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, 2006
--------------------------
Item 1. Reports to Stockholders
VALIC Company II, Annual Report at August 31, 2006
VALIC Company II
Annual Report
August 31, 2006
VALIC COMPANY II - ANNUAL REPORT AUGUST 31, 2006
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.................................................... 18
International Small Cap Equity Fund..................................... 25
Large Cap Value Fund.................................................... 29
Mid Cap Growth Fund..................................................... 32
Mid Cap Value Fund...................................................... 35
Moderate Growth Lifestyle Fund.......................................... 39
Money Market II Fund.................................................... 41
Small Cap Growth Fund................................................... 44
Small Cap Value Fund.................................................... 47
Socially Responsible Fund............................................... 52
Strategic Bond Fund..................................................... 56
Statements of Assets and Liabilities....................................... 68
Statements of Operations................................................... 70
Statements of Changes in Net Assets........................................ 72
Notes to Financial Statements.............................................. 76
Financial Highlights....................................................... 88
Report of Independent Registered Public Accounting Firm.................... 96
Approval of Advisory Agreements............................................ 97
Trustees & Officers Information............................................ 101
Shareholder Tax Information................................................ 103
Comparisons: Funds vs. Indexes............................................. 104
- --------------------------------------------------------------------------------
PRESIDENT'S LETTER 1
Dear Valued Investor:
We are pleased to provide you with the Annual Report for VALIC Company II. The
report contains the investment portfolio information and the financial
statements of VALIC Company II for the period ending August 31, 2006.
The U.S. economy advanced at a strong pace during the first half of the
twelve-month period, moderated in March, April and May, then showed signs of
slowdown in July and August due largely to a cooling housing market and higher
interest rates and energy prices. The domestic equity markets were volatile but
showed generally positive results for the one-year period. Despite conflicting
economic data, the S&P 500 Index returned 8.88% for the year.
We believe that diversification is an important strategy in all markets, but is
especially well suited for volatile markets. Spreading your investments between
different asset classes (e.g., large and small capitalization stocks, bonds,
money markets and international investments) and different investment styles
(e.g., growth and value) is the best long-term strategy to manage risk. With
this in mind, we are committed to continually monitor the investment expertise
represented in VALIC Company II and to supply you with the appropriate choices
to meet your asset allocation objectives.
Additionally, once you have a plan in place based on your individual retirement
goals -- stick with it. A common mistake of investors is to buy high when
enthusiasm is soaring and to sell low when fear sets in. Select a portfolio
that is appropriate for your needs and adjust it only as your needs change or
rebalance as necessary due to market conditions. We recommend that you contact
your financial advisor to make certain that your current portfolio allocation
is appropriate for you.
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, 2006
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) of 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, 2006 and held until August 31, 2006. Shares of VC II 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") offered by The
Variable Annuity Life Insurance Company ("VALIC"), the investment adviser to VC
II and other life insurance companies affiliated with VALIC. 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 fees associated with the Variable Contract or Plans.
Actual Expenses
The "Actual" section 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 the Six Months Ended August 31, 2006" to estimate the expenses you paid
on your account during this period. The "Expenses Paid During the Six Months
Ended August 31, 2006" column and the "Expense Ratio as of August 31, 2006"
column do not include fees and expenses that may be charged by the Variable
Contracts or Plans, in which the Funds are offered. Had these fees and expenses
been included, the "Expenses Paid During the Six Months Ended August 31, 2006"
column would have been higher and the "Ending Account Value" would have been
lower.
Hypothetical Example for Comparison Purposes
The "Hypothetical" section 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 the
Six Months Ended August 31, 2006" column and the "Expense Ratio as of August
31, 2006" column do not include fees and expenses that may be charged by the
Variable Contracts or Plans, in which the Funds are offered. Had these fees and
expenses been included, the "Expenses Paid During the Six Months Ended August
31, 2006" column would have been higher and the "Ending Account Value" would
have been lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any fees and expenses that may be charged
by the Variable Contracts or Plans. Please refer to your Variable Contract
prospectus or Plan document for more information. Therefore, the "hypothetical"
example is useful in comparing ongoing costs and will not help you determine
the relative total costs of owning different funds. In addition, if these fees
and expenses were included, your costs would have been higher.
August 31, 2006 VALIC COMPANY II - EXPENSE EXAMPLE (Unaudited) - CONTINUED 3
Actual Hypothetical
----------------------------------------- -----------------------------------------
Ending
Account Value
Ending Expenses Paid Using a Expenses Paid
Account Value During the Hypothetical During the Expense
Beginning Using Actual Six Months Beginning 5% Assumed Six Months Ratio
Account Value Return at Ended Account Value Return at Ended as of
at March 1, August 31, August 31, at March 1, August 31, August 31, August 31,
Fund 2006 2006 2006* 2006 2006 2006* 2006*
- ---- ------------- ------------- ------------- ------------- ------------- ------------- ----------
Aggressive Growth Lifestyle#... $1,000.00 $1,009.48 $0.51 $1,000.00 $1,024.70 $0.51 0.10%
Capital Appreciation#.......... $1,000.00 $ 951.87 $4.18 $1,000.00 $1,020.92 $4.33 0.85%
Conservative Growth Lifestyle#. $1,000.00 $1,004.69 $0.51 $1,000.00 $1,024.70 $0.51 0.10%
Core Bond#..................... $1,000.00 $1,017.14 $3.91 $1,000.00 $1,021.32 $3.92 0.77%
High Yield Bond#............... $1,000.00 $1,046.02 $5.11 $1,000.00 $1,020.21 $5.04 0.99%
International Small Cap Equity# $1,000.00 $1,009.62 $5.07 $1,000.00 $1,020.16 $5.09 1.00%
Large Cap Value#............... $1,000.00 $1,040.69 $4.17 $1,000.00 $1,021.12 $4.13 0.81%
Mid Cap Growth#................ $1,000.00 $ 978.39 $4.24 $1,000.00 $1,020.92 $4.33 0.85%
Mid Cap Value#@................ $1,000.00 $1,010.78 $5.32 $1,000.00 $1,019.91 $5.35 1.05%
Moderate Growth Lifestyle#..... $1,000.00 $ 999.20 $0.50 $1,000.00 $1,024.70 $0.51 0.10%
Money Market II#............... $1,000.00 $1,022.75 $2.86 $1,000.00 $1,022.38 $2.85 0.56%
Small Cap Growth #............. $1,000.00 $ 928.26 $5.64 $1,000.00 $1,019.36 $5.90 1.16%
Small Cap Value#............... $1,000.00 $1,010.74 $4.81 $1,000.00 $1,020.42 $4.84 0.95%
Socially Responsible#.......... $1,000.00 $1,039.66 $2.88 $1,000.00 $1,022.38 $2.85 0.56%
Strategic Bond#................ $1,000.00 $1,025.27 $4.54 $1,000.00 $1,020.72 $4.53 0.89%
* 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
365 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 the 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:
Actual Hypothetical
----------------------------------------- -----------------------------------------
Ending
Account Value
Ending Expenses Paid Using a Expenses Paid
Account Value During the Hypothetical During the Expense
Beginning Using Actual Six Months Beginning 5% Assumed Six Months Ratio
Account Value Return at Ended Account Value Return at Ended as of
at March 1, August 31, August 31, at March 1, August 31, August 31, August 31,
Fund 2006 2006 2006* 2006 2006 2006* 2006*
- ---- ------------- ------------- ------------- ------------- ------------- ------------- ----------
Mid Cap Value $1,000.00 $1,010.78 $5.27 $1,000.00 $1,019.96 $5.30 1.04%
4 AGGRESSIVE GROWTH LIFESTYLE FUND - PORTFOLIO PROFILE August 31, 2006
(Unaudited)
Industry Allocation*
Large Cap Equity Funds... 54.07%
International Equity Fund 35.05%
Mid Cap Equity Funds..... 5.31%
Bond Fund................ 5.00%
Small Cap Equity Funds... 0.70%
------
100.13%
======
* Calculated as a percentage of Net Assets.
August 31, 2006 AGGRESSIVE GROWTH LIFESTYLE FUND - SCHEDULE OF INVESTMENTS 5
Value
Shares (Note 2)
-----------------------------------------------------------------------
AFFILIATED INVESTMENT COMPANIES#(1) -- 100.13%
Bond Fund -- 5.00%
VALIC Co. II Core Bond Fund................. 267,875 $ 2,702,860
-----------
International Equity Fund -- 35.05%
VALIC Co. I International Equities Fund..... 1,875,124 18,920,003
-----------
Large Cap Equity Funds -- 54.07%
VALIC Co. II Capital Appreciation Fund...... 2,186,585 19,460,606
VALIC Co. II Large Cap Value Fund........... 667,374 9,730,313
-----------
29,190,919
-----------
Mid Cap Equity Funds -- 5.31%
VALIC Co. II MidCap Value Fund.............. 51,895 973,027
VALIC Co. II MidCap Growth Fund............. 232,147 1,892,000
-----------
2,865,027
-----------
Small Cap Equity Funds -- 0.70%
VALIC Co. II Small Cap Growth Fund.......... 21,316 270,287
VALIC Co. II Small Cap Value Fund........... 7,179 108,114
-----------
378,401
-----------
TOTAL INVESTMENTS
(Cost $51,946,778)(2)...................... 100.13% 54,057,210
Liabilities in excess of other assets......... (0.13)% (70,058)
--------- -----------
NET ASSETS -- 100.00% $53,987,152
========= ===========
- --------
# The Aggressive Growth Lifestyle Fund invests in various VALIC Company I or
VALIC Company II Funds, some of which are not presented in this report.
Additional information on the underlying Funds is available at our website,
www.aigvalic.com.
(1)See Note 3.
(2)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, 2006
Industry Allocation*
Financial Services................ 12.46%
Retail............................ 10.47%
Telecommunications................ 9.96%
Oil & Gas......................... 6.94%
Hospital Supplies................. 6.41%
Machinery......................... 6.20%
Repurchase Agreement.............. 5.22%
Information Processing -- Software 4.74%
Banks............................. 4.09%
Information Processing -- Services 3.57%
Beverages......................... 3.35%
Information Processing -- Hardware 3.01%
Airlines.......................... 2.97%
Drugs............................. 2.42%
Metals............................ 2.35%
Broadcasting...................... 2.00%
Commercial Services............... 2.00%
Chemical.......................... 1.78%
Multimedia........................ 1.78%
Utilities-Electric................ 1.73%
Aerospace/Defense................. 1.71%
Freight........................... 1.71%
Electronics/Electrical Equipment.. 1.25%
Foods............................. 1.17%
Savings & Loan.................... 1.16%
Medical Technology................ 1.08%
------
101.53%
======
* Calculated as a percentage of Net Assets.
August 31, 2006 CAPITAL APPRECIATION FUND - SCHEDULE OF INVESTMENTS 7
Value
Shares (Note 2)
--------------------------------------------------------------------
COMMON STOCK -- 96.31%
Aerospace/Defense -- 1.71%
Lockheed Martin Corp........................... 14,400 $1,189,440
----------
Airlines -- 2.97%
AMR Corp.+..................................... 14,900 307,685
Southwest Airlines Co.......................... 101,300 1,754,516
----------
2,062,201
----------
Banks -- 4.09%
State Street Bank & Trust Co................... 13,600 840,480
Synovus Financial Corp......................... 40,500 1,177,740
U.S. Bancorp................................... 25,700 824,199
----------
2,842,419
----------
Beverages -- 3.35%
Coca-Cola Co................................... 51,900 2,325,639
----------
Broadcasting -- 2.00%
DIRECTTV Group Inc.+........................... 73,700 1,384,823
----------
Chemical -- 1.78%
Monsanto Co.................................... 26,100 1,238,184
----------
Commercial Services -- 2.00%
Paychex, Inc................................... 38,700 1,389,717
----------
Drugs -- 2.42%
Bristol-Myers Squibb Co........................ 38,000 826,500
Schering-Plough Corp........................... 40,800 854,760
----------
1,681,260
----------
Electronics/Electrical Equipment -- 1.25%
Molex, Inc..................................... 23,700 864,339
----------
Financial Services -- 12.46%
Charles Schwab Corp............................ 85,900 1,401,029
Chicago Merchantile Exchange Holdings, Inc..... 2,600 1,144,000
Citigroup, Inc................................. 27,500 1,357,125
JPMorgan Chase & Co............................ 25,600 1,168,896
Merrill Lynch & Co., Inc....................... 18,500 1,360,305
Morgan Stanley................................. 33,700 2,217,123
----------
8,648,478
----------
Foods -- 1.17%
Archer-Daniels-Midland Co...................... 19,700 811,049
----------
Freight -- 1.71%
CH Robinson Worldwide, Inc..................... 25,900 1,186,738
----------
Hospital Supplies -- 6.41%
Johnson & Johnson.............................. 50,600 3,271,796
Stryker Corp................................... 24,500 1,176,735
----------
4,448,531
----------
Information Processing - Hardware -- 3.01%
Apple Computer, Inc.+.......................... 18,200 1,234,870
Hewlett-Packard Co............................. 23,400 855,504
----------
2,090,374
----------
Information Processing - Services -- 3.57%
Akamai Technologies, Inc.+..................... 21,800 854,560
Cognizant Technology Solutions Corp., Class A+. 11,900 831,929
Google, Inc.+.................................. 2,100 794,913
----------
2,481,402
----------
Information Processing - Software -- 4.74%
BMC Software, Inc.+............................ 32,000 851,840
Oracle Corp.+.................................. 89,100 1,394,415
Red Hat, Inc.+................................. 44,800 1,041,152
----------
3,287,407
----------
Shares/
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------------
Machinery -- 6.20%
Dover Corp............................................... 17,500 $ 850,850
Illinois Tool Works, Inc................................. 31,600 1,387,240
Precision Castparts Corp................................. 35,300 2,062,932
-----------
4,301,022
-----------
Medical Technology -- 1.08%
Hologic, Inc.+........................................... 17,300 747,014
-----------
Metals -- 2.35%
Alcoa, Inc............................................... 28,500 814,815
Allegheny Technologies, Inc.............................. 14,200 814,370
-----------
1,629,185
-----------
Multimedia -- 1.78%
Walt Disney Co........................................... 41,700 1,236,405
-----------
Oil & Gas -- 6.94%
Grant Prideco, Inc.+..................................... 8,600 357,158
McDermott International, Inc.+........................... 35,100 1,691,820
Schlumberger, Ltd........................................ 21,300 1,305,690
XTO Energy, Inc.......................................... 31,966 1,463,084
-----------
4,817,752
-----------
Retail -- 10.47%
Best Buy Co., Inc........................................ 10,100 474,700
Home Depot, Inc.......................................... 24,600 843,534
Kohl's Corp.+............................................ 36,800 2,300,368
Wal-Mart Stores, Inc..................................... 49,900 2,231,528
Walgreen Co.............................................. 28,700 1,419,502
-----------
7,269,632
-----------
Savings & Loan -- 1.16%
Washington Mutual, Inc................................... 19,200 804,288
-----------
Telecommunications -- 9.96%
Cisco Systems, Inc.+..................................... 96,200 2,115,438
Harris Corp.............................................. 18,800 825,696
Motorola, Inc............................................ 75,000 1,753,500
QUALCOMM, Inc............................................ 36,700 1,382,489
Qwest Communications International, Inc.+................ 95,200 838,712
-----------
6,915,835
-----------
Utilities - Electric -- 1.73%
TXU Corp................................................. 18,100 1,198,401
-----------
Total Long-Term Investment Securities
(Cost $65,533,351)...................................... 66,851,535
-----------
REPURCHASE AGREEMENT -- 5.22%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $3,625,486 and collateralized
by Federal Home Loan Mtg. Corp., bearing interest at
5.00%, due 11/01/10 and having an approximate value of
$3,733,950
(Cost $3,625,000)....................................... $3,625,000 3,625,000
-----------
TOTAL INVESTMENTS
(Cost $69,158,351)(1)................................... 101.53% 70,476,535
Liabilities in excess of other assets...................... (1.53)% (1,064,121)
---------- -----------
NET ASSETS -- 100.00% $69,412,414
========== ===========
- --------
+ Non-income producing security
(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, 2006
(Unaudited)
Industry Allocation*
Bond Fund................ 42.08%
Large Cap Equity Funds... 37.57%
Mid Cap Equity Funds..... 9.32%
International Equity Fund 8.02%
Small Cap Equity Funds... 3.21%
------
100.20%
======
* Calculated as a percentage of Net Assets.
August 31, 2006 CONSERVATIVE GROWTH LIFESTYLE FUND - SCHEDULE OF INVESTMENTS 9
Value
Shares (Note 2)
-----------------------------------------------------------------------
AFFILIATED INVESTMENT COMPANIES#(1) -- 100.20%
Bond Fund -- 42.08%
VALIC Co. II Core Bond Fund................. 1,556,074 $15,700,788
-----------
International Equity Fund -- 8.02%
VALIC Co. I International Equities Fund..... 296,394 2,990,619
-----------
Large Cap Equity Funds -- 37.57%
VALIC Co. II Capital Appreciation Fund...... 1,050,082 9,345,729
VALIC Co. II Large Cap Value Fund........... 320,499 4,672,879
-----------
14,018,608
-----------
Mid Cap Equity Funds -- 9.32%
VALIC Co. II MidCap Value Fund.............. 61,806 1,158,859
VALIC Co. II MidCap Growth Fund............. 284,384 2,317,727
-----------
3,476,586
-----------
Small Cap Equity Funds -- 3.21%
VALIC Co. II Small Cap Growth Fund.......... 61,912 785,045
VALIC Co. II Small Cap Value Fund........... 27,305 411,210
-----------
1,196,255
-----------
TOTAL INVESTMENTS
(Cost $36,652,049)(2)...................... 100.20% 37,382,856
Liabilities in excess of other assets......... (0.20)% (74,142)
--------- -----------
NET ASSETS -- 100.00% $37,308,714
========= ===========
- --------
# The Conservative Growth Lifestyle Fund invests in various VALIC Company I or
VALIC Company II Funds, some of which are not presented in this report.
Additional information on the underlying Funds is available at our website,
www.aigvalic.com.
(1)See Note 3.
(2)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, 2006
Industry Allocation*
Government Agencies............... 31.19%
Government Obligations............ 24.78%
Financial Services................ 17.35%
Utilities -- Electric............. 3.63%
Foreign Government Agencies....... 3.45%
Telecommunications................ 2.09%
Oil & Gas......................... 2.06%
Banks............................. 1.96%
Insurance......................... 1.95%
Repurchase Agreement.............. 1.70%
Broadcasting...................... 1.62%
Savings & Loan.................... 1.15%
Leisure & Tourism................. 0.92%
Multimedia........................ 0.81%
Chemical.......................... 0.70%
Airlines.......................... 0.69%
Paper/Forest Products............. 0.59%
Metals............................ 0.55%
Real Estate....................... 0.55%
Drugs............................. 0.53%
Commercial Services............... 0.49%
Railroads & Equipment............. 0.36%
Real Estate Investment Trusts..... 0.35%
Utilities -- Gas, Pipeline........ 0.35%
Mining............................ 0.31%
Aerospace/Defense................. 0.30%
Utilities -- Gas, Distribution.... 0.25%
Freight........................... 0.24%
Publishing........................ 0.17%
Conglomerates..................... 0.15%
Automotive........................ 0.14%
Electronics/Electrical Equipment.. 0.13%
Hospital Management............... 0.12%
Manufacturing..................... 0.09%
Beverages......................... 0.08%
Hospital Supplies................. 0.08%
Information Processing -- Services 0.08%
Medical -- Technology............. 0.08%
Advertising....................... 0.07%
Funeral Services.................. 0.07%
Machinery......................... 0.07%
Pollution Control................. 0.07%
Building Materials................ 0.06%
Information Processing -- Software 0.05%
Foods............................. 0.03%
------
102.46%
======
Credit Quality+#
Government -- Agency.. 34.27%
Government -- Treasury 22.49%
AAA................... 4.30%
AA.................... 3.23%
A..................... 7.96%
BBB................... 16.75%
BB.................... 4.22%
B..................... 2.81%
CCC................... 1.37%
Below C............... 0.45%
Not Rate@............. 2.15%
------
100.00%
======
* Calculated as a percentage of Net Asset.
@ Represent debt issues that either have no rating, or the rating is
unavailable from the date source.
+ Source: Standard and Poors
# Calculated as percentage of total debt issues, excluding short-term
securities.
August 31, 2006 CORE BOND FUND - SCHEDULE OF INVESTMENTS 11
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 6.06%
Financial Services -- 6.06%
Banc of America Commercial Mtg., Inc.,
Series 2006-4, Class AJ:
5.70% due 07/10/46(3)(8).................................... $1,120,000 $1,130,931
Banc of America Large Loan, Inc., Series 2005-BBA6,
Class A2:
5.50% due 01/15/19*(1)(8)................................... 240,000 240,114
Bear Stearns Commercial Mtg. Securities, Series 2006-PW12,
Class F:
5.93% due 09/11/38*(3)(8)................................... 445,000 442,376
Bear Stearns Commercial Mtg. Securities, Series 2006-PW12,
Class G:
5.93% due 09/11/38(8)....................................... 76,000 74,897
Chase Funding Mtg. Loan, Series 2003-6, Class 1A6:
4.59% due 05/25/15.......................................... 200,000 194,269
Commercial Mtg. Pass Through Certs., Series 2004-LB2A,
Class A3:
4.22% due 03/10/39(8)....................................... 2,053,000 1,976,065
Countrywide Certs., Series 2006-S4, Class A3:
5.80% due 7/25/34(6)........................................ 910,000 909,989
Credit Suisse Mtg. Capital Certs, Series 2006-TFLA, Class C:
5.59% due 04/15/21*(1)(8)................................... 354,000 354,109
Credit Suisse Mtg. Capital Certs, Series 2006-TFLA, Class D:
5.61% due 04/15/21*(1)(8)................................... 353,000 353,109
LB-UBS Commercial Mtg. Trust, Series 2004-C4, Class C:
5.30% due 06/15/36(3)(8).................................... 125,000 124,472
Morgan Stanley Capital I, Series 2004-IQ8, Class C:
5.30% due 06/15/40(3)(8).................................... 315,000 307,848
Residential Asset Securities Corp. Series 2003-KS10,
Class AI6:
4.54% due 12/25/33.......................................... 200,000 191,876
Wachovia Bank Commercial Mtg. Trust, Series 2006-C25,
Class G:
5.96% due 05/15/43*(3)(8)................................... 300,000 301,780
----------
6,601,835
----------
Total Asset-Backed Securities
(Cost $6,582,152)........................................... 6,601,835
----------
CORPORATE BONDS -- 24.34%
Advertising -- 0.07%
Affinity Group, Inc.:
9.00% due 02/15/12.......................................... 75,000 75,000
----------
Aerospace/Defense -- 0.30%
Raytheon Co.:
6.00% due 12/15/10.......................................... 85,000 86,943
6.75% due 08/15/07.......................................... 233,000 235,199
----------
322,142
----------
Airlines -- 0.69%
American Airlines, Inc., Series 2001-1A2 Pass Through:
6.82% due 05/23/11.......................................... 200,000 196,500
Atlas Air, Inc., Series 1999-1B Pass Through, Class B:
7.63% due 01/02/15.......................................... 211,305 217,644
Atlas Air, Inc., Series 1999-A1 Pass Through, Class A:
7.20% due 01/02/19.......................................... 345,230 342,641
----------
756,785
----------
Automotive -- 0.14%
Cooper-Standard Automotive, Inc.:
8.38% due 12/15/14.......................................... 15,000 11,363
DaimlerChrysler North American Holding Corp.:
7.30% due 01/15/12.......................................... 75,000 79,791
General Motors Corp.:
8.25% due 07/15/23.......................................... 70,000 58,100
----------
149,254
----------
Principal Value
Amount (Note 2)
----------------------------------------------------------------
Banks -- 1.28%
ABN Amro North American Holding Capital:
6.52% due 11/08/12*(11)................. $150,000 $ 155,310
BankBoston Capital Trust IV:
5.87% due 06/08/28(1)................... 181,000 175,217
Chemical Bank:
6.13% due 11/01/08...................... 138,000 140,693
First Maryland Capital II:
6.34% due 02/01/27(1)................... 159,000 155,427
Huntington National Bank:
6.60% due 06/15/18...................... 92,000 96,770
Popular North America, Inc.:
5.65% due 04/15/09...................... 120,000 120,213
Sanwa Bank, Ltd.:
7.40% due 06/15/11...................... 85,000 91,551
Southtrust Bank NA:
4.75% due 03/01/13...................... 170,000 163,660
UBS AG:
5.88% due 07/15/16...................... 90,000 91,971
Union Bank of California:
5.95% due 05/11/16...................... 170,000 174,040
US Bank:
3.90% due 08/15/08...................... 32,000 31,301
----------
1,396,153
----------
Beverages -- 0.08%
SABMiller PLC:
6.20% due 07/01/11*..................... 85,000 87,193
----------
Broadcasting -- 1.20%
Chancellor Media Corp.:
8.00% due 11/01/08...................... 238,000 248,925
Charter Communications Holdings LLC:
11.13% due 01/15/11..................... 155,000 119,350
Cox Communications, Inc.:
7.13% due 10/01/12...................... 150,000 158,691
Nexstar Finance, Inc.:
7.00% due 01/15/14...................... 55,000 49,225
Paxson Communications Corp.:
11.76% due 01/15/13*(1)................. 365,000 367,737
Univision Communications, Inc.:
3.50% due 10/15/07...................... 75,000 72,780
Viacom, Inc.:
6.63% due 05/15/11...................... 170,000 175,811
Young Broadcasting, Inc.:
10.00% due 03/01/11..................... 125,000 115,625
----------
1,308,144
----------
Building Materials -- 0.06%
American Standard, Inc.:
7.38% due 02/01/08...................... 68,000 69,361
----------
Chemical -- 0.70%
BCI US Finance Corp.:
11.01% due 07/15/10*(1)................. 200,000 204,000
Cytec Industries, Inc.:
6.00% due 10/01/15...................... 180,000 176,545
E.I. du Pont de Nemours and Co.:
4.88% due 04/30/14...................... 54,000 51,890
Eastman Chemical Co.:
7.63% due 06/15/24...................... 95,000 103,000
ICI Wilmington, Inc.:
7.05% due 09/15/07...................... 230,000 233,117
----------
768,552
----------
Commercial Services -- 0.49%
Aramark Services, Inc.:
7.00% due 05/01/07...................... 183,000 183,704
Monitronics International, Inc.:
11.75% due 09/01/10..................... 85,000 84,150
12 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount (Note 2)
------------------------------------------------------------
CORPORATE BONDS (continued)
Commercial Services (continued)
Pitney Bowes, Inc.:
4.75% due 01/15/16.................... $128,000 $121,491
Rent-Way, Inc.:
11.88% due 06/15/10................... 64,000 71,520
ServiceMaster Co.:
7.88% due 08/15/09.................... 72,000 75,495
--------
536,360
--------
Drugs -- 0.53%
Abbott Laboratories:
5.88% due 05/15/16.................... 180,000 184,865
American Home Products Corp.:
6.95% due 03/15/11.................... 100,000 105,983
Merck & Co., Inc.:
2.50% due 03/30/07.................... 116,000 114,152
Wyeth:
5.50% due 02/01/14.................... 177,000 176,520
--------
581,520
--------
Electronics/Electrical Equipment -- 0.13%
Arrow Electronics, Inc.:
6.88% due 06/01/18.................... 135,000 136,880
--------
Financial Services -- 4.45%
BAE Systems Holdings, Inc.:
5.20% due 08/15/15*................... 225,000 213,718
Capital One Financial Corp.:
6.15% due 09/01/16.................... 190,000 190,835
CIT Group, Inc.:
5.40% due 03/07/13.................... 100,000 98,831
Citigroup, Inc.:
5.00% due 09/15/14.................... 85,000 82,240
Comerica, Inc.:
4.80% due 05/01/15.................... 85,000 78,838
Consolidated Communications Illinois:
9.75% due 04/01/12.................... 150,000 157,125
Devon Financing Corp.:
6.88% due 09/30/11.................... 150,000 159,073
Ford Motor Credit Co.:
5.80% due 01/12/09.................... 19,000 18,201
9.96% due 04/15/12(1)................. 190,000 200,861
General Electric Capital Corp.:
2.80% due 01/15/07.................... 213,000 211,108
General Motors Acceptance Corp.:
6.75% due 12/01/14.................... 85,000 81,489
6.88% due 09/15/11.................... 400,000 393,952
6.88% due 08/28/12.................... 12,000 11,714
7.75% due 01/19/10.................... 175,000 177,879
Genworth Global Funding Trusts:
5.75% due 05/15/13.................... 170,000 173,425
Goldman Sachs Group, Inc.:
6.13% due 02/15/33.................... 200,000 196,913
JP Morgan Chase Capital XVIII:
6.95% due 08/17/36.................... 95,000 99,980
Kinder Morgan Finance Co.:
5.70% due 01/05/16.................... 138,000 125,570
Lehman Brothers Holdings, Inc.:
4.50% due 07/26/10.................... 200,000 193,987
5.75% due 05/17/13.................... 170,000 171,882
Merrill Lynch & Co., Inc.:
5.77% due 07/25/11.................... 180,000 183,267
Morgan Stanley:
5.63% due 01/09/12.................... 200,000 201,685
6.25% due 08/09/26.................... 150,000 152,781
Nisource Finance Corp.:
5.40% due 07/15/14.................... 95,000 91,025
Principal Life Global Funding I:
5.25% due 01/15/13*................... 219,000 216,570
Principal Value
Amount (Note 2)
----------------------------------------------------------------
Financial Services (continued)
Residential Capital Corp.:
6.38% due 06/30/10...................... $550,000 $ 554,771
6.50% due 04/17/13...................... 80,000 80,708
Swiss Re Capital I LP:
6.85% due 05/25/16*(11)................. 77,000 78,659
Transamerica Finance Corp.:
6.40% due 09/15/08...................... 79,000 80,482
UBS Preferred Funding Trust V:
6.24% due 05/15/16(11).................. 170,000 173,481
----------
4,851,050
----------
Foods -- 0.03%
Dole Foods Co., Inc.:
8.88% due 03/15/11...................... 35,000 34,125
----------
Freight -- 0.24%
FedEx Corp.:
5.50% due 08/15/09...................... 90,000 90,462
Ryder System, Inc.:
5.00% due 06/15/12...................... 177,000 169,345
----------
259,807
----------
Funeral Services -- 0.07%
Service Corp. International:
6.75% due 04/01/16...................... 75,000 71,250
----------
Hospital Management -- 0.12%
HCA, Inc.:
6.95% due 05/01/12...................... 150,000 131,250
----------
Hospital Supplies -- 0.08%
Universal Hospital Services, Inc.:
10.13% due 11/01/11..................... 85,000 87,975
----------
Information Processing - Services -- 0.08%
Computer Sciences Corp.:
3.50% due 04/15/08...................... 85,000 82,303
----------
Information Processing - Software -- 0.05%
Oracle Corp. & Ozark Holding, Inc.:
5.00% due 01/15/11...................... 56,000 55,137
----------
Insurance -- 1.48%
Americo Life, Inc.:
7.88% due 05/01/13*..................... 109,000 108,893
AmerUs Group Co.:
6.58% due 05/16/11...................... 170,000 176,195
Great-West Life & Annuity Insurance Co:
7.15% due 05/16/16*(2).................. 286,000 291,397
ING Security Life Institutional Funding:
2.70% due 02/15/07*..................... 153,000 150,857
Kingsway America, Inc.:
7.50% due 02/01/14...................... 85,000 86,123
Marsh & McLennan Cos., Inc.:
5.38% due 07/15/14...................... 80,000 76,421
MetLife, Inc.:
5.00% due 11/24/13...................... 102,000 98,526
Metropolitan Life Global Funding I:
5.75% due 07/25/11*..................... 90,000 91,556
MIC Financing Trust I:
8.38% due 02/01/27*..................... 68,000 68,456
Monumental Global Funding II:
5.65% due 07/14/11*..................... 120,000 121,535
Nationwide Life Global Funding I:
5.35% due 03/15/11*..................... 170,000 170,216
Ohio Casualty Corp.:
7.30% due 06/15/14...................... 163,000 172,122
----------
1,612,297
----------
Leisure & Tourism -- 0.64%
Brunswick Corp.:
5.00% due 06/01/11...................... 134,000 128,800
August 31, 2006 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 13
Principal Value
Amount (Note 2)
---------------------------------------------------------
CORPORATE BONDS (continued)
Leisure & Tourism (continued)
Harrah's Operating Co., Inc.:
6.50% due 06/01/16............... $367,000 $ 364,095
MGM Mirage, Inc.:
5.88% due 02/27/14............... 200,000 182,500
Riviera Holdings Corp.:
11.00% due 06/15/10.............. 25,000 26,312
----------
701,707
----------
Medical Technology -- 0.08%
Baxter International, Inc.:
5.90% due 09/01/16............... 90,000 91,278
----------
Metals -- 0.23%
Barrick Gold Finance Co.:
7.50% due 05/01/07............... 112,000 113,441
Timken Co.:
5.75% due 02/15/10............... 133,000 132,031
----------
245,472
----------
Mining -- 0.10%
Newmont Mining Corp.:
8.63% due 05/15/11............... 100,000 111,384
----------
Multimedia -- 0.81%
AOL Time Warner, Inc.:
6.75% due 04/15/11............... 80,000 82,888
Belo Corp:
6.75% due 05/30/13............... 80,000 81,523
Clear Channel Communications:
4.90% due 05/15/15............... 170,000 148,935
News America, Inc.:
7.30% due 04/30/28............... 110,000 115,793
Time Warner Entertainment Co. LP:
8.38% due 03/15/23............... 160,000 180,025
8.38% due 07/15/33............... 110,000 126,148
Time Warner, Inc.:
7.25% due 10/15/17............... 71,000 75,675
Viacom, Inc.:
6.88% due 04/30/36*.............. 70,000 68,664
----------
879,651
----------
Oil & Gas -- 1.82%
Amerada Hess Corp.:
7.88% due 10/01/29............... 95,000 110,748
ConocoPhillips:
7.00% due 03/30/29............... 293,000 331,710
Consumers Energy Co.:
4.25% due 04/15/08............... 170,000 166,664
Devon Energy Corp.:
7.95% due 04/15/32............... 133,000 161,094
El Paso Production Holding Co.:
7.75% due 06/01/13............... 265,000 268,975
Encore Acquisition Co.:
6.00% due 07/15/15............... 44,000 40,810
6.25% due 04/15/14............... 26,000 24,440
Hanover Compressor Co.:
9.00% due 06/01/14............... 145,000 153,700
Hilcorp Energy LP:
10.50% due 09/01/10*............. 85,000 92,225
Premcor Refining Group, Inc.:
6.75% due 02/01/11............... 158,000 165,286
Seitel, Inc.:
11.75% due 07/15/11.............. 100,000 115,500
Valero Energy Corp.:
7.50% due 04/15/32............... 308,000 356,831
----------
1,987,983
----------
Paper/Forest Products -- 0.50%
MeadWestvaco Corp.:
6.85% due 04/01/12............... 170,000 176,340
Principal Value
Amount (Note 2)
-------------------------------------------------------------------
Paper/Forest Products (continued)
Pliant Corp.:
11.13% due 09/01/09........................ $146,000 $ 140,890
Plum Creek Timberlands LP:
5.88% due 11/15/15......................... 138,000 135,730
Weyerhaeuser Co.:
6.88% due 12/15/33......................... 100,000 97,607
----------
550,567
----------
Pollution Control -- 0.07%
Republic Services, Inc.:
6.09% due 03/15/35......................... 75,000 74,059
----------
Publishing -- 0.17%
Knight-Ridder, Inc.:
6.88% due 03/15/29......................... 85,000 80,585
7.15% due 11/01/27......................... 105,000 100,582
----------
181,167
----------
Railroads & Equipment -- 0.19%
Burlington Northern Santa Fe Corp.:
7.29% due 06/01/36......................... 176,000 205,890
----------
Real Estate -- 0.39%
AMB Property LP:
5.90% due 08/15/13......................... 76,000 76,641
Duke Realty LP:
5.63% due 08/15/11......................... 190,000 190,270
EOP Operating LP:
7.00% due 07/15/11......................... 150,000 158,238
----------
425,149
----------
Real Estate Investment Trusts -- 0.35%
Equity One, Inc.:
6.25% due 01/15/17......................... 86,000 87,295
Heritage Property Investment Trust:
4.50% due 10/15/09......................... 75,000 72,963
Mack-Cali Realty LP:
5.80% due 01/15/16......................... 80,000 79,594
Reckson Operating Partnership LP:
6.00% due 03/31/16......................... 47,000 46,904
Simon Property Group LP:
5.60% due 09/01/11......................... 95,000 95,243
----------
381,999
----------
Savings & Loan -- 1.15%
Downey Financial Corp.:
6.50% due 07/01/14......................... 170,000 171,499
Golden West Financial Corp.:
4.75% due 10/01/12......................... 182,000 175,897
Independence Community Bank Corp.:
3.50% due 06/20/08......................... 81,000 78,307
Sovereign Bancorp, Inc.:
4.80% due 09/01/10*........................ 280,000 272,550
Washington Mutual Bank:
5.95% due 05/20/13......................... 170,000 172,471
Washington Mutual Preferred Funding Cayman:
7.25% due 03/15/11*........................ 200,000 199,724
Western Financial Bank:
9.63% due 05/15/12......................... 164,000 181,323
----------
1,251,771
----------
Telecommunications -- 1.34%
American Cellular Corp.:
10.00% due 08/01/11........................ 185,000 192,400
Centennial Communications Corp.:
11.26% due 01/01/13(1)..................... 125,000 129,062
Corning, Inc.:
7.25% due 08/15/36......................... 180,000 187,438
Embarq Corp.:
7.08% due 06/01/16......................... 98,000 99,993
14 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS (continued)
Telecommunications (continued)
GTE Northwest, Inc.:
5.55% due 10/15/08....................... $ 95,000 $ 94,809
GTE Southwest, Inc.:
8.50% due 11/15/31....................... 190,000 224,557
ICO North America, Inc. (Convertible):
7.50% due 08/15/09(6)(13)(14)............ 25,000 30,750
LCI International, Inc.:
7.25% due 06/15/07....................... 245,000 245,000
New England Telephone & Telegraph Co.:
7.88% due 11/15/29....................... 115,000 123,292
Qwest Corp.:
7.50% due 10/01/14*...................... 45,000 45,788
Verizon New York, Inc.:
6.88% due 04/01/12....................... 80,000 83,065
----------
1,456,154
----------
Utilities - Electric -- 3.63%
AES Corp.:
8.88% due 02/15/11....................... 110,000 117,700
American Electric Power Co., Inc.:
4.71% due 08/16/07(7).................... 90,000 89,431
Appalachian Power Co.:
5.00% due 06/01/17....................... 102,000 94,758
Calpine Corp.:
8.75% due 07/15/13*(4)(5)................ 445,000 440,550
CenterPoint Energy Houston Electric, LLC:
5.60% due 07/01/23....................... 133,000 127,973
CenterPoint Energy, Inc.:
5.88% due 06/01/08....................... 190,000 190,681
Commonwealth Edison Co.:
5.95% due 08/15/16....................... 190,000 190,968
Consolidated Natural Gas Co.:
5.38% due 11/01/06....................... 94,000 93,961
Dominion Resources, Inc.:
5.69% due 05/15/08(7).................... 165,000 165,548
Duke Energy Co.:
4.20% due 10/01/08....................... 150,000 146,346
Energy East Corp.:
6.75% due 07/15/36....................... 310,000 320,207
Entergy Louisiana LLC:
5.83% due 11/01/10....................... 255,000 253,462
Florida Power & Light Co.:
5.95% due 10/01/33....................... 95,000 96,304
Indianapolis Power & Light Co.:
6.60% due 01/01/34*...................... 41,000 42,820
Indiantown Cogeneration LP:
9.26% due 12/15/10....................... 60,025 63,135
NRG Energy, Inc.:
7.25% due 02/01/14....................... 50,000 49,375
7.38% due 02/01/16....................... 185,000 182,225
Old Dominion Electric Cooperative:
5.68% due 12/01/28....................... 45,042 44,985
Pepco Holding, Inc.:
5.50% due 08/15/07....................... 193,000 192,907
Pepco Holdings, Inc.:
6.45% due 08/15/12....................... 90,000 92,705
PSEG Power LLC:
7.75% due 04/15/11....................... 115,000 124,412
PSI Energy, Inc.:
7.85% due 10/15/07....................... 287,000 294,289
Public Service Electric & Gas Co.:
5.00% due 08/15/14....................... 84,000 81,266
Puget Sound Energy, Inc.:
5.20% due 10/01/15....................... 268,000 257,975
Reliant Resources, Inc.:
9.50% due 07/15/13....................... 50,000 52,000
Southern Energy, Inc.:
7.90% due 07/15/09+(6)(13)(14)........... 150,000 0
Principal Value
Amount (Note 2)
----------------------------------------------------------------
Utilities - Electric (continued)
Virginia Electric and Power Co.:
4.10% due 12/15/08..................... $157,000 $ 152,663
-----------
3,958,646
-----------
Utilities - Gas, Distribution -- 0.25%
Sempra Energy:
4.62% due 05/17/07..................... 161,000 160,038
Southern California Gas Co.:
5.75% due 11/15/35..................... 110,000 108,792
-----------
268,830
-----------
Utilities - Gas, Pipeline -- 0.35%
Duke Energy Field Services LLC:
6.88% due 02/01/11..................... 80,000 83,821
NGC Corp. Capital Trust I:
8.32% due 06/01/27..................... 135,000 117,787
Reliant Energy Resources Corp.:
7.75% due 02/15/11..................... 170,000 183,546
-----------
385,154
-----------
Total Corporate Bonds
(Cost $26,279,277)..................... 26,529,399
-----------
FOREIGN BONDS -- 9.44%
Banks -- 0.68%
Banco Continental de Panama:
6.63% due 12/01/10*.................... 48,000 47,809
Caisse Nationale des Caisses d'Epargne:
5.55% due 12/30/09(1).................. 132,000 105,600
Glitnir Banki HF:
6.69% due 06/15/16*(2)................. 88,000 89,566
Landsbanki Islands HF:
6.10% due 08/25/11*.................... 100,000 100,197
Mizuho Finance Group, Ltd.:
8.38% due 04/27/09..................... 165,000 174,636
National Westminster Bank PLC:
7.75% due 10/16/07(11)................. 63,000 64,409
NIB Capital Bank NV:
5.82% due 12/11/13*(11)................ 80,000 77,412
Santander Issuances SA Unipersonal:
5.81% due 06/20/11*.................... 85,000 87,493
-----------
747,122
-----------
Broadcasting -- 0.42%
British Telecommunications PLC:
8.63% due 12/15/30..................... 85,000 109,711
Grupo Televisa SA:
6.63% due 03/18/25..................... 176,000 176,498
Telenet Group Holding NV:
11.50% due 06/15/14*(7)................ 196,000 168,560
-----------
454,769
-----------
Conglomerates -- 0.15%
Tyco International Group SA:
6.00% due 11/15/13..................... 160,000 165,047
-----------
Financial Services -- 1.89%
Aiful Corp.:
4.45% due 02/16/10*.................... 85,000 80,717
Aries Vermogensverwaltung GmbH:
9.60% due 10/25/14..................... 500,000 641,150
Canadian Oil Sands, Ltd.:
5.80% due 08/15/13*.................... 164,000 164,448
Diageo Capital PLC:
4.38% due 05/03/10..................... 166,000 160,505
EnCana Holdings Finance Corp.:
5.80% due 05/01/14..................... 80,000 80,577
HBOS Capital Funding LP:
6.85% due 03/23/09(11)................. 288,000 288,720
August 31, 2006 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 15
Principal Value
Amount (Note 2)
------------------------------------------------------------
FOREIGN BONDS (continued)
Financial Services (continued)
Hybrid Capital Funding I LP:
8.00% due 06/30/11(11).............. $260,000 $ 267,771
Nell AF SARL:
8.38% due 08/15/15*................. 200,000 200,250
SovRisc BV:
4.63% due 10/31/08*................. 174,000 172,281
----------
2,056,419
----------
Foreign Government Agencies -- 3.45%
Federal Republic of Brazil:
8.00% due 01/15/18.................. 250,000 274,500
10.50% due 07/14/14................. 70,000 87,885
Government of United Kingdom:
2.25% due 07/08/08*................. 123,000 117,467
Quebec Province Canada:
7.50% due 09/15/29.................. 224,000 280,111
Republic of Argentina:
5.59% due 08/03/12(1)(12)........... 250,000 175,625
8.28% due 12/31/33.................. 278,124 273,535
Republic of Turkey:
9.00% due 06/30/11.................. 65,000 71,175
11.88% due 01/15/30................. 600,000 895,500
Republic of Venezuela:
8.50% due 10/08/14.................. 35,000 39,077
9.25% due 09/15/27.................. 800,000 994,400
Russian Federation:
5.00% due 03/31/30*(7).............. 102,000 113,403
8.25% due 03/31/10.................. 417,778 436,829
United Mexican States:
7.50% due 04/08/33.................. 3,000 3,473
----------
3,762,980
----------
Insurance -- 0.47%
Aegon NV:
5.80% due 07/15/14(11).............. 189,000 157,343
Fairfax Financial Holdings, Ltd.:
8.25% due 10/01/15.................. 135,000 112,556
ING Groep NV:
5.78% due 12/08/15(11).............. 125,000 124,143
Montpelier Re Holdings, Ltd.:
6.13% due 08/15/13.................. 121,000 115,039
----------
509,081
----------
Leisure & Tourism -- 0.28%
Royal Caribbean Cruises, Ltd.:
7.00% due 06/15/13.................. 100,000 100,407
7.25% due 06/15/16.................. 200,000 200,231
----------
300,638
----------
Machinery -- 0.07%
Atlas Copco AB:
6.50% due 04/01/08*................. 73,000 74,119
----------
Manufacturing -- 0.09%
Siemens Financieringmaatschappij NV:
5.75% due 10/17/16*................. 95,000 96,148
----------
Metals -- 0.32%
Inco, Ltd.:
7.20% due 09/15/32.................. 110,000 116,447
Noranda, Inc.:
6.00% due 10/15/15.................. 233,000 232,805
----------
349,252
----------
Mining -- 0.21%
Vale Overseas, Ltd.:
6.25% due 01/11/16.................. 230,000 228,275
----------
Principal Value
Amount (Note 2)
---------------------------------------------------------------
Oil & Gas -- 0.24%
Nexen, Inc.:
5.88% due 03/10/35................... $ 95,000 $ 88,876
Shell International Finance BV:
5.63% due 06/27/11................... 170,000 173,365
-----------
262,241
-----------
Paper/Forest Products -- 0.09%
Stora Enso Oyj:
7.25% due 04/15/36*.................. 100,000 102,740
-----------
Railroads & Equipment -- 0.17%
Canadian National Railway Co.:
6.38% due 10/15/11................... 180,000 188,197
-----------
Real Estate -- 0.16%
Brascan Corp.:
8.13% due 12/15/08................... 166,000 174,865
-----------
Telecommunications -- 0.75%
America Movil SA de CV:
6.38% due 03/01/35................... 91,000 86,949
Intelsat Bermuda, Ltd.:
9.25% due 06/15/16*.................. 100,000 104,000
Telecom Italia Capital SA:
5.25% due 11/15/13................... 117,000 111,458
6.38% due 11/15/33................... 243,000 229,445
7.20% due 07/18/36................... 95,000 99,219
Telus Corp.:
7.50% due 06/01/07................... 133,000 134,849
8.00% due 06/01/11................... 45,000 49,485
-----------
815,405
-----------
Total Foreign Bonds
(Cost $9,927,603).................... 10,287,298
-----------
UNITED STATES GOVERNMENT BONDS -- 51.40%
Government Agencies -- 31.19%
Federal Home Loan Bank:
3.90% due 02/25/08................... 365,000 358,792
4.00% due 01/23/07................... 300,000 298,386
4.50% due 09/08/08................... 440,000 435,333
Federal Home Loan Mtg. Corp.:
4.35% due 06/02/08................... 420,000 414,066
4.45% due 03/06/08................... 205,000 202,937
4.50% due 11/01/18................... 620,092 596,745
4.50% due 02/01/19................... 690,710 663,785
4.50% due 07/01/19................... 536,193 515,291
4.50% due 08/01/20................... 443,336 425,763
5.00% due 03/01/19................... 289,492 283,750
5.00% due 10/01/33................... 69,053 66,471
5.00% due 06/01/34................... 351,497 337,914
5.00% due 06/01/34................... 1,009,824 970,799
5.00% due 12/01/34................... 465,926 447,920
5.00% due 08/01/35................... 137,059 131,479
5.00% due 08/01/35................... 1,422,012 1,364,122
5.00% due 11/01/35................... 1,066,567 1,023,146
5.50% due 11/01/18................... 320,145 319,392
5.50% due 10/01/33................... 782,434 770,944
5.50% due 07/01/34................... 533,064 524,702
5.50% due 02/01/35................... 605,216 594,656
5.50% due 07/01/35................... 1,534,656 1,507,877
5.74% due 08/01/36(1)................ 2,650,000 2,652,704
6.00% due 07/01/35................... 705,269 706,628
6.50% due 12/01/32................... 463,776 472,561
6.50% due 01/01/36................... 1,065,477 1,082,414
6.50% due 02/01/36................... 718,154 729,604
6.50% due 03/01/36................... 506,626 514,679
6.50% due September TBA.............. 1,500,000 1,523,437
7.00% due 11/01/16................... 47,353 48,634
7.00% due 07/01/32................... 68,428 70,432
7.50% due 12/01/30................... 8,663 8,980
16 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount (Note 2)
-----------------------------------------------------------------------
UNITED STATES GOVERNMENT BONDS (continued)
Government Agencies (continued)
7.50% due 04/01/31........................... $ 107,131 $ 110,953
8.00% due 02/01/30........................... 12,023 12,660
8.00% due 07/01/30........................... 2,627 2,767
Federal Home Loan Mtg. Corp. Reference REMIC,
Series R004, Class AL:
5.13% due 12/15/13........................... 295,494 292,167
Federal Home Loan Mtg. Corp. Reference REMIC,
Series R005, Class AB:
5.50% due 12/15/18........................... 589,187 587,166
Federal National Mtg. Assoc.:
3.88% due 02/01/08........................... 315,000 309,560
4.50% due 06/01/18........................... 161,288 155,382
4.75% due 12/15/10........................... 202,000 199,805
5.00% due 09/01/18........................... 53,341 52,380
5.00% due 10/01/18........................... 53,474 52,511
5.00% due 10/01/18........................... 547,102 537,245
5.00% due 12/01/18........................... 266,723 261,917
5.00% due 03/01/20........................... 398,886 391,212
5.00% due 11/01/33........................... 29,537 28,406
5.00% due 03/01/34........................... 574,313 551,587
5.00% due 04/01/34........................... 1,773,895 1,703,700
5.00% due 05/01/35........................... 133,432 127,872
5.25% due 08/01/12........................... 314,000 313,853
5.50% due 02/01/36(1)........................ 533,757 532,174
5.50% due 10/01/17........................... 115,118 114,975
5.50% due 05/01/18........................... 111,170 110,984
5.50% due 11/01/19........................... 426,822 426,110
5.50% due 12/01/33........................... 730,096 718,810
5.50% due 05/01/34........................... 283,593 279,209
5.50% due 12/01/35........................... 1,086,791 1,067,075
6.00% due 06/25/16 REMIC..................... 481,693 486,945
6.00% due 09/01/16........................... 195,457 197,832
6.00% due 12/01/16........................... 45,668 46,223
6.00% due 12/01/33........................... 646,406 648,717
6.00% due 08/01/34........................... 1,040,304 1,044,449
6.00% due 10/01/34........................... 334,174 335,061
6.00% due 04/01/35........................... 978,953 982,453
6.50% due 02/01/17........................... 78,250 79,654
6.50% due 03/01/17........................... 92,368 94,025
6.50% due 04/01/29........................... 93,328 95,280
6.50% due 06/01/29........................... 168,639 172,168
6.50% due 07/01/32........................... 254,409 259,076
7.00% due 09/01/31........................... 203,161 209,033
7.50% due 11/01/14........................... 1,781 1,808
Government National Mtg. Assoc.:
6.50% due 06/15/29........................... 29,935 30,678
6.50% due 10/15/32........................... 286,038 292,662
7.00% due 09/15/28........................... 23,347 24,090
-----------
34,004,977
-----------
Government Obligations -- 20.21%
United States Treasury Bonds:
4.50% due 02/15/36........................... 1,093,000 1,028,701
5.38% due 02/15/31........................... 1,188,000 1,263,920
6.25% due 08/15/23........................... 3,266,000 3,744,929
7.25% due 08/15/22........................... 3,072,000 3,845,281
United States Treasury Notes:
3.63% due 04/30/07........................... 3,000,000 2,971,407
3.75% due 03/31/07........................... 9,000,000 8,928,981
4.50% due 02/28/11........................... 88,000 87,313
5.13% due 05/15/16........................... 151,000 155,288
-----------
22,025,820
-----------
Total United States Government Bonds
(Cost $56,458,117)........................... 56,030,797
-----------
Principal
Amount/ Value
Shares (Note 2)
- ---------------------------------------------------------------------------------------
PREFERRED STOCK -- 0.36%
Financial Services -- 0.36%
Fannie Mae 7.63%(1)...................................... 2,370 $ 126,202
General Electric Capital Corp. 8.00%(8).................. 12,000 272,640
------------
398,842
------------
Total Preferred Stock
(Cost $428,535)......................................... 398,842
------------
Total Long-Term Investment Securities
(Cost $99,675,684)...................................... 99,848,171
------------
SHORT-TERM INVESTMENT SECURITIES -- 9.16%
COMMERCIAL PAPER -- 4.59%
Rabobank USA Financial Corp.:
5.27% due 09/01/06...................................... $ 5,000,000 5,000,000
------------
UNITED STATES TREASURY BILLS -- 4.57%
United States Treasury Bills:
4.96% due 09/21/06...................................... 5,000,000 4,986,319
------------
Total Short-Term Investment Securities
(Cost $9,986,319)....................................... 9,986,319
------------
REPURCHASE AGREEMENT -- 1.70%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $1,854,249 and collateralized
by Federal Home Loan Bank Notes, bearing interest at
3.63%, due 01/15/08 and having an approximate value
of $1,909,883 (Cost $1,854,000)......................... 1,854,000 1,854,000
------------
TOTAL INVESTMENTS
(Cost $111,516,003)(11)................................. 102.46% 111,688,490
Liabilities in excess of other assets...................... (2.46)% (2,681,577)
----------- ------------
NET ASSETS -- 100.00% $109,006,913
=========== ============
Bond & Notes Sold Short -- (1.35)%
U.S. Government Agencies -- (1.35)%
Federal Home Loan Mtg. Corp. 5.50% due September TBA
(Proceeds $(1,461,973))................................. $(1,500,000) $ (1,472,813)
============
- --------
REMIC- Real Estate Mortgage Investment Conduits
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
+ Non-income producing security
* 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, 2006, the aggregate value of
these securities was $6,976,516 representing 6.40% of net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(1)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of August 31, 2006.
(2)Variable rate security -- the rate reflected is as of August 31, 2006,
maturity date reflects next reset date.
(3)Variable rate security -- the rate reflected is as of August 31, 2006,
maturity date reflects stated maturity date.
(4)Bond in default
(5)Company has filed for Chapter 11 bankruptcy protection.
(6)Fair valued security (see Note 2)
(7)"Step Up" security where the rate increases ("steps up") at a predetermined
rate. Rate shown reflects the increased rate.
(8)Commercial Mortgage-Backed Security
(9)Collateralized Mortgage Obligation
(10)See Note 5 for costs of investments on a tax basis.
(11)Perpetual maturity. The maturity date shown represents the next call date.
August 31, 2006 CORE BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 17
(12)The par value of this security is at a ratio of 75.00/100
(13)Illiquid security
(14)To the extent permitted by the Statement of Additional Information, the
Core Bond Fund may invest in restricted securities. The Fund has no right
to demand registration of these securities. The 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, 2006, the
Core Bond Fund held the following restricted securities:
Market Value as a
Acquisition Principal Acquisition Market Value % of
Name Date Amount Cost Value Per Share Net Assets
- ----------------------- ----------- --------- ----------- ------- --------- ----------
ICO North America, Inc.
7.50% due 08/15/09.... 08/11/2005 $ 25,000 $25,000 $30,750 $123.00 0.03%
Southern Energy, Inc.
7.90% due 07/15/09.... 01/10/2006 150,000 - - - -
------- ----
$30,750 0.03%
======= ====
See Notes to Financial Statements
18 HIGH YIELD BOND FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2006
Industry Allocation*
Financial Services................ 19.24%
Telecommunications................ 9.94%
Oil & Gas......................... 8.69%
Broadcasting...................... 7.53%
Airlines.......................... 6.23%
Utilities -- Electric............. 5.83%
Leisure & Tourism................. 4.92%
Commercial Services............... 3.60%
Repurchase Agreement.............. 3.15%
Utilities -- Gas, Pipeline........ 3.13%
Paper/Forest Products............. 2.59%
Retail............................ 1.81%
Metals............................ 1.77%
Chemical.......................... 1.68%
Building Materials................ 1.45%
Multimedia........................ 1.41%
Healthcare........................ 1.38%
Real Estate Investment Trusts..... 1.37%
Funeral Services.................. 1.32%
Hospital Management............... 1.25%
Foods............................. 1.18%
Drugs............................. 1.05%
Insurance......................... 0.94%
Semiconductors.................... 0.86%
Electronics/Electrical Equipment.. 0.73%
Advertising....................... 0.71%
Aerospace/Defense................. 0.70%
Pollution Control................. 0.66%
Information Processing -- Software 0.60%
Automotove........................ 0.55%
Machinery......................... 0.55%
Household Products................ 0.51%
Freight........................... 0.44%
Coal.............................. 0.33%
Beverages......................... 0.30%
Manufacturing..................... 0.29%
Hospital Supplies................. 0.24%
Textile -- Products............... 0.21%
Appliances/Furnishings............ 0.19%
Information Processing -- Services 0.17%
Conglomerates..................... 0.11%
Railroads & Equipment............. 0.07%
Entertainment..................... 0.05%
-----
99.73%
=====
Credit Quality+#
A......... 0.60%
BBB....... 0.78%
BB........ 26.85%
B......... 42.09%
CCC....... 17.95%
Below C... 3.34%
Not Rated@ 8.39%
------
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 & Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
August 31, 2006 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS 19
Principal Value
Amount (Note 2)
- ----------------------------------------------------------------------------------
CORPORATE BONDS -- 72.93%
Advertising -- 0.71%
Affinity Group, Inc.:
9.00% due 02/15/12....................................... $ 300,000 $ 300,000
Vertis, Inc.:
9.75% due 04/01/09....................................... 50,000 50,625
10.88% due 06/15/09...................................... 400,000 404,000
----------
754,625
----------
Aerospace/Defense -- 0.70%
Decrane Aircraft Holdings, Inc.:
12.00% due 09/30/08...................................... 220,000 164,450
L-3 Communications Corp.:
6.13% due 07/15/13....................................... 400,000 385,000
6.38% due 10/15/15....................................... 200,000 192,500
----------
741,950
----------
Airlines -- 6.23%
American Airlines, Inc., Series 2001-1A2 Pass Through:
6.82% due 05/23/11....................................... 1,400,000 1,375,500
Atlas Air, Inc.:
7.38% due 07/02/19....................................... 68,908 68,563
Atlas Air, Inc., Series 1999-1A2 Pass Through:
6.88% due 07/02/09....................................... 399,525 387,539
Atlas Air, Inc., Series 1999-1B Pass Through, Class B:
7.63% due 01/02/15....................................... 862,020 887,880
Atlas Air, Inc., Series 1999-1C:
8.77% due 01/02/11....................................... 87,400 74,290
Atlas Air, Inc., Series 1999-A1 Pass Through, Class A:
7.20% due 01/02/19....................................... 458,723 455,282
Atlas Air, Inc., Series 2000-1A Pass Through:
8.71% due 01/02/19....................................... 1,186,537 1,228,066
Atlas Air, Inc., Series 2001B Pass Through:
9.06% due 01/02/14....................................... 197,175 216,893
Continental Airlines, Inc., Series 1999-1A Pass Through:
6.55% due 08/02/20....................................... 519,821 525,935
Continental Airlines, Inc., Series 1999-1C Pass Through:
6.95% due 08/02/09....................................... 108,959 105,977
Continental Airlines, Inc., Series 1999-2C1 Pass Through:
7.73% due 03/15/11....................................... 186,533 176,236
Continental Airlines, Inc., Series 2000-2B:
8.31% due 10/02/19....................................... 80,982 80,485
Delta Air Lines, Inc.:
9.50% due 11/18/08*(2)(5)................................ 175,000 193,375
Delta Air Lines, Inc. Pass Through Certs.:
7.57% due 11/18/10(5).................................... 375,000 376,406
Northwest Airlines, Inc. Pass Through Certs. Series 1A-1:
7.04% due 04/01/22(5).................................... 336,745 332,536
United Airlines, Inc. Pass Through Certs.:
6.20% due 09/01/08....................................... 117,865 118,012
----------
6,602,975
----------
Appliances/Furnishings -- 0.19%
Xerox Corp:
6.75% due 02/01/17....................................... 200,000 200,500
----------
Automotive -- 0.55%
Cooper-Standard Automotive, Inc.:
8.38% due 12/15/14....................................... 90,000 68,175
Exide Corp.:
10.00% due 03/15/25+(1)(8)............................... 300,000 0
General Motors Corp.:
8.25% due 07/15/23....................................... 625,000 518,750
Venture Holdings Trust:
11.00% due 06/01/07+(2)(8)(11)........................... 50,000 63
----------
586,988
----------
Beverages -- 0.30%
Le-Natures, Inc.:
9.00% due 06/15/13*...................................... 300,000 313,500
----------
Principal Value
Amount (Note 2)
-------------------------------------------------------------
Broadcasting -- 6.54%
Adelphia Communications Corp.:
10.25% due 06/15/11+(2)(5).......... $ 100,000 $ 62,750
Allbritton Communications Co.:
7.75% due 12/15/12.................. 425,000 420,219
Charter Communications Holdings LLC:
9.63% due 11/15/09.................. 1,075,000 978,250
9.92% due 04/01/11(3)............... 350,000 259,000
10.25% due 01/15/10................. 50,000 41,500
10.75% due 10/01/09................. 550,000 503,250
11.13% due 01/15/11................. 1,340,000 1,031,800
CSC Holdings, Inc.:
7.63% due 04/01/11.................. 210,000 214,725
8.13% due 08/15/09.................. 200,000 206,500
Fisher Communications, Inc.:
8.63% due 09/15/14.................. 375,000 385,313
Insight Communications Co., Inc.:
12.25% due 02/15/11(3).............. 565,000 600,312
LIN Television Corp.:
6.50% due 05/15/13.................. 450,000 415,125
Medianews Group, Inc.:
6.38% due 04/01/14.................. 15,000 13,275
6.88% due 10/01/13.................. 110,000 100,650
Nexstar Finance, Inc.:
7.00% due 01/15/14.................. 400,000 358,000
Paxson Communications Corp.:
11.76% due 01/15/13*(9)............. 800,000 806,000
Young Broadcasting, Inc.:
8.75% due 01/15/14.................. 225,000 191,250
10.00% due 03/01/11................. 375,000 346,875
----------
6,934,794
----------
Building Materials -- 1.45%
Associated Materials, Inc.:
9.75% due 04/15/12.................. 425,000 416,500
11.25% due 03/01/14(3).............. 225,000 122,625
Dayton Superior Corp.:
10.75% due 09/15/08................. 542,000 566,390
13.00% due 06/15/09................. 250,000 235,000
Interline Brands, Inc.:
8.13% due 06/15/14.................. 200,000 201,500
----------
1,542,015
----------
Chemical -- 0.85%
BCI US Finance Corp.:
11.01% due 07/15/10*(9)............. 175,000 178,500
Equistar Chemicals LP:
10.63% due 05/01/11................. 200,000 215,000
Nalco Co.:
7.75% due 11/15/11.................. 100,000 101,750
8.88% due 11/15/13.................. 110,000 113,300
Rockwood Specialties Group, Inc.:
7.50% due 11/15/14.................. 150,000 147,375
10.63% due 05/15/11................. 55,000 58,987
Tronox Worldwide LLC:
9.50% due 12/01/12.................. 85,000 87,338
----------
902,250
----------
Coal -- 0.11%
Alpha Natural Resources, Inc. LLC:
10.00% due 06/01/12................. 110,000 117,700
----------
Commercial Services -- 3.11%
Avis Budget Car Rental LLC:
7.63% due 05/15/14*................. 75,000 71,250
7.91% due 05/15/14*(9).............. 125,000 122,187
Corrections Corp. of America:
6.25% due 03/15/13.................. 200,000 193,250
DI Finance LLC:
9.50% due 02/15/13.................. 472,000 487,340
20 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount (Note 2)
---------------------------------------------------------------
CORPORATE BONDS (continued)
Commercial Services (continued)
FTI Consulting, Inc.:
7.63% due 06/15/13.................... $ 100,000 $ 100,750
H&E Equipment Services, Inc.:
8.38% due 07/15/16*................... 275,000 279,125
Mobile Mini, Inc.:
9.50% due 07/01/13.................... 65,000 69,550
Mobile Services Group, Inc.:
9.75% due 08/01/14*................... 150,000 152,250
Monitronics International, Inc.:
11.75% due 09/01/10................... 350,000 346,500
NationsRent Cos., Inc.:
9.50% due 05/01/15.................... 225,000 264,312
Owens Brockway Glass Container, Inc.:
8.25% due 05/15/13.................... 150,000 151,875
Owens- Brockway Glass Container, Inc.:
8.88% due 02/15/09.................... 286,000 293,865
Rent-Way, Inc.:
11.88% due 06/15/10................... 300,000 335,250
United Rentals NA, Inc.:
7.75% due 11/15/13.................... 450,000 430,875
----------
3,298,379
----------
Conglomerates -- 0.11%
Park-Ohio Industries, Inc.:
8.38% due 11/15/14.................... 125,000 113,125
----------
Drugs -- 0.27%
Mylan Laboratories, Inc.:
6.38% due 08/15/15.................... 300,000 289,125
----------
Electronics/Electrical Equipment -- 0.66%
Fisher Scientific International, Inc.:
6.75% due 08/15/14.................... 150,000 152,063
Sanmina-SCI Corp.:
6.75% due 03/01/13.................... 125,000 119,688
Solectron Corp.:
8.00% due 03/15/16*................... 175,000 170,187
Xerox Corp.:
7.63% due 06/15/13.................... 250,000 258,437
----------
700,375
----------
Entertainment -- 0.05%
Pokagon Gaming Authority:
10.38% due 06/15/14*.................. 50,000 52,875
----------
Financial Services -- 8.91%
AAC Group Holding Corp.:
10.25% due 10/01/12(3)................ 275,000 220,688
AMR HoldCo, Inc.:
10.00% due 02/15/15................... 175,000 186,375
Chukchansi Economic Development Auth.:
8.78% due 11/15/12*(9)................ 175,000 180,250
Consolidated Communications Illinois:
9.75% due 04/01/12.................... 291,000 304,823
ESI Tractebel Acquisition Corp.:
7.99% due 12/30/11.................... 146,000 151,137
Ford Motor Credit Co.:
5.80% due 01/12/09.................... 875,000 838,211
9.96% due 04/15/12(9)................. 775,000 819,299
General Motors Acceptance Corp.:
6.75% due 12/01/14.................... 850,000 814,884
6.88% due 09/15/11.................... 1,900,000 1,871,270
6.88% due 08/28/12.................... 329,000 321,171
7.25% due 03/02/11.................... 300,000 299,315
7.43% due 12/01/14(9)................. 640,000 632,169
7.75% due 01/19/10.................... 1,125,000 1,143,510
Hexion US Finance Corp:
9.00% due 07/15/14.................... 370,000 371,850
MedCath Holdings Corp.:
9.88% due 07/15/12.................... 250,000 265,000
MXEnergy Holdings, Inc.:
13.02% due 08/01/11*(9)............... 425,000 415,437
Principal Value
Amount (Note 2)
-------------------------------------------------------------
Financial Services (continued)
Nexstar Finance Holdings LLC:
11.38% due 04/01/13(3).............. $ 200,000 $ 165,000
PCA LLC:
11.88% due 08/01/09(2)(8)........... 400,000 82,000
Southern Star Central Corp.:
6.75% due 03/01/16*................. 125,000 122,656
Terra Capital, Inc.:
11.50% due 06/01/10................. 228,000 247,950
----------
9,452,995
----------
Foods -- 1.18%
Dole Foods Co., Inc.:
8.88% due 03/15/11.................. 275,000 268,125
JBS SA:
10.50% due 08/04/16*(1)............. 250,000 253,125
Smithfield Foods, Inc.:
7.75% due 05/15/13.................. 175,000 178,937
Wornick Co.:
10.88% due 07/15/11................. 575,000 546,250
----------
1,246,437
----------
Freight -- 0.22%
PHI, Inc.:
7.13% due 04/15/13*................. 250,000 238,125
----------
Funeral Services -- 1.32%
Alderwoods Group, Inc.:
7.75% due 09/15/12.................. 75,000 79,500
Carriage Services, Inc.:
7.88% due 01/15/15.................. 262,000 254,140
Service Corp. International:
6.50% due 03/15/08.................. 325,000 325,000
6.75% due 04/01/16.................. 325,000 308,750
8.00% due 06/15/17*................. 200,000 191,500
Stewart Enterprises Inc.:
6.25% due 02/15/13.................. 275,000 243,375
----------
1,402,265
----------
Healthcare -- 1.29%
CDRV Investors, Inc.:
9.63% due 01/01/15(3)............... 375,000 270,000
Community Health Systems, Inc.:
6.50% due 12/15/12.................. 115,000 107,525
Concentra Operating Corp.:
9.13% due 06/01/12.................. 50,000 52,062
Encore Medical Corp.:
9.75% due 10/01/12.................. 100,000 109,750
Genesis HealthCare Corp.:
2.50% due 03/15/25*................. 125,000 130,000
8.00% due 10/15/13.................. 100,000 103,750
Inverness Medical Innovations, Inc.:
8.75% due 02/15/12.................. 350,000 346,500
Multiplan, Inc.:
10.38% due 04/15/16*................ 250,000 251,875
----------
1,371,462
----------
Hospital Management -- 1.25%
HCA, Inc.:
6.30% due 10/01/12.................. 1,504,000 1,259,600
6.95% due 05/01/12.................. 75,000 65,625
----------
1,325,225
----------
Hospital Supplies -- 0.24%
Universal Hospital Services, Inc.:
10.13% due 11/01/11................. 250,000 258,750
----------
Household Products -- 0.51%
ACCO Brands Corp.:
7.63% due 08/15/15.................. 75,000 71,063
August 31, 2006 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 21
Principal Value
Amount (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS (continued)
Household Products (continued)
Jostens Holding Corp.:
10.25% due 12/01/13(3).................... $ 275,000 $ 222,062
Prestige Brands, Inc.:
9.25% due 04/15/12........................ 50,000 49,750
Visant Holding Corp.:
8.75% due 12/01/13*....................... 200,000 196,000
----------
538,875
----------
Information Processing - Services -- 0.17%
Sunguard Data Systems, Inc.:
9.13% due 08/15/13........................ 175,000 180,688
----------
Information Processing - Software -- 0.60%
Activant Solutions, Inc.:
9.50% due 05/01/16*....................... 175,000 164,063
Spheris, Inc.:
11.00% due 12/15/12....................... 200,000 185,000
SS&C Technologies, Inc.:
11.75% due 12/01/13*...................... 275,000 287,375
----------
636,438
----------
Insurance -- 0.35%
Crum & Forster Holdings Corp.:
10.38% due 06/15/13....................... 275,000 273,625
Presidental Life Corp.:
7.88% due 02/15/09........................ 100,000 93,000
----------
366,625
----------
Leisure & Tourism -- 4.40%
AMC Entertainment, Inc.:
9.88% due 02/01/12........................ 175,000 178,938
Cinemark, Inc.:
9.75% due 03/15/14(3)..................... 225,000 175,500
Eldorado Casino Shreveport Capital Corp.:
10.00% due 08/01/12(4)(8)................. 429,222 390,592
Eldorado Resorts LLC:
9.00% due 04/15/14(1)(8).................. 475,000 475,000
Gaylord Entertainment Co.:
6.75% due 11/15/14........................ 250,000 237,500
K2, Inc.:
7.38% due 07/01/14........................ 75,000 72,750
MGM Mirage, Inc.:
5.88% due 02/27/14........................ 1,375,000 1,254,687
NPC International, Inc.:
9.50% due 05/01/14*....................... 300,000 290,250
Restaurant Co.:
10.00% due 10/01/13....................... 100,000 89,250
Riviera Holdings Corp.:
11.00% due 06/15/10....................... 150,000 157,875
Starwood Hotels & Resorts Worldwide, Inc.:
7.88% due 05/01/12........................ 250,000 270,625
Station Casinos, Inc.:
6.63% due 03/15/18........................ 125,000 111,563
TDS Investor Corp.:
9.88% due 09/01/14*....................... 75,000 73,312
10.02% due 09/01/14*(9)................... 75,000 73,125
11.88% due 09/01/16*...................... 300,000 292,500
True Temper Sports, Inc.:
8.38% due 09/15/11........................ 275,000 244,750
Waterford Gaming LLC:
8.63% due 09/15/12*....................... 266,000 280,298
----------
4,668,515
----------
Machinery -- 0.55%
Case New Holland, Inc.:
6.00% due 06/01/09........................ 300,000 294,000
Dresser-Rand Group, Inc.:
7.38% due 11/01/14........................ 198,000 190,575
Principal Value
Amount (Note 2)
----------------------------------------------------------------
Machinery (continued)
Stewart & Stevenson LLC:
10.00% due 07/15/14*................... $ 100,000 $ 102,500
----------
587,075
----------
Manufacturing -- 0.29%
Covalence Specialty Materials Corp.:
10.25% due 03/01/16*................... 125,000 120,000
Indalex Holding Corp.:
11.50% due 02/01/14*................... 175,000 186,375
----------
306,375
----------
Metals -- 1.52%
Allegheny Technologies, Inc.:
8.38% due 12/15/11..................... 100,000 105,750
Chaparral Steel Co.:
10.00% due 07/15/13.................... 300,000 331,500
Crown Cork & Seal Co., Inc.:
7.38% due 12/15/26..................... 350,000 316,750
8.00% due 04/15/23..................... 575,000 543,375
Freeport McMoRan Resources:
7.00% due 02/15/08..................... 125,000 124,688
Metals USA, Inc.:
11.13% due 12/01/15*................... 175,000 192,937
Renco Metals, Inc.:
11.50% due 07/01/03+(1)(5)(6)(8)....... 210,000 0
----------
1,615,000
----------
Multimedia -- 0.67%
Cablevision Systems Corp.:
8.00% due 04/15/12..................... 155,000 155,775
Charter Communications Holdings II LLC:
10.25% due 09/15/10.................... 350,000 353,500
Haights Cross Operating Co.:
11.75% due 08/15/11.................... 200,000 206,250
----------
715,525
----------
Oil & Gas -- 7.55%
Allis-Chalmers Energy, Inc.:
9.00% due 01/15/14*.................... 300,000 305,250
Atlas Pipeline Partners LP:
8.13% due 12/15/15..................... 250,000 255,000
Belden & Blake Corp.:
8.75% due 07/15/12..................... 125,000 128,125
Brigham Exploration Co.:
9.63% due 05/01/14*.................... 300,000 297,750
Chaparral Energy, Inc.:
8.50% due 12/01/15..................... 500,000 503,750
Chesapeake Energy Corp.:
6.25% due 01/15/18..................... 200,000 184,500
6.63% due 01/15/16..................... 1,225,000 1,176,000
6.88% due 11/15/20..................... 125,000 117,812
Colorado Interstate Gas Co.:
6.85% due 06/15/37..................... 175,000 176,008
Compton Petroleum Finance Corp.:
7.63% due 12/01/13..................... 250,000 243,750
Dynegy-Roseton/Danskammer:
7.67% due 11/08/16..................... 275,000 270,875
El Paso Production Holding Co.:
7.75% due 06/01/13..................... 1,350,000 1,370,250
Encore Acquisition Co.:
6.00% due 07/15/15..................... 100,000 92,750
6.25% due 04/15/14..................... 50,000 47,000
Exco Resources, Inc.:
7.25% due 01/15/11..................... 170,000 165,325
Hanover Compressor Co.:
8.63% due 12/15/10..................... 150,000 156,000
Hilcorp Energy LP:
7.75% due 11/01/15*.................... 425,000 417,562
10.50% due 09/01/10*................... 146,000 158,410
22 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount (Note 2)
---------------------------------------------------------------
CORPORATE BONDS (continued)
Oil & Gas (continued)
Newfield Exploration Co.:
6.63% due 09/01/14..................... $150,000 $ 146,625
Oslo Seismic Services, Inc.:
8.28% due 06/01/11..................... 198,358 203,049
Pride International, Inc.:
7.38% due 07/15/14..................... 75,000 76,313
Quicksilver Resources, Inc.:
7.13% due 04/01/16..................... 150,000 143,250
Seitel, Inc.:
11.75% due 07/15/11.................... 425,000 490,875
Tennessee Gas Pipeline Co.:
7.00% due 10/15/28..................... 350,000 341,220
Transmeridian Exploration, Inc.:
12.00% due 12/15/10.................... 275,000 276,375
Verasun Energy Corp.:
9.88% due 12/15/12..................... 250,000 265,625
----------
8,009,449
----------
Paper/Forest Products -- 1.66%
Bowater, Inc.:
6.50% due 06/15/13..................... 775,000 689,750
Caraustar Industries, Inc.:
7.38% due 06/01/09..................... 350,000 327,250
Pliant Corp.:
11.13% due 09/01/09.................... 767,000 740,155
----------
1,757,155
----------
Pollution Control -- 0.66%
Allied Waste North America, Inc.:
8.50% due 12/01/08..................... 675,000 702,000
----------
Real Estate Investment Trusts -- 1.37%
National Health Investors, Inc.:
7.30% due 07/16/07..................... 200,000 200,430
Omega Healthcare Investors, Inc.:
7.00% due 04/01/14..................... 325,000 319,313
Senior Housing Properties Trust:
8.63% due 01/15/12..................... 525,000 560,437
Trustreet Properties, Inc.:
7.50% due 04/01/15..................... 375,000 371,719
----------
1,451,899
----------
Retail -- 1.37%
Dave & Buster's, Inc:
11.25% due 03/15/14*................... 200,000 186,000
Ferrellgas LP:
6.75% due 05/01/14..................... 350,000 336,875
General Nutrition Centers, Inc.:
8.50% due 12/01/10..................... 200,000 191,000
MTS, Inc.:
9.38% due 03/15/09(1)(2)(4)(5)(8)(10).. 16,572 4,309
Neiman-Marcus Group, Inc.:
9.00% due 10/15/15..................... 250,000 265,625
Rite Aid Corp.:
8.13% due 05/01/10..................... 250,000 250,937
Saks, Inc.:
9.88% due 10/01/11..................... 200,000 216,500
----------
1,451,246
----------
Semiconductors -- 0.23%
Advanced Micro Devices, Inc.:
7.75% due 11/01/12..................... 244,000 244,915
----------
Telecommunications -- 5.88%
American Cellular Corp.:
10.00% due 08/01/11.................... 600,000 624,000
Centennial Communications Corp.:
10.00% due 01/01/13.................... 54,000 53,865
10.13% due 06/15/13.................... 175,000 184,625
11.26% due 01/01/13(9)................. 250,000 258,125
Cincinnati Bell Telephone Co.:
7.18% due 12/15/23..................... 50,000 50,250
7.20% due 11/29/23..................... 275,000 266,750
Principal Value
Amount (Note 2)
----------------------------------------------------------------
Telecommunications (continued)
Cincinnati Bell, Inc.:
7.00% due 02/15/15.................... $ 175,000 $ 170,625
7.25% due 06/15/23.................... 50,000 47,750
ICO North America, Inc. (convertible):
7.50% due 08/15/09(1)(8)(10).......... 250,000 307,500
Insight Midwest LP:
9.75% due 10/01/09.................... 100,000 101,750
LCI International, Inc.:
7.25% due 06/15/07.................... 1,650,000 1,650,000
Qwest Corp.:
7.50% due 10/01/14*................... 250,000 254,375
Rural Cellular Corp.:
8.25% due 03/15/12*................... 275,000 281,875
9.75% due 01/15/10.................... 500,000 497,500
11.24% due 11/01/12(9)................ 225,000 231,750
Windstream Corp.:
8.63% due 08/01/16*................... 875,000 925,312
Zeus Special Subsidiary, Ltd.:
9.25% due 02/01/15*(3)................ 475,000 325,375
-----------
6,231,427
-----------
Textile - Products -- 0.21%
Collins & Aikman Floor Cover:
9.75% due 02/15/10.................... 225,000 221,063
-----------
Utilities - Electric -- 5.57%
AES Corp.:
8.75% due 05/15/13*................... 450,000 483,187
Calpine Corp.:
8.75% due 07/15/13*(2)(5)............. 2,968,000 2,938,320
Edison Mission Energy:
7.50% due 06/15/13*................... 250,000 250,000
7.75% due 06/15/16*................... 100,000 100,000
Mirant Americas Generation LLC:
8.30% due 05/01/11.................... 200,000 200,000
Mission Energy Holding Co.:
13.50% due 07/15/08................... 950,000 1,062,812
NRG Energy, Inc.:
7.38% due 02/01/16.................... 675,000 664,875
Reliant Energy, Inc.:
6.75% due 12/15/14.................... 75,000 70,688
Reliant Resources, Inc.:
9.50% due 07/15/13.................... 134,000 139,360
Southern Energy, Inc.:
7.90% due 07/15/09+(1)(8)(10)......... 1,225,000 0
-----------
5,909,242
-----------
Utilities - Gas, Pipeline -- 3.13%
Copano Energy LLC:
8.13% due 03/01/16.................... 225,000 227,813
El Paso Natural Gas Co.:
7.63% due 08/01/10.................... 50,000 51,375
8.63% due 01/15/22.................... 525,000 592,290
Markwest Energy Partners LP:
6.88% due 11/01/14.................... 200,000 187,500
NGC Corp. Capital Trust I:
8.32% due 06/01/27.................... 1,125,000 981,562
Pacific Energy Partners LP:
6.25% due 09/15/15.................... 194,000 189,635
7.13% due 06/15/14.................... 281,000 283,810
Transcontinental Gas Pipe Line Corp.:
7.00% due 08/15/11.................... 75,000 76,594
8.88% due 07/15/12.................... 125,000 138,594
Williams Cos., Inc.:
7.88% due 09/01/21.................... 575,000 585,062
-----------
3,314,235
-----------
Total Corporate Bonds
(Cost $76,319,887).................... 77,354,182
-----------
August 31, 2006 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 23
Principal Value
Amount (Note 2)
----------------------------------------------------------------------------
FOREIGN BONDS & NOTES -- 8.71%
Broadcasting -- 0.99%
Telenet Group Holding NV:
11.50% due 06/15/14*(3)............................ $1,220,000 $1,049,200
----------
Chemical -- 0.83%
Rhodia SA:
8.88% due 06/01/11................................. 864,000 883,440
----------
Coal -- 0.22%
Adaro Finance B.V.:
8.50% due 12/08/10*................................ 225,000 228,375
----------
Commercial Services -- 0.43%
North American Energy Partners, Inc.:
8.75% due 12/01/11................................. 135,000 135,000
9.00% due 06/01/10................................. 300,000 318,000
----------
453,000
----------
Drugs -- 0.78%
Elan Finance PLC/ Elan Finance Corp.:
7.75% due 11/15/11................................. 625,000 600,000
9.41% due 11/15/11(9).............................. 225,000 227,250
----------
827,250
----------
Electronics/Electrical Equipment -- 0.07%
Celestica, Inc.:
7.63% due 07/01/13................................. 75,000 73,688
----------
Financial Services -- 0.90%
Bluewater Finance, Ltd.:
10.25% due 02/15/12................................ 300,000 301,125
Nell AF SARL:
8.38% due 08/15/15*................................ 650,000 650,812
----------
951,937
----------
Freight -- 0.22%
Ultrapetrol Bahamas, Ltd.:
9.00% due 11/24/14................................. 250,000 230,000
----------
Insurance -- 0.59%
Fairfax Financial Holdings, Ltd.:
7.75% due 04/26/12................................. 193,000 164,050
8.25% due 10/01/15................................. 550,000 458,562
----------
622,612
----------
Leisure & Tourism -- 0.47%
Corporacion Interamericana de Entretenimiento SA:
8.88% due 06/14/15*................................ 299,000 291,525
Grupo Posadas SA de CV:
8.75% due 10/04/11*................................ 200,000 209,000
----------
500,525
----------
Metals -- 0.25%
CSN Islands VIII Corp.:
9.75% due 12/16/13*................................ 50,000 57,000
10.00% due 01/15/15*............................... 175,000 203,875
----------
260,875
----------
Paper/Forest Products -- 0.93%
Abitibi-Cons., Inc.:
8.55% due 08/01/10................................. 875,000 864,062
8.85% due 08/01/30................................. 150,000 127,875
----------
991,937
----------
Railroads & Equipment -- 0.07%
Grupo Transportacion Ferroviaria Mexicana SA DE CV:
9.38% due 05/01/12................................. 75,000 79,406
----------
Retail -- 0.31%
Jean Coutu Group, Inc.:
8.50% due 08/01/14................................. 125,000 119,225
Principal
Amount/ Value
Shares (Note 2)
---------------------------------------------------------------------------
Retail (continued)
Vitro Envases Norteamerica SA:
10.75% due 07/23/11*............................... $200,000 $ 210,000
----------
329,225
----------
Semiconductors -- 0.48%
Avago Technologies Finance Ltd.:
10.13% due 12/01/13*............................... 350,000 366,188
STATS ChipPAC, Ltd.:
6.75% due 11/15/11................................. 150,000 144,000
----------
510,188
----------
Telecommunications -- 1.17%
Intelsat Bermuda, Ltd.:
11.25% due 06/15/16*............................... 250,000 259,063
Intelsat, Ltd.:
9.25% due 06/15/16*................................ 500,000 520,000
Nordic Telephone Co Holding ApS:
8.88% due 05/01/16*................................ 325,000 338,000
Rogers Wireless, Inc.:
7.25% due 12/15/12................................. 125,000 128,906
----------
1,245,969
----------
Utilities - Electric -- 0.00%
AES Drax Energy, Ltd.:
11.50% due 08/30/10 +(2)(8)........................ 475,000 48
----------
Total Foreign Bonds & Notes
(Cost $9,507,426).................................. 9,237,675
----------
SUPRANATIONAL -- 0.15%
Semiconductors -- 0.15%
MagnaChip Semiconductor SA:
6.88% due 12/15/11................................. 175,000 142,625
8.00% due 12/15/14................................. 25,000 16,000
----------
158,625
----------
Total Supranational
(Cost $197,627).................................... 158,625
----------
COMMON STOCK -- 4.41%
Healthcare -- 0.09%
Critical Care Systems International, Inc.(1)(8)(10). 13,262 92,834
----------
Leisure & Tourism -- 0.05%
Shreveport Gaming Holdings, Inc.+(1)(8)(10)......... 2,501 57,581
----------
Oil & Gas -- 1.12%
Transmeridian Exploration, Inc.+.................... 3,095 15,784
Trico Marine Services, Inc.+........................ 32,840 1,177,971
----------
1,193,755
----------
Retail -- 0.00%
MTS, Inc.+(1)(8)(11)................................ 3,863 0
----------
Telecommunications -- 2.89%
iPCS, Inc.+(8)...................................... 58,957 3,061,047
----------
Utilities - Electric -- 0.26%
Mirant Corp.+....................................... 9,517 275,708
----------
Total Common Stock
(Cost $1,736,688).................................. 4,680,925
----------
PREFERRED STOCK -- 0.93%
Commercial Services -- 0.06%
Rent-Way, Inc. (convertible):
8.00%(1)(8)(11).................................... 4 59,895
----------
Multimedia -- 0.74%
ION Media Networks, Inc.
14.25%(4).......................................... 92 791,200
----------
Retail -- 0.13%
GNC Corp.:
12.00%(4)(8)....................................... 125 137,500
----------
Total Preferred Stock
(Cost $928,026).................................... 988,595
----------
24 HIGH YIELD BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal
Amount/ Value
Shares (Note 2)
- -----------------------------------------------------------------------------------
WARRANTS -- 0.02%+
Commercial Services -- 0.00%
Maxim Crane Works Holdings, Inc.:
Expires 01/20/10 (Strike Price $30.05)(1)(8)............ 226 $ 0
Expires 01/20/10 (Strike Price $31.58)(1)(8)............ 231 0
Expires 01/20/10 (Strike Price $33.04)(1)(8)............ 168 0
------------
0
------------
Oil & Gas -- 0.02%
Transmeridian Exploration, Inc.:
Expires 12/15/10 (Strike Price $4.31)(1)................ 13,811 27,621
------------
Telecommunications -- 0.00%
GT Group Telecommunications, Inc.:
Expires 02/01/10 *(1)(8)(10)............................ 200 2
------------
Total Warrants
(Cost $163,443)......................................... 27,623
------------
Total Long-Term Investment Securities
(Cost $88,853,097)...................................... 92,447,625
------------
SHORT-TERM INVESTMENT SECURITIES -- 9.43%
Commercial Paper -- 9.43%
Dresdner U.S. Finance:
5.27% due 09/01/06...................................... 5,000,000 5,000,000
Rabobank USA Financial Corp.:
5.27% due 09/01/06...................................... 5,000,000 5,000,000
------------
10,000,000
------------
Total Short-Term Investment Securities
(Cost $10,000,000)...................................... 10,000,000
------------
REPURCHASE AGREEMENT -- 3.15%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $3,340,448 and collateralized
by Federal Home Loan Banks Notes, bearing interest at
3.63%, due 01/15/08 and having an approximate value of
$3,440,744 (Cost $3,340,000)............................ 3,340,000 3,340,000
------------
TOTAL INVESTMENTS
(Cost $102,193,097)(7).................................. 99.73% 105,787,625
Other assets less liabilities.............................. 0.27% 282,384
--------- ------------
NET ASSETS 100.00% $106,070,009
========= ============
- --------
+ Non-income producing security
* Securities exempt from registration under rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normal to qualified institutional buyers. The Fund has no rights to demand
registration of these securities. At August 31, 2006, the aggregate value of
these securities was $17,687,408 representing 16.68% 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)"Step up" security where the coupon rate increases ("steps up") at a
predetermined rate. Rate shown reflects the increased rate.
(4)PIK ("Payment-in-Kind) security. Payments made with additional securities in
lieu of cash.
(5)Company has filed for Chapter 11 bankruptcy protection.
(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)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of August 31, 2006.
(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 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, 2006, the
High Yield Bond Fund held the following restricted securities:
Principal Market Value as a
Acquisition Amount/ Acquisition Market Value % of Net
Name Date Shares Cost Value Per Share Assets
- ------------------------ ----------- ---------- ----------- -------- ---------- ----------
Critical Care Systems
International, Inc.
Common Stock........... 06/04/05 $ 1,420 $ 12,824
2,368 21,394
4,737 37,189
4,737 35,230
---------- --------
13,262 106,637 $ 92,834 $ 7.00 0.09%
GT Group
Telecommunications,
Inc.
Warrant................ 09/05/00 200 0 2 0.01 0.00
ICO North America, Inc.:
7.50% due
08/15/09............... 08/11/05 250,000 250,000 307,500 1.23 0.29
MTS, Inc.:
9.38% due
03/15/09............... 03/16/04 13,636 47,099
09/03/04 681 681
03/19/05 715 143
09/04/05 751 195
03/04/06 789 205
---------- --------
16,572 48,323 4,309 0.26 0.00
MTS, Inc.:
Common Stock........... 03/16/04 3,863 - - - -
Rent-Way, Inc. 8%
Convertible Preferred
Stock.................. 05/29/03 3 25,000
05/14/04 1 10,000
---------- --------
4 35,000 59,895 17,112.76 0.06
Shreveport Gaming
Holdings, Inc.
Common Stock........... 07/21/05 531 12,228
07/29/05 1,970 45,355
---------- --------
2,501 57,583 57,581 23.02 0.05
Southern Energy, Inc.:
7.90% due
07/15/09............... 01/10/06 $1,225,000 - - - 0.00
-------- ----
$522,121 0.49%
======== ====
(11)Company has filed for Chapter 7 bankruptcy protection.
See Notes to Financial Statements
August 31, 2006 INTERNATIONAL SMALL CAP EQUITY FUND - PORTFOLIO PROFILE 25
(Unaudited)
Industry Allocation*
Commercial Services............... 6.72%
Repurchase Agreement.............. 6.45%
Retail............................ 6.14%
Information Processing -- Services 6.13%
Financial Services................ 6.06%
Electronics/Electrical Equipment.. 5.86%
Machinery......................... 5.48%
Leisure & Tourism................. 4.84%
Automotive........................ 3.79%
Banks............................. 3.55%
Freight........................... 3.45%
Apparel & Products................ 2.94%
Drugs............................. 2.44%
Manufacturing..................... 2.34%
Foods............................. 2.33%
Chemical.......................... 2.19%
Oil & Gas......................... 2.17%
Telecommunications................ 2.06%
Real Estate....................... 1.91%
Home Builders..................... 1.85%
Beverages......................... 1.72%
Hospital Supplies................. 1.58%
Insurance......................... 1.34%
Information Processing -- Software 1.33%
Medical -- Biomedical/Gene........ 1.26%
Appliances/Furnishings............ 1.25%
Pollution Control................. 1.23%
Paper/Forest Products............. 1.11%
Building Materials................ 1.09%
Multimedia........................ 1.09%
Information Processing -- Hardware 1.08%
Mining............................ 0.95%
Broadcasting...................... 0.93%
Conglomerates..................... 0.80%
Aerospace/Defense................. 0.72%
Human Resources................... 0.71%
Utilities -- Electric............. 0.71%
Household Products................ 0.68%
Advertising....................... 0.63%
Medical Technology................ 0.58%
Shipbuilding...................... 0.57%
Metals............................ 0.56%
Schools........................... 0.46%
Publishing........................ 0.45%
Healthcare........................ 0.29%
Textile -- Products............... 0.29%
Semiconductors.................... 0.17%
Investment Company................ 0.11%
Hardware & Tools.................. 0.07%
------
102.46%
======
Country Allocation*
Japan......... 32.07%
Germany....... 8.52%
United States. 7.86%
Sweden........ 7.75%
France........ 6.69%
United Kingdom 4.54%
Norway........ 4.00%
Denmark....... 3.85%
Greece........ 2.77%
Italy......... 2.56%
Australia..... 2.47%
Switzerland... 2.31%
Singapore..... 2.27%
Hong Kong..... 2.23%
Ireland....... 1.97%
Finland....... 1.77%
Spain......... 1.72%
Bermuda....... 1.34%
Luxembourg.... 1.06%
Netherlands... 1.05%
Korea......... 0.77%
Indonesia..... 0.69%
Thailand...... 0.58%
Cayman Islands 0.55%
Taiwan........ 0.54%
Malaysia...... 0.40%
China......... 0.13%
------
102.46%
======
* Calculated as a percentage of Net Assets
26 INTERNATIONAL SMALL CAP EQUITY FUND - SCHEDULE OF August 31, 2006
INVESTMENTS
Value
Shares (Note 2)
--------------------------------------------------------------------
COMMON STOCK -- 94.39%
Advertising -- 0.63%
Moshi Moshi Hotline, Inc.................... 70,350 $ 2,696,665
-----------
Aerospace/Defense -- 0.72%
Japan Aviation Electronics Industry, Ltd.... 220,000 3,088,377
-----------
Apparel & Products -- 1.32%
Nagaileben Co., Ltd......................... 18,000 379,488
Shenzhou International Group Holdings, Ltd.. 1,001,000 435,035
Tod's SpA................................... 58,119 4,832,398
-----------
5,646,921
-----------
Appliances/Furnishings -- 1.25%
Corona Corp................................. 40,000 713,829
Rational AG................................. 20,549 3,712,278
Sanyo Electric Taiwan Co., Ltd.............. 1,422,000 912,079
-----------
5,338,186
-----------
Automotive -- 3.79%
ElringKlinger AG............................ 118,932 6,234,967
Exedy Corp.................................. 80,300 2,250,411
Great Wall Motor Co., Ltd................... 700,000 549,937
GUD Holdings, Ltd........................... 77,919 420,603
Somboon Advance Technology PCL+(1).......... 1,740,200 639,030
Teikoku Piston Ring Co., Ltd................ 216,900 2,281,797
TI Automotive, Ltd., Class A+(1)(2)(4)...... 7,400 0
USS Co., Ltd................................ 47,000 3,186,848
Xinyi Glass Holding Co., Ltd................ 2,036,000 651,855
-----------
16,215,448
-----------
Banks -- 3.55%
Banco Pastor SA............................. 247,160 3,505,304
Banque Cantonale Vaudoise................... 16,010 6,064,640
Piraeus Bank SA............................. 164,490 4,303,235
Wing Hang Bank, Ltd......................... 136,000 1,302,774
-----------
15,175,953
-----------
Beverages -- 1.72%
Asahi Soft Drinks Co., Ltd.................. 178,000 2,492,713
Oenon Holdings, Inc......................... 190,000 752,587
Royal Unibrew AS............................ 38,090 4,121,445
-----------
7,366,745
-----------
Broadcasting -- 0.93%
Tandberg Television ASA+.................... 287,309 3,965,155
-----------
Building Materials -- 1.09%
Bauer AG+................................... 87,910 2,241,254
Nichias Corp................................ 328,000 2,430,768
-----------
4,672,022
-----------
Chemical -- 2.19%
Asahi Denka Co., Ltd........................ 192,100 2,053,627
China Sky Chemical Fibre Co., Ltd........... 1,666,000 1,058,618
Fujimi, Inc................................. 32,500 829,145
Kingboard Chemicals Holdings, Ltd........... 394,000 1,271,580
Lintec Corp................................. 145,000 3,569,573
SSCP Co., Ltd.+............................. 30,700 586,024
-----------
9,368,567
-----------
Commercial Services -- 6.72%
Aker Kvaerner ASA........................... 55,851 5,344,805
Alesco Corp., Ltd........................... 47,318 326,952
Coates Hire, Ltd............................ 93,071 417,831
Detica Group PLC............................ 409,340 2,353,801
Groupe Steria SCA........................... 63,430 3,175,770
Intage, Inc................................. 80,000 1,795,647
Koninklijke BAM Groep NV.................... 224,655 4,469,793
Kyoritsu Maintenace Co., Ltd................ 13,300 399,923
Park24 Co., Ltd............................. 75,300 2,309,127
SBS Co., Ltd................................ 478 1,331,454
Value
Shares (Note 2)
----------------------------------------------------------------
Commercial Services (continued)
Secom Techno Service Co., Ltd........... 46,000 $ 2,096,341
SembCorp Marine, Ltd.................... 499,000 1,097,087
Totetsu Kogyo Co., Ltd.................. 110,000 673,709
Transfield Services, Ltd................ 88,850 567,117
WorleyParsons, Ltd...................... 30,500 421,024
YIT Oyj................................. 89,509 1,943,731
-----------
28,724,112
-----------
Conglomerates -- 0.80%
Amano Corp.............................. 117,000 1,628,502
First Pacific Co........................ 2,584,000 1,162,879
Guangzhou Investment Co., Ltd........... 3,374,000 629,053
-----------
3,420,434
-----------
Drugs -- 2.44%
Ain Pharmaciez, Inc..................... 19,000 318,838
Fujirebio, Inc.......................... 70,000 1,723,242
Hisamitsu Pharmaceutical Co., Inc....... 94,100 2,645,173
Nippon Chemiphar Co., Ltd.+............. 213,000 1,190,238
Toho Pharmaceutical Co., Ltd............ 97,800 1,610,353
Tsumura & Co............................ 118,000 2,960,177
-----------
10,448,021
-----------
Electronics/Electrical Equipment -- 5.86%
ASM SpA................................. 542,748 2,312,010
Bang & Olufsen AS....................... 45,460 4,661,243
Iriso Electronics Co., Ltd.............. 49,500 1,817,326
Kumho Electric Co., Ltd................. 13,540 650,731
Miraial Co., Ltd........................ 15,000 1,404,233
Neopost SA.............................. 59,500 6,955,841
SUNX, Ltd............................... 22,800 553,516
Thielert AG+............................ 93,529 2,682,874
TXC Corp................................ 467,455 692,021
Wolfson Microelectronics PLC+........... 364,410 3,320,097
-----------
25,049,892
-----------
Financial Services -- 6.06%
Compagnie Financiere Tradition.......... 22,550 2,748,101
D. Carnegie & Co. AB.................... 331,549 5,901,891
Grenkeleasing AG........................ 46,910 2,825,241
Hellenic Exchanges Holdings SA.......... 225,260 3,636,256
Kenedix, Inc............................ 418 2,015,316
Kyokuto Securities Co., Ltd............. 88,100 1,092,667
Marfin Financial Group SA............... 115,539 3,892,998
Okasan Holdings, Inc.................... 169,000 1,741,897
UFJ Central Leasing Co., Ltd............ 43,800 2,033,391
-----------
25,887,758
-----------
Foods -- 2.33%
Celestial Nutrifoods, Ltd.+............. 1,354,000 1,359,377
Iaws Group PLC.......................... 189,170 3,792,857
Kuala Lumpur Kepong Bhd................. 223,000 690,627
Luzhou Bio-Chem Technology, Ltd......... 1,980,000 931,025
Olam International, Ltd................. 1,109,000 1,127,498
Singapore Food Industries, Ltd.......... 1,026,000 593,271
Synear Food Holdings, Ltd.+............. 132,000 81,360
Unicharm Petcare Corp................... 17,000 708,122
Xiwang Sugar Holdings Co., Ltd.......... 1,232,000 666,909
-----------
9,951,046
-----------
Freight -- 3.45%
Cargotec Corp........................... 129,769 5,627,681
DSV AS.................................. 34,180 5,541,687
Hamakyorex Co., Ltd..................... 23,000 656,331
Sankyu, Inc............................. 369,000 2,030,530
Thoresen Thai Agencies Public Co., Ltd.. 1,401,000 894,731
-----------
14,750,960
-----------
August 31, 2006 INTERNATIONAL SMALL CAP EQUITY FUND - SCHEDULE OF 27
INVESTMENTS - CONTINUED
Value
Shares (Note 2)
----------------------------------------------------------------------
COMMON STOCK (continued)
Hardware & Tools -- 0.07%
Wellcall Holdings Bhd......................... 661,400 $ 305,455
-----------
Healthcare -- 0.29%
Primary Health Care, Ltd...................... 33,950 304,829
Raffles Medical Group, Ltd.................... 1,642,000 949,465
-----------
1,254,294
-----------
Home Builders -- 1.85%
JM AB......................................... 221,560 3,454,805
Kaufman & Broad SA............................ 57,870 3,262,166
Token Corp.................................... 17,000 1,174,411
-----------
7,891,382
-----------
Hospital Supplies -- 1.58%
Elekta AB..................................... 269,261 4,755,949
Mani, Inc..................................... 31,300 1,999,659
-----------
6,755,608
-----------
Household Products -- 0.68%
Amorepacific Corp.+........................... 1,202 522,663
La Parler Co., Ltd............................ 440 1,326,803
Milbon Co., Ltd............................... 29,000 1,062,226
-----------
2,911,692
-----------
Human Resources -- 0.71%
Candle Australia, Ltd......................... 261,737 699,427
Fullcast Co., Ltd............................. 746 2,325,789
-----------
3,025,216
-----------
Information Processing - Hardware -- 1.08%
Ju Teng International Holdings, Ltd.+......... 842,000 147,240
Otsuka Corp................................... 29,200 2,852,966
Roland DG Corp................................ 53,200 1,635,947
-----------
4,636,153
-----------
Information Processing - Services -- 6.13%
Alten+........................................ 124,960 3,813,402
DeNa Co., Ltd.+............................... 608 1,760,893
DMX Technologies Group, Ltd.+................. 1,313,000 579,847
Hitachi Systems & Services, Ltd............... 125,500 2,640,530
Kakaku.Com., Inc.............................. 525 1,520,508
NDS Group, PLC ADR+........................... 130,374 6,003,723
Oakton, Ltd................................... 301,565 840,393
Protect Data AB............................... 161,250 2,458,758
RaySearch Laboratories AB+.................... 108,149 1,783,381
Seek, Ltd..................................... 63,946 254,855
Transcom WorldWide SA......................... 474,150 4,547,307
-----------
26,203,597
-----------
Information Processing - Software -- 1.33%
GameLoft+..................................... 416,290 2,378,651
Intec, Inc.................................... 60,000 785,042
The9, Ltd.+................................... 48,100 1,279,460
Works Applications Co., Ltd.+................. 1,742 1,224,200
-----------
5,667,353
-----------
Insurance -- 1.34%
Euler Hermes SA............................... 48,705 5,731,292
-----------
Investment Company -- 0.11%
Macquarie Communications Infrastructure Group. 102,914 473,806
-----------
Leisure & Tourism -- 4.84%
Central Sports Co., Ltd....................... 72,600 2,065,540
Gondola Holdings PLC.......................... 492,959 2,984,809
HIS Co., Ltd.................................. 106,300 2,779,854
IG Group Holdings PLC......................... 729,270 3,277,019
Kura Corp..................................... 140 356,574
Punch Taverns PLC............................. 248,458 4,373,594
Renaissance, Inc.............................. 95,000 1,691,299
Value
Shares (Note 2)
--------------------------------------------------------------
Leisure & Tourism (continued)
Resorttrust, Inc...................... 94,400 $ 2,653,605
Shaw Brothers, Ltd.................... 261,000 498,693
-----------
20,680,987
-----------
Machinery -- 5.48%
Anest Iwata Corp...................... 98,000 495,864
Chen Hsong Holdings, Ltd.............. 1,610,000 892,231
Disco Corp............................ 44,900 2,600,792
Harmonic Drive Systems, Inc........... 228 1,068,189
Japan Steel Works, Ltd................ 384,000 2,724,750
Kyowa Exeo Corp....................... 230,000 2,503,854
Modec, Inc............................ 59,600 1,337,757
Nabtesco Corp......................... 197,000 2,223,476
Obara Corp............................ 37,200 1,473,487
OSG Corp.............................. 106,800 1,719,426
TCM Corp.............................. 274,000 919,596
Toshiba Machine Co., Ltd.............. 255,000 2,265,556
United Tractors Tbk PT................ 1,278,500 808,110
Washtec AG+........................... 149,540 2,385,210
-----------
23,418,298
-----------
Manufacturing -- 2.34%
Mecalux SA............................ 107,814 3,849,568
Pfleiderer AG......................... 117,932 2,683,332
Surteco AG............................ 30,435 1,163,905
Toyo Tanso Co., Ltd................... 33,300 2,314,647
-----------
10,011,452
-----------
Medical - Biomedical/Gene -- 1.26%
Genmab AS+............................ 57,129 2,129,189
Q-Med AB.............................. 236,190 3,251,084
-----------
5,380,273
-----------
Medical Technology -- 0.58%
Sysmex Corp........................... 41,300 1,699,212
Topcon Corp........................... 55,000 779,590
-----------
2,478,802
-----------
Metals -- 0.56%
Taewoong Co., Ltd..................... 36,317 838,695
Tocalo Co., Ltd....................... 46,600 1,536,198
-----------
2,374,893
-----------
Mining -- 0.95%
Bradken, Ltd.......................... 107,308 478,469
Independence Group NL................. 222,748 588,435
Jubilee Mines NL...................... 100,119 701,727
Kagara Zinc, Ltd.+.................... 210,143 835,914
Korea Zinc Co., Ltd................... 8,166 705,064
Sino Gold, Ltd.+...................... 210,129 766,872
-----------
4,076,481
-----------
Multimedia -- 1.09%
Modern Times Group AB+................ 89,370 4,661,624
-----------
Oil & Gas -- 2.17%
Medco Energi Internasional Tbk PT..... 2,314,000 915,731
Prosafe ASA........................... 63,670 4,245,002
Sevan Marine ASA+..................... 669,999 3,550,295
Singapore Petroleum Co., Ltd.......... 182,000 559,733
-----------
9,270,761
-----------
Paper/Forest Products -- 1.11%
FP Corp............................... 41,500 1,353,933
Indah Kiat Pulp & Paper Corp. Tbk PT+. 6,715,000 679,103
Nine Dragons Paper Holdings, Ltd.+.... 1,244,000 1,135,672
Singamas Container Holdings, Ltd...... 1,698,000 871,133
Ta Ann Holdings Bhd................... 335,000 696,210
-----------
4,736,051
-----------
28 INTERNATIONAL SMALL CAP EQUITY FUND - SCHEDULE OF August 31, 2006
INVESTMENTS - CONTINUED
Value
Shares (Note 2)
--------------------------------------------------------------------------
COMMON STOCK (continued)
Pollution Control -- 1.23%
Inter-Roller Engineering, Ltd.................... 2,328,000 $ 1,242,586
Munters AB....................................... 82,560 3,229,806
Transpacific Industries Group, Ltd............... 144,796 801,500
-----------
5,273,892
-----------
Publishing -- 0.45%
Gentosha, Inc.................................... 262 1,176,149
West Australian Newspapers Holdings, Ltd......... 101,154 727,517
-----------
1,903,666
-----------
Real Estate -- 1.91%
Ascott Group , Ltd............................... 1,608,000 1,062,634
Central Pattana PCL(1)........................... 1,821,900 945,371
Great Eagle Holdings, Ltd........................ 136,161 451,696
Icade+........................................... 69,768 3,289,303
Kawasan Industri Jababeka Tbk PT................. 39,590,000 543,998
Midland Realty Holdings, Ltd..................... 1,534,000 682,457
Wing Tai Holdings, Ltd........................... 1,032,000 1,193,481
-----------
8,168,940
-----------
Retail -- 6.14%
Culture Convenience Club Co., Ltd................ 320,800 3,615,302
Don Quijote Co, Ltd.............................. 170,000 3,475,446
EDION Corp....................................... 45,000 801,141
Fairwood Holdings, Ltd........................... 712,000 678,379
Fielmann AG...................................... 106,336 5,558,279
Grafton Group PLC (Dublin)+...................... 123,231 1,686,130
Grafton Group PLC (London)+...................... 215,138 2,949,176
JB Hi-Fi, Ltd.................................... 126,877 483,384
Nishimatsuya Chain Co., Ltd...................... 45,600 877,857
Right On Co., Ltd................................ 50 1,619
rnb Retail and Brands AB......................... 544,590 3,644,728
St. Marc Holdings Co., Ltd....................... 37,100 2,465,011
-----------
26,236,452
-----------
Schools -- 0.46%
Raffles Education Corp., Ltd..................... 558,000 928,966
Shuei Yobiko Co., Ltd............................ 19,000 356,063
Tokyo Individualized Educational Institute, Inc.. 230,000 681,800
-----------
1,966,829
-----------
Semiconductors -- 0.17%
King Yuan Electronics Co., Ltd................... 950,870 711,061
-----------
Shipbuilding -- 0.57%
Chugoku Marine Paints, Ltd....................... 307,000 1,712,893
Sasebo Heavy Industries Co., Ltd.+............... 261,000 711,444
-----------
2,424,337
-----------
Telecommunications -- 2.06%
Commander Communications, Ltd.................... 310,000 466,269
Digital Multimedia Technologies SpA+............. 69,020 3,811,115
Okinawa Cellular Telephone Co.................... 392 1,041,816
Telepark Corp.................................... 770 1,836,535
VTech Holdings, Ltd.............................. 334,000 1,629,792
-----------
8,785,527
-----------
Shares/
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------------
Textile - Products -- 0.29%
Texwinca Holdings, Ltd................................. 1,024,000 $ 671,497
Victory City International Holdings, Ltd............... 1,716,000 547,196
------------
1,218,693
------------
Utilities - Electric -- 0.71%
Viridian Group PLC..................................... 159,590 3,044,752
------------
Total Common Stock
(Cost $372,980,148)................................... 403,445,881
------------
PREFERRED STOCK -- 1.62%
Apparel & Products -- 1.62%
Hugo Boss AG 7.49%:
(Cost $6,041,160)..................................... 162,069 6,934,996
------------
Total Long-Term Investment Securities
(Cost $379,021,308)................................... 410,380,877
------------
REPURCHASE AGREEMENT -- 6.45%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $27,573,699 and
collateralized by Federal Home Loan Bank Notes,
bearing interest at 5.80%, due 09/02/08 and having an
approximate value of $28,402,031
(Cost $27,570,000).................................... $27,570,000 27,570,000
------------
TOTAL INVESTMENTS
(Cost $406,591,308)(3)................................ 102.46% 437,950,877
Liabilities in excess of other assets.................... (2.46)% (10,513,767)
----------- ------------
NET ASSETS -- 100.00% $427,437,110
=========== ============
- --------
ADR--AmericanDepository Receipt
+ Non-income producing security
(1)Fair valued security (see Note 2)
(2)Illiquid security
(3)See Note 5 for cost of investments on a tax basis.
(4)To the extent permitted by the Statement of Additional Information, the
International Small Cap Equity Fund may invest in restricted securities. The
Fund has no right to demand registration of these securities. The 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, 2006, the
International Small Cap Equity Fund held the following restricted security:
Value
Market as a
Principal Value % of
Acquisition Amount/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
-------------------- ----------- --------- ----------- ------- ------- ------
TI Automotive, Ltd.,
Class A Common
Stock.............. 08/22/2001 7,400 $ - $ - $ - 0.00%
======= ====
See Notes to Financial Statements
August 31, 2006 LARGE CAP VALUE FUND - PORTFOLIO PROFILE (Unaudited) 29
Industry Allocation*
Financial Services................ 15.68%
Oil & Gas......................... 14.09%
Insurance......................... 9.94%
Banks............................. 9.04%
Information Processing -- Hardware 4.53%
Drugs............................. 4.21%
Utilities -- Electric............. 3.54%
Aerospace/Defense................. 3.13%
Telecommunications................ 3.07%
Leisure & Tourism................. 3.00%
Retail............................ 2.91%
Registered Investment Companies... 2.82%
Multimedia........................ 2.75%
Apparel & Products................ 2.11%
Savings & Loan.................... 2.01%
Utilities -- Communication........ 1.93%
Metals............................ 1.90%
Hospital Supplies................. 1.64%
Tobacco........................... 1.49%
Schools........................... 1.32%
Beverages......................... 1.30%
Conglomerates..................... 1.16%
Real Estate Investment Trusts..... 0.98%
Foods............................. 0.81%
Paper/Forest Products............. 0.76%
Chemical.......................... 0.75%
Machinery......................... 0.71%
Household Products................ 0.68%
Freight........................... 0.44%
Advertising....................... 0.39%
Airlines.......................... 0.38%
Information Processing -- Software 0.38%
Healthcare........................ 0.37%
Utilities -- Gas, Distribution.... 0.32%
Utilities -- Gas, Pipeline........ 0.25%
Semiconductors.................... 0.23%
Automotive........................ 0.21%
Real Estate....................... 0.18%
Information Processing -- Services 0.12%
------
101.53%
======
* Calculated as a percentage of net assets.
30 LARGE CAP VALUE FUND - SCHEDULE OF INVESTMENTS August 31, 2006
Value
Shares (Note 2)
-------------------------------------------------------
COMMON STOCK -- 98.71%
Advertising -- 0.39%
Omnicom Group, Inc............... 7,900 $ 690,618
-----------
Aerospace/Defense -- 3.13%
Boeing Co........................ 4,500 337,050
Lockheed Martin Corp............. 33,700 2,783,620
Raytheon Co...................... 51,900 2,450,199
-----------
5,570,869
-----------
Airlines -- 0.38%
US Airways Group, Inc.+.......... 15,900 671,775
-----------
Apparel & Products -- 2.11%
AnnTaylor Stores Corp.+.......... 45,500 1,810,900
Payless ShoeSource, Inc.+........ 82,600 1,937,796
-----------
3,748,696
-----------
Automotive -- 0.21%
AutoNation, Inc.+................ 19,680 382,382
-----------
Banks -- 9.04%
Bank of America Corp............. 157,400 8,101,378
Comerica, Inc.................... 9,000 515,250
First American Corp.............. 32,400 1,316,088
KeyCorp.......................... 69,900 2,571,621
PNC Financial Services Group..... 25,200 1,783,908
Regions Financial Corp........... 13,700 493,063
SunTrust Banks, Inc.............. 2,300 175,720
U.S. Bancorp..................... 34,400 1,103,208
-----------
16,060,236
-----------
Beverages -- 1.30%
Coca-Cola Enterprises, Inc....... 36,300 809,490
Pepsi Bottling Group, Inc........ 43,000 1,505,430
-----------
2,314,920
-----------
Chemical -- 0.75%
Hercules, Inc.+.................. 24,700 385,320
Lyondell Chemical Co............. 31,800 826,164
Tronox, Inc., Class B............ 9,906 127,787
-----------
1,339,271
-----------
Conglomerates -- 1.16%
General Electric Co.............. 60,300 2,053,818
-----------
Drugs -- 4.21%
King Pharmaceuticals, Inc.+...... 38,900 630,958
Merck & Co., Inc................. 103,500 4,196,925
Pfizer, Inc...................... 96,200 2,651,272
-----------
7,479,155
-----------
Financial Services -- 15.68%
American Express Co.............. 55,300 2,905,462
AmeriCredit Corp.+............... 70,800 1,663,092
Ameriprise Financial, Inc........ 28,400 1,298,732
Capital One Financial Corp....... 39,600 2,894,760
CapitalSource, Inc............... 34,800 845,640
Citigroup, Inc................... 167,000 8,241,450
E*TRADE Group, Inc.+............. 65,900 1,554,581
JPMorgan Chase & Co.............. 133,160 6,080,086
Principal Financial Group, Inc... 42,000 2,236,080
Raymond James Financial, Inc..... 5,600 155,232
-----------
27,875,115
-----------
Foods -- 0.81%
ConAgra Foods, Inc............... 47,300 1,125,740
Del Monte Foods Co............... 28,500 316,350
-----------
1,442,090
-----------
Freight -- 0.44%
Overseas Shipholding Group, Inc.. 11,600 773,720
-----------
Value
Shares (Note 2)
--------------------------------------------------------------
Healthcare -- 0.37%
McKesson Corp........................... 12,800 $ 650,240
-----------
Hospital Supplies -- 1.64%
AmerisourceBergen Corp.................. 66,200 2,923,392
-----------
Household Products -- 0.68%
Procter & Gamble Co..................... 19,400 1,200,860
-----------
Information Processing - Hardware -- 4.53%
Hewlett-Packard Co...................... 109,300 3,996,008
International Business Machines Corp.... 27,000 2,186,190
Lexmark International, Inc., Class A+... 33,500 1,878,345
-----------
8,060,543
-----------
Information Processing - Services -- 0.12%
Computer Sciences Corp.+................ 4,500 213,210
-----------
Information Processing - Software -- 0.38%
BMC Software, Inc.+..................... 25,400 676,148
-----------
Insurance -- 9.94%
Allstate Corp........................... 39,000 2,259,660
Assurant, Inc........................... 22,700 1,167,915
Chubb Corp.............................. 59,500 2,984,520
Coventry Health Care, Inc.+............. 15,800 856,992
Humana, Inc.+........................... 49,400 3,009,942
MetLife, Inc............................ 47,900 2,635,937
RenaissanceRe Holdings, Ltd............. 10,200 525,300
W.R. Berkley Corp....................... 55,590 1,945,650
WellCare Health Plans, Inc.+............ 22,900 1,284,232
XL Capital, Ltd., Class A............... 15,100 991,164
-----------
17,661,312
-----------
Leisure & Tourism -- 3.00%
Darden Restaurants, Inc................. 66,300 2,347,020
McDonald's Corp......................... 73,400 2,635,060
Wyndham Worldwide Corp.+................ 12,160 355,802
-----------
5,337,882
-----------
Machinery -- 0.71%
AGCO Corp.+............................. 16,300 405,055
Cummins, Inc............................ 4,300 493,726
Ingersoll-Rand Co....................... 9,500 361,190
-----------
1,259,971
-----------
Metals -- 1.90%
Nucor Corp.............................. 39,100 1,910,817
United States Steel Corp................ 25,200 1,465,884
-----------
3,376,701
-----------
Multimedia -- 2.75%
CBS Corp................................ 112,100 3,200,455
Walt Disney Co.......................... 56,800 1,684,120
-----------
4,884,575
-----------
Oil & Gas -- 14.09%
ChevronTexaco Corp...................... 23,100 1,487,640
ConocoPhillips.......................... 3,600 228,348
Equitable Resources, Inc................ 15,500 571,330
Exxon Mobil Corp........................ 193,740 13,110,386
Frontier Oil Corp....................... 61,700 2,017,590
Holly Corp.............................. 4,100 187,862
Occidental Petroleum Corp............... 57,900 2,952,321
Sunoco, Inc............................. 29,300 2,106,963
Tesoro Petroleum Corp................... 30,000 1,938,300
Tidewater, Inc.......................... 9,400 447,534
-----------
25,048,274
-----------
Paper/Forest Products -- 0.76%
Louisiana-Pacific Corp.................. 50,800 993,648
Pactiv Corp.+........................... 13,600 363,528
-----------
1,357,176
-----------
August 31, 2006 LARGE CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED 31
Value
Shares (Note 2)
--------------------------------------------------------
COMMON STOCK (continued)
Real Estate -- 0.18%
Realogy Corp.+...................... 15,375 $ 329,025
----------
Real Estate Investment Trusts -- 0.98%
Annaly Capital Management, Inc...... 29,100 364,041
General Growth Properties, Inc...... 19,700 893,001
Host Marriott Corp.................. 21,200 477,848
----------
1,734,890
----------
Retail -- 2.91%
Big Lots, Inc.+..................... 67,200 1,233,120
Kohl's Corp.+....................... 26,700 1,669,017
Kroger Co........................... 7,900 188,099
OfficeMax, Inc...................... 18,500 768,305
SUPERVALU, Inc...................... 46,300 1,322,328
----------
5,180,869
----------
Savings & Loan -- 2.01%
Washington Mutual, Inc.............. 85,300 3,573,217
----------
Schools -- 1.32%
Apollo Group, Inc., Class A+........ 33,300 1,671,993
Career Education Corp.+............. 26,500 507,475
Corinthian Colleges, Inc.+.......... 13,100 158,772
----------
2,338,240
----------
Semiconductors -- 0.23%
Atmel Corp.+........................ 71,300 411,401
----------
Telecommunications -- 3.07%
CenturyTel, Inc..................... 30,500 1,214,510
Cisco Systems, Inc.+................ 20,400 448,596
Motorola, Inc....................... 33,400 780,892
Verizon Communications, Inc......... 85,400 3,004,372
----------
5,448,370
----------
Tobacco -- 1.49%
Altria Group, Inc................... 7,400 618,122
Loews Corp. -- Carolina Group....... 35,600 2,038,456
----------
2,656,578
----------
Value
Shares (Note 2)
-------------------------------------------------------------------
Utilities - Communication -- 1.93%
AT&T, Inc.............................. 110,061 $ 3,426,199
------------
Utilities - Electric -- 3.54%
American Electric Power Co., Inc....... 58,200 2,123,136
DTE Energy Co.......................... 27,600 1,152,024
Duke Energy Corp....................... 47,100 1,413,000
FPL Group, Inc......................... 26,400 1,173,480
PPL Corp............................... 12,100 423,137
------------
6,284,777
------------
Utilities - Gas, Distribution -- 0.32%
Sempra Energy.......................... 11,300 561,836
------------
Utilities - Gas, Pipeline -- 0.25%
National Fuel Gas Co................... 11,800 450,406
------------
Total Long-Term Investment Securities
(Cost $165,561,418)................... 175,448,757
------------
SHORT-TERM INVESTMENT SECURITIES -- 2.82%
Registered Investment Companies -- 2.82%
American AAdvantage Money Market Fund
(Cost $5,011,936)..................... 5,011,936 5,011,936
------------
TOTAL INVESTMENTS
(Cost $170,573,354)(1)................ 101.53% 180,460,693
Liabilities in excess of other assets.... (1.53)% (2,723,698)
--------- ------------
NET ASSETS -- 100.00% $177,736,995
========= ============
- --------
+ Non-income producing security
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
32 MID CAP GROWTH FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2006
Industry Allocation*
Telecommunications................ 7.31%
Semiconductors.................... 6.28%
Oil & Gas......................... 6.19%
Repurchase Agreement.............. 6.17%
Electronics/Electrical Equipment.. 5.72%
Information Processing -- Software 5.28%
Retail............................ 5.18%
Drugs............................. 4.37%
Financial Services................ 4.33%
Leisure & Tourism................. 4.26%
Machinery......................... 4.10%
Healthcare........................ 3.55%
Commercial Services............... 3.50%
Apparel & Products................ 3.01%
Information Processing -- Services 2.82%
Banks............................. 2.59%
Automotive........................ 2.22%
Insurance......................... 1.95%
Foods............................. 1.83%
Medical -- Biomedical/Gene........ 1.82%
Metals............................ 1.51%
Real Estate....................... 1.47%
Household Products................ 1.21%
Medical Technology................ 1.16%
Utilities -- Electric............. 1.11%
Freight........................... 1.06%
Registered Investment Companies... 1.06%
Utilities -- Gas, Pipeline........ 1.04%
Hospital Management............... 1.03%
Appliances/Furnishings............ 1.02%
Hospital Supplies................. 1.00%
Advertising....................... 0.98%
Chemical.......................... 0.98%
Paper/Forest Products............. 0.81%
Beverages......................... 0.62%
Information Processing -- Hardware 0.56%
Aerospace/Defense................. 0.53%
Building Materials................ 0.52%
Home Builders..................... 0.50%
------
100.65%
======
* Calculated as a percentage of net assets.
August 31, 2006 MID CAP GROWTH FUND - SCHEDULE OF INVESTMENTS 33
Value
Shares (Note 2)
----------------------------------------------------------------
COMMON STOCK -- 93.42%
Advertising -- 0.98%
Clear Channel Outdoor Holdings, Inc.+....... 31,817 $ 634,431
----------
Aerospace/Defense -- 0.53%
L-3 Communications Holdings, Inc............ 4,545 342,648
----------
Apparel & Products -- 3.01%
Carter's, Inc.+............................. 23,371 539,870
Coach, Inc.+................................ 17,352 523,857
Polo Ralph Lauren Corp., Class A............ 14,973 883,257
----------
1,946,984
----------
Appliances/Furnishings -- 1.02%
Whirlpool Corp.............................. 8,123 657,232
----------
Automotive -- 2.22%
Acuity Brands, Inc.......................... 17,486 747,177
Kaydon Corp................................. 17,948 683,998
----------
1,431,175
----------
Banks -- 2.59%
Centennial Bank Holdings, Inc.+............. 65,512 652,500
Commerce Bancorp, Inc....................... 15,000 499,650
Signature Bank+............................. 15,779 518,340
----------
1,670,490
----------
Beverages -- 0.62%
Hansen Natural Corp.+....................... 14,500 399,040
----------
Building Materials -- 0.52%
NCI Building Systems, Inc.+................. 6,222 338,103
----------
Chemical -- 0.98%
Ashland, Inc................................ 10,057 634,999
----------
Commercial Services -- 3.50%
Alliance Data Systems Corp.+................ 12,311 622,198
Corrections Corp. of America+............... 15,532 976,031
Foster Wheeler, Ltd.+....................... 15,259 663,309
----------
2,261,538
----------
Drugs -- 4.37%
Adams Respiratory Therapeutics, Inc.+....... 17,000 693,600
Allergan, Inc............................... 3,700 423,872
Barr Pharmaceuticals, Inc.+................. 9,000 508,500
Endo Pharmaceuticals Holdings, Inc.+........ 10,400 343,512
Forest Laboratories, Inc.+.................. 17,001 849,710
----------
2,819,194
----------
Electronics/Electrical Equipment -- 5.72%
Amphenol Corp., Class A..................... 12,997 746,938
Avnet, Inc.+................................ 17,908 350,280
Harman International Industries, Inc........ 7,882 639,388
Molex, Inc.................................. 16,464 517,957
Polycom, Inc.+.............................. 26,354 626,962
Wesco International, Inc.+.................. 13,933 815,081
----------
3,696,606
----------
Financial Services -- 4.33%
AllianceBernstein Holding LP................ 9,264 617,909
AmeriCredit Corp.+.......................... 13,952 327,732
Charles Schwab Corp......................... 61,103 996,590
Chicago Merchantile Exchange Holdings, Inc.. 1,942 854,480
----------
2,796,711
----------
Foods -- 1.83%
Bunge, Ltd.................................. 5,921 333,589
Burger King Holdings, Inc.+................. 34,859 506,850
Corn Products International, Inc............ 9,824 338,928
----------
1,179,367
----------
Freight -- 1.06%
UTI Worldwide, Inc.......................... 29,697 684,516
----------
Value
Shares (Note 2)
-------------------------------------------------------------------
Healthcare -- 3.55%
HealthExtras, Inc.+............................ 15,200 $ 467,096
Intuitive Surgical, Inc.+...................... 4,200 396,480
Mentor Corp.................................... 7,000 339,780
Pharmaceutical Product Development, Inc........ 8,700 331,644
Psychiatric Solutions, Inc.+................... 23,577 754,700
----------
2,289,700
----------
Home Builders -- 0.50%
Williams Scotsman International, Inc.+......... 15,355 322,301
----------
Hospital Management -- 1.03%
Omnicare, Inc.................................. 14,708 666,419
----------
Hospital Supplies -- 1.00%
Henry Schein, Inc.+............................ 13,000 648,310
----------
Household Products -- 1.21%
Jarden Corp.+.................................. 26,615 780,352
----------
Information Processing - Hardware -- 0.56%
Network Appliance, Inc.+....................... 10,556 361,437
----------
Information Processing - Services -- 2.82%
Cadence Design Systems, Inc.+.................. 40,839 670,985
Cognizant Technology Solutions Corp., Class A+. 8,563 598,639
IHS, Inc., Class A+............................ 18,391 551,914
----------
1,821,538
----------
Information Processing - Software -- 5.28%
Cerner Corp.+.................................. 13,628 627,706
Citrix Systems, Inc.+.......................... 19,912 610,900
Fidelity National Information Services, Inc.... 17,436 638,855
Hyperion Solutions Corp.+...................... 10,704 354,516
Red Hat, Inc.+................................. 19,121 444,372
TIBCO Software, Inc.+.......................... 93,222 732,725
----------
3,409,074
----------
Insurance -- 1.95%
Coventry Health Care, Inc.+.................... 11,600 629,184
Humana, Inc.+.................................. 10,300 627,579
----------
1,256,763
----------
Leisure & Tourism -- 4.26%
Hilton Hotels Corp............................. 32,201 820,159
Scientific Games Corp., Class A+............... 24,417 709,802
Starwood Hotels & Resorts Worldwide, Inc....... 13,627 725,774
Station Casinos, Inc........................... 8,487 494,368
----------
2,750,103
----------
Machinery -- 4.10%
Cooper Industries, Ltd., Class A............... 9,907 811,185
Joy Global, Inc................................ 10,839 471,930
Mueller Water Products, Inc.+.................. 18,592 316,064
Precision Castparts Corp....................... 17,962 1,049,700
----------
2,648,879
----------
Medical - Biomedical/Gene -- 1.82%
Celgene Corp.+................................. 13,621 554,239
Genzyme Corp.+................................. 9,415 623,555
----------
1,177,794
----------
Medical Technology -- 1.16%
Hologic, Inc.+................................. 14,014 605,125
Illumina, Inc.+................................ 4,300 144,824
----------
749,949
----------
Metals -- 1.51%
Allegheny Technologies, Inc.................... 10,961 628,613
Freeport-McMoRan Copper & Gold, Inc............ 6,008 349,726
----------
978,339
----------
34 MID CAP GROWTH FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Value
Shares (Note 2)
--------------------------------------------------------------
COMMON STOCK (continued)
Oil & Gas -- 6.19%
GlobalSantaFe Corp........................ 12,600 $ 620,172
McDermott International, Inc.+............ 8,000 385,600
National-Oilwell Varco, Inc.+............. 11,198 731,230
Rosetta Resources, Inc.+.................. 43,973 813,940
Southwestern Energy Co.+.................. 22,201 762,604
Todco, Class A+........................... 4,500 166,635
Weatherford International, Ltd.+.......... 12,000 516,000
----------
3,996,181
----------
Paper/Forest Products -- 0.81%
Smurfit-Stone Container Corp.+............ 46,072 524,760
----------
Real Estate -- 1.47%
CB Richard Ellis Group, Inc., Class A+.... 41,363 951,349
----------
Retail -- 5.18%
Express Scripts, Inc., Class A+........... 7,829 658,262
Nordstrom, Inc............................ 13,931 520,323
Office Depot, Inc.+....................... 16,121 593,898
Shoppers Drug Mart Corp................... 22,577 952,470
Staples, Inc.............................. 27,445 619,159
----------
3,344,112
----------
Semiconductors -- 6.28%
Advanced Micro Devices, Inc.+............. 13,360 333,866
ASML Holding NV+.......................... 31,228 688,890
Integrated Device Technology, Inc.+....... 18,979 327,008
Intersil Corp., Class A................... 34,689 879,366
MEMC Electronic Materials, Inc.+.......... 17,342 670,789
Micron Technology, Inc.+.................. 28,963 500,481
National Semiconductor Corp............... 14,219 345,379
Omnivision Technologies, Inc.+............ 18,668 309,889
----------
4,055,668
----------
Telecommunications -- 7.31%
Amdocs, Ltd.+............................. 18,536 703,441
American Tower Corp., Class A+............ 14,792 530,441
Crown Castle International Corp.+......... 18,657 641,055
Leap Wireless International, Inc.+........ 9,047 418,514
Level 3 Communications, Inc.+............. 36,701 162,585
NII Holdings, Inc., Class B+.............. 16,733 892,706
Qwest Communications International, Inc.+. 98,119 864,428
Tellabs, Inc.+............................ 49,703 506,474
----------
4,719,644
----------
Shares/
Principal Value
Amount (Note 2)
- ----------------------------------------------------------------------------------------
Utilities - Electric -- 1.11%
Aventine Renewable Energy Holdings, Inc.+................... 26,187 $ 717,524
-----------
Utilities - Gas, Pipeline -- 1.04%
Williams Cos., Inc.......................................... 27,180 669,443
-----------
Total Common Stock
(Cost $56,400,706)......................................... 60,332,673
-----------
EXCHANGE-TRADED FUNDS -- 1.06%
Registered Investment Companies -- 1.06%
iShares Nasdaq Biotechnology Index Fund+
(Cost $713,487)............................................ 9,281 684,381
-----------
Total Long-Term Investment Securities
(Cost $57,114,193)......................................... 61,017,054
-----------
REPURCHASE AGREEMENT -- 6.17%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $3,984,535 and collateralized
by Federal National Mtg. Assoc. Notes, bearing interest at
4.25%, due 05/15/09 and having an approximate value of
$4,105,336
(Cost $3,984,000).......................................... $3,984,000 3,984,000
-----------
TOTAL INVESTMENTS
(Cost $61,098,193)(1)...................................... 100.65% 65,001,054
Liabilities in excess of other assets......................... (0.65)% (417,979)
---------- -----------
NET ASSETS -- 100.00% $64,583,075
========== ===========
- --------
+ Non-income producing security
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
August 31, 2006 MID CAP VALUE FUND - PORTFOLIO PROFILE (Unaudited) 35
Industry Allocation*
Insurance......................... 9.14%
Utilities -- Electric............. 6.57%
Electronics/Electrical Equipment.. 5.32%
Oil & Gas......................... 5.04%
Financial Services................ 4.81%
Automotive........................ 4.49%
Banks............................. 4.14%
Chemical.......................... 3.70%
Semiconductors.................... 3.47%
Paper/Forest Products............. 3.21%
Foods............................. 3.19%
Drugs............................. 3.03%
Real Estate Investment Trusts..... 2.98%
Aerospace/Defense................. 2.78%
Retail............................ 2.54%
Information Processing -- Services 2.51%
Machinery......................... 2.38%
Telecommunications................ 2.07%
Leisure & Tourism................. 1.93%
Building Materials................ 1.79%
Information Processing -- Software 1.72%
Advertising....................... 1.71%
Multimedia........................ 1.71%
Apparel & Products................ 1.62%
Household Products................ 1.61%
Healthcare........................ 1.46%
Repurchase Agreement.............. 1.26%
Conglomerates..................... 1.25%
Home Builders..................... 1.24%
Commercial Services............... 1.15%
Metals............................ 1.14%
Hardware & Tools.................. 0.89%
Therapeutics...................... 0.88%
Publishing........................ 0.84%
Broadcasting...................... 0.78%
Utilities -- Gas, Distribution.... 0.74%
Time Deposit...................... 0.69%
Beverages......................... 0.68%
Airlines.......................... 0.64%
Railroads & Equipment............. 0.57%
Pollution Control................. 0.55%
Savings & Loan.................... 0.43%
Coal.............................. 0.40%
Freight........................... 0.36%
Real Estate....................... 0.30%
-----
99.71%
=====
* Calculated as a percentage of net assets.
36 MID CAP VALUE FUND - SCHEDULE OF INVESTMENTS August 31, 2006
Value
Shares (Note 2)
------------------------------------------------------------------------------
COMMON STOCK -- 97.76%
Advertising -- 1.71%
R.H. Donnelley Corp..................................... 113,765 $ 6,179,715
-----------
Aerospace/Defense -- 2.78%
Alliant Techsystems, Inc.+.............................. 42,000 3,212,580
Armor Holdings, Inc.+................................... 32,351 1,710,397
Goodrich Corp........................................... 132,047 5,143,231
-----------
10,066,208
-----------
Airlines -- 0.64%
UAL Corp.+.............................................. 93,200 2,330,000
-----------
Apparel & Products -- 1.62%
Foot Locker, Inc........................................ 181,573 4,375,909
VF Corp................................................. 21,444 1,498,721
-----------
5,874,630
-----------
Automotive -- 4.49%
Acuity Brands, Inc...................................... 68,732 2,936,918
American Axle & Manufacturing Holdings, Inc............. 105,037 1,753,068
Autoliv, Inc............................................ 22,810 1,289,221
Borg-Warner, Inc........................................ 63,863 3,621,671
Carlisle Cos., Inc...................................... 28,412 2,429,226
Compagnie Generale des Etablissements Michelin, Class B. 26,015 1,766,443
Ford Motor Co........................................... 110,539 925,211
TRW Automotive Holdings Corp.+.......................... 62,549 1,542,458
-----------
16,264,216
-----------
Banks -- 4.14%
City National Corp...................................... 31,100 2,046,380
Comerica, Inc........................................... 13,813 790,795
Cullen/Frost Bankers, Inc............................... 29,520 1,740,499
Huntington Bancshares, Inc.............................. 116,400 2,784,288
KeyCorp................................................. 57,747 2,124,512
Marshall & Ilsley Corp.................................. 53,946 2,515,502
Northern Trust Corp..................................... 28,488 1,595,043
UnionBanCal Corp........................................ 23,408 1,402,139
-----------
14,999,158
-----------
Beverages -- 0.68%
Molson Coors Brewing Co................................. 8,791 618,007
Pepsi Bottling Group, Inc............................... 52,442 1,835,995
-----------
2,454,002
-----------
Broadcasting -- 0.78%
Entercom Communications Corp............................ 111,100 2,823,051
-----------
Building Materials -- 1.79%
American Standard Cos., Inc............................. 98,636 4,120,026
Shaw Group, Inc.+....................................... 64,400 1,620,304
Sherwin-Williams Co..................................... 14,189 732,720
-----------
6,473,050
-----------
Chemical -- 3.70%
Albemarle Corp.......................................... 46,985 2,579,476
Ashland, Inc............................................ 28,865 1,822,536
Chemtura Corp........................................... 269,400 2,341,086
Cytec Industries, Inc................................... 74,356 3,966,893
Rohm & Haas Co.......................................... 41,742 1,840,822
UAP Holding Corp........................................ 40,600 845,698
-----------
13,396,511
-----------
Coal -- 0.40%
Arch Coal, Inc.......................................... 44,802 1,467,265
-----------
Commercial Services -- 1.15%
BearingPoint, Inc.+..................................... 159,900 1,336,764
URS Corp.+.............................................. 69,775 2,829,376
-----------
4,166,140
-----------
Value
Shares (Note 2)
--------------------------------------------------------------
Conglomerates -- 1.25%
Eaton Corp.............................. 33,254 $ 2,211,391
Trinity Industries, Inc................. 69,701 2,325,225
-----------
4,536,616
-----------
Drugs -- 3.03%
Barr Pharmaceuticals, Inc.+............. 73,335 4,143,428
Endo Pharmaceuticals Holdings, Inc.+.... 164,812 5,443,740
Impax Laboratories, Inc.+............... 229,215 1,386,751
-----------
10,973,919
-----------
Electronics/Electrical Equipment -- 5.32%
Amphenol Corp., Class A................. 24,933 1,432,899
Arrow Electronics, Inc.+................ 182,667 5,096,409
Flextronics International, Ltd.+........ 237,162 2,798,512
Graftech International, Ltd.+........... 163,300 889,985
Parker Hannifin Corp.................... 46,853 3,469,465
PerkinElmer, Inc........................ 32,965 607,545
Tektronix, Inc.......................... 104,447 2,960,028
Vishay Intertechnology, Inc.+........... 70,794 991,824
Xerox Corp.+............................ 70,890 1,049,881
-----------
19,296,548
-----------
Financial Services -- 4.81%
Affiliated Managers Group, Inc.+........ 30,876 2,856,956
Apollo Investment Corp.................. 200,676 4,007,500
Bear Stearns Cos., Inc.................. 12,303 1,603,696
CIT Group, Inc.......................... 123,028 5,543,642
TD Ameritrade Holding Corp.............. 47,696 835,634
Webster Financial Corp.................. 54,990 2,597,727
-----------
17,445,155
-----------
Foods -- 3.19%
Bunge, Ltd.............................. 68,251 3,845,262
Corn Products International, Inc........ 44,692 1,541,874
Ralcorp Holdings, Inc.+................. 32,579 1,611,683
Smithfield Foods, Inc.+................. 100,201 3,009,036
Tyson Foods, Inc., Class A.............. 104,311 1,536,501
-----------
11,544,356
-----------
Freight -- 0.36%
YRC Worldwide, Inc.+.................... 35,225 1,295,575
-----------
Hardware & Tools -- 0.89%
Black & Decker Corp..................... 43,575 3,208,863
-----------
Healthcare -- 1.46%
Community Health Systems, Inc.+......... 52,090 2,019,008
Cooper Cos., Inc........................ 65,600 3,278,688
-----------
5,297,696
-----------
Home Builders -- 1.24%
Pulte Homes, Inc........................ 54,753 1,624,521
Walter Industries, Inc.................. 52,000 2,862,080
-----------
4,486,601
-----------
Household Products -- 1.61%
Fortune Brands, Inc..................... 36,286 2,634,364
Newell Rubbermaid, Inc.................. 118,196 3,190,110
-----------
5,824,474
-----------
Information Processing - Services -- 2.51%
Electronic Data Systems Corp............ 75,918 1,809,126
NCR Corp.+.............................. 74,200 2,581,418
Reynolds and Reynolds Co., Class A...... 82,500 3,164,700
Unisys Corp.+........................... 291,175 1,557,786
-----------
9,113,030
-----------
August 31, 2006 MID CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED 37
Value
Shares (Note 2)
--------------------------------------------------------------------
COMMON STOCK (continued)
Information Processing - Software -- 1.72%
Avid Technology, Inc.+........................ 42,200 $ 1,680,826
IMS Health, Inc............................... 124,900 3,408,521
Sybase, Inc.+................................. 50,286 1,160,098
-----------
6,249,445
-----------
Insurance -- 9.14%
ACE, Ltd...................................... 25,542 1,375,692
AMBAC Financial Group, Inc.................... 95,041 8,229,600
Aon Corp...................................... 60,990 2,108,424
CIGNA Corp.................................... 16,341 1,847,677
Everest Reinsurance Group, Ltd................ 31,944 3,002,097
Genworth Financial, Inc....................... 36,626 1,261,033
Health Net, Inc.+............................. 22,364 935,039
MGIC Investment Corp.......................... 32,280 1,868,044
Platinum Underwriters Holdings, Ltd........... 79,055 2,347,933
PMI Group, Inc................................ 31,271 1,352,158
Radian Group, Inc............................. 1,984 118,802
Reinsurance Group of America, Inc............. 66,095 3,415,790
StanCorp Financial Group, Inc................. 25,124 1,170,025
UnumProvident Corp............................ 110,185 2,088,006
W.R. Berkley Corp............................. 57,333 2,006,655
-----------
33,126,975
-----------
Leisure & Tourism -- 1.93%
Darden Restaurants, Inc....................... 33,698 1,192,909
Harrah's Entertainment, Inc................... 19,740 1,230,986
Mattel, Inc................................... 103,203 1,944,345
Ruby Tuesday, Inc............................. 101,180 2,612,468
-----------
6,980,708
-----------
Machinery -- 2.38%
Crane Co...................................... 31,114 1,243,938
Joy Global, Inc............................... 16,133 702,431
Kennametal, Inc............................... 52,700 2,779,398
Terex Corp.+.................................. 47,228 2,074,726
Toro Co....................................... 45,800 1,832,458
-----------
8,632,951
-----------
Metals -- 1.14%
Century Aluminum Co.+......................... 34,300 1,190,553
Cleveland-Cliffs, Inc......................... 35,400 1,291,038
Commercial Metals Co.......................... 27,943 603,289
Grupo IMSA, SA de CV.......................... 251,809 969,122
Verzatec SA de CV+............................ 244,809 92,424
-----------
4,146,426
-----------
Multimedia -- 1.71%
Cinram International Income Fund(1)........... 219,767 4,626,094
Cinram International Income Fund (Toronto)(1). 15,800 331,639
Gannett Co., Inc.............................. 21,712 1,234,327
-----------
6,192,060
-----------
Oil & Gas -- 5.04%
BJ Services Co................................ 25,456 873,395
GlobalSantaFe Corp............................ 31,719 1,561,209
Hess Corp..................................... 32,342 1,480,617
Newfield Exploration Co.+..................... 97,119 4,199,426
Noble Energy, Inc............................. 117,556 5,809,618
SBM Offshore NV............................... 12,463 341,853
Sunoco, Inc................................... 8,006 575,711
Tesoro Petroleum Corp......................... 12,458 804,911
UGI Corp...................................... 105,516 2,616,797
-----------
18,263,537
-----------
Paper/Forest Products -- 3.21%
Packaging Corp. of America.................... 87,482 2,024,333
Pactiv Corp.+................................. 179,645 4,801,911
Sonoco Products Co............................ 50,886 1,703,663
Value
Shares (Note 2)
-----------------------------------------------------------------------------
Paper/Forest Products (continued)
Temple-Inland, Inc.................................... 69,353 $ 3,087,596
------------
11,617,503
------------
Pollution Control -- 0.55%
Republic Services, Inc., Class A...................... 51,027 1,978,827
------------
Publishing -- 0.84%
R. R. Donnelley & Sons Co............................. 94,237 3,055,164
------------
Railroads & Equipment -- 0.57%
CSX Corp.............................................. 68,764 2,078,048
------------
Real Estate -- 0.30%
Brookfield Properties Corp............................ 30,864 1,081,783
------------
Real Estate Investment Trusts -- 2.98%
Boston Properties, Inc................................ 20,595 2,093,070
Camden Property Trust................................. 14,197 1,101,545
Developers Diversified Realty Corp.................... 30,890 1,671,149
KKR Financial Corp.................................... 141,004 3,371,406
ProLogis.............................................. 18,133 1,023,789
Vornado Realty Trust.................................. 14,753 1,562,490
------------
10,823,449
------------
Retail -- 2.54%
Dollar Tree Stores, Inc.+............................. 48,021 1,382,044
J.C. Penney Co., Inc.................................. 15,267 962,432
Kroger Co............................................. 91,060 2,168,139
Office Depot, Inc.+................................... 55,334 2,038,504
United Stationers, Inc.+.............................. 57,646 2,641,916
------------
9,193,035
------------
Savings & Loan -- 0.43%
Astoria Financial Corp................................ 51,329 1,575,800
------------
Semiconductors -- 3.47%
Fairchild Semiconductor International, Inc., Class A+. 175,316 3,160,948
Freescale Semiconductor, Inc.+........................ 76,858 2,375,681
Lam Research Corp.+................................... 19,936 853,061
QLogic Corp.+......................................... 121,858 2,239,750
Varian Semiconductor Equipment Associates, Inc.+...... 111,600 3,940,596
------------
12,570,036
------------
Telecommunications -- 2.07%
Arris Group, Inc.+.................................... 114,378 1,310,772
Citizens Communications Co............................ 4,300 59,297
Embarq Corp........................................... 59,200 2,791,280
Harris Corp........................................... 28,602 1,256,200
Powerwave Technologies, Inc.+......................... 177,300 1,343,934
Syniverse Holdings, Inc.+............................. 44,200 740,350
------------
7,501,833
------------
Therapeutics -- 0.88%
Theravance, Inc.+..................................... 119,971 3,184,030
------------
Utilities - Electric -- 6.57%
Constellation Energy Group, Inc....................... 40,837 2,453,895
Edison International, Inc............................. 58,035 2,532,648
Entergy Corp.......................................... 17,854 1,386,363
Northeast Utilities................................... 137,200 3,129,532
PG&E Corp............................................. 29,103 1,220,289
PPL Corp.............................................. 219,700 7,682,909
Wisconsin Energy Corp................................. 125,477 5,395,511
------------
23,801,147
------------
Utilities - Gas, Distribution -- 0.74%
Atmos Energy Corp..................................... 46,503 1,339,287
Sempra Energy......................................... 27,238 1,354,273
------------
2,693,560
------------
Total Long-Term Investment Securities
(Cost $321,512,304).................................. 354,263,096
------------
38 MID CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount (Note 2)
- ------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES -- 0.69%
Time Deposit -- 0.69%
Euro Time Deposit with State Street Bank & Trust Co.:
2.80% due 09/01/06
(Cost $2,490,000)....................................... $2,490,000 $ 2,490,000
------------
REPURCHASE AGREEMENT -- 1.26%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $4,565,612 and collateralized
by Federal National Mtg. Assoc. Notes, bearing interest
at 4.25%, due 05/15/09 and having an approximate
value of $4,705,995
(Cost $4,565,000)....................................... 4,565,000 4,565,000
------------
TOTAL INVESTMENTS
(Cost $328,567,304)(2).................................. 99.71% 361,318,096
Other assets less liabilities.............................. 0.29% 1,060,446
---------- ------------
NET ASSETS -- 100.00% $362,378,542
========== ============
- --------
+ Non-income producing security
(1)Consists of more than one class of securities traded together as a unit.
(2)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
August 31, 2006 MODERATE GROWTH LIFESTYLE FUND - PORTFOLIO PROFILE 39
(Unaudited)
Industry Allocation*
Large Cap Equity Funds... 52.17%
Bond Fund................ 25.03%
International Equity Fund 10.01%
Mid Cap Equity Funds..... 9.81%
Small Cap Equity Funds... 3.11%
------
100.13%
======
* Calculated as a percentage of Net Assets.
40 MODERATE GROWTH LIFESTYLE FUND - SCHEDULE OF INVESTMENTS August 31, 2006
Value
Shares (Note 2)
-----------------------------------------------------------------------
AFFILIATED INVESTMENT COMPANIES#(1) -- 100.13%
Bond Fund -- 25.03%
VALIC Co. II Core Bond Fund................. 2,197,009 $22,167,819
-----------
International Equity Fund -- 10.01%
VALIC Co. I International Equities Fund..... 878,802 8,867,117
-----------
Large Cap Equity Funds -- 52.17%
VALIC Co. II Capital Appreciation Fund...... 3,437,261 30,591,628
VALIC Co. II Large Cap Value Fund........... 1,070,383 15,606,190
-----------
46,197,818
-----------
Mid Cap Equity Funds -- 9.81%
VALIC Co. II MidCap Value Fund.............. 156,061 2,926,140
VALIC Co. II MidCap Growth Fund............. 707,193 5,763,623
-----------
8,689,763
-----------
Small Cap Equity Funds -- 3.11%
VALIC Co. II Small Cap Growth Fund.......... 146,854 1,862,104
VALIC Co. II Small Cap Value Fund........... 58,879 886,711
-----------
2,748,815
-----------
TOTAL INVESTMENTS
(Cost $85,986,462)(2)...................... 100.13% 88,671,332
Liabilities in excess of other assets......... (0.13)% (112,999)
--------- -----------
NET ASSETS -- 100.00% $88,558,333
========= ===========
- --------
# The Moderate Growth Lifestyle Fund invests in various VALIC Company I or
VALIC Company II Funds, some of which are not presented in this report.
Additional information on the underlying Funds is available at our website,
www.aigvalic.com.
(1)See Note 3.
(2)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
August 31, 2006 MONEY MARKET II FUND - PORTFOLIO PROFILE (Unaudited) 41
Industry Allocation*
Asset Backed/ Receivables........ 24.16%
Foreign Bank..................... 23.48%
Asset Backed/Multi-Asset......... 11.18%
Asset Backed/Securities.......... 9.98%
Money Center Banks............... 8.05%
Finance.......................... 6.70%
Diversified Financial Services... 4.60%
Commercial Banks................. 4.22%
Investment Bank/Brokerage........ 1.97%
Asset Backed/Finance............. 1.32%
Domestic Bank.................... 1.32%
Regional Bank.................... 1.32%
Asset Backed/Loans............... 1.20%
Government Agency................ 0.66%
Asset Backed/CLOs................ 0.33%
------
100.49%
======
Weighted Average Days to Maturity 42
Credit Quality+#
Government -- Agency 0.66%
A-1................. 99.34%
------
100.00%
======
* Calculated as a percentage of Net Assets.
+ Standard and Poors
# Calculated as a percentage of total debt issues.
42 MONEY MARKET II FUND - SCHEDULE OF INVESTMENTS August 31, 2006
Principal Value
Amount (Note 2)
-----------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES -- 96.46%
ASSET BACKED COMMERCIAL PAPER -- 47.33%
Amstel Funding Corp.:
5.28% due 10/20/06..................... $1,245,000 $ 1,236,053
5.29% due 11/15/06..................... 1,000,000 988,979
Amsterdam Funding Corp.:
5.26% due 09/19/06*.................... 3,000,000 2,992,110
5.27% due 12/14/06*.................... 1,000,000 984,775
5.35% due 09/18/06*.................... 1,000,000 997,474
Atlantis One Funding Corp.:
5.13% due 09/28/06..................... 500,000 498,076
Cafco LLC:
5.27% due 11/16/06..................... 3,000,000 2,966,623
Cancara Asset Securitisation, Ltd.:
5.26% due 10/18/06..................... 3,000,000 2,979,398
5.33% due 02/09/07..................... 1,000,000 1,000,000
Chariot Funding LLC:
5.25% due 09/21/06*.................... 5,000,000 4,985,417
Charta LLC:
5.28% due 11/08/06..................... 1,000,000 990,036
Cheyne Finance LLC:
5.32% due 12/06/06*(1)................. 2,000,000 1,999,747
CRC Funding LLC:
5.26% due 09/22/06..................... 2,000,000 1,993,863
5.26% due 10/16/06..................... 3,000,000 2,980,275
5.26% due 10/18/06..................... 4,000,000 3,972,531
5.27% due 09/25/06..................... 1,000,000 996,487
Edison Asset Securitization LLC:
5.11% due 09/27/06..................... 1,000,000 996,309
Falcon Asset Securitization Corp.:
5.25% due 09/22/06..................... 4,000,000 3,987,750
Fountain Square Commercial Funding:
5.15% due 09/05/06..................... 1,000,000 999,428
5.33% due 09/15/06..................... 817,000 815,306
Galaxy Funding, Inc.:
5.27% due 11/24/06..................... 1,000,000 987,704
5.28% due 11/10/06..................... 4,000,000 3,958,933
Giro Funding U. S. Corp.:
5.26% due 11/13/06..................... 4,000,000 3,957,336
Greyhawk Funding LLC:
5.27% due 09/20/06..................... 4,000,000 3,988,874
Kittyhawk Funding Corp.:
5.26% due 10/26/06..................... 3,000,000 2,975,892
Old Line Funding Corp.:
5.26% due 10/04/06*.................... 1,000,000 995,178
Ranger Funding Co. LLC:
5.25% due 10/24/06..................... 1,000,000 992,271
5.26% due 10/05/06..................... 3,000,000 2,985,096
Sedna Finance, Inc.:
5.19% due 10/03/06*.................... 700,000 696,771
5.37% due 09/01/06*(1)................. 1,000,000 999,979
Sheffield Receivables Corp.:
5.27% due 09/22/06..................... 1,000,000 996,926
5.27% due 10/16/06..................... 2,000,000 1,986,825
Surrey Funding Corp.:
5.27% due 10/13/06..................... 1,000,000 993,852
Sydney Capital Corp.:
5.24% due 09/07/06..................... 1,760,000 1,758,463
5.26% due 10/17/06..................... 1,000,000 993,279
5.27% due 09/21/06..................... 2,000,000 1,994,150
Windmill Funding Corp.:
5.27% due 10/03/06..................... 1,000,000 995,316
-----------
Total Asset Backed Commercial Paper
(Cost $71,617,482)..................... 71,617,482
-----------
CERTIFICATES OF DEPOSIT -- 21.31%
ABN AMRO Bank NA:
4.85% due 01/24/07..................... 2,600,000 2,592,850
ABN AMRO Bank NV:
5.46% due 11/13/06(1).................. 1,000,000 1,000,779
Principal Value
Amount (Note 2)
----------------------------------------------------------
Certificates of Deposit (continued)
Barclays Bank PLC:
5.35% due 11/17/06.............. $2,250,000 $ 2,249,956
BNP Paribas:
4.99% due 09/21/06.............. 2,000,000 1,994,456
5.08% due 12/13/06.............. 1,000,000 998,883
Caylon NY:
5.08% due 12/13/06(1)........... 3,000,000 2,998,103
Citibank NA:
5.35% due 11/13/06.............. 1,000,000 1,000,000
Deutsche Bank AG:
5.03% due 11/27/06(1)........... 300,000 299,789
5.31% due 10/23/06.............. 4,000,000 4,000,000
Dexia Credit Local SA:
5.33% due 09/04/06(1)........... 1,000,000 999,987
First Tennessee Bank:
5.32% due 10/10/06.............. 1,000,000 1,000,000
5.35% due 11/16/06.............. 1,000,000 1,000,000
Fortis Bank:
5.15% due 10/23/06.............. 2,000,000 2,000,014
HBOS Treasury Services:
4.63% due 10/30/06(1)........... 300,000 299,638
4.81% due 12/07/06.............. 505,000 503,836
JPMorgan Chase Bank:
5.15% due 11/06/06.............. 822,000 814,239
5.15% due 11/17/06.............. 976,000 965,249
Lloyds Bank PLC:
5.28% due 09/20/06.............. 2,000,000 2,000,000
Royal Bank of Scotland:
4.31% due 09/29/06.............. 1,000,000 1,000,000
4.76% due 11/14/06(1)........... 300,000 299,627
4.79% due 01/03/07(1)........... 1,000,000 997,981
Societe Generale:
4.77% due 01/17/07.............. 235,000 234,222
Wells Fargo Bank NA:
5.28% due 09/19/06.............. 3,000,000 3,000,000
-----------
Total Certificates of Deposit
(Cost $32,249,609).............. 32,249,609
-----------
COMMERCIAL PAPER -- 20.57%
Bank of America Corp.:
5.27% due 10/13/06.............. 2,000,000 1,987,699
5.34% due 09/13/06.............. 2,000,000 1,996,438
Bear Stearns Co., Inc.:
5.28% due 10/23/06.............. 2,000,000 1,984,747
Citigroup Funding, Inc.:
5.07% due 10/24/06.............. 2,000,000 1,985,072
Dorada Finance, Inc.:
5.12% due 09/29/06.............. 500,000 498,009
General Electric Capital Corp.:
5.25% due 01/16/07.............. 3,000,000 2,940,062
HBOS Treasury Services PLC:
5.06% due 09/11/06.............. 1,000,000 998,595
5.27% due 11/21/06.............. 2,000,000 1,976,285
5.27% due 11/27/06.............. 2,000,000 1,974,528
5.30% due 11/22/06.............. 667,000 658,948
HSBC Bank USA, Inc.:
5.05% due 09/01/06.............. 1,000,000 1,000,000
Royal Bank of Canada:
5.01% due 10/23/06.............. 1,000,000 992,763
5.04% due 02/21/07.............. 190,000 189,472
5.23% due 02/06/07.............. 1,000,000 977,068
State Street Boston Corp.:
5.23% due 09/21/06.............. 4,000,000 3,988,378
Svenska Handelsbank, Inc.:
4.90% due 02/08/07.............. 1,000,000 1,000,000
5.65% due 07/20/07.............. 2,000,000 2,002,981
August 31, 2006 MONEY MARKET II FUND - SCHEDULE OF INVESTMENTS - CONTINUED 43
Principal Value
Amount (Note 2)
-----------------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES (continued)
Commercial Paper (continued)
UBS Finance, Inc.:
5.27% due 10/23/06............................. $2,000,000 $ 1,984,776
5.27% due 10/26/06............................. 2,000,000 1,983,897
------------
Total Commercial Paper
(Cost $31,119,718)............................. 31,119,718
------------
MEDIUM TERM NOTES -- 6.59%
Beta Finance, Inc.:
5.34% due 09/15/06*(1)......................... 2,000,000 2,000,814
Merrill Lynch & Co., Inc.:
5.31% due 09/15/06(1).......................... 1,000,000 1,000,000
Sigma Finance, Inc.:
5.29% due 09/15/06(1).......................... 1,000,000 999,950
5.32% due 09/18/07*(1)......................... 2,000,000 1,999,900
Wells Fargo & Co.:
5.38% due 09/04/06(1).......................... 1,000,000 1,000,000
White Pine Finance LLC:
5.04% due 10/31/06............................. 3,000,000 2,974,800
------------
Total Medium Term Notes
(Cost $9,975,464).............................. 9,975,464
------------
U.S. GOVERNMENT AGENCY -- 0.66%
Federal Home Loan Bank:
5.40% due 11/28/06 (Cost 1,000,000) 1,000,000 1,000,000
------------
Total Short-Term Investment Securities
(Cost $145,962,273)............................ 145,962,273
------------
REPURCHASE AGREEMENT -- 4.03%
UBS Warburg, LLC, Joint Repurchase Agreement(2)
(Cost $6,100,000).............................. 6,100,000 6,100,000
------------
TOTAL INVESTMENTS
(Cost $152,062,273)(3)......................... 100.49% 152,062,273
Liabilities in excess of other assets............. (0.49)% (736,014)
---------- ------------
NET ASSETS -- 100.00% $151,326,259
========== ============
- --------
* 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 [period ended], the aggregate value of
these securities was $79,592,946 representing 52.60% of net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(1)Variable rate security -- the rate reflected is as of August 31, 2006;
maturity date reflects next reset date.
(2)See Note 2 for details of Joint Repurchase Agreement.
(3)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
44 SMALL CAP GROWTH FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2006
Industry Allocation*
Electronics/Electrical Equipment.. 8.61%
Oil & Gas......................... 7.80%
Semiconductors.................... 7.72%
Information Processing -- Services 7.68%
Leisure & Tourism................. 7.03%
Commercial Services............... 5.46%
Information Processing -- Software 5.19%
Telecommunications................ 4.97%
Financial Services................ 4.75%
Banks............................. 3.58%
Medical -- Biomedical/Gene........ 3.07%
Freight........................... 3.03%
Real Estate Investment Trusts..... 2.69%
Medical Technology................ 2.32%
Drugs............................. 2.28%
Healthcare........................ 2.26%
Apparel & Products................ 2.20%
Chemical.......................... 2.07%
Machinery......................... 1.89%
Retail............................ 1.83%
Therapeutics...................... 1.82%
Building Materials................ 1.60%
Aerospace/Defense................. 1.57%
Information Processing -- Hardware 1.18%
Hospital Management............... 1.00%
Advertising....................... 0.84%
Metals............................ 0.78%
Government Agencies............... 0.76%
Schools........................... 0.76%
Airlines.......................... 0.71%
Automotive........................ 0.68%
Utilities -- Electric............. 0.67%
Insurance......................... 0.58%
Coal.............................. 0.46%
Savings & Loan.................... 0.40%
Human Resources................... 0.30%
------
100.54%
======
* Calculated as a percentage of net assets.
August 31, 2006 SMALL CAP GROWTH FUND - SCHEDULE OF INVESTMENTS 45
Value
Shares (Note 2)
-----------------------------------------------------------
COMMON STOCK -- 99.78%
Advertising -- 0.84%
Marchex, Inc., Class B+................ 25,200 $ 413,784
----------
Aerospace/Defense -- 1.57%
ARGON ST, Inc.+........................ 23,840 613,165
K&F Industries Holdings, Inc.+......... 8,700 163,386
----------
776,551
----------
Airlines -- 0.71%
JetBlue Airways Corp.+................. 34,400 352,256
----------
Apparel & Products -- 2.20%
Christopher & Banks Corp............... 13,800 336,030
CROCS, Inc.+........................... 8,900 240,478
Hot Topic, Inc.+....................... 23,300 230,204
J Crew Group, Inc...................... 11,000 278,630
----------
1,085,342
----------
Automotive -- 0.68%
Tenneco Automotive, Inc.+.............. 14,800 336,700
----------
Banks -- 3.58%
East West Bancorp, Inc................. 5,800 234,900
First State Bancorp.................... 8,625 220,714
Hancock Holding Co..................... 3,300 171,072
Signature Bank+........................ 6,700 220,095
UCBH Holdings, Inc..................... 21,400 388,196
UMB Financial Corp..................... 4,100 142,967
Whitney Holding Corp................... 11,000 386,870
----------
1,764,814
----------
Building Materials -- 1.60%
Beacon Roofing Supply, Inc.+........... 16,750 307,865
Drew Industries, Inc.+................. 18,400 480,424
----------
788,289
----------
Chemical -- 2.07%
Cabot Corp............................. 7,700 255,871
FMC Corp............................... 7,200 440,064
Minerals Technologies, Inc............. 6,300 327,537
----------
1,023,472
----------
Coal -- 0.46%
Alpha Natural Resources, Inc. LLC+..... 12,400 224,812
----------
Commercial Services -- 5.46%
BearingPoint, Inc.+.................... 51,500 430,540
Clayton Holdings, Inc.+................ 23,200 286,288
Euronet Worldwide, Inc.+............... 8,700 211,410
Freightcar America, Inc................ 4,700 273,540
Global Cash Access, Inc.+.............. 17,400 268,482
Heartland Payment Systems, Inc.+....... 13,600 367,336
LECG Corp.+............................ 12,600 213,570
Parexel International Corp.+........... 19,500 645,450
----------
2,696,616
----------
Drugs -- 2.28%
Adams Respiratory Therapeutics, Inc.+.. 10,200 416,160
Angiotech Pharmaceuticals, Inc.+....... 18,400 220,064
Impax Laboratories, Inc.+.............. 26,200 158,510
Penwest Pharmaceuticals Co.+........... 18,400 329,360
----------
1,124,094
----------
Electronics/Electrical Equipment -- 8.61%
Flir Systems, Inc.+.................... 24,900 689,730
Greatbatch, Inc.+...................... 6,800 166,328
Microtune, Inc.+....................... 34,720 209,014
Molecular Devices Corp.+............... 13,800 331,338
Netlogic Microsystems, Inc.+........... 19,500 575,445
Silicon Laboratories, Inc.+............ 16,600 585,482
Tektronix, Inc......................... 19,600 555,464
Value
Shares (Note 2)
---------------------------------------------------------------
Electronics/Electrical Equipment (continued)
Trimble Navigation, Ltd.+................. 13,300 $ 651,301
Varian, Inc.+............................. 10,400 485,472
----------
4,249,574
----------
Financial Services -- 4.75%
Ares Capital Corp......................... 20,579 350,872
CapitalSource, Inc........................ 19,875 482,962
Doral Financial Corp...................... 41,600 208,416
Financial Federal Corp.................... 12,500 327,500
GFI Group, Inc.+.......................... 7,700 358,050
Jackson Hewitt Tax Service, Inc........... 10,300 325,480
National Financial Partners Corp.......... 7,900 290,878
----------
2,344,158
----------
Freight -- 3.03%
American Commercial Lines, Inc.+.......... 6,800 357,000
Forward Air Corp.......................... 15,600 501,384
Knight Transportation, Inc................ 37,100 637,749
----------
1,496,133
----------
Healthcare -- 2.26%
American Medical Systems Holdings, Inc.+.. 23,600 414,416
Psychiatric Solutions, Inc.+.............. 15,600 499,356
RehabCare Group, Inc.+.................... 13,600 199,648
----------
1,113,420
----------
Hospital Management -- 1.00%
VCA Antech, Inc.+......................... 13,900 492,338
----------
Human Resources -- 0.30%
CDI Corp.................................. 7,100 148,745
----------
Information Processing - Hardware -- 1.18%
Rackable Systems, Inc.+................... 13,000 360,880
Xyratex, Ltd.+............................ 11,700 222,417
----------
583,297
----------
Information Processing - Services -- 7.68%
aQuantive, Inc.+.......................... 12,000 297,600
Ariba, Inc.+.............................. 40,600 336,168
Entrust, Inc.+............................ 66,400 235,056
Micros Systems, Inc.+..................... 9,100 435,526
National Instruments Corp................. 17,200 477,472
Redback Networks, Inc.+................... 12,900 240,456
Rightnow Technologies, Inc.+.............. 27,700 425,472
Sapient Corp.+............................ 133,500 650,145
Trizetto Group, Inc.+..................... 26,200 359,464
ValueClick, Inc.+......................... 18,800 331,820
----------
3,789,179
----------
Information Processing - Software -- 5.19%
Allscripts Heathcare Solutions, Inc.+..... 25,300 515,108
Blackbaud, Inc............................ 8,100 187,191
F5 Networks, Inc.+........................ 6,600 330,594
Nuance Communications, Inc.+.............. 52,998 416,034
Quest Software, Inc.+..................... 32,300 449,939
THQ, Inc.+................................ 12,500 322,500
Witness Systems, Inc.+.................... 21,000 341,250
----------
2,562,616
----------
Insurance -- 0.58%
Aspen Insurance Holdings, Ltd............. 1,500 37,095
Max Re Capital, Ltd....................... 10,800 250,668
----------
287,763
----------
Leisure & Tourism -- 7.03%
BJ's Restaurants, Inc.+................... 13,600 250,648
Four Seasons Hotels, Inc.................. 7,500 473,325
Gaylord Entertainment Co.+................ 9,300 406,596
46 SMALL CAP GROWTH FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Value
Shares (Note 2)
--------------------------------------------------------
COMMON STOCK (continued)
Leisure & Tourism (continued)
Orient-Express Hotels, Ltd.......... 21,900 $ 733,212
Panera Bread Co., Class A+.......... 7,300 378,870
Penn National Gaming, Inc.+......... 20,600 682,272
Red Lion Hotels Corp+............... 15,500 152,210
Republic Airways Holdings, Inc.+.... 24,700 393,718
----------
3,470,851
----------
Machinery -- 1.89%
Flowserve Corp.+.................... 7,700 393,778
Manitowoc Co., Inc.................. 12,200 539,240
----------
933,018
----------
Medical - Biomedical/Gene -- 3.07%
Coley Pharmaceutical Group, Inc.+... 19,800 205,326
Keryx Biopharmaceuticals, Inc.+..... 20,500 281,465
Myogen, Inc.+....................... 12,500 435,000
Myriad Genetics, Inc.+.............. 20,800 526,032
Panacos Pharmaceuticals, Inc.+...... 11,600 65,540
----------
1,513,363
----------
Medical Technology -- 2.32%
Dexcom, Inc.+....................... 25,100 322,284
Digene Corp.+....................... 10,600 441,490
Telik, Inc.+........................ 21,300 379,779
----------
1,143,553
----------
Metals -- 0.78%
RTI International Metals, Inc.+..... 8,900 385,993
----------
Oil & Gas -- 7.80%
Barrett Bill Corp.+................. 12,900 373,068
Denbury Resources, Inc.+............ 22,100 685,321
FMC Technologies, Inc.+............. 7,500 441,150
Helix Energy Solutions Group, Inc.+. 22,900 880,734
Mariner Energy, Inc.+............... 19,400 366,660
Oil States International, Inc.+..... 8,000 255,680
Seitel, Inc.+....................... 69,600 272,832
Superior Energy Services, Inc.+..... 16,500 526,845
Western Refining, Inc............... 2,100 49,497
----------
3,851,787
----------
Real Estate Investment Trusts -- 2.69%
FelCor Lodging Trust, Inc........... 22,100 474,045
Innkeepers USA Trust................ 24,400 404,064
LaSalle Hotel Properties............ 10,200 448,188
----------
1,326,297
----------
Retail -- 1.83%
Cost Plus, Inc.+.................... 13,860 141,095
Select Comfort Corp.+............... 21,600 428,760
Tractor Supply Co.+................. 7,800 332,124
----------
901,979
----------
Shares/
Principal Value
Amount (Note 2)
---------------------------------------------------------------------------
Savings & Loan -- 0.40%
Franklin Bank Corp.+............................. 10,000 $ 198,800
-----------
Schools -- 0.76%
Lincoln Educational Services+.................... 400 7,220
Strayer Education, Inc........................... 3,500 368,900
-----------
376,120
-----------
Semiconductors -- 7.72%
FormFactor, Inc.+................................ 14,300 690,118
Microsemi Corp.+................................. 29,800 827,546
Power Integrations, Inc.+........................ 29,700 546,480
Sirf Technology Holdings, Inc.+.................. 12,300 323,859
Trident Microsystems, Inc.+...................... 14,400 297,072
Varian Semiconductor Equipment Associates, Inc.+. 31,850 1,124,624
-----------
3,809,699
-----------
Telecommunications -- 4.97%
Arris Group, Inc.+............................... 42,000 481,320
Atheros Communications, Inc.+.................... 29,700 483,219
Essex Corp.+..................................... 6,600 98,208
Ixia+............................................ 50,000 502,500
Netgear, Inc.+................................... 11,100 218,337
ViaSat, Inc.+.................................... 24,700 668,135
-----------
2,451,719
-----------
Therapeutics -- 1.82%
Medicines Co.+................................... 22,100 498,576
Trimeris, Inc.+.................................. 26,700 249,111
Vanda Pharmaceuticals, Inc.+..................... 15,700 148,051
-----------
895,738
-----------
Utilities - Electric -- 0.67%
Headwaters, Inc.+................................ 15,000 331,800
-----------
Total Long-Term Investment Securities
(Cost $45,797,796).............................. 49,244,670
-----------
SHORT-TERM INVESTMENT SECURITIES -- 0.76%
Government Agencies -- 0.76%
Federal Home Loan Bank Cons. Disc. Notes:
5.05% due 09/01/06
(Cost $377,000)................................. $377,000 377,000
-----------
TOTAL INVESTMENTS
(Cost $46,174,796)(1)........................... 100.54% 49,621,670
Liabilities in excess of other assets.............. (0.54)% (267,807)
-------- -----------
NET ASSETS -- 100.00% $49,353,863
======== ===========
- --------
+ Non-income producing security
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
August 31, 2006 SMALL CAP VALUE FUND - PORTFOLIO PROFILE (Unaudited) 47
Industry Allocation*
Banks............................. 11.69%
Real Estate Investment Trusts..... 11.06%
Electronics/Electrical Equipment.. 4.55%
Insurance......................... 4.45%
Information Processing -- Software 4.25%
Oil & Gas......................... 4.02%
Information Processing -- Services 4.00%
Financial Services................ 3.41%
Commercial Services............... 3.20%
Machinery......................... 3.08%
Retail............................ 3.00%
Chemical.......................... 2.98%
Leisure & Tourism................. 2.90%
Semiconductors.................... 2.67%
Apparel & Products................ 2.58%
Repurchase Agreement.............. 2.57%
Automotive........................ 2.50%
Metals............................ 2.40%
Utilities -- Electric............. 2.35%
Savings & Loan.................... 1.87%
Healthcare........................ 1.83%
Appliances/Furnishings............ 1.62%
Utilities -- Gas, Distribution.... 1.60%
Telecommunications................ 1.58%
Household Products................ 1.32%
Foods............................. 1.19%
Information Processing -- Hardware 1.08%
Publishing........................ 1.05%
Paper/Forest Products............. 0.94%
Airlines.......................... 0.86%
Aerospace/Defense................. 0.85%
Drugs............................. 0.69%
Human Resources................... 0.69%
Multimedia........................ 0.66%
Funeral Services.................. 0.62%
Freight........................... 0.58%
Medical Technology................ 0.56%
Building Materials................ 0.53%
Manufacturing..................... 0.46%
Utilities -- Communication........ 0.34%
Therapeutics...................... 0.31%
Broadcasting...................... 0.30%
Hospital Supplies................. 0.21%
Government Obligations............ 0.19%
Medical -- Biomedical/Gene........ 0.09%
Registered Investment Companies... 0.08%
Finance Companies................. 0.05%
-----
99.81%
=====
* Calculated as a percentage of net assets.
48 SMALL CAP VALUE FUND - SCHEDULE OF INVESTMENTS August 31, 2006
Value
Shares (Note 2)
-------------------------------------------------------------
COMMON STOCK -- 97.05%
Aerospace/Defense -- 0.85%
Kaman Corp., Class A..................... 13,100 $ 234,621
Orbital Sciences Corp., Class A+......... 41,200 745,308
----------
979,929
----------
Airlines -- 0.86%
Continental Airlines, Inc., Class B+..... 31,900 800,371
ExpressJet Holdings, Inc.+............... 27,200 190,128
----------
990,499
----------
Apparel & Products -- 2.58%
Blair Corp............................... 6,600 157,740
Kellwood Co.............................. 16,900 463,229
Payless ShoeSource, Inc.+................ 47,600 1,116,696
Shoe Carnival, Inc.+..................... 7,300 166,878
Skechers U.S.A., Inc., Class A+.......... 12,700 287,528
Talbots, Inc............................. 28,200 620,682
Weyco Group, Inc......................... 3,500 74,515
Wolverine World Wide, Inc................ 3,100 78,213
----------
2,965,481
----------
Appliances/Furnishings -- 1.62%
CompX International, Inc., Class A....... 9,400 150,870
Furniture Brands International, Inc...... 41,100 787,065
Griffon Corp.+........................... 9,400 222,404
HNI Corp................................. 11,300 450,870
Kimball International, Inc., Class B..... 5,600 98,784
Stanley Furniture Co., Inc............... 6,200 154,628
----------
1,864,621
----------
Automotive -- 2.50%
Acuity Brands, Inc....................... 11,000 470,030
ArvinMeritor, Inc........................ 27,600 409,860
CSK Auto Corp.+.......................... 64,300 737,521
Modine Manufacturing Co.................. 46,700 1,087,643
Visteon Corp.+........................... 18,700 160,259
----------
2,865,313
----------
Banks -- 11.69%
1st Source Corp.......................... 8,530 255,474
Amcore Financial, Inc.................... 4,400 132,220
BancFirst Corp........................... 6,100 288,957
Bank of Hawaii Corp...................... 18,800 917,816
Camden National Corp..................... 2,800 121,800
City Holding Co.......................... 13,200 519,816
Commerce Bancshares, Inc................. 15,760 789,891
Community Bank Systems, Inc.............. 10,100 220,887
Community Trust Bancorp, Inc............. 9,000 345,780
Corus Bankshares, Inc.................... 10,600 231,186
Cullen/Frost Bankers, Inc................ 8,500 501,160
Farmers Capital Bank Corp................ 900 29,583
First Citizens BancShares, Inc., Class A. 600 117,480
First Commonwealth Financial Corp........ 12,300 158,178
First Community Bancshares, Inc.......... 3,200 108,960
First Financial Bankshares, Inc.......... 1,300 50,505
First State Bancorp...................... 3,800 97,242
FirstMerit Corp.......................... 29,200 671,892
FNB Corp. (VA)........................... 3,500 123,830
Fulton Financial Corp.................... 499 8,333
Great Southern Bancorp, Inc.............. 1,900 52,953
Greater Bay Bancorp...................... 46,700 1,329,549
Heartland Financial USA, Inc............. 5,800 156,194
Integra Bank Corp........................ 3,600 92,952
Lakeland Bancorp, Inc.................... 7,440 110,112
Lakeland Financial Corp.................. 2,400 59,160
MB Financial, Inc........................ 5,000 184,500
Mercantile Bank Corp..................... 7,850 318,082
Mid-State Bancshares..................... 3,600 97,452
Old National Bancorp..................... 2,800 52,388
Value
Shares (Note 2)
-------------------------------------------------------------
Banks (continued)
Pacific Capital Bancorp................. 8,300 $ 232,068
Premierwest Bancorp..................... 3,210 49,562
Provident Bankshares Corp............... 9,700 363,556
R&G Financial Corp., Class B............ 11,700 84,240
Santander BanCorp....................... 1,000 20,170
SCBT Financial Corp..................... 1,200 46,704
Simmons First National Corp., Class A... 7,800 224,796
Southwest Bancorp, Inc.................. 3,500 92,925
Suffolk Bancorp......................... 1,000 34,840
Susquehanna Bancshares, Inc............. 12,200 298,534
Taylor Capital Group, Inc............... 2,300 67,643
TCF Financial Corp...................... 36,100 941,127
Tompkins Trustco, Inc................... 880 39,477
UMB Financial Corp...................... 34,200 1,192,554
Umpqua Holdings Corp.................... 11,600 317,492
Virginia Financial Group, Inc........... 2,500 108,900
W Holding Co., Inc...................... 27,300 137,865
Washington Trust Bancorp, Inc........... 11,100 292,929
Westamerica Bancorp..................... 4,100 196,103
Whitney Holding Corp.................... 15,150 532,826
-----------
13,418,643
-----------
Broadcasting -- 0.30%
Cumulus Media, Inc., Class A+........... 20,400 204,816
Sinclair Broadcast Group, Inc., Class A. 17,700 136,644
-----------
341,460
-----------
Building Materials -- 0.53%
LSI Industries, Inc..................... 33,100 606,723
-----------
Chemical -- 2.98%
Georgia Gulf Corp....................... 22,300 591,842
H.B. Fuller Co.......................... 37,600 723,048
Pioneer Cos., Inc.+..................... 12,600 306,936
Sensient Technologies Corp.............. 39,900 802,788
Spartech Corp........................... 27,800 626,334
Stepan Co............................... 12,400 365,552
-----------
3,416,500
-----------
Commercial Services -- 3.20%
BlueLinx Holdings, Inc.................. 10,700 113,099
Central Parking Corp.................... 5,500 91,520
Clark, Inc.............................. 9,400 121,354
Deluxe Corp............................. 3,100 55,552
Dollar Financial Corp.+................. 17,648 336,900
Geo Group, Inc.+........................ 11,700 522,639
Laidlaw International, Inc.............. 38,600 1,042,200
Pacer International, Inc................ 6,800 187,204
Quanta Services, Inc.+.................. 7,300 129,429
Silgan Holdings, Inc.................... 18,500 654,900
Washington Group International, Inc..... 7,100 420,391
-----------
3,675,188
-----------
Drugs -- 0.69%
Adolor Corp.+........................... 9,700 242,015
Alpharma, Inc., Class A................. 7,900 165,426
Cubist Pharmaceuticals, Inc.+........... 5,000 117,300
Medicis Pharmaceutical Corp............. 6,200 181,598
ViroPharma, Inc.+....................... 6,600 82,566
-----------
788,905
-----------
Electronics/Electrical Equipment -- 4.55%
Avista Corp............................. 32,500 787,800
Bel Fuse, Inc., Class B................. 4,742 175,312
Coherent, Inc.+......................... 20,800 754,208
Commscope, Inc.+........................ 11,000 321,310
CTS Corp................................ 20,500 301,350
Cubic Corp.............................. 5,700 114,741
Emcor Group, Inc.+...................... 15,400 853,776
August 31, 2006 SMALL CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED 49
Value
Shares (Note 2)
---------------------------------------------------------------
COMMON STOCK (continued)
Electronics/Electrical Equipment (continued)
Kemet Corp.+.............................. 22,800 $ 187,644
Magma Design Automation, Inc.+............ 13,600 103,088
Molecular Devices Corp.+.................. 7,400 177,674
Park Electrochemical Corp................. 19,100 498,510
Paxar Corp.+.............................. 10,400 202,488
Teleflex, Inc............................. 13,400 747,854
----------
5,225,755
----------
Finance Companies -- 0.05%
Credit Acceptance Corp.+.................. 2,100 59,724
----------
Financial Services -- 3.41%
A.G. Edwards, Inc......................... 4,100 216,562
AmeriCredit Corp.+........................ 40,400 948,996
Federal Agricultural Mtg. Corp., Class C.. 19,400 544,170
Gladstone Capital Corp.................... 4,100 92,824
Investment Technology Group, Inc.+........ 8,600 397,406
Jackson Hewitt Tax Service, Inc........... 10,500 331,800
Marlin Business Services, Inc.+........... 10,400 232,440
World Acceptance Corp.+................... 28,700 1,147,139
----------
3,911,337
----------
Foods -- 1.19%
Del Monte Foods Co........................ 94,500 1,048,950
Pilgrims Pride Corp....................... 7,400 180,264
Seaboard Corp............................. 100 140,000
----------
1,369,214
----------
Freight -- 0.58%
Arkansas Best Corp........................ 5,600 247,240
Atlas Air Worldwide Holdings, Inc.+....... 3,800 166,934
Gulfmark Offshore, Inc.+.................. 4,700 142,645
Saia, Inc.+............................... 3,400 104,550
----------
661,369
----------
Funeral Services -- 0.62%
Alderwoods Group, Inc.+................... 26,500 524,435
Stewart Enterprises, Inc., Class A........ 31,500 182,070
----------
706,505
----------
Healthcare -- 1.83%
Magellan Health Services, Inc.+........... 17,200 826,804
Manor Care, Inc........................... 14,000 730,800
Steris Corp............................... 22,800 542,184
----------
2,099,788
----------
Hospital Supplies -- 0.21%
Datascope Corp............................ 7,500 246,975
----------
Household Products -- 1.32%
American Greetings Corp., Class A......... 30,700 752,764
Chattem, Inc.+............................ 8,300 287,844
Playtex Products, Inc.+................... 36,000 473,400
----------
1,514,008
----------
Human Resources -- 0.69%
Spherion Corp.+........................... 106,600 796,302
----------
Information Processing - Hardware -- 1.08%
Electronics for Imaging, Inc.+............ 30,600 705,024
Imation Corp.............................. 6,800 269,484
Tech Data Corp.+.......................... 7,500 261,675
----------
1,236,183
----------
Information Processing - Services -- 4.00%
Agilysys, Inc............................. 15,400 208,208
Ansoft Corp.+............................. 8,600 206,744
BISYS Group, Inc.+........................ 63,500 653,415
Black Box Corp............................ 11,700 450,918
CSG Systems International, Inc.+.......... 26,000 699,920
Digital Insight Corp.+.................... 8,900 231,489
Fair Issac & Co., Inc..................... 1,500 52,515
Value
Shares (Note 2)
---------------------------------------------------------------
Information Processing - Services (continued)
Intergraph Corp.+.......................... 4,100 $ 153,176
SonicWALL, Inc.+........................... 39,100 401,166
Sykes Enterprises, Inc.+................... 22,800 458,508
Trizetto Group, Inc.+...................... 17,800 244,216
Unisys Corp.+.............................. 73,200 391,620
United Online, Inc......................... 38,000 435,860
----------
4,587,755
----------
Information Processing - Software -- 4.25%
Acxiom Corp................................ 26,100 633,969
Altiris, Inc.+............................. 22,800 515,280
Aspen Technologies, Inc.+.................. 37,500 418,500
BMC Software, Inc.+........................ 19,200 511,104
EPIQ Systems, Inc.+........................ 40,900 608,592
Infousa, Inc............................... 14,000 115,640
Inter-Tel, Inc............................. 32,900 725,116
Microstrategy, Inc., Class A+.............. 3,700 337,440
Parametric Technology Corp.+............... 31,420 506,176
Per-Se Technologies, Inc.+................. 18,092 412,317
Progress Software Corp.+................... 3,700 93,684
----------
4,877,818
----------
Insurance -- 4.45%
Affirmative Insurance Holdings, Inc........ 6,300 93,051
Alfa Corp.................................. 18,700 316,030
AmerUs Group Co............................ 9,300 630,540
Crawford & Co., Class B.................... 13,800 109,158
Delphi Financial Group, Inc., Class A...... 21,250 826,200
FBL Financial Group, Inc., Class A......... 2,700 89,532
Great American Financial Resources, Inc.... 4,200 87,948
Harleysville Group, Inc.................... 19,300 694,607
Horace Mann Educators Corp................. 31,900 585,684
James River Group, Inc.+................... 1,200 33,828
LandAmerica Financial Group, Inc........... 8,300 524,892
ProAssurance Corp.+........................ 7,100 357,130
Protective Life Corp....................... 10,200 469,506
StanCorp Financial Group, Inc.............. 6,200 288,734
----------
5,106,840
----------
Leisure & Tourism -- 2.90%
Arctic Cat, Inc............................ 15,400 256,102
Dominos Pizza, Inc......................... 30,400 743,280
Dover Downs Gaming & Entertainment, Inc.... 14,600 191,698
Hasbro, Inc................................ 14,600 296,380
Jack in the Box, Inc.+..................... 17,400 834,852
Luby's, Inc.+.............................. 16,500 156,915
Marvel Entertainment, Inc.+................ 39,900 855,456
----------
3,334,683
----------
Machinery -- 3.08%
AGCO Corp.+................................ 21,200 526,820
Applied Industrial Technologies, Inc....... 16,300 368,543
Cognex Corp................................ 14,800 377,844
Flowserve Corp.+........................... 1,100 56,254
Lindsay Manufacturing Co................... 6,700 191,084
NACCO Industries, Inc., Class A............ 1,200 160,236
Tennant Co................................. 2,100 56,826
Terex Corp.+............................... 26,400 1,159,752
Wabtec Corp................................ 22,800 643,188
----------
3,540,547
----------
Manufacturing -- 0.46%
Reddy Ice Holdings, Inc.................... 22,500 533,700
----------
Medical - Biomedical/Gene -- 0.09%
Myogen, Inc.+.............................. 2,900 100,920
----------
50 SMALL CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Value
Shares (Note 2)
-------------------------------------------------------------------
COMMON STOCK (continued)
Medical Technology -- 0.56%
DJ Orthopedics, Inc.+.......................... 3,700 $ 142,709
Illumina, Inc.+................................ 2,900 97,672
Nektar Therapeutics+........................... 5,800 101,616
Zoll Medical Corp.+............................ 7,900 299,489
----------
641,486
----------
Metals -- 2.40%
Century Aluminum Co.+.......................... 9,700 336,687
Chaparral Steel Co.+........................... 6,600 471,372
CIRCOR International, Inc...................... 8,100 232,389
MascoTech, Inc.+(1)(2)......................... 200 0
Quanex Corp.................................... 7,150 245,459
Steel Dynamics, Inc............................ 19,300 1,018,847
USEC, Inc...................................... 20,400 206,244
Valmont Industries, Inc........................ 4,700 245,152
----------
2,756,150
----------
Multimedia -- 0.66%
Belo Corp...................................... 46,400 756,320
----------
Oil & Gas -- 4.02%
Forest Oil Corp.+.............................. 8,800 298,056
Harvest Natural Resources, Inc.+............... 11,000 140,690
Helmerich & Payne, Inc......................... 9,100 223,223
Holly Corp..................................... 11,700 536,094
Houston Exploration Co.+....................... 22,700 1,456,205
Mariner Energy, Inc.+.......................... 18,491 349,480
Meridian Resource Corp.+....................... 17,200 57,792
ONEOK, Inc..................................... 2,500 95,675
Swift Energy Co.+.............................. 10,700 468,232
Tesoro Petroleum Corp.......................... 2,600 167,986
Todco, Class A+................................ 1,400 51,842
Trico Marine Services, Inc.+................... 21,400 767,618
----------
4,612,893
----------
Paper/Forest Products -- 0.94%
Graphic Packaging Corp.+....................... 44,400 172,272
Longview Fibre Co.............................. 7,278 151,674
Neenah Paper, Inc.............................. 20,200 678,114
Smurfit -Stone Container Corp.+................ 6,600 75,174
----------
1,077,234
----------
Publishing -- 1.05%
John Wiley & Sons, Inc., Class A............... 15,700 541,650
Readers Digest Assoc., Inc., Class A........... 20,800 266,448
Standard Register Co........................... 30,600 392,598
----------
1,200,696
----------
Real Estate Investment Trusts -- 11.06%
American Home Mortgage Investment Corp......... 14,400 456,480
Annaly Mtg. Management, Inc.................... 15,600 195,156
Anworth Mtg. Asset Corp........................ 40,200 314,766
Apartment Investment & Management Co., Class A. 13,000 666,120
Boykin Lodging Co.............................. 5,000 54,850
Brandywine Realty Trust........................ 23,446 765,043
Cousins Properties, Inc........................ 25,900 890,183
Equity Inns, Inc............................... 46,100 709,018
Equity Lifestyle Properties, Inc............... 15,400 690,382
Extra Space Storage, Inc....................... 7,300 127,750
Home Properties of New York, Inc............... 23,500 1,336,680
Innkeepers USA Trust........................... 74,400 1,232,064
Lexington Corporate Properties Trust........... 42,900 901,758
Luminent Mtg. Capital, Inc..................... 38,600 391,018
MFA Mtg. Investments, Inc...................... 54,100 380,323
Pennsylvania Real Estate Investment Trust...... 800 33,856
PS Business Parks, Inc......................... 13,600 831,232
Ramco-Gershenson Properties Trust.............. 21,700 694,400
Sunstone Hotel Investors, Inc.................. 16,300 487,370
Taubman Centers, Inc........................... 16,400 660,756
Value
Shares (Note 2)
---------------------------------------------------------------------------
Real Estate Investment Trusts (continued)
Universal Health Realty Income Trust.................. 8,100 $ 293,949
Winston Hotels, Inc................................... 48,900 582,399
-----------
12,695,553
-----------
Registered Investment Companies -- 0.08%
Gladstone Capital Corp................................ 4,100 92,824
-----------
Retail -- 3.00%
Barnes & Noble, Inc................................... 5,400 196,344
Big Lots, Inc.+....................................... 49,400 906,490
Borders Group, Inc.................................... 200 3,826
GameStop Corp.+....................................... 11,700 511,056
Myers Industries, Inc................................. 18,200 299,026
OfficeMax, Inc........................................ 8,000 332,240
Pantry, Inc.+......................................... 6,400 299,904
Retail Ventures, Inc.+................................ 30,700 439,931
United Stationers, Inc.+.............................. 6,700 307,061
Weis Markets, Inc..................................... 3,700 146,187
-----------
3,442,065
-----------
Savings & Loan -- 1.87%
Astoria Financial Corp................................ 35,800 1,099,060
First Financial Holdings, Inc......................... 1,900 65,626
First Indiana Corp.................................... 3,150 77,017
First Niagara Financial Group, Inc.................... 23,000 344,080
FirstFed Financial Corp.+............................. 7,500 381,450
Horizon Financial Corp................................ 1,200 35,928
OceanFirst Financial Corp............................. 1,100 24,046
WSFS Financial Corp................................... 1,900 120,175
-----------
2,147,382
-----------
Semiconductors -- 2.67%
Asyst Technologies, Inc.+............................. 57,300 429,177
Axcelis Technologies, Inc.+........................... 21,400 134,606
Cirrus Logic, Inc.+................................... 71,400 522,648
Cohu, Inc............................................. 8,100 135,837
Emulex Corp.+......................................... 13,200 228,624
Fairchild Semiconductor International, Inc., Class A+. 14,300 257,829
Lattice Semiconductor Corp.+.......................... 50,800 371,856
Mattson Technology, Inc.+............................. 38,200 299,106
Omnivision Technologies, Inc.+........................ 35,400 587,640
Triquint Semiconductor, Inc.+......................... 20,400 100,572
-----------
3,067,895
-----------
Telecommunications -- 1.58%
CalAmp Corp.+......................................... 10,800 72,684
Carrier Access Corp.+................................. 9,600 86,592
CenturyTel, Inc....................................... 6,700 266,794
Dobson Communications Corp., Class A+................. 71,400 490,518
North Pittsburgh Systems, Inc......................... 7,900 197,342
UTStarcom, Inc.+...................................... 19,500 160,095
Windstream Corp....................................... 41,100 542,520
-----------
1,816,545
-----------
Therapeutics -- 0.31%
Cypress Biosciences, Inc.+............................ 13,600 97,920
Renovis, Inc.+........................................ 12,500 184,250
United Therapeutics Corp.+............................ 1,400 76,426
-----------
358,596
-----------
Utilities - Communication -- 0.34%
Commonwealth Telephone Enterprises, Inc............... 11,200 394,912
-----------
Utilities - Electric -- 2.35%
CenterPoint Energy, Inc............................... 48,500 700,825
El Paso Electric Co.+................................. 28,200 674,262
Great Plains Energy, Inc.............................. 2,100 64,092
Headwaters, Inc.+..................................... 5,000 110,600
Idacorp, Inc.......................................... 9,700 372,674
August 31, 2006 SMALL CAP VALUE FUND - SCHEDULE OF INVESTMENTS - CONTINUED 51
Shares/
Principal Value
Amount (Note 2)
--------------------------------------------------------------
COMMON STOCK (continued)
Utilities - Electric (continued)
NorthWestern Corp.................... 5,900 $ 205,556
Puget Energy, Inc.................... 25,200 570,276
------------
2,698,285
------------
Utilities - Gas, Distribution -- 1.60%
Nicor, Inc........................... 34,200 1,493,172
Vectren Corp......................... 12,500 344,500
------------
1,837,672
------------
Total Common Stock
(Cost $101,228,137)................. 111,419,193
------------
UNITED STATES GOVERNMENT BONDS -- 0.19%
Government Obligations -- 0.19%
United States Treasury Notes:
2.88% due 11/30/06@
(Cost $221,906)..................... $225,000 223,761
------------
Total Long-Term Investment Securities
(Cost $101,450,043)................. 111,642,954
------------
Principal Value
Amount (Note 2)
- ------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.57%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $2,952,396 and collateralized
by Federal National Mtg. Assoc. Notes, bearing interest
at 4.25%, due 05/15/09 and having an approximate
value of $3,043,012
(Cost $2,952,000)....................................... $2,952,000 $ 2,952,000
------------
TOTAL INVESTMENTS
(Cost $104,402,043)(3).................................. 99.81% 114,594,954
Other assets less liabilities.............................. 0.19% 214,529
---------- ------------
NET ASSETS -- 100.00% $114,809,483
========== ============
- --------
+ Non-income producing security
@ The security was pledged as collateral to cover margin requirements for open
futures contracts.
(1)Fair valued security (see Note 2)
(2)Illiquid security
(3)See Note 5 for cost of investments on a tax basis.
Open Futures Contracts
- -------------------------------------------------------------------------------------
Unrealized
Number of Expiration Value at Value as of Appreciation
Contracts Description Date Trade Date August 31, 2006 (Depreciation)
- -------------------------------------------------------------------------------------
8 Long Russell 2000 Index September 2006 $2,817,413 $2,886,800 $69,387
=======
See Notes to Financial Statements
52 SOCIALLY RESPONSIBLE FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2006
Industry Allocation*
Commercial Services............... 12.87%
Financial Services................ 7.89%
Banks............................. 7.80%
Oil & Gas......................... 6.71%
Insurance......................... 5.56%
Telecommunications................ 5.34%
Drugs............................. 4.85%
Retail............................ 4.38%
Information Processing -- Software 3.85%
Information Processing -- Hardware 3.33%
Beverages......................... 3.14%
Leisure & Tourism................. 2.57%
Freight........................... 2.56%
Information Processing -- Services 2.49%
Medical -- Biomedical/Gene........ 2.31%
Hospital Supplies................. 2.25%
Semiconductors.................... 2.18%
Repurchase Agreement.............. 2.08%
Multimedia........................ 1.98%
Household Products................ 1.92%
Broadcasting...................... 1.42%
Railroads & Equipment............. 1.41%
Apparel & Products................ 1.17%
Savings & Loan.................... 1.12%
Utilities -- Electric............. 1.05%
Building Materials................ 0.91%
Paper/Forest Products............. 0.91%
Government Obligations............ 0.75%
Medical Technology................ 0.60%
Advertising....................... 0.59%
Foods............................. 0.52%
Therapeutics...................... 0.47%
Airlines.......................... 0.41%
Metals............................ 0.38%
Healthcare........................ 0.34%
Electronics/Electrical Equipment.. 0.32%
Chemical.......................... 0.22%
Machinery......................... 0.19%
Automotive........................ 0.15%
Heavy Duty Trucks/Parts........... 0.10%
Photography....................... 0.10%
Schools........................... 0.06%
-----
99.25%
=====
* Calculated as a percentage of net assets.
August 31, 2006 SOCIALLY RESPONSIBLE FUND - SCHEDULE OF INVESTMENTS 53
Value
Shares (Note 2)
-------------------------------------------------------------
COMMON STOCK -- 83.55%
Advertising -- 0.59%
Omnicom Group, Inc..................... 19,990 $ 1,747,526
-----------
Airlines -- 0.41%
Southwest Airlines Co.................. 69,400 1,202,008
-----------
Apparel & Products -- 1.17%
Coach, Inc.+........................... 15,330 462,813
Nike, Inc., Class B.................... 37,000 2,988,120
-----------
3,450,933
-----------
Automotive -- 0.15%
AutoZone, Inc.+........................ 1,710 154,413
SPX Corp............................... 5,420 286,176
-----------
440,589
-----------
Banks -- 7.80%
Bank of America Corp................... 145,565 7,492,231
Bank of New York Co., Inc.............. 65,280 2,203,200
Fifth Third Bancorp.................... 24,030 945,340
National City Corp..................... 81,190 2,807,550
PNC Financial Services Group........... 22,280 1,577,201
SunTrust Banks, Inc.................... 39,380 3,008,632
Wells Fargo & Co....................... 143,706 4,993,784
-----------
23,027,938
-----------
Beverages -- 3.14%
Coca-Cola Co........................... 101,272 4,537,998
Coca-Cola Enterprises, Inc............. 13,610 303,503
PepsiCo, Inc........................... 68,067 4,443,414
-----------
9,284,915
-----------
Broadcasting -- 1.42%
Clear Channel Communications, Inc...... 72,370 2,101,625
Comcast Corp., Class A+................ 48,570 1,699,950
DIRECTTV Group Inc.+................... 20,740 389,704
-----------
4,191,279
-----------
Building Materials -- 0.91%
Masco Corp............................. 97,623 2,675,846
-----------
Chemical -- 0.22%
Huntsman Corp.+........................ 35,790 646,367
-----------
Drugs -- 4.85%
Abbott Laboratories.................... 85,850 4,180,895
Bristol-Myers Squibb Co................ 109,700 2,385,975
Caremark Rx, Inc....................... 50,273 2,912,817
Forest Laboratories, Inc.+............. 9,610 480,308
Merck & Co., Inc....................... 107,280 4,350,204
-----------
14,310,199
-----------
Electronics/Electrical Equipment -- 0.32%
Fisher Scientific International, Inc.+. 2,300 179,929
Xerox Corp.+........................... 52,240 773,674
-----------
953,603
-----------
Financial Services -- 7.89%
American Express Co.................... 74,793 3,929,624
Citigroup, Inc......................... 157,978 7,796,215
Fannie Mae............................. 22,886 1,204,948
Goldman Sachs Group, Inc............... 1,710 254,192
JPMorgan Chase & Co.................... 130,564 5,961,552
Merrill Lynch & Co., Inc............... 40,270 2,961,053
Principal Financial Group, Inc......... 22,030 1,172,877
-----------
23,280,461
-----------
Foods -- 0.52%
General Mills, Inc..................... 28,520 1,546,640
-----------
Freight -- 2.56%
FedEx Corp............................. 32,230 3,256,197
United Parcel Service, Inc............. 61,388 4,300,229
-----------
7,556,426
-----------
Value
Shares (Note 2)
--------------------------------------------------------------
Healthcare -- 0.34%
McKesson Corp........................... 19,810 $ 1,006,348
-----------
Heavy Duty Trucks/Parts -- 0.10%
PACCAR, Inc............................. 5,295 289,478
-----------
Hospital Supplies -- 2.25%
Johnson & Johnson....................... 102,584 6,633,081
-----------
Household Products -- 1.92%
Avon Products, Inc...................... 6,990 200,683
Colgate-Palmolive Co.................... 53,895 3,226,155
Estee Lauder Cos., Inc., Class A........ 43,590 1,606,727
Newell Rubbermaid, Inc.................. 23,440 632,646
-----------
5,666,211
-----------
Information Processing - Hardware -- 3.33%
Apple Computer, Inc.+................... 33,388 2,265,376
Dell, Inc.+............................. 99,534 2,244,492
EMC Corp.+.............................. 30,620 356,723
Hewlett-Packard Co...................... 135,635 4,958,815
Seagate Technology, Inc.+(1)(2)(4)...... 510 0
-----------
9,825,406
-----------
Information Processing - Services -- 2.49%
Computer Sciences Corp.+................ 6,980 330,712
eBay, Inc.+............................. 21,224 591,301
Electronic Data Systems Corp............ 61,270 1,460,064
First Data Corp......................... 77,960 3,349,941
Google, Inc.+........................... 3,870 1,464,911
Monster Worldwide, Inc.+................ 4,120 167,849
-----------
7,364,778
-----------
Information Processing - Software -- 3.85%
Microsoft Corp.......................... 288,999 7,424,384
Oracle Corp.+........................... 251,949 3,943,002
-----------
11,367,386
-----------
Insurance -- 5.56%
Aetna, Inc.............................. 9,646 359,507
AFLAC, Inc.............................. 12,961 584,152
Chubb Corp.............................. 59,730 2,996,057
Cincinnati Financial Corp............... 12,840 599,114
Coventry Health Care, Inc.+............. 10,400 564,096
Genworth Financial, Inc................. 44,180 1,521,117
Hartford Financial Services Group, Inc.. 16,490 1,415,831
MetLife, Inc............................ 64,960 3,574,749
UnitedHealth Group, Inc................. 32,940 1,711,233
WellPoint, Inc.+........................ 37,690 2,917,583
XL Capital, Ltd., Class A............... 2,540 166,726
-----------
16,410,165
-----------
Leisure & Tourism -- 2.57%
Carnival Corp........................... 67,900 2,845,010
Harley-Davidson, Inc.................... 17,760 1,039,138
McDonald's Corp......................... 100,163 3,595,852
Starbucks Corp.+........................ 3,740 115,977
-----------
7,595,977
-----------
Machinery -- 0.19%
Caterpillar, Inc........................ 8,480 562,648
-----------
Medical - Biomedical/Gene -- 2.31%
Amgen, Inc.+............................ 62,610 4,253,097
Genentech, Inc.+........................ 31,130 2,568,848
-----------
6,821,945
-----------
Medical Technology -- 0.60%
Quest Diagnostics, Inc.................. 23,930 1,538,220
Zimmer Holdings, Inc.+.................. 3,390 230,520
-----------
1,768,740
-----------
54 SOCIALLY RESPONSIBLE FUND - SCHEDULE OF INVESTMENTS - August 31, 2006
CONTINUED
Value
Shares (Note 2)
-----------------------------------------------------------
COMMON STOCK (continued)
Metals -- 0.38%
Freeport-McMoRan Copper & Gold, Inc.. 19,510 $ 1,135,677
-----------
Multimedia -- 1.98%
News Corp., Class A.................. 81,440 1,549,803
Time Warner, Inc..................... 246,062 4,089,551
Walt Disney Co....................... 7,020 208,143
-----------
5,847,497
-----------
Oil & Gas -- 6.71%
Apache Corp.......................... 42,670 2,785,498
BJ Services Co....................... 23,690 812,804
EOG Resources, Inc................... 41,210 2,671,232
Grant Prideco, Inc.+................. 19,070 791,977
Halliburton Co....................... 21,750 709,485
Kinder Morgan, Inc................... 21,340 2,227,043
Murphy Oil Corp...................... 6,720 328,675
Nabors Industries, Ltd.+............. 7,210 237,065
National-Oilwell Varco, Inc.+........ 9,580 625,574
Noble Energy, Inc.................... 50,240 2,482,861
Pioneer Natural Resources Co......... 26,440 1,102,812
Schlumberger, Ltd.................... 64,166 3,933,376
XTO Energy, Inc...................... 23,890 1,093,445
-----------
19,801,847
-----------
Paper/Forest Products -- 0.91%
Avery Dennison Corp.................. 43,170 2,673,950
-----------
Photography -- 0.10%
Eastman Kodak Co..................... 13,800 293,526
-----------
Railroads & Equipment -- 1.41%
Burlington Northern Santa Fe Corp.... 33,590 2,248,851
Norfolk Southern Corp................ 44,980 1,921,995
-----------
4,170,846
-----------
Retail -- 4.38%
Best Buy Co., Inc.................... 17,710 832,370
Costco Wholesale Corp................ 23,950 1,120,620
CVS Corp............................. 9,570 321,073
Federated Department Stores, Inc..... 10,740 407,905
Gap, Inc............................. 83,080 1,396,575
J.C. Penney Co., Inc................. 16,590 1,045,834
Kohl's Corp.+........................ 13,760 860,138
Kroger Co............................ 85,870 2,044,565
Office Depot, Inc.+.................. 12,230 450,553
Safeway, Inc......................... 29,560 914,291
Target Corp.......................... 60,600 2,932,434
Walgreen Co.......................... 12,540 620,228
-----------
12,946,586
-----------
Savings & Loan -- 1.12%
Washington Mutual, Inc............... 78,890 3,304,702
-----------
Schools -- 0.06%
Apollo Group, Inc., Class A+......... 3,640 182,764
-----------
Semiconductors -- 2.18%
Analog Devices, Inc.................. 54,980 1,684,587
Freescale Semiconductor, Inc.+....... 11,000 340,010
Intel Corp........................... 169,561 3,313,222
Micron Technology, Inc.+............. 37,120 641,434
Xilinx, Inc.......................... 19,650 449,395
-----------
6,428,648
-----------
Telecommunications -- 5.34%
Alltel Corp.......................... 40,050 2,171,110
BellSouth Corp....................... 102,560 4,176,243
Cisco Systems, Inc.+................. 176,940 3,890,911
Citizens Communications Co........... 132,230 1,823,452
QUALCOMM, Inc........................ 98,380 3,705,975
-----------
15,767,691
-----------
Therapeutics -- 0.47%
Gilead Sciences, Inc.+............... 21,700 1,375,780
-----------
Shares/
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------
Utilities - Electric -- 1.05%
AES Corp.+............................................. 68,360 $ 1,451,966
NRG Energy, Inc.+...................................... 32,790 1,660,486
------------
3,112,452
------------
Total Long-Term Investment Securities
(Cost $237,307,972)................................... 246,668,859
------------
SHORT-TERM INVESTMENT SECURITIES -- 13.62%
Commercial Paper -- 12.87%
Dover Corp. Yrs 3 & 4:
5.27% due 09/01/06.................................... $10,000,000 10,000,000
Dresdner U S Finance:
5.27% due 09/01/06.................................... 14,000,000 14,000,000
Rabobank USA Financial Corp.:
5.27% due 09/01/06.................................... 14,000,000 14,000,000
------------
38,000,000
------------
UNITED STATES TREASURY BILLS -- 0.75%
United States Treasury Bills:
4.77% due 09/14/06@................................... 35,000 34,940
4.78% due 09/14/06@................................... 80,000 79,862
4.84% due 09/21/06@................................... 100,000 99,731
4.87% due 09/21/06@................................... 535,000 533,552
4.88% due 09/21/06@................................... 550,000 548,509
4.89% due 10/19/06@................................... 75,000 74,511
4.90% due 09/21/06@................................... 80,000 79,782
4.92% due 10/19/06@................................... 510,000 506,656
4.93% due 10/19/06@................................... 100,000 99,343
4.93% due 10/12/06@................................... 160,000 159,103
------------
2,215,989
------------
Total Short-Term Investments
(Cost $40,215,989).................................... 40,215,989
------------
REPURCHASE AGREEMENT -- 2.08%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.83%, dated 08/31/06, to be repurchased
09/01/06 in the amount of $6,131,823 and
collateralized by Federal National Mtg. Assoc. Notes,
bearing interest at 4.25%, due 05/15/09 and having an
approximate value $6,319,337
(Cost $6,131,000)..................................... 6,131,000 6,131,000
------------
TOTAL INVESTMENTS
(Cost $283,654,961)(3)................................ 99.25% 293,015,848
Other assets less liabilities............................ 0.75% 2,214,832
----------- ------------
NET ASSETS -- 100.00% $295,230,680
=========== ============
- --------
+ Non-income producing security
@ The security or a portion thereof represents collateral for open futures
contracts.
(1)Fair value security (see Note 2)
(2)Illiquid security
(3)See Note 5 for cost of investments on a tax basis.
(4)To the extent permitted by the Statement of Additional Information, the
Socially Responsible Fund may invest in restricted securities. The Fund has
no right to demand registration of these securities. The 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, 2006, the
Socially Responsible Fund held the following restricted securities:
Market
Value % of
Acquisition Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
------------------ ----------- ------ ----------- ------ ------ ------
Seagate Technology
Common Stock..... 11/22/00 510 $0 $0 $0 0.00%
== == ====
August 31, 2006 SOCIALLY RESPONSIBLE FUND - SCHEDULE OF INVESTMENTS - 55
CONTINUED
Open Futures Contracts
- ---------------------------------------------------------------------------------
Unrealized
Number of Expiration Value at Value as of Appreciation
Contracts Description Date Trade Date August 31, 2006 (Depreciation)
- ---------------------------------------------------------------------------------
143 Long S&P 500 Index September 2006 $46,168,100 $46,675,200 $507,100
========
See Notes to Financial Statements
56 STRATEGIC BOND FUND - PORTFOLIO PROFILE (Unaudited) August 31, 2006
Industry Allocation*
Foreign Government Agencies......... 35.89%
Financial Services.................. 11.37%
United States Government Agencies... 10.39%
United States Government Obligations 9.13%
Telecommunications.................. 3.72%
Oil & Gas........................... 3.13%
Broadcasting........................ 2.80%
Utilities -- Electric............... 2.62%
Airlines............................ 1.96%
Repurchase Agreement................ 1.89%
Leisure & Tourism................... 1.83%
Commercial Services................. 1.35%
Utilities -- Gas, Pipeline.......... 1.09%
Paper/Forest Products............... 0.92%
Insurance........................... 0.79%
Drugs............................... 0.74%
Multimedia.......................... 0.69%
Metals.............................. 0.68%
Retail.............................. 0.59%
Chemical............................ 0.57%
Banks............................... 0.55%
Building Materials.................. 0.47%
Healthcare.......................... 0.45%
Real Estate Investment Trusts....... 0.44%
Household Products.................. 0.42%
Foods............................... 0.40%
Funeral Services.................... 0.40%
Hospital Management................. 0.37%
Aerospace/Defense................... 0.35%
Savings & Loan...................... 0.30%
Advertising......................... 0.26%
Freight............................. 0.25%
Pollution Control................... 0.23%
Information Processing -- Software.. 0.22%
Electronics/Electrical Equipment.... 0.22%
Semiconductors...................... 0.21%
Automotive.......................... 0.19%
Machinery........................... 0.15%
Real Estate......................... 0.15%
Beverages........................... 0.12%
Manufacturing....................... 0.12%
Railroads & Equipment............... 0.10%
Coal................................ 0.09%
Hospital Supplies................... 0.09%
Utilities -- Gas, Distribution...... 0.09%
Information Processing -- Services.. 0.08%
Textile -- Products................. 0.08%
Conglomerates....................... 0.08%
Mining.............................. 0.08%
Appliances/Furnishings.............. 0.05%
Publishing.......................... 0.05%
Medical Technology.................. 0.02%
Entertainment....................... 0.01%
-----
99.24%
=====
Credit Quality +#
Government -- Agency.. 10.43%
Government -- Treasury 10.07%
AAA................... 12.20%
AA.................... 3.88%
A..................... 5.62%
BBB................... 8.25%
BB.................... 23.27%
B..................... 14.79%
CCC................... 5.44%
Below C............... 0.93%
Not Rated@............ 5.12%
------
100.00%
======
Country Allocation*
United States. 59.21%
Brazil........ 4.59%
Turkey........ 2.99%
Sweden........ 2.73%
Russia........ 2.54%
Japan......... 2.14%
Mexico........ 2.10%
Philippines... 1.83%
Canada........ 1.81%
Argentina..... 1.79%
Colombia...... 1.77%
United Kingdom 1.65%
Norway........ 1.56%
Australia..... 1.41%
South Africa.. 1.16%
Venezuela..... 1.15%
Peru.......... 1.03%
Germany....... 1.02%
Uruguay....... 0.99%
Hungary....... 0.72%
Netherlands... 0.53%
Indonesia..... 0.52%
Spain......... 0.45%
Poland........ 0.45%
Belgium....... 0.41%
Luxembourg.... 0.33%
Cayman Islands 0.29%
France........ 0.27%
El Salvador... 0.26%
Ireland....... 0.26%
Greece........ 0.25%
Austria....... 0.23%
Bermuda....... 0.20%
Jersey........ 0.15%
Ukraine....... 0.12%
Denmark....... 0.11%
Bahamas....... 0.11%
Finland....... 0.05%
Iceland....... 0.03%
Singapore..... 0.02%
Panama........ 0.01%
-----
99.24%
=====
* 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 & Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
August 31, 2006 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS 57
Principal Value
Amount(13) (Note 2)
- -----------------------------------------------------------------------------------
ASSET - BACKED SECURITIES -- 1.36%
Financial Services--1.36%
Banc of America Commercial Mtg., Inc., Series 2006-4,
Class AJ:
5.70% due 7/10/46(11)(14)................................. $ 560,000 $ 565,466
Banc of America Large Loan, Inc., Series 2005-BBA6,
Class A2:
5.50% due 01/15/19*(9)(11)................................ 120,000 120,057
Bear Stearns Commercial Mtg. Securities Trust,
Series 2006-PW12, Class F:
5.93% due 09/11/38*(11)(14)............................... 220,000 218,703
Bear Stearns Commercial Mtg. Securities Trust,
Series 2006-PW12, Class G:
5.93% due 09/11/38(11)(14)................................ 38,000 37,448
Commercial Mtg. Pass Through Certs., Series 2004-LB2A:
4.22% due 03/10/39(11).................................... 1,026,000 987,551
Credit Suisse Mtg. Capital Certs., Series 2006-T, Class C:
5.59% due 04/15/21*(9)(11)................................ 180,000 180,055
Credit Suisse Mtg. Capital Certs., Series 2006-T, Class D:
5.61% due 04/15/21*(9)(11)................................ 180,000 180,055
LB-UBS Commercial Mtg. Trust, Series 2004-C4, Class C:
5.13% due 06/15/36(11)(14)................................ 60,000 59,747
Morgan Stanley Capital I, Series 2004-IQ8, Class C:
5.30% due 06/15/40(11)(14)................................ 155,000 151,481
Wachovia Bank Commercial Mtg. Trust, Series 2006-C25,
Class G:
5.78% due 05/15/43*(11)(14)............................... 150,000 150,890
----------
2,651,453
----------
Total Asset - Backed Securities
(Cost $2,636,851)......................................... 2,651,453
----------
CORPORATE BONDS -- 29.42%
Advertising -- 0.26%
Affinity Group, Inc.:
9.00% due 02/15/12........................................ 236,000 236,000
Vertis, Inc.:
9.75% due 04/01/09........................................ 25,000 25,312
10.88% due 06/15/09....................................... 250,000 252,500
----------
513,812
----------
Aerospace/Defense -- 0.35%
Decrane Aircraft Holdings, Inc.:
12.00% due 09/30/08....................................... 150,000 112,125
L-3 Communications Corp.:
6.13% due 07/15/13........................................ 200,000 192,500
6.38% due 10/15/15........................................ 250,000 240,625
Raytheon Co.:
6.00% due 12/15/10........................................ 45,000 46,028
6.75% due 08/15/07........................................ 97,000 97,916
----------
689,194
----------
Airlines -- 1.96%
American Airlines, Inc., Series 2001-1A2 Pass Through:
6.82% due 05/23/11........................................ 800,000 786,000
Atlas Air, Inc., Series 1999-1A2 Pass Through:
6.88% due 07/02/09........................................ 171,227 166,090
Atlas Air, Inc., Series 1999-1B Pass Through, Class B:
7.63% due 01/02/15........................................ 486,267 500,856
Atlas Air, Inc., Series 1999-1C:
8.77% due 01/02/11........................................ 37,457 31,838
Atlas Air, Inc., Series 1999-A1 Pass Through, Class A:
7.20% due 01/02/19........................................ 414,549 411,440
Atlas Air, Inc., Series 2000-1A Pass Through:
8.71% due 01/02/19........................................ 523,472 541,794
Atlas Air, Inc., Series 2001B Pass Through:
9.06% due 01/02/14........................................ 197,175 216,893
Continental Airlines, Inc., Series 1999-1A Pass Through:
6.55% due 02/02/19........................................ 279,904 283,196
Continental Airlines, Inc., Series 1999-1C Pass Through:
6.95% due 08/02/09........................................ 62,620 60,906
Principal Value
Amount(13) (Note 2)
- ----------------------------------------------------------------------------------
Airlines (continued)
Continental Airlines, Inc., Series 1999-2C1 Pass Through:
7.73% due 03/15/11....................................... $105,335 $ 99,520
Continental Airlines, Inc., Series 2000-2B:
8.31% due 10/02/19....................................... 48,589 48,291
Delta Air Lines, Inc.:
9.50% due 11/18/08*(2)(5)................................ 125,000 138,125
Delta Air Lines, Inc. Pass Through Certs.:
7.57% due 11/18/10(5).................................... 200,000 200,750
Northwest Airlines, Inc. Pass Through Certs. Series 1A-1:
7.04% due 04/01/22(5).................................... 261,913 258,639
United Airlines, Inc. Pass Through Certs.:
6.20% due 09/01/08....................................... 78,577 78,675
----------
3,823,013
----------
Appliances/Furnishings -- 0.05%
Xerox Corp:
6.75% due 02/01/17....................................... 100,000 100,250
----------
Automotive -- 0.19%
Cooper-Standard Automotive, Inc.:
8.38% due 12/15/14....................................... 55,000 41,663
DaimlerChrysler NA Holding Corp.:
7.30% due 01/15/12....................................... 45,000 47,875
Exide Corp.:
10.00% due 03/15/25+(1)(8)............................... 150,000 0
General Motors Corp.:
8.25% due 07/15/23....................................... 350,000 290,500
Venture Holdings Trust:
11.00% due 06/01/07+(2)(8)(18)........................... 25,000 31
----------
380,069
----------
Banks -- 0.36%
ABN Amro North American Holding Capital:
6.52% due 11/08/12*(17).................................. 90,000 93,186
Chemical Bank:
6.13% due 11/01/08....................................... 58,000 59,132
Glitnir Banki HF:
6.69% due 06/15/11*...................................... 55,000 55,979
Huntington National Bank:
6.60% due 06/15/18....................................... 57,000 59,955
Popular North America, Inc.:
5.65% due 04/15/09....................................... 68,000 68,121
Sanwa Bank Ltd.:
7.40% due 06/15/11....................................... 50,000 53,854
Southtrust Bank NA:
4.75% due 03/01/13....................................... 100,000 96,271
UBS AG/Stamford Branch:
5.88% due 07/15/16....................................... 50,000 51,095
Union Bank of California:
5.95% due 05/11/16....................................... 100,000 102,376
US Bank NA:
3.90% due 08/15/08....................................... 65,000 63,579
----------
703,548
----------
Beverages -- 0.12%
Le-Natures, Inc.:
9.00% due 06/15/13*...................................... 175,000 182,875
SABMiller PLC:
6.20% due 07/01/11*...................................... 45,000 46,161
----------
229,036
----------
Broadcasting -- 2.37%
Adelphia Communications Corp.:
10.25% due 06/15/11+(2)(5)............................... 75,000 47,063
Allbritton Communications Co.:
7.75% due 12/15/12....................................... 275,000 271,906
Charter Communications Holdings LLC:
8.63% due 04/01/09....................................... 250,000 228,125
9.63% due 11/15/09....................................... 350,000 318,500
9.92% due 04/01/11(3).................................... 275,000 203,500
58 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount(13) (Note 2)
-------------------------------------------------------------------------
CORPORATE BONDS (continued)
Broadcasting (continued)
Charter Communications Holdings LLC (continued):
10.25% due 01/15/10............................. $ 75,000 $ 62,250
10.75% due 10/01/09............................. 225,000 205,875
11.13% due 01/15/11............................. 1,125,000 866,250
Cox Communications, Inc.:
7.13% due 10/01/12.............................. 90,000 95,214
CSC Holdings, Inc.:
7.63% due 04/01/11.............................. 95,000 97,138
8.13% due 08/15/09.............................. 125,000 129,062
Fisher Communications, Inc.:
8.63% due 09/15/14.............................. 275,000 282,562
Insight Communications Co., Inc.:
12.25% due 02/15/11(3).......................... 280,000 297,500
LIN Television Corp.:
6.50% due 05/15/13.............................. 275,000 253,688
Medianews Group, Inc.:
6.38% due 04/01/14.............................. 10,000 8,850
6.88% due 10/01/13.............................. 80,000 73,200
Nexstar Finance, Inc.:
7.00% due 01/15/14.............................. 225,000 201,375
Paxson Communications Corp.:
11.76% due 01/15/13*(9)......................... 550,000 554,125
Univision Communications, Inc.:
3.50% due 10/15/07.............................. 45,000 43,668
Viacom, Inc.:
6.63% due 05/15/11.............................. 80,000 82,735
Young Broadcasting, Inc.:
8.75% due 01/15/14.............................. 100,000 85,000
10.00% due 03/01/11............................. 250,000 231,250
----------
4,638,836
----------
Building Materials -- 0.47%
American Standard, Inc.:
7.38% due 02/01/08.............................. 43,000 43,860
Associated Materials, Inc.:
9.75% due 04/15/12.............................. 250,000 245,000
11.25% due 03/01/14(3).......................... 125,000 68,125
Dayton Superior Corp.:
10.75% due 09/15/08............................. 325,000 339,625
13.00% due 06/15/09............................. 125,000 117,500
Interline Brands, Inc.:
8.13% due 06/15/14.............................. 100,000 100,750
----------
914,860
----------
Chemical -- 0.34%
BCI US Finance Corp.:
11.01% due 07/15/10*(9)......................... 75,000 76,500
Cytec Industries, Inc.:
6.00% due 10/01/15.............................. 90,000 88,273
Eastman Chemical Co.:
7.63% due 06/15/24.............................. 55,000 59,631
Equistar Chemicals LP:
10.63% due 05/01/11............................. 75,000 80,625
ICI Wilmington, Inc.:
7.05% due 09/15/07.............................. 77,000 78,043
Nalco Co.:
7.75% due 11/15/11.............................. 50,000 50,875
8.88% due 11/15/13.............................. 65,000 66,950
Rockwood Specialties Group, Inc.:
7.50% due 11/15/14.............................. 75,000 73,687
10.63% due 05/15/11............................. 33,000 35,393
Tronox Worldwide LLC:
9.50% due 12/01/12.............................. 55,000 56,513
----------
666,490
----------
Coal -- 0.04%
Alpha Natural Resources, Inc. LLC:
10.00% due 06/01/12............................. 67,000 71,690
----------
Principal Value
Amount(13) (Note 2)
---------------------------------------------------------------
Commercial Services -- 1.16%
Aramark Services, Inc.:
7.00% due 05/01/07.................... $110,000 $ 110,423
Avis Budget Car Rental LLC:
7.63% due 05/15/14*................... 50,000 47,500
7.91% due 05/15/14*(9)................ 75,000 73,313
Corrections Corp. of America:
6.25% due 03/15/13.................... 125,000 120,781
DI Finance LLC:
9.50% due 02/15/13.................... 283,000 292,198
FTI Consulting, Inc.:
7.63% due 06/15/13.................... 100,000 100,750
H&E Equipment Services, Inc.:
8.38% due 07/15/16*................... 135,000 137,025
Mobile Mini, Inc.:
9.50% due 07/01/13.................... 33,000 35,310
Mobile Services Group, Inc.:
9.75% due 08/01/14*................... 75,000 76,125
Monitronics International, Inc.:
11.75% due 09/01/10................... 175,000 173,250
NationsRent Cos., Inc.:
9.50% due 05/01/15.................... 175,000 205,576
Owens-Brockway Glass Container, Inc.:
8.25% due 05/15/13.................... 100,000 101,250
8.88% due 02/15/09.................... 154,000 158,235
Pitney Bowes, Inc.:
4.75% due 01/15/16.................... 77,000 73,084
Rent-Way, Inc.:
11.88% due 06/15/10................... 206,000 230,205
ServiceMaster Co.:
7.88% due 08/15/09.................... 36,000 37,747
United Rentals NA, Inc.:
7.75% due 11/15/13.................... 300,000 287,250
----------
2,260,022
----------
Conglomerates -- 0.03%
Park-Ohio Industries, Inc.:
8.38% due 11/15/14.................... 75,000 67,875
----------
Drugs -- 0.26%
Abbott Laboratories:
5.88% due 05/15/16.................... 108,000 110,919
American Home Products Corp.:
6.95% due 03/15/11.................... 45,000 47,692
Merck & Co., Inc.:
2.50% due 03/30/07.................... 29,000 28,538
Mylan Laboratories, Inc.:
5.75% due 08/15/10.................... 25,000 24,313
6.38% due 08/15/15.................... 175,000 168,656
Wyeth:
5.50% due 02/01/14.................... 85,000 84,769
6.00% due 02/15/36.................... 50,000 49,656
----------
514,543
----------
Electronics/Electrical Equipment -- 0.21%
Arrow Electronics, Inc.:
6.88% due 06/01/18.................... 81,000 82,128
Sanmina-SCI Corp.:
6.75% due 03/01/13.................... 50,000 47,875
Solectron Corp.:
8.00% due 03/15/16*................... 100,000 97,250
Telex Communications, Inc.:
11.50% due 10/15/08................... 25,000 26,406
Xerox Corp.:
7.63% due 06/15/13.................... 150,000 155,063
----------
408,722
----------
Entertainment -- 0.01%
Pokagon Gaming Authority:
10.38% due 06/15/14*.................. 25,000 26,438
----------
August 31, 2006 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 59
Principal Value
Amount(13) (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS (continued)
Financial Services -- 4.05%
AAC Group Holding Corp.:
10.25% due 10/01/12(3)................ $ 175,000 $ 140,438
AMR HoldCo, Inc.:
10.00% due 02/15/15................... 100,000 106,500
BAE Systems Holdings, Inc.:
5.20% due 08/15/15*................... 150,000 142,479
Capital One Financial Corp.:
6.15% due 09/01/16.................... 90,000 90,395
Chukchansi Economic Development Auth.:
8.78% due 11/15/12*(9)................ 75,000 77,250
Citigroup, Inc.:
5.00% due 09/15/14.................... 45,000 43,539
Comerica, Inc.:
4.80% due 05/01/15.................... 50,000 46,375
Consolidated Communications Illinois:
9.75% due 04/01/12.................... 121,000 126,748
ESI Tractebel Acquisition Corp.:
7.99% due 12/30/11.................... 93,000 96,272
Ford Motor Credit Co.:
5.80% due 01/12/09.................... 635,000 608,301
9.96% due 04/15/12(9)................. 310,000 327,720
General Electric Capital Corp.:
5.13% due 03/21/12.................... JPY 85,000,000 705,539
General Motors Acceptance Corp.:
6.75% due 12/01/14.................... 785,000 752,569
6.88% due 09/15/11.................... 1,025,000 1,009,501
6.88% due 08/28/12.................... 7,000 6,833
7.25% due 03/02/11.................... 30,000 29,932
7.43% due 12/01/14(9)................. 425,000 419,800
7.75% due 01/19/10.................... 660,000 670,859
Genworth Global Funding Trusts:
5.75% due 05/15/13.................... 100,000 102,015
Goldman Sachs Group, Inc.:
6.13% due 02/15/33.................... 110,000 108,302
Hexion US Finance Corp:
9.00% due 07/15/14.................... 220,000 221,100
ING USA Global Funding Trust:
4.50% due 10/01/10.................... 80,000 77,537
JP Morgan Chase Capital XVIII:
6.95% due 08/17/36.................... 50,000 52,621
Kinder Morgan Finance Co.:
5.70% due 01/05/16.................... 78,000 70,975
Lehman Brothers Holdings, Inc.:
4.50% due 07/26/10.................... 80,000 77,595
5.75% due 05/17/13.................... 100,000 101,107
MedCath Holdings Corp.:
9.88% due 07/15/12.................... 125,000 132,500
Merrill Lynch & Co., Inc.:
5.77% due 07/25/11.................... 100,000 101,815
Morgan Stanley:
5.63% due 01/09/12.................... 100,000 100,843
6.25% due 08/09/26.................... 100,000 101,854
MXEnergy Holdings, Inc.:
13.02% due 08/01/11*(9)............... 215,000 210,162
Nexstar Finance Holdings LLC:
11.38% due 04/01/13(3)................ 100,000 82,500
Nisource Finance Corp.:
5.40% due 07/15/14.................... 45,000 43,117
PCA LLC:
11.88% due 08/01/09(2)(8)............. 200,000 41,000
Principal Life Global Funding I:
5.25% due 01/15/13*................... 163,000 161,191
Residential Capital Corp.:
6.38% due 06/30/10.................... 215,000 216,865
6.50% due 04/17/13.................... 45,000 45,398
Southern Star Central Corp.:
6.75% due 03/01/16*................... 75,000 73,594
Principal Value
Amount(13) (Note 2)
-------------------------------------------------------------
Financial Services (continued)
Swiss Re Capital I LP:
6.85% due 05/25/16*(17)............. $ 56,000 $ 57,206
Terra Capital, Inc.:
11.50% due 06/01/10................. 81,000 88,088
12.88% due 10/15/08................. 100,000 111,750
Transamerica Finance Corp.:
6.40% due 09/15/08.................. 33,000 33,619
UBS Preferred Funding Trust V:
6.24% due 05/15/16(18).............. 100,000 102,048
----------
7,915,852
----------
Foods -- 0.40%
Dole Foods Co., Inc.:
8.88% due 03/15/11.................. 175,000 170,625
JBS SA:
10.50% due 08/04/16*(1)............. 175,000 177,187
Smithfield Foods, Inc.:
7.75% due 05/15/13.................. 100,000 102,250
Wornick Co.:
10.88% due 07/15/11................. 350,000 332,500
----------
782,562
----------
Freight -- 0.14%
FedEx Corp.:
5.50% due 08/15/09.................. 45,000 45,231
PHI, Inc.:
7.13% due 04/15/13*................. 150,000 142,875
Ryder System, Inc.:
5.00% due 06/15/12.................. 88,000 84,194
----------
272,300
----------
Funeral Services -- 0.40%
Alderwoods Group, Inc.:
7.75% due 09/15/12.................. 25,000 26,500
Carriage Services, Inc.:
7.88% due 01/15/15.................. 212,000 205,640
Service Corp. International:
6.50% due 03/15/08.................. 250,000 250,000
6.75% due 04/01/16.................. 50,000 47,500
7.00% due 06/15/17*................. 125,000 119,687
Stewart Enterprises Inc.:
6.25% due 02/15/13.................. 150,000 132,750
----------
782,077
----------
Healthcare -- 0.43%
CDRV Investors, Inc.:
9.63% due 01/01/15(3)............... 225,000 162,000
Community Health Systems, Inc.:
6.50% due 12/15/12.................. 56,000 52,360
Concentra Operating Corp.:
9.13% due 06/01/12.................. 50,000 52,062
Encore Medical Corp.:
9.75% due 10/01/12.................. 50,000 54,875
Genesis HealthCare Corp.:
2.50% due 03/15/25*................. 50,000 52,000
8.00% due 10/15/13.................. 50,000 51,875
Inverness Medical Innovations, Inc.:
8.75% due 02/15/12.................. 270,000 267,300
Multiplan, Inc.:
10.38% due 04/15/16*................ 150,000 151,125
----------
843,597
----------
Hospital Management -- 0.37%
HCA, Inc.:
6.30% due 10/01/12.................. 868,000 726,950
----------
Hospital Supplies -- 0.09%
Universal Hospital Services, Inc.:
10.13% due 11/01/11................. 175,000 181,125
----------
60 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount(13) (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS (continued)
Household Products -- 0.42%
ACCO Brands Corp.:
7.63% due 08/15/15...................... $ 50,000 $ 47,375
Jostens Holding Corp.:
10.25% due 12/01/13(3).................. 198,000 159,885
Prestige Brands, Inc.:
9.25% due 04/15/12...................... 25,000 24,875
Procter & Gamble Co.:
2.00% due 06/21/10...................... JPY 52,000,000 458,026
Visant Holding Corp.:
8.75% due 12/01/13*..................... 125,000 122,500
--------
812,661
--------
Information Processing - Services -- 0.08%
Computer Sciences Corp.:
3.50% due 04/15/08...................... 45,000 43,572
Sunguard Data Systems, Inc.:
9.13% due 08/15/13...................... 100,000 103,250
--------
146,822
--------
Information Processing - Software -- 0.22%
Activant Solutions, Inc.:
9.50% due 05/01/16*..................... 100,000 93,750
Cisco Systems, Inc.:
5.50% due 02/22/16...................... 45,000 44,802
Oracle Corp. & Ozark Holding, Inc.:
5.00% due 01/15/11...................... 35,000 34,461
Spheris, Inc.:
11.00% due 12/15/12..................... 100,000 92,500
SS&C Technologies, Inc.:
11.75% due 12/01/13*.................... 150,000 156,750
--------
422,263
--------
Insurance -- 0.48%
Americo Life, Inc.:
7.88% due 05/01/13*..................... 28,000 27,973
AmerUs Group Co.:
6.58% due 05/16/11...................... 100,000 103,644
Crum & Forster Holdings Corp.:
10.38% due 06/15/13..................... 75,000 74,625
Great- West Life & Annuity Insurance Co:
7.15% due 05/16/16*(10)................. 176,000 179,321
Marsh & McLennan Cos., Inc.:
5.38% due 07/15/14...................... 45,000 42,987
MetLife, Inc.:
5.00% due 11/24/13...................... 60,000 57,957
Metropolitan Life Global Funding I:
5.75% due 07/25/11*..................... 50,000 50,864
MIC Financing Trust I:
8.38% due 02/01/27*..................... 113,000 113,757
Monumental Global Funding II:
5.65% due 07/14/11*..................... 60,000 60,768
Nationwide Life Global Funding I:
5.35% due 03/15/11*..................... 100,000 100,127
Ohio Casualty Corp.:
7.30% due 06/15/14...................... 75,000 79,197
Presidental Life Corp.:
7.88% due 02/15/09...................... 50,000 46,500
--------
937,720
--------
Leisure & Tourism -- 1.67%
AMC Entertainment, Inc.:
9.88% due 02/01/12...................... 100,000 102,250
Brunswick Corp.:
5.00% due 06/01/11...................... 63,000 60,555
Cinemark, Inc.:
9.75% due 03/15/14(3)................... 150,000 117,000
Circus & Eldorado Joint Venture:
10.13% due 03/01/12..................... 335,000 351,750
Principal Value
Amount(13) (Note 2)
-------------------------------------------------------------------
Leisure & Tourism (continued)
Eldorado Casino Shreveport Capital Corp.:
10.00% due 08/01/12(4)(8)................. $462,426 $ 420,808
Eldorado Resorts LLC:
9.00% due 04/15/14(1)(8).................. 250,000 250,000
Gaylord Entertainment Co.:
6.75% due 11/15/14........................ 150,000 142,500
Harrah's Operating Co., Inc.:
6.50% due 06/01/16........................ 189,000 187,504
K2, Inc.:
7.38% due 07/01/14........................ 25,000 24,250
MGM Mirage, Inc.:
5.88% due 02/27/14........................ 650,000 593,125
NPC International, Inc.:
9.50% due 05/01/14*....................... 175,000 169,312
Restaurant Co.:
10.00% due 10/01/13....................... 50,000 44,625
Riviera Holdings Corp.:
11.00% due 06/15/10....................... 60,000 63,150
Starwood Hotels & Resorts Worldwide, Inc.:
7.88% due 05/01/12........................ 150,000 162,375
Station Casinos, Inc.:
6.63% due 03/15/18........................ 75,000 66,938
TDS Investor Corp.:
9.88% due 09/01/14*....................... 50,000 48,875
10.02% due 09/01/14*(9)................... 50,000 48,750
11.88% due 09/01/16*...................... 150,000 146,250
True Temper Sports, Inc.:
8.38% due 09/15/11........................ 200,000 178,000
Waterford Gaming LLC:
8.63% due 09/15/12*....................... 80,000 84,300
----------
3,262,317
----------
Machinery -- 0.15%
Case New Holland, Inc.:
6.00% due 06/01/09........................ 175,000 171,500
Dresser-Rand Group, Inc.:
7.38% due 11/01/14........................ 66,000 63,525
Stewart & Stevenson LLC:
10.00% due 07/15/14*...................... 50,000 51,250
----------
286,275
----------
Manufacturing -- 0.09%
Covalence Specialty Materials Corp.:
10.25% due 03/01/16*...................... 75,000 72,000
Indalex Holding Corp.:
11.50% due 02/01/14*...................... 100,000 106,500
----------
178,500
----------
Medical Technology -- 0.02%
Baxter International, Inc.:
5.90% due 09/01/16........................ 45,000 45,639
----------
Metals -- 0.51%
Allegheny Technologies, Inc.:
8.38% due 12/15/11........................ 50,000 52,875
Barrick Gold Finance Co.:
7.50% due 05/01/07........................ 67,000 67,862
Chaparral Steel Co.:
10.00% due 07/15/13....................... 150,000 165,750
Crown Cork & Seal Co., Inc.:
7.38% due 12/15/26........................ 175,000 158,375
8.00% due 04/15/23........................ 300,000 283,500
Freeport McMoRan Resources:
7.00% due 02/15/08........................ 150,000 149,625
Metals USA, Inc.:
11.13% due 12/01/15*...................... 100,000 110,250
Renco Metals, Inc.:
11.50% due 07/01/03+(1)(5)(6)(8).......... 75,000 0
----------
988,237
----------
August 31, 2006 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 61
Principal Value
Amount(13) (Note 2)
--------------------------------------------------------------
CORPORATE BONDS (continued)
Mining -- 0.02%
Newmont Mining Corp.:
8.63% due 05/15/11..................... $ 40,000 $ 44,554
--------
Multimedia -- 0.47%
AOL Time Warner, Inc.:
6.75% due 04/15/11..................... 55,000 56,986
Belo Corp:
6.75% due 05/30/13..................... 45,000 45,857
Cablevision Systems Corp.:
8.00% due 04/15/12..................... 65,000 65,325
Charter Communications Holdings II LLC:
10.25% due 09/15/10.................... 200,000 202,000
Clear Channel Communications:
4.90% due 05/15/15..................... 106,000 92,865
Haights Cross Operating Co.:
11.75% due 08/15/11.................... 100,000 103,125
News America, Inc.:
7.30% due 04/30/28..................... 50,000 52,633
Time Warner Entertainment Co. LP:
8.38% due 03/15/23..................... 135,000 151,896
8.38% due 07/15/33..................... 55,000 63,074
Time Warner, Inc.:
7.25% due 10/15/17..................... 43,000 45,831
Viacom, Inc.:
6.88% due 04/30/36*.................... 40,000 39,237
--------
918,829
--------
Oil & Gas -- 2.49%
Allis-Chalmers Energy, Inc.:
9.00% due 01/15/14*.................... 165,000 167,887
Amerada Hess Corp.:
7.88% due 10/01/29..................... 55,000 64,117
Atlas Pipeline Partners LP:
8.13% due 12/15/15..................... 150,000 153,000
Belden & Blake Corp.:
8.75% due 07/15/12..................... 100,000 102,500
Brigham Exploration Co.:
9.63% due 05/01/14*.................... 175,000 173,687
Chaparral Energy, Inc.:
8.50% due 12/01/15..................... 350,000 352,625
Chesapeake Energy Corp.:
6.25% due 01/15/18..................... 425,000 392,062
6.63% due 01/15/16..................... 275,000 264,000
6.88% due 11/15/20..................... 75,000 70,688
Colorado Interstate Gas Co.:
6.85% due 06/15/37..................... 75,000 75,432
Compton Petroleum Finance Corp.:
7.63% due 12/01/13..................... 125,000 121,875
ConocoPhillips:
7.00% due 03/30/29..................... 100,000 113,212
Devon Energy Corp.:
7.95% due 04/15/32..................... 70,000 84,786
Dynegy-Roseton/Danskammer:
7.67% due 11/08/16..................... 200,000 197,000
El Paso Production Holding Co.:
7.75% due 06/01/13..................... 550,000 558,250
Encore Acquisition Co.:
6.00% due 07/15/15..................... 50,000 46,375
6.25% due 04/15/14..................... 25,000 23,500
Exco Resources, Inc.:
7.25% due 01/15/11..................... 65,000 63,213
Hanover Compressor Co.:
8.63% due 12/15/10..................... 100,000 104,000
Hilcorp Energy LP:
7.75% due 11/01/15*.................... 225,000 221,062
10.50% due 09/01/10*................... 134,000 145,390
Newfield Exploration Co.:
6.63% due 09/01/14..................... 100,000 97,750
Principal Value
Amount(13) (Note 2)
------------------------------------------------------------
Oil & Gas (continued)
Oslo Seismic Services, Inc.:
8.28% due 06/01/11................. $123,975 $ 126,906
Premcor Refining Group, Inc.:
6.75% due 02/01/11................. 95,000 99,381
Pride International, Inc.:
7.38% due 07/15/14................. 50,000 50,875
Quicksilver Resources, Inc.:
7.13% due 04/01/16................. 75,000 71,625
Seitel, Inc.:
11.75% due 07/15/11................ 250,000 288,750
Tennessee Gas Pipeline Co.:
7.00% due 10/15/28................. 200,000 194,983
Transmeridian Exploration, Inc.:
12.00% due 12/15/10................ 125,000 125,625
Valero Energy Corp.:
7.50% due 04/15/32................. 158,000 183,050
Verasun Energy Corp.:
9.88% due 12/15/12................. 125,000 132,813
----------
4,866,419
----------
Paper/Forest Products -- 0.66%
Bowater, Inc.:
6.50% due 06/15/13................. 450,000 400,500
Caraustar Industries, Inc.:
7.38% due 06/01/09................. 225,000 210,375
MeadWestvaco Corp.:
6.85% due 04/01/12................. 100,000 103,729
Pliant Corp.:
11.13% due 09/01/09................ 453,000 437,145
Plum Creek Timberlands LP:
5.88% due 11/15/15................. 86,000 84,586
Weyerhaeuser Co.:
6.88% due 12/15/33................. 55,000 53,684
----------
1,290,019
----------
Pollution Control -- 0.23%
Allied Waste North America, Inc.:
8.50% due 12/01/08................. 425,000 442,000
----------
Publishing -- 0.05%
Knight-Ridder, Inc.:
6.88% due 03/15/29................. 50,000 47,403
7.15% due 11/01/27................. 60,000 57,476
----------
104,879
----------
Railroads & Equipment -- 0.05%
Burlington Northern Santa Fe Corp.:
7.29% due 06/01/36................. 88,000 102,945
----------
Real Estate -- 0.11%
AMB Property LP:
5.90% due 08/15/13................. 36,000 36,304
Duke Realty LP:
5.63% due 08/15/11................. 90,000 90,128
EOP Operating LP:
7.00% due 07/15/11................. 90,000 94,942
----------
221,374
----------
Real Estate Investment Trusts -- 0.44%
Equity One, Inc.:
6.25% due 01/15/17................. 41,000 41,618
Heritage Property Investment Trust:
4.50% due 10/15/09................. 45,000 43,778
Mack-Cali Realty LP:
5.80% due 01/15/16................. 45,000 44,772
National Health Investors, Inc.:
7.30% due 07/16/07................. 75,000 75,161
Omega Healthcare Investors, Inc.:
7.00% due 04/01/14................. 100,000 98,250
62 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount(13) (Note 2)
------------------------------------------------------------------
CORPORATE BONDS (continued)
Real Estate Investment Trusts (continued)
Reckson Operating Partnership LP:
6.00% due 03/31/16......................... $ 25,000 $ 24,949
Senior Housing Properties Trust:
8.63% due 01/15/12......................... 250,000 266,875
Simon Property Group LP:
5.60% due 09/01/11......................... 45,000 45,115
Trustreet Properties, Inc.:
7.50% due 04/01/15......................... 225,000 223,031
--------
863,549
--------
Retail -- 0.47%
Dave & Buster's, Inc:
11.25% due 03/15/14*....................... 100,000 93,000
Ferrellgas LP:
6.75% due 05/01/14......................... 225,000 216,562
General Nutrition Centers, Inc.:
8.50% due 12/01/10......................... 100,000 95,500
Jean Coutu Group, Inc.:
7.63% due 08/01/12......................... 4,000 4,200
MTS, Inc.:
9.38% due 03/15/09(1)(2)(4)(5)(8)(16)...... 16,572 4,309
Neiman-Marcus Group, Inc.:
9.00% due 10/15/15......................... 150,000 159,375
Rite Aid Corp.:
8.13% due 05/01/10......................... 125,000 125,469
Saks, Inc.:
9.88% due 10/01/11......................... 200,000 216,500
--------
914,915
--------
Savings & Loan -- 0.30%
Golden West Financial Corp.:
4.75% due 10/01/12......................... 107,000 103,412
Independence Community Bank Corp.:
3.50% due 06/20/08......................... 48,000 46,404
Sovereign Bancorp, Inc.:
4.80% due 09/01/10*........................ 120,000 116,807
Washington Mutual Bank:
5.95% due 05/20/13......................... 100,000 101,454
Washington Mutual Preferred Funding Cayman:
7.25% due 03/15/11*........................ 110,000 109,848
Western Financial Bank:
9.63% due 05/15/12......................... 92,000 101,718
--------
579,643
--------
Semiconductors -- 0.08%
Advanced Micro Devices, Inc.:
7.75% due 11/01/12......................... 162,000 162,607
--------
Telecommunications -- 2.54%
American Cellular Corp.:
10.00% due 08/01/11........................ 500,000 520,000
AT&T Wireless Services, Inc.:
7.88% due 03/01/11......................... 246,000 268,406
Centennial Communications Corp.:
10.00% due 01/01/13........................ 28,000 27,930
10.13% due 06/15/13........................ 100,000 105,500
11.26% due 01/01/13(9)..................... 150,000 154,875
Cincinnati Bell Telephone Co.:
7.18% due 12/15/23......................... 25,000 25,125
7.20% due 11/29/23......................... 125,000 121,250
Cincinnati Bell, Inc.:
7.00% due 02/15/15......................... 125,000 121,875
7.25% due 06/15/23......................... 25,000 23,875
Corning, Inc.:
7.25% due 08/15/36......................... 99,000 103,091
Embarq Corp.:
7.08% due 06/01/16......................... 49,000 49,997
GTE Northwest, Inc.:
5.55% due 10/15/08......................... 40,000 39,920
Principal Value
Amount(13) (Note 2)
------------------------------------------------------------------
Telecommunications (continued)
GTE Southwest, Inc.:
8.50% due 11/15/31....................... $ 110,000 $ 130,007
ICO North America, Inc. (convertible):
7.50% due 08/15/09(1)(8)(16)............. 125,000 153,750
Insight Midwest LP:
9.75% due 10/01/09....................... 50,000 50,875
LCI International, Inc.:
7.25% due 06/15/07....................... 1,400,000 1,400,000
New England Telephone & Telegraph Co.:
7.88% due 11/15/29....................... 50,000 53,605
Qwest Corp.:
7.50% due 10/01/14*...................... 125,000 127,187
Rural Cellular Corp.:
8.25% due 03/15/12*...................... 175,000 179,375
9.75% due 01/15/10....................... 225,000 223,875
11.24% due 11/01/12(9)................... 125,000 128,750
Southwestern Bell Telephone Co.:
6.55% due 10/07/08....................... 200,000 203,944
Verizon New York, Inc.:
6.88% due 04/01/12....................... 45,000 46,724
Windstream Corp.:
8.63% due 08/01/16*...................... 475,000 502,312
Zeus Special Subsidiary, Ltd.:
9.25% due 02/01/15*(3)................... 285,000 195,225
----------
4,957,473
----------
Textile - Products -- 0.08%
Collins & Aikman Floor Cover:
9.75% due 02/15/10....................... 154,000 151,305
----------
Utilities - Electric -- 2.55%
AES Corp.:
8.75% due 05/15/13*...................... 325,000 348,969
American Electric Power Co., Inc.:
4.71% due 08/16/07(3).................... 108,000 107,317
Appalachian Power Co.:
5.00% due 06/01/17....................... 60,000 55,740
Calpine Corp.:
8.75% due 07/15/13*(2)(5)................ 1,680,000 1,663,200
Centerpoint Energy Houston Electric, LLC:
5.60% due 07/01/23....................... 73,000 70,241
Commonwealth Edison Co.:
5.95% due 08/15/16....................... 90,000 90,458
Consolidated Natural Gas Co.:
5.38% due 11/01/06....................... 34,000 33,986
Dominion Resources, Inc.:
5.69% due 05/15/08(3).................... 99,000 99,329
Duke Energy Co.:
4.20% due 10/01/08....................... 90,000 87,808
Edison Mission Energy:
7.50% due 06/15/13*...................... 150,000 150,000
7.75% due 06/15/16*...................... 25,000 25,000
Energy East Corp.:
6.75% due 07/15/36....................... 165,000 170,433
Entergy Louisiana LLC:
5.83% due 11/01/10....................... 135,000 134,186
Florida Power & Light Co.:
5.95% due 10/01/33....................... 58,000 58,796
Mirant Americas Generation, LLC:
8.30% due 05/01/11....................... 150,000 150,000
Mission Energy Holding Co.:
13.50% due 07/15/08...................... 675,000 755,156
NRG Energy, Inc.:
7.38% due 02/01/16....................... 400,000 394,000
Pepco Holding, Inc.:
5.50% due 08/15/07....................... 81,000 80,961
Pepco Holdings, Inc.:
6.45% due 08/15/12....................... 45,000 46,352
August 31, 2006 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 63
Principal Value
Amount(13) (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS (continued)
Utilities - Electric (continued)
PSEG Power LLC:
7.75% due 04/15/11..................... $ 40,000 $ 43,274
PSI Energy, Inc.:
7.85% due 10/15/07..................... 119,000 122,022
Public Service Electric & Gas Co.:
5.00% due 08/15/14..................... 48,000 46,438
Puget Sound Energy, Inc.:
5.20% due 10/01/15..................... 130,000 125,137
Reliant Energy, Inc.:
6.75% due 12/15/14..................... 25,000 23,562
Reliant Resources, Inc.:
9.50% due 07/15/13..................... 96,000 99,840
Southern Energy, Inc.:
7.90% due 07/15/09+(1)(8)(16).......... 725,000 0
-----------
4,982,205
-----------
Utilities - Gas, Distribution -- 0.09%
Sempra Energy:
4.62% due 05/17/07..................... 128,000 127,235
Southern California Gas Co.:
5.75% due 11/15/35..................... 45,000 44,506
-----------
171,741
-----------
Utilities - Gas, Pipeline -- 1.09%
Copano Energy LLC:
8.13% due 03/01/16..................... 125,000 126,563
Duke Energy Field Services LLC:
6.88% due 02/01/11..................... 50,000 52,388
El Paso Natural Gas Co.:
7.63% due 08/01/10..................... 75,000 77,063
8.63% due 01/15/22..................... 275,000 310,247
Markwest Energy Partners LP:
6.88% due 11/01/14..................... 125,000 117,188
NGC Corp. Capital Trust I:
8.32% due 06/01/27..................... 650,000 567,125
Pacific Energy Partners LP:
6.25% due 09/15/15..................... 97,000 94,817
7.13% due 06/15/14..................... 178,000 179,780
Reliant Energy Resources Corp.:
7.75% due 02/15/11..................... 80,000 86,374
Transcontinental Gas Pipe Line Corp.:
7.00% due 08/15/11..................... 100,000 102,125
8.88% due 07/15/12..................... 50,000 55,437
Williams Cos., Inc.:
7.88% due 09/01/21..................... 350,000 356,125
-----------
2,125,232
-----------
Total Corporate Bonds
(Cost $56,795,268)..................... 57,492,984
-----------
FOREIGN BONDS & NOTES -- 40.14%
Banks -- 0.19%
Banco Continental de Panama:
6.63% due 12/01/10*.................... 15,000 14,940
Caisse Nationale des Caisses d'Epargne:
5.55% due 12/30/09(9).................. 78,000 62,400
Landsbanki Islands HF:
6.10% due 08/25/11*.................... 50,000 50,098
Mizuho Finance Group Cayman, Ltd.:
8.38% due 04/27/09..................... 100,000 105,840
National Westminster Bank PLC:
7.75% due 10/16/07(18)................. 38,000 38,850
NIB Capital Bank NV:
5.82% due 12/11/13*(17)................ 50,000 48,383
Santander Issuances SA Unipersonal:
5.81% due 06/20/11*.................... 45,000 46,320
-----------
366,831
-----------
Principal Value
Amount(13) (Note 2)
--------------------------------------------------------------------
Broadcasting -- 0.43%
British Telecommunications PLC:
8.88% due 12/15/30.................... $ 100,000 $ 129,072
Grupo Televisa SA:
6.63% due 03/18/25.................... 149,000 149,422
Telenet Group Holding NV:
11.50% due 06/15/14*(3)............... 643,000 552,980
----------
831,474
----------
Chemical -- 0.23%
Rhodia SA:
8.88% due 06/01/11.................... 447,000 457,058
----------
Coal -- 0.05%
Adaro Finance B.V.:
8.50% due 12/08/10*................... 100,000 101,500
----------
Commercial Services -- 0.16%
North American Energy Partners, Inc.:
8.75% due 12/01/11.................... 190,000 190,000
9.00% due 06/01/10.................... 125,000 132,500
----------
322,500
----------
Conglomerates -- 0.05%
Tyco International Group SA:
6.00% due 11/15/13.................... 100,000 103,154
----------
Drugs -- 0.48%
Abbott Japan Co., Ltd.:
1.05% due 11/06/08.................... JPY 50,000,000 426,798
Elan Finance PLC/ Elan Finance Corp.:
7.75% due 11/15/11.................... 425,000 408,000
9.41% due 11/15/11(9)................. 100,000 101,000
----------
935,798
----------
Electronics/Electrical Equipment -- 0.01%
Celestica, Inc.:
7.63% due 07/01/13.................... 25,000 24,563
----------
Financial Services -- 0.67%
Aiful Corp.:
4.45% due 02/16/10*................... 50,000 47,480
Bluewater Finance, Ltd.:
10.25% due 02/15/12................... 200,000 200,750
Canadian Oil Sands, Ltd.:
5.80% due 08/15/13*................... 92,000 92,251
Diageo Capital PLC:
4.38% due 05/03/10.................... 68,000 65,749
EnCana Holdings Finance Corp.:
5.80% due 05/01/14.................... 40,000 40,289
HBOS Capital Funding LP:
6.85% due 03/23/09(17)................ 125,000 125,312
Hybrid Capital Funding I LP:
8.00% due 06/30/11(17)................ 286,000 294,548
Kaupthing Bank:
7.13% due 05/19/16*................... 4,000 4,105
Nationwide Building Society:
2.63% due 01/30/07*................... 65,000 64,277
Nell AF SARL:
8.38% due 08/15/15*................... 375,000 375,469
----------
1,310,230
----------
Foreign Government Agencies -- 35.82%
Federal Republic of Brazil:
5.49% due 01/05/16.................... BRL 908,000 427,743
7.88% due 03/07/15.................... 500,000 549,500
8.00% due 01/15/18.................... 1,550,000 1,701,900
8.25% due 01/20/34.................... 1,590,000 1,828,500
8.75% due 02/04/25.................... 720,000 855,720
8.88% due 10/14/19.................... 400,000 473,400
8.88% due 04/15/24.................... 100,000 120,250
10.25% due 06/17/13................... 495,000 602,662
11.00% due 01/11/12................... 80,000 97,760
11.00% due 08/17/40................... 1,790,000 2,338,635
64 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal Value
Amount(13) (Note 2)
--------------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Foreign Government Agencies (continued)
Federal Republic of Germany:
3.50% due 10/09/09.................. EUR 490,000 $ 626,768
4.75% due 07/04/34.................. EUR 405,000 580,622
5.50% due 01/04/31.................. EUR 498,000 781,592
Government of Australia:
6.25% due 04/15/15.................. AUD 1,345,000 1,066,592
7.50% due 09/15/09.................. AUD 2,105,000 1,681,873
Government of Canada:
4.00% due 09/01/10.................. CAD 1,090,000 986,493
4.25% due 09/01/08.................. CAD 770,000 700,050
Government of Hungary:
6.25% due 04/24/09.................. HUF 319,000,000 1,405,549
Government of Japan:
0.70% due 05/15/08.................. JPY 124,800,000 1,065,438
0.90% due 12/22/08.................. JPY 138,000,000 1,181,741
1.00% due 12/20/12.................. JPY 125,700,000 1,052,036
1.30% due 06/20/15.................. JPY 54,800,000 456,171
Government of The Netherlands:
5.25% due 07/15/08.................. EUR 458,000 604,730
Government of Ukraine:
7.65% due 06/11/13.................. 220,000 234,674
Government of United Kingdom:
4.00% due 03/07/09.................. GBP 520,000 971,437
4.25% due 03/07/11.................. GBP 645,000 1,205,403
5.00% due 03/07/08.................. GBP 322,000 614,331
Kingdom of Norway:
5.50% due 05/15/09.................. NOK 10,300,000 1,696,281
6.50% due 05/15/13.................. NOK 7,420,000 1,343,013
Kingdom of Spain:
5.75% due 07/30/32.................. EUR 170,000 275,925
6.15% due 01/31/13.................. EUR 385,000 561,873
Kingdom of Sweden:
4.00% due 12/01/09.................. SEK 7,040,000 986,229
4.50% due 08/12/15.................. SEK 18,415,000 2,695,622
5.00% due 01/28/09.................. SEK 11,700,000 1,672,628
Republic of Argentina:
5.25% due 12/31/38(3)............... 773,637 336,532
7.00% due 03/28/11.................. 728,000 723,632
8.28% due 12/31/33.................. 2,328,440 2,290,021
Republic of Austria:
4.00% due 09/15/16*................. EUR 340,000 443,222
Republic of Colombia:
7.38% due 01/27/17.................. 460,000 478,400
8.25% due 12/22/14.................. 580,000 638,000
11.75% due 02/25/20................. 590,000 827,180
12.00% due 10/22/15(1).............. COP 3,141,000,000 1,508,257
Republic of El Salvador:
7.65% due 06/15/35*................. 320,000 335,200
8.25% due 04/10/32.................. 155,000 173,057
Republic of Greece:
5.25% due 05/18/12.................. EUR 362,000 497,495
Republic of Indonesia:
7.50% due 01/15/16.................. 200,000 210,862
8.50% due 10/12/35*................. 705,000 813,394
Republic of Peru:
5.00% due 03/07/07(10).............. 130,350 127,743
7.35% due 07/21/25.................. 1,075,000 1,134,125
8.75% due 11/21/33.................. 615,000 741,075
Republic of Philippines:
6.25% due 03/15/16.................. EUR 300,000 388,688
7.75% due 01/14/31.................. 330,000 340,313
8.00% due 01/15/16.................. 460,000 496,225
8.25% due 01/15/14.................. 1,170,000 1,267,987
9.88% due 01/15/19.................. 400,000 485,500
10.63% due 03/16/25................. 460,000 603,175
Republic of Poland:
5.75% due 03/24/10.................. PLN 2,660,000 875,456
Principal Value
Amount(13) (Note 2)
------------------------------------------------------------------------------
Foreign Government Agencies (continued)
Republic of South Africa:
8.75% due 12/21/14............................... ZAR 4,030,000 $ 558,726
13.00% due 08/31/10.............................. ZAR 5,420,000 858,035
13.50% due 09/15/15.............................. ZAR 4,750,000 852,057
Republic of Turkey:
6.88% due 03/17/36............................... 1,120,000 1,044,400
7.00% due 06/05/20............................... 250,000 246,250
7.25% due 03/15/15............................... 1,790,000 1,819,087
8.00% due 02/14/34............................... 550,000 575,438
9.50% due 01/15/14............................... 495,000 566,775
11.88% due 01/15/30.............................. 1,075,000 1,604,437
Republic of Uruguay:
7.50% due 03/15/15............................... 150,000 155,250
8.00% due 11/18/22............................... 1,385,000 1,450,787
9.25% due 05/17/17............................... 280,000 325,500
Republic of Venezuela:
6.00% due 12/09/20............................... 420,000 382,200
8.50% due 10/08/14............................... 480,000 535,920
9.25% due 09/15/27............................... 545,000 677,435
9.38% due 01/13/34............................... 510,000 642,600
Russian Federation:
7.50% due 03/31/30(3)............................ 4,215,000 4,690,873
12.75% due 06/24/28.............................. 150,000 267,525
United Mexican States:
6.63% due 03/03/15............................... 400,000 424,400
7.50% due 04/08/33............................... 525,000 607,688
8.00% due 12/24/08............................... MXN 9,300,000 859,612
8.00% due 12/19/13............................... MXN 7,500,000 682,515
8.13% due 12/30/19............................... 260,000 313,300
8.30% due 08/15/31............................... 540,000 678,510
-----------
69,998,000
-----------
Freight -- 0.11%
Ultrapetrol Bahamas, Ltd.:
9.00% due 11/24/14............................... 225,000 207,000
-----------
Insurance -- 0.31%
Aegon NV:
5.80% due 07/15/14(17)........................... 112,000 93,240
Fairfax Financial Holdings, Ltd.:
7.75% due 04/26/12............................... 100,000 85,000
8.25% due 10/01/15............................... 350,000 291,812
ING Groep NV:
5.78% due 12/08/15(17)........................... 140,000 139,041
-----------
609,093
-----------
Leisure & Tourism -- 0.14%
Corporacion Interamericana de Entretenimiento SA:
8.88% due 06/14/15*.............................. 175,000 170,625
Grupo Posadas SA de CV:
8.75% due 10/04/11*.............................. 100,000 104,500
-----------
275,125
-----------
Manufacturing -- 0.03%
Siemens Financieringmaatschappij NV:
5.75% due 10/17/16*.............................. 50,000 50,604
-----------
Metals -- 0.17%
CSN Islands VIII Corp.:
10.00% due 01/15/15*............................. 125,000 145,625
Inco, Ltd.:
7.20% due 09/15/32............................... 55,000 58,224
Noranda, Inc.:
6.00% due 10/15/15............................... 133,000 132,888
-----------
336,737
-----------
Mining -- 0.06%
Vale Overseas, Ltd.:
6.25% due 01/11/16............................... 110,000 109,175
-----------
August 31, 2006 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 65
Principal Value
Amount(13) (Note 2)
--------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Oil & Gas -- 0.24%
ENI Coordination Center:
5.25% due 12/27/07................. GBP 135,000 $ 256,825
Nexen, Inc.:
5.88% due 03/10/35................. 55,000 51,454
Shell International Finance BV:
5.63% due 06/27/11................. 90,000 91,781
Weatherford International, Ltd.:
5.50% due 02/15/16................. 63,000 61,683
-----------
461,743
-----------
Paper/Forest Products -- 0.26%
Abitibi-Cons., Inc.:
8.55% due 08/01/10................. 350,000 345,625
8.85% due 08/01/30................. 75,000 63,937
Stora Enso Oyj:
7.25% due 04/15/36*................ 100,000 102,740
-----------
512,302
-----------
Railroads & Equipment -- 0.05%
Canadian National Railway Co.:
6.38% due 10/15/11................. 90,000 94,098
-----------
Real Estate -- 0.04%
Brascan Corp.:
8.13% due 12/15/08................. 69,000 72,685
-----------
Retail -- 0.09%
Jean Coutu Group, Inc.:
8.50% due 08/01/14................. 70,000 66,766
Vitro Envases Norteamerica SA:
10.75% due 07/23/11*............... 100,000 105,000
-----------
171,766
-----------
Semiconductors -- 0.10%
Avago Technologies Finance Ltd.:
10.13% due 12/01/13*............... 150,000 156,938
STATS ChipPAC, Ltd.:
6.75% due 11/15/11................. 50,000 48,000
-----------
204,938
-----------
Telecommunications -- 0.45%
Intelsat Bermuda, Ltd.:
11.25% due 06/15/16*............... 125,000 129,531
Intelsat, Ltd.:
9.25% due 06/15/16*................ 250,000 260,000
Nordic Telephone Co Holding ApS:
8.88% due 05/01/16*................ 200,000 208,000
Rogers Wireless, Inc.:
7.25% due 12/15/12................. 75,000 77,344
Telecom Italia Capital SA:
5.25% due 11/15/13................. 14,000 13,337
6.38% due 11/15/33................. 106,000 100,087
7.20% due 07/18/36................. 55,000 57,442
Telus Corp.:
7.50% due 06/01/07................. 32,000 32,445
-----------
878,186
-----------
Utilities - Electric -- 0.00%
AES Drax Energy, Ltd.:
11.50% due 08/30/10+(2)(8)......... 175,000 18
-----------
Total Foreign Bonds & Notes
(Cost $77,122,193)................. 78,434,578
-----------
SUPRANATIONAL -- 0.03%
Semiconductors -- 0.03%
MagnaChip Semiconductor SA:
6.88% due 12/15/11 (Cost $72,500).. 75,000 61,125
-----------
Principal Value
Amount(13) (Note 2)
------------------------------------------------------------------------------
UNITED STATES GOVERNMENT BONDS -- 19.52%
Government Agencies -- 10.39%
Federal Home Loan Bank:
3.50% due 05/15/07.................................. $ 400,000 $ 394,959
3.88% due 12/20/06.................................. 400,000 398,170
4.50% due 09/08/08.................................. 400,000 395,757
Federal Home Loan Mtg. Corp.:
3.63% due 02/15/07.................................. 416,000 412,756
4.13% due 07/12/10.................................. 200,000 193,687
4.25% due 06/23/08.................................. 400,000 394,333
4.35% due 06/02/08.................................. 400,000 394,348
4.45% due 03/06/08.................................. 400,000 395,975
4.50% due 02/01/20.................................. 501,545 481,665
4.50% due 08/01/20.................................. 177,334 170,305
4.75% due 01/18/11.................................. 280,000 276,895
5.00% due 09/01/18.................................. 640,449 628,556
5.00% due 07/01/20.................................. 435,693 426,513
5.00% due 05/01/34.................................. 664,796 639,105
5.00% due 02/01/35.................................. 109,704 105,464
5.00% due 08/01/35.................................. 853,207 818,473
5.00% due 11/01/35.................................. 969,606 930,133
5.50% due 07/01/35.................................. 1,013,345 995,663
5.74% due 08/01/36(9)............................... 1,000,000 1,001,021
6.00% due 01/01/30.................................. 44,937 45,250
6.00% due 02/01/32.................................. 248,370 249,803
6.00% due 07/01/35.................................. 329,095 329,729
6.50% due 07/01/29.................................. 6,833 6,980
6.50% due 12/01/35.................................. 486,550 494,307
6.50% due 02/01/36.................................. 237,351 241,135
6.50% due 03/01/36.................................. 253,312 257,339
6.50% due September TBA............................. 650,000 660,156
6.88% due 09/15/10.................................. 772,000 823,443
7.00% due 06/01/29.................................. 18,374 18,945
Federal Home Loan Mtg. Corp. Reference REMIC, Series
R004, Class AL:
5.13% due 12/15/13(15).............................. 189,960 187,822
Federal Home Loan Mtg. Corp. Reference REMIC, Series
R005, Class AB:
5.50% due 12/15/18(15).............................. 235,675 234,866
Federal National Mtg. Assoc.:
3.00% due 03/02/07.................................. 400,000 395,358
4.50% due 06/01/19.................................. 405,763 390,328
4.75% due 12/15/10.................................. 251,000 248,273
5.00% due 06/01/19.................................. 160,526 157,438
5.00% due 03/01/34.................................. 314,823 302,365
5.00% due 11/01/34.................................. 437,414 420,104
5.25% due 08/01/12.................................. 384,000 383,820
5.50% due 03/01/18.................................. 31,317 31,278
5.50% due 07/01/19.................................. 295,140 294,460
5.50% due 01/01/29.................................. 79,472 78,427
5.50% due 05/01/29.................................. 27,070 26,709
5.50% due 06/01/34.................................. 429,138 422,076
5.50% due 03/01/35.................................. 792,276 777,903
5.50% due 12/01/35.................................. 543,396 533,537
5.50% due 02/01/36(9)............................... 266,878 266,087
6.00% due 06/25/16.................................. 289,016 292,167
6.00% due 02/01/32.................................. 104,939 105,477
6.00% due 10/01/34.................................. 1,472,333 1,476,239
6.00% due 06/01/35.................................. 171,675 171,904
6.50% due 12/01/31.................................. 98,541 100,419
6.50% due 04/01/34.................................. 252,149 256,220
6.50% due 02/01/35.................................. 131,844 133,856
7.50% due 03/01/32.................................. 9,016 9,316
8.50% due 08/01/31.................................. 22,111 23,795
-----------
20,301,109
-----------
Government Obligations -- 9.13%
United States Treasury Bonds:
4.50% due 02/15/36.................................. 1,820,000 1,712,933
5.38% due 02/15/31.................................. 1,463,000 1,556,495
6.25% due 08/15/23.................................. 495,000 567,587
66 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED August 31, 2006
Principal
Amount/ Value
Shares(13) (Note 2)
-----------------------------------------------------------------------------
UNITED STATES GOVERNMENT BONDS (continued)
Government Obligations (continued)
United States Treasury Notes:
2.25% due 02/15/07................................. $2,000,000 $ 1,974,296
3.38% due 10/15/09................................. 73,000 70,206
3.63% due 01/15/10................................. 538,000 519,926
3.75% due 03/31/07................................. 2,000,000 1,984,218
3.88% due 05/15/10................................. 65,000 63,218
3.88% due 07/15/10................................. 45,000 43,741
3.88% due 09/15/10................................. 26,000 25,218
4.00% due 02/15/15................................. 500,000 474,511
4.00% due 06/15/09................................. 410,000 402,505
4.13% due 05/15/15................................. 38,000 36,354
4.25% due 08/15/14................................. 82,000 79,383
4.25% due 08/15/15................................. 516,000 497,698
4.25% due 10/15/10................................. 90,000 88,513
4.38% due 12/15/10................................. 61,000 60,233
4.50% due 02/15/09................................. 1,750,000 1,740,020
4.50% due 11/15/10................................. 40,000 39,708
4.50% due 11/15/15................................. 586,000 575,333
4.88% due 05/31/08................................. 1,225,000 1,225,765
4.88% due 05/31/11................................. 1,400,000 1,409,789
5.13% due 05/15/16................................. 945,000 971,836
5.13% due 06/30/08................................. 1,300,000 1,306,958
6.50% due 02/15/10................................. 300,000 316,851
6.50% due 10/15/06................................. 100,000 100,133
-----------
17,843,428
-----------
Total United States Government Bonds
(Cost $38,391,658)................................. 38,144,537
-----------
COMMON STOCK -- 1.23%
Healthcare -- 0.02%
Critical Care Systems International, Inc.(1)(8)(16). 5,372 37,604
-----------
Leisure & Tourism -- 0.02%
Shreveport Gaming Holdings, Inc.+(1)(8)(16)......... 1,280 29,470
-----------
Oil & Gas -- 0.39%
Transmeridian Exploration, Inc.+.................... 1,753 8,940
Trico Marine Services, Inc.+........................ 21,039 754,669
-----------
763,609
-----------
Retail -- 0.00%
MTS, Inc.+(1)(8)(16)................................ 3,863 0
-----------
Telecommunications -- 0.73%
iPCS, Inc.+(8)...................................... 27,658 1,436,003
-----------
Utilities - Electric -- 0.07%
Mirant Corp.+...................................... 4,930 142,822
-----------
Total Common Stock
(Cost $1,001,345).................................. 2,409,508
-----------
PREFERRED STOCK -- 0.45%
Commercial Services -- 0.03%
Rent-Way, Inc. (convertible):
8.00% (1)(8)(16)................................... 4 59,895
-----------
Financial Services -- 0.17%
Fannie Mae:
7.63%(9)........................................... 997 53,090
General Electric Capital Corp.:
8.00%(3)........................................... 12,000 272,640
-----------
325,730
-----------
Multimedia -- 0.22%
ION Media Networks, Inc.:
14.25%(4).......................................... 51 438,600
-----------
Retail -- 0.03%
GNC Corp.:
12.00%(4)(8)....................................... 50 55,000
-----------
Total Preferred Stock
(Cost $836,497).................................... 879,225
-----------
Principal
Amount/ Value
Shares(13) (Note 2)
- ----------------------------------------------------------------------------------------
RIGHTS -- 0.07%+
Foreign Government Agencies -- 0.07%
Republic of Argentina, Expires 12/15/35(12)
(Cost $70,350)............................................. 1,510,972 $ 143,542
------------
WARRANTS -- 0.01%+
Oil & Gas -- 0.01%
Transmeridian Exploration, Inc.:
Expires 12/15/10 (Strike Price $4.31)(1)................... 6,905 13,811
------------
Telecommunications -- 0.00%
GT Group Telecommunications, Inc.:
Expires 02/01/10*(1)(8)(16)................................ 50 0
------------
Total Warrants
(Cost $18,990)............................................. 13,811
------------
Total Long-Term Investment Securities
(Cost $176,945,652)........................................ 180,230,763
------------
SHORT-TERM INVESTMENT SECURITIES - 5.12%
Commercial Paper - 5.12%
Dresdner U S Finance:
5.27% due 09/01/06......................................... $5,000,000 5,000,000
Rabobank USA Financial Corp.:
5.27% due 09/01/06......................................... 5,000,000 5,000,000
------------
10,000,000
------------
Total Short-Term Investment Securities
(Cost $10,000,000)......................................... 10,000,000
------------
REPURCHASE AGREEMENT -- 1.89%
Agreement with State Street Bank & Co., bearing interest at
4.83%, dated 08/31/06, to be repurchased 09/01/06 in
the amount of $3,688,495 and collateralized by Federal
Home Loan Bank Notes, bearing interest at 3.63%, due
01/15/08 and having an approximate value of
$3,800,077 (Cost $3,688,000)............................... 3,688,000 3,688,000
------------
TOTAL INVESTMENTS
(Cost $190,633,652)(7)..................................... 99.24% 193,918,763
Other assets less liabilities................................. 0.76% 1,494,429
---------- ------------
NET ASSETS 100.00% $195,413,192
========== ============
BONDS & NOTES SOLD SHORT -- (0.33%)
GOVERNMENT AGENCIES -- (0.33%)
Federal Home Loan Mtg. Corp.:
5.50% due September TBA....................................
(Proceeds $(633,522))...................................... (650,000) (638,219)
============
- --------
REMIC--Real Estate Mortgage Investment Conduits
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.
+ Non-income producing security
* 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, 2006, the aggregate value of
these securities was $14,243,783 representing 7.29% of net assets. Unless
otherwise indicated, these securities are not considered to be illiquid.
(1)Fair Value Security (see Note 2)
(2)Bond in default
(3)"Step Up" security where the rate increases ("steps up") at a predetermined
rate.
Rate shown reflects the increased rate.
(4)PIK ("Payment-in-Kind) security. Payments made with additional securities in
lieu of cash.
(5)Company has filed for Chapter 11 bankruptcy protection.
(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.
August 31, 2006 STRATEGIC BOND FUND - SCHEDULE OF INVESTMENTS - CONTINUED 67
(7)See Note 5 for cost of investments on a tax basis.
(8)Illiquid security
(9)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of August 31, 2006.
(10)Variable rate security - the rate reflected is as of August 31, 2006;
maturity date reflects next reset date.
(11)Commercial Mortgage-Backed Security
(12)Gross Domestic Product ("GDP") linked security. Income is linked to the
growth of Argentina's GDP.
(13)Denominated in United States dollars unless otherwise indicated.
(14)Variable rate security - the rate reflected is as of August 31, 2006;
maturity date reflects stated maturity date.
(15)Collateralized Mortgage Obligation.
(16)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 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, 2006, the
Strategic Bond Fund held the following restricted securities:
Principal Market Value as a
Acquisition Amount/ Acquisition Market Value % of
Name Date Shares Cost Value Per Share Net Assets
- ------------------------ ----------- --------- ----------- -------- ---------- ----------
Critical Care Systems
International, Inc.
Common Stock........... 06/17/04 $ 635 $ 5,490
11/09/04 4,737 35,231
-------- --------
5,372 40,721 $ 37,604 $ 7.00 0.02%
GT Group
Telecommunications,
Inc.
Warrant................ 09/15/00 50 0 0 0.01 0.00
ICO North America, Inc.:
7.50% due 08/15/09..... 08/11/05 125,000 125,000 153,750 1.23 0.08
MTS, Inc.:
9.38% due 03/15/09..... 03/16/04 13,636 49,087
09/03/04 681 681
03/19/05 715 143
09/04/05 751 195
03/04/06 789 205
-------- --------
16,572 50,311 4,309 0.26 0.00
MTS, Inc.:
Common Stock........... 03/16/04 3,863 - - - 0.00
Rent-Way, Inc. 8%
Convertible Preferred
Stock................. 05/29/03 3 25,000
05/14/04 1 10,000
-------- --------
4 35,000 59,895 17,112.76 0.03
Shreveport Gaming
Holdings, Inc.
Common Stock........... 07/21/05 257 5,918
07/29/05 1,023 23,552
-------- --------
1,280 29,470 29,470 23.02 0.02
Southern Energy, Inc.:
7.90% due 07/15/09..... 01/10/06 725,000 - - - 0.00
-------- ----
$285,028 0.15%
======== ====
(17)Perpetual maturity. The maturity date shown represents the next call date.
(18)Company has filed for Chapter 7 bankruptcy protection.
Currency Legend
AUD--Australian Dollar
BRL--Brazilian Real
CAD--Canadian Dollar
COP--Columbian Peso
EUR--Euro Dollar
GBP--British Pound
HUF--Hungarian Forint
JPY--Japanese Yen
MXN--Mexican Peso
NOK--Norwegian Krone
PLN--Polish Zloty
SEK--Swedish Krona
ZAR--South African Rand
See Notes to Financial Statements
68 STATEMENTS OF ASSETS & LIABILITIES August 31, 2006
AGGRESSIVE CAPITAL CONSERVATIVE
GROWTH APPRECIATION GROWTH CORE BOND
LIFESTYLE FUND FUND LIFESTYLE FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*. $ - $ 66,851,535 $ - $ 99,848,171
Long-term investment securities, at value (affiliated)*... 54,057,210 - 37,382,856 -
Short-term investment securities, at value (unaffiliated)* - - - 9,986,319
Repurchase agreements (cost equals market value).......... - 3,625,000 - 1,854,000
-------------- -------------- -------------- --------------
Total Investments......................................... 54,057,210 70,476,535 37,382,856 111,688,490
-------------- -------------- -------------- --------------
Cash...................................................... 2,492 9,542,487 587 95,975
Foreign cash*............................................. - - - -
Receivable for:
Trust shares sold...................................... 65,826 116,923 87,597 568,369
Dividends and interest................................. - 87,173 - 1,011,765
Investments sold....................................... 14,709 - 1,495 3,112,730
Prepaid expenses and other assets......................... 1,580 3,250 1,322 4,874
Due from investment adviser for expense reimbursements/
fee waivers.............................................. 8,547 12,164 5,288 24,464
Variation margin on futures contracts..................... - - - -
-------------- -------------- -------------- --------------
TOTAL ASSETS.............................................. 54,150,364 80,238,532 37,479,145 116,506,667
-------------- -------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired................................ 22,259 759 769 14,617
Investments purchased.................................. 58,276 10,683,098 88,323 5,779,024
Interest on securities sold short...................... - - - 2,750
Investment advisory and management fees................ 4,471 31,841 3,107 43,660
Shareholder services................................... - 14,473 - 21,830
Administrative service fee............................. - 4,052 - 6,113
Transfer agent fees and expenses....................... 220 662 220 471
Trustees' fees and expenses............................ 48,404 49,301 50,365 98,803
Other accrued expenses................................. 29,582 41,932 27,647 59,673
Variation margin on futures contracts..................... - - - -
Due to custodian.......................................... - - - -
Securities sold short, at value#.......................... - - - 1,472,813
-------------- -------------- -------------- --------------
TOTAL LIABILITIES......................................... 163,212 10,826,118 170,431 7,499,754
-------------- -------------- -------------- --------------
NET ASSETS................................................ $ 53,987,152 $ 69,412,414 $ 37,308,714 $ 109,006,913
============== ============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share.............. $ 46,118 $ 77,967 $ 34,883 $ 108,024
Additional paid in capital................................ 46,773,613 80,013,522 34,778,097 107,133,065
Accumulated undistributed net investment income
(loss)................................................... (48,608) 85,229 (48,995) 3,506,980
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions received from underlying funds............. 5,105,597 (12,082,488) 1,813,922 (1,902,803)
Unrealized appreciation (depreciation) on investments..... 2,110,432 1,318,184 730,807 172,487
Unrealized appreciation (depreciation) on futures
contracts................................................ - - - -
Unrealized foreign exchange gain (loss) on other assets
and liabilities.......................................... - - - -
Unrealized appreciation (depreciation) on securities sold
short.................................................... - - - (10,840)
Accrued capital gains tax on unrealized appreciation
(depreciation)........................................... - - - -
-------------- -------------- -------------- --------------
NET ASSETS................................................ $ 53,987,152 $ 69,412,414 $ 37,308,714 $ 109,006,913
============== ============== ============== ==============
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............................................ 4,611,835 7,796,748 3,488,266 10,802,424
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE....................................... $ 11.71 $ 8.90 $ 10.70 $ 10.09
============== ============== ============== ==============
- --------
*Cost
Long-term investment securities (unaffiliated)......... $ - $ 65,533,351 $ - $ 99,675,684
============== ============== ============== ==============
Long-term investment securities (affiliated)........... $ 51,946,778 $ - $ 36,652,049 $ -
============== ============== ============== ==============
Short-term investment securities (unaffiliated)........ $ - $ - $ - $ 9,986,319
============== ============== ============== ==============
Foreign Cash........................................... $ - $ - $ - $ -
============== ============== ============== ==============
#Proceeds from securities sold short...................... $ - $ - $ - $ 1,461,973
============== ============== ============== ==============
INTERNATIONAL
HIGH YIELD SMALL CAP LARGE CAP MID CAP
BOND FUND EQUITY FUND VALUE FUND GROWTH FUND
- -------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*. $ 92,447,625 $ 410,380,877 $ 175,448,757 $ 61,017,054
Long-term investment securities, at value (affiliated)*... - - - -
Short-term investment securities, at value (unaffiliated)* 10,000,000 - 5,011,936 -
Repurchase agreements (cost equals market value).......... 3,340,000 27,570,000 - 3,984,000
-------------- -------------- -------------- --------------
Total Investments......................................... 105,787,625 437,950,877 180,460,693 65,001,054
-------------- -------------- -------------- --------------
Cash...................................................... - 178 324 549
Foreign cash*............................................. 27,104 3,918,283 - 2
Receivable for:
Trust shares sold...................................... 248,361 2,369,601 1,689,490 62,091
Dividends and interest................................. 1,711,541 303,820 426,495 21,021
Investments sold....................................... 722,632 41,138 - 189,898
Prepaid expenses and other assets......................... 10,926 7,581 4,628 3,439
Due from investment adviser for expense reimbursements/
fee waivers.............................................. 20,578 243,791 28,773 21,792
Variation margin on futures contracts..................... - - - -
-------------- -------------- -------------- --------------
TOTAL ASSETS.............................................. 108,528,767 444,835,269 182,610,403 65,299,846
-------------- -------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired................................ 31,726 145,674 34,644 21,492
Investments purchased.................................. 1,916,394 16,617,136 4,594,548 514,036
Interest on securities sold short...................... - - - -
Investment advisory and management fees................ 61,737 275,080 66,021 42,780
Shareholder services................................... 22,049 83,308 33,010 13,552
Administrative service fee............................. 6,174 23,326 9,243 3,795
Transfer agent fees and expenses....................... 467 192 386 387
Trustees' fees and expenses............................ 63,991 75,011 78,072 74,055
Other accrued expenses................................. 53,839 178,432 57,484 46,674
Variation margin on futures contracts..................... - - - -
Due to custodian.......................................... 302,381 - - -
Securities sold short, at value#.......................... - - - -
-------------- -------------- -------------- --------------
TOTAL LIABILITIES......................................... 2,458,758 17,398,159 4,873,408 716,771
-------------- -------------- -------------- --------------
NET ASSETS................................................ $ 106,070,009 $ 427,437,110 $ 177,736,995 $ 64,583,075
============== ============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share.............. $ 113,771 $ 254,447 $ 121,925 $ 79,287
Additional paid in capital................................ 95,172,373 371,280,365 154,144,735 57,096,469
Accumulated undistributed net investment income
(loss)................................................... 4,969,454 822,230 1,284,004 (60,655)
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions received from underlying funds............. 2,220,236 23,743,565 12,298,992 3,565,113
Unrealized appreciation (depreciation) on investments..... 3,594,528 31,359,569 9,887,339 3,902,861
Unrealized appreciation (depreciation) on futures
contracts................................................ - - - -
Unrealized foreign exchange gain (loss) on other assets
and liabilities.......................................... (353) (4,241) - -
Unrealized appreciation (depreciation) on securities sold
short.................................................... - - - -
Accrued capital gains tax on unrealized appreciation
(depreciation)........................................... - (18,825) - -
-------------- -------------- -------------- --------------
NET ASSETS................................................ $ 106,070,009 $ 427,437,110 $ 177,736,995 $ 64,583,075
============== ============== ============== ==============
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............................................ 11,377,053 25,444,714 12,192,463 7,928,736
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE....................................... $ 9.32 $ 16.80 $ 14.58 $ 8.15
============== ============== ============== ==============
- --------
*Cost
Long-term investment securities (unaffiliated)......... $ 88,853,097 $ 379,021,308 $ 165,561,418 $ 57,114,193
============== ============== ============== ==============
Long-term investment securities (affiliated)........... $ - $ - $ - $ -
============== ============== ============== ==============
Short-term investment securities (unaffiliated)........ $ 10,000,000 $ - $ 5,011,936 $ -
============== ============== ============== ==============
Foreign Cash........................................... $ 27,458 $ 3,903,181 $ - $ 2
============== ============== ============== ==============
#Proceeds from securities sold short...................... $ - $ - $ - $ -
============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS
August 31, 2006 STATEMENTS OF ASSETS & LIABILITIES - CONTINUED 69
MID CAP MODERATE MONEY
VALUE GROWTH MARKET II
FUND LIFESTYLE FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*................. $ 354,263,096 $ - $ -
Long-term investment securities, at value (affiliated)*................... - 88,671,332 -
Short-term investment securities, at value (unaffiliated)*................ 2,490,000 - 145,962,273
Repurchase agreements (cost equals market value).......................... 4,565,000 - 6,100,000
-------------- -------------- --------------
Total Investments......................................................... 361,318,096 88,671,332 152,062,273
-------------- -------------- --------------
Cash...................................................................... 864 6,006 384
Foreign cash*............................................................. 88,733 - -
Receivable for:
Trust shares sold...................................................... 342,674 142,113 1,208,527
Dividends and interest................................................. 508,582 - 460,114
Investments sold....................................................... 3,396,931 15,041 -
Prepaid expenses and other assets......................................... 14,079 2,778 4,874
Due from investment adviser for expense reimbursements/fee waivers........ 46,823 13,431 11,816
Variation margin on futures contracts..................................... - - -
-------------- -------------- --------------
TOTAL ASSETS.............................................................. 365,716,782 88,850,701 153,747,988
-------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired................................................ 35,211 32,995 204,082
Investments purchased.................................................. 2,634,329 124,159 1,999,900
Interest on securities sold short...................................... - - -
Investment advisory and management fees................................ 217,278 7,407 30,241
Shareholder services................................................... 74,945 - 30,241
Administrative service fee............................................. 20,985 - 8,467
Transfer agent fees and expenses....................................... 159 220 166
Trustees' fees and expenses............................................ 230,795 88,349 106,290
Other accrued expenses................................................. 124,538 39,238 42,342
Variation margin on futures contracts..................................... - - -
Due to custodian.......................................................... - - -
Securities sold short, at value#.......................................... - - -
-------------- -------------- --------------
TOTAL LIABILITIES......................................................... 3,338,240 292,368 2,421,729
-------------- -------------- --------------
NET ASSETS................................................................ $ 362,378,542 $ 88,558,333 $ 151,326,259
============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share.............................. $ 193,306 $ 71,217 $ 1,513,263
Additional paid in capital................................................ 291,122,606 78,086,673 149,810,274
Accumulated undistributed net investment income (loss).................... 1,165,627 772,788 2,722
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short, foreign exchange transactions and
capital gains distributions received from underlying funds............... 37,144,003 6,942,785 -
Unrealized appreciation (depreciation) on investments..................... 32,750,792 2,684,870 -
Unrealized appreciation (depreciation) on futures contracts............... - - -
Unrealized foreign exchange gain (loss) on other assets and liabilities... 2,208 - -
Unrealized appreciation (depreciation) on securities sold short........... - - -
Accrued capital gains tax on unrealized appreciation (depreciation)....... - - -
-------------- -------------- --------------
NET ASSETS................................................................ $ 362,378,542 $ 88,558,333 $ 151,326,259
============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share)................................. 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding............................................................ 19,330,618 7,121,652 151,326,259
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE................................................................. $ 18.75 $ 12.44 $ 1.00
============== ============== ==============
- --------
* Cost
Long-term investment securities (unaffiliated)......................... $ 321,512,304 $ - $ -
============== ============== ==============
Long-term investment securities (affiliated)........................... $ - $ 85,986,462 $ -
============== ============== ==============
Short-term investment securities (unaffiliated)........................ $ 2,490,000 $ - $ 145,962,273
============== ============== ==============
Foreign Cash........................................................... $ 87,467 $ - $ -
============== ============== ==============
#Proceeds from securities sold short...................................... $ - $ - $ -
============== ============== ==============
SMALL CAP SMALL CAP SOCIALLY
GROWTH VALUE RESPONSIBLE
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*................. $ 49,244,670 $ 111,642,954 $ 246,668,859
Long-term investment securities, at value (affiliated)*................... - - -
Short-term investment securities, at value (unaffiliated)*................ 377,000 - 40,215,989
Repurchase agreements (cost equals market value).......................... - 2,952,000 6,131,000
-------------- -------------- --------------
Total Investments......................................................... 49,621,670 114,594,954 293,015,848
-------------- -------------- --------------
Cash...................................................................... 965 840 253
Foreign cash*............................................................. - - -
Receivable for:
Trust shares sold...................................................... 131,627 368,218 2,064,758
Dividends and interest................................................. 7,865 115,062 388,082
Investments sold....................................................... 342,865 - -
Prepaid expenses and other assets......................................... 3,235 5,651 5,623
Due from investment adviser for expense reimbursements/fee waivers........ 21,892 18,674 46,398
Variation margin on futures contracts..................................... - - 17,650
-------------- -------------- --------------
TOTAL ASSETS.............................................................. 50,130,119 115,103,399 295,538,612
-------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired................................................ 18,678 29,236 62,722
Investments purchased.................................................. 606,218 - -
Interest on securities sold short...................................... - - -
Investment advisory and management fees................................ 34,964 64,744 55,989
Shareholder services................................................... 10,284 23,268 55,989
Administrative service fee............................................. 2,879 6,515 15,677
Transfer agent fees and expenses....................................... 471 386 54
Trustees' fees and expenses............................................ 57,450 89,586 46,467
Other accrued expenses................................................. 45,312 78,581 71,034
Variation margin on futures contracts..................................... - 1,600 -
Due to custodian.......................................................... - - -
Securities sold short, at value#.......................................... - - -
-------------- -------------- --------------
TOTAL LIABILITIES......................................................... 776,256 293,916 307,932
-------------- -------------- --------------
NET ASSETS................................................................ $ 49,353,863 $ 114,809,483 $ 295,230,680
============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share.............................. $ 38,919 $ 76,217 $ 244,863
Additional paid in capital................................................ 47,908,942 94,065,437 277,952,593
Accumulated undistributed net investment income (loss).................... (58,079) 558,343 2,196,991
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short, foreign exchange transactions and
capital gains distributions received from underlying funds............... (1,982,793) 9,847,188 4,968,246
Unrealized appreciation (depreciation) on investments..................... 3,446,874 10,192,911 9,360,887
Unrealized appreciation (depreciation) on futures contracts............... - 69,387 507,100
Unrealized foreign exchange gain (loss) on other assets and liabilities... - - -
Unrealized appreciation (depreciation) on securities sold short........... - - -
Accrued capital gains tax on unrealized appreciation (depreciation)....... - - -
-------------- -------------- --------------
NET ASSETS................................................................ $ 49,353,863 $ 114,809,483 $ 295,230,680
============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share)................................. 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding............................................................ 3,891,874 7,621,729 24,486,334
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE................................................................. $ 12.68 $ 15.06 $ 12.06
============== ============== ==============
- --------
* Cost
Long-term investment securities (unaffiliated)......................... $ 45,797,796 $ 101,450,043 $ 237,307,972
============== ============== ==============
Long-term investment securities (affiliated)........................... $ - $ - $ -
============== ============== ==============
Short-term investment securities (unaffiliated)........................ $ 377,000 $ - $ 40,215,989
============== ============== ==============
Foreign Cash........................................................... $ - $ - $ -
============== ============== ==============
#Proceeds from securities sold short...................................... $ - $ - $ -
============== ============== ==============
STRATEGIC
BOND
FUND
- ------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*................. $ 180,230,763
Long-term investment securities, at value (affiliated)*................... -
Short-term investment securities, at value (unaffiliated)*................ 10,000,000
Repurchase agreements (cost equals market value).......................... 3,688,000
--------------
Total Investments......................................................... 193,918,763
--------------
Cash...................................................................... -
Foreign cash*............................................................. 653,655
Receivable for:
Trust shares sold...................................................... 424,381
Dividends and interest................................................. 2,812,405
Investments sold....................................................... 2,009,101
Prepaid expenses and other assets......................................... 5,014
Due from investment adviser for expense reimbursements/fee waivers........ 59,504
Variation margin on futures contracts..................................... -
--------------
TOTAL ASSETS.............................................................. 199,882,823
--------------
LIABILITIES:
Payable for:
Trust shares reacquired................................................ 62,666
Investments purchased.................................................. 3,287,898
Interest on securities sold short...................................... 1,192
Investment advisory and management fees................................ 97,447
Shareholder services................................................... 40,603
Administrative service fee............................................. 11,369
Transfer agent fees and expenses....................................... 140
Trustees' fees and expenses............................................ 87,297
Other accrued expenses................................................. 92,615
Variation margin on futures contracts..................................... -
Due to custodian.......................................................... 150,185
Securities sold short, at value#.......................................... 638,219
--------------
TOTAL LIABILITIES......................................................... 4,469,631
--------------
NET ASSETS................................................................ $ 195,413,192
==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share.............................. $ 171,955
Additional paid in capital................................................ 182,680,372
Accumulated undistributed net investment income (loss).................... 7,373,155
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short, foreign exchange transactions and
capital gains distributions received from underlying funds............... 1,912,886
Unrealized appreciation (depreciation) on investments..................... 3,285,111
Unrealized appreciation (depreciation) on futures contracts............... -
Unrealized foreign exchange gain (loss) on other assets and liabilities... (5,590)
Unrealized appreciation (depreciation) on securities sold short........... (4,697)
Accrued capital gains tax on unrealized appreciation (depreciation)....... -
--------------
NET ASSETS................................................................ $ 195,413,192
==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share)................................. 1,000,000,000
Outstanding............................................................ 17,195,467
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE................................................................. $ 11.36
==============
- --------
* Cost
Long-term investment securities (unaffiliated)......................... $ 176,945,652
==============
Long-term investment securities (affiliated)........................... $ -
==============
Short-term investment securities (unaffiliated)........................ $ 10,000,000
==============
Foreign Cash........................................................... $ 657,559
==============
#Proceeds from securities sold short...................................... $ 633,522
==============
SEE NOTES TO FINANCIAL STATEMENTS
70 STATEMENTS OF OPERATIONS August 31, 2006
AGGRESSIVE CONSERVATIVE
GROWTH CAPITAL GROWTH
LIFESTYLE APPRECIATION LIFESTYLE CORE BOND
FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated)..................................................... $ - $ 523,257 $ - $ 34,856
Dividends (affiliated)....................................................... 648,643 - 507,683 -
Interest (unaffiliated)...................................................... 53 110,260 291 4,996,441
Interest (affiliated)........................................................ - - - -
----------- ----------- ----------- -----------
Total investment income*.................................................. 648,696 633,517 507,974 5,031,297
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory and management fees...................................... 45,973 327,754 34,384 442,634
Administrative service fee................................................... - 41,714 - 61,969
Shareholder services......................................................... - 148,979 - 221,317
Transfer agent fees and expenses............................................. 1,307 2,611 1,307 2,615
Custodian fees............................................................... 18,853 15,265 18,432 66,132
Reports to shareholders...................................................... 16,755 21,482 11,936 35,805
Audit and tax fees........................................................... 26,876 28,133 26,876 33,057
Legal fees................................................................... 4,763 5,454 4,227 7,575
Trustees' fees and expenses.................................................. 13,194 17,185 11,901 28,424
Interest expense............................................................. - - - 724
Dividends and interest expense on securities sold short...................... - - - -
Other expenses............................................................... 4,133 7,746 3,894 7,971
----------- ----------- ----------- -----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................... 131,854 616,323 112,957 908,223
----------- ----------- ----------- -----------
Fees waived and expenses reimbursed by investment adviser (Note 3)........ (85,882) (109,793) (78,573) (226,565)
Fees paid indirectly (Note 7)............................................. - - - -
----------- ----------- ----------- -----------
Net expenses.............................................................. 45,972 506,530 34,384 681,658
----------- ----------- ----------- -----------
Net investment income (loss)................................................. 602,724 126,987 473,590 4,349,639
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................... - 2,786,200 - (1,731,587)
Net realized gain (loss) on investments (affiliated)....................... 5,553,949 - 2,106,420 -
Net realized gain (loss) from capital gain distributions received from
underlying funds (affiliated)............................................. 506,259 - 259,003 -
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 increase from payments by affiliates (Note 3).......................... - - - -
----------- ----------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies............. 6,060,208 2,786,200 2,365,423 (1,731,587)
----------- ----------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments
(unaffiliated)............................................................ - (3,740,363) - (707,106)
Change in unrealized appreciation (depreciation) on investments
(affiliated).............................................................. (2,333,278) - (1,018,035) -
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.. - - - (10,840)
Change in accrued capital gains tax on unrealized appreciation
(depreciation)............................................................ - - - -
----------- ----------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies............. (2,333,278) (3,740,363) (1,018,035) (717,946)
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies.................................................................. 3,726,930 (954,163) 1,347,388 (2,449,533)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................................. $ 4,329,654 $ (827,176) $ 1,820,978 $ 1,900,106
=========== =========== =========== ===========
*Net of foreign withholding taxes on interest and dividends of............... $ - $ - $ - $ 1,912
----------- ----------- ----------- -----------
**Net of foreign withholding taxes on capital gains of....................... $ - $ - $ - $ -
----------- ----------- ----------- -----------
INTERNATIONAL LARGE CAP
HIGH YIELD SMALL CAP VALUE
BOND FUND EQUITY FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated)..................................................... $ 100,701 $ 4,372,500 $ 2,360,301
Dividends (affiliated)....................................................... - - -
Interest (unaffiliated)...................................................... 7,027,423 468,185 7,341
Interest (affiliated)........................................................ - - -
----------- ----------- -----------
Total investment income*.................................................. 7,128,124 4,840,685 2,367,642
----------- ----------- -----------
EXPENSES:
Investment advisory and management fees...................................... 619,390 2,354,115 504,401
Administrative service fee................................................... 61,939 197,235 70,616
Shareholder services......................................................... 221,211 704,411 252,200
Transfer agent fees and expenses............................................. 2,610 2,178 2,178
Custodian fees............................................................... 33,178 360,345 29,863
Reports to shareholders...................................................... 37,808 106,036 36,624
Audit and tax fees........................................................... 33,065 34,631 28,164
Legal fees................................................................... 7,440 14,079 7,671
Trustees' fees and expenses.................................................. 27,698 65,439 29,555
Interest expense............................................................. - 1,943 -
Dividends and interest expense on securities sold short...................... 533 - -
Other expenses............................................................... 7,665 13,588 14,188
----------- ----------- -----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................... 1,052,537 3,854,000 975,460
----------- ----------- -----------
Fees waived and expenses reimbursed by investment adviser (Note 3)........ (176,543) (1,036,351) (158,331)
Fees paid indirectly (Note 7)............................................. - - -
----------- ----------- -----------
Net expenses.............................................................. 875,994 2,817,649 817,129
----------- ----------- -----------
Net investment income (loss)................................................. 6,252,130 2,023,036 1,550,513
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................... 2,241,462 23,737,064 12,540,321
Net realized gain (loss) on investments (affiliated)....................... - - -
Net realized gain (loss) from capital gain distributions received from
underlying funds (affiliated)............................................. - - -
Net realized gain (loss) on securities sold short.......................... 9,615 - -
Net realized gain (loss) on futures contracts.............................. - - -
Net realized foreign exchange gain (loss) on other assets and liabilities.. - (1,020,486) -
Net realized gain (loss) on disposal of investments, in violation of
investments restrictions (Note 3)......................................... - (28,874) (7,056)
Net increase from payments by affiliates (Note 3).......................... 34,151 28,874 7,056
----------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies............. 2,285,228 22,716,578 12,540,321
----------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments
(unaffiliated)............................................................ (1,380,440) 18,413,756 (1,226,016)
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............................................................... 1,004 (24,511) -
Change in unrealized appreciation (depreciation) on securities sold short.. (16,313) - -
Change in accrued capital gains tax on unrealized appreciation
(depreciation)............................................................ - (18,614) -
----------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies............. (1,395,749) 18,370,631 (1,226,016)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies.................................................................. 889,479 41,087,209 11,314,305
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................................. $ 7,141,609 $43,110,245 $12,864,818
=========== =========== ===========
*Net of foreign withholding taxes on interest and dividends of............... $ 1,396 $ 451,196 $ -
----------- ----------- -----------
**Net of foreign withholding taxes on capital gains of....................... $ - $ 39,835 $ -
----------- ----------- -----------
MID CAP
GROWTH
FUND
- ------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated)..................................................... $ 301,071
Dividends (affiliated)....................................................... -
Interest (unaffiliated)...................................................... 115,865
Interest (affiliated)........................................................ -
-----------
Total investment income*.................................................. 416,936
-----------
EXPENSES:
Investment advisory and management fees...................................... 472,835
Administrative service fee................................................... 41,800
Shareholder services......................................................... 149,287
Transfer agent fees and expenses............................................. 2,178
Custodian fees............................................................... 31,091
Reports to shareholders...................................................... 30,787
Audit and tax fees........................................................... 28,164
Legal fees................................................................... 5,025
Trustees' fees and expenses.................................................. 31,959
Interest expense............................................................. -
Dividends and interest expense on securities sold short...................... -
Other expenses............................................................... 8,356
-----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................... 801,482
-----------
Fees waived and expenses reimbursed by investment adviser (Note 3)........ (293,908)
Fees paid indirectly (Note 7)............................................. -
-----------
Net expenses.............................................................. 507,574
-----------
Net investment income (loss)................................................. (90,638)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................... 7,239,740
Net realized gain (loss) on investments (affiliated)....................... -
Net realized gain (loss) from capital gain distributions received from
underlying funds (affiliated)............................................. -
Net realized gain (loss) on securities sold short.......................... -
Net realized gain (loss) on futures contracts.............................. (58,162)
Net realized foreign exchange gain (loss) on other assets and liabilities.. 1,081
Net realized gain (loss) on disposal of investments, in violation of
investments restrictions (Note 3)......................................... -
Net increase from payments by affiliates (Note 3).......................... -
-----------
Net realized gain (loss) on investments and foreign currencies............. 7,182,659
-----------
Change in unrealized appreciation (depreciation) on investments
(unaffiliated)............................................................ (3,194,703)
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............................................................... (4)
Change in unrealized appreciation (depreciation) on securities sold short.. -
Change in accrued capital gains tax on unrealized appreciation
(depreciation)............................................................ -
-----------
Net unrealized gain (loss) on investments and foreign currencies............. (3,194,707)
-----------
Net realized and unrealized gain (loss) on investments and foreign
currencies.................................................................. 3,987,952
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................................. $ 3,897,314
===========
*Net of foreign withholding taxes on interest and dividends of............... $ 1,392
-----------
**Net of foreign withholding taxes on capital gains of....................... $ -
-----------
SEE NOTES TO FINANCIAL STATEMENTS
August 31, 2006 STATEMENTS OF OPERATIONS - CONTINUED 71
MODERATE
GROWTH MONEY
MID CAP LIFESTYLE MARKET II
VALUE FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated).................................................................. $ 4,490,771 $ - $ -
Dividends (affiliated).................................................................... - 1,159,467 -
Interest (unaffiliated)................................................................... 297,911 26 4,481,942
Interest (affiliated)..................................................................... - - -
----------- ----------- ----------
Total investment income*............................................................... 4,788,682 1,159,493 4,481,942
----------- ----------- ----------
EXPENSES:
Investment advisory and management fees................................................... 2,395,019 79,944 238,913
Administrative service fee................................................................ 230,752 - 66,895
Shareholder services...................................................................... 824,114 - 238,913
Transfer agent fees and expenses.......................................................... 2,815 1,307 870
Custodian fees............................................................................ 122,223 19,139 9,650
Reports to shareholders................................................................... 207,058 32,417 28,569
Audit and tax fees........................................................................ 28,209 24,660 25,985
Legal fees................................................................................ 25,494 6,696 6,513
Trustees' fees and expenses............................................................... 103,967 24,389 24,039
Interest expense.......................................................................... 370 - -
Dividends and interest expense on securities sold short................................... - - -
Other expenses............................................................................ 22,564 5,136 2,876
----------- ----------- ----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................................ 3,962,585 193,688 643,223
----------- ----------- ----------
Fees waived and expenses reimbursed by investment adviser (Note 3)..................... (501,304) (113,745) (108,058)
Fees paid indirectly (Note 7).......................................................... (27,563) - -
----------- ----------- ----------
Net expenses........................................................................... 3,433,718 79,943 535,165
----------- ----------- ----------
Net investment income (loss).............................................................. 1,354,964 1,079,550 3,946,777
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................................ 37,437,202 - -
Net realized gain (loss) on investments (affiliated).................................... - 6,408,382 -
Net realized gain (loss) from capital gain distributions received from underlying funds
(affiliated)........................................................................... - 775,931 -
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............... 9,298 - -
Net realized gain (loss) on disposal of investments, in violation of investments
restrictions (Note 3).................................................................. - - -
Net increase from payments by affiliates (Note 3)....................................... - - -
----------- ----------- ----------
Net realized gain (loss) on investments and foreign currencies.......................... 37,446,500 7,184,313 -
----------- ----------- ----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).......... (6,047,323) - -
Change in unrealized appreciation (depreciation) on investments (affiliated)............ - (3,015,592) -
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts.............................................................................. - - -
Change in unrealized foreign exchange gain (loss) on other assets and liabilities....... 1,764 - -
Change in unrealized appreciation (depreciation) on securities sold short............... - - -
Change in accrued capital gains tax on unrealized appreciation (depreciation)........... - - -
----------- ----------- ----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (6,045,559) (3,015,592) -
----------- ----------- ----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 31,400,941 4,168,721 -
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $32,755,905 $ 5,248,271 $3,946,777
=========== =========== ==========
*Net of foreign withholding taxes on interest and dividends of............................ $ 39,577 $ - $ -
----------- ----------- ----------
**Net of foreign withholding taxes on capital gains of.................................... $ - $ - $ -
----------- ----------- ----------
SMALL CAP SOCIALLY
GROWTH SMALL CAP RESPONSIBLE
FUND VALUE FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated).................................................................. $ 239,360 $ 1,526,481 $ 2,925,809
Dividends (affiliated).................................................................... - - 339
Interest (unaffiliated)................................................................... 56,827 147,403 701,213
Interest (affiliated)..................................................................... - - -
----------- ----------- -----------
Total investment income*............................................................... 296,187 1,673,884 3,627,361
----------- ----------- -----------
EXPENSES:
Investment advisory and management fees................................................... 416,105 691,949 436,547
Administrative service fee................................................................ 34,267 69,133 122,233
Shareholder services...................................................................... 122,384 246,903 436,547
Transfer agent fees and expenses.......................................................... 2,615 2,178 1,270
Custodian fees............................................................................ 32,432 59,577 53,753
Reports to shareholders................................................................... 19,450 42,289 81,743
Audit and tax fees........................................................................ 28,183 28,148 28,191
Legal fees................................................................................ 4,803 8,044 11,790
Trustees' fees and expenses............................................................... 15,302 32,608 58,556
Interest expense.......................................................................... - 1,396 -
Dividends and interest expense on securities sold short................................... - - -
Other expenses............................................................................ 8,337 11,865 10,764
----------- ----------- -----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................................ 683,878 1,194,090 1,241,394
----------- ----------- -----------
Fees waived and expenses reimbursed by investment adviser (Note 3)..................... (116,018) (255,857) (263,530)
Fees paid indirectly (Note 7).......................................................... - - -
----------- ----------- -----------
Net expenses........................................................................... 567,860 938,233 977,864
----------- ----------- -----------
Net investment income (loss).............................................................. (271,673) 735,651 2,649,497
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................................ 5,910,938 10,095,553 5,687,654
Net realized gain (loss) on investments (affiliated).................................... - - (1,926)
Net realized gain (loss) from capital gain distributions received from underlying funds
(affiliated)........................................................................... - - -
Net realized gain (loss) on securities sold short....................................... - - -
Net realized gain (loss) on futures contracts........................................... - (153,976) (516,459)
Net realized foreign exchange gain (loss) on other assets and liabilities............... - 25 -
Net realized gain (loss) on disposal of investments, in violation of investments
restrictions (Note 3).................................................................. - - -
Net increase from payments by affiliates (Note 3)....................................... - - -
----------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies.......................... 5,910,938 9,941,602 5,169,269
----------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).......... (4,270,831) (1,936,940) 8,976,568
Change in unrealized appreciation (depreciation) on investments (affiliated)............ - - 11,455
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts.............................................................................. - 91,425 501,625
Change in unrealized foreign exchange gain (loss) on other assets and liabilities....... - - -
Change in unrealized appreciation (depreciation) on securities sold short............... - - -
Change in accrued capital gains tax on unrealized appreciation (depreciation)........... - - -
----------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (4,270,831) (1,845,515) 9,489,648
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 1,640,107 8,096,087 14,658,917
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 1,368,434 $ 8,831,738 $17,308,414
=========== =========== ===========
*Net of foreign withholding taxes on interest and dividends of............................ $ 345 $ 478 $ -
----------- ----------- -----------
**Net of foreign withholding taxes on capital gains of.................................... $ - $ - $ -
----------- ----------- -----------
STRATEGIC
BOND
FUND
- -------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated).................................................................. $ 82,673
Dividends (affiliated).................................................................... -
Interest (unaffiliated)................................................................... 10,053,075
Interest (affiliated)..................................................................... -
-----------
Total investment income*............................................................... 10,135,748
-----------
EXPENSES:
Investment advisory and management fees................................................... 969,288
Administrative service fee................................................................ 113,084
Shareholder services...................................................................... 403,870
Transfer agent fees and expenses.......................................................... 2,090
Custodian fees............................................................................ 140,532
Reports to shareholders................................................................... 69,584
Audit and tax fees........................................................................ 33,108
Legal fees................................................................................ 11,990
Trustees' fees and expenses............................................................... 47,526
Interest expense.......................................................................... -
Dividends and interest expense on securities sold short................................... -
Other expenses............................................................................ 10,298
-----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................................ 1,801,370
-----------
Fees waived and expenses reimbursed by investment adviser (Note 3)..................... (363,592)
Fees paid indirectly (Note 7).......................................................... -
-----------
Net expenses........................................................................... 1,437,778
-----------
Net investment income (loss).............................................................. 8,697,970
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................................ 2,079,073
Net realized gain (loss) on investments (affiliated).................................... -
Net realized gain (loss) from capital gain distributions received 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............... 58,281
Net realized gain (loss) on disposal of investments, in violation of investments
restrictions (Note 3).................................................................. -
Net increase from payments by affiliates (Note 3)....................................... 20,238
-----------
Net realized gain (loss) on investments and foreign currencies.......................... 2,157,592
-----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).......... (1,099,825)
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....... 39,481
Change in unrealized appreciation (depreciation) on securities sold short............... (4,697)
Change in accrued capital gains tax on unrealized appreciation (depreciation)........... -
-----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (1,065,041)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 1,092,551
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 9,790,521
===========
*Net of foreign withholding taxes on interest and dividends of............................ $ 20,754
-----------
**Net of foreign withholding taxes on capital gains of.................................... $ -
-----------
See Notes To Financial Statements
72 STATEMENTS OF CHANGES IN NET ASSETS August 31, 2006
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,
2006 2005 2006 2005
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)....................................... $ 602,724 $ 291,138 $ 126,987 $ 155,852
Net realized gain (loss) on investments and foreign currencies... 6,060,208 3,870,260 2,786,200 335,714
Net unrealized gain (loss) on investments and foreign currencies. (2,333,278) 2,926,876 (3,740,363) 5,759,726
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 4,329,654 7,088,274 (827,176) 6,251,292
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (686,468) (296,134) (28,150) (136,132)
Net realized gain on securities.................................. (887,991) - - -
----------- ----------- ----------- -----------
Total distributions to shareholders................................ (1,574,459) (296,134) (28,150) (136,132)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)....................................... 10,608,697 310,949 21,328,616 279,844
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................ 13,363,892 7,103,089 20,473,290 6,395,004
NET ASSETS:
Beginning of period................................................ 40,623,260 33,520,171 48,939,124 42,544,120
----------- ----------- ----------- -----------
End of period+..................................................... $53,987,152 $40,623,260 $69,412,414 $48,939,124
=========== =========== =========== ===========
+ Includesaccumulated undistributed
net investment income (loss)............................. $ (48,608) $ 5,975 $ 85,229 $ (13,608)
=========== =========== =========== ===========
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,
2006 2005 2006 2005
----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)....................................... $ 473,590 $ 745,101 $ 4,349,639 $ 3,463,366
Net realized gain (loss) on investments and foreign currencies... 2,365,423 1,455,631 (1,731,587) 381,785
Net unrealized gain (loss) on investments and foreign currencies. (1,018,035) 1,672,231 (717,946) 251,924
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from operations.. 1,820,978 3,872,963 1,900,106 4,097,075
----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (558,981) (752,113) (1,200,000) (3,388,978)
Net realized gain on securities.................................. (1,543,386) - (149,409) (223,226)
----------- ----------- ------------ ------------
Total distributions to shareholders................................ (2,102,367) (752,113) (1,349,409) (3,612,204)
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)....................................... 3,121,786 698,678 7,157,586 29,404,646
----------- ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................ 2,840,397 3,819,528 7,708,283 29,889,517
NET ASSETS:
Beginning of period................................................ 34,468,317 30,648,789 101,298,630 71,409,113
----------- ----------- ------------ ------------
End of period+..................................................... $37,308,714 $34,468,317 $109,006,913 $101,298,630
=========== =========== ============ ============
+ Includesaccumulated undistributed
net investment income (loss)............................. $ (48,995) $ 20,251 $ 3,506,980 $ 277,668
=========== =========== ============ ============
See Notes to Financial Statements
August 31, 2006 STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED 73
INTERNATIONAL
HIGH YIELD BOND FUND SMALL CAP EQUITY FUND
------------------------- --------------------------
For the Year For the For the For the
Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2006 2005 2006 2005
------------ ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss).............................. $ 6,252,130 $ 5,090,425 $ 2,023,036 $ 616,204
Net realized gain (loss) on investments and foreign
currencies............................................... 2,285,228 1,181,494 22,716,578 7,574,496
Net unrealized gain (loss) on investments and foreign
currencies............................................... (1,395,749) 4,534,578 18,370,631 9,567,276
------------ ----------- ------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................... 7,141,609 10,806,497 43,110,245 17,757,976
------------ ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (1,500,000) (5,041,023) (439,407) (152,146)
Net realized gain on securities........................... (844,831) (1,345,599) (2,878,425) (277,505)
------------ ----------- ------------ ------------
Total distributions to shareholders......................... (2,344,831) (6,386,622) (3,317,832) (429,651)
------------ ----------- ------------ ------------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)................................ 20,608,362 22,682,983 283,614,749 45,474,252
------------ ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 25,405,140 27,102,858 323,407,162 62,802,577
NET ASSETS:
Beginning of period......................................... 80,664,869 53,562,011 104,029,948 41,227,371
------------ ----------- ------------ ------------
End of period+.............................................. $106,070,009 $80,664,869 $427,437,110 $104,029,948
============ =========== ============ ============
+ Includesaccumulated undistributed net
investment income (loss).......................... $ 4,969,454 $ 205,176 $ 822,230 $ 298,922
============ =========== ============ ============
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,
2006 2005 2006 2005
------------ ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss).............................. $ 1,550,513 $ 1,135,912 $ (90,638) $ (88,566)
Net realized gain (loss) on investments and foreign
currencies............................................... 12,540,321 5,878,432 7,182,659 7,294,108
Net unrealized gain (loss) on investments and foreign
currencies............................................... (1,226,016) 6,654,302 (3,194,707) 4,554,134
------------ ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................... 12,864,818 13,668,646 3,897,314 11,759,676
------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (390,000) (1,037,372) - -
Net realized gain on securities........................... (5,343,846) (3,197,600) - -
------------ ----------- ----------- -----------
Total distributions to shareholders......................... (5,733,846) (4,234,972) - -
------------ ----------- ----------- -----------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)................................ 81,753,118 9,587,874 8,350,384 (3,870,260)
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 88,884,090 19,021,548 12,247,698 7,889,416
NET ASSETS:
Beginning of period......................................... 88,852,905 69,831,357 52,335,377 44,445,961
------------ ----------- ----------- -----------
End of period+.............................................. $177,736,995 $88,852,905 $64,583,075 $52,335,377
============ =========== =========== ===========
+ Includesaccumulated undistributed net
investment income (loss).......................... $ 1,284,004 $ 123,491 $ (60,655) $ (52,389)
============ =========== =========== ===========
See Notes to Financial Statements
74 STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED August 31, 2006
MODERATE GROWTH
MID CAP VALUE FUND LIFESTYLE 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,
2006 2005 2006 2005
------------ ------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)....................................... $ 1,354,964 $ 73,728 $ 1,079,550 $ 1,034,861
Net realized gain (loss) on investments and foreign currencies... 37,446,500 24,862,784 7,184,313 4,234,383
Net unrealized gain (loss) on investments and foreign currencies. (6,045,559) 24,972,352 (3,015,592) 4,728,655
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 32,755,905 49,908,864 5,248,271 9,997,899
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (127,930) (153,060) (340,001) (1,022,983)
Net realized gain on securities.................................. (23,322,429) (20,020,807) (2,483,137) -
------------ ------------ ----------- -----------
Total distributions to shareholders................................ (23,450,359) (20,173,867) (2,823,138) (1,022,983)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)....................................... 51,059,027 79,671,722 12,328,767 8,585,540
------------ ------------ ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................ 60,364,573 109,406,719 14,753,900 17,560,456
NET ASSETS:
Beginning of period................................................ 302,013,969 192,607,250 73,804,433 56,243,977
------------ ------------ ----------- -----------
End of period+..................................................... $362,378,542 $302,013,969 $88,558,333 $73,804,433
============ ============ =========== ===========
+ Includesaccumulated undistributed net
investment income (loss)................................. $ 1,165,627 $ (70,705) $ 772,788 $ 33,239
============ ============ =========== ===========
MONEY MARKET II FUND SMALL 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,
2006 2005 2006 2005
------------ ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)....................................... $ 3,946,777 $ 1,425,364 $ (271,673) $ (352,809)
Net realized gain (loss) on investments and foreign currencies... - - 5,910,938 2,277,027
Net unrealized gain (loss) on investments and foreign currencies. - - (4,270,831) 5,634,685
------------ ----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 3,946,777 1,425,364 1,368,434 7,558,903
------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (3,946,777) (1,425,364) - -
Net realized gain on securities.................................. - - - -
------------ ----------- ----------- -----------
Total distributions to shareholders................................ (3,946,777) (1,425,364) - -
------------ ----------- ----------- -----------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)....................................... 75,490,366 2,935,100 1,897,583 (226,076)
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................ 75,490,366 2,935,100 3,266,017 7,332,827
NET ASSETS:
Beginning of period................................................ 75,835,893 72,900,793 46,087,846 38,755,019
------------ ----------- ----------- -----------
End of period+..................................................... $151,326,259 $75,835,893 $49,353,863 $46,087,846
============ =========== =========== ===========
+ Includesaccumulated undistributed net
investment income (loss)................................. $ 2,722 $ 2,722 $ (58,079) $ (50,689)
============ =========== =========== ===========
See Notes to Financial Statements
August 31, 2006 STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED 75
SMALL CAP VALUE FUND SOCIALLY RESPONSIBLE 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,
2006 2005 2006 2005
------------ ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)....................................... $ 735,651 $ 749,840 $ 2,649,497 $ 1,537,668
Net realized gain (loss) on investments and foreign currencies... 9,941,602 12,394,119 5,169,269 4,076,604
Net unrealized gain (loss) on investments and foreign currencies. (1,845,515) 3,377,380 9,489,648 921,621
------------ ----------- ------------ ------------
Net Increase (decrease) in net assets resulting from operations.. 8,831,738 16,521,339 17,308,414 6,535,893
------------ ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (120,001) (791,963) (600,000) (1,419,049)
Net realized gain on securities.................................. (11,678,539) (4,525,473) (3,035,140) -
------------ ----------- ------------ ------------
Total distributions to shareholders................................ (11,798,540) (5,317,436) (3,635,140) (1,419,049)
------------ ----------- ------------ ------------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)....................................... 20,462,567 14,738,413 88,953,017 154,637,423
------------ ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................ 17,495,765 25,942,316 102,626,291 159,754,267
NET ASSETS:
Beginning of period................................................ 97,313,718 71,371,402 192,604,389 32,850,122
------------ ----------- ------------ ------------
End of period+..................................................... $114,809,483 $97,313,718 $295,230,680 $192,604,389
============ =========== ============ ============
+ Includesaccumulated undistributed
net investment income (loss)............................. $ 558,343 $ (57,332) $ 2,196,991 $ 147,494
============ =========== ============ ============
STRATEGIC BOND FUND
--------------------------
For the For the
Year Ended Year Ended
August 31, August 31,
2006 2005
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)....................................... $ 8,697,970 $ 5,498,377
Net realized gain (loss) on investments and foreign currencies... 2,157,592 3,097,001
Net unrealized gain (loss) on investments and foreign currencies. (1,065,041) 2,534,810
------------ ------------
Net Increase (decrease) in net assets resulting from operations.. 9,790,521 11,130,188
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (2,050,000) (5,326,894)
Net realized gain on securities.................................. (2,453,570) (2,131,530)
------------ ------------
Total distributions to shareholders................................ (4,503,570) (7,458,424)
------------ ------------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)....................................... 53,831,570 52,830,246
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................ 59,118,521 56,502,010
NET ASSETS:
Beginning of period................................................ 136,294,671 79,792,661
------------ ------------
End of period+..................................................... $195,413,192 $136,294,671
============ ============
+ Includesaccumulated undistributed
net investment income (loss)............................. $ 7,373,155 $ 524,444
============ ============
See Notes to Financial Statements
76 NOTES TO FINANCIAL STATEMENTS
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" or the
"Adviser"). VALIC, the investment adviser to VC II, is an indirect wholly-owned
subsidiary of American International Group, Inc. ("AIG"). VC II is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company. VC II consists of 15 separate mutual
funds (the "Funds"), each of which issues its own 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 Small Cap Equity 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.
Each Fund is diversified with the exception of Aggressive Growth Lifestyle
Fund, Conservative Growth Lifestyle Fund and Moderate Growth Lifestyle Fund,
which are non-diversified as defined by the 1940 Act.
Indemnifications. Under the Funds organizational documents, its officers and
trustees are indemnified against certain liability arising out of the
performance of their duties to the Funds. In addition, in the normal course of
business the Funds enter into contracts that contain the obligation to
indemnify others. The Funds maximum exposure under these arrangements is
unknown. Currently, however, the Funds expect 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 Valuation
Stocks are generally valued based upon closing sales prices reported on
recognized securities exchanges. Stocks listed on the NASDAQ are valued using
the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will be the
last sale price unless the reported trade for the stock 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 will be valued based upon the last
reported bid price.
As of the close of regular trading on the New York Stock Exchange, securities
traded primarily on security 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. If a
security's price is available from more than one exchange, the Fund uses the
exchange that is the primary market for the security. 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
do not reflect the fair value of securities. 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. The 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.
Non-convertible bonds and debentures, other long-term debt securities, and
short term debt securities with maturities in excess of 60 days, are valued at
bid prices obtained for the day of valuation from a bond pricing service, when
such prices are available. If a vendor quote is unavailable the securities may
be priced at the mean of two independent quotes obtained from brokers.
Securities for which market quotations are not readily available are valued as
determined pursuant to procedures adopted in good faith by the Board of
Trustees.
Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the Fund if acquired within 60 days of maturity
or, if already held by the Fund on the 60th day, are amortized to maturity
based on the value determined on the 61st day.
Future contracts and options traded on national securities exchanges are
valued as of the close of the exchange upon which they trade. Forward contracts
are valued at the 4:00 p.m. eastern time forward rate. Other securities are
valued on the basis of last sale or bid price (if a last sale price is not
available) in what is, in the opinion of the Adviser or Subadviser, the
broadest and most representative market, that may be either a securities
exchange or the over-the-counter market. Mutual funds held by the Fund are
valued at the net asset value (market value) of the underlying fund. 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 ask prices in the market for such Loans, as provided by a third party
pricing service.
For the Money Market II Fund, securities are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium.
Securities for which market quotations are not readily available or if a
development/significant event occurs that may significantly impact the value of
the security, then these securities are valued, as determined pursuant to
procedures adopted in good faith by the Board of Trustees.
NOTES TO FINANCIAL STATEMENTS - CONTINUED 77
B. Options, Futures and Forward Currency Contracts
Options. An option is a contract conveying a right to buy or sell a financial
instrument at a specified price during a stipulated period. The premium paid by
a Fund for the purchase of a call or a put option is included in the Fund's
Statement of Assets and Liabilities as an investment and subsequently marked to
market to reflect the current market value of the option. When a Fund writes a
call or a put option, an amount equal to the premium received by the Fund is
included in the Fund's Statement of Assets and Liabilities as a liability and
is subsequently marked to market to reflect the current market value of the
option written. If an option which the Fund has written either expires on its
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such options is extinguished. If a call option which
the Fund has written is exercised, the Fund realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale are increased
by the premium originally received. If a put option which the Fund has written
is exercised, the amount of the premium originally received reduces the cost of
the security which the Fund purchased upon exercise of the option.
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 a futures transaction, a Fund will be required to segregate an
initial margin payment of cash or other liquid securities with the Futures
Commission Merchant ("the broker"). The Funds' 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
minimize counter-party credit risks. A Fund's participation in the futures
markets involves certain risks, including imperfect correlation between
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
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. The Fund bears the risk of an unfavorable change in the
foreign exchange rate underlying the forward contract.
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, 2006, Money Market II Fund held 3.05% undivided interest,
representing $6,100,000 in principal amount in a joint repurchase agreement
with UBS Warburg, LLC which is dated August 31, 2006, bears interest at a rate
of 5.21% per annum, has a principal amount of $200,000,000, a repurchase price
of $200,028,944 and matures September 1, 2006. The repurchase agreement is
collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- -------------------------------------------------------------------------------
U.S. Treasury Inflation Index Bonds 2.00% 01/15/26 $ 50,000,000 $ 49,187,500
U.S. Treasury Inflation Index Bonds 3.38% 04/15/32 107,790,000 154,813,388
D. Mortgage-Backed Dollar Rolls
During the period ended August 31, 2006, the Core Bond Fund and the Strategic
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 and the Strategic 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.
78 NOTES TO FINANCIAL STATEMENTS - CONTINUED
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.
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. Under applicable foreign law, a withholding of tax may be imposed on
interest, dividends and capital gains at various rates. India, Thailand and
certain other countries tax regulations require that taxes be paid on capital
gains realized by the Fund.
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.
Effective February 24, 2006, except for the Money Market II Fund, dividends
from net investment income, if any, are declared and paid annually. Prior to
February 24, 2006, except for the Money Market II Fund, dividends from net
investment income, if any, were declared and paid quarterly. For the Money
Market II Fund, dividends from net investment income are declared and paid
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 U.S. generally accepted
accounting principles. 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 comply with the requirements of the Internal Revenue
Code, as amended, applicable to regulated investment companies and distribute
all of its taxable income, including any net realized gain on investments, to
its shareholders. Therefore, no federal tax provision is required. Each Fund is
considered a separate entity for tax purposes.
H. New Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board (FASB) released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN
48). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Adoption of FIN 48 is required for fiscal years beginning after
December 15, 2006 and is to be applied to all open tax years as of the
effective date. At this time, management is evaluating the implications of FIN
48 and its impact in the financial statements, if any, has not yet been
determined.
NOTES TO FINANCIAL STATEMENTS - CONTINUED 79
Note 3 -- Advisory Fees and Other Transactions with Affiliates
VALIC, an indirect wholly owned subsidiary of 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 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 Small Cap Equity 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 entered into sub-advisory agreements with the following:
AIG Global Investment Corp. ("AIGGIC")--subadviser for the International
Small Cap Equity Fund, 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. ("AIG SAAMCo")--subadviser for the
Money Market II Fund.
A I M Capital Management, Inc.--subadviser for the Mid Cap Growth Fund.
Bridgeway Capital Management, Inc.--subadviser for the Capital
Appreciation Fund.
FAF Advisors, Inc.--subadviser for a portion of the Mid Cap Value Fund.
Franklin Advisers, Inc.--subadviser for the Small Cap Growth Fund.
JPMorgan Investment Advisors, Inc.--subadviser for Small Cap Value Fund.
SSgA Funds Management, Inc.--subadviser for the Large Cap Value Fund.
Wellington Management Co. LLP--subadviser for a portion of the Mid Cap
Value Fund.
Effective November 7, 2005, FAF Advisors, Inc. (formerly known as U.S. Bancorp
Asset Management, Inc.) became a subadviser to the Mid Cap Value Fund, managing
a portion of the assets of the Fund. Wellington Management Co. LLP continues to
manage a portion of the assets of the Mid Cap Value Fund.
Effective August 28, 2006, Bridgeway Capital Management, Inc. replaced Credit
Suisse Asset Management, LLC as subadviser for the Capital Appreciation Fund.
The subadvisers are compensated for their services by VALIC.
80 NOTES TO FINANCIAL STATEMENTS - CONTINUED
VALIC has agreed to contractually waive a portion of its management fee or to
reimburse certain expenses of the Funds listed below through 12/31/06. 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 Small Cap Equity 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%
- --------
*Effective January 1, 2007, the expense limitation will be 0.55%.
VC II, on behalf of each Fund, has entered into an Administrative Services
Agreement with AIG SAAMCo. AIG 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, AIG SAAMCo will provide certain
accounting and administrative services to VC II. During the period ended
August 31, 2006, VC II accrued $1,111,637 for accounting and administrative
services.
VC II, on behalf of each Fund, has entered into a 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, 2006, VC II accrued $30,129 in
transfer agency and shareholder services fees.
VC II, on behalf of each Fund, has entered into a Shareholder Services
Agreement with VALIC. 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, 2006, VC II accrued $3,970,136 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, 2006, VC II has deferred $22,962 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. The following amounts for the
retirement plan liability are included in the payable for Trustees' fees and
expenses line on the Statement of Assets and Liabilities and the amounts for
the retirement plan expenses are included in the Trustees' fees and expenses
line on the Statement of Operations:
Retirement Retirement
Plan Plan
Retirement Expense Payments
Plan Liability as ---------- ----------
of August 31, For the period ended
Fund 2006 August 31, 2006
------------------------------ ----------------- ---------------------
Aggressive Growth Lifestyle... $ 47,458 $ 5,381 $ --
Capital Appreciation.......... 47,141 6,685 215
Conservative Growth Lifestyle. 47,968 4,638 --
Core Bond..................... 97,224 12,251 345
High Yield Bond............... 62,188 10,367 325
International Small Cap Equity 62,941 10,940 863
Large Cap Value............... 76,278 11,880 352
Mid Cap Growth................ 58,140 7,175 222
Mid Cap Value................. 223,731 37,694 1,230
Moderate Growth Lifestyle..... 86,677 9,662 --
Money Market II............... 104,508 10,462 325
Small Cap Growth.............. 55,696 6,346 186
Small Cap Value............... 87,790 13,222 373
Socially Responsible.......... 45,050 17,116 635
Strategic Bond................ 84,325 16,078 579
NOTES TO FINANCIAL STATEMENTS - CONTINUED 81
At August 31, 2006, VALIC, through their insurance company separate accounts,
owned over five percent of the outstanding shares of the following Funds:
Fund VALIC
------------------------------ ------
Aggressive Growth Lifestyle... 100.00%
Capital Appreciation.......... 100.00%
Conservative Growth Lifestyle. 100.00%
Core Bond..................... 100.00%
High Yield Bond............... 99.43%
International Small Cap Equity 100.00%
Large Cap Value............... 100.00%
Mid Cap Growth................ 100.00%
Mid Cap Value................. 99.09%
Moderate Growth Lifestyle..... 100.00%
Money Market II............... 100.00%
Small Cap Growth.............. 100.00%
Small Cap Value............... 100.00%
Socially Responsible.......... 100.00%
Strategic Bond................ 99.26%
As disclosed in the schedule of investments, certain Funds own securities
issued by AIG or an affiliate thereof. As of August 31, 2006, the following
Funds recorded realized gains (losses) and income on security transactions of
AIG and subsidiaries of AIG as follows:
Capital Gain
Distribution
Fund Security Income Received
- ----------------------------- ---------------------------------- ---------- ------------
Aggressive Growth Lifestyle.. Various VC I and VC II Funds* $ 648,643 $506,259
Conservative Growth Lifestyle Various VC I and VC II Funds* 507,683 259,003
Moderate Growth Lifestyle.... Various VC I and VC II Funds* 1,159,467 775,931
Socially Responsible......... American International Group, Inc. 339 --
Change in
Proceeds Realized Unrealized
Market Value Cost of from Gain/ Gain/
Fund Security at 8/31/05 Purchases Sales (Loss) (Loss)
- ----------------------------- ---------------------------------- ------------ ----------- ----------- ---------- ----------
Aggressive Growth Lifestyle.. Various VC I and VC II Funds* $40,685,042 $46,519,017+ $36,367,520 $5,553,949 (2,333,278)
Conservative Growth Lifestyle Various VC I and VC II Funds* 34,522,660 29,866,269+ 28,094,458 2,106,420 (1,018,035)
Moderate Growth Lifestyle.... Various VC I and VC II Funds* 73,910,825 67,699,266+ 56,331,550 6,408,382 (3,015,592)
Socially Responsible......... American International Group, Inc. 66,837 -- 76,366 (1,926) 11,455
Market Value
Fund at 8/31/06
- ----------------------------- ------------
Aggressive Growth Lifestyle.. $54,057,210
Conservative Growth Lifestyle 37,382,856
Moderate Growth Lifestyle.... 88,671,332
Socially Responsible......... --
- --------
*See Schedule of Investments for details.
+Includes reinvestment of distributions paid.
On January 11, 2006, the International Small Cap Equity Fund sold incorrect
share amounts of various Japanese equity securities in connection with the
rebalancing of the Fund. The error was corrected on January 12, 2006, resulting
in a loss of $27,313 to the Fund, which was reimbursed by AIGGIC, the
subadviser to the Fund.
On April 20, 2006, the Large Cap Value Fund purchased an additional 63,200
shares of Citigroup, Inc. common stock, resulting in the Fund's total position
in the security to exceed 5% of net assets. The Fund has an investment
restriction which prohibits the Fund from owning more than 5% of net assets of
a single 12(d)(3) issuer. On April 25, 2006, the Fund sold 8,400 shares of
Citigroup, Inc. common stock, reducing the Fund's position in the security to
less than 5% of net assets. The sale resulted in a loss of $7,056 to the Fund,
which was reimbursed by SSgA Funds Management Inc., the subadviser to the Fund.
On April 28, 2006, the International Small Cap Equity Fund sold 98,000 shares
of China State Construction International Holdings common stock that the Fund
did not own. The Fund has an investment restriction that prohibits securities
being sold short. The short position was closed on May 10, 2006, resulting in a
loss of $1,561 to the Fund, which was reimbursed by AIGGIC, the subadviser to
the Fund.
During the year ended August 31, 2006, the High Yield Bond and Strategic Bond
Funds received payments from AIGGIC, the subadviser for the Funds, of $34,151
and $20,238, respectively, with respect to bonds issued by Fibermark, Inc. (and
an affiliate thereof) that were previously held by the Funds. These amounts
represent the reimbursement of certain settlement costs of issues that arose in
connection with the resolution of the bankruptcy of Fibermark, Inc. and the
portion of fees paid to a bankruptcy court-appointed examiner in excess of what
would have typically have been borne in bankruptcy proceedings.
82 NOTES TO FINANCIAL STATEMENTS - CONTINUED
Note 4 -- Investment Activity
The cost of purchases and proceeds from sales and maturities of long-term
investments, during the period ended August 31, 2006, were as follows:
Purchases of Sales of
Investment Securities Investment Securities
(Excluding (Excluding Purchase of Sales of
U.S. Government U.S. Government U.S. Government U.S. Government
Fund Securities) Securities) Securities Securities
- ------------------------------ --------------------- --------------------- --------------- ---------------
Aggressive Growth Lifestyle... $ 45,364,116 $ 36,367,520 $ -- $ --
Capital Appreciation.......... 121,235,868 96,562,044 -- --
Conservative Growth Lifestyle. 29,099,583 28,094,457 -- --
Core Bond..................... 101,605,201 104,035,069 86,709,369 67,602,664
High Yield Bond............... 65,343,669 42,422,555 -- --
International Small Cap Equity 458,796,548 189,464,358 -- --
Large Cap Value............... 182,277,808 105,080,948 -- --
Mid Cap Growth................ 88,784,673 81,843,424 -- --
Mid Cap Value................. 276,487,558 247,410,869 -- --
Moderate Growth Lifestyle..... 65,906,616 56,331,550 -- --
Small Cap Growth.............. 37,005,859 33,504,271 -- --
Small Cap Value............... 68,226,105 56,513,183 221,906 --
Socially Responsible.......... 335,663,740 279,131,019 -- --
Strategic Bond................ 180,132,544 137,380,147 44,916,895 18,172,183
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, 2006.
The information in the following table is presented on the basis of cost for
federal income tax purposes at August 31, 2006:
Identified Cost Gross Gross Net Unrealized
of Investments Unrealized Unrealized Appreciation
Fund Owned Appreciation Depreciation (Depreciation)
- ------------------------------ --------------- ------------ ------------ --------------
Aggressive Growth Lifestyle... $ 51,976,327 $ 2,110,432 $ 29,549 $ 2,080,883
Capital Appreciation.......... 69,171,753 2,001,039 696,257 1,304,782
Conservative Growth Lifestyle. 36,907,764 858,344 383,252 475,092
Core Bond..................... 111,575,517 1,297,631 1,184,657 112,974
High Yield Bond............... 102,244,204 6,061,279 2,517,858 3,543,421
International Small Cap Equity 406,748,396 45,592,241 14,389,760 31,202,481
Large Cap Value............... 170,865,044 12,157,150 2,561,501 9,595,649
Mid Cap Growth................ 61,344,435 5,816,268 2,159,649 3,656,619
Mid Cap Value................. 329,082,197 42,411,237 10,175,338 32,235,899
Moderate Growth Lifestyle..... 86,243,869 2,702,924 275,461 2,427,463
Money Market II............... 152,062,273 -- -- --
Small Cap Growth.............. 46,196,282 6,788,817 3,363,429 3,425,388
Small Cap Value............... 104,584,001 13,858,565 3,847,612 10,010,953
Socially Responsible.......... 285,714,785 13,224,476 5,923,413 7,301,063
Strategic Bond................ 191,049,009 5,828,038 2,958,284 2,869,754
The tax basis distributable earnings at August 31, 2006 and the tax character
of distributions paid during the year ended August 31, 2006 were as follows:
Distributable Earnings Tax Distributions
------------------------------------------- ----------------------
Long-Term Gains/ Unrealized Long-Term
Ordinary Capital and Appreciation Ordinary Capital
Fund Income Other Losses (Depreciation) Income Gains
- ------------------------------ ----------- ---------------- -------------- ---------- -----------
Aggressive Growth Lifestyle... $ 757,435 $ 4,377,711 $ 2,080,883 $ 686,468 $ 887,991
Capital Appreciation.......... 134,676 (12,069,086) 1,304,782 28,150 --
Conservative Growth Lifestyle. 434,456 1,635,181 475,092 558,981 1,543,386
Core Bond..................... 3,641,316 (1,843,289) 102,133 1,349,409 --
High Yield Bond............... 5,583,928 2,271,343 3,543,068 1,742,080 602,751
International Small Cap Equity 14,316,655 10,473,042 31,179,415 3,317,832 --
Large Cap Value............... 4,298,804 9,655,500 9,595,649 2,960,923 2,772,923
Mid Cap Growth................ -- 3,811,355 3,656,619 -- --
Mid Cap Value................. 15,018,210 24,040,708 32,238,107 6,761,108 16,689,251
Moderate Growth Lifestyle..... 2,255,241 5,806,383 2,427,463 340,001 2,483,137
NOTES TO FINANCIAL STATEMENTS - CONTINUED 83
Distributable Earnings Tax Distributions
------------------------------------------ ---------------------
Long-Term Gains/ Unrealized Long-Term
Ordinary Capital and Appreciation Ordinary Capital
Fund Income Other Losses (Depreciation) Income Gains
- -------------------- ---------- ---------------- -------------- ---------- ----------
Money Market II..... $ 111,364 $ -- $ -- $3,946,777 $ --
Small Cap Growth.... -- (1,961,307) 3,425,388 -- --
Small Cap Value..... 2,641,351 8,107,241 10,010,953 1,825,160 9,973,380
Socially Responsible 8,500,868 1,279,671 7,301,063 2,832,068 803,072
Strategic Bond...... 7,715,284 2,328,243 2,859,467 3,273,998 1,229,572
The tax character of distributions paid during the year ended August 31, 2005
were as follows:
Tax Distributions
------------------------
Ordinary Long-Term
Fund Income Capital Gains
------------------------------ ---------- -------------
Aggressive Growth Lifestyle... $ 296,134 $ --
Capital Appreciation.......... 136,132 --
Conservative Growth Lifestyle. 752,113 --
Core Bond..................... 3,602,735 9,469
High Yield Bond............... 5,041,023 1,345,599
International Small Cap Equity 186,149 243,502
Large Cap Value............... 1,037,372 3,197,600
Mid Cap Growth................ -- --
Mid Cap Value................. 6,640,147 13,533,720
Moderate Growth Lifestyle..... 1,022,983 --
Money Market II............... 1,425,364 --
Small Cap Growth.............. -- --
Small Cap Value............... 1,095,362 4,222,074
Socially Responsible.......... 1,419,049 --
Strategic Bond................ 5,910,783 1,547,641
As of August 31, 2006, 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 2013
------------------------------ ---------- ---------- ---------- --------
Aggressive Growth Lifestyle... $ -- $ -- $ -- $ --
Capital Appreciation.......... 3,277,344 6,282,529 2,100,734 408,479
Conservative Growth Lifestyle. -- -- -- --
Core Bond..................... -- -- -- 348,311
High Yield Bond............... -- -- -- --
International Small Cap Equity -- -- -- --
Large Cap Value............... -- -- -- --
Mid Cap Growth................ -- -- -- --
Mid Cap Value................. -- -- -- --
Moderate Growth Lifestyle..... -- -- -- --
Money Market II............... -- -- -- --
Small Cap Growth.............. -- 1,961,307 -- --
Small Cap Value............... -- -- -- --
Socially Responsible.......... -- -- -- --
Strategic Bond................ -- -- -- --
The Funds' indicated below utilized capital loss carryforwards, which offset
net taxable gains realized in the year ended August 31, 2006.
Fund Capital Loss Carryforward Utilized
------------------------------ ----------------------------------
Aggressive Growth Lifestyle... $ --
Capital Appreciation.......... 2,687,035
Conservative Growth Lifestyle. --
Core Bond..................... --
High Yield Bond............... --
International Small Cap Equity --
Large Cap Value............... --
Mid Cap Growth................ 3,530,070
Mid Cap Value................. --
Moderate Growth Lifestyle..... --
84 NOTES TO FINANCIAL STATEMENTS - CONTINUED
Fund Capital Loss Carryforward Utilized
-------------------- ----------------------------------
Money Market II..... $ --
Small Cap Growth.... 5,736,116
Small Cap Value..... --
Socially Responsible --
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, 2006, the Funds elected to defer capital losses as
follows:
Deferred Post-October Deferred Post-October
Fund Capital Loss Currency Loss
------------------------------ --------------------- ---------------------
Aggressive Growth Lifestyle... $ -- $ --
Capital Appreciation.......... -- --
Conservative Growth Lifestyle. -- --
Core Bond..................... 1,494,978 --
High Yield Bond............... 374,184 --
International Small Cap Equity -- 1,039,757
Large Cap Value............... -- --
Mid Cap Growth................ -- --
Mid Cap Value................. -- --
Moderate Growth Lifestyle..... -- --
Money Market II............... -- --
Small Cap Growth.............. -- --
Small Cap Value............... -- --
Socially Responsible.......... -- --
Strategic Bond................ -- --
For the period ended August 31, 2006, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily due
to net investment losses, disposition of PFIC securities, principal paydown
adjustments, treatment of foreign currency and disposition of defaulted bonds,
to the components of net assets as follows:
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain
Fund (Loss) (Loss) Capital Paid-in
- ------------------------------ ----------------- ----------------- ---------------
Aggressive Growth Lifestyle... $ 29,161 $ (29,161) $ --
Capital Appreciation.......... -- -- --
Conservative Growth Lifestyle. 16,145 (16,145) --
Core Bond..................... 79,673 (79,673) --
High Yield Bond............... 12,148 (12,148) --
International Small Cap Equity (1,060,321) 1,060,321 --
Large Cap Value............... -- -- --
Mid Cap Growth................ 82,372 (1,081) (81,291)
Mid Cap Value................. 9,298 (9,298) --
Moderate Growth Lifestyle..... -- -- --
Money Market II............... -- -- --
Small Cap Growth.............. 264,283 -- (264,283)
Small Cap Value............... 25 (25) --
Socially Responsible.......... -- -- --
Strategic Bond................ 200,741 (200,741) --
Note 6 -- Capital Share Transactions
Transactions in capital shares of each Fund were as follows:
Aggressive Growth Lifestyle Capital Appreciation
-------------------------------------------------- --------------------------------------------------
For the period ended For the year ended For the period ended For the year ended
August 31, 2006 August 31, 2005 August 31, 2006 August 31, 2005
------------------------ ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold............ 2,020,505 $ 23,207,686 1,154,937 $ 11,809,558 4,467,101 $ 40,890,979 2,011,313 $ 17,015,673
Reinvested dividends... 140,176 1,574,459 28,458 296,134 3,030 28,150 15,382 136,132
Shares redeemed........ (1,248,988) (14,173,448) (1,166,011) (11,794,743) (2,172,046) (19,590,513) (1,990,333) (16,871,961)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) 911,693 $ 10,608,697 17,384 $ 310,949 2,298,085 $ 21,328,616 36,362 $ 279,844
========== ============ ========== ============ ========== ============ ========== ============
NOTES TO FINANCIAL STATEMENTS - CONTINUED 85
Conservative Growth Lifestyle
---------------------------------------------------------
For the period ended August 31, For the year ended
2006 August 31, 2005
------------------------------ -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares sold............ 1,455,082 $ 15,428,176 1,163,750 $ 12,143,767
Reinvested dividends... 201,523 2,102,367 71,522 752,113
Shares redeemed........ (1,358,113) (14,408,757) (1,175,880) (12,197,202)
----------- ------------ ----------- ------------
Net increase (decrease) 298,492 $ 3,121,786 59,392 $ 698,678
=========== ============ =========== ============
High Yield Bond
---------------------------------------------------------
For the period ended August 31, For the year ended
2006 August 31, 2005
------------------------------ -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares sold............ 5,240,567 $ 47,186,720 5,110,983 $ 44,212,347
Reinvested dividends... 270,853 2,344,831 738,269 6,386,622
Shares redeemed........ (3,224,553) (28,923,189) (3,228,903) (27,915,986)
----------- ------------ ----------- ------------
Net increase (decrease) 2,286,867 $ 20,608,362 2,620,349 $ 22,682,983
=========== ============ =========== ============
Large Cap Value
---------------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------------ -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares sold............ 8,020,214 $113,685,333 2,645,083 $ 34,505,286
Reinvested dividends... 423,402 5,733,846 322,066 4,234,972
Shares redeemed........ (2,726,855) (37,666,061) (2,226,243) (29,152,384)
----------- ------------ ----------- ------------
Net increase (decrease) 5,716,761 $ 81,753,118 740,906 $ 9,587,874
=========== ============ =========== ============
Mid Cap Value
---------------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------------ -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares sold............ 5,320,454 $ 97,662,735 5,332,054 $ 92,143,978
Reinvested dividends... 1,340,021 23,450,359 1,180,449 20,173,867
Shares redeemed........ (3,858,333) (70,054,067) (1,886,258) (32,646,123)
----------- ------------ ----------- ------------
Net increase (decrease) 2,802,142 $ 51,059,027 4,626,245 $ 79,671,722
=========== ============ =========== ============
Money Market II
---------------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------------ -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares sold............ 157,487,749 $157,487,749 89,488,133 $ 89,488,133
Reinvested dividends... 3,946,777 3,946,777 1,425,364 1,425,364
Shares redeemed........ (85,944,160) (85,944,160) (87,978,397) (87,978,397)
----------- ------------ ----------- ------------
Net increase (decrease) 75,490,366 $ 75,490,366 2,935,100 $ 2,935,100
=========== ============ =========== ============
Small Cap Value
---------------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------------ -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares sold............ 3,226,235 $ 47,811,244 2,496,971 $ 36,647,207
Reinvested dividends... 843,018 11,798,540 358,281 5,317,436
Shares redeemed........ (2,682,922) (39,147,217) (1,837,149) (27,226,230)
----------- ------------ ----------- ------------
Net increase (decrease) 1,386,331 $ 20,462,567 1,018,103 $ 14,738,413
=========== ============ =========== ============
Core Bond
---------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
Shares sold............ 7,150,257 $ 70,689,516 5,272,809 $ 52,892,818
Reinvested dividends... 138,212 1,349,409 360,971 3,612,204
Shares redeemed........ (6,557,628) (64,881,339) (2,699,948) (27,100,376)
---------- ------------- ---------- ------------
Net increase (decrease) 730,841 $ 7,157,586 2,933,832 $ 29,404,646
========== ============= ========== ============
International Small Cap Equity
---------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
Shares sold............ 24,383,197 $ 388,289,558 5,762,882 $ 74,556,978
Reinvested dividends... 217,301 3,317,832 35,924 429,651
Shares redeemed........ (6,561,047) (107,992,641) (2,373,753) (29,512,377)
---------- ------------- ---------- ------------
Net increase (decrease) 18,039,451 $ 283,614,749 3,425,053 $ 45,474,252
========== ============= ========== ============
Mid Cap Growth
---------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
Shares sold............ 3,212,319 $ 26,063,891 1,467,927 $ 10,047,954
Reinvested dividends... -- -- -- --
Shares redeemed........ (2,203,843) (17,713,507) (2,034,783) (13,918,214)
---------- ------------- ---------- ------------
Net increase (decrease) 1,008,476 $ 8,350,384 (566,856) $ (3,870,260)
========== ============= ========== ============
Moderate Growth Lifestyle
---------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
Shares sold............ 3,024,569 $ 37,158,514 1,958,656 $ 22,316,840
Reinvested dividends... 233,257 2,823,138 88,284 1,022,983
Shares redeemed........ (2,265,572) (27,652,885) (1,296,969) (14,754,283)
---------- ------------- ---------- ------------
Net increase (decrease) 992,254 $ 12,328,767 749,971 $ 8,585,540
========== ============= ========== ============
Small Cap Growth
---------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
Shares sold............ 1,710,180 $ 22,318,958 1,152,352 $ 13,217,917
Reinvested dividends... -- -- -- --
Shares redeemed........ (1,597,679) (20,421,375) (1,173,260) (13,443,993)
---------- ------------- ---------- ------------
Net increase (decrease) 112,501 $ 1,897,583 (20,908) $ (226,076)
========== ============= ========== ============
Socially Responsible
---------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
Shares sold............ 16,723,063 $ 195,591,227 14,695,378 $162,535,482
Reinvested dividends... 316,393 3,635,140 128,097 1,419,049
Shares redeemed........ (9,733,170) (110,273,350) (848,858) (9,317,108)
---------- ------------- ---------- ------------
Net increase (decrease) 7,306,286 $ 88,953,017 13,974,617 $154,637,423
========== ============= ========== ============
86 NOTES TO FINANCIAL STATEMENTS - CONTINUED
Strategic Bond
--------------------------------------------------
For the period ended For the year ended
August 31, 2006 August 31, 2005
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 7,282,768 $ 80,284,471 5,948,459 $ 65,240,483
Reinvested dividends... 416,023 4,503,570 681,787 7,458,424
Shares redeemed........ (2,805,272) (30,956,471) (1,812,139) (19,868,661)
---------- ------------ ---------- ------------
Net increase (decrease) 4,893,519 $ 53,831,570 4,818,107 $ 52,830,246
========== ============ ========== ============
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, 2006, the Mid Cap Value Fund received expense
reductions in the amount of $27,563 which were used to offset the Fund's
non-affiliated expenses.
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 31.19%, 0.66% and 10.39%, respectively, of their total net assets invested
in such securities.
Some of the Funds may invest internationally, including in "emerging market"
countries. Emerging market 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
Small Cap Equity Fund and Strategic Bond Fund. At the end of the period, the
International Small Cap Equity Fund had 32.07% of its net assets invested in
equity securities domiciled in Japan. At the end of the period, Strategic Bond
Fund had 35.89% of its net assets invested in securities issued by foreign
government agencies.
Note 9 -- Lines of Credit
Except for the VC II Large Cap Value Fund, VC I and VC II have established 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 interest
expense on the Statement of Operations. Borrowings under the line of credit
will commence when the Fund's shortfall exceeds $100,000.
For the period ended August 31, 2006, the following Fund had borrowings:
Average Weighted
Days Interest Debt Average
Fund Outstanding Charges Utilized Interest
----------------------------------- ----------- -------- ---------- --------
Core Bond.......................... 3 $ 724 $1,945,190 4.50%
International Small Cap Equity Fund 3 1,943 4,494,111 5.19%
Mid Cap Value...................... 3 370 924,217 4.83%
Small Cap Value.................... 3 1,396 3,465,608 4.83%
As of August 31, 2006, none of the Funds had outstanding borrowings.
Note 10 -- Interfund Lending Agreement
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 VALIC 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,
2006, none of the Funds participated in this program.
Note 11 -- Other Matters
On February 9, 2006, American International Group, Inc. ("AIG"), the parent
company and an affiliated person of The Variable Annuity Life Insurance Company
("Adviser"), AIG SunAmerica Asset Management Corp. ("SAAMCo"), AIG Global
Investment Corp. ("AIGGIC") and American General Distributors, Inc. ("AGDI"),
announced that it had consented to the settlement of an injunctive action
instituted by the Securities and Exchange Commission ("SEC"). In its complaint,
the SEC alleged that AIG violated Section 17(a) of the Securities Act of 1933,
as amended, Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Securities
Exchange Act of 1934, as amended, and Rules 10b-5, 12b-20, 13a-1 and 13b2-1
promulgated thereunder, in connection with AIG's accounting and public
reporting practices. The conduct described in the complaint did not involve any
conduct of AIG or its subsidiaries related to their investment advisory or
distribution activities with respect to the assets of the Funds.
NOTES TO FINANCIAL STATEMENTS - CONTINUED 87
AIG, without admitting or denying the allegations in the complaint (except as
to jurisdiction), consented to the entry of an injunction against further
violations of the statutes referred to above. Absent exemptive relief granted
by the SEC, the entry of such an injunction would prohibit AIG and its
affiliated persons from, among other things, serving as an investment adviser
of any registered investment management company or principal underwriter for
any registered open-end investment company pursuant to Section 9(a) of the
Investment Company Act of 1940, as amended ("1940 Act"). Certain affiliated
persons of AIG, including the Adviser, received a temporary order from the SEC
pursuant to Section 9(c) of the 1940 Act with respect to the entry of the
injunction, granting exemptive relief from the provisions of Section 9(a) of
the 1940 Act. The temporary order permits AIG and its affiliated persons,
including AIG's investment management subsidiaries, to serve as investment
adviser, subadviser, principal underwriter or sponsor of the fund(s) or
portfolio(s). The Adviser expects that a permanent exemptive order will be
granted, although there is no assurance the SEC will issue the order.
Additionally, AIG and its subsidiaries reached a resolution of claims and
matters under investigation with the United State Department of Justice
("DOJ"), the Attorney General of the State of New York ("NYAG") and the New
York State Department of Insurance ("DOI"), regarding accounting, financial
reporting and insurance brokerage practices of AIG and its subsidiaries, as
well as claims relating to the underpayment of certain workers compensation
premium taxes and other assessments.
As a result of the settlements with the SEC, the DOJ, the NYAG and the DOI,
AIG will make payments totaling approximately $1.64 billion. In addition, as
part of its settlements, AIG has agreed to retain for a period of three years
an Independent Consultant who will conduct a review that will include the
adequacy of AIG's internal controls over financial reporting and the
remediation plan that AIG has implemented as a result of its own internal
review.
Subject to receipt of permanent relief, the Adviser, AIG SAAMCo, AIGGIC and
AGDI believe that the settlements are not likely to have a material adverse
effect on their ability to perform their respective investment advisory or
distribution services relating to the Funds.
88 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,
-------------------------------------------------
2006 2005 2004 2003 2002
------------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 10.98 $ 9.10 $ 8.37 $ 7.43 $ 8.82
-------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(e)/............................ 0.15 0.08 0.08 0.07 0.05
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.00 1.88 0.73 0.94 (1.35)
Net increase from payments by affiliates..................... - - - - -
-------------------------------------------------
Total income (loss) from investment operations............... 1.15 1.96 0.81 1.01 (1.30)
-------------------------------------------------
Distributions from:
Net investment income........................................ (0.18) (0.08) (0.08) (0.07) (0.09)
Net realized gain on securities.............................. (0.24) - - - -
-------------------------------------------------
Total distributions.......................................... (0.42) (0.08) (0.08) (0.07) (0.09)
-------------------------------------------------
Net asset value at end of period................................ $ 11.71 $ 10.98 $ 9.10 $ 8.37 $ 7.43
-------------------------------------------------
TOTAL RETURN/(a)/............................................... 10.65% 21.62% 9.66% 13.66% (14.90)%
-------------------------------------------------
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)/.................... 0.29% 0.30% 0.34% 0.34% 0.10%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 1.31% 0.80% 0.89% 0.92% 0.62%
Ratio of net investment income (loss) to average net assets/(c)/ 1.12% 0.60% 0.65% 0.68% 0.62%
Portfolio turnover rate......................................... 79% 40% 71% 52% 180%
Number of shares outstanding at end of period (000's)........... 4,612 3,700 3,683 3,419 2,763
Net assets at the end of period (000's)......................... $53,987 $40,623 $33,520 $28,627 $20,522
Capital Appreciation Fund
---------------------------------------------------
Year Ended August 31,
---------------------------------------------------
2006 2005 2004 2003 2002
------------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 8.90 $ 7.79 $ 7.66 $ 6.71 $ 9.11
---------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(e)/............................ 0.02 0.03 (0.02) (0.00) (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... (0.01) 1.11 0.15 0.95 (2.41)
Net increase from payments by affiliates..................... - - - - 0.02
---------------------------------------------------
Total income (loss) from investment operations............... 0.01 1.14 0.13 0.95 (2.40)
---------------------------------------------------
Distributions from:
Net investment income........................................ (0.01) (0.03) - - -
Net realized gain on securities.............................. - - - - -
---------------------------------------------------
Total distributions.......................................... (0.01) (0.03) - - -
---------------------------------------------------
Net asset value at end of period................................ $ 8.90 $ 8.90 $ 7.79 $ 7.66 $ 6.71
---------------------------------------------------
TOTAL RETURN/(a)/............................................... 0.06% 14.58% 1.70% 14.22% (26.34)%/(d)/
---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of expenses to average net assets/(c)/.................... 1.03% 1.13% 1.19% 1.29% 1.25%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 0.21% 0.34% (0.22)% (0.03)% (0.09)%
Ratio of net investment income (loss) to average net assets/(c)/ 0.03% 0.06% (0.56)% (0.47)% (0.49)%
Portfolio turnover rate......................................... 169% 105% 119% 87% 126%
Number of shares outstanding at end of period (000's)........... 7,797 5,499 5,462 4,588 4,082
Net assets at the end of period (000's)......................... $69,412 $48,939 $42,544 $35,152 $27,406
/(a)/Total return is not annualized. It does include, 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 89
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,
------------------------------------------------
2006 2005 2004 2003 2002
------------ ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............................. $ 10.81 $ 9.79 $ 9.37 $ 8.73 $ 9.47
------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................... 0.15 0.24 0.30 0.21 0.26
Net realized and unrealized gain (loss) on investments and
foreign currencies............................................. 0.42 1.03 0.41 0.64 (0.68)
Net increase from payments by affiliates........................ - - - - -
------------------------------------------------
Total income (loss) from investment operations.................. 0.57 1.27 0.71 0.85 (0.42)
------------------------------------------------
Distributions from:
Net investment income........................................... (0.18) (0.25) (0.29) (0.21) (0.32)
Net realized gain on securities................................. (0.50) - - - -
------------------------------------------------
Total distributions............................................. (0.68) (0.25) (0.29) (0.21) (0.32)
------------------------------------------------
Net asset value at end of period................................... $ 10.70 $ 10.81 $ 9.79 $ 9.37 $ 8.73
------------------------------------------------
TOTAL RETURN/(a)/.................................................. 5.50% 13.03% 7.60% 9.90% (4.62)%
------------------------------------------------
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)/....................... 0.33% 0.31% 0.36% 0.34% 0.10%
Ratio of expense reductions to average net assets.................. - - - - -
Ratio of net investment income (loss) to average net assets/(b)/... 1.38% 2.35% 3.01% 2.41% 2.92%
Ratio of net investment income (loss) to average net assets/(c)/... 1.15% 2.14% 2.75% 2.17% 2.92%
Portfolio turnover rate............................................ 81% 46% 67% 65% 181%
Number of shares outstanding at end of period (000's).............. 3,488 3,190 3,130 2,952 2,386
Net assets at the end of period (000's)............................ $37,309 $34,468 $30,649 $27,652 $20,841
Core Bond Fund
------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............................. $ 10.06 $ 10.00 $ 10.02 $ 9.95 $ 9.91
------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................... 0.49 0.42 0.34 0.31 0.48
Net realized and unrealized gain (loss) on investments and
foreign currencies............................................. (0.31) 0.08 0.22 0.09 0.09
Net increase from payments by affiliates........................ - - - - -
------------------------------------------------------------
Total income (loss) from investment operations.................. 0.18 0.50 0.56 0.40 0.57
------------------------------------------------------------
Distributions from:
Net investment income........................................... (0.13) (0.41) (0.35) (0.33) (0.47)
Net realized gain on securities................................. (0.02) (0.03) (0.23) - (0.06)
------------------------------------------------------------
Total distributions............................................. (0.15) (0.44) (0.58) (0.33) (0.53)
------------------------------------------------------------
Net asset value at end of period................................... $ 10.09 $ 10.06 $ 10.00 $ 10.02 $ 9.95
------------------------------------------------------------
TOTAL RETURN/(a)/.................................................. 1.82% 5.05% 5.71% 4.08% 5.98%
------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/....................... 0.77% 0.77% 0.77% 0.77% 0.77%
Ratio of expenses to average net assets/(c)/....................... 1.03% 1.00% 1.07% 1.12% 1.14%
Ratio of expense reductions to average net assets.................. - - - - -
Ratio of net investment income (loss) to average net assets/(b)/... 4.91% 4.23% 3.37% 3.13% 4.94%
Ratio of net investment income (loss) to average net assets/(c)/... 4.66% 3.99% 3.07% 2.77% 4.57%
Portfolio turnover rate............................................ 202% 212%/(e)/ 187%/(e)/ 214%/(e)/ 255%
Number of shares outstanding at end of period (000's).............. 10,802 10,072 7,138 6,336 4,280
Net assets at the end of period (000's)............................ $109,007 $101,299 $71,409 $63,519 $42,568
/(a)/Total return is not annualized. It does include, 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)/Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was
as follows:
Fund 2005 2004 2003 2002
--------- ---- ---- ---- ----
Core Bond 205% 179% 197% 248%
90 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,
-----------------------------------------------------------------
2006 2005 2004 2003 2002
-------- ------- -------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............. $ 8.87 $ 8.28 $ 7.73 $ 6.82 $ 8.16
-----------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............... 0.63 0.62 0.69 0.69 0.74
Net realized and unrealized gain (loss) on
investments and foreign currencies............. 0.07 0.78 0.54 0.90 (1.35)
Net increase from payments by affiliates........ 0.00 - - - -
-----------------------------------------------------------------
Total income (loss) from investment operations.. 0.70 1.40 1.23 1.59 (0.61)
-----------------------------------------------------------------
Distributions from:
Net investment income........................... (0.16) (0.63) (0.68) (0.68) (0.73)
Net realized gain on securities................. (0.09) (0.18) - - -
-----------------------------------------------------------------
Total distributions............................. (0.25) (0.81) (0.68) (0.68) (0.73)
-----------------------------------------------------------------
Net asset value at end of period................... $ 9.32 $ 8.87 $ 8.28 $ 7.73 $ 6.82
-----------------------------------------------------------------
TOTAL RETURN/(a)/.................................. 8.16%/(g)/ 17.45% 16.27% 24.25% (7.96)%
-----------------------------------------------------------------
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)/....... 1.19% 1.27% 1.31%// 1.42% 1.51%
Ratio of expense reductions to average net assets.. - - - - -
Ratio of net investment income (loss) to average
net assets/(b)/................................... 7.07% 7.30% 8.45% 9.69% 9.80%
Ratio of net investment income (loss) to average
net assets/(c)/................................... 6.87% 7.01% 8.12% 9.26% 9.28%
Portfolio turnover rate............................ 53% 58%/(f)/ 110%/(f)/ 124%/(f)/ 118%/(f)/
Number of shares outstanding at end of period
(000's)........................................... 11,377 9,090 6,470 5,433 2,789
Net assets at the end of period (000's)............ $106,070 $80,665 $53,562 $41,986 $19,026
International Small Cap Equity Fund
-------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............. $ 14.05 $ 10.36 $ 9.07 $ 8.67 $ 9.97
-------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............... 0.11 0.12 0.11 0.11 0.07
Net realized and unrealized gain (loss) on
investments and foreign currencies............. 2.87 3.68 1.29 0.40 (1.36)
Net increase from payments by affiliates........ 0.00 - - - -
-------------------------------------------------------
Total income (loss) from investment operations.. 2.98 3.80 1.40 0.51 (1.29)
-------------------------------------------------------
Distributions from:
Net investment income........................... (0.03) (0.04) (0.11) (0.11) (0.01)
Net realized gain on securities................. (0.20) (0.07) - - -
-------------------------------------------------------
Total distributions............................. (0.23) (0.11) (0.11) (0.11) (0.01)
-------------------------------------------------------
Net asset value at end of period................... $ 16.80 $ 14.05 $ 10.36 $ 9.07 $ 8.67
-------------------------------------------------------
TOTAL RETURN/(a)/.................................. 21.36%/(h)/ 36.89%/(e)/ 15.42% 5.94% (12.91)%
-------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/....... 1.00% 1.00% 1.00% 1.01% 1.01%
Ratio of expenses to average net assets/(c)/....... 1.37% 1.57% 1.62% 1.71% 1.88%
Ratio of expense reductions to average net assets.. - - - - 0.02%
Ratio of net investment income (loss) to average
net assets/(b)/................................... 0.72% 0.99% 1.09% 1.34% 0.76%
Ratio of net investment income (loss) to average
net assets/(c)/................................... 0.35% 0.42% 0.47% 0.65% (0.11)%
Portfolio turnover rate............................ 69% 143% 85% 70% 139%
Number of shares outstanding at end of period
(000's)........................................... 25,445 7,405 3,980 4,654 3,474
Net assets at the end of period (000's)............ $427,437 $104,030 $41,227 $42,206 $30,114
/(a)/Total return is not annualized. It does include, 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.
/(f)/Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was
as follows:
Fund 2005 2004 2003 2002
--------------- ---- ---- ---- ----
High Yield Bond 57% 110% 124% 118%
/(g)/The Fund's performance figure was increased by less than 0.01% from a
reimbursement by an affiliate. (See Note 3)
/(h)/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 91
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,
------------------------------------------------------
2006 2005 2004 2003 2002
-------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 13.72 $ 12.18 $ 10.97 $ 10.22 $ 11.10
------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.21 0.18 0.15 0.13 0.10
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.50 2.05 1.21 0.74 (0.88)
Net increase from payments by affiliates..................... 0.00 - - - -
------------------------------------------------------
Total income (loss) from investment operations............... 1.71 2.23 1.36 0.87 (0.78)
------------------------------------------------------
Distributions from:
Net investment income........................................ (0.06) (0.17) (0.15) (0.12) (0.10)
Net realized gain on securities.............................. (0.79) (0.52) - - -
------------------------------------------------------
Total distributions.......................................... (0.85) (0.69) (0.15) (0.12) (0.10)
------------------------------------------------------
Net asset value at end of period................................ $ 14.58 $ 13.72 $ 12.18 $ 10.97 $ 10.22
------------------------------------------------------
TOTAL RETURN/(a)/............................................... 12.98%/(f)/ 18.62% 12.42%/(e)/ 8.59% (7.08)%
------------------------------------------------------
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)/.................... 0.97% 1.01% 1.08% 1.19% 1.29%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 1.54% 1.41% 1.26% 1.28% 0.98%
Ratio of net investment income (loss) to average net assets/(c)/ 1.38% 1.21% 0.99% 0.90% 0.50%
Portfolio turnover rate......................................... 103% 84% 97% 67% 85%
Number of shares outstanding at end of period (000's)........... 12,192 6,476 5,735 4,091 2,743
Net assets at the end of period (000's)......................... $177,737 $88,853 $69,831 $44,883 $28,030
Mid Cap Growth Fund
-----------------------------------------------
Year Ended August 31,
-----------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 7.56 $ 5.94 $ 5.70 $ 4.44 $ 6.20
-----------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ (0.01) (0.01) (0.03) (0.02) (0.03)
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 0.60 1.63 0.27 1.28 (1.73)
Net increase from payments by affiliates..................... - - - - -
-----------------------------------------------
Total income (loss) from investment operations............... 0.59 1.62 0.24 1.26 (1.76)
-----------------------------------------------
Distributions from:
Net investment income........................................ - - - - -
Net realized gain on securities.............................. - - - - -
-----------------------------------------------
Total distributions.......................................... - - - - -
-----------------------------------------------
Net asset value at end of period................................ $ 8.15 $ 7.56 $ 5.94 $ 5.70 $ 4.44
-----------------------------------------------
TOTAL RETURN/(a)/............................................... 7.80% 27.27% 4.21% 28.38% (28.39)%
-----------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of expenses to average net assets/(c)/.................... 1.34% 1.37% 1.40% 1.51% 1.59%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ (0.15)% (0.18)% (0.41)% (0.41)% (0.45)%
Ratio of net investment income (loss) to average net assets/(c)/ (0.64)% (0.70)% (0.96)% (1.07)% (1.19)%
Portfolio turnover rate......................................... 142% 125% 123% 99% 69%
Number of shares outstanding at end of period (000's)........... 7,929 6,920 7,487 7,682 5,745
Net assets at the end of period (000's)......................... $64,583 $52,335 $44,446 $43,785 $25,527
/(a)/Total return is not annualized. It does include, 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 increased by 0.09% from a gain realized on
the disposal of investments in violation of investment restrictions.
/(f)/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)
92 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,
--------------------------------------------------------
2006 2005 2004 2003 2002
-------------- -------- -------- -------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 18.27 $ 16.18 $ 14.10 $ 11.75 $ 13.54
--------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.08 0.01 0.02 0.02 0.04
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.79 3.63 2.08 2.36 (1.36)
Net increase from payments by affiliates..................... - - - - -
--------------------------------------------------------
Total income (loss) from investment operations............... 1.87 3.64 2.10 2.38 (1.32)
--------------------------------------------------------
Distributions from:
Net investment income........................................ (0.01) (0.01) (0.02) (0.03) (0.04)
Net realized gain on securities.............................. (1.38) (1.54) - - (0.43)
--------------------------------------------------------
Total distributions.......................................... (1.39) (1.55) (0.02) (0.03) (0.47)
--------------------------------------------------------
Net asset value at end of period................................ $ 18.75 $ 18.27 $ 16.18 $ 14.10 $ 11.75
--------------------------------------------------------
TOTAL RETURN/(a)/............................................... 10.74% 23.18% 14.86% 20.28% (10.07)%
--------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 1.05% 1.05% 1.05% 1.05% 1.05%
Ratio of expenses to average net assets/(c)/.................... 1.20% 1.18% 1.25% 1.32% 1.35%
Ratio of expense reductions to average net assets............... 0.01% 0.02% 0.03% 0.04% 0.07%
Ratio of net investment income (loss) to average net assets/(b)/ 0.40% 0.01% 0.09% 0.11% 0.29%
Ratio of net investment income (loss) to average net assets/(c)/ 0.25% (0.11)% (0.11)% (0.16)% (0.01)%
Portfolio turnover rate......................................... 76% 46% 57% 48% 156%
Number of shares outstanding at end of period (000's)........... 19,331 16,528 11,902 9,587 7,937
Net assets at the end of period (000's)......................... $362,379 $302,014 $192,607 $135,190 $93,245
Moderate Growth Lifestyle Fund
-------------------------------------------------
Year Ended August 31,
-------------------------------------------------
2006 2005 2004 2003 2002
------------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 12.04 $ 10.46 $ 9.80 $ 8.93 $ 10.02
-------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.16 0.18 0.22 0.17 0.19
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 0.70 1.58 0.66 0.87 (1.04)
Net increase from payments by affiliates..................... - - - - -
-------------------------------------------------
Total income (loss) from investment operations............... 0.86 1.76 0.88 1.04 (0.85)
-------------------------------------------------
Distributions from:
Net investment income........................................ (0.06) (0.18) (0.22) (0.17) (0.24)
Net realized gain on securities.............................. (0.40) - - - -
-------------------------------------------------
Total distributions.......................................... (0.46) (0.18) (0.22) (0.17) (0.24)
-------------------------------------------------
Net asset value at end of period................................ $ 12.44 $ 12.04 $ 10.46 $ 9.80 $ 8.93
-------------------------------------------------
TOTAL RETURN/(a)/............................................... 7.21% 16.88% 8.96% 11.84% (8.62)%
-------------------------------------------------
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)/.................... 0.24% 0.25% 0.32% 0.32% 0.10%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 1.35% 1.58% 2.12% 1.94% 2.03%
Ratio of net investment income (loss) to average net assets/(c)/ 1.21% 1.44% 1.89% 1.72% 2.03%
Portfolio turnover rate......................................... 70% 38% 76% 65% 184%
Number of shares outstanding at end of period (000's)........... 7,122 6,129 5,379 4,865 4,003
Net assets at the end of period (000's)......................... $88,558 $73,804 $56,244 $47,692 $35,747
/(a)/Total return is not annualized. It does include, 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 93
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,
--------------------------------------------
2006 2005 2004 2003 2002
-------- ------- ------- ------- -------
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)/(d)/..................................... 0.04 0.02 0.01 0.01 0.02
Net realized and unrealized gain (loss) on investments and
foreign currencies................................................... - - - - -
Net increase from payments by affiliates.............................. - - - - -
--------------------------------------------
Total income (loss) from investment operations........................ 0.04 0.02 0.01 0.01 0.02
--------------------------------------------
Distributions from:
Net investment income................................................. (0.04) (0.02) (0.01) (0.01) (0.02)
Net realized gain on securities....................................... - - - - -
--------------------------------------------
Total distributions................................................... (0.04) (0.02) (0.01) (0.01) (0.02)
--------------------------------------------
Net asset value at end of period......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------
TOTAL RETURN/(a)/........................................................ 4.09% 1.99% 0.59% 0.83% 1.63%
--------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/............................. 0.56% 0.56% 0.55% 0.56% 0.56%
Ratio of expenses to average net assets/(c)/............................. 0.67% 0.75% 0.80% 0.85% 0.83%
Ratio of expense reduction to average net assets......................... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/......... 4.13% 1.98% 0.59% 0.82% 1.61%
Ratio of net investment income (loss) to average net assets/(c)/......... 4.02% 1.78% 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).................... 151,326 75,836 72,901 79,798 70,870
Net assets at the end of period (000's).................................. $151,326 $75,836 $72,901 $79,798 $70,870
Small Cap Growth Fund
-----------------------------------------------
Year Ended August 31,
-----------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period................................... $ 12.19 $ 10.20 $ 9.70 $ 7.40 $ 10.69
-----------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/..................................... (0.07) (0.09) (0.09) (0.05) (0.07)
Net realized and unrealized gain (loss) on investments and
foreign currencies................................................... 0.56 2.08 0.59 2.35 (3.22)
Net increase from payments by affiliates.............................. - - - - -
-----------------------------------------------
Total income (loss) from investment operations........................ 0.49 1.99 0.50 2.30 (3.29)
-----------------------------------------------
Distributions from:
Net investment income................................................. - - - - -
Net realized gain on securities....................................... - - - - -
-----------------------------------------------
Total distributions................................................... - - - - -
-----------------------------------------------
Net asset value at end of period......................................... $ 12.68 $ 12.19 $ 10.20 $ 9.70 $ 7.40
-----------------------------------------------
TOTAL RETURN/(a)/........................................................ 4.02% 19.51% 5.15% 31.08% (30.78)%
-----------------------------------------------
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)/............................. 1.40% 1.44% 1.46% 1.57% 1.58%
Ratio of expense reduction to average net assets......................... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/......... (0.55)% (0.81)% (0.84)% (0.66)% (0.76)%
Ratio of net investment income (loss) to average net assets/(c)/......... (0.79)% (1.09)% (1.14)% (1.06)% (1.18)%
Portfolio turnover rate.................................................. 69% 46% 66% 37% 153%
Number of shares outstanding at end of period (000's).................... 3,892 3,779 3,800 4,565 3,389
Net assets at the end of period (000's).................................. $49,354 $46,088 $38,755 $44,290 $25,072
/(a)/Total return is not annualized. It does include, 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.
94 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,
---------------------------------------------------
2006 2005 2004 2003 2002
-------------- -------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 15.61 $ 13.68 $ 11.70 $ 10.04 $ 11.36
---------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.11 0.12// 0.04 0.07 0.10
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.25 2.68 1.99 1.84 (1.03)
Net increase from payments by affiliates..................... - - - - -
---------------------------------------------------
Total income (loss) from investment operations............... 1.36 2.80 2.03 1.91 (0.93)
---------------------------------------------------
Distributions from:
Net investment income........................................ (0.02) (0.13) (0.05) (0.09) (0.10)
Net realized gain on securities.............................. (1.89) (0.74) - (0.16) (0.29)
---------------------------------------------------
Total distributions.......................................... (1.91) (0.87) (0.05) (0.25) (0.39)
---------------------------------------------------
Net asset value at end of period................................ $ 15.06 $ 15.61 $ 13.68 $ 11.70 $ 10.04
---------------------------------------------------
TOTAL RETURN/(a)/............................................... 9.69% 20.84% 17.37% 19.47% (8.47)%
---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets/(c)/.................... 1.21% 1.22% 1.28% 1.40% 1.53%
Ratio of expense reductions to average net assets............... - - - - 0.01%
Ratio of net investment income (loss) to average net assets/(b)/ 0.74% 0.83% 0.34% 0.72% 0.91%
Ratio of net investment income (loss) to average net assets/(c)/ 0.49% 0.56% 0.01% 0.26% 0.33%
Portfolio turnover rate......................................... 58% 85% 47% 42% 166%
Number of shares outstanding at end of period (000's)........... 7,622 6,235 5,217 5,035 4,496
Net assets at the end of period (000's)......................... $114,809 $97,314 $71,371 $58,923 $45,124
Socially Responsible Fund
-------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------
2006 2005 2004 2003 2002
-------- --------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 11.21 $ 10.25 $ 9.42 $ 8.44 $ 10.46
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.17 0.15// 0.09 0.09 0.08
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 0.96 0.96 0.82 0.96 (2.02)
Net increase from payments by affiliates..................... - 0.00 - - -
-------------------------------------------------------------
Total income (loss) from investment operations............... 1.13 1.11 0.91 1.05 (1.94)
-------------------------------------------------------------
Distributions from:
Net investment income........................................ (0.05) (0.15) (0.08) (0.07) (0.08)
Net realized gain on securities.............................. (0.23) - - - -
-------------------------------------------------------------
Total distributions.......................................... (0.28) (0.15) (0.08) (0.07) (0.08)
-------------------------------------------------------------
Net asset value at end of period................................ $ 12.06 $ 11.21 $ 10.25 $ 9.42 $ 8.44
-------------------------------------------------------------
TOTAL RETURN/(a)/............................................... 10.16% 10.85%/(e)/ 9.70%/(e)/ 12.58%/(e)/ (18.65)%
-------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.56% 0.56% 0.56% 0.56% 0.56%
Ratio of expenses to average net assets/(c)/.................... 0.71% 0.71% 0.96% 1.30% 1.19%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 1.52% 1.47% 0.91% 1.11% 0.82%
Ratio of net investment income (loss) to average net assets/(c)/ 1.37% 1.32% 0.51% 0.37% 0.19%
Portfolio turnover rate......................................... 172% 74% 117% 96% 25%
Number of shares outstanding at end of period (000's)........... 24,486 17,180 3,205 1,314 1,186
Net assets at the end of period (000's)......................... $295,231 $192,604 $32,850 $12,380 $10,008
/(a)/Total return is not annualized. It does include, 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.
FINANCIAL HIGHLIGHTS - CONTINUED 95
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,
-----------------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............. $ 11.08 $ 10.66 $ 10.28 $ 9.31 $ 9.60
-----------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............... 0.58 0.56 0.57 0.66 0.62
Net realized and unrealized gain (loss) on
investments and foreign currencies............. 0.04 0.65 0.46 0.95 (0.32)
Net increase from payments by affiliates........ 0.00 - - - -
-----------------------------------------------------------------
Total income (loss) from investment operations.. 0.62 1.21 1.03 1.61 0.30
-----------------------------------------------------------------
Distributions from:
Net investment income........................... (0.16) (0.54) (0.56) (0.64) (0.59)
Net realized gain on securities................. (0.18) (0.25) (0.09) - -
-----------------------------------------------------------------
Total distributions............................. (0.34) (0.79) (0.65) (0.64) (0.59)
-----------------------------------------------------------------
Net asset value at end of period................... $ 11.36 $ 11.08 $ 10.66 $ 10.28 $ 9.31
-----------------------------------------------------------------
TOTAL RETURN/(a)/.................................. 5.75%/(g)/ 11.66%/(e)/ 10.30% 17.73% 3.13%
-----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/....... 0.89% 0.89% 0.88% 0.89% 0.89%
Ratio of expenses to average net assets/(c)/....... 1.12% 1.09% 1.22% 1.52% 1.58%
Ratio of expense reductions to average net assets.. - - - - -
Ratio of net investment income (loss) to average
net assets/(b)/................................... 5.38% 5.21% 5.54% 6.79% 6.64%
Ratio of net investment income (loss) to average
net assets/(c)/................................... 5.16% 5.01% 5.20% 6.17% 5.95%
Portfolio turnover rate............................ 104% 155%/(f)/ 128%/(f)/ 76%/(f)/ 112%/(f)/
Number of shares outstanding at end of period
(000's)........................................... 17,195 12,302 7,484 4,431 2,810
Net assets at the end of period (000's)............ $195,413 $136,295 $79,793 $45,565 $26,167
/(a)/Total return is not annualized. It does include, 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 increased by 0.10% from a gain realized on
the disposal of investments in violation of investment restrictions.
/(f)/Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was
as follows:
Fund 2005 2004 2003 2002
-------------- ---- ---- ---- ----
Strategic Bond 153% 127% 63% 109%
/(g)/The Fund's performance figure was increased by less than 0.01% from a
reimbursement by an affiliate. (See Note 3)
96 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's Aggressive Growth
Lifestyle Fund, Capital Appreciation Fund, Conservative Growth Lifestyle Fund,
Core Bond Fund, High Yield Bond Fund, International Small Cap Equity 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, 2006,
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. We were not engaged to perform an audit of the Funds' internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Funds' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of August 31, 2006, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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 VALIC
Company II's Aggressive Growth Lifestyle Fund, Capital Appreciation Fund,
Conservative Growth Lifestyle Fund, Core Bond Fund, High Yield Bond Fund,
International Small Cap Equity 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, 2006, the results of their 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
Houston, Texas
October 19, 2006
August 31, 2006 APPROVAL OF ADVISORY AGREEMENTS (Unaudited) 97
At a meeting held on July 17-18, 2006, the Board of Trustees (the "Board"),
including the Trustees that are not interested persons of VC II, as such term
is defined in the Investment Company Act of 1940, as amended (the "1940 Act")
(the "Independent Trustees"), approved with respect to each Fund the Investment
Advisory Agreement between the Variable Annuity Life Insurance Company
("VALIC") and VC II (the "Advisory Agreement") and the investment sub-advisory
agreements between VALIC and each of the following subadvisers of VC II
(collectively, the "Subadvisory Agreements): AIG Global Investment Corp.
("AIGGIC"), AIG SunAmerica Asset Management Corp. ("AIG SAAMCo"), A I M Capital
Management, Inc. ("AIM"), Credit Suisse Asset Management, LLC ("Credit
Suisse"), Franklin Advisers, Inc. ("Franklin"), JPMorgan Investment Advisors,
Inc. ("JP Morgan"), SSgA Funds Management, Inc. ("State Street"), and
Wellington Management Company, LLP ("Wellington"), (collectively referred to as
the "Subadvisers"). In addition, the Board, including the Independent Trustees,
approved a new investment sub-advisory agreement between VALIC and Bridgeway
Capital Management, Inc. ("Bridgeway").
The Advisory Agreement and Sub-advisory Agreements are collectively referred
to as the "Advisory Contracts."
The Board was advised that each SubAdviser completed detailed questionnaires
and their responses were reviewed by management and counsel to the Independent
Trustees. The Board was advised of the various factors that the Board should
consider in its review of the Advisory Contracts.
In connection with the approval of Advisory Contracts, the Board received
materials related to certain factors used in its consideration whether to renew
or approve such Advisory Contracts. Those factors included: (1) the nature,
extent and quality of services provided or to be provided by (as the case may
be) by VALIC and the Subadvisers; (2) the advisory fee and subadvisory fees
charged in connection with VALIC's and the Subadvisers' management of the
Funds, compared to advisory fee rates and subadvisory fee rates of a group of
funds with similar investment objectives (respectively, the "Expense
Group/Universe" and the "SubAdvisor Expense Group/Universe"), as selected by
Lipper, Inc.; (3) the investment performance of the Funds, if any, compared to
performance of comparable funds as selected by an independent third-party
provider of investment company data ("Performance Group/Universe") and against
each Fund's benchmarks; (4) the costs of services and the benefits potentially
derived by VALIC and the Subadvisers; (5) the terms of the Advisory Contracts;
(6) whether the Funds will benefit from possible economies of scale; (7) the
profitability of VALIC and the Subadvisers; and (8) information regarding VALIC
and each of the Subadvisers' compliance and regulatory history.
The Board also took into account performance, fee and expense information
regarding each Fund provided to them on a quarterly basis. The Independent
Trustees were separately represented by counsel that is independent of VALIC in
connection with their consideration of approval of the Advisory Contracts. The
matters discussed below were also considered separately by the Independent
Trustees in executive sessions during which such independent counsel provided
guidance to the Independent Trustees.
Nature, Extent and Quality of Services. The Board considered the nature,
quality and extent of services to be provided to the Funds by VALIC and the
Subadvisers. The Board reviewed information provided by VALIC relating to its
operations and personnel. The Board also took into account their familiarity
with VALIC's management through Board meetings, discussions and reports during
the preceding year. The Board considered that VALIC is responsible for the
management of the day-to-day operations of the Funds, including but not limited
to, general supervision of and coordination of the services provided by the
Subadvisers, and is also responsible for monitoring and reviewing the
activities of the Subadvisers and other third-party service providers and in
recommending to the Board changes/replacements when deemed appropriate. The
Board also noted that VALIC's and the Subadvisers' management of the Funds is
subject to the oversight of the Board, and must be made in accordance with the
investment objectives, policies and restrictions set forth in the Funds'
prospectus and statement of additional information.
The Board also noted that VALIC personnel meet on a periodic basis to discuss
the performance of the Funds, as well as the positioning of the insurance
products, employer-sponsored retirement plans and the Funds generally vis-a-vis
competitors. In addition, it was considered that VALIC works to develop
marketing strategies to promote an identity for the Funds separate and apart
from the insurance products and the employer-sponsored retirement plans. The
Board also considered VALIC's financial condition and whether it had the
financial wherewithal to provide the services under the Advisory Agreement with
respect to each Fund.
With respect to the services provided by the Subadvisers, the Board considered
information provided to them regarding the services provided by each
Subadviser, including information presented throughout the previous year. The
Board noted that each Subadviser (i) determines the securities to be purchased
or sold on behalf of the Funds it manages as may be necessary in connection
therewith; (ii) provides VALIC with records concerning its activities, which
VALIC or the Funds are required to maintain; and (iii) renders regular reports
to VALIC and to officers and Trustees of the Funds concerning its discharge of
the foregoing responsibilities. The Board reviewed the qualifications,
background and responsibilities of each Subadviser's investment and compliance
personnel who are or would be responsible for providing investment management
services to the Funds. The Board also took into account the financial condition
of each Subadviser. The Board also noted each Subadviser's brokerage practices.
The Board considered VALIC's and each Subadviser's history and investment
experience. With respect to Bridgeway and in addition to the considerations
described above, the Board noted that Bridgeway would be responsible for
providing investment management services to the Capital Appreciation Fund.
It was also noted that VC II pays VALIC a fee for the provision of record
keeping and shareholder services to contract owners and participants, and that
VALIC is paid approximately $132,000 for providing transfer agency and related
services to the Funds. Such payment is allocated to each Fund based on the
number of accounts serviced. Finally, it was noted that VALIC pays AIG SAAMCo,
an affiliate, an annual fee of approximately 0.07% based on each Fund's average
daily net assets, for the provision of certain accounting and administrative
services to those Funds.
Fees and Expenses; Investment Performance. The Board received and reviewed
information regarding each Fund's total expenses, advisory and subdvisory fees,
and other expenses compared against the expenses and fees of the funds in its
Expense Group, Expense Universe and Subadvisor Expense Group and, in some cases
as noted below, the Subadvisor Expense Universe. It was noted that VALIC
negotiates the sub-advisory fees with each of the unaffiliated Subadvisers at
arms-length. The Board also considered that the subadvisory fees are paid by
VALIC out of its advisory fees it receives from the Funds and is not paid by
the Funds, and that subadvisory fees may vary widely within the Subadvisor
Expense Group/Universe for various reasons, including market pricing demands,
existing relationships, experience and success, and individual client needs. It
was noted that expense ratio data included in the Lipper reports was based on
the most recently available VC II annual report from August 31, 2005.
98 APPROVAL OF ADVISORY AGREEMENTS (Unaudited) - CONTINUED August 31, 2006
The Board received and reviewed information prepared by management and by
Lipper regarding the Funds' investment performance compared against their
benchmarks and other funds in their respective Performance Groups and
Performance Universes. It was noted that Performance information provided by
Lipper was for the period ended April 30, 2006 and the benchmark information
presented by management was through the period June 30, 2006.
. Aggressive Growth, Conservative Growth and Moderate Growth Lifestyle Funds
(each subadvised by AIGGIC). The Board considered that each Fund's total
expenses and actual advisory fees were at or below the medians of their
respective Expense Groups/Universes. In addition, the Board noted that
each Fund's subadvisory fees were below the median of its respective
Subadvisor Expense Group.
Aggressive Growth Lifestyle Fund. The Board considered that the Fund's
performance slightly trailed the median of its Performance Universe and
the Lipper Global Core Index for the one- and three-year periods. It also
noted the for the five-year period, the Fund outperformed the index and
slightly trailed the median of its Performance Universe. The Board also
noted that the Fund outperformed its blended benchmark for the one- and
three-year period and slightly trailed the benchmark for the five-year
period. The Fund's blended benchmark consists of the Wilshire 5000 Index
("Wilshire 5000") (65%), Lehman Brothers U.S. Aggregate Index (10%) and
the Morgan Stanley Capital International Europe, Australasia, Far East
Index ("MSCI EAFE Index") (25%). The Board concluded that the Fund's
performance has been satisfactory in light of all factors considered.
Conservative Growth Lifestyle. The Board considered that the Fund's
performance exceeded the median of its Performance Universe for the one-,
three- and five-year periods and that it trailed the S&P 500 Daily Review
Index for the one-, three- and five-year periods. In addition, the Board
noted that the Fund equaled or outperformed its blended benchmark for the
one-, three- and five-year periods. The Fund's blended benchmark consists
of the Wilshire 5000 (42%), Lehman Brothers U.S. Aggregate Index (50%) and
the MSCI EAFE Index (8%). The Board concluded that the Fund's performance
has been satisfactory in light of all factors considered.
Moderate Growth Lifestyle. The Board considered that the Fund's
performance exceeded the S&P 500 Index and the medians of its Performance
Group/Universe for the one-, three- and five-year periods. In addition,
the Board noted that the Fund slightly outperformed its blended benchmark
for the one-, three- and five-year periods. The Fund's blended benchmark
consists of the Wilshire 5000 (55%), Lehman Brothers U.S. Aggregate Index
(30%) and the MSCI EAFE Index (15%). The Board concluded that the Fund's
performance has been satisfactory in light of all factors considered.
. Capital Appreciation Fund (subadvised by Credit Suisse through August 28,
2006; subadvised by Bridgeway beginning August 28, 2006). The Board
considered that the Fund's total expenses and actual advisory fees were
below the medians of its Expense Group/Universe. The Board also noted that
the Fund's subadvisory fees were below the median of its Subadvisor
Expense Group.
The Board considered that the Fund equaled or trailed the Lipper Large Cap
Growth Index and the medians of its Performance Group/Universe for the
one-, three- and five-year periods. The Board also noted that the Fund
trailed its benchmark, the Russell 1000 Growth Index, for the one-, three-
and five-year periods. In addition, in connection with the Board's
approval of a Subadvisory Agreement with Bridgeway, the Board considered
the performance results of the Bridgeway Large Cap Growth Fund which
Bridgeway manages with a similar investment objective and investment
strategy as the Fund. It was reported that the Bridgeway Large Cap Growth
Fund had outperformed its benchmark, the Russell 1000 Growth Index, for
calendar years 2004, 2005 and the year-to-date through March 31, 2006, and
was in the 24% and 47% in the Morningstar Large Cap Growth Category for
2005 and 2004, respectively. The Trustees took into account management's
plans for the Fund, noting that Credit Suisse would be serving as
subadviser for a temporary period until Bridgeway was able to assume
sub-advisory duties. The Board concluded that appropriate actions have
been taken to address performance.
. Core Bond Fund (subadvised by AIGGIC). The Board considered that the
Fund's total expenses were below the median of its Expense Group and above
the median of its Expense Universe and that the Fund's actual advisory
fees were at or above the medians of its Expense Group/Universe. The Board
also noted that the Fund's sub-advisory fees were above the median of its
Subadvisor Expense Group.
The Board considered that the Fund's performance exceeded the Lipper
A-Rated Bond Fund Index for the one-year period but trailed for the,
three- and five-year periods. The Board noted that the Fund outperformed
the medians of its Performance Group/Universe for the one-, three- and
five-year periods. The Board also noted that the Fund outperformed its
benchmark, the Lehman Brothers U.S. Aggregate Index, for the one- and
three-year periods and trailed the benchmark for the five-year period. The
Trustees took into account management's discussion of the Fund's
performance. The Board concluded that the Fund's performance has been
satisfactory in light of all factors considered.
. High Yield Bond Fund (subadvised by AIGGIC). The Board considered that the
Fund's total expenses were below the median of its Expense Group and above
the median of its Expense Universe and that the Fund's actual advisory
fees were above the medians of its Expense Group/Universe. The Board also
considered that the Fund's sub-advisory fees were above the medians of its
Subadvisor Expense Group/Universe.
The Board considered that the Fund's performance exceeded the Lipper High
Yield Index and the medians of its Performance Group/Universe for the
one-, three- and five-year periods. The Board also noted that the Fund
outperformed its benchmark, the Citigroup High Yield Index, for the one-,
three- and five-year periods. The Board concluded that the Fund's
performance has been satisfactory in light of all factors considered.
. International Small Cap Equity Fund (subadvised by AIGGIC). The Board
considered that the Fund's total expenses were below the medians of its
Expense Group/Universe and that the Fund's actual advisory fees were above
the medians of its Expense Group/Universe. The Board also noted that the
Fund's subadvisory fees were above the medians of its Subadvisor Expense
Group/Universe.
The Board considered that the Fund outperformed the Lipper International
Core Index and the medians of its Performance Group/Universe for the one-,
three- and five-year periods. The Board also noted that the Fund
outperformed its benchmark, the MSCI EAFE Small Cap Index, for the
one-year period but trailed the benchmark for the three- and five-year
periods. It was noted that AIGGIC assumed subadvisory duties of the Fund
in October 2004. The Board concluded that the Fund's performance has been
satisfactory in light of all factors considered.
August 31, 2006 APPROVAL OF ADVISORY AGREEMENTS (Unaudited) - CONTINUED 99
. Large Cap Value Fund (subadvised by SSgA FM). The Board considered that
the Fund's total expenses and actual advisory fees were below the medians
of its Expense Group/Universe. The Board also noted that the Fund's
subadvisory fees were below the medians of its Subadvisor Expense
Group/Universe.
The Board considered that the Fund's performance exceeded the Lipper
Mid-Cap Value Index and the medians of its Performance Group/Universe for
the one- and five-year periods but trailed such index and medians for the
three-year period. The Board also noted that the Fund outperformed its
benchmark, the Russell 1000 Value Index, for the one- and five-year
periods but trailed the benchmark for the three-year period. The Trustees
took into account the Fund's improving performance. The Board concluded
that the Fund's performance has been satisfactory in light of all factors
considered.
. Mid Cap Growth Fund (subadvised by AIM). The Board considered that the
Fund's total expenses were below the medians of its Expense Group/Universe
and that the Fund's actual advisory fees were above the medians of its
Expense Group/Universe. The Board also noted that the Fund's subadvisory
fees were above the medians of its Subadvisor Expense Group/Universe.
The Board also considered that the Fund's performance exceeded the Lipper
Mid-Cap Growth Index and the median of its Performance Universe for the
one- and three-year periods and trailed the index and median for the
five-year period. The Board also noted that the Fund outperformed the
median of its Performance Group for the one-, three- and five-year
periods. In addition, the Board noted that the Fund outperformed its
benchmark, the Russell Midcap Growth Index, for the one-year period but
trailed the benchmark for the three- and five-year periods. It was noted
that AIM began subadvising the Fund in October 2004 and that the Fund's
performance has improved since such time. The Board concluded that action
has been taken to address performance.
. Mid Cap Value Fund (subadvised by Wellington and FAF). The Board
considered that the Fund's total expenses were below the median of its
Expense Group and above the median of its Expense Universe and that the
Fund's actual advisory fees were slightly below the medians of its Expense
Group/Universe. The Board also noted that the Fund's subadvisory fees were
above the medians of its Subadvisor Expense Group/Universe.
The Board considered that the Fund outperformed the Lipper MidCap Value
Index and the median of its Performance Universe for the one-, three- and
five-year periods. It also considered that the Fund's performance exceeded
the median of its Performance Group for the one- and the three-year
periods but trailed the median for the five-year period. The Board noted
that the Fund outperformed its benchmark, the Russell 2500 Value Index,
for the one-year period but trailed the benchmark for the three- and
five-year periods. The Board concluded that the Fund's performance has
been satisfactory in light of all factors considered.
. Money Market II Fund (subadvised by AIG SAAMCo). The Board considered that
the Fund's total expenses and actual advisory fees were below the medians
of its Expense Group/Universe. The Board also noted that the Fund's
sub-advisory fees were below the medians of its Subadvisor Expense
Group/Universe.
The Board considered that the Fund slightly underperformed the Lipper
Money Market Fund Index for the one-, three- and five- year periods. The
Board also considered that the Fund's performance exceeded the medians of
its Performance Group for the one-, three- and five-year periods. Finally,
the Board noted that the Fund underperformed its benchmark, the New York
City 30 Day Certificate of Deposit Primary Offering Rate for the one-,
three- and five-year periods. The Board concluded that the Fund's
performance has been satisfactory in light of all factors considered.
. Small Cap Growth Fund (subadvised by Franklin Advisers). The Board
considered that the Fund's total expenses were below the median of its
Expense Group and above the median of its Expense Universe and that the
Fund's actual advisory fees were at or slightly above the medians of its
Expense Group/Universe. The Board also noted that the Fund's sub-advisory
fees were above the median of its Subadvisor Expense Group.
The Board considered that the Fund's performance trailed the Lipper Small
Cap Growth Index for the one-, three- and five-year periods. The Board
also noted that the Fund's performance was at or trailed the medians of
its Performance Group/Universe for the one-, three- and five-year periods.
In addition, the Board noted that the Fund trailed its benchmark, the
Russell 2000 Growth Index, for the one-, three- and five-year periods. The
Trustees took into account management's discussion of its plans to address
the Fund's performance. The Board concluded that appropriate action is
being taken to address the Fund's performance.
. Small Cap Value Fund (subadvised by JP Morgan). The Board considered that
the Fund's total expenses and actual advisory fees were below the medians
of its Expense Group/Universe. The Board also noted that the Fund's
sub-advisory fees were slightly below the medians of its Subadvisor
Expense Group/Universe.
The Board considered that the Fund's performance equaled or trailed the
Lipper Small Cap Value Index and the medians of its Performance
Group/Universe for the one-, three- and five-year periods. In addition,
the Board noted that the Fund underperformed its benchmark, the Russell
2000 Value Index, for the same periods. Management also noted the change
of portfolio managers in January 2005. The Board concluded that
appropriate actions are being taken to monitor the Fund's performance.
. Socially Responsible Fund (subadvised by AIGGIC). The Board considered
that the Fund's total expenses and actual advisory fees were below the
medians of its Expense Group/Universe. The Board also noted that the
Fund's sub-advisory fees were below the medians of its Subadvisor Expense
Group/Universe.
The Board considered that the Fund underperformed the Lipper Large Cap
Core Index for the one- and three-year periods but slightly outperformed
the index for the five-year period. The Board also considered that the
Fund's performance equaled or trailed the medians of its Performance
Group/Universe for the one- and three-year periods but exceeded such
median for the five-year period. In addition, the Board noted that the
Fund slightly outperformed its benchmark, the S&P 500 Index, for the
one-year period but slightly trailed the benchmark for the three- and
five-year periods. The Board concluded that the Fund's performance has
been satisfactory in light of all factors considered.
. Strategic Bond Fund (subadvised by AIGGIC). The Board considered that the
Fund's total expenses were below the median of its Expense Group and
slightly above the median of its Expense Universe. The Board also noted
that the Fund's actual advisory fees were slightly above the median of its
Expense Group and below the median of its Expense Universe. In addition,
the Board considered that the Fund's subadvisory fees were above the
medians of its Subadvisor Expense Group/Universe.
The Board considered that the Fund outperformed the Lipper General Bond
Fund Index and the medians of its Performance Group/ Universe for the
one-, three- and five-year periods. In addition, the Board noted that the
Fund outperformed its benchmark, the Lehman Brothers U.S. Aggregate Index,
for the one-, three- and five-year periods. The Board concluded that the
Fund's performance has been satisfactory.
100 APPROVAL OF ADVISORY AGREEMENTS (Unaudited) - CONTINUED August 31, 2006
The Board concluded that the advisory fee and subadvisory fee for each Fund
are fair and reasonable in light of the usual and customary charges made for
services of the same nature and quality and the other factors considered.
Cost of Services & Benefits Derived. The Board was provided information
related to the cost of services and benefits derived in connection with the
Advisory Contracts. Management reported that it believed that any indirect
costs are inconsequential to the analysis of the adequacy of the advisory fees
and that any collateral benefits derived as a result of providing advisory
services to the Funds are de minimis.
Profitability and Economies of Scale. The Board requested and received
information related to VALIC's profitability with respect to the services VALIC
provides to the Funds. It was noted that the sub-advisory fees paid pursuant to
the Subadvisory Agreements are paid by VALIC out of the advisory fees that
VALIC receives from the Funds under the Advisory Agreements. The Trustees also
relied on the ability of VALIC to negotiate the Subadvisory Agreements and the
fees thereunder at arm's length. The Board determined that the profitability to
each Subadviser in connection with the Subadvisers' relationship with the Funds
is therefore not a material factor in their consideration of the Subadvisory
Agreements. For similar reasons, the potential for the Funds to experience
economies of scale from the Subadvisers' management of the Funds was not
considered a material factor in the Board' approval of the Sub-advisory
Agreements, although the Board noted that many of the Funds' subadvisory fees
include breakpoints that reduce the fee rate on assets above specified levels.
With respect to VALIC, the Board reviewed profitability of other investment
advisers and determined that VALIC's profitability was reasonable. Furthermore,
the Board noted that VALIC serves as a transfer agent to the Funds and AIG
SAAMCo serves as the administrator to the Funds and that the fees for such
services are paid for by the Funds.
The Board noted that certain of the Funds currently have breakpoints in their
advisory fees. The Board also noted that VALIC is currently waiving advisory
fees or reimbursing expenses for certain of the Funds and that VALIC pays the
sub-advisory fees out of the advisory fees that it receives under the Advisory
Agreements. In response to the Board' inquiries, management noted that it
believes that each Fund's existing fee schedule reflects the economics of scale
inherent in providing investment advice to a Fund in its particular asset
category and asset size. The Board concluded that no additional changes to each
Fund's advisory fee structure, other than those proposed at the meeting, were
currently necessary.
Terms of the Advisory Contracts. The Board reviewed the terms of the Advisory
Contracts including the duties and responsibilities undertaken by VALIC. The
Board also reviewed the terms of payment for services rendered by VALIC and the
Subadvisers and noted that VALIC compensates the Subadvisers out of the fees it
received from the Funds. The Board noted that the Subadvisory Agreements
provide that each Subadviser will pay all of its own expenses in connection
with the performance of its duties as well as the cost of maintaining staff and
personnel as necessary for it to perform its obligations. The Board considered
the termination and liability provisions of the Advisory Contracts as well as
other provisions contained therein. The Board concluded that the terms of the
Advisory Contracts were fair and reasonable.
Compliance. The Board reviewed the administrator's and VALIC's compliance
program and personnel and, VALIC's and each Subadviser's regulatory history,
including information whether it was currently involved in any regulatory
actions or investigations as well as material litigation. The Board concluded
that there was no information provided to the Board that have a material
adverse effect on VALIC's or the Subadvisers' ability to provide services to
the Funds.
August 31, 2006 TRUSTEES AND OFFICERS INFORMATION (Unaudited) 101
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
Thomas J. Brown Trustee November 2005- Formerly, Chief Operating Officer and 47
DOB: December 24, 1944 Present Chief Financial Officer, American General
Asset Management, (2000-2002).
- ----------------------------------------------------------------------------------------------------------------------
Dr. Judith L. Craven Trustee 1998- Retired Administrator. 90
DOB: October 6, 1945 Present
- ----------------------------------------------------------------------------------------------------------------------
William F. Devin Chairman of July 2005- Retired. 90
DOB: December 30, 1938 the Board(5) Present
- ----------------------------------------------------------------------------------------------------------------------
Dr. Timothy J. Ebner Trustee 1998- Professor and Head, Department of 47
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).
- ----------------------------------------------------------------------------------------------------------------------
Judge Gustavo E. Gonzales, Jr. Trustee 1998- Retired. 47
DOB: July 27, 1940 Present
- ----------------------------------------------------------------------------------------------------------------------
Dr. Norman Hackerman Trustee 1998- President Emeritus, Rice University, 47
DOB: March 2, 1912 Present Houston, Texas (1985-Present).
- ----------------------------------------------------------------------------------------------------------------------
Dr. John Wm. Lancaster Trustee 1998- Pastor Emeritus and Director of Planned 47
DOB: December 15, 1923 Present Giving, First Presbyterian Church
(1997-Present).
- ----------------------------------------------------------------------------------------------------------------------
Kenneth J. Lavery Trustee 2001- Vice President, Massachusetts Capital 47
DOB: December 30, 1949 Present Resources Co. (1982-Present).
- ----------------------------------------------------------------------------------------------------------------------
Ben H. Love Trustee 1998- Retired. 47
DOB: September 26, 1930 Present
- ----------------------------------------------------------------------------------------------------------------------
Dr. John E. Maupin, Jr. Trustee 1998- President, Morehouse School of Medicine, 47
DOB: October 28, 1946 Present Atlanta, Georgia (2006-Present). Formerly,
President, Meharry Medical College,
Nashville, Tennessee (1994-2006).
- ----------------------------------------------------------------------------------------------------------------------
Interested Trustees
Peter A. Harbeck(1) Trustee 2001- President, CEO and Director, SAAMCo. 99
DOB: January 23, 1954 Present (August 1995-Present); Director, AIG
SunAmerica Capital Services, Inc.
("SACS") (August 1993 to Present)
President and CEO, AIG Advisor Group,
Inc. (June 2004 to Present).
- ----------------------------------------------------------------------------------------------------------------------
Name, Birth Date Other Directorships
and Address* Held by Trustee(3)
- -------------------------------------------------------------
Independent Trustees
Thomas J. Brown Trustee, Merrimac Funds, a
DOB: December 24, 1944 mutual fund company (2004-
Present).
- -------------------------------------------------------------
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 Board of Governors, Boston
DOB: December 30, 1938 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).
- -------------------------------------------------------------
Interested Trustees
Peter A. Harbeck(1) None.
DOB: January 23, 1954
- -------------------------------------------------------------
102 TRUSTEES AND OFFICERS INFORMATION (Unaudited) - CONTINUED August 31, 2006
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)
- ---------------------------------------------------------------------------------------------------------------
Officers
Evelyn M. Curran President 2002- Senior Vice President, VALIC (2001- N/A
DOB: June 4, 1965 Present Present); Formerly, Vice President, VC I
and VC II (2001-2002); Formerly, Vice
President, American General Fund Group
(1999-2001); Senior Attorney, American
General Corp. (1997-1999).
- ---------------------------------------------------------------------------------------------------------------
Gregory R. Kingston Treasurer 2000- Assistant Treasurer (1999-2000); Vice N/A
DOB: January 18, 1966 Present President, SAAMCo (2001-Present);
Formerly, Vice President, American
General Investment Management, L.P.
(1999-2001); Assistant Treasurer, First
Investors Management Co. (1994-1999).
- ---------------------------------------------------------------------------------------------------------------
Nori L. Gabert Secretary 2000- Vice President and Deputy General N/A
DOB: August 15, 1953 Present Counsel, SAAMCo (2001-Present);
Formerly, Associate General Counsel,
American General Corp. (1997-2001).
- ---------------------------------------------------------------------------------------------------------------
Name, Birth Date Other Directorships
and Address* Held by Trustee(3)
- -------------------------------------------
Officers
Evelyn M. Curran N/A
DOB: June 4, 1965
- -------------------------------------------
Gregory R. Kingston N/A
DOB: January 18, 1966
- -------------------------------------------
Nori L. Gabert N/A
DOB: August 15, 1953
- -------------------------------------------
* 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 employment with AIG SAAMCo, a company
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 administrator. The "Fund Complex" includes the SunAmerica Equity
Funds (10 funds), SunAmerica Income Funds (5 funds), SunAmerica Money Market
Funds, Inc. (2 funds), SunAmerica Senior Floating Rate Fund, Inc. (1 fund),
AIG Series Trust (6 funds), SunAmerica Focused Series, Inc. (17 portfolios),
SunAmerica Focused Alpha Growth Fund, Inc. (1 fund), SunAmerica Focused
Alpha Large Cap Fund (1 fund), Anchor Series Trust (9 portfolios), Seasons
Series Trust (24 portfolios), SunAmerica Series Trust (36 portfolios), VALIC
Company I (32 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.
(5)Mr. Devin became Chairman of the Board effective July 27, 2005 and has been
a Trustee since 2001.
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, 2006 VALIC COMPANY II - SHAREHOLDER TAX INFORMATION (Unaudited) 103
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, 2006.
During the year ended August 31, 2006, 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... $ 1,574,459 $ 686,468 $ 887,991 $ -- $ -- 17.22%
Capital Appreciation.......... 28,150 28,150 -- -- -- 100.00
Conservative Growth Lifestyle. 2,102,367 558,981 1,543,386 -- -- 2.06
Core Bond..................... 1,349,409 1,349,409 -- -- -- 0.56
High Yield Bond............... 2,344,831 1,742,080 602,751 -- -- 1.26
International Small Cap Equity 3,317,832 3,317,832 -- 491,031 4,237,672 1.91
Large Cap Value............... 5,733,846 2,960,923 2,772,923 -- -- 48.99
Mid Cap Growth................ -- -- -- -- -- --
Mid Cap Value................. 23,450,359 6,761,108 16,689,251 -- -- 24.31
Moderate Growth Lifestyle..... 2,823,138 340,001 2,483,137 -- -- 14.28
Money Market II............... 3,946,777 3,946,777 -- -- -- --
Small Cap Growth.............. -- -- -- -- -- --
Small Cap Value............... 11,798,540 1,825,160 9,973,380 -- -- 53.34
Socially Responsible.......... 3,635,140 2,832,068 803,072 -- -- 46.04
Strategic Bond................ 4,503,570 5,910,783 1,229,572 -- -- 0.62
The information and distributions reported herein may differ from the
information and distributions taxable to the shareholders for the calendar year
ending December 31, 2006, 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.
104 VALIC COMPANY II - COMPARISONS: FUNDS VS. INDEXES August 31, 2006
(Unaudited)
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 in 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. 105
INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The equity and fixed income markets were positive in the year ending August 31,
2006, with the Dow Jones Wilshire 5000 Total Market, Morgan Stanley Capital
International Europe, Australasia, Far East, and Lehman Brothers U.S. Aggregate
Indices returning 8.76%, 24.28%, and 1.71% respectively. For the period, the
Aggressive Growth Lifestyle Fund returned 10.65% versus a return of 8.88% for
the S&P 500(R) Index, the Fund's benchmark, and 11.79% for the Blended Index.
The domestic equity sub-funds had mixed results with the small, medium, and
large cap value funds outperforming while their growth counterparts
underperformed. The VC II International Small Cap Equities Fund started the
fiscal year as the Fund's third largest holding and returned 19.06% thru the
end of July when it was removed from the Fund. The VC I International Equities
Fund, added at the beginning of 2006, is now the second largest holding in the
Fund and has returned 11.74% since being added. The VC II Capital Appreciation
Fund, the Fund's largest holding, was the worst performer for the year,
returning 0.06%, nearly nine percent behind the Dow Jones Wilshire 5000 Total
Market Index.
Growth of $10,000 Investment
[CHART]
Aggressive Dow Jones
Growth S & P Wilshire 5000 MSCI Lehman Brothers
Lifestyle 500/R/ Blended Total Market EAFE U.S. Aggregate
Fund Index* Index** Index*** Index**** Index*****
---------- ------- -------- ------------- --------- ---------------
9/21/1998 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/1999 12,638 13,057 12,778 12,986 13,213 9,958
8/31/2000 16,418 15,188 14,850 15,583 14,475 10,709
8/31/2001 12,300 11,484 11,600 11,601 10,950 12,003
8/31/2002 10,453 9,417 10,009 9,680 9,313 13,009
8/31/2003 11,897 10,553 11,265 11,118 10,161 13,576
8/31/2004 13,046 11,762 12,810 12,396 12,462 14,408
8/31/2005 15,868 13,238 14,938 14,365 15,400 15,006
8/31/2006 17,557 14,413 16,699 15,624 19,138 15,262
For the year ended August 31, 2006, the Aggressive Growth Lifestyle Fund
returned 10.65% compared to 8.88% for the S&P 500(R) Index and 11.79% for the
Blended Index.
* The S&P 500(R) Index consists of 500 stocks 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 Dow Jones
Wilshire 5000 Total Market Index ("Wilshire") (65%), Morgan Stanley Capital
International Europe, Australasia, Far East ("MSCI EAFE") Index (25%), and
Lehman Brothers U.S. Aggregate Index (10%).
*** Wilshire measures the performance of all U.S. headquartered equity
securities with readily available price data. Over 5,000 capitalization
weighted security returns are used to adjust the 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.
*****The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
10.65% 7.38% 7.34%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
106 CAPITAL APPRECIATION FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with Credit Suisse Asset Management, LLC
The Capital Appreciation Fund posted a return of 0.06% for the twelve-month
period ending August 31, 2006, compared to a return of 3.68% for the Russell
1000(R) Growth Index.
Through stock selection the Fund ended the period with underweight allocations
in the Transportation and Consumer Discretionary (mostly retail) sectors and an
overweight position in Financials. The impact on performance of these positions
together was positive. Detracting from performance was an overweight position
in Healthcare, which underperformed for the period.
By far the largest detractor from performance was stock selection in the
Healthcare area. While achieving some success with Medco and Pfizer,
performance was negatively impacted by St. Jude (which had performed well last
year), Forest Labs and Barr Pharmaceutical. In addition, Genentech detracted
from performance.
On the positive side, Starbucks, Proctor and Gamble, Monsanto, Precision
Castparts , American Tower, United Technologies and Salesforce.com all helped
performance.
Effective August 28, 2006, Bridgeway Capital Management, Inc. replaced Credit
Suisse Asset Management, LLC as investment subadviser for the Fund.
Growth of $10,000 Investment
[CHART]
Capital Russell 1000/R/
Appreciation Fund Growth Index*
----------------- --------------
9/21/1998 $10,000 $10,000
8/31/1999 13,811 13,726
8/31/2000 18,048 18,318
8/31/2001 9,843 10,016
8/31/2002 7,239 7,795
8/31/2003 8,281 8,893
8/31/2004 8,422 9,369
8/31/2005 9,649 10,506
8/31/2006 9,655 10,892
For the year ended August 31, 2006, the Capital Appreciation Fund returned
0.06% compared to 3.68% for the Russell 1000(R) Growth Index.
*The Russell 1000 Growth(R) Index measures the performance of those Russell
1000 companies with higher price-to-book ratios and higher forecasted growth
values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
0.06% -0.39% -0.44%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
CONSERVATIVE GROWTH LIFESTYLE FUND - COMPARISON: FUND VS. 107
INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The equity and fixed income markets were positive in the year ending August 31,
2006, with the Dow Jones Wilshire 5000 Total Market, Morgan Stanley Capital
International Europe, Australasia, Far East, and Lehman Brothers U.S. Aggregate
Indices returning 8.76%, 24.28%, and 1.71% respectively. For the period, the
Conservative Growth Lifestyle Fund returned 5.50% versus a return of 8.88% for
the S&P 500(R) Index, the Fund's benchmark, and 6.41% for the Blended Index.
The domestic equity sub-funds had mixed results with the small, medium, and
large cap value funds outperforming while their growth counterparts
underperformed. The VC II International Small Cap Equities Fund started the
year as the Fund's fourth largest holding and returned 19.06% thru the end of
July when it was removed from the Fund. The VC I International Equities Fund,
added at the beginning of 2006, is now the fourth largest holding in the Fund
and has returned 11.74% since being added. The VC II Capital Appreciation Fund,
the Fund's second largest holding, was the worst performer for the year,
returning 0.06%, nearly nine percent behind the Wilshire index. The VC II Core
Bond Fund, the Fund's largest holding, outperformed the Lehman Brothers U.S.
Aggregate Index by 11 basis points, returning 1.82%.
Growth of $10,000 Investment
[CHART]
Conservative Dow Jones
Growth S & P Wilshire 5000 MSCI Lehman Brothers
Lifestyle 500/R/ Blended Total Market EAFE U.S. Aggregate
Fund Index* Index** Index*** Index**** Index*****
------------ ------- ------- ------------- --------- ----------------
9/21/1998 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/1999 11,599 13,057 11,423 12,986 13,213 9,958
8/31/2000 13,841 15,188 12,922 15,583 14,475 10,709
8/31/2001 12,906 11,484 11,906 11,601 10,950 12,033
8/31/2002 12,309 9,417 11,391 9,680 9,313 13,009
8/31/2003 13,528 10,553 12,487 11,118 10,161 13,576
8/31/2004 14,557 11,762 13,708 12,396 12,462 14,408
8/31/2005 16,454 13,238 15,160 14,365 15,400 15,006
8/31/2006 17,359 14,413 16,131 15,624 19,138 15,262
For the year ended August 31, 2006, the Conservative Growth Lifestyle Fund
returned 5.50% compared to 8.88% for the S&P 500(R) Index and 6.41% for the
Blended Index.
* The S&P 500(R) Index consists of 500 stocks 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 ("MSCI EAFE") Index (8%),
and Lehman Brothers U.S. Aggregate Index (50%).
*** Wilshire measures the performance of all U.S. headquartered equity
securities with readily available price data. Over 5,000 capitalization
weighted security returns are used to adjust the 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.
*****The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
5.50% 6.11% 7.19%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
108 CORE BOND FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The Core Bond Fund posted a return of 1.82% for the twelve-month period ending
August 31, 2006, compared to a return of 1.71% for the Lehman Brothers U.S.
Aggregate Index.
Market conditions continued to play a role in the performance of the Fund
versus its benchmark. The Fund's exposure to lower credit rated bonds provided
a solid boost to performance. In addition, a strong market environment enabled
the Fund to seek higher yielding bonds in all asset classes, an excellent
driver of returns for the year.
Sector selection played an important role in returns. Broadly speaking,
Emerging Market Debt performed strongly. U.S. High Yield Bonds were also a
strong contributor as conditions in that asset class remained favorable. Within
Investment Grade Credit, investments in the Financial sector provided the
largest boost, while Federal Home Loan Mortgage Corporation Mortgage Backed
Securities investments were a drag on performance.
Specific security selection proved once again to be a primary driver of returns
in the Fund. Each asset class is managed from a "bottom up" perspective which
places a high degree of weight on the manager's ability to select the best
performing securities available. Top performing securities for the year
included Calpine secured debt, Republic of Venezuela, Republic of Turkey, and
Atlas Air secured notes. Poor performers included Calpine unsecured notes,
Verizon New York and American Store issues.
Growth of $10,000 Investment
[CHART]
Core Lehman Brothers U.S.
Bond Fund Aggregate Index*
--------- -------------------------
9/21/1998 $10,000 $10,000
8/31/1999 9,983 9,958
8/31/2000 10,513 10,709
8/31/2001 11,649 12,033
8/31/2002 12,334 13,009
8/31/2003 12,836 13,576
8/31/2004 13,569 14,408
8/31/2005 14,254 15,006
8/31/2006 14,513 15,262
For the year ended August 31, 2006, the Core Bond Fund returned 1.82% compared
to 1.71% for the Lehman Brothers U.S. Aggregate Index.
*The Lehman Brothers Aggregate Bond Index covers the investment grade fixed
rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
1.82% 4.49% 4.80%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
HIGH YIELD BOND FUND - COMPARISON: FUND VS. INDEX 109
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The High Yield Bond Fund posted a return of 8.16% for the twelve-month period
ending August 31, 2006, compared to a return of 5.06% for the Citigroup High
Yield Market Index.
For the fiscal year, security selection was by far the largest contributor to
excess performance versus the benchmark. Notable positive contributors were
Utilities, Wireless, Energy-Other, and to a lesser extent Broadcast-Outdoor,
and Automotive. In the Utilities sector, performance was driven by two debt
instruments, Southern Energy and Calpine, and a bond position in NRG Energy
Inc. For the Wireless and Energy-Other sectors, the largest contributors were
equity positions in IPCS Inc. and Trico Marine, respectively. The notable
contributor in Broadcast-Outdoor was a preferred stock position in Paxson (now
ION Media Networks). Finally, in the Automotive sector, excess performance was
due to holdings in General Motors/GMAC and to a lesser extent in Ford/Ford
Motor Credit.
With regard to sector selection, the most notable sectors were Airlines and
Automotive. A large overweight allocation to the Airline sector was
significantly positive for the Fund as this sector had one of the highest
returns in the index for the period. A large underweight allocation in
Automotive, which was an outperforming sector, hurt performance.
Growth of $10,000 Investment
[CHART]
High Yield Citigroup High Yield
Bond Fund Market Index*
---------- --------------------
9/21/1998 $10,000 $10,000
8/31/1999 10,540 10,513
8/31/2000 11,173 10,655
8/31/2001 10,927 10,674
8/31/2002 10,060 9,766
8/31/2003 12,481 12,392
8/31/2004 14,512 14,170
8/31/2005 17,064 15,449
8/31/2006 18,436 16,231
For the year ended August 31, 2006, the High Yield Bond Fund returned 8.16%
compared to 5.06% for the Citigroup High Yield Market Index.
*The Citigroup High Yield Market Index measures the performance of below
investment grade debt issued by corporations domiciled in the United States or
Canada. All of the bonds in such index are publicly placed, have a fixed
coupon, and are nonconvertible.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
8.16% 11.03% 8.01%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
110 INTERNATIONAL SMALL CAP EQUITY - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The International Small Cap Equity Fund posted a return of 21.36% for the
twelve-month period ending August 31, 2006, compared to a return of 19.42% for
the Morgan Stanley Capital International Europe, Australasia, Far East Small
Cap Index.
Sector, region, and country selection negatively impacted performance relative
to the benchmark. However, the contribution to performance from security
selection, the primary focus of the Fund's investment approach, outweighed all
other effects, leading to overall excess performance relative to the benchmark.
From a country perspective, an underweight allocation in the United Kingdom
negatively impacted performance. However, this underperformance was primarily
the result of currency and stock selection. Positions in Premier Oil, Getmobile
Europe and Rhm Plc were the most significant detractors from performance in the
United Kingdom.
From a sector standpoint, an overweight position in Technology and underweight
position in Materials detracted from performance, however, positive stock
selection in Technology counter-balanced the negative sector effects. On an
individual stock basis, Norwegian oil services provider, Aker Kvaerner, was the
leading contributor to performance. Greek Bank of Piraeus delivered significant
returns as well. In Japan, Toho Zinc was a solid contributor in the Materials
sector.
GROWTH OF $10,000 INVESTMENT
[CHART]
International
Small Cap MSCI EAFE Small Cap
Equity Fund Index*
------------- -------------------
9/21/1998 $10,000 $10,000
8/31/1999 11,911 13,656
8/31/2000 16,355 14,098
8/31/2001 11,752 11,571
8/31/2002 10,234 10,485
8/31/2003 10,842 12,568
8/31/2004 12,514 16,190
8/31/2005 17,131 21,477
8/31/2006 20,790 25,235
For the year ended August 31, 2006, the International Small Cap Equity returned
21.36% compared to 19.42% for the MSCI EAFE Small Cap Index.
*The Morgan Stanley Capital International Europe, Australasia, and the Far East
Index ("MSCI EAFE") Small Cap Index is comprised of 40% of the full market
capitalization of the eligible small cap universe with each industry group and
each country in the MSCI EAFE Index.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
21.36% 12.09% 9.65%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
LARGE CAP VALUE FUND - COMPARISON: FUND VS. INDEX 111
MANAGEMENT OVERVIEW
A discussion with SSgA Funds Management, Inc.
The Large Cap Value Fund posted a return of 12.98% for the twelve-month period
ending August 31, 2006, compared to a return of 13.96% for the Russell 1000(R)
Value Index.
While positions among Energy, Utilities and Healthcare stocks added value,
there were losses within Materials, Consumer Staples and Telecommunications
stocks. An overweight position in Kerr-McGee Corp. was the largest stock-level
contributor for this time period. Additionally, an overweight position in Merck
& Co. also contributed positively to performance.
A number of overweight positions detracted from the Fund's positive results.
The maker of anti-virus software, McAfee Inc. served as one of the largest
stock-level performance detractors. Other detractors included the US book
retailer, Barnes & Noble Inc., Capital One Financial Corp., and AmeriCredit
Corp.
GROWTH OF $10,000 INVESTMENT
[CHART]
Large Cap Russell 1000/R/
Value Fund Value Index*
---------- ------------
9/21/1998 $10,000 $10,000
8/31/1999 12,126 12,244
8/31/2000 13,018 12,753
8/31/2001 12,672 12,610
8/31/2002 11,786 10,954
8/31/2003 12,798 12,227
8/31/2004 14,388 14,369
8/31/2005 17,066 16,791
8/31/2006 19,282 19,135
For the year ended August 31, 2006, the Large Cap Value Fund returned 12.98% as
compared to 13.96% for the Russell 1000(R) Value Index.
*The Russell 1000(R) Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
12.98% 8.76% 8.62%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
112 MID CAP GROWTH FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with A I M Capital Management, Inc.
The Mid Cap Growth Fund posted a return of 7.80% for the twelve-month period
ending August 31, 2006, compared to a return of 6.00% for the Russell MidCap(R)
Growth Index.
The Fund outperformed relative to the benchmark in four sectors -- Consumer
Staples, Telecom, Consumer Discretionary and Information Technology (IT). In
the Consumer Staples sector, two holdings made significant contributions to
Fund performance, Hansen Natural and Archer-Daniels-Midland. In the
Telecommunication sector, the Fund benefited from both stock selection and a
large overweight position. Several wireless holdings made key contributions to
fund performance, including American Tower Corp, NII Holdings and Leap
Wireless. Positive performance in the Consumer Discretionary sector was driven
by strong stock selection and an underweight position, as many consumer-related
stocks struggled during the reporting period. However, some holdings held up
during this period, including Office Depot. Solid stock selection in the
Technology sector also enhanced fund performance, software holdings that
performed well included Red Hat Inc. and Citrix Systems. In the technology
services area, Alliance Data Systems contributed to Fund performance.
The Fund underperformed relative to the benchmark in four sectors --
Healthcare, Energy, Financials and Utilities. Underperformance in the
Healthcare, Energy and Financials sectors was driven largely by stock
selection. In the Healthcare sector, two of the largest detractors from
performance were holdings in Amerigroup and Lifepoint Hospitals. In the Energy
sector, the largest detractor from performance was Aventine Renewable Energy.
In the Financials sector, key detractors included real estate investment trust
holdings Aames Investment and Friedman Billings Ramsey. Insurance holdings
National Financial Partners and Endurance Specialty Holdings also detracted
from Fund performance. Underperformance in the Utilities sector was driven
largely by an underweight position, as this was one of the top performing
sectors in the Russell MidCap(R) Growth Index during the reporting period.
GROWTH OF $10,000 INVESTMENT
[CHART]
Mid Cap Russell Midcap/R/
Growth Fund Growth Index*
----------- -----------------
9/21/1998 $10,000 $10,000
8/31/1999 11,636 13,692
8/31/2000 17,017 22,891
8/31/2001 9,020 12,580
8/31/2002 6,460 9,639
8/31/2003 8,293 12,568
8/31/2004 8,642 13,506
8/31/2005 10,999 17,078
8/31/2006 11,857 18,102
For the year ended August 31, 2006, the Mid Cap Growth Fund returned 7.80%
compared to 6.00% for the Russell Midcap(R) Growth Index.
*The Russell Midcap(R) Growth Index measures the performance of those mid cap
companies with higher price-to-book ratios and higher forecasted growth
values. The stocks are also members of the Russell(R) 1000 Growth Index.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
7.80% 5.62% 2.17%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
MID CAP VALUE FUND - COMPARISON: FUND VS. INDEX 113
MANAGEMENT OVERVIEW
A discussion with Wellington Management Company, LLP.
The Mid Cap Value Fund posted a return of 10.74% for the twelve-month period
ending August 31, 2006, compared to a return of 10.13% for the Russell 2500(R)
Value Index.
A discussion with Wellington Management Company, LLP -- regarding their portion
of the Fund ("the portfolio")
The portfolio's overall sector selection detracted from relative performance
during the period. An overweight allocation to Consumer Discretionary, the
worst performing sector during the period and an underweight allocation to
Financials, specifically Real Estate, detracted from relative results. The
portfolio benefited from overweight allocations to Materials and Information
Technology and an underweight allocation to Utilities.
The portfolio's overall security selection was the driver of relative excess
performance during the period. Stock selection was strong within Consumer
Discretionary, Materials, and Information Technology. Consumer Discretionary
holdings such as Office Depot and Ruby Tuesday contributed to relative results,
as did avoidance of the Automobile and Component companies such as Delphi and
Dana Corporation. Materials sector holdings Inco and Pactiv were among the
strongest relative performing stocks in the portfolio. Inco was eliminated from
the portfolio during the period. Additionally, Information Technology holdings
Seagate Technology, Reynolds and Reynolds and LAM Research posted strong gains
during the period. Seagate Technology was eliminated from the portfolio during
the period. The largest relative detractors during the period were Impax Lab,
Goodrich and R.H. Donnelley.
A discussion with FAF Advisors, Inc (formerly US Bancorp Asset Management) --
regarding their portion of the Fund ("the portfolio")
FAF Advisors, Inc. assumed management responsibilities for their portion of the
portfolio on November 7, 2005.
Market conditions were generally favorable with small and mid cap value stocks
advancing approximately 11.8% during the period. Leading sectors included
Telecom Services, Materials, and Utilities, while Consumer Discretionary and
Healthcare sectors lagged.
The portfolio underperformed the benchmark with regard to sector selection as
the portfolio was underweight in the Telecom and Materials sectors which
experienced strong relative performance during the period. Additionally, the
portfolio was overweight in Household Durables within the Consumer
Discretionary sector which underperformed during the period.
Stock selection was positive with strong relative returns within the Consumer
Discretionary, Consumer Staples, Energy and Industrial areas. Stock selection
was negative in the Financials, Healthcare, Technology and Materials sectors.
Key stocks that had a positive impact on performance include energy company
Kerr-McGee, specialty chemical manufacturer Engelhard-Corp, agricultural
concern Archer-Daniels-Midland Co, mining equipment manufacturer Joy Global Inc
and paint manufacturer Sherwin-Williams Co. Stocks that lagged during the
period include homebuilder Pulte Homes Inc, chemical manufacturer Lyondell
Chemical, health care supplies provider PerkinElmer Inc and tool manufacturer
Black & Decker Corp. The portfolio's investment process continues to focus on
selecting companies that exhibit improving fundamentals, that sell at
attractive valuations and which exhibit a near term catalyst for improvement in
investor perception.
Growth of $10,000 Investment
[CHART]
Mid Cap Russell 2500/R/
Value Fund Value Index*
---------- ---------------
9/21/1998 $10,000 $10,000
8/31/1999 13,560 11,202
8/31/2000 17,534 12,633
8/31/2001 18,365 14,481
8/31/2002 16,502 13,934
8/31/2003 19,865 16,911
8/31/2004 22,818 20,275
8/31/2005 28,107 25,346
8/31/2006 31,127 27,913
For the year ended August 31, 2006, the Mid Cap Value Fund returned 10.74%
compared to 10.13% for the Russell 2500(R) Value Index.
*The Russell 2500 Value Index measures the performance of those Russell 2500
companies (the 2500 smallest companies, by market capitalization in the
Russell 3000 Index) with lower price-to-book ratios and lower forecasted
growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
10.74% 11.13% 15.37%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
114 MODERATE GROWTH LIFESTYLE FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The equity and fixed income markets were positive in the year ending August 31,
2006, with the Dow Jones Wilshire 5000 Total Market, Morgan Stanley Capital
International Europe, Australasia, Far East, and Lehman Brothers U.S. Aggregate
Indices returning 8.76%, 24.28%, and 1.71% respectively. For the period, the
Moderate Growth Lifestyle Fund returned 7.21% versus a return of 8.88% for the
S&P 500(R) Index, the Fund's benchmark, and 8.86% for the Blended Index.
The domestic equity sub-funds had mixed results with the small, medium, and
large cap value funds outperforming while their growth counterparts
underperformed. The VC II International Small Cap Equities Fund started the
year as the Fund's fourth largest holding and returned 19.06% thru the end of
July when it was removed from the Fund. The VC I International Equities Fund,
added at the beginning of 2006, is now the fourth largest holding in the Fund
and has returned 11.74% since being added. The VC II Capital Appreciation Fund,
the Fund's largest holding, was the worst performer for the year, returning
0.06%, nearly nine percent behind the Wilshire index. The VC II Core Bond Fund,
the Fund's second largest holding, outperformed the Lehman Brothers U.S.
Aggregate Index by 11 basis points, returning 1.82%.
Growth of $10,000 Investment
[CHART]
Moderate Dow Jones
Growth S & P Wilshire 5000 MSCI Lehman Brothers
Lifestyle 500/R/ Blended Total Market EAFE U.S. Aggregate
Fund Index* Index** Index*** Index**** Index*****
--------- ------- ------- ------------- --------- --------------
9/21/1998 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/1999 12,039 13,057 12,075 12,986 13,213 9,958
8/31/2000 14,843 15,188 13,869 15,583 14,475 10,709
8/31/2001 12,748 11,484 11,773 11,601 10,950 12,033
8/31/2002 11,650 9,417 10,703 9,680 9,313 13,009
8/31/2003 13,029 10,553 11,907 11,118 10,161 13,576
8/31/2004 14,197 11,762 13,287 12,396 12,462 14,408
8/31/2005 16,593 13,238 15,078 14,365 15,400 15,006
8/31/2006 17,790 14,413 16,414 15,624 19,138 15,262
For the year ended August 31, 2006, the Moderate Growth Lifestyle Fund returned
7.21% compared to 8.88% for the S&P 500(R) Index and 8.86% for the Blended
Index.
* The S&P 500(R) Index consists of 500 stocks 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 ("MSCI EAFE") (15%) Index,
and Lehman Brothers U.S. Aggregate Index (30%).
*** Wilshire measures the performance of all U.S. headquartered equity
securities with readily available price data. Over 5,000 capitalization
weighted security returns are used to adjust the 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.
*****The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
7.21% 6.89% 7.52%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
MONEY MARKET II FUND - COMPARISON: FUND VS. INDEX 115
MANAGEMENT OVERVIEW
A discussion with AIG SunAmerica Asset Management Corp.
The Money Market II Fund returned 4.09% for the twelve-month period ending
August 31, 2006, compared to a return of 4.27% for the T-Bill 3 Month Index and
1.18% for the NYC 30 day CD Rate.*
The Federal Open Market Committee raised short-term interest rates by 25 basis
points at each meeting this past year except for August. The last 25 basis
point increase in June, the seventeenth consecutive increase brought their
target rate to 5.25%. Throughout the period, policy makers described monetary
policy as balanced, in an effort to contain long term inflation pressures.
Yields on the money market securities increased steadily throughout the period
with 1-month CDs yielding approximately 5.29% at the end of the period, up from
the 3.65% level at the start of the fiscal year.
Average Annual Total Return
- --------------------------------
1 Year 5 Years Since Inception**
- --------------------------------
4.09% 1.82% 3.07%
- --------------------------------
**Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
*The NYC 30 day CD Rate return is from September 1, 2005 through March 31, 2006
due to the NYC 30 day CD Rate return being inaccessible after March 31, 2006.
116 SMALL CAP GROWTH FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with Franklin Advisers, Inc.
The Small Cap Growth Fund posted a return of 4.02% for the twelve-month period
ending August 31, 2006, compared to a return of 6.00% for the Russell 2000(R)
Growth Index.
The most significant contributors to performance relative to the benchmark came
from investments in the Electronic Technology sector, where stock selection in
the telecommunications equipment and electronic production equipment industries
helped performance, as did an overweight allocation in semiconductors.
Performance relative to the index was also positively impacted by an overweight
position in Finance, where investments in regional banks and real estate
development companies fared well. Stock selection in Energy Minerals, primarily
oil and gas production companies, also aided the Fund's relative results.
The most significant detractor to the Fund's performance relative to the
benchmark came from stock selection in the Health Technology sector, as
investments in medical specialties and generic pharmaceuticals generally posted
disappointing returns. Stock selection in the Retail Trade sector was also a
hindrance to performance, as was an overweight position and poor stock
selection in the Process Industries sector.
Growth of $10,000 Investment
[CHART]
Small Cap Russell 2000/R/
Growth Fund Growth Index*
----------- ---------------
9/21/1998 $10,000 $10,000
8/31/1999 13,831 13,072
8/31/2000 23,362 18,181
8/31/2001 12,512 11,828
8/31/2002 8,661 8,750
8/31/2003 11,353 11,804
8/31/2004 11,938 12,203
8/31/2005 14,267 15,072
8/31/2006 14,841 15,976
For the year ended August 31, 2006, the Small Cap Growth Fund returned 4.02%
compared to 6.00% for the Russell 2000(R) Growth Index.
*The Russell 2000(R) Growth Index measures the performance of those Russell
2000(R) companies with higher price-to-book ratios and higher forecasted
growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
4.02% 3.47% 5.10%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
SMALL CAP VALUE FUND - COMPARISON: FUND VS. INDEX 117
MANAGEMENT OVERVIEW
A discussion with JPMorgan Investment Advisors, Inc.
The Small Cap Value Fund posted a return of 9.69% for the twelve-month period
ending August 31, 2006, compared to a return of 12.72% for the Russell 2000(R)
Value Index.
Stock selection in the Industrial Cyclical and Software & Services sectors
detracted from performance, while the Health Services and Insurance sectors
contributed to performance.
The largest detractor from performance was Teleflex Inc., a diversified
manufacturer. Bisys Group, a financial services outsourcer, also detracted from
performance. The largest contributor to performance was Terex Corp., a maker of
construction and industrial equipment. Illumina Inc., manufacturer of tools
used for genetic analysis also contributed to performance.
GROWTH OF $10,000 INVESTMENT
[CHART]
Small Cap Russell 2000/R/
Value Fund Value Index*
---------- ---------------
9/21/1998 $10,000 $10,000
8/31/1999 10,361 10,834
8/31/2000 12,176 12,318
8/31/2001 13,636 14,540
8/31/2002 12,469 13,726
8/31/2003 14,912 16,976
8/31/2004 17,502 20,286
8/31/2005 21,150 24,872
8/31/2006 23,198 28,036
For the year ended August 31, 2006, the Small Cap Value Fund returned 9.69%
compared to 12.72% for the Russell 2000(R) Value Index.
*The Russell 2000(R) Value Index measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
9.69% 11.21% 11.18%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
118 SOCIALLY RESPONSIBLE FUND - COMPARISON: FUND VS. INDEX
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The Socially Responsible Fund posted a return of 10.16% for the twelve-month
period ending August 31, 2006, compared to a return of 8.88% for the S&P 500(R)
Index.
The Fund's excess performance was due to stock selection. One negative of the
past year's performance was sector allocation. Over the past year the sectors
that had the greatest impact on performance were Materials and Telecomm.
Underweight allocations to the Materials and Telecomm sectors, stemming largely
from the social mandate, reduced performance. Once again, stock selection was a
positive contributor to performance, offsetting entirely the sector bias. Two
holdings that were significant positive contributors to performance were Merck
(MRK) and Hewlett Packard (HPQ).
Growth of $10,000 Investment
[CHART]
Socially S & P 500/R/
Responsible Fund Index*
---------------- ------------
9/21/1998 $10,000 $10,000
8/31/1999 12,783 13,057
8/31/2000 14,672 15,188
8/31/2001 11,087 11,484
8/31/2002 9,019 9,417
8/31/2003 10,153 10,553
8/31/2004 11,138 11,762
8/31/2005 12,346 13,238
8/31/2006 13,601 14,413
For the year ended August 31, 2006, the Socially Responsible Fund returned
10.16% compared to 8.88% for the S&P 500(R) Index.
*The S&P 500(R) Index consists of 500 stocks chosen for market size, liquidity,
and industry group representation. It is a market-value weighted index with
each stock's weight in the index proportionate to its market value.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
10.16% 4.17% 3.95%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
STRATEGIC BOND FUND - COMPARISON: FUND VS. INDEX 119
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The Strategic Bond Fund posted a return of 5.75% for the twelve-month period
ending August 31, 2006, compared to a return of 1.71% for the Lehman Brothers
U.S. Aggregate Index.
Market conditions continued to play a role in the performance of the Fund
versus its benchmark. The Fund's exposure to lower credit rated bonds provided
a solid boost to performance. Lastly, a strong market environment enabled the
Fund to seek higher yielding bonds in all asset classes, an excellent driver of
returns for the year.
Sector selection played an important role in returns. Broadly speaking,
Emerging Market Debt was the most significant contributor to yearly
performance. U.S. High Yield Bonds were also a strong contributor as conditions
in that asset class remained favorable. Exposure to the Mortgage-Backed
Securities market also aided performance.
Specific security selection proved once again to be the primary driver of
returns in the fund. Top performing securities included investments in Emerging
Market Debt of Brazil, Argentina, Turkey, and Venezuela. In the high yield
sector, investments in Calpine secured debt provided excellent returns.
Underperforming securities included investments in Hospital Corporation of
America (HCA), Republic of South Africa, Republic of Columbia, and Calpine
unsecured debt.
Country selection had an impact on returns in both Emerging Markets and
Non-Dollar Investment Grade sectors. South African, Japanese, and Columbian
investments proved a negative drag on yearly returns, while Swedish, Canadian,
and British investments provided a boost to returns.
Growth of $10,000 Investment
[CHART]
Strategic Lehman Brothers
Bond Fund U.S. Aggregate Index*
--------- ---------------------
9/21/1998 $10,000 $10,000
8/31/1999 10,409 9,958
8/31/2000 11,286 10,709
8/31/2001 11,951 12,033
8/31/2002 12,326 13,009
8/31/2003 14,511 13,576
8/31/2004 16,021 14,408
8/31/2005 17,873 15,006
8/31/2006 18,900 15,262
For the year ended August 31, 2006, the Strategic Bond Fund returned 5.75%
compared to 1.71% for the Lehman Brothers U.S. Aggregate Index.
*The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
5.75% 9.60% 8.34%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
120 VALIC COMPANY II
BOARD OF TRUSTEES
Thomas J. Brown
Judith L. Craven
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 SUBADVISERS
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, New Jersey 07311-4992
A I M Capital Management, Inc.
11 Greenway Plaza
Houston, Texas 77046
Bridgeway Capital Management, Inc.
5615 Kirby Dr., Suite 518
Houston, TX 77005
FAF Advisors, Inc.
800 Nicollet Mall
Minneapolis, Minnesota 55402
Franklin Advisers, Inc.
One Franklin Parkway
San Mateo, California 94403-1906
JPMorgan Investment Advisors, Inc.
1111 Polaris Parkway
Columbus, Ohio 43271-0211
SSgA Funds Management, Inc.
2 International Place
Boston, Massachusetts 02110
Wellington Management Co., 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 (VALIC)
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, Chief Legal Officer and Secretary
Cynthia A. Gibbons,
Vice President, Chief Compliance Officer and Assistant Secretary
Donna Handel,
Vice President and Assistant Treasurer
Kathryn A. Pearce,
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 U.S. Securities and Exchange Commission for its first and
third fiscal quarters on Form N-Q. VALIC Company II's Forms N-Q are available
on the U.S. Securities and Exchange Commission's website at www.sec.gov. You
can also review and obtain copies of Forms N-Q at the U.S. Securities and
Exchange Commission'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).
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 VALIC Company II's Statement of Additional
Information, may be obtained without charge upon request, by calling
800-448-2542. This information is also available from the EDGAR database on the
U.S. 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 portfolios during the most recent
twelve month period ended June 30, is available, once filed with the U.S.
Securities and Exchange Commission without charge, upon request, by calling
800-448-2542 or on the U.S. Securities and Exchange Commission's website at
http://www.sec.gov.
AIG VALIC ONLINE
Account Access
You must establish a Manage your account on the Web through AIG VALIC
Personal Identification Online!
Number (PIN) before
using the automated Enjoy quick, easy and secure access -- now or anytime.
account services. Go to www.aigvalic.com and click on "AIG VALIC Online"
in the Login Section.
Your PIN is valid for You'll find these exciting features:
both AIG VALIC by Phone
at 1.800.448.2542 . View your account portfolio including values
and AIG VALIC Online. . View, download or print account and transaction
confirmation statements
. View current and historical fund performance and
unit values
. View or download transaction history
. View your financial advisor's contact information
. Update or reset your Personal Identification Number
(PIN)
. Change your contact information such as telephone,
address or e-mail
. Initiate account transactions including:
(greater than)Allocation changes
(greater than)Transfer money among investment options
(greater than)
Rebalance account to your desired allocation mix
. Loan modeling
. Request forms for a variety of services
. Ability to display information from other accounts
. Enroll in the electronic document delivery service
Start exploring AIG VALIC Online today by establishing
a Personal Identification Number (PIN)!
To set up a PIN through AIG VALIC Online:
. Go to www.aigvalic.com
. Click "AIG VALIC Online" in the Login Section
. Click "I am a new user"
. Enter the information required to establish a new
PIN
. Click "I Agree" to accept AIG VALIC'S access
agreement (required)
. Verify and/or update your address, e-mail and
telephone number information
. Click "Continue" to update your record and proceed
to the Client Summary screen
Your PIN setup is complete when the Client Summary
screen appears.
This PIN is valid for both AIG VALIC by Phone at
1-800-448-2542 and AIG VALIC Online.
AIG VALIC by Phone is AIG VALIC'S toll-free automated
phone line providing 24-hour access to your account.
---------------
VALIC COMPANY II PRSRT STD
P.O. Box 3206 U.S. POSTAGE
Houston, Texas 77253-3206 PAID
LANCASTER, PA
PERMIT NO. 1765
---------------
VL 11288 VER 08/06
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.
The Registrant's Board of Trustees has determined that Thomas J. Brown qualifies
as an audit committee financial expert, as defined in instruction 2(b) of item 3
of Form N-CSR. Mr. Brown is considered an independent Trustee pursuant to
paragraph (a) (2) of item 3 of Form N-CSR.
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:
2005 2006
Audit Fees $ 243,410 $267,750
Audit-Related Fees $ 64,295 $ 85,194
Tax Fees $ 89,990 $ 60,730
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 2006 and 2005 were $2,322,603 and
$890,253, 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
Series'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.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. 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 as defined under
Rule 30a-3(c) under the Investment Company Act of 1940
(17 CFR 270.30a-3(c)). 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 of 1940 (17 CFR 270.30a-3(d))) that
occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal contro1
over financial reporting.
Item 12. 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(a)) attached hereto as
Exhibit 99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) and 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 8, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Evelyn M. Curran
----------------------------
Evelyn M. Curran
President
Date: November 8, 2006
By: /s/ Gregory R. Kingston
----------------------------
Gregory R. Kingston
Treasurer
Date: November 8, 2006