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 811-08789
---------------------------------------------
VALIC Company II
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
2929 Allen Parkway, Houston, TX 77019
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Evelyn M. Curran
Senior Vice President
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, TX 77019
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (713) 831-6425
-----------------------------
Date of fiscal year end: August 31
--------------------------
Date of reporting period: August 31, 2004
--------------------------
Item 1. Reports to Shareholders
VALIC Company II, Annual Report at August 31, 2004
VALIC Company II
Annual Report
August 31, 2004
VALIC COMPANY II - ANNUAL REPORT AUGUST 31, 2004
TABLE OF CONTENTS
President's Letter.........................................................
1
Expense Example............................................................
2
Schedules of Investments:
Aggressive Growth Lifestyle Fund........................................ 4
Capital Appreciation Fund............................................... 6
Conservative Growth Lifestyle Fund...................................... 8
Core Bond Fund.......................................................... 10
High Yield Bond Fund.................................................... 16
International Growth II Fund............................................ 22
Large Cap Value Fund.................................................... 25
Mid Cap Growth Fund..................................................... 28
Mid Cap Value Fund...................................................... 31
Moderate Growth Lifestyle Fund.......................................... 34
Money Market II Fund.................................................... 36
Small Cap Growth Fund................................................... 38
Small Cap Value Fund.................................................... 41
Socially Responsible Fund............................................... 45
Strategic Bond Fund..................................................... 48
Statements of Assets and Liabilities.......................................
55
Statements of Operations...................................................
57
Statements of Changes in Net Assets........................................
59
Notes to Financial Statements..............................................
63
Financial Highlights.......................................................
74
Report of Independent Registered Public Accounting Firm....................
82
Trustee Information........................................................
83
Shareholder Tax Information................................................
85
Comparisons: Fund vs Indexes...............................................
86
- --------------------------------------------------------------------------------
PRESIDENT'S LETTER 1
Dear Valued Investor:
We are pleased to provide you with the Annual Report for VALIC Company II for
the twelve month period ending August 31, 2004.
During the twelve month period, the pre-eminent factors that influenced the
market included strong corporate earnings, rising oil prices, rising short-term
interest rates and increasing violence in the Middle East. With geopolitical
and economic "uncertainty" continuing to be the predominate theme, the markets
have generally been stagnant in 2004.
Each new period brings with it more issues for the markets to face. Exposure to
certain asset classes, such as bonds and value companies in recent months, may
help performance during one quarter, but the leaders the next quarter may be
completely different. These changes only reinforce the benefits of a
well-diversified portfolio with exposure to numerous asset classes that perform
differently in varying market conditions.
With VALIC Company II, you have a wide range of investment choices, covering
many asset classes, to help you meet your objectives. Each investor has his or
her own risk tolerance and financial goals. We recommend that you contact your
financial representative to make certain that your current portfolio allocation
is appropriate for you.
The following pages provide you with detailed information about your fund's
returns and holdings, as well as financial information. Additionally, you will
find data and analysis that provide insight into the market conditions
affecting your particular fund's performance.
Thank you for your continued confidence in our ability to help you meet your
investment goals.
Sincerely,
/s/ Evelyn M. Curran
Evelyn M. Curran, President
VALIC Company II
2 VALIC COMPANY II - EXPENSE EXAMPLE (Unaudited) August 31, 2004
Disclosure of Fund Expenses in Shareholder Reports
As a shareholder of a Fund in VALIC Company II ("VC II"), you incur ongoing
costs, including management fees and other Fund expenses. This Example is
intended to help you understand your ongoing costs (in dollars) on investing in
the Funds and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
March 1, 2004 and held until August 31, 2004. Shares are currently issued and
redeemed only in connection with investments in and payments under variable
annuity contracts and variable life insurance policies ("Variable Contracts'')
and qualified retirement plans (the "Plans"). The fees and expenses associated
with the Variable Contracts and Plans are not included in these Examples, and
had such fees and expenses been included, your costs would have been higher.
Please see your Variable Contract prospectus or Plan document for more details
on the separate account fees or administration fees.
Actual Expenses
The second through the fourth columns of the table provides information about
your actual account values and actual expenses. You may use the information in
these columns, together with the amount you invested, to estimate the expenses
that you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the column under the heading entitled "Expenses Paid
During Period'' to estimate the expenses you paid on your account during this
period. The "Expenses Paid During Period'' in column four and "Expense Ratio as
of August 31, 2004'' in column eight do not include fees and expenses that may
be charged by the Variable Contracts or Plans, in which the Funds are offered.
Hypothetical Example for Comparison Purposes
The fifth through the seventh columns of the table provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Funds and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. The "Expenses Paid During
Period'' in column seven and "Expense Ratio as of August 31, 2004" in column
eight do not include fees and expenses that may be charged by the Variable
Contracts or Plans, in which the Funds are offered.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and will not help you determine the relative total costs of
owning different funds.
August 31, 2004 VALIC COMPANY II - EXPENSE EXAMPLE (Unaudited) - CONTINUED 3
Actual Hypothetical
----------------------------------------- -----------------------------------------
Ending
Account Value
Ending Using a
Account Value Expenses Paid Hypothetical Expenses Paid Expense
Beginning Using Actual During the Beginning 5% Assumed During the Ratio
Account Value Return at Period Ended Account Value Return at Period Ended as of
at March 1, August 31, August 31, at March 1, August 31, August 31, August 31,
Fund 2004 2004 2004* 2004 2004 2004* 2004*
- ---- ------------- ------------- ------------- ------------- ------------- ------------- ----------
Aggressive Growth Lifestyle#.. $1,000.00 $ 956.07 $0.49 $1,000.00 $1,024.70 $0.51 0.10%
Capital Appreciation#......... $1,000.00 $ 934.05 $4.14 $1,000.00 $1,020.92 $4.33 0.85%
Conservative Growth Lifestyle# $1,000.00 $ 978.68 $0.50 $1,000.00 $1,024.70 $0.51 0.10%
Core Bond#.................... $1,000.00 $1,011.74 $3.90 $1,000.00 $1,021.32 $3.92 0.77%
High Yield Bond#.............. $1,000.00 $1,031.60 $5.07 $1,000.00 $1,020.21 $5.04 0.99%
International Growth II#...... $1,000.00 $ 956.23 $4.93 $1,000.00 $1,020.16 $5.09 1.00%
Large Cap Value#.............. $1,000.00 $ 963.70 $4.01 $1,000.00 $1,021.12 $4.13 0.81%
Mid Cap Growth#............... $1,000.00 $ 920.93 $4.12 $1,000.00 $1,020.92 $4.33 0.85%
Mid Cap Value#@............... $1,000.00 $ 964.04 $5.20 $1,000.00 $1,019.91 $5.35 1.05%
Moderate Growth Lifestyle#.... $1,000.00 $ 967.16 $0.50 $1,000.00 $1,024.70 $0.51 0.10%
Money Market II#.............. $1,000.00 $1,003.23 $2.78 $1,000.00 $1,022.43 $2.80 0.55%
Small Cap Growth #............ $1,000.00 $ 927.27 $5.64 $1,000.00 $1,019.36 $5.90 1.16%
Small Cap Value#.............. $1,000.00 $ 993.42 $4.77 $1,000.00 $1,020.42 $4.84 0.95%
Socially Responsible#......... $1,000.00 $ 964.99 $2.77 $1,000.00 $1,022.38 $2.85 0.56%
Strategic Bond#............... $1,000.00 $1,019.97 $4.43 $1,000.00 $1,020.82 $4.43 0.87%
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 184 days then divided by
366 days. These ratios do not reflect fees and expenses associated with the
Variable Contracts or Plans. If such fees and expenses had been included, the
expenses would have been higher. Please refer to your variable contract
prospectus for details on the expenses that apply to the Variable Contracts
or your Plan document for details on administration fees charged by your Plan
sponsor.
# During the stated period, the investment adviser waived a portion of or all
fees and assumed a portion of or all expenses for the Fund. As a result, if
these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Period" and the "Expense
Ratios" would have been higher.
@ Through expense offset arrangements resulting from broker commission
recapture, a portion of the Fund's expenses has been reduced. Had the expense
reductions been taken into account, the Expense Example would have been as
follows:
Ending
Account Value
Ending Using a
Account Value Expenses Paid Hypothetical Expenses Paid Expense
Beginning Using Actual During the Beginning 5% Assumed During the Ratio
Account Value Return at Period Ended Account Value Return at Period Ended as of
at March 1, August 31, August 31, at March 1, August 31, August 31, August 31,
Fund 2004 2004 2004* 2004 2004 2004* 2004*
- ---- ------------- ------------- ------------- ------------- ------------- ------------- ----------
Mid Cap Value $1,000.00 $964.04 $5.00 $1,000.00 $1,020.11 $5.14 1.01%
4 AGGRESSIVE GROWTH LIFESTYLE FUND - PORTFOLIO PROFILE August 31, 2004
(Unaudited)
Industry Allocation*
Large Cap Equity Funds.... 60.05%
International Equity Funds 26.02%
Mid Cap Equity Funds...... 5.81%
Bond Funds................ 5.50%
Small Cap Equity Funds.... 2.70%
------
100.08%
======
* Calculated as a percentage of Net Assets.
August 31, 2004 AGGRESSIVE GROWTH LIFESTYLE FUND - SCHEDULE OF INVESTMENTS 5
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------------
AFFILIATED INVESTMENT COMPANIES# -- 100.08%
Bond Fund -- 5.50%
VALIC Co. II Core Bond Fund............... 184,501 $ 1,845,006
-----------
International Equity Fund -- 26.02%
VALIC Co. II International Growth II Fund. 841,877 8,721,846
-----------
Large Cap Equity Funds -- 60.05%
VALIC Co. II Capital Appreciation Fund.... 1,274,645 9,929,486
VALIC Co. II Large Cap Value Fund......... 837,262 10,197,850
-----------
20,127,336
-----------
Mid Cap Equity Funds -- 5.81%
VALIC Co. II MidCap Value Fund............ 60,124 972,821
VALIC Co. II MidCap Growth Fund........... 163,775 972,821
-----------
1,945,642
-----------
Small Cap Equity Funds -- 2.70%
VALIC Co. II Small Cap Growth Fund........ 42,754 436,092
VALIC Co. II Small Cap Value Fund......... 34,331 469,638
-----------
905,730
-----------
Total Affiliated Investment Companies
(Cost $32,028,726)(1).................... 100.08% 33,545,560
Liabilities in excess of other assets....... (0.08)% (25,389)
--------- -----------
NET ASSETS -- 100% $33,520,171
========= ===========
- --------
# See Note 3.
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
6 CAPITAL APPRECIATION FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Information Processing -- Services 9.09%
Medical -- Biomedical/Gene........ 7.22%
Multimedia........................ 7.18%
Telecommunications................ 7.16%
Information Processing -- Software 7.10%
Drugs............................. 6.65%
Conglomerates..................... 6.30%
Semiconductors.................... 4.27%
Automotive........................ 3.71%
Medical Technology................ 3.57%
Oil & Gas......................... 3.35%
Apparel & Products................ 2.97%
Finance Companies................. 2.87%
Household Products................ 2.54%
Therapeutics...................... 2.39%
Information Processing -- Hardware 2.24%
Foods............................. 2.22%
Chemical.......................... 2.15%
Hospital Supplies................. 2.13%
Leisure & Tourism................. 2.01%
Aerospace/Defense................. 1.94%
Retail............................ 1.94%
Schools........................... 1.87%
Financial Services................ 1.82%
Beverages......................... 1.47%
Healthcare........................ 1.18%
Electronics/Electrical Equipment.. 1.07%
Machinery......................... 0.97%
Repurchase Agreement.............. 0.55%
-----
99.93%
=====
* Calculated as a percentage of Net Assets.
August 31, 2004 CAPITAL APPRECIATION FUND - SCHEDULE OF INVESTMENTS 7
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------
COMMON STOCK -- 99.38%
Aerospace/Defense -- 1.94%
United Technologies Corp................ 8,800 $ 826,408
----------
Apparel & Products -- 2.97%
Gap, Inc................................ 42,900 803,946
TJX Cos., Inc........................... 21,700 459,172
----------
1,263,118
----------
Automotive -- 3.71%
Autoliv, Inc............................ 11,300 477,425
Danaher Corp............................ 21,400 1,100,388
----------
1,577,813
----------
Beverages -- 1.47%
Coca-Cola Co............................ 14,000 625,940
----------
Chemical -- 2.15%
Dow Chemical Co......................... 9,400 402,414
E.I. du Pont de Nemours and Co.......... 12,100 511,346
----------
913,760
----------
Conglomerates -- 6.30%
General Electric Co..................... 40,900 1,341,111
Tyco International, Ltd................. 42,800 1,340,496
----------
2,681,607
----------
Drugs -- 6.65%
Caremark Rx, Inc.+...................... 14,900 427,630
Eli Lilly & Co.......................... 11,900 755,055
Schering-Plough Corp.................... 47,700 880,542
Sepracor, Inc.+......................... 15,400 763,994
----------
2,827,221
----------
Electronics/Electrical Equipment -- 1.07%
Comverse Technology, Inc.+.............. 26,100 457,011
----------
Finance Companies -- 2.87%
Capital One Financial Corp.............. 18,000 1,219,680
----------
Financial Services -- 1.82%
Countrywide Financial Corp.............. 21,800 774,990
----------
Foods -- 2.22%
Dean Foods Co.+......................... 13,700 507,859
Sara Lee Corp........................... 19,800 438,174
----------
946,033
----------
Healthcare -- 1.18%
Anthem, Inc.+........................... 6,200 503,688
----------
Hospital Supplies -- 2.13%
St. Jude Medical, Inc.+................. 13,500 907,875
----------
Household Products -- 2.54%
Avon Products, Inc...................... 12,200 538,996
Estee Lauder Cos., Inc., Class A........ 12,300 540,585
----------
1,079,581
----------
Information Processing - Hardware -- 2.24%
Dell, Inc.+............................. 14,600 508,664
Lexmark International, Inc., Class A+... 5,000 442,250
----------
950,914
----------
Information Processing - Services -- 9.09%
eBay, Inc.+............................. 13,400 1,159,636
EMC Corp.+.............................. 51,000 549,270
IAC/InterActive Corp.+.................. 29,500 672,895
VeriSign, Inc.+......................... 25,900 449,624
Yahoo!, Inc.+........................... 36,300 1,034,913
----------
3,866,338
----------
Information Processing - Software -- 7.10%
Automatic Data Processing, Inc.......... 31,500 1,252,755
Microsoft Corp.......................... 64,800 1,769,040
----------
3,021,795
----------
Leisure & Tourism -- 2.01%
Starbucks Corp.+........................ 19,800 856,152
----------
Number Market
of Shares/ Value
Par Value (Note 2)
- ----------------------------------------------------------------------------------------
Machinery -- 0.97%
Caterpillar, Inc............................................... 2,800 $ 203,560
Deere & Co..................................................... 3,300 208,791
-----------
412,351
-----------
Medical - Biomedical/Gene -- 7.22%
Amgen, Inc.+................................................... 10,500 622,545
Biogen Idec, Inc.+............................................. 8,400 498,372
Genentech, Inc.+............................................... 24,800 1,209,744
Genzyme Corp.+................................................. 13,700 739,800
-----------
3,070,461
-----------
Medical Technology -- 3.57%
Boston Scientific Corp.+....................................... 23,700 846,801
Guidant Corp................................................... 11,200 669,760
-----------
1,516,561
-----------
Multimedia -- 7.18%
E.W. Scripps Co., Class A...................................... 6,200 634,322
News Corp., Ltd. ADR........................................... 14,995 446,101
Time Warner, Inc.+............................................. 57,950 947,483
Viacom, Inc., Class B.......................................... 30,842 1,027,347
-----------
3,055,253
-----------
Oil & Gas -- 3.35%
BJ Services Co.+............................................... 13,700 658,285
XTO Energy, Inc................................................ 27,400 768,296
-----------
1,426,581
-----------
Retail -- 1.94%
Best Buy Co., Inc.............................................. 8,800 409,376
Wal-Mart Stores, Inc........................................... 7,900 416,093
-----------
825,469
-----------
Schools -- 1.87%
Apollo Group, Inc., Class A+................................... 10,200 795,600
-----------
Semiconductors -- 4.27%
Analog Devices, Inc............................................ 16,300 565,936
Applied Materials, Inc.+....................................... 29,300 465,577
Intel Corp..................................................... 29,100 619,539
KLA-Tencor Corp.+.............................................. 4,400 164,384
-----------
1,815,436
-----------
Telecommunications -- 7.16%
Avaya, Inc.+................................................... 29,400 356,328
Cisco Systems, Inc.+........................................... 56,500 1,059,940
Corning, Inc.+................................................. 77,100 780,252
Motorola, Inc.................................................. 52,700 851,105
-----------
3,047,625
-----------
Therapeutics -- 2.39%
Gilead Sciences, Inc.+......................................... 14,700 1,016,211
-----------
Total Investment Securities
(Cost $42,982,651)............................................ 42,281,472
-----------
REPURCHASE AGREEMENTS -- 0.55%
Agreement with State Street Bank & Trust Co., bearing interest
at 1.42%, dated 8/31/04, to be repurchased 9/01/04 in the
amount of $231,009 and collateralized by Federal National
Mortgage Assoc. Notes, bearing interest at 1.28%, due
12/09/05 and having an approximate value of $240,600
(Cost $231,000)............................................... $231,000 231,000
-----------
TOTAL INVESTMENTS
(Cost $43,213,651)(1)......................................... 99.93% 42,512,472
Other assets less liabilities.................................... 0.07% 31,648
-------- -----------
NET ASSETS -- 100% $42,544,120
======== ===========
- --------
ADR American Depository Receipt
+ Non-income producing
(1) See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
8 CONSERVATIVE GROWTH LIFESTYLE FUND - PORTFOLIO PROFILE August 31, 2004
(Unaudited)
Industry Allocation*
Bond Funds................ 47.03%
Large Cap Equity Funds.... 39.33%
International Equity Funds 8.21%
Mid Cap Equity Funds...... 3.80%
Small Cap Equity Funds.... 1.70%
------
100.07%
======
* Calculated as a percentage of Net Assets.
August 31, 2004 CONSERVATIVE GROWTH LIFESTYLE FUND - SCHEDULE OF INVESTMENTS 9
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------------
AFFILIATED INVESTMENT COMPANIES# -- 100.07%
Bond Fund -- 47.03%
VALIC Co. II Core Bond Fund............... 1,441,567 $14,415,673
-----------
International Equity Fund -- 8.21%
VALIC Co. II International Growth II Fund. 242,768 2,515,075
-----------
Large Cap Equity Funds -- 39.33%
VALIC Co. II Capital Appreciation Fund.... 763,838 5,950,299
VALIC Co. II Large Cap Value Fund......... 501,121 6,103,658
-----------
12,053,957
-----------
Mid Cap Equity Funds -- 3.80%
VALIC Co. II MidCap Value Fund............ 36,018 582,761
VALIC Co. II MidCap Growth Fund........... 98,108 582,761
-----------
1,165,522
-----------
Small Cap Equity Funds -- 1.70%
VALIC Co. II Small Cap Growth Fund........ 24,056 245,373
VALIC Co. II Small Cap Value Fund......... 20,179 276,045
-----------
521,418
-----------
Total Affiliated Investment Companies
(Cost $30,595,034)(1).................... 100.07% 30,671,645
Liabilities in excess of other assets....... (0.07)% (22,856)
--------- -----------
NET ASSETS -- 100% $30,648,789
========= ===========
- --------
# See Note 3.
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
10 CORE BOND FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Government Agencies............... 47.60%
Financial Services................ 8.28%
Government Obligations............ 6.74%
Utilities -- Electric............. 4.76%
Banks............................. 3.67%
Finance Companies................. 3.30%
Telecommunications................ 2.73%
Broadcasting...................... 2.19%
Oil & Gas......................... 1.96%
Insurance......................... 1.59%
Foreign Government Bonds.......... 1.44%
Airlines.......................... 1.04%
Automotive........................ 1.04%
Utilities -- Communication........ 0.95%
Beverages......................... 0.93%
Retail............................ 0.92%
Utilities -- Gas, Pipeline........ 0.91%
Commercial Services............... 0.86%
Paper/Forest Products............. 0.85%
Aerospace/Defense................. 0.83%
Pollution Control................. 0.71%
Multimedia........................ 0.62%
Metals............................ 0.56%
Railroads & Equipment............. 0.51%
Chemical.......................... 0.50%
Savings & Loan.................... 0.46%
Drugs............................. 0.44%
Real Estate Investment Trusts..... 0.40%
Household Products................ 0.39%
Conglomerates..................... 0.37%
Hospital Management............... 0.37%
Utilities -- Gas, Distribution.... 0.37%
Hospital Supplies................. 0.24%
Information Processing -- Hardware 0.16%
Foods............................. 0.15%
Healthcare........................ 0.15%
Real Estate....................... 0.14%
Heavy Duty Trucks/Parts........... 0.13%
Information Processing -- Services 0.12%
Electronics/Electrical Equipment.. 0.11%
Machinery......................... 0.11%
Leisure & Tourism................. 0.04%
-----
99.64%
=====
Credit Quality+#
Government -- Agency.. 47.70%
Government -- Treasury 6.74%
AAA................... 4.61%
AA.................... 1.92%
A..................... 12.65%
BBB................... 15.48%
BB.................... 2.80%
B..................... 4.15%
CCC................... 1.72%
CC.................... 0.01%
Not Rated@............ 2.22%
------
100.00%
======
* Calculated as a percentage of Net Assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
August 31, 2004 CORE BOND FUND - SCHEDULE OF INVESTMENTS 11
Market
Value
Par Value (Note 2)
--------------------------------------------------------
CORPORATE BONDS -- 43.86%
Aerospace/Defense -- 0.83%
Goodrich Corp.:
6.45% due 12/15/07.............. $ 77,000 $ 83,458
Northrop Grumman Corp.:
7.13% due 2/15/11............... 171,000 196,600
4.08% due 11/16/06.............. 208,000 211,907
Raytheon Co.:
4.85% due 1/15/11............... 102,000 104,066
----------
596,031
----------
Airlines -- 1.04%
American Airlines, Inc.:
6.82% due 11/23/12.............. 200,000 177,302
Atlas Air, Inc.:
7.63% due 7/2/16................ 190,086 126,219
6.88% due 1/2/11................ 175,000 166,651
Continental Airlines, Inc.:
9.56% due 9/1/19................ 180,473 180,666
7.08% due 11/1/04............... 11,204 10,995
6.95% due 2/2/11................ 97,299 73,626
Delta Air Lines, Inc.:
10.00% due 8/15/08.............. 20,000 7,300
----------
742,759
----------
Automotive -- 1.04%
Ford Motor Co.:
7.45% due 7/16/31............... 201,000 197,090
General Motors Corp.:
8.38% due 7/15/33............... 126,000 133,946
8.25% due 7/15/23............... 196,000 206,605
7.20% due 1/15/11............... 191,000 202,809
----------
740,450
----------
Banks -- 3.67%
American Express Centurion Bank:
4.38% due 7/30/09............... 101,000 103,319
Bank of America Corp.:
4.25% due 10/1/10............... 160,000 160,457
BankBoston Capital Trust IV:
1.97% due 6/8/28(2)............. 181,000 174,268
Capital One Bank:
5.13% due 2/15/14............... 103,000 101,957
Emigrant Capital Trust I:
4.23% due 12/10/33*(1).......... 296,000 294,394
European Investment Bank:
4.00% due 3/15/05............... 100,000 101,230
First Maryland Capital II:
2.54% due 2/1/27(1)............. 159,000 154,235
First Union Corp.:
7.50% due 4/15/35............... 115,000 143,348
Huntington National Bank:
4.65% due 6/30/09............... 85,000 87,341
Key Bank NA:
7.00% due 2/1/11................ 72,000 80,802
4.10% due 6/30/05............... 100,000 101,620
KeyCorp:
2.75% due 2/27/07............... 186,000 183,730
National City Bank:
2.50% due 4/17/06............... 176,000 176,129
PNC Funding Corp.:
5.75% due 8/1/06................ 196,000 206,351
RBS Capital Trust III:
5.51% due 9/30/14(2)............ 146,000 147,976
United Overseas Bank, Ltd.:
5.38% due 9/3/14*(2)............ 88,000 89,077
US Bank NA:
3.90% due 8/15/08............... 32,000 32,289
3.70% due 8/1/07................ 170,000 172,090
Wells Fargo & Co.:
5.13% due 9/1/12................ 108,000 110,884
----------
2,621,497
----------
Market
Value
Par Value (Note 2)
--------------------------------------------------------------
Beverages -- 0.93%
Anheuser-Busch Cos., Inc.:
5.95% due 1/15/33..................... $174,000 $ 182,591
Coca Cola Enterprises, Inc.:
8.50% due 2/1/22...................... 159,000 208,156
Coca-Cola HBC Finance BV:
5.13% due 9/17/13..................... 76,000 77,736
PepsiCo, Inc.:
3.20% due 5/15/07..................... 197,000 198,243
----------
666,726
----------
Broadcasting -- 2.19%
Charter Communications Holdings, LLC:
11.13% due 1/15/11.................... 125,000 104,375
Clear Channel Communications, Inc.:
6.00% due 11/1/06..................... 101,000 106,497
5.75% due 1/15/13..................... 111,000 113,760
Comcast Corp.:
6.88% due 6/15/09..................... 61,000 67,896
Cox Communications, Inc.:
7.75% due 8/15/06..................... 119,000 127,799
CSC Holdings, Inc.:
7.88% due 2/15/18..................... 150,000 152,775
Insight Communications Co., Inc.:
12.25% due 2/15/11(3)................. 400,000 359,000
Liberty Media Corp.:
3.02% due 9/17/06(1).................. 181,000 183,176
TCI Communications, Inc.:
6.88% due 2/15/06..................... 76,000 80,159
Telenet Group Holding NV:
11.50% due 6/15/14*(3)................ 275,000 189,062
Young Broadcasting, Inc.:
10.00% due 3/1/11..................... 75,000 76,688
----------
1,561,187
----------
Chemical -- 0.50%
E.I. du Pont de Nemours and Co.:
4.13% due 4/30/10..................... 32,000 32,153
Huntsman Co., LLC:
11.63% due 10/15/10................... 150,000 168,000
Rohm & Haas Co.:
7.85% due 7/15/29..................... 125,000 158,116
----------
358,269
----------
Commercial Services -- 0.86%
Crown European Holdings SA:
10.88% due 3/1/13..................... 125,000 145,312
Hertz Corp.:
6.90% due 8/15/14..................... 60,000 61,999
6.35% due 6/15/10..................... 85,000 87,724
4.70% due 10/2/06..................... 179,000 183,067
Owens- Brockway Glass Container, Inc.:
8.88% due 2/15/09..................... 75,000 81,563
Rent-Way, Inc.:
11.88% due 6/15/10.................... 50,000 55,125
----------
614,790
----------
Conglomerates -- 0.37%
Tyco International Group SA:
6.38% due 10/15/11.................... 82,000 89,833
4.44% due 6/15/07*.................... 170,000 173,957
----------
263,790
----------
Drugs -- 0.44%
Pfizer, Inc.:
2.50% due 3/15/07..................... 185,000 182,427
Schering Plough Corp.:
6.50% due 12/1/33..................... 125,000 134,024
----------
316,451
----------
Electronics/Electrical Equipment -- 0.11%
Xerox Corp.,
7.63% due 6/15/13..................... 75,000 79,687
----------
12 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Value
Par Value (Note 2)
------------------------------------------------------------------------------
CORPORATE BONDS (continued)
Finance Companies -- 3.30%
Devon Financing Corp. ULC:
6.88% due 9/30/11.................................... $ 150,000 $ 169,248
Ford Motor Credit Co.:
7.38% due 10/28/09................................... 187,000 204,671
1.67% due 3/13/07(1)................................. 125,000 122,142
General Motors Acceptance Corp.:
4.50% due 7/15/06.................................... 150,000 153,129
2.51% due 1/16/07(1)................................. 150,000 150,170
Honda Auto Receivables Owner Trust, Series 2003-3 A4:
2.77% due 11/21/08................................... 1,000,000 999,096
Household Finance Corp.:
4.75% due 5/15/09.................................... 97,000 100,294
3.38% due 2/21/06.................................... 142,000 143,279
National Rural Utilities Cooperative Finance Corp.:
3.88% due 2/15/08.................................... 153,000 154,168
Sprint Capital Corp.:
6.13% due 11/15/08................................... 147,000 159,093
----------
2,355,290
----------
Financial Services -- 8.28%
American Express Co.:
3.75% due 11/20/07................................... 32,000 32,409
Athena Neurosciences Finance, LLC:
7.25% due 2/21/08.................................... 100,000 99,500
Bear Stearns Commercial Mtg. Securities, Inc.:
6.02% due 2/14/31.................................... 250,000 271,671
Bunge, Ltd. Finance Corp.:
4.38% due 12/15/08................................... 63,000 63,563
Canadian Oil Sands, Ltd.:
4.80% due 8/10/09*................................... 32,000 32,509
Chukchansi Economic Development Auth. (6):
14.50% due 6/15/09*.................................. 150,000 187,500
CIT Group, Inc.:
7.75% due 4/2/12..................................... 85,000 100,299
Citicorp Capital I:
7.93% due 2/15/27.................................... 150,000 170,661
Citigroup, Inc.:
7.25% due 10/1/10.................................... 88,000 103,529
6.00% due 10/31/33................................... 92,000 92,752
DLJ Commercial Mtg. Corp.:
7.34% due 10/10/32................................... 500,000 574,451
FPL Group Capital, Inc.:
3.25% due 4/11/06.................................... 169,000 170,673
General Electric Capital Corp.:
6.75% due 3/15/32.................................... 99,000 112,450
6.13% due 2/22/11.................................... 185,000 203,485
2.80% due 1/15/07.................................... 213,000 211,694
Goldman Sachs Group, Inc.:
6.13% due 2/15/33.................................... 105,000 105,153
iPCS Escrow Co.:
11.50% due 5/1/12*................................... 270,000 282,825
JPMorgan Chase & Co.:
6.63% due 3/15/12.................................... 153,000 170,933
5.25% due 5/30/07.................................... 185,000 195,075
4.88% due 3/15/14.................................... 111,000 110,048
Lehman Brothers Holdings, Inc.:
6.63% due 1/18/12.................................... 111,000 123,807
MBNA America Bank NA:
5.38% due 1/15/08.................................... 98,000 102,998
Morgan Stanley:
6.75% due 4/15/11.................................... 150,000 168,398
4.75% due 4/1/14..................................... 223,000 215,137
Morgan Stanley Dean Witter Capital I:
6.66% due 2/15/33.................................... 651,500 732,991
6.48% due 11/15/30................................... 300,000 328,410
Nationwide Building Society:
2.63% due 1/30/07*................................... 153,000 151,198
Pricoa Global Funding I:
4.35% due 6/15/08*................................... 16,000 16,422
Market
Value
Par Value (Note 2)
----------------------------------------------------------------
Financial Services (continued)
Principal Life Global Funding:
5.13% due 6/28/07*...................... $ 50,000 $ 52,571
Qwest Capital Funding, Inc.:
7.90% due 8/15/10....................... 200,000 176,500
Residential Funding Mtg. Securities II:
3.05% due 7/25/16....................... 200,000 198,016
Salomon Smith Barney Holdings, Inc.:
5.88% due 3/15/06....................... 32,000 33,586
TIAA Global Markets, Inc.:
4.13% due 11/15/07*..................... 82,000 84,094
Washington Mutual Bank:
5.65% due 8/15/14....................... 26,000 26,980
Washington Mutual Finance Corp.:
6.25% due 5/15/06....................... 195,000 206,736
----------
5,909,024
----------
Foods -- 0.15%
Unilever Capital Corp.:
5.90% due 11/15/32...................... 104,000 107,128
----------
Healthcare -- 0.15%
Cardinal Health, Inc.:
6.75% due 2/15/11....................... 100,000 108,218
----------
Heavy Duty Trucks/Parts -- 0.13%
Dana Corp.:
9.00% due 8/15/11....................... 75,000 89,906
----------
Hospital Management -- 0.37%
HCA, Inc.:
7.88% due 2/1/11........................ 107,000 121,158
IASIS Healthcare, LLC:
8.75% due 6/15/14*...................... 20,000 20,900
Tenet Healthcare Corp.:
5.00% due 7/1/07........................ 125,000 124,688
----------
266,746
----------
Hospital Supplies -- 0.24%
Johnson & Johnson:
4.95% due 5/15/33....................... 183,000 170,536
----------
Household Products -- 0.39%
Fortune Brands, Inc.:
2.88% due 12/1/06....................... 153,000 152,849
Procter & Gamble Co.:
5.80% due 8/15/34....................... 125,000 128,973
----------
281,822
----------
Information Processing - Hardware -- 0.16%
International Business Machines Corp.:
6.22% due 8/1/27........................ 106,000 113,136
----------
Information Processing - Services -- 0.12%
Computer Sciences Corp.:
6.75% due 6/15/06....................... 82,000 87,558
----------
Insurance -- 1.59%
Assurant, Inc.:
5.63% due 2/15/14....................... 82,000 83,863
Fairfax Financial Holdings, Ltd.:
8.25% due 10/1/15....................... 100,000 97,500
7.75% due 7/15/37....................... 25,000 21,500
7.38% due 4/15/18....................... 25,000 22,437
ING Security Life Institutional Funding:
2.70% due 2/15/07*...................... 153,000 152,213
America, Inc.:
7.50% due 2/1/14........................ 85,000 86,881
MetLife, Inc.:
6.38% due 6/15/34....................... 199,000 208,596
Ohio Casualty Corp.:
7.30% due 6/15/14....................... 163,000 168,975
WR Berkley Corp.:
6.15% due 8/15/19....................... 146,000 146,342
August 31, 2004 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 13
Market
Value
Par Value (Note 2)
----------------------------------------------------------
CORPORATE BONDS (continued)
Insurance (continued)
XL Capital, Ltd.:
5.25% due 9/15/14................. $146,000 $ 146,494
----------
1,134,801
----------
Leisure & Tourism -- 0.04%
Riviera Holdings Corp.:
11.00% due 6/15/10................ 25,000 27,250
----------
Machinery -- 0.11%
Atlas Copco AB:
6.50% due 4/1/08*................. 73,000 79,347
----------
Metals -- 0.56%
Alcan, Inc.:
6.13% due 12/15/33................ 107,000 110,022
Alcoa, Inc.:
6.75% due 1/15/28................. 88,000 99,967
Noranda, Inc.:
7.00% due 7/15/05................. 77,000 79,574
6.00% due 10/15/15................ 106,000 107,920
----------
397,483
----------
Multimedia -- 0.62%
News America Holdings:
7.75% due 12/1/45................. 73,000 86,386
News America, Inc.:
7.63% due 11/30/28................ 118,000 137,939
Time Warner, Inc.:
6.88% due 6/15/18................. 23,000 25,193
6.13% due 4/15/06................. 182,000 191,301
----------
440,819
----------
Oil & Gas -- 1.96%
Amerada Hess Corp.:
6.65% due 8/15/11................. 169,000 185,395
Chesapeake Energy Corp.:
7.75% due 1/15/15................. 75,000 80,438
ConocoPhillips Holding Co.:
6.95% due 4/15/29................. 118,000 135,659
Devon Energy Corp.:
2.75% due 8/1/06.................. 147,000 146,262
Diamond Offshore Drilling, Inc.:
5.15% due 9/1/14*................. 85,000 86,125
Dynegy Holdings, Inc.:
8.75% due 2/15/12................. 225,000 225,563
El Paso Production Holding Co.:
7.75% due 6/1/13.................. 125,000 122,813
EnCana Corp.:
6.50% due 8/15/34................. 114,000 120,658
Enterprise Products Operating, LP:
6.88% due 3/1/33.................. 92,000 90,476
Hanover Compressor Co.:
zero coupon due 3/31/07........... 125,000 105,313
Pennzoil Co.:
10.25% due 11/1/05................ 15,000 16,176
Plains All American Pipeline LP:
5.63% due 12/15/13*............... 84,000 85,052
----------
1,399,930
----------
Paper/Forest Products -- 0.85%
Georgia-Pacific Corp.:
8.00% due 1/15/24................. 50,000 53,875
7.75% due 11/15/29................ 100,000 104,000
7.38% due 12/1/25................. 50,000 50,250
Norske Skogsindustrier ASA:
7.13% due 10/15/33*............... 37,000 39,077
Sealed Air Corp.:
6.88% due 7/15/33*................ 125,000 132,075
Weyerhaeuser Co.:
6.13% due 3/15/07................. 173,000 185,242
5.50% due 3/15/05................. 42,000 42,710
----------
607,229
----------
Market
Value
Par Value (Note 2)
---------------------------------------------------------
Pollution Control -- 0.71%
Allied Waste North America, Inc.:
5.75% due 2/15/11.................. $ 91,000 $ 87,360
Republic Services, Inc.:
7.13% due 5/15/09.................. 75,000 85,083
USA Waste Services, Inc.:
7.13% due 10/1/07.................. 150,000 166,262
Waste Management, Inc.:
7.38% due 5/15/29.................. 63,000 71,852
7.00% due 7/15/28.................. 88,000 96,236
--------
506,793
--------
Railroads & Equipment -- 0.51%
Burlington Northern Santa Fe Corp.:
8.13% due 4/15/20.................. 125,000 155,257
Canadian National Railway Co.:
6.25% due 8/1/34................... 198,000 207,842
--------
363,099
--------
Real Estate -- 0.14%
Brascan Corp.:
7.38% due 3/1/33................... 88,000 97,759
--------
Real Estate Investment Trusts -- 0.40%
CarrAmerica Realty Corp.:
5.13% due 9/1/11................... 73,000 73,616
Omega Healthcare Investors, Inc.:
7.00% due 4/1/14*.................. 125,000 122,500
Vornado Realty, LP:
4.50% due 8/15/09.................. 89,000 89,390
--------
285,506
--------
Retail -- 0.92%
Jean Coutu Group, Inc.:
8.50% due 8/1/14*.................. 50,000 50,375
May Department Stores Co.:
3.95% due 7/15/07*................. 170,000 171,946
Safeway, Inc.:
2.50% due 11/1/05.................. 153,000 152,738
Wal-Mart Stores, Inc.:
6.88% due 8/10/09.................. 246,000 279,497
--------
654,556
--------
Savings & Loan -- 0.46%
Downey Financial Corp.:
6.50% due 7/1/14................... 213,000 222,835
World Savings Bank FSB:
4.50% due 6/15/09.................. 102,000 104,774
--------
327,609
--------
Telecommunications -- 2.73%
British Telecommunications, PLC:
7.63% due 12/15/05................. 32,000 34,117
Citizens Communications Co.:
9.00% due 8/15/31.................. 110,000 108,075
Fairpoint Communications, Inc.:
9.50% due 5/1/08................... 225,000 231,750
France Telecom SA:
9.00% due 3/1/11................... 182,000 217,065
GTE Corp.:
7.90% due 2/1/27................... 213,000 234,090
Koninklijke (Royal) KPN NV:
8.00% due 10/1/10.................. 153,000 181,853
7.50% due 10/1/05.................. 117,000 123,294
LCI International, Inc.:
7.25% due 6/15/07.................. 25,000 22,125
Nextel Communications, Inc.:
7.38% due 8/1/15................... 225,000 235,125
Rural Cellular Corp.:
9.75% due 1/15/10.................. 200,000 179,000
14 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Value
Par Value (Note 2)
----------------------------------------------------------------
CORPORATE BONDS (continued)
Telecommunications (continued)
TELUS Corp.:
8.00% due 6/1/11........................ $ 25,000 $ 29,066
7.50% due 6/1/07........................ 170,000 186,763
United States West Communications, Inc.:
7.13% due 11/15/43...................... 200,000 165,500
----------
1,947,823
----------
Utilities - Communication -- 0.95%
Bell Atlantic Pennsylvania, Inc.:
8.75% due 8/15/31....................... 137,000 178,430
Pacific Bell:
6.63% due 10/15/34...................... 355,000 357,697
Verizon New York, Inc., Series A:
7.38% due 4/1/32........................ 131,000 144,808
----------
680,935
----------
Utilities - Electric -- 4.76%
AES Corp.:
7.75% due 3/1/14........................ 175,000 176,313
Alabama Power Co.:
2.80% due 12/1/06....................... 153,000 153,070
Appalachian Power Co.:
4.80% due 6/15/05....................... 100,000 101,694
Calpine Canada Energy Finance, ULC:
8.50% due 5/1/08........................ 200,000 127,500
CenterPoint Energy, Inc.:
6.85% due 6/1/15........................ 81,000 88,221
Constellation Energy Group, Inc.:
7.88% due 4/1/05........................ 78,000 80,469
Consumers Energy Co.:
4.00% due 5/15/10....................... 72,000 70,264
Duke Energy Corp.:
5.30% due 10/1/15....................... 285,000 290,831
Edison Mission Energy:
9.88% due 4/15/11....................... 275,000 315,563
Georgia Power Co., Series G:
6.20% due 2/1/06........................ 100,000 105,175
Great Lakes Power, Inc.:
8.30% due 3/1/05........................ 72,000 73,869
Indianapolis Power & Light Co.:
6.60% due 1/1/34*....................... 41,000 42,441
Niagara Mohawk Power Corp.:
5.38% due 10/1/04....................... 100,000 100,279
NiSource Finance Corp.:
7.63% due 11/15/05...................... 100,000 105,791
NRG Energy, Inc.:
8.00% due 12/15/13*..................... 175,000 183,750
Old Dominion Electric Cooperative:
5.68% due 12/1/28....................... 47,000 49,527
Pacific Gas & Electric Co.:
6.05% due 3/1/34........................ 212,000 212,755
Progress Energy, Inc.:
6.75% due 3/1/06........................ 173,000 182,659
Reliant Resources, Inc.:
9.50% due 7/15/13....................... 225,000 248,625
Southern California Edison Co.:
8.00% due 2/15/07....................... 239,000 266,257
TECO Energy, Inc.:
7.50% due 6/15/10....................... 25,000 26,781
Virginia Electric and Power Co.:
5.75% due 3/31/06....................... 152,000 158,966
4.10% due 12/15/08...................... 157,000 158,895
Western Resources, Inc.:
7.88% due 5/1/07........................ 72,000 79,960
----------
3,399,655
----------
Utilities - Gas, Distribution -- 0.37%
KeySpan Corp.:
6.15% due 6/1/06........................ 250,000 264,039
----------
Market
Value
Par Value (Note 2)
---------------------------------------------------------------
Utilities - Gas, Pipeline -- 0.91%
Arkla, Inc.:
8.90% due 12/15/06................... $ 181,000 $ 202,123
Duke Capital Corp.:
6.25% due 7/15/05.................... 68,000 70,043
Duke Capital, LLC:
5.67% due 8/15/14.................... 161,000 162,953
Williams Cos., Inc.:
7.88% due 9/1/21..................... 200,000 216,750
-----------
651,869
-----------
Total Corporate Bonds
(Cost $31,044,141)................... 31,317,503
-----------
FOREIGN GOVERNMENT BONDS -- 1.44%
Government of United Kingdom:
2.25% due 7/8/08*.................... 123,000 119,220
Quebec Province Canada:
7.50% due 9/15/29.................... 224,000 287,639
5.00% due 7/17/09.................... 157,000 165,180
Republic of Italy:
3.75% due 12/14/07................... 170,000 172,428
Russian Federation:
5.00% due 3/31/30*(3)................ 102,000 97,792
United Mexican States:
7.50% due 4/8/33..................... 176,000 185,944
-----------
1,028,203
-----------
Total Foreign Government Bonds
(Cost $998,040)...................... 1,028,203
-----------
UNITED STATES GOVERNMENT BONDS -- 54.34%
Government Agencies -- 47.60%
Federal Farm Credit Bks.:
2.50% due 3/15/06.................... 420,000 420,564
2.38% due 10/2/06.................... 207,000 205,616
Federal Home Loan Bank:
5.25% due 8/15/06.................... 415,000 435,469
4.50% due 9/16/13.................... 320,000 319,636
1.88% due 6/15/06.................... 510,000 504,528
Federal Home Loan Mtg. Corp.:
8.00% due 2/1/30(4).................. 12,329 13,385
8.00% due 7/1/30(4).................. 5,727 6,217
7.50% due 12/1/30(4)................. 19,429 20,915
7.50% due 4/1/31(4).................. 272,484 293,195
7.00% due 11/1/16(4)................. 94,047 99,775
7.00% due 7/1/32(4).................. 99,615 106,350
6.63% due 9/15/09.................... 858,000 970,283
6.50% due 12/1/32.................... 994,547 1,049,109
6.00% due 10/1/33.................... 287,939 298,123
6.00% due 11/1/33(4)................. 2,406,445 2,491,552
5.50% due 11/1/18.................... 472,970 490,033
5.50% due 10/1/33.................... 1,253,412 1,276,787
5.50% due 1/1/34..................... 792,461 806,263
5.50% due 7/1/34..................... 799,220 813,140
5.50% due September TBA.............. 400,000 413,625
5.00% due 10/1/33.................... 86,273 85,847
5.00% due 2/1/34..................... 1,170,768 1,162,504
5.00% due 3/1/34..................... 1,860,276 1,847,144
5.00% due 6/1/34..................... 1,196,183 1,187,739
4.50% due 1/15/14.................... 395,000 392,745
4.50% due 11/1/18.................... 820,534 822,255
4.50% due 2/1/19..................... 947,561 948,241
4.50% due 7/1/19..................... 697,097 697,597
3.38% due 8/23/07.................... 316,000 316,682
3.00% due 10/27/06................... 452,000 452,693
2.63% due 9/17/07.................... 316,000 312,058
2.50% due 12/4/06.................... 435,000 432,827
2.20% due 12/30/05................... 452,000 451,690
2.00% due 2/23/06.................... 632,000 628,609
August 31, 2004 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 15
Market
Value
Par Value (Note 2)
------------------------------------------------------------------
UNITED STATES GOVERNMENT BONDS (continued)
Government Agencies (continued)
Federal National Mtg. Assoc.:
7.50% due 11/1/14(4)................... $ 8,585 $ 9,139
7.00% due 9/1/31(4).................... 548,266 585,764
6.63% due 11/15/30..................... 516,000 600,007
6.50% due 2/1/17....................... 140,556 149,347
6.50% due 3/1/17....................... 175,201 186,158
6.50% due 4/1/29(4).................... 161,604 170,340
6.50% due 6/1/29....................... 355,255 374,460
6.50% due 7/1/32....................... 516,484 544,155
6.00% due 9/1/16....................... 308,994 324,860
6.00% due 12/1/16...................... 87,059 91,529
6.00% due 8/1/34....................... 1,791,272 1,857,884
5.50% due 5/1/18....................... 257,693 267,277
5.50% due 12/1/33...................... 2,977,298 3,031,529
5.00% due 9/1/18....................... 649,281 662,914
5.00% due 10/1/18...................... 892,589 911,332
5.00% due 12/1/18...................... 910,328 929,443
5.00% due 11/1/33...................... 41,597 41,410
5.00% due 3/1/34....................... 681,744 677,239
4.50% due 6/1/18....................... 224,105 224,501
3.25% due 6/28/06...................... 320,000 321,299
2.77% due 8/25/06...................... 420,000 420,942
Government National Mtg. Assoc.:
8.00% due 4/15/30(4)................... 16,772 18,330
7.00% due 9/15/28(4)................... 77,328 82,772
6.50% due 6/15/29(4)................... 74,211 78,473
6.50% due 10/15/32(4).................. 619,661 654,884
-----------
33,989,184
-----------
Government Obligations -- 6.74%
United States Treasury Bonds:
7.25% due 8/15/22...................... 72,000 92,315
7.13% due 2/15/23...................... 888,000 1,126,789
6.88% due 8/15/25...................... 263,000 328,277
6.25% due 8/15/23...................... 689,000 800,344
5.38% due 2/15/31...................... 307,000 326,859
5.25% due 2/15/29...................... 356,000 367,918
United States Treasury Notes:
5.00% due 8/15/11...................... 42,000 45,175
4.75% due 5/15/14...................... 80,000 83,959
4.25% due 8/15/13...................... 193,000 195,737
4.25% due 11/15/13..................... 42,000 42,520
4.00% due 2/15/14...................... 98,000 97,161
3.88% due 2/15/13...................... 14,000 13,897
3.63% due 5/15/13...................... 10,000 9,740
2.75% due 6/30/06...................... 52,000 52,388
2.00% due 8/31/05...................... 980,000 980,421
2.00% due 1/15/14...................... 248,425 253,957
-----------
4,817,457
-----------
Total United States Government Bonds
(Cost $38,483,997)..................... 38,806,641
-----------
TOTAL INVESTMENTS
(Cost $70,526,178)(5).................. 99.64% 71,152,347
Other assets less liabilities............. 0.36% 256,766
---------- -----------
NET ASSETS -- 100% $71,409,113
========== ===========
Principal
Amount Value
BONDS & NOTES SOLD SHORT -- (4.04%)
U.S. Government Agencies -- (4.04%)
Federal Home Loan Mtg. Assoc. 6.00% due
September TBA....................................... $(1,200,000) $(1,240,500)
Federal Home Loan Mtg. Assoc. 5.00% due
September TBA....................................... (400,000) (396,625)
Federal National Mtg. Assoc. 6.50% due September TBA. (800,000) (839,750)
Federal National Mtg. Assoc. 5.00% due September TBA. (400,000) (407,375)
-----------
Total Bonds & Notes Sold Short -- (4.04%)
(Proceeds $2,885,750)............................... $(2,884,250)
-----------
- --------
TBA Securities purchased on a forward commitment basis with an approximate
principal amount and no definitive maturity date. The actual principal and
maturity date will be determined upon settlement date.
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no rights to demand
registration of these securities. At August 31, 2004, the aggregate value of
these securities was $2,936,422 representing 4.11% of net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(1) Security is a "floating rate" bond where the coupon rate fluctuates. The
rate steps up or down for each rate downgrade or upgrade. The rate reflected
is as of August 31, 2004.
(2) Variable rate security -- The rate reflected is as of August 31, 2004;
maturity date reflects next reset date.
(3) Security is a "step-up" bond where the coupon rate increases or steps up at
a predetermined rate. Rate shown reflects the increased rate.
(4) The security or a portion thereof represents collateral for TBA Securities.
(5) See Note 5 for cost of investments on a tax basis.
(6) Issuer did not file a registration statement within the stated period, as
required by the Registration Rights Agreement. Therefore, the issuer is
required to pay penalty interest of $0.05 per week per $1,000 principal
amount until the securities are registered. The penalty interest increases
every 90 days by $0.05 per $1,000 principal amount until it reaches a cap of
$0.50 per week per $1,000 principal amount.
See Notes to Financial Statements
16 HIGH YIELD BOND FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Telecommunications................ 13.77%
Financial Services................ 10.29%
Utilities -- Electric............. 10.05%
Repurchase Agreement.............. 9.70%
Broadcasting...................... 8.53%
Oil & Gas......................... 7.17%
Leisure & Tourism................. 4.99%
Airlines.......................... 4.21%
Commercial Services............... 2.92%
Retail............................ 2.84%
Paper/Forest Products............. 2.81%
Utilities -- Gas, Pipeline........ 2.62%
Chemical.......................... 2.46%
Metals............................ 1.57%
Real Estate Investment Trusts..... 1.53%
Hospital Management............... 1.46%
Healthcare........................ 1.36%
Insurance......................... 1.06%
Automotive........................ 1.00%
Foods............................. 0.88%
Finance Companies................. 0.82%
Building Materials................ 0.76%
Electronics/Electrical Equipment.. 0.69%
Publishing........................ 0.56%
Machinery......................... 0.42%
Advertising....................... 0.34%
Hospital Supplies................. 0.33%
Heavy Duty Trucks/Parts........... 0.32%
Multimedia........................ 0.31%
Aerospace/Defense................. 0.28%
Household Products................ 0.28%
Utilities -- Communication........ 0.17%
Funeral Services.................. 0.15%
Information Processing -- Hardware 0.15%
Pollution Control................. 0.15%
Real Estate....................... 0.15%
Water Services.................... 0.15%
Textile -- Products............... 0.14%
Schools........................... 0.11%
Semiconductors.................... 0.11%
Apparel & Products................ 0.10%
Freight........................... 0.00%
-----
97.71%
=====
Credit Quality+#
BBB....... 1.19%
BB........ 13.90%
B......... 42.55%
CCC....... 29.16%
CC........ 0.55%
D......... 4.41%
Not Rated@ 8.24%
------
100.00%
======
* Calculated as a percentage of Net Assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
August 31, 2004 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS 17
Market
Value
Par Value (Note 2)
-------------------------------------------------------------
CORPORATE BONDS -- 82.49%
Advertising -- 0.34%
Affinity Group, Inc.:
9.00% due 2/15/12.................... $175,000 $ 182,875
----------
Aerospace/Defense -- 0.28%
Condor Systems, Inc.:
11.88% due 5/1/09+(1)(2)(5).......... 125,000 8,750
Decrane Aircraft Holdings, Inc.:
12.00% due 9/30/08................... 220,000 143,275
----------
152,025
----------
Airlines -- 4.21%
American Airlines, Inc.:
7.80% due 4/1/08..................... 405,000 346,792
6.82% due 11/23/12................... 100,000 88,651
Atlas Air, Inc.:
9.06% due 7/2/17..................... 197,175 135,590
8.71% due 7/2/21..................... 259,858 261,994
7.63% due 7/2/16..................... 862,020 572,389
7.38% due 7/2/19..................... 90,788 87,747
6.88% due 1/2/11..................... 325,000 309,495
Continental Airlines, Inc.:
8.31% due 10/2/19.................... 179,885 146,832
7.73% due 9/15/12.................... 58,505 40,714
6.95% due 2/2/11..................... 153,909 116,463
Delta Air Lines, Inc.:
10.00% due 8/15/08................... 150,000 54,750
7.78% due 7/2/13..................... 229,581 93,055
----------
2,254,472
----------
Apparel & Products -- 0.10%
Warnaco, Inc.:
8.88% due 6/15/13.................... 50,000 55,250
----------
Automotive -- 0.94%
Collins & Aikman Products:
12.88% due 8/15/12*.................. 75,000 74,812
Diamond Triumph Auto Glass, Inc.:
9.25% due 4/1/08..................... 115,000 108,100
Eagle-Picher Industries, Inc.:
9.75% due 9/1/13..................... 200,000 215,500
Exide Corp (Escrow Note):
10.00% due 4/15/05+(1)(8)............ 300,000 0
Stanadyne Corp.:
10.00% due 8/15/14*.................. 100,000 103,500
Venture Holdings Trust:
11.00% due 6/1/07+(2)(5)............. 50,000 2,250
----------
504,162
----------
Broadcasting -- 7.89%
CF Cable TV, Inc.:
9.13% due 7/15/07.................... 75,000 78,793
Charter Communications Holdings, LLC:
11.13% due 1/15/11................... 690,000 576,150
10.75% due 10/1/09................... 550,000 462,000
10.25% due 1/15/10................... 50,000 41,125
10.00% due 5/15/11................... 75,000 59,250
9.92% due 4/1/11(3).................. 275,000 217,250
9.63% due 11/15/09................... 750,000 605,625
CSC Holdings, Inc.:
7.63% due 4/1/11..................... 50,000 51,875
7.63% due 7/15/18.................... 250,000 251,250
6.75% due 4/15/12*................... 75,000 74,250
Insight Communications Co., Inc.:
12.25% due 2/15/11(3)................ 675,000 605,812
Paxson Communications Corp.:
12.25% due 1/15/09(3)................ 325,000 275,031
Rogers Cable, Inc.:
8.75% due 5/1/32..................... 50,000 54,776
Salem Communications Holding Corp.:
7.75% due 12/15/10................... 50,000 52,000
Market
Value
Par Value (Note 2)
-----------------------------------------------------------------
Broadcasting (continued)
Telenet Group Holding NV:
11.50% due 6/15/14*(3)................... $575,000 $ 395,313
Young Broadcasting, Inc.:
10.00% due 3/1/11........................ 325,000 332,312
8.75% due 1/15/14........................ 100,000 95,875
----------
4,228,687
----------
Building Materials -- 0.76%
Associated Materials, Inc.:
11.25% due 3/1/14*(3).................... 300,000 212,250
MMI Products, Inc.:
11.25% due 4/15/07....................... 100,000 100,500
North American Energy Partners, Inc.:
8.75% due 12/1/11*....................... 100,000 92,500
----------
405,250
----------
Chemical -- 2.46%
Equistar Chemicals, LP:
10.63% due 5/1/11........................ 200,000 225,000
Huntsman Co., LLC:
11.63% due 10/15/10...................... 150,000 168,000
Huntsman International Holdings, LLC:
9.88% due 3/1/09......................... 285,000 307,800
Huntsman International, LLC:
10.13% due 7/1/09........................ 200,000 206,000
Lyondell Chemical Co.:
9.50% due 12/15/08....................... 75,000 80,156
Rockwood Specialties Group, Inc.:
10.63% due 5/15/11....................... 150,000 163,500
Westlake Chemical Corp.:
8.75% due 7/15/11........................ 150,000 166,875
----------
1,317,331
----------
Commercial Services -- 2.63%
Crown Cork & Seal Co., Inc.:
8.00% due 4/15/23........................ 250,000 232,500
Crown European Holdings SA:
10.88% due 3/1/13........................ 250,000 290,625
Hydrochem Industrial Services, Inc.:
10.38% due 8/1/07........................ 175,000 176,313
Mobile Mini, Inc.:
9.50% due 7/1/13......................... 100,000 111,000
Monitronics International, Inc.:
11.75% due 9/1/10*....................... 300,000 324,375
Petroleum Helicopters, Inc.:
9.38% due 5/1/09......................... 25,000 26,375
Rent-Way, Inc.:
11.88% due 6/15/10....................... 225,000 248,062
----------
1,409,250
----------
Electronics/Electrical Equipment -- 0.69%
Muzak, LLC:
9.88% due 3/15/09........................ 150,000 107,250
Xerox Corp.:
7.63% due 6/15/13........................ 125,000 132,813
7.20% due 4/1/16......................... 75,000 75,375
7.13% due 6/15/10........................ 50,000 53,000
----------
368,438
----------
Finance Companies -- 0.81%
United States West Capital Funding, Inc.:
6.88% due 7/15/28........................ 200,000 142,500
Worldspan Financing Corp.:
9.63% due 6/15/11........................ 300,000 294,000
----------
436,500
----------
Financial Services -- 10.30%
Alamosa Delaware, Inc.:
12.00% due 7/31/09(3).................... 102,000 101,490
Athena Neurosciences Finance, LLC:
7.25% due 2/21/08........................ 375,000 373,125
18 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Value
Par Value (Note 2)
- ----------------------------------------------------------------------------------
CORPORATE BONDS (continued)
Financial Services (continued)
Bear Island Paper Co., LLC:
10.00% due 12/1/07........................................ $350,000 $ 336,000
Bluewater Finance, Ltd.:
10.25% due 2/15/12........................................ 200,000 212,000
Borden US Finance Corp.:
9.00% due 7/15/14*........................................ 100,000 103,000
Chukchansi Economic Development Auth.(9):
14.50% due 6/15/09*....................................... 650,000 812,500
Consolidated Communications Illinois/Texas Holdings, Inc.:
9.75% due 4/1/12*......................................... 225,000 227,250
ESI Tractebel Acquisition Corp.:
7.99% due 12/30/11........................................ 162,000 167,670
Excelcomindo Finance Co.:
8.00% due 1/27/09*........................................ 25,000 24,875
H&E Equipment Services, LLC:
11.13% due 6/15/12........................................ 175,000 178,500
Huntsman Advanced Materials, LLC:
11.00% due 7/15/10*....................................... 175,000 199,500
iPCS Escrow Co.:
11.50% due 5/1/12*(8)..................................... 175,000 183,313
LaBranche & Co., Inc.:
11.00% due 5/15/12*....................................... 100,000 101,000
Madison River Capital, LLC:
13.25% due 3/1/10......................................... 475,000 507,062
Medcath Holdings Corp.:
9.88% due 7/15/12*........................................ 75,000 78,375
Nexstar Finance Holdings, LLC:
11.38% due 4/1/13(3)...................................... 375,000 281,719
PCA, LLC/PCA Finance Corp.:
11.88% due 8/1/09......................................... 200,000 216,000
PX Escrow Corp.:
9.63% due 2/1/06(3)....................................... 100,000 85,000
Qwest Capital Funding, Inc.:
7.90% due 8/15/10......................................... 475,000 419,187
7.75% due 2/15/31......................................... 150,000 110,250
7.63% due 8/3/21.......................................... 275,000 213,813
7.25% due 2/15/11......................................... 225,000 192,375
Terra Capital, Inc.:
11.50% due 6/1/10......................................... 350,000 390,250
----------
5,514,254
----------
Foods -- 0.88%
Doane Pet Care Co.:
10.75% due 3/1/10......................................... 100,000 106,000
9.75% due 5/15/07......................................... 25,000 23,313
Stater Brothers Holdings, Inc.:
8.13% due 6/15/12*........................................ 150,000 156,000
Wornick Co.:
10.88% due 7/15/11*....................................... 175,000 183,750
----------
469,063
----------
Freight -- 0.00%
Anthony Crane Rental, LP:
9.38% due 2/1/08+(1)(2)(4)(8)............................. 180,236 18
----------
Funeral Services -- 0.15%
Alderwoods Group, Inc.:
7.75% due 9/15/12*........................................ 75,000 78,000
----------
Healthcare -- 1.36%
Concentra Operating Corp.:
9.13% due 6/1/12*......................................... 75,000 80,531
Curative Health Services, Inc.:
10.75% due 5/1/11*........................................ 175,000 161,000
Genesis HealthCare Corp.:
8.00% due 10/15/13........................................ 50,000 53,375
Inverness Medical Innovations, Inc.:
8.75% due 2/15/12*........................................ 125,000 120,000
National Nephrology Associates, Inc.:
9.00% due 11/1/11*........................................ 50,000 57,813
Market
Value
Par Value (Note 2)
-------------------------------------------------------------
Healthcare (continued)
Pediatric Services of America, Inc.:
10.00% due 4/15/08(1).................. $ 50,000 $ 50,500
Psychiatric Solutions, Inc.:
10.63% due 6/15/13..................... 75,000 84,375
Team Health, Inc.:
9.00% due 4/1/12*...................... 125,000 121,875
--------
729,469
--------
Heavy Duty Trucks/Parts -- 0.32%
Dana Corp.:
9.00% due 8/15/11...................... 75,000 89,906
Navistar International Corp.:
7.50% due 6/15/11...................... 75,000 78,750
--------
168,656
--------
Hospital Management -- 1.46%
HCA, Inc.:
6.95% due 5/1/12....................... 100,000 107,621
IASIS Healthcare, LLC:
8.75% due 6/15/14*..................... 175,000 182,875
Tenet Healthcare Corp.:
6.50% due 6/1/12....................... 125,000 110,625
5.00% due 7/1/07....................... 125,000 124,687
Triad Hospitals, Inc.:
7.00% due 5/15/12...................... 100,000 104,250
7.00% due 11/15/13..................... 100,000 100,625
US Oncology, Inc.:
10.75% due 8/15/14*.................... 50,000 52,625
--------
783,308
--------
Hospital Supplies -- 0.33%
Universal Hospital Services, Inc.:
10.13% due 11/1/11..................... 175,000 177,625
--------
Household Products -- 0.28%
Jostens Holding Corp.:
10.25% due 12/1/13(3).................. 225,000 150,750
--------
Information Processing - Hardware -- 0.15%
Seagate Technology HDD Holdings:
8.00% due 5/15/09...................... 75,000 78,750
--------
Insurance -- 1.06%
Crum & Forster Holdings Corp.:
10.38% due 6/15/13..................... 125,000 136,875
Fairfax Financial Holdings, Ltd.:
8.25% due 10/1/15...................... 375,000 365,625
7.75% due 7/15/37...................... 25,000 21,500
7.38% due 4/15/18...................... 50,000 44,875
--------
568,875
--------
Leisure & Tourism -- 4.53%
Bally Total Fitness Holding Corp.:
10.50% due 7/15/11..................... 125,000 117,188
Blockbuster, Inc.:
9.00% due 9/1/12*...................... 75,000 77,625
Cinemark, Inc.:
9.75% due 3/15/14(3)................... 250,000 172,187
Courtyard by Marriott II:
10.75% due 2/1/08...................... 150,000 151,500
Denny's Corp.:
11.25% due 1/15/08..................... 175,000 182,000
Eldorado Resorts, LLC:
9.00% due 4/15/14(1)................... 475,000 475,000
Hollywood Casino Corp.:
13.00% due 8/1/06+(2)(8)............... 385,000 332,062
Perkins Family Restaurants, LP:
10.13% due 12/15/07.................... 5,000 5,213
Riviera Holdings Corp.:
11.00% due 6/15/10..................... 150,000 163,500
August 31, 2004 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 19
Market
Value
Par Value (Note 2)
------------------------------------------------------------
CORPORATE BONDS (continued)
Leisure & Tourism (continued)
Six Flags, Inc.:
9.75% due 4/15/13.................. $ 300,000 $ 279,000
Steinway Musical Instruments, Inc.:
8.75% due 4/15/11.................. 75,000 81,000
True Temper Sports, Inc.:
8.38% due 9/15/11.................. 175,000 162,750
Waterford Gaming, LLC:
8.63% due 9/15/12*................. 211,000 224,715
----------
2,423,740
----------
Machinery -- 0.42%
Briggs & Stratton Corp.:
8.88% due 3/15/11.................. 100,000 118,500
Dresser, Inc.:
9.38% due 4/15/11.................. 100,000 107,500
----------
226,000
----------
Metals -- 1.57%
Allegheny Technologies, Inc.:
8.38% due 12/15/11................. 100,000 104,000
CSN Islands VII Corp.:
10.75% due 9/12/08*................ 185,000 203,500
CSN Islands VIII Corp.:
9.75% due 12/16/13*................ 325,000 323,375
Freeport McMoRan Resources:
7.00% due 2/15/08.................. 125,000 132,500
Renco Metals, Inc.:
11.50% due 7/1/03+(1)(5)(6)........ 210,000 0
Ryerson Tull, Inc.:
9.13% due 7/15/06.................. 75,000 78,375
----------
841,750
----------
Multimedia -- 0.31%
Haights Cross Operating Co.:
11.75% due 8/15/11................. 150,000 164,250
----------
Oil & Gas -- 7.17%
Belden & Blake Corp.:
8.75% due 7/15/12*................. 25,000 26,063
Chesapeake Energy Corp.:
9.00% due 8/15/12.................. 25,000 28,500
7.75% due 1/15/15.................. 50,000 53,625
7.50% due 9/15/13.................. 50,000 53,750
6.88% due 1/15/16.................. 50,000 50,625
Citgo Petroleum Corp.:
11.38% due 2/1/11.................. 125,000 145,938
Colorado Interstate Gas Co.:
6.85% due 6/15/37.................. 175,000 181,344
Dynegy Holdings, Inc.:
8.75% due 2/15/12.................. 225,000 225,562
Dynegy-Roseton Danskammer:
7.67% due 11/8/16.................. 150,000 132,000
El Paso Production Holding Co.:
7.75% due 6/1/13................... 325,000 319,312
Encore Acquisition Co.:
8.38% due 6/15/12.................. 100,000 110,000
6.25% due 4/15/14.................. 50,000 49,000
Exco Resources, Inc.:
7.25% due 1/15/11.................. 100,000 105,000
Hanover Compressor Co.:
zero coupon due 3/31/07............ 375,000 315,937
Hilcorp Energy, LP:
10.50% due 9/1/10*................. 250,000 276,875
KCS Energy, Inc.:
7.13% due 4/1/12................... 125,000 128,125
NGC Corp. Capital Trust:
8.32% due 6/1/27................... 1,225,000 943,250
Oslo Seismic Services, Inc.:
8.28% due 6/1/11................... 188,599 192,371
Market
Value
Par Value (Note 2)
-----------------------------------------------------------
Oil & Gas (continued)
Pride International, Inc.:
7.38% due 7/15/14*................. $ 75,000 $ 79,875
Seitel, Inc.:
11.75% due 7/15/11*................ 125,000 125,313
Trico Marine Services, Inc.:
8.88% due 5/15/12+(2).............. 625,000 300,000
----------
3,842,465
----------
Paper/Forest Products -- 2.81%
Caraustar Industries, Inc.:
9.88% due 4/1/11................... 100,000 105,750
7.38% due 6/1/09................... 50,000 52,000
Constar International, Inc.:
11.00% due 12/1/12................. 100,000 96,500
Fibermark, Inc.:
10.75% due 4/15/11+(2)(5)(8)....... 125,000 78,750
Georgia-Pacific Corp.:
8.00% due 1/15/24.................. 175,000 188,562
7.75% due 11/15/29................. 225,000 234,000
7.70% due 6/15/15.................. 125,000 139,688
7.38% due 12/1/25.................. 100,000 100,500
Pliant Corp.:
11.13% due 9/1/09.................. 150,000 160,875
Speciality Paperboard, Inc.:
9.38% due 10/15/06+(2)(5).......... 550,000 346,500
----------
1,503,125
----------
Pollution Control -- 0.15%
Allied Waste North America, Inc.:
8.88% due 4/1/08................... 25,000 27,438
8.50% due 12/1/08.................. 50,000 54,875
----------
82,313
----------
Publishing -- 0.56%
American Lawyer Media, Inc.:
9.75% due 12/15/07................. 300,000 298,500
----------
Real Estate -- 0.15%
LNR Property Corp.:
7.63% due 7/15/13.................. 75,000 79,500
----------
Real Estate Investment Trusts -- 1.13%
National Health Investors, Inc.:
7.30% due 7/16/07.................. 200,000 205,491
Omega Healthcare Investors, Inc.:
7.00% due 4/1/14*.................. 125,000 122,500
Senior Housing Properties Trust:
8.63% due 1/15/12.................. 250,000 277,500
----------
605,491
----------
Retail -- 2.59%
Ferrellgas, LP:
6.75% due 5/1/14................... 275,000 273,625
JC Penney Co., Inc.:
6.88% due 10/15/15................. 200,000 209,000
Jean Coutu Group, Inc.:
8.50% due 8/1/14*.................. 325,000 327,438
MTS, Inc.:
10.00% due 3/15/09+(1)(2)(5)(8).... 13,636 3,545
Rite Aid Corp.:
6.88% due 8/15/13.................. 75,000 69,000
Saks, Inc.:
9.88% due 10/1/11.................. 100,000 119,000
7.00% due 12/1/13.................. 125,000 125,625
Vitro Envases Norteamerica SA:
10.75% due 7/23/11*................ 175,000 169,111
Vitro SA de CV:
11.75% due 11/1/13*................ 100,000 90,000
----------
1,386,344
----------
20 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Value
Par Value (Note 2)
----------------------------------------------------------------------
CORPORATE BONDS (continued)
Schools -- 0.11%
KinderCare Learning Centers, Inc.:
9.50% due 2/15/09............................ $ 57,000 $ 57,855
----------
Semiconductors -- 0.11%
ON Semiconductor Corp.:
12.00% due 3/15/10........................... 49,000 56,350
----------
Telecommunications -- 10.35%
AirGate PCS, Inc.:
9.38% due 9/1/09............................. 216,600 216,600
Alaska Communications Systems Holdings, Inc.:
9.38% due 5/15/09............................ 275,000 266,063
American Cellular Corp.:
10.00% due 8/1/11............................ 450,000 365,625
Cincinnati Bell Telephone Co.:
7.20% due 11/29/23........................... 275,000 258,500
7.18% due 12/15/23........................... 50,000 47,000
Empresa Brasileira de Telecom SA:
11.00% due 12/15/08.......................... 25,000 27,500
Fairpoint Communications, Inc.:
12.50% due 5/1/10............................ 175,000 187,250
9.50% due 5/1/08............................. 575,000 592,250
GCB iPCS, Inc.:
14.00% due 7/15/10+(1)(2)(5)................. 2,025,000 0
Iwo Holdings, Inc.:
14.00% due 1/15/11+(2)(8).................... 1,950,000 916,500
Kyivstar:
10.38% due 8/17/09*.......................... 125,000 132,500
LCI International, Inc.:
7.25% due 6/15/07............................ 775,000 685,875
Nextel Communications, Inc.:
5.95% due 3/15/14............................ 150,000 142,500
Nextmedia Operating, Inc.:
10.75% due 7/1/11............................ 75,000 84,000
Rural Cellular Corp.:
9.75% due 1/15/10............................ 300,000 268,500
9.63% due 5/15/08............................ 300,000 279,000
Triton PCS, Inc.:
9.38% due 2/1/11............................. 625,000 443,750
8.75% due 11/15/11........................... 75,000 51,187
TSI Telecommunication Services, Inc.:
12.75% due 2/1/09............................ 75,000 83,250
United States West Communications, Inc.:
7.25% due 10/15/35........................... 200,000 167,000
7.13% due 11/15/43........................... 400,000 331,000
----------
5,545,850
----------
Textile - Products -- 0.14%
Collins & Aikman Floor Cover:
9.75% due 2/15/10............................ 75,000 76,875
----------
Utilities - Communication -- 0.17%
Cincinnati Bell, Inc.:
8.38% due 1/15/14............................ 50,000 44,250
7.25% due 6/15/23............................ 50,000 46,750
----------
91,000
----------
Utilities - Electric -- 10.05%
AES Corp.:
8.88% due 11/1/27............................ 200,000 187,500
AES Drax Energy, Ltd.:
11.50% due 8/30/10+(2)....................... 475,000 2,375
Calpine Canada Energy Finance, ULC:
8.50% due 5/1/08............................. 3,425,000 2,183,437
Edison Mission Energy:
9.88% due 4/15/11............................ 225,000 258,188
7.73% due 6/15/09............................ 50,000 52,375
Mirant Corp.:
7.90% due 7/15/09+*(2)(5).................... 1,250,000 775,000
Mission Energy Holding Co.:
13.50% due 7/15/08........................... 1,250,000 1,571,875
Par Value/ Market
Number of Value
Shares (Note 2)
----------------------------------------------------------------
Utilities - Electric (continued)
Reliant Resources, Inc.:
9.50% due 7/15/13..................... $225,000 $ 248,625
Tiverton/Rumford Power Assoc., Ltd.:
9.00% due 7/15/18*.................... 153,973 106,241
-----------
5,385,616
-----------
Utilities - Gas, Pipeline -- 2.62%
El Paso Natural Gas Co.:
8.63% due 1/15/22..................... 525,000 561,750
Pacific Energy Partners:
7.13% due 6/15/14*.................... 150,000 158,625
Southern Natural Gas Co.:
8.88% due 3/15/10..................... 100,000 112,500
Williams Cos., Inc.:
7.88% due 9/1/21...................... 525,000 568,969
-----------
1,401,844
-----------
Water Services -- 0.15%
Companhia De Saneamento Basico:
12.00% due 6/20/08*................... 75,000 80,063
-----------
Total Corporate Bonds
(Cost $43,770,155).................... 44,181,939
-----------
COMMON STOCK -- 4.51%
Automotive -- 0.04%
Exide Technologies+.................... 1,450 22,997
-----------
Broadcasting -- 0.23%
Cablevision Systems Corp., Class A+.... 6,559 121,473
-----------
Commercial Services -- 0.23%
NES Rentals Holdings, Inc.+............ 15,414 123,312
-----------
Leisure & Tourism -- 0.47%
John Q. Hammons Hotels, Inc., Class A+. 3,350 34,505
MGM Mirage, Inc.+...................... 5,300 219,102
-----------
253,607
-----------
Real Estate Investment Trusts -- 0.40%
Meristar Hospitality Corp.+............ 36,815 212,054
-----------
Retail -- 0.00%
MTS, Inc.(1)(8)........................ 3,863 0
-----------
Telecommunications -- 3.14%
AirGate PCS, Inc....................... 6,925 119,803
AirGate PCS, Inc*(1)................... 19,274 333,440
iPCS, Inc.+............................ 57,705 1,073,313
Telewest Global, Inc.+................. 13,644 157,588
-----------
1,684,144
-----------
Total Common Stock
(Cost $2,399,924)..................... 2,417,587
-----------
PREFERRED STOCK -- 0.99%
Broadcasting -- 0.40%
Paxson Communications Corp.:
13.25%(4)............................. 26 215,800
-----------
Commercial Services -- 0.06%
Rent-Way, Inc.:(1)(8)(10).............. 4 35,000
-----------
Retail -- 0.25%
General Nutrition Centers Holding Co.:
12.00%*(1)............................ 125 132,500
-----------
Telecommunications -- 0.28%
Alamosa Holdings, Inc.:
7.50%................................. 251 148,229
-----------
Total Preferred Stock
(Cost $479,340)....................... 531,529
-----------
August 31, 2004 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 21
Par Value/ Market
Number of Value
Shares (Note 2)
- ----------------------------------------------------------------------------------------
WARRANTS -- 0.02%
Automotive -- 0.02%
Exide Technologies:
Expires 5/5/11+............................................... 3,627 $ 10,881
-----------
Telecommunications -- 0.00%
GT Group Telecom, Inc.:
Expires 2/1/10+*(1)........................................... 200 2
-----------
Total Warrants
(Cost $36,751)................................................ 10,883
-----------
Total Investment Securities
(Cost $46,686,170)............................................ 47,141,938
-----------
REPURCHASE AGREEMENT -- 9.70%
Agreement with State Street Bank & Trust Co., bearing interest
at 1.42%, dated 8/31/04, to be repurchased 9/1/04 in the
amount of $5,196,205 and collateralized by Federal
National Mtg. Assoc. Notes, bearing interest at 6.63%, due
11/15/10 and having an approximate value of $5,356,331
(Cost $5,196,000)............................................. 5,196,000 5,196,000
-----------
TOTAL INVESTMENTS
(Cost $51,882,170)(7)......................................... 97.71% 52,337,938
Other assets less liabilities.................................... 2.29% 1,224,073
--------- -----------
NET ASSETS -- 100% $53,562,011
========= ===========
- --------
+ Non-income producing
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no rights to demand
registration of these securities. At August 31, 2004, the aggregate value of
these securities was $7,966,043 representing 14.87% of net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(1)Fair valued security (see Note 2).
(2)Bond in default
(3)Security is a "step-up" bond where the coupon rate increases or steps up at
a predetermined rate. Rate shown reflects the increased rate.
(4)PIK ("Payment-in-Kind") bond. Payments made with additional securities in
lieu of cash.
(5)Company has filed Chapter 11 bankruptcy.
(6)Bond is in default and did not pay principal at maturity. Security is
subject to litigation, the outcome of which is still to be determined.
(7)See Note 5 for cost of investments on a tax basis.
(8)Illiquid security
(9)Issuer did not file a registration statement within the stated period as
required by the Registration Rights Agreement. Therefore, the issuer is
required to pay penalty interest of $0.05 per week per $1,000 principal
amount until the securities are registered. The penalty interest increases
every 90 days by $0.05 per $1,000 principal amount until it reaches a cap of
$0.50 per week per $1,000 principal amount.
(10)To the extent permitted by the Statement of Additional Information, the
High Yield Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The restricted securities
are valued pursuant to Note 2. Restricted securities held by a Fund may not
be sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities
is generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of August 31, 2004, the
High Yield Bond Fund held the following restricted security:
Value as a
Acquisition Shares/ Acquisition Market % of
Name Date Par Cost Value Net Assets
---- ----------- ------- ----------- ------- ----------
Rent-Way, Inc.
Preferred Stock 05/29/2003 4 $35,000 $35,000 0.06%
See Notes to Financial Statements
22 INTERNATIONAL GROWTH II FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Banks........................... 14.03%
Drugs........................... 8.54%
Telecommunications.............. 8.22%
Oil & Gas....................... 8.07%
Electronics/Electrical Equipment 6.50%
Automotive...................... 6.20%
Financial Services.............. 4.72%
Chemical........................ 3.27%
Insurance....................... 3.01%
Retail.......................... 2.83%
Metals.......................... 2.69%
Foods........................... 2.53%
Beverages....................... 2.25%
Exchange-Traded Funds........... 2.25%
Conglomerates................... 1.90%
Broadcasting.................... 1.76%
Railroads & Equipment........... 1.76%
Utilities -- Communication...... 1.75%
Utilities -- Electric........... 1.62%
Tobacco......................... 1.51%
Publishing...................... 1.43%
Freight......................... 1.18%
Semiconductors.................. 1.14%
Household Products.............. 1.03%
Building Materials.............. 1.02%
Advertising..................... 0.99%
Machinery....................... 0.92%
Finance Companies............... 0.89%
Commercial Services............. 0.76%
Leisure & Tourism............... 0.73%
Multimedia...................... 0.73%
Water Services.................. 0.72%
Airlines........................ 0.62%
Paper/Forest Products........... 0.44%
Medical Technology.............. 0.36%
Mining.......................... 0.30%
Human Resources................. 0.21%
-----
98.88%
=====
Country Allocation*
Japan......... 21.07%
United Kingdom 17.73%
Switzerland... 14.05%
France........ 10.76%
United States. 10.63%
Germany....... 4.06%
Sweden........ 3.11%
Italy......... 2.89%
Singapore..... 2.73%
Netherlands... 2.47%
Spain......... 2.15%
Ireland....... 2.01%
Canada........ 1.43%
Australia..... 0.91%
Korea......... 0.88%
Denmark....... 0.80%
China......... 0.59%
Belgium....... 0.52%
Hong Kong..... 0.05%
Finland....... 0.04%
-----
98.88%
=====
* Calculated as a percentage of Net Assets.
August 31, 2004 INTERNATIONAL GROWTH II FUND - SCHEDULE OF INVESTMENTS 23
Market
Number Value
of Shares (Note 2)
----------------------------------------------------------------------
COMMON STOCK -- 95.64%
Advertising -- 0.99%
WPP Group, PLC(1).............................. $45,382 $ 407,422
----------
Airlines -- 0.62%
Singapore Airlines, Ltd.(1).................... 39,000 253,956
----------
Automotive -- 5.95%
Honda Motor Co., Ltd.(1)....................... 11,400 569,169
Hyundai Motor Co.+*(3)......................... 9,300 199,950
PSA Peugoet Citroen(1)......................... 2,094 126,220
Renault SA(1).................................. 4,829 389,485
TI Automotive, Ltd., Class A(1)................ 7,400 0
Toyota Motor Corp.(1).......................... 29,500 1,168,085
----------
2,452,909
----------
Banks -- 14.03%
Allied Irish Banks, PLC (London)(1)............ 13,012 205,631
Australia & New Zealand Banking Group, Ltd.(1). 1,568 20,296
Banco Bilbao Vizcaya Argentaria SA(1).......... 4,146 55,415
Banco Itau SA ADR.............................. 1,800 90,720
Bank of Ireland (Dublin)(1).................... 2,120 28,520
Bank of Ireland (London)(1).................... 12,871 173,725
Barclays, PLC(1)............................... 65,965 613,957
BNP Paribas SA(1).............................. 6,735 410,172
Credit Agricole SA(1).......................... 8,879 224,779
Danske Bank A/S(1)............................. 13,642 330,280
DBS Group Holdings, Ltd.(1).................... 44,000 402,302
Kookmin Bank ADR+.............................. 3,900 124,605
Mitsubishi Tokyo Financial Group, Inc.(1)...... 38 343,697
Oversea-Chinese Banking Corp., Ltd.(1)......... 39,000 303,661
Royal Bank of Scotland Group, PLC(1)........... 30,176 844,014
Sanpaolo IMI SpA(1)............................ 3,450 38,776
UBS AG(1)...................................... 19,123 1,286,524
UFJ Holdings, Inc.+(1)......................... 57 287,816
----------
5,784,890
----------
Beverages -- 2.25%
Diageo, PLC(1)................................. 58,063 716,659
Interbrew SA(1)................................ 6,606 212,619
----------
929,278
----------
Broadcasting -- 1.76%
ITV, PLC(1).................................... 55,471 103,931
Mediaset SpA(1)................................ 28,999 298,334
Societe Television Francaise 1(1).............. 11,398 322,085
----------
724,350
----------
Building Materials -- 1.02%
CRH, PLC (London)(1)........................... 6,890 157,748
CRH, PLC (Dublin)(1)........................... 11,498 261,758
----------
419,506
----------
Chemical -- 2.53%
BASF AG(1)..................................... 9,354 506,513
CIBA Specialty Chemicals Holding, Inc.+(1)..... 4,529 275,630
L'Air Liquide SA(1)............................ 146 22,951
Shin Etsu Chemical Co.(1)...................... 3,400 119,264
Uni Charm Corp.(1)............................. 2,400 119,892
----------
1,044,250
----------
Commercial Services -- 0.76%
Linde AG(1).................................... 1,500 80,676
Securitas AB(1)................................ 18,515 231,015
----------
311,691
----------
Conglomerates -- 1.90%
LVMH Moet Hennessy Louis Vuitton SA(1)......... 2,149 138,259
Siemens AG(1).................................. 9,062 622,632
Swire Pacific, Ltd.(1)......................... 3,000 21,282
----------
782,173
----------
Market
Number Value
of Shares (Note 2)
-----------------------------------------------------------------
Drugs -- 8.54%
AstraZeneca, PLC(1)....................... $23,218 $1,072,575
GlaxoSmithKline, PLC(1)................... 11,259 230,286
Novartis AG(1)............................ 19,762 915,670
Roche Holdings AG-Genusschein(1).......... 8,799 855,612
Yamanouchi Pharmaceutical Co., Ltd.(1).... 12,800 447,156
----------
3,521,299
----------
Electronics/Electrical Equipment -- 6.50%
Canon, Inc.(1)............................ 19,300 925,971
Keyence Corp.(1).......................... 100 20,629
Philips Electronics NV(1)................. 5,744 133,255
Ricoh Co., Ltd.(1)........................ 7,000 137,725
Samsung Electronics Co., Ltd. GDR+*....... 4,978 964,487
Samsung Electronics Co., Ltd., Reg S GDR*. 1,866 361,537
Schneider Electric SA(1).................. 339 21,315
SMC Corp.(1).............................. 1,200 115,947
----------
2,680,866
----------
Finance Companies -- 0.89%
Credit Saison Co., Ltd.(1)................ 6,800 226,023
Takefuji Corp.(1)......................... 1,990 140,496
----------
366,519
----------
Financial Services -- 4.72%
Acom Co., Ltd.(1)......................... 4,930 326,905
Credit Suisse First Boston USA, Inc.+(1).. 18,289 573,605
Deutsche Boerse AG(1)..................... 347 16,797
Mizuho Financial Group, Inc.(1)........... 21 85,422
Nomura Holdings, Inc.(1).................. 38,000 526,955
ORIX Corp.(1)............................. 1,600 164,999
UniCredito Italiano SpA(1)................ 44,525 214,123
Zurich Financial Services Group+(1)....... 254 35,631
----------
1,944,437
----------
Foods -- 2.53%
Groupe Danone(1).......................... 314 25,234
Nestle SA(1).............................. 4,301 1,019,681
----------
1,044,915
----------
Freight -- 1.18%
Mitsui & Co., Ltd.(1)..................... 17,000 138,895
TPG NV(1)................................. 15,011 348,818
----------
487,713
----------
Household Products -- 1.03%
KAO Corp.(1).............................. 8,000 197,417
Reckitt Benckiser, PLC(1)................. 8,640 227,839
----------
425,256
----------
Human Resources -- 0.21%
Adecco SA(1).............................. 1,855 86,392
----------
Insurance -- 3.01%
ACE, Ltd.................................. 2,700 104,085
Aegon NV(1)............................... 14,663 157,601
Allianz AG(1)............................. 2,400 232,277
Swiss Reinsurance(1)...................... 7,742 439,845
XL Capital, Ltd., Class A................. 4,400 308,880
----------
1,242,688
----------
Leisure & Tourism -- 0.73%
Accor SA(1)............................... 4,172 176,877
Carnival, PLC(1).......................... 2,612 126,087
----------
302,964
----------
Machinery -- 0.92%
SKF AB, Class B(1)........................ 10,231 378,536
----------
Medical Technology -- 0.36%
Synthes-Stratec, Inc.(1).................. 1,367 146,486
----------
24 INTERNATIONAL GROWTH II FUND - SCHEDULE OF INVESTMENTS - August 31, 2004
CONTINUED
Market
Number Value
of Shares (Note 2)
------------------------------------------------------------------------
COMMON STOCK (continued)
Metals -- 2.69%
BHP Billiton, PLC(1)............................. $ 40,767 $ 385,961
Hennes & Mauritz AB, Class B(1).................. 12,141 317,535
POSCO ADR........................................ 3,020 109,264
Rio Tinto, PLC(1)................................ 11,973 298,320
----------
1,111,080
----------
Mining -- 0.30%
Aggregate Industries, PLC(1)..................... 76,993 121,949
----------
Multimedia -- 0.73%
News Corp., Ltd. ADR............................. 3,047 95,219
Vivendi Universal SA+(1)......................... 8,235 204,627
----------
299,846
----------
Oil and Gas -- 8.07%
BP, PLC(1)....................................... 28,391 253,510
E. ON AG(1)...................................... 700 49,805
ENI SpA(1)....................................... 20,620 423,219
Imperial Oil, Ltd................................ 1,900 89,084
Noble Corp.+..................................... 2,900 116,638
Petroleo Brasileiro SA ADR....................... 5,300 162,975
Royal Dutch Petroleum Co.(1)..................... 983 49,773
Scottish & Southern Energy, PLC(1)............... 2,783 37,087
Shell Transport & Trading Co., PLC(1)............ 3,378 24,770
Tokyo Gas Co., Ltd.(1)........................... 89,000 327,965
Total SA, Class B(1)............................. 9,161 1,792,179
----------
3,327,005
----------
Paper/Forest Products -- 0.44%
Amcor, Ltd.(1)................................... 35,145 181,730
----------
Publishing -- 1.43%
Dai Nippon Printing Co., Ltd.(1)................. 13,000 191,946
Singapore Press Holdings, Ltd.(1)................ 66,000 166,918
VNU NV(1)........................................ 8,993 230,355
----------
589,219
----------
Railroads & Equipment -- 1.76%
Canadian National Railway Co..................... 7,255 331,539
East Japan Railway Co.(1)........................ 70 394,050
----------
725,589
----------
Retail -- 2.83%
Aeon Co., Ltd. (Special)......................... 4,800 78,876
Aeon Co., Ltd.(1)................................ 4,800 80,060
Lawson, Inc.(1).................................. 5,900 210,432
Pinault-Printemps-Redoute SA(1).................. 1,764 161,731
Swatch Group AG(1)............................... 4,982 127,580
Swatch Group AG, Class B(1)...................... 1,413 174,723
Tesco, PLC(1).................................... 33,721 162,007
Woolworths, Ltd.(1).............................. 19,327 172,323
----------
1,167,732
----------
Semiconductors -- 1.14%
ASML Holding NV+(1).............................. 7,650 98,913
Infineon Technologies AG+(1)..................... 2,200 21,475
Rohm Co., Ltd.(1)................................ 1,700 177,210
Taiwan Semiconductor Manufacturing Co., Ltd. ADR. 22,980 173,499
----------
471,097
----------
Telecommunications -- 8.22%
China Telecom Corp., Ltd.(1)..................... 752,000 244,464
France Telecom SA(1)............................. 5,235 124,570
Nokia Oyj(1)..................................... 1,417 16,785
Nortel Networks Corp.+........................... 32,000 121,150
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------------
Telecommunications (continued)
NTT DoCoMo, Inc.(1).......................... $ 323 $ 603,450
SK Telecom Co., Ltd. ADR..................... 11,539 218,087
Telecom Corp. of New Zealand, Ltd.(1)........ 2 8
Telefonaktiebolaget LM Ericsson, Class B+(1). 131,190 354,782
TELUS Corp................................... 2,600 48,841
Vodafone Group, PLC(1)....................... 726,398 1,658,179
-----------
3,390,316
-----------
Tobacco -- 1.51%
Altadis SA(1)................................ 9,713 303,307
Japan Tobacco, Inc.(1)....................... 39 317,905
-----------
621,212
-----------
Utilities - Communication -- 1.75%
Deutsche Telekom AG+(1)...................... 2,300 40,258
Nippon Telegraph and Telephone Corp.(1)...... 44 191,732
Telecom Italia SpA(1)........................ 72,242 217,064
Telefonica SA(1)............................. 3,784 54,075
Telefonos de Mexico SA de CV ADR............. 6,683 216,462
-----------
719,591
-----------
Utilities - Electric -- 1.62%
Iberdrola SA(1).............................. 23,164 474,806
Kansai Electric Power Co., Inc.(1)........... 1,400 25,770
Korea Electric Power Corp. ADR............... 11,686 117,327
Scottish Power, PLC(1)....................... 3,348 24,318
Tokyo Electric Power Co., Inc.(1)............ 1,140 26,364
-----------
668,585
-----------
Water Services -- 0.72%
Veolia Environnement(1)...................... 11,386 295,037
-----------
Total Common Stock
(Cost $36,018,387).......................... 39,428,484
-----------
PREFERRED STOCK -- 0.25%
Automotive -- 0.25%
Porsche AG
(Cost $109,108)(1).......................... 170 103,777
-----------
WARRANTS -- 0.74%
Chemical -- 0.74%
Reliance Industries, Ltd.
Expires 7/15/09+
(Cost $299,633)............................. 29,742 305,129
-----------
EXCHANGE-TRADED FUNDS -- 2.25%
iShares MSCI EAFE Index Fund
(Cost $940,557)............................. 6,700 928,151
-----------
TOTAL INVESTMENTS
(Cost $37,367,685)(2)....................... 98.88% 40,765,541
Other assets less liabilities.................. 1.12% 461,830
-------- -----------
NET ASSETS -- 100% $41,227,371
======== ===========
- --------
ADRAmerican Depository Receipt
GDRGlobal Depository Receipt
+ Non-income producing
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no rights to demand
registration of these securities. At August 31, 2004, the aggregate value of
these securities was $1,525,974 representing 3.70% of net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(1)Fair valued security (see Note 2).
(2)See Note 5 for cost of investments on a tax basis.
(3)Illiquid security
August 31, 2004 LARGE CAP VALUE FUND - PORTFOLIO PROFILE (Unaudited) 25
Industry Allocation*
Oil & Gas......................... 13.11%
Banks............................. 11.42%
Insurance......................... 9.86%
Financial Services................ 9.82%
Conglomerates..................... 5.92%
Telecommunications................ 4.84%
Utilities -- Electric............. 4.20%
Retail............................ 2.78%
Household Products................ 2.38%
Multimedia........................ 2.22%
Leisure & Tourism................. 2.10%
Electronics/Electrical Equipment.. 1.97%
Information Processing -- Services 1.94%
Automotive........................ 1.90%
Machinery......................... 1.85%
Paper/Forest Products............. 1.80%
Foods............................. 1.78%
Drugs............................. 1.73%
Healthcare........................ 1.61%
Information Processing -- Hardware 1.46%
Tobacco........................... 1.37%
Commercial Services............... 1.31%
Finance Companies................. 1.18%
Utilities -- Gas, Distribution.... 1.00%
Railroads & Equipment............. 0.99%
Registered Investment Companies... 0.98%
Building Materials................ 0.96%
Freight........................... 0.96%
Utilities -- Communication........ 0.96%
Metals............................ 0.95%
Apparel & Products................ 0.93%
Hospital Supplies................. 0.91%
Information Processing -- Software 0.79%
Beverages......................... 0.71%
Savings & Loan.................... 0.67%
Medical Technology................ 0.56%
Chemical.......................... 0.32%
------
100.24%
======
* Calculated as a percentage of Net Assets.
26 LARGE CAP VALUE FUND - SCHEDULE OF INVESTMENTS August 31, 2004
Market
Number Value
of Shares (Note 2)
--------------------------------------------------------------------
COMMON STOCK -- 99.26%
Apparel & Products -- 0.93%
American Eagle Outfitters, Inc.+............. 19,500 $ 649,350
----------
Automotive -- 1.90%
American Axle & Manufacturing Holdings, Inc.. 15,000 508,350
Ford Motor Co................................ 58,200 821,202
----------
1,329,552
----------
Banks -- 11.42%
Bank of America Corp......................... 69,000 3,103,620
BB&T Corp.................................... 21,300 851,787
National City Corp........................... 27,600 1,043,004
U.S. Bancorp................................. 48,200 1,421,900
Wachovia Corp................................ 16,400 769,324
Wells Fargo & Co............................. 13,400 787,250
----------
7,976,885
----------
Beverages -- 0.71%
Pepsi Bottling Group, Inc.................... 18,600 498,294
----------
Building Materials -- 0.96%
Sherwin-Williams Co.......................... 16,200 669,060
----------
Chemical -- 0.32%
Monsanto Co.................................. 6,100 223,260
----------
Commercial Services -- 1.31%
Cendant Corp................................. 42,300 914,949
----------
Conglomerates -- 5.92%
General Electric Co.......................... 100,000 3,279,000
Textron, Inc................................. 13,500 857,115
----------
4,136,115
----------
Drugs -- 1.73%
Merck & Co., Inc............................. 26,900 1,209,693
----------
Electronics/Electrical Equipment -- 1.97%
Parker Hannifin Corp......................... 12,200 663,314
Xerox Corp.+................................. 53,300 715,819
----------
1,379,133
----------
Finance Companies -- 1.18%
Capital One Financial Corp................... 12,200 826,672
----------
Financial Services -- 9.82%
Citigroup, Inc............................... 54,200 2,524,636
Doral Financial Corp......................... 17,300 703,591
JPMorgan Chase & Co.......................... 34,660 1,371,843
Lehman Brothers Holdings, Inc................ 7,500 554,175
Morgan Stanley............................... 4,700 238,431
New Century Financial Corp................... 14,800 793,872
Sovereign Bancorp, Inc....................... 30,600 668,916
----------
6,855,464
----------
Foods -- 1.78%
Corn Products International, Inc............. 13,900 641,485
Tyson Foods, Inc., Class A................... 36,300 598,224
----------
1,239,709
----------
Freight -- 0.96%
CNF, Inc..................................... 16,300 668,626
----------
Healthcare -- 1.61%
Anthem, Inc.+................................ 10,200 828,648
Medco Health Solutions, Inc.+................ 9,500 296,685
----------
1,125,333
----------
Hospital Supplies -- 0.91%
Johnson & Johnson............................ 11,000 639,100
----------
Household Products -- 2.38%
Kimberly-Clark Corp.......................... 13,000 867,100
Procter & Gamble Co.......................... 14,200 794,774
----------
1,661,874
----------
Market
Number Value
of Shares (Note 2)
--------------------------------------------------------------------
Information Processing - Hardware -- 1.46%
Hewlett-Packard Co........................... 17,076 $ 305,489
International Business Machines Corp......... 8,400 711,396
----------
1,016,885
----------
Information Processing - Services -- 1.94%
CheckFree Corp.+............................. 600 16,350
McAfee, Inc.+................................ 34,200 676,476
VeriSign, Inc.+.............................. 38,000 659,680
----------
1,352,506
----------
Information Processing - Software -- 0.79%
Microsoft Corp............................... 20,200 551,460
----------
Insurance -- 9.86%
ACE, Ltd..................................... 10,600 408,630
Allstate Corp................................ 23,500 1,109,435
Chubb Corp................................... 10,500 714,105
CIGNA Corp................................... 9,300 619,008
Hartford Financial Services Group, Inc....... 9,100 556,556
Humana, Inc.+................................ 18,900 359,100
MetLife, Inc................................. 26,600 990,850
Nationwide Financial Services, Inc., Class A. 13,300 462,707
Safeco Corp.................................. 18,200 876,694
W.R. Berkley Corp............................ 19,450 785,391
----------
6,882,476
----------
Leisure & Tourism -- 2.10%
Caesars Entertainment, Inc.+................. 19,000 293,550
Hasbro, Inc.................................. 12,700 235,331
McDonald's Corp.............................. 34,700 937,594
----------
1,466,475
----------
Machinery -- 1.85%
Deere & Co................................... 11,200 708,624
Terex Corp.+................................. 16,200 585,306
----------
1,293,930
----------
Medical Technology -- 0.56%
Andrx Corp.+................................. 19,400 391,104
----------
Metals -- 0.95%
United States Steel Corp..................... 17,900 660,689
----------
Multimedia -- 2.22%
Time Warner, Inc.+........................... 27,400 447,990
Viacom, Inc., Class B........................ 4,300 143,233
Walt Disney Co............................... 42,600 956,370
----------
1,547,593
----------
Oil & Gas -- 13.11%
Amerada Hess Corp............................ 6,900 555,450
ChevronTexaco Corp........................... 18,400 1,794,000
ConocoPhillips............................... 5,400 401,922
Exxon Mobil Corp............................. 79,840 3,680,624
Kerr-McGee Corp.............................. 8,400 443,352
Marathon Oil Corp............................ 20,800 754,416
Occidental Petroleum Corp.................... 16,900 872,885
Sunoco, Inc.................................. 10,600 651,900
----------
9,154,549
----------
Paper/Forest Products -- 1.80%
Georgia-Pacific Corp......................... 19,400 659,212
Louisiana-Pacific Corp....................... 24,100 595,270
----------
1,254,482
----------
Railroads & Equipment -- 0.99%
Burlington Northern Santa Fe Corp............ 19,400 694,520
----------
Retail -- 2.78%
Barnes & Noble, Inc.+........................ 19,300 667,008
Circuit City Stores, Inc..................... 52,300 678,331
SUPERVALU, Inc............................... 22,600 595,736
----------
1,941,075
----------
August 31, 2004 LARGE CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED 27
Market
Number Value
of Shares (Note 2)
--------------------------------------------------------
COMMON STOCK (continued)
Savings & Loan -- 0.67%
Golden West Financial Corp....... 4,300 $ 465,389
----------
Telecommunications -- 4.84%
BellSouth Corp................... 9,800 262,248
CenturyTel, Inc.................. 19,800 637,362
Scientific-Atlanta, Inc.......... 22,800 621,072
Verizon Communications, Inc...... 47,400 1,860,450
----------
3,381,132
----------
Tobacco -- 1.37%
Altria Group, Inc................ 19,500 954,525
----------
Utilities - Communication -- 0.96%
SBC Communications, Inc.......... 25,963 669,586
----------
Utilities - Electric -- 4.20%
Constellation Energy Group, Inc.. 15,900 653,490
Exelon Corp...................... 22,600 832,810
PPL Corp......................... 14,600 698,318
TXU Corp......................... 18,000 749,340
----------
2,933,958
----------
Number Market
of Shares/ Value
Par Value (Note 2)
-----------------------------------------------------------------
Utilities - Gas, Distribution -- 1.00%
Sempra Energy......................... 19,300 $ 697,695
-----------
Total Investment Securities
(Cost $64,854,045)................... 69,313,098
-----------
SHORT-TERM INVESTMENTS -- 0.98%
Registered Investment Companies -- 0.98%
American AAdvantage Money Market Fund
(Cost $687,388)...................... $687,388 687,388
-----------
TOTAL INVESTMENTS
(Cost $65,541,433)(1)................ 100.24% 70,000,486
Liabilities in excess of other assets... (0.24)% (169,129)
-------- -----------
NET ASSETS -- 100% $69,831,357
======== ===========
- --------
+ Non-income producing
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
28 MID CAP GROWTH FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Repurchase Agreement.............. 8.37%
Retail............................ 7.06%
Telecommunications................ 7.03%
Oil & Gas......................... 5.35%
Drugs............................. 5.12%
Leisure & Tourism................. 5.09%
Information Processing -- Services 5.02%
Financial Services................ 4.67%
Machinery......................... 4.01%
Electronics/Electrical Equipment.. 3.70%
Insurance......................... 3.45%
Commercial Services............... 3.44%
Apparel & Products................ 3.12%
Information Processing -- Software 2.93%
Banks............................. 2.82%
Human Resources................... 2.50%
Pollution Control................. 2.29%
Information Processing -- Hardware 2.21%
Healthcare........................ 2.09%
Semiconductors.................... 1.88%
Building Materials................ 1.53%
Medical Technology................ 1.50%
Home Builders..................... 1.49%
Conglomerates..................... 1.41%
Chemical.......................... 1.37%
Heavy Duty Trucks/Parts........... 1.31%
Broadcasting...................... 1.19%
Foods............................. 1.09%
Utilities -- Gas, Pipeline........ 1.02%
Optical Instruments & Lenses...... 1.01%
Exchange-Traded Funds............. 1.00%
Hospital Supplies................. 0.95%
Schools........................... 0.90%
Medical -- Biomedical/Gene........ 0.86%
Advertising....................... 0.85%
Multimedia........................ 0.74%
Auto -- Replacement Parts......... 0.67%
Freight........................... 0.51%
------
101.55%
======
* Calculated as a percentage of Net Assets.
See Notes to Financial Statements
August 31, 2004 MID CAP GROWTH FUND - SCHEDULE OF INVESTMENTS 29
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------------
COMMON STOCK -- 92.18%
Advertising -- 0.85%
Omnicom Group, Inc............................ 5,460 $ 375,703
----------
Apparel & Products -- 3.12%
Abercrombie and Fitch Co., Class A............ 9,400 263,200
Coach, Inc.+.................................. 9,400 396,210
Polo Ralph Lauren Corp., Class A.............. 19,900 726,947
----------
1,386,357
----------
Auto-Replacement Parts -- 0.67%
Advance Auto Parts, Inc.+..................... 8,000 296,480
----------
Banks -- 2.82%
Marshall & Ilsley Corp........................ 5,900 236,472
Northern Trust Corp........................... 7,070 304,363
Providian Financial Corp.+.................... 16,400 236,816
Zions Bancorp................................. 7,600 473,328
----------
1,250,979
----------
Broadcasting -- 1.19%
Univision Communications, Inc., Class A+...... 16,010 528,330
----------
Building Materials -- 1.53%
Chicago Bridge & Iron Co. NV.................. 7,200 213,408
Fastenal Co................................... 7,430 466,455
----------
679,863
----------
Chemical -- 1.37%
Invitrogen Corp.+............................. 6,900 341,550
Rohm & Haas Co................................ 6,600 267,498
----------
609,048
----------
Commercial Services -- 3.44%
Alliance Data Systems Corp.+.................. 7,400 282,680
Cintas Corp................................... 9,100 373,191
Iron Mountain, Inc.+.......................... 13,400 413,122
Moody's Corp.................................. 3,400 233,104
Paychex, Inc.................................. 7,700 228,459
----------
1,530,556
----------
Conglomerates -- 1.41%
Eaton Corp.................................... 10,360 625,226
----------
Drugs -- 5.12%
Caremark Rx, Inc.+............................ 17,112 491,114
Elan Corp., PLC Sponsored ADR+................ 23,400 529,542
Shire Pharmaceuticals Group, PLC ADR+......... 26,300 681,696
Valeant Pharmaceuticals International......... 24,500 574,770
----------
2,277,122
----------
Electronics/Electrical Equipment -- 3.70%
Amphenol Corp., Class A+...................... 7,400 222,444
Comverse Technology, Inc.+.................... 29,900 523,549
Garmin, Ltd................................... 11,700 455,247
Thermo Electron Corp.+........................ 8,200 215,414
Waters Corp.+................................. 5,300 229,543
----------
1,646,197
----------
Financial Services -- 4.67%
Franklin Resources, Inc....................... 7,000 372,890
Friedman Billings Ramsey Group, Inc., Class A. 12,900 243,165
Investors Financial Services Corp............. 9,400 435,972
Legg Mason, Inc............................... 6,990 563,953
T. Rowe Price Group, Inc...................... 9,300 460,629
----------
2,076,609
----------
Foods -- 1.09%
Bunge, Ltd.................................... 9,100 362,999
Dean Foods Co.+............................... 3,300 122,331
----------
485,330
----------
Market
Number Value
of Shares (Note 2)
--------------------------------------------------------------------------
Freight -- 0.51%
CH Robinson Worldwide, Inc......................... 3,000 $ 128,010
Sirva, Inc.+....................................... 4,600 97,428
----------
225,438
----------
Healthcare -- 2.09%
Anthem, Inc.+...................................... 5,400 438,696
Kinetic Concepts, Inc.+............................ 6,400 318,528
McKesson Corp...................................... 5,600 173,320
----------
930,544
----------
Heavy Duty Trucks/Parts -- 1.31%
PACCAR, Inc........................................ 9,700 583,843
----------
Home Builders -- 1.49%
Pulte Homes, Inc................................... 11,200 660,240
----------
Hospital Supplies -- 0.95%
Henry Schein, Inc.+................................ 6,800 423,504
----------
Human Resources -- 2.50%
Manpower, Inc...................................... 15,730 664,278
Robert Half International, Inc..................... 18,180 445,410
----------
1,109,688
----------
Information Processing - Hardware -- 2.21%
Lexmark International, Inc., Class A+.............. 7,720 682,834
Storage Technology Corp.+.......................... 12,300 298,275
----------
981,109
----------
Information Processing - Services -- 5.02%
Ask Jeeves, Inc.+.................................. 7,700 199,584
Check Point Software Technologies, Ltd.+........... 14,900 261,346
DST Systems, Inc.+................................. 14,900 674,076
Symantec Corp.+.................................... 10,920 523,723
VeriSign, Inc.+.................................... 33,000 572,880
----------
2,231,609
----------
Information Processing - Software -- 2.93%
Intuit, Inc.+...................................... 13,400 566,686
NAVTEQ Corp.+...................................... 9,500 312,360
Novell, Inc.+...................................... 71,900 424,210
----------
1,303,256
----------
Insurance -- 3.45%
Aetna, Inc......................................... 4,800 444,720
PMI Group, Inc..................................... 10,800 448,524
Quanta Capital Holdings, Ltd.+..................... 5,700 52,668
Safeco Corp........................................ 12,230 589,119
----------
1,535,031
----------
Leisure & Tourism -- 5.09%
Hilton Hotels Corp................................. 41,100 733,635
Royal Caribbean Cruises, Ltd....................... 12,200 503,860
Starwood Hotels & Resorts Worldwide, Inc., Class B. 12,000 530,400
Station Casinos, Inc............................... 10,700 492,200
----------
2,260,095
----------
Machinery -- 4.01%
Cooper Industries, Ltd., Class A................... 4,000 220,880
Cummins, Inc....................................... 4,900 329,721
Deere & Co......................................... 8,100 512,487
Ingersoll-Rand Co., Class A........................ 7,000 455,070
Zebra Technologies Corp., Class A+................. 4,650 265,747
----------
1,783,905
----------
Medical-Biomedical/Gene -- 0.86%
Genzyme Corp.+..................................... 7,100 383,400
----------
Medical Technology -- 1.50%
Guidant Corp....................................... 3,100 185,380
Nobel Biocare Holding AG(1)........................ 1,800 254,824
30 MID CAP GROWTH FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Number Value
of Shares (Note 2)
----------------------------------------------------------
COMMON STOCK (continued)
Medical Technology (continued)
Smith & Nephew, PLC(1)............. 24,820 $ 224,284
----------
664,488
----------
Multimedia -- 0.74%
E.W. Scripps Co., Class A.......... 3,200 327,392
----------
Oil & Gas -- 5.35%
Apache Corp........................ 4,870 217,640
BJ Services Co.+................... 4,900 235,445
Murphy Oil Corp.................... 7,010 529,325
Smith International, Inc.+......... 11,820 673,504
Talisman Energy, Inc............... 23,400 534,924
Weatherford International, Ltd.+... 4,000 185,360
----------
2,376,198
----------
Optical Instruments & Lenses -- 1.01%
Alcon, Inc......................... 5,990 448,292
----------
Pollution Control -- 2.29%
Republic Services, Inc., Class A... 24,330 680,024
Stericycle, Inc.+.................. 7,200 339,696
----------
1,019,720
----------
Retail -- 7.06%
BJ's Wholesale Club, Inc.+......... 20,000 506,400
CDW Corp........................... 6,500 380,250
Dollar General Corp................ 17,800 350,660
Express Scripts, Inc., Class A+.... 7,100 448,720
JC Penney Co., Inc................. 5,500 210,760
Kohl's Corp.+...................... 11,200 554,176
Priceline.com, Inc.+............... 7,300 152,424
Staples, Inc....................... 18,600 533,448
----------
3,136,838
----------
Schools -- 0.90%
Apollo Group, Inc., Class A+....... 2,660 207,480
Career Education Corp.+............ 6,300 194,292
----------
401,772
----------
Semiconductors -- 1.88%
Altera Corp.+...................... 14,990 283,611
Microchip Technology, Inc.......... 16,805 443,484
National Semiconductor Corp.+...... 8,200 109,306
----------
836,401
----------
Number Market
of Shares/ Value
Par Value (Note 2)
- --------------------------------------------------------------------------------------
Telecommunications -- 7.03%
Amdocs, Ltd.+............................................. 19,750 $ 396,975
American Tower Corp., Class A+............................ 33,000 491,370
Avaya, Inc.+.............................................. 47,100 570,852
Corning, Inc.+............................................ 34,200 346,104
EchoStar Communications Corp., Class A+................... 17,870 547,716
Juniper Networks, Inc.+................................... 10,600 242,634
Nextel Partners, Inc., Class A+........................... 22,105 318,754
Spectrasite, Inc.+........................................ 4,700 211,218
-----------
3,125,623
-----------
Utilities - Gas, Pipeline -- 1.02%
Williams Cos., Inc........................................ 38,100 453,009
-----------
Total Common Stock
(Cost $38,426,278)....................................... 40,969,195
-----------
EXCHANGE-TRADED FUNDS -- 1.00%
iShares Nasdaq Biotechnology Index Fund+..................
(Cost $446,334).......................................... 6,600 446,820
-----------
Total Investment Securities
(Cost $38,872,612)....................................... 41,416,015
-----------
REPURCHASE AGREEMENT -- 8.37%
Agreement with State Street Bank & Trust Co., bearing
interest at 1.42%, dated 8/31/04, to be repurchased
9/1/04 in the amount of $3,720,147 and collateralized by
Federal Home Loan Mfg. Corp. Notes, bearing interest at
2.05%, due 11/28/05 and having an approximate value of
$3,836,392 (Cost $3,720,000)............................. $3,720,000 3,720,000
-----------
TOTAL INVESTMENTS
(Cost $42,592,612)(2).................................... 101.55% 45,136,015
Liabilities in excess of other assets....................... (1.55)% (690,054)
---------- -----------
NET ASSETS -- 100% $44,445,961
========== ===========
- --------
+ Non-income producing
(1)Fair valued security (see Note 2).
(2)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
August 31, 2004 MID CAP VALUE FUND - PORTFOLIO PROFILE (Unaudited) 31
Industry Allocation*
Insurance......................... 12.12%
Semiconductors.................... 7.07%
Oil & Gas......................... 6.90%
Retail............................ 6.27%
Banks............................. 5.77%
Electronics/Electrical Equipment.. 5.40%
Financial Services................ 5.12%
Foods............................. 4.87%
Building Materials................ 4.24%
Paper/Forest Products............. 3.86%
Automotive........................ 3.55%
Apparel & Products................ 3.12%
Utilities -- Electric............. 2.85%
Chemical.......................... 2.74%
Freight........................... 2.59%
Metals............................ 2.58%
Repurchase Agreement.............. 2.15%
Broadcasting...................... 2.10%
Drugs............................. 1.98%
Aerospace/Defense................. 1.96%
Leisure & Tourism................. 1.93%
Machinery......................... 1.66%
Commercial Services............... 1.60%
Healthcare........................ 1.35%
Railroads & Equipment............. 0.97%
Pollution Control................. 0.96%
Publishing........................ 0.96%
Utilities -- Gas, Distribution.... 0.82%
Coal.............................. 0.68%
Information Processing -- Services 0.59%
Airlines.......................... 0.48%
Telecommunications................ 0.32%
Home Builders..................... 0.20%
Real Estate Investment Trusts..... 0.16%
Real Estate....................... 0.10%
------
100.02%
======
* Calculated as a percentage of Net Assets.
32 MID CAP VALUE FUND - SCHEDULE OF INVESTMENTS August 31, 2004
Market
Number Value
of Shares (Note 2)
------------------------------------------------------------------------
COMMON STOCK -- 97.87%
Aerospace/Defense -- 1.96%
Bombardier, Inc., Class B....................... 412,900 $ 953,028
United Defense Industries, Inc.+................ 73,900 2,825,197
-----------
3,778,225
-----------
Airlines -- 0.48%
Continental Airlines, Inc., Class B+............ 36,600 353,190
ExpressJet Holdings, Inc.+...................... 53,500 575,125
-----------
928,315
-----------
Apparel & Products -- 3.12%
Foot Locker, Inc................................ 193,800 4,335,306
VF Corp......................................... 34,100 1,682,494
-----------
6,017,800
-----------
Automotive -- 3.55%
Borg-Warner, Inc................................ 34,000 1,521,160
Compagnie Generale des Etablissements Michelin,
Class B(1)..................................... 66,900 3,556,005
Cooper Tire & Rubber Co......................... 77,900 1,763,656
-----------
6,840,821
-----------
Banks -- 5.77%
City National Corp.............................. 19,000 1,253,620
Comerica, Inc................................... 26,300 1,581,945
Hibernia Corp., Class A......................... 158,100 4,244,985
UnionBanCal Corp................................ 67,900 4,037,334
-----------
11,117,884
-----------
Broadcasting -- 2.10%
UnitedGlobalCom, Inc., Class A+................. 595,040 4,046,272
-----------
Building Materials -- 4.24%
Rinker Group, Ltd.(1)........................... 895,696 5,498,352
York International Corp......................... 81,900 2,666,664
-----------
8,165,016
-----------
Chemical -- 2.74%
Engelhard Corp.................................. 91,100 2,575,397
IMC Global, Inc................................. 169,300 2,698,642
-----------
5,274,039
-----------
Coal -- 0.68%
Peabody Energy Corp............................. 24,700 1,317,004
-----------
Commercial Services -- 1.60%
BearingPoint, Inc.+............................. 231,300 1,866,591
United Rentals, Inc.+........................... 82,800 1,216,332
-----------
3,082,923
-----------
Drugs -- 1.98%
Barr Pharmaceuticals, Inc.+..................... 42,400 1,665,048
Biovail Corp.+.................................. 142,300 2,157,268
-----------
3,822,316
-----------
Electronics/Electrical Equipment -- 5.40%
Ametek, Inc..................................... 29,800 850,790
Arrow Electronics, Inc.+........................ 157,300 3,403,972
Graftech International, Ltd.+................... 265,600 2,831,296
Vishay Intertechnology, Inc.+................... 259,200 3,304,800
-----------
10,390,858
-----------
Financial Services -- 5.12%
Apollo Investment Corp.+........................ 134,500 1,887,035
CIT Group, Inc.................................. 110,200 3,938,548
Federated Investors, Inc., Class B.............. 56,300 1,624,255
IndyMac Bancorp, Inc............................ 40,500 1,397,250
Webster Financial Corp.......................... 20,600 1,013,520
-----------
9,860,608
-----------
Market
Number Value
of Shares (Note 2)
----------------------------------------------------------------
Foods -- 4.87%
Bunge, Ltd.............................. 136,100 $ 5,429,029
Dean Foods Co.+......................... 74,700 2,769,129
Smithfield Foods, Inc.+................. 45,700 1,174,490
-----------
9,372,648
-----------
Freight -- 2.59%
CNF, Inc................................ 83,400 3,421,068
USF Corp................................ 45,600 1,562,256
-----------
4,983,324
-----------
Healthcare -- 1.35%
Dentsply International, Inc............. 50,850 2,590,807
-----------
Home Builders -- 0.20%
Toll Brothers, Inc.+.................... 8,700 386,193
-----------
Information Processing - Services -- 0.59%
Unisys Corp.+........................... 112,200 1,126,488
-----------
Insurance -- 12.12%
AMBAC Financial Group, Inc.............. 67,700 5,111,350
Converium Holding AG ADR................ 97,900 988,790
Coventry Health Care, Inc.+............. 29,800 1,513,244
Endurance Specialty Holdings, Ltd....... 84,700 2,756,138
Health Net, Inc.+....................... 48,500 1,258,090
Platinum Underwriters Holdings, Ltd..... 43,700 1,240,206
Radian Group, Inc....................... 60,800 2,693,440
Reinsurance Group of America, Inc....... 122,300 4,873,655
RenaissanceRe Holdings, Ltd............. 60,300 2,901,636
-----------
23,336,549
-----------
Leisure and Tourism -- 1.93%
Bally Total Fitness Holding Corp.+...... 213,900 840,627
CBRL Group, Inc......................... 90,400 2,881,952
-----------
3,722,579
-----------
Machinery -- 1.66%
Hughes Supply, Inc...................... 14,000 848,260
Pall Corp............................... 96,800 2,358,048
-----------
3,206,308
-----------
Metals -- 2.58%
Grupo Imsa SA de CV ADR................. 56,800 1,218,360
Inco, Ltd.+............................. 54,900 1,874,286
International Steel Group, Inc.+........ 62,000 1,884,800
-----------
4,977,446
-----------
Oil and Gas -- 6.90%
Cal Dive International, Inc.+........... 3,800 113,506
EOG Resources, Inc...................... 42,900 2,478,333
IHC Caland NV(1)........................ 84,907 4,091,657
Talisman Energy, Inc.................... 99,200 2,267,712
UGI Corp................................ 70,300 2,401,448
XTO Energy, Inc......................... 69,250 1,941,770
-----------
13,294,426
-----------
Paper/Forest Products -- 3.86%
Pactiv Corp.+........................... 189,600 4,484,040
Smurfit-Stone Container Corp.+.......... 166,000 2,944,840
-----------
7,428,880
-----------
Pollution Control -- 0.96%
Republic Services, Inc., Class A........ 66,400 1,855,880
-----------
Publishing -- 0.96%
R. R. Donnelley & Sons Co............... 60,400 1,856,092
-----------
Railroads & Equipment -- 0.97%
CSX Corp................................ 59,300 1,872,694
-----------
August 31, 2004 MID CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED 33
Market
Number Value
of Shares (Note 2)
------------------------------------------------------------------------------
COMMON STOCK (continued)
Real Estate -- 0.10%
CB Richard Ellis Group, Inc.+......................... 9,400 $ 183,206
-----------
Real Estate Investment Trusts -- 0.16%
Prologis Trust........................................ 8,400 303,660
-----------
Retail -- 6.27%
Office Depot, Inc.+................................... 150,800 2,414,308
Rent-A-Center, Inc.+.................................. 79,200 2,383,920
Ross Stores, Inc...................................... 89,300 1,888,695
United Stationers, Inc.+.............................. 63,600 2,618,412
Yankee Candle Co., Inc.+.............................. 102,200 2,770,642
-----------
12,075,977
-----------
Semiconductors -- 7.07%
Axcelis Technologies, Inc.+........................... 379,100 2,956,980
Fairchild Semiconductor International, Inc., Class A+. 303,200 3,738,456
Freescale Semiconductor, Inc., Class A+............... 67,900 943,810
Lam Research Corp.+................................... 139,800 3,012,690
QLogic Corp.+......................................... 44,000 1,148,840
Teradyne, Inc.+....................................... 140,700 1,810,809
-----------
13,611,585
-----------
Telecommunications -- 0.32%
Citizens Communications Co............................ 48,700 615,081
-----------
Utilities - Electric -- 2.85%
PPL Corp.............................................. 82,200 3,931,626
Wisconsin Energy Corp................................. 47,500 1,555,625
-----------
5,487,251
-----------
Number Market
of Shares/ Value
Par Value (Note 2)
- ---------------------------------------------------------------------------------------
Utilities - Gas, Distribution -- 0.82%
Sempra Energy............................................. 43,500 $ 1,572,525
------------
Total Investment Securities
(Cost $174,675,106)...................................... 188,501,680
------------
REPURCHASE AGREEMENT -- 2.15%
Agreement with State Street Bank & Trust Co., bearing
interest at 1.42%, dated 8/31/04, to be repurchased
9/1/04 in the amount of $4,148,164 and collateralized by
$ 3,695,000 of Federal National Mfg. Assoc. Notes,
bearing interest at 6.63%, due 11/15/10 and having an
approximate value of $4,274,653 (Cost $4,148,000)........ $4,148,000 4,148,000
------------
TOTAL INVESTMENTS
(Cost $178,823,106)(2)................................... 100.02% 192,649,680
Liabilities in excess of other assets....................... (0.02)% (42,430)
---------- ------------
NET ASSETS -- 100% $192,607,250
========== ============
- --------
ADR American Depository Receipt
+ Non-income producing
(1) Fair valued security (see Note 2).
(2) See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
34 MODERATE GROWTH LIFESTYLE FUND - PORTFOLIO PROFILE August 31, 2004
(Unaudited)
Industry Allocation*
Large Cap Equity Funds.... 51.23%
Bond Funds................ 26.02%
International Equity Funds 15.51%
Mid Cap Equity Funds...... 5.00%
Small Cap Equity Funds.... 2.30%
------
100.06%
======
* Calculated as a percentage of Net Assets.
August 31, 2004 MODERATE GROWTH LIFESTYLE FUND - SCHEDULE OF INVESTMENTS 35
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------------
AFFILIATED INVESTMENT COMPANIES# -- 100.06%
Bond Fund -- 26.02%
VALIC Co. II Core Bond Fund............... 1,463,193 $14,631,928
-----------
International Equity Fund -- 15.51%
VALIC Co. II International Growth II Fund. 841,975 8,722,863
-----------
Large Cap Equity Funds -- 51.23%
VALIC Co. II Capital Appreciation Fund.... 1,827,726 14,237,986
VALIC Co. II Large Cap Value Fund......... 1,196,682 14,575,587
-----------
28,813,573
-----------
Mid Cap Equity Funds -- 5.00%
VALIC Co. II MidCap Value Fund............ 86,954 1,406,916
VALIC Co. II MidCap Growth Fund........... 236,854 1,406,915
-----------
2,813,831
-----------
Small Cap Equity Funds -- 2.30%
VALIC Co. II Small Cap Growth Fund........ 60,691 619,042
VALIC Co. II Small Cap Value Fund......... 49,365 675,318
-----------
1,294,360
-----------
Total Affiliated Investment Companies
(Cost $55,304,748)(1).................... 100.06% 56,276,555
Liabilities in excess of other assets....... (0.06)% (32,578)
--------- -----------
NET ASSETS -- 100% $56,243,977
========= ===========
- --------
# See Note 3.
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
36 MONEY MARKET II FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Government Agencies.............. 41.81%
Asset Backed/Receivables......... 15.76%
Asset Backed/Multi-Asset......... 15.07%
Asset Backed/Securities.......... 9.59%
Finance.......................... 5.49%
Domestic Bank.................... 3.43%
Regional Bank.................... 2.06%
Foreign Bank..................... 2.05%
Commercial Bank.................. 1.77%
Government Obligations........... 1.37%
Asset Backed-Loans............... 1.37%
-----
99.77%
=====
Weighted Average Days to Maturity 45
Credit Quality+#
Government -- Agency.. 40.53%
Government -- Treasury 1.37%
A-1................... 56.72%
Not Rated@............ 1.38%
------
100.00%
======
* Calculated as a percentage of Net Assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues.
August 31, 2004 MONEY MARKET II FUND - SCHEDULE OF INVESTMENTS 37
Market
Value
Par Value (Note 2)
- ------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 54.82%
Apreco, Inc. (LOC - Citibank):
1.54% due 9/23/04......................................... $1,000,000 $ 999,059
Barton Capital Corp. (LOC - SocGen):
1.53% due 9/23/04......................................... 1,500,000 1,498,597
Cafco, LLC:
1.53% due 9/27/04......................................... 1,000,000 998,895
CRC Funding, LLC:
1.43% due 9/13/04......................................... 1,000,000 999,523
1.53% due 9/23/04......................................... 1,000,000 999,065
Cancara Asset Securitisation, Ltd.:
1.54% due 9/14/04......................................... 1,000,000 999,444
1.52% due 10/8/04......................................... 1,000,000 998,438
Compass Securitization, LLC (LOC - AMBAC):
1.60% due 10/15/04........................................ 1,000,000 998,044
Delaware Funding Corp. (LOC - JP Morgan):
1.53% due 9/15/04......................................... 1,500,000 1,499,107
1.53% due 9/22/04......................................... 1,500,000 1,498,661
Edison Asset Securitization, LLC (LOC - GE Capital Corp.):
1.64% due 11/4/04......................................... 1,000,000 997,084
1.46% due 9/16/04......................................... 1,500,000 1,499,087
First Tennessee Bank NA:
1.53% due 9/13/04......................................... 1,500,000 1,500,000
Fountain Square Commercial Funding:
1.53% due 9/10/04......................................... 1,000,000 999,618
Galaxy Funding, Inc.:
1.67% due 11/15/04........................................ 1,500,000 1,494,797
1.64% due 10/21/04........................................ 1,000,000 997,722
General Electric Capital Corp.:
1.52% due 9/21/04......................................... 1,500,000 1,498,733
Giro Funding United States Corp.:
1.54% due 9/21/04......................................... 1,500,000 1,498,717
1.48% due 9/1/04.......................................... 1,000,000 1,000,000
Goldman Sachs Group, Inc.:
1.62% due 7/29/05......................................... 1,500,000 1,500,000
Govco, Inc.:
1.50% due 9/16/04......................................... 1,000,000 999,375
1.48% due 10/6/04......................................... 1,000,000 998,561
HBOs Treasury Services, PLC:
1.66% due 11/19/04........................................ 1,500,000 1,494,552
Merril Lynch & Co., Inc.:
1.59% due 1/31/05......................................... 1,000,000 1,000,000
Receivable Capital Corp. (LOC - Bank of America):
1.53% due 9/17/04......................................... 1,000,000 999,320
Sheffield Receivables Corp. (LOC - Barclays):
1.53% due 9/9/04.......................................... 2,000,000 1,999,320
Sigma Finance, Inc.:
1.56% due 4/21/05......................................... 1,000,000 999,936
Wells Fargo & Co.:
1.53% due 9/14/04......................................... 1,500,000 1,500,000
1.53% due 9/17/04......................................... 1,000,000 1,000,000
Windmill Funding Corp. (LOC - ABN AMRO):
1.53% due 9/15/04......................................... 1,500,000 1,499,108
Yorktown Capital LLC:
1.53% due 9/17/04......................................... 1,500,000 1,498,980
1.50% due 9/1/04.......................................... 1,500,000 1,500,000
-----------
Total Commercial Paper
(Cost $39,963,743)........................................ 39,963,743
-----------
GOVERNMENT AGENCIES -- 41.81%
Federal Home Loan Bank:
1.54% due 4/25/05......................................... 2,000,000 1,999,954
1.46% due 3/1/05.......................................... 1,000,000 1,000,000
1.40% due 4/1/05.......................................... 1,000,000 1,000,000
1.30% due 2/23/05......................................... 1,000,000 1,000,000
1.30% due 4/11/05......................................... 1,000,000 1,000,000
Market
Value
Par Value (Note 2)
- ------------------------------------------------------------------------------------
Federal Home Loan Mtg. Corp.:
1.50% due 2/14/05........................................ $1,000,000 $ 1,000,000
1.48% due 9/7/04......................................... 2,000,000 1,999,507
1.12% due 12/20/04....................................... 3,000,000 2,989,733
1.03% due 9/7/04......................................... 2,000,000 1,999,657
Federal National Mtg. Assoc.:
1.65% due 2/8/05......................................... 1,500,000 1,500,000
1.61% due 11/3/04........................................ 2,000,000 1,994,365
1.55% due 7/26/05........................................ 1,500,000 1,499,865
1.51% due 9/22/04........................................ 1,500,000 1,498,679
1.51% due 9/27/04........................................ 1,500,000 1,498,364
1.51% due 1/18/05........................................ 1,000,000 999,803
1.50% due 5/9/05......................................... 1,000,000 1,000,000
1.49% due 9/20/04........................................ 1,000,000 999,214
1.42% due 9/15/04........................................ 1,000,000 999,448
1.38% due 2/14/05........................................ 1,000,000 1,000,000
1.35% due 9/10/04........................................ 1,500,000 1,500,000
1.33% due 2/23/05........................................ 1,000,000 1,000,000
Student Loan Marketing Assoc.:
1.61% due 11/18/04....................................... 1,000,000 1,000,000
-----------
Total Government Agencies
(Cost $30,478,589)....................................... 30,478,589
-----------
UNITED STATES TREASURY BILLS -- 1.37%
United States Treasury Bills:
1.08% due 10/21/04
(Cost $998,500).......................................... 1,000,000 998,500
-----------
Total Short-Term Securities
(Cost $71,440,832)....................................... 71,440,832
-----------
REPURCHASE AGREEMENTS -- 1.77%
State Street Bank & Trust Co., Joint Repurchase Agreement
(see Note 2)............................................. 294,000 294,000
UBS Warburg, LLC, Joint Repurchase Agreement
(see Note 2)............................................. 1,000,000 1,000,000
-----------
Total Repurchase Agreements
(Cost $1,294,000)........................................ 1,294,000
-----------
TOTAL INVESTMENTS
(Cost $72,734,832)(1).................................... 99.77% 72,734,832
Other assets less liabilities............................... 0.23% 165,961
---------- -----------
NET ASSETS -- 100% $72,900,793
========== ===========
- --------
LOC Letter of credit. Principal and interest payments are guaranteed by the
letter of credit agreements.
(1) See Note 5 for cost of investments on a tax basis.
Allocation of investments as a percentage of net assets by industry category as
of August 31, 2004:
Asset Backed-Loans...... 1.37%
Asset Backed/Receivables 15.76%
Asset Backed/Multi-Asset 15.07%
Asset Backed/Securities. 9.59%
Commercial Bank......... 1.77%
Domestic Bank........... 3.43%
Finance................. 5.49%
Foreign Bank............ 2.05%
Government Agencies..... 41.81%
Government Obligations.. 1.37%
Regional Bank........... 2.06%
------
99.77%
======
See Notes to Financial Statements
38 SMALL CAP GROWTH FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Electronics/Electrical Equipment.. 11.02%
Semiconductors.................... 9.09%
Information Processing -- Services 6.08%
Information Processing -- Software 5.93%
Chemical.......................... 5.85%
Oil & Gas......................... 5.68%
Leisure & Tourism................. 5.56%
Healthcare........................ 4.82%
Retail............................ 4.00%
Freight........................... 3.93%
Machinery......................... 3.17%
Banks............................. 3.03%
Government Agencies............... 2.89%
Therapeutics...................... 2.83%
Financial Services................ 2.69%
Drugs............................. 2.36%
Commercial Services............... 2.13%
Insurance......................... 1.83%
Apparel & Products................ 1.67%
Telecommunications................ 1.57%
Hospital Management............... 1.50%
Real Estate....................... 1.48%
Metals............................ 1.38%
Medical Technology................ 1.27%
Information Processing -- Hardware 1.15%
Human Resources................... 1.03%
Finance Companies................. 0.97%
Utilities -- Electric............. 0.79%
Automotive........................ 0.74%
Broadcasting...................... 0.65%
Hospital Supplies................. 0.65%
Savings & Loan.................... 0.58%
Multimedia........................ 0.55%
Mobile Homes...................... 0.54%
Pollution Control................. 0.30%
Foods............................. 0.26%
-----
99.97%
=====
* Calculated as a percentage of Net Assets.
August 31, 2004 SMALL CAP GROWTH FUND - SCHEDULE OF INVESTMENTS 39
Market
Number Value
of Shares (Note 2)
----------------------------------------------------------------------
COMMON STOCK -- 97.08%
Apparel & Products -- 1.67%
Casual Male Retail Group, Inc.+................ 16,500 $ 97,185
Finish Line, Inc., Class A..................... 3,600 104,436
Hot Topic, Inc.+............................... 12,800 193,280
J. Jill Group, Inc.+........................... 14,000 253,260
----------
648,161
----------
Automotive -- 0.74%
Oshkosh Truck Corp., Class B................... 5,600 285,376
----------
Banks -- 3.03%
CVB Financial Corp............................. 830 17,986
East West Bancorp, Inc......................... 7,800 282,594
First State Bancorp............................ 6,811 200,925
Greater Bay Bancorp............................ 13,000 370,110
Umpqua Holdings Corp........................... 13,100 303,003
----------
1,174,618
----------
Broadcasting -- 0.65%
Acme Communications, Inc.+..................... 5,000 32,350
Cumulus Media, Inc., Class A+.................. 13,200 199,320
Radio One, Inc., Class D.+..................... 1,200 18,720
----------
250,390
----------
Chemical -- 5.85%
Cabot Corp..................................... 13,000 517,920
Cabot Microelectronics Corp.+.................. 11,700 390,663
FMC Corp.+..................................... 10,900 503,907
Minerals Technologies, Inc..................... 8,100 454,977
Nova Chemicals Corp............................ 8,300 268,256
Westlake Chemical Corp.+....................... 7,500 131,250
----------
2,266,973
----------
Commercial Services -- 2.13%
BearingPoint, Inc.+............................ 22,000 177,540
Maximus, Inc.+................................. 6,200 180,358
Parexel International Corp.+................... 12,600 242,550
PRG-Shultz International, Inc.+................ 39,900 226,233
----------
826,681
----------
Drugs -- 2.36%
Angiotech Pharmaceuticals, Inc.+............... 12,200 205,936
Medicis Pharmaceutical Corp., Class A.......... 4,900 179,438
OSI Pharmaceuticals, Inc.+..................... 5,000 297,950
Pharmion Corp.+................................ 1,400 68,838
Taro Pharmaceutical Industries, Ltd., Class A+. 7,800 161,694
----------
913,856
----------
Electronics/Electrical Equipment -- 11.02%
Advanced Energy Industries, Inc.+.............. 17,100 166,896
Ametek, Inc.................................... 7,200 205,560
C&D Technologies, Inc.......................... 6,200 99,820
Coherent, Inc.+................................ 10,000 254,300
Electro Scientific Industries, Inc.+........... 21,400 442,766
Flir Systems, Inc.+............................ 9,200 537,004
Graftech International, Ltd.+.................. 12,100 128,986
Kemet Corp.+................................... 14,900 129,183
Mettler-Toledo International, Inc.+............ 11,100 511,044
Microtune, Inc.+............................... 33,700 167,152
Photon Dynamics, Inc.+......................... 7,600 170,772
Tektronix, Inc................................. 15,400 439,978
Trimble Navigation, Ltd.+...................... 9,800 269,892
Varian, Inc.+.................................. 14,400 566,208
Wilson Greatbatch Technologies, Inc.+.......... 11,000 180,180
----------
4,269,741
----------
Finance Companies -- 0.97%
Federal Agricultural Mtg. Corp., Class C+...... 3,100 61,566
Financial Federal Corp.+....................... 9,500 315,970
----------
377,536
----------
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------------
Financial Services -- 2.69%
Greenhill & Co., Inc.......................... 1,000 $ 20,450
Jackson Hewitt Tax Service, Inc.+............. 12,300 238,005
Jefferies Group, Inc.......................... 5,200 174,252
National Financial Partners Corp.............. 5,200 178,880
NCO Group, Inc.+.............................. 16,900 431,964
----------
1,043,551
----------
Foods -- 0.26%
Performance Food Group Co.+................... 2,800 61,600
United Natural Foods, Inc.+................... 1,500 37,140
----------
98,740
----------
Freight -- 3.93%
Forward Air Corp.+............................ 16,800 610,344
Knight Transportation, Inc.+.................. 15,000 298,350
Landstar System, Inc.+........................ 11,700 614,016
----------
1,522,710
----------
Healthcare -- 4.82%
American Medical Systems Holdings, Inc.+...... 14,400 454,464
LabOne, Inc.+................................. 8,600 251,378
Molina Healthcare, Inc.+...................... 4,200 139,440
Pharmaceutical Product Development, Inc.+..... 7,300 247,835
RehabCare Group, Inc.+........................ 10,400 239,096
Steris Corp.+................................. 16,100 368,368
Symbion, Inc.+................................ 3,600 58,212
United Surgical Partners International, Inc.+. 3,000 108,330
----------
1,867,123
----------
Hospital Management -- 1.50%
Amsurg Corp.+................................. 2,200 49,148
Select Medical Corp........................... 13,000 172,640
VCA Antech, Inc.+............................. 18,800 360,208
----------
581,996
----------
Hospital Supplies -- 0.65%
Merit Medical Systems, Inc.+.................. 14,666 250,935
----------
Human Resources -- 1.03%
CDI Corp...................................... 10,800 226,800
Resources Connection, Inc.+................... 5,300 173,734
----------
400,534
----------
Information Processing - Hardware -- 1.15%
Avocent Corp.+................................ 9,500 270,845
Drexler Technology Corp.+..................... 4,600 36,294
Overland Storage, Inc.+....................... 10,500 137,550
----------
444,689
----------
Information Processing - Services -- 6.08%
Adaptec, Inc.+................................ 24,600 171,708
aQuantive, Inc.+.............................. 21,100 182,726
Ask Jeeves, Inc.+............................. 4,600 119,232
Catapult Communications Corp.+................ 13,200 315,480
Entrust, Inc.+................................ 38,200 102,376
FileNET Corp.+................................ 14,600 286,744
Jack Henry & Associates, Inc.................. 11,200 202,832
Macromedia, Inc.+............................. 22,000 426,360
National Instruments Corp..................... 18,400 479,688
ValueClick, Inc.+............................. 9,600 69,408
----------
2,356,554
----------
Information Processing - Software -- 5.93%
Ascential Software Corp.+..................... 25 324
Aspen Technology, Inc.+....................... 11,100 64,269
Borland Software Corp.+....................... 18,500 150,405
F5 Networks, Inc.+............................ 8,000 196,560
Global Payments, Inc.......................... 10,600 470,216
Hyperion Solutions Corp.+..................... 6,500 237,640
IDX Systems Corp.+............................ 5,400 156,600
40 SMALL CAP GROWTH FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Number Value
of Shares (Note 2)
------------------------------------------------------------------
COMMON STOCK (continued)
Information Processing - Software (continued)
Lawson Software, Inc.+..................... 34,200 $ 191,520
NetIQ Corp.+............................... 21,300 204,906
Quest Software, Inc.+...................... 18,200 184,184
RSA Security, Inc.+........................ 10,700 159,323
Tumbleweed Communications Corp.+........... 20,600 43,260
Verity, Inc.+.............................. 21,000 240,450
----------
2,299,657
----------
Insurance -- 1.83%
IPC Holdings, Ltd.......................... 6,400 232,256
Sierra Health Services, Inc.+.............. 11,100 478,632
----------
710,888
----------
Leisure & Tourism -- 5.56%
Alliance Gaming Corp.+..................... 9,800 146,118
Argosy Gaming Co.+......................... 11,500 384,445
BJ's Restaurants, Inc.+.................... 8,700 127,716
Four Seasons Hotels, Inc................... 8,300 475,756
La Quinta Corp.+........................... 25,300 198,352
Panera Bread Co., Class A+................. 8,300 288,674
Penn National Gaming, Inc.+................ 11,200 435,120
Red Robin Gourmet Burgers, Inc.+........... 2,800 97,916
----------
2,154,097
----------
Machinery -- 3.17%
Briggs & Stratton Corp..................... 2,400 180,240
Crane Co................................... 6,500 175,500
Cuno, Inc.+................................ 4,100 233,208
Flowserve Corp.+........................... 19,300 442,742
Manitowoc Co., Inc......................... 5,900 195,644
----------
1,227,334
----------
Medical Technology -- 1.27%
CTI Molecular Imaging, Inc.+............... 9,400 88,266
InterMune, Inc.+........................... 16,700 172,511
Serologicals Corp.+........................ 11,000 230,340
----------
491,117
----------
Metals -- 1.38%
Meridian Gold, Inc.+....................... 7,600 99,712
Reliance Steel & Aluminum Co............... 6,100 231,373
Roper Industries, Inc...................... 3,700 204,055
----------
535,140
----------
Mobile Homes -- 0.54%
Winnebago Industries, Inc.................. 6,600 207,240
----------
Multimedia -- 0.55%
Entravision Communications Corp.+.......... 26,500 214,650
----------
Oil & Gas -- 5.68%
Cal Dive International, Inc.+.............. 17,300 516,751
Denbury Resources, Inc.+................... 8,100 177,390
FMC Technologies, Inc.+.................... 13,800 423,936
Patterson-UTI Energy, Inc.................. 16,800 290,976
PetroQuest Energy, Inc.+................... 25,800 114,810
Spinnaker Exploration Co.+................. 14,100 481,374
Superior Energy Services, Inc.+............ 17,600 196,944
----------
2,202,181
----------
Pollution Control -- 0.30%
Waste Connections, Inc.+................... 3,900 114,465
----------
Real Estate -- 1.48%
Jones Lang LaSalle, Inc.+.................. 17,600 574,640
----------
Number Market
of Shares/ Value
Par Value (Note 2)
---------------------------------------------------------------------------
Retail -- 4.00%
Cost Plus, Inc.+................................. 8,400 $ 287,784
Fred's, Inc., Class A............................ 11,100 154,401
Leapfrog Enterprises, Inc.+...................... 8,800 174,152
Regis Corp....................................... 5,600 229,208
Tractor Supply Co.+.............................. 8,300 289,006
Tuesday Morning Corp.+........................... 13,400 416,472
-----------
1,551,023
-----------
Savings & Loan -- 0.58%
First Niagara Financial Group, Inc............... 11,600 146,044
Franklin Bank Corp.+............................. 4,900 78,008
-----------
224,052
-----------
Semiconductors -- 9.09%
Actel Corp.+..................................... 20,000 289,000
Exar Corp.+...................................... 23,200 319,928
Integrated Circuit Systems, Inc.+................ 24,800 545,104
Integrated Device Technology, Inc.+.............. 26,900 288,099
Lam Research Corp.+.............................. 12,900 277,995
Micrel, Inc.+.................................... 9,600 93,216
Pericom Semiconductor Corp.+..................... 12,900 127,194
Semtech Corp.+................................... 41,600 752,544
Varian Semiconductor Equipment Associates, Inc.+. 26,900 753,200
ZiLOG, Inc.+..................................... 10,000 77,200
-----------
3,523,480
-----------
Telecommunications -- 1.57%
NII Holdings, Inc., Class B+..................... 10,100 370,165
ViaSat, Inc.+.................................... 12,100 239,822
-----------
609,987
-----------
Therapeutics -- 2.83%
Eyetech Pharmaceuticals, Inc.+................... 4,600 159,712
Medicines Co.+................................... 9,600 242,688
NPS Pharmaceuticals, Inc.+....................... 11,700 245,700
Trimeris, Inc.+.................................. 14,900 179,396
Vicuron Phamaceuticals, Inc.+.................... 17,900 267,426
-----------
1,094,922
-----------
Utilities - Electric -- 0.79%
Headwaters, Inc.+................................ 10,000 306,100
-----------
Total Investment Securities
(Cost $35,538,117).............................. 37,621,137
-----------
SHORT-TERM INVESTMENTS -- 2.89%
Government Agencies -- 2.89%
Federal Home Loan Mtg. Corp. Disc. Notes:
1.45% due 9/1/04
(Cost $1,121,000)............................... $1,121,000 1,121,000
-----------
TOTAL INVESTMENTS
(Cost $36,659,117)(1)........................... 99.97% 38,742,137
Other assets less liabilities...................... 0.03% 12,882
---------- -----------
NET ASSETS -- 100% $38,755,019
========== ===========
- --------
+ Non-income producing
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
August 31, 2004 SMALL CAP VALUE FUND - PORTFOLIO PROFILE (Unaudited) 41
Industry Allocation*
Insurance......................... 14.75%
Banks............................. 7.74%
Repurchase Agreement.............. 6.15%
Leisure & Tourism................. 5.47%
Electronics/Electrical Equipment.. 5.40%
Retail............................ 5.10%
Chemical.......................... 4.93%
Building Materials................ 4.58%
Oil And Gas....................... 4.48%
Freight........................... 3.73%
Exchange-Traded Funds............. 3.36%
Real Estate Investment Trusts..... 3.02%
Utilities -- Electric............. 2.97%
Machinery......................... 2.45%
Metals............................ 1.98%
Appliances/Furnishings............ 1.92%
Semiconductors.................... 1.72%
Financial Services................ 1.60%
Healthcare........................ 1.51%
Information Processing -- Software 1.48%
Apparel & Products................ 1.41%
Textile -- Products............... 1.25%
Information Processing -- Hardware 1.15%
Airlines.......................... 1.00%
Multimedia........................ 0.93%
Conglomerates..................... 0.92%
Drugs............................. 0.88%
Foods............................. 0.83%
Savings & Loan.................... 0.68%
Telecommunications................ 0.68%
Information Processing -- Services 0.66%
Paper/Forest Products............. 0.65%
Commercial Services............... 0.58%
Mobile Homes...................... 0.58%
Automotive........................ 0.55%
Medical Technology................ 0.39%
Utilities -- Gas, Distribution.... 0.39%
Gas & Pipeline Utilities.......... 0.38%
Aerospace/Defense................. 0.34%
Hardware & Tools.................. 0.30%
Human Resources................... 0.25%
Beverages......................... 0.21%
Finance Companies................. 0.20%
Hospital Supplies................. 0.18%
Publishing........................ 0.14%
Miscellaneous..................... 0.06%
Household Products................ 0.04%
Tobacco........................... 0.02%
-----
99.99%
=====
* Calculated as a percentage of Net Assets.
42 SMALL CAP VALUE FUND - SCHEDULE OF INVESTMENTS August 31, 2004
Market
Number Value
of Shares (Note 2)
-------------------------------------------------------------
COMMON STOCK -- 90.48%
Aerospace/Defense -- 0.34%
AAR Corp.+............................ 8,240 $ 88,168
Herley Industries, Inc.+.............. 3,710 68,227
Kaman Corp., Class A.................. 7,140 83,252
----------
239,647
----------
Airlines -- 1.00%
Alaska Air Group, Inc.+............... 19,720 464,209
Frontier Airlines, Inc.+.............. 27,560 248,040
----------
712,249
----------
Apparel & Products -- 1.41%
Dress Barn, Inc.+..................... 11,820 195,858
Footstar, Inc.+....................... 6,970 29,553
Goody's Family Clothing, Inc.......... 6,320 48,348
Payless ShoeSource, Inc.+............. 45,820 531,512
Russell Corp.......................... 5,830 104,124
Wolverine World Wide, Inc............. 3,870 93,344
----------
1,002,739
----------
Appliances/Furnishings -- 1.92%
CompX International, Inc., Class A+... 16,140 257,433
Furniture Brands International, Inc... 13,730 315,790
Griffon Corp.+........................ 19,820 396,796
HNI Corp.............................. 6,920 271,264
La-Z-Boy Chair Co..................... 8,240 127,226
----------
1,368,509
----------
Automotive -- 0.55%
Cooper Tire & Rubber Co............... 17,460 395,294
----------
Banks -- 7.74%
Associated Banc-Corp.................. 16,948 530,473
C&F Financial Corp.................... 2,090 74,529
City National Corp.................... 6,880 453,942
Colonial BancGroup, Inc............... 4,660 94,039
Commerce Bancshares, Inc.............. 8,406 406,262
Community Bank Systems, Inc........... 6,000 153,300
Compass Bancshares, Inc............... 4,890 226,163
Corus Bankshares, Inc................. 3,100 132,897
Eastern Virginia Bankshares, Inc...... 4,410 97,241
First Commonwealth Financial Corp..... 14,340 193,303
FirstMerit Corp....................... 17,630 464,374
Fulton Financial Corp................. 13,663 288,699
IBERIABANK Corp....................... 920 51,676
LSB Bancshares, Inc................... 6,590 106,758
Mercantile Bank Corp.................. 5,717 200,038
Mercantile Bankshares Corp............ 6,880 327,488
North Valley Bancorp.................. 8,206 131,296
Old National Bancorp.................. 1,420 35,372
Silicon Valley Bancshares+............ 3,620 135,207
Simmons First National Corp., Class A. 1,580 39,200
Susquehanna Bancshares, Inc........... 6,670 160,080
UMB Financial Corp.................... 10,280 496,010
Umpqua Holdings Corp.................. 5,916 136,837
Washington Trust Bancorp, Inc......... 5,120 126,208
WesBanco, Inc......................... 6,940 192,238
Whitney Holding Corp.................. 6,510 268,212
----------
5,521,842
----------
Beverages -- 0.21%
Farmer Brothers Co.................... 6,060 151,500
----------
Building Materials -- 4.58%
Apogee Enterprises, Inc............... 7,325 82,553
Eagle Materials, Inc.................. 5,841 379,139
Lafarge North America, Inc............ 21,660 970,584
LSI Industries, Inc................... 8,260 78,883
Martin Marietta Materials, Inc........ 12,910 580,821
Patrick Industries, Inc.+............. 9,760 106,872
Shaw Group, Inc.+..................... 34,790 357,989
Market
Number Value
of Shares (Note 2)
-----------------------------------------------------------------
Building Materials (continued)
Texas Industries, Inc..................... 7,080 $ 310,104
Watsco, Inc............................... 5,550 161,394
York International Corp................... 7,460 242,898
----------
3,271,237
----------
Chemical -- 4.93%
Albemarle Corp............................ 3,810 126,721
Ashland, Inc.............................. 26,540 1,364,952
H.B. Fuller Co............................ 16,060 422,860
Hawkins, Inc.............................. 5,140 61,526
Lubrizol Corp............................. 10,080 359,352
Olin Corp................................. 4,630 78,201
OM Group, Inc.+........................... 4,350 148,117
Penford Corp.............................. 14,640 249,465
Sensient Technologies Corp................ 21,180 444,780
Stepan Co................................. 11,450 259,915
----------
3,515,889
----------
Commercial Services -- 0.58%
Cornell Cos., Inc.+....................... 9,710 116,520
Deluxe Corp............................... 1,700 72,624
Geo Group, Inc.+.......................... 5,670 110,565
Parexel International Corp.+.............. 3,720 71,610
Volt Information Sciences, Inc.+.......... 1,460 38,865
----------
410,184
----------
Conglomerates -- 0.92%
Trinity Industries, Inc................... 23,550 653,513
----------
Drugs -- 0.88%
D&K Healthcare Resources, Inc............. 34,210 364,337
King Pharmaceuticals, Inc.+............... 5,850 72,891
Perrigo Co................................ 9,760 191,686
----------
628,914
----------
Electronics/Electrical Equipment -- 5.40%
ACT Manufacturing, Inc.+.................. 189 1
American Power Conversion Corp............ 29,570 496,776
Analogic Corp............................. 5,690 234,599
Belden CDT, Inc.+......................... 4,730 94,742
Coherent, Inc.+........................... 12,020 305,669
CTS Corp.................................. 21,610 246,354
Emcor Group, Inc.+........................ 4,330 175,798
Intermagnetics General Corp.+............. 16,350 375,723
Kemet Corp.+.............................. 36,380 315,414
Newport Corp.+............................ 9,020 112,750
Park Electrochemical Corp................. 6,780 150,177
Paxar Corp.+.............................. 10,290 208,270
Planar Systems, Inc.+..................... 32,630 370,677
Standard Microsystems Corp.+.............. 5,360 85,063
Teleflex, Inc............................. 7,370 322,290
Thomas Industries, Inc.................... 5,910 181,732
X-Rite, Inc............................... 12,790 179,060
----------
3,855,095
----------
Finance Companies -- 0.20%
Federal Agricultural Mtg. Corp., Class C+. 7,100 141,006
----------
Financial Services -- 1.60%
A.G. Edwards, Inc......................... 6,330 220,157
Affiliated Managers Group, Inc.+.......... 10,080 494,424
E*TRADE Group, Inc.+...................... 15,490 182,472
Sovereign Bancorp, Inc.................... 11,340 247,893
----------
1,144,946
----------
Foods -- 0.83%
J&J Snack Foods Corp.+.................... 5,141 220,960
Ralcorp Holdings, Inc.+................... 2,000 72,860
Smithfield Foods, Inc.+................... 11,720 301,204
----------
595,024
----------
August 31, 2004 SMALL CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED 43
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------
COMMON STOCK (continued)
Freight -- 3.73%
Alexander & Baldwin, Inc................ 3,740 $ 115,155
CNF, Inc................................ 7,640 313,393
Kirby Corp.+............................ 1,870 66,460
Offshore Logistics, Inc.+............... 23,430 698,214
Overnite Corp........................... 9,490 288,876
Ryder System, Inc....................... 8,410 368,442
SCS Transportation, Inc.+............... 5,825 108,112
Swift Transportation Co., Inc.+......... 20,480 372,326
Teekay Shipping Corp.................... 9,370 328,418
----------
2,659,396
----------
Gas & Pipeline Utilities -- 0.38%
Atmos Energy Corp....................... 8,090 204,596
Cascade Natural Gas Corp................ 3,210 66,864
----------
271,460
----------
Hardware & Tools -- 0.30%
Stanley Works........................... 4,980 215,435
----------
Healthcare -- 1.51%
Manor Care, Inc......................... 14,280 437,968
RehabCare Group, Inc.+.................. 11,280 259,327
Steris Corp.+........................... 13,610 311,397
Vital Signs, Inc........................ 2,250 68,220
----------
1,076,912
----------
Hospital Supplies -- 0.18%
Datascope Corp.......................... 3,610 130,249
----------
Household Products -- 0.04%
Oneida, Ltd.+........................... 17,430 25,971
----------
Human Resources -- 0.25%
Kelly Services, Inc., Class A........... 6,730 181,710
----------
Information Processing - Hardware -- 1.15%
Cray, Inc.+............................. 13,420 51,264
Electronics for Imaging, Inc.+.......... 10,550 209,734
Interphase Corp.+....................... 1,810 18,589
Optimal Robotics Corp., Class A+........ 25,770 179,359
Tech Data Corp.+........................ 9,600 361,536
----------
820,482
----------
Information Processing - Services -- 0.66%
Adaptec, Inc.+.......................... 8,290 57,864
Agilysys, Inc........................... 14,940 232,765
Analysts International Corp.+........... 6,880 20,984
Braun Consulting, Inc.+................. 28,190 29,036
Jack Henry & Associates, Inc............ 7,310 132,384
----------
473,033
----------
Information Processing - Software -- 1.48%
Acxiom Corp............................. 11,710 263,124
Agile Software Corp.+................... 6,600 50,292
Ascential Software Corp.+............... 13,357 173,107
EPIQ Systems, Inc.+..................... 28,830 460,703
Nuance Communications, Inc.+............ 14,370 58,342
Retek, Inc.+............................ 14,210 53,572
----------
1,059,140
----------
Insurance -- 14.75%
Alfa Corp............................... 16,400 227,140
American Medical Security Group, Inc.+.. 11,800 265,972
Assurant, Inc........................... 5,640 149,686
Assured Guaranty, Ltd................... 28,220 452,367
Axis Capital Holdings, Ltd.............. 15,050 359,243
Ceres Group, Inc.+...................... 18,050 97,650
Commerce Group, Inc..................... 5,690 272,835
Delphi Financial Group, Inc., Class A... 8,615 338,742
Endurance Specialty Holdings, Ltd....... 12,220 397,639
FBL Financial Group, Inc., Class A...... 4,880 126,148
Market
Number Value
of Shares (Note 2)
---------------------------------------------------------------------
Insurance (continued)
Harleysville Group, Inc...................... 18,950 $ 376,347
Health Net, Inc.+............................ 5,110 132,553
Horace Mann Educators Corp................... 32,880 557,973
Humana, Inc.+................................ 63,240 1,201,560
LandAmerica Financial Group, Inc............. 5,220 224,669
Nationwide Financial Services, Inc., Class A. 11,920 414,697
Old Republic International Corp.............. 9,665 227,611
PMI Group, Inc............................... 48,660 2,020,850
ProAssurance Corp.+.......................... 4,460 150,570
Protective Life Corp......................... 5,570 217,954
PXRE Group, Ltd.............................. 10,138 235,607
Radian Group, Inc............................ 14,450 640,135
Reinsurance Group of America, Inc............ 16,190 645,171
Selective Insurance Group, Inc............... 10,120 349,444
StanCorp Financial Group, Inc................ 4,920 356,700
Universal American Financial Corp.+.......... 1,990 22,706
Vesta Insurance Group, Inc................... 13,700 65,212
-----------
10,527,181
-----------
Leisure & Tourism -- 5.47%
Action Performance Cos., Inc................. 8,130 88,780
Arctic Cat, Inc.............................. 13,420 350,530
Bob Evans Farms, Inc......................... 15,750 394,380
Brinker International, Inc.+................. 4,360 132,762
California Pizza Kitchen, Inc.+.............. 17,020 324,912
CBRL Group, Inc.............................. 6,480 206,582
CEC Entertainment, Inc.+..................... 6,310 212,458
Jack in the Box, Inc.+....................... 23,270 657,145
Landry's Seafood Restaurants, Inc............ 13,680 362,109
Marcus Corp.................................. 15,420 292,980
Papa John's International, Inc.+............. 8,300 238,293
Prime Hospitality Corp.+..................... 36,290 436,206
Steak N Shake Co.+........................... 12,160 209,152
-----------
3,906,289
-----------
Machinery -- 2.45%
Alamo Group, Inc............................. 770 13,082
Applied Industrial Technologies, Inc......... 4,120 123,106
Granite Construction, Inc.................... 13,900 316,920
Insituform Technologies, Inc., Class A+...... 2,160 38,426
Jacobs Engineering Group, Inc.+.............. 11,720 458,369
Lindsay Manufacturing Co..................... 7,390 184,455
Lufkin Industries, Inc....................... 3,300 106,920
NACCO Industries, Inc., Class A.............. 980 77,675
Stewart & Stevenson Services, Inc............ 12,800 213,888
Tecumseh Products Co., Class A............... 3,240 133,326
Tennant Co................................... 2,060 82,915
-----------
1,749,082
-----------
Medical Technology -- 0.39%
Maxim Pharmaceuticals, Inc.+................. 15,500 104,935
Osteotech, Inc.+............................. 17,580 74,363
Zoll Medical Corp.+.......................... 2,940 98,049
-----------
277,347
-----------
Metals -- 1.97%
Brush Engineered Materials, Inc.+............ 18,660 382,343
CIRCOR International, Inc.................... 1,570 28,354
Intermet Corp................................ 22,920 73,344
Lawson Products, Inc......................... 1,720 63,984
Mueller Industries, Inc...................... 12,400 487,196
Valmont Industries, Inc...................... 8,420 166,211
Wolverine Tube, Inc.+........................ 18,160 208,477
-----------
1,409,909
-----------
44 SMALL CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Number Value
of Shares (Note 2)
-----------------------------------------------------------------
COMMON STOCK (continued)
Mobile Homes -- 0.58%
Coachmen Industries, Inc.................. 11,380 $ 177,301
National R.V. Holdings, Inc.+............. 13,280 176,358
Palm Harbor Homes, Inc.+.................. 3,800 62,168
----------
415,827
----------
Multimedia -- 0.93%
Belo Corp................................. 29,000 665,260
----------
Oil & Gas -- 4.48%
Forest Oil Corp.+......................... 13,040 339,692
Frontier Oil Corp......................... 6,580 134,363
Helmerich & Payne, Inc.................... 7,030 181,796
Laclede Group, Inc........................ 830 23,954
Newfield Exploration Co.+................. 4,240 234,684
ONEOK, Inc................................ 20,230 476,619
Pride International, Inc.+................ 26,730 490,763
Seacor Smit, Inc.+........................ 8,110 350,109
Spinnaker Exploration Co.+................ 10,080 344,131
Tidewater, Inc............................ 18,100 528,158
Willbros Group, Inc.+..................... 6,890 96,460
----------
3,200,729
----------
Paper/Forest Products -- 0.65%
Bemis Co., Inc............................ 13,940 368,434
Glatfelter................................ 7,530 95,481
----------
463,915
----------
Publishing -- 0.14%
Bowne & Co., Inc.......................... 7,370 98,905
----------
Real Estate Investment Trusts -- 3.02%
Associated Estates Realty Corp............ 8,840 82,831
Boykin Lodging Co.+....................... 8,530 71,396
Brandywine Realty Trust................... 5,570 164,872
Equity Inns, Inc.......................... 26,800 255,940
First Industrial Realty Trust, Inc........ 4,110 164,400
Highwoods Properties, Inc................. 21,590 531,114
Pennsylvania Real Estate Investment Trust. 650 24,869
Prentiss Properties Trust................. 3,410 125,181
Summit Properties, Inc.................... 15,350 416,906
Winston Hotels, Inc....................... 31,190 318,450
----------
2,155,959
----------
Retail -- 5.17%
BJ's Wholesale Club, Inc.+................ 22,350 565,902
Bon-Ton Stores, Inc....................... 2,620 34,558
Borders Group, Inc........................ 21,790 520,781
Building Materials Holding Corp........... 4,221 95,479
Enesco Group, Inc.+....................... 5,670 46,040
Linens 'N Things, Inc.+................... 11,380 285,410
Rex Stores Corp.+......................... 25,050 318,135
Ruddick Corp.............................. 17,300 329,911
ShopKo Stores, Inc.+...................... 15,350 259,722
Toys "R" Us, Inc.+........................ 36,920 599,581
Weis Markets, Inc......................... 6,210 208,159
Whitehall Jewellers, Inc.+................ 690 5,451
Zale Corp.+............................... 16,376 419,553
----------
3,688,682
----------
Savings & Loan -- 0.68%
Astoria Financial Corp.................... 9,040 328,514
Washington Federal, Inc................... 6,041 155,616
----------
484,130
----------
Semiconductors -- 1.72%
Alliance Semiconductor Corp.+............. 7,850 29,987
Cohu, Inc................................. 9,710 153,224
Emulux Corp.+............................. 10,260 108,859
Number Market
of Shares/ Value
Par Value (Note 2)
- ------------------------------------------------------------------------------------
Semiconductors (continued)
Exar Corp.+............................................... 28,920 $ 398,807
Integrated Device Technology, Inc.+....................... 25,530 273,426
Lattice Semiconductor Corp.+.............................. 32,710 149,157
Parlex Corp.+............................................. 19,200 113,280
-----------
1,226,740
-----------
Telecommunications -- 0.68%
Advanced Fibre Communications, Inc.+...................... 28,120 482,820
MRV Communications, Inc.+................................. 68 151
-----------
482,971
-----------
Textile - Products -- 1.25%
G&K Services, Inc., Class A............................... 8,490 309,121
UniFirst Corp............................................. 20,220 580,921
-----------
890,042
-----------
Tobacco -- 0.02%
DIMON, Inc................................................ 1,910 10,963
-----------
Utilities - Electric -- 2.97%
Black Hills Corp.......................................... 4,420 123,097
Central Vermont Public Service Corp....................... 17,410 366,480
El Paso Electric Co.+..................................... 4,920 75,473
Idacorp, Inc.............................................. 270 7,865
MDU Resources Group, Inc.................................. 7,165 181,776
PNM Resources, Inc........................................ 19,080 407,740
Puget Energy, Inc......................................... 28,120 644,229
Sierra Pacific Resources+................................. 20,740 178,364
TECO Energy, Inc.......................................... 10,360 137,374
-----------
2,122,398
-----------
Utilities - Gas, Distribution -- 0.39%
Vectren Corp.............................................. 11,360 277,752
-----------
Total Common Stock
(Cost $55,948,870)....................................... 64,575,457
-----------
EXCHANGE-TRADED FUNDS -- 3.36%
iShares Russell 2000 Value Index Fund..................... 6,399 1,062,874
iShares S&P Small Cap 600/BARRA Value Index Fund.......... 12,787 1,339,310
-----------
Total Exchange-Traded Funds
(Cost $2,298,338)........................................ 2,402,184
-----------
Total Investment Securities
(Cost $58,247,208)....................................... 66,977,641
-----------
REPURCHASE AGREEMENT -- 6.15%
Agreement with State Street Bank & Trust Co., bearing
interest at 1.42%, dated 8/31/04, to be repurchased
9/1/04 in the amount of $4,389,173 and collateralized by
Federal Home Loan Mtg. Corp. Notes, bearing interest at
2.05%, due 11/28/05 and having an approximate value of
$4,522,536 (Cost $4,389,000)............................. $4,389,000 4,389,000
-----------
TOTAL INVESTMENTS
(Cost $62,636,208)(1).................................... 99.99% 71,366,641
Other assets less liabilities............................... 0.01% 4,761
---------- -----------
NET ASSETS -- 100% $71,371,402
========== ===========
- --------
+ Non-income producing
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
August 31, 2004 SOCIALLY RESPONSIBLE FUND - PORTFOLIO PROFILE (Unaudited) 45
Industry Allocation*
Financial Services................ 15.80%
Retail............................ 7.78%
Insurance......................... 7.25%
Repurchase Agreement.............. 6.89%
Conglomerates..................... 6.28%
Drugs............................. 6.05%
Banks............................. 4.86%
Information Processing -- Software 4.54%
Information Processing -- Hardware 4.31%
Household Products................ 4.18%
Telecommunications................ 4.05%
Machinery......................... 3.30%
Oil & Gas......................... 3.00%
Multimedia........................ 2.76%
Information Processing -- Services 2.51%
Chemical.......................... 2.38%
Hospital Supplies................. 2.06%
Beverages......................... 1.98%
Semiconductors.................... 1.64%
Broadcasting...................... 1.63%
Electronics/Electrical Equipment.. 1.33%
Railroads & Equipment............. 1.29%
Utilities -- Electric............. 1.25%
Automotive........................ 1.16%
Finance Companies................. 1.11%
U.S. Government Treasuries........ 0.93%
Schools........................... 0.88%
Medical -- Biomedical/Gene........ 0.87%
Utilities -- Communication........ 0.86%
Photography....................... 0.84%
Apparel & Products................ 0.79%
Appliances/Furnishings............ 0.76%
Freight........................... 0.74%
Utilities -- Gas, Pipeline........ 0.68%
Hardware & Tools.................. 0.50%
Healthcare........................ 0.49%
Utilities -- Gas, Distribution.... 0.41%
Leisure & Tourism................. 0.37%
Building Materials................ 0.31%
Medical Technology................ 0.09%
Commercial Services............... 0.03%
------
108.94%
======
* Calculated as a percentage of Net Assets.
46 SOCIALLY RESPONSIBLE FUND - SCHEDULE OF INVESTMENTS August 31, 2004
Market
Number Value
of Shares (Note 2)
--------------------------------------------------------------
COMMON STOCK -- 91.99%
Apparel & Products -- 0.79%
Gap, Inc............................... 2,490 $ 46,663
Jones Apparel Group, Inc............... 2,790 99,575
Nike, Inc., Class B.................... 1,510 113,718
----------
259,956
----------
Appliances/Furnishings -- 0.76%
Leggett & Platt, Inc................... 9,230 248,195
----------
Automotive -- 1.16%
Danaher Corp........................... 7,400 380,508
----------
Banks -- 4.86%
Bank of America Corp................... 8,258 371,445
Comerica, Inc.......................... 3,020 181,653
U.S. Bancorp........................... 990 29,205
Wachovia Corp.......................... 9,310 436,732
Wells Fargo & Co....................... 9,850 578,687
----------
1,597,722
----------
Beverages -- 1.98%
Coca-Cola Co........................... 13,060 583,913
Coca-Cola Enterprises, Inc............. 2,520 52,038
PepsiCo, Inc........................... 310 15,500
----------
651,451
----------
Broadcasting -- 1.63%
Clear Channel Communications, Inc...... 1,830 61,323
Comcast Corp., Class A+................ 16,840 474,383
----------
535,706
----------
Building Materials -- 0.31%
Masco Corp............................. 3,200 102,816
----------
Chemical -- 2.38%
Eastman Chemical Co.................... 4,490 208,920
Ecolab, Inc............................ 5,740 171,741
Rohm & Haas Co......................... 9,870 400,031
----------
780,692
----------
Commercial Services -- 0.03%
Convergys Corp.+....................... 520 7,228
Fluor Corp............................. 70 2,993
----------
10,221
----------
Conglomerates -- 6.28%
3M Co.................................. 6,620 545,223
General Electric Co.@.................. 36,460 1,195,523
Tyco International, Ltd................ 10,330 323,536
----------
2,064,282
----------
Drugs -- 6.05%
Allergan, Inc.......................... 930 69,425
Bristol-Myers Squibb Co................ 4,170 98,954
Caremark Rx, Inc.+..................... 8,370 240,219
Eli Lilly & Co......................... 1,720 109,134
Merck & Co., Inc....................... 5,230 235,193
Pfizer, Inc.@.......................... 31,550 1,030,739
Watson Pharmaceuticals, Inc.+.......... 2,110 58,109
Wyeth.................................. 3,990 145,914
----------
1,987,687
----------
Electronics/Electrical Equipment -- 1.33%
Emerson Electric Co.................... 5,690 354,203
Hawaiian Electric Industries, Inc...... 2,120 54,717
Jabil Circuit, Inc.+................... 80 1,650
Waters Corp.+.......................... 620 26,852
----------
437,422
----------
Finance Companies -- 1.11%
Capital One Financial Corp............. 3,040 205,990
SLM Corp............................... 4,040 157,641
----------
363,631
----------
Market
Number Value
of Shares (Note 2)
-----------------------------------------------------------------
Financial Services -- 6.67%
American Express Co....................... 800 $ 40,016
Charles Schwab Corp....................... 550 5,198
Citigroup, Inc.@.......................... 20,950 975,851
Fannie Mae................................ 2,210 164,534
Freddie Mac............................... 3,040 204,045
Goldman Sachs Group, Inc.................. 1,120 100,408
JPMorgan Chase & Co....................... 17,333 686,040
Merrill Lynch & Co., Inc.................. 310 15,832
----------
2,191,924
----------
Freight -- 0.74%
United Parcel Service, Inc., Class B...... 3,310 241,795
----------
Hardware & Tools -- 0.50%
Black & Decker Corp....................... 1,540 106,152
Stanley Works............................. 1,360 58,834
----------
164,986
----------
Healthcare -- 0.49%
Medco Health Solutions, Inc.+............. 5,110 159,585
----------
Hospital Supplies -- 2.06%
AmerisourceBergen Corp.................... 1,790 96,839
Johnson & Johnson......................... 9,980 579,838
----------
676,677
----------
Household Products -- 4.18%
Colgate-Palmolive Co...................... 2,630 142,020
Gillette Co............................... 11,870 504,475
Procter & Gamble Co....................... 12,990 727,050
----------
1,373,545
----------
Information Processing - Hardware -- 4.31%
Apple Computer, Inc.+..................... 2,420 83,466
Dell, Inc.+............................... 16,080 560,227
Hewlett-Packard Co........................ 21,840 390,718
International Business Machines Corp...... 2,500 211,725
Lexmark International, Inc., Class A+..... 1,860 164,517
Seagate Technology, Inc.(2)............... 510 0
Sun Microsystems, Inc.+................... 1,230 4,723
----------
1,415,376
----------
Information Processing - Services -- 2.51%
Adobe Systems, Inc........................ 3,590 164,673
eBay, Inc.+............................... 3,550 307,217
First Data Corp........................... 3,178 134,270
Fiserv, Inc.+............................. 6,315 219,636
----------
825,796
----------
Information Processing - Software -- 4.54%
Microsoft Corp.@.......................... 44,050 1,202,565
Oracle Corp.+............................. 29,110 290,227
----------
1,492,792
----------
Insurance -- 7.25%
Aetna, Inc................................ 3,690 341,878
AFLAC, Inc................................ 8,840 354,484
Allstate Corp............................. 8,690 410,255
American International Group, Inc.#....... 1,129 80,430
Chubb Corp................................ 1,790 121,738
Hartford Financial Services Group, Inc.... 2,400 146,784
Lincoln National Corp..................... 170 7,701
Marsh & McLennan Cos., Inc................ 5,030 224,791
St. Paul Cos., Inc........................ 11,530 399,976
UnitedHealth Group, Inc................... 1,270 83,985
Wellpoint Health Networks, Inc., Class A+. 2,140 210,105
----------
2,382,127
----------
Leisure & Tourism -- 0.37%
Hasbro, Inc............................... 900 16,677
McDonald's Corp........................... 3,840 103,757
----------
120,434
----------
August 31, 2004 SOCIALLY RESPONSIBLE FUND - SCHEDULE OF INVESTMENTS - 47
CONTINUED
Market
Number Value
of Shares (Note 2)
-------------------------------------------------------
COMMON STOCK (continued)
Machinery -- 3.30%
Caterpillar, Inc................ 5,180 $ 376,586
Dover Corp...................... 2,610 98,475
Illinois Tool Works, Inc........ 4,680 427,237
Ingersoll-Rand Co., Class A..... 2,790 181,378
----------
1,083,676
----------
Medical - Biomedical/Gene -- 0.87%
Amgen, Inc.+.................... 4,810 285,185
----------
Medical Technology -- 0.09%
Boston Scientific Corp.+........ 780 27,869
----------
Multimedia -- 2.76%
Time Warner, Inc.+@............. 30,870 504,724
Viacom, Inc., Class B........... 5,360 178,542
Walt Disney Co.................. 9,930 222,929
----------
906,195
----------
Oil and Gas -- 3.00%
Cooper Cameron Corp.+........... 1,020 51,949
Diamond Offshore Drilling, Inc.. 1,590 40,418
Halliburton Co.................. 11,890 346,831
Helmerich & Payne, Inc.......... 3,870 100,078
ONEOK, Inc...................... 1,120 26,387
Schlumberger, Ltd............... 2,710 167,478
Tidewater, Inc.................. 3,440 100,379
Transocean, Inc.+............... 4,890 150,123
----------
983,643
----------
Photography -- 0.84%
Eastman Kodak Co................ 9,340 276,277
----------
Railroads & Equipment -- 1.29%
Norfolk Southern Corp........... 14,960 424,864
----------
Retail -- 7.78%
Bed Bath & Beyond, Inc.+........ 3,200 119,744
Best Buy Co., Inc............... 2,590 120,487
CVS Corp........................ 7,750 310,000
Home Depot, Inc................. 3,390 123,938
JC Penney Co., Inc.............. 3,520 134,887
Kohl's Corp.+................... 1,060 52,449
Lowe's Cos., Inc................ 4,090 203,273
RadioShack Corp................. 878 23,653
Staples, Inc.................... 11,050 316,914
Target Corp..................... 5,150 229,587
Wal-Mart Stores, Inc.@.......... 17,490 921,198
----------
2,556,130
----------
Schools -- 0.88%
Apollo Group, Inc., Class A+.... 3,710 289,380
----------
Semiconductors -- 1.64%
Applied Materials, Inc.+........ 14,510 230,564
Intel Corp...................... 10,210 217,371
KLA-Tencor Corp.+............... 340 12,702
National Semiconductor Corp.+... 5,820 77,581
----------
538,218
----------
Telecommunications -- 4.05%
Alltel Corp..................... 1,510 82,522
AT&T Wireless Services, Inc.+... 11,850 173,247
Number Market
of Shares/ Value
Par Value (Note 2)
- ---------------------------------------------------------------------------------------
Telecommunications (continued)
Cisco Systems, Inc.+....................................... 23,190 $ 435,044
Motorola, Inc.............................................. 11,540 186,371
Nextel Communications, Inc., Class A+...................... 5,750 133,343
Verizon Communications, Inc................................ 8,170 320,672
-----------
1,331,199
-----------
Utilities - Communication -- 0.86%
SBC Communications, Inc.................................... 2,870 74,017
Sprint Corp................................................ 10,520 207,034
-----------
281,051
-----------
Utilities - Electric -- 1.25%
Duquesne Light Holdings, Inc............................... 3,030 56,934
OGE Energy Corp............................................ 3,230 83,980
Puget Energy, Inc.......................................... 9,110 208,710
TECO Energy, Inc........................................... 4,490 59,537
-----------
409,161
-----------
Utilities - Gas, Distribution -- 0.41%
AGL Resources, Inc......................................... 2,250 68,603
KeySpan Corp............................................... 1,770 67,437
-----------
136,040
-----------
Utilities - Gas, Pipeline -- 0.68%
National Fuel Gas Co....................................... 8,350 223,613
-----------
Total Investment Securities
(Cost $30,736,048)........................................ 30,217,827
-----------
SHORT-TERM INVESTMENTS -- 10.06%
COMMERCIAL PAPER -- 9.13%
UBS Finance, Inc.:
1.57% due 9/1/04@......................................... $3,000,000 3,000,000
-----------
UNITED STATES TREASURY BILLS -- 0.93%
United States Treasury Bills:
1.37% due 9/23/04@........................................ 10,000 9,992
1.36% due 9/23/04@........................................ 10,000 9,992
1.33% due 9/2/04@......................................... 285,000 284,989
-----------
304,973
-----------
Total Short-Term Investments
(Cost $3,304,973)......................................... 3,304,973
-----------
REPURCHASE AGREEMENT -- 6.89%
Agreement with State Street Bank & Trust Co., bearing
interest at 1.42%, dated 8/31/04, to be repurchased
9/01/04 in the amount of $2,263,089 and collateralized by
Federal National Mortgage Assoc. Notes, bearing interest
at 6.88%, due 9/15/10 and having an approximate value
of $2,336,400 (cost $2,263,000)@.......................... 2,263,000 2,263,000
-----------
TOTAL INVESTMENTS
(Cost $36,304,021)(1)..................................... 108.94% 35,785,800
Liabilities in excess of other assets........................ (8.94)% (2,935,678)
---------- -----------
NET ASSETS -- 100% $32,850,122
========== ===========
- --------
+ Non-income producing
# Security represents an investment in an affiliated company.
@ The security or a portion thereof represents collateral for open futures
contracts.
(1)See Note 5 for cost of investments on a tax basis.
(2)Fair valued security (See Note 2).
Open Futures Contracts
- -------------------------------------------------------------------------------------
Number of Expiration Value at Value as of Unrealized
Contracts Description Date Trade Date August 31, 2004 Depreciation
- -------------------------------------------------------------------------------------
27 Long E-Mini S&P 500 Index September 2004 $1,515,596 $1,490,535 $(25,061)
========
See Notes to Financial Statements
48 STRATEGIC BOND FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2004
Industry Allocation*
Foreign Government Bonds.......... 32.32%
Financial Services................ 8.85%
Government Agencies............... 8.43%
Telecommunications................ 6.89%
Government Obligations............ 4.59%
Utilities -- Electric............. 4.29%
Broadcasting...................... 4.01%
Oil & Gas......................... 3.35%
Repurchase Agreement.............. 2.67%
Airlines.......................... 2.22%
Insurance......................... 2.15%
Leisure & Tourism................. 1.96%
Utilities -- Gas, Pipeline........ 1.70%
Retail............................ 1.54%
Banks............................. 1.51%
Chemical.......................... 1.26%
Commercial Services............... 1.23%
Paper/Forest Products............. 1.10%
Automotive........................ 0.94%
Drugs............................. 0.84%
Real Estate Investment Trusts..... 0.62%
Healthcare........................ 0.60%
Hospital Management............... 0.60%
Conglomerates..................... 0.59%
Foods............................. 0.43%
Metals............................ 0.41%
Electronics/Electrical Equipment.. 0.33%
Utilities -- Communication........ 0.27%
Finance Companies................. 0.26%
Building Materials................ 0.24%
Heavy Duty Trucks/Parts........... 0.18%
Publishing........................ 0.18%
Beverages......................... 0.17%
Advertising....................... 0.16%
Hospital Supplies................. 0.16%
Pollution Control................. 0.16%
Machinery......................... 0.14%
Aerospace/Defense................. 0.13%
Household Products................ 0.13%
Multimedia........................ 0.07%
Semiconductors.................... 0.05%
Apparel & Products................ 0.04%
Funeral Services.................. 0.03%
Information Processing -- Hardware 0.03%
Real Estate....................... 0.03%
Textile -- Products............... 0.03%
Water Services.................... 0.03%
Schools........................... 0.02%
-----
97.94%
=====
Credit Quality+#
Government -- Agency.. 9.19%
Government -- Treasury 5.07%
AAA................... 4.88%
AA.................... 5.04%
A..................... 5.16%
BBB................... 11.06%
BB.................... 17.59%
B..................... 25.16%
CCC................... 11.34%
CC.................... 0.22%
D..................... 1.45%
Not Rated@............ 3.84%
------
100.00%
======
* Calculated as a percentage of Net Assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
August 31, 2004 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS 49
Market
Value
Par Value (Note 2)
---------------------------------------------------------
CORPORATE BONDS -- 44.18%
Advertising -- 0.16%
Affinity Group, Inc.:
9.00% due 2/15/12................ $125,000 $ 130,625
----------
Aerospace/Defense -- 0.12%
Condor Systems, Inc.:
11.88% due 5/1/09+(1)(2)(7)...... 25,000 1,750
Decrane Aircraft Holdings, Inc.:
12.00% due 9/30/08............... 150,000 97,688
----------
99,438
----------
Airlines -- 2.22%
American Airlines, Inc.:
7.80% due 4/1/08................. 250,000 214,069
6.82% due 11/23/12............... 75,000 66,488
Atlas Air, Inc.:
9.06% due 7/2/17................. 98,588 67,795
8.71% due 7/2/21................. 238,203 240,161
7.63% due 7/2/16................. 486,267 322,886
6.88% due 1/2/11................. 225,000 214,266
Continental Airlines, Inc.:
9.56% due 9/1/19................. 408,806 409,243
8.31% due 10/2/19................ 112,428 91,770
7.73% due 9/15/12................ 23,402 16,286
6.95% due 2/2/11................. 70,762 53,546
Delta Air Lines, Inc.:
10.00% due 8/15/08............... 80,000 29,200
7.78% due 7/2/13................. 104,355 42,298
----------
1,768,008
----------
Apparel & Products -- 0.03%
Warnaco, Inc.:
8.88% due 6/15/13................ 25,000 27,625
----------
Automotive -- 0.91%
Collins & Aikman Products:
12.88% due 8/15/12*.............. 50,000 49,875
Diamond Triumph Auto Glass, Inc.:
9.25% due 4/1/08................. 25,000 23,500
Eagle-Picher Industries, Inc.:
9.75% due 9/1/13................. 125,000 134,688
Exide Corp (Escrow Note):
10.00% due 4/15/05+(1)(10)....... 150,000 0
Ford Motor Co.:
7.45% due 7/16/31................ 245,000 240,234
General Motors Corp.:
8.38% due 7/15/33................ 208,000 221,117
Stanadyne Corp.:
10.00% due 8/15/14*.............. 50,000 51,750
Venture Holdings Trust:
11.00% due 6/1/07+(2)(7)......... 25,000 1,125
----------
722,289
----------
Banks -- 1.52%
American Express Centurion Bank:
4.38% due 7/30/09................ 410,000 419,412
Emigrant Capital Trust I:
4.23% due 12/10/33*(3)........... 287,000 285,442
RBS Capital Trust III:
5.51% due 9/29/49(4)............. 55,000 55,745
United Overseas Bank, Ltd.:
5.38% due 9/3/19*(4)............. 33,000 33,404
US Bank NA:
3.70% due 8/1/07................. 410,000 415,041
----------
1,209,044
----------
Beverages -- 0.17%
Coca Cola Enterprises, Inc.:
8.50% due 2/1/22................. 60,000 78,549
Cott Beverages USA, Inc.:
8.00% due 12/15/11............... 50,000 54,188
----------
132,737
----------
Market
Value
Par Value (Note 2)
-------------------------------------------------------------
Broadcasting -- 3.79%
CF Cable TV, Inc.:
9.13% due 7/15/07.................... $ 25,000 $ 26,264
Charter Communications Holdings, LLC:
11.13% due 1/15/11................... 625,000 521,875
10.75% due 10/1/09................... 225,000 189,000
10.25% due 1/15/10................... 75,000 61,687
10.00% due 5/15/11................... 25,000 19,750
9.92% due 4/1/11(5).................. 250,000 197,500
9.63% due 11/15/09................... 350,000 282,625
Clear Channel Communications, Inc.:
6.00% due 11/1/06.................... 410,000 432,316
5.75% due 1/15/13.................... 56,000 57,392
CSC Holdings, Inc.:
7.63% due 4/1/11..................... 25,000 25,938
7.63% due 7/15/18.................... 125,000 125,625
6.75% due 4/15/12*................... 50,000 49,500
Insight Communications Co., Inc.:
12.25% due 2/15/11(5)................ 350,000 314,125
Paxson Communications Corp.:
12.25% due 1/15/09(5)................ 175,000 148,094
Salem Communications Holding Corp.:
7.75% due 12/15/10................... 25,000 26,000
Telenet Group Holding NV:
11.50% due 6/15/14*(5)............... 425,000 292,187
Young Broadcasting, Inc.:
10.00% due 3/1/11.................... 200,000 204,500
8.75% due 1/15/14.................... 50,000 47,938
----------
3,022,316
----------
Building Materials -- 0.24%
Associated Materials, Inc.:
11.25% due 3/1/14*(5)................ 175,000 123,813
MMI Products, Inc.:
11.25% due 4/15/07................... 25,000 25,125
North American Energy Partners, Inc.:
8.75% due 12/1/11*................... 50,000 46,250
----------
195,188
----------
Chemical -- 1.26%
Equistar Chemicals, LP:
10.63% due 5/1/11.................... 75,000 84,375
Huntsman, LLC:
11.63% due 10/15/10.................. 75,000 84,000
Huntsman ICI:
10.13% due 7/1/09.................... 100,000 103,000
Huntsman International, LLC:
9.88% due 3/1/09..................... 115,000 124,200
Lyondell Chemical Co.:
9.88% due 5/1/07..................... 250,000 263,437
9.50% due 12/15/08................... 200,000 213,750
Rockwood Specialties Group, Inc.:
10.63% due 5/15/11................... 70,000 76,300
Westlake Chemical Corp.:
8.75% due 7/15/11.................... 50,000 55,625
----------
1,004,687
----------
Commercial Services -- 1.14%
Crown Cork & Seal Co., Inc.:
8.00% due 4/15/23.................... 100,000 93,000
Crown European Holdings SA:
10.88% due 3/1/13.................... 125,000 145,312
Hertz Corp.:
6.35% due 6/15/10.................... 205,000 211,569
Hydrochem Industrial Services, Inc.:
10.38% due 8/1/07.................... 75,000 75,563
Mobile Mini, Inc.:
9.50% due 7/1/13..................... 50,000 55,500
Monitronics International, Inc.:
11.75% due 9/1/10*................... 150,000 162,187
Petroleum Helicopters, Inc.:
9.38% due 5/1/09..................... 25,000 26,375
50 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
CORPORATE BONDS (continued)
Commercial Services (continued)
Rent-Way, Inc.:
11.88% due 6/15/10.................................. $ 125,000 $137,813
--------
907,319
--------
Conglomerates -- 0.59%
Foamex, LP:
10.75% due 4/1/09................................... 50,000 47,125
Tyco International Group SA:
4.44% due 6/15/07*.................................. 410,000 419,543
--------
466,668
--------
Drugs -- 0.84%
Abbott Japan Co., Ltd.:
1.05% due 11/6/08................................... JPY 50,000,000 462,457
NeighborCare, Inc.:
6.88% due 11/15/13.................................. 150,000 156,750
Schering Plough Corp.:
6.50% due 12/1/33................................... 45,000 48,249
--------
667,456
--------
Electronics/Electrical Equipment -- 0.33%
Muzak, LLC:
9.88% due 3/15/09................................... 75,000 53,625
Telex Communications Holdings, Inc.:
11.50% due 10/15/08................................. 25,000 27,000
Xerox Corp.:
7.63% due 6/15/13................................... 125,000 132,813
7.20% due 4/1/16.................................... 25,000 25,125
7.13% due 6/15/10................................... 25,000 26,500
--------
265,063
--------
Finance Companies -- 0.26%
United States West Capital Funding, Inc.:
6.88% due 7/15/28................................... 50,000 35,625
Worldspan Financing Corp.:
9.63% due 6/15/11................................... 175,000 171,500
--------
207,125
--------
Financial Services -- 5.09%
Alamosa Delaware, Inc.:
12.00% due 7/31/09(5)............................... 70,000 69,650
Athena Neurosciences Finance, LLC:
7.25% due 2/21/08................................... 275,000 273,625
Bear Island Paper Co., LLC:
10.00% due 12/1/07.................................. 150,000 144,000
Bluewater Finance, Ltd.:
10.25% due 2/15/12.................................. 125,000 132,500
Borden US Finance Corp.:
9.00% due 7/15/14*.................................. 50,000 51,500
Chukchansi Economic Development Auth.(11):
14.50% due 6/15/09*................................. 375,000 468,750
Citicorp Capital I:
7.93% due 2/15/27................................... 410,000 466,473
Citigroup, Inc.:
7.25% due 10/1/10................................... 33,000 38,824
Consolidated Communications Illinois/Texas Holdings,
Inc.:
9.75% due 4/1/12*................................... 150,000 151,500
ESI Tractebel Acquisition Corp.:
7.99% due 12/30/11.................................. 103,000 106,605
H&E Equipment Services, LLC:
11.13% due 6/15/12.................................. 75,000 76,500
Huntsman Advanced Materials, LLC:
11.00% due 7/15/10*................................. 75,000 85,500
iPCS Escrow Co.:
11.50% due 5/1/12*(10).............................. 100,000 104,750
LaBranche & Co., Inc.:
11.00% due 5/15/12*................................. 50,000 50,500
Madison River Capital, LLC:
13.25% due 3/1/10................................... 225,000 240,188
Market
Value
Par Value (Note 2)
-------------------------------------------------------------
Financial Services (continued)
Medcath Holdings Corp.:
9.88% due 7/15/12*................... $ 50,000 $ 52,250
Nexstar Finance Holdings, LLC:
11.38% due 4/1/13(5)................. 225,000 169,031
PCA, LLC/PCA Finance Corp.:
11.88% due 8/1/09.................... 100,000 108,000
PX Escrow Corp.:
9.63% due 2/1/06(5).................. 100,000 85,000
Qwest Capital Funding, Inc.:
7.90% due 8/15/10.................... 475,000 419,187
7.75% due 2/15/31.................... 75,000 55,125
7.63% due 8/3/21..................... 225,000 174,938
7.25% due 2/15/11.................... 325,000 277,875
Terra Capital, Inc.:
12.88% due 10/15/08.................. 100,000 123,000
11.50% due 6/1/10.................... 125,000 139,375
----------
4,064,646
----------
Foods -- 0.43%
Del Monte Corp.:
8.63% due 12/15/12................... 25,000 27,812
Doane Pet Care Co.:
10.75% due 3/1/10.................... 50,000 53,000
Stater Brothers Holdings, Inc.:
8.13% due 6/15/12*................... 75,000 78,000
Wornick Co.:
10.88% due 7/15/11*.................. 175,000 183,750
----------
342,562
----------
Funeral Services -- 0.03%
Alderwoods Group, Inc.:
7.75% due 9/15/12*................... 25,000 26,000
----------
Healthcare -- 0.60%
Cardinal Health, Inc.:
6.75% due 2/15/11.................... 45,000 48,698
Concentra Operating Corp.:
9.13% due 6/1/12*.................... 25,000 26,844
Curative Health Services, Inc.:
10.75% due 5/1/11*................... 75,000 69,000
Genesis HealthCare Corp.:
8.00% due 10/15/13................... 25,000 26,688
Inverness Medical Innovations, Inc.:
8.75% due 2/15/12*................... 100,000 96,000
National Nephrology Associates, Inc.:
9.00% due 11/1/11*................... 25,000 28,906
Pediatric Services of America, Inc.:
10.00% due 4/15/08(1)................ 25,000 25,250
Psychiatric Solutions, Inc.:
10.63% due 6/15/13................... 75,000 84,375
Team Health, Inc.:
9.00% due 4/1/12*.................... 75,000 73,125
----------
478,886
----------
Heavy Duty Trucks/Parts -- 0.18%
Dana Corp.:
9.00% due 8/15/11.................... 95,000 113,881
Navistar International Corp.:
7.50% due 6/15/11.................... 25,000 26,250
----------
140,131
----------
Hospital Management -- 0.60%
HCA, Inc.:
6.95% due 5/1/12..................... 100,000 107,621
IASIS Healthcare, LLC:
8.75% due 6/15/14*................... 75,000 78,375
Tenet Healthcare Corp.:
6.50% due 6/1/12..................... 100,000 88,500
5.00% due 7/1/07..................... 75,000 74,812
August 31, 2004 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 51
Market
Value
Par Value (Note 2)
---------------------------------------------------------------
CORPORATE BONDS (continued)
Hospital Management (continued)
Triad Hospitals, Inc.:
7.00% due 5/15/12...................... $ 50,000 $ 52,125
7.00% due 11/15/13..................... 50,000 50,312
US Oncology, Inc.:
10.75% due 8/15/14*.................... 25,000 26,313
----------
478,058
----------
Hospital Supplies -- 0.16%
Universal Hospital Services, Inc.:
10.13% due 11/1/11..................... 125,000 126,875
----------
Household Products -- 0.13%
Jostens Holding Corp.,
10.25% due 12/1/13(5).................. 150,000 100,500
----------
Information Processing - Hardware -- 0.03%
Seagate Technology HDD Holdings:
8.00% due 5/15/09...................... 25,000 26,250
----------
Insurance -- 2.15%
Crum & Forster Holdings Corp.:
10.38% due 6/15/13..................... 75,000 82,125
Fairfax Financial Holdings, Ltd.:
8.25% due 10/1/15...................... 225,000 219,375
7.75% due 7/15/37...................... 25,000 21,500
7.38% due 4/15/18...................... 50,000 44,875
MetLife, Inc.:
6.38% due 6/15/34...................... 775,000 812,370
Ohio Casualty Corp.:
7.30% due 6/15/14...................... 410,000 425,028
WR Berkley Corp.:
6.15% due 8/15/19...................... 56,000 56,131
XL Capital, Ltd.:
5.25% due 9/15/14...................... 56,000 56,190
----------
1,717,594
----------
Leisure & Tourism -- 1.64%
Bally Total Fitness Holding Corp.:
10.50% due 7/15/11..................... 75,000 70,312
Blockbuster, Inc.:
9.00% due 9/1/12*...................... 25,000 25,875
Cinemark, Inc.:
9.75% due 3/15/14(5)................... 125,000 86,094
Courtyard by Marriott II:
10.75% due 2/1/08...................... 75,000 75,750
Denny's Corp.:
11.25% due 1/15/08..................... 175,000 182,000
Eldorado Resorts, LLC:
9.00% due 4/15/14(1)................... 250,000 250,000
Hollywood Casino Corp.:
13.00% due 8/1/06+(2)(10).............. 200,000 172,500
Riviera Holdings Corp.:
11.00% due 6/15/10..................... 60,000 65,400
Six Flags, Inc.:
9.75% due 4/15/13...................... 175,000 162,750
Steinway Musical Instruments, Inc.:
8.75% due 4/15/11...................... 50,000 54,000
True Temper Sports, Inc.:
8.38% due 9/15/11...................... 100,000 93,000
Waterford Gaming, LLC:
8.63% due 9/15/12*..................... 70,000 74,550
----------
1,312,231
----------
Machinery -- 0.14%
Briggs & Stratton Corp.:
8.88% due 3/15/11...................... 50,000 59,250
Dresser, Inc.:
9.38% due 4/15/11...................... 50,000 53,750
----------
113,000
----------
Metals -- 0.41%
Allegheny Technologies, Inc.:
8.38% due 12/15/11..................... 50,000 52,000
Market
Value
Par Value (Note 2)
--------------------------------------------------------
Metals (continued)
CSN Islands VII Corp.:
10.75% due 9/12/08*............. $ 85,000 $ 93,500
CSN Islands VIII Corp.:
9.75% due 12/16/13*............. 100,000 99,500
Freeport McMoRan Resources:
7.00% due 2/15/08............... 50,000 53,000
Renco Metals, Inc.:
11.50% due 7/1/03+(1)(7)(8)..... 75,000 0
Ryerson Tull, Inc.:
9.13% due 7/15/06............... 25,000 26,125
----------
324,125
----------
Multimedia -- 0.07%
Haights Cross Operating Co.:
11.75% due 8/15/11.............. 50,000 54,750
----------
Oil and Gas -- 3.36%
Belden & Blake Corp.:
8.75% due 7/15/12*.............. 25,000 26,063
Chesapeake Energy Corp.:
9.00% due 8/15/12............... 25,000 28,500
7.75% due 1/15/15............... 25,000 26,812
7.50% due 9/15/13............... 25,000 26,875
6.88% due 1/15/16............... 25,000 25,313
Citgo Petroleum Corp.:
11.38% due 2/1/11............... 75,000 87,562
Colorado Interstate Gas Co.:
6.85% due 6/15/37............... 75,000 77,719
Diamond Offshore Drilling, Inc.:
5.15% due 9/1/14*............... 410,000 415,428
Dynegy Holdings, Inc.:
8.75% due 2/15/12............... 50,000 50,125
Dynegy-Roseton Danskammer:
7.67% due 11/8/16............... 75,000 66,000
El Paso Production Holding Co.:
7.75% due 6/1/13................ 175,000 171,937
EnCana Corp.:
6.50% due 8/15/34............... 109,000 115,366
Encore Acquisition Co.:
8.38% due 6/15/12............... 50,000 55,000
6.25% due 4/15/14............... 25,000 24,500
Exco Resources, Inc.:
7.25% due 1/15/11............... 50,000 52,500
Hanover Compressor Co.:
zero coupon due 3/31/07......... 250,000 210,625
Hilcorp Energy, LP:
10.50% due 9/1/10*.............. 125,000 138,437
KCS Energy, Inc.:
7.13% due 4/1/12................ 75,000 76,875
NGC Corp. Capital Trust:
8.32% due 6/1/27................ 750,000 577,500
Oslo Seismic Services, Inc.:
8.28% due 6/1/11................ 125,734 128,249
Pride International, Inc.:
7.38% due 7/15/14*.............. 50,000 53,250
Seitel, Inc.:
11.75% due 7/15/11*............. 75,000 75,188
Trico Marine Services, Inc.:
8.88% due 5/15/12+(2)........... 350,000 168,000
----------
2,677,824
----------
Paper/Forest Products -- 1.10%
Caraustar Industries, Inc.:
9.88% due 4/1/11................ 50,000 52,875
7.38% due 6/1/09................ 25,000 26,000
Constar International, Inc.:
11.00% due 12/1/12.............. 71,000 68,515
Fibermark, Inc.:
10.75% due 4/15/11+(2)(7)(10)... 75,000 47,250
Georgia-Pacific Corp.:
8.00% due 1/15/24............... 100,000 107,750
7.75% due 11/15/29.............. 125,000 130,000
7.70% due 6/15/15............... 100,000 111,750
7.38% due 12/1/25............... 50,000 50,250
52 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Market
Value
Par Value (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS (continued)
Paper/Forest Products (continued)
Pliant Corp.:
11.13% due 9/1/09............................ $ 75,000 $ 80,437
Speciality Paperboard, Inc.:
9.38% due 10/15/06+(2)(7).................... 325,000 204,750
----------
879,577
----------
Pollution Control -- 0.16%
Allied Waste North America, Inc.:
9.25% due 9/1/12............................. 50,000 56,125
7.38% due 4/15/14............................ 75,000 72,844
----------
128,969
----------
Publishing -- 0.18%
American Lawyer Media, Inc.:
9.75% due 12/15/07........................... 143,000 142,285
----------
Real Estate -- 0.03%
LNR Property Corp.:
7.63% due 7/15/13............................ 25,000 26,500
----------
Real Estate Investment Trusts -- 0.48%
CarrAmerica Realty Corp.:
5.13% due 9/1/11............................. 28,000 28,236
National Health Investors, Inc.:
7.30% due 7/16/07............................ 75,000 77,059
Omega Healthcare Investors, Inc.:
7.00% due 4/1/14*............................ 50,000 49,000
6.95% due 8/1/07............................. 25,000 25,438
Senior Housing Properties Trust:
8.63% due 1/15/12............................ 150,000 166,500
Vornado Realty, LP:
4.50% due 8/15/09............................ 36,000 36,158
----------
382,391
----------
Retail -- 1.47%
Ferrellgas, LP:
6.75% due 5/1/14............................. 150,000 149,250
JC Penney Co., Inc.:
6.88% due 10/15/15........................... 125,000 130,625
Jean Coutu Group, Inc.:
8.50% due 8/1/14*............................ 175,000 176,313
May Department Stores Co.:
3.95% due 7/15/07*........................... 410,000 414,693
MTS, Inc.:
10.00% due 3/15/09(1)(2)(7)(10).............. 13,636 3,545
Rite Aid Corp.:
6.88% due 8/15/13............................ 50,000 46,000
Saks, Inc.:
9.88% due 10/1/11............................ 50,000 59,500
7.00% due 12/1/13............................ 75,000 75,375
Vitro Envases Norteamerica SA:
10.75% due 7/23/11*.......................... 75,000 72,476
Vitro SA de CV:
11.75% due 11/1/13*.......................... 50,000 45,000
----------
1,172,777
----------
Schools -- 0.02%
KinderCare Learning Centers, Inc.:
9.50% due 2/15/09............................ 19,000 19,285
----------
Semiconductors -- 0.05%
ON Semiconductor Corp.:
12.00% due 3/15/10........................... 33,000 37,950
----------
Telecommunications -- 5.77%
AirGate PCS, Inc.:
9.38% due 9/1/09............................. 163,300 163,300
Alaska Communications Systems Holdings, Inc.:
9.38% due 5/15/09............................ 175,000 169,313
American Cellular Corp.:
10.00% due 8/1/11............................ 350,000 284,375
Cincinnati Bell Telephone Co.:
7.20% due 11/29/23........................... 125,000 117,500
7.18% due 12/15/23........................... 25,000 23,500
Market
Value
Par Value (Note 2)
-----------------------------------------------------------------
Telecommunications (continued)
Citizens Communications Co.:
9.00% due 8/15/31....................... $ 410,000 $ 402,825
Empresa Brasileira de Telecom SA:
11.00% due 12/15/08..................... 25,000 27,500
Fairpoint Communications, Inc.:
9.50% due 5/1/08........................ 325,000 334,750
GCB iPCS, Inc.:
14.00% due 7/15/10(1)(2)(7)............. 950,000 0
Iwo Holdings, Inc.:
14.00% due 1/15/11+(2)(10).............. 1,000,000 470,000
Kyivstar:
10.38% due 8/17/09*..................... 100,000 106,000
LCI International, Inc.:
7.25% due 6/15/07....................... 325,000 287,625
Nextel Communications, Inc.:
6.88% due 10/31/13...................... 275,000 277,750
5.95% due 3/15/14....................... 75,000 71,250
Nextmedia Operating, Inc.:
10.75% due 7/1/11....................... 75,000 84,000
Rural Cellular Corp.:
9.75% due 1/15/10....................... 125,000 111,875
9.63% due 5/15/08....................... 250,000 232,500
Southwestern Bell Telephone Co.:
6.55% due 10/7/08....................... 200,000 217,787
TELUS Corp.:
7.50% due 6/1/07........................ 410,000 450,428
Triton PCS, Inc.:
9.38% due 2/1/11........................ 325,000 230,750
8.75% due 11/15/11...................... 200,000 136,500
TSI Telecommunication Services, Inc.:
12.75% due 2/1/09....................... 25,000 27,750
United States West Communications, Inc.:
7.25% due 10/15/35...................... 275,000 229,625
7.13% due 11/15/43...................... 175,000 144,813
----------
4,601,716
----------
Textile - Products -- 0.03%
Collins & Aikman Floor Cover:
9.75% due 2/15/10....................... 25,000 25,625
----------
Utilities - Communication -- 0.27%
Bell Atlantic Pennsylvania, Inc.:
8.75% due 8/15/31....................... 55,000 71,633
Cincinnati Bell, Inc.:
8.38% due 1/15/14....................... 25,000 22,125
7.25% due 6/15/23....................... 25,000 23,375
Pacific Bell:
6.63% due 10/15/34...................... 100,000 100,759
----------
217,892
----------
Utilities - Electric -- 4.29%
AES Corp.:
8.88% due 11/1/27....................... 125,000 117,188
AES Drax Energy, Ltd.:
11.50% due 8/30/10+(2).................. 175,000 875
Calpine Canada Energy Finance, ULC:
8.50% due 5/1/08........................ 1,975,000 1,259,062
Edison Mission Energy:
9.88% due 4/15/11....................... 150,000 172,125
7.73% due 6/15/09....................... 50,000 52,375
Mirant Corp.:
7.90% due 7/15/09+*(2)(7)............... 650,000 403,000
Mission Energy Holding Co.:
13.50% due 7/15/08...................... 875,000 1,100,312
Pacific Gas & Electric Co.:
6.05% due 3/1/34........................ 82,000 82,292
Reliant Resources, Inc.:
9.50% due 7/15/13....................... 150,000 165,750
Tiverton/Rumford Power Assoc., Ltd.:
9.00% due 7/15/18*...................... 99,337 68,543
----------
3,421,522
----------
August 31, 2004 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 53
Market
Value
Par Value (Note 2)
-------------------------------------------------------------
CORPORATE BONDS (continued)
Utilities - Gas, Pipeline -- 1.70%
Arkla, Inc.:
8.90% due 12/15/06............. $ 435,000 $ 485,764
Duke Capital, LLC:
5.67% due 8/15/14.............. 61,000 61,740
El Paso Natural Gas Co.:
8.63% due 1/15/22.............. 275,000 294,250
Pacific Energy Partners:
7.13% due 6/15/14*............. 75,000 79,313
Southern Natural Gas Co.:
8.88% due 3/15/10.............. 50,000 56,250
Williams Cos., Inc.:
7.88% due 9/1/21............... 350,000 379,312
-----------
1,356,629
-----------
Water Services -- 0.03%
Companhia De Saneamento Basico:
12.00% due 6/20/08*............ 25,000 26,688
-----------
Total Corporate Bonds
(Cost $34,716,199)............. 35,248,826
-----------
FOREIGN GOVERNMENT BONDS -- 32.32%
Australia Government:
6.75% due 11/15/06............. AUD 770,000 559,393
Brazil Federative Republic:
14.50% due 10/15/09............ 100,000 126,100
12.00% due 4/15/10............. 120,000 138,600
11.00% due 1/11/12............. 300,000 333,000
11.00% due 8/17/40............. 1,105,000 1,182,350
10.25% due 6/17/13............. 495,000 527,175
10.13% due 5/15/27............. 75,000 75,938
10.00% due 8/7/11.............. 200,000 211,000
8.88% due 4/15/24.............. 100,000 91,250
8.25% due 1/20/34.............. 100,000 84,750
8.00% due 4/15/14.............. 756,438 740,402
2.13% due 4/15/12(3)........... 1,741,182 1,567,064
2.06% due 4/15/06(3)........... 32,000 31,958
Government of Canada:
5.75% due 9/1/06............... CAD 538,000 431,269
5.75% due 6/1/29............... CAD 315,000 261,296
4.25% due 9/1/08............... CAD 180,000 139,790
Government of France:
5.50% due 4/25/29.............. EUR 175,000 238,718
Government of Japan:
1.10% due 6/20/05.............. JPY85,200,000 786,590
Government of United Kingdom:
7.50% due 12/7/06.............. GBP 116,000 221,082
5.00% due 3/7/08............... GBP 135,000 244,472
Kingdom of Denmark:
7.00% due 11/15/07............. DKK 1,950,000 357,840
Kingdom of Spain:
6.15% due 1/31/13.............. EUR 265,000 373,360
5.15% due 7/30/09.............. EUR 304,000 400,940
Kingdom of Sweden:
6.75% due 5/5/14............... SEK 2,300,000 362,832
5.50% due 10/8/12.............. SEK 2,500,000 360,948
5.00% due 1/28/09.............. SEK 3,200,000 448,743
Republic of Bulgaria:
8.25% due 1/15/15.............. 170,000 208,505
2.75% due 7/28/12(4)........... 110,476 110,200
Republic of Colombia:
11.75% due 2/25/20............. 225,000 274,500
10.75% due 1/15/13............. 290,000 334,225
Republic of Ecuador:
8.00% due 8/15/30(5)........... 190,000 149,150
Republic of Greece:
5.25% due 5/18/12.............. EUR 235,000 310,646
4.65% due 4/19/07.............. EUR 214,000 273,304
Republic of Italy:
5.25% due 12/15/05............. EUR 478,000 603,159
5.25% due 11/1/29.............. EUR 158,000 204,553
3.75% due 12/14/07............. 410,000 415,855
Republic of Panama:
9.63% due 2/8/11............... 125,000 142,188
9.38% due 1/16/23.............. 175,000 189,875
Market
Value
Par Value (Note 2)
------------------------------------------------------------------
Republic of Peru:
9.88% due 2/6/15..................... $ 80,000 $ 90,400
9.13% due 2/21/12.................... 185,000 203,500
8.38% due 5/3/16..................... 180,000 182,250
5.00% due 3/7/17(4).................. 150,150 136,261
Republic of Philippines:
9.00% due 2/15/13.................... 80,000 82,400
8.25% due 1/15/14.................... 200,000 196,000
Republic of Poland:
5.75% due 6/24/08.................... PLN 1,050,000 269,718
Republic of South Africa:
6.50% due 6/2/14..................... 175,000 184,888
Republic of Turkey:
11.88% due 1/15/30................... 150,000 203,250
11.75% due 6/15/10................... 390,000 479,700
11.00% due 1/14/13................... 250,000 303,750
9.50% due 1/15/14.................... 100,000 112,500
9.00% due 6/30/11.................... 675,000 739,125
Republic of Uruguay:
7.50% due 3/15/15.................... 50,000 41,500
Republic of Venezuela:
9.25% due 9/15/27.................... 925,000 862,562
2.75% due 12/18/07(3)................ 250,000 245,000
Russian Federation:
8.25% due 3/31/10.................... 975,000 1,065,187
5.00% due 3/31/30(5)................. 2,390,000 2,290,815
3.00% due 5/14/08.................... 870,000 785,175
United Mexican States:
9.88% due 2/1/10..................... 200,000 248,200
8.38% due 1/14/11.................... 350,000 411,950
8.30% due 8/15/31.................... 210,000 240,765
8.13% due 12/30/19................... 285,000 327,750
8.00% due 12/24/08................... MXN 6,480,000 540,332
7.50% due 1/14/12.................... 750,000 847,875
6.63% due 3/3/15..................... 570,000 601,350
6.38% due 1/16/13.................... 295,000 309,750
5.88% due 1/15/14.................... 275,000 278,300
-----------
25,797,393
-----------
Total Foreign Government Bonds
(Cost $24,774,268)................... 25,793,273
-----------
UNITED STATES GOVERNMENT BONDS -- 13.02%
Government Agencies -- 8.43%
Federal Home Loan Mtg. Corp.:
7.00% due 6/1/29..................... 30,646 32,747
6.50% due 7/1/29..................... 15,048 15,879
6.00% due 1/1/30..................... 69,898 72,473
6.00% due 2/1/32..................... 412,982 427,906
5.00% due 5/1/34..................... 792,945 787,348
Federal National Mtg. Assoc.:
8.50% due 8/1/31..................... 39,866 43,355
7.50% due 3/1/32..................... 9,228 9,903
6.50% due 12/1/31.................... 255,615 269,289
6.50% due 4/1/34..................... 652,201 685,597
6.00% due 2/1/32..................... 461,676 479,193
6.00% due 5/1/34..................... 761,253 789,632
5.50% due 7/1/19..................... 521,244 540,445
5.50% due 1/1/29..................... 128,239 131,074
5.50% due 5/1/29..................... 39,688 40,531
5.50% due 6/1/34..................... 1,320,705 1,343,114
5.00% due 6/1/19..................... 525,553 536,209
4.50% due 6/1/19..................... 520,471 520,844
-----------
6,725,539
-----------
Government Obligations -- 4.59%
United States Treasury Bonds:
9.38% due 2/15/06.................... 320,000 353,013
5.38% due 2/15/31.................... 566,000 602,613
54 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2004
Par Value/ Market
Number of Value
Shares (Note 2)
-----------------------------------------------------------------
UNITED STATES GOVERNMENT BONDS (continued)
Government Obligations (continued)
United States Treasury Notes:
7.00% due 7/15/06...................... $360,000 $ 390,473
6.50% due 10/15/06..................... 100,000 108,301
5.88% due 11/15/04..................... 250,000 252,188
4.75% due 5/15/14...................... 542,000 568,825
4.00% due 6/15/09...................... 410,000 422,892
2.50% due 5/31/06...................... 205,000 205,705
2.00% due 8/31/05...................... 763,000 763,328
-----------
3,667,338
-----------
Total United States Government Bonds
(Cost $10,141,761)..................... 10,392,877
-----------
COMMON STOCK -- 1.67%
Automotive -- 0.02%
Exide Technologies+..................... 725 11,499
-----------
Broadcasting -- 0.08%
Cablevision Systems Corp., Class A+..... 3,497 64,764
-----------
Commercial Services -- 0.05%
NES Rentals Holdings, Inc.+............. 5,026 40,208
-----------
Leisure & Tourism -- 0.32%
John Q. Hammons Hotels, Inc., Class A+.. 1,725 17,768
MGM Mirage, Inc.+....................... 5,750 237,705
-----------
255,473
-----------
Real Estate Investment Trusts -- 0.14%
Meristar Hospitality Corp.+............. 19,490 112,262
-----------
Retail -- 0.00%
MTS, Inc.(1)(10)........................ 3,863 0
-----------
Telecommunications -- 1.06%
AirGate PCS, Inc........................ 3,575 61,848
AirGate PCS, Inc*(1).................... 8,811 152,430
iPCS, Inc.+............................. 27,071 503,520
Telewest Global, Inc.+.................. 11,085 128,032
-----------
845,830
-----------
Total Common Stock
(Cost $1,333,974)...................... 1,330,036
-----------
PREFERRED STOCK -- 0.31%
Broadcasting -- 0.14%
Paxson Communications Corp.:
13.25%(6).............................. 14 116,200
-----------
Commercial Services -- 0.04%
Rent-Way, Inc.(1)(10)(12).............. 4 35,000
-----------
Retail -- 0.07%
General Nutrition Centers Holding Co.:
12.00%*(1)............................. 50 53,000
-----------
Telecommunications -- 0.06%
Alamosa Holdings, Inc.:
7.50%.................................. 77 45,473
-----------
Total Preferred Stock
(Cost $231,508)........................ 249,673
-----------
WARRANTS -- 0.01%
Automotive -- 0.01%
Exide Technologies
Expires 5/5/11+........................ 1,813 5,439
-----------
Telecommunications -- 0.00%
GT Group Telecom, Inc.
Expires 2/1/10+*(1).................... 50 0
-----------
Total Warrants
(Cost $18,376)......................... 5,439
-----------
Total Investment Securities
(Cost $71,216,086)..................... 73,020,124
-----------
Market
Value
Par Value (Note 2)
- ------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.76%
Commercial Paper -- 3.76%
UBS Finance, Inc.:
1.57% due 9/1/04
(Cost $3,000,000)........................................ $3,000,000 $ 3,000,000
-----------
REPURCHASE AGREEMENT -- 2.67%
Agreement with State Street Bank & Trust Co., bearing
interest at 1.42%, dated 8/31/04, to be repurchased
9/1/04 in the amount of $2,127,084 and collateralized by
Federal National Mtg. Assoc. Notes, bearing interest at
6.63%, due 11/15/10 and having an approximate value of
$2,192,278 (Cost $2,127,000)............................. 2,127,000 2,127,000
-----------
TOTAL INVESTMENTS
(Cost $76,343,086)(9).................................... 97.94% 78,147,124
Other assets less liabilities............................... 2.06% 1,645,537
---------- -----------
NET ASSETS -- 100% $79,792,661
========== ===========
- --------
+ Non-income producing.
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no rights to demand
registration of these securities. At August 31, 2004, the aggregate value of
these securities was $5,816,261 representing 7.29% of net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(1)Fair valued security (see Note 2).
(2)Bond in default.
(3)Security is a "floating rate" bond where the coupon rate fluctuates. The
rate steps up or down for each rate downgrade or upgrade. The rate reflected
is as of August 31, 2004.
(4)Variable rate security -- the rate reflected is as of August 31, 2004;
maturity date reflects next reset date.
(5)Security is a "step-up" bond where the coupon rate increases or steps up at
a predetermined rate. Rate shown reflects the increased rate.
(6)PIK ("Payment-in-Kind") bonds. Payments made with additional securities in
lieu of cash.
(7)Company has filed Chapter 11 bankruptcy.
(8)Bond is in default and did not pay principal at maturity. Security is
subject to litigation, the outcome of which is still to be determined.
(9)See Note 5 for cost of investments on a tax basis.
(10)Illiquid security
(11)Issuer did not file a registration statement within the stated period as
required by the Registration Rights Agreement. Therefore, the issuer is
required to pay penalty interest of $0.05 per week per $1,000 principal
amount until the securities are registered. The penalty interest increases
every 90 days by $0.05 per $1,000 principal amount until it reaches a cap
of $0.50 per week per $1,000 principal amount.
(12)To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The restricted securities
are valued pursuant to Note 2. Restricted securities held by a Fund may not
be sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities
is generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of August 31, 2004, the
Strategic Bond Fund held the following restricted security:
Value as a
Acquisition Shares/ Acquisition Market % of
Name Date Par Cost Value Net Assets
---- ----------- ------- ----------- ------- ----------
Rent-Way, Inc. Preferred
Stock.................. 05/29/2003 4 $35,000 $35,000 0.04%
Currency Legend
AUDAustralian Dollar JPYJapanese Yen
CADCanadian Dollar MXNMexico Peso
DKKDanish Krone PLNPolish Zloty
EUREuro Dollar SEKSwedish Krona
GBPBritish Pound
See Notes to Financial Statements
August 31, 2004 STATEMENTS OF ASSETS AND LIABILITIES 55
AGGRESSIVE CONSERVATIVE
GROWTH CAPITAL GROWTH
LIFESTYLE APPRECIATION LIFESTYLE CORE BOND
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment securities, at value* (unaffiliated)........ $ - $ 42,281,472 $ - $ 71,152,347
Investment securities, at value* (affiliated).......... 33,545,560 - 30,671,645 -
Short-term securities*................................. - - - -
Repurchase agreements (cost equals market)............. - 231,000 - -
Cash................................................... 18,090 117 23,748 130,308
Foreign cash*.......................................... - - - -
Receivable for-
Trust shares sold................................... 62,061 76,024 55,830 201,981
Dividends and interest.............................. - 38,316 - 628,123
Investments sold.................................... 33,953 - 31,380 2,892,406
Prepaid expenses and other assets...................... 724 2,433 692 3,297
Due from investment adviser for expense
reimbursements/fee waivers............................ 9,819 18,509 8,513 36,369
Variation margin on futures contracts.................. - - - -
-------------- -------------- -------------- --------------
TOTAL ASSETS........................................... 33,670,207 42,647,871 30,791,808 75,044,831
-------------- -------------- -------------- --------------
LIABILITIES:
Payable for-
Trust shares redeemed............................... 62,096 4,163 55,956 42,591
Investments purchased............................... 33,918 - 31,254 545,012
Investment advisory and management fees............. 2,809 20,027 2,603 29,976
Shareholder services................................ - 9,103 - 14,988
Administrative services............................. - 2,549 - 4,197
Trustees' fees and expenses......................... 34,785 35,654 36,780 70,933
Transfer agent fees and expenses.................... 267 535 267 534
Other accrued expenses.............................. 16,161 31,720 16,159 43,237
Due to custodian....................................... - - - -
Securities sold short, at value#....................... - - - 2,884,250
-------------- -------------- -------------- --------------
TOTAL LIABILITIES...................................... 150,036 103,751 143,019 3,635,718
-------------- -------------- -------------- --------------
NET ASSETS............................................. $ 33,520,171 $ 42,544,120 $ 30,648,789 $ 71,409,113
============== ============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share........... $ 36,828 $ 54,623 $ 31,304 $ 71,378
Additional paid in capital............................. 35,863,257 58,428,406 30,961,212 70,607,479
Accumulated undistributed net investment income
(loss)................................................ 10,971 (33,328) 27,263 71,182
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions from underlying Funds................... (3,907,719) (15,204,402) (447,601) 31,405
Unrealized appreciation (depreciation) on:
Investments......................................... 1,516,834 (701,179) 76,611 626,169
Futures contracts................................... - - - -
Securities sold short............................... - - - 1,500
Foreign exchange transactions....................... - - - -
-------------- -------------- -------------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING........................................ $ 33,520,171 $ 42,544,120 $ 30,648,789 $ 71,409,113
============== ============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share).............. 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding......................................... 3,682,758 5,462,301 3,130,382 7,137,751
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE......................... $ 9.10 $ 7.79 $ 9.79 $ 10.00
============== ============== ============== ==============
- --------
*Cost
Investment securities (unaffiliated)................ $ - $ 42,982,651 $ - $ 70,526,178
============== ============== ============== ==============
Investment securities (affiliated).................. $ 32,028,726 $ - $ 30,595,034 $ -
============== ============== ============== ==============
Short-term securities............................... $ - $ - $ - $ -
============== ============== ============== ==============
Foreign cash........................................ $ - $ - $ - $ -
============== ============== ============== ==============
#Proceeds from securities sold short................... $ - $ - $ - $ 2,885,750
============== ============== ============== ==============
INTERNATIONAL MID CAP
HIGH YIELD GROWTH II LARGE CAP GROWTH
BOND FUND FUND VALUE FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment securities, at value* (unaffiliated)........ $ 47,141,938 $ 40,765,541 $ 69,313,098 $ 41,416,015
Investment securities, at value* (affiliated).......... - - - -
Short-term securities*................................. - - 687,388 -
Repurchase agreements (cost equals market)............. 5,196,000 - - 3,720,000
Cash................................................... 946 - 971 271,261
Foreign cash*.......................................... 24,657 470,151 - 1,152
Receivable for-
Trust shares sold................................... 296,811 12,598 133,621 60,061
Dividends and interest.............................. 1,072,790 122,872 113,456 19,157
Investments sold.................................... 25,379 576,703 1,150,767 567,967
Prepaid expenses and other assets...................... 3,136 2,860 2,717 2,806
Due from investment adviser for expense
reimbursements/fee waivers............................ 35,207 49,274 32,023 39,159
Variation margin on futures contracts.................. - - - -
-------------- -------------- -------------- --------------
TOTAL ASSETS........................................... 53,796,864 41,999,999 71,434,041 46,097,578
-------------- -------------- -------------- --------------
LIABILITIES:
Payable for-
Trust shares redeemed............................... 8,114 13,184 115,260 38,053
Investments purchased............................... 114,528 552,803 1,352,685 1,494,834
Investment advisory and management fees............. 30,544 31,110 29,026 29,892
Shareholder services................................ 10,909 8,642 14,513 9,341
Administrative services............................. 3,054 2,420 4,064 2,616
Trustees' fees and expenses......................... 40,110 44,703 49,155 42,547
Transfer agent fees and expenses.................... 532 445 446 445
Other accrued expenses.............................. 27,062 43,750 37,535 33,889
Due to custodian....................................... - 75,571 - -
Securities sold short, at value#....................... - - - -
-------------- -------------- -------------- --------------
TOTAL LIABILITIES...................................... 234,853 772,628 1,602,684 1,651,617
-------------- -------------- -------------- --------------
NET ASSETS............................................. $ 53,562,011 $ 41,227,371 $ 69,831,357 $ 44,445,961
============== ============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share........... $ 64,698 $ 39,802 $ 57,348 $ 74,871
Additional paid in capital............................. 51,930,101 42,406,009 62,868,320 52,765,566
Accumulated undistributed net investment income
(loss)................................................ 138,534 82,289 24,951 (39,266)
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions from underlying Funds................... 973,332 (4,699,536) 2,421,685 (10,898,644)
Unrealized appreciation (depreciation) on:
Investments......................................... 455,768 3,397,856 4,459,053 2,543,403
Futures contracts................................... - - - -
Securities sold short............................... - - - -
Foreign exchange transactions....................... (422) 951 - 31
-------------- -------------- -------------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING........................................ $ 53,562,011 $ 41,227,371 $ 69,831,357 $ 44,445,961
============== ============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share).............. 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding......................................... 6,469,837 3,980,210 5,734,796 7,487,116
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE......................... $ 8.28 $ 10.36 $ 12.18 $ 5.94
============== ============== ============== ==============
- --------
*Cost
Investment securities (unaffiliated)................ $ 46,686,170 $ 37,367,685 $ 64,854,045 $ 38,872,612
============== ============== ============== ==============
Investment securities (affiliated).................. $ - $ - $ - $ -
============== ============== ============== ==============
Short-term securities............................... $ - $ - $ 687,388 $ -
============== ============== ============== ==============
Foreign cash........................................ $ 25,078 $ 473,193 $ - $ 1,124
============== ============== ============== ==============
#Proceeds from securities sold short................... $ - $ - $ - $ -
============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS
56 STATEMENTS OF ASSETS AND LIABILITIES - CONTINUED August 31, 2004
MODERATE
MID CAP GROWTH MONEY SMALL CAP
VALUE LIFESTYLE MARKET II GROWTH
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment securities, at value* (unaffiliated)........ $ 188,501,680 $ - $ - $ 37,621,137
Investment securities, at value* (affiliated).......... - 56,276,555 - -
Short-term securities*................................. - - 71,440,832 1,121,000
Repurchase agreements (cost equals market)............. 4,148,000 - 1,294,000 -
Cash................................................... 202 32,622 2,765 94
Foreign cash*.......................................... 6,099 - - -
Receivable for-
Trust shares sold................................... 392,305 44,714 368,868 134,827
Dividends and interest.............................. 232,529 - 43,161 5,659
Investments sold.................................... 1,101,277 47,242 - 69,448
Prepaid expenses and other assets...................... 21,881 13,995 14,521 2,609
Due from investment adviser for expense
reimbursements/fee waivers............................ 103,038 13,506 - 29,988
Variation margin on futures contracts.................. - - - -
-------------- -------------- -------------- --------------
TOTAL ASSETS........................................... 194,507,011 56,428,634 73,164,147 38,984,762
-------------- -------------- -------------- --------------
LIABILITIES:
Payable for-
Trust shares redeemed............................... 64,172 4,962 97,131 39,034
Investments purchased............................... 1,450,797 86,994 - 77,884
Investment advisory and management fees............. 118,466 4,682 15,383 27,497
Shareholder services................................ 40,120 - 15,393 8,087
Administrative services............................. 11,234 - 4,308 2,264
Trustees' fees and expenses......................... 143,300 63,798 81,373 42,304
Transfer agent fees and expenses.................... 534 267 178 534
Other accrued expenses.............................. 71,138 23,954 49,588 32,139
Due to custodian....................................... - - - -
Securities sold short, at value#....................... - - - -
-------------- -------------- -------------- --------------
TOTAL LIABILITIES...................................... 1,899,761 184,657 263,354 229,743
-------------- -------------- -------------- --------------
NET ASSETS............................................. $ 192,607,250 $ 56,243,977 $ 72,900,793 $ 38,755,019
============== ============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share........... $ 119,022 $ 53,794 $ 729,008 $ 38,003
Additional paid in capital............................. 160,466,141 57,189,789 72,171,785 46,843,712
Accumulated undistributed net investment income
(loss)................................................ 20,337 21,361 - (38,970)
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions from underlying Funds................... 18,175,543 (1,992,774) - (10,170,746)
Unrealized appreciation (depreciation) on:
Investments......................................... 13,826,574 971,807 - 2,083,020
Futures contracts................................... - - - -
Securities sold short............................... - - - -
Foreign exchange transactions....................... (367) - - -
-------------- -------------- -------------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING........................................ $ 192,607,250 $ 56,243,977 $ 72,900,793 $ 38,755,019
============== ============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share).............. 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding......................................... 11,902,231 5,379,427 72,900,793 3,800,281
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE......................... $ 16.18 $ 10.46 $ 1.00 $ 10.20
============== ============== ============== ==============
- --------
*Cost
Investment securities (unaffiliated)................ $ 174,675,106 $ - $ - $ 35,538,117
============== ============== ============== ==============
Investment securities (affiliated).................. $ - $ 55,304,748 $ - $ -
============== ============== ============== ==============
Short-term securities............................... $ - $ - $ 71,440,832 $ 1,121,000
============== ============== ============== ==============
Foreign cash........................................ $ 6,076 $ - $ - $ -
============== ============== ============== ==============
#Proceeds from securities sold short................... $ - $ - $ - $ -
============== ============== ============== ==============
SOCIALLY
SMALL CAP RESPONSIBLE STRATEGIC
VALUE FUND FUND BOND FUND
- ------------------------------------------------------------------------------------------------------
ASSETS:
Investment securities, at value* (unaffiliated)........ $ 66,977,641 $ 30,137,397 $ 73,020,124
Investment securities, at value* (affiliated).......... - 80,430 -
Short-term securities*................................. - 3,304,973 3,000,000
Repurchase agreements (cost equals market)............. 4,389,000 2,263,000 2,127,000
Cash................................................... 516 362 401
Foreign cash*.......................................... - - 27,801
Receivable for-
Trust shares sold................................... 193,763 1,157,420 537,538
Dividends and interest.............................. 86,933 40,420 1,224,845
Investments sold.................................... 283,672 502,223 25,379
Prepaid expenses and other assets...................... 3,287 1,648 1,850
Due from investment adviser for expense
reimbursements/fee waivers............................ 41,695 17,660 37,427
Variation margin on futures contracts.................. - 7,185 -
-------------- -------------- --------------
TOTAL ASSETS........................................... 71,976,507 37,512,718 80,002,365
-------------- -------------- --------------
LIABILITIES:
Payable for-
Trust shares redeemed............................... 17,446 1,981 3,023
Investments purchased............................... 424,272 4,612,340 69,789
Investment advisory and management fees............. 42,156 6,172 39,345
Shareholder services................................ 14,585 6,172 16,393
Administrative services............................. 4,084 1,728 4,590
Trustees' fees and expenses......................... 60,902 14,449 50,025
Transfer agent fees and expenses.................... 445 178 356
Other accrued expenses.............................. 41,215 19,576 26,183
Due to custodian....................................... - - -
Securities sold short, at value#....................... - - -
-------------- -------------- --------------
TOTAL LIABILITIES...................................... 605,105 4,662,596 209,704
-------------- -------------- --------------
NET ASSETS............................................. $ 71,371,402 $ 32,850,122 $ 79,792,661
============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share........... $ 52,173 $ 32,054 $ 74,838
Additional paid in capital............................. 58,888,501 34,574,962 76,115,673
Accumulated undistributed net investment income
(loss)................................................ (16,640) 28,875 119,256
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions from underlying Funds................... 3,716,935 (1,242,487) 1,677,839
Unrealized appreciation (depreciation) on:
Investments......................................... 8,730,433 (518,221) 1,804,038
Futures contracts................................... - (25,061) -
Securities sold short............................... - - -
Foreign exchange transactions....................... - - 1,017
-------------- -------------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING........................................ $ 71,371,402 $ 32,850,122 $ 79,792,661
============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share).............. 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding......................................... 5,217,295 3,205,431 7,483,841
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE......................... $ 13.68 $ 10.25 $ 10.66
============== ============== ==============
- --------
*Cost
Investment securities (unaffiliated)................ $ 58,247,208 $ 30,658,435 $ 71,216,086
============== ============== ==============
Investment securities (affiliated).................. $ - $ 77,613 $ -
============== ============== ==============
Short-term securities............................... $ - $ 3,304,973 $ 3,000,000
============== ============== ==============
Foreign cash........................................ $ - $ - $ 27,762
============== ============== ==============
#Proceeds from securities sold short................... $ - $ - $ -
============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS
For the Year Ended August 31, 2004 STATEMENTS OF OPERATIONS 57
AGGRESSIVE CONSERVATIVE
GROWTH CAPITAL GROWTH
LIFESTYLE APPRECIATION LIFESTYLE CORE BOND
FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends* (unaffiliated).................................................... $ - $ 214,205 $ - $ -
Dividends* (affiliated)...................................................... 332,656 - 974,069 -
Interest (unaffiliated)...................................................... - 17,619 - 2,896,664
---------- ----------- ----------- ----------
Total investment income................................................... 332,656 231,824 974,069 2,896,664
---------- ----------- ----------- ----------
EXPENSES:
Investment advisory and management fees...................................... 33,712 201,621 31,364 349,787
Administrative services...................................................... - 25,661 - 48,970
Shareholder service fees..................................................... - 91,647 - 174,892
Transfer agent fees.......................................................... 1,629 3,257 1,628 3,257
Registration fees............................................................ 54 15 189 171
Custodian fees............................................................... 11,982 49,200 11,982 48,070
Reports to shareholders...................................................... 18,758 19,747 17,700 38,876
Audit and tax fees........................................................... 8,752 8,005 8,719 9,601
Legal fees................................................................... 7,331 7,621 5,914 9,953
Trustees' fees............................................................... 30,779 28,128 33,140 60,830
Interest expense............................................................. - - - -
Interest expense on securities sold short.................................... - - - -
Other expenses............................................................... 1,822 2,076 1,800 2,993
---------- ----------- ----------- ----------
Total expenses before reimbursements and fees paid indirectly............. 114,819 436,978 112,436 747,400
---------- ----------- ----------- ----------
Expenses waived/reimbursed by investment advisor.......................... (81,107) (125,380) (81,071) (208,745)
Fees paid indirectly (Note 7)............................................. - - - -
---------- ----------- ----------- ----------
Net expenses.............................................................. 33,712 311,598 31,365 538,655
---------- ----------- ----------- ----------
Net investment income (loss)................................................. 298,944 (79,774) 942,704 2,358,009
---------- ----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)..................... - 1,427,012 - 233,225
Net realized gain (loss) on investments (affiliated)....................... 3,255,339 - 2,733,742 -
Net realized gain (loss) from capital gain distributions from
underlying Funds (affiliated)............................................. 19,818 - 93,193 -
Net realized gain (loss) on securities sold short.......................... - - - -
Net realized gain (loss) on futures contracts.............................. - - - -
Net realized foreign exchange gain (loss) on other assets and
liabilities............................................................... - - - -
Net realized gain (loss) on disposal of investments, in violation of
investments restrictions (Note 3)......................................... - - - -
---------- ----------- ----------- ----------
Net realized gain (loss) on investments, capital gain distributions, short
sales, futures contracts, disposal of investments in violation of
investment restrictions and foreign exchange gain (loss) on other
assets and liabilities.................................................... 3,275,157 1,427,012 2,826,935 233,225
---------- ----------- ----------- ----------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated)................................................ - (1,030,393) - 1,189,297
Change in unrealized appreciation (depreciation) on
investments (affiliated).................................................. (692,940) - (1,566,074) -
Change in unrealized appreciation (depreciation) on futures
contracts and options contracts........................................... - - - -
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities.................................................... - - - -
Change in unrealized appreciation (depreciation) on securities
sold short................................................................ - - - 1,500
---------- ----------- ----------- ----------
Net unrealized gain (loss) on investments, futures contracts, short sales and
foreign gain (loss) on other assets and liabilities......................... (692,940) (1,030,393) (1,566,074) 1,190,797
---------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on investments, futures
contracts, options contracts short sales, and foreign exchange
gain (loss) on other assets and liabilities................................. 2,582,217 396,619 1,260,861 1,424,022
---------- ----------- ----------- ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................................. $2,881,161 $ 316,845 $ 2,203,565 $3,782,031
---------- ----------- ----------- ----------
*Net of foreign withholding taxes on interest and dividends of............... $ - $ 297 $ - $ 140
---------- ----------- ----------- ----------
INTERNATIONAL MID CAP
HIGH YIELD GROWTH II LARGE CAP GROWTH
BOND FUND FUND VALUE FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends* (unaffiliated).................................................... $ 36,534 $1,002,759 $1,187,691 $ 207,714
Dividends* (affiliated)...................................................... - - - -
Interest (unaffiliated)...................................................... 4,879,789 7,459 697 11,051
---------- ---------- ---------- -----------
Total investment income................................................... 4,916,323 1,010,218 1,188,388 218,765
---------- ---------- ---------- -----------
EXPENSES:
Investment advisory and management fees...................................... 364,654 434,151 287,152 395,185
Administrative services...................................................... 36,465 33,767 40,201 34,624
Shareholder service fees..................................................... 130,233 120,597 143,576 123,658
Transfer agent fees.......................................................... 3,448 2,714 2,715 2,714
Registration fees............................................................ 254 69 45 14
Custodian fees............................................................... 47,993 93,068 51,465 49,130
Reports to shareholders...................................................... 28,691 31,224 30,487 28,247
Audit and tax fees........................................................... 8,373 17,048 8,679 8,555
Legal fees................................................................... 6,328 8,231 8,631 8,474
Trustees' fees............................................................... 44,051 39,195 44,926 38,583
Interest expense............................................................. 604 - - -
Interest expense on securities sold short.................................... 10,616 - - -
Other expenses............................................................... 2,125 2,405 1,954 2,291
---------- ---------- ---------- -----------
Total expenses before reimbursements and fees paid indirectly............. 683,835 782,469 619,831 691,475
---------- ---------- ---------- -----------
Expenses waived/reimbursed by investment advisor.......................... (169,424) (300,080) (154,645) (271,038)
Fees paid indirectly (Note 7)............................................. - - - -
---------- ---------- ---------- -----------
Net expenses.............................................................. 514,411 482,389 465,186 420,437
---------- ---------- ---------- -----------
Net investment income (loss)................................................. 4,401,912 527,829 723,202 (201,672)
---------- ---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)..................... 3,185,822 5,654,088 4,349,660 6,969,223
Net realized gain (loss) on investments (affiliated)....................... - - - -
Net realized gain (loss) from capital gain distributions from
underlying Funds (affiliated)............................................. - - - -
Net realized gain (loss) on securities sold short.......................... (26,410) - - -
Net realized gain (loss) on futures contracts.............................. - - - -
Net realized foreign exchange gain (loss) on other assets and
liabilities............................................................... (388) (2,528) - (4,924)
Net realized gain (loss) on disposal of investments, in violation of
investments restrictions (Note 3)......................................... - - 48,565 -
---------- ---------- ---------- -----------
Net realized gain (loss) on investments, capital gain distributions, short
sales, futures contracts, disposal of investments in violation of
investment restrictions and foreign exchange gain (loss) on other
assets and liabilities.................................................... 3,159,024 5,651,560 4,398,225 6,964,299
---------- ---------- ---------- -----------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated)................................................ (102,774) 868,283 1,098,664 (4,628,558)
Change in unrealized appreciation (depreciation) on
investments (affiliated).................................................. - - - -
Change in unrealized appreciation (depreciation) on futures
contracts and options contracts........................................... - - - -
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities.................................................... (422) 1,910 - 737
Change in unrealized appreciation (depreciation) on securities
sold short................................................................ 14,375 - - -
---------- ---------- ---------- -----------
Net unrealized gain (loss) on investments, futures contracts, short sales and
foreign gain (loss) on other assets and liabilities......................... (88,821) 870,193 1,098,664 (4,627,821)
---------- ---------- ---------- -----------
Net realized and unrealized gain (loss) on investments, futures
contracts, options contracts short sales, and foreign exchange
gain (loss) on other assets and liabilities................................. 3,070,203 6,521,753 5,496,889 2,336,478
---------- ---------- ---------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................................. $7,472,115 $7,049,582 $6,220,091 $ 2,134,806
---------- ---------- ---------- -----------
*Net of foreign withholding taxes on interest and dividends of............... $ 79 $ 124,417 $ 260 $ 3,168
---------- ---------- ---------- -----------
SEE NOTES TO FINANCIAL STATEMENTS
58 STATEMENTS OF OPERATIONS - CONTINUED For the Year Ended August 31, 2004
MODERATE
MID CAP GROWTH MONEY
VALUE LIFESTYLE MARKET II
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends* (unaffiliated)................................................................... $ 1,962,006 $ - $ -
Dividends* (affiliated)..................................................................... - 1,222,645 -
Interest (unaffiliated)..................................................................... 38,164 - 818,418
----------- ----------- ---------
Total investment income.................................................................. 2,000,170 1,222,645 818,418
----------- ----------- ---------
EXPENSES:
Investment advisory and management fees..................................................... 1,302,586 55,179 178,737
Administrative services..................................................................... 123,353 - 50,047
Shareholder service fees.................................................................... 440,547 - 178,737
Transfer agent fees......................................................................... 3,257 1,629 1,085
Registration fees........................................................................... - 146 -
Custodian fees.............................................................................. 69,147 11,982 48,085
Reports to shareholders..................................................................... 94,408 30,696 41,780
Audit and tax fees.......................................................................... 16,409 9,798 10,312
Legal fees.................................................................................. 15,514 8,692 9,969
Trustees' fees.............................................................................. 131,380 55,961 53,185
Interest expense............................................................................ - - -
Interest expense on securities sold short................................................... - - -
Other expenses.............................................................................. 3,620 3,695 2,782
----------- ----------- ---------
Total expenses before reimbursements and fees paid indirectly............................ 2,200,221 177,778 574,719
----------- ----------- ---------
Expenses waived/reimbursed by investment advisor......................................... (349,923) (122,600) (179,081)
Fees paid indirectly (Note 7)............................................................ (59,541) - -
----------- ----------- ---------
Net expenses............................................................................. 1,790,757 55,178 395,638
----------- ----------- ---------
Net investment income (loss)................................................................ 209,413 1,167,467 422,780
----------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 22,168,785 - -
Net realized gain (loss) on investments (affiliated)...................................... - 5,848,184 -
Net realized gain (loss) from capital gain distributions from
underlying Funds (affiliated)............................................................ - 97,761 -
Net realized gain (loss) on securities sold short......................................... - - -
Net realized gain (loss) on futures contracts............................................. - - -
Net realized foreign exchange gain (loss) on other assets and
liabilities.............................................................................. 2,927 - -
Net realized gain (loss) on disposal of investments, in violation of
investments restrictions (Note 3)........................................................ - - -
----------- ----------- ---------
Net realized gain (loss) on investments, capital gain distributions, short sales, futures
contracts, disposal of investments in violation of investment restrictions and foreign
exchange gain (loss) on other assets and liabilities..................................... 22,171,712 5,945,945 -
----------- ----------- ---------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated)............................................................... (1,216,626) - -
Change in unrealized appreciation (depreciation) on
investments (affiliated)................................................................. - (2,688,056) -
Change in unrealized appreciation (depreciation) on futures
contracts and options contracts.......................................................... - - -
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities................................................................... 228 - -
Change in unrealized appreciation (depreciation) on securities
sold short............................................................................... - - -
----------- ----------- ---------
Net unrealized gain (loss) on investments, futures contracts, short sales and foreign
gain (loss) on other assets and liabilities.............................................. (1,216,398) (2,688,056) -
----------- ----------- ---------
Net realized and unrealized gain (loss) on investments, futures
contracts, options contracts short sales, and foreign exchange
gain (loss) on other assets and liabilities................................................ 20,955,314 3,257,889 -
----------- ----------- ---------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................................................. $21,164,727 $ 4,425,356 $ 422,780
----------- ----------- ---------
*Net of foreign withholding taxes on interest and dividends of.............................. $ 29,131 $ - $ -
----------- ----------- ---------
SMALL CAP
GROWTH SMALL CAP
FUND VALUE FUND
- -----------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends* (unaffiliated)................................................................... $ 131,578 $ 859,022
Dividends* (affiliated)..................................................................... - -
Interest (unaffiliated)..................................................................... 23,480 25,596
----------- -----------
Total investment income.................................................................. 155,058 884,618
----------- -----------
EXPENSES:
Investment advisory and management fees..................................................... 406,558 495,316
Administrative services..................................................................... 33,481 47,957
Shareholder service fees.................................................................... 119,576 171,275
Transfer agent fees......................................................................... 3,257 2,714
Registration fees........................................................................... 17 -
Custodian fees.............................................................................. 49,378 49,045
Reports to shareholders..................................................................... 28,434 38,021
Audit and tax fees.......................................................................... 8,462 9,759
Legal fees.................................................................................. 8,512 9,354
Trustees' fees.............................................................................. 38,890 52,867
Interest expense............................................................................ - -
Interest expense on securities sold short................................................... - -
Other expenses.............................................................................. 3,150 2,859
----------- -----------
Total expenses before reimbursements and fees paid indirectly............................ 699,715 879,167
----------- -----------
Expenses waived/reimbursed by investment advisor......................................... (144,885) (228,321)
Fees paid indirectly (Note 7)............................................................ - -
----------- -----------
Net expenses............................................................................. 554,830 650,846
----------- -----------
Net investment income (loss)................................................................ (399,772) 233,772
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 6,353,173 6,826,894
Net realized gain (loss) on investments (affiliated)...................................... - -
Net realized gain (loss) from capital gain distributions from
underlying Funds (affiliated)............................................................ - -
Net realized gain (loss) on securities sold short......................................... - -
Net realized gain (loss) on futures contracts............................................. - -
Net realized foreign exchange gain (loss) on other assets and
liabilities.............................................................................. 15 -
Net realized gain (loss) on disposal of investments, in violation of
investments restrictions (Note 3)........................................................ - -
----------- -----------
Net realized gain (loss) on investments, capital gain distributions, short sales, futures
contracts, disposal of investments in violation of investment restrictions and foreign
exchange gain (loss) on other assets and liabilities..................................... 6,353,188 6,826,894
----------- -----------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated)............................................................... (2,921,965) 3,541,324
Change in unrealized appreciation (depreciation) on
investments (affiliated)................................................................. - -
Change in unrealized appreciation (depreciation) on futures
contracts and options contracts.......................................................... - -
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities................................................................... - -
Change in unrealized appreciation (depreciation) on securities
sold short............................................................................... - -
----------- -----------
Net unrealized gain (loss) on investments, futures contracts, short sales and foreign
gain (loss) on other assets and liabilities.............................................. (2,921,965) 3,541,324
----------- -----------
Net realized and unrealized gain (loss) on investments, futures
contracts, options contracts short sales, and foreign exchange
gain (loss) on other assets and liabilities................................................ 3,431,223 10,368,218
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................................................. $ 3,031,451 $10,601,990
----------- -----------
*Net of foreign withholding taxes on interest and dividends of.............................. $ 747 $ -
----------- -----------
SOCIALLY
RESPONSIBLE STRATEGIC
FUND BOND FUND
- --------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends* (unaffiliated)................................................................... $ 311,444 $ 7,086
Dividends* (affiliated)..................................................................... 308 -
Interest (unaffiliated)..................................................................... 27,686 4,189,180
--------- ----------
Total investment income.................................................................. 339,438 4,196,266
--------- ----------
EXPENSES:
Investment advisory and management fees..................................................... 57,715 392,338
Administrative services..................................................................... 16,160 45,773
Shareholder service fees.................................................................... 57,715 163,474
Transfer agent fees......................................................................... 1,085 2,375
Registration fees........................................................................... - 349
Custodian fees.............................................................................. 49,107 87,554
Reports to shareholders..................................................................... 9,439 33,428
Audit and tax fees.......................................................................... 6,901 8,536
Legal fees.................................................................................. 6,106 8,856
Trustees' fees.............................................................................. 14,097 50,346
Interest expense............................................................................ 478 -
Interest expense on securities sold short................................................... - -
Other expenses.............................................................................. 1,982 4,310
--------- ----------
Total expenses before reimbursements and fees paid indirectly............................ 220,785 797,339
--------- ----------
Expenses waived/reimbursed by investment advisor......................................... (91,504) (220,857)
Fees paid indirectly (Note 7)............................................................ - -
--------- ----------
Net expenses............................................................................. 129,281 576,482
--------- ----------
Net investment income (loss)................................................................ 210,157 3,619,784
--------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 699,739 1,938,108
Net realized gain (loss) on investments (affiliated)...................................... - -
Net realized gain (loss) from capital gain distributions from
underlying Funds (affiliated)............................................................ - -
Net realized gain (loss) on securities sold short......................................... - -
Net realized gain (loss) on futures contracts............................................. 245,114 -
Net realized foreign exchange gain (loss) on other assets and
liabilities.............................................................................. - (51,488)
Net realized gain (loss) on disposal of investments, in violation of
investments restrictions (Note 3)........................................................ 1,402 -
--------- ----------
Net realized gain (loss) on investments, capital gain distributions, short sales, futures
contracts, disposal of investments in violation of investment restrictions and foreign
exchange gain (loss) on other assets and liabilities..................................... 946,255 1,886,620
--------- ----------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated)............................................................... (338,033) 338,547
Change in unrealized appreciation (depreciation) on
investments (affiliated)................................................................. 13,175 -
Change in unrealized appreciation (depreciation) on futures
contracts and options contracts.......................................................... (31,592) -
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities................................................................... - 4,488
Change in unrealized appreciation (depreciation) on securities
sold short............................................................................... - -
--------- ----------
Net unrealized gain (loss) on investments, futures contracts, short sales and foreign
gain (loss) on other assets and liabilities.............................................. (356,450) 343,035
--------- ----------
Net realized and unrealized gain (loss) on investments, futures
contracts, options contracts short sales, and foreign exchange
gain (loss) on other assets and liabilities................................................ 589,805 2,229,655
--------- ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................................................. $ 799,962 $5,849,439
--------- ----------
*Net of foreign withholding taxes on interest and dividends of.............................. $ - $ 896
--------- ----------
SEE NOTES TO FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS 59
AGGRESSIVE GROWTH CAPITAL
LIFESTYLE FUND APPRECIATION FUND
------------------------ ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
OPERATIONS:
Net investment income (loss)................................................ $ 298,944 $ 208,115 $ (79,774) $ (7,836)
Net realized gain (loss) on investments, futures contracts, securities sold
short, foreign currencies and capital gain distributions from underlying
funds...................................................................... 3,275,157 (2,368,674) 1,427,012 (4,904,594)
Change in net unrealized appreciation (depreciation) on investments, futures
contracts, securities sold short and foreign currencies.................... (692,940) 5,507,178 (1,030,393) 9,206,092
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations............... 2,881,161 3,346,619 316,845 4,293,662
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (295,103) (210,024) - (15,000)
Net realized gain on securities............................................. - - - -
----------- ----------- ----------- -----------
Decrease in net assets resulting from distributions to shareholders....... (295,103) (210,024) - (15,000)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from trust share
transactions (Note 6)...................................................... 2,306,928 4,968,535 7,074,828 3,467,520
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... 4,892,986 8,105,130 7,391,673 7,746,182
NET ASSETS:
Beginning of period......................................................... 28,627,185 20,522,055 35,152,447 27,406,265
----------- ----------- ----------- -----------
End of period+.............................................................. $33,520,171 $28,627,185 $42,544,120 $35,152,447
=========== =========== =========== ===========
+ Includes undistributed net investment income (loss) included in net assets
at the end of the period................................................... $ 10,971 $ 7,130 $ (33,328) $ -
=========== =========== =========== ===========
CONSERVATIVE GROWTH
LIFESTYLE FUND CORE BOND FUND
------------------------ ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
OPERATIONS:
Net investment income (loss)................................................ $ 942,704 $ 553,199 $ 2,358,009 $ 1,663,015
Net realized gain (loss) on investments, futures contracts, securities sold
short, foreign currencies and capital gain distributions from underlying
funds...................................................................... 2,826,935 (1,018,023) 233,225 2,080,193
Change in net unrealized appreciation (depreciation) on investments, futures
contracts, securities sold short and foreign currencies.................... (1,566,074) 2,717,921 1,190,797 (1,882,030)
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations............... 2,203,565 2,253,097 3,782,031 1,861,178
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (926,203) (555,753) (2,485,003) (1,772,964)
Net realized gain on securities............................................. - - (1,555,224) -
----------- ----------- ----------- -----------
Decrease in net assets resulting from distributions to shareholders....... (926,203) (555,753) (4,040,227) (1,772,964)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from trust share
transactions (Note 6)...................................................... 1,719,210 5,113,619 8,148,374 20,862,966
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... 2,996,572 6,810,963 7,890,178 20,951,180
NET ASSETS:
Beginning of period......................................................... 27,652,217 20,841,254 63,518,935 42,567,755
----------- ----------- ----------- -----------
End of period+.............................................................. $30,648,789 $27,652,217 $71,409,113 $63,518,935
=========== =========== =========== ===========
+ Includes undistributed net investment income (loss) included in net assets
at the end of the period................................................... $ 27,263 $ 10,762 $ 71,182 $ 79,281
=========== =========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
60 STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
INTERNATIONAL
HIGH YIELD BOND FUND GROWTH II FUND
------------------------ ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
OPERATIONS:
Net investment income (loss)................................................ $ 4,401,912 $ 2,760,284 $ 527,829 $ 451,193
Net realized gain (loss) on investments, futures contracts, securities sold
short, foreign currencies and capital gain distributions from underlying
funds...................................................................... 3,159,024 763,989 5,651,560 (3,740,132)
Change in net unrealized appreciation (depreciation) on investments, futures
contracts, securities sold short and foreign currencies.................... (88,821) 2,601,782 870,193 6,170,418
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations............... 7,472,115 6,126,055 7,049,582 2,881,479
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (4,350,004) (2,710,856) (507,002) (469,933)
Net realized gain on securities............................................. - - - -
----------- ----------- ----------- -----------
Decrease in net assets resulting from distributions to shareholders....... (4,350,004) (2,710,856) (507,002) (469,933)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from trust share
transactions (Note 6)...................................................... 8,453,886 19,544,542 (7,521,516) 9,680,391
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... 11,575,997 22,959,741 (978,936) 12,091,937
NET ASSETS:
Beginning of period......................................................... 41,986,014 19,026,273 42,206,307 30,114,370
----------- ----------- ----------- -----------
End of period+.............................................................. $53,562,011 $41,986,014 $41,227,371 $42,206,307
=========== =========== =========== ===========
+ Includes undistributed net investment income (loss) included in net assets
at the end of the period................................................... $ 138,534 $ 97,022 $ 82,289 $ 45,000
=========== =========== =========== ===========
LARGE CAP VALUE FUND MID CAP GROWTH FUND
------------------------ ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
OPERATIONS:
Net investment income (loss)................................................ $ 723,202 $ 441,273 $ (201,672) $ (129,380)
Net realized gain (loss) on investments, futures contracts, securities sold
short, foreign currencies and capital gain distributions from underlying
funds...................................................................... 4,398,225 (1,040,758) 6,964,299 (2,669,190)
Change in net unrealized appreciation (depreciation) on investments, futures
contracts, securities sold short and foreign currencies.................... 1,098,664 4,323,877 (4,627,821) 11,663,341
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations............... 6,220,091 3,724,392 2,134,806 8,864,771
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (724,004) (420,981) - -
Net realized gain on securities............................................. - - - -
----------- ----------- ----------- -----------
Decrease in net assets resulting from distributions to shareholders....... (724,004) (420,981) - -
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from trust share
transactions (Note 6)...................................................... 19,452,224 13,549,441 (1,473,866) 9,393,496
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... 24,948,311 16,852,852 660,940 18,258,267
NET ASSETS:
Beginning of period......................................................... 44,883,046 28,030,194 43,785,021 25,526,754
----------- ----------- ----------- -----------
End of period+.............................................................. $69,831,357 $44,883,046 $44,445,961 $43,785,021
=========== =========== =========== ===========
+ Includes undistributed net investment income (loss) included in net assets
at the end of the period................................................... $ 24,951 $ 25,753 $ (39,266) $ (4,433)
=========== =========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED 61
MID CAP VALUE
FUND
--------------------------
For the For the
Year Ended Year Ended
August 31, August 31,
2004 2003
------------ ------------
OPERATIONS:
Net investment income (loss)................................................ $ 209,413 $ 145,745
Net realized gain (loss) on investments, futures contracts, securities sold
short, foreign currencies and capital gain distributions from underlying
funds...................................................................... 22,171,712 (1,393,330)
Change in net unrealized appreciation (depreciation) on investments, futures
contracts, securities sold short and foreign currencies.................... (1,216,398) 23,565,137
------------ ------------
Increase (decrease) in net assets resulting from operations............... 21,164,727 22,317,552
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (190,001) (233,002)
Net realized gain on securities............................................. - -
------------ ------------
Decrease in net assets resulting from distributions to
shareholders............................................................. (190,001) (233,002)
------------ ------------
Net increase (decrease) in net assets resulting from trust share
transactions (Note 6)...................................................... 36,442,943 19,860,237
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... 57,417,669 41,944,787
NET ASSETS:
Beginning of period......................................................... 135,189,581 93,244,794
------------ ------------
End of period+.............................................................. $192,607,250 $135,189,581
============ ============
+ Includes undistributed net investment income (loss) included in net assets
at the end of the period................................................... $ 20,337 $ (2,003)
============ ============
MODERATE GROWTH MONEY
LIFESTYLE FUND MARKET II FUND
------------------------ ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
OPERATIONS:
Net investment income (loss)................................................ $ 1,167,467 $ 755,812 $ 422,780 $ 643,672
Net realized gain (loss) on investments, futures contracts, securities sold
short, foreign currencies and capital gain distributions from underlying
funds...................................................................... 5,945,945 (2,774,285) - -
Change in net unrealized appreciation (depreciation) on investments, futures
contracts, securities sold short and foreign currencies.................... (2,688,056) 6,801,970 - -
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations............... 4,425,356 4,783,497 422,780 643,672
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... (1,158,503) (761,188) (422,780) (643,672)
Net realized gain on securities............................................. - - - -
----------- ----------- ----------- -----------
Decrease in net assets resulting from distributions to
shareholders............................................................. (1,158,503) (761,188) (422,780) (643,672)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from trust share
transactions (Note 6)...................................................... 5,285,574 7,922,219 (6,897,510) 8,928,510
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... 8,552,427 11,944,528 (6,897,510) 8,928,510
NET ASSETS:
Beginning of period......................................................... 47,691,550 35,747,022 79,798,303 70,869,793
----------- ----------- ----------- -----------
End of period+.............................................................. $56,243,977 $47,691,550 $72,900,793 $79,798,303
=========== =========== =========== ===========
+ Includes undistributed net investment income (loss) included in net assets
at the end of the period................................................... $ 21,361 $ 12,397 $ - $ -
=========== =========== =========== ===========
SMALL CAP GROWTH FUND
------------------------
For the For the
Year Ended Year Ended
August 31, August 31,
2004 2003
----------- -----------
OPERATIONS:
Net investment income (loss)................................................ $ (399,772) $ (200,295)
Net realized gain (loss) on investments, futures contracts, securities sold
short, foreign currencies and capital gain distributions from underlying
funds...................................................................... 6,353,188 (4,265,433)
Change in net unrealized appreciation (depreciation) on investments, futures
contracts, securities sold short and foreign currencies.................... (2,921,965) 14,419,025
----------- -----------
Increase (decrease) in net assets resulting from operations............... 3,031,451 9,953,297
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................................... - -
Net realized gain on securities............................................. - -
----------- -----------
Decrease in net assets resulting from distributions to
shareholders............................................................. - -
----------- -----------
Net increase (decrease) in net assets resulting from trust share
transactions (Note 6)...................................................... (8,566,822) 9,265,092
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... (5,535,371) 19,218,389
NET ASSETS:
Beginning of period......................................................... 44,290,390 25,072,001
----------- -----------
End of period+.............................................................. $38,755,019 $44,290,390
=========== ===========
+ Includes undistributed net investment income (loss) included in net assets
at the end of the period................................................... $ (38,970) $ -
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
62 STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
SOCIALLY RESPONSIBLE
SMALL CAP VALUE FUND FUND STRATEGIC BOND FUND
------------------------ ------------------------ ------------------------
For the For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31, August 31, August 31,
2004 2003 2004 2003 2004 2003
----------- ----------- ----------- ----------- ----------- -----------
OPERATIONS:
Net investment income (loss).. $ 233,772 $ 327,040 $ 210,157 $ 116,238 $ 3,619,784 $ 2,291,133
Net realized gain (loss) on
investments, futures
contracts, securities sold
short, foreign currencies
and capital gain
distributions from
underlying funds............. 6,826,894 (2,490,647) 946,255 (1,348,556) 1,886,620 1,214,983
Change in net unrealized
appreciation (depreciation)
on investments, futures
contracts, securities sold
short and foreign currencies. 3,541,324 11,481,647 (356,450) 2,590,022 343,035 1,772,085
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net
assets resulting from
operations................. 10,601,990 9,318,040 799,962 1,357,704 5,849,439 5,278,201
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income......... (272,003) (395,002) (211,004) (89,502) (3,603,003) (2,219,077)
Net realized gain on
securities................... - (718,060) - - (538,087) -
----------- ----------- ----------- ----------- ----------- -----------
Decrease in net assets
resulting from
distributions
to shareholders............ (272,003) (1,113,062) (211,004) (89,502) (4,141,090) (2,219,077)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net assets resulting from
trust share transactions
(Note 6)..................... 2,118,576 5,593,467 19,880,764 1,104,491 32,519,260 16,338,469
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN
NET ASSETS................... 12,448,563 13,798,445 20,469,722 2,372,693 34,227,609 19,397,593
NET ASSETS:
Beginning of period........... 58,922,839 45,124,394 12,380,400 10,007,707 45,565,052 26,167,459
----------- ----------- ----------- ----------- ----------- -----------
End of period+................ $71,371,402 $58,922,839 $32,850,122 $12,380,400 $79,792,661 $45,565,052
=========== =========== =========== =========== =========== ===========
+ Includes undistributed net
investment income (loss)
included in net assets
at the end of the period..... $ (16,640) $ 21,591 $ 28,875 $ 30,345 $ 119,256 $ 191,771
=========== =========== =========== =========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS 63
Note 1 -- Organization
VALIC Company II ("VC II") was organized as a Delaware business trust on May
6, 1998, by The Variable Annuity Life Insurance Company ("VALIC") and is
registered under the Investment Company Act of 1940, as amended, (the "1940
Act") as an open-end, management investment company. On August 26, 1998, VALIC
contributed $100,000 to VC II as its initial funding. On September 21, 1998,
VALIC Separate Account A, invested an additional $74,900,000, and VC II
commenced operations. VC II consists of the following 15 separate investment
portfolios or "Funds", each of which is, in effect, a separate mutual fund
issuing its own separate class of shares of beneficial interest:
Aggressive Growth Lifestyle Fund* Mid Cap Value Fund
Capital Appreciation Fund Moderate Growth Lifestyle Fund*
Conservative Growth Lifestyle Fund* Money Market II Fund
Core Bond Fund Small Cap Growth Fund
High Yield Bond Fund Small Cap Value Fund
International Growth II Fund Socially Responsible Fund
Large Cap Value Fund Strategic Bond Fund
Mid Cap Growth Fund
- --------
*The Lifestyle Funds represent "Funds of Funds" which invest in either the
VALIC Company I ("VC I") or VALIC Company II Mutual Funds.
Indemnifications. Under VC II's organizational documents, its officers and
trustees are indemnified against certain liability arising out of the
performance of their duties to VC II. In addition, in the normal course of
business VC II enters into contracts that contain a variety of representations
and warranties which provide general indemnifications. VC II's maximum exposure
under these arrangements is unknown as this would involve future claims that
may be made against VC II that have not yet occurred. However, VC II expects
the risk of loss to be remote.
Note 2 -- Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates. The
following is a summary of the significant accounting policies followed by the
Funds in the preparation of their financial statements:
A. Security Valuations
Securities listed or traded on a national exchange are valued daily at their
last reported sale price as of the close of the customary trading session on
the exchange where the security is principally traded. Securities listed on the
NASDAQ stock market are valued using the NASDAQ Official Closing Price
("NOCP"). Generally, the NOCP is the last sale price unless the reported trade
for the security is outside the range of the bid/ask price. In such cases, the
NOCP will be normalized to the nearer of the bid or ask price. For listed
securities having no sales reported and for unlisted securities, such
securities are valued based upon the last reported bid price.
Options traded on national securities exchanges are valued as of the close of
the exchange on which they are traded. Futures traded on commodity exchanges
are valued as of the close of such exchange. U.S. Treasury securities and other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, are valued at representative quoted prices. Such quoted
prices generally are obtained from third party pricing services; however, in
circumstances where it is deemed appropriate to do so, quotations may be
obtained from dealers in government securities. Publicly-traded corporate bonds
are valued at prices obtained from third party pricing services.
Convertible bonds are valued at prices obtained from one or more of the major
dealers in such bonds. Where there is a discrepancy between dealers or when no
quotes are readily available, values may be adjusted based on a combination of
yields and premium spreads to the underlying common stock. Senior Secured
Floating Rate Loans ("Loans") for which an active secondary market exists to a
reliable degree, will be valued at the mean of the last available bid and asked
prices in the market for such Loans, as provided by a third party pricing
service.
As of the close of regular trading on the New York Stock Exchange, securities
traded primarily on securities exchanges outside the United States are valued
at the last sale price on such exchanges on the day of valuation, or if there
is no sale on the day of valuation, at the last-reported bid price. However,
depending on the foreign market, closing prices may be up to 15 hours old when
they are used to price the Fund's shares, and the Fund may determine that
certain closing prices are unreliable. This determination will be based on
review of a number of factors, including developments in foreign markets, the
performance of U.S. securities markets, and the performance of instruments
trading in U.S. markets that represent foreign securities and baskets of
foreign securities. If the Fund determines that closing prices do not reflect
the fair value of the securities, the Fund will adjust the previous closing
prices in accordance with pricing procedures approved by the Board to reflect
what it believes to be the fair value of the securities as of the close of
regular trading on the New York Stock Exchange. A Fund may also fair value
securities in other situations, for example, when a particular foreign market
is closed but the Fund is open. For foreign equity securities, the Fund uses an
outside pricing service to provide it with closing market prices and
information used for adjusting those prices.
Short-term debt securities for which market quotations are readily available
are valued at the last reported bid price. However, any short-term security
with a remaining maturity of 60 days or less, and all investments of the Money
Market II Fund, are valued by the amortized cost method which approximates fair
market value.
Securities for which market quotations are not readily available or if a
development/event occurs that may significantly impact the value of the
securities, then these securities may be fair valued as determined pursuant to
procedures adopted in good faith by the Board of Trustees. Securities of the
Lifestyle Funds are valued at the net asset value (market value) of the
underlying VC I and VC II Funds.
B. Futures and Forward Currency Contracts
Futures Contracts. A futures contract is an agreement between two parties to
buy and sell a financial instrument at a set price on a future date. Upon
entering into such a contract the Funds are required to pledge to the broker an
amount of cash or U.S. government securities equal to the minimum "initial
margin'' requirements of the exchange on which the futures contract is traded.
The Fund's activities in futures contracts are used primarily for hedging
purposes and from time to time for income enhancement. Futures contracts are
conducted through regulated exchanges that do not result in counter-party
credit risks. A Fund's participation in the futures markets involves certain
risks, including imperfect correlation between
64 NOTES TO FINANCIAL STATEMENTS - CONTINUED
movements in the price of futures contracts and movements in the price of the
securities hedged or used for cover. Pursuant to a contract the Funds agree to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin'' and are recorded by the Funds as unrealized appreciation or
depreciation. Futures contracts involve elements of risk in excess of the
amount reflected in the Statement of Assets and Liabilities. When a contract is
closed, the Funds record a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed.
Forward Foreign Currency Contracts. Certain Funds may enter into forward
foreign currency contracts ("forward contracts'') to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates or to enhance return. A forward contract is an agreement
between two parties to buy or sell currency at a set price on a future date.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily using the forward rate
and the change in market value is recorded by the Fund as unrealized gain or
loss. On the settlement date, the Fund records either realized gains or losses
when the contract is closed equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
Risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Forward contracts involve elements of risk in excess of the amount reflected in
the Statement of Assets and Liabilities. VC II bears the risk of an unfavorable
change in the foreign exchange rate underlying the forward contract.
The Funds will cover outstanding forward contracts by maintaining liquid
portfolio securities denominated in, or whose value is tied to, the currency
underlying the forward contract or the currency being hedged. To the extent
that a Fund is not able to cover its forward foreign currency positions with
underlying portfolio securities, the custodian will segregate cash or other
liquid assets having a value equal to the aggregate amount of a Fund's
commitments under forward contracts entered into with respect to position
hedges, settlement hedges and anticipatory hedges.
C. Repurchase Agreements
The Funds, along with other affiliated registered investment companies,
pursuant to exemptive relief granted by the Securities and Exchange Commission,
may transfer uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S.Treasury or federal agency obligations. For repurchase
agreements and joint repurchase agreements, the Funds' custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark to market basis
to ensure that the value, at the time the agreement is entered into, is equal
to at least 102% of the repurchase price, including accrued interest. In the
event of default of the obligation to repurchase, a Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
At August 31, 2004, Money Market II Fund held 0.14% undivided interest,
representing $294,000 in principal amount in a joint repurchase agreement with
State Street Bank and Trust Co. which is dated August 31, 2004, bears interest
at a rate of 1.49% per annum, has a principal amount of $217,124,000 a
repurchase price of $217,132,987 and matures September 1, 2004. The repurchase
agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
---------------------------------------------------------------
U.S. Treasury Notes 6.75% 05/15/05 $ 19,370,000 $ 20,404,435
U.S. Treasury Notes 5.88% 11/15/05 19,225,000 20,402,531
U.S. Treasury Notes 5.00% 02/15/11 19,000,000 20,401,250
U.S. Treasury Notes 4.63% 05/15/06 16,615,000 17,466,519
U.S. Treasury Bills 1.77% 02/24/05 144,095,000 142,834,169
In addition, at August 31, 2004, Money Market II Fund held 0.40% undivided
interest, representing $1,000,000 in principal amount in a joint repurchase
agreement with UBS Warburg, LLC which is dated August 31, 2004, bears interest
at a rate of 1.54% per annum, has a principal amount of $250,000,000, a
repurchase price of $250,010,694 and matures September 1, 2004. The repurchase
agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
---------------------------------------------------------------
U.S. Treasury Bonds 7.63% 11/15/22 $ 66,661,000 $ 89,575,719
U.S. Treasury Bonds 7.25% 05/15/16 130,000,000 165,425,000
D. Mortgage-Backed Dollar Rolls
During the period ended August 31, 2004, the Core Bond Fund entered into
dollar rolls using "to be announced" ("TBA") mortgage-backed securities ("TBA
Rolls"). The Fund's policy is to record the components of TBA Rolls as
purchase/sale transactions. Any difference between the purchase and sale price
is recorded as a realized gain or loss on the date the transaction is entered
into. The Core Bond Fund had TBA Rolls outstanding at period end, which are
included in receivable for investments sold and payable for investments
purchased in the Statement of Assets and Liabilities.
Dollar roll transactions involve the risk that the market value of the
securities held by the Fund may decline below the price of the securities that
the Fund has sold but is obligated to repurchase under the agreement. In the
event that the buyer of securities in a dollar roll transaction files
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale
of the securities may be restricted pending a determination by the other party,
or its trustee or receiver, whether to enforce the Fund's obligation to
repurchase the securities. The return earned by the Fund with the proceeds of
the dollar roll transaction may not exceed transaction costs.
E. Foreign Currency Translation
The books and records of VC II are maintained in U.S. dollars. Assets and
liabilities denominated in foreign currencies and commitments under forward
foreign currency contracts are translated into U.S. dollars based on the
exchange rate of such currencies against U.S. dollars on the date of valuation.
VC II does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the changes in the market
prices of securities held at the end of the period. Similarly, VC II does not
isolate the effect of changes in foreign exchange rates from the changes in the
market prices of portfolio securities sold during the period.
NOTES TO FINANCIAL STATEMENTS - CONTINUED 65
Realized foreign exchange gains and losses on other assets and liabilities and
change in unrealized foreign exchange gains and losses on other assets and
liabilities located in the Statement of Operations include realized foreign
exchange gains and losses from currency gains or losses between the trade and
the settlement dates of securities transactions; the difference between the
amounts of interest, dividends and foreign withholding taxes recorded on VC
II's books and the U.S. dollar equivalent amounts actually received or paid and
changes in the unrealized foreign exchange gains and losses relating to the
other assets and liabilities arising as a result of changes in the exchange
rate.
F. Short Sales
All Funds, except for the Money Market II Fund and the three Lifestyle Funds,
may engage in "short sales against the box." This technique involves selling
either a security that a Fund owns, or a security equivalent in kind and amount
to the security sold short. A Fund may enter into a short sale against the box
to hedge against anticipated declines in the market price of that security. The
High Yield Bond Fund may also engage in "naked" short sales. To complete such
transactions, the Fund must borrow the security to make delivery to the buyer.
The Fund then is obligated to replace the security borrowed by purchasing it at
market price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Fund. Until the
security is replaced, the Fund is required to pay to the lender any dividends
or interest that accrue during the period of the loan. To borrow the security,
the Fund also may be required to pay a premium, which would increase the cost
of the security sold. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet margin requirements, until the short
position is closed out. Until the Fund replaces a borrowed security, the Fund
will maintain daily a segregated account, containing cash or liquid securities,
at such a level that (i) the amount deposited in the account plus the amount
deposited with the broker as collateral will equal the current value of the
security sold short and (ii) the amount deposited in the segregated account
plus the amount deposited with the broker as collateral will not be less than
the market value of the security at the time it was sold short. Liabilities for
securities sold short are reported at market value in the financial statements.
Such liabilities are subject to off balance sheet risk to the extent of any
future increases in market value of the securities sold short. The ultimate
liability for securities sold short could exceed the liabilities recorded in
the Statement of Assets and Liabilities. The Fund bears the risk of potential
inability of the broker to meet their obligation to perform.
G. Securities Transactions, Investment Income, Expenses, Dividends and
Distributions to Shareholders
Security transactions are recorded on a trade date basis. Realized gains and
losses on securities sold are determined on the basis of identified cost.
Dividend income and capital gain distributions received are recorded on the
ex-dividend date except for certain dividends from foreign securities, which
are recorded as soon as VC II is informed after the ex-dividend date. Interest
income is accrued daily except when collection is not expected. For financial
statement purposes, VC II amortizes all premiums and accretes all discounts on
fixed income securities. Funds which earn foreign income and capital gains may
be subject to foreign withholding taxes and capital gains taxes at various
rates. Common expenses incurred by VC II are allocated among the Funds based
upon relative net assets or other appropriate allocation methods. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis. For the Lifestyle Funds, the expenses included in the
accompanying financial statements reflect the expenses of the Lifestyle Funds
and do not include any expenses associated with the underlying Funds.
Dividends from net investment income, if any, are declared and paid quarterly,
except for the Money Market II Fund, which declares daily. Distributions from
net realized capital gains, if any, are normally declared and paid annually.
The Funds record dividends and distributions to their shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized gains are determined and presented in accordance with
federal income tax regulations, which may differ from accounting principles
generally accepted in the United States of America. These "book/tax''
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts at fiscal year end based on their federal tax-basis
treatment; temporary differences do not require reclassification. Net
investment income (loss), net realized gain (loss) and net assets are not
affected by these reclassifications.
Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code and to distribute all of its taxable
net investment income and taxable net realized capital gains, in excess of any
available capital loss carryovers. Therefore, no Federal income tax provision
is required.
Note 3 -- Advisory Fees and Other Transactions with Affiliates
VALIC, an indirect wholly owned subsidiary of American International Group,
Inc. ("AIG"), serves as investment adviser to VC II. Certain officers and
trustees of VC II are officers and directors of VALIC or affiliates of VALIC.
VALIC entered into sub-advisory agreements with the following:
AIG Global Investment Corp.--sub-adviser for the Socially Responsible
Fund, High Yield Bond Fund, Strategic Bond Fund, Core Bond Fund,
Aggressive, Moderate and Conservative Growth Lifestyle Funds.
AIG SunAmerica Asset Management Corp. ("SAAMCo")--sub-adviser for the
Money Market II Fund.
Banc One Investment Advisors Corp.--sub-adviser for Small Cap Value Fund.
Credit Suisse Asset Management, LLC--sub-adviser for the Capital
Appreciation Fund.
Franklin Advisers, Inc.--sub-adviser for the Small Cap Growth Fund.
INVESCO Institutional (N.A.), Inc.--sub-adviser for the Mid Cap Growth
Fund.
Putnam Investment Management, LLC--sub-adviser for the International
Growth II Fund.
SSgA Funds Management, Inc.--sub-adviser for the Large Cap Value Fund.
Wellington Management Co. LLP--sub-adviser for the Mid Cap Value Fund.
The sub-advisers are compensated for their services by VALIC.
66 NOTES TO FINANCIAL STATEMENTS - CONTINUED
VALIC receives from VC II a monthly fee based on each Fund's average daily net
asset value at the following annual rates:
Aggressive Growth Lifestyle Fund 0.10%
------------------------------------------------------------------------
Capital Appreciation Fund 0.55%
------------------------------------------------------------------------
Conservative Growth Lifestyle Fund 0.10%
------------------------------------------------------------------------
Core Bond Fund 0.50% on the first $200 million
0.45% on the next $300 million
0.40% on assets over $500 million
------------------------------------------------------------------------
High Yield Bond Fund 0.70% on the first $200 million
0.60% on the next $300 million
0.55% on assets over $500 million
------------------------------------------------------------------------
International Growth II Fund 0.90% on the first $100 million
0.80% on assets over $100 million
------------------------------------------------------------------------
Large Cap Value Fund 0.50%
------------------------------------------------------------------------
Mid Cap Growth Fund 0.80% on the first $50 million
0.75% on the next $50 million
0.70% on the next $150 million
0.65% on the next $250 million
0.60% on assets over $500 million
------------------------------------------------------------------------
Mid Cap Value Fund 0.75% on the first $100 million
0.725% on the next $150 million
0.70% on the next $250 million
0.675% on the next $250 million
0.65% on the assets over $750 million
------------------------------------------------------------------------
Moderate Growth Lifestyle Fund 0.10%
------------------------------------------------------------------------
Money Market II Fund 0.25%
------------------------------------------------------------------------
Small Cap Growth Fund 0.85%
------------------------------------------------------------------------
Small Cap Value Fund 0.75% on the first $50 million
0.65% on the assets over $50 million
------------------------------------------------------------------------
Socially Responsible Fund 0.25%
------------------------------------------------------------------------
Strategic Bond Fund 0.60% on the first $200 million
0.50% on the next $300 million
0.45% on assets over $500 million
VALIC has agreed to waive a portion of its management fee or to reimburse
certain expenses of the Funds listed below through 12/31/04. The table below
reflects total annual operating expenses by Fund, as limited by the Adviser,
shown as a percentage of average net assets:
Maximum
Expense
Fund Limitation
----------------------------------------
Aggressive Growth Lifestyle.. 0.10%
Capital Appreciation......... 0.85%
Conservative Growth Lifestyle 0.10%
Core Bond.................... 0.77%
High Yield Bond.............. 0.99%
International Growth II...... 1.00%
Large Cap Value.............. 0.81%
Mid Cap Growth............... 0.85%
Mid Cap Value................ 1.05%
Moderate Growth Lifestyle.... 0.10%
Money Market II.............. 0.56%
Small Cap Growth............. 1.16%
Small Cap Value.............. 0.95%
Socially Responsible......... 0.56%
Strategic Bond............... 0.89%
NOTES TO FINANCIAL STATEMENTS - CONTINUED 67
Effective October 1, 2001, VC II entered into an Administrative Services
Agreement with SAAMCo. SAAMCo receives from each Fund, other than the Lifestyle
Funds, an annual fee of 0.07% based on the average daily net asset value of the
Fund. Under the agreement, SAAMCo will provide certain accounting and
administrative services to VC II. During the period ended August 31, 2004, VC
II accrued $536,459 for accounting and administrative services.
Effective October 17, 2000, VC II entered into an Amended and Restated
Transfer Agency and Services Agreement with VALIC. Under this agreement, VALIC
provides services which include the issuance and redemption of shares, payment
of dividends between VC II and their "Institutional" shareholders and certain
shareholder reporting services including confirmation of transactions,
statements of account and tax reporting. For the period ended August 31, 2004,
VC II accrued $36,764 in transfer agency and shareholder services fees.
On July 17, 2001, VC II entered into a Shareholder Services Agreement with
VALIC, which replaced an Administrative Services Agreement between VC II and
VALIC dated August 26, 1998. Under the agreement, VALIC provides record
keeping, account maintenance, and other administrative and shareholder services
for contract owners and participants. VALIC receives from each Fund, other than
the Lifestyle Funds, an annual fee of 0.25% based on average daily net assets
of the Fund. For the period ended August 31, 2004, VC II accrued $1,915,927 in
shareholder service expenses.
On January 23, 2001, the Board of Trustees ratified a Deferred Compensation
Plan for its independent trustees who are not officers, directors, or employees
of VALIC, or an affiliate of VALIC. The effective date of the plan was January
1, 2001. The first deferred payment was made in March of 2001. Under the
deferred compensation plan, trustees may elect to defer all or portion of their
compensation. Amounts deferred may be invested in up to six different
affiliated mutual funds that are specified in the plan as selected by the
trustees. For the period ended August 31, 2004, VC II has deferred $5,724 of
trustee compensation.
On January 23, 2001, the Board of Trustees approved a retirement plan for its
independent trustees who are not officers, directors, or employees of VALIC or
an affiliate of VALIC. VC II is responsible for the payment of the retirement
benefits, as well as all expenses of administration of the plan. Benefits
vested under the plan are payable for a ten-year period upon retirement and are
based upon each trustee's years of service. At the end of the period, VC II had
a retirement plan liability to its independent trustees totaling $743,437 which
is included in the payable for Trustees' fees and expenses line of the
Statement of Assets and Liabilities and for the period ended August 31, 2004,
expensed $442,653 for the Retirement Plan, which is included in Trustees' fees
and expenses on the Statement of Operations. During the period, a total of
$5,649 was paid to retired trustees.
At August 31, 2004, VALIC Separate Account A (a registered separate account of
VALIC), VALIC Separate Account C (a non-registered separate account of VALIC)
and A.G. Separate Account A (a registered separate account of AIG Annuity
Insurance Co.) owned, directly or indirectly, 100% of the outstanding shares of
all Funds. The ownership breakdown is as follows:
VALIC VALIC A.G.
Separate Separate Separate
Account Account Account
Fund A C A
----------------------------- -------- -------- --------
Aggressive Growth Lifestyle.. 97.32% 2.68% --
Capital Appreciation......... 96.77% 3.23% --
Conservative Growth Lifestyle 89.70% 10.30% --
Core Bond.................... 97.12% 2.88% --
High Yield Bond.............. 98.81% -- 1.19%
International Growth II...... 100.00% -- --
Large Cap Value.............. 100.00% -- --
Mid Cap Growth............... 100.00% -- --
Mid Cap Value................ 98.52% -- 1.48%
Moderate Growth Lifestyle.... 95.66% 4.34% --
Money Market II.............. 100.00% -- --
Small Cap Growth............. 96.39% 3.61% --
Small Cap Value.............. 100.00% -- --
Socially Responsible......... 100.00% -- --
Strategic Bond............... 94.47% 3.64% 1.89%
As disclosed in the schedule of investments, certain Funds own securities
issued by AIG or an affiliate thereof. As of August 31, 2004, the following
Funds recorded realized gains (losses) and income on security transactions of
AIG and subsidiaries of AIG as follows:
Market Value Cost of Cost of Realized
Fund Security Income at 8/31/03 Purchases Sales Gain/(Loss)
- ----------------------------- ---------------------------------- ---------- ------------ ----------- ----------- -----------
Aggressive Growth Lifestyle.. Various VC II Funds* $ 332,656 $28,619,705 $26,025,025+ $23,661,569 $3,255,339
Conservative Growth Lifestyle Various VC II Funds* 974,069 27,644,528 22,855,354+ 20,995,905 2,733,742
Moderate Growth Lifestyle.... Various VC II Funds* 1,222,645 47,670,366 47,209,979+ 41,763,918 5,848,184
Socially Responsible......... American International Group, Inc. 308 67,254 14,240 15,641 1,402
Change in
Unrealized Market Value
Fund Gain/(Loss) at 08/31/04
- ----------------------------- ----------- ------------
Aggressive Growth Lifestyle.. $ (692,940) $33,545,560
Conservative Growth Lifestyle (1,566,074) 30,671,645
Moderate Growth Lifestyle.... (2,688,056) 56,276,555
Socially Responsible......... 13,175 80,430
- --------
*See Schedule of Investments for details.
+Includes reinvestment of distributions paid.
On October 10, 2003, State Street Global Advisers, Inc., the sub-adviser for
the Large Cap Value Fund, purchased 2,100 shares of Citigroup, Inc. common
stock causing the Fund's ownership of Citigroup, Inc. to exceed 5% of gross
assets. The Fund is prohibited from owning securities of a single 12(d)(3)
issuer that exceeds 5% of gross assets. On October 14, 2003, the Fund sold
2,600 shares of Citigroup, Inc. of which 2,100 shares were related to the
purchase on October 10, 2003. The sale of 2,100 shares of Citigroup, Inc.,
reduced the Fund's position in Citigroup, Inc. to less than 5% of gross assets
and resulted in a gain of $48,565 to the Fund which increased the Fund's total
return by 0.09%.
On June 4, 2004, the Large Cap Value Fund's investment in the American
Advantage Money Market Fund totaled 20.10%. The Fund is prohibited from owning
a single investment company that is greater than 5% of gross assets and the
total of all investment companies held by the Fund cannot exceed 10% of gross
assets. On June 8, 2004, the
68 NOTES TO FINANCIAL STATEMENTS - CONTINUED
position in the American Advantage Money Market Fund was reduced to less than
5% of gross assets and the Fund's position in all investment companies was
reduced to below 10% of gross assets, resulting in no gain or loss to the Fund.
On December 19, 2003, AIG Global Investment Corp., the sub-adviser for the
Socially Responsible Fund, purchased 220 shares of AIG common stock. On August
29, 2001, VALIC became a indirect wholly owned subsidiary of AIG and the Fund
was prohibited from purchasing any additional securities issued by AIG. On
March 31, 2004, AIG Global Investment Corp. sold 220 shares of AIG common
stock, resulting in a gain of $1,402 to the Fund.
From February 12, 2004 through February 20, 2004, the Socially Responsible
Fund was invested in a repurchase agreement of a single issuer that was in
excess of 25% of the Fund's net assets. The Fund is prohibited from owning a
repurchase agreement of a single issuer that exceeds 25% of net assets for more
than three consecutive days. On February 20, 2004, the Fund's position in the
repurchase agreement was reduced to less than 25% of the Fund's net assets and
there was no gain or loss to the Fund as a result of the reduction.
On August 31, 2004, the Socially Responsible Fund, purchased $3 million of UBS
Finance commercial paper which caused the Fund's position to exceed 5% of gross
assets. The Fund is prohibited from owning securities of a single 12(d)(3)
issuer that exceeds 5% of gross assets. The UBS Finance commercial paper
matured on September 1, 2004, resulting in no gain or loss to the Fund.
Note 4 -- Investment Activity
During the period ended August 31, 2004, the cost of purchases and proceeds
from sales of securities, excluding short-term securities and government
securities, was as follows:
Cost of
Securities Proceeds from
Fund Purchased Securities Sold
----------------------------- ------------ ---------------
Aggressive Growth Lifestyle.. $ 25,672,551 $23,661,569
Capital Appreciation......... 49,738,589 41,535,179
Conservative Growth Lifestyle 21,788,093 20,995,906
Core Bond.................... 74,776,019 60,128,561
High Yield Bond.............. 59,617,272 52,262,619
International Growth II...... 39,772,519 46,969,735
Large Cap Value.............. 75,151,101 55,141,590
Mid Cap Growth............... 59,026,298 62,661,921
Mid Cap Value................ 133,749,485 97,801,907
Moderate Growth Lifestyle.... 45,889,573 41,763,918
Small Cap Growth............. 29,417,019 35,878,287
Small Cap Value.............. 31,950,687 30,591,235
Socially Responsible......... 43,123,392 24,032,628
Strategic Bond............... 66,273,477 44,941,885
The cost of purchases and proceeds from sales of U.S. government securities
was as follows:
Cost of
Securities Proceeds from
Fund Purchased Securities Sold
-------------- ----------- ---------------
Core Bond..... $76,504,159 $59,510,063
Strategic Bond 19,474,377 22,545,904
Note 5 -- Federal Income Taxes
The following tables detail the tax basis of distributions as well as the
components of distributable earnings. The tax basis components of distributable
earnings differ from the amounts reflected in the Statements of Assets and
Liabilities due to temporary book/tax differences primarily arising from wash
sales, post October losses, investments in passive foreign investment
companies, and derivative transactions. Also included in the following tables
are the capital loss carryforwards at August 31, 2004.
The information in the following table is presented on the basis of cost for
federal income tax purposes at August 31, 2004:
Identified
Cost of Gross Gross Net Unrealized
Investments Unrealized Unrealized Appreciation
Fund Owned Appreciation Depreciation (Depreciation)
- ----------------------------- ------------ ------------ ------------ --------------
Aggressive Growth Lifestyle.. $ 33,501,018 $ 1,535,864 $ 1,491,322 $ 44,542
Capital Appreciation......... 43,887,445 2,174,988 3,549,961 (1,374,973)
Conservative Growth Lifestyle 30,728,583 447,531 504,469 (56,938)
Core Bond.................... 70,555,614 987,383 390,650 596,733
High Yield Bond.............. 51,990,937 2,830,044 2,483,043 347,001
International Growth II...... 38,060,510 4,296,700 1,591,669 2,705,031
Large Cap Value.............. 65,790,357 5,652,590 1,442,461 4,210,129
Mid Cap Growth............... 42,764,414 4,127,634 1,756,033 2,371,601
Mid Cap Value................ 179,244,431 24,569,890 11,164,641 13,405,249
Moderate Growth Lifestyle.... 55,901,296 1,494,821 1,119,562 375,259
Money Market II.............. 72,734,832 -- -- --
Small Cap Growth............. 36,999,980 5,481,928 3,739,771 1,742,157
Small Cap Value.............. 62,693,960 10,721,407 2,048,726 8,672,681
Socially Responsible......... 36,459,024 745,738 1,418,962 (673,224)
Strategic Bond............... 76,349,625 3,131,181 1,333,682 1,797,499
NOTES TO FINANCIAL STATEMENTS - CONTINUED 69
The tax character of distributable earnings and distributions paid during the
year ended August 31, 2004 was as follows:
Distributable Earnings Tax Distributions
----------------------------------------- --------------------
Long-term Gains/ Unrealized Long-Term
Ordinary Capital Loss Appreciation Ordinary Capital
Income Carryover (Depreciation) Income Gains
---------- ---------------- -------------- ---------- ---------
Aggressive Growth Lifestyle.. $ 43,765 $ (2,435,427) $ 44,542 $ 295,103 $ --
Capital Appreciation......... -- (14,530,608) (1,374,973) -- --
Conservative Growth Lifestyle 62,164 (314,053) (56,938) 926,203 --
Core Bond.................... 249,290 (50,715) 598,233 3,625,650 414,577
High Yield Bond.............. 649,304 1,082,099 346,579 4,350,004 --
International Growth II...... 152,145 (4,035,206) 2,705,982 507,002 --
Large Cap Value.............. 70,759 2,670,609 4,210,129 724,004 --
Mid Cap Growth............... -- (10,726,842) 2,371,632 -- --
Mid Cap Value................ 5,216,206 13,533,720 13,404,882 190,001 --
Moderate Growth Lifestyle.... 81,903 (1,396,226) 375,259 1,158,503 --
Money Market II.............. 76,921 -- -- 422,780 --
Small Cap Growth............. -- (9,829,883) 1,742,157 -- --
Small Cap Value.............. 341,109 3,471,288 8,672,681 272,003 --
Socially Responsible......... 42,485 (1,112,545) (673,224) 211,004 --
Strategic Bond............... 859,399 1,253,926 1,798,516 3,603,003 538,087
The tax character of distributions paid during the fiscal year ended August
31, 2003 was as follows:
Distributions paid from:
-------------------------------------------
Ordinary Net Long Term Total Taxable
Fund Income Capital Gains Distributions Paid
----------------------------- ---------- ------------- ------------------
Aggressive Growth Lifestyle.. $ 210,024 $-- $ 210,024
Capital Appreciation......... 15,000 -- 15,000
Conservative Growth Lifestyle 555,753 -- 555,753
Core Bond.................... 1,772,964 -- 1,772,964
High Yield Bond.............. 2,710,856 -- 2,710,856
International Growth II...... 469,933 -- 469,933
Large Cap Value.............. 420,981 -- 420,981
Mid Cap Growth............... -- -- --
Mid Cap Value................ 233,002 -- 233,002
Moderate Growth Lifestyle.... 761,188 -- 761,188
Money Market II.............. 643,672 -- 643,672
Small Cap Growth............. -- -- --
Small Cap Value.............. 1,113,062 -- 1,113,062
Socially Responsible......... 89,502 -- 89,502
Strategic Bond............... 2,219,077 -- 2,219,077
As of August 31, 2004, for Federal income tax purposes, the Funds indicated
below have capital loss carryforwards, which expire in the year indicated and
are available to offset future capital gains, if any:
Capital Loss Carryforward
---------------------------------
Fund 2010 2011 2012
----------------------------- ---------- ----------- ----------
Aggressive Growth Lifestyle.. $ 123,029 $ 2,312,398 $ --
Capital Appreciation......... 5,964,379 6,282,529 2,100,734
Conservative Growth Lifestyle -- 314,053 --
Core Bond.................... -- -- --
High Yield Bond.............. -- -- --
International Growth II...... -- 4,006,710 --
Large Cap Value.............. -- -- --
Mid Cap Growth............... 254,203 10,472,639 --
Mid Cap Value................ -- -- --
Moderate Growth Lifestyle.... -- 1,396,226 --
Money Market II.............. -- -- --
Small Cap Growth............. 2,474,123 7,355,760 --
Small Cap Value.............. -- -- --
Socially Responsible......... -- 1,112,545 --
Strategic Bond............... -- -- --
70 NOTES TO FINANCIAL STATEMENTS - CONTINUED
The Fund's indicated below, utilized capital loss carryforwards, which offset
net taxable gains realized in the year ended August 31, 2004.
Capital Loss
Carryforward
Fund Utilized
----------------------------- ------------
Aggressive Growth Lifestyle.. $1,496,919
Capital Appreciation......... --
Conservative Growth Lifestyle 1,415,488
Core Bond.................... --
High Yield Bond.............. 1,853,335
International Growth II...... 3,537,872
Large Cap Value.............. 1,594,451
Mid Cap Growth............... 5,340,251
Mid Cap Value................ 2,448,189
Moderate Growth Lifestyle.... 2,690,396
Money Market II.............. --
Small Cap Growth............. 5,047,194
Small Cap Value.............. 802,595
Socially Responsible......... 545,575
Strategic Bond............... --
Under the current law, capital losses related to securities and foreign
currency realized after October 31 and prior to the Fund's fiscal year end may
be deferred as occurring on the first day of the following year. For the fiscal
year ended August 31, 2004, the Funds elected to defer capital losses as
follows:
Deferred Post-October Deferred Post-October
Fund Capital Loss Currency Loss
----------------------- --------------------- ---------------------
Capital Appreciation... $182,966 $ --
Core Bond.............. 60,184 --
International Growth II -- 28,496
For the period ended August 31, 2004, the following reclassifications arising
from book/tax differences resulted in increases (decreases) to the components
of net assets that were primarily due to net investment losses, treatment of
foreign currency and investments in real estate investment trusts:
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain
(Loss) (Loss) Capital Paid-in
----------------- ----------------- ---------------
Aggressive Growth Lifestyle.. $ -- $ -- $ --
Capital Appreciation......... 46,446 -- (46,446)
Conservative Growth Lifestyle -- -- --
Core Bond.................... 118,895 (118,895) --
High Yield Bond.............. (10,396) 10,396 --
International Growth II...... 16,462 (16,462) --
Large Cap Value.............. -- -- --
Mid Cap Growth............... 166,839 4,924 (171,763)
Mid Cap Value................ 2,928 (2,928) --
Moderate Growth Lifestyle.... -- -- --
Money Market II.............. -- -- --
Small Cap Growth............. 360,802 (15) (360,787)
Small Cap Value.............. -- -- --
Society Responsible.......... (623) 623 --
Strategic Bond............... (89,296) 89,296 --
Note 6 -- Capital Share Transactions
Transactions in capital shares of each Fund were as follows:
Aggressive Growth Lifestyle Capital Appreciation
------------------------------------------------ --------------------------------------------------
For the year ended For the year ended For the year ended For the year ended
August 31, 2004 August 31, 2003 August 31, 2004 August 31, 2003
---------------------- ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
--------- ----------- ---------- ------------ ---------- ------------ ---------- ------------
Shares sold............ 1,176,747 $10,763,997 2,965,863 $ 21,640,948 3,724,699 $ 30,238,195 2,285,673 $ 15,419,910
Reinvested dividends... 31,975 295,103 27,487 210,024 -- -- 2,358 15,000
Shares redeemed........ (945,162) (8,752,172) (2,337,348) (16,882,437) (2,850,788) (23,163,367) (1,781,537) (11,967,390)
--------- ----------- ---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) 263,560 $ 2,306,928 656,002 $ 4,968,535 873,911 $ 7,074,828 506,494 $ 3,467,520
========= =========== ========== ============ ========== ============ ========== ============
NOTES TO FINANCIAL STATEMENTS - CONTINUED 71
Conservative Growth Lifestyle
--------------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
--------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
Shares sold............ 1,203,385 $ 11,828,219 2,188,411 $ 19,290,638
Reinvested dividends... 94,020 926,203 61,966 555,753
Shares redeemed........ (1,119,332) (11,035,212) (1,684,195) (14,732,772)
------------ ------------- ------------ -------------
Net increase (decrease) 178,073 $ 1,719,210 566,182 $ 5,113,619
============ ============= ============ =============
High Yield Bond
--------------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
--------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
Shares sold............ 8,806,620 $ 72,422,427 8,454,739 $ 63,564,855
Reinvested dividends... 531,228 4,350,004 367,969 2,710,856
Shares redeemed........ (8,301,284) (68,318,545) (6,178,146) (46,731,169)
------------ ------------- ------------ -------------
Net increase (decrease) 1,036,564 $ 8,453,886 2,644,562 $ 19,544,542
============ ============= ============ =============
Large Cap Value
--------------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
--------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
Shares sold............ 3,524,338 $ 42,537,038 3,075,002 $ 30,554,582
Reinvested dividends... 60,095 724,004 41,049 420,981
Shares redeemed........ (1,940,475) (23,808,818) (1,768,085) (17,426,122)
------------ ------------- ------------ -------------
Net increase (decrease) 1,643,958 $ 19,452,224 1,347,966 $ 13,549,441
============ ============= ============ =============
Mid Cap Value
--------------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
--------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
Shares sold............ 5,331,688 $ 85,500,721 5,760,943 $ 66,406,586
Reinvested dividends... 11,654 190,001 19,492 233,002
Shares redeemed........ (3,027,915) (49,247,779) (4,130,864) (46,779,351)
------------ ------------- ------------ -------------
Net increase (decrease) 2,315,427 $ 36,442,943 1,649,571 $ 19,860,237
============ ============= ============ =============
Money Market II
--------------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
--------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
Shares sold............ 160,682,029 $ 160,682,029 226,598,759 $ 226,598,759
Reinvested dividends... 422,780 422,780 643,672 643,672
Shares redeemed........ (168,002,319) (168,002,319) (218,313,921) (218,313,921)
------------ ------------- ------------ -------------
Net increase (decrease) (6,897,510) $ (6,897,510) 8,928,510 $ 8,928,510
============ ============= ============ =============
Small Cap Value
--------------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
--------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
Shares sold............ 2,416,279 $ 32,066,801 3,008,871 $ 28,891,499
Reinvested dividends... 20,090 272,003 114,114 1,113,062
Shares redeemed........ (2,254,555) (30,220,228) (2,583,885) (24,411,094)
------------ ------------- ------------ -------------
Net increase (decrease) 181,814 $ 2,118,576 539,100 $ 5,593,467
============ ============= ============ =============
Core Bond
--------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 4,514,242 $ 45,345,195 5,748,688 $ 58,493,116
Reinvested dividends... 405,283 4,040,227 175,237 1,772,964
Shares redeemed........ (4,118,028) (41,237,048) (3,867,618) (39,403,114)
---------- ------------ ---------- ------------
Net increase (decrease) 801,497 $ 8,148,374 2,056,307 $ 20,862,966
========== ============ ========== ============
International Growth II
--------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 3,559,540 $ 36,186,715 6,779,221 $ 56,895,584
Reinvested dividends... 48,439 507,002 53,795 469,933
Shares redeemed........ (4,281,434) (44,215,233) (5,653,002) (47,685,126)
---------- ------------ ---------- ------------
Net increase (decrease) (673,455) $ (7,521,516) 1,180,014 $ 9,680,391
========== ============ ========== ============
Mid Cap Growth
--------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 2,781,319 $ 17,012,498 5,664,363 $ 26,683,279
Reinvested dividends... -- -- -- --
Shares redeemed........ (2,976,051) (18,486,364) (3,727,714) (17,289,783)
---------- ------------ ---------- ------------
Net increase (decrease) (194,732) $ (1,473,866) 1,936,649 $ 9,393,496
========== ============ ========== ============
Moderate Growth Lifestyle
--------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 2,182,155 $ 23,005,265 4,054,801 $ 35,978,063
Reinvested dividends... 109,669 1,158,503 82,867 761,188
Shares redeemed........ (1,777,348) (18,878,194) (3,275,479) (28,817,032)
---------- ------------ ---------- ------------
Net increase (decrease) 514,476 $ 5,285,574 862,189 $ 7,922,219
========== ============ ========== ============
Small Cap Growth
--------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 2,940,363 $ 30,834,015 5,322,885 $ 41,225,306
Reinvested dividends... -- -- -- --
Shares redeemed........ (3,705,150) (39,400,837) (4,146,581) (31,960,214)
---------- ------------ ---------- ------------
Net increase (decrease) (764,787) $ (8,566,822) 1,176,304 $ 9,265,092
========== ============ ========== ============
Socially Responsible
--------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 4,090,678 $ 43,051,389 609,464 $ 5,068,704
Reinvested dividends... 20,419 211,004 10,721 89,502
Shares redeemed........ (2,219,340) (23,381,629) (492,612) (4,053,715)
---------- ------------ ---------- ------------
Net increase (decrease) 1,891,757 $ 19,880,764 127,573 $ 1,104,491
========== ============ ========== ============
72 NOTES TO FINANCIAL STATEMENTS - CONTINUED
Strategic Bond
--------------------------------------------------
For the year ended For the year ended
August 31, 2004 August 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 5,083,807 $ 54,228,473 3,210,130 $ 32,083,742
Reinvested dividends... 391,748 4,141,090 222,875 2,219,077
Shares redeemed........ (2,422,847) (25,850,303) (1,812,087) (17,964,350)
---------- ------------ ---------- ------------
Net increase (decrease) 3,052,708 $ 32,519,260 1,620,918 $ 16,338,469
========== ============ ========== ============
Note 7 -- Expense Reductions
Through expense offset arrangements, resulting from broker commission
recapture, a portion of Mid Cap Value Fund's expenses have been reduced. For
the period ended August 31, 2004, the Mid Cap Value Fund received expense
reductions in the amount of $59,541.
Note 8 -- Investment Concentration
The High Yield Bond Fund's investment in high yield securities, whether rated
or unrated, may be considered speculative and subject to greater market
fluctuations and risk of loss of income and principal than lower-yielding,
higher-rated, fixed-income securities. The risk of loss due to default by the
issuer may be significantly greater for the holders of high yield securities,
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer.
The Core Bond Fund, Money Market II Fund and Strategic Bond Fund invest in
U.S. Government sponsored securities. No assurance can be given that the U.S.
Government will provide support to such U.S. Government sponsored agencies or
instrumentalities in the future since it is not required to do so by law. As a
result of a Fund's concentration in such investments, it may be subject to
risks associated with the U.S. Government. At the end of the period, the Funds
had 47.60%, 41.81% and 8.43%, respectively, of their total net assets invested
in such securities.
Some of the Funds may invest internationally, including in "emerging market''
countries. Emerging markets securities involve risks not typically associated
with investing in securities of issuers in more developed markets. These
investments are subject to various risk factors including market, credit,
exchange rate and sovereign risk. The markets in which these securities trade
can be volatile and at times illiquid. These securities may be denominated in
currencies other than U.S. dollars. While investing internationally may reduce
portfolio risk by increasing the diversification of portfolio investments, the
value of the investment may be affected by fluctuating currency values,
changing local and regional economic, political and social conditions, and
greater market volatility. These risks are primary risks of the International
Growth II Fund and Strategic Bond Fund. The International Growth II Fund had
17.73% and 21.07% of its net assets invested in equity securities domiciled in
the United Kingdom and Japan, respectively. Strategic Bond Fund had 32.32% of
its net assets invested in securities issued by foreign governments.
Note 9 -- Commitments and Contingencies
VC I and VC II have an $85 million committed and a $40 million uncommitted
line of credit with State Street Bank and Trust Company, the Funds' custodian.
Interest is currently payable at the Federal Funds Rate plus 50 basis points on
the committed line and State Street's discretionary bid rate on the uncommitted
line of credit. There is also a commitment fee of 10 basis points per annum for
the daily unused portion of the committed line of credit, which is included in
miscellaneous expenses on the Statement of Operations. For the period ended
August 31, 2004, the following funds had borrowings:
Weighted
Average Average
Days Interest Debt Interest
Outstanding Charges Utilized Rate
----------- -------- ---------- --------
High Yield Bond..... 9 $604 $1,574,838 1.53%
Socially Responsible 5 478 2,220,297 1.55%
As of August 31, 2004, none of the Funds had outstanding borrowings.
Pursuant to the exemptive relief granted by the Securities and Exchange
Commission, the Funds are permitted to participate in an interfund lending
program among investment companies advised by SAAMCo or an affiliate. The
interfund lending program allows the participating portfolios to borrow money
from and lend money to each other for temporary or emergency purposes. An
interfund loan will be made under this facility only if the participating funds
receive a more favorable interest rate than would otherwise be available from a
typical bank for a comparable transaction. For the period ended August 31, 2004
none of the Funds participated in this program.
NOTES TO FINANCIAL STATEMENTS - CONTINUED 73
Note 10 -- Investment Holdings by Country
The following represents the investment holdings by country held by the
International Growth II Fund as a percentage of net assets as of August 31,
2004:
International Growth II Fund
----------------------------
Percentage of
Country Net Assets
----------------------------------------------
Australia........ 0.91%
Belgium.......... 0.52%
Canada........... 1.43%
China............ 0.59%
Denmark.......... 0.80%
Finland.......... 0.04%
France........... 10.76%
Germany.......... 4.06%
Hong Kong........ 0.05%
Ireland ......... 2.01%
Italy............ 2.89%
Japan............ 21.07%
Korea............ 0.88%
Netherlands...... 2.47%
Singapore........ 2.73%
Spain............ 2.15%
Sweden........... 3.11%
Switzerland...... 14.05%
United Kingdom... 17.73%
United States.... 10.63%
-----
Total investments 98.88%
=====
Note 11 -- Subsequent Events
Effective October 11, 2004, AIG Global Investment Corp. will replace Putnam
Investment Management, LLC as the sub-advisor for the International Growth II
Fund. Additionally, International Growth II Fund will have its name changed to
International Small Cap Equity Fund. The Fund's investment objective will
change from capital appreciation to long-term capital appreciation through
equity and equity-related investments in small capitalization companies outside
the United States.
Effective October 20, 2004, AIM Capital Management, Inc. replaced INVESCO
Institutional (N.A.), Inc. as sub-advisor for the Mid Cap Growth Fund.
74 FINANCIAL HIGHLIGHTS
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Aggressive Growth Lifestyle Fund
------------------------------------------------------
Year Ended August 31,
------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period....................... $ 8.37 $ 7.43 $ 8.82 $ 14.89 $ 12.77
------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).............................. 0.08(e) 0.07/(e)/ 0.05/(e)/ 0.18 0.37
Net realized and unrealized gain (loss) on investments
and foreign currencies................................... 0.73 0.94 (1.35) (3.59) 3.31
Net increase from payments by affiliates resulting from
disposal of investments in violation of investment
restrictions............................................. - - - - -
------------------------------------------------------
Total income (loss) from investment operations............ 0.81 1.01 (1.30) (3.41) 3.68
------------------------------------------------------
Distributions:
From net investment income................................ (0.08) (0.07) (0.09) (0.38) (1.09)
From net realized gain on securities...................... - - - (2.28) (0.47)
From return of capital.................................... - - - - -
------------------------------------------------------
Total distributions....................................... (0.08) (0.07) (0.09) (2.66) (1.56)
------------------------------------------------------
Net asset value at end of period............................. $ 9.10 $ 8.37 $ 7.43 $ 8.82 $ 14.89
------------------------------------------------------
TOTAL RETURN/(a)/............................................ 9.66% 13.66% (14.90)% (25.08)% 29.91%
------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/................. 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of expenses to average net assets/(c)/................. 0.34% 0.34% 0.10% 0.10% 0.10%
Ratio of expense reductions to average net assets............ - - - - -
Ratio of net investment income (loss) to average net
assets/(b)/................................................. 0.89% 0.92% 0.62% 0.74% 1.07%
Ratio of net investment income (loss) to average net
assets/(c)/................................................. 0.65% 0.68% 0.62% - -
Portfolio turnover rate...................................... 71% 52% 180% 105% 79%
Number of shares outstanding at end of period (000's)........ 3,683 3,419 2,763 2,136 938
Net assets at the end of period (000's)...................... $33,520 $28,627 $20,522 $18,850 $13,963
Capital Appreciation Fund
-----------------------------------------------------------
Year Ended August 31,
-----------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period....................... $ 7.66 $ 6.71 $ 9.11 $ 17.68 $ 13.96
-----------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).............................. (0.02)/(e)/ -/(e)/ (0.01)/(e)/ (0.02) (0.02)
Net realized and unrealized gain (loss) on investments
and foreign currencies................................... 0.15 0.95 (2.41) (7.88) 4.24
Net increase from payments by affiliates resulting from
disposal of investments in violation of investment
restrictions............................................. - - 0.02 - -
-----------------------------------------------------------
Total income (loss) from investment operations............ 0.13 0.95 (2.40) (7.90) 4.22
-----------------------------------------------------------
Distributions:
From net investment income................................ - - - - -
From net realized gain on securities...................... - - - (0.56) (0.50)
From return of capital.................................... - - - (0.11) -
-----------------------------------------------------------
Total distributions....................................... - - - (0.67) (0.50)
-----------------------------------------------------------
Net asset value at end of period............................. $ 7.79 $ 7.66 $ 6.71 $ 9.11 $ 17.68
-----------------------------------------------------------
TOTAL RETURN/(a)/............................................ 1.70% 14.22% (26.34)%/(d)/ (45.46)% 30.68%
-----------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/................. 0.85% 0.85% 0.85% 0.85% 0.86%
Ratio of expenses to average net assets/(c)/................. 1.19% 1.29% 1.25% 1.08% 1.44%
Ratio of expense reductions to average net assets............ - - - - -
Ratio of net investment income (loss) to average net
assets/(b)/................................................. (0.22)% (0.03)% (0.09)% (0.16)% (0.12)%
Ratio of net investment income (loss) to average net
assets/(c)/................................................. (0.56)% (0.47)% (0.49)% - -
Portfolio turnover rate...................................... 119% 87% 126% 67% 68%
Number of shares outstanding at end of period (000's)........ 5,462 4,588 4,082 3,335 2,035
Net assets at the end of period (000's)...................... $42,544 $35,152 $27,406 $30,397 $35,983
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The Fund's total return increased by 0.11% from reimbursements for losses
realized on the disposal of investments in violation of investment
restrictions.
/(e)/The per share amounts are calculated using the average share method.
FINANCIAL HIGHLIGHTS - CONTINUED 75
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Conservative Growth Lifestyle Fund
-------------------------------------------------------- ------------
Year Ended August 31,
-------------------------------------------------------- ------------
2004 2003 2002 2001 2000 2004
------- ------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............. $ 9.37 $ 8.73 $ 9.47 $ 11.33 $ 11.73 $ 10.02
----------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).................... 0.30/(d)/ 0.21/(d)/ 0.26/(d)/ 0.34 0.46 0.34/(d)/
Net realized and unrealized gain (loss)
on investments and foreign currencies.......... 0.41 0.64 (0.68) (1.09) 1.59 0.22
Net increase from payments by affiliates
resulting from disposal of investments in
violation of investment restrictions........... - - - - - -
----------------------------------------------------------------------
Total income (loss) from investment operations.. 0.71 0.85 (0.42) (0.75) 2.05 0.56
----------------------------------------------------------------------
Distributions:
From net investment income...................... (0.29) (0.21) (0.32) (0.43) (0.92) (0.35)
From net realized gain on securities............ - - - (0.68) (1.53) (0.23)
From return of capital.......................... - - - - - -
----------------------------------------------------------------------
Total distributions............................. (0.29) (0.21) (0.32) (1.11) (2.45) (0.58)
----------------------------------------------------------------------
Net asset value at end of period................... $ 9.79 $ 9.37 $ 8.73 $ 9.47 $ 11.33 $ 10.00
----------------------------------------------------------------------
TOTAL RETURN/(a)/.................................. 7.60% 9.90% (4.62)% (6.76)% 19.33% 5.71%
----------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/....... 0.10% 0.10% 0.10% 0.10% 0.10% 0.77%
Ratio of expenses to average net assets/(c)/....... 0.36% 0.34% 0.10% 0.10% 0.10% 1.07%
Ratio of expense reductions to average net assets.. - - - - - -
Ratio of net investment income (loss) to average
net assets/(b)/................................... 3.01% 2.41% 2.92% 3.28% 2.99% 3.37%
Ratio of net investment income (loss) to average
net assets/(c)/................................... 2.75% 2.17% 2.92% - - 3.07%
Portfolio turnover rate............................ 67% 65% 181% 122% 63% 179%
Number of shares outstanding at end of period
(000's)........................................... 3,130 2,952 2,386 2,062 1,083 7,138
Net assets at the end of period (000's)............ $30,649 $27,652 $20,841 $19,527 $12,268 $71,409
Core Bond Fund
------------------------------------------
Year Ended August 31,
------------------------------------------
2003 2002 2001 2000
------- ------- ------- ------
PER SHARE DATA
Net asset value at beginning of period............. $ 9.95 $ 9.91 $ 9.46 $ 9.58
------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).................... 0.31/(d)/ 0.48/(d)/ 0.53 0.61
Net realized and unrealized gain (loss)
on investments and foreign currencies.......... 0.09 0.09 0.46 (0.12)
Net increase from payments by affiliates
resulting from disposal of investments in
violation of investment restrictions........... - - - -
------------------------------------------
Total income (loss) from investment operations.. 0.40 0.57 0.99 0.49
------------------------------------------
Distributions:
From net investment income...................... (0.33) (0.47) (0.54) (0.61)
From net realized gain on securities............ - (0.06) - -
From return of capital.......................... - - - -
------------------------------------------
Total distributions............................. (0.33) (0.53) (0.54) (0.61)
------------------------------------------
Net asset value at end of period................... $ 10.02 $ 9.95 $ 9.91 $ 9.46
------------------------------------------
TOTAL RETURN/(a)/.................................. 4.08% 5.98% 10.81% 5.31%
------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/....... 0.77% 0.77% 0.77% 0.80%
Ratio of expenses to average net assets/(c)/....... 1.12% 1.14% 0.99% 1.42%
Ratio of expense reductions to average net assets.. - - - -
Ratio of net investment income (loss) to average
net assets/(b)/................................... 3.13% 4.94% 5.66% 6.39%
Ratio of net investment income (loss) to average
net assets/(c)/................................... 2.77% 4.57% - -
Portfolio turnover rate............................ 197% 248% 341% 476%
Number of shares outstanding at end of period
(000's)........................................... 6,336 4,280 3,254 573
Net assets at the end of period (000's)............ $63,519 $42,568 $32,250 $5,420
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
76 FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
High Yield Bond Fund
--------------------------------------------------------
Year Ended August 31,
--------------------------------------------------------
2004 2003 2002 2001 2000
-------- ------- ------- ------- ------
PER SHARE DATA
Net asset value at beginning of period................................. $ 7.73 $ 6.82 $ 8.16 $ 9.28 $ 9.69
---------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)........................................ 0.69/(d)/ 0.69/(d)/ 0.74/(d)/ 0.88 0.96
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 0.54 0.90 (1.35) (1.12) (0.41)
Net increase from payments by affiliates resulting from disposal
of investments in violation of investment restrictions............. - - - - -
---------------------------------------------------------
Total income (loss) from investment operations...................... 1.23 1.59 (0.61) (0.24) 0.55
---------------------------------------------------------
Distributions:
From net investment income.......................................... (0.68) (0.68) (0.73) (0.88) (0.96)
From net realized gain on securities................................ - - - - -
From return of capital.............................................. - - - - -
---------------------------------------------------------
Total distributions................................................. (0.68) (0.68) (0.73) (0.88) (0.96)
---------------------------------------------------------
Net asset value at end of period....................................... $ 8.28 $ 7.73 $ 6.82 $ 8.16 $ 9.28
---------------------------------------------------------
TOTAL RETURN/(a)/...................................................... 16.27% 24.25% (7.96)% (2.20)% 6.01%
---------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of expenses to average net assets/(c)/........................... 1.31%// 1.42% 1.51% 1.19% 1.62%
Ratio of expense reductions to average net assets...................... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/....... 8.45% 9.69% 9.80% 10.64% 10.21%
Ratio of net investment income (loss) to average net assets/(c)/....... 8.12% 9.26% 9.28% - -
Portfolio turnover rate................................................ 110% 124% 118% 83% 90%
Number of shares outstanding at end of period (000's).................. 6,470 5,433 2,789 2,095 628
Net assets at the end of period (000's)................................ $53,562 $41,986 $19,026 $17,102 $5,830
International Growth II Fund
--------------------------------------------------------
Year Ended August 31,
--------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period................................. $ 9.07 $ 8.67 $ 9.97 $ 14.79 $ 11.22
---------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)........................................ 0.11/(d)/ 0.11/(d)/ 0.07/(d)/ 0.14 0.05
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 1.29 0.40 (1.36) (4.17) 4.16
Net increase from payments by affiliates resulting from disposal
of investments in violation of investment restrictions............. - - - - -
---------------------------------------------------------
Total income (loss) from investment operations...................... 1.40 0.51 (1.29) (4.03) 4.21
---------------------------------------------------------
Distributions:
From net investment income.......................................... (0.11) (0.11) (0.01) (0.03) (0.20)
From net realized gain on securities................................ - - - (0.76) (0.44)
From return of capital.............................................. - - - - -
---------------------------------------------------------
Total distributions................................................. (0.11) (0.11) (0.01) (0.79) (0.64)
---------------------------------------------------------
Net asset value at end of period....................................... $ 10.36 $ 9.07 $ 8.67 $ 9.97 $ 14.79
---------------------------------------------------------
TOTAL RETURN/(a)/...................................................... 15.42% 5.94% (12.91)% (28.14)% 37.31%
---------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 1.00% 1.01% 1.01% 1.03% 1.15%
Ratio of expenses to average net assets/(c)/........................... 1.62% 1.71% 1.88% 1.50% 1.81%
Ratio of expense reductions to average net assets...................... - - 0.02% - -
Ratio of net investment income (loss) to average net assets/(b)/....... 1.09% 1.34% 0.76% 0.93% 0.31%
Ratio of net investment income (loss) to average net assets/(c)/....... 0.47% 0.65% (0.11)% - -
Portfolio turnover rate................................................ 85% 70% 139% 63% 81%
Number of shares outstanding at end of period (000's).................. 3,980 4,654 3,474 2,844 792
Net assets at the end of period (000's)................................ $41,227 $42,206 $30,114 $28,357 $11,715
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
FINANCIAL HIGHLIGHTS - CONTINUED 77
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Large Cap Value Fund
-------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period....................... $ 10.97 $ 10.22 $ 11.10 $ 11.60 $ 12.85
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).............................. 0.15/(d)/ 0.13/(d)/ 0.10/(d)/ 0.10 0.13
Net realized and unrealized gain (loss) on investments
and foreign currencies................................... 1.21 0.74 (0.88) (0.40) 0.65
Net increase from payments by affiliates resulting from
disposal of investments in violation of investment
restrictions............................................. - - - - -
-------------------------------------------------------------
Total income (loss) from investment operations............ 1.36 0.87 (0.78) (0.30) 0.78
-------------------------------------------------------------
Distributions:
From net investment income................................ (0.15) (0.12) (0.10) (0.09) (0.13)
From net realized gain on securities...................... - - - (0.07) (1.90)
From return of capital.................................... - - - (0.04) -
-------------------------------------------------------------
Total distributions....................................... (0.15) (0.12) (0.10) (0.20) (2.03)
-------------------------------------------------------------
Net asset value at end of period............................. $ 12.18 $ 10.97 $ 10.22 $ 11.10 $ 11.60
-------------------------------------------------------------
TOTAL RETURN/(a)/............................................ 12.42%/(e)/ 8.59% (7.08)% (2.66)% 7.35%
-------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/................. 0.81% 0.81% 0.81% 0.81% 0.81%
Ratio of expenses to average net assets/(c)/................. 1.08% 1.19% 1.29% 1.14% 1.41%
Ratio of expense reductions to average net assets............ - - - - -
Ratio of net investment income (loss) to average net
assets/(b)/................................................. 1.26% 1.28% 0.98% 0.98% 1.17%
Ratio of net investment income (loss) to average net
assets/(c)/................................................. 0.99% 0.90% 0.50% - -
Portfolio turnover rate...................................... 97% 67% 85% 106% 142%
Number of shares outstanding at end of period (000's)........ 5,735 4,091 2,743 1,846 955
Net assets at the end of period (000's)...................... $69,831 $44,883 $28,030 $20,482 $11,084
Mid Cap Growth Fund
---------------------------------------------------------------
Year Ended August 31,
---------------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period....................... $ 5.70 $ 4.44 $ 6.20 $ 16.30 $ 12.45
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).............................. (0.03)/(d)/ (0.02)/(d)/ (0.03)/(d)/ 0.01 (0.02)
Net realized and unrealized gain (loss) on investments
and foreign currencies................................... 0.27 1.28 (1.73) (6.74) 5.32
Net increase from payments by affiliates resulting from
disposal of investments in violation of investment
restrictions............................................. - - - - -
---------------------------------------------------------------
Total income (loss) from investment operations............ 0.24 1.26 (1.76) (6.73) 5.30
---------------------------------------------------------------
Distributions:
From net investment income................................ - - - (0.02) -
From net realized gain on securities...................... - - - (3.27) (1.45)
From return of capital.................................... - - - (0.08) -
---------------------------------------------------------------
Total distributions....................................... - - - (3.37) (1.45)
---------------------------------------------------------------
Net asset value at end of period............................. $ 5.94 $ 5.70 $ 4.44 $ 6.20 $ 16.30
---------------------------------------------------------------
TOTAL RETURN/(a)/............................................ 4.21% 28.38% (28.39)% (46.99)% 46.25%
---------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/................. 0.85% 0.85% 0.85% 0.83% 0.79%
Ratio of expenses to average net assets/(c)/................. 1.40% 1.51% 1.59% 1.38% 1.55%
Ratio of expense reductions to average net assets............ - - - - -
Ratio of net investment income (loss) to average net
assets/(b)/................................................. (0.41)% (0.41)% (0.45)% (0.14)% (0.20)%
Ratio of net investment income (loss) to average net
assets/(c)/................................................. (0.96)% (1.07)% (1.19)% - -
Portfolio turnover rate...................................... 123% 99% 69% 114% 51%
Number of shares outstanding at end of period (000's)........ 7,487 7,682 5,745 3,754 783
Net assets at the end of period (000's)...................... $44,446 $43,785 $25,527 $23,277 $12,770
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursement, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/The Fund's performance figure increased by 0.09% from a gain realized on
the disposal of investments in violation of investment restrictions (see
Note 3).
78 FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Mid Cap Value Fund
-------------------------------------------------
Year Ended August 31,
-------------------------------------------------
2004 2003 2002 2001
-------- -------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.................................. $ 14.10 $ 11.75 $ 13.54 $ 13.54
-------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)......................................... 0.02/(d)/ 0.02/(d)/ 0.04/(d)/ 0.07
Net realized and unrealized gain (loss) on investments
and foreign currencies.............................................. 2.08 2.36 (1.36) 0.56
Net increase from payments by affiliates resulting from disposal of
investments in violation of investment restrictions................. - - - -
-------------------------------------------------
Total income (loss) from investment operations....................... 2.10 2.38 (1.32) 0.63
-------------------------------------------------
Distributions:
From net investment income........................................... (0.02) (0.03) (0.04) (0.07)
From net realized gain on securities................................. - - (0.43) (0.56)
From return of capital............................................... - - - -
-------------------------------------------------
Total distributions.................................................. (0.02) (0.03) (0.47) (0.63)
-------------------------------------------------
Net asset value at end of period........................................ $ 16.18 $ 14.10 $ 11.75 $ 13.54
-------------------------------------------------
TOTAL RETURN/(a)/....................................................... 14.86% 20.28% (10.07)% 4.74%
-------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................ 1.05% 1.05% 1.05% 1.05%
Ratio of expenses to average net assets/(c)/............................ 1.25% 1.32% 1.35% 1.26%
Ratio of expense reductions to average net assets....................... 0.03% 0.04% 0.07% -
Ratio of net investment income (loss) to
average net assets/(b)/................................................ 0.09% 0.11% 0.29% 0.65%
Ratio of net investment income (loss) to
average net assets/(c)/................................................ (0.11)% (0.16)% (0.01)% -
Portfolio turnover rate................................................. 57% 48% 156% 215%
Number of shares outstanding at end of period (000's)................... 11,902 9,587 7,937 4,981
Net assets at the end of period (000's)................................. $192,607 $135,190 $93,245 $67,460
Mid Cap Value Fund
---------------------
Year Ended August 31,
---------------------
2000
-------
PER SHARE DATA
Net asset value at beginning of period.................................. $ 13.82
--------
Income (loss) from investment operations:
Net investment income (loss)......................................... 0.05
Net realized and unrealized gain (loss) on investments
and foreign currencies.............................................. 3.13
Net increase from payments by affiliates resulting from disposal of
investments in violation of investment restrictions................. -
--------
Total income (loss) from investment operations....................... 3.18
--------
Distributions:
From net investment income........................................... (0.05)
From net realized gain on securities................................. (3.41)
From return of capital............................................... -
--------
Total distributions.................................................. (3.46)
--------
Net asset value at end of period........................................ $ 13.54
--------
TOTAL RETURN/(a)/....................................................... 29.31%
--------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................ 1.05%
Ratio of expenses to average net assets/(c)/............................ 1.64%
Ratio of expense reductions to average net assets....................... -
Ratio of net investment income (loss) to
average net assets/(b)/................................................ 0.41%
Ratio of net investment income (loss) to
average net assets/(c)/................................................ -
Portfolio turnover rate................................................. 166%
Number of shares outstanding at end of period (000's)................... 1,286
Net assets at the end of period (000's)................................. $17,411
Moderate Growth Lifestyle Fund
------------------------------------------------
Year Ended August 31,
------------------------------------------------
2004 2003 2002 2001
------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.................................. $ 9.80 $ 8.93 $ 10.02 $ 13.42
------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)......................................... 0.22/(d)/ 0.17/(d)/ 0.19/(d)/ 0.30
Net realized and unrealized gain (loss) on investments
and foreign currencies.............................................. 0.66 0.87 (1.04) (2.11)
Net increase from payments by affiliates resulting from disposal of
investments in violation of investment restrictions................. - - - -
------------------------------------------------
Total income (loss) from investment operations....................... 0.88 1.04 (0.85) (1.81)
------------------------------------------------
Distributions:
From net investment income........................................... (0.22) (0.17) (0.24) (0.45)
From net realized gain on securities................................. - - - (1.14)
From return of capital............................................... - - - -
------------------------------------------------
Total distributions.................................................. (0.22) (0.17) (0.24) (1.59)
------------------------------------------------
Net asset value at end of period........................................ $ 10.46 $ 9.80 $ 8.93 $ 10.02
------------------------------------------------
TOTAL RETURN/(a)/....................................................... 8.96% 11.84% (8.62)% (14.11)%
------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................ 0.10% 0.10% 0.10% 0.10%
Ratio of expenses to average net assets/(c)/............................ 0.32% 0.32% 0.10% 0.10%
Ratio of expense reductions to average net assets....................... - - - -
Ratio of net investment income (loss) to
average net assets/(b)/................................................ 2.12% 1.94% 2.03% 2.23%
Ratio of net investment income (loss) to
average net assets/(c)/................................................ 1.89% 1.72% 2.03% -
Portfolio turnover rate................................................. 76% 65% 184% 109%
Number of shares outstanding at end of period (000's)................... 5,379 4,865 4,003 3,194
Net assets at the end of period (000's)................................. $56,244 $47,692 $35,747 $31,993
Moderate Growth Lifestyle Fund
------------------------------
Year Ended August 31,
------------------------------
2000
-------
PER SHARE DATA
Net asset value at beginning of period.................................. $ 12.24
--------
Income (loss) from investment operations:
Net investment income (loss)......................................... 0.43
Net realized and unrealized gain (loss) on investments
and foreign currencies.............................................. 2.28
Net increase from payments by affiliates resulting from disposal of
investments in violation of investment restrictions................. -
--------
Total income (loss) from investment operations....................... 2.71
--------
Distributions:
From net investment income........................................... (1.10)
From net realized gain on securities................................. (0.43)
From return of capital............................................... -
--------
Total distributions.................................................. (1.53)
--------
Net asset value at end of period........................................ $ 13.42
--------
TOTAL RETURN/(a)/....................................................... 23.29%
--------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................ 0.10%
Ratio of expenses to average net assets/(c)/............................ 0.10%
Ratio of expense reductions to average net assets....................... -
Ratio of net investment income (loss) to
average net assets/(b)/................................................ 2.00%
Ratio of net investment income (loss) to
average net assets/(c)/................................................ -
Portfolio turnover rate................................................. 72%
Number of shares outstanding at end of period (000's)................... 1,209
Net assets at the end of period (000's)................................. $16,222
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursement, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
FINANCIAL HIGHLIGHTS - CONTINUED 79
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Money Market II Fund
-------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).............................. 0.01/(d)/ 0.01/(d)/ 0.02/(d)/ 0.05 0.06
Net realized and unrealized gain (loss) on investments
and foreign currencies................................... - - - - -
Net increase from payments by affiliates resulting from
disposal of investments in violation of investment
restrictions............................................. - - - - -
-------------------------------------------------------
Total income (loss) from investment operations............ 0.01 0.01 0.02 0.05 0.06
-------------------------------------------------------
Distributions:
From net investment income................................ (0.01) (0.01) (0.02) (0.05) (0.06)
From net realized gain on securities...................... - - - - -
From return of capital.................................... - - - - -
-------------------------------------------------------
Total distributions....................................... (0.01) (0.01) (0.02) (0.05) (0.06)
-------------------------------------------------------
Net asset value at end of period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------
TOTAL RETURN/(a)/............................................ 0.59% 0.83% 1.63% 5.07% 5.67%
-------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/................. 0.55% 0.56% 0.56% 0.56% 0.56%
Ratio of expenses to average net assets/(c)/................. 0.80% 0.85% 0.83% 0.71% 1.10%
Ratio of expense reduction to average net assets............. - - - - -
Ratio of net investment income (loss) to average net
assets/(b)/................................................. 0.59% 0.82% 1.61% 4.72% 5.65%
Ratio of net investment income (loss) to average net
assets/(c)/................................................. 0.34% 0.53% 1.34% - -
Portfolio turnover rate...................................... N/A N/A N/A N/A N/A
Number of shares outstanding at end of period (000's)........ 72,901 79,798 70,870 51,979 25,427
Net assets at the end of period (000's)...................... $72,901 $79,798 $70,870 $51,979 $25,427
Small Cap Growth Fund
-----------------------------------------------------------
Year Ended August 31,
-----------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period....................... $ 9.70 $ 7.40 $ 10.69 $ 23.24 $ 14.86
-----------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss).............................. (0.09)/(d)/ (0.05)/(d)/ (0.07)/(d)/ (0.05) (0.10)
Net realized and unrealized gain (loss) on investments
and foreign currencies................................... 0.59 2.35 (3.22) (10.38) 10.05
Net increase from payments by affiliates resulting from
disposal of investments in violation of investment
restrictions............................................. - - - - -
-----------------------------------------------------------
Total income (loss) from investment operations............ 0.50 2.30 (3.29) (10.43) 9.95
-----------------------------------------------------------
Distributions:
From net investment income................................ - - - - -
From net realized gain on securities...................... - - - (2.12) (1.57)
From return of capital.................................... - - - - -
-----------------------------------------------------------
Total distributions....................................... - - - (2.12) (1.57)
-----------------------------------------------------------
Net asset value at end of period............................. $ 10.20 $ 9.70 $ 7.40 $ 10.69 $ 23.24
-----------------------------------------------------------
TOTAL RETURN/(a)/............................................ 5.15% 31.08% (30.78)% (46.44)% 68.91%
-----------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/................. 1.16% 1.16% 1.16% 1.16% 1.16%
Ratio of expenses to average net assets/(c)/................. 1.46% 1.57% 1.58% 1.40% 1.71%
Ratio of expense reduction to average net assets............. - - - - -
Ratio of net investment income (loss) to average net
assets/(b)/................................................. (0.84)% (0.66)% (0.76)% (0.49)% (0.64)%
Ratio of net investment income (loss) to average net
assets/(c)/................................................. (1.14)% (1.06)% (1.18)% - -
Portfolio turnover rate...................................... 66% 37% 153% 111% 133%
Number of shares outstanding at end of period (000's)........ 3,800 4,565 3,389 2,574 1,463
Net assets at the end of period (000's)...................... $38,755 $44,290 $25,072 $27,523 $34,000
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursements; but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
80 FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Small Cap Value Fund
------------------------------------------------------
Year Ended August 31,
------------------------------------------------------
2004// 2003 2002 2001 2000
------- ------- ------- ------- ------
PER SHARE DATA
Net asset value at beginning of period.................................. $ 11.70 $ 10.04 $ 11.36 $ 11.73 $10.48
------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)......................................... 0.04/(d)/ 0.07/(d)/ 0.10/(d)/ 0.13 0.15
Net realized and unrealized gain (loss) on investments and foreign
currencies.......................................................... 1.99 1.84 (1.03) 1.09 1.60
Net increase from payments by affiliates resulting from disposal of
investments in violation of investment restrictions................. - - - - -
------------------------------------------------------
Total income (loss) from investment operations....................... 2.03 1.91 (0.93) 1.22 1.75
------------------------------------------------------
Distributions:
From net investment income........................................... (0.05) (0.09) (0.10) (0.13) (0.15)
From net realized gain on securities................................. - (0.16) (0.29) (1.46) (0.35)
From return of capital............................................... - - - - -
------------------------------------------------------
Total distributions.................................................. (0.05) (0.25) (0.39) (1.59) (0.50)
------------------------------------------------------
Net asset value at end of period........................................ $ 13.68 $ 11.70 $ 10.04 $ 11.36 $11.73
------------------------------------------------------
TOTAL RETURN/(a)/....................................................... 17.37% 19.47% (8.47)% 11.99% 17.53%
------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................ 0.95% 0.95% 0.95% 0.95% 0.98%
Ratio of expenses to average net assets/(c)/............................ 1.28% 1.40% 1.53% 1.55% 1.69%
Ratio of expense reductions to average net assets....................... - - 0.01% - -
Ratio of net investment income loss to average net assets/(b)/.......... 0.34% 0.72% 0.91% 1.18% 1.36%
Ratio of net investment income (loss) to average net assets/(c)/........ 0.01% 0.26% 0.33% - -
Portfolio turnover rate................................................. 47% 42% 166% 100% 97%
Number of shares outstanding at end of period (000's)................... 5,217 5,035 4,496 2,677 462
Net assets at the end of period (000's)................................. $71,371 $58,923 $45,124 $30,403 $5,421
Socially Responsible Fund
--------------------------------------------------
Year Ended August 31,
--------------------------------------------------
2004 2003 2002 2001
------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.................................. $ 9.42 $ 8.44 $ 10.46 $ 14.16
--------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)......................................... 0.09/(d)/ 0.09/(d)/ 0.08/(d)/ 0.13
Net realized and unrealized gain (loss) on investments and foreign
currencies.......................................................... 0.82 0.96 (2.02) (3.56)
Net increase from payments by affiliates resulting from disposal of
investments in violation of investment restrictions................. - - - -
--------------------------------------------------
Total income (loss) from investment operations....................... 0.91 1.05 (1.94) (3.43)
--------------------------------------------------
Distributions:
From net investment income........................................... (0.08) (0.07) (0.08) (0.13)
From net realized gain on securities................................. - - - (0.14)
From return of capital............................................... - - - -
--------------------------------------------------
Total distributions.................................................. (0.08) (0.07) (0.08) (0.27)
--------------------------------------------------
Net asset value at end of period........................................ $ 10.25 $ 9.42 $ 8.44 $ 10.46
--------------------------------------------------
TOTAL RETURN/(a)/....................................................... 9.70%/(e)/ 12.58%/(e)/ (18.65)% (24.43)%
--------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................ 0.56% 0.56% 0.56% 0.56%
Ratio of expenses to average net assets/(c)/............................ 0.96% 1.30% 1.19% 0.76%
Ratio of expense reductions to average net assets....................... - - - -
Ratio of net investment income loss to average net assets/(b)/.......... 0.91% 1.11% 0.82% 1.07%
Ratio of net investment income (loss) to average net assets/(c)/........ 0.51% 0.37% 0.19% -
Portfolio turnover rate................................................. 117% 96% 25% 58%
Number of shares outstanding at end of period (000's)................... 3,205 1,314 1,186 1,111
Net assets at the end of period (000's)................................. $32,850 $12,380 $10,008 $11,612
Socially Responsible Fund
-------------------------
Year Ended August 31,
-------------------------
2000
-------
PER SHARE DATA
Net asset value at beginning of period.................................. $ 12.88
--------
Income (loss) from investment operations:
Net investment income (loss)......................................... 0.13
Net realized and unrealized gain (loss) on investments and foreign
currencies.......................................................... 1.74
Net increase from payments by affiliates resulting from disposal of
investments in violation of investment restrictions................. -
--------
Total income (loss) from investment operations....................... 1.87
--------
Distributions:
From net investment income........................................... (0.13)
From net realized gain on securities................................. (0.46)
From return of capital............................................... -
--------
Total distributions.................................................. (0.59)
--------
Net asset value at end of period........................................ $ 14.16
--------
TOTAL RETURN/(a)/....................................................... 14.77%
--------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................ 0.56%
Ratio of expenses to average net assets/(c)/............................ 1.15%
Ratio of expense reductions to average net assets....................... -
Ratio of net investment income loss to average net assets/(b)/.......... 0.99%
Ratio of net investment income (loss) to average net assets/(c)/........ -
Portfolio turnover rate................................................. 40%
Number of shares outstanding at end of period (000's)................... 1,009
Net assets at the end of period (000's)................................. $14,276
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/The Fund's performance figure was increased by less than 0.01% from
reimbursements for losses realized on the disposal of investments in
violation of investment restrictions (see Note 3).
FINANCIAL HIGHLIGHTS - CONTINUED 81
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Strategic Bond Fund
------------------------------------------------------
Year Ended August 31,
------------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- ------
PER SHARE DATA
Net asset value at beginning of period.................. $ 10.28 $ 9.31 $ 9.60 $ 9.82 $ 9.86
------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)......................... 0.57/(d)/ 0.66/(d)/ 0.62/(d)/ 0.77 0.81
Net realized and unrealized gain (loss) on
investments and foreign currencies.................. 0.46 0.95 (0.32) (0.23) (0.01)
Net increase from payments by affiliates resulting
from disposal of investments in violation of
investment restrictions............................. - - - - -
------------------------------------------------------
Total income (loss) from investment operations....... 1.03 1.61 0.30 0.54 0.80
------------------------------------------------------
Distributions:
From net investment income........................... (0.56) (0.64) (0.59) (0.76) (0.84)
From net realized gain on securities................. (0.09) - - - -
From return of capital............................... - - - - -
------------------------------------------------------
Total distributions.................................. (0.65) (0.64) (0.59) (0.76) (0.84)
------------------------------------------------------
Net asset value at end of period........................ $ 10.66 $ 10.28 $ 9.31 $ 9.60 $ 9.82
------------------------------------------------------
TOTAL RETURN/(a)/....................................... 10.30% 17.73% 3.13% 5.90% 8.43%
------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............ 0.88% 0.89% 0.89% 0.89% 0.89%
Ratio of expenses to average net assets/(c)/............ 1.22% 1.52% 1.58% 1.09% 1.51%
Ratio of expense reductions to average net assets....... - - - - -
Ratio of net investment income loss to average net
assets/(b)/............................................ 5.54% 6.79% 6.64% 8.68% 8.27%
Ratio of net investment income (loss) to average net
assets/(c)/............................................ 5.20% 6.17% 5.95% - -
Portfolio turnover rate................................. 127% 63% 109% 69% 100%
Number of shares outstanding at end of period (000's)... 7,484 4,431 2,810 1,574 598
Net assets at the end of period (000's)................. $79,793 $45,565 $26,167 $15,113 $5,870
/(a)/Includes, if any, expense reimbursements and expense reductions. The
effect of fees and charges incurred at the separate account level are not
reflected in these performance figures. If such expenses had been
included, the total return would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
82 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of and Board of Trustees of
VALIC Company II:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of VALIC Company II (comprised of
Aggressive Growth Lifestyle Fund, Capital Appreciation Fund, Conservative
Growth Lifestyle Fund, Core Bond Fund, High Yield Bond Fund, International
Growth II Fund, Large Cap Value Fund, Mid Cap Growth Fund, Mid Cap Value Fund,
Moderate Growth Lifestyle Fund, Money Market II Fund, Small Cap Growth Fund,
Small Cap Value Fund, Socially Responsible Fund, and Strategic Bond Fund) as of
August 31, 2004, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of August 31, 2004, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting VALIC Company II as of August 31, 2004,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
October 20, 2004
August 31, 2004 TRUSTEE INFORMATION (Unaudited) 83
Number of
Funds in
Position Term of Office Fund Complex
Name, Birth Date Held With and Length of Overseen by
and Address* VALIC Complex Time Served(4) Principal Occupations During Past Five Years Trustee(2)
- ----------------------------------------------------------------------------------------------------------------------
Independent Trustees
Dr. Judith L. Craven Trustee 1998- Retired. 73
DOB: October 6, 1945 Present
- ----------------------------------------------------------------------------------------------------------------------
William F. Devin Trustee 2001- Retired. 73
DOB: December 30, 1938 Present
- ----------------------------------------------------------------------------------------------------------------------
Dr. Timothy J. Ebner Trustee 1998- Professor and Head, Department of 36
DOB: July 15, 1949 Present Neuroscience, and Visscher Chair of
Physiology, University of Minnesota
(1999-Present). Formerly, Director,
Graduate Program in Neuroscience,
University of Minnesota (1995-1999);
Professor of Neurosurgery, University of
Minnesota (1980-1999); Consultant to
EMPI Inc. (1994-1995); and Medtronic
Inc. (1997-1998).
- ----------------------------------------------------------------------------------------------------------------------
Judge Gustavo E. Gonzales, Jr. Trustee 1998- Municipal Court Judge, Dallas, Texas 36
DOB: July 27, 1940 Present (1995-Present).
- ----------------------------------------------------------------------------------------------------------------------
Dr. Norman Hackerman Trustee 1998- President Emeritus, Rice University, 36
DOB: March 2, 1912 Present Houston, Texas (1985-Present).
- ----------------------------------------------------------------------------------------------------------------------
Dr. John Wm. Lancaster Trustee 1998- Pastor Emeritus and Director of Planned 36
DOB: December 15, 1923 Present Giving, First Presbyterian Church
(1997-Present).
- ----------------------------------------------------------------------------------------------------------------------
Kenneth J. Lavery Trustee 2001- Vice President of Massachusetts Capital 36
DOB: December 30, 1949 Present Resources Co. (1982-Present).
- ----------------------------------------------------------------------------------------------------------------------
Ben H. Love Trustee 1998- Retired. 36
DOB: September 26, 1930 Present
- ----------------------------------------------------------------------------------------------------------------------
Dr. John E. Maupin, Jr. Trustee 1998- President, Meharry Medical College, 36
DOB: October 28, 1946 Present Nashville, Tennessee (1994-Present).
- ----------------------------------------------------------------------------------------------------------------------
Name, Birth Date Other Directorships
and Address* Held by Trustee(3)
- -------------------------------------------------------------
Independent Trustees
Dr. Judith L. Craven Director, A.G. Belo
DOB: October 6, 1945 Corp., a media company
(1992-Present); Director
SYSCO Corp., a food
marketing and distribution
company (1996-Present);
Director, Luby's, Inc., a
restaurant chain (1998-
Present); Director, University
of Texas Board of Regents
(2001-Present).
- -------------------------------------------------------------
William F. Devin Member, Board of Governors,
DOB: December 30, 1938 Boston Stock Exchange (1985-
Present).
- -------------------------------------------------------------
Dr. Timothy J. Ebner None.
DOB: July 15, 1949
- -------------------------------------------------------------
Judge Gustavo E. Gonzales, Jr. None.
DOB: July 27, 1940
- -------------------------------------------------------------
Dr. Norman Hackerman Chairman--Scientific Advisory
DOB: March 2, 1912 Board for The Robert A. Welch
Foundation (1983-Present).
- -------------------------------------------------------------
Dr. John Wm. Lancaster None.
DOB: December 15, 1923
- -------------------------------------------------------------
Kenneth J. Lavery Director, Board of Overseers,
DOB: December 30, 1949 Newton Wellesley Hospital
(1996-Present).
- -------------------------------------------------------------
Ben H. Love None.
DOB: September 26, 1930
- -------------------------------------------------------------
Dr. John E. Maupin, Jr. Director, Monarch Dental
DOB: October 28, 1946 Corp. (1997-Present);
Director, Pinnacle Financial
Partners, Inc. (2000-Present).
- -------------------------------------------------------------
84 TRUSTEE INFORMATION (Unaudited) - CONTINUED August 31, 2004
Number of
Funds in
Position Term of Office Fund Complex
Name, Birth Date Held With and Length of Overseen by
and Address* VALIC Complex Time Served(4) Principal Occupations During Past Five Years Trustee(2)
- ---------------------------------------------------------------------------------------------------------------
Interested Trustees
Paige T. Davis(1) Trustee 2002- Formerly, Regional Manager, VALIC 36
DOB: July 4, 1943 Present (1976-2001).
- ---------------------------------------------------------------------------------------------------------------
Peter A. Harbeck(1) Trustee 2001- President, CEO and Director, AIG 82
DOB: January 23, 1954 Present SunAmerica Asset Management Corp.
("SAAMCo.") (August 1995-Present);
Director, AIG SunAmerica Capital
Services, Inc. ("SACS") (August 1993-
Present).
- ---------------------------------------------------------------------------------------------------------------
Name, Birth Date Other Directorships
and Address* Held by Trustee(3)
- ------------------------------------------------------
Interested Trustees
Paige T. Davis(1) Director, Maryland African
DOB: July 4, 1943 American Museum
Corp. (1999-Present);
Director, Maryland Racing
Commission (1996-Present);
Director, Morgan State
University Foundation, Inc.
(1998-Present); Director,
Maryland Health and Higher
Education Facilities Authority
(1987-Present).
- ------------------------------------------------------
Peter A. Harbeck(1) None.
DOB: January 23, 1954
- ------------------------------------------------------
* The business address for each Trustee is, 2929 Allen Parkway, Houston, TX,
77019.
(1)Interested Trustee, as defined within the Investment Company Act of 1940
(the "1940 Act"), because of current or former employment with VALIC (Mr.
Davis) or SAAMCo (Mr. Harbeck), companies affiliated with VALIC.
(2)The "Fund Complex" consists of all registered investment company portfolios
for which VALIC or an affiliated person of VALIC serves as investment
adviser or business manager. The "Fund Complex" includes the SunAmerica
Equity Funds (9 funds), SunAmerica Income Funds (6 funds), SunAmerica Money
Market Funds, Inc. (2 funds), SunAmerica Senior Floating Rate Fund, Inc. (1
fund), AIG Series Trust (4 funds), SunAmerica Focused Series, Inc. (15
portfolios), Anchor Series Trust (9 portfolios), Seasons Series Trust (19
portfolios), SunAmerica Series Trust (32 portfolios), VALIC Company I
(21 funds), and VALIC Company II (15 funds).
(3)Directorships of companies required to report to the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (i.e. "public
companies") or other investment companies registered under the 1940 Act
other than those listed under the preceding column.
(4)Trustees serve until their successors are duly elected and qualified.
Additional Information concerning the Trustee is contained in the Statement
of Additional Information and is available without charge by calling
1-800-448-2542.
August 31, 2004 VALIC COMPANY II - SHAREHOLDER TAX INFORMATION (Unaudited) 85
Certain tax information regarding VALIC Company II is required to be provided
to the shareholders based upon each Fund's income and capital gain
distributions for the year ended August 31, 2004.
During the year ended August 31, 2004, the Funds paid the following dividends
along with the percentage of ordinary income dividends that qualified for the
70% dividends received deductions for corporations:
Net Net Qualifying % for the
Total Ordinary Long-term Foreign Foreign 70% Dividends
Fund Dividends Income Capital Gains Tax Credit* Source Income Received Deduction
- ---- ---------- ---------- ------------- ----------- ------------- --------------------
Aggressive Growth Lifestyle.. $ 295,103 $ 295,103 $ - $ - $ - 27.80%
Conservative Growth Lifestyle 926,203 926,203 - - - 7.10%
Core Bond.................... 4,040,227 3,625,650 414,577 - - -
High Yield Bond.............. 4,350,004 4,350,004 - - - 0.86%
International Growth II...... 631,419 631,419 - 124,417 887,349 2.15%
Large Cap Value.............. 724,004 724,004 - - - 100.00%
Mid Cap Value................ 190,001 190,001 - - - 25.52%
Moderate Growth Lifestyle.... 1,158,503 1,158,503 - - - 11.53%
Money Market II.............. 422,780 422,780 - - - -
Small Cap Value.............. 272,003 272,003 - - - 100.00%
Socially Responsible......... 211,004 211,004 - - - 100.00%
Strategic Bond............... 4,141,087 3,603,000 538,087 - - 0.14%
The information and distributions reported herein may differ from the
information and distributions taxable to the shareholders for the calendar year
ending December 31, 2004, which will be made available after the end of the
calendar year.
*The Funds make an election under the Internal Revenue Code Section 853 to pass
through foreign taxes paid to shareholders.
86 VALIC COMPANY II - COMPARISONS: FUND VS. INDEXES
In the following pages, we have included graphs that compare the Fund's
performance with certain market indices. These graphs show the hypothetical
growth of a $10,000 investment in each Fund versus the same $10,000 investment
in comparable market indices. Descriptions of these market indices are provided
below the individual graphs. It is important to note that the VCII Funds are
professionally managed mutual funds while the indices are not available for
investment and are unmanaged.
Please note that the graphs and tables that accompany the following investment
comments include all fund expenses, but do not reflect the insurance company
expenses associated with the variable annuity contract. All dividends are
assumed to be reinvested. No expenses are deducted from the performance of the
indices.
Investments in stocks and bonds are subject to risk, including stock market and
interest rate fluctuations. Investments in non-U.S. stocks are subject to
additional risks, including political and social instability, differing
securities regulations and accounting standards, and limited public
information. Mortgage-backed securities are subject to prepayment, which can
result in reinvestment of principal at lower yields. Money market instruments
generally offer stability and income, but an investment in these securities,
like investments in other portfolios, are not guaranteed by the U.S. government
or any other federal government entity.
AGGRESSIVE GROWTH LIFESTYLE FUND - COMPARISON: FUND VS. 87
INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp. (Prior to January 1, 2002,
American General Investment, L.P. served as sub-adviser)
For the year ended August 31, 2004, the equity markets and the bond markets
both had very impressive years with the Dow Jones Wilshire 5000 Total Market
Index returning +11.49%, EAFE returning 22.64% and the Lehman Aggregate
returning +6.13%. Over the twelve-month period ending August 31, 2004, the Fund
returned +9.66% versus a return of +11.45% for the S&P 500(R) Index, the Fund's
benchmark, and 13.71% for the blended index. This underperformance can
primarily be attributed to the underlying equity funds trailing the asset class
returns of the Dow Jones Wilshire 5000 & EAFE. Two of the larger equity
holdings, the VC II International Growth II Fund and the VC II Capital
Appreciation Fund, underperformed their respective asset class returns. These
two funds represented over 50% of the portfolio as of August 31, 2004. On a
positive note, the largest holding, the VC II Large Cap Value Fund, returned
+13.33%, gross of fees, outpacing the Dow Jones Wilshire 5000 by +1.84%.
[CHART]
Growth of $10,000 Investment
Aggressive Growth
Lifestyle Fund S & P 500/(R)/ Index* Blended Index**
----------------- --------------------- ---------------
9/98 $10,000 $10,000 $10,000
8/99 12,638 13,057 12,778
8/00 16,418 15,188 14,850
8/01 12,300 11,484 11,600
8/02 10,453 9,417 10,009
8/03 11,897 10,553 11,265
8/04 13,046 11,762 12,810
For the year ended August 31, 2004, the Aggressive Growth Lifestyle Fund
returned 9.66% compared to 11.45% for the S&P 500(R) Index and 13.71% for the
Blended Index.
*The S&P 500(R) Index is an index of the stocks of 500 major large-cap U.S.
corporations, chosen for market size, liquidity, and industry group
representation. It is a market-value weighted index, with each stock's
percentage in the Index in proportion to its market value.
**The blended index of Aggressive Growth Lifestyle Fund consists of a
combination of Dow Jones Wilshire 5000 Total Market Index ("Wilshire") (65%),
Morgan Stanley Capital International Europe, Australasia, Far East ("EAFE")
Index (25%), and Lehman Brothers U.S. Aggregate Index (10%).
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
9.66% 0.64% 4.58%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees and surrender charges.
88 CAPITAL APPRECIATION FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with Credit Suisse Asset Management, LLC
The Fund had a gain of 1.70% in the twelve months ending August 31, 2004,
trailing the Russell 1000(R) Growth Index, which had an increase of 5.36%.
The investment environment was favorable in the first half of the period, but
conditions deteriorated amid heightened geopolitical concerns, persistently
high oil prices and the perception that US interest rates would rise from
historical lows. These factors clouded the corporate earnings outlook, causing
investors to take profits after a strong equity rally in 2003. Growth stocks
underperformed value stocks, mostly due to a sharp selloff in the technology
sector, which comprises a larger share of the growth universe. In the end, the
broad rise in US equities supported the Fund's absolute performance. The fund
and its benchmark tended to lag value-oriented stock portfolios in the period.
The Fund's sector allocation is a byproduct of our bottom-up stock selection
process. The Fund was underweighted in the technology sector during much of the
period, including in the final months when technology stocks struggled. This
position was a large sector contributor to the Fund's performance relative to
its benchmark, as technology was the poorest performing sector in the Russell
1000(R) Growth Index. The Fund's overweighting in energy was also beneficial,
while its underweighting in the financial services sector, which gained 9.5% in
the benchmark, hindered its relative performance.
Top contributors to the Fund's performance on the stock level included Yahoo
and Ebay, representing 2.4% and 2.7% of the Fund, respectively, as of August
31, 2004. We increased our exposure to these "new media" companies during the
period in the belief that they might begin to capture more advertising dollars,
and the theme was beneficial. Tyco, representing 3.2% of the Fund as of August
31, 2004, an ongoing turnaround story, was another good performer for the Fund.
XTO Energy, representing 1.8% of the Fund as of August 31, 2004, a natural gas
producer, had a solid return as well. Our overweightings in these four stocks
helped performance. Stocks that detracted from performance vs. the Fund's
benchmark included Pfizer, a position we eliminated late in the period based on
our concerns over its product pipeline. IAC/InterActive, representing 1.6% of
the Fund as of August 31, 2004, an interactive commerce company, was another
underperformer. Relative performance was hampered by not owning Johnson &
Johnson and Qualcomm, which both rallied. Combined, the two stocks accounted
for approximately 4.5% of the benchmark as of the end of the period.
[CHART]
Growth of $10,000 Investment
Capital Appreciation Russell 1000/R/
Fund Growth Index*
--------------------- ------------
9/98 $10,000 $10,000
8/99 13,811 13,726
8/00 18,048 18,318
8/01 9,843 10,016
8/02 7,239 7,795
8/03 8,281 8,893
8/04 8,422 9,369
For the year ended August 31, 2004, the Capital Appreciation Fund returned
1.70% compared to 5.36% for the Russell 1000(R) Growth Index.
*The Russell 1000 Growth(R) Index is constructed to provide a comprehensive and
unbiased barometer of the large-cap growth market. Based on ongoing empirical
research of investment manager behavior, the methodology used to determine
growth probability approximates the aggregate large-cap growth manager's
opportunity set.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
1.70% -9.42% -2.85%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
CONSERVATIVE GROWTH LIFESTYLE FUND - COMPARISON: FUND VS. 89
INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp. (Prior to January 1, 2002,
American General Investment, L.P. served as sub-adviser)
For the year ended August 31, 2004, the equity markets and the bond markets
both had very impressive years with the Dow Jones Wilshire 5000 Total Market
Index returning +11.49%, EAFE returning +22.64% and the Lehman Aggregate
returning +6.13%. Over the twelve-month period ending August 31, 2004, the
Conservative Growth Lifestyle Fund returned +7.60% versus a return of +11.45%
for the S&P 500(R) Index, the Fund's benchmark, and +9.78 for the blended
index. This underperformance can be attributed to the underlying equity funds
trailing the asset class return of the Dow Jones Wilshire 5000 & EAFE. Two of
the larger equity holdings, the VC II International Growth II Fund and the VC
II Capital Appreciation Fund, underperformed their respective asset class
returns. These two Funds represented 28% of the portfolio at the end of the
fiscal year. On a positive note, the two largest holdings, the VC II Large Cap
Value Fund and the VC II Core Bond Fund, outperformed their asset class
benchmarks by +1.84% and +.40%, gross of fees, respectively.
[CHART]
Growth of $10,000 Investment
Conservative Growth
Lifestyle Fund S & P 500/(R)/ Index* Blended Index**
------------------- --------------------- ---------------
9/98 $10,000 $10,000 $10,000
8/99 11,599 13,057 11,423
8/00 13,841 15,188 12,922
8/01 12,906 11,484 11,906
8/02 12,309 9,417 11,391
8/03 13,528 10,553 12,487
8/04 14,557 11,762 13,708
For the year ended August 31, 2004, the Conservative Growth Lifestyle Fund
returned 7.60% compared to 11.45% for the S&P 500(R) Index and 9.78% for the
Blended Index.
*The S&P 500(R) Index is an index of the stocks of 500 major large-cap U.S.
corporations, chosen for market size, liquidity, and industry group
representation. It is a market-value weighted index, with each stock's
percentage in the Index in proportion to its market value.
**The blended index of the Fund consists of a combination of the Dow Jones
Wilshire 5000 Total Market Index ("Wilshire") (42%), Morgan Stanley Capital
International(R) Europe, Australasia, Far East ("EAFE") Index (8%), and
Lehman Brothers U.S. Aggregate Index (50%).
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
7.60% 4.65% 6.52%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
90 CORE BOND FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp. (Prior to January 1, 2002,
American General Investment, L.P. served as sub-adviser)
For the annual period ending August 31, 2004, the Core Bond Fund returned
5.71%. The Fund underperformed its benchmark, the Lehman Brothers Aggregate
Bond Index, which returned 6.13% for the twelve-month period.
Market conditions, as one might expect, have an important influence on the
Fund's performance versus its benchmark. The past year has been witness to an
excellent environment for high yield bonds; benign inflation, a steep yield
curve and an improving fundamental picture have all contributed to strong
excess returns. The Fund's yield advantage and overweight in high yield bonds
over the longer term benefited returns versus the benchmark.
Sector selection was a marginal drag on performance. Among those sectors,
industrial and finance companies performed the worst. The Fund's allocation to
mortgage backed securities was beneficial to performance. The increasing
compression on a spread basis among sectors made it increasingly difficult to
successfully add alpha on a consistent basis in this sub-sector of performance.
Security selection was a primary driver of performance for the 12 month period.
Three names that added to the performance of the Fund were Georgia Pacific,
Citigroup and Proctor and Gamble bonds. This performance sub-component
continues to be a key source of our returns.
An overweight in credit was maintained throughout the period. Positions were
increased in the high yield asset class in the first quarter of 2004, as
favorable conditions for continued outperformance were ascertained. Credit
positions were bolstered in the third quarter due to technical conditions. U.S.
Agency investments were reduced in the second quarter due to anticipated event
risk surrounding accounting issues at FHLMC and FNMA.
[CHART]
Growth of $10,000 Investment
Lehman Brothers
Core Bond Fund Aggregate Bond Index*
-------------- --------------------
9/98 $10,000 $10,000
8/99 9,983 9,958
8/00 10,513 10,709
8/01 11,649 12,033
8/02 12,334 13,009
8/03 12,836 13,576
8/04 13,569 14,408
For the year ended August 31, 2004, the Core Bond Fund returned 5.71% compared
to 6.13% for the Lehman Brothers Aggregate Bond Index.
*The Lehman Brothers Aggregate Bond Index is an unmanaged index that is
composed of securities from Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index, and the Asset-Backed Securities Index.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
5.71% 6.33% 5.27%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
HIGH YIELD BOND FUND - COMPARISON: FUND VS. INDEX 91
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp. (Prior to January 1, 2002,
American General Investment, L.P. served as sub-adviser)
For the year ended August 31, 2004, the High Yield Fund returned 16.27%
compared to its benchmark, the Citigroup High Yield Market Index return of
14.34%. The combination of low interest rates, low default rates and a growing
economy formed a solid backdrop for the high yield market over the past 12
months. The yield on the 10-year Treasury note ranged from 3.68% to 4.87%
during the period, while averaging 4.29%. The economy grew at a low-single
digit pace and default rates, as measured by Moody's, have dropped to 3.8% from
a peak of over 10%. As a result of these factors, investors have been willing
to take more risk, so our strategy of investing in higher risk lower rated
credits contributed positively to the Fund.
Underweights in automotive and restaurants and an overweight in the electric
industry detracted from performance. However an underweight in media
(non-cable), lodging, healthcare and environment were positive contributors.
Security selection was the primary driver of performance with particularly
strong security selection in wireless telecommunications, media cable,
pharmaceuticals and transport services. Specific names include Charter
Communications, Elan, Atlas Air, IPCS and IWO Holdings which each contributed
to the Fund's outperformance of its benchmark.
[CHART]
Growth of $10,000 Investment
High Yield Citigroup High Yield
Bond Fund Market Index*
---------- --------------------
9/98 $10,000 $10,000
8/99 10,540 10,513
8/00 11,173 10,655
8/01 10,927 10,674
8/02 10,060 9,766
8/03 12,481 12,392
8/04 14,512 14,170
For the year ended August 31, 2004, the High Yield Bond Fund returned 16.27% as
compared to 14.34% for the Citigroup High Yield Market Index.
*The Citigroup High Yield Market Index captures the performance of below
investment-grade debt issued by corporations domiciled in the United States or
Canada.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
16.27% 6.61% 6.47%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
92 INTERNATIONAL GROWTH II FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with Putnam Investment Management, LLC
For the annual period ended August 31, 2004, the International Growth II Fund
returned 15.42% underperforming its benchmark, the MSCI EAFE Index, which
returned 22.64%. The Fund's underperformance was largely the result of
unfavorable stock selection in the financial and communications services
sectors. An underweight allocation to the strongest performing sector
(utilities) coupled with an overweight to the weakest performing sector
(technology) also detracted from performance results over the past year.
The last months of 2003 and the beginning of 2004 continued a challenging
period for valuation-oriented investment processes such as ours that favor
companies with strong upside potential, especially in terms of future cash
flow. The rally among stocks of largely unprofitable, debt-burdened companies
was the single most important investment theme of 2003, and the biggest
detractor from the Fund's annual performance. While markets are currently
experiencing a change in leadership as large- and mega-cap stocks once again
outpace the market, relative performance over the full year period was hampered
most by last year's rally.
Over the past year, stock selection was especially strong in the technology and
consumer staples sectors. While the Fund's overweight to the technology sector
worked against us during the period as technology stocks lagged the broader
market, our investments in companies like Ericsson added positive performance.
The financial sector was a primary area of underperformance, as a few key
portfolio holdings in Europe underperformed and weighed on results. This was
notable in the insurance sector as our investments in Swiss Re and ING Group
lagged. Stock selection was also weak in the communications services sector,
where two of our primary wireless companies trailed the market.
In country terms, stock selection was weakest in Japan, followed by the United
Kingdom. Japanese mobile phone market leader NTT DoCoMo was the single greatest
detractor from performance. The stock was severely punished despite an
attractive valuation, a dominant position in the Japanese mobile phone market,
and minimal exposure to overseas markets and currencies. Yet another strong
Japanese company, Canon, was our second-biggest Japanese detractor. Canon
remains a top holding in the Fund due to its high quality, shareholder friendly
management team, market dominance in its digital cameras, printers and copier
business lines, and attractive valuation resulting from strong cash flow. Our
investment in HSBC (U.K.) earlier in the period was also a top detractor from
results.
While strengthening international currencies proved beneficial to both index
and Fund returns, our positions vis-a-vis the index detracted overall. This was
most evident in Europe, where average underweights to Continental Europe and
the United Kingdom detracted as the Euro and British Pound appreciated versus
the U.S. dollar. Overweights to the Swiss Franc and emerging-market currencies
also detracted from results.
[CHART]
Growth of $10,000 Investment
International
Growth II Fund MSCI EAFE Index*
--------------- ----------------
9/98 $10,000 $10,000
8/99 11,911 13,213
8/00 16,355 14,475
8/01 11,752 10,950
8/02 10,234 9,313
8/03 10,842 10,161
8/04 12,514 12,462
For the year ended August 31, 2004, the International Growth II Fund returned
15.42% as compared to 22.64% for the MSCI EAFE Index.
*The Morgan Stanley Capital International, Europe, Australasia, and the Far
East Index (MSCI EAFE Index) is comprised of 21 Morgan Stanley Capital
International country indices and measures the performance of approximately
1,000 large-cap stocks.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
15.42% 0.99% 3.85%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
LARGE CAP VALUE FUND - COMPARISON: FUND VS. INDEX 93
MANAGEMENT OVERVIEW
A discussion with SSgA Funds Management, Inc.
The Large Cap Value Fund returned 12.42% for the twelve-month period ended
August 31, 2004, compared to the Russell 1000(R) Value Index, which returned
17.52%. During the twelve-month period ended August 31, 2004, low quality
stocks that were expensive on a price-to-free cash flow basis tended to
outperform quality stocks. Our investment process incorporates perspectives on
valuation, quality and sentiment. Specifically, we seek to own high quality
stocks with strong cash flow available to sustain future growth, as well as
those that are inexpensive on a price-to-earnings basis.
Our sector exposures relative to the benchmark are a function of stock
selection. Poor stock selection among technology and consumer discretionary
names has led to the Fund's underperformance for the past year. Atmel Corp.
(-28%) and Avnet Inc. (-35%) were two semiconductor names that detracted from
performance. Atmel declined after some analysts forecasted lower chip prices as
a result of lighter demand. Also dampening performance were high tech
manufacturers Scientific Atlanta (-20%) and Motorola Inc. Scientific Atlanta
was overweighted when the stock dropped after failing to meet analysts' 2/nd/
quarter estimates. The Fund also was hurt by not owning Motorola, which gained
+72%. Overweights to Blockbuster (-24%) and Cendant Corp. (-12%) led to the
Fund's breakdown in the consumer discretionary sector. In the case of
Blockbuster, the world's largest video store chain declined after Viacom Inc.
announced its intention to sell its 80% stake in Blockbuster. While not
sufficient to overcome the Fund's losses, materials and energy stocks added
value. Oil companies Amerada Hess Corp., Occidental Petroleum Corp. and Sunoco
benefited from increased oil prices. Overweight positions to these companies
resulted in positive contributions.
[CHART]
Growth of $10,000 Investment
Large Cap Russell 1000/R/
Value Fund Value Index*
---------- ---------------
9/98 $10,000 $10,000
8/99 12,126 12,244
8/00 13,018 12,753
8/01 12,672 12,610
8/02 11,786 10,954
8/03 12,798 12,227
8/04 14,388 14,369
For the year ended August 31, 2004, the Large Cap Value Fund returned 12.42% as
compared to 17.52% for the Russell 1000(R) Value Index.
*The Russell 1000(R) Value Index is constructed to provide a comprehensive and
unbiased barometer of the large-cap value market. Based on ongoing empirical
research of investment manager behavior, the methodology used to determine
growth probability approximates the aggregate large-cap value manager's
opportunity set.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
12.42% 3.48% 6.31%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
94 MID CAP GROWTH FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with INVESCO Institutional (NA), Inc.
The Mid Cap Growth Fund returned 4.21% for the twelve-month period ended August
31, 2004, compared to the Russell MidCap Growth(R) Index, which returned 7.46%.
The Fund underperformed its benchmark during the period primarily due to stock
selection in the Health Care sector, specifically in the biotechnology
industry. Gilead Sciences, Inc., a biopharmaceutical company that discovers,
develops and commercializes therapeutics to advance the care of patients
suffering from life-threatening diseases worldwide, negatively impacted the
Fund. In addition, an overweight position and stock selection in the
Information Technology sector contributed to negative performance relative to
the benchmark. Stock picks in the software industry, specifically Novell, Inc.,
a provider of business solutions that work across multiple platforms and are
designed to secure and empower the networked world, generated most of the
negative performance relative to the benchmark in the Information Technology
sector. Underweight positions in the Consumer Staples sector and the Materials
sector also contributed to negative performance relative to the benchmark.
The most positive impact on performance relative to the benchmark came from the
Industrials sector during the period. Within this sector, Fastenal Company, a
company engaged in the wholesale distribution of industrial and construction
supplies, generated positive performance in the trading companies and
distributors industry. Stock selection in the Consumer Discretionary sector and
the Energy sector also contributed to relative performance. The largest
contributor to absolute and relative performance during the period was Symantec
Corp., a provider of software, appliances and services designed to help
individuals, small and mid-sized businesses and large enterprises secure and
manage their information technology (IT) infrastructure.
At the end of the period, the Fund was overweight in the Energy, Financials,
Industrials and Telecommunications sectors and underweight in the Consumer
Staples, Health Care, and Materials sectors compared to the benchmark.
[CHART]
Growth of $10,000 Investment
Mid Cap Growth Russell Midcap/R/
Fund Growth Index*
-------------- ------------------
9/98 $10,000 $10,000
8/99 11,636 13,692
8/00 17,017 22,891
8/01 9,020 12,580
8/02 6,460 9,639
8/03 8,293 12,568
8/04 8,642 13,506
For the year ended August 31, 2004, the Mid Cap Growth Fund returned 4.21% as
compared to 7.46% for the Russell Midcap(R) Growth Index.
*The Russell Midcap(R) Growth Index is constructed to provide a comprehensive
and unbiased barometer of the mid-cap growth market. Based on ongoing
empirical research of investment manager behavior, the methodology used to
determine growth probability approximates the aggregate mid-cap growth
manager's opportunity set.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
4.21% -5.78% -2.43%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
MID CAP VALUE FUND - COMPARISON: FUND VS. INDEX 95
MANAGEMENT OVERVIEW
A discussion with Wellington Management Company, LLP.
The Mid Cap Value Fund managed by Wellington Management, LLP started out the
fiscal year with strong absolute performance numbers, posting double digit
appreciation in the first fiscal quarter alone. During the second half of the
fiscal year, the market seemed to lack a strong desire to move in either
direction. Overall, the Fund finished with solid gains (+14.86%), but
under-performed its benchmark, the Russell 2500(R) Value Index (+19.89%),
during the 12-month period ended August 31, 2004.
Security selection, which was negative in seven of ten sectors, was the primary
driver of the underperformance, relative to the benchmark. The Fund's absolute
performance was driven primarily by gains in utilities, materials, energy, and
consumer staples. In terms of individual stocks, IMC Global, TXU Corp, XTO
Energy, Rinker Group, and Foot Locker were the largest contributors to absolute
performance.
On a relative basis, stock selection in the financials, industrials, and
information technology sectors detracted the most from performance. Bally Total
Fitness, Converium Holdings, and Fairchild Semiconductor were the largest
individual detractors from absolute returns.
The fiscal year began with a sustained economic recovery, but with slowed
momentum. The Fund emphasized cyclicals during the year to benefit from
improving manufacturing, by overweighting materials, industrials, and energy.
The Fund had the most significant underweight position in financials due to our
limited exposure to REITs, which didn't have the fundamentals to support the
premium at which they were trading.
The Mid Cap Value Fund style seeks to add value through bottom-up,
fundamentally driven security selection. The approach employs a contrarian
approach to stock selection, favoring securities that appear to be temporarily
misunderstood or undervalued in the marketplace.
[CHART]
Growth of $10,000 Investment
Mid Cap Russell 2500/R/
Value Fund Value Index*
---------- -------------
9/98 $10,000 $10,000
8/99 13,560 11,202
8/00 17,534 12,633
8/01 18,365 14,481
8/02 16,502 13,934
8/03 19,865 16,911
8/04 22,818 20,275
For the year ended August 31, 2004, the Mid Cap Value Fund returned 14.86% as
compared to 19.89% for the Russell 2500(R) Value Index.
*The Russell 2500(R) Value Index is constructed to provide a comprehensive and
unbiased barometer of the small to mid-cap value market. Based on ongoing
empirical research of investment manager behavior, the methodology used to
determine value probability approximates the aggregate small to mid-cap value
manager's opportunity set.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
14.86% 10.97% 14.89%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
96 MODERATE GROWTH LIFESTYLE FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp. (Prior to January 1, 2002,
American General Investment, L.P. served as sub-adviser)
For the year ended August 31, 2004, the equity markets and the bond markets
both had very impressive years with the Dow Jones Wilshire 5000 Total Market
Index returning +11.49%, EAFE returning +22.64% and the Lehman Aggregate
returning +6.13%. Over the twelve months ending August 31, 2004, the Moderate
Growth Lifestyle Fund returned +8.96% versus +11.45% for the S&P 500(R) Index,
the Fund's benchmark, and +11.59% for the blended index. This underperformance
can be attributed to the underlying equity funds trailing the asset class
return of the Dow Jones Wilshire 5000 & EAFE. Two of the larger equity
holdings, the VC II International Growth II Fund and the VC II Capital
Appreciation Fund, underperformed their respective asset class returns. These
two funds represented 41% of the portfolio as of August 31, 2004. On a positive
note, the two largest holdings, the VC II Large Cap Value Fund and the VC II
Core Bond Fund, outperformed their asset class benchmarks by +1.84% and + .40%,
gross of expenses, respectively.
[CHART]
Growth of $10,000 Investment
Moderate Growth
Lifestyle Fund Blended Index** S & P 500/(R)/ Index*
--------------- --------------- ---------------------
9/98 $10,000 $10,000 $10,000
8/99 12,039 12,075 13,057
8/00 14,843 13,869 15,188
8/01 12,748 11,773 11,484
8/02 11,650 10,703 9,417
8/03 13,029 11,907 10,553
8/04 14,197 13,287 11,762
For the year ended August 31, 2004, the Moderate Growth Lifestyle Fund returned
8.96% as compared to 11.45% for the S&P 500(R) Index and 11.59% for the Blended
Index.
*The S&P 500(R) Index is an index of the stocks of 500 major large-cap U.S.
corporations, chosen for market size, liquidity, and industry group
representation. It is a market-value weighted index, with each stock's
percentage in the Index in proportion to its market value.
**The blended index of the Fund consists of a combination of the Dow Jones
Wilshire 5000 Total Market Index ("Wilshire") (55%), Morgan Stanley Capital
International(R) Europe, Australasia, Far East ("EAFE") (15%) Index, and
Lehman Brothers U.S. Aggregate Index (30%).
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
8.96% 3.35% 6.07%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
MONEY MARKET II FUND - COMPARISON: FUND VS. INDEX 97
MANAGEMENT OVERVIEW
A discussion with AIG SunAmerica Asset Management Corp.
Throughout most of the fiscal year the Federal Open Market Committee ("FOMC")
held short-term rates steady at 1.00%. As the economy strengthened, the FOMC
removed its deflationary bias and focused on the employment situation, more
specifically the lack of job creation.
The Labor Department's non-farm payroll survey began to show net job creation
in September of 2003, peaking in March of 2004 with the addition of over
350,000 new hires. This acceleration in job growth prompted the FOMC to begin
increasing the federal funds rate, albeit at a measured pace. The FOMC raised
the federal funds rate by 25 basis points at their June and August meetings,
bringing their target rate to 1.50%.
Sector selection had little impact on the portfolio. Instead value was added
through active management of the portfolio's duration. During the second half
of the reporting period, we reduced the Fund's weighted average to maturity in
order to take advantage of rising short-term interest rates.
98 SMALL CAP GROWTH FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with Franklin Advisers, Inc.
In aggregate, the US stock market ended the past year with positive returns,
although performance throughout the year was volatile. The first half of the
reporting period was characterized by strong equity market gains, driven by a
rapidly growing U.S. economy and better than expected profit results. Third
quarter 2003 GDP grew 8.2%, and this coupled with improving profits and growing
consumer confidence helped lead the markets higher. However, investors grew
more cautious early in 2004 when GDP and job statistics came in below
expectations. As well, geopolitical tensions, including the war in Iraq, record
high oil prices, and fears of rising interest rates weighed heavily on the
markets. After broad declines from April through mid-May, markets turned around
on positive economic news in June, just to reverse back in July and August
amidst earnings disappointments, particularly from technology companies, rising
energy prices, and mixed economic data.
For the one-year period ended August 31, 2004, the Small Cap Growth Fund
returned 5.15% outperforming the Russell 2000(R) Growth Index's return of
3.38%. The Fund's performance relative to the index was positively impacted by
the strong stock selection in electronic technology, process industries, energy
minerals and transportation sectors. The positive performance was partially
offset by our weak relative performance of selected investments in technology
services and health technology, including the biotechnology industry.
Our philosophy is to invest in small cap stocks that present the best trade-off
between growth opportunity, business and financial risk, and valuation. We
focus on innovative, rapidly growing companies in a variety of industries. We
search for companies with identifiable growth drivers, such as new product
development, leverage to a change in the economy, or secular industry growth.
We look for companies with solid balance sheets, having the ability to invest
in future growth and gain market share, and strong operating leverage, or the
ability to increase profit margins as sales grow.
[CHART]
Growth of $10,000 Investment
Small Cap Russell 2000/R/
Growth Fund Growth Index*
----------- ---------------
9/98 $10,000 $10,000
8/99 13,831 13,072
8/00 23,362 18,181
8/01 12,512 11,828
8/02 8,661 8,750
8/03 11,353 11,804
8/04 11,938 12,203
For the year ended August 31, 2004, the Small Cap Growth Fund returned 5.15% as
compared to 3.38% for the Russell 2000(R) Growth Index.
*The Russell 2000(R) Growth Index is constructed to provide a comprehensive and
unbiased barometer of the small-cap growth market. Based on ongoing empirical
research of investment manager behavior, the methodology used to determine
growth probability approximates the aggregate small-cap growth manager's
opportunity set.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
5.15% -2.90% 3.03%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
SMALL CAP VALUE FUND - COMPARISON: FUND VS. INDEX 99
MANAGEMENT OVERVIEW
A discussion with Banc One Investment Advisors Corp.
The Fund and the benchmark benefited from an upward trend in the overall stock
market in the year ended August 31, 2004. A recovery in the economy gave a
boost to overall corporate earnings, thus fueling a stock market advance that
pushed the Fund's benchmark, the Russell 2000(R) Value Index up by 19.49% over
the year ended August 31, 2004 versus the Fund's return of 17.37%.
Sector selection added value in the past year. Overweights specifically in
consumer cyclicals, transportation and energy helped the Fund's performance.
The Fund was hurt most notably by an under weighting in the REIT sector.
Security selection was a negative for the Fund in the year ended August 31,
2004. More sectors were hurt by security selection than were helped. The top
four stocks that helped the Fund in terms of contribution were Ashland, Brush
Engineered Materials, Stein Mart, and CyberOptics. On the negative side, the
three specific securities that hurt the Fund the most were Advanced Fiber
Communications, Health Net, and Lattice Semiconductor.
[CHART]
Growth of $10,000 Investment
Small Cap Russell 2000/R/
Value Fund Value Index*
---------- ---------------
9/98 $10,000 $10,000
8/99 10,361 10,834
8/00 12,176 12,318
8/01 13,636 14,540
8/02 12,469 13,726
8/03 14,912 16,976
8/04 17,502 20,286
For the year ended August 31, 2004, the Small Cap Value Fund returned 17.37% as
compared to 19.49% for the Russell 2000(R) Value Index.
*The Russell 2000(R) Value Index is constructed to provide a comprehensive and
unbiased barometer of the small-cap value market. Based on ongoing empirical
research of investment manager behavior, the methodology used to determine
value probability approximates the aggregate small-cap value manager's
opportunity set.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
17.37% 11.06% 9.88%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
100 SOCIALLY RESPONSIBLE FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp. (Prior to January 1, 2002,
American General Investment, L.P. served as sub-adviser)
For the year ended August 31, 2004, the Socially Responsible Fund posted a
return of 9.70%, while the S&P 500(R) Index had a return of 11.45%. A portion
of the underperformance of -1.75% can be attributed to sector weightings, in
particular, the Energy and Utility sectors. The underweighting of the energy
and utility sectors, stemming from the social mandate, cost the fund
approximately -1.00%. Once again, stock selection was a positive as Motorola,
Proctor & Gamble and EBay helped offset some of the sector bias. Large cash
flows into the Fund is another reason the Fund's performance lagged the
benchmark. These large cash flows created larger than expected cash positions,
which then created a cash drag.
[CHART]
Growth of $10,000 Investment
Socially
Responsible Fund S & P 500/(R)/ Index*
---------------- ---------------------
9/98 $10,000 $10,000
8/99 12,783 13,057
8/00 14,672 15,188
8/01 11,087 11,484
8/02 9,019 9,417
8/03 10,153 10,553
8/04 11,138 11,762
For the year ended August 31, 2004, the Socially Responsible Fund returned
9.70% as compared to 11.45% for the S&P 500(R) Index.
*The S&P 500(R) Index is an index of the stocks of 500 major large-cap U.S.
corporations, chosen for market size, liquidity, and industry group
representation. It is a market-value weighted index, with each stock's
percentage in the Index in proportion to its market value.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
9.70% -2.72% 1.83%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
STRATEGIC BOND FUND - COMPARISON: FUND VS. INDEX 101
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp. (Prior to January 1, 2002,
American General Investment, L.P. served as sub-adviser)
For the annual period ending August 31, 2004, the Strategic Bond Fund returned
10.30%. The Fund outperformed its benchmark, the Lehman Brothers Aggregate Bond
Index, which returned 6.13% for the twelve-month period.
Market conditions, as one might expect, have an important influence on the
Fund's performance versus its benchmark. The past year has been witness to an
excellent environment for high yield and emerging market debt; benign
inflation, a steep yield curve and an improving fundamental picture have all
contributed to strong excess returns.
Sector selection is a primary driver of returns for the Strategic Bond Fund.
Relative overweights in the high yield, emerging markets and non-U.S. dollar
asset classes all proved beneficial to outperformance. The positive credit
environment of stable to improving fundamentals, good technicals and lower
volatility, have all bolstered the performance of these non-traditional asset
classes. Non-U.S. dollar performance was realized by the weakness of the U.S.
Dollar, which suffered over the past 12 months most notably versus the Euro.
During the period, positions in emerging markets were reduced in favor of
investment grade bonds to realize gains and protect against increased
volatility in the asset class. High yield positions were also reduced just
prior to the end of the period as valuations reached attractive sale levels in
some issues.
As of August 31, 2004, the Fund's assets were allocated in the following
percentage ranges: 36% high yield bonds; 24% emerging market debt; 24%
investment grade debt; 9% in non-U.S. dollar debt issued by developed countries
and 7% in cash.
[CHART]
Growth of $10,000 Investment
Strategic Bond Lehman Brothers
Fund Aggregate Bond Index*
-------------- --------------------
9/98 $10,000 $10,000
8/99 10,409 9,958
8/00 11,286 10,709
8/01 11,951 12,033
8/02 12,326 13,009
8/03 14,511 13,576
8/04 16,021 14,408
For the year ended August 31, 2004, the Strategic Bond Fund returned 10.30% as
compared to 6.13% for the Lehman Brothers Aggregate Bond Index.
*The Lehman Brothers Aggregate Bond Index is an unmanaged index that is
composed of securities from Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index, and the Asset-Backed Securities Index.
Average Annual Total Return/(a)/
- --------------------------------
1 Year 5 Years Since Inception*
- --------------------------------
10.30% 9.01% 8.25%
- --------------------------------
*Inception date of the Fund: September 21, 1998
/(a)/Average annual total returns are net of expenses.
Past performance is not predictive of future performance. The Fund's returns
reflect investment management fees and other Fund expenses. The Fund's returns
do not reflect charges included in the annuity contract or variable life policy
for mortality and expense guarantees, administrative fees, distribution fees
and surrender charges.
102 VALIC COMPANY II
BOARD OF TRUSTEES
Judith L. Craven
Paige T. Davis
William F. Devin
Timothy J. Ebner
Gustavo E. Gonzales, Jr.
Norman Hackerman
Peter A. Harbeck
John W. Lancaster
Kenneth J. Lavery
Ben H. Love
John E. Maupin, Jr.
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INVESTMENT ADVISER
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
INVESTMENT SUB-ADVISERS
AIG Global Investment Corp.
175 Water Street
New York, New York 10038
AIG SunAmerica Asset Management Corp.
Haborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Banc One Investment Advisors Corporation
1111 Polaris Parkway
Columbus, Ohio 43271-0211
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, New York 10017-3147
Franklin Advisers, Inc.
One Franklin Parkway
San Mateo, California 94403-1906
INVESCO Institutional (N.A.), Inc.
4530 S. Manoca Street
Denver, Colorado 80237
Putnam Investment Management, LLC
One Post Office Square
Boston, Massachusetts 02109
SSgA Funds Management, Inc.
2 International Place
Boston, Massachusetts 02110
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
1401 McKinney Street, Suite 1200
Houston, Texas 77010
TRANSFER AND SHAREHOLDER
SERVICE AGENT
The Variable Annuity Life
Insurance Company
2929 Allen Parkway
Houston, Texas 77019
OFFICERS
Evelyn M. Curran,
President and Chief Executive Officer
John Packs,
Vice President and Senior Investment Officer
Gregory R. Kingston,
Treasurer and Chief Financial Officer
Nori L. Gabert,
Vice President, Secretary and Chief Legal Officer
Cynthia A. Gibbons,
Chief Compliance Officer and Assistant Secretary
Robert M. Zakem,
Vice President and Assistant Secretary
Donna Handel,
Vice President and Assistant Treasurer
Kathryn A. Pearce,
Assistant Treasurer
Donald H. Guire,
Assistant Treasurer
Mark Matthes,
Assistant Secretary
This report is for the information of the shareholders and variable contract
owners investing in VALIC Company II. It is authorized for distribution to
other persons only when preceded or accompanied by an effective prospectus
which contains information on how to purchase shares and other pertinent
information.
If you would like further information about this material or products issued
by VALIC or American General Life Insurance Company, please contact your
financial professional.
DISCLOSURE OF QUARTERLY FUND PORTFOLIO HOLDINGS
VALIC Company II is required to file its complete schedule of portfolio
holdings with the SEC for its first and third fiscal quarters on Form N-Q for
fiscal quarters ending after July 9, 2004. Once filed, VALIC Company II's Form
N-Q will be available without charge on the SEC's website at www.sec.gov. You
can also obtain copies of Form N-Q by (i) visiting the SEC's Public Reference
Room in Washington, DC (information on the operation of the Public Reference
Room may be obtained by calling 1-800-SEC-0330, (ii) sending your request and a
duplicating fee to the SEC's Public Reference Room, Washington DC 20549-0102 or
(iii) sending your request electronically to publicinfo@sec.gov.
VOTING PROXIES ON VALIC COMPANY II PORTFOLIO SECURITIES
A description of the policies and procedures that VALIC Company II uses to
determine how to vote proxies related to securities held in the Fund's
portfolios which is available in the VALIC Company II Statement of Additional
information, may be obtained without charge upon request, by calling (800)
858-8850. This information is also available from the EDGAR database on the
Securities and Exchange Commission's website at http://www.sec.gov.
PROXY VOTING RECORD ON VALIC COMPANY II PORTFOLIO SECURITIES
Information regarding how VALIC Company II voted proxies relating to
securities held in the VALIC Company II Funds during the twelve month period
ended June 30, 2004 is available (i) without charge, upon request, by calling
(800) 448-2542 or (ii) on the SEC's website at http://www.sec.gov.
---------------
VALIC Company II PRSRT STD
P.O. Box 3206 U.S. POSTAGE
Houston, Texas 77253-3206 PAID
LANCASTER, PA
PERMIT NO. 1765
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VL 11288 VER 08/04
Item 2. Code of Ethics.
VALIC Company II ("the Registrant") has adopted a Code of Ethics applicable to
its Principal Executive and Principal Accounting Officers pursuant to Section
406 of the Sarbanes-Oxley Act of 2002.
Item 3. Audit Committee Financial Expert.
Currently, the Registrant does not have an Audit Committee member who possesses
all of the attributes required to be an "audit committee financial expert" as
defined in instruction 2(b) of Item 3 of Form N-CSR. However, the Board of
Trustees believes that each member of the Audit Committee has substantial
experience relating to the review of financial statements and the operations of
audit committees. Accordingly, the Board believes that the members are qualified
to evaluate the Registrant's financial statements, supervise the Registrant's
preparation of its financial statements, and oversee the work of the
Registrant's independent auditors.
Item 4. Principal Accountant Fees and Services.
(a)-(d) Aggregate fees billed to the Registrant for the last two fiscal
years for professional services rendered by the Registrant's
principal accountant were as follows:
2003 2004
Audit Fees $18,089 $38,852
Audit-Related Fees $ 9,075 $14,187
Tax Fees $76,450 $84,575
All Other Fees $ 0 $ 0
Audit Fees include amounts related to the audit of the
Registrant's annual financial statements and services normally
provided by the principal accountant in connection with statutory
and regulatory filings. Audit-Related Fees principally include a
SAS No. 100 review of the Registrant's Semiannual Shareholder
Report. Tax Fees principally include tax compliance, tax advice,
tax planning and preparation of tax returns.
(e)
(1) The Registrant's audit committee pre-approves all audit
services provided by the Registrant's principal accountant
for the Registrant and all non-audit services provided by
the Registrant's principal accountant for the Registrant,
its investment adviser and any entity controlling,
controlled by, or under common control with the investment
adviser ("Adviser Affiliate") that provides ongoing services
to the Registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the
operations and financial reporting of the Registrant.
(2) No services included in (b)-(d) above were approved pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the Registrant's principal accountant
for non-audit services rendered to the Registrant, its investment
adviser, and Adviser Affiliate that provides ongoing services to
the Registrant for 2004 and 2003 were $1,029,660 and $462,725,
respectively.
(h) Non-audit services rendered to the Registrant's investment
adviser and any Adviser Affiliate that were not pre-approved
pursuant to Paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X
were considered by the Registrant's audit committee as to whether
they were compatible with maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the Registrant's
disclosure controls and procedures. Based on that evaluation, the
Registrant's management, including the President and Treasurer,
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) There was no change in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act) 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 contro1 over financial
reporting.
Item 11. Exhibits.
(a) (1) Code of Ethics applicable to its Principal Executive and Principal
Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act
of 2002 attached hereto as Exhibit 99.406.Code of Ethics.
(2) Certification pursuant to Rule 30a-2 under the Investment Company
Act of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT.
(3) Not applicable.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 attached hereto as Exhibit 99.906.CERT.
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.
VALIC Company II
By: /s/ Evelyn M. Curran
Evelyn M. Curran
President
Date: November 9, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Evelyn M. Curran
Evelyn M. Curran
President
Date: November 9, 2004
By: /s/ Gregory R. Kingston
Gregory R. Kingston
Treasurer
Date: November 9, 2004