685,757 JAP
100,000 Thomson Corp. ........ 3,625,000 CDA
195,524 Thomson Corp. ........ 7,118,761 CDA
345 Yahoo Japan
Corp.*(a)........... 4,636,924 JAP
--------------
16,066,442
--------------
LEISURE AND RECREATION -- 0.4%
87,600 Accor SA.............. 3,963,127 FRA
--------------
MANUFACTURING -- 4.5%
409,328 ABB, Ltd.*............ 2,074,431 SWI
375,800 Assa Abloy AB......... 4,470,075 SWE
402,524 Compagnie Financiere
Richemont AG........ 9,662,919 SWI
641,000 Mitsubishi Heavy
Industries, Ltd. ... 1,782,882 JAP
21,700 NIDEC Corp.(a)........ 2,071,971 JAP
61,900 Schneider Electric
SA.................. 4,048,531 FRA
129,000 Siemens AG(a)......... 10,331,058 GER
32,700 SMC Corp. ............ 4,071,477 JAP
607,214 Smiths Group PLC...... 7,178,073 BRI
78,600 Wesfarmers, Ltd. ..... 1,568,456 AUS
--------------
47,259,873
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.6%
54,600 Essilor International
SA CIE Generale
D'Optique........... 2,821,084 FRA
370,600 Smith & Nephew PLC.... 3,110,100 BRI
--------------
5,931,184
--------------
METALS AND MINING -- 3.6%
67,700 Alcan, Inc. .......... 3,171,131 CDA
428,300 Alumina, Ltd. ........ 2,119,734 AUS
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
METALS AND MINING (CONTINUED)
102,900 Anglo American PLC.... $ 2,221,198 BRI
1,152,109 BHP Billiton PLC...... 10,054,906 BRI
203,975 BHP Billiton, Ltd. ... 1,873,047 AUS
59,000 Companhia Vale do Rio
Doce (CVRD) (ADR)... 3,451,500 BRA
65,000 Companhia Vale do Rio
Doce (CVRD) (ADR)... 3,348,150 BRA
77,200 Inco, Ltd.*........... 3,083,582 CDA
994,000 Nippon Steel Corp. ... 2,133,844 JAP
58,500 Rio Tinto PLC......... 1,614,308 BRI
407,500 WMC Resources, Ltd.*.. 1,728,240 AUS
255,000 Xstrata PLC........... 2,873,065 BRI
--------------
37,672,705
--------------
OIL, COAL AND GAS -- 5.2%
1,833,900 BG Group PLC.......... 9,404,674 BRI
315,800 Eni Spa............... 5,953,649 ITA
134,500 Repsol YPF SA......... 2,620,422 SPA
492,400 Royal Dutch Petroleum
Company............. 25,937,839 NET
34,000 Royal Dutch Petroleum
Company............. 1,781,260 NET
518,300 Statoil ASA(a)........ 5,812,543 NOR
112,200 Suncor Energy,
Inc. ............... 2,819,968 CDA
--------------
54,330,355
--------------
PAPER AND FOREST PRODUCTS -- 0.8%
408,800 Abitibi-Consolidated,
Inc.(a)............. 3,278,367 CDA
189,000 Sumitomo Forestry
Company, Ltd. ...... 1,599,991 JAP
196,000 UPM-Kymmene Oyj(a).... 3,734,627 FIN
--------------
8,612,985
--------------
PHARMACEUTICALS -- 10.4%
549,728 AstraZeneca PLC....... 26,805,741 BRI
167,100 AstraZeneca PLC....... 8,008,956 BRI
40,062 AstraZeneca PLC
(ADR)(a)............ 1,938,200 BRI
102,200 Chugai Pharmaceutical
Company, Ltd. ...... 1,469,948 JAP
42,500 GlaxoSmithKline PLC... 972,890 BRI
378,971 Novartis AG........... 17,199,500 SWI
58,800 Novo Nordisk A/S --
Class B............. 2,393,359 DEN
58,412 Roche Holding AG...... 5,889,829 SWI
</Table>
See notes to financial statements.
150
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
241,000 Sankyo Company,
Ltd. ............... $ 4,532,527 JAP
411,080 Sanofi-Synthelabo
SA.................. 30,927,168 FRA
2,747 Serono SA -- Class
B................... 1,958,337 SWI
256,000 Shionogi & Company,
Ltd. ............... 4,769,236 JAP
59,000 Yamanouchi
Pharmaceutical
Company, Ltd. ...... 1,833,769 JAP
--------------
108,699,460
--------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.2%
33,000 Fuji Photo Film
Company, Ltd. ...... 1,065,708 JAP
121,500 Konica Minolta
Holdings, Inc. ..... 1,634,138 JAP
--------------
2,699,846
--------------
PRINTING AND PUBLISHING -- 1.3%
115,000 DAI Nippon Printing
Company, Ltd. ...... 1,615,410 JAP
689,100 Pearson PLC........... 7,665,444 BRI
57,800 Reed Elsevier NV...... 717,470 NET
220,900 Reed Elsevier PLC..... 1,845,906 BRI
64,003 VNU NV................ 2,020,447 NET
--------------
13,864,677
--------------
REAL ESTATE -- 1.7%
362,000 Cheung Kong Holdings,
Ltd. ............... 2,879,493 HNG
2,374,000 Hang Lung Properties,
Ltd. ............... 3,042,806 HNG
746,000 Hong Kong Land
Holdings, Ltd. ..... 1,268,200 HNG
660,000 Mitsubishi Estate
Company, Ltd. ...... 6,258,726 JAP
328,000 Mitsui Fudosan
Company, Ltd. ...... 2,963,450 JAP
183,000 Sun Hung Kai
Properties, Ltd. ... 1,514,588 HNG
--------------
17,927,263
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
RETAIL -- 1.9%
248,000 Aeon Company, Ltd. ... $ 8,309,876 JAP
321,400 Industria de Diseno
Textil SA........... 6,520,955 SPA
45,300 Metro AG(a)........... 1,998,047 GER
19,500 SHIMAMURA Company,
Ltd. ............... 1,324,995 JAP
217,500 Woolworths, Ltd. ..... 1,933,344 AUS
--------------
20,087,217
--------------
RETAIL: SUPERMARKETS -- 0.2%
35,800 Carrefour SA.......... 1,963,412 FRA
--------------
SEMICONDUCTORS -- 3.0%
512,400 Arm Holdings PLC*..... 1,177,543 BRI
173,200 Infineon Technologies
AG*................. 2,352,914 GER
2,100 NEC Electronics
Corp.*.............. 153,668 JAP
83,200 STMicroelectronics
NV.................. 2,247,232 SWI
100,500 STMicroelectronics
NV.................. 2,722,977 NET
1,128,719 Taiwan Semiconductor
Manufacturing
Company, Ltd.
(ADR)*.............. 11,558,083 TWN
142,900 Tokyo Electron,
Ltd. ............... 10,856,879 JAP
--------------
31,069,296
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 10.3%
110,700 America Movil SA de
CV -- Series L
(ADR)............... 3,026,538 MEX
219,300 BCE, Inc.(a).......... 4,901,222 CDA
164,200 France Telecom SA*.... 4,688,917 FRA
364 Japan Telecom Holdings
Company, Ltd. ...... 975,061 JAP
1,261,400 Koninklijke (Royal)
KPN NV*............. 9,728,452 NET
488,000 Nokia Oyj............. 8,431,343 FIN
664 NTT DoCoMo, Inc. ..... 1,505,992 JAP
7,285,000 Singapore
Telecommunications,
Ltd. ............... 8,408,574 SIN
193,100 Societe Europeenne des
Satellites (FDR).... 1,946,757 LUX
32,158 Swisscom AG........... 10,604,966 SWI
19,900 TDC A/S(a)............ 717,378 DEN
775,705 Telecom Italia Spa.... 1,578,733 ITA
569,560 Telefonica SA......... 8,354,721 SPA
</Table>
See notes to financial statements.
151
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
101,800 Telefonos de Mexico SA
de CV, Series L
(ADR)(a)............ $ 3,362,454 MEX
161,900 Telus Corp. .......... 3,029,913 CDA
15,096,140 Vodafone Group PLC.... 37,392,141 BRI
--------------
108,653,162
--------------
TEXTILES -- 0.3%
728,000 Toray Industries,
Inc. ............... 3,044,092 JAP
--------------
TOYS -- 0.2%
29,100 Nintendo Company,
Ltd. ............... 2,716,072 JAP
--------------
TRANSPORTATION: SERVICES -- 0.3%
84,500 TPG NV................ 1,977,462 NET
80,000 Yamato Transport
Company, Ltd. ...... 942,318 JAP
--------------
2,919,780
--------------
UTILITIES: ELECTRIC -- 0.8%
219,200 Kansai Electric Power
Company, Inc. ...... 3,842,240 JAP
587,200 National Grid Transco
PLC................. 4,203,219 BRI
--------------
8,045,459
--------------
UTILITIES: GAS -- 0.2%
577,000 Centrica PLC.......... 2,177,323 BRI
--------------
TOTAL COMMON STOCKS
(Cost
$836,375,631)....... 973,177,045
--------------
REGULATED INVESTMENT COMPANIES -- 0.6%
2,728,476 American Aadvantage
Select(b)........... 2,728,476 USA
844,678 Merrill Lynch Premier
Institutional
Fund(b)............. 844,678 USA
2,338,694 Merrimac Cash Fund --
Premium Class(b).... 2,338,694 USA
--------------
TOTAL REGULATED
INVESTMENT COMPANIES
(Cost $5,911,848)... 5,911,848
--------------
<Caption>
PRINCIPAL VALUE COUNTRY
--------- -------------- -------
CONVERTIBLE BONDS -- 0.0%
BANKS
$21,000,000 SMFG Finance, Ltd.
2.25%, 07/11/05(c)
(Cost $274,968)..... $ 357,328 CAY
--------------
CORPORATE BONDS AND NOTES -- 0.7%
BANKS
1,050,000 Credit Suisse Group,
6.00%, 12/23/05..... 1,155,068 CHI
351,000,000 SMFG Finance -- 144A,
2.25%, 07/11/05(c).. 6,134,473 CAY
--------------
TOTAL CORPORATE BONDS
AND NOTES (Cost
$3,538,461)......... 7,289,541
--------------
<Caption>
SHARES
------
RIGHTS -- 0.0%
AUTOMOTIVE EQUIPMENT
390,900 TI Automotive, Ltd. --
Class A, zero
coupon*
(Cost $0)........... -- BRI
--------------
<Caption>
PRINCIPAL
---------
SHORT TERM COMMERCIAL PAPER -- 0.2%
$ 850,794 General Electric
Capital Corp.,
1.09%, 01/09/04(b).. 850,794 USA
779,565 General Electric
Capital Corp.,
1.08%, 01/16/04(b).. 779,565 USA
--------------
TOTAL SHORT TERM
COMMERCIAL PAPER
(Cost $1,630,359)... 1,630,359
--------------
SHORT TERM CORPORATE NOTES -- 1.9%
779,565 Bear Stearns
Companies, Inc.,
Floating Rate,
1.14%(**),
06/10/04(b)......... 779,565 USA
779,565 Bear Stearns
Companies, Inc.,
Floating Rate,
1.14%(**),
09/08/04(b)......... 779,565 USA
1,948,912 Canadian Imperial Bank
of Commerce,
Floating Rate,
1.01%(**),
11/04/04(b)......... 1,948,912 USA
</Table>
See notes to financial statements.
152
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE COUNTRY
--------- -------------- -------
SHORT TERM CORPORATE NOTES (CONTINUED)
$ 1,559,129 Fleet National Bank,
Floating Rate,
1.00%(**),
01/21/04(b)......... $ 1,559,129 USA
1,948,912 Goldman Sachs Group,
Inc., Floating Rate,
1.06%(**),
01/05/04(b)......... 1,948,912 USA
3,118,259 Goldman Sachs Group,
Inc., Floating Rate,
1.04%(**),
01/30/04(b)......... 3,118,259 USA
5,067,170 Morgan Stanley,
Floating Rate,
1.05%(**),
06/14/04(b)......... 5,067,170 USA
1,169,347 Morgan Stanley,
Floating Rate,
1.05%(**),
06/21/04(b)......... 1,169,347 USA
3,897,823 Morgan Stanley,
Floating Rate,
1.05%(**),
09/10/04(b)......... 3,897,823 USA
--------------
TOTAL SHORT TERM
CORPORATE NOTES
(Cost
$20,268,682)........ 20,268,682
--------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.2%
FANNIE MAE -- 0.1%
1,552,472 1.06%, 01/02/04(b).... 1,552,472 USA
--------------
FREDDIE MAC -- 0.1%
779,565 1.06%, 01/27/04(b).... 779,565 USA
--------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY
SECURITIES (Cost
$2,332,037)......... 2,332,037
--------------
TIME DEPOSITS -- 4.0%
7,143,581 Bank of Montreal,
1.06%, 01/15/04(b).. 7,143,581 USA
3,118,259 Bank of Montreal,
1.06%, 02/17/04(b).. 3,118,259 USA
</Table>
<Table>
<Caption>
PRINCIPAL VALUE COUNTRY
--------- -------------- -------
TIME DEPOSITS (CONTINUED)
$ 3,897,823 Bank of Novia Scotia,
1.08%, 03/10/04(b).. $ 3,897,823 USA
2,338,694 Citigroup, Inc.,
1.08%, 01/05/04(b).. 2,338,694 USA
1,169,347 Citigroup, Inc.,
1.09%, 02/06/04(b).. 1,169,347 USA
2,338,694 Credit Agricole
Indosuez,
0.98%, 01/02/04(b).. 2,338,694 USA
2,338,694 Credit Agricole
Indosuez,
1.08%, 01/28/04(b).. 2,338,694 USA
3,118,259 Den Danske Bank,
1.08%, 01/20/04(b).. 3,118,259 USA
3,897,823 Royal Bank of Canada,
1.05%, 02/27/04(b).. 3,897,823 USA
1,948,912 Royal Bank of
Scotland,
1.08%, 01/09/04(b).. 1,948,912 USA
779,565 Royal Bank of
Scotland,
1.08%, 01/15/04(b).. 779,565 USA
5,846,735 Royal Bank of
Scotland,
1.08%, 01/20/04(b).. 5,846,735 USA
1,948,912 Svenska Handlesbanken,
1.08%, 02/04/04(b).. 1,948,912 USA
779,565 Toronto Dominion Bank,
1.10%, 01/08/04(b).. 779,565 USA
1,169,347 Wells Fargo Bank,
N.A.,
1.04%, 01/30/04(b).. 1,169,347 USA
--------------
TOTAL TIME DEPOSITS
(Cost
$41,834,210)........ 41,834,210
--------------
TOTAL SECURITIES (Cost
$912,166,196)....... 1,052,801,050
--------------
</Table>
See notes to financial statements.
153
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 7.5%
$ 8,575,211 With Goldman Sachs Group,
Inc., dated 12/31/03,
1.04%, due 01/02/04,
repurchase proceeds at
maturity $8,575,706
(Collateralized by
Archer-Daniels-Midland
Company, 8.88%, due
04/15/11, with a value of
$1,792,142, Den Danske
Bank -- 144A, 7.40%, due
06/15/10, with a value of
$1,759,207, Honeywell
International, Inc., 6.88%,
due 10/03/05, with a value
of $2,795,270, Morgan
Stanley, 6.75%, due
04/15/11, with a value of
$699,409, and Lehman
Brothers Holdings, Inc.,
3.50%, due 08/07/08, with a
value of $1,700,687)(b).... $ 8,575,211
70,240,655 With Investors Bank and
Trust, dated 12/31/03,
0.45%, due 01/02/04,
repurchase proceeds at
maturity $70,242,411 (Col-
lateralized by Fannie Mae
Adjustable Rate Mortgage,
4.11%, due 05/01/33, with a
value of $35,864,131 and
Fannie Mae Adjustable Rate
Mortgage, 4.20%, due
07/01/33, with a value of
$37,888,556)............... 70,240,655
--------------
TOTAL REPURCHASE AGREEMENTS
(Cost $78,815,866)......... 78,815,866
--------------
Total Investments -- 107.9%
(Cost $990,982,062)........ 1,131,616,916
Liabilities less other
assets -- (7.9)%........... (82,583,020)
--------------
NET ASSETS -- 100.0%......... $1,049,033,896
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2003 is $996,861,248.
The following amount is based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation......... $178,623,414
Gross unrealized depreciation......... (43,867,746)
------------
Net unrealized appreciation........... $134,755,668
============
</Table>
- ---------------
* Non-income producing security.
** Variable rate security. The rate shown was in effect at December 31,
2003.
(a) All or part of this security is on loan.
(b) Short term security purchased with cash collateral received for
securities loaned.
(c) Principal amount shown for this debt security is denominated in Japanese
Yen.
(ADR) American Depository Receipt.
(FDR) Foreign Depository Receipt.
(GDR) Global Depository Receipt.
See notes to financial statements.
154
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2003
<Table>
<Caption>
PERCENT OF TOTAL
COUNTRY COMPOSITION INVESTMENTS AT VALUE
------------------- --------------------
Australia (AUS)...................... 2.28%
Bermuda (BER)........................ 0.11
Brazil (BRA)......................... 0.60
Canada (CDA)......................... 3.71
Denmark (DEN)........................ 0.28
Finland (FIN)........................ 1.08
France (FRA)......................... 9.67
Grand Cayman (CAY)................... 0.57
Germany (GER)........................ 4.76
Great Britain (BRI).................. 16.79
Hong Kong (HNG)...................... 1.75
Ireland (IRE)........................ 0.33
Italy (ITA).......................... 0.81
Japan (JPN).......................... 18.01
Korea (KOR).......................... 0.98
Luxembourg (LUX)..................... 0.17
Mexico (MEX)......................... 0.57
Netherlands (NET).................... 8.43
Norway (NOR)......................... 1.42
Singapore (SIN)...................... 1.64
Spain (SPA).......................... 2.57
Sweden (SWE)......................... 1.19
Switzerland (SWI).................... 7.93
Taiwan (TWN)......................... 1.02
United States (USA).................. 13.33
------
TOTAL PERCENTAGE..................... 100.00%
======
</Table>
See notes to financial statements.
155
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Diversified Investors Portfolios (the Series Portfolio), a series trust
organized on September 1, 1993, under the laws of the State of New York, is
composed of sixteen different series that are, in effect, separate investment
funds: the Money Market Portfolio, the High Quality Bond Portfolio, the
Intermediate Government Bond Portfolio, the Core Bond Portfolio, the Balanced
Portfolio, the Value & Income Portfolio, the Growth & Income Portfolio, the
Equity Growth Portfolio, the Mid-Cap Value Portfolio, the Mid-Cap Growth
Portfolio, the Small-Cap Value Portfolio, the Special Equity Portfolio, the
Small-Cap Growth Portfolio, the Aggressive Equity Portfolio, the High-Yield Bond
Portfolio, and the International Equity Portfolio (each a Series). The
Declaration of Trust permits the Board of Trustees to issue an unlimited number
of beneficial interests in each Series. Investors in a Series (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of that Series (and of no other
Series).
2. SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION:
Short-term securities having remaining maturities of 60 days or less are valued
at amortized cost, which approximates value. The amortized cost of a security is
determined by valuing it at original cost and thereafter amortizing any discount
or premium at a constant rate until maturity. Equity securities are valued at
the last sale price on the exchange on which they are primarily traded or at the
bid price on the Nasdaq system for unlisted national market issues, or at the
last quoted bid price for securities not reported on the Nasdaq system. Bonds
are valued at the mean of the last available bid and asked prices by an
independent pricing service. Futures and option contracts that are traded on
commodities or securities exchanges are normally valued at the last settlement
price on the exchange on which they are traded. All other securities, futures,
and option contracts, if necessary, will be valued at their fair value as
determined by the Board of Trustees.
Events or circumstances affecting the values of portfolio securities that occur
between the closing of their principal markets and the time the net asset value
is determined may be reflected in the Trust's calculation of net asset value for
each applicable Portfolio when the Trust's Manager deems that the particular
event or circumstance would materially affect such Portfolio's net asset value.
B. REPURCHASE AGREEMENTS:
Each Series, along with other affiliated entities of the investment advisor, may
enter into repurchase agreements with financial institutions deemed to be
creditworthy by the Series investment advisor, subject to the seller's agreement
to repurchase and the Series agreement to resell such securities at a mutually
agreed upon price. Securities purchased subject to repurchase agreements are
segregated at the custodian and, pursuant to the terms of the repurchase
agreements, must have an aggregate market value greater than or equal to 102%
for domestic securities and 105% for international securities of the repurchase
price at all times. If the value of the underlying securities falls below the
value of the repurchase price, the Series will require the seller to deposit
additional collateral by the next business day. If the request for additional
collateral is not met or the seller defaults on its repurchase obligation, the
Series maintains the right to sell the underlying securities at market value and
may claim any resulting loss against the seller. However, in the event of
default or bankruptcy by the seller, realization and/or retention of the
collateral may be subject to legal proceedings.
C. FOREIGN CURRENCY TRANSLATION:
The accounting records of each Series are maintained in U.S. dollars. The market
values of foreign securities, currency holdings and other assets and liabilities
denominated in a foreign currency are translated to U.S.
156
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
dollars based on the prevailing exchange rates each business day. Income and
expenses denominated in foreign currencies are translated at prevailing exchange
rates when accrued or incurred.
The Series does not isolate realized gains and losses attributable to changes in
exchange rates from gains and losses that arise from changes in the market value
of investments. Such fluctuations are included with net realized and unrealized
gains or losses on securities. Net realized gains and losses on foreign currency
transactions represent net foreign exchange gains and losses on disposition of
foreign currencies and foreign currency forward contracts, and the difference
between the amount of investment income receivable and foreign withholding taxes
payable recorded on the Series' books and the U.S. dollar equivalent of amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities (other than
investments in securities) and foreign currency forward contracts, resulting
from changes in the prevailing exchange rates.
D. FOREIGN CURRENCY FORWARD CONTRACTS:
Each Series, with the exception of the Money Market Series, may enter into
foreign currency forward contracts and forward cross currency contracts in
connection with settling planned purchases or sales of securities or to hedge
the currency exposure associated with some or all of the Series' portfolio
securities. A foreign currency forward contract is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of a foreign currency forward contract fluctuates with changes in forward
currency exchange rates. Foreign currency forward contracts are marked to market
daily and the change in value is recorded by the Series as an unrealized foreign
exchange gain or loss. When a foreign currency forward contract is extinguished,
through delivery or by entering into another offsetting foreign currency forward
contract, the Series records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value of the
contract at the time it was extinguished. These contracts may involve market
risk in excess of the unrealized gain or loss reflected in the Series' Statement
of Assets and Liabilities and Statement of Operations. In addition, the Series
could be exposed to risk if the counterparties are unable to meet the terms of
the contracts or if the value of the currency changes unfavorably to the U.S.
dollar.
E. OPTIONS:
Each Series, with the exception of the Money Market Series, may purchase and
write (sell) call and put options on securities indices for the purpose of
protecting against an anticipated decline in the value of the securities held by
that Series. Index options are marked to market daily and the change in value is
recorded by the Series as an unrealized gain or loss. A realized gain or loss
equal to the difference between the exercise price and the value of the index is
recorded by the Series upon cash settlement of the option. The use of index
options may expose the Series to the risk that trading in such options may be
interrupted if trading in certain securities included in the index is
interrupted or the value of the securities in the index may not move in direct
correlation with the movements of the Series portfolio. In addition, there is
the risk the Series may not be able to enter into a closing transaction because
of an illiquid secondary market.
157
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transactions in options written for the year ended December 31, 2003 were as
follows:
<Table>
<Caption>
CORE BOND BALANCED
--------------------- --------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
--------- --------- --------- --------
Options outstanding at December 31, 2002............. -- $ -- -- $ --
Options written...................................... 9,625,592 804,149 1,050,071 92,675
Options terminated in closing purchase
transactions....................................... (314) (359,426) (41) (44,511)
Options expired...................................... -- -- -- --
--------- --------- --------- --------
Options outstanding at December 31, 2003............. 9,625,278 $ 444,723 1,050,030 $ 48,164
========= ========= ========= ========
</Table>
F. FUTURES CONTRACTS:
Each Series may invest in futures contracts solely for the purpose of hedging
its existing portfolio securities, or securities that the Series intends to
purchase, against fluctuations in fair value caused by changes in prevailing
market or interest rates.
Initial margin deposits made in cash upon entering into futures contracts are
recognized as assets due from the broker (the Series agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
marking to market on a daily basis to reflect the daily market value of the
contract.
Variation margin payments are received or made by each Series each day,
depending upon the daily fluctuations in the fair value of the underlying
instrument. Each Series recognizes an unrealized gain or loss equal to the daily
variation margin. When the contract is closed, the Series records a realized
gain or loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the basis in the contract.
Should market conditions move unexpectedly, the Series may not achieve the
anticipated benefits of the futures contracts and may realize a loss. The use of
futures transactions involves the risk of imperfect correlation in movements in
the price of futures contracts, interest rates, and the underlying hedged
assets. These contracts may involve market risk in excess of the unrealized
gains or loss reflected in the Series' Statement of Assets and Liabilities.
Open futures contracts as of December 31, 2003:
<Table>
<Caption>
VALUE AS OF UNREALIZED
NUMBER OF EXPIRATION COST AT DECEMBER 31, APPRECIATION
SERIES CONTRACTS DESCRIPTION DATE TRADE DATE 2003 (DEPRECIATION)
- ------ ---------- -------------------------------- ---------- ------------ ------------ --------------
Core Bond............ 1950 Short US Treasury Notes 5 Year Future March 2004 $216,630,330 $217,668,750 $(1,038,420)
842 Short US Treasury Notes 10 Year Future March 2004 94,060,545 94,527,656 (467,111)
84 Long US Long Bond Future March 2004 9,282,286 9,182,250 (100,036)
-----------
$(1,605,567)
===========
Balanced............. 54 Long US Long Bond Future March 2004 $ 5,822,914 $ 5,902,875 $ 79,961
144 Short US Treasury Notes 5 Year Future March 2004 16,014,981 16,074,000 (59,019)
148 Short US Treasury Notes 10 Year Future March 2004 16,384,154 16,615,312 (231,158)
-----------
$ (210,216)
===========
Growth & Income...... 8 Long S&P 500 Future March 2004 $ 2,191,072 $ 2,221,200 $ 30,128
===========
Special Equity....... 18 Long Russell 2000 Future March 2004 $ 4,911,740 $ 5,014,800 $ 103,060
===========
</Table>
158
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. SHORT SALES:
The Series, with the exception of the Money Market Series, may sell securities
short. A short sale is a transaction in which the Series sells securities it
does not own, but has borrowed, in anticipation of a decline in the market price
of the securities. The Series is obligated to replace the borrowed securities at
the market price at the time of replacement. The Series' obligation to replace
the securities borrowed in connection with a short sale will be fully secured by
collateral deposited with the custodian. In addition, the Series will consider
the short sale to be a borrowing by the Series that is subject to the asset
coverage requirements of the 1940 Act. Short sales by the Series involve certain
risks and special considerations. Possible losses from short sales differ from
losses that could be incurred from a purchase of a security because losses from
short sales may be unlimited, whereas losses from purchases can not exceed the
total amount invested. During the year ended December 31, 2003, Core Bond Series
and the Balanced Series had short sales.
H. DOLLAR ROLLS:
Each Series, with the exception of the Money Market Series, may enter into
dollar rolls (principally using TBA's) in which the Series sell mortgage
securities for delivery in the current month and simultaneously contract to
repurchase similar, but not identical, securities at an agreed-upon price on a
fixed date. The Series account for such dollar rolls as purchases and sales and
receive compensation as consideration for entering into the commitment to
repurchase. The Series must maintain liquid securities having a value not less
than the repurchase price (including accrued interest) for such dollar rolls.
The market value of the securities that the Series are required to purchase may
decline below the agreed upon repurchase price of those securities.
I. FEDERAL INCOME TAXES:
It is the Series' policy to comply with the applicable provisions of the
Internal Revenue Code. Therefore, no federal income tax provision is required.
J. SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are accounted for on a trade date basis (the date the
order to buy or sell is executed). Dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes
amortization of premiums and accretion of discounts on investments. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.
All of the net investment income and realized and unrealized gains and losses
from security transactions are determined on each valuation day and allocated
pro rata among the investors in a Series at the time of such determination.
K. OPERATING EXPENSES:
The Series Portfolio accounts separately for the assets, liabilities and
operations of each Series. Expenses directly attributable to a Series are
charged to that Series, while expenses attributable to all Series are allocated
among the series based on their relative net assets, or another methodology that
is appropriate based on the circumstances.
L. OTHER:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of 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.
159
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES
Transamerica Financial Life Insurance Company, Inc. (TFLIC), formerly AUSA Life
Insurance Company, Inc. (AUSA), a wholly-owned subsidiary of AEGON USA, Inc.
(AEGON), is an affiliate of Diversified Investment Advisors, Inc. (the Advisor).
The Advisor is an indirect, wholly-owned subsidiary of AEGON USA, Inc., a
financial services holding company whose primary emphasis is life and health
insurance and annuity and investment products. AEGON USA is an indirect,
wholly-owned subsidiary of AEGON N.V., a Netherlands corporation which is a
publicly traded international insurance group. TFLIC has sub-accounts which
invest in the corresponding Series Portfolios as follows:
<Table>
<Caption>
AUSA SUB-ACCOUNT INVESTMENT IN PORTFOLIO
- ---------------- -----------------------
Money Market................................................ 11.09%
High Quality Bond........................................... 17.46
Intermediate Government Bond................................ 27.79
Core Bond................................................... 14.67
Balanced.................................................... 36.04
Value & Income.............................................. 30.31
Growth & Income............................................. 27.82
Equity Growth............................................... 23.90
Mid-Cap Value............................................... 02.50
Mid-Cap Growth.............................................. 00.14
Small-Cap Value............................................. 00.03
Special Equity.............................................. 27.26
Small-Cap Growth............................................ 00.00
Aggressive Equity........................................... 24.32
High Yield Bond............................................. 09.68
International Equity........................................ 15.48
</Table>
The Advisor manages the assets of each Series of the Series Portfolio pursuant
to an Investment Advisory Agreement with the Series Portfolio. Subject to such
further policies as the Board of Trustees may determine, the Advisor provides
general investment advice to each Series. For its services, the Advisor receives
from each Series fees, accrued daily and payable monthly, at an annual rate
equal to the percentages specified in the table below of the corresponding
Series' average daily net assets. The Advisor is currently waiving a portion of
its investment advisory fees for certain Series.
For each Series, the Advisor has entered into Investment Subadvisory Agreements
with the subadvisors listed in the table below (each a Subadvisor, collectively
the Subadvisors). It is the responsibility of a Subadvisor to make the
day-to-day investment decisions of the Series and to place the purchase and
sales orders for securities transactions of such Series, subject in all cases to
the general supervision of the Advisor. Payment of fees to the Subadvisors is
the responsibility of the Advisor, and is not an additional expense of a Series.
160
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
For its services, the Advisor receives a fee from each Series, and the
Subadvisors receive a fee from the Advisor, at an annual rate equal to the
percentages specified in the table below of the portion of the corresponding
Series' average daily net assets which they subadvise.
<Table>
<Caption>
ADVISOR SUBADVISOR
PORTFOLIO SERIES PORTFOLIO SUBADVISOR FEE (%) FEE (%)
- ---------------- -------------------------------------- ------- ----------
Money Market Series................... Capital Management Group 0.25 0.05
High Quality Bond Series.............. Merganser Capital Management 0.35 (2)
Limited Partnership
Intermediate Government Bond Series... (3) 0.35 (4)
Core Bond Series...................... BlackRock Advisors, Inc. 0.35(1) (5)
Balanced Series....................... (6) 0.45(1) (7)
Value & Income Series................. (8) 0.45 (9)
Growth & Income Series................ (10) 0.60 (11)
Equity Growth Series.................. (12) 0.62 (13)
Mid-Cap Value Series.................. Cramer, Rosenthal, McGlynn, LLC 0.67(1) (14)
Mid-Cap Growth Series................. Dresdner RCM Global Investors, LLC 0.72(1) (15)
Small-Cap Value Series................ Sterling Capital Management, LLC 0.82(1) 0.50
Special Equity Series................. (16) 0.80(1) (17)
Small-Cap Growth Series............... Delaware Management Company 0.87(1) 0.50
Aggressive Equity Series.............. McKinley Capital Management, Inc. 0.97(1) (18)
High-Yield Bond Series................ Eaton Vance Management 0.55(1) (19)
International Equity Series........... Capital Guardian Trust Company 0.75 (20)
</Table>
- ---------------
(1) The Advisor is currently waiving a portion of its fee.
(2) 0.20% on the first $100,000,000 in average daily net assets, 0.15% on the
next $100,000,000 in average daily net assets, 0.10% on the next
$100,000,000 in average daily net assets, and 0.05% on all average daily
net assets in excess of $300,000,000.
(3) The Intermediate Government Bond Series has two subadvisors: Allegiance
Investment Management, LLC and Stephens Capital Management. Effective
September 15, 2003, Allegiance Investment Management, LLC and Stephens
Capital Management replaced Capital Management Group.
During the year-ended December 31, 2003 the Intermediate Government Bond
Series executed $49,414,342 of purchase transactions and $8,122,795 of
sales transactions through Stephen's, Inc., an affiliate of the
Portfolio's subadvisor, for which no commissions were charged.
(4) From January 1, 2003 to September 14, 2003, Capital Management Group
received 0.15% on all average daily net assets. From September 15, 2003 to
December 31, 2003 Allegiance Investment Management, LLC received 0.35% on
the first $20,000,000 in average daily net assets, 0.25% on the next
$30,000,000 in average daily net assets, 0.20% on the next $50,000,000 in
average daily net assets, and 0.05% on all average daily net assets in
excess of $100,000,000. From September 15, 2003 to December 31, 2003,
Stephens Capital Management received 0.10% on all average daily net assets.
(5) The market values of the fixed income securities of the Core Bond Series
and Balanced Series were combined to determine the fee at the rate of 0.12%
on the first $1,000,000,000 in average daily net assets and 0.05% on all
average daily net assets in excess of $1,000,000,000.
(6) The Balanced Series has two subadvisors: Aeltus Investment Management, Inc.
and BlackRock Advisors, Inc. for equity and fixed income securities,
respectively.
(7) Aeltus Investment Management, Inc. received 0.20% on the first $200,000,000
in average daily net assets, 0.15% on the next $300,000,000 in average
daily net assets, 0.125% on the next $500,000,000 in
161
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
average daily net assets, and 0.10% on all average daily net assets in excess
of $1,000,000,000. Black Rock Advisors, Inc. received 0.12% on the first
$1,000,000,000 in average daily net assets, and 0.05% on all average daily
net assets in excess of $1,000,000,000 on the combined market values of the
fixed income securities of the Core Bond Series and Balanced Series.
(8) The Value & Income Series has two subadvisors: Alliance Capital Management
LP and AllianceBernstein. Effective May 28, 2003, Alliance Capital
Management LP replaced Asset Management Group.
During the year ended December 31, 2003, the Value & Income Series executed
trades through AllianceBernstein, an affiliate of Alliance Capital
Management and AllianceBernstein. Commissions paid for such transactions
amounted to $1,610,982.
(9) For the period January 1, 2003 to May 27, 2003, Asset Management Group
received 0.27% on the first $300,000,000 in average daily net assets, 0.16%
on the next $700,000,000 in average daily net assets, and 0.13% on all
average daily net assets in excess of $1,000,000,000. For the period May
28, 2003 to December 31, 2003, Alliance Capital Management LP received
0.27% on the first $300,000,000 in average daily net assets, 0.15% on the
next $700,000,000 in average daily net assets, and 0.12% on the next
$1,000,000,000 in average daily net assets, and 0.11% on all average daily
net assets in excess of $2,000,000,000. AllianceBernstein received 0.27% on
the first $300,000,000 in average daily net assets, 0.16% on the next
$700,000,000 in average daily net assets, and 0.13% on all average daily
net assets in excess of $1,000,000,000.
(10) The Growth & Income Series has two subadvisors: Aeltus Investment
Management, Inc. and Credit Suisse Asset Management LLC.
(11) Aeltus Investment Management, Inc. received 0.15% on the first $300,000,000
in average daily net assets, 0.125% on the next $700,000,000 in average
daily net assets and 0.10% on all average daily net assets in excess of
$1,000,000,000. Credit Suisse Asset Management received 0.30% on the first
$100,000,000 in average daily net assets, 0.20% on the next $200,000,000 in
average daily net assets, 0.15% on the next $200,000,000 in average daily
net assets and 0.10% on all average daily net assets in excess of
$500,000,000.
(12) The Equity Growth Series has three subadvisors, Ark Asset Management
Company, Inc., Marsico Capital Management LLC, and Dresdner RCM Global
Investors LLC.
During the year-ended December 31, 2003 the Equity Growth Series executed
$27,264 of sales transactions through Bank of America International, an
affiliate of the Portfolio's subadvisor, for which no commissions were
charged.
(13) Dresdner RCM Global Investors LLC received 0.22% on the first $700,000,000
in average daily net assets, and 0.15% on all average daily net assets in
excess of $700,000,000. Ark Asset Management received 0.20% of average
daily net assets. Marsico Capital Management LLC received 0.30% on the
first $1,000,000,000 in average daily net assets, 0.25% on the next
$1,000,000,000 in average daily net assets, and 0.27% on all average daily
net assets in excess of $2,000,000,000.
(14) 0.70% on the first $25,000,000 in average daily net assets, 0.40% on the
next $25,000,000 in average daily net assets, 0.35% on the next $50,000,000
in average daily net assets, 0.25% on the next $200,000,000 in average
daily net assets, and 0.20% on all average daily net assets in excess of
$300,000,000.
(15) 0.82% on the first $25,000,000 in average daily net assets, 0.46% on the
next $25,000,000 in average daily net assets, 0.35% on the next $50,000,000
in average daily net assets, and 0.23% on all average daily net assets in
excess of $100,000,000.
(16) The Special Equity Series has five subadvisors: Wellington Management
Company LLP; Westport Asset Management, Inc.; Robertson, Stephens; Seneca
Capital Management, LLC; and INVESCO, Inc.
162
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(17) Wellington Management Company, LLC received 0.45% on the first $200,000,000
of average daily net assets, and 0.375% on average daily net assets in
excess of $200,000,000. Westport Asset Management, Inc. received 0.50% of
average daily net assets. Robertson, Stephens received 0.50% on the first
$100,000,000 in average daily net assets, and 0.40% on all average daily
net assets in excess of $100,000,000. Seneca Capital Management, LLC
received 0.43% on the first $200,000,000 in average daily net assets, and
0.33% on all average daily net assets in excess of $200,000,000. INVESCO,
Inc. received 0.55% on the first $100,000,000 in average daily net assets,
0.45% on the next $100,000,000 in average daily net assets, 0.30% on the
next $100,000,000 in average daily net assets and 0.20% on all average
daily net assets in excess of $300,000,000.
(18) 0.45% on the first $100,000,000 in average daily net assets, 0.35% on the
next $200,000,000 in average daily net assets, and 0.25% on all average
daily net assets in excess of $300,000,000.
(19) 0.35% on the first $20,000,000 in average daily net assets, 0.25% on the
next $20,000,000 in average daily net assets, 0.20% on the next $85,000,000
in average daily net assets, and 0.15% on all average daily net assets in
excess of $125,000,000.
(20) 0.75% on the first $25,000,000 in average daily net assets, 0.60% on the
next $25,000,000 in average daily net assets, 0.425% on the next
$200,000,000 in average daily net assets and 0.375% on all average daily
net assets in excess of $250,000,000. The following fee discount will be
applied on the total eligible equity, convertible and balanced assets
managed: Assets between $500,000,000 and $750,000,000 have a 5% fee
reduction; assets between $750,000,000 and $1,000,000,000 have a 7.5% fee
reduction and assets above $1,000,000,000 have a 10% fee reduction.
For the year ended December 31, 2003, the Advisor has voluntarily undertaken to
waive fees to the extent the expenses of a Series exceeds the following expense
caps (as a proportion of average daily net assets):
<Table>
<Caption>
FUND EXPENSE CAP
- ---- ----------------------
Money Market Series......................................... 30 basis points (b.p.)
High Quality Bond Series.................................... 40 b.p.
Intermediate Government Bond Series......................... 40 b.p.
Core Bond Series............................................ 40 b.p.
Balanced Series............................................. 50 b.p.
Value & Income Series....................................... 50 b.p.
Growth & Income Series...................................... 65 b.p.
Equity Growth Series........................................ 65 b.p.
Mid-Cap Value Series........................................ 70 b.p.
Mid-Cap Growth Series....................................... 75 b.p.
Small-Cap Value Series...................................... 85 b.p.
Special Equity Series....................................... 85 b.p.
Small-Cap Growth Series..................................... 90 b.p.
Aggressive Equity Series.................................... 100 b.p.
High-Yield Bond Series...................................... 60 b.p.
International Equity Series................................. 90 b.p.
</Table>
Certain trustees and officers of the Series Portfolio and of the funds that
invest in the Series Portfolio are also directors, officers or employees of the
Advisor or its affiliates. None of the non-independent trustees so affiliated
receive compensation for services as trustees of the Series Portfolio or the
funds that invest in the Series Portfolio. Similarly, none of the Series
Portfolio officers receive compensation from the Series Portfolio. Aggregate
remuneration earned by non-affiliated trustees of the Series Portfolio from the
Series Portfolio for the year ended December 31, 2003, amounted to $48,863.
163
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SECURITIES LENDING
All Series may lend its securities to certain member firms of the New York Stock
Exchange. The loans are collateralized at all times with cash or securities with
a market value at least 102% of the market value of the securities on loan. Any
deficiencies or excess of collateral must be delivered or transferred by the
member firms no later than the close of business on the next business day. As
with other extensions of credit, the Series may bear the risk of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially.
Each Series receives compensation, net of related expenses, for lending its
securities which is reported on the Statements of Operations. The reported
compensation includes interest income on short term investments purchased with
cash collateral received. At December 31, 2003, the Series loaned securities
having market values as follows:
<Table>
<Caption>
CASH COLLATERAL
MARKET VALUE RECEIVED
------------ ---------------
High Quality Bond Series.................................... $ 30,383,029 $ 31,159,620
Intermediate Government Bond Series......................... 51,666,236 53,416,536
Core Bond Series............................................ 155,854,884 160,419,929
Balanced Series............................................. 28,596,977 29,454,439
Value & Income Series....................................... 147,679,746 151,980,023
Growth & Income Series...................................... 56,942,432 59,141,095
Equity Growth Series........................................ 72,942,209 75,729,565
Mid-Cap Value Series........................................ 35,197,759 36,445,993
Mid-Cap Growth Series....................................... 28,028,598 29,139,322
Small-Cap Value Series...................................... 8,120,070 8,553,351
Special Equity Series....................................... 161,555,759 170,584,121
Small-Cap Growth Series..................................... 13,173,828 13,953,530
Aggressive Equity Series.................................... 84,692,547 88,458,027
International Equity Series................................. 76,680,492 80,552,348
</Table>
164
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities (excluding short-term securities) for the year ended December 31,
2003, were as follows:
<Table>
<Caption>
COST OF PROCEEDS
PURCHASES FROM SALES
--------------- ---------------
High Quality Bond Series............... Government Obligations $ 83,500,064 $ 35,429,222
Other 356,825,207 220,467,137
Intermediate Government Bond Series.... Government Obligations 990,297,309 945,795,725
Other 49,922,833 93,602,335
Core Bond Series....................... Government Obligations 10,932,895,068 10,717,416,435
Other 943,480,662 675,083,376
Balanced Series........................ Government Obligations 1,174,759,298 1,169,386,802
Other 320,214,764 316,066,148
Value & Income Series.................. Other 1,445,556,647 1,199,993,213
Growth & Income Series................. Other 951,827,127 883,153,593
Equity Growth Series................... Other 1,366,817,628 904,290,161
Mid-Cap Value Series................... Other 279,620,651 163,985,481
Mid-Cap Growth Series.................. Other 183,506,116 92,589,482
Small-Cap Value Series................. Other 80,329,377 19,620,670
Special Equity Series.................. Other 1,066,748,487 1,229,169,474
Small-Cap Growth Series................ Other 83,606,598 35,504,702
Aggressive Equity Series............... Other 541,330,918 564,632,157
High Yield Bond Series................. Other 324,780,378 304,500,327
International Equity Series............ Other 274,707,549 174,414,386
</Table>
6. CONTINGENT LIABILITY
On December 12, 2003, the Series Portfolio received a copy of a complaint (the
"Complaint") filed in the United States Bankruptcy Court for the Southern
District of New York styled Enron Corp. v. J. P. Morgan Securities, Inc., et al.
The Complaint names as defendants two Portfolios, believed to be the
Intermediate Government Bond Portfolio and the Value & Income Portfolio (the
"Subject Portfolios"), and alleges that Enron Corp. ("Enron") transferred to the
defendants, including the Subject Portfolios, over $1 billion in the aggregate
for the purpose of prepaying certain commercial paper issued by Enron (the
"Notes") and held by the defendants prior to the filing by Enron for bankruptcy
protection under Chapter 11 of Title 11 of the Bankruptcy Code (the "Bankruptcy
Code"). The Complaint seeks to hold the defendants, including the Subject
Portfolios, liable for these transfers as preferential transfers or as
fraudulent transfers under the Bankruptcy Code. Although the Complaint does not
specify the amount of each transfer in dispute, it appears that the sale by the
Intermediate Government Bond Portfolio of approximately $2.4 million of the
Notes on or about October 30, 2001 and the sales by the Value & Income Portfolio
of approximately $10.3 million of the Notes on or about October 30, 2001 are in
dispute. It should be noted, however, that the Complaint has grouped the
above-referenced sales with certain other sales of Notes, totaling approximately
$16.6 million, allegedly made on the same date, and seeks to hold the Subject
Portfolios and the sellers of such other Notes jointly and severally liable for
the aggregate amount of these transfers. The Subject Portfolios have filed a
motion to dismiss all counts of the Complaint. As of February 24, 2004, no
ruling has been made. The Series Portfolio and its counsel are in the process of
investigating the factual background of the allegations in the Complaint,
defenses to the allegations in the Complaint and whether third parties might be
partially or wholly liable to the Subject Portfolios for any loss sustained in
connection with the Complaint. The Subject Portfolios are currently unable to
predict whether Enron will prevail, in whole or in part; in its claims against
the Subject Portfolios and whether, in such event, any third party might be
liable to the Subject Portfolios.
165
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. GENERAL INDEMNIFICATION
In the normal course of business, the Series enter into contracts that contain a
variety of representations and warranties which provide general
indemnifications. The Series' maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Series
that have not yet occurred. However, based on experience, the Series expects the
risk of loss to be remote.
166
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. FOREIGN CURRENCY FORWARD CONTRACTS
At December 31, 2003, the Core Bond Series, the Balanced Series, Equity Growth
Series, and the International Equity Series had entered into foreign currency
forward contracts which contractually obligate each Series to deliver/receive
currency at specified future dates. The open contracts were as follows:
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT APPRECIATION/
CURRENCY FOR DATE VALUE (DEPRECIATION)
------------ ----------- ---------- ----------- --------------
CORE BOND
PURCHASE CONTRACTS:
Canadian Dollar.................. 7,091,592 $ 5,407,237 01/12/04 $ 5,481,649 $ 74,412
Euro............................. 6,029,000 7,008,713 01/08/04 7,596,614 587,901
Euro............................. 11,199,370 13,054,434 01/08/04 14,111,344 1,056,910
Great British Pound.............. 12,037,724 20,054,848 01/15/04 21,509,437 1,454,589
------------
TOTAL............................ $ 3,173,812
============
SALE CONTRACTS:
Canadian Dollar.................. 16,908,502 $12,562,037 01/12/04 $13,069,911 $ (507,874)
Canadian Dollar.................. 3,137,790 2,386,152 01/12/04 2,425,444 (39,292)
Canadian Dollar.................. 8,618,700 6,554,144 01/12/04 6,662,071 (107,927)
Canadian Dollar.................. 4,037,225 3,103,170 01/12/04 3,120,688 (17,518)
Euro............................. 54,294,119 62,981,178 01/08/04 68,411,255 (5,430,077)
Euro............................. 16,392,516 19,039,908 01/08/04 20,654,772 (1,614,864)
Euro............................. 15,339,638 18,254,169 01/08/04 19,328,132 (1,073,963)
Euro............................. 55,099,314 67,729,178 01/08/04 69,425,811 (1,696,633)
Great British Pound.............. 12,037,724 20,355,791 01/15/04 21,509,437 (1,153,646)
Swedish Krona.................... 91,393,271 11,832,376 01/07/04 12,711,621 (879,245)
------------
TOTAL............................ $(12,521,039)
============
BALANCED
PURCHASE CONTRACTS:
Canadian Dollar.................. 787,955 $ 600,804 01/12/04 $ 609,072 $ 8,268
Euro............................. 652,423 758,442 01/08/04 822,061 63,619
Euro............................. 1,205,626 1,405,326 01/08/04 1,519,104 113,778
------------
TOTAL............................ $ 185,665
============
SALE CONTRACTS:
Canadian Dollar.................. 1,878,722 $ 1,395,782 01/12/04 $ 1,452,212 $ (56,430)
Canadian Dollar.................. 948,848 721,557 01/12/04 733,439 (11,882)
Canadian Dollar.................. 342,784 260,672 01/12/04 264,965 (4,293)
Canadian Dollar.................. 422,193 324,515 01/12/04 326,347 (1,832)
Euro............................. 5,997,991 6,957,670 01/08/04 7,557,543 (599,873)
Euro............................. 2,422,045 2,883,445 01/08/04 3,051,807 (168,362)
Euro............................. 2,502,118 2,978,772 01/08/04 3,152,700 (173,928)
Swedish Krona.................... 6,772,401 876,800 01/07/04 941,953 (65,153)
------------
TOTAL............................ $ (1,081,753)
============
</Table>
167
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. FOREIGN CURRENCY FORWARD CONTRACTS (CONTINUED)
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT APPRECIATION/
CURRENCY FOR DATE VALUE (DEPRECIATION)
------------ ----------- ---------- ----------- --------------
EQUITY GROWTH
SALE CONTRACTS:
Euro............................. 5,959,263 $ 7,368,331 03/17/04 $ 7,494,969 $ (126,638)
Euro............................. 5,386,849 6,647,911 03/17/04 6,775,044 (127,133)
------------
TOTAL............................ $ (253,771)
============
INTERNATIONAL EQUITY
PURCHASE CONTRACTS:
Swiss Franc...................... 6,020,413 $ 4,285,907 01/30/04 $ 4,869,823 $ 583,916
Australian Dollar................ 43,839 32,616 01/02/04 33,024 408
Euro............................. 30,092 37,627 01/02/04 37,922 295
Euro............................. 529,664 662,292 01/02/04 667,483 5,191
------------
TOTAL............................ $ 589,810
============
SALE CONTRACTS:
Swiss Franc...................... 6,020,413 $ 4,469,000 01/30/04 $ 4,869,823 $ (400,823)
Swiss Franc...................... 8,995,549 6,610,000 05/12/04 7,297,121 (687,121)
Japanese Yen..................... 366,529,095 3,173,000 03/04/04 3,428,506 (255,506)
Canadian Dollar.................. 1,733 1,336 01/02/04 1,340 (4)
Canadian Dollar.................. 231 178 01/02/04 179 (1)
Euro............................. 112,829 124,056 12/30/04 140,951 (16,895)
Euro............................. 43,294 54,053 01/02/04 54,559 (506)
------------
TOTAL............................ $ (1,360,856)
============
FOREIGN CURRENCY CROSS CONTRACTS:
</Table>
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT PURCHASE SALE APPRECIATION/
PURCHASE/SALE DATE CURRENT VALUE CURRENT VALUE (DEPRECIATION)
- ------------- ---------- -------------- ------------- --------------
Canadian Dollar/Japanese Yen................. 01/20/04 $ 5,779,813 $ 5,693,120 $ 86,693
Great British Pound/Swiss Franc.............. 05/12/04 6,978,448 7,181,206 (202,758)
Japanese Yen/Swiss Franc..................... 05/26/04 11,296,985 11,668,628 (371,643)
---------
TOTAL........................................ $(487,708)
=========
</Table>
168
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS
<Table>
<Caption>
{RATIO TO AVERAGE NET ASSETS}
---------------------------------------------------------
INVESTMENT
FOR THE EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
MONEY MARKET
12/31/2003 0.28% 0.28% 1.11% 1.11% N/A $ 799,572,598 1.11%
12/31/2002 0.28 0.28 1.70 1.70 N/A 864,772,946 1.72
12/31/2001 0.27 0.27 3.85 3.85 N/A 704,577,191 4.04
12/31/2000 0.28 0.28 6.18 6.18 N/A 492,136,376 N/A
12/31/1999 0.28 0.28 5.06 5.06 N/A 416,768,827 N/A
HIGH QUALITY BOND
12/31/2003 0.38 0.38 3.19 3.19 50% 622,748,334 2.34
12/31/2002 0.38 0.38 4.36 4.36 54 439,015,018 6.21
12/31/2001 0.38 0.38 5.74 5.74 53 330,502,956 8.26
12/31/2000 0.38 0.38 6.21 6.21 73 228,391,465 N/A
12/31/1999 0.38 0.38 5.78 5.78 56 199,906,097 N/A
INTERMEDIATE GOVERNMENT BOND
12/31/2003 0.38 0.38 2.91 2.91 392 265,519,988 1.60
12/31/2002 0.39 0.39 3.93 3.93 134 358,005,390 8.31
12/31/2001 0.38 0.38 5.25 5.25 40 260,795,117 6.83
12/31/2000 0.37 0.37 5.82 5.82 48 208,106,902 N/A
12/31/1999 0.39 0.39 5.46 5.46 25 174,804,385 N/A
CORE BOND
12/31/2003 0.39 0.39 3.52 3.52 922 1,468,787,007 4.64
12/31/2002 0.39 0.39 4.85 4.85 462 999,624,604 9.24
12/31/2001 0.38 0.38 5.32 5.32 547 761,473,139 6.97
12/31/2000 0.38 0.38 6.28 6.28 521 641,903,354 N/A
12/31/1999 0.37 0.37 5.86 5.86 307 515,721,444 N/A
</Table>
- ---------------
* Annualized.
(1) Commencement of Operations, April 27, 2001.
(2) Commencement of Operations, April 15, 2002.
169
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIO TO AVERAGE NET ASSETS
---------------------------------------------------------
INVESTMENT
FOR THE EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
BALANCED
12/31/2003 0.51% 0.50% 2.15% 2.16% 377% $ 434,085,832 17.69%
12/31/2002 0.52 0.50 2.63 2.65 289 375,745,612 (10.01)
12/31/2001 0.49 0.49 2.82 2.82 312 497,836,597 (5.27)
12/31/2000 0.49 0.49 2.93 2.93 286 512,675,482 N/A
12/31/1999 0.52 0.50 2.46 2.48 256 525,583,903 N/A
VALUE & INCOME
12/31/2003 0.47 0.47 1.91 1.91 70 2,198,085,735 26.52
12/31/2002 0.48 0.48 1.97 1.97 31 1,553,159,805 (15.25)
12/31/2001 0.48 0.48 2.07 2.07 32 1,653,702,046 (1.98)
12/31/2000 0.46 0.46 2.23 2.23 76 1,530,760,024 N/A
12/31/1999 0.46 0.46 1.75 1.75 43 1,414,634,230 N/A
GROWTH & INCOME
12/31/2003 0.63 0.63 1.02 1.02 100 1,063,389,332 24.16
12/31/2002 0.66 0.65 0.77 0.78 115 799,621,503 (22.57)
12/31/2001 0.63 0.63 0.50 0.50 153 968,765,767 (22.31)
12/31/2000 0.62 0.62 0.07 0.07 80 1,172,093,970 N/A
12/31/1999 0.62 0.62 0.07 0.07 86 1,242,236,443 N/A
EQUITY GROWTH
12/31/2003 0.65 0.65 0.34 0.34 61 1,975,636,700 26.48
12/31/2002 0.65 0.65 0.22 0.22 75 1,146,889,083 (23.60)
12/31/2001 0.64 0.64 0.09 0.09 63 1,230,944,333 (20.22)
12/31/2000 0.64 0.64 0.05 0.05 97 1,226,091,994 N/A
12/31/1999 0.64 0.64 0.12 0.12 44 1,266,869,154 N/A
MID-CAP VALUE
12/31/2003 0.75 0.70 0.51 0.56 156 216,193,119 41.63
12/31/2002 1.02 0.70 0.20 0.52 156 47,629,380 (15.09)
12/31/2001(1) 1.91* 0.70* (0.48)* 0.73* 87 13,632,294 8.28
MID-CAP GROWTH
12/31/2003 0.81 0.75 (0.37) (0.31) 100 165,747,874 26.91
12/31/2002 0.96 0.75 (0.62) (0.41) 138 44,270,757 (25.29)
12/31/2001(1) 1.93* 0.75* (1.50)* (0.32)* 63 15,562,948 (13.27)
SMALL-CAP VALUE
12/31/2003 0.94 0.85 1.19 1.28 40 100,887,458 41.10
12/31/2002(2) 1.39* 0.85* (0.17)* 0.37* 26 17,920,226 (21.90)
</Table>
170
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIO TO AVERAGE NET ASSETS
---------------------------------------------------------
INVESTMENT
FOR THE EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
SPECIAL EQUITY
12/31/2003 0.85% 0.85% (0.02)% (0.02)% 103% $1,270,601,125 43.96%
12/31/2002 0.84 0.84 0.05 0.05 109 1,005,958,858 (24.33)
12/31/2001 0.83 0.83 (0.02) (0.02) 88 1,323,223,840 (3.09)
12/31/2000 0.82 0.82 0.10 0.10 77 1,311,523,517 N/A
12/31/1999 0.84 0.84 0.13 0.13 171 1,171,034,281 N/A
SMALL-CAP GROWTH
12/31/2003 1.02 0.90 (0.29) (0.17) 81 83,589,643 39.31
12/31/2002(2) 1.48* 0.90* (1.03)* (0.45)* 68 16,521,455 (15.98)
AGGRESSIVE EQUITY
12/31/2003 1.01 1.00 (0.61) (0.60) 165 371,333,010 28.12
12/31/2002 1.01 1.00 (0.60) (0.59) 87 312,299,599 (26.56)
12/31/2001 1.00 1.00 (0.72) (0.72) 98 372,579,133 (31.15)
12/31/2000 0.98 0.98 (0.62) (0.62) 62 435,760,615 N/A
12/31/1999 1.01 1.00 (0.47) (0.46) 132 259,974,422 N/A
HIGH YIELD BOND
12/31/2003 0.61 0.60 9.07 9.08 136 282,700,774 27.91
12/31/2002 0.61 0.60 9.15 9.16 95 208,085,535 2.19
12/31/2001 0.59 0.59 9.41 9.41 90 174,019,465 5.15
12/31/2000 0.65 0.60 9.17 9.22 105 139,986,593 N/A
12/31/1999 0.61 0.60 8.45 8.46 145 124,990,408 N/A
INTERNATIONAL EQUITY
12/31/2003 0.86 0.86 1.11 1.11 23 1,049,033,896 33.52
12/31/2002 0.87 0.87 0.83 0.83 25 656,888,348 (16.90)
12/31/2001 0.88 0.88 0.67 0.67 28 632,888,725 (18.57)
12/31/2000 0.84 0.84 0.77 0.77 46 650,534,093 N/A
12/31/1999 0.86 0.86 0.74 0.74 35 592,713,641 N/A
</Table>
- ---------------
* Annualized.
(1) Commencement of Operations, April 27, 2001.
(2) Commencement of Operations, April 15, 2002.
171
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Owners of Beneficial Interests
of the Diversified Investors Portfolios:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios 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 the Money Market Portfolio, High
Quality Bond Portfolio, Intermediate Government Bond Portfolio, Core Bond
Portfolio, Balanced Portfolio, Value & Income Portfolio, Growth & Income
Portfolio, Equity Growth Portfolio, Mid-Cap Value Portfolio, Mid-Cap Growth
Portfolio, Small-Cap Value Portfolio, Special Equity Portfolio, Small-Cap Growth
Portfolio, Aggressive Equity Portfolio, High Yield Bond Portfolio and
International Equity Portfolio (constituting the Diversified Investors
Portfolios, hereafter referred to as the "Portfolios") at December 31, 2003, 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 each of the periods
presented, 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
Portfolios' 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
New York, New York
February 26, 2004
172
DIVERSIFIED INVESTORS PORTFOLIOS
TRUSTEES INFORMATION
(UNAUDITED)
Each portfolio is supervised by the Board of Trustees of Diversified Investors
Portfolios. The respective Trustees and officers of each Portfolio Trust and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Unless otherwise indicated, the
address of each Trustee and officer of Diversified Investors Portfolios is Four
Manhattanville Road, Purchase, New York 10577. Additional information about
Diversified Investors Portfolios' Trustees may be found in Diversified Investors
Portfolios' Statement of Additional Information, which is available without
charge upon request by calling 1-800-755-5801.
OFFICERS AND INTERESTED TRUSTEES:
<Table>
<Caption>
POSITION(S), LENGTH OF PRINCIPAL OCCUPATIONS DURING
NAME, ADDRESS AND AGE TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD
- --------------------- ---------------------- -----------------------------------
Joseph P. Carusone, 38................. Treasurer since 2001 Vice President and Director,
Diversified Investment Advisors,
Inc.; Vice President, Assistant
Vice President and Assistant
Treasurer, The Bank of New York.
Robert F. Colby, 48.................... Secretary since 1993 Senior Vice President and General
Counsel, Diversified Investment
Advisors, Inc.; Vice President,
Diversified Investors Securities
Corp.; Vice President and Assistant
Secretary, of AUSA Life Insurance
Company, Inc.
John F. Hughes, 62..................... Assistant Secretary Assistant Secretary, Vice President
since 1993 and Senior Counsel, Diversified
Investment Advisors, Inc.; Vice
President, AUSA Life Insurance
Company, Inc.; Assistant Secretary,
Diversified Investors Securities
Corp.
Peter G. Kunkel, 53.................... Trustee since 2002 Senior Vice President, Chief
Operating Officer, Diversified
Investment Advisors, Inc.
Suzanne Montemurro, 39................. Assistant Treasurer Director, Diversified Investment
since 2002 Advisors, Inc.
Mark Mullin, 41........................ President since 2002 President, Chairman of the Board,
Trustee since 1995 Chief Executive Officer, Vice
President, Chief Investment
Officer, Diversified Investment
Advisors, Inc.
</Table>
173
DIVERSIFIED INVESTORS PORTFOLIOS
TRUSTEES INFORMATION (CONTINUED)
(UNAUDITED)
DISINTERESTED TRUSTEES:
<Table>
<Caption>
POSITION(S), LENGTH OF PRINCIPAL OCCUPATIONS DURING
NAME, ADDRESS AND AGE TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD
- --------------------- ---------------------- -----------------------------------
Neal M. Jewell, 69..................... Trustee since 1993 Consultant; Independent Trustee,
355 Thornridge Drive EAI Select (a registered investment
Stamford, CT 06903 company)
Robert Lester Lindsay, 69.............. Trustee since 1993 Retired
2 Huguenot Center
Tenafly, NJ 07670
Eugene M. Mannella, 50................. Trustee since 1993 Executive Vice President,
2 Orchard Neck Road Investment Management Services,
Center Moriches, NY 11934 Inc.
Joyce Galpern Norden, 64............... Trustee since 1993 Vice President, Institutional
505 Redleaf Road Advancement, Reconstructionist
Wynnewood, PA 19096 Rabbinical College
Patricia L. Sawyer, 53................. Trustee since 1993, President and Executive Search
Smith & Sawyer LLP Chairperson of Audit Consultant, Smith & Sawyer LLC
P.O. Box 8063 Committee since 2003
Vero Beach, FL 32963
</Table>
174
TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road, Purchase, New York 10577
(914) 697-8000
DISTRIBUTOR:
Diversified Investors Securities Corp. (DISC)
4 Manhattanville Road, Purchase, New York 10577
914-697-8000
2873 (2/04)
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, Registrant had adopted a
code of ethics (the "Code") that applies to the Registrant's principal executive
officer ("PEO"), principal financial officer ("PFO"), and Assistant Treasurer
("AT"). There were no amendments to the Code during the period covered by the
report. A copy of the Code of Ethics is attached as an exhibit to this Form
N-CSR.
The Registrant did not grant any waivers, including implicit waivers, from any
provisions of the Code to the PEO, PFO, or AT, during the period covered by this
report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that the Registrant has two audit committee
financial experts serving on its audit committee. The audit committee financial
experts are Robert L. Lindsay and Eugene M. Mannella. Messrs. are independent
trustees.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. - The aggregate fees billed for professional services rendered
by PricewaterhouseCoopers ("PWC") for the audit of the Registrant's financial
statements and services that are normally provided by the accountant in
connection with statutory and regulatory filings for 2003 and 2002 were $13,500
and $12,000, respectively.
(b) AUDIT RELATED FEE. - No such fees were billed by PWC for 2003 or 2002.
(c) TAX FEES. - No such fees were billed by PWC for 2003 or 2002.
(d) ALL OTHER FEES - No such fees were billed by PWC for 2003 or 2002.
(e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICY. The Audit Committee is required to
pre-approve audit and non-audit services performed for the Funds by the
independent accountant in order to assure that the provision of such services
does not impair the accountant's independence. The Audit Committee also is
required to pre-approve non-audit services performed by the Funds' independent
accountant for the Funds investment adviser, and certain of the adviser's
affiliates that provide ongoing services to the Funds, if the services to be
provided by the accountant relate directly to the operations and financial
reporting of the Funds. The pre-approval of these services also is intended to
assure that the provision of the services does not impair the accountant's
independence.
Unless a type of service to be provided by the independent accountant has
received pre-approval, it will require separate pre-approval by the Audit
Committee. Also, any proposed services exceeding pre-approved cost levels will
require separate pre-approval by the Audit Committee. When considering services
for pre-approval the Audit committee will take into account such matters as it
deems appropriate or advisable, including applicable rules regarding auditor
independence.
The Audit Committee may delegate pre-approval authority to one or more of its
members. The member or members to whom such authority is delegated shall report
any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Requests or applications to provide services that require separate approval by
the Audit Committee will be submitted to the Audit Committee by both the
independent accountant and the Funds' treasurer, and must include a joint
statement as to whether, in their view, the request or application is consistent
with the SEC's rules on auditor independence.
Management will promptly report to the Chair of the Audit Committee any
violation of this Policy which it becomes aware.
(e) (2) 100% of services described in paragraphs (b) through (d) were approved
by the Audit Committee.
(f) Not applicable.
(g) The aggregate non-audit fees billed by PWC for services rendered to the
Registrant and the Registrant's investment advisor, Diversified Investment
Advisors ("DIA") for 2003 and 2002, were $173,000 and $132,500, respectively.
The fees rendered were in connection with the examination of DIA's
record-keeping operations (SAS-70), and in connection with the review of DIA's
Transfer Agent's internal control structure. All such fees were incurred by and
paid for by DIA.
(h) PWC provided non-audit services to DIA in 2003 and 2002 that were not
required to be pre-approved by the Registrant's audit committee because the
services were not directly related to the operation of the Registrant's funds.
The Board of Trustees will consider PWC's independence and will consider whether
the provision of these non-audit services to DIA is compatible with maintaining
PWC's independence.
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. Reserved
ITEM 9. CONTROLS AND PROCEDURES
(a) The Registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the Registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the Registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's most recent fiscal six-month
period that has materially affected, or is likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 10. Exhibits.
(a) (1) Code of Ethics.
(a) (2) Separate certifications by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
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.
Diversified Investors Strategic Variable Funds
By /s/ Mark Mullin
Mark Mullin
Principal Executive Officer
Date March 8, 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 /s/ Mark Mullin
Mark Mullin
Principal Executive officer
Date March 8, 2004
By /s/ Joseph Carusone
Joseph Carusone
Principal Financial Officer
Date March 8, 2004