<Page>
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 811-03980
--------------------------------------------
Morgan Stanley Institutional Fund Trust
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
RONALD E. ROBISON
1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-221-6726
------------------------------------- ----------------------------
Date of fiscal year end: 9/30/04
---------------------------------
Date of reporting period: 3/31/04
------- -------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
<Page>
2004 SEMI-ANNUAL REPORT
[MORGAN STANLEY LOGO]
March 31, 2004
Morgan Stanley Institutional Fund Trust
EQUITY PORTFOLIOS
Equity
Mid Cap Growth
Strategic Small Value
U.S. Mid Cap Value
U.S. Small Cap Value
Value
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
TABLE OF CONTENTS
<Table>
SHAREHOLDER'S LETTER ..........................................................2
STATEMENTS OF NET ASSETS
EQUITY PORTFOLIOS:
Equity ........................................................................3
Mid Cap Growth ................................................................5
Strategic Small Value .........................................................7
U.S. Mid Cap Value ............................................................9
U.S. Small Cap Value .........................................................11
Value ........................................................................14
STATEMENTS OF OPERATIONS .....................................................16
STATEMENTS OF CHANGES IN NET ASSETS ..........................................17
FINANCIAL HIGHLIGHTS .........................................................19
NOTES TO FINANCIAL STATEMENTS ................................................27
TRUSTEE AND OFFICER INFORMATION ..............................................31
</Table>
This report is authorized for distribution only when preceded or accompanied by
prospectuses of the Morgan Stanley Institutional Fund Trust. To receive a
prospectus and/or SAI, which contains more complete information such as charges,
expenses, policies for voting proxies, risk considerations, and describes in
detail each of the Portfolio's investment policies to the prospective investor,
please call 1 (800) 354-8185. Please read the prospectus carefully before you
invest or send money. Additionally, you can access portfolio information
including performance, characteristics, and investment team commentary through
Morgan Stanley Investment Management's website: www.morganstanley.com/im.
1
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
SHAREHOLDER'S LETTER
Dear Shareholders:
We are pleased to present to you the Fund's Semi-Annual Report for the six
months ended March 31, 2004. Our Fund currently consists of 19 portfolios,
providing investors with a broad array of equity, fixed- income, and balanced
portfolios. The Fund's portfolios, together with the portfolios of the Morgan
Stanley Institutional Fund, Inc., provide investors with a means to help them
meet specific investment needs and to allocate their investments among equities
(e.g., value and growth; small, medium, and large capitalization), and fixed
income (e.g., short, medium, and long duration; investment grade and high
yield).
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President and Principal Executive Officer
April 2004
2
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
EQUITY PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (95.8%)
CONSUMER DISCRETIONARY (14.7%)
Clear Channel Communications, Inc. 65,910 $ 2,791
Hilton Hotels Corp. 148,540 2,414
Honda Motor Co., Ltd. ADR (c)119,350 2,762
Interpublic Group of Cos., Inc. (a)75,670 1,164
Kohl's Corp. (a)25,800 1,247
Magna International, Inc., Class A 28,400 2,249
McDonald's Corp. 43,100 1,231
Starwood Hotels & Resorts Worldwide, Inc. 55,930 2,265
Target Corp. 27,650 1,245
Time Warner, Inc. (a)250,700 4,227
Walt Disney Holding Co. 134,030 3,350
- --------------------------------------------------------------------------------
24,945
================================================================================
CONSUMER STAPLES (7.8%)
Altria Group, Inc. 22,200 1,209
Cadbury Schweppes plc ADR (c)47,500 1,527
Coca-Cola Co. (The) 33,010 1,660
Kimberly-Clark Corp. 45,200 2,852
Kraft Foods, Inc., Class A 37,850 1,212
Nestle S.A., (Registered) ADR (a),(c)19,060 1,215
PepsiCo, Inc. 36,690 1,976
Wal-Mart Stores, Inc. 28,650 1,710
- --------------------------------------------------------------------------------
13,361
================================================================================
ENERGY (11.2%)
BP plc ADR 85,250 4,365
ConocoPhillips, Inc. 34,600 2,415
EOG Resources, Inc. 13,310 611
Exxon Mobil Corp. 63,890 2,657
Royal Dutch Petroleum Co. (NY Shares) 55,240 2,628
Schlumberger Ltd. 67,860 4,333
Valero Energy Corp. 33,340 1,999
- --------------------------------------------------------------------------------
19,008
================================================================================
FINANCIAL SERVICES (24.1%)
A.G. Edwards, Inc. 26,290 1,028
Bank of America Corp. 20,880 1,691
Bank One Corp. 44,210 2,410
Chubb Corp. 62,130 4,321
Citigroup, Inc. 71,930 3,719
Fannie Mae 37,630 2,798
Freddie Mac 62,480 3,690
Hartford Financial Services Group, Inc. 53,480 3,407
J.P. Morgan Chase & Co. 71,710 3,008
Lehman Brothers Holdings, Inc. 28,830 2,389
Merrill Lynch & Co., Inc. 48,050 2,862
Metlife, Inc. 43,930 1,567
PNC Financial Services Group, Inc. 35,460 1,965
Prudential Financial, Inc. 53,320 2,388
Travelers Property Casualty Corp., Class A 148,950 2,555
Wachovia Corp. 26,300 1,236
- --------------------------------------------------------------------------------
41,034
================================================================================
HEALTH CARE (10.4%)
AstraZeneca plc ADR (c)31,060 1,451
Bausch & Lomb, Inc. 44,940 2,695
Bristol-Myers Squibb Co. 219,470 $ 5,318
CIGNA Corp. 27,000 1,594
Roche Holding Ltd. ADR (a)27,280 2,665
Schering-Plough Corp. 132,780 2,154
Tenet Healthcare Corp. (a)64,250 717
Wyeth 27,710 1,040
- --------------------------------------------------------------------------------
17,634
================================================================================
INDUSTRIALS (6.8%)
Equifax, Inc. 96,090 2,481
Ingersoll-Rand Co., Class A 23,400 1,583
Norfolk Southern Corp. 110,430 2,439
Northrop Grumman Corp. 14,000 1,378
Parker-Hannifin Corp. 29,390 1,660
Textron, Inc. 9,380 499
Union Pacific Corp. 25,940 1,552
- --------------------------------------------------------------------------------
11,592
================================================================================
INFORMATION TECHNOLOGY (7.5%)
Accenture Ltd., Class A (a)38,880 964
Automatic Data Processing, Inc. 34,230 1,438
Computer Associates International, Inc. 27,800 747
First Data Corp. 39,990 1,686
Hewlett-Packard Co. 67,170 1,534
Intel Corp. 31,100 846
International Business Machines Corp. 19,780 1,816
Microsoft Corp. 68,190 1,703
Nokia Oyj ADR (c)99,820 2,024
- --------------------------------------------------------------------------------
12,758
================================================================================
MATERIALS (6.3%)
Bayer AG ADR 123,360 3,010
Consolidated Edison, Inc. (c)22,690 1,001
Dow Chemical Co. (The) 40,110 1,616
Newmont Mining Corp. 32,460 1,513
Phelps Dodge Corp. (a)24,930 2,036
Temple-Inland, Inc. (c)25,480 1,614
- --------------------------------------------------------------------------------
10,790
================================================================================
TELECOMMUNICATION SERVICES (3.7%)
AT&T Wireless Services, Inc. (a)61,500 837
SBC Communications, Inc. 34,700 851
Sprint Corp. (FON Group) 109,150 2,012
Verizon Communications, Inc. 70,770 2,586
- --------------------------------------------------------------------------------
6,286
================================================================================
UTILITIES (3.3%)
Edison International Ltd. 46,350 1,126
Entergy Corp. 28,120 1,673
Exelon Corp. 22,930 1,579
FirstEnergy Corp. 33,800 1,321
- --------------------------------------------------------------------------------
5,699
================================================================================
TOTAL COMMON STOCKS (COST $148,319) 163,107
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
EQUITY PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (7.9%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED SECURITIES (3.7%)
American Express Credit Corp.,
1.10%, 4/15/04 $ (h)56 $ 56
Beta Finance, Inc., 1.08%, 4/1/04 (h)264 264
Canadian Imperial Bank N.Y., 1.11%, 4/1/04 (h)94 94
Chase Credit Card Master Trust,
1.10%, 4/15/04 (h)75 75
CIC NY, 1.11%, 7/30/04 94 94
CIT Group Holdings, 1.12%, 6/21/04 (h)70 70
Credit Agricole N.Y.,
1.07%, 4/1/04 (h)271 271
CS First Boston, N.Y., 1.04%, 4/2/04 169 169
Dresdner Bank N.Y., 1.05%, 4/20/04 189 189
Federal National Mortgage Association,
1.13%, 4/14/04 83 83
Jackson National Life Global Funding,
1.06%, 4/1/04 (h)95 95
Landesbank Hessen Thueringen London,
1.50%, 11/19/04 94 94
Links Finance LLC, 1.08%, 4/1/04 (h)94 94
Links Finance LLC, 1.09%, 4/1/04 (h)151 151
Macquarie Bank Ltd., 1.18%, 6/24/04 (h)83 83
Natexis Banques Populaires N.Y.,
1.21%, 4/1/04 (h)151 151
Nationwide Building Society, 1.12%,
6/28/04 (h)219 219
Sears Credit Card Account Master,
1.12%, 4/15/04 (h)151 151
Societe Generale London, 1.54%, 11/12/04 94 94
Societe Generale N.Y., 1.07%, 4/1/04 (h)183 183
Target Credit Card Master Trust,
1.12%, 4/26/04 (h)149 149
UBS Securities LLC, 1.06%, 4/1/04 2,968 2,968
Union Bank of Switzerland, Stamford,
1.13%, 12/20/04 188 188
Wachovia Bank N.A., 1.13%, 4/1/04 (h)189 189
Westdeutsche Landesbank N.Y.,
1.09%, 4/1/04 (h)185 185
- --------------------------------------------------------------------------------
6,359
================================================================================
REPURCHASE AGREEMENT (4.2%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $7,116 (f)7,116 7,116
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $13,475) 13,475
================================================================================
TOTAL INVESTMENTS (103.7%) (COST $161,794) --
INCLUDING $6,858 OF SECURITIES LOANED 176,582
================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------------------------------
OTHER ASSETS (0.3%)
Dividends Receivable $ 342
Receivable for Investments Sold 93
Other 5 $ 440
- --------------------------------------------------------------------------------
LIABILITIES (-4.0%)
Collateral on Securities Loaned, at Value (6,359)
Payable for Investment Advisory Fees (209)
Payable for Investments Purchased (196)
Payable for Administrative Fees (17)
Payable for Trustees' Fees and Expenses (14)
Payable for Custodian Fees (5)
Other Liabilities (21) (6,821)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 170,201
================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 256,884
Undistributed (Distributions in Excess of)
Net Investment Income 560
Accumulated Net Realized Gain (Loss) (102,031)
Unrealized Appreciation (Depreciation) on
Investments 14,788
- --------------------------------------------------------------------------------
NET ASSETS $ 170,201
================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 170,196
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 16,627,564 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $ 10.24
================================================================================
ADVISER CLASS:
NET ASSETS $ 5
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 510 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 10.21
================================================================================
</Table>
(a) Non-income producing security
(c) All or a portion of security on loan at March 31, 2004.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates shown
are those in effect on March 31, 2004.
ADR American Depositary Receipt
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
MID CAP GROWTH PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (99.5%)
AUTO & TRANSPORTATION (1.8%)
C.H. Robinson Worldwide, Inc. 299,877 $ 12,445
Gentex Corp. 220,400 9,561
- --------------------------------------------------------------------------------
22,006
================================================================================
CONSUMER DISCRETIONARY (35.2%)
Apollo Group, Inc., Class A (a)209,100 18,006
Brascan Corp., Class A 320,484 12,903
Career Education Corp. (a)108,800 6,162
Cheesecake Factory, Inc. (The) (a)267,100 12,321
Chico's FAS, Inc. (a)268,573 12,462
ChoicePoint, Inc. (a)287,661 10,940
Coach, Inc. (a)289,920 11,884
Corporate Executive Board Co. 126,700 5,955
DeVry, Inc. (a)286,220 8,629
Dollar Tree Stores, Inc. (a)495,400 15,303
Electronic Arts, Inc. (a)245,100 13,226
Getty Images, Inc. (a)174,800 9,436
GTECH Holdings Corp. 459,241 27,159
Harman International Industries, Inc. 152,900 12,171
International Game Technology 308,304 13,861
Iron Mountain, Inc. (a)281,225 12,551
ITT Educational Services, Inc. (a)100,474 3,135
Krispy Kreme Doughnuts, Inc. (a)124,900 4,289
MGM Mirage, Inc. (a)134,800 6,112
Outback Steakhouse, Inc. 245,500 11,956
P.F. Chang's China Bistro, Inc. (a)246,800 12,416
Petsmart, Inc. 371,300 10,122
R.H. Donnelley Corp. (a)209,200 9,770
Radio One, Inc., Class D (a)799,275 14,787
Royal Caribbean Cruises Ltd. 854,294 37,674
Sonic Corp. (a)193,100 6,619
Station Casinos, Inc. 837,200 36,979
Univision Communications, Inc., Class A (a)718,275 23,710
Washington Post Co. (The), Class B 6,500 5,749
Westwood One, Inc. (a)304,825 8,977
Wynn Resorts Ltd. (a)875,605 30,646
XM Satellite Radio Holdings, Inc., Class A (a)216,200 6,054
- --------------------------------------------------------------------------------
431,964
================================================================================
CONSUMER STAPLES (0.5%)
Whole Foods Market, Inc. 78,800 5,906
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (6.5%)
Ameritrade Holding Corp. (a)634,700 9,774
Assurant, Inc. (a)244,500 6,149
Chicago Mercantile Exchange (The) 67,400 6,520
Doral Financial Corp. 181,307 6,382
Interactive Data Corp. (a)452,700 8,049
Legg Mason, Inc. 127,600 11,839
Moody's Corp. 89,726 6,353
UCBH Holdings, Inc. 282,700 11,319
White Mountains Insurance Group Ltd. 24,992 13,108
- --------------------------------------------------------------------------------
79,493
================================================================================
HEALTH CARE (19.9%)
Allergan, Inc. 136,485 $ 11,487
Apogent Technologies, Inc. (a)291,600 8,946
Biogen Idec, Inc. (a)222,600 12,377
C.R. Bard, Inc. 124,800 12,185
Caremark Rx, Inc. (a)545,200 18,128
Celgene Corp. (a)139,637 6,654
Charles River Laboratories International, Inc. (a)178,800 7,662
Community Health Systems, Inc. (a)211,300 5,880
Dade Behring Holdings, Inc. (a)436,300 19,407
DaVita, Inc. (a)128,800 6,150
Elan Corp. plc ADR (a)212,000 4,371
Genzyme Corp. (a)125,660 5,911
Gilead Sciences, Inc. (a)108,900 6,073
IDEXX Laboratories, Inc. (a)121,200 6,893
Kinetic Concepts, Inc. (a)151,000 6,772
Lincare Holdings, Inc. (a)178,550 5,610
Omnicare, Inc. 132,800 5,887
Pacificare Health Systems, Inc. (a)163,800 6,478
Patterson Dental Co. (a)182,600 12,528
Shire Pharmaceuticals plc ADR (a)201,900 5,942
St. Jude Medical, Inc. (a)83,602 6,028
Stericycle, Inc. (a)405,925 19,428
Taro Pharmaceutical Industries Ltd. (a)139,800 8,107
Varian Medical Systems, Inc. (a)175,555 15,152
VCA Antech, Inc. (a)241,900 8,619
Zimmer Holdings, Inc. (a)154,986 11,435
- --------------------------------------------------------------------------------
244,110
================================================================================
MATERIALS & PROCESSING (6.6%)
American Standard Cos., Inc. (a)53,800 6,120
Ecolab, Inc. 220,768 6,299
Freeport-McMoRan Copper & Gold, Inc.,
Class B 372,200 14,549
Mohawk Industries, Inc. (a)106,600 8,778
Phelps Dodge Corp. (a)70,400 5,749
Placer Dome, Inc. 508,500 9,138
Plum Creek Timber Co., Inc. 363,700 11,813
Rinker Group Ltd. ADR 231,400 12,294
Sealed Air Corp. (a)111,077 5,524
- --------------------------------------------------------------------------------
80,264
================================================================================
OTHER ENERGY (6.4%)
BJ Services Co. (a)267,800 11,587
Kinder Morgan, Inc. 97,600 6,151
Questar Corp. 163,500 5,958
Smith International, Inc. (a)241,128 12,903
Suncor Energy, Inc. 227,328 6,217
Ultra Petroleum Corp. (a)1,183,300 35,511
- --------------------------------------------------------------------------------
78,327
================================================================================
PRODUCER DURABLES (2.4%)
Fisher Scientific International, Inc. (a)116,700 6,423
Graco, Inc. 209,700 6,105
KLA-Tencor Corp. (a)218,477 11,000
NVR, Inc. (a)12,900 5,934
- --------------------------------------------------------------------------------
29,462
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
MID CAP GROWTH PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
TECHNOLOGY (17.4%)
Adobe Systems, Inc. 447,702 $ 17,653
Altera Corp. (a)530,200 10,843
Avaya, Inc. (a)273,300 4,340
CDW Corp. 88,364 5,974
Cognizant Technology Solutions Corp. (a)98,000 4,434
Corning, Inc. (a)960,900 10,743
Crown Castle International Corp. (a)1,419,400 17,927
Dun & Bradstreet Corp. (a)107,600 5,757
Global Payments, Inc. 193,700 8,732
Integrated Circuit Systems, Inc. (a)164,769 4,124
Juniper Networks, Inc. (a)311,000 8,089
Lexmark International, Inc. (a)181,100 16,661
Marvell Technology Group Ltd. (a)216,352 9,747
Mercury Interactive Corp. (a)243,936 10,928
National Semiconductor Corp. (a) 99,700 4,430
Network Appliance, Inc. (a)630,100 13,516
QLogic Corp. (a)104,528 3,450
Rambus, Inc. (a)120,700 3,383
Red Hat, Inc. (a)732,200 16,738
SunGard Data Systems, Inc. (a)283,779 7,776
Symantec Corp. (a)388,238 17,975
Synopsys, Inc. (a)363,216 10,519
- --------------------------------------------------------------------------------
213,739
================================================================================
UTILITIES (2.8%)
IDT Corp., Class B (a)304,200 6,130
NII Holdings, Inc., Class B (a)179,460 6,286
NTL, Inc. (a)373,641 22,213
- --------------------------------------------------------------------------------
34,629
================================================================================
TOTAL COMMON STOCKS (COST $1,067,413) 1,219,900
================================================================================
<Caption>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT (0.9%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $10,975
(COST $10,975) $ (f)10,975 10,975
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%) (COST $1,078,388) 1,230,875
================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------------------------------
OTHER ASSETS (1.0%)
Receivable for Investments Sold $ 11,659
Dividends Receivable 118
Foreign Withholding Tax Reclaim
Receivable 2
Other 30 $ 11,809
- --------------------------------------------------------------------------------
LIABILITIES (-1.4%)
Payable for Investments Purchased (15,140)
Payable for Investment Advisory Fees (1,463)
Payable for Distribution Fees --
Adviser Class (139)
Payable for Administrative Fees (94)
Payable for Trustees' Fees and Expenses (52)
Payable for Custodian Fees (16)
Other Liabilities (48) (16,952)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 1,225,732
================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 2,225,062
Undistributed Net Investment Income
(Accumulated Net Investment Loss) (2,322)
Accumulated Net Realized Gain (Loss) (1,149,495)
Unrealized Appreciation (Depreciation) on
Investments 152,487
- --------------------------------------------------------------------------------
NET ASSETS $ 1,225,732
================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 559,170
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 30,789,953 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 18.16
================================================================================
ADVISER CLASS:
NET ASSETS $ 666,562
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 37,468,890 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $ 17.79
================================================================================
</Table>
(a) Non-income producing security
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
ADR American Depositary Receipt
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
STRATEGIC SMALL VALUE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (95.9%)
BASIC RESOURCES (6.3%)
Albany International Corp., Class A 25,700 $ 691
Apex Silver Mines Ltd. (a)25,200 569
Cytec Industries, Inc. 20,900 743
FMC Corp. (a)4,400 188
Hercules, Inc. (a)9,200 106
OM Group, Inc. (a)20,300 617
Reliance Steel & Aluminum Co. 23,700 833
Schulman, Inc., Class A 6,400 126
Steel Dynamics, Inc. (a)5,400 134
- --------------------------------------------------------------------------------
4,007
================================================================================
CONSUMER DURABLES (3.1%)
Furniture Brands International, Inc. 10,600 341
Lojack Corp. (a)49,700 377
Strattec Security Corp. (a)7,000 445
Tower Automotive, Inc. (a)158,700 800
- --------------------------------------------------------------------------------
1,963
================================================================================
CONSUMER SERVICES (8.8%)
Ambassadors Group, Inc. 22,400 554
Banta Corp. 12,500 579
Intrawest Corp. 70,100 1,192
Isle of Capri Casinos, Inc. (a)9,200 231
Journal Communications, Inc., Class A 17,800 356
La Quinta Corp. (a)48,100 363
Nexstar Broadcasting Group, Inc., Class A (a)37,300 436
R.H. Donnelley Corp. (a)6,900 322
Saga Communications, Inc., Class A (a)31,600 589
Sinclair Broadcast Group, Inc., Class A (a)80,000 1,000
- --------------------------------------------------------------------------------
5,622
================================================================================
ENERGY (12.1%)
Cabot Oil & Gas Corp. 14,600 446
Denbury Resources, Inc. (a)72,100 1,216
Remington Oil & Gas Corp. (a)29,400 581
Southwest Gas Corp. 16,600 388
St. Mary Land & Exploration Co. 18,800 629
Stone Energy Corp. (a)52,400 2,592
Superior Energy Services, Inc. (a)54,900 553
Universal Compression Holdings, Inc. (a)38,400 1,263
- --------------------------------------------------------------------------------
7,668
================================================================================
FINANCIAL SERVICES (22.2%)
Anthracite Capital, Inc. REIT 40,900 521
BankAtlantic Bancorp, Inc., Class A 20,400 346
Capital Automotive REIT 18,300 646
CarrAmerica Realty Corp. REIT 15,600 529
CCC Information Services Group, Inc. (a)31,260 556
Community First Bankshares, Inc. 24,000 771
Conseco, Inc. (a)28,800 667
Direct General Corp. 6,000 217
Downey Financial Corp. 6,400 339
Falcon Financial Investment Trust (a)41,600 386
First Niagara Financial Group, Inc. 34,100 465
LNR Property Corp. 21,500 1,151
MAF Bancorp, Inc. 12,700 552
MB Financial Corp. 11,100 $ 433
NY Magic, Inc. 15,400 390
Oriental Financial Group, Inc. 11,500 366
Parkway Properties, Inc. REIT 12,000 561
Penn-America Group, Inc. 35,900 526
Platinum Underwriters Holdings Ltd. 10,700 343
ProAssurance Corp. (a)22,800 798
Provident Bancorp, Inc. 34,100 404
Provident Bankshares Corp. 13,500 424
Reinsurance Group of America, Inc. 28,200 1,155
Texas Regional Bancshares, Inc. 13,700 583
Triad Guaranty, Inc. (a)16,800 886
Universal Health Realty Income Trust REIT 3,700 125
- --------------------------------------------------------------------------------
14,140
================================================================================
FOOD & TOBACCO (1.1%)
Corn Products International, Inc. 16,700 668
- --------------------------------------------------------------------------------
HEALTH CARE (5.3%)
American Medical Security Group, Inc. (a)14,500 387
Apria Healthcare Group, Inc. (a)63,100 1,889
Diversa Corp. (a)40,400 358
Hanger Orthopedic Group, Inc. (a)41,300 746
- --------------------------------------------------------------------------------
3,380
================================================================================
HEAVY INDUSTRY & TRANSPORTATION (18.9%)
A.O. Smith Corp. 21,400 620
Ametek, Inc. 17,400 446
Black Box Corp. 8,400 450
CIRCOR International, Inc. 26,000 588
Dollar Thrifty Automotive Group, Inc. (a)2,500 63
DRS Technologies, Inc. (a)48,700 1,363
Geo Group, Inc. (The) (a)27,400 630
Imagistics International, Inc. (a)9,600 423
Laidlaw International, Inc. (a)74,000 1,077
Maximus, Inc. (a)13,700 480
Navigant International, Inc. (a)32,000 576
Overnite Corp. 25,700 591
School Specialty, Inc. (a)37,200 1,323
TBC Corp. (a)37,600 1,104
Terex Corp. (a)37,600 1,390
Watts Water Technologies, Inc., Class A 37,600 879
- --------------------------------------------------------------------------------
12,003
================================================================================
RETAIL (9.1%)
AFC Enterprises, Inc. (a)61,700 1,350
Central Garden & Pet Co. (a)20,500 738
Maxwell Shoe Co., Inc., Class A (a)26,300 592
Movie Gallery, Inc. 37,200 729
Russell Corp. 65,200 1,190
Stage Stores, Inc. (a)22,900 886
Topps Co. (The) 34,700 331
- --------------------------------------------------------------------------------
5,816
================================================================================
TECHNOLOGY (4.8)%
EMS Technologies, Inc. (a)16,000 309
Hummingbird Ltd. (a)24,400 554
Imation Corp. 21,400 805
ManTech International Corp., Class A (a)36,900 756
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
STRATEGIC SMALL VALUE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
TECHNOLOGY (CONT'D)
MSC.Software Corp. (a)73,600 $ 649
- --------------------------------------------------------------------------------
3,073
================================================================================
UTILITIES (4.2%)
AGL Resources, Inc. 20,000 580
Energen Corp. 10,700 441
PNM Resources, Inc. 34,100 1,025
UGI Corp. 18,100 596
- --------------------------------------------------------------------------------
2,642
================================================================================
TOTAL COMMON STOCKS (COST $53,393) 60,982
================================================================================
<Caption>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.5%)
REPURCHASE AGREEMENT (3.5%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $2,249 (COST $2,249) $ (f)2,249 2,249
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.4%) (COST $55,642) 63,231
- --------------------------------------------------------------------------------
<Caption>
AMOUNT
(000)
- --------------------------------------------------------------------------------
OTHER ASSETS (1.6%)
Cash $ 2
Receivable for Investments Sold 979
Dividends Receivable 35
Other 1 1,017
- --------------------------------------------------------------------------------
LIABILITIES (-1.0%)
Payable for Investments Purchased (508)
Payable for Investment Advisory Fees (134)
Payable for Administrative Fees (9)
Payable for Custodian Fees (4)
Other Liabilities (17) (672)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 63,576
================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 50,846
Undistributed (Distributions in Excess of)
Net Investment Income (32)
Accumulated Net Realized Gain (Loss) 5,173
Unrealized Appreciation (Depreciation) on
Investments 7,589
- --------------------------------------------------------------------------------
NET ASSETS $ 63,576
================================================================================
INSTITUTIONAL CLASS:
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 4,531,324 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $ 14.03
================================================================================
</Table>
(a) Non-income producing security
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
REIT Real Estate Investment Trust
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
U.S. MID CAP VALUE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (94.5%)
CONSUMER DISCRETIONARY (10.8%)
Darden Restaurants, Inc. 284,490 $ 7,053
Interpublic Group of Cos., Inc. (a)561,200 8,631
Office Depot, Inc. (a)415,330 7,817
Scholastic Corp. (a)260,640 7,102
Starwood Hotels & Resorts Worldwide, Inc. 100,750 4,080
Wendy's International, Inc. 169,570 6,900
- --------------------------------------------------------------------------------
41,583
================================================================================
CONSUMER STAPLES (1.9%)
Hormel Foods Corp. 244,950 7,184
- --------------------------------------------------------------------------------
ENERGY (6.8%)
GlobalSantaFe Corp. 316,860 8,799
Transocean, Inc. (a)249,290 6,953
Valero Energy Corp. 172,410 10,338
- --------------------------------------------------------------------------------
26,090
================================================================================
FINANCIAL SERVICES (24.4%)
A.G. Edwards, Inc. 102,510 4,010
ACE Ltd. 201,990 8,617
AON Corp. 400,770 11,186
Arthur J. Gallagher & Co. 223,870 7,291
Assurant, Inc. (a)372,900 9,378
Bristol West Holdings, Inc. (a)117,880 2,405
Chubb Corp. 145,250 10,101
Conseco, Inc. (a)405,330 9,388
Horace Mann Educators Corp. 305,940 4,809
National Commerce Financial Corp. 303,740 8,690
Sovereign Bancorp, Inc. 506,730 10,854
UnumProvident Corp. 482,170 7,054
- --------------------------------------------------------------------------------
93,783
================================================================================
HEALTH CARE (9.9%)
Applera Corp. - Applied Biosystems Group
(Tracking Stock) 358,410 7,089
Bausch & Lomb, Inc. 212,460 12,741
IMS Health, Inc. 332,050 7,724
Watson Pharmaceuticals, Inc. (a)249,290 10,667
- --------------------------------------------------------------------------------
38,221
================================================================================
INDUSTRIALS (12.2%)
Equifax, Inc. 293,140 7,569
Goodrich Corp. 387,230 10,870
Hubbell, Inc., Class B 232,840 9,344
Manpower, Inc. 167,050 7,768
Pall Corp. 67,100 1,522
Valassis Communications, Inc. (a)319,420 9,710
- --------------------------------------------------------------------------------
46,783
================================================================================
INFORMATION TECHNOLOGY (12.4%)
BearingPoint, Inc. (a)669,730 7,180
BISYS Group, Inc. (The) (a)567,740 9,515
Cadence Design Systems, Inc. (a)426,600 6,288
Convergys Corp. (a)453,670 6,896
Intuit, Inc. (a)182,100 8,173
Sabre Holdings Corp., Class A 387,000 9,601
- --------------------------------------------------------------------------------
47,653
================================================================================
MATERIALS (7.4%)
Hercules, Inc. (a)274,470 $ 3,151
International Flavors & Fragrances, Inc. 283,490 10,064
Lyondell Chemical Co. 534,500 7,932
Temple-Inland, Inc. 114,420 7,247
- --------------------------------------------------------------------------------
28,394
================================================================================
TELECOMMUNICATION SERVICES (1.6%)
Sprint Corp. - PCS Group (Tracking Stock) (a)666,940 6,136
- --------------------------------------------------------------------------------
UTILITIES (7.1%)
Edison International Ltd. 374,420 9,094
Pinnacle West Capital Corp. 233,160 9,175
Wisconsin Energy Corp. 286,180 9,201
- --------------------------------------------------------------------------------
27,470
================================================================================
TOTAL COMMON STOCKS (COST $322,260) 363,297
================================================================================
<Caption>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (5.9%)
REPURCHASE AGREEMENT (5.9%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $22,945 (COST $22,944) $ (f)22,944 22,944
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%) (COST $345,204) 386,241
================================================================================
<Caption>
AMOUNT
(000)
- --------------------------------------------------------------------------------
OTHER ASSETS (0.3%)
Cash $ 1
Dividends Receivable 603
Receivable for Investments Sold 410
Interest Receivable 1
Other 15 1,030
- --------------------------------------------------------------------------------
LIABILITIES (-0.7%)
Payable for Investments Purchased (1,806)
Payable for Investment Advisory Fees (785)
Payable for Trustees' Fees and Expenses (37)
Payable for Administrative Fees (34)
Payable for Distribution Fees -- Adviser Class (13)
Payable for Custodian Fees (7)
Payable for Shareholder Servicing Fees --
Investment Class (2)
Other Liabilities (42) (2,726)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 384,545
================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 607,688
Undistributed (Distributions in Excess of)
Net Investment Income 249
Accumulated Net Realized Gain (Loss) (264,429)
Unrealized Appreciation (Depreciation) on
Investments 41,037
- --------------------------------------------------------------------------------
NET ASSETS $ 384,545
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. MID CAP VALUE PORTFOLIO
<Table>
<Caption>
AMOUNT
(000)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS:
NET ASSETS $ 307,362
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 14,644,136 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 20.99
================================================================================
INVESTMENT CLASS:
NET ASSETS $ 15,044
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 720,760 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 20.87
================================================================================
ADVISER CLASS:
NET ASSETS $ 62,139
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,976,435 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 20.88
================================================================================
</Table>
(a) Non-income producing security
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
U.S. SMALL CAP VALUE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (90.3%)
BASIC RESOURCES (5.9%)
Albany International Corp., Class A 173,100 $ 4,655
Apex Silver Mines Ltd. (a)145,800 3,289
Cytec Industries, Inc. 121,900 4,336
FMC Corp. (a)61,000 2,612
Georgia Gulf Corp. 113,900 3,434
GrafTech International Ltd. (a)187,500 2,803
IMC Global, Inc. 256,400 3,666
OM Group, Inc. (a)117,200 3,563
Reliance Steel & Aluminum Co. 135,100 4,749
Rock-Tenn Co., Class A 219,600 3,167
- --------------------------------------------------------------------------------
36,274
================================================================================
CONSUMER DURABLES (1.9%)
Furniture Brands International, Inc. 123,900 3,990
Lojack Corp. (a)286,000 2,171
Tower Automotive, Inc. (a)1,061,000 5,347
- --------------------------------------------------------------------------------
11,508
================================================================================
CONSUMER SERVICES (9.9%)
Alliance Gaming Corp. (a)190,000 6,105
Ambassadors Group, Inc. 116,600 2,883
Argosy Gaming Co. (a)174,400 6,200
Banta Corp. 73,200 3,388
Choice Hotels International, Inc. 103,600 4,635
Gray Television, Inc. 352,700 5,156
Intrawest Corp. 400,000 6,804
Journal Communications, Inc., Class A 102,900 2,058
La Quinta Corp. (a)458,500 3,457
Nexstar Broadcasting Group, Inc., Class A (a)251,100 2,935
R.H. Donnelley Corp. (a)45,900 2,144
Saga Communications, Inc., Class A (a)183,900 3,430
SCP Pool Corp. (a)136,300 5,079
Sinclair Broadcast Group, Inc., Class A (a)513,900 6,424
- --------------------------------------------------------------------------------
60,698
================================================================================
ENERGY (8.5%)
Cabot Oil & Gas Corp. 69,000 2,109
Cimarex Energy Co. (a)156,100 4,511
Denbury Resources, Inc. (a)492,700 8,307
Remington Oil & Gas Corp. (a)171,200 3,381
St. Mary Land & Exploration Co. 108,200 3,617
Stone Energy Corp. (a)302,800 14,977
Superior Energy Services, Inc. (a)316,400 3,189
Ultra Petroleum Corp. (a)153,600 4,610
Universal Compression Holdings, Inc. (a)229,400 7,547
- --------------------------------------------------------------------------------
52,248
================================================================================
FINANCIAL SERVICES (25.8%)
Affiliated Managers Group, Inc. (a)87,150 4,757
American Financial Group, Inc. 139,100 4,149
Anthracite Capital, Inc. REIT 236,700 3,013
Associated Banc-Corp. 73,500 3,292
BankAtlantic Bancorp, Inc., Class A 117,800 1,998
Camden Property Trust REIT 52,800 2,373
Capital Automotive REIT 102,900 3,633
CarrAmerica Realty Corp. REIT 89,900 3,048
Catellus Development Corp. REIT 125,821 $ 3,273
CCC Information Services Group, Inc. (a)199,674 3,548
Community First Bankshares, Inc. 134,900 4,336
Conseco, Inc. (a)168,400 3,900
Cousins Properties, Inc. REIT 105,900 3,472
Cullen/Frost Bankers, Inc. 78,700 3,365
Direct General Corp. 68,500 2,480
Downey Financial Corp. 72,000 3,809
Falcon Financial Investment Trust (a)278,100 2,584
First Midwest Bancorp, Inc. 132,100 4,510
First Niagara Financial Group, Inc. 203,300 2,775
Greater Bay Bancorp. 149,600 4,376
Independent Bank Corp. 80,000 2,229
Integra Bank Corp. 122,200 2,944
Kilroy Realty Corp. REIT 111,800 3,969
LNR Property Corp. 125,600 6,723
Macerich Co. (The) REIT 54,500 2,938
MAF Bancorp, Inc. 79,500 3,455
MB Financial Corp. 76,900 2,998
NY Magic, Inc. 102,700 2,598
Oriental Financial Group, Inc. 66,300 2,112
Parkway Properties, Inc. REIT 69,600 3,254
Penn-America Group, Inc. 202,700 2,972
PFF Bancorp, Inc. 55,100 2,101
Platinum Underwriters Holdings Ltd. 117,900 3,779
ProAssurance Corp. (a)132,200 4,627
Provident Bancorp, Inc. 196,900 2,333
Provident Bankshares Corp. 76,300 2,394
PS Business Parks, Inc. REIT 63,200 2,929
R&G Financial Corp., Class B 95,950 3,314
Reinsurance Group of America, Inc. 181,900 7,452
Sky Financial Group, Inc. 182,700 4,741
Stancorp Financial Group, Inc. 77,300 5,044
Texas Regional Bancshares, Inc. 107,109 4,558
Triad Guaranty, Inc. (a)93,900 4,953
Webster Financial Corp. 100,400 5,091
- --------------------------------------------------------------------------------
158,199
================================================================================
FOOD & TOBACCO (2.6%)
Corn Products International, Inc. 95,100 3,804
Delta & Pine Land Co. 125,600 3,134
Riviana Foods, Inc. 55,000 1,534
Smithfield Foods, Inc. (a)132,100 3,582
Universal Corp. 75,200 3,822
- --------------------------------------------------------------------------------
15,876
================================================================================
HEALTH CARE (3.8%)
Apria Healthcare Group, Inc. (a)359,500 10,763
Diversa Corp. (a)229,500 2,033
Hanger Orthopedic Group, Inc. (a)241,800 4,365
Medicines Co. (a)71,000 2,287
Steris Corp. (a)155,000 3,999
- --------------------------------------------------------------------------------
23,447
================================================================================
HEAVY INDUSTRY & TRANSPORTATION (15.9%)
A.O. Smith Corp. 143,600 4,157
Ametek, Inc. 107,600 2,759
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. SMALL CAP VALUE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
HEAVY INDUSTRY & TRANSPORTATION (CONT'D)
Arkansas Best Corp. 84,500 $ 2,264
Black Box Corp. 48,700 2,610
CIRCOR International, Inc. 152,700 3,451
Covenant Transport, Inc., Class A (a)137,700 2,483
Dollar Thrifty Automotive Group, Inc. (a)16,800 424
DRS Technologies, Inc. (a)277,900 7,776
Gardner Denver, Inc. (a)104,000 2,816
Genesee & Wyoming, Inc., Class A (a)146,850 3,627
Geo Group, Inc. (The) (a)144,300 3,319
Goodrich Corp. 91,200 2,560
Icon plc ADR (a)133,200 4,706
Imagistics International, Inc. (a)55,700 2,454
Laidlaw International, Inc. (a)429,500 6,249
Maximus, Inc. (a)78,600 2,751
Navigant International, Inc. (a)210,300 3,785
Navistar International Corp. (a)57,700 2,645
Oshkosh Truck Corp. 81,200 4,523
Overnite Corp. 148,700 3,420
Ryder System, Inc. 46,400 1,797
School Specialty, Inc. (a)211,800 7,534
TBC Corp. (a)219,600 6,450
Terex Corp. (a)218,500 8,078
Watts Water Technologies, Inc., Class A 214,500 5,017
- --------------------------------------------------------------------------------
97,655
================================================================================
RETAIL (7.6%)
AFC Enterprises, Inc. (a)355,700 7,781
Central Garden & Pet Co. (a)118,400 4,262
Foot Locker, Inc. 188,600 4,866
Hancock Fabrics, Inc. 199,500 3,170
Maxwell Shoe Co., Inc., Class A (a)135,300 3,046
Movie Gallery, Inc. 215,800 4,228
Russell Corp. 418,200 7,636
Stage Stores, Inc. (a)132,700 5,134
Topps Co. (The) 201,200 1,921
Tuesday Morning Corp. (a)126,400 4,356
- --------------------------------------------------------------------------------
46,400
================================================================================
TECHNOLOGY (4.6%)
Electronics for Imaging, Inc. (a)88,930 2,185
EMS Technologies, Inc. (a)91,400 1,765
Hummingbird Ltd. (a)150,225 3,413
Imation Corp. 142,100 5,346
ManTech International Corp., Class A (a)248,300 5,088
MSC.Software Corp. (a)497,400 4,382
Sybase, Inc. (a)208,300 4,372
Tech Data Corp. (a)35,000 1,433
- --------------------------------------------------------------------------------
27,984
================================================================================
UTILITIES (3.8%)
AGL Resources, Inc. 180,500 5,238
Avista Corp. 110,500 2,091
ONEOK, Inc. 103,900 2,343
Peoples Energy Corp. 41,200 1,840
PNM Resources, Inc. 194,100 5,833
UGI Corp. 77,200 2,541
WGL Holdings, Inc. 112,000 $ 3,371
- --------------------------------------------------------------------------------
23,257
================================================================================
TOTAL COMMON STOCKS (COST $452,499) 553,546
================================================================================
MUTUAL FUND (5.0%)
iShares Russell 2000 Value Index Fund
(COST $29,407) 177,700 30,422
- --------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.3%)
REPURCHASE AGREEMENT (4.3%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $26,590 (COST $26,589) $ (f)26,589 26,589
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%) (COST $508,495) 610,557
================================================================================
<Caption>
AMOUNT
(000)
- --------------------------------------------------------------------------------
OTHER ASSETS (1.5%)
Cash $ 10
Receivable for Investments Sold 8,707
Dividends Receivable 576
Interest Receivable 1
Other 17 9,311
- --------------------------------------------------------------------------------
LIABILITIES (-1.1%)
Payable for Investments Purchased (5,543)
Payable for Investment Advisory Fees (1,116)
Payable for Administrative Fees (50)
Payable for Trustees' Fees and Expenses (32)
Payable for Distribution Fees -- Adviser Class (17)
Payable for Custodian Fees (9)
Other Liabilities (38) (6,805)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 613,063
================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 541,799
Undistributed (Distributions in Excess of)
Net Investment Income 455
Accumulated Net Realized Gain (Loss) (31,253)
Unrealized Appreciation (Depreciation) on
Investments 102,062
- --------------------------------------------------------------------------------
NET ASSETS $ 613,063
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. SMALL CAP VALUE PORTFOLIO
<Table>
<Caption>
AMOUNT
(000)
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS:
NET ASSETS $ 540,633
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 24,382,591 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $ 22.17
================================================================================
ADVISER CLASS:
NET ASSETS $ 72,430
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 3,270,562 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $ 22.15
================================================================================
</Table>
(a) Non-income producing security
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
ADR American Depositary Receipt
REIT Real Estate Investment Trust
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
VALUE PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (96.7%)
CONSUMER DISCRETIONARY (8.3%)
Boise Cascade Corp. 109,300 $ 3,787
Clear Channel Communications, Inc. (c)413,200 17,499
Darden Restaurants, Inc. 438,700 10,875
Eastman Kodak Co. 267,500 7,000
Federated Department Stores, Inc. 193,200 10,442
General Motors Corp. (c)120,800 5,690
Jones Apparel Group, Inc. 345,500 12,490
Liberty Media Corp., Class A (a)1,402,600 15,359
May Department Stores Co. (The) 183,100 6,332
Walt Disney Holding Co. 711,600 17,783
- --------------------------------------------------------------------------------
107,257
================================================================================
CONSUMER STAPLES (7.0%)
Altria Group, Inc. 287,500 15,654
CVS Corp. 210,200 7,420
Kimberly-Clark Corp. 486,000 30,667
Kraft Foods, Inc., Class A (c)356,000 11,395
Kroger Co. (The) (a)767,300 12,768
Unilever N.V. (NY Shares) (c)181,900 12,631
- --------------------------------------------------------------------------------
90,535
================================================================================
ENERGY (16.5%)
BP plc ADR (c)294,700 15,089
ConocoPhillips, Inc. 150,200 10,485
GlobalSantaFe Corp. (c)878,300 24,390
Halliburton Co. 2,044,400 62,129
Petroleo Brasileiro S.A. ADR (c)193,900 6,496
Royal Dutch Petroleum Co. (NY Shares) 95,100 4,525
Schlumberger Ltd. 832,500 53,155
Total S.A. ADR 180,800 16,634
Transocean, Inc. (a),(c)728,000 20,304
- --------------------------------------------------------------------------------
213,207
================================================================================
FINANCIAL SERVICES (19.5%)
Allstate Corp. (The) 418,300 19,016
Ambac Financial Group, Inc. 138,800 10,241
Assurant, Inc. (a)168,200 4,230
Bank of America Corp. 370,500 30,003
Berkshire Hathaway, Inc., Class B (a)500 1,556
Capital One Financial Corp. 29,600 2,233
Chubb Corp. 280,600 19,513
Citigroup, Inc. 520,800 26,925
Fannie Mae 93,900 6,981
Freddie Mac 835,000 49,315
Goldman Sachs Group, Inc. 9,600 1,002
J.P. Morgan Chase & Co. 146,900 6,162
Merrill Lynch & Co., Inc. 74,000 4,407
Metlife, Inc. 251,300 8,966
PNC Financial Services Group, Inc. 294,100 16,299
SunTrust Banks, Inc. 41,600 2,900
Torchmark Corp. 204,900 11,022
Travelers Property Casualty Corp., Class A 238,400 4,089
Travelers Property Casualty Corp., Class B 102,200 1,765
Wells Fargo & Co. 469,700 26,618
- --------------------------------------------------------------------------------
253,243
================================================================================
HEALTH CARE (13.3%)
Aetna, Inc. 254,500 $ 22,834
AmerisourceBergen Corp. (c)148,600 8,125
Bristol-Myers Squibb Co. 1,822,700 44,164
GlaxoSmithKline plc ADR (c)925,300 36,966
Merck & Co., Inc. 98,900 4,370
Pfizer, Inc. 603,100 21,139
Roche Holding Ltd. ADR (a)155,700 15,209
Schering-Plough Corp. 743,200 12,055
Wyeth 191,800 7,202
- --------------------------------------------------------------------------------
172,064
================================================================================
INDUSTRIALS (0.6%)
Burlington Northern Santa Fe Corp. 254,700 8,023
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (5.6%)
Affiliated Computer Services, Inc., Class A (a)81,900 4,251
Check Point Software Technologies Ltd. (a),(c)98,100 2,234
Ericsson (LM) Telefonaktiebolaget ADR (a),(c)115,000 3,191
Flextronics International Ltd. (a)484,700 8,347
Hewlett-Packard Co. 999,700 22,833
Intel Corp. 33,200 903
International Business Machines Corp. 70,500 6,475
Jabil Circuit, Inc. (a)85,900 2,528
JDS Uniphase Corp. (a)183,800 748
Lexmark International, Inc. (a)52,600 4,839
Microsoft Corp. 249,600 6,232
Nokia Oyj ADR (c)246,600 5,001
Novellus Systems, Inc. (a)39,000 1,240
SunGard Data Systems, Inc. (a)159,500 4,370
- --------------------------------------------------------------------------------
73,192
================================================================================
MATERIALS (9.0%)
Alcoa, Inc. 333,600 11,573
Dow Chemical Co. (The) 611,200 24,619
E.I. DuPont de Nemours & Co. 357,500 15,094
Georgia Pacific Corp. 695,100 23,418
International Paper Co. 694,000 29,328
PPG Industries, Inc. 104,400 6,086
Rohm & Haas Co. 158,800 6,327
- --------------------------------------------------------------------------------
116,445
================================================================================
TELECOMMUNICATION SERVICES (10.8%)
Amdocs Ltd. (a),(c)67,000 1,862
SBC Communications, Inc. 1,525,600 37,438
Sprint Corp. (FON Group) 3,039,900 56,026
Verizon Communications, Inc. 1,237,200 45,207
- --------------------------------------------------------------------------------
140,533
================================================================================
UTILITIES (6.1%)
American Electric Power Co., Inc. 171,800 5,656
CenterPoint Energy, Inc. (c)312,300 3,569
Constellation Energy Group, Inc. 164,600 6,576
FirstEnergy Corp. 735,200 28,732
Public Service Enterprise Group, Inc. 95,700 4,496
Scottish Power plc ADR (c)96,500 2,737
TXU Corp. 935,400 26,808
- --------------------------------------------------------------------------------
78,574
================================================================================
TOTAL COMMON STOCKS (COST $1,112,747) 1,253,073
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
VALUE PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (10.8%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED SECURITIES (7.3%)
American Express Credit Corp.,
1.10%, 4/15/04 $ (h)840 $ 840
Beta Finance, Inc., 1.08%, 4/1/04 (h)3,917 3,917
Canadian Imperial Bank N.Y.,
1.11%, 4/1/04 (h)1,399 1,399
Chase Credit Card Master Trust,
1.10%, 4/15/04 (h)1,120 1,120
CIC N.Y., 1.11%, 7/30/04 1,399 1,399
CIT Group Holdings, 1.12%, 6/21/04 (h)1,036 1,036
Credit Agricole N.Y., 1.07%, 4/1/04 (h)4,028 4,028
CS First Boston, N.Y., 1.04%, 4/2/04 2,518 2,518
Dresdner Bank N.Y., 1.05%, 4/20/04 2,800 2,800
Federal National Mortgage Association,
1.13%, 4/14/04 1,234 1,234
Jackson National Life Global Funding,
1.06%, 4/1/04 (h)1,405 1,405
Landesbank Hessen Thueringen London,
1.50%, 11/19/04 1,400 1,400
Links Finance LLC, 1.08%, 4/1/04 (h)1,399 1,399
Links Finance LLC, 1.09%, 4/1/04 (h)2,238 2,238
Macquarie Bank Ltd., 1.18%, 6/24/04 (h)1,231 1,231
Natexis Banques Populaires N.Y.,
1.21%, 4/1/04 (h)2,237 2,237
Nationwide Building Society,
1.12%, 6/28/04 (h)3,245 3,245
Sears Credit Card Account Master,
1.12%, 4/15/04 (h)2,240 2,240
Societe Generale London,
1.54%, 11/12/04 1,399 1,399
Societe Generale N.Y., 1.07%, 4/1/04 (h)2,713 2,713
Target Credit Card Master Trust,
1.12%, 4/26/04 (h)2,211 2,211
UBS Securities LLC, 1.06%, 4/1/04 44,073 44,073
Union Bank of Switzerland,
1.13%, 12/20/04 2,798 2,798
Wachovia Bank N.A., 1.13%, 4/1/04 (h)2,800 2,800
Westdeutsche Landesbank N.Y.,
1.09%, 4/1/04 (h)2,741 2,741
- --------------------------------------------------------------------------------
94,421
================================================================================
REPURCHASE AGREEMENT (3.5%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $45,204 (f)45,203 45,203
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $139,624) 139,624
================================================================================
TOTAL INVESTMENTS (107.5%) (COST $1,252,371) --
INCLUDING $93,567 OF SECURITIES LOANED 1,392,697
================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------------------------------
OTHER ASSETS (0.2%)
Dividends Receivable $ 2,592
Interest Receivable 1
Other 30 $ 2,623
- --------------------------------------------------------------------------------
LIABILITIES (-7.7%)
Collateral on Securities Loaned, at Value (94,421)
Payable for Investments Purchased (3,003)
Payable for Investment Advisory Fees (1,539)
Payable for Distribution Fees --
Adviser Class (186)
Payable for Administrative Fees (99)
Payable for Trustees' Fees and Expenses (40)
Payable for Custodian Fees (13)
Payable for Shareholder Servicing Fees --
Investment Class (3)
Other Liabilities (53) (99,357)
- --------------------------------------------------------------------------------
NET ASSETS (100%) $ 1,295,963
================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 1,247,670
Undistributed (Distributions in Excess of)
Net Investment Income 4,263
Accumulated Net Realized Gain (Loss) (96,296)
Unrealized Appreciation (Depreciation) on
Investments 140,326
- --------------------------------------------------------------------------------
NET ASSETS $ 1,295,963
================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 368,642
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 23,096,331 outstanding shares of
beneficial interest (unlimited authorization, no
par value) $ 15.96
================================================================================
INVESTMENT CLASS:
NET ASSETS $ 34,472
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,157,334 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 15.98
================================================================================
ADVISER CLASS:
NET ASSETS $ 892,849
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 56,003,962 outstanding shares of
beneficial interest (unlimited authorization,
no par value) $ 15.94
================================================================================
</Table>
(a) Non-income producing security
(c) All or a portion of security on loan at March 31, 2004.
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates shown
are those in effect on March 31, 2004.
ADR American Depositary Receipt
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2004
<Table>
<Caption>
MID CAP STRATEGIC
EQUITY GROWTH SMALL VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME+:
Dividends $ 1,643 $ 2,184 $ 350
Interest 27 141 10
- -----------------------------------------------------------------------------------------------------------------------
Total Investment Income 1,670 2,325 360
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 409 2,991 300
Administrative Fees 75 531 30
Custodian Fees 16 48 12
Shareholder Reporting Fee 6 103 14
Professional Fees 13 22 12
Shareholder Servicing Fees --
Investment Class Shares -- -- --
Distribution Fees -- Adviser Class Shares 1 761 --
Trustees' Fees and Expenses 4 19 --#
Other Expenses 23 80 22
- -----------------------------------------------------------------------------------------------------------------------
Total Expenses 547 4,555 390
- -----------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees -- -- (45)
Expense Offset --# --# --
- -----------------------------------------------------------------------------------------------------------------------
Net Expenses 547 4,555 345
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 1,123 (2,230) 15
- -----------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON:
Investments Sold 15,271 176,294 9,042
- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON:
Investments 6,804 14,921 2,074
- -----------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain (Loss) and Change
in Unrealized Appreciation (Depreciation) 22,075 191,215 11,116
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $23,198 $188,985 $11,131
=======================================================================================================================
<Caption>
U.S. MID U.S. SMALL
CAP VALUE CAP VALUE VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME+:
Dividends $ 2,690 $ 3,260 $ 13,021
Interest 55 147 236
- -----------------------------------------------------------------------------------------------------------------------
Total Investment Income 2,745 3,407 13,257
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 1,644 2,265 2,876
Administrative Fees 201 268 504
Custodian Fees 29 29 42
Shareholder Reporting Fee 47 62 121
Professional Fees 13 16 26
Shareholder Servicing Fees --
Investment Class Shares 11 -- 23
Distribution Fees -- Adviser Class Shares 96 95 939
Trustees' Fees and Expenses 11 11 16
Other Expenses 32 43 52
- -----------------------------------------------------------------------------------------------------------------------
Total Expenses 2,084 2,789 4,599
- -----------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees -- -- --
Expense Offset (3) --# --#
- -----------------------------------------------------------------------------------------------------------------------
Net Expenses 2,081 2,789 4,599
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 664 618 8,658
- -----------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON:
Investments Sold 111,527 96,679 178,869
- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON:
Investments (41,009) 21,361 (10,572)
- -----------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain (Loss) and Change
in Unrealized Appreciation (Depreciation) 70,518 118,040 168,297
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $71,182 $118,658 $176,955
=======================================================================================================================
</Table>
+ Net of $2, $22 and $1, withholding tax for the Equity Portfolio, Mid Cap
Growth Portfolio and Strategic Small Value Portfolio, respectively.
# Amount is less than $500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
EQUITY MID CAP GROWTH
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
2004 30, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 1,123 $ 2,366 $ (2,230) $ (4,357)
Net Realized Gain (Loss) 15,271 8,131 176,294 45,464
Net Change in Unrealized Appreciation (Depreciation) 6,804 29,663 14,921 203,522
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 23,198 40,160 188,985 244,629
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (994) (2,539) -- --
Net Realized Gain -- -- -- --
ADVISER CLASS:
Net Investment Income (4) (7) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (998) (2,546) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 20,762 36,506 142,578 223,058
Distributions Reinvested 986 2,449 -- --
Redeemed (24,057) (97,710) (237,492) (229,215)
ADVISER CLASS:
Subscribed 71 148 113,348 187,568
Distributions Reinvested 4 7 -- --
Redeemed (880) (198) (73,018) (159,693)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (3,114) (58,798) (54,584) 21,718
- ----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 19,086 (21,184) 134,401 266,347
NET ASSETS:
Beginning of Period 151,115 172,299 1,091,331 824,984
- ----------------------------------------------------------------------------------------------------------------------------------
End of Period $170,201 $151,115 $1,225,732 $1,091,331
==================================================================================================================================
Undistributed (Distributions in Excess of)
Net Investment Income Included in End of Period Net Assets $ 560 $ 435 $ -- $ --
Accumulated Net Investment Loss Included in End of Period
Net Assets -- -- (2,322) (92)
==================================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 2,106 5,053 8,295 18,366
Shares Issued on Distributions Reinvested 104 316 -- --
Shares Redeemed (2,480) (12,370) (13,796) (19,735)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding (270) (7,001) (5,501) (1,369)
==================================================================================================================================
ADVISER CLASS:
Shares Subscribed 7 18 6,656 14,498
Shares Issued on Distributions Reinvested 1 1 -- --
Shares Redeemed (84) (26) (4,325) (13,076)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares Outstanding (76) (7) 2,331 1,422
==================================================================================================================================
<Caption>
STRATEGIC SMALL VALUE
PORTFOLIO
- ------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, SEPTEMBER
2004 30,
(UNAUDITED) 2003
(000) (000)
- ------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 15 $ 78
Net Realized Gain (Loss) 9,042 991
Net Change in Unrealized Appreciation (Depreciation) 2,074 8,289
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 11,131 9,358
- ------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (78) (60)
Net Realized Gain (4,303) --
ADVISER CLASS:
Net Investment Income -- --
- ------------------------------------------------------------------------------------------------
Total Distributions (4,381) (60)
- ------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 8,395 32,308
Distributions Reinvested 4,381 60
Redeemed (9,464) (8,548)
ADVISER CLASS:
Subscribed -- --
Distributions Reinvested -- --
Redeemed -- --
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 3,312 23,820
- ------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 10,062 33,118
NET ASSETS:
Beginning of Period 53,514 20,396
- ------------------------------------------------------------------------------------------------
End of Period $63,576 $53,514
================================================================================================
Undistributed (Distributions in Excess of)
Net Investment Income Included in End of Period Net Assets $ (32) $ 31
Accumulated Net Investment Loss Included in End of Period
Net Assets -- --
================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 623 2,967
Shares Issued on Distributions Reinvested 333 6
Shares Redeemed (707) (764)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding 249 2,209
================================================================================================
ADVISER CLASS:
Shares Subscribed -- --
Shares Issued on Distributions Reinvested -- --
Shares Redeemed -- --
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares Outstanding -- --
================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
U.S. MID CAP VALUE U.S. SMALL CAP VALUE
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
2004 30, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 664 $ 513 $ 618 $ 1,091
Net Realized Gain (Loss) 111,527 (124,379) 96,679 (6,033)
Net Change in Unrealized Appreciation (Depreciation) (41,009) 303,118 21,361 151,629
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 71,182 179,252 118,658 146,687
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (872) -- (822) (2,280)
INVESTMENT CLASS:
Net Investment Income (12) -- -- --
ADVISER CLASS:
Net Investment Income (11) -- -- (59)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (895) -- (822) (2,339)
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 83,932 225,748 123,108 221,655
Distributions Reinvested 852 -- 738 1,807
Redeemed (274,899) (605,222) (223,465) (406,455)
INVESTMENT CLASS:
Subscribed 1,880 4,769 -- --
Distributions Reinvested 12 -- -- --
Redeemed (1,918) (31,125) -- --
ADVISER CLASS:
Subscribed 15,750 32,702 18,037 20,461
Distributions Reinvested 11 -- -- 59
Redeemed (50,874) (71,772) (24,202) (21,631)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (225,254) (444,900) (105,784) (184,104)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (154,967) (265,648) 12,052 (39,756)
NET ASSETS:
Beginning of Period 539,512 805,160 601,011 640,767
- ----------------------------------------------------------------------------------------------------------------------------------
End of Period $ 384,545 $ 539,512 $ 613,063 $ 601,011
==================================================================================================================================
Undistributed (Distributions in Excess of) Net Investment
Income Included in End of Period Net Assets $ 249 $ 480 $ 455 $ 659
==================================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 4,176 16,066 5,966 14,780
Shares Issued on Distributions Reinvested 42 -- 36 122
Shares Redeemed (14,021) (41,444) (11,123) (27,334)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding (9,803) (25,378) (5,121) (12,432)
==================================================================================================================================
INVESTMENT CLASS:
Shares Subscribed 92 313 -- --
Shares Issued on Distributions Reinvested 1 -- -- --
Shares Redeemed (96) (2,053) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class
Shares Outstanding (3) (1,740) -- --
==================================================================================================================================
ADVISER CLASS:
Shares Subscribed 793 2,114 879 1,265
Shares Issued on Distributions Reinvested 1 -- -- 4
Shares Redeemed (2,537) (4,799) (1,154) (1,432)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares Outstanding (1,743) (2,685) (275) (163)
==================================================================================================================================
<Caption>
VALUE
PORTFOLIO
- ------------------------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, SEPTEMBER
2004 30,
(UNAUDITED) 2003
(000) (000)
- ------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ 8,658 $ 13,955
Net Realized Gain (Loss) 178,869 (126,760)
Net Change in Unrealized Appreciation (Depreciation) (10,572) 355,321
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 176,955 242,516
- ------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (3,053) (7,260)
INVESTMENT CLASS:
Net Investment Income (205) (310)
ADVISER CLASS:
Net Investment Income (4,725) (6,551)
- ------------------------------------------------------------------------------------------------
Total Distributions (7,983) (14,121)
- ------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 59,932 98,739
Distributions Reinvested 2,950 7,030
Redeemed (114,963) (307,494)
INVESTMENT CLASS:
Subscribed 8,715 13,267
Distributions Reinvested 206 306
Redeemed (5,061) (12,039)
ADVISER CLASS:
Subscribed 212,723 197,545
Distributions Reinvested 4,719 6,537
Redeemed (54,265) (231,355)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 114,956 (227,464)
- ------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 283,928 931
NET ASSETS:
Beginning of Period 1,012,035 1,011,104
- ------------------------------------------------------------------------------------------------
End of Period $1,295,963 $1,012,035
================================================================================================
Undistributed (Distributions in Excess of) Net Investment
Income Included in End of Period Net Assets $ 4,263 $ 3,588
================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 3,807 8,562
Shares Issued on Distributions Reinvested 203 621
Shares Redeemed (7,581) (25,423)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding (3,571) (16,240)
================================================================================================
INVESTMENT CLASS:
Shares Subscribed 562 1,058
Shares Issued on Distributions Reinvested 14 26
Shares Redeemed (336) (991)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class
Shares Outstanding 240 93
================================================================================================
ADVISER CLASS:
Shares Subscribed 13,594 15,648
Shares Issued on Distributions Reinvested 323 570
Shares Redeemed (3,600) (20,819)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares Outstanding 10,317 (4,601)
================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
EQUITY PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 --------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.90 $ 7.18 $ 9.75 $ 17.28 $ 19.82 $ 20.44
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.07+ 0.11+ 0.08+ 0.09+ 0.05+ 0.14
Net Realized and Unrealized Gain (Loss)
on Investments 1.33 1.72 (2.57) (4.78) 3.53 5.24
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.40 1.83 (2.49) (4.69) 3.58 5.38
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.06) (0.11) (0.08) (0.09) (0.05) (0.17)
Net Realized Gain -- -- -- (2.75) (6.07) (5.83)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.11) (0.08) (2.84) (6.12) (6.00)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.24 $ 8.90 $ 7.18 $ 9.75 $ 17.28 $ 19.82
==================================================================================================================================
TOTAL RETURN 15.79%++ 25.78% (25.71)% (30.58)% 19.83% 30.15%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 170,196 $150,432 $171,698 $403,062 $615,078 $635,593
Ratio of Expenses to Average Net Assets (1) 0.67%* 0.63% 0.66% 0.62% 0.61% 0.62%
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.37%* 1.35% 0.78% 0.71% 0.27% 0.64%
Portfolio Turnover Rate 85%++ 59% 93% 160% 211% 103%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net
Assets Including Expense Offsets 0.67%* 0.62% 0.66% 0.62% 0.61% 0.60%
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
-------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 --------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.88 $ 7.17 $ 9.71 $ 17.24 $ 19.79 $ 20.42
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.05+ 0.09+ 0.05+ 0.06+ 0.01+ 0.11
Net Realized and Unrealized Gain (Loss)
on Investments 1.33 1.71 (2.55) (4.78) 3.53 5.21
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.38 1.80 (2.50) (4.72) 3.54 5.32
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.05) (0.09) (0.04) (0.06) (0.02) (0.12)
Net Realized Gain -- -- -- (2.75) (6.07) (5.83)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.05) (0.09) (0.04) (2.81) (6.09) (5.95)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.21 $ 8.88 $ 7.17 $ 9.71 $ 17.24 $ 19.79
==================================================================================================================================
TOTAL RETURN 15.58%++ 25.35% (25.83)% (30.81)% 19.58% 29.80%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 5 $ 683 $ 601 $ 1,063 $ 5,039 $ 2,123
Ratio of Expenses to Average Net Assets (2) 0.92%* 0.88% 0.91% 0.86% 0.86% 0.87%
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.12%* 1.10% 0.53% 0.48% 0.04% 0.34%
Portfolio Turnover Rate 85%++ 59% 93% 160% 211% 103%
- ----------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.92%* 0.87% 0.91% 0.86% 0.86% 0.85%
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
* Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
MID CAP GROWTH PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.42 $ 11.65 $ 14.80 $ 35.15 $ 25.77 $ 18.62
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02)+ (0.05)+ (0.05)+ (0.05) (0.06) (0.01)
Net Realized and Unrealized Gain (Loss)
on Investments 2.76 3.82 (3.10) (16.44) 13.71 10.65
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.74 3.77 (3.15) (16.49) 13.65 10.64
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- -- -- -- -- (0.00)#
Net Realized Gain -- -- -- (3.86) (4.27) (3.49)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (3.86) (4.27) (3.49)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.16 $ 15.42 $ 11.65 $ 14.80 $ 35.15 $ 25.77
==================================================================================================================================
TOTAL RETURN 17.77%++ 32.36% (21.28)% (50.80)% 56.60% 64.27%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 559,170 $559,760 $438,778 $1,063,186 $2,109,750 $785,659
Ratio of Expenses to Average Net Assets (1) 0.64%* 0.64% 0.65% 0.61% 0.62% 0.62%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.25)%* (0.37)% (0.35)% (0.25)% (0.21)% (0.07)%
Portfolio Turnover Rate 95%++ 180% 221% 145% 169% 208%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.64%* 0.63% 0.64% 0.60% 0.61% 0.60%
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
----------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.13 $ 11.45 $ 14.59 $ 34.79 $ 25.59 $ 18.55
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.04)+ (0.08)+ (0.09)+ (0.10) (0.09) (0.05)
Net Realized and Unrealized Gain (Loss)
on Investments 2.70 3.76 (3.05) (16.24) 13.56 10.58
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.66 3.68 (3.14) (16.34) 13.47 10.53
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Realized Gain -- -- -- (3.86) (4.27) (3.49)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.79 $ 15.13 $ 11.45 $ 14.59 $ 34.79 $ 25.59
==================================================================================================================================
TOTAL RETURN 17.58%++ 32.14% (21.52)% (50.91)% 56.24% 63.87%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 666,562 $531,571 $386,206 $656,786 $979,694 $263,312
Ratio of Expenses to Average Net Assets (2) 0.89%* 0.89% 0.90% 0.86% 0.87% 0.88%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.50)%* (0.62)% (0.60)% (0.50)% (0.46)% (0.31)%
Portfolio Turnover Rate 95%++ 180% 221% 145% 169% 208%
- ----------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.89%* 0.88% 0.89% 0.85% 0.86% 0.86%
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
# Amount is less than $0.005 per share.
* Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
STRATEGIC SMALL VALUE PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------------------------
SIX MONTHS PERIOD FROM
ENDED JUNE 30,
MARCH 31, 2000** TO
2004 YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.50 $ 9.84 $ 10.51 $10.62 $10.00
===============================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.00)+# 0.02+ 0.05+ 0.09 0.03
Net Realized and Unrealized Gain (Loss)
on Investments 2.56 2.66 (0.24) (0.15) 0.59
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.56 2.68 (0.19) (0.06) 0.62
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.02) (0.02) (0.05) (0.05) --
Net Realized Gain (1.01) -- (0.43) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.03) (0.02) (0.48) (0.05) --
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.03 $ 12.50 $ 9.84 $10.51 $10.62
===============================================================================================================================
TOTAL RETURN 21.01%++ 27.32% (2.41)% (0.60)% 6.20%++
===============================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 63,576 $53,514 $20,396 $2,434 $2,506
Ratio of Expenses to Average Net Assets (1) 1.15%* 1.15% 1.15% 1.15% 1.31%*
Ratio of Net Investment Income (Loss) to Average
Net Assets (1) 0.05%* 0.22% 0.43% 0.73% 1.15%*
Portfolio Turnover Rate 91%++ 159% 131% 80% 33%++
- -------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 1.30%* 1.51% 2.09% 3.00% 5.38%*
Net Investment Income (Loss) to Average Net Assets (0.10)%* (0.14)% (0.51)% (1.12)% (3.08)%*
Ratio of Expenses to Average Net Assets Including
Expense Offsets 1.15%* 1.15% 1.15% 1.15% 1.15%*
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
# Amount is less than $0.005 per share.
* Annualized
** Commencement of Operations
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
U.S. MID CAP VALUE PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.07 $ 13.50 $ 16.91 $ 25.07 $ 21.88 $ 18.12
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) 0.03+ 0.02+ (0.01)+ 0.05+ 0.06+ 0.12+
Net Realized and Unrealized Gain (Loss)
on Investments 2.94 4.55 (3.38) (4.91) 5.78 5.01
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.97 4.57 (3.39) (4.86) 5.84 5.13
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.05) -- (0.02) (0.08) (0.08) (0.06)
Net Realized Gain -- -- -- (3.22) (2.57) (1.31)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.05) -- (0.02) (3.30) (2.65) (1.37)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.99 $ 18.07 $ 13.50 $ 16.91 $ 25.07 $ 21.88
==================================================================================================================================
TOTAL RETURN 16.45%++ 33.85% (20.09)% (21.23)% 29.48% 29.44%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 307,362 $441,775 $672,507 $1,096,021 $1,374,275 $721,015
Ratio of Expenses to Average Net Assets (1) 0.90%* 0.88% 0.89% 0.86% 0.87% 0.87%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.35%* 0.13% (0.05)% 0.22% 0.28% 0.57%
Portfolio Turnover Rate 101%++ 138% 145% 176% 226% 244%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.90%* 0.87% 0.89% 0.85% 0.85% 0.86%
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
----------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.95 $ 13.43 $ 16.83 $ 24.97 $ 21.80 $ 18.05
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) 0.02+ (0.01)+ (0.03)+ 0.01+ 0.03+ 0.09+
Net Realized and Unrealized Gain (Loss)
on Investments 2.92 4.53 (3.37) (4.88) 5.75 5.00
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.94 4.52 (3.40) (4.87) 5.78 5.09
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.02) -- -- (0.05) (0.04) (0.03)
Net Realized Gain -- -- -- (3.22) (2.57) (1.31)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) -- -- (3.27) (2.61) (1.34)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.87 $ 17.95 $ 13.43 $ 16.83 $ 24.97 $ 21.80
==================================================================================================================================
TOTAL RETURN 16.36%++ 33.66% (20.20)% (21.36)% 29.25% 29.30%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 15,044 $ 13,004 $ 33,100 $ 46,063 $ 29,593 $ 25,197
Ratio of Expenses to Average Net Assets (2) 1.05%* 1.03% 1.04% 1.01% 1.02% 1.02%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.20%* (0.02)% (0.20)% 0.05% 0.14% 0.42%
Portfolio Turnover Rate 101%++ 138% 145% 176% 226% 244%
- ----------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 1.05%* 1.02% 1.04% 1.00% 1.00% 1.01%
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
* Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
U.S. MID CAP VALUE PORTFOLIO
<Table>
<Caption>
ADVISER CLASS
----------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.95 $ 13.44 $ 16.87 $ 25.02 $ 21.86 $ 18.12
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) 0.02+ (0.02)+ (0.05)+ (0.01)+ 0.01+ 0.07+
Net Realized and Unrealized Gain (Loss) on 2.91 4.53 (3.38) (4.88) 5.76 5.01
Investments
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.93 4.51 (3.43) (4.89) 5.77 5.08
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.00)# -- -- (0.04) (0.04) (0.03)
Net Realized Gain -- -- -- (3.22) (2.57) (1.31)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.00)# -- -- (3.26) (2.61) (1.34)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.88 $ 17.95 $ 13.44 $ 16.87 $ 25.02 $ 21.86
==================================================================================================================================
TOTAL RETURN 16.34%++ 33.56% (20.33)% (21.40)% 29.12% 29.12%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 62,139 $ 84,733 $ 99,553 $ 105,479 $ 98,588 $ 40,636
Ratio of Expenses to Average Net Assets (1) 1.15%* 1.13% 1.14% 1.11% 1.12% 1.12%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.10%* (0.12)% (0.30)% (0.03)% 0.03% 0.33%
Portfolio Turnover Rate 101%++ 138% 145% 176% 226% 244%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 1.15%* 1.12% 1.14% 1.10% 1.10% 1.11%
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
# Amount is less than $0.005 per share.
* Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
U.S. SMALL CAP VALUE PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ------------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.19 $ 14.04 $ 15.16 $ 21.18 $ 18.62 $ 17.37
==================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) 0.02+ 0.03+ 0.06+ 0.10+ 0.09+ 0.13+
Net Realized and Unrealized Gain (Loss)
on Investments 3.99 4.18 (1.10) (4.35) 4.01 3.65
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.01 4.21 (1.04) (4.25) 4.10 3.78
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.03) (0.06) (0.05) (0.07) (0.14) (0.07)
Net Realized Gain -- -- (0.03) (1.70) (1.40) (2.46)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) (0.06) (0.08) (1.77) (1.54) (2.53)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.17 $ 18.19 $ 14.04 $ 15.16 $ 21.18 $ 18.62
==================================================================================================================================
TOTAL RETURN 22.07%++ 30.09% (6.97)% (21.25)% 23.11% 23.83%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 540,633 $536,620 $588,803 $1,017,346 $1,269,171 $897,629
Ratio of Expenses to Average Net Assets (1) 0.89%* 0.89% 0.89% 0.86% 0.86% 0.86%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.24%* 0.21% 0.35% 0.52% 0.43% 0.70%
Portfolio Turnover Rate 61%++ 159% 118% 157% 193% 251%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.89%* 0.89% 0.89% 0.86% 0.85% 0.86%
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
---------------------------------------------------------------------------------
SIX MONTHS PERIOD FROM
ENDED JANUARY 22,
MARCH 31, YEAR ENDED SEPTEMBER 30, 1999** TO
2004 ------------------------------------------------- SEPTEMBER 30,
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.16 $ 14.01 $ 15.13 $ 21.15 $ 18.62 $ 17.32
=================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) (0.00)+# (0.01)+ 0.02+ 0.05+ 0.04+ 0.06+
Net Realized and Unrealized Gain (Loss)
on Investments 3.99 4.18 (1.11) (4.34) 4.02 1.24
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.99 4.17 (1.09) (4.29) 4.06 1.30
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income -- (0.02) (0.00)# (0.03) (0.13) --
Net Realized Gain -- -- (0.03) (1.70) (1.40) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.02) (0.03) (1.73) (1.53) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.15 $ 18.16 $ 14.01 $ 15.13 $ 21.15 $ 18.62
=================================================================================================================================
TOTAL RETURN 21.97%++ 29.76% (7.22)% (21.46)% 22.83% 7.51%++
=================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 72,430 $64,391 $51,964 $55,259 $47,708 $ 16,117
Ratio of Expenses to Average Net Assets (2) 1.14%* 1.14% 1.14% 1.11% 1.11% 1.11%*
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.01)%* (0.04)% 0.10% 0.26% 0.18% 0.45%*
Portfolio Turnover Rate 61%++ 159% 118% 157% 193% 251%++
- ---------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 1.14%* 1.14% 1.14% 1.11% 1.10% 1.10%*
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
# Amount is less than $0.005 per share.
* Annualized
** Commencement of offering of Adviser Class Shares.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
VALUE PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ----------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.64 $ 10.65 $ 13.80 $ 12.86 $ 13.59 $ 15.16
================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.13+ 0.19+ 0.16+ 0.19+ 0.16+ 0.21+
Net Realized and Unrealized Gain (Loss)
on Investments 2.31 2.99 (3.14) 0.93 0.95 1.11
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.44 3.18 (2.98) 1.12 1.11 1.32
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.12) (0.19) (0.17) (0.18) (0.18) (0.28)
Net Realized Gain -- -- -- -- (1.66) (2.61)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.19) (0.17) (0.18) (1.84) (2.89)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.96 $ 13.64 $ 10.65 $ 13.80 $ 12.86 $ 13.59
================================================================================================================================
TOTAL RETURN 17.98%++ 30.19% (21.93)% 8.68% 9.67% 8.30%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 368,642 $363,636 $456,996 $656,007 $690,859 $1,079,356
Ratio of Expenses to Average Net Assets (1) 0.63%* 0.63% 0.64% 0.62% 0.61% 0.63%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.68%* 1.57% 1.09% 1.26% 1.32% 1.38%
Portfolio Turnover Rate 73%++ 65% 42% 38% 50% 53%
- --------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.63%* 0.62% 0.64% 0.61% 0.60% 0.62%
- --------------------------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ----------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.65 $ 10.65 $ 13.80 $ 12.86 $ 13.58 $ 15.15
================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.12+ 0.17+ 0.14+ 0.16+ 0.15+ 0.19+
Net Realized and Unrealized Gain (Loss)
on Investments 2.32 3.00 (3.15) 0.93 0.94 1.12
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.44 3.17 (3.01) 1.09 1.09 1.31
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.11) (0.17) (0.14) (0.15) (0.15) (0.27)
Net Realized Gain -- -- -- -- (1.66) (2.61)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.11) (0.17) (0.14) (0.15) (1.81) (2.88)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.98 $ 13.65 $ 10.65 $ 13.80 $ 12.86 $ 13.58
================================================================================================================================
TOTAL RETURN 17.92%++ 30.06% (22.06)% 8.46% 9.50% 8.20%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 34,472 $ 26,169 $ 19,440 $ 19,552 $ 4,069 $ 9,673
Ratio of Expenses to Average Net Assets (2) 0.78%* 0.78% 0.79% 0.77% 0.76% 0.78%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.53%* 1.42% 0.94% 1.08% 1.19% 1.25%
Portfolio Turnover Rate 73%++ 65% 42% 38% 50% 53%
- --------------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.78%* 0.77% 0.79% 0.76% 0.75% 0.77%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
* Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
VALUE PORTFOLIO
<Table>
<Caption>
ADVISER CLASS
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 ----------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.62 $ 10.63 $ 13.78 $ 12.83 $ 13.57 $ 15.13
================================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.11+ 0.16+ 0.12+ 0.15+ 0.13+ 0.17+
Net Realized and Unrealized Gain (Loss)
on Investments 2.31 2.99 (3.14) 0.94 0.94 1.12
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.42 3.15 (3.02) 1.09 1.07 1.29
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.10) (0.16) (0.13) (0.14) (0.15) (0.24)
Net Realized Gain -- -- -- -- (1.66) (2.61)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.10) (0.16) (0.13) (0.14) (1.81) (2.85)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.94 $ 13.62 $ 10.63 $ 13.78 $ 12.83 $ 13.57
================================================================================================================================
TOTAL RETURN 17.85%++ 29.87% (22.17)% 8.49% 9.31% 8.10%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 892,849 $622,230 $534,668 $805,799 $301,497 $254,483
Ratio of Expenses to Average Net Assets (1) 0.88%* 0.88% 0.89% 0.87% 0.86% 0.88%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.43%* 1.32% 0.84% 0.99% 1.05% 1.10%
Portfolio Turnover Rate 73%++ 65% 42% 38% 50% 53%
- --------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.88%* 0.87% 0.89% 0.86% 0.85% 0.87%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
* Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS
Morgan Stanley Institutional Fund Trust ("MSIFT" or the "Fund") is registered
under the Investment Company Act of 1940 as an open-end investment company. The
Fund is comprised of nineteen active portfolios. The accompanying financial
statements and financial highlights are those of the Equity, Mid Cap Growth,
Strategic Small Value, U.S. Mid Cap Value, U.S. Small Cap Value, and Value
Portfolios, all of which are considered diversified funds for purposes of the
1940 Act (each referred to as a "Portfolio"). The financial statements of the
remaining portfolios are presented separately.
The Fund offers up to three different classes of shares for certain Portfolios -
Institutional Class shares, Investment Class shares and Adviser Class shares.
Each class of shares has identical voting rights (except shareholders of a Class
have exclusive voting rights regarding any matter relating solely to that Class
of shares), dividend, liquidation and other rights, except each class bears
different distribution or service fees as described in Note D. The Strategic
Small Value and U.S. Small Cap Value Portfolios are authorized to issue
unlimited shares per class but are currently closed to new accounts.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with accounting principles generally accepted in the
United States for investment companies. Such policies are consistently followed
by the Fund in the preparation of its financial statements. Accounting
principles generally accepted in the United States may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are valued at
the latest quoted sales price on the valuation date. Equity securities listed
or traded on NAS-DAQ, for which market quotations are available, are valued
at the NASDAQ Official Closing Price. Securities listed on a foreign exchange
are valued at their closing price. Unlisted securities and listed securities
not traded on the valuation date for which market quotations are readily
available are valued at the mean between the current bid and asked prices
obtained from reputable brokers. Debt securities purchased with remaining
maturities of 60 days or less are valued at amortized cost, if it
approximates value.
All other securities and investments for which market values are not readily
available, including restricted securities, and those securities for which it
is inappropriate to determine prices in accordance with the aforementioned
procedures, are valued at fair value as determined in good faith under
procedures adopted by the Board of Trustees, although the actual calculations
may be done by others. Factors considered in making this determination may
include, but are not limited to, information obtained by contacting the
issuer, analysts, or the appropriate stock exchange (for exchange-traded
securities), analysis of the issuer's financial statements or other available
documents and, if necessary, available information concerning other
securities in similar circumstances.
2. REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
under which a Portfolio lends excess cash and takes possession of securities
with an agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities which are held as
collateral, with a market value at least equal to the amount of the
repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value of
the of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the counterparty to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Portfolios may transfer their uninvested cash balances into a
joint trading account with other Portfolios of the Fund which invests in one
or more repurchase agreements. Any such joint repurchase agreement is covered
by the same collateral requirements as discussed above.
3. FOREIGN CURRENCY TRANSLATION AND FOREIGN CURRENCY EXCHANGE CONTRACTS: The
books and records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars at the bid prices of such
currencies against U.S. dollars quoted by a bank. Net realized gains (losses)
on foreign currency transactions represent net foreign exchange gains
(losses) from foreign currency exchange contracts, disposition of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amount of investment income and foreign withholding taxes recorded on a
Portfolio's books and the U.S. dollar equivalent of amounts actually received
or paid.
A foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. Each Portfolio (except
the Mid Cap Growth Portfolio) may enter into foreign currency exchange
contracts to protect securities and related receivables and payables against
future changes in foreign exchange rates.
27
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (UNAUDITED)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Fluctuations in the value of such contracts are recorded as unrealized
appreciation or depreciation; realized gains or losses, which are disclosed
in the Statement of Operations, include net gains or losses on contracts
which have been terminated by settlements. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts and are generally limited to the amount of
unrealized gain on the contract, if any, at the date of default. Risks may
also arise from unanticipated movements in the value of the foreign currency
relative to the U.S. dollar.
The Portfolios do not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the
fluctuations arising from changes in the market prices of the securities held
at period end. Similarly, the Portfolios do not isolate the effect of changes
in foreign exchange rates from the fluctuations arising from changes in the
market prices of securities sold during the period. Accordingly, the
components of realized and unrealized foreign currency gains (losses)
representing foreign exchange changes on investments is included in the
reported net realized and unrealized gains (losses) on investment
transactions and balances. Changes in currency exchange rates will affect the
value of and investment income from such securities and currency.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
governmental supervision, relative currency valuation fluctuation, regulation
of foreign securities markets and the possibility of political or economic
instability.
4. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses on
the sale of investment securities are those of specific securities sold.
Interest income is recognized on the accrual basis. Discounts and premiums on
securities purchased are amortized over their respective lives. Most expenses
of the Fund can be directly attributed to a particular Portfolio. Expenses
which cannot be directly attributed are apportioned among the Portfolios on
the basis of their relative net assets. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses are allocated
to each class of shares based upon their relative net assets.
B. INVESTMENT ADVISORY FEE. Under the terms of an Investment Advisory Agreement,
each Portfolio has agreed to pay Morgan Stanley Investment Management Inc. ("MS
Investment Management," formerly Morgan Stanley Investments LP, or the
"Adviser"), a wholly-owned subsidiary of Morgan Stanley, for investment advisory
services performed at a fee calculated by applying a quarterly rate based on an
annual percentage rate to each Portfolio's average daily net assets for the
quarter.
<Table>
<Caption>
ANNUAL VOLUNTARY EXPENSE LIMITATIONS
INVESTMENT ----------------------------------
ADVISORY INSTITUTION INVESTMENT ADVISER
PORTFOLIO FEE CLASS CLASS CLASS
- -------------------------------------------------------------------------
Equity 0.500% --% --% --%
Mid Cap Growth 0.500 -- -- --
Strategic Small Value 1.000 1.15 -- --
U.S. Mid Cap Value 0.750 -- -- --
U.S. Small Cap Value 0.750 -- -- --
Value 0.500 -- -- --
</Table>
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse the Strategic Small Value Portfolio for certain expenses so
that annual operating expenses, after giving effect to custody fee offsets, will
not exceed voluntary expense limitations established for each class of shares as
presented in the table above.
C. ADMINISTRATOR. MS Investment Management (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.08% of the average daily net
assets of each Portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Administrator and J.P. Morgan Investor Services Co.
("JPMIS"), a corporate affiliate of JPMorgan Chase Bank, JPMIS provides certain
administrative services to the Fund. For such services, the Administrator pays
JPMIS a portion of the fee the Administrator receives from the Fund. An employee
of JPMIS is an officer of the Fund.
D. DISTRIBUTOR. Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"),
a wholly owned subsidiary of the Adviser, is the distributor for the Fund. MSDI
is a limited-purpose broker/dealer whose only function is to distribute open-end
mutual fund shares. The Distributor provides all classes of shares in each
Portfolio with distribution services, and receives fees in connection with these
services, pursuant to separate Distribution and Shareholder Servicing Plans (the
"Plans") in accordance with Rule 12b-1 under the Investment Company Act of 1940.
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support distribution
efforts and/or servicing of accounts. The Adviser Class of shares pays a
distribution fee of 0.25% of average net assets of the class for such services
under the 12b-1 plan adopted by the Fund. The Investment Class of
28
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
shares pays a shareholder servicing fee of 0.15% of average net assets of the
class. The shareholder servicing fee is used to support the expenses associated
with servicing and maintaining accounts. Both fees are paid directly to MSDI.
The distribution fee may be retained by MSDI if an Adviser Class shareholder
invests directly through MSDI. Usually the fees are paid by MSDI to external
organizations such as 401(k) alliance sponsors, discount brokers and bank trust
departments who distribute MSIFT Portfolios to the public.
E. CUSTODY. JPMorgan Chase Bank serves as custodian for the Fund in accordance
with a custodian agreement. The Custodian holds cash, securities, and other
assets of the Fund as required by the 1940 Act.
The Portfolios have entered into an arrangement with their custodian whereby
credits realized on uninvested cash balances were used to offset a portion of
each applicable Portfolio's expenses. These custodian credits are shown as
"expense offsets" on the Statement of Operations.
F. PORTFOLIO INVESTMENT ACTIVITY.
1. PURCHASES AND SALES OF SECURITIES. For the six months ended March 31, 2004,
purchases and sales of investment securities other than temporary cash
investments and long-term U.S. government securities were:
<Table>
<Caption>
PURCHASES SALES
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
Equity $ 136,084 $ 146,226
Mid Cap Growth 1,103,467 1,124,567
Strategic Small Value 52,122 53,659
U.S. Mid Cap Value 432,126 674,858
U.S. Small Cap Value 350,690 470,625
Value 915,109 819,633
</Table>
There were no purchases or sales of long-term U.S. government securities.
During the six month period ended March 31, 2004, the following Portfolios
paid brokerage commissions to Morgan Stanley & Co., an affiliated
broker/dealer.
<Table>
<Caption>
BROKER
COMMISSIONS
PORTFOLIO (000)
- --------------------------------------------------------------------------------
Equity $ 1
Mid Cap Growth 55
Strategic Small Value 8
U.S. Mid Cap Value 15
U.S. Small Cap Value 181
Value 12
</Table>
G. SECURITIES LENDING. Certain Portfolios may lend investment securities to
qualified financial institutions, such as broker-dealers, to earn additional
income. Any increase or decrease in the fair value of the securities loaned that
might occur and any interest earned or dividends declared on those securities
during the term of the loan would remain in the Portfolio. Portfolios that lend
securities receive cash or securities as collateral in an amount equal to or
exceeding 100% of the current fair value of the loaned securities. The
collateral is marked to market daily, by the securities lending agent, to ensure
that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any
cash collateral that is received in high-quality short-term investments. The
Portfolio retains a portion of the income derived from these investments, which
is included in the Statement of Operations in interest income. Risks in
securities lending transactions are that a borrower may not provide additional
collateral when required or return the securities when due, and that the value
of the short-term investments will be less than the amount of cash collateral
plus any rebate that is required to be returned to the borrower. The value of
loaned securities and related collateral outstanding at March 31, 2004 are as
follows:
<Table>
<Caption>
VALUE OF
LOANED VALUE OF
SECURITIES COLLATERAL
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
Equity $ 6,858 $ 6,927
Value 93,567 94,421
</Table>
The following Portfolios had income from securities lending (after rebates to
borrowers and fee paid to securities lending agent):
<Table>
<Caption>
NET INTEREST
EARNED BY
PORTFOLIO
PORTFOLIO (000)
- --------------------------------------------------------------------------------
Equity $ 5
Value 38
</Table>
H. FEDERAL INCOME TAXES. It is each Portfolio's intention to continue to qualify
as a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Dividends from net investment income, if any, are declared and paid quarterly
for the Equity and Value Portfolios. The Mid Cap Growth, Strategic Small Value,
U.S. Mid Cap Value, and U.S. Small Cap Value Portfolios dividends are declared
and paid annually. Net realized capital gains are distributed at least annually.
The tax character of distributions paid may differ from the character of
distributions shown on the Statement of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. As of September
30, 2003,
29
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
the tax character of distributions paid during 2003 and 2002 were as follows:
<Table>
<Caption>
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS
PAID FROM: PAID FROM:
------------------ -----------------------
ORDINARY ORDINARY LONG-TERM
INCOME INCOME CAPITAL GAIN
PORTFOLIO (000) (000) (000)
- --------------------------------------------------------------------------------
Equity $ 2,546 $ 2,873 $ --
Strategic Small Value 60 74 37
U.S. Mid Cap Value -- 1,189 --
U.S. Small Cap Value 2,339 3,166 2,110
Value 14,121 14,798 --
</Table>
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States. The book/tax differences are
either considered temporary or permanent in nature.
Temporary differences are generally due to differing book and tax treatments in
the timing of the recognition of gains or losses on securities, forwards and
futures, including Post October Losses. Permanent differences are generally due
to REIT adjustments, gain (loss) on in-kind redemptions, foreign currency
transactions and gains on certain equity securities designated as issued by
"passive foreign investment companies".
Permanent book and tax basis differences may result in reclassifications to
undistributed (distributions in excess of) net investment income (or accumulated
net investment loss), accumulated net realized gain (loss) and paid-in capital.
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM
INCOME CAPITAL GAIN
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
Equity $ 432 $ --
Strategic Small Value 886 150
U.S. Mid Cap Value 547 --
U.S. Small Cap Value 487 --
Value 3,625 --
</Table>
At March 31, 2004, cost, unrealized appreciation, unrealized depreciation and
net unrealized appreciation (depreciation) of securities for Federal income tax
purposes were:
<Table>
<Caption>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
PORTFOLIO (000) (000) (000) (000)
- --------------------------------------------------------------------------------
Equity $ 161,794 $ 18,331 $ (3,543) $ 14,788
Mid Cap Growth 1,078,388 170,117 (17,630) 152,487
Strategic Small Value 55,642 7,930 (341) 7,589
U.S. Mid Cap Value 345,204 43,157 (2,120) 41,037
U.S. Small Cap Value 508,495 104,704 (2,642) 102,062
Value 1,252,371 153,006 (12,680) 140,326
</Table>
At September 30, 2003, the following Portfolios had available for Federal income
tax purposes unused capital losses, which will expire on the indicated dates:
<Table>
<Caption>
EXPIRATION DATE
SEPTEMBER 30,
(000)
-----------------------------------------------------------
PORTFOLIO 2008 2009 2010 2011 TOTAL
- -------------------------------------------------------------------------------------
Equity $ -- $ 9,611 $ 71,011 $ 32,106 $ 112,728
Mid Cap Growth -- 16,101 1,000,928 303,325 1,320,354
U.S. Mid Cap Value -- 493 102,896 157,636 261,025
U.S. Small Cap Value -- -- 118,523 -- 118,523
Value 16,828 3,629 15,692 139,659 175,808
</Table>
Under current tax law, certain capital and net foreign exchange losses realized
after October 31 may be deferred and treated as occurring on the first day of
the following fiscal year. For the fiscal year ended September 30, 2003, the
following Portfolios elected to defer capital and currency losses occurring
between November 1, 2002 and September 30, 2003 up to the following amounts:
<Table>
<Caption>
POST-OCTOBER
------------------
CAPITAL CURRENCY
LOSSES LOSSES
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
Equity $ 944 $--
Strategic Small Value 86 --
U.S. Mid Cap Value 98,049 --
Value 80,464 --
</Table>
I. OTHER. At March 31, 2004, certain Portfolios had otherwise unaffiliated
record owners of 10% or greater. Investment activities of these shareholders
could have a material impact on these Portfolios. These Portfolios and the
aggregate percentage of such owners was as follows:
<Table>
<Caption>
PERCENTAGE
OF OWNERSHIP
------------------------------------
INSTITUTIONAL INVESTMENT ADVISER
PORTFOLIO CLASS CLASS CLASS
- --------------------------------------------------------------------------------
Equity 48.6% --% 100.0%
Mid Cap Growth 37.6 -- 80.0
Strategic Small Value 97.7 -- --
U.S. Mid Cap Value 35.3 90.3 68.1
U.S. Small Cap Value 57.8 -- 78.1
Value 49.6 100.0 98.1
</Table>
J. SUBSEQUENT EVENT. Effective April 21, 2004, Philip J. Purcell resigned from
the Board of Trustees.
K. SUPPLEMENTAL PROXY INFORMATION. A special meeting of shareholders of the
Strategic Small Value Portfolio was held on February 24, 2004. The primary
purpose of this meeting was to vote on an Agreement and Plan of Reorganization
for the Strategic Small Value Portfolio. The meeting is currently adjourned
until June 8, 2004 to permit further solicitation of proxies, as a quorum was
not obtained on the original date of the meeting, or at three subsequent
meetings.
30
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
TRUSTEE AND OFFICER INFORMATION
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael Nugent
Fergus Reid
INVESTMENT ADVISER AND ADMINISTRATOR
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
DISTRIBUTOR
Morgan Stanley Distribution, Inc.
One Tower Bridge
100 Front Street, Suite 1100
West Conshohocken, PA 19428-2899
CUSTODIAN
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
Mitchell M. Merin
PRESIDENT
Ronald E. Robison
EXECUTIVE VICE PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER
Barry Fink
VICE PRESIDENT
Joseph J. McAlinden
VICE PRESIDENT
Stefanie V. Chang
VICE PRESIDENT
James W. Garrett
TREASURER AND CHIEF FINANCIAL OFFICER
Michael J. Leary
ASSISTANT TREASURER
Mary E. Mullin
SECRETARY
LEGAL COUNSEL
Clifford Chance US LLP
200 Park Avenue
New York, NY 10166
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
This report is authorized for distribution only when preceded or accompanied by
a prospectus of the Morgan Stanley Institutional Fund Trust which describes in
detail each Investment Portfolio's investment policies, risks, fees and
expenses. Please read the prospectus carefully before you invest or send money.
For additional information, including information regarding the investments
comprising the Portfolio, please visit our website at www.morganstanley.com/im
or call 1(800) 354-8185.
Additionally, a description of the Trust's proxy voting policies and procedures
is available without charge at our website at www.morganstanley.com/im/legal, at
the SEC's website at www.sec.gov or by calling 1(800) 354-8185.
31
<Page>
Printed in U.S.A.
This Report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Investment Adviser: (610) 940-5000 - MSIF Trust (800) 354-8185
(C) 2004 Morgan Stanley
[MORGAN STANLEY LOGO]
929-eqann-0404
<Page>
2004 SEMI-ANNUAL REPORT
[MORGAN STANLEY LOGO] March 31, 2004
MORGAN STANLEY INSTITUTIONAL FUND TRUST
ADVISORY PORTFOLIOS
Advisory Foreign Fixed Income
Advisory Foreign Fixed Income II
Advisory Mortgage
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
TABLE OF CONTENTS
<Table>
SHAREHOLDER'S LETTER ..........................................................2
STATEMENTS OF NET ASSETS
ADVISORY PORTFOLIOS:
Advisory Foreign Fixed Income .................................................3
Advisory Foreign Fixed Income II ..............................................5
Advisory Mortgage .............................................................7
STATEMENTS OF OPERATIONS .....................................................11
STATEMENTS OF CHANGES IN NET ASSETS ..........................................12
STATEMENT OF CASH FLOWS ......................................................13
FINANCIAL HIGHLIGHTS .........................................................14
NOTES TO FINANCIAL STATEMENTS ................................................17
TRUSTEE AND OFFICER INFORMATION ..............................................23
</Table>
This report is authorized for distribution only when preceded or accompanied by
prospectuses of the Morgan Stanley Institutional Fund Trust. To receive a
prospectus and/or SAI, which contains more complete information such as charges,
expenses, policies for voting proxies, risk considerations, and describes in
detail each of the Portfolio's investment policies to the prospective investor,
please call 1 (800) 354-8185. Please read the prospectus carefully before you
invest or send money.
1
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
SHAREHOLDER'S LETTER
Dear Shareholders:
We are pleased to present to you the Fund's Semi-Annual Report for the six
months ended March 31, 2004. Our Fund currently consists of 19 portfolios,
providing investors with a broad array of equity, fixed- income, and balanced
portfolios. The Fund's portfolios, together with the portfolios of the Morgan
Stanley Institutional Fund, Inc., provide investors with a means to help them
meet specific investment needs and to allocate their investments among equities
(e.g., value and growth; small, medium, and large capitalization), and fixed
income (e.g., short, medium, and long duration; investment grade and high
yield).
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President and Principal Executive Officer
April 2004
2
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
ADVISORY FOREIGN FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (51.6%)
DANISH KRONE (0.3%)
Kingdom of Denmark
5.00%, 8/15/05 DKK 2,500 $ 429
- -------------------------------------------------------------------------------------------------------------
EURO (51.0%)
BAT International Finance plc
4.88%, 2/25/09 EUR 10,120 12,978
DEPFA Deutsche Pfandbriefbank AG
5.00%, 2/3/05 340 429
France Telecom S.A.
7.00%, 12/23/09 5,500 7,855
Government of France
5.00%, 7/12/05 27,500 35,141
Government of France O.A.T.
5.50%, 4/25/04 1,700 2,099
Kingdom of Belgium
7.25%, 4/29/04 330 408
Kingdom of Spain
3.25%, 1/31/05 355 442
Netherlands Government
7.25%, 10/1/04 1,700 2,148
Olivetti Finance N.V.
5.88%, 1/24/08 5,925 7,911
Republic of Austria
3.40%, 10/20/04 350 435
Treuhandanstalt
7.50%, 9/9/04 330 416
- -------------------------------------------------------------------------------------------------------------
70,262
=============================================================================================================
SWEDISH KRONA (0.3%)
Swedish Government
6.00%, 2/9/05 SEK 3,150 431
- -------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (COST $65,640) 71,122
=============================================================================================================
SHORT-TERM INVESTMENTS (44.2%)
REPURCHASE AGREEMENT (0.0%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $4 $ (f)4 4
- -------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY (44.2%)
U.S. Treasury Bill
0.91%, 4/1/04 60,900 60,899
- -------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $60,904) 60,903
=============================================================================================================
TOTAL INVESTMENTS (95.8%) (COST $126,544) 132,025
=============================================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- -------------------------------------------------------------------------------------------------------------
OTHER ASSETS (4.2%)
Cash $ 1
Net Unrealized Appreciation on
Foreign Currency Exchange Contracts 2,071
Due from Broker 1,993
Interest Receivable 1,747 $ 5,812
- -------------------------------------------------------------------------------------------------------------
LIABILITIES (0.0%)
Payable for Administrative Fees (15)
Payable for Investment Advisory Fees (8)
Payable for Trustees' Fees and Expenses (5)
Payable for Custodian Fees (3)
Other Liabilities (18) (49)
- -------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 137,788
=============================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 135,738
Undistributed (Distributions in Excess of)
Net Investment Income 2,389
Accumulated Net Realized Gain (Loss) (8,240)
Unrealized Appreciation (Depreciation) on:
Investments 5,481
Foreign Currency Exchange Contracts and Translations 2,101
Futures Contracts 319
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 137,788
=============================================================================================================
INSTITUTIONAL CLASS:
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 41,411,589 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 3.33
=============================================================================================================
</Table>
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ----------------------------------------------------------------------------------------------------
EUR 3,010 $ 3,706 4/26/04 US$ 3,815 $ 3,815 $ 109
EUR 13,754 16,932 4/26/04 US$ 17,429 17,429 497
EUR 40,791 50,217 4/26/04 US$ 51,682 51,682 1,465
------- ------- ------
$70,855 $72,926 $2,071
======= ======= ======
</Table>
- --------------------------------------------------------------------------------
EUR -- Euro
US$ -- U.S. Dollar
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF NET ASSETS (CONT'D)
ADVISORY FOREIGN FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- -----------------------------------------------------------------------------
LONG:
Euro Schatz 2 yr.
(Germany) 456 $59,910 Jun-04 $319
====
</Table>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
ADVISORY FOREIGN FIXED INCOME II PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (48.2%)
EURO (47.8%)
BAT International Finance plc
4.88%, 2/25/09 EUR 1,755 $ 2,250
DEPFA Deutsche Pfandbriefbank AG
5.00%, 2/3/05 80 101
France Telecom S.A.
7.00%, 12/23/09 930 1,328
Government of France
5.00%, 7/12/05 4,500 5,750
Government of France O.A.T.
5.50%, 4/25/04 430 531
Kingdom of Belgium
7.25%, 4/29/04 75 93
Kingdom of Spain
3.25%, 1/31/05 85 106
Netherlands Government
7.25%, 10/1/04 420 531
Olivetti Finance N.V.
5.88%, 1/24/08 1,000 1,335
Republic of Austria
3.40%, 10/20/04 80 99
Treuhandanstalt
7.50%, 9/9/04 75 95
- -------------------------------------------------------------------------------------------------------------
12,219
=============================================================================================================
SWEDISH KRONA (0.4%)
Swedish Government
6.00%, 2/9/05 SEK 750 103
- -------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (COST $11,310) 12,322
=============================================================================================================
SHORT-TERM INVESTMENTS (47.3%)
REPURCHASE AGREEMENT (0.3%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $69 $ (f)69 69
- -------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY (47.0%)
U.S. Treasury Bill
0.91%, 4/1/04 12,000 12,000
- -------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $12,069) 12,069
=============================================================================================================
TOTAL INVESTMENTS (95.5%) (COST $23,379) 24,391
=============================================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- -------------------------------------------------------------------------------------------------------------
OTHER ASSETS (4.7%)
Cash $ 1
Due from Broker 497
Net Unrealized Appreciation on
Foreign Currency Exchange Contracts 360
Interest Receivable 305
Foreign Withholding Tax Reclaim Receivable 18
Receivable from Investment Adviser 12
Other 1 $ 1,194
- -------------------------------------------------------------------------------------------------------------
LIABILITIES (-0.2%)
Payable for Administrative Fees (6)
Payable for Custodian Fees (1)
Payable for Trustees' Fees and Expenses (1)
Other Liabilities (33) (41)
- -------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 25,544
=============================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 25,183
Undistributed (Distributions in Excess of)
Net Investment Income 413
Accumulated Net Realized Gain (Loss) (1,496)
Unrealized Appreciation (Depreciation) on:
Investments 1,012
Foreign Currency Exchange Contracts and Translations 373
Futures Contracts 59
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $ 25,544
=============================================================================================================
INSTITUTIONAL CLASS:
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,168,923 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.78
=============================================================================================================
</Table>
- --------------------------------------------------------------------------------
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ------------------------------------------------------------------------------------------------------
EUR 855 $ 1,053 4/26/04 US$ 1,084 $ 1,084 $ 31
EUR 5,201 6,403 4/26/04 US$ 6,590 6,590 187
EUR 3,947 4,860 4/26/04 US$ 5,002 5,002 142
------- ------- ----
$12,316 $12,676 $360
======= ======= ====
</Table>
- --------------------------------------------------------------------------------
EUR -- Euro
US$ -- U.S. Dollar
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
ADVISORY FOREIGN FIXED INCOME II PORTFOLIO
- --------------------------------------------------------------------------------
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- --------------------------------------------------------------------------------
LONG:
Euro Schatz 2 yr.
(Germany) 83 $10,905 Jun-04 $ 59
====
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
ADVISORY MORTGAGE PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (140.9%)
AGENCY ADJUSTABLE RATE MORTGAGES (2.0%)
Government National Mortgage Association,
Adjustable Rate Mortgages:
4.375%, 5/20/24 - 2/20/28 $ 60,914 $ 62,035
4.625%, 10/20/25 - 12/20/27 16,871 17,321
4.75%, 7/20/25 - 9/20/27 12,209 12,494
- -------------------------------------------------------------------------------------------------------------
91,850
=============================================================================================================
AGENCY FIXED RATE MORTGAGES (103.3%)
Federal Home Loan Mortgage Corporation,
5.125%, 11/7/13 79,650 81,391
Conventional Pools:
7.00%, 10/26/29 1 1
8.00%, 3/1/07 - 9/1/08 99 105
8.25%, 10/1/06 - 7/1/08 92 96
8.75%, 4/1/08 26 28
9.00%, 10/1/16 72 81
9.50%, 10/1/16 - 3/1/20 2,711 3,039
10.00%, 1/1/09 - 12/1/20 5,780 6,485
10.25%, 1/1/09 - 12/1/11 37 42
10.50%, 11/1/08 - 12/1/20 3,343 3,761
11.00%, 2/1/11 - 9/1/20 1,741 1,968
11.25%, 6/1/10 - 12/1/15 15 17
11.50%, 1/1/07 - 9/1/19 1,120 1,272
11.75%, 3/1/11 - 4/1/15 81 93
12.00%, 10/1/09 - 7/1/20 1,064 1,217
12.50%, 10/1/09 - 6/1/15 158 181
13.00%, 9/1/10 - 11/1/13 11 13
13.50%, 2/1/10 5 5
Gold Pools:
6.50%, 5/1/21 - 11/1/33 153,412 161,329
7.00%, 12/1/26 - 11/1/32 62,202 65,977
7.50%, 2/1/23 - 1/1/33 144,049 155,073
8.00%, 5/1/20 - 12/1/31 55,369 59,894
8.50%, 10/1/10 - 7/1/31 143,485 155,347
9.00%, 10/1/17 - 1/1/31 10,092 11,059
9.50%, 11/1/16 - 12/1/22 3,338 3,744
10.00%, 6/1/17 - 4/1/25 2,616 2,942
10.50%, 6/1/11 - 3/1/21 812 920
11.00%, 7/1/17 - 9/1/20 726 819
11.50%, 1/1/16 - 6/1/20 295 337
12.00%, 6/1/20 895 1,017
12.50%, 7/1/19 22 26
April TBA
6.00%, 4/1/34 (i)333,650 346,788
May TBA
5.00%, 5/1/19 (i)94,500 96,981
Federal National Mortgage Association,
Conventional Pools:
6.50%, 1/1/24 - 1/1/34 436,593 458,900
7.00%, 7/1/07 - 2/1/33 323,340 343,264
7.50%, 10/1/12 - 12/1/33 334,655 358,815
8.00%, 3/1/07 - 4/1/33 219,170 237,279
8.50%, 10/1/05 - 4/1/32 179,027 193,912
9.00%, 6/1/18 - 4/1/26 $ 2,867 $ 3,203
9.50%, 7/1/16 - 4/1/30 17,941 20,100
10.00%, 9/1/10 - 9/1/26 16,056 18,143
10.50%, 5/1/06 - 6/1/27 5,637 6,394
10.75%, 10/1/11 34 38
11.00%, 10/1/13 - 7/1/25 1,374 1,560
11.25%, 1/1/11 - 1/1/16 72 82
11.50%, 2/1/11 - 8/1/25 2,250 2,570
12.00%, 9/1/10 - 8/1/20 1,213 1,387
12.50%, 1/1/10 - 9/1/15 1,047 1,213
April TBA
5.00%, 4/1/19 (i)131,500 135,157
5.50%, 4/1/19 - 4/1/34 (i)261,775 268,786
6.00%, 4/1/34 (i)23,950 24,931
6.50%, 4/1/34 (i)825,700 867,501
7.00%, 4/1/34 (i)50,000 53,078
May TBA
4.50%, 5/1/19 (i)153,400 154,886
5.50%, 5/1/19 - 5/1/34 (i)292,200 301,401
Government National Mortgage Association,
Various Pools:
8.50%, 7/15/08 - 3/15/20 4,370 4,856
9.00%, 11/15/16 - 11/15/24 24,835 27,888
9.50%, 7/15/09 - 10/15/24 56,031 62,888
10.00%, 10/15/09 - 2/15/26 83,044 94,189
10.50%, 6/15/12 - 4/15/25 17,855 20,378
11.00%, 12/15/09 - 4/15/21 24,784 28,307
11.50%, 3/15/10 - 11/15/19 1,549 1,786
12.00%, 11/15/12 - 5/15/16 3,060 3,539
12.50%, 5/15/10 - 7/15/15 189 220
13.00%, 1/15/11 - 10/15/13 60 70
13.50%, 5/15/10 - 9/15/14 81 96
- -------------------------------------------------------------------------------------------------------------
4,858,865
=============================================================================================================
ASSET BACKED CORPORATES (2.8%)
Centex Home Equity Corp.
2.03%, 6/25/19 34,238 34,315
Chase Funding Mortgage Loan
2.005%, 2/25/17 4,637 4,639
CitiFinancial Mortgage Securities, Inc.
1.94%, 1/25/33 (g)10,237 10,241
Harley-Davidson Eaglemark Motorcycle Trust
3.02%, 9/15/06 12,366 12,437
Hyundai Auto Receivables Trust
1.56%, 9/15/06 43,000 43,093
Lehman ABS Manufactured Housing Contract
3.01%, 3/15/10 6,142 5,975
MBNA Master Credit Card Trust
1.21%, 2/15/07 (h)400 401
Nissan Auto Receivables Owner Trust
3.58%, 9/15/05 87 87
Whole Auto Loan Trust
1.88%, 6/15/05 20,492 20,530
- -------------------------------------------------------------------------------------------------------------
131,718
=============================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF NET ASSETS (CONT'D)
ADVISORY MORTGAGE PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (4.4%)
Federal Home Loan Mortgage Corporation,
9.50%, 7/15/21 $ 342 $ 349
Inv Fl IO
1.50%, 6/17/27 3,073 96
5.739%, 12/15/23 9,375 407
6.41%, 1/15/29 4,202 344
6.91%, 6/15/28 18,776 1,406
7.31%, 12/15/27 13,482 624
7.41%, 9/15/30 8,200 795
7.539%, 10/15/22 2,579 269
19.495%, 9/15/07 1,015 191
23.88%, 3/15/24 26,915 7,738
41.625%, 11/15/07 150 62
Inv Fl IO PAC
7.439%, 2/15/08 1,681 112
Inv Fl IO REMIC
6.41%, 8/15/30 91 7
6.875%, 10/15/08 2,416 176
Inv Fl IO REMIC PAC
8.475%, 3/15/08 1,061 83
IO
5.00%, 6/15/17 859 80
5.50%, 1/15/29 - 8/15/30 25,029 2,113
6.00%, 5/1/31 3,001 388
6.50%, 4/1/28 - 5/15/33 5,748 861
7.00%, 8/15/30 - 3/1/32 10,880 1,577
7.50%, 4/1/28 - 8/15/30 8,793 1,302
8.00%, 10/15/12 - 6/1/31 29,052 4,644
IO PAC
1.00%, 2/15/27 13,679 263
7.00%, 9/15/27 170 20
IO REMIC
10.00%, 5/1/20 - 6/1/20 269 39
PAC
8.55%, 1/15/21 95 95
9.60%, 4/15/20 275 275
9.90%, 10/15/19 1,360 1,363
10.00%, 5/15/20 - 6/15/20 1,543 1,547
REMIC
1.625%, 9/15/07 725 728
REMIC PAC
9.50%, 4/15/20 309 310
Federal National Mortgage Association,
1.494%, 12/25/08 1,850 1,855
2.115%, 10/25/42 19,145 19,144
2.25%, 7/25/42 6,969 6,970
3.25%, 6/25/33 27,417 27,694
7.00%, 9/25/32 29,414 30,730
Inv Fl IO
6.439%, 10/25/07 2,615 140
6.46%, 2/17/31 153 16
6.906%, 7/25/22 - 7/18/27 3,039 213
6.91%, 12/25/27 1,574 72
7.11%, 10/25/28 - 12/25/28 22,329 1,999
7.41%, 7/25/30 - 11/18/30 $ 14,776 $ 1,380
7.46%, 10/18/30 1,185 102
7.51%, 10/25/29 3,277 250
Inv Fl IO PAC
17.515%, 1/25/23 2,893 698
Inv Fl IO REMIC
57.673%, 9/25/20 378 658
73.406%, 9/25/22 502 626
Inv Fl IO REMIC
16,272.66%, 9/25/22 4 1,078
IO
5.00%, 9/25/11 - 2/25/15 10,961 297
5.50%, 3/25/17 - 6/25/26 4,365 295
6.00%, 8/25/32 - 7/25/33 151,377 22,507
6.50%, 7/1/31 - 5/25/33 72,460 10,703
7.00%, 3/1/32 - 5/25/33 71,328 10,321
7.50%, 4/1/27 - 1/1/32 5,683 835
8.00%, 2/1/23 - 8/1/31 95,643 15,262
8.50%, 10/1/24 - 10/1/25 13,269 1,799
9.00%, 11/1/26 7,379 995
9.50%, 9/1/18 2 1
IO PAC
8.00%, 8/18/27 - 9/18/27 13,084 2,068
IO REMIC PAC
8.00%, 8/18/27 3,712 591
PAC
8.50%, 9/25/20 146 161
8.60%, 12/25/04 21 21
8.75%, 11/25/19 17 19
Government National Mortgage Association,
Inv Fl IO
6.875%, 9/16/27 233 24
6.91%, 4/16/29 45,596 4,208
7.06%, 5/20/31 10,159 1,058
7.46%, 12/16/29 2,172 265
7.51%, 8/16/29 46,597 5,280
IO
5.50%, 10/20/23 15,379 361
IO PAC
5.50%, 9/20/24 10,600 404
Kidder Peabody Mortgage Assets Trust, IO
9.50%, 4/22/18 34 6
Lehman Structured Securities Corp., IO
7.00%, 10/26/29 (e)115,242 9,219
- -------------------------------------------------------------------------------------------------------------
208,589
=============================================================================================================
MORTGAGES -- OTHER (0.1%)
American Express Co.
9.625%, 12/1/12 116 116
American Housing Trust
9.125%, 4/25/21 1,453 1,471
9.553%, 9/25/20 1,591 1,591
California Federal Savings & Loan Association
8.80%, 1/1/14 7 7
First Federal Savings & Loan Association
8.75%, 6/1/06 124 125
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
ADVISORY MORTGAGE PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------------------
MORTGAGES -- OTHER (CONT'D)
Gemsco Mortgage Pass Through Certificate
8.701%, 11/25/10 $ 93 $ 93
Household Bank
7.809%, 12/1/07 14 14
Ryland Acceptance Corp. IV
6.65%, 7/1/11 1,408 1,442
- ---------------------------------------------------------------------------------------------------------------
4,859
===============================================================================================================
U.S. TREASURY SECURITIES (28.3%)
U.S. Treasury Strips, IO
4.567%, 2/15/17 65,000 35,925
4.611%, 5/15/16 10,000 5,789
4.939%, 2/15/20 413,010 188,598
4.899%, 2/15/19 75,000 36,508
4.953%, 5/15/20 247,000 111,057
4.935%, 5/15/19 108,000 51,710
5.03%, 8/15/20 68,300 30,234
5.003%, 11/15/19 39,150 18,182
5.05%, 2/15/21 150,300 64,472
5.058%, 5/15/21 745,570 314,252
5.086%, 2/15/22 29,100 11,728
5.078%, 11/15/21 185,825 75,980
5.107%, 11/15/22 63,900 24,655
5.123%, 8/15/22 123,050 48,174
5.145%, 2/15/23 37,000 14,043
5.157%, 11/15/23 65,000 23,692
U.S. Treasury Strips, PO
5/15/21 - 11/15/21 658,450 278,048
- ---------------------------------------------------------------------------------------------------------------
1,333,047
- ---------------------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (COST $6,687,427) 6,628,928
===============================================================================================================
STRUCTURED INVESTMENT (0.0%)
Morgan Guaranty Trust Co., 11/20/05;
monthly payments equal to 1% per annum
of the outstanding notional balance indexed
to GNMA ARM pools (COST $7,169) 29,911 221
===============================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------
PREFERRED STOCK (1.6%)
MORTGAGES -- OTHER (1.6%)
Home Ownership Funding Corp., 13.331%
(COST $67,931) (e)151,800 72,746
===============================================================================================================
<Caption>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (5.3%)
REPURCHASE AGREEMENT (4.6%)
J.P. Morgan Securities, Inc., 0.97%,
dated 3/31/04, due 4/1/04,
repurchase price $215,186 $(f)215,180 215,180
- ---------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.7%)
U.S. Treasury Bills
0.95%, 7/15/04 (j)10,000 9,973
0.98%, 9/23/04 (j)25,000 24,883
- ---------------------------------------------------------------------------------------------------------------
34,856
===============================================================================================================
TOTAL SHORT-TERM INVESTMENTS (COST $250,033) $ 250,036
===============================================================================================================
TOTAL INVESTMENTS (147.8%) (COST $7,012,560) 6,951,931
===============================================================================================================
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------------------
OTHER ASSETS (20.3%)
Receivable for Forward Commitments $ 781,598
Due from Broker 148,542
Interest Receivable 22,514
Receivable for Investments Sold 681
Receivable from Investment Adviser 319
Other 168 953,822
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES (-68.1%)
Payable for Forward Commitments (3,025,006)
Net Unrealized Depreciation on
Swap Agreements (93,255)
Interest Payable for Swap Agreements (42,576)
Payable for Investments Purchased (36,415)
Bank Overdraft Payable (4,099)
Payable for Administrative Fees (358)
Payable for Trustees' Fees and Expenses (236)
Payable for Custodian Fees (107)
Other Liabilities (97) (3,202,149)
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 4,703,604
===============================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 4,984,714
Undistributed (Distributions in Excess of)
Net Investment Income (33,929)
Accumulated Net Realized Gain (Loss) (99,552)
Unrealized Appreciation (Depreciation) on:
Investments (60,629)
Futures Contracts 6,255
Swap Agreements (93,255)
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 4,703,604
===============================================================================================================
INSTITUTIONAL CLASS:
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 467,667,250 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 10.06
===============================================================================================================
</Table>
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(g) Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 2004. Maturity date disclosed is the
ultimate maturity date.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(i) Security is subject to delayed delivery.
(j) A portion of the security was pledged to cover margin requirements for
futures contracts.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
ADVISORY MORTGAGE PORTFOLIO
Inv Fl Inverse Floating Rate -- Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 2004.
IO Interest Only
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced
- --------------------------------------------------------------------------------
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- --------------------------------------------------------------------------------
LONG:
U.S. Treasury
5 yr. Note 327 $ 37,135 Jun-04 $ 398
U.S. Treasury
10 yr. Note 2,803 323,484 Jun-04 5,055
U.S. Treasury
Long Bond 353 40,264 Jun-04 833
SHORT:
U.S. Treasury
2 yr. Note 250 53,793 Jun-04 (31)
------
$6,255
======
================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2004
<Table>
<Caption>
ADVISORY ADVISORY
FOREIGN FOREIGN
FIXED FIXED ADVISORY
INCOME INCOME II MORTGAGE
PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ -- $ -- $ 2,649
Interest 1,497 255 60,938
- -------------------------------------------------------------------------------------------------------------------------
Total Investment Income 1,497 255 63,587
- -------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 281 46 9,758
Administrative Fees 70 14 2,313
Custodian Fees 17 5 315
Shareholder Reporting Fee 2 --# 89
Professional Fees 12 17 61
Trustees' Fees and Expenses 2 --# 87
Other Expenses 8 11 67
- -------------------------------------------------------------------------------------------------------------------------
Total Expenses 392 93 12,690
- -------------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees (281) (46) (9,758)
Expenses Reimbursed by Adviser -- (28) (852)
Expense Offset (1) --# (1)
- -------------------------------------------------------------------------------------------------------------------------
Net Expenses 110 19 2,079
- -------------------------------------------------------------------------------------------------------------------------
Net Investment Income 1,387 236 61,508
- -------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS):
Investments Sold -- -- 109,305
Foreign Currency Transactions (9,325) (1,678) --
Futures Contracts 1,088 182 10,829
Swap Agreements -- -- (45,900)
- -------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) (8,237) (1,496) 74,234
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments 4,498 774 (19,821)
Foreign Currency Exchange Contracts and Translations 5,294 979 --
Futures Contracts (401) (66) (5,049)
Swap Agreements -- -- 12,680
- -------------------------------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation (Depreciation) 9,391 1,687 (12,190)
- -------------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation) 1,154 191 62,044
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ 2,541 $ 427 $123,552
=========================================================================================================================
</Table>
# Amount is less than $500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
ADVISORY FOREIGN ADVISORY FOREIGN
FIXED INCOME FIXED INCOME II ADVISORY MORTGAGE
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
2004 30, 2004 30, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,387 $ 1,044 $ 236 $ 216 $ 61,508 $ 160,766
Net Realized Gain (Loss) (8,237) 1,191 (1,496) 204 74,234 112,548
Net Change in Unrealized Appreciation (Depreciation) 9,391 (1,607) 1,687 (282) (12,190) 22,780
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations 2,541 628 427 138 123,552 296,094
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (960) (735) (139) (67) (154,928) (334,458)
Net Realized Gain (19) (1,275) (3) -- -- (386,871)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (979) (2,010) (142) (67) (154,928) (721,329)
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 3,130 160,585 1,291 30,358 276,370 833,304
Distributions Reinvested 858 1,845 134 54 131,094 656,642
Redeemed (25,427) (12,096) (3,040) (5,790) (1,389,006) (2,382,589)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (21,439) 150,334 (1,615) 24,622 (981,542) (892,643)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (19,877) 148,952 (1,330) 24,693 (1,012,918) (1,317,878)
NET ASSETS:
Beginning of Period 157,665 8,713 26,874 2,181 5,716,522 7,034,400
- ----------------------------------------------------------------------------------------------------------------------------------
End of Period $137,788 $157,665 $25,544 $26,874 $4,703,604 $5,716,522
==================================================================================================================================
Undistributed (Distributions in Excess of) Net
Investment Income Included in End of Period
Net Assets $ 2,389 $ 1,962 $ 413 $ 316 $ (33,929) $ 59,491
==================================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 950 48,996 110 2,619 27,443 79,367
Shares Issued on Distributions Reinvested 263 555 12 5 13,059 64,655
Shares Redeemed (7,711) (3,730) (264) (501) (138,065) (233,653)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding (6,498) 45,821 (142) 2,123 (97,563) (89,631)
==================================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 2004
<Table>
<Caption>
ADVISORY
MORTGAGE
PORTFOLIO
(000)
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Proceeds from Sales and Maturities of Investments $ 8,874,228
Purchases of Investments (6,636,109)
Net (Increase) Decrease in Short-Term Investments 424,503
Net Realized Gain (Loss) on Futures Contracts 10,829
Net Realized Gain (Loss) on Swap Agreements (45,900)
Net Investment Income 61,508
ADJUSTMENTS TO RECONCILE NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net (Increase) Decrease in Receivables Related to Operations 7,504
Net Increase (Decrease) in Payables Related to Operations 16,081
Accretion/Amortization of Discounts and Premiums (1,626)
- ----------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 2,711,018
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Portfolio Shares Sold 276,370
Payment on Portfolio Shares Redeemed (1,389,006)
Proceeds from Sales of Forward Commitments 15,992,617
Purchases of Forward Commitments (17,586,033)
Cash Dividends and Distributions Paid (23,834)
- ----------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (2,729,886)
- ----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash (18,868)
CASH AT BEGINNING OF PERIOD 18,868
- ----------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ --
==========================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
ADVISORY FOREIGN FIXED INCOME PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 -------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 3.29 $ 4.17 $ 3.97 $ 3.71 $ 3.85 $ 10.18
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income 0.03+ 0.06+ 0.18+ 0.19+ 0.18+ 0.19+
Net Realized and Unrealized Gain (Loss) on
Investments 0.03 0.01 0.19 0.21 0.03 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.06 0.07 0.37 0.40 0.21 0.19
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.02) (0.34) (0.17) (0.14) (0.35) (5.52)
Net Realized Gain (0.00)# (0.61) -- -- -- (1.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.95) (0.17) (0.14) (0.35) (6.52)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 3.33 $ 3.29 $ 4.17 $ 3.97 $ 3.71 $ 3.85
====================================================================================================================================
TOTAL RETURN 1.85%++ 1.88% 9.73% 11.12% 5.86% 2.87%
====================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $137,788 $157,665 $8,713 $215,557 $9,052 $14,322
Ratio of Expenses to Average Net Assets (1) 0.14%* 0.22% 0.15% 0.14% 0.16% 0.15%
Ratio of Net Investment Income to
Average Net Assets (1) 1.86%* 1.86% 4.51% 5.02% 4.87% 4.24%
Portfolio Turnover Rate 0%++ 13% 54% 10% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratios Before Expenses Waived/Reimbursed by
Adviser:
Expenses to Average Net Assets 0.52%* 0.54% 0.49% 0.50% 0.72% 0.53%
Net Investment Income to Average Net Assets 1.48%* 1.47% 4.14% 4.65% 4.30% 3.85%
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.14%* 0.15% 0.12% 0.13% 0.15% 0.14%
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
# Amount is less than $0.005 per share.
* Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
ADVISORY FOREIGN FIXED INCOME II PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
---------------------------------------------------------------
SIX MONTHS PERIOD FROM
ENDED JUNE 20,
MARCH 31, YEAR ENDED SEPTEMBER 30, 2000** TO
2004 -------------------------------- SEPTEMBER 30,
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.63 $ 11.60 $10.92 $ 10.18 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income 0.11+ 0.24+ 0.48+ 0.50+ 0.14+
Net Realized and Unrealized Gain (Loss) on Investments 0.10 (0.01) 0.79 0.51 0.04
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.21 0.23 1.27 1.01 0.18
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.06) (0.20) (0.59) (0.27) --
Net Realized Gain (0.00)# -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.20) (0.59) (0.27) --
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.78 $ 11.63 $11.60 $ 10.92 $10.18
==================================================================================================================================
TOTAL RETURN 1.83%++ 1.96% 12.07% 10.13% 1.80%++
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $25,544 $26,874 $2,181 $58,010 $1,806
Ratio of Expenses to Average Net Assets (1) 0.15%* 0.22% 0.16% 0.16% 0.15%*
Ratio of Net Investment Income to Average Net Assets (1) 1.91%* 2.08% 4.51% 4.80% 5.09%*
Portfolio Turnover Rate 0%++ 50% 59% 4% 0%++
- ----------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.75%* 1.23% 0.57% 0.58% 3.17%*
Net Investment Income to Average Net Assets 1.31%* 1.00% 4.09% 4.37% 2.07%*
Ratio of Expenses to Average Net Assets Including Expense
Offsets 0.15%* 0.15% 0.15% 0.15% 0.15%*
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
# Amount is less than $0.005 per share.
* Annualized
** Commencement of Operations
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
ADVISORY MORTGAGE PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 --------------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.11 $ 10.74 $ 10.63 $ 10.00 $ 10.03 $ 10.86
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income 0.12+ 0.25+ 0.46 0.62 0.72 0.66
Net Realized and Unrealized Gain (Loss) on
Investments 0.13 0.20 0.41 0.66 (0.08) (0.69)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.25 0.45 0.87 1.28 0.64 (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.30) (0.51) (0.76) (0.65) (0.67) (0.58)
Net Realized Gain -- (0.57) -- -- -- (0.22)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (1.08) (0.76) (0.65) (0.67) (0.80)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.06 $ 10.11 $ 10.74 $ 10.63 $ 10.00 $ 10.03
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 2.44%++ 4.42% 8.49% 13.30% 6.76% (0.32)%
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $4,703,604 $5,716,522 $7,034,400 $7,963,569 $7,019,170 $8,463,568
Ratio of Expenses to Average Net Assets (1) 0.08%* 0.08% 0.09% 0.09% 0.09% 0.09%
Ratio of Net Investment Income to Average Net 2.37%* 2.43% 4.24% 6.01% 7.19% 6.62%
Assets (1)
Portfolio Turnover Rate 287%++^ 120% 112% 134% 49% 94%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO
AVERAGE NET ASSETS:
Ratios Before Expenses Waived/Reimbursed by
Adviser:
Expenses to Average Net Assets 0.49%* 0.49% 0.48% 0.47% 0.46% 0.47%
Net Investment Income to Average Net Assets 1.96%* 2.02% 3.84% 5.62% 6.81% 6.23%
Ratio of Expenses to Average Net Assets
Including Expense Offsets 0.08%* 0.08% 0.08% 0.08% 0.08% 0.08%
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
* Annualized
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of the portfolio securities during such fiscal year. The turnover
rate may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in the past
years. The inclusion of such securities caused the reported turnover rate
to be higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS
Morgan Stanley Institutional Fund Trust ("MSIFT" or the "Fund") is registered
under the Investment Company Act of 1940 as an open-end investment company. The
Fund was comprised of nineteen active portfolios. The accompanying financial
statements and financial highlights are those of the Advisory Foreign Fixed
Income, Advisory Foreign Fixed Income II and Advisory Mortgage Portfolios (each
referred to as a "Portfolio") only. For the purposes of the 1940 Act, Advisory
Foreign Fixed Income and Advisory Foreign Fixed Income II Portfolios are
considered non-diversified funds; Advisory Mortgage Portfolio is considered a
diversified fund. The financial statements of the remaining portfolios are
presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with accounting principles generally accepted in the
United States. Such policies are consistently followed by the Fund in the
preparation of its financial statements. Accounting principles generally
accepted in the United States of America may require management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are valued
at the latest quoted sales price on the valuation date. Equity securities
listed or traded on NASDAQ, for which market quotations are available, are
valued at the NASDAQ Official Closing Price. Securities listed on a foreign
exchange are valued at their closing price. Unlisted and listed equity
securities not traded on the valuation date, for which market quotations
are readily available, are valued at the mean between the current bid and
asked prices obtained from reputable brokers. Bonds and other fixed income
securities may be valued according to the broadest and most representative
market. In addition, bonds and other fixed income securities may be valued
on the basis of prices provided by a pricing service. The prices provided
by a pricing service take into account broker dealer market price
quotations for institutional size trading in similar groups of securities,
security quality, maturity, coupon and other security characteristics as
well as any developments related to the specific security. Debt securities
purchased with remaining maturities of 60 days or less are valued at
amortized cost, if it approximates market value.
All other securities and investments for which market values are not
readily available, including restricted securities, and those securities
for which it is inappropriate to determine prices in accordance with the
aforementioned procedures, are valued at fair value as determined in good
faith under procedures adopted by the Board of Trustees, although the
actual calculations may be done by others. Factors consid ered in making
this determination may include, but are not limited to, information
obtained by contacting the issuer, analysts, or the appropriate stock
exchange (for exchange-traded securities), analysis of the issuer's
financial statements or other available documents and, if necessary,
available information concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE).
Occasionally, developments that could affect the closing prices of
securities and other assets may occur between the times at which valuations
of such securities are determined (that is, close of the foreign market on
which the securities trade) and the close of business on the NYSE. If these
developments are expected to materially affect the value as of the
securities, the valuations may be adjusted to reflect the estimated fair
value as of the close of the NYSE, as determined in good faith under
procedures established by the Board of Trustees.
2. REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
under which a Portfolio lends excess cash and takes possession of
securities with an agreement that the counterparty will repurchase such
securities. In connection with transactions in repurchase agreements, a
bank as custodian for the Fund takes possession of the underlying
securities which are held as collateral, with a market value at least equal
to the amount of the repurchase transaction, including principal and
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the of the collateral is marked-to-market on a
daily basis to determine the adequacy of the collateral. In the event of
default on the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to
the agreement, realization and/or retention of the collateral or proceeds
may be subject to legal proceedings.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Portfolios may transfer their uninvested cash balances into
a joint trading account with other Portfolios of the Fund which invests in
one or more repurchase agreements. Any such joint repurchase agreement is
covered by the same collateral requirements as discussed above.
3. FUTURES: Financial futures contracts (secured by cash and securities
deposited with brokers as "initial margin") are valued based upon their
quoted daily settlement prices; changes in initial settlement value
(represented by cash paid to or received from brokers as "variation
margin") are accounted for as unrealized appreciation (depreciation). When
futures contracts are closed, the difference between the opening
17
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
value at the date of purchase and the value at closing is recorded as
realized gain or loss in the Statement of Operations. "Due from (to)
Broker" includes initial margin and variation margin, as stated in the
Statement of Net Assets.
Futures contracts may be used by each Portfolio in order to hedge against
unfavorable changes in the value of securities or to attempt to realize
profits from the value of the related securities.
Futures contracts involve market risk that may exceed the amounts
recognized in the Statement of Net Assets. Risks arise from the possible
movements in the prices of securities relating to these instruments. The
change in value of futures contracts primarily corresponds with the value
of their related securities, but may not precisely correlate with the
change in value of such securities. In addition, there is the risk that a
Portfolio may not be able to enter into a closing transaction because of an
illiquid secondary market.
4. SECURITIES SOLD SHORT: Each Portfolio may sell securities short. A short
sale is a transaction in which the Portfolio sells securities it may or may
not own, but has borrowed, in anticipation of a decline in the market price
of the securities. The Portfolio is obligated to replace the borrowed
securities at their market price at the time of replacement. The Portfolio
may have to pay a premium to borrow the securities as well as pay any
dividends or interest payable on the securities until they are replaced.
The Portfolio's obligation to replace the securities borrowed in connection
with a short sale will generally be secured by collateral deposited with
the broker that consists of cash, U.S. government securities or other
liquid high grade debt obligations. In addition, the Portfolio will either
place in a segregated account with its custodian or denote on its custody
records an amount of cash, U.S. government securities or other liquid high
grade debt obligations equal to the difference, if any, between (1) the
market value of the securities sold at the time they were sold short and
(2) any cash, U.S. government securities or other liquid high grade debt
obligations deposited as collateral with the broker in connection with the
short sale (not including the proceeds of the short sale). Short sales by
the Portfolios involve certain risks and special considerations. Possible
losses from short sales differ from losses that could be incurred from a
purchase of a security because losses from short sales may be unlimited,
whereas losses from purchases cannot exceed the total amount invested.
5. SWAP AGREEMENTS: Each Portfolio may enter into swap agreements to exchange
the interest rate on, or return generated by, one nominal instrument for
the return generated by another instrument. Cash collateral for swap
agreements, if applicable, is deposited with the broker serving as
counter-party to the agreement, and is included in "Due from (to) Broker"
on the Statement of Net Assets. The following summarizes swaps entered into
by the Portfolios:
CREDIT DEFAULT SWAPS: Credit default swaps involve commitments to pay a
fixed rate in exchange for payment if a credit event affecting a third
party (the referenced company) occurs. Credit events may include a failure
to pay interest, bankruptcy, or restructuring. Net periodic interest
payments to be received or paid are accrued daily and are recorded in the
Statement of Operations as an adjustment to interest income. Credit default
swaps are marked-to-market daily based upon quotations from market makers
and the change, if any, is recorded as unrealized appreciation or
depreciation in the Statement of Operations.
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal
amount. Net periodic interest payments to be received or paid are accrued
daily and are recorded in the Statement of Operations as an adjustment to
interest income. In a zero-coupon interest rate swap, payments only occur
at maturity, at which time one counterparty pays the total compounded fixed
rate over the life of the swap and the other pays the total compounded
floating rate that would have been earned had a series of LIBOR investments
been rolled over through the life of the swap. Interest rate swaps are
marked-to-market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized appreciation or depreciation in
the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security or index underlying the transaction
exceeds or falls short of the offsetting interest rate obligation, the
Portfolio will receive a payment from or make a payment to the
counterparty, respectively. Total return swaps are marked-to-market daily
based upon quotations from market makers and the change, if any, is
recorded as unrealized appreciation or depreciation in the Statement of
Operations. Periodic payments received or made at the end of each
measurement period, but prior to termination, are recorded as realized
gains or losses in the Statement of Operations.
Realized gains or losses on maturity or termination of swaps are presented
in the Statement of Operations. Because there is no organized market for
these swap agreements, the unrealized gain/loss reported in the Statement
of Net Assets may differ from that which would be realized in the event the
Portfolio terminated its position in the agreement. Risks may arise upon
entering into these agreements from the potential inability of the
counterparties to meet the terms of the agreements and are generally
limited to the amount of
18
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
net interest payments to be received, if any, at the date of default.
6. STRUCTURED INVESTMENTS: Each Portfolio may invest in structured investments
whose values are linked either directly or inversely to changes in foreign
currencies, interest rates, commodities, indices, or other underlying
instruments. A Portfolio uses these securities to increase or decrease its
exposure to different underlying instruments and to gain exposure to
markets that might be difficult to invest in through conventional
securities. Structured investments may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
7. DELAYED DELIVERY COMMITMENTS: Each Portfolio may purchase or sell
securities on a when-issued or forward commitment basis. Payment and
delivery may take place a month or more after the date of the transaction.
The price of the underlying securities and the date when the securities
will be delivered and paid for are fixed at the time the transaction is
negotiated. Liquid securities or cash is designated in an amount at least
equal to these commitments. Securities held for this purpose cannot be sold
while this strategy is outstanding, unless replaced with other assets. As a
result, there is a possibility that as designated assets reach certain
levels, a Portfolio may lose some flexibility in managing its investments,
responding to shareholder redemption requests, or meeting other current
obligations.
8. FOREIGN CURRENCY TRANSLATION AND FOREIGN CURRENCY EXCHANGE CONTRACTS: The
books and records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars at the bid prices of such
currencies against U.S. dollars quoted by a bank. Net realized gains
(losses) on foreign currency transactions represent net foreign exchange
gains (losses) from foreign currency exchange contracts, disposition of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amount of investment income and foreign withholding taxes recorded on a
Portfolio's books and the U.S. dollar equivalent of amounts actually
received or paid.
A foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. Each Portfolio may
enter into foreign currency exchange contracts to protect securities and
related receivables and payables against future changes in foreign exchange
rates. Fluctuations in the value of such contracts are recorded as
unrealized appreciation or depreciation; realized gains or losses, which
are disclosed in the Statement of Operations, include net gains or losses
on contracts which have been terminated by settlements. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and are generally
limited to the amount of unrealized gain on the contract, if any, at the
date of default. Risks may also arise from unanticipated movements in the
value of the foreign currency relative to the U.S. dollar.
At March 31, 2004, the Advisory Foreign Fixed Income and Advisory Foreign
Fixed Income II Portfolio's net assets included foreign denominated
securities and currency. The net assets of these Portfolios are presented
at the foreign exchange rates and market values at the close of the period.
The Portfolios do not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the
fluctuations arising from changes in the market prices of the securities
held at period end. Similarly, the Portfolios do not isolate the effect of
changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities sold during the period.
Accordingly, the component of realized and unrealized foreign currency
gains (losses) representing foreign exchange changes on investments is
included in the reported net realized and unrealized gains (losses) on
investment transactions and balances. Changes in currency exchange rates
will affect the value of and investment income from such securities and
currency.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the possibly
lower level of governmental supervision, relative currency valuation
fluctuation and regulation of foreign securities markets and the
possibility of political or economic instability.
9. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses
on the sale of investment securities are those of specific securities sold.
Discounts and premiums on securities purchased are accreted/amortized over
their respective lives. Most expenses of the Fund can be directly
attributed to a particular Portfolio. Expenses which cannot be directly
attributed are apportioned among the Portfolios on the basis of their
relative net assets.
B. INVESTMENT ADVISORY FEE. Under the terms of an Investment Advisory Agreement,
each Portfolio pays Morgan Stanley Investment Management Inc. ("MS Investment
Management," formerly Morgan Stanley Investments LP, or "the Adviser"), a
wholly-owned subsidiary of Morgan Stanley, for investment advisory services
performed at a fee calculated by applying a quarterly rate based on an annual
percentage
19
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
rate of 0.375% of the Portfolio's average daily net assets for the quarter.
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse the Portfolios if annual operating expenses exceed 0.15%,
0.15% and 0.08% of average daily net assets of the Advisory Foreign Fixed
Income, Advisory Foreign Fixed Income II and Advisory Mortgage Portfolios,
respectively.
Morgan Stanley Investment Management Limited ("MSIM Limited") serves as
Sub-Adviser to the Advisory Foreign Fixed Income Portfolio and the Advisory
Foreign Fixed Income II Portfolio. MSIM Limited is a wholly-owned subsidiary of
Morgan Stanley. Under an Investment Sub-Advisory Agreement with the Adviser,
MSIM Limited, subject to the control and supervision of the Fund, its officers,
Trustees and the Adviser, and in accordance with the investment objectives,
policies and restrictions of these Portfolios, makes certain day-to-day
investment decisions for these Portfolios and places certain of the Portfolios'
purchase and sales orders. The Adviser pays MSIM Limited on a monthly basis a
portion of the net advisory fees the Adviser receives from these Portfolios.
C. ADMINISTRATOR. MS Investment Management (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.08% of the average daily net
assets of each Portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Administrator and J.P. Morgan Investor Services Co.
("JPMIS"), a corporate affiliate of JPMorgan Chase Bank, JPMIS provides certain
administrative services to the Fund. For such services, the Administrator pays
JPMIS a portion of the fee the Administrator receives from the Fund. An employee
of JPMIS is an officer of the Fund.
D. DISTRIBUTOR. Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"),
a wholly owned subsidiary of the Adviser, is the distributor for the Fund. MSDI
is a limited-purpose broker/dealer whose only function is to distribute open-end
mutual fund shares.
E. CUSTODY. JPMorgan Chase Bank serves as custodian for the Fund in accordance
with a custodian agreement. The Custodian holds cash, securities, and other
assets of the Fund as required by the 1940 Act.
The Portfolios have entered into an arrangement with their custodian whereby
credits realized on uninvested cash balances were used to offset a portion of
each applicable Portfolio's expenses. These custodian credits are shown as
"expense offset" on the Statements of Operations.
F. PORTFOLIO INVESTMENT ACTIVITY.
1. PURCHASES AND SALES OF SECURITIES. For the six months ended March 31, 2004,
purchases and sales of investment securities other than temporary cash
investments and long-term U.S. government securities were:
<Table>
<Caption>
PURCHASES SALES
PORTFOLIO (000) (000)
- ---------------------------------------------------------------------
Advisory Foreign Fixed Income $ -- $ --
Advisory Foreign Fixed Income II -- --
Advisory Mortgage 21,557,084 24,099,155
</Table>
For the six months ended March 31, 2004, purchases and sales of long-term
U.S. government securities were:
<Table>
<Caption>
PURCHASES SALES
PORTFOLIO (000) (000)
- ---------------------------------------------------------------------
Advisory Mortgage $345,266 $--
</Table>
2. SWAP AGREEMENTS. At March 31, 2004, the Advisory Mortgage Portfolio had the
following open Interest Rate and Total Return Swap Agreements:
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ------------------------------------------------------------------------------------------------------------------------------------
Bank of
America 4/30/04 $ 35,000 TRS 3 month LIBOR Index Return(1) $ 1,060
6/30/04 67,700 TRS 3 month LIBOR Index Return(1) --
8/31/04 119,000 TRS 3 month LIBOR Index Return(1) 1,916
9/30/04 295,900 IRS fixed rate of 2.3932% 3 month LIBOR (1,778)
9/28/12 64,300 IRS fixed rate of 4.4685% 3 month LIBOR (2,229)
Citigroup 3/19/12 243,350 IRS fixed rate of 6.0428% 3 month LIBOR (36,330)
2/15/19 75,000 ZCS at maturity compounded 3 month LIBOR @--
5/15/19 73,000 ZCS at maturity compounded 3 month LIBOR less 7.125 bps (1,482)
5/15/19 30,000 ZCS at maturity compounded 3 month LIBOR less 4.2 bps (486)
11/15/19 39,150 ZCS at maturity compounded 3 month LIBOR less 7.9 bps (982)
2/15/20 25,875 ZCS at maturity compounded 3 month LIBOR less 3.1 bps 187
2/15/20 25,875 ZCS at maturity compounded 3 month LIBOR less 2.75 bps 174
2/15/20 92,000 ZCS at maturity compounded 3 month LIBOR less 4.14 bps 31
2/15/20 142,850 ZCS at maturity compounded 3 month LIBOR less 4.882 bps (251)
</Table>
20
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup 5/15/20 $ 65,750 ZCS at maturity compounded 3 month LIBOR $ 710
5/15/20 74,550 ZCS at maturity compounded 3 month LIBOR less 6 bps (627)
5/15/20 73,725 ZCS at maturity compounded 3 month LIBOR less 3.1 bps (592)
8/15/20 18,300 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (311)
8/15/20 50,000 ZCS at maturity compounded 3 month LIBOR less 6.25 bps (603)
2/15/21 35,000 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (880)
5/15/21 39,800 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (1,144)
5/15/21 39,800 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (1,092)
5/15/21 15,500 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (486)
5/15/21 47,200 ZCS at maturity compounded 3 month LIBOR less 7.75 bps (1,477)
5/15/21 33,000 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (1,064)
5/15/21 30,410 ZCS at maturity compounded 3 month LIBOR less 7.75 bps (899)
5/15/21 36,300 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (1,196)
5/15/21 119,875 ZCS at maturity compounded 3 month LIBOR less 3.75 bps (1,154)
5/15/21 63,800 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (313)
5/15/21 63,900 ZCS at maturity compounded 3 month LIBOR less 3 bps 1,689
5/15/21 27,250 ZCS at maturity compounded 3 month LIBOR less 4.5 bps 990
11/15/21 63,800 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (735)
11/15/21 26,275 ZCS at maturity compounded 3 month LIBOR less 3.7 bps (382)
11/15/21 63,800 ZCS at maturity compounded 3 month LIBOR less 4.25 bps (755)
2/15/22 29,100 ZCS at maturity compounded 3 month LIBOR 242
8/15/22 85,000 ZCS at maturity compounded 3 month LIBOR less 7 bps (2,635)
8/15/22 19,750 ZCS at maturity compounded 3 month LIBOR 226
2/15/23 27,000 ZCS at maturity compounded 3 month LIBOR 149
2/15/23 10,000 ZCS at maturity compounded 3 month LIBOR (118)
Credit Suisse
First Boston 5/15/16 10,000 ZCS at maturity compounded 3 month LIBOR (148)
2/15/17 65,000 ZCS at maturity compounded 3 month LIBOR 524
5/15/21 289,000 ZCS at maturity compounded 3 month LIBOR (4,609)
5/15/21 199,125 ZCS at maturity compounded 3 month LIBOR (2,386)
5/15/21 199,500 ZCS at maturity compounded 3 month LIBOR (909)
5/15/21 63,900 ZCS at maturity compounded 3 month LIBOR 587
11/15/23 65,000 ZCS at maturity compounded 3 month LIBOR 563
Goldman Sachs 6/27/12 157,850 IRS fixed rate of 5.3776% 3 month LIBOR (16,126)
6/28/12 158,000 IRS fixed rate of 5.2506% 3 month LIBOR (14,702)
2/15/20 30,410 ZCS at maturity compounded 3 month LIBOR (959)
2/15/20 66,500 ZCS at maturity compounded 3 month LIBOR (58)
2/15/20 29,500 ZCS at maturity compounded 3 month LIBOR (27)
5/15/20 32,975 ZCS at maturity compounded 3 month LIBOR 216
2/15/21 40,350 ZCS at maturity compounded 3 month LIBOR (1,438)
2/15/21 27,850 ZCS at maturity compounded 3 month LIBOR (263)
2/15/21 47,100 ZCS at maturity compounded 3 month LIBOR (602)
11/15/21 56,100 ZCS at maturity compounded 3 month LIBOR (200)
11/15/21 111,650 ZCS at maturity compounded 3 month LIBOR (1,328)
8/15/22 18,300 ZCS at maturity compounded 3 month LIBOR (308)
11/15/22 63,900 ZCS at maturity compounded 3 month LIBOR 1,545
--------------
$ (93,255)
==============
</Table>
(1) Receive if positive (pay if negative), the total rate of return on the Banc
of America Securities LLC AAA 10-year Commercial Mortgage-Backed Securities
Daily Index.
bps -- basis points
IRS -- Interest Rate Swap
TRS -- Total Return Swap
ZCS -- Zero Coupon Interest Rate Swap
@ -- Amount is less than $500.
21
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
G. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue to qualify
as a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recognized on the accrual basis.
Dividends from net investment income, if any, are declared and paid quarterly
for the Advisory Foreign Fixed Income and Advisory Foreign Fixed Income II
Portfolios and monthly for the Advisory Mortgage Portfolio. Net realized capital
gains are distributed at least annually.
The tax character of distributions paid may differ from the character of
distributions shown on the Statement of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2003 and 2002 were as follows:
<Table>
<Caption>
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS
PAID FROM: PAID FROM:
--------------------- ---------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAIN INCOME CAPITAL GAIN
PORTFOLIO (000) (000) (000) (000)
- --------------------------------------------------------------------------------
Advisory Foreign
Fixed Income $ 1,929 $ 81 $ 8,518 $ --
Advisory Foreign
Fixed Income II 67 -- 8,702 2
Advisory Mortgage 655,237 66,092 518,033 --
</Table>
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States. The book/tax differences are
either considered temporary or permanent in nature.
Temporary differences are generally due to a portion of certain redemptions
being treated as taxable dividends and/or capital gain distributions, and
differing book and tax treatments in the timing of the recognition of gains or
losses on securities, forwards and futures, including Post-October Losses.
Permanent differences are generally due to gain (loss) on in-kind redemptions
and foreign currency transactions.
Permanent book and tax basis differences may result in reclassifications to
undistributed (distributions in excess of) net investment income, accumulated
net realized net gain (loss) and paid-in capital.
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
<Caption>
UNDISTRIBUTED
ORDINARY INCOME
PORTFOLIO (000)
- --------------------------------------------------------------------------------
Advisory Foreign Fixed Income $ 17
Advisory Foreign Fixed Income II 3
Advisory Mortgage 70,171
</Table>
At March 31, 2004, cost, unrealized appreciation, unrealized depreciation and
net unrealized appreciation (depreciation) of securities for Federal income tax
purposes were:
<Table>
<Caption>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
PORTFOLIO (000) (000) (000) (000)
- ------------------------------------------------------------------------------------
Advisory Foreign
Fixed Income $ 126,544 $ 5,482 $ (1) $ 5,481
Advisory Foreign
Fixed Income II 23,379 1,012 -- 1,012
Advisory Mortgage 7,012,560 84,854 (145,483) (60,629)
</Table>
Under current tax law, certain capital and net foreign exchange losses realized
after October 31 may be deferred and treated as occurring on the first day of
the following fiscal year. For the fiscal year ended September 30, 2003, the
following Portfolios elected to defer capital and currency losses occurring
between November 1, 2002 and September 30, 2003 up to the following amounts:
<Table>
<Caption>
POST-OCTOBER
-----------------------------
CAPITAL CURRENCY
LOSSES LOSSES
PORTFOLIO (000) (000)
- -------------------------------------------------------------------------
Advisory Foreign Fixed Income $ -- $ 703
Advisory Foreign Fixed Income II -- 81
Advisory Mortgage 85,977 --
</Table>
H. OTHER. At March 31, 2004, the Advisory Foreign Fixed Income and the Advisory
Foreign Fixed Income II Portfolios each had otherwise unaffiliated record owners
of 10% or greater. Investment activities of these shareholders could have a
material impact on the Portfolios. The aggregate percentage of such owners was
23.8% and 53.4%, respectively.
I. SUBSEQUENT EVENT. Effective April 21, 2004, Philip J. Purcell resigned from
the Board of Trustees.
22
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
TRUSTEE AND OFFICER INFORMATION
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael Nugent
Fergus Reid
INVESTMENT ADVISER AND ADMINISTRATOR
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
DISTRIBUTOR
Morgan Stanley Distribution, Inc.
One Tower Bridge
100 Front Street, Suite 1100
West Conshohocken, PA 19428-2899
CUSTODIAN
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
Mitchell M. Merin
PRESIDENT
Ronald E. Robison
EXECUTIVE VICE PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER
Barry Fink
VICE PRESIDENT
Joseph J. McAlinden
VICE PRESIDENT
Stefanie V. Chang
VICE PRESIDENT
James W. Garrett
TREASURER AND CHIEF FINANCIAL OFFICER
Michael J. Leary
ASSISTANT TREASURER
Mary E. Mullin
SECRETARY
LEGAL COUNSEL
Clifford Chance US LLP
200 Park Avenue
New York, NY 10166
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
This report is authorized for distribution only when preceded or accompanied by
a prospectus of the Morgan Stanley Institutional Fund Trust which describes in
detail each Investment Portfolio's investment policies, risks, fees and
expenses. Please read the prospectus carefully before you invest or send money.
For additional information, including information regarding the investments
comprising the Portfolio, please call 1(800) 354-8185.
Additionally, a description of the Trust's proxy voting policies and procedures
is available without charge at our website at www.morganstanley.com/im/legal, at
the SEC's website at www.sec.gov or by calling 1(800) 354-8185.
23
<Page>
Printed in U.S.A.
This Report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Investment Adviser : (610) 940-5000 - MSIF Trust (800) 354-8185
(C) 2004 Morgan Stanley
[MORGAN STANLEY LOGO] 931-advis-0404
<Page>
2004 SEMI-ANNUAL REPORT
[MORGAN STANLEY LOGO] March 31, 2004
Morgan Stanley Institutional Fund Trust
FIXED INCOME PORTFOLIOS
Core Plus Fixed Income
Investment Grade Fixed Income
U.S. Core Fixed Income
Cash Reserves
High Yield
Intermediate Duration
International Fixed Income
Limited Duration
Municipal
BALANCED PORTFOLIO
Balanced
<Page>
TABLE OF CONTENTS
<Table>
SHAREHOLDER'S LETTER .............................................2
STATEMENTS OF NET ASSETS
FIXED INCOME PORTFOLIOS:
Core Plus Fixed Income ...........................................3
Investment Grade Fixed Income ...................................10
U.S. Core Fixed Income ..........................................17
Cash Reserves ...................................................23
High Yield ......................................................24
Intermediate Duration ...........................................30
International Fixed Income ......................................36
Limited Duration ................................................39
Municipal .......................................................45
BALANCED PORTFOLIO:
Balanced ........................................................52
STATEMENTS OF OPERATIONS ........................................63
STATEMENTS OF CHANGES IN NET ASSETS .............................65
STATEMENTS OF CASH FLOWS ........................................70
FINANCIAL HIGHLIGHTS ............................................72
NOTES TO FINANCIAL STATEMENTS ...................................85
TRUSTEE AND OFFICER INFORMATION .................................97
</Table>
This report is authorized for distribution only when preceded or accompanied by
prospectuses of the Morgan Stanley Institutional Fund Trust. To receive a
prospectus and/or SAI, which contains more complete information such as charges,
expenses, policies for voting proxies, risk considerations, and describes in
detail each of the Portfolio's investment policies to the prospective investor,
please call 1 (800) 354-8185. Please read the prospectus carefully before you
invest or send money. Additionally, you can access portfolio information
including performance, characteristics, and investment team commentary through
Morgan Stanley Investment Management's website: www.morganstanley.com/im.
1
<Page>
SHAREHOLDER'S LETTER
Dear Shareholders:
We are pleased to present to you the Fund's Semi-Annual Report for the six
months ended March 31, 2004. Our Fund currently consists of 19 portfolios,
providing investors with a broad array of equity, fixed- income, and balanced
portfolios. The Fund's portfolios, together with the portfolios of the Morgan
Stanley Institutional Fund, Inc., provide investors with a means to help them
meet specific investment needs and to allocate their investments among equities
(e.g., value and growth; small, medium, and large capitalization), and fixed
income (e.g., short, medium, and long duration; investment grade and high
yield).
SIGNIFICANT DEVELOPMENTS
The Cash Reserves Portfolio will be liquidated on May 27, 2004. The Portfolio
closed to new investors on April 30, 2004, but will remain open for additional
purchases by existing shareholders until the liquidation date.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President and Principal Executive Officer
April 2004
2
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (118.6%)
AGENCY ADJUSTABLE RATE MORTGAGES (1.5%)
Government National Mortgage Association,
Adjustable Rate Mortgages:
4.375%, 1/20/25-1/20/28 $ 26,219 $ 26,698
4.625%, 10/20/25-12/20/27 6,147 6,313
4.75%, 7/20/25-9/20/27 3,533 3,613
- ---------------------------------------------------------------------------------------------------
36,624
===================================================================================================
AGENCY FIXED RATE MORTGAGES (64.6%)
Federal Home Loan Mortgage Corporation,
Conventional Pools:
10.00%, 2/1/10-11/1/20 3,048 3,437
10.50%, 8/1/09-10/1/20 1,036 1,164
11.00%, 12/1/10-9/1/20 972 1,096
11.25%, 10/1/11-12/1/15 352 400
11.50%, 1/1/11-12/1/15 19 21
11.75%, 12/1/17-4/1/19 40 45
12.00%, 10/1/09-2/1/15 45 51
13.00%, 6/1/19 14 16
14.00%, 8/1/14 3 3
14.75%, 3/1/10 5 6
Gold Pools:
6.50%, 11/1/13-11/1/33 84,881 89,259
7.00%, 2/1/28-7/1/32 7,279 7,722
7.50%, 8/1/17-10/1/32 47,692 51,338
8.00%, 11/1/25-12/1/31 12,823 13,870
8.50%, 3/1/09-8/1/31 30,336 32,837
9.00%, 7/1/17 1,345 1,503
9.50%, 1/1/21-12/1/22 1,508 1,692
10.00%, 6/1/17-3/1/21 1,135 1,281
10.50%, 11/1/15-4/1/21 703 791
April TBA
6.00%, 4/1/34 (i)127,250 132,261
May TBA
5.00%, 5/1/19 (i)38,950 39,972
Federal National Mortgage Association,
Conventional Pools:
6.50%, 6/1/23-1/1/34 305,856 321,524
7.00%, 2/1/17-5/1/33 117,928 125,219
7.50%, 10/1/17-5/1/33 111,582 119,631
8.00%, 3/1/07-10/1/32 86,323 93,472
8.50%, 11/1/08-9/1/32 73,654 79,790
9.00%, 12/1/08-1/1/22 4,923 5,424
9.50%, 11/1/13-4/1/30 14,878 16,605
10.00%, 9/1/10-10/1/25 2,285 2,576
10.50%, 5/1/12-7/1/25 2,326 2,641
10.75%, 2/1/11 5 5
11.00%, 7/1/20-11/1/20 480 547
11.50%, 1/1/13-2/1/20 611 702
12.00%, 11/1/15 568 653
12.50%, 9/1/15-2/1/16 159 182
April TBA
5.00%, 4/1/19 (i)34,225 35,188
5.50%, 4/1/19-5/1/34 (i)137,650 142,103
6.50%, 4/1/34 (i)76,650 80,530
7.00%, 4/1/34 $ (i)25,450 $ 27,017
May TBA
4.50%, 5/1/19 (i)63,000 63,610
5.50%, 5/1/34 (i)57,800 59,064
Government National Mortgage Association,
Various Pools:
9.00%, 12/15/21-11/15/24 5,156 5,792
9.50%, 8/15/09-12/15/19 4,761 5,342
10.00%, 11/15/09-1/15/26 32,724 37,108
10.50%, 12/15/14-4/15/25 3,378 3,857
11.00%, 12/15/09-2/15/25 9,061 10,363
11.50%, 4/15/13-4/20/19 185 213
12.00%, 3/15/11-11/15/19 4,020 4,655
12.50%, 6/15/10-12/15/13 17 20
- ---------------------------------------------------------------------------------------------------
1,622,598
===================================================================================================
ASSET BACKED CORPORATES (4.3%)
Centex Home Equity
2.03%, 6/25/19 10,462 10,485
Citibank Credit Card Issuance Trust
6.875%, 11/16/09 17,930 20,498
Ford Credit Auto Owner Trust
1.62%, 8/15/05 12,278 12,301
Harley-Davidson Eaglemark Motorcycle Trust
3.02%, 9/15/06 253 254
Honda Auto Receivables Owner Trust
1.46%, 9/19/05 1,201 1,202
Hyundai Auto Receivables Trust
1.56%, 9/15/06 15,600 15,634
iStar Asset Receivables Trust
1.35%, 5/28/17 (e)(h)3,348 3,349
Lehman ABS Manufactured Housing Contract
3.01%, 3/15/10 2,341 2,278
MBNA Master Credit Card Trust
5.90%, 8/15/11 19,110 21,452
7.80%, 10/15/12 17,475 21,501
Whole Auto Loan Trust
1.88%, 6/15/05 116 116
- ---------------------------------------------------------------------------------------------------
109,070
===================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (3.1%)
Federal Home Loan Mortgage Corporation
Inv Fl IO
6.41%, 1/15/29 1,989 163
41.625%, 11/15/07 314 130
Inv Fl IO PAC
7.439%, 2/15/08 3,638 243
Inv Fl IO REMIC
6.41%, 8/15/30 817 64
6.875%, 10/15/08 6,911 503
Inv Fl IO REMIC PAC
8.475%, 3/15/08 2,152 169
IO
6.00%, 4/1/28-5/1/31 27,852 3,630
7.50%, 12/1/29 1,392 199
8.00%, 1/1/28-7/1/31 10,030 1,611
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (CONT'D)
PAC
6.50%, 3/15/28 $ 4,640 $ 4,649
REMIC PAC
9.50%, 4/15/20 7 7
Federal National Mortgage Association
2.25%, 7/25/42 2,454 2,454
3.25%, 6/25/33 9,635 9,732
7.00%, 9/25/32 13,318 13,913
Inv Fl IO
6.439%, 10/25/07 5,715 307
6.906%, 7/25/22 488 45
6.91%, 12/25/27 8,856 404
7.11%, 10/25/28 25,413 2,130
7.41%, 7/25/30 15,526 1,467
7.46%, 10/18/30 7,703 666
Inv Fl IO REMIC
57.673%, 9/25/20 127 222
73.406%, 9/25/22 225 280
IO
6.00%, 8/25/32-7/25/33 27,089 3,978
6.50%, 9/1/29-5/25/33 58,044 8,332
7.00%, 3/1/32 20,352 3,056
8.00%, 4/1/24-8/1/31 33,912 5,432
8.50%, 10/1/25 800 108
9.00%, 11/1/26 1,361 183
IO PAC
8.00%, 9/18/27 4,678 739
PAC
3.471%, 11/25/33 10,538 10,659
Government National Mortgage Association
Inv Fl IO
7.06%, 5/16/31 22,074 2,276
7.11%, 8/16/31 9,429 949
7.51%, 8/16/29 1,073 122
Inv Fl IO PAC
7.31%, 5/16/26 5,872 235
Kidder Peabody Mortgage Assets Trust, IO
9.50%, 4/22/18 8 1
- ---------------------------------------------------------------------------------------------------
79,058
===================================================================================================
FEDERAL AGENCY (1.1%)
Federal Home Loan Mortgage Corporation
5.125%, 11/7/13 (c)25,900 26,466
- ---------------------------------------------------------------------------------------------------
FINANCE (7.7%)
AIG SunAmerica Global Financing VI
6.30%, 5/10/11 (e)12,745 14,415
American General Corp.
7.50%, 7/15/25 1,430 1,782
AXA Financial, Inc.
6.50%, 4/1/08 5,825 6,573
Citigroup, Inc.
5.625%, 8/27/12 (c)4,730 5,184
6.00%, 2/21/12 4,165 4,695
6.625%, 6/15/32 855 965
Countrywide Home Loans, Inc.
3.25%, 5/21/08 $ 5,435 $ 5,456
EOP Operating LP
6.763%, 6/15/07 920 1,031
7.50%, 4/19/29 4,600 5,332
Farmers Insurance Exchange
8.625%, 5/1/24 (e)9,330 11,011
General Electric Capital Corp.
4.25%, 12/1/10 2,115 2,168
6.75%, 3/15/32 4,680 5,424
Goldman Sachs Group, Inc.
5.25%, 10/15/13 1,090 1,130
6.875%, 1/15/11 8,195 9,535
Household Finance Corp.
5.875%, 2/1/09 9,045 10,034
6.40%, 6/17/08 1,805 2,032
iStar Financial, Inc.
7.00%, 3/15/08 (c)1,975 2,158
J.P. Morgan Chase & Co.
6.00%, 2/15/09 7,595 8,459
6.625%, 3/15/12 (c)1,410 1,624
Mantis Reef Ltd.
4.692%, 11/14/08 (e)5,600 5,773
MBNA America Bank
7.125%, 11/15/12 1,240 1,465
MBNA Corp.
6.125%, 3/1/13 (c)4,755 5,285
Nationwide Mutual Insurance Co.
7.50%, 2/15/24 (e)16,000 16,563
Newcourt Credit Group, Inc.
6.875%, 2/16/05 3,895 4,072
Prime Property Funding II
7.00%, 8/15/04 (e)9,465 9,651
Prudential Holdings LLC
7.245%, 12/18/23 (e)17,100 20,235
8.695%, 12/18/23 (e)5,440 7,173
Reckson Operating Partnership LP
5.15%, 1/15/11 2,740 2,800
Rouse Co. (The)
3.625%, 3/15/09 1,480 1,468
5.375%, 11/26/13 760 782
Washington Mutual, Inc.
8.25%, 4/1/10 3,700 4,529
World Financial Properties
6.91%, 9/1/13 (e)2,758 3,123
6.95%, 9/1/13 (e)9,357 10,619
- ---------------------------------------------------------------------------------------------------
192,546
===================================================================================================
INDUSTRIALS (14.9%)
Abitibi-Consolidated, Inc.
8.55%, 8/1/10 2,870 3,142
8.85%, 8/1/30 (c)4,073 4,157
Aetna, Inc.
7.875%, 3/1/11 6,000 7,308
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
Albertson's, Inc.
7.50%, 2/15/11 $ (c)2,375 $ 2,791
Allied Waste North America
6.50%, 11/15/10 (e)715 734
8.50%, 12/1/08 1,940 2,183
Altria Group, Inc.
7.00%, 11/4/13 985 1,087
7.75%, 1/15/27 3,645 4,074
Amerada Hess Corp.
7.875%, 10/1/29 4,690 5,325
AT&T Corp.
8.05%, 11/15/11 575 673
8.75%, 11/15/31 (c)4,995 5,912
AT&T Wireless Services, Inc.
8.75%, 3/1/31 1,985 2,584
Avaya, Inc.
11.125%, 4/1/09 1,360 1,629
Avnet, Inc.
9.75%, 2/15/08 835 977
BAT International Finance plc
4.875%, 2/25/09 4,480 5,745
Bowater Canada Finance Corp.
7.95%, 11/15/11 7,490 8,024
Cendant Corp.
7.375%, 1/15/13 2,205 2,591
Clear Channel Communications, Inc.
7.65%, 9/15/10 2,565 3,048
Comcast Corp.
5.30%, 1/15/14 (c)7,845 8,050
Conoco, Inc.
6.95%, 4/15/29 4,287 5,013
Constellation Energy Group, Inc.
7.60%, 4/1/32 2,275 2,724
Consumer's Energy Co.
4.00%, 5/15/10 (c)1,900 1,882
4.80%, 2/17/09 2,000 2,092
5.375%, 4/15/13 955 984
Continental Airlines, Inc.
6.648%, 3/15/19 (c)7,789 7,626
7.461%, 10/1/16 1,372 1,337
D.R. Horton, Inc.
6.875%, 5/1/13 (c)2,660 2,966
DaimlerChrysler N.A. Holding Corp.
7.30%, 1/15/12 (c)4,780 5,520
8.00%, 6/15/10 (c)1,155 1,362
8.50%, 1/18/31 3,095 3,818
Deutsche Telekom International Finance BV
8.75%, 6/15/30 3,850 5,066
Echostar DBS Corp.
6.375%, 10/1/11 (e)3,825 4,083
Electronic Data Systems Corp.
6.00%, 8/1/13 2,965 2,883
7.125%, 10/15/09 (c)1,125 1,203
Federated Department Stores, Inc.
6.90%, 4/1/29 $ 1,250 $ 1,396
7.00%, 2/15/28 2,070 2,338
FedEx Corp.
2.65%, 4/1/07 (e)2,565 2,564
FMC Corp.
10.25%, 11/1/09 (c)1,055 1,245
Ford Motor Co.
6.625%, 10/1/28 11,635 10,726
Ford Motor Credit Corp.
7.25%, 10/25/11 (c)2,045 2,218
7.375%, 10/28/09 6,005 6,599
France Telecom S.A.
7.00%, 12/23/09 1,860 2,656
General Motors Acceptance Corp.
4.50%, 7/15/06 (c)1,120 1,158
6.875%, 9/15/11 11,750 12,766
8.00%, 11/1/31 2,170 2,409
Glencore Nickel Property Ltd.
9.00%, 12/1/14 (b)(d)18,080 2
GTE Corp.
6.94%, 4/15/28 6,940 7,562
Harrah's Operating Co., Inc.
8.00%, 2/1/11 3,225 3,879
HCA, Inc.
6.30%, 10/1/12 1,960 2,058
7.19%, 11/15/15 4,110 4,538
7.58%, 9/15/25 45 48
9.00%, 12/15/14 2,575 3,195
Health Net, Inc.
8.375%, 4/15/11 5,075 6,257
Hilton Hotels Corp.
7.625%, 12/1/12 (c)4,425 5,105
Honeywell International, Inc.
6.125%, 11/1/11 (c)3,575 4,024
Hutchison Whampoa International Ltd.
5.45%, 11/24/10 (e)1,795 1,858
6.50%, 2/13/13 (e)3,100 3,305
Hyatt Equities LLC
6.875%, 6/15/07 (e)4,805 5,213
ICI Wilmington, Inc.
4.375%, 12/1/08 1,985 2,037
Inco Ltd.
7.20%, 9/15/32 3,800 4,404
7.75%, 5/15/12 (c)1,405 1,700
International Paper Co.
4.25%, 1/15/09 2,740 2,814
Iron Mountain, Inc.
6.625%, 1/1/16 1,350 1,316
7.75%, 1/15/15 2,606 2,749
Kennametal, Inc.
7.20%, 6/15/12 3,400 3,787
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
Kerr-McGee Corp.
5.875%, 9/15/06 $ 1,315 $ 1,418
6.875%, 9/15/11 1,000 1,138
7.875%, 9/15/31 2,115 2,520
Key Energy Services, Inc.
6.375%, 5/1/13 1,310 1,349
Kraft Foods, Inc.
6.25%, 6/1/12 2,830 3,178
Kroger Co.
6.80%, 4/1/11 1,355 1,557
Lockheed Martin Corp.
7.75%, 5/1/26 2,285 2,821
Marathon Oil Corp.
6.80%, 3/15/32 2,240 2,523
MGM Mirage, Inc.
8.50%, 9/15/10 (c)4,525 5,306
Miller Brewing Co.
4.25%, 8/15/08 (e)3,415 3,538
Mohawk Industries, Inc.
7.20%, 4/15/12 2,020 2,352
News America Holdings, Inc.
7.28%, 6/30/28 2,775 3,184
7.75%, 2/1/24 3,156 3,744
Nexen, Inc.
5.05%, 11/20/13 (c)2,925 2,990
Olivetti Finance N.V
5.875%, 1/24/08 1,840 2,457
Owens-Brockway Glass Containers
7.75%, 5/15/11 (c)2,455 2,578
8.75%, 11/15/12 1,580 1,726
Packaging Corp. of America
5.75%, 8/1/13 (c)2,200 2,319
Pemex Project Funding Master Trust
8.00%, 11/15/11 900 1,052
8.625%, 2/1/22 9,675 11,223
9.125%, 10/13/10 4,250 5,227
Petro Canada
4.00%, 7/15/13 1,065 1,015
5.35%, 7/15/33 1,810 1,682
Pulte Homes, Inc.
6.375%, 5/15/33 1,535 1,535
7.875%, 8/1/11 800 961
Raytheon Co.
8.30%, 3/1/10 2,485 3,056
Sappi Papier Holding AG
6.75%, 6/15/12 (e)2,355 2,661
Schering-Plough Corp.
5.30%, 12/1/13 1,595 1,667
Sealed Air Corp.
5.625%, 7/15/13 (e)2,635 2,767
Smithfield Foods, Inc.
7.75%, 5/15/13 (c)300 332
8.00%, 10/15/09 4,255 4,776
Sprint Capital Corp.
8.375%, 3/15/12 $ (c)2,345 $ 2,860
8.75%, 3/15/32 805 1,021
Starwood Hotels & Resorts Worldwide, Inc.
7.375%, 5/1/07 1,735 1,895
7.875%, 5/1/12 2,760 3,133
Station Casinos, Inc.
6.00%, 4/1/12 (e)2,430 2,527
Systems 2001 Asset Trust LLC
6.664%, 9/15/13 (e)7,415 8,333
Tenet Healthcare Corp.
6.875%, 11/15/31 3,080 2,564
7.375%, 2/1/13 (c)1,360 1,234
Time Warner, Inc.
6.625%, 5/15/29 6,460 6,775
7.625%, 4/15/31 1,102 1,294
Toys R Us, Inc.
7.375%, 10/15/18 (c)2,285 2,251
Tricon Global Restaurants
8.875%, 4/15/11 (c)1,320 1,655
Tyco International Group S.A.
6.375%, 10/15/11 2,520 2,760
6.75%, 2/15/11 1,065 1,188
Verizon New England, Inc.
6.50%, 9/15/11 2,100 2,375
Waste Management, Inc.
7.00%, 7/15/28 4,400 4,907
7.375%, 5/15/29 1,245 1,447
Weyerhaeuser Co.
6.00%, 8/1/06 1,293 1,398
6.75%, 3/15/12 (c)5,400 6,110
Xerox Corp.
7.125%, 6/15/10 (c)3,315 3,530
- ---------------------------------------------------------------------------------------------------
374,428
===================================================================================================
MORTGAGES -- OTHER (0.1%)
American Express Co.
9.625%, 12/1/12 34 34
American Housing Trust
9.125%, 4/25/21 673 681
9.553%, 9/25/20 62 63
First Federal Savings & Loan Association
8.75%, 6/1/06 18 18
Household Bank
7.809%, 12/1/07 15 15
Pelican Homestead Savings Association
9.214%, 10/1/07 132 132
Ryland Acceptance Corp. IV
6.65%, 7/1/11 1,226 1,256
- ---------------------------------------------------------------------------------------------------
2,199
===================================================================================================
SOVEREIGN (0.4%)
Republic of Colombia
10.75%, 1/15/13 2,640 3,185
United Mexican States
8.00%, 9/24/22 905 1,048
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SOVEREIGN (CONT'D)
8.375%, 1/14/11 $ (c)4,405 $ 5,365
- ---------------------------------------------------------------------------------------------------
9,598
===================================================================================================
U.S. TREASURY SECURITIES (18.2%)
U.S. Treasury Strips
IO
4.567%, 2/15/17 24,500 13,541
4.611%, 5/15/16 25,000 14,473
4.887%, 2/15/20 (c)170,175 77,709
4.899%, 2/15/19 9,100 4,429
4.955%, 5/15/20 (c)195,925 88,092
4.961%, 5/15/19 (c)10,200 4,884
5.00%, 8/15/20 39,000 17,264
5.003%, 11/15/19 (c)5,000 2,322
5.038%, 2/15/21 (c)23,750 10,188
5.069%, 5/15/21 (c)194,440 81,955
5.086%, 2/15/22 (c)14,500 5,844
5.108%, 11/15/21 (c)57,875 23,664
5.109%, 11/15/22 (c)23,100 8,913
5.12%, 8/15/22 33,500 13,115
5.147%, 2/15/23 31,750 12,050
5.157%, 11/15/23 (c)23,500 8,566
PO
5/15/21 115,600 49,133
11/15/21 52,050 21,429
- ---------------------------------------------------------------------------------------------------
457,571
===================================================================================================
UTILITIES (2.7%)
Appalachian Power Co.
5.95%, 5/15/33 2,330 2,333
Cincinnati Gas & Electric Co.
5.40%, 6/15/33 775 729
Columbus Southern Power Co.
6.60%, 3/1/33 2,525 2,804
Consolidated Natural Gas Co.
6.25%, 11/1/11 3,800 4,277
Detroit Edison Co.
6.125%, 10/1/10 90 101
6.35%, 10/15/32 1,100 1,204
DPL, Inc.
8.25%, 3/1/07 2,560 2,714
Entergy Gulf States, Inc.
3.60%, 6/1/08 1,655 1,653
Exelon Corp.
6.75%, 5/1/11 2,170 2,486
FirstEnergy Corp.
6.45%, 11/15/11 3,865 4,239
7.375%, 11/15/31 975 1,091
GulfTerra Energy Partners LP
6.25%, 6/1/10 1,820 1,993
8.50%, 6/1/10 (c)2,734 3,171
Monongahela Power Co.
5.00%, 10/1/06 2,220 2,276
Nevada Power Co.
9.00%, 8/15/13 (e)2,180 2,458
Nisource Finance Corp.
7.625%, 11/15/05 $ 2,720 $ 2,960
Ohio Edison Co.
5.45%, 5/1/15 3,265 3,330
Pacific Gas & Electric Co.
6.05%, 3/1/34 3,400 3,453
Panhandle Eastern Pipe Line Co.
2.75%, 3/15/07 (e)775 775
PSEG Energy Holdings LLC
7.75%, 4/16/07 2,200 2,338
8.625%, 2/15/08 2,480 2,691
Ras Laffan Liquefied Natural Gas Co., Ltd.
8.294%, 3/15/14 (e)4,155 5,007
Reliant Energy Resources Corp.
7.75%, 2/15/11 2,075 2,369
Southern California Edison Co.
5.00%, 1/15/14 585 602
Texas Eastern Transmission LP
7.00%, 7/15/32 2,240 2,531
Texas-New Mexico Power Co.
6.25%, 1/15/09 2,025 2,153
TXU Corp.
6.375%, 6/15/06 1,505 1,631
TXU Energy Co.
7.00%, 3/15/13 1,930 2,216
Wisconsin Electric Power Co.
5.625%, 5/15/33 1,110 1,122
Wisconsin Energy Corp.
6.20%, 4/1/33 1,410 1,469
- ---------------------------------------------------------------------------------------------------
68,176
===================================================================================================
TOTAL FIXED INCOME SECURITIES (COST $2,931,871) 2,978,334
===================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
PREFERRED STOCK (1.2%)
MORTGAGES -- OTHER
Home Ownership Funding Corp.
13.331% (COST $28,516) (e)64,625 30,970
- ---------------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
STRUCTURED INVESTMENT (0.0%)
Morgan Guaranty Trust Co., 11/20/05;
monthly payments equal to 1% per annum of
the outstanding notional balance indexed to
GNMA ARM pools (COST $6,942) $ 20,662 153
SHORT-TERM INVESTMENTS (9.5%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED SECURITIES (7.0%)
American Express Credit Corp.
1.10%, 5/17/04 (h)1,573 1,573
Beta Finance, Inc.
1.08%, 6/16/04 (h)7,337 7,337
Canadian Imperial Bank N.Y.
1.11%, 8/3/04 (h)2,620 2,620
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED SECURITIES (CONT'D)
Chase Credit Card Master Trust
1.10%, 4/15/04 $ (h)2097 $ 2097
CIC N.Y.
1.11%, 7/30/04 2,620 2,620
CIT Group Holdings
1.12%, 9/20/04 (h)1,941 1,941
Credit Agricole Indosuez S.A., N.Y.
1.07%, 3/4/05 (h)7,545 7,545
Credit Suisse First Boston, N.Y.
1.04%, 4/2/04 4,717 4,717
Dresdner Bank, N.Y.
1.05%, 4/20/04 5,244 5,244
Federal National Mortgage Association
1.13%, 4/14/04 2,311 2,311
Jackson National Life Global Funding
1.06%, 1/18/05 (h)2,631 2,631
Landesbank Hessen-Thueringen, London
1.50%, 11/19/04 2,623 2,623
Links Finance LLC
1.08%, 6/16/04 (h)2,620 2,620
1.09%, 5/24/04 (h)4,192 4,192
Macquarie Bank Ltd.
1.18%, 6/24/04 (h)2,307 2,307
Natexis Banques Populaires, N.Y.
1.21%, 12/20/04 (h)4,191 4,191
Nationwide Building Society
1.12%, 3/31/05 (h)6,079 6,079
Sears Credit Card Account Master
1.12%, 10/15/04 (h)4,196 4,196
Societe Generale, London
1.54%, 11/12/04 2,620 2,620
Societe Generale, N.Y.
1.07%, 3/3/05 (h)5,083 5,083
Target Credit Card Master Trust
1.12%, 7/26/04 (h)4,141 4,141
UBS Securities LLC
1.06%, 4/1/04 82,555 82,555
Union Bank of Switzerland, Stamford
1.13%, 12/20/04 5,241 5,241
Wachovia Bank NA
1.13%, 11/15/04 (h)5,244 5,244
Westdeutsche Landesbank, N.Y.
1.09%, 11/29/04 (h)5,135 5,135
- ---------------------------------------------------------------------------------------------------
176,863
===================================================================================================
REPURCHASE AGREEMENT (1.9%)
J.P. Morgan Securities, Inc.,
0.97%, dated 3/31/04,
due 4/1/04, repurchase price $46,749 (f)46,748 46,748
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.6%)
U.S. Treasury Bills
0.95%, 7/15/04 $ (j)2,000 $ 1,995
0.98%, 9/23/04 (j)12,300 12,242
- ---------------------------------------------------------------------------------------------------
14,237
===================================================================================================
TOTAL SHORT-TERM INVESTMENTS (COST $237,847) 237,848
===================================================================================================
TOTAL INVESTMENTS (129.3%) (COST $3,205,176) --
INCLUDING $240,671 OF SECURITIES LOANED 3,247,305
===================================================================================================
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (13.2%)
Cash 761
Receivable for Forward Commitments 256,906
Due from Broker 45,974
Interest Receivable 19,445
Receivable for Investments Sold 6,956
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 319
Other 88 330,449
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-42.5%)
Payable for Forward Commitments (834,814)
Collateral for Securities Loaned, at Value (176,863)
Net Unrealized Depreciation on Swap
Agreements (27,152)
Interest Payable for Swap Agreements (14,652)
Payable for Investments Purchased (9,791)
Payable for Investment Advisory Fees (2,475)
Payable for Administrative Fees (197)
Payable for Trustees' Fees and Expenses (147)
Payable for Custodian Fees (40)
Payable for Distribution Fees -- Adviser Class (30)
Payable for Shareholder Servicing Fees --
Investment Class (16)
Other Liabilities (38) (1,066,215)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 2,511,539
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 2,539,174
Undistributed (Distributions in Excess of) Net
Investment Income 10,704
Accumulated Net Realized Gain (Loss) (51,941)
Unrealized Appreciation (Depreciation) on:
Investments 42,129
Foreign Currency Exchange Contracts and Translations 318
Futures Contracts (1,693)
Swap Agreements (27,152)
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 2,511,539
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS:
NET ASSETS $ 2,248,786
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 191,086,332 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.77
- ---------------------------------------------------------------------------------------------------
INVESTMENT CLASS:
NET ASSETS $ 121,798
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 10,352,944 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.76
- ---------------------------------------------------------------------------------------------------
ADVISER CLASS:
NET ASSETS $ 140,955
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 11,988,313 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.76
- ---------------------------------------------------------------------------------------------------
</Table>
(b) Issuer is in default.
(c) All or a portion of security on loan at March 31, 2004.
(d) Security was valued at fair value -- At March 31, 2004, the Portfolio
held $2,000 of fair valued securities, representing less than 0.05% of
net assets.
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(i) Security is subject to delayed delivery.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
Inv Fl Inverse Floating Rate -- Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 2004.
IO Interest Only
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open
at period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ---------------------------------------------------------------------------------------
EUR 4,211 $ 5,185 4/26/04 US$ 5,337 $ 5,337 $ 152
EUR 4,638 5,709 4/26/04 US$ 5,876 5,876 167
---------- ---------- --------
$ 10,894 $ 11,213 $ 319
========== ========== ========
=======================================================================================
</Table>
EUR -- Euro
US$ -- U.S. Dollar
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- -----------------------------------------------------------------------------
LONG:
U.S. Treasury
2 yr. Note 60 $ 12,910 Jun - 04 $ 89
U.S. Treasury
10 yr. Note 3,325 383,726 Jun - 04 4,191
U.S. Treasury
Long Bond 1,549 176,683 Jun - 04 2,389
SHORT:
U.S. Treasury
5 yr. Note 4,722 536,242 Jun - 04 (8,362)
--------
$ (1,693)
========
=============================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
INVESTMENT GRADE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
===================================================================================================
FIXED INCOME SECURITIES (114.9%)
AGENCY ADJUSTABLE RATE MORTGAGES (1.3%)
Government National Mortgage Association,
Adjustable Rate Mortgages:
4.375%, 2/20/25-1/20/28 $ 5,126 $ 5,221
4.625%, 11/20/25-12/20/27 1,489 1,528
4.75%, 7/20/25 103 105
- ---------------------------------------------------------------------------------------------------
6,854
===================================================================================================
AGENCY FIXED RATE MORTGAGES (56.1%)
Federal Home Loan Mortgage Corporation,
Conventional Pools:
8.25%, 10/1/06 5 6
10.00%, 11/1/20 33 38
10.25%, 7/1/09 30 33
11.00%, 1/1/16 48 53
11.25%, 12/1/14 48 55
13.00%, 9/1/10 2 2
Gold Pools:
6.00%, 2/1/32-4/1/32 294 306
6.50%, 10/1/17-11/1/33 16,131 16,960
7.00%, 2/1/26 66 70
7.50%, 5/1/16-6/1/32 11,902 12,819
8.00%, 11/1/29-10/1/31 3,011 3,257
8.50%, 12/1/30 449 486
10.00%, 9/1/17-1/1/21 269 301
10.50%, 3/1/16 126 140
April TBA
6.00%, 4/1/34 (i)26,050 27,076
May TBA
5.00%, 5/1/19 (i)5,750 5,901
Federal National Mortgage Association,
Conventional Pools:
6.00%, 10/1/31-12/1/31 241 251
6.50%, 6/1/26-6/1/33 69,511 73,055
7.00%, 10/1/28-12/1/32 29,064 30,853
7.50%, 5/1/23-12/1/32 14,791 15,860
8.00%, 3/1/07-6/1/32 11,177 12,096
8.50%, 4/1/30-9/1/32 9,446 10,228
9.00%, 2/1/17 187 209
9.50%, 5/1/28 369 413
10.00%, 3/1/20-6/1/28 361 406
10.50%, 12/1/17-10/1/18 131 150
11.00%, 4/1/21 294 333
11.25%, 8/1/13 58 67
11.50%, 1/1/17-11/1/19 101 116
April TBA
5.00%, 4/1/19 (i)10,400 10,692
5.50%, 4/1/19-4/1/34 (i)28,100 29,034
6.50%, 4/1/34 (i)14,400 15,129
7.00%, 4/1/34 (i)10,650 11,306
May TBA
4.50%, 5/1/19 (i)10,900 11,006
5.50%, 5/1/34 (i)12,800 13,080
Government National Mortgage Association,
Various Pools:
9.00%, 11/15/17 $ 478 $ 535
9.50%, 12/15/17-9/15/22 1,775 1,992
10.00%, 11/15/09-2/15/25 2,661 3,012
10.50%, 3/15/19 6 7
11.00%, 2/15/10-2/15/16 235 268
11.50%, 1/20/18 4 5
- ---------------------------------------------------------------------------------------------------
307,606
===================================================================================================
ASSET BACKED CORPORATES (3.6%)
Chase Credit Card Master Trust
5.50%, 11/17/08 1,045 1,129
Chase Funding Mortgage Loan
2.005%, 2/25/17 953 953
Citibank Credit Card Issuance Trust
6.90%, 10/15/07 1,805 1,950
7.45%, 9/15/07 1,430 1,544
CitiFinancial Mortgage Securities, Inc.
1.94%, 1/25/33 (g)585 586
Ford Credit Auto Owner Trust
1.62%, 8/15/05 1,359 1,362
Harley-Davidson Motorcycle Trust
1.56%, 5/15/07 1,320 1,322
Honda Auto Receivables Owner Trust
1.46%, 9/19/05 1,788 1,790
1.66%, 6/15/05 727 728
Lehman ABS Manufactured Housing Contract
3.01%, 3/15/10 139 135
MBNA Master Credit Card Trust
5.90%, 8/15/11 940 1,055
7.80%, 10/15/12 2,715 3,340
Nissan Auto Receivables Owner Trust
4.80%, 2/15/07 1,399 1,422
Peco Energy Transition Trust
6.05%, 3/1/09 1,250 1,360
Whole Auto Loan Trust
1.88%, 6/15/05 1,017 1,019
- ---------------------------------------------------------------------------------------------------
19,695
===================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (2.1%)
Federal Home Loan Mortgage Corporation
Inv Fl IO
1.50%, 6/17/27 1,363 43
6.91%, 3/15/32 1,896 167
8.01%, 4/15/25 35 @--
23.88%, 3/15/24 1,688 485
IO
6.00%, 5/15/30-4/15/32 13,393 1,229
6.50%, 4/1/28-5/15/33 5,819 848
8.00%, 1/1/28-6/1/31 635 103
REMIC PAC
10.00%, 6/15/20 50 50
Federal National Mortgage Association
2.115%, 10/25/42 992 992
2.25%, 7/25/42 393 393
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INVESTMENT GRADE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (CONT'D)
7.00%, 9/25/32 $ 2,442 $ 2,551
Inv Fl IO
7.01%, 12/25/29 1,112 61
7.11%, 10/25/28 1,529 128
7.41%, 5/18/27 2,263 219
7.46%, 10/25/30 759 68
IO
6.00%, 8/25/32-7/25/33 10,267 1,384
6.50%, 2/25/33-5/25/33 8,411 1,244
7.00%, 4/25/33 2,826 407
7.50%, 11/1/29 958 141
8.00%, 4/1/24-8/1/31 3,002 480
9.00%, 11/1/26 259 35
Government National Mortgage Association
Inv Fl IO
7.51%, 8/16/29 1,889 205
IO
5.50%, 3/20/33 3,067 80
- ---------------------------------------------------------------------------------------------------
11,313
===================================================================================================
FEDERAL AGENCY (1.0%)
Federal Home Loan Mortgage Corporation
5.125%, 11/7/13 (c)5,125 5,237
- ---------------------------------------------------------------------------------------------------
FINANCE (7.7%)
AIG SunAmerica Global Financing IX
6.90%, 3/15/32 (e)1,175 1,387
American General Corp.
7.50%, 7/15/25 545 679
American General Finance Corp.
4.625%, 9/1/10 915 955
AXA Financial, Inc.
6.50%, 4/1/08 760 858
Bank of New York Co., Inc. (The)
5.20%, 7/1/07 285 310
Bank One Corp.
6.00%, 2/17/09 1,350 1,511
CIT Group, Inc.
2.875%, 9/29/06 (c)590 598
7.375%, 4/2/07 195 222
Citicorp
6.375%, 11/15/08 705 794
6.75%, 8/15/05 640 686
Citigroup, Inc.
5.625%, 8/27/12 (c)915 1,003
5.75%, 5/10/06 156 168
6.00%, 2/21/12 310 350
Countrywide Home Loans, Inc.
3.25%, 5/21/08 (c)1,150 1,154
EOP Operating LP
7.50%, 4/19/29 1,160 1,345
Farmers Exchange Capital
7.05%, 7/15/28 (c)(e)1,185 1,205
Farmers Insurance Exchange
8.625%, 5/1/24 (e)975 1,151
FleetBoston Financial Corp.
7.25%, 9/15/05 $ 1,145 $ 1,236
General Electric Capital Corp.
4.25%, 12/1/10 445 456
6.75%, 3/15/32 1,535 1,779
Goldman Sachs Group, Inc.
5.25%, 10/15/13 630 653
6.60%, 1/15/12 730 838
6.875%, 1/15/11 700 814
Hartford Financial Services Group, Inc.
2.375%, 6/1/06 170 171
7.75%, 6/15/05 475 509
7.90%, 6/15/10 175 213
Household Finance Corp.
4.125%, 12/15/08 (c)450 465
5.875%, 2/1/09 485 538
6.375%, 10/15/11 538 611
6.40%, 6/17/08 465 524
6.75%, 5/15/11 365 422
International Lease Finance Corp.
3.75%, 8/1/07 500 515
J.P. Morgan Chase & Co.
6.00%, 2/15/09 (c)940 1,047
Mantis Reef Ltd.
4.692%, 11/14/08 (e)1,100 1,134
MBNA America Bank
7.125%, 11/15/12 265 313
MBNA Corp.
6.125%, 3/1/13 (c)950 1,056
Nationwide Mutual Insurance Co.
7.50%, 2/15/24 (e)1,465 1,517
8.25%, 12/1/31 (e)745 948
Prime Property Funding II
7.00%, 8/15/04 (e)1,380 1,407
Prudential Holdings LLC
7.245%, 12/18/23 (e)3,125 3,698
8.695%, 12/18/23 (e)1,080 1,424
Rouse Co. (The)
3.625%, 3/15/09 335 332
5.375%, 11/26/13 155 159
SLM Corp.
5.00%, 10/1/13 865 892
Vornado Realty Trust
5.625%, 6/15/07 530 578
Washington Mutual Bank FA
5.50%, 1/15/13 170 181
Washington Mutual, Inc.
8.25%, 4/1/10 510 624
World Financial Properties
6.91%, 9/1/13 (e)2,429 2,751
- ---------------------------------------------------------------------------------------------------
42,181
===================================================================================================
INDUSTRIALS (10.9%)
Aetna, Inc.
7.875%, 3/1/11 1,475 1,796
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INVESTMENT GRADE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
Albertson's, Inc.
7.50%, 2/15/11 $ (c)465 $ 546
Altria Group, Inc.
7.00%, 11/4/13 340 375
7.75%, 1/15/27 635 710
Amerada Hess Corp.
7.875%, 10/1/29 620 704
America West Airlines, Inc.
7.10%, 4/2/21 1,243 1,371
Anthem Insurance Cos., Inc.
9.125%, 4/1/10 (e)250 323
AT&T Corp.
8.75%, 11/15/31 (c)795 941
AT&T Wireless Services, Inc.
8.75%, 3/1/31 395 514
Cendant Corp.
7.375%, 1/15/13 445 523
Centex Corp.
7.875%, 2/1/11 465 560
Clear Channel Communications, Inc.
7.65%, 9/15/10 660 784
Comcast Cable Communications
6.75%, 1/30/11 (c)320 364
Comcast Corp.
6.50%, 1/15/15 600 665
Conoco, Inc.
6.95%, 4/15/29 1,135 1,327
Constellation Energy Group, Inc.
7.60%, 4/1/32 535 641
Continental Airlines, Inc.
6.545%, 2/2/19 346 341
6.648%, 9/15/17 (c)583 571
6.90%, 1/2/18 (c)650 648
Cooper Industries, Inc.
5.25%, 7/1/07 770 832
CVS Corp.
5.625%, 3/15/06 860 920
6.204%, 10/10/25 (e)243 258
DaimlerChrysler N.A. Holding Corp.
7.30%, 1/15/12 (c)980 1,132
7.75%, 1/18/11 440 515
8.50%, 1/18/31 545 672
Deutsche Telekom International Finance BV
8.75%, 6/15/30 830 1,092
Electronic Data Systems Corp.
6.00%, 8/1/13 475 462
7.125%, 10/15/09 (c)315 337
Federated Department Stores, Inc.
6.30%, 4/1/09 370 417
6.625%, 9/1/08 225 255
6.90%, 4/1/29 (c)140 156
8.50%, 6/1/10 65 80
FedEx Corp.
2.65%, 4/1/07 $ (e)550 $ 550
Ford Motor Co.
6.375%, 2/1/29 1,230 1,098
6.625%, 10/1/28 (c)850 784
Ford Motor Credit Corp.
7.25%, 10/25/11 (c)1,700 1,844
General Motors Acceptance Corp.
4.50%, 7/15/06 (c)375 388
6.875%, 9/15/11 1,885 2,048
8.00%, 11/1/31 975 1,082
GTE Corp.
6.94%, 4/15/28 1,360 1,482
Honeywell International, Inc.
6.125%, 11/1/11 (c)870 979
Hutchison Whampoa International Ltd.
5.45%, 11/24/10 (e)400 414
6.50%, 2/13/13 (e)565 602
Hyatt Equities LLC
6.875%, 6/15/07 (e)680 738
ICI Wilmington, Inc.
4.375%, 12/1/08 400 410
Inco Ltd.
7.20%, 9/15/32 875 1,014
7.75%, 5/15/12 300 363
International Paper Co.
4.25%, 1/15/09 570 585
Kerr-McGee Corp.
5.875%, 9/15/06 190 205
6.875%, 9/15/11 250 285
Kraft Foods, Inc.
5.625%, 11/1/11 175 190
6.25%, 6/1/12 (c)495 556
Kroger Co.
7.70%, 6/1/29 (c)120 144
8.00%, 9/15/29 465 577
Lockheed Martin Corp.
7.75%, 5/1/26 470 580
Lowe's Cos., Inc.
6.875%, 2/15/28 480 559
Marathon Oil Corp.
6.80%, 3/15/32 595 670
Marriott International, Inc.
7.00%, 1/15/08 1,270 1,453
May Department Stores Co. (The)
6.70%, 9/15/28 1,325 1,458
7.875%, 3/1/30 (c)225 282
Miller Brewing Co.
4.25%, 8/15/08 (e)660 684
Mohawk Industries, Inc.
7.20%, 4/15/12 355 413
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INVESTMENT GRADE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
News America Holdings, Inc.
7.75%, 2/1/24 $ 565 $ 670
8.875%, 4/26/23 375 494
News America, Inc.
7.30%, 4/30/28 160 184
Nexen, Inc.
5.05%, 11/20/13 490 501
Pemex Project Funding Master Trust
7.375%, 12/15/14 245 274
8.00%, 11/15/11 480 561
8.625%, 2/1/22 (c)1,155 1,340
9.125%, 10/13/10 185 228
Petro Canada
4.00%, 7/15/13 170 162
5.35%, 7/15/33 395 367
Pulte Homes, Inc.
6.375%, 5/15/33 400 400
Raytheon Co.
8.30%, 3/1/10 460 566
Sappi Papier Holding AG
6.75%, 6/15/12 (e)465 526
Schering-Plough Corp.
5.30%, 12/1/13 (c)345 361
Sealed Air Corp.
5.625%, 7/15/13 (c)(e)565 593
Southwest Airlines Co.
5.496%, 11/1/06 520 558
Sprint Capital Corp.
8.75%, 3/15/32 220 279
Systems 2001 Asset Trust LLC
6.664%, 9/15/13 (e)1,480 1,663
TCI Communications, Inc.
7.875%, 2/15/26 520 618
Time Warner, Inc.
6.625%, 5/15/29 310 325
7.625%, 4/15/31 650 763
7.70%, 5/1/32 465 552
Verizon New England, Inc.
6.50%, 9/15/11 610 690
Waste Management, Inc.
5.00%, 3/15/14 (c)410 414
6.875%, 5/15/09 830 949
Wellpoint Health Networks, Inc.
6.375%, 6/15/06 735 801
Weyerhaeuser Co.
6.00%, 8/1/06 305 330
6.75%, 3/15/12 (c)1,270 1,437
- ---------------------------------------------------------------------------------------------------
59,875
===================================================================================================
MORTGAGES -- OTHER (0.0%)
California Federal Savings & Loan Association
8.80%, 1/1/14 7 7
First Federal Savings & Loan Association
8.75%, 6/1/06 15 15
Ryland Acceptance Corp. IV
6.65%, 7/1/11 $ 158 $ 162
- ---------------------------------------------------------------------------------------------------
184
===================================================================================================
SOVEREIGN (0.5%)
United Mexican States
8.00%, 9/24/22 745 862
8.30%, 8/15/31 575 677
8.375%, 1/14/11 1,060 1,291
- ---------------------------------------------------------------------------------------------------
2,830
===================================================================================================
U.S. TREASURY SECURITIES (29.9%)
U.S. Treasury Bonds
6.125%, 8/15/29 (c)2,920 3,462
7.25%, 8/15/22 (c)11,500 15,112
8.125%, 8/15/19-8/15/21 (c)18,210 25,768
8.75%, 8/15/20 (c)2,050 3,043
U.S. Treasury Notes
3.50%, 11/15/06 (c)6,000 6,256
3.875%, 2/15/13 (c)4,000 4,056
U.S. Treasury Strips
IO
4.39%, 5/15/10 (c)7,500 6,142
4.567%, 2/15/17 5,000 2,763
4.611%, 5/15/16 8,000 4,631
4.899%, 2/15/19 6,000 2,921
4.961%, 5/15/19 (c)5,100 2,442
4.967%, 2/15/20 (c)37,425 17,090
4.993%, 5/15/20 16,700 7,509
5.00%, 8/15/20 (c)14,400 6,374
5.003%, 11/15/19 (c)2,000 929
5.08%, 5/15/21 (c)58,590 24,695
5.083%, 2/15/21 (c)4,000 1,716
5.086%, 2/15/22 (c)3,000 1,209
5.109%, 11/15/21 (c)14,350 5,867
5.11%, 11/15/22 (c)3,475 1,341
5.119%, 8/15/22 9,100 3,563
5.147%, 2/15/23 12,000 4,554
5.157%, 11/15/23 (c)5,000 1,822
PO
5/15/21 17,625 7,491
11/15/21 8,000 3,294
- ---------------------------------------------------------------------------------------------------
164,050
===================================================================================================
UTILITIES (1.8%)
Appalachian Power Co.
5.95%, 5/15/33 440 440
Carolina Power & Light Co.
5.125%, 9/15/13 850 890
Cincinnati Gas & Electric Co.
5.375%, 6/15/33 165 155
5.40%, 6/15/33 225 212
5.70%, 9/15/12 440 475
Columbus Southern Power Co.
6.60%, 3/1/33 310 344
Consolidated Natural Gas Co.
6.25%, 11/1/11 720 810
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INVESTMENT GRADE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
UTILITIES (CONT'D)
Detroit Edison Co.
6.125%, 10/1/10 $ 120 $ 135
6.35%, 10/15/32 210 230
Duke Energy Corp.
4.50%, 4/1/10 560 582
Entergy Gulf States, Inc.
3.60%, 6/1/08 345 345
Exelon Corp.
6.75%, 5/1/11 465 533
Ohio Power Co.
6.60%, 2/15/33 325 361
Pacific Gas & Electric Co.
6.05%, 3/1/34 735 747
Panhandle Eastern Pipe Line Co.
2.75%, 3/15/07 (e)170 170
Public Service Electric & Gas Co.
5.00%, 1/1/13 580 605
Ras Laffan Liquefied Natural Gas Co., Ltd.
8.294%, 3/15/14 (e)890 1,072
South Carolina Electric & Gas Co.
5.30%, 5/15/33 265 256
Southern California Edison Co.
5.00%, 1/15/14 120 123
Texas Eastern Transmission LP
7.00%, 7/15/32 425 480
TXU Energy Co.
7.00%, 3/15/13 515 591
Wisconsin Electric Power Co.
5.625%, 5/15/33 165 167
Wisconsin Energy Corp.
6.20%, 4/1/33 215 224
- ---------------------------------------------------------------------------------------------------
9,947
===================================================================================================
TOTAL FIXED INCOME SECURITIES (COST $614,293) 629,772
===================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
PREFERRED STOCK (0.6%)
MORTGAGES -- OTHER (0.6%)
Home Ownership Funding Corp.
13.331% (COST $3,290) (e)7,150 3,426
<Caption>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (19.4%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED SECURITIES (12.4%)
American Express Credit Corp.
1.10%, 5/17/04 $ (h)602 602
Beta Finance, Inc.
1.08%, 6/16/04 (h)2,810 2,810
Canadian Imperial Bank N.Y.
1.11%, 8/3/04 (h)1,004 1,004
Chase Credit Card Master Trust
1.10%, 10/15/04 (h)803 803
CIC N.Y
1.11%, 7/30/04 $ 1,004 $ 1,004
CIT Group Holdings
1.12%, 9/20/04 (h)743 743
Credit Agricole Indosuez S.A., N.Y.
1.07%, 3/4/05 (h)2,890 2,890
Credit Suisse First Boston, N.Y.
1.04%, 4/2/04 1,806 1,806
Dresdner Bank, N.Y.
1.05%, 4/20/04 2,008 2,008
Federal National Mortgage Association
1.13%, 4/14/04 885 885
Jackson National Life Global Funding
1.06%, 1/18/05 (h)1,008 1,008
Landesbank Hessen-Thueringen, London
1.50%, 11/19/04 1,005 1,005
Links Finance LLC
1.08%, 6/16/04 (h)1,004 1,004
1.09%, 5/24/04 (h)1,606 1,606
Macquarie Bank Ltd.
1.18%, 6/24/04 (h)883 883
Natexis Banques Populaires, N.Y.
1.21%, 12/20/04 (h)1,605 1,605
Nationwide Building Society
1.12%, 3/31/05 (h)2,328 2,328
Sears Credit Card Account Master
1.12%, 10/15/04 (h)1,607 1,607
Societe Generale, London
1.54%, 11/12/04 1,004 1,004
Societe Generale, N.Y.
1.07%, 3/3/05 (h)1,947 1,947
Target Credit Card Master Trust
1.12%, 7/26/04 (h)1,586 1,586
UBS Securities LLC
1.06%, 4/1/04 31,618 31,618
Union Bank of Switzerland, Stamford
1.13%, 12/20/04 2,007 2,007
Wachovia Bank NA
1.13%, 11/15/04 (h)2,008 2,008
Westdeutsche Landesbank, N.Y.
1.09%, 11/29/04 (h)1,967 1,967
- ---------------------------------------------------------------------------------------------------
67,738
===================================================================================================
DISCOUNT NOTES (3.6%)
Federal Home Loan Bank
1.00%, 5/26/04 20,000 19,972
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.1%)
J.P. Morgan Securities, Inc.,
0.97%, dated 3/31/04, due 4/1/04,
repurchase price $17,170 (f)17,170 17,170
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.3%)
U.S. Treasury Bills
0.95%, 7/15/04 (j)300 299
0.98%, 9/23/04 (j)1,350 1,344
- ---------------------------------------------------------------------------------------------------
1,643
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INVESTMENT GRADE FIXED INCOME PORTFOLIO
<Table>
<Caption>
VALUE
(000)
- ----------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $106,520) $ 106,523
==================================================================================
TOTAL INVESTMENTS (134.9%) (COST $724,103)--
INCLUDING $120,597 OF SECURITIES LOANED 739,721
==================================================================================
</Table>
<Table>
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (10.2%)
Receivable for Forward Commitments $ 43,203
Due from Broker 5,370
Interest Receivable 3,644
Receivable for Investments Sold 3,528
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 73
Other 16 55,834
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-45.1%)
Payable for Forward Commitments (166,089)
Collateral on Securities Loaned, at Value (67,738)
Payable for Investments Purchased (5,773)
Net Unrealized Depreciation on Swap
Agreements (3,244)
Interest Payable for Swap Agreements (2,736)
Bank Overdraft Payable (1,004)
Payable for Investment Advisory Fees (514)
Payable for Administrative Fees (46)
Payable for Portfolio Shares Redeemed (39)
Payable for Trustees' Fees and Expenses (24)
Payable for Custodian Fees (10)
Other Liabilities (19) (247,236)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 548,319
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 532,740
Undistributed (Distributions in Excess of) Net
Investment Income 2,355
Accumulated Net Realized Gain (Loss) 723
Unrealized Appreciation (Depreciation) on:
Investments 15,618
Foreign Currency Exchange Contracts and Translations 73
Futures Contracts 54
Swap Agreements (3,244)
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 548,319
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 546,889
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 47,064,895 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.62
===================================================================================================
ADVISER CLASS:
NET ASSETS $ 1,430
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 123,135 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.61
===================================================================================================
</Table>
(c) All or a portion of security on loan at March 31, 2004.
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(g) Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 2004. Maturity date disclosed is the
ultimate maturity date.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(i) Security is subject to delayed delivery.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
@ Value/Face Amount is less than $500.
Inv Fl Inverse Floating Rate -- Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 2004.
IO Interest Only
PAC Planned Amortization Class
PO Principal Only
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced
================================================================================
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- -----------------------------------------------------------------------------------------
EUR 960 $ 1,182 4/26/04 US$ 1,217 $ 1,217 $ 35
EUR 771 949 4/26/04 US$ 977 977 28
US$ 1,174 1,174 4/26/04 EUR 960 1,182 8
US$ 947 947 4/26/04 EUR 771 949 2
---------- ---------- --------
$ 4,252 $ 4,325 $ 73
========== ========== ========
=========================================================================================
</Table>
EUR -- Euro
US$ -- U.S. Dollar
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INVESTMENT GRADE FIXED INCOME PORTFOLIO
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- -----------------------------------------------------------------------------
LONG:
U.S. Treasury
10 yr. Note 569 $ 65,666 Jun - 04 $ 1,013
U.S. Treasury
Long Bond 35 3,992 Jun - 04 72
SHORT:
U.S. Treasury
2 yr. Note 16 3,443 Jun - 04 (12)
U.S. Treasury
5 yr. Note 569 64,617 Jun - 04 (1,019)
---------
$ 54
=========
=============================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
U.S. CORE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (109.3%)
AGENCY ADJUSTABLE RATE MORTGAGES (1.3%)
Government National Mortgage Association,
Adjustable Rate Mortgages:
4.375%, 2/20/25-1/20/28 $ 2,086 $ 2,123
4.625%, 10/20/27-12/20/27 94 97
4.75%, 8/20/25-9/20/27 580 593
- ---------------------------------------------------------------------------------------------------
2,813
===================================================================================================
AGENCY FIXED RATE MORTGAGES (57.1%)
Federal Home Loan Mortgage Corporation,
Conventional Pools:
10.00%, 10/1/12-11/1/20 123 138
11.50%, 8/1/19 63 73
Gold Pools:
6.50%, 1/1/28-11/1/33 13,518 14,215
7.50%, 1/1/30-6/1/32 2,221 2,391
8.00%, 10/1/29-10/1/31 1,578 1,708
8.50%, 3/1/30-7/1/31 756 818
10.00%, 6/1/17-3/1/21 212 237
12.00%, 11/1/19 11 12
April TBA
6.00%, 4/1/34 (i)10,000 10,394
May TBA
5.00%, 5/1/19 (i)2,500 2,566
Federal National Mortgage Association,
Conventional Pools:
6.50%, 7/1/29-1/2/33 18,494 19,437
7.00%, 2/1/26-5/1/33 10,732 11,393
7.50%, 9/1/16-7/1/32 7,764 8,324
8.00%, 4/1/25-8/1/32 7,314 7,919
8.50%, 5/1/23-9/1/32 5,826 6,318
9.00%, 4/1/26 1,265 1,413
9.50%, 2/1/20-8/1/21 331 371
10.00%, 8/1/18-2/1/25 103 118
10.50%, 11/1/10-10/1/18 127 144
11.00%, 9/1/19-9/1/20 193 220
11.50%, 11/1/19 137 156
April TBA
5.00%, 4/1/19 (i)3,425 3,521
5.50%, 4/1/19-5/1/34 (i)7,400 7,664
6.50%, 4/1/34 (i)8,750 9,193
May TBA
4.50%, 5/1/19 (i)3,950 3,988
5.50%, 5/1/34 (i)7,200 7,358
Government National Mortgage Association,
Various Pools:
9.00%, 11/15/17 81 91
9.50%, 12/15/17-12/15/21 619 694
10.00%, 9/15/18-4/15/25 537 608
10.50%, 2/15/13-2/15/25 1,094 1,252
11.00%, 12/15/09-7/15/20 107 123
11.50%, 4/15/13-8/15/13 150 173
12.00%, 12/15/12-3/15/14 14 16
- ---------------------------------------------------------------------------------------------------
123,046
===================================================================================================
ASSET BACKED CORPORATES (4.3%)
Centex Home Equity Corp.
1.833%, 9/25/19 $ (g)1,100 $ 1,101
Chase Credit Card Master Trust
5.50%, 11/17/08 865 934
Citibank Credit Card Issuance Trust
6.875%, 11/16/09 (c)1,240 1,418
7.45%, 9/15/07 705 761
Harley-Davidson Eaglemark Motorcycle Trust
1.91%, 4/15/07 397 398
Honda Auto Receivables Owner Trust
1.66%, 6/15/05 521 522
Lehman ABS Manufactured Housing Contract
3.01%, 3/15/10 99 97
MBNA Master Credit Card Trust
7.80%, 10/15/12 1,480 1,821
Nissan Auto Receivables Owner Trust
4.80%, 2/15/07 613 624
Wells Fargo Financial Auto Owner Trust
1.47%, 3/15/07 1,100 1,101
Whole Auto Loan Trust
1.88%, 6/15/05 581 582
- ---------------------------------------------------------------------------------------------------
9,359
===================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (1.9%)
Federal Home Loan Mortgage Corporation
Inv Fl IO
1.50%, 6/17/27 237 7
7.46%, 10/15/29 335 24
8.01%, 4/15/25 22 @--
23.88%, 3/15/24 298 86
IO
5.00%, 12/15/16 2,577 239
6.00%, 5/1/31 2,022 262
6.50%, 4/1/28-5/15/33 3,759 548
8.00%, 1/1/28-8/1/31 230 37
Federal National Mortgage Association
Inv Fl IO
6.46%, 2/17/31 902 95
7.01%, 12/25/29 699 38
7.11%, 10/25/28 1,595 134
IO
6.00%, 8/25/32-7/25/33 6,342 850
6.50%, 2/25/33-5/25/33 5,232 776
7.00%, 4/25/33 2,265 326
8.00%, 4/1/24-8/1/31 1,883 301
9.00%, 11/1/26 98 13
IO PAC
8.00%, 8/18/27 96 15
Government National Mortgage Association
Inv Fl IO
6.49%, 9/16/31 388 33
6.856%, 12/16/25 1,406 145
6.875%, 9/16/27 622 64
7.41%, 9/20/30 369 37
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. CORE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (CONT'D)
7.51%, 8/16/29 $ 1,456 $ 161
- ---------------------------------------------------------------------------------------------------
4,191
===================================================================================================
FEDERAL AGENCY (1.4%)
Federal Home Loan Mortgage Corporation
5.125%, 11/7/13 (c)3,000 3,066
- ---------------------------------------------------------------------------------------------------
FINANCE (8.5%)
AIG SunAmerica Global Financing VI
6.30%, 5/10/11 (e)965 1,091
American General Finance Corp.
4.625%, 9/1/10 465 485
AXA Financial, Inc.
6.50%, 4/1/08 105 119
Bank of New York Co., Inc. (The)
5.20%, 7/1/07 165 180
Bank One Corp.
6.00%, 2/17/09 730 817
CIT Group, Inc.
2.875%, 9/29/06 (c)340 345
Citicorp
6.375%, 11/15/08 380 428
Citigroup, Inc.
5.625%, 8/27/12 (c)525 575
5.75%, 5/10/06 90 97
Countrywide Home Loans, Inc.
3.25%, 5/21/08 385 386
EOP Operating LP
7.50%, 4/19/29 425 493
Equitable Life Assurance Society U.S.A.
6.95%, 12/1/05 (e)860 932
Farmers Exchange Capital
7.05%, 7/15/28 (e)165 168
Farmers Insurance Exchange
8.625%, 5/1/24 (e)475 561
FleetBoston Financial Corp.
7.25%, 9/15/05 405 437
General Electric Capital Corp.
4.25%, 12/1/10 230 236
6.75%, 3/15/32 465 539
Goldman Sachs Group, Inc.
6.875%, 1/15/11 700 814
Hartford Financial Services Group, Inc.
2.375%, 6/1/06 360 362
Household Finance Corp.
4.125%, 12/15/08 100 103
5.875%, 2/1/09 270 300
6.375%, 10/15/11 185 210
6.75%, 5/15/11 235 272
J.P. Morgan Chase & Co.
6.00%, 2/15/09 (c)635 707
John Hancock Financial Services, Inc.
5.625%, 12/1/08 295 324
Mantis Reef Ltd.
4.692%, 11/14/08 (e)200 206
MBNA Corp.
6.125%, 3/1/13 $ (c)475 $ 528
Nationwide Mutual Insurance Co.
7.50%, 2/15/24 (e)755 782
8.25%, 12/1/31 (e)225 286
Prime Property Funding II
7.00%, 8/15/04 (e)400 408
Prudential Holdings LLC
7.245%, 12/18/23 (c)(e)1,350 1,598
Rouse Co. (The)
3.625%, 3/15/09 95 94
5.375%, 11/26/13 90 93
SLM Corp.
5.00%, 10/1/13 (c)490 505
U.S. Bank N.A.
2.85%, 11/15/06 455 466
Vornado Realty Trust
5.625%, 6/15/07 280 305
Wachovia Corp.
4.95%, 11/1/06 (c)760 813
Washington Mutual, Inc.
8.25%, 4/1/10 240 294
World Financial Properties
6.95%, 9/1/13 (e)773 878
- ---------------------------------------------------------------------------------------------------
18,237
===================================================================================================
INDUSTRIALS (10.8%)
Aetna, Inc.
7.875%, 3/1/11 510 621
Albertson's, Inc.
7.50%, 2/15/11 175 206
Altria Group, Inc.
7.00%, 11/4/13 200 221
7.75%, 1/15/27 155 173
Amerada Hess Corp.
6.65%, 8/15/11 310 343
America West Airlines, Inc.
7.10%, 4/2/21 649 715
Anthem Insurance Cos., Inc.
9.125%, 4/1/10 (e)200 258
AT&T Corp.
8.75%, 11/15/31 280 331
AT&T Wireless Services, Inc.
8.75%, 3/1/31 145 189
Cendant Corp.
7.375%, 1/15/13 100 118
Centex Corp.
7.875%, 2/1/11 295 355
Clear Channel Communications, Inc.
7.65%, 9/15/10 160 190
Comcast Corp.
6.50%, 1/15/15 555 615
Conoco, Inc.
6.95%, 4/15/29 400 468
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. CORE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
Constellation Energy Group, Inc.
7.60%, 4/1/32 $ 160 $ 192
Continental Airlines, Inc.
6.545%, 2/2/19 (c)363 358
7.461%, 4/1/15 100 97
Cooper Industries, Inc.
5.25%, 7/1/07 405 438
CVS Corp.
5.789%, 1/10/26 (e)259 269
6.204%, 10/10/25 (e)144 153
DaimlerChrysler N.A. Holding Corp.
7.20%, 9/1/09 215 245
7.30%, 1/15/12 (c)530 612
Deutsche Telekom International Finance BV
8.75%, 6/15/30 320 421
Electronic Data Systems Corp.
6.00%, 8/1/13 85 83
7.125%, 10/15/09 (c)170 182
Federated Department Stores, Inc.
6.625%, 9/1/08 120 136
6.90%, 4/1/29 (c)330 368
FedEx Corp.
2.65%, 4/1/07 (e)215 215
Ford Motor Co.
6.625%, 10/1/28 485 447
Ford Motor Credit Corp.
7.25%, 10/25/11 (c)750 813
France Telecom S.A.
9.50%, 3/1/31 155 210
General Motors Acceptance Corp.
4.50%, 7/15/06 (c)275 284
6.875%, 9/15/11 520 565
8.00%, 11/1/31 405 450
GTE Corp.
6.94%, 4/15/28 725 790
Honeywell International, Inc.
6.125%, 11/1/11 (c)250 281
Hutchison Whampoa International Ltd.
6.50%, 2/13/13 (e)340 363
Hyatt Equities LLC
6.875%, 6/15/07 (e)280 304
ICI Wilmington, Inc.
4.375%, 12/1/08 235 241
Inco Ltd.
7.75%, 5/15/12 130 157
International Paper Co.
4.25%, 1/15/09 195 200
Kerr-McGee Corp.
5.875%, 9/15/06 115 124
Kraft Foods, Inc.
6.25%, 6/1/12 255 286
Kroger Co.
7.50%, 4/1/31 (c)140 166
Lockheed Martin Corp.
8.50%, 12/1/29 $ 135 $ 182
Lowe's Cos., Inc.
6.50%, 3/15/29 190 215
6.875%, 2/15/28 (c)110 128
Marathon Oil Corp.
6.80%, 3/15/32 155 175
Marriott International, Inc.
7.00%, 1/15/08 (c)740 847
May Department Stores Co. (The)
6.70%, 9/15/28 900 990
Miller Brewing Co.
4.25%, 8/15/08 (e)245 254
Mohawk Industries, Inc.
7.20%, 4/15/12 170 198
News America Holdings, Inc.
7.75%, 2/1/24 440 522
Nexen, Inc.
5.05%, 11/20/13 100 102
Pemex Project Funding Master Trust
7.375%, 12/15/14 1,045 1,168
Petro Canada
5.35%, 7/15/33 180 167
Pulte Homes, Inc.
6.375%, 5/15/33 250 250
Raytheon Co.
8.30%, 3/1/10 145 178
Schering-Plough Corp.
5.30%, 12/1/13 200 209
Sealed Air Corp.
5.625%, 7/15/13 (e)195 205
Southwest Airlines Co.
5.496%, 11/1/06 325 349
Sprint Capital Corp.
8.75%, 3/15/32 80 101
Telecom Italia Capital S.A.
4.00%, 11/15/08 (e)115 118
Time Warner, Inc.
7.625%, 4/15/31 260 305
7.70%, 5/1/32 275 326
Union Pacific Corp.
3.625%, 6/1/10 (c)305 302
Waste Management, Inc.
6.875%, 5/15/09 425 486
Wellpoint Health Networks, Inc.
6.375%, 6/15/06 380 414
Weyerhaeuser Co.
6.00%, 8/1/06 175 189
6.75%, 3/15/12 525 594
- ---------------------------------------------------------------------------------------------------
23,227
===================================================================================================
MORTGAGES -- OTHER (0.0%)
Gemsco Mortgage Pass Through Certificate
8.701%, 11/25/10 29 29
- ---------------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. CORE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SOVEREIGN (0.4%)
United Mexican States
8.30%, 8/15/31 $ 700 $ 824
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (22.2%)
U.S. Treasury Bond
6.125%, 8/15/29 (c)2,550 3,024
U.S. Treasury Note
3.875%, 2/15/13 (c)6,150 6,235
U.S. Treasury Strips
IO
4.567%, 2/15/17 2,000 1,105
4.611%, 5/15/16 1,000 579
4.899%, 2/15/19 2,750 1,339
4.983%, 2/15/20 (c)6,075 2,774
5.002%, 11/15/19 (c)1,150 534
5.003%, 5/15/20 (c)17,325 7,790
5.036%, 8/15/20 (c)2,000 885
5.071%, 2/15/21 (c)2,000 858
5.086%, 2/15/22 (c)1,000 403
5.089%, 5/15/21 (c)30,605 12,900
5.109%, 11/15/22 (c)2,200 849
5.11%, 11/15/21 (c)5,425 2,218
5.12%, 8/15/22 (c)5,900 2,310
5.147%, 2/15/23 (c)2,500 949
5.157%, 11/15/23 (c)2,750 1,002
PO
11/15/21 4,925 2,028
- ---------------------------------------------------------------------------------------------------
47,782
===================================================================================================
UTILITIES (1.4%)
Carolina Power & Light Co.
5.125%, 9/15/13 305 319
Columbus Southern Power Co.
6.60%, 3/1/33 250 278
Detroit Edison Co.
6.125%, 10/1/10 100 112
6.35%, 10/15/32 75 82
Duke Energy Corp.
4.50%, 4/1/10 335 348
Entergy Gulf States, Inc.
3.60%, 6/1/08 200 200
Exelon Corp.
6.75%, 5/1/11 175 200
Ohio Power Co.
6.60%, 2/15/33 105 117
Pacific Gas & Electric Co.
6.05%, 3/1/34 285 290
Panhandle Eastern Pipe Line Co.
2.75%, 3/15/07 (e)65 65
Public Service Electric & Gas Co.
5.00%, 1/1/13 345 360
South Carolina Electric & Gas Co.
5.30%, 5/15/33 170 164
Southern California Edison Co.
5.00%, 1/15/14 75 77
TXU Energy Co.
7.00%, 3/15/13 $ 175 $ 201
Wisconsin Electric Power Co.
5.625%, 5/15/33 105 106
Wisconsin Energy Corp.
6.20%, 4/1/33 130 135
- ---------------------------------------------------------------------------------------------------
3,054
===================================================================================================
TOTAL FIXED INCOME SECURITIES ($231,344) 235,628
===================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
PREFERRED STOCK (0.7%)
MORTGAGES -- OTHER
Home Ownership Funding Corp.
13.331% (COST $1,365) (e)2,975 1,426
- ---------------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (24.4%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED SECURITIES (13.8%)
American Express Credit Corp.
1.10%, 5/17/04 $ (h)265 265
Beta Finance, Inc.
1.08%, 6/16/04 (h)1,235 1,235
Canadian Imperial Bank N.Y.
1.11%, 8/3/04 (h)441 441
Chase Credit Card Master Trust
1.10%, 4/15/04 (h)353 353
CIC N.Y.
1.11%, 7/30/04 441 441
CIT Group Holdings
1.12%, 9/20/04 (h)327 327
Credit Agricole Indosuez S.A., N.Y.
1.07%, 3/4/05 (h)1,270 1,270
Credit Suisse First Boston, N.Y.
1.04%, 4/2/04 794 794
Dresdner Bank, N.Y.
1.05%, 4/20/04 883 883
Federal National Mortgage Association
1.13%, 4/14/04 389 389
Jackson National Life Global Funding
1.06%, 1/18/05 (h)443 443
Landesbank Hessen-Thueringen, London
1.50%, 11/19/04 442 442
Links Finance LLC
1.08%, 6/16/04 (h)441 441
1.09%, 5/24/04 (h)706 706
Macquarie Bank Ltd.
1.18%, 6/24/04 (h)388 388
Natexis Banques Populaires, N.Y.
1.21%, 12/20/04 (h)705 705
Nationwide Building Society
1.12%, 3/31/05 (h)1,023 1,023
Sears Credit Card Account Master
1.12%, 10/15/04 (h)706 706
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. CORE FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED SECURITIES (CONT'D)
Societe Generale, London
1.54%, 11/12/04 $ 441 $ 441
Societe Generale, N.Y.
1.07%, 3/3/05 (h)856 856
Target Credit Card Master Trust
1.12%, 7/26/04 (h)697 697
UBS Securities LLC
1.06%, 4/1/04 13,896 13,896
Union Bank of Switzerland, Stamford
1.13%, 12/20/04 882 882
Wachovia Bank NA
1.13%, 11/15/04 (h)883 883
Westdeutsche Landesbank, N.Y.
1.09%, 11/29/04 (h)864 864
- ---------------------------------------------------------------------------------------------------
29,771
===================================================================================================
DISCOUNT NOTES (6.5%)
Federal National Mortgage Association
0.90%, 4/21/04 8,000 7,996
0.96%, 6/2/04 6,000 5,990
- ---------------------------------------------------------------------------------------------------
13,986
===================================================================================================
REPURCHASE AGREEMENT (3.5%)
J.P. Morgan Securities, Inc.,
0.97%, dated 3/31/04, due 4/1/04,
repurchase price $7,489 (f)7,489 7,489
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.6%)
U.S. Treasury Bills
0.95%, 7/15/04 (j)1,300 1,296
- ---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS ($52,542) 52,542
===================================================================================================
TOTAL INVESTMENTS (134.4%) (COST $285,251) --
INCLUDING $44,950 OF SECURITIES LOANED 289,596
===================================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (11.4%)
Cash $ 1,375
Receivable for Forward Commitments 19,462
Due from Broker 1,766
Interest Receivable 1,462
Receivable for Investments Sold 597
Other 9 $ 24,671
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-45.8%)
Payable for Forward Commitments (63,985)
Collateral on Securities Loaned, at Value (29,771)
Payable for Investments Purchased (2,715)
Interest Payable for Swap Agreements (1,129)
Net Unrealized Depreciation on Swap Agreements (911)
Payable for Investment Advisory Fees (211)
Payable for Administrative Fees (21)
Payable for Trustees' Fees and Expenses (9)
Payable for Custodian Fees (7)
Payable for Distribution Fees -- Adviser Class (2)
Other Liabilities (21) (98,782)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 215,485
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 208,924
Undistributed (Distributions in Excess of) Net
Investment Income 320
Accumulated Net Realized Gain (Loss) 2,519
Unrealized Appreciation (Depreciation) on:
Investments 4,345
Futures Contracts 288
Swap Agreements (911)
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 215,485
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 206,244
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 18,229,423 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.31
===================================================================================================
ADVISER CLASS:
NET ASSETS $ 9,241
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 820,667 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.26
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
U.S. CORE FIXED INCOME PORTFOLIO
(c) All or a portion of security on loan at March 31, 2004.
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(g) Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 2004. Maturity date disclosed is the
ultimate maturity date.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(i) Security is subject to delayed delivery.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
@ Value/Face Amount is less than $500.
Inv Fl Inverse Floating Rate -- Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 2004.
IO Interest Only
PAC Planned Amortization Class
PO Principal Only
TBA To be announced
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- ----------------------------------------------------------------------------
LONG:
U.S. Treasury
10 yr. Note 333 $ 38,430 Jun - 04 $ 613
U.S. Treasury
Long Bond 132 15,056 Jun - 04 355
SHORT:
U.S. Treasury
2 yr. Note 3 645 Jun - 04 (2)
U.S. Treasury
5 yr. Note 366 41,564 Jun - 04 (678)
-------
$ 288
=======
============================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
CASH RESERVES PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (78.0%)
ASSET BACKED -- AUTO (12.1%)
New Center Asset Trust
1.05%, 4/2/04 $ 4,000 $ 4,000
- ---------------------------------------------------------------------------------------------------
ASSET BACKED -- CONSUMER (15.1%)
Old Line Funding Corp.
1.03%, 4/7/04 (e)3,560 3,559
1.03%, 5/3/04 (e)1,465 1,464
- ---------------------------------------------------------------------------------------------------
5,023
===================================================================================================
ASSET BACKED -- CORPORATE (18.1%)
Asset Securitization Co-op Corp.
1.05%, 4/20/04 (e)2,000 1,999
1.05%, 4/28/04 (e)2,000 1,998
Moat Funding LLC
1.04%, 5/27/04 (e)2,000 1,997
- ---------------------------------------------------------------------------------------------------
5,994
===================================================================================================
BANKING (6.0%)
Northern Trust Corp.
1.03%, 4/14/04 2,000 1,999
- ---------------------------------------------------------------------------------------------------
INTEGRATED OIL (9.0%)
Shell Finance (UK) plc
1.04%, 6/3/04 3,000 2,994
- ---------------------------------------------------------------------------------------------------
INTERNATIONAL BANKS (14.1%)
ING US Funding LLC
1.03%, 5/18/04 4,700 4,694
- ---------------------------------------------------------------------------------------------------
INVESTMENT BANK / BROKER (3.6%)
Goldman Sachs Group, Inc. (The)
1.05%, 4/2/04 1,200 1,200
===================================================================================================
TOTAL COMMERCIAL PAPER (COST $25,904) 25,904
===================================================================================================
CERTIFICATES OF DEPOSIT (9.0%)
INTERNATIONAL BANKS (9.0%)
Deutsche Bank AG
1.10%, 8/30/04 (COST $3,000) 3,000 3,000
===================================================================================================
REPURCHASE AGREEMENT (13.0%)
UBS Securities LLC, 1.06%, dated 3/31/04, due
4/1/04 repurchase price $4,300 (COST $4,300) (f)4,300 4,300
===================================================================================================
TOTAL INVESTMENTS (100.0%) (COST $33,204) 33,204
===================================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (0.3%)
Cash $ 94
Interest Receivable 3
Other 2 $ 99
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-0.3%)
Payable for Investment Advisory Fees (52)
Dividends Payable (20)
Payable for Administrative Fees (11)
Payable for Trustees' Fees and Expenses (4)
Payable for Custodian Fees (3)
Payable for Shareholder Servicing Fees --
Investment Class (2)
Other Liabilities (9) (101)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 33,202
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 33,193
Undistributed (Distributions in Excess of) Net
Investment Income 14
Accumulated Net Realized Gain (Loss) (5)
===================================================================================================
NET ASSETS $ 33,202
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 22,186
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 22,177,634 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 1.00
===================================================================================================
INVESTMENT CLASS:
NET ASSETS $ 11,016
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 11,016,215 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 1.00
===================================================================================================
</Table>
(e) 144A security -- certain conditions for public sale may exist
(f) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (93.4%)
AEROSPACE (0.4%)
Dunlop Standard Aerospace Holdings plc
11.875%, 5/15/09 $ (e)995 $ 1,065
- ---------------------------------------------------------------------------------------------------
BROADCASTING (2.0%)
Granite Broadcasting Corp.
9.75%, 12/1/10 (e)1,180 1,145
Interep National Radio Sales, Inc.
10.00%, 7/1/08 1,290 1,169
Salem Communications Holding Corp.
9.00%, 7/1/11 650 712
TV Azteca S.A. de C.V
10.50%, 2/15/07 (c)2,775 2,872
- ---------------------------------------------------------------------------------------------------
5,898
===================================================================================================
CABLE (5.3%)
Avalon Cable Holding Finance, Inc.
11.875%, 12/1/08 (g)447 474
Cablevision Systems Corp.
5.66%, 4/1/09 (e)(h)820 823
Charter Communications Holdings LLC
0.00%, 1/15/11 (g)1,765 1,271
9.625%, 11/15/09 825 701
10.25%, 1/15/10 (c)840 716
10.75%, 10/1/09 900 792
CSC Holdings, Inc.
10.50%, 5/15/16 (c)495 574
DirecTV Holdings LLC
8.375%, 3/15/13 2,159 2,472
Echostar DBS Corp.
6.375%, 10/1/11 (e)1,865 1,991
Pegasus Communications Corp.
9.75%, 12/1/06 (c)930 824
12.50%, 8/1/07 (c)650 575
Pegasus Satellite Communication, Inc.
13.50%, 3/1/07 (g)120 90
Renaissance Media Group LLC
10.00%, 4/15/08 (g)710 735
Satelites Mexicanos S.A. de C.V
10.125%, 11/1/04 (b)(c)2,170 814
Telenet Communications N.V
9.00%, 12/15/13 EUR (e)1,255 1,572
Telenet Group Holding N.V
0.00%, 6/15/14 $ (c)(e)(g)1,265 778
- ---------------------------------------------------------------------------------------------------
15,202
===================================================================================================
CHEMICALS (7.3%)
Avecia Group plc
11.00%, 7/1/09 (c)1,730 1,479
Equistar Chemicals LP
10.125%, 9/1/08 (c)1,650 1,782
10.625%, 5/1/11 (c)1,120 1,212
FMC Corp.
10.25%, 11/1/09 1,100 1,298
Huntsman Advanced Materials LLC
11.00%, 7/15/10 $ (c)(e)825 $ 936
Huntsman International LLC
10.125%, 7/1/09 EUR 1,300 1,542
10.125%, 7/1/09 $ (c)1,425 1,457
ISP Holdings, Inc.
10.625%, 12/15/09 1,300 1,450
Koppers, Inc.
9.875%, 10/15/13 (e)575 635
Millennium America, Inc.
7.00%, 11/15/06 1,475 1,508
Nalco Co.
7.75%, 11/15/11 (e)2,170 2,279
Nalco Finance Holdings, Inc.
0.00%, 2/1/14 (c)(e)(g)2,050 1,230
Rhodia S.A.
8.875%, 6/1/11 (c)(e)2,105 1,768
Rockwood Specialties Group, Inc.
10.625%, 5/15/11 1,320 1,465
Westlake Chemical Corp.
8.75%, 7/15/11 905 1,005
- ---------------------------------------------------------------------------------------------------
21,046
===================================================================================================
CONSUMER PRODUCTS (2.0%)
Oxford Industries, Inc.
8.875%, 6/1/11 (e)955 1,031
Prestige Brands, Inc.
9.25%, 4/5/12 1,245 1,245
Rayovac Corp.
8.50%, 10/1/13 1,270 1,375
Safilo Capital International S.A.
9.625%, 5/15/13 EUR (e)1,875 2,004
- ---------------------------------------------------------------------------------------------------
5,655
===================================================================================================
DIVERSIFIED MEDIA (7.2%)
Advanstar Communications, Inc.
8.62%, 8/15/08 $ (h)2,125 2,244
10.75%, 8/15/10 (c)545 602
12.00%, 2/15/11 525 560
Alliance Atlantis Communications, Inc.
13.00%, 12/15/09 1,970 2,216
Cinemark USA, Inc.
0.00%, 3/15/14 (g)1,980 1,238
Dex Media East LLC/Dex Media East Finance Co.
12.125%, 11/15/12 (c)(e)1,390 1,630
Dex Media West LLC/Dex Media Finance Co.
9.875%, 8/15/13 (e)690 769
Dex Media, Inc.
0.00%, 11/15/13 (c)(e)(g)2,700 1,741
Hollinger Participation Trust PIK
12.125%, 11/15/10 (e)2,437 2,823
Muzak Finance Corp.
9.875%, 3/15/09 (c)1,930 1,870
Nebraska Book Co.
8.625%, 3/15/12 (e)1,335 1,382
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
24
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA (CONT'D)
PEI Holdings, Inc.
11.00%, 3/15/10 $ 855 $ 992
Primedia, Inc.
8.875%, 5/15/11 (c)1,375 1,416
Vivendi Universal S.A.
6.25%, 7/15/08 475 515
9.25%, 4/15/10 (e)790 948
- ---------------------------------------------------------------------------------------------------
20,946
===================================================================================================
ENERGY (8.0%)
BRL Universal Equipment LP
8.875%, 2/15/08 2,580 2,799
Chesapeake Energy Corp.
7.50%, 9/15/13 (c)2,550 2,830
Citgo Petroleum Corp.
11.375%, 2/1/11 905 1,061
El Paso Production Holding Co.
7.75%, 6/1/13 2,765 2,578
GulfTerra Energy Partners LP
8.50%, 6/1/10 1,249 1,449
10.625%, 12/1/12 603 760
Hanover Compressor Co.
8.625%, 12/15/10 (c)280 302
Hanover Equipment Trust
8.50%, 9/1/08 (c)2,370 2,548
Hilcorp Energy I LP / Hilcorp Finance Co.
10.50%, 9/1/10 (e)2,295 2,559
Husky Oil Co.
8.90%, 8/15/28 (h)1,145 1,355
Magnum Hunter Resources, Inc.
9.60%, 3/15/12 1,160 1,302
MSW Energy Holdings LLC/MSW Energy
Finance Co., Inc.
7.375%, 9/1/10 (e)1,730 1,834
8.50%, 9/1/10 360 396
Tesoro Petroleum Corp.
9.625%, 4/1/12 (c)1,090 1,221
- ---------------------------------------------------------------------------------------------------
22,994
===================================================================================================
FINANCIAL (0.5%)
iStar Financial, Inc.
8.75%, 8/15/08 (c)1,343 1,565
- ---------------------------------------------------------------------------------------------------
FOOD & DRUG (0.5%)
CA FM Lease Trust
8.50%, 7/15/17 (e)1,338 1,536
- ---------------------------------------------------------------------------------------------------
FOOD & TOBACCO (2.9%)
Michael Foods, Inc.
8.00%, 11/15/13 (c)(e)1,455 1,550
Pilgrim's Pride Corp.
9.625%, 9/15/11 (c)1,800 1,948
PPC Escrow Corp.
9.25%, 11/15/13 (e)1,110 1,166
Smithfield Foods, Inc.
7.625%, 2/15/08 (c)1,025 1,112
8.00%, 10/15/09 $ (c)1,490 $ 1,673
Standard Commercial Corp.
8.00%, 4/15/12 (e)865 897
- ---------------------------------------------------------------------------------------------------
8,346
===================================================================================================
FOREST PRODUCTS (7.1%)
Abitibi-Consolidated, Inc.
6.00%, 6/20/13 1,585 1,488
Georgia Pacific Corp.
8.875%, 2/1/10 2,750 3,224
Graphic Packaging International Corp.
9.50%, 8/15/13 1,365 1,549
JSG Funding plc
10.125%, 10/1/12 EUR 2,350 3,271
Norampac, Inc.
6.75%, 6/1/13 $ 900 958
Owens-Brockway
7.75%, 5/15/11 175 184
8.75%, 11/15/12 950 1,038
Owens-Illinois, Inc.
7.35%, 5/15/08 (c)1,550 1,534
7.50%, 5/15/10 (c)650 626
Pliant Corp.
13.00%, 6/1/10 (c)2,210 1,923
Tekni-Plex, Inc.
8.75%, 11/15/13 (e)390 390
12.75%, 6/15/10 2,070 2,179
Tembec Industries, Inc.
8.50%, 2/1/11 (c)2,130 2,141
- ---------------------------------------------------------------------------------------------------
20,505
===================================================================================================
GAMING & LEISURE (5.3%)
Global Cash Acces LLC/Global Cash Finance Corp.
8.75%, 3/15/12 (e)340 355
Hilton Hotels Corp.
7.95%, 4/15/07 1,200 1,338
Horseshoe Gaming Holding Corp.
8.625%, 5/15/09 2,260 2,379
Host Marriott LP
7.125%, 11/1/13 (c)1,755 1,830
Lodgenet Entertainment Corp.
9.50%, 6/15/13 715 797
MGM Mirage, Inc.
6.00%, 10/1/09 1,750 1,846
Park Place Entertainment Corp.
8.50%, 11/15/06 1,465 1,637
Starwood Hotels & Resorts Worldwide, Inc.
7.788%, 5/1/12 1,360 1,544
Station Casinos, Inc.
6.50%, 2/1/14 (e)2,125 2,154
Venetian Casino Resort LLC
11.00%, 6/15/10 1,230 1,421
- ---------------------------------------------------------------------------------------------------
15,301
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
HEALTH CARE (3.5%)
AmerisourceBergen Corp.
7.25%, 11/15/12 $ 1,200 $ 1,311
8.125%, 9/1/08 1,090 1,221
Fisher Scientific International, Inc.
8.00%, 9/1/13 (e)620 699
8.125%, 5/1/12 901 1,005
Fresenius Medical Care Capital Trust II
7.875%, 2/1/08 2,301 2,514
National Nephrology Associates, Inc.
9.00%, 11/1/11 (e)335 390
Team Health Inc.
9.00%, 4/1/12 (c)(e)1,005 982
Tenet Healthcare Corp.
5.375%, 11/15/06 (c)840 794
6.50%, 6/1/12 1,555 1,349
- ---------------------------------------------------------------------------------------------------
10,265
===================================================================================================
HOUSING (5.5%)
Associated Materials, Inc.
0.00%, 3/1/14 (e)(g)3,420 2,095
CB Richard Ellis, Inc.
9.75%, 5/15/10 710 800
11.25%, 6/15/11 1,600 1,816
Interface, Inc.
9.50%, 2/1/14 (c)(e)2,415 2,403
Jacuzzi Brands, Inc.
9.625%, 7/1/10 1,310 1,454
LNR Property Corp.
7.625%, 7/15/13 1,265 1,347
Nortek Holdings, Inc.
0.00%, 5/15/11 (e)(g)2,950 2,257
Schuler Homes, Inc.
9.375%, 7/15/09 1,745 1,963
Technical Olympic USA, Inc.
9.00%, 7/1/10 780 852
WII Components, Inc.
10.00%, 2/15/12 (e)875 906
- ---------------------------------------------------------------------------------------------------
15,893
===================================================================================================
INFORMATION TECHNOLOGY (2.3%)
Avaya, Inc.
11.125%, 4/1/09 209 250
Iron Mountain, Inc.
6.625%, 1/1/16 630 614
7.75%, 1/15/15 340 359
8.625%, 4/1/13 1,545 1,692
Nortel Networks Ltd.
6.125%, 2/15/06 1,070 1,102
Xerox Corp.
7.125%, 6/15/10 2,425 2,583
- ---------------------------------------------------------------------------------------------------
6,600
===================================================================================================
MANUFACTURING (5.0%)
ABB Finance, Inc.
6.75%, 6/3/04 $ 295 $ 297
11.00%, 1/15/08 EUR 1,475 2,140
Brand Services, Inc.
12.00%, 10/15/12 $ 930 1,088
Flowserve Corp.
12.25%, 8/15/10 2,267 2,624
Johnsondiversey, Inc.
9.625%, 5/15/12 (c)2,010 2,201
Manitowoc Co., Inc. (The)
10.375%, 5/15/11 EUR 1,585 2,187
NMHG Holding Co.
10.00%, 5/15/09 $ 1,455 1,608
Trimas Corp.
9.875%, 6/15/12 2,210 2,420
- ---------------------------------------------------------------------------------------------------
14,565
===================================================================================================
METALS (2.3%)
General Cable Corp.
9.50%, 11/15/10 (e)855 945
Glencore Nickel Property Ltd.
9.00%, 12/1/14 (b)(d)4,140 @--
Murrin Murrin Holdings Property Ltd.
9.375%, 8/31/07 (d)2,485 @--
Republic Engineered Products LLC
10.00%, 8/16/09 (b)1,163 820
Republic Technologies International LLC
13.75%, 7/15/09 (b)(e)6,180 62
SGL Carbon Luxembourg S.A.
8.50%, 2/1/12 EUR (e)905 1,136
Ucar Finance, Inc.
10.25%, 2/15/12 $ 1,870 2,188
United States Steel Corp.
9.75%, 5/15/10 1,420 1,626
- ---------------------------------------------------------------------------------------------------
6,777
===================================================================================================
RETAIL (1.3%)
General Nutrition Centers, Inc.
8.50%, 12/1/10 (e)1,215 1,282
Payless Shoesource, Inc.
8.25%, 8/1/13 (c)1,340 1,310
Petro Stopping Centers LP/Petro Financial Corp.
9.00%, 2/15/12 (c)(e)1,240 1,283
- ---------------------------------------------------------------------------------------------------
3,875
===================================================================================================
SERVICES (1.6%)
Allied Waste North America
7.875%, 4/15/13 (c)1,675 1,838
Encompass Services Corp.
10.50%, 5/1/09 (d)2,615 --
United Rentals North America, Inc.
6.50%, 2/15/12 (e)1,730 1,730
7.75%, 11/15/13 (e)1,200 1,176
- ---------------------------------------------------------------------------------------------------
4,744
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
HIGH YIELD PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (4.0%)
AXtel S.A.
11.00%, 12/15/13 $ (e)2,040 $ 2,081
Esprit Telecom Group plc
10.875%, 6/15/08 (b)(d)965 --
11.00%, 6/15/08 DEM (d)2,608 --
11.50%, 12/15/07 EUR (d)1,669 --
11.50%, 12/15/07 $ (b)(d)600 --
Exodus Communications, Inc.
11.625%, 7/15/10 (d)4,036 --
Knology, Inc., PIK
12.00%, 11/30/09 (c)(e)1,949 1,961
Primus Telecommunications Group, Inc.
8.00%, 1/15/14 (c)(e)3,555 3,413
Qwest Communications International
4.63%, 2/15/09 (e)(h)1,400 1,316
Qwest Corp.
5.625%, 11/15/08 295 295
Qwest Services Corp.
13.00%, 12/15/07 (e)2,050 2,368
Rhythms NetConnections, Inc.
12.75%, 4/15/09 (d)434 --
13.878%, 5/15/08 (d)12,890 --
14.00%, 2/15/10 (d)11,507 --
Viatel, Inc.
12.40%, 4/15/08 DEM (d)3,300 8
12.50%, 4/15/08 $ (d)15,025 @--
- ---------------------------------------------------------------------------------------------------
11,442
===================================================================================================
TRANSPORTATION (5.2%)
Amsted Industries Corp.
10.25%, 10/15/11 (e)1,450 1,646
AutoNation, Inc.
9.00%, 8/1/08 2,065 2,426
Intermet Corp.
9.75%, 6/15/09 1,270 1,213
Laidlaw International, Inc.
10.75%, 6/15/11 (e)2,370 2,666
Sonic Automotive, Inc.
8.625%, 8/15/13 (c)2,440 2,660
Tenneco Automotive, Inc.
11.625%, 10/15/09 (c)2,035 2,213
TRW Automotive, Inc.
9.375%, 2/15/13 1,240 1,432
11.00%, 2/15/13 (c)625 750
- ---------------------------------------------------------------------------------------------------
15,006
===================================================================================================
UTILITIES (8.8%)
AES Corp. (The)
7.75%, 3/1/14 40 40
8.875%, 2/15/11 (c)198 212
9.00%, 5/15/15 (e)1,365 1,514
9.375%, 9/15/10 (c)326 357
Allegheny Energy, Inc.
7.75%, 8/1/05 1,020 1,063
Calpine Canada Energy Finance ULC
8.50%, 5/1/08 $ (c)(e)2,035 $ 1,516
Calpine Corp.
8.50%, 7/15/10 640 592
CMS Energy Corp.
7.50%, 1/15/09 (c)280 289
8.50%, 4/15/11 (c)1,635 1,754
Dynegy Holdings, Inc.
6.875%, 4/1/11 (c)2,690 2,354
9.875%, 7/15/10 (e)1,180 1,289
Ipalco Enterprises, Inc.
8.625%, 11/14/11 605 684
Monongahela Power Co.
5.00%, 10/1/06 1,255 1,286
Nevada Power Co.
9.00%, 8/15/13 (e)2,205 2,486
Northwest Pipeline Corp.
8.125%, 3/1/10 390 433
Ormat Funding Corp.
8.25%, 12/30/20 (e)2,430 2,442
PG & E Corp.
6.875%, 7/15/08 (e)915 1,003
PSEG Energy Holdings LLC
7.75%, 4/16/07 775 824
8.625%, 2/15/08 600 651
Southern Natural Gas Co.
8.875%, 3/15/10 775 864
Transcontinental Gas Pipe Line Corp.
8.875%, 7/15/12 710 845
Williams Cos., Inc.
6.75%, 1/15/06 (h)865 906
7.875%, 9/1/21 1,950 1,984
- ---------------------------------------------------------------------------------------------------
25,388
===================================================================================================
WIRELESS COMMUNICATIONS (5.4%)
American Tower Corp.
7.50%, 5/1/12 (c)(e)1,280 1,229
9.375%, 2/1/09 (c)1,830 1,940
Centennial Communications Corp.
8.125%, 2/1/14 (c)(e)2,320 2,152
MetroPCS, Inc.
10.75%, 10/1/11 (c)1,595 1,699
Nextel Communications, Inc.
9.375%, 11/15/09 1,265 1,382
Nextel Partners, Inc.
11.00%, 3/15/10 (c)1,535 1,711
Rural Cellular Corp.
5.61%, 3/15/10 (e)(h)855 870
SBA Communications Corp.
0.00%, 12/15/11 (c)(e)(g)1,060 750
10.25%, 2/1/09 (c)2,275 2,252
UbiquiTel Operating Co.
0.00%, 4/15/10 (g)560 529
9.875%, 3/1/11 1,000 980
- ---------------------------------------------------------------------------------------------------
15,494
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
27
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
HIGH YIELD PORTFOLIO
<Table>
<Caption>
VALUE
(000)
- ---------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (COST $295,804) $ 270,108
===================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (0.7%)
BROADCASTING (0.6%)
Paxson Communications Corp. PIK 9.75% (e)242 1,767
- ---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.1%)
Song Networks Holding AB 0.00% (d)41,918 171
- ---------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,506) 1,938
===================================================================================================
COMMON STOCKS (0.1%)
BROADCASTING (0.0%)
Paxson Communications Corp. (a)110,192 10
- ---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.1%)
Song Networks Holding AB (a)20,656 168
Viatel Holding Bermuda Ltd. (a)(d)1 @--
- ---------------------------------------------------------------------------------------------------
168
===================================================================================================
TOTAL COMMON STOCKS (COST $63) 178
===================================================================================================
PREFERRED STOCKS (1.1%)
BROADCASTING (0.2%)
Paxson Communications Corp. PIK 14.25% 49 431
- ---------------------------------------------------------------------------------------------------
UTILITIES (0.9%)
TNP Enterprises, Inc. PIK 14.50% 2,325 2,657
- ---------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $1,312) 3,088
===================================================================================================
<Caption>
NO. OF
WARRANTS
- ---------------------------------------------------------------------------------------------------
WARRANTS (0.0%)
METALS (0.0%)
Republic Technologies International LLC
expiring 7/15/09 (a)(d)61,800 --
- ---------------------------------------------------------------------------------------------------
UTILITIES (0.0%)
SW Acquisitions, Inc. expiring 4/1/11 (a)(e)8,020 96
- ---------------------------------------------------------------------------------------------------
TOTAL WARRANTS (COST $29) 96
===================================================================================================
<Caption>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (27.0%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED
SECURITIES (23.7%)
American Express Credit Corp.
1.10%, 4/15/04 $ (h)610 610
BETA Finance LLC
1.08%, 4/1/04 (h)2,847 2,847
Canadian Imperial Bank, N.Y.
1.11%, 4/1/04 (h)1,017 1,016
Chase Credit Card Master Trust
1.10%, 4/15/04 (h)814 814
CIC NY
1.11%, 7/30/04 1,017 1,017
CIT Group Holdings
1.12%, 6/21/04 (h)753 753
Credit Agricole Indosuez S.A., N.Y.
1.07%, 4/1/04 (h)2,928 2,927
Credit Suisse First Boston, N.Y.
1.04%, 4/2/04 1,830 1,830
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
Dresdner Bank, N.Y.
1.05%, 4/20/04 $ 2,035 $ 2,035
Federal National Mortgage Association
1.13%, 4/14/04 897 897
Jackson National Life Global Fund
1.06%, 4/1/04 (h)1,021 1,021
Landesbank Hessen Thur, London
1.50%, 11/19/04 1,018 1,018
Links Finance LLC
1.08%, 4/1/04 (h)1,017 1,017
1.09%, 4/1/04 1,627 1,627
Macquarie Bank Ltd.
1.18%, 6/24/04 (h)895 895
Natexis Banques Populaires, N.Y.
1.21%, 4/1/04 (h)1,626 1,626
Nationwide Building Society
1.12%, 6/28/04 (h)2,359 2,359
Sears Credit Account Master Trust
1.12%, 4/15/04 (h)1,628 1,628
Societe Generale, N.Y.
1.07%, 4/1/04 (h)1,972 1,972
Societe Generale, London
1.54%, 11/12/04 1,017 1,017
Target Credit Card Master Trust
1.12%, 4/26/04 (h)1,607 1,607
UBS Securities LLC
1.06%, 4/1/04 32,032 32,032
Union Bank of Switzerland, Stamford
1.13%, 12/20/04 2,033 2,033
Wachovia Bank N.A.
1.13%, 4/1/04 (h)2,035 2,035
Westdeutsche Landesbank, N.Y.
1.09%, 4/1/04 (h)1,992 1,992
- ---------------------------------------------------------------------------------------------------
68,625
===================================================================================================
REPURCHASE AGREEMENT (3.0%)
J.P. Morgan Securities, Inc.,
0.97%, dated 3/31/04, due 4/1/04,
repurchase price $8,630 (f)8,630 8,630
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.3%)
U.S. Treasury Bills
0.95%, 7/15/04 (j)1,000 997
- ---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $78,252) 78,252
===================================================================================================
TOTAL INVESTMENTS (122.3%) (COST $376,966) --
INCLUDING $67,588 OF SECURITIES LOANED 353,660
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
HIGH YIELD PORTFOLIO
<Table>
<Caption>
AMOUNT AMOUNT
(000) (000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (2.8%)
Cash $ 154
Interest Receivable 5,776
Receivable for Investments Sold 1,933
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 418
Other 9 $ 8,290
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-25.1%)
Collateral on Securities Loaned, at Value (68,625)
Payable for Investments Purchased (3,490)
Payable for Investment Advisory Fees (370)
Due to Broker (102)
Payable for Trustees' Fees and Expenses (37)
Payable for Administrative Fees (27)
Payable for Custodian Fees (6)
Payable for Distribution Fees -- Adviser Class (3)
Other Liabilities (26) (72,686)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 289,264
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 833,603
Undistributed (Distributions in Excess of) Net
Investment Income 4,383
Accumulated Net Realized Gain (Loss) (525,634)
Unrealized Appreciation (Depreciation) on:
Investments (23,306)
Foreign Currency Exchange Contracts and Translations 417
Futures Contracts (199)
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 289,264
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 275,801
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 50,345,463 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 5.48
===================================================================================================
INVESTMENT CLASS:
NET ASSETS $ 1,111
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 202,130 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 5.50
===================================================================================================
ADVISER CLASS:
NET ASSETS $ 12,352
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,254,478 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 5.48
===================================================================================================
</Table>
(a) Non-income producing security
(b) Issuer is in default.
(c) All or a portion of security on loan at March 31, 2004.
(d) Security was valued at fair value -- At March 31, 2004, the Portfolio
held $179,000 of fair valued securities, representing 0.1% of net
assets.
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(g) Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 2004. Maturity date disclosed is the
ultimate maturity date.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
@ Value/Face Amount is less than $500.
EUR Euro
DEM German Mark
PIK Payment-in-Kind
================================================================================
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open
at period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ----------------------------------------------------------------------------------------
EUR 8,860 $ 10,907 4/26/04 US$ 11,224 $ 11,224 $ 317
EUR 4,135 5,091 4/26/04 US$ 5,239 5,239 148
SEK 501 66 4/05/04 US$ 66 66 @--
SEK 7,000 927 6/21/04 US$ 923 923 (4)
US$ 1,936 1,936 4/26/04 EUR 1,545 1,902 (34)
US$ 501 501 4/26/04 EUR 400 492 (9)
----------- --------- -------
$ 19,428 $ 19,846 $ 418
=========== ========= =======
========================================================================================
</Table>
EUR -- Euro
SEK -- Swedish Krona
US$ -- U.S. Dollar
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- -----------------------------------------------------------------------------
SHORT:
U.S. Treasury
5 yr. Note 261 $ 29,640 Jun - 04 $ (199)
=======
=============================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
29
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
INTERMEDIATE DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (103.7%)
AGENCY ADJUSTABLE RATE MORTGAGES (0.6%)
Government National Mortgage Association,
Adjustable Rate Mortgages:
4.375%, 3/20/25-1/20/28 $ 403 $ 410
4.625%, 11/20/25-11/20/27 191 196
4.75%, 7/20/25-9/20/27 137 141
- ---------------------------------------------------------------------------------------------------
747
===================================================================================================
AGENCY FIXED RATE MORTGAGES (41.8%)
Federal Home Loan Mortgage Corporation,
Conventional Pools:
2.75%, 8/15/06 12,380 12,616
11.00%, 7/1/13 18 20
Gold Pools:
6.50%, 4/1/26-8/1/33 578 607
7.00%, 6/1/28-6/1/32 475 504
7.50%, 5/1/30-6/1/32 505 543
8.00%, 6/1/30-9/1/31 1,343 1,452
8.50%, 7/1/30-7/1/31 348 377
9.50%, 12/1/22 53 60
10.00%, 6/1/17 58 65
Federal National Mortgage Association,
Conventional Pools:
6.50%, 4/1/29-1/1/33 7,325 7,703
7.00%, 9/1/31-11/1/32 3,565 3,784
7.50%, 8/1/29-3/1/32 4,091 4,385
8.00%, 10/1/30-9/1/31 869 940
8.50%, 8/1/30 27 29
9.50%, 12/1/17-12/1/21 820 918
10.00%, 7/1/18-5/1/22 31 36
April TBA
6.50%, 4/1/34 (i)13,350 14,026
7.00%, 4/1/34 (i)1,350 1,433
7.50%, 4/1/34 (i)1,000 1,072
Government National Mortgage Association,
Various Pools:
9.50%, 11/15/16-12/15/21 464 521
10.00%, 1/15/16-3/15/25 653 740
10.50%, 3/15/16-2/15/18 93 106
11.00%, 3/15/10-6/15/20 265 303
11.50%, 6/15/13 19 22
12.00%, 12/15/12-5/15/14 14 16
12.50%, 12/15/10 7 8
- ---------------------------------------------------------------------------------------------------
52,286
===================================================================================================
ASSET BACKED CORPORATES (23.9%)
American Express Credit Account Master Trust
1.69%, 1/15/09 650 647
5.53%, 10/15/08 600 644
Bank One Issuance Trust
2.94%, 6/16/08 900 918
3.86%, 6/15/11 750 777
Capital Auto Receivables Asset Trust
2.92%, 4/15/08 1,100 1,122
4.50%, 10/15/07 850 879
Chase Credit Card Master Trust
5.50%, 11/17/08 $ 690 $ 745
Chase Manhattan Auto Owner Trust
2.94%, 6/15/10 850 864
4.21%, 1/15/09 750 777
4.24%, 9/15/08 700 724
Citibank Credit Card Issuance Trust
2.70%, 1/15/08 700 712
4.10%, 12/7/06 500 510
4.40%, 5/15/07 1,000 1,034
6.90%, 10/15/07 875 945
7.45%, 9/15/07 240 259
Connecticut RRB Special Purpose Trust
5.36%, 3/30/07 194 199
DaimlerChrysler Auto Trust
2.58%, 4/8/09 800 805
3.09%, 1/8/08 900 922
Detroit Edison Securitization Funding LLC
5.51%, 3/1/07 438 451
Fleet Credit Card Master Trust II
2.75%, 4/15/08 950 967
Ford Credit Auto Owner Trust
3.13%, 11/15/06 1,000 1,021
3.79%, 9/15/06 800 822
4.14%, 12/15/05 223 226
4.75%, 8/15/06 200 208
Harley-Davidson Motorcycle Trust
2.63%, 11/15/10 600 609
2.76%, 5/15/11 800 812
3.09%, 6/15/10 600 612
4.50%, 1/15/10 700 731
Honda Auto Receivables Owner Trust
2.48%, 7/18/08 900 912
2.70%, 3/17/08 500 508
2.77%, 11/21/08 800 813
3.50%, 10/17/05 152 153
4.49%, 9/17/07 800 829
Hyundai Auto Receivables Trust
2.33%, 11/15/07 250 252
MBNA Credit Card Master Note Trust
3.90%, 11/15/07 550 566
6.90%, 1/15/08 355 381
National City Auto Receivables Trust
4.04%, 7/15/06 342 345
Nissan Auto Receivables Owner Trust
3.58%, 9/15/05 139 139
4.80%, 2/15/07 613 623
Nordstrom Private Label Credit Card Master Note Trust
4.82%, 4/15/10 (e)450 479
USAA Auto Owner Trust
2.67%, 10/15/10 875 882
Volkswagen Auto Lease Trust
2.36%, 12/20/05 1,000 1,006
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
30
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INTERMEDIATE DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
ASSET BACKED CORPORATES (CONT'D)
Whole Auto Loan Trust
2.58%, 3/15/10 $ 900 $ 909
William Street Funding Corp.
1.42%, 4/23/06 (e)(h)1,100 1,102
- ---------------------------------------------------------------------------------------------------
29,841
===================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (1.5%)
Federal Home Loan Mortgage Corporation
6.50%, 3/15/28 327 327
Inv Fl IO
6.91%, 3/15/32 1,147 99
6.91%, 3/15/32 666 59
IO
5.00%, 9/15/14 1,782 108
6.00%, 5/1/31-4/15/32 1,625 185
6.50%, 4/1/28-8/1/28 1,547 217
7.00%, 2/15/32 386 56
8.00%, 1/1/28-7/1/31 61 10
Federal National Mortgage Association
Inv Fl IO
7.01%, 12/25/29 254 14
IO
6.00%, 5/25/33-7/25/33 2,749 418
6.50%, 7/1/31 529 77
7.00%, 4/25/33 1,122 162
8.00%, 5/1/30 38 6
9.00%, 11/1/26 104 14
IO PAC
8.00%, 8/18/27 110 18
Government National Mortgage Association
Inv Fl IO
6.856%, 12/16/25 541 56
6.875%, 9/16/27 337 34
6.91%, 5/16/32 477 44
- ---------------------------------------------------------------------------------------------------
1,904
===================================================================================================
FINANCE (11.9%)
AIG SunAmerica Global Financing VI
6.30%, 5/10/11 (e)420 475
Allstate Financial Global Funding II
2.625%, 10/22/06 (e)250 253
American General Finance Corp.
5.875%, 7/14/06 475 514
Bank of America Corp.
3.375%, 2/17/09 245 247
3.875%, 1/15/08 165 171
4.75%, 10/15/06 170 181
Bank of New York Co., Inc. (The)
5.20%, 7/1/07 85 93
Bank One Corp.
6.00%, 2/17/09 355 397
Bank One N.A.
1.23%, 5/5/06 (h)250 250
CIT Group, Inc.
2.875%, 9/29/06 $ 130 $ 132
6.50%, 2/7/06 240 260
Citicorp
6.75%, 8/15/05 140 150
Citigroup Global Markets Holdings, Inc.
1.22%, 12/12/06 (h)80 80
Citigroup, Inc.
5.625%, 8/27/12 150 164
5.75%, 5/10/06 235 253
6.00%, 2/21/12 250 282
Countrywide Home Loans, Inc.
3.25%, 5/21/08 277 278
EOP Operating LP
6.763%, 6/15/07 400 448
Equitable Life Assurance Society U.S.A.
6.95%, 12/1/05 (e)275 298
Farmers Insurance Exchange
8.625%, 5/1/24 (e)300 354
FleetBoston Financial Corp.
7.25%, 9/15/05 245 265
General Electric Capital Corp.
5.375%, 3/15/07 695 753
Goldman Sachs Group, Inc.
5.25%, 10/15/13 280 290
6.875%, 1/15/11 295 343
Hartford Financial Services Group, Inc.
2.375%, 6/1/06 250 252
7.75%, 6/15/05 300 321
7.90%, 6/15/10 60 73
Household Finance Corp.
4.125%, 12/15/08 90 93
5.875%, 2/1/09 135 150
6.08%, 3/8/06 95 99
6.40%, 6/17/08 270 304
International Lease Finance Corp.
3.75%, 8/1/07 120 124
J.P. Morgan Chase & Co.
5.25%, 5/30/07 165 178
6.00%, 2/15/09 170 189
John Hancock Global Funding II
7.90%, 7/2/10 (e)510 619
Lehman Brothers Holdings, Inc.
8.25%, 6/15/07 273 319
Mantis Reef Ltd.
4.692%, 11/14/08 (e)255 263
Marsh & McLennan Cos., Inc.
5.375%, 3/15/07 335 362
6.625%, 6/15/04 225 227
MBNA Corp.
6.125%, 3/1/13 375 417
Monumental Global Funding II
6.05%, 1/19/06 (e)285 307
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
31
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INTERMEDIATE DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FINANCE (CONT'D)
Prime Property Funding II
7.00%, 8/15/04 $ (e)120 $ 122
Prudential Funding, LLC
6.60%, 5/15/08 (e)470 529
Rouse Co. (The)
3.625%, 3/15/09 75 74
5.375%, 11/26/13 35 36
SLM Corp.
5.00%, 10/1/13 185 191
TIAA Global Markets
5.00%, 3/1/07 (e)710 762
U.S. Bancorp
5.10%, 7/15/07 125 135
U.S. Bank N.A.
2.85%, 11/15/06 160 164
Vornado Realty Trust
5.625%, 6/15/07 110 120
Wachovia Corp.
3.625%, 2/17/09 60 61
4.95%, 11/1/06 280 299
Washington Mutual, Inc.
8.25%, 4/1/10 150 184
Wells Fargo & Co.
1.22%, 3/3/06 (h)180 180
World Financial Properties
6.91%, 9/1/13 (e)668 757
- ---------------------------------------------------------------------------------------------------
14,842
===================================================================================================
INDUSTRIALS (18.4%)
Aetna, Inc.
7.375%, 3/1/06 100 110
7.875%, 3/1/11 225 274
Albertson's, Inc.
7.50%, 2/15/11 260 306
Altria Group, Inc.
7.00%, 11/4/13 75 83
7.65%, 7/1/08 120 136
Amerada Hess Corp.
6.65%, 8/15/11 325 360
America West Airlines, Inc.
7.10%, 10/2/22 261 288
American Honda Finance Corp.
3.85%, 11/6/08 (e)200 205
Anthem Insurance Cos., Inc.
6.80%, 8/1/12 115 133
9.125%, 4/1/10 (e)190 245
Ashland, Inc.
7.83%, 8/15/05 120 129
AT&T Corp.
8.05%, 11/15/11 220 258
AT&T Wireless Services, Inc.
7.875%, 3/1/11 100 119
BAT International Finance plc
4.875%, 2/25/09 160 205
Centex Corp.
7.875%, 2/1/11 $ 120 $ 144
Clear Channel Communications, Inc.
7.65%, 9/15/10 205 244
Comcast Cable Communications
6.375%, 1/30/06 110 118
6.75%, 1/30/11 105 119
8.375%, 5/1/07 45 52
Comcast Corp.
6.50%, 1/15/15 115 128
ConAgra Foods, Inc.
6.00%, 9/15/06 260 282
Conoco Funding Co.
6.35%, 10/15/11 310 355
ConocoPhillips, Inc.
8.50%, 5/25/05 230 248
Constellation Energy Group, Inc.
6.35%, 4/1/07 165 182
Continental Airlines, Inc.
6.545%, 2/2/19 59 58
6.648%, 9/15/17 260 254
Cooper Industries, Inc.
5.25%, 7/1/07 160 173
CVS Corp.
3.875%, 11/1/07 65 67
5.625%, 3/15/06 365 391
6.204%, 10/10/25 (e)54 58
DaimlerChrysler N.A. Holding Corp.
6.40%, 5/15/06 215 231
7.30%, 1/15/12 550 635
Delphi Corp.
6.125%, 5/1/04 220 221
Deutsche Telekom International Finance BV
8.50%, 6/15/10 300 367
Electronic Data Systems Corp.
6.00%, 8/1/13 110 107
7.125%, 10/15/09 60 64
Federated Department Stores, Inc.
6.30%, 4/1/09 265 298
FedEx Corp.
6.875%, 2/15/06 145 157
Ford Motor Credit Corp.
6.875%, 2/1/06 160 170
7.25%, 10/25/11 1,100 1,193
France Telecom S.A.
7.00%, 12/23/09 50 71
General Mills, Inc.
3.875%, 11/30/07 85 87
General Motors Acceptance Corp.
4.50%, 7/15/06 310 321
6.875%, 9/15/11 875 951
GTE Corp.
6.36%, 4/15/06 465 503
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INTERMEDIATE DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
Hertz Corp.
7.00%, 7/1/04 $ 270 $ 273
Honeywell International, Inc.
5.125%, 11/1/06 520 557
Hutchison Whampoa International Ltd.
5.45%, 11/24/10 (e)100 104
6.50%, 2/13/13 (e)105 112
Hyatt Equities LLC
6.875%, 6/15/07 (e)210 228
ICI Wilmington, Inc.
4.375%, 12/1/08 90 92
Inco Ltd.
7.75%, 5/15/12 400 484
International Paper Co.
4.25%, 1/15/09 120 123
Johnson Controls, Inc.
5.00%, 11/15/06 255 273
Kerr-McGee Corp.
5.875%, 9/15/06 125 135
6.875%, 9/15/11 200 228
Kraft Foods, Inc.
5.25%, 6/1/07 115 124
5.625%, 11/1/11 45 49
6.25%, 6/1/12 120 135
Kroger Co.
6.80%, 4/1/11 485 555
Lenfest Communications, Inc.
7.625%, 2/15/08 40 46
Lockheed Martin Corp.
8.20%, 12/1/09 100 123
Marathon Oil Corp.
5.375%, 6/1/07 120 129
6.00%, 7/1/12 130 143
Marriott International, Inc.
7.00%, 1/15/08 125 143
8.125%, 4/1/05 140 149
Masco Corp.
4.625%, 8/15/07 140 148
May Department Stores Co. (The)
5.95%, 11/1/08 295 324
6.875%, 11/1/05 85 91
MeadWestvaco Corp.
2.75%, 12/1/05 125 125
Miller Brewing Co.
4.25%, 8/15/08 (e)140 145
Mohawk Industries, Inc.
6.50%, 4/15/07 125 138
News America Holdings
9.25%, 2/1/13 150 197
News America, Inc.
4.75%, 3/15/10 70 72
6.625%, 1/9/08 300 337
Nexen, Inc.
5.05%, 11/20/13 $ 110 $ 112
Olivetti Finance N.V
5.875%, 1/24/08 90 120
Pemex Project Funding Master Trust
7.375%, 12/15/14 545 609
7.875%, 2/1/09 200 231
9.125%, 10/13/10 175 215
Petro Canada
4.00%, 7/15/13 60 57
Raytheon Co.
8.30%, 3/1/10 225 277
Safeway, Inc.
6.15%, 3/1/06 335 359
Sappi Papier Holding AG
6.75%, 6/15/12 (e)105 119
Schering-Plough Corp.
5.30%, 12/1/13 75 78
Sealed Air Corp.
5.625%, 7/15/13 (e)120 126
Southwest Airlines Co.
5.496%, 11/1/06 110 118
Sprint Capital Corp.
8.375%, 3/15/12 55 67
Systems 2001 Asset Trust LLC
6.664%, 9/15/13 (e)315 353
TCI Communications, Inc.
8.00%, 8/1/05 190 205
Time Warner, Inc.
6.125%, 4/15/06 240 258
6.75%, 4/15/11 205 232
Toyota Motor Credit Corp.
5.65%, 1/15/07 385 419
Union Pacific Corp.
3.625%, 6/1/10 110 108
6.79%, 11/9/07 110 125
UnitedHealth Group, Inc.
5.20%, 1/17/07 25 27
7.50%, 11/15/05 200 218
Verizon Global Funding Corp.
7.25%, 12/1/10 140 165
Verizon New England, Inc.
6.50%, 9/15/11 200 226
Waste Management, Inc.
5.00%, 3/15/14 65 66
6.875%, 5/15/09 195 223
Wellpoint Health Networks, Inc.
6.375%, 6/15/06 180 196
Weyerhaeuser Co.
6.125%, 3/15/07 115 126
6.75%, 3/15/12 545 617
- ---------------------------------------------------------------------------------------------------
22,934
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
33
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INTERMEDIATE DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SOVEREIGN (1.1%)
Province of Quebec
6.125%, 1/22/11 $ 550 $ 628
United Mexican States
8.375%, 1/14/11 215 262
8.625%, 3/12/08 385 461
- ---------------------------------------------------------------------------------------------------
1,351
===================================================================================================
U.S. TREASURY SECURITIES (2.2%)
U.S. Treasury Note
3.875%, 2/15/13 2,700 2,738
- ---------------------------------------------------------------------------------------------------
UTILITIES (2.3%)
Appalachian Power Co.
3.60%, 5/15/08 240 241
Carolina Power & Light Co.
5.125%, 9/15/13 185 194
Cincinnati Gas & Electric Co.
5.70%, 9/15/12 195 211
Columbus Southern Power Co.
4.40%, 12/1/10 100 102
Consolidated Natural Gas Co.
5.375%, 11/1/06 540 578
Detroit Edison Co.
6.125%, 10/1/10 100 112
Duke Energy Corp.
4.50%, 4/1/10 130 135
Entergy Gulf States, Inc.
3.60%, 6/1/08 75 75
Exelon Corp.
6.75%, 5/1/11 110 126
Pacific Gas & Electric Co.
4.80%, 3/1/14 195 196
Panhandle Eastern Pipe Line Co.
2.75%, 3/15/07 (e)40 40
Public Service Electric & Gas Co.
5.00%, 1/1/13 145 151
Ras Laffan Liquefied Natural Gas Co., Ltd.
8.294%, 3/15/14 (e)220 265
Southern California Edison Co.
5.00%, 1/15/14 30 31
TXU Energy Co.
6.125%, 3/15/08 125 137
7.00%, 3/15/13 90 103
Wisconsin Electric Power Co.
4.50%, 5/15/13 140 141
- ---------------------------------------------------------------------------------------------------
2,838
===================================================================================================
TOTAL FIXED INCOME SECURITIES (COST $126,460) 129,481
===================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
PREFERRED STOCK (0.2%)
MORTGAGES -- OTHER (0.2%)
Home Ownership Funding Corp.
13.331% (COST $287) (e)650 312
- ---------------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (10.2%)
DISCOUNT NOTES (8.2%)
Federal Home Loan Bank
0.98%, 4/16/04 $ 6,200 $ 6,198
Federal National Mortgage Association
0.99%, 6/2/04 4,000 3,993
- ---------------------------------------------------------------------------------------------------
10,191
===================================================================================================
REPURCHASE AGREEMENT (1.6%)
J.P. Morgan Securities, Inc.,
0.97%, dated 3/31/04, due 4/1/04,
repurchase price $2,013 (f)2,013 2,013
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.4%)
U.S. Treasury Bills
0.95%, 7/15/04 (j)100 99
0.98%, 9/23/04 (j)400 398
- ---------------------------------------------------------------------------------------------------
497
===================================================================================================
TOTAL SHORT-TERM INVESTMENTS (COST $12,701) 12,701
===================================================================================================
TOTAL INVESTMENTS (114.1%) (COST $139,448) 142,494
- ---------------------------------------------------------------------------------------------------
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (0.9%)
Cash 38
Interest Receivable 951
Due from Broker 109
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 12
Other 3 1,113
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-15.0%)
Payable for Forward Commitments (16,517)
Payable for Investments Purchased (1,324)
Net Unrealized Depreciation on Swap Agreements (580)
Payable for Investment Advisory Fees (114)
Interest Payable for Swap Agreements (106)
Payable for Administrative Fees (14)
Payable for Shareholder Servicing Fees --
Investment Class (13)
Payable for Trustees' Fees and Expenses (3)
Payable for Custodian Fees (3)
Other Liabilities (15) (18,689)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 124,918
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
34
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INTERMEDIATE DURATION PORTFOLIO
<Table>
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in Capital $ 122,386
Undistributed (Distributions in Excess of) Net
Investment Income (8)
Accumulated Net Realized Gain (Loss) (213)
Unrealized Appreciation (Depreciation) on:
Investments 3,046
Foreign Currency Exchange Contracts and Translations 12
Futures Contracts 275
Swap Agreements (580)
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 124,918
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 18,713
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 1,778,867 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 10.52
===================================================================================================
INVESTMENT CLASS:
NET ASSETS $ 106,205
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 10,121,688 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 10.49
===================================================================================================
</Table>
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(i) Security is subject to delayed delivery.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
Inv Fl Inverse Floating Rate -- Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 2004.
IO Interest Only
PAC Planned Amortization Class
TBA To be announced
================================================================================
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ---------------------------------------------------------------------------------------
EUR 157 $ 193 4/26/04 US$ 199 $ 199 $ 6
EUR 165 203 4/26/04 US$ 209 209 6
----- ----- ----
$ 396 $ 408 $ 12
===== ===== ====
=======================================================================================
</Table>
EUR -- Euro
US$ -- U.S. Dollar
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- ---------------------------------------------------------------------------------------------------
LONG:
U.S. Treasury
10 yr. Note 282 $ 32,545 Jun - 04 $ 511
U.S. Treasury
Long Bond 22 2,509 Jun - 04 37
SHORT:
U.S. Treasury
2 yr. Note 51 10,974 Jun - 04 (212)
U.S. Treasury
5 yr. Note 138 15,672 Jun - 04 (61)
-----
$ 275
=====
===================================================================================================
</Table>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
35
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
INTERNATIONAL FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (63.1%)
BRITISH POUND (4.4%)
United Kingdom Treasury Bond
6.00%, 12/7/28 GBP 1,000 $ 2,212
6.75%, 11/26/04 2,175 4,080
- ---------------------------------------------------------------------------------------------------
6,292
===================================================================================================
DANISH KRONE (3.4%)
Kingdom of Denmark
5.00%, 8/15/05 DKK 28,200 4,838
- ---------------------------------------------------------------------------------------------------
EURO (46.4%)
Adecco Financial Service Bermuda Ltd.
6.00%, 3/15/06 EUR 225 291
Allianz Finance BV
6.125%, 5/31/22 (g)300 406
AT&T Corp.
6.75%, 11/21/06 (g)250 335
BAT International Finance plc
4.875%, 2/25/09 355 455
Bombardier Capital Funding LP
6.125%, 5/14/07 150 193
Colt Telecom Group plc
7.625%, 7/31/08 105 131
Corning, Inc.
6.25%, 2/18/10 145 184
Deutsche Bank AG
5.125%, 1/31/13 200 260
Deutsche Bundesrepublik
6.00%, 1/5/06 6,500 8,536
6.25%, 1/4/24 7,110 10,618
Deutsche Telekom International Finance
6.375%, 7/11/06 (h)375 497
7.50%, 5/29/07 450 626
Fixed Link Finance BV
5.75%, 8/1/25 (h)300 398
France Telecom S.A.
7.00%, 12/23/09 300 428
8.125%, 1/28/33 160 258
General Motors Corp.
8.375%, 7/5/33 500 705
GIE Suez Alliance
5.50%, 2/20/09 200 266
Goldman Sachs Group, Inc.
6.50%, 10/6/10 350 493
Government of France O.A.T.
6.50%, 4/25/11 11,325 16,512
8.50%, 10/25/19 2,500 4,497
Government of Spain
5.15%, 7/30/09 @-- @--
Household Finance Corp.
5.125%, 6/24/09 300 396
Hutchison Whampoa Finance CI Ltd.
5.875%, 7/8/13 100 129
International Bank for Reconstruction
& Development
7.125%, 4/12/05 EUR 2,664 $ 3,449
MBNA American-Euro Structured Offering
5.125%, 4/19/08 511 674
Munich Re Finance BV
6.75%, 6/21/23 (h)300 417
National Grid Transco plc
5.00%, 7/2/18 270 326
Pemex Project Funding Master Trust
6.625%, 4/4/10 530 713
Philip Morris Finance Ltd.
5.625%, 6/24/08 220 286
Republic of Austria
3.40%, 10/20/04 4,000 4,967
Republic of Italy BTPS
9.50%, 2/1/06 @-- @--
RWE Finance BV
5.50%, 10/26/07 230 306
SL Finance plc (h)
6.375%, 7/12/22 220 295
Syngenta Luxembourg Finance II S.A.
5.50%, 7/10/06 290 379
TPSA Eurofinance BV
6.625%, 3/1/06 225 297
Treuhandanstalt
7.50%, 9/9/04 5,110 6,444
Tyco International Group S.A.
6.125%, 4/4/07 90 119
Vivendi Environnement
5.875%, 6/27/08 250 337
VNU N.V.
6.625%, 5/30/07 300 407
WPP Group plc
6.00%, 6/18/08 300 404
Xerox Corp.
9.75%, 1/15/09 90 130
- ---------------------------------------------------------------------------------------------------
66,564
===================================================================================================
JAPANESE YEN (6.0%)
Ford Motor Credit Co.
1.20%, 2/7/05 JPY 65,000 624
Government of Japan
1.10%, 9/20/12 856,000 8,082
- ---------------------------------------------------------------------------------------------------
8,706
===================================================================================================
SWEDISH KRONA (2.9%)
Swedish Government
6.00%, 2/9/05 SEK 30,450 4,170
- ---------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME SECURITIES (COST $73,393) 90,570
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
36
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL FIXED INCOME PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (33.5%)
DISCOUNT NOTES (20.5%)
Federal Home Loan Bank
1.00%, 5/26/04 $ 6,500 $ 6,491
1.02%, 4/7/04 6,000 5,999
Federal Home Loan Mortgage Corporation
1.00%, 5/25/04 6,500 6,491
Federal National Mortgage Association
1.02%, 4/21/04 4,000 3,997
1.00%, 5/19/04 (e)6,500 6,492
- ---------------------------------------------------------------------------------------------------
29,470
===================================================================================================
REPURCHASE AGREEMENT (0.1%)
J.P. Morgan Securities, Inc.,
0.97% dated 3/31/04, due 4/1/04,
repurchase price $ 120 (f)120 120
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (12.9%)
U.S. Treasury Bills
0.91%, 4/1/04 (j)18,400 18,399
0.98%, 9/23/04 (j)100 100
- ---------------------------------------------------------------------------------------------------
18,499
===================================================================================================
TOTAL SHORT-TERM INVESTMENTS (COST $48,088) 48,089
===================================================================================================
TOTAL INVESTMENTS (96.6%) (COST $121,481) 138,659
===================================================================================================
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (3.5%)
Interest Receivable 2,481
Due from Broker 1,830
Net Unrealized Appreciation on Foreign
Currency Exchange Contracts 749
Other 3 5,063
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-0.1%)
Payable for Investment Advisory Fees (124)
Payable for Administrative Fees (15)
Payable for Custodian Fees (4)
Payable for Trustees' Fees and Expenses (3)
Other Liabilities (24) (170)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 143,552
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 128,183
Undistributed (Distributions in Excess of) Net
Investment Income (5,900)
Accumulated Net Realized Gain (Loss) 3,209
Unrealized Appreciation (Depreciation) on:
Investments 17,178
Foreign Currency Exchange Contracts and Translations 810
Futures Contracts 72
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 143,552
===================================================================================================
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 12,719,507 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.29
===================================================================================================
</Table>
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(g) Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 2004. Maturity date disclosed is the
ultimate maturity date.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
@ Value/Face Amount is less than $500.
================================================================================
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY CLASSIFICATION AT PERIOD END
<Table>
<Caption>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- ------------------------------------------------------------------------------------------
Finance $ 7,868 5.5%
Industrial 3,693 2.6
Utilities 603 0.4
Yankee 78,406 54.6
Short-Term Investments 48,089 33.5
- ------------------------------------------------------------------------------------------
$138,659 96.6%
==========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
37
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
INTERNATIONAL FIXED INCOME PORTFOLIO
================================================================================
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- -----------------------------------------------------------------------------------------------
CHF 4,665 $ 3,689 4/22/04 US$ 3,744 $ 3,744 $ 55
DKK 3,445 568 6/18/04 US$ 569 569 1
DKK 15,500 2,559 6/18/04 US$ 2,561 2,561 2
EUR 3,815 4,697 4/26/04 US$ 4,834 4,834 137
EUR 2,400 2,955 4/26/04 US$ 2,971 2,971 16
SEK 24,055 3,184 6/21/04 US$ 3,175 3,175 (9)
US$ 1,951 1,951 5/20/04 AUD 2,495 1,902 (49)
US$ 5,515 5,515 5/20/04 CAD 7,320 5,576 61
US$ 470 470 5/20/04 CAD 630 480 10
US$ 3,506 3,506 4/22/04 CHF 4,400 3,479 (27)
US$ 1,903 1,903 4/22/04 GBP 1,055 1,944 41
US$ 11,955 11,955 4/26/04 EUR 9,665 11,898 (57)
US$ 487 487 4/26/04 EUR 400 492 5
US$ 19,011 19,011 5/10/04 JPY 2,000,000 19,200 189
US$ 22,944 22,944 5/10/04 JPY 2,421,700 23,249 305
US$ 4,097 4,097 5/10/04 JPY 431,000 4,138 41
US$ 644 644 5/10/04 JPY 70,000 672 28
------- ------- ----
$90,135 $90,884 $749
======= ======= ====
===============================================================================================
</Table>
AUD -- Australian Dollar
CAD -- Canadian Dollar
CHF -- Swiss Franc
DKK -- Danish Krone
EUR -- Euro
GBP -- British Pound
JPY -- Japanese Yen
SEK -- Swedish Krona
US$ -- U.S. Dollar
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- -----------------------------------------------------------------------------------------
LONG:
Euro Dollar
Long Bond 80 $9,286 Jun - 04 $107
Japanese
10 yr. Bond 15 2,063 Jun - 04 (35)
----
$ 72
====
=========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
38
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
LIMITED DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (104.0%)
AGENCY ADJUSTABLE RATE MORTGAGES (0.3%)
Government National Mortgage Association,
Adjustable Rate Mortgages:
4.375%, 1/20/25-1/20/28 $ 1,411 $ 1,437
4.625%, 12/20/25-12/20/27 414 424
4.75%, 7/20/27-9/20/27 370 379
- ---------------------------------------------------------------------------------------------------
2,240
===================================================================================================
AGENCY FIXED RATE MORTGAGES (29.7%)
Federal Home Loan Mortgage Corporation,
Conventional Pools:
2.75%, 8/15/06 67,520 68,806
10.00%, 4/1/10-10/1/20 332 372
10.50%, 12/1/14 25 28
11.50%, 4/1/11-1/1/18 124 140
Gold Pools:
6.50%, 9/1/19-9/1/32 7,094 7,458
7.00%, 3/1/32 13 14
7.50%, 11/1/19-11/1/32 6,809 7,331
8.50%, 8/1/28-10/1/30 155 169
10.00%, 10/1/21 29 33
10.50%, 1/1/19-10/1/20 104 114
11.00%, 5/1/20 18 20
11.50%, 8/1/10 19 21
12.00%, 6/1/15-9/1/15 62 72
April TBA
7.50%, 4/1/34 (i)650 700
Federal National Mortgage Association,
Conventional Pools:
6.50%, 3/1/18-12/1/33 74,808 78,625
7.00%, 3/1/30-6/1/32 3,294 3,497
7.50%, 9/1/29-10/1/32 24,665 26,441
8.00%, 12/1/29-8/1/31 721 780
9.50%, 11/1/20 88 98
10.00%, 12/1/15-9/1/16 156 175
10.50%, 12/1/16 51 57
11.00%, 7/1/20 45 50
11.50%, 11/1/19 68 78
12.00%, 8/1/20 8 9
12.50%, 2/1/15 32 37
April TBA
6.50%, 4/1/34 (i)18,150 19,069
7.00%, 4/1/34 (i)32,225 34,209
Government National Mortgage Association,
Various Pools:
9.00%, 11/15/16-1/15/17 324 363
9.50%, 12/15/17-12/15/21 519 582
10.00%, 11/15/09-7/15/22 1,008 1,145
10.50%, 11/15/18-8/15/21 86 99
11.00%, 1/15/10-1/15/21 575 657
11.50%, 2/15/13-11/15/19 352 406
- ---------------------------------------------------------------------------------------------------
251,655
===================================================================================================
ASSET BACKED CORPORATES (18.1%)
American Express Credit Account Master Trust
1.69%, 1/15/09 $ 4,210 $ 4,188
5.53%, 10/15/08 2,400 2,574
Americredit Automobile Receivables Trust
2.07%, 8/6/08 3,450 3,450
Bank One Issuance Trust
2.94%, 6/16/08 3,450 3,521
3.86%, 6/15/11 3,700 3,836
BMW Vehicle Owner Trust
4.46%, 5/25/07 3,050 3,144
Capital Auto Receivables Asset Trust
2.64%, 3/17/08 1,925 1,955
4.50%, 10/15/07 2,050 2,119
Chase Credit Card Master Trust
5.50%, 11/17/08 3,310 3,575
Chase Manhattan Auto Owner Trust
2.83%, 9/15/10 6,000 6,057
2.94%, 6/15/10 5,100 5,184
4.21%, 1/15/09 2,600 2,692
4.24%, 9/15/08 1,900 1,964
Citibank Credit Card Issuance Trust
2.70%, 1/15/08 2,550 2,593
4.10%, 12/7/06 1,300 1,326
4.40%, 5/15/07 3,800 3,929
6.90%, 10/15/07 3,465 3,742
7.45%, 9/15/07 875 945
Connecticut RRB Special Purpose Trust
5.36%, 3/30/07 646 663
DaimlerChrysler Auto Trust
2.58%, 4/8/09 6,000 6,037
3.09%, 1/8/08 4,550 4,659
4.49%, 10/6/08 3,700 3,829
Detroit Edison Securitization Funding LLC
5.51%, 3/1/07 1,263 1,301
Fleet Credit Card Master Trust II
2.75%, 4/15/08 3,400 3,460
Ford Credit Auto Owner Trust
3.13%, 11/15/06 3,605 3,679
3.79%, 9/15/06 4,100 4,210
4.14%, 12/15/05 670 678
4.75%, 8/15/06 800 831
Harley-Davidson Motorcycle Trust
2.63%, 11/15/10 2,100 2,133
2.76%, 5/15/11 3,500 3,555
3.09%, 6/15/10 2,450 2,500
4.50%, 1/15/10 2,700 2,820
Honda Auto Receivables Owner Trust
2.48%, 7/18/08 3,350 3,393
2.70%, 3/17/08 2,000 2,033
2.77%, 11/21/08 4,000 4,067
3.50%, 10/17/05 620 624
4.49%, 9/17/07 2,400 2,487
Household Automotive Trust
3.68%, 4/17/06 1,236 1,245
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
39
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
LIMITED DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
ASSET BACKED CORPORATES (CONT'D)
Hyundai Auto Receivables Trust
2.33%, 11/15/07 $ 1,300 $ 1,311
MBNA Master Credit Card Trust
1.21%, 2/15/07 (h)2,675 2,678
3.90%, 11/15/07 1,825 1,879
6.60%, 4/16/07 1,600 1,654
National City Auto Receivables Trust
4.04%, 7/15/06 821 829
Nissan Auto Receivables Owner Trust
2.76%, 7/15/09 4,500 4,536
3.58%, 9/15/05 537 540
4.60%, 9/17/07 2,650 2,741
4.80%, 2/15/07 2,282 2,319
Nordstrom Private Label Credit Card Master Note Trust
4.82%, 4/15/10 (e)1,200 1,278
USAA Auto Owner Trust
2.67%, 10/15/10 6,000 6,047
Volkswagen Auto Lease Trust
2.36%, 12/20/05 5,400 5,434
Whole Auto Loan Trust
2.58%, 3/15/10 6,200 6,260
William Street Funding Corp.
1.42%, 4/23/06 (e)(h)4,400 4,409
- ---------------------------------------------------------------------------------------------------
152,913
===================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY
COLLATERAL SERIES (0.2%)
Federal Home Loan Mortgage Corporation
6.50%, 3/15/28 1,578 1,581
8.00%, 7/15/06 233 233
- ---------------------------------------------------------------------------------------------------
1,814
===================================================================================================
FINANCE (9.4%)
AIG SunAmerica Global Financing VI
5.20%, 5/10/04 (e)830 833
Allstate Financial Global Funding II
2.625%, 10/22/06 (e)1,250 1,266
American General Finance Corp.
4.625%, 9/1/10 580 605
5.875%, 7/14/06 1,640 1,777
Bank of America Corp.
3.375%, 2/17/09 2,595 2,614
3.875%, 1/15/08 530 550
4.75%, 10/15/06 925 984
Bank of New York Co., Inc. (The)
5.20%, 7/1/07 415 452
Bank One Corp.
6.00%, 2/17/09 664 743
Bank One N.A. Illinois
1.23%, 5/5/06 (h)1,000 1,002
CIT Group, Inc.
1.36%, 11/4/05 (h)1,700 1,704
2.875%, 9/29/06 625 634
6.50%, 2/7/06 $ 1,215 $ 1,315
7.375%, 4/2/07 680 773
Citicorp
6.375%, 11/15/08 1,000 1,127
6.75%, 8/15/05 650 697
Citigroup Global Markets Holdings, Inc.
1.22%, 12/12/06 (h)1,050 1,050
Citigroup, Inc.
5.50%, 8/9/06 995 1,073
5.75%, 5/10/06 1,520 1,639
Countrywide Home Loans, Inc.
3.25%, 5/21/08 1,535 1,541
EOP Operating LP
6.50%, 6/15/04 1,020 1,030
6.763%, 6/15/07 1,945 2,179
Farmers Insurance Exchange
8.50%, 8/1/04 (e)680 690
FleetBoston Financial Corp.
7.25%, 9/15/05 1,160 1,252
General Electric Capital Corp.
4.25%, 12/1/10 850 871
5.00%, 6/15/07 800 862
5.375%, 3/15/07 3,025 3,284
Goldman Sachs Group, Inc.
4.125%, 1/15/08 2,415 2,522
Hartford Financial Services Group, Inc.
2.375%, 6/1/06 575 579
7.75%, 6/15/05 1,638 1,755
Hartford Life, Inc.
6.90%, 6/15/04 285 288
Household Finance Corp.
4.125%, 12/15/08 615 636
5.875%, 2/1/09 750 832
6.375%, 10/15/11 285 324
6.40%, 6/17/08 815 918
6.75%, 5/15/11 630 729
Huntington National Bank
2.75%, 10/16/06 695 712
ING Security Life Institutional Funding
2.70%, 2/15/07 (e)1,150 1,165
International Lease Finance Corp.
2.95%, 5/23/06 115 117
3.75%, 8/1/07 500 515
J.P. Morgan Chase & Co.
5.25%, 5/30/07 780 843
6.00%, 2/15/09 305 340
7.00%, 11/15/09 315 370
John Hancock Financial Services, Inc.
5.625%, 12/1/08 1,095 1,204
John Hancock Global Funding II
5.625%, 6/27/06 (e)1,210 1,305
7.90%, 7/2/10 (e)625 761
Key Bank N.A.
7.125%, 8/15/06 1,370 1,528
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
40
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
LIMITED DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FINANCE (CONT'D)
Lehman Brothers Holdings, Inc.
8.25%, 6/15/07 $ 3,525 $ 4,127
Mantis Reef Ltd.
4.692%, 11/14/08 (e)1,300 1,340
Marsh & McLennan Cos., Inc.
5.375%, 3/15/07 2,245 2,433
6.625%, 6/15/04 1,030 1,041
MBNA Corp.
6.125%, 3/1/13 1,795 1,995
Monumental Global Funding II
6.05%, 1/19/06 (e)1,160 1,249
Newcourt Credit Group, Inc.
6.875%, 2/16/05 75 78
Pricoa Global Funding I
3.90%, 12/15/08 (e)1,545 1,582
Prime Property Funding II
7.00%, 8/15/04 (e)295 301
Prudential Funding, LLC
6.60%, 5/15/08 (e)845 954
Prudential Insurance Co. of America
6.375%, 7/23/06 (e)1,505 1,649
Rouse Co. (The)
3.625%, 3/15/09 535 531
5.375%, 11/26/13 210 216
TIAA Global Markets
5.00%, 3/1/07 (e)500 537
U.S. Bancorp
5.10%, 7/15/07 980 1,063
U.S. Bank N.A.
2.85%, 11/15/06 915 937
Vornado Realty Trust
5.625%, 6/15/07 725 791
Wachovia Corp.
3.625%, 2/17/09 960 977
4.95%, 11/1/06 1,695 1,814
Washington Mutual, Inc.
8.25%, 4/1/10 1,003 1,228
Wells Fargo & Co.
1.22%, 3/3/06 (h)1,360 1,363
World Financial Properties
6.91%, 9/1/13 (e)2,040 2,310
6.95%, 9/1/13 (e)1,046 1,187
- ---------------------------------------------------------------------------------------------------
79,693
===================================================================================================
INDUSTRIALS (11.4%)
Aetna, Inc.
7.375%, 3/1/06 1,100 1,211
7.875%, 3/1/11 950 1,157
Albertson's, Inc.
7.50%, 2/15/11 1,100 1,293
Altria Group, Inc.
5.625%, 11/4/08 1,030 1,091
7.65%, 7/1/08 510 580
Amerada Hess Corp.
6.65%, 8/15/11 $ 1,455 $ 1,610
American Honda Finance Corp.
3.85%, 11/6/08 (e)1,105 1,135
Anthem, Inc.
4.875%, 8/1/05 1,720 1,790
Ashland, Inc.
7.83%, 8/15/05 500 537
AT&T Corp.
8.05%, 11/15/11 1,070 1,253
Cendant Corp.
6.25%, 1/15/08 740 821
Centex Corp.
9.75%, 6/15/05 295 322
Clear Channel Communications, Inc.
7.65%, 9/15/10 1,370 1,628
Comcast Cable Communications
6.875%, 6/15/09 700 799
Comcast Corp.
5.85%, 1/15/10 900 982
ConAgra Foods, Inc.
6.00%, 9/15/06 1,218 1,322
Conoco Funding Co.
5.45%, 10/15/06 560 605
ConocoPhillips Holding Co.
5.90%, 4/15/04 980 982
ConocoPhillips, Inc.
8.50%, 5/25/05 1,580 1,705
Constellation Energy Group, Inc.
6.35%, 4/1/07 1,125 1,241
Cooper Industries, Inc.
5.25%, 7/1/07 1,080 1,167
COX Communications, Inc.
7.75%, 8/15/06 500 561
CVS Corp.
5.625%, 3/15/06 585 626
DaimlerChrysler N.A. Holding Corp.
4.05%, 6/4/08 770 779
6.40%, 5/15/06 1,460 1,572
7.30%, 1/15/12 545 629
8.00%, 6/15/10 85 100
Delphi Corp.
6.125%, 5/1/04 1,295 1,299
Deutsche Telekom International Finance BV
8.50%, 6/15/10 1,240 1,525
Federated Department Stores, Inc.
6.30%, 4/1/09 790 889
6.625%, 9/1/08 930 1,055
FedEx Corp.
2.65%, 4/1/07 (e)270 270
6.875%, 2/15/06 525 571
Ford Motor Credit Corp.
6.50%, 1/25/07 2,400 2,565
6.875%, 2/1/06 2,500 2,660
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
41
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
LIMITED DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
General Mills, Inc.
3.875%, 11/30/07 $ 360 $ 371
General Motors Acceptance Corp.
4.50%, 7/15/06 3,330 3,443
6.125%, 8/28/07 1,370 1,478
6.75%, 1/15/06 60 64
GTE Corp.
6.36%, 4/15/06 1,960 2,122
Hertz Corp.
7.00%, 7/1/04 935 944
Honeywell International, Inc.
5.125%, 11/1/06 2,275 2,442
Hyatt Equities LLC
6.875%, 6/15/07 (e)935 1,014
ICI Wilmington, Inc.
4.375%, 12/1/08 545 559
Inco Ltd.
7.75%, 5/15/12 960 1,162
International Paper Co.
3.80%, 4/1/08 700 712
4.25%, 1/15/09 85 87
Johnson Controls, Inc.
5.00%, 11/15/06 820 879
Kerr-McGee Corp.
5.875%, 9/15/06 635 685
6.875%, 9/15/11 670 763
Kraft Foods, Inc.
5.25%, 6/1/07 1,940 2,093
Kroger Co.
7.625%, 9/15/06 2,280 2,555
Lenfest Communications, Inc.
7.625%, 2/15/08 185 212
Lockheed Martin Corp.
8.20%, 12/1/09 450 557
Lowe's Cos., Inc.
7.50%, 12/15/05 1,015 1,112
Marathon Oil Corp.
5.375%, 6/1/07 1,320 1,426
Marriott International, Inc.
8.125%, 4/1/05 970 1,030
Masco Corp.
4.625%, 8/15/07 485 513
May Department Stores Co. (The)
6.875%, 11/1/05 960 1,029
McDonnell Douglas Corp.
6.875%, 11/1/06 675 747
MeadWestvaco Corp.
2.75%, 12/1/05 680 679
Miller Brewing Co.
4.25%, 8/15/08 (e)775 803
Mohawk Industries, Inc.
6.50%, 4/15/07 320 354
News America, Inc.
4.75%, 3/15/10 $ 1,320 $ 1,369
Nexen, Inc.
5.05%, 11/20/13 665 680
Pemex Project Funding Master Trust
7.875%, 2/1/09 890 1,030
8.00%, 11/15/11 1,080 1,262
9.125%, 10/13/10 710 873
Raytheon Co.
4.85%, 1/15/11 350 364
6.75%, 8/15/07 470 529
8.30%, 3/1/10 520 639
Safeway, Inc.
6.15%, 3/1/06 2,237 2,400
Schering-Plough Corp.
5.30%, 12/1/13 470 491
Southwest Airlines Co.
5.496%, 11/1/06 520 558
Target Corp.
7.50%, 2/15/05 715 751
TCI Communications, Inc.
8.00%, 8/1/05 525 566
Telecom Italia Capital S.A.
4.00%, 11/15/08 (e)640 655
Time Warner, Inc.
6.125%, 4/15/06 1,835 1,978
6.15%, 5/1/07 670 737
Union Pacific Corp.
3.625%, 6/1/10 480 475
5.84%, 5/25/04 500 503
6.79%, 11/9/07 1,590 1,805
UnitedHealth Group, Inc.
5.20%, 1/17/07 115 124
7.50%, 11/15/05 985 1,073
Verizon Global Funding Corp.
6.125%, 6/15/07 1,695 1,876
7.25%, 12/1/10 1,140 1,345
Waste Management, Inc.
6.875%, 5/15/09 1,760 2,013
Wellpoint Health Networks, Inc.
6.375%, 6/15/06 770 839
Weyerhaeuser Co.
6.00%, 8/1/06 60 65
6.125%, 3/15/07 505 553
6.75%, 3/15/12 2,530 2,862
- ---------------------------------------------------------------------------------------------------
96,582
===================================================================================================
SOVEREIGN (0.8%)
Province of Quebec
5.50%, 4/11/06 1,645 1,767
6.125%, 1/22/11 845 969
United Mexican States
8.375%, 1/14/11 2,385 2,905
8.625%, 3/12/08 1,265 1,513
- ---------------------------------------------------------------------------------------------------
7,154
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
42
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
LIMITED DURATION PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (32.9%)
U.S. Treasury Notes
4.625%, 5/15/06 $ 13,000 $ 13,816
5.625%, 2/15/06 72,900 78,476
5.75%, 11/15/05 15,000 16,049
6.00%, 8/15/04 18,000 18,340
6.50%, 8/15/05 20,000 21,427
6.75%, 5/15/05 48,500 51,507
7.25%, 8/15/04 55,000 56,293
7.875%, 11/15/04 22,000 22,932
- ---------------------------------------------------------------------------------------------------
278,840
===================================================================================================
UTILITIES (1.2%)
Appalachian Power Co.
3.60%, 5/15/08 1,015 1,025
Columbus Southern Power Co.
4.40%, 12/1/10 860 880
Consolidated Natural Gas Co.
5.375%, 11/1/06 2,890 3,101
Duke Energy Corp.
4.50%, 4/1/10 795 826
Entergy Gulf States, Inc.
3.60%, 6/1/08 445 444
Exelon Corp.
6.75%, 5/1/11 735 842
Pacific Gas & Electric Co.
3.60%, 3/1/09 1,670 1,680
Panhandle Eastern Pipe Line Co.
2.75%, 3/15/07 (e)255 255
Ras Laffan Liquefied Natural Gas Co., Ltd.
7.628%, 9/15/06 (e)248 264
Southern California Edison Co.
5.00%, 1/15/14 165 170
Wisconsin Electric Power Co.
4.50%, 5/15/13 530 535
- ---------------------------------------------------------------------------------------------------
10,022
===================================================================================================
TOTAL FIXED INCOME SECURITIES (COST $870,267) 880,913
===================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
PREFERRED STOCK (0.1%)
MORTGAGES -- OTHER (0.1%)
Home Ownership Funding Corp.
13.331% (COST $795) (e)1,800 862
===================================================================================================
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (2.0%)
REPURCHASE AGREEMENT (1.8%)
J.P. Morgan Securities, Inc.,
0.97% dated 3/31/04, due 4/1/04,
repurchase price $14,979 $ (f)14,979 $ 14,979
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.2%)
U.S. Treasury Bills
0.95%, 7/15/04 (j)650 648
0.98%, 9/23/04 (j)1,200 1,195
- ---------------------------------------------------------------------------------------------------
1,843
===================================================================================================
TOTAL SHORT-TERM INVESTMENTS (COST $16,822) 16,822
===================================================================================================
TOTAL INVESTMENTS (106.1%)(COST $887,884) 898,597
===================================================================================================
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (0.9%)
Cash 1
Interest Receivable 7,822
Receivable for Investments Sold 8
Other 17 7,848
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-7.0%)
Payable for Forward Commitments (53,951)
Payable for Investments Purchased (4,418)
Due to Broker (623)
Payable for Investment Advisory Fees (603)
Payable for Administrative Fees (66)
Payable for Custodian Fees (11)
Payable for Trustees' Fees and Expenses (6)
Other Liabilities (12) (59,690)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 846,755
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 844,663
Undistributed (Distributions in Excess of) Net
Investment Income 942
Accumulated Net Realized Gain (Loss) (7,100)
Unrealized Appreciation (Depreciation) on:
Investments 10,713
Futures Contracts (2,463)
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 846,755
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 79,711,409 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 10.62
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
43
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
LIMITED DURATION PORTFOLIO
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(i) Security is subject to delayed delivery.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
TBA To be announced
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- -----------------------------------------------------------------------------------------
LONG:
Euro Dollar
Long Bond 300 $74,123 Jun - 04 $ 179
U.S. Treasury
2 yr. Note 389 83,702 Jun - 04 563
SHORT:
U.S. Treasury
5 yr. Note 813 92,326 Jun - 04 (1,419)
U.S. Treasury
10 yr. Note 694 80,092 Jun - 04 (1,786)
-------
$(2,463)
=======
=========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
44
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
MUNICIPAL PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (103.2%)
MUNICIPAL BONDS (90.1%)
Allegheny County, PA Hospital Development
Authority Revenue Bonds
9.25%, 11/15/15 $ 1,300 $ 1,438
Allegheny County, PA Industrial Development
Authority Revenue Bonds
4.75%, 12/1/32 525 574
Austin, TX Convention Enterprises, Inc.,
Revenue Bonds
6.70%, 1/1/28 400 426
Austin, TX Water & Wastewater System
Revenue Bonds (MBIA)
5.25%, 11/15/13 4,100 4,668
Badger TOB Asset Securitization Corp.,
WI, Revenue Bonds
6.125%, 6/1/27 1,350 1,307
Beaver County Industrial Development
Authority, PA Pollution Control Revenue Bonds
4.65%, 6/1/33 750 753
Berks County, PA (FGIC)
Zero Coupon, 5/15/19-11/15/20 2,250 1,077
Brazos River Authority, TX Pollution Collateral
Revenue Bonds
5.40%, 10/1/29 325 350
Brunswick County, NC, General
Obligation Bonds (FGIC)
5.00%, 5/1/17 1,700 1,847
Bucks County, PA Industrial Development
Authority Revenue Bonds, Grand View Hospital
SAVRS (AMBAC)
0.91%, 7/3/12 1,650 1,650
Bucks County, PA Water & Sewer Authority
Revenue Bonds (FGIC)
5.50%, 2/1/08 45 47
Butler & Sedgwick Counties, KS Unified
School District (FSA)
5.85%, 9/1/17 1,375 1,590
California State Department of Water Resources
Power Supply Revenue Bonds
5.25%, 5/1/12 2,200 2,502
California State Department Water Reserve
Power Supply Revenue Bond SAVRS
0.93%, 5/1/22 3,000 3,000
California State General Obligation Bonds
5.25%, 2/1/14 1,375 1,504
Camden Industrial Development Board, AL
Revenue Bonds
1.00%, 12/1/24 625 675
Carbon County, PA Industrial Development
Authority Revenue Bonds
6.65%, 5/1/10 325 355
Carrollton, TX General Obligation Bonds (FSA)
5.125%, 8/15/16 1,470 1,614
Center Township, PA Sewer Authority
Revenue Bonds (MBIA)
Zero Coupon, 4/15/17 $ 615 $ 343
Charleston County, SC Hospital Facilities
Revenue Bonds (University Medical Association)
SAVRS
0.918%, 11/15/24 4,150 4,150
Chelsea, MA Lease Revenue Bonds SAVRS
0.92%, 6/13/23 3,000 3,000
Cherokee County, GA School Systems,
General Obligation Bonds (MBIA)
5.00%, 8/1/13 1,000 1,129
Chicago, IL General Obligation Bonds (FGIC)
Zero Coupon, 1/1/19 4,000 1,993
Chicago, IL Park District General
Obligation Bonds (FGIC)
4.70%, 1/1/20 3,000 3,080
Chicago, IL Wastewater Transmission
Revenue Bonds (MBIA)
5.50%, 1/1/20 1,650 1,893
Children's Trust Fund Revenue Bonds
5.375%, 5/15/33 2,030 1,999
5.75%, 7/1/20 1,095 1,221
City of New York, Series B SAVRS
0.95%, 10/1/20 4,000 4,000
Clark County, WA School District General
Obligation Bonds (FSA)
5.00%, 6/1/13 2,500 2,812
Clear Creek, TX Independent School District
(PSFG)
4.50%, 2/15/20 2,000 2,022
5.65%, 2/15/19 1,000 1,126
Cleveland, OH Airport Special Revenue Bonds
5.50%, 12/1/08 750 678
Colorado E470 Public Highway Authority
Revenue Bonds (MBIA)
Zero Coupon, 9/1/29 18,900 5,088
Colorado Educational & Cultural Facilities
Authority Revenue Bonds (MBIA)
4.375%, 3/1/14 1,400 1,485
4.50%, 3/1/15 1,600 1,695
4.60%, 3/1/16 1,000 1,056
Colorado Health Facilities Authority
Revenue Bonds
Zero Coupon, 7/15/20 1,000 455
Cook County, IL School District General
Obligation Bonds (MBIA)
Zero Coupon, 12/1/22 4,125 1,631
Corpus Christi, TX Business & Job Development
Corp. (AMBAC)
4.875%, 9/1/20 2,745 2,862
5.00%, 9/1/21 1,590 1,683
Council Rock, PA School District General
Obligation Bonds (MBIA)
5.00%, 11/15/19 1,285 1,367
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
45
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (CONT'D)
Cranberry Township, PA (FGIC)
4.80%, 12/1/18 $ 1,310 $ 1,373
Crandall, TX Independent School District
General Obligation Bonds
Zero Coupon, 8/15/19 - 8/15/21 4,315 1,902
Crisp County Development Authority
5.55%, 2/1/15 200 218
Crown Point, IN Multi-School Building Corp.
Revenue Bonds (MBIA)
Zero Coupon, 1/15/24 5,200 1,905
Cypress-Fairbanks, TX Independent
School District
4.55%, 2/15/17 1,400 1,452
4.80%, 2/15/19 1,650 1,711
Dallas, TX Area Rapid Transit Sales Tax
Revenue Bonds (FGIC)
4.80%, 12/1/20 2,800 2,896
4.90%, 12/1/21 1,800 1,869
Delaware County, PA Industrial Development
Authority Revenue Bonds
6.50%, 1/1/08 200 219
Delta County, MI Economic Development Corp.
Revenue Bonds
6.25%, 4/15/27 450 476
Denton, TX Utility System Revenue Bonds
(AMBAC)
5.00%, 12/1/16 1,865 2,028
Detroit, MI City School District General
Obligation Bonds (FGIC)
5.15%, 5/1/22 2,500 2,675
Director of the State of Nevada Department of
Business & Industry Revenue Bonds
5.625%, 12/1/26 1,100 1,159
Director of the State of Nevada Department of
Business & Industry Revenue Bonds (AMBAC)
Zero Coupon, 1/1/21 - 11/1/23 3,845 1,580
District of Columbia, George Washington
University SAVRS
0.92%, 4/1/21 3,000 3,000
District of Columbia, George Washington
University Revenue Bonds (MBIA)
5.50%, 10/1/14 1,500 1,742
Dover, PA Area School District (FGIC)
5.00%, 4/1/16 1,000 1,085
Eagle, IN - Union Middle School Building
Revenue Bonds (AMBAC)
4.90%, 7/5/16 1,000 1,066
5.00%, 7/5/17 1,500 1,618
Eanes, TX Independent School District General
Obligation Bonds
4.80%, 8/1/19 1,365 1,421
4.875%, 8/1/20 1,525 1,587
East Porter County, IN School Building Corp.
Revenue Bonds (MBIA)
4.70%, 7/15/12 1,025 1,089
Edgewood, TX Independent School District
(PSFG)
4.75%, 8/15/16 $ 1,310 $ 1,381
4.85%, 8/15/17 880 926
Edinburg, TX Consolidated Independent School
District General Obligation Bonds
4.55%, 2/15/17 2,465 2,552
Elizabeth Forward, PA School District (MBIA)
Zero Coupon, 9/1/11 1,250 967
Essex County, NJ Utility Authority Revenue Bonds
(FSA)
4.80%, 4/1/14 1,005 1,063
Everett, WA Water & Sewer Revenue Bonds
5.00%, 7/1/13 - 7/1/14 3,340 3,736
Fort Wayne, IN Hospital Authority Hospital
Revenue Bonds (MBIA)
4.70%, 11/15/11 1,100 1,183
Frisco, TX Independent School District (PSFG)
Zero Coupon, 8/15/20 - 8/15/22 6,260 2,663
Geneva, IL Industrial Development
Revenue Bonds (FSA)
4.80%, 5/1/19 1,705 1,774
4.90%, 5/1/20 700 730
Georgetown County, SC Pollution Control
Facility Revenue Bonds
5.125%, 2/1/12 725 788
Georgia State Housing & Financing Authority
(FHA)
5.875%, 12/1/19 5 5
Girard Area, PA School District (FGIC)
Zero Coupon, 10/1/18 - 10/1/19 950 502
Grand Prairie, TX Independent School District
General Obligation Bonds
Zero Coupon, 2/15/14 2,240 1,490
Granite City, Madison County, IL Disposal
Revenue Bonds SAVRS
5.00%, 5/1/27 700 722
Grapevine, TX Certificates of Obligation (FGIC)
5.75%, 8/15/17 1,000 1,145
Hawaii State Certificate of Participation (AMBAC)
4.80%, 5/1/12 1,275 1,365
Hillsborough County, FL, Industrial Development
Authority Pollution Control Revenue Bonds
4.00%, 5/15/18 1,625 1,665
Houston, TX Water & Sewer System
Revenue Bonds (FSA)
5.50%, 12/1/25 12,350 4,052
Illinois Development Finance Authority
Revenue Bonds (FGIC)
Zero Coupon, 12/1/09 2,000 1,689
Illinois Development Finance Authority, Solid
Waste Disposal Revenue Bonds
5.85%, 2/1/07 110 119
Illinois Educational Facilities Authority SAVRS
0.95%, 4/1/28 3,000 3,000
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
46
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (CONT'D)
Illinois Health Facilities Authority
Revenue Bonds (MBIA)
5.00%, 11/15/12 $ 1,000 $ 1,079
Illinois Health Facilities Authority Revenue Bonds
SAVRS (AMBAC)
0.939%, 9/16/24 3,000 3,000
Indiana State University Revenue Bonds (FGIC)
5.20%, 10/1/12 1,640 1,820
Indiana Transportation Finance Authority
Highway Revenue Bonds (AMBAC)
Zero Coupon, 12/1/16 1,695 969
Indianapolis, IN Airport Authority Revenue Bonds
7.10%, 1/15/17 375 389
Intermountain Power Agency, UT Power Supply
Revenue Bonds
Zero Coupon, 7/1/17 1,750 957
Irving, TX Independent School District General
Obligation Bonds
Zero Coupon, 2/15/13 1,945 1,372
Kane & De Kalb Counties, IL Community Unit
School District (AMBAC)
Zero Coupon, 12/1/09 725 613
Kent State University, OH Revenue Bonds SAVRS
(MBIA)
0.90%, 5/1/32 3,000 3,000
King County, WA General Obligation Bonds (MBIA)
5.00%, 12/1/19 1,075 1,144
Lake County, IL Community Consolidated School
District General Obligation Bonds (MBIA)
Zero Coupon, 12/1/19 - 12/1/21 12,775 5,693
Lakeview, MI Public School District General
Obligation Bonds
5.00%, 5/1/16 1,060 1,148
Leander, TX Independent School District General
Obligation Bonds
4.85%, 8/15/20 1,160 1,203
Long Island, NY Power Authority Electric System
Revenue Bonds (FSA)
Zero Coupon, 12/1/29 3,700 2,269
Long Island, NY Power Authority Electric System
Revenue Bonds SAVRS (FSA)
0.90%, 6/1/16 3,500 3,500
Los Angeles County Calif Met Trans Authority
Sales Tax Revenue SAVRS
0.90%, 7/1/25 3,000 3,000
Madison & Jersey Counties, IL Unit School
District General Obligation Bonds (FSA)
Zero Coupon, 12/1/20 2,900 1,291
Maricopa County Arizona Pollution Control
2.90%, 6/1/35 1,600 1,585
Maryland State Economic Development Corp.,
Revenue Bonds
7.50%, 12/1/14 350 342
Massachusetts State College Building Authority
Project Revenue Bonds
5.375%, 5/1/15 $ 1,635 $ 1,866
Massachusetts State Development Financing
Agency Resource Recovery Revenue Bonds
6.90%, 12/1/29 250 292
Massachusetts State Health & Educational
Facilities Authority Revenue Bonds (MBIA)
5.75%, 10/1/22 3,000 3,000
Massachusetts State Health & Educational
Facilities Authority Revenue Bonds (AMBAC)
4.80%, 7/1/12 1,665 1,777
Massachusetts State Water Reserve Authority
Revenue Bonds SAVRS (AMBAC)
0.95%, 4/1/29 5,400 5,400
Maury County, TN Industrial Development Board
Solid Waste Disposal Revenue Bonds
6.30%, 8/1/18 1,075 1,149
McKinney, TX Independent School District
General Obligation Bonds
4.75%, 2/15/20 1,155 1,190
Memphis-Shelby County, TN Airport Authority
Special Facilities Revenue Bonds, Federal
Express Corp.
5.00%, 9/1/09 850 923
Metropolitan Pier & Exposition Authority, IL
Dedicated State Tax Revenue Bonds (MBIA)
Zero Coupon, 6/15/20 - 12/15/23 5,175 2,257
Michigan City, IN Area-Wide School Building Corp.
Revenue Bonds (FGIC)
Zero Coupon, 1/15/17 - 1/15/20 6,750 3,502
Midland, TX Independent School District General
Obligation Bonds (FGIC)
5.95%, 3/1/18 1,225 1,414
Midland, TX Independent School District General
Obligation Bonds (PSFG)
Zero Coupon, 8/15/06 750 719
Milwaukee, WI Sewer Revenue Bonds (AMBAC)
4.875%, 6/1/19 2,070 2,158
5.00%, 6/1/20 1,170 1,235
Minneapolis & St. Paul, MN Metropolitan
Airports Commission
6.50%, 4/1/25 405 383
Montgomery County, PA Industrial Development
Authority Pollution Control Revenue Bonds
5.20%, 10/1/30 850 863
Montour, PA School District (MBIA)
Zero Coupon, 1/1/13 300 215
Morton Grove, IL (FGIC)
4.50%, 12/1/13 1,480 1,546
Nassau County, NY Improvement Bonds (FSA)
6.00%, 3/1/17 1,275 1,480
Nevada Housing Division (FHA)
5.30%, 4/1/28 325 329
5.70%, 10/1/27 30 30
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
47
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (CONT'D)
New Jersey Economic Development Authority
Revenue Bonds
Zero Coupon, 4/1/12 $ 625 $ 472
New Orleans, LA Audubon Commission General
Obligation Bonds (FSA)
5.00%, 10/1/13 1,695 1,914
New York City, NY Industrial Development Agency
Revenue Bonds (FSA)
6.00%, 11/1/15 1,820 1,901
New York State Dormitory Authority
Revenue Bonds (FGIC)
5.10%, 2/15/11 1,250 1,372
New York State Dormitory Authority
Revenue Bonds (FSA)
5.10%, 2/15/11 825 906
New York State Energy SAVRS
0.94%, 7/1/15 5,000 5,000
Noblesville, IN High School Building Corp.
(AMBAC)
Zero Coupon, 2/15/19 1,850 915
North Carolina Municipal Power Agency, Electric
Revenue Bonds
6.625%, 1/1/10 850 1,002
North Harris, TX Montgomery Community College
District General Obligation Bonds (FGIC)
4.90%, 2/15/21 1,825 1,890
North Side, IN High School Building Corp.
Revenue Bonds (FSA)
5.25%, 7/15/13 2,910 3,321
North Slope Borough, AK (MBIA)
Zero Coupon, 6/30/12 2,900 2,124
Northside, TX Independent School District
General Obligation Bonds
4.90%, 8/1/21 1,850 1,912
Ohio Air Quality Development Authority SAVRS
0.95%, 10/1/27 3,960 3,960
Ohio State Solid Waste Revenue
4.25%, 4/1/33 700 682
Okemos, MI Public School District (MBIA)
Zero Coupon, 5/1/15 900 567
Orange County, FL Health Facilities Authority
9.50%, 10/15/26 3,000 3,000
Orange County, FL Housing & Finance Authority
Single Family Mortgage Revenue Bonds
5.10%, 9/1/27 90 91
Ouachita Parish, LA West Ouachita Parish School
District Revenue Bonds (MBIA)
4.70%, 9/1/14 1,020 1,085
Pearland, TX Independent School District
4.875%, 2/15/19 1,425 1,485
4.90%, 2/15/20 1,505 1,566
Penn Hills Municipality, PA
Zero Coupon, 6/1/12 - 12/1/13 2,115 1,465
Pennsylvania Convention Center Authority
6.25%, 9/1/04 55 56
Pennsylvania Convention Center Authority (FGIC)
6.70%, 9/1/16 $ 500 $ 627
Pennsylvania Housing & Finance Authority
5.35%, 10/1/08 60 61
5.55%, 10/1/12 130 132
Pennsylvania State Financing Authority School
Revenue Bonds, Aliquippa School District
Zero Coupon, 6/1/12 685 492
Pennsylvania State Public School Building
Authority, Marple Newtown School District
Project Revenue Bonds (MBIA)
4.60%, 3/1/15 1,065 1,127
4.70%, 3/1/16 715 754
Philadelphia, PA Authority For Industrial
Development Special Facilities Revenue Bonds,
Doubletree Hotel
6.50%, 10/1/27 320 326
Philadelphia, PA Hospital Authority
Revenue Bonds
10.875%, 7/1/08 80 88
Philadelphia, PA Hospitals & Higher Education
FacilitiesAuthority Revenue Bonds
6.15%, 7/1/05 50 53
Philadelphia, PA Water & Wastewater Revenue
Bonds (FGIC)
5.15%, 6/15/04 50 50
Pittsburgh, PA Stadium Authority Lease
Revenue Bonds
6.50%, 4/1/11 185 212
Port Authority, NY & NJ Special Obligation
Revenue Bonds
7.00%, 10/1/07 500 522
Richardson, TX Hotel Occupancy Certificates of
Obligation (FGIC)
5.75%, 2/15/17 1,405 1,596
Richland County, SC Revenue Bonds
6.10%, 4/1/23 725 785
Rio Grande City, TX Consolidated Independent
School District General Obligation Bonds
4.45%, 8/15/20 1,245 1,254
Robinson Township, PA Municipal Authority
6.90%, 5/15/18 105 126
Rockport, IN Pollution Control Revenue Bonds
SAVRS
4.90%, 6/1/25 455 475
Ross County, Ohio Hospital Revenue Bonds
SAVRS
0.95%, 12/1/31 4,000 4,000
Saginaw Valley State University, MI Revenue
Bonds SAVRS
0.90%, 7/1/31 3,000 3,000
Saginaw, MI Hospital Financing Authority Revenue
Bonds (MBIA)
5.375%, 7/1/19 1,265 1,359
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
48
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (CONT'D)
Sam Rayburn, TX Municipal Power Agency
Revenue Bonds
6.00%, 10/1/21 $ 650 $ 692
San Antonio County, TX Parking System Revenue
Bonds (AMBAC)
5.50%, 8/15/17 700 784
Sanger, TX Independent School District General
Obligation Bonds
Zero Coupon, 2/12/19 - 2/15/22 4,265 1,898
Santa Ana, CA Unified School District General
Obligation Bonds (FGIC)
Zero Coupon, 8/1/19 - 8/1/20 5,475 2,586
Savannah, GA Economic Development Authority
Revenue Bonds
7.40%, 4/1/26 310 317
Scranton-Lackawanna, PA Health & Welfare
Authority Revenue Bonds
6.625%, 7/1/09 80 90
Seattle, WA Refunding & Public Improvement
Bonds General Obligation Bonds
4.60%, 12/1/21 2,500 2,542
Southeastern Area Schools, PA Revenue Bonds
Zero Coupon, 10/1/06 590 558
Spring, TX Independent School District General
Obligation Bonds (PSFG)
5.00%, 8/15/19 1,760 1,869
Steel Valley, PA School District, Allegheny County
General Obligation Bonds
Zero Coupon, 11/1/11- 11/1/17 1,820 1,207
Stroudsberg, PA Area District School (FSA)
4.90%, 4/1/20 1,110 1,160
Texas Department of Housing & Community
Revenue Bonds (FSA)
5.45%, 3/1/21 10 10
Texas State Turnpike Authority Revenue Bonds
(AMBAC)
Zero Coupon, 8/15/18 5,700 2,903
Thurston & Pierce Counties Community Schools,
WA General Obligation Bonds
3.95%, 12/1/14 1,735 1,776
Tobacco Settlement Authority of Washington,
Asset Backed Bonds
6.50%, 6/1/26 995 982
Tobacco Settlement Financing Corp., LA, Asset
Backed Bonds
5.50%, 5/15/30 1,350 1,225
Tobacco Settlement Financing Corp., NJ, Asset
Backed Bonds
4.375%, 6/1/19 1,000 985
Tobacco Settlement Financing Corp., RI, Asset
Backed Bonds
6.00%, 6/1/23 1,575 1,502
Toledo-Lucas County, OH Port Authority
Revenue Bonds
6.45%, 12/15/21 900 1,010
Tomball, TX Independent School District (PSFG)
4.75%, 2/15/15 $ 1,205 $ 1,277
University of Arkansas Revenue Bonds (FSA)
4.90%, 12/1/19 2,315 2,428
University of North Texas Board of Regents
(FGIC)
4.875%, 4/15/20 2,250 2,334
Upper Darby Township, PA (AMBAC)
Zero Coupon, 7/15/11 525 408
Utah County, UT Environmental Improvement
Revenue Bonds
5.05%, 11/1/17 170 188
Utah State Water Finance Agency (AMBAC)
4.625%, 10/1/20 2,500 2,554
Valparaiso, IN Middle Schools Building Corp.
Revenue Bonds (MBIA)
4.50%, 7/15/18 1,370 1,403
4.60%, 7/15/19 1,630 1,669
Vancouver, WA Water & Sewer
Revenue Bonds (MBIA)
4.60%, 6/1/13 1,000 1,045
Virginia State Peninsula Regional Jail Authority
5.00%, 10/1/12 - 10/1/13 2,705 3,031
Waco, TX Educational Finance Corp.
Revenue Bonds Series B SAVRS
0.95%, 2/1/32 2,850 2,850
Warren, MI Consolidated School District
General Obligation Bonds
4.15%, 5/1/14 1,000 1,041
4.25%, 5/1/15 1,440 1,492
Washington State Health Care Facilities
Authority Revenue Bonds (AMBAC)
4.70%, 10/1/11 1,075 1,150
5.125%, 11/15/11 1,000 1,096
Washington State Health Care Facilities
(Fred Hutchinson) SAVRS
0.92%, 1/1/32 3,500 3,500
Washington State Recreational Facilities (FGIC)
Zero Coupon, 1/1/17 6,900 3,869
Washoe County, NV General Obligation Bonds
(FSA)
Zero Coupon, 7/1/18 4,235 2,169
Wayne State University, MI Revenue Bonds
SAVRS
0.92%, 11/15/32 5,000 5,000
West Ottawa, MI Public School District
General Obligation Bonds
5.00%, 5/1/21 1,680 1,777
West Virginia University Revenue Bonds (AMBAC)
Zero Coupon, 4/1/22 - 4/1/24 2,000 779
Winnebago County, IL School District General
Obligation Bonds (FSA)
Zero Coupon, 1/1/14 3,600 2,406
Wisconsin Housing & Economic Development
Authority Home Ownership Revenue Bonds
5.125%, 9/1/26 740 752
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
49
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (CONT'D)
Wisconsin State Health & Educational Facilities
Authority (AMBAC)
5.625%, 2/15/12 $ 1,000 $ 1,155
York County, PA Hospital Authority Revenue
Bonds SAVRS (AMBAC)
0.93%, 7/1/21 4,050 4,050
Ypsilanti, MI School District General
Obligation Bonds (FGIC)
4.70%, 5/1/12 1,115 1,191
- ---------------------------------------------------------------------------------------------------
334,270
===================================================================================================
AGENCY FIXED RATE MORTGAGES (9.5%)
Federal National Mortgage Association,
April TBA
6.50%, 4/25/33 (i)33,600 35,301
- ---------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (1.1%)
Federal Home Loan Mortgage Corporation
Inv Fl IO
8.01%, 4/15/25 16 @--
IO
6.00%, 4/15/32 4,972 506
6.50%, 3/15/33 1,859 290
Federal National Mortgage Association
Inv Fl IO
7.01%, 12/25/29 508 28
7.91%, 3/25/23 1,389 186
IO
6.00%, 5/25/33--7/25/33 9,970 1,522
6.50%, 7/1/31--5/25/33 4,928 732
7.00%, 3/1/32--4/25/33 2,497 363
8.00%, 5/1/30--6/1/30 755 122
Government National Mortgage Association
Inv Fl IO
6.856%, 12/16/25 1,072 110
6.91%, 5/16/32 1,092 102
7.456%, 4/16/19 1,454 180
7.46%, 12/16/29 621 76
- ---------------------------------------------------------------------------------------------------
4,217
===================================================================================================
FINANCE (0.0%)
iStar Financial, Inc.
7.00%, 3/15/08 155 169
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (2.0%)
Abitibi-Consolidated, Inc.
8.55%, 8/1/10 450 493
8.85%, 8/1/30 405 413
Allied Waste North America
8.50%, 12/1/08 195 219
AT&T Corp.
8.75%, 11/15/31 700 828
Avnet, Inc.
9.75%, 2/15/08 95 111
Bowater Canada Finance Corp.
7.95%, 11/15/11 855 916
FMC Corp.
10.25%, 11/1/09 $ 65 $ 77
Ford Motor Co.
6.625%, 10/1/28 834 769
Hilton Hotels Corp.
7.625%, 12/1/12 390 450
Hyatt Equities LLC
6.875%, 6/15/07 (e)360 391
Owens-Brockway Glass Containers
7.75%, 5/15/11 330 347
8.75%, 11/15/12 85 93
Smithfield Foods, Inc.
7.75%, 5/15/13 90 99
8.00%, 10/15/09 380 427
Starwood Hotels & Resorts Worldwide, Inc.
7.375%, 5/1/07 100 109
7.875%, 5/1/12 245 278
Tenet Healthcare Corp.
7.375%, 2/1/13 625 567
Toys R Us, Inc.
7.375%, 10/15/18 315 310
Xerox Corp.
7.125%, 6/15/10 315 335
- ---------------------------------------------------------------------------------------------------
7,232
===================================================================================================
UTILITIES (0.5%)
GulfTerra Energy Partners LP
8.50%, 6/1/10 277 322
Nevada Power Co.
9.00%, 8/15/13 (e)320 361
PSEG Energy Holdings LLC
7.75%, 4/16/07 645 685
Texas-New Mexico Power Co.
6.25%, 1/15/09 295 314
- ---------------------------------------------------------------------------------------------------
1,682
===================================================================================================
TOTAL FIXED INCOME SECURITIES (COST $363,331) 382,871
- ---------------------------------------------------------------------------------------------------
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (6.3%)
MONEY MARKET FUND (4.0%)
Dreyfus Basic Municipal Money Market Fund 14,803,648 14,804
- ---------------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.8%)
J.P. Morgan Securities, Inc.,
0.97%, dated 3/31/04, due 4/1/04,
repurchase price $6,704 $ (f)6,704 6,704
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.5%)
U.S. Treasury Bills
0.95%, 07/15/04 (j)800 798
0.98%, 09/23/04 (j)1,000 995
- ---------------------------------------------------------------------------------------------------
1,793
===================================================================================================
TOTAL SHORT-TERM INVESTMENTS (COST $23,301) 23,301
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
50
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
MUNICIPAL PORTFOLIO
<Table>
<Caption>
VALUE
(000)
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (109.5%) (COST $386,632) $ 406,172
===================================================================================================
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (1.0%)
Cash $ 21
Interest Receivable 2,883
Due from Broker 657
Net Unrealized Appreciation on Swap Agreements 157
Receivable for Investments Sold 135
Dividends Receivable 7
Other 9 3,869
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-10.5%)
Payable for Forward Commitments (35,281)
Payable for Investments Purchased (2,700)
Interest Payable for Swap Agreements (702)
Payable for Investment Advisory Fees (345)
Payable for Administrative Fees (32)
Payable for Custodian Fees (5)
Payable for Trustees' Fees and Expenses (4)
Other Liabilities (14) (39,083)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 370,958
===================================================================================================
NET ASSETS CONSIST OF:
Paid-in Capital $ 353,428
Undistributed (Distributions in Excess of) Net
Investment Income 171
Accumulated Net Realized Gain (Loss) (2,282)
Unrealized Appreciation (Depreciation) on:
Investments 19,540
Futures Contracts (56)
Swap Agreements 157
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 370,958
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 29,388,928 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 12.62
===================================================================================================
</Table>
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(i) Security is subject to delayed delivery.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
Inv Fl Inverse Floating Rate -- Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 2004.
@ Value/Face Amount is less than $500.
IO Interest Only
TBA To be announced
AMBAC Ambac Assurance Corporation
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FSA Financial Security Assurance Inc.
MBIA MBIA Insurance Corporation
PSFG Permanent School Fund Guaranteed
SAVRS Semi-Annual Variable Rate Security
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- ---------------------------------------------------------------------------------------------------
LONG:
U.S. Treasury
10 yr. Note 310 $35,776 Jun - 04 $482
SHORT:
U.S. Treasury
2 yr. Note 37 7,961 Jun - 04 (31)
U.S. Treasury
5 yr. Note 160 18,170 Jun - 04 (298)
U.S. Treasury
Long Bond 72 8,213 Jun - 04 (209)
-----
$ (56)
=====
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
51
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS
BALANCED PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES (33.8%)
AGENCY ADJUSTABLE RATE MORTGAGES (0.7%)
Government National Mortgage Association,
Adjustable Rate Mortgages:
4.375%, 2/20/25-1/20/28 $ 1,308 $ 1,332
4.625%, 11/20/25-12/20/27 409 420
- ---------------------------------------------------------------------------------------------------
1,752
===================================================================================================
AGENCY FIXED RATE MORTGAGES (18.2%)
Federal Home Loan Mortgage Corporation,
Conventional Pools:
10.00%, 9/1/17 85 94
10.50%, 8/1/19-12/1/19 207 236
11.00%, 5/1/20-9/1/20 97 110
12.00%, 3/1/15 77 88
Gold Pools:
6.50%, 9/1/22 719 757
7.50%, 8/1/20-11/1/32 1,734 1,867
8.00%, 2/1/21-8/1/31 1,300 1,406
9.50%, 12/1/22 90 101
10.00%, 12/1/19 140 158
April TBA
6.00%, 4/1/34 (i)3,700 3,846
May TBA
5.00%, 5/1/19 (i)900 924
Federal National Mortgage Association,
Conventional Pools:
6.50%, 9/1/31-1/1/33 6,356 6,680
7.00%, 3/1/18-7/1/32 3,511 3,727
7.50%, 10/1/29-6/1/32 2,267 2,430
8.00%, 2/1/30-4/4/32 1,520 1,646
8.50%, 5/1/30-12/1/30 1,113 1,205
9.50%, 11/1/20-4/1/30 788 883
10.00%, 1/1/10-1/1/20 105 120
10.50%, 12/1/16-4/1/22 509 575
11.50%, 11/1/19 8 9
12.50%, 9/1/15 34 40
April TBA
5.00%, 4/1/19 (i)1,625 1,671
5.50%, 4/1/19-4/1/34 (i)5,000 5,178
6.50%, 4/1/34 (i)7,200 7,565
May TBA
4.50%, 5/1/19 (i)1,700 1,716
5.50%, 5/1/34 (i)1,950 1,993
Government National Mortgage Association,
Various Pools:
9.50%, 10/15/18-11/15/21 227 255
10.00%, 11/15/09-12/15/21 727 824
10.50%, 2/15/20-12/15/20 162 185
11.00%, 1/15/19 142 163
April TBA
6.50%, 4/1/34 (i)975 1,029
7.00%, 4/1/34 (i)975 1,039
- ---------------------------------------------------------------------------------------------------
48,520
===================================================================================================
ASSET BACKED CORPORATES (1.3%)
Centex Home Equity Corp.
1.833%, 9/25/19 $ (g)400 $ 401
Citibank Credit Card Issuance Trust
6.90%, 10/15/07 900 972
Ford Credit Auto Owner Trust
1.62%, 8/15/05 181 182
Harley-Davidson Eaglemark Motorcycle Trust
3.02%, 9/15/06 28 28
Harley-Davidson Motorcycle Trust
1.56%, 5/15/07 220 220
Honda Auto Receivables Owner Trust
1.46%, 9/19/05 418 418
Lehman ABS Manufactured Housing Contract
3.01%, 3/15/10 94 92
MBNA Master Credit Card Trust
7.80%, 10/15/12 900 1,107
Whole Auto Loan Trust
1.88%, 6/15/05 145 146
- ---------------------------------------------------------------------------------------------------
3,566
===================================================================================================
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL SERIES (0.5%)
Federal Home Loan Mortgage Corporation
Inv Fl IO
7.46%, 10/15/29 383 27
41.625%, 11/15/07 30 12
Inv Fl IO PAC
7.439%, 2/15/08 339 23
Inv Fl IO REMIC
6.875%, 10/15/08 559 41
Inv Fl IO REMIC PAC
8.475%, 3/15/08 208 16
IO
5.00%, 6/15/17 653 61
6.50%, 3/15/33 518 81
7.50%, 12/1/29 369 53
8.00%, 1/1/28-7/1/31 106 17
Federal National Mortgage Association
Inv Fl IO
6.439%, 10/25/07 538 29
6.46%, 2/17/31 1,016 107
7.49%, 3/18/30 244 17
IO
5.00%, 2/25/15 935 58
5.50%, 6/25/26 1,253 76
6.00%, 8/25/32-7/25/33 748 109
6.50%, 7/1/31-5/25/33 663 98
7.00%, 4/25/33 395 57
8.00%, 4/1/24-8/1/31 1,391 222
9.00%, 11/1/26 123 16
IO PAC
8.00%, 8/18/27 270 43
PAC
8.50%, 9/25/20 39 43
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
52
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- AGENCY COLLATERAL
SERIES (CONT'D)
Government National Mortgage Association
Inv Fl IO
6.91%, 4/16/29 $ 863 $ 79
7.51%, 8/16/29 540 56
- ---------------------------------------------------------------------------------------------------
1,341
===================================================================================================
FEDERAL AGENCY (0.3%)
Federal Home Loan Mortgage Corporation
5.125%, 11/7/13 (c)800 817
- ---------------------------------------------------------------------------------------------------
FINANCE (1.9%)
AIG SunAmerica Global Financing VI
6.30%, 5/10/11 (e)45 51
American General Corp.
7.50%, 7/15/25 300 374
Citigroup, Inc.
5.625%, 8/27/12 (c)140 153
Countrywide Home Loans, Inc.
3.25%, 5/21/08 150 150
EOP Operating LP
6.763%, 6/15/07 20 22
7.50%, 4/19/29 145 168
Farmers Insurance Exchange
8.625%, 5/1/24 (e)290 342
General Electric Capital Corp.
4.25%, 12/1/10 (c)80 82
6.75%, 3/15/32 120 139
Goldman Sachs Group, Inc.
6.875%, 1/15/11 250 291
Hartford Financial Services Group, Inc.
2.375%, 6/1/06 25 25
Household Finance Corp.
5.875%, 2/1/09 305 338
iStar Financial, Inc.
7.00%, 3/15/08 50 55
J.P. Morgan Chase & Co.
7.00%, 11/15/09 255 300
Mantis Reef Ltd.
4.692%, 11/14/08 (e)200 206
MBNA Corp.
6.125%, 3/1/13 (c)170 189
Nationwide Mutual Insurance Co.
7.50%, 2/15/24 (e)420 435
Newcourt Credit Group, Inc.
6.875%, 2/16/05 105 110
Prime Property Funding II
7.00%, 8/15/04 (e)255 260
Prudential Holdings LLC
7.245%, 12/18/23 (e)550 651
8.695%, 12/18/23 (e)160 211
Reckson Operating Partnership LP
5.15%, 1/15/11 75 77
Rouse Co. (The)
3.625%, 3/15/09 45 45
5.375%, 11/26/13 25 26
Washington Mutual, Inc.
8.25%, 4/1/10 $ 100 $ 122
World Financial Properties
6.91%, 9/1/13 (e)336 381
- ---------------------------------------------------------------------------------------------------
5,203
===================================================================================================
INDUSTRIALS (4.0%)
Abitibi-Consolidated, Inc.
8.55%, 8/1/10 100 109
8.85%, 8/1/30 95 97
Aetna, Inc.
7.875%, 3/1/11 185 225
Albertson's, Inc.
7.50%, 2/15/11 65 76
Allied Waste North America
6.50%, 11/15/10 (e)15 15
8.50%, 12/1/08 55 62
Altria Group, Inc.
7.00%, 11/4/13 (c)60 66
7.75%, 1/15/27 75 84
Amerada Hess Corp.
7.875%, 10/1/29 130 148
AT&T Corp.
8.75%, 11/15/31 155 183
AT&T Wireless Services, Inc.
8.75%, 3/1/31 55 72
Avaya, Inc.
11.125%, 4/1/09 37 44
Avnet, Inc.
9.75%, 2/15/08 30 35
BAT International Finance plc
4.875%, 2/25/09 115 148
Bowater Canada Finance Corp.
7.95%, 11/15/11 210 225
Cendant Corp.
7.375%, 1/15/13 55 65
Clear Channel Communications, Inc.
7.65%, 9/15/10 65 77
Comcast Corp.
6.50%, 1/15/15 (a)35 39
Conoco, Inc.
6.95%, 4/15/29 130 152
Constellation Energy Group, Inc.
7.60%, 4/1/32 60 72
Consumer's Energy Co.
4.00%, 5/15/10 50 50
4.80%, 2/17/09 80 84
5.375%, 4/15/13 25 26
Continental Airlines, Inc.
6.648%, 9/15/17 (c)311 304
D.R. Horton, Inc.
6.875%, 5/1/13 (c)85 95
DaimlerChrysler N.A. Holding Corp.
7.30%, 1/15/12 (c)150 173
8.50%, 1/18/31 105 130
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
53
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
Deutsche Telekom International Finance BV
8.75%, 6/15/30 $ 115 $ 151
Echostar DBS Corp.
6.375%, 10/1/11 (e)115 123
Electronic Data Systems Corp.
6.00%, 8/1/13 55 53
7.125%, 10/15/09 (c)50 53
Federated Department Stores, Inc.
6.625%, 9/1/08 100 113
FedEx Corp.
2.65%, 4/1/07 (e)75 75
FMC Corp.
10.25%, 11/1/09 25 30
Ford Motor Co.
6.625%, 10/1/28 345 318
Ford Motor Credit Corp.
7.25%, 10/25/11 (c)160 174
7.375%, 10/28/09 90 99
France Telecom S.A.
7.00%, 12/23/09 50 71
General Motors Acceptance Corp.
4.50%, 7/15/06 (c)70 72
6.875%, 9/15/11 140 152
8.00%, 11/1/31 (c)230 255
Glencore Nickel Property Ltd.
9.00%, 12/1/14 (b)(d)320 @--
GTE Corp.
6.94%, 4/15/28 200 218
Harrah's Operating Co., Inc.
8.00%, 2/1/11 95 114
HCA, Inc.
7.58%, 9/15/25 115 122
9.00%, 12/15/14 150 186
Health Net, Inc.
8.375%, 4/15/11 155 191
Hilton Hotels Corp.
7.625%, 12/1/12 (c)130 150
Honeywell International, Inc.
6.125%, 11/1/11 (c)105 118
Hutchison Whampoa International Ltd.
6.50%, 2/13/13 (e)85 91
Hyatt Equities LLC
6.875%, 6/15/07 (e)125 136
ICI Wilmington, Inc.
4.375%, 12/1/08 65 67
Inco Ltd.
7.20%, 9/15/32 40 46
7.75%, 5/15/12 120 145
International Paper Co.
4.25%, 1/15/09 90 92
Iron Mountain, Inc.
6.625%, 1/1/16 30 29
7.75%, 1/15/15 90 95
Kennametal, Inc.
7.20%, 6/15/12 $ 105 $ 117
Kerr-McGee Corp.
5.875%, 9/15/06 35 38
7.875%, 9/15/31 95 113
Key Energy Services, Inc.
6.375%, 5/1/13 40 41
Kraft Foods, Inc.
5.625%, 11/1/11 60 65
6.25%, 6/1/12 45 51
Kroger Co.
7.50%, 4/1/31 (a)40 47
Lenfest Communications, Inc.
7.625%, 2/15/08 180 206
Lockheed Martin Corp.
7.75%, 5/1/26 75 93
Marathon Oil Corp.
6.80%, 3/15/32 65 73
MGM Mirage, Inc.
8.50%, 9/15/10 (c)125 147
Miller Brewing Co.
4.25%, 8/15/08 (e)90 93
Mohawk Industries, Inc.
7.20%, 4/15/12 80 93
News America Holdings, Inc.
7.75%, 2/1/24 195 231
Nexen, Inc.
5.05%, 11/20/13 80 82
Olivetti Finance N.V.
5.875%, 1/24/08 50 67
Owens-Brockway Glass Containers
7.75%, 5/15/11 60 63
8.75%, 11/15/12 60 66
Packaging Corp. of America
5.75%, 8/1/13 60 63
Pemex Project Funding Master Trust
9.125%, 10/13/10 95 117
Petro Canada
4.00%, 7/15/13 25 24
5.35%, 7/15/33 65 60
Pulte Homes, Inc.
6.375%, 5/15/33 30 30
7.875%, 8/1/11 35 42
Raytheon Co.
8.30%, 3/1/10 60 74
Sappi Papier Holding AG
6.75%, 6/15/12 (e)70 79
Schering-Plough Corp.
5.30%, 12/1/13 55 58
Sealed Air Corp.
5.625%, 7/15/13 (e)90 95
Smithfield Foods, Inc.
7.75%, 5/15/13 25 28
8.00%, 10/15/09 (c)110 123
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
54
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
INDUSTRIALS (CONT'D)
Sprint Capital Corp.
8.375%, 3/15/12 $ (c)75 $ 92
8.75%, 3/15/32 15 19
Starwood Hotels & Resorts Worldwide, Inc.
7.875%, 5/1/12 130 148
Station Casinos, Inc.
6.00%, 4/1/12 (e)75 78
Systems 2001 Asset Trust LLC
6.664%, 9/15/13 (e)200 225
Tenet Healthcare Corp.
6.875%, 2/15/13 105 87
7.375%, 2/1/13 (c)30 27
Time Warner Cos., Inc.
7.57%, 2/1/24 95 110
Time Warner, Inc.
6.625%, 5/15/29 115 121
Toys R Us, Inc.
7.375%, 10/15/18 (c)90 89
Tricon Global Restaurants
8.875%, 4/15/11 40 50
Tyco International Group S.A.
5.80%, 8/1/06 20 21
6.375%, 10/15/11 85 93
Verizon Global Funding Corp.
7.75%, 12/1/30 (c)70 85
Waste Management, Inc.
7.375%, 5/15/29 190 221
Weyerhaeuser Co.
6.00%, 8/1/06 65 70
6.75%, 3/15/12 (c)135 153
Xerox Corp.
7.125%, 6/15/10 (c)90 96
- ---------------------------------------------------------------------------------------------------
10,659
===================================================================================================
MORTGAGES -- OTHER (0.0%)
American Housing Trust
9.125%, 4/25/21 25 25
First Federal Savings & Loan Association
8.75%, 6/1/06 @-- 1
Ryland Acceptance Corp. IV
6.65%, 7/1/11 17 17
- ---------------------------------------------------------------------------------------------------
43
===================================================================================================
SOVEREIGN (0.3%)
Republic of Colombia
10.75%, 1/15/13 75 90
United Mexican States
8.30%, 8/15/31 195 230
8.375%, 1/14/11 335 408
- ---------------------------------------------------------------------------------------------------
728
===================================================================================================
U.S. TREASURY SECURITIES (5.9%)
U.S. Treasury Bond
6.125%, 8/15/29 (c)650 771
U.S. Treasury Note
3.875%, 2/15/13 $ (c)1,000 $ 1,014
U.S. Treasury Strips
IO
4.567%, 2/15/17-2/15/22 1,150 576
4.611%, 5/15/16 500 290
4.899%, 2/15/19 900 438
4.953%, 5/15/20 (c)2,475 1,113
4.961%, 5/15/19 (c)800 383
4.976%, 2/15/20 4,035 1,843
5.001%, 11/15/19 (c)300 139
5.035%, 2/15/21 (c)2,975 1,276
5.036%, 8/15/20 550 243
5.078%, 11/15/21 (c)2,300 940
5.089%, 5/15/21 (c)8,670 3,654
5.108%, 11/15/22 (c)575 222
5.122%, 8/15/22 1,200 470
5.147%, 2/15/23 750 285
5.158%, 11/15/23 (c)750 273
U.S. Treasury Strips
PO
5/15/21 2,875 1,222
11/15/21 1,300 535
- ---------------------------------------------------------------------------------------------------
15,687
===================================================================================================
UTILITIES (0.7%)
Appalachian Power Co.
5.95%, 5/15/33 45 45
Cincinnati Gas & Electric Co.
5.40%, 6/15/33 30 28
Columbus Southern Power Co.
6.60%, 3/1/33 65 72
Detroit Edison Co.
6.35%, 10/15/32 30 33
DPL, Inc.
8.25%, 3/1/07 70 74
Entergy Gulf States, Inc.
3.60%, 6/1/08 45 45
Exelon Corp.
6.75%, 5/1/11 60 69
FirstEnergy Corp.
6.45%, 11/15/11 110 121
7.375%, 11/15/31 25 28
GulfTerra Energy Partners LP
6.25%, 6/1/10 55 60
8.50%, 6/1/10 80 93
Monongahela Power Co.
5.00%, 10/1/06 60 61
Nevada Power Co.
9.00%, 8/15/13 (e)70 79
Nisource Finance Corp.
7.625%, 11/15/05 70 76
Ohio Edison Co.
5.45%, 5/1/15 85 87
Ohio Power Co.
6.60%, 2/15/33 30 33
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
55
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
UTILITIES (CONT'D)
Pacific Gas & Electric Co.
6.05%, 3/1/34 $ 105 $ 107
Panhandle Eastern Pipe Line Co.
2.75%, 3/15/07 (e)25 25
PSEG Energy Holdings LLC
7.75%, 4/16/07 75 80
8.625%, 2/15/08 65 70
Ras Laffan Liquefied Natural Gas Co., Ltd.
8.294%, 3/15/14 (e)145 175
Reliant Energy Resources Corp.
7.75%, 2/15/11 65 74
Southern California Edison Co.
5.00%, 1/15/14 20 21
Texas Eastern Transmission LP
7.00%, 7/15/32 (c)70 79
Texas-New Mexico Power Co.
6.25%, 1/15/09 65 69
TXU Corp.
6.375%, 6/15/06 45 49
TXU Energy Co.
7.00%, 3/15/13 65 75
Wisconsin Electric Power Co.
5.625%, 5/15/33 25 25
Wisconsin Energy Corp.
6.20%, 4/1/33 35 36
- ---------------------------------------------------------------------------------------------------
1,889
===================================================================================================
TOTAL FIXED INCOME SECURITIES (COST $89,029) 90,205
===================================================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------
COMMON STOCKS (57.0%)
AUTOMOBILES & Components (0.3%)
Delphi Corp. 50 1
Ford Motor Co. 100 1
Honda Motor Co., Ltd. ADR 21,830 505
Magna International, Inc. 5,340 423
- ---------------------------------------------------------------------------------------------------
930
===================================================================================================
Banks (2.4%)
AmSouth Bancorp. 2,480 58
Bank of America Corp. 8,182 663
Bank One Corp. 12,660 690
BB&T Financial Corp. 950 34
Charter One Financial, Inc. 1,223 43
Comerica, Inc. 4,340 236
Countrywide Financial Corp. 510 49
Fannie Mae 13,870 1,031
Fifth Third Bancorp. 2,110 117
Freddie Mac 14,840 877
Golden West Financial Corp. 520 58
KeyCorp. 640 19
Marshall & Ilsley Corp. 1,370 52
MGIC Investment Corp. 1,225 79
National City Corp. 2,320 83
<Caption>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------------------------------
PNC Financial Services Group, Inc. 10,070 $ 558
Regions Financial Corp. 1,910 70
SouthTrust Corp. 2,100 70
SunTrust Banks, Inc. 910 63
Synovus Financial Corp. 2,020 49
U.S. Bancorp 12,490 345
Union Planters Corp. 1,070 32
Wachovia Corp. 9,940 467
Washington Mutual, Inc. 4,010 171
Wells Fargo & Co. 9,120 517
- ---------------------------------------------------------------------------------------------------
6,431
===================================================================================================
CAPITAL GOODS (3.4%)
3M Co. 10,600 868
American Power Conversion Corp. 2,050 47
American Standard Cos., Inc. (a)550 63
Boeing Co. (The) 5,550 228
Caterpillar, Inc. 2,500 198
Cooper Industries, Inc., Class A 850 49
Danaher Corp. 1,100 103
Deere & Co. 1,550 107
Dover Corp. 1,550 60
Eaton Corp. 1,300 73
Emerson Electric Co. 2,850 171
General Dynamics Corp. 1,200 107
General Electric Co. 114,275 3,488
Honeywell International, Inc. 6,000 203
Illinois Tool Works, Inc. 2,200 174
Ingersoll-Rand Co., Class A 5,550 375
ITT Industries, Inc. 550 42
Lockheed Martin Corp. 2,750 125
Masco Corp. 3,150 96
Molex, Inc. 250 8
Northrop Grumman Corp. 3,800 374
Paccar, Inc. 1,325 75
Parker-Hannifin Corp. 6,840 386
Raytheon Co. 2,750 86
Rockwell Automation, Inc. 7,530 261
Rockwell Collins, Inc. 1,300 41
Textron, Inc. 2,680 142
Tyco International Ltd. 23,800 682
United Technologies Corp. 6,140 530
W.W. Grainger, Inc. 750 36
- ---------------------------------------------------------------------------------------------------
9,198
===================================================================================================
COMMERCIAL SERVICES & SUPPLIES (0.5%)
Apollo Group, Inc., Class A (a)4,500 388
Avery Dennison Corp. 850 53
Cendant Corp. 7,300 178
Cintas Corp. 1,300 57
Equifax, Inc. 18,680 482
H&R Block, Inc. 1,200 61
Pitney Bowes, Inc. 1,850 79
Robert Half International, Inc. (a)1,950 46
Waste Management, Inc. 4,050 122
- ---------------------------------------------------------------------------------------------------
1,466
===================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
56
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS (4.6%)
A.G. Edwards, Inc. 4,970 $ 194
American Express Co. 22,450 1,164
Bank of New York Co., Inc. (The) 14,740 464
Bear Stearns Co., Inc. (The) 2,100 184
Capital One Financial Corp. 6,873 519
Charles Schwab Corp. (The) 14,551 169
Citigroup, Inc. 82,425 4,261
Franklin Resources, Inc. 7,280 405
Goldman Sachs Group, Inc. 10,020 1,046
J.P. Morgan Chase & Co. 14,250 598
Lehman Brothers Holdings, Inc. 12,267 1,017
MBNA Corp. 15,534 429
Mellon Financial Corp. 2,040 64
Merrill Lynch & Co., Inc. 20,320 1,210
Moody's Corp. 1,720 122
Northern Trust Corp. 970 45
Piper Jaffray Cos. (a)153 8
Principal Financial Group 4,670 166
SLM Corp. 300 13
State Street Corp. 3,680 192
- ---------------------------------------------------------------------------------------------------
12,270
===================================================================================================
ENERGY (5.4%)
Amerada Hess Corp. 370 24
Anadarko Petroleum Corp. 4,870 253
Apache Corp. 7,986 345
Baker Hughes, Inc. 10,860 396
BJ Services Co. (a)5,740 248
BP plc ADR 15,700 804
Burlington Resources, Inc. 5,850 372
ChevronTexaco Corp. 17,926 1,574
ConocoPhillips, Inc. 18,573 1,297
Devon Energy Corp. 2,400 140
EOG Resources, Inc. 2,710 124
Exxon Mobil Corp. 129,391 5,381
Halliburton Co. 7,784 237
Kerr-McGee Corp. 200 10
Marathon Oil Corp. 7,420 250
Nabors Industries Ltd. (a)650 30
Occidental Petroleum Corp. 9,034 416
Royal Dutch Petroleum Co. 9,700 461
Schlumberger Ltd. 19,440 1,241
Smith International, Inc. (a)4,600 246
Transocean, Inc. (a)4,590 128
Unocal Corp. 5,630 210
Valero Energy Corp. 6,210 372
- ---------------------------------------------------------------------------------------------------
14,559
===================================================================================================
FOOD & STAPLES RETAILING (1.9%)
Albertson's, Inc. 4,053 90
Costco Wholesale Corp. (a)5,001 188
Kroger Co. 28,758 478
Safeway, Inc. (a)5,002 103
Sysco Corp. 7,090 277
Wal-Mart Stores, Inc. 57,944 3,458
Walgreen Co. 10,889 $ 359
- ---------------------------------------------------------------------------------------------------
4,953
===================================================================================================
FOOD, BEVERAGE & TOBACCO (4.0%)
Altria Group, Inc. 36,010 1,961
Anheuser-Busch Cos., Inc. 13,238 675
Archer-Daniels-Midland Co. 10,602 179
Brown-Foreman, Inc. 2,100 100
Cadbury Schweppes plc ADR 9,980 321
Campbell Soup Co. 6,620 181
Coca-Cola Co. (The) 51,115 2,571
Coca-Cola Enterprises, Inc. 7,303 176
ConAgra Foods, Inc. 8,811 237
General Mills, Inc. 5,967 279
Heinz (H.J.) Co. 5,859 218
Hershey Foods Corp. 2,064 171
Kellogg Co. 6,793 267
Kraft Foods, Inc., Class A 9,010 288
Nestle S.A. ADR (a)3,590 229
Pepsi Bottling Group, Inc. 4,140 123
PepsiCo, Inc. 40,355 2,173
R.J. Reynolds Tobacco Holdings, Inc. 1,300 79
Sara Lee Corp. 12,478 273
UST, Inc. 2,712 98
W.M. Wrigley Jr., Co. 3,737 221
- ---------------------------------------------------------------------------------------------------
10,820
===================================================================================================
HEALTH CARE EQUIPMENT & SERVICES (3.3%)
Aetna, Inc. 2,310 207
AmerisourceBergen Corp., Class A 1,490 81
Anthem, Inc. (a)5,255 476
Applera Corp. - Applied Biosystems Group 2,400 47
Bausch & Lomb, Inc. 9,590 575
Baxter International, Inc. 8,650 267
Becton Dickinson & Co. 3,770 183
Biomet, Inc. 3,890 149
Boston Scientific Corp. (a)18,340 777
C.R. Bard, Inc. 1,000 98
Cardinal Health, Inc. 6,360 438
Caremark Rx, Inc. (a)6,250 208
CIGNA Corp. 7,500 443
Express Scripts, Inc., Class A (a)1,200 90
Guidant Corp. 8,050 510
HCA, Inc. 7,100 288
Health Management Associates, Inc., Class A 4,000 93
Humana, Inc. (a)2,400 46
IMS Health, Inc. 4,500 105
Manor Care, Inc. 1,000 35
McKesson Corp. 4,310 130
Medco Health Solutions, Inc. (a)3,617 123
Medtronic, Inc. 21,070 1,006
Millipore Corp. (a)500 26
Quest Diagnostics, Inc. 1,500 124
St. Jude Medical, Inc. (a)4,360 314
Stryker Corp. 2,960 262
Tenet Healthcare Corp. (a)18,340 205
UnitedHealth Group, Inc. 13,540 873
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
57
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SERVICES (CONT'D)
WellPoint Health Networks, Inc. (a)2,300 $ 262
Zimmer Holdings, Inc. (a)4,080 301
- ---------------------------------------------------------------------------------------------------
8,742
===================================================================================================
HOTELS, RESTAURANTS & LEISURE (1.8%)
Carnival Corp. 15,650 703
GTECH Holdings Corp. 3,620 214
Harrah's Entertainment, Inc. 350 19
Hilton Hotels Corp. 37,430 608
International Game Technology 12,850 578
Marriott International, Inc., Class A 4,850 207
McDonald's Corp. 31,360 896
Starbucks Corp. (a)8,300 313
Starwood Hotels & Resorts Worldwide, Inc. 14,100 571
Wynn Resorts Ltd. (a)5,165 181
Yum! Brands, Inc. (a)10,290 391
- ---------------------------------------------------------------------------------------------------
4,681
===================================================================================================
HOUSEHOLD & PERSONAL PRODUCTS (1.3%)
Avon Products, Inc. 2,595 197
Clorox Co. 2,517 123
Colgate Palmolive Co. 5,892 325
Gillette Co. (The) 11,078 433
Kimberly-Clark Corp. 11,468 723
Proctor & Gamble Co. 16,808 1,763
- ---------------------------------------------------------------------------------------------------
3,564
===================================================================================================
INSURANCE (2.6%)
ACE Ltd. 2,130 91
Aflac, Inc. 2,160 87
Allstate Corp. (The) 7,440 338
Ambac Financial Group, Inc. 950 70
American International Group, Inc. 30,630 2,186
Chubb Corp. 12,350 859
Hartford Financial Services Group, Inc. 13,330 849
John Hancock Financial Services, Inc. 2,550 111
Loews Corp. 1,920 113
Marsh & McLennan Cos., Inc. 3,440 159
MBIA, Inc. 3,760 236
Metlife, Inc. 11,720 418
Progressive Corp. (The) 1,960 172
Prudential Financial, Inc. 10,600 475
St. Paul Cos., Inc. 2,960 118
Travelers Property Casualty Corp., Class A 29,600 508
Travelers Property Casualty Corp., Class B 5,395 93
XL Capital Ltd., Class A 860 65
- ---------------------------------------------------------------------------------------------------
6,948
===================================================================================================
MATERIALS (2.4%)
Agnico-Eagle Mines Ltd. 5,900 88
Barrick Gold Corp. 43,000 1,017
Bayer AG ADR 22,780 556
Dow Chemical Co. (The) 8,110 327
Glamis Gold Ltd. (a)10,000 178
Goldcorp, Inc. 14,100 209
Kinross Gold Corp. 22,400 164
Meridian Gold, Inc. (a)7,700 94
Newmont Mining Corp. 51,333 $ 2,393
Phelps Dodge Corp. (a)4,647 379
Placer Dome, Inc. 33,600 605
Temple-Inland, Inc. 4,609 292
- ---------------------------------------------------------------------------------------------------
6,302
===================================================================================================
MEDIA (2.8%)
Clear Channel Communications, Inc. 29,960 1,269
Comcast Corp., Class A 23,800 684
Gannett, Inc. 3,300 291
Interpublic Group of Cos., Inc. (a)19,590 301
Knight-Ridder, Inc. 150 11
McGraw-Hill Cos., Inc. (The) 2,350 179
New York Times Co., Class A 2,050 91
News Corp., Ltd. ADR 4,800 152
Omnicom Group, Inc. 2,050 164
Time Warner, Inc. (a)92,713 1,563
Tribune Co. 3,600 182
Univision Communications, Inc., Class A (a)13,580 448
Viacom, Inc., Class B 24,150 947
Walt Disney Holding Co. 46,170 1,154
- ---------------------------------------------------------------------------------------------------
7,436
===================================================================================================
PHARMACEUTICALS & BIOTECHNOLOGY (6.0%)
Abbott Labs, Inc. 15,776 648
Allergan, Inc. 3,160 266
Amgen, Inc. (a)23,053 1,341
AstraZeneca plc ADR 6,080 284
Biogen Idec, Inc. (a)5,836 324
Bristol-Myers Squibb Co. 69,081 1,674
Chiron Corp. (a)4,480 197
Eli Lilly & Co. 15,720 1,052
Forest Laboratories, Inc., Class A (a)4,310 309
Genentech, Inc. (a)2,100 222
Genzyme Corp. (a)3,900 183
Gilead Sciences, Inc. (a)1,475 82
Inamed Corp. (a)1,665 89
Johnson & Johnson 38,210 1,938
King Pharmaceuticals, Inc. (a)1,730 29
Medimmune, Inc. (a)2,970 69
Merck & Co., Inc. 23,800 1,052
Pfizer, Inc. 116,121 4,070
Roche Holding Ltd. ADR (a)5,420 529
Schering-Plough Corp. 43,620 708
Teva Pharmaceutical Industries Ltd. ADR 3,300 209
Wyeth 18,767 705
- ---------------------------------------------------------------------------------------------------
15,980
===================================================================================================
REAL ESTATE (0.2%)
Equity Office Properties Trust REIT 9,410 272
Equity Residential Property Trust REIT 7,300 218
- ---------------------------------------------------------------------------------------------------
490
===================================================================================================
RETAILING (1.4%)
AutoZone, Inc. (a)50 4
Bed Bath & Beyond, Inc. (a)3,700 154
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
58
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------------------------------
RETAILING (CONT'D)
Chico's FAS, Inc. (a)4,131 $ 192
CVS Corp. 4,320 152
eBay, Inc. (a)7,440 516
Family Dollar Stores, Inc. 50 2
Federated Department Stores, Inc. 50 3
Home Depot, Inc. 7,940 297
InterActiveCorp. (a)21,100 666
Kohl's Corp. (a)4,780 231
Lowe's Cos., Inc. 5,450 306
Petsmart, Inc. 8,900 243
RadioShack Corp. 50 2
Sherwin-Williams Co. (The) 50 2
Staples, Inc. (a)5,250 133
Target Corp. 9,978 449
Tiffany & Co. 3,409 130
TJX Cos., Inc. 4,650 114
- ---------------------------------------------------------------------------------------------------
3,596
===================================================================================================
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.9%)
Advanced Micro Devices, Inc. (a)6,922 112
Altera Corp. (a)9,729 199
Analog Devices, Inc. 12,592 605
Applied Materials, Inc. (a)22,738 486
Broadcom Corp., Class A (a)5,020 197
Intel Corp. 63,900 1,738
KLA-Tencor Corp. (a)1,310 66
Linear Technology Corp. 9,408 348
LSI Logic Corp. (a)2,460 23
Marvell Technology Group Ltd. (a)4,800 216
Maxim Integrated Products, Inc. 1,914 90
Micron Technology, Inc. (a)3,236 54
National Semiconductor Corp. (a)1,253 56
Novellus Systems, Inc. (a)928 30
Teradyne, Inc. (a)1,055 25
Texas Instruments, Inc. 24,478 715
Xilinx, Inc. (a)2,060 78
- ---------------------------------------------------------------------------------------------------
5,038
===================================================================================================
SOFTWARE & SERVICES (3.6%)
Accenture Ltd., Class A (a)21,750 539
Adobe Systems, Inc. 6,638 262
Automatic Data Processing, Inc. 11,121 467
BMC Software, Inc. (a)4,677 91
Citrix Systems, Inc. (a)941 20
Computer Associates International, Inc. 10,275 276
Computer Sciences Corp. (a)3,719 150
Electronic Arts, Inc. (a)5,692 307
Electronic Data Systems Corp. 4,009 78
First Data Corp. 14,717 621
Fiserv, Inc. (a)1,642 59
Intuit, Inc. (a)1,621 73
Mercury Interactive Corp. (a)7,420 332
Microsoft Corp. 156,005 3,896
NCR Corp. (a)504 22
Novell, Inc. (a)3,000 $ 34
Oracle Corp. (a)58,801 706
Paychex, Inc. 3,312 118
Peoplesoft, Inc. (a)3,180 59
Red Hat, Inc. (a)9,200 210
Sabre Holdings Corp., Class A 931 23
Siebel Systems, Inc. (a)4,939 57
SunGard Data Systems, Inc. (a)2,272 62
Symantec Corp. (a)2,700 125
Unisys Corp. (a)2,843 41
VERITAS Software Corp. (a)8,857 238
Yahoo!, Inc. (a)17,639 857
- ---------------------------------------------------------------------------------------------------
9,723
===================================================================================================
TECHNOLOGY, HARDWARE & EQUIPMENT (2.8%)
Agilent Technologies, Inc. (a)2,718 86
Amphenol Corp., Class A (a)6,600 196
Apple Computer, Inc. (a)2,120 57
Avaya, Inc. (a)1,956 31
Cisco Systems, Inc. (a)83,824 1,972
Corning, Inc. (a)6,725 75
Dell, Inc. (a)28,019 942
EMC Corp. (a)30,150 410
Hewlett-Packard Co. 30,744 702
International Business Machines Corp. 8,415 773
Jabil Circuit, Inc. (a)952 28
JDS Uniphase Corp. (a)9,366 38
Juniper Networks, Inc. (a)8,300 216
Lexmark International, Inc. (a)815 75
Lucent Technologies, Inc. (a)18,736 77
Motorola, Inc. 23,212 409
Network Appliance, Inc. (a)8,729 187
Nokia Oyj ADR, Class A 19,500 396
QLogic Corp. (a)657 22
Qualcomm, Inc. 8,462 562
Sanmina-SCI Corp. (a)1,148 13
Scientific-Atlanta, Inc. 1,189 38
Solectron Corp. (a)4,649 26
Sun Microsystems, Inc. (a)19,034 79
Thermo Electron Corp. (a)962 27
Waters Corp. (a)740 30
Xerox Corp. (a)4,654 68
- ---------------------------------------------------------------------------------------------------
7,535
===================================================================================================
TELECOMMUNICATION SERVICES (2.9%)
Alltel Corp. 6,200 310
AT&T Corp. 14,385 282
AT&T Wireless Services, Inc. (a)61,000 830
BellSouth Corp. 33,650 932
CenturyTel, Inc. 3,100 85
Nextel Communications, Inc., Class A (a)19,050 471
Qwest Communications International, Inc. (a)31,150 134
SBC Communications, Inc. 66,550 1,633
Sprint Corp. (FON Group) 37,400 689
Sprint Corp. (PCS Group) (a)19,250 177
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
59
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (CONT'D)
Verizon Communications, Inc. 63,240 $ 2,311
- ---------------------------------------------------------------------------------------------------
7,854
===================================================================================================
TRANSPORTATION (0.8%)
Burlington Northern Santa Fe Corp. 2,400 76
C.H. Robinson Worldwide, Inc. 4,785 199
CSX Corp. 1,650 50
FedEx Corp. 1,950 147
Norfolk Southern Corp. 22,610 499
Southwest Airlines Co. 5,450 77
Union Pacific Corp. 6,710 401
United Parcel Service, Inc., Class B 10,700 747
- ---------------------------------------------------------------------------------------------------
2,196
===================================================================================================
UTILITIES (0.7%)
AES Corp. (The) (a)1,300 11
Ameren Corp. 200 9
American Electric Power Co., Inc. 950 31
Cinergy Corp. 350 14
Consolidated Edison, Inc. 4,250 187
Constellation Energy Group, Inc. 400 16
Dominion Resources, Inc. 650 42
DTE Energy Co. 200 8
Duke Energy Corp. 1,800 41
Edison International Ltd. 9,130 222
Entergy Corp. 5,370 319
Exelon Corp. 4,760 328
FirstEnergy Corp. 7,180 281
FPL Group, Inc. 400 27
KeySpan Corp. 400 15
Kinder Morgan, Inc. 300 19
Nisource, Inc. 550 12
PG&E Corp. (a)700 20
PPL Corp. 400 18
Progress Energy, Inc. 500 24
Public Service Enterprise Group, Inc. 500 23
Sempra Energy Co. 500 16
Southern Co. (The) 850 26
TXU Corp. 550 16
Williams Cos., Inc. 1,100 11
Xcel Energy, Inc. 700 12
- ---------------------------------------------------------------------------------------------------
1,748
===================================================================================================
TOTAL COMMON STOCKS (COST $120,301) 152,460
===================================================================================================
MUTUAL FUNDS (8.7%)
iShares MSCI Emerging Markets Index Fund 36,500 6,406
iShares MSCI EMU Index Fund 70,700 4,303
iShares MSCI Hong Kong Index Fund 238,250 2,525
iShares MSCI Japan Index Fund 790,700 8,595
iShares S&P Europe 350 Index Fund 20,350 1,323
- ---------------------------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS (COST $17,418) 23,152
===================================================================================================
PREFERRED STOCK (0.1%)
MORTGAGES -- OTHER (0.1%)
Home Ownership Funding Corp.
13.331% (COST $245) (e)500 240
- ---------------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
STRUCTURED INVESTMENT (0.0%)
Morgan Guaranty Trust Co., 11/20/05; monthly
payments equal to 1% per annum of the
outstanding notional balance indexed to GNMA
ARM pools (COST $374) $ 1,362 $ 10
===================================================================================================
SHORT-TERM INVESTMENTS (12.1%)
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED
SECURITIES (2.5%)
American Express Credit Corp.
1.10%, 5/17/04 (h)59 59
Beta Finance, Inc.
1.08%, 6/16/04 (h)275 275
Canadian Imperial Bank N.Y.
1.11%, 8/3/04 (h)98 98
Chase Credit Card Master Trust
1.10%, 4/15/04 (h)79 79
CIC N.Y.
1.11%, 7/30/04 98 98
CIT Group Holdings
1.12%, 9/20/04 (h)73 73
Credit Agricole Indosuez S.A., N.Y.
1.07%, 3/4/05 (h)283 283
Credit Suisse First Boston, N.Y.
1.04%, 4/2/04 177 177
Dresdner Bank, N.Y.
1.05%, 4/20/04 196 196
Federal National Mortgage Association
1.13%, 4/14/04 87 87
Jackson National Life Global Funding
1.06%, 1/18/05 (h)99 99
Landesbank Hessen-Thueringen, London
1.50%, 11/19/04 98 98
Links Finance LLC
1.08%, 6/16/04 (h)98 98
1.09%, 5/24/04 (h)157 157
Macquarie Bank Ltd.
1.18%, 6/24/04 (h)86 86
Natexis Banques Populaires, N.Y.
1.21%, 12/20/04 (h)157 157
Nationwide Building Society
1.12%, 3/31/05 (h)228 228
Sears Credit Card Account Master
1.12%, 10/15/04 (h)157 157
Societe Generale, London
1.54%, 11/12/04 98 98
Societe Generale, N.Y.
1.07%, 3/3/05 (h)190 190
Target Credit Card Master Trust
1.12%, 7/26/04 (h)155 155
UBS Securities LLC
1.06%, 4/1/04 3,092 3,092
Union Bank of Switzerland, Stamford
1.13%, 12/20/04 196 196
Wachovia Bank NA
1.13%, 11/15/04 (h)196 196
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
60
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
<Table>
<Caption>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES HELD AS COLLATERAL ON LOANED
SECURITIES (CONT'D)
Westdeutsche Landesbank, N.Y.
1.09%, 11/29/04 $ (h)192 $ 192
- ---------------------------------------------------------------------------------------------------
6,624
===================================================================================================
DISCOUNT NOTES (3.5%)
Federal Home Loan Bank
0.98%, 4/23/04 3,500 3,498
Federal National Mortgage Association
0.99%, 6/2/04 3,000 2,995
1.02%, 4/21/04 3,000 2,998
- ---------------------------------------------------------------------------------------------------
9,491
===================================================================================================
REPURCHASE AGREEMENT (5.8%)
J.P. Morgan Securities, Inc.,
0.97%, dated 3/31/04, due 4/1/04,
repurchase price $15,438 (f)15,438 15,438
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES (0.3%)
U.S. Treasury Bills
0.98%, 9/23/04 (j)830 826
- ---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $32,379) 32,379
===================================================================================================
TOTAL INVESTMENTS (111.7%) (COST $259,746) --
INCLUDING $12,131 OF SECURITIES LOANED 298,446
- ---------------------------------------------------------------------------------------------------
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS (4.4%)
Cash 12
Receivable for Forward Commitments 6,783
Receivable for Investments Sold 2,684
Due from Broker 1,433
Interest Receivable 571
Dividends Receivable 215
Other 9 11,707
- ---------------------------------------------------------------------------------------------------
LIABILITIES (-16.1%)
Payable for Forward Commitments (31,684)
Collateral on Securities Loaned, at Value (6,624)
Payable for Investments Purchased (2,844)
Net Unrealized Depreciation on Swap
Agreements (721)
Interest Payable for Swap Agreements (411)
Payable for Investment Advisory Fees (311)
Net Unrealized Depreciation on Foreign
Currency Exchange Contracts (264)
Payable for Administrative Fees (25)
Payable for Custodian Fees (18)
Payable for Trustees' Fees and Expenses (13)
Payable for Distribution Fees -- Adviser Class (13)
Payable for Shareholder Servicing Fees --
Investment Class (1)
Other Liabilities (21) (42,950)
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 267,203
===================================================================================================
<Caption>
AMOUNT
(000)
- ---------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in Capital $ 319,628
Undistributed (Distributions in Excess of) Net
Investment Income 443
Accumulated Net Realized Gain (Loss) (90,626)
Unrealized Appreciation (Depreciation) on:
Investments 38,700
Foreign Currency Exchange Contracts and Translations (264)
Futures Contracts 43
Swap Agreements (721)
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 267,203
===================================================================================================
INSTITUTIONAL CLASS:
NET ASSETS $ 204,435
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 18,532,112 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.03
===================================================================================================
INVESTMENT CLASS:
NET ASSETS $ 3,020
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 274,180 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.01
===================================================================================================
ADVISER CLASS:
NET ASSETS $ 59,748
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 5,425,608 outstanding shares of beneficial
interest (unlimited authorization, no par value) $ 11.01
===================================================================================================
</Table>
(a) Non-income producing security
(b) Issuer is in default.
(c) All or a portion of security on loan at March 31, 2004.
(d) Security was valued at fair value -- At March 31, 2004, the Portfolio
held less than $500 of fair valued securities, representing less than
0.05% of net assets.
(e) 144A security -- certain conditions for public sale may exist.
(f) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated parties.
(g) Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of March 31, 2004. Maturity date disclosed is the
ultimate maturity date.
(h) Variable/Floating Rate Security -- interest rate changes on these
instruments are based on changes in a designated base rate. The rates
shown are those in effect on March 31, 2004.
(i) Security is subject to delayed delivery.
(j) All or a portion of the security was pledged to cover margin
requirements for futures contracts.
@ Value/Face Amount is less than $500.
ADR American Depositary Receipt
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
61
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
BALANCED PORTFOLIO
Inv Fl Inverse Floating Rate -- Interest rate fluctuates with an inverse
relationship to an associated interest rate. Indicated rate is the
effective rate at March 31, 2004.
IO Interest Only
PO Principal Only
PAC Planned Amortization Class
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
TBA To be announced
================================================================================
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Portfolio had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- ---------------------------------------------------------------------------------------
EUR 112 $ 138 4/26/04 US$ 142 $ 142 $ 4
EUR 118 145 4/26/04 US$ 149 149 4
US$ 13,856 13,856 12/13/04 CNY 109,282 13,592 (264)
US$ 6,919 6,919 6/17/04 EUR 5,621 6,911 (8)
------- ------- ------
$21,058 $20,794 $(264)
======= ======= ======
=======================================================================================
</Table>
CNY -- Chinese RenMinBi
EUR -- Euro
US$ -- U.S. Dollar
================================================================================
FUTURES CONTRACTS:
The Portfolio had the following futures contract(s) open at period end:
<Table>
<Caption>
NET
UNREALIZED
NUMBER APPRECIATION
OF VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
- --------------------------------------------------------------------------------------------
LONG:
British Pound
Long Gilt 27 $ 5,422 Jun - 04 $ 22
S&P 500 Index 25 1,406 Jun - 04 8
U.S. Treasury
2 yr. Note 8 1,721 Jun - 04 11
U.S. Treasury
10 yr. Note 113 13,041 Jun - 04 205
U.S. Treasury
Long Bond 37 4,220 Jun - 04 95
SHORT:
S&P 500 Index 10 2,812 Jun - 04 (27)
U.S. Treasury
5 yr. Note 147 16,694 Jun - 04 (271)
-------
$ 43
=======
=========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
62
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2004
<Table>
<Caption>
CORE PLUS INVESTMENT U.S. CORE
FIXED GRADE FIXED FIXED CASH
INCOME INCOME INCOME RESERVES HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 1,127 $ 125 $ 52 $ -- $ 155
Interest 50,917 9,360 4,871 675 14,304
- -----------------------------------------------------------------------------------------------------------------------------
Total Investment Income 52,044 9,485 4,923 675 14,459
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 5,147 1,048 529 161 782
Administrative Fees 1,222 255 131 61 156
Custodian Fees 120 34 20 7 19
Shareholder Reporting Fees 88 18 9 4 15
Professional Fees 85 27 16 9 25
Shareholder Servicing Fees -- Investment Class Shares 89 -- -- 9 1
Distribution Fees -- Adviser Class Shares 204 2 12 -- 17
Trustees' Fees and Expenses 49 9 4 2 9
Other Expenses 74 35 27 11 52
- -----------------------------------------------------------------------------------------------------------------------------
Total Expenses 7,078 1,428 748 264 1,076
- -----------------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees -- -- (32) (50) --
Waiver of Distribution Fees -- Adviser Class Shares -- (1) -- -- --
Expense Offset (1) @-- @-- @-- @--
- -----------------------------------------------------------------------------------------------------------------------------
Net Expenses 7,077 1,427 716 214 1,076
- -----------------------------------------------------------------------------------------------------------------------------
Net Investment Income 44,967 8,058 4,207 461 13,383
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS):
Investments Sold 51,235 8,632 10,051 -- (17,895)
Foreign Currency Transactions (1,608) (180) -- -- (836)
Futures Contracts 10,683 1,328 (1,013) -- (788)
Swap Agreements (19,199) (2,107) (535) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 41,111 7,673 8,503 -- (19,519)
- -----------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments (2,624) 586 (5,066) -- 29,107
Foreign Currency Exchange Contracts and Translations 948 170 -- -- 837
Futures Contracts (7,803) (8) 1,466 -- 507
Swap Agreements 8,580 (803) (1,325) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation (Depreciation) (899) (55) (4,925) -- 30,451
- -----------------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain (Loss) and Change in Unrealized
Appreciation (Depreciation) 40,212 7,618 3,578 -- 10,932
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations $ 85,179 $15,676 $ 7,785 $461 $ 24,315
=============================================================================================================================
</Table>
@ Amount is less than $500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
63
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2004
<Table>
<Caption>
INTERNATIONAL
INTERMEDIATE FIXED LIMITED
DURATION INCOME DURATION MUNICIPAL BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 11 $ -- $ 31 $ 64 $ 1,733
Interest 2,181 2,030 10,023 5,923 1,986
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 2,192 2,030 10,054 5,987 3,719
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 229 237 1,121 666 699
Administrative Fees 58 59 336 162 141
Custodian Fees 10 12 33 14 54
Shareholder Reporting Fees 6 25 30 13 13
Professional Fees 12 17 19 15 19
Shareholder Servicing Fees -- Investment Class Shares 75 -- -- -- 6
Distribution Fees -- Adviser Class Shares -- -- -- -- 79
Trustees' Fees and Expenses 1 1 6 3 5
Other Expenses 15 20 30 28 30
- ------------------------------------------------------------------------------------------------------------------------------
Total Expenses 406 371 1,575 901 1,046
- ------------------------------------------------------------------------------------------------------------------------------
Waiver of Investment Advisory Fees -- -- -- (14) --
Expense Offset @-- @-- @-- @-- @--
- ------------------------------------------------------------------------------------------------------------------------------
Net Expenses 406 371 1,575 887 1,046
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 1,786 1,659 8,479 5,100 2,673
- ------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN (LOSS):
Investments Sold 1,243 164 2,202 765 13,949
Foreign Currency Transactions (51) 3,907 -- -- 557
Futures Contracts 316 483 (5,073) (1,431) 1,003
Swap Agreements 55 -- -- 2,448 (417)
- ------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 1,563 4,554 (2,871) 1,782 15,092
- ------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments (754) 4,674 2,162 3,456 15,122
Foreign Currency Exchange Contracts and Translations 30 (478) -- -- (353)
Futures Contracts 292 (166) 1,278 1,840 (1,196)
Swap Agreements (91) -- -- (3,278) 30
- ------------------------------------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation (Depreciation) (523) 4,030 3,440 2,018 13,603
- ------------------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain (Loss) and Change in
Unrealized Appreciation (Depreciation) 1,040 8,584 569 3,800 28,695
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations $2,826 $10,243 $ 9,048 $ 8,900 $31,368
==============================================================================================================================
</Table>
@ Amount is less than $500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
64
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
CORE PLUS FIXED INVESTMENT GRADE FIXED
INCOME PORTFOLIO INCOME PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER ENDED MARCH SEPTEMBER
31, 2004 30, 31, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 44,967 $ 124,905 $ 8,058 $ 16,801
Net Realized Gain (Loss) 41,111 42,296 7,673 6,557
Net Change in Unrealized Appreciation (Depreciation) (899) 59,284 (55) 4,539
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 85,179 226,485 15,676 27,897
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (67,111) (200,533) (11,920) (26,826)
Net Realized Gain -- (46,124) -- (2,546)
INVESTMENT CLASS:
Net Investment Income (2,974) (5,569) -- --
Net Realized Gain -- (1,212) -- --
ADVISER CLASS:
Net Investment Income (4,460) (11,373) (29) (75)
Net Realized Gain -- (2,483) -- (7)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (74,545) (267,294) (11,949) (29,454)
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 237,093 520,310 106,484 182,446
Distributions Reinvested 61,852 229,294 11,494 27,471
Redeemed (660,469) (1,993,910) (144,400) (195,027)
INVESTMENT CLASS:
Subscribed 4,427 38,555 -- --
Distributions Reinvested 2,954 6,711 -- --
Redeemed (775) (13,603) -- --
ADVISER CLASS:
Subscribed 11,200 65,072 1 526
Distributions Reinvested 3,906 12,057 26 74
Redeemed (85,505) (64,143) (187) (725)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Capital Share Transactions (425,317) (1,199,657) (26,582) 14,765
- ----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (414,683) (1,240,466) (22,855) 13,208
NET ASSETS:
Beginning of Period 2,926,222 4,166,688 571,174 557,966
- ----------------------------------------------------------------------------------------------------------------------
End of Period $2,511,539 $2,926,222 $548,319 $ 571,174
======================================================================================================================
Undistributed (Distributions in Excess of) Net Investment
Income Included in End of Period Net Assets $ 10,704 $ 40,282 $ 2,355 $ 6,246
======================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 20,377 45,833 9,267 15,970
Shares Issued on Distributions Reinvested 5,339 19,879 1,005 2,413
Shares Redeemed (56,683) (172,303) (12,583) (17,065)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class Shares
Outstanding (30,967) (106,591) (2,311) 1,318
======================================================================================================================
INVESTMENT CLASS:
Shares Subscribed 382 3,315 -- --
Shares Issued on Distributions Reinvested 255 582 -- --
Shares Redeemed (66) (1,167) -- --
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class Shares Outstanding 571 2,730 -- --
======================================================================================================================
ADVISER CLASS:
Shares Subscribed 959 5,612 #-- 46
Shares Issued on Distributions Reinvested 337 1,044 2 6
Shares Redeemed (7,362) (5,538) (16) (63)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares Outstanding (6,066) 1,118 (14) (11)
======================================================================================================================
</Table>
# Share amount is less than 500.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
65
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
U.S. CORE FIXED CASH RESERVES
INCOME PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER ENDED MARCH SEPTEMBER
31, 2004 30, 31, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 4,207 $ 9,577 $ 461 $ 1,432
Net Realized Gain (Loss) 8,503 1,461 -- --
Net Change in Unrealized Appreciation (Depreciation) (4,925) 4,173 -- --
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations 7,785 15,211 461 1,432
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (7,553) (14,550) (427) (1,375)
Net Realized Gain -- (5,576) -- --
INVESTMENT CLASS:
Net Investment Income -- -- (33) (57)
ADVISER CLASS:
Net Investment Income (222) (456) -- --
Net Realized Gain -- (191) -- --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (7,775) (20,773) (460) (1,432)
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 49,809 72,540 74,961 165,946
Distributions Reinvested 7,491 20,065 487 1,374
Redeemed (171,079) (77,733) (181,359) (213,361)
INVESTMENT CLASS:
Subscribed -- -- 28,849 114,112
Distributions Reinvested -- -- 31 57
Redeemed -- -- (25,730) (111,325)
ADVISER CLASS:
Subscribed 1,629 5,426 -- --
Distributions Reinvested 222 647 -- --
Redeemed (3,218) (4,362) -- --
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Capital
Share Transactions (115,146) 16,583 (102,761) (43,197)
- ----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (115,136) 11,021 (102,760) (43,197)
NET ASSETS:
Beginning of Period 330,621 319,600 135,962 179,159
- ----------------------------------------------------------------------------------------------------------------------
End of Period $ 215,485 $330,621 $ 33,202 $ 135,962
======================================================================================================================
Undistributed (Distributions in Excess of) Net
Investment Income Included in End of
Period Net Assets $ 320 $ 3,888 $ 14 $ 13
======================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 4,451 6,465 74,961 165,937
Shares Issued on Distributions Reinvested 673 1,799 487 1,374
Shares Redeemed (15,306) (6,940) (181,358) (213,352)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding (10,182) 1,324 (105,910) (46,041)
======================================================================================================================
INVESTMENT CLASS:
Shares Subscribed -- -- 28,849 114,112
Shares Issued on Distributions Reinvested -- -- 31 57
Shares Redeemed -- -- (25,730) (111,325)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class
Shares Outstanding -- -- 3,150 2,844
======================================================================================================================
ADVISER CLASS:
Shares Subscribed 146 484 -- --
Shares Issued on Distributions Reinvested 20 58 -- --
Shares Redeemed (289) (391) -- --
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares Outstanding (123) 151 -- --
======================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
66
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
HIGH YIELD INTERMEDIATE DURATION
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER ENDED MARCH SEPTEMBER
31, 2004 30, 31, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 13,383 $ 31,299 $ 1,786 $ 3,371
Net Realized Gain (Loss) (19,519) (318,721) 1,563 1,851
Net Change in Unrealized Appreciation (Depreciation) 30,451 375,610 (523) 155
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 24,315 88,188 2,826 5,377
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (12,395) (23,218) (481) (1,803)
Net Realized Gain -- -- -- (1,809)
INVESTMENT CLASS:
Net Investment Income (14) (271) (1,971) (2,651)
Net Realized Gain -- -- -- (1,833)
ADVISER CLASS:
Net Investment Income (489) (767) -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (12,898) (24,256) (2,452) (8,096)
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 162,364 335,401 865 15,472
Distributions Reinvested 11,432 18,386 446 3,514
Redeemed (239,891) (450,786) (6,570) (57,379)
INVESTMENT CLASS:
Subscribed 1,495 2,957 6,394 38,058
Distributions Reinvested 14 192 1,971 4,482
Redeemed (1,791) (9,361) (1,994) --
ADVISER CLASS:
Subscribed 8,075 17,197 -- --
Distributions Reinvested 464 719 -- --
Redeemed (10,570) (19,406) -- --
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions (68,408) (104,701) 1,112 4,147
- -----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (56,991) (40,769) 1,486 1,428
NET ASSETS:
Beginning of Period 346,255 387,024 123,432 122,004
- -----------------------------------------------------------------------------------------------------------------------
End of Period $ 289,264 $ 346,255 $ 124,918 $ 123,432
=======================================================================================================================
Undistributed (Distributions in Excess of) Net
Investment Income Included in End of Period Net
Assets $ 4,383 $ 3,898 $ (8) $ 658
=======================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 29,956 75,393 83 1,470
Shares Issued on Distributions Reinvested 2,138 4,035 43 337
Shares Redeemed (44,153) (100,320) (634) (5,486)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding (12,059) (20,892) (508) (3,679)
=======================================================================================================================
INVESTMENT CLASS:
Shares Subscribed 280 636 616 3,638
Shares Issued on Distributions Reinvested 3 44 190 431
Shares Redeemed (330) (1,992) (192) --
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class Shares
Outstanding (47) (1,312) 614 4,069
=======================================================================================================================
ADVISER CLASS:
Shares Subscribed 1,489 3,454 -- --
Shares Issued on Distributions Reinvested 87 158 -- --
Shares Redeemed (1,947) (3,984) -- --
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares
Outstanding (371) (372) -- --
=======================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
67
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
INTERNATIONAL FIXED LIMITED DURATION
INCOME PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER ENDED MARCH SEPTEMBER
31, 2004 30, 31, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,659 $ 3,762 $ 8,479 $ 11,529
Net Realized Gain (Loss) 4,554 6,596 (2,871) 3,476
Net Change in Unrealized Appreciation (Depreciation) 4,030 10,486 3,440 (1,362)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 10,243 20,844 9,048 13,643
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (16,119) -- (8,943) (13,320)
Net Realized Gain -- -- (1,611) (2,201)
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (16,119) -- (10,554) (15,521)
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 49,722 85,143 321,813 420,236
Distributions Reinvested 15,868 -- 10,434 15,258
Redeemed (31,094) (85,529) (106,787) (240,752)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 34,496 (386) 225,460 194,742
- -----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 28,620 20,458 223,954 192,864
NET ASSETS:
Beginning of Period 114,932 94,474 622,801 429,937
- -----------------------------------------------------------------------------------------------------------------------
End of Period $ 143,552 $ 114,932 $ 846,755 $ 622,801
=======================================================================================================================
Undistributed (Distributions in Excess of) Net
Investment Income Included in End of Period Net
Assets $ (5,900) $ 8,560 $ 942 $ 1,406
=======================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 4,335 7,868 30,320 39,415
Shares Issued on Distributions Reinvested 1,449 -- 984 1,433
Shares Redeemed (2,710) (7,785) (10,061) (22,586)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding 3,074 83 21,243 18,262
=======================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
68
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
MUNICIPAL BALANCED
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER ENDED MARCH SEPTEMBER
31, 2004 30, 31, 2004 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 5,100 $ 11,588 $ 2,673 $ 6,668
Net Realized Gain (Loss) 1,782 (4,113) 15,092 (7,314)
Net Change in Unrealized Appreciation (Depreciation) 2,018 4,375 13,603 55,835
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations 8,900 11,850 31,368 55,189
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
INSTITUTIONAL CLASS:
Net Investment Income (6,215) (10,489) (3,320) (8,260)
INVESTMENT CLASS:
Net Investment Income -- -- (98) (175)
ADVISER CLASS:
Net Investment Income -- -- (687) (1,682)
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (6,215) (10,489) (4,105) (10,117)
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Subscribed 118,124 195,711 18,617 50,960
Distributions Reinvested 5,125 8,847 3,317 8,255
Redeemed (68,975) (137,177) (101,880) (83,174)
INVESTMENT CLASS:
Subscribed -- -- 540 3,117
Distributions Reinvested -- -- 98 175
Redeemed -- -- (6,595) (874)
ADVISER CLASS:
Subscribed -- -- 6,323 7,962
Distributions Reinvested -- -- 687 1,682
Redeemed -- -- (11,590) (10,234)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Capital Share Transactions 54,274 67,381 (90,483) (22,131)
- -----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 56,959 68,742 (63,220) 22,941
NET ASSETS:
Beginning of Period 313,999 245,257 330,423 307,482
- -----------------------------------------------------------------------------------------------------------------------
End of Period $ 370,958 $ 313,999 $ 267,203 $ 330,423
=======================================================================================================================
Undistributed (Distributions in Excess of) Net
Investment Income Included in End of Period Net
Assets $ 171 $ 1,286 $ 443 $ 1,875
=======================================================================================================================
(1) CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL CLASS:
Shares Subscribed 9,384 15,801 1,750 5,323
Shares Issued on Distributions Reinvested 408 714 314 897
Shares Redeemed (5,464) (11,084) (9,443) (8,860)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Institutional Class
Shares Outstanding 4,328 5,431 (7,379) (2,640)
=======================================================================================================================
INVESTMENT CLASS:
Shares Subscribed -- -- 51 320
Shares Issued on Distributions Reinvested -- -- 9 19
Shares Redeemed -- -- (596) (91)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Investment Class Shares
Outstanding -- -- (536) 248
=======================================================================================================================
ADVISER CLASS:
Shares Subscribed -- -- 586 845
Shares Issued on Distributions Reinvested -- -- 65 183
Shares Redeemed -- -- (1,074) (1,081)
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Adviser Class Shares
Outstanding -- -- (423) (53)
=======================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
69
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2004
<Table>
<Caption>
CORE PLUS INVESTMENT U.S. CORE
FIXED GRADE FIXED FIXED
INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Proceeds from Sales and Maturities of Investments $ 2,532,932 $ 378,007 $ 356,731
Purchases of Investments (1,598,895) (283,867) (157,189)
Net (Increase) Decrease in Short-Term Investments 162,957 46,841 18,238
Net Realized Gain (Loss) on Foreign Currency Transactions (1,608) (180) --
Net Realized Gain (Loss) on Futures Contracts 10,683 1,328 (1,013)
Net Realized Gain (Loss) on Swap Agreements (19,199) (2,107) (535)
Net Investment Income 44,967 8,058 4,207
ADJUSTMENTS TO RECONCILE NET INVESTMENT INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net (Increase) Decrease in Receivables Related to Operations 5,520 154 863
Net Increase (Decrease) in Payables Related to Operations 2,129 2,074 61
Accretion/Amortization of Discounts and Premiums (427) (151) 12
- -------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) in Operating Activities 1,139,059 150,157 221,375
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Portfolio Shares Sold 254,536 107,547 51,885
Payment on Portfolio Shares Redeemed (797,134) (144,699) (174,334)
Proceeds from sales of Forward Commitments 4,522,747 899,734 490,819
Purchases of Forward Commitments (5,111,603) (1,012,129) (588,184)
Cash Dividends and Distributions Paid (5,833) (429) (62)
- -------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities (1,137,287) (149,976) (219,876)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash 1,772 181 1,499
CASH AT BEGINNING OF PERIOD (1,011) (181) (124)
- -------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 761 $ -- $ 1,375
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
70
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2004
<Table>
<Caption>
INTERMEDIATE LIMITED
DURATION DURATION MUNICIPAL BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Proceeds from Sales and Maturities of Investments $ 80,322 $ 235,540 $ 72,578 $ 262,203
Purchases of Investments (49,606) (468,612) (121,621) (190,518)
Net (Increase) Decrease in Short-Term Investments (6,581) 47,615 (7,401) 22,510
Net Realized Gain (Loss) on Foreign Currency Transactions (51) -- -- 557
Net Realized Gain (Loss) on Futures Contracts 316 (5,073) (1,431) 1,003
Net Realized Gain (Loss) on Swap Agreements 55 -- 2,448 (417)
Net Investment Income 1,786 8,479 5,100 2,673
ADJUSTMENTS TO RECONCILE NET INVESTMENT INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net (Increase) Decrease in Receivables Related to
Operations (7) (2,432) 169 191
Net Increase (Decrease) in Payables Related to Operations (30) 162 741 18
Accretion/Amortization of Discounts and Premiums 115 5,779 (440) 66
- -------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) in Operating Activities 26,319 (178,542) (49,857) 98,286
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Portfolio Shares Sold 7,497 323,000 119,923 25,593
Payment on Portfolio Shares Redeemed (8,602) (107,178) (69,829) (120,552)
Proceeds from sales of Forward Commitments 103,864 411,061 175,502 157,255
Purchases of Forward Commitments (129,078) (448,353) (174,653) (160,553)
Cash Dividends and Distributions Paid (35) (120) (1,090) (3)
- -------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities (26,354) 178,410 49,853 (98,260)
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash (35) (132) (4) 26
CASH AT BEGINNING OF PERIOD 73 133 25 (14)
- -------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 38 $ 1 $ 21 $ 12
- -------------------------------------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
71
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 ----------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.71 $ 11.82 $ 11.84
===========================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.02+ 0.40+ 0.55+
Net Realized and Unrealized Gain (Loss) on Investments 0.35 0.31 0.17
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.37 0.71 0.72
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.31) (0.67) (0.74)
Net Realized Gain -- (0.15) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.82) (0.74)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.77 $ 11.71 $ 11.82
===========================================================================================================
TOTAL RETURN 3.23%++ 6.24% 6.30%
===========================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 2,248,786 $ 2,600,453 $ 3,883,346
Ratio of Expenses to Average Net Assets (1) 0.49%* 0.50% 0.50%
Ratio of Net Investment Income to Average Net Assets (1) 3.30%* 3.39% 4.69%
Portfolio Turnover Rate 176%++^ 92% 110%
- -----------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.49%* 0.50% 0.50%
- -----------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
---------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.25 $ 11.26 $ 12.22
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.75 0.77+ 0.77+
Net Realized and Unrealized Gain (Loss) on Investments 0.62 (0.02) (0.72)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.37 0.75 0.05
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.78) (0.76) (0.71)
Net Realized Gain -- -- (0.30)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.78) (0.76) (1.01)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.84 $ 11.25 $ 11.26
=============================================================================================================
TOTAL RETURN 12.74% 7.02% 0.33%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 4,142,009 $ 4,087,553 $ 4,338,939
Ratio of Expenses to Average Net Assets (1) 0.48% 0.48% 0.48%
Ratio of Net Investment Income to Average Net Assets (1) 6.46% 7.03% 6.62%
Portfolio Turnover Rate 111% 62% 103%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.47% 0.47% 0.47%
- -------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.71 $ 11.81 $ 11.84
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.02+ 0.37+ 0.53+
Net Realized and Unrealized Gain (Loss) on Investments 0.33 0.33 0.16
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.35 0.70 0.69
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.30) (0.65) (0.72)
Net Realized Gain -- (0.15) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.80) (0.72)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.76 $ 11.71 $ 11.81
===============================================================================================================
TOTAL RETURN 3.14%++ 6.07% 6.08%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 121,798 $ 114,509 $ 83,308
Ratio of Expenses to Average Net Assets (2) 0.64%* 0.65% 0.65%
Ratio of Net Investment Income to Average Net
Assets (2) 3.15%* 3.24% 4.54%
Portfolio Turnover Rate 176%++^ 92% 110%
- ---------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.64%* 0.65% 0.65%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.25 $ 11.27 $ 12.22
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.72 0.76+ 0.76+
Net Realized and Unrealized Gain (Loss) on Investments 0.64 (0.03) (0.72)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.36 0.73 0.04
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.77) (0.75) (0.69)
Net Realized Gain -- -- (0.30)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.77) (0.75) (0.99)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.84 $ 11.25 $ 11.27
=============================================================================================================
TOTAL RETURN 12.59% 6.84% 0.24%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 74,905 $ 63,944 $ 39,165
Ratio of Expenses to Average Net Assets (2) 0.63% 0.63% 0.63%
Ratio of Net Investment Income to Average Net
Assets (2) 6.28% 6.89% 6.50%
Portfolio Turnover Rate 111% 62% 103%
- -------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.62% 0.62% 0.62%
- -------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
72
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
CORE PLUS FIXED INCOME PORTFOLIO
<Table>
<Caption>
ADVISER CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.70 $ 11.81 $ 11.83
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.02+ 0.36+ 0.52+
Net Realized and Unrealized Gain (Loss) on Investments 0.34 0.32 0.15
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.36 0.68 0.67
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.30) (0.64) (0.69)
Net Realized Gain -- (0.15) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.79) (0.69)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.76 $ 11.70 $ 11.81
===============================================================================================================
TOTAL RETURN 3.11%++ 5.99% 6.01%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 140,955 $ 211,260 $ 200,034
Ratio of Expenses to Average Net Assets (1) 0.74%* 0.75% 0.75%
Ratio of Net Investment Income to Average Net
Assets (1) 3.05%* 3.14% 4.44%
Portfolio Turnover Rate 176%++^ 92% 110%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.74%* 0.75% 0.75%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.24 $ 11.26 $ 12.23
=========================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.71 0.75+ 0.74+
Net Realized and Unrealized Gain (Loss) on Investments 0.63 (0.02) (0.72)
- ---------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.34 0.73 0.02
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.75) (0.75) (0.69)
Net Realized Gain -- -- (0.30)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.75) (0.75) (0.99)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.83 $ 11.24 $ 11.26
=========================================================================================================
TOTAL RETURN 12.43% 6.79% 0.07%
=========================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 176,849 $ 144,754 $ 141,709
Ratio of Expenses to Average Net Assets (1) 0.73% 0.73% 0.73%
Ratio of Net Investment Income to Average Net
Assets (1) 6.20% 6.78% 6.38%
Portfolio Turnover Rate 111% 62% 103%
- ---------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.72% 0.72% 0.72%
- ---------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
73
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
INVESTMENT GRADE FIXED INCOME PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.54 $ 11.57 $ 11.32
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.17+ 0.34+ 0.47+
Net Realized and Unrealized Gain (Loss) on Investments 0.15 0.23 0.39
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.32 0.57 0.86
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.24) (0.55) (0.61)
Net Realized Gain -- (0.05) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.24) (0.60) (0.61)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.62 $ 11.54 $ 11.57
===============================================================================================================
TOTAL RETURN 2.91%++ 5.00% 7.93%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 546,889 $ 569,593 $ 556,252
Ratio of Expenses to Average Net Assets (1) 0.51%* 0.51% 0.51%
Ratio of Net Investment Income to Average Net Assets (1) 2.88%* 2.96% 4.15%
Portfolio Turnover Rate 178%++^ 81% 93%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.51%* 0.51% 0.51%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.67 $ 10.74 $ 11.69
=========================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.68 0.78 0.69
Net Realized and Unrealized Gain (Loss) on Investments 0.70 (0.12) (0.75)
- ---------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.38 0.66 (0.06)
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.73) (0.73) (0.63)
Net Realized Gain -- -- (0.26)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.73) (0.73) (0.89)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.32 $ 10.67 $ 10.74
=========================================================================================================
TOTAL RETURN 13.45% 6.48% (0.57)%
=========================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 278,657 $ 279,141 $ 384,893
Ratio of Expenses to Average Net Assets (1) 0.50% 0.49% 0.48%
Ratio of Net Investment Income to Average Net Assets (1) 6.19% 6.99% 6.20%
Portfolio Turnover Rate 89% 43% 106%
- ---------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.50% 0.48% 0.47%
- ---------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
-------------------------------------------------
SIX MONTHS YEAR MAY 20,
ENDED MARCH ENDED 2002** TO
31, 2004 SEPTEMBER SEPTEMBER
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 30, 2003 30, 2003
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.53 $ 11.57 $ 11.18
=================================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.16+ 0.32+ 0.34+
Net Realized and Unrealized Gain (Loss) on Investments 0.15 0.22 0.15
- -----------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.31 0.54 0.49
- -----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.23) (0.53) (0.10)
Net Realized Gain -- (0.05) --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.23) (0.58) (0.10)
=================================================================================================================
NET ASSET VALUE, END OF PERIOD $ 11.61 $ 11.53 $ 11.57
=================================================================================================================
TOTAL RETURN 2.74%++ 4.87% 4.40%++
=================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 1,430 $ 1,581 $ 1,714
Ratio of Expenses to Average Net Assets (2) 0.66%* 0.66% 0.66%*
Ratio of Net Investment Income to Average Net Assets (2) 2.73%* 2.81% 4.00%*
Portfolio Turnover Rate 178%++^ 81% 93%++
- -----------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Distributor:
Expenses to Average Net Assets 0.76%* N/A N/A
Net Investment Income to Average Net Assets 2.63%* N/A N/A
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.66%* 0.66% 0.66%*
- -----------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized.
** Initial offering of Adviser Class shares.
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
74
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
U.S. CORE FIXED INCOME PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.26 $ 11.46 $ 11.15
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.17+ 0.32+ 0.44+
Net Realized and Unrealized Gain (Loss) on Investments 0.14 0.19 0.42
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.31 0.51 0.86
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.26) (0.51) (0.55)
Net Realized Gain -- (0.20) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.26) (0.71) (0.55)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.31 $ 11.26 $ 11.46
===============================================================================================================
TOTAL RETURN 2.84%++ 4.61% 7.98%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 206,244 $ 320,036 $ 310,546
Ratio of Expenses to Average Net Assets (1) 0.50%* 0.50% 0.50%
Ratio of Net Investment Income to Average Net Assets (1) 2.98%* 2.82% 3.89%
Portfolio Turnover Rate 191%++^ 109% 86%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.52%* 0.51% 0.53%
Net Investment Income to Average Net Assets 2.96%* 2.81% 3.86%
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.50%* 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.46 $ 10.55 $ 11.40
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.65+ 0.71+ 0.71
Net Realized and Unrealized Gain (Loss) on Investments 0.73 (0.12) (0.83)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.38 0.59 (0.12)
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.69) (0.68) (0.52)
Net Realized Gain -- -- (0.21)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.68) (0.73)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.15 $ 10.46 $ 10.55
=============================================================================================================
TOTAL RETURN 13.68% 5.88% (1.12)%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 195,467 $ 181,884 $ 189,860
Ratio of Expenses to Average Net Assets (1) 0.51% 0.51% 0.51%
Ratio of Net Investment Income to Average Net Assets (1) 6.04% 6.86% 6.09%
Portfolio Turnover Rate 86% 51% 115%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets N/A 0.51% N/A
Net Investment Income to Average Net Assets N/A 6.85% N/A
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.50% 0.50% 0.49%
- -------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 -------------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.22 $ 11.42 $ 11.10
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.15+ 0.29+ 0.41+
Net Realized and Unrealized Gain (Loss) on Investments 0.14 0.19 0.43
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.29 0.48 0.84
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.25) (0.48) (0.52)
Net Realized Gain -- (0.20) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.25) (0.68) (0.52)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.26 $ 11.22 $ 11.42
===============================================================================================================
TOTAL RETURN 2.73%++ 4.28% 7.85%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 9,241 $ 10,585 $ 9,054
Ratio of Expenses to Average Net Assets (2) 0.75%* 0.75% 0.75%
Ratio of Net Investment Income to Average Net Assets (2) 2.73%* 2.57% 3.64%
Portfolio Turnover Rate 191%++^ 109% 86%
- ---------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.77%* 0.76% 0.78%
Net Investment Income to Average Net Assets 2.71%* 2.56% 3.61%
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.75%* 0.75% 0.75%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
-----------------------------------------------
YEAR ENDED SEPTEMBER 30, PERIOD FROM
-------------------------- MARCH 1, 1999** TO
SELECTED PER SHARE DATA AND RATIOS 2001 2000 SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.43 $ 10.53 $ 10.85
==============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.62+ 0.68+ 0.39
Net Realized and Unrealized Gain (Loss) on Investments 0.72 (0.11) (0.43)
- --------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.34 0.57 (0.04)
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.67) (0.67) (0.28)
Net Realized Gain -- -- --
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.67) (0.67) (0.28)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.10 $ 10.43 $ 10.53
==============================================================================================================
TOTAL RETURN 13.29% 5.68% (0.40)%++
==============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 4,635 $ 1,625 $ 1,192
Ratio of Expenses to Average Net Assets (2) 0.75% 0.76% 0.75%*
Ratio of Net Investment Income to Average Net Assets (2) 5.72% 6.61% 6.73%*
Portfolio Turnover Rate 86% 51% 115%++
- --------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets N/A 0.76% N/A*
Net Investment Income to Average Net Assets N/A 6.60% N/A*
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.75% 0.75% 0.74%*
- --------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
++ Not Annualized
* Annualized
** Initial offering of Adviser Class shares.
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
75
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
CASH RESERVES PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
===============================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.004 0.010 0.018
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.004) (0.010) (0.018)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
===============================================================================================================
TOTAL RETURN 0.36%++ 1.02% 1.79%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 22,186 $ 128,097 $ 174,138
Ratio of Expenses to Average Net Assets (1) 0.32%* 0.32% 0.33%
Ratio of Net Investment Income to Average Net Assets (1) 0.72%* 1.02% 1.75%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.40%* 0.40% 0.39%
Net Investment Income to Average Net Assets 0.64%* 0.94% 1.68%
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.32%* 0.32% 0.32%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
==========================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.049 0.058 0.048
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.049) (0.058) (0.048)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
==========================================================================================================
TOTAL RETURN 5.03% 5.91% 4.93%
==========================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 132,901 $ 115,513 $ 156,510
Ratio of Expenses to Average Net Assets (1) 0.39% 0.37% 0.33%
Ratio of Net Investment Income to Average Net Assets (1) 4.86% 5.72% 4.77%
- ----------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.38% 0.37% 0.36%
Net Investment Income to Average Net Assets 4.80% 5.67% 4.73%
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.32% 0.32% 0.32%
- ----------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 -------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
===============================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.003 0.009 0.016
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.003) (0.009) (0.016)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
===============================================================================================================
TOTAL RETURN 0.29%++ 0.87% 1.63%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 11,016 $ 7,865 $ 5,021
Ratio of Expenses to Average Net Assets (2) 0.47%* 0.47% 0.48%
Ratio of Net Investment Income to Average Net Assets (2) 0.57%* 0.87% 1.60%
- ---------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.55%* 0.55% 0.47%
Net Investment Income to Average Net Assets 0.49%* 0.79% 1.53%
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.47%* 0.47% 0.47%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
-----------------------------------------------------
PERIOD FROM
AUGUST 16,
YEAR ENDED SEPTEMBER 30, 1999** TO
------------------------- SEPTEMBER 30,
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.048 0.056 0.006
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.048) (0.056) (0.006)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
========================================================================================================================
TOTAL RETURN 4.88% 5.75% 0.60%++
========================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 16,100 $ 1,977 $ 919
Ratio of Expenses to Average Net Assets (2) 0.54% 0.52% 0.48%*
Ratio of Net Investment Income to Average Net Assets (2) 4.58% 5.74% 4.83%*
- ------------------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.52% 0.54% 0.51%*
Net Investment Income to Average Net Assets 4.53% 5.67% 4.79%*
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.47% 0.47% 0.47%*
- ------------------------------------------------------------------------------------------------------------------------
</Table>
* Annualized
++ Not Annualized
** Initial offering of Investment Class shares.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
76
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
HIGH YIELD PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.30 $ 4.41 $ 5.75
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.21+ 0.43+ 0.54+
Net Realized and Unrealized Gain (Loss) on Investments 0.16 0.77 (1.16)
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.37 1.20 (0.62)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.19) (0.31) (0.72)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.19) (0.31) (0.72)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.48 $ 5.30 $ 4.41
===============================================================================================================
TOTAL RETURN 7.10%++ 28.68% (12.33)%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 275,801 $ 330,990 $ 366,956
Ratio of Expenses to Average Net Assets (1) 0.61%* 0.61% 0.59%
Ratio of Net Investment Income to Average Net Assets (1) 7.70%* 9.05% 10.13%
Portfolio Turnover Rate 36%++ 97% 79%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.61%* 0.60% 0.58%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.86 $ 8.77 $ 8.99
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.78+ 0.89+ 0.86+
Net Realized and Unrealized Gain (Loss) on Investments (1.95) (0.88) (0.10)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.17) 0.01 0.76
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.94) (0.92) (0.79)
Net Realized Gain -- -- (0.19)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.94) (0.92) (0.98)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.75 $ 7.86 $ 8.77
=============================================================================================================
TOTAL RETURN (16.27)% (0.22)% 8.81%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 583,110 $ 848,507 $ 937,482
Ratio of Expenses to Average Net Assets (1) 0.57% 0.56% 0.49%
Ratio of Net Investment Income to Average Net Assets (1) 11.44% 10.50% 9.61%
Portfolio Turnover Rate 67% 55% 45%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.56% 0.55% 0.48%
- -------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 ------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.31 $ 4.41 $ 5.75
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.21+ 0.45+ 0.53+
Net Realized and Unrealized Gain (Loss) on Investments 0.16 0.76 (1.16)
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.37 1.21 (0.63)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.18) (0.31) (0.71)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.18) (0.31) (0.71)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.50 $ 5.31 $ 4.41
===============================================================================================================
TOTAL RETURN 7.13%++ 28.69% (12.54)%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 1,111 $ 1,329 $ 6,890
Ratio of Expenses to Average Net Assets (2) 0.76%* 0.76% 0.74%
Ratio of Net Investment Income to Average Net Assets (2) 7.55%* 8.90% 9.98%
Portfolio Turnover Rate 36%++ 97% 79%
- ---------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.76%* 0.75% 0.73%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.87 $ 8.78 $ 9.00
=========================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.77+ 0.88+ 0.85+
Net Realized and Unrealized Gain (Loss) on Investments (1.96) (0.89) (0.10)
- ---------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.19) (0.01) 0.75
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.93) (0.90) (0.78)
Net Realized Gain -- -- (0.19)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.93) (0.90) (0.97)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.75 $ 7.87 $ 8.78
=========================================================================================================
TOTAL RETURN (16.42)% (0.40)% 8.67%
=========================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 9,603 $ 10,151 $ 7,041
Ratio of Expenses to Average Net Assets (2) 0.72% 0.71% 0.64%
Ratio of Net Investment Income to Average Net Assets (2) 11.32% 10.43% 9.50%
Portfolio Turnover Rate 67% 55% 45%
- ---------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.71% 0.70% 0.63%
- ---------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
77
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
HIGH YIELD PORTFOLIO
<Table>
<Caption>
ADVISER CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 -------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.31 $ 4.40 $ 5.72
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.20+ 0.42+ 0.54+
Net Realized and Unrealized Gain (Loss) on Investments 0.16 0.78 (1.15)
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.36 1.20 (0.61)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.19) (0.29) (0.71)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.19) (0.29) (0.71)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.48 $ 5.31 $ 4.40
===============================================================================================================
TOTAL RETURN 6.83%++ 28.54% (12.24)%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 12,352 $ 13,936 $ 13,178
Ratio of Expenses to Average Net Assets (1) 0.86%* 0.86% 0.84%
Ratio of Net Investment Income to Average Net Assets (1) 7.45%* 8.80% 9.88%
Portfolio Turnover Rate 36%++ 97% 79%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.86%* 0.85% 0.83%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.85 $ 8.76 $ 8.99
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.72+ 0.87+ 0.84+
Net Realized and Unrealized Gain (Loss) on Investments (1.92) (0.88) (0.11)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.20) (0.01) 0.73
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.93) (0.90) (0.77)
Net Realized Gain -- -- (0.19)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.93) (0.90) (0.96)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.72 $ 7.85 $ 8.76
=============================================================================================================
TOTAL RETURN (16.62)% (0.42)% 8.44%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 95,483 $ 22,781 $ 13,701
Ratio of Expenses to Average Net Assets (1) 0.83% 0.81% 0.74%
Ratio of Net Investment Income to Average Net Assets (1) 11.03% 10.34% 9.29%
Portfolio Turnover Rate 67% 55% 45%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.82% 0.80% 0.73%
- -------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
78
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
INTERMEDIATE DURATION PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 -------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.49 $ 10.71 $ 10.37
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.16+ 0.28+ 0.39+
Net Realized and Unrealized Gain (Loss) on Investments 0.09 0.14 0.43
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.25 0.42 0.82
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.22) (0.36) (0.48)
Net Realized Gain -- (0.28) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.22) (0.64) (0.48)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.52 $ 10.49 $ 10.71
===============================================================================================================
TOTAL RETURN 2.45%++ 4.12% 8.12%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 18,713 $ 23,991 $ 63,912
Ratio of Expenses to Average Net Assets (1) 0.54%* 0.54% 0.54%
Ratio of Net Investment Income to Average Net Assets (1) 3.05%* 2.63% 3.73%
Portfolio Turnover Rate 106%++^ 89% 61%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.54%* 0.54% 0.53%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.67 $ 9.77 $ 10.68
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.57 0.67+ 0.72
Net Realized and Unrealized Gain (Loss) on Investments 0.69 (0.19) (0.65)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.26 0.48 0.07
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.56) (0.58) (0.76)
Net Realized Gain -- -- (0.22)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.58) (0.98)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.37 $ 9.67 $ 9.77
=============================================================================================================
TOTAL RETURN 13.42% 5.84% 0.64%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 50,814 $ 37,686 $ 50,513
Ratio of Expenses to Average Net Assets (1) 0.54% 0.54% 0.49%
Ratio of Net Investment Income to Average Net Assets (1) 5.62% 6.95% 6.20%
Portfolio Turnover Rate 59% 76% 97%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.54% 0.53% 0.48%
- -------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
-----------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
2004 -------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.46 $ 10.68 $ 10.35
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.15+ 0.26+ 0.37+
Net Realized and Unrealized Gain (Loss) on Investments 0.09 0.15 0.43
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.24 0.41 0.80
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.21) (0.35) (0.47)
Net Realized Gain -- (0.28) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.21) (0.63) (0.47)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.49 $ 10.46 $ 10.68
===============================================================================================================
TOTAL RETURN 2.30%++ 3.97% 8.02%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 106,205 $ 99,441 $ 58,092
Ratio of Expenses to Average Net Assets (2) 0.69%* 0.69% 0.69%
Ratio of Net Investment Income to Average Net Assets (2) 2.90%* 2.48% 3.58%
Portfolio Turnover Rate 106%++^ 89% 61%
- ---------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.69%* 0.69% 0.68%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
------------------------------------------
PERIOD FROM
AUGUST 16,
YEAR ENDED SEPTEMBER 30, 1999** TO
------------------------- SEPTEMBER
SELECTED PER SHARE DATA AND RATIOS 2001 2000 30, 1999
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.66 $ 9.77 $ 9.76
=========================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.54 0.65+ 0.11
Net Realized and Unrealized Gain (Loss) on Investments 0.70 (0.23) 0.04
- ---------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.24 0.42 0.15
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.55) (0.53) (0.14)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.53) (0.14)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.35 $ 9.66 $ 9.77
=========================================================================================================
TOTAL RETURN 13.24% 5.68% 1.49%++
=========================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 35,094 $ 27,678 $ 9,304
Ratio of Expenses to Average Net Assets (2) 0.69% 0.69% 0.64%*
Ratio of Net Investment Income to Average Net Assets (2) 5.47% 6.81% 8.99%*
Portfolio Turnover Rate 59% 76% 97%++
- ---------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.69% 0.68% 0.63%*
- ---------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized.
** Initial offering of Investment Class shares.
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
79
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
INTERNATIONAL FIXED INCOME PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.92 $ 9.88 $ 8.96
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.15+ 0.38+ 0.39
Net Realized and Unrealized Gain (Loss) on Investments 0.81 1.66 0.53
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.96 2.04 0.92
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (1.59) -- --
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (1.59) -- --
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.29 $ 11.92 $ 9.88
===============================================================================================================
TOTAL RETURN 8.43%++ 20.65% 10.27%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 143,552 $ 114,932 $ 94,474
Ratio of Expenses to Average Net Assets (1) 0.59%* 0.56% 0.60%
Ratio of Net Investment Income to Average Net Assets (1) 2.62%* 3.51% 3.44%
Portfolio Turnover Rate 6%++ 41% 38%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.59%* 0.56% 0.60%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.88 $ 10.12 $ 10.75
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.28+ 0.35 0.34
Net Realized and Unrealized Gain (Loss) on Investments 0.04 (1.15) (0.41)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.32 (0.80) (0.07)
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.24) (0.27) (0.34)
Net Realized Gain -- (0.17) (0.22)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.24) (0.44) (0.56)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.96 $ 8.88 $ 10.12
=============================================================================================================
TOTAL RETURN 3.63% (8.23)% (0.93)%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 77,363 $ 112,456 $ 125,981
Ratio of Expenses to Average Net Assets (1) 0.55% 0.56% 0.52%
Ratio of Net Investment Income to Average Net Assets (1) 3.31% 3.76% 3.68%
Portfolio Turnover Rate 71% 91% 64%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.55% 0.55% 0.52%
- -------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
80
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
LIMITED DURATION PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.65 $ 10.69 $ 10.59
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.12+ 0.23+ 0.39
Net Realized and Unrealized Gain (Loss) on Investments -- 0.05 0.14
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.12 0.28 0.53
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.13) (0.27) (0.43)
Net Realized Gain (0.02) (0.05) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.15) (0.32) (0.43)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.62 $ 10.65 $ 10.69
===============================================================================================================
TOTAL RETURN 1.17%++ 2.65% 5.13%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 846,755 $ 622,801 $ 429,937
Ratio of Expenses to Average Net Assets (1) 0.42%* 0.43% 0.44%
Ratio of Net Investment Income to Average Net Assets (1) 2.27%* 2.17% 3.45%
Portfolio Turnover Rate 83%++^ 68% 72%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.42%* 0.43% 0.44%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 10.18 $ 10.54
==========================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.59 0.60 0.68
Net Realized and Unrealized Gain (Loss) on Investments 0.42 (0.03) (0.31)
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.01 0.57 0.37
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.59) (0.58) (0.73)
Net Realized Gain -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.59) (0.58) (0.73)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.59 $ 10.17 $ 10.18
==========================================================================================================
TOTAL RETURN 10.23% 6.37% 3.61%
==========================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 224,358 $ 177,776 $ 161,538
Ratio of Expenses to Average Net Assets (1) 0.43% 0.42% 0.41%
Ratio of Net Investment Income to Average Net Assets (1) 5.67% 6.61% 6.16%
Portfolio Turnover Rate 59% 57% 102%
- ----------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.43% 0.41% 0.41%
- ----------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
81
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
MUNICIPAL PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.53 $ 12.49 $ 12.14
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.20+ 0.50+ 0.47
Net Realized and Unrealized Gain (Loss) on Investments 0.12 (0.01) 0.39
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.32 0.49 0.86
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.23) (0.45) (0.51)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.23) (0.45) (0.51)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.62 $ 12.53 $ 12.49
===============================================================================================================
TOTAL RETURN 2.37%++ 4.19% 7.27%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 370,958 $ 313,999 $ 245,257
Ratio of Expenses to Average Net Assets (1) 0.50%* 0.50% 0.50%
Ratio of Net Investment Income to Average Net Assets (1) 3.15%* 4.01% 3.70%
Portfolio Turnover Rate 69%++^ 47% 72%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.51%* 0.51% 0.52%
Net Investment Income to Average Net Assets 3.14%* 4.00% 4.14%
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.50%* 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.43 $ 11.39 $ 11.96
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.48 0.62 0.55
Net Realized and Unrealized Gain (Loss) on Investments 0.72 0.10 (0.53)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.20 0.72 0.02
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.49) (0.62) (0.59)
Net Realized Gain -- (0.06) --
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.68) (0.59)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.14 $ 11.43 $ 11.39
=============================================================================================================
TOTAL RETURN 10.69% 6.66% 0.11%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 164,504 $ 115,217 $ 121,917
Ratio of Expenses to Average Net Assets (1) 0.51% 0.51% 0.51%
Ratio of Net Investment Income to Average Net Assets (1) 4.03% 5.51% 4.72%
Portfolio Turnover Rate 70% 82% 88%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratios Before Expenses Waived/Reimbursed by Adviser:
Expenses to Average Net Assets 0.51% 0.51% 0.59%
Net Investment Income to Average Net Assets 4.65% 4.30% 3.85%
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.50% 0.50% 0.50%
- -------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
82
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
BALANCED PORTFOLIO
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 8.78 $ 10.60
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.10+ 0.21+ 0.25+
Net Realized and Unrealized Gain (Loss) on Investments 0.91 1.47 (1.75)
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.01 1.68 (1.50)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.13) (0.31) (0.32)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.13) (0.31) (0.32)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.03 $ 10.15 $ 8.78
===============================================================================================================
TOTAL RETURN 9.99%++ 19.48% (14.60)%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 204,435 $ 262,960 $ 250,796
Ratio of Expenses to Average Net Assets (1) 0.62%* 0.60% 0.59%
Ratio of Net Investment Income to Average Net Assets (1) 1.77%* 2.17% 2.37%
Portfolio Turnover Rate 112%++^ 84% 133%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.62%* 0.60% 0.59%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.37 $ 13.83 $ 13.46
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.35+ 0.44+ 0.45+
Net Realized and Unrealized Gain (Loss) on Investments (2.07) 1.45 1.71
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.72) 1.89 2.16
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.38) (0.46) (0.43)
Net Realized Gain (0.67) (1.89) (1.36)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (1.05) (2.35) (1.79)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.60 $ 13.37 $ 13.83
=============================================================================================================
TOTAL RETURN (13.51)% 14.75% 16.99%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 397,666 $ 505,078 $ 341,886
Ratio of Expenses to Average Net Assets (1) 0.58% 0.58% 0.58%
Ratio of Net Investment Income to Average Net Assets (1) 2.98% 3.29% 3.21%
Portfolio Turnover Rate 157% 162% 111%
- -------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.57% 0.57% 0.57%
- -------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 ------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.13 $ 8.76 $ 10.61
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.09+ 0.18+ 0.23+
Net Realized and Unrealized Gain (Loss) on Investments 0.91 1.48 (1.78)
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.00 1.66 (1.55)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.12) (0.29) (0.30)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.29) (0.30)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.01 $ 10.13 $ 8.76
===============================================================================================================
TOTAL RETURN 9.92%++ 19.28% (15.03)%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 3,020 $ 8,209 $ 4,925
Ratio of Expenses to Average Net Assets (2) 0.77%* 0.75% 0.74%
Ratio of Net Investment Income to Average Net Assets (2) 1.62%* 2.02% 2.22%
Portfolio Turnover Rate 112%++^ 84% 133%
- ---------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Included
Expense Offsets 0.77%* 0.75% 0.74%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
INVESTMENT CLASS
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.37 $ 13.82 $ 13.45
=============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.34+ 0.42+ 0.42+
Net Realized and Unrealized Gain (Loss) on Investments (2.08) 1.45 1.72
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.74) 1.87 2.14
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.35) (0.43) (0.41)
Net Realized Gain (0.67) (1.89) (1.36)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (1.02) (2.32) (1.77)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.61 $ 13.37 $ 13.82
=============================================================================================================
TOTAL RETURN (13.65)% 14.59% 16.84%
=============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 6,284 $ 8,085 $ 208
Ratio of Expenses to Average Net Assets (2) 0.73% 0.73% 0.74%
Ratio of Net Investment Income to Average Net Assets (2) 2.83% 3.13% 3.03%
Portfolio Turnover Rate 157% 162% 111%
- -------------------------------------------------------------------------------------------------------------
(2) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Included
Expense Offsets 0.72% 0.72% 0.72%
- -------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
83
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004
FINANCIAL HIGHLIGHTS
BALANCED PORTFOLIO
<Table>
<Caption>
ADVISER CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 -------------------------
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.13 $ 8.77 $ 10.57
===============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.08+ 0.18+ 0.22+
Net Realized and Unrealized Gain (Loss) on Investments 0.92 1.46 (1.74)
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.00 1.64 (1.52)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.12) (0.28) (0.28)
Net Realized Gain -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.28) (0.28)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.01 $ 10.13 $ 8.77
===============================================================================================================
TOTAL RETURN 9.89%++ 19.12% (14.76)%
===============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 59,748 $ 59,254 $ 51,761
Ratio of Expenses to Average Net Assets (1) 0.87%* 0.85% 0.84%
Ratio of Net Investment Income to Average Net Assets (1) 1.52%* 1.92% 2.12%
Portfolio Turnover Rate 112%++^ 84% 133%
- ---------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.87%* 0.85% 0.84%
- ---------------------------------------------------------------------------------------------------------------
<Caption>
ADVISER CLASS
------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.34 $ 13.80 $ 13.43
============================================================================================================
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income 0.33+ 0.41+ 0.42+
Net Realized and Unrealized Gain (Loss) on Investments (2.09) 1.44 1.71
- ------------------------------------------------------------------------------------------------------------
Total from Investment Operations (1.76) 1.85 2.13
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND/OR IN EXCESS OF:
Net Investment Income (0.34) (0.42) (0.40)
Net Realized Gain (0.67) (1.89) (1.36)
- ------------------------------------------------------------------------------------------------------------
Total Distributions (1.01) (2.31) (1.76)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.57 $ 13.34 $ 13.80
============================================================================================================
TOTAL RETURN (13.79)% 14.46% 16.76%
============================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands) $ 57,172 $ 33,928 $ 29,210
Ratio of Expenses to Average Net Assets (1) 0.84% 0.83% 0.83%
Ratio of Net Investment Income to Average Net Assets (1) 2.77% 3.04% 2.97%
Portfolio Turnover Rate 157% 162% 111%
- ------------------------------------------------------------------------------------------------------------
(1) SUPPLEMENTAL INFORMATION ON THE RATIOS TO AVERAGE NET
ASSETS:
Ratio of Expenses to Average Net Assets Including
Expense Offsets 0.83% 0.82% 0.82%
- ------------------------------------------------------------------------------------------------------------
</Table>
+ Per share amount is based on average shares outstanding.
* Annualized
++ Not Annualized
^ The Portfolio's turnover rate is calculated by dividing the lesser of
purchases and sales of securities for a fiscal year by the average monthly
value of portfolio securities during such fiscal year. The turnover rate
may vary greatly from year to year as well as within a year. The
Portfolio's current year turnover rate reflects mortgage pool forward
commitments as purchases and sales, which was not the case in past years.
The inclusion of such securities caused the reported turnover rate to be
higher during the period than in previous fiscal years.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
84
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS
Morgan Stanley Institutional Fund Trust ("MSIFT" or the "Fund") is registered
under the Investment Company Act of 1940 as an open-end investment company. The
Fund is comprised of nineteen active portfolios. The accompanying financial
statements and financial highlights are those of the Core Plus Fixed Income,
Investment Grade Fixed Income, U.S. Core Fixed Income, Cash Reserves, High
Yield, Intermediate Duration, International Fixed Income, Limited Duration,
Municipal and Balanced Portfolios, all of which except the International Fixed
Income Portfolio are considered diversified for purposes of the 1940 Act (each
referred to as a "Portfolio"). The financial statements of the remaining
portfolios of the Fund are presented separately.
The Fund offers up to three different classes of shares for certain Portfolios
- -- Institutional Class shares, Investment Class shares and Adviser Class shares.
Each class of shares has identical voting rights (except shareholders of each
Class have exclusive voting rights regarding any matter relating solely to that
particular Class of shares), dividend, liquidation and other rights.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with accounting principles generally accepted in the
United States. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Accounting principles generally
accepted in the United States may require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are valued at
the latest quoted sales price on the valuation date. Equity securities listed
or traded on NAS-DAQ, for which market quotations are available, are valued
at the NASDAQ Official Closing Price. Securities listed on a foreign exchange
are valued at their closing price. Unlisted and listed equity securities not
traded on the valuation date, for which market quotations are readily
available, are valued at the mean between the current bid and asked prices
obtained from reputable brokers. Bonds and other fixed income securities may
be valued according to the broadest and most representative market. In
addition, bonds and other fixed income securities may be valued on the basis
of prices provided by a pricing service. The prices provided by a pricing
service take into account broker dealer market price quotations for
institutional size trading in similar groups of securities, security quality,
maturity, coupon and other security characteristics as well as any
developments related to the specific security. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
approximates market value.
All other securities and investments for which market values are not readily
available, including restricted securities, and those securities for which it
is inappropriate to determine prices in accordance with the aforementioned
procedures, are valued at fair value as determined in good faith under
procedures adopted by the Board of Trustees, although the actual calculations
may be done by others. Factors considered in making this determination may
include, but are not limited to, information obtained by contacting the
issuer, analysts, or the appropriate stock exchange (for exchange-traded
securities), analysis of the issuer's financial statements or other available
documents and, if necessary, available information concerning other
securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE).
Occasionally, developments that could affect the closing prices of securities
and other assets may occur between the times at which valuations of such
securities are determined (that is, close of the foreign market on which the
securities trade) and the close of business on the NYSE. If these
developments are expected to materially affect the value as of the
securities, the valuations may be adjusted to reflect the estimated fair
value as of the close of the NYSE, as determined in good faith under
procedures established by the Board of Trustees.
2. REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
under which a Portfolio lends excess cash and takes possession of securities
with an agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities which are held as
collateral, with a market value at least equal to the amount of the
repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value of
the of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the counterparty to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Portfolios may transfer their uninvested cash balances into a
joint trading account with other Portfolios of the Fund which invests in one
or more repurchase agreements. Any such joint repurchase agreement is covered
by the same collateral requirements as discussed above.
85
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
3. FUTURES: Financial futures contracts (secured by cash and securities
deposited with brokers as "initial margin") are valued based upon their
quoted daily settlement prices; changes in initial settlement value
(represented by cash paid to or received from brokers as "variation margin")
are accounted for as unrealized appreciation (depreciation). When futures
contracts are closed, the difference between the opening value at the date of
purchase and the value at closing is recorded as realized gain or loss in the
Statement of Operations. "Due from (to) Broker" includes initial margin and
variation margin, as stated in the Statement of Net Assets.
Futures contracts may be used by each Portfolio, except the Cash Reserves
Portfolio, in order to hedge against unfavorable changes in the value of
securities or to attempt to realize profits from the value of the related
securities.
Futures contracts involve market risk that may exceed the amounts recognized
in the Statement of Net Assets. Risks arise from the possible movements in
the prices of securities relating to these instruments. The change in value
of futures contracts primarily corresponds with the value of their related
securities, but may not precisely correlate with the change in value of such
securities. In addition, there is the risk that a Portfolio may not be able
to enter into a closing transaction because of an illiquid secondary market.
4. SECURITIES SOLD SHORT: Each Portfolio, except Cash Reserves Portfolio, may
sell securities short. A short sale is a transaction in which the Portfolio
sells securities it may or may not own, but has borrowed, in anticipation of
a decline in the market price of the securities. The Portfolio is obligated
to replace the borrowed securities at their market price at the time of
replacement. The Portfolio may have to pay a premium to borrow the securities
as well as pay any dividends or interest payable on the securities until they
are replaced. The Portfolio's obligation to replace the securities borrowed
in connection with a short sale will generally be secured by collateral
deposited with the broker that consists of cash, U.S. government securities
or other liquid high grade debt obligations. In addition, the Portfolio will
either place in a segregated account with its custodian or denote on its
custody records an amount of cash, U.S. government securities or other liquid
high grade debt obligations equal to the difference, if any, between (1) the
market value of the securities sold at the time they were sold short and (2)
any cash, U.S. government securities or other liquid high grade debt
obligations deposited as collateral with the broker in connection with the
short sale (not including the proceeds of the short sale). Short sales by the
Portfolios involve certain risks and special considerations. Possible losses
from short sales differ from losses that could be incurred from a purchase of
a security because losses from short sales may be unlimited, whereas losses
from purchases cannot exceed the total amount invested.
5. SWAP AGREEMENTS: Each Portfolio, except the Cash Reserves Portfolio, may
enter into swap agreements to exchange the interest rate on, or return
generated by, one nominal instrument for the return generated by another
nominal instrument. Cash collateral for swap agreements, if applicable, is
deposited with the broker serving as counterparty to the agreement, and is
included in "Due from (to) Broker" on the Statement of Net Assets. The
following summarizes swaps entered into by the Portfolios:
CREDIT DEFAULT SWAPS: Credit default swaps involve commitments to pay a fixed
rate in exchange for payment if a credit event affecting a third party (the
referenced company) occurs. Credit events may include a failure to pay
interest, bankruptcy, or restructuring. Net periodic interest payments to be
received or paid are accrued daily and are recorded in the Statement of
Operations as an adjustment to interest income. Credit default swaps are
marked-to-market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized appreciation or depreciation in the
Statement of Operations.
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of commitments
to pay and receive interest based on a notional principal amount. Net
periodic interest payments to be received or paid are accrued daily and are
recorded in the Statement of Operations as an adjustment to interest income.
In a zero-coupon interest rate swap, payments only occur at maturity, at
which time one counterparty pays the total compounded fixed rate over the
life of the swap and the other pays the total compounded floating rate that
would have been earned had a series of LIBOR investments been rolled over
through the life of the swap. Interest rate swaps are marked-to-market daily
based upon quotations from market makers and the change, if any, is recorded
as unrealized appreciation or depreciation in the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest in
exchange for a market-linked return based on a notional amount. To the extent
the total return of the security or index underlying the transaction exceeds
or falls short of the offsetting interest rate obligation, the Portfolio will
receive a payment from or make a payment to the counterparty, respectively.
Total return swaps are marked-to-market daily based upon quotations from
market makers and the change, if any, is recorded as unrealized appreciation
or depreciation in the Statement of Operations. Periodic payments received or
made at the end of each measurement period, but prior to termination, are
recorded as realized gains or losses in the Statement of Operations.
86
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Realized gains or losses on maturity or termination of swaps are presented in
the Statement of Operations. Because there is no organized market for these
swap agreements, the unrealized gain/loss reported in the Statement of Net
Assets may differ from that which would be realized in the event the
Portfolio terminated its position in the agreement. Risks may arise upon
entering into these agreements from the potential inability of the
counterparties to meet the terms of the agreements and are generally limited
to the amount of net payments to be received, if any, at the date of default.
6. STRUCTURED INVESTMENTS: Certain Portfolios may invest in structured
investments whose values are linked either directly or inversely to changes
in foreign currencies, interest rates, commodities, indices, equity
securities or other underlying instruments. A Portfolio uses these securities
to increase or decrease its exposure to different underlying instruments and
to gain exposure to markets that might be difficult to invest in through
conventional securities. Structured investments may be more volatile than
their underlying instruments, but any loss is limited to the amount of the
original investment.
7. DELAYED DELIVERY COMMITMENTS: Each Portfolio, except the Cash Reserves
Portfolio, may purchase or sell securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more after
the date of the transaction. The price of the underlying securities and the
date when the securities will be delivered and paid for are fixed at the time
the transaction is negotiated. Liquid securities or cash is designated in an
amount at least equal to these commitments. Securities held for this purpose
cannot be sold while this strategy is outstanding, unless replaced with other
assets. As a result, there is a possibility that as designated assets reach
certain levels, a Portfolio may lose some flexibility in managing its
investments, responding to shareholder redemption requests, or meeting other
current obligations.
8. PURCHASED OPTIONS: Certain Portfolios may purchase call and put options on
their portfolio securities. A call option, upon payment of a premium, gives
the purchaser of the option the right to buy, and the writer the obligation
to sell, the underlying instrument at the exercise price. The purchase of a
call option might be intended to protect the Portfolio against an increase in
the price of the underlying instrument that it intends to purchase in the
future by fixing the price at which it may purchase the instrument. A put
option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the instrument at the
exercise price. A Portfolio may purchase a put option to protect its holdings
in the underlying instrument, or a similar instrument, against a substantial
decline in the market value of such instrument by giving the Portfolio the
right to sell the instrument at the option exercise price. Possible losses
from purchased options cannot exceed the total amount invested.
9. FOREIGN CURRENCY TRANSLATION AND FOREIGN CURRENCY EXCHANGE CONTRACTS: The
books and records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars at the bid prices of such
currencies against U.S. dollars quoted by a bank. Net realized gains (losses)
on foreign currency transactions represent net foreign exchange gains
(losses) from foreign currency exchange contracts, disposition of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amount of investment income and foreign withholding taxes recorded on a
Portfolio's books and the U.S. dollar equivalent of amounts actually received
or paid.
A foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. Each Portfolio (except
the U.S. Core Fixed Income, Cash Reserves, and Limited Duration Portfolios)
may enter into foreign currency exchange contracts to protect securities and
related receivables and payables against future changes in foreign exchange
rates. Fluctuations in the value of such contracts are recorded as unrealized
appreciation or depreciation; realized gains or losses, which are disclosed
in the Statement of Operations, include net gains or losses on contracts
which have been terminated by settlements. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts and are generally limited to the amount of
unrealized gain on the contract, if any, at the date of default. Risks may
also arise from unanticipated movements in the value of the foreign currency
relative to the U.S. dollar.
At March 31, 2004, the net assets of certain Portfolios were substantially
comprised of foreign-currency denominated securities and foreign currency.
The net assets of these Portfolios are presented at the foreign exchange
rates and market values at the close of the period. The Portfolios do not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at period end. Similarly,
the Portfolios do not isolate the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of securities
sold during the period. Accordingly, the components of realized and
unrealized foreign currency gains (losses) representing foreign exchange
changes on investments is included in the reported net realized and
unrealized gains (losses) on
87
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
investment transactions and balances. Changes in currency exchange rates will
affect the value of and investment income from such securities and currency.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
governmental supervision, relative currency valuation fluctuation, regulation
of foreign securities markets and the possibility of political or economic
instability.
10. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Costs used in determining realized gains and losses on
the sale of investment securities are those of specific securities sold.
Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Most expenses of the Fund can be directly attributed to a
particular Portfolio. Expenses which cannot be directly attributed are
apportioned among the Portfolios on the basis of their relative net assets.
Income, expenses (other than class specific expenses) and realized and
unrealized gains or losses are allocated to each class of shares based upon
their relative net assets.
B. INVESTMENT ADVISORY FEE. Under the terms of an Investment Advisory Agreement,
each Portfolio has agreed to pay Morgan Stanley Investment Management Inc. ("MS
Investment Management," formerly Morgan Stanley Investments LP, or the
"Adviser"), a wholly-owned subsidiary of Morgan Stanley, for investment advisory
services performed at a fee calculated by applying a quarterly rate based on the
annual percentage rate listed below, to each Portfolio's average daily net
assets for the quarter.
<Table>
<Caption>
VOLUNTARY EXPENSE LIMITATIONS
ANNUAL ------------------------------------------
INVESTMENT INSTITUTION INVESTMENT ADVISER
PORTFOLIO ADVISORY FEE CLASS CLASS CLASS
- -------------------------------------------------------------------------------------------
Core Plus Fixed Income 0.375% --% --% --%
Investment Grade Fixed
Income 0.375 -- -- --
U.S. Core Fixed Income 0.375 0.50 -- 0.75
Cash Reserves 0.250 0.32 0.47 --
High Yield 0.450 -- -- --
Intermediate Duration 0.375 -- -- --
International Fixed
Income 0.375 -- -- --
Limited Duration 0.300 -- -- --
Municipal 0.375 0.50 -- --
Balanced 0.450 -- -- --
</Table>
The Adviser has voluntarily agreed to reduce the fees payable to it and, if
necessary, reimburse the Portfolios for certain expenses so that annual
operating expenses, after giving effect to custody fee offsets, will not exceed
voluntary expense limitations established for each class of shares as presented
in the table above.
Morgan Stanley Investment Management Limited ("MSIM Limited") serves as
Sub-Adviser to the International Fixed Income Portfolio. MSIM Limited is a
wholly-owned subsidiary of Morgan Stanley. Under an Investment Sub-Advisory
Agreement with the Adviser, MSIM Limited, subject to the control and supervision
of the Fund, its officers, Trustees and the Adviser, and in accordance with the
investment objectives, policies and restrictions of the Portfolio, makes certain
day-to-day investment decisions for the Portfolio and places certain of the
Portfolio's purchase and sales orders. The Adviser pays MSIM Limited on a
monthly basis a portion of the net advisory fees the Adviser receives from the
Portfolio.
C. ADMINISTRATOR. MS Investment Management (the "Administrator") also provides
the Fund with administrative services pursuant to an administrative agreement
for a monthly fee which on an annual basis equals 0.08% of the average daily net
assets of each Portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Administrator and J.P. Morgan Investor Services Co.
("JPMIS"), a corporate affiliate of JPMorgan Chase Bank, JPMIS provides certain
administrative services to the Fund. For such services, the Administrator pays
JPMIS a portion of the fee the Administrator receives from the Fund. An employee
of JPMIS is an officer of the Fund.
D. DISTRIBUTOR. Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"),
a wholly-owned subsidiary of the Adviser, is the distributor for the Fund. MSDI
is a limited-purpose broker/dealer whose only function is to distribute open-end
mutual fund shares. The Distributor provides all classes of shares in each
Portfolio with distribution services, and receives fees in connection with these
services, pursuant to separate Distribution and Shareholder Servicing Plans (the
"Plans") in accordance with Rule 12b-1 under the Investment Company Act of 1940.
Under the Plans, the Distributor is entitled to distribution fees and
shareholder servicing fees for Adviser Class and Investment Class shares,
respectively. The distribution fee is an asset-based fee to support distribution
efforts and/or servicing of accounts. The Adviser Class of shares pays an annual
distribution fee of 0.25% of average net assets of the class for such services
under the 12b-1 plan adopted by the Fund. The Investment Class of shares pays an
annual shareholder servicing fee of 0.15% of average net assets of the class.
The shareholder servicing fee is used to support the expenses associated with
servicing and maintaining accounts. Both fees are paid directly to MSDI. The
distribution fee may be retained by MSDI if an Adviser Class shareholder invests
directly through
88
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
MSDI. Usually the fees are paid by MSDI to external organizations such as 401(k)
alliance sponsors, discount brokers and bank trust departments who distribute
MSIFT Portfolios to the public. The Distributor has voluntarily agreed to waive
0.10% of the 0.25% distribution fee it is entitled to receive from the Adviser
Class Shares' average daily net assets for the Investment Grade Fixed Income
Portfolio.
E. CUSTODY. JPMorgan Chase Bank serves as custodian for the Fund in accordance
with a custodian agreement. The Custodian holds cash, securities, and other
assets of the Fund as required by the 1940 Act.
The Portfolios have entered into an arrangement with their custodian whereby
credits realized on uninvested cash balances were used to offset a portion of
each applicable Portfolio's expenses. These custodian credits are shown as
"expense offset" on the Statements of Operations.
F. PORTFOLIO INVESTMENT ACTIVITY.
1. PURCHASES AND SALES OF SECURITIES. For the six months ended March 31, 2004,
purchases and sales of investment securities other than temporary cash
investments and long-term U.S. government securities were:
<Table>
<Caption>
PURCHASES SALES
PORTFOLIO (000) (000)
- ------------------------------------------------------------------
Core Plus Fixed Income $5,742,709 $6,661,404
Investment Grade Fixed Income 1,105,405 1,239,359
U.S. Core Fixed Income $575,176 $735,682
High Yield 118,006 191,113
Intermediate Duration 135,893 157,330
International Fixed Income 7,641 5,306
Limited Duration 716,055 616,076
Municipal 299,071 249,800
Balanced 313,749 392,909
</Table>
For the six months ended March 31, 2004, purchases and sales of long-term
U.S. government securities were:
<Table>
<Caption>
PURCHASES SALES
PORTFOLIO (000) (000)
- ------------------------------------------------------------------
Core Plus Fixed Income $222,129 $175,594
Investment Grade Fixed Income 55,548 6,495
U.S. Core Fixed Income 52,280 83,445
Intermediate Duration 6,793 8,406
Limited Duration 130,037 16,356
Balanced 17,956 15,673
</Table>
2. TRANSACTIONS WITH AFFILIATES: During the six months ended March 31, 2004, the
Balanced Portfolio paid brokerage commissions of approximately $5,000 to
Morgan Stanley & Co., an affiliated broker/dealer.
3. SWAP AGREEMENTS: At March 31, 2004, the following Portfolios had open Swap
Agreements:
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ----------------------------------------------------------------------------------------------------------------------------------
CORE PLUS FIXED INCOME PORTFOLIO
Bank of America 4/30/04 $ 29,500 TRS 3 month LIBOR Index Return(1) $ 894
6/30/04 7,300 TRS 3 month LIBOR Index Return(1) --
8/31/04 17,600 TRS 4 month LIBOR Index Return(1) --
8/31/04 2,000 TRS 3 month LIBOR Index Return(1) 322
9/30/04 107,050 IRS fixed rate of 2.3932% 3 month LIBOR (643)
9/28/12 40,750 IRS fixed rate of 4.4685% 3 month LIBOR (1,413)
Citigroup 3/15/12 47,300 IRS fixed rate of 5.99625% 3 month LIBOR (6,905)
3/19/12 11,690 IRS fixed rate of 6.0428% 3 month LIBOR (1,745)
6/27/12 58,225 IRS fixed rate of 5.3628% 3 month LIBOR (5,888)
2/15/19 9,100 ZCS at maturity compounded 3 month LIBOR @--
5/15/19 10,200 ZCS at maturity compounded 3 month LIBOR less 7.125 bps (207)
11/15/19 5,000 ZCS at maturity compounded 3 month LIBOR less 7.9 bps (125)
2/15/20 15,250 ZCS at maturity compounded 3 month LIBOR less 3.1 bps 110
2/15/20 15,250 ZCS at maturity compounded 3 month LIBOR less 2.75 bps 103
2/15/20 53,000 ZCS at maturity compounded 3 month LIBOR less 4.14 bps 18
2/15/20 52,000 ZCS at maturity compounded 3 month LIBOR less 4.882 bps (91)
5/15/20 22,000 ZCS at maturity compounded 3 month LIBOR 238
5/15/20 25,725 ZCS at maturity compounded 3 month LIBOR less 6 bps (216)
5/15/20 117,850 ZCS at maturity compounded 3 month LIBOR less 5.75 bps (1,498)
5/15/20 20,350 ZCS at maturity compounded 3 month LIBOR less 3.1 bps (163)
8/15/20 18,000 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (306)
2/15/21 8,250 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (207)
</Table>
89
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ----------------------------------------------------------------------------------------------------------------------------------
CORE PLUS FIXED INCOME PORTFOLIO (CONT'D)
Citigroup 5/15/21 $ 9,500 ZCS at maturity compounded 3 month LIBOR less 7.5 bps $ (306)
5/15/21 9,700 ZCS at maturity compounded 3 month LIBOR less 7.75 bps (287)
5/15/21 10,000 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (314)
5/15/21 46,300 ZCS at maturity compounded 3 month LIBOR less 3.75 bps (446)
5/15/21 23,150 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (114)
5/15/21 23,100 ZCS at maturity compounded 3 month LIBOR less 3 bps 611
5/15/21 16,000 ZCS at maturity compounded 3 month LIBOR less 4.5 bps 581
5/15/21 10,440 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (344)
11/15/21 23,150 ZCS at maturity compounded 3 month LIBOR less 4.25 bps (274)
11/15/21 23,150 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (267)
2/15/22 14,500 ZCS at maturity compounded 3 month LIBOR 120
8/15/22 3,500 ZCS at maturity compounded 3 month LIBOR less 7 bps (109)
8/15/22 12,000 ZCS at maturity compounded 3 month LIBOR 137
2/15/23 11,750 ZCS at maturity compounded 3 month LIBOR 65
2/15/23 20,000 ZCS at maturity compounded 3 month LIBOR (237)
Credit Suisse First
Boston 5/15/16 25,000 ZCS at maturity compounded 3 month LIBOR (371)
2/15/17 24,500 ZCS at maturity compounded 3 month LIBOR 198
5/15/21 69,450 ZCS at maturity compounded 3 month LIBOR (843)
5/15/21 69,300 ZCS at maturity compounded 3 month LIBOR (316)
5/15/21 23,100 ZCS at maturity compounded 3 month LIBOR 212
11/15/23 23,500 ZCS at maturity compounded 3 month LIBOR 204
Deutsche Bank 11/14/07 5,000 CDS fixed rate of 1.20% upon the occurrence of a negative credit (127)
event(2)
Goldman Sachs 6/27/12 63,475 IRS fixed rate of 5.3776% 3 month LIBOR (6,485)
2/15/20 9,700 ZCS at maturity compounded 3 month LIBOR (306)
2/15/20 17,700 ZCS at maturity compounded 3 month LIBOR (15)
2/15/20 7,275 ZCS at maturity compounded 3 month LIBOR (7)
5/15/20 10,000 ZCS at maturity compounded 3 month LIBOR 65
8/15/20 21,000 ZCS at maturity compounded 3 month LIBOR 182
2/15/21 15,500 ZCS at maturity compounded 3 month LIBOR (146)
11/15/21 23,100 ZCS at maturity compounded 3 month LIBOR (82)
11/15/21 40,525 ZCS at maturity compounded 3 month LIBOR (482)
8/15/22 18,000 ZCS at maturity compounded 3 month LIBOR (485)
11/15/22 23,100 ZCS at maturity compounded 3 month LIBOR 558
------------
(27,152)
============
INVESTMENT GRADE FIXED INCOME PORTFOLIO
Bank of America 4/30/04 2,750 TRS 3 month LIBOR Index Return(1) 83
6/30/04 5,900 TRS 3 month LIBOR Index Return(1) --
8/31/04 7,600 TRS 3 month LIBOR Index Return(1) 122
9/30/04 14,450 IRS fixed rate of 2.3932% 3 month LIBOR (87)
9/28/12 4,575 IRS fixed rate of 4.4685% 3 month LIBOR (159)
Citigroup 3/19/12 4,900 IRS fixed rate of 6.0428% 3 month LIBOR (731)
8/16/12 5,000 IRS fixed rate of 4.55% 3 month LIBOR (208)
2/15/19 6,000 ZCS at maturity compounded 3 month LIBOR @--
5/15/19 5,100 ZCS at maturity compounded 3 month LIBOR less 7.125 bps (104)
11/15/19 2,000 ZCS at maturity compounded 3 month LIBOR less 7.9 bps (50)
2/15/20 4,600 ZCS at maturity compounded 3 month LIBOR less 3.1 bps 33
2/15/20 4,600 ZCS at maturity compounded 3 month LIBOR less 2.75 bps 31
2/15/20 16,100 ZCS at maturity compounded 3 month LIBOR less 4.14 bps 5
2/15/20 6,425 ZCS at maturity compounded 3 month LIBOR less 4.882 bps (11)
5/15/20 3,500 ZCS at maturity compounded 3 month LIBOR 38
5/15/20 3,425 ZCS at maturity compounded 3 month LIBOR less 6 bps (29)
5/15/20 2,950 ZCS at maturity compounded 3 month LIBOR less 5.75 bps (37)
5/15/20 6,150 ZCS at maturity compounded 3 month LIBOR less 3.1 bps (49)
</Table>
90
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE FIXED INCOME PORTFOLIO (CONT'D)
Citigroup 8/15/20 $ 3,400 ZCS at maturity compounded 3 month LIBOR less 7.25 bps $ (58)
2/15/21 1,500 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (38)
5/15/21 1,850 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (60)
5/15/21 1,950 ZCS at maturity compounded 3 month LIBOR less 7.75 bps (58)
5/15/21 16,000 ZCS at maturity compounded 3 month LIBOR less 8 bps (453)
5/15/21 2,700 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (77)
5/15/21 2,700 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (75)
5/15/21 5,000 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (157)
5/15/21 2,040 ZCS at maturity compounded 3 month LIBOR less 7.25 bps. (67)
5/15/21 7,200 ZCS at maturity compounded 3 month LIBOR less 3.75 bps. (69)
5/15/21 3,600 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (18)
5/15/21 3,475 ZCS at maturity compounded 3 month LIBOR less 3 bps 92
5/15/21 5,000 ZCS at maturity compounded 3 month LIBOR less 4.5 bps 182
11/15/21 3,600 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (41)
11/15/21 5,350 ZCS at maturity compounded 3 month LIBOR less 3.7 bps (78)
11/15/21 3,600 ZCS at maturity compounded 3 month LIBOR less 4.25 bps (42)
2/15/22 3,000 ZCS at maturity compounded 3 month LIBOR 25
8/15/22 2,200 ZCS at maturity compounded 3 month LIBOR less 7 bps (68)
8/15/22 3,500 ZCS at maturity compounded 3 month LIBOR 40
2/15/23 5,000 ZCS at maturity compounded 3 month LIBOR 28
2/15/23 7,000 ZCS at maturity compounded 3 month LIBOR (83)
Credit Suisse First
Boston 5/15/16 8,000 ZCS at maturity compounded 3 month LIBOR (119)
2/15/17 5,000 ZCS at maturity compounded 3 month LIBOR 41
5/15/21 10,800 ZCS at maturity compounded 3 month LIBOR (134)
5/15/21 10,425 ZCS at maturity compounded 3 month LIBOR (47)
5/15/21 3,475 ZCS at maturity compounded 3 month LIBOR 32
11/15/23 5,000 ZCS at maturity compounded 3 month LIBOR 43
Goldman Sachs 2/15/20 1,950 ZCS at maturity compounded 3 month LIBOR (51)
2/15/20 1,200 ZCS at maturity compounded 3 month LIBOR (1)
2/15/20 2,550 ZCS at maturity compounded 3 month LIBOR (2)
5/15/20 675 ZCS at maturity compounded 3 month LIBOR 4
8/15/20 11,000 ZCS at maturity compounded 3 month LIBOR 96
2/15/21 2,500 ZCS at maturity compounded 3 month LIBOR (89)
11/15/21 3,475 ZCS at maturity compounded 3 month LIBOR 84
11/15/21 6,325 ZCS at maturity compounded 3 month LIBOR (75)
8/15/22 3,400 ZCS at maturity compounded 3 month LIBOR (58)
11/15/22 3,475 ZCS at maturity compounded 3 month LIBOR (12)
Lehman Brothers 11/29/13 22,500 IRS fixed rate of 4.585% 3 month LIBOR (742)
Merrill Lynch 3/12/13 4,500 IRS fixed rate of 4.03% 3 month LIBOR 14
------------
(3,244)
============
U.S. CORE FIXED INCOME PORTFOLIO
Bank of America 4/30/04 1,050 TRS 3 month LIBOR Index Return(1) 32
6/30/04 2,200 TRS 3 month LIBOR Index Return(1) --
8/31/04 3,100 TRS 3 month LIBOR Index Return(1) 50
9/30/04 8,350 IRS fixed rate of 2.3932% 3 month LIBOR (50)
9/28/12 3,850 IRS fixed rate of 4.4685% 3 month LIBOR (133)
Citigroup 2/15/19 2,750 ZCS at maturity compounded 3 month LIBOR @--
11/15/19 1,150 ZCS at maturity compounded 3 month LIBOR less 7.9 bps (29)
2/15/20 1,325 ZCS at maturity compounded 3 month LIBOR less 3.1 bps @--
2/15/20 1,325 ZCS at maturity compounded 3 month LIBOR less 2.75 bps 9
5/15/20 1,750 ZCS at maturity compounded 3 month LIBOR 19
5/15/20 1,650 ZCS at maturity compounded 3 month LIBOR less 6 bps (14)
5/15/20 3,500 ZCS at maturity compounded 3 month LIBOR less 3.1 bps (28)
</Table>
91
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. CORE FIXED INCOME PORTFOLIO (CONT'D)
Citigroup 5/15/20 $ 9,750 ZCS at maturity compounded 3 month LIBOR less 5.75 bps $ (124)
8/15/20 2,000 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (34)
2/15/21 1,500 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (38)
5/15/21 2,000 ZCS at maturity compounded 3 month LIBOR less 8 bps (56)
5/15/21 1,500 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (43)
5/15/21 1,500 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (41)
5/15/21 4,500 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (141)
5/15/21 1,090 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (35)
5/15/21 1,150 ZCS at maturity compounded 3 month LIBOR less 7.75 bps (34)
5/15/21 4,350 ZCS at maturity compounded 3 month LIBOR less 3.75 bps (42)
5/15/21 2,175 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (11)
5/15/21 2,200 ZCS at maturity compounded 3 month LIBOR less 3 bps 58
5/15/21 6,750 ZCS at maturity compounded 3 month LIBOR less 4.5 bps 246
5/15/21 1,190 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (39)
11/15/21 2,175 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (25)
11/15/21 2,175 ZCS at maturity compounded 3 month LIBOR less 4.25 bps (26)
2/15/22 1,000 ZCS at maturity compounded 3 month LIBOR 8
8/15/22 1,900 ZCS at maturity compounded 3 month LIBOR less 7 bps (59)
8/15/22 2,000 ZCS at maturity compounded 3 month LIBOR 23
2/15/23 1,000 ZCS at maturity compounded 3 month LIBOR 6
2/15/23 1,500 ZCS at maturity compounded 3 month LIBOR (18)
Credit Suisse First
Boston 5/15/16 1,000 ZCS at maturity compounded 3 month LIBOR (15)
2/15/17 2,000 ZCS at maturity compounded 3 month LIBOR 16
5/15/21 2,200 ZCS at maturity compounded 3 month LIBOR 20
11/15/23 2,750 ZCS at maturity compounded 3 month LIBOR 24
Goldman Sachs 10/22/12 550 IRS fixed rate of 4.754% 3 month LIBOR (30)
2/15/20 1,150 ZCS at maturity compounded 3 month LIBOR (30)
2/15/20 1,100 ZCS at maturity compounded 3 month LIBOR (1)
2/15/20 1,175 ZCS at maturity compounded 3 month LIBOR (1)
5/15/20 675 ZCS at maturity compounded 3 month LIBOR 4
2/15/21 500 ZCS at maturity compounded 3 month LIBOR (5)
11/15/21 2,200 ZCS at maturity compounded 3 month LIBOR 53
11/15/21 3,800 ZCS at maturity compounded 3 month LIBOR (45)
8/15/22 2,000 ZCS at maturity compounded 3 month LIBOR (34)
11/15/22 2,200 ZCS at maturity compounded 3 month LIBOR (8)
Lehman Brothers 11/29/13 9,000 IRS fixed rate of 4.585% 3 month LIBOR (297)
Merrill Lynch 3/12/13 2,250 IRS fixed rate of 4.03% 3 month LIBOR 7
------------
(911)
============
INTERMEDIATE DURATION PORTFOLIO
Bank of America 4/30/04 1,475 TRS 3 month LIBOR Index Return(1) 45
8/31/04 1,500 TRS 4 month LIBOR Index Return(1) --
Citigroup 3/15/12 850 IRS fixed rate of 5.99625% 3 month LIBOR (124)
3/19/12 1,350 IRS fixed rate of 6.0428% 3 month LIBOR (202)
11/27/12 6,800 IRS fixed rate of 4.6165% 3 month LIBOR (299)
------------
(580)
============
MUNICIPAL PORTFOLIO
Citigroup 5/15/19 5,000 ZCS at maturity compounded 3 month LIBOR less 7.125 bps (102)
5/15/20 8,000 ZCS at maturity compounded 3 month LIBOR 86
8/15/20 5,000 ZCS at maturity compounded 3 month LIBOR less 6.25 bps (29)
5/15/21 5,000 ZCS at maturity compounded 3 month LIBOR less 7.75 bps (156)
5/15/21 640 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (21)
5/15/21 700 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (23)
2/15/22 4,000 ZCS at maturity compounded 3 month LIBOR 33
</Table>
92
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL PORTFOLIO (CONT'D)
Citigroup 8/15/22 $ 5,000 ZCS at maturity compounded 3 month LIBOR less 7 bps $ (123)
8/15/22 5,000 ZCS at maturity compounded 3 month LIBOR 57
2/15/23 3,000 ZCS at maturity compounded 3 month LIBOR 17
6/16/23 35,000 IRS fixed rate of 4.396% 3 month LIBOR 1,196
Goldman Sachs 2/15/21 5,000 ZCS at maturity compounded 3 month LIBOR (178)
2/15/22 50,000 ZCS at maturity compounded 3 month LIBOR (600)
------------
157
============
BALANCED PORTFOLIO
Bank of America 4/30/04 750 TRS 3 month LIBOR Index Return(1) 23
8/31/04 400 TRS 4 month LIBOR Index Return(1) --
8/31/04 750 TRS 3 month LIBOR Index Return(1) 12
6/30/04 400 TRS 3 month LIBOR Index Return(1) --
9/30/04 2,850 IRS fixed rate of 2.3932% 3 month LIBOR (17)
9/28/12 950 IRS fixed rate of 4.4685% 3 month LIBOR (33)
Citigroup 3/19/12 635 IRS fixed rate of 6.0428% 3 month LIBOR (95)
6/27/12 1,075 IRS fixed Rate of 5.3628% 3 month LIBOR (109)
6/28/12 1,750 IRS fixed Rate of 5.2133% 3 month LIBOR (158)
8/16/12 930 IRS fixed Rate of 4.55% 3 month LIBOR (39)
2/15/19 900 ZCS at maturity compounded 3 month LIBOR --
5/15/19 800 ZCS at maturity compounded 3 month LIBOR less 7.125 bps (16)
11/15/19 300 ZCS at maturity compounded 3 month LIBOR less 7.9 bps (7)
5/15/20 500 ZCS at maturity compounded 3 month LIBOR 5
5/15/20 1,025 ZCS at maturity compounded 3 month LIBOR less 3.1 bps (8)
8/15/20 550 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (9)
2/15/21 400 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (10)
5/15/21 2,500 ZCS at maturity compounded 3 month LIBOR less 8 bps (71)
5/15/21 400 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (11)
5/15/21 400 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (11)
5/15/21 1,000 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (31)
5/15/21 1,150 ZCS at maturity compounded 3 month LIBOR less 3.75 bps (11)
5/15/21 575 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (3)
5/15/21 575 ZCS at maturity compounded 3 month LIBOR less 3 bps 15
5/15/21 290 ZCS at maturity compounded 3 month LIBOR less 7.5 bps (9)
5/15/21 310 ZCS at maturity compounded 3 month LIBOR less 7.75 bps (9)
5/15/21 320 ZCS at maturity compounded 3 month LIBOR less 7.25 bps (10)
11/15/21 575 ZCS at maturity compounded 3 month LIBOR less 4.5 bps (7)
11/15/21 875 ZCS at maturity compounded 3 month LIBOR less 3.7 bps (13)
11/15/21 575 ZCS at maturity compounded 3 month LIBOR less 4.25 bps (7)
2/15/22 400 ZCS at maturity compounded 3 month LIBOR 3
8/15/22 400 ZCS at maturity compounded 3 month LIBOR less 7 bps (12)
8/15/22 250 ZCS at maturity compounded 3 month LIBOR 3
2/15/23 250 ZCS at maturity compounded 3 month LIBOR 1
2/15/23 500 ZCS at maturity compounded 3 month LIBOR (6)
Credit Suisse First
Boston 5/15/16 500 ZCS at maturity compounded 3 month LIBOR (7)
2/15/17 750 ZCS at maturity compounded 3 month LIBOR 6
5/15/21 1,725 ZCS at maturity compounded 3 month LIBOR (8)
5/15/21 1,725 ZCS at maturity compounded 3 month LIBOR (21)
5/15/21 575 ZCS at maturity compounded 3 month LIBOR 5
11/15/23 750 ZCS at maturity compounded 3 month LIBOR 6
Goldman Sachs 2/15/20 310 ZCS at maturity compounded 3 month LIBOR (10)
2/15/20 2,550 ZCS at maturity compounded 3 month LIBOR (2)
2/15/20 1,175 ZCS at maturity compounded 3 month LIBOR (1)
5/15/20 950 ZCS at maturity compounded 3 month LIBOR 6
</Table>
93
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
<Table>
<Caption>
NET UNREALIZED
NOTIONAL APPRECIATION
TERMINATION AMOUNT (DEPRECIATION)
COUNTERPARTY DATE (000) TYPE PAY RECEIVE (000)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO (CONT'D)
Goldman Sachs 2/15/21 $ 400 ZCS at maturity compounded 3 month LIBOR $ (14)
2/15/21 1,175 ZCS at maturity compounded 3 month LIBOR (11)
2/15/21 1,000 ZCS at maturity compounded 3 month LIBOR (13)
11/15/21 575 ZCS at maturity compounded 3 month LIBOR (2)
11/15/21 1,000 ZCS at maturity compounded 3 month LIBOR (12)
8/15/22 550 ZCS at maturity compounded 3 month LIBOR (9)
11/15/22 575 ZCS at maturity compounded 3 month LIBOR 14
Merrill Lynch 3/12/13 750 IRS fixed rate of 4.03% 3 month LIBOR 2
------------
(721)
============
</Table>
(1) Receive if positive (pay if negative), the total rate of return on the
Banc of America Securities LLC AAA 10-year Commercial Mortgage-Backed
Securities Daily Index.
(2) Payment of $1,000,000 or $10,000,000, in the event of a missed payment
or bankruptcy by the issuer, respectively, of Cooper Tire and Rubber
Co., 7.75% Bond Maturing 12/15/2009.
bps -- Basis Points
CDS -- Credit Default Swap
IRS -- Interest Rate Swap
TRS -- Total Return Swap
ZCS -- Zero Coupon Interest Rate Swap
@ -- Amount is less than $500.
G. SECURITIES LENDING. Certain Portfolios may lend securities to qualified
financial institutions, such as broker-dealers, to earn additional income. Any
increase or decrease in the fair value of the securities loaned that might occur
and any interest earned or dividends declared on those securities during the
term of the loan would remain in the Portfolio. Portfolios that lend securities
receive cash or securities as collateral in an amount equal to or exceeding 100%
of the current fair value of the loaned securities. The collateral is marked to
market daily, by the securities lending agent, to ensure that a minimum of 100%
collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any
cash collateral that is received in high-quality short-term investments. the
Portfolio retains a portion of the income derived from these investments, which
is included in the Statement of Operations in interest income. Risk in
securities lending transactions are that a borrower may not provide additional
collateral when required or return the securities when due, and that the value
of the short-term investments will be less than the amount of cash collateral
plus any rebate that is required to be returned to the borrower. The value of
loaned securities and related collateral outstanding at March 31, 2004 are as
follows:
<Table>
<Caption>
VALUE OF
LOANED VALUE OF
SECURITIES COLLATERAL
PORTFOLIO (000) (000)
- --------------------------------------------------------------------
Core Plus Fixed Income $240,671 $244,704
Investment Grade Fixed Income 120,597 122,836
U.S. Core Fixed Income 44,950 45,810
High Yield 67,588 68,625
Balanced 12,131 12,353
</Table>
The following Portfolios had income from securities lending (after rebates to
borrowers and allocation to the securities lending agent):
<Table>
<Caption>
NET INTEREST
EARNED BY
PORTFOLIO
PORTFOLIO (000)
- --------------------------------------------------------------------
Core Plus Fixed Income $287
Investment Grade Fixed Income 59
U.S. Core Fixed Income 35
High Yield 65
Balanced 17
</Table>
H. FEDERAL INCOME TAXES. It is each Portfolio's intention to continue to qualify
as a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recognized on the accrual basis.
Dividends from net investment income, if any, are declared and paid quarterly
except for those of the Cash Reserves Portfolio which are declared daily and
94
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
paid monthly and Intermediate Duration, Limited Duration and Municipal
Portfolios which are declared and paid monthly. Net realized capital gains are
distributed at least annually.
The tax character of the Municipal Portfolio's ordinary income distributions
include tax exempt as well as taxable components. The undistributed ordinary
income for the Municipal Portfolio includes tax exempt as well as taxable
components.
The tax character for distributions paid may differ from the character of
distributions shown on the Statement of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during fiscal 2003 and 2002 were as follows:
<Table>
<Caption>
2003 2002
DISTRIBUTIONS DISTRIBUTIONS
PAID FROM: PAID FROM:
--------------------------------------
ORDINARY LONG-TERM ORDINARY
INCOME CAPITAL GAIN INCOME
PORTFOLIO (000) (000) (000)
- -----------------------------------------------------------------------------
Core Plus Fixed Income $267,294 $ -- $261,898
Investment Grade Fixed Income 28,788 666 17,261
U.S. Core Fixed Income 20,574 199 11,282
Cash Reserves 1,432 -- 2,539
High Yield 24,256 -- 81,395
Intermediate Duration 6,936 1,160 4,621
Limited Duration 14,833 688 11,264
Municipal 10,489 -- 8,022
Balanced 10,117 -- 13,362
</Table>
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States. The book/tax differences are
either considered temporary or permanent in nature. Temporary differences are
generally due to differing book and tax treatments in the timing of the
recognition of gains or losses on securities, forwards and futures, including
Post October losses. Permanent differences are generally due to REIT
adjustments, gain (loss) on in-kind redemptions, foreign currency transactions
and gains on certain equity securities designated as issued by "passive foreign
investment companies".
Permanent book and tax basis differences may result in reclassifications to
undistributed (distributions in excess of) net investment income and paid-in
capital.
At September 30, 2003, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM
INCOME CAPITAL GAIN
PORTFOLIO (000) (000)
- -------------------------------------------------------------------
Core Plus Fixed Income $42,991 $--
Investment Grade Fixed Income 6,776 --
U.S. Core Fixed Income 4,367 --
Cash Reserves 105 --
High Yield 6,651 --
Intermediate Duration 731 --
International Fixed Income 13,791 --
Limited Duration 1,417 --
Municipal 1,292 --
Balanced 2,116 --
</Table>
At March 31, 2004, cost, unrealized appreciation, unrealized depreciation and
net unrealized appreciation (depreciation) of securities for Federal income tax
purposes were:
<Table>
<Caption>
NET UNREALIZED
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
PORTFOLIO (000) (000) (000) (000)
- --------------------------------------------------------------------------------------
Core Plus Fixed
Income $3,205,176 $103,917 $(61,788) $42,129
Investment Grade
Fixed Income 724,103 21,362 (5,744) 15,618
U.S. Core Fixed
Income 285,251 7,609 (3,264) 4,345
Cash Reserves 33,204 -- -- --
High Yield 376,966 22,810 (46,116) (23,306)
Intermediate
Duration 139,448 3,609 (563) 3,046
International Fixed
Income 121,481 17,216 (38) 17,178
Limited Duration 887,884 11,015 (302) 10,713
Municipal 386,632 21,302 (1,762) 19,540
Balanced 259,746 41,746 (3,046) 38,700
</Table>
At September 30, 2003, the following Portfolios had available for Federal income
tax purposes unused capital losses, which will expire on the indicated dates:
<Table>
<Caption>
EXPIRATION DATE SEPTEMBER 30,
(000)
---------------------------------------------------------------
PORTFOLIO 2007 2008 2009 2010 2011 TOTAL
- -------------------------------------------------------------------------------------------
Core Plus Fixed
Income $ -- $ -- $ -- $ -- $53,942 $53,942
Investment Grade
Fixed Income -- -- -- -- -- --
U.S. Core Fixed
Income -- -- -- -- -- --
Cash Reserves -- -- -- -- 5 5
High Yield 718 12,236 26,962 20,212 183,778 243,906
Intermediate
Duration -- -- -- -- 280 280
International
Fixed Income -- -- 1,259 57 -- 1,316
Limited Duration -- -- -- -- --
Municipal -- -- 281 -- 171 452
Balanced -- -- 4,254 38,924 40,947 84,125
</Table>
95
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
In addition to the $243,906,000 in unused capital losses attributed to the High
Yield Portfolio in the table above, approximately $63,437,000 has been brought
forward as a result of the Portfolio's merger with the MSIF High Yield II
Portfolio. The utilization of the capital loss carryforward in subsequent years
may be limited pursuant to sections 382 and 383 of the Internal Revenue Code.
This acquired capital loss carryforward is expected to expire between 2006-2011.
To the extent that capital loss carryover is used to offset any future capital
gains realized during the carryover period as provided by U.S. Federal income
tax regulations, no capital gains tax liability will be incurred by a portfolio
for gains realized and not distributed. To the extent that capital gains are
offset, such gains will not be distributed to the shareholders.
Under current tax law, certain capital and net foreign exchange losses realized
after October 31 may be deferred and treated as occurring on the first day of
the following fiscal year. For the fiscal year ended September 30, 2003, the
following Portfolios elected to defer capital and currency losses occurring
between November 1, 2002 and September 30, 2003 up to the following amounts:
<Table>
<Caption>
POST-OCTOBER
------------------
CAPITAL CURRENCY
LOSSES LOSSES
PORTFOLIO (000) (000)
- -----------------------------------------------------------------
Core Plus Fixed Income $ 2,277 $ --
Investment Grade Fixed Income 658 8
U.S. Core Fixed Income 3,967 --
Cash Reserves -- --
High Yield 206,433 446
Intermediate Duration 269 3
International Fixed Income -- --
Limited Duration 463 --
Municipal 5,315 --
Balanced 8,434 --
</Table>
I. OTHER. The High Yield Portfolio's net assets are substantially comprised of
high yield fixed income securities. The financial condition of an issuer of
these securities and general economic and industry specific conditions may
affect an issuer's ability to make payments of income and principal on these
securities and ultimately impact their valuation.
A portion of the securities of the Municipal Portfolio are insured by certain
companies specializing in the insurance of municipal debt obligations. At March
31, 2004, approximately 52.8% of the net assets of the Municipal Portfolio are
covered by such insurance. Listed below are the insurers that insure obligations
constituting more than 10% of the Portfolio's net assets:
<Table>
<Caption>
% OF
PORTFOLIO'S NET
INSURERS ASSETS
- ---------------------------------------------------------
MBIA 15.1 %
AMBAC 11.8
FGIC 12.2
FSA 10.4
</Table>
At March 31, 2004, certain Portfolios had otherwise unaffiliated record owners
of 10% or greater. Investment activities of these shareholders could have a
material impact on these Portfolios. These Portfolios and the aggregate
percentage of such owners was as follows:
<Table>
<Caption>
PERCENTAGE OF OWNERSHIP
-----------------------------------------------
INSTITUTIONAL INVESTMENT ADVISER
PORTFOLIO CLASS CLASS CLASS
- ------------------------------------------------------------------------------
Core Plus Fixed Income 33.8% 86.5% 91.2%
Investment Grade Fixed Income 63.0 -- 51.5
U.S. Core Fixed Income 82.2 91.3 --
Cash Reserves 43.2 100.0 --
High Yield 49.6 94.5 74.6
Intermediate Duration 85.7 99.0 --
International Fixed Income 83.3 -- --
Limited Duration 86.0 -- --
Municipal 43.7 -- --
Balanced 74.8 98.3 91.0
</Table>
J. SUBSEQUENT EVENTS. Effective April 21, 2004, Philip J. Purcell resigned from
the Board of Trustees.
On April 21, 2004, the Fund's Board of Trustees unanimously decided to liquidate
the Cash Reserves Portfolio. The Portfolio will make its final distribution of
liquidation proceeds on May 27, 2004.
96
<Page>
2004 SEMI-ANNUAL REPORT
March 31, 2004 (unaudited)
TRUSTEE AND OFFICER INFORMATION
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael Nugent
Fergus Reid
INVESTMENT ADVISER AND ADMINISTRATOR
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
DISTRIBUTOR
Morgan Stanley Distribution, Inc.
One Tower Bridge
100 Front Street, Suite 1100
West Conshohocken, PA 19428-2899
CUSTODIAN
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
Mitchell M. Merin
PRESIDENT
Ronald E. Robison
EXECUTIVE VICE PRESIDENT AND PRINCIPAL EXECUTIVE
Barry Fink
VICE PRESIDENT
Joseph J. McAlinden
VICE PRESIDENT
Stefanie V. Chang
VICE PRESIDENT
James W. Garrett
TREASURER AND CHIEF FINANCIAL OFFICER
Michael J. Leary
ASSISTANT TREASURER
Mary E. Mullin
SECRETARY
LEGAL COUNSEL
Clifford Chance US LLP
220 Park Avenue
New York, NY 10166
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
This report is authorized for distribution only when preceded or accompanied by
a prospectus of the Morgan Stanley Institutional Fund Trust which describes in
detail each Investment Portfolio's investment policies, risks, fees and
expenses. Please read the prospectus carefully before you invest or send money.
For additional information, including information regarding the investments
comprising the Portfolio, please visit our website at www.morganstanley.com/im
or call 1(800) 354-8185.
Additionally, a description of the Trust's proxy voting policies and procedures
is available without charge at our website at www.morganstanley.com/im/legal, at
the SEC's website at www.sec.gov or by calling 1(800) 354-8185.
97
<Page>
(This page has been left blank intentionally.)
<Page>
(This page has been left blank intentionally.)
<Page>
(This page has been left blank intentionally.)
<Page>
Printed in U.S.A.
This Report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Investment Adviser: (610) 940-5000 - MSIF Trust (800) 354-8185
(C) 2004 Morgan Stanley
[MORGON STANLEY LOGO] 930-fibalseman-0404
<Page>
ITEM 2. CODE OF ETHICS.
NOT APPLICABLE FOR SEMIANNUAL REPORTS.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
NOT APPLICABLE FOR SEMIANNUAL REPORTS.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
NOT APPLICABLE FOR SEMIANNUAL REPORTS.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
NOT APPLICABLE FOR SEMIANNUAL REPORTS.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
NOT APPLICABLE FOR SEMIANNUAL REPORTS.
ITEM 8. [RESERVED.]
ITEM 9 - CONTROLS AND PROCEDURES
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
<Page>
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's second fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING.
Item 10 Exhibits
(a) Code of Ethics - Not applicable for semiannual reports.
(b) A SEPARATE CERTIFICATION FOR EACH PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
FINANCIAL OFFICER OF THE REGISTRANT ARE ATTACHED HERETO AS PART OF EX-99.CERT.
<Page>
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.
(Registrant) Morgan Stanley Institutional Fund Trust
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: May 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: May 18, 2004
By: /s/ James W. Garrett
Name: James W. Garrett
Title: Principal Financial Officer
Date: May 18, 2004