UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811 - 07717
The Diversified Investors Strategic
Variable Funds
--------------------------------------
(Exact name of Registrant as specified
in charter)
Address of Registrant: 4 Manhattanville Road
Purchase, NY
Name and address of agent for service: Joseph Carusone
4 Manhattanville Road
Purchase, NY 10577
Registrant's telephone number, including area code: (914) 697-8586
Date of fiscal year end: December 31, 2005
Date of reporting period: December 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
THE DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
DIVERSIFIED INVESTORS VARIABLE FUNDS
DIVERSIFIED INVESTORS
STRATEGIC VARIABLE FUNDS
ANNUAL REPORT
December 31, 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 -- December 31, 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
Report of Independent Registered Public Accounting Firm..... 24
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS:
An Explanation of Fund Expenses............................. 25
Statements of Assets and Liabilities........................ 27
Statements of Operations.................................... 28
Statements of Changes in Net Assets -- December 31, 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
Report of Independent Registered Public Accounting Firm..... 41
APPROVAL OF INVESTMENT ADVISORY CONTRACTS................... 42
DIVERSIFIED INVESTORS PORTFOLIOS:
Annual Economic Overview.................................... 44
Statements of Assets and Liabilities........................ 54
Statements of Operations.................................... 58
Statements of Changes in Net Assets -- December 31, 2005.... 62
Statements of Changes in Net Assets -- December 31, 2004.... 66
PORTFOLIOS OF INVESTMENTS:
Money Market Portfolio.................................... 68
High Quality Bond Portfolio............................... 69
Intermediate Government Bond Portfolio.................... 76
Core Bond Portfolio....................................... 78
Total Return Bond Portfolio............................... 94
Balanced Portfolio........................................ 100
Value & Income Portfolio.................................. 111
Value Portfolio........................................... 114
Growth & Income Portfolio................................. 116
Equity Growth Portfolio................................... 121
Mid-Cap Value Portfolio................................... 124
Mid-Cap Growth Portfolio.................................. 128
Small-Cap Value Portfolio................................. 130
Special Equity Portfolio.................................. 132
Small-Cap Growth Portfolio................................ 143
Aggressive Equity Portfolio............................... 148
High Yield Bond Portfolio................................. 150
International Equity Portfolio............................ 160
Summary of Footnotes and Abbreviations to Portfolios........ 166
Portfolio Composition....................................... 167
Notes to Financial Statements............................... 169
Report of Independent Registered Public Accounting Firm..... 192
Approval of Investment Advisory Contracts................... 193
Trustees Information........................................ 195
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.
The first line of each table shown below, based on an investment of $1,000, will
show you how much of your investment (per $1,000) went to the ongoing costs of
both your trust and its corresponding Portfolio. The figures are based on the
actual total return and the actual expenses incurred for the period July 1,
2005 - December 31, 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 July 1,
2005 - December 31, 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
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
MONEY MARKET July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,012.10 $6.72 1.33%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,018.38 $6.75 1.33%
(5% annual return before expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
--------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
HIGH QUALITY BOND July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,002.10 $7.48 1.49%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.60 $7.54 1.49%
(5% annual return before expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
--------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
INTERMEDIATE GOVERNMENT BOND July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $ 992.10 $7.48 1.50%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.56 $7.58 1.50%
(5% annual return before expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
2
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
--------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
CORE BOND July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $ 996.40 $7.47 1.49%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.58 $7.55 1.49%
(5% annual return before expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
--------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
BALANCED July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,039.70 $8.18 1.60%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.04 $8.09 1.60%
(5% annual return before expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
--------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
VALUE & INCOME July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,053.30 $8.17 1.59%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.11 $8.03 1.59%
(5% annual return before expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
--------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
GROWTH & INCOME July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,067.10 $9.01 1.74%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,016.35 $8.79 1.74%
(5% annual return before expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
3
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
EQUITY GROWTH July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,083.80 $9.16 1.75%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.28 $8.86 1.75%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
SPECIAL EQUITY July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,071.30 $10.19 1.96%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.23 $9.91 1.96%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
AGGRESSIVE EQUITY July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,106.20 $10.04 1.90%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.54 $9.60 1.90%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
HIGH YIELD BOND July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,022.30 $8.63 1.70%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,016.54 $8.60 1.70%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
4
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
INTERNATIONAL EQUITY July 1, 2005 December 31, 2005 (1)(2) Ratio(1)(3)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,137.10 $10.60 1.98%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,015.15 $10.00 1.98%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 Annualized
Value Value December 31, 2005 Expense
CALVERT July 1, 2005 December 31, 2005 (2)(3)(4) Ratio(3)(4)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,034.80 $5.61 1.10%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,019.55 $5.57 1.10%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) These figures reflect the expenses of both the trust and its corresponding
Portfolio.
(2) Expenses are equal to each Trust's annualized expense ratio multiplied by
the average account value over the period, divided by 365, multiplied by 183
(to reflect the one-half year period).
(3) Please be aware that the expense ratios shown in this table may not match
the expense ratios shown in each Trust's financial highlights, as the
expense ratios in the financial highlights reflect the actual expense ratios
over the period January 1, 2005 - December 31, 2005.
(4) These figures do not include expenses incurred by the Calvert Social
Balanced Portfolio.
5
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
----------- ----------- ------------ ----------- -----------
ASSETS:
Investment in the Portfolios, at value (Notes 1 and
2)................................................... $37,189,327 $24,278,361 $25,694,813 $65,856,908 $83,112,131
Receivable for units sold.............................. 341,841 11,379 15,209 21,333 32,625
----------- ----------- ----------- ----------- -----------
Total assets........................................... 37,531,168 24,289,740 25,710,022 65,878,241 83,144,756
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for units redeemed............................. 61,018 10,969 40 872 36,127
Accrued mortality and expense risk..................... 33,332 21,803 23,228 59,078 75,514
----------- ----------- ----------- ----------- -----------
Total liabilities...................................... 94,350 32,772 23,268 59,950 111,641
----------- ----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS..... $37,436,818 $24,256,968 $25,686,754 $65,818,291 $83,033,115
=========== =========== =========== =========== ===========
ACCUMULATION UNITS..................................... 1,940,304 1,673,643 1,279,147 2,139,744 2,200,757
=========== =========== =========== =========== ===========
UNIT VALUE............................................. $ 19.29 $ 14.49 $ 20.08 $ 30.76 $ 37.73
=========== =========== =========== =========== ===========
</Table>
See notes to financial statements.
6
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ---------- -------------
$351,570,361.. $138,570,922 $215,447,806 $124,289,834 $58,992,062 $4,350,645 $80,841,517
97,049...... 63,201 65,866 55,578 31,868 -- 53,389
------------ ------------ ------------ ------------ ----------- ---------- -----------
351,667,410.. 138,634,123 215,513,672 124,345,412 59,023,930 4,350,645 80,894,906
------------ ------------ ------------ ------------ ----------- ---------- -----------
33,071...... 42,801 74,307 117,256 2,549 -- 2,874
319,497..... 126,445 197,115 113,300 54,081 3,910 71,984
------------ ------------ ------------ ------------ ----------- ---------- -----------
352,568..... 169,246 271,422 230,556 56,630 3,910 74,858
------------ ------------ ------------ ------------ ----------- ---------- -----------
$351,314,842.. $138,464,877 $215,242,250 $124,114,856 $58,967,300 $4,346,735 $80,820,048
============ ============ ============ ============ =========== ========== ===========
6,603,906... 5,405,715 4,347,218 3,500,514 3,799,795 256,503 3,820,571
============ ============ ============ ============ =========== ========== ===========
$53.20....... $ 25.61 $ 49.51 $ 35.46 $ 15.52 $ 16.95 $ 21.15
============ ============ ============ ============ =========== ========== ===========
</Table>
7
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
---------- --------- ------------ ----------- ----------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIOS (NOTE 2):
Interest income........................................... $1,201,695 $ 859,051 $1,014,998 $ 2,710,299 $1,363,614
Securities lending income (net)........................... -- 1,078 12,607 10,355 5,985
Dividend income........................................... -- -- -- -- 932,705
Expenses (net of reimbursement)........................... (103,536) (91,232) (107,393) (241,852) (418,369)
---------- --------- ---------- ----------- ----------
Net investment income (loss) allocated from Portfolios.... 1,098,159 768,897 920,212 2,478,802 1,883,935
---------- --------- ---------- ----------- ----------
EXPENSES (NOTE 4):
Mortality and expense risk................................ 408,066 259,917 295,853 683,409 919,755
Less expenses reimbursed by TFLIC......................... (58,563) -- -- -- --
---------- --------- ---------- ----------- ----------
Net expenses.............................................. 349,503 259,917 295,853 683,409 919,755
---------- --------- ---------- ----------- ----------
NET INVESTMENT INCOME (LOSS).............................. 748,656 508,980 624,359 1,795,393 964,180
---------- --------- ---------- ----------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) allocated from Portfolios on:
Securities.............................................. (58) (121,700) (453,457) (203,377) 5,161,656
Futures................................................. -- -- -- 73,574 107,269
Written options......................................... -- -- -- 28,525 21,293
Foreign currency transactions........................... -- -- -- (216,468) (37,666)
Change in net unrealized appreciation (depreciation)
allocated from Portfolios on:
Securities.............................................. -- (190,503) (112,971) (880,719) (2,725,260)
Futures................................................. -- -- -- 16,512 (24,286)
Written options......................................... -- -- -- 3,735 --
Short sales............................................. -- -- -- (29,835) (6,742)
Foreign currency translations........................... -- -- -- 205,424 108,129
---------- --------- ---------- ----------- ----------
Net realized and unrealized gains (losses) on
investments............................................. (58) (312,203) (566,428) (1,002,629) 2,604,393
---------- --------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $ 748,598 $ 196,777 $ 57,931 $ 792,764 $3,568,573
========== ========= ========== =========== ==========
</Table>
See notes to financial statements.
8
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD
INCOME INCOME GROWTH EQUITY EQUITY BOND
--------------- ------------- ------------- ------------- ------------- -------------
$ 283,691 $ 51,417 $ 164,391 $ 102,510 $ 19,618 $ 342,145
87,648 14,637 26,324 57,469 8,815 --
5,997,598 2,072,418 1,883,441 937,270 342,060 2,375
(1,653,379) (855,570) (1,368,822) (988,424) (447,626) (24,797)
------------ ---------- ----------- ----------- ---------- ---------
4,715,558 1,282,902 705,334 108,825 (77,133) 319,723
------------ ---------- ----------- ----------- ---------- ---------
3,769,789 1,479,531 2,318,269 1,278,248 614,916 45,482
-- -- -- -- -- --
------------ ---------- ----------- ----------- ---------- ---------
3,769,789 1,479,531 2,318,269 1,278,248 614,916 45,482
------------ ---------- ----------- ----------- ---------- ---------
945,769 (196,629) (1,612,935) (1,169,423) (692,049) 274,241
------------ ---------- ----------- ----------- ---------- ---------
31,008,302 7,339,332 9,361,543 14,213,804 3,875,791 27,137
-- (7,335) -- 17,381 -- --
-- -- -- -- -- --
-- (23) -- (33) -- 1,006
(12,747,803) 641,694 4,339,219 (2,621,826) 553,656 (205,547)
-- (2,941) -- (13,621) -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- (84) (10) 11 -- 11
------------ ---------- ----------- ----------- ---------- ---------
18,260,499 7,970,643 13,700,752 11,595,716 4,429,447 (177,393)
------------ ---------- ----------- ----------- ---------- ---------
$ 19,206,268 $7,774,014 $12,087,817 $10,426,293 $3,737,398 $ 96,848
============ ========== =========== =========== ========== =========
<Caption>
INTERNATIONAL
EQUITY
-------------
$ 32,756
53,363
2,059,518
(641,830)
----------
1,503,807
----------
806,718
--
----------
806,718
----------
697,089
----------
3,853,266
--
--
(50,330)
2,858,411
--
--
--
(13,342)
----------
6,648,005
----------
$7,345,094
==========
</Table>
9
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
------------ ----------- ------------ ------------ ------------
FROM OPERATIONS:
Net investment income (loss)........................ $ 748,656 $ 508,980 $ 624,359 $ 1,795,393 $ 964,180
Net realized gains (losses) allocated from
Portfolios on:
Securities........................................ (58) (121,700) (453,457) (203,377) 5,161,656
Futures........................................... -- -- -- 73,574 107,269
Written options................................... -- -- -- 28,525 21,293
Foreign currency transactions..................... -- -- -- (216,468) (37,666)
Change in net unrealized appreciation (depreciation)
allocated from Portfolios on:
Securities........................................ -- (190,503) (112,971) (880,719) (2,725,260)
Futures........................................... -- -- -- 16,512 (24,286)
Written options................................... -- -- -- 3,735 --
Short sales....................................... -- -- -- (29,835) (6,742)
Foreign currency translations..................... -- -- -- 205,424 108,129
------------ ----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from
operations........................................ 748,598 196,777 57,931 792,764 3,568,573
------------ ----------- ----------- ------------ ------------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold.......................................... 45,062,203 5,085,234 5,173,446 13,367,109 10,189,249
Units redeemed...................................... (48,631,868) (5,440,530) (8,953,380) (10,191,307) (19,302,872)
------------ ----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from
unit transactions................................. (3,569,665) (355,296) (3,779,934) 3,175,802 (9,113,623)
------------ ----------- ----------- ------------ ------------
Total increase (decrease) in net assets............. (2,821,067) (158,519) (3,722,003) 3,968,566 (5,545,050)
NET ASSETS:
Beginning of year................................... 40,257,885 24,415,487 29,408,757 61,849,725 88,578,165
------------ ----------- ----------- ------------ ------------
End of year......................................... $ 37,436,818 $24,256,968 $25,686,754 $ 65,818,291 $ 83,033,115
============ =========== =========== ============ ============
Units outstanding beginning of year................. 2,129,128 1,698,725 1,467,906 2,036,065 2,451,834
Units sold.......................................... 2,361,827 352,726 258,187 437,231 280,468
Units redeemed...................................... (2,550,651) (377,808) (446,946) (333,552) (531,545)
------------ ----------- ----------- ------------ ------------
Units outstanding end of year....................... 1,940,304 1,673,643 1,279,147 2,139,744 2,200,757
============ =========== =========== ============ ============
</Table>
See notes to financial statements.
10
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ------------ ---------- -------------
$ 945,769 $ (196,629) $ (1,612,935) $ (1,169,423) $ (692,049) $ 274,241 $ 697,089
31,008,302 7,339,332 9,361,543 14,213,804 3,875,791 27,137 3,853,266
-- (7,335) -- 17,381 -- -- --
-- -- -- -- -- -- --
-- (23) -- (33) -- 1,006 (50,330)
(12,747,803) 641,694 4,339,219 (2,621,826) 553,656 (205,547) 2,858,411
-- (2,941) -- (13,621) -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- (84) (10) 11 -- 11 (13,342)
------------ ------------ ------------ ------------ ------------ ---------- ------------
19,206,268 7,774,014 12,087,817 10,426,293 3,737,398 96,848 7,345,094
------------ ------------ ------------ ------------ ------------ ---------- ------------
37,212,740 19,225,540 20,115,332 21,327,873 9,886,890 659,762 13,552,575
(52,393,574) (27,281,312) (40,385,678) (24,954,226) (13,995,272) (999,385) (13,866,081)
------------ ------------ ------------ ------------ ------------ ---------- ------------
(15,180,834) (8,055,772) (20,270,346) (3,626,353) (4,108,382) (339,623) (313,506)
------------ ------------ ------------ ------------ ------------ ---------- ------------
4,025,434 (281,758) (8,182,529) 6,799,940 (370,984) (242,775) 7,031,588
347,289,408 138,746,635 223,424,779 117,314,916 59,338,284 4,589,510 73,788,460
------------ ------------ ------------ ------------ ------------ ---------- ------------
$351,314,842 $138,464,877 $215,242,250 $124,114,856 $ 58,967,300 $4,346,735 $ 80,820,048
============ ============ ============ ============ ============ ========== ============
6,901,393 5,739,439 4,783,781 3,617,451 4,092,218 276,841 3,836,891
730,716 793,773 433,578 644,513 695,062 39,514 703,864
(1,028,203) (1,127,497) (870,141) (761,450) (987,485) (59,852) (720,184)
------------ ------------ ------------ ------------ ------------ ---------- ------------
6,603,906 5,405,715 4,347,218 3,500,514 3,799,795 256,503 3,820,571
============ ============ ============ ============ ============ ========== ============
</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
DECEMBER 31, 2005
<Table>
ASSETS:
Investments, at cost........................................ $42,204,785
===========
Investments, at value (Note 6).............................. $42,304,699
Receivable for units sold................................... 22,759
-----------
Total assets................................................ 42,327,458
-----------
LIABILITIES:
Payable for units redeemed.................................. 9,994
Payable for securities purchased............................ 12,765
Accrued mortality and expense risk.......................... 38,432
-----------
Total liabilities........................................... 61,191
-----------
NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS.......... $42,266,267
===========
ACCUMULATION UNITS.......................................... 1,451,064
===========
UNIT VALUE.................................................. $ 29.13
===========
</Table>
See notes to financial statements.
14
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
INVESTMENT INCOME (NOTE 2):
Dividend income............................................. $ 745,600
----------
EXPENSES (NOTE 4):
Mortality and expense risk.................................. 447,528
----------
NET INVESTMENT INCOME (LOSS)................................ 298,072
----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE
2):
Net realized gains (losses) from securities................. (273,588)
Change in net unrealized appreciation (depreciation) on
securities................................................ 1,788,103
----------
Net realized and unrealized gains (losses) on investments... 1,514,515
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $1,812,587
==========
</Table>
See notes to financial statements.
15
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------
2005 2004
----------- -----------
FROM OPERATIONS:
Net investment income (loss)................................ $ 298,072 $ 245,178
Net realized gains (losses) from securities................. (273,588) (388,818)
Change in net unrealized appreciation (depreciation) on
securities................................................ 1,788,103 2,802,137
----------- -----------
Net increase (decrease) in net assets resulting from
operations................................................ 1,812,587 2,658,497
----------- -----------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold.................................................. 6,411,494 7,151,803
Units redeemed.............................................. (6,302,427) (6,011,153)
----------- -----------
Net increase (decrease) in net assets from unit
transactions.............................................. 109,067 1,140,650
----------- -----------
Total increase (decrease) in net assets..................... 1,921,654 3,799,147
NET ASSETS:
Beginning of year........................................... 40,344,613 36,545,466
----------- -----------
End of year................................................. $42,266,267 $40,344,613
=========== ===========
Units outstanding beginning of year......................... 1,447,441 1,403,970
Units sold.................................................. 227,718 270,209
Units redeemed.............................................. (224,095) (226,738)
----------- -----------
Units outstanding end of year............................... 1,451,064 1,447,441
=========== ===========
</Table>
See notes to financial statements.
16
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Diversified Investors Variable Funds (individually, a "Subaccount" and
collectively, "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 commenced operations on August 18, 1994. There are currently thirteen
Subaccounts within DIVF which are available to contractholders of Group Plans.
Twelve of the Subaccounts invest in a corresponding portfolio of Diversified
Investors Portfolios (the "Portfolios"). The thirteenth Subaccount is a fund of
fund and invests in the Calvert Social Balanced Portfolio, a series of Calvert
Variable Series, Inc. ("Calvert"). The financial statements of the Portfolios
and Calvert accompany this report.
At December 31, 2005, each of the DIVF Subaccounts' investment in the
corresponding Portfolios was as follows:
<Table>
<Caption>
PERCENTAGE INVESTMENT
SUBACCOUNT IN PORTFOLIO
- ---------- ---------------------
Money Market................................................ 4.86
High Quality Bond........................................... 3.08
Intermediate Government Bond................................ 9.84
Core Bond................................................... 3.21
Balanced.................................................... 20.23
Value & Income.............................................. 11.65
Growth & Income............................................. 11.76
Equity Growth............................................... 8.33
Special Equity.............................................. 9.59
Aggressive Equity........................................... 15.44
High Yield Bond............................................. 1.05
International Equity........................................ 4.70
</Table>
For information regarding each Portfolio's investments, please refer to the
Portfolio Composition section of the Portfolios' financial statements or
Calvert's investments in the Asset Allocation section of Calvert's financial
statements which accompany this report.
2. SIGNIFICANT ACCOUNTING POLICIES
A. INVESTMENTS:
The investment by DIVF in the Portfolios reflects DIVF's proportionate interest
in the net assets of the Portfolios. 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.
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. A description of the
17
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
portfolio valuation policy for Calvert can be found in Note A of Calvert's Notes
to Financial Statements which accompanies this report.
B. INVESTMENT INCOME:
Each Subaccount, except the Calvert 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 Portfolio 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 accounting principles
generally accepted in the United States of America 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 $3,361,077 and $2,952,790
respectively.
4. FEES AND TRANSACTIONS WITH AFFILIATES
All Subaccounts, except the Calvert Subaccount, purchase interests in the
Portfolios. The net assets of those 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 group 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.
During the year, TFLIC elected to voluntarily waive $58,563 of its fees to
maintain a positive yield in the Money Market Subaccount.
18
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. GROUP PLAN ASSUMPTIONS
On December 31, 1993, TFLIC entered into an agreement with MONY Life Insurance
Company ("MONY") pursuant to which certain contracts issued by MONY to Group
Plans may be transferred through assumption reinsurance to TFLIC subject to
receipt of any necessary state insurance department approvals and
authorizations. The assumption reinsurance of any Group Plan to TFLIC will
result in the transfer of the applicable assets out of a corresponding MONY
separate account and into DIVF. There were no assets transferred to TFLIC
pursuant to this assumption reinsurance agreement for the years ended December
31, 2005 or 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 December 31, 2005,
it holds 21,772,876 shares with a market value of $42,304,699.
7. 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
regarding certain matters. In February 2006, DISC settled an administrative
proceeding with the NASD regarding agreements with two customers who were
permitted to engage in market timing activity in the Diversified Investors
International Equity Fund from July 1, 2003 through October 24, 2003. The
settlement also addressed alleged deficiencies in DISC's procedures relating to
the retention of e-mail communications. Under the terms of the Letter of
Acceptance, Waiver and Consent ("AWC") with the NASD, under which DISC neither
admitted nor denied the allegations or findings, DISC consented to the following
sanctions: (i) censure; (ii) a fine of $1.3 million; (iii) restitution of
approximately $949,011 to the Diversified International Equity Portfolio for
losses attributable to the trading described in the AWC; and (iv) agreement to
make certifications to the NASD regarding the review and establishment of
procedures relating to e-mail retention and to the enforcement of the Funds'
policies and procedures relating to market timing. The restitution payment of
$949,011 referred to above was made on February 14, 2006.
DISC and DIA 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.
8. CONCENTRATIONS AND INDEMNIFICATIONS
From time to time, DIVF 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 DIVF.
In the normal course of business, DIVF enters into contracts that contain a
variety of representations and warranties which provide general
indemnifications. DIVF's maximum exposure under these arrangements is unknown as
this would involve future claims that may be made against DIVF that have not yet
occurred. However, based on experience, DIVF expect the risk of loss to be
remote.
19
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
----------------------------
NET NET REALIZED TOTAL INCOME
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM
BEGINNING INCOME GAINS (LOSSES) INVESTMENT UNIT VALUE,
FOR THE YEAR ENDED OF YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS END OF YEAR
- ------------------ ------------ ---------- -------------- ------------ -----------
MONEY MARKET
12/31/2005 $18.91 $0.38 $(0.00)(c) $ 0.38 $19.29
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
HIGH QUALITY BOND
12/31/2005 14.37 0.31 (0.19) 0.12 14.49
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
INTERMEDIATE GOVERNMENT BOND
12/31/2005 20.03 0.46 (0.41) 0.05 20.08
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
CORE BOND
12/31/2005 30.38 0.88 (0.50) 0.38 30.76
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
BALANCED
12/31/2005 36.13 0.42 1.18 1.60 37.73
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
VALUE & INCOME
12/31/2005 50.32 0.14 2.74 2.88 53.20
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
GROWTH & INCOME
12/31/2005 24.17 (0.04) 1.48 1.44 25.61
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
</Table>
20
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
EXPENSES, INCLUDING EXPENSES NET NET INVESTMENT
INCLUDING OF THE PORTFOLIO INVESTMENT INCOME (LOSS)
NET ASSETS, TOTAL EXPENSES OF (NET OF INCOME (NET OF PORTFOLIO
END OF YEAR RETURN THE PORTFOLIO REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER(B)
------------ ------- ------------- ------------------ ---------- --------------- -----------
$ 37,436,818 2.01% 1.38% 1.22% 1.86% 2.02% N/A
40,257,885 0.37 1.38 1.11 0.07 0.34 N/A
44,852,848 0.16 1.36 1.22 0.03 0.17 N/A
48,563,760 0.75 1.38 1.20 0.60 0.78 N/A
47,640,329 3.09 1.37 1.20 2.80 2.97 N/A
24,256,968 0.84 1.49 1.49 2.15 2.15 58%
24,415,487 0.35 1.48 1.48 1.86 1.86 48
25,677,769 1.20 1.48 1.48 2.10 2.10 50
21,846,053 5.05 1.48 1.48 3.27 3.27 54
17,155,475 7.07 1.48 1.48 4.60 4.60 53
25,686,754 0.25 1.50 1.50 2.32 2.32 756
29,408,757 0.45 1.52 1.50(d) 1.35 1.37 554
34,530,489 0.50 1.49 1.49 1.79 1.79 392
43,274,632 7.13 1.49 1.49 2.81 2.81 134
33,005,776 5.65 1.48 1.48 4.17 4.17 40
65,818,291 1.25 1.49 1.49 2.89 2.89 1,003(e)
61,849,725 3.51 1.49 1.49 2.52 2.52 885
63,545,946 3.49 1.49 1.49(d) 2.43 2.43 922
54,824,483 8.08 1.49 1.49 3.78 3.78 462
52,479,298 5.81 1.48 1.48 4.22 4.22 547
83,033,115 4.43 1.64 1.60(d) 1.11 1.15 367
88,578,165 7.12 1.62 1.60(d) 1.09 1.11 338
89,699,459 16.43 1.61 1.60(d) 1.05 1.06 377
79,573,766 (11.00) 1.62 1.60(d) 1.53 1.55 289
105,443,013 (6.33) 1.59 1.59 1.72 1.72 312
351,314,842 5.72 1.58 1.58 0.28 0.28 89
347,289,408 11.67 1.58 1.58 0.68 0.68 44
317,902,738 25.17 1.57 1.57 0.82 0.82 70
259,445,696 (16.18) 1.58 1.58 0.86 0.86 31
348,558,727 (3.07) 1.58 1.58 0.97 0.97 32
138,464,877 5.96 1.74 1.74 (0.15) (0.15) 79
138,746,635 9.56 1.74 1.74 0.12 0.12 184
130,636,290 22.83 1.73 1.73(d) (0.08) (0.08) 100
100,189,150 (23.44) 1.76 1.75(d) (0.33) (0.32) 115
146,175,492 (23.18) 1.73 1.73 (0.61) (0.61) 153
</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
BEGINNING INCOME GAINS (LOSSES) INVESTMENT UNIT VALUE,
FOR THE YEAR ENDED OF YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS END OF YEAR
- ------------------ ----------- ---------- -------------- ------------ -----------
EQUITY GROWTH
12/31/2005 $46.70 $(0.35) $ 3.16 $ 2.81 $49.51
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
SPECIAL EQUITY
12/31/2005 32.43 (0.33) 3.36 3.03 35.46
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
AGGRESSIVE EQUITY
12/31/2005 14.50 (0.18) 1.20 1.02 15.52
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
HIGH YIELD BOND
12/31/2005 16.58 1.10 (0.73) 0.37 16.95
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
INTERNATIONAL EQUITY
12/31/2005 19.23 0.18 1.74 1.92 21.15
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
CALVERT
12/31/2005 27.87 0.21 1.05 1.26 29.13
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
</Table>
- ---------------
(a) Calculated based upon average units outstanding.
(b) Portfolio turnover of the Portfolio or the Calvert Subaccount.
(c) Amount rounds to less than one penny per share.
(d) Includes reimbursement of fees at the underlying Portfolio level.
(e) Includes the effect of buying and selling TBA securities used in dollar roll
transactions. Refer to Note 2H of the Portfolio's Notes to Financial
Statements, which accompany this report.
(f) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio.
22
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------------------------
EXPENSES,
EXPENSES, INCLUDING EXPENSES NET NET INVESTMENT
INCLUDING OF THE PORTFOLIO INVESTMENT INCOME (LOSS)
NET ASSETS, TOTAL EXPENSES OF (NET OF INCOME (NET OF PORTFOLIO
END OF YEAR RETURN THE PORTFOLIO REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER(B)
------------ ------ ------------- ------------------ ------------- --------------- -----------
$215,242,250 6.02% 1.75% 1.75% (0.77)% (0.77)% 76%
223,424,779 6.57 1.75 1.75 (0.45) (0.45) 129
223,128,369 25.20 1.75 1.70 (0.76) (0.71) 61
165,484,094 (24.34) 1.75 1.60 (0.89) (0.74) 75
254,915,207 (21.02) 1.75 1.60 (1.02) (0.87) 63
124,114,856 9.34 1.95 1.95(d) (1.01) (1.01) 92
117,314,916 11.41 1.94 1.94 (0.95) (0.95) 103
105,781,184 42.42 1.95 1.95(d) (1.13) (1.13) 103
69,607,014 (25.18) 1.95 1.95 (1.06) (1.06) 109
103,905,285 (4.17) 1.93 1.93 (1.12) (1.12) 88
58,967,300 7.03 1.91 1.90(d) (1.25) (1.24) 187
59,338,284 10.86 2.06 2.05(d) (1.59) (1.58) 252
55,827,123 26.74 2.11 2.10(d) (1.72) (1.71) 165
42,349,073 (27.38) 2.11 2.10(d) (1.70) (1.69) 87
62,154,959 (31.94) 2.10 2.10 (1.82) (1.82) 98
4,346,735 2.23 1.70 1.70 6.63 6.63 68
4,589,510 9.29 1.70 1.70(d) 6.97 6.97 80
4,091,738 26.52 1.71 1.70(d) 8.02 8.03 136
5,221,809 1.01 1.71 1.70(d) 8.04 8.05 95
5,402,423 4.03 1.69 1.69 8.31 8.31 90
80,820,048 9.98 1.98 1.98(d) 0.95 0.95 94
73,788,460 18.34 1.97 1.97 0.75 0.75 171
60,723,598 32.11 1.97 1.97(d) 0.03 0.03 23
47,525,206 (17.84) 1.98 1.98 (0.26) (0.26) 25
63,490,941 (19.52) 1.99 1.99 (0.45) (0.45) 28
42,266,267 4.52 1.10(f) 1.10(f) 0.73 0.73 7
40,344,613 7.07 1.10(f) 1.10(f) 0.65 0.65 8
36,545,466 18.05 2.03 2.03 0.86 0.86 374
30,880,782 (13.12) 2.01 2.01 0.69 0.69 552
37,131,528 (7.98) 1.97 1.97 4.35 4.35 751
</Table>
23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of Transamerica Financial Life Insurance Company, Inc.
and the Contractholders of Diversified Investors Variable Funds:
In our opinion, the accompanying statements of assets and liabilities and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of the Money Market, High Quality Bond, Intermediate Government Bond,
Core Bond, Balanced, Value & Income, Growth & Income, Equity Growth, Special
Equity, Aggressive Equity, High Yield Bond, International Equity, and Calvert
Subaccounts; (constituting the Diversified Investors Variable Funds, hereafter
referred to as the "Funds") at December 31, 2005, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2005 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 21, 2006
24
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES
(UNAUDITED)
As a shareholder in an open-end management investment company (a "Subaccount")
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 Subaccount invests. You will also
bear the cost of operating the Subaccount.
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 Subaccount and its investments in DIVF. The figures are based on the
actual total return and the actual expenses incurred for the period July 1,
2005 - December 31, 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 Subaccount, but assumes a
total annual return rate of 5% before expenses. Since the 5% is hypothetical,
the ending account values and the expenses paid for the period July 1,
2005 - December 31, 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
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
SHORT HORIZON July 1, 2005 December 31, 2005 (1)(2) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,007.40 $1.01 0.20%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,024.07 $1.01 0.20%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 - Annualized
Value Value December 31, 2005 Expense
INTERMEDIATE HORIZON July 1, 2005 December 31, 2005 (1)(2) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,040.70 $1.02 0.20%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,024.07 $1.01 0.20%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
25
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-----------------------------------------------------------------------------
Expenses Paid
During the Period
Beginning Account Ending Account July 1, 2005 Annualized
Value Value December 31, 2005 Expense
INTERMEDIATE LONG HORIZON July 1, 2005 December 31, 2005 (1)(2) Ratio(1)
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,056.40 $1.03 0.20%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% annual return before $1,000 $1,024.07 $1.01 0.20%
expenses)
- ----------------------------------------------------------------------------------------------------------------
</Table>
- ---------------
(1) These figures exclude the fees and expenses of the underlying investments in
DIVF.
(2) Expenses are equal to each Subaccount's annualized expense ratio multiplied
by the average account value over the period, divided by 365, multiplied by
183 (to reflect the one-half year period).
26
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
ASSETS:
Investments in affiliates, at cost....................... $10,406,548 $25,027,714 $38,738,594
=========== =========== ===========
Investments in affiliates, at value (Notes 1 and 2)...... $11,575,967 $29,286,112 $45,448,595
Receivable for securities sold........................... 38,852 -- --
Receivable for units sold................................ 11,148 24,475 257,641
----------- ----------- -----------
Total assets............................................. 11,625,967 29,310,587 45,706,236
----------- ----------- -----------
LIABILITIES:
Payable for securities purchased......................... 50,000 22,996 257,253
Payable for units redeemed............................... -- 1,479 388
Accrued investment advisory fees......................... 1,895 4,789 7,415
----------- ----------- -----------
Total liabilities........................................ 51,895 29,264 265,056
----------- ----------- -----------
NET ASSETS............................................... $11,574,072 $29,281,323 $45,441,180
=========== =========== ===========
ACCUMULATION UNITS....................................... 776,216 1,817,622 2,694,280
=========== =========== ===========
UNIT VALUE............................................... $ 14.91 $ 16.11 $ 16.87
=========== =========== ===========
NET ASSETS CONSIST OF:
Cost of accumulation units............................... $ 9,686,773 $23,352,243 $37,355,238
Undistributed (accumulated) net realized gains
(losses)............................................... 818,723 1,981,614 1,786,618
Undistributed (accumulated) net investment income
(loss)................................................. (100,843) (310,932) (410,677)
Net unrealized appreciation (depreciation) on
investments............................................ 1,169,419 4,258,398 6,710,001
----------- ----------- -----------
NET ASSETS............................................... $11,574,072 $29,281,323 $45,441,180
=========== =========== ===========
</Table>
See notes to financial statements.
27
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
INVESTMENT ADVISORY FEES (NOTE 3)........................ $(21,104) $ (56,662) $ (82,965)
-------- ---------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS IN
AFFILIATES (NOTE 2):
Net realized gains (losses) on investments in
affiliates............................................. 107,702 11,318 332,033
Change in net unrealized appreciation (depreciation) on
investments in affiliates.............................. 82,296 1,152,015 1,869,113
-------- ---------- ----------
Net realized and unrealized gains (losses) on investments
in affiliates.......................................... 189,998 1,163,333 2,201,146
-------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $168,894 $1,106,671 $2,118,181
======== ========== ==========
</Table>
See notes to financial statements.
28
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
FROM OPERATIONS:
Investment advisory fees.............................. $ (21,104) $ (56,662) $ (82,965)
Net realized gains (losses) on investments in
affiliates.......................................... 107,702 11,318 332,033
Change in net unrealized appreciation (depreciation)
on investments in affiliates........................ 82,296 1,152,015 1,869,113
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... 168,894 1,106,671 2,118,181
----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Units sold............................................ 5,106,113 6,857,218 10,967,621
Units redeemed........................................ (3,892,234) (7,402,589) (7,767,095)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
unit transactions................................... 1,213,879 (545,371) 3,200,526
----------- ----------- -----------
Total increase (decrease) in net assets............... 1,382,773 561,300 5,318,707
NET ASSETS:
Beginning of year..................................... 10,191,299 28,720,023 40,122,473
----------- ----------- -----------
End of year........................................... $11,574,072 $29,281,323 $45,441,180
=========== =========== ===========
Units outstanding beginning of year................... 694,223 1,853,382 2,497,752
Units sold............................................ 346,649 441,480 680,542
Units redeemed........................................ (264,656) (477,240) (484,014)
----------- ----------- -----------
Units outstanding end of year......................... 776,216 1,817,622 2,694,280
=========== =========== ===========
</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
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
204,779 Diversified Investors Variable Funds -- Core Bond........... $ 6,298,976
8,396 Diversified Investors Variable Funds -- Equity Growth....... 415,730
6,074 Diversified Investors Variable Funds -- Growth & Income..... 155,584
200,896 Diversified Investors Variable Funds -- High Quality Bond... 2,911,687
64,043 Diversified Investors Variable Funds -- High Yield Bond..... 1,085,281
9,375 Diversified Investors Variable Funds -- International
Equity.................................................... 198,320
1,639 Diversified Investors Variable Funds -- Money Market........ 31,625
2,114 Diversified Investors Variable Funds -- Special Equity...... 74,972
7,590 Diversified Investors Variable Funds -- Value & Income...... 403,792
-----------
Total Investments -- 100.0% (Cost $10,406,548).............. 11,575,967
Liabilities less other assets -- (0.0%)..................... (1,895)
-----------
NET ASSETS -- 100.0%........................................ $11,574,072
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2005 is $10,406,548.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 1,169,419
===========
</Table>
See notes to financial statements.
31
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
283,617 Diversified Investors Variable Funds -- Core Bond........... $ 8,724,043
97,595 Diversified Investors Variable Funds -- Equity Growth....... 4,832,198
72,979 Diversified Investors Variable Funds -- Growth & Income..... 1,869,325
278,399 Diversified Investors Variable Funds -- High Quality Bond... 4,034,973
86,378 Diversified Investors Variable Funds -- High Yield Bond..... 1,463,783
110,088 Diversified Investors Variable Funds -- International
Equity.................................................... 2,328,788
12,676 Diversified Investors Variable Funds -- Money Market........ 244,571
25,142 Diversified Investors Variable Funds -- Special Equity...... 891,439
92,051 Diversified Investors Variable Funds -- Value & Income...... 4,896,992
-----------
Total Investments -- 100.0% (Cost $25,027,714).............. 29,286,112
Liabilities less other assets -- (0.0%)..................... (4,789)
-----------
NET ASSETS -- 100.0%........................................ $29,281,323
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2005 is $25,027,714.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 4,258,398
===========
</Table>
See notes to financial statements.
32
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
265,730 Diversified Investors Variable Funds -- Core Bond........... $ 8,173,838
208,165 Diversified Investors Variable Funds -- Equity Growth....... 10,306,785
155,172 Diversified Investors Variable Funds -- Growth & Income..... 3,974,657
272,762 Diversified Investors Variable Funds -- High Quality Bond... 3,953,269
80,130 Diversified Investors Variable Funds -- High Yield Bond..... 1,357,907
231,422 Diversified Investors Variable Funds -- International
Equity.................................................... 4,895,476
28,795 Diversified Investors Variable Funds -- Money Market........ 555,577
52,317 Diversified Investors Variable Funds -- Special Equity...... 1,854,974
195,045 Diversified Investors Variable Funds -- Value & Income...... 10,376,112
-----------
Total Investments -- 100.0% (Cost $38,738,594).............. 45,448,595
Liabilities less other assets -- (0.0%)..................... (7,415)
-----------
NET ASSETS -- 100.0%........................................ $45,441,180
===========
The aggregate cost of investments for federal income tax purposes at December 31,
2005 is $38,738,594.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 6,710,001
===========
</Table>
See notes to financial statements.
33
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
PORTFOLIO COMPOSITION
DECEMBER 31, 2005
The following charts summarize the portfolio composition of each Fund by asset
type.
<Table>
SHORT HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 0.3%
Fixed Income Funds.......................................... 88.9
Domestic Equity Funds....................................... 9.1
International Equity Funds.................................. 1.7
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 0.8%
Fixed Income Funds.......................................... 48.6
Domestic Equity Funds....................................... 42.7
International Equity Funds.................................. 7.9
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 1.2%
Fixed Income Funds.......................................... 29.7
Domestic Equity Funds....................................... 58.3
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
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 Long 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 commenced operations on August 18, 1994. DIVF
operates as a unit investment trust under the 1940 Act. The Separate Account
commenced operations on January 2, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Subaccounts 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 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 accounting principles
generally accepted in the United States of America 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)
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.
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 group 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 Subaccounts for which they receive fees.
4. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales for the year
ended December 31, 2005, was as follows:
<Table>
<Caption>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
Short Horizon............................................... $ 6,062,970 $ 4,870,026
Intermediate Horizon........................................ 8,263,889 8,865,965
Intermediate Long Horizon................................... 13,348,332 10,230,036
</Table>
For a detailed description of each Subaccount's purchases and sales, refer to
Note 10.
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
regarding certain matters. In February 2006, DISC settled an administrative
proceeding with the NASD regarding agreements with two customers who were
permitted to engage in market timing activity in the Diversified Investors
International Equity Fund from July 1, 2003 through October 24, 2003. The
settlement also addressed alleged deficiencies in DISC's procedures relating to
the retention of e-mail communications. Under the terms of the Letter of
Acceptance, Waiver and Consent ("AWC") with the NASD, under which DISC neither
admitted nor denied the allegations or findings, DISC consented to the following
sanctions: (i) censure; (ii) a fine of $1.3 million; (iii) restitution of
approximately $949,011 to the Diversified International Equity Portfolio for
losses attributable to the trading described in the AWC; and (iv) agreement to
make certifications to the NASD regarding the review and establishment of
procedures relating to e-mail retention and to the enforcement of the Funds'
policies and procedures relating to market timing. The restitution payment of
$949,011 referred to above was made on February 14, 2006.
36
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. LEGAL AND REGULATORY MATTERS: (CONTINUED)
DISC and DIA 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.
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 year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
------------------------
NET
REALIZED
AND TOTAL
UNIT NET UNREALIZED INCOME UNIT NET
VALUE, INVESTMENT GAINS (LOSS) FROM VALUE, ASSETS,
FOR THE BEGINNING INCOME (LOSSES) ON INVESTMENT END OF TOTAL END OF
YEAR ENDED OF YEAR (LOSS)(A) INVESTMENTS OPERATIONS YEAR RETURN YEAR
---------- --------- ---------- ----------- ----------- ------- ------- -----------
SHORT HORIZON
12/31/2005 $14.68 $(0.03) $ 0.26 $ 0.23 $14.91 1.57% $11,574,072
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
INTERMEDIATE HORIZON
12/31/2005 15.50 (0.03) 0.64 0.61 16.11 3.94 29,281,323
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
INTERMEDIATE LONG HORIZON
12/31/2005 16.06 (0.03) 0.84 0.81 16.87 5.04 45,441,180
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
<Caption>
RATIOS TO AVERAGE
NET ASSETS
---------------------
NET
INVESTMENT PORTFOLIO
FOR THE INCOME TURNOVER
YEAR ENDED EXPENSES (LOSS) RATE
---------- -------- ---------- ---------
SHORT HORIZON
12/31/2005 0.20% (0.20)% 46%
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
INTERMEDIATE HORIZON
12/31/2005 0.20 (0.20) 29
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
INTERMEDIATE LONG HORIZON
12/31/2005 0.20 (0.20) 25
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
</Table>
- ---------------
(a) Calculated based upon average units outstanding.
38
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. INVESTMENTS IN AFFILIATES
The market value of investments in affiliates (as defined in the 1940 Act,
"Affiliated Companies" are those in which the Trust is under common control with
an affiliated entity) at December 31, 2005 totaled $11,575,967, $29,286,112 and
$45,448,595 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 36,410 2,977 204,779 $ 1,117,596 $ 67,856 $ 23,462
Diversified Investors Variable
Funds -- Equity Growth.......... 8,347 1,018 969 8,396 48,478 37,487 6,975
Diversified Investors Variable
Funds -- Growth & Income........ 6,073 745 744 6,074 18,397 14,348 3,612
Diversified Investors Variable
Funds -- High Quality Bond...... 186,754 31,270 17,128 200,896 451,985 209,307 38,116
Diversified Investors Variable
Funds -- High Yield Bond........ 58,506 7,826 2,289 64,043 131,417 27,924 9,890
Diversified Investors Variable
Funds -- International Equity... 9,559 1,107 1,291 9,375 21,902 16,785 7,210
Diversified Investors Variable
Funds -- Money Market........... 8,418 220,937 227,716 1,639 4,215,956 4,343,426 3,390
Diversified Investors Variable
Funds -- Special Equity......... 2,272 258 416 2,114 8,761 9,460 4,196
Diversified Investors Variable
Funds -- Value & Income......... 7,563 942 915 7,590 48,478 35,731 10,851
----------- ---------- ---------
$ 6,062,970 $4,762,324 $ 107,702
=========== ========== =========
</Table>
39
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. INVESTMENTS IN AFFILIATES (CONTINUED)
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING UNITS UNITS ENDING PURCHASE GAIN/(LOSS)
UNITS PURCHASED SOLD UNITS COST SALE COST ON SALES
--------- --------- ------- ------- ----------- ---------- -----------
INTERMEDIATE HORIZON
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond.............. 255,315 39,447 11,145 283,617 $ 1,204,164 $ 280,946 $ 60,316
Diversified Investors Variable
Funds -- Equity Growth.......... 104,786 1,346 8,537 97,595 65,258 571,252 (148,122)
Diversified Investors Variable
Funds -- Growth & Income........ 77,194 999 5,214 72,979 25,032 195,177 (62,777)
Diversified Investors Variable
Funds -- High Quality Bond...... 267,367 27,330 16,298 278,399 394,557 195,530 39,981
Diversified Investors Variable
Funds -- High Yield Bond........ 84,155 2,223 -- 86,378 37,168 -- --
Diversified Investors Variable
Funds -- International Equity... 123,343 1,475 14,730 110,088 29,520 286,589 7,792
Diversified Investors Variable
Funds -- Money Market........... 44,565 336,520 368,409 12,676 6,431,203 7,028,593 7,710
Diversified Investors Variable
Funds -- Special Equity......... 28,405 341 3,604 25,142 11,729 84,918 40,446
Diversified Investors Variable
Funds -- Value & Income......... 96,086 1,253 5,288 92,051 65,258 211,642 65,972
----------- ---------- ---------
$ 8,263,889 $8,854,647 $ 11,318
=========== ========== =========
INTERMEDIATE LONG HORIZON
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond.............. 215,399 50,331 -- 265,730 $ 1,536,787 $ -- $ --
Diversified Investors Variable
Funds -- Equity Growth.......... 202,963 16,220 11,018 208,165 771,075 463,837 89,672
Diversified Investors Variable
Funds -- Growth & Income........ 149,454 11,958 6,240 155,172 296,005 178,082 (16,769)
Diversified Investors Variable
Funds -- High Quality Bond...... 216,893 55,869 -- 272,762 806,367 -- --
Diversified Investors Variable
Funds -- High Yield Bond........ 69,048 11,082 -- 80,130 186,109 -- --
Diversified Investors Variable
Funds -- International Equity... 236,130 18,206 22,914 231,422 348,827 337,088 133,703
Diversified Investors Variable
Funds -- Money Market........... 38,289 444,665 454,159 28,795 8,493,553 8,661,735 15,610
Diversified Investors Variable
Funds -- Special Equity......... 54,350 4,028 6,061 52,317 138,534 149,829 68,163
Diversified Investors Variable
Funds -- Value & Income......... 182,904 14,925 2,784 195,045 771,075 107,432 41,654
----------- ---------- ---------
$13,348,332 $9,898,003 $ 332,033
=========== ========== =========
</Table>
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and the Contractholders of Diversified Investors
Strategic Variable Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Short Horizon
Strategic Variable Fund, Intermediate Horizon Strategic Variable Fund, and
Intermediate Long Horizon Strategic Variable Fund; (constituting the Diversified
Investors Strategic Variable Funds, hereafter referred to as the "Funds") at
December 31, 2005, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2005 by correspondence with the custodian, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 21, 2006
41
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS
DECEMBER 31, 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.
A discussion of the Managing Members' considerations and determinations with
respect to the continuation of existing Investment Advisory Agreements between
Diversified and TFLIC is included in the Subaccounts' Semi-Annual Report for
such period.
42
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43
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW
DECEMBER 31, 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.
THE ECONOMY AND CAPITAL MARKETS OVERVIEW
The capital markets struggled against numerous headwinds in 2005. Oil prices
surged in the third quarter before falling back later in the year, rising by
approximately 40% during the year. Hurricanes Katrina and Rita, which heavily
damaged or destroyed a good deal of our energy production, refining and
distribution capacity, contributed meaningfully to hikes in energy prices, as
did resurgent economies in India and China. The price of gold also increased, as
nervous investors bid up the price of this commodity by 18% during the year.
Domestically, we saw two of our major automotive companies weakened by rising
pension and healthcare-related obligations, to the point that their bonds were
downgraded to junk status. Airlines continued to suffer as well, with both Delta
and Northwest, among others, declaring bankruptcy. Elsewhere, a housing craze
reminiscent of the Internet bubble of 2000 threatened a major economic backlash
as rising interest rates caused some to speculate that consumer spending, the
economy's dominant economic engine, might collapse, taking the national economy
along with it.
In the end, however, this headline-grabbing news failed to derail economic
growth by very much, with 2005 Gross Domestic Product growth expected by most to
weigh in at a very strong 4.1%, or thereabouts. Unemployment also continued to
fall, marginally, reaching 4.9%, or effective full employment by year's end. A
steady diet of interest rate increases, thanks to the Federal Reserve, appeared
to be slowly taking air out of the overheated housing market. The strength of
the U.S. dollar increased markedly through much of the year, as capital market
flows into the U.S. offset a huge trade deficit. Corporate profits remained
strong, with earnings expected to be a record 13.9% for the full year,
indicating that the recovery and present economic expansion were more widespread
than many had anticipated.
EQUITY MARKETS
U.S. stocks were positive for the year, with the broad market returning 4.9% as
measured by the S&P 500 Stock Index. Generally speaking, large-cap stocks
outperformed small-cap stocks, while mid-cap indices produced the highest
returns, with the Russell Mid-Cap Value Index finishing up 12.65% for the year.
International stocks were the period's best performers, despite a stronger
dollar that reduced results for U.S. based investors. Emerging markets
outperformed developed markets and, with encouraging signs of economic recovery,
the Japanese stock market had its biggest annual gain in local currency terms
since 1986.
FIXED INCOME MARKETS
The Federal Reserve increased interest rates steadily throughout the year,
raising the Fed Funds rate eight times, by a total of 2.00%, to end the year at
4.25%. While yields on shorter-term issues rose dramatically, yields on
intermediate and longer-term issues rose by smaller amounts, causing a temporary
inversion or "flattening" of the curve at certain key rates by the quarter's
close. This development, which has often presaged a significant economic
slowdown, or recession, had been widely expected. Despite this and other
negative factors, including major credit downgrades amongst auto makers and
stock buybacks that undermine
44
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
debt holders' interests, the positive bond returns of 2005, while considerably
lower than 2004 results, were therefore somewhat surprising. In general, rising
rates only partly offset coupon income.
Domestically, long-term Treasury bonds had some of the highest returns although
intermediate Treasuries, where the yield curve inversion was most noticeable,
had some of the lowest returns (up 1.4%). High yield and corporate bonds posted
results of 2.7% and 2.0% respectively, well off their 2004 returns. Additional
coupon income over like Treasuries was particularly beneficial in these sectors.
Elsewhere, improving finances and upgrades amongst emerging market issuers
attracted global investors with local currency total returns of 12%, on average,
versus 2004 total returns of 11.8%.
MONEY MARKET SERIES
The Series returned 3.00% for the year after fees, equal to the Citigroup
Treasury Bill 3 Month Index of 3.00%. The major contributor to performance was
the dramatic increase in short term rates. The portfolio manager anticipated the
Federal Reserve's actions, and maintained his focus on maturities at the short
end of the yield curve to avoid losses, as well as to be able to take advantage
of the rise in short rates. As it becomes apparent that the Fed is ending its
credit tightening stance, the portfolio manager intends to lengthen the Series'
duration in excess of the benchmark.
To generate more coupon income, the portfolio manager concentrated on high
quality commercial paper by banks and other finance companies that have a strong
incentive to maintain high credit ratings, as their operations depend on having
good access to the credit market. This concentration in financial companies such
as Barclays, Warburg Dillon, Morgan Stanley, CIBC and HSBC paid off as major
shocks were delivered to the credit markets in the form of significant
downgrades of General Motors and Ford paper. The Series also benefited from
swings at the short end of the credit markets as well as holdings in floating
rate corporate securities that had a portfolio weight at year end of
approximately 18%.
HIGH QUALITY BOND SERIES
The Series returned 1.95% for the twelve months ended December 31, ahead of the
Merrill Lynch 1-3 Year Treasury Index of 1.66% and the 1.40% median return for
the Morningstar Short-Term Bond Universe. The majority of the positive
contribution to return during the year came from security selection in the form
of income. Sector and security spread also contributed modestly to the total
excess return. The yield curve effect contributed only slightly, while duration
had a neutral effect.
The income component of the portfolio was the greatest source of return for the
year. The portfolio was underweight treasuries relative to the Merrill Lynch 1-3
Year Treasury benchmark primarily by overweighting corporate (32%) and
asset-backed issues (28%). These sectors were two of the best performers in the
Series as well. Asset-backed securities returned just under 3% for the year with
corporates capturing just under 2.5%; both beating out the all Treasury index
return of 1.66% for the year. Collateralized mortgage obligations and commercial
mortgage-backed securities, the next two largest allocations at 12% and 14%
respectively, were also contributors returning 2.3% and 1.7%, respectively, to
the Series.
INTERMEDIATE GOVERNMENT BOND SERIES
The Series returned a modest 1.34% return in 2005 versus the Lehman Brothers
Intermediate Government Bond Index return of 1.68%.
45
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
Treasuries, which make up 54% of the index, were the best place to be invested,
returning 2.8%. Government related securities, often referred to as agency
securities, account for the remaining 46% of the index. The Series maintained
10% positions in mortgage and asset-backed securities throughout most of the
year. These out-of-index sectors outperformed the government related sector,
benefiting the Series. For the majority of the year, the Series maintained a
neutral to long duration in a rising interest rate environment. The long
duration detracted from total returns.
CORE BOND SERIES
The Series' 2.38% return for the year fell just short of the Lehman Brothers
Aggregate Bond Index of 2.43%, but was ahead of the 1.80% median return of the
Morningstar Intermediate Bond Universe.
The Series picked up performance from commercial mortgage-backed securities and
asset-backed securities very early in the year, but the majority of performance
for the year was received from duration positioning. A shorter portfolio
duration relative to the Lehman Brothers Aggregate Bond Index was additive for
the year as rates rose in the intermediate and shorter end of the yield curve. A
moderate allocation to the out-of-index sectors; High Yield, Non-dollar and
Emerging Markets was also beneficial. The Series exited its Emerging Market
exposure early in the year as better risk-adjusted return opportunities
presented themselves in the High Yield and Non-dollar sectors. The year ended
with the plus sector allocations comprising 3% of the Series and contributing 16
basis points towards performance.
Weakening fundamentals and concerns of potential downgrades of leading
automotive manufacturers to junk status brought down returns in the credit
sector for the year, contributing mild returns to the portfolio.
TOTAL RETURN BOND SERIES
The Series returned 2.35% since its inception on May 6 through December 31,
2005. The Lehman Brothers Aggregate Bond Index, which consists of government,
corporate, mortgage and asset-backed securities of investment grade quality,
returned a moderate 2.4% for the year. The Treasury component in the index
posted the largest annual return. A small 1% overweight to Treasuries helped.
In addition to investing in investment-grade quality bonds, the Series
opportunistically invests in out-of-index sectors, such as Emerging Markets,
Non-dollar securities and High Yield. On a duration-adjusted basis, Emerging
Markets returned over 9%, adding to the absolute return.
Since inception, the Series has maintained a neutral to short duration in a
rising interest rate environment. Duration positioning has been additive to the
Series' overall performance.
BALANCED SERIES
The Series posted a 5.59% return for the year, outpacing the 4.00% return of the
60% S&P 500 Index/40% Lehman Brothers Aggregate Bond Index. An overweight to
equities for the year was beneficial, with the S&P 500 Index outperforming the
Lehman Brothers Aggregate Bond Index by 2.5%. Stock performance and bond results
within the Series were also superior to their respective benchmarks.
The equity component of the Series realized strong returns from the Energy
sector. Burlington Resources, Inc. was up 99% and Exxon Mobil Corp., a 2%
overweight in the portfolio, was up over 11%. Energy companies by and large
benefited from surging energy prices, driven by both increasing global demand
and supply disruptions as a result of the tumultuous hurricane season.
46
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
Healthcare saw good results from two biotech heavyweights; Amgen, up 23%, and
Genentech, Inc. up 70%. The two companies posted positive years on increased
sales and earnings. Genentech also received favorable FDA expanded approval for
two of its cancer fighting drugs. The major detraction from a sector standpoint
for the year was Consumer Discretionary. The Series was slightly underweight the
poor performing sector by a quarter of a percent, but the holdings in the sector
were a drain on performance, costing the Series about 1%.
The Series' fixed income segment benefited from a moderate allocation to
out-of-index sectors: High Yield, Non-dollar and Emerging Markets. A shorter
duration positioning relative to the Lehman Brothers Aggregate Bond Index was
slightly additive for the year as rates rose in the intermediate and shorter end
of the yield curve.
VALUE & INCOME SERIES
The Series was up 6.88% for the year, short of the 7.05% return of the Russell
1000 Value Index, but ahead of the 5.45% median return of the Morningstar Large
Value Universe. The Energy and Utility sectors led the index posting 27% and 15%
returns, respectively. Although the Series was 2.5% underweight the strong
performing Energy sector, excellent stock selection offset any losses. Energy
holdings ConocoPhillips, Occidental Petroleum Corp., Exxon Mobil Inc., and
Chevron posted double digit returns.
The Series' main contributor to performance was the Industrial sector. The
Series' Industrial sector returned 16.5% for the year, while the index returned
6.6%. Within Industrials, a 3% overweight to rails benefited from the increased
cargo rates and shipments of energy-related commodities, such as coal. Top
performing rail stocks included CSX Corp., Burlington Northern Santa Fe Corp.,
CNF, Inc. and Norfolk Southern Corp.
A 7% overweight and strong stock selection in the Information Technology sector
also helped the Series this year. Hewlett-Packard's stock price climbed 38% on
news of a large restructuring to reduce costs, stock buyback and profit
improvement in the PC enterprise. A 6% overweight and stock selection in the
Consumer Discretionary sector negatively affected the Series. For the year, the
Consumer Discretionary sector within the Index was down 6.1% while the
portfolio's experience in the sector lagged, posting a negative 8.4% return.
Stocks experiencing difficulty included Federal National Mortgage Association,
Tenet Healthcare Corp., and Comcast Corp.
VALUE SERIES
The Series returned 9.47% since its inception on May 6 through December 31,
2005. Stock selection within Financials and Consumer Discretionary drove
relative performance versus the Russell 1000 Value benchmark. Homebuilder Centex
gained 18%, benefiting from the robust housing market. Among Financials,
insurers MetLife, Inc. (up 13%), Prudential Financial, Inc. (up 23%) and The St.
Paul Travelers Companies, Inc. (up 18%) performed well while MBNA shares
increased due to the merger with Bank of America. Energy prices broke record
levels for the first nine months but saw a pullback during the fourth quarter.
Although the Series was significantly underweight (13%) the sector, stock
selection made up for any losses incurred. Except for Petro-Canada, which
returned 38%, the portfolio manager believes that valuations in this sector are
too rich.
GROWTH & INCOME SERIES
The Series returned 7.12% for the year, outpacing both the S&P 500 Index return
of 4.91% and the 5.68% median return for the Morningstar Large Blend Universe.
Eight of the ten sectors in the index were up for the year, with the Energy
sector posting the largest absolute returns (up 37%). Consumer Discretionary
(down 5.7%) and Telecommunication Services (down 6.3%) sectors were the worst
performers. The Series' barbell
47
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
strategy -- with 33% invested in large value, 33% in large growth and 34% in
large core -- was additive to performance, as both the Russell 1000 Value and
Russell 1000 Growth indices outperformed the S&P 500.
Oil prices hit new highs during the year driven by two catastrophic hurricanes.
Energy companies, including Sunoco, Inc. (up 94%), Exxon Mobil Corp. (up 11%),
EOG Resources, Inc. (up 106%), and Burlington Resources, Inc. (up 99%), had a
significant impact on the Series' overall performance. A number of information
technology stocks also added value. Google, Inc. and SanDisk Corp. returned over
100% for the year, while Hewlett-Packard and Texas Instruments returned over
30%. Internet-related company Google moved higher as advertising dollars
continue to move on-line from more traditional print, television and radio
media. SanDisk climbed on strong demand for flash-memory chips used in consumer
electronics.
Stock selection was the main driver of performance, while sector selection
detracted 43 basis points for the year. In addition, a small 2% overweight to
the weak performing Consumer Discretionary sector hurt Series returns.
EQUITY GROWTH SERIES
The Series' 7.18% annual return outpaced the 5.27% return of the Russell 1000
Growth Index, as well as the 6.05% median return of the Morningstar Large Growth
Universe. Within the Russell 1000 Growth index, Energy (up 56%), Utilities (up
31%) and Telecommunications Services (up 24%) were the best place to be
invested. The Series outperformed seven of the ten sectors, with excellent stock
selection displayed in the Healthcare and Information Technology sectors. Within
Biotechnology, Genentech (up 70%) and health services provider, UnitedHealthcare
(up 41%) contributed over 2% to the Series' annual performance. Internet service
provider, Google, Inc. and semiconductor holding, SanDisk Corp., each returned
over 100%. Rounding out the top five individual stock contributors to
performance was the Chicago Mercantile Exchange, which is the largest futures
exchange in the U.S. and operates the largest clearing house in the world.
Sector weights are the result of the stock selection process. A 2% overweight to
the poor performing Consumer Discretionary sector detracted from performance.
MID-CAP VALUE SERIES
The Series posted strong absolute returns for 2005, up 9.77% for the year, ahead
of the 9.19% median return of the Morningstar Mid-Cap Blend Universe, but short
of the 12.65% Russell Mid-Cap Value Index return. From a sector standpoint,
Energy provided the lion's share of the performance for the year. Portfolio
holdings in the Energy sector returned more than the index but the managers were
underweight this expensive sector by about 2.5%. Leading the charge was Frontier
Oil which scored well in the quantitative model employed by LSV; the security
appreciated over 120% since it was added to the Series in March. EnCana, the
other top contributor in the sector, was up over 60% for the year with returns
largely driven by the rising natural gas prices during the year.
The most significant sector drawback for the Series during the year was from
Consumer Discretionary holdings. The Series averaged a 7% overweight to the
sector throughout the year. Lear Corp., an automotive supplier, was down 27%.
The company saw its shares drop in value due to a negative earnings
preannouncement combined with the sharper than expected order cuts from Ford and
General Motors, two of its main customers. Also hurting was Royal Caribbean
Cruises, Ltd. which returned -16% for the year. Rising fuel prices translated
into higher transportation costs which ate into profits, and as a result, 2005
and 2006 earnings estimates were lowered. Another detractor for the year was a
conscious avoidance of REIT stocks in the financial sector. The underweight was
significant as REITs made up just over 10% of the index. Both managers in the
Series shared the view that REIT securities began the year overvalued. This view
seemed to have been
48
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
validated during the first quarter when REITs posted negative returns. However,
REITs came roaring back for the remainder of the year, leaving the portfolio
disadvantaged relative to the benchmark.
Holdings in the Utility sector also aided performance for the year. Questar
Corp., a 1.5% position in the Series, returned just over 50% for the year. The
natural gas producer and distribution and company benefited greatly from the
rising natural gas prices throughout the year. TXU Corp., an electricity
provider, was similarly up over 60% on the year as a result of the increasing
energy prices.
MID-CAP GROWTH SERIES
Mid-cap stocks were the strongest domestic performers for the quarter and the
year. The Series 13.42% return outpaced the Russell Mid-Cap Growth Index return
of 12.10% as well as the 9.76% median return for the Morningstar Mid-Cap Growth
Universe. Outstanding stock selection within and an overweight to the Energy
sector was the main contributor to performance, as oil and gas prices increased
throughout the summer. Due to the loss of production in the New Orleans region,
prices surged. Natural gas companies EOG Resources, Inc. and Quicksilver
Resources, Inc. benefiting from price increases that resulted from lost
production following Hurricanes Katrina and Rita, added over 3% to the Series'
annual return. Both companies are active in the Barnett Shale natural gas
reserve, near Fort Worth, Texas, an extremely promising area for on-shore
natural gas development efforts.
The wireless telecommunications services industry in the mid-cap growth space
returned over 62% for the year. Broadcom Corp. (up 46%) is a global leader in
wireless broadband communications and a top holding throughout the year.
SpectraSite (up 40%), a wireless tower operator, rose following the announcement
that American Tower would acquire the company. The new blended firm will create
the largest wireless tower operator in the U.S. Harris Corp. (up 40%) is a
manufacturer of antenna systems and secure radio communications products. Demand
from U.S. military and intelligence agencies drove prices higher during the
year.
Stock selection in Healthcare detracted from the annual performance. Eyetech
Pharmaceuticals, a biotechnology company, fell 41% early this year. The
portfolio manager exited the stock due to concerns that a competitor's drug
might impact growth projections.
SMALL-CAP VALUE SERIES
For the year, the Series was down 4.70%, below the positive 4.71% return of the
Russell 2000 Value Index and the 6.70% median return of the Morningstar Small
Value Universe. EARNEST Partners replaced Sterling Capital as sub-advisor to the
Series in April 2005 as a result of performance concerns.
The Consumer Discretionary sector was the worst performing sector for the Index,
returning -3.62% for the year. Overweighting this sector by 8% coupled with poor
stock selection contributed to the Series' underperformance. Of the 29 names
held in this sector by the Series, seventeen experienced losses for the year.
The biggest loser was Exide Technologies (down 73%) which engages in the
manufacture and supply of lead acid batteries. The company saw its costs rise,
as commodity prices soared during the year. Catalina Marketing Corp. (down 13%)
also detracted from performance significantly, as it was a large holding within
the Series.
Although the Healthcare sector returned 3.7% for the Index on the year, the
Series, overweighting this sector by 11%, posted a disappointing negative 16%
return due to stock selection. Nabi Pharmaceuticals (down 70%) was a principal
driver of negative return. Nabi fell on announcement that its much anticipated
new vaccine to protect hospital patients from deadly staph infection had failed
in its final testing stage.
49
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
The Series' overweight to the Energy sector was a positive contributor to
performance. Spinnaker Exploration Company (up 88%), Swift Energy (up 56%) and
Cabot Oil & Gas (up 56%). Spinnaker was acquired by Norsk Hydro ASA in an
all-cash transaction of approximately $2.45 billion.
SPECIAL EQUITY SERIES
The Series' performance in 2005 was 10.53%, well ahead of the Russell 2000 Index
return of 4.55% and the Morningstar Small Growth median return of 5.70%. This
strong result was driven by sector and stock selection with sectors a fallout
from bottom up stock picking. The top three performing sectors for the Series
were Energy, Healthcare and Industrials. The red hot Energy sector posted a
staggering 47% return for the Index. The Series' slight overweight to this
sector, coupled with excellent stock selection, contributed to returns for the
year. Top performers included Vintage Petroleum (up 136% for the year on news of
Occidental Petroleum's $3.5 acquisition of the firm). The Series held Vintage
for most of the year before exiting in the fourth quarter, and reaped a 120%
gain on the holding. Other individual contributors to the Series' return
included Ultra Petroleum Corp. (up 112%), Cal Dive International, Inc. (up 76%)
and Patterson-UTI Energy (up 70%).
An overweight in Healthcare and good stock selection was also positive for the
Series. Notable out-performers were Vertex Pharmaceuticals (up 160%) and, as a
result of the December Amgen acquisition, Abgenix, Inc. (up 108%). An
underweight in Industrials was offset by strong stock selection. Watsco Inc.,
U.S. distributor of air conditioning, heating, and refrigeration equipment,
closed the year up 72%. Other top performing stocks were Administaff, Inc. and
Red Hat, Inc., up 257% and 104%, respectively for the year. Red Hat, Inc., a
software company, was added to the Nasdaq 100 as part of the stock market's
annual reweighting of the index.
Materials was the only sector that significantly detracted from Series
performance in 2005. Series holdings in this sector returned just 2% versus the
Index sector return of 4.6%. On an individual security level, Amerigroup
Corporation, Infospace, and Flir Systems Inc. were the top three detractors.
SMALL-CAP GROWTH SERIES
The Series' 2005 return was 0.55%, falling short of the Russell 2000 Growth
Index return of 4.15% and the 5.70% median return for the Morningstar Small-Cap
Growth Universe. Delaware Investment Management was the sub-advisor to the
Series for almost the full year 2005 -- replaced by Trusco Capital Management in
mid-December.
Small-cap growth stocks were the worst place to be in 2005. The Russell 2000
Growth Index returned 4.1%, underperforming all other caps and styles. For the
Series, weak industry selection overshadowed positive stock selection. The best
performing sectors in the Russell 2000 Growth Index were Energy (up 53%),
Materials (up 6.4%) and Industrials (up 5.8%). The Series, however, was
underweight in these sectors as the portfolio manager believed these
commodity-driven volatile sectors would not produce sustainable growth. An
overweight in Financials was a positive contributor to overall performance.
Hibbett Sporting Goods, Inc. (up 60%), Amylin Pharmaceuticals (up 70%), and
Aquantive, Inc. (up 182%) were the largest security contributors to performance.
AGGRESSIVE EQUITY SERIES
With a 2005 return of 8.20%, the Series outperformed the Russell 1000 Growth
Index of 5.27%. While value stocks continued to dominate growth stocks within
the large-cap space, the fourth quarter of 2005 marked the
50
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
third consecutive quarter that large growth stocks outperformed their value
counterparts, perhaps indicating a turning of the tide.
The Series' stock selection and overweight position in typical growth industries
benefited the portfolio. The 13% overweight to the Information Technology sector
included most of the Series' top performers. Internet service provider, Google,
Inc. and Apple Computers, Inc. soared throughout the year returning 115% and
123%, respectively. Semi-conductor companies with strong returns included
Broadcom (up 59%) and Marvel Technologies (up 58%), which designs chips for hard
disc drives used in iPods, portable computers and other broadband applications.
In the Consumer Discretionary sector, Chico's FAS, Inc. was a top performer.
Chico's FAS is a women's clothing and accessory retailer selling its products
through retail stores and catalogs. A 4% underweight position to the strong
performing Energy sector detracted slightly from the Series' annual return. The
Series continues to be overweighted to mid- and large-cap stocks at the expense
of megacaps. This overweight was additive for the year.
HIGH YIELD BOND SERIES
The Series generated a return of 3.34% versus the Merrill Lynch High Yield
Master II Index of 2.72% and a 2.46% median return for the Morningstar High
Yield Bond Universe. The Series benefited from the manager's general outlook,
which anticipated continuing economic growth due to improving corporate cash
flows and modestly rising interest rates. This perspective led to a strategy
that included a shorter duration exposure and greater credit exposure.
Throughout the year, the Series' short duration stance helped in the rising
interest rate environment. Moreover, the overweight to the lower-quality CCC
credit sector (31% in the fund versus 14% in the benchmark by year end) was
additive, especially because good security selection within this sector
generated additional excess return. The Series successfully navigated the credit
storm when General Motors and Ford bonds made a rapid decent from investment
grade to junk bond status.
Industries that benefited the Series' return for the year included Air
Transportation, including American and Delta, as airline prospects picked up;
Chemicals, including BCP Crystal Holdings and Lyondel Chemical, with strong
export demand from developing nations; Transportation, especially railroads such
as TFM SA, as people substituted coal for petroleum; and Gaming, including
Mohegan Tribal Gaming Authority and Trump Entertainment, as cash flows provided
the ability to service high yield principal and interest.
Sectors that negatively affected performance included Financial Services, such
as E*TRADE and CB Richard Ellis; Autos (Tenneco); and Paper, including Smurfit
Stone Container.
INTERNATIONAL EQUITY SERIES
In light of the robust overseas returns, the Series posted a strong absolute
return of 11.20% for the year, but fell short of the 14.96% return of the Morgan
Stanley Capital International World ex-US Equity Index. The strengthening dollar
meant that the Series did not enjoy the full benefit of the foreign markets'
local returns. The performance shortfall was primarily attributable to the
growth portion of the Series. One security in particular, Elan, was responsible
for a majority of the loss. A pharmaceutical company domiciled in Ireland, Elan
was a top holding in the Series during the early part of the year. The stock
underperformed on negative news regarding a multiple sclerosis drug, and the
resulting fallout cost the Series about 1.50% of performance. Later in the year,
it was exposure to flat panel television companies that hurt returns. The
industry sold off significantly with holdings such as LG Phillips and Chi Mei
Optoelectronics Corp. down approximately 30% in
51
DIVERSIFIED INVESTORS PORTFOLIOS
ANNUAL ECONOMIC OVERVIEW (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
aggregate. For the full year, the 7% Series overweight to the Consumer
Discretionary stocks, the worst performing sector for the index, was the biggest
performance detractor.
The Series did reap strong performance in the Energy and Financial sectors.
Among energy stocks, names such as Petro-Canada, (up 58%) and Husky Energy (up
80%) were up on increasing prices. Financials saw profits from holdings in
Japan, which benefited from the strengthening picture of balance sheets of
financial companies there.
The Series had a modest 4.5% exposure to emerging markets for the year which was
a positive contribution to return, as emerging markets were up 34% for the year.
52
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53
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
------------ ------------ ------------
ASSETS:
Securities, at cost................................... $699,954,298 $804,162,449 $266,734,256
============ ============ ============
Securities, at value, including investments held as
collateral for securities out on loan (Notes 2 and
4).................................................. $699,954,298 $791,382,073 $265,743,380
Repurchase agreements (cost equals market)............ 64,809,827 2,538,212 31,249,456
Cash.................................................. -- -- --
Cash at broker........................................ -- -- --
Foreign currency holdings, at value (cost
$22,052,678)........................................ -- -- --
Receivable for securities sold........................ -- -- 52,459,602
Unrealized appreciation on foreign currency forward
and spot contracts (Note 10)........................ -- -- --
Variation margin...................................... -- -- --
Interest receivable................................... 1,239,809 4,983,252 1,841,746
Dividends receivable.................................. -- -- --
Foreign tax reclaim receivable........................ -- -- --
Receivable from Advisor............................... -- -- --
Receivable from securities lending (net).............. -- 13,010 12,992
------------ ------------ ------------
Total assets.......................................... 766,003,934 798,916,547 351,307,176
------------ ------------ ------------
LIABILITIES:
Due to Advisor........................................ -- -- --
Due to Custodian...................................... -- -- --
Collateral for securities out on loan................. -- 10,225,000 60,166,347
Payable for securities purchased...................... -- -- 29,908,194
Securities sold short, at value (proceeds
$166,575,457)....................................... -- -- --
Written options, at value (premium $186,315).......... -- -- --
Unrealized depreciation on foreign currency forward
and spot contracts (Note 10)........................ -- -- --
Variation margin...................................... -- -- --
Investment advisory fees.............................. 155,905 221,657 75,674
Accrued expenses...................................... 70,771 70,724 50,438
Contingent liability (Note 6)......................... -- -- --
------------ ------------ ------------
Total liabilities..................................... 226,676 10,517,381 90,200,653
------------ ------------ ------------
NET ASSETS............................................ $765,777,258 $788,399,166 $261,106,523
============ ============ ============
</Table>
See notes to financial statements.
54
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND BALANCED INCOME VALUE INCOME
-------------- ----------- ------------ -------------- ----------- --------------
$2,667,687,695 $79,563,350 $423,423,019 $2,919,820,629 $33,489,097 $1,148,007,269
============== =========== ============ ============== =========== ==============
$2,650,242,346 $79,536,894 $445,197,531 $3,257,195,169 $34,069,401 $1,267,710,870
20,000,000 10,632,489 18,527,728 75,971,770 3,667,757 9,108,749
2,136,372 -- 110,600 -- -- --
-- 150,000 300,000 -- -- 560,000
21,365,693 -- -- -- -- --
351,732,896 195,133 4,432,749 13,371,369 39,292 11,493,226
552,492 7,344 81,176 -- -- --
-- -- 1,541 -- -- --
18,034,094 447,131 1,055,878 44,318 389 12,756
-- 11,463 419,578 3,714,394 48,926 1,764,517
-- -- -- -- -- --
-- 12,779 10,451 -- 15,945 --
61,474 -- 4,195 34,754 -- 41,891
-------------- ----------- ------------ -------------- ----------- --------------
3,064,125,367 90,993,233 470,141,427 3,350,331,774 37,841,710 1,290,692,009
-------------- ----------- ------------ -------------- ----------- --------------
-- -- -- -- -- --
-- -- 2,224,475 -- -- 724,422
208,030,600 -- 15,913,228 307,114,865 -- 99,867,379
634,926,924 20,865,226 40,921,187 23,792,978 2,668,390 10,639,192
167,143,064 -- -- -- -- --
69,875 -- -- -- -- --
164,573 4,968 120,192 -- -- --
124,676 2,091 -- -- -- 8,338
584,473 19,902 152,390 1,121,869 10,758 587,683
188,147 28,187 62,300 241,765 24,050 106,126
-- -- -- -- -- --
-------------- ----------- ------------ -------------- ----------- --------------
1,011,232,332 20,920,374 59,393,772 332,271,477 2,703,198 111,933,140
-------------- ----------- ------------ -------------- ----------- --------------
$2,052,893,035 $70,072,859 $410,747,655 $3,018,060,297 $35,138,512 $1,178,758,869
============== =========== ============ ============== =========== ==============
</Table>
55
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
-------------- ------------ ------------
ASSETS:
Securities, at cost................................. $2,397,433,385 $650,707,512 $288,539,416
============== ============ ============
Securities, at value, including investments held as
collateral for securities out on loan (Notes 2 and
4)................................................ $2,782,712,472 $690,590,249 $336,106,830
Repurchase agreements (cost equals market).......... 30,474,532 30,210,034 9,643,935
Cash................................................ -- -- --
Cash at broker...................................... -- -- --
Foreign currency holdings, at value (cost
$10,689,848)...................................... -- -- --
Receivable for securities sold...................... -- -- 290,624
Unrealized appreciation on foreign currency forward
and spot contracts (Note 10)...................... -- -- --
Variation margin.................................... -- -- --
Interest receivable................................. 29,610 12,075 8,085
Dividends receivable................................ 2,346,294 859,927 60,606
Foreign tax reclaim receivable...................... 2,218 -- --
Receivable from Advisor............................. -- 6,672 3,322
Receivable from securities lending (net)............ 68,773 7,118 9,004
-------------- ------------ ------------
Total assets........................................ 2,815,633,899 721,686,075 346,122,406
-------------- ------------ ------------
LIABILITIES:
Due to Advisor...................................... 14,695 -- --
Due to Custodian.................................... -- -- --
Collateral for securities out on loan............... 223,420,265 75,129,412 59,815,920
Payable for securities purchased.................... 3,260,321 4,618,722 3,138,846
Unrealized depreciation on foreign currency forward
and spot contracts (Note 10)...................... -- -- --
Variation margin.................................... -- -- --
Investment advisory fees............................ 1,329,959 346,634 167,917
Accrued expenses.................................... 226,598 59,769 49,281
Contingent liability (Note 6)....................... -- -- --
-------------- ------------ ------------
Total liabilities................................... 228,251,838 80,154,537 63,171,964
-------------- ------------ ------------
NET ASSETS.......................................... $2,587,382,061 $641,531,538 $282,950,442
============== ============ ============
</Table>
See notes to financial statements.
56
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ -------------- ------------ ------------ ------------ --------------
$251,209,142 $1,365,874,892 $136,273,691 $359,770,887 $390,881,819 $1,501,332,918
============ ============== ============ ============ ============ ==============
$264,386,086 $1,525,034,512 $136,316,184 $417,662,383 $393,052,864 $1,797,181,916
10,432,642 37,835,074 6,730,608 2,103,212 21,798,954 31,033,338
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- 10,688,721
-- 2,254,614 1,055,394 1,443,615 -- 4,912,393
-- -- -- -- 135 940
-- -- -- -- -- --
7,608 34,639 1,710 4,581 7,546,826 141,317
109,656 1,198,327 24,988 425,823 16,145 1,822,736
-- -- -- -- -- 398,394
-- -- 22,024 3,484 -- 921
4,335 55,536 3,964 858 -- 31,781
------------ -------------- ------------ ------------ ------------ --------------
274,940,327 1,566,412,702 144,154,872 421,643,956 422,414,924 1,846,212,457
------------ -------------- ------------ ------------ ------------ --------------
2,703 10,318 -- -- 1,230 --
-- -- -- -- -- --
55,066,408 259,405,644 8,438,426 36,910,309 -- 118,326,135
942,003 9,329,699 2,672,633 2,310,429 6,153,099 4,793,518
-- -- -- -- -- 17,174
-- 12,350 -- -- -- --
147,747 862,808 95,150 250,792 186,848 1,040,791
32,245 119,974 45,129 43,366 46,492 248,690
-- -- -- -- -- --
------------ -------------- ------------ ------------ ------------ --------------
56,191,106 269,740,793 11,251,338 39,514,896 6,387,669 124,426,308
------------ -------------- ------------ ------------ ------------ --------------
$218,749,221 $1,296,671,909 $132,903,534 $382,129,060 $416,027,255 $1,721,786,149
============ ============== ============ ============ ============ ==============
</Table>
57
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
----------- ----------- ------------
INVESTMENT INCOME (NOTE 2):
Interest income.......................................... $26,377,329 $27,128,270 $ 9,659,877
Securities lending income (net).......................... -- 34,499 120,699
Dividend income.......................................... -- -- --
Less: foreign withholding taxes.......................... -- -- --
----------- ----------- -----------
Total income............................................. 26,377,329 27,162,769 9,780,576
----------- ----------- -----------
EXPENSES (NOTE 2):
Investment advisory fees................................. 2,027,410 2,612,994 889,104
Custody fees............................................. 146,645 171,694 73,436
Audit fees............................................... 26,312 28,025 26,610
Legal fees............................................... 30,590 37,253 10,868
Reports to shareholders.................................. 6,554 7,799 3,063
Other fees............................................... 27,584 24,956 11,895
----------- ----------- -----------
Total expenses........................................... 2,265,095 2,882,721 1,014,976
Expenses reimbursed by the Advisor....................... -- -- --
----------- ----------- -----------
Net expenses............................................. 2,265,095 2,882,721 1,014,976
----------- ----------- -----------
NET INVESTMENT INCOME (LOSS)............................. 24,112,234 24,280,048 8,765,600
----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) on transactions from:
Securities............................................. (1,321) (3,873,615) (4,498,062)
Futures................................................ -- -- --
Written options........................................ -- -- --
Foreign currency transactions.......................... -- -- --
Change in net unrealized appreciation (depreciation) on:
Securities............................................. -- (5,794,902) (713,722)
Futures................................................ -- -- --
Written options........................................ -- -- --
Short sales............................................ -- -- --
Foreign currency translations.......................... -- -- --
----------- ----------- -----------
Net realized and unrealized gains (losses) on
investments............................................ (1,321) (9,668,517) (5,211,784)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $24,110,913 $14,611,531 $ 3,553,816
=========== =========== ===========
</Table>
- ---------------
(1) Commencement of Operations, May 6, 2005.
See notes to financial statements.
58
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND(1) BALANCED INCOME VALUE(1) INCOME
------------ -------------- ------------ ------------- -------- -----------
$ 80,751,592 $1,714,789 $ 6,683,930 $ 2,375,426 $ 22,995 $ 428,447
309,680 -- 29,395 734,304 -- 121,383
-- 27,475 4,573,646 50,251,586 181,954 17,261,363
-- -- -- (120,251) (366) (40,646)
------------ ---------- ------------ ------------- -------- -----------
81,061,272 1,742,264 11,286,971 53,241,065 204,583 17,770,547
------------ ---------- ------------ ------------- -------- -----------
6,471,281 136,040 1,844,123 12,888,475 43,962 6,698,192
494,384 43,169 253,075 524,488 29,423 252,896
34,171 28,219 28,160 36,326 28,219 30,022
90,777 2,639 21,769 165,079 550 56,023
19,143 344 66,625 92,575 201 13,568
88,184 1,379 6,728 110,968 1,219 46,806
------------ ---------- ------------ ------------- -------- -----------
7,197,940 211,790 2,220,480 13,817,911 103,574 7,097,507
-- (56,316) (171,455) -- (55,215) --
------------ ---------- ------------ ------------- -------- -----------
7,197,940 155,474 2,049,025 13,817,911 48,359 7,097,507
------------ ---------- ------------ ------------- -------- -----------
73,863,332 1,586,790 9,237,946 39,423,154 156,224 10,673,040
------------ ---------- ------------ ------------- -------- -----------
(6,477,165) (410,160) 25,146,537 256,256,688 262,769 61,012,020
2,212,048 38,572 520,728 -- -- (61,117)
864,930 28,041 104,520 -- -- --
(6,020,058) 112,407 (155,938) -- -- (187)
(26,483,597) (26,456) (13,066,904) (101,548,512) 580,304 6,508,944
470,718 13,410 (125,867) -- -- (23,415)
116,440 -- -- -- -- --
(878,427) -- (31,741) -- -- --
5,644,968 2,388 504,647 -- -- (711)
------------ ---------- ------------ ------------- -------- -----------
(30,550,143) (241,798) 12,895,982 154,708,176 843,073 67,435,534
------------ ---------- ------------ ------------- -------- -----------
$ 43,313,189 $1,344,992 $ 22,133,928 $ 194,131,330 $999,297 $78,108,574
============ ========== ============ ============= ======== ===========
</Table>
59
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
------------ ------------ ------------
INVESTMENT INCOME (NOTE 2):
Interest income........................................ $ 1,868,866 $ 837,735 $ 243,424
Securities lending income (net)........................ 303,316 154,668 72,671
Dividend income........................................ 21,309,696 9,183,191 549,800
Less: foreign withholding taxes........................ (3,391) (59,254) --
------------ ------------ -----------
Total income........................................... 23,478,487 10,116,340 865,895
------------ ------------ -----------
EXPENSES (NOTE 2):
Investment advisory fees............................... 14,762,028 3,423,757 1,668,902
Custody fees........................................... 440,785 149,907 60,288
Audit fees............................................. 34,879 23,150 22,415
Legal fees............................................. 104,807 26,349 8,499
Reports to shareholders................................ 26,160 14,335 2,487
Other fees............................................. 97,090 19,539 10,041
------------ ------------ -----------
Total expenses......................................... 15,465,749 3,657,037 1,772,632
Expenses reimbursed by the Advisor..................... -- (79,662) (34,193)
------------ ------------ -----------
Net expenses........................................... 15,465,749 3,577,375 1,738,439
------------ ------------ -----------
NET INVESTMENT INCOME (LOSS)........................... 8,012,738 6,538,965 (872,544)
------------ ------------ -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) on transactions from:
Securities........................................... 106,473,301 58,473,413 16,182,706
Futures.............................................. -- -- --
Foreign currency transactions........................ -- -- --
Change in net unrealized appreciation (depreciation)
on:
Securities........................................... 60,565,829 (13,904,553) 17,077,446
Futures.............................................. -- -- --
Written options...................................... -- -- --
Foreign currency translations........................ (108) -- --
------------ ------------ -----------
Net realized and unrealized gains (losses) on
investments.......................................... 167,039,022 44,568,860 33,260,152
------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $175,051,760 $ 51,107,825 $32,387,608
============ ============ ===========
</Table>
See notes to financial statements.
60
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ -------------- ------------ ----------- ------------ -------------
$ 374,560 $ 1,087,431 $ 161,023 $ 131,397 $ 31,420,234 $ 671,601
40,257 609,839 128,052 58,893 -- 1,081,663
1,431,010 9,976,191 276,660 2,282,796 222,742 45,661,701
(2,353) (16,018) (983) (7,270) -- (3,709,035)
------------ ------------ ------------ ----------- ------------ ------------
1,843,474 11,657,443 564,752 2,465,816 31,642,976 43,705,930
------------ ------------ ------------ ----------- ------------ ------------
1,588,559 9,871,350 1,012,859 2,876,807 2,087,039 11,275,694
67,191 389,421 72,657 100,485 126,883 1,694,174
22,317 32,274 22,122 25,920 26,937 35,084
12,340 51,671 5,772 16,867 18,788 75,764
8,301 90,224 19,086 12,038 3,863 15,847
7,749 52,990 4,727 9,211 12,621 61,163
------------ ------------ ------------ ----------- ------------ ------------
1,706,457 10,487,930 1,137,223 3,041,328 2,276,131 13,157,726
(59,862) (332) (89,438) (52,451) -- (921)
------------ ------------ ------------ ----------- ------------ ------------
1,646,595 10,487,598 1,047,785 2,988,877 2,276,131 13,156,805
------------ ------------ ------------ ----------- ------------ ------------
196,879 1,169,845 (483,033) (523,061) 29,366,845 30,549,125
------------ ------------ ------------ ----------- ------------ ------------
10,466,324 150,782,575 17,043,638 25,848,657 2,376,419 79,654,574
-- 180,475 -- -- -- --
-- (347) -- -- 88,320 (1,029,821)
(18,234,057) (26,525,774) (14,455,154) 4,064,836 (18,982,146) 64,809,780
-- (137,225) -- -- -- --
-- -- -- -- -- --
-- 122 -- -- 31 (260,276)
------------ ------------ ------------ ----------- ------------ ------------
(7,767,733) 124,299,826 2,588,484 29,913,493 (16,517,376) 143,174,257
------------ ------------ ------------ ----------- ------------ ------------
$ (7,570,854) $125,469,671 $ 2,105,451 $29,390,432 $ 12,849,469 $173,723,382
============ ============ ============ =========== ============ ============
</Table>
61
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
--------------- ------------- -------------
FROM OPERATIONS:
Net investment income (loss)..................... $ 24,112,234 $ 24,280,048 $ 8,765,600
Net realized gains (losses) on transactions from:
Securities..................................... (1,321) (3,873,615) (4,498,062)
Futures........................................ -- -- --
Written options................................ -- -- --
Foreign currency transactions.................. -- -- --
Change in net unrealized appreciation
(depreciation) on:
Securities..................................... -- (5,794,902) (713,722)
Futures........................................ -- -- --
Written options................................ -- -- --
Short sales.................................... -- -- --
Foreign currency translations.................. -- -- --
--------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations................................ 24,110,913 14,611,531 3,553,816
--------------- ------------- -------------
FROM TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions.................................. 3,000,861,945 394,658,991 134,271,687
Withdrawals.................................... (3,068,547,985) (311,465,734) (133,221,631)
--------------- ------------- -------------
Net increase (decrease) in net assets resulting
from transactions in investors' beneficial
interests...................................... (67,686,040) 83,193,257 1,050,056
--------------- ------------- -------------
Net increase (decrease) in net assets............ (43,575,127) 97,804,788 4,603,872
NET ASSETS:
Beginning of year................................ 809,352,385 690,594,378 256,502,651
--------------- ------------- -------------
End of year...................................... $ 765,777,258 $ 788,399,166 $ 261,106,523
=============== ============= =============
</Table>
- ---------------
(1) Commencement of Operations, May 6, 2005.
See notes to financial statements.
62
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND(1) BALANCED INCOME VALUE(1) INCOME
-------------- ----------- ------------ -------------- ----------- --------------
$ 73,863,332 $ 1,586,790 $ 9,237,946 $ 39,423,154 $ 156,224 $ 10,673,040
(6,477,165) (410,160) 25,146,537 256,256,688 262,769 61,012,020
2,212,048 38,572 520,728 -- -- (61,117)
864,930 28,041 104,520 -- -- --
(6,020,058) 112,407 (155,938) -- -- (187)
(26,483,597) (26,456) (13,066,904) (101,548,512) 580,304 6,508,944
470,718 13,410 (125,867) -- -- (23,415)
116,440 -- -- -- -- --
(878,427) -- (31,741) -- -- --
5,644,968 2,388 504,647 -- -- (711)
-------------- ----------- ------------ -------------- ----------- --------------
43,313,189 1,344,992 22,133,928 194,131,330 999,297 78,108,574
-------------- ----------- ------------ -------------- ----------- --------------
746,674,137 95,063,361 126,239,193 844,155,946 46,721,034 276,213,786
(392,462,176) (26,335,494) (157,352,155) (725,690,301) (12,581,819) (311,511,925)
-------------- ----------- ------------ -------------- ----------- --------------
354,211,961 68,727,867 (31,112,962) 118,465,645 34,139,215 (35,298,139)
-------------- ----------- ------------ -------------- ----------- --------------
397,525,150 70,072,859 (8,979,034) 312,596,975 35,138,512 42,810,435
1,655,367,885 -- 419,726,689 2,705,463,322 -- 1,135,948,434
-------------- ----------- ------------ -------------- ----------- --------------
$2,052,893,035 $70,072,859 $410,747,655 $3,018,060,297 $35,138,512 $1,178,758,869
============== =========== ============ ============== =========== ==============
</Table>
63
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
-------------- ------------- ------------
FROM OPERATIONS:
Net investment income (loss)....................... $ 8,012,738 $ 6,538,965 $ (872,544)
Net realized gains (losses) on transactions from:
Securities....................................... 106,473,301 58,473,413 16,182,706
Futures.......................................... -- -- --
Foreign currency transactions.................... -- -- --
Change in net unrealized appreciation
(depreciation) on:
Securities....................................... 60,565,829 (13,904,553) 17,077,446
Futures.......................................... -- -- --
Written options.................................. -- -- --
Foreign currency translations.................... (108) -- --
-------------- ------------- ------------
Net increase (decrease) in net assets resulting
from operations.................................. 175,051,760 51,107,825 32,387,608
-------------- ------------- ------------
FROM TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions.................................... 722,199,519 288,221,115 101,501,469
Withdrawals...................................... (600,429,165) (112,508,081) (61,039,507)
-------------- ------------- ------------
Net increase (decrease) in net assets resulting
from transactions in investors' beneficial
interests........................................ 121,770,354 175,713,034 40,461,962
-------------- ------------- ------------
Net increase (decrease) in net assets.............. 296,822,114 226,820,859 72,849,570
NET ASSETS:
Beginning of year.................................. 2,290,559,947 414,710,679 210,100,872
-------------- ------------- ------------
End of year........................................ $2,587,382,061 $ 641,531,538 $282,950,442
============== ============= ============
</Table>
See notes to financial statements.
64
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ -------------- ------------ ------------- ------------ --------------
$ 196,879 $ 1,169,845 $ (483,033) $ (523,061) $ 29,366,845 $ 30,549,125
10,466,324 150,782,575 17,043,638 25,848,657 2,376,419 79,654,574
-- 180,475 -- -- -- --
-- (347) -- -- 88,320 (1,029,821)
(18,234,057) (26,525,774) (14,455,154) 4,064,836 (18,982,146) 64,809,780
-- (137,225) -- -- -- --
-- -- -- -- -- --
-- 122 -- -- 31 (260,276)
------------ -------------- ------------ ------------- ------------ --------------
(7,570,854) 125,469,671 2,105,451 29,390,432 12,849,469 173,723,382
------------ -------------- ------------ ------------- ------------ --------------
95,676,461 417,698,258 55,270,954 136,961,726 141,534,891 506,290,794
(42,092,335) (474,026,762) (32,902,023) (181,949,965) (90,129,641) (359,845,971)
------------ -------------- ------------ ------------- ------------ --------------
53,584,126 (56,328,504) 22,368,931 (44,988,239) 51,405,250 146,444,823
------------ -------------- ------------ ------------- ------------ --------------
46,013,272 69,141,167 24,474,382 (15,597,807) 64,254,719 320,168,205
172,735,949 1,227,530,742 108,429,152 397,726,867 351,772,536 1,401,617,944
------------ -------------- ------------ ------------- ------------ --------------
$218,749,221 $1,296,671,909 $132,903,534 $ 382,129,060 $416,027,255 $1,721,786,149
============ ============== ============ ============= ============ ==============
</Table>
65
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.
66
<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>
67
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
COMMERCIAL PAPER -- 37.6%
$39,460,000 Abbey National NA LLC,
4.50%, 01/03/06.............. $ 39,445,203
30,410,000 Bank of America Corp.,
4.19%, 01/31/06.............. 30,300,279
30,980,000 Barclays US Funding LLC,
4.16%, 01/09/06.............. 30,947,781
19,040,000 Ciesco LLC -- 144A,
4.19%, 01/12/06.............. 19,013,407
30,710,000 Credit Suisse First Boston New
York,
4.21%, 01/23/06.............. 30,627,399
10,630,000 Deutsche Bank Financial LLC,
4.39%, 01/03/06.............. 10,626,111
30,630,000 Goldman Sachs Group LP,
4.36%, 01/04/06.............. 30,615,161
33,180,000 HBOS Treasury Services PLC,
4.16%, 02/02/06.............. 33,053,473
29,790,000 Jupiter Securities
Corp. -- 144A,
4.30%, 01/17/06.............. 29,729,510
3,945,000 Preferred Receivables
Funding -- 144A,
4.24%, 01/24/06.............. 3,933,849
29,850,000 Sheffield Receivables -- 144A,
4.29%, 01/13/06.............. 29,803,757
------------
TOTAL COMMERCIAL PAPER (Cost
$288,095,930)................ 288,095,930
------------
YANKEE CERTIFICATES OF DEPOSIT -- 15.3%
30,910,000 Calyon New York,
4.17%, 01/09/06.............. 30,910,000
22,390,000 Dexia Bank,
4.34%, 02/02/06.............. 22,390,000
33,410,000 Lloyds Bank PLC New York,
4.04%, 01/06/06.............. 33,409,930
30,130,000 Toronto Dominion Holdings,
4.45%, 03/23/06.............. 30,130,000
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT (Cost
$116,839,930)................ 116,839,930
------------
DOMESTIC CERTIFICATES OF DEPOSIT -- 6.5%
14,470,000 First Tennessee Bank,
4.31%, 01/31/06.............. 14,470,000
15,350,000 First Tennessee Bank,
4.35%, 01/31/06.............. 15,350,000
4,410,000 Wells Fargo Bank NA,
4.40%, 01/06/06.............. 4,410,000
15,580,000 Wells Fargo Bank NA,
4.34%, 01/09/06.............. 15,580,000
------------
TOTAL DOMESTIC CERTIFICATES OF
DEPOSIT (Cost $49,810,000)... 49,810,000
------------
MEDIUM TERM CORPORATE NOTES -- 1.7%
13,000,000 Caterpillar Financial Service
Corp., Series MTN, Variable
Rate,
4.23%, 07/09/06(a) (Cost
$13,000,000)................. 13,000,000
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 12.4%
FREDDIE MAC
$21,140,000 3.66%, 01/10/06................ $ 21,118,478
33,580,000 3.80%, 07/12/06................ 33,580,000
3,430,000 3.97%, 01/17/06................ 3,423,570
37,110,000 4.23%, 04/25/06................ 36,609,144
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$94,731,192)................. 94,731,192
------------
SHORT TERM CORPORATE NOTES -- 17.9%
16,900,000 American Express Credit
Company, Variable Rate,
4.39%, 04/05/06(a)........... 16,906,922
10,440,000 Canadian Imperial Bank of
Commerce, Variable Rate,
4.21%, 12/22/06(a)........... 10,440,000
33,400,000 HSBC Finance Corp., Variable
Rate,
4.55%, 06/22/06(a)........... 33,413,840
14,000,000 Merrill Lynch & Company,
Variable Rate,
4.56%, 02/10/06(a)........... 14,000,000
33,850,000 Morgan Stanley, Variable Rate,
4.30%, 02/03/06(a)........... 33,850,000
28,870,000 Societe Generale New York,
Variable Rate,
4.33%, 10/31/06(a)........... 28,866,484
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $137,477,246).... 137,477,246
------------
TOTAL SECURITIES (Cost
$699,954,298)................ 699,954,298
------------
REPURCHASE AGREEMENTS -- 8.5%
9,827 With Investors Bank & Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase proceeds
at maturity $9,831
(Collateralized by Small
Business Administration,
7.13% due 06/25/14, with a
value of $10,318)............ 9,827
64,800,000 With Warburg Dillon Reed, dated
12/30/05, 4.27%, due
01/03/06, repurchase proceeds
at maturity $64,830,744
(Collateralized by Fannie
Mae, 6.25%, due 02/01/11 with
a value of $63,788,712, and
Freddie Mac, 5.25%, due
11/05/12 with a value of
$2,311,070).................. 64,800,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $64,809,827)........... 64,809,827
------------
Total Investments -- 99.9%
(Cost $764,764,125).......... 764,764,125
Other assets less
liabilities -- 0.1%.......... 1,013,133
------------
NET ASSETS -- 100.0%........... $765,777,258
============
</Table>
The aggregate cost of securities for federal income tax purposes at
December 31, 2005 is $764,764,125.
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
68
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 70.7%
AEROSPACE AND DEFENSE -- 0.6%
$ 4,375,000 The Boeing Company,
8.10%, 11/15/06.............. $ 4,491,957
------------
AUTOMOBILE: RENTAL -- 0.6%
4,800,000 General American Transportation
Corp. (New York),
6.75%, 05/01/09.............. 4,973,395
------------
BANKS -- 11.3%
2,905,000 ABN AMRO Bank NV (Chicago),
7.13%, 06/18/07.............. 2,990,814
3,000,000 American Express Centurion
Bank, Series BKNT,
4.38%, 07/30/09.............. 2,946,417
1,000,000 Bank of America Corp.,
6.20%, 02/15/06.............. 1,001,758
4,000,000 Bank of America Corp.,
7.13%, 03/01/09.............. 4,254,700
6,000,000 Bank of Montreal-Chicago,
7.80%, 04/01/07.............. 6,206,370
4,600,000 Bank of Scotland -- 144A
(United Kingdom),
3.50%, 11/30/07.............. 4,491,113
5,600,000 Bank One Corp.,
2.63%, 06/30/08.............. 5,309,550
2,000,000 BankBoston NA, Series BKNT,
6.38%, 04/15/08.............. 2,067,276
2,000,000 HBOS Treasury Services
PLC -- 144A(United Kingdom),
3.75%, 09/30/08.............. 1,948,038
1,000,000 HSBC Bank PLC (United Kingdom),
6.95%, 03/15/11.............. 1,079,608
5,333,000 Midland Bank PLC (United
Kingdom),
7.63%, 06/15/06.............. 5,397,636
4,090,909 National City Bank, Series
BKNT,
2.70%, 08/24/09.............. 3,899,344
2,825,000 National City Bank, Series
BKNT,
4.25%, 01/29/10.............. 2,764,144
1,000,000 National Westminster Bank
(United Kingdom),
7.38%, 10/01/09.............. 1,086,537
6,115,000 Nordea Bank Finland PLC, New
York Branch,
6.50%, 01/15/06.............. 6,118,131
3,000,000 Svenska Handelsbanken (New
York),
8.13%, 08/15/07.............. 3,149,457
3,000,000 Swiss Bank Corp.,
7.25%, 09/01/06.............. 3,040,467
3,000,000 US Bank NA, Series BKNT,
4.13%, 03/17/08.............. 2,965,671
6,300,000 US Central Credit Union,
2.75%, 05/30/08.............. 6,010,969
3,125,000 Wachovia Corp.,
5.63%, 12/15/08.............. 3,198,438
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 7,000,000 Wachovia Corp., Floating Rate,
4.46%, 07/20/07(c)........... $ 7,011,563
3,166,000 Wells Fargo & Company,
6.88%, 04/01/06.............. 3,181,054
6,000,000 Wells Fargo & Company, Floating
Rate,
4.58%, 09/28/07(b)........... 6,010,578
2,150,000 Wells Fargo & Company, Series
MTN, Floating Rate,
4.52%, 03/10/08(b)........... 2,152,189
1,000,000 Wells Fargo & Company, Series
MTNH,
6.75%, 10/01/06.............. 1,012,759
------------
89,294,581
------------
FINANCIAL SERVICES -- 9.1%
7,672,000 Capital One Bank, Series BKNT,
6.70%, 05/15/08.............. 7,935,625
2,050,000 Caterpillar Financial Services
Corp., Series MTND,
9.50%, 02/06/07.............. 2,114,712
2,000,000 Caterpillar Financial Services
Corp., Series MTNF,
3.63%, 11/15/07.............. 1,956,896
5,000,000 Citigroup, Inc.,
3.50%, 02/01/08.............. 4,870,190
1,000,000 General Electric Capital Corp.,
Series MTNA,
8.70%, 03/01/07.............. 1,039,845
8,000,000 Goldman Sachs Group, Inc.,
Series MTN, Floating Rate,
4.50%, 10/07/11(b)........... 8,062,593
1,000,000 Heller Financial, Inc.,
6.38%, 03/15/06.............. 1,003,430
6,675,000 International Lease Finance
Corp.,
6.38%, 03/15/09.............. 6,937,988
2,250,000 Lehman Brothers Holdings, Inc.,
7.00%, 02/01/08.............. 2,343,386
3,200,000 Lehman Brothers Holdings, Inc.,
Series MTNG,
3.95%, 11/10/09.............. 3,084,755
7,775,000 Merrill Lynch & Company, Series
MTNC,
4.83%, 10/27/08.............. 7,764,271
5,000,000 Morgan Stanley,
3.88%, 01/15/09.............. 4,856,350
2,000,000 Morgan Stanley, Floating Rate,
4.34%, 07/27/07(b)........... 2,003,436
3,600,000 Residential Capital Corp.,
6.13%, 11/21/08.............. 3,611,106
4,000,000 Residential Capital Corp.,
6.38%, 06/30/10.............. 4,068,388
2,100,000 The Bear Stearns Companies,
Inc.,
3.25%, 03/25/09.............. 1,993,343
</Table>
See notes to financial statements.
69
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 6,000,000 The Bear Stearns Companies,
Inc., Floating Rate,
4.39%, 04/29/08(b)........... $ 6,015,006
2,181,810 Toyota Motor Credit Corp.,
Series MTN,
2.75%, 08/06/09.............. 2,098,247
------------
71,759,567
------------
FOOD AND BEVERAGE -- 0.5%
4,000,000 General Mills, Inc.,
5.13%, 02/15/07.............. 3,997,632
------------
INSURANCE -- 1.2%
10,000,000 Met Life Global Funding
I -- 144A,
4.25%, 07/30/09.............. 9,815,900
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.4%
3,000,000 Abbott Laboratories,
5.63%, 07/01/06.............. 3,014,298
------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT -- 13.8%
6,500,000 AmeriCredit Automobile
Receivables Trust, Series
2005-AX, Class A3,
3.63%, 01/06/10.............. 6,427,052
4,500,000 Bay View Auto Trust, Series
2005-LJ1, Class A4,
4.09%, 05/25/12.............. 4,407,441
3,000,000 Capital Auto Receivables Asset
Trust, Series 2005-1, Class
A4,
4.05%, 07/15/09.............. 2,968,863
190,089 Capital One Auto Finance Trust,
Series 2003-A, Class A3A,
1.83%, 10/15/07.............. 189,843
4,000,000 Capital One Auto Finance Trust,
Series 2005-A, Class A3,
4.28%, 07/15/09.............. 3,968,563
2,000,000 Capital One Auto Finance Trust,
Series 2005-BSS, Class A3,
4.08%, 11/15/09.............. 1,974,694
2,000,000 Capital One Auto Finance Trust,
Series 2005-C, Class A3,
4.61%, 07/15/10.............. 1,992,345
3,500,000 Capital One Prime Auto
Receivables Trust,
Series 2004-3, Class A4,
3.69%, 06/15/10.............. 3,415,434
4,500,000 Carmax Auto Owner Trust, Series
2004-2, Class A4,
3.46%, 09/15/11.............. 4,371,500
3,100,000 Carmax Auto Owner Trust, Series
2005-2, Class A4,
4.34%, 09/15/10.............. 3,055,573
3,000,000 Chase Manhattan Auto Owner
Trust, Series 2005-A, Class
CTFS,
4.04%, 04/15/11.............. 2,944,689
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT
(CONTINUED)
$ 428,495 Chevy Chase Auto Receivables
Trust, Series 2001-2, Class
A4,
4.44%, 04/16/07.............. $ 428,573
7,500,000 Fifth Third Auto Trust, Series
2004-A, Class A4,
3.70%, 10/20/11.............. 7,351,504
2,250,000 Ford Credit Auto Owner Trust,
Series 2005-B, Class B,
4.64%, 04/15/10.............. 2,228,615
2,400,000 Ford Credit Auto Owner Trust,
Series 2005-C, Class A3,
4.30%, 08/15/09.............. 2,377,122
3,600,000 Ford Credit Auto Owner Trust,
Series 2005-C, Class B,
4.52%, 09/15/10.............. 3,547,603
3,556,215 Franklin Auto Trust, Series
2003-1, Class A4,
2.27%, 05/20/11.............. 3,476,992
2,000,000 Franklin Auto Trust, Series
2004-1, Class A2,
3.57%, 03/16/09.............. 1,980,421
3,000,000 Harley-Davidson Motorcycle
Trust, Series 2004-1, Class
A2,
2.53%, 11/15/11.............. 2,899,546
5,000,000 Hertz Vehicle Financing
LLC -- 144A, Series 2005-2A,
Class A2,
4.93%, 02/25/10.............. 5,016,406
206,702 Household Automotive Trust,
Series 2003-1, Class A3,
1.73%, 12/17/07.............. 206,355
108,334 Hyundai Auto Receivables Trust,
Series 2002-A, Class A3,
2.80%, 02/15/07.............. 108,311
3,500,000 Long Beach Auto Receivables
Trust, Series 2005-B, Class
A3,
4.41%, 05/15/10.............. 3,470,452
2,651,567 National City Auto Receivables
Trust, Series 2004-A, Class
A3,
2.11%, 07/15/08.............. 2,617,172
712,716 Onyx Acceptance Owner Trust,
Series 2004-A, Class A3,
2.19%, 03/17/08.............. 708,947
3,250,000 Onyx Acceptance Owner Trust,
Series 2005-A, Class A4,
3.91%, 09/15/11.............. 3,183,137
1,805,903 Regions Auto Receivables Trust,
Series 2003-2, Class A3,
2.31%, 01/15/08.............. 1,795,587
1,166,641 Ryder Vehicle Lease Trust,
Series 2001-A, Class A5,
6.17%, 11/15/07.............. 1,172,277
1,836,277 Susquehanna Auto Lease
Trust -- 144A, Series 2003-1,
Class A3,
2.46%, 01/14/07.............. 1,826,076
</Table>
See notes to financial statements.
70
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT
(CONTINUED)
$ 9,600,000 Susquehanna Auto Lease
Trust -- 144A, Series 2005-1,
Class A3,
4.43%, 06/16/08.............. $ 9,528,001
2,000,000 Susquehanna Auto Lease
Trust -- 144A, Series 2005-1,
Class B,
4.71%, 07/14/08.............. 1,984,380
3,311,198 Triad Auto Receivables Owner
Trust, Series 2002-A, Class
A4,
3.24%, 08/12/09.............. 3,282,822
8,500,000 Wachovia Auto Owner Trust,
Series 2004-A, Class A4,
3.66%, 07/20/10.............. 8,333,737
4,500,000 WFS Financial Owner Trust,
Series 2004-1, Class A4,
2.81%, 08/22/11.............. 4,384,043
1,154,260 Whole Auto Loan Trust, Series
2003-1, Class A3B,
1.99%, 05/15/07.............. 1,148,527
------------
108,772,603
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 3.0%
5,000,000 Citibank Credit Card Issuance
Trust, Series 2000-A3, Class
A3,
6.88%, 11/16/09.............. 5,187,951
1,550,000 Discover Card Master Trust I,
Series 2002-2, Class B,
5.45%, 10/15/09.............. 1,561,798
1,409,000 Fleet Credit Card Master Trust
II, Series 2001-B, Class A,
5.60%, 12/15/08.............. 1,414,908
1,700,000 Household Private Label Credit
Card Master Note Trust I,
Series 2002-2, Class A,
Floating Rate,
4.54%, 01/18/11(c)........... 1,702,759
7,500,000 MBNA Credit Card Master Note
Trust, Series 2005-A7, Class
A7,
4.30%, 02/15/11.............. 7,413,319
6,000,000 Nordstrom Private Label Credit
Card -- 144A, Series 2001-1A,
Class A,
4.82%, 04/15/10.............. 6,001,792
------------
23,282,527
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 4.7%
736,252 Caterpillar Financial Asset
Trust, Series 2003-A, Class
A3,
1.66%, 12/26/07.............. 730,907
4,008,588 Caterpillar Financial Asset
Trust, Series 2004-A, Class
A3,
3.13%, 01/26/09.............. 3,957,573
5,000,000 Caterpillar Financial Asset
Trust, Series 2005-A, Class
A4,
4.10%, 06/25/10.............. 4,918,997
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL SERVICES
(CONTINUED)
$ 3,085,906 Community Program Loan Trust,
Series 1987-A, Class A4,
4.50%, 10/01/18.............. $ 3,040,796
7,409,207 Greenwich Capital Commercial
Funding Corp., Series
2005-GG5, Class A1,
4.79%, 04/10/37.............. 7,384,412
504,731 Morgan Stanley Capital I,
Series 2001-IQA, Class A2,
5.33%, 12/18/32.............. 504,931
1,484,085 Morgan Stanley Capital I,
Series 2003-T11, Class A1,
3.26%, 06/13/41.............. 1,441,371
1,504,337 Morgan Stanley Capital I,
Series 2004-T13, Class A1,
2.85%, 09/13/45.............. 1,449,276
7,115,648 Morgan Stanley Capital I,
Series 2005-HQ5, Class A1,
4.52%, 01/14/42.............. 7,051,195
2,869,322 Morgan Stanley Capital I,
Series 2005-HQ6, Class A1,
4.65%, 08/13/42.............. 2,849,206
107,503 Morgan Stanley Capital, Series
2001-TOP3, Class A1,
5.31%, 07/15/33.............. 107,446
831,162 PSE&G Transition Funding LLC,
Series 2001-1, Class A3,
5.98%, 06/15/08.............. 835,072
2,925,829 Public Service New Hampshire
Funding LLC, Series 2001-1,
Class A2,
5.73%, 11/01/10.............. 2,966,155
------------
37,237,337
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 12.1%
2,065,102 Banc of America Commercial
Mortgage, Inc., Series
2002-2, Class A1,
3.37%, 07/11/43.............. 2,038,595
2,399,890 Banc of America Commercial
Mortgage, Inc., Series
2003-2, Class A1,
3.41%, 03/11/41.............. 2,330,221
1,328,823 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 1998-C1, Class A1,
6.34%, 06/16/30.............. 1,348,168
570,647 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 1999-C1, Class A1,
5.91%, 02/14/31.............. 575,110
1,471,812 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2001-TOP4, Class A1,
5.06%, 11/15/16.............. 1,473,071
</Table>
See notes to financial statements.
71
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 868,582 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2002-PBW1, Class A1,
3.97%, 11/11/35.............. $ 847,012
1,691,721 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2004-PWR5, Class A1,
3.76%, 07/11/42.............. 1,649,116
1,942,245 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2005-PWR9, Class A1,
4.50%, 09/11/42.............. 1,919,920
3,967,200 Citigroup/Deutsche Bank
Commercial Mortgage Trust,
Series 2005-CD1, Class A1,
5.05%, 07/15/44.............. 3,975,664
2,164,324 Commercial Mortgage Pass-
Through Certificates, Series
2004-LB2A, Class A1,
2.96%, 03/10/39.............. 2,085,437
5,000,000 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2001-CP4, Class A2,
5.87%, 12/15/35.............. 5,077,986
3,137,532 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2003-C3, Class A1,
2.08%, 05/15/38.............. 3,015,507
2,929,230 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2004-C1, Class A1,
2.25%, 01/15/37.............. 2,847,069
743,215 GE Capital Commercial Mortgage
Corp., Series 2001-3, Class
A1,
5.56%, 06/10/38.............. 750,902
419,776 GE Capital Commercial Mortgage
Corp., Series 2002-1, Class
A1,
5.03%, 12/10/35.............. 420,051
3,571,728 GE Capital Commercial Mortgage
Corp., Series 2002-3A, Class
A1,
4.23%, 12/10/37.............. 3,502,025
2,634,338 GE Capital Commercial Mortgage
Corp., Series 2004-C3, Class
A1,
3.75%, 07/10/39.............. 2,572,775
2,249,163 GE Capital Commercial Mortgage
Corp., Series 2005-C1, Class
A1,
4.01%, 06/10/48.............. 2,211,717
2,200,000 GMAC Mortgage Corp. Loan Trust,
Series 2004-GH1, Class A2,
4.39%, 12/25/25.............. 2,183,002
415,679 IMC Home Equity Loan Trust,
Series 1997-3, Class A7,
7.08%, 08/20/28.............. 414,940
1,059,474 Interstar Millennium Trust,
Series 2003-3G, Class A2
(Australia),
Floating Rate,
4.77%, 09/27/35(b)........... 1,061,840
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 1,782,543 Interstar Millennium Trust,
Series 2004-2G, Class A
(Australia),
Floating Rate,
4.69%, 03/14/36(b)........... $ 1,787,688
778,303 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2002-C2, Class A1,
4.33%, 12/12/34.............. 762,501
5,302,746 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-LDP4, Class A1,
4.61%, 10/15/42.............. 5,260,047
3,250,408 JPMorgan Mortgage Trust, Series
2005-A1, Class 5A1,
4.48%, 02/25/35.............. 3,170,123
1,569,456 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A1,
2.72%, 03/15/27.............. 1,520,333
1,850,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A2,
3.32%, 03/15/27.............. 1,791,316
2,550,628 LB-UBS Commercial Mortgage
Trust, Series 2003-C3, Class
A1,
2.60%, 05/15/27.............. 2,455,398
3,000,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C5, Class
A2,
3.48%, 07/15/27.............. 2,896,939
1,808,736 LB-UBS Commercial Mortgage
Trust, Series 2004-C8, Class
A1,
3.94%, 12/15/29.............. 1,772,624
962,201 LB-UBS Commercial Mortgage
Trust, Series 2005-C5, Class
A1,
4.74%, 09/15/40.............. 958,441
5,026,599 LB-UBS Commercial Mortgage
Trust, Series 2005-C7, Class
A1,
4.99%, 11/15/30.............. 5,035,647
2,300,000 Permanent Financing PLC, Series
7, Class 2A (United Kingdom),
Floating Rate,
4.52%, 09/10/14(b)........... 2,296,894
3,000,000 Popular ABS Mortgage Pass-
Through Trust, Series 2005-3,
Class AF3,
4.44%, 07/25/35.............. 2,954,135
3,400,000 Residential Asset Mortgage
Products, Inc., Series
2003-RS11, Class AI4,
4.26%, 06/25/29.............. 3,386,943
7,625,000 Structured Adjustable Rate
Mortgage Loan, Series
2005-23, Class 1A3,
5.45%, 01/25/36(l)........... 7,657,763
3,938,971 Wachovia Bank Commercial
Mortgage Trust, Series
2003-4, Class A1,
3.00%, 04/15/35.............. 3,822,495
</Table>
See notes to financial statements.
72
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 5,625,000 Wells Fargo Mortgage Backed
Securities Trust, Series
2005-9, Class 1A1,
4.75%, 10/25/35.............. $ 5,533,390
------------
95,362,805
------------
PRIVATE ASSET BACKED: OTHER -- 4.7%
1,423,631 Bear Stearns Asset Backed
Securities, Inc., Series
2003-AC3, Class A1,
4.00%, 07/25/33.............. 1,399,099
4,672,000 California Infrastructure PG&E
Corp., Series 1997-1, Class
A8,
6.48%, 12/26/09.............. 4,790,309
1,296,426 California Infrastructure
SCE-1, Series 1997-1, Class
A6,
6.38%, 09/25/08.............. 1,307,794
473,321 CIT Equipment Collateral,
Series 2003-VT1, Class A3B,
1.63%, 04/20/07.............. 469,500
1,256,798 CIT Equipment Collateral,
Series 2004-VT1, Class A3,
2.20%, 03/20/08.............. 1,239,502
1,819,895 CIT RV Trust, Series 1998-A,
Class A5,
6.12%, 11/15/13.............. 1,833,584
5,000,000 CNH Equipment Trust, Series
2004-A,
Class A3B, 2.94%, 10/15/08... 4,921,248
4,594,805 Connecticut RRB Special Purpose
Trust CL&P1, Series 2001-1,
Class A3,
5.73%, 03/30/09.............. 4,626,892
2,012,616 Crusade Global Trust, Series
2004-2, Class A1 (Australia),
Floating Rate,
4.50%, 11/19/37(b)........... 2,015,906
1,000,000 GE Dealer Floorplan Master Note
Trust, Series 2004-1, Class
B, Floating Rate,
4.63%, 07/20/08(c)........... 1,000,773
6,250,000 Marlin Leasing Receivables
LLC -- 144A,
Series 2005-1A, Class A2,
4.49%, 01/15/08.............. 6,229,495
3,649,625 Nelnet Student Loan Corp.,
Series 2001-A, Class A1,
5.76%, 07/01/12.............. 3,709,378
1,432,762 PBG Equipment Trust, Series 1A,
Class A,
6.27%, 01/20/12.............. 1,434,950
2,400,000 Providian Gateway Master
Trust -- 144A,
Series 2004-FA, Class A,
3.65%, 11/15/11.............. 2,350,874
------------
37,329,304
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: RECEIVABLES -- 0.2%
$ 1,292,189 Alter Moneta Receivables
LLC -- 144A, Series 2003-1,
2.56%, 03/15/11.............. $ 1,283,536
------------
PRIVATE ASSET BACKED: TRANSPORTATION -- 1.0%
2,150,000 E-Trade RV and Marine Trust,
Series 2004-1, Class A3,
3.62%, 10/08/18.............. 2,065,686
552,289 Railcar Leasing LLC -- 144A,
Series 1, Class A1,
6.75%, 07/15/06.............. 555,330
5,000,000 Railcar Leasing LLC, Series 1,
Class A2,
7.13%, 01/15/13.............. 5,306,825
------------
7,927,841
------------
PRIVATE ASSET BACKED: UTILITIES -- 0.5%
3,991,739 PECO Energy Transition Trust,
Series 1999-A, Class A6,
6.05%, 03/01/09.............. 4,027,336
------------
SPECIAL PURPOSE ENTITY -- 1.0%
2,500,000 New York Life Global
Funding -- 144A,
3.88%, 01/15/09.............. 2,428,920
5,000,000 New York Life Global
Funding -- 144A, Floating
Rate,
4.46%, 02/26/07(b)........... 5,006,880
------------
7,435,800
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.2%
2,000,000 SBC Communications Capital
Corp., Series MTND,
6.68%, 11/28/07.............. 2,052,510
7,350,000 Sprint Capital Corp.,
6.38%, 05/01/09.............. 7,634,232
------------
9,686,742
------------
TRANSPORTATION -- 1.7%
2,485,000 CSX Corp.,
6.25%, 10/15/08.............. 2,564,898
10,000,000 Union Pacific Corp.,
7.25%, 11/01/08.............. 10,572,800
------------
13,137,698
------------
UTILITIES -- 3.1%
6,725,000 Alabama Power Company, Series
G,
5.38%, 10/01/08.............. 6,806,776
3,000,000 Consolidated Edison Company of
New York, Inc.,
4.70%, 06/15/09.............. 2,982,798
1,750,000 Metropolitan Edison Company,
4.45%, 03/15/10.............. 1,708,574
3,195,000 Northern States Power Company
(Minnesota),
6.88%, 08/01/09.............. 3,390,534
</Table>
See notes to financial statements.
73
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES (CONTINUED)
$ 5,200,000 Northern States Power Company
(Wisconsin),
7.64%, 10/01/08.............. $ 5,540,985
4,150,000 Ohio Edison,
4.00%, 05/01/08.............. 4,051,678
------------
24,481,345
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $566,898,240).......... 557,312,204
------------
US TREASURY SECURITIES -- 2.5%
US TREASURY NOTES
20,000,000 4.25%, 11/30/07(1)
(Cost $19,939,790)........... 19,947,660
------------
US GOVERNMENT AGENCY SECURITIES -- 20.9%
FANNIE MAE -- 3.2%
7,000,000 3.00%, 03/02/07................ 6,862,366
1,048,691 PL# 254062, 6.00%, 10/01/11.... 1,073,231
2,082,713 PL# 254754, 4.50%, 05/01/10.... 2,041,642
3,112,043 PL# 254758, 4.50%, 06/01/13.... 3,060,474
1,562,088 PL# 254805, 5.00%, 06/01/13.... 1,561,571
3,096,704 PL# 254807, 5.00%, 07/01/13.... 3,095,679
766,480 PL# 323743, 5.00%, 04/01/14.... 759,854
468,772 PL# 429168, 6.00%, 05/01/13.... 479,154
366,377 PL# 50903, 6.00%, 09/01/08..... 372,091
475,319 PL# 50973, 6.00%, 01/01/09..... 482,732
487,789 PL# 517699, 6.00%, 07/01/14.... 498,781
1,548,926 PL# 545038, 6.00%, 09/01/14.... 1,583,073
3,086,684 PL# 555154, 5.50%, 12/01/22.... 3,089,190
295,256 PL# 609771, 6.00%, 09/01/08.... 301,719
------------
25,261,557
------------
FEDERAL HOME LOAN BANK -- 0.7%
5,810,134 Series 6T-9009, 3.84%,
11/25/09..................... 5,595,519
------------
FREDDIE MAC -- 0.6%
4,555,000 4.25%, 02/28/07................ 4,529,465
------------
FREDDIE MAC GOLD -- 1.1%
183,168 PL# E00532, 6.50%, 02/01/13.... 188,210
316,781 PL# E00542, 6.50%, 04/01/13.... 325,504
841,532 PL# E00676, 5.50%, 06/01/14.... 848,339
1,199,150 PL# E89557, 5.50%, 04/01/17.... 1,207,431
4,678,917 PL# G40426, 5.50%, 03/01/11.... 4,688,407
1,072,613 PL# M90802, 4.00%, 03/01/08.... 1,047,827
------------
8,305,718
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.3%
2,099,716 PL# 436708, 5.75%, 12/15/22.... 2,139,814
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 14.4%
$ 1,934,542 Fannie Mae -- ACES,
Series 1998-M1, Class A2,
6.25%, 01/25/08.............. $ 1,966,377
950,021 Fannie Mae, Series 1993-234,
Class PC,
5.50%, 12/25/08.............. 951,156
5,400,000 Fannie Mae, Series 2003-32,
Class PE,
4.00%, 03/25/26.............. 5,239,694
2,300,000 Fannie Mae, Series 2003-34,
Class GT,
4.00%, 01/25/27.............. 2,262,860
5,000,000 Fannie Mae, Series 2003-46,
Class PQ,
3.00%, 06/25/19.............. 4,925,249
2,550,000 Fannie Mae, Series 2003-62,
Class OD,
3.50%, 04/25/26.............. 2,430,971
2,666,605 Fannie Mae, Series 2003-63,
Class GU,
4.00%, 07/25/33.............. 2,626,999
1,500,000 Fannie Mae, Series 2003-67,
Class GL,
3.00%, 01/25/25.............. 1,457,987
6,306,854 Fannie Mae, Series 2003-69,
Class GJ,
3.50%, 12/25/31.............. 5,978,983
5,290,000 Fannie Mae, Series 2003-92,
Class KQ,
3.50%, 06/25/23.............. 5,170,474
3,057,204 Fannie Mae, Series 2004-21,
Class QA,
4.00%, 11/25/17.............. 3,030,918
3,451,655 Fannie Mae, Series 2004-70,
Class DN,
4.00%, 12/25/29.............. 3,309,225
6,700,000 Fannie Mae, Series 2004-80,
Class LG,
4.00%, 10/25/16.............. 6,544,947
7,885,686 Federal Home Loan Bank, Series
00-0582, Class H,
4.75%, 10/25/10.............. 7,818,658
5,542,275 Federal Home Loan Bank, Series
1Y-9009, Class A,
4.06%, 08/25/09.............. 5,430,459
2,873,334 Federal Home Loan Bank, Series
3Q-9009, Class 1,
3.92%, 09/25/09.............. 2,788,731
2,550,181 Freddie Mac, Series 2614, Class
JA,
3.76%, 03/15/29.............. 2,440,871
7,068,232 Freddie Mac, Series 2625, Class
JD,
3.25%, 07/15/17.............. 6,689,844
6,336,400 Freddie Mac, Series 2627, Class
KP,
2.87%, 12/15/16.............. 5,976,499
</Table>
See notes to financial statements.
74
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME EQ-
UITY (CONTINUED)
$ 7,326,373 Freddie Mac, Series 2630, Class
HC,
4.00%, 01/15/17.............. $ 7,125,040
5,800,000 Freddie Mac, Series 2631, Class
CD,
4.00%, 10/15/26.............. 5,586,246
7,403,723 Freddie Mac, Series 2637,
Class A,
3.38%, 03/15/18.............. 6,992,913
5,565,934 Freddie Mac, Series 2672, Class
HA,
4.00%, 09/15/16.............. 5,410,291
3,917,974 Freddie Mac, Series 2760, Class
EA,
4.50%, 04/15/13.............. 3,896,393
2,409,617 Freddie Mac, Series 2782, Class
HE,
4.00%, 09/15/17.............. 2,329,123
5,771,642 Freddie Mac, Series 3056, Class
AP,
5.50%, 01/15/27.............. 5,822,287
------------
114,203,195
------------
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.............. 4,836,825
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $167,988,023).......... 164,872,093
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 1.2%
5,000,000 Hydro Quebec, Series MTNB
(Canada),
6.52%, 02/23/06.............. 5,013,840
4,000,000 Province of Ontario (Canada),
5.50%, 10/01/08.............. 4,079,996
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $9,180,116)............ 9,093,836
------------
SECURITIES LENDING COLLATERAL -- 1.3%
10,225,000 Securities Lending Collateral
Investment (Note 4)
(Cost $10,225,000)........... 10,225,000
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 3.8%
FANNIE MAE -- 2.5%
10,000,000 4.16%, 01/11/06................ 9,987,288
10,000,000 Series BB, 4.17%, 01/19/06..... 9,977,992
------------
19,965,280
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES (CONTINUED)
FREDDIE MAC -- 1.3%
$10,000,000 4.08%, 01/30/06................ $ 9,966,000
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES
(Cost $29,931,280)........... 29,931,280
------------
TOTAL SECURITIES
(Cost $804,162,449).......... 791,382,073
------------
REPURCHASE AGREEMENTS -- 0.3%
2,538,212 With Investors Bank and Trust,
dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $2,539,289
(Collateralized by Small
Business Administration,
7.13%, due 04/25/15, with a
value of $2,665,123) (Cost
$2,538,212).................. 2,538,212
------------
Total Investments -- 100.7%
(Cost $806,700,661).......... 793,920,285
Liabilities less other
assets -- (0.7)%............. (5,521,119)
------------
NET ASSETS -- 100.0%........... $788,399,166
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $806,797,200.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 198,196
Gross unrealized depreciation.......... (13,075,111)
------------
Net unrealized depreciation............ $(12,876,915)
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
75
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 38.8%
US TREASURY INFLATION INDEX -- 4.8%
$12,132,575 3.63%, 01/15/08................ $ 12,461,963
------------
US TREASURY NOTES -- 34.0%
2,000,000 3.25%, 01/15/09(1)............. 1,937,110
2,250,000 3.00%, 02/15/09................ 2,160,178
3,945,000 3.13%, 04/15/09................ 3,796,447
2,200,000 3.63%, 07/15/09................ 2,146,892
2,000,000 3.38%, 10/15/09................ 1,931,954
28,841,000 3.50%, 11/15/09(1)............. 27,961,147
2,000,000 3.50%, 12/15/09(1)............. 1,938,360
2,000,000 3.63%, 01/15/10................ 1,945,782
2,000,000 4.00%, 03/15/10................ 1,971,954
2,500,000 4.00%, 04/15/10................ 2,464,455
31,257,000 4.00%, 02/15/15(1)............. 30,314,413
1,900,000 4.25%, 08/15/15................ 1,876,028
8,509,000 4.50%, 11/15/15(1)............. 8,581,463
------------
89,026,183
------------
TOTAL US TREASURY SECURITIES
(Cost $101,651,399).......... 101,488,146
------------
US GOVERNMENT AGENCY SECURITIES -- 24.4%
FANNIE MAE -- 18.8%
2,100,000 2.50%, 06/15/08................ 1,993,952
19,246,000 3.25%, 08/15/08................ 18,566,885
2,000,000 3.25%, 02/15/09................ 1,917,022
2,400,000 3.88%, 02/15/10................ 2,325,910
2,200,000 4.38%, 09/15/12................ 2,152,733
2,000,000 4.38%, 03/15/13................ 1,950,426
2,100,000 4.63%, 10/15/13................ 2,078,238
1,900,000 4.13%, 04/15/14................ 1,814,954
93,744 PL# 648057, 6.50%, 07/01/32.... 96,897
2,304,200 PL# 648688, 6.50%, 07/01/32.... 2,381,502
421,109 PL# 685402, 6.50%, 01/01/33.... 433,714
13,789,000 TBA, 5.00%, 01/01/36........... 13,362,395
------------
49,074,628
------------
FEDERAL HOME LOAN BANK -- 2.1%
2,000,000 Series 363,
4.50%, 11/15/12.............. 1,971,608
2,000,000 Series 432,
4.50%, 09/16/13.............. 1,964,406
1,500,000 Series P113,
5.13%, 05/24/13.............. 1,532,198
------------
5,468,212
------------
FREDDIE MAC -- 3.2%
2,200,000 3.63%, 09/15/08................ 2,140,442
2,200,000 4.25%, 07/15/09................ 2,167,138
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC (CONTINUED)
$ 2,000,000 4.50%, 01/15/13................ $ 1,967,486
2,000,000 4.50%, 01/15/14................ 1,966,184
------------
8,241,250
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.3%
779,386 PL# 615244, 6.50%, 06/15/33.... 814,477
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$63,920,905)................. 63,598,567
------------
CORPORATE BONDS AND NOTES -- 15.5%
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT -- 3.8%
676,000 Navistar Financial Corp. Owner
Trust, Series 2005-A, Class
A4,
4.43%, 01/15/14.............. 666,086
2,105,000 Triad Auto Receivables Owner
Trust, Series 2005-A, Class
A4,
4.22%, 06/12/12.............. 2,070,901
3,499,000 Wachovia Auto Owner Trust,
Series 2005-B, Class A5,
4.93%, 11/20/12.............. 3,498,743
1,327,000 Wells Fargo Financial Auto
Owner Trust, Series 2005-A,
Class A4,
4.28%, 05/15/12.............. 1,304,436
1,553,000 WFS Financial Owner Trust,
Series 2004-4, Class A4,
3.44%, 05/17/12.............. 1,511,941
856,000 WFS Financial Owner Trust,
Series 2005-3, Class A4,
4.39%, 05/17/13.............. 845,197
------------
9,897,304
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 0.4%
1,080,000 Citibank Credit Card Issuance
Trust, Series 2003-A7, Class
A7,
4.15%, 07/07/17.............. 1,020,991
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 1.7%
1,075,000 Chase Issuance Trust, Series
2005-A4, Class A4,
4.23%, 01/15/13.............. 1,050,693
1,822,000 Greenwich Capital Commercial
Funding Corp., Series
2005-GG3, Class A3,
4.57%, 08/10/42.............. 1,771,562
1,686,000 Morgan Stanley Capital I,
Series 2005-T17, Class A5,
4.78%, 12/13/41.............. 1,641,290
------------
4,463,545
------------
</Table>
See notes to financial statements.
76
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND
HOME EQUITY -- 6.8%
$ 72,000 Ameriquest Mortgage Securities,
Inc., Series 2003-IA1, Class
A4,
4.97%, 11/25/33.............. $ 71,379
857,000 Banc of America Commercial
Mortgage, Inc., Series
2005-6, Class A4,
5.18%, 09/10/47.............. 861,514
1,614,000 Citigroup Commercial Mortgage
Trust, Series 2004-C2, Class
A5,
4.73%, 10/15/41.............. 1,568,403
1,773,000 Citigroup Commercial Mortgage
Trust, Series 2005-C3, Class
A2,
4.64%, 05/15/43.............. 1,743,786
3,321,000 Commercial Mortgage
Pass-Through Certificates,
Series 2005-C6, Class A5A,
5.12%, 06/10/44.............. 3,312,550
1,639,000 Credit-Based Asset Servicing
and Securities, Series
2005-CB3, Class AF2,
4.45%, 12/25/34.............. 1,610,820
3,428,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-LDP3, Class A4A,
4.94%, 08/15/42.............. 3,369,407
1,345,000 Merrill Lynch Mortgage Trust,
Series 2005-MCP1, Class A2,
4.56%, 05/12/43.............. 1,317,568
4,014,000 Wells Fargo Home Equity Trust,
Series 2004-2, Class AI3,
3.97%, 09/25/24.............. 3,931,949
------------
17,787,376
------------
PRIVATE ASSET BACKED: OTHER -- 2.1%
2,164,000 CNH Equipment Trust, Series
2004-A, Class A4B,
3.48%, 09/15/11.............. 2,099,764
1,156,000 Countrywide Asset-Backed
Certificates, Series 2005-1,
Class AF3,
4.58%, 07/25/35.............. 1,141,154
2,330,00 John Deere Owner Trust, Series
2005-A, Class A4,
4.16%, 05/15/12.............. 2,288,100
------------
5,529,018
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: UTILITIES -- 0.7%
$ 1,571,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A8,
6.89%, 12/15/17.............. $ 1,792,086
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $40,995,605)........... 40,490,320
------------
SECURITIES LENDING COLLATERAL -- 23.0%
60,166,347 Securities Lending Collateral
Investment (Note 4) (Cost
$60,166,347)................. 60,166,347
------------
TOTAL SECURITIES
(Cost $266,734,256).......... 265,743,380
------------
REPURCHASE AGREEMENTS -- 12.0%
31,249,456 With Investors Bank and Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase proceeds
at maturity $31,262,720
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.68%, due 08/25/34, with a
value of $32,276,545 and
Government National Mortgage
Association, 4.38%, due
01/20/23, with a value of
$535,383) (Cost
$31,249,456)................. 31,249,456
------------
Total Investments -- 113.7%
(Cost $297,983,712).......... 296,992,836
Liabilities less other
assets -- (13.7)%............ (35,886,313)
------------
NET ASSETS -- 100.0%........... $261,106,523
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $298,509,992.
The following amount is based on cost for federal income tax purposes:
<Table>
Net unrealized depreciation............. $(1,517,156)
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
77
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US TREASURY SECURITIES -- 28.5%
US TREASURY BONDS -- 6.9%
$ 13,125,000 10.38%, 11/15/12(1)......... $ 14,509,281
5,210,000 8.13%, 08/15/19(1).......... 7,069,730
26,490,000 8.50%, 02/15/20(1) (2)...... 37,168,781
6,275,000 8.00%, 11/15/21............. 8,647,000
39,455,000 6.25%, 08/15/23(1).......... 47,127,182
12,095,000 6.75%, 08/15/26............. 15,492,945
7,500,000 5.50%, 08/15/28(d).......... 8,435,453
3,220,000 5.38%, 02/15/31(1).......... 3,617,973
--------------
142,068,345
--------------
US TREASURY INFLATION INDEX -- 1.5%
32,366,118 0.88%, 04/15/10............. 30,779,433
--------------
US TREASURY NOTES -- 20.1%
61,175,000 2.50%, 10/31/06(d).......... 60,250,218
27,975,000 3.88%, 07/31/07(1).......... 27,756,459
12,500,000 4.00%, 08/31/07(1).......... 12,420,900
43,705,000 4.00%, 09/30/07(1).......... 43,414,799
37,740,000 4.25%, 10/31/07(1).......... 37,641,234
55,400,000 4.25%, 11/30/07(1).......... 55,255,018
38,890,000 4.13%, 08/15/08............. 38,687,966
101,570,000 4.38%, 11/15/08(d).......... 101,617,637
34,290,000 4.50%, 11/15/15(1).......... 34,582,014
--------------
411,626,245
--------------
TOTAL US TREASURY SECURITIES
(Cost $585,861,826)....... 584,474,023
--------------
US GOVERNMENT AGENCY SECURITIES -- 39.8%
FANNIE MAE -- 19.6%
3,800,000 2.35%, 04/29/06............. 3,772,921
2,760,000 1.75%, 06/16/06............. 2,725,304
13,850,000 4.00%, 10/16/06............. 13,774,102
25,850,000 2.71%, 01/30/07............. 25,302,678
14,090,000 2.35%, 04/05/07............. 13,682,137
398,223 PL# 252571,
7.00%, 07/01/29........... 416,054
6,512 PL# 252716,
7.00%, 09/01/29........... 6,803
1,439 PL# 253264,
7.00%, 05/01/30........... 1,502
1,433 PL# 253346,
7.50%, 06/01/30........... 1,502
18,714 PL# 253479,
7.00%, 10/01/30........... 19,541
13,387 PL# 253698,
6.00%, 02/01/16........... 13,688
46,343 PL# 253990,
7.00%, 09/01/16........... 48,169
36,101 PL# 254008,
7.00%, 10/01/31........... 37,697
463,018 PL# 254346,
6.50%, 06/01/32........... 476,002
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 403,536 PL# 254406,
6.50%, 08/01/32........... $ 414,853
1,896 PL# 259141,
7.50%, 12/01/30........... 1,987
1,232,293 PL# 323842,
5.50%, 07/01/14........... 1,242,725
66,972 PL# 323967,
7.00%, 10/01/29........... 69,971
2,918,627 PL# 357327,
5.00%, 01/01/18........... 2,892,969
6,092 PL# 492742,
7.00%, 05/01/29........... 6,364
7,448 PL# 503916,
7.50%, 06/01/29........... 7,813
2,844 PL# 508415,
7.00%, 08/01/29........... 2,971
18,453 PL# 515946,
7.00%, 10/01/29........... 19,279
523 PL# 524164,
7.00%, 11/01/29........... 546
116,753 PL# 524657,
7.00%, 01/01/30........... 121,914
34,490 PL# 526053,
7.00%, 12/01/29........... 36,035
591 PL# 527717,
7.50%, 01/01/30........... 620
8,841 PL# 528107,
7.00%, 02/01/30........... 9,237
1,333 PL# 531092,
7.50%, 10/01/29........... 1,398
17,134 PL# 531497,
7.00%, 02/01/30........... 17,891
6,591 PL# 531735,
7.00%, 02/01/30........... 6,882
1,931 PL# 533841,
7.50%, 12/01/30........... 2,024
32,075 PL# 535030,
7.00%, 12/01/29........... 33,512
50,452 PL# 535103,
7.00%, 01/01/15........... 52,455
12,926 PL# 535159,
7.00%, 02/01/30........... 13,505
56,890 PL# 535195,
7.00%, 03/01/30........... 59,438
20,583 PL# 535277,
7.00%, 04/01/30........... 21,504
627,653 PL# 535675,
7.00%, 01/01/16........... 652,490
1,339 PL# 535722,
7.00%, 02/01/31........... 1,398
9,073 PL# 535723,
7.00%, 02/01/31........... 9,474
2,029 PL# 535811,
6.50%, 04/01/31........... 2,086
</Table>
See notes to financial statements.
78
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 142,388 PL# 535880,
7.00%, 02/01/31........... $ 148,713
3,266 PL# 540211,
7.50%, 06/01/30........... 3,424
6,065 PL# 542999,
7.50%, 08/01/30........... 6,358
142,736 PL# 545194,
7.00%, 08/01/31........... 149,047
46,746 PL# 545477,
7.00%, 03/01/32........... 48,797
317,605 PL# 545759,
6.50%, 07/01/32........... 326,512
1,228,058 PL# 545760,
6.50%, 07/01/32........... 1,262,497
233,291 PL# 545762,
6.50%, 07/01/32........... 239,833
46,262 PL# 545815,
7.00%, 07/01/32........... 48,307
68,705 PL# 548822,
7.00%, 08/01/30........... 71,743
50,642 PL# 549659,
7.00%, 02/01/16........... 52,637
16,643 PL# 549962,
7.00%, 10/01/30........... 17,379
51,097 PL# 549975,
7.00%, 10/01/30........... 53,356
9,734 PL# 550440,
7.00%, 02/01/16........... 10,117
360 PL# 550544,
7.50%, 09/01/30........... 377
64,353 PL# 554493,
7.00%, 10/01/30........... 67,198
352,470 PL# 555114,
5.50%, 12/01/17........... 355,016
43,784 PL# 555144,
7.00%, 10/01/32........... 45,720
559,912 PL# 555254,
6.50%, 01/01/33........... 575,723
320,702 PL# 555798,
6.50%, 05/01/33........... 329,759
1,636 PL# 558362,
7.50%, 11/01/30........... 1,715
718 PL# 558519,
7.50%, 11/01/30........... 753
11,535 PL# 559277,
7.00%, 10/01/30........... 12,045
45,688 PL# 559313,
7.00%, 12/01/30........... 47,708
2,386 PL# 559741,
7.50%, 01/01/31........... 2,501
33,471 PL# 560384,
7.00%, 11/01/30........... 34,951
1,476 PL# 560596,
7.50%, 01/01/31........... 1,547
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 2,907 PL# 561678,
7.50%, 12/01/30........... $ 3,048
1,516 PL# 564080,
7.50%, 12/01/30........... 1,590
26,796 PL# 564183,
7.00%, 12/01/30........... 27,981
1,939 PL# 564529,
7.50%, 12/01/30........... 2,032
21,140 PL# 566658,
7.00%, 02/01/31........... 22,074
56,596 PL# 574885,
6.00%, 05/01/16........... 57,872
6,515 PL# 575285,
7.50%, 03/01/31........... 6,827
10,883 PL# 577525,
6.00%, 05/01/16........... 11,129
10,105 PL# 579161,
6.50%, 04/01/31........... 10,390
212,353 PL# 579224,
6.00%, 04/01/16........... 217,138
26,741 PL# 580179,
7.00%, 10/01/16........... 27,794
714 PL# 580377,
7.50%, 04/01/31........... 748
9,841 PL# 584811,
7.00%, 05/01/31........... 10,276
199,902 PL# 585248,
7.00%, 06/01/31........... 208,740
50,861 PL# 589395,
6.00%, 07/01/16........... 52,008
1,152 PL# 589405,
7.50%, 06/01/31........... 1,208
10,446 PL# 589893,
7.00%, 06/01/31........... 10,908
4,761 PL# 592129,
7.50%, 06/01/31........... 4,989
11,758 PL# 596895,
6.50%, 07/01/31........... 12,090
124,925 PL# 596922,
6.00%, 08/01/16........... 127,740
28,413 PL# 598125,
7.00%, 09/01/16........... 29,533
55,143 PL# 600259,
6.00%, 08/01/16........... 56,386
11,082 PL# 606551,
6.50%, 10/01/31........... 11,395
6,175 PL# 606600,
7.00%, 10/01/31........... 6,448
66,684 PL# 607386,
5.50%, 11/01/16........... 67,194
22,739 PL# 610128,
7.00%, 10/01/31........... 23,745
284,775 PL# 610579,
5.50%, 12/01/16........... 286,952
</Table>
See notes to financial statements.
79
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 38,209 PL# 611323,
7.00%, 10/01/16........... $ 39,714
2,479,850 PL# 619054,
5.50%, 02/01/17........... 2,497,766
8,119 PL# 622119,
6.50%, 01/01/32........... 8,348
297,033 PL# 624035,
6.50%, 01/01/32........... 307,571
15,361 PL# 629236,
6.50%, 02/01/32........... 15,792
903,748 PL# 631321,
5.50%, 02/01/17........... 910,277
71,618 PL# 631606,
5.50%, 03/01/17........... 72,136
67,969 PL# 632269,
7.00%, 05/01/32........... 70,974
10,537 PL# 634563,
6.50%, 03/01/32........... 10,832
92,533 PL# 634949,
7.00%, 05/01/32........... 96,592
355,701 PL# 635164,
6.50%, 08/01/32........... 365,676
2,605 PL# 644932,
6.50%, 07/01/32........... 2,678
6,042 PL# 647556,
7.00%, 01/01/30........... 6,312
679,614 PL# 648795,
6.50%, 08/01/32........... 698,673
218,339 PL# 650206,
5.50%, 01/01/18........... 219,916
72,333 PL# 650291,
6.50%, 07/01/32........... 74,361
10,405 PL# 650872,
7.00%, 07/01/32........... 10,861
122,322 PL# 650891,
6.50%, 07/01/32........... 125,752
320,994 PL# 651649,
6.50%, 08/01/32........... 329,995
1,426,565 PL# 652127,
6.50%, 06/01/32........... 1,466,570
3,787 PL# 663353,
6.50%, 09/01/32........... 3,893
47,285 PL# 664188,
5.50%, 09/01/17........... 47,626
91,243 PL# 664194,
5.50%, 09/01/17........... 91,902
598,461 PL# 670402,
6.50%, 06/01/32........... 615,243
251,991 PL# 675314,
5.50%, 12/01/17........... 253,811
399,637 PL# 676800,
5.50%, 01/01/18........... 402,524
563,647 PL# 679631,
5.50%, 02/01/18........... 567,565
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 511,556 PL# 683199,
5.50%, 02/01/18........... $ 515,112
1,074,747 PL# 694200,
4.50%, 05/01/18........... 1,049,003
6,696 PL# 694372,
6.50%, 11/01/32........... 6,884
114,160 PL# 695925,
5.50%, 05/01/18........... 114,953
1,853,029 PL# 701161,
4.50%, 04/01/18........... 1,807,869
664,914 PL# 711636,
4.50%, 05/01/18........... 648,709
2,850,212 PL# 720317,
5.00%, 07/01/18........... 2,824,706
26,133,224 PL# 725027,
5.00%, 11/01/33........... 25,420,666
11,788,366 PL# 725162,
6.00%, 02/01/34........... 11,915,129
22,451,292 PL# 725206,
5.50%, 02/01/34........... 22,293,662
16,428 PL# 725269,
5.50%, 03/01/19........... 16,547
317,508 PL# 725407,
6.50%, 01/01/34........... 326,474
445,202 PL# 725418,
6.50%, 05/01/34........... 457,774
14,246,103 PL# 725946,
5.50%, 11/01/34........... 14,124,697
754,218 PL# 731682,
4.50%, 03/01/19........... 735,273
6,029,977 PL# 735454,
5.50%, 11/01/18........... 6,073,540
4,976,515 PL# 735494,
4.50%, 03/01/20........... 4,855,234
1,620,088 PL# 735611,
5.50%, 03/01/20........... 1,631,792
36,213,633 PL# 735989,
5.50%, 02/01/35........... 35,969,961
213,852 PL# 738632,
5.00%, 11/01/18........... 211,938
6,954,958 PL# 743575,
5.00%, 11/01/18........... 6,892,718
12,000,000 PL# 745140,
5.00%, 11/01/35........... 11,625,000
691,167 PL# 748257,
4.50%, 10/01/18........... 674,323
9,668 PL# 748655,
6.50%, 09/01/33........... 9,922
253,512 PL# 755813,
6.50%, 11/01/33........... 260,194
169,974 PL# 757687,
5.50%, 07/01/34........... 168,526
45,396 PL# 761808,
5.50%, 05/01/18........... 45,724
</Table>
See notes to financial statements.
80
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 664,356 PL# 766312,
5.50%, 03/01/19........... $ 668,914
717,384 PL# 766419,
4.50%, 03/01/19........... 699,364
295,565 PL# 768313,
5.50%, 01/01/19........... 297,620
264,556 PL# 774338,
6.50%, 02/01/34........... 271,528
263,693 PL# 789873,
6.50%, 09/01/34........... 270,608
8,541,300 PL# 806549, Variable Rate,
4.58%, 01/01/35(a)........ 8,449,368
1,693,523 PL# 844797,
4.50%, 10/01/35........... 1,595,440
2,084,277 PL# 844803,
4.50%, 10/01/35........... 1,963,562
68,600,000 TBA,
4.50%, 01/01/21........... 66,756,374
38,400,000 TBA,
5.00%, 01/01/21........... 37,991,999
31,800,000 TBA,
5.50%, 01/01/21........... 31,998,750
19,800,000 TBA,
4.50%, 01/01/36........... 18,649,125
2,200,000 TBA,
5.00%, 01/01/36........... 2,131,936
--------------
402,925,687
--------------
FREDDIE MAC -- 0.3%
6,878,783 PL# 1B2853, Variable Rate,
4.29%, 04/01/35(a)........ 6,745,570
--------------
FREDDIE MAC GOLD -- 14.7%
171,408 PL# A16148,
6.00%, 11/01/33........... 173,375
286,445 PL# A32037,
5.00%, 03/01/35........... 277,404
1,346,345 PL# A38585,
5.50%, 10/01/35........... 1,334,705
517,528 PL# B10307,
4.50%, 10/01/18........... 504,916
606,624 PL# B11431,
4.50%, 12/01/18........... 591,841
59,534 PL# B13285,
4.50%, 04/01/19........... 58,039
843,126 PL# B14218,
4.50%, 05/01/19........... 821,959
1,236,513 PL# B14518,
4.50%, 01/01/20........... 1,205,470
737,424 PL# B16484,
5.00%, 10/01/19........... 730,701
1,851,286 PL# B17118,
4.50%, 11/01/19........... 1,804,810
29,134 PL# B17892,
4.50%, 10/01/19........... 28,424
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 3,137,002 PL# B18144,
5.00%, 04/01/20........... $ 3,107,016
185,210 PL# B18433,
4.50%, 05/01/20........... 180,287
195,498 PL# B18493,
5.00%, 06/01/20........... 193,629
501,834 PL# B18530,
5.00%, 06/01/20........... 497,037
197,079 PL# B19022,
4.50%, 04/01/20........... 191,840
922,888 PL# B19028,
4.50%, 03/01/20........... 898,357
5,613,871 PL# B19043,
4.50%, 03/01/20........... 5,464,650
317,272 PL# B19101,
4.50%, 04/01/20........... 308,839
424,555 PL# B19108,
5.00%, 04/01/20........... 420,497
1,619,716 PL# B19138,
5.00%, 04/01/20........... 1,604,233
674,332 PL# B19177,
4.50%, 05/01/20........... 656,407
1,319,822 PL# B19187,
4.50%, 04/01/20........... 1,284,740
214,113 PL# B19188,
4.50%, 05/01/20........... 208,422
180,434 PL# B19234,
5.00%, 04/01/20........... 178,710
448,609 PL# B19238,
4.50%, 05/01/20........... 436,684
740,412 PL# B19272,
4.50%, 05/01/20........... 720,731
4,216,846 PL# B19621,
5.00%, 07/01/20........... 4,176,538
423,503 PL# B19727,
5.00%, 08/01/20........... 419,455
26,119 PL# B19932,
5.00%, 09/01/20........... 25,870
3,541,297 PL# B19933,
5.00%, 09/01/20........... 3,507,446
1,277,146 PL# C01271,
6.50%, 12/01/31........... 1,311,871
3,659,353 PL# C57150,
6.00%, 05/01/31........... 3,706,110
5,348 PL# C67653,
7.00%, 06/01/32........... 5,572
74,648 PL# C67868,
7.00%, 06/01/32........... 77,765
19,110 PL# C67999,
7.00%, 06/01/32........... 19,908
170,238 PL# C68001,
7.00%, 06/01/32........... 177,348
177,516 PL# C90229,
7.00%, 08/01/18........... 185,789
</Table>
See notes to financial statements.
81
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 28,572 PL# E00570,
6.00%, 09/01/13........... $ 29,165
610,903 PL# E00592,
6.00%, 12/01/13........... 623,609
28,925 PL# E00720,
6.00%, 07/01/14........... 29,532
27,365 PL# E01007,
6.00%, 08/01/16........... 27,944
88,880 PL# E01095,
6.00%, 01/01/17........... 90,759
447,513 PL# E01488,
5.00%, 10/01/18........... 443,852
521,418 PL# E01490,
5.00%, 11/01/18........... 517,142
36,467 PL# E01638,
4.00%, 04/01/19........... 34,878
40,905 PL# E69171,
6.00%, 02/01/13........... 41,756
33,068 PL# E73319,
6.00%, 11/01/13........... 33,756
48,027 PL# E73769,
6.00%, 12/01/13........... 49,026
26,594 PL# E75990,
6.00%, 04/01/14........... 27,144
36,404 PL# E76341,
6.00%, 04/01/14........... 37,174
63,255 PL# E76730,
6.00%, 05/01/14........... 64,593
43,808 PL# E76731,
6.00%, 05/01/14........... 44,735
41,826 PL# E78995,
6.00%, 11/01/14........... 42,711
318,582 PL# E84191,
6.00%, 07/01/16........... 325,314
5,968 PL# E84758,
5.50%, 07/01/16........... 6,013
24,468 PL# E85885,
6.00%, 11/01/16........... 24,985
349,486 PL# E86502,
5.50%, 12/01/16........... 352,070
5,927 PL# E86565,
5.50%, 12/01/16........... 5,971
272,888 PL# E87961,
6.00%, 02/01/17........... 278,654
522,310 PL# E88001,
6.00%, 02/01/17........... 533,315
57,451 PL# E88452,
6.00%, 03/01/17........... 58,661
347,024 PL# E88749,
6.00%, 03/01/17........... 354,357
805,963 PL# E88789,
6.00%, 04/01/17........... 822,945
182,684 PL# E88979,
5.50%, 04/01/17........... 183,946
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 472,474 PL# E89282,
6.00%, 04/01/17........... $ 482,430
824,805 PL# E89336,
6.00%, 05/01/17........... 842,184
31,252 PL# E89653,
6.00%, 04/01/17........... 31,912
603,932 PL# E89913,
6.00%, 05/01/17........... 616,657
1,060,926 PL# E91644,
5.50%, 10/01/17........... 1,068,253
294,324 PL# E91754,
5.50%, 10/01/17........... 296,357
434,981 PL# E91774,
5.50%, 10/01/17........... 437,985
190,896 PL# E91968,
5.50%, 10/01/17........... 192,214
386,297 PL# E92113,
5.50%, 10/01/17........... 388,965
29,361 PL# E95352,
4.50%, 04/01/18........... 28,645
63,332 PL# E98821,
4.50%, 09/01/18........... 61,789
1,874,349 PL# G01391,
7.00%, 04/01/32........... 1,953,266
12,362,632 PL# G01912,
5.00%, 09/01/35........... 11,972,436
22,490 PL# G11111,
6.00%, 04/01/16........... 22,965
139,187 PL# G11394,
4.50%, 05/01/18........... 135,796
8,538,821 PL# G11618,
4.50%, 05/01/18........... 8,334,023
513,224 PL# G11639,
4.50%, 12/01/19........... 500,339
3,803,943 PL# G11681,
5.00%, 04/01/20........... 3,769,262
10,336,084 PL# G11720,
4.50%, 08/01/20........... 10,076,595
484,552 PL# G11753,
5.00%, 08/01/20........... 479,920
15,998,410 PL# G11768,
5.00%, 10/01/20........... 15,845,484
16,248,451 PL# G11769,
5.00%, 10/01/20........... 16,093,135
8,660,642 PL# G11777,
5.00%, 10/01/20........... 8,577,856
237,511 PL# G18052,
4.50%, 05/01/20........... 231,198
2,037,740 PL# G18065,
5.00%, 07/01/20........... 2,018,262
8,999,994 PL# G18078,
5.00%, 10/01/20........... 8,913,964
2,014,674 PL# G18089,
5.00%, 12/01/20........... 1,995,416
</Table>
See notes to financial statements.
82
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 3,328,857 PL# J00006,
5.00%, 09/01/20........... $ 3,297,037
1,824,050 PL# J00147,
5.00%, 10/01/20........... 1,806,614
1,553,283 PL# J00151,
5.00%, 10/01/20........... 1,538,435
3,183,893 PL# J00154,
5.00%, 10/01/20........... 3,153,459
3,086,935 PL# J00156,
5.00%, 10/01/20........... 3,057,428
437,232 PL# J00159,
5.00%, 10/01/20........... 433,052
478,159 PL# J00328,
5.00%, 11/01/20........... 473,588
4,351,502 PL# J00331,
5.00%, 11/01/20........... 4,309,907
996,319 PL# J00395,
5.00%, 11/01/20........... 986,796
996,400 PL# J00409,
5.00%, 11/01/20........... 986,876
996,389 PL# J00415,
5.00%, 11/01/20........... 986,864
996,375 PL# J00438,
5.00%, 11/01/20........... 986,850
3,110,284 PL# J00466,
5.00%, 11/01/20........... 3,080,553
1,871,701 PL# J00469,
5.00%, 11/01/20........... 1,853,809
2,989,272 PL# J00488,
5.00%, 12/01/20........... 2,960,698
500,078 PL# J00604,
5.00%, 12/01/20........... 495,519
3,582,483 PL# J00611,
5.00%, 12/01/20........... 3,548,239
9,001,800 PL# J00630,
5.00%, 12/01/20........... 8,915,753
4,445,900 PL# J00638,
5.00%, 12/01/20........... 4,403,402
1,500,000 PL# J00696,
5.00%, 12/01/20........... 1,485,662
3,972,170 PL# J00697,
5.00%, 12/01/20........... 3,934,201
3,202,722 PL# J00724,
5.00%, 12/01/20........... 3,172,108
2,511,018 PL# J00726,
5.00%, 12/01/20........... 2,487,016
484,652 PL# J00728,
5.00%, 12/01/20........... 480,019
726,997 PL# J00731,
5.00%, 12/01/20........... 720,048
705,371 PL# J00733,
5.00%, 12/01/20........... 698,628
868,216 PL# J00734,
5.00%, 12/01/20........... 859,917
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 1,803,382 PL# J00806,
5.00%, 12/01/20........... $ 1,786,144
3,460,846 PL# J00807,
5.00%, 12/01/20........... 3,427,764
3,907,134 PL# J02239,
5.00%, 07/01/20........... 3,869,787
278,885 PL# J02294,
5.00%, 07/01/20........... 276,219
3,920,744 PL# J02590,
5.00%, 10/01/20........... 3,883,266
8,176,492 PL# J02616,
5.00%, 10/01/20........... 8,098,334
381,352 PL# J02621,
5.00%, 10/01/20........... 377,707
1,501,348 PL# J02728,
5.00%, 11/01/20........... 1,486,997
3,890,100 PL# M80813,
4.00%, 04/01/10........... 3,768,912
3,800,000 TBA,
5.50%, 01/01/21........... 3,822,564
55,900,000 TBA,
5.00%, 01/01/36........... 54,118,188
18,400,000 TBA,
5.50%, 01/01/36........... 18,233,259
500,000 TBA,
6.00%, 01/01/36........... 505,000
--------------
302,715,329
--------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.7%
168,716 PL# 3173,
6.50%, 12/20/31........... 175,183
1,092 PL# 434615,
7.00%, 11/15/29........... 1,147
214,572 PL# 435071,
7.00%, 03/15/31........... 225,346
44,427 PL# 462559,
7.00%, 02/15/28........... 46,705
27,326 PL# 493966,
7.00%, 06/15/29........... 28,712
65,328 PL# 494742,
7.00%, 04/15/29........... 68,641
1,821 PL# 530260,
7.00%, 02/15/31........... 1,912
236,164 PL# 531025,
6.00%, 04/15/32........... 242,177
1,024 PL# 538271,
7.00%, 11/15/31........... 1,075
108,722 PL# 538312,
6.00%, 02/15/32........... 111,490
220,700 PL# 543989,
7.00%, 03/15/31........... 231,782
1,400 PL# 547545,
7.00%, 04/15/31........... 1,471
475,801 PL# 550985,
7.00%, 10/15/31........... 499,692
</Table>
See notes to financial statements.
83
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 584 PL# 551549,
7.00%, 07/15/31........... $ 613
65,123 PL# 552413,
7.00%, 02/15/32........... 68,388
147,838 PL# 554808,
6.00%, 05/15/31........... 151,571
98,719 PL# 555360,
6.00%, 06/15/31........... 101,212
109,126 PL# 555733,
6.00%, 03/15/32........... 111,904
1,055 PL# 557664,
7.00%, 08/15/31........... 1,108
83,789 PL# 557678,
7.00%, 08/15/31........... 87,996
6,449 PL# 561050,
7.00%, 05/15/31........... 6,773
1,182 PL# 561996,
7.00%, 07/15/31........... 1,241
12,574 PL# 563346,
7.00%, 09/15/31........... 13,206
72,072 PL# 563599,
7.00%, 06/15/32........... 75,685
196,257 PL# 564086,
7.00%, 07/15/31........... 206,112
45,225 PL# 564300,
6.00%, 08/15/31........... 46,367
9,806 PL# 564706,
7.00%, 07/15/31........... 10,299
85,215 PL# 565808,
6.00%, 11/15/31........... 87,366
235,840 PL# 567622,
6.00%, 04/15/32........... 241,844
111,513 PL# 569567,
7.00%, 01/15/32........... 117,104
96,593 PL# 570517,
6.00%, 01/15/32........... 99,052
40,407 PL# 572821,
6.00%, 12/15/31........... 41,427
108,065 PL# 574873,
6.00%, 12/15/31........... 110,794
95,087 PL# 575906,
6.00%, 01/15/32........... 97,508
35,695 PL# 576323,
6.00%, 12/15/31........... 36,596
1,321 PL# 579377,
7.00%, 04/15/32........... 1,387
438,139 PL# 581015,
7.00%, 02/15/32........... 460,106
110,653 PL# 581070,
6.00%, 02/15/32........... 113,470
33,736 PL# 581084,
7.00%, 02/15/32........... 35,428
109,443 PL# 582956,
7.00%, 02/15/32........... 114,930
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 367,208 PL# 587122,
7.00%, 06/15/32........... $ 385,618
12,645 PL# 587494,
7.00%, 06/15/32........... 13,279
973 PL# 589696,
7.00%, 05/15/32........... 1,022
116,974 PL# 592030,
6.00%, 02/15/32........... 119,952
23,362 PL# 780802,
6.50%, 05/15/28........... 24,470
40,970 PL# 781113,
7.00%, 11/15/29........... 43,048
227,027 PL# 781148,
6.00%, 07/15/29........... 232,908
122,354 PL# 781276,
6.50%, 04/15/31........... 128,055
37,009 PL# 781287,
7.00%, 05/15/31........... 38,876
58,587 PL# 781324,
7.00%, 07/15/31........... 61,534
314,999 PL# 781328,
7.00%, 09/15/31........... 330,897
215,044 PL# 781330,
6.00%, 09/15/31........... 220,592
63,259 PL# 781496,
6.50%, 09/15/32........... 66,148
90,785 PL# 781548,
7.00%, 11/15/32........... 95,349
55,082 PL# 781584,
7.00%, 05/15/32........... 57,854
8,636,955 PL# 80916,
3.75%, 05/20/34........... 8,446,144
500,000 TBA,
6.00%, 01/01/36........... 511,720
--------------
14,852,286
--------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 4.1%
2,894,609 Fannie Mae, Series 1999-7,
Class AB,
6.00%, 03/25/29........... 2,945,901
8,956,387 Fannie Mae, Series 2003-35,
Class TE,
5.00%, 05/25/18........... 8,867,549
5,590,000 Fannie Mae, Series 2004-101,
Class AR,
5.50%, 01/25/35........... 5,641,192
7,101,616 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34........... 7,024,630
8,205,100 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34........... 8,246,203
7,377,410 Fannie Mae, Series 2005-51,
Class TA,
5.50%, 12/25/33........... 7,405,831
</Table>
See notes to financial statements.
84
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 5,622,656 Fannie Mae, Series 2005-57,
Class PA,
5.50%, 05/25/27........... $ 5,663,994
280,751 Fannie Mae, Series 2005-70,
Class NA,
5.50%, 08/25/35........... 282,783
11,103,469 Fannie Mae, Series 2005-80,
Class PB,
5.50%, 04/25/30........... 11,195,138
6,588,194 Freddie Mac, Series 2825,
Class VP,
5.50%, 06/15/15........... 6,668,424
4,816,169 Freddie Mac, Series 2877,
Class PA,
5.50%, 07/15/33........... 4,854,962
7,990,780 Freddie Mac, Series 2927,
Class BA,
5.50%, 10/15/33........... 8,063,768
6,904,395 Freddie Mac, Series 2996,
Class MK,
5.50%, 06/15/35........... 6,973,773
--------------
83,834,148
--------------
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES -- 0.3%
2,780,874 Small Business
Administration, Series
2002-P10B, Class I,
5.20%, 08/01/12........... 2,805,387
2,688,976 Small Business
Administration, Series
2004-P10A,
4.50%, 02/10/14........... 2,627,397
--------------
5,432,784
--------------
RESOLUTION FUNDING STRIPS -- 0.1%
1,200,000 Zero coupon, 07/15/18....... 664,293
1,200,000 Zero coupon, 10/15/18....... 655,954
--------------
1,320,247
--------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $820,752,902)....... 817,826,051
--------------
CORPORATE BONDS AND NOTES -- 40.4%
AEROSPACE AND DEFENSE -- 0.4%
320,000 B/E Aerospace,
8.50%, 10/01/10........... 343,200
1,250,000 Lockheed Martin Corp.,
8.50%, 12/01/29........... 1,708,834
545,000 Lockheed Martin Corp.,
7.20%, 05/01/36........... 660,701
2,390,000 Northrop Grumman Corp.,
4.08%, 11/16/06........... 2,372,037
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
AEROSPACE AND DEFENSE (CONTINUED)
$ 4,790,000 RC Trust I,
7.00%, 05/15/06........... $ 2,421,943
675,000 United Technologies Corp.,
8.88%, 11/15/19........... 903,936
--------------
8,410,651
--------------
AUTOMOBILE: RENTAL -- 0.0%
965,000 Hertz Corp. -- 144A,
8.88%, 01/01/14........... 987,919
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.1%
765,000 Daimler Chrysler AG Corp.,
7.45%, 03/01/27........... 832,492
280,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08........... 272,733
130,000 Navistar International
Corp.,
6.25%, 03/01/12........... 117,000
--------------
1,222,225
--------------
BANKS -- 4.4%
4,960,000 Bank of America Corp.,
4.50%, 08/01/10........... 4,879,132
1,250,000 Bank of Scotland -- 144A
(United Kingdom),
3.50%, 11/30/07........... 1,220,411
2,000,000 BankBoston NA, Series BKNT,
6.38%, 03/25/08........... 2,064,418
660,000 Barclays Bank PLC -- 144A
(United Kingdom), Variable
Rate,
6.86%, perpetual(a)....... 737,465
9,000,000 Depfa ACS Bank -- 144A
(Ireland),
4.25%, 08/16/10........... 8,796,321
3,850,000 Deutsche Bank AG New York,
Series YCD, Variable Rate,
3.84%, 03/15/07(a)........ 3,825,656
2,850,000 HBOS Treasury Services
PLC -- 144A (United
Kingdom),
3.75%, 09/30/08........... 2,775,954
11,200,000 HSBC Bank USA NA, Series CD,
3.87%, 06/07/07........... 11,040,411
1,990,000 HSBC Bank USA, Series BKNT,
3.88%, 09/15/09........... 1,920,322
1,155,000 Huntington National Bank,
Series BKNT,
2.75%, 10/16/06........... 1,136,240
2,600,000 JPMorgan Chase & Company,
5.35%, 03/01/07........... 2,610,917
1,495,000 JPMorgan Chase & Company,
3.63%, 05/01/08........... 1,454,894
2,100,000 JPMorgan Chase & Company,
5.75%, 10/15/08........... 2,141,744
</Table>
See notes to financial statements.
85
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 1,100,000 JPMorgan Chase & Company,
7.00%, 11/15/09(e)........ $ 1,177,789
1,135,000 RBS Capital Trust I,
Variable Rate,
4.71%, perpetual(a)....... 1,080,419
650,000 Royal Bank of Scotland Group
PLC (United Kingdom),
Variable Rate,
7.65%, perpetual(a)....... 787,431
2,475,000 Sumitomo Mitsui Banking --
144A (Japan), Variable
Rate, 5.63%,
perpetual(a).............. 2,470,322
2,990,000 SunTrust Banks, Inc.,
3.63%, 10/15/07........... 2,926,334
2,000,000 SunTrust Banks, Inc.,
4.00%, 10/15/08........... 1,955,558
1,535,000 SunTrust Banks, Inc., Series
CD,
4.42%, 06/15/09........... 1,514,090
2,275,000 Swedish Export Credit
(Sweden),
2.88%, 01/26/07........... 2,231,502
2,150,000 The Bank of New York
Company, Inc., Series
BKNT,
3.80%, 02/01/08........... 2,106,237
980,000 UBS Preferred Funding Trust
I, Variable Rate,
8.62%, perpetual(a)....... 1,122,136
490,000 US Bancorp, Series MTNN,
3.95%, 08/23/07........... 483,839
3,040,000 US Bank NA,
2.40%, 03/12/07........... 2,951,591
6,725,000 US Bank NA, Series BKNT,
4.40%, 08/15/08........... 6,661,402
1,165,000 Wachovia Bank NA, Series
BKNT,
4.38%, 08/15/08........... 1,152,507
2,340,000 Wachovia Corp.,
6.30%, 04/15/08........... 2,420,185
5,295,000 Wells Fargo & Company,
4.00%, 08/15/08........... 5,199,277
500,000 Wells Fargo & Company,
3.13%, 04/01/09........... 473,983
2,760,000 Wells Fargo & Company,
4.20%, 01/15/10........... 2,689,402
4,090,000 Wells Fargo & Company,
4.63%, 08/09/10........... 4,043,190
--------------
88,051,079
--------------
BROADCAST SERVICES/MEDIA -- 1.5%
1,065,000 British Sky Broadcasting
Group Financing
PLC -- 144A (United
Kingdom),
6.50%, 10/15/35........... 1,064,724
5,374,000 Comcast Cable Communications
Holdings,
8.38%, 03/15/13........... 6,228,879
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 1,800,000 Comcast Cable
Communications, Inc.,
6.75%, 01/30/11........... $ 1,907,894
965,000 Comcast Corp.,
7.05%, 03/15/33........... 1,045,079
3,800,000 Comcast Corp.,
6.50%, 11/15/35........... 3,885,279
465,000 Cox Communications, Inc.,
7.75%, 11/01/10........... 504,135
445,000 DIRECTV Holdings LLC/
DIRECTV Financing Company,
Inc.,
6.38%, 06/15/15........... 437,213
1,070,000 News America Holdings,
7.63%, 11/30/28........... 1,216,866
1,275,000 News America, Inc.,
7.30%, 04/30/28........... 1,402,898
545,000 News America, Inc.,
7.28%, 06/30/28........... 597,606
865,000 News America, Inc.,
6.20%, 12/15/34........... 862,075
2,750,000 News America, Inc. -- 144A,
6.40%, 12/15/35........... 2,781,078
650,000 TCI Communications, Inc.,
7.88%, 02/15/26........... 752,262
1,675,000 TCI Communications, Inc.,
7.13%, 02/15/28........... 1,803,955
725,000 Time Warner Entertainment,
8.38%, 07/15/33........... 858,956
1,910,000 Time Warner, Inc.,
7.57%, 02/01/24........... 2,088,625
2,760,000 Time Warner, Inc.,
6.95%, 01/15/28........... 2,867,668
280,000 Time Warner, Inc.,
7.63%, 04/15/31........... 312,746
--------------
30,617,938
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 0.0%
145,000 SunGard Data Systems,
Inc. -- 144A,
9.13%, 08/15/13........... 150,800
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.1%
915,000 K Hovnanian Enterprises,
Inc.,
6.25%, 01/15/15........... 865,688
765,000 K Hovnanian Enterprises,
Inc.,
6.25%, 01/15/16........... 713,612
335,000 Lennar Corp. -- Series B,
5.60%, 05/31/15........... 324,031
280,000 Pulte Homes, Inc.,
5.20%, 02/15/15........... 263,874
425,000 Pulte Homes, Inc.,
6.00%, 02/15/35........... 378,432
--------------
2,545,637
--------------
</Table>
See notes to financial statements.
86
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONTAINERS AND PACKAGING -- 0.0%
$ 370,000 Crown Americas,
Inc. -- 144A,
7.75%, 11/15/15........... $ 384,800
490,000 Owens-Brockway Glass
Container, Inc.,
6.75%, 12/01/14........... 477,750
--------------
862,550
--------------
ELECTRONICS -- 0.0%
200,000 L-3 Communications Corp. --
144A,
6.38%, 10/15/15........... 200,500
--------------
EQUIPMENT RENTAL AND LEASING -- 0.0%
225,000 United Rentals North
America, Inc.,
6.50%, 02/15/12(d)........ 220,219
--------------
FINANCIAL SERVICES -- 6.2%
390,000 American Real Estate
Partners, LP/Financing,
8.13%, 06/01/12........... 406,575
225,000 American Real Estate
Partners,
LP/Financing -- 144A,
7.13%, 02/15/13........... 226,125
25,000 BCP US Crystal Holdings
Corp.,
9.63%, 06/15/14........... 27,938
9,050,000 Citigroup, Inc.,
3.50%, 02/01/08........... 8,815,044
14,330,000 Citigroup, Inc.,
3.63%, 02/09/09........... 13,806,095
820,000 Citigroup, Inc.,
6.20%, 03/15/09........... 851,162
8,000,000 Citigroup, Inc.,
4.13%, 02/22/10........... 7,779,320
900,000 Citigroup, Inc.,
5.85%, 12/11/34........... 940,625
8,225,000 Eksportfinans ASA, Series
MTN (Norway),
3.38%, 01/15/08........... 8,024,507
22,305,000 General Electric Capital
Corp.,
5.00%, 11/15/11........... 22,355,030
1,220,000 General Electric Capital
Corp.,
6.50%, 09/28/15(r)........ 822,913
2,000,000 General Electric Capital
Corp., Series MTNA,
6.50%, 12/10/07........... 2,061,374
9,875,000 General Electric Capital
Corp., Series MTNA,
4.13%, 09/01/09........... 9,621,114
22,250,000 General Electric Capital
Corp., Series MTNA,
Variable Rate,
3.45%, 01/15/08(a)........ 22,091,402
450,000 HSBC Finance Corp.,
7.20%, 07/15/06........... 455,390
2,925,000 HSBC Finance Corp.,
6.50%, 11/15/08........... 3,046,244
10,450,000 Morgan Stanley,
5.05%, 01/21/11........... 10,464,630
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 425,000 Morgan Stanley,
6.75%, 04/15/11........... $ 458,033
350,000 Nationwide Building
Society -- 144A (United
Kingdom),
2.63%, 01/30/07........... 342,018
4,000,000 Nationwide Building
Society -- 144A (United
Kingdom),
3.50%, 07/31/07........... 3,920,588
355,000 Nationwide Building
Society -- 144A (United
Kingdom),
4.25%, 02/01/10........... 346,244
1,600,000 Prudential Financial, Inc.,
Series MTNC,
5.40%, 06/13/35........... 1,537,331
545,000 SLM Student Loan Trust,
Series MTN,
3.63%, 03/17/08........... 531,555
1,000,000 The Bear Stearns Companies,
Inc., Series MTNB,
4.55%, 06/23/10........... 982,257
2,475,000 TIAA Global Markets -- 144A,
3.88%, 01/22/08........... 2,428,220
1,955,000 USAA Capital Corp., Series
MTNB,
4.00%, 12/10/07........... 1,924,766
--------------
124,266,500
--------------
FOOD AND BEVERAGE -- 0.0%
285,000 Smithfield Foods, Inc,
7.00%, 08/01/11........... 292,125
--------------
FUNERAL SERVICES -- 0.0%
515,000 Service Corp. International,
7.70%, 04/15/09........... 543,325
--------------
INSURANCE -- 0.8%
2,775,000 Allstate Financial Global
Funding -- 144A,
6.15%, 02/01/06(e)........ 2,778,114
1,775,000 ASIF Global Financial
XXIII -- 144A,
3.90%, 10/22/08........... 1,728,122
2,000,000 Berkshire Hathaway Finance
Corp.,
3.40%, 07/02/07........... 1,958,060
2,850,000 Berkshire Hathaway Finance
Corp.,
3.38%, 10/15/08........... 2,747,853
2,815,000 Berkshire Hathaway Finance
Corp.,
4.13%, 01/15/10........... 2,737,937
2,085,000 Liberty Mutual
Group -- 144A,
6.50%, 03/15/35........... 2,040,731
1,280,000 MetLife, Inc.,
5.70%, 06/15/35........... 1,289,321
</Table>
See notes to financial statements.
87
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE (CONTINUED)
$ 1,145,000 Protective Life Secured
Trust, Series MTN,
3.70%, 11/24/08........... $ 1,111,978
--------------
16,392,116
--------------
LEISURE AND RECREATION -- 0.1%
290,000 K2, Inc.,
7.38%, 07/01/14........... 290,000
450,000 Mashantucket West Pequot --
144A,
5.91%, 09/01/21........... 450,757
1,235,000 MGM MIRAGE,
6.00%, 10/01/09........... 1,233,455
325,000 Mohegan Tribal Gaming
Authority,
6.13%, 02/15/13........... 320,938
185,000 Wynn Las Vegas LLC/Capital
Corp.,
6.63%, 12/01/14........... 180,838
--------------
2,475,988
--------------
MANUFACTURING -- 0.3%
395,000 Briggs & Stratton Corp.,
8.88%, 03/15/11........... 444,518
1,575,000 Tyco International Group SA
(Luxembourg),
6.38%, 10/15/11........... 1,637,756
2,980,000 Tyco International Group SA
(Luxembourg),
6.00%, 11/15/13........... 3,048,770
1,615,000 Tyco International Group SA
(Luxembourg),
7.00%, 06/15/28........... 1,781,860
--------------
6,912,904
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 0.2%
825,000 HCA, Inc.,
5.50%, 12/01/09........... 818,925
465,000 Omnicare, Inc.,
6.88%, 12/15/15........... 474,300
2,075,000 WellPoint, Inc.,
6.38%, 06/15/06........... 2,088,983
1,300,000 WellPoint, Inc.,
5.95%, 12/15/34........... 1,344,816
--------------
4,727,024
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
METALS AND MINING -- 0.2%
$ 85,000 International Steel Group,
6.50%, 04/15/14........... $ 85,425
1,999,000 Ispat Inland ULC (Canada),
9.75%, 04/01/14........... 2,273,863
1,425,000 Teck Cominco, Ltd. (Canada),
6.13%, 10/01/35........... 1,414,036
145,000 TriMas Corp.,
9.88%, 06/15/12........... 120,350
--------------
3,893,674
--------------
OIL AND GAS: PIPELINES -- 0.3%
50,000 ANR Pipeline Company,
9.63%, 11/01/21........... 61,333
10,000 ANR Pipeline Company,
7.38%, 02/15/24........... 10,331
1,425,000 Consolidated Natural Gas,
Series A,
5.00%, 03/01/14........... 1,394,951
1,020,000 Dynegy Holdings,
Inc. -- 144A,
10.13%, 07/15/13.......... 1,157,700
15,000 El Paso Corp. -- 144A,
7.42%, 02/15/37........... 14,325
365,000 El Paso Natural Gas,
8.63%, 01/15/22........... 415,951
15,000 El Paso Natural Gas,
8.38%, 06/15/32........... 17,017
25,000 El Paso Natural Gas, Series
A,
7.63%, 08/01/10........... 26,414
910,000 Northwest Pipeline Corp.,
8.13%, 03/01/10........... 969,150
60,000 Targa Resources,
Inc. -- 144A,
8.50%, 11/01/13........... 61,800
935,000 Transcontinental Gas Pipe
Line Corp., Series B,
8.88%, 07/15/12........... 1,075,250
480,000 Williams Companies, Inc.,
7.63%, 07/15/19........... 517,200
225,000 Williams Companies, Inc.,
7.75%, 06/15/31........... 238,500
--------------
5,959,922
--------------
OIL, COAL AND GAS -- 0.6%
1,150,000 Amerada Hess Corp.,
7.13%, 03/15/33........... 1,309,576
300,000 Chesapeake Energy Corp.,
7.50%, 06/15/14........... 319,500
705,000 Chesapeake Energy Corp.,
6.25%, 01/15/18........... 694,425
275,000 Chesapeake Energy Corp. --
144A,
6.88%, 11/15/20........... 279,813
270,000 Colorado Interstate Gas
Company -- 144A,
6.80%, 11/15/15........... 277,229
1,600,000 Devon Financing Corp. ULC,
7.88%, 09/30/31........... 2,039,491
</Table>
See notes to financial statements.
88
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$ 700,000 EnCana Corp. (Canada),
6.50%, 08/15/34........... $ 784,837
2,600,000 Enterprise Products
Operating LP,
4.95%, 06/01/10........... 2,552,047
1,225,000 Enterprise Products
Operating LP, Series B,
4.00%, 10/15/07........... 1,199,908
200,000 KCS Energy, Inc.,
7.13%, 04/01/12........... 200,500
1,790,000 Petro-Canada (Canada),
5.95%, 05/15/35........... 1,822,157
200,000 Suncor Energy, Inc.
(Canada),
5.95%, 12/01/34........... 212,309
--------------
11,691,792
--------------
PAPER AND FOREST PRODUCTS -- 0.0%
400,000 Catalyst Paper Corp., Series
D (Canada),
8.63%, 06/15/11........... 384,000
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.2%
170,000 Bio-Rad Laboratories, Inc.,
7.50%, 08/15/13........... 181,050
530,000 Bio-Rad Laboratories, Inc.,
6.13%, 12/15/14........... 526,025
1,100,000 Bristol-Myers Squibb,
6.88%, 08/01/97........... 1,254,441
2,675,000 Wyeth -- 144A,
6.00%, 02/15/36........... 2,764,399
--------------
4,725,915
--------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT -- 2.4%
16,200,000 Daimler Chrysler Auto Trust,
Series 2005-B, Class A3,
4.04%, 09/08/09........... 16,029,247
20,900,000 Ford Credit Auto Owner
Trust, Series 2005-A,
Class A3,
3.48%, 11/15/08........... 20,648,870
13,200,000 Ford Credit Auto Owner
Trust, Series 2005-B,
Class A3,
4.17%, 01/15/09........... 13,104,053
--------------
49,782,170
--------------
PRIVATE ASSET BACKED: BANKS -- 0.2%
4,536,973 Bank of America Alternative
Loan Trust, Series 2004-7,
Class 4A1,
5.00%, 08/25/19........... 4,467,503
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: CREDIT CARDS -- 3.2%
$ 14,000,000 American Express Credit
Account Master Trust,
Series 2005-3, Class A,
Floating Rate,
4.37%, 01/18/11(c)........ $ 14,008,070
12,075,000 Chase Issuance Trust, Series
2004-A9, Class A9,
3.22%, 06/15/10........... 11,757,611
14,950,000 Citibank Credit Card
Issuance Trust, Series
2004-A1, Class A1,
2.55%, 01/20/09........... 14,610,603
14,850,000 Citibank Credit Card
Issuance Trust, Series
2004-A4, Class A4,
3.20%, 08/24/09........... 14,476,525
11,500,000 MBNA Credit Card Master Note
Trust, Series 2003-A6,
Class A6,
2.75%, 10/15/10........... 10,985,902
--------------
65,838,711
--------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 3.8%
2,805,000 Greenwich Capital Commercial
Funding Corp., Series
2004-GG1, Class A4,
4.76%, 06/10/36........... 2,768,086
11,200,000 Greenwich Capital Commercial
Funding Corp., Series
2005-GG3, Class A3,
4.57%, 08/10/42........... 10,889,946
3,058,304 Morgan Stanley Capital I,
Series 1998-WF1, Class A2,
6.55%, 03/15/30........... 3,130,837
2,980,000 Morgan Stanley Capital I,
Series 1999-FNV1, Class
A2,
6.53%, 03/15/31........... 3,093,042
14,918,264 SLM Student Loan Trust,
Series 2004-9, Class A2,
Floating Rate,
4.22%, 10/25/12(b)........ 14,898,198
14,603,294 SLM Student Loan Trust,
Series 2005-5, Class A1,
Floating Rate,
4.20%, 01/25/18(b)........ 14,606,038
14,200,000 SLM Student Loan Trust,
Series 2005-6, Class A5B,
Floating Rate,
4.21%, 07/27/26(b)........ 14,209,040
14,030,000 Washington Mutual Asset
Securities Corp., -- 144A
Series 2005-C1A, Class A2,
5.15%, 05/25/36........... 14,029,682
--------------
77,624,869
--------------
</Table>
See notes to financial statements.
89
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 12.1%
$ 9,300,000 Banc of America Commercial
Mortgage, Inc., Series
2001-1, Class A2,
6.50%, 04/15/36........... $ 9,818,087
16,715,000 Banc of America Commercial
Mortgage, Inc., Series
2002-2, Class A3,
5.12%, 07/11/43........... 16,756,578
11,170,000 Banc of America Commercial
Mortgage, Inc., Series
2002-PB2, Class A4,
6.19%, 06/11/35........... 11,761,669
1,387,976 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2001, Class A1,
6.08%, 02/15/35........... 1,407,325
2,545,000 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2005-PWR8, Class
A4,
4.67%, 06/11/41........... 2,451,958
3,475,000 Chase Commercial Mortgage
Securities Corp., Series
2000-3, Class A2,
7.32%, 10/15/32........... 3,769,738
9,052,257 Commercial Mortgage
Acceptance Corp., Series
1998-C2, Class A2,
6.03%, 09/15/30........... 9,201,449
7,655,379 Countrywide Asset-Backed
Certificates, Series
2004-13, Class AV4,
Floating Rate,
4.67%, 06/25/35(c)........ 7,664,403
13,414,562 Countrywide Asset-Backed
Certificates, Series
2005-12, Class 2A1,
Floating Rate,
4.49%, 02/25/36(c)........ 13,423,362
14,900,000 Countrywide Asset-Backed
Certificates, Series
2005-BC5, Class 3A1,
Floating Rate,
4.48%, 01/25/36(c)........ 14,899,702
19,025,000 Countrywide Asset-Backed
Certificates, Series
2005-IM3, Class A1,
Floating Rate,
4.49%, 03/25/36(c)........ 19,021,575
4,875,000 DLJ Commercial Mortgage
Corp., Series 2000-CKP1,
Class A1B,
7.18%, 11/10/33........... 5,267,961
10,380,000 GE Capital Commercial
Mortgage Corp., Series
2002-1A, Class A3,
6.27%, 12/10/35........... 11,001,525
11,875,000 GE Capital Commercial
Mortgage Corp., Series
2002-2A, Class A3,
5.35%, 08/11/36........... 12,039,658
6,150,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33........... 6,490,206
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 6,980,046 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C3, Class A2,
7.18%, 08/15/36........... $ 7,401,058
8,700,000 GS Mortgage Securities Corp.
II, Series 2005-GG4, Class
A4A,
4.75%, 07/10/39........... 8,447,160
10,490,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-C1, Class A3,
5.86%, 10/12/35........... 10,862,454
6,650,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIB2, Class
A3,
6.43%, 04/15/35........... 7,045,295
9,475,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIBC, Class
A3,
6.26%, 03/15/33........... 9,969,135
9,350,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-CB12, Class
A4,
4.90%, 09/12/37........... 9,164,226
7,425,000 LB Commercial Conduit
Mortgage Trust, Series
1998-C4, Class A1B,
6.21%, 10/15/35........... 7,641,102
6,900,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C3,
Class A2,
7.95%, 05/15/25........... 7,594,180
6,830,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C4,
Class A2,
7.37%, 08/15/26........... 7,419,653
7,395,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C7,
Class A3,
4.56%, 09/15/27........... 7,225,849
9,100,000 LB-UBS Commercial Mortgage
Trust, Series 2004-C8,
Class A4,
4.51%, 12/15/29........... 8,837,336
9,099,504 Salomon Brothers Mortgage
Securities VII, Series
2001-C2, Class A3,
6.50%, 10/13/11........... 9,698,288
--------------
246,280,932
--------------
PRIVATE ASSET BACKED: OTHER -- 0.2%
5,435,464 Structured Asset Securities
Corp. -- 144A, Series
2003-AL2, Class A,
3.36%, 01/25/31........... 4,949,787
--------------
</Table>
See notes to financial statements.
90
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: UTILITIES -- 0.4%
$ 8,000,000 Peco Energy Transition
Trust, Series 2000-A,
Class A4,
7.65%, 03/01/10........... $ 8,738,575
--------------
REAL ESTATE -- 0.1%
1,252,000 EOP Operating LP,
7.50%, 04/19/29........... 1,414,913
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.3%
910,000 AvalonBay Communities,
Series MTN,
6.63%, 09/15/11........... 974,678
725,000 Rouse Company,
3.63%, 03/15/09........... 677,665
4,135,000 Rouse Company,
5.38%, 11/26/13........... 3,931,207
--------------
5,583,550
--------------
RETAIL -- 0.1%
430,000 Federated Department Stores,
Inc.,
6.79%, 07/15/27........... 453,328
395,000 May Department Stores
Company,
6.65%, 07/15/24........... 416,424
495,000 May Department Stores
Company,
7.88%, 03/01/30........... 592,075
295,000 May Department Stores
Company,
6.70%, 07/15/34........... 315,234
430,000 Movie Gallery,
11.00%, 05/01/12.......... 337,550
--------------
2,114,611
--------------
RETAIL: SUPERMARKETS -- 0.0%
770,000 Delhaize America, Inc.,
9.00%, 04/15/31........... 909,076
--------------
SEMICONDUCTORS -- 0.0%
245,000 Freescale Semiconductor,
Inc., Floating Rate,
6.90%, 07/15/09(b)........ 252,963
700,000 MagnaChip Semiconductor,
Ltd., Floating Rate,
7.74%, 12/15/11(b)........ 714,000
--------------
966,963
--------------
SPECIAL PURPOSE ENTITY -- 0.4%
355,222 AES Ironwood LLC,
8.86%, 11/30/25........... 394,296
2,150,000 Atlantic Marine,
Inc. -- 144A,
5.34%, 12/01/50........... 2,086,081
2,875,000 Belvoir Land LLC -- 144A,
5.40%, 12/15/47........... 2,794,241
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY (CONTINUED)
$ 1,000,000 California Preferred Fund
Trust, 7.00%, perpetual... $ 1,034,370
1,600,000 New York Life Global
Funding -- 144A,
3.88%, 01/15/09........... 1,554,509
--------------
7,863,497
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.9%
625,000 America Movil SA de CV
(Mexico),
6.38%, 03/01/35........... 619,563
810,000 Cincinnati Bell, Inc.,
7.25%, 07/15/13........... 846,450
290,000 France Telecom (France),
8.50%, 03/01/31........... 388,112
405,000 Intelsat Bermuda,
Ltd. -- 144A (Bermuda),
Floating Rate,
8.70%, 01/15/12(i)........ 413,606
2,350,000 New England Telephone &
Telegraph,
7.88%, 11/15/29........... 2,624,570
970,000 New Jersey Bell Telephone,
7.85%, 11/15/29........... 1,092,891
860,000 Qwest Corp.,
7.88%, 09/01/11........... 930,950
400,000 Qwest Corp.,
8.88%, 03/15/12........... 453,000
675,000 Qwest Corp. -- 144A,
Floating Rate,
7.74%, 06/15/13(b)........ 731,531
50,000 Rogers Wireless, Inc.
(Canada),
7.25%, 12/15/12........... 52,813
990,000 Rogers Wireless, Inc.
(Canada),
7.50%, 03/15/15........... 1,074,150
1,015,000 SBC Communications, Inc.,
6.45%, 06/15/34........... 1,059,688
190,000 SBC Communications, Inc.,
6.15%, 09/15/34........... 191,491
1,660,000 Sprint Capital Corp.,
8.75%, 03/15/32........... 2,209,624
1,105,000 Telecom Italia Capital
(Luxembourg),
6.00%, 09/30/34........... 1,068,070
850,000 Telefonica Europe BV (the
Netherlands),
7.75%, 09/15/10........... 931,685
215,000 Verizon Maryland, Inc.,
Series B,
5.13%, 06/15/33........... 181,194
1,470,000 Vodafone Group PLC (United
Kingdom),
5.00%, 12/16/13........... 1,446,232
2,225,000 Vodafone Group PLC (United
Kingdom),
5.00%, 09/15/15........... 2,171,275
</Table>
See notes to financial statements.
91
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 890,000 Wind Acquisition Finance
SA -- 144A (Luxembourg),
10.75%, 12/01/15.......... $ 923,375
--------------
19,410,270
--------------
TRANSPORTATION -- 0.1%
375,000 Burlington Northern Santa Fe
Corp.,
7.29%, 06/01/36........... 462,020
765,000 Canadian National Railway
Company (Canada),
6.90%, 07/15/28........... 913,389
265,000 OMI Corp. (Marshall
Islands),
7.63%, 12/01/13........... 269,969
560,000 Overseas Shipholding Group,
7.50%, 02/15/24........... 557,200
--------------
2,202,578
--------------
UTILITIES -- 0.8%
2,735,000 Centerpoint Energy, Inc.,
Series B,
7.25%, 09/01/10........... 2,936,845
375,000 Dominion Resources, Inc.,
5.95%, 06/15/35........... 367,284
591,847 Elwood Energy LLC,
8.16%, 07/05/26........... 639,847
275,000 FirstEnergy Corp., Series C,
7.38%, 11/15/31........... 325,512
1,000,000 Florida Power & Light,
5.63%, 04/01/34........... 1,011,825
131,600 Homer City Funding LLC,
8.14%, 10/01/19........... 145,418
84,091 Homer City Funding LLC,
8.73%, 10/01/26........... 98,386
195,000 Midwest Generation LLC,
8.75%, 05/01/34........... 215,719
610,264 Midwest Generation LLC,
Series B,
8.56%, 01/02/16........... 664,044
570,000 Mirant North America
LLC -- 144A,
7.38%, 12/31/13........... 579,263
350,000 NorthWestern Corp.,
5.88%, 11/01/14........... 352,408
470,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10.......... 533,450
1,940,000 Progress Energy, Inc.,
7.75%, 03/01/31........... 2,334,214
55,000 Reliant Energy, Inc.,
9.25%, 07/15/10........... 55,275
825,000 Reliant Energy, Inc.,
6.75%, 12/15/14........... 723,938
300,000 SP PowerAssets, Ltd. -- 144A
(Singapore),
5.00%, 10/22/13........... 300,246
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES (CONTINUED)
$ 493,338 Tenaska Alabama II Partners,
LP -- 144A,
7.00%, 06/30/21........... $ 498,782
5,325,000 TXU Corp., Series O,
4.80%, 11/15/09........... 5,148,592
--------------
16,931,048
--------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $845,653,202)......... 830,613,856
--------------
FOREIGN GOVERNMENT OBLIGATIONS -- 2.2%
9,700,000 AID-Israel (Israel),
5.50%, 09/18/23........... 10,477,571
2,275,000 Bundesrepublic Deutschland,
Series 03 (Germany),
4.75%, 07/04/34(o)........ 3,246,718
9,300,000 Bundesrepublic Deutschland,
Series 05 (Germany),
4.00%, 01/04/37(o)........ 11,878,617
8,335,000 Mexican Fixed Rate Bonds,
Series M (Mexico),
9.00%, 12/22/11(q)........ 818,135
29,265,000 Mexican Fixed Rate Bonds,
Series MI10 (Mexico),
8.00%, 12/19/13(q)........ 2,717,730
8,295,000 Mexican Fixed Rate Bonds,
Series MI10 (Mexico),
9.50%, 12/18/14(q)........ 840,851
2,930,000 Province of Manitoba
(Canada),
6.38%, 09/01/15(r)........ 1,984,945
5,790,000 Province of Ontario, Series
GMTN (Canada),
6.25%, 06/16/15(r)........ 3,914,710
2,050,000 Quebec Province (Canada),
6.75%, 11/09/15(r)........ 1,414,261
4,045,000 United Mexican States
(Mexico),
8.13%, 12/30/19........... 4,975,350
2,385,000 United Mexican States,
Series MTNA (Mexico),
8.00%, 09/24/22........... 2,948,456
--------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $43,308,693).......... 45,217,344
--------------
SHORT TERM CORPORATE NOTES -- 0.6%
4,760,000 BellSouth Corp. -- 144A,
Variable Rate,
4.26%, 04/26/06(a)........ 4,767,019
7,750,000 SBC Communications,
Inc. -- 144A,
4.39%, 06/05/06........... 7,761,857
--------------
TOTAL SHORT TERM CORPORATE NOTES
(Cost $12,528,876).......... 12,528,876
--------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 7.4%
FANNIE MAE -- 3.7%
75,000,000 4.17%, 01/03/06............. 74,973,938
--------------
</Table>
See notes to financial statements.
92
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SHORT TERM US GOVERNMENT AGENCY SECURITIES
(CONTINUED)
FREDDIE MAC -- 3.7%
$ 76,600,000 3.50%, 01/03/06............. $ 76,577,658
--------------
TOTAL SHORT TERM US GOVERNMENT AGENCY
SECURITIES
(Cost $151,551,596)......... 151,551,596
--------------
SECURITIES LENDING COLLATERAL -- 10.1%
208,030,600 Securities Lending
Collateral Investment
(Note 4)
(Cost $208,030,600)....... 208,030,600
--------------
TOTAL SECURITIES
(Cost $2,667,687,695)..... 2,650,242,346
--------------
REPURCHASE AGREEMENTS -- 1.0%
20,000,000 With Investors Bank and
Trust, dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $20,008,489
(Collateralized by Freddie
Mac, 4.97%,
due 12/15/32, with a value
of $21,000,000) (Cost
$20,000,000).............. 20,000,000
--------------
TOTAL INVESTMENTS BEFORE
CALL OPTIONS WRITTEN, PUT
OPTIONS WRITTEN AND
SECURITIES SOLD
SHORT -- 130.0%
(Cost $2,687,687,695)..... 2,670,242,346
--------------
<Caption>
CONTRACTS
---------
CALL OPTIONS WRITTEN -- (0.0)%
(172) US Treasury Note (10 Year)
March Future, Expiring
March 2006 @ 111,
6.00%, 02/24/06
(Premium $98,503)......... (43,000)
--------------
PUT OPTIONS WRITTEN -- (0.0)%
(172) US Treasury Note (10 Year)
March Future, Expiring
March 2006 @ 107,
6.00%, 02/24/06
(Premium $87,812)......... (26,875)
--------------
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES SOLD SHORT -- (8.1)%
$ (7,000,000) Fannie Mae, TBA,
5.50%, 01/12/06........... $ (7,181,566)
(46,300,000) Fannie Mae, TBA,
6.00%, 01/12/06........... (45,851,446)
(23,600,000) Fannie Mae, TBA,
6.00%, 01/12/06........... (22,869,863)
(10,200,000) Fannie Mae, TBA,
6.50%, 01/12/06........... (10,295,625)
(4,300,000) Freddie Mac Gold, TBA,
6.00%, 01/12/06........... (4,343,000)
(68,200,000) Freddie Mac Gold, TBA,
4.50%, 01/18/06........... (67,518,000)
(6,600,000) Freddie Mac Gold, TBA,
5.00%, 01/18/06........... (6,422,625)
(2,600,000) Government National Mortgage
Association, TBA,
6.00%, 01/23/06........... (2,660,939)
--------------
TOTAL SECURITIES SOLD SHORT
(Proceeds $166,575,457)... (167,143,064)
--------------
Total Investments net of
Call Options Written,
Put Options Written and
Securities Sold
Short -- 121.9%
(Cost $2,520,925,923)..... 2,503,029,407
Liabilities less other
assets -- (21.9)%......... (450,136,372)
--------------
NET ASSETS -- 100.0%........ $2,052,893,035
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $2,521,104,118.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 8,628,825
Gross unrealized depreciation.......... (26,703,536)
------------
Net unrealized depreciation............ $(18,074,711)
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
93
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 29.1%
US TREASURY BONDS -- 1.9%
$ 250,000 8.00%, 11/15/21................ $ 344,502
550,000 6.13%, 11/15/27(2)............. 663,868
270,000 5.38%, 02/15/31................ 303,370
------------
1,311,740
------------
US TREASURY INFLATION INDEX -- 4.4%
262,840 0.88%, 04/15/10................ 249,955
855,342 1.63%, 01/15/15................ 824,302
737,266 1.88%, 07/15/15................ 725,286
1,056,650 2.38%, 01/15/25................ 1,110,887
109,041 3.88%, 04/15/29................ 147,172
------------
3,057,602
------------
US TREASURY NOTES -- 22.0%
130,000 4.00%, 08/31/07................ 129,177
3,380,000 3.38%, 02/15/08................ 3,311,477
3,950,000 3.75%, 05/15/08................ 3,895,071
4,010,000 3.88%, 05/15/10................ 3,935,286
4,000,000 4.50%, 11/15/10................ 4,022,816
120,000 3.88%, 02/15/13................ 116,349
20,000 4.50%, 11/15/15................ 20,170
------------
15,430,346
------------
US TREASURY STRIPS -- 0.8%
1,310,000 Zero coupon, 11/15/27.......... 481,434
270,000 Zero coupon, 05/15/30.......... 89,345
------------
570,779
------------
TOTAL US TREASURY SECURITIES
(Cost $20,415,212)........... 20,370,467
------------
US GOVERNMENT AGENCY SECURITIES -- 37.3%
FANNIE MAE -- 26.7%
400,000 Floating Rate,
4.38%, 09/22/06(b)........... 399,990
622,205 PL# 735809, Variable Rate,
4.52%, 08/01/35(a)........... 614,839
72,970 PL# 801516, Variable Rate,
4.72%, 08/01/34(a)........... 72,457
154,748 PL# 810896, Variable Rate,
4.88%, 01/01/35(a)........... 154,831
363,041 PL# 821150, Variable Rate,
4.59%, 04/01/35(a)........... 358,531
800,000 TBA,
5.00%, 01/01/21.............. 791,500
500,000 TBA,
5.50%, 01/01/21.............. 503,125
300,000 TBA,
4.50%, 01/01/36.............. 282,563
9,200,000 TBA,
5.00%, 01/01/36.............. 8,915,370
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 4,200,000 TBA,
5.50%, 01/01/36.............. $ 4,159,310
2,400,000 TBA,
6.00%, 01/01/36.............. 2,422,500
------------
18,675,016
------------
FEDERAL AGRICULTURAL MORTGAGE CORP. -- 0.1%
80,000 4.25%, 07/29/08................ 79,109
------------
FREDDIE MAC -- 1.6%
430,000 4.38%, 11/16/07................ 427,333
720,000 4.75%, 01/18/11................ 720,425
------------
1,147,758
------------
FREDDIE MAC GOLD -- 0.8%
300,000 TBA,
5.00%, 01/01/21.............. 297,000
300,000 TBA,
5.00%, 01/01/36.............. 290,438
------------
587,438
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 7.3%
1,997,553 PL# 644631,
5.00%, 09/15/35.............. 1,973,208
2,590,000 TBA,
5.00%, 01/01/36.............. 2,556,006
600,000 TBA,
5.50%, 01/01/36.............. 603,750
------------
5,132,964
------------
TENNESSEE VALLEY AUTHORITY -- 0.8%
470,000 5.88%, 04/01/36................ 535,959
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$26,006,139)................. 26,158,244
------------
CORPORATE BONDS AND NOTES -- 41.0%
AUTOMOBILE: RENTAL -- 0.0%
15,000 Hertz Corp. -- 144A,
8.88%, 01/01/14.............. 15,356
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.8%
160,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08.............. 155,847
200,000 Ford Motor Company,
7.45%, 07/16/31.............. 137,000
440,000 General Motors Corp.,
8.25%, 07/15/23.............. 284,900
------------
577,747
------------
BANKS -- 1.0%
90,000 Bank of America Corp.,
3.88%, 01/15/08.............. 88,393
140,000 Bank of America Corp.,
4.50%, 08/01/10.............. 137,717
</Table>
See notes to financial statements.
94
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 10,000 Rabobank Capital Funding Trust
II -- 144A, Variable Rate,
5.26%, perpetual(a).......... $ 9,923
20,000 Rabobank Capital Funding Trust
III -- 144A,
Variable Rate,
5.25%, perpetual(a).......... 19,650
240,000 Wachovia Corp.,
5.25%, 08/01/14.............. 240,730
230,000 Wells Fargo & Company,
4.20%, 01/15/10.............. 224,117
------------
720,530
------------
BROADCAST SERVICES/MEDIA -- 1.5%
10,000 Clear Channel Communications,
Inc.,
4.63%, 01/15/08.............. 9,868
290,000 Clear Channel Communications,
Inc.,
5.50%, 09/15/14.............. 277,967
50,000 Clear Channel Communications,
Inc.,
4.90%, 05/15/15.............. 45,296
170,000 Comcast Corp.,
6.50%, 01/15/15.............. 179,970
80,000 Cox Communications, Inc.,
3.88%, 10/01/08.............. 77,145
100,000 Liberty Media Corp.,
7.88%, 07/15/09.............. 105,871
50,000 Time Warner Entertainment,
8.38%, 07/15/33.............. 59,238
160,000 Time Warner, Inc.,
6.88%, 05/01/12.............. 170,536
140,000 Time Warner, Inc.,
7.70%, 05/01/32.............. 157,926
------------
1,083,817
------------
CONSUMER GOODS AND SERVICES -- 0.7%
180,000 Altria Group, Inc.,
7.00%, 11/04/13.............. 197,263
270,000 Eastman Kodak Company,
Series MTNA,
6.38%, 06/15/06.............. 271,630
------------
468,893
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.2%
120,000 Waste Management, Inc.,
6.38%, 11/15/12.............. 128,022
------------
FINANCIAL SERVICES -- 5.8%
90,000 Aiful Corp. -- 144A (Japan),
5.00%, 08/10/10.............. 88,935
250,000 Citigroup, Inc.,
4.13%, 02/22/10.............. 243,104
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 340,000 Countrywide Financial Corp.,
Series MTNA,
4.50%, 06/15/10.............. $ 330,359
50,000 Credit Suisse First Boston USA,
Inc.,
4.88%, 08/15/10.............. 49,667
790,000 Ford Motor Credit Company,
7.38%, 10/28/09.............. 701,199
250,000 General Electric Capital Corp.,
Series MTNA,
4.25%, 01/15/08.............. 247,212
70,000 General Motors Acceptance
Corp.,
6.13%, 08/28/07.............. 64,913
350,000 General Motors Acceptance
Corp.,
5.63%, 05/15/09.............. 311,622
30,000 General Motors Acceptance
Corp., Series GM,
6.31%, 11/30/07.............. 27,154
600,000 General Motors Acceptance
Corp., Series MTN, Floating
Rate,
5.05%, 01/16/07(b)........... 570,224
250,000 HSBC Finance Corp.,
4.63%, 01/15/08.............. 248,471
220,000 JPMorgan Chase & Company,
5.13%, 09/15/14.............. 218,158
130,000 JPMorgan Chase & Company,
5.15%, 10/01/15.............. 128,399
310,000 Lehman Brothers E-Capital Trust
I -- 144A, Floating Rate,
5.15%, 08/19/65(b)........... 311,146
130,000 Lehman Brothers Holdings, Inc.,
4.00%, 01/22/08.............. 127,909
80,000 Lehman Brothers Holdings, Inc.,
4.50%, 07/26/10.............. 78,402
200,000 Morgan Stanley,
3.63%, 04/01/08.............. 194,946
130,000 The Goldman Sachs Group, Inc.,
4.50%, 06/15/10.............. 127,169
------------
4,068,989
------------
FOOD AND BEVERAGE -- 0.3%
140,000 Anheuser-Busch Companies, Inc.,
4.95%, 01/15/14.............. 140,044
60,000 Kraft Foods, Inc.,
5.63%, 11/01/11.............. 61,636
------------
201,680
------------
INSURANCE -- 0.0%
30,000 ASIF Global Financing
XIX -- 144A,
4.90%, 01/17/13.............. 29,894
------------
LEISURE AND RECREATION -- 0.0%
10,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 9,950
------------
</Table>
See notes to financial statements.
95
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MANUFACTURING -- 0.5%
$ 120,000 Tyco International Group SA
(Luxembourg),
6.38%, 10/15/11.............. $ 124,781
240,000 Tyco International Group SA
(Luxembourg),
6.00%, 11/15/13.............. 245,539
------------
370,320
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 0.3%
160,000 HCA, Inc.,
6.75%, 07/15/13.............. 165,774
20,000 HCA, Inc.,
5.75%, 03/15/14.............. 19,494
------------
185,268
------------
OIL AND GAS: PIPELINES -- 0.6%
50,000 El Paso Corp., Series MTN,
7.80%, 08/01/31.............. 50,125
100,000 El Paso Corp., Series MTN,
7.75%, 01/15/32.............. 100,750
110,000 El Paso Natural Gas,
8.38%, 06/15/32.............. 124,788
170,000 Williams Companies, Inc.,
Series A,
7.50%, 01/15/31.............. 176,800
------------
452,463
------------
OIL, COAL AND GAS -- 2.2%
110,000 Amerada Hess Corp.,
7.30%, 08/15/31.............. 127,699
100,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31.............. 122,947
150,000 Apache Finance Canada (Canada),
4.38%, 05/15/15.............. 144,190
150,000 ChevronTexaco Capital Company
(Canada),
3.50%, 09/17/07.............. 147,004
230,000 Conoco, Inc.,
6.95%, 04/15/29.............. 278,459
50,000 Devon Energy Corp.,
7.95%, 04/15/32.............. 64,688
310,000 Kerr-McGee Corp.,
7.88%, 09/15/31.............. 369,412
120,000 Pemex Project Funding Master
Trust,
7.38%, 12/15/14.............. 133,620
20,000 Western Oil Sands, Inc.
(Canada),
8.38%, 05/01/12.............. 22,575
120,000 XTO Energy, Inc.,
6.25%, 04/15/13.............. 127,365
------------
1,537,959
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PAPER AND FOREST PRODUCTS -- 0.4%
$ 25,000 International Paper Company,
5.50%, 01/15/14.............. $ 24,610
210,000 Weyerhaeuser Company,
6.75%, 03/15/12.............. 223,174
------------
247,784
------------
PRINTING AND PUBLISHING -- 0.0%
10,000 Reader's Digest Association,
Inc.,
6.50%, 03/01/11.............. 9,825
------------
PRIVATE ASSET BACKED: BANKS -- 1.7%
587,197 Washington Mutual Bank,
Series 2005-AR13, Class A1A1,
Floating Rate,
4.67%, 10/25/45(c)........... 586,443
593,498 Washington Mutual Bank, Series
2005-AR15, Class A1A2,
Floating Rate,
4.66%, 11/25/45(c)........... 592,454
------------
1,178,897
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 1.5%
578,959 Lehman XS Trust, Series
2005-5N, Class 1A1, Floating
Rate,
4.68%, 11/25/35(c)........... 578,670
329,310 Lehman XS Trust, Series
2005-7N, Class 1A1B, Floating
Rate,
4.68%, 12/25/35(c)........... 329,247
140,000 Morgan Stanley Capital I,
Series 2005-HQ6, Class A4A,
4.99%, 08/13/42.............. 138,167
------------
1,046,084
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 20.9%
564,841 Accredited Mortgage Loan Trust,
Series 2005-3, Class A1,
Floating Rate,
4.62%, 09/25/35(c)........... 565,304
396,327 Adjustable Rate Mortgage Trust,
Series 2004-2, Class 7A2,
Floating Rate,
4.80%, 02/25/35(c)........... 397,399
417,347 Adjustable Rate Mortgage Trust,
Series 2004-5, Class 7A2,
Floating Rate,
4.76%, 04/25/35(c)........... 414,092
589,084 American Home Mortgage
Investment Trust, Series
2005-4, Class 1A1, Floating
Rate,
4.67%, 11/25/45(c)........... 587,741
400,000 Banc of America Commercial
Mortgage, Inc., Series
2005-3, Class A4,
4.67%, 07/10/43.............. 385,718
407,554 Banc of America Mortgage
Securities, Series 2005-A,
Class 2A1, Floating Rate,
4.47%, 02/25/35(c)........... 400,706
</Table>
See notes to financial statements.
96
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 133,270 Chevy Chase Mortgage Funding
Corp. -- 144A, Series
2003-2AT, Class A1, Floating
Rate,
4.76%, 05/25/34(c)........... $ 133,553
615,088 Countrywide Alternative Loan
Trust, Series 2005-36, Class
3A1, Floating Rate,
5.03%, 08/25/35(c)........... 609,584
397,845 Countrywide Alternative Loan
Trust, Series 2005-44, Class
1A1, Floating Rate,
4.71%, 10/25/35(c)........... 397,793
597,915 Countrywide Alternative Loan
Trust, Series 2005-59, Class
1A1, Floating Rate,
4.70%, 11/20/35(c)........... 599,003
601,386 Countrywide Alternative Loan
Trust, Series 2005-J12, Class
2A1, Floating Rate,
4.65%, 08/25/35(c)........... 601,309
477,104 Countrywide Asset-Backed
Certificates, Series 2005-11,
Class AF1, Floating Rate,
4.56%, 02/25/36(c)........... 477,501
130,000 Countrywide Asset-Backed
Certificates, Series 2005-4,
Class AF3,
4.46%, 10/25/35.............. 127,701
538,903 Countrywide Home Equity Loan
Trust, Series 2005-G, Class
2A, Floating Rate,
4.60%, 12/15/35(c)........... 539,240
552,727 Countrywide Home Loans, Series
2004-23, Class A, Floating
Rate,
6.08%, 11/25/34(c)........... 564,279
562,722 Countrywide Home Loans, Series
2005-R3, Class AF, Floating
Rate,
4.78%, 09/25/35(c)........... 562,722
528,005 First Franklin Mortgage Loan
Asset Backed Certificates,
Series 2004-FF10, Class A2,
Floating Rate,
4.78%, 12/25/32(c)........... 529,645
595,011 GMAC Mortgage Corp. Loan Trust,
Series 2003-AR2, Class 1A1,
Floating Rate,
3.60%, 12/19/33(c)........... 589,953
427,029 GMAC Mortgage Corp. Loan Trust,
Series 2005-AR1, Class 3A,
Floating Rate,
4.67%, 03/18/35(c)........... 420,166
200,000 GS Mortgage Securities Corp.
II, Series 2005-GG4, Class
AABA,
4.68%, 07/10/39.............. 194,933
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 306,279 Impac CMB Trust, Series
2003-10, Class 1A1, Floating
Rate,
4.73%, 10/25/33(c)........... $ 306,474
470,342 Impac CMB Trust, Series 2004-2,
Class A1, Floating Rate,
4.64%, 04/25/34(c)........... 471,339
493,665 Impac CMB Trust, Series 2004-6,
Class 1A1, Floating Rate,
4.78%, 10/25/34(c)........... 497,398
439,465 JPMorgan Mortgage Trust, Series
2004-A3, Class 1A1, Floating
Rate,
4.33%, 07/25/34(c)........... 431,932
100,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C3, Class
A5,
4.74%, 07/15/30.............. 97,053
100,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C3, Class
AAB,
4.66%, 07/15/30.............. 97,281
200,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C5, Class
A4,
4.95%, 09/15/40.............. 197,141
500,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A4, Class 2A2,
4.46%, 07/25/35.............. 484,435
400,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A5, Class A3,
4.44%, 06/25/35.............. 386,429
510,427 MLCC Mortgage Investors, Inc.,
Series 2003-F, Class A1,
Floating Rate,
4.70%, 10/25/28(c)........... 510,743
31,913 Quest Trust, Series 2003-X3,
Class A1, Floating Rate,
4.86%, 02/25/34(c)........... 31,936
455,731 Structured Adjustable Rate
Mortgage Loan, Series
2005-15, Class 1A1,
5.06%, 07/25/35.............. 452,097
468,995 Structured Asset Mortgage
Investments, Inc., Series
2003-AR4, Class A1, Floating
Rate,
4.72%, 01/19/34(c)........... 469,762
505,587 Wachovia Mortgage Loan Trust,
LLC, Series 2005-WMC1, Class
A1, Floating Rate,
4.49%, 10/25/35(c)........... 505,935
555,939 Washington Mutual, Series
2005-AR8, Class 2A1A,
Floating Rate,
4.67%, 07/25/45(c)........... 555,121
------------
14,593,418
------------
</Table>
See notes to financial statements.
97
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS -- 0.0%
$ 30,000 Ventas Realty LP/Ventas Capital
Corp. -- 144A,
6.50%, 06/01/16.............. $ 30,300
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.4%
70,000 AT&T, Inc.,
5.10%, 09/15/14.............. 68,500
10,000 Bellsouth Corp.,
4.75%, 11/15/12.............. 9,759
50,000 Deutsche Telekom International
Finance BV (the Netherlands),
5.25%, 07/22/13.............. 49,811
115,000 Koninklijke KPN NV (the
Netherlands),
8.38%, 10/01/30.............. 136,663
190,000 Qwest Communications
International, Inc., Floating
Rate,
7.84%, 02/15/09(b)........... 193,563
320,000 Sprint Capital Corp.,
6.00%, 01/15/07.............. 323,209
90,000 Telecom Italia Capital
(Luxembourg),
5.25%, 10/01/15.............. 87,579
100,000 Verizon Global Funding Corp.,
7.38%, 09/01/12.............. 111,672
------------
980,756
------------
TRANSPORTATION -- 0.1%
10,000 Teekay Shipping Corp. (Marshall
Islands),
8.88%, 07/15/11.............. 11,350
50,000 Union Pacific Corp.,
5.38%, 05/01/14.............. 50,654
------------
62,004
------------
UTILITIES -- 1.1%
30,000 Dominion Resources, Inc.,
4.75%, 12/15/10.............. 29,351
100,000 Dominion Resources, Inc.,
5.70%, 09/17/12.............. 101,822
50,000 Duke Energy Corp.,
6.25%, 01/15/12.............. 52,763
90,000 Duke Energy Corp.,
5.63%, 11/30/12.............. 92,447
70,000 FirstEnergy Corp., Series B,
6.45%, 11/15/11.............. 74,290
150,000 FirstEnergy Corp., Series C,
7.38%, 11/15/31.............. 177,552
110,000 Oncor Electric Delivery
Company,
6.38%, 01/15/15.............. 116,927
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES (CONTINUED)
$ 70,000 Pacific Gas & Electric Company,
6.05%, 03/01/34.............. $ 72,696
70,000 Swepco Capital Trust I,
Variable Rate,
5.25%, 10/01/43(a)........... 69,236
------------
787,084
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $29,044,704)........... 28,787,040
------------
<Caption>
SHARES
------
PREFERRED STOCKS -- 1.0%
FANNIE MAE
13,100 Series O, Floating Rate,
7.00%(b) (Cost $726,838)..... 711,985
------------
CONVERTIBLE PREFERRED STOCKS -- 0.3%
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT
9,300 General Motors Corp., Series A,
4.50% (Cost $217,415)........ 192,975
------------
<Caption>
PRINCIPAL
---------
MUNICIPAL BONDS -- 0.1%
NEW YORK
$ 50,000 Liberty NY Development Corp.,
Revenue Bond,
5.25%, 10/01/35 (Cost
$55,325)..................... 56,827
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 4.7%
60,000 Federal Republic of Brazil
(Brazil),
8.88%, 04/15/24.............. 67,050
60,000 Federal Republic of Brazil
(Brazil),
12.25%, 03/06/30............. 86,700
230,000 Federal Republic of Brazil
(Brazil),
11.00%, 08/17/40............. 296,758
61,177 Federal Republic of Brazil
(Brazil), Series 18YR,
Floating Rate,
5.25%, 04/15/12(i)........... 60,566
13,000 Federal Republic of Brazil
(Brazil), Series B,
8.88%, 04/15/24.............. 14,528
118,202 Government of Canada Real
Return Bonds (Canada),
4.00%, 12/01/31(n)........... 157,609
320,000 Queensland Treasury Corp.
(Australia), Series 11G,
6.00%, 06/14/11(m)........... 241,746
240,000 Republic of Colombia
(Colombia), Floating Rate,
6.14%, 11/16/15(b)........... 245,400
110,000 Republic of Colombia
(Colombia), Floating Rate,
11.75%, 02/25/20(b).......... 152,625
</Table>
See notes to financial statements.
98
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 160,000 Republic of Panama (Panama),
7.13%, 01/29/26.............. $ 162,800
50,000 Republic of Peru (Peru),
8.75%, 11/21/33.............. 56,500
73,800 Republic of Peru, Series 20YR
(Peru), Variable Rate,
5.00%, 03/07/17(a)........... 71,033
690,000 Russian Federation
(Russia) -- 144A,
5.00%, 03/31/30.............. 780,651
110,000 United Mexican States (Mexico),
Series MTN,
8.30%, 08/15/31.............. 141,625
610,000 United Mexican States (Mexico),
Series MTNA,
7.50%, 04/08/33.............. 723,765
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$3,097,717).................. 3,259,356
------------
TOTAL SECURITIES (Cost
$79,563,350)................. 79,536,894
------------
REPURCHASE AGREEMENTS -- 15.2%
10,632,489 With Investors Bank and Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase proceeds
at maturity $10,637,002
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
5.04%,
due 12/01/18, with a value of
$11,164,113) (Cost
$10,632,489)................. 10,632,489
------------
Total Investments -- 128.7%
(Cost $90,195,839)........... 90,169,383
Liabilities less other
assets -- (28.7)%............ (20,096,524)
------------
NET ASSETS -- 100.0%........... $ 70,072,859
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $90,205,290.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............ $ 452,415
Gross unrealized depreciation............ (488,322)
---------
Net unrealized depreciation.............. $ (35,907)
=========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
99
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 64.1%
AEROSPACE AND DEFENSE -- 1.9%
30,550 Lockheed Martin Corp. ......... $ 1,943,897
34,471 Northrop Grumman Corp. ........ 2,072,051
49,650 Raytheon Company............... 1,993,448
25,500 The Boeing Company............. 1,791,120
------------
7,800,516
------------
AGRICULTURE -- 0.5%
26,850 Monsanto Company............... 2,081,681
------------
APPAREL: MANUFACTURING AND RETAIL -- 0.8%
4,000 Abercrombie & Fitch Company --
Class A(1)................... 260,720
54,700 Coach, Inc.*................... 1,823,698
25,400 Nordstrom, Inc. ............... 949,960
8,900 The Men's Wearhouse, Inc.*..... 262,016
------------
3,296,394
------------
AUTOMOBILE: RETAIL -- 0.2%
46,300 AutoNation, Inc.*.............. 1,006,099
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.3%
22,900 Autoliv, Inc. ................. 1,040,118
47,550 Ford Motor Company............. 367,086
------------
1,407,204
------------
BANKS -- 4.3%
128,012 Bank of America Corp. ......... 5,907,753
4,900 Bank of Hawaii Corp. .......... 252,546
6,900 Golden West Financial Corp. ... 455,400
65,350 North Fork Bancorp, Inc. ...... 1,787,976
21,300 UnionBanCal Corp. ............. 1,463,736
78,682 US Bancorp..................... 2,351,805
66,153 Wachovia Corp. ................ 3,496,848
30,050 Wells Fargo & Company.......... 1,888,042
------------
17,604,106
------------
BROADCAST SERVICES/MEDIA -- 2.6%
11,900 Clear Channel Communications,
Inc. ........................ 374,255
50,700 Comcast Corp. -- Class A*(1)... 1,316,172
5,660 Discovery Holding Company --
Class A*..................... 85,749
56,600 Liberty Media Corp. -- Class
A*........................... 445,442
4,700 Pixar*......................... 247,784
13,500 The McGraw-Hill Companies,
Inc. ........................ 697,005
25,800 The Walt Disney Company........ 618,426
197,690 Time Warner, Inc. ............. 3,447,714
8,100 Tribune Company................ 245,106
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
19,600 Univision Communications,
Inc. -- Class A*............. $ 576,044
83,700 Viacom, Inc. -- Class B*....... 2,728,620
------------
10,782,317
------------
BUSINESS SERVICES AND SUPPLIES -- 0.8%
5,800 Fair Isaac Corp. .............. 256,186
43,900 First Data Corp. .............. 1,888,139
19,700 Moody's Corp. ................. 1,209,974
------------
3,354,299
------------
CHEMICALS -- 0.3%
15,100 EI du Pont de Nemours and
Company...................... 641,750
9,850 The Dow Chemical Company....... 431,627
------------
1,073,377
------------
COMMERCIAL SERVICES -- 0.3%
1,487 CCE Spino, Inc.*(1)............ 19,480
68,750 Cendant Corp. ................. 1,185,937
------------
1,205,417
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 4.1%
36,600 Autodesk, Inc. ................ 1,571,970
32,400 Cadence Design Systems,
Inc.*(1)..................... 548,208
31,700 Computer Sciences Corp.*....... 1,605,288
8,400 Dell, Inc.*.................... 251,916
15,800 Electronic Data Systems
Corp. ....................... 379,832
121,987 Hewlett-Packard Company........ 3,492,488
13,700 Ingram Micro, Inc. -- Class
A*........................... 273,041
19,450 International Business Machines
Corp. ....................... 1,598,790
180,350 Microsoft Corp. ............... 4,716,152
21,450 Oracle Corp.*.................. 261,905
10,200 SanDisk Corp.*................. 640,764
85,900 Western Digital Corp.*......... 1,598,599
------------
16,938,953
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.3%
12,500 Lafarge North America, Inc. ... 687,750
5,300 Martin Marietta Materials,
Inc. ........................ 406,616
------------
1,094,366
------------
CONSUMER GOODS AND SERVICES -- 3.2%
69,650 Altria Group, Inc. ............ 5,204,247
16,900 American Greetings Corp. --
Class A(1)................... 371,293
38,750 Colgate-Palmolive Company...... 2,125,438
14,000 Energizer Holdings, Inc.*...... 697,060
55,398 Procter & Gamble Company....... 3,206,436
</Table>
See notes to financial statements.
100
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
4,900 United Parcel Service, Inc. --
Class B...................... $ 368,235
20,485 UST, Inc. ..................... 836,403
3,300 Whirlpool Corp. ............... 276,408
------------
13,085,520
------------
DIVERSIFIED OPERATIONS AND SERVICES -- 2.4%
287,000 General Electric Company....... 10,059,350
------------
ELECTRONICS -- 0.7%
21,100 Avnet, Inc.*................... 505,134
24,300 Emerson Electric Company....... 1,815,210
2,800 Harman International
Industries, Inc. ............ 273,980
4,750 Rockwell Collins, Inc. ........ 220,733
------------
2,815,057
------------
FINANCIAL SERVICES -- 5.8%
58,500 AmeriCredit Corp.*............. 1,499,355
920 Ameriprise Financial, Inc. .... 37,720
19,500 Ameritrade Holding Corp.*...... 468,000
96,899 Citigroup, Inc. ............... 4,702,508
20,000 Countrywide Financial Corp. ... 683,800
29,300 E*TRADE Financial Corp.*....... 611,198
121,400 JPMorgan Chase & Company....... 4,818,365
44,800 Merrill Lynch & Company,
Inc. ........................ 3,034,304
40,300 Morgan Stanley................. 2,286,622
27,500 Prudential Financial, Inc. .... 2,012,725
26,000 SLM Corp. ..................... 1,432,340
59,250 Washington Mutual, Inc. ....... 2,577,375
------------
24,164,312
------------
FOOD AND BEVERAGE -- 1.6%
78,150 Archer-Daniels-Midland
Company...................... 1,927,178
39,550 Coca-Cola Company.............. 1,594,261
10,450 Hershey Foods Corp. ........... 577,363
10,000 PepsiAmericas, Inc. ........... 232,600
15,200 PepsiCo, Inc. ................. 898,016
81,300 Tyson Foods, Inc. -- Class A... 1,390,230
------------
6,619,648
------------
INSURANCE -- 3.9%
18,600 Aetna, Inc. ................... 1,754,166
37,703 American International Group,
Inc. ........................ 2,572,476
46,000 Genworth Financial, Inc. --
Class A...................... 1,590,680
19,700 Loews Corp. ................... 1,868,545
28,800 MBIA, Inc. .................... 1,732,608
46,200 MetLife, Inc. ................. 2,263,800
11,000 Principal Financial Group,
Inc. ........................ 521,730
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
19,600 The Allstate Corp. ............ $ 1,059,772
35,100 The St. Paul Travelers
Companies, Inc. ............. 1,567,917
20,500 WR Berkley Corp. .............. 976,210
------------
15,907,904
------------
INTERNET SERVICES -- 1.3%
187,350 Cisco Systems, Inc.*........... 3,207,432
3,750 Google, Inc. -- Class A*....... 1,555,725
26,817 Symantec Corp.*................ 469,298
------------
5,232,455
------------
LEISURE AND RECREATION -- 0.8%
23,700 Carnival Corp. (Panama)(1)..... 1,267,239
12,100 Choice Hotels International,
Inc. ........................ 505,296
35,900 MGM MIRAGE*.................... 1,316,453
18,900 Regal Entertainment Group --
Class A(1)................... 359,478
------------
3,448,466
------------
MANUFACTURING -- 0.4%
14,800 Illinois Tool Works, Inc. ..... 1,302,252
2,850 ITT Industries, Inc. .......... 293,037
------------
1,595,289
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 3.5%
7,350 Guidant Corp. ................. 475,913
7,500 Humana, Inc.*.................. 407,475
95,550 Johnson & Johnson.............. 5,742,554
37,400 McKesson Corp. ................ 1,929,466
55,650 Medtronic, Inc. ............... 3,203,771
39,800 St Jude Medical, Inc.*......... 1,997,960
6,700 UnitedHealth Group, Inc. ...... 416,338
------------
14,173,477
------------
METALS AND MINING -- 0.5%
5,300 Newmont Mining Corp. .......... 283,020
27,000 Nucor Corp.(1)................. 1,801,440
------------
2,084,460
------------
OIL AND GAS: PIPELINES -- 0.4%
23,000 Equitable Resources, Inc. ..... 843,870
8,100 Questar Corp. ................. 613,170
------------
1,457,040
------------
OIL, COAL AND GAS -- 5.8%
21,900 Anadarko Petroleum Corp. ...... 2,075,025
29,814 Apache Corp. .................. 2,042,855
27,200 Burlington Resources, Inc. .... 2,344,640
26,000 ChevronTexaco Corp. ........... 1,476,020
32,426 ConocoPhillips................. 1,886,545
</Table>
See notes to financial statements.
101
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
34,850 Devon Energy Corp. ............ $ 2,179,519
12,800 EOG Resources, Inc. ........... 939,136
121,650 Exxon Mobil Corp. ............. 6,833,080
25,100 Helmerich & Payne, Inc. ....... 1,553,941
5,100 Noble Corp. (Cayman Islands)... 359,754
2,800 Schlumberger, Ltd. (Netherlands
Antilles).................... 272,020
22,400 Sunoco, Inc. .................. 1,755,712
3,800 Transocean, Inc. (Cayman
Islands)*.................... 264,822
------------
23,983,069
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 5.1%
66,400 Abbott Laboratories............ 2,618,152
9,600 Allergan, Inc.(1).............. 1,036,416
48,300 AmerisourceBergen Corp. ....... 1,999,620
48,934 Amgen, Inc.*................... 3,858,935
6,300 Genentech, Inc.*............... 582,750
23,150 Genzyme Corp.*................. 1,638,557
87,500 Merck & Company, Inc. ......... 2,783,375
239,860 Pfizer, Inc. .................. 5,593,535
15,600 Wyeth.......................... 718,692
------------
20,830,032
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.4%
8,600 Equity Office Properties
Trust........................ 260,838
32,000 ProLogis....................... 1,495,040
------------
1,755,878
------------
RETAIL -- 1.9%
78,700 Circuit City Stores, Inc. ..... 1,777,833
44,300 Dillard's, Inc. -- Class A..... 1,099,526
8,400 Office Depot, Inc.*............ 263,760
13,172 The Home Depot, Inc. .......... 533,203
50,600 Walgreen Company(1)............ 2,239,556
36,670 Wal-Mart Stores, Inc. ......... 1,716,156
------------
7,630,034
------------
RETAIL: RESTAURANTS -- 0.7%
36,350 Darden Restaurants, Inc. ...... 1,413,288
28,800 YUM! Brands, Inc. ............. 1,350,144
------------
2,763,432
------------
RETAIL: SUPERMARKETS -- 0.4%
84,400 The Kroger Company*............ 1,593,472
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.5%
56,900 Agilent Technologies, Inc.*.... 1,894,201
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS -- 2.6%
50,639 Freescale Semiconductor,
Inc. -- Class B*............. $ 1,274,584
203,950 Intel Corp. ................... 5,090,591
106,100 Micron Technology, Inc.*(1).... 1,412,191
86,850 Texas Instruments, Inc. ....... 2,785,280
------------
10,562,646
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.6%
116,000 AT&T, Inc. .................... 2,840,839
45,700 BellSouth Corp. ............... 1,238,470
47,350 CenturyTel, Inc.(1)............ 1,570,126
10,050 Comverse Technology, Inc.*..... 267,230
34,800 Corning, Inc.*................. 684,168
33,350 Motorola, Inc. ................ 753,377
7,000 QUALCOMM, Inc. ................ 301,560
70,150 Sprint Nextel Corp. ........... 1,638,704
48,900 Verizon Communications,
Inc. ........................ 1,472,868
------------
10,767,342
------------
TRANSPORTATION -- 1.5%
31,000 Burlington Northern Santa Fe
Corp. ....................... 2,195,420
36,100 CSX Corp. ..................... 1,832,797
11,700 Laidlaw International, Inc. ... 271,791
24,850 Norfolk Southern Corp. ........ 1,114,026
12,800 Swift Transportation Company,
Inc.*........................ 259,840
4,100 Union Pacific Corp. ........... 330,091
------------
6,003,965
------------
UTILITIES -- 1.7%
16,800 Consolidated Edison, Inc. ..... 778,344
9,200 Duke Energy Corp.(1)........... 252,540
44,000 Edison International........... 1,918,840
4,250 Entergy Corp. ................. 291,763
49,650 PG&E Corp. .................... 1,843,008
39,900 TXU Corp. ..................... 2,002,581
------------
7,087,076
------------
TOTAL COMMON STOCKS
(Cost $241,036,639).......... 263,158,854
------------
PREFERRED STOCKS -- 0.4%
FANNIE MAE
29,700 Series O, Floating Rate,
7.00%(b) (Cost $1,659,000)... 1,614,195
------------
CONVERTIBLE PREFERRED STOCKS -- 0.1%
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT
20,200 General Motors Corp., Series A,
4.50% (Cost $472,230)........ 419,150
------------
</Table>
See notes to financial statements.
102
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- -----
US TREASURY SECURITIES -- 5.8%
US TREASURY BONDS -- 0.3%
$ 740,000 8.00%, 11/15/21................ $ 1,019,726
370,000 5.38%, 02/15/31(1)............. 415,730
------------
1,435,456
------------
US TREASURY INFLATION INDEX -- 1.7%
1,741,977 1.63%, 01/15/15................ 1,678,762
2,795,465 1.88%, 07/15/15................ 2,750,043
1,658,941 2.38%, 01/15/25................ 1,744,092
472,512 3.88%, 04/15/29................ 637,744
------------
6,810,641
------------
US TREASURY NOTES -- 3.4%
1,185,000 3.38%, 02/28/07................ 1,170,929
2,585,000 3.75%, 03/31/07................ 2,563,795
40,000 4.00%, 08/31/07................ 39,747
730,000 3.00%, 02/15/08(1)............. 709,669
865,000 3.38%, 02/15/08(1)............. 847,464
1,060,000 3.75%, 05/15/08(2)............. 1,045,260
6,500,000 3.88%, 05/15/10(2)............. 6,378,891
420,000 3.88%, 02/15/13(1)............. 407,220
860,000 4.13%, 05/15/15(1)............. 841,423
20,000 4.50%, 11/15/15(1)............. 20,170
------------
14,024,568
------------
US TREASURY STRIPS -- 0.4%
3,660,000 Zero coupon, 11/15/27(1)....... 1,345,076
770,000 Zero coupon, 05/15/30(1)....... 254,799
------------
1,599,875
------------
TOTAL US TREASURY SECURITIES
(Cost $23,857,318)........... 23,870,540
------------
US GOVERNMENT AGENCY SECURITIES -- 14.5%
FANNIE MAE -- 9.6%
188,735 PL# 535675,
7.00%, 01/01/16.............. 196,203
970 PL# 549906,
7.50%, 09/01/30.............. 1,017
2,813 PL# 552549,
7.50%, 09/01/30.............. 2,949
601 PL# 558384,
7.50%, 01/01/31.............. 630
3,782 PL# 568677,
7.50%, 01/01/31.............. 3,965
2,081 PL# 572762,
7.50%, 03/01/31.............. 2,181
16,162 PL# 582178,
7.50%, 06/01/31.............. 16,936
13,439 PL# 594316,
6.50%, 07/01/31.............. 13,819
2,619 PL# 602859,
6.50%, 10/01/31.............. 2,693
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 19,877 PL# 614924,
7.00%, 12/01/16.............. $ 20,660
1,511,069 PL# 735809, Variable Rate,
4.52%, 08/01/35(a)........... 1,493,181
99,227 PL# 745000,
6.00%, 10/01/35.............. 100,198
71,080 PL# 793193,
5.50%, 07/01/19.............. 71,568
145,940 PL# 801516, Variable Rate,
4.72%, 08/01/34(a)........... 144,914
618,990 PL# 810896, Variable Rate,
4.88%, 01/01/35(a)........... 619,323
816,841 PL# 821150, Variable Rate,
4.59%, 04/01/35(a)........... 806,694
1,100,000 TBA,
5.00%, 01/01/21.............. 1,088,313
1,300,000 TBA,
5.50%, 01/01/21.............. 1,308,125
700,000 TBA,
4.50%, 01/01/36.............. 659,313
18,700,000 TBA,
5.00%, 01/01/36.............. 18,121,458
8,600,000 TBA,
5.50%, 01/01/36.............. 8,516,683
6,600,000 TBA,
6.00%, 01/01/36.............. 6,661,875
------------
39,852,698
------------
FEDERAL AGRICULTURAL MORTGAGE CORP. -- 0.1%
220,000 4.25%, 07/29/08................ 217,551
------------
FREDDIE MAC -- 0.8%
1,060,000 4.38%, 11/16/07................ 1,053,425
1,460,000 4.75%, 01/18/11................ 1,460,862
600,000 5.63%, 11/23/35................ 607,447
------------
3,121,734
------------
FREDDIE MAC GOLD -- 0.5%
900,000 TBA,
5.00%, 01/01/21.............. 891,000
1,000,000 TBA,
5.00%, 01/01/36.............. 968,125
------------
1,859,125
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 2.3%
9,373 PL# 461836,
7.00%, 01/15/28.............. 9,853
1,538 PL# 596647,
7.00%, 09/15/32.............. 1,616
278,890 PL# 604404,
5.00%, 06/15/33.............. 275,713
780,254 PL# 604845,
5.00%, 12/15/33.............. 771,365
</Table>
See notes to financial statements.
103
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 981,130 PL# 608280,
5.00%, 09/15/33.............. $ 969,952
977,868 PL# 615892,
5.00%, 08/15/33.............. 966,727
993,302 PL# 616832,
5.00%, 01/15/35.............. 981,198
955,383 PL# 620521,
5.00%, 08/15/33.............. 944,498
898,939 PL# 637934,
5.00%, 01/15/35.............. 887,983
998,776 PL# 639093,
5.00%, 01/15/35.............. 986,604
499,316 PL# 639865,
5.00%, 06/15/35.............. 493,230
126,636 PL# 781881,
5.00%, 03/15/35.............. 125,161
1,390,000 TBA,
5.00%, 01/01/36.............. 1,371,757
900,000 TBA,
5.50%, 01/01/36.............. 905,625
------------
9,691,282
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 0.7%
600,000 Fannie Mae Grantor Trust,
Series 2001-T2, Class B,
6.02%, 11/25/10.............. 628,383
278,998 Fannie Mae, Series 1999-7,
Class AB,
6.00%, 03/25/29.............. 283,942
760,000 Fannie Mae, Series 2003-35,
Class TE,
5.00%, 05/25/18.............. 752,461
543,581 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34.............. 537,688
676,041 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34.............. 679,428
------------
2,881,902
------------
RESOLUTION FUNDING STRIPS -- 0.1%
250,000 Zero coupon, 07/15/18.......... 138,395
250,000 Zero coupon, 10/15/18.......... 136,657
------------
275,052
------------
TENNESSEE VALLEY AUTHORITY -- 0.4%
1,380,000 5.88%, 04/01/36................ 1,573,666
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $59,186,528)........... 59,473,010
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 17.4%
ADVERTISING -- 0.0%
$ 40,000 Lamar Media Corp.,
7.25%, 01/01/13.............. $ 41,700
------------
AEROSPACE AND DEFENSE -- 0.1%
35,000 B/E Aerospace,
8.50%, 10/01/10.............. 37,538
720,000 RC Trust I,
7.00%, 05/15/06.............. 364,050
------------
401,588
------------
AGRICULTURAL EQUIPMENT -- 0.0%
20,000 Case New Holland, Inc.,
9.25%, 08/01/11.............. 21,500
------------
AUTOMOBILE: RENTAL -- 0.0%
30,000 Hertz Corp. -- 144A,
8.88%, 01/01/14.............. 30,713
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.3%
355,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08.............. 345,786
580,000 Ford Motor Company,
7.45%, 07/16/31(1)........... 397,300
970,000 General Motors Corp.,
8.25%, 07/15/23(1)........... 628,075
50,000 Visteon Corp.,
8.25%, 08/01/10.............. 42,750
------------
1,413,911
------------
BANKS -- 0.6%
420,000 Bank of America Corp.,
4.50%, 08/01/10.............. 413,152
325,000 Deutsche Bank AG New York,
Series YCD, Variable Rate,
3.84%, 03/15/07(a)........... 322,945
270,000 First Union National Bank,
Series BKNT,
5.80%, 12/01/08.............. 277,299
20,000 Rabobank Capital Funding Trust
II -- 144A, Variable Rate,
5.26%, perpetual(a).......... 19,846
40,000 Rabobank Capital Funding Trust
III -- 144A, Variable Rate,
5.25%, perpetual(a).......... 39,301
215,000 SunTrust Banks, Inc., Series
CD,
4.42%, 06/15/09.............. 212,071
540,000 Wachovia Corp.,
5.25%, 08/01/14.............. 541,641
515,000 Wells Fargo & Company,
4.20%, 01/15/10.............. 501,827
------------
2,328,082
------------
</Table>
See notes to financial statements.
104
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA -- 0.7%
$ 20,000 Clear Channel Communications,
Inc.,
4.63%, 01/15/08.............. $ 19,735
100,000 Clear Channel Communications,
Inc.,
4.25%, 05/15/09.............. 96,200
590,000 Clear Channel Communications,
Inc.,
5.50%, 09/15/14.............. 565,521
60,000 Clear Channel Communications,
Inc.,
4.90%, 05/15/15.............. 54,356
380,000 Comcast Corp.,
6.50%, 01/15/15.............. 402,285
180,000 Cox Communications, Inc.,
3.88%, 10/01/08.............. 173,576
40,000 CSC Holdings, Inc.,
7.88%, 02/15/18.............. 38,800
15,000 CSC Holdings, Inc.,
7.63%, 07/15/18.............. 14,325
10,000 CSC Holdings, Inc., Series B,
7.63%, 04/01/11.............. 10,000
70,000 DIRECTV Holdings LLC/ DIRECTV
Financing Company, Inc.,
6.38%, 06/15/15.............. 68,775
280,000 Liberty Media Corp.,
7.88%, 07/15/09.............. 296,438
10,000 Liberty Media Corp.,
5.70%, 05/15/13(1)........... 9,368
35,000 News America, Inc.,
6.20%, 12/15/34.............. 34,882
10,000 Rogers Cable, Inc. (Canada),
5.50%, 03/15/14.............. 9,413
20,000 Rogers Cable, Inc. (Canada),
6.75%, 03/15/15.............. 20,400
10,000 Sinclair Broadcast Group,
8.00%, 03/15/12.............. 10,350
110,000 Time Warner Entertainment,
8.38%, 07/15/33.............. 130,324
350,000 Time Warner, Inc.,
6.88%, 05/01/12.............. 373,046
315,000 Time Warner, Inc.,
7.70%, 05/01/32.............. 355,333
------------
2,683,127
------------
CHEMICALS -- 0.0%
40,000 IMC Global, Inc., Series B,
10.88%, 06/01/08............. 44,500
20,000 Rhodia SA (France),
10.25%, 06/01/10(1).......... 22,000
20,000 Westlake Chemical Corp.,
8.75%, 07/15/11.............. 21,500
------------
88,000
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 0.0%
$ 40,000 SunGard Data Systems,
Inc. -- 144A,
9.13%, 08/15/13.............. $ 41,600
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.0%
65,000 K Hovnanian Enterprises, Inc.,
6.25%, 01/15/15.............. 61,497
------------
CONSUMER GOODS AND SERVICES -- 0.3%
400,000 Altria Group, Inc.,
7.00%, 11/04/13.............. 438,363
10,000 Eastman Kodak Company,
7.25%, 11/15/13.............. 9,608
620,000 Eastman Kodak Company, Series
MTNA,
6.38%, 06/15/06.............. 623,743
------------
1,071,714
------------
CONTAINERS AND PACKAGING -- 0.0%
10,000 Solo Cup Company,
8.50%, 02/15/14.............. 8,800
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.1%
160,000 Waste Management, Inc.,
6.50%, 11/15/08.............. 166,023
270,000 Waste Management, Inc.,
6.38%, 11/15/12.............. 288,049
------------
454,072
------------
FINANCIAL SERVICES -- 2.7%
200,000 Aiful Corp. -- 144A (Japan),
5.00%, 08/10/10.............. 197,634
560,000 Citigroup, Inc.,
4.13%, 02/22/10.............. 544,552
760,000 Countrywide Financial Corp.,
Series MTNA,
4.50%, 06/15/10.............. 738,449
110,000 Credit Suisse First Boston USA,
Inc.,
4.88%, 08/15/10.............. 109,268
10,000 E*TRADE Financial Corp. --
144A,
7.38%, 09/15/13.............. 10,175
160,000 Ford Motor Credit Company,
6.63%, 06/16/08.............. 145,208
2,345,000 Ford Motor Credit Company,
7.38%, 10/28/09.............. 2,081,405
560,000 General Electric Capital Corp.,
Series MTNA,
4.25%, 01/15/08.............. 553,754
500,000 General Motors Acceptance
Corp.,
6.75%, 01/15/06.............. 499,674
200,000 General Motors Acceptance
Corp.,
4.50%, 07/15/06.............. 193,938
700,000 General Motors Acceptance
Corp.,
6.13%, 08/28/07.............. 649,129
</Table>
See notes to financial statements.
105
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 1,010,000 General Motors Acceptance
Corp.,
5.63%, 05/15/09.............. $ 899,252
110,000 General Motors Acceptance
Corp., Series GM,
6.31%, 11/30/07.............. 99,564
160,000 General Motors Acceptance
Corp., Series MTN, Floating
Rate,
5.65%, 09/23/08(b)........... 144,787
560,000 HSBC Finance Corp.,
4.63%, 01/15/08.............. 556,574
490,000 JPMorgan Chase & Company,
5.13%, 09/15/14.............. 485,898
290,000 JPMorgan Chase & Company,
5.15%, 10/01/15.............. 286,430
660,000 Lehman Brothers E-Capital Trust
I -- 144A, Floating Rate,
5.15%, 08/19/65(b)........... 662,441
290,000 Lehman Brothers Holdings, Inc.,
4.00%, 01/22/08.............. 285,335
180,000 Lehman Brothers Holdings, Inc.,
4.50%, 07/26/10.............. 176,405
450,000 Morgan Stanley,
3.63%, 04/01/08.............. 438,628
290,000 The Goldman Sachs Group, Inc.,
4.50%, 06/15/10.............. 283,685
900,000 The Goldman Sachs Group, Inc.,
Series MTNB, Floating Rate,
4.33%, 08/01/06(c)........... 900,627
------------
10,942,812
------------
FOOD AND BEVERAGE -- 0.1%
320,000 Anheuser-Busch Companies, Inc.,
4.95%, 01/15/14.............. 320,100
130,000 Kraft Foods, Inc.,
5.63%, 11/01/11.............. 133,544
------------
453,644
------------
FUNERAL SERVICES -- 0.0%
35,000 Service Corp. International,
7.70%, 04/15/09.............. 36,925
10,000 Service Corp. International --
144A,
7.50%, 06/15/17.............. 9,975
------------
46,900
------------
INSURANCE -- 0.0%
80,000 ASIF Global Financing XIX --
144A,
4.90%, 01/17/13.............. 79,716
------------
LEISURE AND RECREATION -- 0.1%
20,000 AMC Entertainment, Inc.,
8.00%, 03/01/14.............. 18,200
30,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 29,850
10,000 K2, Inc.,
7.38%, 07/01/14.............. 10,000
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
$ 25,000 MGM MIRAGE,
6.00%, 10/01/09.............. $ 24,969
50,000 MGM MIRAGE,
8.50%, 09/15/10.............. 54,438
40,000 MGM MIRAGE,
6.63%, 07/15/15.............. 40,100
15,000 Mohegan Tribal Gaming
Authority,
6.13%, 02/15/13.............. 14,813
60,000 Station Casinos, Inc.,
6.88%, 03/01/16.............. 61,649
------------
254,019
------------
MACHINERY -- 0.0%
40,000 Terex Corp.,
7.38%, 01/15/14.............. 39,800
------------
MANUFACTURING -- 0.2%
270,000 Tyco International Group SA
(Luxembourg),
6.38%, 10/15/11.............. 280,758
530,000 Tyco International Group SA
(Luxembourg),
6.00%, 11/15/13.............. 542,231
------------
822,989
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 0.1%
30,000 Davita, Inc.,
7.25%, 03/15/15.............. 30,525
10,000 Fresenius Medical Care Capital
Trust II,
7.88%, 02/01/08.............. 10,350
40,000 HCA, Inc.,
5.50%, 12/01/09.............. 39,705
160,000 HCA, Inc.,
6.75%, 07/15/13.............. 165,775
90,000 HCA, Inc.,
5.75%, 03/15/14.............. 87,723
40,000 HCA, Inc.,
7.69%, 06/15/25.............. 41,736
110,000 HCA, Inc.,
7.50%, 11/06/33.............. 114,127
60,000 Tenet Healthcare Corp.,
6.38%, 12/01/11.............. 55,050
30,000 Tenet Healthcare Corp.,
6.50%, 06/01/12.............. 27,600
------------
572,591
------------
METALS AND MINING -- 0.0%
20,000 International Steel Group,
6.50%, 04/15/14.............. 20,100
25,000 TriMas Corp.,
9.88%, 06/15/12.............. 20,750
------------
40,850
------------
</Table>
See notes to financial statements.
106
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES -- 0.3%
$ 200,000 El Paso Corp., Series MTN,
7.80%, 08/01/31.............. $ 200,500
100,000 El Paso Corp., Series MTN,
7.75%, 01/15/32(1)........... 100,750
330,000 El Paso Natural Gas,
8.38%, 06/15/32.............. 374,364
510,000 Williams Companies, Inc.,
Series A,
7.50%, 01/15/31.............. 530,400
------------
1,206,014
------------
OIL, COAL AND GAS -- 0.9%
250,000 Amerada Hess Corp.,
7.30%, 08/15/31.............. 290,224
210,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31.............. 258,188
330,000 Apache Finance Canada (Canada),
4.38%, 05/15/15.............. 317,219
45,000 Chesapeake Energy Corp.,
7.75%, 01/15/15.............. 47,925
20,000 Chesapeake Energy Corp.,
6.25%, 01/15/18.............. 19,700
340,000 ChevronTexaco Capital Company
(Canada),
3.50%, 09/17/07.............. 333,209
390,000 Conoco, Inc.,
6.95%, 04/15/29.............. 472,169
110,000 Devon Energy Corp.,
7.95%, 04/15/32.............. 142,313
870,000 Kerr-McGee Corp.,
7.88%, 09/15/31.............. 1,036,738
310,000 Pemex Project Funding Master
Trust,
7.38%, 12/15/14.............. 345,185
20,000 Pogo Producing Company -- 144A,
6.88%, 10/01/17.............. 19,600
30,000 Pride International, Inc.,
7.38%, 07/15/14.............. 32,325
30,000 Vintage Petroleum,
7.88%, 05/15/11.............. 31,500
80,000 Western Oil Sands, Inc.
(Canada),
8.38%, 05/01/12.............. 90,300
270,000 XTO Energy, Inc.,
6.25%, 04/15/13.............. 286,572
------------
3,723,167
------------
PAPER AND FOREST PRODUCTS -- 0.1%
60,000 International Paper Company,
5.50%, 01/15/14.............. 59,064
470,000 Weyerhaeuser Company,
6.75%, 03/15/12.............. 499,484
------------
558,548
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.0%
$ 40,000 AmerisourceBergen
Corp. -- 144A,
5.88%, 09/15/15.............. $ 40,550
15,000 Bio-Rad Laboratories, Inc.,
7.50%, 08/15/13.............. 15,975
45,000 Bio-Rad Laboratories, Inc.,
6.13%, 12/15/14.............. 44,663
75,000 Elan Finance PLC/Elan Finance
Corp. -- 144A (Ireland),
7.75%, 11/15/11.............. 70,500
------------
171,688
------------
PRINTING AND PUBLISHING -- 0.0%
20,000 Reader's Digest Association,
Inc.,
6.50%, 03/01/11.............. 19,650
------------
PRIVATE ASSET BACKED: BANKS -- 0.9%
1,042,211 Washington Mutual Bank, Series
2005-AR1, Class A1A, Floating
Rate,
4.70%, 01/25/45(c)........... 1,040,653
1,370,127 Washington Mutual Bank, Series
2005-AR13, Class A1A1,
Floating Rate,
4.67%, 10/25/45(c)........... 1,368,368
1,384,828 Washington Mutual Bank, Series
2005-AR15, Class A1A2,
Floating Rate,
4.66%, 11/25/45(c)........... 1,382,392
------------
3,791,413
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 0.6%
1,350,904 Lehman XS Trust, Series
2005-5N, Class 1A1, Floating
Rate,
4.68%, 11/25/35(c)........... 1,350,229
718,494 Lehman XS Trust, Series
2005-7N, Class 1A1B, Floating
Rate,
4.68%, 12/25/35(c)........... 718,358
300,000 Morgan Stanley Capital I,
Series 2005-HQ6, Class A4A,
4.99%, 08/13/42.............. 296,072
------------
2,364,659
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 7.7%
1,412,102 Accredited Mortgage Loan Trust,
Series 2005-3, Class A1,
Floating Rate,
4.62%, 09/25/35(c)........... 1,413,260
990,818 Adjustable Rate Mortgage Trust,
Series 2004-2, Class 7A2,
Floating Rate,
4.80%, 02/25/35(c)........... 993,496
1,043,368 Adjustable Rate Mortgage Trust,
Series 2004-5, Class 7A2,
Floating Rate,
4.76%, 04/25/35(c)........... 1,035,231
</Table>
See notes to financial statements.
107
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 280,000 Banc of America Commercial
Mortgage, Inc., Series
2005-5, Class A4,
5.11%, 10/10/45.............. $ 278,906
1,240,381 Banc of America Mortgage
Securities, Series 2005-A,
Class 2A1, Floating Rate,
4.47%, 02/25/35(c)........... 1,219,540
512,432 Chevy Chase Funding LLC, Series
2003-3, Class A1, Floating
Rate,
3.99%, 07/25/34(c)........... 513,354
615,088 Countrywide Alternative Loan
Trust, Series 2005-36, Class
3A1, Floating Rate,
5.03%, 08/25/35(c)........... 609,583
1,489,632 Countrywide Alternative Loan
Trust, Series 2005-56, Class
4A1, Floating Rate,
4.69%, 11/25/35(c)........... 1,490,301
1,494,788 Countrywide Alternative Loan
Trust, Series 2005-59, Class
1A1, Floating Rate,
4.70%, 11/20/35(c)........... 1,497,504
1,240,471 Countrywide Asset-Backed
Certificates, Series 2005-11,
Class AF1, Floating Rate,
4.56%, 02/25/36(c)........... 1,241,503
390,000 Countrywide Asset-Backed
Certificates, Series 2005-4,
Class AF3,
4.46%, 10/25/35.............. 383,104
1,257,441 Countrywide Home Equity Loan
Trust, Series 2005-G, Class
2A, Floating Rate,
4.60%, 12/15/35(c)........... 1,258,227
1,313,018 Countrywide Home Loans, Series
2005-R3, Class AF, Floating
Rate,
4.78%, 09/25/35(c)........... 1,313,018
1,232,013 First Franklin Mortgage Loan
Asset Backed Certificates,
Series 2004-FF10, Class A2,
Floating Rate,
4.78%, 12/25/32(c)........... 1,235,839
900,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33.............. 949,786
1,281,087 GMAC Mortgage Corp. Loan Trust,
Series 2005-AR1, Class 3A,
Floating Rate,
4.68%, 03/18/35(c)........... 1,260,497
765,698 Impac CMB Trust, Series
2003-10, Class 1A1, Floating
Rate,
4.73%, 10/25/33(c)........... 766,184
1,175,855 Impac CMB Trust, Series 2004-2,
Class A1, Floating Rate,
4.64%, 04/25/34(c)........... 1,178,349
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 1,151,884 Impac CMB Trust, Series 2004-6,
Class 1A1, Floating Rate,
4.78%, 10/25/34(c)........... $ 1,160,596
1,080,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-CB12, Class A4,
4.90%, 09/12/37.............. 1,058,542
1,098,663 JPMorgan Mortgage Trust, Series
2004-A3, Class 1A1, Floating
Rate,
4.33%, 07/25/34(c)........... 1,079,830
870,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C1, Class
A3,
4.55%, 02/15/30.............. 842,522
500,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A4, Class 2A2,
4.46%, 07/25/35.............. 484,435
1,300,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A5, Class A3,
4.44%, 06/25/35.............. 1,255,894
696,037 MLCC Mortgage Investors, Inc.,
Series 2003-F, Class A1,
Floating Rate,
4.70%, 10/25/28(c)........... 696,468
984,427 Opteum Mortgage Acceptance
Corp., Series 2005-4, Class
1A1A, Floating Rate,
4.55%, 11/25/35(c)........... 985,021
1,490,613 Residential Accredit Loans,
Inc., Series 2005-Q03, Class
A1, Floating Rate,
4.78%, 10/25/45(c)........... 1,495,631
1,367,192 Structured Adjustable Rate
Mortgage Loan, Series
2005-15, Class 1A1,
5.06%, 07/25/35.............. 1,356,292
1,108,535 Structured Asset Mortgage
Investments, Inc., Series
2003-AR4, Class A1, Floating
Rate,
4.72%, 01/19/34(c)........... 1,110,346
1,179,703 Wachovia Mortgage Loan Trust,
LLC, Series 2005-WMC1, Class
A1, Floating Rate,
4.49%, 10/25/35(c)........... 1,180,516
------------
31,343,775
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.0%
50,000 Ventas Realty LP/Capital Corp.,
6.75%, 06/01/10.............. 51,500
40,000 Ventas Realty LP/Ventas Capital
Corp.,
7.13%, 06/01/15.............. 42,200
------------
93,700
------------
</Table>
See notes to financial statements.
108
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL -- 0.0%
$ 20,000 JC Penney & Company, Inc.,
7.40%, 04/01/37.............. $ 22,444
60,000 Suburban Propane Partners,
6.88%, 12/15/13.............. 56,400
------------
78,844
------------
RETAIL: SUPERMARKETS -- 0.0%
100,000 Delhaize America, Inc.,
9.00%, 04/15/31.............. 118,062
------------
SEMICONDUCTORS -- 0.0%
25,000 Freescale Semiconductor, Inc.,
Floating Rate,
6.90%, 07/15/09(b)........... 25,813
40,000 MagnaChip Semiconductor, Ltd.,
Floating Rate,
7.74%, 12/15/11(b)........... 40,800
------------
66,613
------------
SPECIAL PURPOSE ENTITY -- 0.1%
235,000 Resona Preferred Global
Securities -- 144A (Cayman
Islands), Variable Rate,
7.19%, perpetual(a).......... 249,758
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.7%
140,000 AT&T, Inc.,
5.10%, 09/15/14.............. 137,001
73,000 Cincinnati Bell, Inc.,
7.00%, 02/15/15.............. 71,905
15,000 Citizens Communications
Company,
9.25%, 05/15/11.............. 16,613
10,000 Citizens Communications
Company,
9.00%, 08/15/31.............. 10,175
110,000 Deutsche Telekom International
Finance BV (the Netherlands),
5.25%, 07/22/13.............. 109,584
15,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda),
8.25%, 01/15/13.............. 15,225
30,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda), Floating Rate,
8.70%, 01/15/12(i)........... 30,638
220,000 Koninklijke KPN NV (the
Netherlands),
8.38%, 10/01/30.............. 261,442
10,000 Nextel Communications, Inc.,
Series D,
7.38%, 08/01/15.............. 10,561
60,000 Nextel Communications, Inc.,
Series F,
5.95%, 03/15/14.............. 60,392
780,000 Qwest Communications
International, Inc., Floating
Rate,
7.84%, 02/15/09(b)........... 794,624
105,000 Qwest Corp.,
7.88%, 09/01/11.............. 113,663
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 40,000 Rogers Wireless, Inc. (Canada),
6.38%, 03/01/14.............. $ 40,300
15,000 Rogers Wireless, Inc. (Canada),
7.50%, 03/15/15.............. 16,275
710,000 Sprint Capital Corp.,
6.00%, 01/15/07.............. 717,119
200,000 Telecom Italia Capital
(Luxembourg),
5.25%, 10/01/15.............. 194,621
210,000 Verizon Global Funding Corp.,
7.38%, 09/01/12.............. 234,512
------------
2,834,650
------------
TRANSPORTATION -- 0.1%
85,000 OMI Corp. (Marshall Islands),
7.63%, 12/01/13.............. 86,594
80,000 Overseas Shipholding Group,
7.50%, 02/15/24.............. 79,600
20,000 Teekay Shipping Corp. (Marshall
Islands),
8.88%, 07/15/11.............. 22,700
110,000 Union Pacific Corp.,
5.38%, 05/01/14.............. 111,440
------------
300,334
------------
UTILITIES -- 0.7%
760,000 AES Corp.,
7.75%, 03/01/14.............. 800,850
70,000 Dominion Resources, Inc.,
4.75%, 12/15/10.............. 68,485
220,000 Dominion Resources, Inc.,
5.70%, 09/17/12.............. 224,008
110,000 Duke Energy Corp.,
6.25%, 01/15/12.............. 116,078
200,000 Duke Energy Corp.,
5.63%, 11/30/12.............. 205,438
40,000 Exelon Corp.,
5.63%, 06/15/35.............. 37,826
160,000 FirstEnergy Corp., Series B,
6.45%, 11/15/11.............. 169,806
330,000 FirstEnergy Corp., Series C,
7.38%, 11/15/31.............. 390,615
50,000 Midwest Generation LLC,
8.75%, 05/01/34.............. 55,313
42,577 Midwest Generation LLC, Series
B,
8.56%, 01/02/16.............. 46,329
15,000 Mirant North America
LLC -- 144A,
7.38%, 12/31/13.............. 15,244
250,000 Oncor Electric Delivery
Company,
6.38%, 01/15/15.............. 265,744
</Table>
See notes to financial statements.
109
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES (CONTINUED)
$ 130,000 Pacific Gas & Electric Company,
6.05%, 03/01/34.............. $ 135,006
15,000 Reliant Energy, Inc.,
9.25%, 07/15/10.............. 15,075
200,000 Swepco Capital Trust I,
Variable Rate,
5.25%, 10/01/43(a)........... 197,818
40,000 Texas Genco LLC/
Financing -- 144A,
6.88%, 12/15/14.............. 43,500
------------
2,787,135
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $72,715,598)........... 71,607,635
------------
MUNICIPAL BONDS -- 0.0%
NEW YORK
110,000 Liberty NY Development Corp.,
Revenue Bond,
5.25%, 10/01/35 (Cost
$121,715).................... 125,019
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 2.1%
450,000 AID-Israel (Israel),
5.50%, 04/26/24.............. 486,849
315,000 AID-Israel (Israel),
5.50%, 09/18/33.............. 345,437
120,000 Federal Republic of Brazil
(Brazil),
8.88%, 04/15/24.............. 134,100
190,000 Federal Republic of Brazil
(Brazil),
12.25%, 03/06/30............. 274,550
370,000 Federal Republic of Brazil
(Brazil),
11.00%, 08/17/40............. 477,393
145,296 Federal Republic of Brazil
(Brazil), Series 18YR,
Floating Rate,
5.25%, 04/15/12(i)........... 143,843
28,000 Federal Republic of Brazil
(Brazil), Series B,
8.88%, 04/15/24.............. 31,290
342,786 Government of Canada Real
Return Bonds (Canada),
4.00%, 12/01/31(n)........... 457,067
920,000 Queensland Treasury Corp.
(Australia), Series 11G,
6.00%, 06/14/11(m)........... 695,021
530,000 Republic of Colombia
(Colombia), Floating Rate,
6.14%, 11/16/15(b)........... 541,925
280,000 Republic of Colombia
(Colombia), Floating Rate,
11.75%, 02/25/20(b).......... 388,500
390,000 Republic of Panama (Panama),
7.13%, 01/29/26.............. 396,825
150,000 Republic of Peru (Peru),
8.75%, 11/21/33.............. 169,500
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 205,000 Republic of Peru, Series 20YR
(Peru), Variable Rate,
5.00%, 03/07/17(a)........... $ 197,313
1,510,000 Russian Federation
(Russia) -- 144A,
5.00%, 03/31/30.............. 1,708,383
320,000 United Mexican States (Mexico),
Series MTN,
8.30%, 08/15/31.............. 412,000
1,395,000 United Mexican States (Mexico),
Series MTNA,
7.50%, 04/08/33.............. 1,655,168
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $7,960,027)............ 8,515,164
------------
SHORT TERM CORPORATE NOTES -- 0.1%
500,000 BellSouth Corp. -- 144A,
Variable Rate,
4.26%, 04/26/06(a) (Cost
$500,736).................... 500,736
------------
SECURITIES LENDING COLLATERAL -- 3.9%
15,913,228 Securities Lending Collateral
Investment (Note 4)
(Cost $15,913,228)........... 15,913,228
------------
TOTAL SECURITIES
(Cost $423,423,019).......... 445,197,531
------------
REPURCHASE AGREEMENTS -- 4.5%
18,527,728 With Investors Bank and Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase proceeds
at maturity $18,535,592
(Collateralized by Government
National Mortgage Association
Adjustable Rate Mortgage,
4.00%, due 04/20/35, with a
value of $19,454,114)
(Cost $18,527,728)........... 18,527,728
------------
Total Investments -- 112.9%
(Cost $441,950,747).......... 463,725,259
Liabilities less other
assets -- (12.9)%............ (52,977,604)
------------
NET ASSETS -- 100.0%........... $410,747,655
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $444,683,213.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $26,993,722
Gross unrealized depreciation........... (7,951,676)
-----------
Net unrealized appreciation............. $19,042,046
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
110
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 97.7%
ADVERTISING -- 0.3%
1,070,000 The Interpublic Group of
Companies, Inc.*(1)....... $ 10,325,500
--------------
AEROSPACE AND DEFENSE -- 2.2%
303,600 Goodrich Corp. ............. 12,477,960
165,000 Northrop Grumman Corp. ..... 9,918,150
633,400 The Boeing Company.......... 44,490,016
--------------
66,886,126
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.6%
341,600 Jones Apparel Group,
Inc. ..................... 10,493,952
320,000 Limited Brands, Inc. ....... 7,152,000
--------------
17,645,952
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.7%
104,000 Borg Warner, Inc. .......... 6,305,520
843,900 General Motors Corp.(1)..... 16,388,538
142,725 Lear Corp.(1)............... 4,061,954
173,900 Magna International, Inc. --
Class A (Canada)(1)....... 12,519,061
123,000 Toyota Motor Corp. (ADR)
(Japan)................... 12,868,260
--------------
52,143,333
--------------
BANKS -- 3.7%
926,082 Bank of America Corp.(1).... 42,738,684
397,300 National City Corp.(1)...... 13,337,361
255,800 SunTrust Banks, Inc. ....... 18,612,008
560,000 Wachovia Corp. ............. 29,601,600
132,800 Wells Fargo & Company....... 8,343,824
--------------
112,633,477
--------------
BROADCAST SERVICES/MEDIA -- 5.3%
1,031,900 Clear Channel
Communications, Inc. ..... 32,453,255
1,198,265 Comcast Corp. -- Class
A*(1)..................... 31,106,959
645,000 Comcast Corp. -- Special
Class A*.................. 16,570,050
3,470,200 Time Warner, Inc. .......... 60,520,288
592,800 Tribune Company(1).......... 17,938,128
--------------
158,588,680
--------------
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES --
7.1%
1,856,500 Electronic Data Systems
Corp. .................... 44,630,260
3,044,200 Hewlett-Packard Company..... 87,155,446
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES
(CONTINUED)
543,500 International Business
Machines Corp. ........... $ 44,675,700
580,000 Microsoft Corp. ............ 15,167,000
5,420,200 Sun Microsystems, Inc.*..... 22,710,638
--------------
214,339,044
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.2%
67,000 Vulcan Materials
Company(1)................ 4,539,250
--------------
CONSUMER GOODS AND SERVICES -- 3.4%
425,000 Altria Group, Inc. ......... 31,756,000
410,900 Kimberly-Clark Corp. ....... 24,510,185
228,000 Procter & Gamble Company.... 13,196,640
320,000 The Clorox Company.......... 18,204,800
217,000 Unilever NV (the
Netherlands).............. 14,897,050
--------------
102,564,675
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 1.8%
1,040,800 General Electric Company.... 36,480,040
240,000 Textron, Inc. .............. 18,475,200
--------------
54,955,240
--------------
ELECTRONICS -- 3.8%
285,233 Arrow Electronics, Inc.*.... 9,136,013
422,200 Avnet, Inc.*................ 10,107,468
1,121,400 Flextronics International,
Ltd. (Singapore)*......... 11,707,416
100,000 Hubbell, Inc. -- Class B.... 4,512,000
1,939,177 Sanmina-SCI Corp.*.......... 8,260,894
7,527,875 Solectron Corp.*............ 27,552,023
1,087,500 Sony Corp. (ADR)
(Japan)(1)................ 44,370,000
--------------
115,645,814
--------------
FINANCIAL SERVICES -- 11.3%
329,400 American Express Company.... 16,950,924
1,415,500 Citigroup, Inc. ............ 68,694,215
830,500 Fannie Mae.................. 40,536,705
399,900 Freddie Mac................. 26,133,465
2,061,940 JPMorgan Chase & Company.... 81,838,399
124,500 Lehman Brothers Holdings,
Inc. ..................... 15,957,165
999,000 Merrill Lynch & Company,
Inc. ..................... 67,662,270
</Table>
See notes to financial statements.
111
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
74,400 Morgan Stanley.............. $ 4,221,456
139,000 The Goldman Sachs Group,
Inc. ..................... 17,751,690
--------------
339,746,289
--------------
FOOD AND BEVERAGE -- 2.0%
1,239,500 Kraft Foods, Inc. -- Class
A(1)...................... 34,879,530
255,000 PepsiCo, Inc. .............. 15,065,400
600,000 Tyson Foods, Inc. -- Class
A(1)...................... 10,260,000
--------------
60,204,930
--------------
INSURANCE -- 8.8%
718,925 American International
Group, Inc. .............. 49,052,253
240,000 Genworth Financial, Inc. --
Class A................... 8,299,200
450,200 MetLife, Inc.(1)............ 22,059,800
61,566 PartnerRE, Ltd.
(Bermuda)(1).............. 4,043,039
170,000 RenaissanceRe Holdings, Ltd.
(Bermuda)................. 7,498,700
712,200 The Allstate Corp. ......... 38,508,654
559,500 The Chubb Corp. ............ 54,635,175
210,000 The Hartford Financial
Services Group, Inc.(1)... 18,036,900
1,046,238 The St. Paul Travelers
Companies, Inc. .......... 46,735,451
238,000 XL Capital, Ltd. -- Class A
(Cayman Islands).......... 16,036,440
--------------
264,905,612
--------------
MANUFACTURING -- 1.8%
204,000 Cooper Industries, Ltd. --
Class A (Bermuda)......... 14,892,000
100,000 Eaton Corp. ................ 6,709,000
680,900 Honeywell International,
Inc.(1)................... 25,363,525
592,950 Smurfit-Stone Container
Corp.*.................... 8,402,102
--------------
55,366,627
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES --
4.5%
1,077,200 HCA, Inc. .................. 54,398,600
1,114,600 Medco Health Solutions,
Inc.*..................... 62,194,680
2,560,600 Tenet Healthcare Corp.*..... 19,614,196
--------------
136,207,476
--------------
METALS AND MINING -- 0.5%
312,500 United States Steel
Corp. .................... 15,021,875
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS -- 9.0%
854,600 ChevronTexaco Corp. ........ $ 48,515,642
1,544,402 ConocoPhillips.............. 89,853,308
188,950 ENSCO International,
Inc. ..................... 8,379,933
1,354,800 Exxon Mobil Corp. .......... 76,099,116
300,000 GlobalSantaFe Corp. (Cayman
Islands).................. 14,445,000
195,000 Noble Corp. (Cayman
Islands)(1)............... 13,755,300
242,000 Occidental Petroleum
Corp. .................... 19,330,960
--------------
270,379,259
--------------
PAPER AND FOREST PRODUCTS -- 0.5%
500,000 MeadWestvaco Corp. ......... 14,015,000
--------------
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT --
5.7%
294,600 Eli Lilly and Company....... 16,671,414
773,800 Merck & Company, Inc. ...... 24,614,578
2,407,300 Millennium Pharmaceuticals,
Inc.*(1).................. 23,350,810
1,280,000 Pfizer, Inc. ............... 29,849,600
975,300 Watson Pharmaceuticals,
Inc.*..................... 31,707,003
1,026,000 Wyeth....................... 47,267,820
--------------
173,461,225
--------------
PRINTING AND PUBLISHING -- 0.3%
500,000 The Reader's Digest
Association, Inc. ........ 7,610,000
--------------
RETAIL -- 3.8%
297,081 Federated Department Stores,
Inc. ..................... 19,705,383
1,625,400 Office Depot, Inc.*......... 51,037,560
235,500 Sears Holdings Corp.*(1).... 27,207,315
304,000 Target Corp. ............... 16,710,880
--------------
114,661,138
--------------
RETAIL: RESTAURANTS -- 0.6%
535,000 McDonald's Corp. ........... 18,040,200
--------------
RETAIL: SUPERMARKETS -- 1.4%
819,925 Safeway, Inc.(1)............ 19,399,426
295,700 SUPERVALU, Inc. ............ 9,604,336
779,350 The Kroger Company*......... 14,714,128
--------------
43,717,890
--------------
RUBBER PRODUCTS -- 0.1%
193,100 Cooper Tire & Rubber
Company(1)................ 2,958,292
--------------
</Table>
See notes to financial statements.
112
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS -- 2.8%
1,053,000 Advanced Micro Devices,
Inc.*..................... $ 32,221,800
605,000 Intel Corp. ................ 15,100,800
1,488,000 Intersil Corp. -- Class A... 37,021,440
--------------
84,344,040
--------------
TELECOMMUNICATIONS EQUIPMENT AND SERVICES --
6.3%
180,300 American Tower Corp. --
Class A*.................. 4,886,130
1,546,500 AT&T, Inc. ................. 37,873,785
183,300 Crown Castle International
Corp.*.................... 4,932,603
8,534,700 Lucent Technologies,
Inc.*(1).................. 22,702,302
1,139,200 Nokia Oyj (ADR) (Finland)... 20,847,360
572,966 Nortel Networks Corp.
(Canada)*................. 1,753,276
8,942,200 Qwest Communications
International, Inc.*(1)... 50,523,430
1,178,800 Sprint Nextel Corp. ........ 27,536,768
964,950 Tellabs, Inc.*.............. 10,517,955
320,652 Verizon Communications,
Inc. ..................... 9,658,038
--------------
191,231,647
--------------
TOYS -- 1.0%
1,838,300 Mattel, Inc. ............... 29,081,906
--------------
TRANSPORTATION -- 4.2%
116,900 Burlington Northern Santa Fe
Corp. .................... 8,278,858
603,200 CNF, Inc. .................. 33,712,848
1,436,600 CSX Corp. .................. 72,936,182
271,380 Norfolk Southern Corp. ..... 12,165,965
--------------
127,093,853
--------------
UTILITIES -- 3.0%
1,200,180 American Electric Power
Company, Inc. ............ 44,514,676
344,800 Constellation Energy
Group..................... 19,860,480
225,000 Entergy Corp. .............. 15,446,250
305,800 Wisconsin Energy Corp. ..... 11,944,548
--------------
91,765,954
--------------
TOTAL COMMON STOCKS
(Cost $2,612,705,764)..... 2,950,080,304
--------------
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES LENDING COLLATERAL -- 10.2%
$307,114,865 Securities Lending
Collateral Investment
(Note 4) (Cost
$307,114,865)............. $ 307,114,865
--------------
TOTAL SECURITIES
(Cost $2,919,820,629)..... 3,257,195,169
--------------
REPURCHASE AGREEMENTS -- 2.5%
75,971,770 With Investors Bank & Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase
proceeds at maturity
$76,004,016
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 4.68%, due
08/25/32, with a value of
$36,226,871 and Freddie
Mac Adjustable Rate
Mortgage, 4.72%, due
01/15/35, with a value of
$43,543,488) (Cost
$75,971,770).............. 75,971,770
--------------
Total Investments -- 110.4%
(Cost $2,995,792,399)..... 3,333,166,939
Liabilities less other
assets -- (10.4)%......... (315,106,642)
--------------
NET ASSETS -- 100.0%........ $3,018,060,297
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $3,005,761,558.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation......... $ 449,254,791
Gross unrealized depreciation......... (121,849,410)
-------------
Net unrealized appreciation........... $ 327,405,381
=============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
113
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS -- 97.0%
ADVERTISING -- 1.0%
36,400 The Interpublic Group of
Companies, Inc.*............... $ 351,260
-----------
AEROSPACE AND DEFENSE -- 4.5%
13,900 Lockheed Martin Corp. ........... 884,457
5,900 Northrop Grumman Corp. .......... 354,649
8,800 Raytheon Company................. 353,320
-----------
1,592,426
-----------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.0%
4,900 Magna International,
Inc. -- Class A (Canada)....... 352,751
-----------
BANKS -- 3.0%
7,600 Bank of America Corp. ........... 350,740
6,200 Comerica, Inc. .................. 351,912
5,300 KeyCorp.......................... 174,529
2,600 UnionBanCal Corp. ............... 178,672
-----------
1,055,853
-----------
CHEMICALS -- 0.9%
21,100 The Mosaic Company*.............. 308,693
-----------
COMMERCIAL SERVICES -- 2.1%
41,900 Cendant Corp. ................... 722,775
-----------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 11.7%
58,500 Computer Associates
International, Inc. ........... 1,649,115
72,400 Electronic Data Systems Corp. ... 1,740,496
26,800 Microsoft Corp. ................. 700,820
-----------
4,090,431
-----------
CONSTRUCTION SERVICES AND SUPPLIES -- 5.7%
20,800 Centex Corp. .................... 1,486,992
13,200 Pulte Homes, Inc. ............... 519,552
-----------
2,006,544
-----------
CONSUMER GOODS AND SERVICES -- 5.6%
14,100 Altria Group, Inc. .............. 1,053,552
9,700 Eastman Kodak Company............ 226,980
17,200 Unilever PLC (ADR) (United
Kingdom)....................... 690,064
-----------
1,970,596
-----------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 1.5%
17,400 Waste Management, Inc. .......... 528,090
-----------
FINANCIAL SERVICES -- 10.0%
17,000 Freddie Mac...................... 1,110,950
29,700 JPMorgan Chase & Company......... 1,178,793
6,500 MBNA Corp. ...................... 176,540
</Table>
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
8,400 Prudential Financial, Inc. ...... $ 614,796
10,100 Washington Mutual, Inc. ......... 439,350
-----------
3,520,429
-----------
FOOD AND BEVERAGE -- 3.0%
24,900 Kraft Foods, Inc. -- Class A..... 700,686
18,600 Sara Lee Corp. .................. 351,540
-----------
1,052,226
-----------
INSURANCE -- 14.3%
8,100 Assurant, Inc. .................. 352,269
15,100 Conseco, Inc.*................... 349,867
25,400 Genworth Financial, Inc. -- Class
A.............................. 878,332
23,200 MetLife, Inc. ................... 1,136,800
7,000 Principal Financial Group,
Inc. .......................... 332,010
6,500 The Allstate Corp. .............. 351,455
4,100 The Hartford Financial Services
Group, Inc. ................... 352,149
27,500 The St. Paul Travelers Companies,
Inc............................ 1,228,425
-----------
4,981,307
-----------
LEISURE AND RECREATION -- 1.1%
5,200 Harrah's Entertainment, Inc. .... 370,708
-----------
MANUFACTURING -- 4.0%
48,800 Tyco International, Ltd.
(Bermuda)...................... 1,408,368
-----------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 2.6%
12,500 HCA, Inc. ....................... 631,250
38,900 Tenet Healthcare Corp.*.......... 297,974
-----------
929,224
-----------
METALS AND MINING -- 4.2%
10,700 Alcan, Inc. (Canada)............. 438,165
35,600 Alcoa, Inc. ..................... 1,052,692
-----------
1,490,857
-----------
OIL, COAL AND GAS -- 1.0%
8,900 Petro-Canada (Canada)............ 356,801
-----------
PAPER AND FOREST PRODUCTS -- 2.0%
7,700 International Paper Company...... 258,797
6,600 Weyerhaeuser Company............. 437,844
-----------
696,641
-----------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 2.0%
21,800 Merck & Company, Inc. ........... 693,458
-----------
REAL ESTATE DEVELOPMENT AND SERVICES -- 1.2%
6,500 The St. Joe Company.............. 436,930
-----------
</Table>
See notes to financial statements.
114
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 1.5%
5,200 McDonald's Corp. ................ $ 175,344
7,400 YUM! Brands, Inc. ............... 346,912
-----------
522,256
-----------
RETAIL: SUPERMARKETS -- 3.1%
18,900 Albertson's, Inc. ............... 403,515
29,200 Safeway, Inc. ................... 690,872
-----------
1,094,387
-----------
SEMICONDUCTORS -- 0.3%
4,700 Freescale Semiconductor, Inc. --
Class A*....................... 118,393
-----------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.5%
2,800 ALLTEL Corp. .................... 176,680
-----------
TRANSPORTATION -- 3.0%
20,700 CSX Corp. ....................... 1,050,939
-----------
UTILITIES -- 6.2%
3,800 Entergy Corp. ................... 260,870
3,600 FirstEnergy Corp. ............... 176,364
25,300 FPL Group, Inc. ................. 1,051,468
10,800 Public Service Enterprise Group,
Inc. .......................... 701,676
-----------
2,190,378
-----------
TOTAL COMMON STOCKS
(Cost $33,489,097)............. 34,069,401
-----------
<Caption>
PRINCIPAL VALUE
- --------- -----------
REPURCHASE AGREEMENTS -- 10.4%
$3,667,757 With Investors Bank and Trust,
dated 12/30/05,
3.82%, due 01/03/06, repurchase
proceeds at maturity $3,669,314
(Collateralized by Small
Business Administration,
7.38%, due 07/25/15, with a
value of $3,851,145) (Cost
$3,667,757).................... $ 3,667,757
-----------
Total Investments -- 107.4% (Cost
$37,156,854)................... 37,737,158
Liabilities less other
assets -- (7.4)%............... (2,598,646)
-----------
NET ASSETS -- 100.0%............. $35,138,512
===========
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $37,162,270.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............ $ 899,277
Gross unrealized depreciation............ (324,389)
---------
Net unrealized appreciation.............. $ 574,888
=========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
115
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 99.0%
AEROSPACE AND DEFENSE -- 1.8%
28,200 Lockheed Martin Corp. ....... $ 1,794,366
113,800 Northrop Grumman Corp. ...... 6,840,518
65,200 Raytheon Company............. 2,617,780
148,100 The Boeing Company........... 10,402,544
--------------
21,655,208
--------------
AGRICULTURE -- 0.6%
98,100 Monsanto Company............. 7,605,693
--------------
APPAREL: MANUFACTURING AND RETAIL -- 1.9%
55,600 Abercrombie & Fitch
Company -- Class A(1)...... 3,624,008
40,300 Claire's Stores, Inc. ....... 1,177,566
133,300 Coach, Inc.*................. 4,444,222
65,300 Jones Apparel Group, Inc. ... 2,006,016
176,300 Nordstrom, Inc. ............. 6,593,620
53,100 Payless ShoeSource, Inc.*.... 1,332,810
167,400 The Gap, Inc. ............... 2,952,936
3,500 VF Corp. .................... 193,690
--------------
22,324,868
--------------
AUTOMOBILE: RETAIL -- 0.2%
111,800 AutoNation, Inc.*............ 2,429,414
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.7%
76,500 Autoliv, Inc. ............... 3,474,630
511,200 Ford Motor Company........... 3,946,464
11,700 Navistar International
Corp.*..................... 334,854
27,200 TRW Automotive Holdings
Corp.*..................... 716,720
--------------
8,472,668
--------------
BANKS -- 6.7%
185,000 Bank of America Corp. ....... 8,537,750
9,500 Bank of Hawaii Corp. ........ 489,630
90,000 BB&T Corp. .................. 3,771,900
65,000 Comerica, Inc. .............. 3,689,400
114,800 Commerce Bancorp, Inc. (New
Jersey)(1)................. 3,950,268
38,400 Downey Financial Corp. ...... 2,626,176
80,100 IndyMac Bancorp, Inc.(1)..... 3,125,502
136,300 KeyCorp...................... 4,488,359
58,800 Mellon Financial Corp. ...... 2,013,900
46,800 National City Corp. ......... 1,571,076
60,500 PNC Financial Services
Group, Inc. ............... 3,740,715
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
15,400 The Bank of New York Company,
Inc. ...................... $ 490,490
92,000 UnionBanCal Corp. ........... 6,322,240
370,000 US Bancorp................... 11,059,300
183,600 Wachovia Corp. .............. 9,705,096
219,000 Wells Fargo & Company........ 13,759,770
--------------
79,341,572
--------------
BROADCAST SERVICES/MEDIA -- 2.6%
20,200 Clear Channel
Communications, Inc. ...... 635,290
73,600 Comcast Corp. -- Class
A*(1)...................... 1,910,656
18,500 Gannett Company, Inc. ....... 1,120,545
13,500 Hearst-Argyle Television,
Inc. -- Class A............ 321,975
27,300 Liberty Global, Inc. -- Class
A*......................... 614,250
14,700 Liberty Global,
Inc. -- Series C*.......... 311,640
194,100 Liberty Media Corp. -- Class
A*......................... 1,527,567
152,700 Shaw Communications, Inc. --
Class B (Canada)(1)........ 3,310,536
43,600 The McGraw-Hill Companies,
Inc. ...................... 2,251,068
723,300 Time Warner, Inc. ........... 12,614,352
123,365 Viacom, Inc. -- Class B*..... 4,021,699
57,500 XM Satellite Radio Holdings,
Inc. -- Class A*(1)........ 1,568,600
--------------
30,208,178
--------------
BUSINESS SERVICES AND SUPPLIES -- 1.5%
84,800 Automatic Data Processing,
Inc. ...................... 3,891,472
42,200 Fair Isaac Corp.(1).......... 1,863,974
149,900 First Data Corp. ............ 6,447,199
61,400 Fiserv, Inc.*................ 2,656,778
21,000 Global Payments, Inc. ....... 978,810
36,600 Moody's Corp. ............... 2,247,972
--------------
18,086,205
--------------
CHEMICALS -- 0.9%
133,600 Agrium, Inc. (Canada)........ 2,937,864
17,100 Air Products and Chemicals,
Inc. ...................... 1,012,149
20,200 Ashland, Inc. ............... 1,169,580
64,100 Methanex Corp. (Canada)(1)... 1,201,234
99,600 The Dow Chemical Company..... 4,364,472
--------------
10,685,299
--------------
</Table>
See notes to financial statements.
116
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMMERCIAL SERVICES -- 0.0%
20,300 Cendant Corp. ............... $ 350,175
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 7.0%
200,300 Activision, Inc.*............ 2,752,122
10,500 Apple Computer, Inc.*........ 754,845
29,100 Autodesk, Inc. .............. 1,249,845
18,200 BMC Software, Inc.*.......... 372,918
100,900 Cadence Design Systems,
Inc.*(1)................... 1,707,228
160 Computer Associates
International, Inc. ....... 4,510
28,300 Computer Sciences Corp.*..... 1,433,112
12,100 Dell, Inc.*.................. 362,879
60,900 DST Systems, Inc.*(1)........ 3,648,519
173,500 Electronic Arts, Inc.*....... 9,075,785
20,500 Electronic Data Systems
Corp. ..................... 492,820
457,800 Hewlett-Packard Company...... 13,106,814
175,700 Ingram Micro, Inc. -- Class
A*......................... 3,501,701
36,200 International Business
Machines Corp. ............ 2,975,640
1,233,300 Microsoft Corp. ............. 32,250,795
138,400 SanDisk Corp.*............... 8,694,288
--------------
82,383,821
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.8%
52,900 Beazer Homes USA, Inc.(1).... 3,853,236
41,300 DR Horton, Inc. ............. 1,475,649
21,900 KB Home(1)................... 1,591,254
29,900 Martin Marietta Materials,
Inc. ...................... 2,293,928
--------------
9,214,067
--------------
CONSUMER GOODS AND SERVICES -- 4.5%
232,600 Altria Group, Inc. .......... 17,379,872
28,400 American Greetings Corp. --
Class A(1)................. 623,948
135,400 Colgate-Palmolive Company.... 7,426,690
35,100 FedEx Corp. ................. 3,628,989
355,005 Procter & Gamble Company..... 20,547,689
4,000 Reynolds American, Inc.(1)... 381,320
47,400 The Clorox Company........... 2,696,586
7,200 United Parcel Service,
Inc. -- Class B............ 541,080
--------------
53,226,174
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONTAINERS AND PACKAGING -- 0.1%
88,700 Crown Holdings, Inc.*........ $ 1,732,311
--------------
DISTRIBUTION -- 0.1%
40,600 Tech Data Corp.*............. 1,611,008
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 2.7%
913,200 General Electric Company..... 32,007,660
--------------
ELECTRONICS -- 0.5%
181,700 ATI Technologies, Inc.
(Canada)*.................. 3,087,083
16,400 Avnet, Inc.*................. 392,616
25,700 Emerson Electric Company..... 1,919,790
--------------
5,399,489
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.0%
10,400 Republic Services, Inc. ..... 390,520
--------------
FINANCIAL SERVICES -- 9.5%
186,800 American Express Company..... 9,612,728
91,400 AmeriCredit Corp.*........... 2,342,582
35,400 Ameriprise Financial,
Inc. ...................... 1,451,400
20,200 Ameritrade Holding Corp.*.... 484,800
80,800 Capital One Financial
Corp. ..................... 6,981,120
32,700 CIT Group, Inc. ............. 1,693,206
586,900 Citigroup, Inc. ............. 28,482,257
11,200 Countrywide Financial
Corp. ..................... 382,928
73,500 E*TRADE Financial Corp.*..... 1,533,210
12,100 Franklin Resources, Inc. .... 1,137,521
176,300 JPMorgan Chase & Company..... 6,997,347
54,200 Lehman Brothers Holdings,
Inc.(1).................... 6,946,814
195,500 Merrill Lynch & Company,
Inc. ...................... 13,241,215
83,200 Morgan Stanley............... 4,720,768
10,900 Nuveen Investments -- Class
A(1)....................... 464,558
47,500 Prudential Financial,
Inc. ...................... 3,476,525
32,900 SLM Corp. ................... 1,812,461
16,200 The Bear Stearns Companies,
Inc. ...................... 1,871,586
54,600 The Goldman Sachs Group,
Inc. ...................... 6,972,966
244,021 Washington Mutual, Inc. ..... 10,614,914
--------------
111,220,906
--------------
</Table>
See notes to financial statements.
117
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 2.8%
113,600 Archer-Daniels-Midland
Company.................... $ 2,801,376
189,200 Coca-Cola Company............ 7,626,652
42,300 Dean Foods Company*.......... 1,593,018
157,500 PepsiCo, Inc. ............... 9,305,100
138,200 Pilgrim's Pride Corp.(1)..... 4,582,712
104,500 Sysco Corp. ................. 3,244,725
63,800 The Pepsi Bottling Group,
Inc. ...................... 1,825,318
123,600 Tyson Foods, Inc. -- Class
A.......................... 2,113,560
--------------
33,092,461
--------------
INSURANCE -- 5.4%
28,000 Aetna, Inc. ................. 2,640,680
111,400 American International
Group, Inc. ............... 7,600,822
18,800 Assurant, Inc. .............. 817,612
8,800 CIGNA Corp. ................. 982,960
48,800 CNA Financial Corp.*......... 1,597,224
70,000 First American Corp. ........ 3,171,000
46,900 Genworth Financial, Inc. --
Class A.................... 1,621,802
60,500 Loews Corp. ................. 5,738,425
42,300 MBIA, Inc. .................. 2,544,768
69,300 MetLife, Inc. ............... 3,395,700
9,000 Nationwide Financial
Services, Inc. -- Class
A.......................... 396,000
109,100 Principal Financial Group,
Inc. ...................... 5,174,613
63,400 Radian Group, Inc. .......... 3,714,606
70,400 SAFECO Corp. ................ 3,977,600
127,700 The Allstate Corp. .......... 6,904,739
30,300 The Chubb Corp. ............. 2,958,795
77,200 The PMI Group, Inc. ......... 3,170,604
25,000 The Progressive Corp.(1)..... 2,919,500
38,100 The St. Paul Travelers
Companies, Inc. ........... 1,701,927
58,100 WR Berkley Corp. ............ 2,766,722
--------------
63,796,099
--------------
INTERNET SERVICES -- 3.0%
589,900 Cisco Systems, Inc.*......... 10,099,088
33,900 Google, Inc. -- Class
A*(1)...................... 14,063,754
214,100 Juniper Networks, Inc.*...... 4,774,430
38,400 Symantec Corp.*.............. 672,000
134,700 YAHOO!, Inc.*................ 5,277,546
--------------
34,886,818
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION -- 1.1%
50,500 Carnival Corp. (Panama)(1)... $ 2,700,235
26,900 MGM MIRAGE*.................. 986,423
38,200 Royal Caribbean Cruises, Ltd.
(Liberia).................. 1,721,292
119,200 Starwood Hotels & Resorts
Worldwide, Inc. ........... 7,612,112
--------------
13,020,062
--------------
MACHINERY -- 1.0%
69,500 Caterpillar, Inc. ........... 4,015,015
35,200 Cummins, Inc.(1)............. 3,158,496
20,800 Terex Corp.*................. 1,235,520
116,500 The Timken Company(1)........ 3,730,330
--------------
12,139,361
--------------
MANUFACTURING -- 0.6%
54,800 3M Company................... 4,247,000
5,800 Harsco Corp. ................ 391,558
14,600 ITT Industries, Inc. ........ 1,501,172
8,200 Parker Hannifin Corp. ....... 540,872
9,000 SPX Corp. ................... 411,930
--------------
7,092,532
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 5.2%
40,700 Baxter International,
Inc. ...................... 1,532,355
22,800 Becton, Dickinson and
Company.................... 1,369,824
67,300 Dade Behring Holdings,
Inc. ...................... 2,751,897
66,900 DaVita, Inc.*................ 3,387,816
10,700 Guidant Corp. ............... 692,825
15,200 Humana, Inc.*................ 825,816
133,600 Johnson & Johnson............ 8,029,360
70,800 Kinetic Concepts, Inc.*(1)... 2,815,008
54,400 McKesson Corp. .............. 2,806,496
74,100 Medco Health Solutions,
Inc.*...................... 4,134,780
126,200 Medtronic, Inc. ............. 7,265,334
129,800 Omnicare, Inc. .............. 7,427,156
112,000 St Jude Medical, Inc.*....... 5,622,400
91,600 UnitedHealth Group, Inc. .... 5,692,024
37,300 Varian Medical Systems,
Inc.*...................... 1,877,682
67,600 WellPoint, Inc.*............. 5,393,804
--------------
61,624,577
--------------
</Table>
See notes to financial statements.
118
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
METALS AND MINING -- 1.2%
65,700 Freeport-McMoRan Copper &
Gold, Inc. -- Class B(1)... $ 3,534,660
46,000 IPSCO, Inc. (Canada)(1)...... 3,817,080
7,900 Newmont Mining Corp. ........ 421,860
98,000 Nucor Corp.(1)............... 6,538,560
--------------
14,312,160
--------------
OIL AND GAS: PIPELINES -- 0.1%
12,900 Questar Corp. ............... 976,530
--------------
OIL, COAL AND GAS -- 9.1%
30,900 Anadarko Petroleum Corp. .... 2,927,775
37,600 Apache Corp. ................ 2,576,352
60,600 Baker Hughes, Inc. .......... 3,683,268
90,500 Burlington Resources,
Inc. ...................... 7,801,100
129,500 ChevronTexaco Corp. ......... 7,351,715
208,100 ConocoPhillips............... 12,107,258
145,800 Devon Energy Corp. .......... 9,118,332
29,300 ENSCO International, Inc. ... 1,299,455
104,400 EOG Resources, Inc. ......... 7,659,828
488,700 Exxon Mobil Corp. ........... 27,450,279
8,900 Helmerich & Payne, Inc. ..... 550,999
112,700 Newfield Exploration
Company*................... 5,642,889
51,400 Petro-Canada (Canada)........ 2,060,626
7,800 Pioneer Natural Resources
Company.................... 399,906
17,200 Schlumberger, Ltd.
(Netherlands Antilles)..... 1,670,980
88,900 Sunoco, Inc.(1).............. 6,967,982
82,200 Talisman Energy, Inc.
(Canada)(1)................ 4,346,736
53,200 Valero Energy Corp. ......... 2,745,120
--------------
106,360,600
--------------
PAPER AND FOREST PRODUCTS -- 0.0%
10,500 Plum Creek Timber
Company, Inc. ............. 378,525
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 7.7%
83,500 Abbott Laboratories.......... 3,292,405
21,800 Allergan, Inc.(1)............ 2,353,528
167,200 AmerisourceBergen Corp. ..... 6,922,080
193,600 Amgen, Inc.*................. 15,267,296
125,500 Cardinal Health, Inc. ....... 8,628,125
136,900 Caremark Rx, Inc.*........... 7,090,051
53,100 Genentech, Inc.*............. 4,911,750
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT
(CONTINUED)
15,600 Genzyme Corp.*............... $ 1,104,168
203,300 King Pharmaceuticals,
Inc.*...................... 3,439,836
72,000 MedImmune, Inc.*............. 2,521,440
128,300 Merck & Company, Inc. ....... 4,081,223
36,800 Novartis AG (ADR)
(Switzerland)(1)........... 1,931,264
945,100 Pfizer, Inc. ................ 22,039,732
92,600 Schering-Plough Corp. ....... 1,930,710
113,200 Wyeth........................ 5,215,124
--------------
90,728,732
--------------
PRINTING AND PUBLISHING -- 0.0%
14,400 Dex Media, Inc. ............. 390,096
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.4%
70,300 CB Richard Ellis Group,
Inc. -- Class A*........... 4,137,155
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
56,400 Equity Office Properties
Trust...................... 1,710,612
8,200 ProLogis..................... 383,104
--------------
2,093,716
--------------
RETAIL -- 3.9%
55,300 Best Buy Company, Inc. ...... 2,404,444
123,403 Circuit City Stores, Inc. ... 2,787,674
154,600 CVS Corp. ................... 4,084,532
43,300 Dillard's, Inc. -- Class A... 1,074,706
130,600 Kohl's Corp.*................ 6,347,160
74,900 Lowe's Companies, Inc.(1).... 4,992,834
98,500 Office Depot, Inc.*.......... 3,092,900
48,800 Sears Holdings Corp.*(1)..... 5,637,864
19,200 The Home Depot, Inc. ........ 777,216
92,000 Walgreen Company............. 4,071,920
233,100 Wal-Mart Stores, Inc. ....... 10,909,080
--------------
46,180,330
--------------
RETAIL: RESTAURANTS -- 1.1%
96,600 Brinker International,
Inc.(1).................... 3,734,556
135,300 Darden Restaurants, Inc. .... 5,260,464
13,600 Panera Bread Company -- Class
A*......................... 893,248
75,500 YUM! Brands, Inc. ........... 3,539,440
--------------
13,427,708
--------------
</Table>
See notes to financial statements.
119
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL: SUPERMARKETS -- 0.9%
153,200 SUPERVALU, Inc. ............. $ 4,975,936
288,700 The Kroger Company*.......... 5,450,656
--------------
10,426,592
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.2%
55,600 Agilent Technologies,
Inc.*...................... 1,850,924
--------------
SEMICONDUCTORS -- 4.3%
408,800 Applied Materials, Inc. ..... 7,333,872
55,499 Freescale Semiconductor,
Inc. -- Class B*........... 1,396,910
349,300 Intel Corp. ................. 8,718,528
156,100 Maxim Integrated Products,
Inc. ...................... 5,657,064
174,600 Micron Technology,
Inc.*(1)................... 2,323,926
293,400 National Semiconductor
Corp. ..................... 7,622,532
437,500 Texas Instruments, Inc.(1)... 14,030,625
141,900 Xilinx, Inc. ................ 3,577,299
--------------
50,660,756
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 4.3%
49,600 AT&T, Inc. .................. 1,214,704
149,700 BCE, Inc. (Canada)(1)........ 3,585,315
44,800 BellSouth Corp. ............. 1,214,080
165,800 CenturyTel, Inc.(1).......... 5,497,928
102,000 Corning, Inc.*............... 2,005,320
581,800 Motorola, Inc. .............. 13,142,862
164,000 QUALCOMM, Inc. .............. 7,065,120
101,700 Sprint Nextel Corp. ......... 2,375,712
10,400 Telephone and Data Systems,
Inc. -- Special Common
Shares..................... 359,944
468,500 Verizon Communications,
Inc. ...................... 14,111,220
--------------
50,572,205
--------------
TRANSPORTATION -- 1.5%
59,900 Burlington Northern Santa Fe
Corp. ..................... 4,242,118
60,200 CNF, Inc. ................... 3,364,578
52,800 CSX Corp. ................... 2,680,656
112,500 Norfolk Southern Corp. ...... 5,043,375
41,900 Teekay Shipping Corp.
(Marshall Islands)(1)...... 1,671,810
5,200 Union Pacific Corp. ......... 418,652
--------------
17,421,189
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
UTILITIES -- 2.9%
82,700 American Electric Power
Company, Inc. ............. $ 3,067,343
74,000 Constellation Energy Group... 4,262,400
168,100 Edison International......... 7,330,841
51,000 Entergy Corp. ............... 3,501,150
82,600 FirstEnergy Corp. ........... 4,046,574
47,200 NRG Energy, Inc.*(1)......... 2,224,064
72,900 PG&E Corp.(1)................ 2,706,048
135,300 TXU Corp. ................... 6,790,707
--------------
33,929,127
--------------
TOTAL COMMON STOCKS (Cost
$1,048,139,890)............ 1,167,843,491
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 8.5%
$99,867,379 Securities Lending Collateral
Investment (Note 4) (Cost
$99,867,379)............... 99,867,379
--------------
TOTAL SECURITIES (Cost
$1,148,007,269)............ 1,267,710,870
--------------
REPURCHASE AGREEMENTS -- 0.8%
9,108,749 With Investors Bank and
Trust, dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $9,112,615
(Collateralized by various
Small Business
Administrations,
7.02%-7.13%, due
04/25/18-04/25/27, with a
total value of $9,564,186)
(Cost $9,108,749).......... 9,108,749
--------------
Total Investments -- 108.3%
(Cost $1,157,116,018)...... 1,276,819,619
Liabilities less other
assets -- (8.3)%........... (98,060,750)
--------------
NET ASSETS -- 100.0%......... $1,178,758,869
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $1,163,601,017.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $141,679,280
Gross unrealized depreciation.......... (28,460,678)
------------
Net unrealized appreciation............ $113,218,602
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
120
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 98.9%
AEROSPACE AND DEFENSE -- 1.7%
161,122 General Dynamics Corp. ..... $ 18,375,964
360,670 The Boeing Company.......... 25,333,461
--------------
43,709,425
--------------
AGRICULTURE -- 0.7%
243,630 Monsanto Company............ 18,888,634
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.9%
295,260 Nordstrom, Inc. ............ 11,042,724
683,000 The Gap, Inc. .............. 12,048,120
--------------
23,090,844
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.0%
250,942 Toyota Motor Corp. (ADR)
(Japan)(1)................ 26,253,552
--------------
BANKS -- 2.0%
468,545 Commerce Bancorp, Inc. (New
Jersey)(1)................ 16,122,633
371,421 UBS AG (Switzerland)........ 35,340,709
--------------
51,463,342
--------------
BROADCAST SERVICES/MEDIA -- 0.9%
936,460 Time Warner, Inc. .......... 16,331,862
235,600 XM Satellite Radio Holdings,
Inc. -- Class A*(1)....... 6,427,168
--------------
22,759,030
--------------
BUSINESS SERVICES AND SUPPLIES -- 1.2%
345,220 Automatic Data Processing,
Inc. ..................... 15,842,146
360,905 First Data Corp. ........... 15,522,524
--------------
31,364,670
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 8.8%
821,565 Activision, Inc.*........... 11,288,303
699,744 Apple Computer, Inc.*....... 50,304,596
710,793 Electronic Arts, Inc.*...... 37,181,582
3,859,730 Microsoft Corp. ............ 100,931,939
442,630 SanDisk Corp.*.............. 27,806,017
--------------
227,512,437
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.0%
408,213 Lennar Corp. -- Class
A(1)...................... 24,909,157
--------------
CONSUMER GOODS AND SERVICES -- 7.5%
230,605 Altria Group, Inc. ......... 17,230,806
310,900 Colgate-Palmolive Company... 17,052,865
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
566,915 FedEx Corp. ................ $ 58,613,342
1,764,442 Procter & Gamble Company.... 102,125,902
--------------
195,022,915
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 5.0%
3,655,841 General Electric Company.... 128,137,227
--------------
ELECTRONICS -- 0.5%
739,030 ATI Technologies, Inc.
(Canada)*................. 12,556,120
--------------
FINANCIAL SERVICES -- 8.8%
759,435 American Express Company.... 39,080,525
332,854 Capital One Financial
Corp. .................... 28,758,586
111,576 Chicago Mercantile Exchange
Holdings, Inc.(1)......... 41,003,064
643,252 Countrywide Financial
Corp. .................... 21,992,786
34,161 Lehman Brothers Holdings,
Inc. ..................... 4,378,415
766,255 SLM Corp. .................. 42,212,988
399,170 The Goldman Sachs Group,
Inc. ..................... 50,978,001
--------------
228,404,365
--------------
FOOD AND BEVERAGE -- 2.4%
362,000 Coca-Cola Company........... 14,592,220
575,284 PepsiCo, Inc. .............. 33,987,779
432,600 Sysco Corp. ................ 13,432,230
--------------
62,012,229
--------------
INSURANCE -- 0.6%
234,120 American International
Group, Inc. .............. 15,974,008
--------------
INTERNET SERVICES -- 5.5%
1,450,800 Cisco Systems, Inc.*........ 24,837,696
185,246 Google, Inc. -- Class
A*(1)..................... 76,851,155
874,100 Juniper Networks, Inc.*..... 19,492,430
552,370 YAHOO!, Inc.*............... 21,641,857
--------------
142,823,138
--------------
LEISURE AND RECREATION -- 3.8%
142,558 Four Seasons Hotels, Inc.
(Canada)(1)............... 7,092,261
795,179 MGM MIRAGE*................. 29,159,214
157,660 Royal Caribbean Cruises,
Ltd. (Liberia)............ 7,104,160
</Table>
See notes to financial statements.
121
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
486,550 Starwood Hotels & Resorts
Worldwide, Inc. .......... $ 31,071,082
416,544 Wynn Resorts, Ltd.*(1)...... 22,847,438
--------------
97,274,155
--------------
MACHINERY -- 1.9%
838,222 Caterpillar, Inc. .......... 48,424,085
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 10.9%
271,190 DaVita, Inc.*............... 13,733,062
288,385 Kinetic Concepts,
Inc.*(1).................. 11,466,188
303,485 Medco Health Solutions,
Inc.*..................... 16,934,463
688,750 Medtronic, Inc. ............ 39,651,337
436,975 Omnicare, Inc. ............. 25,003,710
221,400 St Jude Medical, Inc.*...... 11,114,280
1,674,193 UnitedHealth Group, Inc. ... 104,034,352
152,640 Varian Medical Systems,
Inc.*..................... 7,683,898
276,180 WellPoint, Inc.*............ 22,036,402
488,968 Zimmer Holdings, Inc.*...... 32,976,001
--------------
284,633,693
--------------
OIL, COAL AND GAS -- 2.4%
247,150 Baker Hughes, Inc. ......... 15,021,777
285,400 EOG Resources, Inc. ........ 20,939,798
38,236 Halliburton Company......... 2,369,103
457,915 Newfield Exploration
Company*.................. 22,927,804
--------------
61,258,482
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 9.2%
838,330 Amgen, Inc.*................ 66,110,704
238,795 Cardinal Health, Inc. ...... 16,417,156
558,700 Caremark Rx, Inc.*.......... 28,935,073
925,374 Genentech, Inc.*............ 85,597,095
292,605 MedImmune, Inc.*............ 10,247,027
150,200 Novartis AG (ADR)
(Switzerland)............. 7,882,496
380,870 Schering-Plough Corp. ...... 7,941,140
315,400 Wyeth....................... 14,530,478
--------------
237,661,169
--------------
RETAIL -- 9.7%
227,032 Best Buy Company, Inc.(1)... 9,871,351
979,658 CVS Corp. .................. 25,882,564
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
534,495 Kohl's Corp.*............... $ 25,976,457
1,119,979 Lowe's Companies, Inc.(1)... 74,657,801
402,040 Office Depot, Inc.*......... 12,624,056
200,140 Sears Holdings Corp.*(1).... 23,122,174
649,888 The Home Depot, Inc. ....... 26,307,466
322,900 Walgreen Company............ 14,291,554
806,050 Wal-Mart Stores, Inc. ...... 37,723,140
--------------
250,456,563
--------------
RETAIL: RESTAURANTS -- 0.6%
541,960 Starbucks Corp.*............ 16,264,220
--------------
SEMICONDUCTORS -- 5.1%
1,670,990 Applied Materials, Inc. .... 29,977,561
638,005 Maxim Integrated Products,
Inc. ..................... 23,121,301
1,198,500 National Semiconductor
Corp. .................... 31,137,030
1,054,700 Texas Instruments,
Inc.(1)................... 33,824,229
579,905 Xilinx, Inc. ............... 14,619,405
--------------
132,679,526
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 5.3%
3,693,743 Motorola, Inc. ............. 83,441,654
1,242,197 QUALCOMM, Inc. ............. 53,513,847
--------------
136,955,501
--------------
TRANSPORTATION -- 1.5%
398,314 Burlington Northern Santa Fe
Corp. .................... 28,208,598
236,340 Norfolk Southern Corp. ..... 10,595,122
--------------
38,803,720
--------------
TOTAL COMMON STOCKS (Cost
$2,174,013,120)........... 2,559,292,207
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 8.6%
$223,420,265 Securities Lending
Collateral Investment
(Note 4) (Cost
$223,420,265)............. 223,420,265
--------------
TOTAL SECURITIES (Cost
$2,397,433,385)........... 2,782,712,472
--------------
</Table>
See notes to financial statements.
122
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 1.2%
$ 30,474,532 With Investors Bank and
Trust, dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $30,487,467
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 4.88%, due
12/25/33, with a value of
$28,147,351 and Small
Business Administration,
7.13%, due 09/25/15, with
a value of $3,850,908)
(Cost $30,474,532)........ $ 30,474,532
--------------
Total Investments -- 108.7%
(Cost $2,427,907,917)..... 2,813,187,004
Liabilities less other
assets -- (8.7)%.......... (225,804,943)
--------------
NET ASSETS -- 100.0%........ $2,587,382,061
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $2,453,033,279.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $402,593,097
Gross unrealized depreciation.......... (42,439,372)
------------
Net unrealized appreciation............ $360,153,725
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
123
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 96.0%
AEROSPACE AND DEFENSE -- 1.8%
284,900 Goodrich Corp.................. $ 11,709,390
------------
AIRLINES -- 0.4%
46,400 Alaska Air Group, Inc.*........ 1,657,408
121,900 ExpressJet Holdings, Inc.*..... 986,171
------------
2,643,579
------------
APPAREL: MANUFACTURING AND RETAIL -- 1.5%
113,600 Limited Brands, Inc............ 2,538,960
24,400 Reebok International, Ltd...... 1,420,812
59,600 Russell Corp................... 802,216
98,550 The Cato Corp. -- Class A...... 2,113,898
44,300 VF Corp........................ 2,451,562
------------
9,327,448
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.9%
97,600 ArvinMeritor, Inc.............. 1,404,464
52,900 Autoliv, Inc................... 2,402,718
65,300 Navistar International
Corp.*....................... 1,868,886
------------
5,676,068
------------
BANKS -- 8.1%
88,400 Comerica, Inc.................. 5,017,584
35,300 Downey Financial Corp.......... 2,414,167
158,500 Huntington Bancshares, Inc..... 3,764,375
145,400 KeyCorp........................ 4,788,022
131,700 Marshall & Ilsley Corp......... 5,668,368
304,000 North Fork Bancorp, Inc........ 8,317,440
147,800 PNC Financial Services Group,
Inc.......................... 9,138,474
106,000 State Street Corp.............. 5,876,640
73,900 Trustmark Corp................. 2,030,033
34,600 UnionBanCal Corp............... 2,377,712
67,259 United Bankshares, Inc......... 2,370,207
------------
51,763,022
------------
BROADCAST SERVICES/MEDIA -- 1.6%
93,800 Arbitron, Inc.................. 3,562,524
115,900 The EW Scripps Company -- Class
A(1)......................... 5,565,518
42,100 Tribune Company................ 1,273,946
------------
10,401,988
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES -- 2.9%
169,800 Convergys Corp.*............... $ 2,691,330
122,800 Dun & Bradstreet Corp.*........ 8,222,688
161,600 Manpower, Inc.................. 7,514,400
------------
18,428,418
------------
CHEMICALS -- 2.6%
38,100 Ashland, Inc................... 2,205,990
42,300 Eastman Chemical Company....... 2,182,257
146,500 PolyOne Corp.*................. 941,995
38,100 PPG Industries, Inc............ 2,205,990
254,300 Syngenta AG (ADR)
(Switzerland)*............... 6,334,613
60,800 The Lubrizol Corp.............. 2,640,544
------------
16,511,389
------------
COMMERCIAL SERVICES -- 1.4%
198,800 ChoicePoint, Inc.*............. 8,848,588
3,680 Pre-Paid Legal Services,
Inc.(1)...................... 140,613
------------
8,989,201
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 3.5%
135,600 Activision, Inc.*.............. 1,863,144
24,800 Computer Sciences Corp.*....... 1,255,872
339,400 NCR Corp.*..................... 11,519,236
144,700 Sybase, Inc.*.................. 3,163,142
85,100 The Reynolds and Reynolds
Company -- Class A........... 2,388,757
127,400 Western Digital Corp.*......... 2,370,914
------------
22,561,065
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.1%
166,100 American Standard Companies,
Inc.......................... 6,635,695
15,200 KB Home........................ 1,104,432
17,000 The Ryland Group, Inc.......... 1,226,210
72,500 USG Corp.*(1).................. 4,712,500
------------
13,678,837
------------
CONSUMER GOODS AND SERVICES -- 2.4%
73,500 Blyth, Inc..................... 1,539,825
82,900 Eastman Kodak Company(1)....... 1,939,860
78,000 Fortune Brands, Inc............ 6,085,560
115,200 Tupperware Corp................ 2,580,480
37,900 Whirlpool Corp.(1)............. 3,174,504
------------
15,320,229
------------
</Table>
See notes to financial statements.
124
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED OPERATIONS AND SERVICES -- 1.5%
122,800 Textron, Inc................... $ 9,453,144
------------
ELECTRONICS -- 2.1%
120,100 Amphenol Corp. -- Class A...... 5,315,626
47,600 Belden CDT, Inc................ 1,162,868
327,400 Solectron Corp.*............... 1,198,284
276,200 Thomson (ADR) (France)......... 5,783,628
------------
13,460,406
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.2%
135,700 Allied Waste Industries,
Inc.*(1)..................... 1,186,018
------------
EQUIPMENT RENTAL AND LEASING -- 0.4%
112,400 United Rentals North America,
Inc.*(1)..................... 2,629,036
------------
FINANCIAL SERVICES -- 2.9%
75,964 Advanta Corp. -- Class B....... 2,464,272
58,100 AG Edwards, Inc................ 2,722,566
37,900 CIT Group, Inc................. 1,962,462
281,300 E*TRADE Financial Corp.*....... 5,867,918
80,500 Friedman, Billings, Ramsey
Group, Inc. --
Class A(1)................... 796,950
54,800 H&R Block, Inc................. 1,345,340
86,600 Nuveen Investments -- Class
A(1)......................... 3,690,892
------------
18,850,400
------------
FOOD AND BEVERAGE -- 3.0%
152,900 Archer-Daniels-Midland
Company...................... 3,770,514
219,900 Del Monte Foods Company*....... 2,293,557
150,300 McCormick & Company, Inc....... 4,647,276
190,500 Sysco Corp..................... 5,915,025
53,200 The Pepsi Bottling Group,
Inc.......................... 1,522,052
76,500 Tyson Foods, Inc. -- Class
A(1)......................... 1,308,150
------------
19,456,574
------------
INSURANCE -- 8.2%
238,000 Aon Corp....................... 8,556,100
132,000 Assurant, Inc.................. 5,740,680
19,100 CIGNA Corp..................... 2,133,470
64,680 Cincinnati Financial Corp...... 2,889,902
102,000 Horace Mann Educators Corp..... 1,933,920
40,600 Jefferson-Pilot Corp........... 2,311,358
36,600 LandAmerica Financial Group,
Inc.......................... 2,283,840
59,800 Lincoln National Corp.......... 3,171,194
122,000 MBIA, Inc.(1).................. 7,339,520
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
28,400 MGIC Investment Corp.(1)....... $ 1,869,288
92,000 Nationwide Financial Services,
Inc. -- Class A.............. 4,048,000
70,400 Principal Financial Group,
Inc.......................... 3,339,072
12,100 Radian Group, Inc.............. 708,939
56,300 SAFECO Corp.................... 3,180,950
55,000 Unitrin, Inc................... 2,477,750
------------
51,983,983
------------
INTERNET SERVICES -- 0.4%
259,500 EarthLink, Inc.*............... 2,883,045
------------
LEISURE AND RECREATION -- 2.4%
108,200 Harrah's Entertainment, Inc.... 7,713,578
169,200 Royal Caribbean Cruises, Ltd.
(Liberia).................... 7,624,152
------------
15,337,730
------------
MANUFACTURING -- 4.6%
105,500 Carlisle Companies, Inc.(1).... 7,295,325
41,300 Crane Company.................. 1,456,651
64,700 EnPro Industries, Inc.*........ 1,743,665
50,200 Furniture Brands International,
Inc.......................... 1,120,966
58,100 ITT Industries, Inc............ 5,973,842
86,600 Precision Castparts Corp....... 4,486,746
140,700 The Sherwin-Williams Company... 6,390,594
104,900 Tredegar Corp.................. 1,352,161
------------
29,819,950
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 2.0%
164,100 CR Bard, Inc................... 10,817,472
31,400 Kindred Healthcare, Inc.*...... 808,864
31,200 Universal Health Services,
Inc. --
Class B(1)................... 1,458,288
------------
13,084,624
------------
METALS AND MINING -- 0.2%
20,700 United States Steel Corp....... 995,049
------------
OFFICE EQUIPMENT -- 0.6%
91,000 Pitney Bowes, Inc.............. 3,844,750
------------
OIL AND GAS: PIPELINES -- 2.1%
57,100 National Fuel Gas Company...... 1,780,949
150,900 Questar Corp................... 11,423,130
------------
13,204,079
------------
</Table>
See notes to financial statements.
125
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS -- 2.9%
28,400 Amerada Hess Corp.............. $ 3,601,688
10,099 Kerr-McGee Corp................ 917,595
68,306 Marathon Oil Corp.............. 4,164,617
76,400 Praxair, Inc................... 4,046,144
40,200 Sunoco, Inc.(1)................ 3,150,876
66,400 Swift Energy Company*.......... 2,992,648
------------
18,873,568
------------
PAPER AND FOREST PRODUCTS -- 0.4%
86,000 MeadWestvaco Corp.............. 2,410,580
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 1.4%
30,800 AmerisourceBergen Corp......... 1,275,120
113,200 King Pharmaceuticals, Inc.*.... 1,915,344
86,600 Millipore Corp.*............... 5,719,064
------------
8,909,528
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.9%
117,100 Brookfield Asset Management,
Inc. -- Class A
(Canada)(1).................. 5,893,643
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.7%
47,800 American Home Mortgage
Investment Corp.............. 1,556,846
227,500 Anthracite Capital, Inc........ 2,395,575
53,200 Crescent Real Estate Equities
Company(1)................... 1,054,424
335,800 HRPT Properties Trust.......... 3,475,530
180,000 MeriStar Hospitality Corp.*.... 1,692,000
38,998 RAIT Investment Trust.......... 1,010,828
------------
11,185,203
------------
RETAIL -- 3.5%
48,500 Borders Group, Inc............. 1,050,995
264,000 Dollar Tree Stores, Inc.*(1)... 6,320,160
136,100 Federated Department Stores,
Inc.......................... 9,027,513
77,900 JC Penney Company, Inc.
(Holding Company)(1)......... 4,331,240
97,300 Saks, Inc.*.................... 1,640,478
------------
22,370,386
------------
RETAIL: RESTAURANTS -- 1.1%
149,800 Brinker International,
Inc.(1)...................... 5,791,268
61,900 Lone Star Steakhouse & Saloon,
Inc.......................... 1,469,506
------------
7,260,774
------------
RETAIL: SUPERMARKETS -- 0.8%
113,800 Albertson's, Inc............... 2,429,630
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL: SUPERMARKETS (CONTINUED)
76,900 SUPERVALU, Inc................. $ 2,497,712
------------
4,927,342
------------
RUBBER PRODUCTS -- 0.5%
183,200 The Goodyear Tire & Rubber
Company*(1).................. 3,184,016
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 2.0%
51,300 Applera Corp.-Applied
Biosystems Group............. 1,362,528
493,800 PerkinElmer, Inc............... 11,633,928
------------
12,996,456
------------
SECURITY SERVICES -- 0.9%
125,500 The Brink's Company............ 6,012,705
------------
SEMICONDUCTORS -- 0.7%
320,800 Micron Technology, Inc.*....... 4,269,848
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.2%
274,200 Amdocs, Ltd. (Guernsey)*....... 7,540,500
616,100 Avaya, Inc.*................... 6,573,787
86,100 CenturyTel, Inc................ 2,855,076
123,500 CommScope, Inc.*............... 2,486,055
53,400 Polycom, Inc.*................. 817,020
------------
20,272,438
------------
TOYS -- 0.3%
136,600 Mattel, Inc.................... 2,161,012
------------
TRANSPORTATION -- 5.8%
45,300 Arkansas Best Corp............. 1,978,704
81,500 CNF, Inc....................... 4,555,035
234,700 CSX Corp....................... 11,915,719
106,500 Florida East Coast Industries,
Inc.......................... 4,512,405
70,600 GATX Corp...................... 2,547,248
140,700 Norfolk Southern Corp.......... 6,307,581
135,400 Sabre Holdings Corp. -- Class
A............................ 3,264,494
98,700 Swift Transportation Company,
Inc.*........................ 2,003,610
------------
37,084,796
------------
UTILITIES -- 10.1%
170,200 AGL Resources, Inc............. 5,924,662
135,300 American Electric Power
Company, Inc.(1)............. 5,018,277
118,300 Cleco Corp..................... 2,466,555
266,000 CMS Energy Corp.*(1)........... 3,859,660
</Table>
See notes to financial statements.
126
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
UTILITIES (CONTINUED)
53,200 DTE Energy Company............. $ 2,297,708
83,500 Duquesne Light Holdings,
Inc.(1)...................... 1,362,720
151,900 FirstEnergy Corp............... 7,441,581
109,100 KeySpan Corp................... 3,893,779
119,300 NiSource, Inc.................. 2,488,598
200,300 Northeast Utilities............ 3,943,907
153,400 PG&E Corp...................... 5,694,208
30,500 Pinnacle West Capital
Corp.(1)..................... 1,261,175
193,700 PPL Corp.(1)................... 5,694,780
24,800 Progress Energy, Inc........... 1,089,216
59,200 Public Service Enterprise
Group, Inc................... 3,846,224
135,900 Puget Energy, Inc.............. 2,775,078
68,700 TECO Energy, Inc............... 1,180,266
228,100 Xcel Energy, Inc.(1)........... 4,210,726
------------
64,449,120
------------
TOTAL COMMON STOCKS (Cost
$575,578,100)................ 615,460,837
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 11.7%
$75,129,412 Securities Lending Collateral
Investment (Note 4) (Cost
$75,129,412)................. 75,129,412
------------
TOTAL SECURITIES (Cost
$650,707,512)................ 690,590,249
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 4.7%
$30,210,034 With Investors Bank and Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase proceeds
at maturity $30,222,856
(Collateralized by various
Fannie Mae Adjustable Rate
Mortgages, 4.20%-4.24%, due
03/01/33-07/01/33, with a
total value of $31,720,535)
(Cost $30,210,034)........... $ 30,210,034
------------
Total Investments -- 112.4%
(Cost $680,917,546).......... 720,800,283
Liabilities less other
assets -- (12.4)%............ (79,268,745)
------------
NET ASSETS -- 100.0%........... $641,531,538
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $681,872,748.
The following amounts are based on cost for federal income tax purposes:
<Table>
<Caption>
Gross unrealized appreciation.......... $ 51,745,452
Gross unrealized depreciation.......... (12,817,917)
------------
Net unrealized appreciation............ $ 38,927,535
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
127
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 97.7%
ADVERTISING -- 1.4%
44,100 Getty Images, Inc.*(1)......... $ 3,936,807
------------
AIRLINES -- 3.2%
324,000 JetBlue Airways Corp.*(1)...... 4,983,120
245,900 Southwest Airlines Company..... 4,040,137
------------
9,023,257
------------
APPAREL: MANUFACTURING AND RETAIL -- 2.3%
148,800 Chico's FAS, Inc.*............. 6,536,784
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.7%
105,600 Oshkosh Truck Corp. ........... 4,708,704
------------
BROADCAST SERVICES/MEDIA -- 2.3%
509,210 Sirius Satellite Radio,
Inc.*(1)..................... 3,411,707
108,390 XM Satellite Radio Holdings,
Inc. -- Class A*(1).......... 2,956,879
------------
6,368,586
------------
BUSINESS SERVICES AND SUPPLIES -- 4.9%
99,670 Fluor Corp. ................... 7,700,504
132,600 Global Payments, Inc. ......... 6,180,486
------------
13,880,990
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 6.4%
144,900 Business Objects SA (ADR)
(France)*(1)................. 5,855,409
248,000 Ceridian Corp.*................ 6,162,800
215,300 Citrix Systems, Inc.*.......... 6,196,334
------------
18,214,543
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.5%
134,300 Washington Group International,
Inc.*........................ 7,113,871
------------
CONSUMER GOODS AND SERVICES -- 1.4%
118,000 Herbalife, Ltd. (Cayman
Islands)*(1)................. 3,837,360
------------
FINANCIAL SERVICES -- 5.3%
195,386 Janus Capital Group, Inc. ..... 3,640,041
49,950 Legg Mason, Inc. .............. 5,978,516
75,500 T Rowe Price Group, Inc. ...... 5,438,265
------------
15,056,822
------------
FOOD AND BEVERAGE -- 1.7%
130,620 Dean Foods Company*............ 4,919,149
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES -- 5.6%
101,000 CheckFree Corp.*............... $ 4,635,900
142,300 Monster Worldwide, Inc.*(1).... 5,808,686
248,200 VeriSign, Inc.*(1)............. 5,440,544
------------
15,885,130
------------
MACHINERY -- 1.5%
108,300 Joy Global, Inc. .............. 4,332,000
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 11.1%
116,300 DaVita, Inc.*.................. 5,889,432
89,000 Hologic, Inc.*................. 3,374,880
67,100 Mentor Corp.(1)................ 3,091,968
48,100 Psychiatric Solutions, Inc.*... 2,825,394
51,854 Sierra Health Services,
Inc.*........................ 4,146,246
111,800 Varian Medical Systems,
Inc.*........................ 5,628,012
232,700 VCA Antech, Inc.*.............. 6,562,140
------------
31,518,072
------------
OIL, COAL AND GAS -- 14.5%
71,000 Bill Barrett Corp.*............ 2,741,310
77,400 Cooper Cameron Corp.*.......... 3,204,360
63,700 Diamond Offshore Drilling,
Inc.(1)...................... 4,430,972
78,100 EOG Resources, Inc. ........... 5,730,197
60,500 Noble Corp. (Cayman
Islands)(1).................. 4,267,670
49,700 Peabody Energy Corp. .......... 4,096,274
153,200 Quicksilver Resources,
Inc.*(1)..................... 6,435,932
276,600 Southwestern Energy Company*... 9,941,004
------------
40,847,719
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 5.9%
78,100 Celgene Corp.*................. 5,060,880
199,800 Endo Pharmaceuticals
Holdings, Inc.*.............. 6,045,948
196,700 Protein Design Labs,
Inc.*(1)..................... 5,590,214
------------
16,697,042
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 1.2%
56,040 CB Richard Ellis Group, Inc. --
Class A*..................... 3,297,954
------------
RETAIL: RESTAURANTS -- 4.5%
153,800 Darden Restaurants, Inc. ...... 5,979,744
101,806 Panera Bread Company -- Class
A*(1)........................ 6,686,618
------------
12,666,362
------------
</Table>
See notes to financial statements.
128
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS -- 6.1%
217,000 ASML Holding (the
Netherlands)*(1)............. $ 4,357,360
182,150 Broadcom Corp. -- Class A*..... 8,588,373
174,600 Cree, Inc.*(1)................. 4,406,904
------------
17,352,637
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 14.2%
188,300 ADTRAN, Inc. .................. 5,600,042
313,241 American Tower Corp. --
Class A*..................... 8,488,831
196,000 Comverse Technology, Inc.*..... 5,211,640
211,400 Crown Castle International
Corp.*....................... 5,688,774
132,762 Harris Corp. .................. 5,710,094
164,000 NeuStar, Inc. -- Class A*...... 5,000,360
130,100 UNOVA, Inc.*(1)................ 4,397,380
------------
40,097,121
------------
TOTAL COMMON STOCKS
(Cost $228,723,496).......... 276,290,910
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 21.1%
$59,815,920 Securities Lending Collateral
Investment (Note 4)
(Cost $59,815,920)........... 59,815,920
------------
TOTAL SECURITIES (Cost
$288,539,416)................ 336,106,830
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 3.4%
$ 9,643,935 With Investors Bank and Trust,
dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $9,648,029
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.50%, due 07/01/33,
with a value of $10,126,132)
(Cost $9,643,935)............ $ 9,643,935
------------
Total Investments -- 122.2%
(Cost $298,183,351).......... 345,750,765
Liabilities less other
assets -- (22.2)%............ (62,800,323)
------------
NET ASSETS -- 100.0%........... $282,950,442
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $298,462,040.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $48,835,587
Gross unrealized depreciation........... (1,546,862)
-----------
Net unrealized appreciation............. $47,288,725
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
129
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 95.6%
AEROSPACE AND DEFENSE -- 2.2%
172,454 Moog, Inc. -- Class A*......... $ 4,894,245
------------
APPAREL: MANUFACTURING AND RETAIL -- 4.8%
211,500 Phillips-Van Heusen Corp. ..... 6,852,600
196,214 Stein Mart, Inc. .............. 3,561,284
------------
10,413,884
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 3.4%
146,900 CSK Auto Corp.*................ 2,215,252
154,700 Winnebago Industries,
Inc.(1)...................... 5,148,416
------------
7,363,668
------------
BANKS -- 5.9%
171,100 BankUnited Financial
Corp. -- Class A............. 4,546,127
132,200 Digital Insight Corp.*......... 4,233,044
168,073 Oriental Financial Group, Inc.
(Puerto Rico)(1)............. 2,077,382
77,800 Sterling Financial Corp.
(Spokane).................... 1,943,444
------------
12,799,997
------------
BUSINESS SERVICES AND SUPPLIES -- 4.7%
138,600 Administaff, Inc. ............. 5,828,130
170,814 Kelly Services, Inc. -- Class
A............................ 4,478,743
------------
10,306,873
------------
COLLECTIBLES -- 1.1%
130,800 Sotheby's Holdings,
Inc. -- Class A*............. 2,401,488
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 5.0%
56,500 ANSYS, Inc.*................... 2,411,985
186,000 Checkpoint Systems, Inc.*...... 4,584,900
115,500 Verint Systems, Inc.*.......... 3,981,285
------------
10,978,170
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.4%
35,000 Hovnanian Enterprises,
Inc. -- Class A*............. 1,737,400
21,300 Meritage Homes Corp.*.......... 1,340,196
57,000 Standard Pacific Corp. ........ 2,097,600
------------
5,175,196
------------
CONSUMER GOODS AND SERVICES -- 0.9%
43,200 The Scotts Miracle-Gro
Company -- Class A(1)........ 1,954,368
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
DISTRIBUTION -- 3.4%
122,953 Watsco, Inc. .................. $ 7,353,819
------------
EDUCATION -- 1.6%
97,662 School Specialty, Inc.*(1)..... 3,558,803
------------
ELECTRONICS -- 2.0%
288,500 Sonic Solutions*(1)............ 4,359,235
------------
FINANCIAL SERVICES -- 6.4%
121,500 Accredited Home Lenders Holding
Company*(1).................. 6,023,970
102,500 Eaton Vance Corp. ............. 2,804,400
54,400 Jefferies Group, Inc.(1)....... 2,446,912
71,862 Raymond James Financial,
Inc. ........................ 2,707,042
------------
13,982,324
------------
FOOD AND BEVERAGE -- 1.9%
158,900 United Natural Foods, Inc.*.... 4,194,960
------------
INSURANCE -- 8.2%
93,300 American Physicians Capital,
Inc.*........................ 4,272,207
123,713 Delphi Financial Group,
Inc. -- Class A.............. 5,692,035
17,900 Philadelphia Consolidated
Holding Corp.*............... 1,730,751
32,100 Protective Life Corp. ......... 1,405,017
37,600 The Commerce Group, Inc. ...... 2,153,728
69,400 United Fire & Casualty
Company(1)................... 2,805,842
------------
18,059,580
------------
INTERNET SERVICES -- 1.9%
139,600 Digital River, Inc.*........... 4,151,704
------------
LEISURE AND RECREATION -- 0.6%
52,400 WMS Industries, Inc.*.......... 1,314,716
------------
MACHINERY -- 3.4%
81,800 Bucyrus International,
Inc. -- Class A(1)........... 4,310,860
79,200 Joy Global, Inc. .............. 3,168,000
------------
7,478,860
------------
MANUFACTURING -- 0.6%
55,200 FLIR Systems, Inc.*(1)......... 1,232,616
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 13.3%
157,000 American Healthways,
Inc.*(1)..................... 7,104,249
66,000 AMERIGROUP Corp.*.............. 1,284,360
42,700 Covance, Inc.*................. 2,073,085
</Table>
See notes to financial statements.
130
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES (CONTINUED)
141,700 Immucor, Inc.*................. $ 3,310,112
138,900 Matria Healthcare, Inc.*....... 5,383,764
181,400 Sunrise Senior Living,
Inc.*(1)..................... 6,114,994
127,250 United Surgical Partners
International, Inc.*......... 4,091,088
------------
29,361,652
------------
OIL, COAL AND GAS -- 9.0%
39,400 Cabot Oil & Gas Corp. ......... 1,776,940
239,000 Energy Partners, Ltd.*......... 5,207,810
59,939 Headwaters, Inc.*(1)........... 2,124,238
64,800 Oceaneering International,
Inc.*........................ 3,225,744
59,100 ONEOK, Inc. ................... 1,573,833
87,000 Swift Energy Company*.......... 3,921,090
39,900 The Houston Exploration
Company*..................... 2,106,720
------------
19,936,375
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 2.8%
101,500 Salix Pharmaceuticals, Ltd.*... 1,784,370
147,100 Serologicals Corp.*(1)......... 2,903,754
160,400 VaxGen, Inc.*(1)............... 1,403,500
------------
6,091,624
------------
PRINTING AND PUBLISHING -- 1.8%
135,658 Scholastic Corp.*.............. 3,867,610
------------
REAL ESTATE INVESTMENT TRUSTS -- 2.2%
47,687 Entertainment Properties
Trust........................ 1,943,245
36,600 SL Green Realty Corp.(1)....... 2,795,874
------------
4,739,119
------------
RETAIL: RESTAURANTS -- 3.6%
52,600 Brinker International,
Inc.(1)...................... 2,033,516
124,200 CEC Entertainment, Inc.*....... 4,227,768
53,200 Sonic Corp.*................... 1,569,400
------------
7,830,684
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.7%
104,000 Tekelec*....................... 1,445,600
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TOOLS -- 0.9%
54,700 Snap-on, Inc.(1)............... $ 2,054,532
------------
UTILITIES -- 0.9%
82,400 PNM Resources, Inc. ........... 2,017,976
------------
TOTAL COMMON STOCKS
(Cost $196,142,734).......... 209,319,678
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 25.2%
$55,066,408 Securities Lending Collateral
Investment (Note 4) (Cost
$55,066,408)................. 55,066,408
------------
TOTAL SECURITIES (Cost
$251,209,142)................ 264,386,086
------------
REPURCHASE AGREEMENTS -- 4.8%
10,432,642 With Investors Bank and Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase proceeds
at maturity $10,437,070
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.71%, due 08/01/34, with a
value of $10,954,274) (Cost
$10,432,642)................. 10,432,642
------------
Total Investments -- 125.6%
(Cost $261,641,784).......... 274,818,728
Liabilities less other
assets -- (25.6)%............ (56,069,507)
------------
NET ASSETS -- 100.0%........... $218,749,221
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $261,681,862.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 24,012,585
Gross unrealized depreciation.......... (10,875,719)
------------
Net unrealized appreciation............ $ 13,136,866
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
131
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 97.5%
ADVERTISING -- 0.4%
111,300 ADVO, Inc. ................. $ 3,136,434
88,300 Catalina Marketing Corp. ... 2,238,405
14,000 Ventiv Health, Inc.*........ 330,680
--------------
5,705,519
--------------
AEROSPACE AND DEFENSE -- 0.9%
38,600 AAR Corp.*.................. 924,470
3,000 Alliant Techsystems,
Inc.*..................... 228,510
37,900 Curtiss-Wright Corp. ....... 2,069,340
67,510 DRS Technologies, Inc. ..... 3,471,364
94,000 Innovative Solutions and
Support, Inc.*(1)......... 1,201,320
110,550 Moog, Inc. -- Class A*...... 3,137,409
39,700 Teledyne Technologies,
Inc.*..................... 1,155,270
--------------
12,187,683
--------------
AGRICULTURE -- 0.0%
14,800 UAP Holding Corp. .......... 302,216
--------------
AIRLINES -- 0.6%
133,500 AirTran Holdings,
Inc.*(1).................. 2,140,005
133,100 Continental Airlines,
Inc. -- Class B*(1)....... 2,835,030
174,200 ExpressJet Holdings,
Inc.*..................... 1,409,278
71,100 Mesa Air Group, Inc.*(1).... 743,706
13,500 Pinnacle Airlines Corp.*.... 90,045
--------------
7,218,064
--------------
APPAREL: MANUFACTURING AND RETAIL -- 3.7%
16,900 Abercrombie & Fitch
Company -- Class A(1)..... 1,101,542
103,400 AnnTaylor Stores Corp.*..... 3,569,368
153,170 Cache, Inc.*................ 2,652,904
26,100 Charming Shoppes, Inc. ..... 344,520
7,800 Columbia Sportswear
Company*(1)............... 372,294
36,600 DSW, Inc. -- Class A*(1).... 959,652
25,600 Genesco, Inc.*.............. 993,024
46,300 Guess?, Inc.*............... 1,648,280
62,227 Jos A Bank Clothiers,
Inc.*(1).................. 2,701,274
100,500 Payless ShoeSource, Inc.*... 2,522,550
152,200 Phillips-Van Heusen
Corp. .................... 4,931,280
47,600 Polo Ralph Lauren Corp. .... 2,672,264
316,300 Quiksilver, Inc.*........... 4,377,592
14,500 Skechers USA, Inc. -- Class
A*........................ 222,140
202,800 Stage Stores, Inc. ......... 6,039,384
252,400 Stein Mart, Inc. ........... 4,581,060
167,650 The Cato Corp. -- Class A... 3,596,093
9,300 The Children's Place Retail
Stores, Inc.*............. 459,606
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
APPAREL: MANUFACTURING AND RETAIL
(CONTINUED)
4,200 The Dress Barn, Inc.*....... $ 162,162
8,800 Too, Inc.*.................. 248,248
23,500 Urban Outfitters,
Inc.*(1).................. 594,785
117,100 Wolverine World Wide,
Inc. ..................... 2,630,066
--------------
47,380,088
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.7%
28,400 Aftermarket Technology
Corp.*.................... 552,096
13,800 Commercial Vehicle Group,
Inc.*..................... 259,164
161,300 CSK Auto Corp.*............. 2,432,404
67,000 Modine Manufacturing
Company................... 2,183,530
190,600 Spartan Motors, Inc. ....... 1,961,274
55,000 Winnebago Industries,
Inc.(1)................... 1,830,400
--------------
9,218,868
--------------
BANKS -- 5.2%
4,900 1st Source Corp. ........... 123,235
82,600 AMCORE Financial, Inc. ..... 2,511,866
6,800 Ameris Bancorp.............. 134,912
146,850 Astoria Financial Corp. .... 4,317,390
7,800 BancFirst Corp. ............ 616,200
23,300 BancorpSouth, Inc. ......... 514,231
72,023 BankUnited Financial
Corp. -- Class A.......... 1,913,651
67,313 Boston Private Financial
Holdings, Inc. ........... 2,047,661
4,700 Camden National Corp. ...... 154,536
9,000 Capital Crossing Bank*...... 300,600
8,200 Chittenden Corp. ........... 228,042
13,300 City Holding Company........ 478,135
16,200 Columbia Banking System,
Inc. ..................... 462,510
2,700 Community Bancorp*.......... 85,347
8,000 Community Trust Bancorp,
Inc. ..................... 246,000
30,900 Corus Bankshares, Inc.(1)... 1,738,743
13,100 Downey Financial Corp. ..... 895,909
41,700 East West Bancorp, Inc. .... 1,521,633
12,200 Eurobancshares, Inc. (Puerto
Rico)*.................... 172,874
9,800 First Charter Corp. ........ 231,868
4,000 First Citizens Bancshares,
Inc. -- Class A........... 697,680
2,900 First Community Bancorp..... 157,673
45,600 First Financial Bancorp..... 798,912
</Table>
See notes to financial statements.
132
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
15,300 First Financial Bankshares,
Inc. ..................... $ 536,418
3,600 First Financial Holdings.
Inc. ..................... 110,592
19,100 First Indiana Corp. ........ 656,658
75,400 First Midwest Bancorp,
Inc. ..................... 2,643,524
4,100 First Place Financial
Corp. .................... 98,605
10,050 First Republic Bank......... 371,951
31,700 FirstFed Financial Corp.*... 1,728,284
7,400 Flushing Financial Corp. ... 115,218
82,900 Fremont General Corp.(1).... 1,925,767
18,300 Frontier Financial Corp. ... 585,600
17,200 Hancock Holding Company..... 650,332
5,700 Harbor Florida Bancshares,
Inc. ..................... 211,185
4,000 Horizon Financial Corp. .... 87,360
7,200 Independent Bank Corp.
(Massachusetts)........... 205,416
10,290 Independent Bank Corp.
(Michigan)................ 280,197
3,900 Integra Bank Corp. ......... 83,226
5,100 International Bancshares
Corp. .................... 149,736
31,300 Irwin Financial Corp. ...... 670,446
6,000 ITLA Capital Corp.*......... 293,100
6,195 MainSource Financial Group,
Inc. ..................... 110,581
48,400 MB Financial, Inc. ......... 1,713,360
12,300 MBT Financial Corp. ........ 199,260
21,100 Mid-State Bancshares........ 564,425
5,300 NBC Capital Corp. .......... 126,087
192,500 NewAlliance Bancshares,
Inc.(1)................... 2,798,950
3,800 OceanFirst Financial
Corp. .................... 86,488
11,900 Old Second Bancorp, Inc. ... 363,783
54,800 Oriental Financial Group,
Inc. (Puerto Rico)(1)..... 677,328
58,700 Pacific Capital Bancorp..... 2,088,546
13,350 PFF Bancorp, Inc. .......... 407,442
111,290 PrivateBancorp, Inc. ....... 3,958,585
14,900 S&T Bancorp, Inc. .......... 548,618
3,700 Sandy Spring Bancorp,
Inc. ..................... 129,056
16,200 Santander BanCorp (Puerto
Rico)(1).................. 406,944
3,360 SCBT Financial Corp. ....... 112,291
5,800 Simmons First National
Corp. -- Class A.......... 160,660
6,125 Sterling Financial Corp.
(Pennsylvania)............ 121,275
92,900 Sterling Financial Corp.
(Spokane)................. 2,320,642
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
6,200 Suffolk Bancorp............. $ 209,374
20,900 Susquehanna Bancshares,
Inc. ..................... 494,912
146,300 SVB Financial Group*(1)..... 6,852,692
6,900 SY Bancorp, Inc. ........... 172,638
5,400 Taylor Capital Group,
Inc. ..................... 218,160
84,700 Texas Regional Bancshares,
Inc. -- Class A........... 2,397,010
17,400 TierOne Corp. .............. 511,734
8,600 TrustCo Bank Corp. NY....... 106,812
19,600 Trustmark Corp. ............ 538,412
3,000 Uninvest Corp. of
Pennsylvania.............. 72,810
3,900 Union Bankshares Corp. ..... 168,090
25,800 United Bankshares, Inc. .... 909,192
21,500 United Community Financial
Corp. .................... 253,915
9,555 USB Holding Company,
Inc. ..................... 206,961
7,000 Washington Trust Bancorp,
Inc. ..................... 183,260
13,600 WesBanco, Inc. ............. 413,576
6,800 West Coast Bancorp.......... 179,860
60,200 Westamerica Bancorp......... 3,194,814
2,900 Western Sierra Bancorp*..... 105,531
20,100 Wintrust Financial Corp. ... 1,103,490
8,300 WSFS Financial Corp. ....... 508,375
--------------
67,449,162
--------------
BROADCAST SERVICES/MEDIA -- 0.7%
31,700 Citadel Broadcasting
Company................... 426,048
34,300 CKX, Inc.*.................. 445,900
36,600 Emmis Communications
Corp. -- Class A*......... 728,706
11,800 Gray Television, Inc. ...... 115,876
109,800 Pixar*...................... 5,788,656
98,800 Sinclair Broadcast Group,
Inc. -- Class A........... 908,960
10,400 WPT Enterprises, Inc.*(1)... 61,776
--------------
8,475,922
--------------
BUSINESS SERVICES AND SUPPLIES -- 3.4%
164,600 Administaff, Inc. .......... 6,921,429
17,200 Ambassadors Group, Inc. .... 393,708
107,128 Barrett Business Services,
Inc.*..................... 2,677,129
88,100 CSG Systems International,
Inc.*..................... 1,966,392
173,130 FirstService Corp.
(Canada)*................. 4,440,785
5,100 Forrester Research, Inc.*... 95,625
145,380 Global Payments, Inc. ...... 6,776,161
</Table>
See notes to financial statements.
133
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES (CONTINUED)
25,200 Huron Consulting Group,
Inc.*..................... $ 604,548
63,300 John H Harland Company...... 2,380,080
35,180 Kelly Services,
Inc. -- Class A........... 922,420
15,700 Labor Ready, Inc.*.......... 326,874
129,800 MAXIMUS, Inc. .............. 4,762,362
238,720 Optimal Group, Inc. -- Class
A (Canada)*............... 4,836,467
56,190 Portfolio Recovery
Associates, Inc.*(1)...... 2,609,464
20,800 Resources Connection,
Inc.*..................... 542,048
26,600 Robert Half International,
Inc. ..................... 1,007,874
3,800 SOURCECORP, Inc.*........... 91,124
113,500 Spherion Corp.*............. 1,136,135
5,000 TALX Corp. ................. 228,550
85,300 TeleTech Holdings, Inc.*.... 1,027,865
3,000 The Corporate Executive
Board Company............. 269,100
17,900 Vertrue, Inc.*(1)........... 632,407
--------------
44,648,547
--------------
CHEMICALS -- 0.5%
159,800 Compass Minerals
International, Inc. ...... 3,921,492
11,600 FMC Corp.*.................. 616,772
5,300 NewMarket Corp.*............ 129,638
105,300 Terra Industries, Inc.*..... 589,680
65,000 The Valspar Corp. .......... 1,603,550
5,000 Westlake Chemical Corp. .... 144,050
10,900 WR Grace & Company*......... 102,460
--------------
7,107,642
--------------
COLLECTIBLES -- 0.1%
25,900 Escala Group, Inc.*(1)...... 525,252
15,600 Sotheby's Holdings, Inc. --
Class A*.................. 286,416
--------------
811,668
--------------
COMMERCIAL SERVICES -- 0.6%
2,300 Pre-Paid Legal Services,
Inc.(1)................... 87,883
71,020 Providence Service Corp.*... 2,044,666
96,410 Steiner Leisure, Ltd.
(Bahama Islands)*......... 3,428,340
142,880 TNS, Inc.*.................. 2,740,438
--------------
8,301,327
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 6.2%
31,500 Advent Software, Inc.*...... 910,665
13,100 Ansoft Corp.*............... 446,055
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES
(CONTINUED)
2,600 ANSYS, Inc.*................ $ 110,994
38,100 Avid Technology, Inc.*...... 2,086,356
70,000 Black Box Corp. ............ 3,316,600
11,200 Blackbaud, Inc. ............ 191,296
176,070 Bottomline Technologies,
Inc.*..................... 1,940,291
150,000 Checkpoint Systems, Inc.*... 3,697,500
134,360 Concur Technologies,
Inc.*..................... 1,731,900
29,200 Covansys Corp.*............. 397,412
37,800 Electronics For Imaging,
Inc.*..................... 1,005,858
217,750 Epicor Software Corp.*...... 3,076,808
20,200 Imation Corp. .............. 930,614
53,100 Intergraph Corp.*(1)........ 2,644,911
22,800 InterVideo, Inc.*........... 240,540
99,440 Itron, Inc.*................ 3,981,578
45,000 Jack Henry & Associates,
Inc. ..................... 858,600
111,800 Keane, Inc.*................ 1,230,918
80,900 Lawson Software, Inc.*(1)... 594,615
38,300 Manhattan Associates,
Inc.*..................... 784,384
5,400 ManTech International
Corp. -- Class A*......... 150,444
1,197,900 Maxtor Corp.*............... 8,313,426
17,500 Mercury Computer Systems,
Inc.*..................... 361,025
73,754 Merge Technologies,
Inc.*(1).................. 1,846,800
27,300 MicroStrategy, Inc. -- Class
A*(1)..................... 2,258,802
85,870 M-Systems Flash Disk
Pioneers, Ltd.
(Israel)*(1).............. 2,844,014
27,000 MTS Systems Corp. .......... 935,280
151,990 PDF Solutions, Inc.*........ 2,469,838
13,700 Phoenix Technologies,
Ltd.*..................... 85,762
5,400 Progress Software Corp.*.... 153,252
67,700 Red Hat, Inc.*(1)........... 1,844,148
5,000 Renaissance Learning,
Inc.(1)................... 94,550
91,800 Retalix, Ltd.
(Israel)*(1).............. 2,245,428
6,200 SERENA Software, Inc.*...... 145,328
4,500 SPSS, Inc.*................. 139,185
54,600 Sybase, Inc.*............... 1,193,556
117,600 Sykes Enterprises, Inc.*.... 1,572,312
188,600 Synopsys, Inc.*............. 3,783,316
401,613 Synplicity, Inc.*........... 3,333,388
148,500 The Reynolds and Reynolds
Company -- Class A........ 4,168,395
139,126 The Ultimate Software Group,
Inc.*..................... 2,653,133
114,800 THQ, Inc.*(1)............... 2,737,980
</Table>
See notes to financial statements.
134
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES
(CONTINUED)
35,300 Transaction Systems
Architects, Inc. -- Class
A*........................ $ 1,016,287
16,400 Tyler Technologies, Inc.*... 143,992
92,300 Western Digital Corp.*...... 1,717,703
17,000 Wind River Systems, Inc.*... 251,090
119,190 Witness Systems, Inc.*...... 2,344,467
--------------
78,980,796
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 4.0%
93,700 Agilysys, Inc. ............. 1,707,214
20,400 Brookfield Homes Corp.(1)... 1,014,492
48,720 Building Materials Holding
Corp.(1).................. 3,323,191
18,700 Eagle Materials, Inc.(1).... 2,288,132
45,200 Granite Construction,
Inc. ..................... 1,623,132
163,500 Hovnanian Enterprises,
Inc. -- Class A*.......... 8,116,140
148,000 Meritage Homes Corp.*....... 9,312,160
10,200 Perini Corp.*............... 246,330
148,300 Simpson Manufacturing
Company, Inc. ............ 5,390,705
137,700 Standard Pacific Corp. ..... 5,067,360
83,475 Technical Olympic USA,
Inc. ..................... 1,760,488
10,800 The Ryland Group, Inc. ..... 779,004
138,700 Trex Company, Inc.*(1)...... 3,890,535
42,600 USG Corp.*(1)............... 2,769,000
141,500 WCI Communities, Inc.*...... 3,799,275
12,400 William Lyon Homes,
Inc.*(1).................. 1,251,160
--------------
52,338,318
--------------
CONSUMER GOODS AND SERVICES -- 2.9%
23,300 American Greetings Corp. --
Class A(1)................ 511,901
85,360 Central Garden & Pet
Company*.................. 3,921,438
40,900 Chattem, Inc.*.............. 1,488,351
5,900 CNS, Inc. .................. 129,269
117,800 Helen Of Troy, Ltd.
(Bermuda)*(1)............. 1,897,758
152,000 Herbalife, Ltd. (Cayman
Islands)*................. 4,943,041
112,395 Jarden Corp.*(1)............ 3,388,709
183,800 NBTY, Inc.*................. 2,986,750
32,700 Playtex Products, Inc.*..... 447,009
197,910 Rollins, Inc. .............. 3,900,806
164,200 Tempur-Pedic International,
Inc.*(1).................. 1,888,300
69,600 The Scotts Miracle-Gro
Company -- Class A(1)..... 3,148,704
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSUMER GOODS AND SERVICES (CONTINUED)
158,900 The Yankee Candle Company,
Inc. ..................... $ 4,067,840
56,200 Vector Group, Ltd.(1)....... 1,021,154
81,700 Weight Watchers
International, Inc.*...... 4,038,431
--------------
37,779,461
--------------
CONTAINERS AND PACKAGING -- 0.1%
2,900 Greif, Inc. -- Class A...... 192,212
45,800 Silgan Holdings, Inc. ...... 1,654,296
--------------
1,846,508
--------------
CORRECTIONAL FACILITIES -- 0.0%
22,400 The Geo Group, Inc.*........ 513,632
--------------
DISTRIBUTION -- 1.6%
19,100 Handleman Company........... 237,222
165,200 United Stationers, Inc.*.... 8,012,200
82,900 Universal Corp. ............ 3,594,544
115,200 Watsco, Inc. ............... 6,890,112
49,500 WESCO International,
Inc.*..................... 2,115,135
--------------
20,849,213
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 0.0%
20,100 Resource America, Inc. --
Class A................... 342,705
--------------
EDUCATION -- 0.7%
52,000 Education Management
Corp.*.................... 1,742,520
9,100 ITT Educational Services,
Inc.*..................... 537,901
50,130 Laureate Education, Inc.*... 2,632,326
76,500 School Specialty, Inc.*..... 2,787,661
65,010 Universal Technical
Institute, Inc.*.......... 2,011,409
--------------
9,711,817
--------------
ELECTRONICS -- 2.0%
126,520 Axsys Technologies, Inc.*... 2,271,034
221,049 Belden CDT, Inc.(1)......... 5,400,227
4,900 Electro Scientific
Industries, Inc.*......... 118,335
341,600 Flextronics International,
Ltd. (Singapore)*......... 3,566,304
128,800 Nam Tai Electronics, Inc.
(Virgin Islands)(1)....... 2,898,000
54,100 Park Electrochemical
Corp. .................... 1,405,518
35,800 Plexus Corp.*............... 814,092
649,400 Sanmina-SCI Corp.*.......... 2,766,444
119,300 Sonic Solutions*(1)......... 1,802,623
304,380 SRS Labs, Inc.*............. 2,002,820
</Table>
See notes to financial statements.
135
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
ELECTRONICS (CONTINUED)
4,600 Superior Essex, Inc.*....... $ 92,736
88,700 Technitrol, Inc. ........... 1,516,770
45,200 Thomas & Betts Corp.*....... 1,896,592
--------------
26,551,495
--------------
ENGINEERING -- 0.4%
4,600 EMCOR Group, Inc.*.......... 310,638
125,300 URS Corp.*.................. 4,712,533
--------------
5,023,171
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.3%
205,300 Allied Waste Industries,
Inc.*(1).................. 1,794,322
36,700 Clean Harbors, Inc.*(1)..... 1,057,327
17,800 Metal Management, Inc. ..... 414,028
--------------
3,265,677
--------------
EQUIPMENT RENTAL AND LEASING -- 0.3%
128,440 McGrath Rentcorp............ 3,570,632
23,400 Rent-Way, Inc.*............. 149,526
--------------
3,720,158
--------------
FINANCIAL SERVICES -- 4.7%
156,000 Accredited Home Lenders
Holding Company*(1)....... 7,734,480
15,000 Affiliated Managers Group,
Inc.*(1).................. 1,203,750
229,900 AmeriCredit Corp.*.......... 5,892,337
78,500 Calamos Asset Management,
Inc. -- Class A........... 2,468,825
96,000 CapitalSource, Inc.*(1)..... 2,150,400
32,800 CBOT Holdings, Inc. -- Class
A*(1)..................... 3,075,328
384,800 E*TRADE Financial Corp.*.... 8,026,928
163,500 Eaton Vance Corp. .......... 4,473,360
113,100 Friedman, Billings, Ramsey
Group, Inc. -- Class
A(1)...................... 1,119,690
79,900 Investment Technology Group,
Inc.*..................... 2,831,656
111,800 Jefferies Group, Inc.(1).... 5,028,764
165,200 Knight Capital Group,
Inc. -- Class A*.......... 1,633,828
142,900 Lazard, Ltd. -- Class A
(Bermuda)(1).............. 4,558,510
3,200 Nelnet, Inc. -- Class
A*(1)..................... 130,176
16,100 Nuveen Investments -- Class
A(1)...................... 686,182
19,600 Piper Jaffray Companies,
Inc.*..................... 791,840
110,400 Raymond James Financial,
Inc. ..................... 4,158,768
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
42,100 SEI Investments Company..... $ 1,557,700
18,400 The Student Loan Corp. ..... 3,849,832
16,100 W Holding Company, Inc.
(Puerto Rico)............. 132,503
--------------
61,504,857
--------------
FOOD AND BEVERAGE -- 0.4%
30,400 Boston Beer Company, Inc. --
Class A*.................. 760,000
56,300 Chiquita Brands
International, Inc.(1).... 1,126,563
57,200 Gold Kist, Inc.*............ 855,140
105,300 John B Sanfilippo & Son,
Inc.*..................... 1,361,529
40,900 Nash Finch Company(1)....... 1,042,132
11,200 Premium Standard Farms,
Inc. ..................... 167,552
--------------
5,312,916
--------------
FUNERAL SERVICES -- 0.1%
66,500 Alderwoods Group, Inc.*..... 1,055,355
--------------
INSURANCE -- 4.3%
7,300 American Physicians Capital,
Inc.*..................... 334,267
299,984 Amerisafe, Inc.*............ 3,023,839
218,700 Assured Guaranty, Ltd.
(Bermuda)................. 5,552,793
147,400 Delphi Financial Group,
Inc. -- Class A........... 6,781,874
6,300 FPIC Insurance Group,
Inc.*..................... 218,610
12,200 Infinity Property & Casualty
Corp. .................... 453,962
54,900 IPC Holdings, Ltd.
(Bermuda)................. 1,503,162
48,300 LandAmerica Financial Group,
Inc.(1)................... 3,013,920
9,700 Penn Treaty American
Corp.*.................... 97,388
79,600 Philadelphia Consolidated
Holding Corp.*............ 7,696,524
143,700 Platinum Underwriters
Holdings, Ltd.
(Bermuda)................. 4,464,759
7,500 Presidential Life Corp. .... 142,800
40,500 Protective Life Corp. ...... 1,772,685
114,200 Reinsurance Group of
America, Inc.(1).......... 5,454,192
5,400 Safety Insurance Group,
Inc. ..................... 217,998
19,600 Stewart Information Services
Corp. .................... 953,932
61,100 The Commerce Group, Inc. ... 3,499,808
51,300 The Navigators Group,
Inc.*..................... 2,237,193
</Table>
See notes to financial statements.
136
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
77,091 Tower Group, Inc. .......... $ 1,694,460
8,600 UICI........................ 305,386
102,000 United Fire & Casualty
Company(1)................ 4,123,860
130,000 Universal American Financial
Corp.*.................... 1,960,400
--------------
55,503,812
--------------
INTERNET SERVICES -- 5.5%
143,400 aQuantive, Inc.*(1)......... 3,619,416
88,860 Avocent Corp.*.............. 2,416,103
8,200 Blue Nile, Inc.*(1)......... 330,542
46,900 CheckFree Corp.*............ 2,152,710
139,580 CNET Networks, Inc.*(1)..... 2,050,430
24,600 Ctrip.com International,
Ltd. (ADR) (Cayman
Islands).................. 1,420,650
431,450 CyberSource Corp.*.......... 2,847,570
259,825 Digitas, Inc.*.............. 3,253,009
225,300 EarthLink, Inc.*............ 2,503,083
110,179 Equinix, Inc.*(1)........... 4,490,896
67,900 eResearch Technology,
Inc.*(1).................. 1,025,290
104,500 GSI Commerce, Inc.*(1)...... 1,576,905
60,500 InfoSpace, Inc.*............ 1,562,110
111,400 Internet Security Systems,
Inc.*..................... 2,333,830
105,670 j2 Global Communications,
Inc.*(1).................. 4,516,335
224,620 Keynote Systems, Inc.*...... 2,886,367
52,149 Marchex, Inc. -- Class
B*(1)..................... 1,172,831
43,300 Monster Worldwide,
Inc.*(1).................. 1,767,506
64,600 Netflix, Inc.*(1)........... 1,748,076
45,600 NETGEAR, Inc.*(1)........... 877,800
42,200 Nutri/System, Inc.*(1)...... 1,520,044
289,910 Online Resources Corp.*..... 3,203,506
200,230 Openwave Systems,
Inc.*(1).................. 3,498,018
17,300 Priceline.com, Inc.*(1)..... 386,136
162,220 RADVision, Ltd. (Israel)*... 2,690,046
85,860 RightNow Technologies,
Inc.*..................... 1,584,976
96,997 SafeNet, Inc.*(1)........... 3,125,243
151,300 SonicWALL, Inc.*............ 1,198,296
14,600 Stamps.com, Inc.*........... 335,216
100,000 The TriZetto Group,
Inc.*(1).................. 1,699,000
126,100 United Online, Inc. ........ 1,793,142
113,950 ValueClick, Inc.*(1)........ 2,063,635
18,500 webMethods, Inc.*........... 142,635
24,100 Websense, Inc.*............. 1,581,924
133,200 WebSideStory, Inc.*......... 2,414,916
--------------
71,788,192
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION -- 1.3%
289,580 Century Casinos, Inc.*...... $ 2,490,388
61,200 Choice Hotels International,
Inc. ..................... 2,555,712
25,800 Four Seasons Hotels, Inc.
(Canada)(1)............... 1,283,550
224,300 Interstate Hotels & Resorts,
Inc.*..................... 980,191
283,820 Mikohn Gaming Corp.*........ 2,801,303
42,600 Monarch Casino & Resort,
Inc.*..................... 962,760
178,560 Scientific Games Corp. --
Class A*.................. 4,871,117
24,200 Shuffle Master, Inc.*(1).... 608,388
52,500 Sunterra Corp.*............. 746,550
--------------
17,299,959
--------------
MACHINERY -- 1.5%
56,000 Albany International
Corp. -- Class A.......... 2,024,960
49,700 Applied Industrial
Technologies, Inc. ....... 1,674,393
70,700 Bucyrus International,
Inc. -- Class A........... 3,725,890
8,700 Columbus McKinnon Corp.*.... 191,226
50,200 Flow International
Corp.*(1)................. 422,684
19,500 Gardner Denver, Inc.*....... 961,350
132,000 Joy Global, Inc. ........... 5,280,000
74,300 Kadant, Inc.*............... 1,374,550
13,000 Middleby Corp.*(1).......... 1,124,500
13,600 Terex Corp.*................ 807,840
67,200 The Timken Company.......... 2,151,744
--------------
19,739,137
--------------
MANUFACTURING -- 2.6%
199,100 Acuity Brands, Inc. ........ 6,331,380
39,200 AO Smith Corp. ............. 1,375,920
51,500 AptarGroup, Inc. ........... 2,688,300
101,900 Carlisle Companies,
Inc.(1)................... 7,046,385
16,300 CIRCOR International,
Inc. ..................... 418,258
37,700 Coherent, Inc.*............. 1,118,936
146,250 Deswell Industries, Inc.
(Virgin Islands).......... 1,573,650
3,400 EnPro Industries, Inc.*..... 91,630
256,600 FLIR Systems, Inc.*(1)...... 5,729,878
6,300 Freightcar America, Inc. ... 302,904
45,200 Harsco Corp. ............... 3,051,452
34,100 Kaydon Corp. ............... 1,095,974
</Table>
See notes to financial statements.
137
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MANUFACTURING (CONTINUED)
8,800 LSI Industries, Inc. ....... $ 137,808
67,100 Matthews International
Corp. -- Class A.......... 2,443,111
9,200 Steinway Musical
Instruments, Inc.*........ 234,692
--------------
33,640,278
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 8.7%
83,240 Adeza Biomedical Corp.*..... 1,752,202
48,710 Amedisys, Inc.*(1).......... 2,057,510
109,500 American Healthways,
Inc.*(1).................. 4,954,875
5,200 American Medical Systems
Holdings, Inc.*(1)........ 92,716
243,400 AMERIGROUP Corp.*........... 4,736,564
224,620 AMN Healthcare Services,
Inc.*..................... 4,442,984
107,100 AmSurg Corp.*............... 2,448,306
37,896 AngioDynamics, Inc.*........ 967,485
32,600 Beckman Coulter, Inc. ...... 1,854,940
9,200 Cantel Medical Corp.*....... 165,048
87,000 CorVel Corp.*............... 1,652,130
110,300 Covance, Inc.*.............. 5,355,065
69,800 Diagnostic Products
Corp. .................... 3,388,790
22,000 DJ Orthopedics, Inc.*....... 606,760
437,510 Encore Medical Corp.*....... 2,165,675
413,650 Five Star Quality Care,
Inc.*..................... 3,255,426
65,100 Haemonetics Corp.*.......... 3,180,786
248,890 Health Grades, Inc.*........ 1,560,540
120,800 ICON PLC (ADR) (Ireland)*... 4,969,712
12,200 ICU Medical, Inc.*.......... 478,362
172,420 I-Flow Corp.*(1)............ 2,520,780
121,160 Illumina, Inc.*............. 1,708,356
98,590 Immucor, Inc.*.............. 2,303,062
71,940 Intermagnetics General
Corp.*(1)................. 2,294,886
13,200 Intuitive Surgical, Inc.*... 1,547,964
34,760 LCA-Vision, Inc. ........... 1,651,448
7,900 Lifecore Biomedical,
Inc.*..................... 128,217
88,770 Lifeline Systems, Inc.*..... 3,245,431
28,200 Luminex Corp.*.............. 327,684
7,200 Magellan Health Services,
Inc.*..................... 226,440
73,110 Matria Healthcare, Inc.*.... 2,833,744
62,500 Matrixx Initiatives,
Inc.*(1).................. 1,309,375
7,700 MedCath Corp.*.............. 142,835
1,900 Mentor Corp.(1)............. 87,552
11,100 Meridian Bioscience,
Inc. ..................... 223,554
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES
(CONTINUED)
13,900 Natus Medical, Inc.*........ $ 224,346
39,400 Neurometrix, Inc.*.......... 1,074,832
107,170 NuVasive, Inc.*(1).......... 1,939,777
10,500 Odyssey HealthCare, Inc.*... 195,720
144,900 OraSure Technologies,
Inc.*..................... 1,278,018
501,570 Orthovita, Inc.*............ 1,946,092
5,300 Pediatrix Medical Group,
Inc.*..................... 469,421
5,700 Per-Se Technologies,
Inc.*..................... 133,152
103,401 PolyMedica Corp.(1)......... 3,460,831
39,700 PSS World Medical, Inc.*.... 589,148
1,700 Quality Systems, Inc.*...... 130,492
11,600 Sierra Health Services,
Inc.*..................... 927,536
4,000 Somanetics Corp.*........... 128,000
64,780 SonoSite, Inc.*(1).......... 2,267,948
122,600 Sunrise Senior Living,
Inc.*(1).................. 4,132,846
43,700 SurModics, Inc.*(1)......... 1,616,463
49,140 Syneron Medical, Ltd.
(Israel)*(1).............. 1,560,195
49,800 Techne Corp.*............... 2,796,270
109,600 The Cooper Companies,
Inc. ..................... 5,622,480
214,070 The Spectranetics Corp.*.... 2,408,288
100,800 Thoratec Corp.*............. 2,085,552
18,700 Triad Hospitals, Inc.*...... 733,601
65,300 Universal Health Services,
Inc. -- Class B(1)........ 3,052,122
4,500 US Physical Therapy,
Inc.*..................... 83,115
26,300 Varian Medical Systems,
Inc.*(1).................. 1,323,942
5,500 Vital Signs, Inc. .......... 235,510
--------------
111,052,901
--------------
METALS AND MINING -- 1.5%
51,500 Aber Diamond Corp.
(Canada)(1)............... 1,896,745
70,300 Commercial Metals Company... 2,639,062
107,200 Mueller Industries, Inc. ... 2,939,424
305,700 Novelis, Inc. (Canada)(1)... 6,386,073
48,800 NS Group, Inc.*............. 2,040,328
34,700 Reliance Steel & Aluminum
Company................... 2,120,864
17,000 Titanium Metals Corp.*(1)... 1,075,420
175,200 Wolverine Tube, Inc.*....... 886,512
--------------
19,984,428
--------------
OFFICE EQUIPMENT -- 0.3%
115,800 Herman Miller, Inc. ........ 3,264,402
--------------
</Table>
See notes to financial statements.
138
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
OIL AND GAS: EQUIPMENT -- 0.9%
32,290 Hydril Company*............. $ 2,021,354
24,300 Lone Star Technologies,
Inc.*..................... 1,255,338
78,440 Maverick Tube Corp.*(1)..... 3,126,619
82,730 Oil States International,
Inc.*(1).................. 2,620,886
138,580 Superior Energy Services,
Inc.*..................... 2,917,109
--------------
11,941,306
--------------
OIL, COAL AND GAS -- 5.7%
14,100 Berry Petroleum Company --
Class A................... 806,520
215,850 Cabot Oil & Gas Corp. ...... 9,734,835
59,600 Cal Dive International,
Inc.*(1).................. 2,139,044
13,800 Callon Petroleum Company*... 243,570
16,100 Clayton Williams Energy,
Inc.*..................... 672,014
154,450 Encore Acquisition
Company*.................. 4,948,578
260,900 Energy Partners, Ltd.*...... 5,685,011
14,900 Foundation Coal Holdings,
Inc. ..................... 566,200
57,300 Frontier Oil Corp. ......... 2,150,469
161,600 Global Industries, Ltd.*.... 1,834,160
353,440 Grey Wolf, Inc.*............ 2,732,091
154,000 Harvest Natural Resources,
Inc.*(1).................. 1,367,520
93,400 Headwaters, Inc.*(1)........ 3,310,096
88,300 Oceaneering International,
Inc.*..................... 4,395,574
95,100 ONEOK, Inc. ................ 2,532,513
183,700 Parker Drilling Company*.... 1,989,471
106,180 Patterson-UTI Energy,
Inc. ..................... 3,498,631
3,100 Petroleum Development
Corp.*.................... 103,354
34,500 Remington Oil & Gas
Corp.*.................... 1,259,250
57,500 St Mary Land & Exploration
Company(1)................ 2,116,575
135,800 Swift Energy Company*....... 6,120,506
74,600 The Houston Exploration
Company*.................. 3,938,880
23,900 Ultra Petroleum Corp.
(Canada)*................. 1,333,620
50,250 Unit Corp.*................. 2,765,258
154,800 Whiting Petroleum Corp.*.... 6,192,000
--------------
72,435,740
--------------
PAPER AND FOREST PRODUCTS -- 0.0%
10,100 Longview Fibre Company...... 210,181
19,200 Rock-Tenn Company -- Class
A......................... 262,080
--------------
472,261
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 5.3%
238,300 Abgenix, Inc.*(1)........... $ 5,125,833
14,700 Adams Respiratory
Therapeutics, Inc.*....... 597,702
27,000 Affymetrix, Inc.*........... 1,289,250
105,800 Albany Molecular Research,
Inc.*..................... 1,285,470
106,700 Alpharma, Inc. -- Class A... 3,042,017
34,900 Andrx Corp.*................ 574,803
96,429 AtheroGenics, Inc.*(1)...... 1,929,544
46,700 Barr Pharmaceuticals,
Inc.*..................... 2,908,943
15,000 Bentley Pharmaceuticals,
Inc.*..................... 246,150
151,700 Cephalon, Inc.*(1).......... 9,821,057
163,700 Cubist Pharmaceuticals,
Inc.*..................... 3,478,625
24,300 deCODE genetics, Inc.*(1)... 200,718
363,300 Dendreon Corp.*(1).......... 1,969,086
215,700 DepoMed, Inc.*(1)........... 1,294,200
86,100 Endo Pharmaceuticals
Holdings, Inc.*........... 2,605,386
20,799 Enzo Biochem, Inc.*(1)...... 258,324
143,600 Enzon Pharmaceuticals,
Inc.*..................... 1,062,640
211,230 First Horizon Pharmaceutical
Corp.*(1)................. 3,643,718
51,400 InterMune, Inc.*(1)......... 863,520
27,700 LifeCell Corp.*............. 528,239
287,500 Medarex, Inc.*(1)........... 3,981,875
10,400 Millipore Corp.*............ 686,816
23,700 Neurocrine Biosciences,
Inc.*..................... 1,486,701
9,300 Nutraceutical International
Corp.*.................... 126,015
125,336 Pharmaceutical Product
Development, Inc. ........ 7,764,565
18,400 POZEN, Inc.*................ 176,456
39,900 Regeneron Pharmaceuticals,
Inc.*..................... 636,405
137,040 Salix Pharmaceuticals,
Ltd.*(1).................. 2,409,163
86,700 Serologicals Corp.*(1)...... 1,711,458
</Table>
See notes to financial statements.
139
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT
(CONTINUED)
91,700 Trimeris, Inc.*(1).......... $ 1,053,633
35,000 United Therapeutics
Corp.*.................... 2,419,200
183,610 ViroPharma, Inc.*(1)........ 3,405,966
--------------
68,583,478
--------------
PRINTING AND PUBLISHING -- 0.7%
232,400 Bowne & Company, Inc. ...... 3,448,816
102,500 Scholastic Corp.*........... 2,922,275
103,200 Valassis Communications,
Inc.*..................... 3,000,024
--------------
9,371,115
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.1%
29,800 Getty Realty Corp. ......... 783,442
27,300 Trammell Crow Company*...... 700,245
--------------
1,483,687
--------------
REAL ESTATE INVESTMENT TRUSTS -- 4.2%
175,900 Acadia Realty Trust......... 3,526,795
45,000 Arbor Realty Trust, Inc. ... 1,166,400
18,300 Associated Estates Realty
Corp. .................... 165,432
18,100 Boykin Lodging Company*..... 221,182
17,500 Capital Trust, Inc. -- Class
A......................... 512,400
3,200 CentraCore Properties
Trust..................... 85,984
12,100 Commercial Net Lease
Realty.................... 246,477
89,500 Cousins Properties, Inc. ... 2,532,850
5,200 Digital Realty Trust,
Inc. ..................... 117,676
57,000 Entertainment Properties
Trust..................... 2,322,750
127,700 Equity Inns, Inc. .......... 1,730,335
69,500 Equity One, Inc. ........... 1,606,840
113,600 FelCor Lodging Trust,
Inc. ..................... 1,955,056
8,600 Global Signal, Inc. ........ 371,176
32,200 Gramercy Capital Corp. ..... 733,516
57,900 Heritage Property Investment
Trust..................... 1,933,860
37,300 Innkeepers USA Trust........ 596,800
31,700 Jer Investors Trust,
Inc. ..................... 537,315
157,890 KKR Financial Corp. ........ 3,787,781
80,700 LaSalle Hotel Properties.... 2,963,304
59,500 LTC Properties, Inc. ....... 1,251,285
85,600 Maguire Properties, Inc. ... 2,645,040
197,600 MeriStar Hospitality
Corp.*.................... 1,857,440
30,100 Mid-America Apartment
Communities, Inc. ........ 1,459,850
11,400 National Health Realty,
Inc. ..................... 295,944
12,500 NorthStar Realty Finance
Corp. .................... 127,375
124,300 OMEGA Healthcare Investors,
Inc. ..................... 1,564,937
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
44,900 PS Business Parks, Inc. .... $ 2,209,080
76,500 RAIT Investment Trust....... 1,982,880
167,300 Realty Income Corp. ........ 3,617,026
6,600 Saul Centers, Inc. ......... 238,260
46,200 SL Green Realty Corp.(1).... 3,529,218
11,500 Sovran Self Storage(1)...... 540,155
16,700 Sunstone Hotel Investors,
Inc. ..................... 443,719
36,100 Taubman Centers, Inc. ...... 1,254,475
201,200 U-Store-It Trust............ 4,235,260
--------------
54,365,873
--------------
REGISTERED INVESTMENT COMPANIES -- 0.0%
4,900 Apollo Investment Corp. .... 87,857
--------------
RETAIL -- 1.0%
148,300 Casey's General Stores,
Inc. ..................... 3,677,840
40,600 Circuit City Stores,
Inc. ..................... 917,154
41,800 Longs Drug Stores Corp. .... 1,521,102
31,500 Pantry, Inc.*............... 1,480,185
6,100 Sonic Automotive, Inc. ..... 135,908
49,900 Trans World Entertainment
Corp.*.................... 284,430
57,500 Williams-Sonoma, Inc.*...... 2,481,125
91,600 Zale Corp.*................. 2,303,740
--------------
12,801,484
--------------
RETAIL: RESTAURANTS -- 1.7%
84,700 Brinker International,
Inc.(1)................... 3,274,502
112,050 CEC Entertainment, Inc.*.... 3,814,182
56,800 CKE Restaurants, Inc. ...... 767,368
144,038 Cosi, Inc.*................. 1,195,515
60,700 Domino's Pizza, Inc. ....... 1,468,940
24,700 Jack in the Box, Inc.*...... 862,771
34,500 Lone Star Steakhouse &
Saloon, Inc. ............. 819,030
21,800 Panera Bread Company --
Class A*(1)............... 1,431,824
35,100 Papa John's International,
Inc.*..................... 2,081,781
148,500 Ruby Tuesday, Inc.(1)....... 3,844,665
85,800 Sonic Corp.*................ 2,531,100
--------------
22,091,678
--------------
RETAIL: SUPERMARKETS -- 0.0%
12,100 Pathmark Stores, Inc.*...... 120,879
14,600 Spartan Stores, Inc.*....... 152,132
--------------
273,011
--------------
</Table>
See notes to financial statements.
140
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.9%
53,800 Cymer, Inc.*................ $ 1,910,438
114,200 FEI Company*(1)............. 2,189,214
188,960 Hexcel Corp.*............... 3,410,728
67,800 Varian, Inc.*............... 2,697,762
11,400 Woodward Governor Company... 980,514
--------------
11,188,656
--------------
SEMICONDUCTORS -- 4.7%
156,790 Advanced Analogic
Technologies, Inc.*....... 2,171,542
50,240 Agere Systems, Inc.*........ 648,096
387,700 Altera Corp.*............... 7,184,080
234,100 AMIS Holdings, Inc.*........ 2,493,165
320,200 Brooks Automation, Inc.*.... 4,012,106
99,100 Cirrus Logic, Inc.*......... 661,988
13,500 Cohu, Inc. ................. 308,745
198,100 Cree, Inc.*(1).............. 5,000,044
95,000 Emulex Corp.*............... 1,880,050
9,300 Fairchild Semiconductor
International, Inc.*...... 157,263
194,900 Genesis Microchip,
Inc.*(1).................. 3,525,741
102,800 Intersil Corp. -- Class A... 2,557,664
22,400 Kopin Corp.*................ 119,840
176,900 Kulicke and Soffa
Industries, Inc.*......... 1,563,796
329,000 Lattice Semiconductor
Corp.*.................... 1,421,280
143,900 Micrel, Inc.*............... 1,669,240
170,260 Microsemi Corp.*............ 4,709,392
19,400 MKS Instruments, Inc.*...... 347,066
56,600 Netlogic Microsystems,
Inc.*(1).................. 1,541,784
88,400 Novellus Systems, Inc.*..... 2,132,208
201,640 O2Micro International, Ltd.
(ADR) (Cayman Islands)*... 2,052,695
89,200 OmniVision Technologies,
Inc.*(1).................. 1,780,432
160,900 Pixelworks, Inc.*........... 817,372
60,200 PortalPlayer, Inc.*(1)...... 1,704,864
15,900 SiRF Technology Holdings,
Inc.*..................... 473,820
21,100 Supertex, Inc.*............. 933,675
324,600 Teradyne, Inc.*............. 4,729,422
131,430 Ultratech, Inc.*............ 2,158,081
140,980 Volterra Semiconductor
Corp.*(1)................. 2,114,700
--------------
60,870,151
--------------
SPORTING GOODS AND EQUIPMENT -- 0.2%
80,150 Hibbett Sporting Goods,
Inc.*..................... 2,282,672
49,000 The Nautilus Group, Inc. ... 914,340
--------------
3,197,012
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.8%
27,500 ADTRAN, Inc. ............... $ 817,850
136,500 American Tower Corp. --
Class A*.................. 3,699,150
18,100 Anaren, Inc.*............... 282,903
638,100 Avaya, Inc.*................ 6,808,527
91,500 Brightpoint, Inc.*.......... 2,537,295
6,400 Centennial Communications
Corp.*.................... 99,328
21,700 Commonwealth Telephone
Enterprises, Inc. ........ 732,809
97,700 CommScope, Inc.*(1)......... 1,966,701
16,100 CT Communications, Inc. .... 195,454
27,600 Digi International, Inc.*... 289,524
28,100 Dobson Communications
Corp. -- Class A*......... 210,750
8,100 Intrado, Inc.*.............. 186,462
10,100 Iowa Telecommunications
Services, Inc. ........... 156,449
11,000 Newport Corp.*.............. 148,940
10,700 North Pittsburgh Systems,
Inc. ..................... 201,909
94,900 Plantronics, Inc. .......... 2,685,670
549,100 Polycom, Inc.*.............. 8,401,230
692,000 RF Micro Devices, Inc.*..... 3,743,720
10,900 Syniverse Holdings, Inc.*... 227,810
88,900 TALK America Holdings,
Inc.*(1).................. 767,207
152,000 UbiquiTel, Inc.*............ 1,503,280
9,300 USA Mobility, Inc.*......... 257,796
--------------
35,920,764
--------------
TOOLS -- 0.3%
88,900 Snap-on, Inc.(1)............ 3,339,084
--------------
TOYS -- 0.1%
63,800 JAKKS Pacific, Inc.*(1)..... 1,335,972
--------------
TRANSPORTATION -- 1.2%
101,540 American Commercial Lines,
Inc.*..................... 3,075,647
142,450 Genesee & Wyoming, Inc. --
Class A*.................. 5,348,997
2,700 Hub Group, Inc. -- Class
A*........................ 95,445
107,905 Old Dominion Freight Line,
Inc.*..................... 2,911,277
</Table>
See notes to financial statements.
141
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION (CONTINUED)
10,700 Swift Transportation
Company, Inc.*............ $ 217,210
159,860 Vitran Corp., Inc. -- Class
A (Canada)*............... 3,149,242
49,000 Werner Enterprises, Inc. ... 965,300
--------------
15,763,118
--------------
UTILITIES -- 1.5%
94,500 Atmos Energy Corp. ......... 2,472,120
18,600 Avista Corp. ............... 329,406
13,300 Cascade Natural Gas
Corp. .................... 259,483
13,200 Cleco Corp. ................ 275,220
58,700 New Jersey Resources
Corp. .................... 2,458,943
61,000 Nicor, Inc.(1).............. 2,397,910
222,300 PNM Resources, Inc. ........ 5,444,127
32,300 Sierra Pacific Resources*... 421,192
86,800 Westar Energy, Inc. ........ 1,866,200
118,500 WGL Holdings, Inc. ......... 3,562,110
--------------
19,486,711
--------------
TOTAL COMMON STOCKS (Cost
$1,105,725,232)........... 1,264,884,852
--------------
<Caption>
PRINCIPAL
---------
SHORT TERM US TREASURY SECURITIES -- 0.1%
$ 750,000 US Treasury Bill,
3.83%, 03/16/06(e) (Cost
$744,016)................. 744,016
--------------
SECURITIES LENDING COLLATERAL -- 20.0%
259,405,644 Securities Lending
Collateral Investment
(Note 4) (Cost
$259,405,644)............. 259,405,644
--------------
TOTAL SECURITIES (Cost
$1,365,874,892)........... 1,525,034,512
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 2.9%
$ 37,835,074 With Investors Bank and
Trust, dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $37,851,133
(Collateralized by various
Fannie Mae Adjustable Rate
Mortgages, 4.30% -- 4.67%,
due 07/01/18 -- 01/01/34,
with a total value of
$27,408,399, and various
Small Business
Administrations, 6.63% --
7.13%, due 11/25/21 --
11/25/27, with a total
value of $12,318,428)
(Cost $37,835,074)........ $ 37,835,074
--------------
Total Investments -- 120.5%
(Cost $1,403,709,966)..... 1,562,869,586
Liabilities less other
assets -- (20.5)%......... (266,197,677)
--------------
NET ASSETS -- 100.0%........ $1,296,671,909
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $1,407,364,826.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $199,490,679
Gross unrealized depreciation.......... (43,985,919)
------------
Net unrealized appreciation............ $155,504,760
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
142
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 96.2%
ADVERTISING -- 0.6%
31,400 Ventiv Health, Inc.*............ $ 741,668
------------
AEROSPACE AND DEFENSE -- 0.8%
16,400 ARGON ST, Inc.*................. 508,072
15,200 Esterline Technologies Corp.*... 565,288
------------
1,073,360
------------
AIRLINES -- 0.5%
44,000 AirTran Holdings, Inc.*......... 705,320
------------
APPAREL: MANUFACTURING AND RETAIL -- 7.4%
21,772 Cache, Inc.*.................... 377,091
14,300 Carter's, Inc.*................. 841,555
23,700 Coldwater Creek, Inc.*.......... 723,561
22,100 Genesco, Inc.*.................. 857,259
25,000 Jos A Bank Clothiers, Inc.*..... 1,085,250
19,400 K-Swiss, Inc. -- Class A........ 629,336
25,000 Phillips-Van Heusen Corp. ...... 810,000
17,400 Steven Madden, Ltd.*............ 508,602
8,800 The Cato Corp. -- Class A....... 188,760
22,500 The Dress Barn, Inc.*........... 868,725
38,500 The Stride Rite Corp. .......... 522,060
28,100 The Warnaco Group, Inc.*........ 750,832
31,700 Too, Inc.*...................... 894,257
34,100 Wolverine World Wide, Inc. ..... 765,886
------------
9,823,174
------------
AUTOMOBILE: RETAIL -- 0.6%
36,700 Copart, Inc.*................... 846,302
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.2%
8,400 Modine Manufacturing Company.... 273,756
------------
BANKS -- 3.1%
12,900 Central Pacific Financial
Corp. ........................ 463,368
17,400 First BanCorp (Puerto Rico)..... 215,934
2,900 First Citizens Bancshares,
Inc. -- Class A............... 505,818
6,400 First Community Bancorp......... 347,968
31,700 First Niagara Financial Group,
Inc. ......................... 458,699
11,400 FirstFed Financial Corp.*....... 621,528
15,200 Franklin Bank Corp.*............ 273,448
17,400 Greater Bay Bancorp............. 445,788
12,600 The South Financial Group,
Inc. ......................... 347,004
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
9,100 TierOne Corp. .................. $ 267,631
5,300 United Community Banks, Inc.
(Georgia)..................... 141,298
------------
4,088,484
------------
BUSINESS SERVICES AND SUPPLIES -- 2.9%
20,200 Advisory Board Company*......... 962,934
28,600 Gevity HR, Inc. ................ 735,592
25,600 Labor Ready, Inc.*.............. 532,992
16,300 Mobile Mini, Inc.*.............. 772,620
17,200 TALX Corp. ..................... 786,212
------------
3,790,350
------------
COMMERCIAL SERVICES -- 1.2%
13,500 Euronet Worldwide, Inc.*........ 375,300
21,500 Providence Service Corp.*....... 618,985
17,300 Steiner Leisure, Ltd. (Bahama
Islands)*..................... 615,188
------------
1,609,473
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 7.9%
22,100 Advent Software, Inc.*.......... 638,911
15,700 Ansoft Corp.*................... 534,585
14,800 ANSYS, Inc.*.................... 631,812
16,200 Black Box Corp. ................ 767,556
64,200 Bottomline Technologies,
Inc.*......................... 707,484
19,900 Checkpoint Systems, Inc.*....... 490,535
40,900 Epicor Software Corp.*.......... 577,917
12,000 Hutchinson Technology, Inc.*.... 341,400
19,200 Hyperion Solutions Corp.*....... 687,744
35,600 Informatica Corp.*.............. 427,200
39,400 Magma Design Automation,
Inc.*......................... 331,354
16,100 Merge Technologies, Inc.*....... 403,144
88,800 Micromuse, Inc.*................ 878,232
27,700 Moldflow Corp.*................. 386,138
16,200 M-Systems Flash Disk Pioneers,
Ltd. (Israel)*................ 536,544
6,600 Neoware Systems, Inc*........... 153,780
53,400 Radiant Systems, Inc.*.......... 649,344
29,200 The Ultimate Software Group,
Inc.*......................... 556,844
29,000 Transaction Systems Architects,
Inc. -- Class A*.............. 834,910
------------
10,535,434
------------
</Table>
See notes to financial statements.
143
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES -- 4.8%
40,300 Builders FirstSource, Inc.*..... $ 861,211
12,700 Cavco Industries, Inc.*......... 486,156
49,400 Champion Enterprises, Inc.*..... 672,828
27,400 Dycom Industries, Inc.*......... 602,800
20,100 ElkCorp......................... 676,566
18,400 NCI Building Systems,
Inc.*(1)...................... 781,632
12,700 Simpson Manufacturing Company,
Inc. ......................... 461,645
16,100 Texas Industries, Inc. ......... 802,424
19,600 The Genlyte Group, Inc.*........ 1,049,972
------------
6,395,234
------------
CONSUMER GOODS AND SERVICES -- 1.6%
13,000 Chattem, Inc.*.................. 473,070
14,700 Craftmade International,
Inc. ......................... 294,147
1,437 Parlux Fragrances, Inc.*........ 43,872
11,500 Spectrum Brands, Inc.*.......... 233,565
14,900 The Toro Company................ 652,173
31,900 Ultralife Batteries, Inc.*...... 382,800
------------
2,079,627
------------
CONTAINERS AND PACKAGING -- 0.3%
11,400 Silgan Holdings, Inc. .......... 411,768
------------
CORRECTIONAL FACILITIES -- 0.5%
15,200 Corrections Corp. of America*... 683,544
------------
DISTRIBUTION -- 0.5%
17,900 Central European Distribution
Corp.*(1)..................... 718,506
------------
DIVERSIFIED OPERATIONS AND SERVICES -- 0.4%
10,261 Walter Industries, Inc. ........ 510,177
------------
ELECTRONICS -- 1.7%
84,200 Aeroflex, Inc. ................. 905,150
10,100 EDO Corp. ...................... 273,306
13,400 KEMET Corp.*.................... 94,738
94,900 Microtune, Inc.*................ 395,733
22,600 Orbotech, Ltd. (Israel)*........ 541,722
------------
2,210,649
------------
ENGINEERING -- 0.3%
6,600 EMCOR Group, Inc.*.............. 445,698
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.6%
19,300 Aleris International, Inc.*..... 622,232
10,100 Metal Management, Inc. ......... 234,926
------------
857,158
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
EQUIPMENT RENTAL AND LEASING -- 0.5%
32,200 Aaron Rents, Inc. .............. $ 678,776
------------
FINANCIAL SERVICES -- 1.8%
8,200 Affiliated Managers Group,
Inc.*......................... 658,050
9,800 ASTA Funding, Inc. ............. 267,932
12,900 Doral Financial Corp. (Puerto
Rico)......................... 136,740
15,500 Encore Capital Group, Inc.*..... 268,925
14,000 Piper Jaffray Companies,
Inc.*......................... 565,600
61,200 W Holding Company, Inc. (Puerto
Rico)......................... 503,676
------------
2,400,923
------------
FOOD AND BEVERAGE -- 0.6%
13,700 Chiquita Brands International,
Inc. ......................... 274,137
24,500 Corn Products International,
Inc. ......................... 585,305
------------
859,442
------------
INSURANCE -- 3.4%
15,200 Amerisafe, Inc.*................ 153,216
11,700 Arch Capital Group, Ltd.
(Bermuda)*.................... 640,575
18,300 Infinity Property & Casualty
Corp. ........................ 680,943
23,400 Platinum Underwriters Holdings,
Ltd. (Bermuda)................ 727,038
9,300 RLI Corp. ...................... 463,791
13,400 Selective Insurance Group,
Inc. ......................... 711,540
23,800 The Phoenix Companies, Inc. .... 324,632
16,500 Zenith National Insurance
Corp. ........................ 760,980
------------
4,462,715
------------
INTERNET SERVICES -- 9.0%
92,305 Art Technology Group, Inc.*..... 180,918
18,600 Blackboard, Inc.*............... 539,028
9,800 Blue Nile, Inc.*(1)............. 395,038
44,400 Click Commerce, Inc.*(1)........ 933,288
20,500 Digital River, Inc.*(1)......... 609,670
26,500 eCollege.com, Inc.*............. 477,795
124,500 Entrust, Inc.*.................. 602,580
25,700 Jupitermedia Corp.*............. 379,846
45,800 LivePerson, Inc.*............... 256,938
24,300 NETGEAR, Inc.*.................. 467,775
</Table>
See notes to financial statements.
144
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES (CONTINUED)
48,600 Packeteer, Inc.*................ $ 377,622
48,000 Performance Technologies,
Inc.*......................... 393,120
22,100 Priceline.com, Inc.*(1)......... 493,272
41,700 RADVision, Ltd. (Israel)*....... 691,499
76,500 RealNetworks, Inc. ............. 593,640
36,600 Secure Computing Corp.*......... 448,716
33,900 SonicWALL, Inc.*................ 268,488
57,000 Stellent, Inc.*................. 566,010
40,100 The TriZetto Group, Inc.*....... 681,299
45,800 ValueClick, Inc.*............... 829,438
41,997 VASCO Data Security
International, Inc.*.......... 414,090
82,300 webMethods, Inc.*............... 634,533
12,200 Websense, Inc.*................. 800,808
------------
12,035,411
------------
LEISURE AND RECREATION -- 0.9%
9,800 Dover Downs Gaming &
Entertainment, Inc. .......... 138,670
61,500 Mikohn Gaming Corp.*(1)......... 607,005
17,400 Scientific Games Corp. -- Class
A*............................ 474,672
------------
1,220,347
------------
MACHINERY -- 2.6%
23,600 ASV, Inc.*...................... 589,528
146,400 Flow International Corp.*....... 1,232,688
12,300 Gardner Denver, Inc.*........... 606,390
68,400 Presstek, Inc.*................. 618,336
18,200 Sauer-Danfoss, Inc. ............ 342,342
------------
3,389,284
------------
MANUFACTURING -- 3.4%
21,800 Ceradyne, Inc.*................. 954,840
27,500 Encore Wire Corp.*.............. 625,900
23,600 Griffon Corp.*.................. 561,916
9,900 Lincoln Electric Holdings,
Inc. ......................... 392,634
78,300 Power-One, Inc.*................ 471,366
5,700 PW Eagle, Inc. ................. 116,850
11,900 Rogers Corp.*................... 466,242
28,140 TTM Technologies, Inc.*......... 264,516
26,100 Wabtec Corp. ................... 702,090
------------
4,556,354
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 8.8%
20,000 Amedisys, Inc.*................. 844,800
10,400 American Retirement Corp.*...... 261,352
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES
(CONTINUED)
70,600 AMICAS, Inc.*................... $ 350,176
34,100 Aspect Medical Systems, Inc.*... 1,171,335
18,800 Hologic, Inc.*.................. 712,896
7,000 ICU Medical, Inc.*.............. 274,470
25,800 Illumina, Inc.*................. 363,780
32,500 IntraLase Corp*(1).............. 579,475
25,700 IRIS International, Inc.*....... 561,802
22,347 LHC Group, Inc.*................ 389,508
16,100 LifePoint Hospitals, Inc.*...... 603,750
13,000 Matria Healthcare, Inc.*........ 503,880
8,200 Matrixx Initiatives, Inc.*...... 171,790
28,000 Meridian Bioscience, Inc. ...... 563,920
43,300 Natus Medical, Inc.*............ 698,862
31,300 Palomar Medical Technologies,
Inc.*......................... 1,096,752
40,400 Per-Se Technologies, Inc.*...... 943,744
21,700 SurModics, Inc.*(1)............. 802,683
71,400 Third Wave Technologies*........ 212,772
29,000 Thoratec Corp.*................. 600,010
------------
11,707,757
------------
METALS AND MINING -- 1.0%
11,600 Carpenter Technology Corp. ..... 817,452
5,400 Commercial Metals Company....... 202,716
11,600 Gibraltar Industries, Inc. ..... 266,104
------------
1,286,272
------------
OFFICE EQUIPMENT -- 0.5%
22,800 Herman Miller, Inc. ............ 642,732
------------
OIL AND GAS: EQUIPMENT -- 0.4%
22,500 Superior Energy Services,
Inc.*......................... 473,625
------------
OIL AND GAS: PIPELINES -- 0.1%
4,300 Hornbeck Offshore Services,
Inc.*......................... 140,610
------------
OIL, COAL AND GAS -- 3.9%
18,700 Cal Dive International, Inc.*... 671,143
17,200 Core Laboratories NV (the
Netherlands)*................. 642,592
22,000 Foundation Coal Holdings,
Inc. ......................... 836,000
17,300 Headwaters, Inc.*............... 613,112
6,100 Oceaneering International,
Inc.*......................... 303,658
17,200 TETRA Technologies, Inc.*....... 524,944
14,400 Tidewater, Inc. ................ 640,224
</Table>
See notes to financial statements.
145
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
16,600 Todco -- Class A*............... $ 631,796
5,700 Unit Corp.*..................... 313,671
------------
5,177,140
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 6.5%
74,300 Arena Pharmaceuticals,
Inc.*(1)...................... 1,056,546
47,100 Bentley Pharmaceuticals,
Inc.*......................... 772,911
29,200 Cubist Pharmaceuticals, Inc.*... 620,500
14,200 Digene Corp.*................... 414,214
7,400 Hi-Tech Pharmacal Company
Inc.*......................... 327,746
26,200 LifeCell Corp.*................. 499,634
45,400 PetMed Express, Inc.*........... 643,318
48,600 Protein Design Labs, Inc.*...... 1,381,212
42,200 Serologicals Corp.*............. 833,028
31,600 SFBC International, Inc.*....... 505,916
12,400 United Therapeutics Corp.*...... 857,088
39,000 ViroPharma, Inc.*............... 723,450
------------
8,635,563
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.9%
90,300 HouseValues, Inc.*(1)........... 1,176,609
------------
RETAIL -- 1.6%
19,100 BJ'S Wholesale Club, Inc.*...... 564,596
10,400 Conn's, Inc.*................... 383,448
13,800 First Cash Financial Services,
Inc.*......................... 402,408
8,799 Guitar Center, Inc.*............ 440,038
11,400 The Sportman's Guide, Inc.*..... 271,890
------------
2,062,380
------------
RETAIL: RESTAURANTS -- 1.3%
37,800 Luby's, Inc.*................... 502,740
12,300 Panera Bread Company -- Class
A*............................ 807,864
1,242 RARE Hospitality International,
Inc.*......................... 37,744
13,700 Sonic Corp.*.................... 404,150
------------
1,752,498
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 2.0%
19,500 Cymer, Inc.*.................... 692,445
23,500 FEI Company*.................... 450,495
36,500 Metrologic Instruments, Inc.*... 702,990
24,200 Trimble Navigation, Ltd.*....... 858,858
------------
2,704,788
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
SECURITY SERVICES -- 0.4%
31,600 Ituran Location and Control,
Ltd. (Israel)*................ $ 504,020
------------
SEMICONDUCTORS -- 4.9%
16,300 ATMI, Inc.*..................... 455,911
39,400 Credence Systems Corp.*......... 274,224
23,100 Cree, Inc.*(1).................. 583,044
48,000 Cypress Semiconductor Corp.*.... 684,000
43,600 Integrated Device Technology,
Inc.*......................... 574,648
111,600 Kopin Corp.*.................... 597,060
14,200 Microsemi Corp.*................ 392,772
37,500 MIPS Technologies, Inc.*........ 213,000
23,900 Netlogic Microsystems, Inc.*.... 651,036
23,500 O2Micro International, Ltd.
(ADR) (Cayman Islands)*....... 239,230
32,500 Photronics, Inc.*............... 489,450
12,300 PortalPlayer, Inc.*(1).......... 348,336
14,783 Power Integrations, Inc.*....... 351,983
34,300 Semtech Corp.*.................. 626,318
------------
6,481,012
------------
SPORTING GOODS AND EQUIPMENT -- 0.3%
14,000 Hibbett Sporting Goods, Inc.*... 398,720
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.7%
10,132 CALAMP Corp. ................... 106,285
50,900 Carrier Access Corp.*........... 251,446
48,700 Ditech Communications Corp.*.... 406,645
50,300 General Cable Corp.*............ 990,910
21,000 NICE Systems Ltd.(ADR)
(Israel)*..................... 1,011,360
46,700 Radyne Corp.*................... 680,419
42,600 Tekelec*........................ 592,140
46,900 Tollgrade Communications,
Inc*.......................... 512,617
81,900 Westell Technologies, Inc. --
Class A*...................... 368,550
------------
4,920,372
------------
TRANSPORTATION -- 1.8%
6,700 Arkansas Best Corp. ............ 292,656
20,100 Marten Transport, Ltd.*......... 366,222
16,300 Old Dominion Freight Line,
Inc.*......................... 439,774
</Table>
See notes to financial statements.
146
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION (CONTINUED)
22,900 Pacer International, Inc. ...... $ 596,774
31,100 Universal Truckload Services,
Inc.*......................... 715,300
------------
2,410,726
------------
TOTAL COMMON STOCKS
(Cost $127,835,265)........... 127,877,758
------------
<Caption>
PRINCIPAL
- ---------
SECURITIES LENDING COLLATERAL -- 6.3%
$8,438,426 Securities Lending Collateral
Investment (Note 4)
(Cost $8,438,426)............. 8,438,426
------------
TOTAL SECURITIES (Cost
$136,273,691)................. 136,316,184
------------
REPURCHASE AGREEMENTS -- 5.1%
6,730,608 With Investors Bank and Trust,
dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $6,733,465
(Collateralized by Small
Business Administration,
6.27%, due 05/25/18, with a
value of $7,067,139)
(Cost $6,730,608)............. 6,730,608
------------
Total Investments -- 107.6%
(Cost $143,004,299)........... 143,046,792
Liabilities less other
assets -- (7.6)%.............. (10,143,258)
------------
NET ASSETS -- 100.0%............ $132,903,534
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $143,566,156.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 3,382,866
Gross unrealized depreciation........... (3,902,230)
-----------
Net unrealized depreciation............. $ (519,364)
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
147
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 99.5%
AEROSPACE AND DEFENSE -- 1.4%
78,350 The Boeing Company............. $ 5,503,304
------------
AIRLINES -- 0.8%
145,900 AMR Corp.*(1).................. 3,243,357
------------
APPAREL: MANUFACTURING AND RETAIL -- 2.4%
96,290 Chico's FAS, Inc.*............. 4,230,020
148,520 Coach, Inc.*................... 4,951,657
------------
9,181,677
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.5%
55,440 Toyota Motor Corp.
(ADR)(Japan)(1).............. 5,800,133
------------
BROADCAST SERVICES/MEDIA -- 0.7%
398,350 Sirius Satellite Radio,
Inc.*(1)..................... 2,668,945
------------
BUSINESS SERVICES AND SUPPLIES -- 1.0%
79,560 Global Payments, Inc. ......... 3,708,292
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 9.1%
133,490 Apple Computer, Inc.*.......... 9,596,596
49,610 Electronic Arts, Inc.*......... 2,595,099
573,230 EMC Corp. (Massachusetts)*..... 7,807,393
289,210 Hewlett-Packard Company........ 8,280,082
140,060 Network Appliance, Inc.*....... 3,781,620
86,570 Salesforce.com, Inc.*(1)....... 2,774,569
------------
34,835,359
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.0%
65,180 Cemex SA de CV (ADR)
(Mexico)..................... 3,867,129
------------
DIVERSIFIED OPERATIONS AND SERVICES -- 5.9%
642,650 General Electric Company....... 22,524,883
------------
ELECTRONICS -- 2.2%
188,700 ATI Technologies, Inc.
(Canada)*.................... 3,206,013
129,610 Sony Corp. (ADR) (Japan)(1).... 5,288,088
------------
8,494,101
------------
FINANCIAL SERVICES -- 5.2%
12,200 Chicago Mercantile Exchange
Holdings, Inc. .............. 4,483,378
264,570 Mitsubishi UFJ Financial Group,
Inc. (ADR) (Japan)........... 3,621,963
89,140 Nasdaq Stock Market,
Inc.*(1)..................... 3,135,945
201,440 Nomura Holdings, Inc. (ADR)
(Japan)...................... 3,871,677
336,540 The Charles Schwab Corp. ...... 4,937,042
------------
20,050,005
------------
FOOD AND BEVERAGE -- 1.1%
169,240 Archer-Daniels-Midland
Company...................... 4,173,458
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES -- 10.4%
227,120 Akamai Technologies, Inc.*..... $ 4,526,502
224,880 eBay, Inc.*.................... 9,726,060
41,650 Google, Inc. -- Class A*(1).... 17,278,919
207,890 YAHOO!, Inc.*.................. 8,145,130
------------
39,676,611
------------
LEISURE AND RECREATION -- 2.5%
151,740 Scientific Games Corp. -- Class
A*........................... 4,139,467
87,000 Starwood Hotels & Resorts
Worldwide, Inc. ............. 5,555,820
------------
9,695,287
------------
MACHINERY -- 1.4%
130,080 Joy Global, Inc. .............. 5,203,200
------------
MANUFACTURING -- 1.0%
71,000 Precision Castparts Corp. ..... 3,678,510
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 7.3%
38,500 Cerner Corp.*.................. 3,500,035
40,560 Express Scripts, Inc.*......... 3,398,928
52,520 Omnicare, Inc. ................ 3,005,194
158,880 St Jude Medical, Inc.*......... 7,975,776
162,090 UnitedHealth Group, Inc. ...... 10,072,273
------------
27,952,206
------------
METALS AND MINING -- 1.6%
76,380 Companhia Vale do Rio Doce
(CVRD) (ADR) (Brazil)........ 3,142,273
46,200 Nucor Corp.(1)................. 3,082,464
------------
6,224,737
------------
OIL AND GAS: PIPELINES -- 0.7%
29,260 Kinder Morgan, Inc. ........... 2,690,457
------------
OIL, COAL AND GAS -- 1.7%
54,440 CONSOL Energy, Inc. ........... 3,548,400
34,370 Peabody Energy Corp. .......... 2,832,775
------------
6,381,175
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 12.3%
40,170 Allergan, Inc.(1).............. 4,336,753
115,740 Amgen, Inc.*................... 9,127,256
130,720 Caremark Rx, Inc.*............. 6,769,989
91,140 Genentech, Inc.*............... 8,430,450
92,680 Genzyme Corp.*................. 6,559,890
153,750 Gilead Sciences, Inc.*......... 8,091,863
83,440 Teva Pharmaceutical Industries,
Ltd. (ADR) (Israel)(1)....... 3,588,754
------------
46,904,955
------------
</Table>
See notes to financial statements.
148
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.9%
60,500 CB Richard Ellis Group, Inc. --
Class A*..................... $ 3,560,425
------------
RETAIL -- 1.0%
99,300 Tiffany & Company.............. 3,802,197
------------
RETAIL: RESTAURANTS -- 1.3%
162,030 Starbucks Corp.*............... 4,862,520
------------
RETAIL: SUPERMARKETS -- 1.0%
49,420 Whole Foods Market, Inc. ...... 3,824,614
------------
SEMICONDUCTORS -- 12.0%
248,310 Advanced Micro Devices,
Inc.*........................ 7,598,286
416,800 Applied Materials, Inc. ....... 7,477,392
186,340 Broadcom Corp. -- Class A*..... 8,785,931
140,890 KLA-Tencor Corp. .............. 6,950,104
158,820 Marvell Technology Group, Ltd.
(Bermuda)*................... 8,908,213
463,180 Micron Technology, Inc.*(1).... 6,164,926
------------
45,884,852
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 12.1%
125,310 America Movil SA de CV --
Series L (ADR) (Mexico)...... 3,666,571
125,960 Comverse Technology, Inc.*..... 3,349,276
379,070 Corning, Inc.*................. 7,452,516
145,900 Crown Castle International
Corp.*....................... 3,926,169
1,897,930 JDS Uniphase Corp.*............ 4,479,115
319,040 Motorola, Inc. ................ 7,207,114
84,890 NII Holdings, Inc.*(1)......... 3,707,995
228,560 QUALCOMM, Inc. ................ 9,846,365
249,960 Tellabs, Inc.*................. 2,724,564
------------
46,359,685
------------
TOTAL COMMON STOCKS (Cost
$322,860,578)................ 380,752,074
------------
<Caption>
PRINCIPAL VALUE
--------- ------------
SECURITIES LENDING COLLATERAL -- 9.7%
$36,910,309 Securities Lending Collateral
Investment (Note 4) (Cost
$36,910,309)................. $ 36,910,309
------------
TOTAL SECURITIES
(Cost $359,770,887).......... 417,662,383
------------
REPURCHASE AGREEMENTS -- 0.6%
2,103,212 With Investors Bank and Trust,
dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $2,104,105
(Collateralized by Small
Business Administration,
7.13%, due 12/25/26, with a
value of $2,208,373)
(Cost $2,103,212)............ 2,103,212
------------
Total Investments -- 109.8%
(Cost $361,874,099).......... 419,765,595
Liabilities less other
assets -- (9.8)%............. (37,636,535)
------------
NET ASSETS -- 100.0%........... $382,129,060
============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $361,935,319.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $59,518,767
Gross unrealized depreciation........... (1,688,491)
-----------
Net unrealized appreciation............. $57,830,276
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
149
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 89.6%
ADVERTISING -- 0.5%
$ 1,370,000 Advanstar Communications, Inc.,
10.75%, 08/15/10............. $ 1,508,713
455,000 WDAC Subsidiary Corp. -- 144A,
8.38%, 12/01/14.............. 443,056
------------
1,951,769
------------
AEROSPACE AND DEFENSE -- 0.3%
395,000 Argo-Tech Corp.,
9.25%, 06/01/11.............. 406,850
415,000 Armor Holdings, Inc., 8.25%,
08/15/13..................... 448,200
210,000 B/E Aerospace, Series B, 8.00%,
03/01/08..................... 211,050
------------
1,066,100
------------
AGRICULTURAL EQUIPMENT -- 0.2%
940,000 Case New Holland, Inc., 9.25%,
08/01/11..................... 1,010,500
------------
AIRLINES -- 1.3%
920,000 American Airlines, Inc., 8.61%,
04/01/11..................... 914,697
1,700,000 American Airlines, Inc., Series
2001-2,
7.80%, 10/01/06.............. 1,679,009
295,000 American Airlines, Inc., Series
2001-2,
7.86%, 10/01/11.............. 311,221
950,000 AMR Corp.,
9.00%, 08/01/12(2)........... 828,875
1,094,940 Continental Airlines, Inc.,
Series 2001-1,
7.03%, 06/15/11.............. 998,062
500,000 Delta Air Lines, Inc., 7.90%,
12/15/09(g).................. 115,000
435,000 Delta Air Lines, Inc. -- 144A,
9.50%, 11/18/08(g)........... 384,975
------------
5,231,839
------------
APPAREL: MANUFACTURING AND RETAIL -- 4.6%
3,300,000 Levi Strauss & Company, 12.25%,
12/15/12..................... 3,695,999
1,755,000 Levi Strauss & Company, 9.75%,
01/15/15..................... 1,833,975
1,740,000 Levi Strauss & Company,
Floating Rate,
8.80%, 04/01/12(b)........... 1,761,750
2,240,000 Neiman Marcus Group,
Inc. -- 144A,
9.00%, 10/15/15.............. 2,301,600
2,940,000 Neiman Marcus Group,
Inc. -- 144A,
10.38%, 10/15/15............. 3,002,475
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
APPAREL: MANUFACTURING AND RETAIL (CONTINUED)
$ 1,905,000 Oxford Industries, Inc., 8.88%,
06/01/11..................... $ 1,950,244
2,780,000 Perry Ellis International,
Inc., Series B,
8.88%, 09/15/13.............. 2,752,200
490,000 Phillips Van-Heusen Corp.,
7.25%, 02/15/11.............. 499,800
685,000 Phillips Van-Heusen Corp.,
8.13%, 05/01/13.............. 726,100
590,000 Quiksilver, Inc.,
6.88%, 04/15/15.............. 570,825
------------
19,094,968
------------
AUTOMOBILE: RENTAL -- 1.5%
3,505,000 Hertz Corp. -- 144A, 8.88%,
01/01/14..................... 3,588,244
2,615,000 Hertz Corp. -- 144A, 10.50%,
01/01/16..................... 2,706,525
------------
6,294,769
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 2.0%
2,110,000 Collins & Aikman Products
Company, Series B, 9.75%,
02/15/10..................... 1,867,349
395,000 Commercial Vehicle
Group -- 144A,
8.00%, 07/01/13.............. 392,038
155,000 Dura Operating Corp.,
Series D,
9.00%, 05/01/09.............. 88,350
270,000 Keystone Automotive Operations,
Inc.,
9.75%, 11/01/13.............. 234,900
780,000 Metaldyne Corp., 10.00%,
11/01/13..................... 709,800
565,000 Navistar International Corp.,
7.50%, 06/15/11.............. 540,988
1,270,000 Navistar International Corp.,
6.25%, 03/01/12.............. 1,143,000
260,000 Rexnord Corp.,
10.13%, 12/15/12............. 280,800
1,000,000 Tenneco Automotive, Inc.,
8.63%, 11/15/14.............. 950,000
945,000 Tenneco Automotive, Inc.,
Series B,
10.25%, 07/15/13............. 1,037,138
354,000 TRW Automotive, Inc., 11.00%,
02/15/13..................... 399,135
680,000 Visteon Corp.,
8.25%, 08/01/10.............. 581,400
------------
8,224,898
------------
</Table>
See notes to financial statements.
150
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA -- 6.3%
$ 1,075,000 Adelphia Communications,
10.25%, 11/01/06(g).......... $ 602,000
840,000 Adelphia Communications,
10.25%, 06/15/11(g).......... 508,200
305,000 Adelphia Communications, Series
B, 9.25%, 10/01/02(g)(k)..... 170,800
5,970,000 CCO Holdings LLC/Capital
Corp. -- 144A,
8.75%, 11/15/13.............. 5,716,274
2,285,000 Charter Communications Holdings
II,
10.25%, 09/15/10............. 2,285,000
1,740,000 Coleman Cable, Inc., 9.88%,
10/01/12..................... 1,418,100
1,030,000 CSC Holdings, Inc., 10.50%,
05/15/16..................... 1,096,950
405,000 CSC Holdings, Inc.,
Series B,
7.63%, 04/01/11.............. 405,000
4,625,000 Insight Communications Company,
Inc.,
zero coupon, 02/15/11(f)..... 4,856,250
2,040,000 Kabel Deutschland GMBH -- 144A
(Germany), 10.63%,
07/01/14..................... 2,157,300
715,000 LBI Media, Inc.,
10.13%, 07/15/12............. 762,369
570,000 LBI Media, Inc.,
zero coupon, 10/15/13(f)..... 419,663
1,655,000 Nexstar Financial Holdings LLC,
Inc.,
zero coupon, 04/01/13(f)..... 1,255,731
430,000 ONO Finance PLC (United
Kingdom),
14.00%, 02/15/11(l)(o)....... 550,485
1,300,000 ONO Finance PLC (United
Kingdom),
14.00%, 02/15/11............. 1,405,625
2,485,000 Sirius Satellite Radio,
Inc. -- 144A,
9.63%, 08/01/13.............. 2,460,150
------------
26,069,897
------------
BUSINESS SERVICES AND SUPPLIES -- 0.9%
1,500,000 Affinity Group, Inc., 9.00%,
02/15/12..................... 1,505,625
2,010,000 Quintiles Transnational Corp.,
10.00%, 10/01/13............. 2,251,200
------------
3,756,825
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CHEMICALS -- 4.4%
$ 87,000 Avecia Group PLC (United
Kingdom),
11.00%, 07/01/09............. $ 90,045
655,000 Equistar Chemical/Funding,
10.63%, 05/01/11............. 723,775
1,086,000 Huntsman LLC,
11.63%, 10/15/10............. 1,242,113
760,000 IMC Global, Inc., 10.88%,
08/01/13..................... 876,850
1,675,000 IMC Global, Inc.,
Series B,
11.25%, 06/01/11............. 1,809,000
320,000 Lyondell Chemical Company,
11.13%, 07/15/12............. 359,600
1,301,000 Lyondell Chemical Company,
10.50%, 06/01/13............. 1,484,766
2,408,000 Nalco Company,
8.88%, 11/15/13.............. 2,534,420
1,260,000 Nova Chemicals Corp.
(Canada) -- 144A,
Floating Rate,
7.56%, 11/15/13(i)........... 1,293,075
2,900,000 OM Group, Inc.,
9.25%, 12/15/11.............. 2,849,249
1,200,000 PolyOne Corp.,
10.63%, 05/15/10............. 1,293,000
365,000 PolyOne Corp.,
8.88%, 05/01/12.............. 359,525
380,000 PQ Corp. -- 144A, 7.50%,
02/15/13..................... 355,300
340,000 Rhodia SA (France), 10.25%,
06/01/10..................... 374,000
1,148,000 Rockwood Specialties Corp.,
10.63%, 05/15/11............. 1,264,235
215,000 Tronox Worldwide/Tronox Finance
Corp. -- 144A,
9.50%, 12/01/12.............. 220,375
1,455,000 UAP Holding Corp.,
zero coupon, 07/15/12(f)..... 1,267,669
------------
18,396,997
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 2.7%
3,985,000 GSC Holdings Corp. -- 144A,
8.00%, 10/01/12.............. 3,765,825
1,590,000 GSC Holdings Corp. -- 144A,
Floating Rate, 7.88%,
10/01/11(b).................. 1,582,050
1,800,000 Interface, Inc.,
10.38%, 02/01/10............. 1,957,500
170,000 Interface, Inc.,
9.50%, 02/01/14.............. 170,000
</Table>
See notes to financial statements.
151
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES
(CONTINUED)
$ 190,000 Stratus Technologies, Inc.,
10.38%, 12/01/08............. $ 192,850
1,685,000 SunGard Data Systems,
Inc. -- 144A,
9.13%, 08/15/13.............. 1,752,400
1,445,000 SunGard Data Systems,
Inc. -- 144A,
10.25%, 08/15/15............. 1,452,225
420,000 SunGard Data Systems,
Inc. -- 144A, Floating Rate,
8.52%, 08/15/13(i)........... 436,800
------------
11,309,650
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 1.7%
910,000 Dayton Superior Corp., 10.75%,
09/15/08..................... 882,700
1,955,000 Nortek, Inc.,
8.50%, 09/01/14.............. 1,896,350
930,000 NTK Holdings, Inc.,
zero coupon, 03/01/14(f)..... 585,900
865,000 Panolam Industries
International -- 144A,
10.75%, 10/01/13............. 836,888
520,000 Ply Gem Industries, Inc.,
9.00%, 02/15/12.............. 464,100
2,090,000 RMCC Acquisition
Company -- 144A,
9.50%, 11/01/12.............. 2,110,900
330,000 Stanley-Martin
Companies -- 144A,
9.75%, 08/15/15.............. 301,950
------------
7,078,788
------------
CONSUMER GOODS AND SERVICES -- 0.3%
695,000 Fedders North America, 9.88%,
03/01/14..................... 500,400
295,000 Jostens Holding Corp.,
zero coupon, 12/01/13(f)..... 219,775
303,000 WH Holdings, Ltd./WH Capital
Corp.,
9.50%, 04/01/11.............. 328,755
------------
1,048,930
------------
CONTAINERS AND PACKAGING -- 2.3%
995,000 Intertape Polymer US, Inc.,
8.50%, 08/01/14.............. 987,072
300,000 Kappa Beheer BV (the
Netherlands),
10.63%, 07/15/09............. 312,126
3,255,000 Smurfit-Stone Container Corp.,
9.25%, 02/01/08.............. 3,352,650
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONTAINERS AND PACKAGING (CONTINUED)
$ 2,220,000 Solo Cup Company, 8.50%,
02/15/14..................... $ 1,953,600
3,140,000 Stone Container Finance Company
of Canada (Canada), 7.38%,
07/15/14..................... 2,873,100
235,000 US Can Corp.,
10.88%, 07/15/10............. 245,575
------------
9,724,123
------------
DISTRIBUTION -- 0.2%
916,000 Jafra Cosmetics International,
10.75%, 05/15/11............. 1,007,600
------------
EDUCATION -- 0.2%
740,000 Knowledge Learning
Center -- 144A,
7.75%, 02/01/15.............. 706,700
------------
ELECTRONICS -- 0.1%
550,000 Muzak LLC,
10.00%, 02/15/09............. 482,625
------------
ENVIRONMENTAL WASTE MANAGEMENT AND
RECYCLING SERVICES -- 1.6%
1,225,000 Aleris International, Inc.,
10.38%, 10/15/10............. 1,344,438
651,000 Aleris International, Inc.,
9.00%, 11/15/14.............. 673,785
2,630,000 Allied Waste North America,
Inc., Series B,
8.88%, 04/01/08.............. 2,787,800
410,000 Allied Waste North America,
Inc., Series B,
8.50%, 12/01/08.............. 432,550
1,555,000 Waste Services, Inc., 9.50%,
04/15/14..................... 1,562,775
------------
6,801,348
------------
EQUIPMENT RENTAL AND LEASING -- 0.7%
235,000 United Rentals North America,
Inc.,
6.50%, 02/15/12.............. 230,006
365,000 United Rentals North America,
Inc.,
7.75%, 11/15/13.............. 357,700
2,400,000 United Rentals North America,
Inc.,
7.00%, 02/15/14.............. 2,256,000
------------
2,843,706
------------
</Table>
See notes to financial statements.
152
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES -- 5.4%
$ 600,000 Alamosa Delaware, Inc., 12.00%,
07/31/09..................... $ 659,250
2,050,000 Alamosa Delaware, Inc., 11.00%,
07/31/10..................... 2,321,625
1,335,000 BCP US Crystal Holdings Corp.,
9.63%, 06/15/14.............. 1,491,863
385,000 Dana Credit Corp. -- 144A,
8.38%, 08/15/07.............. 364,788
1,665,000 E*TRADE Financial Corp., 8.00%,
06/15/11..................... 1,739,925
865,000 Ford Motor Credit Company,
6.50%, 01/25/07.............. 837,068
3,090,000 Ford Motor Credit Company,
7.38%, 10/28/09.............. 2,742,662
1,465,000 Ford Motor Credit Company,
7.88%, 06/15/10.............. 1,319,530
5,220,000 Ford Motor Credit Company,
Floating Rate, 7.26%,
11/02/07(b).................. 4,993,576
1,060,000 General Motors Acceptance
Corp., 6.13%, 09/15/06....... 1,029,806
170,000 General Motors Acceptance
Corp., 7.00%, 02/01/12....... 154,362
4,200,000 General Motors Acceptance
Corp., 8.00%, 11/01/31....... 4,033,759
620,000 Residential Capital Corp.,
6.88%, 06/30/15.............. 659,955
------------
22,348,169
------------
FOOD AND BEVERAGE -- 2.1%
1,280,000 American Seafood Group LLC,
10.13%, 04/15/10............. 1,348,800
3,250,000 ASG Consolidated LLC/ASG
Finance, Inc.,
zero coupon, 11/01/11(f)..... 2,600,000
1,415,000 Pierre Foods, Inc., 9.88%,
07/15/12..................... 1,443,300
3,100,000 Pinnacle Foods Holding Corp.,
8.25%, 12/01/13.............. 2,968,250
357,000 United Agriculture Products,
8.25%, 12/15/11.............. 376,635
------------
8,736,985
------------
FUNERAL SERVICES -- 0.3%
1,090,000 Service Corp.
International -- 144A,
7.00%, 06/15/17.............. 1,087,275
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION -- 8.2%
$ 1,415,000 AMC Entertainment, Inc., 9.88%,
02/01/12..................... $ 1,393,775
162,890 Eldorado Casino Shreveport,
10.00%, 08/01/12............. 124,611
875,000 GreekTown Holdings -- 144A,
10.75%, 12/01/13............. 872,813
1,870,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 1,860,650
4,710,000 Kerzner International (Bahama
Islands) -- 144A, 6.75%,
10/01/15..................... 4,604,024
2,590,000 Loews Cineplex Entertainment
Corp.,
9.00%, 08/01/14.............. 2,628,850
1,500,000 MGM MIRAGE,
6.63%, 07/15/15.............. 1,503,750
460,000 Mohegan Tribal Gaming
Authority, 8.00%, 04/01/12... 486,450
1,070,000 OED Corp./Diamond JO, 8.75%,
04/15/12..................... 1,048,600
1,330,000 San Pasqual Casino -- 144A,
8.00%, 09/15/13.............. 1,356,600
3,405,000 Six Flags, Inc.,
8.88%, 02/01/10.............. 3,336,900
1,350,000 Station Casinos, Inc., 6.88%,
03/01/16..................... 1,387,125
890,000 The Majestic Star Casino LLC,
9.50%, 10/15/10.............. 941,175
700,000 The Majestic Star Casino LLC/
The Majestic Star Casino
Capital Corp. -- 144A, 9.75%,
01/15/11..................... 708,750
5,965,000 Trump Entertainment Resorts,
Inc., 8.50%, 06/01/15........ 5,845,699
1,035,000 Tunica-Biloxi Gaming
Authority -- 144A,
9.00%, 11/15/15.............. 1,040,175
1,917,000 Waterford Gaming LLC -- 144A,
8.63%, 09/15/12.............. 2,051,190
3,515,000 Wynn Las Vegas LLC/Capital
Corp.,
6.63%, 12/01/14.............. 3,435,913
------------
34,627,050
------------
</Table>
See notes to financial statements.
153
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MACHINERY -- 0.7%
$ 830,000 Chart Industries, Inc. -- 144A,
9.13%, 10/15/15.............. $ 850,750
745,000 Terex Corp.,
Series B,
10.38%, 04/01/11............. 793,425
305,000 The Manitowoc Company, Inc.,
10.50%, 08/01/12............. 340,075
970,000 Thermadyne Holdings Corp.,
9.25%, 02/01/14.............. 853,600
------------
2,837,850
------------
MANUFACTURING -- 1.8%
455,000 Aearo Company I, 8.25%,
04/15/12..................... 464,100
800,000 Amsted Industries,
Inc. -- 144A, 10.25%,
10/15/11..................... 860,000
3,585,000 Dresser, Inc.,
9.38%, 04/15/11.............. 3,791,138
1,025,000 Goodman Global Holding
Company -- 144A,
Floating Rate,
7.49%, 06/15/12(i)........... 1,019,875
15,000 Koppers, Inc.,
9.88%, 10/15/13.............. 16,350
720,000 MAAX Corp. (Canada), 9.75%,
06/15/12..................... 572,400
640,000 Samsonite Corp.,
8.88%, 06/01/11.............. 665,600
720,000 Venture Holdings Trust,
Series B,
9.50%, 02/01/06(g)........... 6,300
------------
7,395,763
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 2.8%
1,540,000 Accellent, Inc. -- 144A,
10.50%, 12/01/13............. 1,586,200
1,345,000 CDRV Investors, Inc.,
zero coupon, 01/01/15(f)..... 830,538
270,000 Concentra Operating Corp.,
9.50%, 08/15/10.............. 280,800
220,000 Concentra Operating Corp.,
9.13%, 06/01/12.............. 227,700
870,000 Inverness Medical Innovations,
8.75%, 02/15/12.............. 887,400
800,000 National Mentor, Inc., 9.63%,
12/01/12..................... 840,000
1,170,000 Norcross Safety Products LLC --
Series B,
9.88%, 08/15/11.............. 1,210,950
835,000 Res-Care, Inc. -- 144A, 7.75%,
10/15/13..................... 839,175
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES
(CONTINUED)
$ 350,000 Safety Products
Holdings -- 144A, 11.75%,
01/01/12(j)(l)............... $ 345,188
1,570,000 US Oncology, Inc., 9.00%,
08/15/12..................... 1,687,749
1,345,000 US Oncology, Inc., 10.75%,
08/15/14..................... 1,499,675
1,220,000 VWR International, Inc., 8.00%,
04/15/14..................... 1,220,000
------------
11,455,375
------------
METALS AND MINING -- 1.3%
1,349,000 Ispat Inland ULC (Canada),
9.75%, 04/01/14.............. 1,534,488
1,635,000 Mueller Group, Inc., 10.00%,
05/01/12..................... 1,745,362
1,240,000 Mueller Holdings (NA), Inc.,
zero coupon, 04/15/14(f)..... 939,300
1,395,000 Novelis, Inc. -- 144A (Canada),
7.50%, 02/15/15.............. 1,307,813
------------
5,526,963
------------
OIL AND GAS: PIPELINES -- 2.0%
1,550,000 Dynegy Holdings, Inc., 7.63%,
10/15/26..................... 1,387,250
105,000 El Paso Corp.,
7.50%, 08/15/06.............. 106,575
620,000 El Paso Corp.,
7.63%, 08/16/07.............. 633,950
740,000 El Paso Corp.,
9.63%, 05/15/12.............. 819,550
485,000 El Paso Corp., Series MTN,
6.95%, 12/15/07.............. 492,881
380,000 Northwest Pipeline Corp.,
8.13%, 03/01/10.............. 404,700
1,120,000 Semgroup LP -- 144A, 8.75%,
11/15/15..................... 1,150,800
275,000 Southern Natural Gas Company,
8.88%, 03/15/10.............. 295,272
2,510,000 Transmontaigne, Inc., 9.13%,
06/01/10..................... 2,478,625
375,000 Williams Companies, Inc.,
8.75%, 03/15/32.............. 436,875
------------
8,206,478
------------
OIL, COAL AND GAS -- 2.6%
415,000 Alpha Natural Resources,
10.00%, 06/01/12............. 450,794
400,000 Clayton William Energy, 7.75%,
08/01/13..................... 386,000
435,000 Denbury Resources, Inc., 7.50%,
12/15/15..................... 442,613
</Table>
See notes to financial statements.
154
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$ 160,000 El Paso Production Holding
Company,
7.75%, 06/01/13.............. $ 166,800
1,025,000 Encore Acquisition Corp.,
7.25%, 12/01/17.............. 1,019,875
695,000 Giant Industries, Inc., 8.00%,
05/15/14..................... 721,063
2,485,000 Hanover Compressor Company,
zero coupon, 03/31/07(f)..... 2,242,712
580,000 Hanover Equipment Trust, Series
B,
8.75%, 09/01/11.............. 616,250
390,000 Ocean Rig Norway AS -- 144A
(Norway),
8.38%, 07/01/13.............. 417,300
525,000 Parker Drilling Company, 9.63%,
10/01/13..................... 588,656
1,125,000 Petrobras International Finance
(Cayman Islands), 9.13%,
07/02/13..................... 1,313,438
175,000 Petrobras International Finance
(Cayman Islands), 7.75%,
09/15/14..................... 189,875
440,000 Ram Energy, Inc., 11.50%,
02/15/08..................... 459,800
1,615,000 United Refining Company,
10.50%, 08/15/12............. 1,736,124
------------
10,751,300
------------
PAPER AND FOREST PRODUCTS -- 1.7%
170,000 Caraustar Industries, Inc.,
7.38%, 06/01/09.............. 164,050
2,550,000 Caraustar Industries, Inc.,
9.88%, 04/01/11.............. 2,613,749
1,185,000 Georgia-Pacific Corp., 9.50%,
12/01/11..................... 1,254,619
595,000 Newark Group, Inc., 9.75%,
03/15/14..................... 526,575
2,395,000 NewPage Corp.,
10.00%, 05/01/12............. 2,365,063
------------
6,924,056
------------
PRINTING AND PUBLISHING -- 4.1%
515,000 American Media Operations,
Inc., 8.88%, 01/15/11........ 440,325
3,910,000 American Media Operations,
Inc., Series B,
10.25%, 05/01/09............. 3,587,425
2,281,634 CanWest Media, Inc. (Canada),
8.00%, 09/15/12.............. 2,341,527
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRINTING AND PUBLISHING (CONTINUED)
$ 410,000 CBD Media LLC/CBD Finance,
Inc.,
8.63%, 06/01/11.............. $ 420,250
1,241,000 Dex Media West Finance Company,
Series B,
9.88%, 08/15/13.............. 1,383,715
1,850,000 Houghton Mifflin Company,
8.25%, 02/01/11.............. 1,919,375
4,595,000 Houghton Mifflin Company,
9.88%, 02/01/13.............. 4,933,881
1,500,000 Houghton Mifflin Company,
zero coupon, 10/15/13(f)..... 1,185,000
1,000,000 Primedia, Inc.,
Floating Rate,
9.72%, 05/15/10(b)........... 966,250
------------
17,177,748
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.4%
130,000 CB Richard Ellis Services,
Inc., 9.75%, 05/15/10........ 142,350
500,000 CB Richard Ellis Services,
Inc., 11.25%, 06/15/11....... 540,000
830,000 HydroChem Industrial Services,
Inc. -- 144A,
9.25%, 02/15/13.............. 800,950
------------
1,483,300
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.7%
350,000 FelCor Lodging LP,
Floating Rate,
8.83%, 06/01/11(i)........... 365,750
150,000 Host Marriott LP,
Series O,
6.38%, 03/15/15.............. 150,375
1,590,000 MeriStar Hospitality Operating
Partnership LP/MeriStar
Hospitality Finance Corp.,
10.50%, 06/15/09............. 1,683,413
485,000 Ventas Realty LP/Ventas Capital
Corp.,
7.13%, 06/01/15.............. 511,675
------------
2,711,213
------------
RETAIL -- 1.2%
3,300,000 Rite Aid Corp.,
7.13%, 01/15/07.............. 3,316,500
800,000 Rite Aid Corp.,
8.13%, 05/01/10.............. 818,000
1,045,000 Rite Aid Corp. -- 144A, 6.13%,
12/15/08..................... 987,525
------------
5,122,025
------------
</Table>
See notes to financial statements.
155
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL: RESTAURANTS -- 0.2%
$ 810,000 EPL Finance Corp. -- 144A,
11.75%, 11/15/13............. $ 811,013
------------
SEMICONDUCTORS -- 1.9%
4,025,000 Advanced Micro Devices, Inc.,
7.75%, 11/01/12.............. 4,085,375
555,000 Amkor Technologies, Inc.,
7.13%, 03/15/11.............. 491,175
3,885,000 Amkor Technologies, Inc.,
7.75%, 05/15/13.............. 3,399,375
------------
7,975,925
------------
SPECIAL PURPOSE ENTITY -- 8.0%
215,000 Altra Industrial Motion,
Inc. -- 144A,
9.50%, 12/01/11.............. 209,625
1,610,000 AMR Holding Company/Emcare
Holding Company -- 144A,
10.00%, 02/15/15............. 1,726,725
890,000 Aventine Renewable Energy
Holdings, Inc. -- 144A,
Floating Rate,
10.49%, 12/15/11(b).......... 925,600
535,000 Borden US Finance/Nova
Scotia -- 144A,
9.00%, 07/15/14.............. 532,325
485,000 CCM Merger, Inc. -- 144A,
8.00%, 08/01/13.............. 468,025
1,200,000 Chukchansi Economic Development
Authority -- 144A, Floating
Rate, 8.06%, 11/15/12(i)..... 1,230,000
450,000 CPI Holdco, Inc.,
Floating Rate, 9.67%,
02/01/15(i).................. 445,185
1,381,000 Crystal US Holdings 3 LLC/
Crystal US Sub 3
Corp. -- Series B,
zero coupon, 10/01/14(f)..... 1,011,583
1,650,000 Digicel, Ltd. -- 144A
(Jamaica), 9.25%, 09/01/12... 1,703,625
1,375,000 Galaxy Entertainment
Finance -- 144A,
9.88%, 12/15/12.............. 1,402,500
1,000,000 Galaxy Entertainment
Finance -- 144A, Floating
Rate, 9.66%, 12/15/10(i)..... 1,020,000
673,000 Interline Brands, Inc., 11.50%,
05/15/11..................... 753,760
1,810,000 Marquee Holdings, Inc.,
zero coupon, 08/15/14(f)..... 1,162,925
2,625,000 MDP Acquisitions PLC (Ireland),
9.63%, 10/01/12.............. 2,638,125
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY (CONTINUED)
$ 1,090,000 Milacron Escrow Corp., 11.50%,
05/15/11..................... $ 937,400
1,605,817 NSP Holdings/Cap Corp., 11.75%,
01/01/12(j)(l)............... 1,583,737
1,880,000 Rainbow National Services
LLC -- 144A,
8.75%, 09/01/12.............. 2,011,600
2,670,000 Rainbow National Services
LLC -- 144A,
10.38%, 09/01/14............. 3,003,750
100,000 Standard Aero Holdings, Inc.,
8.25%, 09/01/14.............. 82,500
3,535,000 UGS Corp.,
10.00%, 06/01/12............. 3,870,824
2,465,000 Universal City Development
Partners, Ltd.,
11.75%, 04/01/10............. 2,776,206
2,035,000 Universal City Florida,
Floating Rate,
9.00%, 05/01/10(b)........... 2,055,350
1,530,000 Vanguard Health Holding Company
II,
9.00%, 10/01/14.............. 1,633,275
------------
33,184,645
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 7.9%
345,000 Airgate PCS, Inc., Floating
Rate, 7.90%, 10/15/11(b)..... 357,938
1,160,000 Centennial Cellular/
Communications, 10.13%,
06/15/13..................... 1,267,300
885,000 Centennial Communications
Corp. -- 144A, 10.00%,
01/01/13..................... 898,275
885,000 Centennial Communications
Corp. -- 144A, Floating Rate,
10.25%, 01/01/13(b).......... 891,638
585,000 General Cable Corp., 9.50%,
11/15/10..................... 623,025
851,000 Inmarsat Finance PLC (United
Kingdom),
7.63%, 06/30/12.............. 881,849
2,520,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda), Floating Rate,
8.70%, 01/15/12(i)........... 2,573,549
4,435,000 Intelsat Bermuda, Ltd.
(Bermuda), 5.25%, 11/01/08... 4,063,568
1,000,000 IWO Holdings, Inc., 14.00%,
01/15/11(g)(l)............... --
765,000 IWO Holdings, Inc.,
zero coupon, 01/15/15(f)..... 556,538
</Table>
See notes to financial statements.
156
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 185,000 IWO Holdings, Inc.,
Floating Rate, 7.90%,
01/15/12(b).................. $ 192,863
3,145,000 LCI International, Inc., 7.25%,
06/15/07..................... 3,176,449
1,730,000 New Skies Satellites NV (the
Netherlands),
9.13%, 11/01/12.............. 1,857,587
645,000 New Skies Satellites NV (the
Netherlands), Floating Rate,
9.57%, 11/01/11(i)........... 674,025
3,095,000 Nortel Networks Corp. (Canada),
4.25%, 09/01/08.............. 2,917,037
485,000 NTL Cable PLC (United Kingdom),
8.75%, 04/15/14.............. 509,250
1,780,000 Qwest Capital Funding, Inc.,
7.75%, 08/15/06.............. 1,806,700
300,000 Qwest Capital Funding, Inc.,
6.38%, 07/15/08.............. 299,250
460,000 Qwest Communications
International,
7.25%, 02/15/11.............. 471,500
2,405,000 Qwest Communications
International -- 144A, 7.50%,
02/15/14..................... 2,483,162
1,035,000 Qwest Corp.,
7.88%, 09/01/11.............. 1,120,388
110,000 Qwest Corp.,
7.20%, 11/10/26.............. 107,250
470,000 Qwest Corp. -- 144A, 7.63%,
06/15/15..................... 505,250
580,000 Rogers Wireless, Inc. (Canada),
8.00%, 12/15/12.............. 616,975
1,130,000 Rogers Wireless, Inc. (Canada),
7.50%, 03/15/15.............. 1,226,050
1,065,000 Rogers Wireless, Inc. (Canada),
Floating Rate, 7.62%,
12/15/10(b).................. 1,104,938
39,000 SBA Telecommunications, Inc.,
zero coupon, 12/15/11(f)..... 36,368
450,000 Telemig Celular Participacoes
SA/ Amazonia Cel -- 144A
(Brazil), 8.75%, 01/20/09.... 481,500
1,590,000 Ubiquitel Operating Company,
9.88%, 03/01/11.............. 1,768,875
------------
33,469,097
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TRANSPORTATION -- 1.1%
$ 497,000 H-Lines Finance Holding,
zero coupon, 04/01/13(f)..... $ 413,753
1,277,000 Horizon Lines LLC, 9.00%,
11/01/12..................... 1,350,428
610,000 Quality Distribution,
LLC/Quality QD Capital Corp.,
Floating Rate, 8.65%,
01/15/12(b).................. 583,313
1,535,000 TFM, SA de CV -- 144A (Mexico),
9.38%, 05/01/12.............. 1,688,499
385,000 TFM, SA de CV (Mexico), 12.50%,
06/15/12..................... 440,825
------------
4,476,818
------------
UTILITIES -- 3.4%
553,000 AES Corp.,
9.38%, 09/15/10.............. 606,918
400,000 AES Corp. -- 144A, 8.75%,
05/15/13..................... 437,500
310,000 AES Corp. -- 144A, 9.00%,
05/15/15..................... 341,000
482,239 AES Eastern Energy,
Series 99-A,
9.00%, 01/02/17.............. 545,231
1,305,000 Inergy LP/ Inergy Finance
Corp., 6.88%, 12/15/14....... 1,194,075
3,350,000 Mirant North America
LLC -- 144A,
7.38%, 12/31/13.............. 3,404,437
2,750,000 Mission Energy Holding Company,
13.50%, 07/15/08............. 3,203,750
488,000 Nevada Power Company, 9.00%,
08/15/13..................... 539,854
698,000 NRG Energy, Inc., 8.00%,
12/15/13..................... 781,760
2,015,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 2,287,025
980,000 Verasun Energy Corp. -- 144A,
9.88%, 12/15/12.............. 999,600
------------
14,341,150
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $372,716,374).......... 372,752,230
------------
LOAN PARTICIPATIONS -- 2.1%
1,200,000 BLB WorldWide Holdings Corp.,
7.83%, 06/30/12.............. 1,224,750
3,260,000 HIT Entertainment, Inc.,
Tranche LN 227525, 9.17%,
02/05/13..................... 3,276,708
2,300,000 Masonite International Corp.,
10.38%, 10/06/06............. 2,300,000
</Table>
See notes to financial statements.
157
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
LOAN PARTICIPATIONS (CONTINUED)
$ 240,529 Resort International
Hotel/Casino, Tranche LN
2030007,
12.03%, 03/22/13............. $ 237,221
1,536,316 Toys R Us, Inc., LN 224666,
9.43%, 07/21/06.............. 1,537,757
------------
TOTAL LOAN PARTICIPATIONS (Cost
$8,558,345).................. 8,576,436
------------
<Caption>
SHARES
------
COMMON STOCKS -- 0.8%
FINANCIAL SERVICES -- 0.0%
1,745,000 Trump Atlantic City(l)......... 67,183
------------
LEISURE AND RECREATION -- 0.5%
1,100 Shreveport Gaming Holdings,
Inc.(l)...................... 19,635
109,444 Trump Entertainment Resorts,
Inc.*........................ 2,203,107
------------
2,222,742
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.3%
11,585 Crown Castle International
Corp.*....................... 311,752
34,860 New Skies Satellites Holdings,
Ltd. (Bermuda)............... 758,903
------------
1,070,655
------------
TOTAL COMMON STOCKS (Cost
$2,244,389).................. 3,360,580
------------
CONVERTIBLE PREFERRED STOCKS -- 1.1%
OIL, COAL AND GAS -- 0.5%
5,273 Chesapeake Energy
Corp. -- 144A, 5.00%......... 556,302
11,700 Chesapeake Energy Corp.,
4.50%........................ 1,129,167
2,400 Chesapeake Energy Corp.,
5.00%........................ 470,700
------------
2,156,169
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.5%
38,375 Crown Castle International
Corp., 6.25%................. 2,024,281
------------
UTILITIES -- 0.1%
245 NRG Energy, Inc. -- 144A,
4.00%........................ 318,469
------------
TOTAL CONVERTIBLE PREFERRED
STOCKS (Cost $3,927,499)..... 4,498,919
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
WARRANTS -- 0.1%
1,125 American Tower Corp., Expires
08/01/08*.................... $ 430,610
1,000 IPCS, Inc. -- 144A, Expires
07/15/10*(l)................. --
1,000 IWO Holdings, Inc., Expires
01/15/11*(g)(l).............. --
84 New World Coffee, Expires
06/20/06*(l)................. 1
1,000 ONO Finance PLC, (United
Kingdom), Expires
03/16/11*(l)................. --
250 Ubiquitel, Inc. -- 144A,
Expires 04/15/10*(l)......... --
------------
TOTAL WARRANTS
(Cost $75,402)............... 430,611
------------
<Caption>
PRINCIPAL
---------
CONVERTIBLE BONDS -- 0.8%
AEROSPACE AND DEFENSE -- 0.3%
$ 1,305,000 L-3 Communications
Corp. -- 144A,
3.00%, 08/01/35.............. 1,296,844
------------
BROADCAST SERVICES/MEDIA -- 0.2%
1,000,000 XM Satellite Radio Holdings,
Inc., 1.75%, 12/01/09........ 868,750
------------
LEISURE AND RECREATION -- 0.2%
645,000 Kerzner International -- 144A
(Bahama Islands), 2.38%,
04/15/24..................... 831,244
------------
SEMICONDUCTORS -- 0.1%
440,000 Amkor Technologies, Inc.,
5.75%, 06/01/06.............. 437,250
------------
TOTAL CONVERTIBLE BONDS (Cost
$3,359,810).................. 3,434,088
------------
TOTAL SECURITIES (Cost
$390,881,819)................ 393,052,864
------------
REPURCHASE AGREEMENTS -- 5.2%
21,798,954 With Investors Bank and Trust,
dated 12/30/05, 3.82%, due
01/03/06, repurchase proceeds
at maturity $21,808,206
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.29%, due 04/01/33 with a
value of $22,888,901) (Cost
$21,798,954)................. 21,798,954
------------
Total Investments -- 99.7%
(Cost $412,680,773).......... 414,851,818
Other assets less
liabilities -- 0.3%.......... 1,175,437
------------
NET ASSETS -- 100.0%........... $416,027,255
============
</Table>
See notes to financial statements.
158
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $412,709,338.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 9,886,166
Gross unrealized depreciation........... (7,743,686)
-----------
Net unrealized appreciation............. $ 2,142,480
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
159
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS -- 97.3%
ADVERTISING -- 0.8%
1,109 Dentsu, Inc.* .......... $ 3,610,938 JPN
274,271 Publicis Groupe SA...... 9,546,458 FRA
--------------
13,157,396
--------------
AEROSPACE AND DEFENSE -- 0.6%
1,565,500 Bae Systems PLC......... 10,282,218 BRI
--------------
AGRICULTURE -- 0.5%
11,951,000 Chaoda Modern
Agriculture (Holdings),
Ltd. .................. 4,970,817 CAY
26,800 Syngenta AG*............ 3,334,576 SWI
--------------
8,305,393
--------------
AIRLINES -- 0.8%
2,698,200 Qantas Airways, Ltd. ... 7,991,324 AUS
88,700 Ryanair Holdings PLC
(ADR)*(1).............. 4,966,313 IRE
--------------
12,957,637
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.8%
51,969 Adidas-Salomon AG....... 9,844,176 GER
336,700 Benetton Group SpA...... 3,834,716 ITA
--------------
13,678,892
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 6.2%
252,900 Aisin Seiki Company,
Ltd. .................. 9,285,259 JPN
127,500 Alpine Electronics,
Inc. .................. 1,708,144 JPN
244,600 DaimlerChrysler AG...... 12,492,564 GER
10,200 Georg Fischer AG........ 3,485,256 SWI
1,726,700 GKN PLC................. 8,555,868 BRI
117,200 Honda Motor Company,
Ltd. .................. 6,688,057 JPN
302,000 Koyo Seiko Company,
Ltd.*(1)............... 5,620,808 JPN
1,122,800 Nissan Motor Company,
Ltd. .................. 11,376,996 JPN
854,500 Toyota Motor Corp. ..... 44,342,561 JPN
104,788 Valeo SA(1)............. 3,896,678 FRA
--------------
107,452,191
--------------
BANKS -- 20.8%
369,060 ABN AMRO Holding NV..... 9,651,787 NET
639,342 Banco Bilbao Vizcaya
Argentaria SA.......... 11,414,308 SPA
927,600 Banco Comercial
Portugues SA -- Class
R...................... 2,558,773 POR
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
724,400 Banco Santander Central
Hispano SA............. $ 9,562,431 SPA
2,469,900 Barclays PLC............ 25,964,219 BRI
234,900 BNP Paribas SA.......... 19,008,006 FRA
198,900 Canadian Imperial Bank
of Commerce(1)......... 13,074,067 CDA
313,238 Commerzbank AG*......... 9,649,321 GER
432,100 Commonwealth Bank of
Australia.............. 13,542,025 AUS
597,624 Credit Suisse Group..... 30,471,296 SWI
169,200 Danske Bank A/S......... 5,960,394 DEN
19,400 Deutsche Bank AG........ 1,881,051 GER
83,901 Dexia................... 1,934,956 BEL
250,800 DNB NOR ASA............. 2,675,477 NOR
89,200 ForeningsSparbanken AB.. 2,430,839 SWE
297,700 Fortis.................. 9,498,447 BEL
708,400 HBOS PLC................ 12,102,706 BRI
135,700 IKB Deutsche
Industriebank AG(1).... 4,016,381 GER
69,588 KBC GROEP NV*........... 6,479,599 BEL
132,200 Laurentian Bank of
Canada(1).............. 3,872,347 CDA
2,574,600 Lloyds TSB Group PLC.... 21,638,593 BRI
659 Mitsubishi Tokyo
Financial Group,
Inc. .................. 8,940,518 JPN
70,200 National Australia Bank,
Ltd. .................. 1,667,421 AUS
231,600 National Bank of
Canada(1).............. 12,017,818 CDA
1,472,300 Nordea Bank AB.......... 15,289,162 SWE
327,700 SanPaolo IMI SpA........ 5,125,005 ITA
857,000 Shinsei Bank, Ltd. ..... 4,955,899 JPN
153,700 Societe Generale........ 18,906,208 FRA
708,066 Standard Chartered PLC.. 15,776,047 BRI
233,700 Suncorp-Metway, Ltd. ... 3,435,076 AUS
1,208,000 The Sumitomo Trust and
Banking Company,
Ltd. .................. 12,342,731 JPN
356,350 UBS AG.................. 33,925,181 SWI
1,562,145 UniCredito Italiano
SpA*................... 10,726,656 ITA
--------------
360,494,745
--------------
BROADCAST SERVICES/MEDIA -- 1.9%
155,100 Grupo Televisa SA
(ADR).................. 12,485,550 MEX
742,262 SES Global (FDR)........ 12,996,919 LUX
</Table>
See notes to financial statements.
160
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
457,500 Seven Network, Ltd. .... $ 2,790,472 AUS
143,800 Vivendi Universal SA.... 4,504,678 FRA
--------------
32,777,619
--------------
BUSINESS SERVICES AND SUPPLIES -- 0.5%
1,521,000 Marubeni Corp. ......... 8,163,760 JPN
--------------
CHEMICALS -- 1.7%
45,100 Akzo Nobel NV........... 2,090,371 NET
17,700 Ciba Specialty Chemicals
AG..................... 1,144,934 SWI
264,800 Methanex Corp.(1)....... 4,979,593 CDA
1,102,800 Mitsubishi Chemical
Holdings Corp.*........ 6,947,728 JPN
26,100 Norsk Hydro ASA*........ 2,679,878 NOR
171,800 Nova Chemicals Corp. ... 5,735,780 CDA
683,500 Sumitomo Bakelite
Company, Ltd.(1)....... 5,644,881 JPN
--------------
29,223,165
--------------
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 1.3%
223,075 Dassault Systemes SA.... 12,594,858 FRA
161,800 Integrated Lottery...... 2,835,014 GRC
147,642 Logitech International
SA*.................... 6,938,011 SWI
--------------
22,367,883
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.3%
353,700 Barratt Developments
PLC.................... 6,000,213 BRI
139,900 Compagnie de Saint-
Gobain................. 8,322,787 FRA
644,700 George Wimpey PLC....... 5,324,190 BRI
903,100 Hanson PLC.............. 9,928,678 BRI
43,500 Lafarge SA.............. 3,913,973 FRA
91,000 Maeda Road Construction
Company, Ltd. ......... 665,901 JPN
2,189,400 Pilkington PLC.......... 5,612,625 BRI
--------------
39,768,367
--------------
CONSUMER GOODS AND SERVICES -- 1.5%
127,298 LVMH Moet Hennessy Louis
Vuitton SA............. 11,310,643 FRA
333,859 Reckitt Benckiser PLC... 11,028,565 BRI
130,093 Swatch Group AG......... 3,935,312 SWI
--------------
26,274,520
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 0.8%
189,300 BASF AG................. 14,502,305 GER
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
ELECTRONICS -- 5.0%
238,800 AU Optronics Corp.
(ADR).................. $ 3,584,388 TWN
5,125,000 Chi Mei Optoelectroics
Corp. ................. 7,587,620 TWN
111,200 Fanuc, Ltd. ............ 9,438,352 JPN
209,000 Hosiden Corp.(1)........ 2,560,775 JPN
32,700 Keyence Corp. .......... 9,302,455 JPN
217,274 Koninklijke (Royal)
Philips Electronics
NV..................... 6,752,306 NET
36,680 LG Electronics, Inc.*... 3,240,366 KOR
310,000 Matsushita Electric
Industrial Company,
Ltd. .................. 5,979,989 JPN
628,000 Nippon Electric Glass
Company, Ltd. ......... 13,711,789 JPN
16,582 Samsung Electronics
Company, Ltd.* ........ 10,810,247 KOR
569,000 Sharp Corp.* ........... 8,655,497 JPN
810,100 Toshiba Tec Corp. ...... 4,375,577 JPN
--------------
85,999,361
--------------
ENGINEERING -- 0.6%
385,321 Altran Technologies
SA*(1)................. 4,324,601 FRA
86,571 SNC-Lavalin Group,
Inc. .................. 5,682,281 CDA
--------------
10,006,882
--------------
FINANCIAL SERVICES -- 5.8%
528,300 Alliance & Leicester
PLC.................... 9,034,865 BRI
800,900 Bradford & Bingley
PLC.................... 5,656,478 BRI
1,456,000 Daiwa Securities Group,
Inc.* ................. 16,506,312 JPN
145,531 Hana Financial Group,
Inc. .................. 6,651,360 KOR
226,900 Hitachi Capital
Corp. ................. 4,521,262 JPN
319,800 Irish Life & Permanent
PLC.................... 6,534,830 IRE
315,800 Japan Securities Finance
Company, Ltd. ......... 3,636,379 JPN
69,776 Muenchener
Rueckversicherungs-
Gesellschaft AG*....... 9,448,681 GER
261,000 Namco Bandhai Holdings,
Inc.*.................. 3,815,356 JPN
99,000 Promise Company,
Ltd. .................. 6,589,647 JPN
225,700 Sampo Oyj -- Class A.... 3,933,276 FIN
38,300 Sanyo Shinpan Finance
Company, Ltd. ......... 2,747,429 JPN
</Table>
See notes to financial statements.
161
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
119,100 Sun Life Financial,
Inc.(1)................ $ 4,787,770 CDA
103,500 Takefuji Corp. ......... 7,029,593 JPN
1,522,000 Tokai Tokyo Securities
Company, Ltd. ......... 9,098,317 JPN
--------------
99,991,555
--------------
FOOD AND BEVERAGE -- 1.9%
545,800 Asahi Breweries,
Ltd.(1)................ 6,659,653 JPN
33,189 Nestle SA*.............. 9,926,013 SWI
1,537,300 Northern Foods PLC...... 4,007,061 BRI
130,234 Royal Numico NV*........ 5,393,357 NET
695,700 Tate & Lyle PLC......... 6,738,839 BRI
--------------
32,724,923
--------------
INSURANCE -- 5.3%
79,951 Allianz AG*(1).......... 12,110,031 GER
1,052,600 Aviva PLC............... 12,767,538 BRI
105,800 CNP Assurances.......... 8,342,091 FRA
1,939,300 Friends Provident PLC... 6,322,792 BRI
422,900 ING Groep NV............ 14,669,670 NET
1,003,300 Milano Assicurazioni
SpA*................... 6,859,585 ITA
3,634,200 Old Mutual PLC.......... 10,301,226 BRI
5,458,900 Royal & Sun Alliance
Insurance Group PLC.... 11,810,487 BRI
36,300 Zurich Financial
Services AG............ 7,734,865 SWI
--------------
90,918,285
--------------
INTERNET SERVICES -- 0.5%
198,900 SOFTBANK Corp.* ........ 8,398,881 JPN
--------------
LEISURE AND RECREATION -- 1.1%
3,056,391 EMI Group PLC........... 12,751,912 BRI
304,500 TUI AG(1)............... 6,236,608 GER
--------------
18,988,520
--------------
MACHINERY -- 2.6%
109,477 Alstom*................. 6,301,629 FRA
146,000 Atlas Copco AB -- Class
A*..................... 3,252,816 SWE
428,000 Komatsui, Ltd. ......... 7,080,409 JPN
148,400 MAN AG.................. 7,920,139 GER
254,200 Mori Seiki Company,
Ltd.* ................. 3,815,102 JPN
15,900 Rieter Holding AG....... 4,718,999 SWI
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
82,500 Saurer AG............... $ 5,493,512 SWI
162,400 Stork NV................ 6,938,857 NET
--------------
45,521,463
--------------
MANUFACTURING -- 0.6%
704,000 Kurabo Industries,
Ltd. .................. 2,638,470 JPN
725,000 Nippon Paint Company,
Ltd. .................. 3,233,561 JPN
56,702 Siemens AG*............. 4,860,176 GER
--------------
10,732,207
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 0.6%
135,184 Essilor International
SA..................... 10,915,024 FRA
--------------
METALS AND MINING -- 3.7%
184,502 Anglo American PLC*..... 6,282,052 BRI
1,257,100 BlueScope Steel,
Ltd. .................. 6,423,413 AUS
109,300 Cameco Corp.(1)......... 6,928,527 CDA
133,700 Companhia Vale do Rio
Doce (CVRD) (ADR)...... 5,500,418 BRA
137,500 Inco, Ltd. ............. 5,990,875 CDA
331,500 Rautaruukki Oyj......... 8,065,112 FIN
127,408 Rio Tinto PLC........... 5,819,905 BRI
78,100 Russel Metals, Inc. .... 1,468,007 CDA
82,700 Salzgitter AG........... 4,465,608 GER
308,300 Sims Group, Ltd.* ...... 3,968,819 AUS
396,900 ThyssenKrupp AG(1)...... 8,279,459 GER
7,653 voestalpine AG*......... 771,492 AST
22,569 Xstrata PLC............. 528,088 BRI
--------------
64,491,775
--------------
OFFICE EQUIPMENT -- 0.2%
3,314,500 TPV Technology, Ltd. ... 3,248,818 HNG
--------------
OIL, COAL AND GAS -- 7.7%
1,176,600 BP PLC.................. 12,530,666 BRI
2,182,200 Cosmo Oil Company,
Ltd. .................. 10,917,014 JPN
807,052 Eni SpA................. 22,386,635 ITA
193,800 Fording Canadian Coal
Trust(1)............... 6,705,352 CDA
147,900 Husky Energy, Inc. ..... 7,506,645 CDA
485,000 Nippon Oil Corp. ....... 3,762,878 JPN
2,114,000 Osaka Gas Company,
Ltd. .................. 7,295,527 JPN
287,000 Repsol YPF SA........... 8,382,355 SPA
887,700 Royal Dutch Shell PLC --
Class B................ 28,377,009 BRI
</Table>
See notes to financial statements.
162
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
145,200 Suncor Energy, Inc. .... $ 9,158,298 CDA
61,400 Total SA -- Class B..... 15,425,128 FRA
--------------
132,447,507
--------------
PAPER AND FOREST PRODUCTS -- 0.4%
660,000 Hokuetsu Paper Mills,
Ltd. .................. 3,413,745 JPN
301,800 Norbord, Inc. .......... 3,180,395 CDA
--------------
6,594,140
--------------
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 3.8%
207,700 Eisai Company, Ltd. .... 8,717,641 JPN
173,800 GlaxoSmithKline PLC..... 4,392,646 BRI
144,809 Merck KGaA*............. 11,992,184 GER
79,077 Roche Holding AG*....... 11,873,134 SWI
16,297 Serono SA -- Class B*... 12,985,016 SWI
91,000 Shionogi & Company,
Ltd.* ................. 1,281,647 JPN
476,000 Tanabe Seiyaku Company,
Ltd. .................. 4,625,395 JPN
210,700 Teva Pharmaceutical
Industries, Ltd.
(ADR)(1)............... 9,062,207 ISR
--------------
64,929,870
--------------
PRINTING AND PUBLISHING -- 0.1%
126,000 Quebecor World,
Inc.(1)................ 1,703,918 CDA
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.6%
2,688,000 Shun Tak Holdings,
Ltd.* ................. 2,478,729 HNG
54,912 Unibail................. 7,307,160 FRA
--------------
9,785,889
--------------
RETAIL -- 2.2%
2,966,129 Carphone Warehouse PLC.. 14,135,934 BRI
1,912,500 Dixons Group PLC........ 5,388,122 BRI
168,300 Hudson's Bay Company.... 2,145,646 CDA
590,900 JJB Sports PLC.......... 1,786,751 BRI
1,566,764 Kingfisher PLC*......... 6,395,352 BRI
54,262 PPR SA*(1).............. 6,112,510 FRA
10,300 Valora Holding AG....... 1,996,823 SWI
--------------
37,961,138
--------------
RETAIL: SUPERMARKETS -- 0.6%
223,480 Seven & I Holdings
Company, Ltd........... 9,569,458 JPN
--------------
RUBBER PRODUCTS -- 0.6%
383,200 JSR Corp.* ............. 10,072,667 JPN
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS -- 0.4%
317,933 ASML Holding NV*........ $ 6,361,175 NET
--------------
TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 5.9%
366,200 America Movil SA de
CV -- Series L (ADR)... 10,715,012 MEX
4,355,600 BT Group PLC............ 16,692,461 BRI
277,800 Deutsche Telekom AG*.... 4,630,735 GER
159,600 Elcoteq Network Corp. --
Class A................ 3,807,351 FIN
110,820 Eutelsat
Communications*........ 1,587,518 FRA
1,765,000 MobileOne, Ltd. ........ 2,250,504 SIN
3,600 Nippon Telegraph and
Telephone Corp. ....... 16,361,555 JPN
690,750 Nokia Oyj*.............. 12,634,684 FIN
2,262 NTT DoCoMo, Inc. ....... 3,452,410 JPN
89,000 Research In Motion,
Ltd.*.................. 5,874,890 CDA
20,800 Swisscom AG(1).......... 6,565,047 SWI
96,700 TDC A/S................. 5,792,487 DEN
3,224,000 Telefonaktiebolaget LM
Ericsson -- Class B.... 11,078,759 SWE
--------------
101,443,413
--------------
TOOLS -- 0.3%
308,000 Hitachi Koki Company,
Ltd. .................. 5,097,859 JPN
--------------
TRANSPORTATION -- 1.9%
32,800 Canadian Pacific
Railway, Ltd. ......... 1,374,414 CDA
461 East Japan Railway
Company*............... 3,170,145 JPN
24,672 Kuehne & Nagel
International AG....... 6,956,339 SWI
2,535,000 Neptune Orient Lines,
Ltd. .................. 5,122,906 SIN
1,508,100 Orient Overseas
International, Ltd. ... 5,115,401 BER
319,446 Toll Holdings, Ltd.* ... 3,489,369 AUS
408,000 Yamato Transport
Company, Ltd. ......... 6,766,846 JPN
--------------
31,995,420
--------------
UTILITIES -- 4.4%
118,900 Chubu Electric Power
Company, Inc. ......... 2,832,993 JPN
613,500 Endesa SA............... 16,138,888 SPA
1,130,300 Energias de Portugal
SA..................... 3,479,222 POR
</Table>
See notes to financial statements.
163
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
UTILITIES (CONTINUED)
314,200 Hokkaido Electric Power
Company, Inc. ......... $ 6,394,031 JPN
676,300 Kelda Group PLC......... 9,006,064 BRI
245,100 Shikoku Electric Power
Company, Inc.(1)....... 4,998,224 JPN
147,300 Suez SA................. 4,586,417 FRA
954,800 Toho Gas Company,
Ltd. .................. 3,829,401 JPN
239,900 Union Fenosa SA......... 8,926,673 SPA
548,800 United Utilities PLC.... 6,335,652 BRI
195,800 Veolia Environment*..... 8,864,323 FRA
--------------
75,391,888
--------------
TOTAL COMMON STOCKS
(Cost
$1,378,836,104)........ 1,674,698,127
--------------
WARRANTS -- 0.2%
FINANCIAL SERVICES
553,800 Citigroup-CW09 Bharti
Televen* (Cost
$4,170,679)............ 4,157,654 LUX
--------------
RIGHTS -- 0.0%
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT
390,900 TI Automotive, Ltd. --
Class A*(l) (Cost $0).. -- BRI
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 6.9%
$118,326,135 Securities Lending
Collateral Investment
(Note 4) (Cost
$118,326,135).......... 118,326,135 USA
--------------
TOTAL SECURITIES (Cost
$1,501,332,918)........ 1,797,181,916
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE COUNTRY
--------- -------------- -------
REPURCHASE AGREEMENTS -- 1.8%
$ 31,033,338 With Investors Bank and
Trust, dated 12/30/05,
3.82%, due 01/03/06,
repurchase proceeds at
maturity $31,046,510
(Collateralized by
Fannie Mae Adjustable
Rate Mortgage, 4.31%,
due 08/01/34, with a
value of $17,368,106
and Small Business
Administration, 7.13%,
due 08/25/28 with a
value of $15,216,899)
(Cost $31,033,338)..... $ 31,033,338 USA
--------------
Total
Investments -- 106.2%
(Cost
$1,532,366,256)........ 1,828,215,254
Liabilities less other
assets -- (6.2)%....... (106,429,105)
--------------
NET ASSETS -- 100.0%.... $1,721,786,149
==============
</Table>
The aggregate cost of securities for federal income tax purposes at December 31,
2005 is $1,538,681,068.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.... $302,643,048
Gross unrealized depreciation.... (13,108,862)
------------
Net unrealized appreciation...... $289,534,186
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
164
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
<Table>
<Caption>
PERCENT OF TOTAL
COUNTRY COMPOSITION INVESTMENTS AT VALUE
- ------------------- --------------------
Australia (AUS)...................... 2.37%
Austria (AST)........................ 0.04
Belgium (BEL)........................ 0.98
Bermuda (BER)........................ 0.46
Brazil (BRA)......................... 0.30
Canada (CDA)......................... 5.59
Cayman Islands (CAY)................. 0.27
Denmark (DEN)........................ 0.64
Finland (FIN)........................ 1.56
France (FRA)......................... 9.07
Germany (GER)........................ 6.69
Greece (GRC)......................... 0.15
Hong Kong (HNG)...................... 0.14
Ireland (IRE)........................ 0.63
Israel (ISR)......................... 0.50
Italy (ITA).......................... 2.68
Japan (JPN).......................... 20.93
Luxembourg (LUX)..................... 0.94
Mexico (MEX)......................... 1.27
Norway (NOR)......................... 0.29
Portugal (POR)....................... 0.33
Singapore (SIN)...................... 0.40
South Korea (KOR).................... 1.13
Spain (SPA).......................... 2.98
Sweden (SWE)......................... 1.75
Switzerland (SWI).................... 8.31
Taiwan (TWN)......................... 0.61
The Netherlands (NET)................ 2.84
United Kingdom (BRI)................. 17.98
United States (USA).................. 8.17
------
TOTAL PERCENTAGE..................... 100.00%
======
</Table>
See notes to financial statements.
165
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO OF INVESTMENTS
SUMMARY OF FOOTNOTES AND ABBREVIATIONS TO PORTFOLIOS
DECEMBER 31, 2005
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.
(1) All or part of this security is on loan.
(2) Security is segregated as collateral for foreign currency forward
contracts sold.
(a) Variable rate security. The rate shown was in effect at December 31, 2005.
(b) Quarterly reset provision. The rate shown was in effect at December 31,
2005.
(c) Monthly reset provision. The rate shown was in effect at December 31,
2005.
(d) Security is segregated as collateral for written options and/or short
sales.
(e) Security is segregated as initial margin for futures contracts.
(f) Represents a zero coupon bond which will convert to an interest bearing
security at a later date.
(g) Bond is in default.
(h) Variable rate security. Interest rate is based on the credit rating of the
issuer. The rate shown was in effect at December 31, 2005.
(i) Floating rate security. The interest rate is subject to change
semi-annually based on the London Interbank Offered Rate ("LIBOR"). The
rate shown was in effect at December 31, 2005.
(j) PIK ("Payment-In-Kind") bond. These bonds pay interest in the form of
additional bonds.
(k) Security was in bankruptcy reorganization at the time of maturity.
Recovery will be determined at the conclusion of the bankruptcy.
(l) Fair valued at December 31, 2005.
Following are the market values (as determined by fair valuation) and the
corresponding percentage of Portfolio net assets of all fair valued
securities at December 31, 2005.
<Table>
<Caption>
FUND MARKET VALUE PERCENTAGE
---- ------------ ----------
High Quality Bond
Portfolio $7,657,763 1.0%
High Yield Bond Portfolio 2,566,229 0.6%
</Table>
(m) Principal amount shown for this debt security is denominated in Australian
Dollars.
(n) Principal amount shown for this debt security is denominated in Canadian
Dollars.
(o) Principal amount shown for this debt security is denominated in Euros.
(p) Principal amount shown for this debt security is denominated in Japanese
Yen.
(q) Principal amount shown for this debt security is denominated in Mexican
Pesos.
(r) Principal amount shown for this debt security is denominated in New
Zealand Dollars.
(s) Principal amount shown for this debt security is denominated in Swedish
Krona.
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 parenthesis.
- Footnotes and abbreviations may or may not appear in each portfolio of
investments.
- Fixed income securities designated as "perpetual" are securities that make
(or are scheduled to make) a steady payment of interest. They do not have
a maturity date, and the interest payments are indefinite.
See notes to financial statements.
166
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION
DECEMBER 31, 2005
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
MONEY MARKET SERIES
Commercial Paper................................ 37.6%
Short Term Corporate Notes...................... 17.9
Yankee Certificates of Deposit.................. 15.3
Short Term US Government Agency Securities...... 12.4
Repurchase Agreements/Cash Equivalents.......... 8.5
Domestic Certificates of Deposit................ 6.5
Medium Term Corporate Notes..................... 1.7
Other assets less liabilities................... 0.1
-----
100.0%
=====
HIGH QUALITY BOND SERIES
Corporate Bonds and Notes....................... 70.7%
US Government Agency Securities................. 20.9
Short Term US Government Agency Securities...... 3.8
US Treasury Securities.......................... 2.5
Securities Lending Collateral................... 1.3
Foreign Government Obligations.................. 1.2
Repurchase Agreements/Cash Equivalents.......... 0.3
Liabilities less other assets................... (0.7)
-----
100.0%
=====
INTERMEDIATE GOVERNMENT BOND SERIES
US Treasury Securities.......................... 38.8%
US Government Agency Securities................. 24.4
Securities Lending Collateral................... 23.0
Corporate Bonds and Notes....................... 15.5
Repurchase Agreements/Cash Equivalents.......... 12.0
Liabilities less other assets................... (13.7)
-----
100.0%
=====
CORE BOND SERIES
Corporate Bonds and Notes....................... 40.4%
US Government Agency Securities................. 39.8
US Treasury Securities.......................... 28.5
Securities Lending Collateral................... 10.1
Short Term US Government Agency Securities...... 7.4
Foreign Government Obligations.................. 2.2
Repurchase Agreements/Cash Equivalents.......... 1.0
Short Term Corporate Notes...................... 0.6
Call Options Written............................ (0.0)*
Put Options Written............................. (0.0)*
Securities Sold Short........................... (8.1)
Liabilities less other assets................... (21.9)
-----
100.0%
=====
TOTAL RETURN BOND SERIES
Corporate Bonds and Notes....................... 41.0%
US Government Agency Securities................. 37.3
US Treasury Securities.......................... 29.1
Repurchase Agreement/Cash Equivalents........... 15.2
Foreign Government Obligations.................. 4.7
Preferred Stocks................................ 1.0
Convertible Preferred Stocks.................... 0.3
Municipal Bonds................................. 0.1
Liabilities less other assets................... (28.7)
-----
100.0%
=====
BALANCED SERIES
Common Stocks................................... 64.1%
Corporate Bonds and Notes....................... 17.4
US Government Agency Securities................. 14.5
US Treasury Securities.......................... 5.8
Repurchase Agreements/Cash Equivalents.......... 4.5
Securities Lending Collateral................... 3.9
Foreign Government Obligations.................. 2.1
Preferred Stock................................. 0.4
Convertible Preferred Stock..................... 0.1
Short Term Corporate Notes...................... 0.1
Municipal Bonds................................. 0.0*
Liabilities less other assets................... (12.9)
-----
100.0%
=====
VALUE & INCOME SERIES
Common Stocks................................... 97.7%
Securities Lending Collateral................... 10.2
Repurchase Agreements/Cash Equivalents.......... 2.5
Liabilities less other assets................... (10.4)
-----
100.0%
=====
VALUE SERIES
Common Stocks................................... 97.0%
Repurchase Agreements/Cash Equivalents.......... 10.4
Liabilities less other assets................... (7.4)
-----
100.0%
=====
GROWTH & INCOME SERIES
Common Stocks................................... 99.0%
Securities Lending Collateral................... 8.5
Repurchase Agreements/Cash Equivalents.......... 0.8
Liabilities less other assets................... (8.3)
-----
100.0%
=====
</Table>
See notes to financial statements.
167
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION (CONTINUED)
DECEMBER 31, 2005
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
EQUITY GROWTH SERIES
Common Stocks................................... 98.9%
Securities Lending Collateral................... 8.6
Repurchase Agreements/Cash Equivalents.......... 1.2
Liabilities less other assets................... (8.7)
-----
100.0%
=====
MID-CAP VALUE SERIES
Common Stocks................................... 96.0%
Securities Lending Collateral................... 11.7
Repurchase Agreements/Cash Equivalents.......... 4.7
Liabilities less other assets................... (12.4)
-----
100.0%
=====
MID-CAP GROWTH SERIES
Common Stock.................................... 97.7%
Securities Lending Collateral................... 21.1
Repurchase Agreements/Cash Equivalents.......... 3.4
Liabilities less other assets................... (22.2)
-----
100.0%
=====
SMALL-CAP VALUE SERIES
Common Stocks................................... 95.6%
Securities Lending Collateral................... 25.2
Repurchase Agreements/Cash Equivalents.......... 4.8
Liabilities less other assets................... (25.6)
-----
100.0%
=====
SPECIAL EQUITY SERIES
Common Stocks................................... 97.5%
Securities Lending Collateral................... 20.0
Repurchase Agreements/Cash Equivalents.......... 2.9
Short Term US Treasury Securities............... 0.1
Liabilities less other assets................... (20.5)
-----
100.0%
=====
SMALL-CAP GROWTH SERIES
Common Stocks................................... 96.2%
Securities Lending Collateral................... 6.3
Repurchase Agreements/Cash Equivalents.......... 5.1
Liabilities less other assets................... (7.6)
-----
100.0%
=====
AGGRESSIVE EQUITY SERIES
Common Stocks................................... 99.5%
Securities Lending Collateral................... 9.7
Repurchase Agreements/Cash Equivalents.......... 0.6
Liabilities less other assets................... (9.8)
-----
100.0%
=====
HIGH YIELD BOND SERIES
Corporate Bonds and Notes....................... 89.6%
Repurchase Agreements/Cash Equivalents.......... 5.2
Loan Participations............................. 2.1
Convertible Preferred Stocks.................... 1.1
Common Stocks................................... 0.8
Convertible Bonds............................... 0.8
Warrants........................................ 0.1
Other assets less liabilities................... 0.3
-----
100.0%
=====
INTERNATIONAL EQUITY SERIES
Common Stocks................................... 97.3%
Securities Lending Collateral................... 6.9
Repurchase Agreements/Cash Equivalents.......... 1.8
Warrants........................................ 0.2
Rights.......................................... 0.0*
Liabilities less other assets................... (6.2)
-----
100.0%
=====
</Table>
- ---------------
* Amount rounds to less than 0.05%.
See notes to financial statements.
168
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Diversified Investors Portfolios (the "Series Portfolio"), a series trust
organized on September 1, 1993, under the laws of the State of New York, is
composed of 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).
The investment objectives of each Series are as follows:
Money Market -- The Series' goal is to provide liquidity and as high a level of
income as is consistent with the preservation of capital.
High Quality Bond -- The Series' goal is to provide a high risk-adjusted return
while focusing on the preservation of capital.
Intermediate Government Bond -- The Series' goal is to provide as high a level
of current income as is consistent with the preservation of capital.
Core Bond -- The Series' goal is to achieve maximum total return.
Total Return Bond -- The Series' goal is to maximize long term total return.
Balanced -- The Series' goal is to provide a high total investment return
through investment in a broadly diversified portfolio of stocks, bonds and money
market instruments.
Value & Income -- The Series' goal is to provide a high level of current income
through investment in a diversified portfolio of common stocks with relatively
high current yield. Capital appreciation is a secondary goal.
Value -- The Series' goal is to provide capital appreciation. Dividend income is
a secondary goal.
Growth & Income -- The Series' goal is to provide capital appreciation and
current income.
Equity Growth -- The Series' goal is to provide a high level of capital
appreciation through investment in a diversified portfolio of common stocks with
a potential for above-average growth in earnings. Current income is a secondary
goal.
Mid-Cap Value -- The Series' goal is to provide a high total investment return
through investments primarily in a diversified portfolio of common stocks.
Mid-Cap Growth -- The Series' goal is to provide a high total investment return
through investments primarily in a diversified portfolio of common stocks.
Small-Cap Value -- The Series' goal is to provide a high total investment return
through investments primarily in a diversified portfolio of common stocks.
Special Equity -- The Series' goal is to provide a high level of capital
appreciation through investment in a diversified portfolio of common stocks of
small to medium size companies.
Small-Cap Growth -- The Series' goal is to provide a high total investment
return through investments primarily in a diversified portfolio of common
stocks.
169
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BUSINESS (CONTINUED)
Aggressive Equity -- The Series' goal is to provide a high level of capital
appreciation primarily through investing in a diversified portfolio of common
stocks.
High Yield Bond -- The Series' goal is to provide a high level of current
income.
International Equity -- The Series' goal is to provide a high level of long-term
capital appreciation through investment in a diversified portfolio of securities
of foreign issuers.
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 market 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 last quoted bid price for securities in which there were no sales
during the day or for unlisted securities. Portfolio securities listed on the
NASDAQ National Market and NASDAQ Small Cap Market for which reliable market
quotations are available are valued at the official closing price or, if there
is no official closing price on that day, at the last sale price. 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. Unlisted securities are valued at the last sales price provided by an
independent pricing agent or the principal market maker.
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 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.
170
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FOREIGN CURRENCY TRANSLATION:
The accounting records of each Series are maintained in US dollars. The market
values of foreign securities, currency holdings and other assets and liabilities
denominated in a foreign currency are translated to US dollars based on the
prevailing exchange rates each business day. Income, expenses, purchases, and
sales of investment securities denominated in foreign currencies are translated
at prevailing exchange rates when accrued or incurred.
Each Series does not isolate realized gains and losses attributable to changes
in exchange rates from gains and losses that arise from changes in the market
value of investments. Such fluctuations are included with net realized and
unrealized gains or losses on securities. Net realized gains and losses on
foreign currency transactions represent net foreign exchange gains and losses on
disposition of foreign currencies and foreign currency forward and spot
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
and spot contracts, resulting from changes in the prevailing exchange rates.
D. FOREIGN CURRENCY FORWARD AND SPOT CONTRACTS:
Each Series, with the exception of the Money Market Series, may enter into
foreign currency forward contracts and spot contracts in connection with
settling planned purchases or sales of securities or to hedge the currency
exposure associated with those series that participate in such contracts. 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. A spot contract is also an
agreement to buy and sell a currency, but will settle within a week or less from
the date it is entered into. The market value of a foreign currency forward or
spot contract fluctuates with changes in forward currency exchange rates.
Foreign currency forward contracts and spot 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 or spot contract
is extinguished, through delivery or by entering into another offsetting foreign
currency forward contract or spot 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. The Series will segregate
securities as collateral for their forward sale contracts. The segregated
securities are identified within each Series' Portfolio of Investments.
As of December 31, 2005, the Core Bond Series, Total Return Bond Series,
Balanced Series, High Yield Bond Series and International Equity Series each had
outstanding foreign currency forward and/or spot contracts as listed in Note 10.
E. WRITTEN OPTIONS:
Each Series, with the exception of 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. These
options are settled for cash and subject the Series to unlimited risk of loss.
The Series, however, are not subject to credit risk on written options, as the
counterparty has already performed its obligation by paying the premium at the
171
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
inception of the contract. 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.
Transactions in options written for the year ended December 31, 2005 were as
follows:
<Table>
<Caption>
CORE BOND TOTAL RETURN BOND
----------------------- --------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
----------- --------- --------- --------
Written call options outstanding at December 31,
2004............................................. -- $ -- -- $ --
Call options written............................... 680 357,250 65 22,035
Call options terminated in closing purchase
transactions..................................... (508) (258,747) (65) (22,035)
Call options expired............................... -- -- -- --
----------- --------- ----- --------
Written call options outstanding at December 31,
2005............................................. 172 $ 98,503 -- $ --
=========== ========= ===== ========
Written put options outstanding at December 31,
2004............................................. -- $ -- -- $ --
Put options written................................ 65,900,793 714,202 84 35,736
Put options terminated in closing purchase
transactions..................................... (65,900,621) (626,390) (84) (35,736)
Put options expired................................ -- -- -- --
----------- --------- ----- --------
Written put options outstanding at December 31,
2005............................................. 172 $ 87,812 -- $ --
=========== ========= ===== ========
</Table>
<Table>
<Caption>
BALANCED EQUITY GROWTH
---------------------- --------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
---------- --------- --------- --------
Written call options outstanding at December 31,
2004.............................................. -- $ -- -- $ --
Call options written................................ 224 82,542 128 21,418
Call options terminated in closing purchase
transactions...................................... (224) (82,542) -- --
Call options expired................................ -- -- -- --
Call options exercised.............................. -- -- (128) (21,418)
---------- --------- ---- --------
Written call options outstanding at December 31,
2005.............................................. -- $ -- -- $ --
========== ========= ==== ========
Written put options outstanding at December 31,
2004.............................................. -- $ -- -- $ --
Put options written................................. 5,650,262 135,102 -- --
Put options terminated in closing purchase
transactions...................................... (5,650,262) (135,102) -- --
Put options expired................................. -- -- -- --
---------- --------- ---- --------
Written put options outstanding at December 31,
2005.............................................. -- $ -- -- $ --
========== ========= ==== ========
</Table>
F. FUTURES CONTRACTS:
Each Series, with the exception of the Money Market Series, may enter into
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 market 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.
172
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 losses reflected in the Series' Statement of Assets and Liabilities.
Use of long futures contracts subjects the Series to risk of loss in excess of
amounts shown on the Statement of Assets and Liabilities up to the notional
value of the futures contracts. Use of short futures contracts subjects the
Series to unlimited risk of loss. The Series may enter into futures contracts
only on exchanges or boards of trade. The exchange or board of trade acts as the
counterparty to each futures transaction; therefore, the Series' credit risk is
limited to failure of the exchange or board of trade.
Open futures contracts as of December 31, 2005:
<Table>
<Caption>
VALUE AS OF NET UNREALIZED
NUMBER OF EXPIRATION DECEMBER 31, APPRECIATION/
SERIES CONTRACTS DESCRIPTION DATE 2005 (DEPRECIATION)
- --------------------- --------- -------------------------------- -------------- ------------ --------------
Core Bond............ 135 Long 90 Day Euro Future March 2007 $32,146,875 $ 20,651
135 Long 90 Day Euro Future June 2007 32,151,938 25,829
135 Long 90 Day Euro Future September 2007 32,151,938 28,703
97 Long US Treasury Notes 2 Year Future March 2006 19,903,188 27,692
4 Long US Treasury Notes 10 Year Future March 2006 437,625 5,440
373 Long US Long Bond Future March 2006 42,591,938 808,897
413 Short Euro-Bobl Future March 2006 46,631,830 10,724
921 Short US Treasury Notes 5 Year Future March 2006 97,942,594 (382,439)
---------
$ 545,497
=========
Total Return Bond.... 5 Long 90 Day Euro Future March 2006 $ 1,190,313 $ (4,438)
8 Long 90 Day Euro Future June 2006 1,903,100 (37)
15 Long 90 Day Euro Future September 2006 3,568,500 3,875
26 Long US Treasury Notes 5 Year Future March 2006 2,764,938 7,339
4 Long US Long Bond Future March 2006 456,750 9,480
2 Short US Treasury Notes 2 Year Future March 2006 410,375 552
5 Short US Treasury Notes 10 Year Future March 2006 547,031 (3,361)
---------
$ 13,410
=========
Balanced............. 18 Long 90 Day Euro Future March 2006 $ 4,285,125 $ (15,552)
19 Long 90 Day Euro Future June 2006 4,519,863 (89)
43 Long 90 Day Euro Future September 2006 10,229,700 11,160
38 Long US Treasury Notes 5 Year Future March 2006 4,041,063 10,685
8 Long US Long Bond Future March 2006 913,500 18,944
6 Short US Treasury Notes 2 Year Future March 2006 1,231,125 1,658
43 Short US Treasury Notes 10 Year Future March 2006 4,704,469 (27,231)
---------
$ (425)
=========
Growth & Income...... 31 Long S&P 500 Future March 2006 $ 1,944,863 $ (18,935)
=========
Special Equity....... 13 Long Russell 2000 Future March 2006 $ 4,408,950 $ (97,290)
=========
</Table>
The Core Bond Series and Special Equity Series have segregated securities as
collateral for their respective open futures contracts. The segregated
securities are identified within each Series' portfolio of investments. The
Total Return Bond Series has segregated $150,000 of cash, the Balanced Series
has segregated $410,600 of cash and the Growth & Income Series has segregated
$560,000 of cash as collateral for their respective open futures contracts.
173
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 a Series sells securities it does
not own, but has borrowed, in anticipation of a decline in the market price of
the securities. The Series is obligated to replace the borrowed securities at
the market price at the time of replacement. The Series' obligation to replace
the securities borrowed in connection with a short sale will be fully secured by
collateral deposited with the custodian. In addition, the Series will consider
the short sale to be a borrowing by the Series that is subject to the asset
coverage requirements of the Investment Company Act of 1940, as amended. Short
sales by the Series involve certain risks and special considerations. Possible
losses from short sales differ from losses that could be incurred from a
purchase of a security because losses from short sales may be unlimited, whereas
losses from purchases cannot exceed the total amount invested.
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 sells mortgage-backed
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 is 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.
Each Series may be subject to foreign taxes on income, gains on investments or
currency repatriation, a portion of which may be recoverable. Each Series will
accrue such taxes and recoveries as applicable, based upon their current
interpretation of tax rules and regulations that exist in the markets in which
they invest.
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
174
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
allocated among all Series based on their relative net assets, or another
methodology that is appropriate based on the circumstances.
L. RESTRICTED AND ILLIQUID SECURITIES:
Each Series is permitted to invest in securities that are subject to legal or
contractual restrictions on resale or are illiquid. Restricted securities
generally may be resold in transactions exempt from registration. A security may
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt sale
at the current valuation may be difficult. At December 31, 2005, there were no
securities held in any Series that were considered illiquid or restricted with
the exception of securities registered under Rule 144A of the Securities Act of
1933.
M. OTHER:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
Transamerica Financial Life Insurance Company, Inc. ("TFLIC"), a wholly-owned
subsidiary of AEGON USA, Inc. ("AEGON"), is an affiliate of Diversified
Investment Advisors, Inc. (the "Advisor"). The Advisor is an indirect,
wholly-owned subsidiary of AEGON, a financial services holding company whose
primary emphasis is life and health insurance and annuity and investment
products. AEGON is an indirect, wholly-owned subsidiary of AEGON 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
as follows:
<Table>
<Caption>
TFLIC SUB-ACCOUNT INVESTMENT IN PORTFOLIO
- ----------------- -----------------------
Money Market................................................ 10.02%
High Quality Bond........................................... 11.19
Intermediate Government Bond................................ 18.46
Core Bond................................................... 9.20
Balanced.................................................... 31.48
Value & Income.............................................. 22.30
Growth & Income............................................. 24.77
Equity Growth............................................... 17.34
Mid-Cap Value............................................... 4.03
Mid-Cap Growth.............................................. 0.31
Small-Cap Value............................................. 0.05
Special Equity.............................................. 26.78
Aggressive Equity........................................... 24.21
High Yield Bond............................................. 7.50
International Equity........................................ 12.28
</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
175
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
table below of the corresponding Series' average daily net assets. The Advisor
is currently waiving a portion of its investment advisory fees for certain
Series.
For each Series, the Advisor has entered into Investment Subadvisory Agreements
with the subadvisors listed in the table below (each a "Subadvisor",
collectively the "Subadvisors"). It is the responsibility of each Subadvisor to
make the day-to-day investment decisions of the Series and to place the purchase
and sales orders for securities transactions of such Series, subject in all
cases to the general supervision of the Advisor. Payment of fees to the
Subadvisors is the responsibility of the Advisor, and is not an additional
expense of a Series.
For its services, the Advisor receives a fee from each Series, and the
Subadvisors receive a fee from the Advisor, at an annual rate equal to the
percentages specified in the table below of the portion of the corresponding
Series' average daily net assets which they subadvise.
<Table>
<Caption>
ADVISOR SUBADVISOR
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 (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(1) (20)
Small-Cap Growth............... Trusco Capital Management, Inc. 0.87(1) (21)
Aggressive Equity.............. Turner Investment Partners, Inc. 0.77(1) (22)
High Yield Bond................ Eaton Vance Management 0.55 (23)
International Equity........... (24) 0.75(1) (25)
</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
176
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
$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 December 31, 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 of this Series. Their fee is included as part of
the same fee schedule listed above.
(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 year ended December 31, 2005, the Balanced Series executed
$12,173,190 of purchase transactions and $25,343 of sales transactions
through Goldman Sachs & Company, an affiliate of Goldman Sachs Asset
Management, LP. Commissions paid for such transactions amounted to $1,690.
(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 December 31, 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 December 31, 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 year ended December 31, 2005, the Value & Income Series executed
$292,179,146 of purchase transactions and $202,901,590 of sales
transactions through Sanford C. Bernstein & Company, LLC, an affiliate of
Alliance Capital Management, LP. Commissions paid for such transactions
amounted to $516,496.
(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 December 31, 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 December 31, 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.
177
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(12) The Growth & Income Series has three subadvisors: Ark Asset Management,
Inc., Goldman Sachs Asset Management, LP and Aronson & Johnson & Ortiz, LP.
During the year ended December 31, 2005, the Growth & Income Series
executed $154,888,746 of purchase transactions and $200,240,403 of sales
transactions through Goldman Sachs & Company, an affiliate of Goldman Sachs
Asset Management, LP. Commissions paid for such transactions amounted to
$235,106.
(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 year ended December 31, 2005, the Equity Growth Series executed
$22,446,835 of purchase transactions and $11,640,386 of sales transactions
through Bank of America Securities, LLC, an affiliate of Marsico Capital
Management, LLC. Commissions paid for such transactions amounted to
$43,885.
(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, LLC 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 December 31, 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.
178
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(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 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 December 31, 2005, Mazama
Capital Management, LLC received 0.55% in average daily net assets.
(21) Effective December 13, 2005, Trusco Capital Management, Inc. replaced
Delaware Management Company. For the period January 1, 2005 to December 12,
2005, Delaware Management Company received 0.50% on all average daily net
assets. For the period December 13, 2005 to December 31, 2005, Trusco
Capital Management, Inc. received 0.80% on the first $10,000,000 in average
daily net assets, 0.64% on the next $40,000,000 in average daily net
assets, and 0.48% on all average daily net assets in excess of $50,000,000.
During the year ended December 31, 2005, the Small Cap Growth Series
executed $1,037,681 of sales transactions through Suntrust Capital Markets,
Inc., an affiliate of Trusco Capital Management, Inc. Commissions paid for
such transactions amounted to $2,069.
(22) 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.
(23) 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.
(24) The International Equity Series has two subadvisors: LSV Asset Management
and Wellington Management Company, LLP.
(25) 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.
179
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
For the year ended December 31, 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>
Certain trustees and officers of the Series Portfolio and of the funds that
invest in the Series Portfolio are also directors, officers or employees of the
Advisor or its affiliates. None of the non-independent trustees so affiliated
receive compensation for services as trustees of the Series Portfolio or the
funds that invest in the Series Portfolio. Similarly, none of the Series
Portfolio officers receive compensation from the Series Portfolio. Aggregate
remuneration earned by non-affiliated trustees of the Series Portfolio from the
Series Portfolio for the year ended December 31, 2005 amounted to $124,779.
4. SECURITIES LENDING
Each 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% for domestic securities and 105%
for international securities 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.
During the term of the loan, a Series receives payments from borrowers
equivalent to dividends, interest and any other distributions that would have
been earned on securities lent while simultaneously seeking to earn income on
the investment of cash collateral in accordance with investment guidelines
contained in the Securities Lending Agreement. For loans secured by cash, each
Series retains the interest on cash collateral investments but is required to
pay the borrower a rebate for the use of the cash collateral. For loans secured
by collateral other than cash, the borrower pays a securities loan fee to the
lending agent.
Any compensation (net of related expenses) received by a Series for lending its
securities, as described above, is reported on its respective Statement of
Operations. This includes the interest income on short-term investments
purchased with cash collateral received.
180
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SECURITIES LENDING (CONTINUED)
At December 31, 2005, the Series loaned securities having market values as
follows:
<Table>
<Caption>
CASH COLLATERAL
SERIES MARKET VALUE RECEIVED
- ------ ------------ ---------------
High Quality Bond........................................... $ 10,010,807 $ 10,225,000
Intermediate Government Bond................................ 58,877,080 60,166,347
Core Bond................................................... 203,578,558 208,030,600
Balanced.................................................... 15,444,789 15,913,228
Value & Income.............................................. 295,433,160 307,114,865
Growth & Income............................................. 96,877,278 99,867,379
Equity Growth............................................... 217,416,134 223,420,265
Mid-Cap Value............................................... 72,828,789 75,129,412
Mid-Cap Growth.............................................. 57,833,970 59,815,920
Small-Cap Value............................................. 53,123,206 55,066,408
Special Equity.............................................. 249,766,854 259,405,644
Small-Cap Growth............................................ 8,078,330 8,438,426
Aggressive Equity........................................... 35,798,864 36,910,309
International Equity........................................ 112,580,466 118,326,135
</Table>
181
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SECURITIES LENDING (CONTINUED)
Each Series has invested the cash collateral received from securities loaned in
the following short term securities:
<Table>
<Caption>
HIGH INTERMEDIATE
QUALITY GOVERNMENT CORE VALUE & GROWTH &
BOND BOND BOND BALANCED INCOME INCOME
----------- ------------ ------------ ----------- ------------ -----------
Abbey National PLC, Time Deposit, 4.29%,
01/11/06.................................. $ 165,289 $ 972,601 $ 3,362,856 $ 257,240 $ 4,964,573 $ 1,614,376
American Beacon Money Market Fund.......... 33,058 194,520 672,571 51,448 992,914 322,876
Bank of America Corp., Floating Rate Note,
4.31%(1), 06/07/06........................ 452,284 2,661,345 9,201,843 703,892 13,584,648 4,417,445
Bank of America Corp., Floating Rate Note,
4.31%(1), 08/10/06........................ 330,578 1,945,202 6,725,712 514,482 9,929,145 3,228,752
Bank of Montreal, Time Deposit, 4.30%,
01/19/06.................................. 330,578 1,945,202 6,725,712 514,482 9,929,145 3,228,752
Bank of Nova Scotia, Time Deposit, 4.25%,
01/27/06.................................. 330,578 1,945,202 6,725,712 514,482 9,929,145 3,228,752
Barclays PLC, Floating Rate CD, 4.31%(1),
01/17/06.................................. 66,116 389,040 1,345,142 102,896 1,985,828 645,750
Barclays PLC, Time Deposit, 4.30%,
01/31/06.................................. 198,347 1,167,121 4,035,427 308,688 5,957,487 1,937,251
Barclays Global Investors Money Market
Fund -- Institutional Shares.............. 429,752 2,528,763 8,743,426 668,826 12,907,889 4,197,378
BNP Paribas, Time Deposit, 4.22%,
01/24/06.................................. 661,157 3,890,403 13,451,424 1,028,962 19,858,291 6,457,504
Branch Banking & Trust, Time Deposit,
4.26%, 01/11/06........................... 165,289 972,601 3,362,856 257,240 4,964,573 1,614,376
Calyon New York, Time Deposit, 4.34%,
01/05/06.................................. 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
Calyon New York, Time Deposit, 4.34%,
02/06/06.................................. 330,578 1,945,202 6,725,712 514,482 9,929,145 3,228,752
Credit Suisse First Boston Corp., Floating
Rate Note, 4.18%(1), 03/10/06............. 33,058 194,520 672,571 51,448 992,915 322,875
Dexia Group, Time Deposit, 4.23%,
01/20/06.................................. 165,289 972,601 3,362,856 257,240 4,964,573 1,614,376
Dexia Group, Time Deposit, 4.27%,
01/27/06.................................. 165,289 972,601 3,362,856 257,240 4,964,573 1,614,376
Federal Home Loan Bank, US Government
Agency Discount Note, 4.19%(2),
01/15/06.................................. 196,401 1,155,669 3,995,828 305,660 5,899,028 1,918,241
Fortis Bank, Time Deposit, 4.35%,
01/03/06.................................. 165,289 972,601 3,362,856 257,240 4,964,573 1,614,376
Fortis Bank, Time Deposit, 4.30%,
01/04/06.................................. 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
Fortis Bank, Time Deposit, 4.28%,
01/12/06.................................. 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
Freddie Mac, US Government Agency Discount
Note, 4.23%(2), 01/30/06.................. 239,833 1,411,231 4,879,461 373,253 7,203,532 2,342,439
Goldman Sachs Financial Square Prime
Obligations Fund -- Institutional
Shares.................................... 26,887 158,207 547,015 41,844 807,556 262,600
Merrill Lynch & Company, Inc., Repurchase
Agreement, dated 12/30/05, 4.24%, due
01/03/06(a)(b)(c)......................... 991,735 5,835,605 20,177,136 1,543,443 29,787,437 9,686,256
Merrimac Cash Fund-Premium Class........... 52,893 311,233 1,076,114 82,317 1,588,664 516,600
National Australia Bank, Time Deposit,
4.16%, 01/03/06........................... 165,801 975,610 3,373,260 258,037 4,979,932 1,619,370
Rabobank Nederland, Time Deposit, 4.21%,
01/19/06.................................. 165,289 972,601 3,362,856 257,240 4,964,573 1,614,376
Rabobank Nederland, Floating Rate CD,
4.10%(1), 05/31/06........................ 165,289 972,601 3,362,856 257,240 4,964,573 1,614,377
Royal Bank of Canada, Time Deposit, 4.25%,
01/24/06.................................. 231,405 1,361,641 4,707,998 360,136 6,950,402 2,260,127
Royal Bank of Scotland, Time Deposit,
4.25%, 01/23/06........................... 330,579 1,945,202 6,725,712 514,481 9,929,146 3,228,752
Skandinaviska Enskilda Banken AB (SEB),
Time Deposit, 4.23%, 01/03/06............. 165,289 972,601 3,362,856 257,240 4,964,573 1,614,377
Societe Generale, Time Deposit, 4.28%,
01/30/06.................................. 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
Societe Generale, Time Deposit, 4.28%,
01/31/06.................................. 165,289 972,601 3,362,856 257,240 4,964,573 1,614,377
The Bank of the West, Time Deposit, 4.29%,
01/25/06.................................. 462,810 2,723,283 9,415,997 720,273 13,900,804 4,520,253
The Bear Stearns Companies, Inc., Floating
Rate Note, 4.39%(1), 03/07/06............. 66,116 389,040 1,345,142 102,896 1,985,829 645,750
The Bear Stearns Companies, Inc., Floating
Rate Note, 4.39%(1), 06/06/06............. 132,231 778,081 2,690,285 205,792 3,971,658 1,291,501
Toronto Dominion Bank, Time Deposit, 4.30%,
01/23/06.................................. 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
UBS AG, Time Deposit, 4.26%, 01/10/06...... 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
Wells Fargo Bank, Time Deposit, 4.30%,
01/18/06.................................. 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
Wells Fargo Bank, Time Deposit, 4.29%,
01/30/06.................................. 330,578 1,945,202 6,725,712 514,481 9,929,146 3,228,752
----------- ----------- ------------ ----------- ------------ -----------
$10,225,000 $60,166,347 $208,030,600 $15,913,228 $307,114,865 $99,867,379
=========== =========== ============ =========== ============ ===========
Information pertaining to the investment of
the cash collateral is shown on each
Series' Portfolio of Investments.
- ---------------
(1) Variable rate security. The rate shown
was in effect at December 31, 2005.
(2) Represents yield to maturity at time of
purchase.
(a) Repurchase proceeds at maturity........ $ 992,202 $ 5,838,354 $ 20,186,642 $ 1,544,170 $ 29,801,470 $ 9,690,819
=========== =========== ============ =========== ============ ===========
(b) Collateralized by various Federal Home
Loan Banks, zero coupon -- 6.75%, due
07/16/08 -- 01/13/33, with a total value
of...................................... $ 275,142 $ 1,618,996 $ 5,597,825 $ 428,202 $ 8,264,051 $ 2,687,301
=========== =========== ============ =========== ============ ===========
(c) Collateralized by various Freddie Macs,
zero coupon, due 01/03/06 -- 07/15/32,
with a total value of................... $ 736,432 $ 4,333,343 $ 14,982,928 $ 1,146,114 $ 22,119,243 $ 7,192,721
=========== =========== ============ =========== ============ ===========
</Table>
182
<Table>
<Caption>
EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE INTERNATIONAL
GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY EQUITY
------------ ----------- ----------- ----------- ------------- ---------- ----------- -------------
$ 3,611,633 $ 1,214,482 $ 966,936 $ 890,159 $ 4,193,344 $ 136,409 $ 596,662 $ 1,912,765
722,326 242,896 193,387 178,032 838,669 27,282 119,332 382,553
9,882,576 3,323,208 2,645,845 2,435,759 11,474,321 373,258 1,632,658 5,233,934
7,223,266 2,428,963 1,933,873 1,780,319 8,386,683 272,818 1,193,325 3,825,532
7,223,266 2,428,963 1,933,873 1,780,319 8,386,687 272,818 1,193,325 3,825,532
7,223,266 2,428,964 1,933,873 1,780,319 8,386,688 272,818 1,193,325 3,825,532
1,444,653 485,793 386,775 356,064 1,677,337 54,564 238,665 765,107
4,333,959 1,457,379 1,160,324 1,068,191 5,032,013 163,690 715,995 2,295,319
9,390,245 3,157,652 2,514,034 2,314,415 10,902,694 354,663 1,551,323 4,973,190
14,446,532 4,857,927 3,867,745 3,560,638 16,773,375 545,635 2,386,650 7,651,062
3,611,633 1,214,482 966,936 890,159 4,193,344 136,409 596,663 1,912,765
7,223,266 2,428,964 1,933,873 1,780,319 8,386,688 272,817 1,193,325 3,825,532
7,223,266 2,428,964 1,933,873 1,780,319 8,386,688 272,817 1,193,325 3,825,532
722,326 242,896 193,387 178,032 838,669 27,281 119,332 382,553
3,611,633 1,214,482 966,936 890,159 4,193,344 136,409 596,663 1,912,765
3,611,633 1,214,482 966,936 890,159 4,193,344 136,409 596,663 1,912,765
4,291,431 1,443,077 1,148,937 1,057,709 4,982,634 162,084 708,969 2,272,794
3,611,633 1,214,482 966,936 890,159 4,193,344 136,409 596,663 1,912,765
7,223,266 2,428,964 1,933,873 1,780,319 8,386,688 272,817 1,193,325 3,825,531
7,223,266 2,428,964 1,933,873 1,780,319 8,386,688 272,817 1,193,325 3,825,531
5,240,433 1,762,197 1,403,012 1,291,610 6,084,488 197,927 865,750 2,775,398
587,482 197,552 157,286 144,797 682,103 22,188 97,055 311,138
21,669,798 7,286,891 5,801,617 5,340,957 25,160,063 818,453 3,579,975 11,476,593
1,155,723 388,635 309,420 284,851 1,341,870 43,651 190,932 612,085
3,622,807 1,218,239 969,928 892,913 4,206,317 136,831 598,508 1,918,683
3,611,633 1,214,482 966,936 890,159 4,193,344 136,409 596,663 1,912,765
3,611,633 1,214,482 966,936 890,159 4,193,344 136,409 596,662 1,912,765
5,056,287 1,700,275 1,353,711 1,246,223 5,870,682 190,972 835,327 2,677,872
7,223,266 2,428,964 1,933,873 1,780,319 8,386,688 272,818 1,193,325 3,825,531
3,611,633 1,214,482 966,936 890,160 4,193,344 136,409 596,662 1,912,765
7,223,266 2,428,964 1,933,872 1,780,319 8,386,688 272,818 1,193,325 3,825,531
3,611,633 1,214,482 966,936 890,159 4,193,344 136,409 596,662 1,912,765
10,112,572 3,400,549 2,707,421 2,492,446 11,741,363 381,945 1,670,655 5,355,743
1,444,653 485,793 386,774 356,064 1,677,337 54,564 238,665 765,106
2,889,307 971,585 773,549 712,128 3,354,675 109,127 477,330 1,530,212
7,223,266 2,428,964 1,933,872 1,780,319 8,386,688 272,818 1,193,325 3,825,531
7,223,266 2,428,964 1,933,872 1,780,319 8,386,688 272,818 1,193,325 3,825,531
7,223,266 2,428,964 1,933,872 1,780,319 8,386,688 272,818 1,193,325 3,825,531
7,223,266 2,428,964 1,933,872 1,780,319 8,386,688 272,818 1,193,325 3,825,531
------------ ----------- ----------- ----------- ------------- ---------- ----------- ------------
$223,420,265 $75,129,412 $59,815,920 $55,066,408 $ 259,405,644 $8,438,426 $36,910,309 $118,326,135
============ =========== =========== =========== ============= ========== =========== ============
$ 21,680,007 $ 7,290,324 $ 5,804,350 $ 5,343,473 $ 25,171,916 $ 818,839 $ 3,581,662 $ 11,482,000
============ =========== =========== =========== ============= ========== =========== ============
$ 6,011,939 $ 2,021,633 $ 1,609,566 $ 1,481,763 $6,980,259.00 $ 227,067 $ 993,208 $ 3,183,996
============ =========== =========== =========== ============= ========== =========== ============
$ 16,091,333 $ 5,411,023 $ 4,308,105 $ 3,966,032 $ 18,683,097 $ 607,758 $ 2,658,381 $ 8,522,169
============ =========== =========== =========== ============= ========== =========== ============
</Table>
183
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities (excluding short-term securities) for the year ended December 31,
2005 were as follows:
<Table>
<Caption>
COST OF PROCEEDS
SERIES PURCHASES FROM SALES
- ------ --------------- ---------------
High Quality Bond...................... Government Obligations $ 146,744,829 $ 147,930,067
Other 353,814,709 271,609,850
Intermediate Government Bond........... Government Obligations 1,789,964,466 1,865,140,056
Other 48,719,358 49,124,964
Core Bond.............................. Government Obligations 19,042,491,794 18,747,270,140
Other 741,529,860 519,826,863
Total Return Bond...................... Government Obligations 243,679,461 196,350,195
Other 41,091,409 8,582,360
Balanced............................... Government Obligations 1,089,137,574 1,111,407,526
Other 412,402,586 401,905,581
Value & Income......................... Other 2,619,799,404 2,460,366,376
Value.................................. Other 36,300,833 3,074,505
Growth & Income........................ Other 872,553,978 901,164,556
Equity Growth.......................... Other 1,894,415,422 1,757,888,098
Mid-Cap Value.......................... Other 721,462,621 544,280,471
Mid-Cap Growth......................... Other 360,116,339 321,796,435
Small-Cap Value........................ Other 308,555,076 262,992,462
Special Equity......................... Other 1,104,309,630 1,153,462,606
Small-Cap Growth....................... Other 224,128,032 205,431,289
Aggressive Equity...................... Other 698,259,275 743,694,021
High Yield Bond........................ Other 319,260,339 240,779,030
International Equity................... Other 1,550,064,499 1,382,579,414
</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 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'
184
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. LEGAL AND REGULATORY MATTERS (CONTINUED)
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 period.
Diversified Investors Securities Corp. ("DISC") is the distributor for each of
the Series and a subsidiary of the Series Portfolio's investment advisor,
Diversified Investment Advisors, Inc. ("DIA").
On February 18, 2005, DISC was notified by NASD Staff that it had made a
preliminary determination to recommend disciplinary action against DISC
regarding certain matters. In February 2006, DISC settled an administrative
proceeding with the NASD regarding agreements with two customers who were
permitted to engage in market timing activity in the Diversified Investors
International Equity Fund from July 1, 2003 through October 24, 2003. The
settlement also addressed alleged deficiencies in DISC's procedures relating to
the retention of e-mail communications. Under the terms of the Letter of
Acceptance, Waiver and Consent ("AWC") with the NASD, under which DISC neither
admitted nor denied the allegations or findings, DISC consented to the following
sanctions: (i) censure; (ii) a fine of $1.3 million; (iii) restitution of
approximately $949,011 to the Diversified International Equity Portfolio for
losses attributable to the trading described in the AWC; and (iv) agreement to
make certifications to the NASD regarding the review and establishment of
procedures relating to e-mail retention and to the enforcement of the Funds'
policies and procedures relating to market timing. The restitution payment of
$949,011 referred to above was made on February 14, 2006.
DISC and DIA 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 Portfolio's
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, DC. 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.
185
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. CONCENTRATIONS AND INDEMNIFICATIONS
Some Series may have elements of risk not typically associated with investments
in the United States of America due to concentrated investments in a limited
number of countries or regions, which may vary throughout the year. Such
concentrations may subject the Series to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions could
cause the securities and their markets to be less liquid and their prices more
volatile than those of comparable US securities.
As of December 31, 2005, the Aggressive Equity Series invested approximately
10.71% of its portfolio in issuers outside the United States.
As of December 31, 2005, the High Yield Bond Series invested approximately
11.40% of its portfolio in issuers outside the United States.
As of December 31, 2005, substantially all of the International Equity Series'
net assets consist of securities of issuers that are denominated in foreign
currencies. Changes in currency exchange rates will affect the value of and
investment income from such securities.
As of December 31, 2005, the International Equity Series invested approximately
20.93% and 17.98% respectively, of its portfolio in issuers in Japan and United
Kingdom, respectively.
The ability of the issuers of debt, asset-backed and mortgage-backed securities
to meet their obligations may be affected by the economic and political
developments in a specific industry or region. The value of asset-backed and
mortgage-backed securities can be significantly affected by changes in interest
rates or rapid principal payments including prepayments.
Credit risk is measured by the loss a Series would record if its counter-parties
failed to perform pursuant to the terms of their obligations to the Series.
Since certain Series can enter into various types of debt obligations including
private placements and swaps, forward currency contracts, spot contracts,
forward commitments and over-the-counter options, credit exposure exists with
counterparties.
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.
During the year, AEGON deposited seed money into the Total Return Bond Series
through an investment in a feeder fund of the Series. At December 31, 2005, this
amount represented 46% of the assets invested in the Total Return Bond Series.
It is anticipated that this seed money will be withdrawn as new deposits
eliminate the need for such seed money.
186
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. FOREIGN CURRENCY FORWARD AND SPOT CONTRACTS
At December 31, 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 and spot contracts which contractually obligate each
portfolio to deliver/receive currency at specified future dates. The open
contracts were as follows:
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 12/31/05 (DEPRECIATION)
---------- ----------- ---------- ----------- --------------
CORE BOND
SALE CONTRACTS:
Euro............................... 13,200,000 $16,041,894 01/20/06 $15,642,102 $ 399,792
Mexican Peso....................... 56,303,463 5,115,613 01/27/06 5,279,247 (163,634)
Mexican Peso....................... 538,000 49,506 01/27/06 50,445 (939)
New Zealand Dollar................. 11,358,753 7,894,333 01/27/06 7,741,633 152,700
---------
TOTAL.............................. $ 387,919
=========
TOTAL RETURN BOND
PURCHASE CONTRACTS:
Canadian Dollar.................... 153,287 $ 129,904 02/08/06 $ 132,006 $ 2,102
=========
SALE CONTRACTS:
Australian Dollar.................. 323,539 $ 242,169 02/08/06 $ 236,927 $ 5,242
Canadian Dollar.................... 320,464 271,005 02/08/06 275,973 (4,968)
---------
TOTAL.............................. $ 274
=========
BALANCED
PURCHASE CONTRACTS:
Euro............................... 4,565,000 $ 5,521,367 02/08/06 $ 5,415,290 $(106,077)
=========
SALE CONTRACTS:
Australian Dollar.................. 940,285 $ 703,804 02/08/06 $ 688,569 $ 15,235
Canadian Dollar.................... 910,497 769,977 02/08/06 784,092 (14,115)
Euro............................... 4,567,485 5,484,179 02/08/06 5,418,238 65,941
---------
TOTAL.............................. $ 67,061
=========
HIGH YIELD BOND
SALE CONTRACTS:
Euro............................... 492,608 $ 584,233 01/31/06 $ 584,098 $ 135
=========
INTERNATIONAL EQUITY
PURCHASE CONTRACTS:
Hong Kong Dollar................... 1,275,680 $ 164,536 01/03/06 $ 164,526 $ (10)
Hong Kong Dollar................... 255,958 33,010 01/04/06 33,011 1
---------
TOTAL.............................. $ (9)
=========
</Table>
187
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. FOREIGN CURRENCY FORWARD AND SPOT CONTRACTS (CONTINUED)
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 12/31/05 (DEPRECIATION)
---------- ----------- ---------- ----------- --------------
INTERNATIONAL EQUITY (CONTINUED)
SALE CONTRACTS:
Canadian Dollar.................... 270,332 $ 231,939 01/03/06 $ 232,553 $ (614)
Canadian Dollar.................... 478,780 411,217 01/04/06 411,883 (666)
Canadian Dollar.................... 244,262 210,113 01/05/06 210,140 (27)
Euro............................... 112,829 124,056 12/29/06 136,181 (12,125)
Great British Pound................ 71,126 122,091 01/03/06 122,373 (282)
Great British Pound................ 240,727 415,110 01/04/06 414,171 939
Great British Pound................ 119,362 205,350 01/05/06 205,362 (12)
Swiss Franc........................ 2,203,555 1,673,480 01/03/06 1,676,918 (3,438)
---------
TOTAL.............................. $ (16,225)
=========
</Table>
188
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,
YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER YEAR RETURN
------- -------- --------------- ---------- --------------- --------- -------------- ------
MONEY MARKET
12/31/2005 0.28% 0.28% 2.97% 2.97% N/A $ 765,777,258 3.00%
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
HIGH QUALITY BOND
12/31/2005 0.39 0.39 3.25 3.25 58% 788,399,166 1.95
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
INTERMEDIATE GOVERNMENT BOND
12/31/2005 0.40 0.40 3.45 3.45 756 261,106,523 1.34
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
CORE BOND
12/31/2005 0.39 0.39 3.99 3.99 1,003(a) 2,052,893,035 2.38
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
TOTAL RETURN BOND
12/31/2005(1) 0.55* 0.40* 3.93* 4.08* 327 70,072,859 2.35
BALANCED
12/31/2005 0.54 0.50 2.21 2.25 367 410,747,655 5.59
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)
VALUE & INCOME
12/31/2005 0.48 0.48 1.38 1.38 89 3,018,060,297 6.88
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)
VALUE
12/31/2005(1) 1.18* 0.55* 1.15* 1.78* 21 35,138,512 9.47
</Table>
189
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,
YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER YEAR RETURN
------- -------- --------------- ---------- --------------- --------- -------------- ------
GROWTH & INCOME
12/31/2005 0.64% 0.64% 0.96% 0.96% 79% $1,178,758,869 7.12%
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)
EQUITY GROWTH
12/31/2005 0.65 0.65 0.34 0.34 76 2,587,382,061 7.18
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)
MID-CAP VALUE
12/31/2005 0.72 0.70 1.26 1.28 112 641,531,538 9.77
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
12/31/2005 0.76 0.75 (0.39) (0.38) 142 282,950,442 13.42
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
12/31/2005 0.88 0.85 0.07 0.10 143 218,749,221 (4.70)
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
12/31/2005 0.85 0.85 0.09 0.09 92 1,296,671,909 10.53
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)
SMALL-CAP GROWTH
12/31/2005 0.98 0.90 (0.49) (0.41) 183 132,903,534 0.55
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>
190
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,
YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER YEAR RETURN
------- -------- --------------- ---------- --------------- --------- -------------- ------
AGGRESSIVE EQUITY
12/31/2005 0.81% 0.80% (0.15)% (0.14)% 187% $ 382,129,060 8.20%
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)
HIGH YIELD BOND
12/31/2005 0.60 0.60 7.74 7.74 68 416,027,255 3.34
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
INTERNATIONAL EQUITY
12/31/2005 0.88 0.88 2.03 2.03 94 1,721,786,149 11.20
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)
</Table>
- ---------------
(a) Portfolio turnover calculation includes effect of buying and selling TBA
securities used in dollar roll transactions. Refer to Note 2H.
* Annualized.
(1) Commencement of Operations, May 6, 2005.
(2) Commencement of Operations, April 27, 2001.
(3) Commencement of Operations, April 15, 2002.
191
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Owners of Beneficial Interests
of the Diversified Investors Portfolios:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Money Market Portfolio, High
Quality Bond Portfolio, Intermediate Government Bond Portfolio, Core Bond
Portfolio, Total Return Bond Portfolio, Balanced Portfolio, Value & Income
Portfolio, Value Portfolio, Growth & Income Portfolio, Equity Growth Portfolio,
Mid-Cap Value Portfolio, Mid-Cap Growth Portfolio, Small-Cap Value Portfolio,
Special Equity Portfolio, Small-Cap Growth Portfolio, Aggressive Equity
Portfolio, High Yield Bond Portfolio and International Equity Portfolio
(constituting the Diversified Investors Portfolios, hereafter referred to as the
"Portfolios") at December 31, 2005, the results of each of their operations, the
changes in each of their net assets, and the financial highlights for the
periods presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 20, 2006
192
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS
DECEMBER 31, 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 each
of the Portfolios. For each Portfolio, Diversified has entered into an
Investment Subadvisory Agreement (each a "Subadvisory Agreement") with one or
more Subadvisers.
A discussion of the Board's considerations and determinations with respect to
the continuation of existing Diversified Advisory Agreements and Subadvisory
Agreements and the approval of new Subadvisory Agreements during the six-month
period ended June 30, 2005 is included in the Portfolios' Semi-Annual Report for
such period.
Additionally, three new Subadvisory Agreements were approved during the
six-month period ended December 31, 2005.
BALANCED PORTFOLIO AND TOTAL RETURN BOND PORTFOLIO. At a meeting held on July
6, 2005, the Board of Trustees approved the appointment of Western Asset
Management Company Limited ("WAML") as an additional subadviser to the Balanced
Portfolio and the Total Return Bond Portfolio, in each case to manage global
fixed income assets alongside its affiliate, Western Asset Management Company
(together with WAML, "Western Asset Management"), a subadviser to each
Portfolio.
Having previously received presentations from Diversified's Manager Monitoring
Group and representatives of Western Asset Management (on behalf of Western
Asset Management Company and WAML), the Board reviewed detailed information
about Western Asset Management, including information about its investment
philosophy, investment process and investment performance. The Trustees focused,
in particular, on the potential benefits of retaining a subadviser dedicated to
the management of the non-U.S. dollar denominated portions of the Portfolios.
The Trustees considered the nature and quality of the anticipated services to be
provided by WAML and reviewed detailed information with respect to the
hypothetical performance of a composite managed by Western Asset Management. In
evaluating WAML's ability to provide services to the Portfolios, the Trustees
reviewed information as to WAML's business organization, financial resources,
personnel and other matters. The Trustees also considered the subadvisory fees
to be paid to WAML and noted that these fees would be paid by Diversified.
After requesting and reviewing such information as they deemed necessary and
after the independent Trustees met in private sessions at which no
representatives of Diversified were present, the Board concluded that the
Subadvisory Agreements with WAML were in the best interests of the Balanced
Portfolio, the Total Return Bond Portfolio and their respective investors.
SMALL-CAP GROWTH PORTFOLIO. At a meeting held on December 9, 2005, the Board of
Trustees considered the termination of Delaware Management Company as the
subadviser to the Small-Cap Growth Portfolio, and the appointment of Trusco
Capital Management, Inc. ("Trusco") as the subadviser to the 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 and explained why Trusco met these criteria. Representatives of
Trusco then made a detailed presentation to the Board of certain information
relating to Trusco, including information about Trusco's investment philosophy,
investment process, and investment performance. The Trustees considered the
objective nature of Trusco's investment process and its emphasis on risk control
and diversification throughout the portfolio construction and management
process.
In their deliberations, the Trustees took into account the nature and quality of
the anticipated services to be provided by Trusco. The Trustees considered
information as to Trusco's investment management experience (including total
assets under management), business organization, financial resources, personnel,
philosophy
193
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
DECEMBER 31, 2005
(UNAUDITED)
and other matters. The Trustees reviewed information with respect to Trusco's
operations and history. The Trustees also considered the subadvisory fees to be
paid by Diversified to Trusco.
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 the independent Trustees met
in private sessions at which no representatives of Diversified were present, the
Board accepted the recommendation to terminate Delaware Management as subadviser
and concluded that the Subadvisory Agreement between Diversified and Trusco was
in the best interests of the Small-Cap Growth Portfolio and its investors.
194
DIVERSIFIED INVESTORS PORTFOLIOS
TRUSTEES INFORMATION
(UNAUDITED)
Each portfolio is supervised by the Board of Trustees of Diversified Investors
Portfolios. The respective Trustees and officers of each Portfolio and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Unless otherwise indicated, the
address of each Trustee and officer of Diversified Investors Portfolios is Four
Manhattanville Road, Purchase, New York 10577. Additional information about
Diversified Investors Portfolios' Trustees may be found in Diversified Investors
Portfolios' Statement of Additional Information, which is available without
charge upon request by calling 1-800-755-5801.
OFFICERS AND INTERESTED TRUSTEES:
<Table>
<Caption>
POSITION(S), LENGTH OF PRINCIPAL OCCUPATIONS DURING
NAME, ADDRESS AND AGE TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD
- --------------------- ------------------------- -----------------------------------
Joseph P. Carusone, 40................. Treasurer since 2001 Vice President and Director,
Diversified Investment Advisors,
Inc.
Robert F. Colby, 50.................... Secretary since 1993 Senior Vice President and General
Counsel, Diversified Investment
Advisors, Inc.; Vice President,
Diversified Investors Securities
Corp.; Vice President and Assistant
Secretary, of Transamerica
Financial Life Insurance Company,
Inc.
Suzanne Montemurro, 41................. Assistant Treasurer since Vice President and Director,
2002 Diversified Investment Advisors,
Inc.
Mark Mullin, 43........................ President since 2002 President, Chairman of the Board,
Trustee since 1995 Chief Executive Officer, Vice
President, Chief Investment
Officer, Diversified Investment
Advisors, Inc.
</Table>
195
DIVERSIFIED INVESTORS PORTFOLIOS
TRUSTEES INFORMATION (CONTINUED)
(UNAUDITED)
DISINTERESTED TRUSTEES:
<Table>
<Caption>
POSITION(S), LENGTH PRINCIPAL OCCUPATIONS DURING
NAME, ADDRESS AND AGE OF TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD
- --------------------- ----------------------- ------------------------------------
Neal M. Jewell, 71..................... Trustee since 1993 Consultant; Independent Trustee, EAI
355 Thornridge Drive Select (a registered investment
Stamford, CT 06903 company)
Robert Lester Lindsay, 71.............. Trustee since 1993 Retired
2 Huguenot Center
Tenafly, NJ 07670
Eugene M. Mannella, 52................. Trustee since 1993 President, Investment Management
2 Orchard Neck Road Services, Inc.
Center Moriches, NY 11934
Joyce Galpern Norden, 66............... Trustee since 1993 Vice President, Institutional
505 Redleaf Road Advancement, Reconstructionist
Wynnewood, PA 19096 Rabbinical College
Patricia L. Sawyer, 55................. Trustee since 1993, President and Executive Search
Smith & Sawyer LLP Chairperson of Audit Consultant, Smith & Sawyer LLC
P.O. Box 8063 Committee since 2003
Vero Beach, FL 32963
</Table>
196
TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road, Purchase, New York 10577
(914) 697-8000
DISTRIBUTOR:
Diversified Investors Securities Corp. (DISC)
4 Manhattanville Road, Purchase, New York 10577
914-697-8000
2873 (2/06)
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, Registrant had adopted a
code of ethics (the "Code") that applies to the Registrant's principal executive
officer ("PEO"), principal financial officer ("PFO"), and Assistant Treasurer
("AT"). There were no amendments to the Code during the period covered by the
report. A copy of the Code of Ethics is attached as an exhibit to this Form
N-CSR.
The Registrant did not grant any waivers, including implicit waivers, from any
provisions of the Code to the PEO, PFO, or AT, during the period covered by this
report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that the Registrant has two audit committee
financial experts serving on its audit committee. The audit committee financial
experts are Robert L. Lindsay and Eugene M. Mannella. Messrs. are independent
trustees.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. - The aggregate fees billed for professional services rendered
by PricewaterhouseCoopers ("PWC") for the audit of the Registrant's financial
statements and services that are normally provided by the accountant in
connection with statutory and regulatory filings for 2005 and 2004 were $14,400
and $14,100, respectively.
(b) AUDIT RELATED FEE. - No such fees were billed by PWC for 2005 or 2004.
(c) TAX FEES. - No such fees were billed by PWC for 2005 or 2004.
(d) ALL OTHER FEES - No such fees were billed by PWC for 2005 or 2004.
(e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICY. The Audit Committee is required to
pre-approve audit and non-audit services performed for the Funds by the
independent accountant in order to assure that the provision of such services
does not impair the accountant's independence. The Audit Committee also is
required to pre-approve non-audit services performed by the Funds' independent
accountant for the Funds investment adviser, and certain of the adviser's
affiliates that provide ongoing services to the Funds, if the services to be
provided by the accountant relate directly to the operations and financial
reporting of the Funds. The pre-approval of these services also is intended to
assure that the provision of the services does not impair the accountant's
independence.
Unless a type of service to be provided by the independent accountant has
received pre-approval, it will require separate pre-approval by the Audit
Committee. Also, any proposed services exceeding pre-approved cost levels will
require separate pre-approval by the Audit Committee. When considering services
for pre-approval the Audit committee will take into account such matters as it
deems appropriate or advisable, including applicable rules regarding auditor
independence.
The Audit Committee may delegate pre-approval authority to one or more of its
members. The member or members to whom such authority is delegated shall report
any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Requests or applications to provide services that require separate approval by
the Audit Committee will be submitted to the Audit Committee by both the
independent accountant and the Funds' treasurer, and must include a joint
statement as to whether, in their view, the request or application is consistent
with the SEC's rules on auditor independence.
Management will promptly report to the Chair of the Audit Committee any
violation of this Policy which it becomes aware.
(e) (2) 100% of services described in paragraphs (b) through (d) were approved
by the Audit Committee.
(f) Not applicable.
(g) The aggregate non-audit fees billed by PWC for services rendered to the
Registrant and the Registrant's investment advisor, Diversified Investment
Advisors ("DIA") for 2005 and 2004, were $254,000 and $200,500, respectively.
The fees rendered were in connection with the examination of DIA's
record-keeping operations and (SAS-70), and in connection with the review of
DIA's Transfer Agent's internal control structure. All such fees were incurred
by and paid for by DIA.
(h) PWC provided non-audit services to DIA in 2005 and 2004 that were not
required to be pre-approved by the Registrant's audit committee because the
services were not directly related to the operation of the Registrant's funds.
The Board of Trustees will consider PWC's independence and will consider whether
the provision of these non-audit services to DIA is compatible with maintaining
PWC's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the Registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the Registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's most recent fiscal six-month
period that has materially affected, or is likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics, attached.
(a) (2) Separate certifications by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(a) (3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Diversified Investors Strategic Variable Funds
By /s/ Mark Mullin
Mark Mullin
Principal Executive Officer
Date March 3, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Mark Mullin
Mark Mullin
Principal Executive Officer
Date March 3, 2006
By /s/ Joseph Carusone
Joseph Carusone
Principal Financial Officer
Date March 3, 2006