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, 2004
Date of reporting period: December 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
THE DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
DIVERSIFIED INVESTORS VARIABLE FUNDS
DIVERSIFIED INVESTORS
STRATEGIC VARIABLE FUNDS
ANNUAL REPORT
December 31, 2004
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:
An Explanation of Fund Expenses............................. 2
Statements of Assets and Liabilities........................ 6
Statements of Operations.................................... 8
Statements of Changes in Net Assets -- December 31, 2004.... 10
Statements of Changes in Net Assets -- December 31, 2003.... 12
CALVERT SUBACCOUNT:
Statement of Assets and Liabilities....................... 14
Statement of Operations................................... 15
Statements of Changes in Net Assets....................... 16
Notes to Financial Statements............................... 17
Report of Independent Registered Public Accounting Firm..... 26
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS:
An Explanation of Fund Expenses............................. 27
Statements of Assets and Liabilities........................ 28
Statements of Operations.................................... 29
Statements of Changes in Net Assets -- December 31, 2004.... 30
Statements of Changes in Net Assets -- December 31, 2003.... 31
PORTFOLIOS OF INVESTMENTS:
Short Horizon Strategic Variable Fund....................... 32
Intermediate Horizon Strategic Variable Fund................ 33
Intermediate Long Horizon Strategic Variable Fund........... 34
Portfolio Composition....................................... 35
Notes to Financial Statements............................... 36
Report of Independent Registered Public Accounting Firm..... 41
DIVERSIFIED INVESTORS PORTFOLIOS:
Annual Economic Overview.................................... 42
Statements of Assets and Liabilities........................ 50
Statements of Operations.................................... 52
Statements of Changes in Net Assets -- December 31, 2004.... 54
Statements of Changes in Net Assets -- December 31, 2003.... 56
PORTFOLIOS OF INVESTMENTS:
Money Market Portfolio...................................... 58
High Quality Bond Portfolio................................. 60
Intermediate Government Bond Portfolio...................... 67
Core Bond Portfolio......................................... 69
Balanced Portfolio.......................................... 83
Value & Income Portfolio.................................... 98
Growth & Income Portfolio................................... 101
Equity Growth Portfolio..................................... 106
Mid-Cap Value Portfolio..................................... 109
Mid-Cap Growth Portfolio.................................... 111
Small-Cap Value Portfolio................................... 113
Special Equity Portfolio.................................... 115
Small-Cap Growth Portfolio.................................. 125
Aggressive Equity Portfolio................................. 127
High Yield Bond Portfolio................................... 129
International Equity Portfolio.............................. 138
Summary of Footnotes and Abbreviations to Portfolios........ 143
Portfolio Composition....................................... 144
Notes to Financial Statements............................... 146
Report of Independent Registered Public Accounting Firm..... 165
Trustees Information........................................ 166
CALVERT SOCIAL BALANCED PORTFOLIO ANNUAL REPORT............. I
</Table>
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES
(UNAUDITED)
As a shareholder in a unit investment trust ("Trust") invested in a
corresponding series of the Diversified Investors Portfolios, you will bear the
ongoing costs of managing the corresponding portfolio in which your Trust
invests (such as the investment advisor's fee and other expenses). You will also
bear the cost of operating the Trust.
The first line of each table shown below, based on an investment of $1,000, will
show you how much of your investment (per $1,000) went to the ongoing costs of
both your Trust and its corresponding portfolio. The figures are based on the
actual total return and the actual expenses incurred for the period July 1,
2004 - December 31, 2004. In order to approximate how much you paid in expenses
during the six months, divide your balance by 1,000, and multiply the result by
the dollar amount shown under the heading "Expenses Paid During the Period".
The second line in each table shown below, also based on an investment of
$1,000, is based on the actual expense ratio of your Trust, but assumes a total
annual return rate of 5% before expenses. Since the 5% is hypothetical, the
ending account values and the expenses paid for the period July 1,
2004 - December 31, 2004 will not be the actual values per $1,000 of your
investment. This information is presented so you may compare the cost of owning
a Diversified Investors Variable Fund against the cost of owning other funds.
Other funds should provide this information based on a hypothetical return of 5%
before expenses in their most recent report in order for you to make a fair
comparison.
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
MONEY MARKET July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,003.18 $5.59 1.11%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,019.56 $5.63 1.11%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
HIGH QUALITY BOND July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,008.42 $7.52 1.49%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.65 $7.56 1.49%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
INTERMEDIATE GOVERNMENT BOND July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,015.72 $7.65 1.51%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.55 $7.66 1.51%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
2
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
CORE BOND July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,037.92 $7.68 1.50%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.60 $7.61 1.50%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
BALANCED July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,057.05 $8.27 1.60%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.09 $8.11 1.60%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
VALUE & INCOME July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,078.21 $8.31 1.59%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.14 $8.06 1.59%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
GROWTH & INCOME July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,075.18 $9.13 1.75%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.34 $8.87 1.75%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
3
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
EQUITY GROWTH July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,058.48 $9.06 1.75%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.34 $8.87 1.75%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
SPECIAL EQUITY July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,070.30 $10.15 1.95%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.33 $9.88 1.95%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
AGGRESSIVE EQUITY July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,068.53 $10.35 1.99%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.13 $10.08 1.99%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
HIGH YIELD BOND July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,081.54 $8.95 1.71%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.54 $8.67 1.71%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
4
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
INTERNATIONAL EQUITY July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,143.96 $10.72 1.99%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.13 $10.08 1.99%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
CALVERT July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,049.72 $5.67 1.10%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,019.61 $5.58 1.10%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) These figures reflect the expenses of both the Trust and its corresponding
portfolio, except for Calvert. The figures for Calvert do not include
expenses incurred by the Calvert Social Balanced Portfolio.
(2) Please be aware that the expense ratios shown in this table may not match
the ratios shown in each fund's financial highlights, as the ratios in the
financial highlights reflect the actual ratios over the period January 1,
2004 - December 31, 2004.
5
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
----------- ----------- ------------ ----------- -----------
ASSETS:
Investment in the Portfolios, at value (Notes 1 and
2)................................................... $40,228,865 $24,437,139 $29,442,645 $61,916,532 $88,672,872
Receivable for units sold.............................. 72,782 3,863 10,279 8,544 16,370
----------- ----------- ----------- ----------- -----------
Total assets........................................... 40,301,647 24,441,002 29,452,924 61,925,076 88,689,242
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for units redeemed............................. 17,074 2,780 16,496 17,484 29,211
Accrued mortality and expense risk..................... 26,688 22,735 27,671 57,867 81,866
----------- ----------- ----------- ----------- -----------
Total liabilities...................................... 43,762 25,515 44,167 75,351 111,077
----------- ----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS..... $40,257,885 $24,415,487 $29,408,757 $61,849,725 $88,578,165
=========== =========== =========== =========== ===========
ACCUMULATION UNITS..................................... 2,129,128 1,698,725 1,467,906 2,036,065 2,451,834
=========== =========== =========== =========== ===========
UNIT VALUE............................................. $ 18.91 $ 14.37 $ 20.03 $ 30.38 $ 36.13
=========== =========== =========== =========== ===========
</Table>
See notes to financial statements.
6
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ---------- -------------
$347,630,775 $138,905,776 $223,662,607 $117,429,154 $59,384,027 $4,593,755 $73,875,289
55,707 29,833 53,590 22,318 25,969 -- 26,868
------------ ------------ ------------ ------------ ----------- ---------- -----------
347,686,482 138,935,609 223,716,197 117,451,472 59,409,996 4,593,755 73,902,157
------------ ------------ ------------ ------------ ----------- ---------- -----------
77,514 61,317 85,158 28,797 17,300 -- 47,046
319,560 127,657 206,260 107,759 54,412 4,245 66,651
------------ ------------ ------------ ------------ ----------- ---------- -----------
397,074 188,974 291,418 136,556 71,712 4,245 113,697
------------ ------------ ------------ ------------ ----------- ---------- -----------
$347,289,408 $138,746,635 $223,424,779 $117,314,916 $59,338,284 $4,589,510 $73,788,460
============ ============ ============ ============ =========== ========== ===========
6,901,393 5,739,439 4,783,781 3,617,451 4,092,218 276,841 3,836,891
============ ============ ============ ============ =========== ========== ===========
$ 50.32 $ 24.17 $ 46.70 $ 32.43 $ 14.50 $ 16.58 $ 19.23
============ ============ ============ ============ =========== ========== ===========
</Table>
7
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
-------- --------- ------------ ---------- ----------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIOS (NOTE 2):
Interest income............................................. $586,784 $ 822,681 $ 873,847 $2,466,766 $1,237,650
Securities lending income (net)............................. -- 1,087 15,277 12,168 7,557
Dividend income............................................. -- -- -- -- 1,116,408
Expenses.................................................... (114,277) (94,582) (123,695) (242,033) (435,782)
-------- --------- --------- ---------- ----------
Net investment income (loss) allocated from Portfolios...... 472,507 729,186 765,429 2,236,901 1,925,833
-------- --------- --------- ---------- ----------
EXPENSES (NOTE 4):
Mortality and expense risk.................................. 445,612 271,390 340,455 680,394 957,744
Less expenses reimbursed by TFLIC........................... (110,225) -- -- -- --
-------- --------- --------- ---------- ----------
Net expenses................................................ 335,387 271,390 340,455 680,394 957,744
-------- --------- --------- ---------- ----------
NET INVESTMENT INCOME (LOSS)................................ 137,120 457,796 424,974 1,556,507 968,089
-------- --------- --------- ---------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE
2):
Net realized gains (losses) allocated from Portfolios on:
Securities................................................ (3,081) 5,623 (89,890) 686,562 5,837,792
Futures, written options and short sales.................. -- -- -- 76,644 55,597
Foreign currency transactions............................. -- -- -- 10,621 (166,452)
Change in net unrealized appreciation (depreciation)
allocated from Portfolios on:
Securities................................................ -- (375,846) (188,402) (415,060) (846,052)
Futures, written options and short sales.................. -- -- -- 66,052 72,420
Foreign currency translations............................. -- -- -- 157,854 70,113
-------- --------- --------- ---------- ----------
Net realized and unrealized gains (losses) on investments... (3,081) (370,223) (278,292) 582,673 5,023,418
-------- --------- --------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $134,039 $ 87,573 $ 146,682 $2,139,180 $5,991,507
======== ========= ========= ========== ==========
</Table>
See notes to financial statements.
8
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
--------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 63,784 $ 12,059 $ 49,334 $ 25,569 $ 10,841 $363,771 $ 18,609
19,529 9,380 11,387 37,333 21,596 -- 49,146
7,250,559 2,389,838 2,729,545 1,011,668 224,635 3,275 1,658,460
(1,561,233) (829,242) (1,394,262) (913,134) (521,975) (25,397) (550,346)
----------- ----------- ----------- ----------- ----------- -------- -----------
5,772,639 1,582,035 1,396,004 161,436 (264,903) 341,649 1,175,869
----------- ----------- ----------- ----------- ----------- -------- -----------
3,571,842 1,427,736 2,367,528 1,196,744 607,045 46,559 698,997
-- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -------- -----------
3,571,842 1,427,736 2,367,528 1,196,744 607,045 46,559 698,997
----------- ----------- ----------- ----------- ----------- -------- -----------
2,200,797 154,299 (971,524) (1,035,308) (871,948) 295,090 476,872
----------- ----------- ----------- ----------- ----------- -------- -----------
18,608,178 14,026,578 3,376,684 20,462,295 7,877,228 28,117 6,385,441
-- 26,453 -- 34,093 -- -- --
-- -- (21,221) (122) -- (461) (67,586)
15,792,360 (2,050,327) 11,310,023 (7,630,444) (1,200,677) 58,588 4,412,223
-- (3,507) -- (4,843) -- -- --
-- -- 27,835 (14) -- (26) 78,236
----------- ----------- ----------- ----------- ----------- -------- -----------
34,400,538 11,999,197 14,693,321 12,860,965 6,676,551 86,218 10,808,314
----------- ----------- ----------- ----------- ----------- -------- -----------
$36,601,335 $12,153,496 $13,721,797 $11,825,657 $ 5,804,603 $381,308 $11,285,186
=========== =========== =========== =========== =========== ======== ===========
</Table>
9
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
------------ ----------- ------------ ------------ ------------
FROM OPERATIONS:
Net investment income (loss)....................... $ 137,120 $ 457,796 $ 424,974 $ 1,556,507 $ 968,089
Net realized gains (losses) allocated from
Portfolios on:
Securities....................................... (3,081) 5,623 (89,890) 686,562 5,837,792
Futures, written options and short sales......... -- -- -- 76,644 55,597
Foreign currency transactions.................... -- -- -- 10,621 (166,452)
Change in net unrealized appreciation
(depreciation) allocated from Portfolios on:
Securities....................................... -- (375,846) (188,402) (415,060) (846,052)
Futures, written options and short sales......... -- -- -- 66,052 72,420
Foreign currency translations.................... -- -- -- 157,854 70,113
------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................. 134,039 87,573 146,682 2,139,180 5,991,507
------------ ----------- ------------ ------------ ------------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold......................................... 60,742,803 6,678,777 6,722,868 11,684,652 13,896,394
Units redeemed..................................... (65,471,805) (8,028,632) (11,991,282) (15,520,053) (21,009,195)
------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from unit transactions........................... (4,729,002) (1,349,855) (5,268,414) (3,835,401) (7,112,801)
------------ ----------- ------------ ------------ ------------
Total increase (decrease) in net assets............ (4,594,963) (1,262,282) (5,121,732) (1,696,221) (1,121,294)
NET ASSETS:
Beginning of year.................................. 44,852,848 25,677,769 34,530,489 63,545,946 89,699,459
------------ ----------- ------------ ------------ ------------
End of year........................................ $ 40,257,885 $24,415,487 $ 29,408,757 $ 61,849,725 $ 88,578,165
============ =========== ============ ============ ============
Units outstanding beginning of year................ 2,380,101 1,792,768 1,731,895 2,165,116 2,659,711
Units sold......................................... 3,221,154 465,457 336,189 393,480 405,591
Units redeemed..................................... (3,472,127) (559,500) (600,178) (522,531) (613,468)
------------ ----------- ------------ ------------ ------------
Units outstanding end of year...................... 2,129,128 1,698,725 1,467,906 2,036,065 2,451,834
============ =========== ============ ============ ============
</Table>
See notes to financial statements.
10
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ------------ ---------- -------------
$ 2,200,797 $ 154,299 $ (971,524) $ (1,035,308) $ (871,948) $ 295,090 $ 476,872
18,608,178 14,026,578 3,376,684 20,462,295 7,877,228 28,117 6,385,441
-- 26,453 -- 34,093 -- -- --
-- -- (21,221) (122) -- (461) (67,586)
15,792,360 (2,050,327) 11,310,023 (7,630,444) (1,200,677) 58,588 4,412,223
-- (3,507) -- (4,843) -- -- --
-- -- 27,835 (14) -- (26) 78,236
------------ ------------ ------------ ------------ ------------ ---------- ------------
36,601,335 12,153,496 13,721,797 11,825,657 5,804,603 381,308 11,285,186
------------ ------------ ------------ ------------ ------------ ---------- ------------
45,173,442 25,581,984 28,345,032 28,055,549 14,369,916 1,043,834 13,533,361
(52,388,107) (29,625,135) (41,770,419) (28,347,474) (16,663,358) (927,370) (11,753,685)
------------ ------------ ------------ ------------ ------------ ---------- ------------
(7,214,665) (4,043,151) (13,425,387) (291,925) (2,293,442) 116,464 1,779,676
------------ ------------ ------------ ------------ ------------ ---------- ------------
29,386,670 8,110,345 296,410 11,533,732 3,511,161 497,772 13,064,862
317,902,738 130,636,290 223,128,369 105,781,184 55,827,123 4,091,738 60,723,598
------------ ------------ ------------ ------------ ------------ ---------- ------------
$347,289,408 $138,746,635 $223,424,779 $117,314,916 $ 59,338,284 $4,589,510 $ 73,788,460
============ ============ ============ ============ ============ ========== ============
7,055,567 5,922,680 5,092,408 3,633,570 4,268,033 269,658 3,737,216
971,881 1,149,500 650,040 933,980 1,087,866 66,937 801,725
(1,126,055) (1,332,741) (958,667) (950,099) (1,263,681) (59,754) (702,050)
------------ ------------ ------------ ------------ ------------ ---------- ------------
6,901,393 5,739,439 4,783,781 3,617,451 4,092,218 276,841 3,836,891
============ ============ ============ ============ ============ ========== ============
</Table>
11
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
------------ ----------- ------------ ------------ ------------
FROM OPERATIONS:
Net investment income (loss)....................... $ 81,450 $ 508,130 $ 724,849 $ 1,453,422 $ 878,824
Net realized gains (losses) allocated from
Portfolios on:
Securities....................................... 154 51,940 1,185,030 1,660,815 (526,325)
Futures, written options and short sales......... -- -- -- (386,815) (80,596)
Foreign currency transactions.................... -- -- -- (468,351) (287,151)
Change in net unrealized appreciation
(depreciation) allocated from Portfolios on:
Securities....................................... -- (308,680) (1,684,576) (288,960) 12,815,747
Futures, written options and short sales......... -- -- -- 225,280 67,959
Foreign currency translations.................... -- -- -- (365,095) (140,105)
------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................. 81,604 251,390 225,303 1,830,296 12,728,353
------------ ----------- ------------ ------------ ------------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold......................................... 122,511,759 10,838,913 10,816,688 22,554,098 15,052,461
Units redeemed..................................... (126,304,275) (7,258,587) (19,786,134) (15,662,931) (17,655,121)
------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from unit transactions........................... (3,792,516) 3,580,326 (8,969,446) 6,891,167 (2,602,660)
------------ ----------- ------------ ------------ ------------
Total 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 sold......................................... 6,504,045 757,650 542,800 774,067 487,099
Units redeemed..................................... (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.
12
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ------------ ----------- -------------
$ 2,248,079 $ (89,658) $ (1,352,741) $ (912,993) $ (809,948) $ 363,444 $ 14,466
(2,733,678) (2,315,051) (7,249,282) 7,939,862 4,454,796 271,377 (2,056,190)
-- 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
-- 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
------------ ------------ ------------ ------------ ------------ ----------- ------------
45,691,539 28,474,589 46,113,086 25,358,358 13,453,776 635,808 63,431,708
(51,086,300) (21,544,926) (31,248,041) (18,638,471) (11,362,699) (2,862,804) (65,530,260)
------------ ------------ ------------ ------------ ------------ ----------- ------------
(5,394,761) 6,929,663 14,865,045 6,719,887 2,091,077 (2,226,996) (2,098,552)
------------ ------------ ------------ ------------ ------------ ----------- ------------
58,457,042 30,447,140 57,644,275 36,174,170 13,478,050 (1,130,071) 13,198,392
259,445,696 100,189,150 165,484,094 69,607,014 42,349,073 5,221,809 47,525,206
------------ ------------ ------------ ------------ ------------ ----------- ------------
$317,902,738 $130,636,290 $223,128,369 $105,781,184 $ 55,827,123 $ 4,091,738 $ 60,723,598
============ ============ ============ ============ ============ =========== ============
7,207,058 5,579,094 4,727,738 3,405,431 4,103,500 435,401 3,862,561
1,168,198 1,461,839 1,173,248 1,022,300 1,165,293 46,609 5,099,198
(1,319,689) (1,118,253) (808,578) (794,161) (1,000,760) (212,352) (5,224,543)
------------ ------------ ------------ ------------ ------------ ----------- ------------
7,055,567 5,922,680 5,092,408 3,633,570 4,268,033 269,658 3,737,216
============ ============ ============ ============ ============ =========== ============
</Table>
13
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS:
Investments at cost......................................... $42,070,086
===========
Investments at value (Note 6)............................... $40,381,897
Receivable for units sold................................... 24,710
-----------
Total assets................................................ 40,406,607
-----------
LIABILITIES:
Payable for units redeemed.................................. 72
Payable for securities purchased............................ 24,637
Accrued mortality and expense risk.......................... 37,285
-----------
Total liabilities........................................... 61,994
-----------
NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS.......... $40,344,613
===========
ACCUMULATION UNITS.......................................... 1,447,441
===========
UNIT VALUE.................................................. $ 27.87
===========
</Table>
See notes to financial statements.
14
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
INVESTMENT INCOME (NOTE 2):
Dividend income............................................. $ 660,405
EXPENSES (NOTE 4):
Mortality and expense risk.................................. 415,227
----------
NET INVESTMENT INCOME (LOSS)................................ 245,178
----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE
2):
Net realized gains (losses) from securities................. (388,818)
Change in net unrealized appreciation (depreciation) on
securities................................................ 2,802,137
----------
Net realized and unrealized gains (losses) on investments... 2,413,319
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $2,658,497
==========
</Table>
See notes to financial statements.
15
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------
2004 2003
----------- -----------
FROM OPERATIONS:
Net investment income (loss)................................ $ 245,178 $ 284,989
Net realized gains (losses) from securities................. (388,818) (366,181)
Change in net unrealized appreciation (depreciation) on
securities................................................ 2,802,137 5,658,606
----------- -----------
Net increase (decrease) in net assets resulting from
operations................................................ 2,658,497 5,577,414
----------- -----------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold.................................................. 7,151,803 7,253,821
Units redeemed.............................................. (6,011,153) (7,166,551)
----------- -----------
Net increase (decrease) in net assets from unit
transactions.............................................. 1,140,650 87,270
----------- -----------
Total increase (decrease) in net assets..................... 3,799,147 5,664,684
NET ASSETS:
Beginning of year........................................... 36,545,466 30,880,782
----------- -----------
End of year................................................. $40,344,613 $36,545,466
=========== ===========
Units outstanding beginning of year......................... 1,403,970 1,400,341
Units sold.................................................. 270,209 305,625
Units redeemed.............................................. (226,738) (301,996)
----------- -----------
Units outstanding end of year............................... 1,447,441 1,403,970
=========== ===========
</Table>
See notes to financial statements.
16
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"), a wholly-owned subsidiary of AEGON USA, Inc. ("AEGON"),
under the laws of the State of New York. AEGON is a financial services holding
company whose primary emphasis is life and health insurance and annuity and
investment products. AEGON is an indirect, wholly-owned subsidiary of AEGON
N.V., a corporation based in The Netherlands which is a publicly traded
international insurance group.
DIVF operates as a unit investment trust under the Investment Company Act of
1940, as amended. 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 financial statements of the
Portfolios and Calvert accompany this report. At December 31, 2004, each of the
DIVF subaccounts' investment in the corresponding Portfolios was as follows:
<Table>
<Caption>
PERCENTAGE INVESTMENT
SUBACCOUNT IN PORTFOLIO
- ---------- ---------------------
Money Market................................................ 4.97
High Quality Bond........................................... 3.54
Intermediate Government Bond................................ 11.48
Core Bond................................................... 3.74
Balanced.................................................... 21.13
Value & Income.............................................. 12.85
Growth & Income............................................. 12.23
Equity Growth............................................... 9.77
Special Equity.............................................. 9.57
Aggressive Equity........................................... 14.93
High Yield Bond............................................. 1.31
International Equity........................................ 5.27
</Table>
For information regarding each Portfolio's investments, please refer to the
Portfolio Composition section of the Portfolios' financial statements, which
accompany this report.
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 Calvert subaccount is valued at the net
asset value per share determined as of the close of business of the New York
Stock Exchange (typically, 4:00 P.M. Eastern time) on a valuation date.
Valuation of securities held in each of the Portfolios is discussed in Note 2A
of the Portfolios' Notes to Financial Statements which accompanies this report.
A description of the portfolio valuation policy for Calvert can be found in Note
A of Calvert's Notes to Financial Statements which accompanies this report.
17
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. INVESTMENT INCOME:
Each DIVF subaccount is allocated its 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.
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 income and expenses during the reporting period. Actual
results could differ from those estimates.
3. INVESTMENT TRANSACTIONS
Purchases and sales of shares in Calvert were $4,404,607 and $3,017,242
respectively.
The U.S. federal income tax basis of DIVF's investment in the Calvert subaccount
at December 31, 2004, was $42,070,086 and net unrealized depreciation for U.S.
federal income tax purposes was $1,688,189 (gross unrealized depreciation was
$1,688,189).
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. ("Diversified") (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.
TFLIC reserves the right to deduct an annual contract charge from a
participant's 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.
Due to the current interest rate environment, TFLIC has elected to voluntarily
waive a portion of its fees to maintain a positive yield in the Money Market
Subaccount. TFLIC reserves the right to terminate this waiver without notice.
18
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 transfer of the applicable assets out of a corresponding MONY
separate account and into DIVF. There were no assets transferred to TFLIC
pursuant to this assumption reinsurance agreement for the years ended December
31, 2004 and for December 31, 2003.
The amounts related to assumptions, if any, would be reflected in the net
proceeds from units sold in the Statements of Changes in Net Assets.
6. PORTFOLIO INVESTMENTS
Calvert invests in the Calvert Social Balanced Portfolio. At December 31, 2004,
it holds 21,571,526 shares with a market value of $40,381,897.
7. SUBSEQUENT EVENTS
Diversified Investors Securities Corp. ("DISC") is the distributor for each of
the Funds and a subsidiary of the Funds' investment advisor, Diversified
Investment Advisors, Inc. ("DIA").
On February 18, 2005, DISC was notified by NASD staff that it had made a
preliminary determination to recommend disciplinary action against DISC based on
claims of alleged market timing activity in the Diversified Investors
International Equity Fund and the Diversified Institutional International Equity
Fund (collectively, the "International Equity Funds") between July 1, 2003 and
October 31, 2003. NASD staff contends that DISC facilitated certain
shareholders' trading in the International Equity Funds in contravention of
prospectus provisions that took effect on or about July 1, 2003, and otherwise
violated NASD rules. NASD staff also has alleged that DISC violated certain
record retention rules relating to email communications.
Like many U.S. financial services companies, DISC and DIA have responded to
requests for information from various governmental and self-regulatory agencies
in connection with investigations related to mutual fund trading activities.
DISC and DIA have cooperated fully with each request.
Although it is not anticipated that these developments will have an adverse
effect on the Funds, there can be no assurance at this time.
8. CONCENTRATIONS AND INDEMNIFICATIONS
From time to time, the Funds may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Funds.
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.
19
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
----------------------------
NET NET REALIZED TOTAL INCOME UNIT
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE YEAR ENDED YEAR (LOSS)(#) ON INVESTMENTS OPERATIONS YEAR
- ------------------ ------------ ---------- -------------- ------------- ------
MONEY MARKET
12/31/2004 $18.84 $0.06 $ 0.01 $ 0.07 $18.91
12/31/2003 18.81 0.03 (0.00)(a) 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 (0.00)(a) 0.93 18.11
HIGH QUALITY BOND
12/31/2004 14.32 0.27 (0.22) 0.05 14.37
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
INTERMEDIATE GOVERNMENT BOND
12/31/2004 19.94 0.27 (0.18) 0.09 20.03
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
CORE BOND
12/31/2004 29.35 0.75 0.28 1.03 30.38
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
BALANCED
12/31/2004 33.73 0.38 2.02 2.40 36.13
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
</Table>
- ---------------
(#) Calculated based upon average units outstanding.
(1) Portfolio turnover of the Portfolio or the Calvert subaccount.
(2) Reimbursement of fees occurs at the underlying Portfolio level.
(a) Amount rounds to less than one penny per share.
(b) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio.
20
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
NET NET INVESTMENT EXPENSES, INCLUDING EXPENSES
INVESTMENT INCOME (LOSS) INCLUDING OF THE PORTFOLIO
NET ASSETS, TOTAL INCOME (NET OF EXPENSES OF (NET OF PORTFOLIO
END OF YEAR RETURN (LOSS) REIMBURSEMENTS) THE PORTFOLIO REIMBURSEMENTS) TURNOVER(1)
------------ ------ ---------- --------------- ------------- ------------------ -----------
$ 40,257,885 0.37% 0.07% 0.34% 1.38% 1.11% N/A
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
24,415,487 0.35 1.86 1.86 1.48 1.48 48%
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
29,408,757 0.45 1.35 1.37 1.52 1.50(2) 554
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
61,849,725 3.51 2.52 2.52 1.49 1.49 885
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
88,578,165 7.12 1.09 1.11 1.62 1.60(2) 338
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
</Table>
21
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS (CONTINUED)
For an accumulation unit outstanding throughout the year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
-----------------------------
NET NET REALIZED TOTAL INCOME UNIT
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE YEAR ENDED YEAR (LOSS)(#) ON INVESTMENTS OPERATIONS YEAR
- ------------------ ------------ ----------- -------------- ------------- ------
VALUE & INCOME
12/31/2004 $45.06 $ 0.32 $ 4.94 $ 5.26 $50.32
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
GROWTH & INCOME
12/31/2004 22.06 0.03 2.08 2.11 24.17
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
EQUITY GROWTH
12/31/2004 43.82 (0.20) 3.08 2.88 46.70
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
SPECIAL EQUITY
12/31/2004 29.11 (0.28) 3.60 3.32 32.43
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
</Table>
- ---------------
(#) Calculated based upon average units outstanding.
(1) Portfolio turnover of the Portfolio or the Calvert subaccount.
(2) Reimbursement of fees occurs at the underlying Portfolio level.
(a) Amount rounds to less than one penny per share.
(b) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio.
22
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
NET NET INVESTMENT EXPENSES, INCLUDING EXPENSES
INVESTMENT INCOME (LOSS) INCLUDING OF THE
NET ASSETS, TOTAL INCOME (NET OF EXPENSES OF PORTFOLIO(NET OF PORTFOLIO
END OF YEAR RETURN (LOSS) REIMBURSEMENTS) THE PORTFOLIO REIMBURSEMENTS) TURNOVER(1)
------------ ------ ---------- --------------- ------------- ------------------ -----------
$347,289,408 11.67% 0.68% 0.68% 1.58% 1.58% 44%
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
138,746,635 9.56 0.12 0.12 1.74 1.74 184
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
223,424,779 6.57 (0.45) (0.45) 1.75 1.75 129
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
117,314,916 11.41 (0.95) (0.95) 1.94 1.94 103
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
</Table>
23
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS (CONTINUED)
For an accumulation unit outstanding throughout the year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
----------------------------
NET NET REALIZED TOTAL INCOME UNIT
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE YEAR ENDED YEAR (LOSS)(#) ON INVESTMENTS OPERATIONS YEAR
- ------------------ ------------ ---------- -------------- --------------- ------
AGGRESSIVE EQUITY
12/31/2004 $13.08 $(0.21) $ 1.63 $ 1.42 $14.50
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
HIGH YIELD BOND
12/31/2004 15.17 1.09 0.32 1.41 16.58
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
INTERNATIONAL EQUITY
12/31/2004 16.25 0.13 2.85 2.98 19.23
12/31/2003 12.30 0.00(a) 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
CALVERT
12/31/2004 26.03 0.17 1.67 1.84 27.87
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
</Table>
- ---------------
(#) Calculated based upon average units outstanding.
(1) Portfolio turnover of the Portfolio or the Calvert subaccount.
(2) Reimbursement of fees occurs at the underlying Portfolio level.
(a) Amount rounds to less than one penny per share.
(b) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio.
24
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
NET NET INVESTMENT EXPENSES, INCLUDING EXPENSES
INVESTMENT INCOME (LOSS) INCLUDING OF THE
NET ASSETS, TOTAL INCOME (NET OF EXPENSES OF PORTFOLIO(NET OF PORTFOLIO
END OF YEAR RETURN (LOSS) REIMBURSEMENTS) THE PORTFOLIO REIMBURSEMENTS) TURNOVER(1)
----------- ------ ---------- --------------- ------------- ------------------ -----------
$59,338,284 10.86% (1.59)% (1.58)% 2.06% 2.05%(2) 252%
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
4,589,510 9.29 6.97 6.97 1.70 1.70(2) 80
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
73,788,460 18.34 0.75 0.75 1.97 1.97 171
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
40,344,613 7.07 0.65 0.65 1.10(b) 1.10(b) 8
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
</Table>
25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Transamerica Financial Life Insurance Company, Inc.
and the Contractholders of Diversified Investors Variable Funds:
In our opinion, the accompanying statements of assets and liabilities, 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, 2004, 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements 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, 2004 by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 22, 2005
26
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES
(UNAUDITED)
As a shareholder in an open-end management investment company ("Fund") invested
in underlying subaccounts of the Diversified Investors Variable Funds ("DIVF"),
a unit investment trust, you will bear the ongoing costs of managing the
corresponding subaccounts in which your Fund invests. You will also bear the
cost of operating the Fund.
The first line of each table shown below, based on an investment of $1,000, will
show you how much of your investment (per $1,000) went to the ongoing costs of
both your Fund and its investments in DIVF. The figures are based on the actual
total return and the actual expenses incurred for the period July 1, 2004 -
December 31, 2004. In order to approximate how much you paid in expenses during
the six months, divide your balance by 1,000, and multiply the result by the
dollar amount shown under the heading "Expenses Paid During the Period".
The second line in each table shown below, also based on an investment of
$1,000, is based on the actual expense ratio of your Fund, but assumes a total
annual return rate of 5% before expenses. Since the 5% is hypothetical, the
ending account values and the expenses paid for the period July 1,
2004 - December 31, 2004 will not be the actual values per $1,000 of your
investment. This information is presented so you may compare the cost of owning
a Diversified Investors Strategic Variable Fund against the cost of owning other
funds. Other Funds should provide this information based on a hypothetical
annual return of 5% before expenses in their most recent report in order for you
to make a fair comparison.
<Table>
<Caption>
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value July 1, 2004 - Expense
SHORT HORIZON July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
Actual $1,000 $1,037.46 $1.02 0.20%
Hypothetical
(5% annual return before $1,000 $1,024.13 $1.02 0.20%
expenses)
</Table>
<Table>
<Caption>
Expenses Paid
Beginning Account Ending Account During the Period Annualized
INTERMEDIATE Value Value July 1, 2004 - Expense
HORIZON July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
Actual $1,000 $1,056.58 $1.03 0.20%
Hypothetical
(5% annual return before $1,000 $1,024.13 $1.02 0.20%
expenses)
</Table>
<Table>
<Caption>
Expenses Paid
INTERMEDIATE Beginning Account Ending Account During the Period Annualized
LONG Value Value July 1, 2004 - Expense
HORIZON July 1, 2004 December 31, 2004 December 31, 2004(1) Ratio(1)(2)
Actual $1,000 $1,064.99 $1.04 0.20%
Hypothetical
(5% annual return before $1,000 $1,024.13 $1.02 0.20%
expenses)
</Table>
- ---------------
(1) These figures exclude the fees and expenses of the underlying investments in
DIVF.
(2) Ratios exclude expenses incurred by the underlying investments in DIVF.
27
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
ASSETS:
Investments in affiliates, at cost....................... $ 9,105,902 $25,618,472 $35,288,265
=========== =========== ===========
Investments in affiliates, at value (Notes 1 and 2)...... $10,193,025 $28,724,855 $40,129,153
Receivable for units sold................................ 7,850 6,729 31,714
----------- ----------- -----------
Total assets............................................. 10,200,875 28,731,584 40,160,867
----------- ----------- -----------
LIABILITIES:
Payable for securities purchased......................... 6,969 6,729 29,338
Payable for units redeemed............................... 881 -- 2,376
Accrued investment advisory fees......................... 1,726 4,832 6,680
----------- ----------- -----------
Total liabilities........................................ 9,576 11,561 38,394
----------- ----------- -----------
NET ASSETS............................................... $10,191,299 $28,720,023 $40,122,473
=========== =========== ===========
ACCUMULATION UNITS....................................... 694,223 1,853,382 2,497,752
=========== =========== ===========
UNIT VALUE............................................... $ 14.68 $ 15.50 $ 16.06
=========== =========== ===========
NET ASSETS CONSIST OF:
Cost of accumulation units............................... $ 8,472,894 $23,897,614 $34,154,712
Undistributed (accumulated) net realized gains
(losses)............................................... 711,021 1,970,296 1,454,585
Undistributed (accumulated) net investment income
(loss)................................................. (79,739) (254,270) (327,712)
Net unrealized appreciation (depreciation) on
investments............................................ 1,087,123 3,106,383 4,840,888
----------- ----------- -----------
NET ASSETS............................................... $10,191,299 $28,720,023 $40,122,473
=========== =========== ===========
</Table>
See notes to financial statements.
28
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
INVESTMENT ADVISORY FEES (NOTE 3)........................ $(20,787) $ (53,074) $ (73,223)
-------- ---------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS IN
AFFILIATES (NOTE 2):
Net realized gains (losses) on investments in
affiliates............................................. 292,665 77,524 244,464
Change in net unrealized appreciation (depreciation) on
investments in affiliates.............................. 96,668 1,778,313 2,850,506
-------- ---------- ----------
Net realized and unrealized gains (losses) on investments
in affiliates.......................................... 389,333 1,855,837 3,094,970
-------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $368,546 $1,802,763 $3,021,747
======== ========== ==========
</Table>
See notes to financial statements.
29
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
FROM OPERATIONS:
Investment advisory fees.................................... $ (20,787) $ (53,074) $ (73,223)
Net realized gains (losses) on investments in affiliates.... 292,665 77,524 244,464
Change in net unrealized appreciation (depreciation) on
investments in affiliates................................. 96,668 1,778,313 2,850,506
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations................................................ 368,546 1,802,763 3,021,747
----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Units sold.................................................. 4,511,488 8,560,481 11,189,227
Units redeemed.............................................. (5,193,862) (7,413,592) (8,805,493)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from unit
transactions.............................................. (682,374) 1,146,889 2,383,734
----------- ----------- -----------
Total increase (decrease) in net assets..................... (313,828) 2,949,652 5,405,481
NET ASSETS:
Beginning of year........................................... 10,505,127 25,770,371 34,716,992
----------- ----------- -----------
End of year................................................. $10,191,299 $28,720,023 $40,122,473
=========== =========== ===========
Units outstanding beginning of year......................... 742,956 1,775,258 2,340,332
Units sold.................................................. 315,306 581,825 743,202
Units redeemed.............................................. (364,039) (503,701) (585,782)
----------- ----------- -----------
Units outstanding end of year............................... 694,223 1,853,382 2,497,752
=========== =========== ===========
</Table>
See notes to financial statements.
30
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 in affiliates.... 252,006 (519,806) (403,627)
Change in net unrealized appreciation (depreciation) on
investments in affiliates................................. 327,167 3,789,465 5,706,874
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations................................................ 559,745 3,225,705 5,247,498
----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Units sold.................................................. 4,194,952 6,755,492 11,219,203
Units redeemed.............................................. (3,335,181) (4,345,206) (5,372,554)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from unit
transactions.............................................. 859,771 2,410,286 5,846,649
----------- ----------- -----------
Total increase (decrease) 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 sold.................................................. 305,372 505,206 836,726
Units redeemed.............................................. (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.
31
SHORT HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
171,346 Diversified Investors Variable Funds -- Core Bond........... $ 5,205,000
8,347 Diversified Investors Variable Funds -- Equity Growth....... 389,832
6,073 Diversified Investors Variable Funds -- Growth & Income..... 146,812
186,754 Diversified Investors Variable Funds -- High Quality Bond... 2,684,173
58,506 Diversified Investors Variable Funds -- High Yield Bond..... 969,915
9,559 Diversified Investors Variable Funds -- International
Equity.................................................... 183,836
8,418 Diversified Investors Variable Funds -- Money Market........ 159,177
2,272 Diversified Investors Variable Funds -- Special Equity...... 73,687
7,563 Diversified Investors Variable Funds -- Value & Income...... 380,593
-----------
Total Investments -- 100.0% (Cost $9,105,902)............... 10,193,025
Liabilities less other assets -- (0.0%)..................... (1,726)
-----------
NET ASSETS -- 100.0%........................................ $10,191,299
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2004 is $9,105,902.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 1,087,123
===========
</Table>
See notes to financial statements.
32
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
255,315 Diversified Investors Variable Funds -- Core Bond........... $ 7,755,734
104,786 Diversified Investors Variable Funds -- Equity Growth....... 4,893,999
77,194 Diversified Investors Variable Funds -- Growth & Income..... 1,866,105
267,367 Diversified Investors Variable Funds -- High Quality Bond... 3,842,809
84,155 Diversified Investors Variable Funds -- High Yield Bond..... 1,395,129
123,343 Diversified Investors Variable Funds -- International
Equity.................................................... 2,372,040
44,565 Diversified Investors Variable Funds -- Money Market........ 842,648
28,405 Diversified Investors Variable Funds -- Special Equity...... 921,190
96,086 Diversified Investors Variable Funds -- Value & Income...... 4,835,201
-----------
Total Investments -- 100.0% (Cost $25,618,472).............. 28,724,855
Liabilities less other assets -- (0.0%)..................... (4,832)
-----------
NET ASSETS -- 100.0%........................................ $28,720,023
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2004 is $25,618,472.
The following amounts are based on cost for federal income tax purposes:
Gross unrealized appreciation............................... $ 3,156,611
Gross unrealized depreciation............................... (50,228)
-----------
Net unrealized appreciation................................. $ 3,106,383
===========
</Table>
See notes to financial statements.
33
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
215,399 Diversified Investors Variable Funds -- Core Bond........... $ 6,543,192
202,963 Diversified Investors Variable Funds -- Equity Growth....... 9,479,310
149,454 Diversified Investors Variable Funds -- Growth & Income..... 3,612,935
216,893 Diversified Investors Variable Funds -- High Quality Bond... 3,117,359
69,048 Diversified Investors Variable Funds -- High Yield Bond..... 1,144,678
236,130 Diversified Investors Variable Funds -- International
Equity.................................................... 4,541,092
38,289 Diversified Investors Variable Funds -- Money Market........ 723,976
54,350 Diversified Investors Variable Funds -- Special Equity...... 1,762,596
182,904 Diversified Investors Variable Funds -- Value & Income...... 9,204,015
-----------
Total Investments -- 100.0% (Cost $35,288,265).............. 40,129,153
Liabilities less other assets -- (0.0%)..................... (6,680)
-----------
NET ASSETS -- 100.0%........................................ $40,122,473
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2004 is $35,288,265.
The following amounts are based on cost for federal income tax purposes:
Gross unrealized appreciation............................... $ 4,975,516
Gross unrealized depreciation............................... (134,628)
-----------
Net unrealized appreciation................................. $ 4,840,888
===========
</Table>
See notes to financial statements.
34
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
PORTFOLIO COMPOSITION
DECEMBER 31, 2004
The following charts summarize the portfolio composition of each Fund by asset
type.
<Table>
SHORT HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 1.6%
Fixed Income Funds.......................................... 86.9
Domestic Equity Funds....................................... 9.7
International Equity Funds.................................. 1.8
Liabilities less other assets............................... (0.0)
-----
100.0%
=====
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 2.9%
Fixed Income Funds.......................................... 45.2
Domestic Equity Funds....................................... 43.6
International Equity Funds.................................. 8.3
Liabilities less other assets............................... (0.0)
-----
100.0%
=====
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 1.8%
Fixed Income Funds.......................................... 26.9
Domestic Equity Funds....................................... 60.0
International Equity Funds.................................. 11.3
Liabilities less other assets............................... (0.0)
-----
100.0%
=====
</Table>
See notes to financial statements.
35
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, as
amended (the "1940 Act"), 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
(individually, a "Fund" and 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") except the
Balanced and Calvert subaccounts. DIVF is a separate investment account offering
thirteen subaccounts, each with a different investment objective. DIVF operates
as a unit investment trust under the 1940 Act. 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 (typically, 4:00 P.M. Eastern time) 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"), a wholly-owned
subsidiary of AEGON USA, Inc. ("AEGON"). AEGON is a financial services holding
company whose primary emphasis is life and health insurance and annuity and
investment products. AEGON is an indirect, wholly-owned subsidiary of AEGON
N.V., a corporation based in The Netherlands which is a publicly traded
international insurance group. 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 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, under which the Advisor provides general investment advice to each
Fund. For providing these services and facilities and for bearing the related
36
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
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.
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 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
period ended December 31, 2004, was as follows:
<Table>
<Caption>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
Short Horizon Strategic Variable Fund....................... $ 5,225,428 $ 5,928,733
Intermediate Horizon Strategic Variable Fund................ 8,607,695 7,513,592
Intermediate Long Horizon Strategic Variable Fund........... 14,833,256 12,522,177
</Table>
5. SUBSEQUENT EVENTS
Diversified Investors Securities Corp. ("DISC") is the distributor for each of
the Funds and a subsidiary of the Funds' investment advisor, Diversified
Investment Advisors, Inc. ("DIA").
On February 18, 2005, DISC was notified by NASD staff that it had made a
preliminary determination to recommend disciplinary action against DISC based on
claims of alleged market timing activity in the Diversified Investors
International Equity Fund and the Diversified Institutional International Equity
Fund (collectively, the "International Equity Funds") between July 1, 2003 and
October 31, 2003. NASD staff contends that DISC facilitated certain
shareholders' trading in the International Equity Funds in contravention of
prospectus provisions that took effect on or about July 1, 2003, and otherwise
violated NASD rules. NASD staff also has alleged that DISC violated certain
record retention rules relating to email communications.
Like many U.S. financial services companies, DISC and DIA have responded to
requests for information from various governmental and self-regulatory agencies
in connection with investigations related to mutual fund trading activities.
DISC and DIA have cooperated fully with each request.
Although it is not anticipated that these developments will have an adverse
effect on the Funds, there can be no assurance at this time.
37
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CONCENTRATIONS AND INDEMNIFICATIONS
From time to time, the Funds may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Funds.
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.
7. PROXY VOTING POLICIES AND PROCEDURES
Since each Fund invests all its assets among DIVF, which, in turn, invests all
its assets in a corresponding portfolio of Diversified Investors Portfolios
("Portfolios"), the Funds themselves do not vote on proxies. A description of
the proxy voting policies and procedures is included in the Statement of
Additional Information, which is available without charge, upon request: (i) by
calling 1-800-755-5803; (ii) on the Advisor's website at www.divinvest.com
(Click on the icon for Sponsors, then click on the icon for Corporate, then
click on Investments) or (iii) on the SEC's website at www.sec.gov. In addition,
the Portfolios will be required to file Form N-PX, with its complete proxy
voting record for the twelve months ended June 30, no later than August 31 of
each year. The filing for the twelve months ended June 30, 2004, is currently
available without charge, upon request.
8. QUARTERLY PORTFOLIOS
The Funds will file their portfolios of investments for the first and third
quarters (March 31 and September 30, respectively) with the SEC by May 30 and
November 29, respectively, each year on Form N-Q. The Funds' Form N-Q is
available on the SEC's website at www.sec.gov. You may also obtain a copy of
Form N-Q without charge, upon request, by calling 1-800-755-5803.
Form N-Q for the corresponding Portfolios is also available without charge on
the SEC website or by calling 1-800-755-5803.
9. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
------------------------
NET
REALIZED
AND TOTAL
UNIT NET UNREALIZED INCOME UNIT NET
FOR THE VALUE, INVESTMENT GAINS (LOSS) FROM VALUE, ASSETS,
YEAR BEGINNING OF INCOME (LOSSES) ON INVESTMENT END OF TOTAL END OF
ENDED YEAR (LOSS)* INVESTMENTS OPERATIONS YEAR RETURN YEAR
------- ------------ ---------- ----------- ----------- ------ ------ -----------
SHORT HORIZON STRATEGIC VARIABLE FUND
12/31/2004 $14.14 $(0.03) $ 0.57 $ 0.54 $14.68 3.82% $10,191,299
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
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
12/31/2004 14.52 (0.03) 1.01 0.98 15.50 6.75 28,720,023
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
<Caption>
RATIOS TO AVERAGE
NET ASSETS
---------------------
NET
FOR THE INVESTMENT PORTFOLIO
YEAR INCOME TURNOVER
ENDED EXPENSES (LOSS) RATE
------- -------- ---------- ---------
SHORT HORIZON STRATEG
12/31/2004 0.20% (0.20)% 50%
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
INTERMEDIATE HORIZON
12/31/2004 0.20 (0.20) 28
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
</Table>
38
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
------------------------
NET
REALIZED
AND TOTAL
UNIT NET UNREALIZED INCOME UNIT NET
FOR THE VALUE, INVESTMENT GAINS (LOSS) FROM VALUE, ASSETS,
YEAR BEGINNING OF INCOME (LOSSES) ON INVESTMENT END OF TOTAL END OF
ENDED YEAR (LOSS)* INVESTMENTS OPERATIONS YEAR RETURN YEAR
------- ------------ ---------- ----------- ----------- ------ ------ -----------
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
12/31/2004 $14.83 $(0.03) $ 1.26 $ 1.23 $16.06 8.29% $40,122,473
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
<Caption>
RATIOS TO AVERAGE
NET ASSETS
---------------------
NET
FOR THE INVESTMENT PORTFOLIO
YEAR INCOME TURNOVER
ENDED EXPENSES (LOSS) RATE
------- -------- ---------- ---------
INTERMEDIATE LONG HOR
12/31/2004 0.20% (0.20)% 34%
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
</Table>
- ---------------
* Calculated based upon average units outstanding.
10. INVESTMENTS IN AFFILIATES
The market value of investments in affiliates (as defined in the 1940 Act,
"Affiliated Companies" are those in which the Trust is under common control with
an affiliated entity) at December 31, 2004 totaled $10,193,025, $28,724,855 and
$40,129,153, 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 UNITS UNITS ENDING PURCHASE SALE GAIN/(LOSS)
UNITS PURCHASED SOLD UNITS COST COST ON SALES
--------- --------- ------- ------- ----------- ----------- -----------
SHORT HORIZON STRATEGIC VARIABLE FUND
- -------------------------------------
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond................. 190,431 8,423 27,508 171,346 $ 248,916 $ 625,506 $191,206
Diversified Investors Variable
Funds -- Equity Growth............. 7,863 750 266 8,347 30,426 10,198 559
Diversified Investors Variable
Funds -- Growth & Income........... 6,147 178 252 6,073 3,711 4,828 495
Diversified Investors Variable
Funds -- High Quality Bond......... 195,396 20,930 29,572 186,754 300,423 342,412 81,227
Diversified Investors Variable
Funds -- High Yield Bond........... 62,438 -- 3,932 58,506 -- 47,667 13,014
Diversified Investors Variable
Funds -- International Equity...... 9,981 74 496 9,559 1,168 6,377 1,446
Diversified Investors Variable
Funds -- Money Market.............. 5,411 245,525 242,518 8,418 4,629,548 4,572,428 395
Diversified Investors Variable
Funds -- Special Equity............ 2,821 93 642 2,272 2,461 14,472 3,074
Diversified Investors Variable
Funds -- Value & Income............ 7,665 198 300 7,563 8,775 12,180 1,249
----------- ----------- --------
$ 5,225,428 $ 5,636,068 $292,665
=========== =========== ========
</Table>
39
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. INVESTMENTS IN AFFILIATES (CONTINUED)
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING UNITS UNITS ENDING PURCHASE SALE GAIN/(LOSS)
UNITS PURCHASED SOLD UNITS COST COST ON SALES
--------- --------- ------- ------- ----------- ----------- -----------
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
- ------------------------------------------------
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond................. 256,127 16,522 17,334 255,315 $ 488,057 $ 436,303 $ 80,785
Diversified Investors Variable
Funds -- Equity Growth............. 95,670 10,490 1,374 104,786 428,585 75,884 (20,452)
Diversified Investors Variable
Funds -- Growth & Income........... 75,024 3,616 1,446 77,194 76,313 54,122 (23,660)
Diversified Investors Variable
Funds -- High Quality Bond......... 262,167 11,060 5,860 267,367 158,285 68,641 15,208
Diversified Investors Variable
Funds -- High Yield Bond........... 84,405 671 921 84,155 10,342 11,237 2,980
Diversified Investors Variable
Funds -- International Equity...... 121,428 1,915 -- 123,343 30,216 -- --
Diversified Investors Variable
Funds -- Money Market.............. 10,944 383,628 350,007 44,565 7,234,369 6,598,778 1,093
Diversified Investors Variable
Funds -- Special Equity............ 34,148 466 6,209 28,405 12,492 150,763 19,199
Diversified Investors Variable
Funds -- Value & Income............ 93,255 3,785 954 96,086 169,036 40,340 2,371
----------- ----------- --------
$ 8,607,695 $ 7,436,068 $ 77,524
=========== =========== ========
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE
FUND
- ------------------------------------------------
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond................. 207,829 26,374 18,804 215,399 $ 770,672 $ 440,661 $112,916
Diversified Investors Variable
Funds -- Equity Growth............. 178,692 25,359 1,088 202,963 1,070,672 43,287 844
Diversified Investors Variable
Funds -- Growth & Income........... 140,160 11,120 1,826 149,454 243,676 40,202 (1,586)
Diversified Investors Variable
Funds -- High Quality Bond......... 207,490 22,428 13,025 216,893 319,334 149,471 36,680
Diversified Investors Variable
Funds -- High Yield Bond........... 67,565 5,120 3,637 69,048 78,489 42,286 13,862
Diversified Investors Variable
Funds -- International Equity...... 226,800 9,905 575 236,130 161,994 8,260 770
Diversified Investors Variable
Funds -- Money Market.............. 16,766 612,509 590,986 38,289 11,548,918 11,141,342 1,398
Diversified Investors Variable
Funds -- Special Equity............ 63,756 2,600 12,006 54,350 76,364 275,339 53,341
Diversified Investors Variable
Funds -- Value & Income............ 174,179 12,373 3,648 182,904 563,137 136,865 26,239
----------- ----------- --------
$14,833,256 $12,277,713 $244,464
=========== =========== ========
</Table>
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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,
2004, 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 the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements 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, 2004 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 22, 2005
41
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW
DECEMBER 31, 2004
(UNAUDITED)
Investors seemed guarded about the prospects of finishing the year on a positive
note, but as the markets cleared several hurdles of uncertainty, capped by the
Bush reelection, the major stock indices surged during the last few months of
2004. And while the returns couldn't match the double-digit pace set in 2003,
this marks the second straight year that equity markets have been
positive -- welcome relief to investors who suffered through the bear market of
2000-2002.
Throughout 2004, investors seemed to be waiting for the "all clear." But,
positive signals were clouded by less favorable news. The first quarter's
"jobless recovery" quickly gave way to concerns about an overheated economy and
higher energy prices did nothing to allay these worries. The Federal Reserve
began raising interest rates at the end of June which continued during the third
quarter. Their actions seemed to reduce inflation concerns, but the economic
recovery slowed somewhat. Even as the economy appeared to be hitting its stride
in the fourth quarter, the November presidential election loomed large. When the
uncertainty was removed, investors expressed their satisfaction with the
election results by bidding stock prices up quickly through year-end.
While inflation and higher interest rates appeared the biggest threats to the
stock and bond markets, those fears were never fully realized. In this regard,
2004 defied history lessons, leaving many experts groping for explanations. It
may be that the Federal Reserve tempered concerns by signaling its intentions
well in advance of any action. But, most agree that the biggest factor was
continued and even increased foreign demand of US bonds. With inflation and
higher interest rates held at bay this year, pressure may be building for 2005.
Adding to that pressure are the Federal budget and trade deficits as well as the
declining value of the dollar. The dollar's drop was significant in 2004,
falling between 4% and 8% against other major currencies, and hitting
record-lows against the euro. The weak dollar is bad news for other economies,
because it hurts their exports to the US. So, foreign governments have an
interest in buying the greenback, and with the notable exception of Japan, some
have already started to do so. Of particular importance to many currency market
observers, is that China has continued to peg its yuan to the dollar, causing it
to be undervalued. Some fear that revaluation of the yuan could have
considerable implications for the global markets. Whatever action the Chinese
government takes, it seems clear that the dollar's relative value will be
carefully watched in the year ahead.
EQUITY MARKET
After three choppy quarters, by September 30 most stock investors were not much
further ahead than where they began the year. But, what a difference a quarter
can make; for the indices made nearly all of their 2004 gains during the last
three months of the year. The broad stock market, as measured by the S&P 500,
edged up 9.2% for the quarter, bringing the full year returns to 10.9%.
Mid-capitalization stocks did even better, with the Russell Midcap Index posting
a 13.7% return for the quarter and finishing the year with a 20.2% return. Among
domestic stocks, small-caps, as measured by the Russell 2000 Index, had the
highest fourth quarter return of 14.1%, but with an 18.3% return for the year,
fell short of the pace set by the mid-caps. Thanks to the declining dollar,
international stocks had the best returns of all, with the MSCI EAFE Ex-US Index
returning 15.2% in the last three months of 2004 alone, bringing the
twelve-month return to 20.8%.
Among investment styles, the fourth quarter was fairly evenly split across the
capitalization spectrum, with growth edging out value among mid- and small- cap
stocks. For the year, value stocks fared better than growth stocks, so the
long-awaited rotation to growth was still not fully evident. With oil prices
topping $55 a barrel in October, the 2004 returns on energy stocks handsomely
outpaced the returns of most other stock sectors. And while the technology
sector surged in the fourth quarter, for the twelve months ended December,
technology was one of the worst places to have been invested, particularly among
semiconductors.
2004 saw some pick-up in IPO activity, including the long-awaited Google deal,
and several mergers during the last quarter appeared to add to the overall
buoyancy of investor sentiment. Consensus appears to be that
42
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2004
(UNAUDITED)
corporate earnings will continue to grow, albeit at a subdued rate. Generally
speaking, companies have strong balance sheets and excess cash that bode well
for the year ahead.
FIXED INCOME MARKET
Anxious about the impact that rising interest rates might have on bond values,
bond investors should be pleased to have seen positive returns for the year.
Like stocks, bonds had a bumpy ride, but the fact that they survived unscathed
-- and even ahead -- surprised even the most experienced investors. After a
sharp decline in the third quarter, the yield on the benchmark 10-year Treasury
note moved to 4.22% by December 31, up from 4.125% on September 30, but slightly
down for the year overall.
As a measure of the broad bond market, the Lehman Aggregate Bond Index rose
0.95% during the quarter, adding to the gains earned during the first nine
months, to finish the year with a very respectable 4.3% return. All sectors
finished in positive territory for both the quarter and the year, with the
riskiest and longest duration securities posting the best results. High yield
bonds led the pack for the quarter and the year, finishing up 4.5% and 10.9%
respectively as measured by the Merrill Lynch High Yield Master II Index.
MONEY MARKET SERIES
The Money Market Fund invests primarily in short-term, US dollar-denominated
money market instruments. Although fixed income investors were not rewarded as
much as most equity investors in 2004, a Citigroup Treasury Bill 3-Month Index
return of 1.24% was welcomed in a year when the Federal Reserve hiked short
rates 125 basis points. Fund returns were positive, and the manager's
positioning along the yield curve was the primary driver behind the performance.
The view that the Federal Reserve would begin raising the Federal funds target
mid-year pointed the manager towards a shorter average maturity in the
portfolio. This approach enabled reinvestments in higher rates as the Fed
continued to raise rates at a measured pace. The portfolio duration was
shortened by selling longer dated fixed rate notes. Currently, portfolio
duration is moderately shorter than the benchmark. The treasury yield curve,
that flattened dramatically in 2004, should continue on that path; however,
trades taking advantage of further curve moves will be evaluated on an
opportunistic basis.
HIGH QUALITY BOND SERIES
The Fund invests in debt issued by the US Government and its agencies as well as
asset-backed and corporate fixed income securities, emphasizing short duration
and high quality securities. Credit risk-taking was not rewarded early in the
year with Treasuries and other high quality sectors faring best. The Fund was
well positioned and holdings in the residential mortgage sector were the largest
contributors to performance. During April, Treasury yields rose sharply and the
portfolio posted negative absolute returns, but was in line with the benchmark.
Additive performance was the result of holdings in the residential mortgage
sector as well as allocations to the money market sector. Negative returns were
primarily generated by the longer than benchmark duration stance of the
portfolio early in the quarter. The third quarter found the portfolio ahead of
the Merrill Lynch 1-3 year US Treasury Index. The best performing sectors for
the portfolio were those with the longest durations, i.e. CMBS, residential
mortgage-backed and asset-backed. Furthermore, as spreads were fairly stable
over the quarter, the largest contributor of return was the income component.
This theme continued into the 4th quarter where the income component again was
the main source of return, propelling the portfolio ahead of its benchmark for
the quarter. This capped off a volatile 12 months with the Fund aligned with its
benchmark, trailing by 2 basis points for the year. In addition to the income
component, issue selection in the MBS and ABS sectors were additive during the
fourth quarter.
43
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2004
(UNAUDITED)
INTERMEDIATE GOVERNMENT BOND SERIES
The Intermediate Government Bond Fund seeks high current income consistent with
preservation of capital by investing primarily in intermediate-term US
Government and Agency securities. The complementary investment approaches
utilized by the two portfolio managers incorporate duration management, yield
curve management and opportunistic investments in corporate, asset-backed and
mortgage-backed securities. By positioning the portfolio in short maturities
with lower coupons to avoid price depreciation, the portfolio lost ground to
higher yielding, longer duration indexes in a year of flat ten-year interest
rates. As a result, the Fund underperformed for the year.
Moving into 2005, the Fund maintains a short duration with an overweight in
asset-backed and mortgage-backed securities.
CORE BOND SERIES
The Core Bond Fund seeks to maximize return through investment in US Government,
asset-backed, mortgage-backed and corporate securities and to a lesser extent
convertible, high yield and international fixed income securities.
The Fund performed in line with the benchmark for the year. Two major themes
garnered the majority of the relative performance: yield curve and non-dollar
securities. The sub-advisor positioned the portfolio to benefit from rising
rates and a flatter yield curve by holding shorter duration securities and
maintaining a barbelled position versus the index. Additionally, the manager's
exposure to non-dollar securities, based on the belief that the yields on these
securities would move lower than comparable US Treasuries, was rewarded.
Allocations to spread sectors, primarily corporates and mortgages, were also
additive.
BALANCED SERIES
The Balanced Fund seeks to provide a high total return consistent with a broad
diversified mix of stocks, bonds and money market instruments and is managed by
two sub-advisors: one overseeing the Fund's equity portion and one managing 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. Market volatility hampered
the quantitative model utilized in the equity portion for the first half of the
year. The second half of 2004 presented a slightly more stable environment which
complemented the approach. For the year, the S&P 500 Index posted a solid 10.9%
return which was matched by the equity portion of the portfolio. Returning just
over 9%, the fourth quarter accounted for the bulk of the year's performance.
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. A shorter duration position relative to the benchmark was additive for
the year and the non-dollar allocation was the other main contributor.
The Fund performance captured most of its 8.3% benchmark return, which is 60%
S&P500/40% Lehman Aggregate Bond.
VALUE & INCOME SERIES
The Value & Income Fund seeks long-term capital appreciation primarily through
investment in a diversified portfolio of common stocks selling at reasonable
valuations relative to their future projected earnings. The Fund utilizes a
combination of deep and relative value sub-styles. The portfolio delivered
healthy absolute gains in 2004, outpacing the broad market but lagging its own
Russell 1000 Value Index, which returned 16.5%. Stock selection in media and an
overweight in pharmaceuticals detracted from relative returns for the year.
These groups were hit by intense negative publicity throughout the year. In
addition, the portfolio had a
44
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2004
(UNAUDITED)
weighted average market capitalization above its benchmark. In an environment
where small-capitalization stocks outperformed their mid- and
large-capitalization counterparts, this higher market capitalization was a
detractor.
GROWTH & INCOME SERIES
The Growth & Income Fund invests in a diversified portfolio of stocks which have
the potential to generate long-term capital appreciation and current dividend
income. The Fund was restructured in May to utilize three sub-advisors, each
with a specific role. The structured core component, sub-advised by Goldman
Sachs Asset Management, applies a quantitative model and tracks the benchmark
risk closely, while the active value and growth components seek to add more
value through fundamental stock selection. The complementary sub-advisors are
Ark Asset Management (growth style) and Aronson+Johnson+Ortiz, LP (value style).
The restructuring proved beneficial for 2004 as all three managers performed
well relative to their respective style benchmarks. For the year, the Fund's
performance was in line with the S&P 500 Index return of 10.9%. The Fund's stock
selection in aggregate remained strong for the year, especially in the household
durables industry of the consumer discretionary sector. Sector allocations,
however, had less of an impact on relative performance. Among the top
twenty-five holdings at the end of 2004, almost half of the names were also
among the top performers in the Fund for the year, including Exxon Mobil Corp.,
General Electric Company, eBay, Inc. and Johnson & Johnson.
EQUITY GROWTH SERIES
The Equity Growth Fund seeks to provide a high level of capital appreciation
through investment in a diversified portfolio of common stocks with the
potential for above-average growth in earnings. The Fund utilizes a
multi-managed approach with complementary large capitalization growth styles.
During the year, the Fund was restructured and a sub-advisor was removed so that
the Fund now has just two sub-advisors: Ark Asset Management and Marsico Capital
Management.
The Fund outperformed its Russell 1000 Growth benchmark, which returned 6.3% for
the year. The best performing sectors -- Utilities, Telecommunications and
Energy -- also had the smallest weightings in the Index. As expected, stock
selection was the main driver of the Fund's performance. Consumer Discretionary,
Healthcare and Financial sectors and names were the main contributors while
Information Technology -- a major growth sector -- was flat. The top five
performing stocks in the portfolio were UnitedHealth Group Inc., eBay, Inc.,
QUALCOMM, Inc., General Electric Company and YAHOO!, Inc.
MID-CAP VALUE SERIES
The Mid-Cap Value Fund has a value-oriented investment philosophy grounded in
identifying opportunities among companies undergoing material strategic change.
The Mid-Cap Value Fund outperformed the Russell Mid Cap Value Index for the
year. A large portion of the excess return was generated from stock selection in
the Healthcare, Consumer Staples and Financial sectors. The portfolio returned
37% vs. the Index return of 11% in Healthcare, 51% vs. 21% in Consumer Staples
and 30% vs. 25% in Financials. In addition to strong stock selection in
Healthcare, an overweight of 5% to the sector was also additive. From a security
standpoint the top three contributors for the year were TXU Corp. (Utilities),
Brascan Corp. (Financial Services) and CR Bard, Inc. (Healthcare). To close out
the year, companies continued to build substantial liquidity positions and 2005
could become a notable year for capital redeployment via mergers and
acquisitions, spin offs, large stock buybacks and meaningful dividend increases.
The portfolio investment process is dedicated to discovering companies that are
efficient in the execution of this process and given the current environment,
should find interesting opportunities in the upcoming year.
45
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2004
(UNAUDITED)
MID-CAP GROWTH SERIES
The Mid-Cap Growth Fund seeks a high level of capital appreciation through
investment in a diversified portfolio of medium size, growth-oriented companies.
At the end of the third quarter, the incumbent sub-advisor was replaced by
Columbus Circle Investors.
Equity performance during the fourth quarter was the strongest of the year,
helping to generate 10% to 20% returns for 2004 and leaving stocks at the
highest levels in three years despite continued Iraqi violence, resumed US
dollar decline, and the Federal Reserve raising short-term interest rates twice.
A confluence of positive events helped power the rally, including a $10 per
barrel drop in the price of oil, a definitive outcome to the US Presidential
election, and heightened merger and acquisition activity. During the fourth
quarter, the mid-growth portfolio gained primarily due to the strength in
telecommunication services, industrial, consumer discretionary and select
technology stocks.
Strong fourth quarter returns helped the Fund's one year return. As we enter the
new year, capital spending, energy services and export oriented industrial
activity are areas of interest as are companies that benefit strong secular
trends, such as satellite radio and internet telephony.
SMALL-CAP VALUE SERIES
The Small-Cap Value Fund's approach to small-cap equity management is
fundamental, bottom-up and value oriented. The strategy identifies stocks of
quality companies selling at large discounts to the underlying value of the
business. Many small- and mid-capitalization stocks surged in price over the
last two years. Most impressive have been the gains registered within the value
category of the small-cap universe. Specifically, the Russell 2000 Value Index
posted a gain of 22.3% for 2004, on the heels of a 46.0% rise in 2003.
The Small-Cap Value Fund posted strong returns for 2004. Given the more normal
economic and investment environment, the sub-advisor's "normalized" free cash
flow methodology was rewarded. Strong stock selection in telecommunication
services, materials and information technology was the primary driver for the
Fund's calendar year performance. For example, the Fund gained 31.7%, 43.5%, and
21.6%, respectively in these three sectors while the Russell 2000 Value Index
only returned (19.6)%, 36.7% and 5.3% for the same three sectors. However,
sector allocations, particularly a 3.3% overweight to the telecommunication
services sector, which was the only major economic sector in the Russell 2000
Value Index to register a negative return for the year, offset partial gains
from strong stock selection.
Given the portfolio's emphasis on free cash flow, below are highlighted two
examples of how portfolio holdings are adding to intrinsic value. Delta & Pine
Land Company (DLP) dominates the cotton seed industry with over 80% share of the
market for genetically modified cotton seeds. Its business is stable
domestically and claims growth potential overseas. The company has built up a
cash balance of more than $150 million with no debt. The sub-advisor has
actively worked with DLP's management and board to encourage restructuring the
company's balance sheet to return excess cash to shareholders and to introduce
debt. The sub-advisor believes DLP's intrinsic value may improve 10-15% through
a combination of a reduced share count and lowered weighted average cost of
capital.
Another company that is restructuring its capital allocations is Post
Properties, Inc. (PPS). Unlike many of its REIT counterparts, management of PPS
has embarked on a strategy of downsizing the company and taking advantage of
high valuations. In an environment where cap rates have reached historic lows of
5%, PPS is selling properties, reducing leverage, and returning capital to
shareholders.
SPECIAL EQUITY SERIES
The Special Equity Fund is managed by five sub-advisors: two small-cap growth
managers, two small-cap value managers, and one small-cap core manager. A
multiple manager approach is utilized to assist in
46
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2004
(UNAUDITED)
maximizing opportunities and dampening the volatility often associated with
small-capitalization stocks. The Fund trailed the Russell 2000 Index for 2004.
Stock selection was the primary driver for the underperformance, while sector
allocations also had a small negative effect. Holdings that detracted from
performance were primarily consumer discretionary names, such as Cox Radio Inc.,
Emmis Communications Corp., and Ruby Tuesday, Inc. In aggregate, stock selection
in the consumer discretionary sector cost the Fund 2.5% in the relative
performance, as the Fund returned 5.4% in this sector compared to the
benchmark's 18.8%. Additionally, underweighted positions in the top-performing
energy and materials sectors, which returned 56.7% and 34.6%, respectively,
within the benchmark for the year, further detracted performance. Positive
contributors to performance included Peoples Bank Bridgeport, InfoSpace Inc.,
and CNET Networks. Strong stock selection in the financial sector also added to
performance.
SMALL-CAP GROWTH SERIES
The Small-Cap Growth Fund seeks a high level of capital appreciation through
investment in a diversified portfolio of small-growth oriented or emerging
growth companies that are believed to offer above average opportunities for
long-term price appreciation. The Small-Cap Growth Fund finished the year with
strong gains, but relative performance trailed that of the benchmark Russell
2000 Growth Index. The year's relative performance was largely due to stock
selection in the technology and healthcare sectors as well as a relative
underweight in the energy and basic industry/capital goods sectors. Strong
performance in the consumer non-durables sector helped to offset these factors.
Among individual names, Urban Outfitters, Inc. was the biggest positive
contributor to performance, rising more than 100% during the year as it
continued to deliver strong earnings and sales growth. Coach, Inc. also
continued to surpass expectations on earnings and sales growth and gained almost
50%. Travel-related firms also did well during the year with Four Seasons
Hotels, Inc. delivering returns in excess of 50%.
Technology-related stocks comprised many of the worst performing stocks during
the year as many companies failed to live up to lofty expectations. O2 Micro
International, Ltd., Asyst Technology and Varian Semiconductor Equipment
Associates, Inc. are three technology companies in the portfolio that performed
poorly during the past year. The sub-advisor exited from Asyst Technology and
Varian Semiconductor Equipment Associates, Inc., but opted to continue to hold
O2 Micro International, Ltd.
For the coming year, the Fund will continue to seek out and hold those companies
that have established market leadership and which the sub-advisor feels will be
able to post superior earnings and sales growth.
AGGRESSIVE EQUITY SERIES
The Aggressive Equity Fund seeks to provide long-term capital appreciation
through investment in large-capitalization, high-growth companies. The Fund
invests in stocks which present an opportunity for significant increases in
earnings, revenue and/or value. At the end of the third quarter, the Fund's
objective was refined from one of all-capitalization growth to
large-capitalization growth. Correspondingly, there was also a change in the
Fund's sub-advisor, which is now Turner Investment Partners.
The Russell 1000 Growth Index posted 6.3% for the year. Growth lagged value in
large part because the best performing sectors -- Utilities, Telecommunications
and Energy -- had the smallest weightings in the Growth Index. The Fund relied
on stock selection as the main driver of performance for these sectors. Consumer
Discretionary, Financial and Information Technology sectors and names were the
main contributors while Industrials failed to add value. The top performing
stocks in the portfolio included Elan, Cooper Cos., Palmone, Urban Outfitters,
Inc., XTO Energy and Apple Computer, Inc.
47
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2004
(UNAUDITED)
HIGH YIELD BOND SERIES
The High Yield Bond Fund seeks high current income as is consistent with
providing reasonable safety of principal by investing in lower rated, high-yield
corporate debt securities. Risk taking continued to be rewarded in 2004 in the
high-yield space, as lower rated issues, such as B and CCC, benefited from
improving credit ratings and better earnings fundamentals. In addition, such
issues tend to be less sensitive to rising interest rates compared to higher
rated credit sectors, such as BB. For the year, according to the Merrill Lynch
High Yield Master II Index, CCC rated bonds gained 15.7%, followed by the B
sector, which returned 10.4%. The BB sector only finished the year with a 9.3%
return. The Fund's overweight to the CCC and B sectors at the expense of the BB
sector contributed significantly to performance in 2004. Sector allocation
decisions, however, had a slightly negative impact on relative performance,
including an underweight to the strong energy industry and an overweight to the
lagging cable/satellite TV industry. Energy issues in aggregate returned 12.3%
for the Index, while cable/satellite TV trailed with a return of 8.3% for the
year. In combination, these factors meant that the fund had strong absolute
performance in line with the benchmark, but fell short of the 10.9% index
return.
INTERNATIONAL EQUITY SERIES
The International Equity Fund provides access to international stock markets,
which represent approximately two-thirds of the investment opportunities
available worldwide. The International Equity Fund underwent a sub-advisory
change in March as the incumbent was replaced with two style specific managers,
Wellington Management Company and LSV Asset Management. The new structure pairs
a growth manager, Wellington Management Company, with a value manager, LSV Asset
Management. This coupling achieves the Fund objective which is an overall core
approach in the international space.
The portfolio posted strong returns for the year, slightly trailing the MSCI
World Ex-US Index return of 20.8%. Value outpaced growth for the second half of
the year to bring it in firmly ahead of growth for 2004. As a result, the slight
overweight to value within the portfolio was beneficial. From a cap size
perspective, small and mid-caps led performance; therefore, the
lower-than-benchmark average market cap for the portfolio was also additive.
Looking at country selection, the overall contribution was slightly negative.
The UK was the largest allocation (21%) at year end and largest overweight (7%)
in the portfolio. Strong stock selection in the UK added to performance.
Currency contribution was slightly negative, but is not an alpha generator and
is expected to be neutral.
48
(This page intentionally left blank)
49
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE VALUE &
MARKET BOND BOND BOND BALANCED INCOME
------------ ------------ ------------ -------------- ------------ --------------
ASSETS:
Securities, at cost................. $748,623,310 $717,304,799 $350,694,701 $2,171,881,538 $418,696,867 $2,305,368,292
============ ============ ============ ============== ============ ==============
Securities, at value, including
investments held as collateral for
securities out on loan (Note 4).... $748,623,310 $710,319,325 $350,417,547 $2,180,919,786 $453,538,283 $2,744,291,344
Repurchase agreements (cost equals
market)............................ 60,216,832 698,287 6,103,722 46,075,207 8,603,926 66,108,926
Cash................................ -- -- -- -- 19,097 --
Foreign currency holdings, at value
(cost $31,058, $3,246 and
$15,335,728, respectively)......... -- -- -- 31,276 3,281 --
Receivable for securities sold...... -- -- 10,312,500 236,270,070 24,248,450 996,418
Unrealized appreciation on foreign
currency forward contracts......... -- -- -- 2,784,501 303,961 --
Variation margin.................... -- -- -- -- 32,188 --
Interest receivable................. 752,643 4,296,758 1,630,660 14,357,614 1,262,549 10,224
Dividends receivable................ -- -- -- -- 370,179 4,138,415
Foreign tax reclaim receivable...... -- -- -- -- -- 1,879
Receivable from Advisor............. -- -- 20,940 -- 5,991 --
Receivable from securities lending
(net).............................. -- 4,305 16,613 8,111 1,991 9,536
------------ ------------ ------------ -------------- ------------ --------------
Total assets........................ 809,592,785 715,318,675 368,501,982 2,480,446,565 488,389,896 2,815,556,742
------------ ------------ ------------ -------------- ------------ --------------
LIABILITIES:
Due to Advisor...................... 3,362 -- -- 1,220 -- --
Due to Custodian.................... -- -- -- -- -- --
Collateral for securities out on
loan............................... -- 24,475,000 64,248,067 357,709,666 24,760,913 108,351,744
Foreign currency due to Custodian,
at value (cost $113,948)........... -- -- -- -- -- --
Payable for securities purchased.... -- -- 47,617,584 290,105,164 27,991,206 599,598
Securities sold short, at value
(proceeds $168,103,608 and
$14,888,708, respectively)......... -- -- -- 167,792,788 14,856,967 --
Unrealized depreciation on foreign
currency forward contracts......... -- -- -- 8,811,052 849,714 --
Variation margin.................... -- -- -- 72,047 -- --
Investment advisory fees............ 177,743 204,564 77,951 493,237 159,974 1,020,983
Accrued expenses.................... 59,295 44,733 55,729 93,506 44,433 121,095
Contingent liability (Note 6)....... -- -- -- -- -- --
------------ ------------ ------------ -------------- ------------ --------------
Total liabilities................... 240,400 24,724,297 111,999,331 825,078,680 68,663,207 110,093,420
------------ ------------ ------------ -------------- ------------ --------------
NET ASSETS.......................... $809,352,385 $690,594,378 $256,502,651 $1,655,367,885 $419,726,689 $2,705,463,322
============ ============ ============ ============== ============ ==============
</Table>
See notes to financial statements.
50
<Table>
<Caption>
GROWTH & EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP
INCOME GROWTH VALUE GROWTH VALUE EQUITY GROWTH
-------------- -------------- ------------ ------------ ------------ -------------- ------------
$1,100,909,061 $2,134,500,942 $398,607,948 $224,614,152 $162,178,255 $1,176,986,716 $123,461,318
============== ============== ============ ============ ============ ============== ============
$1,214,103,718 $2,459,214,200 $452,395,238 $255,104,120 $193,589,256 $1,362,672,110 $137,958,965
7,071,418 41,295,933 22,804,390 5,082,338 1,367,599 26,260,855 1,887,631
-- -- -- -- -- 1,067,441 --
-- -- -- -- -- -- --
2,615,671 4,690,905 4,318,789 412,396 -- 10,445,848 47,359
-- -- -- -- -- -- --
-- -- -- -- -- 2,295 --
5,683 14,872 4,854 3,415 1,448 12,059 2,059
1,490,823 2,151,635 395,854 34,242 176,671 1,221,493 22,574
934 654 4,788 -- -- 1,257 214
-- -- 2,397 31,093 4,061 -- 2,271
37,589 13,295 7,426 11,006 1,188 47,078 3,731
-------------- -------------- ------------ ------------ ------------ -------------- ------------
1,225,325,836 2,507,381,494 479,933,736 260,678,610 195,140,223 1,401,730,436 139,924,804
-------------- -------------- ------------ ------------ ------------ -------------- ------------
6,673 4,920 -- -- -- -- --
-- 8,998 -- -- -- 5,747 --
85,014,118 203,440,449 58,613,178 50,393,267 22,031,456 171,006,787 31,366,433
-- -- -- -- -- 117,942 --
3,719,182 12,057,374 6,351,818 -- 227,162 2,052,639 22,745
-- -- -- -- -- -- --
-- -- -- -- -- 2,369 --
475 -- -- -- -- -- --
579,529 1,194,720 228,378 125,524 117,192 895,583 77,619
57,425 115,086 29,683 58,947 28,464 118,627 28,855
-- -- -- -- -- -- --
-------------- -------------- ------------ ------------ ------------ -------------- ------------
89,377,402 216,821,547 65,223,057 50,577,738 22,404,274 174,199,694 31,495,652
-------------- -------------- ------------ ------------ ------------ -------------- ------------
$1,135,948,434 $2,290,559,947 $414,710,679 $210,100,872 $172,735,949 $1,227,530,742 $108,429,152
============== ============== ============ ============ ============ ============== ============
<Caption>
AGGRESSIVE HIGH YIELD INTERNATIONAL
EQUITY BOND EQUITY
------------ ------------ --------------
$384,745,597 $308,558,949 $1,262,989,346
============ ============ ==============
$438,572,257 $329,712,140 $1,494,028,564
-- 16,169,442 15,085,220
-- -- --
-- -- 15,490,725
3,187,268 1,725,550 17,063,507
-- -- 97,112
-- -- --
2,643 6,638,496 132,789
83,911 -- 1,255,943
-- -- 630,089
25,897 811 --
8,840 -- 65,737
------------ ------------ --------------
441,880,816 354,246,439 1,543,849,686
------------ ------------ --------------
-- -- --
856,129 -- --
42,298,930 -- 127,122,222
-- -- --
674,689 2,268,187 14,057,632
-- -- --
-- 3,950 44,823
-- -- --
261,493 162,774 870,732
62,708 38,992 136,333
-- -- --
------------ ------------ --------------
44,153,949 2,473,903 142,231,742
------------ ------------ --------------
$397,726,867 $351,772,536 $1,401,617,944
============ ============ ==============
</Table>
51
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE VALUE &
MARKET BOND BOND BOND BALANCED INCOME
----------- ----------- ------------ ----------- ----------- ------------
INVESTMENT INCOME:
Interest income............................. $11,986,198 $22,311,088 $ 7,666,832 $61,599,370 $ 5,956,010 $ 479,807
Securities lending income (net)............. -- 29,633 133,678 301,101 36,417 145,453
Dividend income............................. -- -- -- -- 5,369,252 54,262,719
Less: foreign withholding taxes............. -- -- -- -- -- (204,499)
----------- ----------- ----------- ----------- ----------- ------------
Total income................................ 11,986,198 22,340,721 7,800,510 61,900,471 11,361,679 54,683,480
----------- ----------- ----------- ----------- ----------- ------------
EXPENSES:
Investment advisory fees.................... 2,056,993 2,341,487 948,718 5,404,392 1,887,638 10,846,077
Custody fees................................ 168,276 172,231 84,652 554,099 246,669 472,468
Audit fees.................................. 23,901 28,147 28,494 32,663 27,984 28,851
Legal fees.................................. 35,069 14,456 49,424 33,913 7,534 203,840
Reports to shareholders..................... 35,191 5,627 28,969 13,284 2,564 20,110
Miscellaneous fees.......................... 4,128 3,419 1,407 6,668 5,595 20,801
----------- ----------- ----------- ----------- ----------- ------------
Total expenses.............................. 2,323,558 2,565,367 1,141,664 6,045,019 2,177,984 11,592,147
Expenses reimbursed by the Advisor.......... -- -- (57,448) -- (80,562) --
----------- ----------- ----------- ----------- ----------- ------------
Net expenses................................ 2,323,558 2,565,367 1,084,216 6,045,019 2,097,422 11,592,147
----------- ----------- ----------- ----------- ----------- ------------
NET INVESTMENT INCOME (LOSS)................ 9,662,640 19,775,354 6,716,294 55,855,452 9,264,257 43,091,333
----------- ----------- ----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) on transactions
from:
Securities................................. (68,909) 151,339 (958,216) 17,584,819 28,014,567 136,210,030
Futures, written options and short sales... -- -- -- 2,034,427 275,477 --
Foreign currency transactions.............. -- -- -- 754,587 (797,829) --
Change in net unrealized appreciation
(depreciation) on:
Securities................................. -- (10,070,723) (1,623,256) (9,954,093) (4,120,704) 124,599,254
Futures, written options and short sales... -- -- -- 1,831,989 352,272 --
Foreign currency translations.............. -- -- -- 3,018,058 326,110 --
----------- ----------- ----------- ----------- ----------- ------------
Net realized and unrealized gains (losses)
on investments............................. (68,909) (9,919,384) (2,581,472) 15,269,787 24,049,893 260,809,284
----------- ----------- ----------- ----------- ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $ 9,593,731 $ 9,855,970 $ 4,134,822 $71,125,239 $33,314,150 $303,900,617
=========== =========== =========== =========== =========== ============
</Table>
See notes to financial statements.
52
<Table>
<Caption>
GROWTH & EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD
INCOME GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY BOND
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
$ 118,829 $ 486,864 $ 174,747 $ 37,887 $ 41,507 $ 305,771 $ 25,539 $ 103,517 $26,584,824
77,418 110,292 54,391 47,417 32,477 435,904 27,965 114,805 --
19,764,058 26,963,291 4,272,824 777,190 1,555,269 12,022,367 326,788 1,524,038 238,798
(13,548) (48,306) (42,090) (1,445) -- (11,321) (1,936) (9,998) --
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
19,946,757 27,512,141 4,459,872 861,049 1,629,253 12,752,721 378,356 1,732,362 26,823,622
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
6,428,226 12,888,076 2,004,782 1,349,517 1,150,035 10,328,852 836,819 3,401,765 1,702,720
261,661 427,707 100,606 58,237 63,438 371,302 68,091 70,198 122,730
28,263 31,675 22,262 22,178 27,196 29,777 27,172 27,027 29,020
34,733 54,795 6,482 16,529 2,992 38,391 1,934 20,856 8,414
77,203 47,239 2,378 31,075 1,084 40,371 795 32,846 2,650
9,361 17,817 2,590 1,555 1,288 10,889 925 3,221 1,598
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
6,839,447 13,467,309 2,139,100 1,479,091 1,246,033 10,819,582 935,736 3,555,913 1,867,132
-- -- (42,344) (72,900) (53,146) -- (69,756) (43,307) (8,915)
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
6,839,447 13,467,309 2,096,756 1,406,191 1,192,887 10,819,582 865,980 3,512,606 1,858,217
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
13,107,310 14,044,832 2,363,116 (545,142) 436,366 1,933,139 (487,624) (1,780,244) 24,965,405
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
115,263,875 31,940,963 42,407,767 12,882,888 11,963,670 237,402,239 8,624,552 53,282,314 2,115,482
218,837 -- -- -- -- 383,845 -- -- --
-- (195,930) -- -- -- (1,419) -- -- (38,584)
(14,746,118) 124,528,399 28,735,824 14,287,960 16,063,298 (94,435,273) 1,287,183 (6,938,097) 4,878,847
(25,648) -- -- -- -- (63,125) -- -- --
-- 252,838 -- -- -- (128) -- -- (2,274)
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
100,710,946 156,526,270 71,143,591 27,170,848 28,026,968 143,286,139 9,911,735 46,344,217 6,953,471
------------ ------------ ----------- ----------- ----------- ------------ ---------- ----------- -----------
$113,818,256 $170,571,102 $73,506,707 $26,625,706 $28,463,334 $145,219,278 $9,424,111 $44,563,973 $31,918,876
============ ============ =========== =========== =========== ============ ========== =========== ===========
<Caption>
INTERNATIONAL
EQUITY
-------------
$ 342,745
916,541
34,265,596
(3,475,347)
------------
32,049,535
------------
8,840,962
1,236,229
31,571
41,346
51,626
10,146
------------
10,211,880
--
------------
10,211,880
------------
21,837,655
------------
115,705,922
--
(1,206,452)
90,404,364
--
1,402,931
------------
206,306,765
------------
$228,144,420
============
</Table>
53
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE VALUE &
MARKET BOND BOND BOND BALANCED INCOME
--------------- ------------- ------------- -------------- -------------- --------------
FROM OPERATIONS:
Net investment income
(loss)...................... $ 9,662,640 $ 19,775,354 $ 6,716,294 $ 55,855,452 $ 9,264,257 $ 43,091,333
Net realized gains (losses)
on transactions from:
Securities.................. (68,909) 151,339 (958,216) 17,584,819 28,014,567 136,210,030
Futures, written options and
short sales............... -- -- -- 2,034,427 275,477 --
Foreign currency
transactions.............. -- -- -- 754,587 (797,829) --
Change in net unrealized
appreciation (depreciation)
on:
Securities.................. -- (10,070,723) (1,623,256) (9,954,093) (4,120,704) 124,599,254
Futures, written options and
short sales............... -- -- -- 1,831,989 352,272 --
Foreign currency
translations.............. -- -- -- 3,018,058 326,110 --
--------------- ------------- ------------- -------------- -------------- --------------
Net increase (decrease) in
net assets resulting from
operations.................. 9,593,731 9,855,970 4,134,822 71,125,239 33,314,150 303,900,617
--------------- ------------- ------------- -------------- -------------- --------------
FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL
INTERESTS:
Contributions............... 2,390,217,896 297,813,199 108,850,896 481,906,477 80,900,947 698,778,362
Withdrawals................. (2,390,031,840) (239,823,125) (122,003,055) (366,450,838) (128,574,240) (495,301,392)
--------------- ------------- ------------- -------------- -------------- --------------
Net increase (decrease) in
net assets resulting from
transactions in investors'
beneficial interests........ 186,056 57,990,074 (13,152,159) 115,455,639 (47,673,293) 203,476,970
--------------- ------------- ------------- -------------- -------------- --------------
Net increase (decrease) in
net assets.................. 9,779,787 67,846,044 (9,017,337) 186,580,878 (14,359,143) 507,377,587
NET ASSETS:
Beginning of year............ 799,572,598 622,748,334 265,519,988 1,468,787,007 434,085,832 2,198,085,735
--------------- ------------- ------------- -------------- -------------- --------------
End of year.................. $ 809,352,385 $ 690,594,378 $256,502,651 $1,655,367,885 $ 419,726,689 $2,705,463,322
=============== ============= ============= ============== ============== ==============
</Table>
See notes to financial statements.
54
<Table>
<Caption>
GROWTH & EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE
INCOME GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY
-------------- -------------- ------------ ------------ ------------ -------------- ------------ -------------
$ 13,107,310 $ 14,044,832 $ 2,363,116 $ (545,142) $ 436,366 $ 1,933,139 $ (487,624) $ (1,780,244)
115,263,875 31,940,963 42,407,767 12,882,888 11,963,670 237,402,239 8,624,552 53,282,314
218,837 -- -- -- -- 383,845 -- --
-- (195,930) -- -- -- (1,419) -- --
(14,746,118) 124,528,399 28,735,824 14,287,960 16,063,298 (94,435,273) 1,287,183 (6,938,097)
(25,648) -- -- -- -- (63,125) -- --
-- 252,838 -- -- -- (128) -- --
-------------- -------------- ------------ ------------ ------------ -------------- ------------ -------------
113,818,256 170,571,102 73,506,707 26,625,706 28,463,334 145,219,278 9,424,111 44,563,973
-------------- -------------- ------------ ------------ ------------ -------------- ------------ -------------
240,606,463 588,107,212 187,619,787 70,645,237 81,981,796 387,584,089 48,004,475 134,545,173
(281,865,617) (443,755,067) (62,608,934) (52,917,945) (38,596,639) (575,873,750) (32,589,077) (152,715,289)
-------------- -------------- ------------ ------------ ------------ -------------- ------------ -------------
(41,259,154) 144,352,145 125,010,853 17,727,292 43,385,157 (188,289,661) 15,415,398 (18,170,116)
-------------- -------------- ------------ ------------ ------------ -------------- ------------ -------------
72,559,102 314,923,247 198,517,560 44,352,998 71,848,491 (43,070,383) 24,839,509 26,393,857
1,063,389,332 1,975,636,700 216,193,119 165,747,874 100,887,458 1,270,601,125 83,589,643 371,333,010
-------------- -------------- ------------ ------------ ------------ -------------- ------------ -------------
$1,135,948,434 $2,290,559,947 $414,710,679 $210,100,872 $172,735,949 $1,227,530,742 $108,429,152 $ 397,726,867
============== ============== ============ ============ ============ ============== ============ =============
<Caption>
HIGH YIELD INTERNATIONAL
BOND EQUITY
------------ --------------
$ 24,965,405 $ 21,837,655
2,115,482 115,705,922
-- --
(38,584) (1,206,452)
4,878,847 90,404,364
-- --
(2,274) 1,402,931
------------ --------------
31,918,876 228,144,420
------------ --------------
119,654,473 363,246,391
(82,501,587) (238,806,763)
------------ --------------
37,152,886 124,439,628
------------ --------------
69,071,762 352,584,048
282,700,774 1,049,033,896
------------ --------------
$351,772,536 $1,401,617,944
============ ==============
</Table>
55
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
transactions from:
Securities.................... 2,502 1,053,699 9,090,837 33,834,691 (2,378,526) (14,947,882)
Futures, written options and
short sales................. -- -- -- (7,377,329) (381,773) --
Foreign currency
transactions................ -- -- -- (9,734,134) (1,376,703) --
Change in net unrealized
appreciation (depreciation)
on:
Securities.................... -- (6,996,509) (12,217,945) (7,048,140) 61,359,689 432,326,774
Futures, written options and
short sales................. -- -- -- 4,245,398 320,215 --
Foreign currency
translations................ -- -- -- (8,285,094) (677,257) --
--------------- ------------- ------------- -------------- ------------ --------------
Net increase (decrease) 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 TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS:
Contributions................. 4,895,275,949 443,551,095 136,326,640 1,006,604,253 87,161,756 787,647,945
Withdrawals................... (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
transactions in investors'
beneficial interests.......... (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
=============== ============= ============= ============== ============ ==============
</Table>
See notes to financial statements.
56
<Table>
<Caption>
GROWTH & EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE
INCOME GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY
-------------- -------------- ------------ ------------ ------------ -------------- ----------- -------------
$ 9,209,845 $ 5,160,875 $ 630,628 $ (295,799) $ 661,360 $ (259,523) $ (78,423) $ (1,976,889)
(18,757,982) (53,877,311) 16,382,379 7,924,068 3,460,669 93,446,698 3,962,414 28,566,283
393,990 -- -- -- -- 1,993,411 -- --
-- (448,279) 12 -- -- -- -- --
212,270,922 409,432,264 26,563,475 16,015,678 16,155,804 300,788,244 12,202,135 56,018,993
183,859 -- -- -- -- 229,855 -- --
-- (253,185) -- -- -- -- -- --
-------------- -------------- ------------ ------------ ------------ -------------- ----------- -------------
203,300,634 360,014,364 43,576,494 23,643,947 20,277,833 396,198,685 16,086,126 82,608,387
-------------- -------------- ------------ ------------ ------------ -------------- ----------- -------------
426,163,342 842,583,806 152,858,411 117,035,920 74,205,600 619,304,338 60,627,113 219,225,766
(365,696,147) (373,850,553) (27,871,166) (19,202,750) (11,516,201) (750,860,756) (9,645,051) (242,800,742)
-------------- -------------- ------------ ------------ ------------ -------------- ----------- -------------
468,733,253 124,987,245 97,833,170 62,689,399 (131,556,418) 50,982,062 (23,574,976)
60,467,195
-------------- -------------- ------------ ------------ ------------ -------------- ----------- -------------
263,767,829 828,747,617 168,563,739 121,477,117 82,967,232 264,642,267 67,068,188 59,033,411
799,621,503 1,146,889,083 47,629,380 44,270,757 17,920,226 1,005,958,858 16,521,455 312,299,599
-------------- -------------- ------------ ------------ ------------ -------------- ----------- -------------
$1,063,389,332 $1,975,636,700 $216,193,119 $165,747,874 $100,887,458 $1,270,601,125 $83,589,643 $ 371,333,010
============== ============== ============ ============ ============ ============== =========== =============
<Caption>
HIGH YIELD INTERNATIONAL
BOND EQUITY
------------- ---------------
$ 21,480,918 $ 8,873,734
14,222,810 (29,216,895)
-- --
-- 4,292,233
23,379,451 279,190,953
-- --
-- (2,877,612)
------------- ---------------
59,083,179 260,262,413
------------- ---------------
164,492,103 1,663,422,826
(148,960,043) (1,531,539,691)
------------- ---------------
15,532,060 131,883,135
------------- ---------------
74,615,239 392,145,548
208,085,535 656,888,348
------------- ---------------
$ 282,700,774 $ 1,049,033,896
============= ===============
</Table>
57
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
COMMERCIAL PAPER -- 43.2%
$31,650,000 Abbey National NA LLC,
2.17%, 01/04/05.............. $ 31,644,277
18,960,000 Bank of America Corp.,
2.11%, 02/02/05.............. 18,924,440
32,380,000 Barclays US Funding LLC,
2.34%, 02/28/05.............. 32,257,925
32,350,000 Calyon North America, Inc.,
2.24%, 01/19/05.............. 32,313,768
33,780,000 Credit Suisse First Boston NY,
1.95%, 01/03/05.............. 33,776,341
34,990,000 HSBC Americas, Inc.,
2.34%, 01/20/05.............. 34,946,787
32,240,000 ING (US) Funding LLC,
2.28%, 02/04/05.............. 32,170,577
35,100,000 Jupiter Securities
Corp. -- 144A,
2.35%, 01/18/05.............. 35,061,132
35,040,000 Morgan Stanley,
2.34%, 01/25/05.............. 34,985,338
31,410,000 Rabobank USA Financial Corp.,
2.16%, 01/18/05.............. 31,377,962
31,920,000 UBS Finance (Delaware), Inc.,
2.20%, 01/06/05.............. 31,910,247
------------
TOTAL COMMERCIAL PAPER (Cost
$349,368,794)................ 349,368,794
------------
DOMESTIC CERTIFICATES OF DEPOSIT -- 4.3%
34,990,000 Wells Fargo Bank NA,
2.32%, 01/07/05
(Cost $34,990,000)........... 34,990,000
------------
YANKEE CERTIFICATES OF DEPOSIT -- 16.3%
32,280,000 Bank of Montreal,
2.27%, 02/01/05.............. 32,280,000
32,360,000 Dexia Bank,
2.24%, 01/05/05.............. 32,360,000
32,320,000 HBOS Treasury Services PLC,
2.31%, 02/09/05.............. 32,320,000
34,880,000 Toronto Dominion Holdings,
2.39%, 02/25/05.............. 34,880,000
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT (Cost
$131,840,000)................ 131,840,000
------------
MEDIUM TERM CORPORATE NOTES -- 1.6%
13,000,000 Caterpillar Financial Service
Corp., Floating Rate,
2.18%, 07/09/05(a) (Cost
$13,000,000)................. 13,000,000
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 23.3%
FANNIE MAE -- 11.7%
$26,560,000 2.13%, 01/03/05.............. $ 26,556,857
9,260,000 1.87%, 02/23/05.............. 9,234,507
20,200,000 Floating Rate,
1.50%, 02/14/05(a)........... 20,200,000
25,000,000 2.07%, 04/29/05.............. 24,830,785
14,100,000 Floating Rate,
2.36%, 06/09/05(a)........... 14,098,258
------------
94,920,407
------------
FEDERAL HOME LOAN BANK -- 5.5%
7,650,000 1.47%, 03/01/05.............. 7,650,000
20,200,000 1.40%, 04/01/05.............. 20,199,889
16,500,000 1.66%, 05/16/05.............. 16,508,274
------------
44,358,163
------------
FREDDIE MAC -- 6.1%
20,200,000 Floating Rate,
1.50%, 02/14/05(a)........... 20,200,000
15,000,000 2.34%, 03/08/05.............. 14,935,733
14,100,000 Floating Rate,
2.00%, 10/07/05(a)........... 14,100,000
------------
49,235,733
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $188,514,303).......... 188,514,303
------------
SHORT TERM CORPORATE NOTES -- 3.8%
16,900,000 American Express Credit
Company, Floating Rate,
2.38%, 04/05/05(a)........... 16,910,213
14,000,000 Merrill Lynch & Company,
Floating Rate,
2.54%, 03/11/05(a)........... 14,000,000
------------
TOTAL SHORT TERM CORPORATE
NOTES
(Cost $30,910,213)........... 30,910,213
------------
TOTAL SECURITIES
(Cost $748,623,310).......... 748,623,310
------------
</Table>
See notes to financial statements.
58
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 7.4%
$60,210,000 With Barclays Bank PLC, dated
12/31/04, 2.25%, due
01/03/05, repurchase proceeds
at maturity $60,221,289
(Collateralized by Fannie Mae
Discount Note, zero coupon,
due 02/07/05, with a value of
$10,274,250, various Fannie
Maes, 2.00% -- 3.88%, due
03/15/05-01/26/07, with a
total value of $16,412,699,
Federal Home Loan Bank,
2.38%, due 04/05/06, with a
value of $10,514,554, Federal
Home Loan Bank Discount Note,
zero coupon, due 06/03/05,
with a value of $3,405,727,
Freddie Mac, 4.00%, due
08/10/09, with a value of
$10,170,467, and Tennessee
Valley Authority, 6.38%, due
06/15/05, with a value of
$10,636,804)................. $ 60,210,000
6,832 With Investors Bank & Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase proceeds
at maturity $6,833
(Collateralized by Freddie
Mac, 2.95%, due 03/15/32,
with a value of $7,210)...... 6,832
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $60,216,832)........... 60,216,832
------------
Total Investments -- 99.9%
(Cost $808,840,142).......... 808,840,142
Other assets less
liabilities -- 0.1%.......... 512,243
------------
NET ASSETS -- 100.0%........... $809,352,385
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $808,840,142.
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
59
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES -- 76.4%
BANKS -- 17.8%
$1,000,000 Abbey National PLC, Series EMTN,
6.69%, 10/17/05............... $ 1,025,126
6,490,000 ABN AMRO Bank NV (Chicago),
7.25%, 05/31/05............... 6,602,082
5,000,000 Amsouth Bank NA, Series BKNT,
Floating Rate,
2.13%, 01/20/06(b)............ 5,004,810
1,000,000 Bank of America Corp.,
6.20%, 02/15/06............... 1,032,705
4,000,000 Bank of America Corp.,
7.13%, 03/01/09............... 4,471,824
1,500,000 Bank of America Corp., Series
MTN1, Floating Rate,
2.63%, 08/26/05(b)............ 1,502,637
4,100,000 Bank of Montreal-Chicago,
6.10%, 09/15/05............... 4,185,690
3,000,000 Bank of Montreal-Chicago,
7.80%, 04/01/07............... 3,260,286
4,000,000 Bank of Scotland -- 144A,
3.50%, 11/30/07............... 3,988,860
2,000,000 BankBoston NA, Series BKNT,
6.38%, 04/15/08............... 2,157,862
1,000,000 Bayerische Landesbank,
4.13%, 01/14/05............... 1,000,358
2,500,000 Deutsche Bank Financial,
6.70%, 12/13/06............... 2,652,863
2,000,000 Fifth Third Bank,
6.75%, 07/15/05............... 2,040,112
2,000,000 HBOS Treasury Services PLC --
144A,
3.75%, 09/30/08............... 1,998,392
5,333,000 HSBC Bank PLC,
7.63%, 06/15/06............... 5,690,823
1,000,000 HSBC Bank PLC,
6.95%, 03/15/11............... 1,152,514
2,650,000 Inter-American Development Bank,
8.40%, 09/01/09............... 3,143,099
5,000,000 KFW International Finance,
Series DTC,
5.25%, 06/28/06............... 5,162,920
2,000,000 KFW International Finance,
Series DTC,
4.75%, 01/24/07............... 2,063,306
5,000,000 National City Bank, Series BKNT,
2.70%, 08/24/09............... 4,872,050
1,000,000 National Westminster Bank,
7.38%, 10/01/09............... 1,139,590
6,115,000 Nordea Bank (Finland),
6.50%, 01/15/06............... 6,324,151
5,000,000 SouthTrust Bank NA, Series BKNT,
Floating Rate,
2.43%, 12/14/05(b)............ 5,002,740
4,000,000 SunTrust Banks, Inc., Series
BKNT, Floating Rate,
2.56%, 10/03/05(b)............ 4,003,076
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$3,000,000 Svenska Handelsbanken,
8.13%, 08/15/07............... $ 3,327,258
3,000,000 Swiss Bank Corp.,
7.25%, 09/01/06............... 3,189,144
3,000,000 US Bancorp, Series MTNN,
5.10%, 07/15/07............... 3,104,679
2,145,000 US Bank NA (Minnesota), Series
BKNT,
7.30%, 08/15/05............... 2,194,148
3,000,000 US Bank NA, Series BKNT,
Floating Rate,
2.44%, 12/05/05(b)............ 3,001,110
3,500,000 US Central Credit Union,
2.75%, 05/30/08............... 3,390,338
1,500,000 Wachovia Corp.,
7.55%, 08/18/05............... 1,542,872
7,000,000 Wachovia Corp., Floating Rate,
2.50%, 07/20/07(c)............ 7,003,170
3,166,000 Wells Fargo & Company,
6.88%, 04/01/06............... 3,301,951
2,000,000 Wells Fargo & Company, Floating
Rate,
2.56%, 06/12/06(b)............ 2,003,318
4,000,000 Wells Fargo & Company, Floating
Rate,
2.58%, 09/15/06(b)............ 4,006,836
6,000,000 Wells Fargo & Company, Floating
Rate,
2.61%, 09/28/07(b)............ 6,005,784
1,000,000 Wells Fargo & Company, Series
MTNH,
6.75%, 10/01/06............... 1,060,907
------------
122,609,391
------------
BUSINESS SERVICES AND SUPPLIES -- 0.4%
2,500,000 First Data Corp.,
6.75%, 07/15/05............... 2,551,328
------------
FINANCIAL SERVICES -- 9.0%
4,000,000 Associates Corp. NA, Series
MTNH,
7.63%, 04/27/05............... 4,060,384
5,000,000 Citigroup, Inc.,
3.50%, 02/01/08............... 4,981,295
4,500,000 Citigroup, Inc., Floating Rate,
2.50%, 06/04/07(b)............ 4,504,068
3,570,000 General Electric Capital Corp.,
8.30%, 09/20/09............... 4,175,433
1,000,000 General Electric Capital Corp.,
Series MTNA,
8.70%, 03/01/07............... 1,105,288
6,000,000 Goldman Sachs Group, Inc.,
Series MTN1, Floating Rate,
2.20%, 01/09/07(b)............ 6,010,860
8,000,000 Heller Financial, Inc.,
8.00%, 06/15/05............... 8,180,823
</Table>
See notes to financial statements.
60
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$1,000,000 Heller Financial, Inc.,
6.38%, 03/15/06............... $ 1,035,286
7,000,000 Lehman Brothers Holdings, Inc.,
8.25%, 06/15/07............... 7,769,853
2,000,000 Lehman Brothers Holdings, Inc.,
7.00%, 02/01/08............... 2,186,694
5,000,000 Morgan Stanley,
3.88%, 01/15/09............... 4,976,795
2,000,000 Morgan Stanley, Floating Rate,
2.24%, 07/27/07(b)............ 2,001,196
6,000,000 The Bear Stearns Companies,
Inc., Series MTNB, Floating
Rate,
2.76%, 06/19/06(b)............ 6,022,074
2,727,270 Toyota Motor Credit Corp.,
Series MTN,
2.75%, 08/06/09............... 2,672,002
2,500,000 Toyota Motor Credit Corp.,
Series MTN, Floating Rate,
2.42%, 09/09/05(c)............ 2,501,713
------------
62,183,764
------------
FOOD AND BEVERAGE -- 0.9%
6,000,000 Kellogg Company, Series B,
6.00%, 04/01/06............... 6,187,968
------------
INSURANCE -- 0.3%
2,000,000 Met Life Global Funding
I -- 144A,
4.25%, 07/30/09............... 2,015,192
------------
OIL, COAL AND GAS -- 1.2%
3,500,000 ConocoPhillips,
8.75%, 05/25/10............... 4,276,034
3,760,000 Tosco Corp.,
7.25%, 01/01/07............... 4,012,924
------------
8,288,958
------------
PHARMACEUTICALS -- 0.4%
3,000,000 Abbott Laboratories,
5.63%, 07/01/06............... 3,102,723
------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES -- 12.9%
6,575,000 AmeriCredit Auto Receivables
Trust, Series 2002-C, Class
A4,
3.55%, 02/12/09............... 6,601,936
1,741,034 Capital One Auto Finance Trust,
Series 2003-A, Class A3A,
1.83%, 10/15/07............... 1,732,896
3,500,000 Capital One Prime Auto
Receivables Trust, Series
2004-3, Class A4,
3.69%, 06/15/10............... 3,492,344
4,500,000 Carmax Auto Owner Trust, Series
2004-2, Class A4,
3.46%, 09/15/11............... 4,462,112
2,113,988 Chevy Chase Auto Receivables
Trust, Series 2001-2, Class
A4,
4.44%, 04/16/07............... 2,124,930
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES (CONTINUED)
$7,500,000 Fifth Third Auto Trust, Series
2004-A, Class A4,
3.70%, 10/20/11............... $ 7,516,116
4,525,000 Franklin Auto Trust, Series
2003-1, Class A4,
2.27%, 05/20/11............... 4,438,065
2,000,000 Franklin Auto Trust, Series
2004-1, Class A2,
3.57%, 03/16/09............... 1,985,655
3,000,000 Harley-Davidson Motorcycle
Trust, Series 2004-1, Class
A2,
2.53%, 11/15/11............... 2,939,590
2,000,000 Household Automotive Trust,
Series 2003-1, Class A3,
1.73%, 12/17/07............... 1,988,050
1,597,989 Hyundai Auto Receivables Trust,
Series 2002-A, Class A3,
2.80%, 02/15/07............... 1,597,347
942,161 Marshall & Ilsley Auto Loan
Trust, Series 2002-1, Class
A3,
2.49%, 10/22/07............... 942,029
3,500,000 National City Auto Receivables
Trust, Series 2004-A, Class
A3,
2.11%, 07/15/08............... 3,457,066
3,250,000 Onyx Acceptance Auto Trust,
Series 2002-D, Class A4,
3.10%, 07/15/09............... 3,248,758
1,500,000 Onyx Acceptance Auto Trust,
Series 2004-A, Class A3,
2.19%, 03/17/08............... 1,485,337
1,619,990 Provident Auto Lease ABS Trust,
Series 1999-1, Class A2,
7.03%, 01/14/12............... 1,646,761
4,000,000 Regions Auto Receivables Trust,
Series 2003-2, Class A3,
2.31%, 01/15/08............... 3,974,394
193,986 Ryder Vehicle Lease Trust,
Series 2001-A, Class A4,
5.81%, 08/15/06............... 194,721
2,200,000 Ryder Vehicle Lease Trust,
Series 2001-A, Class A5,
6.17%, 11/15/07............... 2,255,298
4,230,568 Susquehanna Auto Lease Trust,
Series 2003-1, Class A3,
2.46%, 01/14/07............... 4,210,581
5,000,000 Triad Auto Receivables Owner
Trust, Series 2002-A, Class
A4,
3.24%, 08/12/09............... 5,006,253
8,000,000 Volkswagen Auto Loan Enhanced
Trust, Series 2003-2, Class
A3,
2.27%, 10/22/07............... 7,943,501
8,500,000 Wachovia Auto Owner Trust,
Series 2004-A, Class A4,
3.66%, 07/20/10............... 8,514,448
</Table>
See notes to financial statements.
61
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES (CONTINUED)
$4,500,000 WFS Financial Owner Trust,
Series 2004-1, Class A4,
2.81%, 08/22/11............... $ 4,420,938
3,000,000 Whole Auto Loan Trust, Series
2003-1, Class A3B,
1.99%, 05/15/07............... 2,974,781
------------
89,153,907
------------
PRIVATE ASSET BACKED: BANKS -- 0.2%
1,550,000 Bank One Issuance Trust, Series
2002-A2, Class A2,
4.16%, 01/15/08............... 1,559,338
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 5.1%
1,625,000 Advanta Business Card Master
Trust, Series 2000-C, Class B,
Floating Rate,
3.11%, 04/20/08(c)............ 1,628,372
1,500,000 Chemical Master Credit Card
Trust 1, Series 1996-2, Class
A,
5.98%, 09/15/08............... 1,539,547
5,000,000 Citibank Credit Card Issuance
Trust, Series 2000-A3, Class
A3,
6.88%, 11/16/09............... 5,444,696
2,000,000 Citibank Credit Card Issuance
Trust, Series 2003-A6, Class
A6,
2.90%, 05/17/10............... 1,948,457
5,375,000 Citibank Omni-S Master Trust,
Series 2000-2, Class A,
6.75%, 09/16/09............... 5,512,569
3,000,000 Fleet Credit Card Master Trust
II, Series 2001-B, Class A,
5.60%, 12/15/08............... 3,097,309
1,700,000 Household Private Label Credit
Card Master Note Trust I,
Series 2002-2, Class A,
Floating Rate,
2.57%, 01/18/11(c)............ 1,704,383
6,000,000 Nordstrom Private Label Credit
Card, Series 2001-1A, Class A,
4.82%, 04/15/10............... 6,145,982
5,500,000 Prime Credit Card Master Trust,
Series 2000-1, Class A,
6.70%, 10/15/09............... 5,670,721
2,570,000 Standard Credit Card Master
Trust, Series 1994-2, Class A,
7.25%, 04/07/08............... 2,699,072
------------
35,391,108
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 5.4%
983,367 Caterpillar Financial Asset
Trust, Series 2002-A, Class
A3,
3.15%, 02/25/08............... 985,437
2,358,489 Caterpillar Financial Asset
Trust, Series 2003-A, Class
A3,
1.66%, 12/26/07............... 2,336,123
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL SERVICES
(CONTINUED)
$4,500,000 Caterpillar Financial Asset
Trust, Series 2004-A, Class
A3,
3.13%, 01/26/09............... $ 4,484,888
3,765,695 Community Program Loan Trust,
Series 1987-A, Class A4,
4.50%, 10/01/18............... 3,769,003
1,271,330 Distribution Financial Services
Trust, Series 2001-1, Class
A4,
5.67%, 01/17/17............... 1,285,799
3,000,000 First National Master Note
Trust, Series 2003-1, Class A,
Floating Rate,
2.50%, 08/15/08(c)............ 3,005,478
1,550,000 Morgan Stanley Capital I, Series
2001-IQA, Class A2,
5.33%, 12/18/32............... 1,603,900
237,309 Morgan Stanley Capital I, Series
2002-HQ, Class A1,
4.59%, 04/15/34............... 239,812
1,057,522 Morgan Stanley Capital I, Series
2002-IQ2, Class A1,
4.09%, 12/15/35............... 1,065,657
1,716,191 Morgan Stanley Capital I, Series
2003-T11, Class A1,
3.26%, 06/13/41............... 1,695,590
1,782,125 Morgan Stanley Capital I, Series
2004-T13, Class A1,
2.85%, 09/13/45............... 1,745,306
385,403 Morgan Stanley Capital, Series
1999-RM1, Class A1,
6.37%, 12/15/31............... 397,864
736,186 Morgan Stanley Capital, Series
2001-TOP3, Class A1,
5.31%, 07/15/33............... 747,635
468,847 Nations Credit Grantor Trust,
Series 1997, Class A,
6.75%, 08/15/13............... 475,252
3,113,061 Navistar Financial Corp. Owner
Trust, Series 2001-B, Class
A4,
4.37%, 11/17/08............... 3,124,655
2,150,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A3,
5.98%, 06/15/08............... 2,209,422
3,550,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A5,
6.45%, 03/15/13............... 3,949,157
3,792,158 Public Service New Hampshire
Funding LLC, Series 2001-1,
Class A2,
5.73%, 11/01/10............... 3,943,347
------------
37,064,325
------------
</Table>
See notes to financial statements.
62
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 10.2%
$4,007,984 Banc of America Commercial
Mortgage, Inc., Series 2002-2,
Class A1,
3.37%, 07/11/43............... $ 3,998,223
2,714,041 Banc of America Commercial
Mortgage, Inc., Series 2003-2,
Class A1,
3.41%, 03/11/41............... 2,691,340
36,686 BankBoston Home Equity Loan
Trust, Series 1998-1, Class
A4,
6.42%, 01/25/21............... 36,637
2,187,194 Bear Stearns Commercial Mortgage
Securities, Inc., Series
1998-C1, Class A1,
6.34%, 06/16/30............... 2,271,352
998,390 Bear Stearns Commercial Mortgage
Securities, Inc., Series
1999-C1, Class A1,
5.91%, 02/14/31............... 1,037,329
1,730,871 Bear Stearns Commercial Mortgage
Securities, Inc., Series
2001-TOP4, Class A1,
5.06%, 11/15/16............... 1,783,675
898,598 Bear Stearns Commercial Mortgage
Securities, Inc., Series
2002-PBW1, Class A1,
3.97%, 11/11/35............... 897,941
1,957,711 Bear Stearns Commercial Mortgage
Securities, Inc., Series
2004-PWR5, Class A1,
3.76%, 07/11/42............... 1,952,028
2,503,349 Commercial Mortgage Pass-Through
Certificates, Series
2004-LB2A, Class A1,
2.96%, 03/10/39............... 2,453,793
2,221,437 Contimortgage Home Equity Loan
Trust, Series 1998-2, Class
A7,
6.57%, 03/15/23............... 2,275,880
522,527 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2001-CF2, Class A1,
5.26%, 02/15/34............... 525,817
4,047,771 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2003-C3, Class A1,
2.08%, 05/15/38............... 3,924,230
4,194,746 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2004-C1, Class A1,
2.25%, 01/15/37............... 4,107,573
54,933 DLJ Commercial Mortgage Corp.,
Series 1998-CG1, Class A1A,
6.11%, 06/10/31............... 55,009
3,000,000 Equity One ABS, Inc., Series
2004-3, Class AF2,
3.80%, 07/25/34............... 2,989,562
19,961 General Electric Capital
Commercial Mortgage Corp.,
Series 2001-2, Class A1,
5.26%, 08/11/33............... 19,973
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY
(CONTINUED)
$ 853,188 General Electric Capital
Commercial Mortgage Corp.,
Series 2001-3, Class A1,
5.56%, 06/10/38............... $ 893,688
597,248 General Electric Capital
Commercial Mortgage Corp.,
Series 2002-1, Class A1,
5.03%, 12/10/35............... 609,780
3,737,611 General Electric Capital
Commercial Mortgage Corp.,
Series 2002-3A, Class A1,
4.23%, 12/10/37............... 3,771,299
3,085,473 General Electric Capital
Commercial Mortgage Corp.,
Series 2004-C3, Class A1,
3.75%, 07/10/39............... 3,080,434
2,200,000 GMAC Mortgage Corp. Loan Trust,
Series 2004-GH1, Class A2,
4.39%, 12/25/25............... 2,213,258
655,629 IMC Home Equity Loan Trust,
Series 1997-3, Class A7,
7.08%, 08/20/28............... 655,189
1,437,009 Interstar Millennium Trust,
Series 2003-3G, Class A2,
Floating Rate,
2.80%, 09/27/35(b)............ 1,437,974
2,292,596 Interstar Millennium Trust,
Series 2004-2G, Class A,
Floating Rate,
2.68%, 03/14/36(b)............ 2,294,907
865,125 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2002-C2, Class A1,
4.33%, 12/12/34............... 871,893
1,935,311 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A1,
2.72%, 03/15/27............... 1,900,120
1,850,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A2,
3.32%, 03/15/27............... 1,821,275
2,938,600 LB-UBS Commercial Mortgage
Trust, Series 2003-C3, Class
A1,
2.60%, 05/15/27............... 2,862,214
3,000,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C5, Class
A2,
3.48%, 07/15/27............... 2,954,589
1,987,297 LB-UBS Commercial Mortgage
Trust, Series 2004-C8, Class
A1,
3.94%, 12/15/29............... 1,993,865
3,400,000 Residential Asset Mortgage
Products, Inc., Series
2003-RS11, Class AI4,
4.26%, 06/25/29............... 3,402,362
</Table>
See notes to financial statements.
63
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY
(CONTINUED)
$ 335,840 Travelers Mortgage Securities
Corp., Series 1, Class Z2,
12.00%, 03/01/14.............. $ 340,085
3,446,632 Vendee Mortgage Trust, Series
1996-1, Class 1K,
6.75%, 11/15/12............... 3,508,689
5,124,704 Wachovia Bank Commercial
Mortgage Trust, Series 2003-4,
Class A1,
3.00%, 04/15/35............... 5,043,907
------------
70,675,890
------------
PRIVATE ASSET BACKED: OTHER -- 7.3%
2,312,782 Bear Stearns Asset Backed
Securities, Inc., Series
2003-AC3, Class A1,
4.00%, 07/25/33............... 2,287,021
4,672,000 California Infrastructure PG&E
Corp., Series 1997-1, Class
A8,
6.48%, 12/26/09............... 4,993,179
3,093,780 California Infrastructure SCE-1,
Series 1997-1, Class A6,
6.38%, 09/25/08............... 3,191,597
459,777 CIT Equipment Collateral, Series
2002-VT1, Class A3,
4.03%, 01/20/06............... 461,061
2,500,000 CIT Equipment Collateral, Series
2003-VT1, Class A3B,
1.63%, 04/20/07............... 2,478,116
2,000,000 CIT Equipment Collateral, Series
2004-VT1, Class A3,
2.20%, 03/20/08............... 1,976,362
3,000,000 CIT RV Trust, Series 1998-A,
Class A5,
6.12%, 11/15/13............... 3,092,782
5,000,000 CNH Equipment Trust, Series
2004-A, Class A3B,
2.94%, 10/15/08............... 4,953,920
2,000,000 CNH Wholesale Master Note Trust,
Series 2003-1, Class A,
Floating Rate,
2.60%, 08/15/08(c)............ 2,000,659
6,000,000 Connecticut RRB Special Purpose
Trust CL&P1, Series 2001-1,
Class A3,
5.73%, 03/30/09............... 6,202,822
2,449,043 Crusade Global Trust, Series
2004-2, Class A1, Floating
Rate,
2.46%, 11/19/37(b)............ 2,448,859
4,000,000 GE Dealer Floorplan Master Note
Trust, Series 2004-2, Class A,
Floating Rate,
2.22%, 07/20/09(c)............ 4,009,355
2,600,000 Illinois Power Special Purpose
Trust, Series 1998-1, Class
A6,
5.54%, 06/25/09............... 2,686,997
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: OTHER (CONTINUED)
$4,837,875 Nelnet Student Loan Corp.,
Series 2001-A, Class A1,
5.76%, 07/01/12............... $ 5,000,753
2,221,186 PBG Equipment Trust, Series 1A,
Class A,
6.27%, 01/20/12............... 2,257,174
2,400,000 Providian Gateway Master Trust,
Series 2004-FA, Class A,
3.65%, 11/15/11............... 2,389,500
------------
50,430,157
------------
PRIVATE ASSET BACKED: RECEIVABLES -- 0.5%
3,774,304 Alter Moneta Receivables LLC,
Series 2003-1,
2.56%, 03/15/11............... 3,762,791
------------
PRIVATE ASSET BACKED: TRANSPORTATION -- 1.3%
2,150,000 E-Trade RV and Marine Trust,
Series 2004-1, Class A3,
3.62%, 10/08/18............... 2,139,922
1,452,531 Railcar Leasing LLC, Series 1,
Class A1,
6.75%, 07/15/06............... 1,491,263
5,000,000 Railcar Leasing LLC, Series 1,
Class A2,
7.13%, 01/15/13............... 5,518,275
------------
9,149,460
------------
PRIVATE ASSET BACKED: UTILITIES -- 1.1%
5,000,000 PECO Energy Transition Trust,
Series 1999-A, Class A6,
6.05%, 03/01/09............... 5,197,540
2,000,000 PECO Energy Transition Trust,
Series 2001-A, Class A1,
6.52%, 12/31/10............... 2,223,373
------------
7,420,913
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
875,000 AvalonBay Communities,
6.63%, 01/15/05............... 875,850
------------
SPECIAL PURPOSE ENTITY -- 1.1%
2,500,000 New York Life Global Funding --
144A,
3.88%, 01/15/09............... 2,488,623
5,000,000 New York Life Global Funding --
144A, Floating Rate,
2.44%, 02/26/07(b)............ 5,003,420
------------
7,492,043
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.8%
5,000,000 Verizon Wireless Capital,
5.38%, 12/15/06............... 5,181,410
------------
</Table>
See notes to financial statements.
64
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES: ELECTRIC -- 0.4%
$2,500,000 Atlantic City Electric, Series
AMBC,
6.67%, 03/23/05............... $ 2,520,823
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $533,442,180)........... 527,617,339
------------
US TREASURY SECURITIES -- 3.4%
US TREASURY NOTES
24,000,000 2.75%, 08/15/07(d)
(Cost $24,008,465)............ 23,744,064
------------
US GOVERNMENT AGENCY SECURITIES -- 16.4%
FANNIE MAE -- 3.7%
1,533,785 PL# 254062, 6.00%, 10/01/11..... 1,611,464
2,899,615 PL# 254754, 4.50%, 05/01/10..... 2,920,053
3,979,381 PL# 254758, 4.50%, 06/01/13..... 4,006,187
2,041,156 PL# 254805, 5.00%, 06/01/13..... 2,107,505
4,050,262 PL# 254807, 5.00%, 07/01/13..... 4,181,918
1,010,633 PL# 323743, 5.00%, 04/01/14..... 1,030,328
649,818 PL# 429168, 6.00%, 05/01/13..... 682,580
611,001 PL# 50903, 6.00%, 09/01/08...... 636,479
768,288 PL# 50973, 6.00%, 01/01/09...... 800,325
652,578 PL# 517699, 6.00%, 07/01/14..... 685,251
2,233,733 PL# 545038, 6.00%, 09/01/14..... 2,346,917
3,640,714 PL# 555154, 5.50%, 12/01/22..... 3,727,657
598,789 PL# 609771, 6.00%, 09/01/08..... 627,497
------------
25,364,161
------------
FEDERAL FARM CREDIT BANK -- 1.2%
8,500,000 2.50%, 11/15/05................. 8,472,180
------------
FEDERAL HOME LOAN BANK -- 1.1%
7,437,647 Series 6T-9009,
3.84%, 11/25/09............... 7,381,322
------------
FREDDIE MAC GOLD -- 0.7%
7,966 PL# D06777, 7.50%, 03/01/08..... 8,363
258,908 PL# E00532, 6.50%, 02/01/13..... 274,499
446,075 PL# E00542, 6.50%, 04/01/13..... 472,940
1,069,679 PL# E00676, 5.50%, 06/01/14..... 1,107,880
1,551,942 PL# E89557, 5.50%, 04/01/17..... 1,605,396
1,576,921 PL# M90802, 4.00%, 03/01/08..... 1,583,986
------------
5,053,064
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.4%
2,346,949 PL# 436708, 5.75%, 12/15/22..... 2,440,734
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 8.6%
3,149,473 Fannie Mae -- ACES, Series
1998-M1, Class A2,
6.25%, 01/25/08............... 3,321,659
2,218,854 Fannie Mae, Series 1993-234,
Class PC,
5.50%, 12/25/08............... 2,258,021
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND
HOME EQUITY (CONTINUED)
$5,000,000 Fannie Mae, Series 2003-46,
Class PQ,
3.00%, 06/25/19............... $ 4,929,068
2,550,000 Fannie Mae, Series 2003-62,
Class OD,
3.50%, 04/25/26............... 2,480,019
3,727,069 Fannie Mae, Series 2003-63,
Class GU,
4.00%, 07/25/33............... 3,718,720
1,500,000 Fannie Mae, Series 2003-67,
Class GL,
3.00%, 01/25/25............... 1,469,460
5,566,165 Fannie Mae, Series 2003-69,
Class GJ,
3.50%, 12/25/31............... 5,383,139
4,087,000 Fannie Mae, Series 2004-21,
Class QA,
4.00%, 11/25/17............... 4,101,668
4,115,570 Fannie Mae, Series 2004-70,
Class DN,
4.00%, 12/25/29............... 4,066,214
6,700,000 Fannie Mae, Series 2004-80,
Class LG,
4.00%, 10/25/16............... 6,713,312
7,093,322 Federal Home Loan Bank, Series
1Y-9009, Class A,
4.06%, 08/25/09............... 7,093,613
3,678,201 Federal Home Loan Bank, Series
3Q-9009, Class 1,
3.92%, 09/25/09............... 3,663,639
1,416,456 Freddie Mac, Series 2557, Class
MA,
4.50%, 07/15/16............... 1,420,966
3,108,702 Freddie Mac, Series 2614, Class
JA,
3.76%, 03/15/29............... 3,055,438
961,371 Freddie Mac, Series 2640, Class
PA,
5.00%, 02/15/11............... 963,230
5,000,000 Freddie Mac, Series 2760, Class
EA,
4.50%, 04/15/13............... 5,072,252
------------
59,710,418
------------
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES -- 0.7%
5,000,000 Student Loan Marketing
Association Student Loan
Trust, Series 2003-4, Class
A5B,
3.39%, 03/15/33............... 4,908,075
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$114,313,527)................. 113,329,954
------------
</Table>
See notes to financial statements.
65
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
- --------- ------------
FOREIGN GOVERNMENT OBLIGATIONS -- 3.1%
$3,000,000 Hydro Quebec, Series MTNB,
7.00%, 04/12/05............... $ 3,034,674
5,000,000 Hydro Quebec, Series MTNB,
6.52%, 02/23/06............... 5,188,255
3,500,000 Province of British Columbia,
4.63%, 10/03/06............... 3,584,469
5,000,000 Province of Manitoba,
4.25%, 11/20/06............... 5,101,150
4,000,000 Province of Ontario,
5.50%, 10/01/08............... 4,244,420
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$21,065,627).................. 21,152,968
------------
SECURITIES LENDING COLLATERAL -- 3.6%
24,475,000 Securities Lending Collateral
Investment (Note 4)
(Cost $24,475,000)............ 24,475,000
------------
TOTAL SECURITIES (Cost
$717,304,799)................. 710,319,325
------------
REPURCHASE AGREEMENTS -- 0.1%
698,287 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase
proceeds at maturity $698,397
(Collateralized by Small
Business Administration,
5.13%, due 11/25/15, with a
value of $733,202) (Cost
$698,287)..................... 698,287
------------
Total Investments -- 103.0%
(Cost $718,003,086)........... 711,017,612
Liabilities less other
assets -- (3.0)%.............. (20,423,234)
------------
NET ASSETS -- 100.0%............ $690,594,378
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $718,003,086.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 1,352,114
Gross unrealized depreciation........... (8,337,588)
-----------
Net unrealized depreciation............. $(6,985,474)
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
66
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- -------------
US TREASURY SECURITIES -- 67.6%
US TREASURY NOTES
$53,997,000 1.63%, 01/31/05(d)............ $ 54,005,477
3,615,000 1.50%, 07/31/05............... 3,593,961
4,575,000 5.63%, 02/15/06............... 4,717,973
4,760,000 2.00%, 05/15/06............... 4,705,336
3,135,000 4.63%, 05/15/06............... 3,208,234
4,315,000 2.38%, 08/15/06(d)............ 4,275,393
2,300,000 6.50%, 10/15/06............... 2,438,541
2,175,000 3.25%, 08/15/07(d)............ 2,178,908
16,185,000 3.00%, 11/15/07(d)............ 16,090,172
2,325,000 3.00%, 02/15/08............... 2,306,746
2,855,000 2.63%, 05/15/08............... 2,792,102
2,300,000 3.13%, 09/15/08............... 2,277,810
2,500,000 3.13%, 10/15/08............... 2,474,123
1,700,000 4.75%, 11/15/08............... 1,781,083
2,142,000 3.38%, 12/15/08............... 2,135,893
2,000,000 3.25%, 01/15/09............... 1,983,282
2,250,000 3.00%, 02/15/09............... 2,209,309
2,545,000 3.13%, 04/15/09............... 2,507,225
16,237,000 4.00%, 06/15/09............... 16,550,959
1,995,000 3.38%, 09/15/09............... 1,977,388
7,494,000 3.50%, 11/15/09(d)............ 7,461,221
4,091,000 5.00%, 02/15/11............... 4,353,241
6,000,000 4.88%, 02/15/12............... 6,343,596
5,417,000 3.88%, 02/15/13............... 5,346,330
3,901,000 4.00%, 02/15/14............... 3,848,430
2,861,000 4.75%, 05/15/14............... 2,982,369
2,998,000 4.25%, 08/15/14(d)............ 3,005,615
5,854,000 4.25%, 11/15/14(d)............ 5,871,152
-------------
TOTAL US TREASURY SECURITIES
(Cost $173,573,532)......... 173,421,869
-------------
US GOVERNMENT AGENCY SECURITIES -- 27.6%
FANNIE MAE -- 19.3%
3,514,389 PL# 648688, 6.50%, 07/01/32... 3,708,190
4,885,582 PL# 777050, 5.00%, 04/01/34... 4,851,353
6,128,639 PL# 798330, 5.00%, 09/01/34... 6,094,603
24,589,000 TBA, 5.00%, 01/01/35.......... 24,396,911
10,000,000 TBA, 6.50%, 01/01/35.......... 10,487,500
-------------
49,538,557
-------------
FREDDIE MAC -- 8.3%
17,177,000 2.88%, 05/15/07(d)............ 17,011,396
4,350,000 4.50%, 07/15/13............... 4,376,061
-------------
21,387,457
-------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $70,893,203).......... 70,926,014
-------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- -------------
CORPORATE BONDS AND NOTES -- 16.4%
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES -- 6.6%
$ 4,418,000 Carmax Auto Owner Trust,
Series 2004-2, Class A4,
3.46%, 09/15/11............. $ 4,380,803
1,651,000 Onyx Acceptance Auto Trust,
Series 2003-C, Class A4,
2.66%, 05/17/10............. 1,627,460
2,409,000 Wells Fargo Financial Auto
Owner Trust, Series 2004-A,
Class A4,
2.67%, 08/16/10............. 2,371,982
6,489,000 WFS Financial Owner Trust,
Series 2003-1, Class A4,
2.74%, 09/20/10............. 6,445,040
2,204,000 Whole Auto Loan Trust, Series
2004-1, Class A4,
3.26%, 03/15/11............. 2,184,066
-------------
17,009,351
-------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 2.0%
5,000,000 Chase Credit Card Master
Trust, Series 2002-6, Class
A, Floating Rate,
2.46%, 01/15/08(c).......... 5,005,257
-------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 1.3%
1,794,000 Navistar Financial Corp. Owner
Trust, Series 2004-A, Class
A4,
2.59%, 03/15/11............. 1,752,067
1,465,000 WFS Financial Owner Trust,
Series 2004-4, Class A4,
3.44%, 05/17/12............. 1,459,860
-------------
3,211,927
-------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 4.3%
2,656,000 Chase Funding Mortgage Loan,
Series 2004-1, Class 1A2,
2.43%, 06/25/19............. 2,622,674
4,690,678 Saxon Asset Securities Trust,
Series 2004-1, Class A,
Floating Rate,
2.69%, 03/25/35(c).......... 4,688,734
3,709,000 Wells Fargo Home Equity Trust,
Series 2004-2, Class AI3,
3.97%, 09/25/24............. 3,694,250
-------------
11,005,658
-------------
PRIVATE ASSET BACKED: OTHER -- 1.5%
3,837,000 CNH Equipment Trust, Series
2003-B, Class A4B,
3.38%, 02/15/11............. 3,821,424
-------------
PRIVATE ASSET BACKED: UTILITIES -- 0.7%
1,510,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A8,
6.89%, 12/15/17............. 1,767,980
-------------
TOTAL CORPORATE BONDS AND
NOTES
(Cost $41,979,899).......... 41,821,597
-------------
</Table>
See notes to financial statements.
67
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- -------------
SECURITIES LENDING COLLATERAL -- 25.0%
$64,248,067 Securities Lending Collateral
Investment (Note 4)
(Cost $64,248,067).......... $ 64,248,067
-------------
TOTAL SECURITIES
(Cost $350,694,701)......... 350,417,547
-------------
REPURCHASE AGREEMENTS -- 2.4%
6,103,722 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase
proceeds at maturity
$6,104,678 (Collateralized
by various Small Business
Administrations,
5.13% -- 5.25%, due
11/25/15-04/25/28, with a
total value of $6,408,908)
(Cost $6,103,722)........... 6,103,722
-------------
Total Investments -- 139.0%
(Cost $356,798,423)......... 356,521,269
Liabilities less other
assets -- (39.0)%........... (100,018,618)
-------------
NET ASSETS -- 100.0%.......... $ 256,502,651
=============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $356,911,054.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 561,701
Gross unrealized depreciation........... (951,486)
---------
Net unrealized depreciation............. $(389,785)
=========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
68
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US TREASURY SECURITIES -- 27.3%
US TREASURY BONDS -- 10.4%
$ 13,125,000 10.38%, 11/15/12(d)......... $ 15,652,599
12,395,000 12.00%, 08/15/13(d)......... 15,978,903
14,770,000 8.13%, 08/15/19(d).......... 20,164,521
8,090,000 8.50%, 02/15/20............. 11,420,176
4,600,000 6.00%, 02/15/26............. 5,270,777
16,850,000 6.75%, 08/15/26(d).......... 21,023,020
21,590,000 6.13%, 11/15/27(d).......... 25,222,366
11,905,000 5.50%, 08/15/28............. 12,889,032
41,580,000 5.38%, 02/15/31(d).......... 44,974,633
--------------
172,596,027
--------------
US TREASURY NOTES -- 16.9%
50,755,000 2.38%, 08/31/06(d).......... 50,265,315
43,435,000 2.50%, 09/30/06(d).......... 43,073,621
64,985,000 2.50%, 10/31/06(d).......... 64,398,640
31,350,000 2.88%, 11/30/06............. 31,261,844
71,800,000 3.00%, 11/15/07(d).......... 71,379,323
8,510,000 3.50%, 11/15/09(d).......... 8,472,777
9,795,000 3.50%, 12/15/09(d).......... 9,750,619
645,000 4.25%, 11/15/14(d).......... 646,890
--------------
279,249,029
--------------
TOTAL US TREASURY SECURITIES
(Cost $451,580,634)....... 451,845,056
--------------
US GOVERNMENT AGENCY SECURITIES -- 43.3%
FANNIE MAE -- 28.2%
2,760,000 1.75%, 06/16/06............. 2,707,408
25,850,000 2.71%, 01/30/07............. 25,570,665
14,090,000 2.35%, 04/05/07............. 13,803,099
9,405,000 6.00%, 05/15/11............. 10,361,141
10,060,000 5.50%, 07/18/12............. 10,182,611
585,531 PL# 252571, 7.00%,
07/01/29.................. 621,400
10,102 PL# 252716, 7.00%,
09/01/29.................. 10,720
2,194 PL# 253264, 7.00%,
05/01/30.................. 2,327
2,450 PL# 253346, 7.50%,
06/01/30.................. 2,626
30,682 PL# 253479, 7.00%,
10/01/30.................. 32,545
18,552 PL# 253698, 6.00%,
02/01/16(e)............... 19,464
70,130 PL# 253990, 7.00%,
09/01/16.................. 74,373
56,987 PL# 254008, 7.00%,
10/01/31.................. 60,430
275,605 PL# 254141, 6.00%,
01/01/17(e)............... 289,067
186,834 PL# 254342, 6.00%,
06/01/17.................. 195,949
704,331 PL# 254346, 6.50%,
06/01/32.................. 739,500
342,534 PL# 254403, 6.00%,
08/01/17.................. 359,245
608,486 PL# 254406, 6.50%,
08/01/32.................. 638,870
69,384 PL# 254623, 6.00%,
01/01/18(e)............... 72,768
272,962 PL# 254804, 5.50%,
06/01/18.................. 282,423
93,855 PL# 255357, 5.50%,
08/01/19(e)............... 97,090
417,118 PL# 255559, 5.50%,
12/01/19(e)............... 431,495
1,962 PL# 259141, 7.50%,
12/01/30.................. 2,103
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 10,390 PL# 323250, 6.00%,
08/01/13.................. $ 10,916
1,631,909 PL# 323842, 5.50%,
07/01/14.................. 1,691,700
102,846 PL# 323967, 7.00%,
10/01/29.................. 109,146
48,471 PL# 357513, 5.50%,
02/01/34(e)............... 49,252
434,018 PL# 357605, 6.50%,
08/01/34.................. 455,439
10,139 PL# 492742, 7.00%,
05/01/29.................. 10,761
7,586 PL# 503916, 7.50%,
06/01/29.................. 8,134
5,807 PL# 508415, 7.00%,
08/01/29.................. 6,162
28,899 PL# 515946, 7.00%,
10/01/29.................. 30,670
597 PL# 524164, 7.00%,
11/01/29.................. 634
120,062 PL# 524657, 7.00%,
01/01/30.................. 127,353
78,967 PL# 526053, 7.00%,
12/01/29.................. 83,804
1,408 PL# 527717, 7.50%,
01/01/30.................. 1,510
9,164 PL# 528107, 7.00%,
02/01/30.................. 9,725
3,017 PL# 531092, 7.50%,
10/01/29.................. 3,234
31,264 PL# 531497, 7.00%,
02/01/30.................. 33,163
22,751 PL# 531735, 7.00%,
02/01/30.................. 24,133
3,161 PL# 533841, 7.50%,
12/01/30.................. 3,388
49,255 PL# 535030, 7.00%,
12/01/29.................. 52,272
70,070 PL# 535103, 7.00%,
01/01/15.................. 74,311
19,972 PL# 535159, 7.00%,
02/01/30.................. 21,196
86,215 PL# 535195, 7.00%,
03/01/30.................. 91,496
33,726 PL# 535277, 7.00%,
04/01/30.................. 35,792
923,622 PL# 535675, 7.00%,
01/01/16.................. 979,554
2,057 PL# 535722, 7.00%,
02/01/31.................. 2,182
14,089 PL# 535723, 7.00%,
02/01/31.................. 14,945
3,160 PL# 535811, 6.50%,
04/01/31.................. 3,318
232,237 PL# 535880, 7.00%,
02/01/31.................. 246,363
753 PL# 538314, 7.50%,
05/01/30.................. 807
3,306 PL# 540211, 7.50%,
06/01/30.................. 3,543
6,143 PL# 542999, 7.50%,
08/01/30.................. 6,585
221,036 PL# 545194, 7.00%,
08/01/31.................. 234,389
77,639 PL# 545477, 7.00%,
03/01/32.................. 82,327
476,562 PL# 545759, 6.50%,
07/01/32.................. 500,357
1,797,001 PL# 545760, 6.50%,
07/01/32.................. 1,886,729
358,202 PL# 545762, 6.50%,
07/01/32.................. 376,088
478,693 PL# 545814, 6.50%,
08/01/32.................. 502,595
74,222 PL# 545815, 7.00%,
07/01/32.................. 78,705
582,882 PL# 545967, 5.50%,
10/01/17(e)............... 603,231
70,650 PL# 548822, 7.00%,
08/01/30.................. 74,941
58,763 PL# 549659, 7.00%,
02/01/16.................. 62,318
31,835 PL# 549962, 7.00%,
10/01/30.................. 33,768
55,213 PL# 549975, 7.00%,
10/01/30.................. 58,566
24,347 PL# 550440, 7.00%,
02/01/16.................. 25,820
1,701 PL# 550544, 7.50%,
09/01/30.................. 1,824
8,069 PL# 552603, 7.00%,
10/01/30.................. 8,559
90,012 PL# 554493, 7.00%,
10/01/30.................. 95,479
458,205 PL# 555114, 5.50%,
12/01/17(e)............... 474,201
</Table>
See notes to financial statements.
69
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 70,469 PL# 555144, 7.00%,
10/01/32.................. $ 74,737
505,386 PL# 555229, 6.00%,
10/01/17(e)............... 530,070
866,866 PL# 555254, 6.50%,
01/01/33.................. 910,285
486,931 PL# 555798, 6.50%,
05/01/33.................. 511,320
721,388 PL# 555878, 6.00%,
03/01/18.................. 756,622
424,522 PL# 555919, 5.50%,
10/01/18(e)............... 439,236
2,531 PL# 558362, 7.50%,
11/01/30.................. 2,713
851 PL# 558519, 7.50%,
11/01/30.................. 912
11,713 PL# 559277, 7.00%,
10/01/30.................. 12,424
68,563 PL# 559313, 7.00%,
12/01/30.................. 72,727
4,164 PL# 559741, 7.50%,
01/01/31.................. 4,463
34,750 PL# 560384, 7.00%,
11/01/30.................. 36,860
1,502 PL# 560596, 7.50%,
01/01/31.................. 1,610
4,521 PL# 561678, 7.50%,
12/01/30.................. 4,845
2,619 PL# 564080, 7.50%,
12/01/30.................. 2,807
41,890 PL# 564183, 7.00%,
12/01/30.................. 44,434
3,341 PL# 564529, 7.50%,
12/01/30.................. 3,580
23,139 PL# 566658, 7.00%,
02/01/31.................. 24,537
71,555 PL# 574885, 6.00%,
05/01/16.................. 75,050
6,593 PL# 575285, 7.50%,
03/01/31.................. 7,066
61,777 PL# 575515, 6.00%,
06/01/17.................. 64,791
15,720 PL# 577525, 6.00%,
05/01/16(e)............... 16,488
16,466 PL# 579161, 6.50%,
04/01/31.................. 17,291
226,872 PL# 579224, 6.00%,
04/01/16.................. 237,953
565,014 PL# 580055, 5.50%,
07/01/16.................. 585,049
46,534 PL# 580179, 7.00%,
10/01/16.................. 49,350
2,966 PL# 580377, 7.50%,
04/01/31.................. 3,179
31,650 PL# 584811, 7.00%,
05/01/31.................. 33,562
284,335 PL# 585248, 7.00%,
06/01/31.................. 301,602
67,509 PL# 589395, 6.00%,
07/01/16.................. 70,806
7,379 PL# 589405, 7.50%,
06/01/31.................. 7,909
23,297 PL# 589893, 7.00%,
06/01/31.................. 24,705
4,816 PL# 592129, 7.50%,
06/01/31.................. 5,161
12,668 PL# 596895, 6.50%,
07/01/31.................. 13,303
172,753 PL# 596922, 6.00%,
08/01/16.................. 181,190
37,646 PL# 598125, 7.00%,
09/01/16.................. 39,924
512,823 PL# 598422, 5.50%,
01/01/17(e)............... 531,008
68,384 PL# 600259, 6.00%,
08/01/16.................. 71,724
507,442 PL# 601426, 6.00%,
11/01/16(e)............... 532,227
604,432 PL# 602050, 6.00%,
09/01/16.................. 633,954
16,653 PL# 606551, 6.50%,
10/01/31.................. 17,487
8,064 PL# 606600, 7.00%,
10/01/31.................. 8,552
83,153 PL# 607386, 5.50%,
11/01/16(e)............... 86,101
262,220 PL# 609539, 6.00%,
10/01/16(e)............... 275,027
26,412 PL# 610128, 7.00%,
10/01/31.................. 28,008
302,925 PL# 610579, 5.50%,
12/01/16(e)............... 313,667
73,986 PL# 610599, 5.50%,
02/01/17(e)............... 76,569
633,730 PL# 610759, 6.00%,
11/01/16(e)............... 664,683
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 66,691 PL# 610987, 6.00%,
10/01/16(e)............... $ 69,948
51,127 PL# 611323, 7.00%,
10/01/16.................. 54,220
33,330 PL# 611695, 5.50%,
12/01/16(e)............... 34,512
274,213 PL# 614934, 6.00%,
12/01/16(e)............... 287,606
495,990 PL# 616908, 6.00%,
12/01/16.................. 520,215
3,254,645 PL# 619054, 5.50%,
02/01/17.................. 3,368,266
91,519 PL# 621656, 6.00%,
01/01/17(e)............... 95,984
11,730 PL# 622119, 6.50%,
01/01/32.................. 12,318
365,670 PL# 624035, 6.50%,
01/01/32.................. 385,257
487,177 PL# 625942, 5.50%,
03/01/17.................. 504,185
18,224 PL# 629236, 6.50%,
02/01/32.................. 19,134
91,239 PL# 629603, 5.50%,
02/01/17.................. 94,474
65,966 PL# 630312, 6.00%,
03/01/17.................. 69,184
464,744 PL# 630962, 6.50%,
02/01/32.................. 487,950
633,469 PL# 631068, 6.00%,
03/01/17.................. 664,373
648,480 PL# 631287, 6.00%,
03/01/17(e)............... 680,117
1,140,321 PL# 631321, 5.50%,
02/01/17.................. 1,180,130
3,000,000 PL# 631323, 5.50%,
02/01/17.................. 3,104,731
96,809 PL# 631606, 5.50%,
03/01/17.................. 100,188
117,403 PL# 632269, 7.00%,
05/01/32.................. 124,496
15,889 PL# 634563, 6.50%,
03/01/32.................. 16,682
169,583 PL# 634949, 7.00%,
05/01/32.................. 179,824
173,116 PL# 634985, 6.00%,
04/01/17.................. 181,561
329,957 PL# 635014, 6.50%,
06/01/32.................. 346,433
603,974 PL# 635164, 6.50%,
08/01/32.................. 634,132
2,000,000 PL# 636691, 5.50%,
05/01/17.................. 2,070,920
7,313 PL# 637270, 6.50%,
05/01/32.................. 7,678
641,283 PL# 641795, 6.00%,
04/01/17.................. 672,568
184,890 PL# 642325, 6.00%,
05/01/17.................. 193,909
51,804 PL# 644646, 6.00%,
04/01/17.................. 54,331
60,430 PL# 644743, 6.00%,
05/01/17.................. 63,378
8,204 PL# 644932, 6.50%,
07/01/32.................. 8,614
581,284 PL# 646396, 5.50%,
08/01/17.................. 601,577
9,606 PL# 647556, 7.00%,
01/01/30.................. 10,194
939,122 PL# 648795, 6.50%,
08/01/32.................. 986,015
59,569 PL# 649170, 6.00%,
07/01/17.................. 62,475
257,405 PL# 650206, 5.50%,
01/01/18(e)............... 266,392
109,413 PL# 650291, 6.50%,
07/01/32.................. 114,876
22,348 PL# 650872, 7.00%,
07/01/32.................. 23,697
248,715 PL# 650891, 6.50%,
07/01/32.................. 261,134
665,289 PL# 650946, 6.50%,
07/01/32.................. 698,508
460,792 PL# 651649, 6.50%,
08/01/32.................. 483,801
1,851,181 PL# 652127, 6.50%,
06/01/32.................. 1,943,615
94,618 PL# 653071, 6.50%,
07/01/32.................. 99,343
2,000,000 PL# 660089, 5.50%,
09/01/17(e)............... 2,069,821
354,654 PL# 662405, 5.50%,
12/01/17(e)............... 367,035
627,099 PL# 662965, 6.50%,
09/01/32.................. 658,411
9,717 PL# 663353, 6.50%,
09/01/32.................. 10,202
</Table>
See notes to financial statements.
70
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 61,925 PL# 664188, 5.50%,
09/01/17.................. $ 64,086
112,994 PL# 664194, 5.50%,
09/01/17.................. 116,938
965,783 PL# 670402, 6.50%,
06/01/32.................. 1,014,007
325,331 PL# 671046, 6.50%,
01/01/33.................. 341,576
2,000,000 PL# 671487, 5.50%,
11/01/17(e)............... 2,069,821
255,614 PL# 673079, 6.50%,
11/01/32.................. 268,377
321,040 PL# 675314, 5.50%,
12/01/17(e)............... 332,247
57,487 PL# 675394, 5.50%,
02/01/18(e)............... 59,479
599,413 PL# 676800, 5.50%,
01/01/18(e)............... 620,339
410,515 PL# 677516, 5.50%,
01/01/18(e)............... 424,744
289,047 PL# 679430, 5.50%,
01/01/18(e)............... 299,138
199,980 PL# 681291, 5.50%,
02/01/18(e)............... 206,962
98,187 PL# 681390, 5.50%,
02/01/18.................. 101,615
622,620 PL# 683199, 5.50%,
02/01/18(e)............... 644,201
460,554 PL# 684130, 5.50%,
01/01/18(e)............... 476,632
1,328,488 PL# 687929, 5.50%,
02/01/18.................. 1,374,535
223,488 PL# 688000, 5.50%,
03/01/18.................. 231,235
46,386 PL# 688312, 5.50%,
03/01/18.................. 47,993
637,642 PL# 688785, 6.00%,
02/01/18.................. 668,750
331,604 PL# 692252, 6.50%,
03/01/33.................. 347,966
1,262,464 PL# 694200, 4.50%,
05/01/18(e)............... 1,263,101
8,905 PL# 694372, 6.50%,
11/01/32.................. 9,350
151,914 PL# 695925, 5.50%,
05/01/18.................. 157,179
706,020 PL# 698481, 6.00%,
02/01/18.................. 740,463
353,944 PL# 698853, 5.50%,
03/01/18(e)............... 366,300
2,377,080 PL# 701161, 4.50%,
04/01/18(e)............... 2,375,609
63,296 PL# 704387, 5.50%,
05/01/18.................. 65,490
3,229,708 PL# 705651, 5.50%,
06/01/18.................. 3,341,655
374,742 PL# 711115, 6.50%,
09/01/33.................. 393,232
294,965 PL# 711582, 5.50%,
04/01/18.................. 305,424
747,479 PL# 711636, 4.50%,
05/01/18(e)............... 747,016
3,471,077 PL# 720317, 5.00%,
07/01/18.................. 3,531,038
47,264 PL# 721897, 5.50%,
05/01/18.................. 48,913
68,427 PL# 725135, 6.00%,
05/01/18.................. 71,769
32,794,559 PL# 725232, 5.00%,
03/01/34(e)............... 32,612,433
21,331 PL# 725269, 5.50%,
03/01/19.................. 22,076
171,552 PL# 725272, 6.00%,
01/01/19(e)............... 179,930
489,093 PL# 725407, 6.50%,
01/01/34.................. 513,590
695,279 PL# 725418, 6.50%,
05/01/34.................. 730,103
11,931,501 PL# 725603, 5.50%,
07/01/19.................. 12,345,067
167,455 PL# 725747, 6.00%,
08/01/19.................. 175,634
925,344 PL# 726747, 4.50%,
03/01/19(e)............... 923,269
3,615,889 PL# 729739, 4.00%,
08/01/18.................. 3,537,673
3,100,437 PL# 730823, 4.00%,
08/01/18.................. 3,033,371
884,517 PL# 731682, 4.50%,
03/01/19(e)............... 882,533
265,125 PL# 738632, 5.00%,
11/01/18.................. 269,705
394,235 PL# 739284, 5.50%,
09/01/18.................. 407,900
4,000,000 PL# 739339, 5.50%,
09/01/18.................. 4,138,647
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 45,273 PL# 739417, 5.50%,
10/01/18.................. $ 46,842
526,122 PL# 740512, 5.50%,
10/01/18(e)............... 544,358
57,131 PL# 741793, 5.50%,
10/01/18(e)............... 59,111
94,491 PL# 744728, 4.00%,
10/01/18.................. 92,447
55,090 PL# 747773, 5.50%,
10/01/18(e)............... 57,000
418,716 PL# 747827, 5.50%,
11/01/18(e)............... 433,229
445,205 PL# 747880, 5.50%,
12/01/18(e)............... 460,637
806,730 PL# 748257, 4.50%,
10/01/18(e)............... 806,231
17,295 PL# 748655, 6.50%,
09/01/33.................. 18,148
255,990 PL# 748917, 5.50%,
12/01/18(e)............... 264,863
70,133 PL# 750045, 5.50%,
12/01/18(e)............... 72,564
183,159 PL# 750057, 5.50%,
01/01/19(e)............... 189,508
270,726 PL# 753961, 5.50%,
12/01/18(e)............... 280,110
361,842 PL# 755813, 6.50%,
11/01/33.................. 379,696
4,883,058 PL# 757687, 5.50%,
07/01/34(e)............... 4,961,768
825,037 PL# 759773, 5.50%,
05/01/18(e)............... 853,839
2,065,297 PL# 761173, 4.50%,
04/01/19(e)............... 2,060,665
4,670,627 PL# 761175, 4.50%,
04/01/19(e)............... 4,660,152
328,088 PL# 761256, 5.50%,
01/01/19(e)............... 339,460
24,280 PL# 761758, 5.50%,
01/01/19(e)............... 25,122
61,520 PL# 761808, 5.50%,
05/01/18.................. 63,667
39,633 PL# 762307, 6.00%,
06/01/17.................. 41,618
176,448 PL# 763249, 5.50%,
02/01/34(e)............... 179,292
327,855 PL# 764221, 5.50%,
05/01/34(e)............... 333,139
951,739 PL# 764800, 4.50%,
04/01/19(e)............... 949,605
821,006 PL# 766312, 5.50%,
03/01/19.................. 849,303
880,714 PL# 766419, 4.50%,
03/01/19(e)............... 878,739
452,891 PL# 766823, 6.50%,
02/01/34.................. 475,243
933,552 PL# 767073, 4.50%,
04/01/19(e)............... 931,459
95,578 PL# 767075, 4.50%,
04/01/19(e)............... 95,364
248,618 PL# 767172, 5.50%,
01/01/34(e)............... 252,694
130,514 PL# 767392, 5.50%,
04/01/34(e)............... 132,618
1,147,456 PL# 767395, 5.50%,
04/01/34(e)............... 1,165,952
523,236 PL# 768306, 6.00%,
12/01/18.................. 548,736
426,349 PL# 768313, 5.50%,
01/01/19.................. 441,127
534,717 PL# 768317, 5.50%,
01/01/19.................. 553,251
1,133,212 PL# 768528, 5.50%,
05/01/34(e)............... 1,151,479
964,871 PL# 769006, 4.50%,
03/01/19(e)............... 962,707
768,258 PL# 770410, 5.50%,
04/01/34(e)............... 780,642
1,763,552 PL# 772651, 5.50%,
03/01/34(e)............... 1,791,978
1,169,842 PL# 772664, 5.50%,
03/01/34(e)............... 1,188,699
1,171,719 PL# 772805, 5.50%,
04/01/34(e)............... 1,190,606
475,215 PL# 773066, 5.50%,
03/01/34(e)............... 482,875
305,705 PL# 773072, 5.50%,
04/01/34(e)............... 310,632
1,797,216 PL# 773073, 5.50%,
04/01/34(e)............... 1,826,186
637,064 PL# 773488, 5.50%,
08/01/19.................. 659,022
723,122 PL# 773532, 4.50%,
04/01/19(e)............... 721,500
1,649,536 PL# 773571, 5.50%,
05/01/34(e)............... 1,676,124
</Table>
See notes to financial statements.
71
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 72,785 PL# 773588, 5.50%,
07/01/34(e)............... $ 73,958
459,732 PL# 773777, 5.50%,
04/01/34(e)............... 467,143
88,801 PL# 773911, 5.50%,
04/01/34(e)............... 90,257
929,099 PL# 774258, 4.50%,
03/01/19(e)............... 927,016
397,138 PL# 774338, 6.50%,
02/01/34.................. 416,733
911,173 PL# 775316, 4.50%,
05/01/19(e)............... 909,130
533,420 PL# 775341, 6.00%,
05/01/19.................. 559,473
1,161,938 PL# 775525, 5.50%,
05/01/34(e)............... 1,180,667
484,556 PL# 775794, 5.50%,
05/01/34(e)............... 492,367
459,897 PL# 776233, 5.50%,
04/01/34(e)............... 467,310
447,388 PL# 776440, 5.50%,
07/01/34(e)............... 454,600
792,065 PL# 776715, 5.50%,
05/01/34(e)............... 804,832
8,319,457 PL# 776983, 5.50%,
04/01/34(e)............... 8,453,558
92,493 PL# 777251, 4.50%,
04/01/19(e)............... 92,285
174,431 PL# 777263, 5.50%,
08/01/19(e)............... 180,443
96,056 PL# 777481, 5.50%,
06/01/34(e)............... 97,605
976,924 PL# 777677, 5.50%,
05/01/34(e)............... 992,671
99,658 PL# 777754, 5.50%,
05/01/34(e)............... 101,264
188,057 PL# 778219, 5.50%,
05/01/34(e)............... 191,088
71,755 PL# 778287, 5.50%,
05/01/34(e)............... 72,911
99,903 PL# 778619, 5.50%,
06/01/34(e)............... 101,513
1,161,664 PL# 779135, 5.50%,
06/01/34(e)............... 1,180,389
154,771 PL# 779520, 5.50%,
06/01/34(e)............... 157,266
479,727 PL# 780211, 5.50%,
05/01/34(e)............... 487,460
777,562 PL# 780698, 6.00%,
04/01/19.................. 815,540
1,111,818 PL# 780901, 5.50%,
05/01/34(e)............... 1,129,739
430,818 PL# 782122, 5.50%,
07/01/34(e)............... 437,762
74,678 PL# 782571, 5.50%,
06/01/34(e)............... 75,882
319,175 PL# 782618, 5.50%,
07/01/34(e)............... 324,320
99,453 PL# 782707, 5.50%,
07/01/34(e)............... 101,056
454,335 PL# 782974, 5.50%,
06/01/34(e)............... 461,658
86,844 PL# 783017, 5.50%,
06/01/34(e)............... 88,244
103,947 PL# 783667, 5.50%,
06/01/34(e)............... 105,623
1,146,270 PL# 783813, 5.50%,
07/01/34(e)............... 1,164,747
1,795,962 PL# 783824, 5.50%,
07/01/34(e)............... 1,824,911
3,165,109 PL# 784017, 5.50%,
06/01/19.................. 3,274,200
1,543,918 PL# 785226, 5.50%,
07/01/34(e)............... 1,568,804
1,235,153 PL# 786148, 5.50%,
07/01/34(e)............... 1,255,063
876,268 PL# 787817, 5.50%,
07/01/34(e)............... 890,392
331,387 PL# 789053, 5.50%,
07/01/34(e)............... 336,729
1,136,820 PL# 789432, 5.50%,
07/01/19.................. 1,176,002
498,070 PL# 789545, 5.50%,
07/01/34(e)............... 506,099
53,054 PL# 789632, 5.50%,
08/01/19.................. 54,882
306,026 PL# 789634, 5.50%,
08/01/19.................. 316,574
315,797 PL# 789873, 6.50%,
09/01/34.................. 331,383
1,175,068 PL# 790929, 6.50%,
09/01/34.................. 1,233,063
858,700 PL# 793193, 5.50%,
07/01/19.................. 888,296
633,615 PL# 793680, 6.50%,
09/01/34.................. 664,887
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 535,658 PL# 794206, 5.50%,
08/01/19.................. $ 554,120
3,323,477 PL# 795118, 5.50%,
10/01/19(e)............... 3,438,027
541,458 PL# 798175, 6.50%,
09/01/34.................. 568,182
6,999,999 PL# 800272, 5.50%,
12/01/19(e)............... 7,241,268
7,600,000 TBA, 4.00%, 01/01/20........ 7,419,500
13,100,000 TBA, 4.50%, 01/01/20........ 13,059,063
32,900,000 TBA, 5.00%, 01/01/20........ 33,424,361
10,175,000 TBA, 4.56%, 12/01/34........ 10,251,313
7,500,000 TBA, 4.50%, 01/01/35........ 7,249,215
39,700,000 TBA, 5.00%, 01/01/35........ 39,389,865
600,000 TBA, 5.50%, 01/01/35........ 609,187
44,600,000 TBA, 6.00%, 01/01/35........ 46,119,166
29,300,000 TBA, 6.50%, 01/01/35........ 30,728,375
--------------
467,369,241
--------------
FREDDIE MAC -- 2.4%
5,350,000 3.50%, 04/01/08............. 5,323,651
13,080,000 3.88%, 11/10/08............. 13,108,658
7,140,000 3.88%, 01/12/09............. 7,117,102
1,560,000 4.75%, 12/08/10............. 1,568,235
12,080,000 4.13%, 02/24/11(d).......... 11,909,757
--------------
39,027,403
--------------
FREDDIE MAC GOLD -- 6.0%
11,345,000 4.50%, 12/16/10............. 11,348,823
1,565,000 6.00%, 06/15/11............. 1,727,500
51,300 6.00%, 02/01/13............. 53,828
933,491 PL# A10807, 5.50%,
07/01/33(e)............... 949,480
217,967 PL# A12350, 5.50%,
08/01/33(e)............... 221,700
129,597 PL# A12533, 5.50%,
08/01/33(e)............... 131,817
350,635 PL# A12800, 5.50%,
08/01/33(e)............... 356,641
678,861 PL# A13289, 5.50%,
09/01/33(e)............... 690,489
135,512 PL# A13331, 5.50%,
09/01/33(e)............... 137,833
7,714,000 PL# A13669, 5.50%,
09/01/33(e)............... 7,846,128
269,926 PL# A16148, 6.00%,
11/01/33(e)............... 279,044
1,095,356 PL# A16728, 5.50%,
12/01/33(e)............... 1,114,117
188,473 PL# B14156, 4.00%,
05/01/19.................. 184,454
1,860,474 PL# C01271, 6.50%,
12/01/31.................. 1,954,622
4,479,185 PL# C01623, 5.50%,
09/01/33(e)............... 4,555,906
5,520,592 PL# C57150, 6.00%,
05/01/31(e)............... 5,712,437
8,301 PL# C67653, 7.00%,
06/01/32.................. 8,801
</Table>
See notes to financial statements.
72
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 147,166 PL# C67868, 7.00%,
06/01/32.................. $ 156,019
35,213 PL# C67999, 7.00%,
06/01/32.................. 37,332
232,027 PL# C68001, 7.00%,
06/01/32.................. 245,985
274,090 PL# C90229, 7.00%,
08/01/18.................. 292,370
56,378 PL# E00418, 6.00%,
02/01/11.................. 59,170
38,623 PL# E00570, 6.00%,
09/01/13.................. 40,526
839,958 PL# E00592, 6.00%,
12/01/13.................. 881,357
39,877 PL# E00720, 6.00%,
07/01/14.................. 41,827
37,640 PL# E01007, 6.00%,
08/01/16.................. 39,438
123,241 PL# E01095, 6.00%,
01/01/17.................. 129,126
3,813,835 PL# E01638, 4.00%,
04/01/19.................. 3,732,510
38,799 PL# E63016, 6.00%,
03/01/11.................. 40,725
62,476 PL# E73319, 6.00%,
11/01/13.................. 65,555
61,720 PL# E73769, 6.00%,
12/01/13.................. 64,762
51,669 PL# E75990, 6.00%,
04/01/14.................. 54,238
46,576 PL# E76341, 6.00%,
04/01/14.................. 48,852
80,505 PL# E76730, 6.00%,
05/01/14.................. 84,440
65,762 PL# E76731, 6.00%,
05/01/14.................. 68,976
52,828 PL# E78995, 6.00%,
11/01/14.................. 55,410
419,078 PL# E84191, 6.00%,
07/01/16.................. 439,092
7,502 PL# E84758, 5.50%,
07/01/16.................. 7,763
39,321 PL# E85885, 6.00%,
11/01/16.................. 41,199
455,440 PL# E86502, 5.50%,
12/01/16.................. 471,294
8,678 PL# E86565, 5.50%,
12/01/16.................. 8,981
351,768 PL# E87961, 6.00%,
02/01/17.................. 368,568
792,230 PL# E88001, 6.00%,
02/01/17.................. 830,080
85,551 PL# E88452, 6.00%,
03/01/17.................. 89,638
500,754 PL# E88749, 6.00%,
03/01/17.................. 524,668
976,911 PL# E88789, 6.00%,
04/01/17.................. 1,023,584
244,127 PL# E88979, 5.50%,
04/01/17.................. 252,535
610,169 PL# E89282, 6.00%,
04/01/17.................. 639,320
1,163,352 PL# E89336, 6.00%,
05/01/17.................. 1,218,932
40,034 PL# E89653, 6.00%,
04/01/17.................. 41,946
735,400 PL# E89913, 6.00%,
05/01/17.................. 770,535
1,399,218 PL# E91644, 5.50%,
10/01/17.................. 1,447,412
363,125 PL# E91754, 5.50%,
10/01/17.................. 375,633
585,969 PL# E91774, 5.50%,
10/01/17.................. 606,152
249,876 PL# E91968, 5.50%,
10/01/17.................. 258,483
525,565 PL# E92113, 5.50%,
10/01/17.................. 543,668
136,767 PL# E93402, 6.00%,
09/01/12.................. 143,561
2,994,979 PL# G01391, 7.00%,
04/01/32.................. 3,176,136
76,483 PL# G10558, 6.00%,
07/01/11.................. 80,280
764,556 PL# G10937, 6.00%,
04/01/14.................. 802,429
31,279 PL# G11111, 6.00%,
04/01/16.................. 32,780
4,838,679 PL# M80813, 4.00%,
04/01/10.................. 4,820,680
4,000,000 TBA, 4.50%, 01/01/20........ 3,986,248
3,800,000 TBA, 5.50%, 01/01/20........ 3,924,686
600,000 TBA, 5.50%, 01/01/35........ 609,563
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 18,000,000 TBA, 6.00%, 01/01/35........ $ 18,596,249
10,500,000 TBA, 5.00%, 01/01/35........ 10,427,813
--------------
99,972,146
--------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 3.5%
271,962 PL# 3173, 6.50%, 12/20/31... 286,026
196,206 PL# 421352, 6.00%,
11/15/33.................. 203,542
3,574 PL# 434615, 7.00%,
11/15/29.................. 3,803
397,458 PL# 435071, 7.00%,
03/15/31.................. 422,576
97,725 PL# 462559, 7.00%,
02/15/28.................. 104,062
41,580 PL# 493966, 7.00%,
06/15/29.................. 44,242
105,592 PL# 494742, 7.00%,
04/15/29.................. 112,352
712,889 PL# 502998, 5.50%,
02/15/29.................. 730,406
2,936 PL# 530260, 7.00%,
02/15/31.................. 3,121
240,098 PL# 531025, 6.00%,
04/15/32.................. 249,210
2,137 PL# 538271, 7.00%,
11/15/31.................. 2,272
152,494 PL# 538312, 6.00%,
02/15/32.................. 158,281
386,061 PL# 543989, 7.00%,
03/15/31.................. 410,459
2,372 PL# 547545, 7.00%,
04/15/31.................. 2,522
766,876 PL# 550985, 7.00%,
10/15/31.................. 815,339
947 PL# 551549, 7.00%,
07/15/31.................. 1,007
84,131 PL# 552413, 7.00%,
02/15/32.................. 89,441
2,699,881 PL# 552942, 5.50%,
12/15/32(e)............... 2,762,995
194,123 PL# 554808, 6.00%,
05/15/31.................. 201,593
170,721 PL# 555360, 6.00%,
06/15/31.................. 177,290
166,024 PL# 555733, 6.00%,
03/15/32.................. 172,325
2,222 PL# 557664, 7.00%,
08/15/31.................. 2,362
337,379 PL# 557678, 7.00%,
08/15/31.................. 358,700
6,548 PL# 561050, 7.00%,
05/15/31.................. 6,962
2,099 PL# 561996, 7.00%,
07/15/31.................. 2,232
27,309 PL# 563346, 7.00%,
09/15/31.................. 29,035
175,207 PL# 563599, 7.00%,
06/15/32.................. 186,266
258,413 PL# 564086, 7.00%,
07/15/31.................. 274,743
57,498 PL# 564300, 6.00%,
08/15/31.................. 59,710
18,731 PL# 564706, 7.00%,
07/15/31.................. 19,915
149,242 PL# 565808, 6.00%,
11/15/31.................. 154,985
273,643 PL# 567622, 6.00%,
04/15/32.................. 284,028
152,054 PL# 567668, 6.00%,
05/15/32.................. 157,824
176,625 PL# 569567, 7.00%,
01/15/32.................. 187,773
149,254 PL# 570517, 6.00%,
01/15/32.................. 154,918
121,111 PL# 572821, 6.00%,
12/15/31.................. 125,771
148,614 PL# 574873, 6.00%,
12/15/31.................. 154,332
138,989 PL# 575906, 6.00%,
01/15/32.................. 144,263
82,343 PL# 576323, 6.00%,
12/15/31.................. 85,511
2,648 PL# 579377, 7.00%,
04/15/32.................. 2,816
525,127 PL# 581015, 7.00%,
02/15/32.................. 558,270
166,418 PL# 581070, 6.00%,
02/15/32.................. 172,734
</Table>
See notes to financial statements.
73
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 78,985 PL# 581084, 7.00%,
02/15/32.................. $ 83,970
200,439 PL# 582956, 7.00%,
02/15/32.................. 213,089
358,271 PL# 585210, 6.00%,
03/15/33.................. 371,666
561,593 PL# 587122, 7.00%,
06/15/32.................. 597,037
146,049 PL# 587390, 6.00%,
11/15/32.................. 151,591
58,899 PL# 587494, 7.00%,
06/15/32.................. 62,616
1,612 PL# 589696, 7.00%,
05/15/32.................. 1,714
209,018 PL# 592030, 6.00%,
02/15/32.................. 216,950
13,662 PL# 593823, 6.00%,
10/15/32.................. 14,180
251,115 PL# 596818, 6.00%,
12/15/32.................. 260,645
447,817 PL# 598205, 6.00%,
05/15/33.................. 464,560
220,045 PL# 598459, 6.00%,
11/15/32.................. 228,396
132,440 PL# 603498, 6.00%,
03/15/33.................. 137,392
202,350 PL# 611085, 6.00%,
05/15/33.................. 209,916
294,940 PL# 615382, 6.00%,
07/15/33.................. 305,968
4,918,032 PL# 618874, 5.50%,
08/15/33.................. 5,029,271
857,686 PL# 625651, 5.50%,
01/15/34(e)............... 876,699
33,671 PL# 780802, 6.50%,
05/15/28.................. 35,532
64,360 PL# 781113, 7.00%,
11/15/29.................. 68,481
314,273 PL# 781148, 6.00%,
07/15/29.................. 326,977
186,765 PL# 781276, 6.50%,
04/15/31.................. 196,895
58,920 PL# 781287, 7.00%,
05/15/31.................. 62,655
96,076 PL# 781324, 7.00%,
07/15/31.................. 102,152
508,425 PL# 781328, 7.00%,
09/15/31.................. 540,692
286,888 PL# 781330, 6.00%,
09/15/31.................. 298,388
100,010 PL# 781496, 6.50%,
09/15/32.................. 105,402
157,682 PL# 781548, 7.00%,
11/15/32.................. 167,651
257,850 PL# 781566, 6.00%,
02/15/33.................. 267,635
90,165 PL# 781584, 7.00%,
05/15/32.................. 95,868
4,684,661 PL# 781689, 5.50%,
12/15/33(e)............... 4,793,912
5,283,030 PL# 781690, 6.00%,
12/15/33.................. 5,483,594
5,632,221 PL# 781707, 5.50%,
02/15/34(e)............... 5,763,568
10,561,871 PL# 80916, 3.75%,
05/20/34.................. 10,419,802
1,700,000 TBA, 5.50%, 01/01/35........ 1,735,063
4,700,000 TBA, 6.00%, 01/01/35........ 4,870,375
3,400,000 TBA, 6.50%, 01/01/35........ 3,577,439
--------------
58,213,755
--------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 2.7%
4,047,588 Fannie Mae, Series 1999-7,
Class AB,
6.00%, 03/25/29........... 4,184,515
3,780,000 Fannie Mae, Series 2002-81,
Class BR,
5.25%, 04/25/25........... 3,872,122
5,050,000 Fannie Mae, Series 2004-101,
Class AR,
5.50%, 01/25/35........... 5,270,938
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 7,085,071 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34........... $ 7,229,054
8,860,000 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34........... 9,120,307
3,325,000 Freddie Mac, Series 2550,
Class QP,
5.00%, 03/15/26........... 3,361,458
6,496,153 Freddie Mac, Series 2825,
Class VP,
5.50%, 06/15/15........... 6,726,686
4,765,543 Freddie Mac, Series 2877,
Class PA,
5.50%, 07/15/33........... 4,915,290
--------------
44,680,370
--------------
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES -- 0.4%
3,423,225 Small Business
Administration, Series
2002-P10B, Class 1,
5.20%, 08/01/12........... 3,498,964
2,940,700 Small Business
Administration, Series
2004-P10A,
4.50%, 02/01/14........... 2,923,401
--------------
6,422,365
--------------
RESOLUTION FUNDING STRIPS -- 0.1%
1,200,000 Zero coupon, 07/15/18....... 612,124
1,200,000 Zero coupon, 10/15/18....... 602,894
--------------
1,215,018
--------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $713,288,680)....... 716,900,298
--------------
CORPORATE BONDS AND NOTES -- 34.8%
AEROSPACE AND DEFENSE -- 0.4%
320,000 B/E Aerospace,
8.50%, 10/01/10........... 353,600
1,545,000 Lockheed Martin Corp.,
8.50%, 12/01/29........... 2,120,469
545,000 Lockheed Martin Corp.,
7.20%, 05/01/36........... 664,001
2,390,000 Northrop Grumman Corp.,
4.08%, 11/16/06........... 2,415,229
35,000 Northrop Grumman Corp.,
7.13%, 02/15/11........... 40,217
940,000 Northrop Grumman Corp.,
7.75%, 02/15/31........... 1,207,335
790,000 RC Trust I,
7.00%, 05/15/06........... 416,479
--------------
7,217,330
--------------
</Table>
See notes to financial statements.
74
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTOMOBILES/MOTOR VEHICLES -- 0.1%
$ 765,000 Daimler Chrysler AG Corp.,
7.45%, 03/01/27........... $ 852,988
280,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08........... 279,643
70,000 Daimler Chrysler NA Holding,
6.50%, 11/15/13........... 76,052
1,200,000 Daimler Chrysler NA Holding,
Series MTND, Floating
Rate,
2.94%, 09/10/07(b)........ 1,204,857
--------------
2,413,540
--------------
BANKS -- 6.7%
5,575,000 American Express Bank FSB,
Series BKNT, Floating
Rate,
2.49%, 11/21/07(c)........ 5,577,291
2,000,000 American Express Centurion
Bank, Series BKNT,
4.38%, 07/30/09........... 2,033,936
1,404,000 Bank of America Corp.,
5.25%, 02/01/07........... 1,454,145
3,550,000 Bank of America Corp.,
3.88%, 01/15/08(f)........ 3,580,221
1,425,000 Bank of America Corp.,
3.25%, 08/15/08........... 1,401,877
2,000,000 Bank of America Corp.,
3.38%, 02/17/09........... 1,961,586
425,000 Bank of America Corp.,
5.38%, 06/15/14........... 444,340
1,250,000 Bank of Scotland -- 144A,
3.50%, 11/30/07........... 1,246,519
1,750,000 Bank One Corp.,
6.00%, 08/01/08........... 1,874,500
2,000,000 BankBoston NA, Series BKNT,
6.38%, 03/25/08........... 2,153,982
2,850,000 HBOS Treasury Services
PLC -- 144A,
3.75%, 09/30/08........... 2,847,709
3,850,000 HSBC Bank USA, Series BKNT,
3.88%, 09/15/09........... 3,820,490
4,350,000 HSBC Bank USA, Series BKNT,
Floating Rate,
2.59%, 09/21/07(b)........ 4,355,255
2,600,000 JP Morgan Chase & Company,
5.35%, 03/01/07........... 2,700,191
475,000 JP Morgan Chase & Company,
5.25%, 05/30/07........... 494,085
1,495,000 JP Morgan Chase & Company,
3.63%, 05/01/08(e)........ 1,485,556
2,100,000 JP Morgan Chase & Company,
5.75%, 10/15/08........... 2,229,856
935,000 JP Morgan Chase & Company,
3.50%, 03/15/09........... 916,969
1,100,000 JP Morgan Chase & Company,
7.00%, 11/15/09........... 1,228,708
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 580,000 JP Morgan Chase & Company,
Floating Rate,
2.16%, 10/02/09(b)........ $ 581,477
2,200,000 National City Bank,
3.38%, 10/15/07........... 2,189,422
2,705,000 National City Bank, Series
BKNT, Floating Rate,
2.67%, 06/29/09(b)........ 2,706,655
800,000 Rabobank Capital Funding
II -- 144A, Variable Rate,
5.26%, perpetual(a)....... 815,441
1,135,000 RBS Capital Trust I,
Variable Rate,
4.71%, perpetual(a)....... 1,107,620
3,600,000 State Street Bank & Trust,
Series CD1, Floating Rate,
2.41%, 12/11/06(b)........ 3,597,840
4,390,000 SunTrust Banks, Inc.,
3.63%, 10/15/07........... 4,382,581
2,000,000 SunTrust Banks, Inc.,
4.00%, 10/15/08........... 2,020,192
1,535,000 SunTrust Banks, Inc.,
4.42%, 06/15/09........... 1,557,227
2,275,000 Swedish Export Credit,
2.88%, 01/26/07........... 2,253,294
980,000 UBS Preferred Funding Trust
I, Variable Rate,
8.62%, perpetual(a)....... 1,179,348
490,000 US Bancorp, Series MTNN,
3.95%, 08/23/07........... 495,016
3,040,000 US Bank NA,
2.40%, 03/12/07........... 2,984,760
8,275,000 US Bank NA, Series BKNT,
Floating Rate,
2.04%, 10/01/07(b)........ 8,281,008
1,140,000 Wachovia Corp.,
3.63%, 02/17/09........... 1,127,941
2,340,000 Wachovia Corp., Variable
Rate,
6.30%, 04/15/08(a)........ 2,512,407
9,925,000 Wells Fargo & Company,
4.00%, 08/15/08........... 9,999,696
500,000 Wells Fargo & Company,
3.13%, 04/01/09........... 485,084
8,250,000 Wells Fargo & Company,
4.20%, 01/15/10........... 8,292,842
10,030,000 Wells Fargo & Company,
Floating Rate,
2.59%, 09/15/09(b)........ 10,031,394
2,150,000 Wells Fargo Bank NA, Series
BKNT, Variable Rate,
7.80%, 06/15/10(a)........ 2,195,238
--------------
110,603,699
--------------
</Table>
See notes to financial statements.
75
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA -- 1.4%
$ 1,395,000 Charter Communications
Holdings LLC,
10.75%, 10/01/09.......... $ 1,276,425
250,000 Comcast Cable
Communications, Inc.,
6.38%, 01/30/06........... 258,302
1,800,000 Comcast Cable
Communications, Inc.,
6.75%, 01/30/11........... 2,023,916
450,000 Comcast Corp.,
7.05%, 03/15/33........... 516,598
2,020,000 Continental Cablevision,
8.30%, 05/15/06........... 2,146,559
465,000 Cox Communications, Inc.,
7.75%, 11/01/10........... 533,289
370,000 Cox Communications, Inc.,
4.63%, 06/01/13........... 354,554
2,300,000 Cox Communications, Inc. --
144A,
4.63%, 01/15/10........... 2,297,246
330,000 CSC Holdings, Inc.,
7.88%, 02/15/18........... 358,050
710,000 CSC Holdings, Inc. -- 144A,
6.75%, 04/15/12(d)........ 734,850
675,000 EchoStar DBS Corp. -- 144A,
6.63%, 10/01/14........... 686,813
1,070,000 News America Holdings,
7.63%, 11/30/28........... 1,274,410
1,275,000 News America, Inc.,
7.30%, 04/30/28........... 1,465,318
545,000 News America, Inc.,
7.28%, 06/30/28........... 624,702
1,200,000 News America, Inc. -- 144A,
5.30%, 12/15/14........... 1,216,490
130,000 Rogers Cable, Inc. -- 144A
(Canada),
6.75%, 03/15/15........... 133,575
650,000 TCI Communications, Inc.,
7.88%, 02/15/26........... 800,470
1,675,000 TCI Communications, Inc.,
7.13%, 02/15/28........... 1,898,532
700,000 Time Warner, Inc.,
8.18%, 08/15/07........... 777,864
1,910,000 Time Warner, Inc.,
7.57%, 02/01/24........... 2,252,883
610,000 Time Warner, Inc.,
6.95%, 01/15/28........... 682,714
80,000 Time Warner, Inc.,
7.63%, 04/15/31........... 97,085
675,000 Walt Disney Company, Series
MTNB,
6.20%, 06/20/14........... 748,571
--------------
23,159,216
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
CHEMICALS -- 0.1%
$ 365,000 Crown Euro Holdings SA
(France),
9.50%, 03/01/11........... $ 417,925
425,000 Crown Euro Holdings SA
(France),
10.88%, 03/01/13.......... 504,688
220,000 Nalco Company,
7.75%, 11/15/11........... 238,700
--------------
1,161,313
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.0%
600,000 D.R. Horton, Inc.,
7.88%, 08/15/11........... 690,000
--------------
FINANCIAL SERVICES -- 6.1%
9,050,000 Citigroup, Inc.,
3.50%, 02/01/08........... 9,016,144
14,330,000 Citigroup, Inc.,
3.63%, 02/09/09........... 14,220,504
820,000 Citigroup, Inc.,
6.20%, 03/15/09........... 892,035
11,200,000 Citigroup, Inc., Floating
Rate,
2.59%, 06/09/09(b)........ 11,231,024
160,000 E*TRADE Financial Corp. --
144A,
8.00%, 06/15/11........... 172,800
8,225,000 Eksportfinans ASA, Series
MTN,
3.38%, 01/15/08........... 8,188,399
2,000,000 General Electric Capital
Corp., Series MTNA,
6.50%, 12/10/07........... 2,156,576
10,285,000 General Electric Capital
Corp., Series MTNA,
4.25%, 01/15/08........... 10,455,206
5,045,000 General Electric Capital
Corp., Series MTNA,
3.60%, 10/15/08........... 4,994,217
630,000 General Electric Capital
Corp., Series MTNA,
4.38%, 11/21/11........... 627,181
5,000,000 General Electric Capital
Corp., Series MTNA,
Floating Rate,
2.22%, 07/28/08(b)........ 5,009,405
2,290,000 General Motors Acceptance
Corp.,
5.63%, 05/15/09........... 2,292,269
1,500,000 General Motors Acceptance
Corp.,
7.25%, 03/02/11........... 1,572,387
2,120,000 General Motors Acceptance
Corp.,
6.88%, 09/15/11........... 2,175,455
1,100,000 General Motors Acceptance
Corp.,
6.75%, 12/01/14........... 1,103,473
</Table>
See notes to financial statements.
76
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 1,560,000 General Motors Acceptance
Corp.,
8.00%, 11/01/31........... $ 1,607,989
450,000 Household Finance Corp.,
7.20%, 07/15/06........... 475,370
2,925,000 Household Finance Corp.,
6.50%, 11/15/08........... 3,183,889
1,500,000 Household Finance Corp.,
4.13%, 12/15/08........... 1,507,493
1,590,000 Household Finance Corp.,
7.00%, 05/15/12........... 1,818,400
1,575,000 HSBC Finance Corp.,
4.13%, 11/16/09........... 1,568,240
440,000 HSBC Finance Corp.,
6.75%, 05/15/11........... 494,424
1,583,000 Lehman Brothers Holdings,
Inc.,
7.00%, 02/01/08........... 1,730,768
4,000,000 Nationwide Building
Society -- 144A,
3.50%, 07/31/07........... 3,984,268
430,000 REFCO Finance Holdings --
144A,
9.00%, 08/01/12........... 473,000
4,550,000 SLM Corp.,
4.00%, 01/15/10........... 4,519,861
545,000 SLM Corp., Series MTNA,
3.63%, 03/17/08........... 542,789
1,000,000 The Bear Stearns Companies,
Inc.,
2.88%, 07/02/08........... 967,960
2,475,000 TIAA Global Markets -- 144A,
3.88%, 01/22/08........... 2,492,120
1,955,000 USAA Capital Corp. -- 144A,
Series MTNB,
4.00%, 12/10/07........... 1,978,693
--------------
101,452,339
--------------
FOOD AND BEVERAGE -- 0.2%
1,915,000 Diageo Capital PLC,
3.38%, 03/20/08........... 1,898,288
1,100,000 General Mills, Inc.,
5.13%, 02/15/07........... 1,129,951
--------------
3,028,239
--------------
INSURANCE -- 1.3%
2,775,000 Allstate Financial Global
Funding -- 144A,
6.15%, 02/01/06........... 2,861,586
1,150,000 ASIF Global Financial
XVIII -- 144A,
3.85%, 11/26/07........... 1,155,175
6,430,000 ASIF Global Financial
XXIII -- 144A,
3.90%, 10/22/08........... 6,432,783
2,850,000 Berkshire Hathaway Finance
Corp.,
3.38%, 10/15/08........... 2,819,864
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE (CONTINUED)
$ 2,000,000 Berkshire Hathaway Finance
Corp. -- 144A,
3.40%, 07/02/07........... $ 1,996,452
1,655,000 Liberty Mutual
Group -- 144A,
5.75%, 03/15/14........... 1,629,935
1,000,000 Marsh & McLennan Companies,
Inc.,
5.38%, 07/15/14........... 978,859
2,060,000 Met Life Global Funding I --
144A,
4.25%, 07/30/09........... 2,075,648
1,980,000 Protective Life Secured
Trust, Series MTN,
3.70%, 11/24/08........... 1,975,959
--------------
21,926,261
--------------
LEISURE AND RECREATION -- 0.1%
310,000 MGM MIRAGE,
6.00%, 10/01/09........... 319,300
795,000 Wynn Las Vegas LLC/Capital
Corp. -- 144A,
6.63%, 12/01/14........... 791,025
--------------
1,110,325
--------------
MANUFACTURING -- 0.2%
395,000 Briggs & Stratton Corp.,
8.88%, 03/15/11........... 476,963
2,390,000 Tyco International Group SA,
6.13%, 11/01/08........... 2,577,182
--------------
3,054,145
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.1%
525,000 HCA, Inc.,
5.50%, 12/01/09........... 525,730
1,300,000 WellPoint, Inc. -- 144A,
5.95%, 12/15/34........... 1,317,256
--------------
1,842,986
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.1%
1,140,000 Boston Scientific Corp.,
5.45%, 06/15/14........... 1,186,468
--------------
METALS AND MINING -- 0.1%
210,000 International Steel Group,
6.50%, 04/15/14........... 226,275
374,000 Ispat Inland ULC,
9.75%, 04/01/14........... 463,760
220,000 TriMas Corp.,
9.88%, 06/15/12........... 234,300
--------------
924,335
--------------
OIL AND GAS: PIPELINES -- 0.2%
1,425,000 Consolidated Natural Gas,
Series A,
5.00%, 03/01/14........... 1,430,934
365,000 El Paso Natural Gas,
8.63%, 01/15/22........... 427,506
</Table>
See notes to financial statements.
77
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES (CONTINUED)
$ 670,000 Transcontinental Gas Pipe
Line Corp., Series B,
8.88%, 07/15/12........... $ 818,238
570,000 Williams Companies, Inc.,
7.63%, 07/15/19........... 629,850
225,000 Williams Companies, Inc.,
7.75%, 06/15/31........... 236,813
--------------
3,543,341
--------------
OIL, COAL AND GAS -- 1.2%
840,000 Amerada Hess Corp.,
7.30%, 08/15/31........... 940,018
2,480,000 Amerada Hess Corp.,
7.13%, 03/15/33........... 2,735,638
295,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31........... 366,664
255,000 Chesapeake Energy Corp. --
144A,
6.38%, 06/15/15........... 263,288
2,500,000 Conoco Funding Company,
6.35%, 10/15/11........... 2,794,327
1,625,000 Devon Energy Corp.,
7.95%, 04/15/32........... 2,083,070
435,000 Devon Financing Corp. ULC,
7.88%, 09/30/31........... 549,435
610,000 El Paso Production Holding
Company,
7.75%, 06/01/13........... 642,025
2,160,000 EnCana Corp.,
4.75%, 10/15/13........... 2,147,299
700,000 EnCana Corp.,
6.50%, 08/15/34........... 771,114
1,225,000 Enterprise Products
Operating LP -- 144A,
4.00%, 10/15/07........... 1,222,806
950,000 Gazprom OAO,
9.63%, 03/01/13........... 1,131,165
1,710,000 Gazprom OAO -- 144A,
9.63%, 03/01/13........... 2,026,350
600,000 Hanover Equipment Trust,
Series B,
8.75%, 09/01/11........... 654,000
505,000 Occidental Petroleum,
8.45%, 02/15/29........... 686,154
700,000 Suncor Energy, Inc.,
5.95%, 12/01/34........... 736,474
--------------
19,749,827
--------------
PAPER AND FOREST PRODUCTS -- 0.1%
735,000 Georgia-Pacific Corp.,
8.00%, 01/15/24........... 856,275
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS -- 0.3%
$ 1,100,000 Bristol-Myers Squibb,
6.88%, 08/01/97........... $ 1,267,019
815,000 Elan Finance PLC/Elan
Finance Corp. -- 144A
(Brazil),
7.75%, 11/15/11........... 872,050
865,000 Merck & Company, Inc.,
5.95%, 12/01/28........... 898,168
1,685,000 Wyeth,
6.50%, 02/01/34........... 1,803,782
--------------
4,841,019
--------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES -- 0.3%
4,329,260 Daimler Chrysler Auto Trust,
Series 2001-C, Class A4,
4.63%, 12/06/06........... 4,353,046
--------------
PRIVATE ASSET BACKED: BANKS -- 0.3%
5,174,564 Bank of America Alternative
Loan Trust, Series 2004-7,
Class 4A1,
5.00%, 08/25/19........... 5,239,499
--------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 3.2%
12,075,000 Chase Issuance Trust, Series
2004-A9, Class A9,
3.22%, 06/15/10........... 11,998,131
14,950,000 Citibank Credit Card
Issuance Trust, Series
2004-A1, Class A1,
2.55%, 01/20/09........... 14,704,945
14,850,000 Citibank Credit Card
Issuance Trust, Series
2004-A4, Class A4,
3.20%, 08/24/09........... 14,718,008
11,500,000 MBNA Credit Card Master Note
Trust, Series 2003-A6,
Class A6,
2.75%, 10/15/10........... 11,157,443
--------------
52,578,527
--------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 1.0%
7,480,000 Greenwich Capital Commercial
Funding Corp.,
Series 2004-GG1, Class A4,
4.76%, 06/10/36........... 7,651,089
5,397,447 Morgan Stanley Capital I,
Series 1998-WF1, Class A2,
6.55%, 03/15/30........... 5,760,775
2,980,000 Morgan Stanley Capital I,
Series 1999-FNV1, Class
A2,
6.53%, 03/15/31........... 3,236,757
--------------
16,648,621
--------------
</Table>
See notes to financial statements.
78
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 6.9%
$ 1,695,287 Bear Stearns Commercial
Mortgage Securities,
Series 2001, Class A1,
6.08%, 02/15/35........... $ 1,778,748
7,670,000 Chase Commercial Mortgage
Securities Corp., Series
2000-3, Class A2,
7.32%, 10/15/32........... 8,768,392
12,725,000 Countrywide Asset-Backed
Certificates, Series
2004-13, Class AV4,
Floating Rate,
2.71%, 06/25/35(c)........ 12,724,999
4,875,000 DLJ Commercial Mortgage
Corp., Series 2000-CKP1,
Class A1B,
7.18%, 11/10/33........... 5,529,630
6,150,000 GMAC Commercial Mortgage
Securities, Inc.,
Series 1999-C2, Class A2,
6.95%, 09/15/33........... 6,807,030
7,715,596 GMAC Commercial Mortgage
Securities, Inc.,
Series 1999-C3, Class A2,
7.18%, 08/15/36........... 8,619,821
12,737,013 GSR Mortgage Loan Trust,
Series 2003-13, Class 1A1,
4.52%, 10/25/33........... 12,475,384
6,650,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIB2, Class
A3,
6.43%, 04/15/35........... 7,388,000
9,475,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIBC, Class
A3,
6.26%, 03/15/33........... 10,419,379
7,425,000 LB Commercial Conduit
Mortgage Trust,
Series 1998-C4, Class A1B,
6.21%, 10/15/35........... 7,971,997
6,900,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C3,
Class A2,
7.95%, 01/15/10........... 8,015,690
6,830,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C4,
Class A2,
7.37%, 08/15/26........... 7,808,134
7,395,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C7,
Class A3,
4.56%, 09/15/27........... 7,466,425
8,060,000 LB-UBS Commercial Mortgage
Trust, Series 2004-C8,
Class A2,
4.20%, 12/15/29........... 8,083,994
--------------
113,857,623
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: OTHER -- 0.4%
$ 6,426,823 Structured Asset Securities
Corp., Series 2003-AL2,
Class A,
3.36%, 01/25/31........... $ 6,131,556
--------------
PRIVATE ASSET BACKED: UTILITIES -- 0.6%
8,000,000 Peco Energy Transition
Trust, Series 2000-A,
Class A4,
7.65%, 03/01/10........... 9,220,028
--------------
REAL ESTATE -- 0.2%
510,000 EOP Operating LP,
4.75%, 03/15/14........... 494,263
2,315,000 EOP Operating LP,
7.50%, 04/19/29........... 2,691,517
--------------
3,185,780
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.4%
910,000 AvalonBay Communities,
Series MTN,
6.63%, 09/15/11........... 1,008,495
2,300,000 Developers Diversified
Realty Corp.,
3.88%, 01/30/09........... 2,259,147
4,135,000 Rouse Company,
5.38%, 11/26/13........... 3,973,789
--------------
7,241,431
--------------
RESEARCH AND DEVELOPMENT -- 0.0%
530,000 Bio-Rad Laboratories,
Inc. -- 144A,
6.13%, 12/15/14........... 536,625
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.0%
175,000 Fisher Scientific
International,
Inc. -- 144A,
6.75%, 08/15/14........... 188,563
--------------
SEMICONDUCTORS -- 0.0%
125,000 Freescale Semiconductor,
Inc.,
6.88%, 07/15/11........... 134,688
245,000 Freescale Semiconductor,
Inc., Floating Rate,
4.82%, 07/15/09(b)........ 256,331
320,000 MagnaChip Semiconductor,
Ltd. -- 144A, Floating
Rate,
5.26%, 12/15/11(b)........ 330,400
--------------
721,419
--------------
SPECIAL PURPOSE ENTITY -- 0.2%
1,000,000 California Preferred Fund
Trust,
7.00%, perpetual.......... 1,042,838
1,600,000 New York Life Global
Funding -- 144A,
3.88%, 01/15/09........... 1,592,718
405,000 Rainbow National Services
LLC -- 144A,
8.75%, 09/01/12........... 446,513
--------------
3,082,069
--------------
</Table>
See notes to financial statements.
79
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.4%
$ 2,175,000 BellSouth Corp.,
4.20%, 09/15/09........... $ 2,182,984
775,000 BellSouth Corp.,
6.55%, 06/15/34........... 847,357
80,000 British Telecom PLC,
Variable Rate,
8.88%, 12/15/30(m)........ 107,444
550,000 Cincinnati Bell, Inc.,
8.38%, 01/15/14(d)........ 559,625
860,000 Citizens Communications
Company,
6.25%, 01/15/13........... 870,750
875,000 Deutsche Telekom
International Corp.,
Variable Rate,
8.25%, 06/15/05(m)........ 895,490
358,000 MCI, Inc.,
6.91%, 05/01/07........... 367,398
258,000 MCI, Inc.,
6.69%, 05/01/09........... 267,675
2,350,000 New England Telephone &
Telegraph,
7.88%, 11/15/29........... 2,845,803
970,000 New Jersey Bell Telephone,
7.85%, 11/15/29........... 1,174,423
605,000 Nextel Communications, Inc.,
5.95%, 03/15/14........... 629,200
535,000 Qwest Communications
International -- 144A,
7.50%, 02/15/14........... 543,025
2,310,000 Qwest Corp. -- 144A,
7.88%, 09/01/11........... 2,517,900
400,000 Qwest Corp. -- 144A,
9.13%, 03/15/12........... 464,000
480,000 Rogers Wireless, Inc.
(Canada),
6.38%, 03/01/14........... 477,600
350,000 Rogers Wireless,
Inc. -- 144A (Canada),
7.25%, 12/15/12........... 372,750
130,000 Rogers Wireless,
Inc. -- 144A (Canada),
7.50%, 03/15/15........... 137,800
645,000 SBC Communications, Inc.,
4.13%, 09/15/09........... 644,504
255,000 SBC Communications, Inc.,
6.45%, 06/15/34........... 274,132
950,000 Telecom Italia
Capital -- 144A,
4.00%, 01/15/10........... 932,511
655,000 Telecom Italia
Capital -- 144A,
4.95%, 09/30/14........... 642,953
2,785,000 Telecom Italia
Capital -- 144A,
6.00%, 09/30/34........... 2,732,071
850,000 Telefonica Europe BV,
7.75%, 09/15/10........... 997,958
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 155,000 Verizon Global Funding
Corp.,
7.75%, 12/01/30........... $ 193,320
215,000 Verizon Maryland, Inc.,
5.13%, 06/15/33........... 193,542
1,470,000 Vodafone Group PLC,
5.00%, 12/16/13........... 1,498,427
--------------
23,370,642
--------------
TRANSPORTATION -- 0.2%
1,350,000 Burlington Northern Santa Fe
Corp.,
7.29%, 06/01/36........... 1,658,710
765,000 Canadian National Railway
Company,
6.90%, 07/15/28........... 883,220
540,000 OMI Corp. (Marshall Island),
7.63%, 12/01/13........... 580,500
810,000 Overseas Shipholding Group,
7.50%, 02/15/24........... 830,250
--------------
3,952,680
--------------
UTILITIES -- 0.1%
325,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12.......... 367,250
470,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10.......... 599,250
--------------
966,500
--------------
UTILITIES: ELECTRIC -- 0.9%
590,000 First Energy Corp., Series
C,
7.38%, 11/15/31........... 675,886
224,753 Homer City Funding LLC,
8.73%, 10/01/26........... 262,960
1,000,000 Midwest Generation LLC,
8.75%, 05/01/34........... 1,140,000
315,000 Midwest Generation LLC,
Series B,
8.56%, 01/02/16........... 349,847
2,725,000 Ohio Edison,
5.45%, 05/01/15........... 2,769,524
1,482,000 Ontario Electricity Finance,
6.10%, 01/30/08........... 1,587,775
1,940,000 Progress Energy, Inc.,
7.75%, 03/01/31........... 2,335,465
160,000 Reliant Energy, Inc.,
9.25%, 07/15/10(d)........ 179,200
355,000 Reliant Energy, Inc.,
6.75%, 12/15/14........... 354,556
300,000 SP PowerAssets,
Ltd. -- 144A,
5.00%, 10/22/13........... 304,954
</Table>
See notes to financial statements.
80
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
$ 600,000 Texas Genco LLC/Financing --
144A,
6.88%, 12/15/14........... $ 623,250
3,750,000 TXU Corp. -- 144A,
4.80%, 11/15/09........... 3,760,747
--------------
14,344,164
--------------
TOTAL CORPORATE BONDS AND
NOTES
(Cost $572,771,188)....... 574,379,431
--------------
MUNICIPAL BONDS -- 0.1%
CALIFORNIA
1,575,000 California State Department
of Water Powersupply
Revenue Bond, Series E,
3.98%, 05/01/05
(Cost $1,574,964)......... 1,579,946
--------------
FOREIGN GOVERNMENT OBLIGATIONS -- 2.9%
9,700,000 AID-Israel,
5.50%, 09/18/23........... 10,164,543
75,228,000 Mexican Fixed Rate Bonds,
Series M7,
8.00%, 12/24/08(l)........ 6,552,590
49,121,000 Mexican Fixed Rate Bonds,
Series MI7,
9.00%, 12/24/09(l)........ 4,378,066
16,795,000 New Zealand Government,
Series 415,
6.00%, 04/15/15(i)........ 12,152,731
1,480,000 Quebec Province,
5.00%, 07/17/09........... 1,547,529
3,198,883 Republic of Colombia,
9.75%, 04/09/11........... 3,694,710
2,295,000 United Mexican States,
8.38%, 01/14/11........... 2,701,215
4,045,000 United Mexican States,
8.13%, 12/30/19........... 4,756,920
2,385,000 United Mexican States,
8.00%, 09/24/22........... 2,757,060
--------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$45,328,200).............. 48,705,364
--------------
PREFERRED CORPORATE BONDS & NOTES -- 0.1%
TELECOMMUNICATIONS EQUIPMENT
AND SERVICES
2,000,000 TCI Communications
Financing III,
9.65%, 03/31/27 (Cost
$2,151,273)............... 2,323,092
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SHORT TERM COMMERCIAL PAPER -- 0.7%
$ 7,500,000 HBOS Treasury Services PLC,
2.04%, 01/26/05........... $ 7,489,375
4,500,000 Santander Central Hispano
Finance (Delaware), Inc.,
2.01%, 01/14/05........... 4,496,734
--------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $11,986,109)........ 11,986,109
--------------
SHORT TERM US TREASURY SECURITY -- 0.9%
15,500,000 US Treasury Bill,
1.78%, 01/13/05
(Cost $15,490,824)........ 15,490,824
--------------
SECURITIES LENDING COLLATERAL -- 21.6%
357,709,666 Securities Lending
Collateral Investment
(Note 4)
(Cost $357,709,666)....... 357,709,666
--------------
TOTAL SECURITIES
(Cost $2,171,881,538)..... 2,180,919,786
--------------
REPURCHASE AGREEMENTS -- 2.8%
46,075,207 With Investors Bank and
Trust, dated 12/31/04,
1.88%, due 01/03/05,
repurchase proceeds at
maturity $46,082,425
(Collateralized by various
Fannie Maes, 2.92%, due
01/25/33-02/25/33, with a
total value of
$21,003,463, and various
Small Business
Administrations, 5.03% --
5.38%, due 07/25/16-
02/25/28, with a total
value of $27,378,967)
(Cost $46,075,207)........ 46,075,207
--------------
SECURITIES SOLD SHORT -- (10.1)%
20,200,000 Fannie Mae, TBA,
5.00%, 01/13/05........... (20,042,198)
43,500,000 Fannie Mae, TBA,
5.50%, 01/13/05........... (44,166,072)
21,400,000 Fannie Mae, TBA,
4.50%, 01/19/05........... (21,333,125)
23,200,000 Fannie Mae, TBA,
5.50%, 01/19/05........... (23,975,762)
3,100,000 Fannie Mae, TBA,
6.00%, 01/19/05........... (3,248,218)
16,300,000 Freddie Mac Gold, TBA,
5.50%, 01/13/05........... (16,559,789)
</Table>
See notes to financial statements.
81
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES SOLD SHORT (CONTINUED)
$ 23,700,000 Freddie Mac Gold, TBA,
6.00%, 01/13/05........... $ (24,485,062)
13,700,000 Government National Mortgage
Association, TBA,
5.50%, 01/20/05........... (13,982,562)
--------------
TOTAL SECURITIES SOLD SHORT
(Proceeds $168,103,608)... (167,792,788)
--------------
Total Investments -- 124.4%
(Cost $2,049,853,137)..... 2,059,202,205
Liabilities less other
assets -- (24.4)%......... (403,834,320)
--------------
NET ASSETS -- 100.0%........ $1,655,367,885
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $2,050,735,894.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $16,686,024
Gross unrealized depreciation........... (8,219,713)
-----------
Net unrealized appreciation............. $ 8,466,311
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
82
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 63.6%
ADVERTISING -- 0.1%
3,500 Interpublic Group of Companies,
Inc.*........................ $ 46,900
4,350 Omnicom Group, Inc. ........... 366,792
------------
413,692
------------
AEROSPACE AND DEFENSE -- 1.6%
10,550 General Dynamics Corp. ........ 1,103,530
2,800 Goodrich Corp. ................ 91,392
2,250 L-3 Communications Holdings,
Inc. ........................ 164,790
16,650 Lockheed Martin Corp. ......... 924,908
7,700 Northrop Grumman Corp. ........ 418,572
23,750 Raytheon Company............... 922,213
41,100 The Boeing Company............. 2,127,746
11,300 United Technologies Corp. ..... 1,167,855
------------
6,921,006
------------
AGRICULTURE -- 0.1%
6,000 Monsanto Company............... 333,300
------------
APPAREL: MANUFACTURING -- 0.5%
7,350 Coach, Inc.*................... 414,540
2,650 Jones Apparel Group, Inc. ..... 96,911
2,650 Liz Claiborne, Inc. ........... 111,857
13,250 Nike, Inc. -- Class B.......... 1,201,642
2,200 Reebok International,
Ltd.(d)...................... 96,800
6,150 VF Corp. ...................... 340,587
------------
2,262,337
------------
APPAREL: RETAIL -- 0.3%
14,900 Limited Brands, Inc. .......... 342,998
33,450 The Gap, Inc.(d)............... 706,464
------------
1,049,462
------------
AUTOMOBILES/MOTOR VEHICLES -- 0.6%
92,400 Ford Motor Company(d).......... 1,352,736
5,100 General Motors Corp.(d)........ 204,306
6,750 Harley-Davidson, Inc. ......... 410,063
9,250 PACCAR, Inc.(d)................ 744,440
------------
2,711,545
------------
AUTOMOTIVE EQUIPMENT -- 0.1%
6,650 Genuine Parts Company.......... 292,999
4,200 Johnson Controls, Inc. ........ 266,448
------------
559,447
------------
BANKS -- 3.9%
7,700 AmSouth Bancorp(d)............. 199,430
86,212 Bank of America Corp. ......... 4,051,101
12,500 BB&T Corp. .................... 525,625
6,700 Comerica, Inc.(d).............. 408,834
5,300 Fifth Third Bancorp............ 250,584
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
1,300 First Horizon National
Corp.(d)..................... $ 56,043
6,900 Golden West Financial Corp. ... 423,798
5,450 Huntington Bancshares,
Inc.(d)...................... 135,051
15,900 KeyCorp........................ 539,010
2,750 M&T Bank Corp. ................ 296,560
5,500 Marshall & Ilsley Corp. ....... 243,100
10,400 Mellon Financial Corp. ........ 323,544
23,950 National City Corp.(d)......... 899,323
9,950 North Fork Bancorp, Inc. ...... 287,058
1,950 Northern Trust Corp. .......... 94,731
2,600 PNC Financial Services Group... 149,344
8,684 Regions Financial Corp. ....... 309,064
3,200 Sovereign Bancorp, Inc.(d)..... 72,160
7,950 State Street Corp. ............ 390,504
7,200 SunTrust Banks, Inc. .......... 531,936
2,850 Synovus Financial Corp. ....... 81,453
15,400 The Bank of New York Company,
Inc. ........................ 514,668
40,482 US Bancorp..................... 1,267,896
34,753 Wachovia Corp. ................ 1,828,007
36,100 Wells Fargo & Company.......... 2,243,614
1,850 Zions Bancorp.................. 125,856
------------
16,248,294
------------
BROADCAST SERVICES/MEDIA -- 1.7%
48,600 Comcast Corp. -- Class A*...... 1,617,408
6,050 Gannett Company, Inc. ......... 494,285
9,550 McGraw-Hill Companies, Inc. ... 874,207
1,050 Meredith Corp. ................ 56,910
45,000 The Walt Disney Company........ 1,251,000
97,050 Time Warner, Inc.*............. 1,886,652
3,000 Tribune Company................ 126,420
24,850 Viacom, Inc. -- Class B........ 904,292
------------
7,211,174
------------
BUSINESS SERVICES AND SUPPLIES -- 0.5%
2,500 Avery Dennison Corp. .......... 149,925
4,000 Cintas Corp. .................. 175,440
3,350 Ecolab, Inc.(d)................ 117,686
19,230 First Data Corp. .............. 818,043
5,000 Fiserv, Inc.*.................. 200,950
3,400 Moody's Corp. ................. 295,290
8,700 Paychex, Inc. ................. 296,496
4,850 Robert Half International,
Inc. ........................ 142,736
------------
2,196,566
------------
CHEMICALS -- 0.9%
5,450 Air Products and Chemicals,
Inc. ........................ 315,937
1,750 Ashland, Inc. ................. 102,165
</Table>
See notes to financial statements.
83
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
2,150 Eastman Chemical Company....... $ 124,120
22,300 EI du Pont de Nemours and
Company...................... 1,093,814
2,650 Engelhard Corp. ............... 81,276
2,500 International Flavors &
Fragrances, Inc. ............ 107,100
9,600 PPG Industries, Inc. .......... 654,336
5,100 Rohm and Haas Company.......... 225,573
2,300 Sigma-Aldrich Corp. ........... 139,058
21,150 The Dow Chemical Company....... 1,047,136
------------
3,890,515
------------
COMMERCIAL SERVICES -- 0.1%
23,150 Cendant Corp. ................. 541,247
------------
COMPUTER SOFTWARE AND SERVICES -- 3.2%
5,700 Adobe Systems, Inc. ........... 357,618
3,050 Affiliated Computer Services,
Inc. -- Class A*(d).......... 183,580
8,500 Autodesk, Inc. ................ 322,575
13,200 Automatic Data Processing,
Inc. ........................ 585,420
11,600 BMC Software, Inc.*............ 215,760
3,500 Citrix Systems, Inc.*.......... 85,855
13,000 Computer Associates
International, Inc.(d)....... 403,780
4,600 Computer Sciences Corp.*....... 259,302
21,300 Compuware Corp.*............... 137,811
2,650 Electronic Arts, Inc.*......... 163,452
11,350 Electronic Data Systems
Corp. ....................... 262,185
4,500 Intuit, Inc.*.................. 198,045
239,650 Microsoft Corp. ............... 6,401,051
2,200 NCR Corp.*..................... 152,306
212,000 Oracle Corp.*.................. 2,908,639
8,700 PeopleSoft, Inc.*.............. 230,376
11,400 Siebel Systems, Inc.*.......... 119,700
7,200 SunGard Data Systems, Inc.*.... 203,976
9,150 Unisys Corp.*.................. 93,147
10,100 VERITAS Software Corp.*(d)..... 288,355
------------
13,572,933
------------
COMPUTERS AND OFFICE EQUIPMENT -- 3.4%
20,000 Apple Computer, Inc.*.......... 1,288,000
91,850 Dell, Inc.*.................... 3,870,558
53,100 EMC Corp. (Massachusetts)*..... 789,597
3,550 Gateway, Inc.*................. 21,336
64,187 Hewlett-Packard Company........ 1,346,001
45,450 International Business Machines
Corp. ....................... 4,480,460
2,950 Lexmark International Group,
Inc.*........................ 250,750
8,000 Network Appliance, Inc.*....... 265,760
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
COMPUTERS AND OFFICE EQUIPMENT (CONTINUED)
5,550 Pitney Bowes, Inc. ............ $ 256,854
171,300 Sun Microsystems, Inc.*........ 921,594
34,750 Xerox Corp.*................... 591,098
------------
14,082,008
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.2%
4,850 American Standard Companies,
Inc.*........................ 200,402
1,150 Centex Corp. .................. 68,517
9,500 Masco Corp. ................... 347,035
2,200 Vulcan Materials Company....... 120,142
------------
736,096
------------
CONSUMER GOODS AND SERVICES -- 6.1%
2,400 Alberto-Culver Company -- Class
B............................ 116,568
43,950 Altria Group, Inc. ............ 2,685,344
4,250 Avon Products, Inc. ........... 164,475
5,950 Clorox Company................. 350,634
11,850 Colgate-Palmolive Company...... 606,246
10,700 Eastman Kodak Company(d)....... 345,075
15,550 FedEx Corp. ................... 1,531,520
3,250 Fortune Brands, Inc. .......... 250,835
224,300 General Electric Company....... 8,186,949
49,250 Gillette Company............... 2,205,415
10,850 Kimberly-Clark Corp. .......... 714,039
1,900 Leggett & Platt, Inc. ......... 54,017
6,600 Newell Rubbermaid, Inc.(d)..... 159,654
86,950 Procter & Gamble Company....... 4,789,205
3,550 Reynolds American, Inc.(d)..... 279,030
4,150 The Black & Decker Corp.(d).... 366,570
8,100 The Sherwin-Williams Company... 361,503
24,050 United Parcel Service, Inc. --
Class B...................... 2,055,313
6,450 UST, Inc. ..................... 310,310
1,900 Whirlpool Corp.(d)............. 131,499
------------
25,664,201
------------
CONTAINERS AND PACKAGING -- 0.1%
2,600 Ball Corp. .................... 114,348
900 Bemis Company, Inc. ........... 26,181
3,550 Pactiv Corp.*.................. 89,780
2,250 Sealed Air Corp.*.............. 119,857
------------
350,166
------------
DISTRIBUTION -- 0.1%
3,300 WW Grainger, Inc. ............. 219,846
------------
EDUCATION -- 0.1%
4,350 Apollo Group, Inc. -- Class
A*........................... 351,089
------------
</Table>
See notes to financial statements.
84
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
ELECTRONICS -- 0.4%
15,800 Emerson Electric Company....... $ 1,107,580
4,550 Jabil Circuit, Inc.*........... 116,389
4,750 Rockwell Collins, Inc. ........ 187,340
300 Sanmina-SCI Corp.*............. 2,541
8,350 Solectron Corp.*............... 44,506
2,900 Tektronix, Inc. ............... 87,609
------------
1,545,965
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.1%
12,750 Waste Management, Inc. ........ 381,735
------------
FINANCIAL SERVICES -- 5.0%
27,050 American Express Company....... 1,524,808
12,650 Capital One Financial
Corp.(d)..................... 1,065,257
11,350 CIT Group, Inc. ............... 520,057
111,749 Citigroup, Inc. ............... 5,384,066
11,950 Countrywide Financial Corp. ... 442,270
8,900 E*TRADE Financial Corp.*....... 133,055
2,800 Equifax, Inc. ................. 78,680
20,900 Fannie Mae..................... 1,488,288
5,500 Franklin Resources, Inc. ...... 383,075
15,500 Freddie Mac.................... 1,142,350
11,000 Goldman Sachs Group, Inc. ..... 1,144,440
6,000 H&R Block, Inc. ............... 294,000
9,900 Lehman Brothers Holdings,
Inc. ........................ 866,052
27,500 MBNA Corp. .................... 775,225
20,100 Merrill Lynch & Company,
Inc. ........................ 1,201,377
23,900 Morgan Stanley................. 1,326,928
6,050 Providian Financial Corp.*..... 99,644
27,150 Prudential Financial, Inc. .... 1,492,163
9,600 SLM Corp. ..................... 512,544
3,850 The Bear Stearns Companies,
Inc. ........................ 393,894
18,950 Washington Mutual, Inc. ....... 801,206
------------
21,069,379
------------
FOOD AND BEVERAGE -- 2.3%
7,000 Anheuser-Busch Companies,
Inc. ........................ 355,110
13,900 Archer-Daniels-Midland
Company...................... 310,109
1,200 Brown-Forman Corp. -- Class
B............................ 58,416
9,250 Campbell Soup Company.......... 276,483
52,550 Coca-Cola Company.............. 2,187,656
10,300 Coca-Cola Enterprises, Inc. ... 214,755
12,850 ConAgra Foods, Inc. ........... 378,433
8,900 General Mills, Inc. ........... 442,419
6,100 Hershey Foods Corp. ........... 338,794
8,450 HJ Heinz Company............... 329,466
9,250 Kellogg Company................ 413,105
3,600 McCormick & Company, Inc. ..... 138,960
50,700 PepsiCo, Inc. ................. 2,646,539
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
17,350 Sara Lee Corp. ................ $ 418,829
5,950 The Pepsi Bottling Group,
Inc. ........................ 160,888
11,700 Wm Wrigley Jr. Company......... 809,523
------------
9,479,485
------------
INSURANCE -- 3.1%
6,100 Ace, Ltd. ..................... 260,775
7,900 Aetna, Inc. ................... 985,524
11,050 AFLAC, Inc. ................... 440,232
14,750 Allstate Corp. ................ 762,870
2,700 Ambac Financial Group, Inc. ... 221,751
55,653 American International Group,
Inc. ........................ 3,654,732
6,950 Aon Corp. ..................... 165,827
9,850 Chubb Corp. ................... 757,465
7,000 CIGNA Corp. ................... 570,990
4,205 Cincinnati Financial Corp. .... 186,113
10,950 Hartford Financial Services
Group, Inc. ................. 758,945
5,550 Humana, Inc.*.................. 164,780
1,400 Jefferson-Pilot Corp. ......... 72,744
7,300 Lincoln National Corp. ........ 340,764
10,100 Loews Corp. ................... 710,030
4,700 Marsh & McLennan Companies,
Inc. ........................ 154,630
3,300 MBIA, Inc.(d).................. 208,824
16,400 MetLife, Inc. ................. 664,364
2,650 MGIC Investment Corp. ......... 182,612
7,100 Principal Financial Group,
Inc. ........................ 290,674
4,950 Progressive Corp. ............. 419,958
6,950 SAFECO Corp. .................. 363,068
2,500 The St. Paul Travelers
Companies, Inc. ............. 92,675
2,150 Torchmark Corp. ............... 122,851
3,100 UnumProvident Corp. ........... 55,614
3,300 XL Capital, Ltd. -- Class
A(d)......................... 256,245
------------
12,865,057
------------
INTERNET SERVICES -- 1.6%
142,600 Cisco Systems, Inc.*........... 2,752,180
14,600 eBay, Inc.*.................... 1,697,688
8,000 Novell, Inc.*(d)............... 54,000
32,100 Symantec Corp.*................ 826,896
31,500 YAHOO!, Inc.*.................. 1,186,920
------------
6,517,684
------------
LEISURE AND RECREATION -- 0.6%
2,050 Brunswick Corp. ............... 101,475
14,350 Carnival Corp. ................ 826,990
2,350 Harrah's Entertainment,
Inc. ........................ 157,192
</Table>
See notes to financial statements.
85
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
8,150 Hilton Hotels Corp. ........... $ 185,331
8,900 International Game
Technology................... 305,982
8,700 Marriott International, Inc. --
Class A...................... 547,926
5,000 Starwood Hotels & Resorts
Worldwide, Inc. ............. 292,000
------------
2,416,896
------------
MACHINERY -- 0.4%
3,150 Caterpillar, Inc. ............. 307,157
1,700 Cummins, Inc. ................. 142,443
5,600 Deere & Company................ 416,640
1,900 Dover Corp. ................... 79,686
4,000 Ingersoll-Rand Company, Ltd. --
Class A...................... 321,200
4,300 Rockwell Automation, Inc. ..... 213,065
------------
1,480,191
------------
MANUFACTURING -- 1.5%
25,500 3M Company..................... 2,092,784
1,800 Cooper Industries,
Ltd. -- Class A.............. 122,202
7,500 Danaher Corp. ................. 430,575
3,800 Eaton Corp. ................... 274,968
18,450 Honeywell International,
Inc. ........................ 653,315
6,700 Illinois Tool Works, Inc. ..... 620,956
2,250 ITT Industries, Inc. .......... 190,013
2,850 Parker Hannifin Corp. ......... 215,859
3,200 Textron, Inc. ................. 236,160
43,250 Tyco International, Ltd. ...... 1,545,755
------------
6,382,587
------------
MEDICAL AND OTHER HEALTH SERVICES -- 1.3%
700 Express Scripts, Inc.*......... 53,508
4,950 IMS Health, Inc. .............. 114,890
3,200 Laboratory Corp. of America
Holdings*.................... 159,424
3,550 Manor Care, Inc. .............. 125,777
6,550 McKesson Corp. ................ 206,063
4,808 Medco Health Solutions,
Inc.*........................ 200,013
950 Quest Diagnostics, Inc. ....... 90,773
29,650 UnitedHealth Group, Inc. ...... 2,610,089
15,550 WellPoint, Inc.*............... 1,788,249
------------
5,348,786
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 2.5%
2,850 Allergan, Inc. ................ 231,050
1,600 Bausch & Lomb, Inc. ........... 103,136
5,400 Baxter International, Inc. .... 186,516
12,700 Becton, Dickinson and
Company...................... 721,360
5,700 Biomet, Inc. .................. 247,323
18,550 Boston Scientific Corp.*....... 659,453
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES (CONTINUED)
2,600 CR Bard, Inc. ................. $ 166,348
2,800 Guidant Corp. ................. 201,880
95,200 Johnson & Johnson.............. 6,037,583
25,750 Medtronic, Inc. ............... 1,279,003
8,100 St. Jude Medical, Inc.*........ 339,633
5,550 Zimmer Holdings, Inc.*......... 444,666
------------
10,617,951
------------
METALS AND MINING -- 0.2%
3,900 Nucor Corp.(d)................. 204,126
4,050 Phelps Dodge Corp. ............ 400,626
4,200 United States Steel Corp. ..... 215,250
------------
820,002
------------
OIL AND GAS: PIPELINES -- 0.1%
21,150 Dynegy, Inc. -- Class A*(d).... 97,713
12,650 El Paso Corp. ................. 131,560
1,100 Kinder Morgan, Inc. ........... 80,443
11,150 Williams Companies, Inc. ...... 181,634
------------
491,350
------------
OIL, COAL AND GAS -- 4.9%
3,750 Amerada Hess Corp. ............ 308,925
9,300 Anadarko Petroleum Corp. ...... 602,733
7,514 Apache Corp. .................. 379,983
7,450 Baker Hughes, Inc. ............ 317,892
3,600 BJ Services Company............ 167,544
21,300 Burlington Resources, Inc. .... 926,550
61,450 ChevronTexaco Corp. ........... 3,226,739
22,913 ConocoPhillips................. 1,989,535
25,600 Devon Energy Corp. ............ 996,352
2,850 EOG Resources, Inc. ........... 203,376
161,050 Exxon Mobil Corp. ............. 8,255,422
9,650 Halliburton Company............ 378,666
2,400 Kerr-McGee Corp. .............. 138,696
7,450 Marathon Oil Corp. ............ 280,195
1,350 Nabors Industries, Ltd.*....... 69,242
3,350 Noble Corp.*................... 166,629
8,450 Occidental Petroleum Corp. .... 493,142
7,600 Praxair, Inc. ................. 335,540
3,100 Sunoco, Inc. .................. 253,301
3,600 Transocean, Inc.*.............. 152,604
5,600 Unocal Corp. .................. 242,144
13,200 Valero Energy Corp. ........... 599,280
------------
20,484,490
------------
PAPER AND FOREST PRODUCTS -- 0.3%
5,800 Georgia-Pacific Corp. ......... 217,384
4,550 International Paper Company.... 191,100
2,850 Louisiana-Pacific Corp. ....... 76,209
</Table>
See notes to financial statements.
86
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
PAPER AND FOREST PRODUCTS (CONTINUED)
4,950 MeadWestvaco Corp. ............ $ 167,756
1,850 Plum Creek Timber Company,
Inc. ........................ 71,114
1,300 Temple-Inland, Inc. ........... 88,920
8,750 Weyerhauser Company............ 588,175
------------
1,400,658
------------
PHARMACEUTICALS -- 3.2%
34,100 Abbott Laboratories............ 1,590,764
4,300 AmerisourceBergen Corp. ....... 252,324
43,600 Bristol-Myers Squibb Company... 1,117,032
9,600 Cardinal Health, Inc.(d)....... 558,240
23,550 Caremark Rx, Inc.*............. 928,577
9,650 Eli Lilly and Company.......... 547,638
8,350 Forest Laboratories,
Inc.*(d)..................... 374,581
3,715 Hospira, Inc.*................. 124,453
2,500 King Pharmaceuticals, Inc.*.... 31,000
48,200 Merck & Company, Inc. ......... 1,549,147
160,410 Pfizer, Inc. .................. 4,313,424
31,750 Schering-Plough Corp. ......... 662,940
29,800 Wyeth.......................... 1,269,182
------------
13,319,302
------------
PRINTING AND PUBLISHING -- 0.1%
800 Knight-Ridder, Inc. ........... 53,552
3,300 New York Times Company -- Class
A............................ 134,640
3,300 RR Donnelley & Sons Company.... 116,457
------------
304,649
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
3,850 Equity Office Properties
Trust........................ 112,112
100 Equity Residential............. 3,618
3,950 ProLogis....................... 171,154
4,900 Simon Property Group, Inc. .... 316,883
------------
603,767
------------
RESEARCH AND DEVELOPMENT -- 0.6%
26,834 Amgen, Inc.*................... 1,721,400
7,050 Biogen Idec, Inc.*............. 469,601
2,150 Genzyme Corp.*................. 124,851
9,900 Gilead Sciences, Inc.*......... 346,401
1,050 Millipore Corp.*(d)............ 52,301
------------
2,714,554
------------
RETAIL -- 3.9%
6,800 Bed Bath & Beyond, Inc.*....... 270,844
7,450 Best Buy Company, Inc. ........ 442,679
8,900 Circuit City Stores, Inc. ..... 139,196
24,500 Costco Wholesale Corp. ........ 1,186,044
9,500 CVS Corp. ..................... 428,165
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
3,900 Federated Department Stores,
Inc. ........................ $ 225,381
82,650 Home Depot, Inc. .............. 3,532,460
13,950 JC Penney Company, Inc.
(Holding Company)............ 577,530
3,050 Kohl's Corp.*.................. 149,969
16,400 Lowe's Companies, Inc.(d)...... 944,476
6,650 May Department Stores Company.. 195,510
3,100 Nordstrom, Inc. ............... 144,863
14,850 Office Depot, Inc.*............ 257,796
3,500 RadioShack Corp. .............. 115,080
25,850 Staples, Inc. ................. 871,404
19,950 Target Corp. .................. 1,036,004
11,600 TJX Companies, Inc.(d)......... 291,508
4,250 Toys "R" Us, Inc.*............. 86,998
91,220 Wal-Mart Stores, Inc. ......... 4,818,239
21,950 Walgreen Company............... 842,222
------------
16,556,368
------------
RETAIL: RESTAURANTS -- 0.8%
3,900 Darden Restaurants, Inc. ...... 108,186
63,950 McDonald's Corp. .............. 2,050,237
14,650 Starbucks Corp.*............... 913,574
2,550 Wendy's International, Inc. ... 100,113
6,450 YUM! Brands, Inc. ............. 304,311
------------
3,476,421
------------
RETAIL: SUPERMARKETS -- 0.1%
3,450 Albertson's, Inc.(d)........... 82,386
5,150 SUPERVALU, Inc. ............... 177,778
6,600 The Kroger Company*............ 115,764
------------
375,928
------------
RUBBER PRODUCTS -- 0.0%
3,900 The Goodyear Tire & Rubber
Company*..................... 57,174
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.3%
11,000 Agilent Technologies, Inc.*.... 265,100
6,700 Applera Corp.-Applied
Biosystems Group............. 140,097
2,750 Fisher Scientific
International, Inc.*......... 171,545
1,100 Pall Corp.(d).................. 31,845
2,450 PerkinElmer, Inc. ............. 55,101
9,250 Thermo Electron Corp.*......... 279,257
2,650 Waters Corp.*.................. 123,994
------------
1,066,939
------------
SEMICONDUCTORS -- 1.5%
8,450 Altera Corp.*.................. 174,915
8,400 Analog Devices, Inc. .......... 310,128
</Table>
See notes to financial statements.
87
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
36,700 Applied Materials, Inc.*....... $ 627,570
9,339 Freescale Semiconductor,
Inc. -- Class B*............. 171,464
137,850 Intel Corp. ................... 3,224,312
4,800 KLA-Tencor Corp.*.............. 223,584
7,550 Linear Technology Corp. ....... 292,638
3,100 Maxim Integrated Products,
Inc. ........................ 131,409
6,000 National Semiconductor
Corp. ....................... 107,700
36,550 Texas Instruments, Inc. ....... 899,861
------------
6,163,581
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.0%
11,350 ALLTEL Corp. .................. 666,926
6,760 AT&T Corp. .................... 128,846
10,350 Avaya, Inc.*(d)................ 178,020
39,500 BellSouth Corp. ............... 1,097,705
3,950 CenturyTel, Inc. .............. 140,107
7,300 Citizens Communications
Company...................... 100,667
3,850 Comverse Technology, Inc.*..... 94,133
11,850 Corning, Inc.*................. 139,475
91,850 Lucent Technologies,
Inc.*(d)..................... 345,356
85,900 Motorola, Inc. ................ 1,477,479
25,600 Nextel Communications, Inc. --
Class A*..................... 768,000
35,050 QUALCOMM, Inc. ................ 1,486,119
16,500 Qwest Communications
International, Inc.*......... 73,260
71,000 SBC Communications, Inc. ...... 1,829,669
3,450 Scientific-Atlanta, Inc. ...... 113,885
31,050 Sprint Corp. (FON Group)....... 771,593
10,150 Tellabs, Inc.*................. 87,189
78,950 Verizon Communications,
Inc. ........................ 3,198,264
------------
12,696,693
------------
TOOLS -- 0.0%
1,700 Snap-on, Inc. ................. 58,412
2,550 Stanley Works(d)............... 124,925
------------
183,337
------------
TOYS -- 0.1%
3,750 Hasbro, Inc. .................. 72,675
9,750 Mattel, Inc. .................. 190,028
------------
262,703
------------
TRANSPORTATION -- 0.3%
9,100 Burlington Northern Santa Fe
Corp. ....................... 430,521
5,300 CSX Corp. ..................... 212,424
14,750 Norfolk Southern Corp. ........ 533,802
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION (CONTINUED)
1,250 Ryder System, Inc. ............ $ 59,713
5,050 Sabre Holdings Corp. -- Class
A............................ 111,908
------------
1,348,368
------------
UTILITIES: ELECTRIC -- 1.6%
25,350 AES Corp.*..................... 346,535
1,850 Ameren Corp. .................. 92,759
9,540 American Electric Power
Company, Inc. ............... 327,604
4,050 Cinergy Corp. ................. 168,602
5,800 Consolidated Edison, Inc.(d)... 253,750
4,000 Constellation Energy Group,
Inc. ........................ 174,840
2,850 Dominion Resources, Inc.
(Virginia)................... 193,059
3,350 DTE Energy Company............. 144,486
48,400 Duke Energy Corp. ............. 1,225,971
7,600 Edison International........... 243,428
4,950 Entergy Corp. ................. 334,571
14,300 Exelon Corp. .................. 630,200
8,350 FirstEnergy Corp. ............. 329,909
4,250 FPL Group, Inc. ............... 317,688
8,450 PG&E Corp.*.................... 281,216
2,150 Pinnacle West Capital Corp. ... 95,482
7,050 PPL Corp. ..................... 375,624
16,050 Southern Company(d)............ 537,995
9,250 TXU Corp.(d)................... 597,179
9,550 Xcel Energy, Inc. ............. 173,810
------------
6,844,708
------------
UTILITIES: GAS -- 0.1%
4,550 KeySpan Corp. ................. 179,498
2,300 NiSource, Inc. ................ 52,394
9,200 Sempra Energy.................. 337,456
------------
569,348
------------
TOTAL COMMON STOCKS
(Cost $233,132,030).......... 267,160,980
------------
<Caption>
PRINCIPAL
---------
US TREASURY SECURITIES -- 9.0%
US TREASURY BONDS -- 2.5%
$ 2,345,000 10.38%, 11/15/12(d)............ 2,796,598
1,150,000 12.00%, 08/15/13(d)............ 1,482,512
1,000,000 6.00%, 02/15/26................ 1,145,821
1,260,000 6.13%, 11/15/27................ 1,471,986
1,060,000 5.50%, 08/15/28................ 1,147,616
2,405,000 5.38%, 02/15/31(d)............. 2,601,347
------------
10,645,880
------------
</Table>
See notes to financial statements.
88
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES (CONTINUED)
US TREASURY NOTES -- 6.5%
$14,120,000 2.38%, 08/31/06................ $ 13,983,771
4,130,000 2.50%, 09/30/06(d)............. 4,095,638
4,370,000 2.50%, 10/31/06................ 4,330,569
4,280,000 3.00%, 11/15/07(d)............. 4,254,924
545,000 3.50%, 12/15/09(d)............. 542,531
------------
27,207,433
------------
TOTAL US TREASURY SECURITIES
(Cost $38,048,417)........... 37,853,313
------------
US GOVERNMENT AGENCY SECURITIES -- 16.1%
FANNIE MAE -- 10.5%
300,000 1.75%, 06/16/06................ 294,284
2,225,000 2.71%, 01/30/07................ 2,200,957
1,355,000 2.35%, 04/05/07................ 1,327,409
520,000 3.13%, 03/16/09................ 505,776
40,000 6.63%, 09/15/09................ 44,708
1,160,000 5.50%, 07/18/12................ 1,174,138
700,000 4.75%, 02/21/13................ 696,940
352,718 PL# 252345, 6.00%,
03/01/14(e).................. 370,501
307,513 PL# 254346, 6.50%, 06/01/32.... 322,868
181,523 PL# 255069, 5.00%, 01/01/34.... 180,515
372,682 PL# 255225, 5.50%,
06/01/34(e).................. 378,689
119,366 PL# 255269, 5.50%,
07/01/34(e).................. 121,290
1,200,119 PL# 255452, 5.50%,
10/01/19(e).................. 1,241,484
234,067 PL# 323842, 5.50%,
07/01/14(e).................. 242,643
654,689 PL# 357414, 4.00%, 07/01/18.... 640,528
300,992 PL# 406815, 7.00%, 07/01/28.... 319,616
277,732 PL# 535675, 7.00%, 01/01/16.... 294,551
983 PL# 549906, 7.50%, 09/01/30.... 1,054
3,893 PL# 552549, 7.50%, 09/01/30.... 4,173
775,293 PL# 555034, 6.00%,
09/01/17(e).................. 813,116
30,482 PL# 555455, 6.00%, 04/01/18.... 31,969
9,969 PL# 555514, 6.00%, 11/01/17.... 10,456
473,802 PL# 555531, 5.50%,
06/01/33(e).................. 481,569
1,295 PL# 558384, 7.50%, 01/01/31.... 1,388
96,863 PL# 566031, 6.00%, 03/01/16.... 101,594
4,236 PL# 568677, 7.50%, 01/01/31.... 4,540
3,648 PL# 572762, 7.50%, 03/01/31.... 3,910
23,642 PL# 575334, 6.00%, 04/01/16.... 24,796
38,629 PL# 577523, 6.00%, 05/01/16.... 40,516
12,029 PL# 578769, 6.00%, 05/01/16.... 12,617
167,083 PL# 579234, 6.00%, 04/01/16.... 175,244
5,222 PL# 581450, 6.50%, 06/01/31.... 5,486
20,648 PL# 582178, 7.50%, 06/01/31.... 22,129
85,193 PL# 582491, 6.00%, 05/01/16.... 89,354
5,112 PL# 589433, 6.50%, 07/01/31.... 5,368
13,627 PL# 594316, 6.50%, 07/01/31.... 14,310
2,676 PL# 602859, 6.50%, 10/01/31.... 2,810
68,821 PL# 614924, 7.00%, 12/01/16.... 72,985
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 30,694 PL# 618454, 5.50%,
12/01/16(e).................. $ 31,782
6,463 PL# 620174, 6.50%, 12/01/31.... 6,786
142,925 PL# 627256, 6.50%, 03/01/32.... 150,061
74,218 PL# 629167, 6.50%, 08/01/32.... 77,924
300,970 PL# 635164, 6.50%, 08/01/32.... 315,998
66,030 PL# 643361, 6.00%, 07/01/17.... 69,252
176,367 PL# 650296, 6.50%, 08/01/32.... 185,173
333,295 PL# 693252, 6.50%, 03/01/33.... 349,741
44,218 PL# 701353, 5.50%,
04/01/18(e).................. 45,761
183,337 PL# 725174, 5.50%,
01/01/19(e).................. 189,692
3,342,696 PL# 725232, 5.00%,
03/01/34(e).................. 3,324,133
305,811 PL# 725418, 6.50%, 05/01/34.... 321,128
705,477 PL# 725464, 6.00%, 04/01/19.... 740,798
468,066 PL# 725551, 5.50%,
06/01/19(e).................. 484,290
917,808 PL# 725603, 5.50%, 07/01/19.... 949,621
371,006 PL# 727361, 5.00%, 08/01/18.... 377,415
2,000,000 PL# 739339, 5.50%, 09/01/18.... 2,069,323
148,508 PL# 740491, 6.00%, 10/01/18.... 155,746
45,861 PL# 744714, 4.50%,
10/01/18(e).................. 45,832
94,347 PL# 748975, 4.00%, 10/01/18.... 92,306
517,149 PL# 749105, 4.50%,
10/01/18(e).................. 516,829
642,353 PL# 770052, 4.50%,
03/01/19(e).................. 640,912
152,704 PL# 772962, 5.50%,
05/01/34(e).................. 155,166
1,185,251 PL# 773068, 5.50%,
03/01/34(e).................. 1,204,356
91,121 PL# 773100, 5.50%,
04/01/34(e).................. 92,590
483,211 PL# 773177, 5.50%,
06/01/34(e).................. 490,999
468,643 PL# 773385, 5.50%,
05/01/34(e).................. 476,197
217,187 PL# 773589, 5.50%,
07/01/34(e).................. 220,688
745,617 PL# 777336, 4.50%,
04/01/19(e).................. 743,945
48,504 PL# 779556, 5.50%,
06/01/34(e).................. 49,286
868,362 PL# 780899, 5.50%,
05/01/34(e).................. 882,360
449,101 PL# 786388, 5.50%,
07/01/34(e).................. 456,340
496,580 PL# 788262, 5.50%,
07/01/34(e).................. 504,585
698,055 PL# 791674, 6.00%, 09/01/17.... 732,149
111,703 PL# 792083, 6.50%, 10/01/34.... 117,216
525,863 PL# 793193, 5.50%, 07/01/19.... 543,988
700,000 TBA, 4.00%, 01/01/20........... 683,375
600,000 TBA, 4.50%, 01/01/20........... 598,125
3,200,000 TBA, 5.00%, 01/01/20........... 3,251,002
1,500,000 TBA, 4.56%, 12/01/34........... 1,511,250
700,000 TBA, 4.50%, 01/01/35........... 676,593
800,000 TBA, 5.00%, 01/01/35........... 793,750
100,000 TBA, 5.50%, 01/01/35........... 101,531
4,400,000 TBA, 6.00%, 01/01/35........... 4,549,874
2,000,000 TBA, 6.50%, 01/01/35........... 2,097,500
------------
44,349,649
------------
</Table>
See notes to financial statements.
89
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC -- 0.6%
$ 60,000 3.88%, 11/10/08................ $ 60,131
410,000 3.88%, 01/12/09................ 408,685
1,230,000 4.13%, 02/24/11................ 1,212,666
695,000 Series MTN, 3.01%, 04/19/07.... 690,543
------------
2,372,025
------------
FREDDIE MAC GOLD -- 2.2%
2,700,000 4.50%, 12/16/10................ 2,700,909
261,749 PL# A12447, 6.00%,
08/01/33(e).................. 270,591
220,881 PL# A12800, 5.50%, 08/01/33.... 224,665
487,537 PL# B13607, 4.50%,
04/01/19(e).................. 486,363
471,182 PL# B14156, 4.00%, 05/01/19.... 461,135
481,176 PL# B14794, 4.50%,
06/01/19(e).................. 480,017
531,786 PL# C01623, 5.50%,
09/01/33(e).................. 540,895
50,703 PL# C64741, 7.00%, 03/01/32.... 53,753
496,395 PL# C75655, 6.00%,
01/01/33(e).................. 513,646
189,159 PL# E90827, 5.50%, 08/01/17.... 195,674
9,726 PL# G01309, 7.00%, 08/01/31.... 10,311
97,915 PL# G01315, 7.00%, 09/01/31.... 103,837
245,732 PL# G01391, 7.00%, 04/01/32.... 260,595
372,206 PL# M80813, 4.00%, 04/01/10.... 370,822
1,000,000 TBA, 5.50%, 01/01/20........... 1,032,812
600,000 TBA, 6.00%, 01/01/35........... 619,875
1,100,000 TBA, 5.00%, 01/01/35........... 1,092,438
------------
9,418,338
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 1.3%
287,558 PL# 3161, 6.50%, 11/20/31...... 302,429
9,677 PL# 461836, 7.00%, 01/15/28.... 10,304
35,472 PL# 480112, 6.00%, 04/15/29.... 36,878
31,735 PL# 499445, 6.00%, 04/15/29.... 32,992
44,619 PL# 552851, 6.00%, 10/15/32.... 46,312
103,347 PL# 555581, 7.00%, 10/15/31.... 109,878
98,083 PL# 578249, 6.00%, 10/15/32.... 101,805
297,321 PL# 590257, 6.00%, 10/15/32.... 308,605
100,010 PL# 594411, 6.50%, 09/15/32.... 105,402
2,941 PL# 596647, 7.00%, 09/15/32.... 3,127
169,549 PL# 607183, 6.00%, 11/15/33.... 175,888
192,190 PL# 616026, 6.00%, 10/15/33.... 199,376
857,686 PL# 625651, 5.50%,
01/15/34(e).................. 876,699
185,322 PL# 629348, 5.50%,
02/15/34(e).................. 189,430
88,645 PL# 780914, 6.00%, 11/15/28.... 92,228
304,299 PL# 781328, 7.00%, 09/15/31.... 323,611
1,368,242 PL# 80916, 3.75%, 05/20/34..... 1,349,838
1,100,000 TBA, 5.50%, 01/01/35........... 1,122,688
------------
5,387,490
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 1.1%
$ 600,000 Fannie Mae Grantor Trust,
Series 2001-T2, Class B,
6.02%, 11/25/10.............. $ 654,297
390,129 Fannie Mae, Series 1999-7,
Class AB, 6.00%,
03/25/29..................... 403,327
365,000 Fannie Mae, Series 2002-81,
Class BR, 5.25%,
04/25/25..................... 373,895
430,000 Fannie Mae, Series 2004-101,
Class AR,
5.50%, 01/25/35.............. 448,813
601,746 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34.............. 613,974
730,000 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34.............. 751,448
325,000 Freddie Mac, Series 2550, Class
QP,
5.00%, 03/15/26.............. 328,564
602,485 Freddie Mac, Series 2825, Class
VP,
5.50%, 06/15/15.............. 623,866
426,913 Freddie Mac, Series 2877, Class
PA,
5.50%, 07/15/33.............. 440,328
------------
4,638,512
------------
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES -- 0.3%
472,946 Small Business Administration,
Series 2002-P10B, Class 1,
5.20%, 08/01/12.............. 483,410
637,152 Small Business Administration,
Series 2004-P10A,
4.50%, 02/10/14.............. 633,403
------------
1,116,813
------------
RESOLUTION FUNDING STRIPS -- 0.1%
250,000 Zero coupon, 07/15/18.......... 127,526
250,000 Zero coupon, 10/15/18.......... 125,603
------------
253,129
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$67,141,801)................. 67,535,956
------------
CORPORATE BONDS AND NOTES -- 12.0%
AEROSPACE AND DEFENSE -- 0.3%
35,000 B/E Aerospace,
8.50%, 10/01/10.............. 38,675
190,000 Lockheed Martin Corp.,
7.65%, 05/01/16.............. 233,258
80,000 Lockheed Martin Corp.,
8.50%, 12/01/29.............. 109,798
110,000 Lockheed Martin Corp.,
7.20%, 05/01/36.............. 134,019
</Table>
See notes to financial statements.
90
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
AEROSPACE AND DEFENSE (CONTINUED)
$ 220,000 Northrop Grumman Corp.,
4.08%, 11/16/06.............. $ 222,322
90,000 Northrop Grumman Corp.,
7.13%, 02/15/11.............. 103,415
20,000 Northrop Grumman Corp.,
7.75%, 02/15/31.............. 25,688
720,000 RC Trust I,
7.00%, 05/15/06.............. 379,575
------------
1,246,750
------------
AUTOMOBILES/MOTOR VEHICLES -- 0.1%
60,000 Daimler Chrysler AG Corp.,
7.45%, 03/01/27.............. 66,901
25,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08.............. 24,968
150,000 Daimler Chrysler NA Holding,
Series MTND, Floating Rate,
2.94%, 09/10/07(b)........... 150,607
------------
242,476
------------
BANKS -- 2.2%
400,000 American Express Bank FSB,
Series BKNT, Floating Rate,
2.49%, 11/21/07(c)........... 400,164
250,000 American Express Centurion
Bank, Series BKNT,
4.38%, 07/30/09.............. 254,242
155,000 Bank of America Corp.,
3.88%, 01/15/08.............. 156,320
175,000 Bank of America Corp.,
3.25%, 08/15/08.............. 172,160
5,000 Bank of America Corp.,
7.80%, 02/15/10.............. 5,821
80,000 Bank of America Corp.,
4.38%, 12/01/10.............. 80,342
45,000 Bank of America Corp.,
5.38%, 06/15/14.............. 47,048
325,000 Bank One Corp.,
6.00%, 08/01/08.............. 348,121
175,000 Chase Manhattan Corp.,
7.13%, 06/15/09.............. 194,895
600,000 DEPFA ACS Bank,
3.63%, 10/29/08.............. 596,249
190,000 FleetBoston Financial Corp.,
3.85%, 02/15/08.............. 191,020
260,000 HBOS Treasury Services
PLC -- 144A,
3.75%, 09/30/08.............. 259,791
575,000 HSBC Bank USA, Series BKNT,
Floating Rate,
2.59%, 09/21/07(b)........... 575,695
175,000 JP Morgan Chase & Company,
5.35%, 03/01/07.............. 181,744
50,000 JP Morgan Chase & Company,
5.25%, 05/30/07.............. 52,009
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 75,000 JP Morgan Chase & Company,
3.63%, 05/01/08.............. $ 74,526
50,000 JP Morgan Chase & Company,
3.50%, 03/15/09.............. 49,036
85,000 JP Morgan Chase & Company,
Floating Rate,
2.75%, 10/02/09(b)........... 85,217
250,000 National City Bank, Series
BKNT, Floating Rate,
2.67%, 06/29/09(b)........... 250,153
115,000 RBS Capital Trust I,
Variable Rate,
4.71%, perpetual(a).......... 112,226
300,000 State Street Bank & Trust,
Series CD1, Floating Rate,
2.41%, 12/11/06(b)........... 299,820
290,000 SunTrust Banks, Inc.,
3.63%, 10/15/07.............. 289,510
150,000 SunTrust Banks, Inc.,
4.00%, 10/15/08.............. 151,514
215,000 SunTrust Banks, Inc.,
4.42%, 06/15/09.............. 218,113
250,000 Swedish Export Credit,
2.88%, 01/26/07.............. 247,615
100,000 UBS Preferred Funding Trust I,
Variable Rate,
8.62%, perpetual(a).......... 120,342
50,000 US Bancorp, Series MTNN,
3.95%, 08/23/07.............. 50,512
475,000 US Bank NA,
2.87%, 02/01/07.............. 471,123
275,000 US Bank NA,
2.40%, 03/12/07.............. 270,003
275,000 US Bank NA, Series BKNT,
Floating Rate,
2.59%, 10/01/07(b)........... 275,200
115,000 Wachovia Corp.,
3.63%, 02/17/09.............. 113,784
1,025,000 Wells Fargo & Company,
4.00%, 08/15/08.............. 1,032,713
625,000 Wells Fargo & Company,
4.20%, 01/15/10.............. 628,245
200,000 Wells Fargo & Company,
Floating Rate,
2.61%, 09/28/07(b)........... 200,193
725,000 Wells Fargo & Company,
Floating Rate,
2.59%, 09/15/09(b)........... 725,101
100,000 Wells Fargo Bank NA, Series
BKNT, Variable Rate,
7.80%, 06/15/10(a)........... 102,104
------------
9,282,671
------------
</Table>
See notes to financial statements.
91
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA -- 0.6%
$ 170,000 Charter Communications Holdings
LLC,
10.75%, 10/01/09............. $ 155,550
465,000 Comcast Cable Communications,
Inc.,
6.75%, 01/30/11.............. 522,845
30,000 Comcast Corp.,
5.50%, 03/15/11.............. 31,750
50,000 Cox Communications, Inc.,
7.75%, 11/01/10.............. 57,343
200,000 Cox Communications, Inc. --
144A,
4.63%, 01/15/10.............. 199,760
40,000 CSC Holdings, Inc.,
7.88%, 02/15/18.............. 43,400
70,000 CSC Holdings, Inc. -- 144A,
6.75%, 04/15/12(d)........... 72,450
60,000 EchoStar DBS Corp. -- 144A,
6.63%, 10/01/14.............. 61,050
20,000 News America Holdings,
7.63%, 11/30/28.............. 23,821
75,000 News America, Inc.,
7.30%, 04/30/28.............. 86,195
175,000 News America, Inc.,
7.28%, 06/30/28.............. 200,593
100,000 News America, Inc. -- 144A,
5.30%, 12/15/14.............. 101,374
10,000 Rogers Cable, Inc. -- 144A
(Canada),
6.75%, 03/15/15.............. 10,275
83,000 TCI Communications, Inc.,
7.88%, 08/01/13.............. 99,677
35,000 TCI Communications, Inc.,
8.75%, 08/01/15.............. 44,723
110,000 TCI Communications, Inc.,
7.88%, 02/15/26.............. 135,464
380,000 Time Warner, Inc.,
6.63%, 05/15/29.............. 410,733
50,000 Walt Disney Company, Series
MTNB,
6.20%, 06/20/14.............. 55,450
------------
2,312,453
------------
CHEMICALS -- 0.0%
60,000 Crown Euro Holdings SA
(France),
9.50%, 03/01/11.............. 68,700
45,000 Nalco Company,
7.75%, 11/15/11.............. 48,825
------------
117,525
------------
FINANCIAL SERVICES -- 2.2%
130,000 Associates Corp. NA,
6.25%, 11/01/08.............. 141,040
375,000 Citigroup, Inc.,
3.50%, 02/01/08.............. 373,597
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 1,565,000 Citigroup, Inc.,
3.63%, 02/09/09(d)........... $ 1,553,041
100,000 Citigroup, Inc.,
6.20%, 03/15/09.............. 108,785
700,000 Citigroup, Inc., Floating Rate,
2.59%, 06/09/09(b)........... 701,939
30,000 E*TRADE Financial Corp. --
144A,
8.00%, 06/15/11.............. 32,400
710,000 Eksportfinans ASA, Series MTN,
3.38%, 01/15/08.............. 706,841
175,000 General Electric Capital Corp.,
Series MTNA,
6.50%, 12/10/07.............. 188,700
995,000 General Electric Capital Corp.,
Series MTNA,
4.25%, 01/15/08.............. 1,011,465
610,000 General Electric Capital Corp.,
Series MTNA,
3.60%, 10/15/08.............. 603,860
60,000 General Electric Capital Corp.,
Series MTNA,
4.38%, 11/21/11.............. 59,732
650,000 General Electric Capital Corp.,
Series MTNA, Floating Rate,
2.22%, 07/28/08(b)........... 651,223
420,000 General Motors Acceptance
Corp.,
5.63%, 05/15/09.............. 420,416
175,000 General Motors Acceptance
Corp.,
7.25%, 03/02/11.............. 183,445
100,000 General Motors Acceptance
Corp.,
6.88%, 09/15/11.............. 102,616
25,000 General Motors Acceptance
Corp.,
8.00%, 11/01/31.............. 25,769
50,000 Household Finance Corp.,
7.20%, 07/15/06.............. 52,819
325,000 Household Finance Corp.,
6.50%, 11/15/08.............. 353,765
125,000 Household Finance Corp.,
4.13%, 12/15/08.............. 125,624
50,000 Household Finance Corp.,
7.00%, 05/15/12.............. 57,182
390,000 Household Finance Corp.,
6.38%, 11/27/12.............. 431,580
100,000 HSBC Finance Corp.,
6.75%, 05/15/11.............. 112,369
55,000 Lehman Brothers Holdings, Inc.,
7.00%, 02/01/08.............. 60,134
400,000 Nationwide Building Society --
144A,
3.50%, 07/31/07.............. 398,427
45,000 REFCO Finance Holdings -- 144A,
9.00%, 08/01/12.............. 49,500
375,000 SLM Corp.,
4.00%, 01/15/10.............. 372,516
</Table>
See notes to financial statements.
92
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 60,000 SLM Corp., Series MTNA,
3.63%, 03/17/08.............. $ 59,757
220,000 TIAA Global Markets -- 144A,
3.88%, 01/22/08.............. 221,522
175,000 USAA Capital Corp. -- 144A,
Series MTNB,
4.00%, 12/10/07.............. 177,121
------------
9,337,185
------------
FOOD AND BEVERAGE -- 0.1%
195,000 Diageo Capital PLC,
3.38%, 03/20/08.............. 193,298
125,000 General Mills, Inc.,
5.13%, 02/15/07.............. 128,404
------------
321,702
------------
INSURANCE -- 0.5%
225,000 Allstate Financial Global
Funding -- 144A,
6.15%, 02/01/06.............. 232,020
125,000 ASIF Global Financial
XVIII -- 144A,
3.85%, 11/26/07.............. 125,563
610,000 ASIF Global Financial
XXIII -- 144A,
3.90%, 10/22/08.............. 610,265
225,000 Berkshire Hathaway Finance
Corp.,
3.38%, 10/15/08.............. 222,621
195,000 Berkshire Hathaway Finance
Corp. -- 144A,
3.40%, 07/02/07.............. 194,654
150,000 Liberty Mutual Group -- 144A,
5.75%, 03/15/14.............. 147,728
90,000 Marsh & McLennan Companies,
Inc.,
5.38%, 07/15/14.............. 88,097
100,000 New York Life
Insurance -- 144A,
5.88%, 05/15/33.............. 103,826
210,000 Protective Life Secured Trust,
Series MTN,
3.70%, 11/24/08.............. 209,571
------------
1,934,345
------------
LEISURE AND RECREATION -- 0.0%
25,000 MGM MIRAGE,
6.00%, 10/01/09.............. 25,750
70,000 Wynn Las Vegas LLC/Capital
Corp. -- 144A,
6.63%, 12/01/14.............. 69,650
------------
95,400
------------
MANUFACTURING -- 0.0%
50,000 Briggs & Stratton Corp.,
8.88%, 03/15/11.............. 60,375
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES -- 0.0%
$ 40,000 HCA, Inc.,
5.50%, 12/01/09.............. $ 40,056
115,000 WellPoint, Inc. -- 144A,
5.95%, 12/15/34.............. 116,526
------------
156,582
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.0%
95,000 Boston Scientific Corp.,
5.45%, 06/15/14.............. 98,872
------------
METALS AND MINING -- 0.0%
20,000 International Steel Group,
6.50%, 04/15/14.............. 21,550
33,000 Ispat Inland ULC,
9.75%, 04/01/14.............. 40,920
25,000 TriMas Corp.,
9.88%, 06/15/12.............. 26,625
------------
89,095
------------
OIL AND GAS: PIPELINES -- 0.1%
275,000 Consolidated Natural Gas,
Series A,
5.00%, 03/01/14.............. 276,145
100,000 El Paso Natural Gas,
8.63%, 01/15/22.............. 117,125
60,000 Transcontinental Gas Pipe Line
Corp., Series B,
8.88%, 07/15/12.............. 73,275
60,000 Williams Companies, Inc.,
7.63%, 07/15/19.............. 66,300
25,000 Williams Companies, Inc.,
7.75%, 06/15/31.............. 26,313
------------
559,158
------------
OIL, COAL AND GAS -- 0.4%
80,000 Amerada Hess Corp.,
7.30%, 08/15/31.............. 89,526
235,000 Amerada Hess Corp.,
7.13%, 03/15/33.............. 259,223
130,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31.............. 161,581
20,000 Chesapeake Energy
Corp. -- 144A,
6.38%, 06/15/15.............. 20,650
140,000 Conoco Funding Company,
6.35%, 10/15/11.............. 156,482
100,000 Devon Energy Corp.,
7.95%, 04/15/32.............. 128,189
50,000 Devon Financing Corp. ULC,
7.88%, 09/30/31.............. 63,154
50,000 El Paso Production Holding
Company,
7.75%, 06/01/13.............. 52,625
230,000 EnCana Corp.,
6.30%, 11/01/11.............. 253,050
</Table>
See notes to financial statements.
93
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$ 100,000 Enterprise Products Operating
LP -- 144A,
4.00%, 10/15/07.............. $ 99,821
75,000 Hanover Equipment Trust, Series
B,
8.75%, 09/01/11.............. 81,750
75,000 Suncor Energy, Inc.,
5.95%, 12/01/34.............. 78,908
------------
1,444,959
------------
PAPER AND FOREST PRODUCTS -- 0.0%
70,000 Georgia-Pacific Corp.,
8.00%, 01/15/24.............. 81,550
------------
PHARMACEUTICALS -- 0.1%
125,000 Bristol-Myers Squibb,
6.88%, 08/01/97.............. 143,980
75,000 Elan Finance PLC/Elan Finance
Corp. -- 144A (Brazil),
7.75%, 11/15/11.............. 80,250
75,000 Merck & Company, Inc.,
5.95%, 12/01/28.............. 77,876
110,000 Wyeth,
6.50%, 02/01/34.............. 117,754
------------
419,860
------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES -- 0.2%
865,852 Daimler Chrysler Auto Trust,
Series 2001-C, Class A4,
4.63%, 12/06/06.............. 870,609
------------
PRIVATE ASSET BACKED: BANKS -- 0.1%
483,785 Bank of America Alternative
Loan Trust, Series 2004-7,
Class 4A1,
5.00%, 08/25/19.............. 489,856
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 1.2%
1,075,000 Chase Issuance Trust, Series
2004-A9, Class A9,
3.22%, 06/15/10.............. 1,068,157
1,250,000 Citibank Credit Card Issuance
Trust, Series 2003-A6, Class
A6,
2.90%, 05/17/10(f)........... 1,217,786
1,475,000 Citibank Credit Card Issuance
Trust, Series 2004-A1, Class
A1,
2.55%, 01/20/09.............. 1,450,822
1,200,000 MBNA Credit Card Master Note
Trust, Series 2004-A4, Class
A4,
2.70%, 09/15/09.............. 1,180,632
------------
4,917,397
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 0.3%
$ 740,000 Greenwich Capital Commercial
Funding Corp., Series
2004-GG1, Class A4,
4.76%, 06/10/36.............. $ 756,926
510,000 Morgan Stanley Capital I,
Series 1999-FNV1, Class A2,
6.53%, 03/15/31.............. 553,942
------------
1,310,868
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 2.0%
322,912 Bear Stearns Commercial
Mortgage Securities, Series
2001, Class A1,
6.08%, 02/15/35.............. 338,809
720,000 Chase Commercial Mortgage
Securities Corp., Series
2000-3, Class A2,
7.32%, 10/15/32.............. 823,108
1,075,000 Countrywide Asset-Backed
Certificates, Series 2004-13,
Class AV4, Floating Rate,
2.71%, 06/25/35(c)........... 1,075,000
900,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33.............. 996,151
712,277 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C3, Class A2,
7.18%, 08/15/36.............. 795,752
1,090,000 GMAC Commercial Mortgage
Securities, Inc., Series
2000-C3, Class A2,
6.96%, 09/15/35.............. 1,232,820
589,094 GS Mortgage Securities Corp.,
Series 1998-C1, Class A3,
6.14%, 10/18/30.............. 627,378
680,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIB2, Class A3,
6.43%, 04/15/35.............. 755,465
605,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C4, Class
A2,
7.37%, 08/15/26.............. 691,643
900,000 LB-UBS Commercial Mortgage
Trust, Series 2004-C6, Class
A2,
4.19%, 08/15/29.............. 904,547
------------
8,240,673
------------
PRIVATE ASSET BACKED: UTILITIES -- 0.6%
2,000,000 Peco Energy Transition Trust,
Series 2000-A, Class A4,
7.65%, 03/01/10.............. 2,305,007
------------
</Table>
See notes to financial statements.
94
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE -- 0.0%
$ 65,000 EOP Operating LP,
4.75%, 03/15/14.............. $ 62,994
90,000 EOP Operating LP,
7.50%, 04/19/29.............. 104,638
------------
167,632
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
225,000 Developers Diversified Realty
Corp.,
3.88%, 01/30/09.............. 221,004
325,000 Rouse Company,
5.38%, 11/26/13.............. 312,329
------------
533,333
------------
RESEARCH AND DEVELOPMENT -- 0.0%
45,000 Bio-Rad Laboratories,
Inc. -- 144A,
6.13%, 12/15/14.............. 45,563
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.0%
15,000 Fisher Scientific
International, Inc. -- 144A,
6.75%, 08/15/14.............. 16,163
------------
SEMICONDUCTORS -- 0.0%
10,000 Freescale Semiconductor, Inc.,
6.88%, 07/15/11.............. 10,775
25,000 Freescale Semiconductor, Inc.,
Floating Rate,
4.82%, 07/15/09(b)........... 26,156
25,000 MagnaChip Semiconductor,
Ltd. -- 144A, Floating Rate,
5.76%, 12/15/11(b)........... 25,813
------------
62,744
------------
SPECIAL PURPOSE ENTITY -- 0.0%
35,000 Rainbow National Services
LLC -- 144A,
8.75%, 09/01/12.............. 38,588
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.5%
350,000 BellSouth Corp.,
4.20%, 09/15/09.............. 351,284
25,000 BellSouth Corp.,
6.55%, 06/15/34.............. 27,334
5,000 British Telecom PLC,
Variable Rate,
8.88%, 12/15/30(m)........... 6,715
50,000 Cincinnati Bell, Inc.,
8.38%, 01/15/14(d)........... 50,875
75,000 Citizens Communications
Company,
6.25%, 01/15/13.............. 75,938
75,000 Deutsche Telekom International
Corp., Variable Rate,
8.25%, 06/15/05(m)........... 76,756
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 25,000 France Telecom,
9.25%, 03/01/31.............. $ 33,990
80,000 MCI, Inc.,
6.91%, 05/01/07.............. 82,100
55,000 MCI, Inc.,
6.69%, 05/01/09.............. 57,063
65,000 New England Telephone &
Telegraph,
7.88%, 11/15/29.............. 78,714
210,000 New Jersey Bell Telephone,
7.85%, 11/15/29.............. 254,256
50,000 Nextel Communications, Inc.,
5.95%, 03/15/14.............. 52,000
60,000 Qwest Communications
International -- 144A,
7.50%, 02/15/14.............. 60,900
155,000 Qwest Corp. -- 144A,
7.88%, 09/01/11.............. 168,950
50,000 Qwest Corp. -- 144A,
9.13%, 03/15/12.............. 58,000
40,000 Rogers Wireless, Inc. (Canada),
6.38%, 03/01/14.............. 39,800
30,000 Rogers Wireless, Inc. -- 144A
(Canada),
7.25%, 12/15/12.............. 31,950
10,000 Rogers Wireless, Inc. -- 144A
(Canada),
7.50%, 03/15/15.............. 10,600
65,000 SBC Communications, Inc.,
4.13%, 09/15/09.............. 64,950
35,000 SBC Communications, Inc.,
6.45%, 06/15/34.............. 37,626
285,000 Telecom Italia Capital -- 144A,
6.00%, 09/30/34.............. 279,584
75,000 Telefonica Europe BV,
7.75%, 09/15/10.............. 88,055
130,000 Vodafone Group PLC,
5.00%, 12/16/13.............. 132,514
------------
2,119,954
------------
TRANSPORTATION -- 0.1%
230,000 Burlington Northern Santa Fe
Corp.,
7.29%, 06/01/36.............. 282,595
75,000 Canadian National Railway
Company,
6.90%, 07/15/28.............. 86,590
55,000 OMI Corp. (Marshall Island),
7.63%, 12/01/13.............. 59,125
80,000 Overseas Shipholding Group,
7.50%, 02/15/24.............. 82,000
------------
510,310
------------
</Table>
See notes to financial statements.
95
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES -- 0.0%
$ 35,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12............. $ 39,550
35,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 44,625
------------
84,175
------------
UTILITIES: ELECTRIC -- 0.3%
10,000 First Energy Corp., Series C,
7.38%, 11/15/31.............. 11,456
110,000 Midwest Generation LLC,
8.75%, 05/01/34.............. 125,400
15,000 Midwest Generation LLC, Series
B,
8.56%, 01/02/16.............. 16,659
275,000 Ohio Edison,
5.45%, 05/01/15.............. 279,493
140,000 Ontario Electricity Finance,
6.10%, 01/30/08.............. 149,992
165,000 Progress Energy, Inc.,
7.75%, 03/01/31.............. 198,635
30,000 Reliant Energy, Inc.,
9.25%, 07/15/10(d)........... 33,600
30,000 Reliant Energy, Inc.,
6.75%, 12/15/14.............. 29,963
55,000 Texas Genco LLC/Financing --
144A,
6.88%, 12/15/14.............. 57,131
200,000 TXU Corp. -- 144A,
6.50%, 11/15/24.............. 200,890
------------
1,103,219
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $50,449,917)........... 50,617,049
------------
MUNICIPAL BONDS -- 0.1%
CALIFORNIA
250,000 California State Department of
Water Powersupply Revenue
Bond, Series E,
3.98%, 05/01/05 (Cost
$249,994).................... 250,785
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 1.1%
450,000 AID-Israel,
5.50%, 04/26/24.............. 470,835
315,000 AID-Israel,
5.50%, 09/18/33.............. 331,944
6,943,000 Mexican Fixed Rate Bonds,
Series M7,
8.00%, 12/24/08(l)........... 604,757
4,526,000 Mexican Fixed Rate Bonds,
Series MI7,
9.00%, 12/24/09(l)........... 403,394
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 1,555,000 New Zealand Government, Series
415,
6.00%, 04/15/15(i)........... $ 1,125,185
130,000 Quebec Province,
5.00%, 07/17/09.............. 135,932
531,269 Republic of Colombia,
9.75%, 04/09/11.............. 613,615
250,000 United Mexican States,
11.38%, 09/15/16............. 369,625
367,000 United Mexican States,
8.13%, 12/30/19.............. 431,592
150,000 United Mexican States,
8.00%, 09/24/22.............. 173,400
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $4,214,787)............ 4,660,279
------------
SHORT TERM COMMERCIAL PAPER -- 0.2%
700,000 HBOS Treasury Services PLC,
2.04%, 01/26/05 (Cost
$699,008).................... 699,008
------------
SECURITIES LENDING COLLATERAL -- 5.9%
24,760,913 Securities Lending Collateral
Investment (Note 4)
(Cost $24,760,913)........... 24,760,913
------------
TOTAL SECURITIES
(Cost $418,696,867).......... 453,538,283
------------
REPURCHASE AGREEMENTS -- 2.1%
8,603,926 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase proceeds
at maturity $8,605,274
(Collateralized by various
Small Business
Administrations,
4.63% -- 5.63%, due 11/25/16-
05/25/27, with a total value
of $9,034,120) (Cost
$8,603,926).................. 8,603,926
------------
SECURITIES SOLD SHORT -- (3.5)%
5,500,000 Fannie Mae, TBA,
5.50%, 01/13/05.............. (5,584,216)
2,500,000 Fannie Mae, TBA,
4.50%, 01/19/05.............. (2,492,188)
2,000,000 Fannie Mae, TBA,
5.50%, 01/19/05.............. (2,066,876)
800,000 Fannie Mae, TBA,
6.00%, 01/19/05.............. (838,250)
500,000 Freddie Mac Gold, TBA,
5.50%, 01/13/05.............. (507,970)
1,300,000 Freddie Mac Gold, TBA,
6.00%, 01/13/05.............. (1,343,062)
</Table>
See notes to financial statements.
96
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SECURITIES SOLD SHORT (CONTINUED)
$ 700,000 Freddie Mac Gold, TBA,
4.50%, 01/19/05.............. $ (697,593)
1,300,000 Government National Mortgage
Association, TBA,
5.50%, 01/20/05.............. (1,326,812)
------------
TOTAL SECURITIES SOLD SHORT
(Proceeds $14,888,708)....... (14,856,967)
------------
Total Investments -- 106.6%
(Cost $412,412,085).......... 447,285,242
Liabilities less other
assets -- (6.6)%............. (27,558,553)
------------
NET ASSETS -- 100.0%........... $419,726,689
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $417,973,038.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $34,510,709
Gross unrealized depreciation........... (5,198,505)
-----------
Net unrealized appreciation............. $29,312,204
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
97
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 97.4%
ADVERTISING -- 0.4%
720,000 Interpublic Group of
Companies, Inc.*.......... $ 9,648,000
--------------
AEROSPACE AND DEFENSE -- 1.5%
43,600 General Dynamics Corp. ..... 4,560,560
180,000 Northrop Grumman Corp. ..... 9,784,800
274,000 The Boeing Company.......... 14,184,980
117,300 United Technologies
Corp. .................... 12,122,955
--------------
40,653,295
--------------
APPAREL: MANUFACTURING -- 0.9%
341,600 Jones Apparel Group,
Inc. ..................... 12,492,312
150,000 Liz Claiborne, Inc. ........ 6,331,500
118,100 VF Corp. ................... 6,540,378
--------------
25,364,190
--------------
AUTOMOBILES/MOTOR VEHICLES -- 0.3%
150,000 Harley-Davidson, Inc. ...... 9,112,500
--------------
AUTOMOTIVE EQUIPMENT -- 1.4%
104,000 BorgWarner, Inc. ........... 5,633,680
163,700 Johnson Controls, Inc. ..... 10,385,128
142,725 Lear Corp.(d)............... 8,707,652
173,900 Magna International, Inc. --
Class A(d)................ 14,355,445
--------------
39,081,905
--------------
BANKS -- 9.5%
1,731,082 Bank of America Corp. ...... 81,343,544
2,050,140 JP Morgan Chase & Company... 79,975,961
397,300 National City Corp.(d)...... 14,918,615
382,100 North Fork Bancorp, Inc. ... 11,023,585
255,800 SunTrust Banks, Inc. ....... 18,898,504
785,000 Wachovia Corp. ............. 41,291,000
132,800 Wells Fargo & Company....... 8,253,520
--------------
255,704,729
--------------
BROADCAST SERVICES/MEDIA -- 6.2%
283,100 Clear Channel
Communications, Inc. ..... 9,481,019
433,165 Comcast Corp. -- Class
A*........................ 14,415,731
970,000 Comcast Corp. -- Special
Class A*.................. 31,854,800
2,548,000 Time Warner, Inc.*.......... 49,533,120
1,461,000 Viacom, Inc. -- Class B.... 53,165,790
386,500 Westwood One, Inc.*......... 10,408,445
--------------
168,858,905
--------------
BUSINESS SERVICES AND SUPPLIES -- 0.6%
425,000 Fiserv, Inc.*............... 17,080,750
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CHEMICALS -- 0.9%
200,565 Air Products and Chemicals,
Inc. ..................... $ 11,626,753
254,600 EI du Pont de Nemours and
Company................... 12,488,130
--------------
24,114,883
--------------
COMPUTER SOFTWARE AND SERVICES -- 2.7%
2,765,700 Microsoft Corp. ............ 73,871,847
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.4%
1,854,300 Hewlett-Packard Company..... 38,884,671
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.0%
257,400 American Standard Companies,
Inc.*..................... 10,635,768
119,800 DR Horton, Inc. ............ 4,829,138
135,000 Martin Marietta Materials,
Inc. ..................... 7,244,100
50,400 Pulte Homes, Inc. .......... 3,215,520
--------------
25,924,526
--------------
CONSUMER GOODS AND SERVICES -- 10.5%
1,298,500 Altria Group, Inc. ......... 79,338,350
622,700 Avon Products, Inc. ........ 24,098,490
118,400 Fortune Brands, Inc. ....... 9,138,112
2,998,100 General Electric Company.... 109,430,650
65,000 Kimberly-Clark Corp. ....... 4,277,650
364,800 Loews Corp.-Carolina
Group..................... 10,560,960
593,000 Procter & Gamble Company.... 32,662,440
217,000 Unilever NV................. 14,476,070
--------------
283,982,722
--------------
DISTRIBUTION -- 0.5%
624,105 Ingram Micro, Inc. -- Class
A*........................ 12,981,384
--------------
ELECTRONICS -- 1.9%
422,200 Avnet, Inc.*................ 7,700,928
80,700 Emerson Electric Company.... 5,657,070
981,400 Flextronics International,
Ltd.*..................... 13,562,948
1,450,000 Sanmina-SCI Corp.*.......... 12,281,500
2,513,375 Solectron Corp.*............ 13,396,289
--------------
52,598,735
--------------
FINANCIAL SERVICES -- 9.6%
2,434,200 Citigroup, Inc. ............ 117,279,756
322,900 Fannie Mae.................. 22,993,709
317,900 Freddie Mac................. 23,429,230
93,000 Goldman Sachs Group,
Inc. ..................... 9,675,720
209,800 Lehman Brothers Holdings,
Inc. ..................... 18,353,304
555,100 MBNA Corp. ................. 15,648,269
656,700 Merrill Lynch & Company,
Inc. ..................... 39,250,959
246,700 Morgan Stanley.............. 13,696,784
--------------
260,327,731
--------------
</Table>
See notes to financial statements.
98
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 0.7%
153,200 Dean Foods Company*......... $ 5,047,940
255,000 PepsiCo, Inc. .............. 13,311,000
--------------
18,358,940
--------------
INSURANCE -- 8.7%
736,400 Ace, Ltd. .................. 31,481,100
107,100 AFLAC, Inc. ................ 4,266,864
458,400 Allstate Corp.(d)........... 23,708,448
852,500 American International
Group, Inc. .............. 55,983,675
456,500 Axis Capital Holdings,
Ltd. ..................... 12,489,840
198,700 Chubb Corp.(d).............. 15,280,030
240,000 Hartford Financial Services
Group, Inc. .............. 16,634,400
690,000 MetLife, Inc. .............. 27,951,900
61,566 PartnerRE, Ltd. ............ 3,813,398
268,438 The St. Paul Travelers
Companies, Inc. .......... 9,950,997
270,300 Torchmark Corp. ............ 15,444,942
238,000 XL Capital, Ltd. -- Class
A(d)...................... 18,480,700
--------------
235,486,294
--------------
LEISURE AND RECREATION -- 0.1%
52,200 Royal Caribbean Cruises,
Ltd. (Liberia)(d)......... 2,841,768
--------------
MACHINERY -- 0.6%
76,200 Deere & Company............. 5,669,280
143,800 Ingersoll-Rand Company,
Ltd. -- Class A.......... 11,547,140
--------------
17,216,420
--------------
MANUFACTURING -- 2.4%
149,700 3M Company.................. 12,285,879
204,000 Cooper Industries, Ltd. --
Class A................... 13,849,560
132,100 Parker Hannifin Corp. ...... 10,005,254
592,950 Smurfit-Stone Container
Corp.*(d)................. 11,076,306
240,000 Textron, Inc. .............. 17,712,000
--------------
64,928,999
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 3.2%
307,000 HCA, Inc. .................. 12,267,720
236,000 Health Management
Associates, Inc. -- Class
A(d)...................... 5,361,920
442,700 Medco Health Solutions,
Inc.*..................... 18,416,320
116,600 UnitedHealth Group, Inc. ... 10,264,298
354,500 WellPoint, Inc.*............ 40,767,500
--------------
87,077,758
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES -- 1.5%
75,000 Beckman Coulter, Inc. ...... $ 5,024,250
989,400 Boston Scientific Corp.*.... 35,173,170
--------------
40,197,420
--------------
METALS AND MINING -- 0.7%
590,200 Alcoa, Inc. ................ 18,544,084
--------------
OIL AND GAS: EQUIPMENT -- 0.2%
147,600 FMC Technologies, Inc.*..... 4,752,720
--------------
OIL, COAL AND GAS -- 10.6%
227,800 Baker Hughes, Inc. ......... 9,720,226
342,000 BP PLC (ADR)................ 19,972,800
624,000 ChevronTexaco Corp. ........ 32,766,240
829,000 ConocoPhillips.............. 71,982,070
187,900 EnCana Corp. (Canada)....... 10,721,574
1,409,800 Exxon Mobil Corp. .......... 72,266,347
209,500 Nabors Industries,
Ltd.*(d).................. 10,745,255
150,000 Noble Energy, Inc. ......... 9,249,000
615,500 Occidental Petroleum
Corp. .................... 35,920,580
187,600 Schlumberger, Ltd. ......... 12,559,820
--------------
285,903,912
--------------
PAPER AND FOREST PRODUCTS -- 0.9%
146,800 International Paper
Company................... 6,165,600
319,702 MeadWestvaco Corp. ......... 10,834,701
119,350 Temple-Inland, Inc. ........ 8,163,540
--------------
25,163,841
--------------
PHARMACEUTICALS -- 2.2%
191,900 Caremark Rx, Inc.*.......... 7,566,617
168,700 Forest Laboratories,
Inc.*..................... 7,567,882
265,400 GlaxoSmithKline PLC
(ADR)(d).................. 12,577,306
858,400 Pfizer, Inc. ............... 23,082,376
224,200 Wyeth....................... 9,548,678
--------------
60,342,859
--------------
RETAIL -- 3.2%
113,800 Bed Bath & Beyond, Inc.*.... 4,532,654
215,700 Federated Department Stores,
Inc.(d)................... 12,465,303
775,000 Home Depot, Inc. ........... 33,123,500
151,800 Lowe's Companies, Inc. ..... 8,742,162
755,000 Office Depot, Inc.*......... 13,106,800
255,000 Target Corp. ............... 13,242,150
--------------
85,212,569
--------------
</Table>
See notes to financial statements.
99
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 0.8%
430,000 McDonald's Corp. ........... $ 13,785,800
200,000 Wendy's International,
Inc. ..................... 7,852,000
--------------
21,637,800
--------------
RETAIL: SUPERMARKETS -- 1.5%
819,925 Safeway, Inc.*.............. 16,185,320
295,700 SUPERVALU, Inc. ............ 10,207,564
779,350 The Kroger Company*......... 13,669,799
--------------
40,062,683
--------------
RUBBER PRODUCTS -- 0.2%
193,100 Cooper Tire & Rubber
Company(d)................ 4,161,305
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.2%
270,000 Applera Corp.-Applied
Biosystems Group.......... 5,645,700
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.6%
266,900 BellSouth Corp. ............ 7,417,151
271,200 Corning, Inc.*.............. 3,192,024
1,707,566 Nortel Networks Corp.*...... 5,959,405
237,800 SBC Communications,
Inc.(d)................... 6,128,106
605,700 Sprint Corp. (FON Group).... 15,051,645
964,950 Tellabs, Inc.*(d)........... 8,288,921
579,452 Verizon Communications,
Inc. ..................... 23,473,600
--------------
69,510,852
--------------
TRANSPORTATION -- 3.9%
706,900 Burlington Northern Santa Fe
Corp. .................... 33,443,439
398,100 CSX Corp. .................. 15,955,848
525,300 Norfolk Southern Corp. ..... 19,010,607
546,800 Union Pacific Corp. ........ 36,772,300
--------------
105,182,194
--------------
UTILITIES: ELECTRIC -- 3.5%
430,780 American Electric Power
Company, Inc.(d).......... 14,792,985
374,800 Constellation Energy Group,
Inc. ..................... 16,382,508
50,000 Dominion Resources, Inc.
(Virginia)................ 3,387,000
380,000 Entergy Corp. .............. 25,684,200
258,800 Exelon Corp. ............... 11,405,316
249,450 Northeast Utilities......... 4,702,133
175,000 PPL Corp. .................. 9,324,000
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
305,800 Wisconsin Energy Corp.(d)... $ 10,308,518
--------------
95,986,660
--------------
UTILITIES: GAS -- 0.4%
259,925 Sempra Energy............... 9,534,049
--------------
TOTAL COMMON STOCKS (Cost
$2,197,016,548)........... 2,635,939,600
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 4.0%
$108,351,744 Securities Lending
Collateral Investment
(Note 4)
(Cost $108,351,744)....... 108,351,744
--------------
TOTAL SECURITIES
(Cost $2,305,368,292)..... 2,744,291,344
--------------
REPURCHASE AGREEMENTS -- 2.5%
66,108,926 With Investors Bank &
Trust, dated 12/31/04,
1.88%, due 01/03/05,
repurchase proceeds at
maturity $66,119,283
(Collateralized by various
Fannie Maes,
2.92% -- 3.75%, due
03/25/33-06/01/33, with a
total value of
$21,000,514, and various
Small Business
Administrations, 4.62% --
5.38%, due 08/25/16-
07/25/29, with a total
value of $48,414,372)
(Cost $66,108,926)........ 66,108,926
--------------
Total Investments -- 103.9%
(Cost $2,371,477,218)..... 2,810,400,270
Liabilities less other
assets -- (3.9)%.......... (104,936,948)
--------------
NET ASSETS -- 100.0%........ $2,705,463,322
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $2,378,411,701.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $476,179,739
Gross unrealized depreciation.......... (44,191,170)
------------
Net unrealized appreciation............ $431,988,569
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
100
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 99.4%
AEROSPACE AND DEFENSE -- 1.8%
137,400 Northrop Grumman Corp. ...... $ 7,469,064
71,300 Raytheon Company............. 2,768,579
136,000 The Boeing Company........... 7,040,720
68,300 United Defense Industries,
Inc.*(d)................... 3,227,175
--------------
20,505,538
--------------
AGRICULTURE -- 0.7%
145,800 Monsanto Company............. 8,099,190
--------------
AIRLINES -- 0.5%
349,700 Southwest Airlines Company... 5,693,116
--------------
APPAREL: MANUFACTURING -- 0.5%
57,800 Liz Claiborne, Inc. ......... 2,439,738
22,300 Nike, Inc. -- Class B........ 2,022,387
28,800 VF Corp. .................... 1,594,944
--------------
6,057,069
--------------
APPAREL: RETAIL -- 1.0%
60,000 Abercrombie & Fitch
Company -- Class A......... 2,817,000
85,700 Aeropostale, Inc.*........... 2,522,151
52,100 American Eagle Outfitters,
Inc. ...................... 2,453,910
30,600 Payless ShoeSource, Inc.*.... 376,380
45,200 The Timberland Company --
Class A*(d)................ 2,832,684
--------------
11,002,125
--------------
ASSET MANAGEMENT -- 0.3%
86,100 Brascan Corp. -- Class A
(Canada)(d)................ 3,100,461
--------------
AUTOMOBILE: RETAIL -- 0.2%
53,100 AutoNation, Inc.*............ 1,020,051
59,000 Copart, Inc.*................ 1,552,880
--------------
2,572,931
--------------
AUTOMOBILES/MOTOR VEHICLES -- 1.4%
557,000 Ford Motor Company(d)........ 8,154,480
59,200 PACCAR, Inc. ................ 4,764,416
44,500 Polaris Industries, Inc. .... 3,026,890
--------------
15,945,786
--------------
AUTOMOTIVE EQUIPMENT -- 0.4%
16,800 American Axle & Manufacturing
Holdings, Inc. ............ 515,088
76,200 Autoliv, Inc. ............... 3,680,460
59,100 Delphi Corp.(d).............. 533,082
--------------
4,728,630
--------------
BANKS -- 7.0%
105,150 Associated Banc-Corp. ....... 3,492,032
24,400 Astoria Financial Corp. ..... 975,268
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
180,100 Bank of America Corp. ....... $ 8,462,899
53,900 Bank of Hawaii Corp. ........ 2,734,886
65,000 Comerica, Inc. .............. 3,966,300
32,700 First BanCorp. .............. 2,076,777
123,800 Fremont General Corp.(d)..... 3,117,284
118,900 Hibernia Corp. -- Class A.... 3,508,739
115,600 JP Morgan Chase & Company.... 4,509,556
136,300 KeyCorp...................... 4,620,570
82,000 Marshall & Ilsley Corp. ..... 3,624,400
42,900 National City Corp. ......... 1,610,895
75,100 R&G Financial Corp. -- Class
B.......................... 2,919,888
85,600 UnionBanCal Corp. ........... 5,519,488
373,600 US Bancorp................... 11,701,152
251,600 Wachovia Corp. .............. 13,234,160
51,400 Wells Fargo & Company........ 3,194,510
--------------
79,268,804
--------------
BROADCAST SERVICES/MEDIA -- 3.1%
67,000 Comcast Corp. -- Class A*.... 2,229,760
18,100 Hearst-Argyle Television,
Inc. -- Class A............ 477,478
113,200 Liberty Media Corp. -- Class
A*......................... 1,242,936
30,200 Liberty Media International,
Inc. -- Class A*........... 1,396,146
64,000 McGraw-Hill Companies,
Inc. ...................... 5,858,560
207,600 The Walt Disney Company...... 5,771,280
514,000 Time Warner, Inc.*........... 9,992,160
116,065 Viacom, Inc. -- Class B...... 4,223,605
98,100 XM Satellite Radio Holdings,
Inc. -- Class A*(d)........ 3,690,522
--------------
34,882,447
--------------
BUSINESS SERVICES AND SUPPLIES -- 0.7%
37,400 Dun & Bradstreet Corp.*...... 2,230,910
57,100 First Data Corp. ............ 2,429,034
14,300 GTECH Holdings Corp. ........ 371,085
30,800 Moody's Corp. ............... 2,674,980
--------------
7,706,009
--------------
CHEMICALS -- 0.9%
169,800 Agrium, Inc.(d).............. 2,861,130
28,600 Eastman Chemical Company..... 1,651,078
9,700 PPG Industries, Inc. ........ 661,152
10,500 Rohm and Haas Company........ 464,415
66,100 The Dow Chemical Company..... 3,272,611
23,100 The Lubrizol Corp. .......... 851,466
--------------
9,761,852
--------------
COMMERCIAL SERVICES -- 0.3%
133,300 Cendant Corp. ............... 3,116,554
--------------
</Table>
See notes to financial statements.
101
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES -- 4.2%
93,500 Activision, Inc.*............ $ 1,886,830
53,500 Autodesk, Inc. .............. 2,030,325
123,250 BMC Software, Inc.*.......... 2,292,450
92,900 Cadence Design Systems,
Inc.*...................... 1,282,949
44,000 Computer Sciences Corp.*..... 2,480,280
1,301,100 Microsoft Corp. ............. 34,752,381
109,500 NVIDIA Corp.*................ 2,579,820
28,300 Oracle Corp.*................ 388,276
--------------
47,693,311
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.8%
293,400 Dell, Inc.*.................. 12,363,876
344,100 Hewlett-Packard Company...... 7,215,777
95,300 International Business
Machines Corp. ............ 9,394,674
118,400 Seagate Technology*.......... 2,044,768
45,100 Xerox Corp.*................. 767,151
--------------
31,786,246
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.9%
87,100 DR Horton, Inc. ............. 3,511,001
36,200 KB Home...................... 3,779,280
39,200 M.D.C. Holdings, Inc. ....... 3,388,448
15,400 Masco Corp. ................. 562,562
5,000 NVR, Inc.*................... 3,847,000
41,200 Standard Pacific Corp. ...... 2,642,568
53,500 Toll Brothers, Inc.*......... 3,670,635
--------------
21,401,494
--------------
CONSUMER GOODS AND SERVICES -- 5.5%
107,700 Altria Group, Inc. .......... 6,580,470
27,500 American Greetings Corp. --
Class A.................... 697,125
38,900 Clorox Company............... 2,292,377
38,500 Colgate-Palmolive Company.... 1,969,660
30,200 FedEx Corp. ................. 2,974,398
559,300 General Electric Company..... 20,414,450
81,700 Gillette Company............. 3,658,526
41,700 Kimberly-Clark Corp. ........ 2,744,277
193,500 Procter & Gamble Company..... 10,657,980
28,100 Reynolds American, Inc.(d)... 2,208,660
13,100 The Black & Decker
Corp.(d)................... 1,157,123
48,000 United Parcel Service,
Inc. -- Class B............ 4,102,080
57,400 UST, Inc. ................... 2,761,514
--------------
62,218,640
--------------
CONTAINERS AND PACKAGING -- 0.2%
64,300 Ball Corp. .................. 2,827,914
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
DISTRIBUTION -- 0.5%
175,700 Ingram Micro, Inc. -- Class
A*......................... $ 3,654,560
51,200 Tech Data Corp.*............. 2,324,480
--------------
5,979,040
--------------
ELECTRONICS -- 0.4%
23,600 Advanced Micro Devices,
Inc.*...................... 519,672
18,000 Emerson Electric Company..... 1,261,800
17,500 Harman International
Industries, Inc. .......... 2,222,500
134,400 Sanmina-SCI Corp.*........... 1,138,368
--------------
5,142,340
--------------
FINANCIAL SERVICES -- 8.2%
140,200 American Express Company..... 7,903,074
72,700 AmeriCredit Corp.*........... 1,777,515
153,800 Ameritrade Holding Corp.*.... 2,187,036
135,200 Capital One Financial
Corp.(d)................... 11,385,192
123,000 CIT Group, Inc. ............. 5,635,860
563,200 Citigroup, Inc. ............. 27,134,975
45,800 Countrywide Financial
Corp. ..................... 1,695,058
72,100 Doral Financial Corp. ....... 3,550,925
32,000 Eaton Vance Corp. ........... 1,668,800
4,900 Fannie Mae................... 348,929
53,700 Freddie Mac.................. 3,957,690
36,200 Goldman Sachs Group, Inc. ... 3,766,248
58,700 Lehman Brothers Holdings,
Inc. ...................... 5,135,076
109,500 MBNA Corp. .................. 3,086,805
105,300 Merrill Lynch & Company,
Inc. ...................... 6,293,781
116,600 Providian Financial Corp.*... 1,920,402
57,600 Prudential Financial,
Inc. ...................... 3,165,696
24,300 The Bear Stearns Companies,
Inc. ...................... 2,486,133
12,900 Washington Mutual, Inc. ..... 545,412
--------------
93,644,607
--------------
FOOD AND BEVERAGE -- 2.9%
22,500 Adolph Coors Company -- Class
B.......................... 1,702,575
83,600 Anheuser-Busch Companies,
Inc. ...................... 4,241,028
141,200 Archer-Daniels-Midland
Company.................... 3,150,172
118,700 Coca-Cola Company............ 4,941,481
7,000 Hershey Foods Corp. ......... 388,780
61,500 Kraft Foods, Inc. -- Class
A(d)....................... 2,190,015
146,000 PepsiCo, Inc. ............... 7,621,200
52,500 Pilgrim's Pride Corp. ....... 1,610,700
57,800 Smithfield Foods, Inc.*...... 1,710,302
</Table>
See notes to financial statements.
102
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
89,000 The Pepsi Bottling Group,
Inc.(d).................... $ 2,406,560
149,600 Tyson Foods, Inc. -- Class
A.......................... 2,752,640
--------------
32,715,453
--------------
INSURANCE -- 4.6%
9,300 Ace, Ltd. ................... 397,575
50,200 Aetna, Inc. ................. 6,262,450
104,200 Allstate Corp. .............. 5,389,224
4,800 Ambac Financial Group,
Inc. ...................... 394,224
128,900 American International Group,
Inc. ...................... 8,464,863
8,600 Cincinnati Financial
Corp. ..................... 380,636
18,600 Everest Re Group, Ltd.
(Bermuda).................. 1,665,816
46,500 First American Corp. ........ 1,634,010
73,000 IPC Holdings, Ltd. .......... 3,176,230
82,900 Lincoln National Corp. ...... 3,869,772
38,100 Loews Corp. ................. 2,678,430
39,300 MBIA, Inc.(d)................ 2,486,904
39,300 Mercury General Corp. ....... 2,354,856
132,900 MetLife, Inc. ............... 5,383,779
11,900 Nationwide Financial
Services, Inc. -- Class
A.......................... 454,937
28,500 Principal Financial Group,
Inc. ...................... 1,166,790
63,400 Radian Group, Inc. .......... 3,375,416
40,100 StanCorp Financial Group,
Inc. ...................... 3,308,250
--------------
52,844,162
--------------
INTERNET SERVICES -- 4.9%
956,200 Cisco Systems, Inc.*......... 18,454,660
80,600 EarthLink, Inc.*............. 928,512
105,500 eBay, Inc.*.................. 12,267,540
10,100 Google, Inc. -- Class A*..... 1,950,310
253,869 Juniper Networks, Inc.*...... 6,902,698
36,800 Symantec Corp.*.............. 947,968
177,200 VeriSign, Inc.*(d)........... 5,939,744
218,300 YAHOO!, Inc.*................ 8,225,544
--------------
55,616,976
--------------
LEISURE AND RECREATION -- 2.4%
7,500 Brunswick Corp. ............. 371,250
8,300 Carnival Corp.(d)............ 478,329
59,300 DreamWorks Animation SKG,
Inc. -- Class A*........... 2,224,343
89,500 Hilton Hotels Corp. ......... 2,035,230
128,500 Marriott International,
Inc. -- Class A............ 8,092,930
23,500 Royal Caribbean Cruises, Ltd.
(Liberia)(d)............... 1,279,340
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
157,200 Starwood Hotels & Resorts
Worldwide, Inc. ........... $ 9,180,480
45,400 Wynn Resorts, Ltd.*(d)....... 3,038,168
--------------
26,700,070
--------------
MACHINERY -- 0.5%
19,500 Caterpillar, Inc. ........... 1,901,445
21,300 Cummins, Inc. ............... 1,784,727
24,200 Graco, Inc. ................. 903,870
20,800 Terex Corp.*................. 991,120
--------------
5,581,162
--------------
MANUFACTURING -- 1.7%
44,400 3M Company................... 3,643,908
23,900 Eaton Corp. ................. 1,729,404
39,900 Harsco Corp. ................ 2,224,026
106,300 Honeywell International,
Inc. ...................... 3,764,083
5,300 Illinois Tool Works, Inc. ... 491,204
9,200 ITT Industries, Inc. ........ 776,940
27,400 Parker Hannifin Corp. ....... 2,075,276
127,500 Tyco International, Ltd. .... 4,556,850
--------------
19,261,691
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 1.2%
95,500 IMS Health, Inc. ............ 2,216,555
29,600 McKesson Corp. .............. 931,216
95,000 Medco Health Solutions,
Inc.*...................... 3,952,000
36,000 UnitedHealth Group, Inc. .... 3,169,080
27,700 WellPoint, Inc.*............. 3,185,500
--------------
13,454,351
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.0%
31,400 Allergan, Inc. .............. 2,545,598
31,700 Bausch & Lomb, Inc.(d)....... 2,043,382
31,100 Becton, Dickinson and
Company.................... 1,766,480
5,700 CR Bard, Inc. ............... 364,686
7,422 Guidant Corp. ............... 535,126
377,200 Johnson & Johnson............ 23,922,024
48,800 Kinetic Concepts, Inc.*...... 3,723,440
6,700 Medtronic, Inc. ............. 332,789
97,800 St. Jude Medical, Inc.*...... 4,100,754
74,800 Zimmer Holdings, Inc.*....... 5,992,976
--------------
45,327,255
--------------
METALS AND MINING -- 1.1%
50,900 Alcoa, Inc. ................. 1,599,278
7,600 Newmont Mining Corp.(d)...... 337,516
113,100 Nucor Corp.(d)............... 5,919,654
35,100 Southern Peru Copper
Corp.(d)................... 1,657,071
</Table>
See notes to financial statements.
103
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
METALS AND MINING (CONTINUED)
39,100 Steel Dynamics, Inc. ........ $ 1,481,108
70,700 Worthington Industries,
Inc. ...................... 1,384,306
--------------
12,378,933
--------------
OIL, COAL AND GAS -- 6.6%
26,800 Amerada Hess Corp. .......... 2,207,784
41,200 Anadarko Petroleum Corp. .... 2,670,172
16,400 Apache Corp. ................ 829,348
99,600 Burlington Resources,
Inc. ...................... 4,332,600
272,900 ChevronTexaco Corp. ......... 14,329,979
109,500 ConocoPhillips............... 9,507,885
11,400 Devon Energy Corp. .......... 443,688
56,900 EOG Resources, Inc. ......... 4,060,384
407,000 Exxon Mobil Corp. ........... 20,862,820
9,600 Halliburton Company.......... 376,704
29,200 Newfield Exploration
Company*................... 1,724,260
49,800 Occidental Petroleum
Corp. ..................... 2,906,328
75,000 PetroKazakhstan,
Inc. -- Class A............ 2,782,500
9,900 Schlumberger, Ltd. .......... 662,805
71,000 Sunoco, Inc. ................ 5,801,410
49,800 Tesoro Corp.*................ 1,586,628
--------------
75,085,295
--------------
PAPER AND FOREST PRODUCTS -- 0.2%
77,200 Louisiana-Pacific Corp. ..... 2,064,328
--------------
PHARMACEUTICALS -- 3.9%
8,000 Abbott Laboratories.......... 373,200
82,000 Cardinal Health, Inc. ....... 4,768,300
190,100 Caremark Rx, Inc.*........... 7,495,643
129,200 Eli Lilly and Company........ 7,332,100
86,125 IVAX Corp.*.................. 1,362,498
120,100 Merck & Company, Inc. ....... 3,860,014
553,600 Pfizer, Inc. ................ 14,886,304
210,300 Schering-Plough Corp. ....... 4,391,064
--------------
44,469,123
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
10,200 AMB Property Corp. .......... 411,978
68,500 Equity Office Properties
Trust...................... 1,994,720
--------------
2,406,698
--------------
RESEARCH AND DEVELOPMENT -- 2.0%
146,100 Amgen, Inc.*................. 9,372,315
44,200 Biogen Idec, Inc.*........... 2,944,162
11,600 Chiron Corp.*(d)............. 386,628
95,700 Genentech, Inc.*............. 5,209,908
10,900 Genzyme Corp.*............... 632,963
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RESEARCH AND DEVELOPMENT (CONTINUED)
53,200 Gilead Sciences, Inc.*....... $ 1,861,468
58,400 ImClone Systems, Inc.*(d).... 2,691,072
--------------
23,098,516
--------------
RETAIL -- 5.2%
44,400 7-Eleven, Inc.*.............. 1,063,380
55,400 BJ'S Wholesale Club, Inc.*... 1,613,802
209,200 Circuit City Stores,
Inc.(d).................... 3,271,888
24,500 Costco Wholesale Corp. ...... 1,186,045
92,900 Dollar General Corp. ........ 1,929,533
99,700 Federated Department Stores,
Inc. ...................... 5,761,663
394,700 Home Depot, Inc. ............ 16,869,478
113,600 JC Penney Company, Inc.
(Holding Company).......... 4,703,040
14,232 Kmart Holding Corp.*(d)...... 1,408,256
165,900 Staples, Inc. ............... 5,592,489
31,100 Toys "R" Us, Inc.*........... 636,617
289,800 Wal-Mart Stores, Inc. ....... 15,307,236
--------------
59,343,427
--------------
RETAIL: RESTAURANTS -- 1.2%
96,400 Darden Restaurants, Inc. .... 2,674,136
245,600 McDonald's Corp. ............ 7,873,936
18,700 Starbucks Corp.*............. 1,166,132
37,000 YUM! Brands, Inc. ........... 1,745,660
--------------
13,459,864
--------------
RETAIL: SUPERMARKETS -- 0.8%
182,600 SUPERVALU, Inc. ............. 6,303,352
175,900 The Kroger Company*.......... 3,085,286
--------------
9,388,638
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.2%
32,500 Fisher Scientific
International, Inc.*....... 2,027,350
--------------
SECURITY SERVICES -- 0.1%
23,100 The Brink's Company.......... 912,912
--------------
SEMICONDUCTORS -- 3.3%
181,600 Altera Corp.*................ 3,759,120
99,600 Applied Materials, Inc.*..... 1,703,160
117,700 Broadcom Corp. -- Class A*... 3,799,356
48,300 Cree, Inc.*(d)............... 1,935,864
21,299 Freescale Semiconductor,
Inc. -- Class B*........... 391,050
251,800 Intel Corp. ................. 5,889,602
183,000 Micron Technology, Inc.*..... 2,260,050
281,800 National Semiconductor
Corp. ..................... 5,058,310
</Table>
See notes to financial statements.
104
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
252,200 PMC-Sierra, Inc.*............ $ 2,837,250
413,400 Texas Instruments, Inc. ..... 10,177,908
--------------
37,811,670
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 6.2%
59,900 Amdocs, Ltd. (Guernsey)*..... 1,572,375
74,200 AT&T Corp. .................. 1,414,252
44,800 BellSouth Corp. ............. 1,244,992
99,800 CenturyTel, Inc. ............ 3,539,906
133,700 Comverse Technology, Inc.*... 3,268,965
29,100 Harris Corp. ................ 1,798,089
550,600 JDS Uniphase Corp.*(d)....... 1,745,402
805,800 Motorola, Inc. .............. 13,859,760
56,400 Nextel Communications,
Inc. -- Class A*........... 1,692,000
299,000 QUALCOMM, Inc. .............. 12,677,600
50,100 SBC Communications, Inc. .... 1,291,077
97,500 Sprint Corp. (FON Group)..... 2,422,875
60,200 Telephone and Data Systems,
Inc.(d).................... 4,632,390
473,500 Verizon Communications,
Inc. ...................... 19,181,485
--------------
70,341,168
--------------
TRANSPORTATION -- 0.9%
16,700 Burlington Northern Santa Fe
Corp. ..................... 790,077
59,300 JB Hunt Transport Services,
Inc. ...................... 2,659,605
54,667 Ryder System, Inc. .......... 2,611,443
86,900 Teekay Shipping Corp. ....... 3,659,359
--------------
9,720,484
--------------
UTILITIES: ELECTRIC -- 2.5%
30,600 Alliant Energy Corp. ........ 875,160
60,700 American Electric Power
Company, Inc. ............. 2,084,438
88,300 Constellation Energy Group,
Inc. ...................... 3,859,593
201,900 Edison International......... 6,466,857
16,200 Entergy Corp. ............... 1,094,958
87,500 Exelon Corp. ................ 3,856,125
18,000 Northeast Utilities.......... 339,300
74,700 Pepco Holdings, Inc. ........ 1,592,604
33,100 PG&E Corp.*.................. 1,101,568
47,400 SCANA Corp. ................. 1,867,560
74,800 TXU Corp.(d)................. 4,829,088
--------------
27,967,251
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
UTILITIES: GAS -- 0.3%
104,400 Sempra Energy(d)............. $ 3,829,392
--------------
TOTAL COMMON STOCKS
(Cost $1,015,745,616)...... 1,128,940,273
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 7.5%
$85,014,118 Securities Lending Collateral
Investment (Note 4)
(Cost $85,014,118)......... 85,014,118
--------------
SHORT TERM US TREASURY SECURITY -- 0.0%
150,000 US Treasury Bill,
2.16%, 03/17/05(f)
(Cost $149,327)............ 149,327
--------------
TOTAL SECURITIES
(Cost $1,100,909,061)...... 1,214,103,718
--------------
REPURCHASE AGREEMENTS -- 0.6%
7,071,418 With Investors Bank and
Trust, dated 12/31/04,
1.88%, due 01/03/05,
repurchase proceeds
at maturity $7,072,526
(Collateralized by Fannie
Mae, 2.92%, due 03/25/33,
with a value of $3,345,100,
and various Small Business
Administrations, 5.13% --
5.38%, due 11/25/15-
10/25/16, with a total
value of $4,082,935) (Cost
$7,071,418)................ 7,071,418
--------------
Total Investments -- 107.5%
(Cost $1,107,980,479)...... 1,221,175,136
Liabilities less other
assets -- (7.5)%........... (85,226,702)
--------------
NET ASSETS -- 100.0%......... $1,135,948,434
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $1,116,324,135.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $121,321,581
Gross unrealized depreciation.......... (16,470,580)
------------
Net unrealized appreciation............ $104,851,001
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
105
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 98.5%
AEROSPACE AND DEFENSE -- 0.9%
74,251 General Dynamics Corp....... $ 7,766,655
257,000 The Boeing Company.......... 13,304,890
--------------
21,071,545
--------------
AGRICULTURE -- 1.1%
463,900 Monsanto Company............ 25,769,645
--------------
AIRLINES -- 1.0%
1,333,500 Southwest Airlines
Company................... 21,709,380
--------------
APPAREL: MANUFACTURING -- 1.1%
282,327 Nike, Inc. -- Class B....... 25,604,236
--------------
BROADCAST SERVICES/MEDIA -- 1.9%
538,200 The Walt Disney Company..... 14,961,960
801,700 Time Warner, Inc.*.......... 15,585,048
369,100 XM Satellite Radio Holdings,
Inc. -- Class A*(d)....... 13,885,542
--------------
44,432,550
--------------
BUSINESS SERVICES AND SUPPLIES -- 0.4%
216,600 First Data Corp. ........... 9,214,164
--------------
CHEMICALS -- 0.6%
252,100 The Dow Chemical Company.... 12,481,471
--------------
COMPUTER SOFTWARE AND SERVICES -- 5.1%
455,837 Electronic Arts, Inc.*...... 28,116,026
2,987,270 Microsoft Corp.............. 79,789,982
410,400 NVIDIA Corp.*............... 9,669,024
--------------
117,575,032
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.8%
1,348,022 Dell, Inc.*................. 56,805,647
443,600 Seagate Technology*......... 7,660,972
--------------
64,466,619
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.5%
186,627 Lennar Corp. -- Class
A(d)...................... 10,578,018
--------------
CONSUMER GOODS AND SERVICES -- 8.8%
144,900 Colgate-Palmolive Company... 7,413,084
337,400 FedEx Corp.(d).............. 33,230,526
2,414,542 General Electric Company.... 88,130,783
158,400 Kimberly-Clark Corp......... 10,424,304
929,904 Procter & Gamble Company.... 51,219,112
140,600 United Parcel Service,
Inc. -- Class B........... 12,015,676
--------------
202,433,485
--------------
ELECTRONICS -- 0.1%
22,657 Harman International
Industries, Inc. ......... 2,877,439
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES -- 10.2%
504,300 American Express Company.... $ 28,427,391
580,300 Ameritrade Holding Corp.*... 8,251,866
515,600 Capital One Financial
Corp.(d).................. 43,418,675
456,611 Citigroup, Inc.............. 21,999,518
1,093,363 Countrywide Financial
Corp...................... 40,465,365
329,777 Goldman Sachs Group, Inc.... 34,309,999
841,607 SLM Corp.................... 44,933,397
55,438 The Chicago Mercantile
Exchange(d)............... 12,678,671
--------------
234,484,882
--------------
FOOD AND BEVERAGE -- 2.4%
255,400 Anheuser-Busch Companies,
Inc....................... 12,956,442
349,000 Coca-Cola Company........... 14,528,870
504,284 PepsiCo, Inc. .............. 26,323,625
--------------
53,808,937
--------------
INSURANCE -- 0.9%
295,500 American International
Group, Inc. .............. 19,405,485
--------------
INTERNET SERVICES -- 8.4%
2,669,340 Cisco Systems, Inc.*........ 51,518,262
564,022 eBay, Inc.*................. 65,584,478
38,300 Google, Inc. -- Class A*.... 7,395,730
845,300 Juniper Networks, Inc.*..... 22,983,707
674,000 VeriSign, Inc.*(d).......... 22,592,480
602,900 YAHOO!, Inc.*............... 22,717,272
--------------
192,791,929
--------------
LEISURE AND RECREATION -- 6.9%
154,180 Carnival Corp.(d)........... 8,885,393
225,600 DreamWorks Animation SKG,
Inc. -- Class A*.......... 8,462,256
142,558 Four Seasons Hotels,
Inc.(d)................... 11,659,819
336,200 Hilton Hotels Corp.......... 7,645,188
489,700 Marriott International,
Inc. -- Class A........... 30,841,306
211,840 MGM MIRAGE*................. 15,409,242
598,000 Starwood Hotels & Resorts
Worldwide, Inc.(d)........ 34,923,200
589,444 Wynn Resorts, Ltd.*(d)...... 39,445,592
--------------
157,271,996
--------------
MACHINERY -- 1.6%
372,241 Caterpillar, Inc.(d)........ 36,297,220
--------------
MANUFACTURING -- 0.6%
402,500 Honeywell International,
Inc. ..................... 14,252,525
--------------
</Table>
See notes to financial statements.
106
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES -- 4.9%
358,800 Medco Health Solutions,
Inc.*..................... $ 14,926,080
977,020 UnitedHealth Group, Inc..... 86,007,071
103,900 WellPoint, Inc.*............ 11,948,500
--------------
112,881,651
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 6.0%
774,200 Johnson & Johnson........... 49,099,765
185,900 Kinetic Concepts, Inc.*..... 14,184,170
260,284 Medtronic, Inc.............. 12,928,306
327,100 St. Jude Medical, Inc.*..... 13,715,303
589,895 Zimmer Holdings, Inc.*...... 47,262,387
--------------
137,189,931
--------------
OIL, COAL AND GAS -- 1.0%
213,400 EOG Resources, Inc.......... 15,228,224
111,540 Newfield Exploration
Company*.................. 6,586,437
--------------
21,814,661
--------------
PHARMACEUTICALS -- 4.0%
491,400 Caremark Rx, Inc.*.......... 19,375,902
205,300 Eli Lilly and Company....... 11,650,775
328,500 IVAX Corp.*(d).............. 5,196,870
1,476,652 Pfizer, Inc................. 39,707,172
790,400 Schering-Plough Corp. ...... 16,503,552
--------------
92,434,271
--------------
RESEARCH AND DEVELOPMENT -- 4.4%
484,169 Amgen, Inc.*................ 31,059,441
1,032,540 Genentech, Inc.*............ 56,211,478
200,400 Gilead Sciences, Inc.*...... 7,011,996
135,800 ImClone Systems, Inc.*(d)... 6,257,664
--------------
100,540,579
--------------
RETAIL -- 8.5%
643,400 Circuit City Stores,
Inc.(d)................... 10,062,776
349,100 Dollar General Corp. ....... 7,250,807
1,158,900 Home Depot, Inc.(d)......... 49,531,386
433,200 JC Penney Company, Inc.
(Holding Company)......... 17,934,480
625,449 Lowe's Companies, Inc.(d)... 36,019,608
627,100 Staples, Inc................ 21,139,541
283,143 Target Corp................. 14,703,616
701,518 Wal-Mart Stores, Inc. ...... 37,054,181
--------------
193,696,395
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 1.9%
580,300 McDonald's Corp............. $ 18,604,418
392,933 Starbucks Corp.*............ 24,503,302
--------------
43,107,720
--------------
RETAIL: SUPERMARKETS -- 0.7%
170,987 Whole Foods Market,
Inc.(d)................... 16,303,610
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.3%
122,800 Fisher Scientific
International, Inc.*...... 7,660,264
--------------
SEMICONDUCTORS -- 4.5%
690,200 Altera Corp.*............... 14,287,140
378,200 Applied Materials, Inc.*.... 6,467,220
440,700 Broadcom Corp. -- Class
A*(d)..................... 14,225,796
1,073,200 National Semiconductor
Corp. .................... 19,263,940
955,200 PMC-Sierra, Inc.*........... 10,746,000
1,509,600 Texas Instruments, Inc. .... 37,166,352
--------------
102,156,448
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 6.1%
510,800 Comverse Technology,
Inc.*..................... 12,489,060
2,093,100 JDS Uniphase Corp.*(d)...... 6,635,127
2,261,200 Motorola, Inc............... 38,892,640
1,744,407 QUALCOMM, Inc............... 73,962,857
196,820 Verizon Communications,
Inc. ..................... 7,973,178
--------------
139,952,862
--------------
UTILITIES: ELECTRIC -- 0.9%
332,569 TXU Corp.(d)................ 21,470,655
--------------
TOTAL COMMON STOCKS
(Cost $1,931,060,493)..... 2,255,735,605
--------------
WARRANTS -- 0.0%
24,143 Lucent Technologies, Inc.,
expires 12/10/07* (Cost
$0)....................... 38,146
--------------
</Table>
See notes to financial statements.
107
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES LENDING COLLATERAL -- 8.9%
$203,440,449 Securities Lending
Collateral Investment
(Note 4)
(Cost $203,440,449)....... $ 203,440,449
--------------
TOTAL SECURITIES
(Cost $2,134,500,942)..... 2,459,214,200
--------------
REPURCHASE AGREEMENTS -- 1.8%
41,295,933 With Investors Bank and
Trust, dated 12/31/04,
1.88%, due 01/03/05,
repurchase proceeds at
maturity $41,302,403
(Collateralized by various
Small Business
Administrations, 4.38% --
5.63%, due 03/25/15-
03/25/29, with a total
value of $43,360,730)
(Cost $41,295,933)........ 41,295,933
--------------
Total Investments -- 109.2%
(Cost $2,175,796,875)..... 2,500,510,133
Liabilities less other
assets -- (9.2)%.......... (209,950,186)
--------------
NET ASSETS -- 100.0%........ $2,290,559,947
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $2,226,733,418.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $287,891,791
Gross unrealized depreciation.......... (14,115,076)
------------
Net unrealized appreciation............ $273,776,715
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
108
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 95.0%
AEROSPACE AND DEFENSE -- 1.8%
227,900 Goodrich Corp. ................ $ 7,438,656
------------
APPAREL: RETAIL -- 1.6%
252,700 Foot Locker, Inc. ............. 6,805,211
------------
ASSET MANAGEMENT -- 1.3%
153,600 Brascan Corp. -- Class A
(Canada)(d).................. 5,531,136
------------
AUTOMOTIVE EQUIPMENT -- 2.5%
88,800 Genuine Parts Company.......... 3,912,528
104,000 Lear Corp. .................... 6,345,040
------------
10,257,568
------------
BANKS -- 7.4%
153,600 First Horizon National
Corp.(d)..................... 6,621,696
54,500 M&T Bank Corp. ................ 5,877,280
304,700 North Fork Bancorp, Inc. ...... 8,790,595
188,300 State Street Corp. ............ 9,249,296
------------
30,538,867
------------
BROADCAST SERVICES/MEDIA -- 1.4%
122,400 The E.W. Scripps Company --
Class A(d)................... 5,909,472
------------
BUSINESS SERVICES AND SUPPLIES -- 4.4%
51,300 Avery Dennison Corp. .......... 3,076,461
118,900 Diebold, Inc. ................. 6,626,297
178,400 Manpower, Inc. ................ 8,616,720
------------
18,319,478
------------
CHEMICALS -- 5.8%
178,400 Cytec Industries, Inc. ........ 9,173,328
168,400 International Flavors &
Fragrances, Inc. ............ 7,214,256
423,300 Methanex Corp. (Canada)........ 7,729,458
------------
24,117,042
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 3.1%
153,600 American Standard Companies,
Inc.*........................ 6,346,752
185,800 York International Corp. ...... 6,417,532
------------
12,764,284
------------
CONSUMER GOODS AND SERVICES -- 2.5%
54,300 Fortune Brands, Inc. .......... 4,190,874
133,700 The Sherwin-Williams Company... 5,967,031
------------
10,157,905
------------
CONTAINERS AND PACKAGING -- 2.5%
157,900 Pactiv Corp.*.................. 3,993,291
138,700 Rexam PLC (Great Britain)
(ADR)(d)..................... 6,260,918
------------
10,254,209
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
DISTRIBUTION -- 0.9%
59,200 CDW Corp. ..................... $ 3,927,920
------------
ELECTRONICS -- 1.5%
236,600 Thomson (France) (ADR)......... 6,281,730
------------
FINANCIAL SERVICES -- 5.7%
213,000 CIT Group, Inc. ............... 9,759,660
500,400 E*TRADE Financial Corp.*....... 7,480,980
74,400 Legg Mason, Inc. .............. 5,450,544
45,100 MoneyGram International,
Inc. ........................ 953,414
------------
23,644,598
------------
FOOD AND BEVERAGE -- 2.8%
182,500 Allied Domecq PLC (Great
Britain) (ADR)(d)............ 7,283,575
113,500 Sysco Corp. ................... 4,332,295
------------
11,615,870
------------
INSURANCE -- 5.6%
218,000 Assurant, Inc. ................ 6,659,900
94,100 Everest Re Group, Ltd.
(Bermuda).................... 8,427,596
128,800 MBIA, Inc.(d).................. 8,150,464
------------
23,237,960
------------
LEISURE AND RECREATION -- 4.8%
273,100 Hilton Hotels Corp. ........... 6,210,294
610,989 InterContinental Hotels Group
PLC (Great Britain) (ADR).... 7,710,681
109,000 Royal Caribbean Cruises, Ltd.
(Liberia)(d)................. 5,933,960
------------
19,854,935
------------
MANUFACTURING -- 1.6%
79,300 ITT Industries, Inc. .......... 6,696,885
------------
MEDICAL AND OTHER HEALTH SERVICES -- 3.3%
128,300 Omnicare, Inc.(d).............. 4,441,746
79,300 WellPoint, Inc.*............... 9,119,500
------------
13,561,246
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 1.1%
69,100 CR Bard, Inc. ................. 4,421,018
------------
OIL, COAL AND GAS -- 6.1%
133,800 EnCana Corp. (Canada).......... 7,634,628
128,800 Praxair, Inc. ................. 5,686,520
163,500 Questar Corp. ................. 8,331,960
69,100 Weatherford International, Ltd.
(Bermuda)*................... 3,544,830
------------
25,197,938
------------
PRINTING AND PUBLISHING -- 1.6%
186,169 RR Donnelley & Sons
Company(d)................... 6,569,904
------------
</Table>
See notes to financial statements.
109
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL -- 3.1%
89,200 CVS Corp. ..................... $ 4,020,244
307,200 Dollar Tree Stores, Inc.*(d)... 8,810,496
------------
12,830,740
------------
RETAIL: RESTAURANTS -- 1.2%
104,600 YUM! Brands, Inc. ............. 4,935,028
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.7%
196,500 Amdocs, Ltd. (Guernsey)*....... 5,158,125
212,100 Corning, Inc.*................. 2,496,417
312,100 UNOVA, Inc.*(d)................ 7,893,009
------------
15,547,551
------------
TOOLS -- 1.0%
83,900 Stanley Works.................. 4,110,261
------------
TOYS -- 1.0%
204,700 Mattel, Inc.(d)................ 3,989,603
------------
TRANSPORTATION -- 7.2%
167,100 CNF, Inc. ..................... 8,371,710
188,300 CSX Corp. ..................... 7,547,064
181,200 Florida East Coast Industries,
Inc. ........................ 8,172,120
163,500 Norfolk Southern Corp. ........ 5,917,065
------------
30,007,959
------------
UTILITIES: ELECTRIC -- 6.3%
574,700 CenterPoint Energy, Inc.(d).... 6,494,110
227,900 PG&E Corp.*.................... 7,584,512
74,300 PPL Corp. ..................... 3,958,704
123,900 TXU Corp.(d)................... 7,998,984
------------
26,036,310
------------
UTILITIES: GAS -- 2.2%
277,400 AGL Resources, Inc. ........... 9,220,776
------------
TOTAL COMMON STOCKS
(Cost $339,994,770).......... 393,782,060
------------
<Caption>
PRINCIPAL VALUE
--------- ------------
SECURITIES LENDING COLLATERAL -- 14.1%
$58,613,178 Securities Lending Collateral
Investment (Note 4)
(Cost $58,613,178)........... $ 58,613,178
------------
TOTAL SECURITIES
(Cost $398,607,948).......... 452,395,238
------------
REPURCHASE AGREEMENTS -- 5.5%
22,804,390 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase proceeds
at maturity $22,807,963
(Collateralized by various
Small Business
Administrations,
4.77% -- 5.77%, due 05/25/16
to 02/25/29, with a total
value of $23,944,609) (Cost
$22,804,390)................. 22,804,390
------------
Total Investments -- 114.6%
(Cost $421,412,338).......... 475,199,628
Liabilities less other
assets -- (14.6)%............ (60,488,949)
------------
NET ASSETS -- 100.0%........... $414,710,679
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $422,114,504.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $54,444,932
Gross unrealized depreciation........... (1,359,808)
-----------
Net unrealized appreciation............. $53,085,124
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
110
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 97.4%
ADVERTISING -- 2.0%
62,300 Getty Images, Inc.*(d)......... $ 4,289,355
------------
APPAREL: RETAIL -- 3.2%
89,400 American Eagle Outfitters,
Inc. ........................ 4,210,740
55,700 Chico's FAS, Inc.*(d).......... 2,536,021
------------
6,746,761
------------
BROADCAST SERVICES/MEDIA -- 5.5%
89,000 Cablevision Systems Corp. New
York Group -- Class A*....... 2,216,100
23,800 Pixar*(d)...................... 2,037,518
367,600 Sirius Satellite Radio,
Inc.*(d)..................... 2,812,140
120,300 XM Satellite Radio Holdings,
Inc. -- Class A*(d).......... 4,525,686
------------
11,591,444
------------
BUSINESS SERVICES AND SUPPLIES -- 2.9%
87,300 Alliance Data Systems Corp.*... 4,145,004
68,800 Robert Half International,
Inc. ........................ 2,024,784
------------
6,169,788
------------
COMPUTER SOFTWARE AND SERVICES -- 3.8%
126,900 Cognos, Inc.*.................. 5,591,214
49,300 NAVTEQ Corp.*.................. 2,285,548
------------
7,876,762
------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.9%
204,700 ATI Technologies, Inc.*........ 3,969,133
------------
CONSUMER GOODS AND SERVICES -- 2.0%
199,810 Tempur-Pedic International,
Inc.*........................ 4,235,972
------------
CONTAINERS AND PACKAGING -- 0.9%
87,660 Owens-Illinois, Inc.*.......... 1,985,499
------------
ELECTRONICS -- 4.0%
32,000 Harman International
Industries, Inc. ............ 4,064,000
129,200 Trimble Navigation, Ltd.*...... 4,268,768
------------
8,332,768
------------
FINANCIAL SERVICES -- 6.4%
96,000 Doral Financial Corp. ......... 4,728,000
63,700 Legg Mason, Inc. .............. 4,666,662
64,300 T. Rowe Price Group, Inc. ..... 3,999,460
------------
13,394,122
------------
INTERNET SERVICES -- 8.6%
124,700 Juniper Networks, Inc.*........ 3,390,593
82,300 Macromedia, Inc.*.............. 2,561,176
159,700 Monster Worldwide, Inc.*(d).... 5,372,308
198,900 VeriSign, Inc.*................ 6,667,128
------------
17,991,205
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION -- 3.0%
83,600 Brunswick Corp. ............... $ 4,138,200
89,000 Scientific Games Corp. -- Class
A*........................... 2,121,760
------------
6,259,960
------------
MACHINERY -- 3.3%
141,800 Rockwell Automation, Inc. ..... 7,026,190
------------
MANUFACTURING -- 2.0%
75,500 Zebra Technologies Corp. --
Class A*..................... 4,249,140
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 9.3%
30,700 Beckman Coulter, Inc. ......... 2,056,593
101,800 CR Bard, Inc. ................. 6,513,164
88,300 Kinetic Concepts, Inc.*........ 6,737,290
53,960 Zimmer Holdings, Inc.*......... 4,323,275
------------
19,630,322
------------
OIL, COAL AND GAS -- 11.2%
68,424 Bill Barrett Corp.*(d)......... 2,188,884
63,200 Chesapeake Energy Corp. ....... 1,042,800
112,300 Diamond Offshore Drilling,
Inc.(d)...................... 4,497,615
62,300 EOG Resources, Inc. ........... 4,445,728
93,900 Massey Energy Company.......... 3,281,805
92,300 Noble Corp.*................... 4,591,002
92,200 Quicksilver Resources,
Inc.*(d)..................... 3,391,116
------------
23,438,950
------------
PHARMACEUTICALS -- 2.0%
151,000 MGI Pharma, Inc.*(d)........... 4,229,510
------------
REAL ESTATE DEVELOPMENT AND MANAGEMENT
SERVICES -- 1.2%
71,940 CB Richard Ellis Group, Inc. --
Class A*..................... 2,413,587
------------
RESEARCH AND DEVELOPMENT -- 2.3%
106,900 Eyetech Pharmaceuticals,
Inc.*(d)..................... 4,863,950
------------
RETAIL -- 4.1%
144,000 MSC Industrial Direct Company,
Inc. -- Class A.............. 5,181,120
99,700 Williams-Sonoma, Inc.*(d)...... 3,493,488
------------
8,674,608
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 1.5%
50,000 Fisher Scientific
International, Inc.*......... 3,119,000
------------
SEMICONDUCTORS -- 3.9%
126,800 Broadcom Corp. -- Class A*..... 4,093,104
104,100 Cree, Inc.*(d)................. 4,172,328
------------
8,265,432
------------
</Table>
See notes to financial statements.
111
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 12.4%
429,700 Alamosa Holdings, Inc.*(d)..... $ 5,358,359
173,400 American Tower Corp. -- Class
A*........................... 3,190,560
241,900 Comverse Technology, Inc.*..... 5,914,455
101,900 Harris Corp. .................. 6,296,401
133,500 Polycom, Inc.*................. 3,113,220
36,000 SpectraSite, Inc.*............. 2,084,400
------------
25,957,395
------------
TOTAL COMMON STOCKS (Cost
$174,220,885)................ 204,710,853
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 24.0%
$50,393,267 Securities Lending Collateral
Investment (Note 4)
(Cost $50,393,267)........... 50,393,267
------------
TOTAL SECURITIES (Cost
$224,614,152)................ 255,104,120
------------
REPURCHASE AGREEMENTS -- 2.4%
5,082,338 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase proceeds
at maturity $5,083,134
(Collateralized by Freddie
Mac, 3.49%, due 12/15/23,
with a value of $5,339,288)
(Cost $5,082,338)............ 5,082,338
------------
Total Investments -- 123.8%
(Cost $229,696,490).......... 260,186,458
Liabilities less other
assets -- (23.8)%............ (50,085,586)
------------
NET ASSETS -- 100.0%........... $210,100,872
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $229,935,908.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $31,179,298
Gross unrealized depreciation........... (928,748)
-----------
Net unrealized appreciation............. $30,250,550
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
112
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 99.3%
ADVERTISING -- 5.5%
322,650 Catalina Marketing Corp. ...... $ 9,560,120
------------
AGRICULTURE -- 4.3%
268,950 Delta and Pine Land Company.... 7,336,956
------------
AUTOMOTIVE EQUIPMENT -- 1.4%
175,650 Exide Technologies*............ 2,420,457
------------
BANKS -- 5.3%
137,225 Commercial Federal Corp. ...... 4,076,954
54,975 First Financial Bancorp........ 962,063
80,000 Provident Financial Services,
Inc. ........................ 1,549,600
45,425 UMB Financial Corp. ........... 2,573,781
------------
9,162,398
------------
BUSINESS SERVICES AND SUPPLIES -- 8.7%
327,350 CSG Systems International,
Inc.*........................ 6,121,445
349,500 Dendrite International,
Inc.*........................ 6,780,299
104,700 FTI Consulting, Inc.*.......... 2,206,029
------------
15,107,773
------------
CHEMICALS -- 3.8%
35,000 Cabot Microelectronics
Corp.*(d).................... 1,401,750
311,450 Tetra Tech, Inc.*.............. 5,213,673
------------
6,615,423
------------
COMPUTER SOFTWARE AND SERVICES -- 3.5%
266,325 Gartner, Inc. -- Class
A*(d)........................ 3,318,410
92,125 Gartner, Inc. -- Class B*..... 1,132,216
105,800 Keane, Inc.*................... 1,555,260
------------
6,005,886
------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.8%
65,600 Black Box Corp. ............... 3,150,112
------------
CONSUMER GOODS AND SERVICES -- 2.2%
131,425 Blyth, Inc. ................... 3,884,923
------------
EDUCATION -- 1.7%
167,200 DeVry, Inc.*(d)................ 2,902,592
------------
ELECTRONICS -- 2.0%
146,750 Belden CDT, Inc.(d)............ 3,404,600
------------
FINANCIAL SERVICES -- 7.4%
245,400 Investment Technology Group,
Inc.*........................ 4,907,999
139,662 Raymond James Financial,
Inc. ........................ 4,326,729
148,200 Waddell & Reed Financial,
Inc. -- Class A.............. 3,540,498
------------
12,775,226
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INSURANCE -- 6.9%
155,100 Horace Mann Educators Corp. ... $ 2,959,308
135,925 Infinity Property & Casualty
Corp. ....................... 4,784,559
331,225 Phoenix Companies, Inc.(d)..... 4,140,313
------------
11,884,180
------------
INTERNET SERVICES -- 2.8%
415,875 EarthLink, Inc.*............... 4,790,880
------------
LEISURE AND RECREATION -- 4.4%
193,550 Speedway Motorsports, Inc. .... 7,583,289
------------
MANUFACTURING -- 9.1%
251,900 Acuity Brands, Inc. ........... 8,010,419
145,750 Crane Company.................. 4,203,430
171,175 Tredegar Corp. ................ 3,459,447
------------
15,673,296
------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.4%
117,200 LifePoint Hospitals,
Inc.*(d)..................... 4,080,904
------------
OIL, COAL AND GAS -- 5.3%
98,400 Forest Oil Corp.*.............. 3,121,248
90,425 Oceaneering International,
Inc.*........................ 3,374,661
76,150 Tidewater, Inc.(d)............. 2,711,702
------------
9,207,611
------------
PAPER AND FOREST PRODUCTS -- 2.9%
102,262 Rayonier, Inc. ................ 5,001,634
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.1%
2,525 Avatar Holdings, Inc.*(d)...... 121,453
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.6%
76,850 Post Properties, Inc. ......... 2,682,065
------------
RETAIL -- 2.6%
214,725 Big Lots, Inc.*(d)............. 2,604,614
92,900 Pier 1 Imports, Inc. .......... 1,830,130
------------
4,434,744
------------
RUBBER PRODUCTS -- 1.7%
16,250 Bandag, Inc.(d)................ 809,413
47,150 Bandag, Inc. -- Class A....... 2,184,459
------------
2,993,872
------------
SECURITY SERVICES -- 2.8%
124,525 The Brink's Company............ 4,921,228
------------
SEMICONDUCTORS -- 1.9%
413,050 Axcelis Technologies, Inc.*.... 3,358,097
------------
SPORTING GOODS AND EQUIPMENT -- 2.7%
351,475 Callaway Golf Company.......... 4,744,913
------------
</Table>
See notes to financial statements.
113
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 4.5%
156,125 Commonwealth Telephone
Enterprises, Inc.*(d)........ $ 7,753,168
------------
TOTAL COMMON STOCKS
(Cost $140,146,799).......... 171,557,800
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 12.8%
$22,031,456 Securities Lending Collateral
Investment (Note 4)
(Cost $22,031,456)........... 22,031,456
------------
TOTAL SECURITIES
(Cost $162,178,255).......... 193,589,256
------------
REPURCHASE AGREEMENTS -- 0.8%
1,367,599 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase proceeds
at maturity $1,367,813
(Collateralized by Small
Business Administration,
5.63%, due 09/25/15, with a
value of $1,435,979) (Cost
$1,367,599).................. 1,367,599
------------
Total Investments -- 112.9%
(Cost $163,545,854).......... 194,956,855
Liabilities less other
assets -- (12.9)%............ (22,220,906)
------------
NET ASSETS -- 100.0%........... $172,735,949
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $163,686,491.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $32,358,280
Gross unrealized depreciation........... (1,087,916)
-----------
Net unrealized appreciation............. $31,270,364
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
114
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 97.0%
ADVERTISING -- 0.7%
86,200 ADVO, Inc. ................. $ 3,073,030
60,200 Catalina Marketing Corp. ... 1,783,726
50,500 R.H. Donnelley Corp.*(d).... 2,982,025
61,800 Ventiv Health, Inc.*........ 1,255,776
--------------
9,094,557
--------------
AEROSPACE AND DEFENSE -- 0.9%
6,600 ARGON ST, Inc.*............. 233,970
41,300 B/E Aerospace, Inc.*........ 480,732
58,700 Curtiss-Wright
Corp. -- Class B.......... 3,302,462
57,580 DRS Technologies, Inc.*..... 2,459,242
3,900 Ducommun, Inc.*............. 81,315
2,800 Innovative Solutions and
Support, Inc.*............ 93,408
57,200 Moog, Inc. -- Class A*...... 2,594,020
162,000 Orbital Sciences
Corp.*(d)................. 1,916,460
--------------
11,161,609
--------------
AIRLINES -- 0.5%
197,700 AirTran Holdings,
Inc.*(d).................. 2,115,390
12,100 Alaska Air Group, Inc.*..... 405,229
61,400 America West Holdings
Corp. -- Class B*(d)...... 404,012
169,600 ExpressJet Holdings,
Inc.*..................... 2,184,448
33,800 Pinnacle Airlines Corp.*.... 471,172
--------------
5,580,251
--------------
APPAREL: MANUFACTURING -- 1.7%
292,900 Ashworth, Inc.*............. 3,189,681
83,200 Gildan Activewear, Inc. --
Class A*.................. 2,827,968
46,900 Guess?, Inc.*............... 588,595
37,100 Hartmarx Corp.*............. 288,267
15,000 Kellwood Company............ 517,500
76,400 Oxford Industries, Inc. .... 3,155,320
149,700 Phillips-Van Heusen
Corp. .................... 4,041,900
14,500 Skechers USA, Inc. -- Class
A*........................ 187,920
238,230 The Warnaco Group, Inc.*.... 5,145,768
38,400 Wolverine World Wide,
Inc. ..................... 1,206,528
--------------
21,149,447
--------------
APPAREL: RETAIL -- 2.6%
25,200 Aeropostale, Inc.*.......... 741,636
268,875 Cache, Inc.*................ 4,845,128
103,300 Cato Corp. -- Class A....... 2,977,106
196,350 Charlotte Russe Holding,
Inc.*..................... 1,983,135
90,300 Claire's Stores, Inc. ...... 1,918,875
7,300 Genesco, Inc.*.............. 227,322
271,860 Jos. A. Bank Clothiers,
Inc.*(d).................. 7,693,638
154,800 New York & Company, Inc.*... 2,557,296
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
APPAREL: RETAIL (CONTINUED)
84,600 Shoe Carnival, Inc.*........ $ 1,099,800
133,600 Stage Stores, Inc.*(d)...... 5,547,072
52,600 Stein Mart, Inc.*........... 897,356
59,100 The Men's Wearhouse,
Inc.*..................... 1,888,836
--------------
32,377,200
--------------
AUTOMOBILES/MOTOR VEHICLES -- 0.4%
3,800 Arctic Cat, Inc. ........... 100,776
40,500 Monaco Coach Corp. ......... 833,085
25,700 Polaris Industries, Inc. ... 1,748,114
61,900 Winnebago Industries,
Inc.(d)................... 2,417,814
--------------
5,099,789
--------------
AUTOMOTIVE EQUIPMENT -- 1.1%
64,800 Modine Manufacturing
Company................... 2,188,296
176,000 O'Reilly Automotive,
Inc.*(d).................. 7,928,800
190,600 Spartan Motors, Inc. ....... 2,273,858
56,800 Tenneco Automotive, Inc.*... 979,232
31,100 Titan International,
Inc.(d)................... 469,610
--------------
13,839,796
--------------
BANKS -- 5.6%
7,000 ABC Bancorp................. 147,000
76,100 AMCORE Financial, Inc. ..... 2,448,898
4,290 AmericanWest Bancorp*....... 86,873
97,900 Astoria Financial Corp. .... 3,913,062
1,400 BancFirst Corp. ............ 110,572
17,500 BancorpSouth, Inc. ......... 426,475
147,323 BankUnited Financial
Corp. -- Class A*......... 4,706,969
104,906 Banner Corp. ............... 3,272,018
5,400 Camden National Corp. ...... 212,814
3,200 Capital Crossing Bank*...... 98,208
139,900 Cathay General Bancorp...... 5,246,249
15,900 City Holding Company........ 576,216
16,200 Columbia Banking System,
Inc. ..................... 404,838
27,800 Commercial Federal Corp. ... 825,938
8,000 Community Trust Bancorp,
Inc. ..................... 258,880
17,700 Corus Bankshares, Inc. ..... 849,777
23,000 First BanCorp. ............. 1,460,730
7,800 First Charter Corp. ........ 204,126
2,600 First Citizens Bancshares,
Inc. -- Class A........... 385,450
15,300 First Financial Bancorp..... 267,750
2,500 First Financial Bankshares,
Inc. ..................... 112,025
65,200 First Midwest Bancorp,
Inc. ..................... 2,366,108
9,600 First Place Financial
Corp. .................... 214,944
6,700 First Republic Bank......... 355,100
21,600 FirstFed Financial Corp.*... 1,120,392
</Table>
See notes to financial statements.
115
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
16,500 Flushing Financial Corp. ... $ 330,990
89,400 Fremont General Corp.(d).... 2,251,092
9,100 Frontier Financial Corp. ... 351,351
19,600 Hancock Holding Company..... 655,816
39,100 Hibernia Corp. -- Class A... 1,153,841
57,211 Hudson United Bancorp....... 2,252,969
3,200 Independent Bank Corp.
(Massachusetts)........... 108,000
9,800 Independent Bank Corp.
(Michigan)................ 292,334
28,100 IndyMac Bancorp, Inc. ...... 968,045
24,500 Irwin Financial Corp. ...... 695,555
5,500 ITLA Capital Corp.*......... 323,345
6,195 MainSource Financial Group,
Inc. ..................... 147,937
3,200 MB Financial, Inc. ......... 134,880
6,700 MBT Financial Corp. ........ 155,909
4,400 Mid-State Bancshares........ 126,060
117,400 Nara Bancorp, Inc. ......... 2,497,098
5,300 NBC Capital Corp. .......... 140,821
192,500 NewAlliance Bancshares,
Inc. ..................... 2,945,250
8,000 Old Second Bancorp, Inc. ... 255,040
15,180 Oriental Financial Group,
Inc. ..................... 429,746
5,100 People's Holding Company.... 168,810
8,900 PFF Bancorp, Inc. .......... 412,337
55,420 PrivateBancorp, Inc. ....... 1,786,187
4,400 Provident Bankshares
Corp. .................... 160,028
50,100 R&G Financial Corp. -- Class
B......................... 1,947,888
2,100 S&T Bancorp, Inc. .......... 79,149
3,700 Sandy Spring Bancorp,
Inc. ..................... 141,821
8,900 Santander BanCorp........... 268,424
3,360 SCBT Financial Corp. ....... 112,795
65,950 Signature Bank*............. 2,134,142
27,600 Silicon Valley
Bancshares*............... 1,237,032
7,000 Simmons First National
Corp. -- Class A.......... 202,650
4,830 Southside Bancshares,
Inc. ..................... 110,366
90,510 Southwest Bancorp of Texas,
Inc. ..................... 2,107,978
3,465 State Bancorp, Inc. ........ 95,288
3,600 State Financial Services
Corp. -- Class A.......... 108,360
7,950 Sterling Bancorp............ 224,588
4,900 Sterling Financial Corp.
(Pennsylvania)............ 140,483
5,300 Suffolk Bancorp............. 184,599
27,600 Susquehanna Bancshares,
Inc. ..................... 688,620
276,150 Texas Capital Bancshares,
Inc.*..................... 5,970,362
14,700 Trustmark Corp. ............ 456,729
2,000 Uninvest Corp. of
Pennsylvania.............. 92,040
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
2,100 Union Bankshares Corp. ..... $ 80,703
21,500 United Community Financial
Corp. .................... 240,800
9,100 USB Holding Company,
Inc. ..................... 226,590
13,600 WesBanco, Inc. ............. 434,792
6,800 West Coast Bancorp.......... 172,788
25,900 Westamerica Bancorp......... 1,510,229
4,500 Western Sierra Bancorp*..... 172,598
6,300 WSFS Financial Corp. ....... 380,016
--------------
68,336,683
--------------
BROADCAST SERVICES/MEDIA -- 0.3%
8,700 Emmis Communications
Corp. -- Class A*......... 166,953
66,400 Insight Communications
Company, Inc. -- Class
A*(d)..................... 615,528
18,700 Journal Communications,
Inc. -- Class A........... 337,909
9,900 Nexstar Broadcasting Group,
Inc. -- Class A*.......... 91,278
71,900 Sinclair Broadcast Group --
Class A................... 662,199
48,300 Spanish Broadcasting System,
Inc. -- Class A*.......... 510,048
8,700 The Liberty Corp. .......... 382,452
13,200 World Wrestling
Entertainment, Inc. ...... 160,116
36,500 Young Broadcasting, Inc. --
Class A*.................. 385,440
--------------
3,311,923
--------------
BUSINESS SERVICES AND SUPPLIES -- 3.2%
44,200 Administaff, Inc.*.......... 557,362
6,900 Ambassadors Group, Inc. .... 245,709
14,700 Angelica Corp. ............. 397,635
48,600 Dendrite International,
Inc.*..................... 942,840
6,500 DiamondCluster
International, Inc.*...... 93,145
90,900 Gevity HR, Inc. ............ 1,868,904
163,390 Global Payments, Inc.(d).... 9,564,851
180,640 Image Entertainment,
Inc.*(d).................. 1,073,002
20,300 John H. Harland Company..... 732,830
58,580 Kelly Services,
Inc. -- Class A........... 1,767,944
258,440 Kforce, Inc.*............... 2,868,684
255,510 Korn/Ferry
International*(d)......... 5,301,833
128,300 Labor Ready, Inc.*.......... 2,170,836
106,400 MAXIMUS, Inc.*.............. 3,311,168
97,820 Navigant Consulting,
Inc.*..................... 2,602,012
177,240 Niku Corp.*................. 3,573,158
12,300 Pomeroy IT Solutions,
Inc.*..................... 187,083
20,000 SOURCECORP, Inc.*........... 382,200
</Table>
See notes to financial statements.
116
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES (CONTINUED)
78,300 TeleTech Holdings, Inc.*.... $ 758,727
7,200 UniFirst Corp. ............. 203,616
14,700 Vertrue, Inc.*.............. 555,219
--------------
39,158,758
--------------
CHEMICALS -- 1.3%
163,600 Airgas, Inc. ............... 4,337,036
25,200 Albemarle Corp. ............ 975,492
54,000 Compass Minerals
International, Inc. ...... 1,308,420
62,100 FMC Corp.*.................. 2,999,430
28,500 Georgia Gulf Corp. ......... 1,419,300
40,500 MacDermid, Inc. ............ 1,462,050
19,400 NewMarket Corp.*............ 386,060
64,600 PolyOne Corp.*.............. 585,276
86,000 Terra Industries,
Inc.*(d).................. 763,680
37,800 The Valspar Corp. .......... 1,890,378
--------------
16,127,122
--------------
COLLECTIBLES -- 0.0%
10,200 Department 56, Inc.*........ 169,830
--------------
COMMERCIAL SERVICES -- 0.5%
53,470 Chemed Corp. ............... 3,588,371
3,600 Euronet Worldwide, Inc.*.... 93,672
118,180 Providence Service Corp.*... 2,478,235
--------------
6,160,278
--------------
COMPUTER SOFTWARE AND SERVICES -- 4.9%
194,870 Activision, Inc.*........... 3,932,477
7,500 Ansoft Corp.*............... 151,500
33,300 ANSYS, Inc.*................ 1,067,598
99,550 Avid Technology, Inc.*...... 6,147,212
376,800 Checkpoint Systems, Inc.*... 6,801,239
29,200 Covansys Corp.*............. 446,760
275,350 Embarcadero Technologies,
Inc.*..................... 2,591,044
174,750 Epicor Software Corp.*...... 2,462,228
51,900 FARO Technologies, Inc.*.... 1,618,242
128,180 Infocrossing, Inc.*(d)...... 2,170,087
74,400 Intergraph Corp.*(d)........ 2,003,592
117,300 Keane, Inc.*................ 1,724,310
109,950 M-Systems Flash Disk
Pioneers, Ltd.*(d)........ 2,168,214
137,080 Macrovision Corp.*.......... 3,525,698
90,250 Merge Technologies,
Inc.*(d).................. 2,008,063
28,300 MTS Systems Corp. .......... 956,823
64,740 Open Solutions, Inc.*....... 1,680,650
5,400 Progress Software Corp.*.... 126,090
12,600 Quest Software, Inc.*....... 200,970
5,000 Renaissance Learning,
Inc. ..................... 92,800
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES (CONTINUED)
29,400 SERENA Software, Inc.*...... $ 636,216
181,730 Smith Micro Software,
Inc.*(d).................. 1,626,484
22,900 SS&C Technologies, Inc. .... 472,885
57,400 Sybase, Inc.*............... 1,145,130
350,450 Synplicity, Inc.*........... 2,074,664
234,600 THQ, Inc.*.................. 5,381,724
16,600 Tier Technologies, Inc. --
Class B*.................. 153,550
40,000 Transaction Systems
Architects, Inc. -- Class
A*........................ 794,000
48,300 Tyler Technologies, Inc.*... 403,788
421,060 Wind River Systems, Inc.*... 5,705,363
--------------
60,269,401
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.4%
102,300 Adaptec, Inc.*.............. 776,457
77,900 Black Box Corp. ............ 3,740,758
137,500 Electronics For Imaging,
Inc.*..................... 2,393,875
792,130 Gateway, Inc.*.............. 4,760,701
90,950 Knoll, Inc.*................ 1,591,625
103,470 Mercury Computer Systems,
Inc.*(d).................. 3,070,990
30,100 RadiSys Corp.*.............. 588,455
--------------
16,922,861
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 3.4%
67,100 Agilysys, Inc. ............. 1,150,094
45,700 Brookfield Homes Corp. ..... 1,549,230
181,600 Dycom Industries, Inc.*..... 5,542,432
24,300 Eagle Materials, Inc. ...... 2,098,305
9,100 Genlyte Group, Inc.*........ 779,688
188,600 Hovnanian Enterprises,
Inc. -- Class A*.......... 9,339,472
57,300 Meritage Corp.*............. 6,457,710
80,100 Simpson Manufacturing
Company, Inc. ............ 2,795,490
80,350 Standard Pacific Corp. ..... 5,153,649
7,400 Universal Forest Products,
Inc. ..................... 321,160
15,700 USG Corp.*(d)............... 632,239
53,700 Walter Industries,
Inc.(d)................... 1,811,301
13,100 Washington Group
International, Inc.*...... 540,375
136,000 WCI Communities, Inc.*(d)... 3,998,400
--------------
42,169,545
--------------
CONSUMER GOODS AND SERVICES -- 1.4%
33,300 Chattem, Inc.*.............. 1,102,230
6,000 CSS Industries, Inc. ....... 190,560
188,020 Fossil, Inc.*............... 4,820,833
47,100 Herbalife, Ltd.*............ 765,375
128,100 NBTY, Inc.*................. 3,075,681
</Table>
See notes to financial statements.
117
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
40,600 The Scotts Company -- Class
A*........................ $ 2,984,912
137,700 Yankee Candle Company,
Inc.*..................... 4,568,886
--------------
17,508,477
--------------
CONTAINERS AND PACKAGING -- 0.1%
2,900 Greif, Inc. -- Class A...... 162,400
14,700 Silgan Holdings, Inc. ...... 896,112
--------------
1,058,512
--------------
CORRECTIONAL FACILITIES -- 0.0%
14,200 The Geo Group, Inc.*........ 377,436
--------------
DISTRIBUTION -- 2.3%
122,970 Beacon Roofing Supply,
Inc.*..................... 2,442,184
8,000 Building Materials Holding
Corp. .................... 306,320
13,600 Handleman Company........... 292,128
175,040 Hughes Supply, Inc. ........ 5,662,544
18,000 Nu Skin Enterprises, Inc. --
Class A................... 456,840
169,300 United Stationers, Inc.*.... 7,821,660
90,900 Universal Corp. ............ 4,348,656
130,500 Watsco, Inc. ............... 4,596,210
71,700 WESCO International,
Inc.*..................... 2,125,188
--------------
28,051,730
--------------
DIVERSIFIED SERVICES -- 0.1%
20,100 Resource America, Inc. --
Class A................... 653,250
--------------
EDUCATION -- 0.2%
58,410 Laureate Education, Inc.*... 2,575,297
--------------
ELECTRONICS -- 3.4%
247,050 Artesyn Technologies,
Inc.*..................... 2,791,665
73,770 BEI Technologies, Inc. ..... 2,278,018
202,349 Belden CDT, Inc.(d)......... 4,694,497
131,650 Benchmark Electronics,
Inc.*..................... 4,489,265
16,600 Electro Scientific
Industries, Inc.*......... 328,016
2,700 Excel Technology, Inc.*..... 70,200
139,800 FLIR Systems, Inc.*......... 8,917,842
23,600 Methode Electronics, Inc. --
Class A................... 303,260
63,900 Nam Tai Electronics,
Inc. ..................... 1,230,075
56,800 Park Electrochemical
Corp. .................... 1,231,424
322,000 Sanmina-SCI Corp.*.......... 2,727,340
120,600 Sonic Solutions*(d)......... 2,706,264
360,200 SRS Labs, Inc.*............. 2,251,610
15,000 Stoneridge, Inc.*........... 226,950
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
ELECTRONICS (CONTINUED)
87,700 Technitrol, Inc.*........... $ 1,596,140
47,400 Thomas & Betts Corp.*(d).... 1,457,550
144,260 Trimble Navigation, Ltd.*... 4,766,350
--------------
42,066,466
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.2%
238,600 Allied Waste Industries,
Inc.*..................... 2,214,208
14,300 Duratek, Inc.*.............. 356,213
3,600 Metal Management, Inc. ..... 96,732
--------------
2,667,153
--------------
EQUIPMENT RENTAL AND LEASING -- 0.3%
72,600 Aaron Rents, Inc. .......... 1,815,000
9,700 Electro Rent Corp.*......... 138,031
100,490 Marlin Business Services,
Inc.*..................... 1,909,310
--------------
3,862,341
--------------
FINANCIAL SERVICES -- 2.9%
98,900 Accredited Home Lenders
Holding Company*.......... 4,913,352
101,900 American Capital Strategies,
Ltd.(d)................... 3,398,365
268,400 AmeriCredit Corp.*.......... 6,562,380
30,800 CompuCredit Corp.*.......... 842,072
95,500 Eaton Vance Corp. .......... 4,980,325
38,100 Financial Federal Corp. .... 1,493,520
130,500 Jefferies Group, Inc. ...... 5,256,540
59,300 Metris Companies, Inc.*..... 756,075
17,700 Nelnet, Inc. -- Class A*.... 476,661
128,900 Raymond James Financial,
Inc. ..................... 3,993,322
14,800 The Student Loan Corp. ..... 2,723,200
4,600 World Acceptance Corp.*..... 126,546
--------------
35,522,358
--------------
FOOD AND BEVERAGE -- 0.6%
32,000 Boston Beer Company, Inc. --
Class A*.................. 680,640
44,600 Chiquita Brands
International, Inc. ...... 983,876
105,300 John B. Sanfilippo & Son,
Inc.*..................... 2,714,634
10,300 M&F Worldwide Corp.*........ 140,286
11,000 Nash Finch Company.......... 415,360
9,200 Sanderson Farms, Inc. ...... 398,176
58,900 Sensient Technologies
Corp. .................... 1,413,011
--------------
6,745,983
--------------
FUNERAL SERVICES -- 0.1%
62,700 Alderwoods Group, Inc.*..... 713,526
--------------
</Table>
See notes to financial statements.
118
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE -- 4.9%
146,150 Affirmative Insurance
Holdings, Inc. ........... $ 2,461,166
2,100 AmerUs Group Company(d)..... 95,130
264,000 Assured Guaranty, Ltd. ..... 5,192,880
154,400 Delphi Financial Group,
Inc. -- Class A........... 7,125,559
9,100 FPIC Insurance Group,
Inc.*(d).................. 321,958
107,060 Infinity Property & Casualty
Corp. .................... 3,768,512
108,700 IPC Holdings, Ltd. ......... 4,729,537
54,700 LandAmerica Financial Group,
Inc.(d)................... 2,949,971
88,800 Philadelphia Consolidated
Holding Corp.*............ 5,873,232
143,700 Platinum Underwriters
Holdings, Inc. ........... 4,469,070
47,300 Protective Life Corp. ...... 2,019,237
114,200 Reinsurance Group of
America, Inc. ............ 5,532,990
38,800 Stewart Information Services
Corp. .................... 1,616,020
68,600 The Commerce Group, Inc. ... 4,187,344
271,000 Tower Group, Inc. .......... 3,252,000
64,500 UICI........................ 2,186,550
17,900 United Fire & Casualty
Company................... 603,409
265,800 Universal American Financial
Corp.*.................... 4,111,926
--------------
60,496,491
--------------
INTERNET SERVICES -- 4.8%
68,500 Akamai Technologies,
Inc.*(d).................. 892,555
95,200 Ask Jeeves, Inc.*(d)........ 2,546,600
124,960 Avocent Corp.*.............. 5,063,379
617,510 CNET Networks, Inc.*(d)..... 6,934,637
380,445 Digitas, Inc.*.............. 3,633,250
200,700 EarthLink, Inc.*............ 2,312,064
55,900 Equinix, Inc.*.............. 2,389,166
6,000 F5 Networks, Inc.*.......... 292,320
111,530 InfoSpace, Inc.*(d)......... 5,303,252
34,300 Internet Security Systems,
Inc.*..................... 797,475
85,510 j2 Global Communications,
Inc.*(d).................. 2,950,095
56,674 Jupitermedia Corp.*......... 1,347,708
281,610 Keynote Systems, Inc.*...... 3,920,011
17,300 Priceline.com, Inc.*(d)..... 408,107
135,770 RADVision, Ltd.*(d)......... 1,832,895
72,620 RADWARE, Ltd.*.............. 1,897,561
275,220 RSA Security, Inc.*......... 5,520,913
99,450 SafeNet, Inc.*.............. 3,653,793
186,900 SonicWALL, Inc.*............ 1,181,208
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES (CONTINUED)
175,580 ValueClick, Inc.*........... $ 2,340,481
15,700 Verity, Inc.*............... 205,984
59,600 Websense, Inc.*............. 3,022,912
--------------
58,446,366
--------------
LEISURE AND RECREATION -- 1.7%
42,500 Choice Hotels International,
Inc. ..................... 2,465,000
310,300 Interstate Hotels & Resorts,
Inc.*..................... 1,663,208
21,400 Mikohn Gaming Corp.*........ 218,708
220,950 Pinnacle Entertainment,
Inc.*..................... 4,370,391
207,640 Scientific Games Corp. --
Class A*.................. 4,950,138
35,400 Shuffle Master, Inc.*(d).... 1,667,340
55,400 Sunterra Corp.*(d).......... 777,816
129,600 WMS Industries, Inc.*(d).... 4,346,784
--------------
20,459,385
--------------
MACHINERY -- 1.3%
98,700 Albany International
Corp. -- Class A.......... 3,470,292
49,800 Applied Industrial
Technologies, Inc. ....... 1,364,520
20,500 Astec Industries, Inc.*..... 352,805
17,700 Blount International,
Inc.*..................... 308,334
109,440 Joy Global, Inc.(d)......... 4,752,979
149,100 Kadant, Inc.*............... 3,056,550
10,300 Middleby Corp. ............. 522,416
45,100 Terex Corp.*................ 2,149,015
--------------
15,976,911
--------------
MANUFACTURING -- 2.7%
91,300 Acuity Brands, Inc. ........ 2,903,340
51,500 AptarGroup, Inc. ........... 2,718,170
16,500 Briggs & Stratton
Corp.(d).................. 686,070
30,600 C&D Technologies, Inc. ..... 521,424
70,100 Carlisle Companies, Inc. ... 4,550,891
24,280 Ceradyne, Inc.*(d).......... 1,389,059
7,300 CIRCOR International,
Inc. ..................... 169,068
44,400 Coherent, Inc.*............. 1,351,536
97,500 Deswell Industries, Inc. ... 2,410,103
43,500 Engineered Support Systems,
Inc.(d)................... 2,576,070
16,800 Griffon Corp.*.............. 453,600
58,140 Harsco Corp. ............... 3,240,724
14,700 II-VI, Inc.*................ 624,603
470,340 Jacuzzi Brands, Inc.*....... 4,091,958
105,110 Kaydon Corp. ............... 3,470,732
22,200 Lincoln Electric Holdings,
Inc. ..................... 766,788
</Table>
See notes to financial statements.
119
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MANUFACTURING (CONTINUED)
4,800 Penn Engineering &
Manufacturing Corp. ...... $ 86,880
33,600 Rayovac Corp.*.............. 1,026,816
9,200 Steinway Musical
Instruments, Inc.*........ 266,248
14,300 TTM Technologies, Inc.*..... 168,740
16,400 Vicor Corp. ................ 215,004
--------------
33,687,824
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 3.3%
132,500 Accredo Health, Inc.*....... 3,672,900
94,520 America Service Group,
Inc.*..................... 2,530,300
25,500 AMERIGROUP Corp.*........... 1,929,330
27,300 AMN Healthcare Services,
Inc.*(d).................. 434,343
107,100 AmSurg Corp.*............... 3,163,734
17,500 Cambrex Corp. .............. 474,250
46,200 CorVel Corp.*............... 1,237,236
128,700 Covance, Inc.*.............. 4,987,124
150,560 Cypress Bioscience, Inc.*... 2,116,874
31,500 ICON plc (ADR)*............. 1,217,475
79,500 Kindred Healthcare, Inc.*... 2,381,025
107,340 LabOne, Inc.*(d)............ 3,439,174
116,460 LifePoint Hospitals,
Inc.*(d).................. 4,055,137
22,000 PDI, Inc.*.................. 490,160
11,600 Per-Se Technologies,
Inc.*..................... 183,628
99,760 Psychiatric Solutions,
Inc.*..................... 3,647,226
8,700 Quality Systems, Inc.*...... 520,260
36,000 RehabCare Group, Inc.*...... 1,007,640
16,100 Res-Care, Inc.*............. 245,042
54,700 Sierra Health Services,
Inc.*(d).................. 3,014,517
--------------
40,747,375
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 6.5%
155,200 Abaxis, Inc.*............... 2,248,848
145,400 Advanced Medical Optics,
Inc.*(d).................. 5,981,756
51,450 Advanced Neuromodulation
Systems, Inc.*(d)......... 2,030,217
117,700 Align Technology, Inc.*..... 1,265,275
20,000 American Medical Systems
Holdings, Inc.*........... 836,200
203,510 ArthroCare Corp.*(d)........ 6,524,530
59,800 Candela Corp.*.............. 679,328
144,100 Closure Medical Corp.*...... 2,809,950
173,040 Cooper Companies, Inc.(d)... 12,214,893
34,500 Dade Behring Holdings,
Inc.*..................... 1,932,000
41,200 Diagnostic Products
Corp. .................... 2,268,060
26,700 DJ Orthopedics, Inc.*....... 571,914
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES (CONTINUED)
386,250 Encore Medical Corp.*....... $ 2,622,638
139,620 Gen-Probe, Inc.*............ 6,312,219
76,400 Haemonetics Corp.*.......... 2,766,444
20,300 Illumina, Inc.*............. 192,444
42,200 Immucor, Inc.*.............. 992,122
29,970 Intuitive Surgical, Inc.*... 1,199,399
21,600 Kensey Nash Corp.*(d)....... 745,848
49,880 Laserscope*(d).............. 1,791,191
106,900 Lifeline Systems, Inc.*..... 2,753,744
91 Lumenis, Ltd.*.............. 177
34,300 Luminex Corp.*.............. 304,584
41,300 Mentor Corp. ............... 1,393,462
470,600 Orthovita, Inc.*............ 1,971,814
135,670 PolyMedica Corp.(d)......... 5,059,134
15,500 Possis Medical, Inc.*....... 208,940
39,700 PSS World Medical, Inc.*.... 496,846
70,800 Techne Corp.*............... 2,754,120
442,300 The Spectranetics Corp.*.... 2,486,168
93,000 Third Wave Technologies*.... 799,800
49,400 Urologix, Inc.*............. 319,618
71,130 Ventana Medical Systems,
Inc.*..................... 4,551,609
3,600 Vital Signs, Inc. .......... 140,112
--------------
79,225,404
--------------
METALS AND MINING -- 0.9%
51,500 Aber Diamond Corp.(d)....... 1,816,869
106,300 AK Steel Holding Corp.*..... 1,538,161
10,500 Carpenter Technology
Corp. .................... 613,830
78,400 Meridian Gold, Inc.*........ 1,487,248
54,600 Mueller Industries,
Inc.(d)................... 1,758,120
11,700 Olympic Steel, Inc.*(d)..... 310,167
13,900 Oregon Steel Mills, Inc.*... 282,031
8,400 Reliance Steel & Aluminum
Company................... 327,264
24,100 RTI International Metals,
Inc.*..................... 495,014
6,900 Titanium Metals Corp.*...... 166,566
175,200 Wolverine Tube, Inc.*....... 2,261,832
--------------
11,057,102
--------------
OIL AND GAS: EQUIPMENT -- 1.2%
11,700 Dril-Quip, Inc.*............ 283,842
45,300 Energy Partners, Ltd.*...... 918,231
210,420 Grant Prideco, Inc.*(d)..... 4,218,921
12,500 Gulf Island Fabrication,
Inc. ..................... 272,875
170,400 Key Energy Services,
Inc.*..................... 2,010,720
66,090 Maverick Tube Corp.*........ 2,002,527
119,750 Oil States International,
Inc.*..................... 2,309,978
</Table>
See notes to financial statements.
120
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
OIL AND GAS: EQUIPMENT (CONTINUED)
156,500 Superior Energy Services,
Inc.*..................... $ 2,411,665
25,000 Veritas DGC, Inc.*.......... 560,250
--------------
14,989,009
--------------
OIL, COAL AND GAS -- 4.5%
226,800 Cabot Oil & Gas Corp. ...... 10,035,899
56,870 Cal Dive International,
Inc.*..................... 2,317,453
322,334 Chesapeake Energy Corp. .... 5,318,511
83,300 Encore Acquisition
Company*.................. 2,908,003
20,000 Giant Industries, Inc.*..... 530,200
448,280 Grey Wolf, Inc.*............ 2,362,436
28,000 Holly Corp. ................ 780,360
219,300 Magnum Hunter Resources,
Inc.*(d).................. 2,828,970
110,500 ONEOK, Inc.(d).............. 3,140,410
165,520 Patterson-UTI Energy,
Inc. ..................... 3,219,364
2,100 Petroleum Development
Corp.*.................... 80,997
168,400 Plains Exploration &
Production Company*....... 4,378,400
143,800 Swift Energy Company*....... 4,161,572
86,600 Tesoro Corp.*............... 2,759,076
58,650 Unit Corp.*................. 2,241,017
275,100 Vintage Petroleum, Inc. .... 6,242,019
52,200 Whiting Petroleum Corp.*.... 1,579,050
--------------
54,883,737
--------------
PAPER AND FOREST PRODUCTS -- 0.1%
55,900 Pope & Talbot, Inc. ........ 956,449
5,200 Potlatch Corp. ............. 263,016
--------------
1,219,465
--------------
PHARMACEUTICALS -- 3.2%
101,960 Alexion Pharmaceuticals,
Inc.*..................... 2,569,392
69,900 AtheroGenics, Inc.*(d)...... 1,646,844
102,700 Connetics Corp.*(d)......... 2,494,583
10,000 Enzon Pharmaceuticals,
Inc.*..................... 137,200
55,100 First Horizon Pharmaceutical
Corp.*(d)................. 1,261,239
13,600 Indevus Pharmaceuticals,
Inc.*..................... 81,056
125,830 Inspire Pharmaceuticals,
Inc.*(d).................. 2,110,169
131,900 K-V Pharmaceutical
Company -- Class A*....... 2,908,395
336,150 Nabi Biopharmaceuticals*.... 4,924,598
18,400 Noven Pharmaceuticals,
Inc.*..................... 313,904
9,300 Nutraceutical International
Corp.*.................... 143,313
13,500 Pharmion Corp.*(d).......... 569,835
167,690 QLT, Inc.*(d)............... 2,696,455
312,370 Salix Pharmaceuticals,
Ltd.*..................... 5,494,588
389,600 Serologicals Corp.*(d)...... 8,617,952
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
27,400 Tanox, Inc.*................ $ 416,480
24,800 United Therapeutics
Corp.*.................... 1,119,720
77,100 VaxGen, Inc.*(d)............ 1,310,700
--------------
38,816,423
--------------
PRINTING AND PUBLISHING -- 0.5%
35,900 Bowne & Company, Inc. ...... 583,734
12,000 Consolidated Graphics,
Inc.*..................... 550,800
41,900 Courier Corp. .............. 2,175,448
77,700 Scholastic Corp.*........... 2,871,792
3,700 Thomas Nelson, Inc. ........ 83,620
6,300 Valassis Communications,
Inc.*..................... 220,563
--------------
6,485,957
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.1%
44,800 Getty Realty Corp. ......... 1,287,104
--------------
REAL ESTATE INVESTMENT TRUSTS -- 3.6%
177,900 Acadia Realty Trust......... 2,899,770
36,600 Associated Estates Realty
Corp. .................... 374,052
4,000 BRT Realty Trust............ 97,360
11,500 Capital Trust, Inc. -- Class
A......................... 353,165
20,800 Corporate Office Properties
Trust..................... 610,480
46,000 Cousins Properties, Inc. ... 1,392,420
100,800 Entertainment Properties
Trust..................... 4,490,640
89,700 Equity Inns, Inc. .......... 1,053,078
62,700 Equity One, Inc. ........... 1,487,871
62,500 LaSalle Hotel Properties.... 1,989,375
40,900 LTC Properties, Inc. ....... 814,319
50,200 Maguire Properties, Inc. ... 1,378,492
31,500 Mid-America Apartment
Communities, Inc. ........ 1,298,430
35,100 National Health Realty,
Inc. ..................... 1,024,218
6,000 New Century Financial
Corp.(d).................. 383,460
70,500 Newcastle Investment
Corp. .................... 2,240,490
90,300 OMEGA Healthcare Investors,
Inc. ..................... 1,065,540
44,900 PS Business Parks, Inc. .... 2,024,990
68,600 RAIT Investment Trust....... 1,918,742
17,300 Saul Centers, Inc. ......... 661,725
139,150 Saxon Capital, Inc. ........ 3,338,209
98,300 Senior Housing Properties
Trust..................... 1,861,802
88,900 SL Green Realty Corp.(d).... 5,382,895
16,800 Sovran Self Storage......... 707,952
163,800 U-Store-It Trust............ 2,841,930
68,700 Ventas, Inc. ............... 1,883,067
--------------
43,574,472
--------------
</Table>
See notes to financial statements.
121
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RESEARCH AND DEVELOPMENT -- 0.9%
50,300 Albany Molecular Research,
Inc.*..................... $ 560,342
23,200 Array BioPharma, Inc.*...... 220,864
46,500 Encysive Pharmaceuticals,
Inc.*..................... 461,745
20,799 Enzo Biochem, Inc.*(d)...... 404,957
17,900 Genencor International,
Inc.*..................... 293,560
53,400 Lexicon Genetics, Inc.*..... 414,117
145,636 Pharmaceutical Product
Development, Inc.*........ 6,013,310
36,500 Protein Design Labs,
Inc.*..................... 754,090
77,550 Rigel Pharmaceuticals,
Inc.*(d).................. 1,893,771
17,500 Valeant Pharmaceuticals
International(d).......... 461,125
--------------
11,477,881
--------------
RETAIL -- 2.4%
197,970 BJ'S Wholesale Club,
Inc.*..................... 5,766,865
9,000 Brookstone, Inc.*........... 175,950
187,200 Casey's General Stores,
Inc. ..................... 3,397,680
70,720 Cost Plus, Inc.*(d)......... 2,272,234
159,600 CSK Auto Corp.*............. 2,671,704
23,700 Dillard's, Inc. -- Class
A......................... 636,819
147,110 EZCORP, Inc. -- Class A*.... 2,266,965
6,700 Finlay Enterprises, Inc.*... 132,593
62,130 Guitar Center, Inc.*........ 3,273,630
30,300 Pantry, Inc.*............... 911,727
14,300 Sonic Automotive, Inc. ..... 354,640
6,600 The Bon-Ton Stores, Inc. ... 103,950
46,000 Trans World Entertainment
Corp.*.................... 573,620
127,530 Tuesday Morning Corp.*...... 3,906,244
96,100 Zale Corp.*................. 2,870,507
--------------
29,315,128
--------------
RETAIL: RESTAURANTS -- 2.0%
97,700 Brinker International,
Inc.*..................... 3,426,339
120,650 CEC Entertainment, Inc.*.... 4,822,381
14,600 CKE Restaurants, Inc.*...... 211,846
271,900 Cosi, Inc.*................. 1,644,995
29,000 Dave & Buster's, Inc.*...... 585,800
25,900 Jack in the Box, Inc.*...... 954,933
36,100 Lone Star Steakhouse &
Saloon, Inc. ............. 1,010,800
34,700 Papa John's International,
Inc.*(d).................. 1,195,068
84,640 RARE Hospitality
International, Inc.*...... 2,696,630
148,500 Ruby Tuesday, Inc.(d)....... 3,872,880
10,100 Ryan's Restaurant Group,
Inc.*..................... 155,742
142,816 Sonic Corp.*................ 4,355,888
--------------
24,933,302
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL: SUPERMARKETS -- 0.0%
25,900 Pathmark Stores, Inc.*...... $ 150,479
15,600 Smart & Final, Inc.*........ 224,484
--------------
374,963
--------------
RUBBER PRODUCTS -- 0.1%
1,900 Bandag, Inc.(d)............. 94,639
38,100 The Goodyear Tire & Rubber
Company*(d)............... 558,546
--------------
653,185
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.5%
147,010 Cymer, Inc.*(d)............. 4,342,675
2,200 Dionex Corp.*............... 124,674
55,600 Hexcel Corp.*............... 806,200
11,900 Woodward Governor Company... 852,159
--------------
6,125,708
--------------
SECURITY SERVICES -- 0.5%
48,500 The Brink's Company......... 1,916,720
458,080 Viisage Technology,
Inc.*(d).................. 4,127,301
--------------
6,044,021
--------------
SEMICONDUCTORS -- 2.2%
136,300 Axcelis Technologies,
Inc.*..................... 1,108,119
168,700 Cirrus Logic, Inc.*......... 929,537
13,800 ESS Technology, Inc.*....... 98,118
146,500 Integrated Device
Technology, Inc.*......... 1,693,540
46,500 Kulicke and Soffa
Industries, Inc.*(d)...... 400,830
112,800 Micrel, Inc.*............... 1,243,056
198,650 Microsemi Corp.*............ 3,448,564
248,620 O2Micro International,
Ltd.*..................... 2,844,213
164,700 Pericom Semiconductor
Corp.*.................... 1,553,121
58,800 Photronics, Inc.*........... 970,200
206,500 Semtech Corp.*.............. 4,516,154
51,490 Sigmatel, Inc.*............. 1,829,440
43,900 Silicon Image, Inc.*........ 722,594
3,400 Siliconix, Inc.*............ 124,066
171,780 SiRF Technology Holdings,
Inc.*..................... 2,185,042
5,000 Tessera Technologies,
Inc.*..................... 186,050
116,310 Ultratech, Inc.*............ 2,192,444
26,700 Veeco Instruments,
Inc.*(d).................. 562,569
--------------
26,607,657
--------------
</Table>
See notes to financial statements.
122
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
SPORTING GOODS AND EQUIPMENT -- 0.7%
213,900 Hibbett Sporting Goods,
Inc.*..................... $ 5,691,879
192,010 K2, Inc.*(d)................ 3,049,119
7,700 The Nautilus Group, Inc. ... 186,109
--------------
8,927,107
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.6%
29,700 Airspan Networks, Inc.*..... 161,271
95,100 Alamosa Holdings,
Inc.*(d).................. 1,185,897
568,700 American Tower Corp. --
Class A*.................. 10,464,079
24,100 Anaren, Inc.*............... 312,336
7,600 Anixter International,
Inc.*..................... 273,524
67,960 Applied Signal Technology,
Inc. ..................... 2,395,590
29,400 Boston Communications Group,
Inc.*..................... 271,656
25,900 Brightpoint, Inc.*.......... 506,086
61,100 Commonwealth Telephone
Enterprises, Inc.*........ 3,034,226
218,230 CommScope, Inc.*............ 4,124,547
16,100 CT Communications, Inc. .... 198,030
49,600 Digi International, Inc.*... 852,624
248,040 Harmonic, Inc.*............. 2,068,654
43,500 Intervoice, Inc.*........... 580,725
73,820 JAMDAT Mobile, Inc.*(d)..... 1,524,383
6,700 Newport Corp.*.............. 94,470
10,700 North Pittsburgh Systems,
Inc. ..................... 264,611
84,120 Novatel Wireless,
Inc.*(d).................. 1,630,246
9,200 Plantronics, Inc. .......... 381,524
328,420 Ptek Holdings, Inc.*........ 3,517,378
571,670 Symmetricom, Inc.*.......... 5,550,916
28,200 TALK America Holdings,
Inc.*(d).................. 186,684
220,180 TNS, Inc.*.................. 4,810,933
--------------
44,390,390
--------------
TOOLS -- 0.3%
100,400 Snap-on, Inc. .............. 3,449,744
--------------
TRANSPORTATION -- 2.2%
43,530 Forward Air Corp.*.......... 1,945,791
148,350 Genesee & Wyoming, Inc. --
Class A*.................. 4,173,086
15,600 Hub Group, Inc. -- Class
A*........................ 814,632
69,940 Old Dominion Freight Line,
Inc.*..................... 2,433,912
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION (CONTINUED)
63,600 Overnite Corp. ............. $ 2,368,464
52,100 Overseas Shipholding Group,
Inc. ..................... 2,875,920
77,370 Petroleum Helicopters,
Inc.*..................... 1,939,666
61,400 USF Corp. .................. 2,330,130
71,890 UTI Worldwide, Inc. ........ 4,889,957
168,950 Vitran Corp., Inc. -- Class
A*........................ 2,889,045
--------------
26,660,603
--------------
UTILITIES: ELECTRIC -- 1.3%
84,300 Avista Corp. ............... 1,489,581
51,000 Black Hills Corp. .......... 1,564,680
80,200 Cleco Corp. ................ 1,624,852
16,300 El Paso Electric Company*... 308,722
25,300 IDACORP, Inc. .............. 773,421
60,100 NorthWestern Corp.*......... 1,682,800
281,800 PNM Resources, Inc. ........ 7,126,722
86,800 Westar Energy, Inc. ........ 1,985,116
--------------
16,555,894
--------------
UTILITIES: GAS -- 0.9%
79,200 Atmos Energy Corp. ......... 2,166,120
14,900 Cascade Natural Gas
Corp. .................... 315,880
58,700 New Jersey Resources
Corp. .................... 2,544,058
51,900 Nicor, Inc.(d).............. 1,917,186
133,800 WGL Holdings, Inc. ......... 4,126,392
--------------
11,069,636
--------------
TOTAL COMMON STOCKS
(Cost $1,004,984,429)..... 1,190,669,823
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 13.9%
$171,006,787 Securities Lending
Collateral Investment
(Note 4)
(Cost $171,006,787)....... 171,006,787
--------------
SHORT TERM US TREASURY SECURITY -- 0.1%
1,000,000 US Treasury Bill,
2.16%, 03/17/05(f)
(Cost $995,500)........... 995,500
--------------
TOTAL SECURITIES
(Cost $1,176,986,716)..... 1,362,672,110
--------------
</Table>
See notes to financial statements.
123
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 2.1%
$ 26,260,855 With Investors Bank and
Trust, dated 12/31/04,
1.88%, due 01/03/05,
repurchase proceeds at
maturity $26,264,969
(Collateralized by Fannie
Mae, 3.02%, due 08/25/33,
with a value of $5,121,016
and various Small Business
Administrations,
4.62% -- 5.38%, due
04/25/14-07/25/29, with a
total value of
$22,457,983) (Cost
$26,260,855).............. $ 26,260,855
--------------
Total Investments -- 113.1%
(Cost $1,203,247,571)..... 1,388,932,965
Liabilities less other
assets -- (13.1)%......... (161,402,223)
--------------
NET ASSETS -- 100.0%........ $1,227,530,742
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $1,207,880,906.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $198,880,236
Gross unrealized depreciation.......... (17,828,177)
------------
Net unrealized appreciation............ $181,052,059
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
124
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 98.3%
APPAREL: MANUFACTURING -- 3.0%
20,400 Carter's, Inc.*(d)............. $ 693,396
46,300 Coach, Inc.*................... 2,611,320
------------
3,304,716
------------
BANKS -- 5.5%
63,600 Brookline Bancorp, Inc. ....... 1,037,952
51,100 Downey Financial Corp. ........ 2,912,700
43,800 Silicon Valley Bancshares*..... 1,963,116
------------
5,913,768
------------
BROADCAST SERVICES/MEDIA -- 2.8%
97,900 Lin TV Corp. -- Class A*....... 1,869,890
181,000 Mediacom Communications
Corp.*....................... 1,131,250
------------
3,001,140
------------
BUSINESS SERVICES AND SUPPLIES -- 10.0%
51,200 Advisory Board Company*........ 1,888,256
40,400 Charles River Associates,
Inc.*(d)..................... 1,889,508
48,500 Gevity HR, Inc. ............... 997,160
68,500 Intersections, Inc.*........... 1,181,625
38,300 iPayment Holdings, Inc.*....... 1,896,616
45,300 Navigant Consulting, Inc.*..... 1,204,980
33,700 Resources Connection,
Inc.*(d)..................... 1,830,247
------------
10,888,392
------------
COMPUTER SOFTWARE AND SERVICES -- 4.7%
183,400 Agile Software Corp.*.......... 1,498,378
66,400 Interwoven, Inc.*.............. 722,432
52,900 Manhattan Associates, Inc.*.... 1,263,252
241,400 MatrixOne, Inc.*............... 1,581,170
------------
5,065,232
------------
ELECTRONICS -- 0.7%
64,500 Merix Corp.*................... 743,040
------------
FINANCIAL SERVICES -- 6.5%
41,600 Advance America Cash Advance
Centers, Inc.*(d)............ 952,640
105,800 CapitalSource, Inc.*(d)........ 2,715,886
6,100 Greenhill & Company, Inc. ..... 175,070
62,800 Westcorp(d).................... 2,884,404
12,400 World Acceptance Corp.*........ 341,124
------------
7,069,124
------------
INSURANCE -- 3.2%
53,000 Delphi Financial Group, Inc. --
Class A...................... 2,445,950
24,900 Hub International, Ltd. ....... 458,409
18,500 Primus Guaranty, Ltd.*......... 303,215
11,200 PXRE Group, Ltd. .............. 282,352
------------
3,489,926
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES -- 6.5%
102,500 Akamai Technologies, Inc.*..... $ 1,335,575
42,800 Ask Jeeves, Inc.*.............. 1,144,900
41,400 Audible, Inc.*(d).............. 1,078,470
317,500 Corillian Corp.*............... 1,562,100
195,500 iVillage, Inc.*................ 1,208,190
107,900 SupportSoft, Inc.*............. 718,614
------------
7,047,849
------------
LEISURE AND RECREATION -- 1.5%
19,700 Four Seasons Hotels, Inc.(d)... 1,611,263
------------
MANUFACTURING -- 1.4%
25,800 Engineered Support Systems,
Inc.(d)...................... 1,527,876
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.3%
113,300 Align Technology, Inc.*........ 1,217,975
64,461 Animas Corp.*(d)............... 1,007,525
57,100 Conceptus, Inc.*(d)............ 463,367
14,100 Conor Medsystems, Inc.*(d)..... 195,285
74,175 Immucor, Inc.*................. 1,743,854
------------
4,628,006
------------
PHARMACEUTICALS -- 13.2%
135,900 CV Therapeutics, Inc.*(d)...... 3,125,699
114,800 Dyax Corp.*.................... 828,856
113,700 Inspire Pharmaceuticals,
Inc.*(d)..................... 1,906,749
116,900 Isolagen, Inc.*(d)............. 920,003
37,600 Medicis Pharmaceuticals
Corp. -- Class A............. 1,320,136
53,400 MGI Pharma, Inc.*(d)........... 1,495,734
95,000 Nektar Therapeutics*........... 1,922,800
101,400 POZEN, Inc.*................... 737,178
46,600 United Therapeutics
Corp.*(d).................... 2,103,990
------------
14,361,145
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.8%
32,300 RAIT Investment Trust.......... 903,431
------------
RESEARCH AND DEVELOPMENT -- 6.3%
46,600 Digene Corp.*.................. 1,218,590
139,900 Pain Therapeutics, Inc.*(d).... 1,008,679
95,600 Protein Design Labs,
Inc.*(d)..................... 1,975,096
39,900 Rigel Pharmaceuticals, Inc.*... 974,358
64,700 Transkaryotic Therapies,
Inc.*........................ 1,642,733
------------
6,819,456
------------
RETAIL -- 9.3%
26,100 America's Car-Mart, Inc.*...... 991,800
45,000 Build-A-Bear-Workshop, Inc.*... 1,581,750
72,100 First Cash Financial Services,
Inc.*........................ 1,925,791
32,400 Guitar Center, Inc.*........... 1,707,156
</Table>
See notes to financial statements.
125
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
25,800 Tractor Supply Company*........ $ 960,018
66,700 Urban Outfitters, Inc.*........ 2,961,480
------------
10,127,995
------------
RETAIL: RESTAURANTS -- 4.4%
40,700 RARE Hospitality International,
Inc.*........................ 1,296,702
57,000 Sonic Corp.*................... 1,738,500
52,050 The Cheesecake Factory,
Inc.*(d)..................... 1,690,064
------------
4,725,266
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 2.6%
44,600 Cymer, Inc.*(d)................ 1,317,484
37,600 Varian, Inc.*.................. 1,541,976
------------
2,859,460
------------
SECURITY SERVICES -- 0.4%
54,000 Identix, Inc.*................. 398,520
------------
SEMICONDUCTORS -- 6.3%
147,300 O2Micro International, Ltd.*... 1,685,112
54,400 Power Integrations, Inc.*(d)... 1,076,032
223,500 Skyworks Solutions, Inc.*(d)... 2,107,605
51,500 Tessera Technologies, Inc.*.... 1,916,315
------------
6,785,064
------------
SPORTING GOODS AND EQUIPMENT -- 2.0%
81,575 Hibbett Sporting Goods,
Inc.*........................ 2,170,711
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.3%
12,400 InPhonic, Inc.*................ 340,752
------------
TRANSPORTATION -- 2.6%
64,350 Knight Transportation, Inc. ... 1,595,880
34,900 Old Dominion Freight Line,
Inc.*........................ 1,214,520
------------
2,810,400
------------
TOTAL COMMON STOCKS (Cost
$92,094,885)................. 106,592,532
------------
<Caption>
PRINCIPAL VALUE
--------- ------------
SECURITIES LENDING COLLATERAL -- 28.9%
$31,366,433 Securities Lending Collateral
Investment (Note 4)
(Cost $31,366,433)........... $ 31,366,433
------------
TOTAL SECURITIES
(Cost $123,461,318).......... 137,958,965
------------
REPURCHASE AGREEMENTS -- 1.8%
1,887,631 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase proceeds
at maturity $1,887,927
(Collateralized by Small
Business Administration,
6.13%, due 06/25/14, with a
value of $1,982,013) (Cost
$1,887,631).................. 1,887,631
------------
Total Investments -- 129.0%
(Cost $125,348,949).......... 139,846,596
Liabilities less other
assets -- (29.0)%............ (31,417,444)
------------
NET ASSETS -- 100.0%........... $108,429,152
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $125,815,650.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $18,791,893
Gross unrealized depreciation........... (4,760,947)
-----------
Net unrealized appreciation............. $14,030,946
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
126
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 99.7%
ADVERTISING -- 0.9%
42,000 Omnicom Group, Inc.(d)......... $ 3,541,440
------------
AGRICULTURE -- 1.7%
123,100 Monsanto Company............... 6,838,205
------------
APPAREL: MANUFACTURING -- 2.1%
146,800 Coach, Inc.*................... 8,279,520
------------
APPAREL: RETAIL -- 1.8%
156,000 Chico's FAS, Inc.*(d).......... 7,102,680
------------
BROADCAST SERVICES/MEDIA -- 1.2%
244,880 News Corp. -- Class B(d)....... 4,701,696
------------
BUSINESS SERVICES AND SUPPLIES -- 3.1%
122,440 Alliance Data Systems Corp.*... 5,813,451
194,080 Paychex, Inc. ................. 6,614,247
------------
12,427,698
------------
COMPUTER SOFTWARE AND SERVICES -- 2.3%
127,950 Cognizant Technology Solutions
Corp. -- Class A*............ 5,416,124
146,940 Microsoft Corp.(d)............. 3,924,767
------------
9,340,891
------------
COMPUTERS AND OFFICE EQUIPMENT -- 9.8%
107,420 Apple Computer, Inc.*.......... 6,917,848
318,400 Dell, Inc.*.................... 13,417,376
697,800 EMC Corp. (Massachusetts)*..... 10,376,286
1,559,110 Sun Microsystems, Inc.*........ 8,388,012
------------
39,099,522
------------
DISTRIBUTION -- 1.6%
93,900 CDW Corp. ..................... 6,230,265
------------
ELECTRONICS -- 5.8%
266,990 Advanced Micro Devices,
Inc.*(d)..................... 5,879,120
44,740 Harman International
Industries, Inc. ............ 5,681,980
68,810 Research In Motion, Ltd.*...... 5,671,320
668,800 Sanmina-SCI Corp.*............. 5,664,736
------------
22,897,156
------------
FINANCIAL SERVICES -- 7.6%
123,500 American Express Company....... 6,961,695
335,000 Ameritrade Holding Corp.*...... 4,763,700
461,370 Charles Schwab Corp. .......... 5,517,985
71,660 Goldman Sachs Group, Inc. ..... 7,455,507
87,100 T. Rowe Price Group, Inc. ..... 5,417,620
------------
30,116,507
------------
FOOD AND BEVERAGE -- 1.9%
342,220 Archer-Daniels-Midland
Company...................... 7,634,928
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES -- 13.8%
154,000 CheckFree Corp.*(d)............ $ 5,864,320
621,060 Cisco Systems, Inc.*........... 11,986,457
78,490 eBay, Inc.*.................... 9,126,817
46,500 Google, Inc. -- Class A*(d).... 8,979,150
243,910 Juniper Networks, Inc.*........ 6,631,913
127,330 VeriSign, Inc.*................ 4,268,102
207,790 YAHOO!, Inc.*.................. 7,829,527
------------
54,686,286
------------
LEISURE AND RECREATION -- 4.1%
84,210 DreamWorks Animation SKG,
Inc. -- Class A*............. 3,158,717
146,390 International Game
Technology................... 5,032,888
111,300 MGM MIRAGE*.................... 8,095,962
------------
16,287,567
------------
MACHINERY -- 3.4%
83,740 Caterpillar, Inc. ............. 8,165,487
109,340 Rockwell Automation, Inc. ..... 5,417,797
------------
13,583,284
------------
MANUFACTURING -- 3.1%
98,180 Danaher Corp. ................. 5,636,514
186,100 Tyco International, Ltd. ...... 6,651,214
------------
12,287,728
------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.9%
30,650 WellPoint, Inc.*............... 3,524,750
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 5.0%
82,660 CR Bard, Inc. ................. 5,288,587
187,780 St. Jude Medical, Inc.*........ 7,873,616
83,520 Zimmer Holdings, Inc.*......... 6,691,622
------------
19,853,825
------------
METALS AND MINING -- 1.2%
158,500 Companhia Vale do Rio Doce
(CVRD) (ADR)(d).............. 4,598,085
------------
OIL, COAL AND GAS -- 1.7%
135,480 Apache Corp. .................. 6,851,224
------------
PHARMACEUTICALS -- 3.3%
202,450 Caremark Rx, Inc.*............. 7,982,603
125,750 Sanofi-Aventis (ADR)........... 5,036,288
------------
13,018,891
------------
RESEARCH AND DEVELOPMENT -- 4.9%
62,500 Amgen, Inc.*................... 4,009,375
118,850 Biogen Idec, Inc.*............. 7,916,599
214,460 Gilead Sciences, Inc.*......... 7,503,955
------------
19,429,929
------------
</Table>
See notes to financial statements.
127
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL -- 2.8%
106,730 Best Buy Company, Inc. ........ $ 6,341,896
137,790 Williams-Sonoma, Inc.*(d)...... 4,828,162
------------
11,170,058
------------
RETAIL: RESTAURANTS -- 2.5%
63,770 Starbucks Corp.*............... 3,976,697
130,600 YUM! Brands, Inc. ............. 6,161,708
------------
10,138,405
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 2.8%
92,830 Fisher Scientific
International, Inc.*......... 5,790,735
115,630 Waters Corp.*.................. 5,410,328
------------
11,201,063
------------
SEMICONDUCTORS -- 8.9%
324,510 Applied Materials, Inc.*....... 5,549,121
400,000 ASML Holding NV*............... 6,364,000
178,780 Marvell Technology Group,
Ltd.*........................ 6,341,327
404,070 Texas Instruments, Inc. ....... 9,948,203
241,930 Xilinx, Inc. .................. 7,173,225
------------
35,375,876
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.5%
115,680 America Movil SA de CV --
Series L (ADR)............... 6,055,848
------------
TOTAL COMMON STOCKS
(Cost $342,446,667).......... 396,273,327
------------
<Caption>
PRINCIPAL VALUE
--------- ------------
SECURITIES LENDING COLLATERAL -- 10.6%
$42,298,930 Securities Lending Collateral
Investment (Note 4)
(Cost $42,298,930)........... $ 42,298,930
------------
Total Investments -- 110.3%
(Cost $384,745,597).......... 438,572,257
Liabilities less other
assets -- (10.3)%............ (40,845,390)
------------
NET ASSETS -- 100.0%........... $397,726,867
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $385,186,143.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $54,587,628
Gross unrealized depreciation........... (1,201,514)
-----------
Net unrealized appreciation............. $53,386,114
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
128
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 91.5%
ADVERTISING -- 0.8%
$ 1,370,000 Advanstar Communications, Inc.,
10.75%, 08/15/10............. $ 1,553,237
585,000 Vertis, Inc. -- 144A,
13.50%, 12/07/09............. 619,369
455,000 WDAC Subsidiary Corp. -- 144A,
8.38%, 12/01/14.............. 451,019
------------
2,623,625
------------
AEROSPACE AND DEFENSE -- 0.3%
395,000 Argo-Tech Corp.,
9.25%, 06/01/11.............. 435,488
415,000 Armor Holdings, Inc.,
8.25%, 08/15/13.............. 466,874
210,000 B/E Aerospace, Series B,
8.00%, 03/01/08.............. 211,313
------------
1,113,675
------------
AGRICULTURAL EQUIPMENT -- 0.2%
755,000 Case New Holland, Inc. -- 144A,
9.25%, 08/01/11.............. 843,713
------------
AIRLINES -- 1.8%
920,000 American Airlines, Inc.,
8.61%, 04/01/11.............. 847,118
1,700,000 American Airlines, Inc., Series
2001-2,
7.80%, 10/01/06.............. 1,557,098
295,000 American Airlines, Inc., Series
2001-2,
7.86%, 10/01/11.............. 305,073
1,505,000 AMR Corp.,
9.00%, 08/01/12.............. 1,219,050
125,000 Continental Airlines, Inc.,
8.00%, 12/15/05.............. 122,500
1,635,754 Continental Airlines, Inc.,
Series 2001-1,
7.03%, 06/15/11.............. 1,347,362
500,000 Delta Air Lines, Inc.,
7.90%, 12/15/09.............. 315,000
550,000 Delta Air Lines, Inc. -- 144A,
9.50%, 11/18/08.............. 512,875
45,000 Delta Air Lines, Inc., Series
2000-1,
7.78%, 11/18/05.............. 41,412
140,000 Northwest Airlines, Inc.,
8.88%, 06/01/06.............. 135,100
------------
6,402,588
------------
APPAREL: MANUFACTURING -- 2.6%
1,330,000 GFSI, Inc., Series B,
9.63%, 03/01/07.............. 1,296,750
885,000 Levi Strauss & Company,
7.00%, 11/01/06.............. 933,675
1,035,000 Levi Strauss & Company,
11.63%, 01/15/08............. 1,091,925
1,385,000 Oxford Industries, Inc.,
8.88%, 06/01/11.............. 1,494,069
2,300,000 Perry Ellis International,
Inc., Series B,
8.88%, 09/15/13.............. 2,426,500
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
APPAREL: MANUFACTURING (CONTINUED)
$ 310,000 Phillips Van-Heusen Corp.,
7.25%, 02/15/11.............. $ 327,050
620,000 Phillips Van-Heusen Corp.,
8.13%, 05/01/13.............. 675,800
875,000 William Carter, Series B,
10.88%, 08/15/11............. 984,375
------------
9,230,144
------------
APPAREL: RETAIL -- 0.0%
20,000 Mothers Work, Inc.,
11.25%, 08/01/10............. 19,500
------------
AUTOMOBILE: RENTAL -- 0.1%
330,000 Williams Scotsman, Inc.,
10.00%, 08/15/08............. 367,950
------------
AUTOMOTIVE EQUIPMENT -- 3.0%
2,540,000 Collins & Aikman Products
Company,
10.75%, 12/31/11............. 2,603,500
2,110,000 Collins & Aikman Products
Company, Series B,
9.75%, 02/15/10.............. 2,278,800
700,000 Dura Operating Corp., Series D,
9.00%, 05/01/09.............. 696,500
235,000 Keystone Automotive Operations,
Inc.,
9.75%, 11/01/13.............. 252,625
940,000 Metaldyne Corp.,
11.00%, 06/15/12............. 784,900
805,000 Metaldyne Corp. -- 144A,
10.00%, 11/01/13............. 768,775
365,000 Rexnord Corp.,
10.13%, 12/15/12............. 414,275
1,000,000 Tenneco Automotive,
Inc. -- 144A,
8.63%, 11/15/14.............. 1,045,000
945,000 Tenneco Automotive, Inc.,
Series B,
10.25%, 07/15/13............. 1,119,825
354,000 TRW Automotive, Inc.,
11.00%, 02/15/13............. 428,340
------------
10,392,540
------------
BROADCAST SERVICES/MEDIA -- 5.4%
1,595,000 Adelphia Communications,
10.25%, 11/01/06(h).......... 1,559,113
305,000 Adelphia Communications, Series
B,
9.25%, 10/01/02(h)(p)........ 293,563
1,975,000 Charter Communications Holdings
LLC,
10.25%, 01/15/10............. 1,742,938
285,000 Charter Communications Holdings
LLC,
10.00%, 05/15/11............. 245,100
1,740,000 Coleman Cable, Inc. -- 144A,
9.88%, 10/01/12.............. 1,857,450
2,175,000 CSC Holdings, Inc.,
10.50%, 05/15/16............. 2,479,499
</Table>
See notes to financial statements.
129
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 320,000 Fisher Communications, Inc. --
144A,
8.63%, 09/15/14.............. $ 347,200
3,810,000 Insight Communications Company,
Inc.,
zero coupon, 02/15/11(g)..... 3,724,274
1,820,000 Kabel Deutschland GMBH -- 144A
(Germany),
10.63%, 07/01/14............. 2,102,100
570,000 LBI Media, Inc.,
zero coupon, 10/15/13(g)..... 421,800
100,000 Nexstar Financial Holdings LLC,
Inc.,
12.00%, 04/01/08............. 108,500
1,655,000 Nexstar Financial Holdings LLC,
Inc.,
zero coupon, 04/01/13(g)..... 1,315,725
360,000 Nextmedia Operating, Inc.,
10.75%, 07/01/11............. 405,000
430,000 ONO Finance PLC (Great
Britain),
14.00%, 02/15/11(j)(q)....... 697,968
900,000 ONO Finance PLC, (Great
Britain),
14.00%, 02/15/11............. 1,039,500
190,000 Paxson Communications,
zero coupon, 01/15/09(g)..... 178,600
535,000 Rogers Cable, Inc. -- 144A,
(Canada),
6.75%, 03/15/15.............. 549,713
------------
19,068,043
------------
BUSINESS SERVICES AND SUPPLIES -- 0.9%
875,000 Affinity Group, Inc.,
9.00%, 02/15/12.............. 951,563
2,010,000 Quintiles Transnational Corp.,
10.00%, 10/01/13............. 2,261,250
------------
3,212,813
------------
CHEMICALS -- 7.2%
260,000 Acetex Corp. (Canada),
10.88%, 08/01/09............. 284,050
405,000 Avecia Group PLC (Great
Britain),
11.00%, 07/01/09............. 419,175
365,000 Crown Euro Holdings SA
(France),
9.50%, 03/01/11.............. 417,925
1,990,000 Crown Euro Holdings SA
(France),
10.88%, 03/01/13............. 2,363,125
655,000 Equistar Chemical/Funding,
10.63%, 05/01/11............. 763,075
720,000 Hercules, Inc.,
11.13%, 11/15/07............. 860,400
140,000 Huntsman Advanced Materials --
144A,
11.00%, 07/15/10............. 167,300
1,685,000 Huntsman LLC,
11.63%, 10/15/10............. 2,000,938
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CHEMICALS (CONTINUED)
$ 760,000 IMC Global, Inc.,
10.88%, 08/01/13............. $ 953,800
1,675,000 IMC Global, Inc., Series B,
11.25%, 06/01/11............. 1,943,000
335,000 Innophos, Inc. -- 144A,
8.88%, 08/15/14.............. 363,475
120,000 Lyondell Chemical Company,
9.50%, 12/15/08.............. 130,800
320,000 Lyondell Chemical Company,
11.13%, 07/15/12............. 381,600
1,661,000 Lyondell Chemical Company,
10.50%, 06/01/13............. 1,984,895
695,000 Lyondell Chemical Company,
Series A,
9.63%, 05/01/07.............. 767,975
2,408,000 Nalco Company,
8.88%, 11/15/13.............. 2,654,820
2,150,000 OM Group, Inc.,
9.25%, 12/15/11.............. 2,300,500
770,000 PolyOne Corp.,
8.88%, 05/01/12.............. 841,225
2,510,000 Rhodia SA (France),
10.25%, 06/01/10............. 2,836,299
1,575,000 Rockwood Specialties Corp.,
10.63%, 05/15/11............. 1,819,125
1,455,000 UAP Holding Corp. -- 144A,
zero coupon, 07/15/12(g)..... 1,149,450
------------
25,402,952
------------
COMMERCIAL SERVICES -- 0.1%
151,000 Coinmach Corp.,
9.00%, 02/01/10.............. 158,550
------------
COMPUTER SOFTWARE AND SERVICES -- 0.3%
610,000 Danka Business Systems (Great
Britain),
11.00%, 06/15/10............. 649,650
360,000 Stratus Technologies, Inc.,
10.38%, 12/01/08............. 326,700
------------
976,350
------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.8%
1,800,000 Interface, Inc.,
10.38%, 02/01/10............. 2,079,000
170,000 Interface, Inc.,
9.50%, 02/01/14.............. 186,150
325,000 Xerox Corp.,
9.75%, 01/15/09.............. 383,500
10,000 Xerox Corp.,
7.13%, 06/15/10.............. 10,850
------------
2,659,500
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.3%
1,140,000 Dayton Superior Corp.,
10.75%, 09/15/08............. 1,225,500
515,000 Owens Corning,
7.70%, 05/01/08(h)........... 419,725
560,000 Owens Corning,
7.50%, 08/01/18(h)........... 460,600
</Table>
See notes to financial statements.
130
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES
(CONTINUED)
$ 695,000 Ply Gem Industries, Inc.,
9.00%, 02/15/12.............. $ 708,900
540,000 Ply Gem Industries,
Inc. -- 144A,
9.00%, 02/15/12.............. 550,800
1,100,000 RMCC Acquisition Company --
144A,
9.50%, 11/01/12.............. 1,102,750
------------
4,468,275
------------
CONSUMER GOODS AND SERVICES -- 0.6%
695,000 Fedders North America,
9.88%, 03/01/14.............. 569,900
515,000 Home Interiors & Gifts,
10.13%, 06/01/08............. 427,450
295,000 Jostens Holding Corp.,
zero coupon, 12/01/13(g)..... 210,925
215,000 Mobile Mini, Inc.,
9.50%, 07/01/13.............. 251,550
505,000 WH Holdings, Ltd. (Cayman
Islands)/WH Capital Corp.,
9.50%, 04/01/11.............. 558,025
------------
2,017,850
------------
CONTAINERS AND PACKAGING -- 2.5%
240,000 Hexcel Corp.,
9.88%, 10/01/08.............. 267,600
155,000 Hexcel Corp.,
9.75%, 01/15/09.............. 161,975
995,000 Intertape Polymer US, Inc. --
144A (Canada),
8.50%, 08/01/14.............. 1,016,144
300,000 Kappa Beheer BV (The
Netherlands),
10.63%, 07/15/09............. 319,500
430,000 Owens-Illinois, Inc.,
8.10%, 05/15/07.............. 460,100
1,185,000 Plastipak Holdings, Inc.,
10.75%, 09/01/11............. 1,339,050
950,000 Pliant Corp.,
zero coupon, 06/15/09(g)..... 882,313
1,325,000 Pliant Corp.,
11.13%, 09/01/09............. 1,450,874
640,000 Smurfit-Stone Container Corp.,
8.25%, 10/01/12.............. 700,800
1,250,000 Stone Container Finance Company
of Canada (Canada),
7.38%, 07/15/14.............. 1,337,500
415,000 Tekni-Plex, Inc. -- 144A,
8.75%, 11/15/13.............. 415,000
235,000 US Can Corp.,
10.88%, 07/15/10............. 250,275
------------
8,601,131
------------
DISTRIBUTION -- 0.2%
485,000 Jafra Cosmetics International,
10.75%, 05/15/11............. 550,475
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRONICS -- 0.3%
$ 775,000 Muzak LLC,
10.00%, 02/15/09............. $ 725,593
530,000 Muzak LLC,
9.88%, 03/15/09.............. 372,988
------------
1,098,581
------------
ENGINEERING -- 0.2%
740,000 The Shaw Group, Inc.,
10.75%, 03/15/10............. 819,550
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 2.0%
1,500,000 Allied Waste North America,
Inc., Series B,
8.88%, 04/01/08.............. 1,612,500
455,000 Allied Waste North America,
Inc., Series B,
9.25%, 09/01/12.............. 494,813
340,000 IMCO Recycling, Inc. -- 144A,
9.00%, 11/15/14.............. 355,300
1,855,000 Synagro Technologies, Inc.,
9.50%, 04/01/09.............. 2,031,225
2,700,000 Waste Services, Inc. -- 144A
(Canada),
9.50%, 04/15/14.............. 2,700,000
------------
7,193,838
------------
EQUIPMENT RENTAL AND LEASING -- 0.6%
1,070,000 Amerco,
9.00%, 03/15/09.............. 1,139,550
235,000 United Rentals North America,
Inc.,
6.50%, 02/15/12.............. 230,300
685,000 United Rentals North America,
Inc.,
7.00%, 02/15/14.............. 643,900
------------
2,013,750
------------
FINANCIAL SERVICES -- 2.5%
475,000 Alamosa Delaware, Inc.,
zero coupon, 07/31/09(g)..... 517,750
715,000 Alamosa Delaware, Inc.,
11.00%, 07/31/10............. 845,488
80,000 Alamosa Delaware, Inc.,
8.50%, 01/31/12.............. 87,800
2,055,000 BCP Caylux Holdings Luxembourg
SCA -- 144A (Luxembourg),
9.63%, 06/15/14.............. 2,327,287
1,200,000 E*TRADE Financial Corp. --
144A,
8.00%, 06/15/11.............. 1,296,000
1,335,000 REFCO Finance Holdings -- 144A,
9.00%, 08/01/12.............. 1,468,500
1,920,000 Trump Holdings & Funding,
12.63%, 03/15/10............. 2,088,000
------------
8,630,825
------------
</Table>
See notes to financial statements.
131
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FOOD AND BEVERAGE -- 1.1%
$ 1,130,000 American Seafood Group LLC,
10.13%, 04/15/10............. $ 1,214,750
985,000 Pierre Foods, Inc. -- 144A,
9.88%, 07/15/12.............. 1,024,400
1,355,000 Pinnacle Foods Holding Corp. --
144A,
8.25%, 12/01/13.............. 1,297,412
357,000 United Agriculture Products --
144A,
8.25%, 12/15/11.............. 384,668
------------
3,921,230
------------
FUNERAL SERVICES -- 0.1%
330,000 Alderwoods Group, Inc. -- 144A,
7.75%, 09/15/12.............. 358,050
------------
LEISURE AND RECREATION -- 6.2%
700,000 AMC Entertainment, Inc.,
9.88%, 02/01/12.............. 766,500
350,000 Ameristar Casinos, Inc.,
10.75%, 02/15/09............. 392,000
215,000 Hollywood Casino Shreveport,
13.00%, 08/01/06(h).......... 183,019
2,025,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 2,379,374
1,890,000 Kerzner International (Bahama
Islands),
8.88%, 08/15/11.............. 2,074,274
995,000 LCE Acquisition Corp. -- 144A,
9.00%, 08/01/14.............. 1,082,063
1,460,000 Majestic Star Casino LLC,
9.50%, 10/15/10.............. 1,554,900
1,810,000 Marquee Holdings, Inc. -- 144A,
zero coupon, 08/15/14(g)..... 1,230,800
335,000 MGM MIRAGE,
6.88%, 02/06/08.............. 364,313
1,030,000 OED Corp./Diamond JO,
8.75%, 04/15/12.............. 1,014,550
960,000 Penn National Gaming, Inc.,
Series B,
11.13%, 03/01/08............. 1,029,600
120,000 Premier Entertainment LLC
(Biloxi) Financial,
10.75%, 02/01/12............. 131,700
1,420,000 Royal Caribbean Cruises, Ltd.
(Liberia),
8.75%, 02/02/11.............. 1,684,475
390,000 Royal Caribbean Cruises, Ltd.,
7.25%, 03/15/18.............. 430,950
680,000 Seneca Gaming Corp.,
7.25%, 05/01/12.............. 719,100
1,745,000 Trump Atlantic City
Association/Funding, Inc.,
11.25%, 05/01/06(h).......... 1,673,019
1,785,000 Venetian Casino Resort/Las
Vegas Sands,
11.00%, 06/15/10............. 2,046,056
1,882,000 Waterford Gaming LLC -- 144A,
8.63%, 09/15/12.............. 2,023,150
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
$ 1,005,000 WMG Holdings Corp. -- 144A,
Floating Rate,
6.91%, 12/15/11(b)........... $ 1,017,563
------------
21,797,406
------------
MACHINERY -- 1.4%
635,000 Dresser-Rand Group,
Inc. -- 144A,
7.38%, 11/01/14.............. 650,875
725,000 Flowserve Corp.,
12.25%, 08/15/10............. 804,750
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............. 542,850
1,570,000 Thermadyne Holdings Corp.,
9.25%, 02/01/14.............. 1,538,600
------------
4,915,200
------------
MANUFACTURING -- 2.3%
455,000 Aearo Company I,
8.25%, 04/15/12.............. 470,925
800,000 Amsted Industries,
Inc. -- 144A,
10.25%, 10/15/11............. 908,000
3,585,000 Dresser, Inc.,
9.38%, 04/15/11.............. 3,943,500
515,000 Goodman Global Holding
Company -- 144A, Floating
Rate,
5.76%, 06/15/12(n)........... 525,300
15,000 Koppers, Inc.,
9.88%, 10/15/13.............. 17,175
720,000 MAAX Corp. -- 144A (Canada),
9.75%, 06/15/12.............. 765,000
180,000 Rayovac Corp.,
8.50%, 10/01/13.............. 200,700
975,000 Samsonite Corp.,
8.88%, 06/01/11.............. 1,060,313
720,000 Venture Holdings Trust, Series
B,
9.50%, 07/01/05(h)........... 32,400
------------
7,923,313
------------
MEDICAL AND OTHER HEALTH SERVICES -- 3.3%
870,000 Ardent Health Services,
10.00%, 08/15/13............. 917,850
270,000 Concentra Operating Corp.,
9.50%, 08/15/10.............. 306,450
665,000 HCA, Inc.,
5.50%, 12/01/09.............. 665,924
1,690,000 HEALTHSOUTH Corp.,
8.38%, 10/01/11.............. 1,761,825
985,000 HEALTHSOUTH Corp.,
7.63%, 06/01/12.............. 994,850
527,609 Magellan Health Services, Inc.,
Series A,
9.38%, 11/15/08.............. 577,072
405,000 National Mentor, Inc. -- 144A,
9.63%, 12/01/12.............. 432,338
</Table>
See notes to financial statements.
132
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES (CONTINUED)
$ 455,000 National Nephrology
Association -- 144A,
9.00%, 11/01/11.............. $ 528,938
670,000 Pacificare Health Systems,
Inc.,
10.75%, 06/01/09............. 777,200
2,155,000 Tenet Healthcare Corp. -- 144A,
9.88%, 07/01/14.............. 2,359,724
670,000 US Oncology, Inc. -- 144A,
9.00%, 08/15/12.............. 752,075
1,345,000 US Oncology, Inc. -- 144A,
10.75%, 08/15/14............. 1,563,563
------------
11,637,809
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 1.8%
1,345,000 CDRV Investors, Inc. -- 144A,
zero coupon, 01/01/15(g)..... 842,306
870,000 Inverness Medical Innovations,
Inc. -- 144A,
8.75%, 02/15/12.............. 913,500
710,000 Medical Device Manufacture,
Inc. -- 144A,
10.00%, 07/15/12............. 768,575
1,375,000 Medquest, Inc., Series B,
11.88%, 08/15/12............. 1,622,500
1,010,000 Norcross Safety Products LLC --
Series B,
9.88%, 08/15/11.............. 1,121,100
175,000 Rotech Healthcare, Inc.,
9.50%, 04/01/12.............. 193,375
885,000 VWR International,
Inc. -- 144A,
8.00%, 04/15/14.............. 949,163
------------
6,410,519
------------
METALS AND MINING -- 1.5%
1,349,000 Ispat Inland ULC,
9.75%, 04/01/14.............. 1,672,760
1,635,000 Mueller Group, Inc.,
10.00%, 05/01/12............. 1,790,325
750,000 Mueller Holdings (NA), Inc.,
zero coupon, 04/15/14(g)..... 517,500
375,000 Oregon Steel Mills, Inc.,
10.00%, 07/15/09............. 419,063
745,000 Ryerson Tull, Inc. -- 144A,
8.25%, 12/15/11.............. 756,175
------------
5,155,823
------------
OIL AND GAS: PIPELINES -- 2.3%
365,000 ANR Pipeline Company,
8.88%, 03/15/10.............. 410,625
760,000 Dynegy Holdings, Inc.,
7.63%, 10/15/26.............. 664,050
2,675,000 Dynegy Holdings, Inc. -- 144A,
10.13%, 07/15/13............. 3,076,250
110,000 El Paso CGP Company,
7.50%, 08/15/06.............. 116,875
740,000 El Paso CGP Company,
9.63%, 05/15/12.............. 825,100
205,000 El Paso Corp.,
7.00%, 05/15/11.............. 208,331
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES (CONTINUED)
$ 625,000 El Paso Corp., Series MTN,
6.95%, 12/15/07.............. $ 657,813
380,000 Northwest Pipeline Corp.,
8.13%, 03/01/10.............. 422,275
275,000 Southern Natural Gas Company,
8.88%, 03/15/10.............. 309,375
1,345,000 Transmontaigne, Inc.,
9.13%, 06/01/10.............. 1,466,050
------------
8,156,744
------------
OIL, COAL AND GAS -- 3.1%
415,000 Alpha Natural
Resources -- 144A,
10.00%, 06/01/12............. 475,175
715,000 El Paso Production Holding
Company,
7.75%, 06/01/13.............. 752,538
695,000 Giant Industries, Inc.,
8.00%, 05/15/14.............. 729,750
1,875,000 Hanover Compressor Company,
zero coupon, 03/31/07(g)..... 1,640,624
355,000 Hanover Compressor Company,
8.63%, 12/15/10.............. 389,613
525,000 Parker Drilling Company,
9.63%, 10/01/13.............. 591,938
1,125,000 Petrobras International Finance
(Cayman Islands),
9.13%, 07/02/13.............. 1,282,500
175,000 Petrobras International Finance
(Cayman Islands),
7.75%, 09/15/14.............. 184,844
1,586,200 Port Arthur Finance Corp.,
12.50%, 01/15/09............. 1,863,784
295,000 Premcor Refining Group,
7.75%, 02/01/12.............. 326,713
440,000 Ram Energy, Inc.,
11.50%, 02/15/08............. 451,000
1,295,000 Sesi LLC,
8.88%, 05/15/11.............. 1,424,500
750,000 United Refining
Company -- 144A,
10.50%, 08/15/12............. 796,875
------------
10,909,854
------------
PAPER AND FOREST PRODUCTS -- 3.0%
470,000 Boise Cascade LLC -- 144A,
Floating Rate,
5.01%, 10/15/12(b)........... 489,975
1,415,000 Caraustar Industries, Inc.,
9.88%, 04/01/11.............. 1,542,350
1,185,000 Georgia-Pacific Corp.,
9.50%, 12/01/11.............. 1,466,438
1,385,000 Georgia-Pacific Corp.,
9.38%, 02/01/13.............. 1,620,450
525,000 Longview Fibre Company,
10.00%, 01/15/09............. 576,188
350,000 Neenah Paper, Inc. -- 144A,
7.38%, 11/15/14.............. 357,000
</Table>
See notes to financial statements.
133
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PAPER AND FOREST PRODUCTS (CONTINUED)
$ 1,100,000 Newark Group, Inc.,
9.75%, 03/15/14.............. $ 1,177,000
3,300,000 Tembec Industries, Inc.
(Canada),
8.50%, 02/01/11.............. 3,332,999
------------
10,562,400
------------
PHARMACEUTICALS -- 0.4%
1,270,000 Elan Finance PLC/Elan Finance
Corp. -- 144A (Brazil),
7.75%, 11/15/11.............. 1,358,900
------------
PRINTING AND PUBLISHING -- 5.7%
270,000 Advertising Directory
Solutions -- 144A,
9.25%, 11/15/12.............. 284,850
3,535,000 American Media Operation,
Series B,
10.25%, 05/01/09............. 3,742,680
1,195,000 CanWest Media, Inc. (Canada),
10.63%, 05/15/11............. 1,347,363
2,281,634 CanWest Media, Inc. -- 144A
(Canada),
8.00%, 09/15/12.............. 2,458,461
410,000 CBD Media LLC/CBD Finance,
Inc.,
8.63%, 06/01/11.............. 435,625
245,000 Dex Media East LLC,
9.88%, 11/15/09.............. 280,219
1,481,000 Dex Media West Finance Company,
Series B,
9.88%, 08/15/13.............. 1,714,258
1,850,000 Houghton Mifflin Company,
8.25%, 02/01/11.............. 1,979,500
1,680,000 Houghton Mifflin Company,
9.88%, 02/01/13.............. 1,848,000
835,000 Liberty Group Operating,
9.38%, 02/01/08.............. 851,700
101,310 Merrill Corp., Series A,
Variable Rate,
12.00%, 05/01/09(a).......... 107,895
185,000 Merrill Corp., Series B,
Variable Rate,
12.00%, 05/01/09(a).......... 197,025
3,615,000 Primedia, Inc.,
8.88%, 05/15/11.............. 3,840,937
1,000,000 Primedia, Inc., Floating Rate,
7.67%, 05/15/10(b)........... 1,065,000
------------
20,153,513
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.3%
315,000 CB Richard Ellis Services,
Inc.,
9.75%, 05/15/10.............. 360,675
500,000 CB Richard Ellis Services,
Inc.,
11.25%, 06/15/11............. 577,500
------------
938,175
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS -- 0.6%
$ 350,000 FelCor Lodging LP, Floating
Rate,
6.87%, 06/01/11(n)........... $ 369,250
150,000 Host Marriott LP, Series I,
9.50%, 01/15/07.............. 165,000
1,295,000 Meristar Hospitality Operating
Partnership LP/ MeriStar
Hospitality Finance Corp.,
10.50%, 06/15/09............. 1,418,025
310,000 Omega Healthcare Investors,
Inc.,
7.00%, 04/01/14.............. 320,075
------------
2,272,350
------------
RETAIL -- 0.1%
430,000 General Nutrition Centers,
Inc.,
8.50%, 12/01/10.............. 408,500
------------
RUBBER PRODUCTS -- 0.1%
505,000 Cooper-Standard Automotive,
Inc. -- 144A,
7.00%, 12/15/12.............. 515,100
------------
SECURITY SERVICES -- 0.0%
135,000 Allied Security, Inc. -- 144A,
11.38%, 07/15/11............. 141,750
------------
SEMICONDUCTORS -- 2.0%
2,495,000 Advanced Micro Devices, Inc. --
144A,
7.75%, 11/01/12.............. 2,610,394
724,000 AMI Semiconductor, Inc.,
10.75%, 02/01/13............. 854,320
265,000 Amkor Technologies, Inc.,
7.13%, 03/15/11.............. 250,425
2,915,000 Amkor Technologies, Inc.,
7.75%, 05/15/13.............. 2,754,675
730,000 STATS ChipPAC, Ltd. -- 144A
(Singapore),
6.75%, 11/15/11.............. 726,350
------------
7,196,164
------------
SPECIAL PURPOSE ENTITY -- 6.9%
345,000 Affinia Group, Inc. -- 144A,
9.00%, 11/30/14.............. 361,388
215,000 Altra Industrial Motion,
Inc. -- 144A,
9.00%, 12/01/11.............. 219,300
1,310,000 ASG Consolidated LLC/Finance,
Inc. -- 144A,
zero coupon, 11/01/11(g)..... 841,675
455,000 Aventine Renewable Energy,
Inc. -- 144A, Floating Rate,
8.50%, 12/15/11(b)........... 461,825
535,000 Borden US Finance/Nova
Scotia -- 144A,
9.00%, 07/15/14.............. 596,525
953,672 Caithness Coso Funding Corp.,
Series B,
9.05%, 12/15/09.............. 1,053,808
1,375,000 Chukchansi Economic Development
Authority -- 144A,
14.50%, 06/15/09............. 1,739,375
</Table>
See notes to financial statements.
134
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY (CONTINUED)
$ 1,625,000 Crystal US Holdings 3 LLC/
Crystal US Sub3
Corp. -- 144A,
zero coupon, 10/01/14(g)..... $ 1,121,250
990,000 Harvest Operations
Corp. -- 144A,
7.88%, 10/15/11.............. 1,002,375
1,035,000 Interline Brands, Inc.,
11.50%, 05/15/11............. 1,169,550
1,350,000 MDP Acquisitions PLC (Ireland),
9.63%, 10/01/12.............. 1,512,000
1,750,000 Milacron Escrow Corp.,
11.50%, 05/15/11............. 1,863,750
370,000 NSP Holdings/Cap Corp. -- 144A,
11.75%, 01/01/12(o).......... 375,550
740,000 PCA LLC/PCA Finance Corp.,
11.88%, 08/01/09............. 654,900
555,000 Rainbow National Services
LLC -- 144A,
8.75%, 09/01/12.............. 611,888
2,155,000 Rainbow National Services
LLC -- 144A,
10.38%, 09/01/14............. 2,440,537
135,000 Riddell Bell Holdings, Inc. --
144A,
8.38%, 10/01/12.............. 140,400
230,000 Standard Aero Holdings, Inc. --
144A,
8.25%, 09/01/14.............. 249,550
2,550,000 UGS Corp. -- 144A,
10.00%, 06/01/12............. 2,913,374
2,060,000 Universal City Development
Partners, Ltd.,
11.75%, 04/01/10............. 2,443,674
300,000 Universal City Florida -- 144A,
8.38%, 05/01/10.............. 312,750
595,000 Universal City Florida -- 144A,
Floating Rate,
7.20%, 05/01/10(b)........... 621,775
1,530,000 Vanguard Health Holding Company
II LLC -- 144A,
9.00%, 10/01/14.............. 1,644,750
------------
24,351,969
------------
SPORTING GOODS AND EQUIPMENT -- 0.0%
185,000 True Temper Sports, Inc.,
8.38%, 09/15/11.............. 172,975
------------
SYNDICATED BANK LOANS -- 0.1%
500,000 Mirant Corp.,
8.63%, 07/17/49(h)........... 355,250
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 9.5%
345,000 AirGate PCS, Inc. -- 144A,
Floating Rate,
5.85%, 10/15/11(b)........... 356,213
125,000 American Tower Corp.,
9.38%, 02/01/09.............. 132,813
2,785,000 Centennial
Cellular/Communications,
10.13%, 06/15/13............. 3,140,087
505,000 Centennial Communications,
10.75%, 12/15/08............. 526,463
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 190,000 Crown Castle International
Corp.,
10.75%, 08/01/11............. $ 207,100
355,000 General Cable Corp.,
9.50%, 11/15/10.............. 402,925
1,310,000 Inmarsat Finance PLC (Great
Britain),
7.63%, 06/30/12.............. 1,368,950
1,000,000 Intelsat, Ltd.,
7.63%, 04/15/12.............. 973,836
185,000 IWO Escrow Company -- 144A,
Floating Rate,
6.32%, 01/15/12(b)........... 187,313
1,000,000 IWO Holdings, Inc.,
14.00%, 01/15/11(h).......... 655,000
2,620,000 LCI International, Inc.,
7.25%, 06/15/07.............. 2,561,049
855,000 New Skies Satellites NV -- 144A
(The Netherlands),
9.13%, 11/01/12.............. 876,375
645,000 New Skies Satellites NV -- 144A
(The Netherlands),
Floating Rate,
7.44%, 11/01/11(n)........... 667,575
450,000 Nextel Communications,
7.38%, 08/01/15.............. 497,250
875,000 Nextel Partners, Inc.,
12.50%, 11/15/09............. 995,313
4,200,000 Nortel Networks Corp. (Canada),
4.25%, 09/01/08.............. 4,105,499
675,000 Nortel Networks, Ltd.,
6.13%, 02/15/06.............. 690,188
2,005,000 PanAmSat Corp. -- 144A,
9.00%, 08/15/14.............. 2,248,105
285,000 Qwest Capital Funding, Inc.,
7.75%, 08/15/06.............. 301,388
290,000 Qwest Capital Funding, Inc.,
7.00%, 08/03/09.............. 287,825
315,000 Qwest Capital Funding, Inc.,
7.90%, 08/15/10.............. 319,725
110,000 Qwest Corp.,
7.20%, 11/10/26.............. 106,150
1,035,000 Qwest Corp. -- 144A,
7.88%, 09/01/11.............. 1,128,150
1,075,000 Qwest Services Corp. -- 144A
(Canada),
14.00%, 12/15/10............. 1,298,063
580,000 Rogers Wireless, Inc. -- 144A
(Canada),
8.00%, 12/15/12.............. 616,250
2,150,000 Rogers Wireless, Inc. -- 144A
(Canada),
7.50%, 03/15/15.............. 2,278,999
1,065,000 Rogers Wireless, Inc. -- 144A
(Canada),
Floating Rate,
5.53%, 12/15/10(b)........... 1,120,913
60,000 SBA Telecommunications, Inc.,
zero coupon, 12/15/11(g)..... 50,850
</Table>
See notes to financial statements.
135
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 450,000 Telemig Celular Participacoes
SA/Amazonia Cel -- 144A
(Brazil),
8.75%, 01/20/09.............. $ 469,125
600,000 Ubiquitel Operating Company,
9.88%, 03/01/11.............. 676,500
1,390,000 US Unwired, Inc., Series B,
10.00%, 06/15/12............. 1,574,175
2,460,000 Western Wireless Corp.,
9.25%, 07/15/13.............. 2,687,549
------------
33,507,716
------------
TRANSPORTATION -- 0.9%
765,000 H-Lines Finance
Holding -- 144A, zero coupon,
04/01/13(g).................. 554,625
715,000 Horizon Lines LLC -- 144A,
9.00%, 11/01/12.............. 772,200
910,000 OMI Corp. (Marshall Islands),
7.63%, 12/01/13.............. 978,250
115,000 Petroleum Helicopters,
9.38%, 05/01/09.............. 126,500
695,000 Quality Distribution Capital --
144A,
9.00%, 11/15/10.............. 696,738
------------
3,128,313
------------
UTILITIES -- 0.7%
635,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12............. 717,550
1,325,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 1,689,375
------------
2,406,925
------------
UTILITIES: ELECTRIC -- 4.4%
347,000 AES Corp.,
8.50%, 11/01/07.............. 353,940
553,000 AES Corp.,
9.38%, 09/15/10.............. 645,627
700,000 AES Corp. -- 144A,
8.75%, 05/15/13.............. 798,875
310,000 AES Corp. -- 144A,
9.00%, 05/15/15.............. 356,500
496,838 AES Eastern Energy, Series
99-A,
9.00%, 01/02/17.............. 564,222
750,000 Calpine Corp.,
8.25%, 08/15/05.............. 761,250
1,575,000 Calpine Corp.,
7.63%, 04/15/06.............. 1,555,312
350,000 Calpine Corp.,
10.50%, 05/15/06............. 351,750
125,000 Calpine Corp.,
8.75%, 07/15/07.............. 110,000
450,000 Calpine Corp. -- 144A,
8.50%, 07/15/10.............. 388,125
1,130,000 Calpine Corp. -- 144A,
8.75%, 07/15/13.............. 937,900
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
$ 1,305,000 Inergy LP/Inergy Finance
Corp. -- 144A,
6.88%, 12/15/14.............. $ 1,318,050
3,000,000 Mission Energy Holding Company,
13.50%, 07/15/08............. 3,757,499
750,000 Nevada Power Company,
9.00%, 08/15/13.............. 881,250
1,085,000 NRG Energy, Inc. -- 144A,
8.00%, 12/15/13.............. 1,188,075
255,000 Reliant Energy, Inc.,
9.25%, 07/15/10.............. 285,600
915,000 Reliant Energy, Inc.,
9.50%, 07/15/13.............. 1,044,244
150,000 Texas Genco LLC/Financing --
144A,
6.88%, 12/15/14.............. 155,813
------------
15,454,032
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $302,606,017).......... 321,976,198
------------
<Caption>
SHARES
------
COMMON STOCKS -- 0.8%
BROADCAST SERVICES/MEDIA -- 0.3%
54,651 Telewest Global, Inc. (Great
Britain)*.................... 960,765
------------
LEISURE AND RECREATION -- 0.0%
2,000 Las Vegas Sands Corp.*......... 96,000
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.5%
7,533 Crown Castle International
Corp.*....................... 125,349
20,340 NTL, Inc.*..................... 1,484,006
------------
1,609,355
------------
TOTAL COMMON STOCKS (Cost
$1,906,825).................. 2,666,120
------------
CONVERTIBLE PREFERRED STOCKS -- 1.0%
OIL AND GAS: PIPELINES -- 0.3%
11,465 Williams Companies,
Inc. -- 144A, 5.50%.......... 960,194
------------
OIL, COAL AND GAS -- 0.1%
2,400 Chesapeake Energy Corp.,
5.00%........................ 293,640
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.6%
43,235 Crown Castle International
Corp., 6.25%................. 2,107,706
------------
UTILITIES: ELECTRIC -- 0.0%
245 NRG Energy, Inc. -- 144A,
4.00%........................ 269,500
------------
TOTAL CONVERTIBLE PREFERRED
STOCKS (Cost $3,003,931)..... 3,631,040
------------
</Table>
See notes to financial statements.
136
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE
------ ------------
WARRANTS -- 0.1%
1,125 American Tower Corp.,
Expires 08/01/08*............ $ 258,750
1,000 IPCS, Inc. -- 144A,
Expires 07/15/10*(q)......... --
1,000 IWO Holdings, Inc.,
Expires 01/15/11*(q)......... --
750 Mueller Holdings, Inc.,
Expires 04/15/14*............ 52,500
84 New World Coffee,
Expires 06/20/06*............ 1
1,000 ONO Finance PLC (Great
Britain),
Expires 03/16/11*(q)......... --
250 Ubiquitel, Inc. -- 144A,
Expires 04/15/10*(q)......... --
------------
TOTAL WARRANTS (Cost
$75,402)..................... 311,251
------------
<Caption>
PRINCIPAL
---------
CONVERTIBLE BONDS -- 0.3%
LEISURE AND RECREATION -- 0.2%
$ 645,000 Kerzner International -- 144A
(Bahama Islands),
2.38%, 04/15/24.............. 787,706
------------
SEMICONDUCTORS -- 0.1%
345,000 Amkor Technologies, Inc.,
5.75%, 06/01/06.............. 339,825
------------
TOTAL CONVERTIBLE BONDS (Cost
$966,774).................... 1,127,531
------------
TOTAL SECURITIES (Cost
$308,558,949)................ 329,712,140
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 4.6%
$16,169,442 With Investors Bank and Trust,
dated 12/31/04, 1.88%, due
01/03/05, repurchase proceeds
at maturity $16,171,976
(Collateralized by various
Small Business
Administrations,
4.88% -- 5.13%, due
01/25/29 - 05/25/30, with a
total value of $16,977,914)
(Cost $16,169,442)........... $ 16,169,442
------------
Total Investments -- 98.3%
(Cost $324,728,391).......... 345,881,582
Other assets less
liabilities -- 1.7%.......... 5,890,954
------------
NET ASSETS -- 100.0%........... $351,772,536
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $324,751,218.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $23,835,148
Gross unrealized depreciation........... (2,704,784)
-----------
Net unrealized appreciation............. $21,130,364
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
137
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS -- 97.5%
ADVERTISING -- 0.4%
209,774 JC Decaux SA*........ $ 6,118,173 FRA
--------------
AEROSPACE AND DEFENSE -- 2.3%
1,565,500 Bae Systems PLC...... 6,928,277 BRI
488,834 European Aeronautic
Defense and Space
Company(d)......... 14,197,372 NET
2,473,290 Rolls-Royce Group
PLC*............... 11,729,331 BRI
--------------
32,854,980
--------------
AGRICULTURE -- 0.1%
4,566,000 Chaoda Modern
Agriculture
(Holdings),
Ltd. .............. 1,689,001 HNG
--------------
AIRLINES -- 0.4%
1,710,200 Qantas Airways,
Ltd. .............. 4,958,494 AUS
--------------
APPAREL: MANUFACTURING -- 0.8%
65,400 Adidas-Salomon AG*... 10,545,014 GER
12,800 Benetton Group SpA... 169,106 ITA
--------------
10,714,120
--------------
AUTOMOBILES/MOTOR VEHICLES -- 4.6%
147,200 DaimlerChrysler AG*.. 7,047,351 GER
51,700 Honda Motor Company,
Ltd. .............. 2,675,180 JPN
149,740 Hyundai Motor
Company*........... 8,028,761 KOR
476,980 Kia Motors Corp.*.... 5,022,782 KOR
1,122,800 Nissan Motor Company,
Ltd. .............. 12,188,649 JPN
299,000 Suzuki Motor
Corp. ............. 5,454,375 JPN
608,200 Toyota Motor
Corp. ............. 24,714,423 JPN
--------------
65,131,521
--------------
AUTOMOTIVE EQUIPMENT -- 1.5%
252,900 Aisin Seiki Company,
Ltd. .............. 6,395,201 JPN
127,500 Alpine Electronics,
Inc.(d)............ 1,712,093 JPN
10,200 Georg Fischer AG*.... 2,641,720 SWI
1,128,000 GKN PLC.............. 5,122,022 BRI
115,700 Valeo SA............. 4,838,602 FRA
--------------
20,709,638
--------------
BANKS -- 19.0%
589,000 ABN AMRO Holding
NV................. 15,587,014 NET
241,200 Allied Irish Banks
PLC................ 5,000,946 IRE
1,023,700 Banca Intesa SpA..... 4,920,529 ITA
601,200 Banco Bilbao Vizcaya
Argentaria SA...... 10,652,837 SPA
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
709,400 Banco Comercial
Portugues, SA --
Class R............ $ 1,820,492 POR
240,100 Banco Santander
Central Hispano
SA*(d)............. 2,976,451 SPA
1,812,600 Barclays PLC......... 20,393,924 BRI
618,900 Bayerische Hypo-und
Vereinsbank AG (HVB
Group)*............ 14,033,718 GER
198,200 BNP Paribas SA....... 14,343,881 FRA
179,200 Canadian Imperial
Bank of
Commerce(d)........ 10,799,846 CDA
158,600 Commonwealth Bank of
Australia.......... 3,978,663 AUS
140,300 Danske Bank A/S...... 4,297,983 DEN
19,400 Deutsche Bank AG..... 1,720,615 GER
365,900 Dexia*(d)............ 8,406,178 BEL
250,800 DNB NOR ASA.......... 2,473,557 NOR
361,700 EFG Eurobank
Ergasias........... 12,415,419 GRC
89,200 ForeningsSparbanken
AB................. 2,221,343 SWE
105,300 Fortis............... 2,909,569 BEL
126,100 HBOS PLC............. 2,053,110 BRI
135,700 IKB Deutsche
Industriebank AG... 3,753,243 GER
1,238,200 Joyo Bank, Ltd. ..... 6,032,937 JPN
77,400 Laurentian Bank of
Canada(d).......... 1,554,458 CDA
1,834,700 Lloyds TSB Group
PLC................ 16,662,011 BRI
456 Mitsubishi Tokyo
Financial Group,
Inc. .............. 4,621,321 JPN
70,200 National Australia
Bank, Ltd. ........ 1,581,103 AUS
177,700 National Bank of
Canada(d).......... 7,348,195 CDA
60,100 National Bank of
Greece SA.......... 1,981,340 GRC
1,248,500 Nordea Bank AB....... 12,586,822 SWE
234,700 SanPaolo IMI SpA*.... 3,377,962 ITA
125,100 Societe Generale*.... 12,646,135 FRA
745,200 Standard Chartered
PLC................ 13,857,143 BRI
490,100 Suncorp-Metway,
Ltd. .............. 6,656,769 AUS
861,000 The Bank of Yokohama,
Ltd. .............. 5,420,055 JPN
199,000 UBS AG............... 16,686,878 SWI
1,739 UFJ Holdings,
Inc.*.............. 10,523,475 JPN
--------------
266,295,922
--------------
</Table>
See notes to financial statements.
138
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BROADCAST SERVICES/MEDIA -- 1.7%
150,200 Grupo Televisa SA
(ADR).............. $ 9,087,100 MEX
883,200 Seven Network,
Ltd.(d)............ 4,424,315 AUS
337,900 Vivendi Universal
SA*................ 10,777,227 FRA
--------------
24,288,642
--------------
BUSINESS SERVICES AND SUPPLIES -- 1.2%
1,671,929 Capita Group PLC..... 11,740,955 BRI
1,914,700 Marubeni Corp. ...... 5,298,916 JPN
--------------
17,039,871
--------------
CHEMICALS -- 0.9%
45,100 Akzo Nobel NV*....... 1,921,610 NET
39,100 Ciba Specialty
Chemicals AG*...... 2,974,365 SWI
52,300 K+S AG............... 2,776,606 GER
1,680,600 Mitsubishi Chemical
Corp. ............. 5,109,600 JPN
--------------
12,782,181
--------------
COMPUTER SOFTWARE AND SERVICES -- 1.8%
129,200 Infosys Technologies,
Ltd. (ADR)(d)...... 8,954,852 IND
309,985 Trend Micro, Inc.*... 16,704,512 JPN
--------------
25,659,364
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.5%
163,900 Creative Technology,
Ltd. .............. 2,449,865 SIN
203,900 Oce NV............... 3,117,392 NET
2,043,000 TPV Technology,
Ltd. .............. 1,222,299 HNG
--------------
6,789,556
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 3.9%
354,700 Autostrade SpA*...... 9,487,750 ITA
353,700 Barratt Developments
PLC................ 4,037,273 BRI
159,300 Compagnie de
Saint-Gobain....... 9,586,308 FRA
644,700 George Wimpey PLC.... 5,006,998 BRI
43,500 Lafarge SA*.......... 4,193,565 FRA
260,000 Maeda Road
Construction
Company, Ltd.(d)... 2,042,097 JPN
2,189,400 Pilkington PLC....... 4,624,013 BRI
438,000 RMC Group PLC........ 7,139,750 BRI
484,000 Sekisui House,
Ltd. .............. 5,631,417 JPN
211,200 The Berkeley Group
Holdings PLC....... 3,280,527 BRI
--------------
55,029,698
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES -- 1.8%
376,500 Imperial Tobacco
Group PLC.......... $ 10,315,498 BRI
1,308 Japan Tobacco,
Inc. .............. 14,912,882 JPN
--------------
25,228,380
--------------
DISTRIBUTION -- 0.9%
2,054,000 Esprit Holdings,
Ltd. .............. 12,420,936 BER
--------------
DIVERSIFIED SERVICES -- 0.7%
142,100 BASF AG.............. 10,225,999 GER
--------------
ELECTRONICS -- 2.9%
56,100 Bang & Olufsen
A/S -- Class B(d).. 4,190,161 DEN
209,000 Hosiden Corp.(d)..... 2,311,586 JPN
39,200 Keyence Corp. ....... 8,770,532 JPN
1,191,000 Minebea Company,
Ltd. .............. 5,187,848 JPN
286,000 Pioneer Corp. ....... 5,573,962 JPN
130,800 Research In Motion,
Ltd.*.............. 10,780,537 CDA
810,100 Toshiba Tec Corp. ... 3,836,568 JPN
--------------
40,651,194
--------------
ENGINEERING -- 0.2%
72,371 SNC-Lavalin Group,
Inc. .............. 3,502,310 CDA
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.3%
224,700 Pennon Group PLC..... 4,301,297 BRI
--------------
FINANCIAL SERVICES -- 4.1%
344,900 Alliance & Leicester
PLC................ 6,039,337 BRI
800,900 Bradford & Bingley
PLC................ 5,162,922 BRI
226,900 Hitachi Capital
Corp. ............. 4,676,413 JPN
155,500 Irish Life &
Permanent PLC...... 2,913,703 IRE
235,389 Man Group PLC........ 6,652,658 BRI
124,000 Mitsubishi Securities
Company, Ltd. ..... 1,355,759 JPN
932,000 Nikko Cordial
Corp. ............. 4,931,553 JPN
96,700 Promise Company,
Ltd. .............. 6,897,720 JPN
225,700 Sampo Oyj -- Class
A.................. 3,113,587 FIN
38,300 Sanyo Shinpan Finance
Company, Ltd. ..... 2,717,053 JPN
119,100 Sun Life Financial,
Inc.(d)............ 3,989,875 CDA
65,500 Takefuji Corp. ...... 4,423,261 JPN
1,386,000 Tokai Tokyo
Securities Company,
Ltd. .............. 4,254,434 JPN
--------------
57,128,275
--------------
</Table>
See notes to financial statements.
139
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 3.4%
464,700 Asahi Breweries,
Ltd. .............. $ 5,746,485 JPN
15,800 Coca-Cola West Japan
Company, Ltd. ..... 404,931 JPN
429,200 Fraser and Neave,
Ltd. .............. 4,285,690 SIN
345,300 Geest PLC............ 4,229,787 BRI
1,537,300 Northern Foods PLC... 5,054,642 BRI
48,600 Pernod Ricard(d)..... 7,436,969 FRA
325,262 Royal Numico NV*..... 11,716,729 NET
695,700 Tate & Lyle PLC...... 6,314,730 BRI
106,400 Wolverhampton &
Dudley Breweries
PLC................ 2,243,082 BRI
--------------
47,433,045
--------------
INSURANCE -- 4.6%
999,300 Aioi Insurance
Company, Ltd. ..... 4,606,012 JPN
105,700 Allianz AG........... 14,007,498 GER
1,052,600 Aviva PLC............ 12,691,830 BRI
516,700 Britannic Group PLC.. 4,523,812 BRI
105,800 CNP Assurances....... 7,570,631 FRA
1,939,300 Friends Provident
PLC................ 5,734,122 BRI
212,400 ING Groep NV*........ 6,419,711 NET
358,800 Pohjola Group PLC --
Class D............ 4,136,147 FIN
31,400 Zurich Financial
Services AG*....... 5,235,635 SWI
--------------
64,925,398
--------------
LEISURE AND RECREATION -- 3.1%
143,511 Carnival PLC......... 8,756,697 BRI
88,128 Club Mediterranee
SA*(d)............. 4,158,192 FRA
2,447,900 EMI Group PLC........ 12,454,916 BRI
703,971 InterContinental
Hotels Group PLC... 8,751,767 BRI
261,000 NAMCO, Ltd. ......... 3,420,824 JPN
227,400 TUI AG(d)............ 5,378,664 GER
--------------
42,921,060
--------------
MACHINERY -- 1.5%
148,400 MAN AG*.............. 5,710,440 GER
15,900 Rieter Holding AG.... 4,614,370 SWI
82,500 Saurer AG*........... 4,861,050 SWI
162,400 Stork NV*............ 5,589,845 NET
--------------
20,775,705
--------------
MANUFACTURING -- 0.4%
295,710 Assa Abloy AB --
Class B*........... 5,050,270 SWE
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES -- 0.8%
134,730 Essilor International
SA CIE Generale
D'Optique.......... $ 10,546,283 FRA
--------------
METALS AND MINING -- 1.4%
1,060,900 BlueScope Steel,
Ltd. .............. 6,840,020 AUS
308,300 Sims Group, Ltd. .... 4,288,669 AUS
396,900 ThyssenKrupp AG(d)... 8,730,355 GER
--------------
19,859,044
--------------
OIL, COAL AND GAS -- 8.9%
602,400 BP PLC............... 5,875,569 BRI
158,700 CNOOC, Ltd.
(ADR)(d)........... 8,599,953 HNG
2,182,200 Cosmo Oil Company,
Ltd. .............. 6,443,253 JPN
559,200 Eni SpA*............. 13,985,970 ITA
83,300 Fording Canadian Coal
Trust.............. 6,440,894 CDA
76,800 Gazprom OAO -- 144A
(ADR)(d)........... 2,726,400 SUR
175,900 Hellenic Petroleum
SA................. 1,910,696 GRC
287,100 Husky Energy,
Inc. .............. 8,204,568 CDA
12,100 OMV AG............... 3,642,229 AST
104,212 Petro-Canada......... 5,318,855 CDA
272,500 Repsol YPF SA........ 7,089,210 SPA
542,700 Saipem SpA........... 6,521,371 ITA
2,506,300 Shell Transport &
Trading Company
PLC................ 21,365,706 BRI
722,700 Snam Rete Gas SpA.... 4,199,887 ITA
102,923 Total SA -- Class
B.................. 22,457,640 FRA
--------------
124,782,201
--------------
PAPER AND FOREST PRODUCTS -- 0.6%
231,000 Billerud............. 4,118,917 SWE
60,360 Fraser Papers,
Inc.*.............. 783,648 CDA
301,800 Norbord, Inc.(d)..... 3,122,503 CDA
--------------
8,025,068
--------------
PHARMACEUTICALS -- 3.9%
35,900 Dainippon
Pharmaceutical
Company, Ltd. ..... 360,679 JPN
1,118,963 Elan Corp. PLC
(ADR)*(d).......... 30,491,742 IRE
160,800 GlaxoSmithKline PLC.. 3,772,754 BRI
218,200 Santen Pharmaceutical
Company, Ltd. ..... 4,762,892 JPN
115,855 Schering AG.......... 8,653,509 GER
280,700 Taisho Pharmaceutical
Company, Ltd. ..... 6,099,795 JPN
--------------
54,141,371
--------------
</Table>
See notes to financial statements.
140
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
PRINTING AND PUBLISHING -- 0.6%
1,772,900 CIR SpA.............. $ 5,247,792 ITA
126,000 Quebecor World,
Inc.(d)............ 2,712,390 CDA
--------------
7,960,182
--------------
REAL ESTATE DEVELOPMENT AND MANAGEMENT
SERVICES -- 0.7%
64,265 Unibail(d)........... 10,104,594 FRA
--------------
RETAIL -- 4.0%
1,246,400 Big Food Group PLC... 2,249,503 BRI
4,077,782 Carphone Warehouse
PLC................ 13,446,895 BRI
1,912,500 Dixons Group PLC..... 5,581,440 BRI
30,100 Galeries Lafayette
SA(d).............. 7,724,388 FRA
521,389 GUS PLC.............. 9,395,013 BRI
168,300 Hudson's Bay
Company............ 1,881,702 CDA
590,900 JJB Sports PLC....... 2,005,278 BRI
279,448 Kingfisher PLC....... 1,661,933 BRI
340,770 Swatch Group AG*..... 10,129,299 SWI
10,300 Valora Holding AG.... 2,536,276 SWI
--------------
56,611,727
--------------
RETAIL: SUPERMARKETS -- 0.9%
1,090,862 J Sainsbury PLC...... 5,665,501 BRI
809,200 Koninklijke Ahold
NV*................ 6,262,771 NET
--------------
11,928,272
--------------
RUBBER PRODUCTS -- 0.2%
150,000 Bridgestone Corp. ... 2,981,875 JPN
--------------
SEMICONDUCTORS -- 0.1%
131,158 ASML Holding NV*..... 2,086,724 NET
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 7.4%
1,243,480 Alcatel SA*.......... 19,332,147 FRA
582,000 BT Group PLC......... 2,268,403 BRI
159,600 Elcoteq Network
Corp. -- Class A... 3,876,850 FIN
297,700 France Telecom SA*... 9,846,728 FRA
2,700 Nippon Telegraph and
Telephone Corp. ... 12,102,904 JPN
298,500 Nokia Oyj (ADR)...... 4,677,495 FIN
152,100 PT Telekomunikasi
Indonesia (ADR)*... 3,197,142 IDN
820,429 Societe Europeenne
des Satellites
(FDR)*............. 10,582,796 LUX
20,800 Swisscom AG*......... 8,194,882 SWI
566,450 Tandberg ASA......... 7,035,978 NOR
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
318,556 Telefonaktiebolaget
LM Ericsson
(ADR)*(d).......... $ 10,031,328 SWE
4,402,233 Vodafone Group PLC... 11,938,856 BRI
--------------
103,085,509
--------------
TRANSPORTATION -- 1.3%
144,432 Canadian National
Railway Company.... 8,805,712 CDA
28,610 Kuehne & Nagel
International AG... 6,164,322 SWI
777,000 Orient Overseas
International,
Ltd. .............. 2,944,166 BER
--------------
17,914,200
--------------
UTILITIES -- 1.2%
33,900 E.ON AG*............. 3,086,733 GER
576,700 Kelda Group PLC...... 7,003,445 BRI
548,800 United Utilities
PLC................ 6,638,285 BRI
--------------
16,728,463
--------------
UTILITIES: ELECTRIC -- 2.3%
78,200 Chubu Electric Power
Company, Inc. ..... 1,874,605 JPN
553,600 Endesa SA............ 12,996,514 SPA
314,200 Hokkaido Electric
Power Company,
Inc. .............. 6,169,489 JPN
245,100 Shikoku Electric
Power Company,
Inc. .............. 4,776,847 JPN
239,900 Union Fenosa SA...... 6,302,996 SPA
--------------
32,120,451
--------------
UTILITIES: GAS -- 0.2%
954,800 Toho Gas Company,
Ltd. .............. 3,405,348 JPN
--------------
TOTAL COMMON STOCKS
(Cost
$1,135,867,124).... 1,366,906,342
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 9.1%
$127,122,222 Securities Lending
Collateral
Investment (Note 4)
(Cost
$127,122,222)...... 127,122,222 USA
--------------
TOTAL SECURITIES
(Cost
$1,262,989,346).... 1,494,028,564
--------------
<Caption>
SHARES
------
RIGHTS -- 0.0%
AUTOMOTIVE EQUIPMENT
390,900 TI Automotive,
Ltd. -- Class A*
(Cost $0)(q)....... -- BRI
--------------
</Table>
See notes to financial statements.
141
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE COUNTRY
--------- -------------- -------
REPURCHASE AGREEMENTS -- 1.1%
$ 15,085,220 With Investors Bank
and Trust, dated
12/31/04, 1.88%,
due 01/03/05,
repurchase proceeds
at maturity
$15,087,583
(Collateralized by
Freddie Mac, 2.95%,
due 12/15/31, with
a value of
$10,500,147 and
various Small
Business
Administrations,
4.88% -- 5.13%, due
11/25/22-12/25/28,
with a total value
of $5,339,481)
(Cost
$15,085,220)....... $ 15,085,220 USA
--------------
Total Investments -- 107.7%
(Cost
$1,278,074,566).... 1,509,113,784
Liabilities less
other
assets -- (7.7)%... (107,495,840)
--------------
NET ASSETS --100.0%.. $1,401,617,944
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2004 is $1,282,950,703.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation......... $233,117,631
Gross unrealized depreciation......... (6,954,550)
------------
Net unrealized appreciation........... $226,163,081
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
<Table>
<Caption>
PERCENT OF TOTAL
COUNTRY COMPOSITION INVESTMENTS AT VALUE
- ------------------- --------------------
Australia (AUS)...................... 2.17%
Austria (AST)........................ 0.24
Belgium (BEL)........................ 0.75
Bermuda (BER)........................ 1.02
Canada (CDA)......................... 4.99
Denmark (DEN)........................ 0.56
Finland (FIN)........................ 1.05
France (FRA)......................... 10.71
Germany (GER)........................ 6.34
Great Britain (BRI).................. 20.85
Greece (GRC)......................... 1.08
Hong Kong (HNG)...................... 0.76
India (IND).......................... 0.59
Indonesia (IDN)...................... 0.21
Ireland (IRE)........................ 2.55
Italy (ITA).......................... 3.18
Japan (JPN).......................... 16.40
Korea (KOR).......................... 0.87
Luxembourg (LUX)..................... 0.70
Mexico (MEX)......................... 0.60
Netherlands (The) (NET).............. 4.43
Norway (NOR)......................... 0.63
Portugal (POR)....................... 0.12
Russia (SUR)......................... 0.18
Singapore (SIN)...................... 0.45
Spain (SPA).......................... 2.65
Sweden (SWE)......................... 2.26
Switzerland (SWI).................... 4.24
United States (USA).................. 9.42
-------
TOTAL PERCENTAGE..................... 100.00%
=======
</Table>
See notes to financial statements.
142
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIOS OF INVESTMENTS
SUMMARY OF FOOTNOTES AND ABBREVIATIONS TO PORTFOLIOS
DECEMBER 31, 2004
Footnotes:
* Non-income producing security.
(a) Variable rate security. The rate shown was in effect at December 31, 2004.
(b) Quarterly reset provision. The rate shown was in effect at December 31,
2004.
(c) Monthly reset provision. The rate shown was in effect at December 31, 2004.
(d) All or part of this security is on loan.
(e) Security is segregated as collateral for written options and/or short
sales.
(f) Security is segregated as initial margin for futures contracts.
(g) Represents a zero coupon bond which will convert to an interest bearing
security at a later date.
(h) Bond is in default.
(i) Principal amount shown for this debt security is denominated in New Zealand
Dollars.
(j) Principal amount shown for this debt security is denominated in Euros.
(k) Principal amount shown for this debt security is denominated in Swedish
Krona.
(l) Principal amount shown for this debt security is denominated in Mexican
Pesos.
(m) Variable rate security. The interest rate is based on the credit rating of
the issuer. The rate shown was in effect at December 31, 2004.
(n) Floating rate security. The interest rate is subject to change semi-annually
based on the London Interbank Offered Rate ("LIBOR"). The rate shown was in
effect at December 31, 2004.
(o) PIK ("Payment-In-Kind") bond. These bonds pay interest in the form of
additional bonds.
(p) Issuer was in bankruptcy reorganization at the time of maturity. Recovery
will be determined at the conclusion of the bankruptcy.
(q) Fair valued at December 31, 2004.
Abbreviations:
ADR American Depository Receipt.
FDR Foreign Depository Receipt.
GDR Global Depository Receipt.
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.
143
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION
DECEMBER 31, 2004
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
MONEY MARKET SERIES
Commercial Paper................................ 43.2%
Domestic Certificates of Deposit................ 4.3
Yankee Certificates of Deposit.................. 16.3
Medium Term Corporate Notes..................... 1.6
Short Term US Government Agency Securities...... 23.3
Short Term Corporate Notes...................... 3.8
Repurchase Agreements........................... 7.4
Other assets less liabilities................... 0.1
-----
100.0%
=====
HIGH QUALITY BOND SERIES
Corporate Bonds and Notes....................... 76.4%
US Treasury Securities.......................... 3.4
US Government Agency Securities................. 16.4
Foreign Government Obligations.................. 3.1
Securities Lending Collateral................... 3.6
Repurchase Agreements........................... 0.1
Liabilities less other assets................... (3.0)
-----
100.0%
=====
INTERMEDIATE GOVERNMENT BOND SERIES
US Treasury Securities.......................... 67.6%
US Government Agency Securities................. 27.6
Corporate Bonds and Notes....................... 16.4
Securities Lending Collateral................... 25.0
Repurchase Agreements........................... 2.4
Liabilities less other assets................... (39.0)
-----
100.0%
=====
CORE BOND SERIES
US Treasury Securities.......................... 27.3%
US Government Agency Securities................. 43.3
Corporate Bonds and Notes....................... 34.7
Municipal Bonds................................. 0.1
Foreign Government Obligations.................. 3.0
Preferred Corporate Bonds and Notes............. 0.1
Short Term Commercial Paper..................... 0.7
Short Term US Treasury Securities............... 0.9
Securities Lending Collateral................... 21.6
Repurchase Agreements........................... 2.8
Securities Sold Short........................... (10.1)
Liabilities less other assets................... (24.4)
-----
100.0%
=====
BALANCED SERIES
Common Stocks................................... 63.6%
US Treasury Securities.......................... 9.0
US Government Agency Securities................. 16.1
BALANCED SERIES (CONTINUED)
Corporate Bonds and Notes....................... 12.0%
Municipal Bonds................................. 0.1
Foreign Government Obligations.................. 1.1
Short Term Commercial Paper..................... 0.2
Securities Lending Collateral................... 5.9
Repurchase Agreements........................... 2.1
Securities Sold Short........................... (3.5)
Liabilities less other assets................... (6.6)
-----
100.0%
=====
VALUE & INCOME SERIES
Common Stocks................................... 97.4%
Securities Lending Collateral................... 4.0
Repurchase Agreements........................... 2.5
Liabilities less other assets................... (3.9)
-----
100.0%
=====
GROWTH & INCOME SERIES
Common Stocks................................... 99.4%
Securities Lending Collateral................... 7.5
Short Term US Treasury Securities............... 0.0
Repurchase Agreements........................... 0.6
Liabilities less other assets................... (7.5)
-----
100.0%
=====
EQUITY GROWTH SERIES
Common Stocks................................... 98.5%
Warrants........................................ 0.0
Securities Lending Collateral................... 8.9
Repurchase Agreements........................... 1.8
Liabilities less other assets................... (9.2)
-----
100.0%
=====
MID-CAP VALUE SERIES
Common Stocks................................... 95.0%
Securities Lending Collateral................... 14.1
Repurchase Agreements........................... 5.5
Liabilities less other assets................... (14.6)
-----
100.0%
=====
MID-CAP GROWTH SERIES
Common Stocks................................... 97.4%
Securities Lending Collateral................... 24.0
Repurchase Agreements........................... 2.4
Liabilities less other assets................... (23.8)
-----
100.0%
=====
</Table>
See notes to financial statements.
144
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION (CONTINUED)
DECEMBER 31, 2004
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
SMALL-CAP VALUE SERIES
Common Stocks................................... 99.3%
Securities Lending Collateral................... 12.8
Repurchase Agreements........................... 0.8
Liabilities less other assets................... (12.9)
-----
100.0%
=====
SPECIAL EQUITY SERIES
Common Stocks................................... 97.0%
Securities Lending Collateral................... 13.9
Short Term US Treasury Securities............... 0.1
Repurchase Agreements........................... 2.1
Liabilities less other assets................... (13.1)
-----
100.0%
=====
SMALL-CAP GROWTH SERIES
Common Stocks................................... 98.3%
Securities Lending Collateral................... 28.9
Repurchase Agreements........................... 1.8
Liabilities less other assets................... (29.0)
-----
100.0%
=====
AGGRESSIVE EQUITY SERIES
Common Stocks................................... 99.7%
Securities Lending Collateral................... 10.6
Liabilities less other assets................... (10.3)
-----
100.0%
=====
HIGH YIELD BOND SERIES
Corporate Bonds and Notes....................... 91.5%
Common Stocks................................... 0.8
Convertible Preferred Stocks.................... 1.0
Warrants........................................ 0.1
Convertible Bonds............................... 0.3
Repurchase Agreements........................... 4.6
Other assets less liabilities................... 1.7
-----
100.0%
=====
INTERNATIONAL EQUITY SERIES
Common Stocks................................... 97.5%
Securities Lending Collateral................... 9.1
Rights.......................................... 0.0
Repurchase Agreements........................... 1.1
Liabilities less other assets................... (7.7)
-----
100.0%
=====
</Table>
See notes to financial statements.
145
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. When valuations are not readily
available, securities will be valued at their fair value as determined by the
Board of Trustees.
Trading in securities on most foreign exchanges and over-the-counter markets is
normally completed before the close of the domestic market and may also take
place on days when the domestic market is closed. 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 calculation of net asset value when the investment advisor
deems that the particular event or circumstance would materially affect its
asset value. In accordance with procedures adopted by the Board of Trustees, the
International Equity Series applies fair value pricing procedures on a daily
basis for all non-U.S. and non-Canadian equity securities held in its portfolio
by utilizing the quotations of an independent pricing service, unless the
Series' investment advisor determines that use of another valuation methodology
is appropriate.
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.
146
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FOREIGN CURRENCY TRANSLATION:
The accounting records of each Series are maintained in US dollars. The market
values of foreign securities, currency holdings and other assets and liabilities
denominated in a foreign currency are translated to US dollars based on the
prevailing exchange rates each business day. Income, expenses, purchases and
sales of investment securities denominated in foreign currencies are translated
at prevailing exchange rates when accrued or incurred.
Each 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 each Series' books and the US 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 US
dollar.
As of December 31, 2004, the Series had outstanding foreign currency forward
contracts as listed in Note 10.
E. WRITTEN OPTIONS:
Each Series, with the exception of the Money Market Series, may write options.
When a Series writes an option, an amount equal to the premium received by the
Series is included in the Series' Statement of Assets and Liabilities as an
asset and corresponding liability. The amount of the liability is adjusted daily
to reflect the current market value of the written option and the change is
recorded in a corresponding unrealized gain or loss account. When a written
option expires on its stipulated expiration date, or when a closing transaction
is entered into, the related liability is extinguished and the Series realizes a
gain or loss contingent on whether the cost of the closing transaction exceeds
the premium received when the option was written.
As of December 31, 2004, none of the Series had written options contracts
outstanding.
147
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Transactions in options written for the year ended December 31, 2004 were as
follows:
<Table>
<Caption>
CORE BOND BALANCED
------------------------- ----------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
----------- ----------- ---------- ---------
Call options outstanding at December 31,
2003......................................... -- $ -- -- $ --
Call options written........................... 11,600,175 186,032 1,200,016 18,065
Call options terminated in closing purchase
transactions................................. (11,600,175) (186,032) (1,200,016) (18,065)
Call options expired........................... -- -- -- --
----------- ----------- ---------- ---------
Call options outstanding at December 31,
2004......................................... -- $ -- -- $ --
=========== =========== ========== =========
Put options outstanding at December 31, 2003... 9,625,278 $ 444,723 1,050,030 $ 48,164
Put options written............................ 793 867,505 78 84,094
Put options terminated in closing purchase
transactions................................. (9,626,071) (1,312,228) (1,050,108) (132,258)
Put options expired............................ -- -- -- --
----------- ----------- ---------- ---------
Put options outstanding at December 31, 2004... -- $ -- -- $ --
=========== =========== ========== =========
</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 market value caused by changes in prevailing
market or interest rates. 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.
Use of long futures contracts subjects the Series to risk of loss in excess of
amounts shown on the Statement of Assets and Liabilities up to the notional
value of the futures contracts. Use of short futures contracts subjects the
Series to unlimited risk of loss. The Series may enter into futures contracts
only on exchanges or boards of trade. The exchange or board of trade acts as the
counterparty to each futures transaction; therefore, the Series' credit risk is
limited to failure of the exchange or board of trade.
148
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Open futures contracts as of December 31, 2004:
<Table>
<Caption>
VALUE AS OF NET UNREALIZED
NUMBER OF EXPIRATION DECEMBER 31, APPRECIATION/
SERIES CONTRACTS DESCRIPTION DATE 2004 (DEPRECIATION)
- ------ ----------- -------------------- ---------- ------------ --------------
Core Bond.......... 283 Long US Long Bond Future March 2005 $ 31,837,500 $ 245,885
1,217 Short US Treasury Notes 5
Year Future March 2005 133,299,531 (62,542)
426 Short US Treasury Notes 10
Year Future March 2005 47,685,375 (108,564)
---------
$ 74,779
=========
Balanced........... 79 Long US Long Bond Future March 2005 $ 8,887,500 $ 133,179
115 Short US Treasury Notes 5
Year Future March 2005 12,596,094 1,174
41 Short US Treasury Notes 10
Year Future March 2005 4,589,438 (8,911)
---------
$ 125,442
=========
Growth & Income.... 10 Long S&P 500 Future March 2005 $ 606,875 $ 4,480
=========
Special Equity..... 8 Long Russell 2000 Future March 2005 $ 2,615,800 $ 39,935
=========
</Table>
G. SHORT SALES:
Each 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 Investment Company Act of 1940, as amended. 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 cannot exceed the total amount invested. During the year
ended December 31, 2004, the 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' intention to comply with the applicable provisions of the
Internal Revenue Code. Therefore, no federal income tax provision is required.
149
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 less foreign taxes withheld,
if any, 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.
Purchases of TBA, when-issued or delayed delivery securities may be settled a
month or more after the trade date. Interest income is not accrued until
settlement date.
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.
3. FEES AND TRANSACTIONS WITH AFFILIATES
Transamerica Financial Life Insurance Company, Inc. ("TFLIC"), 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, a financial services holding company whose
primary emphasis is life and health insurance and annuity and investment
products. AEGON is an indirect, wholly-owned subsidiary of AEGON N.V., a
corporation based in The Netherlands which is a publicly traded international
insurance group. TFLIC has sub-accounts which invest in the corresponding Series
Portfolios as follows:
<Table>
<Caption>
TFLIC SUB-ACCOUNT INVESTMENT IN PORTFOLIO
- ----------------- -----------------------
Money Market................................................ 10.42%
High Quality Bond........................................... 13.82
Intermediate Government Bond................................ 22.14
Core Bond................................................... 11.07
Balanced.................................................... 35.80
Value & Income.............................................. 25.44
Growth & Income............................................. 26.24
Equity Growth............................................... 20.72
Mid-Cap Value............................................... 04.33
Mid-Cap Growth.............................................. 00.32
Small-Cap Value............................................. 00.04
Special Equity.............................................. 29.72
</Table>
150
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
<Table>
<Caption>
TFLIC SUB-ACCOUNT INVESTMENT IN PORTFOLIO
- ----------------- -----------------------
Small-Cap Growth............................................ 00.00%
Aggressive Equity........................................... 24.39
High Yield Bond............................................. 08.89
International Equity........................................ 14.10
</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 each 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.
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.................. GE Asset Management, Inc.* 0.25 0.05
High Quality Bond Series............. Merganser Capital Management LP 0.35 (2)
Intermediate Government Bond
Series............................. (3) 0.35(1) (4)
Core Bond Series..................... BlackRock Advisors, Inc. 0.35 (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................ Columbus Circle Investors** 0.72(1) (15)
Small-Cap Value Series............... Sterling Capital Management LLC 0.82(1) 0.50
Special Equity Series................ (16) 0.80 (17)
Small-Cap Growth Series.............. Delaware Management Company 0.87(1) 0.50
Aggressive Equity Series............. Turner Investment Partners,
Inc.*** 0.77(1)**** (18)
High-Yield Bond Series............... Eaton Vance Management 0.55(1) (19)
International Equity Series.......... (20) 0.75 (21)
</Table>
- ---------------
* Effective June 18, 2004, GE Asset Management, Inc. replaced Capital
Management Group.
** Effective August 27, 2004, Columbus Circle Investors replaced Dresdner RCM
Global Investors LLC.
*** Effective September 21, 2004, Turner Investment Partners, Inc. replaced
McKinley Capital Management, Inc.
**** For the period January 1, 2004 to September 23, 2004, the Advisor fee was
0.97%.
(1) The Advisor is currently voluntarily waiving a portion of its fee.
151
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(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.
During the year ended December 31, 2004, the Intermediate Government Bond
Series executed $370,672 of purchase transactions and $1,696,416 of sales
transactions through Stephens Inc., an affiliate of the Portfolio's
subadvisor. Commissions paid for such transactions amounted to $625.
(4) 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. 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 0.15% 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. BlackRock 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.
During the year ended December 31, 2004, the Value & Income Series executed
$520,246,721 of purchase transactions and $430,265,555 of sales
transactions through Sanford C. Bernstein & Co. LLC, an affiliate of
Alliance Capital Management LP and AllianceBernstein. Commissions paid for
such transactions amounted to $1,356,078.
(9) 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, 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 three subadvisors: Effective May 4, 2004,
Ark Asset Management Company, Inc., Goldman Sachs Asset Management, LP and
Aronson + Johnson + Ortiz, LP replaced Aeltus Investment Management, Inc.
and Credit Suisse Asset Management.
During the year ended December 31, 2004, the Growth & Income Series
executed $43,672,966 of purchase transactions and $45,413,667 of sales
transactions through Goldman Sachs Company, an affiliate of Goldman Sachs
Asset Management, LP. Commissions paid for such transactions amounted to
$49,542.
During the year ended December 31, 2004, the Growth & Income Series
executed $91,609 of purchase transactions and $3,955,539 of sales
transactions through Spear, Leeds & Kellogg, an affiliate of Goldman Sachs
Asset Management, LP. Commissions paid for such transactions amounted to
$2,018.
152
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
During the year ended December 31, 2004, the Growth & Income Series executed
$121,045 of purchase transactions through Wave Securities LLC, an affiliate
of Goldman Sachs Asset Management, LP. Commissions paid for such transactions
amounted to $65.
(11) For the period January 1, 2004 to May 4, 2004, 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. For the
period January 1, 2004 to May 4, 2004, 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. For the period May 5, 2004 to December
31, 2004, Ark Asset Management, Inc. received 0.20% on the first
$750,000,000 in average daily net assets, 0.18% on the next $250,000,000 in
average daily net assets and 0.15% on all average daily net assets in
excess of $1,000,000,000. For the period May 5, 2004 to December 31, 2004,
Goldman Sachs Asset Management, LP received 0.14% on the first $500,000,000
in average daily net assets, 0.12% on the next $1,000,000,000 in average
daily net assets and 0.10% on all average daily net assets in excess of
$1,500,000,000. For the period May 5, 2004 to December 31, 2004, Aronson +
Johnson + Ortiz, LP received 0.30% on the first $250,000,000 in average
daily net assets, 0.20% on the next $250,000,000 in average daily net
assets and 0.15% on all average daily net assets in excess of $500,000,000.
If assets are less than $100,000,000, then Aronson + Johnson + Ortiz, LP
will receive 0.55% on the first $50,000,000 in average daily net assets and
0.35% on all average daily net assets in excess of $50,000,000.
(12) The Equity Growth Series has two subadvisors: Ark Asset Management Company,
Inc. and Marsico Capital Management LLC. Effective September 22, 2004, the
third subadvisor, Dresdner RCM Global Investors, LLC was terminated.
During the year ended December 31, 2004, the Equity Growth Series executed
$16,664,388 of purchase transactions and $3,417,211 of sales transactions
through Bank of America International, an affiliate of Marsico Capital
Management LLC. Commissions paid for such transactions amounted to $24,051.
(13) For the period January 1, 2004 to September 23, 2004, 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 Company, Inc. received 0.20% of all
average daily net assets. Marsico Capital Management LLC received 0.30% on
the first $1,000,000,000 in average daily net assets and 0.25% on all
average daily net assets in excess of $1,000,000,000. If assets are greater
than $2,000,000,000, then Marsico Capital Management LLC will receive 0.27%
on all average daily net assets.
(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) For the period January 1, 2004 to August 26, 2004, Dresdner RCM Global
Investors, LLC received 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. For the period August 27, 2004
to December 31, 2004, Columbus Circle Investors received 0.40% on the first
$135,000,000 in average daily net assets and 0.35% on all average daily net
assets in excess of $135,000,000.
(16) The Special Equity Series has five subadvisors: EARNEST Partners, LLC,
Wellington Management Company LLP, RS Investments Management LP, Seneca
Capital Management LLC and INVESCO, Inc. Effective December 16, 2004,
EARNEST Partners, LLC replaced Westport Asset Management, Inc.
153
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(17) Wellington Management Company LLP 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. For the period January 1, 2004 to December 15,
2004, Westport Asset Management, Inc. received 0.50% of all average daily
net assets. For the period December 16, 2004 to December 31, 2004, EARNEST
Partners LLC received 0.50% of all average daily net assets. RS Investments
Management LP 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) For the period January 1, 2004 to September 20, 2004, McKinley Capital
Management, Inc. received 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. For the
period September 21, 2004 to December 31, 2004, Turner Investment Partners,
Inc. received 0.35% on the first $100,000,000 in average daily net assets,
0.30% on the next $200,000,000 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 $500,000,000.
(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) The International Equity Series has two subadvisors: LSV Asset Management
and Wellington Management Company LLP. Effective March 18, 2004, LSV Asset
Management and Wellington Management Company LLP replaced Capital Guardian
Trust Company.
(21) For the period January 1, 2004 to March 17, 2004, Capital Guardian Trust
Company received 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 was 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
period March 18, 2004 to December 31, 2004, LSV Asset Management received
0.45% on the first $100,000,000 in average daily net assets, 0.40% on the
next $100,000,000 in average daily net assets, 0.37% on the next
$400,000,000 in average daily net assets, 0.35% on the next $200,000,000 in
average daily net assets and 0.33% on all average daily net assets in
excess of $800,000,000. For the period March 18, 2004 to December 31, 2004,
Wellington Management Company LLP received 0.375% on the first $400,000,000
in average daily net assets, 0.35% on the next $600,000,000 in average
daily net assets and 0.325% on all average daily net assets in excess of
$1,000,000,000.
154
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
For the year ended December 31, 2004, the Advisor has voluntarily undertaken to
waive fees to the extent the expenses of a Series exceed 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.................................... 80 b.p.*
High Yield Bond Series...................................... 60 b.p.
International Equity Series................................. 90 b.p.
</Table>
- ---------------
* For the period January 1, 2004 to September 23, 2004, the expense cap was 100
b.p.
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, 2004 amounted to $66,087.
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
155
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SECURITIES LENDING (CONTINUED)
purchased with cash collateral received. At December 31, 2004, the Series loaned
securities having market values as follows:
<Table>
<Caption>
CASH COLLATERAL
MARKET VALUE RECEIVED
------------ ---------------
High Quality Bond Series.................................... $ 23,974,692 $ 24,475,000
Intermediate Government Bond Series......................... 62,908,746 64,248,067
Core Bond Series............................................ 349,712,770 357,709,666
Balanced Series............................................. 24,076,226 24,760,913
Value & Income Series....................................... 104,493,829 108,351,744
Growth & Income Series...................................... 81,557,775 85,014,118
Equity Growth Series........................................ 195,850,405 203,440,449
Mid-Cap Value Series........................................ 56,892,110 58,613,178
Mid-Cap Growth Series....................................... 48,526,678 50,393,267
Small-Cap Value Series...................................... 21,217,862 22,031,456
Special Equity Series....................................... 164,266,229 171,006,787
Small-Cap Growth Series..................................... 30,242,966 31,366,433
Aggressive Equity Series.................................... 40,844,573 42,298,930
International Equity Series................................. 120,660,011 127,122,222
</Table>
The cash collateral received by each Series was pooled and at December 31, 2004
was invested in the following securities:
<Table>
Bank of America Corp., Floating Rate Note, 2.27%(1),
01/18/05
Bank of America Corp., Floating Rate Note, 2.26%(1),
02/15/05
Bank of Montreal, Time Deposit, 2.26%, 01/28/05
Bank of Nova Scotia, Time Deposit, 2.33%, 01/13/05
Bank of Nova Scotia, Time Deposit, 2.33%, 01/24/05
Bank of Nova Scotia, Time Deposit, 2.32%, 02/08/05
Barclays Global Investors Money Market Fund -- Institutional
Shares
BNP Paribas, Time Deposit, 2.30%, 02/01/05
BNP Paribas, Time Deposit, 2.30%, 02/23/05
Calyon, Time Deposit, 2.27%, 01/20/05
Calyon, Time Deposit, 2.34%, 02/02/05
Calyon, Time Deposit, 2.44%, 03/16/05
Canadian Imperial Bank of Commerce, Floating Rate Note,
2.02%(1), 11/04/05
Citigroup, Inc. Time Deposit, 2.06%, 01/25/05
Credit Suisse First Boston Corp., Floating Rate Note,
2.33%(1), 09/09/05
Den Danske Bank, Time Deposit, 2.26%, 01/20/05
Dexia Bank, Time Deposit, 2.04%, 01/21/05
Dreyfus Cash Management Plus Fund -- Institutional Shares
Freddie Mac, US Government Agency Discount Note, 2.28%(2),
02/01/05
General Electric Capital Corp., Commercial Paper, 2.29%(2),
01/10/05
General Electric Capital Corp., Commercial Paper, 2.29%(2),
01/21/05
General Electric Capital Corp., Commercial Paper, 2.25%(2),
02/01/05
Goldman Sachs Financial Square Prime Obligations
Fund -- Institutional Shares
Goldman Sachs Group, Inc., Floating Rate Note, 2.33%(1),
01/27/05
Goldman Sachs Group, Inc., Floating Rate Note, 2.34%(1),
03/29/05
Harris Trust & Savings Bank, Time Deposit, 2.23%, 01/03/05
</Table>
156
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SECURITIES LENDING (CONTINUED)
<Table>
Lloyds TSB Bank, Time Deposit, 2.28%, 02/02/05
Merrill Lynch Premier Institutional Fund -- Institutional
Shares
Merrimac Cash Fund -- Premium Class
Morgan Stanley, Floating Rate Commercial Paper, 2.39%(1),
06/05/05
Morgan Stanley, Floating Rate Commercial Paper, 2.39%(1),
07/19/05
Royal Bank of Canada, Time Deposit, 2.25%, 01/19/05
Royal Bank of Canada, Time Deposit, 2.26%, 02/01/05
Royal Bank of Scotland, Time Deposit, 2.01%, 01/20/05
Royal Bank of Scotland, Time Deposit, 2.02%, 01/21/05
Royal Bank of Scotland, Time Deposit, 2.27%, 02/02/05
Svenska Handelsbanken, New York, Time Deposit, 2.25%,
01/10/05
The Bear Stearns Companies, Inc., Floating Rate Note,
2.45%(1), 06/05/05
The Bear Stearns Companies, Inc., Floating Rate Note,
2.45%(1), 09/08/05
Toronto Dominion Bank, Time Deposit, 2.42%, 03/01/05
Wells Fargo Bank, Time Deposit, 2.32%, 01/14/05
</Table>
- ---------------
(1) Variable rate security. The rate shown was in effect at December 31, 2004.
(2) Represents yield to maturity at time of purchase.
Information pertaining to the investment of the cash collateral is shown on the
Series' Portfolio of Investments.
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,
2004 were as follows:
<Table>
<Caption>
COST OF PROCEEDS
PURCHASES FROM SALES
--------------- ---------------
High Quality Bond Series............... Government Obligations $ 126,006,380 $ 82,084,425
Other 301,487,334 230,905,553
Intermediate Government Bond Series.... Government Obligations 1,486,752,661 1,435,241,541
Other 50,028,213 90,558,517
Core Bond Series....................... Government Obligations 13,040,591,255 12,682,493,110
Other 972,266,984 1,000,006,684
Balanced Series........................ Government Obligations 1,155,881,776 1,128,940,993
Other 267,168,809 322,143,570
Value & Income Series.................. Other 1,266,327,595 1,026,332,876
Growth & Income Series................. Other 1,940,368,092 1,960,453,610
Equity Growth Series................... Other 2,768,331,582 2,600,896,047
Mid-Cap Value Series................... Other 534,084,070 414,858,245
Mid-Cap Growth Series.................. Other 426,921,301 406,458,366
Small-Cap Value Series................. Other 102,907,717 57,136,725
Special Equity Series.................. Other 1,278,890,895 1,444,778,369
Small-Cap Growth Series................ Other 94,631,660 78,461,609
Aggressive Equity Series............... Other 920,241,917 939,620,234
High Yield Bond Series................. Other 291,830,050 230,886,598
International Equity Series............ Other 2,132,546,125 1,952,609,860
</Table>
157
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. LEGAL AND REGULATORY MATTERS
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 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
sale by the Value & Income Portfolio of approximately $10.3 million of the Notes
on or about October 30, 2001 are in dispute. The Subject Portfolios joined other
defendants in moving to dismiss all counts of the Complaint in 2004. The motion
was heard in September 2004. As of February 15, 2005, no ruling had yet been
issued. If the motion to dismiss is denied in whole or in part, the suit may
proceed to the active discovery phase, but that has not yet occurred. The
Subject Portfolios and their counsel have reviewed the Subject Portfolios'
records concerning 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. Only limited formal discovery has taken place.
The Subject Portfolios are not in a position to predict the likelihood that
Enron would 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.
SUBSEQUENT EVENTS
Diversified Investors Securities Corp. ("DISC") is the distributor for each of
the Series and a subsidiary of the Series Portfolio's investment advisor,
Diversified Investment Advisors, Inc. ("DIA").
On February 18, 2005, DISC was notified by NASD staff that it had made a
preliminary determination to recommend disciplinary action against DISC based on
claims of alleged market timing activity in the Diversified Investors
International Equity Fund and the Diversified Institutional International Equity
Fund (collectively, the "International Equity Funds") between July 1, 2003 and
October 31, 2003. NASD staff contends that DISC facilitated certain
shareholders' trading in the International Equity Funds' in contravention of
prospectus provisions that took effect on or about July 1, 2003, and otherwise
violated NASD rules. NASD staff also has alleged that DISC violated certain
record retention rules relating to email communications.
Like many U.S. financial services companies, DISC and DIA have responded to
requests for information from various governmental and self-regulatory agencies
in connection with investigations related to mutual fund trading activities.
DISC and DIA have cooperated fully with each request.
Although it is not anticipated that these developments will have an adverse
effect on the Series Portfolio, there can be no assurance at this time.
7. PROXY VOTING POLICIES AND PROCEDURES
A description of the Series Portfolio's proxy voting policies and procedures is
included in the Statement of Additional Information ("SAI"), which is available
without charge, upon request: (i) by calling 1-800-755-5803; (ii) on the Series
Portfolio's website at www.divinvest.com (Click on the icon for Sponsors, then
click on the icon for Corporate, then click on Investments) or (iii) on the
SEC's website at www.sec.gov. In addition, the Series is required to file Form
N-PX, with its complete proxy voting record for the twelve months ended June 30,
no later than August 31 of each year. The Series' filing for the twelve months
ended
158
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. PROXY VOTING POLICIES AND PROCEDURES (CONTINUED)
June 30, 2004, is available without charge, upon request: (i) by calling
1-800-755-5803; (ii) on the Series Portfolio's website at www.divinvest.com
(Click on the icon for Sponsors, then click on the icon for Corporate, then
click on Investments) or (iii) on the SEC's website at www.sec.gov.
8. QUARTERLY PORTFOLIOS
The Series Portfolio will file its portfolios of investments for the first and
third quarters (March 31 and September 30, respectively) with the SEC by May 30
and November 29, respectively, each year on Form N-Q. The Series Portfolio's
Form N-Q is available on the SEC's website at www.sec.gov. You may also obtain a
copy of Form N-Q without charge, upon request, by calling 1-800-755-5803.
9. CONCENTRATIONS AND INDEMNIFICATIONS
The Series may have elements of risk not typically associated with investments
in the United States of America due to concentrated investments in a limited
number of countries or regions, which may vary throughout the year. Such
concentrations may subject the Series to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions could
cause the securities and their markets to be less liquid and their prices more
volatile than those of comparable US securities.
As of December 31, 2004, the Mid-Cap Value Series and High Yield Bond Series
invested approximately 15.80% and 13.75% of their respective portfolios in
issuers outside the United States.
As of December 31, 2004, substantially all of the International Equity Series'
net assets consist of securities of issuers denominated in foreign currencies.
Changes in currency exchange rates will affect the value of, and investment
income from, such securities.
As of December 31, 2004, the International Equity Series invested approximately
20.85%, 16.40% and 10.71%, of its respective portfolio in issuers in Great
Britain, Japan and France, respectively.
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.
10. FOREIGN CURRENCY FORWARD CONTRACTS
At December 31, 2004, the Core Bond Series, Balanced Series, Special Equity
Series, High Yield Bond Series, and International Equity Series had entered into
foreign currency forward contracts which contractually obligate each portfolio
to deliver/receive currency at specified future dates. The open contracts were
as follows:
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 12/31/04 (DEPRECIATION)
----------- ----------- ---------- ----------- --------------
CORE BOND
PURCHASE CONTRACTS:
Canadian Dollar................... 19,738,461 $16,644,498 01/28/05 $16,448,827 $ (195,671)
Euro.............................. 40,463,982 53,755,712 01/25/05 54,915,406 1,159,694
Euro.............................. 17,384,374 23,344,102 01/25/05 23,593,080 248,978
Euro.............................. 980,608 1,313,612 01/25/05 1,330,825 17,213
Euro.............................. 13,590,811 17,506,324 01/25/05 18,444,673 938,349
Swedish Krona..................... 79,819,271 11,579,523 01/21/05 11,999,790 420,267
-----------
TOTAL............................. $ 2,588,830
===========
</Table>
159
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. FOREIGN CURRENCY FORWARD CONTRACTS (CONTINUED)
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 12/31/04 (DEPRECIATION)
----------- ----------- ---------- ----------- --------------
SALE CONTRACTS:
Canadian Dollar................... 19,738,461 $16,087,290 01/28/05 $16,448,827 $ (361,537)
Euro.............................. 64,849,038 81,729,243 01/25/05 88,009,413 (6,280,170)
Euro.............................. 7,570,737 9,835,826 01/25/05 10,274,572 (438,746)
New Mexico Peso................... 30,063,554 2,579,494 01/21/05 2,689,028 (109,534)
New Zealand Dollar................ 16,867,397 11,722,841 01/27/05 12,136,357 (413,516)
Swedish Krona..................... 79,819,271 10,987,912 01/21/05 11,999,790 (1,011,878)
-----------
TOTAL............................. $(8,615,381)
===========
BALANCED
PURCHASE CONTRACTS:
Canadian Dollar................... 1,827,900 $ 1,541,380 01/28/05 $ 1,523,260 $ (18,120)
Euro.............................. 70,078 93,876 01/25/05 95,106 1,230
Euro.............................. 2,094,779 2,698,285 01/25/05 2,842,914 144,629
Euro.............................. 3,477,985 4,620,444 01/25/05 4,720,123 99,679
Euro.............................. 1,589,484 2,134,393 01/25/05 2,157,157 22,764
Swedish Krona..................... 6,772,401 982,484 01/21/05 1,018,143 35,659
-----------
TOTAL............................. $ 285,841
===========
SALE CONTRACTS:
Canadian Dollar................... 1,827,900 $ 1,489,780 01/28/05 $ 1,523,260 $ (33,480)
Euro.............................. 769,995 1,000,370 01/25/05 1,044,993 (44,623)
Euro.............................. 6,220,145 7,839,249 01/25/05 8,441,626 (602,377)
Euro.............................. 242,186 311,693 01/25/05 328,681 (16,988)
New Mexico Peso................... 2,740,117 235,106 01/21/05 245,089 (9,983)
New Zealand Dollar................ 1,561,772 1,085,431 01/27/05 1,123,719 (38,288)
Swedish Krona..................... 6,772,401 932,288 01/21/05 1,018,143 (85,855)
-----------
TOTAL............................. $ (831,594)
===========
SPECIAL EQUITY
SALE CONTRACTS:
Canadian Dollar................... 164,436 $ 135,707 01/04/05 $ 137,195 $ (1,488)
Canadian Dollar................... 97,784 81,209 01/05/05 81,580 (371)
Canadian Dollar................... 382,062 318,226 01/06/05 318,736 (510)
-----------
TOTAL............................. $ (2,369)
===========
HIGH YIELD BOND
SALE CONTRACTS:
Euro.............................. 518,714 $ 699,922 01/31/05 $ 703,872 $ (3,950)
===========
INTERNATIONAL EQUITY
PURCHASE CONTRACTS:
Canadian Dollar................... 932,087 $ 769,874 01/04/05 $ 777,672 $ 7,798
Canadian Dollar................... 16,380 13,601 01/04/05 13,666 65
Euro.............................. 2,037,416 2,770,885 01/03/05 2,766,403 (4,482)
Euro.............................. 420,602 570,982 01/03/05 571,093 111
Euro.............................. 1,463,482 1,996,043 01/04/05 1,987,116 (8,927)
Japanese Yen...................... 173,404,693 1,683,933 01/04/05 1,689,775 5,842
Japanese Yen...................... 192,278,458 1,850,932 01/05/05 1,873,753 22,821
Japanese Yen...................... 84,680,966 817,518 01/06/05 825,242 7,724
-----------
TOTAL............................. $ 30,952
===========
</Table>
160
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. FOREIGN CURRENCY FORWARD CONTRACTS (CONTINUED)
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 12/31/04 (DEPRECIATION)
----------- ----------- ---------- ----------- --------------
SALE CONTRACTS:
Canadian Dollar................... 658,479 $ 546,864 01/05/05 $ 549,364 $ (2,500)
Euro.............................. 3,422,841 4,676,662 01/04/05 4,647,534 29,128
Euro.............................. 537,956 735,020 01/05/05 730,419 4,601
Euro.............................. 394,811 538,088 01/05/05 536,062 2,026
Euro.............................. 112,829 124,056 12/29/05 151,972 (27,916)
Great British Pound............... 205,973 394,488 01/04/05 395,469 (981)
Great British Pound............... 2,779,462 5,349,798 01/05/05 5,336,233 13,565
Great British Pound............... 40,483 78,112 01/06/05 77,717 395
Hong Kong Dollar.................. 3,356,710 431,870 01/04/05 431,887 (17)
Swedish Krona..................... 1,164,500 176,066 01/05/05 175,215 851
Swiss Franc....................... 646,946 571,128 01/04/05 568,943 2,185
-----------
TOTAL............................. $ 21,337
===========
</Table>
161
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
NET INVESTMENT
FOR THE NET EXPENSES NET INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED NET EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- ------------ --------------- -------------- --------------- --------- -------------- ------
MONEY MARKET
12/31/2004 0.28% 0.28% 1.17% 1.17% N/A $ 809,352,385 1.17%
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
HIGH QUALITY BOND
12/31/2004 0.38 0.38 2.96 2.96 48% 690,594,378 1.48
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
INTERMEDIATE GOVERNMENT BOND
12/31/2004 0.42 0.40 2.46 2.48 554 256,502,651 1.59
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
CORE BOND
12/31/2004 0.39 0.39 3.62 3.62 885 1,655,367,885 4.65
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
BALANCED
12/31/2004 0.52 0.50 2.19 2.21 338 419,726,689 8.31
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
</Table>
- ---------------
* Annualized.
(1) Commencement of Operations, April 27, 2001.
(2) Commencement of Operations, April 15, 2002.
162
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
NET INVESTMENT
FOR THE NET EXPENSES NET INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED NET EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- ------------ --------------- -------------- --------------- --------- -------------- ------
VALUE & INCOME
12/31/2004 0.48% 0.48% 1.79% 1.79% 44% $2,705,463,322 12.91%
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
GROWTH & INCOME
12/31/2004 0.64 0.64 1.22 1.22 184 1,135,948,434 10.79
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
EQUITY GROWTH
12/31/2004 0.65 0.65 0.68 0.68 129 2,290,559,947 7.75
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
MID-CAP VALUE
12/31/2004 0.71 0.70 0.78 0.79 147 414,710,679 25.47
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
12/31/2004 0.79 0.75 (0.33) (0.29) 223 210,100,872 15.38
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
12/31/2004 0.89 0.85 0.27 0.31 42 172,735,949 21.75
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>
- ---------------
* Annualized.
(1) Commencement of Operations, April 27, 2001.
(2) Commencement of Operations, April 15, 2002.
163
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
NET INVESTMENT
FOR THE NET EXPENSES NET INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED NET EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- ------------ --------------- -------------- --------------- --------- -------------- ------
SPECIAL EQUITY
12/31/2004 0.84% 0.84% 0.15% 0.15% 103% $1,227,530,742 12.63%
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
SMALL-CAP GROWTH
12/31/2004 0.97 0.90 (0.58) (0.51) 84 108,429,152 11.94
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
12/31/2004 0.95 0.94 (0.49) (0.48) 252 397,726,867 12.14
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
HIGH YIELD BOND
12/31/2004 0.60 0.60 8.06 8.06 80 351,772,536 10.32
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
INTERNATIONAL EQUITY
12/31/2004 0.87 0.87 1.85 1.85 171 1,401,617,944 19.66
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
</Table>
- ---------------
* Annualized.
(1) Commencement of Operations, April 27, 2001.
(2) Commencement of Operations, April 15, 2002.
164
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 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 the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements 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, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 22, 2005
165
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 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, 39................. Treasurer since 2001 Vice President and Director,
Diversified Investment Advisors,
Inc.
Robert F. Colby, 49.................... 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 Transamerica
Financial Life Insurance Company,
Inc.
Peter G. Kunkel, 54.................... Trustee since 2002 Senior Vice President, Chief
Operating Officer, Diversified
Investment Advisors, Inc.
Suzanne Montemurro, 40................. Assistant Treasurer Director, Diversified Investment
since 2002 Advisors, Inc.
Mark Mullin, 42........................ President since 2002 President, Chairman of the Board,
Trustee since 1995 Chief Executive Officer, Vice
President, Chief Investment
Officer, Diversified Investment
Advisors, Inc.
</Table>
166
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, 70..................... Trustee since 1993 Consultant; Independent Trustee,
355 Thornridge Drive EAI Select (a registered investment
Stamford, CT 06903 company)
Robert Lester Lindsay, 70.............. Trustee since 1993 Retired
2 Huguenot Center
Tenafly, NJ 07670
Eugene M. Mannella, 51................. Trustee since 1993 President, Investment Management
2 Orchard Neck Road Services, Inc.
Center Moriches, NY 11934
Joyce Galpern Norden, 65............... Trustee since 1993 Vice President, Institutional
505 Redleaf Road Advancement, Reconstructionist
Wynnewood, PA 19096 Rabbinical College
Patricia L. Sawyer, 54................. 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>
167
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 (2/05)
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 2004 and 2003 were $14,100
and $13,500, respectively.
(b) AUDIT RELATED FEE. - No such fees were billed by PWC for 2004 or 2003.
(c) TAX FEES. - No such fees were billed by PWC for 2004 or 2003.
(d) ALL OTHER FEES - No such fees were billed by PWC for 2004 or 2003.
(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 2004 and 2003, were $200,500 and $173,000, respectively.
The fees rendered were in connection with the examination of DIA's
record-keeping operations and (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 2004 and 2003 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. SCHEDULE OF INVESTMENTS.
Included in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. 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 12. Exhibits.
(a) (1) Code of Ethics, attached.
(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.
(a) (3) Not applicable.
(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 1, 2005
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 1, 2005
By /s/ Joseph Carusone
Joseph Carusone
Principal Financial Officer
Date March 1, 2005