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
Diversified Investors Strategic Variable Funds
----------------------------------------------
(Exact name of Registrant as specified
in charter)
Address of Registrant: 4 Manhattanville Road
----------------------------------------------
Purchase, NY 10577
----------------------------------------------
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, 2005
-----------------
Date of reporting period: June 30, 2005
-------------
ITEM 1. REPORTS TO STOCKHOLDERS.
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
DIVERSIFIED INVESTORS VARIABLE FUNDS
DIVERSIFIED INVESTORS
STRATEGIC VARIABLE FUNDS
SEMI-ANNUAL REPORT
June 30, 2005
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 -- June 30, 2005........ 10
Statements of Changes in Net Assets -- December 31, 2004.... 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
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS:
An Explanation of Fund Expenses............................. 26
Statements of Assets and Liabilities........................ 27
Statements of Operations.................................... 28
Statements of Changes in Net Assets -- June 30, 2005........ 29
Statements of Changes in Net Assets -- December 31, 2004.... 30
PORTFOLIOS OF INVESTMENTS:
Short Horizon Strategic Variable Fund..................... 31
Intermediate Horizon Strategic Variable Fund.............. 32
Intermediate Long Horizon Strategic Variable Fund......... 33
Portfolio Composition....................................... 34
Notes to Financial Statements............................... 35
Approval of Investment Advisory Contracts................... 41
DIVERSIFIED INVESTORS PORTFOLIOS:
Economic Overview........................................... 44
Statements of Assets and Liabilities........................ 52
Statements of Operations.................................... 56
Statements of Changes in Net Assets -- June 30, 2005........ 60
Statements of Changes in Net Assets -- December 31, 2004.... 64
PORTFOLIOS OF INVESTMENTS:
Money Market Portfolio.................................... 66
High Quality Bond Portfolio............................... 68
Intermediate Government Bond Portfolio.................... 76
Core Bond Portfolio....................................... 78
Total Return Bond Portfolio............................... 94
Balanced Portfolio........................................ 98
Value & Income Portfolio.................................. 109
Value Portfolio........................................... 112
Growth & Income Portfolio................................. 114
Equity Growth Portfolio................................... 120
Mid-Cap Value Portfolio................................... 123
Mid-Cap Growth Portfolio.................................. 127
Small-Cap Value Portfolio................................. 129
Special Equity Portfolio.................................. 131
Small-Cap Growth Portfolio................................ 143
Aggressive Equity Portfolio............................... 145
High Yield Bond Portfolio................................. 147
International Equity Portfolio............................ 157
Summary of Footnotes and Abbreviations to Portfolios........ 162
Portfolio Composition....................................... 163
Notes to Financial Statements............................... 165
Approval of Investment Advisory Contracts................... 185
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 (a "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 (such as distribution fees, administrative
fees, and other expenses).
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 January 1,
2005 - June 30, 2005. 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 January 1,
2005 - June 30, 2005 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 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 January 1, 2005 - Expense
MONEY MARKET January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,007.90 $5.53 1.11%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,019.29 $5.56 1.11%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
HIGH QUALITY BOND January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,006.30 $7.37 1.48%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.45 $7.41 1.48%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
INTERMEDIATE GOVERNMENT BOND January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,010.50 $7.48 1.50%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.36 $7.50 1.50%
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 January 1, 2005 - Expense
CORE BOND January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,016.10 $7.42 1.49%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,017.43 $7.43 1.49%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
BALANCED January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,004.40 $7.95 1.60%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.86 $8.00 1.60%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
VALUE & INCOME January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,003.80 $7.84 1.58%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.97 $7.89 1.58%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
GROWTH & INCOME January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $993.00 $8.56 1.73%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.20 $8.66 1.73%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
EQUITY GROWTH January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $978.20 $8.57 1.75%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.13 $8.73 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 January 1, 2005 - Expense
SPECIAL EQUITY January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,020.70 $9.71 1.94%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.18 $9.69 1.94%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
AGGRESSIVE EQUITY January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $967.60 $9.27 1.90%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.37 $9.50 1.90%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
HIGH YIELD BOND January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,000.00 $8.42 1.70%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.38 $8.49 1.70%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2005 - Expense
INTERNATIONAL EQUITY January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $967.20 $9.61 1.97%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.02 $9.85 1.97%
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 January 1, 2005 - Expense
CALVERT SUBACCOUNT January 1, 2005 June 30, 2005 June 30, 2005(2) Ratio(2)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,010.00 $5.48 1.10%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,019.34 $5.51 1.10%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
(1) These figures reflect the expenses of both the trust and its corresponding
portfolio.
(2) These figures do not include expenses incurred by the Calvert Social
Balanced Portfolio.
5
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
----------- ----------- ------------ ----------- -----------
ASSETS:
Investment in the Portfolios, at value (Notes 1 and
2)................................................... $37,301,560 $23,555,326 $26,891,055 $62,293,929 $83,267,283
Receivable for units sold.............................. 104,224 20,322 15,346 37,404 52,385
----------- ----------- ----------- ----------- -----------
Total assets........................................... 37,405,784 23,575,648 26,906,401 62,331,333 83,319,668
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for units redeemed............................. 88,292 87 9,885 3,637 56,695
Accrued mortality and expense risk..................... 25,343 21,171 24,321 55,724 75,512
----------- ----------- ----------- ----------- -----------
Total liabilities...................................... 113,635 21,258 34,206 59,361 132,207
----------- ----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS..... $37,292,149 $23,554,390 $26,872,195 $62,271,972 $83,187,461
=========== =========== =========== =========== ===========
ACCUMULATION UNITS..................................... 1,956,534 1,629,095 1,327,545 2,016,930 2,292,453
=========== =========== =========== =========== ===========
UNIT VALUE............................................. $ 19.06 $ 14.46 $ 20.24 $ 30.87 $ 36.29
=========== =========== =========== =========== ===========
</Table>
See notes to financial statements.
6
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ---------- -------------
$340,840,536 $132,476,820 $208,256,602 $115,492,597 $55,007,400 $3,963,462 $70,401,583
140,800 88,055 128,242 62,711 33,670 66 37,367
------------ ------------ ------------ ------------ ----------- ---------- -----------
340,981,336 132,564,875 208,384,844 115,555,308 55,041,070 3,963,528 70,438,950
------------ ------------ ------------ ------------ ----------- ---------- -----------
120,508 61,797 83,376 14,689 39,588 -- 47,017
309,137 120,135 190,202 102,907 50,138 3,581 63,284
------------ ------------ ------------ ------------ ----------- ---------- -----------
429,645 181,932 273,578 117,596 89,726 3,581 110,301
------------ ------------ ------------ ------------ ----------- ---------- -----------
$340,551,691 $132,382,943 $208,111,266 $115,437,712 $54,951,344 $3,959,947 $70,328,649
============ ============ ============ ============ =========== ========== ===========
6,742,083 5,516,842 4,556,175 3,487,622 3,915,412 238,910 3,781,240
============ ============ ============ ============ =========== ========== ===========
$ 50.51 $ 24.00 $ 45.68 $ 33.10 $ 14.03 $ 16.58 $ 18.60
============ ============ ============ ============ =========== ========== ===========
</Table>
7
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
-------- ------------ ------------ ---------- -----------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIOS (NOTE 2):
Interest income.......................................... $505,052 $ 422,644 $485,598 $1,283,257 $ 665,472
Securities lending income (net).......................... -- 301 5,177 4,417 2,377
Dividend income.......................................... -- -- -- -- 455,757
Expenses................................................. (51,090) (44,663) (55,072) (117,237) (209,907)
-------- --------- -------- ---------- -----------
Net investment income (loss) allocated from Portfolios... 453,962 378,282 435,703 1,170,437 913,699
-------- --------- -------- ---------- -----------
EXPENSES (NOTE 4):
Mortality and expense risk............................... 204,704 128,730 151,372 334,682 461,588
Less expenses reimbursed by TFLIC........................ (49,228) -- -- -- --
-------- --------- -------- ---------- -----------
Net expenses............................................. 155,476 128,730 151,372 334,682 461,588
-------- --------- -------- ---------- -----------
NET INVESTMENT INCOME (LOSS)............................. 298,486 249,552 284,331 835,755 452,111
-------- --------- -------- ---------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) allocated from Portfolios on:
Securities............................................. 21 (29,857) (52,219) 126,685 3,721,666
Futures, written and purchased options and short
sales................................................ -- -- -- (225,892) 89,439
Foreign currency transactions.......................... -- -- -- 22,064 (109,123)
Change in net unrealized appreciation (depreciation)
allocated from Portfolios on:
Securities............................................. -- (81,780) 44,036 18,047 (3,950,581)
Futures, written and purchased options and short
sales................................................ -- -- -- (34,869) (45,863)
Foreign currency translations.......................... -- -- -- 257,785 181,613
-------- --------- -------- ---------- -----------
Net realized and unrealized gains (losses) on
investments............................................ 21 (111,637) (8,183) 163,820 (112,849)
-------- --------- -------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $298,507 $ 137,915 $276,148 $ 999,575 $ 339,262
======== ========= ======== ========== ===========
</Table>
See notes to financial statements.
8
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD
INCOME INCOME GROWTH EQUITY EQUITY BOND
--------------- ------------- ------------- ------------- ------------- -------------
$ 124,139 $ 18,218 $ 72,602 $ 45,636 $ 8,483 $ 167,419
49,389 8,156 9,559 27,063 5,391 --
2,948,250 980,010 982,101 463,267 144,715 996
(805,353) (416,698) (671,530) (464,394) (218,921) (12,197)
------------ ----------- ----------- ----------- ----------- ---------
2,316,425 589,686 392,732 71,572 (60,332) 156,218
------------ ----------- ----------- ----------- ----------- ---------
1,854,536 724,144 1,142,908 609,252 300,814 22,456
-- -- -- -- -- --
------------ ----------- ----------- ----------- ----------- ---------
1,854,536 724,144 1,142,908 609,252 300,814 22,456
------------ ----------- ----------- ----------- ----------- ---------
461,889 (134,458) (750,176) (537,680) (361,146) 133,762
------------ ----------- ----------- ----------- ----------- ---------
20,459,785 2,668,856 2,537,993 7,138,489 994,805 16,732
-- (1,270) -- (8,491) -- --
-- (23) -- (33) -- 861
(19,672,411) (3,594,936) (6,860,531) (4,374,807) (2,582,983) (145,901)
-- (6,258) -- 3,680 -- --
-- -- (8) 12 -- 7
------------ ----------- ----------- ----------- ----------- ---------
787,374 (933,631) (4,322,546) 2,758,850 (1,588,178) (128,301)
------------ ----------- ----------- ----------- ----------- ---------
$ 1,249,263 $(1,068,089) $(5,072,722) $ 2,221,170 $(1,949,324) $ 5,461
============ =========== =========== =========== =========== =========
<Caption>
INTERNATIONAL
EQUITY
-------------
$ 13,421
43,501
1,356,324
(308,467)
-----------
1,104,779
-----------
389,543
--
-----------
389,543
-----------
715,236
-----------
1,112,279
--
(30,095)
(4,167,147)
--
(18,428)
-----------
(3,103,391)
-----------
$(2,388,155)
===========
</Table>
9
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
------------ ----------- ------------ ----------- ------------
FROM OPERATIONS:
Net investment income (loss)......................... $ 298,486 $ 249,552 $ 284,331 $ 835,755 $ 452,111
Net realized gains (losses) allocated from Portfolios
on:
Securities......................................... 21 (29,857) (52,219) 126,685 3,721,666
Futures, written and purchased options and short
sales............................................ -- -- -- (225,892) 89,439
Foreign currency transactions...................... -- -- -- 22,064 (109,123)
Change in net unrealized appreciation (depreciation)
allocated from Portfolios on:
Securities......................................... -- (81,780) 44,036 18,047 (3,950,581)
Futures, written and purchased options and short
sales............................................ -- -- -- (34,869) (45,863)
Foreign currency translations...................... -- -- -- 257,785 181,613
------------ ----------- ----------- ----------- ------------
Net increase (decrease) in net assets resulting from
operations......................................... 298,507 137,915 276,148 999,575 339,262
------------ ----------- ----------- ----------- ------------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold........................................... 21,307,634 1,876,396 2,581,014 4,613,008 5,472,720
Units redeemed....................................... (24,571,877) (2,875,408) (5,393,724) (5,190,336) (11,202,686)
------------ ----------- ----------- ----------- ------------
Net increase (decrease) in net assets resulting from
unit transactions.................................. (3,264,243) (999,012) (2,812,710) (577,328) (5,729,966)
------------ ----------- ----------- ----------- ------------
Total increase (decrease) in net assets.............. (2,965,736) (861,097) (2,536,562) 422,247 (5,390,704)
NET ASSETS:
Beginning of period.................................. 40,257,885 24,415,487 29,408,757 61,849,725 88,578,165
------------ ----------- ----------- ----------- ------------
End of period........................................ $ 37,292,149 $23,554,390 $26,872,195 $62,271,972 $ 83,187,461
============ =========== =========== =========== ============
Units outstanding beginning of period................ 2,129,128 1,698,725 1,467,906 2,036,065 2,451,834
Units sold........................................... 1,123,189 130,553 128,930 151,237 152,999
Units redeemed....................................... (1,295,783) (200,183) (269,291) (170,372) (312,380)
------------ ----------- ----------- ----------- ------------
Units outstanding end of period...................... 1,956,534 1,629,095 1,327,545 2,016,930 2,292,453
============ =========== =========== =========== ============
</Table>
See notes to financial statements.
10
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ---------- -------------
$ 461,889 $ (134,458) $ (750,176) $ (537,680) $ (361,146) $ 133,762 $ 715,236
20,459,785 2,668,856 2,537,993 7,138,489 994,805 16,732 1,112,279
-- (1,270) -- (8,491) -- -- --
-- (23) -- (33) -- 861 (30,095)
(19,672,411) (3,594,936) (6,860,531) (4,374,807) (2,582,983) (145,901) (4,167,147)
-- (6,258) -- 3,680 -- -- --
-- -- (8) 12 -- 7 (18,428)
------------ ------------ ------------ ------------ ----------- ---------- -----------
1,249,263 (1,068,089) (5,072,722) 2,221,170 (1,949,324) 5,461 (2,388,155)
------------ ------------ ------------ ------------ ----------- ---------- -----------
19,054,858 10,254,238 10,369,124 9,903,596 5,364,581 221,717 6,555,063
(27,041,838) (15,549,841) (20,609,915) (14,001,970) (7,802,197) (856,741) (7,626,719)
------------ ------------ ------------ ------------ ----------- ---------- -----------
(7,986,980) (5,295,603) (10,240,791) (4,098,374) (2,437,616) (635,024) (1,071,656)
------------ ------------ ------------ ------------ ----------- ---------- -----------
(6,737,717) (6,363,692) (15,313,513) (1,877,204) (4,386,940) (629,563) (3,459,811)
347,289,408 138,746,635 223,424,779 117,314,916 59,338,284 4,589,510 73,788,460
------------ ------------ ------------ ------------ ----------- ---------- -----------
$340,551,691 $132,382,943 $208,111,266 $115,437,712 $54,951,344 $3,959,947 $70,328,649
============ ============ ============ ============ =========== ========== ===========
6,901,393 5,739,439 4,783,781 3,617,451 4,092,218 276,841 3,836,891
382,014 434,798 231,217 314,544 390,541 13,440 349,773
(541,324) (657,395) (458,823) (444,373) (567,347) (51,371) (405,424)
------------ ------------ ------------ ------------ ----------- ---------- -----------
6,742,083 5,516,842 4,556,175 3,487,622 3,915,412 238,910 3,781,240
============ ============ ============ ============ =========== ========== ===========
</Table>
11
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.
12
<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>
13
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2005
(UNAUDITED)
<Table>
ASSETS:
Investments, at cost........................................ $41,468,955
===========
Investments, at value (Note 6).............................. $40,551,439
Receivable for units sold................................... 38,343
-----------
Total assets................................................ 40,589,782
-----------
LIABILITIES:
Payable for units redeemed.................................. 4,510
Payable for securities purchased............................ 33,833
Accrued mortality and expense risk.......................... 36,595
-----------
Total liabilities........................................... 74,938
-----------
NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS.......... $40,514,844
===========
ACCUMULATION UNITS.......................................... 1,439,176
===========
UNIT VALUE.................................................. $ 28.15
===========
</Table>
See notes to financial statements.
14
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
INVESTMENT INCOME (NOTE 2):
Dividend income............................................. $ --
---------
EXPENSES (NOTE 4):
Mortality and expense risk.................................. 218,403
---------
NET INVESTMENT INCOME (LOSS)................................ (218,403)
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE
2):
Net realized gains (losses) on securities................... (150,485)
Change in net unrealized appreciation (depreciation) on
securities................................................ 770,673
---------
Net realized and unrealized gains (losses) on investments... 620,188
---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 401,785
=========
</Table>
See notes to financial statements.
15
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE PERIOD ENDED
JUNE 30, 2005 FOR THE YEAR ENDED
(UNAUDITED) DECEMBER 31, 2004
-------------------- ------------------
FROM OPERATIONS:
Net investment income (loss)............................... $ (218,403) $ 245,178
Net realized gains (losses) on securities.................. (150,485) (388,818)
Change in net unrealized appreciation (depreciation) on
securities............................................... 770,673 2,802,137
----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................... 401,785 2,658,497
----------- -----------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold................................................. 3,422,882 7,151,803
Units redeemed............................................. (3,654,436) (6,011,153)
----------- -----------
Net increase (decrease) in net assets resulting from unit
transactions............................................. (231,554) 1,140,650
----------- -----------
Total increase (decrease) in net assets.................... 170,231 3,799,147
NET ASSETS:
Beginning of period/year................................... 40,344,613 36,545,466
----------- -----------
End of period/year......................................... $40,514,844 $40,344,613
=========== ===========
Units outstanding beginning of period/year................. 1,447,441 1,403,970
Units sold................................................. 123,652 270,209
Units redeemed............................................. (131,917) (226,738)
----------- -----------
Units outstanding end of period/year....................... 1,439,176 1,447,441
=========== ===========
</Table>
See notes to financial statements.
16
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 NV,
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 June 30, 2005, each of the DIVF
subaccounts' investment in the corresponding Portfolios was as follows:
<Table>
<Caption>
PERCENTAGE INVESTMENT
SUBACCOUNT IN PORTFOLIO
- ---------- ---------------------
Money Market................................................ 4.20
High Quality Bond........................................... 3.14
Intermediate Government Bond................................ 11.52
Core Bond................................................... 3.33
Balanced.................................................... 20.40
Value & Income.............................................. 12.07
Growth & Income............................................. 12.11
Equity Growth............................................... 9.00
Special Equity.............................................. 9.23
Aggressive Equity........................................... 14.95
High Yield Bond............................................. 1.06
International Equity........................................ 4.89
</Table>
For information regarding each Portfolio's investments, please refer to the
Portfolio Composition section of the Portfolios' financial statements, which
accompanies 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 the 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)
(UNAUDITED)
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 $1,383,492 and $1,834,138
respectively.
The U.S. federal income tax basis of DIVF's investment in the Calvert subaccount
at June 30, 2005, was $41,468,955 and net unrealized depreciation for US federal
income tax purposes was $917,516 (gross unrealized depreciation was $917,516).
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 had elected to voluntarily
waive a portion of its fees to maintain a positive yield in the Money Market
Subaccount. Subsequent to June 30, 2005, TFLIC terminated this waiver.
18
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 six months ended June
30, 2005 or for the year ended December 31, 2004.
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 June 30, 2005, it
holds 21,331,635 shares with a market value of $40,551,439.
7. LEGAL AND REGULATORY MATTERS
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 (the "International Equity Fund") between July 1, 2003
and October 31, 2003. NASD staff contends that DISC facilitated certain
shareholders' trading in the International Equity Fund 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.
DISC and DIA are continuing to provide information to the NASD and have also
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 period/year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
----------------------------
NET NET REALIZED TOTAL INCOME
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM UNIT VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE PERIOD/YEAR ENDED PERIOD/YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS PERIOD/YEAR
- ------------------------- ------------ ---------- -------------- ------------- -----------
MONEY MARKET
06/30/2005(1) $18.91 $0.15 $ 0.00(c) $ 0.15 $19.06
12/31/2004 18.84 0.06 0.01 0.07 18.91
12/31/2003 18.81 0.03 (0.00)(c) 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)(c) 0.93 18.11
HIGH QUALITY BOND
06/30/2005(1) 14.37 0.15 (0.06) 0.09 14.46
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
06/30/2005(1) 20.03 0.21 (0.00)(c) 0.21 20.24
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
06/30/2005(1) 30.38 0.42 0.07 0.49 30.87
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
06/30/2005(1) 36.13 0.19 (0.03) 0.16 36.29
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>
- ---------------
(a) Calculated based upon average units outstanding.
(b) Portfolio turnover of the Portfolio or Calvert.
(c) Amount rounds to less than one penny per share.
(d) Reimbursement of fees occurs at the underlying Portfolio level.
(e) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio.
(1) Unaudited.
* Annualized.
20
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
NET NET INVESTMENT EXPENSES, INCLUDING EXPENSES
NET ASSETS, INVESTMENT INCOME (LOSS) INCLUDING OF THE PORTFOLIO
END OF TOTAL INCOME (NET OF EXPENSES OF (NET OF PORTFOLIO
PERIOD/YEAR RETURN (LOSS) REIMBURSEMENTS) THE PORTFOLIO REIMBURSEMENTS) TURNOVER(B)
------------ ------- ---------- --------------- ------------- ------------------ -----------
$ 37,292,149 0.79% 1.34%* 1.60%* 1.37%* 1.11%* N/A
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
23,554,390 0.63 2.13* 2.13* 1.48* 1.48* 19%
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
26,872,195 1.05 2.07* 2.07* 1.50* 1.50(d)* 397
29,408,757 0.45 1.35 1.37 1.52 1.50(d) 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
62,271,972 1.61 2.75* 2.75* 1.49* 1.49* 571
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(d) 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
83,187,461 0.44 1.03* 1.08* 1.65* 1.60(d)* 252
88,578,165 7.12 1.09 1.11 1.62 1.60(d) 338
89,699,459 16.43 1.05 1.06 1.61 1.60(d) 377
79,573,766 (11.00) 1.53 1.55 1.62 1.60(d) 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 VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM UNIT VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE PERIOD/YEAR ENDED PERIOD/YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS PERIOD/YEAR
- ------------------------- ------------ ---------- -------------- ------------- -----------
VALUE & INCOME
06/30/2005(1) $50.32 $ 0.07 $ 0.12 $ 0.19 $50.51
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
06/30/2005(1) 24.17 (0.02) (0.15) (0.17) 24.00
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
06/30/2005(1) 46.70 (0.16) (0.86) (1.02) 45.68
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
06/30/2005(1) 32.43 (0.15) 0.82 0.67 33.10
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>
- ---------------
(a) Calculated based upon average units outstanding.
(b) Portfolio turnover of the Portfolio or Calvert.
(c) Amount rounds to less than one penny per share.
(d) Reimbursement of fees occurs at the underlying Portfolio level.
(e) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio.
(1) Unaudited.
* Annualized.
22
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
NET NET INVESTMENT EXPENSES, INCLUDING EXPENSES
NET ASSETS, INVESTMENT INCOME (LOSS) INCLUDING OF THE PORTFOLIO
END OF TOTAL INCOME (NET OF EXPENSES OF (NET OF PORTFOLIO
PERIOD/YEAR RETURN (LOSS) REIMBURSEMENTS) THE PORTFOLIO REIMBURSEMENTS) TURNOVER(B)
------------ ------ ---------- --------------- ------------- ------------------ -----------
$340,551,691 0.38% 0.27%* 0.27%* 1.58%* 1.58%* 73%
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
132,382,943 (0.70) (0.20)* (0.20)* 1.73* 1.73* 40
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(d) 100
100,189,150 (23.44) (0.33) (0.32) 1.76 1.75(d) 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
208,111,266 (2.18) (0.72)* (0.72)* 1.75* 1.75* 41
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
115,437,712 2.07 (0.97)* (0.97)* 1.94* 1.94* 55
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(d) 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 VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM UNIT VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE PERIOD/YEAR ENDED PERIOD/YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS PERIOD/YEAR
- ------------------------- ------------ ---------- -------------- ------------- -----------
AGGRESSIVE EQUITY
06/30/2005(1) $14.50 $(0.09) $(0.38) $(0.47) $14.03
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
06/30/2005(1) 16.58 0.54 (0.54) -- 16.58
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
06/30/2005(1) 19.23 0.19 (0.82) (0.63) 18.60
12/31/2004 16.25 0.13 2.85 2.98 19.23
12/31/2003 12.30 0.00(c) 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
06/30/2005(1) 27.87 (0.15) 0.43 0.28 28.15
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>
- ---------------
(a) Calculated based upon average units outstanding.
(b) Portfolio turnover of the Portfolio or Calvert.
(c) Amount rounds to less than one penny per share.
(d) Reimbursement of fees occurs at the underlying Portfolio level.
(e) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio.
(1) Unaudited.
* Annualized.
24
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
NET NET INVESTMENT EXPENSES, INCLUDING EXPENSES
NET ASSETS, INVESTMENT INCOME (LOSS) INCLUDING OF THE PORTFOLIO
END OF TOTAL INCOME (NET OF EXPENSES OF (NET OF PORTFOLIO
PERIOD/YEAR RETURN (LOSS) REIMBURSEMENTS) THE PORTFOLIO REIMBURSEMENTS) TURNOVER(B)
----------- ------ ---------- --------------- ------------- ------------------ -----------
$54,951,344 (3.24)% (1.33)%* (1.32)%* 1.91%* 1.90%(d)* 98%
59,338,284 10.86 (1.59) (1.58) 2.06 2.05(d) 252
55,827,123 26.74 (1.72) (1.71) 2.11 2.10(d) 165
42,349,073 (27.38) (1.70) (1.69) 2.11 2.10(d) 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
3,959,947 0.00 6.55* 6.55* 1.70* 1.70(d)* 35
4,589,510 9.29 6.97 6.97 1.70 1.70(d) 80
4,091,738 26.52 8.02 8.03 1.71 1.70(d) 136
5,221,809 1.01 8.04 8.05 1.71 1.70(d) 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
70,328,649 (3.28) 2.02* 2.02* 1.97* 1.97* 48
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(d) 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
40,514,844 1.00 (1.10)* (1.10)* 1.10(e)* 1.10(e)* 3
40,344,613 7.07 0.65 0.65 1.10(e) 1.10(e) 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
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES
(UNAUDITED)
As a shareholder in an open-end management investment company (a "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 January 1,
2005 - June 30, 2005. 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 January 1,
2005 - June 30, 2005 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 January 1, 2005 - Expense
SHORT HORIZON January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
Actual $1,000 $1,008.20 $1.00 0.20%
Hypothetical $1,000 $1,023.80 $1.00 0.20%
(5% annual return before expenses)
</Table>
<Table>
<Caption>
Expenses Paid
Beginning Account Ending Account During the Period Annualized
INTERMEDIATE Value Value January 1, 2005 - Expense
HORIZON January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
Actual $1,000 $998.70 $0.99 0.20%
Hypothetical $1,000 $1,023.80 $1.00 0.20%
(5% annual return before expenses)
</Table>
<Table>
<Caption>
Expenses Paid
INTERMEDIATE Beginning Account Ending Account During the Period Annualized
LONG Value Value January 1, 2005 - Expense
HORIZON January 1, 2005 June 30, 2005 June 30, 2005(1) Ratio(1)
Actual $1,000 $994.40 $0.99 0.20%
Hypothetical $1,000 $1,023.80 $1.00 0.20%
(5% annual return before expenses)
</Table>
- ---------------
(1) These figures exclude the fees and expenses of the underlying investments in
DIVF.
26
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
ASSETS:
Investments in affiliates, at cost....................... $ 9,211,143 $25,025,969 $35,944,666
=========== =========== ===========
Investments in affiliates, at value (Notes 1 and 2)...... $10,333,801 $28,119,358 $40,601,275
Receivable for securities sold........................... -- -- 25,586
Receivable for units sold................................ 4,965 11,782 22,631
----------- ----------- -----------
Total assets............................................. 10,338,766 28,131,140 40,649,492
----------- ----------- -----------
LIABILITIES:
Payable for securities purchased......................... 4,210 9,684 --
Payable for units redeemed............................... 755 2,098 48,217
Accrued investment advisory fees......................... 1,682 4,608 6,656
----------- ----------- -----------
Total liabilities........................................ 6,647 16,390 54,873
----------- ----------- -----------
NET ASSETS............................................... $10,332,119 $28,114,750 $40,594,619
=========== =========== ===========
ACCUMULATION UNITS....................................... 698,225 1,816,036 2,541,520
=========== =========== ===========
UNIT VALUE............................................... $ 14.80 $ 15.48 $ 15.97
=========== =========== ===========
NET ASSETS CONSIST OF:
Cost of accumulation units............................... $ 8,533,826 $23,328,088 $34,844,220
Undistributed (accumulated) net realized gains
(losses)............................................... 765,492 1,975,486 1,461,140
Undistributed (accumulated) net investment income
(loss)................................................. (89,857) (282,213) (367,350)
Net unrealized appreciation (depreciation) on
investments............................................ 1,122,658 3,093,389 4,656,609
----------- ----------- -----------
NET ASSETS............................................... $10,332,119 $28,114,750 $40,594,619
=========== =========== ===========
</Table>
See notes to financial statements.
27
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
INVESTMENT ADVISORY FEES (NOTE 3)........................ $(10,118) $(27,943) $ (39,638)
-------- -------- ---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS IN
AFFILIATES (NOTE 2):
Net realized gains (losses) on investments in
affiliates............................................. 54,471 5,190 6,555
Change in net unrealized appreciation (depreciation) on
investments in affiliates.............................. 35,535 (12,994) (184,279)
-------- -------- ---------
Net realized and unrealized gains (losses) on investments
in affiliates.......................................... 90,006 (7,804) (177,724)
-------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $ 79,888 $(35,747) $(217,362)
======== ======== =========
</Table>
See notes to financial statements.
28
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
FROM OPERATIONS:
Investment advisory fees.............................. $ (10,118) $ (27,943) $ (39,638)
Net realized gains (losses) on investments in
affiliates.......................................... 54,471 5,190 6,555
Change in net unrealized appreciation (depreciation)
on investments in affiliates........................ 35,535 (12,994) (184,279)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... 79,888 (35,747) (217,362)
----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Units sold............................................ 2,347,242 3,622,008 5,249,775
Units redeemed........................................ (2,286,310) (4,191,534) (4,560,267)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
unit transactions................................... 60,932 (569,526) 689,508
----------- ----------- -----------
Total increase (decrease) in net assets............... 140,820 (605,273) 472,146
NET ASSETS:
Beginning of period................................... 10,191,299 28,720,023 40,122,473
----------- ----------- -----------
End of period......................................... $10,332,119 $28,114,750 $40,594,619
=========== =========== ===========
Units outstanding beginning of period................. 694,223 1,853,382 2,497,752
Units sold............................................ 160,200 236,868 333,089
Units redeemed........................................ (156,198) (274,214) (289,321)
----------- ----------- -----------
Units outstanding end of period....................... 698,225 1,816,036 2,541,520
=========== =========== ===========
</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
SHORT HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
180,654 Diversified Investors Variable Funds -- Core Bond........... $ 5,577,612
7,378 Diversified Investors Variable Funds -- Equity Growth....... 337,001
5,329 Diversified Investors Variable Funds -- Growth & Income..... 127,878
190,999 Diversified Investors Variable Funds -- High Quality Bond... 2,761,582
56,217 Diversified Investors Variable Funds -- High Yield Bond..... 931,801
8,268 Diversified Investors Variable Funds -- International
Equity.................................................... 153,772
2,460 Diversified Investors Variable Funds -- Money Market........ 46,888
1,857 Diversified Investors Variable Funds -- Special Equity...... 61,447
6,648 Diversified Investors Variable Funds -- Value & Income...... 335,820
-----------
Total Investments -- 100.0% (Cost $9,211,143)............... 10,333,801
Liabilities less other assets -- (0.0%)..................... (1,682)
-----------
NET ASSETS -- 100.0%........................................ $10,332,119
===========
The aggregate cost of investments for federal income tax purposes at June 30, 2005
is $9,211,143.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 1,122,658
===========
</Table>
See notes to financial statements.
31
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
255,315 Diversified Investors Variable Funds -- Core Bond........... $ 7,882,727
104,786 Diversified Investors Variable Funds -- Equity Growth....... 4,786,300
77,194 Diversified Investors Variable Funds -- Growth & Income..... 1,852,326
267,367 Diversified Investors Variable Funds -- High Quality Bond... 3,865,749
84,155 Diversified Investors Variable Funds -- High Yield Bond..... 1,394,877
123,343 Diversified Investors Variable Funds -- International
Equity.................................................... 2,294,087
13,091 Diversified Investors Variable Funds -- Money Market........ 249,515
28,405 Diversified Investors Variable Funds -- Special Equity...... 940,079
96,086 Diversified Investors Variable Funds -- Value & Income...... 4,853,698
-----------
Total Investments -- 100.0% (Cost $25,025,969).............. 28,119,358
Liabilities less other assets -- (0.0%)..................... (4,608)
-----------
NET ASSETS -- 100.0%........................................ $28,114,750
===========
The aggregate cost of investments for federal income tax purposes at June 30, 2005
is $25,025,969.
The following amounts are based on cost for federal income tax purposes:
Gross unrealized appreciation............................... $ 3,157,396
Gross unrealized depreciation............................... (64,007)
-----------
Net unrealized appreciation................................. $ 3,093,389
===========
</Table>
See notes to financial statements.
32
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
215,399 Diversified Investors Variable Funds -- Core Bond........... $ 6,650,332
202,963 Diversified Investors Variable Funds -- Equity Growth....... 9,270,704
149,454 Diversified Investors Variable Funds -- Growth & Income..... 3,586,257
216,893 Diversified Investors Variable Funds -- High Quality Bond... 3,135,968
69,048 Diversified Investors Variable Funds -- High Yield Bond..... 1,144,471
236,130 Diversified Investors Variable Funds -- International
Equity.................................................... 4,391,858
72,597 Diversified Investors Variable Funds -- Money Market........ 1,383,722
54,350 Diversified Investors Variable Funds -- Special Equity...... 1,798,739
182,904 Diversified Investors Variable Funds -- Value & Income...... 9,239,224
-----------
Total Investments -- 100.0% (Cost $35,944,666).............. 40,601,275
Liabilities less other assets -- (0.0%)..................... (6,656)
-----------
NET ASSETS -- 100.0%........................................ $40,594,619
===========
The aggregate cost of investments for federal income tax purposes at June 30, 2005
is $35,944,666.
The following amounts are based on cost for federal income tax purposes:
Gross unrealized appreciation............................... $ 4,817,915
Gross unrealized depreciation............................... (161,306)
-----------
Net unrealized appreciation................................. $ 4,656,609
===========
</Table>
See notes to financial statements.
33
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
PORTFOLIO COMPOSITION
JUNE 30, 2005
(UNAUDITED)
The following charts summarize the portfolio composition of each Fund by asset
type.
<Table>
SHORT HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 0.5%
Fixed Income Funds.......................................... 89.7
Domestic Equity Funds....................................... 8.3
International Equity Funds.................................. 1.5
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 0.9%
Fixed Income Funds.......................................... 46.7
Domestic Equity Funds....................................... 44.2
International Equity Funds.................................. 8.2
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 3.4%
Fixed Income Funds.......................................... 26.9
Domestic Equity Funds....................................... 58.9
International Equity Funds.................................. 10.8
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
</Table>
- ---------------
* Amount rounds to less than 0.05%.
See notes to financial statements.
34
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
The Diversified Investors Strategic Variable Funds (the "Separate Account"), a
separate account of Transamerica Financial Life Insurance Company ("TFLIC"), is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a management investment company. The Separate Account is composed of
three different subaccounts that are, in effect, separate investment funds:
Short Horizon Strategic Variable Fund ("Short Horizon"), Intermediate Horizon
Strategic Variable Fund ("Intermediate Horizon"), and Intermediate Long Horizon
Strategic Variable Fund ("Intermediate Long Horizon") (individually, a
"Subaccount" and collectively, the "Subaccounts"). The Separate Account
established and designated each of the Subaccounts as separate subaccounts on
April 15, 1996. Each Subaccount 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 Separate Account 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 Subaccount'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 Separate Account 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 NV, 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 Separate Account. Based upon this expectation, no charges
are currently being deducted from the Separate Account for federal income tax
purposes.
C. OPERATING EXPENSES:
The Separate Account accounts separately for the assets, liabilities and
operations of each Subaccount. Each Subaccount 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.
35
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES
The Separate Account 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 Subaccount. For providing these services and facilities and for bearing
the related expenses, the Advisor receives a monthly fee from each Subaccount at
an annual rate equal to 0.20% of the average daily net assets of each
Subaccount.
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 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.
Certain trustees and officers of the Separate Account 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 Separate Account. Similarly, none of the Separate Account's
officers receive compensation from the Subaccounts. 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 June 30, 2005,was as follows:
<Table>
<Caption>
COST OF PROCEEDS
PURCHASES FROM SALES
---------- ----------
Short Horizon............................................... $2,347,566 $2,296,796
Intermediate Horizon........................................ 2,327,888 2,925,581
Intermediate Long Horizon................................... 3,282,018 2,632,172
</Table>
5. LEGAL AND REGULATORY MATTERS:
Diversified Investors Securities Corp. ("DISC") is the distributor for each of
the Subaccounts 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 (the "International Equity Fund") between July 1, 2003
and October 31, 2003. NASD staff contends that DISC facilitated certain
shareholders' trading in the International Equity Fund 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.
DISC and DIA are continuing to provide information to the NASD and have also
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 Subaccounts, there can be no assurance at this time.
36
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. CONCENTRATIONS AND INDEMNIFICATIONS
From time to time, the Subaccounts may have a concentration of several
shareholders holding a significant percentage of units outstanding. Investment
activities of these unitholders could have a material impact on the Subaccounts.
In the normal course of business, the Subaccounts enter into contracts that
contain a variety of representations and warranties which provide general
indemnifications. The Subaccounts' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the
Subaccounts that have not yet occurred. However, based on experience, the
Subaccounts expect the risk of loss to be remote.
7. PROXY VOTING POLICIES AND PROCEDURES
Since each Subaccount invests all its assets among DIVF which, in turn, invests
all its assets in a corresponding portfolio of Diversified Investors Portfolios
("Portfolios"), the Subaccounts 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 are 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, 2005, is available without
charge, upon request.
8. QUARTERLY PORTFOLIOS
The Subaccounts 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 Subaccounts' Form N-Q
is available on the SEC's website at www.sec.gov. The Subaccounts' Form N-Q may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
For information on the operation of the SEC's Public Reference Room, call
1-800-SEC-0330. 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, at the SEC's Public Reference
Room, or by calling 1-800-755-5803.
37
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the period/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,
PERIOD/YEAR BEGINNING OF INCOME (LOSSES) ON INVESTMENT END OF TOTAL END OF
ENDED PERIOD/YEAR (LOSS)(1) INVESTMENTS OPERATIONS PERIOD/YEAR RETURN PERIOD/YEAR
----------- ------------ ---------- ----------- -------------- ----------- ------ -----------
SHORT HORIZON
06/30/2005(a) $14.68 $(0.01) $ 0.13 $ 0.12 $14.80 0.82% $10,332,119
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
06/30/2005(a) 15.50 (0.02) (0.00)** (0.02) 15.48 (0.13) 28,114,750
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
INTERMEDIATE LONG HORIZON
06/30/2005(a) 16.06 (0.02) (0.07) (0.09) 15.97 (0.56) 40,594,619
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
PERIOD/YEAR INCOME TURNOVER
ENDED EXPENSES (LOSS) RATE
----------- -------- ---------- ---------
SHORT HORIZON
06/30/2005(a) 0.20%* (0.20)%* 23%
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
06/30/2005(a) 0.20* (0.20)* 8
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
INTERMEDIATE LONG HOR
06/30/2005(a) 0.20* (0.20)* 7
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>
- ---------------
(1) Calculated based upon average units outstanding.
(a) Unaudited.
* Annualized.
** Amount rounds to less than one penny per share.
38
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 June 30, 2005 totaled $10,333,801, $28,119,358 and
$40,601,275 for the Short Horizon, Intermediate Horizon, and Intermediate Long
Horizon, respectively.
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING UNITS UNITS ENDING PURCHASE GAIN/(LOSS)
UNITS PURCHASED SOLD UNITS COST SALE COST ON SALES
--------- --------- ------- ------- ---------- ---------- -----------
SHORT HORIZON
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond............... 171,346 10,669 1,361 180,654 $ 329,097 $ 31,290 $10,209
Diversified Investors Variable
Funds -- Equity Growth........... 8,347 -- 969 7,378 -- 37,487 6,975
Diversified Investors Variable
Funds -- Growth & Income......... 6,073 -- 744 5,329 -- 14,348 3,612
Diversified Investors Variable
Funds -- High Quality Bond....... 186,754 4,245 -- 190,999 61,386 -- --
Diversified Investors Variable
Funds -- High Yield Bond......... 58,506 -- 2,289 56,217 -- 27,924 9,890
Diversified Investors Variable
Funds -- International Equity.... 9,559 -- 1,291 8,268 -- 16,785 7,210
Diversified Investors Variable
Funds -- Money Market............ 8,418 103,088 109,046 2,460 1,957,083 2,069,300 1,529
Diversified Investors Variable
Funds -- Special Equity.......... 2,272 -- 415 1,857 -- 9,460 4,195
Diversified Investors Variable
Funds -- Value & Income.......... 7,563 -- 915 6,648 -- 35,731 10,851
---------- ---------- -------
$2,347,566 $2,242,325 $54,471
========== ========== =======
INTERMEDIATE HORIZON
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond............... 255,315 -- -- 255,315 $ -- $ -- $ --
Diversified Investors Variable
Funds -- Equity Growth........... 104,786 -- -- 104,786 -- -- --
Diversified Investors Variable
Funds -- Growth & Income......... 77,194 -- -- 77,194 -- -- --
Diversified Investors Variable
Funds -- High Quality Bond....... 267,367 -- -- 267,367 -- -- --
Diversified Investors Variable
Funds -- High Yield Bond......... 84,155 -- -- 84,155 -- -- --
Diversified Investors Variable
Funds -- International Equity.... 123,343 -- -- 123,343 -- -- --
Diversified Investors Variable
Funds -- Money Market............ 44,565 122,766 154,240 13,091 2,327,888 2,920,391 5,190
Diversified Investors Variable
Funds -- Special Equity.......... 28,405 -- -- 28,405 -- -- --
Diversified Investors Variable
Funds -- Value & Income.......... 96,086 -- -- 96,086 -- -- --
---------- ---------- -------
$2,327,888 $2,920,391 $ 5,190
========== ========== =======
</Table>
39
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. INVESTMENTS IN AFFILIATES (CONTINUED)
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING UNITS UNITS ENDING PURCHASE GAIN/(LOSS)
UNITS PURCHASED SOLD UNITS COST SALE COST ON SALES
--------- --------- ------- ------- ---------- ---------- -----------
INTERMEDIATE LONG HORIZON
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond............... 215,399 -- -- 215,399 $ -- $ -- $ --
Diversified Investors Variable
Funds -- Equity Growth........... 202,963 -- -- 202,963 -- -- --
Diversified Investors Variable
Funds -- Growth & Income......... 149,454 -- -- 149,454 -- -- --
Diversified Investors Variable
Funds -- High Quality Bond....... 216,893 -- -- 216,893 -- -- --
Diversified Investors Variable
Funds -- High Yield Bond......... 69,048 -- -- 69,048 -- -- --
Diversified Investors Variable
Funds -- International Equity.... 236,130 -- -- 236,130 -- -- --
Diversified Investors Variable
Funds -- Money Market............ 38,289 173,059 138,751 72,597 3,282,018 2,625,617 6,555
Diversified Investors Variable
Funds -- Special Equity.......... 54,350 -- -- 54,350 -- -- --
Diversified Investors Variable
Funds -- Value & Income.......... 182,904 -- -- 182,904 -- -- --
---------- ---------- -------
$3,282,018 $2,625,617 $ 6,555
========== ========== =======
</Table>
40
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS
JUNE 30, 2005
(UNAUDITED)
Diversified Investment Advisers, Inc. ("Diversified") manages the assets of each
Subaccount pursuant to an Investment Advisory Agreement with Transamerica
Financial Life Insurance Company ("TFLIC") with respect to such Subaccount.
In approving the continuation of each Investment Advisory Agreement relating to
each Subaccount, the Managing Board of the Separate Account, including the
independent Managing Board members, considered the reasonableness of the
applicable advisory fee in light of the extent and quality of the advisory and
administrative services provided and any additional benefits received by
Diversified or the Subadvisers and their affiliates in connection with their
provision of services, compared the fees charged by Diversified and the
Subadvisers to those paid by similar funds for comparable services, and analyzed
the expenses incurred with respect to each Fund. The Managing Board members also
reviewed information concerning the level of profits received by Diversified
from its arrangements with each Subaccount. Additionally, the Managing Board
considered the quality of Diversified's advisory, administrative and compliance
staffs, including additional compliance resources being added. The Managing
Board members reviewed information regarding the investment performance of each
Subaccount, compared to its benchmark, for the quarter and for the one- and
three-year periods ended December 31, 2004. The Managing Board members also
considered information received at regular meetings throughout the year,
including updates regarding each Subaccount's performance. The Managing Board
also considered the allocations of the Subaccounts.
The Managing Board members also reviewed extensive information provided by the
Subadvisers to the underlying Portfolios of Diversified Investors Portfolios in
which the Subaccounts indirectly invest, regarding, among other things: the
nature and quality of services provided; legal, regulatory and compliance
matters; actual fees paid by Diversified to each Subadviser, comparable fees
paid to each Subadviser and Subadviser profitability data; and other practices
and developments. In addition to the quality and content of information provided
by the Subadvisers, the Managing Board members also noted instances where
information was not disclosed by certain Subadvisers, considered the reasons
such information was withheld and weighed the relative importance of such
information among the other data available to the Managing Board members. In
light of the extensive investment advisor monitoring provided by Diversified and
the arms'-length nature of negotiations between Diversified and the Subadvisers,
the Managing Board members placed considerable value on Diversified's views
regarding the Subadvisers. The Managing Board also considered the allocations of
the Subaccounts.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Managing Board members) and after meetings
conducted by the independent Managing Board members without management being
present, the Managing Board concluded that each Investment Advisory Agreement
and each sub-advisory agreement was in the best interests of the applicable
Subaccount and its contractholders. The Managing Board based its conclusions, in
part, on its observations regarding the performance of and the management fees
and total expenses paid by each Subaccount, some of which observations are
summarized below.
In the case of each of Short Horizon Strategic Variable Fund Subaccount,
Intermediate Horizon Strategic Variable Fund Subaccount and Intermediate-Long
Horizon Strategic Variable Fund Subaccount, the Board observed that performance
was below that of the applicable benchmark for the one- and three-year periods
ended December 31, 2004, but that the performance of Short Horizon Strategic
Variable Fund Subaccount was above the benchmark for the quarter ended as of
such date and was only slightly below the relevant benchmark in the case of the
Intermediate Horizon Strategic Variable Fund Subaccount and Intermediate-Long
Horizon Strategic Variable Fund Subaccount. The Managing Board also considered
recent changes and proposed changes in several of the Subadvisers to the
Portfolios in which the Subaccounts indirectly invest.
41
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
For each of the Subaccounts, the Managing Board found both contractual
management fees and total expenses to be below the median for the applicable
peer group.
The Managing Board's conclusions that each Investment Advisory Agreement was in
the best interests of each applicable Subaccount and its contractholders were
generally based upon the Managing Board's determination for each Subaccount that
the Subaccount's recent performance generally compared favorably with its
benchmark, that contractual management fees and actual total expenses after
giving effect to waivers and reimbursements compared favorably to the peer
group, and that, in reviewing Diversified's profitability on a
Subaccount-by-Subaccount basis, such profitability (together with additional
benefits received by Diversified and its affiliates) appeared reasonable in view
of the nature and quality of the services provided by Diversified. The Managing
Board also considered that the fee waivers and reimbursements for certain
Subaccounts were contractually agreed, and, therefore, could not be discontinued
or modified at Diversified's discretion. In addition to the foregoing, the
Managing Board members were satisfied with the overall quality of the management
services provided by Diversified and with Diversified's approach to selecting
and monitoring subadvisers.
42
(This page intentionally left blank)
43
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
PLEASE NOTE THAT ANY PERFORMANCE FIGURES DISCUSSED BELOW REPRESENT PAST
PERFORMANCE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT
RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
VISIT WWW.DIVINVEST.COM FOR PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT
MONTH-END.
ECONOMIC OVERVIEW
The economy continued to expand, despite rising oil prices that peaked at $60 a
barrel before retreating to $57 by June 30th. In total, oil prices were up 30%
since the beginning of the year. Second quarter preliminary GDP came in at 3.4%,
the ninth straight quarter in which the economy grew by more than 3%. First
quarter GDP was revised upward to 3.8% from 3.5%.
Inflation was held in check, as the Fed increased the Federal Funds rate 25
basis points to 3.25%. It was the ninth consecutive rate increase, and the
Federal Open Market Committee said that going forward it "will respond to
changes in economic prospects as needed to fulfill its obligation to maintain
price stability."
Long-term bond yields continued to decline, leading to a flattening of the yield
curve and prompting several economists to point out that the closeness of short-
and long-term rates is often a precursor to an economic slowdown. Investors
apparently shared that sentiment as the UBS/Gallup Index of Investor Optimism
hit a three-month low during the quarter.
Consumers, however, were more sanguine as low long-term bond yields -- and thus
mortgage rates -- coupled with an improving jobs picture, pushed the Conference
Board's Consumer Confidence Index to a three-year high at June 30th.
Unemployment declined to 5% in June, the lowest rate since September 2001, and
146,000 new jobs were added. While that number was below most economists'
forecasts, it followed better-than-expected job growth in April and May, and
brought the monthly average for the first half of 2005 to 181,000, close to
2004's average of 183,000 jobs per month.
Relatedly, the number of first-time jobless claims fell by 6,000 in the last
full week of June to 310,000, its lowest level in more than two months,
according to the Labor Department. Analysts had expected an increase to 325,000.
Finally, the dollar continued its surprising rise, hitting a four-year peak at
the end of June.
FIXED INCOME MARKETS
Bond prices rebounded and moved into positive territory for the year, as
fixed-income investors absorbed both the downgrade of Ford's and General Motors'
debt in May and short-term inflationary pressures. The Lehman Brothers Aggregate
Index returned 3% for the quarter, pushing year-to-date performance to 2.5%.
The Treasury sector was the best performer, returning 3.2% for the six-month
period. Corporate and high-yield bonds shook off the volatility from the
automaker downgrades and posted semiannual returns of 2.4% and 1.1%,
respectively.
Long-term yields are artificially low and may remain so for the foreseeable
future because of demand for U.S. Treasuries by Japan and China. According to a
United States Treasury Department report released on June 30th, foreign holdings
of U.S. debt increased 19.6% between June 2003 and June 2004. Japan has the
largest portfolio of U.S. debt with $857 billion. China is second with $338
billion.
44
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
EQUITY MARKETS
U.S. stocks picked up ground in the second quarter, but the gains were not
enough to push most domestic equities solidly into the black for the year.
Recall that stocks declined in the first quarter. Second quarter results were
muted by the interest rate increase, which sent stocks tumbling on the last day
of trading.
Overall, the Russell 3000 Index is flat for the year, as the second quarter's
2.2% gain wasn't enough to push the market clearly into positive territory. The
broader Dow Jones Wilshire 5000 Index is also flat for the period ended June
30th.
Mid-cap stocks were the first half's bright spot, up 3.9% year-to-date, as
measured by the Russell Midcap Index. Large-cap stocks -- as measured by the
Standard & Poor's 500 Index -- were down slightly year-to-date, due to a
significant first quarter decline. Small-caps are underwater for the year, down
1.3% as measured by the Russell 2000 Index.
Value continued its dominance over growth, but the latter showed signs of life
in the second quarter, outperforming the former for the first time in a year.
The Russell 3000 Growth Index returned 2.5%, compared with 2% for its value
counterpart. Year-to-date, however, value is ahead of growth, 1.7% gain versus a
1.9% loss.
Segmented by market capitalization, large-cap growth trails large-cap value
year-to-date, though growth was better in the second quarter; Mid-cap and
small-cap value stocks outperformed their growth brethren over the six-month
period.
Energy-related and utility stocks were the best performers. June's record oil
prices boosted energy-related sectors; yield-hungry investors bid up utilities.
Materials was the weakest sector as these stocks declined due to rising energy
costs.
International stocks -- up slightly in the first quarter -- reversed course and
were down at the close of the six-month period. The Morgan Stanley Capital
International World Index (Ex-US) was down 0.3% at June 30th.
LOOKING AHEAD
As we enter the third quarter, the economic expansion and labor market
conditions continue to improve, despite higher oil prices. But the Federal
Reserve Board's measured response to inflation and the flattening yield curve
should make for a challenging investing environment.
MONEY MARKET SERIES
Money market funds returned 1.3% in the first six months of the year, as
measured by the Citigroup Treasury Bill Three-Month Index. The fund performed in
line with the benchmark during the period.
The Federal Open Market Committee (FOMC) continued to remove accommodative
policy and adjust rates as expected, raising the federal funds target to 3.25%
from 2.75% over the first half of the year. Economic growth and inflation did
not alter investors' expectations of the FOMC's action. Investors anticipated
the Fed's action and took advantage of the opportunity by shortening maturities.
Longer rates, however, declined as market pricing reflected a potential pause by
the Fed in late 2005.
The portfolio manager focused on identifying value along the short end of the
yield curve, while keeping maturities short to take advantage of reinvestment
opportunities created by the FOMC action. The manager was able to successfully
execute this strategy during the first six months of 2005.
45
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
HIGH QUALITY BOND SERIES
Short/intermediate-term investment grade bonds were up slightly in the first
half of the year, as measured by the Merrill Lynch 1-3 Year Treasury Index. The
yield curve and automakers within the corporate sector were the two biggest
stories during the period. Treasury yields rose at the short end of the curve
but fell at the long end, following two rate increases by the Federal Open
Market Committee; Ford's and General Motors' debt was downgraded to below
investment grade.
The fund exceeded the benchmark for the six-month period, due to exposure to
mortgages and floating rate asset-backed securities, and an overweight to banks
and finance in the corporate sector. Income was the largest contributor to
performance, accounting for most of the excess return.
The manager shifted the portfolio's term structure from the first quarter to the
second by increasing the two-to-three and four-to-five year buckets and reducing
the one-to-two and three-to-four year ones. Portfolio duration at the end of the
period was still in line with the index at 1.67 years.
The fund was active in the asset-backed sector, purchasing several new issues.
One noteworthy trade was the sale of a short average life (.89 years) home
equity deal originated by Equity One -- a subsidiary of Popular Inc. -- and the
purchase of a three-year home equity deal originated by Popular. The net yield
pick-up on the trade was 34 basis points.
INTERMEDIATE GOVERNMENT BOND SERIES
Intermediate government bonds returned 1.6% for the six months ended June 30th,
as measured by the Lehman Brothers Intermediate Government Bond index.
The fund posted returns in line with the benchmark during the first half of
2005. Exposure to the mortgage sector was additive to the portfolio's returns in
the first quarter; avoidance of the credit sector also helped. In the second
quarter, the manager maintained a duration position of 3.5 years -- slightly
longer than the index's 3.3 -- and an overweight to out-of-index sectors, such
as mortgages and asset-backed securities.
CORE BOND SERIES
The Lehman Brothers Aggregate Index rebounded in the second quarter, reversing a
first quarter loss and posting a 2.5% gain for the six-month period.
The Core Bond Fund underperformed the benchmark during the first half of 2005.
Most of the underperformance is attributable to a short duration position
relative to the index, and an underweight to the mortgage-backed securities
(MBS) sector.
In the first quarter, the portfolio posted negative absolute returns, due
largely to weakening fundamentals and concerns of a potential downgrade of
Ford's and General Motors' debt to junk status. Long-term rates fell over the
next three months and all components of the index realized strong absolute
returns. The portfolio failed to keep pace because of its short duration
position, the underweighting of MBS and an allocation to non-dollar issues. An
underweight to the credit sector, combined with a bias toward financial and
higher quality issues, resulted in a positive contribution to performance.
The portfolio remains short duration, with the underweight concentrated to the
three-through-10 year portion of the yield curve. It is also underweight
mortgages and corporates and has a modest exposure to the plus sectors.
46
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
BALANCED SERIES
The hybrid 60% S&P 500 and 40% Lehman Brothers Aggregate benchmark was up 0.5%
for the six-month period, due largely to the fixed income component, as core
bonds outperformed large-capitalization stocks. Long bonds rallied in the second
quarter as the Federal Open Market Committee raised the federal funds target to
3.25% from 2.75% over the first half of the year.
During the period, Goldman Sachs Asset Management and Western Asset Management
Co. were selected as new subadvisors to the fund, replacing Aeltus Investment
Management Inc. and BlackRock, respectively. Goldman Sachs, the equity manager,
employs a quantitative enhanced index strategy; Western uses a core plus
approach to manage the fixed-income portion of the fund.
Asset allocation detracted slightly from overall performance, as the fund was
overweight equities. The two subadvisors nevertheless exceeded their respective
benchmarks. Excess equity returns came from the energy, information technology
and consumer staples sectors. Overweighting Exxon Mobil Corp. and ConocoPhillips
in the energy sector was additive as these two companies posted gains of 15% and
34%, respectively. Contributions also came from internet search engine Google
Inc., up 34% and retailer Abercrombie & Fitch Co., up 20%.
The fixed income segment benefited from a moderate allocation to out-of-index
sectors: high yield, non-dollar and emerging markets. Duration slightly
detracted from performance as rates dropped during the second quarter.
The fund maintains an overweight to equities with about 36% of the portfolio
allocated to fixed income.
VALUE & INCOME SERIES
Large-cap value stocks were up 1.8% in the first half of the year, as measured
by the Russell 1000 Value Index. Stocks rallied in the second quarter, pushing
the index into positive territory at June 30th. Energy and utilities were the
best performing sectors.
TCW Investment Management Company replaced Alliance Capital Management as the
fund's relative value manager, at the end of the first quarter. Alliance was
replaced due to performance issues and concerns about the viability of its
investment model in different market environments. TCW employs a "search for
value poised for growth" stock selection process. Bernstein Investment
Management and Research continues in its role as the fund's deep value manager.
The fund lagged the Russell 1000 Value Index for the six months ended June 30th,
due mostly to stock selection in financials, and an overweight to insurance. AIG
was the worst performing stock in the portfolio, down 16%. The insurer admitted
to improper accounting practices, and Chairman and CEO Hank Greenberg resigned.
Alliance continued to buy the stock on weakness, believing investors had
overreacted and that AIG's fundamentals remained strong.
Fund performance rebounded in the second quarter, with stock selection as the
main driver, particularly in the information technology sector. Tellabs Inc., a
communications equipment company, was up 19%.
GROWTH & INCOME SERIES
Large-capitalization growth stocks dropped 0.81% in value for the six months
ended June 30th, as measured by the Standard & Poor's 500 Index. Energy was the
strongest performing sector, gaining 20%; the materials sector was the worst,
losing 7.3%.
47
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
The fund exceeded the benchmark during the period. Stock selection in the
consumer discretionary and information technology sectors were the main drivers
of performance. Google, Inc., internet search engine, was the fund's top
performer, returning 52%. Retailers benefited from strong consumer spending, and
shares of Abercrombie & Fitch Co., J. C. Penney Company, Inc., and Federated
Department Stores, Inc. rose 47%, 28% and 27%, respectively.
EQUITY GROWTH SERIES
Large-capitalization growth stocks were down 1.7% in the first half of the year,
as measured by the Russell 1000 Index. The best performing sectors were energy,
up 22%; utilities, which increased 16%; telecommunication services up, 9%; and
healthcare, up 4%.
The fund performed in line with the benchmark during the six-month period.
Positive returns in the second quarter were not strong enough to pull
year-to-date performance out of negative territory. Growth stocks, however,
rallied in the second quarter and outperformed their value counterparts for the
first time in five years.
The first quarter's strong value environment was difficult for the fund's
information technology stock holdings. eBay, Inc., an online auctioneer, fell
45% after it missed profit estimates and announced that growth was slowing in
the United States. Biogen Idec, Inc., a biotechnology company, dropped 36% after
it voluntarily withdrew its multiple sclerosis drug from the market.
Stock selection in healthcare was the main driver of the second quarter's
improved performance. Genentech Inc. rose 42% following strong preliminary tests
for its age related macular degeneration drug. Caremark Rx, Inc., a
pharmaceutical services company, and Express Scripts, a provider of health care
management and administration services, both added positive relative
performance.
MID-CAP VALUE SERIES
Mid-capitalization value stocks were up 3.1% in the first half of the year, as
measured by the Russell Mid Cap Value Index. The energy and the utility sectors
provided the strongest returns for the six-month period.
During the first quarter, LSV Asset Management was added as a subadvisor to the
fund. The decision was a function of capacity constraints at incumbent
subadvisor Cramer Rosenthal McGlynn (CRM) and was not reflective of the latter's
performance. CRM will manage 60% of the assets with LSV overseeing the balance.
LSV's deep value, quantitative approach, complements CRM's opportunistic value
methodology.
The portfolio trailed the benchmark for the six-month period. Consumer
discretionary stocks were the largest detractor from performance, with
automotive supplier Lear Corp. down 27% because of larger-than-expected order
reductions from Ford and General Motors, its two biggest customers. The debt of
both automakers was downgraded to junk status during the second quarter. An
underweighting to Real Estate Investment Trusts (REITs) also hurt returns, as it
was the second quarter's best performing sector in the index.
Energy provided the bulk of the portfolio's year-to-date positive performance,
with Frontier Oil appreciating more than 60% since its addition to the portfolio
in March. The fund is nevertheless underweight energy.
MID-CAP GROWTH SERIES
Mid-capitalization growth stocks were up 1.7% for the first half of the year, as
measured by the Russell Mid Cap Growth Index. The strongest performing sectors
in the index were energy, up 22%; utilities, which increased 18.4%; and
telecommunication services, up 16.6%.
48
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
The fund exceeded the benchmark during the period, with the portfolio benefiting
from an overweight to the energy sector and strong stock selection within
financials. Individual holdings in the pharmaceutical and information technology
sectors detracted from performance.
During the first quarter, Eyetech Pharmaceuticals, Inc., a biopharmaceutical
company, declined 41% on the news of strong clinical drug trials by a major
competitor. Cree, Inc., a semi-conductor chip company, missed fourth quarter
earnings expectations and lost 41% of its value. Both stocks were sold on the
negative news.
The fund's two top performing stocks were in the energy sector. Quicksilver
Resources Inc. and EOG Resources, Inc. reported better-than-expected results and
gained 73% and 59%, respectively. In the financial sector, asset manager Legg
Mason, Inc. posted strong gains on the announcement of its acquisition of
Citigroup's asset management operations.
SMALL-CAP VALUE SERIES
Small-capitalization value stocks eked out a 0.9% gain for the first half of
2005, as measured by the Russell 2000 Value Index. A 5.1% increase in the second
quarter offset a 4.2% drop in the year's first three months, pushing the
category into positive territory. Within the index, the energy, utilities and
consumer sectors outperformed information technology, materials and industrials.
Global energy demand and lower interest rates propelled the winners, while an
absence of capital spending and concerns about a slowing economy dragged down
the losers.
The fund lagged its benchmark over the six-month period due primarily to
one-time transaction costs associated with changing subadvisors. EARNEST
Partners LLC replaced Sterling Capital Management on April 13. An underweighting
to Real Estate Investment Trusts (REITs) also hurt performance as these stocks
surged 14% in the second quarter.
Individual stocks that hurt fund performance during the six-month period include
Dendrite International, Inc., a pharmaceutical software company that lost 29%;
EarthLink, Inc., an internet service provider that declined 25%; and Oriental
Financial Group, Inc., a diversified financial holding company that dropped 45%.
On the positive side, Administaff, Inc., a provider of personnel management
systems, rose 90%, and Phillips-Van Heusen Corp., a shirt manufacturer, posted a
21% gain.
SPECIAL EQUITY SERIES
Small-capitalization stocks were down 1.3% in the first half of the year, as
measured by the Russell 2000 Index. A second quarter rally boosted returns 4.3%
and narrowed the first quarter's 5.3% loss. The best performing sectors in the
index were energy, up 22%; utilities, which increased 11%; and consumer staples,
up 7%. Information Technology was the worst performer, down 11.2%.
The Special Equity Fund has five subadvisors -- two growth, two value and one
structured core manager -- and attempts to generate higher returns relative to
the broad small-cap market over a full market cycle. During the first quarter,
Mazama Capital Management Inc. replaced Seneca Capital Management as one of the
fund's growth managers. The four other subadvisors remain intact: EARNEST
Partners LLC, INVESCO Inc., RS Investments and Wellington Management Co.
During the period, Special Equity posted positive net returns against the
Russell 2000 Index and generated excess returns in the 10 major industry
sectors. Value-oriented stocks led the small-cap category, while growth-oriented
equities lagged.
49
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
Stocks that hurt fund performance were Avocent Corp., an enterprise connectivity
company, down 35%; Viisage Technology, Inc., an identity verification company
that declined 50%; and Gateway, Inc., a seller of personal computers that
dropped 45%.
Individual stocks that contributed to the outperformance include homebuilders
Hovnanian Enterprises Inc. and Meritage Homes Corp., up 31% and 41%,
respectively; and Vintage Petroleum, Inc., an oil exploration and distribution
company that rose 35%.
SMALL-CAP GROWTH SERIES
Small-capitalization growth stocks were down 3.6% for the first half of 2005, as
measured by the Russell 2000 Growth Index. A second quarter rally that boosted
returns 3.5% was not enough to overcome the first quarter's steep 6.8% decline.
Information technology was the weakest sector for the six-month period, followed
by financials and industrials.
The fund trailed its benchmark over the period. Underweighting the energy sector
was a major cause, as the portfolio manager sought to avoid exposure to stocks
with volatile commodity-linked returns. Healthcare and telecommunication
services holdings also hurt performance, while exposure to financials was a
positive contributor in the second quarter.
Individual names that hurt performance during the six-month period include Dyax
Corp., a biotech firm that develops antibodies, down 34.7% and Skyworks
Solutions Inc., a designer and producer of wireless semiconductor systems that
declined 21.8%. Stocks that helped were Immucor, Inc., a supplier of tests for
blood prior to transfusion, up 23.6% and aQuantive, Inc., a digital marketing
services company that rose 98.2%.
AGGRESSIVE EQUITY SERIES
Large-cap growth stocks were down 1.7% for the six months ended June 30, 2005,
as measured by the Russell 1000 Growth Index.
The fund lagged its benchmark over the six-month period because its growth stock
investment approach was out of favor in the first quarter. Portfolio holdings
that experienced difficulties during the period included Biogen Idec, Inc., down
39% and eBay, Inc., which dropped 36%. A biotechnology company, Biogen's share
price plummeted following the company's voluntary withdrawal of its multiple
sclerosis drug from the market; online auctioneer eBay dropped in value after it
missed profit estimates.
Growth industries, such as internet service providers, luxury goods
manufacturers and discount retailers, added value to the portfolio in the second
quarter. Top performers for the quarter included: internet search engine Google,
Inc., up 62%; leather shoes and accessories manufacturer Coach, Inc., which rose
19%; and women's clothing retailer Chicos FAS, Inc., up 21%.
HIGH YIELD BOND SERIES
High yield bonds returned 1.1% for the first six months of 2005, as measured by
the Merrill Lynch High Yield Master II Index. Major concerns during the first
half of the year included future foreign investment in U.S. Treasuries, Federal
Reserve Board comments on inflation and General Motors' surprising loss of
profitability and the subsequent downgrade of its debt.
50
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
The portfolio was positioned to minimize interest rate risk and spread widening
with the understanding that higher interest rates adversely affect high yield
bonds. This stance was neutral as it benefited the portfolio early in the year
and then detracted from performance during the second quarter.
The fund underperformed the benchmark year-to-date, due to an overweighting to
the building materials, air transportation and entertainment sectors, all of
which posted negative returns. An underweight to energy and retail -- two of the
best performing sectors in the index -- further hampered overall returns.
The fund was overweight the strong performing telecommunications sector which
aided returns. Gaming and chemicals are the fund's two largest overweighted
sectors, and both were additive in the first six months.
INTERNATIONAL EQUITY SERIES
International stocks were down 2% for the first six months of 2005, as measured
by the Morgan Stanley Capital International World (Ex-US) Index. Within the
benchmark, Europe was the best performing developed region, due primarily to the
energy sector. Emerging markets was the best performing segment, up 6%
year-to-date; and small-capitalization stocks led their large-cap counterparts.
The co-managed international fund trailed the index for the six-month period,
due largely to one holding, Elan Corp. PLC, an Irish pharmaceutical company that
declined 80% in the first quarter on negative news regarding a multiple
sclerosis drug.
Energy sector stocks proved to be the portfolio's best performers year-to-date
with Royal Dutch Shell PLC up 18%; Husky Energy, Inc. posting a 40% gain; and
Petro-Canada rising 28%. AU Optronics, a manufacturer of thin film
transistor-liquid crystal display (TFT-LCD) panels for flat screen televisions,
was also a strong performer, returning 22% for the first half of the year.
51
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
------------ ------------ ------------
ASSETS:
Securities, at cost................................... $687,733,497 $773,432,531 $260,762,175
============ ============ ============
Securities, at value, including investments held as
collateral for securities out on loan (Notes 2 and
4).................................................. $687,733,497 $764,188,629 $260,875,171
Repurchase agreements (cost equals market)............ 198,685,454 6,530,904 4,429,501
Cash.................................................. 4,049 -- --
Foreign currency holdings, at value (cost $3,770,742,
$5, and $343,539 respectively)...................... -- -- --
Receivable for securities sold........................ -- -- 12,463,343
Unrealized appreciation on foreign currency forward
contracts (Note 10)................................. -- -- --
Interest receivable................................... 1,187,167 4,947,291 1,437,317
Dividends receivable.................................. -- -- --
Foreign tax reclaim receivable........................ -- -- --
Receivable from Advisor............................... -- -- 592
Receivable from securities lending (net).............. -- 1,215 3,926
------------ ------------ ------------
Total assets.......................................... 887,610,167 775,668,039 279,209,850
------------ ------------ ------------
LIABILITIES:
Collateral for securities out on loan................. -- 25,140,250 41,460,158
Payable for securities purchased...................... -- -- 4,199,985
Securities sold short, at value (proceeds
$77,887,388)........................................ -- -- --
Written options, at value (premium $564,568, $18,372,
and $54,365 respectively)........................... -- -- --
Unrealized depreciation on foreign currency forward
contracts (Note 10)................................. -- -- --
Variation margin...................................... -- -- --
Investment advisory fees.............................. 172,683 208,983 67,548
Accrued expenses...................................... 52,219 46,737 61,305
Contingent liability (Note 6)......................... -- -- --
------------ ------------ ------------
Total liabilities..................................... 224,902 25,395,970 45,788,996
------------ ------------ ------------
NET ASSETS............................................ $887,385,265 $750,272,069 $233,420,854
============ ============ ============
</Table>
See notes to financial statements.
52
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND BALANCED INCOME VALUE INCOME
-------------- ----------- ------------ -------------- ----------- --------------
$2,157,262,724 $49,094,846 $396,307,117 $2,776,002,347 $ 9,768,727 $1,120,502,147
============== =========== ============ ============== =========== ==============
$2,167,242,459 $49,566,768 $412,042,714 $3,056,387,698 $10,128,610 $1,204,315,105
20,000,000 10,775,704 39,797,585 103,824,722 248,359 18,393,194
36,064 -- 183,681 -- -- 196,897
3,714,511 5 353,057 -- -- --
419,049,393 -- 36,540 45,739,730 23,923 11,590,315
1,736,993 90,697 491,199 -- -- --
16,875,600 492,956 1,094,647 33,986 18 11,831
-- 8,925 400,597 3,714,617 22,391 1,322,560
-- -- -- -- 22 1,639
-- 5,834 17,824 -- 4,934 --
10,956 -- 2,952 98,469 -- 41,896
-------------- ----------- ------------ -------------- ----------- --------------
2,628,665,976 60,940,889 454,420,796 3,209,799,222 10,428,257 1,235,873,437
-------------- ----------- ------------ -------------- ----------- --------------
94,420,159 -- 18,961,356 317,505,927 -- 125,968,925
581,458,927 9,839,859 26,817,193 65,659,170 15,262 15,066,740
77,834,165 -- -- -- -- --
802,828 28,687 84,984 -- -- --
450,787 5,643 167,075 -- -- --
224,373 11,578 21,037 -- -- 19,610
525,196 14,627 151,785 1,045,035 4,231 540,347
101,116 8,570 84,899 159,770 7,623 61,464
-- -- -- -- -- --
-------------- ----------- ------------ -------------- ----------- --------------
755,817,551 9,908,964 46,288,329 384,369,902 27,116 141,657,086
-------------- ----------- ------------ -------------- ----------- --------------
$1,872,848,425 $51,031,925 $408,132,467 $2,825,429,320 $10,401,141 $1,094,216,351
============== =========== ============ ============== =========== ==============
</Table>
53
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
-------------- ------------ ------------
ASSETS:
Securities, at cost................................. $2,213,986,236 $509,745,551 $250,276,475
============== ============ ============
Securities, at value, including investments held as
collateral for securities out on loan (Notes 2 and
4)................................................ $2,469,446,960 $540,431,524 $281,540,036
Repurchase agreements (cost equals market).......... 67,126,917 29,286,174 6,761,499
Cash................................................ 150 22,286 3,562
Foreign currency holdings, at value (cost
$11,830,181)...................................... -- -- --
Receivable for securities sold...................... -- 12,002,243 2,259,965
Unrealized appreciation on foreign currency forward
contracts (Note 10)............................... -- -- --
Interest receivable................................. 23,294 7,615 5,487
Dividends receivable................................ 1,919,054 2,001,801 47,305
Foreign tax reclaim receivable...................... 35,972 4,505 --
Receivable from Advisor............................. -- 6,431 3,733
Receivable from securities lending (net)............ 26,876 19,451 5,422
-------------- ------------ ------------
Total assets........................................ 2,538,579,223 583,782,030 290,627,009
-------------- ------------ ------------
LIABILITIES:
Collateral for securities out on loan............... 221,128,061 65,903,677 59,966,960
Payable for securities purchased.................... 2,805,749 14,185,065 2,716,033
Unrealized depreciation on foreign currency forward
contracts (Note 10)............................... -- -- --
Variation margin.................................... -- -- --
Investment advisory fees............................ 1,197,677 271,275 131,710
Accrued expenses.................................... 125,398 43,222 57,448
Contingent liability (Note 6)....................... -- -- --
-------------- ------------ ------------
Total liabilities................................... 225,256,885 80,403,239 62,872,151
-------------- ------------ ------------
NET ASSETS.......................................... $2,313,322,338 $503,378,791 $227,754,858
============== ============ ============
</Table>
See notes to financial statements.
54
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ -------------- ------------ ------------ ------------ --------------
$199,110,204 $1,324,867,482 $129,259,289 $374,897,404 $342,137,642 $1,402,436,522
============ ============== ============ ============ ============ ==============
$209,104,478 $1,464,757,812 $139,060,406 $411,298,869 $350,085,615 $1,550,406,470
15,278,831 42,614,970 5,952,517 3,565,577 25,098,512 22,882,397
-- -- -- -- -- --
-- -- -- -- -- 11,661,464
1,538,991 9,061,616 957,019 23,646,069 2,225,214 8,281,279
-- -- -- -- -- 18,437
3,456 24,556 2,987 4,037 7,125,889 13,008
191,417 1,298,543 36,964 226,396 -- 2,984,128
-- 1,287 202 10,051 -- 784,373
7,612 -- 5,832 2,228 180 --
2,818 51,670 11,622 6,559 -- 128,382
------------ -------------- ------------ ------------ ------------ --------------
226,127,603 1,517,810,454 146,027,549 438,759,786 384,535,410 1,597,159,938
------------ -------------- ------------ ------------ ------------ --------------
28,176,600 257,599,303 30,669,845 45,336,885 -- 136,187,298
5,239,354 8,511,456 758,148 25,211,350 10,751,183 12,828,617
-- -- -- -- 1,487 25,437
-- 6,325 -- -- -- --
126,014 810,906 80,592 233,921 165,256 879,244
32,238 28,393 32,626 27,824 41,940 145,167
-- -- -- -- -- --
------------ -------------- ------------ ------------ ------------ --------------
33,574,206 266,956,383 31,541,211 70,809,980 10,959,866 150,065,763
------------ -------------- ------------ ------------ ------------ --------------
$192,553,397 $1,250,854,071 $114,486,338 $367,949,806 $373,575,544 $1,447,094,175
============ ============== ============ ============ ============ ==============
</Table>
55
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
----------- ----------- ------------
INVESTMENT INCOME (NOTE 2):
Interest income........................................... $11,094,838 $12,923,368 $4,247,137
Securities lending income (net)........................... -- 9,124 45,081
Dividend income........................................... -- -- --
Less: foreign withholding taxes........................... -- -- --
----------- ----------- ----------
Total income.............................................. 11,094,838 12,932,492 4,292,218
----------- ----------- ----------
EXPENSES (NOTE 2):
Investment advisory fees.................................. 1,010,827 1,252,178 421,454
Custody fees.............................................. 67,538 82,091 37,921
Audit fees................................................ 13,214 14,071 13,444
Legal fees................................................ 12,747 10,648 7,615
Reports to shareholders................................... 4,770 4,676 1,753
Miscellaneous fees........................................ 2,497 2,111 725
----------- ----------- ----------
Total expenses............................................ 1,111,593 1,365,775 482,912
Expenses reimbursed by the Advisor........................ -- -- (1,437)
----------- ----------- ----------
Net expenses.............................................. 1,111,593 1,365,775 481,475
----------- ----------- ----------
NET INVESTMENT INCOME (LOSS).............................. 9,983,245 11,566,717 3,810,743
----------- ----------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) on transactions from:
Securities.............................................. 332 (904,924) (476,996)
Futures, written and purchased options and short
sales................................................ -- -- --
Foreign currency transactions........................... -- -- --
Change in net unrealized appreciation (depreciation) on:
Securities.............................................. -- (2,258,428) 390,150
Futures, written and purchased options and short
sales................................................ -- -- --
Foreign currency translations........................... -- -- --
----------- ----------- ----------
Net realized and unrealized gains (losses) on
investments............................................. 332 (3,163,352) (86,846)
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. $ 9,983,577 $ 8,403,365 $3,723,897
=========== =========== ==========
</Table>
- ---------------
(1) Commencement of Operations, May 6, 2005.
See notes to financial statements.
56
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND(1) BALANCED INCOME VALUE(1) INCOME
----------- -------------- ------------ ------------- -------- ------------
$36,920,131 $ 336,531 $ 3,222,262 $ 1,007,955 $ 4,549 $ 148,983
126,468 -- 11,518 405,842 -- 66,804
-- 8,925 2,205,457 24,055,378 38,458 8,021,446
-- -- -- (104,768) (33) (10,314)
----------- ---------- ------------ ------------- -------- ------------
37,046,599 345,456 5,439,237 25,364,407 42,974 8,226,919
----------- ---------- ------------ ------------- -------- ------------
3,062,686 27,155 914,273 6,162,290 7,806 3,230,184
250,387 9,296 156,214 252,771 5,391 124,854
16,964 4,276 14,177 18,074 4,276 15,095
25,403 556 10,505 65,692 248 22,485
11,153 119 7,731 27,773 68 7,804
5,101 77 1,999 13,381 50 5,326
----------- ---------- ------------ ------------- -------- ------------
3,371,694 41,479 1,104,899 6,539,981 17,839 3,405,748
-- (10,444) (89,041) -- (9,251) --
----------- ---------- ------------ ------------- -------- ------------
3,371,694 31,035 1,015,858 6,539,981 8,588 3,405,748
----------- ---------- ------------ ------------- -------- ------------
33,674,905 314,421 4,423,379 18,824,426 34,386 4,821,171
----------- ---------- ------------ ------------- -------- ------------
3,609,777 205,639 18,002,950 165,875,407 4,872 21,761,311
615,430 (47,661) 435,385 -- -- (10,318)
(6,287,801) 44,620 (513,012) -- -- (187)
941,487 471,922 (19,105,819) (158,537,701) 359,883 (29,381,699)
(1,046,210) (41,323) (230,205) -- -- (51,923)
7,200,177 82,307 869,283 -- -- --
----------- ---------- ------------ ------------- -------- ------------
5,032,860 715,504 (541,418) 7,337,706 364,755 (7,682,816)
----------- ---------- ------------ ------------- -------- ------------
$38,707,765 $1,029,925 $ 3,881,961 $ 26,162,132 $399,141 $ (2,861,645)
=========== ========== ============ ============= ======== ============
</Table>
57
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
------------ ------------ ----------
INVESTMENT INCOME (NOTE 2):
Interest income......................................... $ 795,633 $ 309,828 $ 82,219
Securities lending income (net)......................... 104,794 74,615 35,319
Dividend income......................................... 10,774,227 4,880,266 240,123
Less: foreign withholding taxes......................... (55,372) (46,567) --
------------ ------------ ----------
Total income............................................ 11,619,282 5,218,142 357,661
------------ ------------ ----------
EXPENSES (NOTE 2):
Investment advisory fees................................ 7,010,055 1,508,522 754,391
Custody fees............................................ 218,932 69,257 32,989
Audit fees.............................................. 17,400 11,665 11,349
Legal fees.............................................. 32,588 10,241 6,492
Reports to shareholders................................. 15,255 7,555 1,377
Miscellaneous fees...................................... 11,066 2,175 972
------------ ------------ ----------
Total expenses.......................................... 7,305,296 1,609,415 807,570
Expenses reimbursed by the Advisor...................... -- (33,031) (21,746)
------------ ------------ ----------
Net expenses............................................ 7,305,296 1,576,384 785,824
------------ ------------ ----------
NET INVESTMENT INCOME (LOSS)............................ 4,313,986 3,641,758 (428,163)
------------ ------------ ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) on transactions from:
Securities............................................ 27,063,584 33,456,569 4,598,756
Futures, written and purchased options and short
sales.............................................. -- -- --
Foreign currency transactions......................... -- -- --
Change in net unrealized appreciation (depreciation) on:
Securities............................................ (69,252,534) (23,101,317) 773,593
Futures, written and purchased options and short
sales.............................................. -- -- --
Foreign currency translations......................... (81) (26,000) --
------------ ------------ ----------
Net realized and unrealized gains (losses) on
investments........................................... (42,189,031) 10,329,252 5,372,349
------------ ------------ ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $(37,875,045) $ 13,971,010 $4,944,186
============ ============ ==========
</Table>
See notes to financial statements.
58
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ ------------ ----------- ------------ ------------ -------------
$ 107,449 $ 488,903 $ 54,388 $ 56,769 $ 14,652,773 $ 266,476
14,390 290,983 45,778 36,099 -- 875,105
754,999 4,987,122 140,604 981,833 90,231 30,534,743
(2,150) (6,689) (734) (15,077) -- (3,310,260)
------------ ------------ ----------- ------------ ------------ ------------
874,688 5,760,319 240,036 1,059,624 14,743,004 28,366,064
------------ ------------ ----------- ------------ ------------ ------------
725,328 4,752,909 458,270 1,409,153 981,387 5,311,563
30,997 158,541 36,036 35,425 63,473 795,530
11,313 16,299 11,215 13,111 13,597 17,578
6,759 22,681 1,528 10,426 5,155 28,367
4,380 23,281 678 4,199 2,278 9,196
909 5,957 554 1,848 1,069 6,910
------------ ------------ ----------- ------------ ------------ ------------
779,686 4,979,668 508,281 1,474,162 1,066,959 6,169,144
(27,676) -- (34,208) (10,107) (180) --
------------ ------------ ----------- ------------ ------------ ------------
752,010 4,979,668 474,073 1,464,055 1,066,779 6,169,144
------------ ------------ ----------- ------------ ------------ ------------
122,678 780,651 (234,037) (404,431) 13,676,225 22,196,920
------------ ------------ ----------- ------------ ------------ ------------
10,663,940 76,481,033 (263,339) 6,674,010 1,396,309 22,044,717
-- (91,430) -- -- -- --
-- (347) -- -- 74,676 (606,843)
(21,416,727) (45,795,064) (4,696,530) (17,425,195) (13,205,218) (83,069,270)
-- 43,060 -- -- -- --
-- 128 -- -- (883) (365,220)
------------ ------------ ----------- ------------ ------------ ------------
(10,752,787) 30,637,380 (4,959,869) (10,751,185) (11,735,116) (61,996,616)
------------ ------------ ----------- ------------ ------------ ------------
$(10,630,109) $ 31,418,031 $(5,193,906) $(11,155,616) $ 1,941,109 $(39,799,696)
============ ============ =========== ============ ============ ============
</Table>
59
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
--------------- ------------- ------------
FROM OPERATIONS:
Net investment income (loss)...................... $ 9,983,245 $ 11,566,717 $ 3,810,743
Net realized gains (losses) on transactions from:
Securities...................................... 332 (904,924) (476,996)
Futures, written and purchased options and short
sales........................................ -- -- --
Foreign currency transactions................... -- -- --
Change in net unrealized appreciation
(depreciation) on:
Securities...................................... -- (2,258,428) 390,150
Futures, written and purchased options and short
sales........................................ -- -- --
Foreign currency translations................... -- -- --
--------------- ------------- ------------
Net increase (decrease) in net assets resulting
from operations................................. 9,983,577 8,403,365 3,723,897
--------------- ------------- ------------
FROM TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions..................................... 1,427,096,087 163,895,294 32,185,568
Withdrawals....................................... (1,359,046,784) (112,620,968) (58,991,262)
--------------- ------------- ------------
Net increase (decrease) in net assets resulting
from transactions in investors' beneficial
interests....................................... 68,049,303 51,274,326 (26,805,694)
--------------- ------------- ------------
Net increase (decrease) in net assets............. 78,032,880 59,677,691 (23,081,797)
NET ASSETS:
Beginning of period............................... 809,352,385 690,594,378 256,502,651
--------------- ------------- ------------
End of period..................................... $ 887,385,265 $ 750,272,069 $233,420,854
=============== ============= ============
</Table>
- ---------------
(1) Commencement of Operations, May 6, 2005.
See notes to financial statements.
60
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND(1) BALANCED INCOME VALUE(1) INCOME
-------------- ----------- ------------ -------------- ----------- --------------
$ 33,674,905 $ 314,421 $ 4,423,379 $ 18,824,426 $ 34,386 $ 4,821,171
3,609,777 205,639 18,002,950 165,875,407 4,872 21,761,311
615,430 (47,661) 435,385 -- -- (10,318)
(6,287,801) 44,620 (513,012) -- -- (187)
941,487 471,922 (19,105,819) (158,537,701) 359,883 (29,381,699)
(1,046,210) (41,323) (230,205) -- -- (51,923)
7,200,177 82,307 869,283 -- -- --
-------------- ----------- ------------ -------------- ----------- --------------
38,707,765 1,029,925 3,881,961 26,162,132 399,141 (2,861,645)
-------------- ----------- ------------ -------------- ----------- --------------
323,836,270 50,002,000 37,960,606 366,086,022 10,002,000 110,147,154
(145,063,495) -- (53,436,789) (272,282,156) -- (149,017,592)
-------------- ----------- ------------ -------------- ----------- --------------
178,772,775 50,002,000 (15,476,183) 93,803,866 10,002,000 (38,870,438)
-------------- ----------- ------------ -------------- ----------- --------------
217,480,540 51,031,925 (11,594,222) 119,965,998 10,401,141 (41,732,083)
1,655,367,885 -- 419,726,689 2,705,463,322 -- 1,135,948,434
-------------- ----------- ------------ -------------- ----------- --------------
$1,872,848,425 $51,031,925 $408,132,467 $2,825,429,320 $10,401,141 $1,094,216,351
============== =========== ============ ============== =========== ==============
</Table>
61
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
-------------- ------------ ------------
FROM OPERATIONS:
Net investment income (loss)........................ $ 4,313,986 $ 3,641,758 $ (428,163)
Net realized gains (losses) on transactions from:
Securities........................................ 27,063,584 33,456,569 4,598,756
Futures, written and purchased options and short
sales.......................................... -- -- --
Foreign currency transactions..................... -- -- --
Change in net unrealized appreciation (depreciation)
on:
Securities........................................ (69,252,534) (23,101,317) 773,593
Futures, written and purchased options and short
sales.......................................... -- -- --
Foreign currency translations..................... (81) (26,000) --
-------------- ------------ ------------
Net increase (decrease) in net assets resulting from
operations........................................ (37,875,045) 13,971,010 4,944,186
-------------- ------------ ------------
FROM TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions....................................... 340,684,997 125,946,443 39,174,957
Withdrawals......................................... (280,047,561) (51,249,341) (26,465,157)
-------------- ------------ ------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests... 60,637,436 74,697,102 12,709,800
-------------- ------------ ------------
Net increase (decrease) in net assets............... 22,762,391 88,668,112 17,653,986
NET ASSETS:
Beginning of period................................. 2,290,559,947 414,710,679 210,100,872
-------------- ------------ ------------
End of period....................................... $2,313,322,338 $503,378,791 $227,754,858
============== ============ ============
</Table>
See notes to financial statements.
62
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ -------------- ------------ ------------ ------------ --------------
$ 122,678 $ 780,651 $ (234,037) $ (404,431) $ 13,676,225 $ 22,196,920
10,663,940 76,481,033 (263,339) 6,674,010 1,396,309 22,044,717
-- (91,430) -- -- -- --
-- (347) -- -- 74,676 (606,843)
(21,416,727) (45,795,064) (4,696,530) (17,425,195) (13,205,218) (83,069,270)
-- 43,060 -- -- -- --
-- 128 -- -- (883) (365,220)
------------ -------------- ------------ ------------ ------------ --------------
(10,630,109) 31,418,031 (5,193,906) (11,155,616) 1,941,109 (39,799,696)
------------ -------------- ------------ ------------ ------------ --------------
49,635,203 163,818,719 23,688,835 56,092,416 60,301,452 234,492,244
(19,187,646) (171,913,421) (12,437,743) (74,713,861) (40,439,553) (149,216,317)
------------ -------------- ------------ ------------ ------------ --------------
30,447,557 (8,094,702) 11,251,092 (18,621,445) 19,861,899 85,275,927
------------ -------------- ------------ ------------ ------------ --------------
19,817,448 23,323,329 6,057,186 (29,777,061) 21,803,008 45,476,231
172,735,949 1,227,530,742 108,429,152 397,726,867 351,772,536 1,401,617,944
------------ -------------- ------------ ------------ ------------ --------------
$192,553,397 $1,250,854,071 $114,486,338 $367,949,806 $373,575,544 $1,447,094,175
============ ============== ============ ============ ============ ==============
</Table>
63
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.
64
<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>
65
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
COMMERCIAL PAPER -- 34.8%
$34,410,000 AIG Funding, Inc.,
3.08%, 07/08/05.............. $ 34,389,392
33,890,000 Citigroup, Inc.,
3.10%, 07/01/05.............. 33,890,000
33,280,000 Credit Suisse First Boston USA,
Inc.,
3.03%, 07/11/05.............. 33,251,990
28,610,000 Deutsche Bank Financial LLC,
3.17%, 07/07/05.............. 28,594,908
33,890,000 Jupiter Securities
Corp. -- 144A,
3.07%, 07/06/05.............. 33,875,550
34,570,000 Rabobank USA Financial Corp.,
3.35%, 11/10/05.............. 34,145,999
28,080,000 Sheffield Receivables -- 144A,
3.18%, 07/15/05.............. 28,045,329
5,810,000 Sheffield Receivables -- 144A,
3.19%, 07/15/05.............. 5,802,792
43,000,000 UBS Finance (Delaware),
3.39%, 07/01/05.............. 43,000,000
34,100,000 Windmill Funding Corp. -- 144A,
3.10%, 07/20/05.............. 34,044,209
------------
TOTAL COMMERCIAL PAPER (Cost
$309,040,169)................ 309,040,169
------------
YANKEE CERTIFICATES OF DEPOSIT -- 15.2%
33,620,000 Abbey National Treasury,
3.11%, 07/18/05.............. 33,620,000
34,410,000 BNP Paribas New York,
3.18%, 08/09/05.............. 34,410,000
33,640,000 Canadian Imperial Bank,
3.05%, 07/01/05.............. 33,640,000
33,100,000 Dexia Credit Local SA,
3.06%, 07/05/05.............. 33,100,000
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT (Cost
$134,770,000)................ 134,770,000
------------
MEDIUM TERM CORPORATE NOTES -- 1.5%
13,000,000 Caterpillar Financial Service
Corp., Variable Rate,
1.24%, 07/09/05(a) (Cost
$13,000,000)................. 13,000,000
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 5.4%
FREDDIE MAC
33,580,000 3.80%, 07/12/06................ 33,580,000
14,100,000 Variable Rate,
3.08%, 10/07/05(a)........... 14,100,000
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$47,680,000)................. 47,680,000
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM CORPORATE NOTES -- 20.6%
$16,900,000 American Express Credit
Company, Variable Rate,
3.23%, 04/05/06(a)........... $ 16,908,576
34,690,000 Bank of America Corp.,
3.20%, 08/22/05.............. 34,690,000
33,400,000 Barclays Bank PLC New York,
Variable Rate,
3.21%, 06/21/06(a)........... 33,396,270
16,970,000 Goldman Sachs Group, Inc.,
Variable Rate,
3.27%, 05/24/06(a)........... 16,970,000
33,400,000 HSBC Finance Corp., Series MTN,
Variable Rate,
3.49%, 06/22/06(a)........... 33,428,482
14,000,000 Merrill Lynch & Company, Series
MTN, Variable Rate,
3.36%, 02/10/06(a)........... 14,000,000
33,850,000 Morgan Stanley, Variable Rate,
3.13%, 02/03/06(a)........... 33,850,000
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $183,243,328).... 183,243,328
------------
TOTAL SECURITIES (Cost
$687,733,497)................ 687,733,497
------------
REPURCHASE AGREEMENTS -- 22.4%
43,000,000 With Bank of America, dated
06/30/05, 3.35%, due
07/01/05, repurchase proceeds
at maturity $43,004,001
(Collateralized by various
Freddie Mac Discount Notes,
zero coupon, due
10/31/05 - 12/20/05, with a
total value of
$43,860,578)................. 43,000,000
43,000,000 With Barclays Bank, dated
06/30/05, 3.37%, due
07/01/05, repurchase proceeds
at maturity $43,004,025
(Collateralized by Fannie Mae
Discount Note, zero coupon,
due 11/02/05, with a value of
$36,797,072 and Freddie Mac
Discount Note, zero coupon,
due 04/13/06, with a value of
$7,063,054).................. 43,000,000
5,454 With Investors Bank & Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $5,454
(Collateralized by Small
Business Administration,
6.13%, due 06/25/26, with a
value of $5,726)............. 5,454
69,680,000 With Morgan Stanley, dated
06/30/05, 3.35%, due
07/01/05, repurchase proceeds
at maturity $69,686,484
(Collateralized by various
Freddie Mac Discount Notes,
zero coupon, due
03/27/06-03/31/06, with a
total value of
$71,076,254)................. 69,680,000
</Table>
See notes to financial statements.
66
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS (CONTINUED)
$43,000,000 With UBS Securities LLC, dated
06/30/05, 3.40%, due
07/01/05, repurchase proceeds
at maturity $43,004,061
(Collateralized by Fannie
Mae, 6.25%, due 02/01/11,
with a value of $36,397,661,
and Freddie Mac, 5.75%, due
01/15/12, with a value of
$7,465,596).................. $ 43,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $198,685,454).......... 198,685,454
------------
Total Investments -- 99.9%
(Cost $886,418,951).......... 886,418,951
Other assets less
liabilities -- 0.1%.......... 966,314
------------
NET ASSETS -- 100.0%........... $887,385,265
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $886,418,951.
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
67
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 76.9%
AEROSPACE AND DEFENSE -- 0.6%
$ 4,375,000 The Boeing Company, 8.10%,
11/15/06..................... $ 4,572,006
------------
AUTOMOBILES -- 0.7%
5,150,000 Daimler Chrysler NA Holding,
4.13%, 03/07/07.............. 5,129,663
------------
BANKS -- 18.2%
1,000,000 Abbey National PLC, Series EMTN
(United Kingdom),
6.69%, 10/17/05.............. 1,008,505
2,905,000 ABN AMRO Bank NV (Chicago),
7.13%, 06/18/07.............. 3,065,495
5,000,000 Amsouth Bank NA, Series BKNT,
Floating Rate, 3.19%,
01/20/06(b).................. 5,003,395
1,000,000 Bank of America Corp., 6.20%,
02/15/06..................... 1,013,661
4,000,000 Bank of America Corp., 7.13%,
03/01/09..................... 4,378,200
1,500,000 Bank of America Corp., Series
MTN1, Floating Rate, 3.55%,
08/26/05(b).................. 1,500,318
4,100,000 Bank of Montreal-Chicago,
6.10%, 09/15/05.............. 4,118,889
3,000,000 Bank of Montreal-Chicago,
7.80%, 04/01/07.............. 3,182,241
4,600,000 Bank of Scotland -- 144A
(United Kingdom),
3.50%, 11/30/07.............. 4,543,696
5,600,000 Bank One Corp.,
2.63%, 06/30/08.............. 5,360,393
2,000,000 BankBoston NA, Series BKNT,
6.38%, 04/15/08.............. 2,113,302
2,000,000 Fifth Third Bank,
6.75%, 07/15/05.............. 2,001,648
2,000,000 HBOS Treasury Services PLC --
144A (United Kingdom), 3.75%,
09/30/08..................... 1,985,062
5,333,000 HSBC Bank (United Kingdom),
7.63%, 06/15/06.............. 5,503,715
1,000,000 HSBC Bank PLC, USA, 6.95%,
03/15/11..................... 1,149,554
2,650,000 Inter-American Development
Bank, 8.40%, 09/01/09........ 3,092,759
5,000,000 KFW International Finance,
Series DTC,
5.25%, 06/28/06.............. 5,060,320
2,000,000 KFW International Finance,
Series DTC,
4.75%, 01/24/07.............. 2,030,696
4,545,455 National City Bank, Series
BKNT, 2.70%, 08/24/09........ 4,403,755
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 2,825,000 National City Bank, Series
BKNT, 4.25%, 01/29/10........ $ 2,826,760
1,000,000 National Westminster Bank
(United Kingdom), 7.38%,
10/01/09..................... 1,123,580
6,115,000 Nordea Bank Finland PLC, New
York Branch,
6.50%, 01/15/06.............. 6,208,504
5,000,000 SouthTrust Bank NA, Series
BKNT, Floating Rate, 3.35%,
12/14/05(b).................. 5,000,020
4,000,000 SunTrust Banks, Inc., Series
BKNT, Floating Rate, 3.12%,
10/03/05(b).................. 4,001,296
3,000,000 Svenska Handelsbanken (Sweden),
8.13%, 08/15/07.............. 3,236,019
3,000,000 Swiss Bank Corp.,
7.25%, 09/01/06.............. 3,098,865
3,000,000 US Bancorp, Series MTNN, 5.10%,
07/15/07..................... 3,060,612
2,145,000 US Bank NA (Minnesota), Series
BKNT,
7.30%, 08/15/05.............. 2,152,392
3,000,000 US Bank NA, Series BKNT,
Floating Rate,
3.35%, 12/05/05(b)........... 3,000,858
6,300,000 US Central Credit Union, 2.75%,
05/30/08..................... 6,120,028
1,500,000 Wachovia Corp.,
7.55%, 08/18/05.............. 1,507,241
3,125,000 Wachovia Corp.,
5.63%, 12/15/08.............. 3,287,681
7,000,000 Wachovia Corp., Floating Rate,
3.37%, 07/20/07(b)........... 7,010,527
6,725,000 Washington Mutual, Inc., 7.50%,
08/15/06..................... 6,962,829
3,166,000 Wells Fargo & Company, 6.88%,
04/01/06..................... 3,230,982
4,000,000 Wells Fargo & Company,
Floating Rate,
3.50%, 09/15/06(b)........... 4,006,044
6,000,000 Wells Fargo & Company,
Floating Rate,
3.54%, 09/28/07(b)........... 6,010,254
2,150,000 Wells Fargo & Company, Series
MTN, Floating Rate, 3.42%,
03/10/08(b)(d)............... 2,150,596
1,000,000 Wells Fargo & Company, Series
MTNH,
6.75%, 10/01/06.............. 1,033,704
------------
135,544,396
------------
BUSINESS SERVICES AND SUPPLIES -- 0.3%
2,500,000 First Data Corp.,
6.75%, 07/15/05.............. 2,502,098
------------
</Table>
See notes to financial statements.
68
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
'-FINANCIAL SERVICES -- 9.0%
$ 5,550,000 Capital One Bank, Series BKNT,
6.70%, 05/15/08.............. $ 5,896,997
2,050,000 Caterpillar Financial Services
Corp., Series MTND, 9.50%,
02/06/07..................... 2,169,656
5,000,000 Citigroup, Inc.,
3.50%, 02/01/08.............. 4,932,515
4,500,000 Citigroup, Inc., Floating Rate,
3.41%, 06/04/07(b)........... 4,505,135
3,570,000 General Electric Capital Corp.,
8.30%, 09/20/09.............. 4,121,554
1,000,000 General Electric Capital Corp.,
Series MTNA,
8.70%, 03/01/07.............. 1,070,677
6,000,000 Goldman Sachs Group, Inc.,
Series MTN1, Floating Rate,
3.27%, 01/09/07(b)........... 6,010,698
1,000,000 Heller Financial, Inc., 6.38%,
03/15/06..................... 1,017,041
7,000,000 Lehman Brothers Holdings, Inc.,
8.25%, 06/15/07.............. 7,543,053
2,250,000 Lehman Brothers Holdings, Inc.,
7.00%, 02/01/08.............. 2,403,743
5,000,000 Morgan Stanley,
3.88%, 01/15/09.............. 4,940,560
2,000,000 Morgan Stanley, Floating Rate,
3.31%, 07/27/07(b)........... 2,003,160
8,000,000 Residential Capital
Corp. -- 144A, 6.38%,
06/30/10..................... 8,046,976
2,100,000 The Bear Stearns Companies,
Inc., 3.25%, 03/25/09........ 2,025,626
6,000,000 The Bear Stearns Companies,
Inc., Floating Rate, 3.34%,
04/29/08(b).................. 6,007,350
2,454,540 Toyota Motor Credit Corp.,
Series MTN,
2.75%, 08/06/09.............. 2,400,822
2,500,000 Toyota Motor Credit Corp.,
Series MTN, Floating Rate,
3.24%, 09/09/05(c)........... 2,500,498
------------
67,596,061
------------
FOOD AND BEVERAGE -- 0.8%
6,000,000 Kellogg Company, Series B,
6.00%, 04/01/06.............. 6,098,856
------------
INSURANCE -- 0.4%
2,000,000 Met Life Global Funding
I -- 144A,
4.25%, 07/30/09.............. 2,008,794
1,391,000 Principal Life Income Funding,
3.20%, 04/01/09.............. 1,346,060
------------
3,354,854
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS -- 1.3%
$ 3,500,000 ConocoPhillips,
8.75%, 05/25/10.............. $ 4,173,600
1,840,000 Michigan Consolidated Gas
Company,
6.13%, 09/01/08.............. 1,935,516
3,760,000 Tosco Corp.,
7.25%, 01/01/07.............. 3,916,051
------------
10,025,167
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.4%
3,000,000 Abbott Laboratories, 5.63%,
07/01/06..................... 3,050,907
------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES -- 14.0%
6,500,000 AmeriCredit Automobile
Receivables Trust, Series
2005-AX, Class A3, 3.63%,
01/06/10..................... 6,460,097
4,500,000 Bay View Auto Trust, Series
2005-LJ1, Class A4, 4.09%,
05/25/12..................... 4,492,446
3,000,000 Capital Auto Receivables Asset
Trust, Series 2005-1, Class
A4, 4.05%, 07/15/09.......... 3,005,616
893,646 Capital One Auto Finance Trust,
Series 2003-A, Class A3A,
1.83%, 10/15/07.............. 890,187
4,000,000 Capital One Auto Finance Trust,
Series 2005-A, Class A3,
4.28%, 07/15/09.............. 4,011,452
2,000,000 Capital One Auto Finance Trust,
Series 2005-BSS, Class A3,
4.08%, 11/15/09.............. 1,998,438
3,500,000 Capital One Prime Auto
Receivables Trust, Series
2004-3, Class A4,
3.69%, 06/15/10.............. 3,467,657
4,500,000 Carmax Auto Owner Trust, Series
2004-2, Class A4, 3.46%,
09/15/11..................... 4,427,825
3,000,000 Chase Manhattan Auto Owner
Trust, Series 2005-A, Class
CTFS,
4.04%, 04/15/11.............. 2,981,250
1,146,912 Chevy Chase Auto Receivables
Trust, Series 2001-2, Class
A4, 4.44%, 04/16/07.......... 1,148,793
7,500,000 Fifth Third Auto Trust, Series
2004-A, Class A4, 3.70%,
10/20/11..................... 7,449,005
2,250,000 Ford Credit Auto Owner Trust,
Series 2005-B, Class B,
4.64%, 04/15/10.............. 2,273,031
4,525,000 Franklin Auto Trust, Series
2003-1, Class A4,
2.27%, 05/20/11.............. 4,443,355
</Table>
See notes to financial statements.
69
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES (CONTINUED)
$ 2,000,000 Franklin Auto Trust, Series
2004-1, Class A2,
3.57%, 03/16/09.............. $ 1,990,474
3,000,000 Harley-Davidson Motorcycle
Trust, Series 2004-1, Class
A2, 2.53%, 11/15/11.......... 2,924,132
973,123 Household Automotive Trust,
Series 2003-1, Class A3,
1.73%, 12/17/07.............. 968,750
753,479 Hyundai Auto Receivables Trust,
Series 2002-A, Class A3,
2.80%, 02/15/07.............. 752,532
204,729 Marshall & Ilsley Auto Loan
Trust, Series 2002-1, Class
A3, 2.49%, 10/22/07.......... 204,669
3,500,000 National City Auto Receivables
Trust, Series 2004-A, Class
A3, 2.11%, 07/15/08.......... 3,456,557
1,404,318 Onyx Acceptance Owner Trust,
Series 2004-A, Class A3,
2.19%, 03/17/08.............. 1,395,550
3,250,000 Onyx Acceptance Owner Trust,
Series 2005-A, Class A4,
3.91%, 09/15/11.............. 3,234,319
560,494 Provident Auto Lease ABS Trust,
Series 1999-1, Class A2,
7.03%, 01/14/12.............. 569,757
3,696,095 Regions Auto Receivables Trust,
Series 2003-2, Class A3,
2.31%, 01/15/08.............. 3,671,802
1,923,553 Ryder Vehicle Lease Trust,
Series 2001-A, Class A5,
6.17%, 11/15/07.............. 1,947,132
3,213,800 Susquehanna Auto Lease
Trust -- 144A, Series 2003-1,
Class A3,
2.46%, 01/14/07.............. 3,192,984
5,600,000 Susquehanna Auto Lease
Trust -- 144A, Series 2005-1,
Class A3,
4.43%, 06/16/08.............. 5,642,000
4,858,247 Triad Auto Receivables Owner
Trust, Series 2002-A, Class
A4,
3.24%, 08/12/09.............. 4,837,881
7,879,585 Volkswagen Auto Loan Enhanced
Trust, Series 2003-2, Class
A3,
2.27%, 10/22/07.............. 7,823,848
8,500,000 Wachovia Auto Owner Trust,
Series 2004-A, Class A4,
3.66%, 07/20/10.............. 8,436,891
4,500,000 WFS Financial Owner Trust,
Series 2004-1, Class A4,
2.81%, 08/22/11.............. 4,425,678
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES (CONTINUED)
$ 2,653,072 Whole Auto Loan Trust, Series
2003-1, Class A3B,
1.99%, 05/15/07.............. $ 2,635,448
------------
105,159,556
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 4.5%
1,625,000 Advanta Business Card Master
Trust, Series 2000-C, Class
B, Floating Rate,
3.96%, 04/20/08(c)........... 1,626,493
1,500,000 Chemical Master Credit Card
Trust 1, Series 1996-2, Class
A,
5.98%, 09/15/08.............. 1,517,529
5,000,000 Citibank Credit Card Issuance
Trust, Series 2000-A3, Class
A3,
6.88%, 11/16/09.............. 5,330,538
2,000,000 Citibank Credit Card Issuance
Trust, Series 2003-A6, Class
A6,
2.90%, 05/17/10.............. 1,940,310
5,375,000 Citibank Omni-S Master Trust,
Series 2000-2, Class A,
6.75%, 09/16/09.............. 5,411,510
3,000,000 Fleet Credit Card Master Trust
II, Series 2001-B, Class A,
5.60%, 12/15/08.............. 3,047,461
4,100,000 GE Credit Card Master Note
Trust, Series 2005-3, Class
A,
4.13%, 06/15/13.............. 4,100,641
1,700,000 Household Private Label Credit
Card Master Note Trust I,
Series 2002-2,
Class A, Floating Rate,
3.39%, 01/18/11(c)........... 1,703,541
6,000,000 Nordstrom Private Label Credit
Card -- 144A, Series 2001-1A,
Class A,
4.82%, 04/15/10.............. 6,064,598
500,000 Prime Credit Card Master Trust,
Series 2000-1, Class A,
6.70%, 10/15/09.............. 505,784
2,570,000 Standard Credit Card Master
Trust, Series 1994-2, Class
A, 7.25%, 04/07/08........... 2,635,902
------------
33,884,307
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 5.6%
5,250,000 Capital One Multi-Asset
Execution Trust, Series
2005-A3, Class A3, 4.05%,
03/15/13..................... 5,226,211
1,453,080 Caterpillar Financial Asset
Trust, Series 2003-A, Class
A3,
1.66%, 12/26/07.............. 1,437,661
4,500,000 Caterpillar Financial Asset
Trust, Series 2004-A, Class
A3,
3.13%, 01/26/09.............. 4,459,964
</Table>
See notes to financial statements.
70
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL SERVICES
(CONTINUED)
$ 3,357,709 Community Program Loan Trust,
Series 1987-A, Class A4,
4.50%, 10/01/18.............. $ 3,357,054
436,300 Distribution Financial Services
Trust, Series 2001-1, Class
A4,
5.67%, 01/17/17.............. 437,747
3,000,000 First National Master Note
Trust, Series 2003-1, Class
A, Floating Rate,
3.32%, 08/15/08(c)........... 3,004,055
185,349 Morgan Stanley Capital, Series
1999-RM1, Class A1,
6.37%, 12/15/31.............. 187,967
498,369 Morgan Stanley Capital, Series
2001-TOP3, Class A1,
5.31%, 07/15/33.............. 501,405
1,550,000 Morgan Stanley Capital I,
Series 2001-IQA, Class A2,
5.33%, 12/18/32.............. 1,577,097
161,186 Morgan Stanley Capital I,
Series 2002-HQ, Class A1,
4.59%, 04/15/34.............. 161,563
1,601,071 Morgan Stanley Capital I,
Series 2003-T11, Class A1,
3.26%, 06/13/41.............. 1,577,773
1,644,832 Morgan Stanley Capital I,
Series 2004-T13, Class A1,
2.85%, 09/13/45.............. 1,602,810
6,866,688 Morgan Stanley Capital I,
Series 2005-HQ5, Class A1,
4.52%, 01/14/42.............. 6,940,864
2,046,693 Navistar Financial Corp. Owner
Trust, Series 2001-B, Class
A4,
4.37%, 11/17/08.............. 2,048,218
1,771,081 PSE&G Transition Funding LLC,
Series 2001-1, Class A3,
5.98%, 06/15/08.............. 1,793,349
3,550,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A5,
6.45%, 03/15/13.............. 3,910,275
3,365,345 Public Service New Hampshire
Funding LLC, Series 2001-1,
Class A2,
5.73%, 11/01/10.............. 3,449,653
------------
41,673,666
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 9.4%
2,616,165 Banc of America Commercial
Mortgage, Inc., Series
2002-2, Class A1,
3.37%, 07/11/43.............. 2,597,190
2,561,028 Banc of America Commercial
Mortgage, Inc., Series
2003-2, Class A1,
3.41%, 03/11/41.............. 2,523,863
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 1,700,866 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 1998-C1, Class A1,
6.34%, 06/16/30.............. $ 1,742,778
883,655 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 1999-C1, Class A1,
5.91%, 02/14/31.............. 874,408
1,661,648 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2001-TOP4, Class A1,
5.06%, 11/15/16.............. 1,694,260
883,655 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2002-PBW1, Class A1,
3.97%, 11/11/35.............. 878,754
1,825,887 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2004-PWR5, Class A1,
3.76%, 07/11/42.............. 1,807,885
2,355,029 Commercial Mortgage Pass-
Through Certificates, Series
2004-LB2A, Class A1,
2.96%, 03/10/39.............. 2,297,666
5,000,000 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2001-CP4, Class A2,
5.87%, 12/15/35.............. 5,203,079
3,645,355 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2003-C3, Class A1,
2.08%, 05/15/38.............. 3,524,678
3,619,405 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2004-C1, Class A1,
2.25%, 01/15/37.............. 3,531,399
816,017 GE Capital Commercial Mortgage
Corp., Series 2001-3, Class
A1,
5.56%, 06/10/38.............. 844,681
508,908 GE Capital Commercial Mortgage
Corp., Series 2002-1, Class
A1,
5.03%, 12/10/35.............. 514,323
3,654,953 GE Capital Commercial Mortgage
Corp., Series 2002-3A, Class
A1,
4.23%, 12/10/37.............. 3,665,207
2,875,689 GE Capital Commercial Mortgage
Corp., Series 2004-C3, Class
A1,
3.75%, 07/10/39.............. 2,850,499
2,463,587 GE Capital Commercial Mortgage
Corp., Series 2005-C1, Class
A1,
4.01%, 06/10/48.............. 2,461,270
2,200,000 GMAC Mortgage Corp. Loan Trust,
Series 2004-GH1, Class A2,
4.39%, 12/25/25.............. 2,197,478
</Table>
See notes to financial statements.
71
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 604,261 IMC Home Equity Loan Trust,
Series 1997-3, Class A7,
7.08%, 08/20/28.............. $ 603,573
1,238,745 Interstar Millennium Trust,
Series 2003-3G, Class A2
(Australia), Floating Rate,
3.72%, 09/27/35(b)........... 1,244,361
2,039,680 Interstar Millennium Trust,
Series 2004-2G, Class A
(Australia), Floating Rate,
3.60%, 03/14/36(b)........... 2,041,603
835,553 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2002-C2, Class A1,
4.33%, 12/12/34.............. 837,328
3,493,242 JP Morgan Mortgage Trust,
Series 2005-A1, Class 5A1,
4.48%, 02/25/35.............. 3,464,633
1,757,213 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A1,
2.72%, 03/15/27.............. 1,716,959
1,850,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A2,
3.32%, 03/15/27.............. 1,814,181
2,745,726 LB-UBS Commercial Mortgage
Trust, Series 2003-C3, Class
A1,
2.60%, 05/15/27.............. 2,668,897
3,000,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C5, Class
A2,
3.48%, 07/15/27.............. 2,951,364
1,901,507 LB-UBS Commercial Mortgage
Trust, Series 2004-C8, Class
A1,
3.94%, 12/15/29.............. 1,894,148
3,000,000 Popular ABS Mortgage Pass-
Through Trust, Series 2005-3,
Class AF3,
4.44%, 07/25/35.............. 3,001,703
3,400,000 Residential Asset Mortgage
Products, Inc., Series
2003-RS11, Class AI4,
4.26%, 06/25/29.............. 3,387,844
1,400,686 Vendee Mortgage Trust, Series
1996-1, Class 1K,
6.75%, 11/15/12.............. 1,406,125
4,324,402 Wachovia Bank Commercial
Mortgage Trust, Series
2003-4, Class A1,
3.00%, 04/15/35.............. 4,240,610
------------
70,482,747
------------
PRIVATE ASSET BACKED: OTHER -- 6.4%
1,809,666 Bear Stearns Asset Backed
Securities, Inc., Series
2003-AC3, Class A1,
4.00%, 07/25/33.............. 1,798,172
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: OTHER (CONTINUED)
$ 4,672,000 California Infrastructure PG&E
Corp., Series 1997-1, Class
A8,
6.48%, 12/26/09.............. $ 4,888,872
2,247,960 California Infrastructure
SCE-1, Series 1997-1, Class
A6,
6.38%, 09/25/08.............. 2,289,690
1,190,555 CIT Equipment Collateral,
Series 2003-VT1, Class A3B,
1.63%, 04/20/07.............. 1,178,937
2,000,000 CIT Equipment Collateral,
Series 2004-VT1, Class A3,
2.20%, 03/20/08.............. 1,975,747
2,583,450 CIT RV Trust, Series 1998-A,
Class A5,
6.12%, 11/15/13.............. 2,628,089
5,000,000 CNH Equipment Trust, Series
2004-A, Class A3B,
2.94%, 10/15/08.............. 4,927,520
2,000,000 CNH Wholesale Master Note
Trust, Series 2003-1, Class
A, Floating Rate,
3.42%, 08/15/08(c)........... 2,001,072
6,000,000 Connecticut RRB Special Purpose
Trust CL&P1, Series 2001-1,
Class A3,
5.73%, 03/30/09.............. 6,108,485
2,233,458 Crusade Global Trust, Series
2004-2, Class A1 (Australia),
Floating Rate,
3.40%, 11/19/37(b)........... 2,237,346
4,000,000 GE Dealer Floorplan Master Note
Trust, Series 2004-2, Class
A, Floating Rate,
3.34%, 07/20/09(c)........... 4,008,501
1,000,000 GE Floorplan Master Note Trust,
Series 2004-1, Class B,
Floating Rate,
3.52%, 07/20/08(c)........... 1,001,042
2,427,657 Illinois Power Special Purpose
Trust, Series 1998-1, Class
A6,
5.54%, 06/25/09.............. 2,470,351
4,243,750 Nelnet Student Loan Corp.,
Series 2001-A, Class A1,
5.76%, 07/01/12.............. 4,364,732
1,767,809 PBG Equipment Trust, Series 1A,
Class A,
6.27%, 01/20/12.............. 1,771,638
2,300,000 Permanent Financing PLC, Series
7, Class 2A (United Kingdom),
Floating Rate,
3.42%, 09/10/14(b)........... 2,299,281
2,400,000 Providian Gateway Master
Trust - 144A, Series 2004-FA,
Class A,
3.65%, 11/15/11.............. 2,373,374
------------
48,322,849
------------
</Table>
See notes to financial statements.
72
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: RECEIVABLES -- 0.3%
$ 2,356,893 Alter Moneta Receivables LLC -
144A, Series 2003-1,
2.56%, 03/15/11.............. $ 2,343,024
------------
PRIVATE ASSET BACKED: TRANSPORTATION -- 1.1%
2,150,000 E-Trade RV and Marine Trust,
Series 2004-1, Class A3,
3.62%, 10/08/18.............. 2,125,097
1,009,942 Railcar Leasing LLC - 144A,
Series 1, Class A1,
6.75%, 07/15/06.............. 1,024,520
5,000,000 Railcar Leasing LLC, Series 1,
Class A2,
7.13%, 01/15/13.............. 5,464,575
------------
8,614,192
------------
PRIVATE ASSET BACKED: UTILITIES -- 1.0%
5,000,000 PECO Energy Transition Trust,
Series 1999-A, Class A6,
6.05%, 03/01/09.............. 5,105,520
2,000,000 PECO Energy Transition Trust,
Series 2001-A, Class A1,
6.52%, 12/31/10.............. 2,208,473
------------
7,313,993
------------
SPECIAL PURPOSE ENTITY -- 2.0%
7,475,000 Allstate Life Global Funding
Trust, Series MTN,
3.85%, 01/25/08.............. 7,429,619
2,500,000 New York Life Global Funding --
144A,
3.88%, 01/15/09.............. 2,482,018
5,000,000 New York Life Global Funding --
144A, Floating Rate,
3.36%, 02/26/07(b)........... 5,004,460
------------
14,916,097
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.3%
2,000,000 SBC Communications Capital
Corp., Series MTND,
6.68%, 11/28/07.............. 2,103,216
------------
UTILITIES: ELECTRIC -- 0.6%
3,000,000 Consolidated Edison Company of
New York, Inc., 4.70%,
06/15/09..................... 3,055,314
1,275,000 Virginia Electric & Power,
Series A,
5.38%, 02/01/07.............. 1,298,649
------------
4,353,963
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $584,711,210).......... 577,041,618
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 3.0%
US TREASURY NOTES
$23,300,000 2.75%, 08/15/07(d)
(Cost $23,107,073)........... $ 22,877,711
------------
US GOVERNMENT AGENCY SECURITIES -- 14.9%
FANNIE MAE -- 2.9%
1,257,711 PL# 254062,
6.00%, 10/01/11.............. 1,301,797
2,484,457 PL# 254754,
4.50%, 05/01/10.............. 2,480,331
3,548,132 PL# 254758,
4.50%, 06/01/13.............. 3,548,609
1,774,644 PL# 254805,
5.00%, 06/01/13.............. 1,811,456
3,573,208 PL# 254807,
5.00%, 07/01/13.............. 3,647,329
889,281 PL# 323743,
5.00%, 04/01/14.............. 901,326
546,426 PL# 429168,
6.00%, 05/01/13.............. 565,618
485,375 PL# 50903,
6.00%, 09/01/08.............. 499,235
612,180 PL# 50973,
6.00%, 01/01/09.............. 629,661
552,254 PL# 517699,
6.00%, 07/01/14.............. 571,570
1,875,828 PL# 545038,
6.00%, 09/01/14.............. 1,941,234
3,394,646 PL# 555154,
5.50%, 12/01/22.............. 3,467,070
419,814 PL# 609771,
6.00%, 09/01/08.............. 433,514
------------
21,798,750
------------
FEDERAL FARM CREDIT BANK -- 0.5%
3,500,000 2.50%, 11/15/05................ 3,487,960
------------
FEDERAL HOME LOAN BANK -- 0.9%
6,632,612 Series 6T-9009,
3.84%, 11/25/09.............. 6,560,900
------------
FREDDIE MAC GOLD -- 0.6%
217,566 PL# E00532,
6.50%, 02/01/13.............. 226,384
376,250 PL# E00542,
6.50%, 04/01/13.............. 391,656
970,942 PL# E00676,
5.50%, 06/01/14.............. 997,817
1,390,059 PL# E89557,
5.50%, 04/01/17.............. 1,427,622
1,314,447 PL# M90802,
4.00%, 03/01/08.............. 1,307,832
------------
4,351,311
------------
</Table>
See notes to financial statements.
73
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.3%
$ 2,250,335 PL# 436708,
5.75%, 12/15/22.............. $ 2,322,271
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 9.1%
2,493,190 Fannie Mae -- ACES, Series
1998-M1, Class A2, 6.25%,
01/25/08..................... 2,585,751
1,548,755 Fannie Mae, Series 1993-234,
Class PC,
5.50%, 12/25/08.............. 1,564,175
5,400,000 Fannie Mae, Series 2003-32,
Class PE,
4.00%, 03/25/26.............. 5,318,650
2,300,000 Fannie Mae, Series 2003-34,
Class GT,
4.00%, 01/25/27.............. 2,277,567
5,000,000 Fannie Mae, Series 2003-46,
Class PQ,
3.00%, 06/25/19.............. 4,942,066
2,550,000 Fannie Mae, Series 2003-62,
Class OD,
3.50%, 04/25/26.............. 2,477,094
3,224,167 Fannie Mae, Series 2003-63,
Class GU,
4.00%, 07/25/33.............. 3,199,290
1,500,000 Fannie Mae, Series 2003-67,
Class GL,
3.00%, 01/25/25.............. 1,467,202
6,873,853 Fannie Mae, Series 2003-69,
Class GJ,
3.50%, 12/25/31.............. 6,709,657
3,952,328 Fannie Mae, Series 2004-21,
Class QA,
4.00%, 11/25/17.............. 3,945,723
3,820,787 Fannie Mae, Series 2004-70,
Class DN,
4.00%, 12/25/29.............. 3,755,882
6,700,000 Fannie Mae, Series 2004-80,
Class LG,
4.00%, 10/25/16.............. 6,654,256
6,326,677 Federal Home Loan Bank, Series
1Y-9009, Class A,
4.06%, 08/25/09.............. 6,292,994
3,280,081 Federal Home Loan Bank, Series
3Q-9009, Class 1,
3.92%, 09/25/09.............. 3,254,240
153,252 Freddie Mac, Series 2557, Class
MA,
4.50%, 07/15/16.............. 153,143
2,838,466 Freddie Mac, Series 2614, Class
JA,
3.76%, 03/15/29.............. 2,782,126
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 6,143,034 Freddie Mac, Series 2672, Class
HA,
4.00%, 09/15/16.............. $ 6,095,673
4,590,793 Freddie Mac, Series 2760, Class
EA,
4.50%, 04/15/13.............. 4,613,971
------------
68,089,460
------------
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES -- 0.6%
5,000,000 Student Loan Marketing
Association Student Loan
Trust - 144A, Series 2003-4,
Class A5B,
3.39%, 03/15/33.............. 4,854,875
------------
TOTAL US GOVERNMENT AGENCY SECURITIES
(Cost $112,856,156).......... 111,465,527
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 1.2%
5,000,000 Hydro Quebec, Series MTNB,
6.52%, 02/23/06.............. 5,084,000
4,000,000 Province of Ontario (Canada),
5.50%, 10/01/08.............. 4,199,132
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $9,237,451)............ 9,283,132
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 2.4%
FANNIE MAE -- 0.8%
6,000,000 3.04%, 07/06/05................ 5,997,467
------------
FEDERAL HOME LOAN BANK -- 0.8%
6,000,000 3.14%, 07/13/05................ 5,993,720
------------
FREDDIE MAC -- 0.8%
6,400,000 3.20%, 07/20/05................ 6,389,204
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $18,380,391)........... 18,380,391
------------
SECURITIES LENDING COLLATERAL -- 3.4%
25,140,250 Securities Lending Collateral
Investment (Note 4)
(Cost $25,140,250)........... 25,140,250
------------
TOTAL SECURITIES
(Cost $773,432,531).......... 764,188,629
------------
</Table>
See notes to financial statements.
74
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENT -- 0.9%
$ 6,530,904 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase
proceeds at maturity
$6,531,378 (Collateralized by
Small Business
Administration, 6.33%, due
11/25/16, with a value of
$6,857,450) (Cost
$6,530,904).................. $ 6,530,904
------------
Total Investments -- 102.7%
(Cost $779,963,435).......... 770,719,533
Liabilities less other
assets -- (2.7)%............. (20,447,464)
------------
NET ASSETS -- 100.0%........... $750,272,069
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $779,963,435.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.............. $ 795,989
Gross unrealized depreciation.............. (10,039,891)
------------
Net unrealized depreciation................ $ (9,243,902)
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
75
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 64.6%
US TREASURY NOTES
$ 2,000,000 2.38%, 08/15/06................ $ 1,974,532
2,000,000 6.50%, 10/15/06................ 2,073,204
39,657,000 3.50%, 05/31/07................ 39,548,578
2,175,000 3.25%, 08/15/07(d)............. 2,158,094
2,610,000 3.00%, 11/15/07(d)............. 2,572,891
2,325,000 3.00%, 02/15/08................ 2,288,037
1,393,000 3.38%, 02/15/08(d)............. 1,383,314
2,855,000 2.63%, 05/15/08................ 2,775,263
2,300,000 3.13%, 09/15/08................ 2,261,728
2,500,000 3.13%, 10/15/08(d)............. 2,457,130
1,700,000 4.75%, 11/15/08................ 1,756,845
2,142,000 3.38%, 12/15/08................ 2,121,167
2,000,000 3.25%, 01/15/09(d)............. 1,972,110
32,125,000 3.00%, 02/15/09(d)............. 31,384,647
1,945,000 3.13%, 04/15/09................ 1,906,633
2,495,000 3.38%, 09/15/09................ 2,462,353
2,250,000 3.38%, 10/15/09................ 2,219,065
2,000,000 3.50%, 12/15/09(d)............. 1,981,798
2,000,000 3.63%, 01/15/10................ 1,991,172
9,765,000 4.00%, 04/15/10................ 9,874,866
1,950,000 3.63%, 05/15/13................ 1,925,779
12,912,000 4.25%, 08/15/13................ 13,238,841
1,750,000 4.00%, 02/15/14................ 1,761,076
9,926,000 4.75%, 05/15/14................ 10,535,526
2,584,000 4.00%, 02/15/15................ 2,593,995
3,527,000 4.13%, 05/15/15................ 3,579,630
------------
TOTAL US TREASURY SECURITIES
(Cost $150,896,803).......... 150,798,274
------------
US GOVERNMENT AGENCY SECURITIES -- 9.5%
FANNIE MAE -- 8.2%
8,186,000 7.13%, 06/15/10................ 9,332,687
1,410,000 5.00%, 04/15/15................ 1,492,436
2,671,860 PL# 648688,
6.50%, 07/01/32.............. 2,775,957
5,383,618 PL# 818844, Variable Rate,
4.53%, 12/01/34(a)........... 5,413,821
------------
19,014,901
------------
FEDERAL HOME LOAN BANK -- 1.3%
1,500,000 Series 363,
4.50%, 11/15/12.............. 1,535,613
1,500,000 Series P113,
5.13%, 05/24/13.............. 1,599,834
------------
3,135,447
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$21,968,665)................. 22,150,348
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 19.9%
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES -- 4.3%
$ 4,665,000 Carmax Auto Owner Trust, Series
2004-2, Class A4,
3.46%, 09/15/11.............. $ 4,590,179
2,102,000 Onyx Acceptance Owner Trust,
Series 2005-A, Class A4,
3.91%, 09/15/11.............. 2,091,858
2,037,000 Triad Auto Receivables Owner
Trust, Series 2005-A, Class
A4,
4.22%, 06/12/12.............. 2,046,363
1,276,000 Wells Fargo Financial Auto
Owner Trust, Series 2005-A,
Class A4,
4.28%, 05/15/12.............. 1,283,377
------------
10,011,777
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 3.5%
1,075,000 Chase Issuance Trust, Series
2005-A4, Class A4,
4.23%, 01/15/13.............. 1,080,039
1,822,000 Greenwich Capital Commercial
Funding Corp., Series
2005-GG3, Class A3,
4.57%, 08/10/42.............. 1,835,865
1,660,000 Morgan Stanley Capital I,
Series 2005-T17, Class A5,
4.78%, 12/13/41.............. 1,688,730
2,142,000 Navistar Financial Corp. Owner
Trust, Series 2004-A, Class
A4,
2.59%, 03/15/11.............. 2,081,278
1,507,000 WFS Financial Owner Trust,
Series 2004-4, Class A4,
3.44%, 05/17/12.............. 1,488,801
------------
8,174,713
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 6.6%
1,112,000 Chase Funding Mortgage Loan
Asset-Backed, Series 2003-6,
Class 1A3,
3.34%, 05/25/26.............. 1,096,246
1,773,000 Citigroup Commercial Mortgage
Trust, Series 2005-C3, Class
A2,
4.64%, 05/15/43.............. 1,781,835
2,580,000 Commercial Mortgage Pass-
Through Certificates, Series
2004-LB4A, Class A4,
4.58%, 10/15/37.............. 2,597,320
1,586,000 Credit-Based Asset Servicing
and Securities, Series
2005-CB3, Class AF2,
4.45%, 12/25/34.............. 1,585,860
1,336,000 GS Mortgage Securities Corp.
II, Series 2005-GG4, Class
A2,
4.48%, 07/10/39.............. 1,344,325
</Table>
See notes to financial statements.
76
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 903,000 JP Morgan Chase Commercial
Mortgage Securities, Series
2003-CB6, Class A2,
5.26%, 07/12/37.............. $ 947,864
889,000 JP Morgan Chase Commercial
Mortgage Securities, Series
2005-LDP2, Class A2,
4.58%, 07/15/42.............. 897,106
1,295,000 Merrill Lynch Mortgage Trust,
Series 2005-MCP1, Class A2,
4.56%, 05/12/43.............. 1,302,068
3,851,000 Wells Fargo Home Equity Trust,
Series 2004-2, Class AI3,
3.97%, 09/25/24.............. 3,816,092
------------
15,368,716
------------
PRIVATE ASSET BACKED: OTHER -- 3.9%
3,837,000 CNH Equipment Trust, Series
2003-B, Class A4B,
3.38%, 02/15/11.............. 3,792,437
2,111,000 CNH Equipment Trust, Series
2004-A, Class A4B,
3.48%, 09/15/11.............. 2,073,168
1,121,000 Countrywide Asset-Backed
Certificates, Series 2005-1,
Class AF3,
4.58%, 07/25/35.............. 1,126,944
2,214,000 John Deere Owner Trust, Series
2005-A, Class A4,
4.16%, 05/15/12.............. 2,219,910
------------
9,212,459
------------
PRIVATE ASSET BACKED: UTILITIES -- 1.6%
1,853,000 PG&E Energy Recovery Funding
LLC, Series 2005-1, Class A2,
3.87%, 06/25/11.............. 1,852,813
1,544,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A8,
6.89%, 12/15/17.............. 1,845,913
------------
3,698,726
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $46,436,549)........... 46,466,391
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SECURITIES LENDING COLLATERAL -- 17.8%
$41,460,158 Securities Lending Collateral
Investment (Note 4)
(Cost $41,460,158)........... $ 41,460,158
------------
TOTAL SECURITIES
(Cost $260,762,175).......... 260,875,171
------------
REPURCHASE AGREEMENT -- 1.9%
4,429,501 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $4,429,823
(Collateralized by Various
Fannie Mae Adjustable Rate
Mortgages, 5.46%-7.15%, due
02/01/30-07/01/32, with a
total value of $4,650,976)
(Cost $4,429,501)............ 4,429,501
------------
Total Investments -- 113.7%
(Cost $265,191,676).......... 265,304,672
Liabilities less other
assets -- (13.7)%............ (31,883,818)
------------
NET ASSETS -- 100.0%........... $233,420,854
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $265,191,676.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............ $ 864,550
Gross unrealized depreciation............ (751,554)
----------
Net unrealized appreciation.............. $ 112,996
==========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
77
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US TREASURY SECURITIES -- 27.0%
US TREASURY BONDS -- 7.1%
$ 13,125,000 10.38%, 11/15/12(d)........ $ 15,100,418
12,350,000 8.13%, 08/15/19(d)......... 17,504,198
16,090,000 8.50%, 02/15/20(d)......... 23,604,545
2,080,000 6.25%, 08/15/23............ 2,592,770
4,600,000 6.00%, 02/15/26............ 5,669,141
12,095,000 6.75%, 08/15/26(d)......... 16,205,885
3,280,000 6.13%, 11/15/27(d)......... 4,143,309
11,285,000 5.50%, 08/15/28............ 13,292,940
29,880,000 5.38%, 02/15/31............ 35,267,752
--------------
133,380,958
--------------
US TREASURY INFLATION INDEX -- 1.9%
8,417,183 2.00%, 07/15/14............ 8,675,952
27,052,061 1.63%, 01/15/15............ 26,962,249
--------------
35,638,201
--------------
US TREASURY NOTES -- 18.0%
72,185,000 3.13%, 01/31/07(d)......... 71,637,982
41,435,000 3.38%, 02/28/07............ 41,266,691
163,365,000 3.75%, 03/31/07(e)......... 163,664,938
34,795,000 3.63%, 04/30/07............ 34,786,858
10,000,000 3.50%, 05/31/07(d)......... 9,972,660
1,265,000 3.88%, 05/15/10(d)......... 1,272,610
3,940,000 3.63%, 06/15/10............ 3,923,996
10,060,000 4.13%, 05/15/15............ 10,210,115
--------------
336,735,850
--------------
TOTAL US TREASURY
SECURITIES (Cost
$502,786,701)............ 505,755,009
--------------
US GOVERNMENT AGENCY SECURITIES -- 31.7%
FANNIE MAE -- 21.8%
3,800,000 2.35%, 04/29/06............ 3,757,178
2,760,000 1.75%, 06/16/06............ 2,708,606
13,850,000 4.00%, 10/16/06............ 13,883,295
25,850,000 2.71%, 01/30/07............ 25,426,421
14,090,000 2.35%, 04/05/07............ 13,746,683
9,935,000 6.63%, 09/15/09............ 10,958,057
8,025,000 5.50%, 03/15/11............ 8,618,577
9,405,000 6.00%, 05/15/11............ 10,356,457
6,800,000 5.13%, 05/27/15............ 6,876,881
290,000 5.50%, 08/31/34............ 296,615
477,256 PL# 252571, 7.00%,
07/01/29................. 503,843
7,945 PL# 252716, 7.00%,
09/01/29................. 8,387
1,550 PL# 253264, 7.00%,
05/01/30................. 1,635
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 1,759 PL# 253346, 7.50%,
06/01/30................. $ 1,880
23,521 PL# 253479, 7.00%,
10/01/30................. 24,819
14,393 PL# 253698, 6.00%,
02/01/16................. 14,890
58,316 PL# 253990, 7.00%,
09/01/16................. 61,124
44,119 PL# 254008, 7.00%,
10/01/31................. 46,551
573,094 PL# 254346, 6.50%,
06/01/32................. 594,273
494,772 PL# 254406, 6.50%,
08/01/32................. 513,056
1,929 PL# 259141, 7.50%,
12/01/30................. 2,062
1,421,445 PL# 323842, 5.50%,
07/01/14................. 1,460,950
80,601 PL# 323967, 7.00%,
10/01/29................. 85,091
43,755 PL# 357513, 5.50%,
02/01/34................. 44,393
8,441 PL# 492742, 7.00%,
05/01/29................. 8,911
7,519 PL# 503916, 7.50%,
06/01/29................. 8,041
4,742 PL# 508415, 7.00%,
08/01/29................. 5,006
21,557 PL# 515946, 7.00%,
10/01/29................. 22,758
561 PL# 524164, 7.00%,
11/01/29................. 592
117,770 PL# 524657, 7.00%,
01/01/30................. 124,266
48,817 PL# 526053, 7.00%,
12/01/29................. 51,536
934 PL# 527717, 7.50%,
01/01/30................. 999
8,952 PL# 528107, 7.00%,
02/01/30................. 9,450
2,996 PL# 531092, 7.50%,
10/01/29................. 3,204
17,264 PL# 531497, 7.00%,
02/01/30................. 18,217
6,638 PL# 531735, 7.00%,
02/01/30................. 7,005
2,910 PL# 533841, 7.50%,
12/01/30................. 3,110
38,214 PL# 535030, 7.00%,
12/01/29................. 40,343
60,848 PL# 535103, 7.00%,
01/01/15................. 63,786
16,057 PL# 535159, 7.00%,
02/01/30................. 16,951
69,667 PL# 535195, 7.00%,
03/01/30................. 73,548
27,805 PL# 535277, 7.00%,
04/01/30................. 29,354
758,720 PL# 535675, 7.00%,
01/01/16................. 795,285
1,630 PL# 535722, 7.00%,
02/01/31................. 1,720
11,330 PL# 535723, 7.00%,
02/01/31................. 11,955
2,531 PL# 535811, 6.50%,
04/01/31................. 2,626
181,575 PL# 535880, 7.00%,
02/01/31................. 191,620
3,286 PL# 540211, 7.50%,
06/01/30................. 3,512
6,106 PL# 542999, 7.50%,
08/01/30................. 6,527
181,187 PL# 545194, 7.00%,
08/01/31................. 191,171
60,664 PL# 545477, 7.00%,
03/01/32................. 64,010
389,830 PL# 545759, 6.50%,
07/01/32................. 404,236
1,470,802 PL# 545760, 6.50%,
07/01/32................. 1,525,154
288,314 PL# 545762, 6.50%,
07/01/32................. 298,968
58,529 PL# 545815, 7.00%,
07/01/32................. 61,754
69,688 PL# 548822, 7.00%,
08/01/30................. 73,532
</Table>
See notes to financial statements.
78
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 52,451 PL# 549659, 7.00%,
02/01/16................. $ 54,977
26,921 PL# 549962, 7.00%,
10/01/30................. 28,406
53,430 PL# 549975, 7.00%,
10/01/30................. 56,377
19,451 PL# 550440, 7.00%,
02/01/16................. 20,388
1,270 PL# 550544, 7.50%,
09/01/30................. 1,358
1,277 PL# 552603, 7.00%,
10/01/30................. 1,348
83,179 PL# 554493, 7.00%,
10/01/30................. 87,767
405,147 PL# 555114, 5.50%,
12/01/17................. 416,309
54,654 PL# 555144, 7.00%,
10/01/32................. 57,666
699,034 PL# 555254, 6.50%,
01/01/33................. 725,317
394,469 PL# 555798, 6.50%,
05/01/33................. 409,300
2,224 PL# 558362, 7.50%,
11/01/30................. 2,377
789 PL# 558519, 7.50%,
11/01/30................. 843
11,628 PL# 559277, 7.00%,
10/01/30................. 12,269
62,990 PL# 559313, 7.00%,
12/01/30................. 66,464
3,334 PL# 559741, 7.50%,
01/01/31................. 3,564
34,225 PL# 560384, 7.00%,
11/01/30................. 36,113
1,487 PL# 560596, 7.50%,
01/01/31................. 1,589
2,925 PL# 561678, 7.50%,
12/01/30................. 3,126
2,234 PL# 564080, 7.50%,
12/01/30................. 2,388
26,969 PL# 564183, 7.00%,
12/01/30................. 28,456
2,669 PL# 564529, 7.50%,
12/01/30................. 2,852
22,986 PL# 566658, 7.00%,
02/01/31................. 24,253
60,191 PL# 574885, 6.00%,
05/01/16................. 62,272
6,555 PL# 575285, 7.50%,
03/01/31................. 7,006
12,216 PL# 577525, 6.00%,
05/01/16................. 12,638
13,204 PL# 579161, 6.50%,
04/01/31................. 13,700
219,726 PL# 579224, 6.00%,
04/01/16................. 227,324
28,053 PL# 580179, 7.00%,
10/01/16................. 29,404
718 PL# 580377, 7.50%,
04/01/31................. 768
9,920 PL# 584811, 7.00%,
05/01/31................. 10,466
237,569 PL# 585248, 7.00%,
06/01/31................. 250,672
57,795 PL# 589395, 6.00%,
07/01/16................. 59,793
1,162 PL# 589405, 7.50%,
06/01/31................. 1,242
17,884 PL# 589893, 7.00%,
06/01/31................. 18,869
4,789 PL# 592129, 7.50%,
06/01/31................. 5,118
11,851 PL# 596895, 6.50%,
07/01/31................. 12,297
145,163 PL# 596922, 6.00%,
08/01/16................. 150,183
29,706 PL# 598125, 7.00%,
09/01/16................. 31,137
61,496 PL# 600259, 6.00%,
08/01/16................. 63,622
13,638 PL# 606551, 6.50%,
10/01/31................. 14,150
7,464 PL# 606600, 7.00%,
10/01/31................. 7,875
73,246 PL# 607386, 5.50%,
11/01/16................. 75,268
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 26,277 PL# 610128, 7.00%,
10/01/31................. $ 27,724
293,982 PL# 610579, 5.50%,
12/01/16................. 302,100
40,227 PL# 611323, 7.00%,
10/01/16................. 42,164
2,859,933 PL# 619054, 5.50%,
02/01/17................. 2,938,723
9,644 PL# 622119, 6.50%,
01/01/32................. 10,007
320,116 PL# 624035, 6.50%,
01/01/32................. 334,273
17,022 PL# 629236, 6.50%,
02/01/32................. 17,651
370,925 PL# 630962, 6.50%,
02/01/32................. 384,633
1,034,449 PL# 631321, 5.50%,
02/01/17................. 1,062,948
81,977 PL# 631606, 5.50%,
03/01/17................. 84,235
96,063 PL# 632269, 7.00%,
05/01/32................. 101,356
13,208 PL# 634563, 6.50%,
03/01/32................. 13,696
93,196 PL# 634949, 7.00%,
05/01/32................. 98,337
303,344 PL# 635014, 6.50%,
06/01/32................. 314,554
466,904 PL# 635164, 6.50%,
08/01/32................. 484,158
8,126 PL# 644932, 6.50%,
07/01/32................. 8,426
8,443 PL# 647556, 7.00%,
01/01/30................. 8,913
782,215 PL# 648795, 6.50%,
08/01/32................. 811,122
239,692 PL# 650206, 5.50%,
01/01/18................. 246,295
72,847 PL# 650291, 6.50%,
07/01/32................. 75,539
22,216 PL# 650872, 7.00%,
07/01/32................. 23,442
123,181 PL# 650891, 6.50%,
07/01/32................. 127,733
349,427 PL# 651649, 6.50%,
08/01/32................. 362,340
1,591,953 PL# 652127, 6.50%,
06/01/32................. 1,650,782
596,807 PL# 662965, 6.50%,
09/01/32................. 618,861
5,848 PL# 663353, 6.50%,
09/01/32................. 6,064
55,099 PL# 664188, 5.50%,
09/01/17................. 56,617
106,530 PL# 664194, 5.50%,
09/01/17................. 109,465
775,225 PL# 670402, 6.50%,
06/01/32................. 803,873
264,817 PL# 671046, 6.50%,
01/01/33................. 274,604
218,907 PL# 673079, 6.50%,
11/01/32................. 226,996
284,514 PL# 675314, 5.50%,
12/01/17................. 292,352
499,967 PL# 676800, 5.50%,
01/01/18................. 513,741
662,457 PL# 679631, 5.50%,
02/01/18................. 680,649
548,262 PL# 683199, 5.50%,
02/01/18................. 563,317
298,832 PL# 692252, 6.50%,
03/01/33................. 309,549
1,182,039 PL# 694200, 4.50%,
05/01/18................. 1,178,452
8,851 PL# 694372, 6.50%,
11/01/32................. 9,178
125,954 PL# 695925, 5.50%,
05/01/18................. 129,413
2,108,021 PL# 701161, 4.50%,
04/01/18................. 2,100,611
261,713 PL# 711115, 6.50%,
09/01/33................. 271,098
702,816 PL# 711636, 4.50%,
05/01/18................. 700,345
3,151,560 PL# 720317, 5.00%,
07/01/18................. 3,190,322
</Table>
See notes to financial statements.
79
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 18,702 PL# 725269, 5.50%,
03/01/19................. $ 19,217
391,777 PL# 725407, 6.50%,
01/01/34................. 406,507
551,915 PL# 725418, 6.50%,
05/01/34................. 572,666
224,685 PL# 725424, 5.50%,
04/01/34................. 228,035
808,945 PL# 731682, 4.50%,
03/01/19................. 806,149
6,984,056 PL# 735454, 5.50%,
11/01/18................. 7,176,463
1,861,186 PL# 735611, 5.50%,
03/01/20................. 1,912,461
239,523 PL# 738632, 5.00%,
11/01/18................. 242,469
744,520 PL# 748257, 4.50%,
10/01/18................. 741,903
11,851 PL# 748655, 6.50%,
09/01/33................. 12,276
306,914 PL# 755813, 6.50%,
11/01/33................. 317,920
4,672,356 PL# 757687, 5.50%,
07/01/34................. 4,740,466
49,781 PL# 761808, 5.50%,
05/01/18................. 51,153
167,392 PL# 763249, 5.50%,
02/01/34................. 169,832
310,163 PL# 764221, 5.50%,
05/01/34................. 314,684
748,690 PL# 766312, 5.50%,
03/01/19................. 769,286
806,169 PL# 766419, 4.50%,
03/01/19................. 803,382
307,289 PL# 766823, 6.50%,
02/01/34................. 318,219
110,845 PL# 767392, 5.50%,
04/01/34................. 112,461
1,073,192 PL# 767395, 5.50%,
04/01/34................. 1,088,836
342,624 PL# 768313, 5.50%,
01/01/19................. 352,032
1,070,711 PL# 768528, 5.50%,
05/01/34................. 1,086,319
616,444 PL# 770410, 5.50%,
04/01/34................. 625,430
1,630,963 PL# 772651, 5.50%,
03/01/34................. 1,654,738
1,018,113 PL# 772664, 5.50%,
03/01/34................. 1,032,954
1,103,911 PL# 772805, 5.50%,
04/01/34................. 1,120,003
416,139 PL# 773066, 5.50%,
03/01/34................. 422,205
274,890 PL# 773072, 5.50%,
04/01/34................. 278,898
1,638,146 PL# 773571, 5.50%,
05/01/34................. 1,662,026
66,220 PL# 773588, 5.50%,
07/01/34................. 67,185
400,428 PL# 773777, 5.50%,
04/01/34................. 406,265
266,204 PL# 774338, 6.50%,
02/01/34................. 275,750
433,400 PL# 775794, 5.50%,
05/01/34................. 439,718
395,376 PL# 776233, 5.50%,
04/01/34................. 401,140
443,828 PL# 776440, 5.50%,
07/01/34................. 450,298
774,006 PL# 776715, 5.50%,
05/01/34................. 785,289
7,553,285 PL# 776983, 5.50%,
04/01/34................. 7,663,391
87,339 PL# 777481, 5.50%,
06/01/34................. 88,612
845,564 PL# 777677, 5.50%,
05/01/34................. 857,890
90,562 PL# 777754, 5.50%,
05/01/34................. 91,882
169,582 PL# 778219, 5.50%,
05/01/34................. 172,054
96,290 PL# 778619, 5.50%,
06/01/34................. 97,694
990,797 PL# 779135, 5.50%,
06/01/34................. 1,005,240
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 140,706 PL# 779520, 5.50%,
06/01/34................. $ 142,757
965,345 PL# 780901, 5.50%,
05/01/34................. 979,417
68,744 PL# 782571, 5.50%,
06/01/34................. 69,746
98,778 PL# 782707, 5.50%,
07/01/34................. 100,218
382,940 PL# 782974, 5.50%,
06/01/34................. 388,523
75,849 PL# 783017, 5.50%,
06/01/34................. 76,954
94,709 PL# 783667, 5.50%,
06/01/34................. 96,090
1,628,941 PL# 783824, 5.50%,
07/01/34................. 1,652,686
1,350,294 PL# 785226, 5.50%,
07/01/34................. 1,369,977
1,192,836 PL# 786148, 5.50%,
07/01/34................. 1,210,224
307,706 PL# 789053, 5.50%,
07/01/34................. 312,191
438,262 PL# 789545, 5.50%,
07/01/34................. 444,651
285,172 PL# 789873, 6.50%,
09/01/34................. 295,316
493,018 PL# 798175, 6.50%,
09/01/34................. 510,555
9,855,978 PL# 806549, Variable Rate,
4.58%, 01/01/35(a)....... 9,885,362
21,400,000 TBA, 5.50%, 07/01/19....... 21,968,426
11,500,000 TBA, 4.50%, 07/01/20....... 11,449,688
10,100,000 TBA, 5.00%, 07/01/20....... 10,213,625
2,200,000 TBA, 5.00%, 07/01/35....... 2,200,686
99,400,000 TBA, 6.00%, 08/01/35....... 101,822,874
46,900,000 TBA, 6.50%, 08/01/35....... 48,512,187
1,700,000 TBA, 4.50%, 07/01/35....... 1,662,813
15,330,900 TBA, 5.50%, 07/01/35....... 15,541,700
5,340,000 Variable Rate,
2.92%, 08/15/07(a)....... 5,337,106
--------------
406,860,010
--------------
FREDDIE MAC GOLD -- 4.0%
1,565,000 6.00%, 06/15/11............ 1,724,774
203,171 PL# A16148, 6.00%,
11/01/33................. 208,530
295,741 PL# A32037, 5.00%,
03/01/35................. 296,210
595,370 PL# B10307, 4.50%,
10/01/18................. 593,345
660,892 PL# B11431, 4.50%,
12/01/18................. 658,643
65,629 PL# B13285, 4.50%,
04/01/19................. 65,414
180,243 PL# B14156, 4.00%,
05/01/19................. 176,378
923,686 PL# B14218, 4.50%,
05/01/19................. 920,665
1,380,963 PL# B14518, 4.50%,
01/01/20................. 1,376,446
1,994,825 PL# B17118, 4.50%,
11/01/19................. 1,988,300
30,095 PL# B17892, 4.50%,
10/01/19................. 29,993
194,900 PL# B18433, 4.50%,
05/01/20................. 194,223
204,138 PL# B19022, 4.50%,
04/01/20................. 203,429
993,241 PL# B19028, 4.50%,
03/01/20................. 989,789
5,875,015 PL# B19043, 4.50%,
03/01/20................. 5,854,598
</Table>
See notes to financial statements.
80
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 348,504 PL# B19101, 4.50%,
04/01/20................. $ 347,293
719,966 PL# B19177, 4.50%,
05/01/20................. 717,464
1,392,073 PL# B19187, 4.50%,
04/01/20................. 1,387,235
224,656 PL# B19188, 4.50%,
05/01/20................. 223,875
508,128 PL# B19233, 4.50%,
04/01/20................. 506,363
483,704 PL# B19238, 4.50%,
05/01/20................. 482,023
775,948 PL# B19272, 4.50%,
05/01/20................. 773,251
1,542,366 PL# C01271, 6.50%,
12/01/31................. 1,600,520
4,466,138 PL# C57150, 6.00%,
05/01/31................. 4,588,487
6,660 PL# C67653, 7.00%,
06/01/32................. 7,015
84,463 PL# C67868, 7.00%,
06/01/32................. 88,964
26,123 PL# C67999, 7.00%,
06/01/32................. 27,515
193,994 PL# C68001, 7.00%,
06/01/32................. 204,332
219,699 PL# C90229, 7.00%,
08/01/18................. 232,255
33,420 PL# E00570, 6.00%,
09/01/13................. 34,566
722,947 PL# E00592, 6.00%,
12/01/13................. 747,749
33,782 PL# E00720, 6.00%,
07/01/14................. 34,951
31,813 PL# E01007, 6.00%,
08/01/16................. 32,904
105,966 PL# E01095, 6.00%,
01/01/17................. 109,598
3,627,572 PL# E01638, 4.00%,
04/01/19................. 3,549,784
46,927 PL# E69171, 6.00%,
02/01/13................. 48,537
45,875 PL# E73319, 6.00%,
11/01/13................. 47,448
56,149 PL# E73769, 6.00%,
12/01/13................. 58,076
34,551 PL# E75990, 6.00%,
04/01/14................. 35,742
41,787 PL# E76341, 6.00%,
04/01/14................. 43,233
73,715 PL# E76730, 6.00%,
05/01/14................. 76,267
51,824 PL# E76731, 6.00%,
05/01/14................. 53,619
50,116 PL# E78995, 6.00%,
11/01/14................. 51,852
371,197 PL# E84191, 6.00%,
07/01/16................. 383,921
6,873 PL# E84758, 5.50%,
07/01/16................. 7,061
30,774 PL# E85885, 6.00%,
11/01/16................. 31,829
383,695 PL# E86502, 5.50%,
12/01/16................. 394,156
6,814 PL# E86565, 5.50%,
12/01/16................. 6,999
328,012 PL# E87961, 6.00%,
02/01/17................. 339,256
643,621 PL# E88001, 6.00%,
02/01/17................. 665,734
59,208 PL# E88452, 6.00%,
03/01/17................. 61,242
388,899 PL# E88749, 6.00%,
03/01/17................. 402,230
836,165 PL# E88789, 6.00%,
04/01/17................. 864,894
217,900 PL# E88979, 5.50%,
04/01/17................. 223,788
552,056 PL# E89282, 6.00%,
04/01/17................. 571,023
981,728 PL# E89336, 6.00%,
05/01/17................. 1,015,458
35,317 PL# E89653, 6.00%,
04/01/17................. 36,527
674,900 PL# E89913, 6.00%,
05/01/17................. 698,088
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 1,210,057 PL# E91644, 5.50%,
10/01/17................. $ 1,242,755
343,692 PL# E91754, 5.50%,
10/01/17................. 352,980
510,148 PL# E91774, 5.50%,
10/01/17................. 523,933
214,983 PL# E91968, 5.50%,
10/01/17................. 220,792
493,417 PL# E92113, 5.50%,
10/01/17................. 506,751
33,437 PL# E95352, 4.50%,
04/01/18................. 33,323
71,045 PL# E98821, 4.50%,
09/01/18................. 70,803
2,371,317 PL# G01391, 7.00%,
04/01/32................. 2,497,716
26,576 PL# G11111, 6.00%,
04/01/16................. 27,486
152,842 PL# G11394, 4.50%,
05/01/18................. 152,322
9,378,383 PL# G11618, 4.50%,
05/01/18................. 9,351,356
553,971 PL# G11639, 4.50%,
12/01/19................. 552,159
249,055 PL# G18052, 4.50%,
05/01/20................. 248,189
4,368,131 PL# M80813, 4.00%,
04/01/10................. 4,323,550
14,100,000 TBA, 5.00%, 07/01/19....... 14,258,626
3,800,000 TBA, 5.50%, 07/01/19....... 3,899,750
400,000 TBA, 6.00%, 07/01/35....... 410,250
--------------
75,766,602
--------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 1.9%
211,323 PL# 3173, 6.50%,
12/20/31................. 220,102
153,428 PL# 421352, 6.00%,
11/15/33................. 158,428
2,987 PL# 434615, 7.00%,
11/15/29................. 3,166
287,110 PL# 435071, 7.00%,
03/15/31................. 304,204
76,203 PL# 462559, 7.00%,
02/15/28................. 80,819
29,217 PL# 493966, 7.00%,
06/15/29................. 30,968
104,801 PL# 494742, 7.00%,
04/15/29................. 111,080
1,835 PL# 530260, 7.00%,
02/15/31................. 1,944
238,204 PL# 531025, 6.00%,
04/15/32................. 246,045
1,456 PL# 538271, 7.00%,
11/15/31................. 1,543
129,225 PL# 538312, 6.00%,
02/15/32................. 133,478
289,915 PL# 543989, 7.00%,
03/15/31................. 307,175
1,411 PL# 547545, 7.00%,
04/15/31................. 1,495
598,379 PL# 550985, 7.00%,
10/15/31................. 634,005
941 PL# 551549, 7.00%,
07/15/31................. 997
73,047 PL# 552413, 7.00%,
02/15/32................. 77,392
172,096 PL# 554808, 6.00%,
05/15/31................. 177,779
149,178 PL# 555360, 6.00%,
06/15/31................. 154,104
163,034 PL# 555733, 6.00%,
03/15/32................. 168,401
1,271 PL# 557664, 7.00%,
08/15/31................. 1,346
175,488 PL# 557678, 7.00%,
08/15/31................. 185,936
6,504 PL# 561050, 7.00%,
05/15/31................. 6,892
</Table>
See notes to financial statements.
81
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 1,616 PL# 561996, 7.00%,
07/15/31................. $ 1,712
18,765 PL# 563346, 7.00%,
09/15/31................. 19,883
112,956 PL# 563599, 7.00%,
06/15/32................. 119,675
215,594 PL# 564086, 7.00%,
07/15/31................. 228,430
56,895 PL# 564300, 6.00%,
08/15/31................. 58,774
15,359 PL# 564706, 7.00%,
07/15/31................. 16,274
127,243 PL# 565808, 6.00%,
11/15/31................. 131,445
271,580 PL# 567622, 6.00%,
04/15/32................. 280,520
150,818 PL# 567668, 6.00%,
05/15/32................. 155,783
143,344 PL# 569567, 7.00%,
01/15/32................. 151,870
122,253 PL# 570517, 6.00%,
01/15/32................. 126,278
120,266 PL# 572821, 6.00%,
12/15/31................. 124,238
129,535 PL# 574873, 6.00%,
12/15/31................. 133,812
124,653 PL# 575906, 6.00%,
01/15/32................. 128,756
35,965 PL# 576323, 6.00%,
12/15/31................. 37,152
1,685 PL# 579377, 7.00%,
04/15/32................. 1,785
440,834 PL# 581015, 7.00%,
02/15/32................. 467,055
141,326 PL# 581070, 6.00%,
02/15/32................. 145,978
34,270 PL# 581084, 7.00%,
02/15/32................. 36,309
132,775 PL# 582956, 7.00%,
02/15/32................. 140,673
301,292 PL# 585210, 6.00%,
03/15/33................. 311,109
449,569 PL# 587122, 7.00%,
06/15/32................. 476,308
121,147 PL# 587390, 6.00%,
11/15/32................. 125,135
30,619 PL# 587494, 7.00%,
06/15/32................. 32,441
985 PL# 589696, 7.00%,
05/15/32................. 1,043
142,405 PL# 592030, 6.00%,
02/15/32................. 147,093
10,099 PL# 593823, 6.00%,
10/15/32................. 10,431
199,967 PL# 596818, 6.00%,
12/15/32................. 206,549
353,611 PL# 598205, 6.00%,
05/15/33................. 365,133
187,844 PL# 598459, 6.00%,
11/15/32................. 194,028
111,110 PL# 603498, 6.00%,
03/15/33................. 114,730
201,009 PL# 611085, 6.00%,
05/15/33................. 207,559
244,154 PL# 615382, 6.00%,
07/15/33................. 252,110
28,696 PL# 780802, 6.50%,
05/15/28................. 30,054
51,382 PL# 781113, 7.00%,
11/15/29................. 54,460
267,344 PL# 781148, 6.00%,
07/15/29................. 276,461
151,538 PL# 781276, 6.50%,
04/15/31................. 158,562
45,907 PL# 781287, 7.00%,
05/15/31................. 48,643
74,108 PL# 781324, 7.00%,
07/15/31................. 78,520
397,350 PL# 781328, 7.00%,
09/15/31................. 421,048
248,696 PL# 781330, 6.00%,
09/15/31................. 257,143
79,842 PL# 781496, 6.50%,
09/15/32................. 83,518
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 119,856 PL# 781548, 7.00%,
11/15/32................. $ 126,993
210,473 PL# 781566, 6.00%,
02/15/33................. 217,401
72,073 PL# 781584, 7.00%,
05/15/32................. 76,365
4,240,575 PL# 781690, 6.00%,
12/15/33................. 4,380,309
9,779,539 PL# 80916, 3.75%,
05/20/34................. 9,625,714
6,900,000 TBA, 5.50%, 07/01/35....... 7,046,624
4,700,000 TBA, 6.00%, 07/01/35....... 4,848,340
--------------
35,687,525
--------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 3.6%
3,469,196 Fannie Mae, Series 1999-7,
Class AB,
6.00%, 03/25/29.......... 3,567,620
8,456,387 Fannie Mae, Series 2003-35,
Class TE,
5.00%, 05/25/18.......... 8,637,992
6,767,233 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34.......... 6,835,341
8,571,525 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34.......... 8,796,541
5,050,000 Fannie Mae, Series
2004-101, Class AR,
5.50%, 01/25/35.......... 5,216,717
7,557,261 Fannie Mae, Series 2005-51,
Class TA,
5.50%, 12/25/33.......... 7,759,017
6,263,763 Freddie Mac, Series 2825,
Class VP,
5.50%, 06/15/15.......... 6,500,349
4,629,365 Freddie Mac, Series 2877,
Class PA,
5.50%, 07/15/33.......... 4,760,401
7,996,362 Freddie Mac, Series 2927,
Class BA,
5.50%, 10/15/33.......... 8,258,703
7,080,000 Freddie Mac, Series 2996,
Class MK,
5.50%, 06/15/35.......... 7,336,650
--------------
67,669,331
--------------
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES -- 0.3%
3,214,473 Small Business
Administration, Series
2002-P10B, Class 1,
5.20%, 08/01/12.......... 3,297,923
</Table>
See notes to financial statements.
82
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES (CONTINUED)
$ 2,842,698 Small Business
Administration, Series
2004-P10A,
4.50%, 02/10/14.......... $ 2,858,524
--------------
6,156,447
--------------
RESOLUTION FUNDING STRIPS -- 0.1%
1,200,000 Zero coupon, 07/15/18...... 675,438
1,200,000 Zero coupon, 10/15/18...... 667,169
--------------
1,342,607
--------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$591,522,860)............ 593,482,522
--------------
CORPORATE BONDS AND NOTES -- 41.0%
AEROSPACE AND DEFENSE -- 0.5%
320,000 B/E Aerospace,
8.50%, 10/01/10.......... 355,200
1,545,000 Lockheed Martin Corp.,
8.50%, 12/01/29.......... 2,238,211
545,000 Lockheed Martin Corp.,
7.20%, 05/01/36.......... 706,535
2,390,000 Northrop Grumman Corp.,
4.08%, 11/16/06.......... 2,383,879
35,000 Northrop Grumman Corp.,
7.13%, 02/15/11.......... 39,630
940,000 Northrop Grumman Corp.,
7.75%, 02/15/31.......... 1,275,632
790,000 RC Trust I,
7.00%, 05/15/06.......... 405,616
1,575,000 United Technologies Corp.,
4.88%, 05/01/15.......... 1,614,233
675,000 United Technologies Corp.,
8.88%, 11/15/19.......... 948,371
--------------
9,967,307
--------------
AIRLINES -- 0.0%
825,000 Southwest Airlines Company,
5.13%, 03/01/17.......... 810,731
--------------
AUTOMOBILES/MOTOR VEHICLES -- 0.1%
765,000 Daimler Chrysler AG Corp.,
7.45%, 03/01/27.......... 873,537
280,000 Daimler Chrysler NA
Holding, 4.05%,
06/04/08................. 275,899
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTOMOBILES/MOTOR VEHICLES (CONTINUED)
$ 130,000 Navistar International --
144A,
6.25%, 03/01/12.......... $ 126,100
--------------
1,275,536
--------------
BANKS -- 6.3%
5,575,000 American Express Bank FSB,
Series BKNT,
Floating Rate,
3.35%, 11/21/07(c)....... 5,583,028
1,500,000 American Express Centurion
Bank, Series BKNT,
4.38%, 07/30/09.......... 1,512,300
1,404,000 Bank of America Corp.,
5.25%, 02/01/07.......... 1,433,394
730,000 Bank of America Corp.,
3.88%, 01/15/08.......... 727,563
1,425,000 Bank of America Corp.,
3.25%, 08/15/08.......... 1,391,552
2,000,000 Bank of America Corp.,
3.38%, 02/17/09.......... 1,950,822
1,250,000 Bank of Scotland -- 144A
(United Kingdom),
3.50%, 11/30/07.......... 1,234,700
2,000,000 BankBoston NA, Series BKNT,
6.38%, 03/25/08.......... 2,110,672
1,350,000 Barclays Bank PLC (United
Kingdom), Variable Rate,
6.28%, perpetual(a)...... 1,378,688
660,000 Barclays Bank PLC -- 144A
(United Kingdom),
Variable Rate,
6.86%, perpetual(a)...... 778,626
1,375,000 Barclays Bank PLC -- 144A
(United Kingdom),
Variable Rate,
8.55%, perpetual(a)...... 1,656,211
3,850,000 Deutsche Bank AG New York,
Series YCD,
Variable Rate,
3.84%, 03/15/07(a)....... 3,846,831
2,850,000 HBOS Treasury Services
PLC -- 144A (United
Kingdom),
3.75%, 09/30/08.......... 2,828,713
11,400,000 HSBC Bank USA NA, Series
CD,
3.87%, 06/07/07.......... 11,328,454
</Table>
See notes to financial statements.
83
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 3,550,000 HSBC Bank USA, Series BKNT,
3.88%, 09/15/09.......... $ 3,503,250
1,155,000 Huntington National Bank,
Series BKNT,
2.75%, 10/16/06.......... 1,136,849
2,600,000 JP Morgan Chase & Company,
5.35%, 03/01/07.......... 2,653,014
475,000 JP Morgan Chase & Company,
5.25%, 05/30/07.......... 485,146
1,495,000 JP Morgan Chase & Company,
3.63%, 05/01/08.......... 1,472,887
2,100,000 JP Morgan Chase & Company,
5.75%, 10/15/08.......... 2,194,382
1,100,000 JP Morgan Chase & Company,
7.00%, 11/15/09(f)....... 1,211,079
850,000 Kazkommerts
International -- 144A,
(The Netherlands)
8.50%, 04/16/13.......... 904,740
535,000 Kazkommerts International
BV -- 144A (The
Netherlands),
7.88%, 04/07/14.......... 551,050
835,000 National City Bank,
3.38%, 10/15/07.......... 826,571
1,135,000 RBS Capital Trust I,
Variable Rate,
4.71%, perpetual(a)...... 1,121,616
1,200,000 Royal Bank of Scotland
Group PLC (United
Kingdom),
Variable Rate,
7.65%, perpetual(a)...... 1,530,919
3,600,000 State Street Bank & Trust,
Series CD1, Floating
Rate,
3.33%, 12/11/06(b)....... 3,599,964
2,990,000 SunTrust Banks, Inc.,
3.63%, 10/15/07.......... 2,952,236
2,000,000 SunTrust Banks, Inc.,
4.00%, 10/15/08.......... 1,990,708
1,535,000 SunTrust Banks, Inc.,
4.42%, 06/15/09.......... 1,549,204
2,275,000 Swedish Export Credit
(Sweden),
2.88%, 01/26/07.......... 2,239,530
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 2,150,000 The Bank of New York
Company, Inc., Series
BKNT,
3.80%, 02/01/08.......... $ 2,133,907
550,000 Turanalem Finance BV --
144A (The Netherlands),
8.50%, 02/10/15.......... 568,497
1,945,000 Turanalem Finance BV --
144A (The Netherlands),
8.00%, 03/24/14.......... 1,974,175
2,068,000,000 UBS AG (Japan),
0.10%, 09/27/05(t)....... 18,659,174
980,000 UBS Preferred Funding Trust
I, Variable Rate,
8.62%, perpetual(a)...... 1,165,617
490,000 US Bancorp, Series MTNN,
3.95%, 08/23/07.......... 489,479
3,040,000 US Bank NA,
2.40%, 03/12/07.......... 2,967,727
3,405,000 VTB Capital SA -- 144A
(Luxembourg),
6.25%, 07/02/35.......... 3,440,753
2,340,000 Wachovia Corp., Variable
Rate,
6.30%, 04/15/08(a)....... 2,480,302
9,210,000 Wells Fargo & Company,
4.00%, 08/15/08.......... 9,200,394
500,000 Wells Fargo & Company,
3.13%, 04/01/09.......... 483,931
6,480,000 Wells Fargo & Company,
4.20%, 01/15/10.......... 6,483,195
--------------
117,731,850
--------------
BROADCAST SERVICES/MEDIA -- 1.5%
3,875,000 Comcast Cable
Communications Holdings,
8.38%, 03/15/13.......... 4,731,938
250,000 Comcast Cable
Communications, Inc.,
6.38%, 01/30/06.......... 253,551
1,800,000 Comcast Cable
Communications, Inc.,
6.75%, 01/30/11.......... 1,988,179
450,000 Comcast Corp.,
7.05%, 03/15/33.......... 533,056
820,000 Comcast Corp.,
5.65%, 06/15/35.......... 819,496
2,020,000 Continental Cablevision,
8.30%, 05/15/06.......... 2,094,378
</Table>
See notes to financial statements.
84
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 465,000 Cox Communications, Inc.,
7.75%, 11/01/10.......... $ 527,083
370,000 Cox Communications, Inc.,
4.63%, 06/01/13.......... 359,749
130,000 CSC Holdings, Inc.,
7.88%, 02/15/18.......... 128,700
690,000 DIRECTV Holdings LLC/
DIRECTV Financing
Company, Inc. -- 144A,
6.38%, 06/15/15.......... 690,000
1,070,000 News America Holdings,
7.63%, 11/30/28.......... 1,296,157
1,275,000 News America, Inc.,
7.30%, 04/30/28.......... 1,488,220
545,000 News America, Inc.,
7.28%, 06/30/28.......... 635,535
865,000 News America, Inc.,
6.20%, 12/15/34.......... 910,956
650,000 TCI Communications, Inc.,
7.88%, 02/15/26.......... 814,096
1,675,000 TCI Communications, Inc.,
7.13%, 02/15/28.......... 1,960,676
700,000 Time Warner, Inc.,
8.18%, 08/15/07.......... 753,404
1,910,000 Time Warner, Inc.,
7.57%, 02/01/24.......... 2,339,847
610,000 Time Warner, Inc.,
6.95%, 01/15/28.......... 704,844
1,905,000 Time Warner, Inc.,
7.63%, 04/15/31.......... 2,386,674
775,000 Time Warner, Inc.,
7.70%, 05/01/32.......... 983,553
870,000 Viacom, Inc.,
6.63%, 05/15/11.......... 935,609
300,000 Viacom, Inc.,
7.88%, 07/30/30.......... 352,968
675,000 Walt Disney Company, Series
MTNB,
6.20%, 06/20/14.......... 750,632
--------------
28,439,301
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.3%
200,000 DR Horton, Inc.,
7.88%, 08/15/11.......... 225,797
430,000 DR Horton, Inc.,
5.63%, 09/15/14.......... 431,530
1,275,000 DR Horton, Inc.,
5.25%, 02/15/15(d)....... 1,240,759
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES
(CONTINUED)
$ 745,000 K Hovnanian Enterprises,
Inc.,
6.25%, 01/15/15.......... $ 739,413
1,390,000 KB Home,
6.25%, 06/15/15.......... 1,420,124
1,195,000 Lennar Corp. -- 144A,
5.60%, 05/31/15.......... 1,226,996
425,000 Pulte Homes, Inc.,
6.00%, 02/15/35.......... 414,910
--------------
5,699,529
--------------
CONTAINERS AND PACKAGING -- 0.0%
790,000 Crown European Holdings SA
(France),
10.88%, 03/01/13......... 932,200
--------------
FINANCIAL SERVICES -- 6.8%
390,000 American Real Estate
Partners, LP/Financing,
8.13%, 06/01/12.......... 403,650
225,000 American Real Estate
Partners, LP/Financing --
144A,
7.13%, 02/15/13.......... 221,625
255,000 BCP US Crystal Holdings
Corp.,
9.63%, 06/15/14.......... 286,875
9,050,000 Citigroup, Inc.,
3.50%, 02/01/08.......... 8,927,852
14,330,000 Citigroup, Inc.,
3.63%, 02/09/09.......... 14,104,861
820,000 Citigroup, Inc.,
6.20%, 03/15/09.......... 875,598
8,000,000 Citigroup, Inc.,
4.13%, 02/22/10.......... 7,979,920
900,000 Citigroup, Inc.,
5.85%, 12/11/34.......... 998,564
1,775,000 Credit Suisse First Boston
USA, Inc.,
4.70%, 06/01/09.......... 1,805,312
8,225,000 Eksportfinans ASA, Series
MTN (Norway),
3.38%, 01/15/08.......... 8,113,691
3,720,000 General Electric Capital
Corp.,
4.13%, 03/04/08.......... 3,726,484
2,000,000 General Electric Capital
Corp., Series MTNA,
6.50%, 12/10/07.......... 2,108,958
</Table>
See notes to financial statements.
85
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 21,875,000 General Electric Capital
Corp., Series MTNA,
4.13%, 09/01/09.......... $ 21,820,859
30,250,000 General Electric Capital
Corp., Series MTNA,
Variable Rate,
3.45%, 01/15/08(a)....... 30,044,450
1,520,000 General Motors Acceptance
Corp.,
4.75%, 09/14/09.......... 1,677,079
2,500,000 General Motors Acceptance
Corp., Series MTN,
Floating Rate,
4.60%, 09/23/08(b)....... 2,313,263
450,000 Household Finance Corp.,
7.20%, 07/15/06.......... 463,994
2,925,000 Household Finance Corp.,
6.50%, 11/15/08.......... 3,124,336
1,583,000 Lehman Brothers Holdings,
Inc.,
7.00%, 02/01/08.......... 1,691,166
1,800,000 Morgan Stanley,
4.00%, 01/15/10.......... 1,774,976
350,000 Nationwide Building
Society -- 144A (United
Kingdom),
2.63%, 01/30/07.......... 342,720
4,000,000 Nationwide Building
Society -- 144A (United
Kingdom),
3.50%, 07/31/07.......... 3,954,848
355,000 Nationwide Building
Society -- 144A (United
Kingdom),
4.25%, 02/01/10.......... 354,480
1,600,000 Prudential Financial, Inc.,
Series MTNC,
5.40%, 06/13/35.......... 1,603,485
390,000 SLM Corp.,
4.00%, 01/15/10.......... 385,654
1,700,000 SLM Corp., Series MTNA,
5.63%, 04/10/07.......... 1,743,653
545,000 SLM Corp., Series MTNA,
3.63%, 03/17/08.......... 536,036
1,000,000 The Bear Stearns Companies,
Inc.,
2.88%, 07/02/08.......... 962,991
2,475,000 TIAA Global Markets --
144A,
3.88%, 01/22/08.......... 2,460,972
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 1,955,000 USAA Capital Corp. -- 144A,
Series MTNB,
4.00%, 12/10/07.......... $ 1,952,973
--------------
126,761,325
--------------
FOOD AND BEVERAGE -- 0.2%
1,915,000 Diageo Capital PLC (United
Kingdom),
3.38%, 03/20/08.......... 1,879,842
1,100,000 General Mills, Inc.,
5.13%, 02/15/07.......... 1,117,580
395,000 Smithfield Foods, Inc,
7.00%, 08/01/11.......... 417,713
--------------
3,415,135
--------------
FUNERAL SERVICES -- 0.0%
655,000 Service Corp.
International,
7.70%, 04/15/09.......... 704,125
--------------
INSURANCE -- 1.3%
2,775,000 Allstate Financial Global
Funding -- 144A,
6.15%, 02/01/06.......... 2,810,689
5,375,000 ASIF Global Financial
XXIII -- 144A,
3.90%, 10/22/08.......... 5,280,002
2,000,000 Berkshire Hathaway Finance
Corp.,
3.40%, 07/02/07.......... 1,975,168
2,850,000 Berkshire Hathaway Finance
Corp.,
3.38%, 10/15/08.......... 2,774,857
2,815,000 Berkshire Hathaway Finance
Corp.,
4.13%, 01/15/10.......... 2,800,998
2,085,000 Liberty Mutual Group --
144A,
6.50%, 03/15/35.......... 2,072,557
2,400,000 Met Life Global Funding --
144A,
4.50%, 05/05/10.......... 2,418,086
1,115,000 Met Life Global Funding
I -- 144A,
4.25%, 07/30/09.......... 1,119,903
1,280,000 MetLife, Inc.,
5.70%, 06/15/35.......... 1,324,320
1,145,000 Protective Life Secured
Trust, Series MTN,
3.70%, 11/24/08.......... 1,128,574
--------------
23,705,154
--------------
</Table>
See notes to financial statements.
86
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION -- 0.1%
$ 440,000 John Q Hammons Hotels,
LP/John Q Hammons Finance
Corporation III,
Series B,
8.88%, 05/15/12.......... $ 481,800
370,000 K2, Inc.,
7.38%, 07/01/14.......... 391,275
1,210,000 MGM MIRAGE,
6.00%, 10/01/09.......... 1,222,100
325,000 Mohegan Tribal Gaming
Authority -- 144A,
6.13%, 02/15/13.......... 329,875
185,000 Wynn Las Vegas LLC/Capital
Corp. -- 144A,
6.63%, 12/01/14.......... 180,838
--------------
2,605,888
--------------
MANUFACTURING -- 0.2%
395,000 Briggs & Stratton Corp.,
8.88%, 03/15/11.......... 453,263
2,390,000 Tyco International Group SA
(Luxembourg),
6.13%, 11/01/08.......... 2,532,563
--------------
2,985,826
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.2%
525,000 HCA, Inc.,
5.50%, 12/01/09.......... 529,180
2,075,000 WellPoint, Inc.,
6.38%, 06/15/06.......... 2,120,036
1,300,000 WellPoint, Inc.,
5.95%, 12/15/34.......... 1,424,173
--------------
4,073,389
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.1%
1,140,000 Boston Scientific Corp.,
5.45%, 06/15/14.......... 1,198,825
--------------
METALS AND MINING -- 0.2%
1,250,000 Falconbridge, Ltd.
(Canada),
5.50%, 06/15/17.......... 1,250,060
85,000 International Steel Group,
6.50%, 04/15/14.......... 82,025
1,999,000 Ispat Inland ULC,
9.75%, 04/01/14.......... 2,338,830
220,000 TriMas Corp.,
9.88%, 06/15/12.......... 185,900
--------------
3,856,815
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES -- 0.3%
$ 1,425,000 Consolidated Natural Gas,
Series A,
5.00%, 03/01/14.......... $ 1,448,026
1,020,000 Dynegy Holdings, Inc. --
144A,
10.13%, 07/15/13......... 1,157,700
365,000 El Paso Natural Gas,
8.63%, 01/15/22.......... 427,563
935,000 Transcontinental Gas Pipe
Line Corp., Series B,
8.88%, 07/15/12.......... 1,117,325
570,000 Williams Companies, Inc.,
7.63%, 07/15/19.......... 644,100
225,000 Williams Companies, Inc.,
7.75%, 06/15/31.......... 249,188
--------------
5,043,902
--------------
OIL, COAL AND GAS -- 1.2%
2,250,000 Amerada Hess Corp.,
7.13%, 03/15/33.......... 2,677,585
875,000 Anadarko Finance Company,
Series B (Canada),
7.50%, 05/01/31.......... 1,108,243
545,000 Chesapeake Energy Corp.,
7.75%, 01/15/15.......... 591,325
500,000 Chesapeake Energy Corp. --
144A,
6.25%, 01/15/18.......... 495,000
2,500,000 Conoco Funding Company
(Canada),
6.35%, 10/15/11.......... 2,771,857
1,625,000 Devon Energy Corp.,
7.95%, 04/15/32.......... 2,144,357
435,000 Devon Financing Corp. ULC,
7.88%, 09/30/31.......... 567,614
180,000 El Paso Production Holding
Company,
7.75%, 06/01/13.......... 193,050
2,160,000 EnCana Corp. (Canada),
4.75%, 10/15/13.......... 2,157,070
700,000 EnCana Corp. (Canada),
6.50%, 08/15/34.......... 806,165
1,225,000 Enterprise Products
Operating LP, Series B,
4.00%, 10/15/07.......... 1,213,413
1,710,000 Gazprom OAO -- 144A
(Russia),
9.63%, 03/01/13.......... 2,105,438
200,000 KCS Energy, Inc. -- 144A,
7.13%, 04/01/12.......... 205,000
</Table>
See notes to financial statements.
87
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$ 950,000 Morgan Stanley (Gazprom) --
144A (Russia),
9.63%, 03/01/13.......... $ 1,167,550
505,000 Occidental
Petroleum -- 144A,
8.45%, 02/15/29.......... 731,575
1,065,000 Pemex Project Funding
Master Trust -- 144A,
5.75%, 12/15/15.......... 1,065,533
2,400,000 Petro-Canada (Canada),
5.95%, 05/15/35.......... 2,519,529
700,000 Suncor Energy, Inc.
(Canada),
5.95%, 12/01/34.......... 781,565
--------------
23,301,869
--------------
PAPER AND FOREST PRODUCTS -- 0.1%
760,000 Abitibi-Consolidated, Inc.
(Canada),
8.38%, 04/01/15(d)....... 779,000
140,000 Georgia-Pacific Corp.,
8.00%, 01/15/24.......... 161,700
--------------
940,700
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.3%
170,000 Bio-Rad Laboratories, Inc.,
7.50%, 08/15/13.......... 182,750
530,000 Bio-Rad Laboratories, Inc.,
6.13%, 12/15/14.......... 537,950
1,100,000 Bristol-Myers Squibb,
6.88%, 08/01/97.......... 1,376,786
815,000 Elan Finance PLC/Elan
Finance Corp. -- 144A
(Brazil),
7.75%, 11/15/11(d)....... 700,900
2,325,000 Merck & Company, Inc.,
4.75%, 03/01/15.......... 2,350,264
--------------
5,148,650
--------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES -- 1.7%
2,209,019 Daimler Chrysler Auto
Trust, Series 2001-C,
Class A4,
4.63%, 12/06/06.......... 2,210,800
16,200,000 Daimler Chrysler Auto
Trust, Series 2005-B,
Class A3,
4.04%, 09/08/09.......... 16,226,977
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES (CONTINUED)
$ 13,200,000 Ford Credit Auto Owner
Trust, Series 2005-B,
Class A3,
4.17%, 01/15/09.......... $ 13,239,791
--------------
31,677,568
--------------
PRIVATE ASSET BACKED: BANKS -- 0.7%
4,882,914 Bank of America Alternative
Loan Trust, Series
2004-7, Class 4A1,
5.00%, 08/25/19.......... 4,908,043
9,000,000 DEPFA ACS Bank -- 144A
(Ireland),
4.25%, 08/16/10(d)....... 9,038,430
--------------
13,946,473
--------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 3.5%
14,000,000 American Express Credit
Account Master Trust,
Series 2005-3, Class A,
3.24%, 01/18/11.......... 14,000,000
12,075,000 Chase Issuance Trust,
Series 2004-A9, Class A9,
3.22%, 06/15/10.......... 11,887,291
14,950,000 Citibank Credit Card
Issuance Trust, Series
2004-A1, Class A1,
2.55%, 01/20/09.......... 14,645,081
14,850,000 Citibank Credit Card
Issuance Trust, Series
2004-A4, Class A4,
3.20%, 08/24/09.......... 14,620,940
11,500,000 MBNA Credit Card Master
Note Trust, Series
2003-A6, Class A6,
2.75%, 10/15/10.......... 11,117,814
--------------
66,271,126
--------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 2.0%
2,805,000 Greenwich Capital
Commercial Funding Corp.,
Series 2004-GG1, Class
A4,
4.76%, 06/10/36.......... 2,855,516
11,200,000 Greenwich Capital
Commercial Funding Corp.,
Series 2005-GG3, Class
A3,
4.57%, 08/10/42.......... 11,285,230
4,540,550 Morgan Stanley Capital I,
Series 1998-WF1, Class
A2,
6.55%, 03/15/30.......... 4,759,600
</Table>
See notes to financial statements.
88
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL SERVICES
(CONTINUED)
$ 2,980,000 Morgan Stanley Capital I,
Series 1999-FNV1, Class
A2,
6.53%, 03/15/31.......... $ 3,187,083
15,075,000 SLM Student Loan Trust,
Series 2005-5, Class A1,
Floating Rate,
3.45%, 01/25/18(b)....... 15,075,000
--------------
37,162,429
--------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 9.2%
9,300,000 Banc of America Commercial
Mortgage, Inc., Series
2001-1, Class A2,
6.50%, 04/15/36.......... 10,238,224
1,559,412 Bear Stearns Commercial
Mortgage Securities,
Inc., Series 2001,
Class A1,
6.08%, 02/15/35.......... 1,610,992
9,075,000 Bear Stearns Commercial
Mortgage Securities,
Inc., Series 2005-PWR8,
Class A4,
4.67%, 06/11/41.......... 9,151,936
7,670,000 Chase Commercial Mortgage
Securities Corp., Series
2000-3, Class A2,
7.32%, 10/15/32.......... 8,637,827
10,848,052 Commercial Mortgage
Acceptance Corp., Series
1998-C2, Class A2,
6.03%, 09/15/30.......... 11,260,552
8,280,000 Commercial Mortgage Pass-
Through Certificates,
Series 2000-C1, Class A2,
7.42%, 08/15/33.......... 9,254,409
11,319,899 Countrywide Asset-Backed
Certificates, Series
2004-13, Class AV4,
Floating Rate,
3.60%, 06/25/35(c)....... 11,338,615
4,875,000 DLJ Commercial Mortgage
Corp., Series 2000-CKP1,
Class A1B,
7.18%, 11/10/33.......... 5,460,750
6,150,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2, 6.95%,
09/15/33................. 6,697,035
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 7,565,745 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C3, Class A2,
7.18%, 08/15/36.......... $ 8,269,441
8,700,000 GS Mortgage Securities
Corp. II, Series
2005-GG4, Class A4A,
4.75%, 07/10/39.......... 8,828,747
11,875,094 GSR Mortgage Loan Trust,
Series 2003-13, Class
1A1,
4.51%, 10/25/33.......... 11,719,091
6,650,000 JP Morgan Chase Commercial
Mortgage Securities
Corp., Series 2001-CIB2,
Class A3,
6.43%, 04/15/35.......... 7,302,845
9,475,000 JP Morgan Chase Commercial
Mortgage Securities
Corp., Series 2001-CIBC,
Class A3,
6.26%, 03/15/33.......... 10,340,876
7,425,000 LB Commercial Conduit
Mortgage Trust, Series
1998-C4, Class A1B,
6.21%, 10/15/35.......... 7,863,189
6,900,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C3,
Class A2,
7.95%, 05/15/25.......... 7,894,719
6,830,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C4,
Class A2,
7.37%, 08/15/26.......... 7,704,340
7,395,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C7,
Class A3,
4.56%, 09/15/27.......... 7,461,651
9,100,000 LB-UBS Commercial Mortgage
Trust, Series 2004-C8,
Class A4,
4.51%, 12/15/29.......... 9,155,896
9,099,504 Salomon Brothers Mortgage
Securities VII, Series
2001-C2, Class A3,
6.50%, 10/13/11.......... 10,073,700
--------------
170,264,835
--------------
PRIVATE ASSET BACKED: OTHER -- 0.3%
5,898,548 Structured Asset Securities
Corp. -- 144A, Series
2003-AL2, Class A,
3.36%, 01/25/31.......... 5,622,260
--------------
</Table>
See notes to financial statements.
89
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: UTILITIES -- 0.5%
$ 8,000,000 Peco Energy Transition
Trust, Series 2000-A,
Class A4,
7.65%, 03/01/10.......... $ 9,068,783
--------------
REAL ESTATE -- 0.1%
1,252,000 EOP Operating LP,
7.50%, 04/19/29.......... 1,507,116
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.4%
910,000 AvalonBay Communities,
Series MTN,
6.63%, 09/15/11.......... 1,003,615
2,300,000 Developers Diversified
Realty Corp.,
3.88%, 01/30/09.......... 2,235,878
4,135,000 Rouse Company,
5.38%, 11/26/13.......... 4,012,617
--------------
7,252,110
--------------
RETAIL -- 0.1%
430,000 Federated Department
Stores, Inc.,
6.79%, 07/15/27.......... 487,493
450,000 Federated Department
Stores, Inc.,
7.00%, 02/15/28.......... 524,743
495,000 May Department Stores
Company,
7.88%, 03/01/30.......... 627,874
625,000 May Department Stores
Company,
6.70%, 07/15/34.......... 701,136
215,000 Movie Gallery,
Inc. -- 144A,
11.00%, 05/01/12......... 226,825
--------------
2,568,071
--------------
RETAIL: SUPERMARKETS -- 0.1%
1,860,000 Delhaize America, Inc.,
9.00%, 04/15/31.......... 2,331,471
--------------
SEMICONDUCTORS -- 0.1%
245,000 Freescale Semiconductor,
Inc., Floating Rate,
5.89%, 07/15/09(b)....... 255,719
55,000 MagnaChip Semiconductor,
Ltd. -- 144A,
6.88%, 12/15/11.......... 54,175
720,000 MagnaChip Semiconductor,
Ltd. -- 144A, Floating
Rate,
6.66%, 12/15/11(b)....... 716,400
--------------
1,026,294
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY -- 0.3%
$ 359,553 AES Ironwood LLC,
8.86%, 11/30/25.......... $ 408,991
2,875,000 Belvoir Land LLC -- 144A,
5.40%, 12/15/47.......... 2,949,808
1,000,000 California Preferred Fund
Trust,
7.00%, perpetual......... 1,046,260
1,600,000 New York Life Global
Funding -- 144A,
3.88%, 01/15/09.......... 1,588,491
--------------
5,993,550
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.4%
625,000 America Movil SA de CV
(Mexico),
6.38%, 03/01/35.......... 613,031
2,175,000 BellSouth Corp.,
4.20%, 09/15/09.......... 2,169,347
775,000 BellSouth Corp.,
6.55%, 06/15/34.......... 885,475
80,000 British Telecom PLC (United
Kingdom), Variable Rate,
8.88%, 12/15/30(m)....... 113,278
810,000 Cincinnati Bell, Inc.,
7.25%, 07/15/13.......... 854,550
200,000 Citizens Communications
Company,
6.25%, 01/15/13.......... 194,500
850,000 France Telecom (France),
8.75%, 03/01/31.......... 1,188,789
75,000 Intelsat Bermuda, Ltd. --
144A (Bermuda),
8.25%, 01/15/13.......... 77,813
330,000 Intelsat Bermuda, Ltd. --
144A (Bermuda), Floating
Rate,
7.81%, 01/15/12(n)....... 337,425
2,350,000 New England Telephone &
Telegraph,
7.88%, 11/15/29.......... 2,976,531
970,000 New Jersey Bell Telephone,
7.85%, 11/15/29.......... 1,203,334
1,710,000 Qwest Corp.,
7.88%, 09/01/11.......... 1,791,225
400,000 Qwest Corp.,
8.88%, 03/15/12.......... 437,000
900,000 Qwest Corp. -- 144A,
Floating Rate,
6.67%, 06/15/13(b)....... 925,875
</Table>
See notes to financial statements.
90
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 50,000 Rogers Wireless, Inc.
(Canada),
7.25%, 12/15/12.......... $ 54,250
590,000 Rogers Wireless, Inc.
(Canada),
7.50%, 03/15/15(d)....... 644,575
1,915,000 SBC Communications, Inc.,
6.45%, 06/15/34.......... 2,160,566
190,000 SBC Communications, Inc.,
6.15%, 09/15/34.......... 206,541
2,575,000 Sprint Capital Corp.,
8.75%, 03/15/32.......... 3,593,315
655,000 Telecom Italia Capital --
144A (Luxembourg),
4.95%, 09/30/14.......... 649,734
2,785,000 Telecom Italia Capital --
144A (Luxembourg),
6.00%, 09/30/34.......... 2,853,149
850,000 Telefonica Europe BV (The
Netherlands),
7.75%, 09/15/10.......... 981,782
215,000 Verizon Maryland, Inc.,
5.13%, 06/15/33.......... 202,269
1,470,000 Vodafone Group PLC (United
Kingdom),
5.00%, 12/16/13.......... 1,514,978
--------------
26,629,332
--------------
TRANSPORTATION -- 0.1%
375,000 Burlington Northern Santa
Fe Corp.,
7.29%, 06/01/36.......... 489,242
765,000 Canadian National Railway
Company (Canada),
6.90%, 07/15/28.......... 943,840
520,000 OMI Corp. (Marshall
Islands),
7.63%, 12/01/13.......... 520,650
810,000 Overseas Shipholding Group,
7.50%, 02/15/24.......... 785,700
--------------
2,739,432
--------------
UTILITIES -- 0.0%
190,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12......... 214,700
470,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10......... 565,175
--------------
779,875
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES: ELECTRIC -- 0.8%
$ 1,500,000 Dominion Resources, Inc.,
5.95%, 06/15/35.......... $ 1,559,237
591,847 Elwood Energy LLC,
8.16%, 07/05/26.......... 670,266
850,000 Exelon Corp.,
5.63%, 06/15/35.......... 859,970
2,490,000 FirstEnergy Corp., Series
C,
7.38%, 11/15/31.......... 3,053,544
223,673 Homer City Funding LLC,
8.73%, 10/01/26.......... 262,815
410,000 Midwest Generation LLC,
8.75%, 05/01/34.......... 461,250
545,000 Midwest Generation LLC,
Series B,
8.56%, 01/02/16.......... 601,203
1,940,000 Progress Energy, Inc.,
7.75%, 03/01/31.......... 2,428,125
75,000 Reliant Energy, Inc.,
9.25%, 07/15/10.......... 82,125
220,000 Reliant Energy, Inc.,
6.75%, 12/15/14.......... 216,150
300,000 SP PowerAssets,
Ltd. -- 144A (Singapore),
5.00%, 10/22/13.......... 311,447
290,000 Tenaska Alabama II
Partners, LP -- 144A,
7.00%, 06/30/21.......... 295,075
15,000 Texas Genco LLC/
Financing -- 144A,
6.88%, 12/15/14.......... 15,863
3,750,000 TXU Corp. -- 144A,
4.80%, 11/15/09.......... 3,700,387
--------------
14,517,457
--------------
TOTAL CORPORATE BONDS AND
NOTES
(Cost $766,315,283)...... 767,956,239
--------------
FOREIGN GOVERNMENT OBLIGATIONS -- 3.4%
9,700,000 AID-Israel (Israel),
5.50%, 09/18/23.......... 10,903,605
2,275,000 Bundesrepublik Deutschland,
Series 03 (Germany),
4.75%, 07/04/34(j)....... 3,287,434
9,300,000 Bundesrepublik Deutschland,
Series 05 (Germany),
4.00%, 01/04/37(j)....... 11,972,425
4,000,000 Japan Finance Corp. for
Municipal Enterprises,
Series DTC (Japan),
4.63%, 04/21/15.......... 4,077,432
</Table>
See notes to financial statements.
91
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 56,188,000 Mexican Fixed Rate Bonds,
Series M7 (Mexico),
8.00%, 12/24/08(l)....... $ 5,046,637
7,800,000 Mexican Fixed Rate Bonds,
Series MI10 (Mexico),
8.00%, 12/19/13(l)....... 670,705
40,611,000 Mexican Fixed Rate Bonds,
Series MI7 (Mexico),
9.00%, 12/24/09(l)....... 3,755,809
4,175,000 New Zealand Government,
Series 415 (New Zealand),
6.00%, 04/15/15(i)....... 2,967,192
7,840,000 Province of Ontario, Series
GMTN (Canada), 6.25%,
06/16/15(i).............. 5,427,172
3,594,421 Republic of Colombia
(Columbia),
9.75%, 04/09/11.......... 4,122,800
2,295,000 United Mexican States
(Mexico),
8.38%, 01/14/11.......... 2,677,118
4,045,000 United Mexican States
(Mexico),
8.13%, 12/30/19.......... 4,975,350
2,385,000 United Mexican States
(Mexico),
8.00%, 09/24/22.......... 2,927,588
--------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$59,337,324)............. 62,811,267
--------------
<Caption>
CONTRACTS
---------
PURCHASED PUT OPTIONS -- 0.0%
232 US Treasury Note (10 Year)
September Future,
Expiring August 2005 @
111,
6.00%, 08/26/05
(Cost $110,259).......... 47,125
--------------
<Caption>
PRINCIPAL
---------
SHORT TERM CORPORATE NOTES -- 0.8%
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
$ 7,575,000 BellSouth Corp. -- 144A,
4.26%, 04/26/06.......... 7,603,792
7,750,000 SBC Communications, Inc. --
144A,
4.39%, 06/05/06.......... 7,775,767
--------------
TOTAL SHORT TERM CORPORATE
NOTES
(Cost $15,379,559)....... 15,379,559
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 6.5%
FEDERAL HOME LOAN BANK
$ 9,100,000 2.55%, 07/01/05............ $ 9,100,000
112,200,000 2.65%, 07/01/05............ 112,200,000
--------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY
SECURITIES (Cost
$121,300,000)............ 121,300,000
--------------
SHORT TERM US TREASURY SECURITY -- 0.3%
6,100,000 US Treasury Bill,
2.78%, 07/21/05
(Cost $6,090,579)........ 6,090,579
--------------
SECURITIES LENDING COLLATERAL -- 5.0%
94,420,159 Securities Lending
Collateral Investment
(Note 4)
(Cost $94,420,159)....... 94,420,159
--------------
TOTAL SECURITIES (Cost
$2,157,262,724).......... 2,167,242,459
--------------
REPURCHASE AGREEMENT -- 1.1%
20,000,000 With Investors Bank and
Trust, dated 06/30/05,
2.61%, due 07/01/05,
repurchase proceeds at
maturity $20,001,450
(Collateralized by
Small Business
Administration, 6.33%,
due 11/25/16, with a
value of $21,000,000)
(Cost $20,000,000)....... 20,000,000
--------------
SECURITIES SOLD SHORT -- (4.2)%
9,600,000 Fannie Mae, TBA,
5.50%, 07/14/05.......... (9,732,000)
9,400,000 Fannie Mae, TBA,
4.50%, 07/19/05.......... (9,358,875)
20,000,000 Fannie Mae, TBA,
5.50%, 07/19/05.......... (20,531,240)
20,000,000 Fannie Mae, TBA,
5.50%, 08/16/05.......... (20,506,240)
200,000 Freddie Mae Gold, TBA,
5.00%, 07/14/05.......... (200,062)
5,000,000 Freddie Mae Gold, TBA,
6.00%, 07/14/05.......... (5,128,125)
3,800,000 Freddie Mae Gold, TBA,
4.00%, 07/19/05.......... (3,715,686)
8,700,000 Freddie Mae Gold, TBA,
4.50%, 07/19/05.......... (8,661,937)
--------------
TOTAL SECURITIES SOLD SHORT
(Proceeds $77,887,388)... (77,834,165)
--------------
</Table>
See notes to financial statements.
92
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
CONTRACTS VALUE
--------- --------------
CALL OPTIONS WRITTEN -- (0.0)%
293 US Treasury Note (10 Year)
September Future,
Expiring August 2005 @
112,
6.00%, 08/26/05.......... $ (544,797)
215 US Treasury Note (10 Year)
September Future,
Expiring August 2005 @
113,
6.00%, 08/26/05.......... (251,953)
--------------
TOTAL CALL OPTIONS WRITTEN
(Premium $258,747)....... (796,750)
--------------
PUT OPTIONS WRITTEN -- (0.0)%
71 US Treasury Note (10 Year)
September Future,
Expiring August 2005 @
105,
6.00%, 08/26/05.......... (1,109)
318 US Treasury Note (10 Year)
September Future,
Expiring August 2005 @
106,
6.00%, 08/26/05.......... (4,969)
--------------
TOTAL PUT OPTIONS WRITTEN
(Premium $305,821)....... (6,078)
--------------
Total Investments -- 112.6%
(Cost $2,098,810,768).... 2,108,605,466
Liabilities less other
assets -- (12.6)%........ (235,757,041)
--------------
NET ASSETS -- 100.0%....... $1,872,848,425
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $2,098,810,768.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.............. $ 20,098,673
Gross unrealized depreciation.............. (10,303,975)
------------
Net unrealized appreciation................ $ 9,794,698
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
93
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- -----------
US TREASURY SECURITIES -- 37.7%
US TREASURY BOND -- 2.5%
$ 1,090,000 5.38%, 02/15/31................. $ 1,286,541
-----------
US TREASURY INFLATION INDEX -- 4.9%
893,473 0.88%, 04/15/10................. 871,695
560,401 1.63%, 01/15/15................. 558,540
928,935 2.38%, 01/15/25................. 1,017,148
35,504 3.88%, 04/15/29................. 49,911
-----------
2,497,294
-----------
US TREASURY NOTES -- 29.1%
11,510,000 3.38%, 02/15/08................. 11,429,972
2,643,000 4.00%, 04/15/10................. 2,672,736
250,000 4.00%, 02/15/15................. 250,967
430,000 4.13%, 05/15/15................. 436,416
-----------
14,790,091
-----------
US TREASURY STRIP -- 1.2%
1,580,000 Zero coupon, 11/15/27........... 601,985
-----------
TOTAL US TREASURY SECURITIES
(Cost $18,970,067)............ 19,175,911
-----------
US GOVERNMENT AGENCY SECURITIES -- 21.2%
FANNIE MAE -- 14.0%
431,622 PL# 801516, 4.73%, 08/01/34..... 435,006
453,995 PL# 810896, 4.90%, 01/01/35..... 460,072
399,064 PL# 821150, 4.60%, 04/01/35..... 400,346
500,000 TBA, 5.50%, 07/01/19............ 513,281
400,000 TBA, 5.00%, 07/01/20............ 404,500
2,200,000 TBA, 5.00%, 07/01/35............ 2,200,686
300,000 TBA, 5.50%, 07/01/35............ 304,125
2,400,000 TBA, 6.00%, 07/01/35............ 2,460,750
-----------
7,178,766
-----------
FREDDIE MAC GOLD -- 0.6%
300,000 TBA, 5.00%, 07/01/19............ 303,375
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 5.6%
2,000,000 TBA, 5.00%, 07/01/34............ 2,015,624
800,000 TBA, 5.50%, 07/01/34............ 817,000
-----------
2,832,624
-----------
TENNESSEE VALLEY AUTHORITY -- 1.0%
520,000 4.65%, 06/15/35................. 523,008
-----------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$10,816,421).................. 10,837,773
-----------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- -----------
CORPORATE BONDS AND NOTES -- 25.1%
AUTOMOBILES/MOTOR VEHICLES -- 1.0%
$ 160,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08............... $ 157,656
200,000 Ford Motor Company, 7.45%,
07/16/31...................... 167,390
250,000 General Motors Corp., 8.38%,
07/15/33...................... 210,001
-----------
535,047
-----------
BANKS -- 1.5%
230,000 Bank of America Corp., 3.88%,
01/15/08...................... 229,232
20,000 Rabobank Capital Federal Trust
III -- 144A, Variable Rate,
5.25%, perpetual(a)........... 20,558
10,000 Rabobank Capital Funding II --
144A, Variable Rate, 5.26%,
perpetual(a).................. 10,305
240,000 Wachovia Corp.,
5.25%, 08/01/14............... 250,986
230,000 Wells Fargo & Company, 4.20%,
01/15/10...................... 230,113
-----------
741,194
-----------
BROADCAST SERVICES/MEDIA -- 1.7%
250,000 Comcast Corp., 6.50%,
01/15/15...................... 279,163
80,000 Cox Communications, Inc., 3.88%,
10/01/08...................... 78,374
100,000 Liberty Media Corp., 7.88%,
07/15/09...................... 106,809
50,000 News America, Inc., 6.20%,
12/15/34...................... 52,656
50,000 Time Warner Entertainment,
8.38%, 07/15/33............... 66,572
160,000 Time Warner, Inc., 6.88%,
05/01/12...................... 180,797
90,000 Time Warner, Inc., 7.70%,
05/01/32...................... 114,219
-----------
878,590
-----------
CONSUMER GOODS AND SERVICES -- 0.4%
180,000 Altria Group, Inc., 7.00%,
11/04/13...................... 201,761
-----------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.3%
120,000 Waste Management, Inc., 6.38%,
11/15/12...................... 131,219
-----------
FINANCIAL SERVICES -- 7.0%
250,000 Citigroup, Inc., 4.13%,
02/22/10...................... 249,373
340,000 Countrywide Financial Corp.,
Series MTNA, 4.50%,
06/15/10...................... 339,952
</Table>
See notes to financial statements.
94
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- -----------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 100,000 Credit Suisse First Boston USA,
Inc., 4.63%, 01/15/08......... $ 101,141
790,000 Ford Motor Credit Company,
7.38%, 10/28/09............... 772,676
250,000 General Electric Capital Corp.,
Series MTNA, 4.25%, 01/15/08.. 251,115
350,000 General Motors Acceptance Corp.,
6.13%, 08/28/07............... 346,572
350,000 General Motors Acceptance Corp.,
5.63%, 05/15/09............... 328,050
30,000..... General Motors Acceptance Corp.,
Series GM, 6.31%, 11/30/07.... 29,076
120,000 Goldman Sachs Group, Inc.,
4.13%, 01/15/08............... 120,003
70,000 Goldman Sachs Group, Inc.,
4.50%, 06/15/10............... 70,303
250,000 HSBC Finance Corp., 4.63%,
01/15/08...................... 252,662
350,000 JPMorgan Chase & Company, 5.13%,
09/15/14...................... 358,686
130,000 Lehman Brothers Holdings, Inc.,
4.00%, 01/22/08............... 129,613
200,000 Morgan Stanley, 3.63%,
04/01/08...................... 197,026
-----------
3,546,248
-----------
FOOD AND BEVERAGE -- 0.6%
170,000 Anheuser-Busch Companies, Inc.,
4.95%, 01/15/14............... 176,891
140,000 Kraft Foods, Inc., 5.63%,
11/01/11...................... 148,713
-----------
325,604
-----------
INSURANCE -- 0.1%
30,000 ASIF Global Financing XIX --
144A,
4.90%, 01/17/13............... 30,490
-----------
MANUFACTURING -- 0.8%
120,000 Tyco International Group SA
(Luxembourg), 6.38%,
10/15/11...................... 131,968
240,000 Tyco International Group SA
(Luxembourg), 6.00%,
11/15/13...................... 261,431
-----------
393,399
-----------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- -----------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES -- 0.6%
$ 110,000 El Paso Natural Gas, 8.38%,
06/15/32...................... $ 128,480
170,000 Williams Companies, Inc., Series
A, 7.50%, 01/15/31............ 184,875
-----------
313,355
-----------
OIL, COAL AND GAS -- 2.3%
110,000 Amerada Hess Corp., 7.30%,
08/15/31...................... 133,149
100,000 Anadarko Finance Company, Series
B (Canada), 7.50%, 05/01/31... 126,656
150,000 Apache Finance Canada (Canada),
4.38%, 05/15/15............... 149,993
150,000 ChevronTexaco Capital Company
(Canada), 3.50%, 09/17/07..... 148,624
230,000 Conoco, Inc., 6.95%, 04/15/29... 289,885
140,000 Devon Energy Corp., 7.95%,
04/15/32...................... 184,745
20,000 Morgan Stanley (Gazprom) -- 144A
(Russia), 9.63%, 03/01/13..... 24,580
120,000 XTO Energy, Inc., 6.25%,
04/15/13...................... 130,069
-----------
1,187,701
-----------
PAPER AND FOREST PRODUCTS -- 0.6%
70,000 International Paper Company,
5.50%, 01/15/14............... 71,600
210,000 Weyerhaeuser Company, 6.75%,
03/15/12...................... 231,364
-----------
302,964
-----------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 5.7%
400,000 Banc of America Commercial
Mortgage, Inc., Series 2005-3,
Class A4, Floating Rate,
4.67%, 07/10/43(c)............ 402,019
440,340 Banc of America Mortgage
Securities, Series 2005-A,
Class 2A1, Floating Rate,
4.49%, 02/25/35(c)............ 439,771
130,000 Countrywide Asset-Backed
Certificates, Series 2005-4,
Class AF3, 4.46%, 10/25/35.... 129,939
679,330 GMAC Mortgage Corp. Loan Trust,
Series 2003-AR2, Class 1A1,
Floating Rate, 3.62%,
12/19/33(c)................... 676,065
</Table>
See notes to financial statements.
95
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- -----------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 470,811 GMAC Mortgage Corp. Loan Trust,
Series 2005-AR1, Class 3A,
Floating Rate, 4.71%,
03/18/35(c)................... $ 472,283
200,000 GS Mortgage Securities Corp. II,
Series 2005-GG4, Class AABA,
4.68%, 07/10/39............... 202,548
100,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C3, Class
A5, 4.74%, 07/15/30........... 101,313
100,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C3, Class
AAB, 4.66%, 07/15/30.......... 101,156
400,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A5, Class A3, 4.44%,
06/25/35...................... 398,516
-----------
2,923,610
-----------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.1%
50,000 Deutsche Telekom International
Finance BV (The Netherlands),
5.25%, 07/22/13............... 51,997
320,000 Sprint Capital Corp., 6.00%,
01/15/07...................... 328,037
170,000 Verizon Global Funding Corp.,
7.38%, 09/01/12............... 198,926
-----------
578,960
-----------
TRANSPORTATION -- 0.1%
50,000 Union Pacific Corp., 5.38%,
05/01/14...................... 52,234
-----------
UTILITIES: ELECTRIC -- 1.3%
30,000 Dominion Resources, Inc., 4.75%,
12/15/10...................... 30,218
100,000 Dominion Resources, Inc., 5.70%,
09/17/12...................... 105,608
140,000 Duke Energy Corp., 5.63%,
11/30/12...................... 148,736
70,000 FirstEnergy Corp., Series B,
6.45%, 11/15/11............... 76,584
150,000 FirstEnergy Corp., Series C,
7.38%, 11/15/31............... 183,949
50,000 Oncor Electric Delivery Company,
6.38%, 01/15/15............... 55,523
70,000 Pacific Gas & Electric Company,
6.05%, 03/01/34............... 77,421
-----------
678,039
-----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $12,560,568)............ 12,820,415
-----------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- -----------
FOREIGN GOVERNMENT OBLIGATIONS -- 9.8%
$ 320,000 Australian Government
(Australia), Series 121,
5.25%, 08/15/10(r)............ $ 245,250
720,000 Bundesrepublik Deutschland
(Germany), Series 03, 4.25%,
01/04/14(j)................... 953,993
170,000 Federal Republic of Brazil
(Brazil), 14.50%, 10/15/09.... 221,850
168,878 Federal Republic of Brazil
(Brazil), 8.00%, 04/15/14..... 174,071
20,000 Federal Republic of Brazil
(Brazil), 8.88%, 10/14/19..... 21,250
140,000 Federal Republic of Brazil
(Brazil), 10.13%, 05/15/27.... 162,890
40,000 Federal Republic of Brazil
(Brazil), 11.00%, 08/17/40.... 48,170
49,412 Federal Republic of Brazil
(Brazil), Series 18YR,
Floating Rate, 4.31%,
04/15/12(n)................... 47,807
116,683 Government of Canada Real Return
Bonds (Canada), 4.00%,
12/01/31(s)................... 137,044
698,670 Government of France, Series
OATi (France), 3.00%,
07/25/09(j)................... 930,913
120,000 Republic of Bulgaria -- 144A
(Bulgaria), 8.25%, 01/15/15... 151,350
30,000 Republic of Colombia (Colombia),
10.50%, 07/09/10.............. 35,850
70,000 Republic of Colombia (Colombia),
11.75%, 02/25/20.............. 92,400
20,000 Republic of Panama (Panama),
9.63%, 02/08/11............... 24,000
80,000 Republic of Panama (Panama),
10.75%, 05/15/20.............. 108,800
50,000 Republic of Peru (Peru), 8.75%,
11/21/33...................... 56,625
76,500 Republic of Peru, Series 20 YR
(Peru), 5.00%, 03/07/17....... 73,494
560,000 Russian Federation (Russia) --
144A, 5.00%, 03/31/30......... 626,567
150,000 United Mexican States (Mexico),
8.38%, 01/14/11............... 174,975
110,000 United Mexican States (Mexico),
Series MTN, 8.30%, 08/15/31... 137,225
520,000 United Mexican States (Mexico),
Series MTNA, 7.50%, 04/08/33.. 598,000
-----------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$5,034,330)................... 5,022,524
-----------
</Table>
See notes to financial statements.
96
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ -----------
PREFERRED STOCKS -- 1.1%
10,200 Fannie Mae, Series O (Cost
$569,925)..................... $ 566,610
-----------
<Caption>
PRINCIPAL
---------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.3%
$ 150,000 Fannie Mae, 3.39%, 12/05/05(f)
(Cost $147,782)............... 147,782
-----------
YANKEE CERTIFICATE OF DEPOSIT -- 1.0%
500,000 Treasury Bank, Series CD,
Floating Rate, 3.31%,
11/23/05(a) (Cost $500,000)... 500,000
-----------
SHORT TERM COMMERCIAL PAPER -- 1.0%
500,000 BankAmerica Corp., zero coupon,
09/30/05 (Cost $495,753)...... 495,753
-----------
TOTAL SECURITIES (Cost
$49,094,846).................. 49,566,768
-----------
REPURCHASE AGREEMENT -- 21.1%
10,775,704 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $10,776,485
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.79%, due 09/01/34, with a
value of $11,314,489) (Cost
$10,775,704).................. 10,775,704
-----------
<Caption>
CONTRACTS VALUE
--------- -----------
PUT OPTIONS WRITTEN -- (0.0)%
12 US Treasury Note (10 Year)
September Future, Expiring
August 2005@ 110, 6.00%,
08/26/05 (Premium $3,159)..... $ (1,125)
-----------
CALL OPTIONS WRITTEN -- (0.1)%
36 US Treasury Note (10 Year)
September Future, Expiring
August 2005 @ 114, 6.00%,
08/26/05...................... (23,625)
12 US Treasury Note (10 Year)
September Future, Expiring
August 2005@ 115, 6.00%,
08/26/05...................... (3,937)
-----------
TOTAL CALL OPTIONS WRITTEN
(Premium $15,213)............. (27,562)
-----------
Total Investments -- 118.2%
(Cost $59,852,178)............ 60,313,785
Liabilities less other
assets -- (18.2)%............. (9,281,860)
-----------
NET ASSETS -- 100.0%............ $51,031,925
===========
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $59,852,178.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............ $ 587,643
Gross unrealized depreciation............ (126,036)
---------
Net unrealized appreciation.............. $ 461,607
=========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
97
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 63.3%
AEROSPACE AND DEFENSE -- 1.6%
33,950 Lockheed Martin Corp. ......... $ 2,202,336
36,271 Northrop Grumman Corp. ........ 2,003,973
50,350 Raytheon Company............... 1,969,692
7,500 The Boeing Company............. 495,000
------------
6,671,001
------------
AGRICULTURE -- 0.4%
29,150 Monsanto Company............... 1,832,661
------------
APPAREL: MANUFACTURING AND RETAIL -- 0.9%
23,300 Abercrombie & Fitch Company --
Class A(d)................... 1,600,710
57,300 Coach, Inc.*................... 1,923,561
------------
3,524,271
------------
AUTOMOBILE: RETAIL -- 0.2%
37,200 AutoNation, Inc.*.............. 763,344
------------
AUTOMOBILES/MOTOR VEHICLES -- 0.1%
47,550 Ford Motor Company............. 486,912
------------
AUTOMOTIVE EQUIPMENT -- 0.4%
33,100 Autoliv, Inc. ................. 1,449,780
------------
BANKS -- 4.4%
130,212 Bank of America Corp. ......... 5,938,969
7,500 Bank of Hawaii Corp. .......... 380,625
6,900 Golden West Financial
Corp.(d)..................... 444,222
15,150 KeyCorp........................ 502,223
65,650 North Fork Bancorp, Inc. ...... 1,844,109
11,900 UnionBanCal Corp. ............. 796,348
74,782 US Bancorp..................... 2,183,634
69,153 Wachovia Corp. ................ 3,429,989
36,550 Wells Fargo & Company.......... 2,250,749
------------
17,770,868
------------
BROADCAST SERVICES/MEDIA -- 3.3%
75,300 Comcast Corp. -- Class A*...... 2,311,710
47,800 Comcast Corp. -- Special Class
A*........................... 1,431,610
4,200 Gannett Company, Inc. ......... 298,746
46,800 Liberty Media Corp. -- Class
A*........................... 476,892
29,700 Pixar*(d)...................... 1,486,485
104,500 The Walt Disney Company........ 2,631,310
203,690 Time Warner, Inc.*............. 3,403,660
42,700 Viacom, Inc. -- Class B........ 1,367,254
------------
13,407,667
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES -- 0.5%
41,900 Moody's Corp. ................. $ 1,883,824
------------
CHEMICALS -- 0.3%
25,650 The Dow Chemical Company....... 1,142,195
------------
COMMERCIAL SERVICES -- 0.5%
97,950 Cendant Corp. ................. 2,191,142
------------
COMPUTER SOFTWARE AND SERVICES -- 3.1%
59,400 Adobe Systems, Inc. ........... 1,700,028
48,000 Autodesk, Inc. ................ 1,649,760
39,600 Computer Sciences Corp.*....... 1,730,520
32,900 Ingram Micro, Inc. -- Class
A*........................... 515,214
179,250 Microsoft Corp. ............... 4,452,570
205,150 Oracle Corp.*.................. 2,707,980
14,700 Parametric Technology Corp.*... 93,786
------------
12,849,858
------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.3%
96,700 Dell, Inc.*.................... 3,820,617
134,987 Hewlett-Packard Company........ 3,173,544
17,950 International Business Machines
Corp. ....................... 1,331,890
167,000 Sun Microsystems, Inc.*........ 622,910
45,100 Western Digital Corp.*......... 605,242
------------
9,554,203
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.1%
5,800 USG Corp.*(d).................. 246,500
------------
CONSUMER GOODS AND SERVICES -- 5.7%
71,750 Altria Group, Inc. ............ 4,639,354
10,900 American Greetings Corp. --
Class A...................... 288,850
11,850 Colgate-Palmolive Company...... 591,434
9,600 Eastman Kodak Company(d)....... 257,760
16,900 Energizer Holdings, Inc.*...... 1,050,673
291,200 General Electric Company....... 10,090,079
24,200 Gillette Company............... 1,225,246
31,950 Procter & Gamble Company(d).... 1,685,363
3,150 Reynolds American, Inc.(d)..... 248,220
11,200 The Black & Decker Corp. ...... 1,006,320
4,300 United Parcel Service, Inc. --
Class B...................... 297,388
35,885 UST, Inc. ..................... 1,638,509
------------
23,019,196
------------
</Table>
See notes to financial statements.
98
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
\xElectronics -- 0.1%
4,750 Rockwell Collins, Inc. ........ $ 226,480
------------
FINANCIAL SERVICES -- 5.1%
35,400 AmeriCredit Corp.*............. 902,700
7,000 CIT Group, Inc. ............... 300,790
103,699 Citigroup, Inc. ............... 4,794,004
15,200 E*TRADE Financial Corp.*....... 212,648
5,500 Franklin Resources, Inc. ...... 423,390
128,800 JPMorgan Chase & Company....... 4,549,215
50,700 Merrill Lynch & Company,
Inc. ........................ 2,789,007
47,900 Morgan Stanley................. 2,513,313
7,500 Nelnet, Inc. -- Class A*....... 249,525
27,500 Prudential Financial, Inc. .... 1,805,650
60,250 Washington Mutual, Inc.(d)..... 2,451,573
------------
20,991,815
------------
FOOD AND BEVERAGE -- 1.7%
90,050 Archer-Daniels-Midland
Company...................... 1,925,268
19,050 Coca-Cola Company.............. 795,338
29,850 Hershey Foods Corp.(d)......... 1,853,685
10,300 PepsiAmericas, Inc. ........... 264,298
12,500 PepsiCo, Inc. ................. 674,125
7,300 Pilgrim's Pride Corp.(d)....... 249,149
6,050 The Pepsi Bottling Group,
Inc. ........................ 173,091
50,900 Tyson Foods, Inc. -- Class A... 906,020
------------
6,840,974
------------
INSURANCE -- 3.4%
17,700 Aetna, Inc. ................... 1,465,914
33,803 American International Group,
Inc. ........................ 1,963,954
14,500 CIGNA Corp. ................... 1,551,935
19,200 CNA Financial Corp.*........... 545,664
53,200 Genworth Financial, Inc. --
Class A...................... 1,608,236
24,000 Loews Corp. ................... 1,860,000
29,800 MBIA, Inc. .................... 1,767,438
28,100 The Allstate Corp. ............ 1,678,975
20,500 WR Berkley Corp. .............. 731,440
8,500 XL Capital, Ltd. -- Class A
(Cayman Islands)............. 632,570
------------
13,806,126
------------
INTERNET SERVICES -- 2.0%
159,350 Cisco Systems, Inc.*........... 3,045,178
7,000 eBay, Inc.*.................... 231,070
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES (CONTINUED)
5,250 Google, Inc. -- Class A*....... $ 1,544,288
62,600 Juniper Networks, Inc.*........ 1,576,268
28,117 Symantec Corp.*................ 611,264
28,100 YAHOO!, Inc.*.................. 973,665
------------
7,981,733
------------
LEISURE AND RECREATION -- 0.3%
11,000 Boyd Gaming Corp. ............. 562,430
4,500 Choice Hotels International,
Inc. ........................ 295,650
7,000 Marriott International, Inc. --
Class A...................... 477,540
------------
1,335,620
------------
MACHINERY -- 0.1%
11,950 Rockwell Automation, Inc. ..... 582,085
------------
MANUFACTURING -- 0.7%
24,200 Illinois Tool Works, Inc. ..... 1,928,256
2,250 ITT Industries, Inc. .......... 219,668
24,850 Tyco International, Ltd.
(Bermuda).................... 725,620
------------
2,873,544
------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.9%
37,200 HCA, Inc. ..................... 2,108,124
36,300 McKesson Corp. ................ 1,625,877
------------
3,734,001
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 2.6%
8,050 Guidant Corp. ................. 541,765
94,650 Johnson & Johnson.............. 6,152,250
57,450 Medtronic, Inc. ............... 2,975,336
23,200 St Jude Medical, Inc.*......... 1,011,752
------------
10,681,103
------------
METALS AND MINING -- 0.3%
6,700 Newmont Mining Corp. .......... 261,501
5,600 Phelps Dodge Corp. ............ 518,000
14,400 United States Steel Corp.(d)... 494,928
------------
1,274,429
------------
OIL AND GAS: PIPELINES -- 0.1%
7,900 Questar Corp. ................. 520,610
------------
OIL, COAL AND GAS -- 5.7%
25,500 Anadarko Petroleum Corp. ...... 2,094,825
32,714 Apache Corp. .................. 2,113,323
38,200 Burlington Resources, Inc. .... 2,110,168
</Table>
See notes to financial statements.
99
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
22,100 ChevronTexaco Corp. ........... $ 1,235,832
36,026 ConocoPhillips................. 2,071,135
13,450 Devon Energy Corp. ............ 681,646
144,450 Exxon Mobil Corp. ............. 8,301,541
21,600 Helmerich & Payne, Inc. ....... 1,013,472
12,500 Noble Energy, Inc. ............ 945,625
3,850 Occidental Petroleum Corp. .... 296,181
15,800 Sunoco, Inc. .................. 1,796,144
6,300 Unit Corp.*.................... 277,263
------------
22,937,155
------------
PAPER AND FOREST PRODUCTS -- 0.4%
52,900 Georgia-Pacific Corp. ......... 1,682,220
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 4.6%
67,800 Abbott Laboratories............ 3,322,878
4,000 AmerisourceBergen Corp. ....... 276,600
55,634 Amgen, Inc.*................... 3,363,631
106,200 Bristol-Myers Squibb Company... 2,652,876
8,000 Eli Lilly and Company.......... 445,680
25,950 Genzyme Corp.*................. 1,559,336
9,300 Gilead Sciences, Inc.*......... 409,107
45,500 Merck & Company, Inc. ......... 1,401,400
167,660 Pfizer, Inc. .................. 4,624,062
15,900 Wyeth.......................... 707,550
------------
18,763,120
------------
PRINTING AND PUBLISHING -- 0.1%
13,800 RR Donnelley & Sons Company.... 476,238
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.4%
15,000 Equity Office Properties
Trust........................ 496,500
32,000 ProLogis....................... 1,287,680
------------
1,784,180
------------
RETAIL -- 2.6%
14,400 7-Eleven, Inc.*................ 435,456
97,700 Circuit City Stores, Inc. ..... 1,689,233
42,000 Dillard's, Inc. -- Class A..... 983,640
12,972 Home Depot, Inc. .............. 504,611
37,800 Michaels Stores, Inc. ......... 1,563,786
14,700 Saks, Inc.*.................... 278,859
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
5,350 Target Corp.(d)................ $ 291,094
48,170 Wal-Mart Stores, Inc. ......... 2,321,794
58,100 Walgreen Company............... 2,672,018
------------
10,740,491
------------
RETAIL: RESTAURANTS -- 0.5%
7,950 Darden Restaurants, Inc. ...... 262,191
33,050 McDonald's Corp. .............. 917,138
17,650 Starbucks Corp.*............... 911,799
------------
2,091,128
------------
SEMICONDUCTORS -- 2.0%
62,000 Advanced Micro Devices,
Inc.*........................ 1,075,080
51,139 Freescale Semiconductor,
Inc. -- Class B*............. 1,083,124
196,250 Intel Corp. ................... 5,114,275
27,850 Texas Instruments, Inc. ....... 781,750
------------
8,054,229
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.8%
45,700 BellSouth Corp.(d)............. 1,214,249
49,650 CenturyTel, Inc. .............. 1,719,380
19,750 Comverse Technology, Inc.*..... 467,088
51,850 Motorola, Inc. ................ 946,781
7,000 QUALCOMM, Inc. ................ 231,070
133,600 SBC Communications, Inc. ...... 3,172,999
69,550 Sprint Corp. (FON Group)(d).... 1,745,010
33,550 Tellabs, Inc.*................. 291,885
45,500 Verizon Communications,
Inc.(d)...................... 1,572,025
------------
11,360,487
------------
TRANSPORTATION -- 1.1%
41,400 Burlington Northern Santa Fe
Corp. ....................... 1,949,112
42,100 CSX Corp. ..................... 1,795,986
9,050 Norfolk Southern Corp. ........ 280,188
12,800 Swift Transportation Company,
Inc.*........................ 298,112
4,100 Union Pacific Corp. ........... 265,680
------------
4,589,078
------------
UTILITIES: ELECTRIC -- 2.0%
47,800 Edison International........... 1,938,290
4,950 Entergy Corp. ................. 373,973
47,550 Exelon Corp. .................. 2,440,741
15,300 FPL Group, Inc. ............... 643,518
</Table>
See notes to financial statements.
100
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
51,150 PG&E Corp. .................... $ 1,920,171
6,450 TXU Corp. ..................... 535,931
8,100 Wisconsin Energy Corp. ........ 315,900
------------
8,168,524
------------
TOTAL COMMON STOCKS
(Cost $243,564,511).......... 258,288,792
------------
PREFERRED STOCKS -- 0.5%
34,800 Fannie Mae, Series O (Cost
1,943,963)................... 1,933,140
------------
<Caption>
PRINCIPAL
---------
US TREASURY SECURITIES -- 5.6%
US TREASURY BOND -- 0.7%
$ 2,280,000 5.38%, 02/15/31(d)............. 2,691,114
------------
US TREASURY INFLATION INDEX -- 2.6%
6,161,880 0.88%, 04/15/10................ 6,011,691
3,715,740 2.38%, 01/15/25................ 4,068,590
236,696 3.88%, 04/15/29................ 332,743
------------
10,413,024
------------
US TREASURY NOTES -- 1.9%
1,350,000 2.50%, 10/31/06................ 1,331,227
1,185,000 3.38%, 02/28/07................ 1,180,187
2,585,000 3.75%, 03/31/07................ 2,589,746
730,000 3.00%, 02/15/08................ 718,394
915,000 3.38%, 02/15/08(d)............. 908,638
910,000 4.00%, 04/15/10................ 920,238
250,000 4.00%, 02/15/15................ 250,967
------------
7,899,397
------------
US TREASURY STRIP -- 0.4%
4,430,000 Zero coupon, 11/15/27.......... 1,687,843
------------
TOTAL US TREASURY SECURITIES
(Cost $22,402,429)........... 22,691,378
------------
US GOVERNMENT AGENCY SECURITIES -- 8.4%
FANNIE MAE -- 5.0%
228,147 PL# 535675, 7.00%, 01/01/16.... 239,142
977 PL# 549906, 7.50%, 09/01/30.... 1,044
3,018 PL# 552549, 7.50%, 09/01/30.... 3,226
606 PL# 558384, 7.50%, 01/01/31.... 647
3,811 PL# 568677, 7.50%, 01/01/31.... 4,073
3,624 PL# 572762, 7.50%, 03/01/31.... 3,874
16,258 PL# 582178, 7.50%, 06/01/31.... 17,377
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 13,535 PL# 594316, 6.50%, 07/01/31.... $ 14,044
2,649 PL# 602859, 6.50%, 10/01/31.... 2,749
50,812 PL# 614924, 7.00%, 12/01/16.... 53,259
76,553 PL# 793193, 5.50%, 07/01/19.... 78,659
1,294,865 PL# 801516, Variable Rate,
4.73%, 08/01/34(a)........... 1,305,019
1,388,608 PL# 810896, Variable Rate,
4.90%, 01/01/35(a)........... 1,407,195
897,895 PL# 821150, Variable Rate,
4.60%, 04/01/35(a)........... 900,779
1,300,000 TBA, 5.50%, 07/01/19........... 1,334,531
1,100,000 TBA, 5.00%, 07/01/20........... 1,112,375
6,400,000 TBA, 5.00%, 07/01/34........... 6,401,997
900,000 TBA, 5.50%, 07/01/35........... 912,375
6,700,000 TBA, 6.00%, 07/01/35........... 6,869,590
------------
20,661,955
------------
FREDDIE MAC GOLD -- 0.2%
900,000 TBA, 5.00%, 07/01/19........... 910,125
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 1.9%
9,526 PL# 461836, 7.00%, 01/15/28.... 10,103
1,549 PL# 596647, 7.00%, 09/15/32.... 1,641
5,700,000 TBA, 5.00%, 07/01/34........... 5,744,528
2,200,000 TBA, 5.50%, 07/01/34........... 2,246,750
------------
8,003,022
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 0.8%
600,000 Fannie Mae Grantor Trust,
Series 2001-T2, Class B,
6.02%, 11/25/10.............. 651,613
334,380 Fannie Mae, Series 1999-7,
Class AB,
6.00%, 03/25/29.............. 343,867
760,000 Fannie Mae, Series 2003-35,
Class TE,
5.00%, 05/25/18.............. 776,321
574,751 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34.............. 580,536
706,232 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34.............. 724,772
------------
3,077,109
------------
</Table>
See notes to financial statements.
101
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
exResolution Funding Strips -- 0.1%
$ 250,000 Zero coupon, 07/15/18.......... $ 140,716
250,000 Zero coupon, 10/15/18.......... 138,994
------------
279,710
------------
TENNESSEE VALLEY AUTHORITY -- 0.4%
1,520,000 4.65%, 06/15/35................ 1,528,792
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $34,368,478)........... 34,460,713
------------
CORPORATE BONDS AND NOTES -- 10.4%
AEROSPACE AND DEFENSE -- 0.1%
35,000 B/E Aerospace, 8.50%,
10/01/10..................... 38,850
720,000 RC Trust I, 7.00%, 05/15/06.... 369,675
------------
408,525
------------
AUTOMOBILES/MOTOR VEHICLES -- 0.3%
475,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08.............. 468,042
580,000 Ford Motor Company,
7.45%, 07/16/31.............. 485,432
520,000 General Motors Corp.,
8.38%, 07/15/33(d)........... 436,800
------------
1,390,274
------------
AUTOMOTIVE EQUIPMENT -- 0.0%
50,000 Visteon Corp.,
8.25%, 08/01/10.............. 46,500
------------
BANKS -- 0.7%
690,000 Bank of America Corp.,
3.88%, 01/15/08.............. 687,696
325,000 Deutsche Bank AG New York,
Series YCD, Variable Rate,
3.84%, 03/15/07(a)........... 324,733
20,000 Rabobank Capital Funding Trust
II -- 144A, Variable Rate,
5.26%, perpetual(a).......... 20,610
40,000 Rabobank Capital Funding Trust
III -- 144A, Variable Rate,
5.25%, perpetual(a).......... 41,117
215,000 SunTrust Banks, Inc.,
4.42%, 06/15/09.............. 216,990
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 740,000 Wachovia Corp.,
5.25%, 08/01/14.............. $ 773,869
625,000 Wells Fargo & Company,
4.20%, 01/15/10.............. 625,308
------------
2,690,323
------------
BROADCAST SERVICES/MEDIA -- 0.7%
100,000 Clear Channel Communications,
Inc.,
4.25%, 05/15/09.............. 96,451
760,000 Comcast Corp.,
6.50%, 01/15/15.............. 848,655
230,000 Cox Communications, Inc.,
3.88%, 10/01/08.............. 225,325
40,000 CSC Holdings, Inc.,
7.88%, 02/15/18.............. 39,600
20,000 CSC Holdings, Inc.,
7.63%, 07/15/18.............. 19,400
20,000 DIRECTV Holdings LLC/ DIRECTV
Financing Company,
Inc. -- 144A,
6.38%, 06/15/15.............. 20,000
280,000 Liberty Media Corp.,
7.88%, 07/15/09.............. 299,066
100,000 Liberty Media Corp.,
5.70%, 05/15/13.............. 93,154
160,000 News America, Inc.,
6.20%, 12/15/34.............. 168,500
20,000 Rogers Cable, Inc. (Canada),
6.75%, 03/15/15.............. 20,500
150,000 Time Warner Entertainment,
8.38%, 07/15/33.............. 199,716
580,000 Time Warner, Inc.,
6.88%, 05/01/12.............. 655,388
270,000 Time Warner, Inc.,
7.70%, 05/01/32.............. 342,657
------------
3,028,412
------------
CHEMICALS -- 0.0%
40,000 IMC Global, Inc., Series B,
10.88%, 06/01/08............. 45,200
20,000 Rhodia SA (France),
10.25%, 06/01/10............. 21,550
20,000 Westlake Chemical Corp.,
8.75%, 07/15/11.............. 21,850
------------
88,600
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.0%
65,000 K Hovnanian Enterprises, Inc.,
6.25%, 01/15/15.............. 64,513
------------
</Table>
See notes to financial statements.
102
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
gxConsumer Goods and Services -- 0.2%
$ 550,000 Altria Group, Inc.,
7.00%, 11/04/13.............. $ 616,492
10,000 Eastman Kodak Company,
7.25%, 11/15/13.............. 10,563
------------
627,055
------------
CONTAINERS AND PACKAGING -- 0.0%
25,000 Crown European Holdings SA
(France),
10.88%, 03/01/13............. 29,500
------------
ELECTRONICS -- 0.0%
10,000 Flextronics International, Ltd.
(Singapore),
6.25%, 11/15/14.............. 9,975
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.1%
160,000 Waste Management, Inc.,
6.50%, 11/15/08.............. 170,088
350,000 Waste Management, Inc.,
6.38%, 11/15/12.............. 382,720
------------
552,808
------------
FINANCIAL SERVICES -- 3.1%
770,000 Citigroup, Inc.,
4.13%, 02/22/10.............. 768,067
1,000,000 Countrywide Financial Corp.,
Series MTNA,
4.50%, 06/15/10.............. 999,860
300,000 Credit Suisse First Boston USA,
Inc.,
4.63%, 01/15/08.............. 303,422
210,000 Ford Motor Credit Company,
6.63%, 06/16/08.............. 207,542
2,305,000 Ford Motor Credit Company,
7.38%, 10/28/09.............. 2,254,455
760,000 General Electric Capital Corp.,
Series MTNA,
4.25%, 01/15/08.............. 763,390
1,170,000 General Motors Acceptance
Corp.,
6.13%, 08/28/07.............. 1,158,542
1,010,000 General Motors Acceptance
Corp.,
5.63%, 05/15/09.............. 946,659
200,000 General Motors Acceptance
Corp., Floating Rate,
4.10%, 07/16/07(b)........... 193,106
110,000 General Motors Acceptance
Corp., Series GM,
6.31%, 11/30/07.............. 106,613
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 160,000 General Motors Acceptance
Corp., Series MTN, Floating
Rate,
4.60%, 09/23/08(b)........... $ 148,049
330,000 Goldman Sachs Group, Inc.,
4.13%, 01/15/08.............. 330,007
200,000 Goldman Sachs Group, Inc.,
4.50%, 06/15/10.............. 200,866
900,000 Goldman Sachs Group, Inc.,
Series MTNB, Floating Rate,
3.15%, 08/01/06(c)........... 900,123
750,000 HSBC Finance Corp.,
4.63%, 01/15/08.............. 757,985
1,060,000 JPMorgan Chase & Company,
5.13%, 09/15/14.............. 1,086,307
380,000 Lehman Brothers Holdings, Inc.,
4.00%, 01/22/08.............. 378,868
620,000 Morgan Stanley,
3.63%, 04/01/08.............. 610,781
45,000 REFCO Finance Holdings,
9.00%, 08/01/12.............. 47,925
------------
12,162,567
------------
FOOD AND BEVERAGE -- 0.2%
530,000 Anheuser-Busch Companies, Inc.,
4.95%, 01/15/14.............. 551,485
430,000 Kraft Foods, Inc.,
5.63%, 11/01/11.............. 456,761
------------
1,008,246
------------
FUNERAL SERVICES -- 0.0%
35,000 Service Corp. International,
7.70%, 04/15/09.............. 37,625
10,000 Service Corp. International --
144A,
7.00%, 06/15/17.............. 10,325
------------
47,950
------------
INSURANCE -- 0.0%
80,000 ASIF Global Financing XIX --
144A,
4.90%, 01/17/13.............. 81,306
------------
LEISURE AND RECREATION -- 0.1%
40,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 46,400
15,000 John Q Hammons Hotels, LP/ John
Q Hammons Finance Corporation
III, Series B,
8.88%, 05/15/12.............. 16,425
10,000 K2, Inc.,
7.38%, 07/01/14.............. 10,575
</Table>
See notes to financial statements.
103
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
$ 40,000 MGM MIRAGE,
7.25%, 10/15/06.............. $ 41,350
25,000 MGM MIRAGE,
6.00%, 10/01/09.............. 25,250
50,000 MGM MIRAGE,
8.50%, 09/15/10.............. 55,750
30,000 MGM MIRAGE -- 144A,
6.63%, 07/15/15.............. 30,488
15,000 Mohegan Tribal Gaming
Authority -- 144A,
6.13%, 02/15/13.............. 15,225
------------
241,463
------------
MANUFACTURING -- 0.3%
350,000 Tyco International Group SA
(Luxembourg),
6.38%, 10/15/11.............. 384,907
710,000 Tyco International Group SA
(Luxembourg),
6.00%, 11/15/13.............. 773,400
------------
1,158,307
------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.1%
30,000 Davita, Inc. -- 144A,
7.25%, 03/15/15.............. 30,975
40,000 HCA, Inc.,
5.50%, 12/01/09.............. 40,318
40,000 HCA, Inc.,
7.69%, 06/15/25.............. 43,055
110,000 HCA, Inc.,
7.50%, 11/06/33.............. 118,859
60,000 Tenet Healthcare Corp.,
6.38%, 12/01/11.............. 57,450
30,000 Tenet Healthcare Corp.,
6.50%, 06/01/12.............. 28,650
------------
319,307
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.0%
10,000 Fresenius Medical Care Capital
Trust II,
7.88%, 02/01/08.............. 10,475
------------
METALS AND MINING -- 0.0%
20,000 International Steel Group,
6.50%, 04/15/14.............. 19,300
25,000 TriMas Corp.,
9.88%, 06/15/12.............. 21,125
------------
40,425
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES -- 0.2%
$ 330,000 El Paso Natural Gas,
8.38%, 06/15/32.............. $ 385,440
510,000 Williams Companies, Inc.,
Series A,
7.50%, 01/15/31.............. 554,625
------------
940,065
------------
OIL, COAL AND GAS -- 0.9%
330,000 Amerada Hess Corp.,
7.30%, 08/15/31.............. 399,447
300,000 Anadarko Finance Company,
Series B (Canada),
7.50%, 05/01/31.............. 379,969
470,000 Apache Finance Canada (Canada),
4.38%, 05/15/15.............. 469,977
45,000 Chesapeake Energy Corp.,
7.75%, 01/15/15.............. 48,825
20,000 Chesapeake Energy
Corp. -- 144A,
6.25%, 01/15/18.............. 19,800
460,000 ChevronTexaco Capital Company
(Canada),
3.50%, 09/17/07.............. 455,781
690,000 Conoco, Inc.,
6.95%, 04/15/29.............. 869,654
420,000 Devon Energy Corp.,
7.95%, 04/15/32.............. 554,234
15,000 KCS Energy, Inc. -- 144A,
7.13%, 04/01/12.............. 15,375
60,000 Morgan Stanley (Gazprom) --
144A (Russia),
9.63%, 03/01/13.............. 73,740
80,000 Western Oil Sands, Inc.
(Canada),
8.38%, 05/01/12.............. 91,500
350,000 XTO Energy, Inc.,
6.25%, 04/15/13.............. 379,369
------------
3,757,671
------------
PAPER AND FOREST PRODUCTS -- 0.2%
35,000 Abitibi-Consolidated, Inc.
(Canada),
8.38%, 04/01/15.............. 35,875
220,000 International Paper Company,
5.50%, 01/15/14.............. 225,027
630,000 Weyerhaeuser Company,
6.75%, 03/15/12.............. 694,092
------------
954,994
------------
</Table>
See notes to financial statements.
104
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.0%
$ 15,000 Bio-Rad Laboratories, Inc.,
7.50%, 08/15/13.............. $ 16,125
45,000 Bio-Rad Laboratories, Inc.,
6.13%, 12/15/14.............. 45,675
75,000 Elan Finance PLC/Elan Finance
Corp. -- 144A (Brazil),
7.75%, 11/15/11(d)........... 64,500
------------
126,300
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 1.6%
1,340,164 Banc of America Mortgage
Securities, Series 2005-A,
Class 2A1, Floating Rate,
4.49%, 02/25/35(c)........... 1,338,435
390,000 Countrywide Asset-Backed
Certificates, Series 2005-4,
Class AF3,
4.46%, 05/25/35.............. 389,817
900,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33.............. 980,054
1,412,434 GMAC Mortgage Corp. Loan Trust,
Series 2005-AR1, Class 3A,
Floating Rate,
4.71%, 03/18/35(c)........... 1,416,847
870,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C1, Class
A3,
4.55%, 02/15/30.............. 875,770
1,300,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A5, Class A3, 4.44%,
06/25/35..................... 1,295,176
------------
6,296,099
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.0%
40,000 Ventas Realty LP/Capital
Corp. -- 144A,
7.13%, 06/01/15.............. 41,800
50,000 Ventas Realty LP/Capital
Corp. -- 144A,
6.75%, 06/01/10.............. 52,128
------------
93,928
------------
RETAIL -- 0.0%
10,000 JC Penney & Company, Inc.,
7.40%, 04/01/37.............. 10,850
60,000 Suburban Propane Partners,
6.88%, 12/15/13.............. 57,300
------------
68,150
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL: SUPERMARKETS -- 0.0%
$ 100,000 Delhaize America, Inc.,
9.00%, 04/15/31.............. $ 125,348
------------
SEMICONDUCTORS -- 0.0%
25,000 Freescale Semiconductor, Inc.,
Floating Rate,
5.89%, 07/15/09(b)........... 26,094
40,000 MagnaChip Semiconductor,
Ltd. -- 144A, Floating Rate,
6.66%, 12/15/11(b)........... 39,800
------------
65,894
------------
SPECIAL PURPOSE ENTITY -- 0.1%
225,000 Irwin Land LLC, Series A-2,
5.40%, 12/15/47.............. 232,432
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.6%
50,000 Cincinnati Bell, Inc.,
7.25%, 07/15/13.............. 52,750
25,000 Citizens Communications
Company,
6.25%, 01/15/13.............. 24,313
150,000 Deutsche Telekom International
Finance BV (The Netherlands),
5.25%, 07/22/13.............. 155,989
15,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda),
8.25%, 01/15/13.............. 15,563
30,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda), Floating Rate,
7.81%, 01/15/12(n)........... 30,675
60,000 Nextel Communications, Inc.,
5.95%, 03/15/14.............. 62,625
10,000 Nextel Communications, Inc.,
7.38%, 08/01/15.............. 10,850
100,000 Qwest Communications
International, Inc. Floating
Rate,
7.27%, 02/15/09(b)........... 98,750
105,000 Qwest Corp.,
7.88%, 09/01/11.............. 109,988
50,000 Qwest Corp.,
8.88%, 03/15/12.............. 54,625
15,000 Rogers Wireless, Inc. (Canada),
7.50%, 03/15/15(d)........... 16,388
960,000 Sprint Capital Corp.,
6.00%, 01/15/07.............. 984,112
</Table>
See notes to financial statements.
105
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 10,000 Valor Telecommunications
Enterprises LLC -144A,
7.75%, 02/15/15.............. $ 9,875
530,000 Verizon Global Funding Corp.,
7.38%, 09/01/12.............. 620,181
------------
2,246,684
------------
TRANSPORTATION -- 0.1%
85,000 OMI Corp. (Marshall Islands),
7.63%, 12/01/13.............. 85,106
80,000 Overseas Shipholding Group,
7.50%, 02/15/24.............. 77,600
130,000 Union Pacific Corp.,
5.38%, 05/01/14.............. 135,808
------------
298,514
------------
UTILITIES -- 0.0%
20,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12............. 22,600
5,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 6,013
------------
28,613
------------
UTILITIES: ELECTRIC -- 0.8%
760,000 AES Corp.,
7.75%, 03/01/14.............. 828,400
90,000 Dominion Resources, Inc.,
4.75%, 12/15/10.............. 90,654
320,000 Dominion Resources, Inc.,
5.70%, 09/17/12.............. 337,945
440,000 Duke Energy Corp.,
5.63%, 11/30/12.............. 467,456
210,000 FirstEnergy Corp., Series B,
6.45%, 11/15/11.............. 229,753
450,000 FirstEnergy Corp., Series C,
7.38%, 11/15/31.............. 551,845
50,000 Midwest Generation LLC,
8.75%, 05/01/34.............. 56,250
45,000 Midwest Generation LLC, Series
B,
8.56%, 01/02/16.............. 49,641
10,000 NRG Energy, Inc. -- 144A,
8.00%, 12/15/13.............. 10,600
140,000 Oncor Electric Delivery
Company,
6.38%, 01/15/15.............. 155,464
210,000 Pacific Gas & Electric Company,
6.05%, 03/01/34.............. 232,264
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
$ 15,000 Reliant Energy, Inc.,
9.25%, 07/15/10.............. $ 16,425
45,000 Reliant Energy, Inc.,
6.75%, 12/15/14.............. 44,213
40,000 Texas Genco LLC/Financing --
144A,
6.88%, 12/15/14.............. 42,300
------------
3,113,210
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $41,923,409)........... 42,354,433
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 3.9%
450,000 AID-Israel (Israel),
5.50%, 04/26/24.............. 505,803
315,000 AID-Israel (Israel),
5.50%, 09/18/33.............. 362,583
930,000 Australian Government
(Australia), Series 121,
5.25%, 08/15/10(r)........... 712,757
2,100,000 Bundesrepublik Deutschland
(Germany), Series 03,
4.25%, 01/04/14(j)........... 2,782,480
510,000 Federal Republic of Brazil
(Brazil),
14.50%, 10/15/09............. 665,550
517,190 Federal Republic of Brazil
(Brazil),
8.00%, 04/15/14.............. 533,091
480,000 Federal Republic of Brazil
(Brazil),
10.13%, 05/15/27............. 558,480
130,000 Federal Republic of Brazil
(Brazil),
11.00%, 08/17/40............. 156,553
156,473 Federal Republic of Brazil
(Brazil), Series 18YR,
Floating Rate,
4.31%, 04/15/12(n)........... 151,388
338,380 Government of Canada Real
Return Bonds (Canada),
4.00%, 12/01/31(s)........... 397,428
2,040,560 Government of France, Series
OATi (France),
3.00%, 07/25/09(j)........... 2,718,857
400,000 Japan Finance Corp. for
Municipal Enterprises, Series
DTC (Japan),
4.63%, 04/21/15.............. 407,743
</Table>
See notes to financial statements.
106
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 350,000 Republic of Bulgaria -- 144A
(Bulgaria),
8.25%, 01/15/15.............. $ 441,438
110,000 Republic of Colombia
(Colombia),
10.50%, 07/09/10............. 131,450
200,000 Republic of Colombia
(Colombia),
11.75%, 02/25/20............. 264,000
50,000 Republic of Panama (Panama),
9.63%, 02/08/11.............. 60,000
230,000 Republic of Panama (Panama),
10.75%, 05/15/20............. 312,800
150,000 Republic of Peru (Peru),
8.75%, 11/21/33.............. 169,875
212,500 Republic of Peru, Series 20YR
(Peru), Variable Rate,
5.00%, 03/07/17(a)........... 204,149
1,650,000 Russian Federation (Russia) --
144A,
5.00%, 03/31/30.............. 1,846,136
450,000 United Mexican States (Mexico),
8.38%, 01/14/11.............. 524,925
320,000 United Mexican States (Mexico),
Series MTN,
8.30%, 08/15/31.............. 399,200
1,540,000 United Mexican States (Mexico),
Series MTNA,
7.50%, 04/08/33.............. 1,771,000
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $15,867,755)........... 16,077,686
------------
SECURITIES LENDING COLLATERAL -- 4.6%
18,961,356 Securities Lending Collateral
Investment (Note 4)
(Cost $18,961,356)........... 18,961,356
------------
YANKEE CERTIFICATE OF DEPOSIT -- 0.4%
1,500,000 Treasury Bank, Series CD,
Variable Rate,
3.31%, 11/23/05(a) (Cost
$1,500,000).................. 1,500,000
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.8%
FANNIE MAE -- 0.1%
300,000 3.39%, 12/05/05(f)............. 295,565
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM US GOVERNMENT AGENCY SECURITIES
(CONTINUED)
FEDERAL HOME LOAN BANK -- 0.7%
$ 1,500,000 2.97%, 07/01/05................ $ 1,500,000
1,500,000 3.00%, 07/06/05................ 1,499,375
------------
2,999,375
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $3,294,940)............ 3,294,940
------------
SHORT TERM CORPORATE NOTES -- 0.1%
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
500,000 BellSouth Corp. -- 144A,
4.26%, 04/26/06 (Cost
$501,900).................... 501,900
------------
SHORT TERM COMMERCIAL PAPER -- 2.9%
1,500,000 Abbey National NA LLC,
2.97%, 07/07/05.............. 1,499,258
1,500,000 BankAmerica Corp.,
3.36%, 09/30/05.............. 1,487,260
1,500,000 Barclays US Funding LLC,
3.16%, 08/03/05.............. 1,495,662
1,500,000 Danske Corp.,
3.06%, 07/05/05.............. 1,499,490
1,500,000 Governor & Company Bank Of
Ireland (Ireland),
3.06%, 07/11/05.............. 1,498,725
1,500,000 HBOS Treasury Services PLC
(United Kingdom),
3.06%, 07/07/05.............. 1,499,235
1,500,000 Rabobank USA Financial Corp.,
3.04%, 07/07/05.............. 1,499,240
1,500,000 Toyota Motor Credit Company,
2.96%, 07/05/05.............. 1,499,506
------------
TOTAL SHORT TERM COMMERCIAL
PAPER
(Cost $11,978,376)........... 11,978,376
------------
TOTAL SECURITIES
(Cost $396,307,117).......... 412,042,714
------------
REPURCHASE AGREEMENT -- 9.8%
39,797,585 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $39,800,470
(Collateralized by various
Fannie Mae Adjustable Rate
Mortgages, 3.38% - 3.81%, due
01/25/33 - 05/01/34, with a
total value of $40,219,224
and Small Business
Administration, 6.13%, due
10/25/20 with a value of
$1,568,241) (Cost
$39,797,585)................. 39,797,585
------------
</Table>
See notes to financial statements.
107
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
CONTRACTS VALUE
--------- ------------
CALL OPTIONS WRITTEN -- (0.0)%
107 US Treasury Note (10 Year)
September Future, Expiring
August 2005 @ 114,
6.00%, 08/26/05.............. $ (70,219)
35 US Treasury Note (10 Year)
September Future, Expiring
August 2005@ 115,
6.00%, 08/26/05.............. (11,484)
------------
TOTAL CALL OPTIONS WRITTEN
(Premium $45,009)............ (81,703)
------------
PUT OPTIONS WRITTEN -- (0.0)%
35 US Treasury Note (10 Year)
September Future, Expiring
August 2005@ 110,
6.00%, 08/26/05
(Premium $9,356)............. (3,281)
------------
Total Investments -- 110.7%
(Cost $436,050,337).......... 451,755,315
Liabilities less other
assets -- (10.7)%............ (43,622,848)
------------
NET ASSETS -- 100.0%........... $408,132,467
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $436,050,337.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $21,536,435
Gross unrealized depreciation........... (5,831,457)
-----------
Net unrealized appreciation............. $15,704,978
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
108
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 96.9%
ADVERTISING -- 0.5%
1,070,000 The Interpublic Group of
Companies, Inc.*(d)....... $ 13,032,600
--------------
AEROSPACE AND DEFENSE -- 3.4%
275,000 Goodrich Corp............... 11,264,000
920,800 The Boeing Company.......... 60,772,800
475,400 United Technologies Corp.... 24,411,790
--------------
96,448,590
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.8%
341,600 Jones Apparel Group, Inc.... 10,603,264
150,000 Liz Claiborne, Inc.......... 5,964,000
118,100 VF Corp..................... 6,757,682
--------------
23,324,946
--------------
AUTOMOBILES/MOTOR VEHICLES -- 1.4%
1,177,400 General Motors Corp.(d)..... 40,031,600
--------------
AUTOMOTIVE EQUIPMENT -- 0.8%
104,000 BorgWarner, Inc.(d)......... 5,581,680
142,725 Lear Corp.(d)............... 5,192,336
173,900 Magna International, Inc. --
Class A (Canada).......... 12,232,126
--------------
23,006,142
--------------
BANKS -- 3.9%
926,082 Bank of America Corp........ 42,238,600
397,300 National City Corp.......... 13,555,876
255,800 SunTrust Banks, Inc......... 18,478,992
560,000 Wachovia Corp............... 27,776,000
132,800 Wells Fargo & Company....... 8,177,824
--------------
110,227,292
--------------
BROADCAST SERVICES/MEDIA -- 5.1%
658,280 Clear Channel
Communications, Inc....... 20,360,600
1,002,165 Comcast Corp. -- Class A*... 30,766,466
645,000 Comcast Corp. -- Special
Class A*.................. 19,317,750
3,448,300 Time Warner, Inc.*.......... 57,621,093
434,400 Tribune Company(d).......... 15,282,192
--------------
143,348,101
--------------
COMPUTER SOFTWARE AND SERVICES -- 2.9%
1,781,400 Electronic Data Systems
Corp...................... 34,291,950
624,105 Ingram Micro, Inc. -- Class
A*........................ 9,773,484
1,481,530 Microsoft Corp.............. 36,801,206
--------------
80,866,640
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTERS AND OFFICE EQUIPMENT -- 4.2%
3,388,300 Hewlett-Packard Company..... $ 79,658,933
543,500 International Business
Machines Corp............. 40,327,700
--------------
119,986,633
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.6%
135,000 Martin Marietta Materials,
Inc....................... 9,331,200
130,000 Vulcan Materials Company.... 8,448,700
--------------
17,779,900
--------------
CONSUMER GOODS AND SERVICES -- 4.4%
487,000 Altria Group, Inc........... 31,489,420
1,110,200 General Electric Company.... 38,468,430
434,400 Kimberly-Clark Corp......... 27,189,096
228,000 Procter & Gamble
Company(d)................ 12,027,000
217,000 Unilever NV (The
Netherlands)(d)........... 14,068,110
--------------
123,242,056
--------------
ELECTRONICS -- 3.8%
285,233 Arrow Electronics, Inc.*.... 7,746,928
422,200 Avnet, Inc.*(d)............. 9,512,166
1,121,400 Flextronics International,
Ltd. (Singapore)*(d)...... 14,813,694
100,000 Hubbell, Inc. -- Class
B(d)...................... 4,410,000
1,933,577 Sanmina-SCI Corp.*.......... 10,576,666
6,111,075 Solectron Corp.*............ 23,160,974
1,087,500 Sony Corp. (ADR) (Japan).... 37,453,501
--------------
107,673,929
--------------
FINANCIAL SERVICES -- 10.8%
606,100 American Express Company.... 32,262,703
1,345,500 Citigroup, Inc.............. 62,202,465
388,200 Fannie Mae.................. 22,670,880
362,900 Freddie Mac................. 23,671,967
139,000 Goldman Sachs Group, Inc.... 14,180,780
2,061,940 JPMorgan Chase & Company.... 72,827,720
209,800 Lehman Brothers Holdings,
Inc.(d)................... 20,828,944
910,800 Merrill Lynch & Company,
Inc....................... 50,103,108
74,400 Morgan Stanley.............. 3,903,768
--------------
302,652,335
--------------
FOOD AND BEVERAGE -- 2.0%
1,055,400 Kraft Foods, Inc. -- Class
A(d)...................... 33,572,274
255,000 PepsiCo, Inc................ 13,752,150
500,000 Tyson Foods, Inc. -- Class
A......................... 8,900,000
--------------
56,224,424
--------------
</Table>
See notes to financial statements.
109
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE -- 7.2%
560,500 American International
Group, Inc................ $ 32,565,050
469,100 Chubb Corp.................. 40,159,651
450,200 MetLife, Inc................ 20,231,988
61,566 PartnerRE, Ltd. (Bermuda)... 3,966,082
708,600 The Allstate Corp........... 42,338,849
240,000 The Hartford Financial
Services Group, Inc....... 17,947,200
340,438 The St. Paul Travelers
Companies, Inc............ 13,457,514
270,300 Torchmark Corp.............. 14,109,660
238,000 XL Capital, Ltd. -- Class A
(Cayman Islands).......... 17,711,960
--------------
202,487,954
--------------
MANUFACTURING -- 3.2%
204,000 Cooper Industries, Ltd. --
Class A (Bermuda)......... 13,035,600
100,000 Eaton Corp.................. 5,990,000
870,900 Honeywell International,
Inc....................... 31,901,067
592,950 Smurfit-Stone Container
Corp.*.................... 6,030,302
442,100 Textron, Inc................ 33,533,285
--------------
90,490,254
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 5.3%
1,067,650 HCA, Inc.................... 60,503,726
1,323,800 Medco Health Solutions,
Inc.*(d).................. 70,637,968
1,462,000 Tenet Healthcare
Corp.*(d)................. 17,894,880
--------------
149,036,574
--------------
OIL, COAL AND GAS -- 9.2%
624,000 ChevronTexaco Corp.......... 34,894,080
1,694,702 ConocoPhillips.............. 97,428,417
1,234,800 Exxon Mobil Corp............ 70,963,956
300,000 GlobalSantaFe Corp. (Cayman
Islands).................. 12,240,000
195,000 Noble Corp. (Cayman
Islands).................. 11,994,450
424,000 Occidental Petroleum
Corp...................... 32,618,320
--------------
260,139,223
--------------
PAPER AND FOREST PRODUCTS -- 0.7%
146,800 International Paper
Company................... 4,434,828
500,000 MeadWestvaco Corp........... 14,020,000
--------------
18,454,828
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 3.7%
1,529,500 Millennium Pharmaceuticals,
Inc.*..................... $ 14,178,465
1,143,200 Pfizer, Inc................. 31,529,456
624,100 Watson Pharmaceuticals,
Inc.*..................... 18,448,396
922,190 Wyeth....................... 41,037,455
--------------
105,193,772
--------------
PRINTING AND PUBLISHING -- 0.2%
400,000 The Reader's Digest
Association, Inc.......... 6,600,000
--------------
REGISTERED INVESTMENT COMPANIES -- 1.8%
438,300 SPDR Trust Series 1(d)...... 52,210,296
--------------
RETAIL -- 4.8%
185,700 Federated Department Stores,
Inc.(d)................... 13,608,096
455,800 May Department Stores
Company................... 18,304,928
1,919,600 Office Depot, Inc.*......... 43,843,664
224,800 Sears Holdings Corp.*(d).... 33,690,776
255,000 Target Corp................. 13,874,550
442,900 Toys "R" Us, Inc.*.......... 11,727,992
--------------
135,050,006
--------------
RETAIL: RESTAURANTS -- 0.5%
535,000 McDonald's Corp.(d)......... 14,846,250
--------------
RETAIL: SUPERMARKETS -- 1.5%
819,925 Safeway, Inc.(d)............ 18,522,105
295,700 SUPERVALU, Inc.(d).......... 9,642,777
779,350 The Kroger Company*......... 14,831,031
--------------
42,995,913
--------------
RUBBER PRODUCTS -- 0.1%
193,100 Cooper Tire & Rubber
Company(d)................ 3,585,867
--------------
SEMICONDUCTORS -- 2.3%
2,464,100 Advanced Micro Devices,
Inc.*(d).................. 42,727,494
1,152,100 Intersil Corp. -- Class A... 21,624,917
--------------
64,352,411
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.4%
4,518,900 Lucent Technologies,
Inc.*..................... 13,149,999
1,707,566 Nortel Networks Corp.
(Canada)*................. 4,456,747
8,721,700 Qwest Communications
International, Inc.*...... 32,357,507
237,800 SBC Communications,
Inc.(d)................... 5,647,750
</Table>
See notes to financial statements.
110
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
964,950 Tellabs, Inc.*.............. 8,395,065
320,652 Verizon Communications,
Inc....................... 11,078,527
--------------
96,806,008
--------------
TOYS -- 1.3%
2,049,200 Mattel, Inc................. 37,500,360
--------------
TRANSPORTATION -- 3.9%
419,900 Burlington Northern Santa Fe
Corp...................... 19,768,892
600,000 CNF, Inc.................... 26,940,000
1,098,100 CSX Corp.................... 46,844,946
525,300 Norfolk Southern Corp....... 16,263,288
--------------
109,817,126
UTILITIES: ELECTRIC -- 3.2% --------------
1,099,780 American Electric Power
Company, Inc.(d).......... 40,548,889
374,800 Constellation Energy Group,
Inc....................... 21,622,212
225,000 Entergy Corp................ 16,998,750
305,800 Wisconsin Energy Corp....... 11,926,200
--------------
91,096,051
--------------
UTILITIES: GAS -- 0.0%
9,046 Sempra Energy............... 373,690
TOTAL COMMON STOCKS (Cost --------------
$2,458,496,420)........... 2,738,881,771
--------------
PRINCIPAL VALUE
- ------------ --------------
SECURITIES LENDING COLLATERAL -- 11.2%
$317,505,927 Securities Lending
Collateral Investment
(Note 4) (Cost
$317,505,927)............. $ 317,505,927
TOTAL SECURITIES (Cost --------------
$2,776,002,347) 3,056,387,698
--------------
REPURCHASE AGREEMENT -- 3.7%
103,824,722 With Investors Bank & Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase
proceeds at maturity
$103,832,249
(Collateralized by various
Fannie Mae Adjustable Rate
Mortgages, 3.65% - 4.83%,
due 08/01/33 - 08/01/37
with a total value of
$94,083,611 and Small
Business Administration,
5.57%, due 07/25/29, with
a value of $14,932,347)
(Cost $103,824,722)....... 103,824,722
--------------
Total Investments -- 111.8%
(Cost $2,879,827,069)..... 3,160,212,420
Liabilities less other
assets -- (11.8)%......... (334,783,100)
--------------
NET ASSETS -- 100.0%........ $2,825,429,320
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $2,879,827,069.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $360,798,514
Gross unrealized depreciation.......... (80,413,163)
------------
Net unrealized appreciation............ $280,385,351
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
111
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS -- 97.4%
ADVERTISING -- 0.9%
7,900 The Interpublic Group of
Companies, Inc.*................ $ 96,222
-----------
AEROSPACE AND DEFENSE -- 3.5%
4,000 Lockheed Martin Corp. ............ 259,480
2,600 Raytheon Company.................. 101,712
-----------
361,192
-----------
BANKS -- 2.9%
2,200 Bank of America Corp. ............ 100,342
1,700 Comerica, Inc. ................... 98,260
1,500 KeyCorp........................... 49,725
800 UnionBanCal Corp. ................ 53,536
-----------
301,863
-----------
CHEMICALS -- 1.5%
10,200 The Mosaic Company*............... 158,712
-----------
COMMERCIAL SERVICES -- 2.4%
11,100 Cendant Corp. .................... 248,307
-----------
COMPUTER SOFTWARE AND SERVICES -- 9.2%
18,600 Computer Associates International,
Inc. ........................... 511,128
23,000 Electronic Data Systems Corp. .... 442,750
-----------
953,878
-----------
COMPUTERS AND OFFICE EQUIPMENT -- 1.1%
4,800 Hewlett-Packard Company........... 112,848
-----------
CONSTRUCTION SERVICES AND SUPPLIES -- 6.0%
6,800 Centex Corp. ..................... 480,556
1,700 Pulte Homes, Inc. ................ 143,225
-----------
623,781
-----------
CONSUMER GOODS AND SERVICES -- 7.1%
6,800 Altria Group, Inc. ............... 439,688
3,900 Eastman Kodak Company............. 104,715
5,100 Unilever PLC (ADR) (United
Kingdom)........................ 198,135
-----------
742,538
-----------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 1.9%
6,900 Waste Management, Inc. ........... 195,546
-----------
FINANCIAL SERVICES -- 14.0%
2,500 CIT Group, Inc. .................. 107,425
4,800 Freddie Mac....................... 313,104
6,300 JPMorgan Chase & Company.......... 222,516
</Table>
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
12,600 MBNA Corp. ....................... $ 329,616
5,000 Prudential Financial, Inc. ....... 328,300
3,600 Washington Mutual, Inc. .......... 146,484
-----------
1,447,445
-----------
FOOD AND BEVERAGE -- 2.8%
6,200 Kraft Foods, Inc. -- Class A...... 197,222
4,700 Sara Lee Corp. ................... 93,107
-----------
290,329
-----------
INSURANCE -- 13.5%
3,000 Assurant, Inc. ................... 108,300
5,000 Conseco, Inc.*.................... 109,100
10,100 MetLife, Inc. .................... 453,894
4,400 Principal Financial Group,
Inc. ........................... 184,360
3,000 The Allstate Corp. ............... 179,250
1,400 The Hartford Financial Services
Group, Inc. .................... 104,692
6,500 The St. Paul Travelers Companies,
Inc. ........................... 256,945
-----------
1,396,541
-----------
LEISURE AND RECREATION -- 2.2%
5,800 MGM MIRAGE*....................... 229,564
-----------
MANUFACTURING -- 2.4%
8,600 Tyco International, Ltd.
(Bermuda)....................... 251,120
-----------
MEDICAL AND OTHER HEALTH SERVICES -- 2.7%
2,700 HCA, Inc. ........................ 153,009
10,800 Tenet Healthcare Corp.*........... 132,192
-----------
285,201
-----------
METALS AND MINING -- 2.7%
3,400 Alcan, Inc. (Canada).............. 102,000
6,900 Alcoa, Inc. ...................... 180,297
-----------
282,297
-----------
OIL, COAL AND GAS -- 1.1%
1,800 Petro-Canada (Canada)............. 117,252
-----------
PAPER AND FOREST PRODUCTS -- 2.0%
2,200 International Paper Company....... 66,462
2,200 Weyerhaeuser Company.............. 140,030
-----------
206,492
-----------
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT --1.7%
5,800 Merck & Company, Inc. ............ 178,640
-----------
</Table>
See notes to financial statements.
112
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 2.0%
3,400 McDonald's Corp. ................. $ 94,350
2,100 YUM! Brands, Inc. ................ 109,368
-----------
203,718
-----------
RETAIL: SUPERMARKETS -- 2.0%
4,900 Albertson's, Inc. ................ 101,332
4,900 Safeway, Inc. .................... 110,691
-----------
212,023
-----------
SEMICONDUCTORS -- 2.2%
10,800 Freescale Semiconductor, Inc. --
Class A*........................ 226,908
-----------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.5%
900 ALLTEL Corp. ..................... 56,052
-----------
TRANSPORTATION -- 3.0%
7,300 CSX Corp. ........................ 311,418
-----------
UTILITIES: ELECTRIC -- 6.1%
1,000 Entergy Corp. .................... 75,550
4,100 FirstEnergy Corp. ................ 197,251
8,700 FPL Group, Inc. .................. 365,922
-----------
638,723
-----------
TOTAL COMMON STOCKS (Cost
$9,768,727)..................... 10,128,610
-----------
<Caption>
PRINCIPAL VALUE
- --------- -----------
REPURCHASE AGREEMENT -- 2.4%
$248,359 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds at
maturity $248,377
(Collateralized by Small
Business Administration, 6.63%,
due 02/25/10, with a value of
$260,777) (Cost $248,359)....... $ 248,359
-----------
Total Investments -- 99.8%
(Cost $10,017,086).............. 10,376,969
Assets less other
liabilities -- 0.2%............. 24,172
-----------
NET ASSETS -- 100.0%.............. $10,401,141
===========
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $10,017,086.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............ $ 493,367
Gross unrealized depreciation............ (133,484)
---------
Net unrealized appreciation.............. $ 359,883
=========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
113
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 98.5%
AEROSPACE AND DEFENSE -- 1.6%
400 Lockheed Martin Corp. ...... $ 25,948
112,900 Northrop Grumman Corp. ..... 6,237,725
67,100 Raytheon Company............ 2,624,952
136,500 The Boeing Company.......... 9,009,000
--------------
17,897,625
--------------
AGRICULTURE -- 0.6%
25,800 Bunge, Ltd. (Bermuda)(d).... 1,635,720
79,100 Monsanto Company............ 4,973,017
--------------
6,608,737
--------------
APPAREL: MANUFACTURING AND RETAIL -- 1.3%
55,600 Abercrombie & Fitch
Company -- Class A(d)..... 3,819,720
104,200 American Eagle Outfitters,
Inc. ..................... 3,193,730
79,300 Coach, Inc.*................ 2,662,101
30,600 Payless ShoeSource, Inc.*... 587,520
62,700 Ross Stores, Inc. .......... 1,812,657
60,000 The Timberland Company --
Class A*.................. 2,323,200
3,500 VF Corp. ................... 200,270
--------------
14,599,198
--------------
ASSET MANAGEMENT -- 0.3%
86,100 Brascan Corp. -- Class A
(Canada)(d)............... 3,285,576
--------------
AUTOMOBILE: RETAIL -- 0.1%
68,300 AutoNation, Inc.*........... 1,401,516
--------------
AUTOMOBILES/MOTOR VEHICLES -- 0.6%
511,200 Ford Motor Company.......... 5,234,688
27,400 PACCAR, Inc. ............... 1,863,200
--------------
7,097,888
--------------
AUTOMOTIVE EQUIPMENT -- 0.3%
84,400 Autoliv, Inc. .............. 3,696,720
--------------
BANKS -- 6.2%
36,600 Astoria Financial Corp. .... 1,042,002
175,500 Bank of America Corp. ...... 8,004,555
16,000 Bank of Hawaii Corp. ....... 812,000
65,000 Comerica, Inc. ............. 3,757,000
89,900 Commerce Bancorp, Inc.
(New Jersey)(d)........... 2,724,869
38,400 Downey Financial Corp.(d)... 2,810,880
58,200 IndyMac Bancorp, Inc. ...... 2,370,486
136,300 KeyCorp..................... 4,518,345
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
40,000 National City Corp. ........ $ 1,364,800
57,600 PNC Financial Services
Group..................... 3,136,896
85,600 UnionBanCal Corp. .......... 5,728,352
370,000 US Bancorp.................. 10,804,000
136,400 Wachovia Corp. ............. 6,765,440
219,000 Wells Fargo & Company....... 13,486,020
--------------
67,325,645
--------------
BROADCAST SERVICES/MEDIA -- 3.1%
73,700 Comcast Corp. -- Class A*... 2,262,590
18,500 Gannett Company, Inc. ...... 1,315,905
13,500 Hearst-Argyle Television,
Inc. -- Class A........... 330,750
28,600 Liberty Global,
Inc. -- Class A*.......... 1,334,762
181,400 Liberty Media Corp. -- Class
A*........................ 1,848,466
29,600 McGraw-Hill Companies,
Inc. ..................... 1,309,800
119,400 News Corp. -- Class A....... 1,931,892
108,400 The Walt Disney Company..... 2,729,512
641,300 Time Warner, Inc.*.......... 10,716,123
206,565 Viacom, Inc. -- Class B..... 6,614,211
93,100 XM Satellite Radio Holdings,
Inc. -- Class A*(d)....... 3,133,746
--------------
33,527,757
--------------
BUSINESS SERVICES AND SUPPLIES -- 0.8%
10,800 Alliance Data Systems
Corp.*(d)................. 438,048
16,000 Dun & Bradstreet Corp.*..... 986,400
42,200 Fair Isaac Corp. ........... 1,540,300
104,300 GTECH Holdings Corp. ....... 3,049,732
56,700 Moody's Corp.(d)............ 2,549,232
--------------
8,563,712
--------------
CHEMICALS -- 1.6%
169,800 Agrium, Inc.(Canada)(d)..... 3,329,778
37,200 Eastman Chemical
Company(d)................ 2,051,580
88,500 EI du Pont de Nemours and
Company................... 3,806,385
64,100 Methanex Corp.
(Canada)(d)............... 1,055,727
9,100 PPG Industries, Inc. ....... 571,116
139,900 The Dow Chemical Company.... 6,229,747
--------------
17,044,333
--------------
COMMERCIAL SERVICES -- 0.3%
132,000 Cendant Corp. .............. 2,952,840
--------------
</Table>
See notes to financial statements.
114
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES -- 4.7%
25,466 Activision, Inc.*........... $ 420,698
65,000 Autodesk, Inc. ............. 2,234,050
76,900 Automatic Data Processing,
Inc. ..................... 3,227,493
65,700 BMC Software, Inc.*......... 1,179,315
55,000 Cadence Design Systems,
Inc.*..................... 751,300
160 Computer Associates
International, Inc. ...... 4,397
53,000 Computer Sciences Corp.*.... 2,316,100
68,700 Electronic Arts, Inc.*(d)... 3,889,107
175,700 Ingram Micro, Inc. -- Class
A*........................ 2,751,462
1,198,800 Microsoft Corp. ............ 29,778,192
185,100 NVIDIA Corp.*............... 4,945,872
--------------
51,497,986
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.2%
56,300 Apple Computer, Inc.*....... 2,072,403
98,000 Dell, Inc.*................. 3,871,980
426,900 Hewlett-Packard Company..... 10,036,419
49,200 HNI Corp. .................. 2,516,580
24,000 International Business
Machines Corp. ........... 1,780,800
122,700 SanDisk Corp.*.............. 2,911,671
28,200 Seagate Technology
(Cayman Islands)*......... 494,910
--------------
23,684,763
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.3%
5,000 DR Horton, Inc. ............ 188,050
4,100 Hovnanian Enterprises,
Inc. -- Class A*.......... 267,320
45,100 KB Home(d).................. 3,437,973
50,960 MDC Holdings, Inc. ......... 4,191,460
42,700 Standard Pacific Corp. ..... 3,755,465
18,900 Toll Brothers, Inc.*(d)..... 1,919,295
--------------
13,759,563
--------------
CONSUMER GOODS AND SERVICES -- 7.0%
130,800 Altria Group, Inc. ......... 8,457,528
27,500 American Greetings Corp. --
Class A................... 728,750
33,900 Clorox Company.............. 1,888,908
76,200 Colgate-Palmolive Company... 3,803,142
13,300 Eastman Kodak Company(d).... 357,105
58,300 Energizer Holdings, Inc.*... 3,624,511
30,200 FedEx Corp. ................ 2,446,502
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
908,900 General Electric Company.... $ 31,493,385
32,400 Gillette Company............ 1,640,412
288,900 Procter & Gamble
Company(d)................ 15,239,475
28,600 Reynolds American,
Inc.(d)................... 2,253,680
26,300 The Black & Decker Corp. ... 2,363,055
6,100 United Parcel Service,
Inc. -- Class B........... 421,876
35,400 UST, Inc. .................. 1,616,364
--------------
76,334,693
--------------
CONTAINERS AND PACKAGING -- 0.0%
13,600 Owens-Illinois, Inc.*....... 340,680
--------------
DISTRIBUTION -- 0.0%
9,600 Tech Data Corp.*............ 351,456
--------------
ELECTRONICS -- 0.4%
64,700 Arrow Electronics, Inc.*.... 1,757,252
18,300 Emerson Electric Company.... 1,146,129
11,900 Harman International
Industries,
Inc. ..................... 968,184
--------------
3,871,565
--------------
FINANCIAL SERVICES -- 9.2%
23,400 AG Edwards, Inc. ........... 1,056,510
127,700 American Express Company.... 6,797,471
84,300 AmeriCredit Corp.*.......... 2,149,650
130,600 Capital One Financial
Corp. .................... 10,449,306
60,600 CIT Group, Inc. ............ 2,603,982
570,300 Citigroup, Inc. ............ 26,364,969
140,800 Countrywide Financial
Corp. .................... 5,436,288
28,900 E*TRADE Financial Corp.*.... 404,311
20,800 Goldman Sachs Group,
Inc. ..................... 2,122,016
28,600 H&R Block, Inc. ............ 1,668,810
137,400 JPMorgan Chase & Company.... 4,852,968
62,600 Lehman Brothers Holdings,
Inc.(d)................... 6,214,928
171,200 Merrill Lynch & Company,
Inc. ..................... 9,417,712
27,100 Morgan Stanley.............. 1,421,937
87,500 Providian Financial
Corp.*.................... 1,542,625
49,800 Prudential Financial,
Inc. ..................... 3,269,868
51,700 The Bear Stearns Companies,
Inc. ..................... 5,373,698
223,300 Washington Mutual,
Inc.(d)................... 9,086,077
--------------
100,233,126
--------------
</Table>
See notes to financial statements.
115
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 2.6%
121,900 Archer-Daniels-Midland
Company................... $ 2,606,222
114,600 Coca-Cola Company........... 4,784,550
67,800 Dean Foods Company*......... 2,389,272
8,800 Hershey Foods Corp.(d)...... 546,480
15,900 PepsiAmericas, Inc. ........ 407,994
156,200 PepsiCo, Inc. .............. 8,423,866
53,900 Pilgrim's Pride Corp.(d).... 1,839,607
104,500 Sysco Corp. ................ 3,781,855
63,800 The Pepsi Bottling Group,
Inc. ..................... 1,825,318
13,560 TreeHouse Foods, Inc.*...... 386,596
108,900 Tyson Foods, Inc. -- Class
A......................... 1,938,420
--------------
28,930,180
--------------
INSURANCE -- 5.6%
92,300 Aetna, Inc. ................ 7,644,286
4,800 Ambac Financial Group,
Inc. ..................... 334,848
124,800 American International
Group, Inc. .............. 7,250,880
14,800 CIGNA Corp. ................ 1,584,044
9,345 Cincinnati Financial
Corp. .................... 369,688
69,800 Endurance Specialty
Holdings, Ltd.
(Bermuda)................. 2,639,836
70,000 First American Corp. ....... 2,809,800
19,200 Genworth Financial, Inc. --
Class A................... 580,416
28,200 Humana, Inc.*(d)............ 1,120,668
5,400 IPC Holdings, Ltd.
(Bermuda)................. 213,948
69,300 Loews Corp. ................ 5,370,750
42,000 MBIA, Inc. ................. 2,491,020
62,600 MetLife, Inc. .............. 2,813,244
11,900 Nationwide Financial
Services,
Inc. -- Class A........... 451,486
104,800 Principal Financial Group,
Inc. ..................... 4,391,120
63,400 Radian Group, Inc. ......... 2,993,748
70,400 SAFECO Corp. ............... 3,825,536
127,700 The Allstate Corp. ......... 7,630,075
77,200 The PMI Group, Inc. ........ 3,009,256
33,900 The Progressive Corp. ...... 3,349,659
--------------
60,874,308
--------------
INTERNET SERVICES -- 3.6%
62,100 CheckFree Corp.*(d)......... 2,115,126
493,200 Cisco Systems, Inc.*........ 9,425,052
32,550 Google, Inc. -- Class
A*(d)..................... 9,574,583
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES (CONTINUED)
214,100 Juniper Networks, Inc.*..... $ 5,391,038
37,500 Symantec Corp.*............. 815,250
134,800 VeriSign, Inc.*............. 3,876,848
241,700 YAHOO!, Inc.*............... 8,374,905
--------------
39,572,802
--------------
LEISURE AND RECREATION -- 1.7%
44,100 Carnival Corp.
(Panama)(d)............... 2,405,655
85,400 Hilton Hotels Corp. ........ 2,036,790
71,100 Marriott International,
Inc. -- Class A........... 4,850,442
19,200 MGM MIRAGE*................. 759,936
38,200 Royal Caribbean Cruises,
Ltd. (Liberia)............ 1,847,352
106,500 Starwood Hotels & Resorts
Worldwide, Inc. .......... 6,237,705
--------------
18,137,880
--------------
MACHINERY -- 1.0%
44,200 Caterpillar, Inc. .......... 4,212,702
20,800 Cummins, Inc.(d)............ 1,551,888
24,400 Graco, Inc. ................ 831,308
14,500 Rockwell Automation,
Inc. ..................... 706,295
20,800 Terex Corp.*................ 819,520
116,500 The Timken Company.......... 2,691,150
--------------
10,812,863
--------------
MANUFACTURING -- 0.8%
40,000 3M Company.................. 2,892,000
19,300 Harsco Corp. ............... 1,052,815
102,300 Honeywell International,
Inc. ..................... 3,747,249
5,300 Illinois Tool Works,
Inc. ..................... 422,304
9,000 ITT Industries, Inc. ....... 878,670
--------------
8,993,038
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 1.5%
57,900 DaVita, Inc.*............... 2,633,292
26,800 HCA, Inc. .................. 1,518,756
15,400 IMS Health, Inc. ........... 381,458
29,600 McKesson Corp. ............. 1,325,784
56,900 Medco Health Solutions,
Inc.*..................... 3,036,184
69,200 UnitedHealth Group, Inc. ... 3,608,088
57,400 WellPoint, Inc.*............ 3,997,336
--------------
16,500,898
--------------
</Table>
See notes to financial statements.
116
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES -- 4.4%
27,400 Allergan, Inc.(d)........... $ 2,335,576
40,700 Baxter International,
Inc. ..................... 1,509,970
31,100 Becton, Dickinson and
Company................... 1,631,817
48,000 Dade Behring Holdings,
Inc. ..................... 3,120,480
10,800 Guidant Corp. .............. 726,840
323,600 Johnson & Johnson........... 21,034,000
69,100 Kinetic Concepts, Inc.*..... 4,146,000
90,500 Medtronic, Inc. ............ 4,686,995
66,200 St. Jude Medical, Inc.*..... 2,886,982
51,900 Stryker Corp. .............. 2,468,364
40,500 Zimmer Holdings, Inc.*...... 3,084,885
--------------
47,631,909
--------------
METALS AND MINING -- 0.7%
7,600 Newmont Mining Corp. ....... 296,628
102,700 Nucor Corp.(d).............. 4,685,174
10,100 Southern Peru Copper
Corp. .................... 432,684
35,000 Steel Dynamics, Inc. ....... 918,750
40,800 United States Steel
Corp.(d).................. 1,402,296
--------------
7,735,532
--------------
OIL, COAL AND GAS -- 8.6%
87,400 Anadarko Petroleum
Corp.(d).................. 7,179,910
37,600 Apache Corp. ............... 2,428,960
51,900 Burlington Resources,
Inc. ..................... 2,866,956
234,500 ChevronTexaco Corp.(d)...... 13,113,240
194,000 ConocoPhillips.............. 11,153,060
11,800 Devon Energy Corp. ......... 598,024
95,900 EOG Resources, Inc. ........ 5,447,120
489,300 Exxon Mobil Corp. .......... 28,120,071
71,000 Newfield Exploration
Company*.................. 2,832,190
40,000 Occidental Petroleum
Corp. .................... 3,077,200
75,000 PetroKazakhstan, Inc.
Class A (Canada).......... 2,743,500
12,900 Questar Corp. .............. 850,110
5,300 Schlumberger, Ltd.
(Netherland Antilles)....... 402,482
56,800 Sunoco, Inc. ............... 6,457,024
21,600 Transocean, Inc. (Cayman
Islands)*................. 1,165,752
94,000 UGI Corp. .................. 2,622,600
19,700 Unit Corp.*................. 866,997
26,600 Valero Energy Corp.(d)...... 2,104,326
--------------
94,029,522
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PAPER AND FOREST PRODUCTS -- 0.0%
10,300 Georgia-Pacific Corp. ...... $ 327,540
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 6.7%
9,800 Abbott Laboratories......... 480,298
12,100 AmerisourceBergen Corp. .... 836,715
223,300 Amgen, Inc.*................ 13,500,718
41,000 Bristol-Myers Squibb
Company................... 1,024,180
27,700 Cardinal Health, Inc. ...... 1,594,966
164,900 Caremark Rx, Inc.*.......... 7,341,348
66,600 Eli Lilly and Company....... 3,710,286
42,600 Genentech, Inc.*............ 3,419,928
17,900 Genzyme Corp.*.............. 1,075,611
12,500 ImClone Systems, Inc.*(d)... 387,125
28,700 King Pharmaceuticals,
Inc.*..................... 299,054
117,400 Merck & Company, Inc. ...... 3,615,920
36,800 Novartis AG (ADR)
(Switzerland)............. 1,745,792
987,200 Pfizer, Inc. ............... 27,226,976
200,900 Schering-Plough Corp.(d).... 3,829,154
76,300 Wyeth....................... 3,395,350
--------------
73,483,421
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.3%
70,300 CB Richard Ellis Group,
Inc. -- Class A*.......... 3,083,358
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
71,700 Equity Office Properties
Trust..................... 2,373,270
--------------
RETAIL -- 4.4%
44,400 7-Eleven, Inc.*............. 1,342,656
53,300 Bed Bath & Beyond, Inc.*.... 2,226,874
212,103 Circuit City Stores,
Inc. ..................... 3,667,261
24,500 Costco Wholesale Corp. ..... 1,098,090
154,600 CVS Corp. .................. 4,494,222
44,500 Dillard's, Inc. -- Class
A......................... 1,042,190
58,100 Federated Department Stores,
Inc.(d)................... 4,257,568
283,900 Home Depot, Inc. ........... 11,043,710
73,900 JC Penney Company, Inc.
(Holding Company)......... 3,885,662
68,200 Kohl's Corp.*............... 3,813,062
82,000 Office Depot, Inc.*......... 1,872,880
61,500 PETsMART, Inc. ............. 1,866,525
10,300 Target Corp.(d)............. 560,423
70,400 Wal-Mart Stores, Inc. ...... 3,393,280
</Table>
See notes to financial statements.
117
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
89,500 Walgreen Company............ $ 4,116,105
--------------
48,680,508
--------------
RETAIL: RESTAURANTS -- 1.0%
36,800 Brinker International,
Inc.*..................... 1,473,840
96,400 Darden Restaurants, Inc. ... 3,179,272
15,100 McDonald's Corp. ........... 419,025
18,700 Starbucks Corp.*............ 966,042
74,600 Wendy's International,
Inc. ..................... 3,554,690
29,700 YUM! Brands, Inc. .......... 1,546,776
--------------
11,139,645
--------------
RETAIL: SUPERMARKETS -- 0.7%
108,700 SUPERVALU, Inc.(d).......... 3,544,707
194,600 The Kroger Company*......... 3,703,238
--------------
7,247,945
--------------
SEMICONDUCTORS -- 4.3%
120,700 Advanced Micro Devices,
Inc.*..................... 2,092,938
175,500 Altera Corp.*............... 3,478,410
192,000 Applied Materials, Inc. .... 3,106,560
124,000 Broadcom Corp. -- Class
A*........................ 4,403,240
59,999 Freescale Semiconductor,
Inc. -- Class B*.......... 1,270,779
330,400 Intel Corp. ................ 8,610,224
84,700 Maxim Integrated Products,
Inc. ..................... 3,236,387
183,000 Micron Technology, Inc.*.... 1,868,430
271,500 National Semiconductor
Corp. .................... 5,981,145
230,900 PMC-Sierra, Inc.*(d)........ 2,154,297
382,300 Texas Instruments, Inc. .... 10,731,161
--------------
46,933,571
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 4.7%
10,700 ALLTEL Corp.(d)............. 666,396
70,800 BCE, Inc. (Canada).......... 1,676,544
44,800 BellSouth Corp.(d).......... 1,190,336
157,600 CenturyTel, Inc. ........... 5,457,688
678,700 Motorola, Inc. ............. 12,393,062
56,400 Nextel Communications,
Inc. -- Class A*.......... 1,822,284
295,200 QUALCOMM, Inc. ............. 9,744,552
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES (CONTINUED)
49,600 SBC Communications, Inc. ... $ 1,178,000
94,200 Sprint Corp. (FON
Group)(d)................. 2,363,478
11,100 Telephone and Data Systems,
Inc. ..................... 452,991
11,100 Telephone and Data Systems,
Inc. -- Special Common
Shares.................... 425,574
419,800 Verizon Communications,
Inc.(d)................... 14,504,090
--------------
51,874,995
--------------
TRANSPORTATION -- 1.0%
52,500 Burlington Northern Santa Fe
Corp. .................... 2,471,700
8,500 CSX Corp. .................. 362,610
105,200 JB Hunt Transport Services,
Inc.(d)................... 2,030,360
54,200 Norfolk Southern Corp. ..... 1,678,032
77,300 Ryder System, Inc. ......... 2,829,180
41,900 Teekay Shipping Corp.
(Marshall Islands)(d)..... 1,839,410
--------------
11,211,292
--------------
UTILITIES: ELECTRIC -- 3.0%
74,000 Constellation Energy Group,
Inc. ..................... 4,269,060
190,100 Edison International........ 7,708,555
16,200 Entergy Corp. .............. 1,223,910
58,900 Exelon Corp. ............... 3,023,337
67,000 FirstEnergy Corp. .......... 3,223,370
84,300 NRG Energy, Inc.*........... 3,169,680
74,700 Pepco Holdings, Inc. ....... 1,788,318
68,800 PG&E Corp. ................. 2,582,752
1,200 SCANA Corp. ................ 51,252
67,800 TXU Corp. .................. 5,633,502
15,000 Wisconsin Energy Corp. ..... 585,000
--------------
33,258,736
--------------
UTILITIES: GAS -- 0.1%
34,800 Sempra Energy............... 1,437,588
--------------
TOTAL COMMON STOCKS (Cost
$994,533,222)............. 1,078,346,180
--------------
</Table>
See notes to financial statements.
118
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES LENDING COLLATERAL -- 11.5%
$125,968,925 Securities Lending
Collateral Investment
(Note 4) (Cost
$125,968,925)............. $ 125,968,925
--------------
TOTAL SECURITIES (Cost
$1,120,502,147)........... 1,204,315,105
--------------
REPURCHASE AGREEMENT -- 1.7%
18,393,194 With Investors Bank and
Trust, dated 06/30/05,
2.61%, due 07/01/05,
repurchase proceeds at
maturity $18,394,528
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 5.58%, due
12/01/31, with a value of
$3,191,761, Freddie Mac,
3.72%, due 02/15/33, with
a value of $11,205,341 and
Small Business
Administration, 6.63%, due
03/25/15, with a value of
$4,915,752) (Cost
$18,393,194).............. 18,393,194
--------------
Total Investments -- 111.7%
(Cost $1,138,895,341)..... 1,222,708,299
Liabilities less other
assets -- (11.7)%......... (128,491,948)
--------------
NET ASSETS -- 100.0%........ $1,094,216,351
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $1,138,895,341.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $113,353,113
Gross unrealized depreciation.......... (29,540,155)
------------
Net unrealized appreciation............ $ 83,812,958
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
119
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 97.2%
AEROSPACE AND DEFENSE -- 1.6%
161,122 General Dynamics Corp. ..... $ 17,649,304
309,000 The Boeing Company.......... 20,394,000
--------------
38,043,304
--------------
AGRICULTURE -- 0.4%
150,100 Monsanto Company............ 9,436,787
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.9%
160,844 Nike, Inc. -- Class B....... 13,929,090
253,600 Ross Stores, Inc. .......... 7,331,576
--------------
21,260,666
--------------
BANKS -- 1.5%
367,400 Commerce Bancorp, Inc. (New
Jersey)(d)................ 11,135,894
305,324 UBS AG (Switzerland)........ 23,769,473
--------------
34,905,367
--------------
BROADCAST SERVICES/MEDIA -- 1.7%
489,900 News Corp. -- Class A....... 7,926,582
1,144,800 Time Warner, Inc.*.......... 19,129,608
372,300 XM Satellite Radio Holdings,
Inc. -- Class A*(d)....... 12,531,618
--------------
39,587,808
--------------
CHEMICALS -- 1.1%
354,300 EI du Pont de Nemours and
Company................... 15,238,443
245,300 The Dow Chemical Company.... 10,923,209
--------------
26,161,652
--------------
COMPUTER SOFTWARE AND SERVICES -- 5.4%
307,500 Automatic Data Processing,
Inc. ..................... 12,905,775
282,100 Electronic Arts, Inc.*(d)... 15,969,681
3,037,270 Microsoft Corp. ............ 75,445,787
740,600 NVIDIA Corp.*............... 19,788,832
--------------
124,110,075
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.5%
491,900 SanDisk Corp.*.............. 11,672,787
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.5%
186,627 Lennar Corp. -- Class A..... 11,841,483
--------------
CONSUMER GOODS AND SERVICES -- 11.7%
304,600 Colgate-Palmolive Company... 15,202,586
424,720 FedEx Corp. ................ 34,406,567
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
3,847,702 General Electric Company.... $ 133,322,875
1,608,912 Procter & Gamble Company.... 84,870,108
--------------
267,802,136
--------------
ELECTRONICS -- 0.3%
259,400 Arrow Electronics, Inc.*.... 7,045,304
--------------
FINANCIAL SERVICES -- 9.1%
510,600 American Express Company.... 27,179,238
522,300 Capital One Financial
Corp. .................... 41,789,223
87,070 Chicago Mercantile Exchange
Holdings, Inc. ........... 25,729,185
886,893 Countrywide Financial
Corp. .................... 34,242,939
399,170 Goldman Sachs Group,
Inc. ..................... 40,723,323
766,255 SLM Corp. .................. 38,925,754
--------------
208,589,662
--------------
FOOD AND BEVERAGE -- 2.6%
354,600 Coca-Cola Company........... 14,804,550
570,284 PepsiCo, Inc. .............. 30,755,416
428,800 Sysco Corp. ................ 15,518,272
--------------
61,078,238
--------------
INSURANCE -- 0.8%
323,600 American International
Group, Inc. .............. 18,801,160
--------------
INTERNET SERVICES -- 6.8%
251,100 CheckFree Corp.*(d)......... 8,552,466
1,321,540 Cisco Systems, Inc.*........ 25,254,629
202,796 Google, Inc. -- Class
A*(d)..................... 59,652,444
856,300 Juniper Networks, Inc.*..... 21,561,634
553,600 VeriSign, Inc.*(d).......... 15,921,536
788,800 YAHOO!, Inc.*............... 27,331,920
--------------
158,274,629
--------------
LEISURE AND RECREATION -- 5.8%
404,234 Carnival Corp. (Panama)..... 22,050,965
142,558 Four Seasons Hotels, Inc.
(Canada)(d)............... 9,423,084
341,400 Hilton Hotels Corp. ........ 8,142,390
291,600 Marriott International,
Inc. -- Class A........... 19,892,952
538,062 MGM MIRAGE*(d).............. 21,296,494
155,660 Royal Caribbean Cruises,
Ltd. (Liberia)............ 7,527,718
</Table>
See notes to financial statements.
120
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
436,200 Starwood Hotels & Resorts
Worldwide, Inc. .......... $ 25,548,233
416,544 Wynn Resorts, Ltd.*(d)...... 19,690,035
--------------
133,571,871
--------------
MACHINERY -- 1.9%
470,040 Caterpillar, Inc. .......... 44,799,512
--------------
MANUFACTURING -- 0.6%
409,000 Honeywell International,
Inc. ..................... 14,981,670
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 6.1%
237,400 DaVita, Inc.*............... 10,796,952
232,630 Medco Health Solutions,
Inc.*..................... 12,413,137
1,944,788 UnitedHealth Group, Inc. ... 101,401,246
229,600 WellPoint, Inc.*............ 15,989,344
--------------
140,600,679
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 8.1%
1,203,024 Johnson & Johnson........... 78,196,560
256,800 Kinetic Concepts, Inc.*..... 15,408,000
329,300 Medtronic, Inc. ............ 17,054,447
216,900 St Jude Medical, Inc.*...... 9,459,009
207,500 Stryker Corp. .............. 9,868,700
747,770 Zimmer Holdings, Inc.*...... 56,957,641
--------------
186,944,357
--------------
OIL, COAL AND GAS -- 1.2%
279,600 EOG Resources, Inc.(d)...... 15,881,280
286,180 Newfield Exploration
Company*.................. 11,415,720
--------------
27,297,000
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 8.6%
492,069 Amgen, Inc.*................ 29,750,492
547,400 Caremark Rx, Inc.*.......... 24,370,248
968,478 Genentech, Inc.*............ 77,749,414
147,100 Novartis AG (ADR)
(Switzerland)............. 6,978,424
1,032,876 Pfizer, Inc. ............... 28,486,720
803,400 Schering-Plough Corp.(d).... 15,312,804
308,300 Wyeth....................... 13,719,350
--------------
196,367,452
--------------
RETAIL -- 7.8%
217,560 Bed Bath & Beyond, Inc.*.... 9,089,657
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
579,500 Circuit City Stores,
Inc. ..................... $ 10,019,555
633,000 CVS Corp. .................. 18,401,310
918,200 Home Depot, Inc. ........... 35,717,980
303,000 JC Penney Company, Inc.
(Holding Company)......... 15,931,740
276,000 Kohl's Corp.*............... 15,431,160
812,059 Lowe's Companies, Inc.(d)... 47,278,075
329,900 Office Depot, Inc.*......... 7,534,916
248,600 PETsMART, Inc.(d)........... 7,545,010
318,400 Walgreen Company............ 14,643,216
--------------
181,592,619
--------------
RETAIL: RESTAURANTS -- 0.9%
404,313 Starbucks Corp.*............ 20,886,810
--------------
SEMICONDUCTORS -- 5.7%
701,900 Altera Corp.*............... 13,911,658
784,200 Applied Materials, Inc. .... 12,688,356
499,000 Broadcom Corp. -- Class
A*........................ 17,719,490
333,400 Maxim Integrated Products,
Inc. ..................... 12,739,214
1,085,900 National Semiconductor
Corp. .................... 23,922,377
947,100 PMC-Sierra, Inc.*(d)........ 8,836,443
1,528,800 Texas Instruments, Inc. .... 42,913,416
--------------
132,730,954
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 4.3%
2,289,500 Motorola, Inc. ............. 41,806,270
1,742,891 QUALCOMM, Inc. ............. 57,532,832
--------------
99,339,102
--------------
UTILITIES: ELECTRIC -- 1.3%
368,225 TXU Corp. .................. 30,595,815
--------------
TOTAL COMMON STOCKS
(Cost $1,992,858,175)..... 2,248,318,899
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 9.6%
$221,128,061 Securities Lending
Collateral Investment
(Note 4)
(Cost $221,128,061)....... 221,128,061
--------------
TOTAL SECURITIES (Cost
$2,213,986,236)........... 2,469,446,960
--------------
</Table>
See notes to financial statements.
121
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENT -- 2.9%
$ 67,126,917 With Investors Bank and
Trust, dated 06/30/05,
2.61%, due 07/01/05,
repurchase proceeds at
maturity $67,131,784
(Collateralized by various
Fannie Maes, 3.81% -
3.86%, due 01/25/33 -
03/25/33, with a total
value of $42,000,000 and
various Small Business
Administrations, 4.63% -
6.38%, due 06/25/15 -
05/25/30, with a total
value of $28,483,263)
(Cost $67,126,917)........ $ 67,126,917
--------------
Total Investments -- 109.7%
(Cost $2,281,113,153)..... 2,536,573,877
Liabilities less other
assets -- (9.7)%.......... (223,251,539)
--------------
NET ASSETS -- 100.0%........ $2,313,322,338
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $2,281,113,153.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $297,140,309
Gross unrealized depreciation.......... (41,679,585)
------------
Net unrealized appreciation............ $255,460,724
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
122
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
COMMON STOCKS -- 94.3%
AEROSPACE AND DEFENSE -- 1.3%
160,900 Goodrich Corp. ................ $ 6,590,464
------------
AIRLINES -- 0.5%
46,400 Alaska Air Group, Inc.*........ 1,380,400
121,900 ExpressJet Holdings, Inc.*..... 1,037,369
------------
2,417,769
------------
APPAREL: MANUFACTURING AND RETAIL -- 2.9%
190,700 Foot Locker, Inc. ............. 5,190,854
113,600 Limited Brands, Inc. .......... 2,433,312
24,400 Reebok International, Ltd. .... 1,020,652
59,600 Russell Corp. ................. 1,218,820
98,550 The Cato Corp. -- Class A...... 2,035,058
44,300 VF Corp. ...................... 2,534,846
------------
14,433,542
------------
ASSET MANAGEMENT -- 1.2%
157,400 Brascan Corp. -- Class A
(Canada)(d).................. 6,006,384
------------
AUTOMOBILES/MOTOR VEHICLES -- 1.2%
65,300 Navistar International
Corp.*....................... 2,089,600
113,000 Winnebago Industries,
Inc.(d)...................... 3,700,750
------------
5,790,350
------------
AUTOMOTIVE EQUIPMENT -- 0.5%
52,900 Autoliv, Inc. ................. 2,317,020
------------
BANKS -- 6.3%
49,600 Comerica, Inc. ................ 2,866,880
20,500 Downey Financial Corp.(d)...... 1,500,600
84,600 First Horizon National
Corp. ....................... 3,570,120
89,200 KeyCorp........................ 2,956,980
52,100 M&T Bank Corp.(d).............. 5,478,836
210,300 North Fork Bancorp, Inc. ...... 5,907,327
116,000 State Street Corp. ............ 5,597,000
34,600 UnionBanCal Corp. ............. 2,315,432
37,813 United Bankshares, Inc. ....... 1,346,521
------------
31,539,696
------------
BROADCAST SERVICES/MEDIA -- 1.5%
77,700 Arbitron, Inc.(d).............. 3,333,330
91,100 The EW Scripps Company -- Class
A(d)......................... 4,445,680
------------
7,779,010
------------
</Table>
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES -- 2.5%
169,800 Convergys Corp.*............... $ 2,414,556
24,700 Diebold, Inc. ................. 1,114,217
59,100 Dun & Bradstreet Corp.*........ 3,643,515
134,300 Manpower, Inc. ................ 5,342,454
------------
12,514,742
------------
CHEMICALS -- 4.1%
38,100 Ashland, Inc.*................. 2,738,247
42,300 Eastman Chemical Company(d).... 2,332,845
190,700 Huntsman Corp.*................ 3,865,489
56,900 International Flavors &
Fragrances, Inc. ............ 2,060,918
243,000 Methanex Corp. (Canada)........ 4,002,210
115,100 PolyOne Corp.*................. 761,962
38,100 PPG Industries, Inc. .......... 2,391,156
60,800 The Lubrizol Corp. ............ 2,554,208
------------
20,707,035
------------
COMMERCIAL SERVICES -- 1.0%
98,200 ChoicePoint, Inc.*............. 3,932,910
26,200 Pre-Paid Legal Services,
Inc.(d)...................... 1,169,830
------------
5,102,740
------------
COMPUTER SOFTWARE AND SERVICES -- 1.9%
19,800 Computer Sciences Corp.*....... 865,260
122,400 NCR Corp.*..................... 4,298,688
123,500 Sybase, Inc.*.................. 2,266,225
85,100 The Reynolds and Reynolds
Company -- Class A........... 2,300,253
------------
9,730,426
------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.3%
94,400 Western Digital Corp.*......... 1,266,848
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.2%
127,700 American Standard Companies,
Inc. ........................ 5,353,184
15,200 KB Home(d)..................... 1,158,696
17,000 The Ryland Group, Inc. ........ 1,289,790
72,500 USG Corp.*(d).................. 3,081,250
------------
10,882,920
------------
CONSUMER GOODS AND SERVICES -- 2.7%
73,500 Blyth, Inc. ................... 2,061,675
82,900 Eastman Kodak Company(d)....... 2,225,865
42,200 Fortune Brands, Inc. .......... 3,747,360
</Table>
See notes to financial statements.
123
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
115,200 Tupperware Corp. .............. $ 2,692,224
37,900 Whirlpool Corp.(d)............. 2,657,169
------------
13,384,293
------------
CONTAINERS AND PACKAGING -- 0.5%
110,300 Pactiv Corp.*.................. 2,380,274
------------
DISTRIBUTION -- 0.8%
74,200 CDW Corp. ..................... 4,236,078
------------
ELECTRONICS -- 1.5%
310,200 Thomson (France)(ADR)(d)....... 7,429,290
------------
EQUIPMENT RENTAL AND LEASING -- 0.5%
112,400 United Rentals, Inc.*.......... 2,271,604
------------
FINANCIAL SERVICES -- 4.8%
75,964 Advanta Corp. -- Class B....... 2,139,146
58,100 AG Edwards, Inc. .............. 2,623,215
127,100 CIT Group, Inc. ............... 5,461,487
452,000 E*TRADE Financial Corp.*....... 6,323,480
80,500 Friedman, Billings, Ramsey
Group, Inc. -- Class A(d).... 1,151,150
17,700 Legg Mason, Inc.(d)............ 1,842,747
127,100 Nuveen Investments -- Class
A(d)......................... 4,781,502
------------
24,322,727
------------
FOOD AND BEVERAGE -- 0.7%
110,200 Archer-Daniels-Midland
Company...................... 2,356,076
64,100 Tyson Foods, Inc. -- Class A... 1,140,980
------------
3,497,056
------------
INSURANCE -- 7.2%
125,200 Assurant, Inc. ................ 4,519,720
31,000 CIGNA Corp. ................... 3,317,930
64,680 Cincinnati Financial Corp. .... 2,558,741
40,800 Everest Re Group, Ltd.
(Bermuda).................... 3,794,400
102,000 Horace Mann Educators Corp. ... 1,919,640
40,600 Jefferson-Pilot Corp. ......... 2,047,052
36,600 LandAmerica Financial Group,
Inc. ........................ 2,172,942
59,800 Lincoln National Corp. ........ 2,805,816
75,700 MBIA, Inc.(d).................. 4,489,767
70,400 Principal Financial Group,
Inc. ........................ 2,949,760
</Table>
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
56,300 SAFECO Corp. .................. $ 3,059,342
55,000 Unitrin, Inc. ................. 2,700,500
------------
36,335,610
------------
INTERNET SERVICES -- 0.4%
259,500 EarthLink, Inc.*............... 2,247,270
------------
LEISURE AND RECREATION -- 3.9%
89,500 Harrah's Entertainment,
Inc. ........................ 6,450,265
127,100 Hilton Hotels Corp. ........... 3,031,335
466,189 InterContinental Hotels Group
PLC (Great Britain)
(ADR)(q)(u).................. --
366,571 InterContinental Hotels Group
PLC (Great Britain) (ADR).... 4,637,123
116,300 Royal Caribbean Cruises, Ltd.
(Liberia)(d)................. 5,624,268
------------
19,742,991
------------
MANUFACTURING -- 3.7%
52,900 Carlisle Companies, Inc. ...... 3,630,527
33,500 Crane Company.................. 881,050
64,700 EnPro Industries, Inc.*........ 1,867,889
53,000 ITT Industries, Inc. .......... 5,174,390
116,500 The Sherwin-Williams Company... 5,485,985
104,900 Tredegar Corp. ................ 1,636,440
------------
18,676,281
------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.9%
204,800 IMS Health, Inc. .............. 5,072,896
31,400 Kindred Healthcare, Inc.*...... 1,243,754
30,600 Manor Care, Inc. .............. 1,215,738
91,800 Omnicare, Inc. ................ 3,895,074
42,800 WellPoint, Inc.*............... 2,980,592
------------
14,408,054
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.7%
54,400 CR Bard, Inc. ................. 3,618,144
------------
METALS AND MINING -- 0.1%
20,700 United States Steel Corp. ..... 711,459
------------
OIL AND GAS: PIPELINES -- 2.3%
53,900 Equitable Resources, Inc. ..... 3,665,200
57,100 National Fuel Gas Company...... 1,650,761
98,800 Questar Corp. ................. 6,510,920
------------
11,826,881
------------
</Table>
See notes to financial statements.
124
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS -- 5.1%
28,400 Amerada Hess Corp. ............ $ 3,024,884
119,800 EnCana Corp. (Canada).......... 4,742,882
100,400 Frontier Oil Corp. ............ 2,946,740
7,631 Kerr-McGee Corp. .............. 582,322
59,300 Marathon Oil Corp. ............ 3,164,841
60,000 Praxair, Inc. ................. 2,796,000
26,700 Sunoco, Inc. .................. 3,035,256
66,400 Swift Energy Company*.......... 2,378,448
45,500 Unocal Corp. .................. 2,959,775
------------
25,631,148
------------
PAPER AND FOREST PRODUCTS -- 1.0%
76,400 Georgia-Pacific Corp. ......... 2,429,520
86,000 MeadWestvaco Corp. ............ 2,411,440
------------
4,840,960
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 2.3%
101,500 Altana AG (Germany)(ADR)....... 5,823,055
98,700 Millipore Corp.*............... 5,599,251
------------
11,422,306
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.3%
38,900 Crescent Real Estate Equities
Company...................... 729,375
12,700 Highwoods Properties, Inc. .... 377,952
214,300 HRPT Properties Trust.......... 2,663,749
52,400 New Century Financial
Corp.(d)..................... 2,695,980
------------
6,467,056
------------
RETAIL -- 3.6%
96,600 Dillard's, Inc. -- Class A..... 2,262,372
187,200 Dollar Tree Stores, Inc.*(d)... 4,492,800
117,800 Federated Department Stores,
Inc.(d)...................... 8,632,384
69,100 Longs Drug Stores Corp. ....... 2,974,755
------------
18,362,311
------------
RETAIL: RESTAURANTS -- 1.3%
72,800 Applebee's International,
Inc. ........................ 1,928,472
83,700 Darden Restaurants, Inc. ...... 2,760,426
61,900 Lone Star Steakhouse & Saloon,
Inc. ........................ 1,882,379
------------
6,571,277
------------
</Table>
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
COMMON STOCKS (CONTINUED)
RETAIL: SUPERMARKETS -- 0.7%
53,600 Albertson's, Inc.(d)........... $ 1,108,448
76,900 SUPERVALU, Inc. ............... 2,507,709
------------
3,616,157
------------
RUBBER PRODUCTS -- 0.5%
183,200 The Goodyear Tire & Rubber
Company*(d).................. 2,729,680
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.8%
51,300 Applera Corp.-Applied
Biosystems Group............. 1,009,071
160,900 PerkinElmer, Inc. ............. 3,041,010
------------
4,050,081
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.7%
188,500 Amdocs, Ltd. (Guernsey)*....... 4,982,055
75,700 CenturyTel, Inc. .............. 2,621,491
123,500 CommScope, Inc.*............... 2,150,135
150,400 UNOVA, Inc.*(d)................ 4,005,152
------------
13,758,833
------------
TOOLS -- 0.5%
54,000 The Stanley Works.............. 2,459,160
------------
TOYS -- 0.2%
50,100 Mattel, Inc. .................. 916,830
------------
TRANSPORTATION -- 6.5%
45,300 Arkansas Best Corp. ........... 1,440,993
127,100 CNF, Inc. ..................... 5,706,790
198,400 CSX Corp. ..................... 8,463,744
127,100 Florida East Coast Industries,
Inc. ........................ 5,503,430
70,600 GATX Corp. .................... 2,435,700
133,800 Norfolk Southern Corp. ........ 4,142,448
135,400 Sabre Holdings Corp. -- Class
A............................ 2,701,230
98,700 Swift Transportation Company,
Inc.*........................ 2,298,723
------------
32,693,058
------------
UTILITIES: ELECTRIC -- 5.9%
82,500 American Electric Power
Company, Inc. ............... 3,041,775
118,300 Cleco Corp. ................... 2,551,731
83,500 Duquesne Light Holdings,
Inc.(d)...................... 1,559,780
93,000 FirstEnergy Corp. ............. 4,474,230
137,400 PG&E Corp. .................... 5,157,996
25,800 Pinnacle West Capital Corp. ... 1,146,810
</Table>
See notes to financial statements.
125
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ----------- ------------
COMMON STOCKS (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
63,600 PPL Corp. ..................... $ 3,776,568
115,600 Puget Energy, Inc. ............ 2,702,728
25,200 TXU Corp. ..................... 2,093,868
159,100 Xcel Energy, Inc.(d)........... 3,105,632
------------
29,611,118
------------
UTILITIES: GAS -- 1.8%
162,500 AGL Resources, Inc. ........... 6,280,625
119,300 NiSource, Inc. ................ 2,950,289
------------
9,230,914
------------
TOTAL COMMON STOCKS (Cost
$443,841,874)................ 474,527,847
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 13.1%
$65,903,677 Securities Lending Collateral
Investment (Note 4)
(Cost $65,903,677)........... 65,903,677
------------
TOTAL SECURITIES
(Cost $509,745,551).......... 540,431,524
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENT -- 5.8%
$29,286,174 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $29,288,298
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.20%, due 03/01/33, with a
value of $21,069,393 and
Small Business
Administration, 5.63%, due
09/25/27 with a value of
$9,681,090) (Cost
$29,286,174)................. $ 29,286,174
------------
Total Investments -- 113.2%
(Cost $539,031,725).......... 569,717,698
Liabilities less other
assets -- (13.2)%............ (66,338,907)
------------
NET ASSETS -- 100.0%........... $503,378,791
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $539,031,725.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 43,177,990
Gross unrealized depreciation.......... (12,492,017)
------------
Net unrealized appreciation............ $ 30,685,973
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
126
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 97.3%
ADVERTISING -- 2.1%
64,400 Getty Images, Inc.*(d)......... $ 4,782,344
------------
APPAREL: MANUFACTURING AND RETAIL -- 4.9%
42,464 Abercrombie & Fitch
Company -- Class A(d)........ 2,917,277
116,700 American Eagle Outfitters,
Inc. ........................ 3,576,855
139,100 Chico's FAS, Inc.*(d).......... 4,768,348
------------
11,262,480
------------
AUTOMOBILES/MOTOR VEHICLES -- 1.4%
40,500 Oshkosh Truck Corp. ........... 3,170,340
------------
BROADCAST SERVICES/MEDIA -- 6.6%
69,196 Cablevision Systems Corp. New
York Group -- Class A*....... 2,228,111
59,200 Pixar, Inc.*(d)................ 2,962,960
749,050 Sirius Satellite Radio,
Inc.*(d)..................... 4,853,844
147,390 XM Satellite Radio Holdings,
Inc. -- Class A*(d).......... 4,961,148
------------
15,006,063
------------
BUSINESS SERVICES AND SUPPLIES -- 2.4%
55,000 Fluor Corp.(d)................. 3,167,450
33,700 Global Payments, Inc.(d)....... 2,284,860
------------
5,452,310
------------
COMPUTER SOFTWARE AND SERVICES -- 3.0%
64,700 Cognos, Inc. (Canada)*......... 2,208,858
56,800 Mercury Interactive Corp.*..... 2,178,848
62,961 NAVTEQ Corp.*.................. 2,340,890
------------
6,728,596
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.0%
89,400 Washington Group International,
Inc.*........................ 4,570,128
------------
CONSUMER GOODS AND SERVICES -- 1.9%
195,660 Tempur-Pedic International,
Inc.*(d)..................... 4,339,739
------------
CONTAINERS AND PACKAGING -- 1.9%
169,314 Owens-Illinois, Inc.*.......... 4,241,316
------------
ELECTRONICS -- 2.7%
156,700 Trimble Navigation, Ltd.*...... 6,106,599
------------
FINANCIAL SERVICES -- 3.9%
53,450 Legg Mason, Inc.(d)............ 5,564,680
54,000 T Rowe Price Group, Inc. ...... 3,380,400
------------
8,945,080
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 3.0%
197,000 Dean Foods Company*............ $ 6,942,280
------------
INTERNET SERVICES -- 5.1%
203,000 Monster Worldwide, Inc.*....... 5,822,040
203,800 VeriSign, Inc.*................ 5,861,288
------------
11,683,328
------------
LEISURE AND RECREATION -- 6.9%
119,600 Brunswick Corp. ............... 5,181,072
244,750 Hilton Hotels Corp. ........... 5,837,288
173,200 Scientific Games Corp. -- Class
A*........................... 4,664,276
------------
15,682,636
------------
MEDICAL AND OTHER HEALTH SERVICES -- 9.1%
66,000 PacifiCare Health Systems,
Inc.*........................ 4,715,700
73,496 Sierra Health Services,
Inc.*........................ 5,252,024
106,200 Triad Hospitals, Inc.*......... 5,802,767
108,000 VCA Antech, Inc.*.............. 2,619,000
226,000 WebMD Corp.*................... 2,321,020
------------
20,710,511
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.4%
30,085 Bausch & Lomb, Inc. ........... 2,497,055
80,200 CR Bard, Inc. ................. 5,334,102
28,110 Zimmer Holdings, Inc.*......... 2,141,139
------------
9,972,296
------------
OIL, COAL AND GAS -- 11.0%
69,300 Diamond Offshore Drilling,
Inc.(d)...................... 3,702,699
107,000 EOG Resources, Inc. ........... 6,077,600
53,900 Nabors Industries, Ltd.
(Bermuda)*................... 3,267,418
56,500 Noble Corp. (Cayman Islands)... 3,475,315
96,400 Quicksilver Resources,
Inc.*(d)..................... 6,162,851
52,000 Southwestern Energy Company*... 2,442,960
------------
25,128,843
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 1.9%
72,400 Sepracor, Inc.*................ 4,344,724
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 1.9%
97,340 CB Richard Ellis Group,
Inc. -- Class A*............. 4,269,332
------------
RETAIL -- 1.2%
64,000 Bed Bath & Beyond, Inc.*....... 2,673,920
------------
</Table>
See notes to financial statements.
127
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 4.1%
133,000 Darden Restaurants, Inc. ...... $ 4,386,340
80,014 Panera Bread Company -- Class
A*(d)........................ 4,967,669
------------
9,354,009
------------
SEMICONDUCTORS -- 2.9%
187,950 Broadcom Corp. -- Class A*..... 6,674,105
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 13.0%
121,000 ADTRAN, Inc. .................. 2,999,590
323,350 Alamosa Holdings, Inc.*(d)..... 4,494,565
83,000 Amdocs, Ltd. (Guernsey)*....... 2,193,690
124,050 American Tower Corp. -- Class
A*(d)........................ 2,607,531
183,200 Comverse Technology,
Inc.*(d)..................... 4,332,680
182,562 Harris Corp. .................. 5,697,759
66,050 SpectraSite, Inc.*............. 4,916,102
86,000 UNOVA, Inc.*................... 2,290,180
------------
29,532,097
------------
TOTAL COMMON STOCKS
(Cost $190,309,515).......... 221,573,076
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 26.3%
$59,966,960 Securities Lending Collateral
Investment (Note 4)
(Cost $59,966,960)........... 59,966,960
------------
TOTAL SECURITIES
(Cost $250,276,475).......... 281,540,036
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENT -- 3.0%
$ 6,761,499 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $6,761,989
(Collateralized by Government
National Mortgage
Association,
3.38%, due 05/20/32, with a
value of $7,099,574) (Cost
$6,761,499).................. $ 6,761,499
------------
Total Investments -- 126.6%
(Cost $257,037,974).......... 288,301,535
Liabilities less other
assets -- (26.6)%............ (60,546,677)
------------
NET ASSETS -- 100.0%........... $227,754,858
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $257,037,974.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............. $33,200,173
Gross unrealized depreciation............. (1,936,612)
-----------
Net unrealized appreciation............... $31,263,561
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
128
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 94.0%
AEROSPACE AND DEFENSE -- 2.4%
145,654 Moog, Inc. -- Class A*(d)...... $ 4,586,644
------------
APPAREL: MANUFACTURING AND RETAIL -- 5.1%
189,700 Phillips-Van Heusen Corp. ..... 6,201,293
165,814 Stein Mart, Inc. .............. 3,647,908
------------
9,849,201
------------
AUTOMOBILES/MOTOR VEHICLES -- 2.9%
170,300 Winnebago Industries,
Inc.(d)...................... 5,577,325
------------
AUTOMOTIVE EQUIPMENT -- 2.2%
175,500 CSK Auto Corp.*................ 2,927,340
267,870 Exide Technologies*(d)......... 1,299,170
------------
4,226,510
------------
BANKS -- 3.2%
135,900 BankUnited Financial Corp. --
Class A...................... 3,674,736
158,373 Oriental Financial Group, Inc.
(Puerto Rico)................ 2,416,772
------------
6,091,508
------------
BROADCAST SERVICES/MEDIA -- 2.2%
468,700 Sinclair Broadcast Group,
Inc. -- Class A.............. 4,255,796
------------
BUSINESS SERVICES AND SUPPLIES -- 3.8%
130,600 Administaff, Inc. ............. 3,103,056
144,314 Kelly Services, Inc. -- Class
A............................ 4,133,153
------------
7,236,209
------------
COMPUTER SOFTWARE AND SERVICES -- 2.4%
260,200 Checkpoint Systems, Inc.*...... 4,605,540
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 3.4%
35,000 Hovnanian Enterprises, Inc. --
Class A*..................... 2,282,000
21,300 Meritage Homes Corp.*.......... 1,693,350
28,500 Standard Pacific Corp. ........ 2,506,575
------------
6,481,925
------------
CONSUMER GOODS AND SERVICES -- 3.0%
102,500 Chattem, Inc.*................. 4,243,500
21,600 The Scotts Miracle-Gro
Company -- Class A*.......... 1,538,136
------------
5,781,636
------------
DISTRIBUTION -- 2.3%
103,753 Watsco, Inc. .................. 4,419,878
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
EDUCATION -- 2.4%
97,662 School Specialty, Inc.*........ $ 4,541,283
------------
FINANCIAL SERVICES -- 5.7%
102,700 Accredited Home Lenders Holding
Company*(d).................. 4,518,800
102,500 Eaton Vance Corp. ............. 2,450,775
54,400 Jefferies Group, Inc. ......... 2,061,216
71,862 Raymond James Financial,
Inc. ........................ 2,030,102
------------
11,060,893
------------
FOOD AND BEVERAGE -- 2.1%
134,200 United Natural Foods, Inc.*.... 4,075,654
------------
INSURANCE -- 5.9%
104,513 Delphi Financial Group, Inc. --
Class A...................... 4,614,249
17,900 Philadelphia Consolidated
Holding Corp.*............... 1,517,204
134,716 Phoenix Companies, Inc.(d)..... 1,603,120
32,100 Protective Life Corp. ......... 1,355,262
37,600 The Commerce Group, Inc. ...... 2,335,336
------------
11,425,171
------------
MACHINERY -- 2.3%
69,100 Bucyrus International, Inc. --
Class A(d)................... 2,624,418
52,800 Joy Global, Inc. .............. 1,773,552
------------
4,397,970
------------
MANUFACTURING -- 0.9%
55,200 FLIR Systems, Inc.*............ 1,647,168
------------
MEDICAL AND OTHER HEALTH SERVICES -- 10.9%
132,600 American Healthways,
Inc.*(d)..................... 5,605,001
53,700 AMERIGROUP Corp.*.............. 2,158,740
42,700 Covance, Inc.*................. 1,915,949
117,300 Matria Healthcare, Inc.*....... 3,780,579
59,400 Sunrise Senior Living,
Inc.*(d)..................... 3,206,412
79,900 United Surgical Partners
International, Inc.*......... 4,161,192
------------
20,827,873
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 2.5%
119,700 Immucor, Inc.*................. 3,465,315
23,500 The Cooper Companies, Inc. .... 1,430,210
------------
4,895,525
------------
</Table>
See notes to financial statements.
129
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS -- 9.9%
39,400 Cabot Oil & Gas Corp. ......... $ 1,367,180
202,000 Energy Partners, Ltd.*......... 5,294,420
50,739 Headwaters, Inc.*.............. 1,744,407
45,400 Oceaneering International,
Inc.*........................ 1,754,710
59,100 ONEOK, Inc.(d)................. 1,929,615
118,000 Spinnaker Exploration
Company*..................... 4,187,820
78,000 Swift Energy Company*.......... 2,793,960
------------
19,072,112
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 4.4%
100,300 K-V Pharmaceutical Company --
Class A*..................... 1,680,025
136,700 Nabi Biopharmaceuticals*(d).... 2,081,941
147,100 Serologicals Corp.*............ 3,125,875
143,500 VaxGen, Inc.*(d)............... 1,556,975
------------
8,444,816
------------
PRINTING AND PUBLISHING -- 2.1%
107,158 Scholastic Corp.*.............. 4,130,941
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.0%
1,500 Avatar Holdings, Inc.*(d)...... 75,405
------------
REAL ESTATE INVESTMENT TRUSTS -- 4.0%
117,287 Entertainment Properties
Trust........................ 5,395,202
36,600 SL Green Realty Corp.(d)....... 2,360,700
------------
7,755,902
------------
RETAIL: RESTAURANTS -- 4.2%
52,600 Brinker International, Inc.*... 2,106,630
104,900 CEC Entertainment, Inc.*(d).... 4,415,241
53,200 Sonic Corp.*................... 1,624,196
------------
8,146,067
------------
TOOLS -- 1.0%
54,700 Snap-on, Inc. ................. 1,876,210
------------
TRANSPORTATION -- 1.6%
71,400 Overnite Corp. ................ 3,068,772
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
UTILITIES: ELECTRIC -- 1.2%
82,400 PNM Resources, Inc. ........... $ 2,373,944
------------
TOTAL COMMON STOCKS (Cost
$170,933,604)................ 180,927,878
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 14.6%
$28,176,600 Securities Lending Collateral
Investment (Note 4) (Cost
$28,176,600)................. 28,176,600
------------
TOTAL SECURITIES
(Cost $199,110,204).......... 209,104,478
------------
REPURCHASE AGREEMENT -- 7.9%
15,278,831 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $15,279,939
(Collateralized by Fannie
Mae, 4.80%, due 09/01/34,
with a value of $16,042,773)
(Cost $15,278,831)........... 15,278,831
------------
Total Investments -- 116.5%
(Cost $214,389,035).......... 224,383,309
Liabilities less other
assets -- (16.5)%............ (31,829,912)
------------
NET ASSETS -- 100.0%........... $192,553,397
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $214,389,035.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $15,594,047
Gross unrealized depreciation........... (5,599,773)
-----------
Net unrealized appreciation............. $ 9,994,274
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
130
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 96.4%
ADVERTISING -- 0.8%
94,600 ADVO, Inc. ................. $ 3,013,010
90,600 Catalina Marketing Corp. ... 2,302,146
46,200 RH Donnelley Corp.*......... 2,863,476
75,900 Ventiv Health, Inc.*........ 1,463,352
--------------
9,641,984
--------------
AEROSPACE AND DEFENSE -- 0.9%
37,900 Curtiss-Wright Corp. ....... 2,044,705
56,440 DRS Technologies, Inc.(d)... 2,894,243
42,600 Innovative Solutions and
Support, Inc.*............ 1,430,082
115,050 Moog, Inc. -- Class A*...... 3,622,925
30,100 Teledyne Technologies,
Inc.*..................... 980,658
--------------
10,972,613
--------------
AIRLINES -- 0.4%
197,700 AirTran Holdings,
Inc.*(d).................. 1,824,771
31,500 Alaska Air Group, Inc.*..... 937,125
6,200 Continental Airlines,
Inc. -- Class B*(d)....... 82,336
169,600 ExpressJet Holdings,
Inc.*..................... 1,443,296
16,300 Mesa Air Group, Inc.*(d).... 109,373
33,800 Pinnacle Airlines
Corp.*(d)................. 290,342
19,800 Republic Airways Holdings,
Inc.*..................... 286,110
--------------
4,973,353
--------------
APPAREL: MANUFACTURING AND RETAIL -- 3.4%
33,300 Abercrombie & Fitch
Company -- Class A(d)..... 2,287,710
16,300 AnnTaylor Stores
Corp.*(d)................. 395,764
254,920 Ashworth, Inc.*............. 2,296,829
8,600 Columbia Sportswear
Company*.................. 424,754
17,300 DSW, Inc. -- Class A*....... 431,635
26,600 Genesco, Inc.*.............. 986,594
100,600 Gildan Activewear, Inc. --
Class A (Canada)*......... 2,650,810
20,100 Guess?, Inc.*............... 333,258
37,100 Hartmarx Corp.*............. 373,597
58,557 Jos A Bank Clothiers,
Inc.*(d).................. 2,535,518
38,100 New York & Company, Inc.*... 802,386
90,800 Payless ShoeSource, Inc.*... 1,743,360
158,300 Phillips-Van Heusen
Corp. .................... 5,174,827
49,200 Polo Ralph Lauren Corp. .... 2,121,012
14,500 Skechers USA, Inc. -- Class
A*........................ 206,770
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
APPAREL: MANUFACTURING AND RETAIL
(CONTINUED)
149,000 Stage Stores, Inc.*(d)...... $ 6,496,400
168,100 Stein Mart, Inc. ........... 3,698,200
160,650 The Cato Corp. -- Class A... 3,317,423
20,800 The Children's Place Retail
Stores, Inc.*............. 970,736
10,600 The Men's Wearhouse,
Inc.*(d).................. 364,958
39,900 Urban Outfitters, Inc.*..... 2,261,931
123,000 Wolverine World Wide,
Inc. ..................... 2,953,230
--------------
42,827,702
--------------
AUTOMOBILES/MOTOR VEHICLES -- 0.2%
3,800 Arctic Cat, Inc. ........... 78,014
61,900 Winnebago Industries,
Inc.(d)................... 2,027,225
--------------
2,105,239
--------------
AUTOMOTIVE EQUIPMENT -- 1.1%
9,000 Commercial Vehicle Group,
Inc.*..................... 159,750
159,600 CSK Auto Corp.*............. 2,662,128
310,650 IMPCO Technologies, Inc.*... 1,494,227
67,000 Modine Manufacturing
Company................... 2,181,520
84,700 O'Reilly Automotive,
Inc.*..................... 2,524,907
190,600 Spartan Motors, Inc. ....... 2,054,668
61,900 Tenneco Automotive, Inc.*... 1,030,016
76,200 Titan International,
Inc.(d)................... 1,065,276
--------------
13,172,492
--------------
BANKS -- 4.7%
8,400 ABC Bancorp................. 151,872
76,100 AMCORE Financial, Inc. ..... 2,273,868
4,290 AmericanWest Bancorp*....... 85,586
146,850 Astoria Financial
Corp.(d).................. 4,180,819
4,700 BancFirst Corp. ............ 408,853
17,500 BancorpSouth, Inc. ......... 413,000
76,723 BankUnited Financial
Corp. -- Class A.......... 2,074,590
4,700 Camden National Corp. ...... 153,925
9,000 Capital Crossing Bank*...... 306,900
13,300 City Holding Company........ 485,716
16,200 Columbia Banking System,
Inc. ..................... 398,844
8,000 Community Trust Bancorp,
Inc. ..................... 261,760
24,400 Corus Bankshares, Inc. ..... 1,353,956
49,600 East West Bancorp, Inc. .... 1,666,064
38,400 First BanCorp (Puerto
Rico)..................... 1,541,760
</Table>
See notes to financial statements.
131
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
9,800 First Charter Corp. ........ $ 215,306
2,900 First Citizens Bancshares,
Inc. -- Class A........... 419,195
23,000 First Financial Bancorp..... 434,700
9,700 First Financial Bankshares,
Inc. ..................... 328,248
3,600 First Financial Holdings.
Inc. ..................... 107,676
14,200 First Indiana Corp. ........ 421,314
70,400 First Midwest Bancorp,
Inc. ..................... 2,475,968
6,400 First Place Financial
Corp. .................... 128,576
10,050 First Republic Bank......... 355,067
29,200 FirstFed Financial Corp.*... 1,740,612
11,000 Flushing Financial Corp. ... 202,400
48,600 Fremont General Corp.(d).... 1,182,438
13,650 Frontier Financial Corp. ... 344,799
17,200 Hancock Holding Company..... 591,680
4,300 Harbor Florida Bancshares,
Inc. ..................... 160,992
4,000 Horizon Financial Corp. .... 88,800
49,400 Hudson United Bancorp....... 1,783,340
3,200 Independent Bank Corp.
(Massachusetts)........... 90,272
9,800 Independent Bank Corp.
(Michigan)................ 278,712
32,900 Irwin Financial Corp. ...... 730,051
6,000 ITLA Capital Corp.*......... 323,400
13,000 Kearny Financial Corp.*..... 153,400
6,195 MainSource Financial Group,
Inc. ..................... 112,068
48,400 MB Financial, Inc. ......... 1,927,772
12,300 MBT Financial Corp. ........ 236,775
15,300 Mid-State Bancshares........ 424,881
5,300 NBC Capital Corp. .......... 129,002
192,500 NewAlliance Bancshares,
Inc. ..................... 2,704,625
3,800 OceanFirst Financial
Corp. .................... 85,538
11,900 Old Second Bancorp, Inc. ... 346,171
96,080 Oriental Financial Group,
Inc. (Puerto Rico)........ 1,466,181
13,350 PFF Bancorp, Inc. .......... 404,372
82,260 PrivateBancorp, Inc.(d)..... 2,910,359
2,100 S&T Bancorp, Inc. .......... 75,810
3,700 Sandy Spring Bancorp,
Inc. ..................... 129,611
12,100 Santander BanCorp (Puerto
Rico)..................... 303,226
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
3,360 SCBT Financial Corp. ....... $ 106,344
7,000 Simmons First National
Corp. -- Class A.......... 189,770
5,072 Southside Bancshares,
Inc. ..................... 103,976
3,465 State Bancorp, Inc. ........ 78,378
7,950 Sterling Bancorp............ 169,733
6,125 Sterling Financial Corp.
(Pennsylvania)............ 130,524
5,300 Suffolk Bancorp............. 171,137
27,600 Susquehanna Bancshares,
Inc. ..................... 678,684
111,900 SVB Financial Group*........ 5,360,009
2,400 Taylor Capital Group,
Inc. ..................... 94,200
84,700 Texas Regional Bancshares,
Inc. -- Class A........... 2,581,656
15,100 TierOne Corp. .............. 409,663
14,700 Trustmark Corp. ............ 430,122
3,000 Uninvest Corp. of
Pennsylvania.............. 89,880
2,100 Union Bankshares Corp. ..... 81,102
23,600 United Bankshares, Inc. .... 840,396
21,500 United Community Financial
Corp. .................... 235,210
9,100 USB Holding Company,
Inc. ..................... 212,940
13,600 WesBanco, Inc. ............. 408,272
6,800 West Coast Bancorp.......... 165,988
67,300 Westamerica Bancorp......... 3,554,112
25,400 Western Alliance Bancorp*... 645,160
4,500 Western Sierra Bancorp*..... 152,325
28,600 Wintrust Financial Corp. ... 1,497,210
8,300 WSFS Financial Corp. ....... 454,093
--------------
58,411,734
--------------
BROADCAST SERVICES/MEDIA -- 0.6%
31,700 Citadel Broadcasting
Company*.................. 362,965
36,000 CKX, Inc.*(d)............... 463,140
78,700 Dolby Laboratories, Inc. --
Class A*.................. 1,736,122
81,700 DreamWorks Animation SKG,
Inc. -- Class A*.......... 2,140,540
11,800 Gray Television, Inc. ...... 142,308
4,900 Journal Communications,
Inc. -- Class A........... 82,320
194,500 Sinclair Broadcast Group,
Inc. -- Class A........... 1,766,060
</Table>
See notes to financial statements.
132
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
56,300 Spanish Broadcasting System,
Inc. -- Class A*.......... $ 562,437
10,400 WPT Enterprises, Inc.*(d)... 202,696
--------------
7,458,588
--------------
BUSINESS SERVICES AND SUPPLIES -- 3.1%
133,400 Administaff, Inc. .......... 3,169,584
6,900 Ambassadors Group, Inc. .... 256,611
14,700 Angelica Corp. ............. 360,297
3,800 CCC Information Services
Group, Inc.*.............. 91,010
37,300 Certegy, Inc. .............. 1,425,606
43,800 CSG Systems International,
Inc.*..................... 831,324
167,220 FirstService Corp.
(Canada)*................. 3,339,383
5,600 Forrester Research, Inc.*... 99,848
94,290 Global Payments, Inc.(d).... 6,392,862
118,800 Herman Miller, Inc. ........ 3,663,792
26,200 Huron Consulting Group,
Inc.*..................... 617,010
6,800 infoUSA*.................... 79,560
32,900 John H Harland Company...... 1,250,200
58,580 Kelly Services,
Inc. -- Class A........... 1,677,731
126,800 Labor Ready, Inc.*.......... 2,955,708
106,400 MAXIMUS, Inc. .............. 3,754,856
189,600 Optimal Group, Inc. -- Class
A (Canada)*............... 3,062,040
12,300 Pomeroy IT Solutions,
Inc.*..................... 124,599
49,740 Portfolio Recovery
Associates, Inc.*......... 2,090,075
33,700 Robert Half International,
Inc.(d)................... 841,489
5,800 SOURCECORP, Inc.*........... 114,956
5,000 TALX Corp. ................. 144,550
94,800 TeleTech Holdings, Inc.*.... 772,620
13,800 The Corporate Executive
Board Company............. 1,080,954
17,900 Vertrue, Inc.*(d)........... 697,384
--------------
38,894,049
--------------
CHEMICALS -- 0.9%
120,900 Compass Minerals
International, Inc. ...... 2,829,060
29,700 FMC Corp.*.................. 1,667,358
10,800 MacDermid, Inc. ............ 336,528
11,500 NewMarket Corp.*............ 170,085
38,900 SurModics, Inc.*(d)......... 1,687,093
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
195,000 Terra Industries,
Inc.*(d).................. $ 1,327,950
37,800 The Valspar Corp. .......... 1,825,362
70,400 Wellman, Inc. .............. 717,376
5,000 Westlake Chemical Corp. .... 122,500
125,500 WR Grace & Company*......... 977,645
--------------
11,660,957
--------------
COLLECTIBLES -- 0.0%
10,200 Department 56, Inc.*........ 104,550
15,600 Sotheby's Holdings, Inc. --
Class A*.................. 213,720
--------------
318,270
--------------
COMMERCIAL SERVICES -- 0.6%
62,920 Chemed Corp. ............... 2,572,170
3,600 Euronet Worldwide, Inc.*.... 104,652
2,300 Pre-Paid Legal Services,
Inc.(d)................... 102,695
72,810 Providence Service Corp.*... 1,807,872
92,620 Steiner Leisure, Ltd.
(Bahama Islands)*......... 3,433,423
--------------
8,020,812
--------------
COMPUTER SOFTWARE AND SERVICES -- 4.1%
13,100 Ansoft Corp.*............... 316,496
2,600 ANSYS, Inc.*................ 92,326
138,500 ATI Technologies, Inc.
(Canada)*................. 1,641,225
8,500 Avid Technology, Inc.*(d)... 452,880
155,150 Bottomline Technologies,
Inc.*..................... 2,322,596
363,400 Checkpoint Systems, Inc.*... 6,432,179
29,200 Covansys Corp.*............. 375,220
147,890 Epicor Software Corp.*...... 1,952,148
75,000 Extreme Networks, Inc.*..... 307,500
156,180 Infocrossing, Inc.*(d)...... 1,947,565
129,100 Intergraph Corp.*(d)........ 4,448,785
20,700 InterVideo, Inc.*........... 297,666
24,600 Itron, Inc.*................ 1,099,128
117,300 Keane, Inc.*................ 1,607,010
116,650 M-Systems Flash Disk
Pioneers, Ltd.
(Israel)*(d).............. 2,236,181
72,800 Manhattan Associates,
Inc.*(d).................. 1,398,488
5,400 ManTech International
Corp. -- Class A*......... 167,616
157,600 Mentor Graphics Corp.*(d)... 1,615,400
146,704 Merge Technologies,
Inc.*(d).................. 2,750,700
</Table>
See notes to financial statements.
133
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES (CONTINUED)
27,800 MicroStrategy, Inc. -- Class
A*(d)..................... $ 1,474,512
28,300 MTS Systems Corp. .......... 950,314
117,600 Parametric Technology
Corp.*.................... 750,288
41,200 Phoenix Technologies,
Ltd.*..................... 320,536
5,400 Progress Software Corp.*.... 162,810
307,100 Red Hat, Inc.*(d)........... 4,023,010
5,000 Renaissance Learning,
Inc. ..................... 101,500
6,200 SERENA Software, Inc.*...... 119,660
4,500 SPSS, Inc.*................. 86,445
22,900 SS&C Technologies, Inc. .... 725,472
57,400 Sybase, Inc.*............... 1,053,290
32,900 Synopsys, Inc.*............. 548,443
407,130 Synplicity, Inc.*........... 2,202,573
32,100 The Ultimate Software Group,
Inc.*..................... 526,440
36,500 Transaction Systems
Architects, Inc. -- Class
A*........................ 898,995
67,800 Trident Microsystems,
Inc.*..................... 1,538,382
34,600 Tyler Technologies, Inc.*... 261,576
98,500 Wind River Systems,
Inc.*(d).................. 1,544,480
120,950 Witness Systems, Inc.*...... 2,204,919
--------------
50,954,754
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 1.6%
77,900 Black Box Corp. ............ 2,757,660
135,500 Electronics For Imaging,
Inc.*(d).................. 2,850,920
597,700 Maxtor Corp.*............... 3,108,040
132,540 Mercury Computer Systems,
Inc.*..................... 3,627,620
9,900 Radiant Systems, Inc.*...... 112,860
196,570 RadiSys Corp.*.............. 3,174,606
314,100 Western Digital Corp.*...... 4,215,221
--------------
19,846,927
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 4.2%
95,600 Agilysys, Inc. ............. 1,500,920
21,200 Brookfield Homes Corp. ..... 966,720
31,170 Building Materials Holding
Corp. .................... 2,159,769
9,700 Drew Industries, Inc.*...... 440,380
24,300 Eagle Materials, Inc. ...... 2,249,937
18,200 Genlyte Group, Inc.*........ 887,068
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES
(CONTINUED)
182,000 Hovnanian Enterprises,
Inc. -- Class A*.......... $ 11,866,400
86,600 Meritage Homes Corp.*....... 6,884,700
148,300 Simpson Manufacturing
Company, Inc. ............ 4,530,565
80,350 Standard Pacific Corp. ..... 7,066,783
115,175 Technical Olympic USA,
Inc. ..................... 2,796,449
26,500 The Ryland Group, Inc. ..... 2,010,555
44,500 USG Corp.*(d)............... 1,891,250
65,000 Walter Industries, Inc. .... 2,613,000
136,000 WCI Communities, Inc.*...... 4,356,080
--------------
52,220,576
--------------
CONSUMER GOODS AND SERVICES -- 2.0%
51,090 Central Garden & Pet
Company*.................. 2,509,541
33,300 Chattem, Inc.*.............. 1,378,620
5,900 CNS, Inc. .................. 134,815
230,100 Herbalife, Ltd. (Cayman
Islands)*................. 4,972,460
62,950 Jarden Corp.*............... 3,394,264
128,100 NBTY, Inc.*................. 3,322,914
32,700 Playtex Products, Inc.*..... 351,852
116,640 Rollins, Inc. .............. 2,337,466
40,600 The Scotts Miracle-Gro
Company -- Class A*....... 2,891,126
129,100 The Yankee Candle Company,
Inc. ..................... 4,144,110
--------------
25,437,168
--------------
CONTAINERS AND PACKAGING -- 0.1%
2,900 Greif, Inc. -- Class A...... 177,190
14,700 Silgan Holdings, Inc. ...... 826,728
--------------
1,003,918
--------------
CORRECTIONAL FACILITIES -- 0.0%
22,400 The Geo Group, Inc.*........ 561,120
--------------
DISTRIBUTION -- 1.7%
59,598 Beacon Roofing Supply,
Inc.*..................... 1,567,427
5,100 Handleman Company........... 84,201
169,300 United Stationers,
Inc.*(d).................. 8,312,630
90,900 Universal Corp. ............ 3,979,602
130,500 Watsco, Inc. ............... 5,559,300
44,900 WESCO International,
Inc.*..................... 1,408,962
--------------
20,912,122
--------------
</Table>
See notes to financial statements.
134
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED SERVICES -- 0.1%
20,100 Resource America, Inc. --
Class A................... $ 774,453
--------------
EDUCATION -- 0.9%
64,200 Education Management
Corp.*.................... 2,165,466
40,000 ITT Educational Services,
Inc.*(d).................. 2,136,800
76,940 Laureate Education, Inc.*... 3,682,348
76,200 School Specialty, Inc.*..... 3,543,300
--------------
11,527,914
--------------
ELECTRONICS -- 1.7%
89,660 BEI Technologies, Inc. ..... 2,392,129
202,349 Belden CDT, Inc.(d)......... 4,289,799
23,300 Electro Scientific
Industries, Inc.*......... 416,604
23,600 Methode Electronics, Inc. --
Class A................... 280,132
128,800 Nam Tai Electronics, Inc.
(Virgin Islands).......... 2,928,912
56,800 Park Electrochemical
Corp. .................... 1,431,360
322,000 Sanmina-SCI Corp.*.......... 1,761,340
120,150 Sonic Solutions*(d)......... 2,234,790
394,670 SRS Labs, Inc.*............. 2,407,487
15,000 Stoneridge, Inc.*........... 99,000
88,700 Technitrol, Inc. ........... 1,253,331
47,400 Thomas & Betts Corp.*....... 1,338,576
--------------
20,833,460
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.2%
238,600 Allied Waste Industries,
Inc.*(d).................. 1,892,098
6,000 Clean Harbors, Inc.*(d)..... 130,080
3,600 Metal Management, Inc. ..... 69,660
--------------
2,091,838
--------------
EQUIPMENT RENTAL AND LEASING -- 0.4%
9,700 Electro Rent Corp.*......... 141,038
178,070 McGrath Rentcorp............ 4,220,259
23,400 Rent-Way, Inc.*............. 230,256
--------------
4,591,553
--------------
FINANCIAL SERVICES -- 4.2%
137,300 Accredited Home Lenders
Holding Company*(d)....... 6,041,200
12,400 Affiliated Managers Group,
Inc.*(d).................. 847,292
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
268,400 AmeriCredit Corp.*.......... $ 6,844,200
38,100 Calamos Asset Management,
Inc. -- Class A........... 1,037,844
117,500 CapitalSource, Inc.*(d)..... 2,306,525
30,800 CompuCredit Corp.*(d)....... 1,055,824
500,200 E*TRADE Financial Corp.*.... 6,997,798
191,000 Eaton Vance Corp. .......... 4,566,810
113,800 Friedman, Billings, Ramsey
Group, Inc. -- Class
A(d)...................... 1,627,340
3,600 Greenhill & Company,
Inc.(d)................... 145,836
83,200 Investment Technology Group,
Inc.*..................... 1,748,864
130,500 Jefferies Group, Inc.(d).... 4,944,645
150,200 Lazard, Ltd. -- Class A
(Bermuda)*(d)............. 3,492,150
24,100 Metris Companies, Inc.*..... 348,486
13,600 Nelnet, Inc. -- Class A*.... 452,472
128,900 Raymond James Financial,
Inc. ..................... 3,641,425
5,100 Renasant Corp. ............. 156,876
43,900 SEI Investments Company..... 1,639,665
19,100 The Student Loan Corp.(d)... 4,198,180
16,100 W Holding Company, Inc.
(Puerto Rico)............. 164,542
--------------
52,257,974
--------------
FOOD AND BEVERAGE -- 0.5%
32,000 Boston Beer Company, Inc. --
Class A*.................. 718,080
58,600 Chiquita Brands
International, Inc. ...... 1,609,156
105,300 John B Sanfilippo & Son,
Inc.*..................... 2,428,218
10,300 M&F Worldwide Corp.*........ 137,608
41,600 Nash Finch Company(d)....... 1,528,384
--------------
6,421,446
--------------
FUNERAL SERVICES -- 0.1%
69,000 Alderwoods Group, Inc.*..... 991,530
--------------
INSURANCE -- 4.7%
4,700 American Physicians Capital,
Inc.*..................... 174,605
270,600 Assured Guaranty, Ltd.
(Bermuda)................. 6,321,216
154,400 Delphi Financial Group,
Inc. -- Class A........... 6,816,760
9,100 FPIC Insurance Group,
Inc.*(d).................. 266,903
</Table>
See notes to financial statements.
135
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
89,970 Infinity Property & Casualty
Corp. .................... $ 3,138,154
108,700 IPC Holdings, Ltd.
(Bermuda)................. 4,306,694
54,200 LandAmerica Financial Group,
Inc. ..................... 3,217,854
88,800 Philadelphia Consolidated
Holding Corp.*............ 7,526,688
143,700 Platinum Underwriters
Holdings, Inc.
(Bermuda)................. 4,572,534
47,300 Protective Life Corp. ...... 1,997,006
114,200 Reinsurance Group of
America, Inc. ............ 5,311,442
5,400 Safety Insurance Group,
Inc. ..................... 182,304
20,100 Stewart Information Services
Corp. .................... 844,200
63,600 The Commerce Group, Inc. ... 3,950,196
274,800 Tower Group, Inc. .......... 4,295,124
77,900 UICI........................ 2,319,083
17,900 United Fire & Casualty
Company................... 795,118
164,800 Universal American Financial
Corp.*.................... 3,727,776
--------------
59,763,657
--------------
INTERNET SERVICES -- 5.0%
195,200 aQuantive, Inc.*............ 3,458,944
98,360 Avocent Corp.*.............. 2,571,130
8,200 Blue Nile, Inc.*(d)......... 268,058
88,000 CheckFree Corp.*(d)......... 2,997,280
78,380 CNET Networks, Inc.*(d)..... 920,181
35,300 Digital River, Inc.*........ 1,120,775
319,635 Digitas, Inc.*.............. 3,647,035
229,800 EarthLink, Inc.*............ 1,990,068
64,140 Equinix, Inc.*.............. 2,779,828
78,500 eResearch Technology,
Inc.*(d).................. 1,051,115
7,900 F5 Networks, Inc.*.......... 373,157
66,300 GSI Commerce, Inc.*(d)...... 1,110,525
169,360 InfoSpace, Inc.*(d)......... 5,577,024
116,900 Internet Security Systems,
Inc.*..................... 2,371,901
142,350 j2 Global Communications,
Inc.*(d).................. 4,902,534
326,440 Keynote Systems, Inc.*...... 3,809,555
12,400 Marchex, Inc. -- Class
B*(d)..................... 186,496
104,300 Monster Worldwide, Inc.*.... 2,991,324
82,500 NETGEAR, Inc.*(d)........... 1,534,500
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES (CONTINUED)
252,420 Online Resources Corp.*..... $ 2,854,870
229,260 Openwave Systems,
Inc.*(d).................. 3,759,864
17,300 Priceline.com, Inc.*(d)..... 403,609
156,390 RADVision, Ltd. (Israel)*... 2,078,423
72,960 RADWARE, Ltd. (Israel)*..... 1,319,117
107,877 SafeNet, Inc.*.............. 3,674,291
114,300 SonicWALL, Inc.*............ 616,077
7,000 Stamps.com, Inc.*(d)........ 131,250
65,500 The TriZetto Group, Inc.*... 917,655
79,900 United Online, Inc. ........ 867,714
205,150 ValueClick, Inc.*........... 2,529,500
28,600 Websense, Inc.*(d).......... 1,374,230
--------------
64,188,030
--------------
LEISURE AND RECREATION -- 1.4%
258,900 Century Casinos, Inc.*...... 1,946,928
31,800 Choice Hotels International,
Inc. ..................... 2,089,260
224,300 Interstate Hotels & Resorts,
Inc.*..................... 1,101,313
34,700 Kerzner International, Ltd.
(Bahama Islands)*......... 1,976,165
120,930 Mikohn Gaming Corp.*........ 1,780,694
32,400 Monarch Casino & Resort,
Inc.*..................... 714,096
189,050 Scientific Games Corp. --
Class A*.................. 5,091,117
53,100 Shuffle Master, Inc.*(d).... 1,488,393
55,400 Sunterra Corp.*............. 898,034
10,300 Vail Resorts, Inc.*......... 289,430
--------------
17,375,430
--------------
MACHINERY -- 1.2%
106,800 Albany International
Corp. -- Class A.......... 3,429,348
50,700 Applied Industrial
Technologies, Inc. ....... 1,637,103
13,000 Astec Industries, Inc.*..... 301,470
17,700 Blount International,
Inc.*..................... 295,413
38,900 Bucyrus International,
Inc. -- Class A........... 1,477,422
45,000 Flow International
Corp.*(d)................. 287,550
91,300 Joy Global, Inc. ........... 3,066,767
101,700 Kadant, Inc.*............... 2,230,281
19,800 Kennametal, Inc. ........... 907,830
12,400 Middleby Corp.*(d).......... 655,464
</Table>
See notes to financial statements.
136
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
28,000 Terex Corp.*................ $ 1,103,200
--------------
15,391,848
--------------
MANUFACTURING -- 2.9%
177,000 Acuity Brands, Inc. ........ 4,547,130
51,500 AptarGroup, Inc. ........... 2,616,200
92,900 Carlisle Companies,
Inc.(d)................... 6,375,727
11,500 CIRCOR International,
Inc. ..................... 283,705
49,800 Coherent, Inc.*............. 1,793,298
146,250 Deswell Industries, Inc.
(Virgin Islands).......... 2,278,560
91,585 Engineered Support Systems,
Inc.(d)................... 3,281,491
301,000 FLIR Systems, Inc.*(d)...... 8,981,840
16,800 Griffon Corp.*.............. 372,960
45,200 Harsco Corp. ............... 2,465,660
23,100 Kaydon Corp.(d)............. 643,335
32,100 Matthews International
Corp. -- Class A.......... 1,250,616
78,700 Power-One, Inc.*............ 496,597
9,200 Steinway Musical
Instruments, Inc.*........ 270,112
--------------
35,657,231
--------------
MEDICAL AND OTHER HEALTH SERVICES -- 4.4%
59,510 Amedisys, Inc.*(d).......... 2,188,778
152,900 American Healthways,
Inc.*(d).................. 6,463,082
95,700 AMERIGROUP Corp.*........... 3,847,140
280,700 AMN Healthcare Services,
Inc.*..................... 4,218,921
107,100 AmSurg Corp.*(d)............ 2,965,599
46,200 CorVel Corp.*............... 1,160,544
128,700 Covance, Inc.*.............. 5,774,769
15,600 Henry Schein, Inc.*......... 647,712
120,800 ICON PLC (Ireland) (ADR)*... 4,191,760
84,700 IDX Systems Corp.*.......... 2,552,858
78,270 Kindred Healthcare, Inc.*... 3,100,275
83,820 LabOne, Inc.*(d)............ 3,336,874
38,100 Manor Care, Inc. ........... 1,513,713
64,650 Matria Healthcare, Inc.*.... 2,083,670
11,500 MedCath Corp.*.............. 319,585
10,000 Per-Se Technologies,
Inc.*..................... 210,200
1,700 Quality Systems, Inc.*...... 80,546
28,000 RehabCare Group, Inc.*...... 748,440
7,000 Res-Care, Inc.*............. 94,920
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES
(CONTINUED)
35,400 Sierra Health Services,
Inc.*..................... $ 2,529,684
34,900 Sunrise Senior Living,
Inc.*..................... 1,883,902
57,200 Triad Hospitals, Inc.*...... 3,125,408
17,200 Universal Health Services,
Inc. -- Class B........... 1,069,496
4,500 US Physical Therapy,
Inc.*..................... 86,310
12,800 VistaCare, Inc. -- Class
A*........................ 236,416
--------------
54,430,602
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.3%
40,000 American Medical Systems
Holdings, Inc.*........... 826,000
9,500 AngioDynamics, Inc.*........ 206,530
51,300 Diagnostic Products
Corp. .................... 2,428,029
22,000 DJ Orthopedics, Inc.*....... 603,460
483,280 Encore Medical Corp.*....... 2,682,204
70,000 Haemonetics Corp.*.......... 2,844,800
4,000 ICU Medical, Inc.*(d)....... 128,680
17,400 Illumina, Inc.*............. 210,018
25,700 Immucor, Inc.*.............. 744,015
6,500 INAMED Corp.*............... 435,305
43,340 Laserscope*(d).............. 1,796,010
24,500 Lifecore Biomedical,
Inc.*..................... 267,050
95,270 Lifeline Systems, Inc.*..... 3,060,072
18,400 Luminex Corp.*.............. 181,056
69,900 Mentor Corp. ............... 2,899,452
7,400 Meridian Bioscience,
Inc. ..................... 140,230
9,400 Neurometrix, Inc.*.......... 188,282
9,800 Oakley, Inc. ............... 166,894
91,700 OraSure Technologies,
Inc.*..................... 916,083
445,800 Orthovita, Inc.*............ 1,751,994
157,020 PolyMedica Corp.(d)......... 5,599,333
39,700 PSS World Medical, Inc.*.... 494,265
4,000 Somanetics Corp.*........... 89,880
42,310 SonoSite, Inc.*............. 1,313,302
75,220 Symmetry Medical, Inc.*..... 1,770,679
96,230 Syneron Medical, Ltd.
(Israel)*(d).............. 3,521,056
62,200 Techne Corp.*(d)............ 2,855,602
136,400 The Cooper Companies,
Inc. ..................... 8,301,304
456,300 The Spectranetics Corp.*.... 3,070,899
73,000 Thoratec Corp.*............. 1,119,820
49,400 Urologix, Inc.*(d).......... 213,902
</Table>
See notes to financial statements.
137
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT AND SUPPLIES (CONTINUED)
57,500 Varian Medical Systems,
Inc.*(d).................. $ 2,146,475
4,700 Vital Signs, Inc. .......... 203,604
--------------
53,176,285
--------------
METALS AND MINING -- 1.1%
51,500 Aber Diamond Corp.
(Canada)(d)............... 1,585,170
33,400 Commercial Metals Company... 795,588
78,400 Meridian Gold, Inc.
(Canada)*(d).............. 1,411,200
84,800 Mueller Industries,
Inc.(d)................... 2,298,080
157,900 Novelis, Inc. (Canada)(d)... 4,054,872
49,800 NS Group, Inc.*............. 1,618,998
18,300 Schnitzer Steel Industries,
Inc. -- Class A........... 433,710
6,900 Titanium Metals Corp.*(d)... 391,851
175,200 Wolverine Tube, Inc.*....... 1,028,424
--------------
13,617,893
--------------
OIL AND GAS: EQUIPMENT -- 0.8%
7,000 Dril-Quip, Inc.*............ 203,070
12,500 Gulf Island Fabrication,
Inc. ..................... 248,500
2,900 Hydril Company*............. 157,615
41,600 Lone Star Technologies,
Inc.*..................... 1,892,800
85,560 Maverick Tube Corp.*........ 2,549,688
93,990 Oil States International,
Inc.*..................... 2,365,728
149,960 Superior Energy Services,
Inc.*..................... 2,669,288
--------------
10,086,689
--------------
OIL AND GAS: PIPELINES -- 0.0%
42,900 TransMontaigne, Inc.*....... 450,450
--------------
OIL, COAL AND GAS -- 5.2%
283,150 Cabot Oil & Gas Corp. ...... 9,825,305
59,860 Cal Dive International,
Inc.*..................... 3,134,868
4,300 Clayton Williams Energy,
Inc.*..................... 128,957
83,300 Encore Acquisition
Company*(d)............... 3,415,300
252,400 Energy Partners, Ltd.*...... 6,615,404
38,500 Global Industries, Ltd.*.... 327,250
266,700 Grey Wolf, Inc.*............ 1,976,247
148,400 Harvest Natural Resources,
Inc.*(d).................. 1,622,012
101,900 Headwaters, Inc.*(d)........ 3,503,322
5,000 Holly Corp. ................ 233,350
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
110,500 ONEOK, Inc.(d).............. $ 3,607,825
111,700 Parker Drilling Company*.... 783,017
102,000 Patterson-UTI Energy,
Inc. ..................... 2,838,660
3,100 Petroleum Development
Corp.*.................... 98,735
16,100 PetroQuest Energy, Inc.*.... 105,777
118,900 Plains Exploration &
Production Company*....... 4,224,517
148,200 Swift Energy Company*....... 5,308,524
48,200 Todco -- Class A*........... 1,237,294
56,400 Ultra Petroleum Corp.
(Canada)*................. 1,712,304
52,360 Unit Corp.*................. 2,304,364
263,700 Vintage Petroleum, Inc. .... 8,034,939
156,600 Whiting Petroleum Corp.*.... 5,686,146
--------------
66,724,117
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 5.8%
330,100 Abgenix, Inc.*(d)........... 2,832,258
66,700 Albany Molecular Research,
Inc.*..................... 933,800
84,950 Alexion Pharmaceuticals,
Inc.*(d).................. 1,957,248
111,200 Alpharma, Inc. -- Class A... 1,609,064
123,989 AtheroGenics, Inc.*(d)...... 1,981,344
69,400 Barr Pharmaceuticals,
Inc.*(d).................. 3,382,556
195,800 Cephalon, Inc.*(d).......... 7,794,798
257,400 Cubist Pharmaceuticals,
Inc.*..................... 3,389,958
33,100 CV Therapeutics, Inc.*(d)... 742,102
24,300 deCODE genetics, Inc.*(d)... 228,177
282,200 Dendreon Corp.*(d).......... 1,475,906
243,400 DepoMed, Inc.*(d)........... 1,063,658
138,200 Endo Pharmaceuticals
Holdings, Inc.*........... 3,631,896
20,799 Enzo Biochem, Inc.*(d)...... 372,926
130,300 Enzon Pharmaceuticals,
Inc.*..................... 844,344
72,000 First Horizon Pharmaceutical
Corp.*(d)................. 1,370,880
81,700 Human Genome Sciences,
Inc.*(d).................. 946,086
51,400 InterMune, Inc.*(d)......... 670,256
103,400 K-V Pharmaceutical
Company -- Class A*....... 1,731,950
26,700 Lexicon Genetics, Inc.*..... 131,898
35,000 LifeCell Corp.*............. 553,350
</Table>
See notes to financial statements.
138
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT
(CONTINUED)
328,500 Ligand Pharmaceuticals,
Inc. -- Class B*.......... $ 2,283,075
18,200 Millipore Corp.*............ 1,032,486
227,000 Nabi
Biopharmaceuticals*(d).... 3,457,210
39,500 Neurocrine Biosciences,
Inc.*..................... 1,661,370
9,300 Nutraceutical International
Corp.*.................... 124,155
14,100 Orchid Cellmark, Inc.*...... 152,421
145,636 Pharmaceutical Product
Development, Inc.*........ 6,824,503
18,400 POZEN, Inc.*................ 150,880
36,000 PRA International*.......... 964,080
124,990 Priority Healthcare Corp. --
Class B*.................. 3,169,746
176,430 QLT, Inc. (Canada)*......... 1,838,401
27,600 Regeneron Pharmaceuticals,
Inc.*..................... 231,564
107,150 Rigel Pharmaceuticals,
Inc.*..................... 2,134,428
147,160 Salix Pharmaceuticals,
Ltd.*..................... 2,598,846
220,400 Serologicals Corp.*(d)...... 4,683,500
186,300 Trimeris, Inc.*(d).......... 1,859,274
36,600 United Therapeutics
Corp.*(d)................. 1,764,120
7,900 Valeant Pharmaceuticals
International............. 139,277
41,600 Vertex Pharmaceuticals,
Inc.*..................... 700,544
--------------
73,414,335
--------------
PRINTING AND PUBLISHING -- 0.5%
148,300 Bowne & Company, Inc. ...... 2,144,418
12,000 Consolidated Graphics,
Inc.*..................... 489,240
77,700 Scholastic Corp.*........... 2,995,335
6,300 Valassis Communications,
Inc.*..................... 233,415
--------------
5,862,408
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.2%
29,800 Getty Realty Corp. ......... 825,460
25,700 Jones Lang LaSalle, Inc.*... 1,136,711
27,300 Trammell Crow Company*...... 661,752
--------------
2,623,923
--------------
REAL ESTATE INVESTMENT TRUSTS -- 4.0%
96,800 Aames Investment Corp. ..... 940,896
177,900 Acadia Realty Trust......... 3,317,835
39,200 American Home Mortgage
Investment Corp. ......... 1,370,432
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
27,800 Arbor Realty Trust, Inc. ... $ 797,860
22,900 Associated Estates Realty
Corp. .................... 211,367
4,000 BRT Realty Trust............ 92,600
17,500 Capital Trust, Inc. -- Class
A......................... 584,675
12,100 Commercial Net Lease
Realty.................... 247,687
89,500 Cousins Properties, Inc. ... 2,647,410
5,200 Digital Realty Trust,
Inc. ..................... 90,376
67,700 Entertainment Properties
Trust..................... 3,114,200
120,900 Equity Inns, Inc. .......... 1,607,970
72,900 Equity One, Inc. ........... 1,654,830
15,900 FelCor Lodging Trust,
Inc.*..................... 230,232
8,600 Global Signal, Inc. ........ 323,790
18,600 Gramercy Capital Corp. ..... 454,956
29,000 HomeBanc Corp. (Georgia).... 263,610
21,300 Innkeepers USA Trust........ 318,222
148,470 KKR Financial Corp.*........ 3,711,750
35,500 LaSalle Hotel Properties.... 1,164,755
40,900 LTC Properties, Inc. ....... 846,630
116,600 Maguire Properties, Inc. ... 3,304,444
32,600 Mid-America Apartment
Communities, Inc. ........ 1,480,692
8,200 MortgageIT Holdings,
Inc.(d)................... 149,650
16,500 National Health Realty,
Inc. ..................... 463,155
29,900 Newcastle Investment
Corp. .................... 901,485
130,600 OMEGA Healthcare Investors,
Inc.(d)................... 1,679,516
44,900 PS Business Parks, Inc. .... 1,995,805
68,600 RAIT Investment Trust....... 2,054,570
3,300 Ramco-Gershenson Properties
Trust..................... 96,624
22,600 Realty Income Corp. ........ 565,904
18,900 Saul Centers, Inc.(d)....... 687,015
53,900 SL Green Realty Corp.(d).... 3,476,550
11,500 Sovran Self Storage......... 522,790
60,900 Taubman Centers, Inc. ...... 2,076,081
201,200 U-Store-It Trust............ 3,832,860
68,700 Ventas, Inc. ............... 2,074,740
6,900 Winston Hotels, Inc. ....... 77,694
--------------
49,431,658
--------------
REGISTERED INVESTMENT COMPANIES -- 1.0%
4,900 Apollo Investment Corp. .... 90,307
77,600 iShares Russell 2000 Growth
Index Fund(d)............. 5,024,600
</Table>
See notes to financial statements.
139
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
REGISTERED INVESTMENT COMPANIES (CONTINUED)
116,100 iShares Russell 2000 Value
Index Fund(d)............. $ 7,447,815
--------------
12,562,722
--------------
RETAIL -- 1.7%
4,000 BJ'S Wholesale Club,
Inc.*..................... 129,960
187,200 Casey's General Stores,
Inc. ..................... 3,710,304
4,500 Conn's, Inc.*............... 110,115
38,300 Design Within Reach,
Inc.*..................... 693,230
77,200 Dollar Tree Stores,
Inc.*(d).................. 1,852,800
82,900 GameStop Corp. -- Class
B*........................ 2,478,710
41,560 Guitar Center, Inc.*........ 2,425,857
40,000 Longs Drug Stores Corp. .... 1,722,000
46,600 Pantry, Inc.*............... 1,804,818
6,100 Sonic Automotive, Inc. ..... 129,686
46,000 Trans World Entertainment
Corp.*.................... 544,180
38,030 Tuesday Morning Corp. ...... 1,198,706
47,900 Williams-Sonoma, Inc.*...... 1,895,403
95,300 Zale Corp.*................. 3,020,057
--------------
21,715,826
--------------
RETAIL: RESTAURANTS -- 2.3%
97,700 Brinker International,
Inc.*..................... 3,912,885
120,650 CEC Entertainment,
Inc.*(d).................. 5,078,158
99,200 CKE Restaurants, Inc. ...... 1,380,864
353,438 Cosi, Inc.*................. 2,431,653
32,400 Dave & Buster's, Inc.*...... 597,456
25,900 Jack in the Box, Inc.*...... 982,128
36,100 Lone Star Steakhouse &
Saloon, Inc. ............. 1,097,801
33,300 Panera Bread Company --
Class A*(d)............... 2,067,431
35,800 Papa John's International,
Inc.*..................... 1,430,926
7,900 PF Chang's China Bistro,
Inc.*(d).................. 465,942
90,540 RARE Hospitality
International, Inc.*...... 2,758,754
148,500 Ruby Tuesday, Inc.(d)....... 3,846,150
96,900 Sonic Corp.*................ 2,958,357
--------------
29,008,505
--------------
RETAIL: SUPERMARKETS -- 0.1%
50,200 Pathmark Stores, Inc.*...... 439,752
15,600 Smart & Final, Inc.*........ 191,100
14,600 Spartan Stores, Inc.*....... 214,182
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL: SUPERMARKETS (CONTINUED)
13,200 The Great Atlantic & Pacific
Tea Company, Inc.*(d)..... $ 383,592
--------------
1,228,626
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.4%
164,600 FEI Company*................ 3,754,526
19,500 Hexcel Corp.*............... 329,940
11,900 Woodward Governor Company... 999,957
--------------
5,084,423
--------------
SEMICONDUCTORS -- 4.5%
127,040 Agere Systems, Inc.*........ 1,524,480
256,900 Altera Corp.*............... 5,091,758
128,900 AMIS Holdings, Inc.*........ 1,719,526
146,800 Amkor Technology,
Inc.*(d).................. 660,600
150,900 Axcelis Technologies,
Inc.*..................... 1,035,174
13,500 Cohu, Inc. ................. 270,675
401,800 Conexant Systems, Inc.*..... 646,898
76,700 Cree, Inc.*(d).............. 1,953,549
214,400 Emulex Corp.*(d)............ 3,914,944
209,400 Genesis Microchip, Inc.*.... 3,865,524
165,700 Intersil Corp. -- Class A... 3,110,189
11,600 IXYS Corp.*................. 164,488
131,400 Kulicke and Soffa
Industries, Inc.*......... 1,039,374
172,900 Lattice Semiconductor
Corp.*.................... 767,676
260,400 Micrel, Inc.*............... 2,999,808
189,310 Microsemi Corp.*(d)......... 3,559,028
103,900 MIPS Technologies, Inc.*.... 748,080
10,900 MKS Instruments, Inc.*...... 184,101
34,800 Netlogic Microsystems,
Inc.*(d).................. 617,004
212,000 Novellus Systems, Inc.*..... 5,238,520
229,000 O2Micro International, Ltd.
(Cayman Islands)*......... 3,217,450
106,900 OmniVision Technologies,
Inc.*(d).................. 1,452,771
85,000 Photronics, Inc.*........... 1,983,900
67,800 Pixelworks, Inc.*........... 581,724
5,600 Rudolph Technologies,
Inc.*..................... 80,248
44,400 Sigmatel, Inc.*(d).......... 761,904
135,690 SiRF Technology Holdings,
Inc.*..................... 2,398,999
286,200 Teradyne, Inc.*(d).......... 3,425,814
88,190 Ultratech, Inc.*............ 1,613,877
14,300 Veeco Instruments, Inc.*.... 232,804
</Table>
See notes to financial statements.
140
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
118,510 Volterra Semiconductor
Corp.*(d)................. $ 1,764,614
--------------
56,625,501
--------------
SPORTING GOODS AND EQUIPMENT -- 0.2%
62,700 Hibbett Sporting Goods,
Inc.*..................... 2,372,568
12,500 The Nautilus Group, Inc. ... 356,250
--------------
2,728,818
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.6%
12,300 ADTRAN, Inc. ............... 304,917
257,700 American Tower Corp. --
Class A*(d)............... 5,416,854
10,700 Anaren, Inc.*............... 140,705
7,600 Anixter International,
Inc.*..................... 282,492
72,600 Arris Group, Inc.*.......... 632,346
613,700 Avaya, Inc.*................ 5,105,984
51,000 Brightpoint, Inc.*.......... 1,131,690
6,400 Centennial Communications
Corp.*.................... 88,832
35,200 Commonwealth Telephone
Enterprises, Inc. ........ 1,475,232
92,600 CommScope, Inc.*(d)......... 1,612,166
16,100 CT Communications, Inc. .... 210,105
51,400 Digi International, Inc.*... 609,604
43,500 Intervoice, Inc.*........... 375,405
6,300 Intrado, Inc.*.............. 94,248
10,700 North Pittsburgh Systems,
Inc. ..................... 209,292
76,100 Plantronics, Inc. .......... 2,766,996
424,200 Polycom, Inc.*.............. 6,324,822
579,600 RF Micro Devices, Inc.*..... 3,147,228
65,700 TALK America Holdings,
Inc.*..................... 657,657
160,400 UbiquiTel, Inc.*............ 1,308,864
9,300 USA Mobility, Inc.*......... 273,048
--------------
32,168,487
--------------
TOOLS -- 0.3%
100,400 Snap-on, Inc. .............. 3,443,720
--------------
TOYS -- 0.1%
40,200 JAKKS Pacific, Inc.*(d)..... 772,242
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- 1.0%
53,900 General Maritime Corp.
(Marshall Islands)(d)..... $ 2,285,360
148,350 Genesee & Wyoming, Inc. --
Class A*(d)............... 4,036,604
20,800 Hub Group, Inc. -- Class
A*........................ 521,040
19,000 Landstar System, Inc.*...... 572,280
40,780 Old Dominion Freight Line,
Inc.*..................... 1,094,127
41,900 Swift Transportation
Company, Inc.*............ 975,851
4,500 Trico Marine Services,
Inc.*..................... 84,600
191,450 Vitran Corp., Inc. -- Class
A (Canada)*............... 3,024,910
--------------
12,594,772
--------------
UTILITIES: ELECTRIC -- 1.2%
52,800 Avista Corp. ............... 981,552
38,500 Cleco Corp. ................ 830,445
60,100 NorthWestern Corp.(d)....... 1,894,352
281,800 PNM Resources, Inc. ........ 8,118,658
126,500 Sierra Pacific
Resources*(d)............. 1,574,925
86,800 Westar Energy, Inc. ........ 2,085,804
--------------
15,485,736
--------------
UTILITIES: GAS -- 1.0%
79,200 Atmos Energy Corp. ......... 2,280,960
14,900 Cascade Natural Gas
Corp. .................... 305,450
58,700 New Jersey Resources
Corp. .................... 2,832,275
63,900 Nicor, Inc.(d).............. 2,630,763
114,900 WGL Holdings, Inc. ......... 3,865,236
--------------
11,914,684
--------------
TOTAL COMMON STOCKS
(Cost $1,066,522,834)..... 1,206,413,164
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 20.6%
$257,599,303 Securities Lending
Collateral Investment
(Note 4)
(Cost $257,599,303)....... 257,599,303
--------------
US TREASURY SECURITY -- 0.1%
750,000 US Treasury Bill,
2.94%, 09/15/05(f)
(Cost $745,345)........... 745,345
--------------
TOTAL SECURITIES
(Cost $1,324,867,482)..... 1,464,757,812
--------------
</Table>
See notes to financial statements.
141
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENT -- 3.4%
$ 42,614,970 With Investors Bank and
Trust, dated 06/30/05,
2.61%, due 07/01/05,
repurchase proceeds at
maturity $42,618,059
(Collateralized by various
Fannie Mae Adjustable Rate
Mortgages, 3.92%-4.07%,
due 01/01/33-02/01/33,
with a total value of
$13,648,836, Government
National Mortgage
Association, 4.00%, due
08/20/34, with a value of
$19,185,137, and various
Small Business
Administrations,
6.13%-6.63%, due
01/25/15-07/25/16, with a
total value of
$11,911,745) (Cost
$42,614,970).............. $ 42,614,970
--------------
Total Investments -- 120.5%
(Cost $1,367,482,452)..... 1,507,372,782
Liabilities less other
assets -- (20.5)%......... (256,518,711)
--------------
NET ASSETS -- 100.0%........ $1,250,854,071
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $1,367,482,452.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............ $177,153,990
Gross unrealized depreciation............ (37,263,660)
------------
Net unrealized appreciation.............. $139,890,330
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
142
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 94.7%
APPAREL: MANUFACTURING AND RETAIL -- 9.5%
29,200 Carter's, Inc.*................ $ 1,704,696
92,600 Coach, Inc.*................... 3,108,582
81,400 The Warnaco Group, Inc.*....... 1,892,550
73,600 Urban Outfitters, Inc.*........ 4,172,384
------------
10,878,212
------------
BANKS -- 3.6%
75,000 Brookline Bancorp, Inc. ....... 1,219,500
19,700 Downey Financial Corp.(d)...... 1,442,040
61,900 Signature Bank*................ 1,510,360
------------
4,171,900
------------
BUSINESS SERVICES AND SUPPLIES -- 4.2%
45,100 Advisory Board Company*........ 2,198,174
4,300 Portfolio Recovery Associates,
Inc.*........................ 180,686
77,800 Resources Connection, Inc.*.... 1,807,294
37,800 TRM Corp.*(d).................. 635,796
------------
4,821,950
------------
COMMERCIAL SERVICES -- 1.2%
77,600 Collectors Universe, Inc.*..... 1,359,552
------------
COMPUTER SOFTWARE AND SERVICES -- 3.3%
123,800 Agile Software Corp.*.......... 779,940
136,800 Interwoven, Inc.*.............. 1,030,104
44,300 Manhattan Associates, Inc.*.... 851,003
213,300 MatrixOne, Inc.*............... 1,066,500
------------
3,727,547
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.0%
45,200 NCI Building Systems, Inc.*.... 1,482,560
29,700 Trex Company, Inc.*(d)......... 763,290
------------
2,245,850
------------
ELECTRONICS -- 0.4%
86,700 Merix Corp.*(d)................ 507,195
------------
FINANCIAL SERVICES -- 2.9%
63,500 Westcorp....................... 3,328,670
------------
INSURANCE -- 2.9%
60,100 Delphi Financial Group, Inc. --
Class A...................... 2,653,415
33,600 Hub International, Ltd.
(Canada)..................... 654,864
------------
3,308,279
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES -- 9.6%
129,000 Akamai Technologies,
Inc.*(d)..................... $ 1,693,770
70,500 aQuantive, Inc.*............... 1,249,260
37,100 Blue Nile, Inc.*(d)............ 1,212,799
230,000 iVillage, Inc.*................ 1,375,400
109,400 Jupitermedia Corp.*(d)......... 1,874,022
108,000 Marchex, Inc. -- Class B*(d)... 1,624,320
156,100 SupportSoft, Inc.*............. 810,159
180,600 TIBCO Software, Inc.*.......... 1,181,124
------------
11,020,854
------------
LEISURE AND RECREATION -- 1.3%
22,400 Four Seasons Hotels, Inc.
(Canada)(d).................. 1,480,640
------------
MANUFACTURING -- 2.7%
39,950 Engineered Support Systems,
Inc.(d)...................... 1,431,409
50,700 Lincoln Electric Holdings,
Inc. ........................ 1,680,705
------------
3,112,114
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 4.8%
138,400 Align Technology, Inc.*(d)..... 1,020,008
86,800 Animas Corp.*(d)............... 1,749,020
110,300 Conceptus, Inc.*(d)............ 623,195
45,000 Conor Medsystems, Inc.*........ 690,750
50,675 Immucor, Inc.*................. 1,467,041
------------
5,550,014
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 16.6%
87,800 Amylin Pharmaceuticals,
Inc.*(d)..................... 1,837,654
110,300 CV Therapeutics, Inc.*(d)...... 2,472,925
48,600 Digene Corp.*.................. 1,345,248
122,600 Dyax Corp.*.................... 578,672
104,600 Encysive Pharmaceuticals,
Inc.*........................ 1,130,726
160,800 Isolagen, Inc.*(d)............. 659,280
38,600 Medicis Pharmaceuticals
Corp. -- Class A(d).......... 1,224,778
60,600 MGI Pharma, Inc.*(d)........... 1,318,656
120,000 Nektar Therapeutics*........... 2,020,800
88,400 POZEN, Inc.*................... 724,880
83,000 Protein Design Labs,
Inc.*(d)..................... 1,677,430
58,500 Rigel Pharmaceuticals, Inc.*... 1,165,320
</Table>
See notes to financial statements.
143
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT
(CONTINUED)
34,400 SeraCare Life Sciences,
Inc.*........................ $ 481,256
47,700 United Therapeutics
Corp.*(d).................... 2,299,140
------------
18,936,765
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.0%
36,600 RAIT Investment Trust.......... 1,096,170
------------
RETAIL -- 5.6%
44,350 America's Car-Mart, Inc.*...... 998,319
39,800 Build-A-Bear-Workshop,
Inc.*(d)..................... 933,310
52,700 First Cash Financial Services,
Inc.*........................ 1,126,199
36,800 Guitar Center, Inc.*........... 2,148,016
25,300 Tractor Supply Company*........ 1,242,230
------------
6,448,074
------------
RETAIL: RESTAURANTS -- 6.1%
5,600 BJ's Restaurants, Inc.*........ 113,904
40,500 CEC Entertainment, Inc.*....... 1,704,645
44,300 RARE Hospitality International,
Inc.*........................ 1,349,821
58,400 Sonic Corp.*................... 1,782,952
59,050 The Cheesecake Factory,
Inc.*(d)..................... 2,050,807
------------
7,002,129
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 1.2%
51,900 Cymer, Inc.*(d)................ 1,367,565
------------
SEMICONDUCTORS -- 8.8%
81,300 Integrated Device Technology,
Inc.*(d)..................... 873,975
141,000 Mattson Technology, Inc.*...... 1,009,560
167,100 O2Micro International, Ltd.
(Cayman Islands)*............ 2,347,755
61,500 Power Integrations, Inc.*(d)... 1,326,555
84,400 SiRF Technology Holdings,
Inc.*........................ 1,492,192
80,800 Skyworks Solutions, Inc.*...... 595,496
72,400 Tessera Technologies, Inc.*.... 2,418,884
------------
10,064,417
------------
SPORTING GOODS AND EQUIPMENT -- 3.1%
92,475 Hibbett Sporting Goods,
Inc.*........................ 3,499,254
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.0%
45,000 InPhonic, Inc.*(d)............. 692,100
147,300 NMS Communications Corp.*...... 421,278
------------
1,113,378
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- 2.9%
56,050 Knight Transportation, Inc. ... $ 1,363,697
36,200 Old Dominion Freight Line,
Inc.*........................ 971,246
60,100 Universal Truckload Services,
Inc.*........................ 1,015,089
------------
3,350,032
------------
TOTAL COMMON STOCKS (Cost
$98,589,444)................. 108,390,561
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 26.8%
$30,669,845 Securities Lending Collateral
Investment (Note 4)
(Cost $30,669,845)........... 30,669,845
------------
TOTAL SECURITIES (Cost
$129,259,289)................ 139,060,406
------------
REPURCHASE AGREEMENT -- 5.2%
5,952,517 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $5,952,949
(Collateralized by Small
Business Administration,
5.63%, due 02/25/27, with a
value of $6,250,143) (Cost
$5,952,517).................. 5,952,517
------------
Total Investments -- 126.7%
(Cost $135,211,806).......... 145,012,923
Liabilities less other
assets -- (26.7)%............ (30,526,585)
------------
NET ASSETS -- 100.0%........... $114,486,338
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $135,211,806.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $17,977,646
Gross unrealized depreciation........... (8,176,529)
-----------
Net unrealized appreciation............. $ 9,801,117
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
144
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 99.5%
AEROSPACE AND DEFENSE -- 2.5%
93,500 Goodrich Corp. ................ $ 3,829,760
83,050 The Boeing Company............. 5,481,300
------------
9,311,060
------------
AGRICULTURE -- 0.9%
52,820 Monsanto Company............... 3,320,793
------------
APPAREL: MANUFACTURING AND RETAIL -- 5.9%
155,160 Chico's FAS, Inc.*(d).......... 5,318,885
220,960 Coach, Inc.*................... 7,417,627
61,400 Nike, Inc. -- Class B.......... 5,317,240
61,490 Urban Outfitters, Inc.*........ 3,485,868
------------
21,539,620
------------
AUTOMOBILES/MOTOR VEHICLES -- 0.9%
46,500 Toyota Motor Corp. (ADR)
(Japan)...................... 3,324,285
------------
BROADCAST SERVICES/MEDIA -- 1.3%
725,540 Sirius Satellite Radio,
Inc.*(d)..................... 4,701,499
------------
BUSINESS SERVICES AND SUPPLIES -- 0.9%
57,000 Fluor Corp. ................... 3,282,630
------------
CHEMICALS -- 1.1%
57,000 Ashland, Inc.*................. 4,096,590
------------
COMPUTER SOFTWARE AND SERVICES -- 2.7%
137,250 Cognizant Technology Solutions
Corp. -- Class A*............ 6,468,593
58,700 Electronic Arts, Inc.*......... 3,323,007
------------
9,791,600
------------
COMPUTERS AND OFFICE EQUIPMENT -- 6.0%
87,040 Apple Computer, Inc.*.......... 3,203,942
265,090 Dell, Inc.*.................... 10,473,707
609,340 EMC Corp. (Massachusetts)*..... 8,354,051
------------
22,031,700
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.9%
91,000 DR Horton, Inc. ............... 3,422,510
------------
CONSUMER GOODS AND SERVICES -- 7.2%
51,510 Fortune Brands, Inc. .......... 4,574,088
632,710 General Electric Company....... 21,923,402
------------
26,497,490
------------
ELECTRONICS -- 1.2%
331,620 Flextronics International,
Ltd. (Singapore)*............ 4,380,700
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES -- 4.8%
16,970 Chicago Mercantile Exchange
Holdings, Inc.(d)............ $ 5,014,635
31,380 Legg Mason, Inc.(d)............ 3,266,972
70,000 SEI Investments Company........ 2,614,500
108,600 T Rowe Price Group, Inc. ...... 6,798,360
------------
17,694,467
------------
FOOD AND BEVERAGE -- 0.9%
111,180 Constellation Brands,
Inc. -- Class A*............. 3,279,810
------------
INTERNET SERVICES -- 9.5%
36,120 Google, Inc. -- Class A*(d).... 10,624,697
283,260 Juniper Networks, Inc.*........ 7,132,487
146,270 Monster Worldwide, Inc.*....... 4,195,024
163,330 VeriSign, Inc.*................ 4,697,371
236,270 YAHOO!, Inc.*.................. 8,186,756
------------
34,836,335
------------
LEISURE AND RECREATION -- 2.4%
53,000 Marriott International, Inc. --
Class A...................... 3,615,660
130,100 MGM MIRAGE*(d)................. 5,149,358
------------
8,765,018
------------
MACHINERY -- 2.5%
54,300 Caterpillar, Inc. ............. 5,175,333
124,000 Joy Global, Inc. .............. 4,165,160
------------
9,340,493
------------
MANUFACTURING -- 0.8%
14,470 Danaher Corp. ................. 757,360
22,450 ITT Industries, Inc. .......... 2,191,793
------------
2,949,153
------------
MEDICAL AND OTHER HEALTH SERVICES -- 3.9%
60,940 Medco Health Solutions,
Inc.*(d)..................... 3,251,758
77,000 UnitedHealth Group, Inc. ...... 4,014,780
101,100 WellPoint, Inc.*............... 7,040,604
------------
14,307,142
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 5.0%
82,660 CR Bard, Inc. ................. 5,497,717
199,380 Johnson & Johnson.............. 12,959,700
------------
18,457,417
------------
</Table>
See notes to financial statements.
145
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL AND GAS: PIPELINES -- 1.0%
55,700 Questar Corp. ................. $ 3,670,630
------------
OIL, COAL AND GAS -- 1.3%
89,000 Peabody Energy Corp. .......... 4,631,560
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 10.7%
108,000 Amgen, Inc.*................... 6,529,680
158,190 Caremark Rx, Inc.*............. 7,042,619
98,700 Genentech, Inc.*............... 7,923,636
95,280 Genzyme Corp.*................. 5,725,375
161,570 Gilead Sciences, Inc.*......... 7,107,464
83,600 Sepracor, Inc.*................ 5,016,836
------------
39,345,610
------------
RETAIL -- 0.9%
49,000 Best Buy Company, Inc. ........ 3,358,950
------------
RETAIL: RESTAURANTS -- 3.0%
85,140 Starbucks Corp.*............... 4,398,332
130,600 YUM! Brands, Inc. ............. 6,801,648
------------
11,199,980
------------
RETAIL: SUPERMARKETS -- 0.8%
25,400 Whole Foods Market, Inc. ...... 3,004,820
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.7%
38,903 Fisher Scientific
International,
Inc.*(d)..................... 2,524,805
------------
SEMICONDUCTORS -- 12.2%
446,510 Applied Materials, Inc. ....... 7,224,532
222,580 Broadcom Corp. -- Class A*..... 7,903,816
690,590 Intel Corp. ................... 17,996,775
134,280 Marvell Technology Group,
Ltd. (Bermuda)*.............. 5,108,011
242,060 Texas Instruments, Inc. ....... 6,794,624
------------
45,027,758
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 7.6%
86,480 America Movil SA de CV --
Series L (ADR) (Mexico)...... 5,155,073
201,000 Comverse Technology,
Inc.*(d)..................... 4,753,650
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
401,720 Corning, Inc.*................. $ 6,676,586
62,500 NII Holdings, Inc.*(d)......... 3,996,250
235,000 Nokia Oyj (ADR) (Finland)...... 3,910,400
388,000 Tellabs, Inc.*................. 3,375,600
------------
27,867,559
------------
TOTAL COMMON STOCKS (Cost
$329,560,519)................ 365,961,984
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 12.3%
$45,336,885 Securities Lending Collateral
Investment (Note 4)
(Cost $45,336,885)........... 45,336,885
------------
TOTAL SECURITIES (Cost
$374,897,404)................ 411,298,869
------------
REPURCHASE AGREEMENT -- 1.0%
3,565,577 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $3,565,836
(Collateralized by Small
Business Administration,
6.60%, due 03/25/16, with a
value of $3,743,856) (Cost
$3,565,577).................. 3,565,577
------------
Total Investments -- 112.8%
(Cost $378,462,981).......... 414,864,446
Liabilities less other
assets -- (12.8)%............ (46,914,640)
------------
NET ASSETS -- 100.0%........... $367,949,806
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $378,462,981.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $39,847,718
Gross unrealized depreciation........... (3,446,253)
-----------
Net unrealized appreciation............. $36,401,465
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
146
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 90.9%
ADVERTISING -- 0.5%
$ 1,370,000 Advanstar Communications, Inc.,
10.75%, 08/15/10............. $ 1,503,575
455,000 WDAC Subsidiary Corp. -- 144A,
8.38%, 12/01/14.............. 436,800
------------
1,940,375
------------
AEROSPACE AND DEFENSE -- 0.3%
395,000 Argo-Tech Corp.,
9.25%, 06/01/11.............. 430,550
415,000 Armor Holdings, Inc.,
8.25%, 08/15/13.............. 450,794
210,000 B/E Aerospace, Series B,
8.00%, 03/01/08.............. 211,050
------------
1,092,394
------------
AGRICULTURAL EQUIPMENT -- 0.3%
940,000 Case New Holland, Inc. -- 144A,
9.25%, 08/01/11.............. 991,700
------------
AIRLINES -- 1.6%
920,000 American Airlines, Inc.,
8.61%, 04/01/11.............. 863,190
1,700,000 American Airlines, Inc., Series
2001-2,
7.80%, 10/01/06.............. 1,616,609
295,000 American Airlines, Inc., Series
2001-2,
7.86%, 10/01/11.............. 311,769
1,505,000 AMR Corp.,
9.00%, 08/01/12.............. 1,188,950
1,433,626 Continental Airlines, Inc.,
Series 2001-1,
7.03%, 06/15/11.............. 1,204,740
500,000 Delta Air Lines, Inc.,
7.90%, 12/15/09.............. 180,000
495,000 Delta Air Lines, Inc. -- 144A,
9.50%, 11/18/08.............. 405,900
45,000 Delta Air Lines, Inc.,
Series 2000-1,
7.78%, 11/18/05.............. 39,213
140,000 Northwest Airlines, Inc.,
8.88%, 06/01/06.............. 89,600
------------
5,899,971
------------
APPAREL: MANUFACTURING AND RETAIL -- 3.2%
1,330,000 GFSI, Inc., Series B,
9.63%, 03/01/07.............. 1,216,950
1,810,000 Levi Strauss & Company,
12.25%, 12/15/12............. 1,986,475
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
APPAREL: MANUFACTURING AND RETAIL (CONTINUED)
$ 895,000 Levi Strauss & Company,
9.75%, 01/15/15.............. $ 892,763
1,740,000 Levi Strauss & Company,
Floating Rate,
7.73%, 04/01/12(b)........... 1,653,000
1,485,000 Oxford Industries, Inc.,
8.88%, 06/01/11.............. 1,596,375
2,300,000 Perry Ellis International,
Inc., Series B,
8.88%, 09/15/13.............. 2,311,499
490,000 Phillips Van-Heusen Corp.,
7.25%, 02/15/11.............. 516,950
685,000 Phillips Van-Heusen Corp.,
8.13%, 05/01/13.............. 744,938
875,000 William Carter, Series B,
10.88%, 08/15/11............. 984,515
------------
11,903,465
------------
AUTOMOBILE: RENTAL -- 0.1%
330,000 Williams Scotsman, Inc.,
10.00%, 08/15/08............. 364,693
------------
AUTOMOBILES/MOTOR VEHICLES -- 0.5%
565,000 Navistar International,
7.50%, 06/15/11.............. 579,125
1,270,000 Navistar International -- 144A,
6.25%, 03/01/12.............. 1,231,900
------------
1,811,025
------------
AUTOMOTIVE EQUIPMENT -- 2.7%
2,110,000 Collins & Aikman Products
Company, Series B,
9.75%, 02/15/10.............. 2,194,399
395,000 Commercial Vehicle
Group -- 144A,
8.00%, 07/01/13.............. 403,888
1,585,000 Delphi Corp.,
6.55%, 06/15/06.............. 1,549,338
1,100,000 Delphi Corp. (Loan
Participation), Tranche B,
9.74%, 06/14/11.............. 1,128,875
155,000 Dura Operating Corp., Series D,
9.00%, 05/01/09.............. 108,500
270,000 Keystone Automotive Operations,
Inc.,
9.75%, 11/01/13.............. 268,650
1,210,000 Metaldyne Corp. -- 144A,
10.00%, 11/01/13............. 998,250
260,000 Rexnord Corp.,
10.13%, 12/15/12............. 286,000
</Table>
See notes to financial statements.
147
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTOMOTIVE EQUIPMENT (CONTINUED)
$ 1,000,000 Tenneco Automotive, Inc.,
8.63%, 11/15/14.............. $ 1,010,000
945,000 Tenneco Automotive, Inc.,
Series B,
10.25%, 07/15/13............. 1,072,575
354,000 TRW Automotive, Inc.,
11.00%, 02/15/13............. 408,870
680,000 Visteon Corp.,
8.25%, 08/01/10.............. 632,400
------------
10,061,745
------------
BROADCAST SERVICES/MEDIA -- 6.2%
1,595,000 Adelphia Communications,
10.25%, 11/01/06(h).......... 1,363,725
840,000 Adelphia Communications,
10.25%, 06/15/11(h).......... 758,100
305,000 Adelphia Communications, Series
B,
9.25%, 10/01/02(h)(p)........ 263,825
1,575,000 Charter Communications Holdings
II,
10.25%, 09/15/10............. 1,600,593
1,975,000 Charter Communications Holdings
LLC,
10.25%, 01/15/10............. 1,476,313
900,000 Charter Communications Holdings
LLC,
11.13%, 01/15/11............. 677,250
285,000 Charter Communications Holdings
LLC,
10.00%, 05/15/11............. 209,475
385,000 Charter Communications
Holdings/Charter Capital,
11.75%, 01/15/10............. 304,150
1,740,000 Coleman Cable, Inc. -- 144A,
9.88%, 10/01/12.............. 1,557,299
1,030,000 CSC Holdings, Inc.,
10.50%, 05/15/16............. 1,112,400
965,000 CSC Holdings, Inc. -- 144A,
6.75%, 04/15/12.............. 911,925
195,000 CSC Holdings, Inc., Series B,
7.63%, 04/01/11.............. 193,538
570,000 Fisher Communications, Inc.,
8.63%, 09/15/14.............. 607,763
4,625,000 Insight Communications Company,
Inc.,
zero coupon, 02/15/11(g)..... 4,659,687
2,040,000 Kabel Deutschland GMBH -- 144A
(Germany),
10.63%, 07/01/14............. 2,223,599
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 570,000 LBI Media, Inc.,
zero coupon, 10/15/13(g)..... $ 425,363
1,655,000 Nexstar Financial Holdings LLC,
Inc.,
zero coupon, 04/01/13(g)..... 1,251,594
835,000 Nextmedia Operating, Inc.,
10.75%, 07/01/11............. 911,194
1,300,000 ONO Finance PLC (United
Kingdom),
14.00%, 02/15/11............. 1,465,750
430,000 ONO Finance PLC (United
Kingdom),
14.00%, 02/15/11(j)(q)....... 578,194
465,000 Paxson Communications Corp.,
10.75%, 07/15/08............. 460,350
190,000 Paxson Communications Corp.,
zero coupon, 01/15/09(g)..... 178,600
------------
23,190,687
------------
BUSINESS SERVICES AND SUPPLIES -- 1.0%
1,500,000 Affinity Group, Inc.,
9.00%, 02/15/12.............. 1,526,250
2,010,000 Quintiles Transnational Corp.,
10.00%, 10/01/13............. 2,211,000
------------
3,737,250
------------
CHEMICALS -- 5.2%
260,000 Acetex Corp. (Canada),
10.88%, 08/01/09............. 274,300
87,000 Avecia Group PLC (United
Kingdom),
11.00%, 07/01/09............. 89,066
655,000 Equistar Chemical/Funding,
10.63%, 05/01/11............. 726,231
720,000 Hercules, Inc.,
11.13%, 11/15/07............. 816,300
1,086,000 Huntsman LLC,
11.63%, 10/15/10............. 1,277,408
760,000 IMC Global, Inc.,
10.88%, 08/01/13............. 894,900
1,675,000 IMC Global, Inc., Series B,
11.25%, 06/01/11............. 1,859,250
220,000 Innophos, Inc. -- 144A,
8.88%, 08/15/14.............. 225,500
320,000 Lyondell Chemical Company,
11.13%, 07/15/12............. 364,800
1,301,000 Lyondell Chemical Company,
10.50%, 06/01/13............. 1,494,524
2,408,000 Nalco Company,
8.88%, 11/15/13.............. 2,594,619
</Table>
See notes to financial statements.
148
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CHEMICALS (CONTINUED)
$ 2,900,000 OM Group, Inc.,
9.25%, 12/15/11.............. $ 2,914,499
765,000 PolyOne Corp.,
10.63%, 05/15/10............. 812,813
105,000 PolyOne Corp.,
8.88%, 05/01/12.............. 104,213
135,000 Polypore, Inc.,
8.75%, 05/15/12.............. 126,900
380,000 PQ Corp. -- 144A,
7.50%, 02/15/13.............. 375,250
1,535,000 Rhodia SA (France),
10.25%, 06/01/10............. 1,653,963
1,575,000 Rockwood Specialties Corp.,
10.63%, 05/15/11............. 1,744,313
1,455,000 UAP Holding Corp.,
zero coupon, 07/15/12(g)..... 1,200,375
------------
19,549,224
------------
COMPUTER SOFTWARE AND SERVICES -- 0.2%
560,000 Danka Business Systems (United
Kingdom),
11.00%, 06/15/10............. 450,800
190,000 Stratus Technologies, Inc.,
10.38%, 12/01/08............. 185,250
------------
636,050
------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.6%
1,800,000 Interface, Inc.,
10.38%, 02/01/10............. 1,989,000
170,000 Interface, Inc.,
9.50%, 02/01/14.............. 174,250
------------
2,163,250
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.3%
1,590,000 Dayton Superior Corp.,
10.75%, 09/15/08............. 1,661,550
1,470,000 Nortek, Inc.,
8.50%, 09/01/14.............. 1,374,450
815,000 Ply Gem Industries, Inc.,
9.00%, 02/15/12.............. 692,750
1,100,000 RMCC Acquisition
Company -- 144A,
9.50%, 11/01/12.............. 1,056,000
155,000 Texas Industries, Inc. -- 144A,
7.25%, 07/15/13.............. 159,650
------------
4,944,400
------------
CONSUMER GOODS AND SERVICES -- 0.7%
595,000 Del Laboratories, Inc.,
8.00%, 02/01/12.............. 514,675
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
$ 695,000 Fedders North America,
9.88%, 03/01/14.............. $ 455,225
295,000 Jostens Holding Corp.,
zero coupon, 12/01/13(g)..... 209,450
1,280,000 Spectrum Brands, Inc. -- 144A,
7.38%, 02/01/15.............. 1,244,800
303,000 WH Holdings, Ltd. (Cayman
Islands)/WH Capital Corp.,
9.50%, 04/01/11.............. 325,725
------------
2,749,875
------------
CONTAINERS AND PACKAGING -- 2.6%
365,000 Crown European Holdings SA
(France),
9.50%, 03/01/11.............. 405,150
1,990,000 Crown European Holdings SA
(France),
10.88%, 03/01/13............. 2,348,200
995,000 Intertape Polymer US, Inc.,
8.50%, 08/01/14.............. 990,986
300,000 Kappa Beheer BV (The
Netherlands),
10.63%, 07/15/09............. 310,500
1,215,000 Pliant Corp.,
11.13%, 09/01/09............. 1,190,700
999,905 Pliant Corp. -- 144A,
11.63%, 06/15/09(o).......... 1,074,898
870,000 Smurfit-Stone Container Corp.,
9.25%, 02/01/08.............. 913,500
960,000 Solo Cup Company,
8.50%, 02/15/14.............. 902,400
1,250,000 Stone Container Finance Company
of Canada (Canada),
7.38%, 07/15/14.............. 1,181,250
235,000 US Can Corp.,
10.88%, 07/15/10............. 246,163
------------
9,563,747
------------
DISTRIBUTION -- 0.3%
916,000 Jafra Cosmetics International,
10.75%, 05/15/11............. 1,030,500
------------
EDUCATION -- 0.2%
740,000 Knowledge Learning
Center -- 144A,
7.75%, 02/01/15.............. 710,400
------------
ELECTRONICS -- 0.1%
550,000 Muzak LLC,
10.00%, 02/15/09............. 459,250
------------
</Table>
See notes to financial statements.
149
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 1.5%
$ 625,000 Aleris International, Inc.,
10.38%, 10/15/10............. $ 689,063
651,000 Aleris International, Inc.,
9.00%, 11/15/14.............. 677,040
2,630,000 Allied Waste North America,
Inc., Series B,
8.88%, 04/01/08.............. 2,774,650
1,555,000 Waste Services, Inc. -- 144A
(Canada),
9.50%, 04/15/14.............. 1,547,225
------------
5,687,978
------------
EQUIPMENT RENTAL AND LEASING -- 1.1%
1,100,000 Neff Rental, Inc./
Neff Finance -- 144A,
11.25%, 06/15/12............. 1,100,000
1,425,000 The Greenbrier
Companies, Inc. -- 144A,
8.38%, 05/15/15.............. 1,457,062
235,000 United Rentals North
America, Inc.,
6.50%, 02/15/12.............. 232,356
365,000 United Rentals North
America, Inc.,
7.75%, 11/15/13.............. 360,438
1,065,000 United Rentals North
America, Inc.,
7.00%, 02/15/14.............. 1,019,738
------------
4,169,594
------------
FINANCIAL SERVICES -- 5.4%
600,000 Alamosa Delaware, Inc.,
zero coupon, 07/31/09(g)..... 664,500
2,050,000 Alamosa Delaware, Inc.,
11.00%, 07/31/10............. 2,308,813
1,335,000 BCP US Crystal Holdings Corp.,
9.63%, 06/15/14.............. 1,501,875
385,000 Dana Credit Corp. -- 144A,
8.38%, 08/15/07.............. 394,387
1,400,000 E*TRADE Financial Corp.,
8.00%, 06/15/11.............. 1,480,500
4,555,000 Ford Motor Credit Company,
7.88%, 06/15/10.............. 4,505,787
200,000 General Motors Acceptance
Corp.,
6.13%, 09/15/06.............. 200,200
1,900,000 General Motors Acceptance
Corp.,
7.25%, 03/02/11.............. 1,783,587
1,540,000 General Motors Acceptance
Corp.,
7.00%, 02/01/12.............. 1,421,414
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 2,300,000 Masonite International Corp.
(Bridge Loan),
9.38%, 10/06/06.............. $ 2,300,000
2,735,000 REFCO Finance Holdings,
9.00%, 08/01/12.............. 2,912,774
620,000 Residential Capital
Corp. -- 144A,
6.88%, 06/30/15.............. 634,793
------------
20,108,630
------------
FOOD AND BEVERAGE -- 1.5%
1,280,000 American Seafood Group LLC,
10.13%, 04/15/10............. 1,372,800
1,550,000 ASG Consolidated LLC/ASG
Finance, Inc.,
zero coupon, 11/01/11(g)..... 1,119,875
1,415,000 Pierre Foods, Inc.,
9.88%, 07/15/12.............. 1,468,063
1,355,000 Pinnacle Foods Holding Corp.,
8.25%, 12/01/13.............. 1,219,500
357,000 United Agriculture Products,
8.25%, 12/15/11.............. 371,280
------------
5,551,518
------------
FUNERAL SERVICES -- 0.3%
1,090,000 Service Corp.
International -- 144A,
7.00%, 06/15/17.............. 1,125,425
------------
LEISURE AND RECREATION -- 5.3%
1,415,000 AMC Entertainment, Inc.,
9.88%, 02/01/12.............. 1,411,463
215,000 Hollywood Casino Shreveport,
13.00%, 08/01/06(h).......... 176,300
2,100,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 2,435,999
2,155,000 LCE Acquisition Corp. -- 144A,
9.00%, 08/01/14.............. 2,095,738
1,460,000 Majestic Star Casino LLC,
9.50%, 10/15/10.............. 1,511,100
460,000 Mohegan Tribal Gaming
Authority,
8.00%, 04/01/12.............. 494,500
1,070,000 OED Corp./Diamond JO,
8.75%, 04/15/12.............. 1,003,125
120,000 Premier Entertainment LLC
(Biloxi) Financial,
10.75%, 02/01/12............. 117,000
250,000 Resort International
Hotel/Casino (Loan
Participation),
8.81%, 03/22/13.............. 250,781
</Table>
See notes to financial statements.
150
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
$ 565,000 Seneca Gaming Corp.,
7.25%, 05/01/12.............. $ 586,894
930,000 Seneca Gaming Corp. -- 144A,
7.25%, 05/01/12.............. 966,038
500,000 Station Casinos, Inc. -- 144A,
6.88%, 03/01/16.............. 516,250
2,560,000 Trump Entertainment Resorts,
Inc.,
8.50%, 06/01/15.............. 2,511,999
1,807,000 Waterford Gaming LLC -- 144A,
8.63%, 09/15/12.............. 1,919,938
3,930,000 Wynn Las Vegas LLC/Capital
Corp. -- 144A,
6.63%, 12/01/14.............. 3,841,574
------------
19,838,699
------------
MACHINERY -- 0.9%
620,000 Flowserve Corp.,
12.25%, 08/15/10............. 672,700
745,000 Terex Corp., Series B,
10.38%, 04/01/11............. 812,050
305,000 The Manitowoc Company, Inc.,
10.50%, 08/01/12............. 346,175
1,570,000 Thermadyne Holdings Corp.,
9.25%, 02/01/14.............. 1,460,100
------------
3,291,025
------------
MANUFACTURING -- 2.0%
455,000 Aearo Company I,
8.25%, 04/15/12.............. 457,275
800,000 Amsted Industries,
Inc. -- 144A,
10.25%, 10/15/11............. 868,000
3,585,000 Dresser, Inc.,
9.38%, 04/15/11.............. 3,791,137
515,000 Goodman Global Holding
Company -- 144A,
Floating Rate,
6.41%, 06/15/12(n)........... 509,850
15,000 Koppers, Inc.,
9.88%, 10/15/13.............. 16,275
720,000 MAAX Corp. (Canada),
9.75%, 06/15/12.............. 639,000
1,035,000 Samsonite Corp.,
8.88%, 06/01/11.............. 1,104,863
720,000 Venture Holdings Trust, Series
B,
9.50%, 02/01/06(h)........... 3,600
------------
7,390,000
------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.1%
1,250,000 Ardent Health Services,
10.00%, 08/15/13............. 1,517,188
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDICAL AND OTHER HEALTH SERVICES (CONTINUED)
$ 270,000 Concentra Operating Corp.,
9.50%, 08/15/10.............. $ 288,900
220,000 Concentra Operating Corp.,
9.13%, 06/01/12.............. 234,300
700,000 HEALTHSOUTH Corp.,
8.38%, 10/01/11.............. 698,250
985,000 HEALTHSOUTH Corp.,
7.63%, 06/01/12.............. 960,375
800,000 National Mentor, Inc. -- 144A,
9.63%, 12/01/12.............. 846,000
315,000 Psychiatric Solutions,
Inc. -- 144A,
7.75%, 07/15/15.............. 317,756
1,570,000 US Oncology, Inc.,
9.00%, 08/15/12.............. 1,687,750
1,345,000 US Oncology, Inc.,
10.75%, 08/15/14............. 1,472,775
------------
8,023,294
------------
MEDICAL EQUIPMENT AND SUPPLIES -- 1.6%
1,345,000 CDRV Investors, Inc. -- 144A,
zero coupon, 01/01/15(g)..... 665,775
870,000 Inverness Medical Innovations,
8.75%, 02/15/12.............. 867,825
710,000 Medical Device Manufacturing,
Inc., Series B,
10.00%, 07/15/12............. 766,800
1,375,000 Medquest, Inc., Series B,
11.88%, 08/15/12............. 1,306,250
1,085,000 Norcross Safety Products LLC --
Series B,
9.88%, 08/15/11.............. 1,139,250
175,000 Rotech Healthcare, Inc.,
9.50%, 04/01/12.............. 188,125
350,000 Safety Products
Holdings -- 144A,
11.75%, 01/01/12(o).......... 335,125
885,000 VWR International, Inc.,
8.00%, 04/15/14.............. 847,388
------------
6,116,538
------------
METALS AND MINING -- 1.7%
630,000 Chaparral Steel
Company -- 144A,
10.00%, 07/15/13............. 636,300
1,349,000 Ispat Inland ULC,
9.75%, 04/01/14.............. 1,578,330
1,635,000 Mueller Group, Inc.,
10.00%, 05/01/12............. 1,724,924
1,240,000 Mueller Holdings (NA), Inc.,
zero coupon, 04/15/14(g)..... 911,400
</Table>
See notes to financial statements.
151
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
METALS AND MINING (CONTINUED)
$ 1,130,000 Novelis, Inc. -- 144A (Canada),
7.25%, 02/15/15.............. $ 1,139,888
375,000 Oregon Steel Mills, Inc.,
10.00%, 07/15/09............. 405,938
------------
6,396,780
------------
OIL AND GAS: PIPELINES -- 2.2%
365,000 ANR Pipeline Company,
8.88%, 03/15/10.............. 402,204
1,285,000 Dynegy Holdings, Inc.,
7.63%, 10/15/26.............. 1,230,388
675,000 Dynegy Holdings, Inc. -- 144A,
10.13%, 07/15/13............. 766,125
105,000 El Paso CGP Company,
7.50%, 08/15/06.............. 107,888
740,000 El Paso CGP Company,
9.63%, 05/15/12.............. 814,000
775,000 El Paso Corp. -- 144A,
7.63%, 08/16/07.............. 798,250
485,000 El Paso Corp., Series MTN,
6.95%, 12/15/07.............. 492,881
380,000 Northwest Pipeline Corp.,
8.13%, 03/01/10.............. 414,200
275,000 Southern Natural Gas Company,
8.88%, 03/15/10.............. 303,030
2,510,000 TransMontaigne, Inc.,
9.13%, 06/01/10.............. 2,622,949
375,000 Williams Companies, Inc.,
8.75%, 03/15/32.............. 452,344
------------
8,404,259
------------
OIL, COAL AND GAS -- 3.0%
415,000 Alpha Natural
Resources -- 144A,
10.00%, 06/01/12............. 460,650
160,000 El Paso Production Holding
Company,
7.75%, 06/01/13.............. 171,600
695,000 Giant Industries, Inc.,
8.00%, 05/15/14.............. 728,013
2,485,000 Hanover Compressor Company,
zero coupon, 03/31/07(g)..... 2,199,224
580,000 Hanover Equipment Trust, Series
B,
8.75%, 09/01/11.............. 619,150
390,000 Ocean Rig Norway AS -- 144A
(Norway),
8.38%, 07/01/13.............. 396,825
525,000 Parker Drilling Company,
9.63%, 10/01/13.............. 594,563
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$ 1,125,000 Petrobras International Finance
(Cayman Islands),
9.13%, 07/02/13.............. $ 1,285,313
175,000 Petrobras International Finance
(Cayman Islands),
7.75%, 09/15/14.............. 184,625
1,470,700 Port Arthur Finance Corp.,
12.50%, 01/15/09............. 1,669,244
295,000 Premcor Refining Group,
7.75%, 02/01/12.............. 323,763
440,000 Ram Energy, Inc.,
11.50%, 02/15/08............. 464,200
290,000 Titan Petrochemicals -- 144A
(Bermuda),
8.50%, 03/18/12.............. 265,350
1,255,000 United Refining Company,
10.50%, 08/15/12............. 1,295,787
360,000 United Refining
Company -- 144A,
10.50%, 08/15/12............. 371,700
------------
11,030,007
------------
PAPER AND FOREST PRODUCTS -- 2.8%
70,000 Boise Cascade LLC -- 144A,
Floating Rate,
6.02%, 10/15/12(b)........... 71,050
170,000 Caraustar Industries, Inc.,
7.38%, 06/01/09.............. 170,000
2,225,000 Caraustar Industries, Inc.,
9.88%, 04/01/11.............. 2,252,813
1,185,000 Georgia-Pacific Corp.,
9.50%, 12/01/11.............. 1,436,813
1,385,000 Georgia-Pacific Corp.,
9.38%, 02/01/13.............. 1,573,706
1,545,000 Mercer International, Inc.,
9.25%, 02/15/13.............. 1,243,725
790,000 Newark Group, Inc.,
9.75%, 03/15/14.............. 730,750
2,620,000 Newpage Corp. -- 144A,
10.00%, 05/01/12............. 2,639,649
375,000 Norske Skog Ltd., Series D,
(Canada),
8.63%, 06/15/11.............. 388,594
------------
10,507,100
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.2%
890,000 Warner Chilcott Corp. -- 144A,
8.75%, 02/01/15.............. 869,975
------------
</Table>
See notes to financial statements.
152
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRINTING AND PUBLISHING -- 4.1%
$ 515,000 American Media Operations,
Inc.,
8.88%, 01/15/11.............. $ 490,538
3,910,000 American Media Operations,
Inc., Series B,
10.25%, 05/01/09............. 3,929,549
1,195,000 CanWest Media, Inc. (Canada),
10.63%, 05/15/11............. 1,310,019
2,281,634 CanWest Media, Inc. (Canada),
8.00%, 09/15/12.............. 2,412,828
410,000 CBD Media LLC/CBD Finance,
Inc.,
8.63%, 06/01/11.............. 424,350
1,241,000 Dex Media West Finance Company,
Series B,
9.88%, 08/15/13.............. 1,420,945
1,850,000 Houghton Mifflin Company,
8.25%, 02/01/11.............. 1,928,625
1,680,000 Houghton Mifflin Company,
9.88%, 02/01/13.............. 1,801,800
500,000 Houghton Mifflin Company,
zero coupon, 10/15/13(g)..... 367,500
101,310 Merrill Corp., Series A,
Variable Rate,
12.00%, 05/01/09(a).......... 108,402
185,000 Merrill Corp., Series B,
Variable Rate,
12.00%, 05/01/09(a).......... 197,950
1,000,000 Primedia, Inc., Floating Rate,
8.64%, 05/15/10(b)........... 1,050,000
------------
15,442,506
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.4%
130,000 CB Richard Ellis Services,
Inc.,
9.75%, 05/15/10.............. 144,950
500,000 CB Richard Ellis Services,
Inc.,
11.25%, 06/15/11............. 557,500
830,000 HydroChem Industrial Services,
Inc. -- 144A,
9.25%, 02/15/13.............. 771,900
------------
1,474,350
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.7%
350,000 FelCor Lodging LP, Floating
Rate,
7.78%, 06/01/11(n)........... 362,250
150,000 Host Marriott LP -- 144A,
6.38%, 03/15/15.............. 149,250
1,605,000 MeriStar Hospitality Operating
Partnership LP/ MeriStar
Hospitality Finance Corp.,
10.50%, 06/15/09............. 1,725,375
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$ 485,000 Ventas Realty LP/Ventas Capital
Corp. -- 144A,
7.13%, 06/01/15.............. $ 506,825
------------
2,743,700
------------
RETAIL -- 0.2%
875,000 Rite Aid Corp.,
7.13%, 01/15/07.............. 881,563
------------
SEMICONDUCTORS -- 1.7%
2,270,000 Advanced Micro Devices, Inc.,
7.75%, 11/01/12.............. 2,247,300
705,000 Amkor Technologies, Inc.,
7.13%, 03/15/11.............. 613,350
4,065,000 Amkor Technologies, Inc.,
7.75%, 05/15/13.............. 3,516,225
------------
6,376,875
------------
SPECIAL PURPOSE ENTITY -- 7.3%
215,000 Altra Industrial Motion,
Inc. -- 144A,
9.00%, 12/01/11.............. 204,250
1,170,000 AMR Holding Company/Emcare
Holding Company -- 144A,
10.00%, 02/15/15............. 1,251,900
455,000 Aventine Renewable Energy
Holdings, Inc. -- 144A,
Floating Rate,
9.41%, 12/15/11(b)........... 439,075
535,000 Borden US Finance/Nova
Scotia -- 144A,
9.00%, 07/15/14.............. 547,038
892,789 Caithness Coso Funding Corp.,
Series B,
9.05%, 12/15/09.............. 961,980
1,375,000 Chukchansi Economic Development
Authority -- 144A,
14.50%, 06/15/09............. 1,687,813
450,000 CPI Holdco, Inc., Floating
Rate,
8.83%, 02/01/15(n)........... 443,464
1,381,000 Crystal US Holdings 3 LLC/
Crystal US Sub 3 Corp. --
Series B,
zero coupon, 10/01/14(g)..... 966,700
140,000 Huntsman Advanced Materials,
11.00%, 07/15/10............. 158,900
673,000 Interline Brands, Inc.,
11.50%, 05/15/11............. 743,665
665,000 JSG Funding PLC -- 144A
(Ireland),
7.75%, 04/01/15.............. 548,625
</Table>
See notes to financial statements.
153
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY (CONTINUED)
$ 1,810,000 Marquee Holdings, Inc.,
zero coupon, 08/15/14(g)..... $ 1,113,150
1,175,000 MDP Acquisitions PLC (Ireland),
9.63%, 10/01/12.............. 1,180,875
1,750,000 Milacron Escrow Corp.,
11.50%, 05/15/11............. 1,846,250
1,530,000 NSP Holdings/Cap Corp.,
11.75%, 01/01/12(o).......... 1,657,755
1,380,000 Rainbow National Services
LLC -- 144A,
8.75%, 09/01/12.............. 1,514,550
2,155,000 Rainbow National Services
LLC -- 144A,
10.38%, 09/01/14............. 2,489,024
100,000 Standard Aero Holdings,
Inc. -- 144A,
8.25%, 09/01/14.............. 106,000
3,535,000 UGS Corp.,
10.00%, 06/01/12............. 3,941,524
2,465,000 Universal City Development
Partners, Ltd.,
11.75%, 04/01/10............. 2,840,912
275,000 Universal City Florida,
8.38%, 05/01/10.............. 288,063
595,000 Universal City Florida,
Floating Rate,
7.96%, 05/01/10(b)........... 620,288
1,530,000 Vanguard Health Holding Company
II,
9.00%, 10/01/14.............. 1,660,050
------------
27,211,851
------------
SPORTING GOODS AND EQUIPMENT -- 0.0%
185,000 True Temper Sports, Inc.,
8.38%, 09/15/11.............. 172,513
------------
SYNDICATED BANK LOANS -- 0.1%
500,000 Mirant Corp.,
8.63%, 07/17/49(h)........... 378,750
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 11.2%
345,000 Airgate PCS, Inc., Floating
Rate,
6.89%, 10/15/11(b)........... 354,488
65,000 American Tower Corp.,
9.38%, 02/01/09.............. 68,494
2,995,000 Centennial Cellular/
Communications,
10.13%, 06/15/13............. 3,399,324
585,000 General Cable Corp.,
9.50%, 11/15/10.............. 628,875
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 1,310,000 Inmarsat Finance PLC
(United Kingdom),
7.63%, 06/30/12.............. $ 1,388,600
2,620,000 Intelsat Bermuda, Ltd.
(Bermuda),
5.25%, 11/01/08.............. 2,462,800
2,620,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda),
8.25%, 01/15/13.............. 2,718,249
1,825,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda), Floating Rate,
7.81%, 01/15/12(n)........... 1,866,063
765,000 IWO Escrow Company -- 144A,
zero coupon, 01/15/15(g)..... 504,900
185,000 IWO Escrow Company -- 144A,
Floating Rate,
6.89%, 01/15/12(b)........... 184,538
1,000,000 IWO Holdings, Inc.,
14.00%, 01/15/11(h).......... --
3,145,000 LCI International, Inc.,
7.25%, 06/15/07.............. 3,066,374
1,395,000 New Skies Satellites NV -- 144A
(The Netherlands),
9.13%, 11/01/12.............. 1,391,513
645,000 New Skies Satellites NV -- 144A
(The Netherlands),
Floating Rate,
8.54%, 11/01/11(n)........... 661,125
3,095,000 Nortel Networks Corp. (Canada),
4.25%, 09/01/08.............. 2,901,562
485,000 NTL Cable PLC,
(United Kingdom),
8.75%, 04/15/14.............. 507,431
848,000 PanAmSat Corp.,
9.00%, 08/15/14.............. 929,620
1,780,000 Qwest Capital Funding, Inc.,
7.75%, 08/15/06.............. 1,828,950
670,000 Qwest Capital Funding, Inc.,
6.38%, 07/15/08.............. 658,275
290,000 Qwest Capital Funding, Inc.,
7.00%, 08/03/09.............. 284,925
540,000 Qwest Capital Funding, Inc.,
7.90%, 08/15/10.............. 540,000
460,000 Qwest Communications
International,
7.25%, 02/15/11.............. 447,350
2,405,000 Qwest Communications
International -- 144A,
7.50%, 02/15/14.............. 2,287,756
</Table>
See notes to financial statements.
154
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 1,035,000 Qwest Corp.,
7.88%, 09/01/11.............. $ 1,084,163
110,000 Qwest Corp.,
7.20%, 11/10/26.............. 99,550
470,000 Qwest Corp. -- 144A,
7.63%, 06/15/15.............. 482,338
1,075,000 Qwest Services Corp.,
13.50%, 12/15/10............. 1,247,000
580,000 Rogers Wireless, Inc. (Canada),
8.00%, 12/15/12.............. 627,850
2,260,000 Rogers Wireless, Inc. (Canada),
7.50%, 03/15/15.............. 2,469,050
1,065,000 Rogers Wireless, Inc. (Canada),
Floating Rate,
6.54%, 12/15/10(b)........... 1,115,588
60,000 SBA Telecommunications, Inc.,
zero coupon, 12/15/11(g)..... 55,500
450,000 Telemig Celular Participacoes
SA/Amazonia Cel -- 144A
(Brazil),
8.75%, 01/20/09.............. 472,500
1,590,000 Ubiquitel Operating Company,
9.88%, 03/01/11.............. 1,752,975
2,460,000 Western Wireless Corp.,
9.25%, 07/15/13.............. 2,813,624
------------
41,301,350
------------
TRANSPORTATION -- 1.6%
765,000 H-Lines Finance
Holding -- 144A,
zero coupon, 04/01/13(g)..... 592,875
1,620,000 Horizon Lines LLC -- 144A,
9.00%, 11/01/12.............. 1,705,050
285,000 OMI Corp. (Marshall Islands),
7.63%, 12/01/13.............. 285,356
560,000 Progress Rail/Metal -- 144A,
7.75%, 04/01/12.............. 569,800
220,000 Quality Distribution LLC/QD
Capital Corp.,
9.00%, 11/15/10.............. 203,500
610,000 Quality Distribution LLC/QD
Capital Corp. -- 144A,
Floating Rate,
7.64%, 01/15/12(b)........... 594,750
385,000 TFM, SA de CV (Mexico),
12.50%, 06/15/12............. 452,375
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TRANSPORTATION (CONTINUED)
$ 1,535,000 TFM, SA de CV -- 144A (Mexico),
9.38%, 05/01/12.............. $ 1,604,075
------------
6,007,781
------------
UTILITIES -- 0.9%
675,000 National Waterworks, Inc.,
Series B,
10.50%, 12/01/12............. 762,750
2,015,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 2,423,038
------------
3,185,788
------------
UTILITIES: ELECTRIC -- 3.5%
553,000 AES Corp.,
9.38%, 09/15/10.............. 629,038
400,000 AES Corp. -- 144A,
8.75%, 05/15/13.............. 449,000
310,000 AES Corp. -- 144A,
9.00%, 05/15/15.............. 349,525
491,412 AES Eastern Energy, Series
99-A,
9.00%, 01/02/17.............. 570,345
1,650,000 Calpine Corp.,
8.25%, 08/15/05.............. 1,647,937
295,000 Calpine Corp.,
7.63%, 04/15/06.............. 278,038
125,000 Calpine Corp.,
8.75%, 07/15/07.............. 98,125
1,130,000 Calpine Corp. -- 144A,
8.75%, 07/15/13.............. 841,850
1,305,000 Inergy LP/Inergy Finance
Corp. -- 144A,
6.88%, 12/15/14.............. 1,275,638
2,750,000 Mission Energy Holding Company,
13.50%, 07/15/08............. 3,279,374
750,000 Nevada Power Company,
9.00%, 08/15/13.............. 847,500
845,000 NRG Energy, Inc. -- 144A,
8.00%, 12/15/13.............. 895,700
255,000 Reliant Energy, Inc.,
9.25%, 07/15/10.............. 279,225
915,000 Reliant Energy, Inc.,
9.50%, 07/15/13.............. 1,020,225
625,000 Reliant Energy, Inc.,
6.75%, 12/15/14.............. 614,063
------------
13,075,583
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $333,912,400).......... 339,563,433
------------
</Table>
See notes to financial statements.
155
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 1.4%
BROADCAST
SERVICES/MEDIA -- 0.3%
54,651 Telewest Global, Inc.
(United Kingdom)*............ $ 1,244,950
------------
FINANCIAL SERVICES -- 0.0%
1,745,000 Trump Atlantic City(q)......... 62,528
------------
LEISURE AND RECREATION -- 0.4%
109,445 Trump Entertainment Resorts,
Inc.*........................ 1,488,457
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.7%
11,585 Crown Castle International
Corp.*....................... 235,407
31,250 IWO Holdings, Inc.*............ 1,117,188
16,540 NTL, Inc.*..................... 1,131,666
------------
2,484,261
------------
TOTAL COMMON STOCKS
(Cost $4,274,737)............ 5,280,196
------------
CONVERTIBLE PREFERRED STOCKS -- 0.9%
OIL AND GAS: PIPELINES -- 0.3%
11,465 Williams Companies,
Inc. -- 144A, 5.50%.......... 1,043,315
------------
OIL, COAL AND GAS -- 0.1%
2,400 Chesapeake Energy Corp.,
5.00%........................ 349,800
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.4%
38,375 Crown Castle International
Corp., 6.25%................. 1,842,000
------------
UTILITIES: ELECTRIC -- 0.1%
245 NRG Energy, Inc. -- 144A,
4.00%........................ 268,489
------------
TOTAL CONVERTIBLE PREFERRED
STOCKS
(Cost $2,797,993)............ 3,503,604
------------
WARRANTS -- 0.2%
1,125 American Tower Corp., Expires
08/01/08*.................... 332,843
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*.................... 262,500
84 New World Coffee, Expires
06/20/06*(q)................. 1
1,000 ONO Finance PLC, (United
Kingdom), Expires
03/16/11*(q)................. --
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
WARRANTS (CONTINUED)
250 UbiquiTel, Inc. -- 144A,
Expires 04/15/10*(q)......... $ --
------------
TOTAL WARRANTS
(Cost $75,402)............... 595,344
------------
<Caption>
PRINCIPAL
---------
CONVERTIBLE BONDS -- 0.3%
LEISURE AND RECREATION -- 0.2%
$ 645,000 Kerzner International -- 144A
(Bahama Islands),
2.38%, 04/15/24.............. 727,238
------------
SEMICONDUCTORS -- 0.1%
440,000 Amkor Technologies, Inc.,
5.75%, 06/01/06.............. 415,800
------------
TOTAL CONVERTIBLE BONDS
(Cost $1,077,110)............ 1,143,038
------------
TOTAL SECURITIES
(Cost $342,137,642).......... 350,085,615
------------
REPURCHASE AGREEMENT -- 6.7%
25,098,512 With Investors Bank and Trust,
dated 06/30/05, 2.61%, due
07/01/05, repurchase proceeds
at maturity $25,100,331
(Collateralized by Fannie Mae
4.43%, due 02/01/34 with
value of $21,000,000 and
Small Business
Administration, 6.38%, due
10/25/14 with a value of
$5,353,437) (Cost
$25,098,512)................. 25,098,512
------------
Total Investments -- 100.4%
(Cost $367,236,154).......... 375,184,127
Liabilities less other
assets -- (0.4)%............. (1,608,583)
------------
NET ASSETS -- 100.0%........... $373,575,544
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $367,236,154.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............. $14,202,696
Gross unrealized depreciation............. (6,254,723)
-----------
Net unrealized appreciation............... $ 7,947,973
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
156
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS -- 97.7%
ADVERTISING -- 0.2%
90,293 Publicis Groupe*(d) $ 2,669,419 FRA
--------------
AEROSPACE AND DEFENSE -- 1.2%
1,565,500 Bae Systems PLC...... 8,050,081 BRI
275,458 European Aeronautic
Defense and Space
Company*(d)........ 8,783,654 NET
--------------
16,833,735
--------------
AGRICULTURE -- 0.3%
11,951,000 Chaoda Modern
Agriculture
(Holdings),
Ltd. .............. 4,729,034 CAY
--------------
AIRLINES -- 0.8%
344,219 British Airways
PLC*............... 1,625,102 BRI
1,710,200 Qantas Airways,
Ltd. .............. 4,387,080 AUS
125,500 Ryanair Holdings PLC
(ADR)*(d).......... 5,627,421 IRE
--------------
11,639,603
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.8%
53,985 Adidas-Salomon AG.... 9,048,851 GER
242,300 Benetton Group SpA... 2,235,798 ITA
--------------
11,284,649
--------------
AUTOMOBILES/MOTOR VEHICLES -- 3.1%
147,200 DaimlerChrysler AG*.. 5,981,742 GER
117,200 Honda Motor Company,
Ltd. .............. 5,780,218 JPN
1,122,800 Nissan Motor Company,
Ltd. .............. 11,115,629 JPN
608,200 Toyota Motor Corp.... 21,770,391 JPN
--------------
44,647,980
--------------
AUTOMOTIVE EQUIPMENT -- 1.4%
252,900 Aisin Seiki Company,
Ltd. .............. 5,483,947 JPN
127,500 Alpine Electronics,
Inc.(d)............ 1,857,722 JPN
10,200 Georg Fischer
AG*(d)............. 3,120,094 SWI
1,128,000 GKN PLC.............. 5,214,277 BRI
113,276 Valeo SA*(d)......... 5,085,703 FRA
--------------
20,761,743
--------------
BANKS -- 20.7%
589,000 ABN AMRO Holding
NV*................ 14,505,039 NET
69,300 Allied Irish Banks
PLC................ 1,484,382 IRE
241,200 Allied Irish Banks
PLC*............... 5,186,853 IRE
818,357 Banco Bilbao Vizcaya
Argentaria SA...... 12,636,671 SPA
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
709,400 Banco Comercial
Portugues SA --
Class R*........... $ 1,819,978 POR
403,900 Banco Santander
Central Hispano
SA................. 4,687,396 SPA
2,176,600 Barclays PLC......... 21,663,467 BRI
301,731 Bayerische Hypo- und
Vereinsbank AG (HVB
Group)*............ 7,854,156 GER
222,100 BNP Paribas SA(d).... 15,239,504 FRA
183,200 Canadian Imperial
Bank of Commerce... 11,332,622 CDA
204,100 Commonwealth Bank of
Australia.......... 5,895,947 AUS
475,728 Credit Suisse
Group*............. 18,765,549 SWI
169,200 Danske Bank A/S...... 5,090,716 DEN
19,400 Deutsche Bank AG..... 1,519,191 GER
476,800 Dexia................ 10,507,161 BEL
250,800 DNB NOR ASA.......... 2,619,577 NOR
115,820 EFG Eurobank
Ergasias........... 3,574,069 GRC
89,200 ForeningsSparbanken
AB*................ 1,958,281 SWE
105,300 Fortis*.............. 2,924,491 BEL
575,000 HBOS PLC............. 8,865,108 BRI
135,700 IKB Deutsche
Industriebank AG*.. 3,683,395 GER
1,238,200 Joyo Bank, Ltd. ..... 6,050,892 JPN
132,200 Laurentian Bank of
Canada............. 2,919,794 CDA
2,249,000 Lloyds TSB Group
PLC................ 19,059,693 BRI
1,118 Mitsubishi Tokyo
Financial Group,
Inc. .............. 9,485,511 JPN
70,200 National Australia
Bank, Ltd.*........ 1,643,699 AUS
194,800 National Bank of
Canada............. 8,650,888 CDA
60,100 National Bank of
Greece SA.......... 2,042,259 GRC
1,472,300 Nordea Bank AB....... 13,381,376 SWE
327,700 SanPaolo IMI
SpA*(d)............ 4,504,992 ITA
153,700 Societe Generale..... 15,651,905 FRA
735,553 Standard Chartered
PLC................ 13,442,481 BRI
490,100 Suncorp-Metway,
Ltd. .............. 7,502,319 AUS
</Table>
See notes to financial statements.
157
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
792,000 The Sumitomo Trust
and Banking
Company, Ltd. ..... $ 4,820,124 JPN
360,950 UBS AG............... 28,166,211 SWI
--------------
299,135,697
--------------
BROADCAST SERVICES/MEDIA -- 3.2%
193,500 Grupo Televisa SA
(ADR).............. 12,014,415 MEX
771,076 SES Global (FDR)..... 11,617,314 LUX
883,200 Seven Network,
Ltd. .............. 4,672,428 AUS
578,910 Vivendi Universal
SA(d).............. 18,256,801 FRA
--------------
46,560,958
--------------
BUSINESS SERVICES AND SUPPLIES -- 1.3%
1,677,379 Capita Group PLC..... 11,059,725 BRI
2,162,700 Marubeni Corp. ...... 7,429,345 JPN
--------------
18,489,070
--------------
CHEMICALS -- 1.2%
45,100 Akzo Nobel NV........ 1,778,144 NET
17,700 Ciba Specialty
Chemicals AG....... 1,031,752 SWI
48,906 KS AG................ 2,709,425 GER
264,800 Methanex Corp. ...... 4,339,850 CDA
2,205,600 Mitsubishi Chemical
Corp. ............. 6,463,078 JPN
257,500 Sumitomo Bakelite
Company, Ltd. ..... 1,666,982 JPN
--------------
17,989,231
--------------
COMPUTER SOFTWARE AND SERVICES -- 1.6%
178,086 Dassault Systemes
SA*(d)............. 8,631,206 FRA
64,883 SAP AG (System,
Anwendungen,
Produkte in der
Datenverarbeitung)*.. 11,307,402 GER
148,824 TomTom NV*........... 3,267,002 NET
--------------
23,205,610
--------------
COMPUTERS AND OFFICE EQUIPMENT -- 0.1%
7,450 Creative Technology,
Ltd. .............. 49,052 SIN
2,043,000 TPV Technology,
Ltd. .............. 1,419,663 HNG
--------------
1,468,715
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.2%
353,700 Barratt Developments
PLC................ 4,540,635 BRI
159,300 Compagnie de Saint-
Gobain............. 8,846,531 FRA
644,700 George Wimpey PLC.... 5,070,928 BRI
43,500 Lafarge SA*.......... 3,966,539 FRA
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES (CONTINUED)
91,000 Maeda Road
Construction
Company, Ltd. ..... $ 649,004 JPN
2,189,400 Pilkington PLC....... 4,697,491 BRI
211,200 The Berkeley Group
Holdings PLC....... 3,462,424 BRI
--------------
31,233,552
--------------
CONSUMER GOODS AND SERVICES -- 2.4%
201,048 Imperial Tobacco
Group PLC.......... 5,414,072 BRI
711 Japan Tobacco,
Inc. .............. 9,487,694 JPN
35,493 LVMH Moet Hennessy
Louis Vuitton
SA*................ 2,744,623 FRA
163,672 Reckitt Benckiser
PLC*............... 4,823,981 BRI
19,886 Swatch Group AG --
Class B............ 2,793,195 SWI
319,551 Swatch Group AG*..... 9,138,934 SWI
--------------
34,402,499
--------------
DISTRIBUTION -- 0.8%
1,593,000 Esprit Holdings,
Ltd.*.............. 11,530,852 BER
--------------
DIVERSIFIED SERVICES -- 0.9%
189,300 BASF AG.............. 12,599,477 GER
--------------
ELECTRONICS -- 4.7%
1,099,000 AU Optronics Corp.
(ADR)*(d).......... 18,617,061 TWN
9,543,000 Chi Mei
Optoelectroics
Corp. ............. 14,853,036 TWN
209,000 Hosiden Corp.(d)..... 2,119,962 JPN
33,900 Keyence Corp. ....... 7,598,539 JPN
253,150 LG Philips LCD
Company, Ltd.*..... 11,770,435 KOR
213,000 Matsushita Electric
Industrial Company,
Ltd. .............. 3,232,161 JPN
427,000 Nippon Electric Glass
Company, Ltd. ..... 6,452,547 JPN
810,100 Toshiba Tec Corp. ... 3,593,627 JPN
--------------
68,237,368
--------------
ENGINEERING -- 0.3%
89,871 SNC-Lavalin Group,
Inc. .............. 5,031,954 CDA
--------------
FINANCIAL SERVICES -- 3.6%
497,100 Alliance & Leicester
PLC................ 7,793,224 BRI
800,900 Bradford & Bingley
PLC................ 4,699,535 BRI
226,900 Hitachi Capital
Corp. ............. 4,490,537 JPN
</Table>
See notes to financial statements.
158
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
155,500 Irish Life &
Permanent PLC...... $ 2,722,940 IRE
315,800 Japan Securities
Finance Company,
Ltd. .............. 2,013,079 JPN
16,000 Orix Corp. .......... 2,400,505 JPN
96,700 Promise Company,
Ltd. .............. 6,199,053 JPN
225,700 Sampo Oyj -- Class
A.................. 3,517,925 FIN
38,300 Sanyo Shinpan Finance
Company, Ltd. ..... 2,631,377 JPN
119,100 Sun Life Financial,
Inc. .............. 4,011,800 CDA
103,500 Takefuji Corp. ...... 6,998,918 JPN
1,522,000 Tokai Tokyo
Securities Company,
Ltd. .............. 4,583,428 JPN
--------------
52,062,321
--------------
FOOD AND BEVERAGE -- 2.3%
464,700 Asahi Breweries,
Ltd. .............. 5,539,026 JPN
42,200 Fraser and Neave,
Ltd. .............. 393,001 SIN
17,514 Groupe Danone........ 1,540,845 FRA
1,537,300 Northern Foods PLC... 4,351,921 BRI
64,765 Pernod Ricard(d)..... 10,345,548 FRA
135,288 Royal Numico NV...... 5,415,817 NET
695,700 Tate & Lyle PLC...... 5,945,737 BRI
--------------
33,531,895
--------------
INSURANCE -- 5.6%
1,052,600 Aviva PLC............ 11,730,568 BRI
278,584 AXA.................. 6,968,445 FRA
612,400 Britannic Group PLC.. 5,582,194 BRI
105,800 CNP Assurances....... 6,772,992 FRA
1,939,300 Friends Provident
PLC................ 6,323,852 BRI
422,900 ING Groep NV*........ 11,960,121 NET
696,775 Milano Assicurazioni
SpA................ 4,342,492 ITA
3,634,200 Old Mutual PLC....... 7,943,903 BRI
358,800 Pohjola Group PLC --
Class D(d)......... 5,210,422 FIN
84,528 Zurich Financial
Services AG*....... 14,564,012 SWI
--------------
81,399,001
--------------
LEISURE AND RECREATION -- 1.7%
3,022,985 EMI Group PLC........ 13,757,357 BRI
261,000 NAMCO, Ltd. ......... 3,473,411 JPN
304,500 TUI AG*(d)........... 7,550,374 GER
--------------
24,781,142
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
MACHINERY -- 1.6%
148,400 MAN AG*(d)........... $ 6,165,196 GER
15,900 Rieter Holding AG.... 4,404,604 SWI
82,500 Saurer AG*........... 5,150,215 SWI
162,400 Stork NV............. 6,731,096 NET
--------------
22,451,111
--------------
MANUFACTURING -- 0.2%
704,000 Kurabo Industries,
Ltd. .............. 1,751,907 JPN
496,000 Nippon Paint Company,
Ltd. .............. 1,833,559 JPN
--------------
3,585,466
--------------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.6%
126,640 Essilor International
SA CIE Generale
D'Optique.......... 8,658,817 FRA
--------------
METALS AND MINING -- 2.0%
1,257,100 BlueScope Steel,
Ltd. .............. 7,875,324 AUS
107,600 Companhia Vale do Rio
Doce (ADR)......... 3,150,528 BRA
331,500 Rautaruukki Oyj...... 4,954,384 FIN
78,100 Russel Metals,
Inc. .............. 882,864 CDA
82,700 Salzgitter AG........ 2,245,782 GER
308,300 Sims Group, Ltd. .... 3,482,621 AUS
396,900 ThyssenKrupp AG...... 6,911,640 GER
--------------
29,503,143
--------------
OIL, COAL AND GAS -- 10.5%
2,182,200 Cosmo Oil Company,
Ltd. .............. 9,247,444 JPN
150,700 EnCana Corp. ........ 5,944,606 CDA
1,114,816 Eni SpA(d)........... 28,749,206 ITA
73,700 ERG SpA.............. 1,426,117 ITA
83,300 Fording Canadian Coal
Trust.............. 7,626,995 CDA
35,460 Hellenic Petroleum
SA................. 379,341 GRC
287,100 Husky Energy,
Inc. .............. 11,418,857 CDA
12,100 OMV AG............... 5,271,267 AST
2,114,000 Osaka Gas Company,
Ltd. .............. 6,652,114 JPN
250,212 Petro-Canada......... 16,286,653 CDA
287,000 Repsol YPF SA........ 7,349,144 SPA
2,958,700 Shell Transport &
Trading Company
PLC................ 28,771,734 BRI
722,700 Snam Rete Gas SpA.... 3,869,996 ITA
114,800 Talisman Energy,
Inc. .............. 4,300,784 CDA
61,400 Total SA -- Class
B.................. 14,437,114 FRA
--------------
151,731,372
--------------
</Table>
See notes to financial statements.
159
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
PAPER AND FOREST PRODUCTS -- 0.6%
231,000 Billerud(d).......... $ 2,764,838 SWE
660,000 Hokuetsu Paper Mills,
Ltd. .............. 3,487,152 JPN
301,800 Norbord, Inc. ....... 2,581,508 CDA
--------------
8,833,498
--------------
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT --
3.4%
163,381 AstraZeneca PLC...... 6,764,984 BRI
158,400 Eisai Company,
Ltd. .............. 5,327,130 JPN
173,800 GlaxoSmithKline PLC.. 4,206,980 BRI
122,371 Merck KGaA*.......... 9,754,508 GER
128,029 Roche Holding AG..... 16,204,685 SWI
114,700 Taisho Pharmaceutical
Company, Ltd. ..... 2,233,811 JPN
476,000 Tanabe Seiyaku
Company, Ltd. ..... 4,592,192 JPN
--------------
49,084,290
--------------
PRINTING AND PUBLISHING -- 0.2%
228,978 CIR SpA.............. 633,168 ITA
126,000 Quebecor World,
Inc. .............. 2,468,169 CDA
--------------
3,101,337
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.5%
57,042 Unibail(d)........... 7,324,017 FRA
--------------
REGISTERED INVESTMENT COMPANIES -- 0.6%
3,274,622 Macquarie Airports... 8,923,659 AUS
--------------
RETAIL -- 1.9%
2,974,038 Carphone Warehouse
PLC................ 9,817,916 BRI
1,912,500 Dixons Group PLC..... 5,379,803 BRI
168,300 Hudson's Bay
Company............ 2,061,854 CDA
590,900 JJB Sports PLC....... 1,900,394 BRI
334,610 Kesa Electricals
PLC................ 1,675,660 BRI
196,900 RONA, Inc.*.......... 3,966,285 CDA
10,300 Valora Holding AG*... 2,332,872 SWI
--------------
27,134,784
--------------
RETAIL: SUPERMARKETS -- 2.0%
110,592 Carrefour SA......... 5,366,700 FRA
1,090,862 J Sainsbury PLC...... 5,575,204 BRI
2,110,517 Koninklijke Ahold
NV*................ 17,367,486 NET
--------------
28,309,390
--------------
RUBBER PRODUCTS -- 0.2%
150,000 Bridgestone Corp. ... 2,887,476 JPN
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS -- 0.5%
793,485 Taiwan Semiconductor
Manufacturing
Company, Ltd.
(ADR).............. $ 7,236,583 TWN
--------------
TELECOMMUNICATIONS EQUIPMENT AND SERVICES --
5.7%
3,290,400 BT Group PLC......... 13,559,442 BRI
159,600 Elcoteq Network
Corp. -- Class
A(d)............... 3,136,593 FIN
149,685 France Telecom
SA*(d)............. 4,376,374 FRA
1,765,000 MobileOne, Ltd.*..... 2,282,350 SIN
3,500 Nippon Telegraph and
Telephone Corp. ... 14,989,632 JPN
747,300 Nokia Oyj (ADR)...... 12,435,072 FIN
81,600 Research In Motion,
Ltd.*.............. 6,018,000 CDA
20,800 Swisscom AG(d)....... 6,784,549 SWI
96,700 TDC A/S.............. 4,146,204 DEN
3,037,000 Telefonaktiebolaget
LM Ericsson --
Class B............ 9,758,085 SWE
2,073,280 Vodafone Group PLC... 5,051,986 BRI
--------------
82,538,287
--------------
TOOLS -- 0.3%
418,000 Hitachi Koki Company,
Ltd. .............. 3,930,881 JPN
--------------
TRANSPORTATION -- 1.9%
92,132 Canadian National
Railway Company.... 5,314,961 CDA
163,300 Canadian Pacific
Railway, Ltd. ..... 5,649,924 CDA
25,629 Kuehne & Nagel
International AG... 5,439,788 SWI
2,158,000 Neptune Orient Lines,
Ltd. .............. 4,838,651 SIN
1,508,100 Orient Overseas
International,
Ltd. .............. 6,598,301 BER
--------------
27,841,625
--------------
UTILITIES -- 1.7%
70,000 E.ON AG*............. 6,241,470 GER
676,300 Kelda Group PLC...... 8,463,910 BRI
147,300 Suez SA(d)........... 3,998,262 FRA
548,800 United Utilities
PLC................ 6,489,681 BRI
--------------
25,193,323
--------------
UTILITIES: ELECTRIC -- 2.6%
78,200 Chubu Electric Power
Company, Inc.(d)... 1,875,503 JPN
613,500 Endesa SA(d)......... 14,410,508 SPA
</Table>
See notes to financial statements.
160
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
UTILITIES: ELECTRIC (CONTINUED)
1,130,300 Energias de Portugal
SA................. $ 2,845,092 POR
314,200 Hokkaido Electric
Power Company,
Inc................ 6,430,746 JPN
245,100 Shikoku Electric
Power Company,
Inc................ 4,883,879 JPN
239,900 Union Fenosa SA...... 7,318,840 SPA
--------------
37,764,568
--------------
UTILITIES: GAS -- 0.3%
954,800 Toho Gas Company,
Ltd................ 3,960,040 JPN
--------------
TOTAL COMMON STOCKS
(Cost
$1,266,249,224).... 1,414,219,172
--------------
RIGHTS -- 0.0%
AUTOMOTIVE EQUIPMENT
390,900 TI Automotive,
Ltd. -- Class A*(q)
(Cost $0) -- BRI
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 9.4%
$136,187,298 Securities Lending
Collateral
Investment (Note 4)
(Cost
$136,187,298)...... 136,187,298 USA
--------------
TOTAL SECURITIES
(Cost
$1,402,436,522).... 1,550,406,470
--------------
REPURCHASE AGREEMENT -- 1.6%
22,882,397 With Investors Bank
and Trust, dated
06/30/05, 2.61%,
due 07/01/05,
repurchase proceeds
at maturity
$22,884,056
(Collateralized by
Fannie Mae
Adjustable Rate
Mortgage, 5.56%,
due 05/01/32, with
a value of
$4,443,986 and
Small Business
Administration,
5.59%, due
05/25/29, with a
value of
$19,582,531) (Cost
$22,882,397) 22,882,397 USA
--------------
Total
Investments -- 108.7%
(Cost
$1,425,318,919).... 1,573,288,867
Liabilities less
other
assets -- (8.7)%... (126,194,692)
--------------
NET ASSETS --100.0%.. $1,447,094,175
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2005 is $1,425,318,919.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation......... $166,939,790
Gross unrealized depreciation......... (18,969,842)
------------
Net unrealized appreciation........... $147,969,948
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
<Table>
<Caption>
PERCENT OF TOTAL
COUNTRY COMPOSITION INVESTMENTS AT VALUE
- ------------------- --------------------
Australia (AUS)...................... 2.82%
Austria (AST)........................ 0.34
Belgium (BEL)........................ 0.85
Bermuda (BER)........................ 1.15
Brazil (BRA)......................... 0.20
Canada (CDA)......................... 7.04
Cayman Islands (CAY)................. 0.30
Denmark (DEN)........................ 0.59
Finland (FIN)........................ 1.86
France (FRA)......................... 9.59
Germany (GER)........................ 5.95
Greece (GRC)......................... 0.38
Hong Kong (HNG)...................... 0.09
Ireland (IRE)........................ 0.95
Italy (ITA).......................... 2.91
Japan (JPN).......................... 14.46
Korea (KOR).......................... 0.75
Luxembourg (LUX)..................... 0.74
Mexico (MEX)......................... 0.76
Norway (NOR)......................... 0.17
Portugal (POR)....................... 0.30
Singapore (SIN)...................... 0.48
Spain (SPA).......................... 2.95
Sweden (SWE)......................... 1.77
Switzerland (SWI).................... 7.49
Taiwan (TWN)......................... 2.59
The Netherlands (NET)................ 4.44
United Kingdom (BRI)................. 17.97
United States (USA).................. 10.11
------
TOTAL PERCENTAGE..................... 100.00%
======
</Table>
See notes to financial statements.
161
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIOS OF INVESTMENTS
SUMMARY OF FOOTNOTES AND ABBREVIATIONS TO PORTFOLIOS
JUNE 30, 2005
(UNAUDITED)
Footnotes:
* Non-income producing security.
144A Security is exempt from registration under Rule 144A of the Securities Act
of 1933. It may be resold in a transaction exempt from registration,
normally to qualified institutional buyers.
(a) Variable rate security. The rate shown was in effect at June 30, 2005.
(b) Quarterly reset provision. The rate shown was in effect at June 30, 2005.
(c) Monthly reset provision. The rate shown was in effect at June 30, 2005.
(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. Interest rate is based on the credit rating of the
issuer. The rate shown was in effect at June 30, 2005.
(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 June 30, 2005.
(o) PIK ("Payment-In-Kind") bond. These bonds pay interest in the form of
additional bonds.
(p) Security was in bankruptcy reorganization at the time of maturity.
Recovery will be determined at the conclusion of the bankruptcy.
(q) Fair valued at June 30, 2005.
(r) Principal amount shown for this debt security is denominated in Australian
Dollars.
(s) Principal amount shown for this debt security is denominated in Canadian
Dollars.
(t) Principal amount shown for this debt security is denominated in Japanese
Yen.
(u) "Contra-CUSIP" security received as part of a stock split. Exchanged for a
dividend of $2.85846 per share subsequent to June 30, 2005.
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.
- ---------------
- Securities issued by companies registered outside the United States are
denoted with their domestic country in parentheses.
- Footnotes and abbreviations may or may not appear in each portfolio of
investments.
See notes to financial statements.
162
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION
JUNE 30, 2005
(UNAUDITED)
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
MONEY MARKET SERIES
Commercial Paper................................ 34.8%
Repurchase Agreements/Cash Equivalents.......... 22.4
Short Term Corporate Notes...................... 20.6
Yankee Certificates of Deposit.................. 15.2
Short Term US Government Agency Securities...... 5.4
Medium Term Corporate Notes..................... 1.5
Other assets less liabilities................... 0.1
-----
100.0%
=====
HIGH QUALITY BOND SERIES
Corporate Bonds and Notes....................... 76.9%
US Government Agency Securities................. 14.9
Securities Lending Collateral................... 3.4
US Treasury Securities.......................... 3.0
Short Term US Government Agency Securities...... 2.4
Foreign Government Obligations.................. 1.2
Repurchase Agreements/Cash Equivalents.......... 0.9
Liabilities less other assets................... (2.7)
-----
100.0%
=====
INTERMEDIATE GOVERNMENT BOND SERIES
US Treasury Securities.......................... 64.6%
Corporate Bonds and Notes....................... 19.9
Securities Lending Collateral................... 17.8
US Government Agency Securities................. 9.5
Repurchase Agreements/Cash Equivalents.......... 1.9
Liabilities less other assets................... (13.7)
-----
100.0%
=====
CORE BOND SERIES
Corporate Bonds and Notes....................... 41.0%
US Government Agency Securities................. 31.7
US Treasury Securities.......................... 27.0
Short Term US Government Agency Securities...... 6.5
Securities Lending Collateral................... 5.0
Foreign Government Obligations.................. 3.4
Repurchase Agreements/Cash Equivalents.......... 1.1
Short Term Corporate Notes...................... 0.8
Short Term US Treasury Securities............... 0.3
Purchased Put Options........................... 0.0*
Call Options Written............................ (0.0)*
Put Options Written............................. (0.0)*
Securities Sold Short........................... (4.2)
Liabilities less other assets................... (12.6)
-----
100.0%
=====
TOTAL RETURN BOND SERIES
US Treasury Securities.......................... 37.7%
Corporate Bonds and Notes....................... 25.1
US Government Agency Securities................. 21.2
Repurchase Agreement/Cash Equivalents........... 21.1
Foreign Government Obligations.................. 9.8
Preferred Stocks................................ 1.1
Yankee Certificates of Deposit.................. 1.0
Short Term Commercial Paper..................... 1.0
Short Term US Government Agency Securities...... 0.3
Put Options Written............................. (0.0)*
Call Options Written............................ (0.1)
Liabilities less other assets................... (18.2)
-----
100.0%
=====
BALANCED SERIES
Common Stocks................................... 63.3%
Corporate Bond and Notes........................ 10.4
Repurchase Agreements/Cash Equivalents.......... 9.8
US Government Agency Securities................. 8.4
US Treasury Securities.......................... 5.6
Securities Lending Collateral................... 4.6
Foreign Government Obligations.................. 3.9
Short Term Commercial Paper..................... 2.9
Short Term US Government Agency Securities...... 0.8
Preferred Stocks................................ 0.5
Yankee Certificates of Deposit.................. 0.4
Short Term Corporate Notes...................... 0.1
Call Options Written............................ (0.0)*
Put Options Written............................. (0.0)*
Liabilities less other assets................... (10.7)
-----
100.0%
=====
VALUE & INCOME SERIES
Common Stocks................................... 96.9%
Securities Lending Collateral................... 11.2
Repurchase Agreements/Cash Equivalents.......... 3.7
Liabilities less other assets................... (11.8)
-----
100.0%
=====
VALUE SERIES
Common Stocks................................... 97.4%
Repurchase Agreements/Cash Equivalents.......... 2.4
Other assets less liabilities................... 0.2
-----
100.0%
=====
</Table>
See notes to financial statements.
163
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
GROWTH & INCOME SERIES
Common Stocks................................... 98.5%
Securities Lending Collateral................... 11.5
Repurchase Agreements/Cash Equivalents.......... 1.7
Liabilities less other assets................... (11.7)
-----
100.0%
=====
EQUITY GROWTH SERIES
Common Stocks................................... 97.2%
Securities Lending Collateral................... 9.6
Repurchase Agreements/Cash Equivalents.......... 2.9
Liabilities less other assets................... (9.7)
-----
100.0%
=====
MID-CAP VALUE SERIES
Common Stocks................................... 94.3%
Securities Lending Collateral................... 13.1
Repurchase Agreements/Cash Equivalents.......... 5.8
Liabilities less other assets................... (13.2)
-----
100.0%
=====
MID-CAP GROWTH SERIES
Common Stock.................................... 97.3%
Securities Lending Collateral................... 26.3
Repurchase Agreements/Cash Equivalents.......... 3.0
Liabilities less other assets................... (26.6)
-----
100.0%
=====
SMALL-CAP VALUE SERIES
Common Stocks................................... 94.0%
Securities Lending Collateral................... 14.6
Repurchase Agreements/Cash Equivalents.......... 7.9
Liabilities less other assets................... (16.5)
-----
100.0%
=====
SPECIAL EQUITY SERIES
Common Stocks................................... 96.4%
Securities Lending Collateral................... 20.6
Repurchase Agreements/Cash Equivalents.......... 3.4
Short Term US Treasury Securities............... 0.1
Liabilities less other assets................... (20.5)
-----
100.0%
=====
SMALL-CAP GROWTH SERIES
Common Stocks................................... 94.7%
Securities Lending Collateral................... 26.8
Repurchase Agreements/Cash Equivalents.......... 5.2
Liabilities less other assets................... (26.7)
-----
100.0%
=====
AGGRESSIVE EQUITY SERIES
Common Stocks................................... 99.5%
Securities Lending Collateral................... 12.3
Repurchase Agreements/Cash Equivalents.......... 1.0
Liabilities less other assets................... (12.8)
-----
100.0%
=====
HIGH YIELD BOND SERIES
Corporate Bonds and Notes....................... 90.9%
Repurchase Agreements/Cash Equivalents.......... 6.7
Common Stocks................................... 1.4
Convertible Preferred Stocks.................... 0.9
Convertible Bonds............................... 0.3
Warrants........................................ 0.2
Liabilities less other assets................... (0.4)
-----
100.0%
=====
INTERNATIONAL EQUITY SERIES
Common Stocks................................... 97.7%
Securities Lending Collateral................... 9.4
Repurchase Agreements/Cash Equivalents.......... 1.6
Rights.......................................... 0.0*
Liabilities less other assets................... (8.7)
-----
100.0%
=====
</Table>
- ---------------
* Amount rounds to less than 0.05%.
See notes to financial statements.
164
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 eighteen 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 Total Return Bond
Portfolio, the Balanced Portfolio, the Value & Income Portfolio, the Value
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-US 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.
165
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 June 30, 2005, the Core Bond Series, Total Return Bond Series, Balanced
Series, High Yield Bond Series and International Equity Series had outstanding
foreign currency forward contracts as listed in Note 10.
E. WRITTEN OPTIONS AND PURCHASED OPTIONS
Each Series, with the exception the Money Market Series, may write or purchase
options for the purpose of either hedging its exposure to the market
fluctuations of the portfolio, or an individual security position. When a Series
writes an option, an amount equal to the premium received by the Series is
recorded 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 an
option is purchased, the Series will pay a premium. Premiums paid for options
are included as investments and are adjusted to their current market value
daily. 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.
166
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Premiums paid for purchased options that expire unexercised will be treated as
short-term capital losses. If an option which a Series has purchased expires on
its stipulated expiration date, it realizes a loss in the amount of the cost of
the option. If it enters into a closing transaction, it realizes a gain or loss,
depending on whether the proceeds from the sale are greater or less than the
cost of the option. If a Series exercises a put option, it realizes a gain or
loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. If a Series exercises a call
option, the cost of the security which it purchases upon exercise will be
increased by the premium originally paid.
Transactions in options written for the period ended June 30, 2005 were as
follows:
<Table>
<Caption>
CORE BOND TOTAL RETURN BOND BALANCED
----------------------- -------------------- ---------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS CONTRACTS PREMIUMS
----------- --------- --------- -------- ---------- --------
Call options outstanding at
December 31, 2004............ -- $ -- -- $ -- -- $ --
Call options written........... 946 456,786 48 15,213 223 84,125
Call options terminated in
closing purchase
transactions................. (438) (198,039) -- -- (81) (39,116)
Call options expired........... -- -- -- -- -- --
----------- --------- --- -------- ---------- --------
Call options outstanding at
June 30, 2005................ 508 $ 258,747 48 $ 15,213 142 $ 45,009
=========== ========= === ======== ========== ========
Put options outstanding at
December 31, 2004............ -- $ -- -- $ -- -- $ --
Put options written............ 65,900,389 479,164 48 13,932 5,650,175 82,146
Put options terminated in
closing purchase
transactions................. (65,900,000) (173,343) (36) (10,773) (5,650,140) (72,790)
Put options expired............ -- -- -- -- -- --
----------- --------- --- -------- ---------- --------
Put options outstanding at June
30, 2005..................... 389 $ 305,821 12 $ 3,159 35 $ 9,356
=========== ========= === ======== ========== ========
</Table>
F. FUTURES CONTRACTS
Each Series, with the exception of the Money Market 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.
167
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Open futures contracts as of June 30, 2005:
<Table>
<Caption>
NET UNREALIZED
NUMBER OF EXPIRATION VALUE AS OF APPRECIATION/
SERIES CONTRACTS DESCRIPTION DATE JUNE 30, 2005 (DEPRECIATION)
- ------ --------- -------------------------------- -------------- ------------- --------------
Core Bond............ 86 Long US Treasury Notes 10 Year Future September 2005 $ 9,758,313 $ (27,789)
413 Short Euro -- Bobl Future September 2005 47,759,320 (310,233)
690 Short US Treasury Notes 5 Year Future September 2005 75,134,531 (137,553)
---------
$(475,575)
=========
Total Return Bond.... 25 Long 90 Day Euro Future September 2005 $ 6,009,375 $ (6,375)
16 Long 90 Day Euro Future December 2005 3,841,200 (380)
1 Long US Long Bond Future September 2005 118,750 339
2 Short US Treasury Notes 2 Year Future September 2005 415,375 (135)
14 Short US Treasury Notes 5 Year Future September 2005 1,524,469 2,899
35 Short US Treasury Notes 10 Year Future September 2005 3,971,406 (27,355)
---------
$ (31,007)
=========
Balanced............. 95 Long 90 Day Euro Future September 2005 $22,835,625 $ (24,225)
44 Long 90 Day Euro Future December 2005 10,563,300 (1,045)
27 Long S&P 500 Future September 2005 1,613,925 (14,904)
3 Long US Long Bond Future September 2005 356,250 844
6 Short US Treasury Notes 2 Year Future September 2005 1,246,125 (702)
15 Short US Treasury Notes 5 Year Future September 2005 1,633,359 191
3 Short US Treasury Notes 10 Year Future September 2005 340,406 (2,562)
---------
$ (42,403)
=========
Growth & Income...... 53 Long S&P 500 Future September 2005 $ 3,168,075 $ (47,444)
=========
Special Equity....... 11 Long Russell 2000 Future September 2005 $ 3,537,050 $ 82,995
=========
</Table>
Each Series (except for Growth & Income) has segregated securities as collateral
for its respective open futures contracts. The segregated securities are
identified within each Series' portfolio of investments. Growth & Income has
segregated $200,000 of cash collateral for its open futures contract. Balanced
has segregated $188,541 of cash as collateral in addition to the securities
identified on its portfolio of investments.
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
168
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 can not exceed the total amount invested. During the
period ended June 30, 2005, 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' policy to comply with the applicable provisions of the
Internal Revenue Code. Therefore, no federal income tax provision is required.
J. SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are accounted for on a trade date basis (the date the
order to buy or sell is executed). Dividend income 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.
169
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 NV, 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................................................ 9.01%
High Quality Bond........................................... 12.64
Intermediate Government Bond................................ 23.60
Core Bond................................................... 10.23
Total Return Bond........................................... 0.00
Balanced.................................................... 35.14
Value & Income.............................................. 24.15
Value....................................................... 0.00
Growth & Income............................................. 26.49
Equity Growth............................................... 19.18
Mid-Cap Value............................................... 4.33
Mid-Cap Growth.............................................. 0.36
Small-Cap Value............................................. 0.05
Special Equity.............................................. 28.93
Small-Cap Growth............................................ 0.00
Aggressive Equity........................................... 24.89
High Yield Bond............................................. 8.28
International Equity........................................ 13.44
</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.
170
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
For its services, the Advisor receives a fee from each Series, and the
Subadvisors receive a fee from the Advisor, at an annual rate equal to the
percentages specified in the table below of the portion of the corresponding
Series' average daily net assets which they subadvise.
<Table>
<Caption>
ADVISOR SUBADVISOR
SERIES SERIES SUBADVISOR FEE (%) FEE (%)
- ------ ------------------------------------------ ------- ----------
Money Market..................... GE Asset Management, Inc. 0.25 0.05
High Quality Bond................ Merganser Capital Management, LP 0.35 (2)
Intermediate Government Bond..... (3) 0.35(1) (4)
Core Bond........................ BlackRock Advisors, Inc. 0.35 (5)
Total Return Bond................ Western Asset Management Company 0.35(1) (6)
Balanced......................... (7) 0.45(1) (8)
Value & Income................... (9) 0.45 (10)
Value............................ Hotchkis and Wiley Capital Management, LLC 0.50(1) (11)
Growth & Income.................. (12) 0.60 (13)
Equity Growth.................... (14) 0.62 (15)
Mid-Cap Value.................... (16) 0.67(1) (17)
Mid-Cap Growth................... Columbus Circle Investors 0.72(1) (18)
Small-Cap Value.................. Earnest Partners, LLC 0.82(1) 0.50
Special Equity................... (19) 0.80 (20)
Small-Cap Growth................. Delaware Management Company 0.87(1) 0.50
Aggressive Equity................ Turner Investment Partners, Inc. 0.77(1) (21)
High Yield Bond.................. Eaton Vance Management 0.55(1) (22)
International Equity............. (23) 0.75 (24)
</Table>
- ---------------
(1) The Advisor is currently voluntarily waiving a portion of its fee.
(2) 0.20% on the first $100,000,000 in average daily net assets, 0.15% on the
next $100,000,000 in average daily net assets, 0.10% on the next
$100,000,000 in average daily net assets and 0.05% on all average daily net
assets in excess of $300,000,000.
(3) The Intermediate Government Bond Series has two subadvisors: Allegiance
Investment Management, LLC and Stephens Capital Management.
(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) For the period January 1, 2005 to April 26, 2005, 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. As of April 27, 2005 the market
value of only the Core Bond Series was used to determine the fee.
(6) For the period May 6, 2005 to June 30, 2005, Western Asset Management
Company received 0.30% on the first $100,000,000 in average daily net
assets and 0.15% on all average daily net assets in excess of $100,000,000.
In addition, Western Asset Management Company, Ltd. manages the foreign
fixed income securities and receives the same fee schedule listed above.
171
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(7) The Balanced Series has three subadvisors. Effective April 27, 2005,
Goldman Sachs Asset Management, LP, Western Asset Management Company and
Western Asset Management Company, Ltd. replaced Aeltus Investment
Management, Inc. and BlackRock Advisors, Inc. for equity, fixed income and
foreign fixed securities, respectively.
During the period ended June 30, 2005, the Balanced Series executed $25,343
of sales transactions through Goldman Sachs & Company, an affiliate of
Goldman Sachs Asset Management, L.P. Commissions paid for such transactions
amounted to $17.
(8) For the period January 1, 2005 to April 26, 2005 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, 2005 to April 26, 2005 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. For the period April 27, 2005 to June 30, 2005, Goldman
Sachs Asset Management, LP received 0.14% on the first $500,000,000 in
combined average daily net assets of the Balanced Series and the Growth &
Income Series average daily net assets, 0.12% on the next $1,000,000,000 in
combined average daily net assets and 0.10% on all combined average daily
net assets in excess of $1,500,000,000. For the period April 27, 2005 to
June 30, 2005, Western Asset Management Company and Western Asset
Management Company, Ltd. received 0.30% on the first $100,000,000 in
average daily net assets and 0.15% on all average daily net assets in
excess of $100,000,000.
(9) The Value & Income Series has two subadvisors: TCW Investment Management
Company and AllianceBernstein. Effective March 30, 2005, TCW Investment
Management Company replaced Alliance Capital Management LP.
During the period ended June 30, 2005, the Value & Income Series executed
$177,203,685 of purchase transactions and $91,349,248 of sales transactions
through Sanford C. Bernstein & Co. LLC, an affiliate of Alliance Capital
Management LP. Commissions paid for such transactions amounted to $297,402.
(10) For the period January 1, 2005 to March 29, 2005, 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. For the period March
30, 2005 to June 30, 2005, TCW Investment Management Company received 0.70%
on the first $25,000,000 in average daily net assets, 0.50% on the next
$75,000,000 in average daily net assets, 0.30% on the next $400,000,000 in
average daily net assets and 0.10% on all average daily net assets in
excess of $500,000,000. 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.
(11) For the period May 6, 2005 to June 30, 2005, Hotchkis and Wiley Capital
Management, LLC received 0.75% on the first $15,000,000 in average daily
net assets, 0.50% on the next $35,000,000 in average daily net assets,
0.35% on the next $100,000,000 in average daily net assets and 0.25% on all
average daily net assets in excess of $150,000,000.
(12) The Growth & Income Series has three subadvisors: Ark Asset Management,
Inc., Goldman Sachs Asset Management, LP and Aronson & Johnson & Ortiz, LP.
During the period ended June 30, 2005, the Growth & Income Series executed
$35,983,901 of purchase transactions and $40,962,418 of sales transactions
through Goldman Sachs Company, an affiliate of Goldman Sachs Asset
Management, LP. Commissions paid for such transactions amounted to $40,806.
172
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
During the period ended June 30, 2005, the Growth & Income Series executed
$471,744 of purchase transactions and $1,239,761 of sales transactions
through Wave Securities LLC, an affiliate of Goldman Sachs Asset Management,
LP. Commissions paid for such transactions amounted to $1,916.
(13) Ark Asset Management, Inc. received 0.20% on the first $750,000,000 in
combined average daily net assets of the Growth & Income Series and the
Equity Growth Series, 0.18% on the next $250,000,000 in combined average
daily net assets and 0.15% on all combined average daily net assets in
excess of $1,000,000,000. Goldman Sachs Asset Management, LP received 0.14%
on the first $500,000,000 in combined average daily net assets of the
Balanced Series and the Growth & Income Series, 0.12% on the next
$1,000,000,000 in combined average daily net assets and 0.10% on all
combined average daily net assets in excess of $1,500,000,000. 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.
(14) The Equity Growth Series has two subadvisors: Ark Asset Management Company,
Inc. and Marsico Capital Management LLC.
During the period ended June 30, 2005, the Equity Growth Series executed
$16,181,054 of purchase transactions and $3,684,145 of sales transactions
through Bank of America Securities LLC, an affiliate of Marsico Capital
Management LLC. Commissions paid for such transactions amounted to $23,032.
(15) Ark Asset Management, Inc. received 0.20% on the first $750,000,000 in
combined average daily net assets of the Growth & Income Series and the
Equity Growth Series, 0.18% on the next $250,000,000 in combined average
daily net assets and 0.15% on all combined average daily net assets in
excess of $1,000,000,000. 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.
(16) Effective March 30, 2005, The Mid-Cap Value Series added an additional
subadvisor, LSV Asset Management, to its existing subadvisor, Cramer,
Rosenthal, McGlynn LLC.
(17) Cramer Rosenthal McGlynn received 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. For the period March 30, 2005
to June 30, 2005, LSV Asset Management received 0.50% on the first
$100,000,000 in average daily net assets, 0.40% on the next $100,000,000 in
average daily net assets, 0.35% on the next $600,000,000 in average daily
net assets, and 0.33% on all average daily net assets in excess of
$800,000,000. In determining the basis point fee applicable to the Series,
the combined average daily net assets of the Series and the portion of the
International Equity Series managed by LSV Asset Management were applied to
the fee schedule.
(18) 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.
(19) The Special Equity Series has five subadvisors: EARNEST Partners, LLC,
Wellington Management Company LLP, RS Investments Management, LP, Mazama
Capital Management, LLC and INVESCO, Inc. Effective March 14, 2005, Mazama
Capital Management, LLC replaced Seneca Capital Management, LLC.
(20) 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. EARNEST Partners, LLC
173
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
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. 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. For the period January 1, 2005 to March 13,
2005, 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. For the period March 14, 2005 to June 30, 2005,
Mazama Capital Management, LLC received 0.55% in average daily net assets.
(21) 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.
(22) 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.
(23) The International Equity Series has two subadvisors: LSV Asset Management
and Wellington Management Company, LLP.
(24) 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. 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.
For the period ended June 30, 2005, 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>
SERIES EXPENSE CAP
- ------ ----------------------
Money Market................................................ 30 basis points (b.p.)
High Quality Bond........................................... 40 b.p.
Intermediate Government Bond................................ 40 b.p.
Core Bond................................................... 40 b.p.
Total Return Bond........................................... 40 b.p.
Balanced.................................................... 50 b.p.
Value & Income.............................................. 50 b.p.
Value....................................................... 55 b.p.
Growth & Income............................................. 65 b.p.
Equity Growth............................................... 65 b.p.
Mid-Cap Value............................................... 70 b.p.
Mid-Cap Growth.............................................. 75 b.p.
Small-Cap Value............................................. 85 b.p.
Special Equity.............................................. 85 b.p.
Small-Cap Growth............................................ 90 b.p.
Aggressive Equity........................................... 80 b.p.
High Yield Bond............................................. 60 b.p.
International Equity........................................ 90 b.p.
</Table>
174
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
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 period ended June 30, 2005 amounted to $42,277.
4. SECURITIES LENDING
All Series may lend its securities to certain member firms of the New York Stock
Exchange. The loans are collateralized at all times with cash or securities with
a market value at least 102% of the market value of the securities on loan. Any
deficiencies or excess of collateral must be delivered or transferred by the
member firms no later than the close of business on the next business day. As
with other extensions of credit, the Series may bear the risk of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially.
Each Series receives compensation, net of related expenses, for lending its
securities which is reported on the Statements of Operations. The reported
compensation includes interest income on short term investments purchased with
cash collateral received. At June 30, 2005, the Series loaned securities having
market values as follows:
<Table>
<Caption>
CASH COLLATERAL
SERIES MARKET VALUE RECEIVED
------ ------------ ---------------
High Quality Bond........................................... $ 24,517,646 $ 25,140,250
Intermediate Government Bond................................ 40,564,413 41,460,158
Core Bond................................................... 92,221,200 94,420,159
Balanced.................................................... 18,384,706 18,961,356
Value & Income.............................................. 307,358,461 317,505,927
Growth & Income............................................. 121,630,404 125,968,925
Equity Growth............................................... 212,726,431 221,128,061
Mid-Cap Value............................................... 63,915,404 65,903,677
Mid-Cap Growth.............................................. 57,167,404 59,966,960
Small-Cap Value............................................. 27,146,206 28,176,600
Special Equity.............................................. 247,780,802 257,599,303
Small-Cap Growth............................................ 29,316,046 30,669,845
Aggressive Equity........................................... 43,915,317 45,336,885
International Equity........................................ 129,197,007 136,187,298
</Table>
The cash collateral received by each Series was pooled and at June 30, 2005 was
invested in the following securities:
ABN Amro Bank NV, Time Deposit, 3.25%, 08/05/2005
American Beacon Money Market Fund
Bank of America Corp., Floating Rate Note, 3.27%(1), 07/18/2005
Bank of America Corp., Floating Rate Note, 3.31%(1), 06/07/2006
Bank Of Montreal, Time Deposit, 3.01%, 07/01/2005
Bank Of Nova Scotia, Time Deposit, 3.11%, 07/11/2005
Bank Of Nova Scotia, Time Deposit, 3.16%, 07/15/2005
Barclays PLC, Time Deposit, 3.16%, 07/14/2005
Barclays PLC, Time Deposit, 3.25%, 07/27/2005
175
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. SECURITIES LENDING (CONTINUED)
Barclays Global Investors Money Market Fund -- Institutional Shares
BNP Paribas, Time Deposit, 3.00%, 07/01/2005
Canadian Imperial Bank of Commerce, Floating Rate CD, 3.40%(1), 11/04/2005
Citigroup, Inc., Time Deposit, 3.03%, 07/06/2005
Citigroup, Inc., Time Deposit, 3.10%, 07/25/2005
Credit Suisse First Boston Corp., Time Deposit, 3.16%, 07/13/2005
Credit Suisse First Boston Corp., Time Deposit, 3.20%, 07/18/2005
Credit Suisse First Boston Corp., Floating Rate Note, 3.15%(1), 09/09/2005
Credit Suisse First Boston Corp., Floating Rate Note, 3.44%(1), 03/10/2006
Dexia Group, Time Deposit, 3.21%, 07/20/2005
Dexia Group, Time Deposit, 3.30%, 08/09/2005
Federal Home Loan Bank, US Government Agency Discount Note, 2.98%, 07/01/2005
First Tennessee National Corp., Time Deposit, 3.22%, 08/09/2005
Fortis Bank, Time Deposit, 3.11%, 07/05/2005
Fortis Bank, Time Deposit, 3.25%, 08/04/2005
Freddie Mac, US Government Agency Discount Note, 3.21%, 07/26/2005
Freddie Mac, US Government Agency Discount Note, 3.24%, 08/16/2005
General Electric Capital Corp., Commercial Paper, 3.25%(2), 07/08/2005
Goldman Sachs Group Inc., Promissory Note, 3.32%, 07/27/2005
Goldman Sachs Group Inc., Promissory Note, 3.32%, 12/28/2005
HBOS Halifax Bank of Scotland, Time Deposit, 3.15%, 08/08/2005
HSBC Banking/Holdings PLC, Time Deposit, 3.25%, 08/05/2005
JPMorgan Chase & Company, Time Deposit, 3.20%, 07/20/2005
Merrimac Cash Fund -- Premium Class
National Australia Bank, Time Deposit, 3.38%, 07/01/2005
National Australia Bank, Time Deposit, 3.26%, 07/06/2005
Nordea Bank Finland PLC (NY Branch), Time Deposit, 3.24%, 08/03/2005
Rabobank Nederland, Time Deposit, 3.35%, 07/01/2005
Rabobank Nederland, Time Deposit, 3.17%, 07/18/2005
Royal Bank of Canada, Time Deposit, 3.26%, 07/28/2005
Royal Bank of Scotland, Time Deposit, 3.27%, 07/29/2005
Royal Bank of Scotland, Time Deposit, 3.25%, 08/04/2005
Royal Bank of Scotland, Time Deposit, 3.24%, 08/08/2005
Societe Generale, Time Deposit, 3.20%, 08/08/2005
Svenska Handelsbanken, Time Deposit, 3.22%, 08/05/2005
The Bank of the West, Time Deposit, 3.27%, 07/27/2005
The Bear Stearns Companies, Inc., Master Note, 3.57%, 09/08/2005
The Bear Stearns Companies, Inc., Master Note, 3.57%, 12/06/2005
Toronto Dominion Bank, Time Deposit, 3.25%, 08/02/2005
UBS AG, Time Deposit, 3.25%, 08/09/2005
Wells Fargo Bank, Time Deposit, 3.27%, 07/21/2005
Wells Fargo Bank, Time Deposit, 3.27%, 08/01/2005
- ---------------
(1) Variable rate security. The rate shown was in effect at June 30, 2005.
(2) Represents yield to maturity at time of purchase.
Information pertaining to the investment of the cash collateral is shown on each
Series' Portfolio of Investments.
176
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities (excluding short-term securities) for the period ended June 30, 2005
were as follows:
<Table>
<Caption>
COST OF PROCEEDS
SERIES PURCHASES FROM SALES
------ -------------- --------------
High Quality Bond........................ Government Obligations $ 25,715,257 $ 27,596,834
Other 149,590,460 106,799,026
Intermediate Government Bond............. Government Obligations 915,211,378 986,585,618
Other 30,124,838 25,463,874
Core Bond................................ Government Obligations 9,913,164,851 9,984,963,319
Other 446,091,651 243,186,347
Total Return Bond........................ Government Obligations 71,706,229 41,594,439
Other 18,538,413 946,571
Balanced................................. Government Obligations 735,906,210 782,298,604
Other 271,495,145 276,433,448
Value & Income........................... Other 2,003,992,477 1,908,387,511
Value.................................... Other 10,189,091 425,236
Growth & Income.......................... Other 434,260,380 477,233,456
Equity Growth............................ Other 935,616,310 900,832,213
Mid-Cap Value............................ Other 386,656,121 316,265,586
Mid-Cap Growth........................... Other 155,468,865 143,978,991
Small-Cap Value.......................... Other 243,988,713 223,865,848
Special Equity........................... Other 642,289,218 656,920,824
Small-Cap Growth......................... Other 49,118,881 42,360,983
Aggressive Equity........................ Other 362,760,240 382,320,397
High Yield Bond.......................... Other 148,921,809 117,349,052
International Equity..................... Other 776,702,129 668,364,746
</Table>
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 Complaint seeks to require the
Subject Portfolios to repay to Enron the full amounts of these transfers, in
which event the Subject Portfolios would be granted unsecured claims against the
Enron bankruptcy estate in the amounts of the repayments. The Subject Portfolios
moved to dismiss all counts of the Complaint, contending, among other things,
that section 546(e) of the Bankruptcy Code provides a complete defense. The
Bankruptcy Court denied the motion on July 1, 2005. Accordingly, the Subject
Portfolios filed an
177
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. LEGAL AND REGULATORY MATTERS (CONTINUED)
answer to the Complaint on July 29, 2005. The Court has set a discovery calendar
indicating that discovery is to proceed through 2006. The Subject Portfolios and
their counsel have reviewed the Subject Portfolios' records concerning the
factual background of the allegations in the Complaint, and have considered
remaining potential defenses to the allegations in the Complaint. Because only
limited discovery has taken place, the Subject Portfolios are unable to predict
whether Enron will prevail, in whole or in part, in its claims against the
Subject Portfolios, and therefore have not recorded a liability in the financial
statements for any potential loss.
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 Advisor, 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 (the "International Equity Fund") between July 1, 2003
and October 31, 2003. NASD staff contends that DISC facilitated certain
shareholders' trading in the International Equity Fund 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.
DISC and DIA are continuing to provide information to the NASD and have also
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 Portfolio 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 Portfolios'
filing for the twelve months ended June 30, 2005, 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. The Series
Portfolio's Form N-Q may be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. For information on the operation of the SEC's Public
Reference Room, call 1-800-SEC-0330. 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 Portfolio 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 Portfolio to additional risks resulting
from
178
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9. CONCENTRATIONS AND INDEMNIFICATIONS (CONTINUED)
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 June 30, 2005, the High Yield Bond Series invested approximately 10.92% of
its portfolio in issuers outside the United States.
As of June 30, 2005, 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 June 30, 2005, the International Equity Series invested approximately
17.97% and 14.46% of its portfolio in issuers in the United Kingdom and Japan,
respectively.
In the normal course of business, the Series Portfolio enters into contracts
that contain a variety of representations and warranties which provide general
indemnifications. The Series Portfolio's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Series Portfolio that have not yet occurred. However, based on
experience, the Series Portfolio expects the risk of loss to be remote.
10. FOREIGN CURRENCY FORWARD CONTRACTS
At June 30, 2005, the Core Bond Series, Total Return Bond Series, Balanced
Series, High Yield Bond Series and International Equity Series had entered into
foreign currency forward contracts which contractually obligate each Series to
deliver/receive currency at specified future dates. The open contracts were as
follows:
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 06/30/05 (DEPRECIATION)
---------- ----------- ---------- ----------- --------------
CORE BOND
PURCHASE CONTRACTS:
Mexican Peso....................... 20,880,547 $ 1,901,654 07/25/05 $ 1,935,718 $ 34,064
==========
SALE CONTRACTS:
Euro............................... 11,743,013 $15,410,591 07/26/05 $14,220,750 $1,189,841
Euro............................... 1,307,200 1,656,968 07/26/05 1,583,015 73,953
Mexican Peso....................... 48,775,000 4,324,611 07/25/05 4,521,656 (197,045)
Mexican Peso....................... 34,144,153 3,040,170 07/25/05 3,165,312 (125,142)
Mexican Peso....................... 48,000,000 4,321,210 07/25/05 4,449,810 (128,600)
New Zealand Dollar................. 16,867,397 12,150,935 07/27/05 11,711,800 439,135
----------
TOTAL.............................. $1,252,142
==========
TOTAL RETURN BOND
PURCHASE CONTRACTS:
Canadian Dollar.................... 153,287 $ 121,947 08/10/05 $ 125,225 $ 3,278
==========
SALE CONTRACTS:
Australian Dollar.................. 323,539 $ 245,728 08/10/05 $ 245,740 $ (12)
Canadian Dollar.................... 320,464 256,166 08/10/05 261,797 (5,631)
Euro............................... 1,564,933 1,983,553 08/10/05 1,896,134 87,419
----------
TOTAL.............................. $ 81,776
==========
</Table>
179
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. FOREIGN CURRENCY FORWARD CONTRACTS (CONTINUED)
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 06/30/05 (DEPRECIATION)
---------- ----------- ---------- ----------- --------------
BALANCED
PURCHASE CONTRACTS:
Euro............................... 1,014,981 $ 1,321,511 07/26/05 $ 1,229,139 $ (92,372)
Mexican Peso....................... 7,167,012 637,799 07/25/05 664,414 26,615
New Zealand Dollar................. 1,561,772 1,118,541 07/27/05 1,084,409 (34,132)
----------
TOTAL.............................. $ (99,889)
==========
SALE CONTRACTS:
Australian Dollar.................. 940,286 $ 721,199 08/10/05 $ 714,181 $ 7,018
Canadian Dollar.................... 910,497 731,030 08/10/05 743,813 (12,783)
Euro............................... 1,014,981 1,331,980 07/26/05 1,229,139 102,841
Euro............................... 4,567,485 5,848,208 08/10/05 5,534,143 314,065
Mexican Peso....................... 4,055,000 359,534 07/25/05 375,916 (16,382)
Mexican Peso....................... 3,112,012 277,091 07/25/05 288,497 (11,406)
New Zealand Dollar................. 1,561,772 1,125,069 07/27/05 1,084,409 40,660
----------
TOTAL.............................. $ 424,013
==========
HIGH YIELD
SALE CONTRACTS:
Euro............................... 504,534 $ 609,563 07/29/05 $ 611,050 $ (1,487)
==========
INTERNATIONAL EQUITY
PURCHASE CONTRACTS:
Euro............................... 261,805 $ 315,905 07/01/05 $ 316,823 $ 918
Japanese Yen....................... 82,870,443 753,642 07/01/05 747,186 (6,456)
Swiss Franc........................ 1,514,457 1,183,165 07/01/05 1,181,785 (1,380)
Swiss Franc........................ 563,496 440,162 07/01/05 439,716 (446)
----------
TOTAL.............................. $ (7,364)
==========
SALE CONTRACTS:
Euro............................... 625,060 $ 753,642 07/01/05 $ 756,416 $ (2,774)
Euro............................... 531,138 642,066 07/05/05 642,756 (690)
Euro............................... 723,664 876,212 07/05/05 875,742 470
Euro............................... 112,829 124,056 12/29/05 137,592 (13,536)
Great British Pound................ 581,878 1,056,414 07/01/05 1,042,551 13,863
Great British Pound................ 154,337 276,371 07/05/05 276,526 (155)
Great British Pound................ 237,391 428,519 07/05/05 425,333 3,186
----------
TOTAL.............................. $ 364
==========
</Table>
180
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
MONEY MARKET
06/30/2005(a) 0.27%* 0.27%* 2.47%* 2.47%* N/A $ 887,385,265 1.22%
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
06/30/2005(a) 0.38* 0.38* 3.23* 3.23* 19% 750,272,069 1.15
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
06/30/2005(a) 0.40* 0.40* 3.16* 3.16* 397 233,420,854 1.59
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
06/30/2005(a) 0.39* 0.39* 3.85* 3.85* 571 1,872,848,425 2.19
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
TOTAL RETURN BOND
6/30/2005(a)(1) 0.53* 0.40* 3.92* 4.05* 87 51,031,925 2.04
</Table>
- ---------------
(a) Unaudited.
* Annualized.
(1) Commencement of Operations, May 6, 2005.
(2) Commencement of Operations, April 27, 2001.
(3) Commencement of Operations, April 15, 2002.
181
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
BALANCED
06/30/2005(a) 0.54%* 0.50%* 2.14%* 2.18%* 252% $ 408,132,467 0.99%
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
VALUE & INCOME
06/30/2005(a) 0.48* 0.48* 1.37* 1.37* 73 2,825,429,320 0.93
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
VALUE
06/30/2005(a)(1) 1.14* 0.55* 1.61* 2.20* 4 10,401,141 3.37
GROWTH & INCOME
06/30/2005(a) 0.63* 0.63* 0.90* 0.90* 40 1,094,216,351 (0.20)
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
06/30/2005(a) 0.65* 0.65* 0.38* 0.38* 41 2,313,322,338 (1.67)
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
</Table>
- ---------------
(a) Unaudited.
* Annualized.
(1) Commencement of Operations, May 6, 2005.
(2) Commencement of Operations, April 27, 2001.
(3) Commencement of Operations, April 15, 2002.
182
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
MID-CAP VALUE
06/30/2005(a) 0.72%* 0.70%* 1.60%* 1.62%* 74% $ 503,378,791 2.73%
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(2) 1.91* 0.70* (0.48)* 0.73* 87 13,632,294 8.28
MID-CAP GROWTH
06/30/2005(a) 0.77* 0.75* (0.43)* (0.41)* 70 227,754,858 2.03
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(2) 1.93* 0.75* (1.50)* (0.32)* 63 15,562,948 (13.27)
SMALL-CAP VALUE
06/30/2005(a) 0.88* 0.85* 0.11* 0.14* 131 192,553,397 (6.24)
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(3) 1.39* 0.85* (0.17)* 0.37* 26 17,920,226 (21.90)
SPECIAL EQUITY
06/30/2005(a) 0.84* 0.84* 0.13* 0.13* 55 1,250,854,071 2.61
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
06/30/2005(a) 0.96* 0.90* (0.51)* (0.45)* 41 114,486,338 (5.17)
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(3) 1.48* 0.90* (1.03)* (0.45)* 68 16,521,455 (15.98)
</Table>
- ---------------
(a) Unaudited.
* Annualized.
(1) Commencement of Operations, May 6, 2005.
(2) Commencement of Operations, April 27, 2001.
(3) Commencement of Operations, April 15, 2002.
183
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
AGGRESSIVE EQUITY
06/30/2005(a) 0.81%* 0.80%* (0.23)%* (0.22)%* 98% $ 367,949,806 (2.64)%
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
06/30/2005(a) 0.60* 0.60* 7.66* 7.66* 35 373,575,544 0.53
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
06/30/2005(a) 0.87* 0.87* 3.13* 3.13* 48 1,447,094,175 (2.76)
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>
- ---------------
(a) Unaudited.
* Annualized.
(1) Commencement of Operations, May 6, 2005.
(2) Commencement of Operations, April 27, 2001.
(3) Commencement of Operations, April 15, 2002.
184
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS
JUNE 30, 2005
(UNAUDITED)
Diversified Investment Advisors, Inc. ("Diversified") manages the assets of each
series of Diversified Investors Portfolios (each, a "Portfolio") pursuant to an
Investment Advisory Agreement (the "Diversified Advisory Agreement") with
Diversified Investors Portfolios. For each Portfolio, Diversified has entered
into an Investment Subadvisory Agreement (each a "Subadvisory Agreement") with a
Subadviser.
CONTINUATION OF ADVISORY AGREEMENTS AND SUBADVISORY AGREEMENTS
In approving the continuation of each Diversified Advisory Agreement and each
Subadvisory Agreement, the Board, including the independent Trustees, considered
the reasonableness of the applicable advisory fee in light of the extent and
quality of the advisory and administrative services provided and any additional
benefits received by Diversified or the Subadvisers and their affiliates in
connection with their provision of services, compared the fees charged by
Diversified and the Subadvisers to those paid by similar funds for comparable
services, and analyzed the expenses incurred with respect to each underlying
fund investing in the Portfolio (a "Fund"). The Trustees reviewed information
concerning the level of profits received by Diversified from its arrangements
with each Fund. The Board also considered the quality of Diversified's advisory,
administrative and compliance staffs, including additional compliance resources
being added. The Trustees reviewed information regarding the investment
performance of each Portfolio, compared to its benchmark, for the quarter and,
to the extent available, for the one- and three-year periods ended December 31,
2004, as well as information regarding the investment performance of each
Portfolio, compared to that of other funds with similar investment objectives
and policies, for the quarter and, to the extent available, for the one- and
three-year periods ended September 30, 2004. The Trustees also considered
information received at regular meetings throughout the year, including updates
regarding each Portfolio's performance.
The Trustees also reviewed extensive information provided by the Subadvisers,
regarding, among other things: the nature and quality of services provided;
legal, regulatory and compliance matters; actual fees paid by Diversified to
each Subadviser, comparable fees paid to each Subadviser and Subadviser
profitability data; and other practices and developments. In addition to the
quality and content of information provided by the Subadvisers, the Trustees
also noted instances where information was not disclosed by certain Subadvisers,
considered the reasons such information was withheld and weighed the relative
importance of such information among the other data available to the Trustees.
In light of the extensive investment advisor monitoring provided by Diversified
and the arms'-length nature of negotiations between Diversified and the
Subadvisers, the Trustees placed considerable value on Diversified's views
regarding the Subadvisers.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board concluded that
each Diversified Advisory Agreement and each sub-advisory agreement was in the
best interests of the applicable Portfolio and its investors. The Board based
its conclusions, in part, on its observations regarding the performance of the
Portfolio and the management fees and total expenses paid by each Fund, some of
which observations are summarized below.
MONEY MARKET FUNDS. The Board noted that the performance of the Money Market
Portfolio approximated the median for the Portfolio's peer group for the one-and
three-year periods ended September 30, 2004, but exceeded the relevant benchmark
for the one- and three-year periods ended December 31, 2004. Contractual
management fees were observed as being somewhat above the median for both
Diversified Investors Money Market Fund and Diversified Institutional Money
Market Fund. The Board found total expenses to be moderately above the median in
the case of Diversified Investors Money Market Fund. The Board also noted that,
in an effort to improve returns, the Subadviser to the underlying portfolio had
been replaced in June 2004.
185
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
BOND FUNDS. For High Quality Bond Portfolio, the Board observed that
performance was above the relevant benchmark for the one- and three-year periods
ended December 31, 2004, and above the median for the peer group for the
three-year period ended September 30, 2004. Contractual management fees were
slightly above the median for the Diversified Investors High Quality Bond Fund
and Diversified Institutional High Quality Bond Fund. The Board noted that total
expenses were somewhat above the median (but slightly below the average) in the
case of Diversified Investors High Quality Bond Fund, and were below the median
in the case of Diversified Institutional High Quality Bond Fund. With respect to
Intermediate Government Portfolio, the Board noted that, while performance had
been substantially below the median for the peer group and the relevant
benchmark for the one- and three-year periods ended September 30, 2004 and
December 31, 2004, respectively, the subadviser to the underlying portfolio had
been replaced in September 2003 and performance exceeded that of the relevant
benchmark in the most recent quarter. The Board found that contractual
management fees were below the median for both Diversified Investors
Intermediate Government Bond Fund and Diversified Institutional Intermediate
Government Bond Fund, and that total expenses were slightly above the median
(though just below the average) in the case of Diversified Investors
Intermediate Government Bond Fund, and were below the median in the case of
Diversified Institutional Intermediate Government Bond Fund. For Core Bond
Portfolio, the Board noted that performance was below the median for the peer
group for the one- and three-year periods ended September 30, 2004, but was
higher than the relevant benchmark for the one- and three-year periods ended
December 31, 2004. The Board also observed that both contractual management fees
and total expenses were below the median for the peer group for Diversified
Investors Core Bond Fund and Diversified Institutional Core Bond Fund. For High
Yield Bond Portfolio, the Board observed that performance was above the median
of the peer group for the one- and three-year periods ended September 30, 2004
and above the benchmark for the one- and three-year periods ended December 31,
2004. The Board also found contractual management fees and total expenses to be
below the median for the peer group for both Diversified Investors High Yield
Bond Fund and Diversified Institutional High Yield Bond Fund.
BALANCED FUNDS. For Balanced Portfolio, the Board noted that performance had
been somewhat below the median for the peer group for the one-and three-year
periods ended September 30, 2004, but above the benchmark for the one-year
period ended December 31, 2004. The Board also noted that both contractual
management fees and total expenses were below the median for the peer group for
Diversified Investors Balanced Fund and Diversified Institutional Balanced Fund.
Additionally, the Board considered that Diversified had recommended replacing
the subadvisers to the underlying Portfolio.
STOCK FUNDS. With respect to Value & Income Portfolio, the Board found
performance to be below the median for the peer group and below the relevant
benchmark for the one- and three-year periods ended September 30, 2004 and
December 31, 2004, respectively. Both contractual management fees and total
expenses were below the median for the peer group for Diversified Investors
Value & Income Fund and Diversified Institutional Value & Income Fund. The Board
also noted that a new subadviser was to be added to the underlying portfolio in
the near future. The Board noted that, for Growth & Income Portfolio, though
performance was below the median for the peer group for the one- and three-year
periods ended September 30, 2004, it was above the benchmark for the one-year
period ended December 31, 2004. Additionally, the Board observed that the
subadvisers to the underlying portfolio had been replaced in May 2004. The Board
also noted that both contractual management fees and total expenses were below
the median for the peer group for Diversified Investors Growth & Income Fund and
Diversified Institutional Growth & Income Fund. In the case of Equity Growth
Portfolio, the Board found performance to be below the median for the peer group
for the one-year period and slightly below the median for the three-year period
ended September 30, 2004, but above the benchmark for the one- and three-year
periods ended December 31, 2004. The Board observed that one of the advisers to
the underlying portfolio had been replaced in
186
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
September 2004. Additionally, it was noted that both contractual management fees
and total expenses were below the median for the peer group for Diversified
Investors Equity Growth Fund and Diversified Institutional Equity Growth Fund.
For Mid-Cap Value Portfolio, the Board observed that performance was above the
median for the one- and three-year periods ended September 30, 2004, and above
the relevant benchmark for the one-year period ended December 31, 2004.
Additionally, it was noted that both contractual management fees and total
expenses were below the median for the peer group for Diversified Investors Mid-
Cap Value Fund and Diversified Institutional Mid-Cap Value Fund. The Board also
noted that a new subadviser was to be added to the underlying portfolio in the
near future. In reviewing information relating to Mid-Cap Growth Portfolio, the
Board observed that, although performance was substantially below the peer group
for the one- and three-year periods ended September 30, 2004, performance was
above the relevant benchmark for the one-year period ended December 31, 2004.
The Board also noted that the subadviser to the underlying portfolio had been
replaced in September 2004. It was also noted that contractual management fees
were modestly above the median for the peer group for Diversified Investors
Mid-Cap Growth Fund and Diversified Institutional Mid-Cap Growth Fund, but that
total expenses were below the median. For Small Cap Value Portfolio, it was
observed that, while performance lagged the median for the peer group for the
one-year period ended September 30, 2004, performance was above the relevant
benchmark for the one-year period ended December 31, 2004. The Board noted that,
while contractual management fees exceeded the median for the peer group for
Diversified Investors Small Cap Value Fund and Diversified Institutional Small
Cap Value Fund, actual total expenses were below the median. The Board also
considered that Diversified had recommended replacing the subadviser to the
underlying portfolio. The Board noted that, while the performance of Special
Equity Portfolio had been below the median for the peer group and the relevant
benchmark for recent one- and three-year periods, one of the subadvisers to the
underlying portfolio had been replaced two weeks prior to the meeting. The Board
also found that contractual management fees were moderately above the median for
Diversified Investors Special Equity Fund and Diversified Institutional Special
Equity Fund, and that total expenses were slightly above the median (though
below the average) in the case of Diversified Investors Special Equity Fund but
below the median in the case of Diversified Institutional Special Equity Fund.
With respect to Small Cap Growth Portfolio, the Board noted that performance was
below the relevant benchmark for the one-year period ended December 31, 2004 but
above the median for the peer group for the one-year period ended September 30,
2004. The Board also considered that, though contractual management fees were
above the median for the peer group for Diversified Investors Small Cap Growth
Fund and Diversified Institutional Small Cap Growth Fund, total expenses were
below the median and the average for the peer group. For Aggressive Equity
Portfolio, the Board found performance to be somewhat below the median for the
peer group for the three-year period and substantially below the peer group for
the one-year period ended September 30, 2004. However, the Board noted that
performance was above the relevant benchmark for the one- and three-year periods
ended December 31, 2004 and that the subadviser to the underlying portfolio had
been replaced in September 2004. The Board found that total expenses were below
the median for the peer group for Diversified Investors Aggressive Equity Fund
and Diversified Institutional Aggressive Equity Fund, but that contractual
management fees were above the median. The Board considered, however, that
Diversified had recently agreed to reduce its management fee by 20 basis points
and that its profitability had dropped substantially since the Board's last
review. In the case of International Equity Portfolio, the Board noted that
performance was somewhat below the median for the peer group and the relevant
benchmark for recent one- and three-year periods, but observed that one of the
advisers to the underlying portfolio had been replaced during the year.
Additionally, it was noted that both contractual management fees and total
expenses were below the median for the peer group for Diversified Investors
International Equity Fund and Diversified Institutional International Equity
Fund.
Except as noted above, the Board's conclusions that each Diversified Advisory
Agreement and each Subadvisory Agreement was in the best interests of each
applicable Portfolio and its investors were generally
187
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
based upon the Board's determination for each Portfolio that the Portfolio's
performance compared favorably with other funds in its peer group and/or
benchmark, that contractual management fees and actual total expenses after
giving effect to waivers and reimbursements compared favorably to the peer
group, and that, in reviewing Diversified's profitability on a Fund-by-Fund
basis, such profitability (together with additional benefits received by
Diversified and its affiliates) appeared reasonable in view of the nature and
quality of the services provided by Diversified. The Board also considered that
the fee waivers and reimbursements for certain Funds were contractually agreed,
and, therefore, could not be discontinued or modified at Diversified's
discretion. In addition to the foregoing, the Trustees were satisfied with the
overall quality of the management services provided by Diversified and with
Diversified's approach to selecting and monitoring subadvisers.
APPOINTMENT OF NEW SUBADVISERS
As noted above, during the six month period ended June 30, 2005, Diversified
appointed new subadvisers, with the approval of the Board of Trustees, for the
Balanced Portfolio, Value & Income Portfolio, Mid Cap Value Portfolio, Small Cap
Value Portfolio, and Special Equity Portfolio. In addition two new series of
Diversified Investors Portfolios, the Total Return Bond Portfolio and the Value
Portfolio, were established and designated and an adviser and subadviser were
approved by the Board of Trustees for each of these Portfolios.
BALANCED PORTFOLIO. At a meeting held on March 28, 2005, the Board of Trustees
considered the termination of Aeltus Investment Management, Inc. ("Aeltus") and
BlackRock Advisers, Inc. ("BlackRock") as subadvisers to the Balanced Portfolio
and the appointment of Goldman Sachs Asset Management ("GS") and Western Asset
Management Company ("WAMCO") as replacement subadvisers to the Balanced
Portfolio.
Diversified's Manager Monitoring Group proposed that both managers be replaced
because Diversified views GS, a subadviser to the Growth & Income Portfolio, and
WAMCO as superior alternatives. The Manager Monitoring Group reviewed with the
Board detailed information about GS and WAMCO, including information about their
investment philosophy, investment process and investment performance. In
particular, the Board reviewed detailed information with respect to the
hypothetical performance of a GS/WAMCO composite versus the actual performance
of the Aeltus/BlackRock managed fund. It was noted that WAMCO and GS had very
recently made presentations to the Board (in connection with their retention as
subadvisers to the Total Return Bond Portfolio and Growth & Income Portfolio,
respectively). The Manager Monitoring Group then reviewed the highlights from
these presentations and stated that no material changes in the investment
process or infrastructure of these firms had occurred since these presentations
had been made to the Board. The Trustees also reviewed subadvisory fees to be
paid by Diversified to GS and WAMCO.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board accepted the
recommendation to terminate Aeltus and Blackrock as subadvisers and concluded
that each of the Subadvisory Agreements with GS and WAMCO was in the best
interests of the Balanced Portfolio and its investors.
VALUE & INCOME PORTFOLIO. At a meeting held on March 7, 2005, the Board of
Trustees considered the appointment of TCW Investment Management Company ("TCW")
as a new subadviser to the Value & Income Portfolio.
At a Board meeting held on February 11, 2005, Diversified's Manager Monitoring
group had reviewed in detail a written presentation previously distributed to
the Board. Diversified had completed its search for a subadviser and recommended
that TCW be selected. The Manager Monitoring Group then reviewed with the Board
Diversified's procedures for selecting new subadvisers and the criteria used.
The Manager Monitoring
188
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
Group discussed in general the managers considered but ultimately not selected.
The Manager Monitoring Group reviewed summaries of TCW and explained why this
firm met the required criteria.
The Manager Monitoring Group then reviewed in detail certain information
relating to TCW, including its affiliations, its assets under management, and
its investment philosophy. It was noted that TCW utilizes fundamental analyses
to identify competitive advantages and price catalysts in constructing a
portfolio of 30-50 companies. TCW's investment discipline required that every
holding have at least one of five specific financial characteristics that is
superior to that (from a value perspective) of the overall S&P 500. The Manager
Monitoring Group reviewed with the Board detailed data on the historical
performance of TCW. The Trustees also reviewed subadvisory fees to be paid by
Diversified to TCW. The Board of Trustees then received a presentation from a
representative of TCW, reviewing in detail the background of the firm, the
firm's investment philosophy, and the firm's compliance policies and procedures.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board concluded that
the Subadvisory Agreement between Diversified and TCW Investment Management
Company was in the best interests of the Value & Income Portfolio and its
investors.
MID-CAP VALUE PORTFOLIO. At a meeting held on March 7, 2005, the Board of
Trustees considered the appointment of LSV Asset Management ("LSV") as an
additional subadviser to the Mid-Cap Value Portfolio in order to resolve
capacity issues with respect to the current subadviser to that Portfolio.
At a meeting held on February 11, 2005, the Board of Trustees had received a
presentation from Diversified's Manager Monitoring Group. The Manager Monitoring
Group described the search criteria for a new manager, e.g., must compliment the
current subadviser's style, must have sufficient capacity and must demonstrate
disciplined sub-style specificity. The Manager Monitoring Group discussed in
general the managers considered but ultimately not hired. Diversified
recommended that LSV be hired as an additional subadviser to the Mid-Cap Value
Portfolio.
The Manager Monitoring Group then reviewed in detail certain information related
to LSV, including LSV's assets under management and LSV's existing relationship
with Diversified as subadviser to another Portfolio. The Manager Monitoring
Group then reviewed LSV's mid-cap value product which utilizes a quantitative
approach designed to pick undervalued stocks with high near-term appreciation
potential. LSV's model is 70% fundamental value factors and 30% momentum
factors. The Manager Monitoring Group then reviewed in detail a written
presentation previously distributed to the Board, which included, among other
things detailed data on the historical investment performance of LSV. The
Trustees also reviewed subadvisory fees to be paid by Diversified to LSV.
The Board of Trustees then received a presentation from representatives of LSV.
The presentation included information regarding the background of LSV, LSV's
compliance policies and procedures, and its investment policy. LSV
representatives described LSV's investment model as a well diversified and risk
controlled quantitative approach with a deep value orientation, noting that LSV
looks for undervalued, out-of-favor companies with a slight small cap bias
versus a mid-cap benchmark.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board concluded that
the Subadvisory Agreement between Diversified and LSV Asset Management was in
the best interests of the Mid-Cap Value Portfolio and its investors.
189
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
SMALL CAP VALUE PORTFOLIO. At a meeting held on March 28, 2005, the Board of
Trustees considered the termination of Sterling Capital Management as subadviser
to the Small Cap Value Portfolio, and the appointment of EARNEST Partners as
replacement subadviser to the Small Cap Value Portfolio.
Diversified's Manager Monitoring Group reviewed with the Board Diversified's
procedures for selecting a new subadviser and the specific search criteria used
for this search, including requirements with respect to historical performance,
risk characteristics, size of the firm, and age of the firm. The Manager
Monitoring Group discussed in general the managers considered but ultimately not
selected. The Manager Monitoring Group reviewed summaries regarding EARNEST and
explained why EARNEST met these criteria.
The Manager Monitoring Group then reviewed in detail certain information
relating to EARNEST, including information about EARNEST's investment
philosophy, investment process, and investment performance. It was noted that
EARNEST had made a presentation to the Board on this investment product in
connection with their retention as a subadviser to another Portfolio. The
Manager Monitoring Group reviewed the highlights from this presentation and
stated that no material changes in the investment process or infrastructure of
EARNEST had occurred since the date of this presentation. The Trustees also
reviewed subadvisory fees to be paid by Diversified to EARNEST.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board accepted the
recommendation to terminate Sterling Capital Management as subadviser and
concluded that the Subadvisory Agreement between Diversified and EARNEST
Partners was in the best interests of the Small Cap Value Portfolio and its
investors.
SPECIAL EQUITY PORTFOLIO. At a meeting held on March 7, 2005, the Board of
Trustees considered the termination of Seneca Capital Management ("Seneca") as
subadviser to the Special Equity Portfolio, and the appointment of Mazama
Capital Management ("Mazama") as replacement subadviser to the Special Equity
Portfolio.
At a meeting held on February 11, 2005, Diversified's Manager Monitoring Group
had reviewed in detail a written presentation previously distributed to the
Board. Diversified had completed its search for a replacement manager and
recommended that Mazama Capital Management be selected. The Manager Monitoring
Group then reviewed with the Board Diversified's procedures for selecting new
subadvisers and the criteria used. The Manager Monitoring Group discussed in
general the managers considered but ultimately not selected. The Manager
Monitoring Group then reviewed summaries of Mazama and explained why this firm
met the required criteria.
The Manager Monitoring Group then reviewed in detail certain information related
to Mazama, including the firm's organizational background, its assets under
management, and its investment policy. The Manager Monitoring Group then
reviewed with the Board detailed data on the historical performance of Mazama.
The Trustees reviewed a comparison of fees paid to Seneca and fees to be paid to
Mazama.
Representatives of Mazama then reviewed in detail a written presentation
previously distributed to the Trustees. Representatives of Mazama provided
information regarding the firm's compliance policies and procedures, the
experience of the management team, and Mazama's investment policy.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board accepted the
recommendation to terminate Seneca Capital Management as subadviser and
concluded that the Subadvisory Agreement between
190
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2005
(UNAUDITED)
Diversified and Mazama Capital Management was in the best interests of the
Special Equity Portfolio and its investors.
TOTAL RETURN BOND PORTFOLIO AND VALUE PORTFOLIO. At a meeting held on March 28,
2005, the Board of Trustees considered an Investment Advisory Agreement between
each new Portfolio and Diversified. The Board of Trustees reviewed Diversified's
general policy to hire investment managers and monitor investment portfolio
management. The Trustees noted that Diversified's Manager Monitoring Group
reports on advisory and subadvisory activities to the Boards on a regular basis
and would do so with respect to the two new Portfolios.
The Trustees then discussed the provisions of the proposed Investment Advisory
Agreements. The Trustees reviewed comparative fee information with respect to
similar funds. The Trustees also reviewed the qualifications and experience of
Diversified in performing investment advisory and administrative services. The
Trustees discussed the proposed advisory fees and estimated expense ratios of
feeder funds which would invest assets in these Portfolios and compared them to
investment advisory fees paid by and expense ratios of other investment
companies with similar investment objectives. The Investment Advisory Agreements
provided for investment advisory fees, accrued daily and paid monthly at an
annual rate (before any waiver) equal to 0.35% and 0.50%, respectively of the
average daily net assets of the Total Return Bond and Value Portfolios.
The Trustees concluded that the advisory fees were reasonable and appropriate in
the context of comparable fee arrangements.
The Board of Trustees reviewed the Investment Subadvisory Agreements between
Diversified and Western Asset Management Company, with respect to the Total
Return Bond Portfolio, and between Diversified and Hotchkis & Wiley Capital
Management, with respect to the Value Portfolio. The Board of Trustees received
presentations from Diversified's Manager Monitoring Group regarding the criteria
used in selecting the subadvisers, Diversified's selection of the subadvisers
for each new Portfolio, each subadviser's area of portfolio management
expertise, and the fees that would be paid to the subadvisers by Diversified.
The Trustees extensively reviewed the performance history of funds managed by
each of the subadvisers. The Trustees also reviewed information regarding the
compliance policies and procedures of each of the subadvisers.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board concluded that
each Diversified Investment Advisory Agreement and each sub-advisory agreement
was in the best interests of the applicable Portfolio and its investors.
191
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
2875 (8/05)
ITEM 2. CODE OF ETHICS.
Item not applicable to semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Item not applicable to semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Item not applicable to semi-annual report.
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) Not applicable.
(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 August 30, 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 August 30, 2005
By /s/ Joseph Carusone
-------------------
Joseph Carusone
Principal Financial Officer
Date August 30, 2005