UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21587
Old Mutual Funds I
(Exact name of registrant as specified in charter)
--------
4643 South Ulster Street, Suite 600
Denver, CO 80237
(Address of principal executive offices)
Julian F. Sluyters
4643 South Ulster Street, Suite 600, Denver, CO 80237
(Name and address of agent for service)
Copies to:
Jay G. Baris, Esq. Andra C. Ozols, Esq.
Kramer Levin Naftalis & Frankel LLP Old Mutual Capital, Inc.
1177 Avenue of the Americas 4643 South Ulster Street, Suite 600
New York, New York 10036 Denver, CO 80237
(212) 715-9100 (720) 200-7725
Registrant's telephone number, including area code:
1-888-772-2888
Date of fiscal year end: December 31
Date of reporting period: June 30, 2008
Item 1. Reports to Stockholders.
[OLD MUTUAL LOGO]
Funds I
Old Mutual Funds I
SEMI-ANNUAL
REPORT
June 30, 2008
Old Mutual VA Asset Allocation Conservative Portfolio
Old Mutual VA Asset Allocation Balanced Portfolio
Old Mutual VA Asset Allocation Moderate Growth Portfolio
TABLE OF CONTENTS
About This Report 1
Message to Shareholders 2
Portfolio Summary and Schedules of Investments
Old Mutual VA Asset Allocation Conservative Portfolio
Initial Class (OVCIX), Service Class (OVCSX) 3
Old Mutual VA Asset Allocation Balanced Portfolio
Initial Class (OVBIX), Service Class (OVBSX) 5
Old Mutual VA Asset Allocation Moderate Growth Portfolio
Initial Class (OVMIX), Service Class (OVMSX) 7
Statements of Assets & Liabilities 9
Statements of Operations 10
Statements of Changes in Net Assets 11
Financial Highlights 12
Notes to Financial Statements 13
Proxy Voting and Portfolio Holdings 26
Portfolio Expenses Example 27
ABOUT THIS REPORT
HISTORICAL RETURNS
- --------------------------------------------------------------------------------
All total returns mentioned in this report account for the change in a
Portfolio's per-share price and assume the reinvestment of any dividends and
capital gain distributions. Past performance does not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance results represent past performance, and current performance may be
higher or lower. In addition, performance results for short periods of time may
not be representative of longer term results. The returns for certain periods
may reflect fee waivers and/or reimbursements in effect for that period; absent
fee waivers and reimbursements, performance would have been lower.
The Portfolios are only available through certain variable annuity contracts and
variable life insurance policies offered by the separate accounts of
participating insurance companies. The Portfolios' performance does not reflect
the fees and expenses associated with the variable insurance products. Early
withdrawal from the variable insurance products may result in tax penalties as
well as sales charges assessed by the variable annuity provider.
PORTFOLIO DATA
- --------------------------------------------------------------------------------
This report reflects views, opinions, and Portfolio holdings as of June 30,
2008, the end of the report period, and is subject to change. The information is
not a complete analysis of every aspect of any sector, industry, security or the
Portfolio. Opinions and forecasts regarding industries, companies and/or themes,
and Portfolio composition and holdings, are subject to change at any time based
on market and other conditions, and should not be construed as a recommendation
of any specific security or as investment advice. Percentage holdings as of June
30, 2008 are included in a Portfolio's Schedule of Investments. There is no
assurance that the securities purchased will remain in a Portfolio or that
securities sold have not been repurchased.
There are risks associated with mutual fund investing, including the risk of
loss of principal. There is no assurance that the investment process will
consistently lead to successful results. There are also risks associated with
small- and mid-cap investing, including limited product lines, less liquidity
and small market share. An investment concentrated in sectors and industries may
involve greater risk and volatility than a more diversified investment. An
investment in a Portfolio is not a bank deposit or other obligation, or
guaranteed by a depository institution. It is not insured or guaranteed by the
Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
COMPARATIVE INDEXES
- --------------------------------------------------------------------------------
The comparative indexes discussed in this report are meant to provide a basis
for judging a Portfolio's performance against a specific securities index. Each
index accounts for changes in security price and assumes reinvestment of
dividends and distributions, but does not reflect the cost of managing a mutual
fund. A Portfolio may significantly differ in holdings and composition from an
index and individuals cannot invest directly in an index.
Indexes:
Russell 3000(R) Growth Index
The unmanaged Russell 3000(R) Growth Index measures the performance of those
Russell 3000(R) Index companies with higher price-to-book ratios and higher
forecasted growth values.
Russell 3000(R) Value Index
The unmanaged Russell 3000(R) Value Index measures the performance of those
Russell 3000(R) Index companies with lower price-to-book ratios and lower
forecasted growth values. The stocks in this index are also members of either
the Russell 1000(R) Value or the Russell 2000(R) Value Indexes.
Standard & Poor's 500 Index
The unmanaged Standard & Poor's 500 ("S&P 500") Index is a market value-weighted
index that measures the performance of large-cap common stocks across all major
industries.
Index returns and statistical data included in this report are provided by
Bloomberg and FactSet.
1
MESSAGE TO SHAREHOLDERS
Dear Shareholder:
Financial markets were volatile during the semi-annual period ended June 30,
2008. The first quarter of the period was trying for investors as every major
domestic equity index traded lower. With market volatility higher and investor
sentiment biased toward risk aversion, companies with the highest earnings
growth prospects fared the worst during the quarter. The second quarter began
with a strong rally propelling all the major indices higher. The rally was
short-lived, however, as surging crude oil prices, declining consumer confidence
and ailing financial firms continued to fuel broad concerns about the economy
and profits. Equity markets were generally weak across the board, without regard
to market capitalization or investment style, although emerging market economies
continued to garner interest. During the period, U.S. stocks, as measured by the
S&P 500 Index, declined by (11.91)%. The broad market Russell 3000(R) Growth and
Russell 3000(R) Value Indexes posted declines of (9.04)% and (13.28)%,
respectively. Overall, the period was one where growth stock indexes
outperformed value-oriented indexes on a relative basis, while mid-cap stocks
outperformed large and small cap peers.
The downturn in the housing market and dislocation in the mortgage market that
contributed to the sharp increase in volatility in the latter half of 2007
continued throughout the first six months of 2008. The decreased willingness for
market participants to adequately price a wide range of previously liquid
financial instruments led to a credit crunch that severely disrupted all markets
in March. Sagging home prices, uncertainty in the labor markets, decelerating
wage growth and high gas prices brought consumer confidence down to a level not
seen in decades. Overall, concerns about the U.S. economy and the credit crunch
caused a major downturn in stock prices regardless of the individual company's
fundamentals. Against this backdrop, Old Mutual VA Asset Allocation Portfolios
produced results during the period that were generally in-line with the returns
of their respective benchmarks.
Despite this challenging environment, there are several reasons to remain
cautiously optimistic as we look forward into the rest of 2008 and beyond. While
the markets in the short term continue to be driven by momentum, we believe the
next six to twelve months may show a rotation back to long ignored equities with
solid cash balances, reasonable debt levels, and good growth prospects. We are
focusing our attention on companies we believe will do well regardless of the
headlines in the paper.
As always, we are grateful for your support and will continue to work diligently
to enhance your experience as an investor in Old Mutual VA Asset Allocation
Portfolios. Please do not hesitate to contact us if there is anything we can do
to serve you better. Feel free to contact me directly, at
President@oldmutualcapital.com, or please see the back cover of this report for
other contact information.
Sincerely,
/s/ Julian F. Sluyters
Julian F. Sluyters
President
Old Mutual Funds I
2
OLD MUTUAL VA ASSET ALLOCATION CONSERVATIVE PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY (UNAUDITED)
Top Ten Holdings as of June 30, 2008
- ------------------------------------------------------------
Old Mutual Dwight Intermediate Fixed Income Fund 26.6%
- ------------------------------------------------------------
Old Mutual Barrow Hanley Core Bond Fund 26.1%
- ------------------------------------------------------------
Old Mutual International Bond Fund 9.1%
- ------------------------------------------------------------
Old Mutual TS&W Mid-Cap Value Fund 7.6%
- ------------------------------------------------------------
Old Mutual Dwight High Yield Fund 7.2%
- ------------------------------------------------------------
Old Mutual Advantage Growth Fund 7.0%
- ------------------------------------------------------------
Old Mutual International Equity Fund 6.4%
- ------------------------------------------------------------
Old Mutual Barrow Hanley Value Fund 2.5%
- ------------------------------------------------------------
Old Mutual Provident Mid-Cap Growth Fund 2.3%
- ------------------------------------------------------------
Old Mutual Analytic U.S. Long/Short Fund 1.8%
- ------------------------------------------------------------
As a % of Total Portfolio Investments 96.6%
- ------------------------------------------------------------
Asset Class Weightings as of June 30, 2008 - % of Total Portfolio Investments
- --------------------------------------------------------------------------------
Cash Equivalents 1%
Government/Corporate 69%
Growth 7%
Growth-Mid Cap 2%
International Equity 6%
Market Neutral-Equity 2%
Value 5%
Value-Mid Cap 8%
[PIE GRAPH WAS REPRESENTED IN THE PRINTED MATERIAL]
3
SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 2008 (UNAUDITED)
- ---------------------------------------------------------------------
Description Shares Value (000)
- ---------------------------------------------------------------------
Affiliated Mutual Funds (1) - 100.0%
Government/Corporate - 69.8%
Old Mutual Barrow Hanley Core
Bond Fund 140,504 $ 1,400
Old Mutual Dwight High Yield Fund 40,895 386
Old Mutual Dwight Intermediate
Fixed Income Fund 142,078 1,429
Old Mutual International Bond Fund 47,404 492
--------------
Total Government/Corporate 3,707
- ---------------------------------------------------------------------
Growth - 7.0%
Old Mutual Advantage Growth Fund* 40,813 374
--------------
Total Growth 374
- ---------------------------------------------------------------------
Growth-Mid Cap - 2.3%
Old Mutual Provident Mid-Cap
Growth Fund* 12,491 122
--------------
Total Growth-Mid Cap 122
- ---------------------------------------------------------------------
International Equity - 6.5%
Old Mutual International Equity Fund 28,957 343
--------------
Total International Equity 343
- ---------------------------------------------------------------------
Market Neutral-Equity - 1.8%
Old Mutual Analytic U.S. Long/Short Fund 7,307 95
--------------
Total Market Neutral-Equity 95
- ---------------------------------------------------------------------
Value - 4.2%
Old Mutual Barrow Hanley Value Fund 21,564 136
Old Mutual Focused Fund 4,150 90
--------------
Total Value 226
- ---------------------------------------------------------------------
Value-Mid Cap - 8.4%
Old Mutual Mid-Cap Fund 3,636 38
Old Mutual TS&W Mid-Cap Value Fund 44,061 410
--------------
Total Value-Mid Cap 448
--------------
Total Affiliated Mutual Funds (Cost $5,386) 5,315
- ---------------------------------------------------------------------
Money Market Fund - 1.1%
Dreyfus Cash Management Fund,
Institutional Class, 2.780% (A) 56,301 56
--------------
Total Money Market Fund (Cost $56) 56
- ---------------------------------------------------------------------
Total Investments - 101.1% (Cost $5,442) 5,371
- ---------------------------------------------------------------------
Other Assets and Liabilities, Net - (1.1)% (61)
- ---------------------------------------------------------------------
Total Net Assets - 100.0% $ 5,310
- ---------------------------------------------------------------------
* Non-income producing security.
(1) - Investments are funds within the Old Mutual family of funds and
they may be deemed to be under common control because they may
share the same Board of Trustees. Old Mutual Capital, Inc.
Government/Corporate - 69.8% serves as the investment adviser to all
affiliated mutual funds.
(A) - The rate reported represents the 7-day effective yield as of
June 30, 2008.
Cost figures are shown with "000's" omitted.
FAS 157 Footnote Disclosure:
The Portfolio utilizes various inputs in determining the value of its
investments. These inputs are summarized in three broad levels as
follows:
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's
own assumption in determining the fair value of
investments)
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing in
those securities.
A summary of the inputs used as of June 30, 2008 in valuing the
Portfolio's net assets were as follows:
Investments
Valuation Inputs (000)
- ---------------------------------------------------------------------
Level 1 - quoted prices $5,371
Level 2 - other significant observable inputs -
Level 3 - significant unobservable inputs -
- ---------------------------------------------------------------------
Total $5,371
- ---------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
OLD MUTUAL VA ASSET ALLOCATION BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY (UNAUDITED)
Top Ten Holdings as of June 30, 2008
- --------------------------------------------------------------
Old Mutual Barrow Hanley Core Bond Fund 14.9%
- --------------------------------------------------------------
Old Mutual Dwight Intermediate Fixed Income Fund 12.2%
- --------------------------------------------------------------
Old Mutual International Equity Fund 12.0%
- --------------------------------------------------------------
Old Mutual Advantage Growth Fund 10.5%
- --------------------------------------------------------------
Old Mutual TS&W Mid-Cap Value Fund 8.8%
- --------------------------------------------------------------
Old Mutual Barrow Hanley Value Fund 6.0%
- --------------------------------------------------------------
Old Mutual International Bond Fund 5.6%
- --------------------------------------------------------------
Old Mutual Analytic U.S. Long/Short Fund 4.2%
- --------------------------------------------------------------
Old Mutual Clay Finlay Emerging Markets Fund 4.1%
- --------------------------------------------------------------
Old Mutual Discover Value Fund 4.1%
- --------------------------------------------------------------
As a % of Total Portfolio Investments 82.4%
- --------------------------------------------------------------
Asset Class Weightings as of June 30, 2008 - % of Total Portfolio Investments
- --------------------------------------------------------------------------------
Aggressive Growth 3%
Cash Equivalents 1%
Emerging Market-Equity 4%
Government/Corporate 37%
Growth 11%
Growth-Mid Cap 3%
International Equity 12%
Market Neutral-Equity 4%
Sector Fund-Real Estate 1%
Value 10%
Value-Mid Cap 10%
Value-Small Cap 4%
[PIE GRAPH WAS REPRESENTED IN THE PRINTED MATERIAL]
5
SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 2008 (UNAUDITED)
- ---------------------------------------------------------------------
Description Shares Value (000)
- ---------------------------------------------------------------------
Affiliated Mutual Funds (1) - 100.5%
Aggressive Growth - 2.7%
Old Mutual Developing
Growth Fund* 9,309 $ 139
--------------
Total Aggressive Growth 139
- ---------------------------------------------------------------------
Emerging Market-Equity - 4.2%
Old Mutual Clay Finlay Emerging
Markets Fund 13,916 217
--------------
Total Emerging Market-Equity 217
- ---------------------------------------------------------------------
Government/Corporate - 37.6%
Old Mutual Barrow Hanley Core
Bond Fund 78,799 785
Old Mutual Dwight High Yield Fund 22,856 216
Old Mutual Dwight Intermediate
Fixed Income Fund 63,985 644
Old Mutual International Bond Fund 28,214 293
--------------
Total Government/Corporate 1,938
- ---------------------------------------------------------------------
Growth - 10.7%
Old Mutual Advantage Growth Fund* 60,518 554
--------------
Total Growth 554
- ---------------------------------------------------------------------
Growth-Mid Cap - 3.1%
Old Mutual Provident Mid-Cap
Growth Fund* 16,622 162
--------------
Total Growth-Mid Cap 162
- ---------------------------------------------------------------------
International Equity - 12.2%
Old Mutual International Equity Fund 52,954 627
--------------
Total International Equity 627
- ---------------------------------------------------------------------
Market Neutral-Equity - 4.2%
Old Mutual Analytic U.S. Long/
Short Fund 16,793 219
--------------
Total Market Neutral-Equity 219
- ---------------------------------------------------------------------
Sector Fund-Real Estate - 0.9%
Old Mutual Heitman REIT Fund 5,629 48
--------------
Total Sector Fund-Real Estate 48
- ---------------------------------------------------------------------
Value - 9.9%
Old Mutual Barrow Hanley Value Fund 49,882 315
Old Mutual Focused Fund 8,925 194
--------------
Total Value 509
- ---------------------------------------------------------------------
Value-Mid Cap - 10.8%
Old Mutual Mid-Cap Fund 8,695 92
Old Mutual TS&W Mid-Cap
Value Fund 49,618 462
--------------
Total Value-Mid Cap 554
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Description Shares Value (000)
- ---------------------------------------------------------------------
Value-Small Cap - 4.2%
Old Mutual Discover Value Fund* 23,534 $ 216
--------------
Total Value-Small Cap 216
--------------
Total Affiliated Mutual Funds
(Cost $5,285) 5,183
- ---------------------------------------------------------------------
Money Market Fund - 1.4%
Dreyfus Cash Management Fund,
Institutional Class, 2.780% (A) 71,759 72
--------------
Total Money Market Fund (Cost $72) 72
- ---------------------------------------------------------------------
Total Investments - 101.9% (Cost $5,357) 5,255
- ---------------------------------------------------------------------
Other Assets and Liabilities, Net - (1.9)% (98)
- ---------------------------------------------------------------------
Total Net Assets - 100.0% $ 5,157
- ---------------------------------------------------------------------
* Non-income producing security.
(1) - Investments are funds within the Old Mutual family of funds and
they may be deemed to be under common control because they may
share the same Board of Trustees. Old Mutual Capital, Inc.
serves as the investment adviser to all affiliated mutual
funds.
(A) - The rate reported represents the 7-day effective yield as of
June 30, 2008.
Cost figures are shown with "000's" omitted.
FAS 157 Footnote Disclosure:
The Portfolio utilizes various inputs in determining the value of its
investments. These inputs are summarized in three broad levels as
follows:
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's
own assumption in determining the fair value of
investments)
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing in
those securities.
A summary of the inputs used as of June 30, 2008 in valuing the
Portfolio's net assets were as follows:
Investments
Valuation Inputs (000)
- ---------------------------------------------------------------------
Level 1 - quoted prices $5,255
Level 2 - other significant observable inputs -
Level 3 - significant unobservable inputs -
- ---------------------------------------------------------------------
Total $5,255
- ---------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
OLD MUTUAL VA ASSET ALLOCATION MODERATE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY (UNAUDITED)
Top Ten Holdings as of June 30, 2008
- ---------------------------------------------------------------
Old Mutual International Equity Fund 18.3%
- ---------------------------------------------------------------
Old Mutual Advantage Growth Fund 16.2%
- ---------------------------------------------------------------
Old Mutual TS&W Mid-Cap Value Fund 9.3%
- ---------------------------------------------------------------
Old Mutual Barrow Hanley Core Bond Fund 8.8%
- ---------------------------------------------------------------
Old Mutual Barrow Hanley Value Fund 8.3%
- ---------------------------------------------------------------
Old Mutual Analytic U.S. Long/Short Fund 6.4%
- ---------------------------------------------------------------
Old Mutual Discover Value Fund 5.7%
- ---------------------------------------------------------------
Old Mutual Dwight Intermediate Fixed Income Fund 4.2%
- ---------------------------------------------------------------
Old Mutual Developing Growth Fund 4.1%
- ---------------------------------------------------------------
Old Mutual Focused Fund 4.0%
- ---------------------------------------------------------------
As a % of Total Portfolio Investments 85.3%
- ---------------------------------------------------------------
Asset Class Weightings as of June 30, 2008 - % of Total Portfolio Investments
- --------------------------------------------------------------------------------
Aggressive Growth 4%
Cash Equivalents 1%
Emerging Market-Equity 3%
Government/Corporate 15%
Growth 16%
Growth-Mid Cap 3%
International Equity 18%
Market Neutral-Equity 7%
Sector Fund-Real Estate 4%
Value 12%
Value-Mid Cap 11%
Value-Small Cap 6%
[PIE GRAPH WAS REPRESENTED IN THE PRINTED MATERIAL]
7
SCHEDULE OF INVESTMENTS
AS OF JUNE 30, 2008 (UNAUDITED)
- ---------------------------------------------------------------------
Description Shares Value (000)
- ---------------------------------------------------------------------
Affiliated Mutual Funds (1) - 100.2%
Aggressive Growth - 4.2%
Old Mutual Developing Growth Fund* 15,155 $ 227
--------------
Total Aggressive Growth 227
- ---------------------------------------------------------------------
Emerging Market-Equity - 3.0%
Old Mutual Clay Finlay
Emerging Markets Fund 10,431 163
--------------
Total Emerging Market-Equity 163
- ---------------------------------------------------------------------
Government/Corporate - 15.4%
Old Mutual Barrow
Hanley Core Bond Fund 48,856 486
Old Mutual Dwight Intermediate
Fixed Income Fund 23,270 234
Old Mutual International Bond Fund 11,563 120
--------------
Total Government/Corporate 840
- ---------------------------------------------------------------------
Growth - 16.4%
Old Mutual Advantage Growth Fund* 97,582 893
--------------
Total Growth 893
- ---------------------------------------------------------------------
Growth-Mid Cap - 3.3%
Old Mutual Provident
Mid-Cap Growth Fund* 18,522 180
--------------
Total Growth-Mid Cap 180
- ---------------------------------------------------------------------
International Equity - 18.5%
Old Mutual International Equity Fund 85,204 1,010
--------------
Total International Equity 1,010
- ---------------------------------------------------------------------
Market Neutral-Equity - 6.5%
Old Mutual Analytic U.S.
Long/Short Fund 27,164 354
--------------
Total Market Neutral-Equity 354
- ---------------------------------------------------------------------
Sector Fund-Real Estate - 3.5%
Old Mutual Heitman REIT Fund 22,177 190
--------------
Total Sector Fund-Real Estate 190
- ---------------------------------------------------------------------
Value - 12.4%
Old Mutual Barrow Hanley
Value Fund 72,095 456
Old Mutual Focused Fund 10,166 221
--------------
Total Value 677
- ---------------------------------------------------------------------
Value-Mid Cap - 11.3%
Old Mutual Mid-Cap Fund 9,509 100
Old Mutual TS&W Mid-Cap
Value Fund 55,072 513
--------------
Total Value-Mid Cap 613
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Description Shares Value (000)
- ---------------------------------------------------------------------
Value-Small Cap - 5.7%
Old Mutual Discover Value Fund* 34,062 $ 313
--------------
Total Value-Small Cap 313
--------------
Total Affiliated Mutual Funds (Cost $5,599) 5,460
- ---------------------------------------------------------------------
Money Market Fund - 1.1%
Dreyfus Cash Management Fund,
Institutional Class, 2.780% (A) 59,600 60
--------------
Total Money Market Fund (Cost $60) 60
- ---------------------------------------------------------------------
Total Investments - 101.3% (Cost $5,659) 5,520
- ---------------------------------------------------------------------
Other Assets and Liabilities, Net - (1.3)% (73)
- ---------------------------------------------------------------------
Total Net Assets - 100.0% $ 5,447
- ---------------------------------------------------------------------
* Non-income producing security.
(1) - Investments are funds within the Old Mutual family of funds and
they may be deemed to be under common control because they may
share the same Board of Trustees. Old Mutual Capital, Inc.
serves as the investment adviser to all affiliated mutual
funds.
(A) - The rate reported represents the 7-day effective yield as of
June 30, 2008.
Cost figures are shown with "000's" omitted.
FAS 157 Footnote Disclosure:
The Portfolio utilizes various inputs in determining the value of its
investments. These inputs are summarized in three broad levels as
follows:
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's
own assumption in determining the fair value of
investments)
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing in
those securities.
A summary of the inputs used as of June 30, 2008 in valuing the Portfolio's net
assets were as follows:
Investments
Valuation Inputs (000)
- ---------------------------------------------------------------------
Level 1 - quoted prices $5,520
Level 2 - other significant observable inputs -
Level 3 - significant unobservable inputs -
- ---------------------------------------------------------------------
Total $5,520
- ---------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
8
STATEMENTS OF ASSETS & LIABILITIES (000, excluding shares)
AS OF JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual Old Mutual Old Mutual
VA Asset Allocation VA Asset Allocation VA Asset Allocation
Conservative Balanced Moderate Growth
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Assets:
Investment in Affiliated Funds, at cost $ 5,386 $ 5,285 $ 5,599
Investments in Unaffiliated Funds, at cost 56 72 60
- ------------------------------------------------------------------------------------------------------------------------------------
Investment in Affiliated Funds, at value $ 5,315 $ 5,183 $ 5,460
Investments in Unaffiliated Funds, at value 56 72 60
Receivable for Dividends and Interest 14 7 3
Receivable from Investment Advisor 10 12 13
Other Assets 2 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 5,397 5,274 5,536
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for Investment Securities Purchased 14 7 3
Payable for Management Fees 5 5 7
Payable to Custodian - - 1
Accrued Expenses 68 105 78
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 87 117 89
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 5,310 $ 5,157 $ 5,447
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid-in Capital ($0.001 par value, unlimited authorization) $ 5,176 $ 5,178 $ 5,743
Undistributed Net Investment Income 78 54 28
Accumulated Net Realized Loss on Investments 127 27 (185)
Net Unrealized Depreciation on Investments (71) (102) (139)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 5,310 $ 5,157 $ 5,447
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - Initial Class $ 5,155 $ 4,990 $ 4,953
Net Assets - Service Class $ 155 $ 167 $ 494
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding Shares of Beneficial Interest - Initial Class 501,663 500,236 496,382
Outstanding Shares of Beneficial Interest - Service Class 15,226 16,807 50,285
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption Price Per Share - Initial Class^ $ 10.28 $ 9.98 $ 9.98
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption Price Per Share - Service Class^ $ 10.20 $ 9.92 $ 9.83
- ------------------------------------------------------------------------------------------------------------------------------------
^ Net Assets Divided by shares may not calculate to the stated NAV because these
amounts are shown rounded.
Amounts designated as "-" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
9
STATEMENTS OF OPERATIONS (000)
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual Old Mutual Old Mutual
VA Asset Allocation VA Asset Allocation VA Asset Allocation
Conservative Balanced Moderate Growth
Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income:
Dividends from Affiliated Funds $ 41 $ 25 $ 14
Dividends 10 17 28
Interest 48 27 8
Less: Foreign Taxes Withheld (1) - (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 98 69 49
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Management Fees 14 15 20
Distribution Fees - - 2
Administration Fees 3 2 3
Custodian Fees 6 18 10
Trustess' Fees - - -
Professional Fees 16 16 18
Printing Fees 5 5 5
Transfer Agent Fees 10 10 10
Pricing Fees 14 17 14
Insurance Expense 5 5 5
Other Expenses - 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 73 89 88
- ------------------------------------------------------------------------------------------------------------------------------------
Less:
Waiver of Management Fees (14) (15) (20)
Reimbursement of Other Expenses by Advisor (42) (58) (46)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 17 16 22
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 81 53 27
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) from Investment Transactions 123 (1) 23 (1) (158)(1)
Net Realized Gain on Foreign Currency Transactions 2 2 -
Net Change in Unrealized Depreciation on Investments (292) (408) (471)
Net Change in Unrealized Depreciation on Foreign Currency Transactions (3) (2) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Loss on Investments (170) (385) (630)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets Resulting from Operations $ (89) $ (332) $ (603)
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Includes net realized gains recognized by the Old Mutual VA Asset
Allocation Conservative Portfolio, Old Mutual VA Asset Allocation Balanced
Portfolio and Old Mutual VA Asset Allocation Moderate Growth Portfolio of
$163, $167 and $176, respectively, as a result of the transaction to change
from a "fund of managers" structure to a "fund of funds" structure. See
Note 1.
Amounts designated as "-" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
10
STATEMENTS OF CHANGES IN NET ASSETS (000)
- -----------------------------------------------------------------------------------------------------------------------------------
Old Mutual Old Mutual Old Mutual
VA Asset Allocation VA Asset Allocation VA Asset Allocation
Conservative Portfolio Balanced Portfolio Moderate Growth
- -----------------------------------------------------------------------------------------------------------------------------------
1/1/08 1/1/07 1/1/08 1/1/07 1/1/08 1/1/07
to 6/30/08 to 12/31/07 to 6/30/08 to 12/31/07 to 6/30/08 to 12/31/07
(Unaudited) (Unaudited) (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net Investment Income $ 81 $ 162 $ 53 $ 109 $ 27 $ 83
Net Realized Gain (Loss) from Investments
and Foreign Currency Transactions 125 (38) 25 5 (158) 10
Net Change in Unrealized Appreciation (Depreciation)
on Investments and Foreign Currency Transactions (295) 224 (410) 308 (472) 333
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations (89) 348 (332) 422 (603) 426
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders From:
Net Investment Income:
Initial Class - (108) - (74) - (36)
Service Class - (4) - (2) - (37)
Net Realized Gains from Investment Transactions:
Initial Class - (13) - (34) - (33)
Service Class - - - (1) - (13)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions - (125) - (111) - (119)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Initial Class
Shares Issued - - - - - -
Shares Issued upon Reinvestment of Distributions - 121 - 108 - 69
Shares Redeemed - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total Initial Class Capital Share Transactions - 121 - 108 - 69
- -----------------------------------------------------------------------------------------------------------------------------------
Service Class
Shares Issued - 53 49 22 424 2,111
Shares Issued upon Reinvestment of Distributions - 4 - 3 - 50
Shares Redeemed (2) - (3) (1) (1,906) (5)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Service Class Capital Share Transactions (2) 57 46 24 (1,482) 2,156
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Derived
from Capital Shares Transactions (2) 178 46 132 (1,482) 2,225
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (91) 401 (286) 443 (2,085) 2,532
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period 5,401 5,000 5,443 5,000 7,532 5,000
- -----------------------------------------------------------------------------------------------------------------------------------
End of Period $5,310 $5,401 $5,157 $5,443 $ 5,447 $7,532
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed Net Investment Income/
(Accumulated Net Investment Loss) $ 78 $ (3) $ 54 $ 1 $ 28 $ 1
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Initial Class
Shares Issued - - - - - -
Shares Issued upon Reinvestment of Distributions - 12 - 10 - 6
Shares Redeemed - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total Initial Class Share Transactions - 12 - 10 - 6
- -----------------------------------------------------------------------------------------------------------------------------------
Service Class
Shares Issued - 5 5 2 43 186
Shares Issued upon Reinvestment of Distributions - - - - - 5
Shares Redeemed - - - - (193) -
- -----------------------------------------------------------------------------------------------------------------------------------
Total Service Class Share Transactions - 5 5 2 (150) 191
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding - 17 5 12 (150) 197
- -----------------------------------------------------------------------------------------------------------------------------------
Amounts designated as "-" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
11
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE FISCAL YEAR OR PERIOD ENDED DECEMBER 31, (UNLESS OTHERWISE NOTED)
AND FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 (UNAUDITED)
Net
Net Realized and
Asset Unrealized Dividends Distributions Total Net
Value, Net Gains Total From Net from Dividends Asset Value,
Beginning Investment (Losses) From Investment Capital and End Total
of Period Income (1) on Securities Operations Income Gains Distributions of Period Return
- ---------------------------------------------------------------------------------------------------------------------------------
OLD MUTUAL VA ASSET ALLOCATION CONSERVATIVE PORTFOLIO
Initial Class
2008 $10.45 $0.16 $(0.33) $(0.17) $ - $ - $ - $10.28 (1.63)%+
2007* 10.00 0.32 0.38 0.70 (0.22) (0.03) (0.25) 10.45 6.99%
Service Class
2008 $10.38 $0.14 $(0.32) $(0.18) $ - $ - $ - $10.20 (1.73)%+
2007* 10.00 0.30 0.37 0.67 (0.26) (0.03) (0.29) 10.38 6.69%
- ---------------------------------------------------------------------------------------------------------------------------------
OLD MUTUAL VA ASSET ALLOCATION BALANCED PORTFOLIO
Initial Class
2008 $10.62 $0.10 $(0.74) $(0.64) $ - $ - $ - $ 9.98 (6.03)%+
2007* 10.00 0.22 0.62 0.84 (0.15) (0.07) (0.22) 10.62 8.42%
Service Class
2008 $10.57 $0.09 $(0.74) $(0.65) $ - $ - $ - $ 9.92 (6.15)%+
2007* 10.00 0.19 0.63 0.82 (0.18) (0.07) (0.25) 10.57 8.17%
- ---------------------------------------------------------------------------------------------------------------------------------
OLD MUTUAL VA ASSET ALLOCATION MODERATE GROWTH PORTFOLIO
Initial Class
2008 $10.86 $0.04 $(0.92) $(0.88) $ - $ - $ - $ 9.98 (8.10)%+
2007* 10.00 0.16 0.84 1.00 (0.07) (0.07) (0.14) 10.86 10.01%
Service Class
2008 $10.71 $0.03 $(0.91) $(0.88) $ - $ - $ - $ 9.83 (8.22)%+
2007* 10.00 0.13 0.84 0.97 (0.19) (0.07) (0.26) 10.71 9.70%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio
of Expenses
to Average Ratio of
Net Net Assets Net
Assets Ratio (Excluding Investment
End of Expenses Waivers and Income Portfolio
of Period to Average Expense to Average Turnover
(000) Net Assets (2) Reductions) (2) Net Assets Rate
- ------------------------------------------------------------------------------------
OLD MUTUAL VA ASSET ALLOCATION CONSERVATIVE PORTFOLIO
Initial Class
2008 $5,155 0.64%** 2.65%** 3.07%** 37.48%+
2007* 5,241 1.00% 3.80% 3.13% 101.66%
Service Class
2008 $ 155 0.89%** 7.69%** 2.82%** 37.48%+
2007* 160 1.25% 16.97% 2.89% 101.66%
- ------------------------------------------------------------------------------------
OLD MUTUAL VA ASSET ALLOCATION BALANCED PORTFOLIO
Initial Class
2008 $4,990 0.62%** 3.29%** 2.05%** 43.62%+
2007* 5,313 1.05% 4.68% 2.08% 103.09%
Service Class
2008 $ 167 0.86%** 8.26%** 1.84%** 43.62%+
2007* 130 1.30% 17.70% 1.82% 103.09%
- ----------------------------------------------------------------------------------
OLD MUTUAL VA ASSET ALLOCATION MODERATE GROWTH PORTFOLIO
Initial Class
2008 $4,953 0.59%** 2.48%** 0.86%** 56.16%+
2007* 5,392 1.05% 4.49% 1.48% 82.26%
Service Class
2008 $ 494 1.08%** 3.63%** 0.58%** 56.16%+
2007* 2,140 1.30% 7.72% 1.24% 82.26%
- --------------------------------------------------------------------------------
(1) Per share amounts for the year or period are calculated based on average
outstanding shares.
(2) Ratio does not include expenses of the underlying funds.
* Portfolios commenced operations on December 29, 2006.
** Ratios for periods of less than one year have been annualized.
+ Total return and portfolio turnover rates are for the period indicated and
have not been annualized. Total return would have been lower had certain
expenses not been waived by the Advisor during the period.
Amounts designated as "-" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
12
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2008 (UNAUDITED)
1. ORGANIZATION
- --------------------------------------------------------------------------------
Old Mutual Funds I (the "Trust"), organized as a Delaware statutory trust
effective May 27, 2004, is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company. The Trust
currently offers fifteen series portfolios, three of which are covered by this
Semi-Annual Report: the Old Mutual VA Asset Allocation Conservative Portfolio
(the "VA Conservative Portfolio"), the Old Mutual VA Asset Allocation Balanced
Portfolio (the "VA Balanced Portfolio") and the Old Mutual VA Asset Allocation
Moderate Growth Portfolio (the "VA Moderate Growth Portfolio") (each also
referenced herein as a "Portfolio", and collectively the "Portfolios"). The
Portfolios commenced operations on December 29, 2006. The Trust's other series
portfolios, whose financial statements are presented separately, are the Old
Mutual Asset Allocation Conservative Portfolio, the Old Mutual Asset Allocation
Balanced Portfolio, the Old Mutual Asset Allocation Moderate Growth Portfolio,
the Old Mutual Asset Allocation Growth Portfolio, the Old Mutual Analytic
Defensive Equity Fund, the Old Mutual Analytic Global Defensive Equity Fund, the
Old Mutual Clay Finlay China Fund, the Old Mutual Clay Finlay Emerging Markets
Fund, the Old Mutual International Equity Fund, the Old Mutual International
Bond Fund, the Old Mutual Provident Mid-Cap Growth Fund and the Old Mutual
Copper Rock Emerging Growth Fund. In addition, the Trust has registered three
other portfolios, the Old Mutual VA Asset Allocation Growth Portfolio, the Old
Mutual Analytic VA Defensive Equity Portfolio and the Old Mutual Analytic VA
Global Defensive Equity Portfolio; however, these portfolios are not currently
offered.
Shareholders may purchase shares of the Portfolios through two separate classes,
the Initial Class and Service Class shares. All classes have equal rights as to
earnings, assets and voting privileges, except that each class may have
different distribution costs, dividends and shareholder services costs and each
class has exclusive voting rights with respect to its distribution plan. Except
for these differences, each share class of each Portfolio represents an equal
proportionate interest in that Portfolio. Each Portfolio is classified as a
diversified management investment company. The Portfolios' prospectuses provide
a description of each Portfolio's investment objective, policies and investment
strategies. Each Portfolio is intended to be a funding vehicle for variable
annuity contracts and variable life insurance policies offered by life insurance
companies.
Prior to April 7, 2008, each Portfolio was run under a "fund of managers"
structure and invested directly in equity and fixed income security positions.
Effective April 7, 2008, each Portfolio is a "fund of funds" which seeks to
achieve its investment objective by investing in a portfolio of affiliated
underlying equity and fixed income funds that are advised by Old Mutual Capital,
Inc., the Portfolio's investment adviser. In addition, a portion of its assets
may be invested in cash, cash equivalents, or in money market funds. These
underlying funds, in turn, invest in a variety of U.S. and foreign equity and
fixed income securities. Under normal circumstances, the Portfolios expect to
invest their assets among equity and fixed income funds in the following ranges:
Equity Fund Allocation: 20-40%
Fixed Income Fund Allocation: 60-80%
On April 7, 2008, the Portfolios exchanged all of the investment securities and
cash held in the Portfolios within each mandate, for Institutional Class shares
of underlying funds with similar investment objectives. A brief description of
each of the underlying funds that the Portfolios currently invest in is as
follows.
Old Mutual Advantage Growth Fund seeks long-term capital growth. To pursue its
objective, the fund normally invests at least 65% of its net assets in equity
securities of medium and large-cap companies with favourable growth prospects,
as evidenced by such factors as superior revenue growth, high quality of
earnings, global distribution, and strong competitive advantages.
Old Mutual Analytic U.S. Long/Short Fund seeks above-average total returns. To
pursue its objective, the fund normally invests at least 80% of its net assets
(plus any borrowings for investment purposes) in equity securities of companies
whose securities are traded in U.S. markets. While the fund may invest in
companies of any size, it generally invests in large and mid-cap companies. The
fund may also invest in long and short positions of publicly traded equity
securities. The fund's long and short positions may include equity securities of
foreign issuers that are traded in U.S. markets. The fund generally takes long
equity positions equal to approximately 120% of the fund's equity assets
excluding cash, and short equity positions equal to approximately 20% of the
fund's equity assets at the time of investment. The fund's long equity exposure
ordinarily ranges from 110% to 125% of the fund's net assets and its short
equity exposure ordinarily ranges from 10% to 33% of the fund's net assets. The
cash received from short sales may be used to invest in long equity positions.
Old Mutual Barrow Hanley Core Bond Fund seeks to maximize total return. To
pursue its objective, the fund normally invests at least 80% of its net assets
in fixed income securities of varying maturities. Fixed income securities may
include: U.S. government securities including Treasury and agency securities,
corporate obligations, inflation-indexed securities, commercial and residential
mortgage-backed securities, collateralized mortgage obligations and asset-backed
securities. The fund may invest up to 25% of its total assets in U.S. dollar
denominated foreign debt obligations. The fund may also invest up to 20% of its
total assets in non-investment grade securities. The fund has no limitations on
the range of maturities of the fixed income securities in which it can invest
and will maintain an average portfolio duration that ranges from 80% to 120% of
the average duration of the Lehman Brothers U.S. Aggregate Index. The
sub-adviser will attempt to maintain an overall weighted average portfolio
credit quality at a rating of "AA" (or equivalent) or higher from any nationally
recognized statistical rating organization ("NRSRO").
13
NOTES TO FINANCIAL STATEMENTS - continued
AS OF JUNE 30, 2008 (UNAUDITED)
Old Mutual Barrow Hanley Value Fund seeks long-term capital growth. The fund is
a non-diversified fund. To pursue its objective, the fund normally invests in
equity securities of large and mid-cap companies with value characteristics.
Undervalued stocks are generally those stocks that are out of favor with
investors and, in the opinion of the fund's sub-adviser, are trading at prices
that are below average at the time of purchase in relation to such measures as
earnings and book value. These stocks often have above average dividend yields.
Old Mutual Clay Finlay Emerging Markets Fund seeks long-term capital
appreciation. Under normal market conditions, the Fund invests at least 80% of
its net assets, plus any borrowings for investment purposes, in securities
issued by companies in emerging market countries. The fund normally emphasizes
equity securities in its portfolio. Equity securities in which the fund may
invest include common stocks, preferred stocks, securities convertible into
common stocks, depository receipts, rights, and warrants. The fund normally
invests in at least 6 emerging market countries, and will not invest more than
35% of its assets in securities of issuers in any one emerging country. The fund
may also invest up to 20% of its assets in debt securities of corporate and
government emerging country issuers and in equity and debt securities of
corporate issuers and debt securities of corporate and government issuers in
developing countries.
Old Mutual Developing Growth Fund seeks long-term capital growth. To pursue this
objective, the fund normally invests at least 80% of its net assets (plus any
borrowings for investment purposes) in equity securities of small-cap companies
with growth characteristics at the time of purchase.
Old Mutual Discover Value Fund seeks to provide investors with long-term capital
growth. To pursue its objective, the fund normally invests at least 65% of its
assets in equity securities of small-cap companies with value characteristics.
The fund may also invest in larger companies if they represent better prospects
for capital appreciation. Although the fund normally invests in equity
securities of U.S. companies, it may invest up to 20% of its total assets in
foreign securities.
Old Mutual Dwight High Yield Fund seeks to provide investors with a high level
of current income. To pursue its objective, the fund normally invests at least
80% of its net assets (plus any borrowings for investment purposes) in
high-yield, below investment-grade securities including high-yield corporate
bonds and loans, municipal bonds, mortgage-backed and asset-backed securities,
income producing convertible securities, and preferred stocks. The fund may
invest up to 30% of its assets in foreign securities. The fund may also invest
in derivative instruments such as options, futures contracts, credit default
swaps, and swaps and options on indices and may engage in certain investment
techniques which create market exposure, such as dollar rolls. The fund's
sub-advisor seeks to maintain a minimum average credit quality for the fund's
investments at a rating of "B" (or equivalent) or higher from any NRSRO. The
fund's investment duration typically ranges from 75% to 125% of the average
duration of the Lehman Brothers U.S. Corporate High Yield Index.
Old Mutual Dwight Intermediate Fixed Income Fund seeks a high level of current
income consistent with relative stability of principal. To pursue its objective,
the fund normally invests at least 80% of its net assets (plus any borrowings
for investment purposes) in a diversified portfolio of fixed income securities
of varying maturities. The fund generally invests in investment grade fixed
income securities but may invest up to 15% of its assets in high yield
securities. The fund may also invest in derivative instruments such as options,
futures contracts, and options on indices and may engage in certain investment
techniques which create market exposure, such as dollar rolls. The fund's
investment duration typically ranges from 75% to 125% of the average duration of
the Lehman Brothers Intermediate Aggregate Bond Index. The fund's dollar
weighted average maturity will typically be between 3 and 10 years.
Old Mutual Focused Fund seeks above-average total returns over a 3 to 5 year
market cycle. The fund is a non-diversified fund. To pursue its objective, the
fund normally invests at least 80% of its net assets (plus any borrowings for
investment purposes) in equity securities of small, medium and large-cap
companies. While the fund may invest in companies of any market capitalization,
the fund generally invests in large-cap companies that the fund's sub-adviser
believes have sustainable long-term growth prospects but are currently trading
at modest relative valuations.
Old Mutual Heitman REIT Fund seeks to provide investors with a high total return
consistent with reasonable risk. To pursue its objective, the fund normally
invests at least 80% of its net assets (plus any borrowings for investment
purposes) in equity securities of companies principally engaged in the real
estate industry, including real estate investment trusts ("REITs"). The fund's
sub-adviser considers a company to be principally engaged in the real estate
industry if it derives at least 50% of its revenues from the ownership,
construction, management,financing or sale of commercial, industrial or
residential real estate or has at least 50% of its assets in such real estate.
Old Mutual International Bond Fund seeks high total return and, when consistent
with total return, income. To pursue its objective, the fund normally invests in
fixed income securities of foreign government and corporate issuers. Those fixed
income securities, referred to as "bonds," generally include long-term and
short-term government bonds, participation interests in loans, corporate debt
obligations, "structured" notes, and other debt obligations. The Fund normally
invests at least 80% of its net assets, plus borrowings for investment purposes,
in "bonds" and invests in at least three countries other than the United States.
Old Mutual International Equity Fund seeks long-term capital appreciation. To
pursue its objective, the fund normally invests at least 80% of its net assets,
plus any borrowings for investment purposes, in equity securities of non-U.S.
issuers. The fund allocates its assets to securities of issuers located in at
least 3 non-U.S. countries and may invest in both developed and emerging
markets. Generally, the fund limits its investments in any country to 25% or
less of its total assets. However, the fund may invest more than 25% of its
assets in issuers organized in Japan or the United Kingdom or in securities
quoted or denominated in the Japanese yen, the British pound, or the euro.
14
Old Mutual Mid-Cap Fund seeks above-average total return over a 3 to 5 year
market cycle, consistent with reasonable risk. To pursue its objective, the fund
normally invests at least 80% of its net assets (plus any borrowings for
investment purposes) in equity securities of mid-cap companies. For purposes of
this fund, mid-cap companies are those companies with market capitalizations
similar to the companies in the S&P MidCap 400(R) Index.
Old Mutual Provident Mid-Cap Growth Fund seeks to provide investors long-term
capital appreciation. To pursue its objective, the fund normally invests at
least 80% of its net assets (plus any borrowing for investment purposes) in
equity securities of mid-cap companies with favorable growth prospects. For
purposes of the fund, mid-cap companies are those companies with market
capitalizations within the range of companies in the Russell MidCap(R) Growth
Index.
Old Mutual TS&W Mid-Cap Value Fund seeks long-term growth. To pursue its
objective, the fund normally invests at least 80% of its net assets (plus any
borrowings for investment purposes) in equity securities of mid-cap companies
with value characteristics. For purposes of this fund, mid-cap companies are
those companies with market capitalizations similar to the companies in the
Russell MidCap(R) Value Index.
In the normal course of business, the Portfolios may enter into various
agreements that provide for general indemnifications. Each Portfolio's maximum
exposure under these arrangements is unknown as any potential exposure involves
future claims that may be made against each Portfolio.
2. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of the significant accounting policies followed by
the Portfolios.
Use of Estimates in the Preparation of Financial Statements - The preparation of
financial statements, in conformity with accounting principles generally
accepted in the United States of America, requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
Security Valuation - Investments in underlying funds are valued at the closing
net asset value per share of each underlying fund as reported on each business
day. The prospectuses for the underlying funds explain the procedures for
determining the market value of securities in their portfolios and the
circumstances under which the underlying funds may use fair value pricing and
its effects. Investment securities of a Portfolio that are listed on a
securities exchange, market or automated quotation system and for which market
quotations are readily available, including securities traded over-the-counter
("OTC") (except for securities traded on NASDAQ), are valued at the last quoted
sales price on the principal market on which they are traded at the close of
trading on the New York Stock Exchange ("NYSE") (normally 4:00 p.m., Eastern
Time) each day that the NYSE is open (the "Valuation Time"), or, if there is no
such reported sale at the Valuation Time, at the most recent quoted bid price
reported by the exchange or the OTC market. For securities traded on NASDAQ, the
NASDAQ Official Closing Price provided by NASDAQ each business day will be used.
If such prices are not available, these securities and unlisted securities for
which market quotations are not readily available are valued in accordance with
Fair Value Procedures established by the Board of Trustees of the Trust (the
"Board"). The Portfolios use pricing services to report the market value of
securities in the portfolios; if the pricing service is not able to provide a
price, or the pricing service quote of valuation is inaccurate or does not
reflect the market value of the security, securities are valued in accordance
with Fair Value Procedures established by the Board. The Trust's Fair Value
Procedures are implemented through a Fair Value Committee (the "Committee").
Some of the more common reasons that may necessitate that a security be valued
using Fair Value Procedures include: the security's trading has been halted or
suspended; the security has been de-listed from a national exchange; the
security's primary trading market is temporarily closed at a time when, under
normal conditions, it would be open; or the security's primary source is not
able or willing to provide a price. When a security is valued in accordance with
the Fair Value Procedures, the Committee will determine the value after taking
into consideration relevant information reasonably available to the Committee.
The valuation is assigned to Fair Valued Securities for purposes of calculating
a Portfolio's net asset value ("NAV"). Debt securities (other than short-term
obligations), including listed issues, are valued on the basis of valuations
furnished by a pricing service which utilizes electronic data processing
techniques to determine valuations for normal institutional size trading units
of debt securities, without exclusive reliance upon exchange or over-the-counter
prices. Short-term obligations with maturities of 60 days or less may be valued
at amortized cost, which approximates market value. Under this valuation method,
acquisition discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
Foreign securities traded on the foreign exchanges in the Western Hemisphere are
valued at the last quoted sales price from the principal market in which they
are traded before the valuation time and are translated from the local currency
into U.S. dollars using current exchange rates. In addition, if quotations are
not readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets may be valued by another
method that the Board believes accurately reflects fair value.
Foreign securities traded in countries outside the Western Hemisphere are fair
valued daily by utilizing the quotations of an independent pricing service,
unless the Portfolio's investment adviser, Old Mutual Capital, Inc. (the
"Adviser") determines that use of another fair valuation methodology is
appropriate. The pricing service uses statistical analyses and quantitative
models to adjust local prices using factors such as subsequent movement and
changes in the prices of indexes, securities and exchange rates in other markets
in determining fair value as of the time the Portfolios calculate the NAVs. The
fair value of the foreign security is translated from the local currency into
U.S. dollars using current exchange rates.
15
NOTES TO FINANCIAL STATEMENTS - continued
AS OF JUNE 30, 2008 (UNAUDITED)
Valuation of Options and Futures - Options are valued at the last quoted sales
price. If there is no such reported sale on the valuation date, long option
positions are valued at the most recent bid price, and short option positions
are valued at the most recent ask price. Futures contracts are valued at the
settlement price established each day by the board of exchange on which they are
traded. The daily settlement prices for financial futures are provided by an
independent source.
Security Transactions and Investment Income - Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Dividend income, dividend expense on securities sold short and distributions to
shareholders are recognized on the ex-dividend date; interest income and expense
is recognized on the accrual basis and includes amortization of premiums and
accretion of discounts on investments, if applicable. Non-cash dividends
included in dividend income, if any, are recorded at the fair market value of
the securities received. Costs used in determining realized capital gains and
losses on the sale of investment securities are those of the specific securities
sold adjusted for the accretion and amortization of acquisition discounts and
premiums during the respective holding periods, if applicable.
Dividends and Distributions - Dividends from net investment income for the
Portfolios are declared at least annually, if available. Distributions of net
realized capital gains, for each Portfolio, are generally made to shareholders
annually, if available.
Foreign Withholding Taxes - Prior to transitioning to a "fund of funds"
structure, the Portfolios may have been subject to taxes imposed by countries in
which they invested with respect to their investments in issuers existing or
operating in such countries. Such taxes are generally based on income earned.
The Portfolios accrue such taxes when the related income is earned.
Forward Foreign Currency Contracts - Prior to transitioning to a "fund of funds"
structure, some of the Portfolios entered into forward foreign currency
contracts as hedges against specific transactions, portfolio positions or
anticipated portfolio positions. All commitments are "marked-to-market" daily at
the applicable foreign exchange rate, and any resulting unrealized gains or
losses are recorded accordingly. The Portfolios realize gains and losses at the
time the forward contracts are extinguished. Unrealized gains or losses on
outstanding positions in forward foreign currency contracts held at the close of
the period are recognized as ordinary income or loss for Federal income tax
purposes. The Portfolios could be exposed to risk if the counterparties to the
contracts are unable to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Finally, the risk exists that losses could exceed amounts disclosed on the
Schedule of Investments.
Investments in Real Estate Investment Trusts ("REIT") - Prior to transitioning
to a "fund of funds" structure, some of the Portfolios invested in REITs.
Dividend income is recorded based on the income included in distributions
received from REIT investments using published REIT reclassifications, including
some management estimates when actual amounts are not available. Distributions
received in excess of this estimated amount are recorded as a reduction of the
cost of investments or reclassified to capital gains. The actual amounts of
income, return of capital and capital gains are only determined by each REIT
after its fiscal year-end, and may differ from the estimated amounts.
TBA Purchase Commitments - Prior to transitioning to a "fund of funds"
structure, some of the Portfolios entered into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date, typically
not exceeding 45 days. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date. This risk is in addition to the
risk of decline in the value of each Portfolio's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Security Valuation"
above.
Mortgage Dollar Rolls - Prior to transitioning to a "fund of funds" structure,
some of the Portfolios entered into mortgage dollar rolls (principally using
TBAs) in which each Portfolio sells mortgage securities for delivery in the
current month and simultaneously contracts to repurchase substantially similar
securities at an agreed-upon price on a fixed date. Each Portfolio accounts for
such dollar rolls under the purchases and sales method and receives compensation
as consideration for entering into the commitment to repurchase. Each Portfolio
must maintain liquid securities having a value not less than the repurchase
price (including accrued interest) for such dollar rolls. The market value of
the securities that each Portfolio is required to purchase may decline below the
agreed upon repurchase price of those securities.
The counterparty receives all principal and interest payments, including
prepayments, made in respect of a security subject to such a contract while it
is the holder. Mortgage dollar rolls may be renewed with a new purchase and
repurchase price and a cash settlement made on settlement date without physical
delivery of the securities subject to the contract.
Foreign Currency Conversion - The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are converted into U.S.
dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at
the current rate of exchange; and
(ii) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
16
The Portfolios do not isolate that portion of gains and losses on investment
securities that is due to changes in the foreign exchange rates from that which
is due to changes in market prices of such securities.
The Portfolios report gains and losses on foreign currency related transactions
as components of realized gains and losses for financial reporting purposes,
whereas such components are treated as ordinary income or loss for Federal
income tax purposes.
Futures Contracts - Prior to transitioning to a "fund of funds" structure, some
of the Portfolios utilized futures contracts primarily to hedge against changes
in security prices. Upon entering into a futures contract, the Portfolios will
deposit securities for the initial margin with its custodian in a segregated
account. Subsequent payments, which are dependent on the daily fluctuations in
the value of the underlying instrument, are made or received by the Portfolios
each day (daily variation margin) and are recorded as unrealized gains or losses
until the contracts are closed. When the contract is closed, the Portfolios
record a realized gain or loss equal to the difference between the proceeds from
(or cost of) the closing transactions and the Portfolio's basis in the contract.
Risks of entering into futures contracts include the possibility that a change
in the value of the contract may not correlate with the changes in the value of
the underlying instruments. Second, it is possible that a lack of liquidity for
futures contracts could exist in the secondary market, resulting in an inability
to close a futures position prior to its maturity date. Third, the purchase of a
futures contract involves the risk that the Portfolios could lose more than the
original margin deposit required to initiate the futures transaction.
Options - Prior to transitioning to a "fund of funds" structure, some of the
Portfolios had written or purchased financial options contracts primarily to
hedge against changes in security prices, or securities that the Portfolios
intend to purchase, and against fluctuations in fair value caused by changes in
prevailing market interest rates. When the Portfolios write or purchase an
option, an amount equal to the premium received or paid by the Portfolios is
recorded as a liability or an asset and is subsequently adjusted to the current
market value of the option written or purchased. Premiums received or paid from
writing or purchasing options which expire unexercised are treated by the
Portfolios on the expiration date as realized gains or losses. The difference
between the premium and the amount paid or received on effecting a closing
purchase or sale transaction, including brokerage commissions, is also treated
as a realized gain or loss. If an option is exercised, the premium paid or
received is added to the cost of the purchase or proceeds from the sale in
determining whether the Portfolios have realized a gain or a loss on investment
transactions. The Portfolios, as writers of an option, may have no control over
whether the underlying securities may be sold (call) or purchased (put) and as a
result bear the market risk of an unfavorable change in the price of the
security underlying the written option.
Collateralized Mortgage Obligations (CMOs) - Prior to transitioning to a "fund
of funds" structure, some of the Portfolios invested directly in CMOs. CMOs are
hybrids between mortgage-backed bonds and mortgage pass-through securities.
Similar to a bond, CMOs usually pay interest monthly and have a more focused
range of principal payment dates than pass-through securities. While CMOs may be
collateralized by whole mortgage loans, CMOs are more typically collateralized
by mortgage-backed securities guaranteed by Government National Mortgage
Association, Federal Home Loan Mortgage Corporation or Federal National Mortgage
Association and their income streams.
A Real Estate Mortgage Investment Conduit (REMIC) is a CMO that qualifies for
special tax treatment under the Internal Revenue Code of 1986, as amended, and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Each class of CMO or REMIC certificate, often referred to as a
"tranche," is issued at a specific interest rate and must be fully retired by
its final distribution date. Generally, all classes of CMOs or REMIC
certificates pay or accrue interest monthly. Investing in the lowest tranche of
CMOs and REMIC certificates involves risks similar to those associated with
investing in equity securities. CMOs are often highly sensitive to changes in
interest rates and any resulting change in the rate at which homeowners sell
their properties, refinance, or otherwise pre-pay their loans. Investors in
these securities may not only be subject to this prepayment risk, but also may
be exposed to significant market and liquidity risks. Investors in privately
backed CMOs may be exposed to significant credit risk resulting from
delinquencies or defaults in the loans backing the mortgage pool.
Other - Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets. Class specific expenses, such as
distribution fees, are borne by that class. Income, other expenses and realized
and unrealized gains and losses of a Portfolio are allocated to the respective
class on the basis of the relative net assets each day. Additionally, each
Portfolio, as a shareholder in the underlying funds, will also indirectly bear
its pro rata share of the expenses incurred by the underlying funds. These
expenses are not reflected in the expenses shown in the Statement of Operations
and are not included in the ratios to average net assets shown in the financial
highlights.
The Portfolios have an arrangement with the transfer agent, DST Systems, Inc.,
whereby interest earned on uninvested cash balances is used to offset a portion
of the transfer agent expense. The transfer agent expenses shown in the
Statements of Operations are in total and do not reflect the expense reductions,
if any, which are shown separately.
17
NOTES TO FINANCIAL STATEMENTS - continued
AS OF JUNE 30, 2008 (UNAUDITED)
3. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
- --------------------------------------------------------------------------------
Investment Adviser - Old Mutual Capital, Inc. is an indirect, wholly owned
subsidiary of Old Mutual (US) Holdings Inc. ("OMUSH"), which is a direct, wholly
owned subsidiary of OM Group (UK) Limited, which is, in turn, a direct, wholly
owned subsidiary of Old Mutual plc., a London-Exchange listed international
financial services firm. The Portfolios and the Adviser are parties to an
Investment Advisory Agreement (the "Advisory Agreement"), under which the
Adviser is paid a monthly fee that is calculated daily and paid monthly, at an
annual rate based on the average daily net assets of each Portfolio. Prior to
April 7, 2008, the Adviser was paid as follows (under the "fund of managers"
structure):
Management Fee Asset Level
- ------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio 0.850% Less than $1 billion
0.825% Between $1 billion - $2 billion
0.800% Between $2 billion - $3 billion
0.775% Greater than $3 billion
Old Mutual VA Asset Allocation Balanced Portfolio 0.900% Less than $1 billion
0.875% Between $1 billion - $2 billion
0.850% Between $2 billion - $3 billion
0.825% Greater than $3 billion
Old Mutual VA Asset Allocation Moderate Growth Portfolio 0.900% Less than $1 billion
0.875% Between $1 billion - $2 billion
0.850% Between $2 billion - $3 billion
0.825% Greater than $3 billion
- ------------------------------------------------------------------------------------------------------------------------
Effective April 7, 2008, the Adviser is paid the following rate (under the "fund
of funds" structure):
Management Fee Asset Level
- --------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio 0.200% Less than $1 billion
0.175% Between $1 billion - $2 billion
0.150% Between $2 billion - $3 billion
0.125% Greater than $3 billion
Old Mutual VA Asset Allocation Balanced Portfolio 0.200% Less than $1 billion
0.175% Between $1 billion - $2 billion
0.150% Between $2 billion - $3 billion
0.125% Greater than $3 billion
Old Mutual VA Asset Allocation Moderate Growth Portfolio 0.250% Less than $1 billion
0.225% Between $1 billion - $2 billion
0.200% Between $2 billion - $3 billion
0.175% Greater than $3 billion
- --------------------------------------------------------------------------------------------------------------------
At June 30, 2008, the Adviser owns 99%, 99% and 93% of the VA Conservative
Portfolio, VA Balanced Portfolio and the VA Moderate Growth Portfolio,
respectively. At June 30, 2008, the separate accounts of OM Financial Life
Company, a wholly owned subsidiary of OMUSH, owns 1%, 1% and 7% of the VA
Conservative Portfolio, VA Balanced Portfolio and the VA Moderate Growth
Portfolio, respectively.
18
Expense Limitation Agreement - In the interest of limiting expenses of the
Portfolios, the Adviser has entered into an expense limitation agreement
("Expense Limitation Agreement") pursuant to which the Adviser has agreed, in
writing, to waive or limit its fees and to assume other expenses of the
Portfolios through April 30, 2009, to the extent necessary to limit the total
annual expenses (including acquired (underlying) fund fees and expenses) to a
specified percentage of the Portfolios' average daily net assets as follows:
Class Limit
- ---------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio Initial Class 1.00%
Service Class 1.25%
Old Mutual VA Asset Allocation Balanced Portfolio Initial Class 1.05%
Service Class 1.30%
Old Mutual VA Asset Allocation Moderate Growth Portfolio Initial Class 1.05%
Service Class 1.30%
- ---------------------------------------------------------------------------------------------------------
The Adviser may seek reimbursement for Management Fees waived and other expenses
paid by the Adviser pursuant to the Expense Limitation Agreement during the
previous three fiscal years in which the Management Fees were waived or other
expenses paid. Reimbursement by the Portfolios of the Management Fees waived and
other expenses paid by the Adviser pursuant to the applicable Expense Limitation
Agreement may be made at a later date when a Portfolio has reached a sufficient
asset size to permit reimbursement to be made without causing the total annual
expense rate of the Portfolio to exceed the expense limitation in effect at the
time the expenses were reimbursed.
At June 30, 2008, the Adviser may seek reimbursement of previously waived and
reimbursed fees as follows (000):
Expires 2010 Expires 2011 Total
- ---------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio $158 $56 $214
Old Mutual VA Asset Allocation Balanced Portfolio 205 73 278
Old Mutual VA Asset Allocation Moderate Growth Portfolio 207 66 273
- ---------------------------------------------------------------------------------------------------------
Sub-Advisory Agreements - The Trust, on behalf of the Portfolios, and the
Adviser entered into a sub-advisory agreement (the "Ibbotson Sub-Advisory
Agreement") with Ibbotson Associates Advisors, LLC ("Ibbotson"). Ibbotson is a
wholly owned subsidiary of Ibbotson Associates, Inc., which is a wholly owned
subsidiary of Morningstar, Inc. For the services provided and expenses incurred
pursuant to the Ibbotson Sub-Advisory Agreement, Ibbotson is entitled to receive
from the Adviser a sub-advisory fee with respect to the average daily net assets
of each of the Portfolios, which is computed and paid monthly at an annual rate
equal to the greater of (i) 0.08% for average daily net assets up to $250
million, 0.07% for average daily net assets from $250 million to $500 million,
0.06% for average daily net assets from $500 million to $750 million, 0.05% for
average daily net assets from $750 million to $1 billion, 0.04% for average
daily net assets from $1 billion to $2 billion, and 0.03% for average daily net
assets over $2 billion, or (ii) a minimum annual fee of $100,000.
The Sub-Advisory Agreement obligates Ibbotson to: (i) recommend a continuous
investment allocation program for each Portfolio in accordance with the
Portfolio's investment objective, policies and limitations; (ii) provide
supervision of each Portfolio's investments; and (iii) recommend the allocation
of the assets of each Portfolio by specific investment style mandate.
Prior to April 7, 2008, the Portfolios were managed under a "fund of managers"
structure. The following sub-advisory agreements, which were in effect under the
"fund of managers" structure were terminated as of April 7, 2008.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "Acadian Sub-Advisory
Agreement") with Acadian Asset Management, LLC ("Acadian"). Acadian is a
majority owned subsidiary of OMUSH. For the services provided and expenses
incurred pursuant to the Acadian Sub-Advisory Agreement prior to April 7, 2008,
Acadian was entitled to receive from the Adviser a sub-advisory fee with respect
to the average daily net assets of such portion of the Portfolios managed by
Acadian, computed and paid monthly at an annual rate of 0.45%.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "Analytic
Sub-Advisory Agreement") with Analytic Investors, LLC ("Analytic"). Analytic is
a majority owned subsidiary of OMUSH. For the services provided and expenses
incurred pursuant to the Analytic Sub-Advisory Agreement prior to April 7, 2008,
Analytic was entitled to receive from the Adviser a sub-advisory fee with
respect to the average daily net assets of such portion of the Portfolios
managed by Analytic, computed and paid monthly at an annual rate of 0.35%.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "BHMS Sub-Advisory
Agreement") with Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow Hanley").
Barrow Hanley is a wholly owned subsidiary of OMUSH. For the services provided
and expenses incurred pursuant to the BHMS Sub-Advisory Agreement prior to April
7, 2008, Barrow Hanley was entitled to receive from the Adviser a sub-advisory
fee with respect to the average daily net assets of such portion of the
Portfolios managed by Barrow Hanley, computed and paid monthly at an annual rate
of 0.15% for the U.S. Intermediate Fixed Income mandate, 0.15% for the U.S. Core
Fixed Income mandate, 0.35% for the U.S. Large Cap Value mandate, 0.45% for the
U.S. Mid Cap Value mandate and 0.50% for the U.S. Small Cap Value mandate.
19
NOTES TO FINANCIAL STATEMENTS - continued
AS OF JUNE 30, 2008 (UNAUDITED)
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "Clay Finlay
Sub-Advisory Agreement") with Clay Finlay LLC ("Clay Finlay"). Clay Finlay is a
majority owned subsidiary of OMUSH. For the services provided and expenses
incurred pursuant to the Clay Finlay Sub-Advisory Agreement prior to April 7,
2008, Clay Finlay was entitled to receive from the Adviser a sub-advisory fee
with respect to the average daily net assets of such portion of the managed by
Clay Finlay, computed and paid monthly at an annual rate of 0.45% for the
International Large Cap Equity mandate and 0.50% for the Emerging Markets Equity
mandate.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement ("the Copper Rock
Sub-Advisory Agreement") with Copper Rock Capital Partners, LLC ("Copper Rock").
OMUSH owns 60% of the limited liability company interests of Copper Rock. For
the services provided and expenses incurred pursuant to the Copper Rock
Sub-Advisory Agreement prior to April 7, 2008, Copper Rock was entitled to
receive from the Adviser a sub-advisory fee with respect to the average daily
net assets of such portion of the Portfolios managed by Copper Rock, computed
and paid monthly at an annual rate of 0.55%.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "Dwight Sub-Advisory
Agreement") with Dwight Asset Management Company LLC ("Dwight"). Dwight is a
majority owned subsidiary of OMUSH. For the services provided and expenses
incurred pursuant to the Dwight Sub-Advisory Agreement prior to April 7, 2008,
Dwight was entitled to receive from the Adviser a sub-advisory fee with respect
to the average daily net assets of such portion of the Portfolios managed by
Dwight, computed and paid monthly at an annual rate of 0.10% for the Cash
Management mandate, 0.15% for the U.S. Intermediate Fixed Income mandate, 0.15%
for the U.S. Core Fixed Income mandate and 0.25% for the U.S. High Yield Fixed
Income mandate.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement, (the "Heitman
Sub-Advisory Agreement") with Heitman Real Estate Securities LLC ("Heitman").
Heitman is a wholly owned subsidiary of Heitman LLC, which is owned 50% by
Heitman senior executives and 50% by Old Mutual (HFL) Inc., a wholly owned
subsidiary of OMUSH. For the services provided and expenses incurred pursuant to
the Heitman Sub-Advisory Agreement prior to April 7, 2008, Heitman was entitled
to receive from the Adviser a sub-advisory fee with respect to the average daily
net assets of such portion of each Portfolio's average daily net assets so
managed, computed and paid monthly at an annual rate of 0.40%.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "LRC Sub-Advisory
Agreement") with Liberty Ridge Capital, Inc. ("Liberty Ridge"). Liberty Ridge is
a wholly owned subsidiary of OMUSH. For the services provided and expenses
incurred pursuant to the LRC Sub-Advisory Agreement prior to April 7, 2008,
Liberty Ridge was entitled to receive from the Adviser a sub-advisory fee with
respect to the average daily net assets of such portion of the Portfolios
managed by Liberty Ridge, computed and paid monthly at an annual rate of 0.35%
for the U.S. Large Cap Growth mandate, 0.35% for the U.S. Large Cap Blend
mandate, 0.40% for the All Cap Blend mandate, 0.45% for the U.S. Mid Cap Equity
mandate, 0.45% for the U.S. Mid Cap Growth mandate, 0.50% for the U.S. Small Cap
Growth mandate and 0.50% for the U.S. Small Cap Blend mandate.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "Provident
Sub-Advisory Agreement") with Provident Investment Counsel, LLC ("Provident").
Provident is a majority owned subsidiary of OMUSH. For the services provided and
expenses incurred pursuant to the Provident Sub-Advisory Agreement prior to
April 7, 2008, Provident was entitled to receive from the Adviser a sub-advisory
fee with respect to the average daily net assets of such portion of the
Portfolios managed by Provident, computed and paid monthly at an annual rate of
0.35% for the U.S. Large Cap Growth mandate and 0.45% for the U.S. Mid Cap
Growth mandate.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "Rogge Sub-Advisory
Agreement") with Rogge Global Partners PLC ("Rogge"). Rogge is a majority owned
subsidiary of OMUSH. For the services provided and expenses incurred pursuant to
the Rogge Sub-Advisory Agreement prior to April 7, 2008, Rogge was entitled to
receive from the Adviser a sub-advisory fee with respect to the average daily
net assets of such portion of the Portfolios managed by Rogge, computed and paid
monthly at an annual rate of 0.25%.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "THB Sub-Advisory
Agreement") with Thomson Horstmann & Bryant, Inc. ("THB"). THB is a wholly owned
subsidiary of OMUSH. For the services provided and expenses incurred pursuant to
the THB Sub-Advisory Agreement prior to April 7, 2008, THB was entitled to
receive from the Adviser a sub-advisory fee with respect to the average daily
net assets of such portion of the Portfolios managed by THB, computed and paid
monthly at an annual rate of 0.60% for the Small Cap Value mandate and 0.50% for
the Mid Cap Value mandate.
Under the "fund of managers" structure, the Trust, on behalf of the Portfolios,
and the Adviser entered into a sub-advisory agreement (the "TS&W Sub-Advisory
Agreement") with Thompson, Siegel & Walmsley, LLC ("TS&W"). TS&W is a majority
owned subsidiary of OMUSH. For the services provided and expenses incurred
pursuant to the TS&W Sub-Advisory Agreement prior to April 7, 2008, TS&W was
entitled to receive from the Adviser a sub-advisory fee with respect to the
average daily net assets of such portion of the Portfolios managed by TS&W,
computed and paid monthly at an annual rate of 0.35% for the U.S. Large Cap
Value mandate, 0.40% for the U.S. All Cap Value mandate, 0.45% for the U.S. Mid
Cap Value mandate, 0.475% for the U.S. Small/Mid Cap Value mandate and 0.50% for
the U.S. Small Cap Value mandate.
20
Administrative Services Agreement - The Trust and Old Mutual Fund Services (the
"Administrator"), a wholly owned subsidiary of the Adviser, entered into an
Administrative Services Agreement (the "Administrative Agreement"), pursuant to
which the Administrator oversees the administration of the Trust's and each
Portfolio's business and affairs, including regulatory reporting and all
necessary office space, equipment, personnel and facilities, as well as services
performed by various third parties. The Administrator is entitled to a fee from
the Trust, which is calculated daily and paid monthly, as follows:
Annual
Average Daily Net Assets Fee Rate
- ------------------------------------------------------------------
$0 to $500 million 0.10%
> $500 million to $1 billion 0.09%
> $1 billion up to $1.5 billion 0.08%
> $1.5 billion 0.07%
- ------------------------------------------------------------------
The Administrative Agreement provides that the Administrator will not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which the Administrative Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Administrator in the performance of its duties.
The Administrative Agreement will continue in effect unless terminated by either
party upon not less than 90 days' prior written notice to the other party.
The Bank of New York Mellon (the "Sub-Administrator") serves as
sub-administrator to the Trust. The Sub-Administrator assists the Administrator
in connection with the administration of the business and affairs of the Trust.
Pursuant to a sub-administration and accounting agreement (the
"Sub-Administration Agreement") between the Administrator and the
Sub-Administrator, the Administrator pays the Sub-Administrator as follows:
annual rates, based on the combined average daily gross assets of the funds
within the Trust, Old Mutual Funds II, Old Mutual Funds III and Old Mutual
Insurance Series Fund (the "Old Mutual Complex"), of (1) 0.0475% of the first $6
billion, plus (2) 0.04% of the average daily gross assets in excess of $6
billion. With regards to the Portfolios, these fees apply only at the underlying
fund level. In addition, the Administrator pays the Sub-Administrator the
following annual fees: (1) $35,000 for each Portfolio; and (2) $3,000 per class
in excess of three classes for each fund in the Old Mutual Complex. Certain
minimum fees apply. The Sub-Administration Agreement provides that the
Sub-Administrator will not be liable for any costs, damages, liabilities or
claims incurred by the Sub-Administrator, except those arising out of the
Sub-Administrator's or it's delegee's or agent's (if such delegee or agent is a
subsidiary of the Sub-Administrator) negligence or wilful misconduct or the
Sub-Administrator's failure to act in good faith. In no event shall the
Sub-Administrator be liable to the Administrator or any third part for special,
indirect or consequential damages.
Distributor - Old Mutual Investment Partners (the "Distributor"), a wholly owned
subsidiary of the Adviser, and the Trust are parties to a distribution agreement
(the "Distribution Agreement"), pursuant to which the Distributor serves as
principal underwriter for the Trust's shares. The Distributor receives no
compensation for servicing in such capacity, except as provided in separate
Distribution and Service Plans.
The Distribution Agreement is renewable annually. The Distribution Agreement may
be terminated by the Distributor, by a majority vote of the Trustees who are not
"interested persons" (as defined in the 1940 Act) and have no financial interest
in the Distribution Agreement or by a majority vote of the outstanding
securities of the Trust upon not more than 60 days written notice by either
party or upon assignment by the Distributor.
The Trust has adopted a Distribution Plan for Service Class Shares pursuant to
Rule 12b-1 under the 1940 Act to enable the Service Class Shares of each
Portfolio to directly and indirectly bear certain expenses relating to the
distribution of such shares. The Distribution Plan is a compensation plan, which
means that it compensates the Distributor or third-party broker-dealer or other
financial intermediary regardless of the expenses actually incurred by such
persons.
Pursuant to the Distribution Plan for Service Class Shares, the Trust will pay
to the Distributor a monthly fee at an annual aggregate rate not to exceed 0.25%
of the average net asset value of the Service Class Shares, which is to
compensate the Distributor for services provided and expenses incurred by it in
connection with the offering and sale of Service Class Shares, which may
include, without limitation, the payment by the Distributor to investment
dealers of commissions on the sale of Service Class Shares, as set forth in the
then current Prospectus or Statement of Additional Information with respect to
Service Class Shares and interest and other financing costs. The amount of such
payments shall be determined by the Trust's disinterested Trustees from time to
time.
The Distributor will prepare and deliver written reports to the Board on a
regular basis (at least quarterly) setting forth the payments made pursuant to
the Distribution Plan, and the purposes for which such expenditures were made,
as well as any supplemental reports as the Board may from time to time
reasonably request.
Except to the extent that the Administrator, Sub-Administrator, Adviser, or
Sub-Advisers may benefit through increased fees from an increase in the net
assets of the Trust which may have resulted in part from the expenditures, no
interested person of the Trust nor any Trustee of the Trust who is not an
"interested person" (as defined in the 1940 Act) of the Trust had a direct or
indirect financial interest in the operation of the Distribution Plan or any
related agreement.
21
NOTES TO FINANCIAL STATEMENTS - continued
AS OF JUNE 30, 2008 (UNAUDITED)
Of the distribution fees the Distributor received for the six-month period ended
June 30, 2008, it retained the following:
Distribution Fees
Service Class
- ------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio $ 192
Old Mutual VA Asset Allocation Balanced Portfolio 187
Old Mutual VA Asset Allocation Moderate Growth Portfolio 1,842
- ------------------------------------------------------------------------------
Transfer Agent - DST Systems, Inc. serves as the transfer agent and dividend
disbursing agent of the Portfolios. From time to time, the Portfolios may pay
amounts to third parties that provide sub-transfer agency and other
administrative services relating to the Portfolios to persons who beneficially
own interests in the Portfolios.
Custodian - The Bank of New York Mellon serves as the custodian for the
Portfolios.
Officers and Trustees of the Portfolios who are or were officers of the Adviser,
Administrator, Sub-Administrator and the Distributor received no compensation
from the Portfolios.
4. INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
The cost of securities purchased and the proceeds from securities sold and
matured, other than short-term investments, for the Portfolios, for the
six-month period ended June 30, 2008 were as follows:
Purchases (000)* Sales and Maturities (000)
------------------ ------------------------------
U.S. U.S.
Government Other Government Other
- -----------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio $162 $1,309 $193 $1,727
Old Mutual VA Asset Allocation Balanced Portfolio 87 1,610 99 2,114
Old Mutual VA Asset Allocation Moderate Growth Portfolio 196 2,385 191 4,541
- -----------------------------------------------------------------------------------------------------------------------
* Excludes all investment transactions related to the restructuring of the
Portfolios from a "fund of managers" structure to a "fund of funds" structure
as described in Note 1.
5. AFFILIATED FUND OF FUNDS TRANSACTIONS
- --------------------------------------------------------------------------------
The Portfolios invest in certain mutual funds within the Old Mutual Complex, of
which certain funds may be deemed to be under common control because they may
share the same Board. A Portfolio's investment in any of the underlying funds
may exceed 25% of the underlying fund's total assets. The financial statements
for each of the underlying funds that are part of the Old Mutual Complex may be
obtained at oldmutualfunds.com. A summary of the Portfolios' transactions in
affiliated underlying funds during the six-month period ended June 30, 2008
follows:
Old Mutual VA Asset Allocation Conservative Portfolio
Unrealized
Purchases Proceeds Appreciation Value Dividend Net Realized
Underlying Fund at Cost from Sales (Depreciation) at 6/30/08 Income Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual Advantage Growth Fund $ 369,357 $ - $ 4,081 $ 373,438 $ - $ -
Old Mutual Analytic US Long/Short Fund 98,865 - (3,507) 95,358 - -
Old Mutual Barrow Hanley Core Bond Fund 1,422,924 - (23,504) 1,399,420 11,313 -
Old Mutual Barrow Hanley Value Fund 147,866 - (11,584) 136,282 1,367 -
Old Mutual Dwight High Yield Fund 385,753 - 293 386,046 8,016 -
Old Mutual Dwight Intermediate Fixed Income Fund 1,876,117 428,715 (15,517) 1,429,307 17,360 (2,578)
Old Mutual Focused Fund 93,084 - (2,864) 90,220 - -
Old Mutual International Bond Fund 520,184 7,445 (21,214) 491,580 3,288 55
Old Mutual International Equity Fund 355,884 - (12,741) 343,143 - -
Old Mutual Mid-Cap Fund 40,937 - (2,618) 38,319 - -
Old Mutual Provident Mid-Cap Growth Fund 134,276 17,016 4,622 121,415 - (467)
Old Mutual TS&W Mid-Cap Value Fund 396,985 - 13,218 410,203 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $5,842,232 $453,176 $(71,335) $5,314,731 $41,344 $(2,990)
- ------------------------------------------------------------------------------------------------------------------------------------
22
Old Mutual VA Asset Allocation Balanced Portfolio
Unrealized
Purchases Proceeds Appreciation Value Dividend Net Realized
Underlying Fund at Cost from Sales (Depreciation) at 6/30/08 Income Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual Advantage Growth Fund $ 547,688 $ - $ 6,052 $ 553,740 $ - $ -
Old Mutual Analytic US Long/Short Fund 230,402 3,109 (8,061) 219,152 - (80)
Old Mutual Barrow Hanley Core Bond Fund 797,645 - (12,805) 784,840 6,399 -
Old Mutual Barrow Hanley Value Fund 343,119 - (27,866) 315,253 3,163 -
Old Mutual Clay Finlay Emerging Markets Fund 232,588 9,326 (5,845) 217,515 - 98
Old Mutual Developing Growth Fund 143,137 3,109 (652) 139,260 - (116)
Old Mutual Discover Value Fund 230,200 2,073 (12,002) 216,038 - (87)
Old Mutual Dwight High Yield Fund 215,593 - 164 215,757 4,480 -
Old Mutual Dwight Intermediate Fixed Income Fund 970,569 317,617 (6,985) 643,685 8,578 (2,282)
Old Mutual Focused Fund 205,902 4,145 (7,566) 194,020 - (171)
Old Mutual Heitman REIT Fund 53,969 - (5,619) 48,350 247 -
Old Mutual International Bond Fund 309,830 4,663 (12,626) 292,575 1,937 34
Old Mutual International Equity Fund 654,503 3,627 (23,300) 627,504 - (72)
Old Mutual Mid-Cap Fund 102,206 4,145 (6,260) 91,644 - (157)
Old Mutual Provident Mid-Cap Growth Fund 155,413 - 6,150 161,563 - -
Old Mutual TS&W Mid-Cap Value Fund 447,055 - 14,885 461,940 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $5,639,819 $ 351,814 $(102,336) $5,182,836 $24,804 $ (2,833)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Moderate Growth Portfolio
Unrealized
Purchases Proceeds Appreciation Value Dividend Net Realized
Underlying Fund at Cost from Sales (Depreciation) at 6/30/08 Income Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual Advantage Growth Fund $ 976,234 $ 91,368 $ 9,758 $ 892,875 $ - $ (1,749)
Old Mutual Analytic US Long/Short Fund 502,576 127,915 (16,877) 354,487 - (3,297)
Old Mutual Barrow Hanley Core Bond Fund 497,271 - (10,668) 486,603 4,717 -
Old Mutual Barrow Hanley Value Fund 571,802 73,094 (40,870) 455,643 4,572 (2,195)
Old Mutual Clay Finlay Emerging Markets Fund 293,989 127,915 (4,381) 163,034 - 1,341
Old Mutual Developing Growth Fund 322,553 91,368 (1,061) 226,719 - (3,405)
Old Mutual Discover Value Fund 330,057 - (17,371) 312,686 - -
Old Mutual Dwight Intermediate Fixed Income Fund 834,992 598,208 (2,542) 234,094 3,263 (148)
Old Mutual Focused Fund 228,028 - (7,015) 221,013 - -
Old Mutual Heitman REIT Fund 289,162 73,094 (22,139) 190,498 974 (3,431)
Old Mutual International Bond Fund 252,060 127,915 (5,173) 119,911 868 939
Old Mutual International Equity Fund 1,252,174 201,009 (37,490) 1,009,671 - (4,004)
Old Mutual Mid-Cap Fund 145,002 36,547 (6,847) 100,227 - (1,381)
Old Mutual Provident Mid-Cap Growth Fund 285,835 109,642 6,853 180,034 - (3,012)
Old Mutual TS&W Mid-Cap Value Fund 860,077 369,283 16,521 512,716 - 5,401
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $7,641,812 $2,027,358 $(139,302) $5,460,211 $14,394 $(14,941)
- ------------------------------------------------------------------------------------------------------------------------------------
6. FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
Each Portfolio has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code for federal
income tax purposes and to distribute substantially all of its taxable income
and net capital gains. Accordingly, no provision has been made for federal
income taxes.
The Portfolios adopted the provisions of Financial Accounting Standards Board
(FASB) Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income
Taxes on June 29, 2007. FIN 48 requires an evaluation of tax positions taken (or
expected to be taken) in the course of preparing a Portfolio's tax returns to
determine whether these positions meet a "more-likely-than-not" standard that
based on the technical
23
NOTES TO FINANCIAL STATEMENTS - concluded
AS OF JUNE 30, 2008 (UNAUDITED)
merits have a more than fifty percent likelihood of being sustained by a taxing
authority upon examination. A tax position that meets the "more-likely-than-not"
recognition threshold is measured to determine the amount of benefit to
recognize in the financial statements. The Portfolios recognize interest and
penalties, if any, related to unrecognized tax benefits as income tax expense in
the statement of operations.
FIN 48 requires management of the Portfolios to analyze all open tax years,
fiscal years 2004-2007 as defined by IRS statute of limitations, for all major
jurisdictions, including federal tax authorities and certain state tax
authorities. As of and during the six-month period ended June 30, 2008, the
Portfolios did not have a liability for any unrecognized tax benefits. The
Portfolios have no examination in progress and are not aware of any tax
positions for which it is reasonably possible that the total amounts of
unrecognized tax benefits will significantly change in the next twelve months.
Dividends from net investment income and distributions from net realized capital
gains are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under accounting principles
generally accepted in the United States of America. These book/tax differences
are either temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to Paid-in Capital or accumulated net
realized gain, as appropriate, in the period that the differences arise.
Accordingly, the following permanent differences as of December 31, 2007,
primary attributable to reclassification of capital gain distributions on Real
Estate Investment Trust Securities and foreign currency translation were
reclassified to the following accounts.
Decrease Increase
Undistributed Net Accumulated Net
Investment Income (000) Realized Gain/(Loss) (000)
- -------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio $(53) $53
Old Mutual VA Asset Allocation Balanced Portfolio (32) 32
Old Mutual VA Asset Allocation Moderate Growth Portfolio (9) 9
- -------------------------------------------------------------------------------------------------------------------------
The tax character of dividends and distributions declared during the year ended
December 31, 2007 were as follows:
Ordinary
Income (000)
- --------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio $125
Old Mutual VA Asset Allocation Balanced Portfolio 111
Old Mutual VA Asset Allocation Moderate Growth Portfolio 119
- --------------------------------------------------------------------------------
As of December 31, 2007, the components of Distributable Earnings/(Accumulated
Losses) were as follows:
Undistributed Undistributed Unrealized
Ordinary Long-Term Appreciation/ Post October Total
Income (000) Capital Gain (000) (Depreciation) (000) Losses (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio $10 $- $219 $ (6) $223
Old Mutual VA Asset Allocation Balanced Portfolio 15 2 298 (4) 311
Old Mutual VA Asset Allocation Moderate Growth Portfolio 2 - 317 (12) 307
- ------------------------------------------------------------------------------------------------------------------------------------
Post-October losses represent losses realized on investment transactions from
November 1, 2007 through December 31, 2007 that in accordance with federal
income tax regulations the Portfolios may elect to defer and treat as having
arisen in the following fiscal year.
Amounts designated as "-" are either $0 or have been rounded to $0.
The Federal tax cost, aggregate gross unrealized appreciation and depreciation
of investments held by each Portfolio at June 30, 2008 were as follows:
Federal Unrealized Unrealized Net Unrealized
Tax Cost Appreciation Depreciation Depreciation
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio $5,442 $24 $ (95) $ (71)
Old Mutual VA Asset Allocation Balanced Portfolio 5,357 28 (130) (102)
Old Mutual VA Asset Allocation Moderate Growth Portfolio 5,659 34 (173) (139)
- ------------------------------------------------------------------------------------------------------------------------------------
24
7. FOREIGN HOLDINGS RISK
- --------------------------------------------------------------------------------
Prior to April 7, 2008, each Portfolio may have invested directly in foreign
securities and under the "fund of fund" structure, certain underlying funds may
invest in foreign securities. Investing in the securities of foreign issuers
involves special risks and considerations not typically associated with
investing in U.S. companies. These risks and considerations include differences
in accounting, auditing and financial reporting standards, generally higher
commission rates on foreign portfolio transactions, the possibility of
expropriation or confiscatory taxation, adverse changes in investment or
exchange control regulations, political instability which could affect U.S.
investment in foreign countries and potential restrictions on the flow of
international capital and currencies. Foreign issuers may also be subject to
less government regulation than U.S. companies. Moreover, the dividends and
interest payable on foreign securities may be subject to foreign withholding
taxes, thus reducing the net amount of income available for distribution to a
Portfolio's shareholders. Further, foreign securities often trade with less
frequency and volume than domestic securities and, therefore, may exhibit
greater price volatility. Changes in foreign exchange rates will affect,
favorably or unfavorably, the value of those securities which are denominated or
quoted in currencies other than the U.S. dollar.
8. INTERFUND LENDING
- --------------------------------------------------------------------------------
Pursuant to resolutions adopted by the Boards of Trustees of each of the Trust,
Old Mutual Funds II and Old Mutual Insurance Series Fund (together, the
"Trusts"), on behalf of certain series portfolios of the Trusts (for purposes of
this Note 7, the "OM Funds"), each of the OM Funds may lend an amount up to its
prospectus-defined limitations to other OM Funds. All such lending shall be
conducted pursuant to the exemptive order granted by the Securities and Exchange
Commission on August 12, 2003 to the Trusts.
The interest rate charged on the loan is the average of the overnight repurchase
agreement rate (highest rate available to the OM Funds from investments in
overnight repurchase agreements) and the bank loan rate (Federal Funds Rate plus
50 basis points). None of the OM Funds may borrow more than 10% of their net
assets.
The Portfolios had no outstanding borrowings or loans related to interfund
lending at any time during the six-month period ended June 30, 2008.
9. NEW ACCOUNTING PRONOUNCEMENTS
- --------------------------------------------------------------------------------
In March 2008, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 161, "Disclosures about Derivative Instruments and Hedging
Activities". SFAS 161 is effective for fiscal years and interim periods
beginning after November 15, 2008. SFAS 161 may require enhanced disclosures
about a Portfolio's derivative and hedging activities. Management is currently
evaluating the impact the adoption of SFAS 161 may have on the Portfolio's
financial statement disclosures.
25
PROXY VOTING AND PORTFOLIO HOLDINGS (Unaudited)
Proxy Voting
A description of the guidelines that the Trust uses to determine how to vote
proxies relating to portfolio securities is available (i) without charge, upon
request, by calling 888.772.2888 toll-free; (ii) on the Trust's website at
oldmutualfunds.com; and (iii) on the SEC's website at http://www.sec.gov.
Information about how the Portfolios voted proxies relating to portfolio
securities for the 12-month period ended June 30, 2008 will be available on the
Trust's website at oldmutualfunds.com and on the SEC's website at
http://www.sec.gov.
Portfolio Holdings
The Trust files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of its fiscal year on Form N-Q. The Trust's Forms N-Q
are available on the SEC's website at http://www.sec.gov, or may be reviewed and
copied at the SEC's Public Reference Room in Washington D.C. Information on the
operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330
toll-free.
26
PORTFOLIO EXPENSES EXAMPLE (Unaudited)
Six Month Hypothetical Expense Example - June 30, 2008
Example. As a shareholder of a Portfolio you may pay two types of fees:
transaction fees and fund-related fees. Transaction fees may include transaction
costs. Portfolio-related fees may include ongoing expenses, including management
fees, distribution and/or service fees, and other fund expenses, which are
indirectly paid by shareholders and affect your investment return.
This Example is intended to help you understand your ongoing costs (in dollars)
of investing in the Portfolios and to compare these costs with the ongoing costs
of investing in other mutual funds. This Example is based on an investment of
$1,000 invested at the beginning of the period and held for the six-month period
ended June 30, 2008.
Actual Expenses. The first line for each share class in the following table
provides information about actual account values and actual expenses. The
Example includes, but is not limited to, management fees, 12b-1 fees, fund
accounting, custody and transfer agent fees. The Example does not include
portfolio trading commissions and related trading expenses. You may use this
information, 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 first line for each share class under the heading
entitled "Expenses Paid During Six Month Period" to estimate the expenses you
paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second line for each share
class in the table provides information about hypothetical account values and
hypothetical expenses based on each Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio'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 each Portfolio and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds. Please note that the expenses shown in
the table are meant to highlight your ongoing costs only and do not reflect any
transactional costs nor do they reflect any additional charges that may be
imposed under variable annuity contracts or variable life insurance policies.
Therefore, this information is useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher.
Annualized Expenses
Expense Paid
Beginning Ending Ratios For During
Account Account the Six Six
Value Value Month Month
1/1/08 6/30/08 Period Period*
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio - Initial Class
Actual Fund Return $1,000.00 $ 983.70 0.64% $3.16
Hypothetical 5% Return 1,000.00 1,021.68 0.64 3.22
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Conservative Portfolio - Service Class
Actual Fund Return 1,000.00 982.70 0.89 4.39
Hypothetical 5% Return 1,000.00 1,024.82 0.89 4.48
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Balanced Portfolio - Initial Class
Actual Fund Return 1,000.00 939.70 0.62 2.99
Hypothetical 5% Return 1,000.00 1,021.78 0.62 3.12
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Balanced Portfolio - Service Class
Actual Fund Return 1,000.00 938.50 0.86 4.15
Hypothetical 5% Return 1,000.00 1,024.82 0.86 4.33
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Moderate Growth Portfolio - Initial Class
Actual Fund Return 1,000.00 919.00 0.59 2.82
Hypothetical 5% Return 1,000.00 1,021.93 0.59 2.97
- ------------------------------------------------------------------------------------------------------------------------------------
Old Mutual VA Asset Allocation Moderate Growth Portfolio - Service Class
Actual Fund Return 1,000.00 917.80 1.08 5.15
Hypothetical 5% Return 1,000.00 1,024.81 1.08 5.44
- ------------------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio multiplied by
the average account value over the period, multiplied by 182/366 days (to
reflect the one-half year period).
27
FOR MORE INFORMATION
For investors who want more information about the Old Mutual Funds I-VA
Portfolios, please contact us at:
| By Telephone:
|
| 888.772.2888
|
| By Mail:
|
| Old Mutual Funds I - VA Portfolios
| P.O. Box 219534
| Kansas City, Missouri 64121-9534
|
| Via the Internet:
|
| oldmutualfunds.com
This semi-annual report is intended for the information of Old Mutual Funds I-VA
Portfolio shareholders, but may be used by prospective investors when preceded
or accompanied by a current prospectus. You may obtain a copy of the prospectus,
which contains important information about the objectives, risks, share classes,
charges and expenses of the Old Mutual Funds I-VA Portfolios, by visiting
oldmutualfunds.com or by calling 888.772.2888. Please read the prospectus
carefully before investing.
[OLD MUTUAL LOGO]
Funds distributed by Old Mutual Investment Partners
R-08-344 08/2008
Item 2. Code of Ethics.
Not applicable to semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable to semiannual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable to semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
SCHEDULE I - INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS is
included as part of the reports to shareholders filed under Item 1
of this report.
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 Company
and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
No material changes have been made to the procedures by which
shareholders may recommend nominees to the board, where those
changes were implemented after Old Mutual Funds I (the
"registrant") last provided disclosure in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item
10.
Item 11. Controls and Procedures.
(a) Based on an evaluation of the Disclosure Controls and
Procedures of the registrant as of a date within 90 days of the
filing date of this report, the registrant's PEO and PFO, or
persons performing similar functions, have concluded that the
Disclosure Controls and Procedures are effectively designed to
ensure that information required to be disclosed in this report is
recorded, processed, summarized, and reported within required time
periods, and accumulated and communicated to the registrant's
management, including the registrant's PEO and PFO, or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
(b) During the quarter ended June 30, 2008, there has been no
change in the registrant's internal control over financial
reporting that has materially affected, or that is reasonably
likely to materially affect, the registrant's internal control
over financial reporting.
Items 12. Exhibits.
(a)(1) Not applicable to semiannual reports.
(a)(2) Attached hereto as Exhibit EX-99.CERT.
(a)(3) Not applicable.
(b) Attached hereto as Exhibit EX-99.906CERT.
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.
OLD MUTUAL FUNDS I
By: /s/ Julian F. Sluyters
--------------------------------------------------
Julian F. Sluyters, President
Date: August 8, 2008
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/ Julian F. Sluyters
---------------------------------------------------
Julian F. Sluyters, Principal Executive Officer
Date: August 8, 2008
By: /s/ Robert T. Kelly
---------------------------------------------------
Robert T. Kelly, Principal Financial Officer
Date: August 8, 2008