UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811 - 07717
Diversified Investors Strategic
Variable Funds
(Exact name of Registrant as specified
in charter)
Address of Registrant: 4 Manhattanville Road
Purchase, NY 10577
Name and address of agent for service: Joseph Carusone
4 Manhattanville Road
Purchase, NY 10577
Registrant's telephone number, including area code: (914) 697-8586
Date of fiscal year end: December 31, 2006
Date of reporting period: June 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
DIVERSIFIED INVESTORS VARIABLE FUNDS
DIVERSIFIED INVESTORS
STRATEGIC VARIABLE FUNDS
SEMI-ANNUAL REPORT
June 30, 2006
Calvert |
|
International Equity |
|
High Yield Bond |
|
Aggressive Equity |
|-- Intermediate/Long
Special Equity | Horizon
| --------------------------
Equity Growth |
|
Growth & Income |-- Intermediate Horizon
| --------------------------
Value & Income |
|
Balanced |
|-- Short Horizon
Core Bond | --------------------------
|
Intermediate Govt. Bond |
|
High Quality Bond |
|
Money Market |
[DIVERSIFIED INVESTMENT ADVISORS Logo]
_________________________________________________
This report is not to be construed as an offering for sale of any contracts
participating in the Subaccounts (Series) of the Diversified Investors Variable
Funds or the Diversified Investors Strategic Variable Funds, or as a
solicitation of an offer to buy contracts unless preceded by or accompanied by a
current prospectus which contains complete information about charges and
expenses.
This is a combined annual report for the subaccounts of the Diversified
Investors Variable Funds and the Diversified Investors Strategic Variable Funds.
THE DIVERSIFIED INVESTORS VARIABLE FUNDS AND STRATEGIC VARIABLE FUNDS
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
DIVERSIFIED INVESTORS VARIABLE FUNDS:
An Explanation of Fund Expenses............................. 2
Statements of Assets and Liabilities........................ 6
Statements of Operations.................................... 8
Statements of Changes in Net Assets -- June 30, 2006........ 10
Statements of Changes in Net Assets -- December 31, 2005.... 12
CALVERT SUBACCOUNT:
Statement of Assets and Liabilities....................... 14
Statement of Operations................................... 15
Statements of Changes in Net Assets....................... 16
Notes to Financial Statements............................... 17
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS:
An Explanation of Fund Expenses............................. 26
Statements of Assets and Liabilities........................ 27
Statements of Operations.................................... 28
Statements of Changes in Net Assets -- June 30, 2006........ 29
Statements of Changes in Net Assets -- December 31, 2005.... 30
PORTFOLIOS OF INVESTMENTS:
Short Horizon Strategic Variable Fund..................... 31
Intermediate Horizon Strategic Variable Fund.............. 32
Intermediate Long Horizon Strategic Variable Fund......... 33
Portfolio Composition....................................... 34
Notes to Financial Statements............................... 35
APPROVAL OF INVESTMENT ADVISORY CONTRACTS................... 41
DIVERSIFIED INVESTORS PORTFOLIOS:
Economic Overview........................................... 44
Statements of Assets and Liabilities........................ 54
Statements of Operations.................................... 58
Statements of Changes in Net Assets -- June 30, 2006........ 62
Statements of Changes in Net Assets -- December 31, 2005.... 66
PORTFOLIOS OF INVESTMENTS:
Money Market Portfolio.................................... 70
High Quality Bond Portfolio............................... 72
Intermediate Government Bond Portfolio.................... 80
Core Bond Portfolio....................................... 82
Total Return Bond Portfolio............................... 96
Balanced Portfolio........................................ 105
Value & Income Portfolio.................................. 117
Value Portfolio........................................... 120
Growth & Income Portfolio................................. 122
Equity Growth Portfolio................................... 127
Mid-Cap Value Portfolio................................... 130
Mid-Cap Growth Portfolio.................................. 134
Small-Cap Value Portfolio................................. 136
Special Equity Portfolio.................................. 138
Small-Cap Growth Portfolio................................ 149
Aggressive Equity Portfolio............................... 154
High Yield Bond Portfolio................................. 156
International Equity Portfolio............................ 165
Summary of Footnotes and Abbreviations to Portfolios........ 170
Portfolio Composition....................................... 171
Notes to Financial Statements............................... 173
Approval of Investment Advisory Contracts................... 197
CALVERT SOCIAL BALANCED PORTFOLIO SEMI-ANNUAL REPORT........ I
</Table>
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES
(UNAUDITED)
As a unitholder in a unit investment trust (a "Trust") invested in a
corresponding series of the Diversified Investors Portfolios, you will bear the
ongoing costs of managing the corresponding portfolio in which your Trust
invests (such as the investment advisor's fee and other expenses). You will also
bear the cost of operating the Trust (such as distribution fees, administrative
fees, and other expenses).
The first line of each table shown below, based on an investment of $1,000, will
show you how much of your investment (per $1,000) went to the ongoing costs of
both your trust and its corresponding portfolio. The figures are based on the
actual total return and the actual expenses incurred for the period January 1,
2006 -- June 30, 2006. In order to approximate how much you paid in expenses
during the six months, divide your balance by 1,000, and multiply the result by
the dollar amount shown under the heading "Expenses Paid During the Period".
The second line in each table shown below, also based on an investment of
$1,000, is based on the actual expense ratio of your Trust, but assumes a total
annual return rate of 5% before expenses. Since the 5% is hypothetical, the
ending account values and the expenses paid for the period January 1,
2006 -- June 30, 2006 will not be the actual values per $1,000 of your
investment. This information is presented so you may compare the cost of owning
a Diversified Investors Variable Fund against the cost of owning other funds.
Other funds should provide this information based on a hypothetical annual
return of 5% before expenses in their most recent report in order for you to
make a fair comparison.
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
MONEY MARKET January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,017.10 $6.90 1.37%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,018.09 $6.90 1.37%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
HIGH QUALITY BOND January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,006.90 $7.40 1.48%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.56 $7.44 1.48%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
INTERMEDIATE GOVERNMENT BOND January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $ 991.50 $7.46 1.50%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.44 $7.56 1.50%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
2
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
CORE BOND January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $ 991.90 $7.35 1.48%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.55 $7.45 1.48%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
BALANCED January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,011.70 $8.03 1.60%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,016.95 $8.05 1.60%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
VALUE & INCOME January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,051.50 $8.06 1.58%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,017.07 $7.93 1.58%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
GROWTH & INCOME January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,006.60 $8.65 1.73%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,016.31 $8.69 1.73%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
3
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
EQUITY GROWTH January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $ 964.70 $8.54 1.74%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,016.24 $8.76 1.74%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
SPECIAL EQUITY January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,031.00 $9.88 1.95%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,015.21 $9.80 1.95%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
AGGRESSIVE EQUITY January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $ 995.50 $9.45 1.90%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,015.46 $9.55 1.90%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
HIGH YIELD BOND January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,039.50 $8.59 1.69%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,016.51 $8.49 1.69%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
4
DIVERSIFIED INVESTORS VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES (CONTINUED)
(UNAUDITED)
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
INTERNATIONAL EQUITY January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,091.70 $10.19 1.95%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,015.19 $ 9.82 1.95%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
CALVERT January 1, 2006 June 30, 2006 June 30, 2006(2)(3) Ratio(3)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $ 997.60 $5.48 1.10%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,019.45 $5.54 1.10%
(5% annual return before 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 182
(to reflect the one-half year period).
(3) These figures do not include expenses incurred by the Calvert Social
Balanced Portfolio.
5
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
----------- ----------- ------------ ----------- -----------
ASSETS:
Investment in the Portfolios, at
value (Notes 1 and 2).......... $39,551,685 $23,779,756 $24,372,676 $61,698,745 $79,668,488
Receivable for units sold........ 426,086 16,268 9,483 43,563 65,358
----------- ----------- ----------- ----------- -----------
Total assets..................... 39,977,771 23,796,024 24,382,159 61,742,308 79,733,846
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for units redeemed....... 135,672 -- 50,157 465 27,425
Accrued mortality and expense
risk........................... 35,557 21,507 21,964 55,700 71,573
----------- ----------- ----------- ----------- -----------
Total liabilities................ 171,229 21,507 72,121 56,165 98,998
----------- ----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO
ANNUITY CONTRACTHOLDERS........ $39,806,542 $23,774,517 $24,310,038 $61,686,143 $79,634,848
=========== =========== =========== =========== ===========
ACCUMULATION UNITS............... 2,028,937 1,629,772 1,221,282 2,021,846 2,086,279
=========== =========== =========== =========== ===========
UNIT VALUE....................... $ 19.62 $ 14.59 $ 19.91 $ 30.51 $ 38.17
=========== =========== =========== =========== ===========
</Table>
See notes to financial statements.
6
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ---------- -------------
$353,913,740 $133,789,923 $197,924,915 $127,936,839 $55,916,259 $4,259,135 $91,051,392
157,532 79,872 69,089 120,482 59,374 424 65,592
------------ ------------ ------------ ------------ ----------- ---------- -----------
354,071,272 133,869,795 197,994,004 128,057,321 55,975,633 4,259,559 91,116,984
------------ ------------ ------------ ------------ ----------- ---------- -----------
175,623 95,045 241,790 104,330 52,873 -- 79,501
316,798 119,094 177,097 113,783 49,746 3,853 79,949
------------ ------------ ------------ ------------ ----------- ---------- -----------
492,421 214,139 418,887 218,113 102,619 3,853 159,450
------------ ------------ ------------ ------------ ----------- ---------- -----------
$353,578,851 $133,655,656 $197,575,117 $127,839,208 $55,873,014 $4,255,706 $90,957,534
============ ============ ============ ============ =========== ========== ===========
6,320,485 5,184,770 4,137,183 3,496,781 3,616,280 241,510 3,939,219
============ ============ ============ ============ =========== ========== ===========
$ 55.94 $ 25.78 $ 47.76 $ 36.56 $ 15.45 $ 17.62 $ 23.09
============ ============ ============ ============ =========== ========== ===========
</Table>
7
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
-------- ------------ ------------ ----------- -----------
INVESTMENT INCOME ALLOCATED FROM
PORTFOLIOS (NOTE 2):
Interest income...................... $883,979 $ 502,298 $ 598,568 $ 1,485,876 $ 782,008
Securities lending income (net)...... -- 460 2,253 3,763 8,578
Dividend income...................... -- -- -- -- 458,629
Expenses (net of reimbursement)...... (50,732) (44,263) (49,519) (119,952) (203,893)
-------- --------- --------- ----------- -----------
Net investment income (loss)
allocated from Portfolios.......... 833,247 458,495 551,302 1,369,687 1,045,322
-------- --------- --------- ----------- -----------
EXPENSES (NOTE 4):
Mortality and expense risk........... 205,569 128,735 135,465 346,663 448,217
-------- --------- --------- ----------- -----------
NET INVESTMENT INCOME (LOSS)......... 627,678 329,760 415,837 1,023,024 597,105
-------- --------- --------- ----------- -----------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS (NOTE 2):
Net realized gains (losses) allocated
from Portfolios.................... -- (68,266) (649,948) (676,668) 1,881,533
Change in net unrealized appreciation
(depreciation) allocated from
Portfolios......................... -- (103,889) 17,950 (866,989) (1,477,428)
-------- --------- --------- ----------- -----------
Net realized and unrealized gains
(losses) on investments............ -- (172,155) (631,998) (1,543,657) 404,105
-------- --------- --------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $627,678 $ 157,605 $(216,161) $ (520,633) $ 1,001,210
======== ========= ========= =========== ===========
</Table>
See notes to financial statements.
8
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
--------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 152,954 $ 25,442 $ 85,696 $ 92,608 $ 15,188 $177,316 $ 28,474
47,099 5,628 32,302 43,915 5,210 -- 45,791
3,103,387 1,108,989 904,581 562,367 158,155 1,157 1,469,932
(853,610) (429,731) (673,459) (556,901) (237,734) (12,609) (380,343)
----------- ----------- ------------ ----------- ----------- -------- ----------
2,449,830 710,328 349,120 141,989 (59,181) 165,864 1,163,854
----------- ----------- ------------ ----------- ----------- -------- ----------
1,970,192 752,546 1,151,543 720,187 326,805 23,563 489,955
----------- ----------- ------------ ----------- ----------- -------- ----------
479,638 (42,218) (802,423) (578,198) (385,986) 142,301 673,899
----------- ----------- ------------ ----------- ----------- -------- ----------
15,233,267 5,305,985 7,750,808 9,523,863 3,800,804 16,241 7,494,272
(4,289,047) (14,179,899) (5,212,548) (3,519,816) 11,011 (834,623)
2,312,379
----------- ----------- ------------ ----------- ----------- -------- ----------
17,545,646 1,016,938 (6,429,091) 4,311,315 280,988 27,252 6,659,649
----------- ----------- ------------ ----------- ----------- -------- ----------
$18,025,284 $ 974,720 $ (7,231,514) $ 3,733,117 $ (104,998) $169,553 $7,333,548
=========== =========== ============ =========== =========== ======== ==========
</Table>
9
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND CORE BOND BALANCED
------------ ----------- ------------ ----------- -----------
FROM OPERATIONS:
Net investment income (loss).... $ 627,678 $ 329,760 $ 415,837 $ 1,023,024 $ 597,105
Net realized gains (losses)
allocated from Portfolios..... -- (68,266) (649,948) (676,668) 1,881,533
Change in net unrealized
appreciation (depreciation)
allocated from Portfolios..... -- (103,889) 17,950 (866,989) (1,477,428)
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................... 627,678 157,605 (216,161) (520,633) 1,001,210
------------ ----------- ----------- ----------- -----------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold...................... 34,058,783 6,216,037 2,597,374 4,151,619 4,702,859
Units redeemed.................. (32,316,737) (6,856,093) (3,757,929) (7,763,134) (9,102,336)
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from unit
transactions.................. 1,742,046 (640,056) (1,160,555) (3,611,515) (4,399,477)
------------ ----------- ----------- ----------- -----------
Total increase (decrease) in net
assets........................ 2,369,724 (482,451) (1,376,716) (4,132,148) (3,398,267)
NET ASSETS:
Beginning of period............. 37,436,818 24,256,968 25,686,754 65,818,291 83,033,115
------------ ----------- ----------- ----------- -----------
End of period................... $ 39,806,542 $23,774,517 $24,310,038 $61,686,143 $79,634,848
============ =========== =========== =========== ===========
Units outstanding beginning of
period........................ 1,940,304 1,673,643 1,279,147 2,139,744 2,200,757
Units sold...................... 1,751,961 428,161 129,941 135,612 122,323
Units redeemed.................. (1,663,328) (472,032) (187,806) (253,510) (236,801)
------------ ----------- ----------- ----------- -----------
Units outstanding end of
period........................ 2,028,937 1,629,772 1,221,282 2,021,846 2,086,279
============ =========== =========== =========== ===========
</Table>
See notes to financial statements.
10
<Table>
<Caption>
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ---------- -------------
$ 479,638 $ (42,218) $ (802,423) $ (578,198) $ (385,986) $ 142,301 $ 673,899
15,233,267 5,305,985 7,750,808 9,523,863 3,800,804 16,241 7,494,272
2,312,379 (4,289,047) (14,179,899) (5,212,548) (3,519,816) 11,011 (834,623)
------------ ------------ ------------ ------------ ----------- ---------- ------------
18,025,284 974,720 (7,231,514) 3,733,117 (104,998) 169,553 7,333,548
------------ ------------ ------------ ------------ ----------- ---------- ------------
17,285,340 9,103,814 10,215,253 13,092,976 5,179,997 318,006 13,511,184
(33,046,615) (14,887,755) (20,650,872) (13,101,741) (8,169,285) (578,588) (10,707,246)
------------ ------------ ------------ ------------ ----------- ---------- ------------
(15,761,275) (5,783,941) (10,435,619) (8,765) (2,989,288) (260,582) 2,803,938
------------ ------------ ------------ ------------ ----------- ---------- ------------
2,264,009 (4,809,221) (17,667,133) 3,724,352 (3,094,286) (91,029) 10,137,486
351,314,842 138,464,877 215,242,250 124,114,856 58,967,300 4,346,735 80,820,048
------------ ------------ ------------ ------------ ----------- ---------- ------------
$353,578,851 $133,655,656 $197,575,117 $127,839,208 $55,873,014 $4,255,706 $ 90,957,534
============ ============ ============ ============ =========== ========== ============
6,603,906 5,405,715 4,347,218 3,500,514 3,799,795 256,503 3,820,571
310,110 347,271 205,207 344,676 319,449 18,161 587,296
(593,531) (568,216) (415,242) (348,409) (502,964) (33,154) (468,648)
------------ ------------ ------------ ------------ ----------- ---------- ------------
6,320,485 5,184,770 4,137,183 3,496,781 3,616,280 241,510 3,939,219
============ ============ ============ ============ =========== ========== ============
</Table>
11
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2005
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT CORE
MARKET BOND BOND 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... (58) (121,700) (453,457) (317,746) 5,252,552
Change in net unrealized
appreciation (depreciation)
allocated from Portfolios... -- (190,503) (112,971) (684,883) (2,648,159)
------------ ----------- ----------- ------------ ------------
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.
12
<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 7,331,974 9,361,543 14,231,152 3,875,791 28,143 3,802,936
(12,747,803) 638,669 4,339,209 (2,635,436) 553,656 (205,536) 2,845,069
------------ ------------ ------------ ------------ ------------ ---------- ------------
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>
13
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006
(UNAUDITED)
<Table>
ASSETS:
Investments, at cost........................................ $39,730,544
===========
Investments, at value (Note 6).............................. $40,243,777
LIABILITIES:
Accrued mortality and expense risk.......................... 36,235
-----------
NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS.......... $40,207,542
===========
ACCUMULATION UNITS.......................................... 1,383,691
===========
UNIT VALUE.................................................. $ 29.06
===========
</Table>
See notes to financial statements.
14
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
MORTALITY AND EXPENSE RISK (NOTE 4)......................... $(229,459)
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE
2):
Net realized gains (losses) from securities................. (271,258)
Change in net unrealized appreciation (depreciation) on
securities................................................ 413,319
---------
Net realized and unrealized gains (losses) on investments... 142,061
---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ (87,398)
=========
</Table>
See notes to financial statements.
15
DIVERSIFIED INVESTORS VARIABLE FUNDS
CALVERT SUBACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE PERIOD ENDED
JUNE 30, 2006 FOR THE YEAR ENDED
(UNAUDITED) DECEMBER 31, 2005
-------------------- ------------------
FROM OPERATIONS:
Net investment income (loss)............................... $ (229,459) $ 298,072
Net realized gains (losses) from securities................ (271,258) (273,588)
Change in net unrealized appreciation (depreciation) on
securities............................................... 413,319 1,788,103
----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................... (87,398) 1,812,587
----------- -----------
FROM UNIT TRANSACTIONS (NOTE 5):
Units sold................................................. 2,904,064 6,411,494
Units redeemed............................................. (4,875,391) (6,302,427)
----------- -----------
Net increase (decrease) in net assets from unit
transactions............................................. (1,971,327) 109,067
----------- -----------
Total increase (decrease) in net assets.................... (2,058,725) 1,921,654
NET ASSETS:
Beginning of period/year................................... 42,266,267 40,344,613
----------- -----------
End of period/year......................................... $40,207,542 $42,266,267
=========== ===========
Units outstanding beginning of period/year................. 1,451,064 1,447,441
Units sold................................................. 98,751 227,718
Units redeemed............................................. (166,124) (224,095)
----------- -----------
Units outstanding end of period/year....................... 1,383,691 1,451,064
=========== ===========
</Table>
See notes to financial statements.
16
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 June 30, 2006, each of the DIVF Subaccounts' investment in the corresponding
Portfolios was as follows:
<Table>
<Caption>
PERCENTAGE INVESTMENT
SUBACCOUNT IN PORTFOLIO
- ---------- ---------------------
Money Market................................................ 4.46
High Quality Bond........................................... 2.90
Intermediate Government Bond................................ 14.77
Core Bond................................................... 3.02
Balanced.................................................... 21.09
Value & Income.............................................. 11.40
Growth & Income............................................. 11.89
Equity Growth............................................... 8.06
Special Equity.............................................. 10.35
Aggressive Equity........................................... 15.39
High Yield Bond............................................. 0.97
International Equity........................................ 5.04
</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 accompany 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)
(UNAUDITED)
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 $959,947 and $3,162,930,
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.
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
18
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. GROUP PLAN ASSUMPTIONS (CONTINUED)
approvals and authorizations. The assumption reinsurance of any Group Plan to
TFLIC will result in the transfer of the applicable assets out of a
corresponding MONY separate account and into DIVF. There were no assets
transferred to TFLIC pursuant to this assumption reinsurance agreement for the
six months ended June 30, 2006 or for the year ended December 31, 2005.
The amounts related to assumptions, if any, would be reflected in the net
proceeds from units sold in the Statements of Changes in Net Assets.
6. PORTFOLIO INVESTMENTS
Calvert invests in the Calvert Social Balanced Portfolio. At June 30, 2006, it
holds 20,648,423 shares with a market value of $40,243,777.
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 expects the risk of loss to be
remote.
19
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the period/year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
----------------------------
NET NET REALIZED TOTAL INCOME
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM UNIT VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE PERIOD/YEAR ENDED PERIOD/YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS PERIOD/YEAR
- ------------------------- ------------ ---------- -------------- ------------- -----------
MONEY MARKET
06/30/2006(1)................ $19.29 $0.33 $ -- $ 0.33 $19.62
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
06/30/2006(1)................ 14.49 0.20 (0.10) 0.10 14.59
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
06/30/2006(1)................ 20.08 0.34 (0.51) (0.17) 19.91
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
06/30/2006(1)................ 30.76 0.50 (0.75) (0.25) 30.51
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
06/30/2006(1)................ 37.73 0.28 0.16 0.44 38.17
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
</Table>
20
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------------------------
EXPENSES,
EXPENSES, INCLUDING EXPENSES NET NET INVESTMENT
NET ASSETS, INCLUDING OF THE PORTFOLIO INVESTMENT INCOME (LOSS)
END OF TOTAL EXPENSES OF (NET OF INCOME (NET OF PORTFOLIO
PERIOD/YEAR RETURN THE PORTFOLIO REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER(B)
------------ ------ ------------- ------------------ ---------- ------------------ -----------
$ 39,806,542 1.71% 1.37%* 1.37%* 3.36%* 3.36%* N/A
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
23,774,517 0.69 1.48* 1.48* 2.82* 2.82* 25%
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
24,310,038 (0.85) 1.50* 1.50(d)* 3.38* 3.38* 301
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
61,686,143 (0.81) 1.48* 1.48* 3.25* 3.25* 269(e)
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
79,634,848 1.17 1.67* 1.60(d)* 1.40* 1.47* 105(e)
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
</Table>
21
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS (CONTINUED)
For an accumulation unit outstanding throughout the period/year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
----------------------------
NET NET REALIZED TOTAL INCOME
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM UNIT VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE PERIOD/YEAR ENDED PERIOD/YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS PERIOD/YEAR
- ------------------------- ------------ ---------- -------------- ------------- -----------
VALUE & INCOME
06/30/2006(1)................ $53.20 $0.07 $ 2.67 $ 2.74 $55.94
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
06/30/2006(1)................ 25.61 (0.01) 0.18 0.17 25.78
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
EQUITY GROWTH
06/30/2006(1)................ 49.51 (0.19) (1.56) (1.75) 47.76
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
06/30/2006(1)................ 35.46 (0.17) 1.27 1.10 36.56
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
</Table>
22
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------------------------
EXPENSES,
EXPENSES, INCLUDING EXPENSES NET NET INVESTMENT
NET ASSETS, INCLUDING OF THE PORTFOLIO INVESTMENT INCOME (LOSS)
END OF TOTAL EXPENSES OF (NET OF INCOME (NET OF PORTFOLIO
PERIOD/YEAR RETURN THE PORTFOLIO REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER(B)
------------ ------ ------------- ------------------ ---------- ------------------ -----------
$353,578,851 5.15% 1.58%* 1.58%* 0.27%* 0.27%* 14%
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
133,655,656 0.66 1.73* 1.73(d)* (0.06)* (0.06)* 38
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
197,575,117 (3.53) 1.74* 1.74* (0.77)* (0.77)* 39
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
127,839,208 3.10 1.95* 1.95(d)* (0.88)* (0.88)* 49
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
</Table>
23
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS (CONTINUED)
For an accumulation unit outstanding throughout the period/year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
----------------------------
NET NET REALIZED TOTAL INCOME
UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM UNIT VALUE,
BEGINNING OF INCOME GAINS (LOSSES) INVESTMENT END OF
FOR THE PERIOD/YEAR ENDED PERIOD/YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS PERIOD/YEAR
- ------------------------- ------------ ---------- -------------- ------------- -----------
AGGRESSIVE EQUITY
06/30/2006(1)............. $15.52 $(0.11) $ 0.04 $(0.07) $15.45
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
06/30/2006(1)............. 16.95 0.58 0.09 0.67 17.62
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
06/30/2006(1)............. 21.15 0.17 1.77 1.94 23.09
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
06/30/2006(1)............. 29.13 (0.16) 0.09 (0.07) 29.06
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>
- ---------------
(1) Unaudited.
(a) Calculated based upon average units outstanding.
(b) Portfolio turnover of the Portfolio or Calvert.
(c) Amount rounds to less than one penny per share.
(d) 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.
* Annualized.
24
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------
EXPENSES,
EXPENSES, INCLUDING EXPENSES NET NET INVESTMENT
NET ASSETS, INCLUDING OF THE PORTFOLIO INVESTMENT INCOME (LOSS)
END OF TOTAL EXPENSES OF (NET OF INCOME (NET OF PORTFOLIO
PERIOD/YEAR RETURN THE PORTFOLIO REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER(B)
----------- ------ ------------- ------------------ ---------- --------------- -----------
$55,873,014 (0.45)% 1.91%* 1.90%(d)* (1.31)%* (1.30)%* 71%
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
4,255,706 3.95 1.69* 1.69* 6.64* 6.64* 46
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
90,957,534 9.17 1.95* 1.95* 1.51* 1.51* 44
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
40,207,542 (0.24) 1.10(f)* 1.10(f)* (1.10)* (1.10)* 2
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>
25
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
AN EXPLANATION OF FUND EXPENSES
(UNAUDITED)
As a unitholder in an open-end management investment company (a "Fund") invested
in underlying subaccounts of the Diversified Investors Variable Funds ("DIVF"),
a unit investment trust, you will bear the ongoing costs of managing the
corresponding subaccounts in which your Fund invests. You will also bear the
cost of operating the Fund.
The first line of each table shown below, based on an investment of $1,000, will
show you how much of your investment (per $1,000) went to the ongoing costs of
both your Fund and its investments in DIVF. The figures are based on the actual
total return and the actual expenses incurred for the period January 1,
2006 -- June 30, 2006. In order to approximate how much you paid in expenses
during the six months, divide your balance by 1,000, and multiply the result by
the dollar amount shown under the heading "Expenses Paid During the Period".
The second line in each table shown below, also based on an investment of
$1,000, is based on the actual expense ratio of your Fund, but assumes a total
annual return rate of 5% before expenses. Since the 5% is hypothetical, the
ending account values and the expenses paid for the period January 1,
2006 -- June 30, 2006 will not be the actual values per $1,000 of your
investment. This information is presented so you may compare the cost of owning
a Diversified Investors Strategic Variable Fund against the cost of owning other
funds. Other funds should provide this information based on a hypothetical
annual return of 5% before expenses in their most recent report in order for you
to make a fair comparison.
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
SHORT HORIZON January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,002.00 $1.00 0.20%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,023.93 $1.01 0.20%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
INTERMEDIATE HORIZON January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,010.60 $1.00 0.20%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,023.93 $1.01 0.20%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
-------------------------------------------------------------------------
Expenses Paid
Beginning Account Ending Account During the Period Annualized
Value Value January 1, 2006 -- Expense
INTERMEDIATE LONG HORIZON January 1, 2006 June 30, 2006 June 30, 2006(1)(2) Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,014.20 $1.00 0.20%
- ---------------------------------------------------------------------------------------------------------------
Hypothetical $1,000 $1,023.93 $1.01 0.20%
(5% annual return before expenses)
- ---------------------------------------------------------------------------------------------------------------
</Table>
(1) These figures exclude the fees and expenses of the underlying investments in
DIVF.
(2) Expenses are equal to each Fund's annualized expense ratio multiplied by the
average account value over the period, divided by 365, multiplied by 182 (to
reflect the one-half year period).
26
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
ASSETS:
Investments in affiliates, at cost....................... $ 9,704,479 $24,848,942 $38,767,384
=========== =========== ===========
Investments in affiliates, at value (Notes 1 and 2)...... $10,505,009 $28,921,199 $45,206,901
Receivable for units sold................................ 13,295 18,201 27,352
----------- ----------- -----------
Total assets............................................. 10,518,304 28,939,400 45,234,253
----------- ----------- -----------
LIABILITIES:
Payable for securities purchased......................... 13,295 18,201 19,003
Payable for units redeemed............................... -- -- 8,349
Accrued investment advisory fees......................... 1,723 4,726 7,338
----------- ----------- -----------
Total liabilities........................................ 15,018 22,927 34,690
----------- ----------- -----------
NET ASSETS............................................... $10,503,286 $28,916,473 $45,199,563
=========== =========== ===========
ACCUMULATION UNITS....................................... 702,884 1,775,892 2,642,119
=========== =========== ===========
UNIT VALUE............................................... $ 14.94 $ 16.28 $ 17.11
=========== =========== ===========
NET ASSETS CONSIST OF:
Cost of accumulation units............................... $ 8,585,335 $22,672,441 $36,457,683
Undistributed (accumulated) net realized gains
(losses)............................................... 1,229,136 2,511,751 2,758,543
Undistributed (accumulated) net investment income
(loss)................................................. (111,715) (339,976) (456,180)
Net unrealized appreciation (depreciation) on
investments............................................ 800,530 4,072,257 6,439,517
----------- ----------- -----------
NET ASSETS............................................... $10,503,286 $28,916,473 $45,199,563
=========== =========== ===========
</Table>
See notes to financial statements.
27
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
INVESTMENT ADVISORY FEES (NOTE 3)........................ $ (10,872) $ (29,044) $ (45,503)
--------- --------- ---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS IN
AFFILIATES (NOTE 2):
Net realized gains (losses) on investments in
affiliates............................................. 410,413 530,137 971,925
Change in net unrealized appreciation (depreciation) on
investments in affiliates.............................. (368,889) (186,141) (270,484)
--------- --------- ---------
Net realized and unrealized gains (losses) on investments
in affiliates.......................................... 41,524 343,996 701,441
--------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $ 30,652 $ 314,952 $ 655,938
========= ========= =========
</Table>
See notes to financial statements.
28
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHORT INTERMEDIATE INTERMEDIATE
HORIZON HORIZON LONG HORIZON
STRATEGIC STRATEGIC STRATEGIC
VARIABLE FUND VARIABLE FUND VARIABLE FUND
------------- ------------- -------------
FROM OPERATIONS:
Investment advisory fees.............................. $ (10,872) $ (29,044) $ (45,503)
Net realized gains (losses) on investments in
affiliates.......................................... 410,413 530,137 971,925
Change in net unrealized appreciation (depreciation)
on investments in affiliates........................ (368,889) (186,141) (270,484)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.......................................... 30,652 314,952 655,938
----------- ----------- -----------
FROM UNIT TRANSACTIONS:
Units sold............................................ 1,773,611 3,812,716 4,078,051
Units redeemed........................................ (2,875,049) (4,492,518) (4,975,606)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
unit transactions................................... (1,101,438) (679,802) (897,555)
----------- ----------- -----------
Total increase (decrease) in net assets............... (1,070,786) (364,850) (241,617)
NET ASSETS:
Beginning of period................................... 11,574,072 29,281,323 45,441,180
----------- ----------- -----------
End of period......................................... $10,503,286 $28,916,473 $45,199,563
=========== =========== ===========
Units outstanding beginning of period................. 776,216 1,817,622 2,694,280
Units sold............................................ 118,490 232,153 235,957
Units redeemed........................................ (191,822) (273,883) (288,118)
----------- ----------- -----------
Units outstanding end of period....................... 702,884 1,775,892 2,642,119
=========== =========== ===========
</Table>
See notes to financial statements.
29
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.
30
SHORT HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
185,373 Diversified Investors Variable Funds -- Core Bond........... $ 5,655,701
6,693 Diversified Investors Variable Funds -- Equity Growth....... 319,627
5,571 Diversified Investors Variable Funds -- Growth & Income..... 143,624
190,313 Diversified Investors Variable Funds -- High Quality Bond... 2,776,211
53,176 Diversified Investors Variable Funds -- High Yield Bond..... 937,034
6,493 Diversified Investors Variable Funds -- International
Equity.................................................... 149,931
6,080 Diversified Investors Variable Funds -- Money Market........ 119,280
2,117 Diversified Investors Variable Funds -- Special Equity...... 77,398
5,831 Diversified Investors Variable Funds -- Value & Income...... 326,203
-----------
Total Investments -- 100.0% (Cost $9,704,479)............... 10,505,009
Liabilities less other assets -- (0.0%)..................... (1,723)
-----------
NET ASSETS -- 100.0%........................................ $10,503,286
===========
The aggregate cost of investments for federal income tax purposes at June 30, 2006
is $9,704,479.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 800,530
===========
</Table>
See notes to financial statements.
31
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
282,165 Diversified Investors Variable Funds -- Core Bond........... $ 8,608,804
93,417 Diversified Investors Variable Funds -- Equity Growth....... 4,461,317
77,758 Diversified Investors Variable Funds -- Growth & Income..... 2,004,497
294,952 Diversified Investors Variable Funds -- High Quality Bond... 4,302,648
80,943 Diversified Investors Variable Funds -- High Yield Bond..... 1,426,333
90,622 Diversified Investors Variable Funds -- International
Equity.................................................... 2,092,478
19,996 Diversified Investors Variable Funds -- Money Market........ 392,316
29,554 Diversified Investors Variable Funds -- Special Equity...... 1,080,391
81,377 Diversified Investors Variable Funds -- Value & Income...... 4,552,415
-----------
Total Investments -- 100.0% (Cost $24,848,942).............. 28,921,199
Liabilities less other assets -- (0.0%)..................... (4,726)
-----------
NET ASSETS -- 100.0%........................................ $28,916,473
===========
The aggregate cost of investments for federal income tax purposes at June 30, 2006
is $24,848,942.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 4,072,257
===========
</Table>
See notes to financial statements.
32
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
- ------ -----------
INVESTMENTS
258,308 Diversified Investors Variable Funds -- Core Bond........... $ 7,880,924
205,258 Diversified Investors Variable Funds -- Equity Growth....... 9,802,447
170,848 Diversified Investors Variable Funds -- Growth & Income..... 4,404,244
270,014 Diversified Investors Variable Funds -- High Quality Bond... 3,938,850
74,100 Diversified Investors Variable Funds -- High Yield Bond..... 1,305,754
199,139 Diversified Investors Variable Funds -- International
Equity.................................................... 4,598,161
45,865 Diversified Investors Variable Funds -- Money Market........ 899,847
64,933 Diversified Investors Variable Funds -- Special Equity...... 2,373,757
178,808 Diversified Investors Variable Funds -- Value & Income...... 10,002,917
-----------
Total Investments -- 100.0% (Cost $38,767,384).............. 45,206,901
Liabilities less other assets -- (0.0%)..................... (7,338)
-----------
NET ASSETS -- 100.0%........................................ $45,199,563
===========
The aggregate cost of investments for federal income tax purposes at June 30, 2006
is $38,767,384.
The following amount is based on cost for federal income tax purposes:
Net unrealized appreciation................................. $ 6,439,517
===========
</Table>
See notes to financial statements.
33
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
PORTFOLIO COMPOSITION
JUNE 30, 2006
(UNAUDITED)
The following charts summarize the portfolio composition of each Fund by asset
type.
<Table>
SHORT HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 1.1%
Fixed Income Funds.......................................... 89.2
Domestic Equity Funds....................................... 8.3
International Equity Funds.................................. 1.4
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 1.4%
Fixed Income Funds.......................................... 49.6
Domestic Equity Funds....................................... 41.8
International Equity Funds.................................. 7.2
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND
Money Market Funds.......................................... 2.0%
Fixed Income Funds.......................................... 29.0
Domestic Equity Funds....................................... 58.8
International Equity Funds.................................. 10.2
Liabilities less other assets............................... (0.0)*
-----
100.0%
=====
</Table>
- ---------------
* Amount rounds to less than 0.05%.
See notes to financial statements.
34
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
The Diversified Investors Strategic Variable Funds (the "Separate Account"), a
separate account of Transamerica Financial Life Insurance Company ("TFLIC"), is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a management investment company. The Separate Account is composed of
three different subaccounts that are, in effect, separate investment funds:
Short Horizon Strategic Variable Fund ("Short Horizon"), Intermediate Horizon
Strategic Variable Fund ( "Intermediate 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 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 Separate Account 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)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES
The Separate Account has entered into an Investment Advisory Agreement with
Diversified Investment Advisors, Inc. (the "Advisor"), an indirect, wholly-owned
subsidiary of AEGON under which the Advisor provides general investment advice
to each Subaccount. For providing these services and facilities and for bearing
the related expenses, the Advisor receives a monthly fee from each Subaccount at
an annual rate equal to 0.20% of the average daily net assets of each
Subaccount.
The Advisor is also advisor to the DIVF's. In addition, TFLIC deducts a
mortality and expense risk charge at an annual rate equivalent to 1.10% of the
average daily net assets from the DIVF's. TFLIC reserves the right to charge
maximum fees of 1.25% upon notice.
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
period ended June 30, 2006 was as follows:
<Table>
<Caption>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
Short Horizon............................................... $ 5,144,911 $ 6,257,393
Intermediate Horizon........................................ 10,496,607 11,205,516
Intermediate Long Horizon................................... 11,918,308 12,861,443
</Table>
5. LEGAL AND REGULATORY MATTERS
Diversified Investors Securities Corp. ("DISC") is the distributor for each of
the Subaccounts and a subsidiary of the Series Portfolio's investment advisor,
Diversified Investment Advisors, Inc. ("DIA").
On February 18, 2005, DISC was notified by NASD Staff that it had made a
preliminary determination to recommend disciplinary action against DISC
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 Fund 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)
(UNAUDITED)
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
contractholders holding a significant percentage of units outstanding.
Investment activities of these contractholders 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 Participants, then click on Fund Information, choose
Investment Funds, click on a Fund, then click on the Fund Information tab) 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 Portfolios'
filing for the twelve months ended June 30, 2006, is available without charge,
upon request.
8. QUARTERLY PORTFOLIOS
The Subaccounts will file their portfolios of investments for the first and
third quarters (March 31 and September 30, respectively) with the SEC by May 30
and November 29, respectively, each year on Form N-Q. The Subaccounts' Form N-Q
is available on the SEC's website at www.sec.gov. The Subaccounts' Form N-Q may
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
For information on the operation of the SEC's Public Reference Room, call
1-800-SEC-0330. You may also obtain a copy of Form N-Q without charge, upon
request, by calling 1-800-755-5803. Form N-Q for the corresponding Portfolios is
also available without charge on the SEC website, at the SEC's Public Reference
Room, or by calling 1-800-755-5803.
37
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FINANCIAL HIGHLIGHTS
For an accumulation unit outstanding throughout the period/year:
<Table>
<Caption>
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
------------------------
NET
REALIZED
AND TOTAL
UNIT NET UNREALIZED INCOME UNIT NET
FOR THE VALUE, INVESTMENT GAINS (LOSS) FROM VALUE, ASSETS,
PERIOD/YEAR BEGINNING OF INCOME (LOSSES) ON INVESTMENT END OF TOTAL END OF
ENDED PERIOD/YEAR (LOSS)(A) INVESTMENTS OPERATIONS PERIOD/YEAR RETURN PERIOD/YEAR
----------- ------------ ---------- ----------- ----------- ----------- ------ -----------
SHORT HORIZON STRATEGIC VARIABLE FUND
06/30/2006(1) $14.91 $(0.01) $ 0.04 $ 0.03 $14.94 0.20% $10,503,286
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 STRATEGIC VARIABLE FUND
06/30/2006(1) 16.11 (0.02) 0.19 0.17 16.28 1.06 28,916,473
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 STRATEGIC VARIABLE FUND
06/30/2006(1) 16.87 (0.02) 0.26 0.24 17.11 1.42 45,199,563
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
FOR THE INVESTMENT PORTFOLIO
PERIOD/YEAR INCOME TURNOVER
ENDED EXPENSES (LOSS) RATE
----------- -------- ---------- ---------
SHORT HORIZON STRATEG
06/30/2006(1) 0.20%* (0.20)%* 47%
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
06/30/2006(1) 0.20* (0.20)* 36
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 HOR
06/30/2006(1) 0.20* (0.20)* 26
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>
- ---------------
(1) Unaudited.
(a) Calculated based upon average units outstanding.
* Annualized.
38
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. INVESTMENTS IN AFFILIATES
The market value of investments in affiliates (as defined in the 1940 Act,
"Affiliated Companies" are those in which the Separate Account is under common
control with an affiliated entity) at June 30, 2006 totaled $10,505,009,
$28,921,199 and $45,206,901 for 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............. 204,779 4,220 23,626 185,373 $ 129,022 $ 581,439 $141,979
Diversified Investors Variable
Funds -- Equity Growth......... 8,396 156 1,859 6,693 7,933 72,311 20,120
Diversified Investors Variable
Funds -- Growth & Income....... 6,074 520 1,023 5,571 13,919 19,891 6,728
Diversified Investors Variable
Funds -- High Quality Bond..... 200,896 76,074 86,657 190,313 1,103,946 1,156,019 103,481
Diversified Investors Variable
Funds -- High Yield Bond....... 64,043 1,228 12,095 53,176 21,504 142,823 67,511
Diversified Investors Variable
Funds -- International
Equity......................... 9,375 152 3,034 6,493 3,583 39,695 29,665
Diversified Investors Variable
Funds -- Money Market.......... 1,639 197,670 193,229 6,080 3,839,512 3,751,985 987
Diversified Investors Variable
Funds -- Special Equity........ 2,114 447 444 2,117 17,559 10,310 6,372
Diversified Investors Variable
Funds -- Value & Income........ 7,590 141 1,900 5,831 7,933 72,507 33,570
----------- ----------- --------
$ 5,144,911 $ 5,846,980 $410,413
=========== =========== ========
INTERMEDIATE HORIZON
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond............. 283,617 13,510 14,962 282,165 $ 413,622 $ 383,101 $ 73,978
Diversified Investors Variable
Funds -- Equity Growth......... 97,595 4,530 8,708 93,417 228,380 528,540 (93,657)
Diversified Investors Variable
Funds -- Growth & Income....... 72,979 8,376 3,597 77,758 223,269 134,677 (41,652)
Diversified Investors Variable
Funds -- High Quality Bond..... 278,399 134,219 117,666 294,952 1,947,721 1,505,955 201,873
Diversified Investors Variable
Funds -- High Yield Bond....... 86,378 3,948 9,383 80,943 68,938 114,481 49,548
Diversified Investors Variable
Funds -- International
Equity......................... 110,088 4,475 23,941 90,622 103,961 508,983 46,675
Diversified Investors Variable
Funds -- Money Market.......... 12,676 360,779 353,459 19,996 7,006,865 6,860,092 3,836
Diversified Investors Variable
Funds -- Special Equity........ 25,142 7,038 2,626 29,554 275,471 50,940 47,111
Diversified Investors Variable
Funds -- Value & Income........ 92,051 4,073 14,747 81,377 228,380 588,610 242,425
----------- ----------- --------
$10,496,607 $10,675,379 $530,137
=========== =========== ========
</Table>
39
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. INVESTMENTS IN AFFILIATES (CONTINUED)
Affiliates and the gain/(loss) from sales of affiliates are as follows:
<Table>
<Caption>
BEGINNING UNITS UNITS ENDING PURCHASE GAIN/(LOSS)
UNITS PURCHASED SOLD UNITS COST SALE COST ON SALES
--------- --------- ------- ------- ----------- ----------- -----------
INTERMEDIATE LONG HORIZON
INVESTMENTS:
Diversified Investors Variable
Funds -- Core Bond............. 265,730 7,455 14,877 258,308 $ 228,574 $ 377,423 $ 76,566
Diversified Investors Variable
Funds -- Equity Growth......... 208,165 5,874 8,781 205,258 295,862 482,535 (41,313)
Diversified Investors Variable
Funds -- Growth & Income....... 155,172 18,438 2,762 170,848 491,964 84,956 (13,536)
Diversified Investors Variable
Funds -- High Quality Bond..... 272,762 118,316 121,064 270,014 1,716,432 1,601,346 155,676
Diversified Investors Variable
Funds -- High Yield Bond....... 80,130 2,195 8,225 74,100 38,096 96,110 48,057
Diversified Investors Variable
Funds -- International
Equity......................... 231,422 5,947 38,230 199,139 135,063 539,739 350,478
Diversified Investors Variable
Funds -- Money Market.......... 28,795 417,254 400,184 45,865 8,108,176 7,766,938 4,469
Diversified Investors Variable
Funds -- Special Equity........ 52,317 15,537 2,921 64,933 608,279 58,986 50,066
Diversified Investors Variable
Funds -- Value & Income........ 195,045 5,330 21,567 178,808 295,862 881,485 341,462
----------- ----------- --------
$11,918,308 $11,889,518 $971,925
=========== =========== ========
</Table>
40
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS
JUNE 30, 2006
(UNAUDITED)
Diversified Investment Advisors, Inc. ("Diversified") manages the assets of each
Subaccount pursuant to an Investment Advisory Agreement with Transamerica
Financial Life Insurance Company ("TFLIC") with respect to such Subaccount.
In approving the continuation of each Investment Advisory Agreement relating to
each Subaccount, the Managing Board of the Separate Account, including the
independent Managing Board members, reviewed and considered the advisory fees
and total expenses of the Separate Accounts. In this regard, the Managing Board
members had reviewed, among other things, comparative fee information with
respect to comparable funds. The Managing Board members reviewed the advisory
fees and expense ratios, before and after the advisory and other fee waivers,
and compared them to investment advisory fees paid by and expense ratios of
other investment companies with similar investment objectives. The Managing
Board members considered that Diversified did not have any other non-mutual fund
clients to whom advisory services were provided. The Managing Board members also
reviewed and considered information relating to the costs of the services
provided to the Subaccounts and the resulting profitability to Diversified of
the relationship with the Subaccounts.
The Managing Board members reviewed and considered information relating to the
investment performance of each of the Subaccounts, which was considered in
connection with each Subaccount's total expenses, contractual management fees,
and Diversified's profitability. In reviewing Subaccount performance, the
Managing Board members considered gross performance results relative to
benchmark for the past one- and three-year periods ended December 31, 2005, as
well as information regarding net performance in comparison to funds with
similar strategies over the same time periods.
The Managing Board members also reviewed extensive information provided by the
subadvisers to the underlying Portfolios of Diversified Investors Portfolios in
which the Subaccounts indirect invest, primarily elicited through questionnaires
regarding, among other things: the nature and quality of services provided;
legal, regulatory and compliance matters; actual fees paid by Diversified to
each subadviser, comparable fees paid to each subadviser and subadviser
profitability data; and other practices and developments. The Managing Board
members also noted instances where information was not disclosed by certain
subadvisers, considered the reasons such information was withheld and weighed
the relative importance of such information among the other data available to
the Managing Board. In light of Diversified's expertise and the extensive
monitoring provided by Diversified, as well as the arms'-length nature of the
relationship between Diversified and the subadvisers, the Trustees placed
considerable value on Diversified's views regarding the subadvisers.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the independent Managing Board members) and after meetings
conducted by the independent Managing Board members without management being
present, the Managing Board concluded that each Investment Advisory Agreement
was in the best interests of the applicable Subaccount and its contractholders.
The Managing Board based its conclusions, in part, on its observations regarding
the performance of and the management fees and total expenses paid by each
Subaccount, some of which observations are summarized below. In reaching this
conclusion, the Managing Board noted that this continuation reaffirmed the
choice of each contractholder in each Subaccount, who had decided to invest in a
Subaccount overseen by Diversified.
In the case of each of Short Horizon Strategic Variable Fund, Intermediate
Horizon Strategic Variable Fund and Intermediate Long Horizon Strategic Variable
Fund, the Managing Board observed that performance (prior to deducting fees and
expenses) was above that of the applicable benchmark for the one- and three-year
periods and the quarter ended December 31, 2005, except that the performance of
Intermediate Long Horizon Strategic Variable Fund was slightly lower than that
of the applicable benchmark for the five-year period then
41
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
ended. The Board also found that, for each of the Strategic Variable Funds, both
contractual management fees and total expenses were below the median for the
applicable peer group.
These conclusions were based upon the Managing Board's determination for each
Subaccount that the Subaccount's performance compared sufficiently favorably
with other funds in the individual Subaccount's peer group and/or benchmark over
recent one- and three-year periods, with exceptions discussed above; that
management fees and total expenses after giving effect to waivers and
reimbursements compared sufficiently favorably to the peer group, with
exceptions discussed above; and that, in reviewing Diversified's profitability
with respect to its services for the fund, that profitability (together with
additional benefits received by Diversified and its affiliated, Diversified
Investors Securities Corp.) generally appeared to be reasonable in view of the
nature and quality of the services provided by Diversified. In addition to the
foregoing, the Managing Board members were satisfied with the overall quality of
the services provided by Diversified, including providing compliance services to
the Subaccounts.
42
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43
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW
SIX MONTHS ENDED JUNE 30, 2006
(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 RETURN PROVIDED FOR A PARTICULAR ISSUER HELD BY A SERIES
REPRESENTS THE RETURN FROM THE SECURITY FOR THE ACTUAL PERIOD HELD BY THE
SERIES, WHICH MAY BE SHORTER THAN THE 6-MONTH REPORTING PERIOD.
THE ECONOMY AND CAPITAL MARKETS OVERVIEW
The first two quarters of 2006 were near opposites of each other in many ways.
The first three months of the year were characterized by a robust and steadily
rising stock market. Strong economic news buoyed stock returns, but negatively
impacted bond returns. In contrast, the second three months of the year started
as a continuation of the first quarter, but concerns about inflation and
continued interest rate increases led to considerable market volatility
beginning in mid-May; as a result, most major stock indices suffered significant
declines.
ECONOMIC REVIEW
Throughout the period, the U.S. economy continued to grow at a healthy pace and
unemployment remained low, essentially at "full employment" levels. Oil prices,
which surged 9.2% during the first quarter to near-record highs, retreated
somewhat through the second quarter; however it appeared that higher energy
prices began working their way into other segments of the economy. Core
inflation (excluding food and energy), which had been hovering at a 2% annual
rate, showed a sharp rise during the second quarter. Throughout the period,
increases in consumer confidence suggested that Americans were not overly
anxious about the state of the economy.
The Federal Reserve continued its campaign to raise interest rates against the
threat of looming inflation. Under the new leadership of Ben Bernanke, the Fed
increased its federal funds rate a total of four times over the first half of
2006, in 0.25% increments, to 5.25% by June 30. The federal funds rate is the
rate commercial banks charge each other, and is the basis upon which other rates
are set. While these interest rate increases served as a mere backdrop during
the first quarter, with most investors taking the increases in stride, during
the second quarter, concerns around interest rates were the central topic of
discussion. Specifically, May's market volatility was sparked by Bernanke's
comments, interpreted by investors to mean interest rate increases were likely
to continue for some time.
Consistent with higher interest rates, the "housing bubble" showed further signs
of deflating, with a decrease in both new home sales and mortgage applications.
This was no doubt due in large part to increases in mortgage rates -- the
30-year rate rose to 6.71% during the period, the highest it's been in four
years.
Corporate earnings have remained strong, despite higher energy and borrowing
costs, with many wondering how long the positive trend can continue.
STOCK MARKET REVIEW
Throughout most of the period, stocks continued to climb, and the Dow Jones
Industrial Average reached 11,709.09 in May, challenging its all-time high set
six years ago. The sharp decline that began in mid-May on interest rate
uncertainty was widespread. Almost all market segments finished lower for the
second quarter, though some indices managed to post positive returns for the
six-month period ended June 30. The
44
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
Standard & Poor's 500 Index, for example, posted a 2.7% gain for the period,
even though it declined 1.4% for the second quarter.
While stock investors seemed unable to take on enough risk during the first
quarter, concerns about inflation and rising interest rates caused a flight from
riskier asset classes during the second quarter. As a result, stocks that had
posted some of the highest returns in recent periods -- including emerging
markets, energy, and small-cap -- suffered the steepest declines during the last
weeks of the period. The Nasdaq Composite Index, heavily weighted in technology
stocks, declined -7.2% for the second quarter, dragging its six-month return
ended June 30 into negative territory (-1.5%).
Overall, value outperformed growth for the six month period across all domestic
market segments, and small-cap stocks outperformed large-cap stocks. As measured
by the Russell 2000 Value Index, small value returned 10.4% for the six months
ended June 30, the highest return for the period, while large growth, as
measured by the Russell 1000 Growth Index had the lowest, and only negative,
return (-0.9%).
Within the S&P 500 Stock Index, the telecommunications (+13.8%) and energy
(+13.7%) sectors finished the period higher, while the healthcare (-3.8%) and
information technology (-5.7%) sectors posted the weakest returns for the
period.
Stock prices outside the U.S. outpaced their domestic counterparts, with the
MSCI World ex-US Index returning 10.40% for the six months ended June 30. As one
of the riskiest components of the international segment, emerging markets were
particularly hard hit during the second quarter. The impact of declines in
foreign markets was mitigated for domestic investors as a weaker U.S. dollar
enhanced returns.
BOND MARKET REVIEW
Rising interest rates generally result in difficult periods for bonds, since
bond prices fall when rates rise. With the Federal Reserve having increased
rates four times during the period -- bringing to 17 the total number of
consecutive increases since the rate tightening campaign began -- most of the
bond market posted negative returns.
The yield on the 10-year Treasury bond rose to 5.145% by June 30, up
considerably from the beginning of the year. In fact, all along the yield curve,
yields moved higher, yet the flatness of the yield curve meant that long-term
bond investors were not being rewarded adequately for the greater interest-rate
and inflation risks they were assuming. Throughout the period, corporate
issuance of new bonds was high as companies sought to take action before rates
get too much higher and to minimize their future coupon payments to investors.
As a measure of the overall bond market, the Lehman Brothers Aggregate Bond
Index return was down -0.7% for the six month period ended June 30. Short-term
and high-yield bonds were among the best performing bond sectors, posting
positive returns for the period. High-yield bonds were helped by Ford and
General Motors issues that were coming off of last year's lows.
MONEY MARKET SERIES
The Money Market Series returned 2.24% for the first six months of 2006, versus
a 2.19% return for the Citigroup Treasury Bill 3-Month Index.
The portfolio management team anticipated Federal Reserve rate increases and
continued to focus on the short end of the yield curve to avoid losses and take
advantage of rises in short-term rates, which was the biggest contributor to
performance over the period. In addition, the portfolio's shorter duration
relative to the benchmark helped performance as rates rose.
45
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
By keeping the average maturity of the Series shorter than that of the
benchmark, the sub-advisor was able to take advantage of reinvesting at higher
rates. The Series' significant allocation to asset-backed commercial paper also
helped performance, as this sector displayed strong returns during the period.
The Series continued to focus on high quality commercial paper from banks.
Because many banks have a continuous need to have access to financial markets,
bank paper is generally considered safer than equivalent industrial securities.
HIGH QUALITY BOND SERIES
The High Quality Bond Series returned 1.20% for the first six months of 2006,
outpacing the 0.89% median return for the Morningstar Short-term Bond Universe
and the 1.04% return of the Merrill Lynch 1-3 Year Treasury Index.
For the six months ended June 30, the income component of the portfolio provided
the largest source of excess return versus the benchmark. The sector
selection/quality component also contributed positively to return, while the
security spread and yield curve components had a slight negative impact on the
portfolio. The source of return is not surprising given that within the
short-term universe from which holdings are selected, the sub-advisor favored
non-U.S. Treasury securities that may generate greater income, although with
slightly higher risks. Because of the Series' focus on shorter maturities,
higher interest rates did not have a material impact on most of the portfolio,
with the exception of the Series' relatively smaller exposure to holdings with
slightly longer maturities (greater than 3 years). These securities were
negatively impacted by the sharp rise in interest rates during the period.
From an absolute return standpoint, for the six-month period ended June 30, the
asset-backed sector had the highest total returns followed by the agency,
corporate, collateralized mortgage-based security and residential mortgage
sectors.
INTERMEDIATE GOVERNMENT BOND SERIES
The Intermediate Government Bond Series fell -0.33% during the first six months
of 2006, underperforming both the Lehman Brothers Intermediate Government Bond
Index return of 0.01% and the 0.89% median return for the Morningstar Short-term
Bond Universe.
During the period, the Series underperformed the benchmark due to its yield
curve position and mortgage-backed security allocation. However, the
overweighted positions to asset-backed securities and commercialized
mortgage-backed securities positively contributed to performance. Additionally,
the Series' slightly longer duration detracted from performance as rates rose
during the period.
CORE BOND SERIES
The Core Bond Series fell -0.27% the first six months of 2006, outperforming the
Lehman Brothers Aggregate Bond Index of -0.72% as well as the Morningstar
Intermediate Bond Universe median return of -0.82%.
As interest rates rose for the first half of 2006, the Series benefited from
having a shorter duration than the benchmark. Additional contributors to
performance included corporate security selection; allocations to asset-backed
and commercial mortgage-backed securities; and a non-dollar bond allocation,
with currency exposure to the euro and yen. Positive performance during the
period was partially offset by underweighted positions to both the mortgage and
agency sectors.
46
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
TOTAL RETURN BOND SERIES
The Total Return Bond Series returned -0.63% for the first six months of 2006,
in line with the Lehman Brothers Aggregate Bond Index of -0.72% and the
Morningstar Intermediate Bond Universe median return of -0.82%.
The Series' longer duration relative to the Lehman Brothers Aggregate Bond Index
detracted from performance as interest rates rose. Additionally, the Series
suffered when the yield curve flattened and a modestly concentrated exposure to
longer duration securities declined in value. Corporate bond prices also fell;
however, the Series' underweight exposure benefited performance. Low volatility
conditions were favorable to the portfolio's overweight exposures to lower
quality issues and the mortgage-backed sector. The Series' TIPS (Treasury
Inflation Protected Securities) holdings also contributed positively to
performance, thanks to an outsized inflation adjustment to principle for the
period. Non-dollar bond exposure had little impact on returns. Emerging market
and high yield debt exposure added to returns as the yield differentials between
these securities and Treasuries remained relatively stable. Finally, an emphasis
on the automobile sector benefited the portfolio as General Motors bonds rose on
favorable restructuring news.
HIGH YIELD BOND SERIES
For the six months ended June 30, 2006, the High Yield Bond Series' return of
4.55% outperformed both the Merrill Lynch High Yield Master II Index of 3.07%
and the 2.30% median return for the Morningstar High Yield Bond Universe.
The Series benefited from having a shorter duration versus the benchmark as
rates increased during the period. From a sector allocation perspective, the
Series was helped by its overweighted position to B-rated bonds, which performed
better than BB-rated bonds. Lower rated debt outperformed the broader high yield
market in the first half of the year, so an overweight position in CCC-rated
debt relative to the benchmark was additive to return.
On an industry basis, the returns were enhanced through strong security
selection. The most notable contributions came from bonds in the gaming,
telecommunications, and building materials industries. Avoiding certain
automobile issues and energy bonds also helped.
BALANCED SERIES
The Balanced Series posted a 1.72% return for the six-month period ended June
30, outpacing the 60% S&P500/40% Lehman Brothers Aggregate Bond Index return of
1.35%. With regard to asset allocation, a primary performance driver, the Series
was slightly overweight to the relatively stronger equity portion over the six
months.
The equity portion of the Series is managed by Goldman Sachs Asset Management,
who employs a quantitative enhanced index strategy. The largest contributions to
return for the period have been from holdings in the materials and industrials
sectors. Within materials, Nucor (+55%), a manufacturer and seller of steel and
steel products, beat estimates on improved sales and an increased dividend,
while Southern Copper (+16%) advanced on merger talks in early May. Industrials
garnered returns from railroad holdings, particularly CSX (+39%), which
benefited from a corporate restructuring, higher than estimated earnings,
increased pricing and solid demand going forward; and Burlington Northern
(+13%), which saw increased demand that improved pricing power and caused
earnings to come in higher than analyst estimates. Also contributing positively
to performance were Boeing (+18%) as well as Emerson Electric (+13%).
47
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
The fixed-income portion of the Series is overseen by Western Asset Management.
The Series' longer duration relative to the Lehman Brothers Aggregate Bond Index
detracted from performance as interest rates rose. Additionally, the Series
suffered when the yield curve flattened and a modestly concentrated exposure to
longer duration securities declined in value. Corporate bond prices also fell;
however, the Series' underweight exposure to corporate bonds benefited
performance. Low volatility conditions were favorable to the portfolio's
overweight exposures to lower quality issues and the mortgage-backed sector. The
Series' TIPS (Treasury Inflation Protected Securities) holdings also contributed
positively to performance, thanks to an outsized inflation adjustment to
principle for the period. Non-dollar bond exposure had little impact on returns.
Emerging market and high yield debt exposure added to returns as the yield
differentials between these securities and treasuries remained relatively
stable. Finally, an emphasis on the automobile sector benefited the portfolio as
General Motors bonds rose on favorable restructuring news.
VALUE & INCOME SERIES
The Value & Income Series posted a 5.73% return for the first six months of
2006, outpacing the 4.80% return of the Morningstar Large Value Universe median,
but lagging the Russell 1000 Value Index return of 6.56%.
In the large value arena, the market favored telecommunications, energy,
consumer staples, and industrials, while financials, information technology,
healthcare and consumer discretionary languished. A portfolio overweight to the
underperforming information technology sector accounted for the majority of the
shortfall versus the Index, while other factors constituted large, albeit
offsetting, differentials.
The portfolio saw gains in the energy, industrial and telecommunications
sectors. Energy stocks rose on increased profits as a result of higher energy
prices. Specific holdings that helped the portfolio in this regard included
ConocoPhilips (+14%), Chevron (+11%), Exxon (+10%) and Occidental Petroleum
(+29%). Within industrials, Boeing, the world's second-largest maker of
commercial airliners, was up +17% as profits rose after a large jump in
deliveries and on news of new contracts with China, GE Commercial Aviation
Services and Pegasus. CSX, representing a key position in the portfolio, also
posted strong returns (+39%), as it benefited from a corporate restructuring and
positive sentiment. The company beat analyst earnings estimates and also
observed increased pricing in light of solid shipping demand. Cooper Industries,
an electrical products and tools company, posted a return of +28% for the
period. The stock faired well as reported revenues exceeded analyst estimates.
Among telecommunications companies, the stock of Qwest Communications returned
43% as profits increased on higher sales and lower costs. In addition, AT&T
posted a 17% return on strong earnings and progress in wireless, broadband as
well as business services units that demonstrated revenue and subscriber growth.
Portfolio holdings in the healthcare, financial and information technology
sectors detracted from performance during the period. Among healthcare, stocks
that disappointed included Boston Scientific (-19%), which acquired Guidant in
early 2006. Guidant's implantable heart device has been recalled and may open
Boston Scientific up to lawsuits. In addition, the firm saw decreased demand for
its drug coated stents on published reports that uncoated stents had fewer
complications. Watson Pharmaceuticals (-28%) saw a 35% drop in first-quarter
profit, hurt by declining prescriptions in its non-promoted brands. The
financial stock with the most impact was AIG, which fell -13% on the news of the
$1.6 billion settlement with the SEC over federal and state charges of fraud.
Decreased first quarter profits hurt the stock's performance. Within information
technology, Intel (-23%) fell on lower than expected revenues combined with
Dell's decision to end its exclusive use of Intel chips in its servers.
48
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
VALUE SERIES
The Diversified Value Series returned -0.55% for the six-month period ended June
30, lagging the Russell 1000 Value Index return of 6.56% and the Morningstar
Large Value Universe median return of 4.80%. Hotchkis and Wiley, the sub-advisor
for the Series, uses a disciplined focus on value, which results in the
portfolio manager seeking out undervalued, out-of-favor stocks while avoiding
more momentum oriented groups.
Relative underperformance was concentrated in the technology and consumer
discretionary sectors. In the technology sector, software developer CA, Inc.
declined on news of executive turnover. In the consumer discretionary sector,
homebuilders Pulte and Centex as well as the St. Joe Company (categorized as a
financial stock) were sources of negative performance. The Series' underweighted
position in energy also detracted from performance year-to-date. Strong relative
performance from railroad CSX, metals stocks Alcoa and Alcan, and financial
stock Mastercard helped offset the negative impact of technology and consumer
discretionary stocks.
GROWTH & INCOME SERIES
The Growth & Income Series returned 1.19% for the first six months of 2006,
trailing the S&P 500 Index return of 2.71% and the Morningstar Large Blend
Universe median return of 2.49%.
Holdings in the financial sector that were additive to returns included Goldman
Sachs (+18%) on news that profits were more than double their level in the same
period last year on higher investment banking fees and trading profits; and Bank
of America (+6%) was up on cost cutting activities, share buy back programs,
improved earnings and higher profits from credit card fees. Nucor, a
manufacturer and seller of steel and steel products within the industrial
sector, beat estimates on improved sales and an increased dividend, and was up
55%. The energy sector was also a positive contributor to return, in particular
Exxon (+10%), a significant position in the portfolio, which rose higher on the
general increase in energy prices and steady demand.
Losses were incurred from securities residing in the poor performing healthcare
and information technology sectors. Among healthcare stocks, Amgen (-17%)
lowered earnings expectations twice during the period and also incurred higher
than expected acquisition costs, which cut into profits. UnitedHealth Group
(-28%), fell on an option backdating scandal which may target the CEO, as well
as increased costs from previous acquisitions. Within information technology,
Qualcomm (-7%) moved lower on concerns over royalties and a suit against Nokia
for patent violations. The firm is also being investigated in South Korea for
antitrust violations. And, despite beating analyst estimates in April, Broadcom
(31%) traded down on news of improper options backdating.
EQUITY GROWTH SERIES
The Equity Growth Series fell -3.01% for the first six months of 2006, falling
short of the Russell 1000 Growth Index return of -0.93% and the -1.13% median
return of the Morningstar Large Growth Universe.
Holdings in the industrial, consumer discretionary and financial sectors were
the greatest contributors to performance. The largest contributors within the
industrial sector included Boeing (+18%) on new contracts; Burlington Northern
(+13%) on increased pricing; Fedex (+13%) due to an increase in ground
transportation market share; and Caterpillar (+30%) as a result of increased
international sales. Gambling stocks within the consumer discretionary sector
were also additive, in particular Las Vegas Sands (+56%), which won a highly
contested contract to build Singapore's first casino; and Wynn Resorts (+34%),
on Macau resorts in China, which have higher revenue per table than casinos in
Las Vegas.
49
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
Unfortunately, the portfolio's positions in healthcare and information
technology more than negated those gains. Healthcare detractors were Genentech
(-12%), which issued earnings guidance decreasing expectations; Amgen (-17%)
lowered earnings expectations twice during the period and also incurred higher
than expected acquisition costs, which cut into profits. With a relatively large
portfolio position, the largest detractor for the period was UnitedHealth Group
(-28%), which fell on an option backdating scandal that may target the CEO, as
well as increased costs from previous acquisitions. Information technology
stocks that hurt performance included Qualcomm (-7%) on concerns over royalties
and a suit against Nokia for patent violations; as well as Apple Computer
(-29%), which was sold from the portfolio after reporting disappointing first
quarter sales results.
MID-CAP VALUE SERIES
The Mid-Cap Value Series returned 6.89% for the first six months of 2006,
outpacing the 4.19% Russell Midcap Value Index return, but falling short of the
7.02% median return of the Morningstar Midcap Blend Universe.
Technology and industrials were the biggest contributors to performance. Within
technology, Amdocs (+24%), a software company, won a key contract with Rogers
Canada while Commscope (+40%) moved higher on guidance that second quarter sales
would be higher. The stock of USG Corporation (+30%), a manufacturer and
distributor of building materials within the industrial sector, moved higher on
stronger earnings forecasts.
Holdings within materials and consumer staples detracted from performance, as
both sectors within the portfolio lagged the benchmark component returns. Within
materials, Ball Corporation (-6%) fell on lower first quarter results while
Lubrizol (-7%), a specialty chemical company posted first quarter losses as
higher costs outweighed a 16% rise in revenue. Among consumer staples stocks,
Tyson Foods (-13%) the nation's largest chicken and beef producer, announced a
second quarter loss, having been impacted by fears surrounding the bird flu. An
underweight to the volatile and expensive real estate industry was also a slight
detractor over the six-month period.
AGGRESSIVE EQUITY SERIES
The 0.11% return of the Aggressive Equity Series during the first six months of
2006 outpaced both the Russell 1000 Growth Index return of -0.93% and the -1.13%
median return of the Morningstar Large Growth Universe.
For the year-to-date, sector selection was positive, as six of the eleven sector
positions within the portfolio outpaced their corresponding index sector
returns. Contributing the most to performance relative to the benchmark were
growth-oriented holdings in the technology, financial service and consumer
staple sectors. Among the stocks that added value were Akamai Technologies
(+82%), Archer-Daniels-Midland (+68%), Joy Global (+31%), Celgene (+37%), Las
Vegas Sands (+44%), Corning (+23%), and Chicago Mercantile Exchange Holdings
(+34%).
The primary detractors from performance were the healthcare and energy sectors
which represented a substantial percentage of the portfolio on a combined basis.
Stocks in these sectors that produced sub-par results for the reporting period
included: Silicon Laboratories (-42%), Cisco Systems (-10%), Marvell Technology
Group (-25%), eBay (-28%), Apple Computer (-21%), and Genzyme (-13%).
50
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
MID-CAP GROWTH SERIES
The Series' 0.91% return for the six-month period ended June 30 fell short of
both the 2.56% Russell Midcap Growth Index return and the 2.56% median return
for the Morningstar Mid Growth Universe.
The healthcare sector was the largest contributor to performance during the
period. Specifically, Celgene (+46%), a multinational integrated
biopharmaceutical company, was the best performing stock in the portfolio as an
increase in revenue caused earnings to surpass estimates. Hologic (+30%)
increased on news that the company was cleared to market its Discovery DXA
System approved for detecting cardiovascular disease. Hologic is a manufacturer
and distributor of diagnostic and medical imaging systems primarily serving the
healthcare needs of women.
Portfolio holdings within the information technology and energy sectors were the
biggest detractors from returns for the period. Within information technology,
two semiconductor companies were down significantly. Silicon Labs (-41%)
declined despite strong first quarter results due to challenges in the low-end
cell phone market for the emerging world, while Broadcom (-30%) fell on
macroeconomic concerns and worries over stock option backdating. Among energy
stocks, Southwestern Energy (-13%), the second largest holding in the Series,
fell due to profit-taking by investors.
SMALL-CAP VALUE SERIES
For the first six months of 2006, the Series posted a return of 5.09%, while the
Russell 2000 Value Index posted a 10.44% return and the median return of the
Morningstar Small Value Universe was 7.79%.
An overweight position to the high-performing energy sector and an underweight
position to the financial sector were additive to the portfolio for the period.
The biggest single stock contributor was Oceaneering (+84%), an advanced applied
technology company, which rose on news that it stands to benefit from favorable
sub-sea infrastructure, offshore construction and deepwater drilling trends.
Among financials, Jefferies Group (+33%), an investment bank, raised its
quarterly dividend by 67%.
Healthcare, materials and consumer discretionary sectors accounted for most of
the Series' underperformance. Disease management company Matria Healthcare
(-44%) fell as analysts downgraded the stock based on a lower earnings outlook.
Meritage Homes (-25%) also fell as a result of being downgraded. Series holdings
of Headwaters (-28%), a diversified company providing products, technologies and
services to the energy and construction materials industries, dropped as
analysts lowered their target price for the stock. Homebuilder stocks and
construction material companies did not fare well in the second quarter as
Federal Reserve interest rate policy concerns gripped the market.
SPECIAL EQUITY SERIES
The Series' 3.67% return for the first six months of 2006 fell short of the
8.22% Russell 2000 Index return as well as the Morningstar Small Growth Universe
median return of 4.91%.
The utilities sector contributed slightly to the Series' performance. Two stocks
that were particularly additive included Avista (+31%), an energy company, the
quarterly profits of which tripled from the same period last year, and Oneok
(+30%), a distributor of natural gas, which increased on higher quarterly
results.
The healthcare and consumer discretionary sectors were the biggest detractors
for the period. Within healthcare, Neurocrine Biosciences (-86%), developer of
drugs for the treatment of neurological and endocrine-related diseases and
disorders, fell as its quarterly net loss widened. The stock of Medarex (-31%),
a biopharmaceutical company, dropped after the firm received a grand jury
subpoena for stock option grant
51
DIVERSIFIED INVESTORS PORTFOLIOS
ECONOMIC OVERVIEW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
practices. Hovnanian Enterprise (-39%) and Meritage Homes (-25%) fell as the
market continued to punish securities in the homebuilding industry from
speculation on a dramatic fall in housing demand.
SMALL-CAP GROWTH SERIES
The Series' return of 2.59% for the first six months of the year was below the
6.07% Russell 2000 Growth Index and the 4.91% median return for the Morningstar
Small Growth Universe.
Although the energy and material sectors did not represent significant positions
within the Series, they were the biggest contributors to performance for the
period. Core Laboratories N.V. (+63%), reported higher first quarter profits,
while Carpenter Technology (+64%), a firm engaged in the manufacturing,
fabrication and distribution of specialty metals and engineered products,
reported record sales for the quarter ending March 31.
The technology sector was the biggest detractor from performance. Specifically,
Neoware (-47%), a software company, saw its stock drop sharply on lower sales
forecasts, while Portalplayer (-65%), a semi-conductor company, fell on a
quarterly earnings decline.
INTERNATIONAL EQUITY SERIES
The Series posted a strong absolute return of 9.74% for the first six months of
2006, above the Morningstar Foreign Large Blend Universe median return of 9.31%,
but below the MSCI World ex-US Index return of 10.40%. A falling U.S. dollar
boosted foreign stock returns.
The Series was aided by positions in financials and materials. London Stock
Exchange (+69%) was up on earnings growth from robust trading volumes as well as
a Nasdaq takeover bid. In materials, German steelmaker ThyssenKrupp saw shares
appreciate after Citigroup raised the price estimate for the stock on expected
steel price increases.
Performance was hurt by the poorer performing consumer discretionary and
information technology sectors. Rakuten (-35%), a Japanese internet catalog
company, was impacted by volatility in Japanese internet stocks. Logitech
International, which designs and manufactures peripherals for personal
computers, traded down on sluggish sales early in the year. From a country
standpoint, the portfolio saw the largest contribution from French securities
while holdings in Australia accounted for the largest detraction.
52
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53
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
------------ ------------ ------------
ASSETS:
Securities, at cost................................... $784,038,988 $857,985,009 $213,926,601
============ ============ ============
Securities, at value, including investments held as
collateral for securities out on loan (Notes 2 and
4).................................................. $784,038,988 $841,364,095 $212,440,940
Repurchase agreements (cost equals market)............ 100,976,502 1,108,158 1,036,822
Cash.................................................. -- -- --
Cash at broker........................................ -- -- --
Foreign currency holdings, at value (cost $29,361,948,
$7,082, and $20,332, respectively).................. -- -- --
Receivable for securities sold........................ -- 6,934,660 4,581,037
Unrealized appreciation on foreign currency forward
and spot contracts (Note 10)........................ -- -- --
Variation margin...................................... -- -- --
Interest receivable................................... 1,760,257 5,552,353 2,285,853
Dividends receivable.................................. -- -- --
Foreign tax reclaim receivable........................ -- -- --
Receivable from Advisor............................... -- -- 260
Receivable from securities lending (net).............. -- 3,947 5,059
------------ ------------ ------------
Total assets.......................................... 886,775,747 854,963,213 220,349,971
------------ ------------ ------------
LIABILITIES:
Due to Custodian...................................... -- -- --
Collateral for securities out on loan................. -- 27,278,625 52,114,730
Payable for securities purchased...................... -- 7,012,089 3,127,206
Securities sold short, at value (proceeds
$89,360,835)........................................ -- -- --
Written options, at value (premium $191,554, $7,668,
and $13,577, respectively).......................... -- -- --
Unrealized depreciation on foreign currency forward
and spot contracts (Note 10)........................ -- -- --
Variation margin...................................... -- -- --
Investment advisory fees.............................. 184,199 239,594 52,273
Accrued expenses...................................... 32,613 49,277 32,960
Contingent liability (Note 6)......................... -- -- --
------------ ------------ ------------
Total liabilities..................................... 216,812 34,579,585 55,327,169
------------ ------------ ------------
NET ASSETS............................................ $886,558,935 $820,383,628 $165,022,802
============ ============ ============
</Table>
See notes to financial statements.
54
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND BALANCED INCOME VALUE INCOME
-------------- ----------- ------------ -------------- ----------- --------------
$2,330,816,972 $85,874,600 $428,330,241 $2,971,135,298 $43,417,472 $1,132,643,308
============== =========== ============ ============== =========== ==============
$2,285,777,577 $84,395,944 $442,822,130 $3,327,832,253 $42,220,261 $1,215,837,271
61,605,052 14,396,650 8,707,948 27,223,217 -- 8,543,416
-- -- -- -- -- --
-- 150,000 430,600 -- -- 560,000
29,406,968 7,134 20,510 -- -- --
129,641,831 391,277 1,068,333 58,414,682 41,845 15,962,827
283,078 2,485 216 -- -- --
1,784,505 21,687 1,458 -- -- --
14,041,089 594,332 1,429,098 43,770 -- 16,328
-- -- 306,607 3,673,160 82,361 1,392,811
-- -- -- 6,466 -- --
-- 7,465 3,868 -- 7,314 425
-- -- 7,767 76,152 -- 37,479
-------------- ----------- ------------ -------------- ----------- --------------
2,522,540,100 99,966,974 454,798,535 3,417,269,700 42,351,781 1,242,350,557
-------------- ----------- ------------ -------------- ----------- --------------
20,313 -- 2,399 -- 600,026 --
30,335,855 -- 26,894,601 275,454,038 -- 104,216,777
362,115,215 24,713,838 49,766,060 35,470,607 387,364 12,038,039
88,601,518 -- -- -- -- --
240,297 7,875 13,806 -- -- --
125,934 5,005 14,221 -- -- --
-- -- -- -- -- 2,635
591,926 21,956 141,455 1,141,342 16,258 549,848
110,702 38,470 137,569 181,982 25,633 65,740
-- -- -- -- -- --
-------------- ----------- ------------ -------------- ----------- --------------
482,141,760 24,787,144 76,970,111 312,247,969 1,029,281 116,873,039
-------------- ----------- ------------ -------------- ----------- --------------
$2,040,398,340 $75,179,830 $377,828,424 $3,105,021,731 $41,322,500 $1,125,477,518
============== =========== ============ ============== =========== ==============
</Table>
55
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
-------------- ------------ ------------
ASSETS:
Securities, at cost................................. $2,362,555,526 $812,599,636 $320,215,848
============== ============ ============
Securities, at value, including investments held as
collateral for securities out on loan (Notes 2 and
4)................................................ $2,570,782,239 $854,008,973 $351,105,229
Repurchase agreements (cost equals market).......... 45,591,828 23,057,477 2,563,163
Cash................................................ -- -- --
Cash at broker...................................... -- -- --
Foreign currency holdings, at value (cost
$9,136,918)....................................... -- -- --
Receivable for securities sold...................... 85,442,300 5,660,184 5,902,800
Unrealized appreciation on foreign currency forward
and spot contracts (Note 10)...................... -- -- --
Variation margin.................................... -- -- --
Interest receivable................................. 36,325 17,079 7,007
Dividends receivable................................ 1,906,472 1,060,233 49,896
Foreign tax reclaim receivable...................... -- -- --
Receivable from Advisor............................. -- 432 1,419
Receivable from securities lending (net)............ 30,886 11,557 11,388
-------------- ------------ ------------
Total assets........................................ 2,703,790,050 883,815,935 359,640,902
-------------- ------------ ------------
LIABILITIES:
Due to Custodian.................................... -- -- --
Collateral for securities out on loan............... 207,745,519 96,209,905 45,722,857
Payable for securities purchased.................... 40,288,146 2,931,651 999,695
Securities sold short, at value..................... -- -- --
Written options, at value........................... -- -- --
Unrealized depreciation on foreign currency forward
and spot contracts (Note 10)...................... -- -- --
Variation margin.................................... -- -- --
Investment advisory fees............................ 1,251,076 423,711 180,183
Accrued expenses.................................... 143,272 48,880 46,115
Contingent liability (Note 6)....................... -- -- --
-------------- ------------ ------------
Total liabilities................................... 249,428,013 99,614,147 46,948,850
-------------- ------------ ------------
NET ASSETS.......................................... $2,454,362,037 $784,201,788 $312,692,052
============== ============ ============
</Table>
See notes to financial statements.
56
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ -------------- ------------ ------------ ------------ --------------
$272,974,443 $1,344,091,768 $162,198,377 $359,881,197 $418,469,092 $1,651,588,907
============ ============== ============ ============ ============ ==============
$288,351,997 $1,454,063,446 $164,768,205 $394,358,808 $421,264,945 $1,932,233,936
6,608,926 43,740,789 8,493,672 10,908,030 19,789,607 10,515,844
-- 303 -- -- 14,660 --
-- -- -- -- -- --
-- -- -- -- -- 9,176,655
-- 21,681,847 5,521,622 19,991,275 8,808,646 4,593,062
- -- -- -- -- -- 119,687
-- 121,200 -- -- -- --
8,514 43,235 4,022 6,574 8,008,353 21,987
71,711 1,120,013 39,533 207,329 -- 2,828,302
-- -- -- 15,799 -- 825,588
1,498 5,544 5,865 2,777 -- --
4,704 91,261 14,755 19,525 -- 104,569
------------ -------------- ------------ ------------ ------------ --------------
295,047,350 1,520,867,638 178,847,674 425,510,117 457,886,211 1,960,419,630
------------ -------------- ------------ ------------ ------------ --------------
-- -- -- -- -- --
52,391,519 256,811,854 19,876,959 35,186,388 -- 141,231,821
-- 26,472,994 5,792,268 26,691,576 18,679,568 10,576,730
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- 59,097
-- -- -- -- -- --
163,523 810,906 109,278 227,852 202,854 1,099,786
32,549 184,700 107,857 40,084 35,857 261,767
-- -- -- -- -- --
------------ -------------- ------------ ------------ ------------ --------------
52,587,591 284,280,454 25,886,362 62,145,900 18,918,279 153,229,201
------------ -------------- ------------ ------------ ------------ --------------
$242,459,759 $1,236,587,184 $152,961,312 $363,364,217 $438,967,932 $1,807,190,429
============ ============== ============ ============ ============ ==============
</Table>
57
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
----------- ----------- ------------
INVESTMENT INCOME (NOTE 2):
Interest income.......................................... $20,686,908 $17,236,753 $ 5,130,373
Securities lending income (net).......................... -- 15,218 19,821
Dividend income.......................................... -- -- --
Less: foreign withholding taxes.......................... -- -- --
----------- ----------- -----------
Total income............................................. 20,686,908 17,251,971 5,150,194
----------- ----------- -----------
EXPENSES (NOTE 2):
Investment advisory fees................................. 1,090,647 1,402,120 373,856
Custody fees............................................. 68,243 87,642 35,790
Audit fees............................................... 12,897 13,907 13,261
Legal fees............................................... 256 244 46
Reports to shareholders.................................. 4,339 3,235 1,377
Other fees............................................... 9,957 9,893 3,487
----------- ----------- -----------
Total expenses........................................... 1,186,339 1,517,041 427,817
Expenses reimbursed by the Advisor....................... -- -- (553)
----------- ----------- -----------
Net expenses............................................. 1,186,339 1,517,041 427,264
----------- ----------- -----------
NET INVESTMENT INCOME (LOSS)............................. 19,500,569 15,734,930 4,722,930
----------- ----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) on transactions from:
Securities............................................. -- (2,233,458) (5,174,426)
Futures................................................ -- -- --
Written options........................................ -- -- --
Foreign currency transactions.......................... -- -- --
Change in net unrealized appreciation (depreciation) on:
Securities............................................. -- (3,840,538) (494,785)
Futures................................................ -- -- --
Written options........................................ -- -- --
Short sales............................................ -- -- --
Foreign currency translations.......................... -- -- --
----------- ----------- -----------
Net realized and unrealized gains (losses) on
investments............................................ -- (6,073,996) (5,669,211)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $19,500,569 $ 9,660,934 $ (946,281)
=========== =========== ===========
</Table>
See notes to financial statements.
58
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND BALANCED INCOME VALUE INCOME
------------ ----------- ----------- ------------ ----------- ------------
$ 48,209,849 $ 1,840,526 $ 3,817,521 $ 1,337,709 $ 35,502 $ 219,332
121,193 -- 41,775 413,670 -- 48,484
-- 5,231 2,240,328 27,273,332 335,971 9,597,919
-- -- -- (113,078) (946) (25,404)
------------ ----------- ----------- ------------ ----------- ------------
48,331,042 1,845,757 6,099,624 28,911,633 370,527 9,840,331
------------ ----------- ----------- ------------ ----------- ------------
3,575,367 128,195 896,229 7,053,418 96,662 3,544,435
260,780 49,169 138,839 308,873 38,793 124,809
17,087 14,575 14,006 18,377 14,519 15,007
555 49 3,041 28,203 58 300
8,080 159 77,476 13,104 89 6,780
25,826 877 6,691 45,339 374 17,930
------------ ----------- ----------- ------------ ----------- ------------
3,887,695 193,024 1,136,282 7,467,314 150,495 3,709,261
-- (46,516) (140,525) -- (44,167) (425)
------------ ----------- ----------- ------------ ----------- ------------
3,887,695 146,508 995,757 7,467,314 106,328 3,708,836
------------ ----------- ----------- ------------ ----------- ------------
44,443,347 1,699,249 5,103,867 21,444,319 264,199 6,131,495
------------ ----------- ----------- ------------ ----------- ------------
(19,117,812) (547,714) 9,285,551 132,985,817 1,288,188 45,893,882
(3,837,005) (114,655) (75,239) -- -- (36,442)
331,744 23,391 52,018 -- -- --
289,991 (4,337) (65,166) -- -- --
(27,594,046) (1,452,200) (7,282,623) 19,322,415 (1,777,515) (36,509,638)
(1,969,333) (73,622) (47,927) -- -- 34,838
(165,183) (207) (229) -- -- --
1,326,924 -- -- -- -- --
550,129 (4,819) 25,260 -- -- 604
------------ ----------- ----------- ------------ ----------- ------------
(50,184,591) (2,174,163) 1,891,645 152,308,232 (489,327) 9,383,244
------------ ----------- ----------- ------------ ----------- ------------
$ (5,741,244) $ (474,914) $ 6,995,512 $173,752,551 $ (225,128) $ 15,514,739
============ =========== =========== ============ =========== ============
</Table>
59
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
------------- ----------- ------------
INVESTMENT INCOME (NOTE 2):
Interest income....................................... $ 1,058,268 $ 661,101 $ 212,054
Securities lending income (net)....................... 398,260 46,831 33,658
Dividend income....................................... 11,348,159 5,851,324 479,386
Less: foreign withholding taxes....................... (194,208) (6,611) (733)
------------- ----------- ------------
Total income.......................................... 12,610,479 6,552,645 724,365
------------- ----------- ------------
EXPENSES (NOTE 2):
Investment advisory fees.............................. 7,997,777 2,434,463 1,107,195
Custody fees.......................................... 229,745 82,049 34,051
Audit fees............................................ 17,826 11,687 11,245
Legal fees............................................ 614 838 2,181
Reports to shareholders............................... 10,700 2,179 1,064
Other fees............................................ 39,142 9,256 4,215
------------- ----------- ------------
Total expenses........................................ 8,295,804 2,540,472 1,159,951
Expenses reimbursed by the Advisor.................... -- (432) (6,623)
------------- ----------- ------------
Net expenses.......................................... 8,295,804 2,540,040 1,153,328
------------- ----------- ------------
NET INVESTMENT INCOME (LOSS).......................... 4,314,675 4,012,605 (428,963)
------------- ----------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 2):
Net realized gains (losses) on transactions from:
Securities.......................................... 95,068,517 37,908,993 17,559,068
Futures............................................. -- -- --
Written options..................................... -- -- --
Foreign currency transactions....................... -- -- --
Change in net unrealized appreciation (depreciation)
on:
Securities.......................................... (177,052,374) 1,526,600 (16,678,033)
Futures............................................. -- -- --
Written options..................................... -- -- --
Short sales......................................... -- -- --
Foreign currency translations....................... 102 -- --
------------- ----------- ------------
Net realized and unrealized gains (losses) on
investments......................................... (81,983,755) 39,435,593 881,035
------------- ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... $ (77,669,080) $43,448,198 $ 452,072
============= =========== ============
</Table>
See notes to financial statements.
60
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
---------- ------------ ---------- ------------ ----------- -------------
$ 299,484 $ 929,132 $ 100,734 $ 99,578 $18,309,945 $ 591,063
23,245 434,668 116,437 34,241 -- 934,261
934,128 5,627,257 196,517 1,049,391 119,297 33,166,645
(258) (8,077) (1,572) (13,624) -- (3,008,129)
---------- ------------ ---------- ------------ ----------- ------------
1,256,599 6,982,980 412,116 1,169,586 18,429,242 31,683,840
---------- ------------ ---------- ------------ ----------- ------------
985,903 5,270,567 653,110 1,501,030 1,217,067 6,908,182
28,842 250,958 90,908 64,397 60,821 898,767
11,165 16,169 11,052 12,947 13,459 17,648
853 4,084 354 126 3,731 502
876 52,773 53,665 3,554 1,645 6,927
3,282 19,856 1,991 6,278 5,364 25,292
---------- ------------ ---------- ------------ ----------- ------------
1,030,921 5,614,407 811,080 1,588,332 1,302,087 7,857,318
(8,948) (15,531) (135,448) (28,820) -- --
---------- ------------ ---------- ------------ ----------- ------------
1,021,973 5,598,876 675,632 1,559,512 1,302,087 7,857,318
---------- ------------ ---------- ------------ ----------- ------------
234,626 1,384,104 (263,516) (389,926) 17,127,155 23,826,522
---------- ------------ ---------- ------------ ----------- ------------
7,337,071 95,390,298 (646,006) 24,906,692 1,678,685 155,946,918
-- (147,259) -- -- -- --
-- -- -- -- -- --
-- -- -- -- (4,252) 309,813
2,200,610 (49,187,942) 2,527,335 (23,413,885) 624,808 (15,203,969)
-- 590,833 -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- 5 -- -- 2,242 112,809
---------- ------------ ---------- ------------ ----------- ------------
9,537,681 46,645,935 1,881,329 1,492,807 2,301,483 141,165,571
---------- ------------ ---------- ------------ ----------- ------------
$9,772,307 $ 48,030,039 $1,617,813 $ 1,102,881 $19,428,638 $164,992,093
========== ============ ========== ============ =========== ============
</Table>
61
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
HIGH INTERMEDIATE
MONEY QUALITY GOVERNMENT
MARKET BOND BOND
--------------- ------------- -------------
FROM OPERATIONS:
Net investment income (loss)..................... $ 19,500,569 $ 15,734,930 $ 4,722,930
Net realized gains (losses) on transactions from:
Securities..................................... -- (2,233,458) (5,174,426)
Futures........................................ -- -- --
Written options................................ -- -- --
Foreign currency transactions.................. -- -- --
Change in net unrealized appreciation
(depreciation) on:
Securities..................................... -- (3,840,538) (494,785)
Futures........................................ -- -- --
Written options................................ -- -- --
Short sales.................................... -- -- --
Foreign currency translations.................. -- -- --
--------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations................................ 19,500,569 9,660,934 (946,281)
--------------- ------------- -------------
FROM TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions.................................... 2,352,357,809 328,095,736 34,368,489
Withdrawals...................................... (2,251,076,701) (305,772,208) (129,505,929)
--------------- ------------- -------------
Net increase (decrease) in net assets resulting
from transactions in investors' beneficial
interests...................................... 101,281,108 22,323,528 (95,137,440)
--------------- ------------- -------------
Net increase (decrease) in net assets............ 120,781,677 31,984,462 (96,083,721)
NET ASSETS:
Beginning of period.............................. 765,777,258 788,399,166 261,106,523
--------------- ------------- -------------
End of period.................................... $ 886,558,935 $ 820,383,628 $ 165,022,802
=============== ============= =============
</Table>
See notes to financial statements.
62
<Table>
<Caption>
TOTAL
CORE RETURN VALUE & GROWTH &
BOND BOND BALANCED INCOME VALUE INCOME
-------------- ------------ ------------ -------------- ----------- --------------
$ 44,443,347 $ 1,699,249 $ 5,103,867 $ 21,444,319 $ 264,199 $ 6,131,495
(19,117,812) (547,714) 9,285,551 132,985,817 1,288,188 45,893,882
(3,837,005) (114,655) (75,239) -- -- (36,442)
331,744 23,391 52,018 -- -- --
289,991 (4,337) (65,166) -- -- --
(27,594,046) (1,452,200) (7,282,623) 19,322,415 (1,777,515) (36,509,638)
(1,969,333) (73,622) (47,927) -- -- 34,838
(165,183) (207) (229) -- -- --
1,326,924 -- -- -- -- --
550,129 (4,819) 25,260 -- -- 604
-------------- ------------ ------------ -------------- ----------- --------------
(5,741,244) (474,914) 6,995,512 173,752,551 (225,128) 15,514,739
-------------- ------------ ------------ -------------- ----------- --------------
377,685,241 23,766,729 47,983,423 470,260,666 13,537,926 155,013,322
(384,438,692) (18,184,844) (87,898,166) (557,051,783) (7,128,810) (223,809,412)
-------------- ------------ ------------ -------------- ----------- --------------
(6,753,451) 5,581,885 (39,914,743) (86,791,117) 6,409,116 (68,796,090)
-------------- ------------ ------------ -------------- ----------- --------------
(12,494,695) 5,106,971 (32,919,231) 86,961,434 6,183,988 (53,281,351)
2,052,893,035 70,072,859 410,747,655 3,018,060,297 35,138,512 1,178,758,869
-------------- ------------ ------------ -------------- ----------- --------------
$2,040,398,340 $ 75,179,830 $377,828,424 $3,105,021,731 $41,322,500 $1,125,477,518
============== ============ ============ ============== =========== ==============
</Table>
63
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE PERIOD ENDED JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
EQUITY MID-CAP MID-CAP
GROWTH VALUE GROWTH
-------------- ------------- ------------
FROM OPERATIONS:
Net investment income (loss)....................... $ 4,314,675 $ 4,012,605 $ (428,963)
Net realized gains (losses) on transactions from:
Securities....................................... 95,068,517 37,908,993 17,559,068
Futures.......................................... -- -- --
Written options.................................. -- -- --
Foreign currency transactions.................... -- -- --
Change in net unrealized appreciation
(depreciation) on:
Securities....................................... (177,052,374) 1,526,600 (16,678,033)
Futures.......................................... -- -- --
Written options.................................. -- -- --
Short sales...................................... -- -- --
Foreign currency translations.................... 102 -- --
-------------- ------------- ------------
Net increase (decrease) in net assets resulting
from operations.................................. (77,669,080) 43,448,198 452,072
-------------- ------------- ------------
FROM TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions...................................... 404,328,217 200,667,961 84,932,734
Withdrawals........................................ (459,679,161) (101,445,909) (55,643,196)
-------------- ------------- ------------
Net increase (decrease) in net assets resulting
from transactions in investors' beneficial
interests........................................ (55,350,944) 99,222,052 29,289,538
-------------- ------------- ------------
Net increase (decrease) in net assets.............. (133,020,024) 142,670,250 29,741,610
NET ASSETS:
Beginning of period................................ 2,587,382,061 641,531,538 282,950,442
-------------- ------------- ------------
End of period...................................... $2,454,362,037 $ 784,201,788 $312,692,052
============== ============= ============
</Table>
See notes to financial statements.
64
<Table>
<Caption>
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE EQUITY GROWTH EQUITY BOND EQUITY
------------ -------------- ------------ ------------ ------------ --------------
$ 234,626 $ 1,384,104 $ (263,516) $ (389,926) $ 17,127,155 $ 23,826,522
7,337,071 95,390,298 (646,006) 24,906,692 1,678,685 155,946,918
-- (147,259) -- -- -- --
-- -- -- -- -- --
-- -- -- -- (4,252) 309,813
2,200,610 (49,187,942) 2,527,335 (23,413,885) 624,808 (15,203,969)
-- 590,833 -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- 5 -- -- 2,242 112,809
------------ -------------- ------------ ------------ ------------ --------------
9,772,307 48,030,039 1,617,813 1,102,881 19,428,638 164,992,093
------------ -------------- ------------ ------------ ------------ --------------
53,110,347 283,247,787 43,617,238 67,051,702 91,693,891 359,084,789
(39,172,116) (391,362,551) (25,177,273) (86,919,426) (88,181,852) (438,672,602)
------------ -------------- ------------ ------------ ------------ --------------
13,938,231 (108,114,764) 18,439,965 (19,867,724) 3,512,039 (79,587,813)
------------ -------------- ------------ ------------ ------------ --------------
23,710,538 (60,084,725) 20,057,778 (18,764,843) 22,940,677 85,404,280
218,749,221 1,296,671,909 132,903,534 382,129,060 416,027,255 1,721,786,149
------------ -------------- ------------ ------------ ------------ --------------
$242,459,759 $1,236,587,184 $152,961,312 $363,364,217 $438,967,932 $1,807,190,429
============ ============== ============ ============ ============ ==============
</Table>
65
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.
66
<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>
67
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.................................. -- -- --
Short sales...................................... -- -- --
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.
68
<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>
69
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
COMMERCIAL PAPER -- 41.8%
$38,610,000 Abbey National NA LLC,
5.04%, 07/03/06.............. $ 38,599,189
35,620,000 Bank of America Corp.,
5.16%, 08/08/06.............. 35,425,990
12,500,000 Barclays US Funding LLC,
5.12%, 08/07/06.............. 12,434,158
7,449,000 Chariot Funding LLC -- 144A,
5.20%, 07/14/06.............. 7,435,012
10,864,000 Chariot Funding LLC -- 144A,
5.20%, 07/17/06.............. 10,838,892
17,280,000 Chariot Funding LLC -- 144A,
5.21%, 07/17/06.............. 17,239,987
35,110,000 Citigroup Funding, Inc.,
5.24%, 08/14/06.............. 34,885,140
18,290,000 Citibank Credit Card Issuance
Trust -- 144A,
5.13%, 07/18/06.............. 18,245,693
36,410,000 Credit Suisse First Boston New
York,
5.25%, 07/24/06.............. 36,287,875
7,000,000 Falcon Asset Securitization --
144A,
5.23%, 07/20/06.............. 6,980,678
28,000,000 Falcon Asset Securitization --
144A,
5.26%, 07/24/06.............. 27,905,905
26,171,000 Jupiter Securities
Corp. -- 144A,
5.10%, 07/10/06.............. 26,137,632
22,290,000 Old Line Funding LLC -- 144A,
5.05%, 07/06/06.............. 22,274,366
11,610,000 Old Line Funding LLC -- 144A,
5.08%, 07/11/06.............. 11,593,617
20,190,000 Preferred Receivable Funding,
5.21%, 07/19/06.............. 20,137,405
26,200,000 The Bear Stearns Companies,
Inc.,
5.09%, 11/07/06.............. 25,722,134
11,540,000 The Bear Stearns Companies,
Inc.,
5.10%, 11/14/06.............. 11,317,663
7,100,000 UBS Finance -- Delaware,
5.27%, 07/03/06.............. 7,097,921
------------
TOTAL COMMERCIAL PAPER (Cost
$370,559,257)................ 370,559,257
------------
YANKEE CERTIFICATES OF DEPOSIT -- 19.4%
31,000,000 Bank of Nova Scotia,
5.30%, 08/08/06.............. 31,000,000
37,620,000 BNP Paribas NY Branch,
5.11%, 08/15/06.............. 37,620,000
34,670,000 Caylon NY Branch,
5.34%, 05/04/07.............. 34,670,000
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
YANKEE CERTIFICATES OF DEPOSIT (CONTINUED)
$34,850,000 Fortis Bank New York,
5.08%, 07/05/06.............. $ 34,850,000
33,860,000 Toronto Dominion,
5.03%, 07/17/06.............. 33,860,000
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT (Cost
$172,000,000)................ 172,000,000
------------
MEDIUM TERM CORPORATE NOTES -- 1.5%
13,000,000 Caterpillar Financial Service
Corp., Series MTN, Variable
Rate,
5.14%, 07/09/06(a) (Cost
$13,000,000)................. 13,000,000
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 11.7%
FANNIE MAE -- 2.0%
17,710,000 4.76%, 07/12/06................ 17,684,269
------------
FREDDIE MAC -- 9.7%
33,580,000 3.80%, 07/12/06................ 33,580,000
33,900,000 4.93%, 01/18/07................ 32,966,874
19,870,000 5.50%, 07/03/07................ 19,870,000
------------
86,416,874
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$104,101,143)................ 104,101,143
------------
SHORT TERM CORPORATE NOTES -- 14.0%
16,900,000 American Express Credit,
Variable Rate,
5.23%, 04/05/07(a)........... 16,900,000
10,440,000 Canadian Imperial Bank of
Commerce NY, Variable Rate,
5.28%, 12/22/06(a)........... 10,440,000
20,320,000 Greenwich Capital Holdings,
Variable Rate,
4.68%, 09/13/06(a)........... 20,320,000
14,000,000 Merrill Lynch & Company --
Series MNT5, Variable Rate,
5.37%, 02/07/07(a)........... 14,000,000
33,850,000 Morgan Stanley,
Variable Rate,
5.15%, 02/02/07(a)........... 33,850,000
28,870,000 Societe Generale NY,
Variable Rate,
5.28%, 10/31/06(a)........... 28,868,588
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $124,378,588).... 124,378,588
------------
TOTAL SECURITIES (Cost
$784,038,988)................ 784,038,988
------------
</Table>
See notes to financial statements.
70
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 11.4%
$20,490,000 With Barclays Bank Agency
Mortgage, dated 06/30/06,
5.15%, due 07/03/06,
repurchase proceeds at
maturity $20,498,794
(Collateralized by Freddie
Mac, zero coupon, due
12/26/06, with a value of
$20,900,072)................. $ 20,490,000
6,502 With Investors Bank & Trust,
dated 06/30/06, 4.76%, due
07/03/06, repurchase proceeds
at maturity $6,505
(Collateralized by Government
National Mortgage
Association,
4.50%, due 09/20/31,
with a value of $6,827)...... 6,502
35,900,000 With Morgan Stanley,
dated 06/30/06, 5.15%, due
07/03/06, repurchase proceeds
at maturity $35,915,407
(Collateralized by various
Federal Home Loan Bank,
4.50%, due 11/15/12-09/16/13,
with a total value of
$36,950,139)................. 35,900,000
44,580,000 With Warburg Dillon Reed,
dated 06/30/06, 5.25%,
due 07/03/06, repurchase
proceeds at maturity
$44,599,504 (Collateralized
by Fannie Mae Adjustable Rate
Mortgage, 6.42%, due
02/01/34, with a value of
$45,474,830)................. 44,580,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $100,976,502).......... 100,976,502
------------
Total Investments -- 99.8%
(Cost $885,015,490).......... 885,015,490
Other assets less
liabilities -- 0.2%.......... 1,543,445
------------
NET ASSETS -- 100.0%........... $886,558,935
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $885,015,490.
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
71
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 74.2%
AEROSPACE AND DEFENSE -- 0.5%
$ 4,375,000 The Boeing Company,
8.10%, 11/15/06.............. $ 4,411,706
------------
AUTOMOBILE: RENTAL -- 0.6%
4,800,000 General American Transportation
Corp. -- New York,
6.75%, 05/01/09.............. 4,869,283
------------
BANKS -- 9.0%
2,905,000 ABN AMRO Bank NV -- Chicago,
7.13%, 06/18/07.............. 2,943,087
5,000,000 American Express Bank FSB,
Series BKNT, Floating Rate,
5.35%, 06/22/09(c)........... 5,002,685
3,000,000 American Express Centurion
Bank, Series BKNT,
4.38%, 07/30/09.............. 2,899,008
4,330,000 Bank of America Corp.,
7.13%, 03/01/09.............. 4,482,533
1,375,000 Bank of America Corp.,
7.80%, 02/15/10.............. 1,469,412
6,000,000 Bank of Montreal-Chicago,
7.80%, 04/01/07.............. 6,087,036
4,600,000 Bank of Scotland -- 144A
(United Kingdom),
3.50%, 11/30/07.............. 4,474,107
13,100,000 Bank One Corp.,
2.63%, 06/30/08.............. 12,372,060
2,650,000 BankBoston NA, Series BKNT,
6.38%, 04/15/08.............. 2,681,845
2,000,000 HBOS Treasury Services
PLC -- 144A (United Kingdom),
3.75%, 09/30/08.............. 1,922,916
3,636,364 National City Bank, Series
BKNT,
2.70%, 08/24/09.............. 3,485,636
3,000,000 Swiss Bank Corp.,
7.25%, 09/01/06.............. 3,005,835
3,630,000 US Bank NA, Series BKNT,
4.13%, 03/17/08.............. 3,546,118
3,125,000 Wachovia Corp.,
5.63%, 12/15/08.............. 3,124,494
7,000,000 Wachovia Corp., Floating Rate,
5.38%, 07/20/07(c)........... 7,010,136
8,500,000 Wells Fargo & Company,
Floating Rate,
5.51%, 03/23/10(b)........... 8,509,860
1,000,000 Wells Fargo & Company, Series
MTNH,
6.75%, 10/01/06.............. 1,002,145
------------
74,018,913
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
EQUIPMENT RENTAL AND LEASING -- 1.3%
$ 6,675,000 International Lease Finance
Corp.,
6.38%, 03/15/09.............. $ 6,778,202
4,000,000 International Lease Finance
Corp.,
4.75%, 07/01/09.............. 3,893,224
------------
10,671,426
------------
FINANCIAL SERVICES -- 9.5%
1,575,000 Capital One Financial Corp.,
7.13%, 08/01/08.............. 1,611,967
2,050,000 Caterpillar Financial Services
Corp., Series MTND,
9.50%, 02/06/07.............. 2,076,275
2,900,000 Caterpillar Financial Services
Corp., Series MTNF,
3.10%, 05/15/07.............. 2,838,993
2,000,000 Caterpillar Financial Services
Corp., Series MTNF,
3.63%, 11/15/07.............. 1,947,412
5,000,000 Citigroup, Inc.,
3.50%, 02/01/08.............. 4,843,745
7,200,000 Credit Suisse First Boston USA,
Inc.,
4.70%, 06/01/09.............. 7,013,578
1,000,000 General Electric Capital Corp.,
Series MTNA,
8.70%, 03/01/07.............. 1,018,923
2,500,000 General Electric Capital Corp.,
Series MTNA,
4.00%, 06/15/09.............. 2,394,163
1,500,000 Goldman Sachs Group, Inc.,
4.50%, 06/15/10.............. 1,435,376
8,000,000 Goldman Sachs Group, Inc.,
Series MTN, Floating Rate,
5.41%, 10/07/11(b)........... 8,065,407
8,060,000 Lehman Brothers Holdings, Inc.,
7.00%, 02/01/08.............. 8,213,784
2,750,000 Lehman Brothers Holdings, Inc.,
Series MTNG,
3.95%, 11/10/09.............. 2,601,192
7,775,000 Merrill Lynch & Company, Series
MTNC,
4.83%, 10/27/08.............. 7,636,854
6,000,000 Merrill Lynch & Company, Series
MTNC,
4.13%, 01/15/09.............. 5,785,338
2,354,000 Morgan Stanley,
3.88%, 01/15/09.............. 2,259,809
2,000,000 Morgan Stanley, Floating Rate,
5.24%, 07/27/07(b)........... 2,002,528
4,125,000 Residential Capital Corp.,
6.13%, 11/21/08.............. 4,079,415
4,000,000 Residential Capital Corp.,
6.38%, 06/30/10.............. 3,948,980
</Table>
See notes to financial statements.
72
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 2,100,000 The Bear Stearns Companies,
Inc.,
3.25%, 03/25/09.............. $ 1,975,814
6,000,000 The Bear Stearns Companies,
Inc., Floating Rate,
5.30%, 04/29/08(b)........... 6,015,936
------------
77,765,489
------------
INSURANCE -- 1.5%
10,000,000 Met Life Global Funding
I -- 144A,
4.25%, 07/30/09.............. 9,650,060
2,485,000 Prudential Financial, Inc.,
Series MTN,
3.75%, 05/01/08.............. 2,400,870
------------
12,050,930
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.3%
2,525,000 Abbott Laboratories,
3.50%, 02/17/09.............. 2,401,376
------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT -- 14.8%
4,500,000 Bay View Auto Trust, Series
2005-LJ1, Class A4,
4.09%, 05/25/12.............. 4,352,401
3,000,000 Capital Auto Receivables Asset
Trust, Series 2005-1, Class
A4,
4.05%, 07/15/09.............. 2,956,906
4,000,000 Capital One Auto Finance Trust,
Series 2005-A, Class A3,
4.28%, 07/15/09.............. 3,964,818
2,000,000 Capital One Auto Finance Trust,
Series 2005-BSS, Class A3,
4.08%, 11/15/09.............. 1,967,603
2,000,000 Capital One Auto Finance Trust,
Series 2005-C, Class A3,
4.61%, 07/15/10.............. 1,976,150
3,500,000 Capital One Prime Auto
Receivables Trust, Series
2004-3, Class A4,
3.69%, 06/15/10.............. 3,383,572
4,000,000 Capital One Prime Auto
Receivables Trust, Series
2006-1, Class A2,
5.04%, 11/15/08.............. 3,988,479
4,500,000 Carmax Auto Owner Trust, Series
2004-2, Class A4,
3.46%, 09/15/11.............. 4,348,496
3,100,000 Carmax Auto Owner Trust, Series
2005-2, Class A4,
4.34%, 09/15/10.............. 3,009,202
952,885 Chase Manhattan Auto Owner
Trust, Series 2004-A, Class
CTFS,
2.58%, 09/15/10.............. 928,160
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT
(CONTINUED)
$ 3,000,000 Chase Manhattan Auto Owner
Trust, Series 2005-A, Class
CTFS,
4.04%, 04/15/11.............. $ 2,936,718
2,000,000 Chase Manhattan Auto Owner
Trust, Series 2006-A, Class
A4,
5.36%, 01/15/13.............. 1,990,444
2,500,000 Chase Manhattan Auto Owner
Trust, Series 2006-A, Class
CTFS,
5.47%, 01/15/13.............. 2,492,269
7,500,000 Fifth Third Auto Trust, Series
2004-A, Class A4,
3.70%, 10/20/11.............. 7,315,936
2,250,000 Ford Credit Auto Owner Trust,
Series 2005-B, Class B,
4.64%, 04/15/10.............. 2,198,388
1,000,000 Ford Credit Auto Owner Trust,
Series 2005-B, Class C,
4.83%, 08/15/10.............. 978,199
2,400,000 Ford Credit Auto Owner Trust,
Series 2005-C, Class A3,
4.30%, 08/15/09.............. 2,359,164
3,600,000 Ford Credit Auto Owner Trust,
Series 2005-C, Class B,
4.52%, 09/15/10.............. 3,487,254
8,500,000 Ford Credit Auto Owner Trust,
Series 2006-A, Class A2A,
5.04%, 09/15/08.............. 8,483,384
2,544,361 Franklin Auto Trust, Series
2003-1, Class A4,
2.27%, 05/20/11.............. 2,475,228
1,692,742 Franklin Auto Trust, Series
2004-1, Class A2,
3.57%, 03/16/09.............. 1,681,039
3,000,000 Harley-Davidson Motorcycle
Trust, Series 2004-1, Class
A2,
2.53%, 11/15/11.............. 2,899,095
5,000,000 Hertz Vehicle Financing
LLC -- 144A, Series 2005-2A,
Class A2,
4.93%, 02/25/10.............. 4,915,563
4,500,000 Honda Auto Receivables Owner
Trust, Series 2006-1, Class
A3,
5.07%, 02/18/10.............. 4,467,890
3,500,000 Long Beach Auto Receivables
Trust, Series 2005-B, Class
A3,
4.41%, 05/15/10.............. 3,447,495
2,000,000 Long Beach Auto Receivables
Trust, Series 2006-A, Class
A2,
5.36%, 11/15/09(n)........... 1,995,938
1,316,699 National City Auto Receivables
Trust, Series 2004-A, Class
A3,
2.11%, 07/15/08.............. 1,306,425
</Table>
See notes to financial statements.
73
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT
(CONTINUED)
$ 4,000,000 Nissan Auto Receivables Owner
Trust, Series 2006-B, Class
A2,
5.18%, 08/15/08.............. $ 3,989,981
135,014 Onyx Acceptance Owner Trust,
Series 2004-A, Class A3,
2.19%, 03/17/08.............. 134,897
3,250,000 Onyx Acceptance Owner Trust,
Series 2005-A, Class A4,
3.91%, 09/15/11.............. 3,155,156
238,297 Regions Auto Receivables Trust,
Series 2003-2, Class A3,
2.31%, 01/15/08.............. 238,183
446,711 Ryder Vehicle Lease Trust,
Series 2001-A, Class A5,
6.17%, 11/15/07.............. 447,405
566,187 Susquehanna Auto Lease
Trust -- 144A, Series 2003-1,
Class A3,
2.46%, 01/14/07.............. 565,934
1,000,000 Susquehanna Auto Lease
Trust -- 144A, Series 2003-1,
Class C,
4.81%, 09/14/07.............. 999,199
9,600,000 Susquehanna Auto Lease
Trust -- 144A, Series 2005-1,
Class A3,
4.43%, 06/16/08.............. 9,499,498
2,000,000 Susquehanna Auto Lease
Trust -- 144A, Series 2005-1,
Class B,
4.71%, 07/14/08.............. 1,969,774
2,153,040 Triad Auto Receivables Owner
Trust, Series 2002-A, Class
A4,
3.24%, 08/12/09.............. 2,132,837
4,500,000 WFS Financial Owner Trust,
Series 2004-1, Class A4,
2.81%, 08/22/11.............. 4,388,760
7,000,000 World Omni Auto Receivables
Trust, Series 2006-A, Class
A2,
5.05%, 10/15/08.............. 6,985,471
------------
120,813,311
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 2.8%
14,435,000 Citibank Credit Card Issuance
Trust, Series 2004-A1, Class
A1,
2.55%, 01/20/09.............. 14,213,810
1,925,000 Citibank Credit Card Issuance
Trust, Series 2006-B2, Class
B2,
5.15%, 03/07/11.............. 1,898,807
4,024,000 Discover Card Master Trust I,
Series 2002-2, Class A,
5.15%, 10/15/09.............. 4,014,255
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: CREDIT CARDS
(CONTINUED)
$ 1,550,000 Discover Card Master Trust I,
Series 2002-2, Class B,
5.45%, 10/15/09.............. $ 1,547,396
1,700,000 Household Private Label Credit
Card Master Note Trust I,
Series 2002-2, Class A,
Floating Rate,
5.37%, 01/18/11(c)........... 1,702,140
------------
23,376,408
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 5.6%
2,545,625 Caterpillar Financial Asset
Trust, Series 2004-A, Class
A3,
3.13%, 01/26/09.............. 2,508,782
5,000,000 Caterpillar Financial Asset
Trust, Series 2005-A, Class
A4,
4.10%, 06/25/10.............. 4,871,573
3,000,000 Caterpillar Financial Asset
Trust, Series 2006-A, Class
B,
5.71%, 06/25/12.............. 2,999,189
2,718,822 Community Program Loan Trust,
Series 1987-A, Class A4,
4.50%, 10/01/18.............. 2,655,294
6,941,577 Greenwich Capital Commercial
Funding Corp., Series
2005-GG5, Class A1,
4.79%, 04/10/37.............. 6,821,170
7,000,000 Greenwich Capital Commercial
Funding Corp., Series
2006-GG7, Class A1,
5.74%, 12/10/10.............. 6,999,803
1,346,936 Morgan Stanley Capital I,
Series 2003-T11, Class A1,
3.26%, 06/13/41.............. 1,302,151
1,353,380 Morgan Stanley Capital I,
Series 2004-T13, Class A1,
2.85%, 09/13/45.............. 1,297,017
6,786,300 Morgan Stanley Capital I,
Series 2005-HQ5, Class A1,
4.52%, 01/14/42.............. 6,634,275
2,663,914 Morgan Stanley Capital I,
Series 2005-HQ6, Class A1,
4.65%, 08/13/42.............. 2,605,337
4,650,000 Morgan Stanley Capital I,
Series 2006-IQ11, Class A1,
5.55%, 10/15/42(n)........... 4,637,253
2,473,232 Public Service New Hampshire
Funding LLC, Series 2001-1,
Class A2,
5.73%, 11/01/10.............. 2,481,440
------------
45,813,284
------------
</Table>
See notes to financial statements.
74
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 13.8%
$ 2,948,234 American General Mortgage Loan
Trust, Series 2006-1, Class
A1,
5.75%, 12/25/35.............. $ 2,941,190
1,475,156 Banc of America Commercial
Mortgage, Inc., Series
2002-2, Class A1,
3.37%, 07/11/43.............. 1,456,465
2,225,868 Banc of America Commercial
Mortgage, Inc., Series
2003-2, Class A1,
3.41%, 03/11/41.............. 2,150,553
1,060,941 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 1998-C1, Class A1,
6.34%, 06/16/30.............. 1,064,706
458,377 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 1999-C1, Class A1,
5.91%, 02/14/31.............. 458,454
914,258 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2001-TOP4, Class A1,
5.06%, 11/15/16.............. 902,600
852,563 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2002-PBW1, Class A1,
3.97%, 11/11/35.............. 822,197
1,549,360 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2004-PWR5, Class A1,
3.76%, 07/11/42.............. 1,496,944
1,823,182 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2005-PWR9, Class A1,
4.50%, 09/11/42.............. 1,775,222
3,920,652 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2006-T22, Class A1,
5.41%, 04/12/38.............. 3,897,900
3,770,600 Citigroup/Deutsche Bank
Commercial Mortgage Trust,
Series 2005-CD1, Class A1,
5.05%, 07/15/44.............. 3,718,612
1,692,961 Commercial Mortgage
Pass-Through Certificates,
Series 2004-LB2A, Class A1,
2.96%, 03/10/39.............. 1,629,081
5,000,000 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2001-CP4, Class A2,
5.87%, 12/15/35.............. 5,006,690
2,338,694 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2003-C3, Class A1,
2.08%, 05/15/38.............. 2,253,294
2,025,440 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2004-C1, Class A1,
2.25%, 01/15/37.............. 1,975,816
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 705,053 GE Capital Commercial Mortgage
Corp., Series 2001-3, Class
A1,
5.56%, 06/10/38.............. $ 703,805
324,052 GE Capital Commercial Mortgage
Corp., Series 2002-1, Class
A1,
5.03%, 12/10/35.............. 323,088
7,000,000 GE Capital Commercial Mortgage
Corp., Series 2002-1A, Class
A2,
5.99%, 12/10/35.............. 7,061,924
3,483,616 GE Capital Commercial Mortgage
Corp., Series 2002-3A, Class
A1,
4.23%, 12/10/37.............. 3,366,150
1,974,351 GE Capital Commercial Mortgage
Corp., Series 2004-C3, Class
A1,
3.75%, 07/10/39.............. 1,917,966
2,025,456 GE Capital Commercial Mortgage
Corp., Series 2005-C1, Class
A1,
4.01%, 06/10/48.............. 1,973,179
2,200,000 GMAC Mortgage Corp. Loan Trust,
Series 2004-GH1, Class A2,
4.39%, 12/25/25.............. 2,173,623
928,141 Interstar Millennium Trust,
Series 2003-3G, Class A2
(Australia), Floating Rate,
5.73%, 09/27/35(b)........... 930,667
1,556,884 Interstar Millennium Trust,
Series 2004-2G, Class A
(Australia), Floating Rate,
5.52%, 03/14/36(b)........... 1,560,425
746,918 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2002-C2, Class A1,
4.33%, 12/12/34.............. 719,495
4,868,097 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-LDP4, Class A1,
4.61%, 10/15/42.............. 4,768,667
3,133,776 JPMorgan Mortgage Trust, Series
2005-A1, Class 5A1,
4.48%, 02/25/35.............. 3,010,963
1,372,547 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A1,
2.72%, 03/15/27.............. 1,327,611
1,850,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C1, Class
A2,
3.32%, 03/15/27.............. 1,782,839
2,346,027 LB-UBS Commercial Mortgage
Trust, Series 2003-C3, Class
A1,
2.60%, 05/15/27.............. 2,253,299
3,000,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C5, Class
A2,
3.48%, 07/15/27.............. 2,877,263
</Table>
See notes to financial statements.
75
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 1,681,991 LB-UBS Commercial Mortgage
Trust, Series 2004-C8, Class
A1,
3.94%, 12/15/29.............. $ 1,632,700
902,948 LB-UBS Commercial Mortgage
Trust, Series 2005-C5, Class
A1,
4.74%, 09/15/40.............. 886,755
4,637,603 LB-UBS Commercial Mortgage
Trust, Series 2005-C7, Class
A1,
4.99%, 11/15/30.............. 4,576,455
2,300,000 Permanent Financing PLC, Series
7, Class 2A (United Kingdom),
Floating Rate,
5.34%, 09/10/14(b)........... 2,299,787
3,000,000 Popular ABS Mortgage
Pass-Through Trust, Series
2005-3, Class AF3,
4.44%, 07/25/35.............. 2,936,093
6,942,650 Structured Adjustable Rate
Mortgage Loan, Series
2005-23, Class 1A3,
5.45%, 01/25/36.............. 6,855,698
7,382,122 Structured Adjustable Rate
Mortgage Loan, Series 2006-1,
Class 5A1,
5.25%, 02/25/36.............. 7,298,395
3,329,505 Wachovia Bank Commercial
Mortgage Trust, Series
2003-4, Class A1,
3.00%, 04/15/35.............. 3,223,171
8,000,000 Washington Mutual Mortgage
Pass-Through Certificates,
WMALT Series 2005-8, Class
1A8,
5.50%, 10/25/35.............. 7,921,919
2,247,761 Wells Fargo Mortgage Backed
Securities Trust, Series
2003-11, Class 1A1,
3.50%, 10/25/18.............. 2,192,662
5,468,289 Wells Fargo Mortgage Backed
Securities Trust, Series
2005-9, Class 1A1,
4.75%, 10/25/35.............. 5,310,264
------------
113,434,587
------------
PRIVATE ASSET BACKED: OTHER -- 5.9%
5,000,000 ALG Student Loan Trust -- 144A,
Series 2006-1A, Class A1,
Floating Rate,
5.22%, 10/28/18(b)........... 5,000,000
1,191,495 Bear Stearns Asset Backed
Securities, Inc., Series
2003-AC3, Class A1,
4.00%, 07/25/33.............. 1,161,969
4,672,000 California Infrastructure PG&E
Corp., Series 1997-1, Class
A8,
6.48%, 12/26/09.............. 4,719,936
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: OTHER (CONTINUED)
$ 447,999 California Infrastructure
SCE-1, Series 1997-1, Class
A6,
6.38%, 09/25/08.............. $ 449,280
44,426 CIT Equipment Collateral,
Series 2003-VT1, Class A3B,
1.63%, 04/20/07.............. 44,365
609,708 CIT Equipment Collateral,
Series 2004-VT1, Class A3,
2.20%, 03/20/08.............. 602,415
3,000,000 CIT Equipment Collateral,
Series 2006-VT1, Class A3,
5.13%, 12/21/09.............. 2,980,893
1,215,954 CIT RV Trust, Series 1998-A,
Class A5,
6.12%, 11/15/13.............. 1,216,973
3,828,425 CNH Equipment Trust, Series
2004-A, Class A3B,
2.94%, 10/15/08.............. 3,777,816
3,102,809 Connecticut RRB Special Purpose
Trust CL&P1, Series 2001-1,
Class A3,
5.73%, 03/30/09.............. 3,105,723
1,818,854 Crusade Global Trust, Series
2004-2, Class A1 (Australia),
Floating Rate,
5.30%, 11/19/37(b)........... 1,819,163
1,000,000 GE Dealer Floorplan Master Note
Trust, Series 2004-1, Class
B, Floating Rate,
5.53%, 07/20/08(c)........... 1,000,526
3,651,000 Goal Capital Funding Trust,
Series 2006-1, Class A1,
Floating Rate,
5.21%, 08/25/20(b)........... 3,647,007
7,000,000 John Deere Owner Trust, Series
2006-A, Class A3,
5.38%, 07/15/10.............. 6,912,499
5,722,029 Marlin Leasing Receivables
LLC -- 144A, Series 2005-1A,
Class A2,
4.49%, 01/15/08.............. 5,696,994
3,055,500 Nelnet Student Loan Corp.,
Series 2001-A, Class A1,
5.76%, 07/01/12.............. 3,071,180
1,039,062 PBG Equipment Trust, Series 1A,
Class A,
6.27%, 01/20/12.............. 1,040,347
2,400,000 Providian Gateway Master
Trust -- 144A, Series
2004-FA, Class A,
3.65%, 11/15/11.............. 2,339,626
------------
48,586,712
------------
</Table>
See notes to financial statements.
76
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: TRANSPORTATION -- 0.9%
$ 2,150,000 E-Trade RV and Marine Trust,
Series 2004-1, Class A3,
3.62%, 10/08/18.............. $ 2,030,972
79,061 Railcar Leasing LLC -- 144A,
Series 1, Class A1,
6.75%, 07/15/06.............. 79,152
5,000,000 Railcar Leasing LLC, Series 1,
Class A2,
7.13%, 01/15/13.............. 5,156,175
------------
7,266,299
------------
PRIVATE ASSET BACKED: UTILITIES -- 0.3%
2,819,429 PECO Energy Transition Trust,
Series 1999-A, Class A6,
6.05%, 03/01/09.............. 2,827,183
------------
SPECIAL PURPOSE ENTITY -- 0.9%
2,500,000 New York Life Global
Funding -- 144A,
3.88%, 01/15/09.............. 2,396,925
5,000,000 New York Life Global
Funding -- 144A, Floating
Rate,
5.27%, 02/26/07(b)........... 5,002,485
------------
7,399,410
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.0%
9,150,000 SBC Communications, Inc.,
4.13%, 09/15/09.............. 8,699,399
4,075,000 Sprint Capital Corp.,
6.38%, 05/01/09.............. 4,141,484
3,275,000 Sprint Capital Corp.,
7.63%, 01/30/11.............. 3,489,342
------------
16,330,225
------------
TRANSPORTATION -- 1.3%
10,000,000 Union Pacific Corp.,
7.25%, 11/01/08.............. 10,371,910
------------
UTILITIES -- 3.2%
6,725,000 Alabama Power Company, Series
G,
5.38%, 10/01/08.............. 6,682,416
3,000,000 Consolidated Edison Company of
New York, Inc.,
4.70%, 06/15/09.............. 2,924,751
1,750,000 Metropolitan Edison Company,
4.45%, 03/15/10.............. 1,665,946
3,195,000 Northern States Power
Company -- Minnesota,
6.88%, 08/01/09.............. 3,280,572
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES (CONTINUED)
$ 5,200,000 Northern States Power
Company -- Wisconsin,
7.64%, 10/01/08.............. $ 5,390,882
6,234,000 Ohio Edison,
4.00%, 05/01/08.............. 6,033,290
------------
25,977,857
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $619,736,519).......... 608,386,309
------------
US TREASURY SECURITIES -- 2.4%
US TREASURY NOTES
20,000,000 4.25%, 11/30/07(h)
(Cost $19,938,778)........... 19,742,200
------------
US GOVERNMENT AGENCY SECURITIES -- 21.4%
FANNIE MAE -- 3.2%
7,000,000 3.00%, 03/02/07................ 6,885,577
3,800,000 5.25%, 06/15/08................ 3,786,179
864,537 PL# 254062, 6.00%, 10/01/11.... 866,095
1,867,279 PL# 254754, 4.50%, 05/01/10.... 1,800,065
2,774,139 PL# 254758, 4.50%, 06/01/13.... 2,674,971
1,379,248 PL# 254805, 5.00%, 06/01/13.... 1,350,519
2,674,505 PL# 254807, 5.00%, 07/01/13.... 2,618,770
698,444 PL# 323743, 5.00%, 04/01/14.... 675,065
405,440 PL# 429168, 6.00%, 05/01/13.... 407,004
272,595 PL# 50903, 6.00%, 09/01/08..... 272,216
358,100 PL# 50973, 6.00%, 01/01/09..... 357,603
438,810 PL# 517699, 6.00%, 07/01/14.... 440,344
1,317,839 PL# 545038, 6.00%, 09/01/14.... 1,321,722
2,862,686 PL# 555154, 5.50%, 12/01/22.... 2,788,262
202,168 PL# 609771, 6.00%, 09/01/08.... 203,394
------------
26,447,786
------------
FEDERAL HOME LOAN BANK -- 2.7%
7,500,000 4.00%, 04/25/07................ 7,407,675
10,000,000 Series 623,
4.63%, 07/18/07.............. 9,912,130
5,321,512 Series 6T-9009,
3.84%, 11/25/09.............. 5,065,414
------------
22,385,219
------------
FREDDIE MAC -- 1.2%
4,555,000 4.25%, 02/28/07................ 4,517,376
5,000,000 4.50%, 04/18/07................ 4,955,895
------------
9,473,271
------------
FREDDIE MAC GOLD -- 0.9%
157,052 PL# E00532, 6.50%, 02/01/13.... 159,097
275,142 PL# E00542, 6.50%, 04/01/13.... 278,702
723,959 PL# E00676, 5.50%, 06/01/14.... 711,555
1,072,040 PL# E89557, 5.50%, 04/01/17.... 1,054,028
</Table>
See notes to financial statements.
77
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 3,977,694 PL# G40426, 5.50%, 03/01/11.... $ 3,938,137
937,314 PL# M90802, 4.00%, 03/01/08.... 905,025
------------
7,046,544
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.2%
2,035,248 PL# 436708, 5.75%, 12/15/22.... 2,013,861
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 12.6%
1,721,033 Fannie Mae -- ACES, Series
1998-M1, Class A2,
6.25%, 01/25/08.............. 1,725,264
416,141 Fannie Mae, Series 1993-234,
Class PC,
5.50%, 12/25/08.............. 415,101
5,400,000 Fannie Mae, Series 2003-32,
Class PE,
4.00%, 03/25/26.............. 5,178,911
2,083,631 Fannie Mae, Series 2003-34,
Class GT,
4.00%, 01/25/27.............. 2,033,424
4,242,869 Fannie Mae, Series 2003-46,
Class PQ,
3.00%, 06/25/19.............. 4,195,094
2,550,000 Fannie Mae, Series 2003-62,
Class OD,
3.50%, 04/25/26.............. 2,409,863
2,123,329 Fannie Mae, Series 2003-63,
Class GU,
4.00%, 07/25/33.............. 2,070,590
1,323,636 Fannie Mae, Series 2003-67,
Class GL,
3.00%, 01/25/25.............. 1,279,555
5,857,363 Fannie Mae, Series 2003-69,
Class GJ,
3.50%, 12/25/31.............. 5,450,036
4,784,826 Fannie Mae, Series 2003-92,
Class KQ,
3.50%, 06/25/23.............. 4,652,717
2,159,103 Fannie Mae, Series 2004-21,
Class QA,
4.00%, 11/25/17.............. 2,137,013
3,217,330 Fannie Mae, Series 2004-70,
Class DN,
4.00%, 12/25/29.............. 3,041,592
6,240,302 Fannie Mae, Series 2004-80,
Class LG,
4.00%, 10/25/16.............. 6,030,166
7,161,542 Federal Home Loan Bank, Series
00-0582, Class H,
4.75%, 10/25/10.............. 6,957,997
5,075,153 Federal Home Loan Bank, Series
1Y-9009, Class A,
4.06%, 08/25/09.............. 4,878,014
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 2,631,692 Federal Home Loan Bank, Series
3Q-9009, Class 1,
3.92%, 09/25/09.............. $ 2,515,697
1,524,035 Freddie Mac, Series 2454, Class
BG,
6.50%, 08/15/31.............. 1,536,551
2,412,562 Freddie Mac, Series 2614, Class
JA,
3.76%, 03/15/29.............. 2,275,088
6,410,111 Freddie Mac, Series 2625, Class
JD,
3.25%, 07/15/17.............. 5,979,022
5,763,519 Freddie Mac, Series 2627, Class
KP,
2.87%, 12/15/16.............. 5,371,368
6,647,604 Freddie Mac, Series 2630, Class
HC,
4.00%, 01/15/17.............. 6,363,570
5,800,000 Freddie Mac, Series 2631, Class
CD,
4.00%, 10/15/26.............. 5,525,677
6,617,513 Freddie Mac, Series 2637, Class
A,
3.38%, 03/15/18.............. 6,141,742
5,072,174 Freddie Mac, Series 2672, Class
HA,
4.00%, 09/15/16.............. 4,858,634
3,190,846 Freddie Mac, Series 2760, Class
EA,
4.50%, 04/15/13.............. 3,150,366
2,230,796 Freddie Mac, Series 2782, Class
HE,
4.00%, 09/15/17.............. 2,121,526
5,258,973 Freddie Mac, Series 3056, Class
AP,
5.50%, 01/15/27.............. 5,236,973
------------
103,531,551
------------
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.............. 4,804,725
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$180,607,548)................ 175,702,957
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 0.5%
4,000,000 Province of Ontario (Canada),
5.50%, 10/01/08 (Cost
$4,142,000).................. 4,001,540
------------
</Table>
See notes to financial statements.
78
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
MUNICIPAL BONDS -- 0.8%
TEXAS
$ 6,350,000 Brazos Texas Higher Education
Authority, Revenue Bond,
Series A-5,
4.91%, 12/01/40 (Cost
$6,281,539).................. $ 6,252,464
------------
SECURITIES LENDING COLLATERAL -- 3.3%
27,278,625 Securities Lending Collateral
Investment (Note 4)
(Cost $27,278,625)........... 27,278,625
------------
TOTAL SECURITIES
(Cost $857,985,009).......... 841,364,095
------------
REPURCHASE AGREEMENTS -- 0.1%
1,108,158 With Investors Bank and Trust,
dated 06/30/06, 4.76%, due
07/03/06, repurchase proceeds
at maturity $1,108,598
(Collateralized by Small
Business Administration,
8.88%, due 09/25/14, with a
value of $1,163,566) (Cost
$1,108,158).................. 1,108,158
------------
Total Investments -- 102.7%
(Cost $859,093,167).......... 842,472,253
Liabilities less other
assets -- (2.7)%............. (22,088,625)
------------
NET ASSETS -- 100.0%........... $820,383,628
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $859,093,167.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 141,970
Gross unrealized depreciation.......... (16,762,884)
------------
Net unrealized depreciation............ $(16,620,914)
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
79
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 68.6%
US TREASURY NOTES
$19,731,000 7.00%, 07/15/06................ $ 19,744,891
20,382,000 4.63%, 02/29/08(h)............. 20,202,863
11,525,000 4.00%, 06/15/09(h)............. 11,174,306
13,697,000 3.63%, 07/15/09................ 13,129,328
2,050,000 4.50%, 02/28/11................ 1,999,552
41,823,000 4.88%, 02/15/12(h)............. 41,378,671
5,713,000 4.50%, 11/15/15................ 5,443,421
------------
TOTAL US TREASURY SECURITIES
(Cost $113,201,769).......... 113,073,032
------------
US GOVERNMENT AGENCY SECURITIES -- 9.8%
FANNIE MAE -- 2.3%
1,062,678 PL# 607848, 6.50%, 11/01/31.... 1,072,703
143,119 PL# 642312, 6.50%, 05/01/32.... 144,427
87,644 PL# 648057, 6.50%, 07/01/32.... 88,857
2,091,071 PL# 648688, 6.50%, 07/01/32.... 2,119,714
408,212 PL# 685402, 6.50%, 01/01/33.... 413,808
------------
3,839,509
------------
FREDDIE MAC -- 7.1%
11,900,000 4.38%, 11/16/07................ 11,727,747
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.4%
611,039 PL# 615244,
6.50%, 06/15/33.............. 619,196
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$16,379,093)................. 16,186,452
------------
CORPORATE BONDS AND NOTES -- 18.8%
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT -- 3.6%
441,000 Navistar Financial Corp. Owner
Trust, Series 2005-A, Class
A4,
4.43%, 01/15/14.............. 427,064
2,267,000 Triad Auto Receivables Owner
Trust, Series 2006-A, Class
A4,
4.88%, 04/12/13.............. 2,219,041
2,973,000 Wachovia Auto Owner Trust,
Series 2005-B, Class A5,
4.93%, 11/20/12.............. 2,906,047
356,000 WFS Financial Owner Trust,
Series 2005-3, Class A4,
4.39%, 05/17/13.............. 347,742
------------
5,899,894
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 0.7%
1,173,000 Citibank Credit Card Issuance
Trust, Series 2006-A3, Class
A3,
5.30%, 03/15/18.............. 1,132,417
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 2.3%
$ 1,735,000 Greenwich Capital Commercial
Funding Corp., Series
2005-GG3, Class A3,
4.57%, 08/10/42.............. $ 1,639,903
200,000 Greenwich Capital Commercial
Funding Corp., Series
2005-GG5, Class A41,
5.24%, 04/10/37.............. 193,498
2,117,000 Morgan Stanley Capital I,
Series 2005-T17, Class A5,
4.78%, 12/13/41.............. 1,965,099
------------
3,798,500
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 9.5%
1,044,000 Ameriquest Mortgage Securities,
Inc., Series 2003-IA1, Class
A4, 4.97%, 11/25/33.......... 1,023,414
2,060,000 Banc of America Commercial
Mortgage, Inc., Series
2005-6, Class A4, Variable
Rate, 5.18%, 09/10/47(a)..... 1,969,681
1,771,000 Citigroup Commercial Mortgage
Trust, Series 2004-C2, Class
A5, 4.73%, 10/15/41.......... 1,642,585
2,238,000 Citigroup/Deutsche Bank
Commercial Mortgage Trust,
Series 2006-CD2, Class A4,
5.55%, 01/15/46.............. 2,160,542
3,356,000 Commercial Mortgage
Pass-Through Certificates,
Series 2005-C6, Class A5A,
5.12%, 06/10/44.............. 3,175,885
1,306,000 Credit-Based Asset Servicing
and Securities, Series
2005-CB3, Class AF2,
4.45%, 12/25/34.............. 1,277,729
564,000 GS Mortgage Securities Corp. II
Series 2005-GG4, Class A3,
4.61%, 07/10/39.............. 531,686
3,443,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-LDP3, Class A4A,
4.94%, 08/15/42.............. 3,213,307
792,000 Renaissance Home Equity Loan
Trust, Series 2006-2, Class
AF3, 5.80%, 08/25/36......... 792,000
------------
15,786,829
------------
PRIVATE ASSET BACKED: OTHER -- 1.0%
1,690,000 John Deere Owner Trust, Series
2006-A, Class A4,
5.39%, 06/17/13.............. 1,645,372
------------
</Table>
See notes to financial statements.
80
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: UTILITIES -- 1.7%
$ 1,355,000 Centerpoint Energy Transition
Bond Company, Series 2005-A,
Class A3,
5.09%, 08/01/15.............. $ 1,310,496
1,386,000 PSE&G Transition Funding LLC,
Series 2001-1, Class A8,
6.89%, 12/15/17.............. 1,493,218
------------
2,803,714
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $32,231,009)........... 31,066,726
------------
SECURITIES LENDING COLLATERAL -- 31.6%
52,114,730 Securities Lending Collateral
Investment (Note 4)
(Cost $52,114,730)........... 52,114,730
------------
TOTAL SECURITIES (Cost
$213,926,601)................ 212,440,940
------------
REPURCHASE AGREEMENTS -- 0.6%
1,036,822 With Investors Bank and Trust,
dated 06/30/06, 4.76%, due
07/03/06, repurchase proceeds
at maturity $1,037,233
(Collateralized by Government
National Mortgage
Association,
5.00%, due 10/20/32 with a
value of $1,088,663) (Cost
$1,036,822).................. 1,036,822
------------
Total Investments -- 129.4%
(Cost $214,963,423).......... 213,477,762
Liabilities less other
assets -- (29.4)%............ (48,454,960)
------------
NET ASSETS -- 100.0%........... $165,022,802
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $214,963,423.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 31,415
Gross unrealized depreciation........... (1,517,076)
-----------
Net unrealized depreciation............. $(1,485,661)
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
81
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US TREASURY SECURITIES -- 12.1%
US TREASURY NOTES -- 11.2%
$ 30,470,000 4.25%, 11/30/07(h).......... $ 30,077,242
30,100,000 4.63%, 03/31/08............. 29,824,886
157,700,000 4.88%, 05/31/08............. 156,868,447
13,705,000 4.50%, 02/15/16............. 13,043,309
--------------
229,813,884
--------------
US TREASURY STRIPS -- 0.9%
12,125,000 Zero coupon, 11/15/21....... 5,362,694
38,580,000 Zero coupon, 11/15/27....... 12,617,010
--------------
17,979,704
--------------
TOTAL US TREASURY SECURITIES
(Cost $248,657,696)....... 247,793,588
--------------
US GOVERNMENT AGENCY SECURITIES -- 38.2%
FANNIE MAE -- 23.3%
13,850,000 4.00%, 10/16/06............. 13,792,190
25,850,000 2.71%, 01/30/07............. 25,440,252
14,090,000 2.35%, 04/05/07............. 13,762,281
10,200,000 4.63%, 05/01/13............. 9,584,338
16,801 PL# 251892, 6.00%,
07/01/08.................. 16,777
349,869 PL# 252571, 7.00%,
07/01/29.................. 358,802
37,244 PL# 252635, 6.00%,
07/01/09.................. 37,221
5,651 PL# 252716, 7.00%,
09/01/29.................. 5,796
1,421 PL# 253264, 7.00%,
05/01/30.................. 1,457
1,175 PL# 253346, 7.50%,
06/01/30.................. 1,218
16,666 PL# 253479, 7.00%,
10/01/30.................. 17,090
12,324 PL# 253698, 6.00%,
02/01/16.................. 12,370
40,395 PL# 253990, 7.00%,
09/01/16.................. 41,441
30,877 PL# 254008, 7.00%,
10/01/31.................. 31,646
65,764 PL# 254047, 6.00%,
11/01/16.................. 66,023
40,757 PL# 254235, 6.00%,
03/01/17.................. 40,926
414,285 PL# 254346, 6.50%,
06/01/32.................. 418,071
504,197 PL# 254369, 6.00%,
06/01/12.................. 505,432
358,362 PL# 254406, 6.50%,
08/01/32.................. 361,636
244,328 PL# 255950, 6.00%,
09/01/15.................. 245,643
713,542 PL# 256137, 6.00%,
02/01/16.................. 717,380
755,145 PL# 256335, 6.00%,
07/01/16.................. 757,743
364,455 PL# 323366, 6.00%,
11/01/08.................. 363,980
1,076,578 PL# 323842, 5.50%,
07/01/14.................. 1,058,832
58,243 PL# 323967, 7.00%,
10/01/29.................. 59,730
2,707,759 PL# 357327, 5.00%,
01/01/18.................. 2,614,652
86,296 PL# 448444, 6.00%,
10/01/13.................. 86,629
92,780 PL# 484832, 6.00%,
04/01/14.................. 93,105
5,376 PL# 492742, 7.00%,
05/01/29.................. 5,513
7,383 PL# 503916, 7.50%,
06/01/29.................. 7,656
2,251 PL# 508415, 7.00%,
08/01/29.................. 2,309
14,344 PL# 515946, 7.00%,
10/01/29.................. 14,711
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 484 PL# 524164, 7.00%,
11/01/29.................. $ 496
115,295 PL# 524657, 7.00%,
01/01/30.................. 118,227
24,813 PL# 526053, 7.00%,
12/01/29.................. 25,447
585 PL# 527717, 7.50%,
01/01/30.................. 606
8,746 PL# 528107, 7.00%,
02/01/30.................. 8,969
1,323 PL# 531092, 7.50%,
10/01/29.................. 1,372
13,814 PL# 531497, 7.00%,
02/01/30.................. 14,165
6,541 PL# 531735, 7.00%,
02/01/30.................. 6,708
960 PL# 533841, 7.50%,
12/01/30.................. 994
27,943 PL# 535030, 7.00%,
12/01/29.................. 28,656
41,781 PL# 535103, 7.00%,
01/01/15.................. 42,887
11,068 PL# 535159, 7.00%,
02/01/30.................. 11,350
51,163 PL# 535195, 7.00%,
03/01/30.................. 52,469
3,812,510 PL# 535238, 6.00%,
02/01/14.................. 3,827,220
16,821 PL# 535277, 7.00%,
04/01/30.................. 17,251
536,042 PL# 535675, 7.00%,
01/01/16.................. 550,043
1,128 PL# 535722, 7.00%,
02/01/31.................. 1,157
7,546 PL# 535723, 7.00%,
02/01/31.................. 7,738
1,762 PL# 535811, 6.50%,
04/01/31.................. 1,779
119,371 PL# 535880, 7.00%,
02/01/31.................. 122,415
3,245 PL# 540211, 7.50%,
06/01/30.................. 3,363
6,023 PL# 542999, 7.50%,
08/01/30.................. 6,242
116,281 PL# 545194, 7.00%,
08/01/31.................. 119,179
38,499 PL# 545477, 7.00%,
03/01/32.................. 39,452
282,252 PL# 545759, 6.50%,
07/01/32.................. 284,831
1,097,582 PL# 545760, 6.50%,
07/01/32.................. 1,107,612
207,783 PL# 545762, 6.50%,
07/01/32.................. 209,681
39,423 PL# 545815, 7.00%,
07/01/32.................. 40,405
67,681 PL# 548822, 7.00%,
08/01/30.................. 69,402
48,762 PL# 549659, 7.00%,
02/01/16.................. 50,025
16,532 PL# 549962, 7.00%,
10/01/30.................. 16,952
49,130 PL# 549975, 7.00%,
10/01/30.................. 50,379
5,978 PL# 550440, 7.00%,
02/01/16.................. 6,132
51 PL# 550544, 7.50%,
09/01/30.................. 53
61,551 PL# 554493, 7.00%,
10/01/30.................. 63,116
317,365 PL# 555114, 5.50%,
12/01/17.................. 312,212
37,993 PL# 555144, 7.00%,
10/01/32.................. 38,960
271,392 PL# 555195, 6.00%,
11/01/17.................. 272,514
495,297 PL# 555254, 6.50%,
01/01/33.................. 499,969
283,831 PL# 555798, 6.50%,
05/01/33.................. 286,508
1,625 PL# 558362, 7.50%,
11/01/30.................. 1,684
712 PL# 558519, 7.50%,
11/01/30.................. 738
8,218 PL# 559277, 7.00%,
10/01/30.................. 8,427
41,359 PL# 559313, 7.00%,
12/01/30.................. 42,411
2,371 PL# 559741, 7.50%,
01/01/31.................. 2,453
32,708 PL# 560384, 7.00%,
11/01/30.................. 33,540
1,465 PL# 560596, 7.50%,
01/01/31.................. 1,518
</Table>
See notes to financial statements.
82
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 2,886 PL# 561678, 7.50%,
12/01/30.................. $ 2,991
1,506 PL# 564080, 7.50%,
12/01/30.................. 1,561
21,546 PL# 564183, 7.00%,
12/01/30.................. 22,094
1,761 PL# 564529, 7.50%,
12/01/30.................. 1,825
20,994 PL# 566658, 7.00%,
02/01/31.................. 21,517
52,524 PL# 574885, 6.00%,
05/01/16.................. 52,731
6,473 PL# 575285, 7.50%,
03/01/31.................. 6,697
10,045 PL# 577525, 6.00%,
05/01/16.................. 10,084
8,987 PL# 579161, 6.50%,
04/01/31.................. 9,072
182,290 PL# 579224, 6.00%,
04/01/16.................. 183,008
15,163 PL# 580179, 7.00%,
10/01/16.................. 15,555
709 PL# 580377, 7.50%,
04/01/31.................. 735
311,140 PL# 583901, 6.00%,
07/01/16.................. 312,366
9,763 PL# 584811, 7.00%,
05/01/31.................. 10,006
174,014 PL# 585248, 7.00%,
06/01/31.................. 178,439
46,285 PL# 589395, 6.00%,
07/01/16.................. 46,467
1,142 PL# 589405, 7.50%,
06/01/31.................. 1,181
10,375 PL# 589893, 7.00%,
06/01/31.................. 10,634
4,731 PL# 592129, 7.50%,
06/01/31.................. 4,895
45,635 PL# 592885, 6.00%,
06/01/16.................. 45,815
9,700 PL# 596895, 6.50%,
07/01/31.................. 9,792
116,891 PL# 596922, 6.00%,
08/01/16.................. 117,352
19,490 PL# 598125, 7.00%,
09/01/16.................. 19,995
46,032 PL# 600259, 6.00%,
08/01/16.................. 46,214
9,686 PL# 606551, 6.50%,
10/01/31.................. 9,777
5,692 PL# 606600, 7.00%,
10/01/31.................. 5,834
58,843 PL# 607386, 5.50%,
11/01/16.................. 57,877
6,119,057 PL# 609558, 6.00%,
11/01/16.................. 6,143,163
22,611 PL# 610128, 7.00%,
10/01/31.................. 23,175
260,718 PL# 610579, 5.50%,
12/01/16.................. 256,440
26,949 PL# 611323, 7.00%,
10/01/16.................. 27,647
349,098 PL# 614259, 6.00%,
12/01/16.................. 350,473
255,695 PL# 617272, 6.00%,
01/01/17.................. 256,702
2,209,381 PL# 619054, 5.50%,
02/01/17.................. 2,173,504
280,659 PL# 619920, 6.00%,
01/01/12.................. 281,225
6,829 PL# 622119, 6.50%,
01/01/32.................. 6,893
288,945 PL# 624035, 6.50%,
01/01/32.................. 292,948
14,679 PL# 629236, 6.50%,
02/01/32.................. 14,814
807,014 PL# 631321, 5.50%,
02/01/17.................. 793,910
65,149 PL# 631606, 5.50%,
03/01/17.................. 64,091
52,181 PL# 632269, 7.00%,
05/01/32.................. 53,481
77,254 PL# 632500, 6.00%,
03/01/17.................. 77,574
140,755 PL# 633651, 6.00%,
04/01/17.................. 141,337
9,307 PL# 634563, 6.50%,
03/01/32.................. 9,392
91,868 PL# 634949, 7.00%,
05/01/32.................. 94,143
309,390 PL# 635164, 6.50%,
08/01/32.................. 312,218
4,098 PL# 644884, 6.00%,
06/01/17.................. 4,115
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 2,569 PL# 644932, 6.50%,
07/01/32.................. $ 2,593
5,646 PL# 647556, 7.00%,
01/01/30.................. 5,791
616,474 PL# 648795, 6.50%,
08/01/32.................. 622,107
555,435 PL# 650194, 6.00%,
10/01/17.................. 557,731
200,404 PL# 650206, 5.50%,
01/01/18.................. 197,150
71,804 PL# 650291, 6.50%,
07/01/32.................. 72,460
10,336 PL# 650872, 7.00%,
07/01/32.................. 10,592
121,447 PL# 650891, 6.50%,
07/01/32.................. 122,557
292,303 PL# 651649, 6.50%,
08/01/32.................. 294,974
1,228,076 PL# 652127, 6.50%,
06/01/32.................. 1,239,299
3,715 PL# 663353, 6.50%,
09/01/32.................. 3,749
42,863 PL# 664188, 5.50%,
09/01/17.................. 42,167
83,824 PL# 664194, 5.50%,
09/01/17.................. 82,463
17,145 PL# 669951, 6.00%,
01/01/18.................. 17,216
532,402 PL# 670402, 6.50%,
06/01/32.................. 537,268
235,995 PL# 675314, 5.50%,
12/01/17.................. 232,163
698,670 PL# 675315, 6.00%,
12/01/17.................. 701,558
364,022 PL# 676800, 5.50%,
01/01/18.................. 358,111
517,205 PL# 679631, 5.50%,
02/01/18.................. 508,599
468,462 PL# 683199, 5.50%,
02/01/18.................. 460,666
1,006,891 PL# 694200, 4.50%,
05/01/18.................. 954,241
5,670 PL# 694372, 6.50%,
11/01/32.................. 5,722
100,291 PL# 695925, 5.50%,
05/01/18.................. 98,622
1,682,704 PL# 701161, 4.50%,
04/01/18.................. 1,594,704
625,483 PL# 711636, 4.50%,
05/01/18.................. 592,772
2,574,722 PL# 720317, 5.00%,
07/01/18.................. 2,486,070
10,509,669 PL# 725162, 6.00%,
02/01/34.................. 10,379,609
20,631,806 PL# 725206, 5.50%,
02/01/34.................. 19,909,959
14,919 PL# 725269, 5.50%,
03/01/19.................. 14,676
279,433 PL# 725407, 6.50%,
01/01/34.................. 282,069
30,809 PL# 725416, 6.00%,
01/01/19.................. 30,931
389,074 PL# 725418, 6.50%,
05/01/34.................. 392,744
6,208,224 PL# 725704, 6.00%,
08/01/34.................. 6,131,395
13,999,999 PL# 725717, 4.00%,
08/01/19.................. 12,937,701
13,178,424 PL# 725946, 5.50%,
11/01/34.................. 12,695,631
694,887 PL# 731682, 4.50%,
03/01/19.................. 657,867
6,065,905 PL# 735439, 6.00%,
09/01/19.................. 6,089,802
5,421,980 PL# 735454, 5.50%,
11/01/18.................. 5,333,937
1,461,675 PL# 735611, 5.50%,
03/01/20.................. 1,437,940
33,502,857 PL# 735989, 5.50%,
02/01/35.................. 32,335,388
197,602 PL# 738632, 5.00%,
11/01/18.................. 190,799
6,286,675 PL# 743575, 5.00%,
11/01/18.................. 6,070,216
11,438,156 PL# 745140, 5.00%,
11/01/35.................. 10,702,538
27,627,970 PL# 745412, 5.50%,
12/01/35.................. 26,615,816
648,398 PL# 748257, 4.50%,
10/01/18.................. 614,489
7,168 PL# 748655, 6.50%,
09/01/33.................. 7,224
157,645 PL# 757687, 5.50%,
07/01/34.................. 151,870
</Table>
See notes to financial statements.
83
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 38,037 PL# 761808, 5.50%,
05/01/18.................. $ 37,419
609,191 PL# 766312, 5.50%,
03/01/19.................. 598,655
667,720 PL# 766419, 4.50%,
03/01/19.................. 632,147
286,289 PL# 768313, 5.50%,
01/01/19.................. 281,525
7,617,885 PL# 806549, Variable Rate,
4.57%, 01/01/35(a)........ 7,452,470
2,431,344 PL# 811545, 6.00%,
03/01/21.................. 2,442,139
1,674,715 PL# 811546, 6.00%,
03/01/21.................. 1,682,151
2,616,735 PL# 811560, 6.00%,
05/01/21.................. 2,628,353
1,755,286 PL# 826273, 6.00%,
07/01/20.................. 1,763,015
1,913,919 PL# 831361, 5.50%,
03/01/21.................. 1,879,291
158,863 PL# 831496, 6.00%,
05/01/21.................. 159,569
5,979,600 PL# 831511, 6.00%,
06/01/16.................. 6,000,170
573,648 PL# 844100, 6.00%,
11/01/20.................. 576,174
29,926 PL# 844190, 6.00%,
11/01/20.................. 30,077
669,433 PL# 848379, 6.00%,
12/01/20.................. 672,808
330,568 PL# 848498, 6.00%,
12/01/20.................. 332,236
996,094 PL# 849239, 5.50%,
01/01/21.................. 978,232
9,841,826 PL# 850867, Variable Rate,
5.64%, 01/01/36(a)........ 9,692,748
351,786 PL# 865293, 6.00%,
02/01/21.................. 353,348
517,021 PL# 865903, 6.00%,
03/01/21.................. 519,316
614,952 PL# 868341, 6.00%,
04/01/21.................. 617,682
8,535,543 PL# 868613, 6.00%,
04/01/21.................. 8,573,438
54,418 PL# 871496, 6.00%,
04/01/21.................. 54,660
917,048 PL# 872168, 6.00%,
04/01/21.................. 921,119
1,366,332 PL# 879610, 6.00%,
04/01/21.................. 1,372,398
530,261 PL# 879620, 6.00%,
05/01/21.................. 532,615
1,555,989 PL# 880437, 6.00%,
04/01/21.................. 1,562,840
996,239 PL# 880770, 5.50%,
05/01/21.................. 978,214
171,742 PL# 881577, 6.00%,
06/01/21.................. 172,504
131,625 PL# 881578, 5.50%,
05/01/21.................. 129,243
215,104 PL# 884006, 6.00%,
05/01/21.................. 216,059
988,959 PL# 885071, 5.50%,
05/01/21.................. 971,066
100,000 PL# 891672, 6.00%,
07/01/21.................. 100,444
494,730 PL# 891899, 6.00%,
06/01/21.................. 496,926
46,400,000 TBA, 5.50%, 07/01/21........ 45,544,476
50,000,000 TBA, 6.00%, 07/01/21........ 50,187,499
19,200,000 TBA, 4.50%, 07/01/36........ 17,394,010
38,000,000 TBA, 5.00%, 07/01/36........ 35,529,999
1,000,000 TBA, 5.50%, 07/01/36........ 960,625
16,000,000 TBA, 6.00%, 07/01/36........ 15,750,000
--------------
477,073,922
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC -- 1.7%
$ 16,800,000 4.75%, 06/28/12............. $ 16,185,255
5,804,312 PL# 1B2853, Variable Rate,
4.29%, 04/01/35(a)........ 5,596,904
12,401,603 PL# 1G1119, Variable Rate,
4.77%, 09/01/35(a)........ 11,966,085
--------------
33,748,244
--------------
FREDDIE MAC GOLD -- 6.4%
271,182 PL# A32037, 5.00%,
03/01/35.................. 253,539
28,728 PL# A38585, 5.50%,
10/01/35.................. 27,620
462,763 PL# B10307, 4.50%,
10/01/18.................. 437,846
562,353 PL# B11431, 4.50%,
12/01/18.................. 532,074
56,001 PL# B13285, 4.50%,
04/01/19.................. 52,954
783,480 PL# B14218, 4.50%,
05/01/19.................. 740,853
1,117,409 PL# B14518, 4.50%,
01/01/20.................. 1,056,614
669,620 PL# B16484, 5.00%,
10/01/19.................. 645,708
1,728,175 PL# B17118, 4.50%,
11/01/19.................. 1,634,150
28,150 PL# B17892, 4.50%,
10/01/19.................. 26,634
190,086 PL# B18493, 5.00%,
06/01/20.................. 183,071
430,318 PL# B18530, 5.00%,
06/01/20.................. 414,438
870,160 PL# B19028, 4.50%,
03/01/20.................. 821,801
5,207,760 PL# B19043, 4.50%,
03/01/20.................. 4,918,335
350,697 PL# B19108, 5.00%,
04/01/20.................. 337,755
26,829 PL# B19177, 4.50%,
05/01/20.................. 25,338
1,008,160 PL# B19187, 4.50%,
04/01/20.................. 952,131
204,784 PL# B19188, 4.50%,
05/01/20.................. 193,403
225,869 PL# B19272, 4.50%,
05/01/20.................. 213,317
3,923,944 PL# B19621, 5.00%,
07/01/20.................. 3,779,142
24,252 PL# B19932, 5.00%,
09/01/20.................. 23,357
1,155,435 PL# C01271, 6.50%,
12/01/31.................. 1,167,052
3,411,232 PL# C57150, 6.00%,
05/01/31.................. 3,374,365
4,574 PL# C67653, 7.00%,
06/01/32.................. 4,687
56,831 PL# C67868, 7.00%,
06/01/32.................. 58,239
16,616 PL# C67999, 7.00%,
06/01/32.................. 17,028
123,293 PL# C68001, 7.00%,
06/01/32.................. 126,348
161,308 PL# C90229, 7.00%,
08/01/18.................. 165,884
24,741 PL# E00570, 6.00%,
09/01/13.................. 24,770
526,538 PL# E00592, 6.00%,
12/01/13.................. 527,068
25,092 PL# E00720, 6.00%,
07/01/14.................. 25,115
23,871 PL# E01007, 6.00%,
08/01/16.................. 23,920
78,979 PL# E01095, 6.00%,
01/01/17.................. 79,146
413,274 PL# E01488, 5.00%,
10/01/18.................. 398,835
479,889 PL# E01490, 5.00%,
11/01/18.................. 463,126
34,381 PL# E01638, 4.00%,
04/01/19.................. 31,753
31,383 PL# E69171, 6.00%,
02/01/13.................. 31,403
26,735 PL# E73319, 6.00%,
11/01/13.................. 26,752
38,055 PL# E73769, 6.00%,
12/01/13.................. 38,079
22,197 PL# E75990, 6.00%,
04/01/14.................. 22,229
</Table>
See notes to financial statements.
84
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 33,919 PL# E76341, 6.00%,
04/01/14.................. $ 33,979
57,466 PL# E76730, 6.00%,
05/01/14.................. 57,566
41,464 PL# E76731, 6.00%,
05/01/14.................. 41,536
32,618 PL# E78995, 6.00%,
11/01/14.................. 32,675
279,454 PL# E84191, 6.00%,
07/01/16.................. 280,054
5,430 PL# E84758, 5.50%,
07/01/16.................. 5,338
21,646 PL# E85885, 6.00%,
11/01/16.................. 21,693
316,278 PL# E86502, 5.50%,
12/01/16.................. 310,896
5,280 PL# E86565, 5.50%,
12/01/16.................. 5,190
260,875 PL# E87961, 6.00%,
02/01/17.................. 261,436
451,429 PL# E88001, 6.00%,
02/01/17.................. 452,455
55,636 PL# E88452, 6.00%,
03/01/17.................. 55,763
320,127 PL# E88749, 6.00%,
03/01/17.................. 320,815
581,842 PL# E88789, 6.00%,
04/01/17.................. 583,165
164,717 PL# E88979, 5.50%,
04/01/17.................. 161,949
376,104 PL# E89282, 6.00%,
04/01/17.................. 376,959
712,828 PL# E89336, 6.00%,
05/01/17.................. 714,449
28,696 PL# E89653, 6.00%,
04/01/17.................. 28,757
539,128 PL# E89913, 6.00%,
05/01/17.................. 540,354
950,046 PL# E91644, 5.50%,
10/01/17.................. 934,083
280,873 PL# E91754, 5.50%,
10/01/17.................. 276,154
392,612 PL# E91774, 5.50%,
10/01/17.................. 386,015
183,275 PL# E91968, 5.50%,
10/01/17.................. 180,195
358,686 PL# E92113, 5.50%,
10/01/17.................. 352,659
26,975 PL# E95352, 4.50%,
04/01/18.................. 25,523
56,144 PL# E98821, 4.50%,
09/01/18.................. 53,121
1,586,669 PL# G01391, 7.00%,
04/01/32.................. 1,626,480
19,567 PL# G11111, 6.00%,
04/01/16.................. 19,606
127,165 PL# G11394, 4.50%,
05/01/18.................. 120,318
7,938,512 PL# G11618, 4.50%,
05/01/18.................. 7,514,939
480,411 PL# G11639, 4.50%,
12/01/19.................. 454,273
3,492,791 PL# G11681, 5.00%,
04/01/20.................. 3,368,061
9,703,273 PL# G11720, 4.50%,
08/01/20.................. 9,175,346
456,775 PL# G11753, 5.00%,
08/01/20.................. 439,919
15,187,674 PL# G11769, 5.00%,
10/01/20.................. 14,627,216
8,162,775 PL# G11777, 5.00%,
10/01/20.................. 7,861,551
19,627,795 PL# G11879, 5.00%,
10/01/20.................. 18,903,487
11,499,400 PL# G11880, 5.00%,
12/01/20.................. 11,075,047
221,713 PL# G18052, 4.50%,
05/01/20.................. 209,391
1,245,801 PL# G18065, 5.00%,
07/01/20.................. 1,199,829
1,731,313 PL# J00147, 5.00%,
10/01/20.................. 1,667,424
2,843,918 PL# J00156, 5.00%,
10/01/20.................. 2,738,971
364,354 PL# J00159, 5.00%,
10/01/20.................. 350,909
433,172 PL# J00328, 5.00%,
11/01/20.................. 417,187
450,674 PL# J00604, 5.00%,
12/01/20.................. 434,580
2,299,150 PL# J00726, 5.00%,
12/01/20.................. 2,214,307
707,240 PL# J00731, 5.00%,
12/01/20.................. 681,142
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FREDDIE MAC GOLD (CONTINUED)
$ 680,391 PL# J00733, 5.00%,
12/01/20.................. $ 655,283
3,620,214 PL# J02239, 5.00%,
07/01/20.................. 3,486,621
3,740,108 PL# J02590, 5.00%,
10/01/20.................. 3,602,090
107,408 PL# J02616, 5.00%,
10/01/20.................. 103,445
358,495 PL# J02621, 5.00%,
10/01/20.................. 345,266
3,581,036 PL# M80813, 4.00%,
04/01/10.................. 3,405,723
3,000,000 TBA, 5.50%, 07/01/21........ 2,942,814
--------------
130,009,883
--------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.6%
141,014 PL# 3173, 6.50%, 12/20/31... 142,484
1,083 PL# 434615, 7.00%,
11/15/29.................. 1,118
196,674 PL# 435071, 7.00%,
03/15/31.................. 202,977
43,996 PL# 462559, 7.00%,
02/15/28.................. 45,405
27,088 PL# 493966, 7.00%,
06/15/29.................. 27,962
64,795 PL# 494742, 7.00%,
04/15/29.................. 66,886
1,512 PL# 530260, 7.00%,
02/15/31.................. 1,561
232,903 PL# 531025, 6.00%,
04/15/32.................. 231,452
910 PL# 538271, 7.00%,
11/15/31.................. 939
95,431 PL# 538312, 6.00%,
02/15/32.................. 94,836
165,889 PL# 543989, 7.00%,
03/15/31.................. 171,205
804 PL# 547545, 7.00%,
04/15/31.................. 830
382,169 PL# 550985, 7.00%,
10/15/31.................. 394,416
252 PL# 551549, 7.00%,
07/15/31.................. 260
42,783 PL# 552413, 7.00%,
02/15/32.................. 44,148
105,393 PL# 554808, 6.00%,
05/15/31.................. 104,742
97,763 PL# 555360, 6.00%,
06/15/31.................. 97,160
84,632 PL# 555733, 6.00%,
03/15/32.................. 84,104
853 PL# 557664, 7.00%,
08/15/31.................. 880
55,612 PL# 557678, 7.00%,
08/15/31.................. 57,394
3,873 PL# 561050, 7.00%,
05/15/31.................. 3,997
913 PL# 561996, 7.00%,
07/15/31.................. 942
12,461 PL# 563346, 7.00%,
09/15/31.................. 12,861
60,151 PL# 563599, 7.00%,
06/15/32.................. 62,069
157,573 PL# 564086, 7.00%,
07/15/31.................. 162,623
44,675 PL# 564300, 6.00%,
08/15/31.................. 44,399
8,998 PL# 564706, 7.00%,
07/15/31.................. 9,286
84,393 PL# 565808, 6.00%,
11/15/31.................. 83,872
204,589 PL# 567622, 6.00%,
04/15/32.................. 203,315
97,146 PL# 569567, 7.00%,
01/15/32.................. 100,244
77,918 PL# 570517, 6.00%,
01/15/32.................. 77,432
40,102 PL# 572821, 6.00%,
12/15/31.................. 39,855
94,047 PL# 574873, 6.00%,
12/15/31.................. 93,466
89,539 PL# 575906, 6.00%,
01/15/32.................. 88,981
35,426 PL# 576323, 6.00%,
12/15/31.................. 35,207
1,305 PL# 579377, 7.00%,
04/15/32.................. 1,346
</Table>
See notes to financial statements.
85
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 237,305 PL# 581015, 7.00%,
02/15/32.................. $ 244,873
94,264 PL# 581070, 6.00%,
02/15/32.................. 93,677
90,232 PL# 582956, 7.00%,
02/15/32.................. 93,109
290,044 PL# 587122, 7.00%,
06/15/32.................. 299,294
5,057 PL# 587494, 7.00%,
06/15/32.................. 5,218
961 PL# 589696, 7.00%,
05/15/32.................. 991
77,397 PL# 592030, 6.00%,
02/15/32.................. 76,915
20,053 PL# 780802, 6.50%,
05/15/28.................. 20,368
34,601 PL# 781113, 7.00%,
11/15/29.................. 35,717
203,165 PL# 781148, 6.00%,
07/15/29.................. 202,211
106,460 PL# 781276, 6.50%,
04/15/31.................. 108,102
31,197 PL# 781287, 7.00%,
05/15/31.................. 32,205
49,692 PL# 781324, 7.00%,
07/15/31.................. 51,290
269,669 PL# 781328, 7.00%,
09/15/31.................. 278,374
193,328 PL# 781330, 6.00%,
09/15/31.................. 192,375
54,758 PL# 781496, 6.50%,
09/15/32.................. 55,545
73,612 PL# 781548, 7.00%,
11/15/32.................. 75,976
43,493 PL# 781584, 7.00%,
05/15/32.................. 44,893
7,770,123 PL# 80916, 3.75%,
05/20/34.................. 7,550,826
--------------
12,252,613
--------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 5.9%
2,596,077 Fannie Mae, Series 1999-7,
Class AB,
6.00%, 03/25/29........... 2,564,661
8,956,387 Fannie Mae, Series 2003-35,
Class TE,
5.00%, 05/25/18........... 8,636,811
5,330,511 Fannie Mae, Series 2004-101,
Class AR,
5.50%, 01/25/35........... 5,271,854
6,660,711 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34........... 6,468,554
7,766,410 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34........... 7,652,624
13,637,040 Fannie Mae, Series 2005-47,
Class PA,
5.50%, 09/25/24........... 13,573,247
7,125,037 Fannie Mae, Series 2005-51,
Class TA,
5.50%, 12/25/33........... 7,019,708
4,943,505 Fannie Mae, Series 2005-57,
Class PA,
5.50%, 05/25/27........... 4,918,857
267,253 Fannie Mae, Series 2005-70,
Class NA,
5.50%, 08/25/35........... 263,260
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 10,012,397 Fannie Mae, Series 2005-80,
Class PB,
5.50%, 04/25/30........... $ 9,951,796
6,319,743 Freddie Mac, Series 2825,
Class VP,
5.50%, 06/15/15........... 6,263,221
4,568,731 Freddie Mac, Series 2877,
Class PA,
5.50%, 07/15/33........... 4,518,290
8,775,461 Freddie Mac, Series 2927,
Class BA,
5.50%, 10/15/33........... 8,683,796
14,750,957 Freddie Mac, Series 2984,
Class NA,
5.50%, 04/15/26........... 14,671,186
6,655,852 Freddie Mac, Series 2996,
Class MK,
5.50%, 06/15/35........... 6,581,406
14,330,863 Freddie Mac, Series 3138,
Class PA,
5.50%, 02/15/27........... 14,244,403
--------------
121,283,674
--------------
PRIVATE ASSET BACKED: US GOVERNMENT
AGENCIES -- 0.2%
2,404,716 Small Business
Administration, Series
2002-P10B, Class I, 5.20%,
08/01/12.................. 2,349,205
2,527,306 Small Business
Administration, Series
2004-P10A,
4.50%, 02/10/14........... 2,382,134
--------------
4,731,339
--------------
RESOLUTION FUNDING STRIPS -- 0.1%
1,200,000 Zero coupon, 07/15/18....... 628,065
1,200,000 Zero coupon, 10/15/18....... 619,430
--------------
1,247,495
--------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$795,184,329)............. 780,347,170
--------------
CORPORATE BONDS AND NOTES -- 57.9%
AEROSPACE AND DEFENSE -- 0.2%
320,000 B/E Aerospace,
8.50%, 10/01/10........... 339,200
2,390,000 Northrop Grumman Corp.,
4.08%, 11/16/06........... 2,376,565
675,000 United Technologies Corp.,
8.88%, 11/15/19........... 845,614
--------------
3,561,379
--------------
</Table>
See notes to financial statements.
86
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.1%
$ 765,000 Daimler Chrysler AG Corp.,
7.45%, 03/01/27........... $ 779,911
280,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08........... 270,842
--------------
1,050,753
--------------
BANKS -- 7.9%
85,000 BAC Capital Trust XI,
6.63%, 05/23/36........... 84,238
404,000 Bank of America Corp.,
4.50%, 08/01/10........... 387,759
15,675,000 Bank of America Corp.,
Floating Rate,
5.47%, 03/24/09(b)........ 15,691,992
1,250,000 Bank of Scotland -- 144A
(United Kingdom),
3.50%, 11/30/07........... 1,215,790
2,000,000 BankBoston NA, Series BKNT,
6.38%, 03/25/08........... 2,023,524
26,675,000 Barclays Bank PLC New York,
Series YCD, Floating Rate,
5.32%, 03/13/09(b)........ 26,676,520
6,250,000 Depfa ACS Bank -- 144A
(Ireland),
4.25%, 08/16/10........... 5,971,225
3,850,000 Deutsche Bank AG New York,
Series YCD, Variable Rate,
3.84%, 03/15/07(a)........ 3,837,599
685,000 HBOS PLC -- 144A (United
Kingdom),
Variable Rate,
5.92%, 09/01/49(a)........ 632,160
2,850,000 HBOS Treasury Services
PLC -- 144A (United
Kingdom),
3.75%, 09/30/08........... 2,740,155
11,200,000 HSBC Bank USA NA, Series CD,
3.87%, 06/07/07........... 11,016,589
1,155,000 Huntington National Bank,
Series BKNT,
2.75%, 10/16/06........... 1,145,990
2,600,000 JPMorgan Chase & Company,
5.35%, 03/01/07........... 2,595,104
1,495,000 JPMorgan Chase & Company,
3.63%, 05/01/08........... 1,441,724
2,100,000 JPMorgan Chase & Company,
5.75%, 10/15/08........... 2,100,506
1,100,000 JPMorgan Chase & Company,
7.00%, 11/15/09........... 1,141,092
36,375,000 Rabobank Nederland -- 144A
(the Netherlands),
Floating Rate,
5.01%, 04/06/09(b)........ 36,399,372
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 1,135,000 RBS Capital Trust I,
Variable Rate,
4.71%, perpetual (a)...... $ 1,027,384
2,990,000 SunTrust Banks, Inc.,
3.63%, 10/15/07........... 2,915,313
2,000,000 SunTrust Banks, Inc.,
4.00%, 10/15/08........... 1,932,162
1,535,000 SunTrust Banks, Inc., Series
CD,
4.42%, 06/15/09........... 1,482,050
2,275,000 Swedish Export Credit
(Sweden),
2.88%, 01/26/07........... 2,244,997
2,150,000 The Bank of New York
Company, Inc., Series
BKNT,
3.80%, 02/01/08........... 2,092,937
980,000 UBS Preferred Funding Trust
I, Variable Rate,
8.62%, perpetual (a)...... 1,072,996
490,000 US Bancorp, Series MTNN,
3.95%, 08/23/07........... 479,723
3,040,000 US Bank NA,
2.40%, 03/12/07........... 2,969,381
4,315,000 US Bank NA, Series BKNT,
4.40%, 08/15/08........... 4,222,495
2,270,000 USB Capital IX, Variable
Rate,
6.19%, perpetual (a)...... 2,222,067
540,000 Wachovia Bank NA, Series
BKNT,
4.38%, 08/15/08........... 526,704
9,125,000 Wachovia Bank NA, Series
DPNT, Floating Rate,
5.49%, 03/23/09(b)........ 9,125,383
2,340,000 Wachovia Corp.,
6.30%, 04/15/08........... 2,372,739
2,760,000 Wells Fargo & Company,
4.20%, 01/15/10........... 2,639,634
4,090,000 Wells Fargo & Company,
4.63%, 08/09/10........... 3,949,132
4,525,000 Wells Fargo & Company,
4.88%, 01/12/11........... 4,388,499
--------------
160,764,935
--------------
BROADCAST SERVICES/MEDIA -- 1.2%
320,000 British Sky Broadcasting
Group Financing
PLC -- 144A (United
Kingdom),
6.50%, 10/15/35........... 297,382
5,374,000 Comcast Cable Communications
Holdings,
8.38%, 03/15/13........... 5,976,318
1,800,000 Comcast Cable
Communications, Inc.,
6.75%, 01/30/11........... 1,859,285
965,000 Comcast Corp.,
7.05%, 03/15/33........... 981,937
</Table>
See notes to financial statements.
87
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 2,460,000 Comcast Corp.,
6.50%, 11/15/35........... $ 2,329,504
465,000 Cox Communications, Inc.,
7.75%, 11/01/10........... 492,878
400,000 Echostar DBS Corp. -- 144A,
7.13%, 02/01/16........... 387,000
1,070,000 News America Holdings,
7.63%, 11/30/28........... 1,135,923
1,275,000 News America, Inc.,
7.30%, 04/30/28........... 1,296,454
545,000 News America, Inc.,
7.28%, 06/30/28........... 552,493
865,000 News America, Inc.,
6.20%, 12/15/34........... 787,456
650,000 TCI Communications, Inc.,
7.88%, 02/15/26........... 701,728
1,675,000 TCI Communications, Inc.,
7.13%, 02/15/28........... 1,657,307
725,000 Time Warner Entertainment,
8.38%, 07/15/33........... 822,570
1,910,000 Time Warner, Inc.,
7.57%, 02/01/24........... 2,034,161
2,760,000 Time Warner, Inc.,
6.95%, 01/15/28........... 2,758,700
280,000 Time Warner, Inc.,
7.63%, 04/15/31(d)(e)..... 302,354
--------------
24,373,450
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 0.1%
1,260,000 Oracle Corp.,
5.25%, 01/15/16........... 1,182,162
95,000 SunGard Data Systems,
Inc. -- 144A, Floating
Rate,
9.43%, 08/15/13(k)........ 99,869
--------------
1,282,031
--------------
CONTAINERS AND PACKAGING -- 0.0%
490,000 Owens-Brockway Glass
Container, Inc.,
6.75%, 12/01/14........... 456,925
--------------
ELECTRONICS -- 0.0%
155,000 L-3 Communications Corp.,
Series B,
6.38%, 10/15/15........... 148,800
--------------
EQUIPMENT RENTAL AND LEASING -- 0.0%
225,000 United Rentals North
America, Inc.,
6.50%, 02/15/12........... 213,750
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES -- 6.6%
$ 225,000 American Real Estate
Partners, LP/American Real
Estate Finance Corp.,
7.13%, 02/15/13........... $ 217,125
390,000 American Real Estate
Partners, LP/Financing,
8.13%, 06/01/12........... 390,975
9,050,000 Citigroup, Inc.,
3.50%, 02/01/08........... 8,767,178
14,330,000 Citigroup, Inc.,
3.63%, 02/09/09........... 13,655,859
820,000 Citigroup, Inc.,
6.20%, 03/15/09........... 832,668
8,000,000 Citigroup, Inc.,
4.13%, 02/22/10........... 7,612,184
8,225,000 Eksportfinans ASA, Series
MTN (Norway),
3.38%, 01/15/08........... 7,973,718
14,675,000 General Electric Capital
Corp.,
5.00%, 11/15/11........... 14,209,362
1,220,000 General Electric Capital
Corp.,
6.50%, 09/28/15(t)........ 722,532
2,000,000 General Electric Capital
Corp., Series MTNA,
6.50%, 12/10/07........... 2,023,288
11,925,000 General Electric Capital
Corp., Series MTNA,
4.13%, 09/01/09........... 11,430,613
22,250,000 General Electric Capital
Corp., Series MTNA,
Variable Rate,
3.45%, 01/15/08(a)........ 22,235,293
450,000 HSBC Finance Corp.,
7.20%, 07/15/06........... 450,176
2,925,000 HSBC Finance Corp.,
6.50%, 11/15/08........... 2,978,302
7,310,000 Morgan Stanley,
5.05%, 01/21/11........... 7,096,468
425,000 Morgan Stanley,
6.75%, 04/15/11........... 441,694
23,540,000 Morgan Stanley, Series MTNF,
Floating Rate,
5.29%, 03/07/08(b)........ 23,551,536
350,000 Nationwide Building
Society -- 144A (United
Kingdom),
2.63%, 01/30/07........... 344,165
4,000,000 Nationwide Building
Society -- 144A (United
Kingdom),
3.50%, 07/31/07........... 3,912,704
355,000 Nationwide Building
Society -- 144A (United
Kingdom),
4.25%, 02/01/10........... 338,277
</Table>
See notes to financial statements.
88
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
x$ 1,000,000 The Bear Stearns Companies,
Inc., Series MTNB,
4.55%, 06/23/10........... $ 959,910
2,475,000 TIAA Global Markets -- 144A,
3.88%, 01/22/08........... 2,408,445
1,955,000 USAA Capital Corp., Series
MTNB,
4.00%, 12/10/07........... 1,909,370
--------------
134,461,842
--------------
INSURANCE -- 0.6%
1,775,000 ASIF Global Financial
XXIII -- 144A,
3.90%, 10/22/08........... 1,709,685
2,000,000 Berkshire Hathaway Finance
Corp.,
3.40%, 07/02/07........... 1,958,350
2,850,000 Berkshire Hathaway Finance
Corp.,
3.38%, 10/15/08........... 2,714,706
2,815,000 Berkshire Hathaway Finance
Corp.,
4.13%, 01/15/10........... 2,680,299
2,175,000 Lincoln National Corp.
Variable Rate,
7.00%, 05/17/66(a)........ 2,161,926
--------------
11,224,966
--------------
LEISURE AND RECREATION -- 0.1%
450,000 Mashantucket West
Pequot -- 144A,
5.91%, 09/01/21........... 418,792
1,185,000 MGM MIRAGE,
6.00%, 10/01/09........... 1,158,337
325,000 Mohegan Tribal Gaming
Authority,
6.13%, 02/15/13........... 307,531
--------------
1,884,660
--------------
MANUFACTURING -- 0.2%
395,000 Briggs & Stratton Corp.,
8.88%, 03/15/11(d)(e)..... 428,575
1,575,000 Tyco International Group SA
(Luxembourg),
6.38%, 10/15/11........... 1,608,880
2,980,000 Tyco International Group SA
(Luxembourg),
6.00%, 11/15/13........... 2,956,610
--------------
4,994,065
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 0.4%
3,800,000 Aetna, Inc.,
6.63%, 06/15/36........... 3,770,902
450,000 HCA, Inc.,
5.50%, 12/01/09........... 435,896
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES
(CONTINUED)
$ 465,000 Omnicare, Inc.,
6.88%, 12/15/15........... $ 444,075
2,200,000 UnitedHealth Group, Inc.,
5.80%, 03/15/36........... 1,975,743
1,300,000 WellPoint, Inc.,
5.95%, 12/15/34........... 1,197,550
1,295,000 WellPoint, Inc.,
5.85%, 01/15/36........... 1,160,995
--------------
8,985,161
--------------
METALS AND MINING -- 0.1%
85,000 International Steel Group,
6.50%, 04/15/14........... 80,750
1,999,000 Ispat Inland ULC (Canada),
9.75%, 04/01/14........... 2,206,934
--------------
2,287,684
--------------
OIL AND GAS: PIPELINES -- 0.2%
50,000 ANR Pipeline Company,
9.63%, 11/01/21........... 58,567
10,000 ANR Pipeline Company,
7.38%, 02/15/24........... 9,739
270,000 Colorado Interstate Gas,
6.80%, 11/15/15........... 261,588
1,425,000 Consolidated Natural Gas,
Series A,
5.00%, 03/01/14........... 1,320,781
365,000 El Paso Natural Gas,
8.63%, 01/15/22........... 396,433
15,000 El Paso Natural Gas,
8.38%, 06/15/32........... 16,029
725,000 Northwest Pipeline Corp.,
8.13%, 03/01/10........... 757,625
35,000 Targa Resources,
Inc. -- 144A,
8.50%, 11/01/13........... 33,950
935,000 Transcontinental Gas Pipe
Line Corp., Series B,
8.88%, 07/15/12........... 1,035,513
480,000 Williams Companies, Inc.,
7.63%, 07/15/19........... 489,600
225,000 Williams Companies, Inc.,
7.75%, 06/15/31........... 222,750
--------------
4,602,575
--------------
OIL, COAL AND GAS -- 0.3%
260,000 Chesapeake Energy Corp.,
6.38%, 06/15/15........... 242,450
705,000 Chesapeake Energy Corp.,
6.25%, 01/15/18........... 646,838
275,000 Chesapeake Energy Corp.,
6.88%, 11/15/20........... 255,750
270,000 Compton Petroleum Finance
Corp. (Canada),
7.63%, 12/01/13........... 259,200
</Table>
See notes to financial statements.
89
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$ 2,600,000 Enterprise Products
Operating LP,
4.95%, 06/01/10........... $ 2,494,203
1,225,000 Enterprise Products
Operating LP, Series B,
4.00%, 10/15/07........... 1,192,263
190,000 KCS Energy, Inc.,
7.13%, 04/01/12........... 180,025
200,000 Suncor Energy, Inc.
(Canada),
5.95%, 12/01/34........... 192,983
650,000 Talisman Energy, Inc.
(Canada),
5.85%, 02/01/37........... 575,140
--------------
6,038,852
--------------
PAPER AND FOREST PRODUCTS -- 0.0%
400,000 Catalyst Paper Corp., Series
D (Canada),
8.63%, 06/15/11........... 392,000
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.1%
170,000 Bio-Rad Laboratories, Inc.,
7.50%, 08/15/13........... 171,700
530,000 Bio-Rad Laboratories, Inc.,
6.13%, 12/15/14........... 488,925
600,000 Bristol-Myers Squibb,
6.88%, 08/01/97(d)(e)..... 612,401
1,580,000 Wyeth,
6.00%, 02/15/36........... 1,477,602
--------------
2,750,628
--------------
PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR
VEHICLES AND AUTOMOTIVE EQUIPMENT -- 4.8%
16,200,000 Daimler Chrysler Auto Trust,
Series 2005-B, Class A3,
4.04%, 09/08/09........... 15,987,589
14,770,000 Daimler Chrysler Auto Trust,
Series 2006-B, Class A3,
5.33%, 08/08/10........... 14,726,136
20,311,899 Ford Credit Auto Owner
Trust, Series 2005-A,
Class A3,
3.48%, 11/15/08........... 20,109,849
13,200,000 Ford Credit Auto Owner
Trust, Series 2005-B,
Class A3,
4.17%, 01/15/09........... 13,071,833
18,911,000 Nissan Auto Receivables
Owner Trust, Series
2006-B, Class A4,
5.22%, 11/15/11........... 18,758,479
16,282,471 Wachovia Auto Owner Trust,
Series 2004-A, Class A3,
3.19%, 06/20/08........... 16,143,132
--------------
98,797,018
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: BANKS -- 0.2%
$ 4,252,409 Bank of America Alternative
Loan Trust, Series 2004-7,
Class 4A1,
5.00%, 08/25/19........... $ 4,057,066
--------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 4.0%
14,000,000 American Express Credit
Account Master Trust,
Series 2005-3, Class A,
Floating Rate,
5.20%, 01/18/11(c)........ 13,989,154
12,075,000 Chase Issuance Trust, Series
2004-A9, Class A9,
3.22%, 06/15/10........... 11,733,606
14,950,000 Citibank Credit Card
Issuance Trust, Series
2004-A1, Class A1,
2.55%, 01/20/09........... 14,720,918
14,850,000 Citibank Credit Card
Issuance Trust, Series
2004-A4, Class A4,
3.20%, 08/24/09........... 14,456,735
15,125,000 Citibank Credit Card
Issuance Trust, Series
2006-A2, Class A2,
4.85%, 02/10/11........... 14,866,430
11,500,000 MBNA Credit Card Master Note
Trust, Series 2003-A6,
Class A6,
2.75%, 10/15/10........... 10,944,716
--------------
80,711,559
--------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 4.0%
2,805,000 Greenwich Capital Commercial
Funding Corp., Series
2004-GG1, Class A4,
4.76%, 06/10/36........... 2,705,900
11,200,000 Greenwich Capital Commercial
Funding Corp., Series
2005-GG3, Class A3,
4.57%, 08/10/42........... 10,586,119
1,732,090 Morgan Stanley Capital I,
Series 1998-WF1, Class A2,
6.55%, 03/15/30........... 1,744,646
2,960,191 Morgan Stanley Capital I,
Series 1999-FNV1, Class
A2,
6.53%, 03/15/31........... 3,005,113
4,281,516 SLM Student Loan Trust,
Series 2004-9, Class A2,
Floating Rate,
5.12%, 10/25/12(b)........ 4,277,041
11,136,768 SLM Student Loan Trust,
Series 2005-5, Class A1,
Floating Rate,
5.10%, 01/25/18(b)........ 11,140,288
14,200,000 SLM Student Loan Trust,
Series 2005-6, Class A5B,
Floating Rate,
5.11%, 07/27/26(b)........ 14,217,166
</Table>
See notes to financial statements.
90
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: FINANCIAL SERVICES
(CONTINUED)
$ 19,542,185 SLM Student Loan Trust,
Series 2006-3, Class A1,
Floating Rate,
5.08%, 01/25/13(b)........ $ 19,555,768
14,030,000 Washington Mutual Asset
Securities Corp. -- 144A,
Series 2005-C1A, Class A2,
5.15%, 05/25/36........... 13,745,054
--------------
80,977,095
--------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 22.1%
11,650,010 ACE Securities Corp., Series
2006-HE1, Class A2A,
Floating Rate,
5.40%, 02/25/36(c)........ 11,660,428
11,960,000 Banc of America Commercial
Mortgage, Inc., Series
2000-1, Class A2A,
7.33%, 11/15/31........... 12,503,324
8,997,979 Banc of America Commercial
Mortgage, Inc., Series
2001-1, Class A2,
6.50%, 04/15/36........... 9,241,823
16,715,000 Banc of America Commercial
Mortgage, Inc., Series
2002-2, Class A3,
5.12%, 07/11/43........... 16,210,810
11,170,000 Banc of America Commercial
Mortgage, Inc., Series
2002-PB2, Class A4,
6.19%, 06/11/35........... 11,378,961
795,185 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2001, Class A1,
6.08%, 02/15/35........... 800,571
2,545,000 Bear Stearns Commercial
Mortgage Securities, Inc.,
Series 2005-PWR8, Class
A4,
4.67%, 06/11/41........... 2,332,696
13,198,105 Carrington Mortgage Loan
Trust, Series 2006-OPT1,
Class A1, Floating Rate,
5.39%, 02/25/36(c)........ 13,210,391
3,475,000 Chase Commercial Mortgage
Securities Corp., Series
2000-3, Class A2,
7.32%, 10/15/32........... 3,650,668
6,886,635 Commercial Mortgage
Acceptance Corp., Series
1998-C2, Class A2,
6.03%, 09/15/30........... 6,914,341
4,456,516 Countrywide Asset-Backed
Certificates, Series
2004-13, Class AV4,
Floating Rate,
5.61%, 06/25/35(c)........ 4,462,023
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 8,083,290 Countrywide Asset-Backed
Certificates, Series
2005-12, Class 2A1,
Floating Rate,
5.43%, 02/25/36(c)........ $ 8,089,275
9,016,947 Countrywide Asset-Backed
Certificates, Series
2005-BC5, Class 3A1,
Floating Rate,
5.42%, 01/25/36(c)........ 9,023,976
14,027,741 Countrywide Asset-Backed
Certificates, Series
2005-IM3, Class A1,
Floating Rate,
5.44%, 03/25/36(c)........ 14,038,827
11,049,823 Countrywide Asset-Backed
Certificates, Series
2006-IM1, Class A1,
Floating Rate,
5.41%, 04/25/36(c)........ 11,058,703
23,608,497 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 1998-C2, Class A2,
6.30%, 11/11/30........... 23,900,963
14,955,000 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2002-CKS4, Class
A2,
5.18%, 11/15/36........... 14,518,535
13,110,000 Credit Suisse First Boston
Mortgage Securities Corp.,
Series 2003-C3, Class A5,
3.94%, 05/15/38........... 11,745,536
13,163,955 Credit Suisse Mortgage
Capital Certificates,
Series 2006-3, Class 1A1A,
Floating Rate,
5.41%, 04/25/36(c)........ 13,175,278
4,865,669 DLJ Commercial Mortgage
Corp., Series 2000-CKP1,
Class A1B,
7.18%, 11/10/33........... 5,089,759
14,035,775 Fieldstone Mortgage
Investment Corp., Series
2006-1, Class A1, Floating
Rate,
5.40%, 05/25/36(c)........ 14,045,396
13,817,544 First Franklin Mortgage Loan
Asset Backed Certificates,
Series 2006-FF4, Class A1,
Floating Rate,
5.39%, 03/25/36(c)........ 13,829,230
12,570,000 First Union National Bank
Commercial Mortgage,
Series 2001-C2, Class A2,
6.66%, 01/12/43........... 13,008,600
10,380,000 GE Capital Commercial
Mortgage Corp., Series
2002-1A, Class A3,
6.27%, 12/10/35........... 10,633,779
11,875,000 GE Capital Commercial
Mortgage Corp., Series
2002-2A, Class A3,
5.35%, 08/11/36........... 11,609,720
</Table>
See notes to financial statements.
91
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 6,150,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33........... $ 6,329,937
6,397,367 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C3, Class A2,
7.18%, 08/15/36........... 6,624,884
3,175,000 GS Mortgage Securities Corp.
II, Series 2005-GG4, Class
A4A,
4.75%, 07/10/39........... 2,936,343
4,545,000 GS Mortgage Securities Corp.
II, Series 2006-GG6, Class
A4,
5.55%, 04/10/38........... 4,437,997
10,490,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-C1, Class A3,
5.86%, 10/12/35........... 10,516,271
6,650,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIB2, Class
A3,
6.43%, 04/15/35........... 6,827,010
9,475,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2001-CIBC, Class
A3,
6.26%, 03/15/33........... 9,672,069
9,350,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-CB12, Class
A4,
4.90%, 09/12/37........... 8,712,400
20,162,470 JPMorgan Mortgage Trust,
Series 2006-A2, Class 4A1,
3.89%, 08/25/34........... 19,427,528
7,369,757 LB Commercial Conduit
Mortgage Trust, Series
1998-C4, Class A1B,
6.21%, 10/15/35........... 7,440,952
6,900,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C3,
Class A2,
7.95%, 05/15/25........... 7,375,336
6,830,000 LB-UBS Commercial Mortgage
Trust, Series 2000-C4,
Class A2,
7.37%, 08/15/26........... 7,193,848
7,395,000 LB-UBS Commercial Mortgage
Trust, Series 2003-C7,
Class A3,
4.56%, 09/15/27........... 7,066,316
9,100,000 LB-UBS Commercial Mortgage
Trust, Series 2004-C8,
Class A4,
4.51%, 12/15/29........... 8,585,248
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 18,315,582 New Century Home Equity Loan
Trust, Series 2006-1,
Class A2A, Floating Rate,
5.38%, 05/25/36(c)........ $ 18,328,105
12,933,062 Residential Asset Mortgage
Products, Inc., Series
2006-RS2, Class A1,
Floating Rate,
5.40%, 03/25/36(c)........ 12,944,714
14,067,547 Residential Asset
Securitization Trust,
Series 2005-A14, Class A4,
5.50%, 12/25/35........... 13,942,927
9,889,136 Salomon Brothers Mortgage
Securities VII, Series
1999-C1, Class A2,
Floating Rate,
7.08%, 05/18/32(c)........ 10,145,110
9,099,504 Salomon Brothers Mortgage
Securities VII, Series
2001-C2, Class A3,
6.50%, 10/13/11........... 9,374,542
7,786,149 Structured Asset Investment
Loan Trust, Series 2006-2,
Class A1, Floating Rate,
5.38%, 04/25/36(c)........ 7,791,419
--------------
451,806,569
--------------
PRIVATE ASSET BACKED: OTHER -- 0.8%
5,018,773 Structured Asset Securities
Corp. -- 144A, Series
2003-AL2, Class A,
3.36%, 01/25/31........... 4,485,636
10,912,954 Terra LNR, Ltd. (Cayman
Islands) -- 144A, Series
2006-1A, Class A1,
Floating Rate,
5.33%, 06/15/17(c)........ 10,912,595
--------------
15,398,231
--------------
PRIVATE ASSET BACKED: UTILITIES -- 0.4%
8,000,000 Peco Energy Transition
Trust, Series 2000-A,
Class A4,
7.65%, 03/01/10........... 8,461,184
--------------
REAL ESTATE -- 0.1%
1,252,000 EOP Operating LP,
7.50%, 04/19/29........... 1,318,902
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.6%
910,000 AvalonBay Communities,
Series MTN,
6.63%, 09/15/11........... 937,583
4,100,000 Prologis 2006,
5.50%, 04/01/12........... 3,996,294
725,000 The Rouse Company,
3.63%, 03/15/09........... 677,332
</Table>
See notes to financial statements.
92
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
$ 4,135,000 The Rouse Company,
5.38%, 11/26/13........... $ 3,731,110
2,200,000 The Rouse Company/TRC
Co-issuer, Inc. -- 144A,
6.75%, 05/01/13........... 2,153,591
--------------
11,495,910
--------------
RETAIL -- 0.1%
430,000 Federated Department Stores,
Inc.,
6.79%, 07/15/27........... 424,545
850,000 May Department Stores
Company,
8.50%, 06/01/19........... 985,912
395,000 May Department Stores
Company,
6.65%, 07/15/24........... 387,883
495,000 May Department Stores
Company,
7.88%, 03/01/30........... 545,567
295,000 May Department Stores
Company,
6.70%, 07/15/34........... 288,971
--------------
2,632,878
--------------
SEMICONDUCTORS -- 0.0%
245,000 Freescale Semiconductor,
Inc., Floating Rate,
7.82%, 07/15/09(b)........ 249,900
190,000 MagnaChip Semiconductor,
Ltd., Floating Rate,
8.58%, 12/15/11(b)........ 181,450
--------------
431,350
--------------
SPECIAL PURPOSE ENTITY -- 0.3%
350,815 AES Ironwood LLC,
8.86%, 11/30/25........... 380,634
2,150,000 Atlantic Marine,
Inc. -- 144A,
5.34%, 12/01/50........... 1,904,793
2,875,000 Belvoir Land LLC -- 144A,
5.40%, 12/15/47........... 2,489,030
1,600,000 New York Life Global
Funding -- 144A,
3.88%, 01/15/09........... 1,534,032
--------------
6,308,489
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.7%
625,000 America Movil SA de CV
(Mexico),
6.38%, 03/01/35........... 546,388
810,000 Cincinnati Bell, Inc.,
7.25%, 07/15/13........... 801,900
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 1,940,000 Deutsche Telecom
International Finance BV
(the Netherlands),
5.75%, 03/23/16........... $ 1,834,320
550,000 Intelsat Bermuda,
Ltd. -- 144A (Bermuda),
9.25%, 06/15/16........... 570,625
405,000 Intelsat Subsidiary Holding
Company, Ltd. (Bermuda),
Floating Rate,
9.61%, 01/15/12(k)........ 411,075
2,350,000 New England Telephone &
Telegraph,
7.88%, 11/15/29........... 2,439,756
970,000 New Jersey Bell Telephone,
7.85%, 11/15/29........... 1,009,866
490,000 PanAmSat Corp. -- 144A,
9.00%, 06/15/16........... 499,800
860,000 Qwest Corp.,
7.88%, 09/01/11........... 875,050
675,000 Qwest Corp., Floating Rate,
8.58%, 06/15/13(b)........ 717,188
50,000 Rogers Wireless, Inc.
(Canada),
7.25%, 12/15/12........... 50,625
990,000 Rogers Wireless, Inc.
(Canada),
7.50%, 03/15/15........... 1,004,850
1,115,000 Sprint Capital Corp.,
8.75%, 03/15/32........... 1,348,416
1,105,000 Telecom Italia Capital
(Luxembourg),
6.00%, 09/30/34........... 957,059
1,875,000 Telefonica Emisiones SAU
(Spain),
6.42%, 06/20/16........... 1,874,514
4,650,000 Telefonica Emisiones SAU
(Spain),
7.05%, 06/20/36........... 4,661,918
850,000 Telefonica Europe BV (the
Netherlands),
7.75%, 09/15/10........... 902,524
215,000 Verizon Maryland, Inc.,
Series B,
5.13%, 06/15/33........... 164,857
1,470,000 Vodafone Group PLC (United
Kingdom),
5.00%, 12/16/13........... 1,360,729
500,000 Vodafone Group PLC (United
Kingdom),
5.00%, 09/15/15........... 453,040
7,910,000 Vodafone Group PLC (United
Kingdom), Floating Rate,
5.59%, 12/28/07(b)........ 7,911,551
890,000 Wind Acquisition Finance
SA -- 144A (Luxembourg),
10.75%, 12/01/15.......... 950,075
</Table>
See notes to financial statements.
93
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 1,375,000 Windstream Corp. -- 144A,
8.13%, 08/01/13........... $ 1,409,375
1,545,000 Windstream Corp. -- 144A,
8.63%, 08/01/16........... 1,587,488
--------------
34,342,989
--------------
TRANSPORTATION -- 0.1%
1,075,000 BNSF Funding Trust I,
Variable Rate,
6.61%, 12/15/55(a)........ 1,012,591
375,000 Burlington Northern Santa Fe
Corp.,
7.29%, 06/01/36........... 424,100
560,000 Overseas Shipholding Group,
7.50%, 02/15/24........... 536,200
--------------
1,972,891
--------------
UTILITIES -- 0.6%
2,735,000 Centerpoint Energy, Inc.,
Series B,
7.25%, 09/01/10........... 2,850,072
401,920 Elwood Energy LLC,
8.16%, 07/05/26........... 436,909
1,000,000 Florida Power & Light,
5.63%, 04/01/34........... 921,234
128,800 Homer City Funding LLC,
8.14%, 10/01/19........... 137,494
83,589 Homer City Funding LLC,
8.73%, 10/01/26........... 93,202
195,000 Midwest Generation LLC,
8.75%, 05/01/34........... 207,675
574,038 Midwest Generation LLC,
Series B,
8.56%, 01/02/16........... 603,099
155,000 NRG Energy, Inc.,
7.25%, 02/01/14........... 151,513
560,000 NRG Energy, Inc.,
7.38%, 02/01/16........... 547,400
470,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10.......... 533,450
545,000 Reliant Energy, Inc.,
6.75%, 12/15/14........... 504,125
300,000 SP PowerAssets, Ltd. -- 144A
(Singapore),
5.00%, 10/22/13........... 282,814
231,536 Tenaska Alabama II Partners,
LP -- 144A,
7.00%, 06/30/21........... 226,817
5,325,000 TXU Corp., Series O,
4.80%, 11/15/09........... 5,092,595
--------------
12,588,399
--------------
TOTAL CORPORATE BONDS AND
NOTES (Cost
$1,209,892,797)........... 1,180,774,986
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
FOREIGN GOVERNMENT OBLIGATIONS -- 1.9%
$ 9,700,000 AID-Israel (Israel),
5.50%, 09/18/23........... $ 9,652,198
10,750,900 France Discount Treasury
Bill (France),
2.71%, 07/13/06(q)........ 13,739,937
2,055,000 Mexican Fixed Rate Bonds,
Series M (Mexico),
9.00%, 12/22/11(s)........ 185,192
3,925,000 Mexican Fixed Rate Bonds,
Series MI10 (Mexico),
8.00%, 12/19/13(s)........ 328,224
2,930,000 Province of Manitoba
(Canada),
6.38%, 09/01/15(t)........ 1,749,723
4,580,000 Province of Ontario, Series
GMTN (Canada),
6.25%, 06/16/15(t)........ 2,732,533
2,050,000 Quebec Province (Canada),
6.75%, 11/09/15(t)........ 1,249,772
1,950,000 United Mexican States
(Mexico),
6.63%, 03/03/15........... 1,979,250
4,045,000 United Mexican States
(Mexico),
8.13%, 12/30/19........... 4,580,963
2,385,000 United Mexican States,
Series MTNA (Mexico),
8.00%, 09/24/22........... 2,665,238
--------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$39,083,347).............. 38,863,030
--------------
SHORT TERM CORPORATE NOTES -- 0.4%
7,750,000 AT&T, Inc. -- 144A,
4.21%, 06/05/07 (Cost
$7,662,948)............... 7,662,948
--------------
SECURITIES LENDING COLLATERAL -- 1.5%
30,335,855 Securities Lending
Collateral Investment
(Note 4) (Cost
$30,335,855).............. 30,335,855
--------------
TOTAL SECURITIES (Cost
$2,330,816,972)........... 2,285,777,577
--------------
</Table>
See notes to financial statements.
94
CORE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 3.0%
$ 61,605,052 With Investors Bank and
Trust, dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $61,629,489
(Collateralized by Fannie
Mae Adjustable Rate
Mortgage, 4.34% due
02/01/34, with a value of
$12,574,420 and Freddie
Mac Adjustable Rate
Mortgage, 5.55%, due
12/15/34, with a value of
$52,110,885) (Cost
$61,605,052).............. $ 61,605,052
--------------
Total Investments before
Call and Put Options
Written and Securities
Sold Short -- 115.0% (Cost
$2,392,422,024)........... 2,347,382,629
--------------
<Caption>
CONTRACTS
---------
CALL OPTIONS WRITTEN -- (0.0)%
(169) US Treasury Note (10 Year)
September Future, Expiring
September 2006 @ 110
(Premium $84,277)......... (2,641)
--------------
PUT OPTIONS WRITTEN -- (0.0)%
(169) US Treasury Note (10 Year)
September Future, Expiring
September 2006 @ 106
(Premium $107,277)........ (237,656)
--------------
<Caption>
PRINCIPAL
---------
SECURITIES SOLD SHORT -- (4.3)%
$(53,000,000) Fannie Mae,
TBA, 5.50%, 07/13/06...... (50,913,125)
(5,800,000) Fannie Mae,
TBA, 6.50%, 07/13/06...... (5,830,810)
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES SOLD SHORT (CONTINUED)
$ (6,362,606) Fannie Mae,
TBA, 4.50%, 07/18/06...... $ (6,014,648)
(10,900,000) Fannie Mae,
TBA, 5.00%, 07/18/06...... (10,498,062)
(3,000,000) Freddie Mac Gold,
TBA, 6.00%, 07/13/06...... (2,954,064)
(6,600,000) Freddie Mac Gold,
TBA, 4.50%, 07/18/06...... (6,230,809)
(6,400,000) Freddie Mac Gold,
TBA, 5.00%, 07/18/06...... (6,160,000)
--------------
TOTAL SECURITIES SOLD SHORT
(Proceeds $89,360,835).... (88,601,518)
--------------
Total Investments net of
Call and Put Options
Written and Securities
Sold Short -- 110.7% (Cost
$2,302,869,635)........... 2,258,540,814
Liabilities less other
assets -- (10.7)%......... (218,142,474)
--------------
NET ASSETS -- 100.0%........ $2,040,398,340
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $2,302,869,635.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 2,979,399
Gross unrealized depreciation.......... (47,308,220)
------------
Net unrealized depreciation............ $(44,328,821)
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
95
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES -- 17.3%
US TREASURY BONDS -- 2.1%
$ 160,000 6.25%, 08/15/23................ $ 176,513
550,000 6.13%, 11/15/27................ 607,879
922,000 4.50%, 02/15/36................ 826,991
------------
1,611,383
------------
US TREASURY INFLATION INDEX -- 3.3%
865,084 1.63%, 01/15/15................ 806,725
538,538 1.88%, 07/15/15................ 511,170
213,137 2.00%, 01/15/16................ 203,605
716,016 2.38%, 01/15/25................ 697,108
263,884 2.00%, 01/15/26................ 241,681
------------
2,460,289
------------
US TREASURY NOTES -- 11.3%
130,000 4.00%, 08/31/07................ 128,207
3,380,000 3.38%, 02/15/08................ 3,286,259
3,940,000 3.75%, 05/15/08................ 3,841,658
210,000 3.88%, 09/15/10................ 200,452
240,000 4.50%, 02/28/11................ 234,094
10,000 4.25%, 11/15/14................ 9,408
290,000 4.50%, 11/15/15................ 276,316
130,000 4.50%, 02/15/16................ 123,723
350,000 5.13%, 05/15/16................ 349,699
------------
8,449,816
------------
US TREASURY STRIPS -- 0.6%
1,220,000 Zero coupon, 11/15/24.......... 462,618
------------
TOTAL US TREASURY SECURITIES
(Cost $13,348,249)........... 12,984,106
------------
US GOVERNMENT AGENCY SECURITIES -- 43.3%
FANNIE MAE -- 31.4%
400,000 Floating Rate, 5.31%,
09/22/06(b).................. 399,962
553,434 PL# 735809, Variable Rate,
4.49%, 08/01/35(a)........... 543,007
43,501 PL# 759626, 6.00%, 02/01/34.... 43,068
47,346 PL# 795774, 6.00%, 10/01/34.... 46,709
190,293 PL# 796050, 6.00%, 08/01/34.... 187,731
1,830,486 PL# 796278, 6.00%, 12/01/34.... 1,805,845
60,609 PL# 801516, Variable Rate,
4.72%, 08/01/34(a)........... 59,618
679,204 PL# 809169, 6.00%, 01/01/35.... 670,061
135,041 PL# 810896, Variable Rate,
4.86%, 01/01/35(a)........... 132,464
35,318 PL# 820426, 6.00%, 03/01/35.... 34,801
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 400,000 TBA, 5.00%, 07/01/21........... $ 385,250
500,000 TBA, 5.50%, 07/01/21........... 490,781
400,000 TBA, 5.00%, 08/01/21........... 385,000
300,000 TBA, 4.50%, 07/01/36........... 271,875
10,300,000 TBA, 5.00%, 07/01/36........... 9,630,500
6,400,000 TBA, 5.50%, 07/01/36........... 6,148,000
2,400,000 TBA, 6.00%, 07/01/36........... 2,362,500
------------
23,597,172
------------
FEDERAL AGRICULTURAL MORTGAGE CORP. -- 0.1%
80,000 4.25%, 07/29/08................ 78,127
------------
FREDDIE MAC -- 1.5%
430,000 4.38%, 11/16/07................ 423,776
720,000 4.75%, 01/18/11................ 699,367
------------
1,123,143
------------
FREDDIE MAC GOLD -- 0.8%
300,000 TBA, 5.00%, 07/01/21........... 288,750
300,000 TBA, 5.00%, 07/01/36........... 280,219
------------
568,969
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 8.6%
1,666,896 PL# 612902, 5.00%, 07/15/33.... 1,579,680
1,983,099 PL# 644631, 5.00%, 09/15/35.... 1,878,061
2,590,000 TBA, 5.00%, 07/01/36........... 2,451,596
600,000 TBA, 5.50%, 07/01/36........... 581,625
------------
6,490,962
------------
TENNESSEE VALLEY AUTHORITY -- 0.9%
470,000 5.88%, 04/01/36................ 488,726
200,000 5.38%, 04/01/56................ 189,778
------------
678,504
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES
(Cost $33,046,834)........... 32,536,877
------------
CORPORATE BONDS AND NOTES -- 45.6%
AEROSPACE AND DEFENSE -- 0.1%
45,000 DRS Technologies, Inc.,
6.63%, 02/01/16.............. 43,763
------------
APPAREL: MANUFACTURING AND RETAIL -- 0.1%
60,000 Russell Corp.,
9.25%, 05/01/10.............. 63,075
------------
</Table>
See notes to financial statements.
96
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
AUTOMOBILE: RENTAL -- 0.0%
$ 15,000 Hertz Corp. -- 144A,
8.88%, 01/01/14.............. $ 15,450
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.9%
60,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08.............. 58,038
100,000 Daimler Chrysler NA Holding,
5.88%, 03/15/11.............. 98,465
200,000 Ford Motor Company,
7.45%, 07/16/31.............. 145,500
440,000 General Motors Corp.,
8.25%, 07/15/23.............. 348,699
60,000 Visteon Corp.,
8.25%, 08/01/10.............. 56,400
------------
707,102
------------
BANKS -- 1.7%
90,000 Bank of America Corp.,
3.88%, 01/15/08.............. 87,795
140,000 Bank of America Corp.,
4.50%, 08/01/10.............. 134,372
130,000 Glintnir Banki HF -- 144A
(Iceland), Variable Rate,
6.69%, 06/15/16(a)........... 129,390
280,000 Kaupthing Bank -- 144A,
5.44%, 04/11/11.............. 280,443
10,000 Rabobank Capital Funding Trust
II -- 144A, Variable Rate,
5.26%, perpetual(a).......... 9,397
20,000 Rabobank Capital Funding Trust
III -- 144A, Variable Rate,
5.25%, perpetual(a).......... 18,357
100,000 Shinsei Financial, Ltd. -- 144A
(Cayman Islands), Variable
Rate,
6.42%, perpetual(a).......... 94,085
90,000 Wachovia Capital Trust III,
Variable Rate,
5.80%, perpetual(a).......... 87,424
240,000 Wachovia Corp.,
5.25%, 08/01/14.............. 229,273
230,000 Wells Fargo & Company,
4.20%, 01/15/10.............. 219,969
------------
1,290,505
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA -- 1.4%
$ 10,000 Clear Channel Communications,
Inc.,
4.63%, 01/15/08.............. $ 9,797
90,000 Clear Channel Communications,
Inc.,
5.50%, 09/15/14.............. 81,608
50,000 Clear Channel Communications,
Inc.,
4.90%, 05/15/15.............. 42,753
170,000 Comcast Corp.,
6.50%, 01/15/15.............. 171,609
80,000 Cox Communications, Inc.,
3.88%, 10/01/08.............. 76,567
40,000 Echostar DBS Corp. -- 144A,
7.13%, 02/01/16.............. 38,700
40,000 Kabel Deutschland GMBH -- 144A
(Germany),
10.63%, 07/01/14............. 42,400
100,000 Liberty Media Corp.,
7.88%, 07/15/09.............. 104,028
40,000 Quebecor Media, Inc. -- 144A
(Canada),
7.75%, 03/15/16.............. 39,400
60,000 Rogers Cable, Inc. (Canada),
6.75%, 03/15/15.............. 57,450
20,000 Sinclair Broadcast Group,
8.00%, 03/15/12.............. 20,400
50,000 Time Warner Entertainment,
8.38%, 07/15/33.............. 56,729
160,000 Time Warner, Inc.,
6.88%, 05/01/12.............. 165,553
140,000 Time Warner, Inc.,
7.70%, 05/01/32.............. 152,605
------------
1,059,599
------------
CHEMICALS -- 0.1%
44,000 Westlake Chemical Corp.,
6.63%, 01/15/16.............. 40,865
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 0.1%
10,000 Electronic Data Systems,
7.13%, 10/15/09.............. 10,335
40,000 SunGard Data Systems,
Inc. -- 144A,
10.25%, 08/15/15............. 41,550
------------
51,885
------------
</Table>
See notes to financial statements.
97
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES -- 0.1%
$ 30,000 Beazer Homes USA, Inc.,
8.63%, 05/15/11.............. $ 30,375
40,000 Jacuzzi Brands Inc.,
9.63%, 07/01/10.............. 42,450
------------
72,825
------------
CONSUMER GOODS AND SERVICES -- 0.3%
180,000 Altria Group, Inc.,
7.00%, 11/04/13.............. 190,172
------------
CONTAINERS AND PACKAGING -- 0.1%
40,000 Graham Packaging Company,
9.88%, 10/15/14.............. 39,800
------------
ENGINEERING -- 0.0%
10,000 Compagnie Generale de
Geophysique SA -- 144A
(France),
7.50%, 05/15/15.............. 9,825
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.2%
120,000 Waste Management, Inc.,
6.38%, 11/15/12.............. 122,576
------------
EQUIPMENT RENTAL AND LEASING -- 0.0%
4,000 NationsRent, Inc.,
9.50%, 10/15/10.............. 4,280
------------
FINANCIAL SERVICES -- 6.5%
90,000 Aiful Corp. -- 144A (Japan),
5.00%, 08/10/10.............. 85,658
250,000 Citigroup, Inc.,
5.13%, 02/14/11.............. 244,377
340,000 Countrywide Financial Corp.,
Series MTNA,
4.50%, 06/15/10.............. 323,903
120,000 Countrywide Home Loans, Series
MTNB, Floating Rate,
5.38%, 02/27/08(b)........... 120,066
50,000 Credit Suisse First Boston USA,
Inc.,
4.88%, 08/15/10.............. 48,507
1,290,000 Ford Motor Credit Company,
5.80%, 01/12/09.............. 1,179,168
90,000 General Electric Capital Corp.,
Series MTNA,
4.25%, 01/15/08.............. 88,302
140,000 General Electric Capital Corp.,
Series MTNA,
4.13%, 09/01/09.............. 134,196
120,000 General Motors Acceptance
Corp.,
6.13%, 08/28/07.............. 118,777
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 400,000 General Motors Acceptance
Corp.,
5.85%, 01/14/09.............. $ 383,661
30,000 General Motors Acceptance
Corp., Series GM,
6.31%, 11/30/07.............. 28,915
60,000 General Motors Acceptance
Corp., Series MTN,
4.38%, 12/10/07.............. 57,572
600,000 General Motors Acceptance
Corp., Series MTN, Floating
Rate,
5.97%, 01/16/07(b)........... 598,309
250,000 HSBC Finance Corp.,
4.63%, 01/15/08.............. 246,518
220,000 JPMorgan Chase & Company,
5.13%, 09/15/14.............. 208,142
130,000 JPMorgan Chase & Company,
5.15%, 10/01/15.............. 121,560
380,000 Lehman Brothers E-Capital Trust
I, Floating Rate,
5.95%, 08/19/65(b)........... 380,347
130,000 Lehman Brothers Holdings, Inc.,
4.00%, 01/22/08.............. 126,650
80,000 Lehman Brothers Holdings, Inc.,
4.50%, 07/26/10.............. 76,493
200,000 Morgan Stanley,
3.63%, 04/01/08.............. 193,635
80,000 The Goldman Sachs Group, Inc.,
4.50%, 06/15/10.............. 76,553
50,000 The Goldman Sachs Group, Inc.,
5.00%, 01/15/11.............. 48,402
------------
4,889,711
------------
FOOD AND BEVERAGE -- 0.3%
140,000 Anheuser-Busch Companies, Inc.,
4.95%, 01/15/14.............. 133,021
60,000 Kraft Foods, Inc.,
5.63%, 11/01/11.............. 59,165
------------
192,186
------------
INSURANCE -- 0.0%
30,000 ASIF Global Financing
XIX -- 144A,
4.90%, 01/17/13.............. 28,469
------------
LEISURE AND RECREATION -- 0.4%
35,000 AMC Entertainment, Inc.,
11.00%, 02/01/16............. 37,625
15,000 Boyd Gaming Corp.,
6.75%, 04/15/14.............. 14,306
</Table>
See notes to financial statements.
98
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
$ 40,000 Boyd Gaming Corp.,
7.13%, 02/01/16.............. $ 38,850
60,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 64,050
60,000 Mandalay Resort Group,
9.50%, 08/01/08.............. 63,750
30,000 River Rock Entertainment
Authority,
9.75%, 11/01/11.............. 31,725
65,000 Station Casinos, Inc.,
6.63%, 03/15/18.............. 59,150
------------
309,456
------------
MANUFACTURING -- 0.5%
120,000 Tyco International Group SA
(Luxembourg),
6.38%, 10/15/11.............. 122,581
240,000 Tyco International Group SA
(Luxembourg),
6.00%, 11/15/13.............. 238,117
------------
360,698
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 0.4%
75,000 DaVita, Inc.,
7.25%, 03/15/15.............. 72,375
110,000 HCA, Inc.,
6.75%, 07/15/13.............. 105,592
125,000 Tenet Healthcare Corp.,
9.88%, 07/01/14.............. 125,625
------------
303,592
------------
OIL AND GAS: PIPELINES -- 0.9%
50,000 El Paso Corp., Series MTN,
7.80%, 08/01/31.............. 48,813
130,000 El Paso Corp., Series MTN,
7.75%, 01/15/32.............. 127,238
110,000 El Paso Natural Gas,
8.38%, 06/15/32.............. 117,549
30,000 Kinder Morgan Energy
Partners, LP,
6.30%, 02/01/09.............. 30,152
120,000 Kinder Morgan Energy Partners,
LP,
6.75%, 03/15/11.............. 122,710
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES (CONTINUED)
$ 80,000 Williams Companies, Inc.,
8.75%, 03/15/32.............. $ 87,400
170,000 Williams Companies, Inc.,
Series A,
7.50%, 01/15/31.............. 164,899
------------
698,761
------------
OIL, COAL AND GAS -- 2.4%
110,000 Amerada Hess Corp.,
7.30%, 08/15/31.............. 116,913
15,000 AmeriGas Partners LP/AmeriGas
Eagle Finance Corp.,
7.13%, 05/20/16.............. 14,138
100,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31.............. 107,754
150,000 Apache Finance Canada (Canada),
4.38%, 05/15/15.............. 134,719
55,000 Chesapeake Energy Corp.,
7.63, 07/15/13............... 55,619
150,000 ChevronTexaco Capital Company
(Canada),
3.50%, 09/17/07.............. 146,378
230,000 Conoco, Inc.,
6.95%, 04/15/29.............. 251,015
50,000 Devon Energy Corp.,
7.95%, 04/15/32.............. 57,784
310,000 Kerr-McGee Corp.,
7.88%, 09/15/31.............. 351,457
120,000 Pemex Project Funding Master
Trust,
7.38%, 12/15/14.............. 124,140
40,000 Pemex Project Funding Master
Trust -- 144A,
6.63%, 06/15/35.............. 36,250
70,000 Pogo Producing Company,
6.88%, 10/01/17.............. 65,188
65,000 Suburban Propane Partners,
6.88%, 12/15/13.............. 61,100
20,000 Vintage Petroleum,
8.25%, 05/01/12.............. 21,164
50,000 Western Oil Sands, Inc.
(Canada),
8.38%, 05/01/12.............. 53,375
100,000 XTO Energy, Inc.,
7.50%, 04/15/12.............. 106,430
120,000 XTO Energy, Inc.,
6.25%, 04/15/13.............. 120,242
------------
1,823,666
------------
</Table>
See notes to financial statements.
99
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PAPER AND FOREST PRODUCTS -- 0.3%
$ 210,000 Weyerhaeuser Company,
6.75%, 03/15/12.............. $ 214,800
------------
PRINTING AND PUBLISHING -- 0.1%
40,000 Reader's Digest Association,
Inc.,
6.50%, 03/01/11.............. 38,800
------------
PRIVATE ASSET BACKED: BANKS -- 2.0%
508,917 Washington Mutual Bank, Series
2005-AR13, Class A1A1,
Floating Rate,
5.61%, 10/25/45(c)........... 512,205
563,337 Washington Mutual Bank, Series
2005-AR15, Class A1A2,
Floating Rate,
5.60%, 11/25/45(c)........... 565,480
419,047 Washington Mutual Bank, Series
2005-AR8, Class 2A1A,
Floating Rate,
5.61%, 07/25/45(c)........... 419,935
------------
1,497,620
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 1.2%
481,208 Lehman XS Trust, Series
2005-5N, Class 1A1, Floating
Rate,
5.62%, 11/25/35(c)........... 482,977
317,035 Lehman XS Trust, Series
2005-7N, Class 1A1B, Floating
Rate,
5.62%, 12/25/35(c)........... 318,670
140,000 Morgan Stanley Capital I,
Series 2005-HQ6, Class A4A,
4.99%, 08/13/42.............. 131,496
------------
933,143
------------
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 20.9%
469,740 Accredited Mortgage Loan Trust,
Series 2005-3, Class A1,
Floating Rate,
5.56%, 09/25/35(c)........... 470,450
289,585 Adjustable Rate Mortgage Trust,
Series 2004-2, Class 7A2,
Floating Rate,
5.74%, 02/25/35(c)........... 290,857
293,746 Adjustable Rate Mortgage Trust,
Series 2004-5, Class 7A2,
Floating Rate,
5.70%, 04/25/35(c)........... 295,381
542,937 American Home Mortgage
Investment Trust, Series
2005-4, Class 1A1, Floating
Rate,
5.61%, 11/25/45(c)........... 545,265
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 400,000 Banc of America Commercial
Mortgage, Inc., Series
2005-3, Class A4,
4.67%, 07/10/43.............. $ 367,258
377,090 Banc of America Mortgage
Securities, Series 2005-A,
Class 2A1, Floating Rate,
4.46%, 02/25/35(c)........... 365,342
77,078 Chevy Chase Mortgage Funding
Corp. -- 144A, Series
2003-2AT, Class A1, Floating
Rate,
5.70%, 05/25/34(c)........... 77,074
518,129 Countrywide Alternative Loan
Trust, Series 2005-36, Class
3A1, Floating Rate,
4.98%, 08/25/35(c)........... 507,403
392,281 Countrywide Alternative Loan
Trust, Series 2005-44, Class
1A1, Floating Rate,
5.65%, 10/25/35(c)........... 393,458
578,417 Countrywide Alternative Loan
Trust, Series 2005-59, Class
1A1, Floating Rate,
5.60%, 11/20/35(c)........... 580,903
533,148 Countrywide Alternative Loan
Trust, Series 2005-J12, Class
2A1, Floating Rate,
5.59%, 08/25/35(c)........... 534,676
689,861 Countrywide Alternative Loan
Trust, Series 2006-OA6, Class
1A1A, Floating Rate,
5.53%, 07/25/46(c)........... 689,992
382,548 Countrywide Asset-Backed
Certificates, Series 2005-11,
Class AF1, Floating Rate,
5.50%, 02/25/36(c)........... 382,922
130,000 Countrywide Asset-Backed
Certificates, Series 2005-4,
Class AF3,
4.46%, 10/25/35.............. 127,713
410,079 Countrywide Home Equity Loan
Trust, Series 2005-G, Class
2A, Floating Rate,
5.43%, 12/15/35(c)........... 410,912
398,132 Countrywide Home Loans, Series
2004-23, Class A, Floating
Rate,
7.15%, 11/25/34(c)........... 403,045
503,674 Countrywide Home Loans, Series
2005-R3, Class AF, Floating
Rate,
5.72%, 09/25/35(c)........... 506,948
</Table>
See notes to financial statements.
100
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 398,028 First Franklin Mortgage Loan
Asset Backed Certificates,
Series 2004-FF10, Class A2,
Floating Rate,
5.72%, 12/25/32(c)........... $ 399,244
210,000 GE Capital Commercial Mortgage
Corp., Series 2005-C4, Class
A4, Floating Rate,
5.53%, 11/10/45(c)........... 202,808
535,399 GMAC Mortgage Corp. Loan Trust,
Series 2003-AR2, Class 1A1,
Floating Rate,
3.66%, 12/19/33(c)........... 531,766
391,998 GMAC Mortgage Corp. Loan Trust,
Series 2005-AR1, Class 3A,
Floating Rate,
4.67%, 03/18/35(c)........... 379,982
200,000 GS Mortgage Securities Corp.
II, Series 2005-GG4, Class
AABA,
4.68%, 07/10/39.............. 188,640
218,578 Impac CMB Trust, Series
2003-10, Class 1A1, Floating
Rate,
6.02%, 10/25/33(c)........... 218,734
253,955 Impac CMB Trust, Series 2004-2,
Class A1, Floating Rate,
5.84%, 04/25/34(c)........... 254,143
380,838 Impac CMB Trust, Series 2004-6,
Class 1A1, Floating Rate,
5.72%, 10/25/34(c)........... 384,241
140,001 IndyMac Index Mortgage Loan
Trust, Series 2005-AR15,
Class A2,
5.10%, 09/25/35.............. 132,608
573,070 IXIS Real Estate Capital Trust,
Series 2006-HE1, Class A1,
Floating Rate,
5.41%, 03/25/36(c)........... 573,455
400,481 JPMorgan Mortgage Trust, Series
2004-A3, Class 1A1, Floating
Rate,
4.30%, 07/25/34(c)........... 388,614
100,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C3, Class
A5,
4.74%, 07/15/30.............. 92,301
100,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C3, Class
AAB,
4.66%, 07/15/30.............. 94,045
200,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C5, Class
A4,
4.95%, 09/15/40.............. 187,416
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 500,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A4, Class 2A2,
4.46%, 07/25/35.............. $ 480,520
400,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A5, Class A3,
4.44%, 06/25/35.............. 380,306
220,000 Merrill Lynch Mortgage Trust,
Series 2006-C1, Class A4,
Floating Rate,
5.84%, 05/12/39(c)........... 217,872
387,728 MLCC Mortgage Investors, Inc.,
Series 2003-F, Class A1,
Floating Rate,
5.64%, 10/25/28(c)........... 387,745
7,134 Quest Trust, Series 2003-X3,
Class A1, Floating Rate,
5.80%, 02/25/34(c)........... 7,139
401,945 Structured Adjustable Rate
Mortgage Loan, Series
2005-15, Class 1A1,
5.06%, 07/25/35.............. 393,265
324,817 Structured Asset Mortgage
Investments, Inc., Series
2003-AR4, Class A1, Floating
Rate,
5.60%, 01/19/34(c)........... 325,762
700,000 Structured Asset Mortgage
Investments, Series 2006-AR6,
Series 1A3,
5.40%, 07/25/36.............. 699,887
981,025 Thornburg Mortgage Securities
Trust, Series 2006-1, Class
A3, Floating Rate,
5.49%, 01/25/36(c)........... 979,694
245,200 Wachovia Mortgage Loan Trust
LLC, Series 2005-WMC1, Class
A1, Floating Rate,
5.43%, 10/25/35(c)........... 245,386
700,000 Zuni Mortgage Loan Trust,
Series 2006-0A1, Class A1,
Floating Rate,
5.41%, 07/25/36(c)........... 700,034
------------
15,795,206
------------
PRIVATE ASSET BACKED: OTHER -- 0.9%
700,000 SLM Student Loan Trust, Series
2006-5, Class A2, Floating
Rate,
5.43%, 07/25/17(b)........... 699,937
------------
</Table>
See notes to financial statements.
101
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.1%
$ 35,000 Forest City Enterprises, Inc.,
7.63%, 06/01/15.............. $ 35,438
30,000 Forest City Enterprises, Inc.,
6.50%, 02/01/17.............. 28,200
------------
63,638
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
40,000 Host Marriott LP, Series
P -- 144A,
6.75%, 06/01/16.............. 38,350
10,000 Ventas Realty LP/Ventas Capital
Corp.,
9.00%, 05/01/12.............. 11,000
30,000 Ventas Realty LP/Ventas Capital
Corp.,
6.50%, 06/01/16.............. 28,913
------------
78,263
------------
SPECIAL PURPOSE ENTITY -- 0.3%
10,000 Hexion US Finance Corp./Hexion
Nova Scotia Finance, ULC,
9.00%, 07/15/14.............. 10,175
100,000 International Lease Finance
Corp. E-Capital Trust
I -- 144A, Variable Rate,
5.90%, 12/21/65(a)........... 97,574
100,000 Mitsubishi UFJ Financial Group
Capital Financial I, Ltd.
(Cayman Islands), Variable
Rate,
6.35%, perpetual (a)......... 96,635
30,000 Resona Preferred Global
Securities -- 144A (Cayman
Islands), Variable Rate,
7.19%, perpetual (a)......... 30,142
------------
234,526
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 1.4%
90,000 AT&T, Inc.,
5.10%, 09/15/14.............. 83,631
10,000 Bellsouth Corp.,
4.75%, 11/15/12.............. 9,285
55,000 Cincinnati Bell, Inc.,
7.00%, 02/15/15.............. 52,113
75,000 Deutsche Telecom International
Finance BV (the Netherlands),
5.75%, 03/23/16.............. 70,914
40,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda),
9.25%, 06/15/16.............. 41,500
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 55,000 Intelsat, Ltd. (Bermuda),
7.63%, 04/15/12.............. $ 45,650
115,000 Koninklijke KPN NV (the
Netherlands),
8.38%, 10/01/30.............. 123,789
190,000 Qwest Communications
International, Inc., Floating
Rate,
8.67%, 02/15/09(b)........... 194,512
320,000 Sprint Capital Corp.,
6.00%, 01/15/07.............. 320,469
90,000 Telecom Italia Capital
(Luxembourg),
5.25%, 10/01/15.............. 81,606
40,000 Verizon Global Funding Corp.,
7.38%, 09/01/12.............. 42,571
20,000 Windstream Corp. -- 144A,
8.63%, 08/01/16.............. 20,550
------------
1,086,590
------------
TRANSPORTATION -- 0.5%
40,000 Gulfmark Offshore, Inc.,
7.75%, 07/15/14.............. 39,200
70,000 Horizon Lines LLC,
9.00%, 11/01/12.............. 71,400
90,000 OMI Corp. (Marshall Islands),
7.63%, 12/01/13.............. 90,225
130,000 Teekay Shipping Corp. (Marshall
Islands),
8.88%, 07/15/11.............. 136,825
50,000 Union Pacific Corp.,
5.38%, 05/01/14.............. 48,547
------------
386,197
------------
UTILITIES -- 1.3%
85,000 AES Corp.,
7.75%, 03/01/14.............. 85,850
30,000 Dominion Resources, Inc.,
4.75%, 12/15/10.............. 28,662
100,000 Dominion Resources, Inc.,
5.70%, 09/17/12.............. 97,981
50,000 Duke Energy Corp.,
6.25%, 01/15/12.............. 50,920
90,000 Duke Energy Corp.,
5.63%, 11/30/12.............. 89,049
70,000 FirstEnergy Corp., Series B,
6.45%, 11/15/11.............. 71,306
</Table>
See notes to financial statements.
102
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES (CONTINUED)
$ 240,000 FirstEnergy Corp., Series C,
7.38%, 11/15/31.............. $ 258,249
30,000 NRG Energy, Inc.,
7.25%, 02/01/14.............. 29,325
30,000 NRG Energy, Inc.,
7.38%, 02/01/16.............. 29,325
60,000 Oncor Electric Delivery
Company,
6.38%, 01/15/15.............. 60,237
70,000 Pacific Gas & Electric Company,
6.05%, 03/01/34.............. 66,282
50,000 TXU Corp., Series P,
5.55%, 11/15/14.............. 45,601
60,000 TXU Corp., Series R,
6.55%, 11/15/34.............. 53,009
------------
965,796
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $34,897,151)........... 34,312,777
------------
<Caption>
SHARES
------
CONVERTIBLE PREFERRED STOCKS -- 0.3%
AUTOMOBILES/MOTOR VEHICLES AND
AUTOMOTIVE EQUIPMENT
9,300 General Motors Corp., Series A,
4.50%
(Cost $217,415).............. 227,013
------------
<Caption>
PRINCIPAL
---------
MUNICIPAL BONDS -- 1.1%
VIRGINIA
$ 830,000 Virginia State Housing
Development Authority, Series
C, Revenue Bond,
6.00%, 06/25/34 (Cost
$816,265).................... 811,292
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 4.3%
500,000 Canada Treasury Bill (Canada),
4.86%, 09/20/06.............. 494,533
290,000 Federal Republic of Brazil
(Brazil),
8.00%, 01/15/18.............. 306,675
60,000 Federal Republic of Brazil
(Brazil),
8.88%, 04/15/24.............. 66,750
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 35,000 Federal Republic of Brazil
(Brazil),
10.13%, 05/15/27............. $ 43,575
11,000 Federal Republic of Brazil
(Brazil),
12.25%, 03/06/30............. 16,170
191,000 Federal Republic of Brazil
(Brazil),
11.00%, 08/17/40............. 237,079
13,000 Federal Republic of Brazil
(Brazil), Series B,
8.88%, 04/15/24.............. 14,443
119,524 Government of Canada Real
Return Bonds (Canada),
4.00%, 12/01/31(p)........... 152,684
320,000 Queensland Treasury Corp.
(Australia), Series 11G,
6.00%, 06/14/11(o)........... 238,733
70,000 Republic of Colombia
(Colombia),
11.75%, 02/25/20............. 92,400
94,000 Republic of Panama (Panama),
7.13%, 01/29/26.............. 91,180
690,000 Russian Federation
(Russia) -- 144A,
5.00%, 03/31/30.............. 735,927
8,000 United Mexican States (Mexico),
5.63%, 01/15/17.............. 7,460
110,000 United Mexican States (Mexico),
Series MTN,
8.30%, 08/15/31.............. 127,325
553,000 United Mexican States (Mexico),
Series MTNA,
7.50%, 04/08/33.............. 588,945
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $3,238,686)............ 3,213,879
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.4%
FEDERAL HOME LOAN BANK
310,000 Series 633,
4.80%, 02/15/07
(Cost $310,000).............. 310,000
------------
TOTAL SECURITIES
(Cost $85,874,600)........... 84,395,944
------------
</Table>
See notes to financial statements.
103
TOTAL RETURN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 19.1%
$14,396,650 With Investors Bank and Trust,
dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $14,402,361
(Collateralized by various
Small Business
Administrations,
8.02%-8.13%, due 03/25/23-
05/25/28, with a total value
of $15,116,483)
(Cost $14,396,650)........... $ 14,396,650
------------
Total Investments before Call
and Put Options
Written -- 131.4%
(Cost $100,271,250).......... 98,792,594
------------
<Caption>
CONTRACTS
---------
CALL OPTIONS WRITTEN -- (0.0)%
(8) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 107.......... (2,875)
(8) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 108.......... (1,500)
------------
TOTAL CALL OPTIONS WRITTEN
(Premium $3,373)............. (4,375)
------------
PUT OPTIONS WRITTEN -- (0.0)%
(8) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 101.......... (1,250)
(8) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 102.......... (2,250)
------------
TOTAL PUT OPTIONS WRITTEN
(Premium $4,295)............. (3,500)
------------
Total Investments net of Call
and Put Options
Written -- 131.4%
(Cost $100,263,582).......... 98,784,719
Liabilities less other
assets -- (31.4)%............ (23,604,889)
------------
NET ASSETS -- 100.0%........... $ 75,179,830
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $100,263,582.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 175,059
Gross unrealized depreciation........... (1,653,922)
-----------
Net unrealized depreciation............. $(1,478,863)
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
104
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 58.7%
AEROSPACE AND DEFENSE -- 1.9%
22,250 Lockheed Martin Corp.(h)....... $ 1,596,215
27,371 Northrop Grumman Corp. ........ 1,753,386
37,550 Raytheon Company............... 1,673,604
26,700 The Boeing Company............. 2,186,997
------------
7,210,202
------------
AGRICULTURE -- 0.3%
14,150 Monsanto Company............... 1,191,289
------------
APPAREL: MANUFACTURING AND RETAIL -- 0.1%
8,911 Coach, Inc.*................... 266,439
------------
AUTOMOBILE: RETAIL -- 0.4%
65,200 AutoNation, Inc.*(h)........... 1,397,888
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.2%
12,400 Autoliv, Inc. ................. 701,468
------------
BANKS -- 3.7%
99,312 Bank of America Corp. ......... 4,776,908
11,600 Golden West Financial Corp. ... 860,720
16,500 Hudson City Bancorp, Inc. ..... 219,945
19,700 UnionBanCal Corp. ............. 1,272,423
76,682 US Bancorp..................... 2,367,940
48,453 Wachovia Corp. ................ 2,620,338
30,050 Wells Fargo & Company.......... 2,015,754
------------
14,134,028
------------
BROADCAST SERVICES/MEDIA -- 3.0%
42,150 CBS Corp. -- Class B(h)........ 1,140,158
44,500 Clear Channel Communications,
Inc. ........................ 1,377,275
29,500 Comcast Corp. -- Class A*(h)... 965,830
2,830 Liberty Media Holding Corp. -
Capital -- Series A*......... 237,069
29,300 The McGraw-Hill Companies,
Inc. ........................ 1,471,739
86,700 The Walt Disney Company........ 2,601,000
155,490 Time Warner, Inc. ............. 2,689,977
15,100 Univision Communications,
Inc. -- Class A*............. 505,850
10,050 Viacom, Inc. -- Class B*....... 360,192
------------
11,349,090
------------
BUSINESS SERVICES AND SUPPLIES -- 0.9%
5,800 Fair Isaac Corp. .............. 210,598
44,100 First Data Corp. .............. 1,986,264
21,000 Moody's Corp. ................. 1,143,660
------------
3,340,522
------------
CHEMICALS -- 0.2%
12,000 Ashland, Inc. ................. 800,400
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 3.3%
3,400 Apple Computer, Inc.*.......... $ 194,208
19,400 Autodesk, Inc.*................ 668,524
32,400 Cadence Design Systems,
Inc.*........................ 555,660
27,200 Computer Sciences Corp.*....... 1,317,568
15,800 Electronic Data Systems
Corp. ....................... 380,148
92,987 Hewlett-Packard Company........ 2,945,828
18,350 International Business Machines
Corp. ....................... 1,409,647
147,750 Microsoft Corp. ............... 3,442,575
9,300 Red Hat, Inc.*(h).............. 217,620
54,600 Sun Microsystems, Inc.*........ 226,590
58,900 Western Digital Corp.*......... 1,166,809
------------
12,525,177
------------
CONSUMER GOODS AND SERVICES -- 3.1%
37,950 Altria Group, Inc. ............ 2,786,669
31,750 Colgate-Palmolive Company...... 1,901,825
86,698 Procter & Gamble Company....... 4,820,408
4,300 Reynolds American, Inc.(h)..... 495,790
4,600 United Parcel Service,
Inc. -- Class B.............. 378,718
17,000 Whirlpool Corp. ............... 1,405,050
------------
11,788,460
------------
DIVERSIFIED OPERATIONS AND SERVICES -- 2.0%
227,900 General Electric Company....... 7,511,584
------------
ELECTRONICS -- 0.8%
9,400 Avnet, Inc.*................... 188,188
23,900 Emerson Electric Company....... 2,003,059
17,500 Jabil Circuit, Inc. ........... 448,000
7,400 Tektronix, Inc. ............... 217,708
------------
2,856,955
------------
FINANCIAL SERVICES -- 4.9%
920 Ameriprise Financial, Inc. .... 41,096
2,800 Capital One Financial Corp. ... 239,260
84,199 Citigroup, Inc. ............... 4,061,760
32,000 Countrywide Financial Corp. ... 1,218,560
27,600 E*TRADE Financial Corp.*....... 629,832
97,000 JPMorgan Chase & Company....... 4,073,999
37,000 Merrill Lynch & Company,
Inc. ........................ 2,573,720
40,300 Morgan Stanley................. 2,547,363
20,200 Prudential Financial, Inc. .... 1,569,540
4,500 SLM Corp. ..................... 238,140
32,200 TD Ameritrade Holding Corp. ... 476,882
25,750 Washington Mutual, Inc. ....... 1,173,685
------------
18,843,837
------------
</Table>
See notes to financial statements.
105
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 1.8%
44,750 Archer-Daniels-Midland
Company...................... $ 1,847,280
26,900 General Mills, Inc. ........... 1,389,654
9,700 PepsiAmericas, Inc. ........... 214,467
10,300 PepsiCo, Inc. ................. 618,412
39,550 The Coca-Cola Company.......... 1,701,441
72,000 Tyson Foods, Inc. -- Class
A(h)......................... 1,069,920
------------
6,841,174
------------
INSURANCE -- 4.1%
29,200 Aetna, Inc. ................... 1,165,956
7,400 Ambac Financial Group, Inc. ... 600,140
31,903 American International Group,
Inc.(h)...................... 1,883,872
20,900 Aon Corp. ..................... 727,738
3,200 CIGNA Corp. ................... 315,232
45,600 Genworth Financial,
Inc. -- Class A.............. 1,588,704
45,600 Loews Corp. ................... 1,616,520
25,302 MBIA, Inc.(h).................. 1,481,432
40,800 MetLife, Inc. ................. 2,089,368
14,400 Principal Financial Group,
Inc.(h)...................... 801,360
9,300 Radian Group, Inc. ............ 574,554
35,100 The St. Paul Travelers
Companies, Inc. ............. 1,564,758
31,200 WR Berkley Corp. .............. 1,064,856
------------
15,474,490
------------
INTERNET SERVICES -- 1.8%
184,550 Cisco Systems, Inc.*........... 3,604,262
7,200 Google, Inc. -- Class A*....... 3,019,176
------------
6,623,438
------------
LEISURE AND RECREATION -- 0.5%
22,700 Carnival Corp. (Panama)(h)..... 947,498
13,600 Choice Hotels International,
Inc. ........................ 824,160
------------
1,771,658
------------
MACHINERY -- 0.6%
30,900 Caterpillar, Inc. ............. 2,301,432
------------
MANUFACTURING -- 0.4%
20,400 Illinois Tool Works, Inc. ..... 969,000
7,400 SPX Corp.(h)................... 414,030
------------
1,383,030
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 2.5%
15,800 Humana, Inc.*.................. $ 848,460
78,850 Johnson & Johnson.............. 4,724,692
34,100 McKesson Corp. ................ 1,612,248
49,250 Medtronic, Inc. ............... 2,310,810
------------
9,496,210
------------
METALS AND MINING -- 0.6%
11,800 Freeport-McMoRan Copper & Gold,
Inc. -- Class B.............. 653,838
4,600 Newmont Mining Corp. .......... 243,478
13,900 Southern Copper Corp.(h)....... 1,238,907
------------
2,136,223
------------
OIL AND GAS: PIPELINES -- 0.4%
27,200 Equitable Resources, Inc. ..... 911,200
8,100 Questar Corp. ................. 651,969
------------
1,563,169
------------
OIL, COAL AND GAS -- 5.5%
36,100 Anadarko Petroleum Corp. ...... 1,721,609
26,414 Apache Corp. .................. 1,802,756
21,500 ChevronTexaco Corp. ........... 1,334,290
44,662 ConocoPhillips................. 2,926,700
31,550 Devon Energy Corp. ............ 1,905,936
24,000 EOG Resources, Inc. ........... 1,664,160
102,750 Exxon Mobil Corp. ............. 6,303,712
44,000 Schlumberger, Ltd. (Netherlands
Antilles).................... 2,864,839
9,100 Sunoco, Inc. .................. 630,539
------------
21,154,541
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 4.4%
36,300 Abbott Laboratories............ 1,583,043
8,000 Allergan, Inc. ................ 858,080
35,900 AmerisourceBergen Corp. ....... 1,504,928
42,134 Amgen, Inc.*................... 2,748,401
15,700 Biogen Idec, Inc.*............. 727,381
19,600 Express Scripts, Inc.*......... 1,406,104
10,800 Forest Laboratories, Inc.*..... 417,852
68,100 Merck & Company, Inc. ......... 2,480,883
198,360 Pfizer, Inc. .................. 4,655,509
9,700 Wyeth.......................... 430,777
------------
16,812,958
------------
</Table>
See notes to financial statements.
106
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS -- 0.6%
4,700 New Century Financial
Corp.(h)..................... $ 215,025
30,500 ProLogis....................... 1,589,660
4,400 Public Storage, Inc. .......... 333,960
------------
2,138,645
------------
RETAIL -- 1.7%
49,400 Circuit City Stores, Inc. ..... 1,344,668
4,200 Costco Wholesale Corp. ........ 239,946
8,100 CVS Corp. ..................... 248,670
39,000 Dillard's, Inc. -- Class A..... 1,242,150
25,600 Office Depot, Inc.*............ 972,800
6,072 The Home Depot, Inc. .......... 217,317
27,600 Walgreen Company............... 1,237,584
21,670 Wal-Mart Stores, Inc. ......... 1,043,844
------------
6,546,979
------------
RETAIL: RESTAURANTS -- 0.9%
36,450 Darden Restaurants, Inc. ...... 1,436,130
10,700 Starbucks Corp.*............... 404,032
28,800 YUM! Brands, Inc. ............. 1,447,776
------------
3,287,938
------------
RETAIL: SUPERMARKETS -- 0.5%
52,600 Safeway, Inc.(h)............... 1,367,600
12,000 SUPERVALU, Inc. ............... 368,400
------------
1,736,000
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.7%
45,600 Agilent Technologies, Inc.*.... 1,439,136
35,300 Applera Corp.-Applied
Biosystems Group............. 1,141,955
------------
2,581,091
------------
SEMICONDUCTORS -- 1.6%
8,600 Advanced Micro Devices,
Inc.*........................ 210,012
52,839 Freescale Semiconductor,
Inc. -- Class B*............. 1,553,467
37,750 Intel Corp. ................... 715,363
94,800 Micron Technology, Inc.*....... 1,427,688
73,850 Texas Instruments, Inc. ....... 2,236,916
------------
6,143,446
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.5%
114,700 AT&T, Inc. .................... 3,198,982
8,900 BellSouth Corp. ............... 322,180
38,350 CenturyTel, Inc. .............. 1,424,703
15,100 Corning, Inc.*................. 365,269
3,007 Embarq Corp.*.................. 123,257
33,350 Motorola, Inc. ................ 672,003
11,800 Polycom, Inc.*................. 258,656
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
5,800 QUALCOMM, Inc. ................ $ 232,406
58,450 Sprint Nextel Corp. ........... 1,168,416
17,800 Tellabs, Inc.*................. 236,918
47,700 Verizon Communications,
Inc. ........................ 1,597,472
------------
9,600,262
------------
TRANSPORTATION -- 1.2%
24,000 Burlington Northern Santa Fe
Corp. ....................... 1,902,000
23,500 CSX Corp. ..................... 1,655,340
9,950 Norfolk Southern Corp. ........ 529,539
3,300 Union Pacific Corp. ........... 306,768
------------
4,393,647
------------
UTILITIES -- 1.6%
6,600 American Electric Power
Company, Inc. ............... 226,050
5,000 Consolidated Edison, Inc. ..... 222,200
9,200 Duke Energy Corp. ............. 270,204
38,800 Edison International........... 1,513,200
4,250 Entergy Corp. ................. 300,688
40,150 PG&E Corp. .................... 1,577,092
31,600 TXU Corp. ..................... 1,889,364
------------
5,998,798
------------
TOTAL COMMON STOCKS
(Cost $203,957,848).......... 221,902,468
------------
CONVERTIBLE PREFERRED STOCKS -- 0.1%
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT
20,200 General Motors Corp., Series A,
4.50% (Cost $472,230)........ 493,082
------------
<Caption>
PRINCIPAL
---------
US TREASURY SECURITIES -- 8.5%
US TREASURY BONDS -- 0.7%
$ 360,000 6.25%, 08/15/23(h)............. 397,153
2,508,000 4.50%, 02/15/36(h)............. 2,249,561
------------
2,646,714
------------
US TREASURY INFLATION INDEX -- 1.3%
1,761,817 1.63%, 01/15/15................ 1,642,965
1,025,294 1.88%, 07/15/15................ 973,188
436,424 2.00%, 01/15/16................ 416,905
1,132,801 2.38%, 01/15/25................ 1,102,888
568,366 2.00%, 01/15/26................ 520,544
269,581 3.88%, 04/15/29................ 333,649
------------
4,990,139
------------
</Table>
See notes to financial statements.
107
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US TREASURY SECURITIES (CONTINUED)
US TREASURY NOTES -- 6.2%
$ 1,185,000 3.38%, 02/28/07................ $ 1,170,697
2,585,000 3.75%, 03/31/07................ 2,556,728
40,000 4.00%, 08/31/07................ 39,448
730,000 3.00%, 02/15/08(h)............. 705,563
865,000 3.38%, 02/15/08................ 841,010
1,060,000 3.75%, 05/15/08................ 1,033,542
1,430,000 3.88%, 05/15/10(h)............. 1,368,946
6,300,000 3.88%, 09/15/10(h)............. 6,013,552
6,920,000 4.25%, 01/15/11................ 6,684,020
570,000 4.50%, 02/28/11................ 555,973
50,000 4.25%, 11/15/14(h)............. 47,039
850,000 4.13%, 05/15/15(h)............. 789,538
390,000 4.50%, 11/15/15................ 371,597
210,000 4.50%, 02/15/16(h)............. 199,861
720,000 5.13%, 05/15/16(h)............. 719,382
------------
23,096,896
------------
US TREASURY STRIPS -- 0.3%
3,270,000 Zero coupon, 11/15/24.......... 1,239,968
------------
TOTAL US TREASURY SECURITIES
(Cost $32,708,803)........... 31,973,717
------------
US GOVERNMENT AGENCY SECURITIES -- 19.4%
FANNIE MAE -- 14.3%
161,187 PL# 535675, 7.00%, 01/01/16.... 165,398
963 PL# 549906, 7.50%, 09/01/30.... 998
2,792 PL# 552549, 7.50%, 09/01/30.... 2,894
596 PL# 558384, 7.50%, 01/01/31.... 618
2,519 PL# 568677, 7.50%, 01/01/31.... 2,611
899 PL# 572762, 7.50%, 03/01/31.... 930
16,061 PL# 582178, 7.50%, 06/01/31.... 16,618
13,340 PL# 594316, 6.50%, 07/01/31.... 13,466
2,587 PL# 602859, 6.50%, 10/01/31.... 2,611
15,307 PL# 614924, 7.00%, 12/01/16.... 15,704
1,344,055 PL# 735809, Variable Rate,
4.49%, 08/01/35(a)........... 1,318,732
94,436 PL# 745000, 6.00%, 10/01/35.... 93,051
58,352 PL# 779545, 6.00%, 06/01/34.... 57,566
51,431 PL# 785183, 6.00%, 07/01/34.... 50,739
477,673 PL# 787311, 6.00%, 06/01/34.... 471,243
3,022,109 PL# 790915, 6.00%, 09/01/34.... 2,981,428
1,788,904 PL# 792113, 6.00%, 09/01/34.... 1,764,823
66,606 PL# 793193, 5.50%, 07/01/19.... 65,454
396,988 PL# 793693, 6.00%, 08/01/34.... 391,644
121,218 PL# 801516, Variable Rate,
4.72%, 08/01/34(a)........... 119,236
540,165 PL# 810896, Variable Rate,
4.86%, 01/01/35(a)........... 529,858
1,077,194 PL# 835136, 6.00%, 09/01/35.... 1,061,400
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
FANNIE MAE (CONTINUED)
$ 1,434,191 PL# 844183, 6.00%, 11/01/35.... $ 1,413,162
1,300,000 TBA, 5.50%, 07/01/21........... 1,276,031
1,100,000 TBA, 5.00%, 08/01/21........... 1,058,750
700,000 TBA, 4.50%, 07/01/36........... 634,375
23,900,000 TBA, 5.00%, 07/01/36........... 22,346,499
12,700,000 TBA, 5.50%, 07/01/36........... 12,199,938
6,600,000 TBA, 6.00%, 07/01/36........... 6,496,875
------------
54,552,652
------------
FEDERAL AGRICULTURAL MORTGAGE CORP. -- 0.1%
220,000 4.25%, 07/29/08................ 214,849
------------
FREDDIE MAC -- 0.8%
1,060,000 4.38%, 11/16/07................ 1,044,657
1,460,000 4.75%, 01/18/11................ 1,418,160
430,000 5.63%, 11/23/35................ 393,072
------------
2,855,889
------------
FREDDIE MAC GOLD -- 0.5%
900,000 TBA, 5.00%, 07/01/21........... 866,250
1,000,000 TBA, 5.00%, 07/01/36........... 934,062
------------
1,800,312
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 2.4%
4,913 PL# 461836, 7.00%, 01/15/28.... 5,070
1,529 PL# 596647, 7.00%, 09/15/32.... 1,578
247,309 PL# 604404, 5.00%, 06/15/33.... 234,369
773,969 PL# 604845, 5.00%, 12/15/33.... 733,473
911,129 PL# 608280, 5.00%, 09/15/33.... 863,456
890,610 PL# 615892, 5.00%, 08/15/33.... 844,011
953,946 PL# 616832, 5.00%, 01/15/35.... 903,419
882,988 PL# 620521, 5.00%, 08/15/33.... 836,788
892,414 PL# 637934, 5.00%, 01/15/35.... 845,146
991,139 PL# 639093, 5.00%, 01/15/35.... 938,642
488,243 PL# 639865, 5.00%, 06/15/35.... 462,382
119,043 PL# 781881, 5.00%, 03/15/35.... 112,697
1,390,000 TBA, 5.00%, 07/01/36........... 1,315,722
900,000 TBA, 5.50%, 07/01/36........... 872,438
------------
8,969,191
------------
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.............. 609,730
250,224 Fannie Mae, Series 1999-7,
Class AB,
6.00%, 03/25/29.............. 247,196
</Table>
See notes to financial statements.
108
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
US GOVERNMENT AGENCY SECURITIES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 760,000 Fannie Mae, Series 2003-35,
Class TE,
5.00%, 05/25/18.............. $ 732,883
509,832 Fannie Mae, Series 2004-60,
Class LB,
5.00%, 04/25/34.............. 495,124
639,896 Fannie Mae, Series 2004-99,
Class A0,
5.50%, 01/25/34.............. 630,521
------------
2,715,454
------------
RESOLUTION FUNDING STRIPS -- 0.1%
250,000 Zero coupon, 07/15/18.......... 130,847
250,000 Zero coupon, 10/15/18.......... 129,048
------------
259,895
------------
TENNESSEE VALLEY AUTHORITY -- 0.5%
1,380,000 5.88%, 04/01/36................ 1,434,983
400,000 5.38%, 04/01/56................ 379,556
------------
1,814,539
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost
$74,496,762)................. 73,182,781
------------
CORPORATE BONDS AND NOTES -- 20.6%
ADVERTISING -- 0.0%
40,000 Lamar Media Corp.,
7.25%, 01/01/13.............. 39,300
------------
AEROSPACE AND DEFENSE -- 0.0%
25,000 DRS Technologies, Inc.,
6.63%, 02/01/16.............. 24,313
------------
AUTOMOBILE: RENTAL -- 0.0%
35,000 Hertz Corp. -- 144A,
8.88%, 01/01/14.............. 36,050
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.4%
45,000 Daimler Chrysler NA Holding,
4.05%, 06/04/08.............. 43,528
300,000 Daimler Chrysler NA Holding,
5.88%, 03/15/11.............. 295,394
580,000 Ford Motor Company,
7.45%, 07/16/31(h)........... 421,950
970,000 General Motors Corp.,
8.25%, 07/15/23(h)........... 768,725
50,000 Visteon Corp.,
8.25%, 08/01/10.............. 47,000
------------
1,576,597
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS -- 1.0%
$ 420,000 Bank of America Corp.,
4.50%, 08/01/10.............. $ 403,116
325,000 Deutsche Bank AG New York,
Series YCD, Variable Rate,
3.84%, 03/15/07(a)........... 323,953
270,000 First Union National Bank,
Series BKNT,
5.80%, 12/01/08.............. 271,693
380,000 Glintnir Banki HF -- 144A
(Iceland), Variable Rate,
6.69%, 06/15/16(a)........... 378,217
600,000 Kaupthing Bank -- 144A,
5.44%, 04/11/11.............. 600,949
130,000 Kaupthing Bank -- 144A
(Iceland),
7.13%, 05/19/16.............. 130,267
20,000 Rabobank Capital Funding Trust
II -- 144A, Variable Rate,
5.26%, perpetual(a).......... 18,794
40,000 Rabobank Capital Funding Trust
III -- 144A, Variable Rate,
5.25%, perpetual(a).......... 36,714
300,000 Shinsei Financial, Ltd. -- 144A
(Cayman Islands), Variable
Rate,
6.42%, perpetual(a).......... 282,256
215,000 SunTrust Banks, Inc., Series
CD,
4.42%, 06/15/09.............. 207,584
220,000 Wachovia Capital Trust III,
Variable Rate,
5.80%, perpetual(a).......... 213,704
540,000 Wachovia Corp.,
5.25%, 08/01/14.............. 515,861
515,000 Wells Fargo & Company,
4.20%, 01/15/10.............. 492,540
------------
3,875,648
------------
BROADCAST SERVICES/MEDIA -- 0.6%
20,000 Clear Channel Communications,
Inc.,
4.63%, 01/15/08.............. 19,594
100,000 Clear Channel Communications,
Inc.,
4.25%, 05/15/09.............. 94,892
170,000 Clear Channel Communications,
Inc.,
5.50%, 09/15/14.............. 154,148
60,000 Clear Channel Communications,
Inc.,
4.90%, 05/15/15.............. 51,304
380,000 Comcast Corp.,
6.50%, 01/15/15.............. 383,599
180,000 Cox Communications, Inc.,
3.88%, 10/01/08.............. 172,275
40,000 CSC Holdings, Inc.,
7.88%, 02/15/18.............. 40,100
</Table>
See notes to financial statements.
109
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 15,000 CSC Holdings, Inc.,
7.63%, 07/15/18.............. $ 14,925
10,000 CSC Holdings, Inc., Series B,
7.63%, 04/01/11.............. 10,050
70,000 DIRECTV Holdings LLC/ DIRECTV
Financing Company, Inc.,
6.38%, 06/15/15.............. 64,925
90,000 Echostar DBS Corp. -- 144A,
7.13%, 02/01/16.............. 87,075
75,000 Kabel Deutschland GMBH -- 144A
(Germany),
10.63%, 07/01/14............. 79,500
280,000 Liberty Media Corp.,
7.88%, 07/15/09.............. 291,278
10,000 Liberty Media Corp.,
5.70%, 05/15/13(h)........... 9,131
35,000 News America, Inc.,
6.20%, 12/15/34.............. 31,862
30,000 Quebecor Media, Inc. -- 144A
(Canada),
7.75%, 03/15/16.............. 29,550
10,000 Rogers Cable, Inc. (Canada),
5.50%, 03/15/14.............. 8,925
35,000 Rogers Cable, Inc. (Canada),
6.75%, 03/15/15.............. 33,513
10,000 Sinclair Broadcast Group,
8.00%, 03/15/12.............. 10,200
110,000 Time Warner Entertainment,
8.38%, 07/15/33.............. 124,804
350,000 Time Warner, Inc.,
6.88%, 05/01/12.............. 362,146
315,000 Time Warner, Inc.,
7.70%, 05/01/32.............. 343,361
------------
2,417,157
------------
CHEMICALS -- 0.0%
40,000 IMC Global, Inc., Series B,
10.88%, 06/01/08............. 42,800
6,000 Rhodia SA (France),
10.25%, 06/01/10(h).......... 6,435
27,000 Westlake Chemical Corp.,
6.63%, 01/15/16.............. 25,076
------------
74,311
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 0.0%
20,000 Electronic Data Systems,
7.13%, 10/15/09.............. 20,670
40,000 SunGard Data Systems,
Inc. -- 144A,
9.13%, 08/15/13.............. 41,700
------------
62,370
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES -- 0.0%
$ 65,000 K Hovnanian Enterprises, Inc.,
6.25%, 01/15/15.............. $ 57,281
------------
CONSUMER GOODS AND SERVICES -- 0.1%
400,000 Altria Group, Inc.,
7.00%, 11/04/13.............. 422,605
------------
ENGINEERING -- 0.0%
25,000 Compagnie Generale de
Geophysique SA -- 144A
(France),
7.50%, 05/15/15.............. 24,563
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.1%
160,000 Waste Management, Inc.,
6.50%, 11/15/08.............. 162,589
270,000 Waste Management, Inc.,
6.38%, 11/15/12.............. 275,796
------------
438,385
------------
EQUIPMENT RENTAL AND LEASING -- 0.0%
8,000 NationsRent, Inc.,
9.50%, 10/15/10.............. 8,560
------------
FINANCIAL SERVICES -- 3.1%
200,000 Aiful Corp. -- 144A (Japan),
5.00%, 08/10/10.............. 190,352
560,000 Citigroup, Inc.,
5.13%, 02/14/11.............. 547,404
760,000 Countrywide Financial Corp.,
Series MTNA,
4.50%, 06/15/10.............. 724,018
280,000 Countrywide Home Loans, Series
MTNB, Floating Rate,
5.38%, 02/27/08(b)........... 280,153
110,000 Credit Suisse First Boston USA,
Inc.,
4.88%, 08/15/10.............. 106,715
10,000 E*TRADE Financial Corp.,
7.38%, 09/15/13.............. 10,050
2,645,000 Ford Motor Credit Company,
5.80%, 01/12/09.............. 2,417,751
129,000 Ford Motor Credit
Company -- 144A, Floating
Rate,
10.49%, 06/15/11(b).......... 129,590
210,000 General Electric Capital Corp.,
Series MTNA,
4.25%, 01/15/08.............. 206,037
300,000 General Electric Capital Corp.,
Series MTNA,
4.13%, 09/01/09.............. 287,563
200,000 General Motors Acceptance
Corp.,
4.50%, 07/15/06.............. 199,908
800,000 General Motors Acceptance
Corp.,
6.13%, 08/28/07.............. 791,848
</Table>
See notes to financial statements.
110
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 1,130,000 General Motors Acceptance
Corp.,
5.85%, 01/14/09.............. $ 1,083,842
110,000 General Motors Acceptance
Corp., Series GM,
6.31%, 11/30/07.............. 106,022
120,000 General Motors Acceptance
Corp., Series MTN,
4.38%, 12/10/07.............. 115,767
160,000 General Motors Acceptance
Corp., Series MTN, Floating
Rate,
6.60%, 09/23/08(b)........... 156,849
560,000 HSBC Finance Corp.,
4.63%, 01/15/08.............. 552,200
490,000 JPMorgan Chase & Company,
5.13%, 09/15/14.............. 463,588
290,000 JPMorgan Chase & Company,
5.15%, 10/01/15.............. 271,173
810,000 Lehman Brothers E-Capital Trust
I, Floating Rate,
5.95%, 08/19/65(b)........... 810,740
290,000 Lehman Brothers Holdings, Inc.,
4.00%, 01/22/08.............. 282,528
180,000 Lehman Brothers Holdings, Inc.,
4.50%, 07/26/10.............. 172,110
450,000 Morgan Stanley,
3.63%, 04/01/08.............. 435,679
170,000 The Goldman Sachs Group, Inc.,
4.50%, 06/15/10.............. 162,676
120,000 The Goldman Sachs Group, Inc.,
5.00%, 01/15/11.............. 116,164
900,000 The Goldman Sachs Group, Inc.,
Series MTNB, Floating Rate,
5.15%, 08/01/06(c)........... 900,077
------------
11,520,804
------------
FOOD AND BEVERAGE -- 0.1%
320,000 Anheuser-Busch Companies, Inc.,
4.95%, 01/15/14.............. 304,048
130,000 Kraft Foods, Inc.,
5.63%, 11/01/11.............. 128,192
------------
432,240
------------
FUNERAL SERVICES -- 0.0%
10,000 Service Corp.
International -- 144A,
8.00%, 06/15/17.............. 9,400
------------
INSURANCE -- 0.0%
80,000 ASIF Global Financing
XIX -- 144A,
4.90%, 01/17/13.............. 75,917
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION -- 0.1%
$ 20,000 AMC Entertainment, Inc.,
11.00%, 02/01/16(h).......... $ 21,500
25,000 Boyd Gaming Corp.,
6.75%, 04/15/14.............. 23,844
80,000 Boyd Gaming Corp.,
7.13%, 02/01/16.............. 77,699
30,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 32,025
25,000 MGM MIRAGE,
6.00%, 10/01/09.............. 24,438
50,000 MGM MIRAGE,
8.50%, 09/15/10.............. 52,188
40,000 MGM MIRAGE,
6.63%, 07/15/15.............. 37,500
15,000 Mohegan Tribal Gaming
Authority,
6.13%, 02/15/13.............. 14,194
10,000 Station Casinos, Inc.,
6.63%, 03/15/18.............. 9,100
60,000 Station Casinos, Inc. -- 144A,
6.88%, 03/01/16.............. 56,250
------------
348,738
------------
MACHINERY -- 0.0%
40,000 Terex Corp.,
7.38%, 01/15/14.............. 40,000
------------
MANUFACTURING -- 0.2%
270,000 Tyco International Group SA
(Luxembourg),
6.38%, 10/15/11.............. 275,808
530,000 Tyco International Group SA
(Luxembourg),
6.00%, 11/15/13.............. 525,840
------------
801,648
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 0.1%
30,000 DaVita, Inc.,
7.25%, 03/15/15.............. 28,950
10,000 Fresenius Medical Care Capital
Trust II,
7.88%, 02/01/08.............. 10,150
40,000 HCA, Inc.,
5.50%, 12/01/09.............. 38,746
160,000 HCA, Inc.,
6.75%, 07/15/13.............. 153,588
40,000 HCA, Inc.,
5.75%, 03/15/14.............. 35,968
60,000 Tenet Healthcare Corp.,
6.38%, 12/01/11.............. 53,850
30,000 Tenet Healthcare Corp.,
6.50%, 06/01/12.............. 26,625
------------
347,877
------------
</Table>
See notes to financial statements.
111
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES -- 0.4%
$ 200,000 El Paso Corp., Series MTN,
7.80%, 08/01/31.............. $ 195,250
130,000 El Paso Corp., Series MTN,
7.75%, 01/15/32(h)........... 127,238
330,000 El Paso Natural Gas,
8.38%, 06/15/32.............. 352,646
50,000 Kinder Morgan Energy Partners,
LP,
6.30%, 02/01/09.............. 50,253
240,000 Kinder Morgan Energy Partners,
LP,
6.75%, 03/15/11.............. 245,421
20,000 Williams Companies, Inc.,
7.75%, 06/15/31.............. 19,800
510,000 Williams Companies, Inc.,
Series A,
7.50%, 01/15/31.............. 494,699
------------
1,485,307
------------
OIL, COAL AND GAS -- 1.0%
250,000 Amerada Hess Corp.,
7.30%, 08/15/31.............. 265,710
30,000 AmeriGas Partners LP/AmeriGas
Eagle Finance Corp.,
7.13%, 05/20/16.............. 28,275
210,000 Anadarko Finance Company,
Series B,
7.50%, 05/01/31.............. 226,283
330,000 Apache Finance Canada (Canada),
4.38%, 05/15/15.............. 296,382
5,000 Chesapeake Energy Corp.,
7.63%, 07/15/13.............. 5,056
45,000 Chesapeake Energy Corp.,
7.75%, 01/15/15.............. 45,338
20,000 Chesapeake Energy Corp.,
6.25%, 01/15/18.............. 18,350
340,000 ChevronTexaco Capital Company
(Canada),
3.50%, 09/17/07.............. 331,790
390,000 Conoco, Inc.,
6.95%, 04/15/29(h)........... 425,635
110,000 Devon Energy Corp.,
7.95%, 04/15/32.............. 127,126
870,000 Kerr-McGee Corp.,
7.88%, 09/15/31.............. 986,349
310,000 Pemex Project Funding Master
Trust,
7.38%, 12/15/14.............. 320,695
45,000 Pogo Producing Company,
6.88%, 10/01/17.............. 41,906
30,000 Pride International, Inc.,
7.38%, 07/15/14.............. 30,300
95,000 Suburban Propane Partners,
6.88%, 12/15/13.............. 89,300
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
$ 80,000 Western Oil Sands, Inc.
(Canada),
8.38%, 05/01/12.............. $ 85,400
190,000 XTO Energy, Inc.,
7.50%, 04/15/12.............. 202,217
270,000 XTO Energy, Inc.,
6.25%, 04/15/13.............. 270,545
------------
3,796,657
------------
PAPER AND FOREST PRODUCTS -- 0.1%
470,000 Weyerhaeuser Company,
6.75%, 03/15/12.............. 480,744
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 0.0%
40,000 AmerisourceBergen
Corp. -- 144A,
5.88%, 09/15/15.............. 37,900
------------
PRINTING AND PUBLISHING -- 0.0%
20,000 Reader's Digest Association,
Inc.,
6.50%, 03/01/11.............. 19,400
------------
PRIVATE ASSET BACKED: BANKS -- 1.3%
775,457 Washington Mutual Bank, Series
2005-AR1, Class A1A, Floating
Rate,
5.64%, 01/25/45(c)........... 777,051
1,187,474 Washington Mutual Bank, Series
2005-AR13, Class A1A1,
Floating Rate,
5.61%, 10/25/45(c)........... 1,195,145
1,272,293 Washington Mutual Bank, Series
2005-AR13, Class A1B3,
Floating Rate,
5.68%, 10/25/45(c)........... 1,279,306
1,314,452 Washington Mutual Bank, Series
2005-AR15, Class A1A2,
Floating Rate,
5.60%, 11/25/45(c)........... 1,319,453
------------
4,570,955
------------
PRIVATE ASSET BACKED: FINANCIAL
SERVICES -- 0.6%
1,122,819 Lehman XS Trust, Series
2005-5N, Class 1A1, Floating
Rate,
5.62%, 11/25/35(c)........... 1,126,946
691,713 Lehman XS Trust, Series
2005-7N, Class 1A1B, Floating
Rate,
5.62%, 12/25/35(c)........... 695,280
300,000 Morgan Stanley Capital I,
Series 2005-HQ6, Class A4A,
4.99%, 08/13/42.............. 281,777
------------
2,104,003
------------
</Table>
See notes to financial statements.
112
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY -- 9.7%
$ 1,174,351 Accredited Mortgage Loan Trust,
Series 2005-3, Class A1,
Floating Rate,
5.56%, 09/25/35(c)........... $ 1,176,126
723,962 Adjustable Rate Mortgage Trust,
Series 2004-2, Class 7A2,
Floating Rate,
5.74%, 02/25/35(c)........... 727,143
734,366 Adjustable Rate Mortgage Trust,
Series 2004-5, Class 7A2,
Floating Rate,
5.70%, 04/25/35(c)........... 738,452
280,000 Banc of America Commercial
Mortgage, Inc., Series
2005-5, Class A4,
5.11%, 09/10/15.............. 264,897
1,147,665 Banc of America Mortgage
Securities, Series 2005-A,
Class 2A1, Floating Rate,
4.46%, 02/25/35(c)........... 1,111,910
349,673 Chevy Chase Mortgage Funding
Corp -- 144A., Series
2003-3A, Class A1, Floating
Rate,
5.67%, 07/25/34(c)........... 350,089
518,129 Countrywide Alternative Loan
Trust, Series 2005-36, Class
3A1, Floating Rate,
4.98%, 08/25/35(c)........... 507,403
1,454,196 Countrywide Alternative Loan
Trust, Series 2005-56, Class
4A1, Floating Rate,
5.63%, 11/25/35(c)........... 1,459,894
1,446,043 Countrywide Alternative Loan
Trust, Series 2005-59, Class
1A1, Floating Rate,
5.60%, 11/20/35(c)........... 1,452,258
994,626 Countrywide Asset-Backed
Certificates, Series 2005-11,
Class AF1, Floating Rate,
5.50%, 02/25/36(c)........... 995,597
390,000 Countrywide Asset-Backed
Certificates, Series 2005-4,
Class AF3,
4.46%, 10/25/35.............. 383,139
956,851 Countrywide Home Equity Loan
Trust, Series 2005-G, Class
2A, Floating Rate,
5.43%, 12/15/35(c)........... 958,795
1,175,240 Countrywide Home Loans, Series
2005-R3, Class AF, Floating
Rate,
5.72%, 09/25/35(c)........... 1,182,878
928,731 First Franklin Mortgage Loan
Asset Backed Certificates,
Series 2004-FF10, Class A2,
Floating Rate,
5.72%, 12/25/32(c)........... 931,568
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 900,000 GMAC Commercial Mortgage
Securities, Inc., Series
1999-C2, Class A2,
6.95%, 09/15/33.............. $ 926,332
1,175,994 GMAC Mortgage Corp. Loan Trust,
Series 2005-AR1, Class 3A,
Floating Rate,
4.66%, 03/18/35(c)........... 1,139,945
1,500,000 GMAC Mortgage Corp. Loan Trust,
Series 2006-HE1, Class A,
Floating Rate,
5.53%, 11/25/36(c)........... 1,500,903
2,708,104 GSAMP Trust, Series 2006-SD2,
Class A1, Floating Rate,
5.43%, 05/25/46(c)........... 2,706,994
546,444 Impac CMB Trust, Series
2003-10, Class 1A1, Floating
Rate,
6.02%, 10/25/33(c)........... 546,836
634,887 Impac CMB Trust, Series 2004-2,
Class A1, Floating Rate,
5.58%, 04/25/34(c)........... 635,358
888,623 Impac CMB Trust, Series 2004-6,
Class 1A1, Floating Rate,
5.72%, 10/25/34(c)........... 896,562
271,252 IndyMac Index Mortgage Loan
Trust, Series 2005-AR15,
Class A2,
5.10%, 09/25/35.............. 256,928
1,080,000 JPMorgan Chase Commercial
Mortgage Securities Corp.,
Series 2005-CB12, Class A4,
4.90%, 09/12/37.............. 1,006,352
1,001,203 JPMorgan Mortgage Trust, Series
2004-A3, Class 1A1, Floating
Rate,
4.30%, 07/25/34(c)........... 971,534
870,000 LB-UBS Commercial Mortgage
Trust, Series 2005-C1, Class
A3,
4.55%, 02/15/30.............. 820,638
500,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A4, Class 2A2,
4.46%, 07/25/35.............. 480,520
1,300,000 Merrill Lynch Mortgage
Investors, Inc., Series
2005-A5, Class A3,
4.44%, 06/25/35.............. 1,235,994
500,000 Merrill Lynch Mortgage Trust,
Series 2006-C1, Class A4,
Floating Rate,
5.66%, 05/12/39(c)........... 495,163
528,720 MLCC Mortgage Investors, Inc.,
Series 2003-F, Class A1,
Floating Rate,
5.64%, 10/25/28(c)........... 528,743
717,122 Opteum Mortgage Acceptance
Corp., Series 2005-4, Class
1A1A, Floating Rate,
5.49%, 11/25/35(c)........... 717,802
</Table>
See notes to financial statements.
113
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PRIVATE ASSET BACKED: MORTGAGE AND HOME
EQUITY (CONTINUED)
$ 2,739,927 Residential Accredit Loans,
Inc., Series 2005-Q03, Class
A1, Floating Rate,
5.72%, 10/25/45(c)........... $ 2,749,692
1,205,834 Structured Adjustable Rate
Mortgage Loan, Series
2005-15, Class 1A1,
5.06%, 07/25/35.............. 1,179,794
767,748 Structured Asset Mortgage
Investments, Inc., Series
2003-AR4, Class A1, Floating
Rate,
5.60%, 01/19/34(c)........... 769,983
2,354,410 Thornburg Mortgage Securities
Trust, Series 2006-1, Class
A3, Floating Rate,
5.49%, 01/25/36(c)........... 2,351,218
572,134 Wachovia Mortgage Loan Trust
LLC, Series 2005-WMC1, Class
A1, Floating Rate,
5.43%, 10/25/35(c)........... 572,567
1,500,000 Zuni Mortgage Loan Trust,
Series 2006-0A1, Class A1,
Floating Rate,
5.41%, 08/25/36(c)........... 1,500,075
------------
36,230,082
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.0%
50,000 Host Marriott LP, Series
P -- 144A,
6.75%, 06/01/16.............. 47,938
50,000 Ventas Realty LP/Capital Corp.,
6.75%, 06/01/10.............. 49,750
40,000 Ventas Realty LP/Ventas Capital
Corp.,
7.13%, 06/01/15.............. 40,200
------------
137,888
------------
RETAIL -- 0.0%
20,000 JC Penney & Company, Inc.,
7.40%, 04/01/37.............. 21,015
------------
RETAIL: SUPERMARKETS -- 0.0%
100,000 Delhaize America, Inc.,
9.00%, 04/15/31.............. 110,161
------------
SEMICONDUCTORS -- 0.0%
25,000 Freescale Semiconductor, Inc.,
Floating Rate,
7.82%, 07/15/09(b)........... 25,500
40,000 MagnaChip Semiconductor, Ltd.,
Floating Rate,
8.58%, 12/15/11(b)........... 38,200
------------
63,700
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY -- 0.2%
$ 10,000 Hexion US Finance Corp./Hexion
Nova Scotia Finance, ULC,
9.00%, 07/15/14.............. $ 10,175
210,000 International Lease Finance
Corp. E-Capital Trust
I -- 144A, Variable Rate,
5.90%, 12/21/65(a)(h)........ 204,906
170,000 Mitsubishi UFJ Financial Group
Capital Financial I, Ltd.
(Cayman Islands), Variable
Rate,
6.35%, perpetual(a).......... 164,280
235,000 Resona Preferred Global
Securities -- 144A (Cayman
Islands), Variable Rate,
7.19%, perpetual(a).......... 236,109
------------
615,470
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.7%
190,000 AT&T, Inc.,
5.10%, 09/15/14.............. 176,553
55,000 Cincinnati Bell, Inc.,
7.00%, 02/15/15.............. 52,113
15,000 Citizens Communications
Company,
9.25%, 05/15/11.............. 16,200
10,000 Citizens Communications
Company,
9.00%, 08/15/31.............. 10,175
180,000 Deutsche Telecom International
Finance BV (the Netherlands),
5.75%, 03/23/16.............. 170,195
45,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda),
9.25%, 06/15/16.............. 46,688
15,000 Intelsat Subsidiary Holding
Company, Ltd. (Bermuda),
8.25%, 01/15/13.............. 14,963
220,000 Koninklijke KPN NV (the
Netherlands),
8.38%, 10/01/30(h)........... 236,813
10,000 Nextel Communications, Inc.,
Series D,
7.38%, 08/01/15.............. 10,186
60,000 Nextel Communications, Inc.,
Series F,
5.95%, 03/15/14.............. 57,726
780,000 Qwest Communications
International, Inc., Floating
Rate,
8.67%, 02/15/09(b)........... 798,524
105,000 Qwest Corp.,
7.88%, 09/01/11.............. 106,838
40,000 Rogers Wireless, Inc. (Canada),
6.38%, 03/01/14.............. 38,300
710,000 Sprint Capital Corp.,
6.00%, 01/15/07.............. 711,042
</Table>
See notes to financial statements.
114
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 200,000 Telecom Italia Capital
(Luxembourg),
5.25%, 10/01/15.............. $ 181,346
50,000 Verizon Global Funding Corp.,
7.38%, 09/01/12.............. 53,214
25,000 Windstream Corp. -- 144A,
8.63%, 08/01/16.............. 25,688
------------
2,706,564
------------
TRANSPORTATION -- 0.1%
85,000 OMI Corp. (Marshall Islands),
7.63%, 12/01/13.............. 85,213
20,000 Teekay Shipping Corp. (Marshall
Islands),
8.88%, 07/15/11.............. 21,050
110,000 Union Pacific Corp.,
5.38%, 05/01/14.............. 106,804
------------
213,067
------------
UTILITIES -- 0.7%
760,000 AES Corp.,
7.75%, 03/01/14.............. 767,599
70,000 Dominion Resources, Inc.,
4.75%, 12/15/10.............. 66,879
220,000 Dominion Resources, Inc.,
5.70%, 09/17/12.............. 215,559
110,000 Duke Energy Corp.,
6.25%, 01/15/12.............. 112,024
200,000 Duke Energy Corp.,
5.63%, 11/30/12.............. 197,886
40,000 Exelon Corp.,
5.63%, 06/15/35.............. 35,205
160,000 FirstEnergy Corp., Series B,
6.45%, 11/15/11.............. 162,986
470,000 FirstEnergy Corp., Series C,
7.38%, 11/15/31.............. 505,737
50,000 Midwest Generation LLC,
8.75%, 05/01/34.............. 53,250
40,049 Midwest Generation LLC, Series
B,
8.56%, 01/02/16.............. 42,077
80,000 NRG Energy, Inc.,
7.25%, 02/01/14.............. 78,200
130,000 Oncor Electric Delivery
Company,
6.38%, 01/15/15.............. 130,514
130,000 Pacific Gas & Electric Company,
6.05%, 03/01/34.............. 123,094
15,000 Reliant Energy, Inc.,
9.25%, 07/15/10.............. 15,075
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES (CONTINUED)
$ 120,000 TXU Corp., Series P,
5.55%, 11/15/14.............. $ 109,442
120,000 TXU Corp., Series R,
6.55%, 11/15/34.............. 106,018
------------
2,721,545
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $79,403,060)........... 77,948,222
------------
MUNICIPAL BONDS -- 0.5%
VIRGINIA
1,780,000 Virginia State Housing
Development Authority, Series
C, Revenue Bond,
6.00%, 06/25/34 (Cost
$1,750,544).................. 1,739,879
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 2.1%
450,000 AID-Israel (Israel),
5.50%, 04/26/24.............. 447,737
315,000 AID-Israel (Israel),
5.50%, 09/18/33.............. 311,292
1,000,000 Canada Treasury Bill (Canada),
4.86%, 09/20/06.............. 989,065
600,000 Federal Republic of Brazil
(Brazil),
8.00%, 01/15/18.............. 634,500
120,000 Federal Republic of Brazil
(Brazil),
8.88%, 04/15/24.............. 133,500
107,000 Federal Republic of Brazil
(Brazil),
10.13%, 05/15/27............. 133,215
47,000 Federal Republic of Brazil
(Brazil),
12.25%, 03/06/30............. 69,090
319,000 Federal Republic of Brazil
(Brazil),
11.00%, 08/17/40............. 395,959
28,000 Federal Republic of Brazil
(Brazil), Series B,
8.88%, 04/15/24.............. 31,108
346,620 Government of Canada Real
Return Bonds (Canada),
4.00%, 12/01/31(p)........... 442,784
920,000 Queensland Treasury Corp.
(Australia), Series 11G,
6.00%, 06/14/11(o)........... 686,358
176,000 Republic of Colombia
(Colombia),
11.75%, 02/25/20............. 232,320
206,000 Republic of Panama (Panama),
7.13%, 01/29/26.............. 199,820
1,510,000 Russian Federation
(Russia) -- 144A,
5.00%, 03/31/30.............. 1,610,507
16,000 United Mexican States (Mexico),
5.63%, 01/15/17.............. 14,920
</Table>
See notes to financial statements.
115
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
$ 320,000 United Mexican States (Mexico),
Series MTN,
8.30%, 08/15/31.............. $ 370,400
1,197,000 United Mexican States (Mexico),
Series MTNA,
7.50%, 04/08/33.............. 1,274,805
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost
$7,936,393).................. 7,977,380
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.2%
FEDERAL HOME LOAN BANK,
710,000 Series 633,
4.80%, 02/15/07 (Cost
$710,000).................... 710,000
------------
SECURITIES LENDING COLLATERAL -- 7.1%
26,894,601 Securities Lending Collateral
Investment (Note 4)
(Cost $26,894,601)........... 26,894,601
------------
TOTAL SECURITIES
(Cost $428,330,241).......... 442,822,130
------------
REPURCHASE AGREEMENTS -- 2.3%
8,707,948 With Investors Bank and Trust,
dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $8,711,403
(Collateralized by various
Small Business
Administrations,
7.63% -- 8.38%, due
05/25/16 -- 03/25/26, with a
total value of $9,143,346)
(Cost $8,707,948)............ 8,707,948
------------
Total Investments before Call
and Put Options
Written -- 119.5%
(Cost $437,038,189).......... 451,530,078
------------
<Caption>
CONTRACTS VALUE
- ----------- ------------
CALL OPTIONS WRITTEN -- (0.0)%
(1) IMM Euro, September Future,
Expiring September 2006 @
94.75........................ $ (25)
(14) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 107.......... (5,031)
(14) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 108.......... (2,625)
------------
TOTAL CALL OPTIONS WRITTEN
(Premium $6,061)............. (7,681)
------------
PUT OPTIONS WRITTEN -- (0.0)%
(14) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 101.......... (2,188)
(14) US Treasury Note (10 Year)
December Future, Expiring
November 2006 @ 102.......... (3,937)
------------
TOTAL PUT OPTIONS WRITTEN
(Premium $7,516)............. (6,125)
------------
Total Investments net of Call
and Put Options
Written -- 119.5%
(Cost $437,024,612).......... 451,516,272
Liabilities less other
assets -- (19.5)%............ (73,687,848)
------------
NET ASSETS -- 100.0%........... $377,828,424
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $437,024,612.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $23,502,092
Gross unrealized depreciation........... (9,010,432)
-----------
Net unrealized appreciation............. $14,491,660
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
116
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 98.3%
ADVERTISING -- 0.3%
1,070,000 The Interpublic Group of
Companies, Inc.*(h)....... $ 8,934,500
--------------
AEROSPACE AND DEFENSE -- 1.9%
200,000 Goodrich Corp. ............. 8,058,000
215,000 Northrop Grumman Corp. ..... 13,772,900
455,700 The Boeing Company.......... 37,326,387
--------------
59,157,287
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.6%
341,600 Jones Apparel Group,
Inc. ..................... 10,859,464
320,000 Limited Brands, Inc. ....... 8,188,800
--------------
19,048,264
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 2.0%
104,000 Borg Warner, Inc. .......... 6,770,400
146,600 DaimlerChrysler AG
(Germany)(h).............. 7,236,176
933,800 General Motors Corp.(h)..... 27,817,902
142,725 Lear Corp.(h)............... 3,169,922
31,350 Magna International,
Inc. -- Class A
(Canada)(h)............... 2,256,260
150,000 Toyota Motor Corp. (ADR)
(Japan)................... 15,688,500
--------------
62,939,160
--------------
BANKS -- 3.9%
1,126,082 Bank of America Corp. ...... 54,164,544
397,300 National City Corp. ........ 14,378,287
215,800 SunTrust Banks, Inc. ....... 16,456,908
530,000 Wachovia Corp. ............. 28,662,400
132,800 Wells Fargo & Company....... 8,908,224
--------------
122,570,363
--------------
BROADCAST SERVICES/MEDIA -- 5.6%
813,500 CBS Corp. -- Class B........ 22,005,175
1,031,900 Clear Channel
Communications, Inc. ..... 31,937,305
1,198,265 Comcast Corp. -- Class
A*(h)..................... 39,231,196
645,000 Comcast Corp. -- Special
Class A*.................. 21,143,100
3,470,200 Time Warner, Inc. .......... 60,034,460
--------------
174,351,236
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 7.1%
1,972,200 Electronic Data Systems
Corp. .................... 47,451,132
500,000 EMC Corp. --
Massachusetts*............ 5,485,000
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES
(CONTINUED)
2,482,600 Hewlett-Packard Company..... $ 78,648,768
553,500 International Business
Machines Corp. ........... 42,519,870
680,000 Microsoft Corp. ............ 15,844,000
7,530,300 Sun Microsystems, Inc.*..... 31,250,745
--------------
221,199,515
--------------
CONSUMER GOODS AND SERVICES -- 3.9%
525,000 Altria Group, Inc. ......... 38,550,750
493,800 Avon Products, Inc. ........ 15,307,800
474,800 Kimberly-Clark Corp. ....... 29,295,160
353,000 Procter & Gamble Company.... 19,626,800
320,000 The Clorox Company.......... 19,510,400
--------------
122,290,910
--------------
CONTAINERS AND PACKAGING -- 0.2%
440,000 Owens-Illinois, Inc.*....... 7,374,400
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 1.8%
1,270,800 General Electric Company.... 41,885,568
149,000 Textron, Inc. .............. 13,734,820
--------------
55,620,388
--------------
ELECTRONICS -- 2.9%
125,116 Arrow Electronics, Inc.*.... 4,028,735
1,121,400 Flextronics International,
Ltd. (Singapore)*......... 11,909,268
1,939,177 Sanmina-SCI Corp.*.......... 8,920,214
8,424,205 Solectron Corp.*............ 28,810,781
841,900 Sony Corp. (ADR)
(Japan)(h)................ 37,077,277
--------------
90,746,275
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.5%
450,800 Waste Management, Inc. ..... 16,174,704
--------------
FINANCIAL SERVICES -- 12.0%
353,900 American Express
Company(h)................ 18,834,558
270,800 Capital One Financial
Corp. .................... 23,139,860
1,495,500 Citigroup, Inc. ............ 72,142,920
948,800 Fannie Mae.................. 45,637,280
399,900 Freddie Mac................. 22,798,299
2,311,940 JPMorgan Chase & Company.... 97,101,480
1,099,600 Merrill Lynch & Company,
Inc.(h)................... 76,488,176
84,000 The Goldman Sachs Group,
Inc. ..................... 12,636,120
--------------
368,778,693
--------------
</Table>
See notes to financial statements.
117
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 2.8%
265,000 Kellogg Company............. $ 12,833,950
1,239,500 Kraft Foods, Inc. -- Class
A(h)...................... 38,300,550
255,000 PepsiCo, Inc. .............. 15,310,200
490,000 The Coca-Cola Company....... 21,079,800
--------------
87,524,500
--------------
INSURANCE -- 8.8%
368,000 Aetna, Inc. ................ 14,694,240
1,166,500 American International
Group, Inc. .............. 68,881,825
235,000 Genworth Financial,
Inc. -- Class A........... 8,187,400
450,200 MetLife, Inc. .............. 23,054,742
61,566 PartnerRE, Ltd.
(Bermuda)(h).............. 3,943,302
170,000 RenaissanceRe Holdings, Ltd.
(Bermuda)................. 8,238,200
159,300 The Allstate Corp. ......... 8,718,489
1,019,000 The Chubb Corp.(h).......... 50,848,100
145,000 The Hartford Financial
Services Group, Inc. ..... 12,267,000
1,255,938 The St. Paul Travelers
Companies, Inc. .......... 55,989,716
238,000 XL Capital, Ltd. -- Class A
(Cayman Islands).......... 14,589,400
--------------
269,412,414
--------------
INTERNET SERVICES -- 0.4%
580,000 Cisco Systems, Inc.*........ 11,327,400
--------------
MANUFACTURING -- 2.3%
204,000 Cooper Industries,
Ltd. -- Class A
(Bermuda)................. 18,955,680
100,000 Eaton Corp. ................ 7,540,000
758,600 Honeywell International,
Inc. ..................... 30,571,580
592,950 Smurfit-Stone Container
Corp.*.................... 6,486,873
126,400 SPX Corp. .................. 7,072,080
--------------
70,626,213
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 3.3%
878,200 Boston Scientific Corp.*.... 14,788,888
733,800 HCA, Inc.(h)................ 31,663,470
671,900 Medco Health Solutions,
Inc.*..................... 38,486,432
2,708,000 Tenet Healthcare
Corp.*(h)................. 18,901,840
--------------
103,840,630
--------------
METALS AND MINING -- 0.6%
280,200 United States Steel
Corp. .................... 19,647,624
--------------
OIL, COAL AND GAS -- 8.1%
916,700 ChevronTexaco Corp. ........ 56,890,402
1,170,702 ConocoPhillips.............. 76,716,102
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS (CONTINUED)
138,950 ENSCO International,
Inc.(h)................... $ 6,394,479
1,354,800 Exxon Mobil Corp. .......... 83,116,980
140,000 GlobalSantaFe Corp. (Cayman
Islands).................. 8,085,000
178,000 Noble Corp. (Cayman
Islands).................. 13,246,760
80,000 Occidental Petroleum
Corp. .................... 8,204,000
--------------
252,653,723
--------------
PAPER AND FOREST PRODUCTS -- 0.9%
984,100 MeadWestvaco Corp. ......... 27,485,913
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 5.2%
294,600 Eli Lilly and Company....... 16,282,542
363,800 Merck & Company, Inc. ...... 13,253,234
2,407,300 Millennium Pharmaceuticals,
Inc.*(h).................. 24,000,781
1,555,000 Pfizer, Inc. ............... 36,495,850
1,076,000 Watson Pharmaceuticals,
Inc.*..................... 25,049,280
1,026,000 Wyeth....................... 45,564,660
--------------
160,646,347
--------------
PRINTING AND PUBLISHING -- 0.2%
500,000 The Reader's Digest
Association, Inc.(h)...... 6,980,000
--------------
RETAIL -- 3.6%
594,162 Federated Department Stores,
Inc. ..................... 21,746,329
1,192,600 Office Depot, Inc.*......... 45,318,800
196,700 Sears Holdings Corp.*(h).... 30,457,028
304,000 Target Corp. ............... 14,856,480
--------------
112,378,637
--------------
RETAIL: RESTAURANTS -- 0.8%
705,000 McDonald's Corp. ........... 23,688,000
--------------
RETAIL: SUPERMARKETS -- 1.4%
819,925 Safeway, Inc.(h)............ 21,318,050
150,800 SUPERVALU, Inc.............. 4,629,560
779,350 The Kroger Company.......... 17,036,591
--------------
42,984,201
--------------
RUBBER PRODUCTS -- 0.0%
103,292 Cooper Tire & Rubber
Company(h)................ 1,150,673
--------------
SEMICONDUCTORS -- 1.7%
1,549,400 Intel Corp. ................ 29,361,130
994,900 Intersil Corp. -- Class A... 23,131,425
--------------
52,492,555
--------------
</Table>
See notes to financial statements.
118
VALUE & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 7.9%
234,500 American Tower
Corp. -- Class A*(h)...... $ 7,297,640
2,306,900 AT&T, Inc. ................. 64,339,441
109,400 BellSouth Corp. ............ 3,960,280
214,500 Crown Castle International
Corp.*.................... 7,408,830
58,940 Embarq Corp.*............... 2,415,951
11,430,300 Lucent Technologies,
Inc.*..................... 27,661,326
1,529,200 Nokia Oyj (ADR) (Finland)... 30,981,592
7,006,700 Qwest Communications
International, Inc.*(h)... 56,684,203
1,178,800 Sprint Nextel Corp. ........ 23,564,212
724,650 Tellabs, Inc.*.............. 9,645,092
320,652 Verizon Communications,
Inc. ..................... 10,738,635
--------------
244,697,202
--------------
TOYS -- 1.0%
1,838,300 Mattel, Inc. ............... 30,350,333
--------------
TRANSPORTATION -- 4.0%
358,620 Con-way, Inc. .............. 20,774,857
1,316,600 CSX Corp. .................. 92,741,303
191,380 Norfolk Southern Corp. ..... 10,185,244
--------------
123,701,404
--------------
UTILITIES -- 2.6%
1,200,180 American Electric Power
Company, Inc. ............ 41,106,165
224,800 Constellation Energy
Group..................... 12,256,096
225,000 Entergy Corp. .............. 15,918,750
305,800 Wisconsin Energy Corp. ..... 12,323,740
--------------
81,604,751
--------------
TOTAL COMMON STOCKS
(Cost $2,695,681,260)..... 3,052,378,215
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING
COLLATERAL -- 8.9%
$275,454,038 Securities Lending
Collateral Investment
(Note 4)
(Cost $275,454,038)....... 275,454,038
--------------
TOTAL SECURITIES
(Cost $2,971,135,298)..... 3,327,832,253
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 0.9%
$ 27,223,217 With Investors Bank & Trust,
dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $27,234,016
(Collateralized by various
Fannie Maes,
4.04% -- 5.67%, due
05/25/34 -- 07/01/34, with
a total value of
$16,663,784, and various
Small Business
Administrations,
7.38% -- 7.63%, due
05/25/27 -- 09/25/30, with
a total value of
$11,920,594)
(Cost $27,223,217)........ $ 27,223,217
--------------
Total Investments -- 108.1%
(Cost $2,998,358,515)..... 3,355,055,470
Liabilities less other
assets -- (8.1)%.......... (250,033,739)
--------------
NET ASSETS -- 100.0%........ $3,105,021,731
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $2,998,358,515.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $489,356,082
Gross unrealized depreciation.......... (132,659,127)
------------
Net unrealized appreciation............ $356,696,955
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
119
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS -- 102.2%
ADVERTISING -- 1.0%
50,300 The Interpublic Group of
Companies, Inc.*................ $ 420,005
-----------
AEROSPACE AND DEFENSE -- 5.0%
16,600 Lockheed Martin Corp. ............ 1,190,884
6,800 Northrop Grumman Corp. ........... 435,608
9,600 Raytheon Company.................. 427,872
-----------
2,054,364
-----------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.0%
5,800 Magna International, Inc. -- Class
A (Canada)...................... 417,426
-----------
BANKS -- 3.6%
13,355 Bank of America Corp. ............ 642,376
8,200 Comerica, Inc. ................... 426,318
6,000 KeyCorp........................... 214,080
3,300 UnionBanCal Corp. ................ 213,147
-----------
1,495,921
-----------
CHEMICALS -- 2.3%
61,800 The Mosaic Company*............... 967,170
-----------
COMMERCIAL SERVICES -- 2.4%
60,400 Cendant Corp. .................... 983,916
-----------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 12.2%
101,400 CA, Inc. ......................... 2,083,770
87,300 Electronic Data Systems Corp. .... 2,100,438
37,100 Microsoft Corp. .................. 864,430
-----------
5,048,638
-----------
CONSTRUCTION SERVICES AND SUPPLIES -- 5.9%
31,600 Centex Corp. ..................... 1,589,480
29,000 Pulte Homes, Inc. ................ 834,910
-----------
2,424,390
-----------
CONSUMER GOODS AND SERVICES -- 5.0%
16,100 Altria Group, Inc. ............... 1,182,223
39,360 Unilever PLC (ADR) (United
Kingdom)........................ 887,174
-----------
2,069,397
-----------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 1.6%
17,900 Waste Management, Inc. ........... 642,252
-----------
</Table>
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES -- 11.0%
23,300 Freddie Mac....................... $ 1,328,333
35,700 JPMorgan Chase & Company.......... 1,499,400
13,200 MasterCard, Inc. -- Class A*...... 633,600
6,900 Prudential Financial, Inc. ....... 536,130
11,700 Washington Mutual, Inc. .......... 533,286
-----------
4,530,749
-----------
FOOD AND BEVERAGE -- 2.0%
13,600 Kraft Foods, Inc. -- Class A...... 420,240
25,900 Sara Lee Corp. ................... 414,918
-----------
835,158
-----------
INSURANCE -- 14.4%
9,000 Assurant, Inc. ................... 435,600
18,600 Conseco, Inc.*.................... 429,660
37,300 Genworth Financial, Inc. -- Class
A............................... 1,299,532
27,600 MetLife, Inc. .................... 1,413,396
5,100 The Hartford Financial Services
Group, Inc. .................... 431,460
33,300 The St. Paul Travelers Companies,
Inc. ........................... 1,484,514
6,900 XL Capital, Ltd. -- Class A
(Cayman Islands)................ 422,970
-----------
5,917,132
-----------
LEISURE AND RECREATION -- 1.8%
10,600 Harrah's Entertainment, Inc....... 754,508
-----------
MANUFACTURING -- 6.7%
16,400 Flowserve Corp.*.................. 933,160
66,700 Tyco International, Ltd.
(Bermuda)....................... 1,834,250
-----------
2,767,410
-----------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 2.7%
17,800 HCA, Inc. ........................ 768,070
51,100 Tenet Healthcare Corp.*........... 356,678
-----------
1,124,748
-----------
METALS AND MINING -- 3.2%
41,400 Alcoa, Inc. ...................... 1,339,704
-----------
OIL, COAL AND GAS -- 1.1%
9,500 Petro-Canada (Canada)............. 450,395
-----------
PAPER AND FOREST PRODUCTS -- 2.1%
9,900 International Paper Company....... 319,770
8,700 Weyerhaeuser Company.............. 541,575
-----------
861,345
-----------
</Table>
See notes to financial statements.
120
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ -----------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 2.1%
24,200 Merck & Company, Inc. ............ $ 881,606
-----------
REAL ESTATE DEVELOPMENT AND SERVICES -- 1.3%
11,400 The St. Joe Company............... 530,556
-----------
RETAIL -- 3.3%
28,900 The Home Depot, Inc. ............. 1,034,331
7,000 Wal-Mart Stores, Inc. ............ 337,190
-----------
1,371,521
-----------
RETAIL: RESTAURANTS -- 1.6%
6,500 McDonald's Corp. ................. 218,400
8,500 YUM! Brands, Inc. ................ 427,295
-----------
645,695
-----------
RETAIL: SUPERMARKETS -- 2.2%
34,300 Safeway, Inc. .................... 891,800
-----------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.5%
3,400 ALLTEL Corp. ..................... 217,022
-----------
UTILITIES -- 6.2%
4,500 Entergy Corp. .................... 318,375
34,300 FPL Group, Inc. .................. 1,419,334
12,700 Public Service Enterprise Group,
Inc. ........................... 839,724
-----------
2,577,433
-----------
Total Investments -- 102.2% (Cost
$43,417,472).................... 42,220,261
Liabilities less other
assets -- (2.2)%................ (897,761)
-----------
NET ASSETS -- 100.0%.............. $41,322,500
===========
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $43,417,472.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 1,040,865
Gross unrealized depreciation........... (2,238,076)
-----------
Net unrealized depreciation............. $(1,197,211)
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
121
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 98.7%
AEROSPACE AND DEFENSE -- 2.8%
53,100 Lockheed Martin Corp. ...... $ 3,809,394
127,500 Northrop Grumman Corp. ..... 8,167,650
124,200 Raytheon Company............ 5,535,594
124,100 The Boeing Company.......... 10,165,031
60,300 United Technologies
Corp. .................... 3,824,226
--------------
31,501,895
--------------
AGRICULTURE -- 0.6%
86,100 Monsanto Company............ 7,248,759
--------------
APPAREL: MANUFACTURING AND RETAIL -- 1.0%
23,700 AnnTaylor Stores Corp.*..... 1,028,106
15,000 Coach, Inc.*................ 448,500
63,100 Jones Apparel Group,
Inc. ..................... 2,005,949
22,700 Liz Claiborne, Inc. ........ 841,262
67,200 Nordstrom, Inc. ............ 2,452,800
24,900 Payless ShoeSource, Inc.*... 676,533
228,700 Urban Outfitters, Inc.*..... 3,999,963
--------------
11,453,113
--------------
AUTOMOBILE: RETAIL -- 0.2%
108,000 AutoNation, Inc.*........... 2,315,520
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.4%
60,700 Autoliv, Inc. .............. 3,433,799
27,200 TRW Automotive Holdings
Corp.*.................... 742,016
--------------
4,175,815
--------------
BANKS -- 5.9%
158,000 Bank of America Corp. ...... 7,599,800
93,400 Commerce Bancorp, Inc. --
New Jersey(h)............. 3,331,578
5,600 Golden West Financial
Corp. .................... 415,520
70,700 IndyMac Bancorp, Inc.(h).... 3,241,595
136,300 KeyCorp..................... 4,863,184
8,800 M&T Bank Corp. ............. 1,037,696
46,800 National City Corp.(h)...... 1,693,692
92,000 UnionBanCal Corp. .......... 5,942,280
336,100 US Bancorp(h)............... 10,378,768
260,200 Wachovia Corp. ............. 14,071,616
209,100 Wells Fargo & Company....... 14,026,428
--------------
66,602,157
--------------
BROADCAST SERVICES/MEDIA -- 2.9%
90,282 CBS Corp. -- Class B(h)..... 2,442,128
88,000 Clear Channel
Communications, Inc. ..... 2,723,600
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
34,100 Comcast Corp. -- Class
A*(h)..................... $ 1,116,434
7,763 Hearst-Argyle Television,
Inc. -- Class A........... 171,252
9,705 Liberty Media Holding
Corp. -- Capital -- Series
A*........................ 812,988
18,500 News Corp. -- Class B....... 373,330
120,100 Shaw Communications, Inc. --
Class B (Canada)(h)....... 3,397,629
115,000 The DIRECTV Group, Inc.*.... 1,897,500
47,600 The McGraw-Hill Companies,
Inc. ..................... 2,390,948
144,300 The Walt Disney Company..... 4,329,000
697,900 Time Warner, Inc. .......... 12,073,669
12,700 Univision Communications,
Inc. -- Class A*.......... 425,450
83 Viacom, Inc. -- Class B*.... 2,975
--------------
32,156,903
--------------
BUSINESS SERVICES AND SUPPLIES -- 1.2%
152,400 First Data Corp. ........... 6,864,096
82,400 Fiserv, Inc.*............... 3,737,664
18,600 Global Payments, Inc. ...... 903,030
41,900 Moody's Corp. .............. 2,281,874
--------------
13,786,664
--------------
CHEMICALS -- 0.3%
25,000 Ashland, Inc. .............. 1,667,500
95,500 Methanex Corp.
(Canada)(h)............... 2,022,690
--------------
3,690,190
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 7.0%
110,900 Apple Computer, Inc.*....... 6,334,608
100,900 Cadence Design Systems,
Inc.*..................... 1,730,435
84,300 Computer Sciences Corp.*.... 4,083,492
307,500 Electronic Arts, Inc.*(h)... 13,234,800
20,500 Electronic Data Systems
Corp. .................... 493,230
346,700 Hewlett-Packard Company..... 10,983,456
175,700 Ingram Micro, Inc. -- Class
A*........................ 3,185,441
68,100 International Business
Machines Corp. ........... 5,231,442
50,000 Lexmark International,
Inc. -- Class A*.......... 2,791,500
1,045,700 Microsoft Corp. ............ 24,364,810
13,300 Red Hat, Inc.*(h)........... 311,220
127,100 SanDisk Corp.*(h)........... 6,479,558
--------------
79,223,992
--------------
</Table>
See notes to financial statements.
122
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES -- 0.5%
71,600 Eagle Materials, Inc. ...... $ 3,401,000
29,900 Martin Marietta Materials,
Inc. ..................... 2,725,385
--------------
6,126,385
--------------
CONSUMER GOODS AND SERVICES -- 4.2%
146,100 Altria Group, Inc. ......... 10,728,123
116,800 Colgate-Palmolive Company... 6,996,320
37,300 Energizer Holdings,
Inc.*(h).................. 2,184,661
32,700 FedEx Corp. ................ 3,821,322
31,700 Herbalife, Ltd. (Cayman
Islands)*................. 1,264,830
228,305 Procter & Gamble Company.... 12,693,758
38,600 Reynolds American,
Inc.(h)................... 4,450,580
24,100 The Clorox Company.......... 1,469,377
7,400 United Parcel Service,
Inc. -- Class B........... 609,242
12,800 UST, Inc. .................. 578,432
25,400 Whirlpool Corp. ............ 2,099,310
--------------
46,895,955
--------------
CONTAINERS AND PACKAGING -- 0.5%
52,300 Bemis Company, Inc. ........ 1,601,426
143,300 Pactiv Corp.*............... 3,546,675
--------------
5,148,101
--------------
DISTRIBUTION -- 0.3%
37,400 Tech Data Corp.*............ 1,432,794
23,700 WESCO International,
Inc.*..................... 1,582,212
--------------
3,015,006
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 1.9%
565,400 General Electric Company.... 18,635,584
29,700 Textron, Inc. .............. 2,737,746
--------------
21,373,330
--------------
ELECTRONICS -- 0.6%
29,600 Arrow Electronics, Inc.*.... 953,120
56,100 Avnet, Inc.*................ 1,123,122
39,800 Emerson Electric Company.... 3,335,638
28,800 Jabil Circuit, Inc. ........ 737,280
14,000 Plexus Corp.*............... 478,940
--------------
6,628,100
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.1%
14,600 Republic Services, Inc. .... 588,964
--------------
FINANCIAL SERVICES -- 9.4%
27,400 AG Edwards, Inc. ........... 1,515,768
160,200 American Express Company.... 8,525,844
77,300 AmeriCredit Corp.*(h)....... 2,158,216
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
35,800 Ameriprise Financial,
Inc. ..................... $ 1,599,186
49,600 CIT Group, Inc. ............ 2,593,584
543,600 Citigroup, Inc. ............ 26,223,263
99,900 Countrywide Financial
Corp. .................... 3,804,192
74,700 E*TRADE Financial Corp.*.... 1,704,654
4,200 Franklin Resources, Inc. ... 364,602
20,400 Janus Capital Group,
Inc. ..................... 365,160
415,600 JPMorgan Chase & Company.... 17,455,200
117,000 Lehman Brothers Holdings,
Inc. ..................... 7,622,550
217,500 Merrill Lynch & Company,
Inc. ..................... 15,129,300
121,400 Morgan Stanley.............. 7,673,694
13,200 Prudential Financial,
Inc. ..................... 1,025,640
19,600 TD Ameritrade Holding
Corp. .................... 290,276
33,600 The Goldman Sachs Group,
Inc. ..................... 5,054,448
79,500 Washington Mutual, Inc. .... 3,623,610
--------------
106,729,187
--------------
FOOD AND BEVERAGE -- 2.9%
74,500 Archer-Daniels-Midland
Company................... 3,075,360
57,700 Campbell Soup Company....... 2,141,247
42,300 Dean Foods Company*......... 1,573,137
90,600 General Mills, Inc. ........ 4,680,396
20,100 Kraft Foods, Inc. -- Class
A(h)...................... 621,090
143,100 PepsiCo, Inc. .............. 8,591,724
171,200 The Coca-Cola Company....... 7,365,024
101,100 The Pepsi Bottling Group,
Inc. ..................... 3,250,365
74,000 Tyson Foods, Inc. -- Class
A(h)...................... 1,099,640
--------------
32,397,983
--------------
INSURANCE -- 5.4%
56,000 Aetna, Inc. ................ 2,236,080
44,300 Ambac Financial Group,
Inc. ..................... 3,592,730
52,900 American International
Group, Inc.(h)............ 3,123,745
18,900 Assurant, Inc.(h)........... 914,760
27,100 CIGNA Corp. ................ 2,669,621
43,700 First American Corp. ....... 1,847,199
75,500 Genworth Financial, Inc. --
Class A................... 2,630,420
169,400 Loews Corp. ................ 6,005,230
41,952 MBIA, Inc.(h)............... 2,456,290
67,400 MetLife, Inc. .............. 3,451,554
</Table>
See notes to financial statements.
123
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
9,000 Nationwide Financial
Services, Inc. -- Class
A......................... $ 396,720
94,200 Principal Financial Group,
Inc. ..................... 5,242,230
72,600 Radian Group, Inc. ......... 4,485,228
70,400 SAFECO Corp.(h)............. 3,967,040
110,700 The Allstate Corp. ......... 6,058,610
76,800 The Chubb Corp.(h).......... 3,832,320
77,200 The PMI Group, Inc. ........ 3,441,576
38,100 The St. Paul Travelers
Companies, Inc. .......... 1,698,498
87,150 WR Berkley Corp. ........... 2,974,430
--------------
61,024,281
--------------
INTERNET SERVICES -- 3.6%
109,400 Akamai Technologies,
Inc.*(h).................. 3,959,186
678,600 Cisco Systems, Inc.*........ 13,253,058
35,688 Google, Inc. -- Class A*.... 14,965,049
379,700 Juniper Networks,
Inc.*(h).................. 6,071,403
54,200 YAHOO!, Inc.*............... 1,788,600
--------------
40,037,296
--------------
LEISURE AND RECREATION -- 1.0%
54,900 Boyd Gaming Corp.(h)........ 2,215,764
50,500 Carnival Corp.
(Panama)(h)............... 2,107,870
18,600 Choice Hotels International,
Inc. ..................... 1,127,160
105,000 Starwood Hotels & Resorts
Worldwide, Inc. .......... 6,335,700
--------------
11,786,494
--------------
MACHINERY -- 1.0%
87,300 Caterpillar, Inc. .......... 6,502,104
34,500 Cummins, Inc. .............. 4,217,625
--------------
10,719,729
--------------
MANUFACTURING -- 0.8%
94,600 3M Company.................. 7,640,842
27,700 Furniture Brands
International, Inc.(h).... 577,268
5,100 Parker Hannifin Corp. ...... 395,760
9,400 SPX Corp.(h)................ 525,930
--------------
9,139,800
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 3.8%
22,800 Becton, Dickinson and
Company................... 1,393,764
52,700 Dade Behring Holdings,
Inc. ..................... 2,194,428
55,200 DaVita, Inc.*............... 2,743,440
30,200 Humana, Inc.*............... 1,621,740
209,400 Johnson & Johnson........... 12,547,248
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES
(CONTINUED)
66,100 Kinetic Concepts, Inc.*..... $ 2,918,315
90,400 McKesson Corp. ............. 4,274,112
94,800 Medco Health Solutions,
Inc.*..................... 5,430,144
16,100 Medtronic, Inc. ............ 755,412
11,100 St Jude Medical, Inc.*...... 359,862
76,400 UnitedHealth Group, Inc. ... 3,421,192
34,400 Varian Medical Systems,
Inc.*..................... 1,628,840
43,600 WellPoint, Inc.*............ 3,172,772
--------------
42,461,269
--------------
METALS AND MINING -- 1.3%
147,100 Alcoa, Inc. ................ 4,760,156
28,400 Freeport-McMoRan Copper &
Gold, Inc. -- Class B..... 1,573,644
15,100 IPSCO, Inc. (Canada)........ 1,444,919
7,400 Newmont Mining Corp. ....... 391,682
87,600 Nucor Corp. ................ 4,752,300
27,200 Steel Dynamics, Inc. ....... 1,788,128
--------------
14,710,829
--------------
OIL AND GAS: PIPELINES -- 0.0%
4,900 Questar Corp. .............. 394,401
--------------
OIL, COAL AND GAS -- 9.4%
61,100 Anadarko Petroleum Corp. ... 2,913,859
43,500 Apache Corp. ............... 2,968,875
45,700 Baker Hughes, Inc. ......... 3,740,545
129,200 ChevronTexaco Corp. ........ 8,018,152
194,186 ConocoPhillips.............. 12,725,009
147,000 Devon Energy Corp. ......... 8,880,270
72,000 EnCana Corp. (Canada)(h).... 3,790,080
39,300 EOG Resources, Inc. ........ 2,725,062
546,100 Exxon Mobil Corp. .......... 33,503,235
70,200 Holly Corp. ................ 3,383,640
41,700 Marathon Oil Corp. ......... 3,473,610
105,300 Newfield Exploration
Company*.................. 5,153,382
51,400 Petro-Canada (Canada)....... 2,436,874
72,200 Schlumberger, Ltd.
(Netherlands Antilles).... 4,700,942
34,000 Sunoco, Inc. ............... 2,355,860
93,600 Talisman Energy, Inc.
(Canada).................. 1,636,128
18,300 Ultra Petroleum Corp.
(Canada)*................. 1,084,641
33,600 Unit Corp.*................. 1,911,504
--------------
105,401,668
--------------
</Table>
See notes to financial statements.
124
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 8.0%
104,800 Abbott Laboratories......... $ 4,570,328
66,300 Allergan, Inc.(h)........... 7,111,338
137,700 AmerisourceBergen Corp. .... 5,772,384
181,800 Amgen, Inc.*................ 11,858,814
63,100 Amylin Pharmaceuticals,
Inc.*(h).................. 3,115,247
25,300 Biogen Idec, Inc.*.......... 1,172,149
160,700 Cardinal Health, Inc. ...... 10,337,831
123,400 Caremark Rx, Inc. .......... 6,153,958
69,500 Eli Lilly and Company....... 3,841,265
32,300 Express Scripts, Inc.*...... 2,317,202
25,800 Forest Laboratories,
Inc.*..................... 998,202
25,800 Genentech, Inc.*(h)......... 2,110,440
20,000 Hospira, Inc.*.............. 858,800
156,900 King Pharmaceuticals,
Inc.*(h).................. 2,667,300
116,600 Merck & Company, Inc. ...... 4,247,738
927,500 Pfizer, Inc. ............... 21,768,425
24,200 Wyeth....................... 1,074,722
--------------
89,976,143
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.6%
39,600 Brookfield Asset Management,
Inc. -- Class A
(Canada).................. 1,608,552
136,200 CB Richard Ellis Group,
Inc. -- Class A*.......... 3,391,380
20,100 Jones Lang LaSalle, Inc. ... 1,759,755
--------------
6,759,687
--------------
REAL ESTATE INVESTMENT TRUSTS -- 0.3%
37,700 Equity Office Properties
Trust..................... 1,376,427
11,800 Kimco Realty Corp. ......... 430,582
24,800 New Century Financial
Corp.(h).................. 1,134,600
16,800 ProLogis.................... 875,616
--------------
3,817,225
--------------
RETAIL -- 4.6%
81,303 Circuit City Stores,
Inc. ..................... 2,213,068
237,900 CVS Corp. .................. 7,303,530
98,500 Dillard's, Inc. -- Class
A......................... 3,137,225
59,700 JC Penney Company, Inc. .... 4,030,347
143,200 Kohl's Corp.*............... 8,465,984
210,800 Office Depot, Inc.*......... 8,010,400
56,600 OfficeMax, Inc. ............ 2,306,450
45,700 Sears Holdings Corp.*(h).... 7,076,188
7,200 Target Corp. ............... 351,864
9,900 The Home Depot, Inc. ....... 354,321
179,900 Wal-Mart Stores, Inc. ...... 8,665,783
--------------
51,915,160
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 0.6%
56,600 Brinker International,
Inc.(h)................... $ 2,054,580
60,400 Darden Restaurants, Inc. ... 2,379,760
10,900 McDonald's Corp. ........... 366,240
61,500 Starbucks Corp.*............ 2,322,240
--------------
7,122,820
--------------
RETAIL: SUPERMARKETS -- 1.2%
164,700 Safeway, Inc.(h)............ 4,282,200
64,100 SUPERVALU, Inc. ............ 1,967,870
306,800 The Kroger Company.......... 6,706,648
--------------
12,956,718
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.5%
160,900 Agilent Technologies,
Inc.*..................... 5,078,004
--------------
SEMICONDUCTORS -- 3.6%
22,900 Advanced Micro Devices,
Inc.*..................... 559,218
315,300 Applied Materials, Inc. .... 5,133,084
115,900 Broadcom Corp. -- Class
A*........................ 3,482,795
63,999 Freescale Semiconductor,
Inc. -- Class B*.......... 1,881,571
61,600 Intel Corp. ................ 1,167,320
373,900 Micron Technology, Inc.*.... 5,630,934
272,700 National Semiconductor
Corp. .................... 6,503,895
155,400 Teradyne, Inc.*(h).......... 2,164,722
478,800 Texas Instruments, Inc. .... 14,502,852
--------------
41,026,391
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 5.0%
150,500 AT&T, Inc. ................. 4,197,445
149,700 BCE, Inc. (Canada)(h)....... 3,540,405
37,800 BellSouth Corp. ............ 1,368,360
163,600 CenturyTel, Inc.(h)......... 6,077,740
123,000 Citizens Communications
Company................... 1,605,150
220,200 Corning, Inc.*.............. 5,326,638
4,905 Embarq Corp.*............... 201,056
644,300 JDS Uniphase Corp.*(h)...... 1,630,079
34,200 Motorola, Inc. ............. 689,130
360,000 QUALCOMM, Inc. ............. 14,425,200
97,500 Sprint Nextel Corp. ........ 1,949,025
10,400 Telephone and Data Systems,
Inc. -- Special Common
Shares.................... 404,560
</Table>
See notes to financial statements.
125
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
24,800 Tellabs, Inc.*.............. $ 330,088
447,400 Verizon Communications,
Inc. ..................... 14,983,426
--------------
56,728,302
--------------
TOYS -- 0.1%
41,600 Mattel, Inc. ............... 686,816
--------------
TRANSPORTATION -- 2.1%
6,100 Burlington Northern Santa Fe
Corp. .................... 483,425
16,000 Con-way, Inc. .............. 926,880
69,700 CSX Corp.(h)................ 4,909,668
31,900 Laidlaw International,
Inc. ..................... 803,880
121,700 Norfolk Southern Corp. ..... 6,476,874
35,800 Ryder System, Inc. ......... 2,091,794
68,900 Union Pacific Corp. ........ 6,404,944
65,400 UTI Worldwide, Inc. (British
Virgin Islands)........... 1,650,042
--------------
23,747,507
--------------
UTILITIES -- 3.1%
112,900 Alliant Energy Corp. ....... 3,872,470
92,000 American Electric Power
Company, Inc. ............ 3,151,000
44,200 Constellation Energy
Group..................... 2,409,784
20,400 DTE Energy Company.......... 831,096
166,400 Edison International........ 6,489,600
63,500 Entergy Corp. .............. 4,492,625
82,600 FirstEnergy Corp. .......... 4,477,746
157,300 PG&E Corp. ................. 6,178,744
53,000 TXU Corp. .................. 3,168,870
--------------
35,071,935
--------------
TOTAL COMMON STOCKS
(Cost $1,028,426,531)..... 1,111,620,494
--------------
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES LENDING COLLATERAL -- 9.3%
$104,216,777 Securities Lending
Collateral Investment
(Note 4) (Cost
$104,216,777)............. $ 104,216,777
--------------
TOTAL SECURITIES
(Cost $1,132,643,308)..... 1,215,837,271
--------------
REPURCHASE AGREEMENTS -- 0.8%
8,543,416 With Investors Bank and
Trust, dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $8,546,805
(Collateralized by various
Small Business
Administrations,
7.79% -- 7.88% due
04/25/27 -- 02/25/29, with
a total value of
$8,970,587) (Cost
$8,543,416)............... 8,543,416
--------------
Total Investments -- 108.8%
(Cost $1,141,186,724)..... 1,224,380,687
Liabilities less other
assets -- (8.8)%.......... (98,903,169)
--------------
NET ASSETS -- 100.0%........ $1,125,477,518
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $1,141,186,724.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.............. $118,093,540
Gross unrealized depreciation.............. (34,899,577)
------------
Net unrealized appreciation................ $ 83,193,963
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
126
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 96.2%
AEROSPACE AND DEFENSE -- 2.6%
322,244 General Dynamics Corp. ..... $ 21,094,092
310,015 The Boeing Company.......... 25,393,329
258,885 United Technologies
Corp. .................... 16,418,487
--------------
62,905,908
--------------
AGRICULTURE -- 0.7%
217,915 Monsanto Company............ 18,346,264
--------------
APPAREL: MANUFACTURING AND RETAIL -- 1.1%
288,060 Nordstrom, Inc.(h).......... 10,514,190
981,260 Urban Outfitters, Inc.*..... 17,162,237
--------------
27,676,427
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.1%
250,942 Toyota Motor Corp. (ADR)
(Japan)................... 26,246,024
--------------
BANKS -- 2.4%
400,665 Commerce Bancorp, Inc. --
New Jersey(h)............. 14,291,721
416,136 UBS AG (Switzerland)(h)..... 45,650,119
--------------
59,941,840
--------------
BROADCAST SERVICES/MEDIA -- 1.2%
891,188 Comcast Corp. -- Class A*... 29,177,495
--------------
BUSINESS SERVICES AND SUPPLIES -- 0.7%
386,050 First Data Corp. ........... 17,387,692
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 7.7%
477,635 Apple Computer, Inc.*....... 27,282,511
1,319,088 Electronic Arts, Inc.*...... 56,773,548
3,264,490 Microsoft Corp. ............ 76,062,617
545,530 SanDisk Corp.*(h)........... 27,811,119
--------------
187,929,795
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.7%
408,213 Lennar Corp. -- Class A..... 18,112,411
--------------
CONSUMER GOODS AND SERVICES -- 6.8%
274,960 Altria Group, Inc. ......... 20,190,313
276,445 Colgate-Palmolive Company... 16,559,056
565,115 FedEx Corp. ................ 66,039,338
1,133,761 Procter & Gamble Company.... 63,037,112
--------------
165,825,819
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED OPERATIONS AND SERVICES -- 2.2%
1,274,575 General Electric Company.... $ 42,009,992
127,225 Textron, Inc. .............. 11,727,601
--------------
53,737,593
--------------
FINANCIAL SERVICES -- 7.0%
687,370 American Express Company.... 36,581,831
40,140 Chicago Mercantile Exchange
Holdings, Inc.(h)......... 19,714,761
429,088 Lehman Brothers Holdings,
Inc. ..................... 27,955,083
209,105 Merrill Lynch & Company,
Inc. ..................... 14,545,344
520,054 SLM Corp. .................. 27,521,258
296,308 The Goldman Sachs Group,
Inc. ..................... 44,573,613
--------------
170,891,890
--------------
FOOD AND BEVERAGE -- 2.1%
535,299 PepsiCo, Inc. .............. 32,139,352
469,415 The Coca-Cola Company....... 20,194,233
--------------
52,333,585
--------------
INSURANCE -- 0.8%
549,029 Genworth Financial, Inc. --
Class A................... 19,128,170
--------------
INTERNET SERVICES -- 5.1%
469,493 Akamai Technologies,
Inc.*(h).................. 16,990,952
1,591,130 Cisco Systems, Inc.*........ 31,074,769
101,573 Google, Inc. -- Class A*.... 42,592,606
1,629,205 Juniper Networks,
Inc.*(h).................. 26,050,988
232,685 YAHOO!, Inc.*............... 7,678,605
--------------
124,387,920
--------------
LEISURE AND RECREATION -- 5.7%
235,420 Boyd Gaming Corp.(h)........ 9,501,551
142,558 Four Seasons Hotels, Inc.
(Canada)(h)............... 8,758,764
396,424 Las Vegas Sands Corp.*(h)... 30,865,573
795,179 MGM MIRAGE*................. 32,443,302
450,440 Starwood Hotels & Resorts
Worldwide, Inc. .......... 27,179,550
414,912 Wynn Resorts, Ltd.*(h)...... 30,413,050
--------------
139,161,790
--------------
MACHINERY -- 2.6%
672,363 Caterpillar, Inc. .......... 50,077,596
174,839 Deere & Company............. 14,597,308
--------------
64,674,904
--------------
</Table>
See notes to financial statements.
127
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MANUFACTURING -- 0.6%
184,290 3M Company.................. $ 14,885,103
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 7.7%
236,930 DaVita, Inc.*............... 11,775,421
365,685 Johnson & Johnson........... 21,911,845
283,685 Kinetic Concepts, Inc.*..... 12,524,693
406,535 Medco Health Solutions,
Inc.*..................... 23,286,325
1,882,830 UnitedHealth Group, Inc. ... 84,313,127
147,740 Varian Medical Systems,
Inc.*..................... 6,995,489
187,150 WellPoint, Inc.*............ 13,618,906
258,721 Zimmer Holdings, Inc.*...... 14,674,655
--------------
189,100,461
--------------
OIL, COAL AND GAS -- 4.0%
194,515 Baker Hughes, Inc.(h)....... 15,921,053
449,626 Halliburton Company......... 33,366,745
451,915 Newfield Exploration
Company*.................. 22,116,720
418,562 Schlumberger, Ltd.
(Netherlands Antilles).... 27,252,572
--------------
98,657,090
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 8.5%
352,492 Abbott Laboratories......... 15,372,176
194,505 Allergan, Inc. ............. 20,862,606
489,069 Amgen, Inc.*................ 31,901,971
270,560 Amylin Pharmaceuticals,
Inc.*(h).................. 13,357,547
402,160 Cardinal Health, Inc. ...... 25,870,953
529,440 Caremark Rx, Inc. .......... 26,403,173
298,301 Eli Lilly and Company....... 16,487,096
722,935 Genentech, Inc.*............ 59,136,082
--------------
209,391,604
--------------
RETAIL -- 7.9%
1,020,830 CVS Corp. .................. 31,339,481
614,250 Kohl's Corp.*(h)............ 36,314,460
620,179 Lowe's Companies, Inc.(h)... 37,626,259
340,780 Office Depot, Inc.*......... 12,949,640
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
195,940 Sears Holdings Corp.*(h).... $ 30,339,350
47,510 Target Corp. ............... 2,321,814
401,258 The Home Depot, Inc. ....... 14,361,024
615,720 Wal-Mart Stores, Inc. ...... 29,659,232
--------------
194,911,260
--------------
RETAIL: RESTAURANTS -- 0.9%
585,007 Starbucks Corp.*............ 22,089,864
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.6%
451,877 Agilent Technologies,
Inc.*..................... 14,261,238
--------------
SEMICONDUCTORS -- 6.0%
1,352,740 Applied Materials, Inc. .... 22,022,607
497,210 Broadcom Corp. -- Class
A*........................ 14,941,161
941,765 Micron Technology, Inc.*.... 14,182,981
1,170,000 National Semiconductor
Corp. .................... 27,904,500
666,855 Teradyne, Inc.*(h).......... 9,289,290
1,950,752 Texas Instruments, Inc. .... 59,088,278
--------------
147,428,817
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 5.3%
734,813 Corning, Inc.*.............. 17,775,126
2,764,000 JDS Uniphase Corp.*(h)...... 6,992,920
1,200,374 Motorola, Inc. ............. 24,187,536
2,053,158 QUALCOMM, Inc. ............. 82,270,042
--------------
131,225,624
--------------
TRANSPORTATION -- 4.2%
443,791 Burlington Northern Santa Fe
Corp. .................... 35,170,437
289,615 Norfolk Southern Corp. ..... 15,413,310
490,030 Union Pacific Corp. ........ 45,553,189
280,745 UTI Worldwide, Inc. (British
Virgin Islands)........... 7,083,196
--------------
103,220,132
--------------
TOTAL COMMON STOCKS (Cost
$2,154,810,007)........... 2,363,036,720
--------------
</Table>
See notes to financial statements.
128
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
SECURITIES LENDING COLLATERAL -- 8.5%
$207,745,519 Securities Lending
Collateral Investment
(Note 4) (Cost
$207,745,519)............. $ 207,745,519
--------------
TOTAL SECURITIES (Cost
$2,362,555,526)........... 2,570,782,239
--------------
REPURCHASE AGREEMENTS -- 1.9%
45,591,828 With Investors Bank and
Trust, dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $45,609,912
(Collateralized by Fannie
Mae, 5.82%, due 03/25/33,
with a value of
$19,956,100, Freddie Mac,
4.23%, due 03/01/34, with
a value of $8,717,322 and
various Small Business
Administrations, 7.75% --
8.63%, due 03/25/15-
10/25/28, with a total
value of $19,197,997)
(Cost $45,591,828)........ 45,591,828
--------------
Total Investments -- 106.6%
(Cost $2,408,147,354)..... 2,616,374,067
Liabilities less other
assets -- (6.6)%.......... (162,012,030)
--------------
NET ASSETS -- 100.0%........ $2,454,362,037
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $2,408,147,354.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation......... $304,914,336
Gross unrealized depreciation......... (96,687,623)
------------
Net unrealized appreciation........... $208,226,713
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
129
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 96.6%
AEROSPACE AND DEFENSE -- 1.8%
351,500 Goodrich Corp. ................. $ 14,161,935
------------
AGRICULTURAL EQUIPMENT -- 0.5%
137,200 AGCO Corp.*..................... 3,611,104
------------
AIRLINES -- 0.3%
46,400 Alaska Air Group, Inc.*......... 1,829,088
121,900 ExpressJet Holdings, Inc.*...... 842,329
------------
2,671,417
------------
APPAREL: MANUFACTURING AND RETAIL -- 1.3%
95,300 Jones Apparel Group, Inc. ...... 3,029,587
62,400 Kellwood Company................ 1,826,448
59,600 Russell Corp. .................. 1,082,336
98,550 The Cato Corp. -- Class A....... 2,547,518
28,000 VF Corp. ....................... 1,901,760
------------
10,387,649
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.7%
97,600 ArvinMeritor, Inc.(h)........... 1,677,744
52,900 Autoliv, Inc. .................. 2,992,553
140,000 Genuine Parts Company........... 5,832,400
100,900 Navistar International Corp.*... 2,483,149
------------
12,985,846
------------
BANKS -- 7.2%
149,800 AmSouth Bancorp................. 3,962,210
88,400 Comerica, Inc. ................. 4,595,916
35,300 Downey Financial Corp.(h)....... 2,395,105
61,900 Huntington Bancshares, Inc. .... 1,459,602
153,200 KeyCorp(h)...................... 5,466,176
270,100 Marshall & Ilsley Corp. ........ 12,354,374
84,100 Northern Trust Corp. ........... 4,650,730
157,600 PNC Financial Services Group,
Inc. ......................... 11,058,792
98,900 State Street Corp. ............. 5,745,101
34,600 UnionBanCal Corp. .............. 2,234,814
67,259 United Bankshares, Inc. ........ 2,463,697
------------
56,386,517
------------
BROADCAST SERVICES/MEDIA -- 0.6%
103,200 Tribune Company(h).............. 3,346,776
166,400 Westwood One, Inc. ............. 1,248,000
------------
4,594,776
------------
BUSINESS SERVICES AND SUPPLIES -- 2.5%
169,800 Convergys Corp.*................ 3,311,100
97,800 Dun & Bradstreet Corp.*......... 6,814,704
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES (CONTINUED)
48,800 John H Harland Company.......... $ 2,122,800
109,000 Manpower, Inc. ................. 7,041,400
------------
19,290,004
------------
CHEMICALS -- 3.0%
38,100 Ashland, Inc. .................. 2,541,270
42,300 Eastman Chemical Company........ 2,284,200
146,500 PolyOne Corp.*.................. 1,286,270
38,100 PPG Industries, Inc. ........... 2,514,600
92,600 Sensient Technologies Corp. .... 1,936,266
57,100 Spartech Corp. ................. 1,290,460
274,900 Syngenta AG (ADR)
(Switzerland)................. 7,301,344
60,800 The Lubrizol Corp. ............. 2,422,880
63,400 The Valspar Corp. .............. 1,674,394
2,036 Tronox, Inc. -- Class B......... 26,814
------------
23,278,498
------------
COMMERCIAL SERVICES -- 0.8%
155,600 ChoicePoint, Inc.*(h)........... 6,499,412
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 3.4%
426,000 Activision, Inc.*............... 4,847,880
24,800 Computer Sciences Corp.*........ 1,201,312
47,500 Lexmark International,
Inc. -- Class A*.............. 2,651,925
285,200 NCR Corp.*...................... 10,449,728
132,400 Sybase, Inc.*................... 2,568,560
85,100 The Reynolds and Reynolds
Company -- Class A............ 2,610,017
101,200 Western Digital Corp.*.......... 2,004,772
------------
26,334,194
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.3%
275,400 American Standard Companies,
Inc. ......................... 11,916,558
43,100 Beazer Homes USA, Inc.(h)....... 1,976,997
15,200 KB Home......................... 696,920
118,600 Masco Corp.(h).................. 3,515,304
------------
18,105,779
------------
CONSUMER GOODS AND SERVICES -- 2.8%
73,500 Blyth, Inc. .................... 1,356,810
82,900 Eastman Kodak Company(h)........ 1,971,362
124,900 Fortune Brands, Inc. ........... 8,869,149
77,200 Newell Rubbermaid, Inc. ........ 1,994,076
36,900 The Black & Decker Corp. ....... 3,116,574
77,700 Tupperware Corp. ............... 1,529,913
37,900 Whirlpool Corp. ................ 3,132,435
------------
21,970,319
------------
</Table>
See notes to financial statements.
130
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
CONTAINERS AND PACKAGING -- 1.9%
325,700 Ball Corp. ..................... $ 12,063,928
77,700 Sonoco Products Company......... 2,459,205
------------
14,523,133
------------
DIVERSIFIED OPERATIONS AND SERVICES -- 1.9%
36,600 LandAmerica Financial Group,
Inc.(h)....................... 2,364,360
137,000 Textron, Inc. .................. 12,628,660
------------
14,993,020
------------
ELECTRONICS -- 2.7%
146,000 Amphenol Corp. -- Class A....... 8,170,160
273,300 Avnet, Inc.*.................... 5,471,466
47,600 Belden CDT, Inc. ............... 1,573,180
335,200 Sanmina-SCI Corp.*.............. 1,541,920
327,400 Solectron Corp.*................ 1,119,708
217,600 Vishay Intertechnology,
Inc.*(h)...................... 3,422,848
------------
21,299,282
------------
EQUIPMENT RENTAL AND LEASING -- 0.3%
83,100 United Rentals North America,
Inc.*(h)...................... 2,657,538
------------
FINANCIAL SERVICES -- 3.4%
75,964 Advanta Corp. -- Class B........ 2,730,906
58,100 AG Edwards, Inc. ............... 3,214,092
44,900 AmeriCredit Corp.*.............. 1,253,608
331,800 Amvescap PLC (ADR) (United
Kingdom)(h)................... 6,134,982
60,000 CIT Group, Inc. ................ 3,137,400
344,500 E*TRADE Financial Corp.*........ 7,861,490
80,500 Friedman, Billings, Ramsey
Group, Inc. -- Class A(h)..... 883,085
54,800 H&R Block, Inc. ................ 1,307,528
------------
26,523,091
------------
FOOD AND BEVERAGE -- 2.8%
322,600 Del Monte Foods Company......... 3,622,798
172,800 McCormick & Company, Inc. ...... 5,797,440
319,200 Sysco Corp. .................... 9,754,752
53,200 The Pepsi Bottling Group,
Inc. ......................... 1,710,380
76,500 Tyson Foods, Inc. -- Class
A(h).......................... 1,136,790
------------
22,022,160
------------
INSURANCE -- 7.9%
342,500 Aon Corp. ...................... 11,925,849
14,800 CIGNA Corp. .................... 1,457,948
64,680 Cincinnati Financial Corp. ..... 3,040,607
232,600 Genworth Financial,
Inc. -- Class A............... 8,103,784
102,000 Horace Mann Educators Corp. .... 1,728,900
81,399 Lincoln National Corp. ......... 4,594,160
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
196,500 MBIA, Inc.(h)................... $ 11,505,075
28,400 MGIC Investment Corp. .......... 1,846,000
92,000 Nationwide Financial Services,
Inc. -- Class A............... 4,055,360
62,500 Principal Financial Group,
Inc. ......................... 3,478,125
71,500 Radian Group, Inc. ............. 4,417,270
56,300 SAFECO Corp. ................... 3,172,505
55,000 Unitrin, Inc. .................. 2,397,450
------------
61,723,033
------------
INTERNET SERVICES -- 0.2%
172,100 EarthLink, Inc.*................ 1,490,386
------------
LEISURE AND RECREATION -- 1.2%
128,900 Harrah's Entertainment, Inc. ... 9,175,102
------------
MANUFACTURING -- 4.0%
121,300 Carlisle Companies, Inc.(h)..... 9,619,090
41,300 Crane Company................... 1,718,080
64,700 EnPro Industries, Inc.*......... 2,173,920
84,900 Furniture Brands International,
Inc.(h)....................... 1,769,316
164,500 Ingersoll-Rand Company,
Ltd. -- Class A (Bermuda)..... 7,037,310
87,800 ITT Industries, Inc. ........... 4,346,100
60,600 Leggett & Platt, Inc. .......... 1,513,788
28,800 SPX Corp. ...................... 1,611,360
104,900 Tredegar Corp. ................. 1,659,518
------------
31,448,482
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 3.8%
340,401 Boston Scientific Corp.*........ 5,732,353
199,700 CR Bard, Inc. .................. 14,630,022
60,700 Invacare Corp. ................. 1,510,216
31,400 Kindred Healthcare, Inc.*....... 816,400
31,200 Universal Health Services,
Inc. -- Class B............... 1,568,112
98,000 Zimmer Holdings, Inc.*.......... 5,558,560
------------
29,815,663
------------
METALS AND MINING -- 1.6%
31,800 Nucor Corp. .................... 1,725,150
162,300 Precision Castparts Corp. ...... 9,699,048
20,700 United States Steel Corp. ...... 1,451,484
------------
12,875,682
------------
OFFICE EQUIPMENT -- 0.2%
145,100 IKON Office Solutions, Inc. .... 1,828,260
------------
</Table>
See notes to financial statements.
131
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL AND GAS: PIPELINES -- 3.9%
57,100 National Fuel Gas Company....... $ 2,006,494
255,000 Questar Corp. .................. 20,524,950
340,900 The Williams Companies, Inc. ... 7,963,424
------------
30,494,868
------------
OIL, COAL AND GAS -- 4.4%
85,200 Hess Corp.(h)................... 4,502,820
20,198 Kerr-McGee Corp. ............... 1,400,731
68,306 Marathon Oil Corp. ............. 5,689,890
326,400 ONEOK, Inc. .................... 11,110,656
131,700 Praxair, Inc. .................. 7,111,800
40,200 Sunoco, Inc. ................... 2,785,458
49,340 Swift Energy Company*........... 2,118,166
------------
34,719,521
------------
PAPER AND FOREST PRODUCTS -- 0.6%
161,200 MeadWestvaco Corp. ............. 4,502,316
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 2.9%
318,700 Endo Pharmaceuticals Holdings,
Inc.*......................... 10,510,726
169,700 King Pharmaceuticals,
Inc.*(h)...................... 2,884,900
148,200 Millipore Corp.*(h)............. 9,335,118
------------
22,730,744
------------
PRINTING AND PUBLISHING -- 0.4%
61,000 Gannett Company, Inc. .......... 3,411,730
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.9%
173,150 Brookfield Asset Management,
Inc. -- Class A (Canada)(h)... 7,033,353
------------
REAL ESTATE INVESTMENT TRUSTS -- 2.1%
47,800 American Home Mortgage
Investment Corp.(h)........... 1,761,908
227,500 Anthracite Capital, Inc. ....... 2,766,400
53,200 Crescent Real Estate Equities
Company....................... 987,392
71,700 Hospitality Properties Trust.... 3,149,064
335,800 HRPT Properties Trust........... 3,881,848
101,200 Innkeepers USA Trust............ 1,748,736
13,900 PS Business Parks, Inc. ........ 820,100
38,998 RAIT Investment Trust........... 1,138,742
------------
16,254,190
------------
RETAIL -- 2.5%
107,200 Borders Group, Inc. ............ 1,978,912
390,600 Dollar Tree Stores, Inc.*....... 10,350,900
131,200 Federated Department Stores,
Inc. ......................... 4,801,920
42,100 JC Penney Company, Inc.......... 2,842,171
------------
19,973,903
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 1.5%
234,000 YUM! Brands, Inc. .............. $ 11,763,180
------------
RETAIL: SUPERMARKETS -- 0.4%
97,611 SUPERVALU, Inc. ................ 2,996,658
------------
RUBBER PRODUCTS -- 0.3%
183,200 The Goodyear Tire & Rubber
Company*(h)................... 2,033,520
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 1.2%
445,700 PerkinElmer, Inc. .............. 9,315,130
------------
SEMICONDUCTORS -- 0.9%
547,300 LSI Logic Corp.*(h)............. 4,898,335
134,300 Micron Technology, Inc.*........ 2,022,558
------------
6,920,893
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 2.4%
598,800 Avaya, Inc.*.................... 6,838,296
86,100 CenturyTel, Inc.(h)............. 3,198,615
359,000 Comverse Technology, Inc.*...... 7,097,430
69,500 Polycom, Inc.*.................. 1,523,440
------------
18,657,781
------------
TOYS -- 0.6%
300,800 Mattel, Inc. ................... 4,966,208
------------
TRANSPORTATION -- 1.7%
45,300 Arkansas Best Corp. ............ 2,274,513
64,500 CSX Corp. ...................... 4,543,380
15,700 GATX Corp. ..................... 667,250
135,400 Sabre Holdings Corp. -- Class
A............................. 2,978,800
98,700 Swift Transportation Company,
Inc.*......................... 3,134,712
------------
13,598,655
------------
UTILITIES -- 9.8%
164,100 AGL Resources, Inc. ............ 6,255,492
73,100 Alliant Energy Corp. ........... 2,507,330
135,300 American Electric Power Company,
Inc. ......................... 4,634,025
118,300 Cleco Corp. .................... 2,750,475
605,900 CMS Energy Corp.*............... 7,840,346
53,200 DTE Energy Company.............. 2,167,368
24,500 Duquesne Light Holdings,
Inc.(h)....................... 402,780
134,200 FirstEnergy Corp. .............. 7,274,982
119,300 NiSource, Inc. ................. 2,605,512
</Table>
See notes to financial statements.
132
MID-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
UTILITIES (CONTINUED)
387,300 Northeast Utilities(h).......... $ 8,005,491
52,100 OGE Energy Corp. ............... 1,825,063
62,700 Pinnacle West Capital Corp. .... 2,502,357
302,100 PPL Corp.(h).................... 9,757,829
24,800 Progress Energy, Inc. .......... 1,063,176
107,200 Public Service Enterprise Group,
Inc. ......................... 7,088,064
135,900 Puget Energy, Inc.(h)........... 2,919,132
210,300 TECO Energy, Inc. .............. 3,141,882
262,400 Xcel Energy, Inc.(h)............ 5,032,832
------------
77,774,136
------------
TOTAL COMMON STOCKS (Cost
$716,389,731)................. 757,799,068
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 12.3%
$96,209,905 Securities Lending Collateral
Investment (Note 4) (Cost
$96,209,905).................. 96,209,905
------------
TOTAL SECURITIES (Cost
$812,599,636)................. 854,008,973
------------
REPURCHASE AGREEMENTS -- 2.9%
23,057,477 With Investors Bank and Trust,
dated 06/30/06, 4.76%, due
07/03/06, repurchase proceeds
at maturity $23,066,623
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.69%, due 11/01/34, with a
value of $8,207,286 and
various Small Business
Administrations,
7.82% -- 7.88%, due
07/25/27 -- 07/25/29, with a
total value of $16,003,065)
(Cost $23,057,477)............ 23,057,477
------------
Total Investments -- 111.8%
(Cost $835,657,113)........... 877,066,450
Liabilities less other
assets -- (11.8)%............. (92,864,662)
------------
NET ASSETS -- 100.0%............ $784,201,788
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $835,657,113.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............. $ 65,313,130
Gross unrealized depreciation............. (23,903,793)
------------
Net unrealized appreciation............... $ 41,409,337
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
133
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 97.7%
ADVERTISING -- 1.7%
98,000 Lamar Advertising Company --
Class A*..................... $ 5,278,280
------------
AIRLINES -- 1.5%
91,000 US Airways Group, Inc.*........ 4,599,140
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.6%
108,500 Oshkosh Truck Corp. ........... 5,155,920
------------
BUSINESS SERVICES AND SUPPLIES -- 4.5%
89,245 Fluor Corp. ................... 8,293,538
91,340 Manpower, Inc. ................ 5,900,564
------------
14,194,102
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 9.1%
228,000 BEA Systems, Inc.*............. 2,984,520
250,835 Citrix Systems, Inc.*.......... 10,068,516
155,961 FactSet Research Systems,
Inc. ........................ 7,376,955
59,812 SanDisk Corp.*................. 3,049,216
163,760 VeriFone Holdings, Inc.*....... 4,991,405
------------
28,470,612
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 3.3%
163,000 Chicago Bridge & Iron NV (the
Netherlands)(h).............. 3,936,450
117,480 Washington Group International,
Inc. ........................ 6,266,383
------------
10,202,833
------------
CONSUMER GOODS AND SERVICES -- 2.3%
180,600 Herbalife, Ltd. (Cayman
Islands)*.................... 7,205,940
------------
ENGINEERING -- 2.1%
146,800 McDermott International, Inc.
(Panama)*.................... 6,674,996
------------
FINANCIAL SERVICES -- 6.4%
210,255 Lazard, Ltd. -- Class A
(Bermuda)(h)................. 8,494,302
100,000 MasterCard, Inc. -- Class A*... 4,800,000
177,470 T Rowe Price Group, Inc. ...... 6,710,141
------------
20,004,443
------------
INTERNET SERVICES -- 6.7%
148,185 Akamai Technologies, Inc.*..... 5,362,815
176,250 CheckFree Corp.*(h)............ 8,734,950
159,005 Monster Worldwide, Inc.*....... 6,783,153
------------
20,880,918
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
LEISURE AND RECREATION -- 5.0%
230,015 Hilton Hotels Corp. ........... $ 6,504,825
85,035 Penn National Gaming, Inc.*.... 3,297,657
86,965 Station Casinos, Inc. ......... 5,920,577
------------
15,723,059
------------
MACHINERY -- 4.9%
61,100 Joy Global, Inc. .............. 3,182,699
97,885 Rockwell Automation, Inc. ..... 7,048,699
133,620 Wabtec Corp. .................. 4,997,388
------------
15,228,786
------------
MANUFACTURING -- 2.1%
141,368 Roper Industries, Inc. ........ 6,608,954
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 7.7%
146,280 Hologic, Inc.*................. 7,220,381
132,790 Psychiatric Solutions, Inc.*... 3,805,761
134,110 Varian Medical Systems,
Inc.*........................ 6,350,109
211,445 VCA Antech, Inc.*.............. 6,751,439
------------
24,127,690
------------
METALS AND MINING -- 1.5%
76,000 Precision Castparts Corp. ..... 4,541,760
------------
OIL AND GAS: EQUIPMENT -- 3.0%
194,075 Cameron International
Corp.*(h).................... 9,270,963
------------
OIL, COAL AND GAS -- 5.9%
38,925 Diamond Offshore Drilling,
Inc.(h)...................... 3,266,975
155,765 Quicksilver Resources,
Inc.*(h)..................... 5,733,710
299,715 Southwestern Energy Company*... 9,339,119
------------
18,339,804
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 5.7%
206,255 Celgene Corp.*................. 9,782,675
228,200 Pharmaceutical Product
Development, Inc. ........... 8,014,384
------------
17,797,059
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 1.7%
212,715 CB Richard Ellis Group, Inc. --
Class A*..................... 5,296,604
------------
RETAIL -- 4.6%
174,020 Circuit City Stores, Inc. ..... 4,736,824
226,245 Coldwater Creek, Inc.*......... 6,054,317
84,862 GameStop Corp. -- Class
A*(h)........................ 3,564,204
------------
14,355,345
------------
</Table>
See notes to financial statements.
134
MID-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
RETAIL: RESTAURANTS -- 2.1%
95,954 Panera Bread Company -- Class
A*(h)........................ $ 6,451,947
------------
SEMICONDUCTORS -- 2.9%
204,995 Broadcom Corp. -- Class A*..... 6,160,100
122,035 Intersil Corp. -- Class A...... 2,837,314
------------
8,997,414
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 11.4%
259,921 American Tower Corp. -- Class
A*........................... 8,088,741
275,320 Crown Castle International
Corp.*....................... 9,509,552
172,742 Harris Corp. .................. 7,170,520
982,345 Level 3 Communications,
Inc.*(h)..................... 4,361,612
121,415 NII Holdings, Inc.*............ 6,845,378
------------
35,975,803
------------
TOTAL COMMON STOCKS (Cost
$274,492,991)................ 305,382,372
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 14.6%
$45,722,857 Securities Lending Collateral
Investment (Note 4) (Cost
$45,722,857)................. 45,722,857
------------
TOTAL SECURITIES (Cost
$320,215,848)................ 351,105,229
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 0.8%
$ 2,563,163 With Investors Bank and Trust,
dated 06/30/06, 4.76%, due
07/03/06, repurchase proceeds
at maturity $2,564,180
(Collateralized by Government
National Mortgage
Association, 4.38%, due
04/20/24, with a value of
$2,691,321) (Cost
$2,563,163).................. $ 2,563,163
------------
Total Investments -- 113.1%
(Cost $322,779,011).......... 353,668,392
Liabilities less other
assets -- (13.1)%............ (40,976,340)
------------
NET ASSETS -- 100.0%........... $312,692,052
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $322,779,011.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $36,093,809
Gross unrealized depreciation.......... (5,204,428)
-----------
Net unrealized appreciation............ $30,889,381
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
135
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 97.4%
AEROSPACE AND DEFENSE -- 1.8%
130,854 Moog, Inc. -- Class A*......... $ 4,477,824
------------
APPAREL: MANUFACTURING AND RETAIL -- 3.4%
128,572 Phillips-Van Heusen Corp. ..... 4,906,308
217,714 Stein Mart, Inc. .............. 3,222,167
------------
8,128,475
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 2.2%
171,600 Winnebago Industries,
Inc.(h)...................... 5,326,464
------------
BANKS -- 6.9%
189,800 BankUnited Financial
Corp. -- Class A............. 5,792,696
146,600 Digital Insight Corp.*......... 5,026,914
186,473 Oriental Financial Group,
Inc. -- Puerto Rico(h)....... 2,379,395
55,400 Pacific Capital Bancorp........ 1,724,048
56,600 Sterling Financial
Corp. -- Spokane............. 1,726,866
------------
16,649,919
------------
BUSINESS SERVICES AND SUPPLIES -- 1.3%
90,100 Administaff, Inc. ............. 3,226,481
------------
COLLECTIBLES -- 1.6%
145,100 Sotheby's Holdings,
Inc. -- Class A*............. 3,808,875
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 3.0%
162,400 Checkpoint Systems, Inc.*...... 3,606,904
125,900 Verint Systems, Inc.*.......... 3,675,021
------------
7,281,925
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 4.1%
110,200 Hovnanian Enterprises,
Inc. -- Class A*(h).......... 3,314,816
70,600 Meritage Homes Corp.*.......... 3,335,850
125,200 Standard Pacific Corp. ........ 3,217,640
------------
9,868,306
------------
CONSUMER GOODS AND SERVICES -- 2.1%
169,200 Elizabeth Arden, Inc.*......... 3,025,296
47,900 The Scotts Miracle-Gro
Company -- Class A........... 2,027,128
------------
5,052,424
------------
DISTRIBUTION -- 3.4%
136,453 Watsco, Inc. .................. 8,162,618
------------
EDUCATION -- 1.4%
108,362 School Specialty, Inc.*(h)..... 3,451,330
------------
ELECTRONICS -- 2.2%
318,100 Sonic Solutions*(h)............ 5,248,650
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
ENGINEERING -- 1.5%
83,900 URS Corp.*..................... $ 3,523,800
------------
FINANCIAL SERVICES -- 6.5%
72,070 Accredited Home Lenders Holding
Company*(h).................. 3,445,667
110,300 Asset Acceptance Capital
Corp.*....................... 2,183,940
113,700 Eaton Vance Corp.(h)........... 2,837,952
120,800 Jefferies Group, Inc. ......... 3,579,304
119,593 Raymond James Financial,
Inc. ........................ 3,620,080
------------
15,666,943
------------
FOOD AND BEVERAGE -- 2.4%
176,300 United Natural Foods,
Inc.*(h)..................... 5,821,426
------------
INSURANCE -- 10.3%
104,000 American Physicians Capital,
Inc.*........................ 5,469,360
205,819 Delphi Financial Group,
Inc. -- Class A.............. 7,483,579
59,600 Philadelphia Consolidated
Holding Corp.*............... 1,809,456
35,600 Protective Life Corp. ......... 1,659,672
116,300 State Auto Financial Corp. .... 3,784,402
83,400 The Commerce Group, Inc. ...... 2,463,636
77,000 United Fire & Casualty
Company...................... 2,320,010
------------
24,990,115
------------
INTERNET SERVICES -- 2.6%
157,500 Digital River, Inc.*(h)........ 6,361,425
------------
LEISURE AND RECREATION -- 1.8%
156,300 WMS Industries, Inc.*(h)....... 4,281,057
------------
MACHINERY -- 2.8%
136,100 Bucyrus International,
Inc. -- Class A.............. 6,873,050
------------
MANUFACTURING -- 1.7%
61,200 FLIR Systems, Inc.*(h)......... 1,350,072
170,700 Hexcel Corp.*.................. 2,681,697
------------
4,031,769
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 13.6%
109,400 AMERIGROUP Corp.*.............. 3,395,776
47,400 Covance, Inc.*(h).............. 2,901,828
174,200 Healthways, Inc.*(h)........... 9,169,887
235,800 Immucor, Inc.*................. 4,534,434
154,100 Matria Healthcare, Inc.*(h).... 3,300,822
201,300 Sunrise Senior Living,
Inc.*(h)..................... 5,565,945
141,150 United Surgical Partners
International, Inc.*......... 4,244,381
------------
33,113,073
------------
</Table>
See notes to financial statements.
136
SMALL-CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
OIL, COAL AND GAS -- 10.9%
93,100 Cabot Oil & Gas Corp.(h)....... $ 4,561,900
96,600 Energy Partners, Ltd.*(h)...... 1,830,570
119,139 Headwaters, Inc.*(h)........... 3,045,193
143,800 Oceaneering International,
Inc.*........................ 6,593,230
65,600 ONEOK, Inc. ................... 2,233,024
96,500 Swift Energy Company*.......... 4,142,745
66,300 The Houston Exploration
Company*..................... 4,056,897
------------
26,463,559
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 2.8%
112,600 Salix Pharmaceuticals,
Ltd.*(h)..................... 1,384,980
147,100 Serologicals Corp.*(h)......... 4,624,824
178,000 VaxGen, Inc.*(h)............... 868,640
------------
6,878,444
------------
PRINTING AND PUBLISHING -- 0.9%
84,904 Scholastic Corp.*.............. 2,204,957
------------
RETAIL -- 1.0%
53,600 Guitar Center, Inc.*(h)........ 2,383,592
------------
RETAIL: RESTAURANTS -- 3.3%
58,400 Brinker International,
Inc.(h)...................... 2,119,920
124,200 CEC Entertainment, Inc.*....... 3,989,304
88,500 Sonic Corp.*................... 1,839,915
------------
7,949,139
------------
TOOLS -- 1.0%
60,700 Snap-on, Inc. ................. 2,453,494
------------
UTILITIES -- 0.9%
91,400 PNM Resources, Inc. ........... 2,281,344
------------
TOTAL COMMON STOCKS
(Cost $220,582,924).......... 235,960,478
------------
<Caption>
PRINCIPAL VALUE
--------- ------------
SECURITIES LENDING COLLATERAL -- 21.6%
$52,391,519 Securities Lending Collateral
Investment (Note 4)
(Cost $52,391,519)........... $ 52,391,519
------------
TOTAL SECURITIES
(Cost $272,974,443).......... 288,351,997
------------
REPURCHASE AGREEMENTS -- 2.7%
6,608,926 With Investors Bank and Trust,
dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $6,611,548
(Collateralized by various
Small Business
Administrations,
7.63% -- 8.13%, due
11/25/12 -- 01/25/15, with a
total value of $6,939,372)
(Cost $6,608,926)............ 6,608,926
------------
Total Investments -- 121.7%
(Cost $279,583,369).......... 294,960,923
Liabilities less other
assets -- (21.7)%............ (52,501,164)
------------
NET ASSETS -- 100.0%........... $242,459,759
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $279,583,369.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 31,343,893
Gross unrealized depreciation.......... (15,966,339)
------------
Net unrealized appreciation............ $ 15,377,554
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
137
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS -- 96.7%
ADVERTISING -- 0.4%
122,550 ADVO, Inc. ................. $ 3,015,956
70,700 Catalina Marketing Corp. ... 2,012,122
--------------
5,028,078
--------------
AEROSPACE AND DEFENSE -- 0.5%
7,000 Armor Holdings, Inc.*....... 383,810
21,400 Innovative Solutions and
Support, Inc.*............ 300,884
3,300 K&F Industries Holdings,
Inc.*..................... 58,509
2,200 Kaman Corp. ................ 40,040
89,650 Moog, Inc. -- Class A*...... 3,067,823
114,300 Orbital Sciences Corp.*..... 1,844,802
18,100 Teledyne Technologies,
Inc.*..................... 592,956
2,600 Triumph Group, Inc.*........ 124,800
4,500 United Industrial Corp. .... 203,625
--------------
6,617,249
--------------
AGRICULTURE -- 0.0%
23,900 UAP Holding Corp. .......... 521,259
--------------
AIRLINES -- 0.8%
228,150 AirTran Holdings,
Inc.*(h).................. 3,390,309
122,100 Continental Airlines,
Inc. -- Class B*(h)....... 3,638,580
185,800 ExpressJet Holdings,
Inc.*..................... 1,283,878
110,300 Mesa Air Group, Inc.*....... 1,086,455
--------------
9,399,222
--------------
APPAREL: MANUFACTURING AND RETAIL -- 4.0%
26,700 AnnTaylor Stores Corp.*..... 1,158,246
193,230 Cache, Inc.*................ 3,350,608
48,060 Carter's, Inc. ............. 1,270,226
23,400 Charlotte Russe Holding,
Inc.*..................... 560,196
21,500 Charming Shoppes, Inc.*..... 241,660
36,600 Citi Trends, Inc.*(h)....... 1,562,454
8,150 Columbia Sportswear
Company*(h)............... 368,869
84,700 Crocs, Inc.*(h)............. 2,130,205
35,600 Deckers Outdoor Corp.*(h)... 1,372,736
28,100 Genesco, Inc.*.............. 951,747
7,400 Guess?, Inc.*............... 308,950
127,520 Iconix Brand Group, Inc.*... 2,083,677
67,423 Jos A Bank Clothiers,
Inc.*(h).................. 1,615,455
81,400 Kellwood Company............ 2,382,578
133,400 Payless ShoeSource, Inc.*... 3,624,478
111,450 Phillips-Van Heusen
Corp. .................... 4,252,932
27,150 Polo Ralph Lauren Corp. .... 1,490,535
351,550 Quiksilver, Inc.*(h)........ 4,281,879
10,500 Skechers USA, Inc. -- Class
A*........................ 253,155
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
APPAREL: MANUFACTURING AND RETAIL
(CONTINUED)
160,100 Stage Stores, Inc. ......... $ 5,283,300
118,200 Stein Mart, Inc. ........... 1,749,360
9,600 Steven Madden, Ltd. ........ 284,352
175,200 The Cato Corp. -- Class A... 4,528,920
8,500 The Dress Barn, Inc.*....... 215,475
30,200 The Gymboree Corp.*......... 1,049,752
81,700 The Wet Seal, Inc. -- Class
A*........................ 398,696
7,300 Too, Inc.*.................. 280,247
93,400 Wolverine World Wide,
Inc. ..................... 2,179,022
--------------
49,229,710
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 0.8%
16,200 Accuride Corp.*............. 202,014
66,800 Aftermarket Technology
Corp.*.................... 1,659,980
11,400 Commercial Vehicle Group,
Inc.*..................... 235,752
266,800 CSK Auto Corp.*............. 3,193,596
64,550 Modine Manufacturing
Company................... 1,507,888
121,912 Spartan Motors, Inc. ....... 1,875,007
44,700 Winnebago Industries,
Inc.(h)................... 1,387,488
--------------
10,061,725
--------------
BANKS -- 6.7%
8,900 1st Source Corp. ........... 301,087
88,100 AMCORE Financial, Inc. ..... 2,582,211
12,800 Ameris Bancorp.............. 296,192
1,500 Anchor BanCorp Wisconsin,
Inc. ..................... 45,255
1,500 Arrow Financial Corp. ...... 41,145
149,100 Astoria Financial Corp. .... 4,540,094
19,100 BancFirst Corp. ............ 854,725
18,200 BancorpSouth, Inc. ......... 495,950
10,300 Bank of Granite Corp. ...... 214,549
58,373 BankUnited Financial
Corp. -- Class A.......... 1,781,544
92,513 Boston Private Financial
Holdings, Inc. ........... 2,581,113
7,000 Cadence Financial Corp...... 155,890
6,500 Camden National Corp. ...... 259,350
1,800 Capital Corp of the West.... 57,600
5,200 Center Financial Corp. ..... 122,928
10,100 Chittenden Corp. ........... 261,085
3,000 Citizens Banking Corp. ..... 73,230
1,100 City Bank -- Lynwood,
Washington................ 51,326
18,400 City Holding Company........ 664,976
19,800 Columbia Banking System,
Inc. ..................... 740,124
</Table>
See notes to financial statements.
138
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
4,400 Community Bancorp*.......... $ 136,752
5,500 Community Bank System,
Inc. ..................... 110,935
11,000 Community Trust Bancorp,
Inc. ..................... 384,230
133,800 Corus Bankshares, Inc.(h)... 3,502,883
5,500 Dime Community Bancshares... 74,635
15,100 Downey Financial Corp. ..... 1,024,535
45,300 East West Bancorp, Inc. .... 1,717,323
13,600 First Charter Corp. ........ 333,608
5,350 First Citizens Bancshares,
Inc. -- Class A........... 1,072,675
7,200 First Community Bancorp..... 425,376
1,500 First Community Bancshares,
Inc. ..................... 49,485
67,600 First Financial
Bancorp(h)................ 1,007,916
20,900 First Financial Bankshares,
Inc. ..................... 763,686
2,200 First Financial Corp. ...... 66,022
5,600 First Financial Holdings,
Inc. ..................... 179,200
30,800 First Indiana Corp. ........ 801,724
80,950 First Midwest Bancorp,
Inc. ..................... 3,001,626
2,200 First Place Financial
Corp. .................... 50,622
400 First Regional Bancorp*..... 35,200
8,700 First State Bancorp......... 206,886
64,500 FirstFed Financial
Corp.*(h)................. 3,719,714
10,200 Flushing Financial Corp. ... 183,192
137,800 Fremont General Corp.(h).... 2,557,568
28,100 Frontier Financial
Corp.(h).................. 955,119
34,100 Hancock Holding Company..... 1,909,600
7,700 Harbor Florida Bancshares,
Inc. ..................... 285,978
6,300 Horizon Financial Corp. .... 172,809
12,300 Independent Bank
Corp. -- Massachusetts.... 399,381
5,500 Independent Bank
Corp. -- Michigan......... 144,650
10,200 Integra Bank Corp. ......... 221,850
92,000 International Bancshares
Corp. .................... 2,528,160
32,900 Irwin Financial Corp. ...... 637,931
9,100 ITLA Capital Corp. ......... 478,478
8,100 Kearny Financial Corp. ..... 119,880
8,800 Lakeland Financial Corp. ... 213,752
1,650 Macatawa Bank Corp. ........ 38,594
8,400 MainSource Financial Group,
Inc. ..................... 146,412
65,150 MB Financial, Inc.(h)....... 2,303,704
15,700 MBT Financial Corp.(h)...... 251,200
28,100 Mid-State Bancshares........ 786,800
3,300 National Penn Bancshares,
Inc. ..................... 65,538
3,000 NBT Bancorp, Inc. .......... 69,690
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
164,750 New Alliance Bancshares,
Inc.(h)................... $ 2,357,573
10,200 OceanFirst Financial
Corp. .................... 226,644
6,600 Old National Bancorp........ 131,802
13,500 Old Second Bancorp, Inc. ... 418,500
45,900 Oriental Financial Group,
Inc. -- Puerto Rico(h).... 585,684
75,300 Pacific Capital Bancorp..... 2,343,336
700 Park National Corp. ........ 69,167
2,200 PennFed Financial Services,
Inc. ..................... 41,030
3,000 People's Bancorp, Inc. ..... 89,520
43,400 PFF Bancorp, Inc. .......... 1,439,144
2,200 Placer Sierra Bancshares.... 51,018
1,500 Preferred Bank -- Los
Angeles, California....... 80,415
78,090 PrivateBancorp, Inc.(h)..... 3,233,707
4,400 Provident Bankshares
Corp. .................... 160,116
37,600 Republic Bancorp, Inc. ..... 465,864
27,900 S&T Bancorp, Inc. .......... 927,117
5,000 Sandy Spring Bancorp,
Inc. ..................... 180,300
20,400 Santander BanCorp -- Puerto
Rico...................... 502,248
4,300 SCBT Financial Corp. ....... 153,295
7,400 Simmons First National
Corp. -- Class A.......... 214,674
6,900 Sterling Financial Corp. --
Pennsylvania(h)........... 151,110
66,950 Sterling Financial Corp. --
Spokane................... 2,042,645
8,400 Suffolk Bancorp............. 275,100
117,400 SVB Financial Group*(h)..... 5,337,003
9,000 SY Bancorp, Inc. ........... 247,320
7,100 Taylor Capital Group,
Inc. ..................... 289,751
46,870 Texas Regional Bancshares,
Inc. -- Class A........... 1,777,310
22,400 TierOne Corp. .............. 756,448
10,400 TrustCo Bank Corp. NY....... 114,608
31,700 Trustmark Corp. ............ 981,749
2,500 Uninvest Corp. of
Pennsylvania(h)........... 69,050
8,600 Union Bankshares Corp. ..... 371,004
39,100 United Bankshares, Inc. .... 1,432,233
26,200 United Community Financial
Corp. .................... 314,400
12,300 USB Holding Company,
Inc. ..................... 276,750
88,270 Virginia Commerce Bancorp,
Inc.*(h).................. 2,109,653
12,500 Washington Trust Bancorp,
Inc. ..................... 346,500
9,800 WesBanco, Inc. ............. 303,702
</Table>
See notes to financial statements.
139
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
2,200 West Bancorp................ $ 41,074
11,300 West Coast Bancorp.......... 333,011
51,050 Westamerica Bancorp......... 2,499,919
16,550 Wintrust Financial Corp. ... 841,568
10,800 WSFS Financial Corp. ....... 663,660
--------------
84,502,415
--------------
BROADCAST SERVICES/MEDIA -- 0.5%
88,700 Citadel Broadcasting
Company................... 789,430
87,650 CKX, Inc.*.................. 1,189,411
19,500 Cumulus Media, Inc. -- Class
A*........................ 208,065
49,300 Entercom Communications
Corp. .................... 1,289,688
12,200 Gray Television, Inc. ...... 70,638
36,400 Martha Stewart Living
Omnimedia, Inc. -- Class
A*(h)..................... 608,244
114,500 Sinclair Broadcast Group,
Inc. -- Class A........... 980,120
98,200 Westwood One, Inc. ......... 736,500
--------------
5,872,096
--------------
BUSINESS SERVICES AND SUPPLIES -- 3.5%
52,200 Acxiom Corp. ............... 1,305,000
99,150 Administaff, Inc. .......... 3,550,562
19,900 Ambassadors Group, Inc. .... 574,712
129,278 Barrett Business Services,
Inc.*..................... 2,372,251
139,700 CSG Systems International,
Inc.*..................... 3,456,178
11,800 First Consulting Group,
Inc.*..................... 104,312
136,440 FirstService Corp.
(Canada)*................. 3,634,762
13,800 Forrester Research, Inc.*... 386,124
5,400 FTI Consulting, Inc.*....... 144,558
100,000 Global Payments, Inc. ...... 4,854,999
27,200 Huron Consulting Group,
Inc.*..................... 954,448
65,100 John H Harland Company...... 2,831,850
3,500 Kenexa Corp.*............... 111,475
69,200 LightBridge, Inc.*.......... 896,140
98,050 MAXIMUS, Inc. .............. 2,269,858
104,000 MoneyGram International,
Inc. ..................... 3,530,800
187,990 Optimal Group, Inc. -- Class
A (Canada)*(h)............ 2,539,745
64,440 Portfolio Recovery
Associates, Inc.*(h)...... 2,944,908
116,100 Spherion Corp.*............. 1,058,832
77,100 Symyx Technologies, Inc.*... 1,861,965
6,200 TALX Corp. ................. 135,594
103,700 TeleTech Holdings, Inc.*.... 1,312,842
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES (CONTINUED)
50,300 UniFirst Corp. ............. $ 1,735,350
23,900 Vertrue, Inc.*(h)........... 1,028,417
--------------
43,595,682
--------------
CHEMICALS -- 1.0%
136,800 Compass Minerals
International, Inc. ...... 3,413,160
7,800 HB Fuller Company........... 339,846
4,600 Innospec, Inc. ............. 116,932
19,900 NewMarket Corp. ............ 976,294
29,800 Olin Corp. ................. 534,314
8,500 Pioneer Companies, Inc.*.... 231,880
80,000 PolyOne Corp.*.............. 702,400
7,400 Rockwood Holdings, Inc.*.... 170,274
27,400 Spartech Corp. ............. 619,240
128,800 Tetra Tech, Inc.*........... 2,284,912
54,500 The Valspar Corp. .......... 1,439,345
8,600 VeraSun Energy
Utilities*(h)............. 225,664
32,100 Westlake Chemical Corp. .... 956,580
--------------
12,010,841
--------------
COMMERCIAL SERVICES -- 0.4%
3,000 Central Parking Corp. ...... 48,000
7,800 Coinmach Service
Corp. -- Class A.......... 79,950
3,700 ICT Group, Inc.*............ 90,761
76,130 Providence Service Corp.*... 2,073,020
60,170 Steiner Leisure, Ltd.
(Bahama Islands)*......... 2,378,520
--------------
4,670,251
--------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 5.3%
81,700 Activision, Inc.*........... 929,746
17,800 Advent Software, Inc.*...... 642,046
115,100 Agilysys, Inc. ............. 2,071,800
6,800 Altiris, Inc.*.............. 122,672
20,100 Ansoft Corp.*............... 411,648
19,600 Avid Technology, Inc.*(h)... 653,268
31,000 Black Box Corp. ............ 1,188,230
9,200 Blackbaud, Inc. ............ 208,840
71,600 Brocade Communications
Systems, Inc.*............ 439,624
106,850 Checkpoint Systems, Inc.*... 2,373,139
144,480 Concur Technologies,
Inc.*..................... 2,235,106
10,500 Electronics For Imaging,
Inc.*..................... 219,240
13,550 FactSet Research Systems,
Inc. ..................... 640,915
71,700 Imation Corp. .............. 2,943,285
171,200 Intergraph Corp.*........... 5,391,087
</Table>
See notes to financial statements.
140
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES
(CONTINUED)
17,600 Itron, Inc.*................ $ 1,042,976
48,300 Jack Henry & Associates,
Inc. ..................... 949,578
61,200 Keane, Inc.*................ 765,000
66,700 Lawson Software, Inc.*...... 446,890
26,800 Manhattan Associates,
Inc.*..................... 543,772
31,800 MicroStrategy, Inc. -- Class
A*........................ 3,101,136
74,140 M-Systems Flash Disk
Pioneers, Ltd.
(Israel)*(h).............. 2,196,768
33,400 MTS Systems Corp. .......... 1,319,634
64,340 Neoware Systems, Inc*(h).... 790,739
150,560 Omniture, Inc.*............. 1,097,582
9,100 Open Solutions, Inc.*....... 242,151
13,990 Parametric Technology
Corp.*.................... 177,813
137,190 PDF Solutions, Inc.*........ 1,702,528
43,490 Rackable Systems, Inc.*..... 1,717,420
107,054 Radiant Systems, Inc.*...... 1,131,561
50,300 Red Hat, Inc.*(h)........... 1,177,020
93,340 Retalix, Ltd.
(Israel)*(h).............. 2,082,415
35,200 Salesforce.com, Inc.*....... 938,432
3,700 SPSS, Inc.*................. 118,918
15,900 Sybase, Inc.*............... 308,460
125,000 Sykes Enterprises, Inc.*.... 2,020,000
67,900 Synaptics, Inc.*(h)......... 1,453,060
145,250 Synopsys, Inc.*............. 2,726,343
175,093 Synplicity, Inc.*........... 1,027,796
188,200 The Reynolds and Reynolds
Company -- Class A........ 5,772,093
136,200 THQ, Inc.*.................. 2,941,920
31,200 Transaction Systems
Architects, Inc. -- Class
A*........................ 1,300,728
55,700 Trident Microsystems,
Inc.*(h).................. 1,057,186
10,600 Tyler Technologies, Inc.*... 118,720
25,800 Western Digital Corp.*...... 511,098
512,500 Wind River Systems, Inc.*... 4,561,250
--------------
65,811,633
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.6%
35,400 BlueLinx Holdings, Inc. .... 461,262
16,800 Brookfield Homes Corp.(h)... 553,560
107,100 Building Materials Holding
Corp.(h).................. 2,984,877
6,500 Dycom Industries, Inc.*..... 138,385
44,200 Eagle Materials, Inc. ...... 2,099,500
23,200 Granite Construction,
Inc. ..................... 1,050,264
100,650 Hovnanian Enterprises,
Inc. -- Class A*(h)....... 3,027,552
133,250 Meritage Homes Corp.*....... 6,296,062
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES
(CONTINUED)
102,950 Simpson Manufacturing
Company, Inc.(h).......... $ 3,711,348
115,500 Standard Pacific Corp. ..... 2,968,350
87,420 Team, Inc.*................. 2,189,871
42,925 Technical Olympic USA,
Inc. ..................... 616,403
118,750 Trex Company, Inc.*(h)...... 3,074,438
121,150 WCI Communities, Inc.*(h)... 2,439,961
--------------
31,611,833
--------------
CONSUMER GOODS AND SERVICES -- 2.4%
23,600 American Greetings
Corp. -- Class A.......... 495,836
70,000 Central Garden & Pet
Company*.................. 3,013,500
40,600 Chattem, Inc.*(h)........... 1,233,022
4,900 CNS, Inc. .................. 120,050
96,100 Elizabeth Arden, Inc.*...... 1,718,268
17,300 FTD Group, Inc.*............ 233,550
100,850 Helen Of Troy, Ltd.
(Bermuda)*(h)............. 1,855,640
68,350 Herbalife, Ltd. (Cayman
Islands)*................. 2,727,165
86,050 NBTY, Inc.*................. 2,057,456
140,020 Rollins, Inc. .............. 2,749,993
1,500 Stanley Furniture Company,
Inc. ..................... 35,955
140,550 Tempur-Pedic International,
Inc.*(h).................. 1,898,831
58,400 The Scotts Miracle-Gro
Company -- Class A(h)..... 2,471,488
160,250 The Yankee Candle Company,
Inc. ..................... 4,007,852
80,500 Vector Group, Ltd.(h)....... 1,308,125
1,900 WD-40 Company............... 63,783
89,250 Weight Watchers
International, Inc. ...... 3,649,432
--------------
29,639,946
--------------
CONTAINERS AND PACKAGING -- 0.2%
3,500 Greif, Inc. -- Class A...... 262,360
48,700 Silgan Holdings, Inc. ...... 1,802,387
--------------
2,064,747
--------------
CORRECTIONAL FACILITIES -- 0.1%
18,800 The Geo Group, Inc.*........ 658,940
--------------
DISTRIBUTION -- 1.0%
93,750 United Stationers, Inc.*.... 4,623,750
132,850 Universal Corp.(h).......... 4,944,677
49,400 Watsco, Inc. ............... 2,955,108
--------------
12,523,535
--------------
</Table>
See notes to financial statements.
141
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED OPERATIONS AND SERVICES -- 0.4%
73,200 LandAmerica Financial Group,
Inc. ..................... $ 4,728,720
15,500 Resource America,
Inc. -- Class A........... 295,275
--------------
5,023,995
--------------
EDUCATION -- 0.2%
24,060 Laureate Education, Inc.*... 1,025,678
62,000 School Specialty,
Inc.*(h).................. 1,974,700
--------------
3,000,378
--------------
ELECTRONICS -- 2.4%
161,699 Belden CDT, Inc. ........... 5,344,152
17,300 Cirrus Logic, Inc.*......... 140,822
456,350 Flextronics International,
Ltd. (Singapore)*......... 4,846,437
48,350 Harman International
Industries, Inc. ......... 4,127,640
168,400 Micrel, Inc.*............... 1,685,684
110,200 Nam Tai Electronics, Inc.
(British Virgin
Islands).................. 2,465,174
42,600 Park Electrochemical
Corp. .................... 1,096,950
56,100 Plexus Corp.*............... 1,919,181
631,650 Sanmina-SCI Corp.*.......... 2,905,590
98,250 Sonic Solutions*............ 1,621,125
367,390 SRS Labs, Inc.*............. 1,833,276
142,100 TTM Technologies, Inc.*..... 2,056,187
--------------
30,042,218
--------------
ENGINEERING -- 0.3%
11,700 EMCOR Group, Inc.*.......... 569,439
76,850 URS Corp.*.................. 3,227,700
--------------
3,797,139
--------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.4%
276,500 Allied Waste Industries,
Inc.*(h).................. 3,141,040
62,800 Metal Management, Inc. ..... 1,922,936
--------------
5,063,976
--------------
EQUIPMENT RENTAL AND LEASING -- 0.2%
80,720 McGrath Rentcorp............ 2,244,823
4,800 Rent-A-Center, Inc.*........ 119,328
--------------
2,364,151
--------------
FINANCIAL SERVICES -- 5.4%
91,750 Accredited Home Lenders
Holding Company*(h)....... 4,386,568
3,700 Advanta Corp. -- Class B.... 133,015
22,750 Affiliated Managers Group,
Inc.*(h).................. 1,976,748
142,800 AmeriCredit Corp.*(h)....... 3,986,976
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
37,600 Asset Acceptance Capital
Corp.*.................... $ 744,480
70,700 ASTA Funding, Inc.(h)....... 2,647,715
60,700 Calamos Asset Management,
Inc. -- Class A........... 1,759,693
87,600 CapitalSource, Inc.(h)...... 2,055,096
286,050 E*TRADE Financial Corp.*.... 6,527,660
137,150 Eaton Vance Corp.(h)........ 3,423,264
33,700 Federal Agricultural
Mortgage Corp. -- Class
C......................... 933,490
48,260 GFI Group, Inc.*............ 2,603,627
71,620 Greenhill & Company,
Inc.(h)................... 4,351,631
61,140 Investment Technology Group,
Inc.*..................... 3,109,580
252,600 Jefferies Group, Inc. ...... 7,484,537
277,700 Knight Capital Group,
Inc. -- Class A*.......... 4,229,371
160,100 LaBranche & Company,
Inc.*(h).................. 1,938,811
19,600 Morningstar, Inc.*.......... 813,008
2,700 Nelnet, Inc. -- Class A*.... 109,485
35,350 Nuveen Investments -- Class
A(h)...................... 1,521,818
78,600 optionsXpress Holdings,
Inc. ..................... 1,832,166
11,400 Piper Jaffray Companies,
Inc.*..................... 697,794
156,350 Raymond James Financial,
Inc. ..................... 4,732,715
51,550 SEI Investments Company..... 2,519,764
20,600 Susquehanna Bancshares,
Inc. ..................... 492,340
15,450 The Student Loan Corp. ..... 3,120,900
28,100 W Holding Company,
Inc. -- Puerto Rico(h).... 186,865
--------------
68,319,117
--------------
FOOD AND BEVERAGE -- 0.2%
36,200 Boston Beer Company,
Inc. -- Class A*.......... 1,060,298
1,500 Coca-Cola Bottling
Company................... 76,155
1,900 Farmer Brothers Company..... 41,192
1,100 Green Mountain Coffee
Roasters, Inc.*........... 44,187
57,300 Nash Finch Company(h)....... 1,219,917
33,300 Premium Standard Farms,
Inc. ..................... 540,459
--------------
2,982,208
--------------
INSURANCE -- 4.1%
14,900 American Physicians Capital,
Inc.*..................... 783,591
265,874 Amerisafe, Inc.*............ 3,307,473
187,200 Assured Guaranty, Ltd.
(Bermuda)................. 4,749,264
</Table>
See notes to financial statements.
142
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
189,125 Delphi Financial Group,
Inc. -- Class A........... $ 6,876,584
5,500 Direct General Corp. ....... 93,060
2,600 FBL Financial Group,
Inc. -- Class A........... 84,240
10,000 FPIC Insurance Group,
Inc.*..................... 387,500
12,000 Infinity Property & Casualty
Corp. .................... 492,000
47,000 IPC Holdings, Ltd.
(Bermuda)................. 1,159,020
1,800 James River Group, Inc.*.... 44,820
550 National Western Life
Insurance Company -- Class
A......................... 131,808
197,500 Philadelphia Consolidated
Holding Corp.*............ 5,996,100
123,050 Platinum Underwriters
Holdings, Ltd.
(Bermuda)................. 3,442,939
25,900 Presidential Life Corp. .... 636,622
33,950 Protective Life Corp. ...... 1,582,749
97,800 Reinsurance Group of
America, Inc. ............ 4,806,870
28,800 Safety Insurance Group,
Inc. ..................... 1,369,440
79,900 Scottish Re Group, Ltd. .... 1,332,732
23,700 State Auto Financial
Corp. .................... 771,198
45,700 Stewart Information Services
Corp.(h).................. 1,659,367
99,200 The Commerce Group, Inc. ... 2,930,368
71,140 The Navigators Group,
Inc.*..................... 3,117,355
69,500 United Fire & Casualty
Company................... 2,094,035
193,000 Universal American Financial
Corp.*.................... 2,537,950
7,400 Zenith National Insurance
Corp. .................... 293,558
--------------
50,680,643
--------------
INTERNET SERVICES -- 4.6%
152,750 aQuantive, Inc.*(h)......... 3,869,158
45,350 CheckFree Corp.*(h)......... 2,247,546
315,430 CNET Networks, Inc.*(h)..... 2,517,131
35,400 Ctrip.com International,
Ltd. (ADR)
(Cayman Islands)(h)....... 1,807,170
28,800 Digital River, Inc.*(h)..... 1,163,232
241,485 Digitas, Inc.*.............. 2,806,056
243,500 EarthLink, Inc.*............ 2,108,710
42,389 Equinix, Inc.*(h)........... 2,325,461
189,100 eResearch Technology,
Inc.*(h).................. 1,720,810
109,600 Internet Security Systems,
Inc.*..................... 2,065,960
127,810 j2 Global Communications,
Inc.*(h).................. 3,990,228
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
INTERNET SERVICES (CONTINUED)
93,319 Marchex, Inc. -- Class
B*(h)..................... $ 1,533,231
336,400 Move, Inc.*................. 1,843,472
160,740 Netflix, Inc.*(h)........... 4,373,735
57,470 Nutri/System, Inc.*(h)...... 3,570,611
300,120 Online Resources Corp.*..... 3,103,241
229,540 Openwave Systems,
Inc.*(h).................. 2,648,892
12,900 Priceline.com, Inc.*(h)..... 385,194
169,920 RADVision, Ltd. (Israel)*... 2,708,525
103,110 RADWARE, Ltd. (Israel)*..... 1,323,932
122,680 Redback Networks, Inc.*..... 2,249,951
205,700 SonicWALL, Inc.*............ 1,849,243
12,000 Stamps.com, Inc.*(h)........ 333,840
117,700 The TriZetto Group, Inc.*... 1,740,783
179,000 United Online, Inc.(h)...... 2,148,000
15,300 webMethods, Inc.*........... 151,011
--------------
56,585,123
--------------
LEISURE AND RECREATION -- 1.2%
228,440 Century Casinos, Inc.*...... 2,446,592
112,200 Dover Downs Gaming &
Entertainment, Inc. ...... 2,203,608
31,400 Four Seasons Hotels, Inc.
(Canada)(h)............... 1,929,216
73,800 Monarch Casino & Resort,
Inc.*..................... 2,075,256
121,950 Scientific Games
Corp. -- Class A*......... 4,343,859
64,800 The9, Ltd. (ADR) (Cayman
Islands)*(h).............. 1,502,712
--------------
14,501,243
--------------
MACHINERY -- 2.2%
86,400 Applied Industrial
Technologies, Inc. ....... 2,100,384
120,225 Bucyrus International,
Inc. -- Class A(h)........ 6,071,362
19,300 Columbus McKinnon Corp.*.... 419,582
146,594 Flow International
Corp.*(h)................. 2,062,578
70,170 Gardner Denver, Inc.*....... 2,701,545
110,750 Joy Global, Inc. ........... 5,768,967
14,700 Middleby Corp.*(h).......... 1,272,432
10,000 Nordson Corp. .............. 491,800
53,210 Regal-Beloit Corp. ......... 2,349,222
114,800 The Timken Company.......... 3,846,948
--------------
27,084,820
--------------
MANUFACTURING -- 4.2%
170,350 Acuity Brands, Inc. ........ 6,628,319
4,600 AEP Industries, Inc.*....... 153,732
</Table>
See notes to financial statements.
143
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MANUFACTURING (CONTINUED)
42,200 Albany International
Corp. -- Class A.......... $ 1,788,858
61,300 AO Smith Corp. ............. 2,841,868
61,650 AptarGroup, Inc. ........... 3,058,457
87,200 Carlisle Companies, Inc. ... 6,914,959
23,600 Ceradyne, Inc.*(h).......... 1,167,964
22,600 CIRCOR International,
Inc. ..................... 689,074
5,200 Coherent, Inc.*............. 175,396
137,650 Deswell Industries, Inc.
(British Virgin
Islands).................. 1,161,766
5,200 EnPro Industries, Inc.*..... 174,720
178,150 FLIRSystems, Inc.*(h)....... 3,929,989
53,300 Freightcar America, Inc. ... 2,958,683
157,400 Furniture Brands
International, Inc.(h).... 3,280,216
50,200 Harsco Corp. ............... 3,913,592
267,500 Hexcel Corp.*(h)............ 4,202,425
96,310 Intevac, Inc.*.............. 2,088,001
44,200 Kaydon Corp. ............... 1,649,102
13,200 LSI Industries, Inc. ....... 224,268
98,900 Matthews International
Corp. -- Class A.......... 3,409,083
4,600 PW Eagle, Inc.(h)........... 139,104
15,300 Rofin-Sinar Technologies,
Inc.*..................... 879,291
--------------
51,428,867
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 7.4%
10,600 AirMethods Corp.*........... 277,508
152,480 American Medical Systems
Holdings, Inc.*........... 2,538,792
115,800 AMERIGROUP Corp.*........... 3,594,432
250,470 AMNHealthcare Services,
Inc.*..................... 5,084,540
91,700 AmSurg Corp.*(h)............ 2,086,175
104,246 AngioDynamics, Inc.*........ 2,819,854
72,700 Apria Healthcare Group,
Inc.*..................... 1,374,030
30,150 Beckman Coulter, Inc. ...... 1,674,833
81,600 CorVel Corp.*............... 2,040,000
92,500 Covance, Inc.*.............. 5,662,849
17,300 DJ Orthopedics, Inc.*....... 637,159
281,910 Five Star Quality Care,
Inc.*..................... 3,120,744
4,500 Genesis HealthCare Corp.*... 213,165
61,800 Haemonetics Corp.*.......... 2,874,318
90,900 Healthspring, Inc.*......... 1,704,375
88,850 Healthways, Inc.*(h)........ 4,677,063
19,300 Hologic, Inc.*.............. 952,648
72,200 ICON PLC (ADR) (Ireland)*... 3,992,659
11,600 ICU Medical, Inc.*.......... 489,984
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES
(CONTINUED)
73,930 I-Flow Corp.*(h)............ $ 799,923
22,260 Illumina, Inc.*............. 660,232
94,625 Immucor, Inc.*.............. 1,819,639
9,500 inVentiv Health, Inc.*...... 273,410
50,690 Kyphon, Inc.*(h)............ 1,944,468
29,580 LCA-Vision, Inc.(h)......... 1,565,078
81,600 Luminex Corp.*.............. 1,419,024
31,600 Magellan Health Services,
Inc.*..................... 1,431,796
5,800 MedCath Corp.*.............. 109,272
9,200 Meridian Bioscience,
Inc. ..................... 229,540
30,600 Molina Healthcare, Inc.*.... 1,164,330
12,300 Natus Medical, Inc.*........ 121,647
5,700 Neurometrix, Inc.*.......... 173,622
127,320 NuVasive, Inc.*(h).......... 2,321,044
68,100 Odyssey HealthCare,
Inc.*(h).................. 1,196,517
89,900 OraSure Technologies,
Inc.*(h).................. 855,848
429,130 Orthovita, Inc.*............ 1,810,929
17,700 Pediatrix Medical Group,
Inc.*..................... 801,810
77,521 PolyMedica Corp.(h)......... 2,787,655
30,700 PSS World Medical,
Inc.*(h).................. 541,855
3,700 RehabCare Group, Inc.*...... 64,306
57,740 ResMed, Inc.*............... 2,710,893
4,000 Sierra Health Services,
Inc.*..................... 180,120
56,930 SonoSite, Inc.*(h).......... 2,222,547
99,500 Sunrise Senior Living,
Inc.*..................... 2,751,175
57,900 Techne Corp.*............... 2,948,268
75,550 The Cooper Companies,
Inc. ..................... 3,346,110
250,700 The Spectranetics Corp.*.... 2,687,504
79,600 Thoratec Corp.*............. 1,104,052
57,500 Universal Health Services,
Inc. -- Class B........... 2,889,950
71,650 Vital Signs, Inc. .......... 3,548,825
16,000 Zoll Medical Corp.*......... 524,160
--------------
92,820,677
--------------
METALS AND MINING -- 1.8%
59,280 Dynamic Materials
Corp.(h).................. 1,999,514
91,800 Mueller Industries, Inc. ... 3,032,154
261,650 Novelis, Inc. (Canada)(h)... 5,646,407
59,300 Olympic Steel, Inc. ........ 2,098,627
31,600 Reliance Steel & Aluminum
Company................... 2,621,220
47,300 Ryerson Tull, Inc.(h)....... 1,277,100
80,700 Steel Dynamics, Inc. ....... 5,305,218
--------------
21,980,240
--------------
</Table>
See notes to financial statements.
144
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
OFFICE EQUIPMENT -- 0.3%
80,250 Herman Miller, Inc. ........ $ 2,068,043
108,850 Knoll, Inc. ................ 1,998,486
--------------
4,066,529
--------------
OIL AND GAS: EQUIPMENT -- 0.9%
27,050 Hydril Company*............. 2,123,966
3,000 Lone Star Technologies,
Inc.*..................... 162,060
47,880 Maverick Tube Corp.*(h)..... 3,025,537
78,750 Oil States International,
Inc.*..................... 2,699,550
86,410 Superior Energy Services,
Inc.*..................... 2,929,299
--------------
10,940,412
--------------
OIL, COAL AND GAS -- 5.3%
159,150 Cabot Oil & Gas Corp.(h).... 7,798,349
11,400 Callon Petroleum Company*... 220,476
21,100 Clayton Williams Energy,
Inc.*..................... 728,794
225,750 Encore Acquisition
Company*.................. 6,056,872
121,950 Energy Partners, Ltd.*(h)... 2,310,953
148,200 EXCO Resources, Inc.*....... 1,689,480
49,500 Global Industries, Ltd.*.... 826,650
19,100 Grey Wolf, Inc.*............ 147,070
185,100 Harvest Natural Resources,
Inc.*(h).................. 2,506,254
120,800 Headwaters, Inc.*(h)........ 3,087,648
53,300 Helix Energy Solutions
Group, Inc.*(h)........... 2,151,188
143,200 Oceaneering International,
Inc.*..................... 6,565,719
79,700 ONEOK, Inc.(h).............. 2,712,988
32,550 Patterson-UTI Energy,
Inc.(h)................... 921,491
8,400 Penn Virginia Corp. ........ 586,992
9,000 Range Resources Corp. ...... 244,710
17,400 Southwest Gas Corp. ........ 545,316
90,600 St Mary Land & Exploration
Company................... 3,646,650
143,200 Swift Energy Company*....... 6,147,575
60,600 The Houston Exploration
Company*.................. 3,708,114
35,300 Todco -- Class A............ 1,442,005
9,150 Ultra Petroleum Corp.
(Canada)*................. 542,321
41,150 Unit Corp.*................. 2,341,024
19,800 W&T Offshore, Inc.(h)....... 770,022
93,990 Warrior Energy Service
Corp.*.................... 2,286,777
122,000 Whiting Petroleum
Corp.*(h)................. 5,108,140
--------------
65,093,578
--------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PAPER AND FOREST PRODUCTS -- 0.1%
1,500 Neenah Paper, Inc. ......... $ 45,675
39,900 Rock-Tenn
Company -- Class A........ 636,405
--------------
682,080
--------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 5.0%
10,900 Adams Respiratory
Therapeutics, Inc.*....... 486,358
63,500 Affymetrix, Inc.*........... 1,625,600
127,000 Albany Molecular Research,
Inc.*..................... 1,356,360
82,300 Alkermes, Inc.*(h).......... 1,557,116
153,300 Alpharma, Inc. -- Class A... 3,685,332
60,550 Barr Pharmaceuticals,
Inc.*..................... 2,887,630
38,900 BioMarin Pharmaceutical,
Inc.*(h).................. 558,993
15,700 Bradley Pharmaceuticals,
Inc.*(h).................. 160,140
12,600 Caraco Pharmaceutical
Laboratories, Ltd.*....... 115,290
123,850 Cephalon, Inc.*(h).......... 7,443,384
134,600 Cubist Pharmaceuticals,
Inc.*(h).................. 3,389,228
124,050 CV Therapeutics, Inc.*(h)... 1,732,979
20,100 deCODE genetics, Inc.*(h)... 124,419
224,950 Dendreon Corp.*(h).......... 1,088,758
175,550 DepoMed, Inc.*.............. 1,030,479
38,100 Digene Corp.*(h)............ 1,475,994
97,200 Endo Pharmaceuticals
Holdings, Inc.*........... 3,205,656
234,100 Enzon Pharmaceuticals,
Inc.*(h).................. 1,765,114
19,300 InterMune, Inc.*(h)......... 317,485
13,600 Kos Pharmaceuticals,
Inc.*..................... 511,632
125,340 LifeCell Corp.*............. 3,875,513
9,500 Ligand Pharmaceuticals,
Inc. -- Class B*.......... 80,275
458,400 Medarex, Inc.*.............. 4,405,224
1,800 Medicis Pharmaceuticals
Corp. -- Class A.......... 43,200
21,462 Metabasis Therapeutics,
Inc.*..................... 163,755
208,200 Pain Therapeutics,
Inc.*(h).................. 1,738,470
198,172 Pharmaceutical Product
Development, Inc. ........ 6,959,800
67,700 Regeneron Pharmaceuticals,
Inc.*..................... 867,914
19,000 Replidyne, Inc.*............ 197,220
63,100 Sciele Pharma, Inc.*(h)..... 1,463,289
71,100 Serologicals Corp.*......... 2,235,384
204,060 Solexa, Inc.*(h)............ 1,734,510
</Table>
See notes to financial statements.
145
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT
(CONTINUED)
136,250 Telik, Inc.*(h)............. $ 2,248,125
57,000 Trimeris, Inc.*............. 654,930
3,200 United Therapeutics
Corp.*(h)................. 184,864
--------------
61,370,420
--------------
PRINTING AND PUBLISHING -- 0.5%
226,100 Bowne & Company, Inc. ...... 3,233,230
1,100 Consolidated Graphics,
Inc.*..................... 57,266
5,200 Playboy Enterprises,
Inc. -- Class B*(h)....... 51,896
121,150 Valassis Communications,
Inc.*(h).................. 2,857,929
--------------
6,200,321
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.1%
36,200 Getty Realty Corp.(h)....... 1,029,528
--------------
REAL ESTATE INVESTMENT TRUSTS -- 5.1%
210,250 Acadia Realty Trust......... 4,972,412
1,500 Agree Realty Corp. ......... 50,955
19,900 CentraCore Properties
Trust..................... 492,525
39,200 Commercial Net Lease
Realty.................... 782,040
21,100 Corporate Office Properties
Trust(h).................. 887,888
59,150 Cousins Properties, Inc. ... 1,829,510
30,800 Crescent Real Estate
Equities Company.......... 571,648
275,300 Equity Inns, Inc.(h)........ 4,558,968
197,200 FelCor Lodging Trust,
Inc. ..................... 4,287,128
52,100 Gramercy Capital Corp. ..... 1,349,390
3,400 Heritage Property Investment
Trust..................... 118,728
105,100 Innkeepers USA Trust........ 1,816,128
110,630 KKR Financial Corp. ........ 2,302,210
34,700 LaSalle Hotel Properties.... 1,606,610
74,000 LTC Properties, Inc. ....... 1,653,900
73,250 Maguire Properties, Inc. ... 2,576,203
64,200 Mid-America Apartment
Communities, Inc. ........ 3,579,150
4,100 Mission West Properties,
Inc. ..................... 45,428
20,100 National Health Realty,
Inc. ..................... 540,489
42,900 NorthStar Realty Finance
Corp. .................... 515,229
166,100 OMEGA Healthcare Investors,
Inc. ..................... 2,195,842
41,600 Pennsylvania Real Estate
Investment Trust.......... 1,679,392
73,650 PS Business Parks, Inc. .... 4,345,350
65,500 RAIT Investment Trust....... 1,912,600
1,800 Ramco-Gershenson Properties
Trust..................... 48,474
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
143,250 Realty Income Corp. ........ $ 3,137,175
11,000 Saul Centers, Inc. ......... 448,580
4,800 Senior Housing Properties
Trust..................... 85,968
40,500 Sizeler Property Investors,
Inc. ..................... 650,430
38,800 SL Green Realty Corp.(h).... 4,247,436
52,300 Sovran Self Storage(h)...... 2,656,317
52,600 Spirit Finance Corp. ....... 592,276
6,300 Tanger Factory Outlet
Centers, Inc. ............ 203,931
25,300 Taubman Centers, Inc. ...... 1,034,770
195,150 U-Store-It Trust............ 3,680,529
32,000 Washington Real Estate
Investment Trust.......... 1,174,400
--------------
62,630,009
--------------
REGISTERED INVESTMENT COMPANIES -- 0.7%
206,100 Ares Capital Corp.(h)....... 3,489,273
72,000 iShares Russell 2000 Value
Index Fund................ 5,193,360
35,400 MCG Capital Corp. .......... 562,860
--------------
9,245,493
--------------
RETAIL -- 0.9%
179,550 Casey's General Stores,
Inc. ..................... 4,490,546
10,550 Circuit City Stores,
Inc. ..................... 287,171
4,900 GameStop Corp. -- Class
A*........................ 205,800
54,400 Longs Drug Stores Corp. .... 2,481,728
28,200 Pantry, Inc.*............... 1,622,628
19,800 Tractor Supply
Company*(h)............... 1,094,346
56,800 Zale Corp.*(h).............. 1,368,312
--------------
11,550,531
--------------
RETAIL: RESTAURANTS -- 1.4%
71,000 Brinker International,
Inc.(h)................... 2,577,300
55,925 CEC Entertainment, Inc.*.... 1,796,311
80,400 Domino's Pizza, Inc. ....... 1,989,096
10,900 IHOP Corp. ................. 524,072
35,600 Jack in the Box, Inc.*...... 1,395,520
3,000 Luby's, Inc.*............... 31,290
24,150 Panera Bread
Company -- Class A*(h).... 1,623,846
98,100 Papa John's International,
Inc.*..................... 3,256,920
39,300 PF Chang's China Bistro,
Inc.*(h).................. 1,494,186
104,425 Sonic Corp.*................ 2,170,996
--------------
16,859,537
--------------
</Table>
See notes to financial statements.
146
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
RETAIL: SUPERMARKETS -- 0.0%
2,600 Ingles Markets,
Inc. -- Class A........... $ 44,200
23,300 Spartan Stores, Inc. ....... 340,879
--------------
385,079
--------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.8%
87,500 Cymer, Inc.*................ 4,065,249
9,750 Energy Conversion Devices,
Inc.*..................... 355,193
9,000 FEI Company*................ 204,120
136,550 GSI Group, Inc. (Canada)*... 1,172,965
63,900 Varian, Inc.*............... 2,652,489
33,700 Woodward Governor Company... 1,028,187
--------------
9,478,203
--------------
SECURITY SERVICES -- 0.1%
121,050 Identix, Inc.*.............. 846,140
--------------
SEMICONDUCTORS -- 3.3%
461,250 Altera Corp.*............... 8,094,937
63,600 Amkor Technology,
Inc.*(h).................. 601,656
209,900 ANADIGICS, Inc.*(h)......... 1,410,528
280,050 Brooks Automation,
Inc.*(h).................. 3,304,590
87,700 Cree, Inc.*(h).............. 2,083,752
12,500 Diodes, Inc.*............... 518,000
39,300 Intersil Corp. -- Class A... 913,725
25,900 Kulicke and Soffa
Industries, Inc.*......... 191,919
428,700 Lattice Semiconductor
Corp.*.................... 2,649,366
92,700 LTX Corp.*.................. 649,827
30,400 Mattson Technology, Inc.*... 297,008
90,670 Microsemi Corp.*............ 2,210,535
21,200 MKS Instruments, Inc.*...... 426,544
113,430 Netlogic Microsystems,
Inc.*(h).................. 3,658,117
87,450 Novellus Systems, Inc.*..... 2,160,015
71,000 OmniVision Technologies,
Inc.*(h).................. 1,499,520
228,900 Pixelworks, Inc.*........... 624,897
348,150 Skyworks Solutions, Inc.*... 1,918,307
261,850 Teradyne, Inc.*(h).......... 3,647,571
10,200 Veeco Instruments, Inc.*.... 243,168
123,040 Volterra Semiconductor
Corp.*(h)................. 1,877,590
61,600 Zoran Corp.*................ 1,499,344
--------------
40,480,916
--------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.3%
27,600 Anaren, Inc.*............... 565,524
5,200 Atheros Communications*..... 98,592
</Table>
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SER-
VICES (CONTINUED)
514,350 Avaya, Inc.*................ $ 5,873,877
149,500 Brightpoint, Inc.*.......... 2,022,735
96,600 Cincinnati Bell, Inc.*...... 396,060
35,600 Commonwealth Telephone
Enterprises, Inc. ........ 1,180,496
133,800 CommScope, Inc.*............ 4,203,996
14,700 Consolidated Communications
Holdings, Inc. ........... 244,461
36,000 CT Communications, Inc. .... 823,320
16,900 Digi International, Inc.*... 211,757
154,500 Ditech Networks, Inc.*...... 1,347,240
96,400 FairPoint Communications,
Inc. ..................... 1,388,160
130,300 InterDigital Communications
Corp.*.................... 4,548,773
31,600 Iowa Telecommunications
Services, Inc. ........... 597,872
14,900 North Pittsburgh Systems,
Inc. ..................... 410,644
500,350 Polycom, Inc.*.............. 10,967,672
687,200 RF Micro Devices,
Inc.*(h).................. 4,102,584
2,900 Shenandoah
Telecommunications
Company................... 136,300
27,000 Syniverse Holdings, Inc.*... 396,900
114,300 TALK America Holdings,
Inc.*(h).................. 707,517
2,800 USA Mobility, Inc. ......... 46,480
--------------
40,270,960
--------------
TOOLS -- 0.2%
72,200 Snap-on, Inc. .............. 2,918,324
--------------
TOYS -- 0.3%
93,600 JAKKS Pacific, Inc.*........ 1,880,424
114,900 Marvel Entertainment,
Inc.*..................... 2,298,000
--------------
4,178,424
--------------
TRANSPORTATION -- 1.3%
30,530 American Commercial Lines,
Inc.*..................... 1,839,433
62,120 American Railcar Industries,
Inc. ..................... 2,056,793
25,900 EGL, Inc.*.................. 1,300,180
110,500 Genesee & Wyoming,
Inc. -- Class A*.......... 3,919,435
49,985 Old Dominion Freight Line,
Inc.*..................... 1,878,936
5,300 PAM Transportation Services,
Inc.*..................... 153,117
2,900 SCS Transportation, Inc.*... 79,837
</Table>
See notes to financial statements.
147
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ --------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION (CONTINUED)
5,300 Swift Transportation
Company, Inc.*............ $ 168,328
187,610 Vitran Corp., Inc. -- Class
A (Canada)*............... 4,406,959
--------------
15,803,018
--------------
UTILITIES -- 1.9%
51,950 Atmos Energy Corp. ......... 1,449,925
35,300 Avista Corp. ............... 805,899
75,100 Black Hills Corp. .......... 2,578,183
12,900 Cleco Corp. ................ 299,925
50,250 New Jersey Resources
Corp. .................... 2,350,695
109,600 Nicor, Inc.(h).............. 4,548,400
226,450 PNM Resources, Inc. ........ 5,652,191
20,600 Unisource Energy Corp. ..... 641,690
16,300 Valor Communications Group,
Inc.(h)................... 186,635
74,300 Westar Energy, Inc. ........ 1,564,015
100,450 WGL Holdings, Inc. ......... 2,908,028
--------------
22,985,586
--------------
TOTAL COMMON STOCKS
(Cost $1,086,537,367)..... 1,196,509,045
--------------
<Caption>
PRINCIPAL
---------
SHORT-TERM US TREASURY SECURITIES -- 0.1%
US TREASURY BILL
$ 750,000 4.77%, 09/14/06(e)
(Cost $742,547)........... 742,547
--------------
SECURITIES LENDING COLLATERAL -- 20.8%
256,811,854 Securities Lending
Collateral Investment
(Note 4)
(Cost $256,811,854)....... 256,811,854
--------------
TOTAL SECURITIES
(Cost $1,344,091,768)..... 1,454,063,446
--------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- --------------
REPURCHASE AGREEMENTS -- 3.5%
$ 43,740,789 With Investors Bank and
Trust, dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $43,758,140
(Collateralized by various
Small Business
Administrations,
7.13% -- 8.13%, due
05/25/15 -- 08/25/29, with
a total value of
$45,927,829) (Cost
$43,740,789).............. $ 43,740,789
--------------
Total Investments -- 121.1%
(Cost $1,387,832,557)..... 1,497,804,235
Liabilities less other
assets -- (21.1)%......... (261,217,051)
--------------
NET ASSETS -- 100.0%........ $1,236,587,184
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $1,387,832,557.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation......... $169,384,602
Gross unrealized depreciation......... (59,412,924)
------------
Net unrealized appreciation........... $109,971,678
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
148
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 94.7%
ADVERTISING -- 0.4%
61,200 24/7 Real Media, Inc.*......... $ 537,336
------------
AEROSPACE AND DEFENSE -- 1.1%
25,200 Esterline Technologies
Corp.*....................... 1,048,068
26,200 MTC Technologies, Inc.*........ 619,106
------------
1,667,174
------------
AIRLINES -- 0.2%
18,700 AirTran Holdings, Inc.*(h)..... 277,882
------------
APPAREL: MANUFACTURING AND RETAIL -- 6.3%
43,400 Bebe Stores, Inc.(h)........... 669,228
31,800 Carter's, Inc. ................ 840,474
24,700 Genesco, Inc.*................. 836,589
16,950 Jos A Bank Clothiers,
Inc.*(h)..................... 406,122
31,800 Phillips-Van Heusen Corp. ..... 1,213,488
28,000 Rocky Brands, Inc.*............ 595,000
25,513 Steven Madden, Ltd. ........... 755,695
15,200 The Children's Place Retail
Stores, Inc.*(h)............. 912,760
32,600 The Dress Barn, Inc.*.......... 826,410
42,600 The Stride Rite Corp. ......... 561,894
32,300 Too, Inc.*..................... 1,239,997
19,094 Under Armour, Inc. -- Class
A*........................... 813,786
------------
9,671,443
------------
AUTOMOBILE: RETAIL -- 1.2%
37,700 Copart, Inc.*.................. 925,912
42,500 Sonic Automotive, Inc. ........ 942,650
------------
1,868,562
------------
BANKS -- 2.9%
18,200 BankUnited Financial
Corp. -- Class A............. 555,464
18,800 Central Pacific Financial
Corp. ....................... 727,560
28,100 Corus Bankshares, Inc.(h)...... 735,658
22,700 First BanCorp -- Puerto Rico... 211,110
3,500 First Citizens Bancshares,
Inc. -- Class A.............. 701,750
6,346 Hanmi Financial Corp. ......... 123,366
29,600 Nara Bancorp, Inc. ............ 555,000
10,900 The South Financial Group,
Inc. ........................ 287,869
15,200 United Community Banks,
Inc. -- Georgia(h)........... 462,688
------------
4,360,465
------------
BUSINESS SERVICES AND SUPPLIES -- 1.6%
8,495 Access Integrated Technologies,
Inc. -- Class A*(h).......... 83,336
33,000 Barrett Business Services,
Inc.*........................ 605,550
28,300 Labor Ready, Inc.*............. 640,995
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES AND SUPPLIES (CONTINUED)
18,500 Mobile Mini, Inc.*............. $ 541,310
26,200 Paxar Corp.*................... 538,934
------------
2,410,125
------------
CHEMICALS -- 1.3%
24,806 A Schulman, Inc. .............. 567,809
15,800 Albemarle Corp. ............... 756,504
81,700 PolyOne Corp.*................. 717,326
------------
2,041,639
------------
COMMERCIAL SERVICES -- 1.5%
92,300 CBIZ, Inc.*.................... 683,943
23,000 Providence Service Corp.*...... 626,290
24,600 Steiner Leisure, Ltd. (Bahama
Islands)*.................... 972,438
------------
2,282,671
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 8.2%
110,140 Actuate Corp.*................. 444,966
39,900 Agilysys, Inc. ................ 718,200
15,800 ANSYS, Inc.*................... 755,556
48,232 Aspen Technology, Inc.*........ 632,804
23,000 Avocent Corp.*................. 603,750
10,300 Black Box Corp. ............... 394,799
23,287 Blackbaud, Inc. ............... 528,615
46,678 Bottomline Technologies,
Inc.*........................ 379,959
11,300 Checkpoint Systems, Inc.*...... 250,973
32,576 Epicor Software Corp.*......... 343,025
21,600 Hyperion Solutions Corp.*...... 596,160
55,000 Infocrossing, Inc.*(h)......... 635,250
7,100 Kronos, Inc.*.................. 257,091
42,500 Mentor Graphics Corp.*......... 551,650
56,854 Nuance Communications, Inc.*... 571,951
43,200 Omnicell, Inc.*................ 597,024
54,900 Quest Software, Inc.*.......... 770,796
65,800 Radiant Systems, Inc.*......... 695,506
62,900 SumTotal Systems, Inc.*........ 394,383
25,000 The Ultimate Software Group,
Inc.*........................ 479,000
27,200 Transaction Systems Architects,
Inc. -- Class A*............. 1,133,968
32,763 Xyratex, Ltd. (Bermuda)*....... 866,581
------------
12,602,007
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 5.0%
36,600 Builders FirstSource, Inc.*.... 745,176
14,600 Cavco Industries, Inc.*........ 648,824
74,400 Champion Enterprises, Inc.*.... 821,376
16,300 Eagle Materials, Inc. ......... 774,250
</Table>
See notes to financial statements.
149
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
CONSTRUCTION SERVICES AND SUPPLIES
(CONTINUED)
16,900 Granite Construction, Inc. .... $ 765,063
31,217 Insituform Technologies,
Inc. -- Class A*(h).......... 714,557
20,300 NCI Building Systems, Inc.*.... 1,079,351
20,986 Simpson Manufacturing Company,
Inc.(h)...................... 756,545
18,900 The Genlyte Group, Inc.*....... 1,368,927
------------
7,674,069
------------
CONSUMER GOODS AND SERVICES -- 2.1%
17,400 Craftmade International,
Inc. ........................ 291,450
22,600 Ethan Allen Interiors, Inc. ... 826,030
40,356 Kimball International,
Inc. -- Class B.............. 795,417
20,300 The Toro Company............... 948,010
31,400 Ultralife Batteries,
Inc.*(h)..................... 318,082
------------
3,178,989
------------
CORRECTIONAL FACILITIES -- 0.7%
21,500 Corrections Corp. of
America*..................... 1,138,210
------------
DISTRIBUTION -- 0.5%
28,494 Central European Distribution
Corp.*(h).................... 716,909
------------
DIVERSIFIED OPERATIONS AND SERVICES -- 0.6%
16,300 Chemed Corp. .................. 888,839
------------
EDUCATION -- 0.3%
4,500 Strayer Education, Inc. ....... 437,040
------------
ELECTRONICS -- 3.6%
65,218 Aeroflex, Inc.*................ 761,094
77,291 Cirrus Logic, Inc.*............ 629,149
47,151 Comtech Group, Inc.*(h)........ 524,791
57,400 Micrel, Inc.*.................. 574,574
11,726 Multi-Fineline Electronix,
Inc.*(h)..................... 389,186
28,294 Orbotech, Ltd. (Israel)*....... 648,781
22,811 Park Electrochemical Corp. .... 587,383
27,600 Technitrol, Inc. .............. 638,940
52,940 TTM Technologies, Inc.*........ 766,042
------------
5,519,940
------------
ENGINEERING -- 0.3%
9,100 EMCOR Group, Inc.*............. 442,897
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 0.7%
15,400 Aleris International, Inc.*.... 706,090
13,700 Metal Management, Inc. ........ 419,494
------------
1,125,584
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
EQUIPMENT RENTAL AND LEASING -- 0.6%
36,700 Aaron Rents, Inc. ............. $ 986,496
------------
FINANCIAL SERVICES -- 0.8%
22,500 CompuCredit Corp.*............. 864,900
3,030 Encore Capital Group, Inc.*.... 37,178
56,500 W Holding Company,
Inc. -- Puerto Rico(h)....... 375,725
------------
1,277,803
------------
FOOD AND BEVERAGE -- 0.2%
23,700 M&F Worldwide Corp.*........... 381,570
------------
INSURANCE -- 4.0%
21,100 FPIC Insurance Group, Inc.*.... 817,625
8,100 Hanover Insurance Group,
Inc. ........................ 384,426
17,529 Harleysville Group, Inc. ...... 556,020
23,300 Infinity Property & Casualty
Corp. ....................... 955,300
16,000 Safety Insurance Group,
Inc. ........................ 760,800
18,300 Selective Insurance Group,
Inc. ........................ 1,022,421
14,900 Triad Guaranty, Inc.*.......... 728,312
22,100 Zenith National Insurance
Corp. ....................... 876,707
------------
6,101,611
------------
INTERNET SERVICES -- 6.7%
165,800 @Road, Inc.*................... 915,216
146,600 Art Technology Group, Inc.*.... 436,868
39,200 Click Commerce, Inc.*(h)....... 773,416
16,000 CryptoLogic, Inc.
(Canada)(h).................. 387,520
41,500 Digitas, Inc.*................. 482,230
83,600 LivePerson, Inc.*.............. 405,460
76,197 Packeteer, Inc.*............... 864,074
47,600 Performance Technologies,
Inc.*........................ 328,440
35,500 Priceline.com, Inc.*(h)........ 1,060,030
47,500 RADVision, Ltd. (Israel)*...... 757,150
27,100 Secure Computing Corp.*........ 233,060
52,100 SonicWALL, Inc.*............... 468,379
81,100 Stellent, Inc. ................ 774,505
48,400 The TriZetto Group, Inc.*...... 715,836
31,800 Vignette Corp.*................ 463,644
80,000 webMethods, Inc.*.............. 789,600
13,400 Websense, Inc.*................ 275,236
3,977 WebSideStory, Inc.*............ 48,519
------------
10,179,183
------------
LEISURE AND RECREATION -- 0.7%
13,200 Speedway Motorsports, Inc. .... 498,168
20,700 WMS Industries, Inc.*(h)....... 566,973
------------
1,065,141
------------
</Table>
See notes to financial statements.
150
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 2.9%
30,739 Columbus McKinnon Corp.*....... $ 668,266
85,391 Flow International Corp.*(h)... 1,201,451
21,400 Gardner Denver, Inc.*.......... 823,900
68,045 Presstek, Inc.*(h)............. 633,499
30,900 Wabtec Corp. .................. 1,155,660
------------
4,482,776
------------
MANUFACTURING -- 4.8%
34,300 Advanced Energy Industries,
Inc.*........................ 454,132
10,800 Albany International
Corp. -- Class A............. 457,812
4,443 Ameron International Corp. .... 297,770
40,960 Barnes Group, Inc. ............ 817,151
21,400 Brady Corp. -- Class A......... 788,376
15,800 Ceradyne, Inc.*(h)............. 781,942
18,497 Griffon Corp.*................. 482,772
8,000 Lincoln Electric Holdings,
Inc. ........................ 501,200
17,700 Matthews International
Corp. -- Class A............. 610,119
71,000 Power-One, Inc.*............... 468,600
13,921 Rofin-Sinar Technologies,
Inc.*........................ 800,040
14,400 Rogers Corp.*.................. 811,296
------------
7,271,210
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 8.5%
15,600 Amedisys, Inc.*(h)............. 591,240
41,358 AMICAS, Inc.*.................. 133,586
39,300 Aspect Medical Systems,
Inc.*........................ 685,392
32,600 Hologic, Inc.*................. 1,609,137
8,900 ICU Medical, Inc.*............. 375,936
43,600 inVentiv Health, Inc.*......... 1,254,808
22,323 IRIS International, Inc.*...... 293,771
25,000 LHC Group, Inc.*............... 498,000
2,689 Matria Healthcare, Inc.*(h).... 57,598
30,700 Meridian Bioscience, Inc. ..... 765,965
39,878 Natus Medical, Inc.*........... 394,393
27,600 Palomar Medical Technologies,
Inc.*(h)..................... 1,259,388
43,100 Per-Se Technologies, Inc.*..... 1,085,258
45,694 Phase Forward, Inc. ........... 526,395
39,900 Res-Care, Inc.*................ 798,000
28,960 SurModics, Inc.*(h)............ 1,045,746
76,100 Third Wave Technologies*....... 226,778
69,000 TriPath Imaging, Inc.*......... 456,780
21,200 West Pharmaceutical Services,
Inc. ........................ 769,136
------------
12,827,307
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
METALS AND MINING -- 1.8%
30,322 AMCOL International Corp. ..... $ 798,985
6,700 Carpenter Technology Corp. .... 773,850
21,752 Gibraltar Industries, Inc. .... 630,808
18,100 Mueller Industries, Inc. ...... 597,843
------------
2,801,486
------------
OIL AND GAS: EQUIPMENT -- 1.1%
30,100 Superior Energy Services,
Inc.*........................ 1,020,390
12,000 Veritas DGC, Inc.*............. 618,960
------------
1,639,350
------------
OIL AND GAS: PIPELINES -- 0.5%
22,600 Hornbeck Offshore Services,
Inc.*........................ 802,752
------------
OIL, COAL AND GAS -- 4.5%
30,925 Allis-Chalmers Energy, Inc.*... 420,271
2,518 Bill Barrett Corp.*............ 74,558
947 Comstock Resources, Inc.*...... 28,277
11,000 Core Laboratories NV (the
Netherlands)*................ 671,440
4,700 Giant Industries, Inc.*........ 312,785
100,800 Grey Wolf, Inc.*............... 776,160
20,100 Helix Energy Solutions Group,
Inc.*(h)..................... 811,236
26,600 KCS Energy, Inc.*.............. 790,020
13,000 Oceaneering International,
Inc.*........................ 596,050
33,845 PetroQuest Energy, Inc.*....... 415,617
30,000 Pioneer Drilling Company*...... 463,200
19,260 RPC, Inc. ..................... 467,633
16,600 TETRA Technologies, Inc.*...... 502,814
11,365 W-H Energy Services, Inc.*..... 577,683
700 World Fuel Services Corp. ..... 31,983
------------
6,939,727
------------
PAPER AND FOREST PRODUCTS -- 0.3%
26,100 Glatfelter..................... 414,207
------------
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 4.5%
73,800 Arena Pharmaceuticals,
Inc.*(h)..................... 854,604
28,800 Bentley Pharmaceuticals,
Inc.*........................ 315,648
37,400 Cubist Pharmaceuticals,
Inc.*........................ 941,732
34,700 Hi-Tech Pharmacal Company,
Inc.*........................ 574,979
28,733 Kendle International, Inc.*.... 1,055,363
36,000 LifeCell Corp.*................ 1,113,120
38,500 PDL BioPharma, Inc.*(h)........ 708,785
22,633 PetMed Express, Inc.*.......... 248,284
</Table>
See notes to financial statements.
151
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT
(CONTINUED)
28,600 Sciele Pharma, Inc.*(h)........ $ 663,234
49,071 ViroPharma, Inc.*.............. 422,992
------------
6,898,741
------------
RETAIL -- 1.0%
24,497 Conn's, Inc.*(h)............... 650,395
20,000 First Cash Financial Services,
Inc.*........................ 395,000
19,600 Movado Group, Inc. ............ 449,820
------------
1,495,215
------------
RETAIL: RESTAURANTS -- 2.3%
17,690 Bob Evans Farms, Inc. ......... 530,877
16,100 CBRL Group, Inc. .............. 546,112
42,600 Luby's, Inc.*.................. 444,318
13,900 Panera Bread Company --
Class A*(h).................. 934,636
26,486 RARE Hospitality International,
Inc.*........................ 761,737
15,900 Sonic Corp.*................... 330,561
------------
3,548,241
------------
RETAIL: SUPERMARKETS -- 0.3%
20,946 Wild Oats Markets, Inc.*....... 410,542
------------
RUBBER PRODUCTS -- 0.2%
16,314 Myers Industries, Inc. ........ 280,438
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 2.3%
14,700 Cymer, Inc.*................... 682,962
23,400 FEI Company*................... 530,712
28,000 Molecular Devices Corp.*....... 855,680
17,800 Trimble Navigation, Ltd.*...... 794,592
23,923 Woodward Governor Company...... 729,891
------------
3,593,837
------------
SECURITY SERVICES -- 0.4%
41,400 Ituran Location and Control,
Ltd. (Israel)................ 580,014
------------
SEMICONDUCTORS -- 2.9%
58,800 ANADIGICS, Inc.*(h)............ 395,136
153,800 Atmel Corp.*................... 853,589
24,000 BTU International, Inc.*....... 325,680
20,100 Credence Systems Corp.*........ 70,350
14,900 Cree, Inc.*(h)................. 354,024
25,100 Cypress Semiconductor
Corp.*(h).................... 364,954
25,800 Integrated Device Technology,
Inc.*........................ 365,844
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
19,637 Kopin Corp.*................... $ 70,890
60,136 MIPS Technologies, Inc.*....... 365,026
11,295 Netlogic Microsystems,
Inc.*(h)..................... 364,264
41,500 Photronics, Inc.*.............. 614,200
19,600 PortalPlayer, Inc.*............ 192,276
35,800 TriQuint Semiconductor,
Inc.*........................ 159,668
------------
4,495,901
------------
SPORTING GOODS AND EQUIPMENT -- 0.3%
3,063 Dick's Sporting Goods, Inc. ... 121,295
13,800 Hibbett Sporting Goods,
Inc.*........................ 329,820
------------
451,115
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 3.7%
55,549 Arris Group, Inc.*............. 728,803
53,295 CalAmp Corp.*.................. 473,793
21,851 CommScope, Inc.*............... 686,558
61,000 Ditech Networks, Inc.*......... 531,920
35,800 General Cable Corp.*........... 1,253,000
28,200 NICE Systems, Ltd. (ADR)
(Israel)*.................... 793,548
49,200 Radyne Corp.*.................. 559,896
11,200 Tekelec*....................... 138,320
43,300 Tollgrade Communications,
Inc*......................... 420,010
50,400 Westell Technologies,
Inc. -- Class A*............. 110,376
------------
5,696,224
------------
TRANSPORTATION -- 0.9%
18,400 Hub Group, Inc. -- Class A*.... 451,352
22,800 Kansas City Southern*.......... 631,560
15,900 Marten Transport, Ltd.*........ 345,666
------------
1,428,578
------------
TOTAL COMMON STOCKS
(Cost $142,321,418).......... 144,891,246
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 13.0%
$19,876,959 Securities Lending Collateral
Investment (Note 4)
(Cost $19,876,959)........... 19,876,959
------------
TOTAL SECURITIES
(Cost $162,198,377).......... 164,768,205
------------
</Table>
See notes to financial statements.
152
SMALL-CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 5.6%
$ 8,493,672 With Investors Bank and Trust,
dated 06/30/06, 4.76%, due
07/03/06, repurchase proceeds
at maturity $8,497,041
(Collateralized by various
Small Business
Administrations,
7.63% -- 7.88%, due
01/25/27 -- 06/25/28, with a
total value of $8,918,356)
(Cost $8,493,672)............ $ 8,493,672
------------
Total Investments -- 113.3%
(Cost $170,692,049).......... 173,261,877
Liabilities less other
assets -- (13.3)%............ (20,300,565)
------------
NET ASSETS -- 100.0%........... $152,961,312
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $170,692,049.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation............... $11,602,671
Gross unrealized depreciation............... (9,032,843)
-----------
Net unrealized appreciation................. $ 2,569,828
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
153
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS -- 98.8%
ADVERTISING -- 1.0%
41,000 Omnicom Group, Inc. ........... $ 3,652,690
------------
AEROSPACE AND DEFENSE -- 1.8%
80,550 The Boeing Company............. 6,597,851
------------
AGRICULTURE -- 1.5%
64,400 Monsanto Company............... 5,421,836
------------
APPAREL: MANUFACTURING AND RETAIL -- 1.8%
213,020 Coach, Inc.*................... 6,369,298
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.2%
42,640 Toyota Motor Corp. (ADR)
(Japan)...................... 4,459,718
------------
BANKS -- 1.3%
43,960 UBS AG (Switzerland)........... 4,822,412
------------
BROADCAST SERVICES/MEDIA -- 0.9%
98,000 Comcast Corp. -- Class A*...... 3,208,520
------------
BUSINESS SERVICES AND SUPPLIES -- 1.1%
79,560 Global Payments, Inc. ......... 3,862,638
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 8.6%
151,090 Apple Computer, Inc.*.......... 8,630,260
91,400 Citrix Systems, Inc.*.......... 3,668,796
219,410 Hewlett-Packard Company........ 6,950,909
184,700 Red Hat, Inc.*(h).............. 4,321,980
154,430 Salesforce.com, Inc.*(h)....... 4,117,104
891,000 Sun Microsystems, Inc.*........ 3,697,650
------------
31,386,699
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 0.1%
3,280 Cemex SA de CV (ADR)
(Mexico)*.................... 186,862
------------
CONSUMER GOODS AND SERVICES -- 0.9%
107,490 Avon Products, Inc. ........... 3,332,190
------------
DIVERSIFIED OPERATIONS AND SERVICES -- 5.7%
464,200 General Electric Company....... 15,300,032
56,800 Textron, Inc. ................. 5,235,824
------------
20,535,856
------------
FINANCIAL SERVICES -- 4.5%
12,000 Chicago Mercantile Exchange
Holdings, Inc. .............. 5,893,801
362,140 The Charles Schwab Corp. ...... 5,786,997
31,310 The Goldman Sachs Group,
Inc. ........................ 4,709,963
------------
16,390,761
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 2.9%
149,640 Archer-Daniels-Midland
Company...................... $ 6,177,139
23,300 Hansen Natural Corp.*(h)....... 4,435,621
------------
10,612,760
------------
INTERNET SERVICES -- 9.5%
140,000 Akamai Technologies,
Inc.*(h)..................... 5,066,600
628,390 Cisco Systems, Inc.*........... 12,272,456
27,630 Google, Inc. -- Class A*....... 11,586,088
181,800 YAHOO!, Inc.*.................. 5,999,400
------------
34,924,544
------------
LEISURE AND RECREATION -- 7.0%
140,200 International Game
Technology................... 5,319,188
67,900 Las Vegas Sands Corp.*......... 5,286,694
124,840 Scientific Games Corp. --
Class A*..................... 4,446,801
100,400 Starwood Hotels & Resorts
Worldwide, Inc. ............. 6,058,136
61,000 Station Casinos, Inc. ......... 4,152,880
------------
25,263,699
------------
MACHINERY -- 3.2%
58,000 Caterpillar, Inc. ............. 4,319,840
53,680 Joy Global, Inc. .............. 2,796,191
65,080 Rockwell Automation, Inc. ..... 4,686,411
------------
11,802,442
------------
MANUFACTURING -- 1.0%
75,900 Roper Industries, Inc. ........ 3,548,325
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 5.7%
56,100 Covance, Inc.*................. 3,434,442
77,440 DaVita, Inc.*.................. 3,848,768
22,110 Henry Schein, Inc.*............ 1,033,200
40,100 Intuitive Surgical, Inc.*(h)... 4,730,597
63,200 Quest Diagnostics, Inc. ....... 3,786,944
81,200 ResMed, Inc.*.................. 3,812,340
------------
20,646,291
------------
METALS AND MINING -- 2.2%
62,270 Allegheny Technologies,
Inc. ........................ 4,311,575
89,070 Tenaris SA (ADR)............... 3,606,444
------------
7,918,019
------------
OIL AND GAS: EQUIPMENT -- 0.7%
40,000 National-Oilwell Varco,
Inc.*........................ 2,532,800
------------
OIL, COAL AND GAS -- 0.8%
45,400 Valero Energy Corp. ........... 3,020,008
------------
</Table>
See notes to financial statements.
154
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND
DEVELOPMENT -- 10.5%
42,070 Allergan, Inc.(h).............. $ 4,512,428
85,400 AstraZeneca PLC (ADR) (United
Kingdom)..................... 5,108,628
155,000 Celgene Corp.*................. 7,351,650
60,860 Express Scripts, Inc.*......... 4,366,096
49,240 Genentech, Inc.*............... 4,027,832
151,250 Gilead Sciences, Inc.*......... 8,947,950
91,100 Shire PLC (ADR) (United
Kingdom)..................... 4,029,353
------------
38,343,937
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 1.0%
146,700 CB Richard Ellis Group, Inc. --
Class A*..................... 3,652,830
------------
RETAIL -- 1.0%
64,800 Best Buy Company, Inc. ........ 3,553,632
------------
RETAIL: RESTAURANTS -- 2.8%
153,030 Starbucks Corp.*............... 5,778,413
87,300 YUM! Brands, Inc. ............. 4,388,571
------------
10,166,984
------------
RETAIL: SUPERMARKETS -- 1.3%
70,620 Whole Foods Market, Inc. ...... 4,564,877
------------
SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 1.2%
121,980 Thermo Electron Corp.*(h)...... 4,420,555
------------
SEMICONDUCTORS -- 8.7%
454,500 Applied Materials, Inc. ....... 7,399,260
193,340 Broadcom Corp. -- Class A*..... 5,809,867
436,000 Intel Corp. ................... 8,262,200
118,600 MEMC Electronic Materials,
Inc.*(h)..................... 4,447,500
388,980 Micron Technology, Inc.*....... 5,858,039
------------
31,776,866
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 6.8%
299,270 Corning, Inc.*................. 7,239,341
1,530,290 JDS Uniphase Corp.*(h)......... 3,871,634
83,490 NII Holdings, Inc.*............ 4,707,166
220,760 QUALCOMM, Inc. ................ 8,845,853
------------
24,663,994
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- 2.1%
61,500 CH Robinson Worldwide, Inc. ... $ 3,277,950
60,400 CSX Corp. ..................... 4,254,576
------------
7,532,526
------------
TOTAL COMMON STOCKS (Cost
$324,694,809)................ 359,172,420
------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 9.7%
$35,186,388 Securities Lending Collateral
Investment (Note 4) (Cost
$35,186,388)................. 35,186,388
------------
TOTAL SECURITIES (Cost
$359,881,197)................ 394,358,808
------------
REPURCHASE AGREEMENTS -- 3.0%
10,908,030 With Investors Bank and Trust,
dated 06/30/06, 4.76%, due
07/03/06, repurchase proceeds
at maturity $10,912,357
(Collateralized by Fannie Mae
Adjustable Rate Mortgage,
4.23% due 07/01/33, with a
value of $6,710,014 and Small
Business Administration,
7.63%, due 02/25/27, with a
value of $4,743,417) (Cost
$10,908,030)................. 10,908,030
------------
Total Investments -- 111.5%
(Cost $370,789,227).......... 405,266,838
Liabilities less other
assets -- (11.5)%............ (41,902,621)
------------
NET ASSETS -- 100.0%........... $363,364,217
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $370,789,227.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $ 44,584,406
Gross unrealized depreciation.......... (10,106,795)
------------
Net unrealized appreciation............ $ 34,477,611
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
155
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES -- 91.8%
ADVERTISING -- 1.9%
$ 3,555,000 Advanstar Communications, Inc.,
10.75%, 08/15/10............. $ 3,830,513
470,000 Affinion Group, Inc. -- 144A,
10.13%, 10/15/13............. 474,700
660,000 Affinion Group, Inc. -- 144A,
11.50%, 10/15/15............. 650,100
2,680,000 RH Donnelley Corp. -- 144A,
6.88%, 01/15/13.............. 2,479,000
1,080,000 RH Donnelley Corp. -- 144A,
8.88%, 01/15/16.............. 1,094,850
------------
8,529,163
------------
AEROSPACE AND DEFENSE -- 0.4%
395,000 Argo-Tech Corp.,
9.25%, 06/01/11.............. 408,825
415,000 Armor Holdings, Inc.,
8.25%, 08/15/13.............. 431,600
980,000 DRS Technologies, Inc.,
7.63%, 02/01/18.............. 980,000
------------
1,820,425
------------
AGRICULTURAL EQUIPMENT -- 0.7%
3,035,000 Case New Holland, Inc.,
9.25%, 08/01/11.............. 3,209,513
------------
AIRLINES -- 0.7%
1,700,000 American Airlines, Inc., Series
2001-2,
7.80%, 10/01/06.............. 1,703,188
831,490 Continental Airlines, Inc.,
Series 2001-1,
7.03%, 06/15/11.............. 812,242
500,000 Delta Air Lines, Inc.,
7.90%, 12/15/09(i)........... 143,750
320,000 Delta Air Lines, Inc. -- 144A,
9.50%, 11/18/08(i)........... 322,400
------------
2,981,580
------------
APPAREL: MANUFACTURING AND RETAIL -- 4.9%
4,035,000 Levi Strauss & Company,
12.25%, 12/15/12............. 4,478,849
2,940,000 Levi Strauss & Company,
Floating Rate,
9.74%, 04/01/12(b)........... 3,006,150
3,175,000 Neiman Marcus Group, Inc. --
144A,
9.00%, 10/15/15.............. 3,333,750
1,405,000 Neiman Marcus Group, Inc. --
144A,
10.38%, 10/15/15............. 1,499,838
2,695,000 Oxford Industries, Inc.,
8.88%, 06/01/11.............. 2,708,475
2,780,000 Perry Ellis International,
Inc., Series B,
8.88%, 09/15/13.............. 2,738,300
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
APPAREL: MANUFACTURING AND RETAIL (CONTINUED)
$ 1,830,000 Phillips Van-Heusen Corp.,
7.25%, 02/15/11.............. $ 1,820,850
685,000 Phillips Van-Heusen Corp.,
8.13%, 05/01/13.............. 703,838
170,000 Quiksilver, Inc.,
6.88%, 04/15/15.............. 158,950
1,065,000 Russell Corp.,
9.25%, 05/01/10.............. 1,119,581
------------
21,568,581
------------
AUTOMOBILE: RENTAL -- 1.3%
4,335,000 Hertz Corp. -- 144A,
8.88%, 01/01/14.............. 4,465,050
1,100,000 Hertz Corp. -- 144A,
10.50%, 01/01/16............. 1,171,500
------------
5,636,550
------------
AUTOMOBILE: RETAIL -- 0.2%
660,000 AutoNation, Inc. -- 144A,
Floating Rate,
7.04%, 04/15/13(b)........... 660,000
------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 1.9%
2,610,000 Collins & Aikman Products
Company, Series B,
9.75%, 02/15/10.............. 2,577,374
395,000 Commercial Vehicle Group,
8.00%, 07/01/13.............. 380,188
270,000 Keystone Automotive Operations,
Inc.,
9.75%, 11/01/13.............. 256,500
260,000 Rexnord Corp.,
10.13%, 12/15/12............. 287,908
1,000,000 Tenneco Automotive, Inc.,
8.63%, 11/15/14.............. 1,002,500
2,195,000 Tenneco Automotive, Inc.,
Series B,
10.25%, 07/15/13............. 2,417,244
354,000 TRW Automotive, Inc.,
11.00%, 02/15/13............. 388,515
680,000 Visteon Corp.,
8.25%, 08/01/10.............. 639,200
370,000 Visteon Corp.,
7.00%, 03/10/14.............. 303,863
------------
8,253,292
------------
BROADCAST SERVICES/MEDIA -- 4.5%
620,000 Adelphia Communications,
10.25%, 11/01/06(i).......... 334,800
840,000 Adelphia Communications,
10.25%, 06/15/11(i).......... 487,200
305,000 Adelphia Communications, Series
B,
9.25%, 10/01/02(i)(m)........ 165,463
</Table>
See notes to financial statements.
156
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
BROADCAST SERVICES/MEDIA (CONTINUED)
$ 1,025,000 Cablevision Systems Corp.,
Class B, Floating Rate,
9.62%, 04/01/09(k)........... $ 1,091,625
5,970,000 CCO Holdings LLC/Capital Corp.,
8.75%, 11/15/13.............. 5,850,599
980,000 CSC Holdings, Inc.,
7.25%, 07/15/08.............. 986,125
405,000 CSC Holdings, Inc., Series B,
7.63%, 04/01/11.............. 407,025
4,700,000 Insight Communications Company,
Inc.,
12.25%, 02/15/11............. 4,982,000
805,000 Kabel Deutschland GMBH -- 144A
(Germany),
10.63%, 07/01/14............. 853,300
715,000 LBI Media, Inc.,
10.13%, 07/15/12............. 765,050
570,000 LBI Media, Inc.,
zero coupon, 10/15/13(g)..... 464,550
1,030,000 Nexstar Financial Holdings LLC,
Inc.,
zero coupon, 04/01/13(g)..... 839,450
2,885,000 Sirius Satellite Radio, Inc.,
9.63%, 08/01/13.............. 2,719,113
------------
19,946,300
------------
BUSINESS SERVICES AND SUPPLIES -- 0.1%
275,000 Affinity Group, Inc.,
9.00%, 02/15/12.............. 275,000
------------
CHEMICALS -- 3.9%
1,210,000 Equistar Chemical/Funding,
10.63%, 05/01/11............. 1,305,288
1,086,000 Huntsman LLC,
11.63%, 10/15/10............. 1,205,460
760,000 IMC Global, Inc.,
10.88%, 08/01/13............. 849,300
1,675,000 IMC Global, Inc., Series B,
11.25%, 06/01/11............. 1,775,500
3,400,000 Ineos Group Holdings PLC --
144A (United Kingdom),
8.50%, 02/15/16.............. 3,200,249
320,000 Lyondell Chemical Company,
11.13%, 07/15/12............. 348,800
1,301,000 Lyondell Chemical Company,
10.50%, 06/01/13............. 1,437,605
830,000 Nova Chemicals Corp. (Canada),
Floating Rate,
8.41%, 11/15/13(k)........... 827,925
2,900,000 OM Group, Inc.,
9.25%, 12/15/11.............. 3,001,500
1,100,000 PolyOne Corp.,
10.63%, 05/15/10............. 1,188,000
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CHEMICALS (CONTINUED)
$ 365,000 PolyOne Corp.,
8.88%, 05/01/12.............. $ 368,194
380,000 PQ Corp.,
7.50%, 02/15/13.............. 359,100
1,148,000 Rockwood Specialties Corp.,
10.63%, 05/15/11............. 1,232,665
------------
17,099,586
------------
COMPUTER EQUIPMENT, SOFTWARE AND
SERVICES -- 1.5%
475,000 Activant Solutions,
Inc. -- 144A,
9.50%, 05/01/16.............. 461,938
1,800,000 Interface, Inc.,
10.38%, 02/01/10............. 1,977,749
170,000 Interface, Inc.,
9.50%, 02/01/14.............. 176,375
1,685,000 SunGard Data Systems, Inc. --
144A,
9.13%, 08/15/13.............. 1,756,613
1,414,000 SunGard Data Systems, Inc. --
144A,
10.25%, 08/15/15............. 1,468,793
840,000 SunGard Data Systems, Inc. --
144A, Floating Rate,
9.43%, 08/15/13(k)........... 883,050
------------
6,724,518
------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.7%
2,025,000 Dayton Superior Corp.,
10.75%, 09/15/08............. 2,065,500
861,000 Goodman Global Holdings, Series
B, Floating Rate,
8.33%, 06/15/12(k)........... 865,305
650,000 Interline Brands, Inc.,
8.13%, 06/15/14.............. 651,625
2,885,000 Nortek, Inc.,
8.50%, 09/01/14.............. 2,805,663
930,000 NTK Holdings, Inc.,
zero coupon, 03/01/14(g)..... 677,738
1,280,000 Panolam Industries
International -- 144A,
10.75%, 10/01/13............. 1,248,000
3,000,000 RMCC Acquisition Company --
144A,
9.50%, 11/01/12.............. 3,134,999
330,000 Stanley-Martin Communities LLC,
9.75%, 08/15/15.............. 283,800
------------
11,732,630
------------
</Table>
See notes to financial statements.
157
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER GOODS AND SERVICES -- 0.4%
$ 630,000 Fedders North America,
9.88%, 03/01/14.............. $ 496,125
755,000 Steinway Musical Instruments --
144A,
7.00%, 03/01/14.............. 734,238
358,000 WH Holdings, Ltd./WH Capital
Corp.,
9.50%, 04/01/11.............. 393,800
------------
1,624,163
------------
CONTAINERS AND PACKAGING -- 0.2%
865,000 Intertape Polymer US, Inc.,
8.50%, 08/01/14.............. 800,125
285,000 Stone Container Finance Company
of Canada (Canada),
7.38%, 07/15/14.............. 253,650
------------
1,053,775
------------
DISTRIBUTION -- 0.2%
916,000 Jafra Cosmetics International,
10.75%, 05/15/11............. 986,990
------------
EDUCATION -- 0.8%
1,350,000 Education Management LLC --
144A,
8.75%, 06/01/14.............. 1,343,250
1,640,000 Education Management LLC --
144A,
10.25%, 06/01/16............. 1,640,000
740,000 Knowledge Learning Center --
144A,
7.75%, 02/01/15.............. 680,800
------------
3,664,050
------------
ELECTRONICS -- 0.1%
550,000 Muzak LLC,
10.00%, 02/15/09............. 464,750
------------
ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING
SERVICES -- 1.1%
1,225,000 Aleris International, Inc.,
10.38%, 10/15/10............. 1,329,125
881,000 Aleris International, Inc.,
9.00%, 11/15/14.............. 900,823
1,150,000 Allied Waste North America,
Inc.,
7.25%, 03/15/15.............. 1,104,000
1,555,000 Waste Services, Inc.,
9.50%, 04/15/14.............. 1,578,325
------------
4,912,273
------------
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
EQUIPMENT RENTAL AND LEASING -- 0.6%
$ 100,000 United Rentals North America,
Inc.,
6.50%, 02/15/12.............. $ 95,000
365,000 United Rentals North America,
Inc.,
7.75%, 11/15/13.............. 348,575
2,400,000 United Rentals North America,
Inc.,
7.00%, 02/15/14.............. 2,205,000
------------
2,648,575
------------
FINANCIAL SERVICES -- 5.6%
2,050,000 Alamosa Delaware, Inc.,
11.00%, 07/31/10............. 2,255,000
1,335,000 BCP US Crystal Holdings Corp.,
9.63%, 06/15/14.............. 1,455,150
315,000 E*TRADE Financial Corp.,
8.00%, 06/15/11.............. 322,875
1,765,000 Ford Motor Credit Company,
6.63%, 06/16/08.............. 1,680,661
3,090,000 Ford Motor Credit Company,
7.38%, 10/28/09.............. 2,858,853
1,465,000 Ford Motor Credit Company,
7.88%, 06/15/10.............. 1,352,557
5,220,000 Ford Motor Credit Company,
Floating Rate,
8.15%, 11/02/07(b)........... 5,216,711
1,060,000 General Motors Acceptance
Corp.,
6.13%, 09/15/06.............. 1,058,485
935,000 General Motors Acceptance
Corp.,
5.13%, 05/09/08.............. 896,119
470,000 General Motors Acceptance
Corp.,
5.85%, 01/14/09.............. 450,802
170,000 General Motors Acceptance
Corp.,
7.00%, 02/01/12.............. 161,546
4,410,000 General Motors Acceptance
Corp.,
8.00%, 11/01/31.............. 4,249,855
2,380,000 Residential Capital
Corp. -- 144A, Floating Rate,
7.34%, 04/17/09(b)........... 2,381,652
------------
24,340,266
------------
FOOD AND BEVERAGE -- 2.3%
3,725,000 ASG Consolidated LLC/ASG
Finance, Inc.,
zero coupon, 11/01/11(g)..... 3,156,938
2,475,000 Dean Foods Company,
7.00%, 06/01/16.............. 2,406,938
1,415,000 Pierre Foods, Inc.,
9.88%, 07/15/12.............. 1,446,838
3,240,000 Pinnacle Foods Holding Corp.,
8.25%, 12/01/13.............. 3,199,499
------------
10,210,213
------------
</Table>
See notes to financial statements.
158
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
FUNERAL SERVICES -- 0.2%
$ 1,090,000 Service Corp. International --
144A,
7.00%, 06/15/17.............. $ 1,024,600
------------
INSURANCE -- 0.4%
1,865,000 Multiplan, Inc. -- 144A,
10.38%, 04/15/16............. 1,897,638
------------
LEISURE AND RECREATION -- 9.2%
2,365,000 AMC Entertainment, Inc.,
9.88%, 02/01/12.............. 2,365,000
820,000 AMC Entertainment, Inc.,
11.00%, 02/01/16............. 881,500
270,000 AMC Entertainment, Inc.,
Floating Rate,
9.42%, 08/15/10(b)........... 279,450
172,437 Eldorado Casino Shreveport,
10.00%, 08/01/12............. 149,158
3,025,000 GreekTown Holdings -- 144A,
10.75%, 12/01/13............. 3,206,500
970,000 HRP Myrtle Beach Holdings/
CA -- 144A,
14.50%, 04/01/14(l).......... 996,675
945,000 HRP Myrtle Beach Operations --
144A,
12.50%, 04/01/13............. 949,725
1,730,000 HRP Myrtle Beach Operations --
144A, Floating Rate,
9.82%, 04/01/12(k)........... 1,721,350
1,870,000 Inn of The Mountain Gods,
12.00%, 11/15/10............. 1,996,225
4,430,000 Kerzner International (Bahama
Islands),
6.75%, 10/01/15.............. 4,645,962
890,000 Majestic Holdco, LLC -- 144A,
zero coupon, 10/15/11(g)..... 667,500
1,500,000 MGM MIRAGE,
6.63%, 07/15/15.............. 1,406,250
460,000 Mohegan Tribal Gaming
Authority,
8.00%, 04/01/12.............. 469,775
2,275,000 OED Corp./Diamond JO,
8.75%, 04/15/12.............. 2,300,594
1,330,000 San Pasqual Casino -- 144A,
8.00%, 09/15/13.............. 1,333,325
2,875,000 Six Flags, Inc.,
8.88%, 02/01/10.............. 2,745,625
735,000 Six Flags, Inc.,
9.63%, 06/01/14.............. 672,525
610,000 The Majestic Star Casino LLC,
9.50%, 10/15/10.............. 642,025
1,080,000 The Majestic Star Casino LLC/
The Majestic Star Casino
Capital Corp. -- 144A,
9.75%, 01/15/11.............. 1,088,100
5,965,000 Trump Entertainment Resorts,
Inc.,
8.50%, 06/01/15.............. 5,763,680
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
LEISURE AND RECREATION (CONTINUED)
$ 1,035,000 Tunica-Biloxi Gaming
Authority -- 144A,
9.00%, 11/15/15.............. $ 1,066,050
1,821,000 Waterford Gaming LLC -- 144A,
8.63%, 09/15/12.............. 1,930,260
2,715,000 Wynn Las Vegas LLC/Capital
Corp.,
6.63%, 12/01/14.............. 2,572,463
------------
39,849,717
------------
MACHINERY -- 1.5%
1,225,000 Allis Chalmers Energy,
Inc. -- 144A,
9.00%, 01/15/14.............. 1,231,125
2,780,000 Case New Holland, Inc. -- 144A,
7.13%, 03/01/14.............. 2,668,800
830,000 Chart Industries, Inc. -- 144A,
9.13%, 10/15/15.............. 850,750
905,000 Stewart & Stevenson LLC --
144A,
10.00%, 07/15/14............. 914,050
305,000 The Manitowoc Company, Inc.,
10.50%, 08/01/12............. 332,450
610,000 Thermadyne Holdings Corp.,
9.25%, 02/01/14.............. 558,150
------------
6,555,325
------------
MANUFACTURING -- 1.4%
985,000 Amsted Industries,
Inc. -- 144A,
10.25%, 10/15/11............. 1,058,875
3,585,000 Dresser, Inc.,
9.88%, 04/15/11.............. 3,647,737
10,000 Koppers, Inc.,
9.88%, 10/15/13.............. 10,775
575,000 Nutro Products, Inc. -- 144A,
10.75%, 04/15/14............. 594,406
380,000 Nutro Products, Inc. -- 144A,
Floating Rate,
9.23%, 10/15/13(k)........... 389,025
305,000 Samsonite Corp.,
8.88%, 06/01/11.............. 317,963
720,000 Venture Holdings Trust, Series
B, 9.50%, 07/01/05(i)(m)..... 6,300
------------
6,025,081
------------
MEDICAL EQUIPMENT, SUPPLIES, AND
SERVICES -- 4.9%
2,625,000 Accellent, Inc., 10.50%,
12/01/13..................... 2,697,187
1,485,000 CDRV Investors, Inc., zero
coupon, 01/01/15(g).......... 1,009,800
270,000 Concentra Operating Corp.,
9.50%, 08/15/10.............. 280,800
220,000 Concentra Operating Corp.,
9.13%, 06/01/12.............. 228,800
</Table>
See notes to financial statements.
159
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES
(CONTINUED)
$ 1,335,000 Encore Medical IHC, Inc.,
9.75%, 10/01/12.............. $ 1,348,350
870,000 Inverness Medical Innovations,
8.75%, 02/15/12.............. 848,250
910,000 National Mentor
Holdings -- 144A,
11.25%, 07/01/14............. 930,475
1,170,000 Norcross Safety Products LLC --
Series B,
9.88%, 08/15/11.............. 1,219,725
985,000 Res-Care, Inc.,
7.75%, 10/15/13.............. 982,538
2,070,562 Safety Products Holdings,
Series B,
11.75%, 01/01/12(l)(n)....... 2,042,092
1,300,000 Tenet Healthcare Corp.,
6.50%, 06/01/12.............. 1,153,750
975,000 Tenet Healthcare Corp.,
9.88%, 07/01/14.............. 979,875
185,000 Tenet Healthcare Corp. -- 144A,
9.25%, 02/01/15.............. 182,225
945,000 Triad Hospitals, Inc.,
7.00%, 05/15/12.............. 945,000
1,115,000 Triad Hospitals, Inc.,
7.00%, 11/15/13.............. 1,089,913
575,000 US Oncology Holdings, Inc.,
Floating Rate,
10.32%, 03/15/15(k).......... 589,375
1,570,000 US Oncology, Inc.,
9.00%, 08/15/12.............. 1,640,650
1,345,000 US Oncology, Inc.,
10.75%, 08/15/14............. 1,466,050
1,985,000 VWR International, Inc.,
8.00%, 04/15/14.............. 1,937,856
------------
21,572,711
------------
METALS AND MINING -- 1.8%
1,349,000 Ispat Inland ULC (Canada),
9.75%, 04/01/14.............. 1,489,322
1,635,000 Mueller Group, Inc.,
10.00%, 05/01/12............. 1,765,800
1,240,000 Mueller Holdings (NA), Inc.,
zero coupon, 04/15/14(g)..... 1,047,800
1,580,000 Novelis, Inc. -- 144A (Canada),
8.00%, 02/15/15.............. 1,524,700
2,050,000 Rathgibson, Inc. -- 144A,
11.25%, 02/15/14............. 2,121,750
------------
7,949,372
------------
OIL AND GAS: PIPELINES -- 2.1%
320,000 Copano Energy LLC -- 144A,
8.13%, 03/01/16.............. 320,000
1,550,000 Dynegy Holdings, Inc.,
7.63%, 10/15/26.............. 1,364,000
1,895,000 Dynegy Holdings, Inc. -- 144A,
8.38%, 05/01/16.............. 1,876,050
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS: PIPELINES (CONTINUED)
$ 105,000 El Paso Corp.,
7.50%, 08/15/06.............. $ 105,394
740,000 El Paso Corp.,
9.63%, 05/15/12.............. 812,150
380,000 Northwest Pipeline Corp.,
8.13%, 03/01/10.............. 397,100
1,120,000 Semgroup LP -- 144A,
8.75%, 11/15/15.............. 1,120,000
2,510,000 Transmontaigne, Inc.,
9.13%, 06/01/10.............. 2,679,424
375,000 Williams Companies, Inc.,
8.75%, 03/15/32.............. 409,688
------------
9,083,806
------------
OIL, COAL AND GAS -- 2.5%
415,000 Alpha Natural Resources,
10.00%, 06/01/12............. 446,125
490,000 Clayton William Energy,
7.75%, 08/01/13.............. 453,250
160,000 El Paso Production Holding
Company,
7.75%, 06/01/13.............. 162,000
685,000 Encore Acquisition Corp.,
7.25%, 12/01/17.............. 661,025
695,000 Giant Industries, Inc.,
8.00%, 05/15/14.............. 689,788
390,000 Ocean Rig Norway AS -- 144A
(Norway),
8.38%, 07/01/13.............. 401,700
525,000 Parker Drilling Company,
9.63%, 10/01/13.............. 572,250
1,125,000 Petrobras International Finance
(Cayman Islands),
9.13%, 07/02/13.............. 1,254,375
175,000 Petrobras International Finance
(Cayman Islands),
7.75%, 09/15/14.............. 182,438
2,715,000 Petrohawk Energy Corp. -- 144A,
9.13%, 07/15/13.............. 2,714,999
655,000 Quicksilver Resources, Inc.,
7.13%, 04/01/16.............. 617,338
440,000 Ram Energy, Inc.,
11.50%, 02/15/08............. 463,650
2,360,000 United Refining Company,
10.50%, 08/15/12............. 2,454,400
------------
11,073,338
------------
PAPER AND FOREST PRODUCTS -- 2.5%
820,000 Abitibi Consolidated, Inc.
(Canada),
6.95%, 04/01/08.............. 798,475
1,185,000 Georgia-Pacific Corp.,
9.50%, 12/01/11.............. 1,244,250
</Table>
See notes to financial statements.
160
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
PAPER AND FOREST PRODUCTS (CONTINUED)
$ 6,700,000 Georgia-Pacific Corp.,
5.30%, 12/23/13.............. $ 6,764,742
1,260,000 NewPage Corp.,
10.00%, 05/01/12............. 1,310,400
855,000 NewPage Corp., Floating Rate,
11.40%, 05/01/12(b).......... 936,225
------------
11,054,092
------------
PRINTING AND PUBLISHING -- 3.1%
3,300,000 American Media Operations,
Inc., Series B,
10.25%, 05/01/09............. 3,093,750
2,281,634 CanWest Media, Inc. (Canada),
8.00%, 09/15/12.............. 2,270,226
410,000 CBD Media LLC/CBD Finance,
Inc.,
8.63%, 06/01/11.............. 410,000
1,241,000 Dex Media West Finance Company,
Series B,
9.88%, 08/15/13.............. 1,351,133
3,795,000 Houghton Mifflin Company,
9.88%, 02/01/13.............. 3,956,287
1,500,000 Houghton Mifflin Company, zero
coupon, 10/15/13(g).......... 1,245,000
475,000 MediaNews Group, Inc.,
6.88%, 10/01/13.............. 434,625
1,000,000 Primedia, Inc., Floating Rate,
10.55%, 05/15/10(b).......... 1,026,250
------------
13,787,271
------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 0.2%
915,000 HydroChem Industrial Services,
Inc. -- 144A,
9.25%, 02/15/13.............. 887,550
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
350,000 FelCor Lodging LP, Floating
Rate,
9.57%, 06/01/11(k)........... 362,250
150,000 Host Marriott LP, Series O,
6.38%, 03/15/15.............. 141,750
485,000 Ventas Realty LP/Ventas Capital
Corp.,
7.13%, 06/01/15.............. 487,425
------------
991,425
------------
RETAIL -- 3.4%
515,000 General Nutrition Centers,
Inc.,
8.63%, 01/15/11.............. 518,219
4,540,000 GSC Holdings Corp.,
8.00%, 10/01/12.............. 4,562,699
4,090,000 GSC Holdings Corp., Floating
Rate,
8.87%, 10/01/11(b)........... 4,222,925
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL (CONTINUED)
$ 2,440,000 Rite Aid Corp.,
8.13%, 05/01/10.............. $ 2,464,400
2,845,000 Rite Aid Corp. -- 144A,
6.13%, 12/15/08.............. 2,766,763
380,000 The Jean Coutu Group (PJC),
Inc. (Canada),
8.50%, 08/01/14.............. 351,500
------------
14,886,506
------------
RETAIL: RESTAURANTS -- 0.5%
1,140,000 EPL Finance Corp. -- 144A,
11.75%, 11/15/13............. 1,308,150
1,050,000 NPC International,
Inc. -- 144A,
9.50%, 05/01/14.............. 1,021,125
------------
2,329,275
------------
SEMICONDUCTORS -- 0.2%
635,000 Avago Technologies Finance --
144A (Singapore),
10.13%, 12/01/13............. 671,513
------------
SPECIAL PURPOSE ENTITY -- 7.8%
1,010,000 Altra Industrial Motion,
9.00%, 12/01/11.............. 1,020,100
2,100,000 AMR Holding Company/Emcare
Holding Company,
10.00%, 02/15/15............. 2,210,250
890,000 Aventine Renewable Energy
Holdings, Inc. -- 144A,
Floating Rate,
11.33%, 12/15/11(b).......... 938,950
645,000 CCM Merger, Inc. -- 144A,
8.00%, 08/01/13.............. 612,750
1,200,000 Chukchansi Economic Development
Authority -- 144A, Floating
Rate,
8.78%, 11/15/12(k)........... 1,230,000
450,000 CPI Holdco, Inc., Floating
Rate,
10.56%, 02/01/15(k).......... 461,250
1,381,000 Crystal US Holdings 3 LLC/
Crystal US Sub 3 Corp. --
Series B,
zero coupon, 10/01/14(g)..... 1,087,538
1,650,000 Digicel, Ltd. -- 144A
(Jamaica),
9.25%, 09/01/12.............. 1,732,500
2,090,000 Galaxy Entertainment Finance --
144A (British Virgin
Islands),
9.88%, 12/15/12.............. 2,184,050
1,000,000 Galaxy Entertainment Finance --
144A (British Virgin
Islands), Floating Rate,
10.42%, 12/15/10(k).......... 1,051,250
535,000 Hexion US Finance Corp./Hexion
Nova Scotia Finance, ULC,
9.00%, 07/15/14.............. 544,363
2,280,000 Marquee Holdings, Inc., zero
coupon, 08/15/14(g).......... 1,638,750
</Table>
See notes to financial statements.
161
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
SPECIAL PURPOSE ENTITY (CONTINUED)
$ 2,625,000 MDP Acquisitions PLC (Ireland),
9.63%, 10/01/12.............. $ 2,716,875
1,880,000 Rainbow National Services
LLC -- 144A,
8.75%, 09/01/12.............. 1,983,400
2,670,000 Rainbow National Services
LLC -- 144A,
10.38%, 09/01/14............. 2,970,375
4,325,000 UGS Corp.,
10.00%, 06/01/12............. 4,670,999
2,915,000 Universal City Development
Partners, Ltd.,
11.75%, 04/01/10............. 3,188,280
2,640,000 Universal City Florida,
Floating Rate,
9.90%, 05/01/10(b)........... 2,739,000
1,000,000 Vanguard Health Holding Company
II,
9.00%, 10/01/14.............. 1,002,500
------------
33,983,180
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 10.2%
345,000 Airgate PCS, Inc., Floating
Rate,
8.83%, 10/15/11(b)........... 354,488
1,460,000 Centennial Cellular/
Communications,
10.13%, 06/15/13............. 1,543,950
755,000 General Cable Corp.,
9.50%, 11/15/10.............. 804,075
1,600,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda),
9.25%, 06/15/16.............. 1,660,000
4,910,000 Intelsat Bermuda, Ltd. -- 144A
(Bermuda),
11.25%, 06/15/16............. 5,057,299
5,000,000 Intelsat Bermuda, Ltd.
(Bermuda),
5.25%, 11/01/08.............. 4,724,999
2,520,000 Intelsat Subsidiary Holding
Company, Ltd. (Bermuda),
Floating Rate,
9.61%, 01/15/12(k)........... 2,557,800
1,000,000 IWO Holdings, Inc.,
14.00%, 01/15/11(i)(n)....... --
185,000 IWO Holdings, Inc., Floating
Rate,
8.82%, 01/15/12(b)........... 192,400
1,195,000 LCI International, Inc.,
7.25%, 06/15/07.............. 1,197,988
2,160,000 New Skies Satellites NV (the
Netherlands),
9.13%, 11/01/12.............. 2,295,000
955,000 New Skies Satellites NV (the
Netherlands), Floating Rate,
10.41%, 11/01/11(k).......... 990,813
6,300,000 Nortel Networks, Inc.,
8.38%, 02/15/07.............. 6,296,062
</Table>
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT AND SERVICES
(CONTINUED)
$ 905,000 Nortel Networks, Ltd. -- 144A
(Canada),
10.75%, 07/15/16............. $ 933,847
905,000 Nortel Networks, Ltd. -- 144A
(Canada), Floating Rate,
9.73%, 07/15/11(b)........... 923,100
1,085,000 NTL Cable PLC (United Kingdom),
8.75%, 04/15/14.............. 1,082,288
255,000 Qwest Capital Funding, Inc.,
7.00%, 08/03/09.............. 251,813
60,000 Qwest Communications
International, Series B,
7.50%, 11/01/08.............. 60,150
1,745,000 Qwest Communications
International, Series B,
7.50%, 02/15/14.............. 1,710,100
1,035,000 Qwest Corp.,
7.88%, 09/01/11.............. 1,053,113
470,000 Qwest Corp.,
7.63%, 06/15/15.............. 466,475
110,000 Qwest Corp.,
7.20%, 11/10/26.............. 100,925
2,430,000 Qwest Corp., Floating Rate,
8.58%, 06/15/13(b)........... 2,581,874
140,000 Rogers Wireless, Inc. (Canada),
8.00%, 12/15/12.............. 143,850
1,065,000 Rogers Wireless, Inc. (Canada),
Floating Rate,
8.45%, 12/15/10(b)........... 1,100,944
450,000 Telemig Celular Participacoes
SA/ Amazonia Cel -- 144A
(Brazil),
8.75%, 01/20/09.............. 466,875
1,590,000 Ubiquitel Operating Company,
9.88%, 03/01/11.............. 1,737,075
1,360,000 Windstream Corp. -- 144A,
8.13%, 08/01/13.............. 1,394,000
2,720,000 Windstream Corp. -- 144A,
8.63%, 08/01/16.............. 2,794,799
------------
44,476,102
------------
TRANSPORTATION -- 1.2%
497,000 H-Lines Finance Holding, zero
coupon, 04/01/13(g).......... 428,663
1,277,000 Horizon Lines LLC,
9.00%, 11/01/12.............. 1,302,540
705,000 Kansas City Southern,
9.50%, 10/01/08.............. 742,013
1,890,000 TFM, SA de CV (Mexico),
9.38%, 05/01/12.............. 2,022,299
610,000 TFM, SA de CV (Mexico),
12.50%, 06/15/12............. 675,575
------------
5,171,090
------------
</Table>
See notes to financial statements.
162
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
UTILITIES -- 2.5%
$ 400,000 AES Corp. -- 144A,
8.75%, 05/15/13.............. $ 430,000
310,000 AES Corp. -- 144A,
9.00%, 05/15/15.............. 334,800
477,908 AES Eastern Energy, Series
99-A,
9.00%, 01/02/17.............. 520,023
1,305,000 Inergy LP/Inergy Finance Corp.,
6.88%, 12/15/14.............. 1,220,175
2,750,000 Mission Energy Holding Company,
13.50%, 07/15/08............. 3,080,000
660,000 NRG Energy, Inc.,
7.25%, 02/01/14.............. 645,150
995,000 NRG Energy, Inc.,
7.38%, 02/01/16.............. 972,613
2,015,000 Orion Power Holdings, Inc.,
12.00%, 05/01/10............. 2,287,025
1,360,000 Verasun Energy Corp. -- 144A,
9.88%, 12/15/12.............. 1,441,600
------------
10,931,386
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $401,291,758).......... 402,543,171
------------
LOAN PARTICIPATIONS -- 1.5%
1,200,000 BLB WorldWide Holdings Corp.,
8.74%, 06/30/12.............. 1,210,500
3,260,000 HIT Entertainment, Inc.,
Tranche LN 227525,
10.58%, 02/05/13............. 3,290,562
2,300,000 Masonite International Corp.,
11.00%, 10/06/06............. 2,238,666
------------
TOTAL LOAN PARTICIPATIONS (Cost
$6,789,278).................. 6,739,728
------------
<Caption>
SHARES
------
COMMON STOCKS -- 0.9%
LEISURE AND RECREATION -- 0.4%
970 HRP -- Class B(n).............. --
1,100 Shreveport Gaming Holdings,
Inc.*(n)..................... 19,635
104,876 Trump Entertainment Resorts,
Inc.*........................ 2,113,251
------------
2,132,886
------------
UTILITIES -- 0.5%
1,770,000 Mirant Corp. (Escrow
Certificates)*............... 26,550
73,215 Mirant Corp.*.................. 1,962,162
------------
1,988,712
------------
TOTAL COMMON STOCKS (Cost
$3,227,291).................. 4,121,598
------------
</Table>
<Table>
<Caption>
SHARES VALUE
------ ------------
CONVERTIBLE PREFERRED STOCKS -- 1.1%
OIL, COAL AND GAS -- 0.6%
5,273 Chesapeake Energy
Corp. -- 144A, 5.00%......... $ 539,823
21,865 Chesapeake Energy Corp.,
4.50%........................ 2,049,844
------------
2,589,667
------------
TELECOMMUNICATIONS EQUIPMENT AND
SERVICES -- 0.5%
38,375 Crown Castle International
Corp., 6.25%................. 2,139,406
------------
TOTAL CONVERTIBLE PREFERRED
STOCKS (Cost $4,427,021)..... 4,729,073
------------
WARRANTS -- 0.1%
1,125 American Tower Corp., Expires
08/01/08*.................... 493,318
1,000 IPCS, Inc. -- 144A, Expires
07/15/10*(n)................. --
1,000 IWO Holdings, Inc., Expires
01/15/11*(n)................. --
84 New World Restaurant Group,
Inc.,
Expires 06/20/06*(n)......... 1
1,000 ONO Finance PLC (United
Kingdom),
Expires 03/16/11*(n)......... 69,000
250 Ubiquitel, Inc. -- 144A,
Expires 04/15/10*(n)......... --
------------
TOTAL WARRANTS (Cost
$75,402)..................... 562,319
------------
<Caption>
PRINCIPAL
---------
CONVERTIBLE BONDS -- 0.6%
AEROSPACE AND DEFENSE -- 0.3%
$ 1,305,000 L-3 Communications Corp. --
144A,
3.00%, 08/01/35.............. 1,278,900
------------
BROADCAST SERVICES/MEDIA -- 0.2%
1,000,000 XM Satellite Radio Holdings,
Inc., 1.75%, 12/01/09........ 778,750
------------
LEISURE AND RECREATION -- 0.1%
375,000 Kerzner International (Bahama
Islands),
2.38%, 04/15/24.............. 511,406
------------
TOTAL CONVERTIBLE BONDS (Cost
$2,658,342).................. 2,569,056
------------
TOTAL SECURITIES (Cost
$418,469,092)................ 421,264,945
------------
</Table>
See notes to financial statements.
163
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
--------- ------------
REPURCHASE AGREEMENTS -- 4.5%
$19,789,607 With Investors Bank and Trust,
dated 06/30/06,
4.76%, due 07/03/06,
repurchase proceeds at
maturity $19,797,457
(Collateralized by various
Small Business
Administrations,
7.75% -- 8.38%, due
07/25/16 -- 02/25/29, with a
total value of $20,779,088)
(Cost $19,789,607)........... $ 19,789,607
------------
Total Investments -- 100.5%
(Cost $438,258,699).......... 441,054,552
Liabilities less other
assets -- (0.5)%............. (2,086,620)
------------
NET ASSETS -- 100.0%........... $438,967,932
============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $438,258,699.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation........... $ 8,929,998
Gross unrealized depreciation........... (6,134,145)
-----------
Net unrealized appreciation............. $ 2,795,853
===========
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
See notes to financial statements.
164
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS -- 99.1%
AEROSPACE AND DEFENSE -- 0.4%
1,131,100 Bae Systems PLC....... $ 7,733,802 BRI
--------------
AGRICULTURE -- 0.6%
11,951,000 Chaoda Modern
Agriculture
(Holdings), Ltd. ... 7,463,315 CAY
26,800 Syngenta AG........... 3,562,227 SWI
--------------
11,025,542
--------------
AIRLINES -- 1.3%
1,022,201 British Airways
PLC*................ 6,478,846 BRI
485,035 easyJet PLC*.......... 3,464,379 BRI
3,537,400 Qantas Airways,
Ltd. ............... 7,780,781 AUS
123,000 Ryanair Holdings PLC
(ADR)*(h)........... 6,484,560 IRE
--------------
24,208,566
--------------
APPAREL: MANUFACTURING AND RETAIL -- 0.3%
336,700 Benetton Group SpA.... 5,030,064 ITA
--------------
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT -- 6.3%
127,500 Alpine Electronics,
Inc. ............... 1,754,740 JPN
244,600 DaimlerChrysler AG.... 12,085,613 GER
1,504,000 Fuji Heavy Industries,
Ltd.(h)............. 8,792,171 JPN
10,200 Georg Fischer AG*..... 4,380,189 SWI
1,726,700 GKN PLC............... 8,716,927 BRI
351,600 Honda Motor Company,
Ltd. ............... 11,152,639 JPN
286,600 Koyo Seiko Company,
Ltd. ............... 5,534,656 JPN
878,800 Nissan Motor Company,
Ltd. ............... 9,598,916 JPN
150,042 PSA Peugeot Citroen... 9,336,481 FRA
740,300 Toyota Motor Corp. ... 38,748,663 JPN
104,788 Valeo SA*(h).......... 3,731,370 FRA
--------------
113,832,365
--------------
BANKS -- 20.8%
369,060 ABN AMRO Holding NV... 10,097,068 NET
621,002 Banco Bilbao Vizcaya
Argentaria SA....... 12,772,225 SPA
927,600 Banco Comercial
Portugues
SA -- Class R....... 2,633,912 POR
1,009,800 Banco Santander
Central Hispano
SA.................. 14,749,897 SPA
2,469,900 Barclays PLC.......... 28,066,299 BRI
312,600 BNP Paribas SA........ 29,927,354 FRA
266,800 Canadian Imperial Bank
of Commerce(h)...... 17,855,978 CDA
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
BANKS (CONTINUED)
499,382 Commerzbank AG........ $ 18,165,611 GER
571,500 Commonwealth Bank of
Australia........... 18,860,112 AUS
357,700 Credit Suisse Group... 20,012,826 SWI
169,200 Danske Bank A/S....... 6,440,906 DEN
19,400 Deutsche Bank AG...... 2,183,594 GER
83,901 Dexia................. 2,017,495 BEL
250,800 DNB NOR ASA........... 3,112,387 NOR
147,067 Erste Bank der
oesterreichischen
Sparkassen AG....... 8,276,666 AST
89,200 ForeningsSparbanken
AB.................. 2,342,557 SWE
367,000 Fortis................ 12,495,730 BEL
1,107,700 HBOS PLC.............. 19,254,573 BRI
79,160 KBC GROEP NV.......... 8,494,841 BEL
243,900 Laurentian Bank of
Canada(h)........... 6,382,083 CDA
2,574,600 Lloyds TSB Group PLC.. 25,304,451 BRI
70,200 National Australia
Bank, Ltd. ......... 1,834,143 AUS
231,600 National Bank of
Canada(h)........... 11,825,853 CDA
1,472,300 Nordea Bank AB........ 17,593,747 SWE
462,300 SanPaolo IMI SpA...... 8,177,746 ITA
1,331,000 Shinsei Bank, Ltd. ... 8,432,148 JPN
153,700 Societe Generale...... 22,607,848 FRA
348,927 Standard Chartered
PLC................. 8,517,113 BRI
104,100 The Sumitomo Trust and
Banking Company,
Ltd. ............... 1,137,059 JPN
260,950 UBS AG*............... 28,601,939 SWI
--------------
378,174,161
--------------
BROADCAST SERVICES/MEDIA -- 1.3%
588,800 Grupo Televisa SA
(ADR)............... 11,369,728 MEX
155,000 Rogers Communications,
Inc. -- Class B..... 6,235,824 CDA
143,800 Vivendi Universal
SA.................. 5,039,610 FRA
--------------
22,645,162
--------------
BUSINESS SERVICES AND SUPPLIES -- 0.4%
1,220,000 Marubeni Corp. ....... 6,502,971 JPN
--------------
CHEMICALS -- 1.6%
45,100 Akzo Nobel NV......... 2,432,006 NET
6,140 Arkema*............... 239,606 FRA
56,300 Ciba Specialty
Chemicals AG........ 3,138,395 SWI
</Table>
See notes to financial statements.
165
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
264,800 Methanex Corp.(h)..... $ 5,581,604 CDA
1,102,800 Mitsubishi Chemical
Holdings Corp. ..... 6,890,091 JPN
171,800 Nova Chemicals
Corp.(h)............ 4,934,075 CDA
597,500 Sumitomo Bakelite
Company, Ltd.*...... 5,607,436 JPN
--------------
28,823,213
--------------
COMPUTER EQUIPMENT, SOFTWARE AND SERVICES --1.7%
833,200 CGI Group, Inc.*...... 5,194,905 CDA
338,912 Logitech International
SA*................. 13,084,656 SWI
66,900 Open Text Corp.*...... 959,481 CDA
50,467 SAP AG................ 10,650,720 GER
--------------
29,889,762
--------------
CONSTRUCTION SERVICES AND SUPPLIES -- 2.3%
353,700 Barratt Developments
PLC................. 6,200,508 BRI
8,800 Cementos Portland
Valderrivas SA...... 913,395 SPA
15,600 Ciments Francais SA... 2,591,918 FRA
139,900 Compagnie de
Saint-Gobain........ 10,002,696 FRA
644,700 George Wimpey PLC..... 5,421,435 BRI
801,000 Hanson PLC............ 9,724,138 BRI
43,500 Lafarge SA............ 5,460,936 FRA
91,000 Maeda Road
Construction
Company, Ltd. ...... 694,189 JPN
--------------
41,009,215
--------------
CONSUMER GOODS AND SERVICES -- 2.4%
129,600 Electrolux AB --
Series B............ 1,872,845 SWE
129,600 Husqvarna AB -- Class
B*(h)............... 1,562,205 SWE
1,762 Japan Tobacco,
Inc. ............... 6,420,430 JPN
112,189 LVMH Moet Hennessy
Louis Vuitton SA.... 11,135,239 FRA
200,463 Reckitt Benckiser
PLC................. 7,488,063 BRI
254,614 Swatch Group AG....... 8,892,902 SWI
413,600 Swedish Match AB...... 6,666,565 SWE
--------------
44,038,249
--------------
DIVERSIFIED OPERATIONS AND SERVICES -- 0.8%
189,300 BASF AG............... 15,200,555 GER
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
ELECTRONICS -- 2.5%
1,357,000 Hon Hai Precision
Industry Company,
Ltd. ............... $ 8,382,364 TWN
209,000 Hosiden Corp.(h)...... 2,164,147 JPN
413,978 Koninklijke (Royal)
Philips Electronics
NV.................. 12,935,650 NET
22,222 Samsung Electronics
Company, Ltd. ...... 14,123,707 KOR
182,000 Sharp Corp. .......... 2,875,358 JPN
810,100 Toshiba Tec Corp. .... 4,013,690 JPN
--------------
44,494,916
--------------
ENGINEERING -- 0.4%
254,113 SNC-Lavalin Group,
Inc. ............... 6,688,023 CDA
--------------
FINANCIAL SERVICES -- 6.7%
535,600 Alliance & Leicester
PLC................. 11,548,432 BRI
983,100 Bradford & Bingley
PLC................. 8,448,916 BRI
87,800 Credit Saison Company,
Ltd. ............... 4,158,301 JPN
1,204,000 Daiwa Securities
Group, Inc. ........ 14,350,366 JPN
161,005 Euronext NV(h)........ 15,094,921 NET
188,070 Hana Financial Group,
Inc. ............... 8,841,025 KOR
226,900 Hitachi Capital
Corp. .............. 3,965,397 JPN
319,800 Irish Life & Permanent
PLC................. 7,608,148 IRE
204,376 Man Group PLC......... 9,629,710 BRI
51,800 Muenchener
Rueckversicherungs-
Gesellschaft AG..... 7,076,674 GER
261,000 Namco Bandhai
Holdings, Inc. ..... 3,966,087 JPN
20,800 Orix Corp. ........... 5,080,042 JPN
132,700 Promise Company,
Ltd. ............... 7,687,880 JPN
38,300 Sanyo Shinpan Finance
Company, Ltd. ...... 1,947,798 JPN
119,100 Sun Life Financial,
Inc.(h)............. 4,731,779 CDA
103,500 Takefuji Corp. ....... 6,168,036 JPN
--------------
120,303,512
--------------
FOOD AND BEVERAGE -- 2.0%
585,700 Asahi Breweries,
Ltd. ............... 8,224,571 JPN
134,340 Groupe Danone......... 17,071,069 FRA
1,537,300 Northern Foods PLC.... 2,260,006 BRI
695,700 Tate & Lyle PLC....... 7,789,688 BRI
--------------
35,345,334
--------------
</Table>
See notes to financial statements.
166
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
INSURANCE -- 5.3%
874,200 Aviva PLC............. $ 12,374,848 BRI
91,100 CNP Assurances........ 8,663,370 FRA
1,939,300 Friends Provident
PLC................. 6,410,249 BRI
516,000 ING Groep NV.......... 20,281,488 NET
1,003,300 Milano Assicurazioni
SpA*................ 7,321,060 ITA
2,215,400 Old Mutual PLC........ 6,687,892 BRI
1,467,700 Promina Group,
Ltd. ............... 6,129,441 AUS
5,458,900 Royal & Sun Alliance
Insurance Group
PLC................. 13,577,234 BRI
94,700 Swiss Re.............. 6,619,046 SWI
36,300 Zurich Financial
Services AG(h)...... 7,957,466 SWI
--------------
96,022,094
--------------
INTERNET SERVICES -- 0.9%
26,460 Rakuten, Inc. ........ 15,722,475 JPN
--------------
LEISURE AND RECREATION -- 1.7%
2,722,872 EMI Group PLC......... 15,294,222 BRI
274,042 Greek Organisation of
Football Prognostics
SA.................. 9,919,530 GRC
255,300 TUI AG(h)............. 5,058,127 GER
--------------
30,271,879
--------------
MACHINERY -- 1.4%
148,400 MAN AG................ 10,747,100 GER
182,400 Mori Seiki Company,
Ltd.(h)............. 3,944,775 JPN
15,900 Rieter Holding AG..... 6,112,633 SWI
59,300 Saurer AG............. 4,510,981 SWI
--------------
25,315,489
--------------
MANUFACTURING -- 0.3%
704,000 Kurabo Industries,
Ltd. ............... 2,233,065 JPN
725,000 Nippon Paint Company,
Ltd. ............... 3,433,677 JPN
--------------
5,666,742
--------------
MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES --0.4%
75,384 Essilor International
SA CIE Generale
D'Optique........... 7,588,247 FRA
--------------
METALS AND MINING -- 6.3%
367,346 BHP Billiton PLC...... 7,125,817 BRI
1,257,100 BlueScope Steel,
Ltd. ............... 7,426,501 AUS
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
METALS AND MINING (CONTINUED)
207,500 Cameco Corp.(h)....... $ 8,293,775 CDA
550,500 Companhia Vale do Rio
Doce (CVRD) (ADR)... 13,234,020 BRA
37,300 Norddeutsche Affinerie
AG.................. 913,142 GER
331,500 Rautaruukki Oyj....... 10,015,000 FIN
78,100 Russel Metals,
Inc. ............... 1,812,049 CDA
58,000 Salzgitter AG......... 4,923,652 GER
308,300 Sims Group, Ltd. ..... 4,581,955 AUS
224,200 Tenaris SA (ADR)...... 9,077,858 LUX
341,100 ThyssenKrupp AG....... 11,679,321 GER
15,694 Vallourec SA(h)....... 18,869,005 FRA
41,400 voestalpine AG........ 6,290,777 AST
254,400 Xstrata PLC........... 9,643,948 BRI
--------------
113,886,820
--------------
OFFICE EQUIPMENT -- 0.5%
315,000 Ricoh Company, Ltd. .. 6,179,439 JPN
3,314,500 TPV Technology,
Ltd. ............... 3,136,832 HNG
--------------
9,316,271
--------------
OIL, COAL AND GAS -- 8.1%
1,176,600 BP PLC................ 13,718,222 BRI
988,200 Cosmo Oil Company,
Ltd. ............... 4,447,073 JPN
635,400 Eni SpA............... 18,716,674 ITA
1,702,000 Nippon Oil Corp. ..... 12,433,345 JPN
227,500 Norsk Hydro ASA....... 6,030,217 NOR
2,114,000 Osaka Gas Company,
Ltd. ............... 6,797,903 JPN
287,000 Repsol YPF SA......... 8,219,086 SPA
887,700 Royal Dutch Shell
PLC -- Class B...... 31,041,423 BRI
406,000 Statoil ASA........... 11,511,671 NOR
137,800 Suncor Energy,
Inc. ............... 11,151,888 CDA
353,738 Total SA.............. 23,278,480 FRA
--------------
147,345,982
--------------
PAPER AND FOREST PRODUCTS -- 0.8%
660,000 Hokuetsu Paper Mills,
Ltd. ............... 3,852,499 JPN
301,800 Norbord, Inc.(h)...... 2,541,360 CDA
1,263,000 Oji Paper Company,
Ltd.(h)............. 7,184,664 JPN
--------------
13,578,523
--------------
</Table>
See notes to financial statements.
167
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 4.9%
265,798 AstraZeneca PLC....... $ 16,043,006 BRI
224,900 Biovail Corp. ........ 5,250,286 CDA
257,300 Daiichi Sanyko
Company, Ltd. ...... 7,082,270 JPN
197,100 Eisai Company,
Ltd. ............... 8,869,844 JPN
414,600 Elan Corp. PLC
(ADR)*(h)........... 6,923,820 IRE
173,800 GlaxoSmithKline PLC... 4,856,217 BRI
75,043 Roche Holding AG...... 12,405,374 SWI
213,260 Sanofi-Aventis........ 20,812,367 FRA
476,000 Tanabe Seiyaku
Company, Ltd.*...... 5,856,414 JPN
--------------
88,099,598
--------------
PRINTING AND PUBLISHING -- 0.5%
126,000 Quebecor World,
Inc.(h)............. 1,399,624 CDA
335,018 Reed Elsevier PLC..... 3,382,553 BRI
439,000 Toppan Printing
Company, Ltd. ...... 4,963,876 JPN
--------------
9,746,053
--------------
REAL ESTATE DEVELOPMENT AND SERVICES -- 1.6%
290,287 British Land Company
PLC................. 6,779,768 BRI
3,720,000 Shun Tak Holdings,
Ltd. ............... 4,861,775 HNG
345,000 Sumitomo Realty &
Development Company,
Ltd. ............... 8,501,398 JPN
52,111 Unibail............... 9,084,745 FRA
--------------
29,227,686
--------------
RETAIL -- 2.4%
673,071 Boots Group PLC....... 9,577,527 BRI
2,814,786 Carphone Warehouse
PLC................. 16,526,200 BRI
1,648,617 Debenhams PLC*........ 5,731,410 BRI
1,912,500 Dixons Group PLC...... 6,754,896 BRI
590,900 JJB Sports PLC........ 1,958,651 BRI
10,300 Valora Holding AG..... 2,232,629 SWI
--------------
42,781,313
--------------
RETAIL: RESTAURANTS -- 0.2%
112,200 Plenus Company,
Ltd. ............... 3,823,663 JPN
--------------
RETAIL: SUPERMARKETS -- 0.0%
143,110 Tesco PLC............. 883,894 BRI
--------------
</Table>
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
RUBBER PRODUCTS -- 0.4%
257,400 JSR Corp. ............ $ 6,500,227 JPN
--------------
SEMICONDUCTORS -- 1.7%
5,886,026 ARM Holdings PLC...... 12,326,627 BRI
458,547 ASML Holding NV*...... 9,290,232 NET
132,200 Tokyo Electron,
Ltd. ............... 9,241,524 JPN
--------------
30,858,383
--------------
TELECOMMUNICATIONS EQUIPMENT AND SERVICES --4.9%
347,500 America Movil SA de
CV -- Series L
(ADR)............... 11,557,850 MEX
4,355,600 BT Group PLC.......... 19,270,093 BRI
277,800 Deutsche Telekom AG... 4,469,927 GER
159,600 Elcoteq Network
Corp. -- Class A.... 3,215,148 FIN
1,765,000 MobileOne, Ltd. ...... 2,308,210 SIN
4,200 Nippon Telegraph and
Telephone Corp. .... 20,588,955 JPN
12,700 NTT DoCoMo, Inc. ..... 18,643,831 JPN
20,800 Swisscom AG........... 6,847,982 SWI
395,600 VTech Holdings,
Ltd. ............... 2,062,990 BER
--------------
88,964,986
--------------
TOYS -- 0.8%
82,100 Nintendo Company,
Ltd. ............... 13,774,205 JPN
--------------
TRANSPORTATION -- 0.4%
2,535,000 Neptune Orient Lines,
Ltd. ............... 2,898,790 SIN
1,367,100 Orient Overseas
International,
Ltd. ............... 4,955,238 BER
--------------
7,854,028
--------------
UTILITIES -- 3.8%
95,900 ATCO, Ltd. -- Class
I................... 3,144,262 CDA
118,900 Chubu Electric Power
Company, Inc. ...... 3,210,425 JPN
500,900 Endesa SA............. 17,419,984 SPA
1,130,300 Energias de Portugal
SA.................. 4,438,330 POR
314,200 Hokkaido Electric
Power Company,
Inc. ............... 7,454,151 JPN
248,000 Kyushu Electric Power
Company, Inc. ...... 5,764,418 JPN
222,700 Shikoku Electric Power
Company, Inc. ...... 4,991,485 JPN
954,800 Toho Gas Company,
Ltd. ............... 4,163,275 JPN
</Table>
See notes to financial statements.
168
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
SHARES VALUE COUNTRY
------ -------------- -------
COMMON STOCKS (CONTINUED)
UTILITIES (CONTINUED)
12,535 Union Fenosa SA....... $ 485,155 SPA
343,546 Veolia Environment.... 17,756,660 FRA
--------------
68,828,145
--------------
TOTAL COMMON STOCKS
(Cost
$1,510,357,086)..... 1,791,002,115
--------------
RIGHTS -- 0.0%
AUTOMOBILES/MOTOR VEHICLES AND AUTOMOTIVE
EQUIPMENT
390,900 TI Automotive, Ltd. --
Class A*(n) (Cost
$0)................. -- BRI
--------------
<Caption>
PRINCIPAL
---------
SECURITIES LENDING COLLATERAL -- 7.8%
$141,231,821 Securities Lending
Collateral
Investment (Note 4)
(Cost
$141,231,821)....... 141,231,821 USA
--------------
TOTAL SECURITIES (Cost
$1,651,588,907)..... 1,932,233,936
--------------
REPURCHASE AGREEMENTS -- 0.6%
10,515,844 With Investors Bank
and Trust, dated
06/30/06, 4.76%, due
07/03/06, repurchase
proceeds at maturity
$10,520,016
(Collateralized by
Fannie Mae, 5.72%,
due 06/25/42, with a
value of $6,697,636
and various Small
Business
Administrations,
7.79% -- 8.63%, due
02/25/16 -- 02/25/29,
with a total value
of $4,344,000)
(Cost
$10,515,844)........ 10,515,844 USA
--------------
Total
Investments -- 107.5%
(Cost
$1,662,104,751)..... 1,942,749,780
Liabilities less other
assets -- (7.5)%.... (135,559,351)
--------------
NET ASSETS --100.0%... $1,807,190,429
==============
</Table>
The aggregate cost of securities for federal income tax purposes at June 30,
2006 is $1,662,104,751.
The following amounts are based on cost for federal income tax purposes:
<Table>
Gross unrealized appreciation.......... $317,081,579
Gross unrealized depreciation.......... (36,436,550)
------------
Net unrealized appreciation............ $280,645,029
============
</Table>
- ---------------
See summary of footnotes and abbreviations to portfolios.
<Table>
<Caption>
PERCENT OF TOTAL
COUNTRY COMPOSITION INVESTMENTS AT VALUE
- ------------------- --------------------
Australia (AUS)...................... 2.40%
Austria (AST)........................ 0.75
Belgium (BEL)........................ 1.19
Bermuda (BER)........................ 0.52
Brazil (BRA)......................... 0.68
Canada (CDA)......................... 5.35
Cayman Islands (CAY)................. 0.39
Denmark (DEN)........................ 0.33
Finland (FIN)........................ 0.68
France (FRA)......................... 11.49
Germany (GER)........................ 5.31
Greece (GRC)......................... 0.51
Hong Kong (HNG)...................... 0.25
Ireland (IRE)........................ 1.08
Italy (ITA).......................... 2.02
Japan (JPN).......................... 19.33
Luxembourg (LUX)..................... 0.47
Mexico (MEX)......................... 1.18
Norway (NOR)......................... 1.06
Portugal (POR)....................... 0.36
Singapore (SIN)...................... 0.27
South Korea (KOR).................... 1.18
Spain (SPA).......................... 2.81
Sweden (SWE)......................... 1.55
Switzerland (SWI).................... 7.10
Taiwan (TWN)......................... 0.43
The Netherlands (NET)................ 3.61
United Kingdom (BRI)................. 19.89
United States (USA).................. 7.81
------
TOTAL PERCENTAGE..................... 100.00%
======
</Table>
See notes to financial statements.
169
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO OF INVESTMENTS
SUMMARY OF FOOTNOTES AND ABBREVIATIONS TO PORTFOLIOS
JUNE 30, 2006
(UNAUDITED)
Footnotes:
* Non-income producing security.
144A Security is exempt from registration under Rule 144A of the Securities Act
of 1933. It may be resold in a transaction exempt from registration,
normally to qualified institutional buyers.
(a) Variable rate security. The rate shown was in effect at June 30, 2006.
(b) Quarterly reset provision. The rate shown was in effect at June 30, 2006.
(c) Monthly reset provision. The rate shown was in effect at June 30, 2006.
(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 restricted and/or illiquid security, as defined by the
Securities Act of 1933.
(g) Represents a zero coupon bond which will convert to an interest bearing
security at a later date.
(h) All or part of this security is on loan.
(i) Bond is in default.
(j) Variable rate security. Interest rate is based on the credit rating of the
issuer. The rate shown was in effect at June 30, 2006.
(k) Floating rate security. The interest rate is subject to change
semi-annually based on the London Interbank Offered Rate ("LIBOR"). The
rate shown was in effect at June 30, 2006.
(l) PIK ("Payment-In-Kind") bond. These bonds pay interest in the form of
additional bonds.
(m) Security was in bankruptcy reorganization at the time of maturity.
Recovery will be determined at the conclusion of the bankruptcy.
(n) Fair valued at June 30, 2006.
Following are the market values (as determined by fair valuation) and the
corresponding percentage of Portfolio net assets of all fair valued
securities at June 30, 2006.
<Table>
<Caption>
SERIES MARKET VALUE PERCENTAGE
- ------ ------------ ----------
High Quality Bond............. $6,633,191 0.81%
High Yield Bond............... 2,130,728 0.49%
</Table>
(o) Principal amount shown for this debt security is denominated in Australian
Dollars.
(p) Principal amount shown for this debt security is denominated in Canadian
Dollars.
(q) Principal amount shown for this debt security is denominated in Euros.
(r) Principal amount shown for this debt security is denominated in Japanese
Yen.
(s) Principal amount shown for this debt security is denominated in Mexican
Pesos.
(t) Principal amount shown for this debt security is denominated in New
Zealand Dollars.
(u) 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.
- 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.
- Footnotes and abbreviations may or may not appear in each portfolio of
investments.
See notes to financial statements.
170
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION
JUNE 30, 2006
(UNAUDITED)
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
MONEY MARKET SERIES
Commercial Paper................................ 41.8%
Yankee Certificates of Deposit.................. 19.4
Short-Term Corporate Notes...................... 14.0
Short-Term US Government Agency Securities...... 11.7
Repurchase Agreements/Cash Equivalents.......... 11.4
Medium Term Corporate Notes..................... 1.5
Other assets less liabilities................... 0.2
-----
100.0%
=====
HIGH QUALITY BOND SERIES
Corporate Bonds and Notes....................... 74.2%
US Government Agency Securities................. 21.4
Securities Lending Collateral................... 3.3
US Treasury Securities.......................... 2.4
Municipal Bonds................................. 0.8
Foreign Government Obligations.................. 0.5
Repurchase Agreements/Cash Equivalents.......... 0.1
Liabilities less other assets................... (2.7)
-----
100.0%
=====
INTERMEDIATE GOVERNMENT BOND SERIES
US Treasury Securities.......................... 68.6%
Securities Lending Collateral................... 31.6
Corporate Bonds and Notes....................... 18.8
US Government Agency Securities................. 9.8
Repurchase Agreements/Cash Equivalents.......... 0.6
Liabilities less other assets................... (29.4)
-----
100.0%
=====
CORE BOND SERIES
Corporate Bonds and Notes....................... 57.9%
US Government Agency Securities................. 38.2
US Treasury Securities.......................... 12.1
Repurchase Agreements/Cash Equivalents.......... 3.0
Foreign Government Obligations.................. 1.9
Securities Lending Collateral................... 1.5
Short-Term Corporate Notes...................... 0.4
Call Options Written............................ (0.0)*
Put Options Written............................. (0.0)*
Securities Sold Short........................... (4.3)
Liabilities less other assets................... (10.7)
-----
100.0%
=====
TOTAL RETURN BOND SERIES
Corporate Bonds and Notes....................... 45.6%
US Government Agency Securities................. 43.3
US Treasury Securities.......................... 17.3
Repurchase Agreements/Cash Equivalents.......... 19.1
Foreign Government Obligations.................. 4.3
Municipal Bonds................................. 1.1
Short-Term US Government Agency Securities...... 0.4
Convertible Preferred Stocks.................... 0.3
Call Options Written............................ (0.0)*
Put Options Written............................. (0.0)*
Liabilities less other assets................... (31.4)
-----
100.0%
=====
BALANCED SERIES
Common Stocks................................... 58.7%
Corporate Bonds and Notes....................... 20.6
US Government Agency Securities................. 19.4
US Treasury Securities.......................... 8.5
Securities Lending Collateral................... 7.1
Repurchase Agreements/Cash Equivalents.......... 2.3
Foreign Government Obligations.................. 2.1
Municipal Bonds................................. 0.5
Short-Term US Government Agency Securities...... 0.2
Convertible Preferred Stocks.................... 0.1
Call Options Written............................ (0.0)*
Put Options Written............................. (0.0)*
Liabilities less other assets................... (19.5)
-----
100.0%
=====
VALUE & INCOME SERIES
Common Stocks................................... 98.3%
Securities Lending Collateral................... 8.9
Repurchase Agreements/Cash Equivalents.......... 0.9
Liabilities less other assets................... (8.1)
-----
100.0%
=====
VALUE SERIES
Common Stocks................................... 102.2%
Liabilities less other assets................... (2.2)
-----
100.0%
=====
GROWTH & INCOME SERIES
Common Stocks................................... 98.7%
Securities Lending Collateral................... 9.3
Repurchase Agreements/Cash Equivalents.......... 0.8
Liabilities less other assets................... (8.8)
-----
100.0%
=====
</Table>
See notes to financial statements.
171
DIVERSIFIED INVESTORS PORTFOLIOS
PORTFOLIO COMPOSITION (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
The following charts summarize the portfolio composition of each Series by asset
type.
<Table>
EQUITY GROWTH SERIES
Common Stocks................................... 96.2%
Securities Lending Collateral................... 8.5
Repurchase Agreements/Cash Equivalents.......... 1.9
Liabilities less other assets................... (6.6)
-----
100.0%
=====
MID-CAP VALUE SERIES
Common Stocks................................... 96.6%
Securities Lending Collateral................... 12.3
Repurchase Agreements/Cash Equivalents.......... 2.9
Liabilities less other assets................... (11.8)
-----
100.0%
=====
MID-CAP GROWTH SERIES
Common Stock.................................... 97.7%
Securities Lending Collateral................... 14.6
Repurchase Agreements/Cash Equivalents.......... 0.8
Liabilities less other assets................... (13.1)
-----
100.0%
=====
SMALL-CAP VALUE SERIES
Common Stocks................................... 97.4%
Securities Lending Collateral................... 21.6
Repurchase Agreements/Cash Equivalents.......... 2.7
Liabilities less other assets................... (21.7)
-----
100.0%
=====
SPECIAL EQUITY SERIES
Common Stocks................................... 96.7%
Securities Lending Collateral................... 20.8
Repurchase Agreements/Cash Equivalents.......... 3.5
Short-Term US Treasury Securities............... 0.1
Liabilities less other assets................... (21.1)
-----
100.0%
=====
SMALL-CAP GROWTH SERIES
Common Stocks................................... 94.7%
Securities Lending Collateral................... 13.0
Repurchase Agreements/Cash Equivalents.......... 5.6
Liabilities less other assets................... (13.3)
-----
100.0%
=====
AGGRESSIVE EQUITY SERIES
Common Stocks................................... 98.8%
Securities Lending Collateral................... 9.7
Repurchase Agreements/Cash Equivalents.......... 3.0
Liabilities less other assets................... (11.5)
-----
100.0%
=====
HIGH YIELD BOND SERIES
Corporate Bonds and Notes....................... 91.8%
Repurchase Agreements/Cash Equivalents.......... 4.5
Loan Participations............................. 1.5
Convertible Preferred Stocks.................... 1.1
Common Stocks................................... 0.9
Convertible Bonds............................... 0.6
Warrants........................................ 0.1
Liabilities less other assets................... (0.5)
-----
100.0%
=====
INTERNATIONAL EQUITY SERIES
Common Stocks................................... 99.1%
Securities Lending Collateral................... 7.8
Repurchase Agreements/Cash Equivalents.......... 0.6
Rights.......................................... 0.0*
Liabilities less other assets................... (7.5)
-----
100.0%
=====
</Table>
- ---------------
* Amount rounds to less than 0.05%.
See notes to financial statements.
172
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
Diversified Investors Portfolios (the "Series Portfolio"), a series trust
organized on September 1, 1993, under the laws of the State of New York, is
composed of eighteen different series that are, in effect, separate investment
funds: the Money Market Portfolio, the High Quality Bond Portfolio, the
Intermediate Government Bond Portfolio, the Core Bond Portfolio, the Total
Return Bond Portfolio, the Balanced Portfolio, the Value & Income Portfolio, the
Value Portfolio, the Growth & Income Portfolio, the Equity Growth Portfolio, the
Mid-Cap Value Portfolio, the Mid-Cap Growth Portfolio, the Small-Cap Value
Portfolio, the Special Equity Portfolio, the Small-Cap Growth Portfolio, the
Aggressive Equity Portfolio, the High Yield Bond Portfolio, and the
International Equity Portfolio (each a "Series"). The Declaration of Trust
permits the Board of Trustees to issue an unlimited number of beneficial
interests in each Series. Investors in a Series (e.g., investment companies,
insurance company separate accounts and common and commingled trust funds) will
each be liable for all obligations of that Series (and of no other Series).
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 broadly 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.
173
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
1. ORGANIZATION AND BUSINESS (CONTINUED)
Small-Cap Growth -- The Series' goal is to provide a high total investment
return through investments primarily in a diversified portfolio of common
stocks.
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
174
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
securities at market value and may claim any resulting loss against the seller.
However, in the event of default or bankruptcy by the seller, realization and/or
retention of the collateral may be subject to legal proceedings.
C. FOREIGN CURRENCY TRANSLATION:
The accounting records of each Series are maintained in 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 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 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 or spot contract is extinguished, through delivery or by
entering into another offsetting foreign currency forward 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.
As of June 30, 2006, the Core Bond Series, Total Return Bond Series, Balanced
Series, and International Equity Series each had outstanding foreign currency
forward contracts as listed in Note 10.
E. WRITTEN OPTIONS:
Each Series, with the exception of the Money Market Series, may write 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
175
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
risk on written options, as the counterparty has already performed its
obligation by paying the premium at the 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 period ended June 30, 2006 were as
follows:
<Table>
<Caption>
CORE BOND TOTAL RETURN BOND BALANCED
--------------------- -------------------- ---------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS CONTRACTS PREMIUMS
--------- --------- --------- -------- --------- ---------
Written call options outstanding
at December 31, 2005........... 172 $ 98,503 -- $ -- -- $ --
Call options written............. 364 176,543 158 52,705 294 106,324
Call options terminated in
closing purchase
transactions................... (367) (190,769) (142) (49,332) (265) (100,263)
Call options expired............. -- -- -- -- -- --
---- --------- ---- -------- ---- ---------
Written call options outstanding
at June 30, 2006............... 169 $ 84,277 16 $ 3,373 29 $ 6,061
==== ========= ==== ======== ==== =========
Written put options outstanding
at December 31, 2005........... 172 $ 87,812 -- $ -- -- $ --
Put options written.............. 364 188,762 109 28,440 257 65,528
Put options terminated in closing
purchase transactions.......... (367) (169,297) (93) (24,145) (229) (58,012)
Put options expired.............. -- -- -- -- -- --
---- --------- ---- -------- ---- ---------
Written put options outstanding
at June 30, 2006............... 169 $ 107,277 16 $ 4,295 28 $ 7,516
==== ========= ==== ======== ==== =========
</Table>
F. FUTURES CONTRACTS:
Each Series, with the exception of the Money Market Series, may enter into
futures contracts 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.
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
176
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the Series to unlimited risk of loss. The Series may enter into futures
contracts on exchanges or boards of trade. In that case, the exchange or board
of trade acts as the counterparty to each futures transaction; therefore, the
Series' credit risk is limited to failure of the exchange or board of trade.
Open futures contracts as of June 30, 2006:
<Table>
<Caption>
NET UNREALIZED
NUMBER OF EXPIRATION VALUE AS OF APPRECIATION/
SERIES CONTRACTS DESCRIPTION DATE JUNE 30, 2006 (DEPRECIATION)
- ------ ----------- -------------------------------- -------------- ------------- --------------
Core Bond............ 1,002 Long US Treasury Notes 10 Year Future September 2006 $105,069,094 $ (210,021)
1,997 Long US Long Bond Future September 2006 212,992,531 (1,553,930)
980 Short US Treasury Note 5 Year Future September 2006 101,338,125 340,115
-----------
$(1,423,836)
===========
Total Return Bond.... 135 Long US Treasury Note 5 Year Future September 2006 $ 13,959,844 $ (67,512)
22 Long US Treasury Note 2 Year Future September 2006 4,461,188 (15,236)
2 Long US Long Bond September 2006 213,313 732
33 Short US 10 Year Note Future September 2006 3,460,359 21,804
-----------
$ (60,212)
===========
Balanced............. 1 Long Euro -- Bobl Future September 2006 $ 236,050 $ (1,580)
17 Long S&P 500 Future September 2006 1,087,575 (1,522)
138 Long US Treasury Notes 5 Year Future September 2006 14,270,063 (67,050)
44 Long US Treasury Note 2 Year Future September 2006 8,922,375 (30,471)
6 Long US Long Bond Future September 2006 639,938 (468)
88 Short US Treasury Note 10 Year Future September 2006 9,227,625 52,739
-----------
$ (48,352)
===========
Growth & Income...... 17 Long S&P 500 Future September 2006 $ 1,087,575 $ 15,903
===========
Special Equity....... 24 Long Russell 2000 Future September 2006 $ 8,778,000 $ 493,543
===========
</Table>
The Core Bond Series and Special Equity Series has 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 $430,600 of cash and the Growth & Income Series has segregated
$560,000 of cash as collateral for their respective open futures contracts.
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
177
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
security because losses from short sales may be unlimited, whereas losses from
purchases can not 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 maintains 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 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 June 30, 2006, there were no
securities held in any Series that
178
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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................................................ 8.50%
High Quality Bond........................................... 10.05
Intermediate Government Bond................................ 25.30
Core Bond................................................... 8.24
Balanced.................................................... 29.86
Value & Income.............................................. 20.81
Growth & Income............................................. 23.82
Equity Growth............................................... 16.23
Mid-Cap Value............................................... 3.65
Mid-Cap Growth.............................................. 0.36
Small-Cap Value............................................. 0.07
Special Equity.............................................. 26.15
Small-Cap Growth............................................ 0.01
Aggressive Equity........................................... 23.02
High Yield Bond............................................. 6.55
International Equity........................................ 12.49
</Table>
The Advisor manages the assets of each Series of the Series Portfolio pursuant
to an Investment Advisory Agreement with the Series Portfolio. Subject to such
further policies as the Board of Trustees may determine, the Advisor provides
general investment advice to each Series. For its services, the Advisor receives
from each Series fees, accrued daily and payable monthly, at an annual rate
equal to the percentages specified in the table below of the corresponding
Series' average daily net assets. The Advisor is currently waiving a portion of
its investment advisory fees for certain Series.
For each Series, the Advisor has entered into Investment Subadvisory Agreements
with the subadvisors listed in the table below (each a "Subadvisor",
collectively the "Subadvisors"). It is the responsibility of each Subadvisor to
make the day-to-day investment decisions of the Series and to place the purchase
and sales orders for securities transactions of such Series, subject in all
cases to the general supervision of the Advisor.
179
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
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..... Allegiance Investment Management, LLC 0.35(1) (3)
Core Bond........................ BlackRock Advisors, Inc. 0.35 (4)
Total Return Bond................ Western Asset Management Company 0.35(1) (5)
Balanced......................... (6) 0.45(1) (7)
Value & Income................... (8) 0.45 (9)
Value............................ Hotchkis and Wiley Capital Management, LLC 0.50(1) (10)
Growth & Income.................. (11) 0.60(1) (12)
Equity Growth.................... (13) 0.62 (14)
Mid-Cap Value.................... (15) 0.67(1) (16)
Mid-Cap Growth................... Columbus Circle Investors 0.72(1) (17)
Small-Cap Value.................. Earnest Partners, LLC 0.82(1) 0.50
Special Equity................... (18) 0.80(1) (19)
Small-Cap Growth................. Trusco Capital Management, Inc. 0.87(1) (20)
Aggressive Equity................ Turner Investment Partners, Inc. 0.77(1) (21)
High Yield Bond.................. Eaton Vance Management 0.55 (22)
International Equity............. (23) 0.75 (24)
</Table>
- ---------------
(1) The Advisor is currently voluntarily waiving a portion of its fee.
(2) 0.20% on the first $100,000,000 in average daily net assets, 0.15% on the
next $100,000,000 in average daily net assets, 0.10% on the next
$100,000,000 in average daily net assets and 0.05% on all average daily net
assets in excess of $300,000,000.
(3) 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. Effective January 22, 2006 the Intermediate Government Bond
Series terminated Stephens Capital Management as subadvisor. For the period
January 1, 2006 to January 22, 2006, Stephens Capital Management received
0.10% on all average daily net assets.
(4) 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.
(5) 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.
(6) The Balanced Series has three subadvisors: Goldman Sachs Asset Management,
LP, Western Asset Management Company and Western Asset Management Company,
Ltd. which manages equity, fixed income and foreign fixed income
securities, respectively.
180
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(7) 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. 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.
(8) The Value & Income Series has two subadvisors: TCW Investment Management
Company and AllianceBernstein LP.
During the period ended June 30, 2006, the Value & Income Series executed
$37,957,845 of purchase transactions and $33,766,151 of sales transactions
through Sanford C. Bernstein & Company, LLC, an affiliate of Alliance
Capital Management, LP. Commissions paid for such transactions amounted to
$57,739.
(9) 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.
(10) 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.
(11) The Growth & Income Series has three subadvisors: Ark Asset Management,
Inc., Goldman Sachs Asset Management, LP and Aronson + Johnson + Ortiz, LP.
During the period ended June 30, 2006, the Growth & Income Series executed
$4,965,513 of purchase transactions and $4,923,634 of sales transactions
through Goldman Sachs & Company, an affiliate of Goldman Sachs Asset
Management, LP. Commissions paid for such transactions amounted to $5,731.
(12) 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.
(13) The Equity Growth Series has two subadvisors: Ark Asset Management Company,
Inc. and Marsico Capital Management, LLC.
During the period ended June 30, 2006, the Equity Growth Series executed
$705,472 of purchase transactions and $3,770,704 of sales transactions
through Bank of America Securities, LLC, an affiliate of Marsico Capital
Management, LLC. Commissions paid for such transactions amounted to
$10,027.
(14) 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
181
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
$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.
(15) The Mid-Cap Value Series has two subadvisors: LSV Asset Management, and
Cramer, Rosenthal, McGlynn, LLC.
(16) 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. 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.
(17) 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.
(18) The Special Equity Series has five subadvisors: EARNEST Partners, LLC,
Wellington Management Company, LLP, RS Investment Management Co, LLC,
Mazama Capital Management, LLC, and INVESCO Institutional (NA), Inc.
("INVESCO").
(19) 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 Co, LLC 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. For the portion of the
portfolio invested in accordance with a small-cap core strategy, INVESCO
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 June 13, 2006 to June 30,
2006, for the portion of the portfolio invested in accordance with a
small-cap value strategy, INVESCO received 0.41% on the first $100,000,000
in average daily net assets, 0.34% on the next $100,000,000 in average
daily net assets, 0.22% on the next $100,000,000 and 0.20% on all average
daily net assets in excess of $300,000,000. Mazama Capital Management, LLC
received 0.55% in average daily net assets.
(20) 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.
(21) 0.35% on the first $100,000,000 in average daily net assets, 0.30% on the
next $200,000,000 in average daily net assets, 0.25% on the next
$200,000,000 in average daily net assets and 0.20% on all average daily net
assets in excess of $500,000,000.
(22) 0.35% on the first $20,000,000 in average daily net assets, 0.25% on the
next $20,000,000 in average daily net assets, 0.20% on the next $85,000,000
in average daily net assets and 0.15% on all average daily net assets in
excess of $125,000,000.
(23) The International Equity Series has two subadvisors: LSV Asset Management
and Wellington Management Company, LLP.
(24) LSV Asset Management received 0.45% on the first $100,000,000 in average
daily net assets, 0.40% on the next $100,000,000 in average daily net
assets, 0.37% on the next $400,000,000 in average daily net assets, 0.35%
on the next $200,000,000 in average daily net assets and 0.33% on all
average daily net assets in
182
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
excess of $800,000,000. Wellington Management Company, LLP received 0.375% on
the first $400,000,000 in average daily net assets, 0.35% on the next
$600,000,000 in average daily net assets and 0.325% on all average daily net
assets in excess of $1,000,000,000.
For the period ended June 30, 2006, 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 period ended June 30, 2006 amounted to $69,348.
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 the 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.
183
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. SECURITIES LENDING (CONTINUED)
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 interest income on short term investments purchased
with cash collateral received.
At June 30, 2006, the Series loaned securities having market values as follows:
<Table>
<Caption>
CASH COLLATERAL
SERIES MARKET VALUE RECEIVED
- ------ ------------ ---------------
High Quality Bond........................................... $ 26,730,205 $ 27,278,625
Intermediate Government Bond................................ 50,804,215 52,114,730
Core Bond................................................... 29,735,373 30,335,855
Balanced.................................................... 26,134,604 26,894,601
Value & Income.............................................. 265,337,590 275,454,038
Growth & Income............................................. 101,151,314 104,216,777
Equity Growth............................................... 202,552,919 207,745,519
Mid-Cap Value............................................... 92,303,001 96,209,905
Mid-Cap Growth.............................................. 43,862,716 45,722,857
Small-Cap Value............................................. 50,613,437 52,391,519
Special Equity.............................................. 246,338,505 256,811,854
Small-Cap Growth............................................ 19,069,579 19,876,959
Aggressive Equity........................................... 33,607,409 35,186,388
International Equity........................................ 134,504,988 141,231,821
</Table>
184
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185
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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
------------ ------------ ----------- ----------- ------------ ------------
ABN Amro Bank NV Chicago, Floating Rate
CD, 5.31%(1), 11/21/06................... $ 483,796 $ 924,274 $ 538,018 $ 476,986 $ 4,885,280 $ 1,848,324
Bank of America NA, Floating Rate Note,
5.31%(1), 08/10/06....................... 967,593 1,848,548 1,076,035 953,972 9,770,559 3,696,646
Bank of America NA, Floating Rate Note,
5.31%(1), 03/08/07....................... 967,593 1,848,548 1,076,035 953,972 9,770,559 3,696,646
Bank of Montreal, Time Deposit, 5.29%,
08/03/06................................. 967,593 1,848,548 1,076,035 953,972 9,770,559 3,696,646
Bank of Nova Scotia, Time Deposit, 5.29%,
08/08/06................................. 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
Barclays, Time Deposit, 5.15%, 08/01/06... 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
Barclays Global Investors Money Market
Fund -- Institutional Shares............. 580,556 1,109,129 645,621 572,383 5,862,336 2,217,988
Branch Banking & Trust, Time Deposit,
5.25%, 07/26/06.......................... 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
Calyon, Time Deposit, 5.30%, 08/08/06..... 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
Canadian Imperial Bank of Commerce, Time
Deposit, 5.31%, 07/31/06................. 677,315 1,293,984 753,225 667,780 6,839,393 2,587,653
Credit Suisse First Boston Corp., Time
Deposit, 5.28%, 07/24/06................. 387,037 739,419 430,415 381,589 3,908,224 1,478,659
Deutsche Bank, Time Deposit, 5.25%,
07/05/06................................. 580,556 1,109,129 645,621 572,383 5,862,336 2,217,988
Dexia Group, Time Deposit, 5.30%,
08/09/06................................. 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
First Tennessee National Corp., Time
Deposit, 5.27%, 07/24/06................. 774,074 1,478,839 860,828 763,177 7,816,447 2,957,317
Fortis Bank, Time Deposit, 5.25%,
07/03/06................................. 387,037 739,419 430,414 381,589 3,908,224 1,478,659
Fortis Bank, Time Deposit, 5.09%,
07/05/06................................. 483,797 924,274 538,018 476,986 4,885,280 1,848,324
Fortis Bank, Time Deposit, 5.25%,
07/06/06................................. 1,451,390 2,772,822 1,614,053 1,430,957 14,655,839 5,544,970
Harris NA, Time Deposit, 5.08%,
07/05/06................................. 774,074 1,478,839 860,828 763,177 7,816,447 2,957,317
HBOS Treasury Services NY, Floating Rate
CD, 5.11%(1), 07/10/06................... 483,796 924,274 538,018 476,986 4,885,280 1,848,323
Merrimac Cash Fund-Premium Class.......... 154,815 295,768 172,166 152,635 1,563,289 591,463
National Australia Bank, Time Deposit,
5.29%, 07/03/06.......................... 1,391,022 2,657,493 1,546,920 1,371,440 14,046,261 5,314,339
Skandinaviska Enskilda Banken AB (SEB),
Time Deposit, 5.13%, 07/12/06............ 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
Societe Generale, Time Deposit, 5.27%,
07/17/06................................. 1,161,112 2,218,258 1,291,242 1,144,766 11,724,671 4,435,976
Standard Chartered Bank, Time Deposit,
5.26%, 07/07/06.......................... 387,037 739,419 430,415 381,589 3,908,224 1,478,659
Svenska Handlesbanken, Time Deposit,
5.29%, 07/03/06.......................... 768,886 1,468,926 855,058 758,062 7,764,056 2,937,495
The Bank of the West, Time Deposit, 5.25%,
08/07/06................................. 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
The Bear Stearns Companies, Inc., Floating
Rate Note, 5.45%(1), 09/07/06............ 193,519 369,710 215,207 190,794 1,954,112 739,329
Toronto Dominion Bank, Time Deposit,
5.30%, 07/26/06.......................... 483,797 924,274 538,018 476,986 4,885,280 1,848,324
Toronto Dominion Bank, Time Deposit,
5.30%, 07/31/06.......................... 483,797 924,274 538,018 476,986 4,885,280 1,848,324
UBS AG Stamford, Connecticut, Time
Deposit, 5.25%, 07/21/06................. 483,797 924,274 538,018 476,986 4,885,280 1,848,324
UBS AG Stamford, Connecticut, Time
Deposit, 5.25%, 08/04/06................. 1,451,390 2,772,823 1,614,053 1,430,957 14,655,839 5,544,970
Wells Fargo Bank NA, Time Deposit, 5.17%,
07/03/06................................. 1,451,390 2,772,823 1,614,053 1,430,957 14,655,839 5,544,970
Wells Fargo Bank NA, Time Deposit, 5.25%,
07/03/06................................. 677,315 1,293,984 753,225 667,780 6,839,392 2,587,653
Wells Fargo Bank NA, Time Deposit, 5.21%,
07/06/06................................. 483,797 924,274 538,018 476,986 4,885,280 1,848,323
Wells Fargo Bank NA, Time Deposit, 5.16%,
07/13/06................................. 967,593 1,848,548 1,076,035 953,971 9,770,559 3,696,646
----------- ----------- ----------- ----------- ------------ ------------
$27,278,625 $52,114,730 $30,335,855 $26,894,601 $275,454,038 $104,216,777
=========== =========== =========== =========== ============ ============
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 June 30, 2006.
</Table>
186
<Table>
<Caption>
EQUITY MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE INTERNATIONAL
GROWTH VALUE GROWTH VALUE EQUITY GROWTH EQUITY EQUITY
------------ ----------- ----------- ----------- ------------ ----------- ----------- -------------
3,684,444 $ 1,706,318 $ 810,912 $ 929,183 $ 4,554,654 $ 352,525 $ 624,044 $ 2,504,798
$
7,368,887 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,087 5,009,598
7,368,887 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,087 5,009,598
7,368,887 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,087 5,009,598
7,368,888 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,087 5,009,598
7,368,888 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,087 5,009,598
2,047,582 973,094 1,115,020 5,465,584 423,030 748,852 3,005,759
4,421,333
7,368,888 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,087 5,009,598
7,368,888 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,087 5,009,598
2,388,846 1,135,277 1,300,856 6,376,515 493,535 873,661 3,506,718
5,158,222
2,947,555 1,365,055 648,729 743,347 3,643,723 282,020 499,235 2,003,839
4,421,333 2,047,582 973,094 1,115,020 5,465,584 423,030 748,852 3,005,759
7,368,888 3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,088 5,009,598
5,895,110 2,730,109 1,297,459 1,486,693 7,287,446 564,040 998,470 4,007,678
2,947,555 1,365,055 648,729 743,347 3,643,723 282,020 499,235 2,003,839
3,684,444 1,706,318 810,912 929,183 4,554,654 352,525 624,044 2,504,798
11,053,332 5,118,955 2,432,735 2,787,549 13,663,961 1,057,576 1,872,131 7,514,396
5,895,110 2,730,109 1,297,459 1,486,693 7,287,446 564,040 998,470 4,007,678
1,706,318 810,912 929,183 4,554,654 352,525 624,044 2,504,799
3,684,444
1,179,022 546,022 259,492 297,339 1,457,489 112,808 199,694 801,536
10,593,593 4,906,043 2,331,551 2,671,607 13,095,638 1,013,588 1,794,264 7,201,852
3,412,637 1,621,824 1,858,366 9,109,307 705,051 1,248,088 5,009,598
7,368,888
8,842,665 4,095,164 1,946,188 2,230,039 10,931,169 846,061 1,497,705 6,011,517
2,947,555 1,365,055 648,729 743,347 3,643,723 282,020 499,235 2,003,839
5,855,597 2,711,810 1,288,762 1,476,728 7,238,600 560,260 991,777 3,980,816
7,368,888 3,412,637 1,621,824 1,858,366 9,109,307 705,050 1,248,087 5,009,598
682,527 324,364 371,673 1,821,861 141,010 249,617 1,001,920
1,473,778
3,684,444 1,706,319 810,912 929,183 4,554,654 352,525 624,044 2,504,798
3,684,444 1,706,319 810,912 929,183 4,554,654 352,525 624,044 2,504,798
3,684,444 1,706,318 810,912 929,183 4,554,654 352,525 624,044 2,504,798
11,053,332 5,118,955 2,432,735 2,787,549 13,663,961 1,057,576 1,872,131 7,514,396
11,053,332 5,118,955 2,432,735 2,787,549 13,663,961 1,057,576 1,872,131 7,514,396
5,158,222 2,388,846 1,135,277 1,300,856 6,376,515 493,535 873,661 3,506,718
3,684,444 1,706,318 810,912 929,183 4,554,654 352,525 624,044 2,504,798
7,368,888 3,412,637 1,621,824 1,858,366 9,109,307 705,050 1,248,087 5,009,598
------------ ----------- ----------- ----------- ------------ ----------- ----------- ------------
$207,745,519 $96,209,905 $45,722,857 $52,391,519 $256,811,854 $19,876,959 $35,186,388 $141,231,821
============ =========== =========== =========== ============ =========== =========== ============
</Table>
187
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities (excluding short-term securities) for the period ended June 30, 2006
were as follows:
<Table>
<Caption>
COST OF PROCEEDS
SERIES PURCHASES FROM SALES
- ------ -------------- --------------
High Quality Bond........................ Government Obligations $ 27,998,457 $ 27,308,898
Other 231,584,837 161,845,754
Intermediate Government Bond............. Government Obligations 535,015,334 566,654,419
Other 20,749,149 28,874,194
Core Bond................................ Government Obligations 5,537,409,432 5,821,378,875
Other 536,498,496 234,624,770
Total Return Bond........................ Government Obligations 174,127,012 173,684,021
Other 12,160,145 6,615,478
Balanced................................. Government Obligations 370,330,362 346,660,629
Other 75,638,564 116,940,745
Value & Income........................... Other 439,811,680 489,705,441
Value.................................... Other 29,810,502 21,119,215
Growth & Income.......................... Other 450,225,198 515,784,465
Equity Growth............................ Other 981,643,715 1,095,876,947
Mid-Cap Value............................ Other 366,208,236 263,305,598
Mid-Cap Growth........................... Other 248,731,426 220,520,999
Small-Cap Value.......................... Other 55,993,167 38,990,048
Special Equity........................... Other 627,102,438 753,419,530
Small-Cap Growth......................... Other 107,845,382 92,713,223
Aggressive Equity........................ Other 272,223,734 294,539,138
High Yield Bond.......................... Other 189,970,704 201,309,367
International Equity..................... Other 796,904,467 824,552,070
</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. Discovery is
underway, with depositions scheduled to commence in
188
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. LEGAL AND REGULATORY MATTERS (CONTINUED)
September 2006 and to continue through much of 2007. The Subject Portfolios and
their counsel have reviewed the Subject Portfolios' records concerning the
factual background of the allegations in the Complaint, and have considered
remaining potential defenses to the allegations in the Complaint. Because only
limited discovery has taken place, the Subject Portfolios are unable to predict
whether Enron will prevail, in whole or in part, in its claims against the
Subject Portfolios, and therefore have not recorded a liability in the financial
statements for any potential loss.
Diversified Investors Securities Corp. ("DISC") is the distributor for each of
the Series and a subsidiary of the Series Portfolio's investment advisor,
Diversified Investment Advisor, Inc. ("DIA").
On February 18, 2005, DISC was notified by NASD Staff that it had made a
preliminary determination to recommend disciplinary action against DISC
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 Participants,
then click on Fund Information, choose Investment Funds, click on a Fund, then
click on the Fund Information tab) 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, 2006, will be 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 Participants, then click on the Fund
Information, choose Investment Funds, click on a Fund, then click on the Fund
Information tab) 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
189
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. QUARTERLY PORTFOLIOS (CONTINUED)
1-800-SEC-0330. You may also obtain a copy of Form N-Q without charge, upon
request, by calling 1-800-755-5803.
9. CONCENTRATIONS AND INDEMNIFICATIONS
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 June 30, 2006, the High Yield Bond Series invested approximately 11.20% of
its portfolio in issuers outside the United States.
As of June 30, 2006, 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 June 30, 2006, the International Equity Series invested approximately
11.49%, 19.33% and 19.89% respectively, of its portfolio in issuers in France,
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 enters 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 2005, AEGON deposited seed money into the Total Return Bond Series
through an investment in a feeder fund of the Series. At June 30, 2006, this
amount represented 32% 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.
190
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. FOREIGN CURRENCY FORWARD AND SPOT CONTRACTS
At June 30, 2006, the Core Bond Series, Total Return Bond Series, Balanced
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 06/30/06 (DEPRECIATION)
----------- ----------- ---------- ---------- --------------
CORE BOND
PURCHASE CONTRACTS:
Euro.......................... 6,050,401 $7,657,496 07/20/06 $7,746,631 $ 89,135
Euro.......................... 2,131,704 2,685,371 07/20/06 2,729,327 43,956
--------
TOTAL......................... $133,091
========
SALE CONTRACTS:
Euro.......................... 5,926,574 $7,521,000 07/20/06 $7,588,089 $(67,089)
Euro.......................... 123,827 156,791 07/20/06 158,542 (1,751)
Euro.......................... 2,131,704 2,683,839 07/20/06 2,729,327 (45,488)
Mexican Peso.................. 11,644,563 1,014,347 07/20/06 1,025,953 (11,606)
New Zealand Dollar............ 11,358,753 7,065,144 07/20/06 6,915,157 149,987
--------
TOTAL......................... $ 24,053
========
TOTAL RETURN BOND
PURCHASE CONTRACTS:
Canadian Dollar............... 153,287 $ 135,055 08/08/06 $ 137,449 $ 2,394
========
SALE CONTRACTS:
Australian Dollar............. 9,600 $ 7,150 07/03/06 $ 7,134 $ 16
Australian Dollar............. 323,539 240,390 08/08/06 240,315 75
Canadian Dollar............... 320,464 282,347 08/08/06 287,352 (5,005)
--------
TOTAL......................... $ (4,914)
========
BALANCED
SALE CONTRACTS:
Australian Dollar............. 940,286 $ 698,632 08/08/06 $ 698,416 $ 216
Canadian Dollar............... 910,497 802,200 08/08/06 816,421 (14,221)
--------
TOTAL......................... $(14,005)
========
</Table>
191
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. FOREIGN CURRENCY FORWARD AND SPOT CONTRACTS (CONTINUED)
<Table>
<Caption>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT VALUE AT APPRECIATION/
CURRENCY FOR DATE 06/30/06 (DEPRECIATION)
----------- ----------- ---------- ---------- --------------
INTERNATIONAL EQUITY
PURCHASE CONTRACTS:
Canadian Dollar............... 31,627 $ 28,457 07/05/06 $ 28,332 $ (125)
Canadian Dollar............... 32,065 28,724 07/05/06 28,724 --
Euro.......................... 1,917,819 2,425,082 07/03/06 2,452,986 27,904
Great British Pound........... 1,329,991 2,408,081 07/03/06 2,459,419 51,338
Great British Pound........... 1,410,389 2,605,694 07/05/06 2,608,091 2,397
Norwegian Krone............... 15,835,699 2,507,632 07/03/06 2,543,928 36,296
--------
TOTAL......................... $117,810
========
SALE CONTRACTS:
Euro.......................... 685,810 $ 877,151 07/05/06 $ 877,185 $ (34)
Euro.......................... 112,829 124,056 12/29/06 145,944 (21,888)
Great British Pound........... 2,378 4,342 07/03/06 4,397 (55)
Great British Pound........... 15,588 28,457 07/05/06 28,826 (369)
Great British Pound........... 15,541 28,724 07/05/06 28,737 (13)
Japanese Yen.................. 5,552,565 48,199 07/03/06 48,519 (320)
Japanese Yen.................. 2,332,440 20,247 07/03/06 20,381 (134)
Japanese Yen.................. 226,462,517 1,942,717 07/05/06 1,978,876 (36,159)
Japanese Yen.................. 143,210,477 1,253,154 07/05/06 1,251,402 1,752
--------
TOTAL......................... $(57,220)
========
</Table>
192
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
MONEY MARKET
06/30/2006(a) 0.27%* 0.27%* 4.47%* 4.47%* N/A $ 886,558,935 2.24%
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
06/30/2006(a) 0.38* 0.38* 3.93* 3.93* 25% 820,383,628 1.20
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
06/30/2006(a) 0.40* 0.40* 4.42* 4.42* 301 165,022,802 (0.33)
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
06/30/2006(a) 0.38* 0.38* 4.35* 4.35* 269(b) 2,040,398,340 (0.27)
12/31/2005 0.39 0.39 3.99 3.99 1,003(b) 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
06/30/2006(a) 0.53* 0.40* 4.51* 4.64* 220(b) 75,179,830 (0.63)
12/31/2005(1) 0.55* 0.40* 3.93* 4.08* 327 70,072,859 2.35
</Table>
193
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
BALANCED
06/30/2006(a) 0.57%* 0.50%* 2.49%* 2.56%* 105%(b) $ 377,828,424 1.72%
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
06/30/2006(a) 0.48* 0.48* 1.37* 1.37* 14 3,105,021,731 5.73
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
06/30/2006(a) 0.78* 0.55* 1.14* 1.37* 57 41,322,500 (0.55)
12/31/2005(1) 1.18* 0.55* 1.15* 1.78* 21 35,138,512 9.47
GROWTH & INCOME
06/30/2006(a) 0.63* 0.63* 1.04* 1.04* 38 1,125,477,518 1.19
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
06/30/2006(a) 0.64* 0.64* 0.33* 0.33* 39 2,454,362,037 (3.01)
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)
</Table>
194
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
MID-CAP VALUE
06/30/2006(a) 0.70%* 0.70%* 1.10%* 1.10%* 38% $ 784,201,788 6.89%
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
06/30/2006(a) 0.75* 0.75* (0.28)* (0.28)* 74 312,692,052 0.91
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
06/30/2006(a) 0.86* 0.85* 0.19* 0.20* 17 242,459,759 5.09
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
06/30/2006(a) 0.85* 0.85* 0.21* 0.21* 49 1,236,587,184 3.67
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)
</Table>
195
DIVERSIFIED INVESTORS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------
NET NET INVESTMENT
FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS,
PERIOD/YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL
ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER PERIOD/YEAR RETURN
----------- -------- --------------- ---------- --------------- --------- -------------- ------
SMALL-CAP GROWTH
06/30/2006(a) 1.08%* 0.90%* (0.53)%* (0.35)%* 64% $ 152,961,312 2.59%
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)
AGGRESSIVE EQUITY
06/30/2006(a) 0.81* 0.80* (0.21)* (0.20)* 71 363,364,217 0.11
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
06/30/2006(a) 0.59* 0.59* 7.74* 7.74* 46 438,967,932 4.55
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
06/30/2006(a) 0.85 0.85 2.59 2.59 44 1,807,190,429 9.74
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) Unaudited.
(b) 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.
196
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS
JUNE 30, 2006
(UNAUDITED)
Diversified Investment Advisors, Inc. ("Diversified") manages the assets of each
series of Diversified Investors Portfolios (each, a "Portfolio") pursuant to an
Investment Advisory Agreement (the "Diversified Advisory Agreement") with
Diversified Investors Portfolios. For each Portfolio, Diversified has entered
into an Investment Subadvisory Agreement (each, a "Subadvisory Agreement") with
a subadviser.
In approving the continuation of each Diversified Advisory Agreement and each
Subadvisory Agreement, the Board, including the independent Trustees, reviewed
and considered the advisory fees and total expenses of each underlying fund
investing in a Portfolio (each, a "Fund"). In this regard, the Trustees had
reviewed, among other things, comparative fee information with respect to
comparable funds. The Trustees reviewed the advisory fees and expense ratios,
before and after the advisory and other fee waivers, and compared them to
investment advisory fees paid by and expense ratios of other investment
companies with similar investment objectives. The Trustees considered that
Diversified did not have any non-mutual fund clients to whom advisory services
were provided. The Trustees also considered that Diversified had agreed to waive
a portion of certain Portfolios' advisory fees, as necessary, to maintain
certain "caps" on total expenses (noting that this agreement had been in effect
for each of the last four calendar years). The Trustees also reviewed and
considered information relating to the costs of the services provided to the
Funds and the resulting profitability to Diversified and the subadvisers of the
relationship with the Funds.
The Trustees reviewed and considered information relating to the investment
performance of each of the Funds, which was considered in connection with each
Fund's total expenses, contractual management fees, and Diversified's (and where
provided, the applicable subadviser's) profitability. In reviewing Fund
performance, the Trustees considered gross performance results relative to
benchmark for the past one- and three-year periods ended December 31, 2005
(except where there was a new subadviser), as well as information regarding net
performance in comparison to funds with similar strategies over the same time
periods. Performance was also considered in light of the performance of
comparable products managed by the subadviser. For Funds managed by multiple
subadvisers, the Board considered both individual subadviser performance and the
combined performance of each such Fund in recognition of the fact that managers
had been selected on the basis of their complementary investment strategies,
which would be expected to perform differently under different market
conditions.
The Trustees also reviewed extensive information provided by the subadvisers,
primarily elicited through questionnaires regarding, among other things: the
nature and quality of services provided; legal, regulatory and compliance
matters; actual fees paid by Diversified to each subadviser, comparable fees
paid to each subadviser and subadviser profitability data; and other practices
and developments. The Trustees also noted instances where information was not
disclosed by certain subadvisers, considered the reasons such information was
withheld and weighed the relative importance of such information among the other
data available to the Trustees. In light of Diversified's expertise and the
extensive monitoring provided by Diversified, as well as the arms'-length nature
of the relationship between Diversified and the subadvisers, the Trustees placed
considerable value on Diversified's views regarding the subadvisers.
After requesting and reviewing such information as they deemed necessary
(including additional information provided by Diversified in response to
inquiries from the Independent Trustees) and after meetings conducted by the
independent Trustees without management being present, the Board concluded that
each Diversified Advisory Agreement and each sub-advisory agreement was in the
best interests of the applicable Portfolio and its investors. The Board based
its conclusions, in part, on its observations regarding the performance of and
the management fees and total expenses paid by each Portfolio and underlying
Fund, some of which observations are summarized below. In reaching this
conclusion, the Board noted that this continuation reaffirmed the choice of each
investor in each fund, who had decided to invest in a fund overseen by
Diversified and managed by the applicable subadviser or subadvisers.
197
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
MONEY MARKET PORTFOLIO. For Money Market Portfolio (GE Asset Management,
Incorporated as subadviser), the Board noted that gross performance was ahead of
the relevant benchmark for the one- and three-year periods, and that net
performance was at or above median for the performance universe for the same
periods. Contractual management fees were at or below the median for the peer
group for both Diversified Investors Money Market Fund and Diversified
Institutional Money Market Fund. The Board found total expenses to be above the
median for the expense universe in the case of the Investors fund, but below the
median in the case of the Institutional fund. The Board determined that the
investment performance and advisory fees were sufficient to warrant continuance
of the advisory and subadvisory agreements.
BOND PORTFOLIOS. For High Quality Bond Portfolio (Merganser Capital Management
as subadviser), the Board noted that gross performance was ahead of the relevant
benchmark for the one- and three-year periods, and that net performance was at
or above median for the performance universe for the same periods. Contractual
management fees were at or below the median for the peer group for both
Diversified Investors High Quality Bond Fund and Diversified Institutional High
Quality Bond Fund. The Board found total expenses to be above the median for the
expense universe in the case of the Investors fund, but below the median in the
case of the Institutional fund. The Board determined that the investment
performance and advisory fees were sufficient to warrant continuance of the
advisory and subadvisory agreements.
For Intermediate Government Bond Portfolio (Allegiance Investment Management as
subadviser), the Board noted that gross performance was ahead of the relevant
benchmark for the one- and three-year periods, but that net performance was
below median for the performance universe for the same periods. Contractual
management fees were at or below the median for the peer group for both
Diversified Investors Intermediate Government Bond Fund and Diversified
Institutional Intermediate Government Bond Fund. The Board found total expenses
to be above the median for the expense universe for the Investors fund, but
below the median in the case of the Institutional fund. The Board noted that a
subadviser to the Portfolio had been terminated in January, 2006 in an effort to
improve performance, and determined that it was appropriate to see the impact of
that change on the Portfolio's performance going forward. The Board determined
that while performance had been below the median for the one- and three-year
periods, given the recent subadviser change, the investment performance and
advisory fees were sufficient to warrant continuance of the advisory and
subadvisory agreements.
For Core Bond Fund Portfolio (BlackRock Advisors, Inc. as subadviser), the Board
noted that gross performance was ahead of the relevant benchmark for the one-
and three-year periods, and that net performance was at or above median for the
performance universe for the same periods. Contractual management fees were at
or below the median for the peer group for both Diversified Investors Core Bond
Fund and Diversified Institutional Core Bond Fund. The Board found total
expenses to be above the median for the expense universe in the case of the
Investors fund, but below the median in the case of the Institutional fund. The
Board determined that the investment performance and advisory fees were
sufficient to warrant continuance of the advisory and subadvisory agreements.
For High Yield Bond Fund Portfolio (Eaton Vance Management as subadviser), the
Board noted that gross performance was ahead of the relevant benchmark for the
one- and three-year periods, and that net performance was at or above median for
the performance universe for the same periods. Contractual management fees were
at or below the median for the peer group for both Diversified Investors High
Yield Bond Fund and Diversified Institutional High Yield Bond Fund. The Board
found total expenses to be at or below the median for the expense universe for
both funds. The Board determined that the investment performance and advisory
fees were sufficient to warrant continuance of the advisory and subadvisory
agreements. The Board noted that the performance of the subadviser continued to
be strong (top quartile).
198
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
BALANCED PORTFOLIO. For Balanced Portfolio (Goldman Sachs Asset Management,
Western Asset Management Company, and Western Asset Management Company Limited
as subadvisers), the Board noted that gross performance was ahead of the
relevant benchmark for the one- and three-year periods, and that net performance
was at or above median for the performance universe for the same periods.
Contractual management fees were at or below the median for the peer group for
both Diversified Investors Balanced Fund and Diversified Institutional Balanced
Fund. The Board found total expenses to be above the median for the expense
universe in the case of the Investors fund and below the median in the case of
the Institutional fund. The Board noted that the two existing subadvisers had
been added in May, 2005 in an effort to improve performance, and determined that
it was appropriate to continue to monitor the impact of that change on the
Portfolio's performance going forward. The Board determined that given the
relatively recent subadviser change, the investment performance and advisory
fees were sufficient to warrant continuance of the advisory and subadvisory
agreements.
STOCK PORTFOLIOS. For Value & Income Portfolio (AllianceBernstein and TCW
Investment Management Company as subadvisers), the Board noted that gross
performance was ahead of the relevant benchmark for the one- and three-year
periods, and that net performance was at or above median for the performance
universe for the same periods. Contractual management fees were at or below the
median for the peer group for both Diversified Investors Value & Income Fund and
Diversified Institutional Value & Income Fund. The Board found total expenses to
be at or below the median for the expense universe for both funds. The Board
noted that TCW had been added as a subadviser in March, 2005, in an effort to
improve performance, and that TCW's performance since its inception with the
Portfolio had been good. The Board also noted that Alliance's reported
profitability was substantial but that Alliance's performance continued to be
good. The Board determined that the investment performance and advisory fees
were sufficient to warrant continuance of the advisory and subadvisory
agreements.
For Growth & Income Portfolio (Aronson+Johnson+Ortiz (AJO), Ark Asset Management
and Goldman Sachs Asset Management as subadvisers), the Board observed that the
subadvisers to the Portfolio had been replaced in May, 2004. In addition, the
Board noted that gross performance was ahead of the relevant benchmark for the
one- and three-year periods, and that net performance was at or above median for
the performance universe for the same periods. The Board noted that
Diversified's profitability for this Fund was higher than for others, but that
the profitability nonetheless appeared reasonable and Fund performance was good.
The Board noted that AJO's reported profitability was substantial but that AJO
had strong performance. Contractual management fees were at or below the median
for the peer group for both Diversified Investors Growth & Income Fund and
Diversified Institutional Growth & Income Fund. The Board found total expenses
to be above the median for the expense universe (but less than the average) in
the case of the Investors fund, but below the median in the case of the
Institutional fund. The Board noted that the change of subadvisers in May, 2004
had improved performance. The Board determined that the investment performance
and advisory fees were sufficient to warrant continuance of the advisory and
subadvisory agreements.
For Equity Growth Portfolio (Ark Asset Management and Marsico Capital Management
as subadvisers), the Board observed that one of the advisers to the Portfolio
had been replaced in September, 2004. Additionally, the Board noted that gross
performance was ahead of the relevant benchmark for the one- and three-year
periods, and that net performance was at or above median for the performance
universe for the same periods. The Board noted that Marsico had not provided
profitability information but had good performance. Contractual management fees
were at or below the median for the peer group for both Diversified Investors
Equity Growth Fund and Diversified Institutional Equity Growth Fund. The Board
found total expenses to be above the median for the expense universe (but less
than the average) in the case of the Investors fund, but below the median in the
case of the Institutional fund. The Board noted that the change of subadvisers
in
199
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
September, 2004 had improved performance. The Board determined that the
investment performance and advisory fees were sufficient to warrant continuance
of the advisory and subadvisory agreements.
For Mid-Cap Value Portfolio (Cramer, Rosenthal, McGlynn and LSV Asset Management
as subadvisers), the Board noted that gross performance was ahead of the
relevant benchmark for the one- and three-year periods, and that net performance
was at or above median for the performance universe for the same periods.
Contractual management fees were at or below the median for the peer group for
both Diversified Investors Mid-Cap Value Fund and Diversified Institutional
Mid-Cap Value Fund. The Board found total expenses to be at or below the median
for the expense universe for both funds. The Board determined that the
investment performance and advisory fees were sufficient to warrant continuance
of the advisory and subadvisory agreements.
For Mid-Cap Growth Portfolio (Columbus Circle Investors as subadviser), the
Board noted that gross performance was ahead of the relevant benchmark for the
one- and three-year periods, and that net performance was at or above median for
the performance universe for the same periods. Contractual management fees were
at or below the median for the peer group for both Diversified Investors Mid-Cap
Growth Fund and Diversified Institutional Mid-Cap Growth Fund. The Board found
total expenses to be above the median for the expense universe (but less than
the average) in the case of the Investors fund, but below the median in the case
of the Institutional fund. The Board determined that the investment performance
and advisory fees were sufficient to warrant continuance of the advisory and
subadvisory agreements.
For Small-Cap Value Portfolio (EARNEST Partners as subadviser), the Board noted
that EARNEST had replaced the former subadviser in April, 2005 in an effort to
improve performance. The Board also noted that gross performance was behind the
relevant benchmark for the one- and three-year periods, and that net performance
was well below median. The Board found that contractual management fees were
above the median for the peer group for both Diversified Investors Small-Cap
Value Fund and Diversified Institutional Small-Cap Value Fund, and that total
expenses were above the median for the expense universe in the case of the
Investors fund, but below the median in the case of the Institutional fund. The
Board noted that EARNEST had been added as a subadviser relatively recently. In
response to the Board's questioning, management had confirmed its continued
confidence in EARNEST as a subadviser. Accordingly, the Board determined that it
was appropriate to continue to monitor the impact of the subadviser change on
the Portfolio's performance going forward. The Board determined that given the
relatively recent subadviser change, the investment performance and advisory
fees were sufficient to warrant continuance of the advisory and subadvisory
agreements, but noted that they would be monitoring performance and fees
carefully.
For Special Equity Portfolio (Mazama Capital Management, RS Investment
Management, EARNEST Partners, Wellington Management Company and INVESCO
Institutional as subadvisers), the Board noted that gross performance was ahead
of the relevant benchmark for the one- and three-year periods, and that net
performance was at or above median for the performance universe for the same
periods. Contractual management fees were above the median for the peer group
for both Diversified Investors Special Equity Fund and Diversified Institutional
Special Equity Fund. The Board found total expenses to be above the median for
the expense universe in the case of the Investors fund, but below the median in
the case of the Institutional fund. The Board noted that Mazama had replaced a
subadviser in March, 2005, in an effort to improve performance, and that
Mazama's performance since its inception with the Portfolio had been good. The
Board also noted that INVESCO's profitability appeared high but that INVESCO's
performance continued to be good. The Board determined that the investment
performance and advisory fees were sufficient to warrant continuance of the
advisory and subadvisory agreements.
200
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
For Small-Cap Growth Portfolio (Trusco Capital Management as subadviser), the
Board noted that Trusco had replaced the former subadviser in December, 2005 in
an effort to improve performance. The Board also noted that gross performance
was behind the relevant benchmark for the one- and three-year periods, and that
net performance was below median for the performance universe for the same
periods. The Board found that contractual management fees were above the median
for the peer group for both Diversified Investors Small-Cap Growth Fund and
Diversified Institutional Small-Cap Growth Fund, and that total expenses were
above the median for the expense universe in the case of the Investors fund, but
below the median in the case of the Institutional fund. The Board noted that
Trusco had been added as a subadviser recently, and that management had
confirmed its continued confidence in Trusco as a subadviser despite somewhat
disappointing short-term results. Accordingly, the Board determined that it was
appropriate to continue to monitor the impact of the subadviser change on the
Portfolio's performance going forward. The Board determined that given the
recent subadviser change, the investment performance and advisory fees were
sufficient to warrant continuance of the advisory and subadvisory agreements,
but stated that they would be monitoring performance and fees carefully.
*Subsequent event: Effective July 24, 2006, Diversified Investment Advisors,
Inc. terminated its Investment Subadvisory Agreement with Trusco Capital
Management, Inc. with respect to the Small-Cap Growth Portfolio and entered into
an Interim Investment Subadvisory Agreement with Perimeter Capital Partners LLC.
For Aggressive Equity Portfolio (Turner Investment Partners as subadviser), the
Board noted that gross performance was ahead of the relevant benchmark for the
one- and three-year periods, but that net performance was below median for the
performance universe for the same periods. The Board found that contractual
management fees were above the median for the peer group for both Diversified
Investors Aggressive Equity Fund and Diversified Institutional Aggressive Equity
Fund, and that total expenses were above the median for the expense universe
(but less than the average) in the case of the Investors fund, but below the
median in the case of the Institutional fund. The Board noted that Turner was a
manager that took bets consistent with its investment style, but that given the
performance, it was appropriate to continue to monitor the performance closely
going forward. The Board noted that Diversified's profitability for these funds
was higher than for others, but that the profitability nonetheless appeared
reasonable and had dropped substantially from prior years. The Board also
considered that in 2004 Diversified had reduced its management fee by 20 basis
points. The Board determined that the investment performance and advisory fees
were sufficient to warrant continuance of the advisory and subadvisory
agreements, but said that they would be monitoring performance and fees
carefully.
For International Equity Portfolio (LSV Asset Management and Wellington
Management Company as subadvisers), the Board noted that gross performance was
behind the relevant benchmark for the one- and three-year periods, and that net
performance was below median for the performance universe for the same periods.
The Board found that contractual management fees were at or below the median for
the peer group for both Diversified Investors International Equity Fund and
Diversified Institutional International Equity Fund, and that total expenses
were above the median for the expense universe in the case of the Investors
fund, but below the median in the case of the Institutional fund. The Board
noted that Wellington had been placed under increased scrutiny by Diversified
because of recent performance, but that management had confirmed its continued
confidence in Wellington as a subadviser. Accordingly, the Board determined that
it was appropriate to continue to monitor Wellington's performance going
forward. The Board determined that the investment performance and advisory fees
were sufficient to warrant continuance of the advisory and subadvisory
agreements, but noted that they would be monitoring performance carefully.
201
DIVERSIFIED INVESTORS PORTFOLIOS
APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED)
JUNE 30, 2006
(UNAUDITED)
* * * * *
These conclusions were based upon the Board's determination for each Portfolio
that the Portfolio's performance compared sufficiently favorably with other
funds in the individual fund's peer group and/or benchmark over recent one- and
three-year periods, with exceptions discussed above; that management fees and
total expenses after giving effect to waivers and reimbursements compared
sufficiently favorably to the peer group, with exceptions discussed above; and
that, in reviewing Diversified's profitability with respect to its services for
the funds, that profitability (together with additional benefits received by
Diversified and its affiliated, Diversified Investors Securities Corp.)
generally appeared to be reasonable in view of the nature and quality of the
services provided by Diversified. The Board also considered that the fee waivers
and reimbursements for certain funds were contractually agreed and as a result
could not be discontinued or modified without Board approval. In addition to the
foregoing, the Trustees were satisfied with the overall quality of the services
provided by Diversified, including selecting and monitoring subadvisers and
providing compliance services to the Portfolios.
202
TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road, Purchase, New York 10577
(914) 697-8000
DISTRIBUTOR:
Diversified Investors Securities Corp. (DISC)
4 Manhattanville Road, Purchase, New York 10577
914-697-8000
2875 (8/06)
ITEM 2. CODE OF ETHICS.
Item not applicable to semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Item not applicable to semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Item not applicable to semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the Registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the Registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's most recent fiscal six-month
period that has materially affected, or is likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Not applicable.
(a) (2) Separate certifications by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(a) (3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Diversified Investors Strategic
Variable Funds
By /s/ Mark Mullin
----------------------------------
Mark Mullin
Principal Executive Officer
Date August 31, 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 August 31, 2006
By /s/ Joseph Carusone
----------------------------------
Joseph Carusone
Principal Financial Officer
Date August 31, 2006