-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BacG7MGU1ctwkLnP7zcHOa9ckvOtfl5oF853wCzr5Yh8BZS7ueUBednGFg/OTTwU +z+0cQ6lsZR7AY5XxFtY/w== 0000893220-04-002318.txt : 20041102 0000893220-04-002318.hdr.sgml : 20041102 20041102134230 ACCESSION NUMBER: 0000893220-04-002318 CONFORMED SUBMISSION TYPE: N-CSR/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20041102 DATE AS OF CHANGE: 20041102 EFFECTIVENESS DATE: 20041102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AB FUNDS TRUST/DE CENTRAL INDEX KEY: 0001131013 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-10263 FILM NUMBER: 041112596 BUSINESS ADDRESS: STREET 1: C/O PFPC INC. STREET 2: 400 BELLVUE PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027911765 MAIL ADDRESS: STREET 1: C/O PFPC INC. STREET 2: 400 BELLVUE PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 FORMER COMPANY: FORMER CONFORMED NAME: ANNUITY BOARD FUNDS TRUST DATE OF NAME CHANGE: 20010102 N-CSR/A 1 w68164nvcsrza.txt AB FUNDS TRUST FORM N-CSR AMENDMENT #1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR AMENDMENT NO. 1 CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-10263 AB Funds Trust -------------------------------------------------- (Exact name of registrant as specified in charter) 2401 Cedar Springs Road Dallas, TX 75201-1407 -------------------------------------------------- (Address of principal executive offices) (Zip code) Rodney R. Miller, Esq. Annuity Board of the Southern Baptist Convention 2401 Cedar Springs Road Dallas, TX 75201-1407 -------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 214-720-1171 Date of fiscal year end: December 31, 2003 Date of reporting period: December 31, 2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [AB FUNDS LOGO] [AB FUNDS TRUST LOGO] Annual Report DECEMBER 31, 2003 BLENDED FUNDS: - FLEXIBLE INCOME FUND - GROWTH & INCOME FUND - CAPITAL OPPORTUNITIES FUND - GLOBAL EQUITY FUND - FLEXIBLE INCOME FUND I - GROWTH & INCOME FUND I - CAPITAL OPPORTUNITIES FUND I - GLOBAL EQUITY FUND I SELECT FUNDS: - MONEY MARKET FUND - LOW-DURATION BOND FUND - MEDIUM-DURATION BOND FUND - EXTENDED-DURATION BOND FUND - EQUITY INDEX FUND - VALUE EQUITY FUND - GROWTH EQUITY FUND - SMALL CAP EQUITY FUND - INTERNATIONAL EQUITY FUND AB Funds Trust Annuity Board of the Southern Baptist Convention ("Annuity Board") SBC Financial Services, Inc. ("SBC Financial") SBC Trust Services, Inc. ("SBC Trust") PFPC Distributors, Inc. ("PFPC") NOTICE CONCERNING YOUR PRIVACY RIGHTS This notice will provide you with information concerning our policies with respect to nonpublic personal information that we collect about you in connection with the following financial products and services provided and/or serviced by the entities listed above: individual retirement accounts ("IRAs") and/or personal mutual fund accounts. The confidentiality of your information is important to us as we recognize that you depend on us to keep your information confidential, as described in this notice. We collect nonpublic personal information about you with regard to your IRA and/or personal mutual fund accounts from the following sources: - Information we receive from you on applications or other forms; - Information about your transactions with us, our affiliates or others (including our third-party service providers); - Information we receive from others such as service providers, broker-dealers and your personal agents or representatives; and - Information you and others provide to us in correspondence sent to us, whether written, electronic or by telephone. We may disclose such nonpublic personal financial information about you to one or more of our affiliates. An affiliate of an organization means any entity that controls, is controlled by, or is under common control with that organization. For example, the Annuity Board, SBC Financial and SBC Trust are affiliates of one another. AB Funds Trust, Annuity Board, SBC Financial, SBC Trust and PFPC do not sell your personal information to nonaffiliated third parties. We may also disclose any of the personal information that we collect about you to nonaffiliated third parties as permitted by law. For example, we may provide your information to nonaffiliated companies that provide account services or that perform marketing services on our behalf and to other financial institutions with whom we have joint marketing agreements. We restrict access to nonpublic personal information about you to those of our employees who need to know that information in order for us to provide and/or service products or services to you. We also maintain physical, electronic, and procedural safeguards to guard your personal information. These procedures will continue to remain in effect after you cease to receive financial products and services from us. If you have any questions concerning our customer information policy, please contact a customer service representative at 1-800-262-0511. TABLE OF CONTENTS Letter from the President 2 From the Chief Investment Officer 3 Blended Funds: Flexible Income 7 Growth & Income 10 Capital Opportunities 13 Global Equity 16 Financial Statements 20 Flexible Income I 28 Growth & Income I 30 Capital Opportunities I 32 Global Equity I 34 Financial Statements 36 Select Funds: Money Market 40 Low-Duration Bond 44 Medium-Duration Bond 53 Extended-Duration Bond 69 Equity Index 75 Value Equity 83 Growth Equity 94 Small Cap Equity 98 International Equity 119 Financial Statements 130 Notes to Financial Statements 147 Report of Independent Auditors 166 Fund Management 167 Investment Sub-advisers 169
This report has been prepared for shareholders of AB Funds Trust. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current prospectus, which contains more complete information about the Funds. Investors are reminded to read the prospectus carefully before investing. 1 LETTER FROM THE PRESIDENT February 16, 2004 [O. S. HAWKINS PHOTO] Dear Shareholder: We are pleased to bring you the AB Funds Trust annual report for 2003. This report reflects a welcome change in the investment climate for investors compared to recent years. We are pleased that through investment in AB Funds Trust, our shareholders participated in the broad advance in both the bond and stock markets. The year 2003 reminds all investors of the importance of being properly positioned when market turns occur. History proves that post-recessionary rallies can be swift and strong, and this past year was no exception. We are proponents of investing in capital markets with a long-term strategic perspective and as a means of meeting specific long-term financial goals. While we stress the importance of reviewing an investment plan periodically, we also emphasize the importance of establishing a plan and staying with it through good and bad markets so that when market rallies occur investors are positioned to take advantage. Equity investors that did so in 2003 were richly rewarded. While we celebrate bringing investment success to our shareholders this year, we are disappointed in certain developments within the financial services industry. The issues of market timing and late trading strike at the heart of the mutual fund industry. These issues must and undoubtedly will be resolved, but in so doing will likely change the way investors relate to mutual funds in the future. AB Funds Trust adheres to the highest ethical and professional standards in our industry. We have shared with you in previous correspondence our position on these issues and our resolve to review our policies, procedures and activities to ensure our business practices protect the interests of you, our shareholder. This report reflects our unwavering commitment to integrity in financial reporting so that you may stay fully informed of your investments. We hope that you will find the information valuable. If you have questions regarding its content, please call us at 1-800-262-0511 or visit our web site at www.absbc.org. Our customer service specialists are ready to serve you. Thank you for choosing to invest in AB Funds Trust. Sincerely, /s/ O. S. Hawkins O. S. Hawkins Past performance is no guarantee of future results. Share prices will fluctuate and there may be a gain or loss when shares are redeemed. Not Part of the Annual Report 2 FROM THE CHIEF INVESTMENT OFFICER [RODRIC E. CUMMINS PHOTO] Rodric E. Cummins, CFA The cyclical rally in stock investments that began early in 2003 continued through the fourth quarter in response to the surprisingly strong U.S. economy. The combination of low interest rates, huge monetary and fiscal stimulus, tax refunds and a weakening currency propelled the U.S. economy into the most robust period of growth in 20 years. This backdrop, coupled with uncertainty and very low expectations from investors at the beginning of the year, set the stage for impressive equity advances in 2003. Investors that maintained well-diversified equity portfolios participated in returns for the year that were strong across all broadly defined global equity markets. U.S. small-cap stocks led all major asset classes by a wide margin. Additionally, international stocks received a large boost from emerging market regions and a weakening U.S. dollar. Small-cap stocks (as represented by the Russell 2000(R) Index) gained 14.52% during the fourth quarter and 47.25% for the year. International stocks (as represented by the MSCI ACWI(R) Free Ex-U.S.) returned 17.08% during the quarter and 40.83% for the year. By comparison, the S&P 500(R) Index posted a 12.18% return for the fourth quarter and 28.71% for the year. ASSET CLASS PERFORMANCE COMPARISON The following graph illustrates the performance of the major asset classes during 2003. [ASSET CLASS BAR CHART]
4TH QTR 1 YEAR ------- ------ S&P 500(R)(1) 12.18 28.71 Russell 2000(R)(2) 14.52 47.25 MSCI ACWI(R) Free Ex-US(3) 17.08 40.83 LB Aggregate(4) 0.32 4.10
(1)The S&P 500(R) Index is a capitalization-weighted index that includes a representative sample of 500 leading companies in leading industries of the U.S. economy. The index focuses on the large-cap segment of the market. (2)The Russell 2000(R) Index is a small-cap index consisting of the smallest 2000 companies in the Russell 3000(R) Index, representing approximately 8% of the Russell 3000(R) Index total market capitalization. (3)The MSCI ACWI(R) (All Country World Index) Free Ex-US is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets excluding the US. (4)The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Not Part of the Annual Report 3 Fixed income investments also enjoyed another solid year of positive returns despite a generally small rise in interest rates in the U.S. The Lehman Brothers Aggregate Bond Index posted a return of 0.32% during the fourth quarter, bringing the calendar year performance to 4.10%. Bonds were boosted by the corporate sector as an improving economy and stronger profit growth resulted in reduced credit spreads. Also, the bond market received a lift from the high yield and emerging market debt sectors, both of which posted equity-like returns for the year. OUTLOOK Financial markets discount existing conditions and react to changes in those conditions. The widespread pessimism that dominated the investment climate one year ago has rightfully given way to optimism that has boosted the fortunes of equity investors. This rapid change in market sentiment accounts in large part for the investment returns in 2003 that were far above forecasts, the historical norm or future sustainability. The economy's surprising performance reflects the powerful effects of unprecedented monetary and fiscal stimulus, the economy's resilience, and the strong U.S. global leadership position. Economic growth and corporate profits in 2004 are expected to moderate from the post-recessionary surge experienced over the past year; however, the fundamental underpinning for continued growth seems to be solidly in place. Bond investors are concerned about inflationary pressures resulting from aggressive monetary policies and improving economic growth. The Federal Reserve ("Fed") has set explicit targets of stronger economic growth and increased inflation, both of which are archenemies of fixed-income securities. If the Fed is successful in its pursuit, bond investors will likely experience investment returns far lower than those experienced in recent years. U.S. ECONOMY -- GROSS DOMESTIC PRODUCT As measured by GDP, the U.S. economy has generated positive growth for eight consecutive quarters through period ending 3Q03. Third quarter GDP grew at an 8.2% annual rate, which was the highest measure of economic expansion since the 4Q83. The economy responded to both aggressive monetary and fiscal policy. Economic growth has been broad based -- derived from both consumer and business spending. [U.S. ECONOMY GRAPH]
REAL GROSS DOMESTIC PRODUCT --------------------------- 12/90 -3.20 -2.00 2.30 9/91 1.00 2.20 3.80 3.80 9/92 3.10 5.40 -0.10 2.50 9/93 1.80 6.20 3.40 5.70 9/94 2.20 5.00 1.50 0.80 9/95 3.10 3.20 2.90 6.80 9/96 2.00 4.60 4.40 5.90 9/97 4.20 2.80 6.10 2.20 9/98 4.10 6.70 3.00 2.00 9/99 5.20 7.10 2.60 4.80 9/00 0.60 1.10 -0.60 -1.60 9/01 -0.30 2.70 5.00 1.30 9/02 4.00 12/02 1.30 3/03 2.00 6/03 3.10 9/03 8.20
Gross Domestic Product ("GDP") is one of, if not the most widely used economic measures for the overall U.S. economy. GDP measures the total market value of all final goods and services produced within the U.S. during a specific period. The index is the percent change from quarter to quarter of GDP and is often presented as an annualized rate. Generally, it is viewed as positive for the equity markets as GDP expands reflecting an environment of economic growth and profitability. The converse is true when GDP is contracting. Data Source: Bloomberg U.S. EQUITY MARKET Following three consecutive years of negative returns, the U.S. equity market, as measured by the S&P 500(R) Index, posted a strong return of 28.71% in 2003. The rebound in the U.S. equity market reflected the improvements in the economic environment and corporate earnings. [LINE GRAPH]
S&P 500 INDEX(R) (TOTAL RETURN) ------------------------------- 12/72 18.98 12/73 -14.66 12/74 -26.47 12/75 37.20 12/76 23.84 12/77 -7.18 12/78 6.56 12/79 18.44 12/80 32.42 12/81 -4.91 12/82 21.41 12/83 22.51 12/84 6.27 12/85 32.16 12/86 18.47 12/87 5.23 12/88 16.81 12/89 31.49 12/90 -3.17 12/91 30.55 12/92 7.67 12/93 9.99 12/94 1.31 12/95 37.43 12/96 23.07 12/97 33.36 12/98 28.58 12/99 21.04 12/00 -9.11 12/01 -11.88 12/02 -22.10 12/03 28.71
The S&P 500(R) Index is used as a measure for the performance of large-cap, U.S. stocks. Not Part of the Annual Report 4 S&P 500(R) INDEX PRICE/EARNINGS RATIO (P/E) The P/E ratio for the S&P 500(R) Index indicates that stock valuations are not inexpensive based on historical standards. [LINE GRAPH]
S&P 500(R) INDEX P/E RATIO AVERAGE -------------------------- ------- 1/31/1977 10.829 15.6557 2/28/1977 10.554 15.6557 3/31/1977 10.038 15.6557 4/29/1977 10.02 15.6557 5/31/1977 9.782 15.6557 6/30/1977 10.027 15.6557 7/29/1977 9.772 15.6557 8/31/1977 9.526 15.6557 9/30/1977 9.319 15.6557 10/31/1977 8.90 15.6557 11/30/1977 9.104 15.6557 12/30/1977 8.939 15.6557 1/31/1978 8.362 15.6557 2/28/1978 8.141 15.6557 3/31/1978 8.193 15.6557 4/28/1978 8.913 15.6557 5/31/1978 8.922 15.6557 6/30/1978 8.698 15.6557 7/31/1978 9.179 15.6557 8/31/1978 9.396 15.6557 9/29/1978 9.026 15.6557 10/31/1978 8.191 15.6557 11/30/1978 8.303 15.6557 12/29/1978 8.183 15.6557 1/31/1979 8.48 15.6557 2/28/1979 8.174 15.6557 3/30/1979 8.209 15.6557 4/30/1979 8.198 15.6557 5/31/1979 7.976 15.6557 6/29/1979 7.708 15.6557 7/31/1979 7.761 15.6557 8/31/1979 8.168 15.6557 9/28/1979 7.83 15.6557 10/31/1979 7.272 15.6557 11/30/1979 7.586 15.6557 12/31/1979 7.367 15.6557 1/31/1980 7.784 15.6557 2/29/1980 7.755 15.6557 3/31/1980 6.753 15.6557 4/30/1980 7.045 15.6557 5/30/1980 7.384 15.6557 6/30/1980 7.322 15.6557 7/31/1980 7.773 15.6557 8/29/1980 7.814 15.6557 9/30/1980 8.021 15.6557 10/31/1980 8.159 15.6557 11/28/1980 9.024 15.6557 12/31/1980 8.622 15.6557 1/30/1981 8.216 15.6557 2/27/1981 8.303 15.6557 3/31/1981 8.53 15.6557 4/30/1981 8.333 15.6557 5/29/1981 8.328 15.6557 6/30/1981 8.736 15.6557 7/31/1981 8.404 15.6557 8/31/1981 7.90 15.6557 9/30/1981 7.561 15.6557 10/30/1981 7.837 15.6557 11/30/1981 8.123 15.6557 12/31/1981 7.716 15.6557 1/29/1982 7.582 15.6557 2/26/1982 7.114 15.6557 3/31/1982 7.069 15.6557 4/30/1982 7.352 15.6557 5/28/1982 7.067 15.6557 6/30/1982 7.145 15.6557 7/30/1982 6.988 15.6557 8/31/1982 7.792 15.6557 9/30/1982 8.124 15.6557 10/29/1982 9.044 15.6557 11/30/1982 9.369 15.6557 12/31/1982 9.653 15.6557 1/31/1983 9.982 15.6557 2/28/1983 10.199 15.6557 3/31/1983 10.714 15.6557 4/29/1983 11.484 15.6557 5/31/1983 11.35 15.6557 6/30/1983 11.807 15.6557 7/29/1983 11.434 15.6557 8/31/1983 11.576 15.6557 9/30/1983 11.519 15.6557 10/31/1983 11.357 15.6557 11/30/1983 11.79 15.6557 12/30/1983 11.187 15.6557 1/31/1984 11.05 15.6557 2/29/1984 10.047 15.6557 3/30/1984 9.836 15.6557 4/30/1984 9.865 15.6557 5/31/1984 9.252 15.6557 6/29/1984 8.881 15.6557 7/31/1984 8.705 15.6557 8/31/1984 9.612 15.6557 9/28/1984 9.319 15.6557 10/31/1984 9.30 15.6557 11/30/1984 9.14 15.6557 12/31/1984 9.362 15.6557 1/31/1985 10.054 15.6557 2/28/1985 10.147 15.6557 3/29/1985 10.097 15.6557 4/30/1985 10.041 15.6557 5/31/1985 10.59 15.6557 6/28/1985 10.877 15.6557 7/31/1985 10.799 15.6557 8/30/1985 10.675 15.6557 9/30/1985 10.579 15.6557 10/31/1985 11.04 15.6557 11/29/1985 11.748 15.6557 12/31/1985 12.351 15.6557 1/31/1986 12.367 15.6557 2/28/1986 13.241 15.6557 3/31/1986 13.822 15.6557 4/30/1986 13.659 15.6557 5/30/1986 14.385 15.6557 6/30/1986 14.433 15.6557 7/31/1986 13.577 15.6557 8/29/1986 14.53 15.6557 9/30/1986 12.947 15.6557 10/31/1986 13.643 15.6557 11/28/1986 13.911 15.6557 12/31/1986 13.418 15.6557 1/30/1987 15.168 15.6557 2/27/1987 15.685 15.6557 3/31/1987 16.29 15.6557 4/30/1987 15.972 15.6557 5/29/1987 16.074 15.6557 6/30/1987 16.506 15.6557 7/31/1987 17.186 15.6557 8/31/1987 17.806 15.6557 9/30/1987 17.512 15.6557 10/30/1987 13.745 15.6557 11/30/1987 12.511 15.6557 12/31/1987 12.87 15.6557 1/29/1988 13.315 15.6557 2/29/1988 13.814 15.6557 3/31/1988 12.573 15.6557 4/29/1988 12.594 15.6557 5/31/1988 12.574 15.6557 6/30/1988 12.489 15.6557 7/29/1988 12.371 15.6557 8/31/1988 11.867 15.6557 9/30/1988 11.471 15.6557 10/31/1988 11.731 15.6557 11/30/1988 11.459 15.6557 12/30/1988 11.202 15.6557 1/31/1989 11.924 15.6557 2/28/1989 11.513 15.6557 3/31/1989 11.283 15.6557 4/28/1989 14.042 15.6557 5/31/1989 14.326 15.6557 6/30/1989 13.948 15.6557 7/31/1989 15.346 15.6557 8/31/1989 15.475 15.6557 9/29/1989 12.704 15.6557 10/31/1989 12.433 15.6557 11/30/1989 12.65 15.6557 12/29/1989 13.218 15.6557 1/31/1990 12.342 15.6557 2/28/1990 12.419 15.6557 3/30/1990 13.325 15.6557 4/30/1990 12.984 15.6557 5/31/1990 14.162 15.6557 6/29/1990 14.716 15.6557 7/31/1990 14.612 15.6557 8/31/1990 13.206 15.6557 9/28/1990 12.643 15.6557 10/31/1990 12.566 15.6557 11/30/1990 13.298 15.6557 12/31/1990 13.725 15.6557 1/31/1991 14.25 15.6557 2/28/1991 15.192 15.6557 3/28/1991 15.215 15.6557 4/30/1991 15.227 15.6557 5/31/1991 15.776 15.6557 6/28/1991 14.877 15.6557 7/31/1991 15.578 15.6557 8/30/1991 15.92 15.6557 9/30/1991 16.097 15.6557 10/31/1991 16.297 15.6557 11/29/1991 15.643 15.6557 12/31/1991 17.947 15.6557 1/31/1992 17.499 15.6557 2/28/1992 17.558 15.6557 3/31/1992 17.969 15.6557 4/30/1992 18.48 15.6557 5/29/1992 18.539 15.6557 6/30/1992 18.092 15.6557 7/31/1992 18.836 15.6557 8/31/1992 18.557 15.6557 9/30/1992 18.562 15.6557 10/30/1992 18.567 15.6557 11/30/1992 18.736 15.6557 12/31/1992 18.918 15.6557 1/29/1993 18.99 15.6557 2/26/1993 17.811 15.6557 3/31/1993 18.162 15.6557 4/30/1993 17.497 15.6557 5/28/1993 17.414 15.6557 6/30/1993 17.526 15.6557 7/30/1993 17.385 15.6557 8/31/1993 17.742 15.6557 9/30/1993 17.571 15.6557 10/29/1993 17.734 15.6557 11/30/1993 17.837 15.6557 12/31/1993 17.995 15.6557 1/31/1994 18.477 15.6557 2/28/1994 17.399 15.6557 3/31/1994 16.665 15.6557 4/29/1994 16.819 15.6557 5/31/1994 16.454 15.6557 6/30/1994 16.046 15.6557 7/29/1994 16.544 15.6557 8/31/1994 16.733 15.6557 9/30/1994 16.284 15.6557 10/31/1994 16.05 15.6557 11/30/1994 15.107 15.6557 12/30/1994 15.221 15.6557 1/31/1995 15.604 15.6557 2/28/1995 15.306 15.6557 3/31/1995 15.599 15.6557 4/28/1995 15.954 15.6557 5/31/1995 15.689 15.6557 6/30/1995 15.964 15.6557 7/31/1995 16.267 15.6557 8/31/1995 15.581 15.6557 9/29/1995 16.229 15.6557 10/31/1995 16.182 15.6557 11/30/1995 16.561 15.6557 12/29/1995 16.901 15.6557 1/31/1996 17.404 15.6557 2/29/1996 17.677 15.6557 3/29/1996 17.934 15.6557 4/30/1996 18.204 15.6557 5/31/1996 18.331 15.6557 6/28/1996 18.41 15.6557 7/31/1996 17.492 15.6557 8/30/1996 17.486 15.6557 9/30/1996 18.379 15.6557 10/31/1996 18.879 15.6557 11/29/1996 19.726 15.6557 12/31/1996 19.443 15.6557 1/31/1997 20.666 15.6557 2/28/1997 20.813 15.6557 3/31/1997 19.89 15.6557 4/30/1997 21.188 15.6557 5/30/1997 22.504 15.6557 6/30/1997 23.469 15.6557 7/31/1997 25.327 15.6557 8/29/1997 24.099 15.6557 9/30/1997 25.349 15.6557 10/31/1997 24.502 15.6557 11/28/1997 25.688 15.6557 12/31/1997 22.249 15.6557 1/30/1998 22.44 15.6557 2/27/1998 28.363 15.6557 3/31/1998 29.845 15.6557 4/30/1998 30.162 15.6557 5/29/1998 29.574 15.6557 6/30/1998 24.656 15.6557 7/31/1998 24.352 15.6557 8/31/1998 20.609 15.6557 9/30/1998 22.008 15.6557 10/30/1998 24.025 15.6557 11/30/1998 25.786 15.6557 12/31/1998 27.918 15.6557 1/29/1999 28.998 15.6557 2/26/1999 27.599 15.6557 3/31/1999 28.584 15.6557 4/30/1999 29.294 15.6557 5/28/1999 29.10 15.6557 6/30/1999 30.709 15.6557 7/30/1999 29.754 15.6557 8/31/1999 28.661 15.6557 9/30/1999 28.146 15.6557 10/29/1999 29.935 15.6557 11/30/1999 29.543 15.6557 12/31/1999 31.493 15.6557 1/31/2000 29.85 15.6557 2/29/2000 27.57 15.6557 3/31/2000 29.976 15.6557 4/28/2000 28.61 15.6557 5/31/2000 27.162 15.6557 6/30/2000 28.455 15.6557 7/31/2000 27.907 15.6557 8/31/2000 28.704 15.6557 9/30/2000 26.876 15.6557 10/31/2000 26.095 15.6557 11/30/2000 23.997 15.6557 12/31/2000 24.204 15.6557 1/31/2001 24.592 15.6557 2/28/2001 22.65 15.6557 3/31/2001 21.32 15.6557 4/30/2001 22.918 15.6557 5/31/2001 22.837 15.6557 6/30/2001 22.642 15.6557 7/31/2001 23.084 15.6557 8/31/2001 22.335 15.6557 9/30/2001 20.649 15.6557 10/31/2001 21.447 15.6557 11/30/2001 24.37 15.6557 12/31/2001 24.711 15.6557 1/31/2002 24.395 15.6557 2/28/2002 25.199 15.6557 3/31/2002 26.25 15.6557 4/30/2002 24.38 15.6557 5/31/2002 24.46 15.6557 6/30/2002 23.20 15.6557 7/31/2002 21.54 15.6557 8/30/2002 21.50 15.6557 9/30/2002 19.23 15.6557 10/31/2002 19.98 15.6557 11/30/2002 20.54 15.6557 12/31/2002 19.42 15.6557 1/31/2003 18.38 15.6557 2/28/2003 17.657 15.6557 3/31/2003 17.91 15.6557 4/30/2003 19.50 15.6557 5/31/2003 19.59 15.6557 6/30/2003 19.78 15.6557 7/31/2003 19.89 15.6557 8/31/2003 19.88 15.6557 9/30/2003 19.63 15.6557 10/31/2003 20.72 15.6557 11/30/2003 20.50 15.6557 12/31/2003 21.51 15.6557
P/E is the ratio of a stock's price divided by its earnings per share. In this case, the P/E ratio is represented for the entire index. The ratio, or multiple, reflects the price an investor is willing to pay for a dollar of expected earnings per share. Data Source: Stockval and Barra FEDERAL RESERVE BANK During 2003, the Federal Reserve Bank ("Fed") continued its aggressive monetary stance in its efforts to stimulate a struggling economy and hold off deflation. The Fed left the Fed Funds rate unchanged at 1.25% until June when it cut the rate by .25% to 1.00%. In December, the Fed announced its plan to remain "accommodative" for some time indicating future rate increases may be slow to come. The year ended with the Fed Funds rate at 1.00% -- its lowest level in over four decades. [LINE GRAPH]
FEDERAL FUNDS TARGET INTEREST RATE ---------------------------------- 9/91 5.28 5.00 4.75 4.00 4.00 4.00 4.00 3.75 3.75 3.75 3.25 3.25 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 6/93 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.25 3.50 3.75 4.25 4.25 4.25 4.75 4.75 4.75 5.50 5.50 5.50 6.00 6.00 6.00 6.00 6/95 6.00 5.75 5.75 5.75 5.75 5.75 5.50 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.25 5.50 5.50 5.50 6/97 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.25 5.00 4.75 4.75 4.75 4.75 4.75 4.75 4.75 6/99 5.00 5.00 5.25 5.25 5.25 5.50 5.50 5.50 5.75 6.00 6.00 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.50 5.50 5.50 5.00 4.50 4.00 6/01 3.75 3.75 3.50 3.00 2.50 2.00 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.25 12/02 1.25 1/03 1.25 3/03 1.25 5/03 1.25 6/03 1.00 8/03 1.00 9/03 1.00 10/03 1.00 12/03 1.00
The Federal Reserve Bank is the central bank of the U.S. with the responsibility of implementing monetary policy. The federal funds rate is the rate banks with excess reserves loan funds to banks needing additional reserves. The fed funds rate is one tool the Fed can use in their efforts of controlling money supply. It is viewed as a stimulus to the economy and to equity markets when the Fed lowers the federal funds rate given money supply increases. Contrarily, the opposite is true when the Fed increases the fed funds rate creating an environment for money supply contraction. Data Source: Bloomberg CONSUMER CONFIDENCE Consumer confidence fell to 61.5 in March, its lowest point of the year when the U.S. invaded Iraq. Since March, the Conference Board index improved to higher levels resulting from the improving economic landscape and the prospects for new job creation. In November, the confidence level hit a 14 month high at 92.50 prior to dropping slightly to 91.70 in December. [LINE GRAPH]
CONSUMER CONFIDENCE INDEX ------------------------- 10/90 62.60 61.70 12/90 61.20 55.10 59.40 81.10 79.40 76.40 78.00 77.70 76.10 72.90 60.10 52.70 12/91 52.50 50.20 47.30 56.50 65.10 71.90 72.60 61.20 59.00 57.30 54.60 65.60 12/92 78.10 76.70 68.50 63.20 67.60 61.90 58.60 59.20 59.30 63.80 60.50 71.90 12/93 79.80 82.60 79.90 86.70 92.10 88.90 92.50 91.30 90.40 89.50 89.10 100.40 12/94 103.40 101.40 99.40 100.20 104.60 102.00 94.60 101.40 102.40 97.30 96.30 101.60 12/95 99.20 88.40 98.00 98.40 104.80 103.50 100.10 107.00 112.00 111.80 107.30 109.50 12/96 114.20 118.70 118.90 118.50 118.50 127.90 129.90 126.30 127.60 130.20 123.40 128.10 12/97 136.20 128.30 137.40 133.80 137.20 136.30 138.20 137.20 133.10 126.40 119.30 126.40 12/98 126.70 128.90 133.10 134.00 135.50 137.70 139.00 136.20 136.00 134.20 130.50 137.00 12/99 141.70 144.70 140.80 137.10 137.70 144.70 139.20 143.00 140.80 142.50 135.80 132.60 12/00 128.60 115.70 109.20 116.90 109.90 116.10 118.90 116.30 114.00 97.00 85.30 84.90 12/01 94.60 97.80 95.00 110.70 108.50 110.30 106.30 97.40 94.50 93.70 79.60 84.90 12/02 80.30 78.80 64.80 61.40 81.00 83.60 83.50 77.00 81.70 77.00 81.70 92.50 12/03 91.70
The Consumer Confidence Index is computed on a monthly basis for the purpose of measuring consumers' attitude toward the economy. The trend in this economic measure is closely monitored given consumers comprise approximately two-thirds of the U.S. economy. Generally, it is viewed as positive to the economy and equity markets when the index increases. This reflects the fact that consumers are positive regarding their economic outlook and that they are more willing to spend money providing further economic stimulus. Data Source: Bloomberg U.S. UNEMPLOYMENT The unemployment rate in the U.S. continued to climb through the first two quarters of the year. Beginning the year at 5.8%, the unemployment rate elevated to 6.30% in June, its highest level since July 1994. Following its peak, unemployment steadily improved and ended the year at 5.70%. Although unemployment is a lagging economic indicator, job creation resulting from the economic recovery has been slow. [LINE GRAPH]
U.S. UNEMPLOYMENT RATE ---------------------- 10/90 5.90 6.20 12/90 6.30 6.40 6.60 6.80 6.70 6.90 6.90 6.80 6.90 6.90 7.00 7.00 12/91 7.30 7.30 7.40 7.40 7.40 7.60 7.80 7.70 7.60 7.60 7.30 7.40 12/92 7.40 7.30 7.10 7.00 7.10 7.10 7.00 6.90 6.80 6.70 6.80 6.60 12/93 6.50 6.80 6.60 6.50 6.40 6.10 6.10 6.30 6.00 5.80 5.80 5.60 12/94 5.50 5.60 5.40 5.40 5.80 5.60 5.60 5.70 5.70 5.60 5.50 5.60 12/95 5.60 5.60 5.50 5.50 5.60 5.60 5.30 5.50 5.10 5.20 5.20 5.40 12/96 5.40 5.30 5.20 5.20 5.10 4.90 5.00 4.90 4.80 4.90 4.70 4.60 12/97 4.70 4.60 4.60 4.70 4.40 4.40 4.50 4.60 4.50 4.50 4.50 4.40 12/98 4.40 4.30 4.30 4.20 4.40 4.20 4.30 4.30 4.20 4.20 4.10 4.10 12/99 4.10 4.00 4.10 4.00 3.90 4.10 4.00 4.10 4.10 4.00 3.90 4.00 12/00 4.00 4.20 4.20 4.30 4.50 4.40 4.60 4.60 4.90 5.00 5.40 5.60 12/01 5.80 5.60 5.50 5.70 6.00 5.80 5.90 5.90 5.70 5.60 5.70 6.00 12/02 6.00 5.80 5.90 5.80 6.00 6.10 6.30 6.20 6.10 6.10 6.00 5.90 12/03 5.70
The U.S. unemployment rate measures the numbers of persons unemployed as a percentage of the labor force. Typically, unemployment tends to increase during and be associated with difficult economic periods. Conversely, the unemployment rate generally declines during and is accompanied by expansionary economic times. Additionally, very low unemployment can place inflationary pressure on the economy as labor markets become very competitive and expensive. Data Source: Bloomberg Not Part of the Annual Report 5 U.S. TREASURY YIELD CURVE The U.S. Treasury yield curve maintained its upward sloping position during 2003 but shifted upward across all maturities with the exception of the short-end of the yield curve. The majority of the increase in yields occurred between the 5-year and 10-year segment of the curve. Although inflation pressures remained at bay, the increase in rates reflected the prospects for continued economic growth. [LINE GRAPH] 12.0000/31/01 12.0000/31/02 3mo. 1.7200 1.1900 6mo. 1.7900 1.2040 2yr. 3.0220 1.5980 5yr. 4.3000 2.7340 10yr. 5.0490 3.8140 30yr. 5.4650 4.7790 Spread 3mo. -0.5306 6mo. -0.5861 2yr. -1.4241 5yr. -1.5663 10yr. -1.2351 30yr. -0.6861
The Treasury yield curve illustrates the relationship between yields on short-term, intermediate-term and long-term Treasury securities. Normally, the shape of the yield curve is upward sloping with rates increasing from the short end of the curve moving higher to the long end. The short end of the curve is impacted more by monetary policy (demand for money) while inflationary expectations and market forces impact the long end of the curve. Data Source: Bloomberg Not Part of the Annual Report 6 FLEXIBLE INCOME FUND Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the fourth quarter were 18% U.S. equity, 7% non-U.S. equity, and 75% fixed income. The fund's composite benchmark performance for the quarter was 3.41%. The fund posted a positive return that was below its composite benchmark for the fourth quarter. The fund's performance was materially impacted by its targeted allocation of 75% to the Low-Duration Bond Fund which slightly added to the fund's returns but negatively impacted its relative performance given the Low-Duration Bond Fund slightly underperformed its respective benchmark during the quarter. Allocations to each of the Equity Select Funds added to the fund's return during the period reflecting the gain in both domestic and international markets. Not Part of the Annual Report 7 FLEXIBLE INCOME FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 9.33% 9.06% 9.19% Since Inception (8/27/01 -- 12/31/03) 3.73% 3.51% 4.03%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- 8/27/01 10000.00 10000.00 8/31/01 9940.00 9926.00 9/30/01 9789.00 9818.00 10/31/01 9947.00 9948.00 11/30/01 10068.00 10105.00 12/31/01 10079.00 10142.00 1/31/02 10072.00 10107.00 2/28/02 10079.00 10109.00 3/31/02 10133.00 10175.00 4/30/02 10133.00 10162.00 5/31/02 10156.00 10177.00 6/30/02 10033.00 10075.00 7/31/02 9842.00 9956.00 8/31/02 9911.00 9990.00 9/30/02 9719.00 9789.00 10/31/02 9880.00 9986.00 11/30/02 10018.00 10107.00 12/31/02 9968.00 10050.00 1/31/03 9920.00 9981.00 2/28/03 9920.00 9968.00 3/31/03 9944.00 9990.00 4/30/03 10153.00 10216.00 5/31/03 10362.00 10401.00 6/30/03 10419.00 10456.00 7/30/03 10410.00 10476.00 8/31/03 10491.00 10544.00 9/30/03 10563.00 10611.00 10/31/03 10692.00 10745.00 11/30/03 10724.00 10783.00 12/31/03 10898.00 10973.00
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Free ex-U.S. Index and the Merrill Lynch 1-3 Year Treasury Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Free ex-U.S. Index is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Merrill Lynch 1-3 Year Treasury Index is composed of all U.S. Treasury Notes and Bonds with maturities greater than or equal to one year and less than three years. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 8 FLEXIBLE INCOME FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ---------- ------------ AFFILIATED MUTUAL FUNDS -- 99.4% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 156,730 $ 2,369,753 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 1,558,967 22,682,975 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 1,445,182 18,729,554 AB Funds Trust -- Low-Duration Bond Fund (Retirement Class)(inf) 15,340,486 199,426,317 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 2,175,235 2,175,235 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 228,930 3,431,655 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 1,501,779 22,947,182 ------------ TOTAL AFFILIATED MUTUAL FUNDS (Cost $227,052,215) 271,762,671 ------------
PAR ---------- U.S. TREASURY OBLIGATIONS -- 0.6% U.S. Treasury Bill 0.89%, 01/22/04++++ $ 90,000 89,956 ------------ U.S. Treasury Note 1.88%, 11/30/05 1,650,000 1,653,610 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,736,680) 1,743,566 ------------ TOTAL INVESTMENTS -- 100.0% (Cost $228,788,895) 273,506,237 LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% (4,060) ------------ NET ASSETS -- 100.0% $273,502,177 ============
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 9 GROWTH & INCOME FUND Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the fourth quarter were 37% U.S. equity, 14% non-U.S. equity, and 49% fixed income. The fund's composite benchmark performance for the quarter was 6.86%. The fund generated a positive return but underperformed its composite benchmark for the fourth quarter. The fund's 51% allocation to the Equity Select Funds generated the majority of its return as both domestic and international equity markets delivered positive returns during the quarter, while the fund's 49% allocation to the Fixed Income Select Funds minimally impacted performance during the quarter reflecting the flat returns in the bond markets. Allocations to the Medium-Duration Bond Fund, Extended-Duration Bond Fund, Value Equity Fund and the Small Cap Equity Fund benefited the fund's relative performance as they outperformed their respective benchmarks during the quarter. Allocations to the Low-Duration Bond Fund, the Growth Equity Fund and the International Equity Fund detracted from relative performance by underperforming their respective benchmarks for the quarter. Not Part of the Annual Report 10 GROWTH & INCOME FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 18.79% 18.52% 18.22% Since Inception (8/27/01 -- 12/31/03) 4.42% 4.20% 4.74%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
GROWTH & INC. RETIREMENT CLASS BENCHMARK INDEX** ------------------------------ ----------------- 8/27/01 10000.00 10000.00 8/31/01 9854.00 9843.00 9/30/01 9410.00 9443.00 10/31/01 9643.00 9657.00 11/30/01 9920.00 9923.00 12/31/01 9953.00 9960.00 1/31/02 9901.00 9899.00 2/28/02 9901.00 9881.00 3/31/02 10049.00 10028.00 4/30/02 9953.00 9938.00 5/31/02 9960.00 9951.00 6/30/02 9664.00 9673.00 7/31/02 9234.00 9324.00 8/31/02 9345.00 9419.00 9/30/02 8916.00 8999.00 10/31/02 9160.00 9306.00 11/30/02 9442.00 9571.00 12/31/02 9319.00 9430.00 1/31/03 9216.00 9305.00 2/28/03 9201.00 9288.00 3/31/03 9216.00 9296.00 4/30/03 9642.00 9731.00 5/31/03 10044.00 10118.00 6/30/03 10131.00 10195.00 7/30/03 10092.00 10145.00 8/31/03 10265.00 10301.00 9/30/03 10375.00 10433.00 10/31/03 10651.00 10706.00 11/30/03 10738.00 10803.00 12/31/03 11070.00 11148.00
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Free ex-U.S. Index and the Lehman Brothers Aggregate Bond Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Free ex-U.S. Index is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchased by foreigners. The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 11 GROWTH & INCOME FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ----------- -------------- AFFILIATED MUTUAL FUNDS -- 98.9% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 1,647,129 $ 24,904,597 AB Funds Trust -- Extended- Duration Bond Fund (Retirement Class)(inf) 7,774,478 114,906,791 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 12,087,976 175,880,055 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 12,580,682 163,045,642 AB Funds Trust -- Low- Duration Bond Fund (Retirement Class)(inf) 12,458,518 161,960,733 AB Funds Trust -- Medium- Duration Bond Fund (Retirement Class)(inf) 19,167,701 260,297,384 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 15,992,626 15,992,626 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 1,905,334 28,560,951 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 12,099,826 184,885,335 -------------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $972,045,212) 1,130,434,114 --------------
PAR ----------- U.S. TREASURY OBLIGATIONS -- 1.1% U.S. Treasury Bills 0.75%, 01/22/04++++ $ 40,000 39,983 0.89%, 01/22/04++++ 630,000 629,690 0.93%, 01/22/04++++ 45,000 44,978 -------------- 714,651 -------------- U.S. Treasury Note 4.75%, 11/15/08 10,660,000 11,415,367 -------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $12,058,251) 12,130,018 -------------- TOTAL INVESTMENTS -- 100.0% (Cost $984,103,463) 1,142,564,132 OTHER ASSETS LESS LIABILITIES -- 0.0% 166,314 -------------- NET ASSETS -- 100.0% $1,142,730,446 ==============
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 12 CAPITAL OPPORTUNITIES FUND Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the quarter were 56% U.S. equity, 20% non-U.S. equity, and 24% fixed income. The fund's composite benchmark performance for the fourth quarter was 10.19%. The fund generated a positive return but underperformed its composite benchmark for the fourth quarter. With a 76% allocation to the Equity Select Funds, the fund benefited from the strong performance in both domestic and international equity markets. The fund's 24% allocation to the Fixed Income Select Funds minimally impacted the fund's performance during the quarter reflecting the flat returns in the bond markets. Allocations to the Medium-Duration Bond Fund, Extended-Duration Bond Fund, Value Equity Fund, and Small Cap Equity Fund benefited the fund's relative performance as these funds outperformed their respective benchmarks during the quarter. Allocations to the Low-Duration Bond Fund, the Growth Equity Fund and the International Equity Fund, detracted from relative performance of the fund by underperforming their respective benchmarks for the quarter. Not Part of the Annual Report 13 CAPITAL OPPORTUNITIES FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 25.23% 24.93% 25.70% Since Inception (8/27/01 -- 12/31/03) 2.85% 2.60% 3.28%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- 8/27/01 10000.00 10000.00 8/31/01 9759.00 9736.00 9/30/01 9081.00 9087.00 10/31/01 9314.00 9301.00 11/30/01 9759.00 9751.00 12/31/01 9832.00 9836.00 1/31/02 9714.00 9707.00 2/28/02 9663.00 9632.00 3/31/02 9972.00 9927.00 4/30/02 9751.00 9695.00 5/31/02 9722.00 9671.00 6/30/02 9288.00 9222.00 7/31/02 8655.00 8668.00 8/31/02 8722.00 8728.00 9/30/02 8067.00 8073.00 10/31/02 8435.00 8506.00 11/30/02 8802.00 8871.00 12/31/02 8530.00 8582.00 1/31/03 8362.00 8409.00 2/28/03 8278.00 8328.00 3/31/03 8300.00 8343.00 4/30/03 8820.00 8893.00 5/31/03 9293.00 9341.00 6/30/03 9415.00 9455.00 7/30/03 9515.00 9545.00 8/31/03 9721.00 9733.00 9/30/03 9736.00 9790.00 10/31/03 10164.00 10219.00 11/30/03 10255.00 10346.00 12/31/03 10682.00 10787.00
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index, the Morgan Stanley Capital International All Country World Free ex-U.S. Index and the Lehman Brothers Aggregate Bond Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Free ex-U.S. Index is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 14 CAPITAL OPPORTUNITIES FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ---------- ------------ AFFILIATED MUTUAL FUNDS -- 99.5% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 2,205,281 $ 33,343,845 AB Funds Trust -- Extended-Duration Bond Fund (Retirement Class)(inf) 3,152,846 46,599,064 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 14,263,883 207,539,502 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 14,355,661 186,049,369 AB Funds Trust -- Low-Duration Bond Fund (Retirement Class)(inf) 5,131,433 66,708,623 AB Funds Trust -- Medium-Duration Bond Fund (Retirement Class)(inf) 7,265,479 98,665,206 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 15,788,011 15,788,011 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 2,339,236 35,065,142 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 14,325,829 218,898,666 ------------ TOTAL AFFILIATED MUTUAL FUNDS (Cost $801,369,604) 908,657,428 ------------ PAR ---------- U.S. TREASURY OBLIGATIONS -- 0.5% U.S. Treasury Bills 0.89%, 01/22/04++++ $ 855,000 854,580 0.92%, 01/22/04++++ 60,000 59,971 ------------ 914,551 ------------ U.S. Treasury Note 4.75%, 11/15/08 3,710,000 3,972,890 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $4,867,613) 4,887,441 ------------ TOTAL INVESTMENTS -- 100.0% (Cost $806,237,217) 913,544,869 OTHER ASSETS LESS LIABILITIES -- 0.0% 61,641 ------------ NET ASSETS -- 100.0% $913,606,510 ============
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 15 GLOBAL EQUITY FUND Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the quarter were 73% U.S. equity, 26% non-U.S. equity, and 1% fixed income. The fund's composite benchmark performance for the fourth quarter was 13.58%. The fund posted a positive return but underperformed its composite benchmark for the fourth quarter. The fund's return directly reflected a positive advance in both domestic and international equity markets. The fund's relative performance was positively impacted by its allocations to the Value Equity Fund and the Small Cap Equity Fund, which outperformed their respective benchmarks for the quarter. Primary detractors from relative performance during the quarter were allocations to the Growth Equity Fund and the International Equity Fund, which underperformed their respective benchmarks for the quarter. Not Part of the Annual Report 16 GLOBAL EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RETIREMENT CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- ------------- ----------------- One Year 31.99% 31.53% 33.48% Since Inception (8/27/01 -- 12/31/03) 1.02% 0.85% 1.58%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- 8/27/01 10000.00 10000.00 8/31/01 9654.00 9629.00 9/30/01 8747.00 8736.00 10/31/01 8968.00 8950.00 11/30/01 9587.00 9569.00 12/31/01 9704.00 9701.00 1/31/02 9527.00 9505.00 2/28/02 9424.00 9376.00 3/31/02 9896.00 9811.00 4/30/02 9542.00 9440.00 5/31/02 9475.00 9381.00 6/30/02 8899.00 8773.00 7/31/02 8080.00 8036.00 8/31/02 8109.00 8064.00 9/30/02 7252.00 7214.00 10/31/02 7732.00 7742.00 11/30/02 8161.00 8186.00 12/31/02 7760.00 7772.00 1/31/03 7543.00 7561.00 2/28/03 7394.00 7429.00 3/31/03 7424.00 7451.00 4/30/03 8021.00 8085.00 5/31/03 8536.00 8578.00 6/30/03 8685.00 8723.00 7/30/03 8909.00 8930.00 8/31/03 9140.00 9145.00 9/30/03 9073.00 9134.00 10/31/03 9632.00 9696.00 11/30/03 9729.00 9849.00 12/31/03 10241.00 10375.00
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Fund's weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Russell 3000(R) Index and the Morgan Stanley Capital International All Country World Free ex-U.S. Index. The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Morgan Stanley Capital International All Country World Free ex-U.S. Index is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 17 GLOBAL EQUITY FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE ----------------- ----------- ------------ AFFILIATED MUTUAL FUNDS -- 100.1% AB Funds Trust -- Equity Index Fund (Retirement Class)(inf) 2,505,736 $ 37,886,732 AB Funds Trust -- Growth Equity Fund (Retirement Class)(inf) 17,060,373 248,228,427 AB Funds Trust -- International Equity Fund (Retirement Class)(inf) 16,326,878 211,596,342 AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 23,616,209 23,616,209 AB Funds Trust -- Small Cap Equity Fund (Retirement Class)(inf) 2,770,215 41,525,516 AB Funds Trust -- Value Equity Fund (Retirement Class)(inf) 16,850,911 257,481,918 ------------ TOTAL AFFILIATED MUTUAL FUNDS (Cost $726,669,301) 820,335,144 ------------
PAR ---------- U.S. TREASURY OBLIGATIONS - 0.2% U.S. Treasury Bills 0.78%, 01/22/04++++ $ 100,000 99,955 0.89%, 01/22/04++++ 1,160,000 1,159,430 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,259,351) 1,259,385 ------------ TOTAL INVESTMENTS -- 100.3% (Cost $727,928,652) 821,594,529 LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.3%) (2,214,269) ------------ NET ASSETS -- 100.0% $819,380,260 ============
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 18 (This page intentionally left blank) 19 STATEMENTS OF ASSETS AND LIABILITIES
FLEXIBLE GROWTH & CAPITAL GLOBAL DECEMBER 31, 2003 INCOME FUND INCOME FUND OPPORTUNITIES FUND EQUITY FUND ----------------- ------------ -------------- ------------------ ------------ ASSETS Investments at value (1) $273,506,237 $1,142,564,132 $913,544,869 $821,594,529 Receivables: Dividends 1,309 9,131 10,191 11,166 Interest 2,694 65,380 22,754 -- Fund shares sold 24,546 234,446 205,683 176,774 Variation margin 1,450 29,725 31,175 53,650 Receivable from administrator 78,495 -- -- -- Prepaid expenses and other assets 13,402 12,458 12,632 12,364 ------------ -------------- ------------ ------------ Total Assets 273,628,133 1,142,915,272 913,827,304 821,848,483 ------------ -------------- ------------ ------------ LIABILITIES Payables: Fund shares redeemed 1,404 35,149 101,995 2,361,628 Excise tax payable 78,495 -- -- -- Accrued expenses: Advisory fee payable 16,093 100,685 77,676 67,277 Distribution fee payable 986 1,119 672 883 Other accrued expenses payable 28,978 47,873 40,451 38,435 ------------ -------------- ------------ ------------ Total Liabilities 125,956 184,826 220,794 2,468,223 ------------ -------------- ------------ ------------ NET ASSETS $273,502,177 $1,142,730,446 $913,606,510 $819,380,260 ============ ============== ============ ============ NET ASSETS CONSIST OF: Paid-in-capital $225,241,858 $ 973,041,920 $801,741,164 $724,676,245 Undistributed net investment income 2,142,437 311,947 76,440 467,766 Accumulated net realized gain (loss) on investments 1,378,203 10,462,757 3,953,463 (133,309) Net unrealized appreciation (depreciation) on investments and futures transactions 44,739,679 158,913,822 107,835,443 94,369,558 ------------ -------------- ------------ ------------ NET ASSETS $273,502,177 $1,142,730,446 $913,606,510 $819,380,260 ============ ============== ============ ============ NET ASSET VALUE: $0.001 par value, unlimited shares authorized Net assets applicable to the Retail Class $ 19,674,579 $ 22,650,071 $ 13,585,322 $ 17,972,974 ------------ -------------- ------------ ------------ Retail shares outstanding 2,090,552 2,441,673 1,405,297 1,796,577 ------------ -------------- ------------ ------------ Net asset value, offering price and redemption price per Retail share $ 9.41 $ 9.28 $ 9.67 $ 10.00 ============ ============== ============ ============ Net assets applicable to the Retirement Class $253,827,598 $1,120,080,375 $900,021,188 $801,407,286 ------------ -------------- ------------ ------------ Retirement shares outstanding 19,519,157 83,500,373 66,064,537 58,769,890 ------------ -------------- ------------ ------------ Net asset value, offering and redemption price per Retirement share $ 13.00 $ 13.41 $ 13.62 $ 13.64 ============ ============== ============ ============ - --------------- (1) Investments at cost $228,788,895 $ 984,103,463 $806,237,217 $727,928,652 ============ ============== ============ ============
See Notes to Financial Statements. 20 STATEMENTS OF OPERATIONS
FLEXIBLE GROWTH & CAPITAL GLOBAL FOR THE YEAR ENDED DECEMBER 31, 2003 INCOME FUND INCOME FUND OPPORTUNITIES FUND EQUITY FUND - ------------------------------------ ----------- ------------ ------------------ ------------ INVESTMENT INCOME Income distributions received from affiliated funds # $ 5,825,153 $ 24,629,979 $ 13,310,757 $ 6,495,960 Interest 45,729 258,216 120,396 11,539 ----------- ------------ ------------ ------------ Total Investment Income # 5,870,882 24,888,195 13,431,153 6,507,499 ----------- ------------ ------------ ------------ EXPENSES Investment advisory fees 276,634 1,068,038 815,010 698,550 Transfer agent fees Retail shares 20,105 30,094 23,960 21,882 Retirement shares 17,590 18,351 17,899 18,067 Custodian fees 9,339 22,727 18,422 15,648 Distribution fees -- Retail shares 10,577 11,428 6,727 8,781 Accounting and administration fees 81,476 184,342 158,624 146,719 Professional fees 39,744 39,725 39,744 39,744 Registration fees 15,111 14,555 14,425 14,447 Shareholder reporting fees Retail shares 16,639 36,721 24,053 19,320 Retirement shares 2,554 (1,188) (391) 238 Trustee fees 1,346 5,229 4,005 3,451 Line of credit facility fees 2,209 8,519 6,487 5,523 Excise tax 78,495 -- -- -- Other expenses 14,684 14,684 14,684 14,684 ----------- ------------ ------------ ------------ Total Expenses 586,503 1,453,225 1,143,649 1,007,054 Expenses waived (192,838) (21,177) (55,595) (69,563) Fees paid indirectly (1,024) (395) (232) (249) ----------- ------------ ------------ ------------ Net expenses 392,641 1,431,653 1,087,822 937,242 ----------- ------------ ------------ ------------ NET INVESTMENT INCOME # 5,478,241 23,456,542 12,343,331 5,570,257 ----------- ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on investment securities # 8,405,491 33,666,365 12,523,263 500,051 Net realized gain on futures transactions 154,124 1,355,634 1,919,174 2,345,083 ----------- ------------ ------------ ------------ Net realized gain # 8,559,615 35,021,999 14,442,437 2,845,134 ----------- ------------ ------------ ------------ Change in net unrealized appreciation (depreciation) on investment securities 10,545,964 124,515,880 157,837,538 187,588,730 Change in net unrealized appreciation (depreciation) on futures transactions 43,665 593,787 697,183 973,494 ----------- ------------ ------------ ------------ Net change in unrealized appreciation (depreciation) 10,589,629 125,109,667 158,534,721 188,562,224 ----------- ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN # 19,149,244 160,131,666 172,977,158 191,407,358 ----------- ------------ ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,627,485 $183,588,208 $185,320,489 $196,977,615 =========== ============ ============ ============
- --------------- # Balance has been reclassified. See Note 9. See Notes to Financial Statements. 21 STATEMENTS OF CHANGES IN NET ASSETS
FLEXIBLE INCOME FUND GROWTH & INCOME FUND ------------------------------- ------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED 12/31/03 ENDED 12/31/02 ENDED 12/31/03 ENDED 12/31/02 -------------- -------------- -------------- -------------- INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income # $ 5,478,241 $ 8,059,012 $ 23,456,542 $ 29,354,167 Net realized gain (loss) on investment securities and futures transactions # 8,559,615 5,783,406 35,021,999 35,438,102 Net change in unrealized appreciation (depreciation) on investment securities and futures transactions 10,589,629 (17,163,347) 125,109,667 (139,143,771) ------------ ------------ -------------- -------------- Net increase (decrease) in net assets resulting from operations 24,627,485 (3,320,929) 183,588,208 (74,351,502) ------------ ------------ -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME Retail shares (402,711) (703,267) (763,570) (742,069) Retirement shares (4,176,812) (8,918,457) (28,642,469) (34,065,901) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS Retail shares (658,891) (277,139) (621,863) (647,836) Retirement shares (6,235,277) (3,345,180) (21,625,383) (27,969,982) ------------ ------------ -------------- -------------- Total dividends and distributions (11,473,691) (13,244,043) (51,653,285) (63,425,788) ------------ ------------ -------------- -------------- NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (19,531,754) 9,491,230 (25,912,931) 17,107,697 ------------ ------------ -------------- -------------- Total increase (decrease) in net assets (6,377,960) (7,073,742) 106,021,992 (120,669,593) ------------ ------------ -------------- -------------- NET ASSETS: Beginning of the Period 279,880,137 286,953,879 1,036,708,454 1,157,378,047 ------------ ------------ -------------- -------------- End of the Period $273,502,177 $279,880,137 $1,142,730,446 $1,036,708,454 ============ ============ ============== ==============
- --------------- # Balance has been reclassified. See Note 9. See Notes to Financial Statements. 22
CAPITAL OPPORTUNITIES FUND GLOBAL EQUITY FUND ------------------------------- ------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED 12/31/03 ENDED 12/31/02 ENDED 12/31/03 ENDED 12/31/02 -------------- -------------- -------------- -------------- $ 12,343,331 $ 14,072,783 $ 5,570,257 $ 4,857,408 14,442,437 13,008,299 2,845,134 (2,839,043) 158,534,721 (145,265,886) 188,562,224 (164,655,197) ------------ ------------- ------------ ------------- 185,320,489 (118,184,804) 196,977,615 (162,636,832) ------------ ------------- ------------ ------------- (267,521) (250,945) (110,878) (97,128) (14,672,538) (15,568,234) (5,053,675) (4,698,218) (190,056) (221,031) -- (45,607) (8,979,773) (12,144,045) -- (1,611,830) ------------ ------------- ------------ ------------- (24,109,888) (28,184,255) (5,164,553) (6,452,783) ------------ ------------- ------------ ------------- (3,431,171) 18,216,951 (1,281,018) (12,776,613) ------------ ------------- ------------ ------------- 157,779,430 (128,152,108) 190,532,044 (181,866,228) ------------ ------------- ------------ ------------- 755,827,080 883,979,188 628,848,216 810,714,444 ------------ ------------- ------------ ------------- $913,606,510 $ 755,827,080 $819,380,260 $ 628,848,216 ============ ============= ============ =============
See Notes to Financial Statements. 23 FINANCIAL HIGHLIGHTS
FLEXIBLE INCOME FUND ------------------------------------------------------------------------ RETAIL CLASS RETIREMENT CLASS ---------------------------------- ----------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ --------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.12 $ 9.83 $ 10.00 $ 12.40 $ 13.15 $ 13.29 ------- ------- ------- --------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.21 0.23 0.10 0.31 0.38 0.17 Capital gain distributions received 0.02 0.10 0.06 0.02 0.10 0.06 Realized and unrealized gain (loss) on investments securities and futures transactions -- net 0.59 (0.45) (0.08) 0.82 (0.62) (0.12) ------- ------- ------- --------- -------- -------- Total from investment operations 0.82 (0.12) 0.08 1.15 (0.14) 0.11 ------- ------- ------- --------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) (0.20) (0.42) (0.22) (0.22) (0.44) (0.22) Distributions from capital gains (0.33) (0.17) (0.03) (0.33) (0.17) (0.03) ------- ------- ------- --------- -------- -------- Total dividends and distributions (0.53) (0.59) (0.25) (0.55) (0.61) (0.25) ------- ------- ------- --------- -------- -------- NET ASSET VALUE -- END OF PERIOD $ 9.41 $ 9.12 $ 9.83 $ 13.00 $ 12.40 $ 13.15 ======= ======= ======= ========= ======== ======== TOTAL RETURN (2) 9.06% (1.27%) 0.72% 9.33% (1.10%) 0.79% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.35% 0.32% 0.48% 0.13% 0.13% 0.13% Expenses -- including expense reduction (3)(4) 0.35% 0.32% 0.48% 0.13% 0.13% 0.13% Expenses -- before waivers and expense reductions (3)(4) 0.46% 0.43% 66.47% 0.20% 0.17% 0.18% Investment income -- net (1)(3) 1.90% 2.82% 6.69% 2.01% 2.86% 3.67% Investment income -- excluding waivers and expense reduction (1)(3) 1.79% 2.71% (59.30%) 1.94% 2.82% 3.62% Portfolio turnover rate (2) 13.44% 13.56% 4.02% 13.44% 13.56% 4.02% Net Assets -- end of the period (000's) $19,674 $16,234 $ 325 $ 253,828 $263,646 $286,628 ======= ======= ======= ========= ======== ========
- --------------- * Commencement of operations. (1) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (2) Non-annualized. (3) Annualized. (4) Does not include expenses of the investment companies in which the Fund invests. (5) Includes dividends paid from the short-term portion of capital gain distributions received from affiliated funds. The Flexible Income Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.36%, 0.64% and 1.00% in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.01, $0.08 and $0.05 in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. The Growth & Income Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.37%, 0.72% and 1.18% in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.05, $0.09 and $0.05 in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. See Notes to Financial Statements. 24
GROWTH & INCOME FUND --------------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ---------------------------------- -------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ ---------- ---------- ------------ $ 8.34 $ 9.72 $10.00 $ 11.82 $ 13.44 $ 13.74 ------- ------- ------ ---------- ---------- ---------- 0.16 0.21 0.07 0.29 0.36 0.14 0.15 0.12 0.06 0.15 0.12 0.06 1.23 (0.96) (0.18) 1.78 (1.33) (0.27) ------- ------- ------ ---------- ---------- ---------- 1.54 (0.63) (0.05) 2.22 (0.85) (0.07) ------- ------- ------ ---------- ---------- ---------- (0.33) (0.40) (0.19) (0.36) (0.42) (0.19) (0.27) (0.35) (0.04) (0.27) (0.35) (0.04) ------- ------- ------ ---------- ---------- ---------- (0.60) (0.75) (0.23) (0.63) (0.77) (0.23) ------- ------- ------ ---------- ---------- ---------- $ 9.28 $ 8.34 $ 9.72 $ 13.41 $ 11.82 $ 13.44 ======= ======= ====== ========== ========== ========== 18.52% (6.59%) (0.52%) 18.79% (6.37%) (0.47%) 0.45% 0.37% 0.48% 0.13% 0.13% 0.13% 0.45% 0.37% 0.48% 0.13% 0.13% 0.13% 0.54% 0.45% 6.53% 0.13% 0.13% 0.17% 2.00% 2.64% 4.44% 2.22% 2.68% 2.87% 1.91% 2.56% (1.61%) 2.22% 2.68% 2.83% 10.38% 12.04% 4.27% 10.38% 12.04% 4.27% $22,650 $17,009 $1,334 $1,120,080 $1,019,700 $1,156,044 ======= ======= ====== ========== ========== ==========
See Notes to Financial Statements. 25
CAPITAL OPPORTUNITIES FUND ----------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ---------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 8.01 $ 9.73 $ 10.00 $ 11.17 $ 13.37 $ 13.71 ------- ------- ------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.11 0.12 0.03 0.19 0.22 0.08 Capital gain distributions received 0.07 0.06 0.03 0.07 0.06 0.03 Realized and unrealized gain (loss) on investments securities and futures transactions -- net 1.82 (1.50) (0.22) 2.56 (2.05) (0.34) ------- ------- ------- -------- -------- -------- Total from investment operations 2.00 (1.32) (0.16) 2.82 (1.77) (0.23) ------- ------- ------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) (0.20) (0.21) (0.11) (0.23) (0.24) (0.11) Distributions from capital gains (0.14) (0.19) --++ (0.14) (0.19) --++ ------- ------- ------- -------- -------- -------- Total dividends and distributions (0.34) (0.40) (0.11) (0.37) (0.43) (0.11) ------- ------- ------- -------- -------- -------- NET ASSET VALUE -- END OF PERIOD $ 9.67 $ 8.01 $ 9.73 $ 13.62 $ 11.17 $ 13.37 ======= ======= ======= ======== ======== ======== TOTAL RETURN (2) 24.93% (13.56%) (1.64%) 25.23% (13.25%) (1.68%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.52% 0.42% 0.48% 0.13% 0.13% 0.13% Expenses -- including expense reduction (3)(4) 0.52% 0.42% 0.48% 0.13% 0.13% 0.13% Expenses -- before waivers and expense reductions (3)(4) 0.62% 0.55% 43.03% 0.14% 0.14% 0.17% Investment income -- net (1)(3) 1.20% 1.54% 3.87% 1.54% 1.72% 1.76% Investment income -- excluding waivers and expense reduction (1)(3) 1.10% 1.41% (38.68%) 1.53% 1.71% 1.72% Portfolio turnover rate (2) 7.75% 10.33% 3.42% 7.75% 10.33% 3.42% Net Assets -- end of the period (000's) $13,585 $ 9,859 $ 331 $900,021 $745,968 $883,648 ======= ======= ======= ======== ======== ========
- --------------- * Commencement of operations. (1) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (2) Non-annualized. (3) Annualized. (4) Does not include expenses of the investment companies in which the Fund invests. (5) Includes dividends paid from the short-term portion of capital gain distributions received from affiliated funds. ++ Amount represents less than $0.01 per share. The Capital Opportunities Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.19%, 0.36% and 0.62% in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.02, $0.04 and $0.03 in the fiscal periods ending December 31, 2003, 2002 and 2001, respectively. The Global Equity Fund has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.03% in the fiscal period ending December 31, 2001. Net investment income per share was unaffected. See Notes to Financial Statements. 26
GLOBAL EQUITY FUND -------------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ------------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 ----------- -------- ------------ -------- -------- ------------ $ 7.65 $ 9.70 $ 10.00 $ 10.40 $ 13.14 $ 13.57 ------- ------- ------- -------- -------- -------- 0.05 0.04 0.02 0.10 0.08 0.03 -- --++ -- -- --++ -- 2.36 (2.00) (0.29) 3.23 (2.71) (0.43) ------- ------- ------- -------- -------- -------- 2.41 (1.96) (0.27) 3.33 (2.63) (0.40) ------- ------- ------- -------- -------- -------- (0.06) (0.06) (0.03) (0.09) (0.08) (0.03) -- (0.03) --++ -- (0.03) --++ ------- ------- ------- -------- -------- -------- (0.06) (0.09) (0.03) (0.09) (0.11) (0.03) ------- ------- ------- -------- -------- -------- $ 10.00 $ 7.65 $ 9.70 $ 13.64 $ 10.40 $ 13.14 ======= ======= ======= ======== ======== ======== 31.53% (20.25%) (2.75%) 31.99% (20.04%) (2.96%) 0.43% 0.35% 0.48% 0.13% 0.13% 0.13% 0.43% 0.35% 0.48% 0.13% 0.13% 0.13% 0.48% 0.44% 66.34% 0.14% 0.14% 0.17% 0.53% 0.53% 1.57% 0.82% 0.68% 0.61% 0.48% 0.44% (64.29%) 0.81% 0.67% 0.57% 4.17% 6.33% 2.70% 4.17% 6.33% 2.70% $17,973 $12,805 $ 207 $801,407 $616,043 $810,507 ======= ======= ======= ======== ======== ========
See Notes to Financial Statements. 27 FLEXIBLE INCOME FUND I Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the fourth quarter were 18% U.S. equity, 7% non-U.S. equity, and 75% fixed income. The fund's composite benchmark performance for the quarter was 3.41%. The fund posted a positive return that was below its composite benchmark for the fourth quarter. The fund's performance was materially impacted by its targeted allocation of 75% to the Low-Duration Bond Fund which slightly added to the fund's returns but negatively impacted its relative performance given the Low-Duration Bond Fund slightly underperformed its respective benchmark during the quarter. Allocations to each of the Equity Select Funds added to the fund's return during the period reflecting the gain in both domestic and international markets. Not Part of the Annual Report 28 FLEXIBLE INCOME FUND I SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- --------- ----------- AFFILIATED MUTUAL FUNDS -- 99.0% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 43,408 $ 394,144 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 257,193 2,355,887 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 183,928 2,034,240 AB Funds Trust -- Low-Duration Bond Fund (Institutional Class)(inf) 2,153,376 20,478,608 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 270,141 270,141 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 29,449 339,248 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 248,698 2,472,053 ----------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $27,944,556) 28,344,321 -----------
PAR --------- U.S. TREASURY OBLIGATIONS -- 1.1% U.S. Treasury Bill 0.87%, 01/22/04++++ $ 10,000 9,995 ----------- U.S. Treasury Note 1.88%, 11/30/05 295,000 295,645 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $305,282) 305,640 ----------- TOTAL INVESTMENTS -- 100.1% (Cost $28,249,838) 28,649,961 LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%) (14,408) ----------- NET ASSETS -- 100.0% $28,635,553 ===========
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 29 GROWTH & INCOME FUND I Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the fourth quarter were 37% U.S. equity, 14% non-U.S. equity, and 49% fixed income. The fund's composite benchmark performance for the quarter was 6.86%. The fund generated a positive return but underperformed its composite benchmark for the fourth quarter. The fund's 51% allocation to the Equity Select Funds generated the majority of its return as both domestic and international equity markets delivered positive returns during the quarter, while the fund's 49% allocation to the Fixed Income Select Funds minimally impacted performance during the quarter reflecting the flat returns in the bond markets. Allocations to the Medium-Duration Bond Fund, Extended-Duration Bond Fund, Value Equity Fund and the Small Cap Equity Fund benefited the fund's relative performance as they outperformed their respective benchmarks during the quarter. Allocations to the Low-Duration Bond Fund, the Growth Equity Fund and the International Equity Fund detracted from the relative performance by underperforming their respective benchmarks for the quarter. Not Part of the Annual Report 30 GROWTH & INCOME FUND I SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- --------- ----------- AFFILIATED MUTUAL FUNDS -- 99.0% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 191,949 $ 1,742,896 AB Funds Trust -- Extended-Duration Bond Fund (Institutional Class)(inf) 780,555 7,204,527 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 1,191,324 10,912,525 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 948,071 10,485,668 AB Funds Trust -- Low-Duration Bond Fund (Institutional Class)(inf) 1,062,499 10,104,369 AB Funds Trust -- Medium-Duration Bond Fund (Institutional Class)(inf) 1,745,304 16,126,608 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 888,105 888,105 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 174,438 2,009,522 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 1,185,799 11,786,844 ----------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $68,039,618) 71,261,064 -----------
PAR --------- U.S. TREASURY OBLIGATIONS -- 1.0% U.S. Treasury Bills 0.88%, 01/22/04++++ $ 20,000 19,990 0.89%, 01/22/04++++ 50,000 49,975 ----------- 69,965 ----------- U.S. Treasury Note 4.75%, 11/15/08 615,000 658,580 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $727,268) 728,545 ----------- TOTAL INVESTMENTS -- 100.0% (Cost $68,766,886) 71,989,609 LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% (7,175) ----------- NET ASSETS -- 100.0% $71,982,434 ===========
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 31 CAPITAL OPPORTUNITIES FUND I Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the quarter were 56% U.S. equity, 20% non-U.S. equity, and 24% fixed income. The fund's composite benchmark performance for the fourth quarter was 10.19%. The fund generated a positive return but underperformed its composite benchmark for the fourth quarter. With a 76% allocation to the Equity Select Funds, the fund benefited from the strong performance in both domestic and international equity markets. The fund's 24% allocation to the Fixed Income Select Funds minimally impacted the fund's performance during the quarter reflecting the flat returns in the bond markets. Allocations to the Medium-Duration Bond Fund, Extended-Duration Bond Fund, Value Equity Fund, and Small Cap Equity Fund benefited the fund's relative performance as these funds outperformed their respective benchmarks during the quarter. Allocations to the Low-Duration Bond Fund, the Growth Equity Fund and the International Equity Fund, detracted from relative performance of the fund by underperforming their respective benchmarks for the quarter. Not Part of the Annual Report 32 CAPITAL OPPORTUNITIES FUND I SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- --------- ----------- AFFILIATED MUTUAL FUNDS -- 99.4% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 232,598 $ 2,111,990 AB Funds Trust -- Extended-Duration Bond Fund (Institutional Class)(inf) 315,998 2,916,665 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 1,420,607 13,012,756 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 1,053,849 11,655,565 AB Funds Trust -- Low-Duration Bond Fund (Institutional Class)(inf) 440,793 4,191,943 AB Funds Trust -- Medium-Duration Bond Fund (Institutional Class)(inf) 674,154 6,229,179 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 998,982 998,982 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 200,495 2,309,703 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 1,381,328 13,730,403 ----------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $52,035,877) 57,157,186 -----------
PAR --------- U.S. TREASURY OBLIGATIONS -- 0.6% U.S. Treasury Bills 0.89%, 01/22/04++++ $ 60,000 59,971 2.12%, 01/22/04++++ 20,000 19,990 ----------- 79,961 ----------- U.S. Treasury Note 4.75%, 11/15/08 235,000 251,652 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $330,808) 331,613 ----------- TOTAL INVESTMENTS -- 100.0% (Cost $52,366,685) 57,488,799 LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% (281) ----------- NET ASSETS -- 100.0% $57,488,518 ===========
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 33 GLOBAL EQUITY FUND I Utilizing investments in the underlying Select Funds, the fund's actual allocations to the major asset classes at the end of the quarter were 73% U.S. equity, 26% non-U.S. equity, and 1% fixed income. The fund's composite benchmark performance for the fourth quarter was 13.58%. The fund posted a positive return but underperformed its composite benchmark for the fourth quarter. The fund's return directly reflected a positive advance in both domestic and international equity markets. The fund's relative performance was positively impacted by its allocations to the Value Equity Fund and the Small Cap Equity Fund, which outperformed their respective benchmarks for the quarter. Primary detractors from relative performance during the quarter were allocations to the Growth Equity Fund and the International Equity Fund, which underperformed their respective benchmarks for the quarter. Not Part of The Annual Report 34 GLOBAL EQUITY FUND I SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ------- ----------- AFFILIATED MUTUAL FUNDS -- 99.8% AB Funds Trust -- Equity Index Fund (Institutional Class)(inf) 131,430 $ 1,193,385 AB Funds Trust -- Growth Equity Fund (Institutional Class)(inf) 848,919 7,776,098 AB Funds Trust -- International Equity Fund (Institutional Class)(inf) 601,017 6,647,252 AB Funds Trust -- Money Market Fund (Institutional Class)(inf) 551,195 551,195 AB Funds Trust -- Small Cap Equity Fund (Institutional Class)(inf) 115,742 1,333,351 AB Funds Trust -- Value Equity Fund (Institutional Class)(inf) 817,516 8,126,110 ----------- TOTAL AFFILIATED MUTUAL FUNDS (Cost $22,212,613) 25,627,391 -----------
PAR ------- U.S. TREASURY OBLIGATION -- 0.2% U.S. Treasury Bill 0.89%, 01/22/04++++ (Cost $54,971) $55,000 54,973 ----------- TOTAL INVESTMENTS -- 100.0% (Cost $22,267,584) 25,682,364 LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% (4,325) ----------- NET ASSETS -- 100.0% $25,678,039 ===========
- --------------- ++++ All or a portion of the security was held as collateral for open futures contracts. See Notes to Financial Statements. 35 STATEMENTS OF ASSETS AND LIABILITIES
FLEXIBLE GROWTH & CAPITAL GLOBAL DECEMBER 31, 2003 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I - ----------------- ------------- ------------- -------------------- ------------- ASSETS Investments at value (1) $28,649,961 $71,989,609 $57,488,799 $25,682,364 Receivables: Dividends 211 697 856 487 Interest 484 3,772 1,441 -- Fund shares sold -- -- 3,012 -- Variation margin 290 1,595 1,885 1,160 Receivable from advisor 4,476 2,636 5,782 4,917 Receivable from administrator 12,047 -- -- 615 Prepaid expenses and other assets 5,902 5,899 5,900 5,900 ----------- ----------- ----------- ----------- Total Assets 28,673,371 72,004,208 57,507,675 25,695,443 ----------- ----------- ----------- ----------- LIABILITIES Payables: Fund shares redeemed 10,333 1,194 -- 1,448 Excise tax payable 12,047 -- -- 615 Accrued expenses: Other accrued expenses payable 15,438 20,580 19,157 15,341 ----------- ----------- ----------- ----------- Total Liabilities 37,818 21,774 19,157 17,404 ----------- ----------- ----------- ----------- NET ASSETS $28,635,553 $71,982,434 $57,488,518 $25,678,039 =========== =========== =========== =========== NET ASSETS CONSIST OF: Paid-in-capital $27,775,293 $67,942,962 $52,004,655 $22,214,957 Undistributed net investment income 315,742 15,757 8,708 4,151 Accumulated net realized gain on investments 140,663 782,911 323,810 29,960 Net unrealized appreciation (depreciation) on investments and futures transactions 403,855 3,240,804 5,151,345 3,428,971 ----------- ----------- ----------- ----------- NET ASSETS $28,635,553 $71,982,434 $57,488,518 $25,678,039 =========== =========== =========== =========== NET ASSET VALUE: $0.001 par value, unlimited shares authorized Net assets applicable to the Institutional Class $28,635,553 $71,982,434 $57,488,518 $25,678,039 ----------- ----------- ----------- ----------- Institutional shares outstanding 2,776,521 6,775,075 5,174,221 2,209,809 ----------- ----------- ----------- ----------- Net asset value, offering price and redemption price per Institutional share $ 10.31 $ 10.62 $ 11.11 $ 11.62 =========== =========== =========== =========== - --------------- (1) Investments at cost $28,249,838 $68,766,886 $52,366,685 $22,267,584 =========== =========== =========== ===========
See Notes to Financial Statements. 36 STATEMENTS OF OPERATIONS
FLEXIBLE GROWTH & CAPITAL GLOBAL JULY 1, 2003* THROUGH DECEMBER 31, 2003 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I - --------------------------------------- ------------- ------------- -------------------- ------------- INVESTMENT INCOME Income distributions received from affiliated funds # $ 530,036 $1,454,528 $ 808,969 $ 211,794 Interest 2,320 10,779 4,736 202 ---------- ---------- ---------- ---------- Total Investment Income # 532,356 1,465,307 813,705 211,996 ---------- ---------- ---------- ---------- EXPENSES Investment advisory fees 14,045 33,787 26,404 11,630 Transfer agent fees 3,732 7,364 6,155 3,763 Custodian fees 1,152 2,956 2,805 2,216 Accounting and administration fees 4,784 10,686 8,468 4,048 Professional fees 23,615 23,615 23,615 23,615 Registration fees 1,883 4,556 3,524 1,506 Shareholder reporting fees 2,224 2,970 2,951 2,224 Trustee fees 84 199 155 70 Line of credit facility fees 102 242 188 83 Excise tax 12,047 -- -- 615 Other expenses 7,086 7,089 7,090 7,089 ---------- ---------- ---------- ---------- Total Expenses 70,754 93,464 81,355 56,859 Expenses waived and reimbursed (46,485) (37,020) (37,372) (37,428) Fees paid indirectly (55) (47) (48) (51) ---------- ---------- ---------- ---------- Net expenses 24,214 56,397 43,935 19,380 ---------- ---------- ---------- ---------- NET INVESTMENT INCOME # 508,142 1,408,910 769,770 192,616 ---------- ---------- ---------- ---------- REALIZED AND UNREALIZED GAIN Net realized gain on investment securities # 301,166 1,143,060 462,798 7,698 Net realized gain on futures transactions 285 46,295 72,004 38,920 ---------- ---------- ---------- ---------- Net realized gain # 301,451 1,189,355 534,802 46,618 ---------- ---------- ---------- ---------- Change in net unrealized appreciation (depreciation) on investment securities 400,123 3,222,723 5,122,114 3,414,780 Change in net unrealized appreciation (depreciation) on futures transactions 3,732 18,081 29,231 14,191 ---------- ---------- ---------- ---------- Net change in unrealized appreciation (depreciation) 403,855 3,240,804 5,151,345 3,428,971 ---------- ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN # 705,306 4,430,159 5,686,147 3,475,589 ---------- ---------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,213,448 $5,839,069 $6,455,917 $3,668,205 ========== ========== ========== ==========
- --------------- * Commencement of operations. # Balance has been reclassified. See Note 9. See Notes to Financial Statements. 37 STATEMENTS OF CHANGES IN NET ASSETS
FLEXIBLE GROWTH & CAPITAL GLOBAL JULY 1, 2003* THROUGH DECEMBER 31, 2003 INCOME FUND I INCOME FUND I OPPORTUNITIES FUND I EQUITY FUND I - --------------------------------------- ------------- ------------- -------------------- ------------- INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income # $ 508,142 $ 1,408,910 $ 769,770 $ 192,616 Net realized gain on investment securities and futures transactions # 301,451 1,189,355 534,802 46,618 Net change in unrealized appreciation (depreciation) on investment securities and futures transactions 403,855 3,240,804 5,151,345 3,428,971 ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations 1,213,448 5,839,069 6,455,917 3,668,205 ----------- ----------- ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (334,618) (1,741,769) (900,689) (192,660) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS (22,765) (62,749) (76,286) (16,658) ----------- ----------- ----------- ----------- Total dividends and distributions (357,383) (1,804,518) (976,975) (209,318) ----------- ----------- ----------- ----------- NET INCREASE FROM CAPITAL SHARE TRANSACTIONS 27,779,488 67,947,883 52,009,576 22,219,152 ----------- ----------- ----------- ----------- Total increase in net assets 28,635,553 71,982,434 57,488,518 25,678,039 ----------- ----------- ----------- ----------- NET ASSETS: Beginning of the Period -- -- -- -- ----------- ----------- ----------- ----------- End of the Period $28,635,553 $71,982,434 $57,488,518 $25,678,039 =========== =========== =========== ===========
- --------------- * Commencement of operations. # Balance has been reclassified. See Note 9. See Notes to Financial Statements. 38 FINANCIAL HIGHLIGHTS
CAPITAL FLEXIBLE GROWTH & OPPORTUNITIES GLOBAL EQUITY INCOME FUND I INCOME FUND I FUND I FUND I -------------- -------------- -------------- -------------- INSTITUTIONAL CLASS ----------------------------------------------------------------- FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD 07/01/03* TO 07/01/03* TO 07/01/03* TO 07/01/03* TO 12/31/03 12/31/03 12/31/03 12/31/03 -------------- -------------- -------------- -------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00 $ 10.00 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income (1) 0.18 0.21 0.15 0.09 Capital gain distributions received 0.10 0.17 0.09 -- Realized and unrealized gain (loss) on investments securities and futures transactions -- net 0.16 0.51 1.07 1.63 ------- ------- ------- ------- Total from investment operations 0.44 0.89 1.31 1.72 ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (5) (0.12) (0.26) (0.18) (0.09) Distributions from capital gains (0.01) (0.01) (0.02) (0.01) ------- ------- ------- ------- Total dividends and distributions (0.13) (0.27) (0.20) (0.10) ------- ------- ------- ------- NET ASSET VALUE -- END OF PERIOD $ 10.31 $ 10.62 $ 11.11 $ 11.62 ======= ======= ======= ======= TOTAL RETURN (2) 4.40% 8.94% 13.02% 17.16% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets of: Expenses -- net (3)(4) 0.17% 0.17% 0.17% 0.17% Expenses -- including expense reduction (3)(4) 0.17% 0.17% 0.17% 0.17% Expenses -- before waivers and expense reductions (3)(4) 0.51% 0.28% 0.31% 0.50% Investment income -- net (1)(3) 4.16% 4.76% 3.24% 1.69% Investment income -- excluding waivers and expense reduction (1)(3) 3.82% 4.65% 3.10% 1.36% Portfolio turnover rate (2) 8.01% 4.51% 2.95% 0.89% Net Assets -- end of the period (000's) $28,636 $71,982 $57,489 $25,678 ======= ======= ======= =======
- --------------- * Commencement of operations. (1) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests. (2) Non-annualized. (3) Annualized. (4) Does not include expenses of the investment companies in which the Fund invests. (5) Includes dividends paid from the short-term portion of capital gain distributions received from affiliated funds. The Flexible Income Fund I has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.49% in the fiscal period ending December 31, 2003. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.05 in the fiscal period ending December 31, 2003. The Growth & Income Fund I has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.52% in the fiscal period ending December 31, 2003. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.05 in the fiscal period ending December 31, 2003. The Capital Opportunities Fund I has reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to capital gains distributions received from affiliated funds. The effect of this reclassification was to decrease the net investment income ratio by 0.26% in the fiscal period ending December 31, 2003. Net investment income per share was decreased and capital gains distributions received from affiliated funds increased by $0.03 in the fiscal period ending December 31, 2003. See Notes to Financial Statements. 39 MONEY MARKET FUND With the exception of the very short end of the Treasury yield curve, interest rates increased across all maturities on the prospects of positive economic growth and some concerns over future Fed action (i.e. raising rates) during 2004. The Fed, serving as the central bank of the United States, met on two separate occasions during the fourth quarter -- on October 28th and December 9th. Confirming the expectations of the market, the Fed left the Fed Funds rate unchanged at 1.00% after both Federal Open Market Committee meetings. In response to stronger economic reports, the Fed shifted its bias in December from a balanced bias with some concerns of disinflation to a balanced risk assessment (i.e. balanced risk of inflation and deflation). The Fed continued to indicate that monetary policy would remain "accommodative" for a considerable time reflecting its continued focus on subdued inflation, unemployment levels and excess capacity. During the fourth quarter and throughout 2003, money market yields remained low reflecting the historically low interest rate environment. The fund is comprised of a broad range of high quality, short-term money market instruments and utilizes a disciplined approach for the purpose of maintaining a constant $1.00 net asset value(1). During the fourth quarter, the fund slightly underperformed its benchmark index, the Citigroup 3-month Treasury-Bill Index. Expectations were for the Fed to remain on hold and keep rates unchanged for the foreseeable future. A relatively long average weighted maturity in the 60-75 day range was maintained for the purpose of capturing additional yield. At quarter-end, the average weighted maturity of the fund was 69 days, slightly longer than the previous quarter-end of 65 days. Shifts in sector exposure during the quarter included a reduction in fixed agency obligation/discount notes and an increase in commercial paper. Major categories of holdings at period-end included commercial paper, corporate/bank floating rate notes and fixed agency obligation/discount notes. - --------------- (1) An investment in the fund is not insured or guaranteed by the FDIC or any other governmental agency. Although the fund seeks to maintain a value of $1.00 per share, it is possible to lose money. The current yield more closely reflects the current earnings of the fund than total return. Not Part of the Annual Report 40 MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
SALOMON BROTHERS RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* 90 DAY TREASURY BILL INDEX** ----------------- -------------------- ------------- ---------------------------- One Year 0.85% 1.04% 0.57% 1.07% Since Inception (8/27/01 -- 12/31/03) 1.44% 1.49% 1.17% 1.62%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
SALOMON BROTHERS 90 DAY TREASURY RETIREMENT CLASS BILL INDEX** ---------------- -------------------------------- 08/27/01 10000 10000 08/31/01 10008 10008 09/30/01 10033 10036 10/31/01 10057 10063 11/30/01 10079 10084 12/31/01 10094 10102 01/31/02 10108 10117 02/28/02 10122 10131 03/31/02 10138 10146 04/30/02 10153 10161 05/31/02 10167 10176 06/30/02 10180 10190 07/31/02 10194 10205 08/31/02 10207 10220 09/30/02 10220 10234 10/31/02 10232 10248 11/30/02 10243 10261 12/31/02 10255 10274 01/31/03 10265 10285 02/28/03 10273 10294 03/31/03 10282 10305 04/30/03 10290 10315 05/31/03 10298 10325 06/30/03 10306 10334 07/30/03 10312 10343 08/31/03 10318 10352 09/30/03 10324 10359 10/31/03 10330 10368 11/30/03 10336 10376 12/31/03 10342 10384
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Salomon Brothers 90-Day Treasury Bill Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Salomon Brothers 90-Day Treasury Bill Index is composed of the monthly return equivalents of yield averages that are not marked to market. The 3-Month Treasury Bill Index consists of the last three 3-month Treasury bill issues. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 41 MONEY MARKET FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 PAR VALUE - ----------------- ----------- ------------ AGENCY OBLIGATIONS -- 18.6% Federal Home Loan Bank 4.88%, 04/16/04 $25,000,000 $ 25,255,431 Federal Home Loan Mortgage Corporation 1.22%, 03/25/04 12,000,000 11,965,840 1.20%, 09/09/04 15,434,000 15,304,354 1.38%, 11/15/04 20,000,000 20,000,000 1.47%, 11/29/04 19,000,000 19,000,000 Federal National Mortgage Association 5.13%, 02/13/04 10,000,000 10,044,072 1.08%, 03/03/04 11,000,000 10,979,540 5.63%, 05/14/04 5,000,000 5,077,587 3.00%, 06/15/04 10,000,000 10,079,940 1.50%, 12/03/04 15,000,000 15,000,000 1.55%, 12/08/04 9,000,000 9,000,000 Student Loan Mortgage Association 4.75%, 04/23/04 19,750,000 19,960,944 ------------ TOTAL AGENCY OBLIGATIONS (Cost $171,667,708) 171,667,708 ------------ CERTIFICATES OF DEPOSIT -- 9.7% Citibank NA 1.09%, 03/10/04 25,000,000 25,000,000 Washington Mutual Bank FA 1.13%, 01/16/04 40,000,000 40,000,000 Westdeutsche Landesbank NY 1.40%, 08/05/04 25,000,000 25,000,000 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $90,000,000) 90,000,000 ------------ COMMERCIAL PAPER -- 42.1% Atomium Funding Corporation 1.12%, 01/09/04 15,123,000 15,119,236 Citigroup Global Markets Holdings, Inc. 1.10%, 01/20/04++ 20,000,000 20,000,000 Countrywide Home Loans, Inc. 1.00%, 01/02/04 6,494,000 6,493,820 Dorada Finance, Inc. 1.10%, 01/15/04 15,000,000 14,993,583 Edison Asset Securitization LLC 1.09%, 01/12/04 10,000,000 9,996,669 General Electric Capital Corporation 1.10%, 02/12/04 10,000,000 9,987,167 1.10%, 02/17/04 32,000,000 31,954,044 HBOS Treasury Services PLC 1.09%, 03/17/04 43,000,000 42,901,052 K2 (USA) LLC 1.13%, 03/22/04 28,000,000 27,928,810 Morgan Stanley 1.08%, 01/26/04 5,000,000 4,996,250
PAR VALUE ----------- ------------ Natexis Banques Populaires US Finance Co. LLC 1.08%, 03/18/04 $25,000,000 $ 24,942,250 Nordea North America, Inc. 1.08%, 01/06/04 23,000,000 22,996,550 Regency Markets No. 1 LLC 1.11%, 01/14/04 12,000,000 11,995,190 Scaldis Capital LLC 1.10%, 03/17/04 25,000,000 24,941,944 1.10%, 03/19/04 7,091,000 7,074,100 Silver Tower US Funding LLC 1.12%, 01/06/04 40,000,000 39,993,779 Thames Asset Global Securitization 1.10%, 01/23/04 39,387,000 39,360,524 Yorktown Capital LLC 1.08%, 01/20/04 32,740,000 32,721,338 ------------ TOTAL COMMERCIAL PAPER (Cost $388,396,306) 388,396,306 ------------ MASTER NOTES -- 6.5% Merrill Lynch Mortgage Capital, Inc. 1.13%, 01/02/04 25,000,000 25,000,000 Morgan Stanley Mortgage Capital 1.17%, 01/02/04 35,000,000 35,000,000 ------------ TOTAL MASTER NOTES (Cost $60,000,000) 60,000,000 ------------ VARIABLE RATE OBLIGATIONS -- 22.8% American Express Centurion Bank 1.15%, 01/13/04++ 25,000,000 25,000,000 Bear Stearns Cos., Inc. 1.15%, 03/05/04++ 7,000,000 7,000,000 Goldman Sachs Group, Inc. 1.14%, 03/08/04++ 30,000,000 30,000,000 John Hancock Global Funding II 1.22%, 03/11/04 144A++ 10,000,000 10,006,370 1.27%, 03/15/04 144A++ 10,000,000 10,009,293 1.32%, 03/29/04 144A++ 6,000,000 6,007,730 Lehman Brothers Holdings, Inc. 1.07%, 01/02/04++ 10,000,000 10,000,000 Merrill Lynch & Co., Inc. 1.55%, 03/18/04++ 8,000,000 8,007,285 Metlife Global Funding 1.15%, 01/28/04++ 10,000,000 10,000,000 National City Bank of Indiana 1.04%, 01/02/04++ 30,000,000 29,997,223 1.05%, 01/02/04++ 10,000,000 9,999,686 U.S. Bank NA 1.05%, 01/02/04++ 25,000,000 24,999,829
See Notes to Financial Statements. 42
PAR VALUE ----------- ------------ Wells Fargo Bank NA 1.04%, 01/01/04++ $20,000,000 $ 20,000,000 1.04%, 01/02/04++ 10,000,000 10,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $211,027,416) 211,027,416 ------------
SHARES ----------- MUTUAL FUND -- 0.0% Northern Institutional Liquid Assets Portfolio sec. (Cost $195,700) 195,700 195,700 -------------- TOTAL INVESTMENTS -- 99.7% (Cost $921,287,130) 921,287,130 OTHER ASSETS LESS LIABILITIES -- 0.3% 3,183,082 -------------- NET ASSETS -- 100.0% $ 924,470,212 ==============
See Notes to Financial Statements. 43 LOW-DURATION BOND FUND Short-term Treasury yields increased during the fourth quarter, specifically in October and November, reflecting the prospects of an improving economy resulting from both monetary and fiscal stimulus. Given the inverse relationship between yields and bond prices, the rise in interest rates dampened short-term bond prices during the period; therefore, interest income was an important factor in generating positive returns. Yields on the 2-year and 5-year Treasury Notes increased 0.36% and 0.42%, respectively. In addition, the short-end of the yield curve steepened as evidenced by the yield spread between the 2-year and the 5-year Treasury Notes which increased by 0.06% during the period. The theme for the quarter was that investors sought yield-producing securities; therefore, non-Treasury sectors, such as corporate bonds, were the better performers as the demand for such securities elevated prices. Low-duration bonds provided modest positive returns during the period as measured by the Merrill Lynch 1-3 Year Treasury Index, which posted a quarterly return of 0.15% with all of the positive performance being generated in the month of December. The fund, comprised of high quality, fixed income securities primarily with shorter maturities, produced a positive absolute return for the fourth quarter, but slightly underperformed its all Treasury benchmark index, the Merrill Lynch 1-3 Year Treasury-Bill Index with most of the underperformance occurring during December. Given the accumulated excess return generated in previous quarters, the fund did outpace its benchmark for the calendar year 2003. During the quarter, the Fund benefited from its exposure to non-Treasury sectors, such as corporates and emerging market debt. Corporate bond spreads narrowed (pushing bond prices higher) reflecting the improvement in the economy, corporate profits and market liquidity. Emerging market bonds benefited from strong demand as investors sought to take advantage of improving fundamentals and higher incremental yields. The fund's performance was negatively impacted by yield curve positioning. One of the three sub-advisers within the fund -- BlackRock -- generated an excess return relative to the benchmark during the quarter. At quarter-end, approximately 89% of the fund was rated AAA/Government with major categories of holdings including Treasury/agency and mortgages. Not Part of the Annual Report 44 LOW-DURATION BOND FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
MERRILL LYNCH 1-3 RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* YEAR TREASURY INDEX** ----------------- -------------------- ------------- --------------------- One Year 2.45% 2.61% 2.20% 1.90% Since Inception (8/27/01 -- 12/31/03) 4.31% 4.27% 4.02% 4.40%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
MERRILL LYNCH 1-3 YEAR TREASURY RETIREMENT CLASS INDEX** ---------------- ------------------------------- 08/27/01 10000 10000 08/31/01 10023 10025 09/30/01 10150 10190 10/31/01 10256 10286 11/30/01 10217 10264 12/31/01 10196 10268 01/31/02 10242 10288 02/28/02 10288 10338 03/31/02 10208 10268 04/30/02 10334 10383 05/31/02 10381 10425 06/30/02 10402 10512 07/31/02 10459 10641 08/31/02 10550 10677 09/30/02 10633 10765 10/31/02 10661 10790 11/30/02 10663 10757 12/31/02 10778 10859 01/31/03 10800 10857 02/28/03 10866 10902 03/31/03 10890 10922 04/30/03 10918 10943 05/31/03 10991 10984 06/30/03 11006 11001 07/30/03 10888 10941 08/31/03 10910 10948 09/30/03 11034 11048 10/31/03 10984 11007 11/30/03 10995 11001 12/31/03 11042 11065
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Merrill Lynch 1-3 Year Treasury Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Merrill Lynch 1-3 Year Treasury Index is composed of all U.S. Treasury Notes and Bonds with maturities greater than or equal to one year and less than three years. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 45 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 PAR VALUE - ----------------- ----------- -------------- AGENCY OBLIGATIONS -- 10.5% Federal Home Loan Bank 1.06%, 01/16/04 $ 2,600,000 $ 2,598,983 1.03%, 01/23/04 3,300,000 3,297,933 Federal Home Loan Mortgage Corporation 1.06%, 01/08/04 40,500,000 40,492,307 1.06%, 01/15/04 5,000,000 4,998,101 1.08%, 02/12/04 9,000,000 8,989,744 4.25%, 03/22/06 3,850,000 3,875,868 3.13%, 08/25/06 3,350,000 3,388,083 4.75%, 12/08/10 2,165,000 2,189,036 Federal National Mortgage Association 1.08%, 01/28/04 1,700,000 1,698,721 1.01%, 02/03/04 400,000 399,630 1.07%, 02/11/04 2,100,000 2,097,665 1.03%, 03/31/04 500,000 498,698 4.45%, 05/03/05 3,325,000 3,365,113 6.63%, 10/15/07 3,200,000 3,611,402 6.00%, 05/15/08 30,000 33,287 Small Business Administration 6.95%, 11/10/16 2,327,740 2,557,357 -------------- TOTAL AGENCY OBLIGATIONS (Cost $83,786,162) 84,091,928 -------------- ASSET-BACKED SECURITIES -- 7.0% Aames Mortgage Trust 1.56%, 01/15/04 131,232 131,332 Amresco Independence Funding, Inc. 3.50%, 06/15/26 1,474,264 1,474,264 Bayview Financial Acquisition Trust 7.01%, 05/25/29 652,409 670,694 Business Loan Express 3.00%, 01/15/04 935,505 904,809 Capital Auto Receivables Asset Trust 3.58%, 10/16/06++++ 2,400,000 2,457,750 Chase Funding Mortgage Loan Asset-Backed Certificates 5.04%, 05/30/05 1,200,000 1,207,603 Citibank Credit Card Issuance Trust 2.50%, 04/07/08 3,950,000 3,961,299 Citibank Credit Card Master Trust I 8.12%, 08/15/06 PO (omg) 2,600,000 2,581,343 Conseco Finance Securitizations Corporation 1.49%, 01/15/04 348,909 348,633 8.07%, 12/01/30 1,164,291 1,184,952 7.30%, 05/01/31 27,688 27,686 Daimler Chrysler Auto Trust 6.16%, 01/08/06 2,267,212 2,313,004 2.25%, 08/08/07 3,000,000 2,962,800
PAR VALUE ----------- -------------- Daimler Chrysler Master Owner Trust 1.22%, 01/15/04 $ 3,000,000 $ 3,000,052 Ford Credit Auto Owner Trust 4.83%, 02/15/05 593,970 596,394 Green Tree Financial Corporation 6.06%, 04/01/18 969,100 982,056 6.04%, 11/01/29 48,903 50,923 Honda Auto Receivables Owner Trust 2.30%, 10/18/07 3,050,000 3,054,766 Nissan Auto Receivables Owner Trust 4.31%, 05/16/05 575,214 576,922 3.58%, 09/15/05 1,976,980 1,990,880 3.99%, 12/15/05 3,011,843 3,043,845 5.35%, 10/15/06 3,275,000 3,324,583 4.80%, 02/15/07 4,225,000 4,327,323 PBG Equipment Trust 6.27%, 01/20/12 1,162,388 1,211,114 Sears Credit Account Master Trust 7.00%, 07/15/08 806,458 819,482 5.25%, 10/16/08 1,135,417 1,154,224 Sequoia Mortgage Trust 2.39%, 10/25/24 1,402,504 1,402,504 SLM Student Loan Trust 1.20%, 03/15/04 2,400,000 2,400,259 1.24%, 01/25/07 13,487 13,490 1.21%, 01/25/09 796,799 796,759 1.21%, 01/25/11 1,339,791 1,340,171 SVO Timeshare Mortgage Corporation 5.47%, 10/20/13@ 3,655,045 3,790,965 The Money Store Business Loan Backed Certificates 1.90%, 04/15/28 673,367 662,276 TMS SBA Loan Trust 1.86%, 04/15/24 601,941 583,173 1.75%, 01/15/25 703,088 665,240 2.23%, 01/25/25 421,853 419,617 -------------- TOTAL ASSET-BACKED SECURITIES (Cost $56,030,417) 56,433,187 -------------- CERTIFICATES OF DEPOSIT -- 0.8% Citibank NA 1.10%, 02/19/04 (Cost $6,300,000) 6,300,000 6,300,031 -------------- COMMERCIAL PAPER -- 2.3% Danske Corporation 1.08%, 02/13/04 4,000,000 3,995,006 1.09%, 02/17/04 4,300,000 4,294,049 Lloyds TSB Bank PLC 1.06%, 01/22/04 500,000 499,695 Shell Finance (UK) PLC 1.10%, 03/16/04 800,000 798,298
See Notes to Financial Statements. 46
PAR VALUE ----------- -------------- UBS Finance (Delaware) LLC 1.08%, 02/25/04 $ 8,700,000 $ 8,686,394 Westpac Trust Securities, Ltd. 1.08%, 02/05/04 300,000 299,701 -------------- TOTAL COMMERCIAL PAPER (Cost $18,572,004) 18,573,143 -------------- CORPORATE BONDS -- 7.9% Alcoa, Inc. 1.46%, 03/08/04 930,000 932,292 Allstate Corporation (The) 7.88%, 05/01/05 830,000 895,706 Allstate Financial Global Funding 5.25%, 02/01/07 500,000 537,823 American Electric Power Co., Inc. 6.13%, 05/15/06 730,000 787,160 American International Group, Inc. 2.85%, 12/01/05 1,300,000 1,320,228 AOL Time Warner, Inc. 5.63%, 05/01/05 2,210,000 2,314,301 AT&T Corporation 7.25%, 11/15/06 780,000 863,226 AT&T Wireless Services, Inc. 7.35%, 03/01/06 700,000 765,932 Bank One Corporation 6.50%, 02/01/06 1,242,000 1,348,832 Centerior Energy Corporation 7.67%, 07/01/04 1,500,000 1,542,891 Citigroup, Inc. 6.75%, 12/01/05 1,600,000 1,739,002 Coca-Cola Co. (The) 4.00%, 06/01/05 1,240,000 1,281,048 ConocoPhillips 8.50%, 05/25/05 1,045,000 1,139,555 DaimlerChrysler NA Holding Corporation 6.90%, 09/01/04 3,200,000 3,301,562 Devon Energy Corporation 2.75%, 08/01/06 800,000 800,865 Dominion Resources, Inc. 7.63%, 07/15/05 650,000 702,480 Ford Motor Credit Co. 7.50%, 03/15/05 500,000 527,858 6.88%, 02/01/06 3,190,000 3,406,362 FPL Group Capital, Inc. 3.25%, 04/11/06 1,465,000 1,491,563 General Dynamics Corporation 2.13%, 05/15/06 1,205,000 1,198,698 General Electric Capital Corporation 9.83%, 12/15/08 350,000 439,593 General Mills, Inc. 2.63%, 10/24/06 800,000 796,144
PAR VALUE ----------- -------------- General Motors Acceptance Corporation 1.88%, 01/20/04 $ 3,100,000 $ 3,100,815 6.75%, 01/15/06 650,000 698,138 IBM Corporation 1.30%, 03/10/04 1,200,000 1,201,408 International Paper Co. 8.13%, 07/08/05 680,000 741,023 Kellogg Co. 6.00%, 04/01/06 700,000 750,473 Lehman Brothers Holdings, Inc. 6.25%, 05/15/06 1,300,000 1,413,101 Masco Corporation 6.75%, 03/15/06 700,000 763,475 Mellon Bank NA 6.50%, 08/01/05 1,000,000 1,070,043 Merrill Lynch and Co., Inc. 2.94%, 01/30/06 1,400,000 1,418,768 MetLife, Inc. 3.91%, 05/15/05 1,300,000 1,337,341 National Rural Utilities Cooperative Finance Corporation 3.00%, 02/15/06 1,120,000 1,134,563 Pemex Project Funding Master Trust 8.50%, 02/15/08 350,000 400,750 Premium Asset Trust 1.47%, 02/27/04@ 2,000,000 2,005,056 Qwest Capital Funding, Inc. 5.88%, 08/03/04 3,000,000 3,022,500 SLM Corporation 1.33%, 01/26/04 1,200,000 1,202,138 3.63%, 03/17/08 120,000 119,603 Southtrust Bank NA 1.25%, 02/24/04 1,200,000 1,200,846 Sprint Capital Corporation 7.13%, 01/30/06 3,700,000 4,005,235 TCI Communications, Inc. 6.88%, 02/15/06 700,000 760,397 Time Warner, Inc. 6.13%, 04/15/06 700,000 754,052 Toyota Motor Credit Corporation 2.80%, 01/18/06 1,060,000 1,079,716 US Bancorp 3.95%, 08/23/07 1,400,000 1,441,688 Verizon Wireless Capital LLC 1.24%, 05/23/05@ 1,400,000 1,398,895 Washington Mutual Bank FA 1.51%, 07/25/06 1,500,000 1,509,554
See Notes to Financial Statements. 47 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- Wells Fargo Co. 7.25%, 08/24/05 $ 1,270,000 $ 1,380,136 Worldcom, Inc. -- WorldCom Group 7.38%, 01/15/11 144A# 3,900,000 1,316,250 -------------- TOTAL CORPORATE BONDS (Cost $65,019,130) 63,359,085 -------------- FOREIGN BONDS -- 6.6% BERMUDA -- 0.1% Tyco International Group SA 6.38%, 06/15/05 860,000 909,450 -------------- CANADA -- 1.3% Alcan, Inc. 1.43%, 12/08/04 (omg)@ 3,100,000 3,092,740 Canadian Government Bond 4.25%, 09/01/08 (C) 7,650,000 6,005,154 Quebec Province 6.50%, 01/17/06 1,190,000 1,284,618 -------------- 10,382,512 -------------- CHILE -- 0.4% Republic of Chile 5.63%, 07/23/07 750,000 806,370 7.13%, 01/11/12 2,300,000 2,631,429 -------------- 3,437,799 -------------- CROATIA -- 0.1% Croatia Government 2.19%, 02/02/04 954,546 954,598 -------------- FRANCE -- 0.2% Total Fina Elf SA 7.00%, 10/05/05 1,470,000 1,593,396 -------------- GERMANY -- 1.2% Bundesobligation 3.00%, 04/11/08 (E) 7,865,000 9,756,617 -------------- MALAYSIA -- 0.1% Government of Malaysia 8.75%, 06/01/09 300,000 368,799 Petroliam Nasional BHD 7.13%, 10/18/06 350,000 389,583 -------------- 758,382 -------------- MEXICO -- 0.8% Grupo Televisa SA 8.63%, 08/08/05 350,000 385,438 United Mexican States 6.38%, 01/16/13 2,280,000 2,371,200 11.38%, 09/15/16 700,000 994,000 8.00%, 09/24/22 2,700,000 2,960,551 -------------- 6,711,189 -------------- SOUTH AFRICA -- 0.1% Republic of South Africa 9.13%, 05/19/09 600,000 724,500 --------------
PAR VALUE ----------- -------------- SUPRANATIONAL -- 0.2% International Bank for Reconstruction and Development 6.02%, 06/21/04 $ 1,200,000 $ 1,226,250 -------------- SWEDEN -- 0.8% Swedish Government Bond 3.50%, 04/20/06 (W) 46,650,000 6,499,724 -------------- TUNISIA -- 0.4% Banque Centrale de Tunisie 7.38%, 04/25/12 2,400,000 2,706,000 -------------- UNITED KINGDOM -- 0.9% British Telecommunications PLC 7.88%, 12/15/05 405,000 446,559 HBOS Treasury Services PLC 1.22%, 03/14/05 1,200,000 1,200,906 Holmes Financing PLC 1.30%, 01/15/08 2,600,000 2,599,948 Permanent Financing PLC 1.32%, 09/10/07 2,800,000 2,800,000 -------------- 7,047,413 -------------- TOTAL FOREIGN BONDS (Cost $50,043,911) 52,707,830 -------------- MORTGAGE-BACKED SECURITIES -- 17.8% Asset Securitization Corporation 7.32%, 01/13/30 946,164 979,026 Bear Stearns Adjustable Rate Mortgage Trust 6.74%, 01/01/04 90,428 90,394 4.83%, 01/25/34 2,776,237 2,794,911 Countrywide Alternative Loan Trust 6.00%, 10/25/32 2,106,587 2,162,245 Countrywide Home Loans, Inc. 6.05%, 04/25/29 1,156,679 1,156,929 6.50%, 08/25/29 2,765,000 2,880,857 3.37%, 06/19/31 366,479 369,571 Credit-Based Asset Servicing and Securitization LLC 1.44%, 01/25/04 1,003,416 999,580 CS First Boston Mortgage Securities Corporation 1.52%, 02/25/32 566,216 566,543 Federal Home Loan Mortgage Corporation 2.39%, 01/01/04 752,578 745,052 3.70%, 01/01/04 166,941 172,848 9.50%, 10/01/04 9,385 9,621 9.50%, 12/01/04 12,171 12,477 9.50%, 01/01/05 13,987 14,339 9.50%, 06/01/05 17,303 18,213 5.75%, 07/28/05 2,221,745 2,280,252 10.00%, 12/01/05 1,409 1,431
See Notes to Financial Statements. 48
PAR VALUE ----------- -------------- 8.00%, 03/01/06 $ 2,254 $ 2,364 7.00%, 05/01/06 5,258 5,412 8.75%, 08/01/06 5,243 5,325 6.50%, 08/15/07 572,426 586,063 8.50%, 12/01/07 21,290 22,666 8.50%, 01/01/08 17,016 18,100 8.00%, 05/01/08 27,193 28,233 8.50%, 06/01/08 19,920 20,688 8.25%, 07/01/08 4,036 4,253 8.75%, 07/01/08 15,497 16,708 8.00%, 01/01/09 8,738 9,276 7.50%, 03/01/09 101,736 105,163 5.50%, 04/01/09 1,617,226 1,688,066 6.00%, 06/01/09 699,530 735,981 6.00%, 07/01/10 1,380,501 1,452,436 6.50%, 06/01/11 1,471,505 1,560,229 16.25%, 07/01/11 2,581 3,077 15.25%, 08/01/11 2,898 3,406 6.00%, 09/01/13 326,899 343,343 6.00%, 10/01/13 309,542 325,113 6.00%, 11/01/13 2,000,155 2,100,769 6.00%, 06/01/14 440,101 461,418 5.00%, 11/15/16 8,493,717 8,756,066 10.75%, 02/01/19 144,729 160,606 4.60%, 09/01/23 1,173,737 1,193,699 7.33%, 03/01/31 170,428 174,390 6.00%, 04/01/33 4,665,054 4,822,787 3.50%, 12/15/33 1,800,000 1,832,544 Federal Housing Authority 7.43%, 09/01/22 40,610 43,239 Federal National Mortgage Association 6.28%, 01/01/04 1,650,919 1,701,961 3.47%, 01/02/04 352,452 358,822 3.77%, 01/02/04 1,823,349 1,891,439 4.99%, 01/02/04 203,326 204,031 5.19%, 01/02/04 1,688,301 1,728,704 7.00%, 06/01/04 238 238 6.00%, 08/01/08 605,233 637,293 6.50%, 11/01/08 793,163 840,063 5.50%, 06/01/09 1,121,320 1,167,518 5.50%, 07/01/09 817,441 851,119 3.00%, 08/25/09 4,010,000 4,035,989 3.50%, 09/25/09 3,500,000 3,557,883 6.00%, 11/01/10 1,652,876 1,738,886 6.00%, 12/01/10 773,716 814,700 6.00%, 03/01/11 400,734 421,302 6.00%, 08/01/11 778,733 818,702 5.50%, 04/01/13 871,822 906,783 6.00%, 05/01/13 693,447 729,039 6.00%, 02/01/14 525,420 552,248 6.00%, 03/01/14 887,370 932,632 6.00%, 04/01/14 175,073 184,021 6.00%, 12/01/14 4,729,733 4,970,028 3.66%, 08/01/22 850,421 877,702 3.70%, 02/01/24 1,743,294 1,808,371
PAR VALUE ----------- -------------- 9.00%, 05/01/25 $ 561,243 $ 626,831 9.00%, 07/01/25 491,295 548,624 5.16%, 12/01/30 135,855 138,257 6.68%, 02/01/31 325,720 331,026 3.31%, 03/25/32 1,060,501 1,060,501 4.34%, 03/11/33 1,897,174 1,941,282 4.34%, 04/01/33 3,584,680 3,644,572 5.50%, 05/01/33 393,222 398,542 4.32%, 06/01/33 968,505 983,475 5.50%, 06/01/33 979,950 993,208 5.50%, 07/01/33 59,593 60,399 5.50%, 08/01/33 481,178 487,688 4.36%, 10/01/33 3,983,551 4,045,219 5.50%, 10/01/33 497,460 504,190 4.45%, 12/01/33 1,200,000 1,224,000 5.00%, 01/01/34 TBA 6,000,000 5,936,250 FFCA Secured Lending Corporation 7.27%, 02/18/11 1,774,447 1,740,294 First Republic Mortgage Loan Trust 3.97%, 06/25/30 1,090,118 1,096,427 Government National Mortgage Association 5.63%, 01/01/04 297,494 306,344 1.35%, 01/16/04 1,726,979 1,726,126 1.78%, 01/16/04 1,099,858 1,109,786 8.25%, 08/15/04 2,089 2,127 8.25%, 03/15/06 5,348 5,640 8.25%, 05/15/06 11,946 12,624 7.00%, 10/15/07 3,678 3,919 7.00%, 11/15/07 90,810 96,758 7.00%, 12/15/07 60,073 64,009 7.00%, 01/15/08 2,112 2,267 7.00%, 05/15/08 29,417 31,584 7.00%, 06/15/08 9,234 9,915 7.00%, 07/15/08 179,624 192,855 7.00%, 08/15/08 124,428 133,593 7.00%, 09/15/08 220,767 237,029 7.00%, 09/18/08 145,605 156,330 7.00%, 11/15/08 248,506 266,810 6.00%, 12/15/08 630,571 666,857 7.00%, 04/15/09 53,022 56,890 6.00%, 02/15/11 981,352 1,038,385 13.50%, 02/15/11 4,275 4,949 7.00%, 05/12/12 443,383 476,070 4.38%, 06/20/17 55,995 57,161 4.38%, 06/20/21 35,018 35,719 7.00%, 08/15/28 52,680 56,235 7.00%, 11/15/28 259,595 277,115 7.00%, 07/15/29 43,953 46,875 8.50%, 10/15/29 173,824 189,137 8.50%, 01/15/30 119,705 130,178 8.50%, 03/15/30 42,969 46,729 8.50%, 04/15/30 292,164 317,727 8.50%, 05/15/30 592,011 643,810
See Notes to Financial Statements. 49 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- 8.50%, 06/15/30 $ 305,051 $ 331,742 8.50%, 07/15/30 766,274 877,941 8.50%, 08/15/30 135,167 146,992 8.50%, 09/15/30 26,167 28,457 8.50%, 10/15/30 82,850 90,098 8.50%, 11/15/30 367,209 399,338 8.50%, 12/15/30 414,146 450,381 7.00%, 01/15/31 65,577 69,911 8.50%, 01/15/31 118,473 128,806 7.00%, 02/15/31 69,697 74,303 8.50%, 02/15/31 260,084 282,767 7.00%, 04/15/31 142,302 151,706 7.00%, 06/15/31 273,812 291,906 7.00%, 07/15/31 254,344 271,156 7.00%, 08/15/31 1,348,650 1,437,775 7.00%, 09/15/31 593,684 632,999 7.00%, 10/15/31 100,008 106,617 7.00%, 12/15/31 182,121 194,156 7.00%, 02/15/32 108,064 115,163 7.00%, 04/15/32 48,090 51,249 7.00%, 05/15/32 316,717 337,524 7.00%, 07/15/32 951,871 1,014,403 7.00%, 09/15/32 245,955 262,113 7.00%, 10/15/32 862,829 919,511 6.75%, 10/16/40 3,514,464 3,671,327 GS Mortgage Securities Corporation II 3.77%, 01/02/04(omg) 45,435,000 1,826,417 6.04%, 08/15/18 579,237 616,431 IFC SBA Loan-Backed Adjustable Rate Certificate 2.00%, 01/15/24++ 925,675 907,162 LB-UBS Commercial Mortgage Trust 3.73%, 08/15/33(omg) 38,255,000 1,745,020 Mellon Residential Funding Corporation 6.75%, 01/25/13 15,294 15,294 MLCC Mortgage Investors, Inc. 1.49%, 01/15/04 1,659,320 1,660,117 Morgan Stanley Capital I 6.22%, 02/07/04 1,329,630 1,388,021 Residential Accredit Loans, Inc. 6.00%, 12/25/16 899,844 923,183 Residential Funding Mortgage Securities I 6.50%, 03/25/32 613,345 632,314 Salomon Brothers Mortgage Securities IV 7.15%, 03/25/25 4,307,859 4,534,136 Security National Mortgage Loan Trust 5.79%, 01/25/04@ 272,040 272,076
PAR VALUE ----------- -------------- Sequoia Mortgage Trust 1.55%, 10/20/27 $ 1,754,694 $ 1,739,914 1.60%, 10/20/33 1,298,505 1,290,893 Structured Asset Securities Corporation 7.50%, 06/28/31 509,566 520,001 United Mortgage Securities Corporation 4.03%, 01/01/04 905,619 909,318 Wachovia Asset Securitization, Inc. 6.25%, 10/25/33 489,273 499,058 Wachovia Bank Commercial Mortgage Trust 4.00%, 06/15/35(omg) 11,144,901 978,662 Washington Mutual 3.69%, 01/01/04 863,292 873,979 Washington Mutual Mortgage Securities Corporation 3.87%, 07/25/31 539,594 544,349 Washington Mutual MSC Mortgage Pass-Through Certificates 3.90%, 03/25/32 973,374 979,019 -------------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $141,346,999) 142,821,226 -------------- MUNICIPAL BONDS -- 1.6% California State Department of Water Resources, Series E Revenue Bond (Non-Callable) 3.59%, 05/01/04 975,000 980,714 Maine Educational Loan Marketing Corporation, Series A-2 Student Loan Revenue Bond (GTD STD LNS Insured) (Callable 01/20/2004 @ $100) 1.45%, 01/07/04 1,500,000 1,500,000 Missouri Higher Education Loan Authority, Revenue Bond (GTD STD LNS Insured) (Callable 04/01/05 @ $100) 1.52%, 07/25/08 837,351 838,267 Panhandle -- Plains, Texas Higher Education Authority, Inc., Series A-4 Student Loan Revenue Bonds (GTD STD LNS Insured) (Non-Callable) 1.21%, 10/01/31 3,200,000 3,200,000
See Notes to Financial Statements. 50
PAR VALUE ----------- -------------- Texas State Public Finance Authority, Series B Revenue Bonds (Non-Callable) 2.63%, 06/15/06 $ 1,365,000 $ 1,368,044 Wisconsin State, Series B-6 General Revenue Bonds (XLCA Insured) (Non-Callable) 1.20%, 05/01/32 5,000,000 4,999,999 -------------- TOTAL MUNICIPAL BONDS (Cost $12,863,369) 12,887,024 -------------- SHARES ----------- SHORT-TERM INVESTMENTS -- 29.4% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 36,116,421 $ 36,116,421 Northern Institutional Liquid Assets Portfolio sec. 200,386,436 200,386,436 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $236,502,857) 236,502,857 -------------- RIGHTS -- 0.0% United Mexican States Recovery Rights Series B, 06/30/04 2,700,000 27,000 United Mexican States Recovery Rights Series C, 06/30/05 2,700,000 5,400 United Mexican States Recovery Rights Series D, 06/30/06 2,700,000 5,400 United Mexican States Recovery Rights Series E, 06/30/07 2,700,000 3,375 -------------- TOTAL RIGHTS (Cost $0) 41,175 -------------- PAR ----------- U.S. TREASURY OBLIGATIONS -- 42.8% U.S. Treasury Bills 0.83%, 01/15/04 $ 2,400,000 $ 2,399,230 0.92%, 03/04/04++++ 20,000 19,972 0.93%, 03/04/04++++ 40,000 39,943 0.88%, 03/18/04++++ 100,000 99,824 0.89%, 03/18/04++++ 365,000 364,358 0.99%, 04/15/04 11,600,000 11,570,513 1.00%, 04/15/04 3,400,000 3,391,357 1.01%, 04/24/04 14,000,000 13,961,668 1.02%, 04/29/04 10,300,000 10,270,017
PAR VALUE ----------- -------------- 1.02%, 05/06/04 $ 5,600,000 $ 5,582,696 1.04%, 05/13/04 12,900,000 12,858,088 1.01%, 05/27/04 3,100,000 3,088,899 1.01%, 06/03/04 10,600,000 10,558,691 1.03%, 06/03/04 15,700,000 15,638,817 1.00%, 06/10/04 7,000,000 6,971,132 0.93%, 06/17/04 3,000,000 2,987,058 0.95%, 06/17/04 11,000,000 10,952,546 0.97%, 06/17/04 2,700,000 2,688,352 -------------- 113,443,161 -------------- U.S. Treasury Bonds 9.13%, 05/15/09 1,250,000 1,287,208 10.38%, 11/15/09 2,700,000 2,909,358 10.00%, 05/15/10 1,700,000 1,892,977 10.38%, 11/15/12 5,750,000 7,337,765 -------------- 13,427,308 -------------- U.S. Treasury Inflationary Index Bonds 3.63%, 01/15/08 12,000,000 15,202,013 3.88%, 01/15/09 2,000,000 2,548,428 -------------- 17,750,441 -------------- U.S. Treasury Notes 1.88%, 09/30/04 8,350,000 8,399,908 1.50%, 02/28/05++++ 12,770,000 12,803,432 1.63%, 03/31/05 10,155,000 10,193,091 1.63%, 04/30/05 5,870,000 5,889,494 6.75%, 05/15/05 19,825,000 21,259,220 1.25%, 05/31/05 7,450,000 7,432,545 1.13%, 06/30/05 6,000,000 5,969,766 1.50%, 07/31/05 11,155,000 11,149,779 2.00%, 08/31/05 24,750,000 24,917,260 1.63%, 09/30/05 11,170,000 11,169,129 1.63%, 10/31/05 2,620,000 2,616,728 5.75%, 11/15/05 2,890,000 3,103,817 1.88%, 11/30/05 20,115,000 20,159,012 1.88%, 12/31/05 10,475,000 10,485,234 5.63%, 02/15/06 2,020,000 2,177,576 2.00%, 05/15/06 11,360,000 11,365,771 2.38%, 08/15/06 1,095,000 1,101,246 6.50%, 10/15/06 975,000 1,086,326 2.63%, 11/15/06 8,000,000 8,073,128 3.50%, 11/15/06 19,550,000 20,213,644 -------------- 199,566,106 -------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $342,231,699) 344,187,016 -------------- TOTAL INVESTMENTS -- 126.7% (Cost $1,012,696,548) 1,017,904,502 --------------
See Notes to Financial Statements. 51 LOW-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
NUMBER OF CONTRACTS VALUE ----------- -------------- WRITTEN OPTIONS -- (0.1)% CALL SWAPTIONS -- 0.0% 3-Month LIBOR, Strike Price $3.80, Expires 10/07/04 (2,170) $ (177,137) 3-Month LIBOR, Strike Price $4.00, Expires 10/31/05 (640) (73,389) -------------- (250,526) -------------- PUT SWAPTIONS -- (0.1%) 3-Month LIBOR, Strike Price $7.00, Expires 10/31/05 (640) (89,901) 3-Month LIBOR, Strike Price $6.00, Expires 10/07/04 (2,170) (165,679) -------------- (255,580) -------------- TOTAL WRITTEN OPTIONS (Cost $(595,524)) (506,106) -------------- LIABILITIES IN EXCESS OF OTHER ASSETS -- (26.6%) (213,955,331) -------------- NET ASSETS -- 100.0% $ 803,443,065 ==============
Interest rate swap agreements outstanding at December 31, 2003:
UNREALIZED EXPIRATION NOTIONAL APPRECIATION/ DESCRIPTION DATE VALUE (DEPRECIATION) - ----------- ---------- ----------- -------------- BRITISH POUNDS Receive fixed rate payments of 4.25% and pay variable rate payments on the six month LIBOR floating rate(c) 03/17/05 23,500,000 $(104,625) EURODOLLARS Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(b) 03/15/07 15,600,000 90,042 U.S. DOLLARS Receive variable rate payments on the three month LIBOR floating rate and pay fixed rate payments of 5.00%(a) 06/16/14 $(1,100,000) (9,141) --------- $ (23,724) =========
See Notes to Financial Statements. 52 MEDIUM-DURATION BOND FUND The broad bond market was characterized by several central themes during the fourth quarter. First, the Treasury sector experienced a difficult period and was the worst performing sector for the quarter. Treasury yields elevated across most maturities as the Treasury yield-curve "priced-in" the prospects for economic growth. Inflation has remained relatively at bay due to the productivity gains; however, with the prospect for economic growth comes the fear of the potential for inflation. The yield on the 10-year Treasury Note increased 0.31% during the quarter. Given the inverse relationship between bond yields and bond prices, Treasury prices were negatively impacted by the rising interest rate environment. Secondly, credit sectors, such as corporate bonds, performed well relative to Treasuries during the quarter as credit spreads continued to tighten (i.e. yields declined and bond prices increased). Spreads tightened as a result of the improving economic backdrop and the prospects for better corporate earnings and improving credit quality. Another theme was that the lower the quality, the better the return as investors were compensated for risk. The lower-tier investment grade corporate bonds and non-benchmark sectors, such as high yield (i.e. below investment grade) and emerging market debt, were the best performing areas of the bond market. Following its first negative performance quarter since the fourth quarter of 1999, the broad bond market, as measured by the Lehman Brothers Aggregate Bond Index, squeaked-out a positive quarterly return of 0.32% with the majority of positive performance taking place in December. For the year, the broad bond market provided a relief from cash returns; however, it performed below historical annual averages and well behind the domestic and international equity markets. The fund, a high quality, core fixed income portfolio, generated positive absolute returns and outpaced its benchmark index, the Lehman Brothers Aggregate Bond Index, during the fourth quarter with the excess return being generated during October and November.* In addition, the fund outpaced its benchmark for the calendar year 2003. For the quarter, the fund's performance benefited from its exposure to and security selection within the corporate bond sector, especially the lower-tier, investment grade securities. The fund's sub-advisers maintained exposure to this sector to take advantage of the higher yield premiums, strong investor demand and the improving fundamentals. Further benefiting the fund was modest tactical exposure to the non-benchmark sectors of high yield and emerging market debt. Both of these sectors weathered the rising interest rate environment and generally experienced spread tightening and rising bond prices. All three of the sub-advisers that manage the fund -- Goldman Sachs, PIMCO and Western Asset Management -- generated excess returns relative to the benchmark index during the quarter. At quarter-end, 79% of the fund was rated AAA while the average credit quality of the fund remained at AA. As of December 31, the fund's primary sector exposure was to Treasuries/agencies, corporates and mortgages. - --------------- * Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. Performance for all funds reflects fee waivers in effect. In the absence of fee waivers, performance would have been lower. Unlike in a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 53 MEDIUM-DURATION BOND FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
LEHMAN BROTHERS RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* AGGREGATE BOND INDEX** ----------------- -------------------- ------------- ---------------------- One Year 6.62% 6.80% 6.33% 4.10% Since Inception (8/27/01 -- 12/31/03) 7.35% 7.19% 7.03% 6.84%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
LEHMAN BROTHERS AGGREGATE BOND RETIREMENT CLASS INDEX** ---------------- ------------------------------ 08/27/01 10000 10000 08/31/01 10051 10056 09/30/01 10123 10173 10/31/01 10364 10386 11/30/01 10223 10243 12/31/01 10149 10177 01/31/02 10253 10260 02/28/02 10387 10359 03/31/02 10223 10187 04/30/02 10422 10384 05/31/02 10479 10473 06/30/02 10453 10563 07/31/02 10466 10691 08/31/02 10685 10871 09/30/02 10774 11047 10/31/02 10752 10997 11/30/02 10833 10994 12/31/02 11079 11221 01/31/03 11165 11231 02/28/03 11315 11386 03/31/03 11312 11377 04/30/03 11461 11471 05/31/03 11671 11685 06/30/03 11674 11662 07/30/03 11295 11270 08/31/03 11403 11345 09/30/03 11721 11645 10/31/03 11638 11536 11/30/03 11704 11564 12/31/03 11811 11682
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Lehman Brothers Aggregate Bond Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Lehman Brothers U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Semi-Annual Report 54 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 PAR VALUE - ----------------- ----------- -------------- AGENCY OBLIGATIONS -- 7.9% Federal Home Loan Bank 1.03%, 01/23/04 $15,000,000 $ 14,990,604 4.50%, 09/16/13 400,000 394,845 Federal Home Loan Mortgage Corporation 1.08%, 02/18/04 8,000,000 7,989,690 4.88%, 03/15/07 1,000,000 1,065,304 6.63%, 09/15/09 8,000,000 9,159,592 7.00%, 03/15/10 1,600,000 1,869,456 Federal National Mortgage Association 1.01%, 02/03/04 12,000,000 11,988,889 1.00%, 02/04/04 2,000,000 1,998,111 1.07%, 02/11/04 4,700,000 4,694,775 1.09%, 03/24/04 525,000 523,840 1.10%, 03/24/04++++ 75,000 74,835 1.06%, 03/25/04 3,900,000 3,891,279 6.63%, 09/15/09 1,500,000 1,715,219 Financing Corporation Principle STRIPS 5.52%, 11/30/17 (omg) 1,130,000 530,770 5.67%, 04/05/19 (omg) 620,000 264,779 Resolution Funding Corporation STRIPS 5.34%, 01/15/17 (omg) 5,176,000 2,608,435 -------------- TOTAL AGENCY OBLIGATIONS (Cost $62,249,628) 63,760,423 -------------- ASSET-BACKED SECURITIES -- 6.3% Amortizing Residential Collateral Trust 1.42%, 01/26/04 510,604 510,045 AQ Finance NIM Trust 1.37%, 01/25/04 144A++ 400,000 400,000 1.79%, 12/25/07 144A++@ 1,106,355 1,107,046 9.50%, 06/25/32 144A@ 11,376 11,376 8.74%, 03/25/35 144A@ 158,843 159,479 Bayview Financial Acquisition Trust 1.52%, 01/26/04 144A++ 2,132,531 2,134,919 Capital One Multi-Asset Execution Trust 4.32%, 04/15/09 310,000 316,155 Centex Home Equity 1.44%, 09/26/33++ 2,414,680 2,413,421 Chase Funding Net Interest Margin 5.25%, 12/17/33 144A@ 230,000 229,701 6.88%, 06/27/36 144A@ 195,441 195,536 Chesapeake Funding LLC 1.42%, 08/07/08++ 3,100,000 3,106,676 Chevy Chase Funding LLC 1.47%, 01/25/04 144A++ 2,977,251 2,977,251
PAR VALUE ----------- -------------- Citibank Credit Card Issuance Trust 2.16%, 02/07/04++ $ 670,000 $ 677,856 CitiFinancial Mortgage Securities, Inc. 1.41%, 01/25/04 STEP 2,776,864 2,772,015 Citigroup Mortgage Loan Trust, Inc. 1.72%, 09/25/35 STEP@ 2,000,000 2,000,000 1.52%, 12/18/49++ 1,900,000 1,900,000 Conseco Finance Securitizations Corporation 6.77%, 09/01/32 2,200,000 2,246,146 8.00%, 02/01/33 IO (omg)@ 14,418,000 860,574 5.16%, 05/01/33 315,541 319,155 Countrywide Home Equity Loan Trust 1.42%, 01/15/04++ 446,164 445,587 Daimler Chrysler Master Owner Trust 1.22%, 01/15/04++ 910,000 910,016 Embarcadero Aircraft Securitization Trust 1.64%, 08/15/25 144A++@ 575,000 264,006 EQCC Trust 1.44%, 01/25/04++ 833,035 833,694 Fleet Home Equity Loan Trust 1.36%, 05/30/31++ 1,435,674 1,431,886 Green Tree Home Improvement Loan Trust 1.33%, 01/15/04 STEP 96,190 96,194 HFC Home Equity Loan Asset-Backed Certificates 1.50%, 01/20/04++ 4,000,000 3,999,999 1.70%, 01/20/04++ 2,107,884 2,115,768 1.50%, 10/20/32++ 1,587,633 1,587,655 Household Mortgage Loan Trust 1.48%, 01/20/04++ 1,800,062 1,800,098 Long Beach Asset Holdings Corporation 7.26%, 06/15/35 144A@ 169,346 169,875 Madison Avenue Manufactured Housing Contract 1.49%, 01/25/04++ 2,415,473 2,409,819 Merrill Lynch Mortgage Investors, Inc. 1.46%, 08/25/09++ 309,800 309,487 Metropolitan Asset Funding, Inc. 1.60%, 01/25/04 STEP 144A 276,576 276,525 NC Finance Trust 9.00%, 03/01/30 144A@ 65,728 65,687
See Notes to Financial Statements. 55 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- New Century Home Equity Loan Trust 7.22%, 11/25/27 $ 378,141 $ 386,390 Nextcard Credit Card Master Note Trust 1.36%, 01/15/04 144A++ 17,910 17,838 3.59%, 12/15/06 144A++ 910,000 134,553 Novastar NIM Trust 7.39%, 07/01/07 144A@ 176,387 176,477 Option One Mortgage Securities Corporation NIM Trust 1.44%, 04/26/09 144A++ 114,902 114,908 8.83%, 06/26/32 144A@ 13,531 13,531 Provident Bank Home Equity Loan Trust 1.41%, 08/25/31++ 803,455 801,909 Residential Asset Securities Corporation 1.38%, 04/25/28++ 146,209 146,243 Residential Funding Mortgage Securities II 8.09%, 03/25/20 584,528 593,556 7.18%, 12/25/22 278,121 277,726 Sail Net Interest Margin Notes 6.75%, 11/27/33 144A@ 193,740 193,902 Salomon Brothers Mortgage Securities VII 1.42%, 01/25/04++ 584,751 585,173 1.38%, 01/26/04 STEP 193,149 193,198 Saxon Asset Securities Trust 1.44%, 06/25/33++ 292,719 292,861 Spiegel Credit Card Master Note Trust 1.44%, 03/15/10++ 3,891,490 3,888,242 Structured Asset Securities Corporation 1.57%, 02/25/33++ 1,830,509 1,833,926 SVO Timeshare Mortgage Corporation 5.47%, 10/20/13 144A 636,688 660,365 -------------- TOTAL ASSET-BACKED SECURITIES (Cost $52,856,216) 51,364,445 -------------- COMMERCIAL PAPER -- 5.8% Danske Corporation 1.08%, 01/21/04 8,000,000 7,995,369 HBOS Treasury Services PLC 1.12%, 02/18/04 4,900,000 4,893,369 1.11%, 03/12/04 900,000 898,192 National Australia Funding (Delaware), Inc. 1.08%, 02/10/04 5,400,000 5,393,520 Rabobank USA Finance Corporation 1.08%, 02/24/04 8,000,000 7,987,476
PAR VALUE ----------- -------------- Royal Bank of Scotland PLC 1.08%, 01/27/04 $ 8,000,000 $ 7,993,913 UBS Finance (Delaware) LLC 1.06%, 01/20/04 1,100,000 1,099,377 1.06%, 01/21/04 4,200,000 4,197,568 1.08%, 02/25/04 1,100,000 1,098,280 Westpac Capital Corporation 1.09%, 01/28/04 300,000 299,763 Westpac Trust Securities, Ltd. 1.10%, 02/12/04 5,300,000 5,293,541 -------------- TOTAL COMMERCIAL PAPER (Cost $47,148,381) 47,150,368 -------------- CORPORATE BONDS -- 14.6% Ace Capital Trust II 9.70%, 04/01/30 60,000 78,507 Ace INA Holdings, Inc. 8.20%, 08/15/04 550,000 571,514 8.30%, 08/15/06 550,000 622,590 Adelphia Communications 9.25%, 10/01/04# 250,000 232,500 9.38%, 11/15/09# 250,000 237,500 AES Corporation (The) 10.00%, 07/15/05 144A 112,824 115,363 9.50%, 06/01/09 42,000 46,778 9.38%, 09/15/10 10,000 11,138 AGCO Corporation 9.50%, 05/01/08 67,000 73,700 Allied Waste North America 8.88%, 04/01/08 265,000 298,125 Amerada Hess Corporation 7.13%, 03/15/33 550,000 560,150 American Axle & Manufacturing, Inc. 9.75%, 03/01/09 103,000 109,438 American Standard, Inc. 7.38%, 02/01/08 170,000 188,700 American Tower Corporation 9.38%, 02/01/09 250,000 267,500 AmerisourceBergen Corporation 8.13%, 09/01/08 170,000 192,525 AMFM, Inc. 8.00%, 11/01/08 1,275,000 1,482,188 Anthem Insurance Cos., Inc. 9.13%, 04/01/10 144A@ 100,000 125,869 ANZ Capital Trust I 4.48%, 01/29/49 144A@ 350,000 352,003 5.36%, 12/29/49 144A@ 800,000 800,398 Apache Corporation 6.25%, 04/15/12 340,000 378,591 Astoria Financial Corporation 5.75%, 10/15/12 144A 450,000 458,320
See Notes to Financial Statements. 56
PAR VALUE ----------- -------------- AT&T Wireless Services, Inc. 7.88%, 03/01/11 $ 100,000 $ 115,909 8.13%, 05/01/12 135,000 159,050 8.75%, 03/01/31 150,000 185,729 Avis Group Holdings, Inc. 11.00%, 05/01/09 161,000 174,300 Bank One Corporation 4.13%, 09/01/07 1,100,000 1,136,957 Bank United Corporation 8.88%, 05/01/07 250,000 295,541 BellSouth Capital Funding 7.88%, 02/15/30 460,000 560,228 BellSouth Corporation 6.88%, 10/15/31 10,000 10,984 Boeing Co. (The) 6.63%, 02/15/38 210,000 220,883 Calpine Corporation 7.75%, 04/15/09 96,000 74,400 8.50%, 02/15/11 519,000 413,254 Capital One Bank 6.50%, 06/13/13 400,000 420,106 Cendant Corporation 6.25%, 01/15/08 150,000 163,800 CenterPoint Energy Resources Corporation 7.88%, 04/01/13 144A 125,000 141,750 5.95%, 01/15/14 144A@ 475,000 472,186 CenterPoint Energy, Inc. 5.88%, 06/01/08 144A 300,000 312,828 7.25%, 09/01/10 144A 100,000 108,402 Chesapeake Energy Corporation 8.13%, 04/01/11 31,000 34,565 Citigroup, Inc. 5.00%, 03/06/07 2,200,000 2,337,312 Cleveland Electric Illuminating Co. (The) 7.88%, 11/01/17 2,050,000 2,401,418 CNA Financial Corporation 6.50%, 04/15/05 125,000 129,901 6.75%, 11/15/06 130,000 138,680 6.95%, 01/15/18 40,000 40,186 7.25%, 11/15/23 50,000 50,177 Comcast Cable Communications 8.38%, 05/01/07 650,000 754,263 6.75%, 01/30/11 740,000 824,974 Comcast Cable Communications Holdings, Inc. 8.38%, 03/15/13 450,000 551,704 ConocoPhillips 8.75%, 05/25/10 230,000 287,682 7.00%, 03/30/29 255,000 289,536 ConocoPhillips Holding Co. 6.95%, 04/15/29 1,060,000 1,205,885
PAR VALUE ----------- -------------- Continental Airlines, Inc. 6.70%, 06/15/21 $ 417,949 $ 409,239 Cox Communications, Inc. 7.13%, 10/01/12 75,000 86,650 4.63%, 06/01/13 170,000 164,205 5.50%, 10/01/15 55,000 55,444 Credit Suisse First Boston USA, Inc. 4.63%, 01/15/08 600,000 625,174 6.13%, 11/15/11 500,000 545,221 CSC Holdings, Inc. 7.63%, 04/01/11 530,000 560,475 7.63%, 07/15/18 30,000 31,650 DaimlerChrysler NA Holding Corporation 7.30%, 01/15/12 550,000 613,339 6.50%, 11/15/13 210,000 221,620 Delta Air Lines, Inc. 6.42%, 07/02/12 400,000 428,991 6.72%, 01/02/23 792,305 847,843 Devon Energy Corporation 7.95%, 04/15/32 725,000 876,924 Devon Financing Corporation ULC 6.88%, 09/30/11 10,000 11,357 Dex Media West LLC/Dex Media Finance Co. 8.50%, 08/15/10 144A 100,000 111,875 Dominion Resources, Inc. 4.13%, 02/15/08 70,000 71,403 5.13%, 12/15/09 230,000 240,439 5.70%, 09/17/12 310,000 327,299 Dryden Investor Trust 7.16%, 07/23/08 144A@ 1,775,052 1,917,346 Dynegy Holdings, Inc. 8.75%, 02/15/12 1,030,000 1,044,163 Eastman Kodak Co. 7.25%, 11/15/13 120,000 126,131 Echostar DBS Corporation 4.41%, 01/01/04 144A++ 103,000 107,764 5.75%, 10/01/08 144A@ 500,000 508,125 9.13%, 01/15/09 69,000 77,539 El Paso CGP Co. 7.75%, 06/15/10 1,000,000 948,750 El Paso Corporation 8.10%, 02/28/21 CONV(omg) 990,000 460,350 8.05%, 10/15/30 600,000 525,000 7.80%, 08/01/31 1,150,000 984,687 7.75%, 01/15/32 1,030,000 883,225 El Paso Natural Gas Co. 8.38%, 06/15/32 210,000 215,670 EOP Operating LP 7.75%, 11/15/07 100,000 114,734 Firstar Bank NA 7.13%, 12/01/09 170,000 196,153
See Notes to Financial Statements. 57 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- FirstEnergy Corporation 6.45%, 11/15/11 $ 230,000 $ 238,823 7.38%, 11/15/31 1,050,000 1,077,978 Ford Motor Co. 6.63%, 10/01/28 550,000 507,400 6.38%, 02/01/29 675,000 603,951 Ford Motor Credit Co. 1.98%, 03/08/04++ 700,000 700,493 6.70%, 07/16/04 1,000,000 1,025,827 7.38%, 10/28/09 100,000 109,947 7.88%, 06/15/10 590,000 660,088 7.38%, 02/01/11 320,000 349,265 7.25%, 10/25/11 1,000,000 1,086,192 7.00%, 10/01/13 1,950,000 2,060,266 Forest Oil Corporation 7.75%, 05/01/14 115,000 122,188 Fort James Corporation 4.75%, 06/29/04(E) 500,000 635,406 Fresenius Medical Care Capital Trust II 7.88%, 02/01/08 230,000 246,675 GATX Financial Corporation 6.00%, 11/19/08 400,000 397,494 General Electric Capital Corporation 6.00%, 06/15/12 600,000 651,757 5.45%, 01/15/13 1,110,000 1,156,818 General Electric Co. 5.00%, 02/01/13 90,000 91,186 General Motors Acceptance Corporation 2.41%, 10/20/05++ 1,700,000 1,713,664 7.25%, 03/02/11 310,000 340,582 6.88%, 09/15/11 100,000 107,875 General Motors Corporation 8.38%, 07/15/33 1,050,000 1,222,518 Georgia-Pacific Corporation 8.13%, 05/15/11 8,000 8,840 9.50%, 12/01/11 46,000 53,590 8.88%, 05/15/31 14,000 15,470 Greenpoint Financial Corporation 3.20%, 06/06/08 144A 350,000 338,656 HCA, Inc. 6.75%, 07/15/13 1,100,000 1,168,607 Host Marriott LP 9.50%, 01/15/07 500,000 558,750 9.25%, 10/01/07 32,000 35,920 Household Finance Corporation 8.00%, 07/15/10 780,000 935,335 7.00%, 05/15/12 690,000 788,124 6.38%, 11/27/12 110,000 120,883 IMC Global, Inc. 10.88%, 06/01/08 119,000 131,495 10.88%, 08/01/13 144A 50,000 55,000
PAR VALUE ----------- -------------- Indiana Michigan Power Co. 6.88%, 07/01/04 $ 2,000,000 $ 2,054,884 Insight Midwest LP/Insight Capital, Inc. 10.50%, 11/01/10 179,000 195,558 International Paper Co. 5.50%, 01/15/14 135,000 135,760 J.P. Morgan Chase & Co. 6.63%, 03/15/12 670,000 749,664 JPM Capital Trust II 7.95%, 02/01/27 700,000 792,837 Kansas City Southern Railway 9.50%, 10/01/08 99,000 110,385 Kellogg Co. 6.60%, 04/01/11 500,000 561,163 Lear Corporation 7.96%, 05/15/05 86,000 92,450 Lehman Brothers Holdings, Inc. 6.63%, 04/01/04 550,000 557,218 8.25%, 06/15/07 100,000 116,651 4.00%, 01/22/08 70,000 71,462 Liberty Media Corporation 2.67%, 03/17/04++ 1,390,000 1,406,205 3.75%, 02/15/30 CONV 40,000 26,350 Lockheed Martin Corporation 8.50%, 12/01/29 190,000 249,730 Lyondell Chemical Co. 9.88%, 05/01/07 500,000 530,000 MacDermid, Inc. 9.13%, 07/15/11 111,000 124,875 Manor Care, Inc. 8.00%, 03/01/08 130,000 147,550 MeadWestvaco Corporation 6.85%, 04/01/12 375,000 413,148 Mediacom LLC/Mediacom Capital Corporation 9.50%, 01/15/13 500,000 532,500 Merrill Lynch & Co., Inc. 3.38%, 09/14/07 420,000 425,793 Millennium America, Inc. 7.00%, 11/15/06 50,000 51,500 9.25%, 06/15/08 30,000 32,850 Moore North America Finance, Inc. 7.88%, 01/15/11 144A 30,000 34,125 Nabisco, Inc. 7.55%, 06/15/15 1,530,000 1,834,865 News America Holdings 8.88%, 04/26/23 1,230,000 1,580,883 Nextel Communications, Inc. 9.38%, 11/15/09 250,000 273,750 9.50%, 02/01/11 160,000 181,600
See Notes to Financial Statements. 58
PAR VALUE ----------- -------------- Niagara Mohawk Power Corporation 8.00%, 06/01/04 $ 500,000 $ 513,016 7.75%, 10/01/08 1,340,000 1,556,929 Nortek Holdings, Inc. 9.25%, 03/15/07 605,000 624,663 8.88%, 08/01/08 70,000 73,588 Northwest Airlines Corporation 7.58%, 03/01/19 662,002 682,369 Omnicare, Inc. 8.13%, 03/15/11 239,000 262,303 Oncor Electric Delivery Co. 6.38%, 01/15/15 140,000 152,503 Patrons' Legacy 5.65%, 01/17/17 640,000 635,590 Peabody Energy Corporation 6.88%, 03/15/13 165,000 174,900 Pemex Project Funding Master Trust 9.13%, 10/13/10 1,075,000 1,281,937 Penney (JC) Co., Inc. 8.00%, 03/01/10 176,000 202,620 PHH Corporation 7.13%, 03/01/13 350,000 392,768 Pioneer Natural Resources Co. 7.50%, 04/15/12 133,000 153,103 Popular North America, Inc. 6.13%, 10/15/06 200,000 217,536 4.25%, 04/01/08 300,000 305,720 3.88%, 10/01/08 250,000 249,800 Premium Asset Trust 1.50%, 02/27/04 144A++@ 2,000,000 2,005,057 Prudential Funding LLC 6.60%, 05/15/08 144A@ 600,000 668,550 PVNGS II Funding Corporation, Inc. 8.00%, 12/30/15 1,800,000 1,977,131 Qwest Capital Funding, Inc. 7.25%, 02/15/11 200,000 198,000 Qwest Corporation 5.63%, 11/15/08 500,000 497,500 8.88%, 03/15/12 144A 1,200,000 1,383,000 7.50%, 06/15/23 500,000 502,500 Rabobank Capital Funding II 5.26%, 12/29/49 144A@ 1,100,000 1,104,067 Raytheon Co. 6.00%, 12/15/10 20,000 21,405 5.50%, 11/15/12 10,000 10,162 5.38%, 04/01/13 115,000 115,405 Ryland Group, Inc. 9.75%, 09/01/10 136,000 155,040 Safeco Corporation 4.88%, 02/01/10 125,000 129,039 Sara Lee Corporation 6.25%, 09/15/11 400,000 444,850 Schuler Homes, Inc. 9.38%, 07/15/09 38,000 42,940
PAR VALUE ----------- -------------- Simon Property Group LP 7.38%, 01/20/06 $ 900,000 $ 988,840 Sonat, Inc. 7.63%, 07/15/11 460,000 428,375 Southern California Edison Co. 6.38%, 01/15/06 500,000 532,500 7.63%, 01/15/10 300,000 346,500 Southern Natural Gas Co. 8.00%, 03/01/32 400,000 415,000 Sovereign Bancorp, Inc. 10.50%, 11/15/06 125,000 147,937 Sovereign Bank 5.13%, 03/15/13 300,000 298,501 4.38%, 08/01/13++ 250,000 252,127 Sprint Capital Corporation 6.00%, 01/15/07 140,000 149,651 6.13%, 11/15/08 310,000 330,838 7.63%, 01/30/11 350,000 392,980 8.38%, 03/15/12 100,000 117,016 6.88%, 11/15/28 550,000 538,594 System Energy Rescouces, Inc. 7.43%, 01/15/11 1,164,449 1,201,293 Systems 2001 Asset Trust LLC 6.66%, 09/15/13 144A 1,064,561 1,177,218 Target Corporation 5.88%, 03/01/12 560,000 608,775 TCI Communications Financing III 9.65%, 03/31/27 2,610,000 3,158,099 TECO Energy, Inc. 10.50%, 12/01/07 144A 200,000 234,500 Tenet Healthcare Corporation 7.38%, 02/01/13 120,000 121,200 Tennessee Valley Authority 6.75%, 11/01/25 1,420,000 1,643,394 7.13%, 05/01/30 3,360,000 4,043,846 Time Warner Entertainment Co. LP 8.38%, 03/15/23 300,000 372,905 8.38%, 07/15/33 520,000 662,807 Time Warner, Inc. 6.88%, 05/01/12 110,000 124,023 7.70%, 05/01/32 1,310,000 1,534,693 Triton PCS, Inc. 8.75%, 11/15/11 500,000 495,000 TXU Energy Co. 7.00%, 03/15/13 150,000 166,242 Unilever Capital Corporation 7.13%, 11/01/10 760,000 885,040 Union Pacific Corporation 6.65%, 01/15/11 260,000 290,368 Unisys Corporation 6.88%, 03/15/10 128,000 139,200
See Notes to Financial Statements. 59 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- United Air Lines, Inc. 9.21%, 01/21/17#@ $ 200,000 $ 81,741 9.56%, 10/19/18#@ 300,000 126,380 United Telephone Co. of Kansas 6.89%, 07/01/08@ 500,000 531,925 Ventas Realty LP/Ventas Capital Corporation 8.75%, 05/01/09 50,000 55,125 9.00%, 05/01/12 20,000 22,300 Verizon Global Funding Corporation 6.88%, 06/15/12 160,000 179,826 4.38%, 06/01/13 390,000 369,266 Verizon New York, Inc. 6.88%, 04/01/12 450,000 498,880 Verizon Wireless Capital LLC 1.24%, 05/23/05 144A++@ 1,200,000 1,199,053 Vintage Petroleum, Inc. 8.25%, 05/01/12 250,000 273,125 Washington Mutual, Inc. 4.00%, 01/15/09 150,000 150,430 8.25%, 04/01/10 300,000 361,180 Waste Management, Inc. 7.75%, 05/15/32 980,000 1,158,510 Wells Fargo & Co. 5.00%, 11/15/14 900,000 897,988 Wells Fargo Bank NA 6.45%, 02/01/11 1,260,000 1,416,813 Westlake Chemical Corporation 8.75%, 07/15/11 144A 20,000 22,000 Westport Resources Corporation 8.25%, 11/01/11 144A 40,000 44,200 8.25%, 11/01/11 20,000 22,100 Weyerhaeuser Co. 6.00%, 08/01/06 200,000 214,287 6.75%, 03/15/12 410,000 447,996 6.88%, 12/15/33 215,000 221,663 Williams Cos., Inc. 7.50%, 01/15/31 1,020,000 1,037,850 7.75%, 06/15/31 200,000 207,750 8.75%, 03/15/32 1,130,000 1,282,549 Xerox Corporation 7.13%, 06/15/10 250,000 268,750 XTO Energy, Inc. 7.50%, 04/15/12 83,000 94,205 6.25%, 04/15/13 215,000 227,363 Zurich Capital Trust I 8.38%, 06/01/37 144A 475,000 547,109 -------------- TOTAL CORPORATE BONDS (Cost $109,943,343) 118,647,408 --------------
PAR VALUE ----------- -------------- FOREIGN BONDS -- 9.1% AUSTRALIA -- 0.1% QBE Insurance Group, Ltd. 5.65%, 07/01/23 144A++@ $ 400,000 $ 382,021 TXU Australia Holdings Partnership LP 6.15%, 11/15/13 144A@ 225,000 229,749 -------------- 611,770 -------------- BAHAMAS -- 0.0% Teekay Shipping Corporation 8.88%, 07/15/11 206,000 234,840 -------------- BERMUDA -- 0.8% Tyco International Group SA 6.38%, 02/15/06 100,000 107,000 5.80%, 08/01/06 800,000 850,000 6.13%, 11/01/08 90,000 96,750 6.75%, 02/15/11 800,000 878,000 6.38%, 10/15/11 890,000 955,638 6.00%, 11/15/13 144A@ 3,270,000 3,384,450 -------------- 6,271,838 -------------- BRAZIL -- 0.8% Federal Republic of Brazil 8.00%, 04/15/04 997,442 984,248 2.00%, 04/15/06++ 880,000 871,360 2.06%, 04/15/09++ 200,589 190,747 14.50%, 10/15/09 150,000 196,125 12.00%, 04/15/10 520,000 626,600 2.06%, 04/15/12++ 450,000 406,906 2.19%, 04/15/12++ 440,000 399,300 8.00%, 04/15/14 1,662,404 1,640,414 10.13%, 05/15/27 800,000 852,000 11.00%, 08/17/40 445,000 491,725 -------------- 6,659,425 -------------- BULGARIA -- 0.1% Republic of Bulgaria 1.94%, 07/28/11++ 636,500 626,749 8.25%, 01/15/15 144A 260,000 304,850 -------------- 931,599 -------------- CANADA -- 0.7% Abitibi-Consolidated, Inc. 8.55%, 08/01/10 32,000 35,690 Alcan, Inc. 5.20%, 01/15/14 1,400,000 1,417,841 Alliance Atlantis Communications, Inc. 13.00%, 12/15/09 74,000 84,730 Anderson Exploration, Ltd. 6.75%, 03/15/11 50,000 55,529 Bombardier Capital Funding LP 6.13%, 05/14/07(E) 250,000 327,409 Cascades, Inc. 7.25%, 02/15/13 144A 199,000 210,443
See Notes to Financial Statements. 60
PAR VALUE ----------- -------------- Conoco Funding Co. 7.25%, 10/15/31 $ 315,000 $ 372,944 General Motors Nova Scotia Finance Co. 6.85%, 10/15/08 1,670,000 1,789,021 Hydro Quebec 6.30%, 05/11/11 860,000 971,650 Western Oil Sands, Inc. 8.38%, 05/01/12 85,000 97,219 -------------- 5,362,476 -------------- CAYMAN ISLANDS -- 0.2% ACE, Ltd. 6.00%, 04/01/07 350,000 379,377 G-Wing, Ltd. 3.82%, 11/06/11 144A++@ 658,622 652,273 PDVSA Finance, Ltd. 8.50%, 11/16/12 440,000 429,000 PRIME Capital Hurricane, Ltd. 7.61%, 01/07/04++ 290,000 290,091 -------------- 1,750,741 -------------- CHILE -- 0.0% Codelco, Inc. 5.50%, 10/15/13 144A 200,000 203,416 -------------- COLOMBIA -- 0.1% Republic of Colombia 10.50%, 07/09/10 60,000 67,560 11.75%, 02/25/20 605,000 732,050 -------------- 799,610 -------------- DOMINICAN REPUBLIC -- 0.1% Dominican Republic 9.50%, 09/27/06 640,000 532,394 9.04%, 01/23/13 144A 180,000 137,700 -------------- 670,094 -------------- FRANCE -- 0.1% Compagnie Generale de Geophysique SA 10.63%, 11/15/07 79,000 84,135 France Telecom 9.00%, 03/01/11 450,000 541,371 Legrand SA 8.50%, 02/15/25 250,000 265,312 Vivendi Universal SA 6.25%, 07/15/08 144A 230,000 244,663 -------------- 1,135,481 -------------- GERMANY -- 3.0% Deutsche Bundesrepublik 3.75%, 01/04/09(E) 8,710,000 11,081,530 4.50%, 01/04/13(E) 5,300,000 6,824,753 5.50%, 01/04/31(E) 4,890,000 6,691,219 -------------- 24,597,502 --------------
PAR VALUE ----------- -------------- HONG KONG -- 0.1% Hutchison Whampoa International, Ltd. 7.45%, 11/24/33 144A@ $ 600,000 $ 627,212 -------------- IRELAND -- 0.0% Eircom Funding 8.25%, 08/15/13 130,000 144,625 -------------- ITALY -- 0.1% Telecom Italia Capital SA 5.25%, 11/15/13 144A 325,000 326,393 -------------- MALAYSIA -- 0.1% Petronas Capital, Ltd. 7.88%, 05/22/22 144A 430,000 511,120 -------------- MEXICO -- 1.2% Telefonos de Mexico SA de CV 8.25%, 01/26/06 250,000 276,895 4.50%, 11/19/08 144A@ 750,000 754,890 United Mexican States 8.38%, 01/14/11 500,000 595,000 7.50%, 01/14/12 750,000 847,875 6.38%, 01/16/13 350,000 364,000 5.88%, 01/15/14 1,820,000 1,801,800 8.13%, 12/30/19 170,000 190,400 11.50%, 05/15/26 3,345,000 4,850,250 -------------- 9,681,110 -------------- NETHERLANDS -- 0.2% Deutsche Telekom International Finance BV 5.25%, 07/22/13 595,000 602,425 8.75%, 06/15/30 700,000 897,394 Royal KPN NV 8.38%, 10/01/30 400,000 508,949 -------------- 2,008,768 -------------- PANAMA -- 0.3% Republic of Panama 1.94%, 01/17/04++ 572,715 500,820 8.25%, 04/22/08 520,000 574,600 9.63%, 08/08/11 110,000 127,600 10.75%, 05/15/20 517,000 622,985 9.38%, 01/16/23 420,000 459,900 -------------- 2,285,905 -------------- PERU -- 0.1% Republic of Peru 5.00%, 03/07/04 144A++ 564,000 524,520 4.50%, 03/08/04++ 170,000 152,723 9.13%, 02/21/12 10,000 11,200 9.88%, 02/06/15 240,000 279,600 5.00%, 03/07/17++ 122,200 114,064 8.75%, 11/21/33 40,000 40,200 -------------- 1,122,307 --------------
See Notes to Financial Statements. 61 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- PHILIPPINES -- 0.0% Republic of Philippines 9.88%, 01/15/19 $ 85,000 $ 90,313 10.63%, 03/16/25 50,000 55,875 -------------- 146,188 -------------- RUSSIA -- 0.4% Ministry Finance of Russia 3.00%, 05/14/08 550,000 493,215 Russian Federation 8.25%, 03/31/10 STEP 70,000 78,418 5.00%, 03/31/30 STEP 2,490,000 2,393,513 -------------- 2,965,146 -------------- SOUTH AFRICA -- 0.1% Republic of South Africa 13.00%, 08/31/10(R) 5,130,000 939,222 -------------- SOUTH KOREA -- 0.0% Korea Asset Funding, Ltd. 3.20%, 02/10/04 144A++ 166,375 166,165 -------------- UNITED KINGDOM -- 0.5% BP Capital Markets PLC 2.75%, 12/29/06 740,000 741,684 British Telecommunications PLC 8.88%, 12/15/30 550,000 721,779 HSBC Capital Funding LP 4.61%, 12/29/49 144A++@ 1,090,000 1,025,637 Standard Chartered Bank 8.00%, 05/30/31 144A@ 300,000 363,639 Telewest Communications PLC 9.88%, 02/01/10# 145,000 90,625 Tribeca Mortgage Fund I 1.92%, 02/18/04++ 775,000 774,991 XL Capital Europe PLC 6.50%, 01/15/12 140,000 153,478 -------------- 3,871,833 --------------
PAR VALUE ----------- -------------- VENEZUELA -- 0.0% Petrozuata Finance, Inc. 8.22%, 04/01/17 144A $ 140,000 $ 128,800 -------------- TOTAL FOREIGN BONDS (Cost $67,785,431) 74,153,586 -------------- MORTGAGE-BACKED SECURITIES -- 30.6% ARC Net Interest Margin Trust 7.75%, 01/27/32 144A@ 57,902 58,191 7.75%, 07/27/32 144A@ 95,496 96,804 Bear Stearns Adjustable Rate Mortgage Trust 5.65%, 02/25/33++ 1,081,634 1,089,515 Commercial Mortgage Pass- Through Certificates 1.40%, 01/15/04 144A++ 330,008 329,993 Commerical Mortgage Asset Trust 7.55%, 01/11/04++ 440,000 513,614 Credit-Based Asset Servicing and Securitization 1.43%, 08/25/33++ 942,781 943,050 CS First Boston Mortgage Securities Corporation 6.00%, 01/25/33 841,007 854,466 80.19%, 04/25/33 IO(omg)@ 701,393 31,557 37.39%, 05/25/33 IO(omg)@ 450,601 4,444 5.50%, 06/25/33 IO@ 481,419 29,831 15.00%, 07/25/33 IO++(omg)@ 2,189,614 29,373 12.35%, 08/25/33 IO++(omg)@ 2,386,994 25,371 Federal Home Loan Mortgage Corporation 8.00%, 10/01/07 1,873 1,898 5.50%, 08/15/14 2,000,000 2,068,310 7.00%, 11/01/14 439,765 469,445 7.00%, 04/01/15 288,722 308,208 8.00%, 06/01/15 17,994 18,233 7.00%, 12/01/15 210,545 224,675 6.00%, 04/15/16 1,065,040 1,094,552 8.50%, 06/01/16 34,373 37,594 5.75%, 03/15/18 1,515,112 1,532,335 8.50%, 06/01/18 33,012 36,106 6.50%, 02/17/21 311,347 312,119 0.37%, 04/15/22 PO STRIP(omg)@ 117,970 116,855 6.00%, 11/01/22 1,002,670 1,041,569 11.44%, 03/15/24 IO++(omg)@ 91,622 98 8.00%, 08/01/24 25,812 28,121 7.50%, 11/01/29 88,791 95,383 7.50%, 12/01/29 137,678 147,899 6.00%, 07/15/30 2,000,000 2,072,526 6.50%, 08/15/30 1,743,410 1,770,383 7.50%, 02/01/31 220,269 236,544 7.50%, 11/01/31 134,592 144,538 7.00%, 01/01/34 TBA 1,000,000 1,057,812 Federal Housing Administration 7.43%, 01/01/04++ 553,289 564,355 Federal National Mortgage Association 3.17%, 01/01/04++ 100,760 101,445 4.64%, 01/01/04++ 1,849,501 1,881,442 4.67%, 01/01/04++ 742,552 755,340 1.57%, 01/18/04++ 294,784 296,190 6.50%, 04/26/06 500,000 533,641 6.50%, 09/01/08 373,178 395,243 6.50%, 12/01/08 40,340 42,456 6.50%, 05/01/09 95,663 101,568 6.50%, 08/01/09 542,951 575,055 6.50%, 03/25/11 3,245,133 3,329,859 5.50%, 09/25/13 1,818,239 1,836,738 8.00%, 06/01/15 180,788 193,954
See Notes to Financial Statements. 62
PAR VALUE ----------- -------------- 8.00%, 06/15/15 $ 113,872 $ 122,164 8.00%, 07/01/15 350,807 376,355 8.00%, 09/01/15 266,897 286,334 6.00%, 10/25/15 1,951,312 1,999,655 6.00%, 05/01/16 718,444 754,385 6.00%, 07/01/16 160,929 168,979 6.00%, 11/01/16 876,239 920,635 5.50%, 01/17/17 TBA 12,000,000 12,431,255 5.50%, 11/01/17 74,180 76,952 5.50%, 01/01/18 TBA 600,000 621,563 4.00%, 08/01/18 2,912,382 2,841,705 4.00%, 09/01/18 8,530,455 8,323,438 8.00%, 09/25/19 159,591 159,946 9.48%, 08/25/21 IO(omg)@ 903 18,240 9.48%, 10/25/21 IO(omg)@ 1,422 25,900 19.77%, 01/25/22++@ 759,783 873,720 3.75%, 03/25/22++ 1,174,835 1,190,552 9.50%, 05/01/22 20,777 23,246 3.27%, 07/01/22++ 94,446 95,083 7.00%, 09/25/22 1,689,059 1,709,065 7.00%, 12/25/22 2,101,793 2,126,962 6.00%, 01/01/23 481,196 500,009 9.50%, 07/01/24 41,678 46,626 3.17%, 11/01/27 CONV++ 217,820 219,302 6.50%, 06/01/28 8,152 8,526 6.50%, 12/25/28 562,972 579,144 8.00%, 10/01/30 363,167 392,643 3.17%, 01/01/31++ 115,752 116,560 6.23%, 05/01/31++ 224,617 230,580 6.50%, 12/01/31 656,763 686,900 6.00%, 01/01/32 219,500 379,488 6.00%, 01/01/32 TBA 5,347,469 5,373,877 6.50%, 01/01/32 TBA 15,000,000 15,684,375 6.00%, 03/01/32 1,314,888 1,359,754 8.00%, 03/01/32 50,902 54,892 6.00%, 04/01/32 2,284,651 2,362,586 6.50%, 05/01/32 97,076 101,541 3.17%, 06/01/32++ 120,487 121,330 3.27%, 08/01/32++ 113,324 114,125 5.38%, 08/01/32++ 1,461,536 1,494,418 4.50%, 01/01/33 TBA 4,500,000 4,504,221 5.00%, 01/01/33 TBA 600,000 611,813 5.50%, 01/01/33 TBA 500,000 517,969 6.00%, 01/01/33 TBA 1,000,000 1,048,438 3.27%, 05/01/33++ 225,773 227,380 4.50%, 08/01/33 3,761,412 3,601,172 3.20%, 01/01/35++ 977,626 984,615 3.17%, 11/01/35++ 111,409 112,204 4.30%, 05/01/36++ 1,256,632 1,277,608 3.17%, 08/01/37++ 932,332 939,057 3.17%, 12/01/37++ 411,028 413,993 3.17%, 01/01/38++ 202,997 204,469 3.17%, 11/01/40++ 286,203 288,296 FFCA Secured Lending Corporation 9.50%, 07/18/20 IO 144A++@ 4,027,717 278,315
PAR VALUE ----------- -------------- Financial Asset Securitization, Inc. 7.25%, 07/25/27 $ 294,429 $ 294,112 First Nationwide Trust 8.50%, 09/25/31 254,222 256,500 First Union Commercial Mortgage Securities, Inc. 7.38%, 04/18/07 6,500,000 7,236,011 First Union National Bank Commercial Mortgage Trust 7.20%, 09/15/10 1,500,000 1,739,218 GMAC Commercial Mortgage Securities, Inc. 6.87%, 08/15/07 600,000 663,596 Government National Mortgage Association 32.18%, 02/08/06++@ 729,479 981,220 7.00%, 10/15/25 128,359 137,462 7.00%, 01/15/26 111,644 119,380 7.00%, 07/15/27 749,362 800,368 6.00%, 09/20/27 2,460,741 2,493,184 7.00%, 12/15/27 9,497 10,143 7.00%, 01/15/28 94,539 100,919 7.00%, 03/15/28 1,036,465 1,107,112 18.81%, 06/20/28 IO(omg)@ 1,104,227 26,646 7.00%, 07/15/28 149,261 159,335 7.50%, 07/15/28 137,073 147,208 6.50%, 08/15/28 144,700 152,781 7.00%, 08/15/28 157,565 168,199 7.50%, 08/15/28 158,373 170,083 6.50%, 09/15/28 434,405 458,666 6.00%, 09/20/28 1,140,600 1,160,435 7.00%, 10/15/28 298,089 318,207 7.50%, 12/15/28 64,423 69,187 6.00%, 02/20/29 580,936 592,317 7.50%, 03/15/29 254,800 273,880 7.50%, 11/15/29 336,022 360,758 5.00%, 11/20/29++ 595,488 608,395 7.50%, 02/15/30 53,929 57,882 8.50%, 08/15/30 36,860 40,085 6.50%, 08/20/30 666,028 679,829 8.50%, 11/20/30 237,596 256,642 7.50%, 02/15/31 67,501 72,427 7.50%, 08/15/31 660,876 709,112 6.50%, 10/15/31 432,458 456,314 6.00%, 01/15/32 1,756,075 1,826,949 6.50%, 02/15/32 819,124 863,597 7.50%, 02/15/32 189,186 202,996 6.00%, 04/15/32 2,006,092 2,087,056 7.50%, 04/15/32 734,615 788,239 6.50%, 06/15/32 628,825 662,966 6.00%, 11/15/32 570,665 593,696
See Notes to Financial Statements. 63 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- 5.00%, 01/01/34 TBA $25,245,000 $ 25,008,327 6.00%, 01/01/34 TBA 29,230,000 30,371,781 6.50%, 01/01/34 TBA 29,650,000 31,243,687 Impac CMB Trust 1.42%, 07/25/31++ 684,546 685,117 1.42%, 08/25/32++ 1,767,719 1,769,116 1.60%, 03/25/33++ 1,032,690 1,035,079 Indymac ARM Trust 6.68%, 09/28/31++ 313,715 321,569 LB-UBS Commercial Mortgage Trust 6.36%, 06/15/36 IO 144A++(omg)@ 5,389,980 298,962 Lehman Brothers Floating Rate Commercial Mortgage Trust 1.38%, 01/17/04 144A++ 311,284 311,243 Lomas & Nettleton Financial Corporation 9.50%, 03/01/04 8,188 8,222 MASTR Asset Securitization Trust 6.00%, 12/25/32 47,371 47,327 Merrill Lynch Mortgage Investors, Inc. 5.32%, 05/25/32++ 350,802 351,547 MLCC Mortgage Investors, Inc. 1.53%, 03/25/28++ 1,249,398 1,248,449 1.62%, 03/25/28++ 446,213 447,533 1.47%, 01/01/49++ 930,308 930,856 Nomura Asset Securities Corporation 7.07%, 04/13/36 587,580 611,506 7.12%, 04/13/36 2,000,000 2,177,956 Residential Accredit Loans, Inc. 6.50%, 01/25/32 769,505 774,276 Residential Asset Mortgage Products, Inc. 1.57%, 01/25/04 144A++ 2,638,574 2,638,575 Residential Asset Securitization Trust 1.57%, 04/25/33++ 1,197,706 1,198,202 Salomon Brothers Mortgage Securities VII 1.52%, 01/25/04 STEP++ 17,854 17,865 1.00%, 10/25/23 IO++(omg)@ 548,983 732 Sequoia Mortgage Trust 1.53%, 02/20/33++ 1,330,158 1,323,650 Structured Asset Securities Corporation 7.50%, 07/25/16 509,566 520,001 Trizec Hahn Office Properties Trust 1.44%, 01/15/04 144A++ 2,866,022 2,827,439 Washington Mutual 2.74%, 01/01/04++ 2,980,234 2,997,316 3.69%, 01/01/04++ 604,304 611,785 24.73%, 05/25/08 IO(omg)@ 4,946,009 26,037 20.95%, 06/25/08 IO++(omg)@ 7,428,365 101,111 4.68%, 02/25/33++ 588,175 601,856 0.50%, 01/01/49 IO++(omg)@ 5,000,000 45,000 --------------
PAR VALUE ----------- -------------- TOTAL MORTGAGE-BACKED SECURITIES (Cost $245,691,359) $ 247,866,292 -------------- MUNICIPAL BONDS -- 2.2% California State, Series A Revenue Anticipation Warrants (Non-Callable) 2.00%, 06/16/04 $ 2,300,000 2,304,669 Florida State Board of Education, Series A General Obligation Bond (Callable 06/01/12 @ $101) 5.00%, 06/01/32 1,200,000 1,230,720 Las Vegas Valley, Nevada Water District, Series A General Obligation Bond (FGIC Insured) (Callable 12/01/12 @ $100) 5.00%, 06/01/32 1,000,000 1,023,770 Massachusetts State Special Obligation, Series A Revenue Bond (FGIC Insured) (Callable 06/01/12 @ $100) 5.00%, 06/01/21 2,945,000 3,084,740 Massachusetts State Water Resources Authority, Series J Revenue Bond (FSA Insured) (Callable 08/01/12 @ $100) 5.00%, 08/01/32 1,250,000 1,274,388 Minnesota State General Obligation Bond (Callable 10/01/11 @ $100) 5.00%, 10/01/20 200,000 211,410 Missouri Higher Education Loan Authority, Series UU Student Loan Revenue Bonds (GTD STD LNS Insured) (Non-Callable) 1.15%, 01/01/31++ 3,000,000 3,000,000 New York State Urban Development Corporation, Series A Revenue Bond (Callable 03/15/12 @ $100) 5.13%, 03/15/22 1,500,000 1,564,590
See Notes to Financial Statements. 64
PAR VALUE ----------- -------------- South Carolina Transportation Infrastructure Bank, Series A Revenue Bond (AMBAC Insured) (Callable 10/01/11 @ $100) 5.00%, 10/01/23 $ 2,700,000 $ 2,803,275 Virginia State Housing Development Authority, Commonwealth Mortgage, Series H Revenue Bond (MBIA Insured) (Callable 07/01/11 @ $100) 5.38%, 07/01/36 1,000,000 1,026,310 -------------- TOTAL MUNICIPAL BONDS (Cost $16,982,337) 17,523,872 -------------- NUMBER OF CONTRACTS ----------- OPTIONS -- 0.0% PUT OPTIONS -- 0.0% 90-Day Eurodollar Futures, Strike Price $94.75, Expires 03/15/03 104 0 Euro-Bund Futures, Strike Price $102.50, Expires 02/20/04 32 0 -------------- TOTAL OPTIONS (Cost $1,412) 0 -------------- SHARES ----------- SHORT-TERM INVESTMENTS -- 36.6% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 123,445,446 123,445,446 Northern Institutional Liquid Assets Portfolio sec. 173,739,800 173,739,800 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $297,185,246) 297,185,246 -------------- RIGHTS -- 0.0% United Mexican States Recovery Rights Series B, 06/30/04 1,100,000 11,000 United Mexican States Recovery Rights Series C, 06/30/05 1,100,000 2,200 United Mexican States Recovery Rights Series D, 06/30/06 1,100,000 2,200 United Mexican States Recovery Rights Series E, 06/30/07 1,100,000 1,375 -------------- TOTAL RIGHTS (Cost $0) 16,775 -------------- PAR VALUE ----------- -------------- U.S. TREASURY OBLIGATIONS -- 24.0% U.S. Treasury Bills 0.93%, 03/04/04++++ $ 200,000 $ 199,718 0.89%, 03/18/04++++ 905,000 903,408 1.00%, 04/08/04 21,300,000 21,249,392 1.02%, 06/03/04 12,000,000 11,953,236 0.99%, 06/10/04 8,400,000 8,365,358 0.96%, 06/17/04 10,000,000 9,956,860 -------------- 52,627,972 -------------- U.S. Treasury Bonds 7.50%, 11/15/16 4,350,000 5,539,455 7.88%, 02/15/21 7,900,000 10,513,485 8.13%, 05/15/21 8,300,000 11,312,643 6.88%, 08/15/25 200,000 244,727 5.50%, 08/15/28 250,000 260,479 5.38%, 02/15/31 7,270,000 7,583,810 -------------- 35,454,599 -------------- U.S. Treasury Inflationary Index Bonds 3.38%, 01/15/07++++ 11,350,000 14,361,422 3.63%, 01/15/08 8,250,000 10,451,384 1.88%, 07/15/13 1,150,000 1,150,444 3.88%, 04/15/29 13,158,000 19,190,096 -------------- 45,153,346 -------------- U.S. Treasury Notes 1.63%, 10/31/05 1,700,000 1,697,877 1.88%, 11/30/05 11,400,000 11,424,943 1.75%, 12/31/05 5,200,000 5,205,080 3.25%, 08/15/08 690,000 694,421 4.25%, 08/15/13 200,000 200,313 4.25%, 11/15/13 2,275,000 2,273,223 -------------- 21,495,857 -------------- U.S. Treasury STRIPS 4.34%, 05/15/12(omg) 5,000,000 3,493,100 4.64%, 02/15/14(omg) 16,600,000 10,444,603
See Notes to Financial Statements. 65 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE ----------- -------------- 4.29%, 02/15/15(omg) 1,600,000 $ 1,135,230 5.08%, 11/15/16(omg) 900,000 471,846 5.09%, 05/15/17(omg) 10,550,000 5,387,041 5.40%, 05/15/20(omg) 17,600,000 7,356,060 5.47%, 11/15/21(omg) 13,480,000 5,147,271 5.52%, 02/15/23(omg) 2,800,000 988,445 5.56%, 11/15/24(omg) 6,400,000 2,041,472 5.57%, 02/15/25(omg) 2,950,000 926,294 5.58%, 08/15/25(omg) 1,900,000 579,240 5.61%, 05/15/26(omg) $ 1,500,000 435,032 5.61%, 11/15/26(omg) 3,600,000 1,015,589 5.57%, 11/15/27(omg) 250,000 67,510 -------------- 39,488,733 -------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $195,360,131) 194,220,507 -------------- TOTAL INVESTMENTS -- 137.1% (Cost $1,095,203,484) 1,111,888,922 -------------- NUMBER OF CONTRACTS ----------- WRITTEN OPTIONS -- (0.3%) CALL OPTIONS -- 0.0% 10-Year U.S. Treasury Note Futures, Strike Price $114.00, Expires 02/21/04 (37) (28,906) -------------- CALL SWAPTIONS -- (0.2%) 3-Month LIBOR, Strike Price $3.25, Expires 03/03/04 (550) (10,494) 3-Month LIBOR, Strike Price $4.00, Expires 03/03/04 (670) (6,895) 3-Month LIBOR, Strike Price $4.00, Expires 09/23/05 (1,700) (195,891)
NUMBER OF CONTRACTS VALUE ----------- -------------- 3-Month LIBOR, Strike Price $4.00, Expires 07/03/06 (1,380) $ (149,316) 3-Month LIBOR, Strike Price $5.50, Expires 01/07/05 (900) (525,600) 3-Month LIBOR, Strike Price $5.97, Expires 10/04/04 (890) (762,240) 3-Month LIBOR, Strike Price $6.00, Expires 10/19/04 (260) (224,089) -------------- (1,874,525) -------------- PUT SWAPTIONS -- (0.1%) 3-Month LIBOR, Strike Price $5.97, Expires 10/04/04 (890) (68,352) 3-Month LIBOR, Strike Price $6.00, Expires 10/19/04 (260) (21,193) 3-Month LIBOR, Strike Price $7.00, Expires 01/07/05 (900) (42,498) 3-Month LIBOR, Strike Price $7.00, Expires 09/23/05 (330) (42,527) 3-Month LIBOR, Strike Price $6.00, Expires 07/03/06 (1,380) (492,080) -------------- (666,650) -------------- TOTAL WRITTEN OPTIONS (Cost $(2,778,035)) (2,570,081) -------------- LIABILITIES IN EXCESS OF OTHER ASSETS -- (36.8%) (298,414,628) -------------- NET ASSETS -- 100.0% $ 810,904,213 ==============
See Notes to Financial Statements. 66 Swap agreements outstanding at December 31, 2003:
UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- BRITISH POUNDS Receive fixed rate payments of 5.25% and pay variable rate payments on the six month LIBOR floating rate(a) 03/15/04 6,700,000 $ 36,102 Receive fixed rate payments of 5.25% and pay variable rate payments on the six month LIBOR floating rate(b) 03/15/04 15,000,000 80,047 Receive fixed rate payments of 4.25% and pay variable rate payments on the six month LIBOR floating rate(c) 03/16/05 3,200,000 (13,198) Receive fixed rate payments of 4.25% and pay variable rate payments on the six month LIBOR floating rate(c) 03/17/05 28,200,000 (125,550) Receive fixed rate payments of 4.00% and pay variable rate payments on the six month LIBOR floating rate(g) 03/17/05 2,400,000 (21,005) Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 5.00%(a) 03/20/18 (5,600,000) 6,867 --------------- (36,737) --------------- EURODOLLARS Receive fixed rate payments of 4.50% and pay variable rate payments on the six month LIBOR floating rate(h) 06/18/07 13,700,000 680,282 Receive fixed rate payments of 3.50% and pay variable rate payments on the six month LIBOR floating rate(a) 09/15/05 16,600,000 93,427 Receive fixed rate payments of 3.50% and pay variable rate payments on the six month LIBOR floating rate(d) 09/15/05 49,100,000 276,342 Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 5.00%(f) 06/17/12 (10,900,000) (738,733) Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 5.50%(e) 12/15/31 (7,000,000) (660,850)
UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 5.00%(g) 06/1/12 (19,700,000) $ (1,335,142) --------------- (1,684,674) --------------- JAPANESE YEN Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 0.238%(c) 05/17/04 (2,660,000,000) (14,892) Receive variable rate payments on the six month LIBOR floating rate and pay fixed rate payments of 1.07%(c) 06/02/12 (540,000,000) 133,813 --------------- 118,921 --------------- SWISS FRANCS Receive fixed rate payments of 1.50% and pay variable rate payments on the three month LIBOR floating rate(g) 03/29/05 13,900,000 65,457 --------------- U.S. DOLLARS Receive fixed rate payments of 4.00% and pay variable rate payments on the three month LIBOR floating rate(a) 06/16/09 $ 13,800,000 (27,158) Receive fixed rate payments of 1.30% and pay floating par in event of default on United Mexican States, 11.50% due 05/15/26(a) 01/27/05 1,000,000 10,868 Receive variable rate payments on the three month LIBOR floating rate and pay fixed rate payments of 5.00%(h) 06/16/24 (19,100,000) 1,091,202 Receive variable rate payments on the three month LIBOR floating rate and pay fixed rate payments of 5.00%(a) 06/16/14 (900,000) (7,479) Receive floating par in event of default on Radioshack Corporation, 7.375% due 05/15/11 and pay fixed rate payments of 0.37%(b) 12/20/08 (300,000) 400 Receive floating par in event of default on Emerson Electric Co., 4.625% due 10/15/12 and pay fixed rate payments of 0.22%(c) 12/20/08 (300,000) 418
See Notes to Financial Statements. 67 MEDIUM-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- Receive floating par in event of default on Devon Financing Corporation, 6.875% due 09/30/11 and pay fixed rate payments of 0.35%(h) 12/20/08 $ (500,000) $ 203 Receive floating par in event of default on Anadarko Petroleum Corporation, 5.00% due 10/01/12 and pay fixed rate payments of 0.27%(h) 12/20/08 (300,000) 138 Receive floating par in event of default on Carnival Corporation, 6.15% due 04/15/08 and pay fixed rate payments of 0.44%(b) 12/20/08 (300,000) 407 Receive floating par in event of default on Countrywide Home Loan, 6.25% due 04/15/09 and pay fixed rate payments of 0.42%(c) 12/20/08 (300,000) (295)
UNREALIZED EXPIRATION APPRECIATION/ DESCRIPTION DATE NOTIONAL VALUE (DEPRECIATION) - ----------- ---------- -------------- --------------- Receive floating par in event of default on Occidental Petroleum, 6.75% due 01/15/12 and pay fixed rate payments of 0.28%(h) 12/20/08 $ (300,000) $ (420) Receive floating par in event of default on Kroger Co., 6.75% due 04/15/12 and pay fixed rate payments of 0.53%(c) 12/20/08 (300,000) (294) --------------- 1,067,990 --------------- $ (469,043) ===============
See Notes to Financial Statements. 68 EXTENDED-DURATION BOND FUND Long-term bonds generally underperformed their mid- and short-duration counterparts during the quarter as long-term rates increased, most notably in October. Given that long-term bonds are more price sensitive to changes in interest rates when compared to bonds with shorter maturities, their prices generally increase more when compared to bonds with shorter maturities when interest rates decline. The fourth quarter experienced a significant divergence in returns between long-term government and long-term credit bonds. The announcement of a robust economic growth rate in the third quarter followed by solid economic activity in the fourth quarter served as a positive for corporate bonds, but was not great news for Treasuries. For the quarter, long-duration credit bonds, as measured by the Lehman Brothers Long-Term Credit Index, returned 0.83%, while long-duration government bonds returned -1.14%, as measured by the Lehman Brothers Long-Term Government Index. The fund, primarily comprised of fixed income securities with longer maturities, produced positive returns and materially outpaced its composite benchmark index during the fourth quarter with the outperformance being generated in October and November. Furthermore, the fund significantly outperformed its benchmark for the calendar year 2003. The fund's allocation to corporate bonds continued to decline during the quarter as valuations became increasingly less attractive. As corporate spreads narrowed, the fund's relative performance versus the composite benchmark was positively impacted by its exposure to and security selection within the corporate bond sector. At the end of the fourth quarter, the fund maintained an approximate 22% allocation to the corporate sector reflecting the sub-advisers' efforts to take advantage of specific opportunities within the sector. Loomis Sayles, one of two sub-advisers within the fund, outpaced the composite benchmark for the fourth quarter. At quarter end, the fund maintained an average credit quality of AA. Not Part of the Annual Report 69 EXTENDED-DURATION BOND FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* BENCHMARK INDEX** ----------------- -------------------- ------------- ----------------- One Year 11.19% 11.32% 10.95% 6.46% Since Inception (8/27/01 -- 12/31/03) 10.11% 10.11% 9.70% 9.09%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS BENCHMARK INDEX** ---------------- ----------------- 8/27/01 10000 10000 8/31/01 10097 10111 9/30/01 9943 10027 10/31/01 10364 10516 11/30/01 10281 10202 12/31/01 10248 10063 1/31/02 10349 10202 2/28/02 10439 10300 3/31/02 10143 9948 4/30/02 10251 10208 5/31/02 10390 10286 6/30/02 10290 10350 7/31/02 10295 10443 8/31/02 10680 10927 9/30/02 10896 11259 10/31/02 10574 10965 11/30/02 10777 11066 12/31/02 11275 11521 1/31/03 11332 11530 2/28/03 11646 11868 3/31/03 11597 11774 4/30/03 11995 12039 5/31/03 12579 12691 6/30/03 12503 12515 7/30/03 11590 11432 8/31/03 11768 11671 9/30/03 12394 12285 10/31/03 12193 12013 11/30/03 12393 12099 12/31/03 12537 12266
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the weighted composite benchmark index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **Represents a weighted composite benchmark index consisting of the Lehman Brothers Long-Term Government Bond Index and the Lehman Brothers Long-Term Credit Bond Index. The Lehman Brothers Long-Term Government Index is composed of all bonds covered by the Lehman Brothers Government Bond Index with maturities of 10 years or greater. The Lehman Brothers Long-Term Credit Index is composed of a subset of the Lehman Brothers Credit Bond Index covering all corporate, publicly issued, fixed-rate, nonconvertible U.S. debt issues rated at least Baa with at least $50 million principal outstanding and maturity greater than 10 years. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 70 EXTENDED-DURATION BOND FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 PAR VALUE - ----------------- -------------- ------------ AGENCY OBLIGATIONS -- 2.9% Federal Home Loan Mortgage Corporation 4.63%, 02/15/07(E) $ 2,250,000 $ 2,957,195 Federal National Mortgage Association 6.09%, 10/29/07(N)(omg) 4,815,000 2,514,135 5.25%, 01/15/09 1,000,000 1,077,436 5.50%, 03/15/11 6,000,000 6,480,120 ------------ TOTAL AGENCY OBLIGATIONS (Cost $11,515,535) 13,028,886 ------------ ASSET-BACKED SECURITIES -- 0.4% Community Program Loan Trust 4.50%, 04/01/29 (Cost $1,649,840) 1,950,000 1,686,724 ------------ CORPORATE BONDS -- 21.9% Agilysys, Inc. 9.50%, 08/01/06 500,000 518,125 AIG SunAmerica Global Finance IX 6.90%, 03/15/32 144A 5,250,000 6,002,245 American Airlines, Inc. 6.98%, 04/01/11 72,387 73,211 8.61%, 10/01/11 850,000 774,583 Arrow Electronics, Inc. 6.88%, 07/01/13 250,000 266,857 Atlas Air, Inc. 7.20%, 01/02/19 465,848 422,731 Bausch & Lomb, Inc. 7.13%, 08/01/28 1,500,000 1,530,000 BellSouth Corporation 6.88%, 10/15/31 2,250,000 2,471,405 Boise Cascade Corporation 7.35%, 02/01/16 450,000 457,707 Borden, Inc. 7.88%, 02/15/23 1,200,000 1,098,000 Chesapeake Energy Corporation 7.75%, 01/15/15 150,000 163,500 6.88%, 01/15/16 144A 825,000 853,875 Citigroup, Inc. 6.63%, 01/15/28 1,000,000 1,090,425 5.88%, 02/22/33 5,000,000 4,930,964 Comcast Corporation 5.50%, 03/15/11 500,000 520,636 Commonwealth Edison Co. 4.75%, 12/01/11 605,000 608,426 Constellation Energy Group, Inc. 4.55%, 06/15/15 750,000 690,963 Continental Airlines, Inc. 6.65%, 09/15/19 2,383,804 2,330,452 6.70%, 06/15/21 435,364 426,291 COX Communications, Inc. 6.75%, 03/15/11 250,000 283,639
PAR VALUE -------------- ------------ Cummins, Inc. 7.13%, 03/01/28 $ 425,000 $ 397,375 Dana Corporation 6.50%, 03/01/09 250,000 266,563 Delphi Corporation 7.13%, 05/01/29 2,500,000 2,549,935 Delta Air Lines, Inc. 8.30%, 12/15/29 500,000 333,125 Devon Energy Corporation 4.95%, 08/15/08 CONV 963,000 988,279 Dillard's, Inc. 7.75%, 07/15/26 890,000 894,450 El Paso Corporation 7.00%, 05/15/11 400,000 371,000 EOP Operating LP 7.25%, 06/15/28 500,000 545,256 First Industrial LP 7.60%, 07/15/28 1,000,000 1,056,969 Foot Locker, Inc. 8.50%, 01/15/22 1,000,000 1,115,000 Ford Motor Co. 6.63%, 10/01/28 1,500,000 1,383,819 6.38%, 02/01/29 1,500,000 1,342,113 General Electric Capital Corporation 6.75%, 03/15/32 3,200,000 3,554,562 General Motors Acceptance Corporation 6.88%, 08/28/12 250,000 269,398 Georgia-Pacific Corporation 7.75%, 11/15/29 2,950,000 2,957,374 HCA, Inc. 6.30%, 10/01/12 1,500,000 1,549,115 7.58%, 09/15/25 1,000,000 1,046,314 7.05%, 12/01/27 500,000 492,856 Health Care Property Investors, Inc. 6.00%, 03/01/15 1,500,000 1,551,470 Highwoods Properties, Inc. 7.50%, 04/15/18 1,500,000 1,640,115 Household Finance Corporation 7.63%, 05/17/32 2,515,000 3,050,680 IMC Global, Inc. 7.38%, 08/01/18 500,000 427,500 7.30%, 01/15/28 750,000 618,750 International Paper Co. 6.88%, 11/01/23 300,000 321,282 Kinder Morgan, Inc. 7.25%, 03/01/28 500,000 557,925 Midamerican Energy Holdings Co. 5.88%, 10/01/12 1,000,000 1,050,322 Missouri Pacific Railroad 4.25%, 01/01/05 90,000 91,748
See Notes to Financial Statements. 71 EXTENDED-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE -------------- ------------ Motorola, Inc. 6.75%, 02/01/06 $ 250,000 $ 269,478 5.80%, 10/15/08 500,000 531,030 7.63%, 11/15/10 500,000 575,589 6.50%, 11/15/28 500,000 496,778 Nisource Finance Corporation 6.15%, 03/01/13 1,000,000 1,077,089 Pemex Project Funding Master Trust 8.63%, 02/01/04 144A 1,000,000 1,112,500 Penney (JC) Co., Inc. 7.95%, 04/01/17 500,000 570,625 Phillips Van-Huesen Corporation 7.75%, 11/15/23 450,000 461,250 Pioneer Natural Resources Co. 7.20%, 01/15/28 2,500,000 2,684,183 Preston Corporation 7.00%, 05/01/11 CONV 250,000 228,125 Prologis Trust 7.63%, 07/01/17 1,000,000 1,199,414 Provident Cos., Inc. 7.25%, 03/15/28 500,000 500,945 Pulte Homes, Inc. 7.30%, 10/24/05 1,000,000 1,046,691 7.88%, 06/15/32 1,500,000 1,747,579 6.38%, 05/15/33 1,000,000 976,570 Raytheon Co. 6.40%, 12/15/18 2,600,000 2,737,517 7.20%, 08/15/27 250,000 274,181 7.00%, 11/01/28 750,000 805,984 Schering-Plough Corporation 6.50%, 12/01/33 2,800,000 2,924,420 SLM Corporation 5.63%, 08/01/33 3,730,000 3,550,826 Southern California Edison Co. 7.25%, 03/01/26 500,000 515,000 6.65%, 04/01/29 250,000 261,250 Southern Natural Gas Co. 7.35%, 02/15/31 1,500,000 1,488,750 Sprint Capital Corporation 6.88%, 11/15/28 3,450,000 3,378,453 Swift Energy Co. 9.38%, 05/01/12 150,000 165,750 Tennessee Gas Pipeline Co. 7.00%, 10/15/28 750,000 716,250 Trinet Corporate Realty Trust, Inc. 7.70%, 07/15/17 1,000,000 1,102,500 Union Pacific Resources Group 7.15%, 05/15/28 250,000 282,530 UnumProvident Corporation 6.75%, 12/15/28 1,500,000 1,433,558
PAR VALUE -------------- ------------ Weyerhaeuser Co. 7.13%, 07/15/23 $ 500,000 $ 527,717 7.38%, 03/15/32 144A 250,000 272,671 Wisconsin Electric Power 6.88%, 12/01/49 6,295,000 6,861,676 ------------ TOTAL CORPORATE BONDS (Cost $88,260,931) 96,714,209 ------------ FOREIGN BONDS -- 13.2% BRAZIL -- 0.8% Federal Republic of Brazil 8.00%, 04/15/14 3,447,948 3,402,339 ------------ CANADA -- 4.4% British Columbia Generic Residual 5.25%, 08/23/13 STRIP(C)(omg) 2,500,000 1,185,440 5.30%, 06/09/14 STRIP(C)(omg) 11,500,000 5,183,788 5.86%, 09/05/20 STRIP(C)(omg) 1,750,000 526,117 Canada Generic Residual 5.44%, 06/01/25 STRIP(C)(omg) 4,110,000 1,017,760 Canadian Government 4.50%, 09/01/07(C) 3,275,000 2,614,298 Macmillan Bloedel, Ltd. 7.70%, 02/15/26 500,000 553,976 Ontario Generic Residual 5.90%, 07/13/22 STRIP(C)(omg) 3,900,000 1,035,171 5.81%, 03/08/29 STRIP(C)(omg) 7,000,000 1,280,720 Rogers Cablesystems, Ltd. 9.65%, 01/15/14(C) 2,370,000 1,948,141 Saskatchewan Residual 5.30%, 04/10/14 STRIP(C)(omg) 7,500,000 3,395,241 5.86%, 02/04/22 STRIP(C)(omg) 3,000,000 816,738 ------------ 19,557,390 ------------ CAYMAN ISLANDS -- 0.2% Enersis SA 7.40%, 12/01/16 625,000 639,020 ------------ HONG KONG -- 0.6% Bangkok Bank Public Co. 9.03%, 03/15/29 144A 2,500,000 2,817,947 ------------ ITALY -- 1.3% Cartesio SRL 6.02%, 03/07/33 144A 5,780,000 5,680,873 ------------
See Notes to Financial Statements. 72
PAR VALUE -------------- ------------ MALAYSIA -- 0.4% Telekom Malaysia BHD 7.88%, 08/01/25 144A $ 225,000 $ 258,591 Tenaga Nasional BHD 7.50%, 11/01/25 144A 1,500,000 1,623,690 ------------ 1,882,281 ------------ MEXICO -- 0.3% Petroleos Mexicanos 8.63%, 12/01/23 144A 1,000,000 1,102,500 TFM SA de CV 11.75%, 06/15/09 STEP 250,000 258,125 ------------ 1,360,625 ------------ NETHERLANDS -- 0.6% Telefonica Europe BV 8.25%, 09/15/30 2,005,000 2,540,223 ------------ NORWAY -- 0.9% Norway Government 6.75%, 01/15/07(K) 24,000,000 3,961,872 ------------ PHILIPPINES -- 0.3% Bangko Sentral Pilipinas 8.60%, 06/15/27 500,000 432,500 Philippine Long Distance Telephone Co. 8.35%, 03/06/17 500,000 438,750 Quezon Power (Philippines), Ltd. 8.86%, 06/15/17 472,500 394,538 ------------ 1,265,788 ------------ SUPRANATIONAL -- 2.4% EUROFIMA 6.50%, 08/22/11(A) 710,000 545,421 European Bank for Reconstruction & Development 6.06%, 02/10/28(A)(omg) 15,000,000 2,748,559 International Bank for Reconstruction & Development 6.21%, 08/20/07(N)(omg) 13,625,000 7,251,569 ------------ 10,545,549 ------------ UNITED KINGDOM -- 0.8% Vodafone Group PLC 7.88%, 02/15/30 3,000,000 3,699,050 ------------ VENEZUELA -- 0.2% Cerro Negro Finance, Ltd. 7.90%, 12/01/20 144A 500,000 435,000 Petrozuata Finance, Inc. 8.37%, 10/01/22 144A 450,000 384,750 ------------ 819,750 ------------ TOTAL FOREIGN BONDS (Cost $46,776,027) 58,172,707 ------------
PAR VALUE -------------- ------------ MORTGAGE-BACKED SECURITIES -- 0.5% Federal Home Loan Mortgage Corporation 5.00%, 12/01/31 $ 349,885 $ 345,605 Federal National Mortgage Association 5.00%, 07/25/23 2,000,000 2,054,340 ------------ TOTAL MORTGAGE-BACKED SECURITIES (Cost $2,085,238) 2,399,945 ------------ MUNICIPAL BONDS -- 7.2% Chicago, Illinois Board of Education, General Obligation Bond (FGIC Insured) (Non-Callable) 5.20%, 12/01/22(omg) 5,700,000 2,163,948 Chicago, Illinois, Wastewater Transmission, Series A Revenue Bond (MBIA Insured) (Non-Callable) 5.15%, 01/01/22(omg) 5,000,000 2,007,000 Clovis, California Unified School District, Series A General Obligation Bond (FGIC Insured) (Non-Callable) 5.31%, 08/01/25(omg) 9,775,000 3,162,995 Coppell, Texas Independent School District, General Obligation Bond (PSF-GTD Insured) (Non-Callable) 5.17%, 08/15/23(omg) 2,195,000 808,331 Granbury, Texas Independent School District, General Obligation Bond (PSF-GTD Insured) (Non-Callable) 4.87%, 08/01/20(omg) 1,000,000 451,290 Houston, Texas Water & Sewer System, Series A Revenue Bond (FSA LOC) (Non-Callable) 5.33%, 12/01/26(omg) 7,300,000 2,193,212 Indianapolis, Indiana Local Public Improvement Bond Bank, Series E Revenue Bond (AMBAC Insured) (Non-Callable) 5.04%, 02/01/22(omg) 2,550,000 1,039,202 Lake County, Illinois Community Consolidated School District No. 073, General Obligation Bond (FGIC Insured) (Non-Callable) 4.62%, 12/01/17(omg) 5,000,000 2,653,299
See Notes to Financial Statements. 73 EXTENDED-DURATION BOND FUND SCHEDULE OF INVESTMENTS CONTINUED
PAR VALUE -------------- ------------ McHenry & Kane Counties, Illinois Community Consolidated School District No. 158, General Obligation Bond (FGIC Insured) (Non-Callable) 3.94%, 01/01/12(omg) $ 3,340,000 $ 2,447,719 Metropolitan Pier & Exposition Authority, Illinois Dedicated State Tax, Series A Revenue Bond (MBIA Insured) (Non-Callable) 5.25%, 12/15/23(omg) 5,850,000 2,085,408 Metropolitan Pier & Exposition Authority, Illinois Dedicated State Tax, Series A Revenue Bond (MBIA Insured) (Non-Callable) 5.20%, 12/15/22(omg) 16,225,000 6,147,328 Northern Illinois University, Auxiliary Facilities System, Revenue Bond (FGIC Insured) (Non-Callable) 4.10%, 10/01/13(omg) 1,225,000 825,932 San Jose, California Unified School District, Santa Clara County, Series A General Obligation Bond (FGIC Insured) (Non-Callable) 4.67%, 08/01/18(omg) 2,055,000 1,050,352 Union Elementary School District, California, Series A General Obligation Bond (FGIC Insured) (Non-Callable) 4.76%, 09/01/19(omg) 1,750,000 839,283 Washington State, Motor Vehicle Fuel Tax, Series 03-C General Obligation Bond, (MBIA Insured) (Non-Callable) 5.16%, 06/01/23(omg) 10,000,000 3,728,399 ------------ TOTAL MUNICIPAL BONDS (Cost $30,043,754) $ 31,603,698 ------------
SHARES VALUE -------------- ------------ SHORT-TERM INVESTMENTS -- 3.6% AB Funds Trust -- Money Market Fund (Retirement Class) (inf) 8,749,138 $ 8,749,138 Northern Institutional Liquid Assets Portfolio sec. 7,364,318 7,364,318 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $16,113,456) 16,113,456 ------------ PREFERRED STOCK -- 0.4% International Paper Capital Trust 5.25%, 01/20/25 CONV (Cost $1,785,750) 36,000 1,813,680 ------------ PAR -------------- U.S. TREASURY OBLIGATIONS -- 50.2% U.S. Treasury Bonds 7.25%, 05/15/16 $ 12,950,000 16,158,673 8.00%, 11/15/21 151,287,000 204,367,557 ------------ 220,526,230 ------------ U.S. Treasury Note 1.63%, 10/31/05 1,500,000 1,498,127 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $220,711,689) 222,024,357 ------------ TOTAL INVESTMENTS -- 100.3% (Cost $418,942,220) 443,557,662 LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.3%) (1,465,732) ------------ NET ASSETS -- 100.0% $442,091,930 ============
See Notes to Financial Statements. 74 EQUITY INDEX FUND U.S. equity markets continued their ascent in the fourth quarter as improvements on the economic front pushed stocks upward for the third consecutive quarter. The broad market, as represented by the S&P 500(R) Index, advanced 12.18% in the fourth quarter and ended the year up 28.71%, the first calendar year gain since 1999. All economic sectors within the index posted positive returns for the quarter with the best performance coming from the materials, energy, industrials and consumer discretionary sectors. Utilities, consumer staples and health care, sectors generally categorized as defensive, lagged during the quarter. The fund is a passively managed fund benchmarked against the S&P 500(R) Index. The fund is comprised of domestic, large-cap equity stocks with both value and growth-style orientations. The differential between the benchmark and the fund is a result of both fund expenses and social restrictions within the portfolio.* - --------------- * S&P 500(R) is a trademark of The McGraw-Hill Companies, and has been licensed for use by AB Funds Trust. The Equity Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of purchasing the Equity Index Fund. Not Part of the Annual Report 75 EQUITY INDEX FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
S&P 500(R) RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- ---------- One Year 28.03% 28.19% 28.09% 28.71% Since Inception (8/27/01 -- 12/31/03) (1.47%) (1.66%) (1.56%) (1.02%)
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS S&P 500(R) INDEX** ---------------- ------------------ 8/27/01 10000 10000 8/31/01 9585 9570 9/30/01 8817 8796 10/31/01 8985 8964 11/30/01 9666 9652 12/31/01 9745 9736 1/31/02 9589 9594 2/28/02 9378 9409 3/31/02 9726 9764 4/30/02 9116 9171 5/31/02 9041 9104 6/30/02 8428 8456 7/31/02 7757 7796 8/31/02 7801 7847 9/30/02 6955 6994 10/31/02 7569 7610 11/30/02 8046 8057 12/31/02 7543 7585 1/31/03 7347 7386 2/28/03 7240 7275 3/31/03 7322 7347 4/30/03 7916 7952 5/31/03 8321 8372 6/30/03 8415 8478 07/30/03 8574 8628 08/31/03 8739 8796 09/30/03 8643 8703 10/31/03 9126 9195 11/30/03 9190 9276 12/31/03 9658 9762
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the S&P 500(R) Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The S&P 500(R) Index is an unmanaged index (with no defined investment objective) of common stocks, includes reinvestment of dividends, and is a registered trademark of McGraw-Hill Co., Inc. The S&P 500(R) Index includes 500 of the largest stocks (in terms of market value) in the United States. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 76 EQUITY INDEX FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ---------- ------------ COMMON STOCK -- 96.6% AUTO & TRANSPORTATION -- 2.6% Burlington Northern Santa Fe Corporation 15,600 $ 504,660 Cooper Tire & Rubber Co. 3,100 66,278 CSX Corporation 9,000 323,460 Dana Corporation 6,200 113,770 Delphi Corporation 23,500 239,935 Delta Air Lines, Inc. 5,200 61,412 FedEx Corporation 12,500 843,750 Ford Motor Co. 76,727 1,227,632 General Motors Corporation 23,500 1,254,900 Genuine Parts Co. 7,300 242,360 Goodyear Tire & Rubber Co. (The) 7,400 58,164 Harley-Davidson, Inc. 12,700 603,631 Navistar International Corporation* 2,900 138,881 Norfolk Southern Corporation 16,400 387,860 Paccar, Inc. 4,850 412,832 Southwest Airlines Co. 33,000 532,620 Union Pacific Corporation 10,700 743,436 United Parcel Service, Inc. Class B 47,100 3,511,305 Visteon Corporation 5,518 57,442 ------------ 11,324,328 ------------ CONSUMER DISCRETIONARY -- 12.2% Alberto-Culver Co. Class B 2,500 157,700 Allied Waste Industries, Inc.* 13,400 185,992 American Greetings Corporation Class A* 2,800 61,236 Apollo Group, Inc. Class A* 7,400 503,200 AutoNation, Inc.* 11,500 211,255 AutoZone, Inc.* 3,700 315,277 Avon Products, Inc. 9,900 668,151 Bed Bath & Beyond, Inc.* 12,400 537,540 Best Buy Co., Inc. 13,550 707,852 Big Lots, Inc.* 4,900 69,629 Black & Decker Corporation 3,300 162,756 Carnival Corporation 26,400 1,048,872 Cendant Corporation* 42,500 946,475 Cintas Corporation 7,200 360,936 Circuit City Stores, Inc. -- Circuit City Group 8,800 89,144 Clear Channel Communications, Inc. 25,800 1,208,214 Convergys Corporation* 6,000 104,760 Costco Wholesale Corporation* 19,200 713,856 Darden Restaurants, Inc. 6,950 146,228 Dillard's, Inc. Class A 3,500 57,610 Dollar General Corporation 14,100 295,959 Donnelley (R.R.) & Sons Co. 4,800 144,720 Eastman Kodak Co. 12,000 308,040 eBay, Inc.* 27,100 1,750,389 Electronic Arts, Inc.* 12,500 597,250 Family Dollar Stores, Inc. 7,200 258,336
SHARES VALUE ---------- ------------ Federated Department Stores, Inc. 7,600 $ 358,188 Gannett Co., Inc. 11,400 1,016,424 Gap, Inc. (The) 37,600 872,696 Gillette Co. (The) 42,400 1,557,352 Hasbro, Inc. 7,300 155,344 Hilton Hotels Corporation 15,900 272,367 Home Depot, Inc. (The) 95,350 3,383,972 International Flavors & Fragrances, Inc. 3,900 136,188 Interpublic Group Cos., Inc. 17,400 271,440 Jones Apparel Group, Inc. 5,300 186,719 Kimberly-Clark Corporation 21,100 1,246,799 Knight-Ridder, Inc. 3,300 255,321 Kohl's Corporation* 14,300 642,642 Leggett & Platt, Inc. 8,000 173,040 Limited Brands 21,700 391,251 Liz Claiborne, Inc. 4,608 163,400 Lowe's Cos., Inc. 33,000 1,827,870 Marriott International, Inc. Class A 9,700 448,140 Mattel, Inc. 18,000 346,860 May Department Stores Co. (The) 12,100 351,747 Maytag Corporation 3,300 91,905 McDonald's Corporation 53,200 1,320,956 McGraw Hill Co., Inc. (The) 8,000 559,360 Meredith Corporation 2,100 102,501 Monster Worldwide, Inc.* 4,700 103,212 New York Times Co. Class A 6,200 296,298 Newell Rubbermaid, Inc. 11,500 261,855 Nike, Inc. Class B 11,000 753,060 Nordstrom, Inc. 5,800 198,940 Office Depot, Inc.* 13,100 218,901 Omnicom Group, Inc. 8,000 698,640 Penney (JC) Co., Inc. 11,400 299,592 RadioShack Corporation 6,900 211,692 Reebok International, Ltd. 2,500 98,300 Robert Half International, Inc.* 7,200 168,048 Sabre Holdings Corporation 6,000 129,540 Sears, Roebuck & Co. 10,600 482,194 Snap-On, Inc. 2,400 77,376 Stanley Works (The) 3,400 128,758 Staples, Inc.* 20,800 567,840 Starbucks Corporation* 16,400 542,184 Starwood Hotels & Resorts Worldwide, Inc. 8,500 305,745 Target Corporation 38,200 1,466,880 Tiffany & Co. 6,100 275,720 Time Warner, Inc.* 189,600 3,410,904 TJX Cos., Inc. 21,100 465,255 Toys "R" Us, Inc.* 8,900 112,496 Tribune Co. 13,100 675,960 Tupperware Corporation 2,400 41,616 Univision Communications, Inc. Class A* 13,500 535,815
See Notes to Financial Statements. 77 EQUITY INDEX FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ---------- ------------ VF Corporation 4,500 $ 194,580 Wal-Mart Stores, Inc. 181,400 9,623,269 Waste Management, Inc. 24,400 722,240 Wendy's International, Inc. 4,800 188,352 Whirlpool Corporation 2,900 210,685 Yahoo!, Inc.* 27,600 1,246,692 Yum! Brands, Inc.* 12,300 423,120 ------------ 52,879,618 ------------ CONSUMER STAPLES -- 5.9% Albertson's, Inc. 15,400 348,810 Campbell Soup Co. 17,200 460,960 Clorox Co. 8,800 427,328 Coca-Cola Co. (The) 102,800 5,217,100 Coca-Cola Enterprises, Inc. 19,100 417,717 Colgate-Palmolive Co. 22,500 1,126,125 ConAgra Foods, Inc. 22,500 593,775 CVS Corporation 16,600 599,592 General Mills, Inc. 15,700 711,210 Heinz (H.J.) Co. 14,800 539,164 Hershey Foods Corporation 5,500 423,445 Kellogg Co. 17,100 651,168 Kroger Co.* 31,200 577,512 McCormick & Co., Inc. 5,800 174,580 Pepsi Bottling Group, Inc. 11,000 265,980 PepsiCo, Inc. 71,940 3,353,843 Procter & Gamble Co. 54,400 5,433,472 Safeway, Inc.* 18,500 405,335 Sara Lee Corporation 33,100 718,601 Supervalu, Inc. 5,600 160,104 Sysco Corporation 27,100 1,008,933 Walgreen Co. 43,000 1,564,340 Winn-Dixie Stores, Inc. 5,900 58,705 Wrigley (W.M.), Jr. Co. 9,400 528,374 ------------ 25,766,173 ------------ FINANCIAL SERVICES -- 21.8% ACE, Ltd. 11,700 484,614 AFLAC, Inc. 21,500 777,870 Allstate Corporation (The) 29,452 1,267,025 AMBAC Financial Group, Inc. 4,500 312,255 American Express Co. 53,900 2,599,597 American International Group, Inc. 109,292 7,243,873 AmSouth Bancorporation 14,700 360,150 AON Corporation 13,100 313,614 Apartment Investment & Management Co. Class A REIT 3,900 134,550 Automatic Data Processing, Inc. 24,900 986,289 Bank of America Corporation 62,243 5,006,204 Bank of New York Co., Inc. (The) 32,400 1,073,088 Bank One Corporation 46,900 2,138,171 BB&T Corporation 22,900 884,856 Bear Stearns Cos., Inc. (The) 4,100 327,795 Block (H&R), Inc. 7,500 415,275
SHARES VALUE ---------- ------------ Capital One Financial Corporation 9,700 $ 594,513 Charter One Financial, Inc. 9,361 323,423 Chubb Corporation 7,900 537,990 Cigna Corporation 5,900 339,250 Cincinnati Financial Corporation 6,700 280,596 Citigroup, Inc. 216,230 10,495,803 Comerica, Inc. 7,400 414,844 Concord EFS, Inc.* 19,500 289,380 Countrywide Financial Corporation 7,736 586,776 Deluxe Corporation 2,100 86,793 Dow Jones & Co., Inc. 3,454 172,182 Equifax, Inc. 5,800 142,100 Equity Office Properties Trust REIT 16,800 481,320 Equity Residential Properties Trust REIT 11,500 339,365 Fannie Mae 40,700 3,054,942 Federated Investors, Inc. Class B 4,600 135,056 Fifth Third Bancorp 23,894 1,412,135 First Data Corporation 30,600 1,257,354 First Tennessee National Corporation 5,300 233,730 Fiserv, Inc.* 8,100 320,031 FleetBoston Financial Corporation 44,200 1,929,330 Franklin Resources, Inc. 10,500 546,630 Freddie Mac 29,200 1,702,944 Golden West Financial Corporation 6,400 660,416 Goldman Sachs Group, Inc. 19,800 1,954,854 Hartford Financial Services Group, Inc. 11,900 702,457 Huntington Bancshares, Inc. 9,600 216,000 Janus Capital Group, Inc. 10,100 165,741 Jefferson-Pilot Corporation 5,900 298,835 John Hancock Financial Services, Inc. 12,100 453,750 JP Morgan Chase & Co. 85,490 3,140,048 KeyCorp 17,600 516,032 Lehman Brothers Holdings, Inc. 11,400 880,308 Lincoln National Corporation 7,500 302,775 Loews Corporation 7,800 385,710 Marsh & McLennan Cos., Inc. 22,200 1,063,158 Marshall & Ilsley Corporation 9,500 363,375 MBIA, Inc. 6,000 355,380 MBNA Corporation 53,550 1,330,718 Mellon Financial Corporation 18,000 577,980 Merrill Lynch & Co., Inc. 39,600 2,322,540 MetLife, Inc. 31,900 1,074,073 MGIC Investment Corporation 4,100 233,454 Moody's Corporation 6,200 375,410 Morgan Stanley 45,400 2,627,298 National City Corporation 25,500 865,470 North Fork Bancorporation, Inc. 6,400 259,008 Northern Trust Corporation 9,200 427,064
See Notes to Financial Statements. 78
SHARES VALUE ---------- ------------ Paychex, Inc. 15,800 $ 587,760 Plum Creek Timber Co., Inc. REIT 7,700 234,465 PNC Financial Services Group, Inc. 11,600 634,868 Principal Financial Group 13,500 446,445 Progressive Corporation (The) 9,100 760,669 Prologis Trust REIT 7,500 240,675 Providian Financial Corporation* 12,200 142,008 Prudential Financial, Inc. 22,700 948,179 Regions Financial Corporation 9,300 345,960 Ryder System, Inc. 2,700 92,205 Safeco Corporation 5,800 225,794 Schwab (Charles) Corporation (The) 56,850 673,104 Simon Property Group, Inc. REIT 8,000 370,720 SLM Corporation 18,900 712,152 SouthTrust Corporation 13,900 454,947 St. Paul Cos., Inc. 9,600 380,640 State Street Corporation 14,000 729,120 Sungard Data Systems, Inc.* 12,000 332,520 SunTrust Banks, Inc. 11,800 843,700 Synovus Financial Corporation 12,700 367,284 T Rowe Price Group, Inc. 5,200 246,532 Torchmark Corporation 4,700 214,038 Travelers Property Casualty Corporation Class B 42,124 714,844 Union Planters Corporation 7,950 250,346 UnumProvident Corporation 12,400 195,548 US Bancorp 80,900 2,409,202 Wachovia Corporation 55,500 2,585,745 Washington Mutual, Inc. 37,700 1,512,524 Wells Fargo & Co. 70,930 4,177,068 XL Capital, Ltd. Class A 5,800 449,790 Zions Bancorporation 3,800 233,054 ------------ 94,065,473 ------------ HEALTHCARE -- 13.2% Abbott Laboratories 65,500 3,052,300 Aetna, Inc. 6,400 432,512 Allergan, Inc. 5,500 422,455 AmerisourceBergen Corporation 4,672 262,333 Amgen, Inc.* 54,128 3,345,110 Anthem, Inc.* 5,800 435,000 Bard (C.R.), Inc. 2,200 178,750 Bausch & Lomb, Inc. 2,200 114,180 Baxter International, Inc. 25,600 781,312 Becton Dickinson & Co. 10,600 436,084 Biogen Idec, Inc.* 13,730 504,989 Biomet, Inc. 10,700 389,587 Boston Scientific Corporation* 34,300 1,260,868 Bristol-Myers Squibb Co. 81,300 2,325,180 Cardinal Health, Inc. 18,200 1,113,112 Chiron Corporation* 7,900 450,221 Express Scripts, Inc.* 3,300 219,219 Forest Laboratories, Inc.* 15,300 945,540
SHARES VALUE ---------- ------------ Genzyme Corporation -- General Division* 9,400 $ 463,796 Guidant Corporation 13,000 782,600 HCA, Inc. 20,800 893,568 Health Management Associates, Inc. Class A 10,100 242,400 Humana, Inc.* 6,800 155,380 IMS Health, Inc. 10,000 248,600 Johnson & Johnson 124,390 6,425,987 King Pharmaceuticals, Inc.* 10,100 154,126 Lilly (Eli) & Co. 47,100 3,312,543 Manor Care, Inc. 3,700 127,909 McKesson Corporation 12,200 392,352 Medco Health Solutions, Inc.* 11,376 386,670 Medimmune, Inc.* 10,400 264,160 Medtronic, Inc. 50,800 2,469,388 Merck & Co., Inc. 93,300 4,310,460 Millipore Corporation* 2,000 86,100 Pfizer, Inc. 319,983 11,305,000 Quest Diagnostics, Inc. 4,400 321,684 Schering-Plough Corporation 61,600 1,071,224 St. Jude Medical, Inc.* 7,200 441,720 Stryker Corporation 8,400 714,084 Tenet Healthcare Corporation* 19,450 312,173 UnitedHealth Group, Inc. 24,600 1,431,228 Watson Pharmaceuticals, Inc.* 4,500 207,000 WellPoint Health Networks, Inc.* 6,400 620,736 Wyeth 55,800 2,368,710 Zimmer Holdings, Inc.* 10,120 712,448 ------------ 56,890,798 ------------ INTEGRATED OILS -- 4.4% Amerada Hess Corporation 3,800 202,046 ChevronTexaco Corporation 44,840 3,873,728 Conocophillips 28,550 1,872,024 Exxon Mobil Corporation 277,144 11,362,903 Marathon Oil Corporation 13,007 430,402 Occidental Petroleum Corporation 16,100 680,064 Unocal Corporation 10,900 401,447 ------------ 18,822,614 ------------ MATERIALS & PROCESSING -- 3.5% Air Products & Chemicals, Inc. 9,500 501,885 Alcoa, Inc. 36,300 1,379,400 Allegheny Technologies, Inc. 3,400 44,948 American Standard Cos., Inc.* 3,100 312,170 Archer-Daniels-Midland Co. 27,127 412,873 Ashland, Inc. 2,900 127,774 Avery Dennison Corporation 4,600 257,692 Ball Corporation 2,396 142,730 Bemis Co. 2,200 110,000 Boise Cascade Corporation 3,600 118,296 Dow Chemical Co. (The) 38,600 1,604,602 Du Pont (E.I.) de Nemours & Co. 41,755 1,916,137 Eastman Chemical Co. 3,200 126,496 Ecolab, Inc. 10,800 295,596
See Notes to Financial Statements. 79 EQUITY INDEX FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ---------- ------------ Engelhard Corporation 5,300 $ 158,735 Fluor Corporation 3,400 134,776 Freeport-McMoRan Copper & Gold, Inc. Class B 7,700 324,401 Georgia-Pacific Corporation 10,700 328,169 Great Lakes Chemical Corporation 2,100 57,099 Hercules, Inc.* 4,600 56,120 International Paper Co. 20,100 866,511 Louisiana-Pacific Corporation* 4,400 78,672 Masco Corporation 19,400 531,754 MeadWestvaco Corporation 8,383 249,394 Monsanto Co. 10,960 315,429 Newmont Mining Corporation 18,100 879,841 Nucor Corporation 3,300 184,800 Pactiv Corporation* 6,600 157,740 Phelps Dodge Corporation* 3,700 281,533 PPG Industries, Inc. 7,100 454,542 Praxair, Inc. 13,680 522,576 Rohm & Haas Co. 9,300 397,203 Sealed Air Corporation* 3,600 194,904 Sherwin-Williams Co. (The) 6,100 211,914 Sigma-Aldrich Corporation 2,900 165,822 Temple-Inland, Inc. 2,300 144,141 United States Steel Corporation 4,300 150,586 Vulcan Materials Co. 4,300 204,551 Weyerhaeuser Co. 9,200 588,800 Worthington Industries, Inc. 3,600 64,908 ------------ 15,055,520 ------------ OTHER -- 4.3% 3M Co. 32,900 2,797,487 Brunswick Corporation 3,800 120,954 Eaton Corporation 3,200 345,536 General Electric Co. 421,000 13,042,580 Honeywell International, Inc. 36,100 1,206,823 ITT Industries, Inc. 3,900 289,419 Johnson Controls, Inc. 3,796 440,792 Textron, Inc. 5,700 325,242 ------------ 18,568,833 ------------ OTHER ENERGY -- 1.5% Anadarko Petroleum Corporation 10,500 535,605 Apache Corporation 6,774 549,371 Baker Hughes, Inc. 14,000 450,240 BJ Services Co.* 6,600 236,940 Burlington Resources, Inc. 8,300 459,654 Calpine Corporation* 17,300 83,213 Devon Energy Corporation 9,700 555,422 Dynegy, Inc. Class A 15,800 67,624 El Paso Corporation 25,500 208,845 EOG Resources, Inc. 4,800 221,616 Halliburton Co. 18,400 478,400 Kerr-McGee Corporation 4,230 196,653 Nabors Industries, Ltd.* 6,100 253,150 Noble Corporation* 5,600 200,368 Rowan Cos., Inc.* 3,900 90,363
SHARES VALUE ---------- ------------ Schlumberger, Ltd. 24,500 $ 1,340,640 Sunoco, Inc. 3,200 163,680 Transocean, Inc.* 13,400 321,734 Williams Cos., Inc. 21,700 213,094 ------------ 6,626,612 ------------ PRODUCER DURABLES -- 4.7% Agilent Technologies, Inc.* 19,900 581,876 American Power Conversion Corporation 8,300 202,935 Andrew Corporation* 6,400 73,664 Applied Materials, Inc.* 69,700 1,564,765 Boeing Co. (The) 35,300 1,487,542 Caterpillar, Inc. 14,600 1,212,092 Centex Corporation 2,600 279,890 Cooper Industries, Ltd. Class A 3,900 225,927 Crane Co. 2,500 76,850 Cummins, Inc. 1,800 88,092 Danaher Corporation 6,400 587,200 Deere & Co. 10,100 657,005 Dover Corporation 8,500 337,875 Emerson Electric Co. 17,600 1,139,600 Goodrich Corporation 4,900 145,481 Grainger (W.W.), Inc. 3,800 180,082 IIIinois Tool Works, Inc. 12,900 1,082,439 Ingersoll-Rand Co. Class A 7,300 495,524 KB HOME 1,900 137,788 KLA-Tencor Corporation* 8,200 481,094 Lexmark International, Inc.* 5,400 424,656 Lockheed Martin Corporation 18,900 971,460 Molex, Inc. 7,950 277,376 Northrop Grumman Corporation 7,678 734,017 Novellus Systems, Inc.* 6,400 269,120 Pall Corporation 5,200 139,516 Parker Hannifin Corporation 5,000 297,500 Pitney Bowes, Inc. 9,800 398,076 Power-One, Inc.* 3,500 37,905 Pulte Homes, Inc. 2,552 238,918 Rockwell Collins, Inc. 7,400 222,222 Tektronix, Inc. 3,500 110,600 Teradyne, Inc.* 8,000 203,600 Thermo Electron Corporation* 6,810 171,612 Thomas & Betts Corporation 2,500 57,225 Tyco International, Ltd. 83,784 2,220,276 United Technologies Corporation 19,700 1,866,969 Waters Corporation* 5,100 169,116 Xerox Corporation* 33,200 458,160 ------------ 20,306,045 ------------ TECHNOLOGY -- 15.6% ADC Telecommunications, Inc.* 33,700 100,089 Adobe Systems, Inc. 9,800 385,140 Advanced Micro Devices, Inc.* 14,600 217,540 Altera Corporation* 15,900 360,930 Analog Devices, Inc. 15,400 703,010 Apple Computer, Inc.* 15,200 324,824
See Notes to Financial Statements. 80
SHARES VALUE ---------- ------------ Applera Corporation-Applied Biosystems Group 8,700 $ 180,177 Applied Micro Circuits Corporation* 12,900 77,142 Autodesk, Inc. 4,680 115,034 Avaya, Inc.* 17,448 225,777 BMC Software, Inc.* 9,500 177,175 Broadcom Corporation Class A* 12,700 432,943 CIENA Corporation* 19,900 132,136 Cisco Systems, Inc.* 289,400 7,029,526 Citrix Systems, Inc.* 6,900 146,349 Computer Associates International, Inc. 24,300 664,362 Computer Sciences Corporation* 7,900 349,417 Compuware Corporation* 16,100 97,244 Comverse Technology, Inc.* 8,100 142,479 Corning, Inc.* 55,700 580,951 Dell, Inc.* 107,300 3,643,908 Electronic Data Systems Corporation 20,100 493,254 EMC Corporation* 100,800 1,302,336 Gateway, Inc.* 13,600 62,560 General Dynamics Corporation 8,300 750,237 Hewlett-Packard Co. 127,802 2,935,612 Intel Corporation 273,800 8,816,360 International Business Machines Corporation 72,100 6,682,228 Intuit, Inc.* 8,300 439,153 Jabil Circuit, Inc.* 8,400 237,720 JDS Uniphase Corporation* 60,200 219,730 Linear Technology Corporation 13,100 551,117 LSI Logic Corporation* 15,900 141,033 Lucent Technologies, Inc.* 175,776 499,204 Maxim Integrated Products, Inc. 13,800 687,240 Mercury Interactive Corporation* 3,800 184,832 Micron Technology, Inc.* 25,600 344,832 Microsoft Corporation 453,300 12,483,881 Motorola, Inc. 97,600 1,373,232 National Semiconductor Corporation* 7,800 307,398 NCR Corporation* 4,000 155,200 Network Appliance, Inc.* 14,500 297,685 Novell, Inc.* 15,700 165,164 Nvidia Corporation* 6,800 158,100 Oracle Corporation* 219,100 2,892,120 Parametric Technology Corporation* 11,200 44,128 Peoplesoft, Inc.* 15,700 357,960 PerkinElmer, Inc. 5,300 90,471 PMC-Sierra, Inc.* 7,200 145,080 QLogic Corporation* 4,000 206,400 Qualcomm, Inc. 33,500 1,806,655 Raytheon Co. 17,400 522,696 Rockwell Automation, Inc. 7,800 277,680 Sanmina-SCI Corporation* 21,700 273,637 Scientific-Atlanta, Inc. 6,400 174,720
SHARES VALUE ---------- ------------ Siebel Systems, Inc.* 20,800 $ 288,496 Solectron Corporation* 35,000 206,850 Sun Microsystems, Inc.* 137,000 615,130 Symantec Corporation* 12,900 446,985 Symbol Technologies, Inc. 9,650 162,989 Tellabs, Inc.* 17,500 147,525 Texas Instruments, Inc. 72,600 2,132,988 Unisys Corporation* 13,900 206,415 Veritas Software Corporation* 17,975 667,951 Xilinx, Inc.* 14,400 557,856 ------------ 67,598,993 ------------ UTILITIES -- 6.9% AES Corporation (The)* 26,100 246,384 Allegheny Energy, Inc.* 5,300 67,628 Alltel Corporation 13,100 610,198 Ameren Corporation 6,800 312,800 American Electric Power Co., Inc. 16,600 506,466 AT&T Corporation 33,085 671,626 AT&T Wireless Services, Inc.* 113,764 908,974 BellSouth Corporation 77,500 2,193,250 Centerpoint Energy, Inc. 12,800 124,032 CenturyTel, Inc. 6,000 195,720 Cinergy Corporation 7,500 291,075 Citizens Communications Co.* 11,900 147,798 CMS Energy Corporation 6,800 57,936 Comcast Corporation Class A* 94,415 3,103,421 Consolidated Edison, Inc. 9,500 408,595 Constellation Energy Group, Inc. 7,000 274,120 Dominion Resources, Inc. 13,600 868,088 DTE Energy Co. 7,100 279,740 Duke Energy Corporation 38,000 777,100 Edison International 13,700 300,441 Entergy Corporation 9,552 545,706 Exelon Corporation 13,712 909,928 FirstEnergy Corporation 13,784 485,197 FPL Group, Inc. 7,700 503,734 KeySpan Corporation 6,700 246,560 Kinder Morgan, Inc. 5,200 307,320 Nextel Communications, Inc. Class A* 46,100 1,293,566 Nicor, Inc. 1,800 61,272 NiSource, Inc. 11,000 241,340 Peoples Energy Corporation 1,500 63,060 PG&E Corporation* 17,400 483,198 Pinnacle West Capital Corporation 3,800 152,076 PPL Corporation 7,400 323,750 Progress Energy, Inc. 10,300 466,178 Public Service Enterprise Group, Inc. 9,900 433,620 Qwest Communications International, Inc.* 74,100 320,112 SBC Communications, Inc. 138,834 3,619,402 Sempra Energy 9,500 285,570 Southern Co. (The) 30,700 928,675
See Notes to Financial Statements. 81 EQUITY INDEX FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ---------- ------------ Sprint Corporation (FON Group) 37,900 $ 622,318 Sprint Corporation (PCS Group)* 43,400 243,908 TECO Energy, Inc. 7,900 113,839 TXU Corporation 13,600 322,592 Verizon Communications, Inc. 115,734 4,059,949 Xcel Energy, Inc. 16,700 283,566 ------------ 29,661,828 ------------ TOTAL COMMON STOCK (Cost $382,326,286) 417,566,835 ------------ SHORT-TERM INVESTMENTS -- 7.9% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 13,406,117 13,406,117 Northern Institutional Liquid Assets Portfolio sec. 20,889,981 20,889,981 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $34,296,098) 34,296,098 ------------
PAR VALUE --------- ------------ U.S. TREASURY OBLIGATIONS -- 0.2% U.S. Treasury Bills 0.89%, 01/22/04++++ $ 865,000 $ 864,575 0.90%, 01/22/04++++ 20,000 19,990 0.92%, 01/22/04++++ 70,000 69,966 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $954,502) 954,531 ------------ TOTAL INVESTMENTS -- 104.7% (Cost $417,576,886) 452,817,464 LIABILITIES IN EXCESS OF OTHER ASSETS -- (4.7%) (20,346,180) ------------ NET ASSETS -- 100.0% $432,471,284 ============
See Notes to Financial Statements. 82 VALUE EQUITY FUND During the fourth quarter, large-cap value stocks outperformed large-cap growth stocks as the Russell 1000(R) Value Index returned 14.19%, while its growth counterpart, the Russell 1000(R) Growth Index, returned 10.41%. The strong showing by value oriented stocks in the fourth quarter pushed the value index to a 30.03% one-year return, slightly outpacing the growth index's 29.75% yearly return. All sectors of the Russell 1000(R) Value Index delivered positive returns during the quarter. The best performing sectors were autos & transportation, materials & processing and producer durables. The financial services sector, although not the best performer, was a large contributor to overall index performance due to its large weighting in the index. Healthcare and utilities lagged all other sectors during the quarter. The fund is comprised of domestic, large-cap value oriented stocks. The fund outperformed its benchmark, the Russell 1000(R) Value Index, during the fourth quarter. Security selection in the financial services, integrated oils and materials & processing sectors contributed to benchmark-relative performance. At the sub-adviser level, Equinox delivered the strongest benchmark-relative performance largely due to its overweight exposure and security selection in the materials & processing sector and security selection in the financial services sector. Not Part of the Annual Report 83 VALUE EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RUSSELL 1000(R) VALUE RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- --------------------- One Year 30.84% 31.09% 30.46% 30.03% Since Inception (8/27/01 -- 12/31/03) 1.69% 2.26% 1.76% 2.67%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS RUSSELL 1000(R) VALUE INDEX** ---------------- ----------------------------- 08/27/01 10000 10000 08/31/01 9711 9702 09/30/01 9027 9019 10/31/01 8948 8942 11/30/01 9408 9462 12/31/01 9621 9684 01/31/02 9529 9610 02/28/02 9535 9625 03/31/02 10031 10081 04/30/02 9747 9735 05/31/02 9734 9784 06/30/02 9157 9222 07/31/02 8273 8365 08/31/02 8366 8428 09/30/02 7382 7491 10/31/02 7807 8046 11/30/02 8306 8553 12/31/02 7950 8181 01/31/03 7783 7983 02/28/03 7514 7770 03/31/03 7528 7783 04/30/03 8138 8468 05/31/03 8755 9015 06/30/03 8885 9128 07/30/03 9041 9264 08/31/03 9196 9408 09/30/03 9088 9316 10/31/03 9643 9886 11/30/03 9791 10020 12/31/03 10402 10638
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Russell 1000(R) Value Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Russell 1000(R) Value Index is a large-cap index consisting of those Russell 1000(R) index securities with a less-than-average growth orientation. Companies in this index tend to exhibit lower price-to-book and price-earnings-ratios, higher dividend yields and lower forecasted growth values than the growth universe. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 84 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ----------- -------------- COMMON STOCK -- 96.5% AUTO & TRANSPORTATION -- 3.1% American Axle & Manufacturing Holdings, Inc.* 33,800 $ 1,366,196 AMR Corporation* 149,500 1,936,025 ArvinMeritor, Inc. 3,800 91,656 Autoliv, Inc. 3,200 120,480 BorgWarner, Inc. 1,600 136,112 Burlington Northern Santa Fe Corporation 381,200 12,331,820 CNF, Inc. 3,000 101,700 CSX Corporation 13,000 467,220 Dana Corporation 9,000 165,150 Delphi Corporation 913,100 9,322,751 Delta Air Lines, Inc. 80,400 949,524 FedEx Corporation 11,200 756,000 Ford Motor Co. 107,095 1,713,520 General Motors Corporation 28,200 1,505,880 Genuine Parts Co. 10,600 351,920 Hunt (J.B.) Transport Services, Inc.* 1,900 51,319 Lear Corporation* 3,800 233,054 Navistar International Corporation* 1,400 67,046 Norfolk Southern Corporation 23,700 560,505 Paccar, Inc. 6,700 570,304 Southwest Airlines Co. 15,450 249,363 Swift Transportation Co., Inc.* 1,000 21,020 Tidewater, Inc. 55,600 1,661,328 Union Pacific Corporation 58,100 4,036,788 Werner Enterprises, Inc. 1,625 31,671 -------------- 38,798,352 -------------- CONSUMER DISCRETIONARY -- 10.5% Alberto-Culver Co. Class B 2,300 145,084 Allied Waste Industries, Inc.* 6,200 86,056 AutoNation, Inc.* 10,600 194,722 Avon Products, Inc. 12,100 816,629 Barnes & Noble, Inc.* 32,500 1,067,625 BearingPoint, Inc.* 7,000 70,630 Belo Corporation Class A 4,300 121,862 Big Lots, Inc.* 3,800 53,998 Black & Decker Corporation 39,900 1,967,868 Blockbuster, Inc. Class A 1,500 26,925 Blyth, Inc. 2,000 64,440 Borders Group, Inc. 3,800 83,296 Carnival Corporation 329,700 13,098,980 CBRL Group, Inc. 26,100 998,586 Cendant Corporation* 503,730 11,218,067 Circuit City Stores, Inc. -- Circuit City Group 155,100 1,571,163 Claire's Stores, Inc. 400 7,536 Clear Channel Communications, Inc. 17,125 801,964 Convergys Corporation* 7,900 137,934 Costco Wholesale Corporation* 28,200 1,048,476
SHARES VALUE ----------- -------------- Cox Radio, Inc. Class A* 900 $ 22,707 Darden Restaurants, Inc. 1,900 39,976 Donnelley (R.R.) & Sons Co. 6,400 192,960 DoubleClick, Inc.* 1,700 17,374 Eastman Kodak Co. 384,100 9,859,847 Entercom Communications Corporation* 200 10,592 Entravision Communications Corporation Class A* 1,500 16,650 Estee Lauder Cos., Inc. (The) Class A 400 15,704 Ethan Allen Interiors, Inc. 2,000 83,760 Federated Department Stores, Inc. 11,400 537,282 Foot Locker, Inc. 8,600 201,670 Furniture Brands International, Inc.* 2,800 82,124 Gannett Co., Inc. 16,400 1,462,224 Gemstar-TV Guide International, Inc.* 11,300 57,065 Gillette Co. (The) 23,800 874,174 Harte-Hanks, Inc. 450 9,788 Hasbro, Inc. 8,525 181,412 Hearst-Argyle Television, Inc. 1,800 49,608 Hilton Hotels Corporation 10,400 178,152 Hughes Electronics Corporation* 21,833 361,335 IKON Office Solutions, Inc. 8,800 104,368 InterActiveCorp* 6,561 222,615 International Flavors & Fragrances, Inc. 1,500 52,380 International Speedway Corporation Class A 400 17,864 Interpublic Group Cos., Inc. 22,400 349,440 ITT Educational Services, Inc.* 37,900 1,780,163 Jones Apparel Group, Inc. 131,600 4,636,268 Kimberly-Clark Corporation 21,600 1,276,344 Knight-Ridder, Inc. 4,300 332,691 La-Z-Boy, Inc. 3,200 67,136 Lamar Advertising Co.* 900 33,588 Lee Enterprises, Inc. 2,700 117,855 Leggett & Platt, Inc. 7,400 160,062 Liberty Media Corporation Class A* 107,300 1,275,797 Limited Brands 26,900 485,007 Liz Claiborne, Inc. 33,100 1,173,726 Manpower, Inc. 42,700 2,010,316 Marriott International, Inc. Class A 5,200 240,240 May Department Stores Co. (The) 17,600 511,632 McClatchy Co. Class A 1,100 75,680 McDonald's Corporation 693,300 17,214,639 McGraw Hill Co., Inc. (The) 21,200 1,482,304 Media General, Inc. Class A 1,000 65,100
See Notes to Financial Statements. 85 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- -------------- Meredith Corporation 800 $ 39,048 Metro-Goldwyn-Mayer, Inc.* 4,700 80,323 Michael's Stores, Inc. 700 30,940 Mohawk Industries, Inc.* 2,100 148,134 MSC Industrial Direct Co., Inc. Class A* 200 5,500 Neiman-Marcus Group, Inc. Class A* 2,200 118,074 New York Times Co. Class A 3,100 148,149 Newell Rubbermaid, Inc. 6,000 136,620 News Corporation, Ltd. (The) ADR 1 23 Nordstrom, Inc. 5,800 198,940 O'Reilly Automotive, Inc.* 600 23,016 Office Depot, Inc.* 209,600 3,502,416 Outback Steakhouse, Inc. 1,000 44,210 Penney (JC) Co., Inc. 16,500 433,620 Pier 1 Imports, Inc. 1,200 26,232 Polo Ralph Lauren Corporation 2,400 69,120 Radio One, Inc. Class D* 2,700 52,110 RadioShack Corporation 78,000 2,393,040 Reader's Digest Association, Inc. (The) 4,800 70,368 Reebok International, Ltd. 2,500 98,300 Regal Entertainment Group Class A 1,800 36,936 Regis Corporation 1,200 47,424 Rent-A-Center, Inc.* 600 17,928 Republic Services, Inc. 9,300 238,359 Sabre Holdings Corporation 8,100 174,879 Saks, Inc.* 7,700 115,808 Scholastic Corporation* 1,600 54,464 Sears, Roebuck & Co. 183,200 8,333,768 Service Corporation International* 18,200 98,098 Servicemaster Co. 18,200 212,030 Sirius Satellite Radio, Inc.* 57,900 182,964 Snap-On, Inc. 3,500 112,840 Stanley Works (The) 87,300 3,306,051 Staples, Inc.* 24,607 671,771 Starwood Hotels & Resorts Worldwide, Inc. 8,600 309,342 Talbots, Inc. 200 6,156 Tech Data Corporation* 3,300 130,977 Time Warner, Inc.* 263,300 4,736,767 Toys "R" Us, Inc.* 13,000 164,320 Tribune Co. 10,400 536,640 Univision Communications, Inc. Class A* 595 23,616 Valassis Communications, Inc.* 2,500 73,375 VeriSign, Inc.* 3,500 57,050 VF Corporation 11,700 505,908 Viad Corporation 2,800 70,000 Washington Post Co. Class B 200 158,280
SHARES VALUE ----------- -------------- Waste Management, Inc. 273,257 $ 8,088,407 Wendy's International, Inc. 242,700 9,523,548 West Corporation* 100 2,323 Whirlpool Corporation 34,800 2,528,220 XM Satellite Radio Holdings, Inc. Class A* 6,800 179,248 -------------- 129,837,140 -------------- CONSUMER STAPLES -- 4.1% Albertson's, Inc. 20,700 468,855 Campbell Soup Co. 7,600 203,680 Church and Dwight Co., Inc. 700 27,720 Clorox Co. 4,200 203,952 Coca-Cola Co. (The) 19,200 974,400 Coca-Cola Enterprises, Inc. 10,000 218,700 Colgate-Palmolive Co. 3,500 175,175 ConAgra Foods, Inc. 467,500 12,337,325 CVS Corporation 24,000 866,880 Dean Foods Co.* 9,450 310,622 Del Monte Foods Co.* 6,000 62,400 Dial Corporation (The) 2,300 65,481 Fresh Del Monte Produce, Inc. 26,200 624,346 General Mills, Inc. 10,900 493,770 Heinz (H.J.) Co. 184,500 6,721,335 Hershey Foods Corporation 2,400 184,776 Hormel Foods Corporation 4,500 116,145 J.M. Smucker Co. (The) 3,000 135,870 Kellogg Co. 7,600 289,408 Kraft Foods, Inc. Class A 16,800 541,296 Kroger Co.* 45,900 849,609 McCormick & Co., Inc. 3,000 90,300 Pepsi Bottling Group, Inc. 1,700 41,106 PepsiAmericas, Inc. 3,600 61,632 PepsiCo, Inc. 11,900 554,778 Performance Food Group Co.* 900 32,553 Procter & Gamble Co. 28,475 2,844,083 Rite Aid Corporation* 6,600 39,864 Safeway, Inc.* 408,400 8,948,044 Sara Lee Corporation 444,715 9,654,763 Smithfield Foods, Inc.* 5,000 103,500 Supervalu, Inc. 74,400 2,127,096 Tootsie Roll Industries, Inc. 1,300 46,800 Tyson Foods, Inc. Class A 12,681 167,896 Winn-Dixie Stores, Inc. 5,100 50,745 Wrigley (W.M.), Jr. Co. 1,700 95,557 -------------- 50,730,462 -------------- FINANCIAL SERVICES -- 31.1% ACE, Ltd. 276,900 11,469,198 Affiliated Computer Services, Inc. Class A* 800 43,568 AFLAC, Inc. 11,400 412,452 AG Edwards, Inc 3,400 123,182 Alleghany Corporation* 212 47,170 Allied Capital Corporation 7,600 211,888 Allstate Corporation (The) 386,300 16,618,626
See Notes to Financial Statements. 86
SHARES VALUE ----------- -------------- AMB Property Corporation REIT 4,600 $ 151,248 AMBAC Financial Group, Inc. 4,650 322,664 American Capital Strategies, Ltd. 19,700 585,681 American Express Co. 17,900 863,317 American Financial Group, Inc. 2,100 55,566 American International Group, Inc. 68,433 4,535,739 American National Insurance Co. 600 50,622 AmeriCredit Corporation* 6,000 95,580 AmSouth Bancorporation 21,400 524,300 Annaly Mortgage Management, Inc. REIT 5,700 104,880 AON Corporation 15,500 371,070 Apartment Investment & Management Co. Class A REIT 5,700 196,650 Archstone-Smith Trust REIT 11,100 310,578 Arden Realty, Inc. REIT 3,500 106,190 Associated Banc-Corp 4,200 179,130 Astoria Financial Corporation 59,700 2,220,840 Automatic Data Processing, Inc. 2,000 79,220 AvalonBay Communities, Inc. REIT 3,700 176,860 Bancorpsouth, Inc. 4,700 111,484 Bank of America Corporation 265,024 21,315,880 Bank of Hawaii Corporation 3,400 143,480 Bank of New York Co., Inc. (The) 39,600 1,311,552 Bank One Corporation 145,400 6,628,786 Banknorth Group, Inc. 9,900 322,047 BB&T Corporation 33,929 1,311,017 Bear Stearns Cos., Inc. (The) 16,100 1,287,195 BISYS Group, Inc. (The)* 500 7,440 Block (H&R), Inc. 50,300 2,785,111 BOK Financial Corporation* 1,027 39,765 Boston Properties, Inc. REIT 4,200 202,398 BRE Properties, Inc. Class A REIT 3,000 100,200 Camden Property Trust REIT 2,000 88,600 Capital One Financial Corporation 4,400 269,676 Capitol Federal Financial 1,300 46,878 CarrAmerica Realty Corporation REIT 3,200 95,296 Catellus Development Corporation REIT 5,574 134,435 CBL & Associates Properties, Inc. REIT 1,300 73,450 Centerpoint Properties Corporation REIT 1,400 104,860 Charter One Financial, Inc. 21,508 743,101
SHARES VALUE ----------- -------------- Checkfree Corporation* 28,800 $ 796,320 Chelsea Property Group, Inc. REIT 1,500 82,215 Chubb Corporation 11,300 769,530 Cigna Corporation 117,600 6,762,000 Cincinnati Financial Corporation 8,300 347,604 CIT Group, Inc. 12,100 434,995 Citigroup, Inc. 911,100 44,224,795 City National Corporation 2,500 155,300 CNA Financial Corporation* 1,400 33,740 Colonial Bancgroup, Inc. 7,500 129,900 Comerica, Inc. 184,600 10,348,676 Commerce Bancorp, Inc. 400 21,072 Commerce Bancshares, Inc. 3,737 183,185 Compass Bancshares, Inc. 41,200 1,619,572 Countrywide Financial Corporation 10,000 758,500 Cousins Properties, Inc. REIT 1,500 45,900 Crescent Real Estate Equities Co. REIT 261,100 4,472,643 Cullen Frost Bankers, Inc. 3,100 125,767 Deluxe Corporation 24,500 1,012,585 Developers Diversified Realty Corporation REIT 4,600 154,422 Downey Financial Corporation 1,300 64,090 DST Systems, Inc.* 400 16,704 Duke Realty Corporation REIT 8,200 254,200 E*TRADE Financial Corporation* 10,400 131,560 Equifax, Inc. 1,600 39,200 Equity Office Properties Trust REIT 24,485 701,495 Equity Residential Properties Trust REIT 16,600 489,866 Erie Indemnity Co. Class A 1,500 63,570 Everest Re Group, Ltd. 32,300 2,732,580 Fannie Mae 37,900 2,844,774 Federal Realty Investors Trust REIT 2,700 103,653 Fidelity National Financial, Inc. 7,618 295,426 First American Corporation 4,100 122,057 First Bancorp Puerto Rico 800 31,640 First Midwest Bancorp, Inc. 2,800 90,748 First Tennessee National Corporation 18,000 793,800 FirstMerit Corporation 4,700 126,759 FleetBoston Financial Corporation 343,916 15,011,933 FNB Corporation 2,835 100,501 Franklin Resources, Inc. 10,000 520,600 Freddie Mac 140,600 8,199,792 Friedman, Billings, Ramsey Group, Inc. Class A 68,200 1,574,056
See Notes to Financial Statements. 87 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- -------------- Fulton Financial Corporation 6,415 $ 140,553 General Growth Properties, Inc. REIT 118,400 3,285,600 Global Payments, Inc. 100 4,712 Golden West Financial Corporation 7,600 784,244 Goldman Sachs Group, Inc. 17,300 1,708,029 Greenpoint Financial Corporation 7,200 254,304 Hartford Financial Services Group, Inc. 324,300 19,143,429 HCC Insurance Holdings, Inc. 2,300 73,140 Health Care Property Investors, Inc. REIT 3,900 198,120 Healthcare Realty Trust, Inc. REIT 2,600 92,950 Hibernia Corporation Class A 57,500 1,351,825 Hospitality Properites Trust REIT 3,600 148,608 Host Marriott Corporation REIT* 16,900 208,208 HRPT Properties Trust REIT 8,700 87,783 Hudson City Bancorp, Inc. 2,600 99,268 Hudson United Bancorp 2,500 92,375 Huntington Bancshares, Inc. 13,900 312,750 Independence Community Bank Corporation 3,000 107,910 IndyMac Bancorp, Inc. 3,100 92,349 Instinet Group, Inc.* 7,500 38,625 Interactive Data Corporation* 1,100 18,216 International Bancshares Corporation 1,600 75,440 iStar Financial, Inc. REIT 6,000 233,400 Janus Capital Group, Inc. 14,600 239,586 Jefferies Group, Inc. 2,300 75,946 Jefferson-Pilot Corporation 8,700 440,655 John Hancock Financial Services, Inc. 17,600 660,000 JP Morgan Chase & Co. 725,522 26,648,423 KeyCorp 281,150 8,243,318 Kimco Realty Corporation REIT 5,900 264,025 LaBranche & Co., Inc. 2,300 26,841 Legg Mason, Inc. 600 46,308 Lehman Brothers Holdings, Inc. 14,842 1,146,099 Leucadia National Corporation 2,700 124,470 Liberty Property Trust REIT 4,800 186,720 Lincoln National Corporation 10,800 435,996 Loews Corporation 7,900 390,655 M & T Bank Corporation 4,100 403,030 Macerich Co. (The) REIT 3,500 155,750 Mack-Cali Realty Corporation REIT 3,500 145,670 Markel Corporation* 300 76,053 Marshall & Ilsley Corporation 13,800 527,850
SHARES VALUE ----------- -------------- MBIA, Inc. 8,750 $ 518,263 MBNA Corporation 79,800 1,983,030 Mellon Financial Corporation 14,900 478,439 Mercantile Bankshares Corporation 4,300 195,994 Mercury General Corporation 1,600 74,480 Merrill Lynch & Co., Inc. 219,167 12,854,145 MetLife, Inc. 20,700 696,969 MGIC Investment Corporation 134,700 7,669,818 Mills Corporation (The) REIT 1,600 70,400 Mony Group, Inc.* 2,700 84,483 Morgan Stanley 130,500 7,552,035 National City Corporation 87,600 2,973,144 National Commerce Financial Corporation 12,500 341,000 Nationwide Financial Services Class A 3,400 112,404 New Plan Excel Realty Trust REIT 5,900 145,553 New York Community Bancorp, Inc. 5,891 224,152 North Fork Bancorporation, Inc. 47,300 1,914,231 Northern Trust Corporation 10,900 505,978 Odyssey Re Holdings Corporation 700 15,785 Old National Bancorp 3,852 88,018 Old Republic International Corporation 73,950 1,875,372 Pan Pacific Retail Properties, Inc. REIT 2,400 114,360 Park National Corporation 700 79,205 People's Bank 1,500 48,900 Plum Creek Timber Co., Inc. REIT 11,162 339,883 PMI Group, Inc. (The) 5,400 201,042 PNC Financial Services Group, Inc. 17,200 941,356 Popular, Inc. 5,700 256,158 Principal Financial Group 17,700 585,339 Prologis Trust REIT 9,889 317,338 Protective Life Corporation 3,900 131,976 Provident Financial Group, Inc. 2,500 79,875 Providian Financial Corporation* 9,400 109,416 Prudential Financial, Inc. 33,600 1,403,472 Public Storage, Inc. REIT 6,100 264,679 Radian Group, Inc. 5,200 253,500 Raymond James Financial, Inc. 2,400 90,480 Realty Income Corporation REIT 2,300 92,000 Regency Centers Corporation REIT 1,600 63,760 Regions Financial Corporation 87,900 3,269,880
See Notes to Financial Statements. 88
SHARES VALUE ----------- -------------- Reinsurance Group of America, Inc. 1,500 $ 57,975 Rouse Co. (The) REIT 12,700 596,900 Ryder System, Inc. 3,500 119,525 Safeco Corporation 7,900 307,547 Shurgard Storage Centers, Inc. Class A REIT 2,700 101,655 Simon Property Group, Inc. REIT 8,000 370,720 Sky Financial Group, Inc. 5,600 145,264 SLM Corporation 86,000 3,240,480 SouthTrust Corporation 92,377 3,023,499 Sovereign Bancorp, Inc. 17,800 422,750 St. Paul Cos., Inc. 12,800 507,520 Stancorp Financial Group, Inc. 1,800 113,184 State Street Corporation 18,100 942,648 Student Loan Corporation 200 29,200 Sungard Data Systems, Inc.* 1,300 36,023 SunTrust Banks, Inc. 15,000 1,072,500 Synovus Financial Corporation 1,600 46,272 T Rowe Price Group, Inc. 1,800 85,338 TCF Financial Corporation 32,400 1,663,740 Thornburg Mortgage, Inc. REIT 4,300 116,960 Torchmark Corporation 7,100 323,334 Transatlantic Holdings, Inc. 1,200 96,960 Travelers Property Casualty Corporation Class B 236,634 4,015,679 Trizec Properties, Inc. REIT 5,000 77,000 Trustmark Corporation 3,000 87,810 Union Planters Corporation 11,500 362,135 UnionBanCal Corporation 12,300 707,742 United Bankshares, Inc. 2,300 71,760 United Dominion Realty Trust, Inc. REIT 7,300 140,160 Unitrin, Inc. 2,800 115,948 UnumProvident Corporation 17,500 275,975 US Bancorp 532,326 15,852,668 Valley National Bancorp 4,416 128,947 Vornado Realty Trust REIT 4,900 268,275 W.R. Berkley Corporation 3,775 131,936 Wachovia Corporation 322,250 15,013,628 Washington Federal, Inc. 4,213 119,649 Washington Mutual, Inc. 313,114 12,562,134 Webster Financial Corporation 24,600 1,128,156 Weingarten Realty Investors REIT 2,800 124,180 WellChoice, Inc.* 1,200 41,400 Wells Fargo & Co. 190,372 11,211,007 Westamerica Bancorporation 1,500 74,550 Whitney Holding Corporation 2,400 98,376 Wilmington Trust Corporation 4,000 144,000 XL Capital, Ltd. Class A 104,900 8,134,995 Zions Bancorporation 5,500 337,315 -------------- 386,217,559 --------------
SHARES VALUE ----------- -------------- HEALTHCARE -- 5.9% Aetna, Inc. 5,300 $ 358,174 AmerisourceBergen Corporation 3,246 182,263 Andrx Corporation* 1,000 24,040 Anthem, Inc.* 5,131 384,825 Apogent Technologies, Inc.* 4,900 112,896 Bard (C.R.), Inc. 300 24,375 Bausch & Lomb, Inc. 3,000 155,700 Baxter International, Inc. 278,500 8,499,820 Becton Dickinson & Co. 3,200 131,648 Bristol-Myers Squibb Co. 347,700 9,944,220 Community Health Systems, Inc.* 1,600 42,528 HCA, Inc. 6,200 266,352 Health Net, Inc.* 221,500 7,243,050 Henry Schein, Inc.* 900 60,822 Human Genome Sciences, Inc.* 3,900 51,675 Humana, Inc.* 9,800 223,930 ICOS Corporation* 1,800 74,304 IMS Health, Inc. 146,500 3,641,990 Invitrogen Corporation* 2,300 161,000 IVAX Corporation* 121,000 2,889,480 King Pharmaceuticals, Inc.* 10,600 161,756 Laboratory Corporation of America Holdings* 700 25,865 Manor Care, Inc. 4,500 155,565 McKesson Corporation 23,900 768,624 Medco Health Solutions, Inc.* 9,217 313,286 Merck & Co., Inc. 114,500 5,289,900 Millennium Pharmeceuticals, Inc.* 9,000 168,030 Neurocrine Biosciences, Inc.* 1,100 59,994 Omnicare, Inc. 2,500 100,975 PacifiCare Health Systems, Inc.* 2,400 162,240 Protein Design Labs, Inc.* 1,500 26,850 Renal Care Group, Inc.* 1,200 49,440 Respironics, Inc.* 11,900 536,571 Schering-Plough Corporation 497,100 8,644,569 Select Medical Corporation* 79,800 1,299,144 Steris Corporation* 200 4,520 Tenet Healthcare Corporation* 452,400 7,261,020 Triad Hospitals, Inc.* 2,500 83,175 UnitedHealth Group, Inc. 47,900 2,786,822 Universal Health Services, Inc. Class B 300 16,116 Valeant Pharmaceuticals International 2,600 65,390 Varian Medical Systems, Inc.* 37,100 2,563,610 Watson Pharmaceuticals, Inc.* 14,200 653,200 WebMD Corporation* 2,700 24,273 WellPoint Health Networks, Inc.* 500 48,495
See Notes to Financial Statements. 89 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- -------------- Wyeth 165,400 $ 7,021,230 -------------- 72,763,752 -------------- INTEGRATED OILS -- 8.6% Amerada Hess Corporation 50,200 2,669,134 BP PLC ADR 224,468 11,077,496 ChevronTexaco Corporation 302,498 26,132,803 Conocophillips 415,588 27,250,104 Exxon Mobil Corporation 474,400 19,450,400 Marathon Oil Corporation 227,900 7,541,211 Murphy Oil Corporation 4,600 300,426 Occidental Petroleum Corporation 279,900 11,822,976 Unocal Corporation 15,700 578,231 -------------- 106,822,781 -------------- MATERIALS & PROCESSING --6.9% Air Products & Chemicals, Inc. 13,800 729,054 Airgas, Inc. 3,600 77,328 Alcoa, Inc. 264,500 10,051,000 Aptargroup, Inc. 2,100 81,900 Archer-Daniels-Midland Co. 31,589 480,785 Ashland, Inc. 11,400 502,284 Avery Dennison Corporation 900 50,418 Ball Corporation 500 29,785 Bemis Co. 2,900 145,000 Boise Cascade Corporation 3,900 128,154 Bowater, Inc. 3,100 143,561 Cabot Corporation 3,600 114,624 Cytec Industries, Inc.* 2,300 88,297 Dow Chemical Co. (The) 320,282 13,314,122 Du Pont (E.I.) de Nemours & Co. 54,100 2,482,649 Eastman Chemical Co. 151,900 6,004,607 Energizer Holdings, Inc.* 3,600 135,216 Engelhard Corporation 26,100 781,695 Florida Rock Industries, Inc. 1,000 54,850 Fluor Corporation 4,700 186,308 Forest City Enterprises, Inc. Class A 1,800 85,518 Georgia-Pacific Corporation 287,971 8,832,071 Harsco Corporation 2,500 109,550 International Paper Co. 227,800 9,820,458 Jacobs Engineering Group, Inc.* 400 19,204 Lafarge North America, Inc. 2,000 81,040 LNR Property Corporation 900 44,559 Louisiana-Pacific Corporation* 10,800 193,104 Lubrizol Corporation 3,100 100,812 Lyondell Chemical Co. 228,000 3,864,600 Martin Marietta Materials, Inc. 3,000 140,910 Masco Corporation 19,600 537,236 MeadWestvaco Corporation 12,247 364,348 Monsanto Co. 416,400 11,983,992 Newmont Mining Corporation 8,900 432,629
SHARES VALUE ----------- -------------- Nucor Corporation 30,700 $ 1,719,200 Owens-Illinois, Inc.* 6,500 77,285 Packaging Corporation of America 3,500 76,510 Pactiv Corporation* 139,200 3,326,880 Phelps Dodge Corporation* 2,800 213,052 PPG Industries, Inc. 10,300 659,406 Praxair, Inc. 13,800 527,160 Precision Castparts Corporation 3,600 163,476 Rayonier, Inc. 3,040 126,199 Rohm & Haas Co. 9,600 410,016 RPM International, Inc. 61,400 1,010,644 Scotts Co. (The) Class A* 1,100 65,076 Sherwin-Williams Co. (The) 82,200 2,855,628 Sigma-Aldrich Corporation 2,400 137,232 Smurfit-Stone Container Corporation* 14,900 276,693 Sonoco Products Co. 5,600 137,872 Southern Peru Copper Corporation 500 23,580 Temple-Inland, Inc. 2,800 175,476 Timken Co. 1,700 34,102 United States Steel Corporation 17,400 609,348 Valspar Corporation 2,900 143,318 Vulcan Materials Co. 5,500 261,635 Weyerhaeuser Co. 13,300 851,200 Worthington Industries, Inc. 2,300 41,469 -------------- 86,114,125 -------------- OTHER -- 0.5% 3M Co. 11,200 952,336 Brunswick Corporation 5,100 162,333 Carlisle Cos., Inc. 1,900 115,634 Eaton Corporation 4,500 485,910 Hillenbrand Industries, Inc. 8,500 527,510 Honeywell International, Inc. 50,600 1,691,558 ITT Industries, Inc. 300 22,263 Johnson Controls, Inc. 14,300 1,660,516 Lancaster Colony Corporation 1,700 76,772 SPX Corporation* 3,900 229,359 Teleflex, Inc. 2,100 101,493 Textron, Inc. 7,000 399,420 Wesco Financial Corporation 100 35,200 -------------- 6,460,304 -------------- OTHER ENERGY -- 2.8% Anadarko Petroleum Corporation 156,500 7,983,065 Apache Corporation 51,461 4,173,487 Baker Hughes, Inc. 51,400 1,653,024 Burlington Resources, Inc. 82,100 4,546,698 Calpine Corporation* 23,500 113,035 Chesapeake Energy Corporation 2,000 27,160 Cooper Cameron Corporation* 300 13,980
See Notes to Financial Statements. 90
SHARES VALUE ----------- -------------- Devon Energy Corporation 14,019 $ 802,728 Diamond Offshore Drilling, Inc. 1,600 32,816 Dynegy, Inc. Class A 16,800 71,904 El Paso Corporation 36,472 298,706 ENSCO International, Inc. 5,800 157,586 Equitable Resources, Inc. 3,800 163,096 Grant Prideco, Inc.* 400 5,208 Halliburton Co. 2,500 65,000 Helmerich & Payne, Inc. 3,000 83,790 Kerr-McGee Corporation 6,100 283,589 Key Energy Services, Inc.* 2,100 21,651 National-Oilwell, Inc.* 2,100 46,956 Newfield Exploration Co.* 1,500 66,810 Noble Energy, Inc. 2,100 93,303 Peabody Energy Corporation 1,900 79,249 Pioneer Natural Resources Co.* 6,300 201,159 Pogo Producing Co. 3,800 183,540 Premcor, Inc.* 2,000 52,000 Pride International, Inc.* 3,700 68,968 Reliant Resources, Inc.* 275,273 2,026,009 Rowan Cos., Inc.* 2,400 55,608 Smith International, Inc.* 1,100 45,672 Sunoco, Inc. 48,300 2,470,545 Texas Genco Holdings, Inc. 900 29,250 Transocean, Inc.* 324,300 7,786,443 Valero Energy Corporation 13,200 611,688 Varco International, Inc.* 1,600 33,008 Westport Resources Corporation* 1,400 41,804 Williams Cos., Inc. 31,500 309,330 XTO Energy, Inc. 4,466 126,388 -------------- 34,824,253 -------------- PRODUCER DURABLES -- 6.6% AGCO Corporation* 4,300 86,602 Agilent Technologies, Inc.* 27,200 795,328 Alliant Techsystems, Inc.* 500 28,880 American Power Conversion Corporation 10,100 246,945 American Tower Corporation Class A* 7,000 75,740 AMETEK, Inc. 1,100 53,086 Boeing Co. (The) 260,700 10,985,898 Caterpillar, Inc. 21,000 1,743,420 Centex Corporation 2,500 269,125 Crane Co. 26,800 823,832 Crown Castle International Corporation* 62,000 683,860 Cummins, Inc. 2,100 102,774 Danaher Corporation 400 36,700 Deere & Co. 14,600 949,730 Diebold, Inc. 4,400 237,028 Donaldson Co., Inc. 4,900 289,884 Dover Corporation 10,000 397,500 DR Horton, Inc. 6,500 281,190
SHARES VALUE ----------- -------------- Emerson Electric Co. 195,600 $ 12,665,100 Goodrich Corporation 7,200 213,768 Grainger (W.W.), Inc. 4,600 217,994 HON Industries, Inc. 2,000 86,640 Hovnanian Enterprises, Inc. Class A* 600 52,236 Hubbell, Inc. Class B 3,000 132,300 IIIinois Tool Works, Inc. 114,200 9,582,522 KB HOME 10,100 732,452 Lennar Corporation Class A 3,100 297,600 Lexmark International, Inc.* 33,200 2,610,848 Lockheed Martin Corporation 16,800 863,520 MDC Holdings, Inc. 1,000 64,500 Molex, Inc. 900 31,401 Northrop Grumman Corporation 87,735 8,387,466 Novellus Systems, Inc.* 1,700 71,485 Pall Corporation 1,300 34,879 Parker Hannifin Corporation 7,200 428,400 Pentair, Inc. 2,700 123,390 Pitney Bowes, Inc. 93,600 3,802,032 Polycom, Inc.* 46,400 905,728 Pulte Homes, Inc. 3,000 280,860 Rockwell Collins, Inc. 5,300 159,159 Ryland Group, Inc. 1,500 132,960 Steelcase, Inc. Class A 2,500 35,900 Tektronix, Inc. 3,800 120,080 Thermo Electron Corporation* 7,800 196,560 Toll Brothers, Inc.* 2,800 111,328 Tyco International, Ltd. 359,800 9,534,700 United Technologies Corporation 119,050 11,282,369 Xerox Corporation* 37,900 523,020 -------------- 81,768,719 -------------- TECHNOLOGY -- 5.2% 3Com Corporation* 22,100 180,557 Acxiom Corporation* 1,300 24,141 ADC Telecommunications, Inc.* 27,000 80,190 Advanced Fibre Communications, Inc.* 3,100 62,465 Advanced Micro Devices, Inc.* 13,700 204,130 Analog Devices, Inc. 20,600 940,390 Apple Computer, Inc.* 22,300 476,551 Applera Corporation-Applied Biosystems Group 1,900 39,349 Applied Micro Circuits Corporation* 10,200 60,996 Arrow Electronics, Inc.* 4,600 106,444 Atmel Corporation* 13,800 82,938 Autodesk, Inc. 6,400 157,312 Avaya, Inc.* 25,400 328,676 Avnet, Inc.* 22,000 476,520 Avocent Corporation* 18,000 657,360 AVX Corporation 3,200 53,184 BMC Software, Inc.* 1,300 24,245
See Notes to Financial Statements. 91 VALUE EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- -------------- Brocade Communications Systems, Inc.* 6,200 $ 35,836 Cadence Design Systems, Inc.* 12,100 217,558 Ceridian Corporation* 3,600 75,384 CIENA Corporation* 13,891 92,236 Computer Associates International, Inc. 65,900 1,801,706 Computer Sciences Corporation* 141,000 6,236,430 Compuware Corporation* 21,700 131,068 Comverse Technology, Inc.* 4,600 80,914 Corning, Inc.* 233,200 2,432,276 Cypress Semiconductor Corporation* 3,000 64,080 Electronic Data Systems Corporation 253,200 6,213,528 Emulex Corporation* 1,400 37,352 Fairchild Semicoductor International, Inc.* 3,400 84,898 General Dynamics Corporation 15,000 1,355,850 Harris Corporation 2,800 106,260 Hewlett-Packard Co. 838,150 19,252,306 Imation Corporation 2,200 77,330 Ingram Micro, Inc. Class A* 6,500 103,350 Integrated Device Technology, Inc.* 3,800 65,246 International Business Machines Corporation 49,400 4,578,392 International Rectifier Corporation* 33,200 1,640,412 Intersil Corporation Class A 4,600 114,310 Intuit, Inc.* 38,100 2,015,871 Jabil Circuit, Inc.* 1,000 28,300 L-3 Communications Holdings, Inc.* 2,200 112,992 LSI Logic Corporation* 13,600 120,632 Lucent Technologies, Inc.* 251,800 715,112 Maxtor Corporation* 7,500 83,250 Micron Technology, Inc.* 18,600 250,542 Motorola, Inc. 326,600 4,595,262 National Semiconductor Corporation* 1,700 66,997 NCR Corporation* 5,200 201,760 Network Associates, Inc.* 1,000 15,040 Novell, Inc.* 12,400 130,448 PanAmSat Corporation* 43,300 933,548 Peoplesoft, Inc.* 12,000 273,600 PerkinElmer, Inc. 4,000 68,280 Raytheon Co. 110,600 3,322,424 Rockwell Automation, Inc. 10,100 359,560 Sanmina-SCI Corporation* 17,176 216,589 Scientific-Atlanta, Inc. 8,500 232,050 Seagate Technology, Inc.*+ 4,600 0 Siebel Systems, Inc.* 10,800 149,796 Solectron Corporation* 26,400 156,024
SHARES VALUE ----------- -------------- Storage Technology Corporation* 3,900 $ 100,425 Sun Microsystems, Inc.* 196,600 882,734 Symbol Technologies, Inc. 1,800 30,402 Tellabs, Inc.* 15,000 126,450 Texas Instruments, Inc. 27,800 816,764 Unisys Corporation* 4,800 71,280 Vishay Intertechnology, Inc.* 9,700 222,130 -------------- 65,050,432 -------------- UTILITIES -- 11.2% AGL Resources, Inc. 3,900 113,490 Allete, Inc. 5,200 159,120 Alliant Energy Corporation 6,600 164,340 Alltel Corporation 18,900 880,362 Ameren Corporation 9,800 450,800 American Electric Power Co., Inc. 259,500 7,917,345 AT&T Corporation 228,760 4,643,828 AT&T Wireless Services, Inc.* 75,700 604,843 BellSouth Corporation 281,600 7,969,280 Cablevision Systems Corporation Class A* 775 18,127 Centerpoint Energy, Inc. 258,900 2,508,741 CenturyTel, Inc. 8,700 283,794 Cinergy Corporation 10,700 415,267 Citizens Communications Co.* 17,300 214,866 Comcast Corporation Class A* 260,563 8,564,706 Consolidated Edison, Inc. 13,600 584,936 Constellation Energy Group, Inc. 10,100 395,516 Cox Communications, Inc. Class A* 72,100 2,483,845 Dominion Resources, Inc. 19,519 1,245,898 DPL, Inc. 7,700 160,776 DTE Energy Co. 72,600 2,860,440 Duke Energy Corporation 230,500 4,713,725 Duquesne Light Holdings, Inc. 4,600 84,364 Edison International 17,300 379,389 Energy East Corporation 8,900 199,360 Entergy Corporation 191,900 10,963,247 Exelon Corporation 110,887 7,358,461 FirstEnergy Corporation 302,612 10,651,942 FPL Group, Inc. 11,200 732,704 Great Plains Energy, Inc. 4,200 133,644 Hawaiian Electric Industries 2,300 108,951 IDT Corporation* 1,700 37,655 KeySpan Corporation 93,500 3,440,800 Kinder Morgan, Inc. 1,100 65,010 Level 3 Communications, Inc.* 31,900 181,830 MDU Resources Group, Inc. 6,750 160,718 National Fuel Gas Co. 4,000 97,760 Nextel Communications, Inc. Class A* 46,100 1,293,566 Nicor, Inc. 2,700 91,908 NII Holdings, Inc. Class B* 14,900 1,111,987 NiSource, Inc. 16,000 351,040
See Notes to Financial Statements. 92
SHARES VALUE ----------- -------------- Northeast Utilities 198,700 $ 4,007,779 NSTAR 3,200 155,200 NTL, Inc.* 4,600 320,850 OGE Energy Corporation 5,200 125,788 Oneok, Inc. 56,400 1,245,312 Peoples Energy Corporation 2,200 92,488 Pepco Holdings, Inc. 9,498 185,591 PG&E Corporation* 24,900 691,473 Philadelphia Suburban Corporation 5,625 124,313 Piedmont Natural Gas Co., Inc. 1,900 82,574 Pinnacle West Capital Corporation 5,100 204,102 PPL Corporation 134,600 5,888,750 Progress Energy, Inc. 13,000 588,380 Progress Energy, Inc. Contingent Value Obligation*+ 3,100 1,209 Public Service Enterprise Group, Inc. 13,800 604,440 Puget Energy, Inc. 5,700 135,489 Questar Corporation 37,100 1,304,065 Qwest Communications International, Inc.* 64,200 277,344 SBC Communications, Inc. 202,200 5,271,354 SCANA Corporation 6,700 229,475 Sempra Energy 103,200 3,102,192 Southern Co. (The) 43,900 1,327,975 Sprint Corporation (FON Group) 278,300 4,569,686 TECO Energy, Inc. 11,400 164,274 Telephone & Data Systems, Inc. 2,100 131,355 TXU Corporation 19,600 464,912 UGI Corporation 2,600 88,140
SHARES VALUE ----------- -------------- UnitedGlobalCom, Inc. Class A* 4,600 $ 39,008 US Cellular Corporation* 600 21,300 Vectren Corporation 4,500 110,925 Verizon Communications, Inc. 626,624 21,981,970 Western Gas Resources, Inc. 1,100 51,975 WGL Holdings, Inc. 3,000 83,370 Wisconsin Energy Corporation 7,100 237,495 WPS Resources Corporation 2,200 101,706 Xcel Energy, Inc. 24,240 411,595 -------------- 139,222,235 -------------- TOTAL COMMON STOCK (Cost $1,047,866,578) 1,198,610,114 -------------- SHORT-TERM INVESTMENTS -- 13.7% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 37,239,515 37,239,515 Northern Institutional Liquid Assets Portfolio sec. 132,608,734 132,608,734 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $169,848,249) 169,848,249 --------------
PAR ---------- U.S. TREASURY OBLIGATION -- 0.3% U.S. Treasury Bill 0.89%, 01/22/04++++ (Cost $3,937,949) $3,940,000 3,938,064 -------------- TOTAL INVESTMENTS -- 110.5% (Cost $1,221,652,776) 1,372,396,427 LIABILITIES IN EXCESS OF OTHER ASSETS -- (10.5%) (130,609,062) -------------- NET ASSETS -- 100.0% $1,241,787,365 ==============
See Notes to Financial Statements. 93 GROWTH EQUITY FUND During the fourth quarter, growth stocks underperformed value stocks across every capitalization tier. In the large capitalization tier, the Russell 1000(R) Growth Index underperformed its value counterpart, the Russell 1000(R) Value Index, by 3.78% for the fourth quarter and 0.28% for the year. All sectors of the Russell 1000(R) Growth Index delivered positive returns during the quarter. The producer durables and materials & processing sectors were the best performers, while the consumer discretionary and autos & transportation sectors posted the weakest index performance. The fund is comprised of domestic, large-cap growth oriented stocks. The fund underperformed its benchmark, the Russell 1000(R) Growth Index, during the fourth quarter. Security selection in the healthcare and autos and transportation sectors detracted from benchmark-relative performance. At the sub-adviser level, TCW delivered solid absolute and benchmark-relative returns as a result of its strong security selection in the technology sector and, to a slightly lesser extent, security selection in the consumer discretionary and financial services sectors. Not Part of the Annual Report 94 GROWTH EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RUSSELL 1000(R) GROWTH RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- ---------------------- One Year 29.56% 29.56% 29.16% 29.75% Since Inception (8/27/01 -- 12/31/03) (3.79%) (3.67%) (4.03%) (3.51%)
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS RUSSELL 1000(R) GROWTH INDEX** ---------------- ------------------------------ 08/27/01 10000 10000 08/31/01 9492 9481 09/30/01 8506 8535 10/31/01 8945 8982 11/30/01 9837 9845 12/31/01 9812 9827 01/31/02 9642 9653 02/28/02 9266 9253 03/31/02 9642 9573 04/30/02 8858 8791 05/31/02 8619 8579 06/30/02 7954 7785 07/31/02 7345 7357 08/31/02 7351 7379 09/30/02 6566 6614 10/31/02 7207 7220 11/30/02 7646 7612 12/31/02 7050 7087 01/31/03 6874 6915 02/28/03 6861 6883 03/31/03 7043 7011 04/30/03 7577 7529 05/31/03 7966 7905 06/30/03 8060 8014 07/30/03 8286 8214 08/31/03 8506 8418 09/30/03 8336 8328 10/31/03 8864 8795 11/30/03 8845 8888 12/31/03 9134 9195
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Russell 1000(R) Growth Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Russell 1000(R) Growth Index is a large-cap index consisting of those Russell 1000(R) Index securities with greater-than-average growth orientation. Companies in this index tend to exhibit higher price-to-book and price-earnings-ratios, lower dividend yields and higher forecasted growth values than the value universe. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 95 GROWTH EQUITY FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ---------- -------------- COMMON STOCK -- 95.3% AUTO & TRANSPORTATION -- 4.6% FedEx Corporation 182,952 $ 12,349,260 Harley-Davidson, Inc. 602,100 28,617,813 Ryanair Holdings PLC ADR* 66,937 3,389,690 Southwest Airlines Co. 419,700 6,773,958 United Parcel Service, Inc. Class B 160,900 11,995,095 -------------- 63,125,816 -------------- CONSUMER DISCRETIONARY --19.3% Amazon.com, Inc.* 494,300 26,019,952 Apollo Group, Inc. Class A* 193,000 13,124,000 Bed Bath & Beyond, Inc.* 189,000 8,193,150 eBay, Inc.* 650,700 42,028,713 Electronic Arts, Inc.* 314,918 15,046,782 Kohl's Corporation* 150,000 6,741,000 Krispy Kreme Doughnuts, Inc.* 101,000 3,696,600 Lowe's Cos., Inc. 491,798 27,240,691 McDonald's Corporation 83,100 2,063,373 Nike, Inc. Class B 117,684 8,056,647 Pixar, Inc.* 142,800 9,894,612 Scripps Co. (E.W.) Class A 65,000 6,119,100 Starbucks Corporation* 807,900 26,709,174 Tiffany & Co. 492,834 22,276,097 Tribune Co. 80,000 4,128,000 Wal-Mart Stores, Inc. 425,900 22,593,995 Weight Watchers International, Inc.* 97,000 3,721,890 Yahoo!, Inc.* 425,200 19,206,284 -------------- 266,860,060 -------------- CONSUMER STAPLES -- 5.8% Coca-Cola Co. (The) 200,400 10,170,300 Colgate-Palmolive Co. 162,500 8,133,125 PepsiCo, Inc. 172,400 8,037,288 Procter & Gamble Co. 191,705 19,147,495 Sysco Corporation 229,300 8,536,839 Walgreen Co. 705,400 25,662,452 -------------- 79,687,499 -------------- FINANCIAL SERVICES -- 14.4% Accenture, Ltd. Class A* 155,000 4,079,600 AFLAC, Inc. 416,200 15,058,116 American Express Co. 80,000 3,858,400 American International Group, Inc. 77,400 5,130,072 Automatic Data Processing, Inc. 60,000 2,376,600 Capital One Financial Corporation 232,000 14,219,280 Citigroup, Inc. 425,333 20,645,664 Countrywide Financial Corporation 126,400 9,587,440 Fannie Mae 226,229 16,980,749 Fifth Third Bancorp 36,300 2,145,330 First Data Corporation 286,000 11,751,740 Franklin Resources, Inc. 79,450 4,136,167 Goldman Sachs Group, Inc. 42,500 4,196,025
SHARES VALUE ---------- -------------- M & T Bank Corporation 22,000 $ 2,162,600 Mellon Financial Corporation 62,100 1,994,031 Merrill Lynch & Co., Inc. 320,159 18,777,325 Moody's Corporation 103,000 6,236,650 Progressive Corporation (The) 384,295 32,123,219 Schwab (Charles) Corporation (The) 963,785 11,411,214 SLM Corporation 340,491 12,829,701 -------------- 199,699,923 -------------- HEALTHCARE -- 19.2% Allergan, Inc. 116,000 8,909,960 Amgen, Inc.* 664,504 41,066,347 Boston Scientific Corporation* 358,542 13,180,004 Cardinal Health, Inc. 32,600 1,993,816 Genentech, Inc.* 628,265 58,786,756 Johnson & Johnson 269,600 13,927,536 Lilly (Eli) & Co. 229,509 16,141,368 Medimmune, Inc.* 289,295 7,348,093 Medtronic, Inc. 396,900 19,293,309 Pfizer, Inc. 660,000 23,317,800 Quest Diagnostics, Inc. 60,685 4,436,680 St. Jude Medical, Inc.* 32,000 1,963,200 Stryker Corporation 133,200 11,323,332 Teva Pharmaceutical Industries, Ltd. ADR 170,000 9,640,700 UnitedHealth Group, Inc. 314,790 18,314,482 WellPoint Health Networks, Inc.* 30,000 2,909,700 Wyeth 160,000 6,792,000 Zimmer Holdings, Inc.* 79,839 5,620,666 -------------- 264,965,749 -------------- INTEGRATED OILS -- 0.5% BP PLC ADR 45,000 2,220,750 Exxon Mobil Corporation 130,000 5,330,000 -------------- 7,550,750 -------------- MATERIALS & PROCESSING -- 0.3% Air Products & Chemicals, Inc. 71,000 3,750,930 -------------- OTHER -- 2.7% 3M Co. 99,000 8,417,970 General Electric Co. 924,625 28,644,883 -------------- 37,062,853 -------------- OTHER ENERGY -- 0.6% Baker Hughes, Inc. 160,000 5,145,600 BJ Services Co.* 61,000 2,189,900 Schlumberger, Ltd. 21,500 1,176,480 -------------- 8,511,980 -------------- PRODUCER DURABLES -- 4.8% Applied Materials, Inc.* 558,650 12,541,693 Caterpillar, Inc. 166,275 13,804,150 Danaher Corporation 31,500 2,890,125 Ingersoll-Rand Co. Class A 29,850 2,026,218 Lennar Corporation Class A 74,527 7,154,592 Lockheed Martin Corporation 160,276 8,238,186
See Notes to Financial Statements. 96
SHARES VALUE ---------- -------------- Nokia Corporation ADR 315,700 $ 5,366,900 Tyco International, Ltd. 54,355 1,440,408 United Technologies Corporation 133,800 12,680,226 -------------- 66,142,498 -------------- TECHNOLOGY -- 21.9% Cisco Systems, Inc.* 2,347,807 57,028,233 Dell, Inc.* 1,323,927 44,960,561 EMC Corporation* 500,759 6,469,806 Hewlett-Packard Co. 125,500 2,882,735 Intel Corporation 1,590,310 51,207,982 Maxim Integrated Products, Inc. 528,120 26,300,376 Microsoft Corporation 1,278,400 35,207,136 Network Appliance, Inc.* 768,200 15,771,146 Oracle Corporation* 721,300 9,521,160 Qualcomm, Inc. 485,790 26,198,655 Red Hat, Inc.* 325,000 6,100,250 SAP AG ADR 49,200 2,044,752 Seagate Technology, Inc.*+ 5,600 0 Veritas Software Corporation* 85,000 3,158,600 Xilinx, Inc.* 434,600 16,836,404 -------------- 303,687,796 -------------- UTILITIES -- 1.2% Nextel Communications, Inc. Class A* 260,190 7,300,931 SBC Communications, Inc. 95,000 2,476,650 Vodafone Group PLC ADR 255,000 6,385,200 -------------- 16,162,781 -------------- TOTAL COMMON STOCK (Cost $1,173,743,447) 1,317,208,635 --------------
SHARES VALUE ---------- -------------- FOREIGN STOCK -- 0.7% GERMANY Bayerische Motoren Werke AG (Cost $8,241,659) 202,515 $ 9,387,520 -------------- SHORT-TERM INVESTMENTS -- 6.9% AB Funds Trust -- Money Market Fund (Retirement Class)(inf) 53,389,394 53,389,394 Northern Institutional Liquid Assets Portfolio sec. 42,718,010 42,718,010 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $96,107,404) 96,107,404 -------------- PAR ---------- U.S. TREASURY OBLIGATION -- 0.3% U.S. Treasury Bill 0.90%, 01/22/04++++ (Cost $3,803,019) $3,805,000 3,803,131 -------------- SHARES ---------- WARRANTS -- 0.0% TECHNOLOGY Orbital Sciences Corporation, Strike Price $4.82, 8/31/04* (Cost $0) 328 2,447 -------------- TOTAL INVESTMENTS -- 103.2% (Cost $1,281,895,529) 1,426,509,137 LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.2%)% (43,639,504) -------------- NET ASSETS -- 100.0% $1,382,869,633 ==============
See Notes to Financial Statements. 97 SMALL CAP EQUITY FUND Small-cap stocks continued to outperform large-cap stocks during the fourth quarter as the Russell 2000(R) Index returned 14.52%, while its large-cap counterpart, the Russell 1000(R) Index, returned 12.26%. For the year, the Russell 2000(R) Index gained a record high 47.25%, while the Russell 1000(R) Index increased 29.89%. Value stocks outpaced growth stocks in the small capitalization tier during the quarter as the Russell 2000(R) Value Index outperformed the Russell 2000(R) Growth Index by 3.69%. All sectors within the Russell 2000(R) Index delivered strong returns for the quarter. The fund is comprised of domestic, small-cap stocks with both value and growth style orientations.(1) The fund outperformed its benchmark, the Russell 2000(R) Index, during the fourth quarter. Security selection within the technology, healthcare and financial services sectors benefited benchmark-relative performance. At the sub-adviser level, HighRock delivered the strongest absolute and benchmark-relative returns and was rewarded for its security selection in the technology sector. High Rock also benefited from its overweight exposure and security selection in the materials and processing sector. - --------------- (1) Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Not Part of the Annual Report 98 SMALL CAP EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RUSSELL 2000(R) RETIREMENT CLASS* INSTITUTIONAL CLASS* RETAIL CLASS* INDEX** ----------------- -------------------- ------------- --------------- One Year 46.24% 46.38% 45.72% 47.25% Since Inception (8/27/01 -- 12/31/03) 6.01% 6.21% 5.78% 7.92%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
RETIREMENT CLASS RUSSELL 2000(R) INDEX** ---------------- ----------------------- 08/27/01 10000 10000 08/31/01 9770 9748 09/30/01 8317 8436 10/31/01 8845 8929 11/30/01 9541 9621 12/31/01 10084 10214 01/31/02 10000 10108 02/28/02 9656 9831 03/31/02 10543 10621 04/30/02 10497 10718 05/31/02 10122 10242 06/30/02 9587 9734 07/31/02 8125 8264 08/31/02 8148 8243 09/30/02 7445 7651 10/31/02 7682 7896 11/30/02 8363 8601 12/31/02 7842 8122 01/31/03 7636 7897 02/28/03 7429 7659 03/31/03 7506 7757 04/30/03 8233 8493 05/31/03 9021 9404 06/30/03 9220 9574 07/30/03 9663 10173 08/31/03 10168 10640 09/30/03 9923 10443 10/31/03 10773 11320 11/30/03 11125 11722 12/31/03 11469 11960
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Russell 2000(R) Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Russell 2000(R) Index is a small-cap equity index comprised of the 2,000 smallest companies in the Russell 3000(R) Index, which represents approximately 8% of the total market capitalization of the Russell 3000(R) Index. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 99 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 SHARES VALUE - ----------------- ----------- ------------- COMMON STOCK -- 95.3% AUTO & TRANSPORTATION -- 5.2% AAR Corporation 2,500 $ 37,375 Aftermarket Technology 1,300 17,836 Corporation* Airtran Holdings, Inc.* 26,800 318,920 Alaska Air Group, Inc.* 2,100 57,309 Alexander & Baldwin, Inc. 3,700 124,653 America West Holdings 900 11,160 Corporation Class B* American Axle & 14,000 565,880 Manufacturing Holdings, Inc.* AMR Corporation* 5,000 64,750 Arctic Cat, Inc. 1,100 27,170 Arkansas Best Corporation 2,000 62,780 ArvinMeritor, Inc. 19,600 472,752 Atlantic Coast Airlines 39,500 391,050 Holdings, Inc.* Autoliv, Inc. 29,700 1,118,205 Aviall, Inc.* 2,800 43,428 Bandag, Inc. 1,000 41,200 BorgWarner, Inc. 6,600 561,462 Central Freight Lines, Inc.* 46,800 830,700 CNF, Inc. 11,600 393,240 Coachmen Industries, Inc. 1,300 23,543 Collins & Aikman 2,800 12,124 Corporation* Continental Airlines, Inc. 5,900 95,993 Class B* Cooper Tire & Rubber Co. 5,900 126,142 Covenant Transport, Inc. 100 1,901 Class A* Dura Automotive Systems, 27,700 353,729 Inc. Class A* EGL, Inc.* 200 3,512 ExpressJet Holdings, Inc.* 51,700 775,500 Fleetwood Enterprises, Inc.* 60,900 624,834 Florida East Coast 1,300 43,030 Industries, Inc. Frontier Airlines, Inc.* 27,700 395,002 General Maritime 50,600 890,560 Corporation* Genesee & Wyoming, Inc. 600 18,900 Class A* Gentex Corporation 17,300 763,968 Goodyear Tire & Rubber Co. 13,600 106,896 (The) Greenbrier Cos., Inc.* 500 8,375 Gulfmark Offshore, Inc.* 25,200 352,800 Heartland Express, Inc. 300 7,257 Hunt (J.B.) Transport 12,900 348,429 Services, Inc.* Kansas City Southern* 14,600 209,072 Kirby Corporation* 1,400 48,832 Laidlaw International, Inc.* 85,200 1,178,316 Lear Corporation* 15,800 969,014 MAIR Holdings, Inc.* 900 6,552
SHARES VALUE ----------- ------------- Marine Products Corporation* 10,500 $ 197,400 Maritrans, Inc. 300 5,013 Modine Manufacturing Co. 31,500 849,870 Monaco Coach Corporation* 2,300 54,740 Northwest Airlines 5,500 69,410 Corporation* Offshore Logistics, Inc.* 13,600 333,472 Old Dominion Freight Line, 10,150 345,912 Inc.* OMI Corporation* 106,200 948,366 Oshkosh Truck Corporation 300 15,309 Overseas Shipholding Group, 1,400 47,670 Inc. P.A.M. Transportation 19,500 415,935 Services, Inc.* Pacer International, Inc.* 27,900 564,138 Petroleum Helicopters, Inc.* 300 7,350 Quality Distribution, Inc.* 31,800 621,690 RailAmerica, Inc.* 2,700 31,860 Raytech Corporation* 500 1,660 Sauer-Danfoss, Inc. 900 14,580 SCS Transportation, Inc.* 1,050 18,459 Seabulk International, Inc.* 1,100 8,932 Skywest, Inc. 16,100 291,732 Standard Motor Products, 300 3,645 Inc. Stoneridge, Inc.* 400 6,020 Strattec Security 100 6,091 Corporation* Superior Industries 1,100 47,872 International, Inc. TBC Corporation* 1,500 38,715 Teekay Shipping Corporation 14,800 844,044 Tenneco Automotive, Inc.* 3,800 25,422 Tower Automotive, Inc.* 5,100 34,833 U.S. Xpress Enterprises, 500 6,125 Inc. Class A* USF Corporation 2,400 82,056 UTI Worldwide, Inc. 18,100 686,533 Visteon Corporation 11,800 122,838 Wabtec Corporation 41,000 698,640 Yellow Roadway Corporation* 30,296 1,095,806 ------------- 21,046,289 ------------- CONSUMER DISCRETIONARY --20.0% 1-800-FLOWERS.COM, Inc. 20,900 231,154 Class A* 4Kids Entertainment, Inc.* 1,000 26,020 Aaron Rents, Inc. 59,350 1,194,716 ABM Industries, Inc. 39,700 691,177 Action Performance 26,400 517,440 Companies, Inc. Activision, Inc.* 6,200 112,840 Advance Auto Parts, Inc.* 13,600 1,107,040 Advanced Marketing Services, 900 10,260 Inc. Advisory Board Co. (The)* 15,500 541,105 Advo, Inc. 26,450 840,052 Aeropostale, Inc.* 14,200 389,364
See Notes to Financial Statements. 100
SHARES VALUE ----------- ------------- Alderwoods Group, Inc.* 3,300 $ 31,086 Alloy, Inc.* 75,800 394,918 Ambassadors International, 500 6,250 Inc. AMC Entertainment, Inc.* 74,400 1,131,624 American Eagle Outfitters, 83,900 1,375,960 Inc.* American Greetings 5,600 122,472 Corporation Class A* American Woodmark 200 11,010 Corporation AMN Healthcare Services, 37,400 641,784 Inc.* Angelica Corporation 800 17,600 AnnTaylor Stores 3,500 136,500 Corporation* Applica, Inc. 1,700 12,920 Arbitron, Inc.* 26,100 1,088,892 Asbury Automotive Group, 1,100 19,701 Inc.* Ask Jeeves, Inc.* 8,300 150,396 Atari, Inc.* 200 840 Bally Total Fitness Holding 2,800 19,600 Corporation* Banta Corporation 3,800 153,900 Barnes & Noble, Inc.* 23,400 768,690 Bassett Furniture 900 14,850 Industries, Inc. Beasley Broadcasting Group, 10,900 179,087 Inc. Class A* Big 5 Sporting Goods 100 2,095 Corporation* Big Lots, Inc.* 42,400 602,504 BJ's Wholesale Club, Inc.* 53,200 1,221,472 Black & Decker Corporation 10,600 522,792 Blair Corporation 600 14,604 Bob Evans Farms, Inc. 3,200 103,872 Boca Resorts, Inc. Class A* 2,200 32,912 Bombay Co., Inc. (The)* 18,800 153,032 Borders Group, Inc. 23,300 510,736 Bowne & Co., Inc. 1,400 18,984 Boyds Collection, Ltd.* 1,300 5,525 Brink's Co. (The) 11,000 248,710 Brookstone, Inc.* 850 18,114 Brown Shoe Co., Inc. 21,000 796,530 Buckle, Inc. (The)* 29,400 651,210 Burlington Coat Factory 11,200 236,992 Warehouse Corporation Callaway Golf Co. 73,500 1,238,475 Casella Waste Systems, Inc. 1,000 13,690 Class A* Catalina Marketing 21,100 425,376 Corporation* Cato Corporation Class A 1,500 30,750 CBRL Group, Inc. 8,800 336,688 CDI Corporation 800 26,200 CEC Entertainment, Inc.* 15,400 729,806
SHARES VALUE ----------- ------------- Central European 40 $ 1,264 Distribution Corporation* Central Garden & Pet Co.* 1,400 39,242 Central Parking Corporation 1,600 23,888 Century Business Services, 104,100 465,327 Inc.* Charlotte Russe Holding, 300 4,158 Inc.* Charming Shoppes, Inc.* 9,200 49,680 Charter Communications, Inc. 23,400 94,068 Class A* Children's Place Retail 100 2,673 Stores, Inc.* Choice Hotels International, 12,900 454,725 Inc. Claire's Stores, Inc. 18,400 346,656 Clark, Inc.* 39,200 754,208 CNET Networks, Inc.* 15,600 106,392 Coinstar, Inc.* 33,400 603,204 Cole National Corporation* 500 10,000 Concord Camera Corporation* 900 8,325 Consolidated Graphics, Inc.* 1,000 31,580 Convergys Corporation* 39,000 680,940 Copart, Inc.* 6,100 100,650 Corinthian Colleges, Inc.* 19,100 1,061,196 Cornell Cos., Inc.* 1,100 15,015 Corporate Executive Board 39,400 1,838,798 Co.* Corrections Corporation of 34,400 991,752 America* Cost Plus, Inc.* 10,600 434,600 CoStar Group, Inc.* 10,250 427,220 Courier Corporation 150 5,771 Cross Country Healthcare, 13,300 198,436 Inc.* Crown Media Holdings, Inc. 1,100 9,097 Class A* CSK Auto Corporation* 1,000 18,770 CSS Industries, Inc. 400 12,404 Cumulus Media, Inc. Class A* 15,100 332,200 Dave & Buster's, Inc.* 1,000 12,680 Deb Shops, Inc. 300 6,450 Department 56, Inc.* 1,100 14,410 Dillard's, Inc. Class A 5,600 92,176 Dollar Thrifty Automotive 9,000 233,460 Group, Inc.* Dorel Industries, Inc. Class 26,900 720,382 B* DoubleClick, Inc.* 29,900 305,578 Dover Motorsports, Inc. 1,300 4,550 Dress Barn, Inc.* 43,700 655,063 EarthLink, Inc.* 1,400 14,000 Education Management 80,600 2,501,823 Corporation* Elizabeth Arden, Inc.* 1,200 23,904 Emerson Radio Corporation* 500 1,880 Emmis Communications 700 18,935 Corporation Class A*
See Notes to Financial Statements. 101 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- Entercom Communications 12,700 $ 672,592 Corporation* Extended Stay America, Inc.* 6,400 92,672 Finish Line, Inc. (The) 16,400 491,508 Class A* Finlay Enterprises, Inc.* 600 8,478 First Consulting Group, 39,200 220,696 Inc.* Fisher Communications, Inc.* 200 10,200 Forrester Research, Inc.* 100 1,787 Fred's, Inc. 9,450 292,761 Friedman's, Inc. Class A 1,800 12,078 FTI Consulting, Inc.* 18,500 432,345 Furniture Brands 6,700 196,511 International, Inc.* G & K Services, Inc. Class A 1,500 55,125 Galyan's Trading Co., Inc.* 300 3,612 GameStop Corporation* 900 13,869 Gaylord Entertainment Co.* 1,100 32,835 Genesco, Inc.* 77,900 1,178,627 Getty Images, Inc.* 36,800 1,844,784 Global Imaging Systems, 3,200 101,600 Inc.* Goody's Family Clothing, 1,700 15,912 Inc. Gray Television, Inc. 3,200 48,384 Group 1 Automotive, Inc.* 1,100 39,809 Guess?, Inc.* 700 8,449 Guitar Center, Inc.* 6,700 218,286 Hampshire Group, Ltd.* 200 6,274 Handleman Co. 37,700 773,981 Haverty Furniture Cos., Inc. 1,400 27,804 Hiedrick & Struggles 800 17,440 International, Inc.* Hollywood Entertainment 64,200 882,750 Corporation* Hooker Furniture Corporation 300 12,240 Hot Topic, Inc.* 22,200 654,012 Hudson Highland Group, Inc.* 300 7,155 IHOP Corporation 1,700 65,416 Information Holdings, Inc.* 11,200 247,520 Infospace, Inc.* 900 20,745 Insight Communications Co., 4,000 41,240 Inc.* Insight Enterprises, Inc.* 27,500 517,000 Insurance Auto Auctions, 700 9,135 Inc.* Integrated Alarm Services 54,800 465,800 Group, Inc.* Inter Parfums, Inc. 100 2,259 Intertan, Inc.* 1,700 17,204 Jack in the Box, Inc.* 3,100 66,216 Jakks Pacific, Inc.* 2,200 28,952 Jarden Corporation* 550 15,037 Jo-Ann Stores, Inc.* 1,495 30,498 Journal Communications, Inc. 28,100 520,693 Class A Journal Register Co.* 2,800 57,960 K-Swiss, Inc. Class A 22,000 529,320 K2, Inc.* 2,600 39,546
SHARES VALUE ----------- ------------- Kellwood Co. 2,400 $ 98,400 Kelly Services, Inc. Class A 500 14,270 Kirkland's, Inc.* 16,700 294,922 Korn/Ferry International* 39,700 529,598 La-Z-Boy, Inc. 51,100 1,072,078 Landry's Restaurants, Inc. 2,000 51,440 Lawson Products, Inc. 400 13,272 Libbey, Inc. 500 14,240 Liberty Corporation 26,600 1,202,054 Lightbridge, Inc.* 600 5,460 Lin TV Corporation Class A* 78,300 2,020,923 Linens 'N Things, Inc.* 3,100 93,248 Lithia Motors, Inc. Class A* 600 15,126 Lodgenet Entertainment 51,200 935,936 Corporation* Lone Star Steakhouse & 1,400 32,452 Saloon, Inc. Mail-Well, Inc.* 1,300 5,993 Marcus Corporation 1,700 27,880 MarineMax, Inc.* 700 13,601 Marketwatch.Com, Inc.* 100 861 Martha Stewart Living 400 3,940 Omnimedia, Inc.* Marvel Enterprises, Inc.* 20,600 599,666 MAXIMUS, Inc.* 23,700 927,381 Maxwell Shoe Co., Inc. Class 1,200 20,364 A* Medical Staffing Network 38,300 419,385 Holdings, Inc.* Memberworks, Inc.* 600 16,302 Men's Warehouse, Inc.* 2,800 70,028 Metro One 1,700 4,420 Telecommunications, Inc.* Midas, Inc.* 1,300 18,590 Midway Games, Inc.* 1,700 6,596 Monro Muffler Brake, Inc.* 550 11,006 Movado Group, Inc. 700 19,761 Movie Gallery, Inc. 32,800 612,704 MPS Group, Inc.* 8,500 79,475 MSC Industrial Direct Co., 18,900 519,750 Inc. Class A* National Presto Industries, 400 14,460 Inc. Nautilus Group, Inc. 34,700 487,535 Navigant Consulting, Inc.* 30,600 577,116 Navigant International, 20,000 277,000 Inc.* Neoforma, Inc.* 200 2,128 Netopia, Inc.* 27,000 393,660 NetRatings, Inc.* 500 5,715 Nexstar Broadcasting Group, 57,300 785,583 Inc. Class A* NIC, Inc.* 600 4,818 Nu Skin Enterprises, Inc. 1,600 27,344 Class A O'Charley's, Inc.* 500 8,975 Oneida, Ltd. 1,300 7,657 Oshkosh B'gosh, Inc. 200 4,292
See Notes to Financial Statements. 102
SHARES VALUE ----------- ------------- Oxford Industries, Inc. 1,100 $ 37,268 Panera Bread Co. Class A* 8,200 324,146 Pantry, Inc.* 500 11,350 Papa John's International, 16,900 564,122 Inc.* Paxson Communications 900 3,465 Corporation* Payless ShoeSource, Inc.* 6,100 81,740 PC Connection, Inc.* 400 3,348 PDI, Inc.* 300 8,043 Pegasus Communications 200 5,616 Corportion* Pegasus Solutions, Inc.* 300 3,141 Pep Boys-Manny, Moe & Jack 4,300 98,341 Perry Ellis International, 300 7,734 Inc.* PF Chang's China Bistro, 4,300 218,784 Inc.* Phillips-Van Heusen 2,200 39,028 Corporation Playtex Products, Inc.* 45,500 351,715 Prime Hospitality 3,300 33,660 Corporation* Primedia, Inc.* 13,300 37,639 Pulitzer, Inc. 400 21,600 Quicksilver, Inc.* 72,000 1,276,560 R.H. Donnelley Corporation* 1,800 71,712 Radio One, Inc.* 27,700 541,535 Radio One, Inc. Class D* 35,000 675,500 Raindance Communications, 1,000 2,750 Inc.* Rare Hospitality 8,850 216,294 International, Inc.* RC2 Corporation* 800 16,600 Red Robin Gourmet Burgers, 9,500 289,180 Inc.* Regent Communications, Inc.* 1,100 6,985 Register.com, Inc.* 700 3,675 Rent-A-Center, Inc.* 45,050 1,346,094 Rent-Way, Inc.* 1,900 15,561 Resources Connection, Inc.* 29,300 800,183 Restoration Hardware, Inc.* 1,700 8,075 Revlon, Inc. Class A* 900 2,016 Rex Stores Corporation* 600 8,496 Right Management 350 6,531 Consultants, Inc.* Roto-Rooter, Inc. 800 36,880 Russ Berrie & Co., Inc. 800 27,120 Russell Corporation 30,700 539,092 Ryan's Family Steak Houses, 3,800 57,532 Inc.* Saga Communications, Inc. 44,600 826,438 Class A* Schawk, Inc. 400 5,452 School Specialty, Inc.* 1,300 44,213 SCP Pool Corporation* 51,750 1,691,190 Shoe Carnival, Inc.* 300 5,340 ShopKo Stores, Inc.* 51,800 789,950 Sina Corporation* 14,400 486,000
SHARES VALUE ----------- ------------- Sinclair Broadcast Group, 18,800 $ 280,496 Inc. Class A* Six Flags, Inc.* 23,600 177,472 Skechers USA, Inc. Class A* 1,300 10,595 Sohu.Com, Inc.* 4,700 141,047 Sonic Automotive, Inc. 2,100 48,132 SOURCECORP, Inc.* 1,400 35,882 Spanish Broadcasting 32,800 344,400 Systems, Inc. Class A* Speedway Motorsports, Inc. 300 8,676 Spherion Corporation* 5,400 52,866 Sports Authority, Inc. 1,077 41,357 (The)* Stage Stores, Inc.* 15,700 438,030 Stamps.com, Inc.* 3,300 20,460 Stanley Furniture Co., Inc. 8,600 270,900 Steak n Shake Co. (The)* 1,100 19,635 Stein Mart, Inc.* 1,700 14,008 Steinway Musical Intruments, 400 9,880 Inc.* Steven Madden, Ltd.* 800 16,320 Stewart Enterprises, Inc. 8,700 49,416 Class A* Strayer Education, Inc. 5,500 598,565 Stride Rite Corporation 36,200 411,956 Sturm Ruger & Co., Inc. 500 5,685 Systemax, Inc.* 800 5,328 Tech Data Corporation* 13,200 523,908 Teletech Holdings, Inc.* 1,800 20,340 Thomas Nelson, Inc. 200 3,866 THQ, Inc.* 2,800 47,348 Tommy Hilfiger Corporation* 55,400 820,474 Topps Co. (The) 23,400 240,084 Toro Co. 600 27,840 Tractor Supply Co.* 12,500 486,125 Trans World Entertainment 600 4,272 Corporation* Triarc Cos., Inc. Class B 1,800 19,404 Tuesday Morning Corporation* 14,600 441,650 Tupperware Corporation 31,700 549,678 Tweeter Home Entertainment 1,700 16,065 Group, Inc.* Ultimate Electronics, Inc.* 400 3,052 UniFirst Corporation 800 18,968 United Auto Group, Inc. 1,300 40,690 United Natural Foods, Inc.* 24,100 865,431 United Online, Inc.* 18,000 302,220 United Stationers, Inc.* 2,100 85,932 Universal Electronics, Inc.* 100 1,274 Urban Outfitters, Inc.* 5,900 218,595 Vail Resorts, Inc.* 1,700 28,900 Valueclick, Inc.* 5,500 49,940 Vans, Inc.* 1,400 15,974 Volt Information Sciences, 700 15,820 Inc.* Wackenhut Corrections 29,600 674,880 Corporation*
See Notes to Financial Statements. 103 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- Warnaco Group, Inc. (The)* 2,400 $ 38,280 Waste Connections, Inc.* 100 3,777 Watson Wyatt & Co. Holdings* 300 7,245 WESCO International, Inc.* 38,000 336,300 West Corporation* 39,400 915,262 West Marine, Inc.* 400 11,124 Wet Seal, Inc. Class A* 77,900 770,431 Whitehall Jewellers, Inc.* 600 5,922 Wilsons The Leather Experts, 1,500 5,235 Inc.* Wireless Facilities, Inc.* 17,800 264,508 Wolverine World Wide, Inc. 1,900 38,722 World Fuel Services 200 6,790 Corporation World Wrestling Federation 1,000 13,100 Entertainment, Inc. Young Broadcasting, Inc. 12,500 250,500 Class A* Zale Corporation* 19,500 1,037,400 ------------- 80,900,495 ------------- CONSUMER STAPLES -- 1.9% 7-Eleven, Inc.* 24,000 385,200 American Italian Pasta Co. 20,000 838,000 Class A* Arden Group, Inc. Class A 50 3,875 Casey's General Stores, Inc. 4,000 70,640 Chiquita Brands 39,800 896,694 International, Inc.* Coca-Cola Bottling Co. 100 5,349 Duane Reade, Inc.* 1,100 18,612 Farmer Brothers Co. 100 31,125 Flowers Foods, Inc. 2,850 73,530 Fresh Del Monte Produce, 14,400 343,152 Inc. Great Atlantic & Pacific Tea 500 4,200 Co., Inc.* Hain Celestial Group, Inc.* 1,800 41,778 Ingles Markets, Inc. Class A 800 8,216 International Multifoods 1,600 28,800 Corporation* Interstate Bakeries 4,000 56,920 Corporation J & J Snack Foods 600 22,656 Corporation* John B. Sanfillippo & Son* 500 25,520 Lance, Inc. 2,200 33,066 Long's Drug Stores 2,700 66,798 Corporation M & F Worldwide Corporation* 900 12,024 Nash Finch Co. 800 17,872 National Beverage 13,100 213,530 Corporation* Nature's Sunshine Products, 800 6,760 Inc. NBTY, Inc.* 13,700 367,982 Omega Protein Corporation* 500 3,860 Pathmark Stores, Inc.* 40,000 304,000 Peet's Coffee & Tea, Inc.* 7,400 128,834 Pilgrim's Pride Corporation 2,200 35,926
SHARES VALUE ----------- ------------- Ralcorp Holdings, Inc.* 21,500 $ 674,240 Riviana Foods, Inc. 400 10,956 Ruddick Corporation 46,000 823,400 Sanderson Farms, Inc. 100 4,030 Seaboard Corporation 30 8,460 Sensient Technologies 3,100 61,287 Corporation Smart & Final, Inc.* 1,100 11,088 SunOpta, Inc.* 22,200 204,906 Supervalu, Inc. 39,400 1,126,446 Weis Markets, Inc. 1,000 36,300 Wild Oats Markets, Inc.* 25,100 324,543 Winn-Dixie Stores, Inc. 20,900 207,955 ------------- 7,538,530 ------------- FINANCIAL SERVICES -- 18.1% 1st Source Corporation 1,100 23,661 21st Century Insurance Group 800 11,000 ABC Bancorp 900 14,373 Acadia Realty Trust REIT 1,400 17,500 Accredited Home Lenders 300 9,180 Holding Co.* Advanta Corporation 7,700 100,023 Advanta Corporation Class B 1,800 22,896 Advent Software, Inc.* 800 13,944 Affiliated Managers Group, 5,500 382,745 Inc.* AG Edwards, Inc 25,700 931,111 Alabama National Bancorp 400 21,020 Alexandria Real Estate 1,400 81,060 Equities, Inc. REIT Alfa Corporation 2,700 34,722 Allegiant Bancorp, Inc. 1,200 33,660 Alliance Data Systems 94,500 2,615,759 Corporation* Allmerica Financial 4,800 147,696 Corporation* Amcore Financial, Inc. 2,200 59,444 American Home Mortgage 792 17,828 Investment Corporation American Land Lease, Inc. 500 9,975 REIT American Mortgage Acceptance 700 11,410 Co. American National 400 10,592 Bankshares, Inc. American Physicians Capital, 800 14,720 Inc.* AmericanWest Bancorporation* 800 18,240 AmerUs Group Co. 23,900 835,783 AMLI Residential Properties 1,500 40,200 Trust REIT Anchor Bancorp, Inc. 1,800 44,820 Anthracite Capital, Inc. 4,300 47,601 REIT Anworth Mortgage Asset 3,500 48,755 Corporation REIT Arch Capital Group, Ltd.* 15,800 629,788
See Notes to Financial Statements. 104
SHARES VALUE ----------- ------------- Argonaut Group, Inc. 21,200 $ 329,448 Associated Banc-Corp 17,100 729,315 Associated Estates Realty 1,500 10,965 REIT Astoria Financial 34,800 1,294,559 Corporation Baldwin & Lyons, Inc. Class 725 20,344 B Bancfirst Corporation 300 17,611 Bancorpsouth, Inc. 34,300 813,596 Banctrust Financial Group, 600 9,612 Inc. Bank Mutual Corporation 2,568 29,250 Bank of Granite Corporation 1,200 26,136 Bank of Hawaii Corporation 27,800 1,173,160 Bank of the Ozarks, Inc. 6,900 155,319 BankAtlantic Bancorp, Inc. 3,800 72,200 Class A BankUnited Financial 13,500 348,165 Corporation Class A* Banner Corporation 900 22,635 Barra, Inc.* 9,000 319,410 Bay View Capital Corporation 2,000 4,280 Bedford Property Investors, 1,200 34,356 Inc. REIT Berkshire Hills Bancorp, 500 18,100 Inc. BISYS Group, Inc. (The)* 54,400 809,472 Boston Private Financial 16,400 407,376 Holdings, Inc. Boykin Lodging Co., Inc. 1,600 14,640 REIT Brandywine Realty Trust REIT 2,500 66,925 Brookfield Properties 13,200 378,840 Corporation Brookline Bancorp, Inc. 5,200 79,768 BRT Realty Trust REIT 300 8,655 Bryn Mawr Bank Corporation 300 7,347 BSB Bancorp, Inc. 700 27,650 C&F Financial Corporation 200 7,940 Camco Financial Corporation 700 12,131 Camden National Corporation 700 21,252 Capital Automotive REIT 2,200 70,400 Capital Bancorp, Ltd. 400 11,360 Capital City Bank Group, 550 25,295 Inc. Capital Corporation of the 400 15,856 West* Capstead Mortgage 900 15,102 Corporation REIT Cash America International, 2,500 52,950 Inc. Cathay General Bancorp, Inc. 646 35,969 CB Bancshares, Inc. 430 26,918 CCBT Financial Cos., Inc. 800 27,960 CCC Information Services 300 5,070 Group* Center Bancorp, Inc. 400 7,864 Center Financial Corporation 300 8,175 Central Coast Bancorp* 700 12,698 Central Pacific Financial 600 18,024 Corporation
SHARES VALUE ----------- ------------- Century Bancorp, Inc. Class 300 $ 10,638 A* Certegy, Inc.* 13,900 455,920 CFS Bancorp, Inc. 900 13,356 CharterMac 2,100 44,373 Chemical Financial 2,180 79,330 Corporation Chittenden Corporation 3,055 102,770 Citizens Banking Corporation 3,900 127,608 Citizens First Bancorp, Inc. 800 18,240 Citizens South Banking 800 11,160 Corporation City Bank Lynwood 700 22,750 City Holdings Co. 600 21,000 City National Corporation 17,700 1,099,524 CNA Surety Corporation* 1,400 13,314 Coastal Bancorp, Inc. 400 16,444 Coastal Financial 220 3,881 Corporation Colonial Bancgroup, Inc. 67,800 1,174,296 Colonial Properties Trust 1,600 63,360 REIT Columbia Bancorp 200 6,390 Columbia Bancorp Oregon 200 3,450 Columbia Banking System, 1,200 25,992 Inc. Commerce Group, Inc. 15,900 628,050 Commercial Bacshares, Inc. 200 6,712 Commercial Federal 4,000 106,840 Corporation Commercial Net Lease Realty, 4,000 71,200 Inc. REIT Community Bank System, Inc. 1,000 49,000 Community Banks, Inc. 510 20,048 Community First Bankshares, 1,300 37,622 Inc. Community Trust Bancorp, 1,189 35,908 Inc. CompuCredit Corporation* 500 10,640 Connecticut Bancshares, Inc. 800 41,232 Cornerstone Realty Income 5,200 45,552 Trust, Inc. REIT Corporate Office Properties 2,600 54,600 Trust REIT Correctional Properties 900 25,920 Trust REIT Corus Bankshares, Inc. 1,400 44,184 Crawford & Co. Class B 900 6,354 Credit Acceptance 800 12,240 Corporation* CRIIMI MAE, Inc. REIT* 1,100 11,473 CVB Financial Corporation 32,918 634,979 Delphi Financial Group, Inc. 13,200 475,200 Class A Deluxe Corporation 28,600 1,182,038 Digital Insight Corporation* 15,250 379,725 Direct General Corporation 11,400 377,340 Donegal Group, Inc. Class A 300 6,606 Doral Financial Corporation 26,550 857,034 Downey Financial Corporation 10,300 507,790 E*TRADE Financial 41,900 530,035 Corporation*
See Notes to Financial Statements. 105 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- Eastern Virginia Bankshares 300 $ 8,649 Eastgroup Properties REIT 1,600 51,808 eFunds Corporation* 11,500 199,525 Electro Rent Corporation* 48,300 644,322 EMC Insurance Group, Inc. 200 4,228 Enstar Group, Inc.* 100 4,705 Entertainment Properties 1,800 62,478 Trust REIT Equity Inns, Inc. REIT 3,700 33,485 Equity One, Inc. REIT 2,640 44,563 ESB Financial Corporation 600 9,834 Essex Property Trust, Inc. 1,000 64,220 REIT Evertrust Financial Group, 400 12,736 Inc. Exchange National 300 10,845 Bancshares, Inc. Factset Research Systems 15,000 573,150 Inc. Farmers Capital Bank 400 13,604 Corporation FBL Financial Group, Inc. 1,100 28,380 Class A Federated Investors, Inc. 11,000 322,960 Class B FelCor Lodging Trust, Inc. 4,400 48,752 REIT Fidelity Bankshares, Inc. 1,200 37,680 Financial Federal 1,200 36,660 Corporation* Financial Industries 700 9,870 Corporation Financial Institutions, Inc. 800 22,584 First Albany Cos., Inc. 500 7,020 First American Corporation 39,100 1,164,007 First Bancorp 200 6,282 First Busey Corporation 300 8,100 First Charter Corporation 2,700 52,785 First Citizens Banc 100 2,840 Corporation First Citizens BancShares, 600 72,918 Inc. Class A First Commonwealth Financial 5,300 75,578 Corporation First Community Bancorp 1,100 39,754 First Community Bancshares, 650 21,554 Inc. First Defiance Financial 400 10,660 Corporation First Essex Bancorp, Inc. 500 29,070 First Federal Capital 1,700 38,284 Corporation First Finanacial Corporation 1,200 36,012 First Financial Bancorp 2,700 43,065 First Financial Bankshares, 1,050 43,785 Inc. First Financial Holdings, 800 25,008 Inc. First Indiana Corporation 1,000 18,750 First Industrial Realty 3,600 121,500 Trust, Inc. REIT First M&F Corporation 300 11,370
SHARES VALUE ----------- ------------- First Merchants Corporation 1,686 $ 43,027 First National Corporation 720 21,607 First Niagara Financial 6,400 95,424 Group, Inc. First Oak Brook Bancshares, 550 16,506 Inc. First of Long Island 300 12,900 Corporation (The) First Place Financial 1,100 21,483 Corporation First Republic Bank 20,600 737,480 First Sentinal Bancorp, Inc. 1,900 40,014 First State Bancorporation 500 17,375 First United Corporation 500 12,185 Firstbank Corporation 420 13,087 FirstFed America Bancorp, 1,400 36,442 Inc. FirstFed Financial 18,900 822,150 Corporation* Flagstar Bancorp, Inc. 38,000 813,960 FloridaFirst Bancorp, Inc. 500 16,550 Flushing Financial 1,350 24,678 Corporation FNB Corporation North 300 6,354 Carolina FNB Corporation Virginia 700 20,790 Foothill Independent Bancorp 300 7,098 Fremont General Corporation 55,700 941,887 Frontier Financial 600 19,896 Corporation GA Financial, Inc. 400 13,892 Gabelli Asset Management, 200 7,960 Inc. Class A Gables Residential Trust 2,500 86,850 REIT GATX Corporation 3,800 106,324 GB&T Bancshares, Inc. 100 2,363 Getty Realty Corporation 700 18,305 REIT Glacier Bancorp, Inc. 1,140 36,936 Glenborough Realty Trust, 1,600 31,920 Inc. REIT Glimcher Realty Trust REIT 1,400 31,332 Global Payments, Inc. 25,700 1,210,984 Gold Banc Corporation, Inc. 3,200 44,992 Great American Financial 600 9,732 Resources, Inc. Great Lakes REIT 1,300 20,410 Great Southern Bancorp, Inc. 300 13,911 Greater Bay Bancorp 4,700 133,856 Greater Community Bancorp 305 5,176 Hancock Holding Co. 1,200 65,484 Hanmi Financial Corporation 800 15,816 Harbor Florida Bancshares, 700 20,797 Inc. Harleysville Group, Inc. 2,700 53,703 Hawthorne Financial 900 25,182 Corporation* HCC Insurance Holdings, Inc. 12,200 387,960 Health Care REIT, Inc. 4,500 162,000 HealthExtras, Inc.* 17,150 229,810 Heartland Financial USA, 450 8,370 Inc.
See Notes to Financial Statements. 106
SHARES VALUE ----------- ------------- Henry (Jack) & Associates, 38,800 $ 798,504 Inc. Heritage Commerce 1,000 12,250 Corporation* Heritage Property Investment 1,800 51,210 Trust REIT Hibernia Corporation Class A 42,500 999,175 Highwoods Properties, Inc. 4,800 121,920 REIT Home Properties, Inc. REIT 2,800 113,092 Homestore, Inc.* 7,800 36,894 Horace Mann Educators 3,500 48,895 Corporation* Horizon Financial 1,000 17,510 Corporation Hudson River Bancorp, Inc. 1,400 54,642 Humboldt Bancorp 1,100 19,272 Hypercom Corporation* 1,200 5,712 IBERIABANK Corporation 500 29,500 Impac Mortgage Holdings, 4,500 81,945 Inc. REIT Independence Community Bank 23,200 834,504 Corporation Independence Holding Co. 300 7,125 Independent Bank Corporation 369 10,465 Independent Bank Corporation 100 2,882 MA IndyMac Bancorp, Inc. 34,800 1,036,692 Infinity Property & Casualty 10,650 351,983 Corporation Innkeepers USA Trust REIT 2,400 20,088 Integra Bank Corporation 1,400 30,768 Intercept Group, Inc.* 1,500 16,935 Interchange Financial 700 17,710 Service Investment Technology Group, 24,400 394,060 Inc.* Investors Financial Services 31,600 1,213,756 Corporation Investors Real Estate Trust 3,200 31,680 REIT iPayment, Inc.* 9,700 329,800 IPC Holdings, Ltd. 19,700 767,118 Irwin Financial Corporation 18,600 584,040 ITLA Capital Corporation* 400 20,040 Jefferies Group, Inc. 27,600 911,352 John H. Harland Co. 13,800 376,740 Kansas City Life Insurance 300 13,860 Co. Keystone Property Trust REIT 2,000 44,180 Kilroy Realty Corporation 2,300 75,325 REIT Klamath First Bancorp, Inc. 600 15,924 Knight Trading Group, Inc.* 53,700 786,168 Koger Equity, Inc. REIT 1,700 35,581 Kramont Realty Trust REIT 1,900 34,390 La Quinta Corporation REIT* 12,500 80,125 LaBranche & Co., Inc. 8,900 103,863 Lakeland Bancorp, Inc. 520 8,351
SHARES VALUE ----------- ------------- Lakeland Financial 500 $ 17,660 Corporation Landamerica Financial Group, 17,500 914,550 Inc. LaSalle Hotel Properties 2,000 37,100 REIT Leucadia National 1 43 Corporation Lexington Corporate 3,300 66,627 Properties Trust REIT Local Financial Corporation* 1,600 33,344 LSB Bancshares, Inc. 800 13,920 LTC Properties, Inc. REIT 1,200 17,688 Macatawa Bank Corporation 225 6,370 MAF Bancorp, Inc. 2,474 103,661 Main Street Banks, Inc. 100 2,650 MainSource Financial Group, 546 16,746 Inc. Manufactured Home 400 15,060 Communities, Inc. REIT Markel Corporation* 5,500 1,394,304 MASSBANK Corporation 300 12,780 MB Financial, Inc. 900 32,760 MBT Financial Corporation 100 1,651 MCG Capital Corporation 2,500 48,750 McGrath RentCorp 300 8,175 Medallion Financial 1,300 12,337 Corporation Mercantile Bank Corporation 50 1,825 Merchant Bancshares, Inc. 400 12,220 MeriStar Hospitality 5,200 33,852 Corporation REIT* Metris Cos., Inc. 2,600 11,544 MFA Mortgage Investments, 5,300 51,675 Inc. REIT Mid-America Apartment 1,500 50,370 Communities, Inc. REIT Mid-State Bancshares 2,100 53,424 Midland Co. 600 14,172 Midwest Banc Holdings, Inc. 100 2,225 Mission West Properties, 1,300 16,835 Inc. REIT MutualFirst Financial, Inc. 400 10,136 NASB Financial, Inc. 100 4,191 National Bankshares, Inc. 300 14,811 National Health Investors, 2,000 49,760 Inc. REIT National Health Realty, Inc. 600 11,820 REIT National Penn Bancshares, 1,150 36,938 Inc. National Processing, Inc.* 700 16,485 National Western Life 200 30,970 Insurance Co. Class A* Nationwide Health 5,300 103,615 Properties, Inc. REIT Navigators Group, Inc.* 300 9,261 NBC Capital Corporation 400 10,668 NBT Bancorp, Inc. 2,600 55,744 NCO Group, Inc.* 12,900 293,733
See Notes to Financial Statements. 107 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- NDCHealth Corporation 23,400 $ 599,508 NetBank, Inc. 58,900 786,315 New Century Financial 23,550 934,229 Corporation Newcastle Investment 2,500 67,750 Corporation REIT Northern States Financial 200 5,782 Corporation Northwest Bancorp, Inc. 700 14,952 NYMAGIC, Inc. 200 5,484 Oak Hill Financial, Inc. 300 9,243 OceanFirst Financial 300 8,148 Corporation Ocwen Financial Corporation* 3,500 31,010 Odyssey Re Holdings 18,300 412,665 Corporation Ohio Casualty Corporation* 5,000 86,800 Old Republic International 16,350 414,636 Corporation Omega Financial Corporation 700 26,943 Omega Healthcare Investors, 1,400 13,062 Inc. REIT Pab Bankshares, Inc. 600 9,324 Pacific Capital Bancorp 1,200 44,184 Pacific Union Bank 400 10,212 Parkvale Financial 400 10,740 Corporation Parkway Properties, Inc. 900 37,440 REIT Partners Trust Financial 600 20,400 Group, Inc. Patriot Bank Corporation 600 17,166 Penn-America Group, Inc. 800 10,616 Pennfed Financial Services, 300 10,050 Inc. Pennsylvania Real Estate 251 9,111 Investment Trust Peoples Bancorp, Inc. 940 27,739 Peoples Holding Co. 750 24,750 PFF Bancorp, Inc. 1,180 42,810 Philadelphia Consolidated 1,100 53,713 Holding Corporation* Phoenix Cos., Inc. 8,500 102,340 PICO Holdings, Inc.* 600 9,402 Platinum Underwriters 6,200 186,000 Holdings, Ltd. PMA Capital Corporation 1,900 9,728 Class A PMI Group, Inc. (The) 33,100 1,232,312 Portal Software, Inc.* 63,900 430,047 Portfolio Recovery 17,100 454,005 Associates, Inc.* Post Properties, Inc. REIT 2,900 80,968 Prentiss Properties Trust 3,000 98,970 REIT Presidential Life 1,900 25,004 Corporation PRG-Schultz International, 69,000 338,100 Inc.* Price Legacy Corporation 1,700 6,477 REIT* PrivateBancorp, Inc. 10,000 455,200 ProAssurance Corporation* 300 9,645
SHARES VALUE ----------- ------------- Prosperity Bancshares, Inc. 500 $ 11,260 Provident Bankshares 2,100 61,824 Corporation Provident Financial 300 10,881 Holdings, Inc. Provident Financial 4,300 81,270 Services, Inc. PS Business Parks, Inc. REIT 1,200 49,512 Quaker City Bancorp, Inc. 200 9,310 R&G Financial Corporation 24,300 967,140 Class B RAIT Investment Trust REIT 1,900 48,640 Ramco-Gershenson Properties 1,000 28,300 REIT Raymond James Financial, 28,300 1,066,910 Inc. Reckson Associates Realty 4,500 109,350 Corporation REIT Redwood Trust, Inc. REIT 1,200 61,020 RenaissanceRe Holdings, Ltd. 14,000 686,700 Republic Bancorp, Inc. 10,189 137,450 Republic Bancorp, Inc. Class 600 11,724 A Republic Bancshares, Inc. 800 25,176 Rewards Network, Inc.* 66,000 703,560 Riggs National Corporation 1,400 23,142 RLI Corporation 1,600 59,936 Royal Bancshares of 406 10,353 Pennsylvania, Inc. Class A Ryder System, Inc. 24,500 836,675 S&T Bancorp, Inc. 1,300 38,870 S.Y. Banc Corporation 100 2,056 S1 Corporation* 34,500 277,725 Safety Insurance Group, Inc. 900 15,399 Sanders Morris Harris Group, 1,000 12,400 Inc. Sandy Spring Bancorp, Inc. 500 18,700 Santander Bancorp 400 9,740 Saul Centers, Inc. REIT 1,000 28,670 Saxon Capital, Inc.* 2,300 48,185 Seacoast Banking Corporation 540 9,374 of Florida Seacoast Financial Services 2,400 65,784 Corporation Second Bancorp, Inc. 700 18,480 Security Bank Corporation 200 6,300 Selective Insurance Group, 10,800 349,488 Inc. Senior Housing Properties 4,100 70,643 Trust REIT Silicon Valley Bancshares* 20,500 739,435 Simmons First National 1,300 36,270 Corporation Class A Sizeler Property Investors 1,000 10,710 REIT SL Green Realty Corporation 2,900 119,045 REIT Sotheby's Holdings, Inc. 65,400 893,364 Class A*
See Notes to Financial Statements. 108
SHARES VALUE ----------- ------------- SoundView Technology Group, 1,480 $ 22,925 Inc.* South Financial Group, Inc. 5,300 147,658 Southern Financial Bancorp, 430 18,520 Inc. Southside Bancshares, Inc. 835 15,448 Southwest Bancorp of Texas, 13,700 532,245 Inc. Southwest Bancorp, Inc. 1,000 17,880 Sovran Self Storage, Inc. 1,300 48,295 REIT Stancorp Financial Group, 12,900 811,152 Inc. State Auto Financial 1,200 28,068 Corporation State Bancorp, Inc. 325 7,885 State Financial Services 500 13,280 Corporation Class A Staten Island Bancorp, Inc. 4,800 108,000 Sterling Bancorp 375 10,688 Sterling Bancshares, Inc. 1,200 15,996 Sterling Financial 1,400 38,850 Corporation Sterling Financial 1,310 44,841 Corporation Washington Stewart Information Services 21,900 888,045 Corporation* Summit Bancshares, Inc. 300 8,358 Summit Properties, Inc. REIT 2,300 55,246 Sun Bancorp, Inc. 300 5,688 Sun Bancorp, Inc. NJ* 625 16,500 Sun Communities, Inc. REIT 900 34,830 Susquehanna Bancshares, Inc. 3,600 90,036 SWS Group, Inc. 1,300 23,140 Tanger Factory Outlet Center 300 12,210 REIT Taubman Centers, Inc. REIT 1,800 37,080 Taylor Capital Group, Inc. 300 7,989 Texas Capital Bancshares, 27,300 394,813 Inc.* Texas Regional Banchshares, 300 11,100 Inc. Class A TierOne Corporation* 2,000 45,920 Tompkins Trustco, Inc. 540 24,867 Town & Country Trust REIT 1,100 27,885 Transcontinental Realty 200 3,346 Investors, Inc. REIT* Triad Guaranty, Inc.* 700 35,245 Trico Bancshares 500 15,780 Troy Financial Corporation 600 21,000 U.S. Restaurant Properties, 1,700 28,968 Inc. REIT UCBH Holdings, Inc. 33,000 1,286,010 UICI* 31,800 422,304 UMB Financial Corporation 1,500 71,310 Umpqua Holdings Corporation 748 15,551 Union Bankshares Corporation 600 18,300 United Community Financial 2,700 30,807 Corporation United Fire & Casualty Co. 700 28,252 United National Bancorp 1,700 60,741
SHARES VALUE ----------- ------------- United Rentals, Inc.* 46,600 $ 897,516 United Security Bancshares 100 2,728 Universal American Financial 2,100 20,811 Corporation* Universal Health Realty 900 27,090 Income Trust REIT Unizan Financial Corporation 2,000 40,500 Urstadt Biddle Properties, 1,900 26,885 Inc. Class A REIT USB Holding Co., Inc. 940 18,227 Ventas, Inc. REIT 6,700 147,400 Virginia Financial Group, 200 7,104 Inc. Warwick Community Bancorp, 300 10,320 Inc. Washington Real Estate 1,400 40,880 Investment Trust REIT Washington Trust Bancorp, 800 20,960 Inc. Wayne Bancorp, Inc. 520 14,004 Waypoint Financial 2,715 58,888 Corporation Webster Financial 19,500 894,270 Corporation WesBanco, Inc. 1,600 44,304 West Coast Bancorp 1,400 29,876 Westcorp 13,300 486,115 Westfield Financial, Inc. 400 9,504 WFS Financial, Inc.* 100 4,246 Willow Grove Bancorp, Inc. 900 15,984 Winston Hotels, Inc. REIT 2,000 20,400 Wintrust Financial 24,400 1,100,440 Corporation WSFS Financial Corporation 500 22,425 Yardville National Bancorp 700 18,018 Zenith National Insurance 24,600 800,730 Corporation ------------- 73,418,964 ------------- HEALTHCARE -- 10.2% aaiPharma, Inc.* 11,100 278,832 Abgenix, Inc.* 7,400 92,204 Able Laboratories, Inc.* 10,700 193,349 Aclara Biosciences, Inc.* 700 2,555 Alaris Medical Systems, 18,100 275,301 Inc.* Albany Molecular Research, 2,400 36,048 Inc.* Alexion Pharmaceuticals, 1,800 30,636 Inc.* Alkermes, Inc.* 12,500 168,750 Alliance Imaging, Inc.* 1,100 4,070 Alpharma, Inc. Class A 3,200 64,320 America Service Group, Inc.* 10,000 309,090 American Healthways, Inc.* 13,250 316,278 American Medical Security 400 8,968 Group, Inc.* American Pharmaceutical 32,950 1,107,120 Partners, Inc.* Amerigroup Corporation* 4,800 204,720 Andrx Corporation* 12,900 310,116 Angiotech Pharmaceuticals, 9,700 446,200 Inc.* Aphton Corporation* 300 1,800
See Notes to Financial Statements. 109 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- Applera 2,300 $ 31,993 Corporation -- Celera Genomics Group* Arena Pharmaceuticals, Inc.* 500 3,100 Arrow International, Inc. 10,500 262,290 Atrix Laboratories, Inc.* 24,300 584,172 Beverly Enterprises, Inc.* 700 6,013 Bio-Rad Laboratories, Inc. 12,400 715,108 Class A* Biopure Corporation* 800 1,904 Biosite, Inc.* 17,800 515,310 Bradley Pharmaceuticals, 9,800 249,214 Inc.* Bruker Biosciences, Inc.* 563 2,562 Cell Genesys, Inc.* 3,100 40,114 Centene Corporation* 8,500 238,085 Cerner Corporation* 100 3,785 Chattem, Inc.* 12,900 230,910 Chronimed, Inc.* 600 5,088 Conmed Corporation* 2,600 61,880 Cubist Pharmaceuticals, 1,200 14,592 Inc.* CuraGen Corporation* 1,300 9,529 Curative Health Services, 200 2,760 Inc.* D&K Healthcare Resources, 900 12,204 Inc. Dade Behring Holdings, Inc.* 500 17,870 Datascope Corporation 1,000 35,850 DaVita, Inc.* 65,500 2,554,499 Decode Genetics, Inc.* 2,800 22,932 Digene Corporation* 8,900 356,890 DJ Orthopedics, Inc.* 200 5,360 Enzon, Inc.* 44,600 535,200 Epix Medical, Inc.* 12,500 203,500 First Horizon Pharmaceutical 600 6,720 Corporation* Gene Logic, Inc.* 2,800 14,532 Genesis Healthcare 1,100 25,058 Corporation* Gentiva Health Services, 300 3,792 Inc.* GTC Biotherapeutics, Inc.* 300 957 Guilford Pharmaceuticals, 2,000 13,560 Inc.* Haemonetics Corporation* 700 16,723 Hanger Orthopedic Group, 1,900 29,583 Inc.* Health Net, Inc.* 23,500 768,450 Healthcare Services Group, 800 15,432 Inc. Hologic, Inc.* 1,800 31,194 Humana, Inc.* 25,600 584,960 Icon PLC ADR* 5,000 218,000 ID Biomedical Corporation* 18,100 214,666 Immunogen, Inc.* 3,300 16,665 IMPAC Medical Systems, Inc.* 26,200 669,672 Incyte Corporation* 6,500 44,460 Intuitive Surgical, Inc.* 15,000 256,350 Invacare Corporation 1,300 52,481
SHARES VALUE ----------- ------------- Inverness Medical 200 $ 4,356 Innovations, Inc.* Invitrogen Corporation* 13,400 938,000 Kindred Healthcare, Inc.* 1,100 57,178 KV Pharmaceutical Co. Class 9,787 249,569 A* Landauer, Inc. 200 8,156 Lexicon Genetics, Inc.* 3,400 20,026 Ligand Pharmaceuticals, Inc. 37,200 546,468 Class B* Martek Biosciences 7,900 513,263 Corporation* Matria Healthcare, Inc.* 700 14,791 Maxygen, Inc.* 1,800 19,134 Medarex, Inc.* 6,600 41,118 Medicines Co.* 19,850 584,781 Medicis Pharmaceutical 8,900 634,570 Corporation Class A MedQuist, Inc.* 9,900 158,994 Meridian Diagnostics, Inc. 300 3,129 Merit Medical Systems, Inc.* 11,600 258,216 MIM Corporation* 300 2,109 Molina Healthcare, Inc.* 89,200 2,250,515 Myogen, Inc.* 12,200 174,460 Nabi Biopharmaceuticals, 1,700 21,607 Inc.* NeighborCare, Inc.* 2,400 47,400 Neose Technologies, Inc.* 900 8,280 Neurocrine Biosciences, 4,200 229,068 Inc.* Ocular Sciences, Inc.* 1,200 34,452 Odyssey HealthCare, Inc.* 14,125 413,298 Omnicare, Inc. 18,800 759,332 Omnicell, Inc.* 12,000 194,400 Option Care, Inc.* 109,500 1,169,460 Orthodontic Centers of 4,500 36,225 America, Inc.* Orthofix International N.V.* 5,200 254,696 Owens & Minor, Inc. 45,300 992,523 PacifiCare Health Systems, 8,400 567,840 Inc.* PAREXEL International 1,300 21,138 Corporation* Pediatrix Medical Group, 13,700 754,733 Inc.* Per-Se Technologies, Inc.* 66,000 1,007,160 Perrigo Co.* 27,100 426,012 Pharmaceutical Product 39,000 1,051,830 Development, Inc.* Pharmaceutical Resources, 10,400 677,560 Inc.* Pharmacopeia, Inc.* 2,100 29,841 Praecis Pharmaceuticals, 4,000 25,760 Inc.* Priority Healthcare 15,800 380,938 Corporation Class B* Protein Design Labs, Inc.* 32,200 576,380 Province Healthcare Co.* 37,200 595,200 PSS World Medical, Inc.* 52,700 636,089 QLT PhotoTherapeutics, Inc.* 26,100 491,985
See Notes to Financial Statements. 110
SHARES VALUE ----------- ------------- RehabCare Group, Inc.* 9,500 $ 201,970 Respironics, Inc.* 42,600 1,920,834 Savient Pharmaceuticals, 3,100 14,291 Inc.* Select Medical Corporation* 20,200 328,856 Serologicals Corporation* 200 3,720 Sirna Therapeutics, Inc.* 100 520 Sola International, Inc.* 2,600 48,880 Specialty Laboratories, 100 1,679 Inc.* Stericycle, Inc.* 20,700 966,690 Steris Corporation* 36,200 818,120 Sunrise Senior Living, Inc.* 1,400 54,236 Sybron Dental Specialties, 700 19,670 Inc.* Taro Pharmaceuticals 10,400 670,800 Industries, Ltd.* Theragenics Corporation* 2,700 14,769 Thoratec Corporation* 13,300 173,033 Transkaryotic Therapies, 900 14,049 Inc.* United Surgical Partners 23,700 793,476 International, Inc.* US Oncology, Inc.* 62,500 672,500 VCA Antech, Inc.* 50,800 1,573,784 Ventana Medical Systems* 2,500 98,500 Viasys Healthcare, Inc.* 2,700 55,620 Vicuron Pharmaceuticals, 13,500 251,775 Inc.* VistaCare, Inc. Class A* 9,200 323,380 VISX, Inc.* 20,900 483,835 Vital Signs, Inc. 500 16,350 West Pharmaceutical 1,000 33,900 Services, Inc. Wright Medical Group, Inc.* 7,200 219,168 Zoll Medical Corporation* 7,725 274,083 ------------- 41,486,854 ------------- INTEGRATED OILS -- 0.0% KCS Energy, Inc.* 1,900 20,045 Petrocorp, Inc.* 500 6,730 ------------- 26,775 ------------- MATERIALS & PROCESSING -- 7.8% Aaon, Inc.* 200 3,882 Aceto Corporation 8,600 219,644 Acuity Brands, Inc. 3,800 98,040 Agrium, Inc. 54,600 898,716 Airgas, Inc. 14,900 320,052 AK Steel Holding 8,700 44,370 Corporation* Albany International 2,200 74,580 Corporation Class A Albemarle Corporation 2,700 80,919 Alico, Inc. 300 10,428 Allegheny Technologies, Inc. 7,300 96,506 Amcol International 1,700 34,510 Corporation Ameron International 600 20,814 Corporation Ampco-Pittsburgh Corporation 400 5,468
SHARES VALUE ----------- ------------- Anchor Glass Container 34,200 $ 547,200 Corporation* Apogee Enterprises, Inc. 2,000 22,700 Arch Chemicals, Inc. 32,500 833,950 Armor Holdings, Inc.* 1,400 36,834 Avatar Holdings, Inc.* 500 18,470 Barnes Group, Inc. 700 22,617 Brady Corporation Class A 100 4,075 Brookfield Homes Corporation 1,300 33,501 Brush Engineered Materials, 1,200 18,372 Inc.* Buckeye Technologies, Inc.* 2,400 24,120 Building Materials Holding 1,100 17,083 Corporation Calgon Carbon Corporation 3,100 19,251 Cambrex Corporation 1,700 42,942 Caraustar Industries, Inc.* 58,100 801,780 Carpenter Technology 1,800 53,226 Corporation Centex Construction 600 36,162 Products, Inc. Century Aluminum Co.* 1,100 20,911 Chesapeake Corporation 8,600 227,728 Chicago Bridge & Iron Co. NV 13,100 378,590 CIRCOR International, Inc. 13,600 327,760 CLARCOR, Inc. 200 8,820 Cleveland-Cliffs, Inc.* 300 15,285 Commercial Metals Co. 79,600 2,419,840 Corn Products International, 3,300 113,685 Inc. Crompton Corporation 3,900 27,963 Crown Holdings, Inc.* 14,900 134,994 Cytec Industries, Inc.* 22,000 844,580 Delta & Pine Land Co. 1,100 27,940 Deltic Timber Corporation 900 27,360 Dycom Industries, Inc.* 19,800 531,036 ElkCorp 100 2,670 EMCOR Group, Inc.* 5,600 245,840 Encore Wire Corporation* 400 7,084 Energy Conversion Devices, 200 1,806 Inc.* Engelhard Corporation 32,900 985,355 Ennis Business Forms, Inc. 1,100 16,830 Ethyl Corporation* 1,300 28,431 Ferro Corporation 47,400 1,289,754 Georgia Gulf Corporation 900 25,992 Gibraltar Steel Corporation 400 10,060 Glatfelter 2,600 32,370 Grace (W.R.) & Co.* 5,900 15,163 GrafTech International, 5,600 75,600 Ltd.* Granite Construction, Inc. 3,000 70,470 Great Lakes Chemical 21,000 570,990 Corporation Greif, Inc. Class A 29,400 1,043,994 Griffon Corporation* 2,200 44,572 H.B. Fuller Co. 33,200 987,368
See Notes to Financial Statements. 111 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- Hecla Mining Co.* 4,900 $ 40,621 Hercules, Inc.* 10,400 126,880 Hughes Supply, Inc. 2,100 104,202 Insituform Technolgies, Inc. 1,700 28,050 Class A* Integrated Electical 1,000 9,250 Services, Inc.* Interface, Inc. Class A* 3,900 21,567 Intertape Polymer Group, 21,800 277,514 Inc.* Jones Lang LaSalle, Inc.* 2,800 58,044 Kaydon Corporation 12,800 330,752 Kronos Worldwide, Inc.* 100 2,220 Lennox International, Inc. 41,600 694,720 Liquidmetal Technologies, 400 1,136 Inc.* LNR Property Corporation 18,800 930,788 Lone Star Technologies, 66,900 1,069,062 Inc.* Longview Fibre Co. 4,600 56,810 Louisiana-Pacific 66,700 1,192,596 Corporation* LSI Industries, Inc. 1,475 19,913 Lydall, Inc.* 700 7,133 MacDermid, Inc. 24,100 825,184 Material Sciences 700 7,077 Corporation* Maverick Tube Corporation* 27,800 535,150 Mestek, Inc.* 300 5,778 Millennium Chemicals, Inc. 5,700 72,276 Minerals Technologies, Inc. 1,600 94,800 Mobile Mini, Inc.* 22,900 451,588 Modtech Holdings, Inc.* 300 2,523 Mueller Industries, Inc.* 2,300 79,028 Myers Industries, Inc. 1,775 21,513 NCI Building Systems, Inc.* 1,500 35,850 New England Business 600 17,700 Service, Inc. NL Industries, Inc. 300 3,510 NN, Inc. 500 6,295 Noland Co. 100 4,150 NS Group, Inc.* 1,200 11,640 Octel Corporation 900 17,721 Olin Corporation 1,720 34,503 OM Group, Inc.* 6,000 157,140 Omnova Solutions, Inc.* 3,000 14,400 Owens-Illinois, Inc.* 38,400 456,576 Penn Engineering & 900 17,127 Manufacturing Corporation Perini Corporation* 1,500 13,725 PolyOne Corporation 8,300 53,037 Pope & Talbot, Inc. 1,400 24,654 Potlatch Corporation 2,400 83,448 Quaker Chemical Corporation 200 6,150 Quanex Corporation 12,700 585,470 Quanta Services, Inc.* 6,600 48,180 Reliance Steel & Aluminum 2,200 73,062 Co. Rock-Tenn Co. Class A 2,200 37,972 RPM International, Inc. 33,600 553,056
SHARES VALUE ----------- ------------- RTI International Metals, 1,700 $ 28,679 Inc.* Ryerson Tull, Inc. 700 8,015 Schnitzer Steel Industries, 900 54,450 Inc. Class A Schulman (A.), Inc. 19,600 417,872 Shaw Group, Inc. (The)* 5,200 70,824 Silgan Holdings, Inc.* 300 12,777 Spartech Corporation 30,700 756,448 Standard Register Co. 62,700 1,055,241 Steel Dynamics, Inc.* 39,700 932,553 Stepan Co. 500 12,825 Stillwater Mining Co.* 4,000 38,280 Tarragon Realty Investors, 500 8,255 Inc. REIT* Texas Industries, Inc. 1,900 70,300 Timken Co. 16,000 320,960 Trammell Crow Co.* 2,800 37,100 Tredegar Corporation 2,200 34,166 Unifi, Inc.* 3,700 23,865 Universal Forest Products, 1,400 45,052 Inc. URS Corporation* 1,400 35,014 USEC, Inc. 7,400 62,160 USG Corporation* 3,300 54,681 Valence Technology, Inc.* 2,900 11,165 Valhi, Inc. 2,440 36,502 Valmont Industries, Inc. 1,300 30,095 Washington Group 2,300 78,131 International, Inc.* Watsco, Inc. 33,900 770,547 Wausau-Mosinee Paper 400 5,408 Corporation WCI Communities, Inc.* 42,300 871,803 WD-40 Co. 500 17,680 Wellman, Inc. 65,400 667,734 Wilson Greatbatch 9,400 397,338 Technologies, Inc.* Worthington Industries, Inc. 17,900 322,737 York International 3,300 121,440 Corporation ------------- 31,732,691 ------------- OTHER -- 0.5% Brunswick Corporation 14,300 455,169 FMC Corporation* 3,200 109,216 GenCorp, Inc. 2,800 30,156 Jacuzzi Brands, Inc.* 25,300 179,377 Kaman Corporation Class A 23,000 292,790 Ritchie Bros. Auctioneers, 8,600 456,660 Inc. Sequa Corporation Class A* 300 14,700 SPX Corporation* 8,900 523,409 Trinity Industries, Inc. 3,200 98,688 United Capital Corporation* 100 2,072 Walter Industries, Inc. 2,500 33,375 ------------- 2,195,612 ------------- OTHER ENERGY -- 5.6% Arch Coal, Inc. 3,300 102,861 Atwood Oceanics, Inc.* 13,100 418,414
See Notes to Financial Statements. 112
SHARES VALUE ----------- ------------- Berry Petroleum Co. Class A 10,000 $ 202,500 Brown (Tom), Inc.* 26,200 844,950 Cabot Oil & Gas Corporation 1,000 29,350 Cal Dive International, 12,200 294,142 Inc.* Chesapeake Energy 14,900 202,342 Corporation Cimarex Energy Co.* 3,800 101,422 Comstock Resources, Inc.* 1,600 30,880 Denbury Resources, Inc.* 30,800 428,428 Dril-Quip, Inc.* 600 9,780 Encore Acquisition Co.* 800 19,720 Energy Partners, Ltd.* 1,900 26,410 Evergreen Resources, Inc.* 19,700 640,447 Forest Oil Corporation* 57,100 1,631,346 Frontier Oil Corporation 400 6,888 FuelCell Energy, Inc.* 600 7,800 Global Industries, Ltd.* 6,400 32,960 Global Power Equipment 1,800 12,024 Group, Inc.* Grant Prideco, Inc.* 19,000 247,380 Grey Wolf, Inc.* 74,700 279,378 Hanover Compressor Co.* 2,700 30,105 Harvest Natural Resources, 32,000 318,400 Inc.* Helmerich & Payne, Inc. 42,100 1,175,853 Holly Corporation 100 2,750 Horizon Offshore, Inc.* 2,300 10,120 Houston Exploration Co.* 12,100 441,892 Hydril Co.* 15,100 361,343 Input/Output, Inc.* 4,000 18,040 Key Energy Services, Inc.* 36,950 380,955 KFX, Inc.* 600 4,530 Lufkin Industries, Inc. 500 14,395 Magnum Hunter Resources, 66,200 629,562 Inc. Massey Energy Co. 37,700 784,160 Matrix Service Co.* 1,400 25,410 McMoRan Exploration Co.* 700 13,125 Meridian Resource 3,700 21,978 Corporation* National-Oilwell, Inc.* 60,200 1,346,072 Newpark Resources, Inc.* 500 2,395 Nuevo Energy Co.* 38,800 937,796 Oceaneering International, 26,800 750,400 Inc.* Oil States International, 700 9,758 Inc.* Parker Drilling Co.* 7,800 19,890 Patina Oil & Gas Corporation 14,300 700,557 Patterson-UTI Energy, Inc.* 14,600 480,632 Penn Virginia Corporation 100 5,565 Petroleum Development 1,400 33,180 Corporation* Plains Exploration & 2,420 37,244 Production Co.* Range Resources Corporation 49,300 465,885 Reliant Resources, Inc.* 67,500 496,800 Resource America, Inc. Class 900 13,500 A
SHARES VALUE ----------- ------------- Seacor Smit, Inc.* 1,500 $ 63,045 Spinnaker Exploration Co.* 2,200 70,994 St. Mary Land & Exploration 1,500 42,750 Co. Stone Energy Corporation* 2,000 84,900 Sunoco, Inc. 28,800 1,473,120 Superior Energy Services, 41,800 392,920 Inc.* Swift Energy Co.* 34,800 586,380 Tesoro Petroleum 74,000 1,078,180 Corporation* Tetra Technologies, Inc.* 18,050 437,532 Texas Genco Holdings, Inc. 19,200 624,000 Transmontaigne, Inc.* 1,600 10,320 Universal Compression 1,500 39,240 Holdings, Inc.* Varco International, Inc.* 21,000 433,230 Veritas DGC, Inc.* 37,700 395,096 Vintage Petroleum, Inc. 56,800 683,304 W-H Energy Services, Inc.* 69,300 1,122,660 ------------- 22,639,385 ------------- PRODUCER DURABLES -- 8.5% Actuant Corporation Class A* 1,900 68,780 Advanced Energy Industries, 43,600 1,135,780 Inc.* Alamo Group, Inc. 500 7,630 American Tower Corporation 33,400 361,388 Class A* Andrew Corporation* 8,177 94,117 Applied Films Corporation* 400 13,208 Applied Industrial 1,500 35,790 Technologies, Inc. Arris Group, Inc.* 141,300 1,023,012 Artesyn Technologies, Inc.* 2,500 21,300 Astec Industries, Inc.* 1,300 15,951 Asyst Technologies, Inc.* 13,600 235,960 ATMI, Inc.* 13,800 319,332 Audiovox Corporation Class 500 6,420 A* Axcelis Technologies, Inc.* 85,900 877,898 Beazer Homes USA, Inc. 9,100 888,706 Belden, Inc. 2,000 42,180 BHA Group Holdings, Inc. 400 10,060 Blount International, Inc. 200 1,574 Class A* Briggs & Stratton 13,100 882,940 Corporation Brooks Automation, Inc.* 14,600 352,882 C & D Technologies, Inc. 1,300 24,921 C-COR.net Corporation* 400 4,452 Cable Design Technologies 1,600 14,384 Corporation* Cascade Corporation 900 20,070 Cohu, Inc. 54,800 1,049,420 Credence Systems 33,700 443,492 Corporation* CTS Corporation 89,900 1,033,850 CUNO, Inc.* 100 4,503 Curtiss-Wright Corporation 1,500 67,515 Cymer, Inc.* 19,400 896,086 Dominion Homes, Inc.* 300 9,099
See Notes to Financial Statements. 113 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- Ducommun, Inc.* 600 $ 13,410 DuPont Photomasks, Inc.* 1,100 26,554 Electro Scientific 2,500 59,500 Industries, Inc.* Enpro Industries, Inc.* 1,800 25,110 ESCO Technologies, Inc.* 400 17,460 Esterline Technologies 1,900 50,673 Corporation* Fairchild Corporation Class 1,000 5,040 A* Federal Signal Corporation 31,200 546,624 FEI Co.* 23,900 537,750 Flowserve Corporation* 4,200 87,696 Franklin Electric Co., Inc. 200 12,098 Gardner Denver, Inc.* 1,400 33,418 General Cable Corporation* 700 5,705 Genlyte Group, Inc.* 1,000 58,380 Gorman-Rupp Co. 600 15,840 Graco, Inc. 6,500 260,650 Gundle SLT Enviromental, 500 10,380 Inc.* Heico Corporation 1,000 18,200 HON Industries, Inc. 19,400 840,408 Hovnanian Enterprises, Inc. 6,900 600,714 Class A* IDEX Corporation 18,400 765,256 Imagistics International, 23,800 892,500 Inc.* Intevac, Inc.* 30,200 426,122 Ionics, Inc.* 1,600 50,960 JLG Industries, Inc. 44,600 679,258 Joy Global, Inc.* 8,500 222,275 Kadant, Inc.* 500 10,825 KB HOME 16,300 1,182,076 Keithley Instruments, Inc. 100 1,830 Kennametal, Inc. 3,000 119,250 Kimball International, Inc. 70,200 1,091,610 Class B Lincoln Electric Holdings, 2,600 64,324 Inc. Lindsay Manufacturing Co. 100 2,525 Littelfuse, Inc.* 200 5,764 LTX Corporation* 59,600 895,788 Manitowoc Co., Inc. 2,000 62,400 Mastec, Inc.* 1,800 26,658 MDC Holdings, Inc. 13,500 870,750 Meritage Corporation* 7,500 497,325 Metrologic Instruments, 200 5,400 Inc.* Mettler Toledo 23,800 1,004,598 International, Inc.* Milacron, Inc. 3,100 12,927 Mine Safety Appliances Co. 600 47,706 MKS Instruments, Inc.* 400 11,600 Moog, Inc. Class A* 1,600 79,040 MTC Technologies, Inc.* 17,200 554,184 MTS Systems Corporation 1,400 26,922 Mykrolis Corporation* 25,100 403,608 NACCO Industries, Inc. Class 7,900 706,892 A
SHARES VALUE ----------- ------------- Nordson Corporation 600 $ 20,718 Orbital Sciences 48,600 584,172 Corporation* Orleans Homebuilders, Inc.* 100 2,833 Palm Harbor Homes, Inc.* 5,300 94,711 Paxar Corporation* 25,200 337,680 Photon Dynamics, Inc.* 13,400 539,216 Photronics, Inc.* 52,100 1,037,832 Plantronics, Inc.* 47,200 1,541,080 Polycom, Inc.* 38,200 745,664 Powell Industries, Inc.* 600 11,490 Powerwave Technologies, 1,300 9,945 Inc.* Rayovac Corporation* 12,200 255,590 Regal-Beloit Corporation 16,000 352,000 Robbins & Myers, Inc. 1,000 18,990 Rofin-Sinar Technologies, 900 31,104 Inc.* Roper Industries, Inc. 3,600 177,336 Rudolph Technologies, Inc.* 100 2,454 Ryland Group, Inc. 12,900 1,143,456 SBA Communications 1,600 6,048 Corporation* Semitool, Inc.* 1,000 10,721 Skyline Corporation 500 17,435 Smith (A.O.) Corporation 1,300 45,565 Sonic Solutions* 11,400 174,420 Standard-Pacific Corporation 16,600 805,930 Standex International 1,000 28,000 Corporation Stewart & Stevenson 2,200 30,910 Services, Inc. Symmetricom, Inc.* 1,300 9,464 Technical Olympic USA, Inc.* 200 5,506 Technitrol, Inc.* 3,400 70,516 Tecumseh Products Co. Class 1,500 72,645 A Teledyne Technologies, Inc.* 34,400 648,440 Tennant Co. 400 17,320 Terayon Communication 5,900 26,550 Systems, Inc.* Terex Corporation* 4,000 113,920 Thomas & Betts Corporation 3,600 82,404 Thomas Industries, Inc. 900 31,194 Tollgrade Communications, 100 1,753 Inc.* TRC Cos., Inc.* 300 6,318 Triumph Group, Inc.* 1,300 47,320 Ultratech, Inc.* 8,200 240,834 United Defense Industries, 24,900 793,812 Inc.* United Industrial 12,800 231,040 Corporation Veeco Instruments, Inc.* 300 8,460 Vicor Corporation* 200 2,282 Watts Water Technologies, 1,200 26,640 Inc. Class A William Lyon Homes, Inc.* 400 25,108 Woodhead Industries, Inc. 500 8,450
See Notes to Financial Statements. 114
SHARES VALUE ----------- ------------- Woodward Governor Co. 800 $ 45,464 Zygo Corporation* 1,400 23,086 ------------- 34,472,509 ------------- TECHNOLOGY -- 14.0% @Road, Inc.* 14,750 196,175 ActivCard Corporation* 2,900 22,852 Acxiom Corporation* 17,000 315,690 Adaptec, Inc.* 9,000 79,470 Adtran, Inc. 9,000 279,000 Aeroflex, Inc.* 22,052 257,788 Aether Systems, Inc.* 1,800 8,550 Agile Software Corporation* 39,300 389,070 Agilysys, Inc. 2,500 27,875 Alliance Semiconductor 2,000 14,220 Corporation* Altiris, Inc.* 34,600 1,262,208 American Management Systems, 76,600 1,154,362 Inc.* Analogic Corporation 600 24,600 Anaren, Inc.* 1,100 15,532 Anixter International, Inc.* 36,100 934,268 Anteon International 15,700 565,985 Corporation* Arrow Electronics, Inc.* 23,500 543,790 Ascential Software 2,600 67,418 Corporation* ASE Test, Ltd.* 30,850 461,825 Asiainfo Holdings, Inc.* 800 5,344 Aspen Technology, Inc.* 200 2,052 Autodesk, Inc. 52,200 1,283,076 Avid Technology, Inc.* 6,100 292,800 Avnet, Inc.* 47,900 1,037,514 Avocent Corporation* 5,400 197,208 Bel Fuse, Inc. Class B 800 26,104 Benchmark Electronics, Inc.* 2,200 76,582 Black Box Corporation 15,800 727,906 Borland Software 120,800 1,175,384 Corporation* Business Objects SA ADR* 8,000 277,360 CACI International, Inc. 6,400 311,168 Class A* Ceva, Inc.* 700 7,280 ChipPAC, Inc. Class A* 40,700 308,913 CIBER, Inc.* 2,100 18,186 Cirrus Logic, Inc.* 2,700 20,709 Citrix Systems, Inc.* 24,800 526,008 Cognizant Technology 7,150 326,326 Solutions Corporation* Cognos, Inc.* 6,100 186,782 Coherent, Inc.* 1,200 28,560 CommScope, Inc.* 37,400 610,742 CompuCom Systems, Inc.* 2,100 11,004 Computer Horizons 2,700 10,611 Corporation* Computer Network Technology 73,300 699,282 Corporation* Corvis Corporation* 9,300 15,810
SHARES VALUE ----------- ------------- Creo, Inc.* 44,100 $ 454,230 CSG Systems International, 45,600 569,544 Inc.* Cubic Corporation 700 16,100 Cypress Semiconductor 44,000 939,840 Corporation* Digital River, Inc.* 12,200 269,620 Digitalnet Holding, Inc.* 13,700 267,150 Ditech Communications 2,500 47,750 Corporation* DRS Technologies, Inc.* 2,241 62,255 DSP Group, Inc.* 9,200 229,172 E.piphany, Inc.* 3,600 25,956 EDO Corporation 1,000 24,650 Electronics for Imaging, 23,150 602,363 Inc.* Elron Electronic Industries* 21,400 242,612 Embarcadero Technologies, 20,700 330,165 Inc.* EMS Technologies, Inc.* 900 18,486 Emulex Corporation* 22,900 610,972 Entrust, Inc.* 600 2,448 Epicor Software Corporation* 22,400 285,824 Equinix, Inc.* 11,100 313,020 ESS Technology, Inc.* 2,500 42,525 Exar Corporation* 1,500 25,620 Extreme Networks, Inc.* 2,900 20,909 F5 Networks, Inc.* 9,700 243,470 Filenet Corporation* 13,600 368,288 Finisar Corporation* 3,900 12,207 FLIR Systems, Inc.* 7,500 273,750 Formfactor, Inc.* 10,500 207,900 Gartner, Inc. Class A* 6,200 70,122 Gartner, Inc. Class B* 50,000 544,000 Gateway, Inc.* 19,600 90,160 Genesis Microchip, Inc.* 300 5,412 Gerber Scientific, Inc.* 1,900 15,124 Herley Industries, Inc.* 800 16,560 Hummingbird, Ltd.* 19,100 411,605 Hutchinson Technology, Inc.* 200 6,148 Identix, Inc.* 1,100 4,895 iGate Corporation* 1,800 14,130 Inet Technolgies, Inc.* 57,100 685,200 InFocus Corporation* 3,400 32,912 Infonet Services Corporation 6,200 10,540 Class B* Informatica Corporation* 96,700 996,010 Ingram Micro, Inc. Class A* 28,400 451,560 Integrated Circuit Systems, 39,100 1,113,959 Inc.* Integrated Silicon 2,500 39,175 Solutions, Inc.* Intergraph Corporation* 300 7,176 Interland, Inc.* 1,240 8,097 Intermagnetics General 600 13,296 Corporation*
See Notes to Financial Statements. 115 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- International Rectifier 10,100 $ 499,041 Corporation* Internet Security Systems, 13,400 252,322 Inc.* Interwoven, Inc.* 24,475 309,364 Invision Technologies Inc* 10,500 352,485 Iomega Corporation* 3,000 17,940 IXYS Corporation* 28,600 267,410 JDA Software Group, Inc.* 2,000 33,020 Keane, Inc.* 1,600 23,424 Kemet Corporation* 7,800 106,782 Keynote Systems, Inc.* 500 5,950 Komag, Inc.* 1,000 14,630 Lattice Semiconductor 78,300 757,944 Corporation* Lawson Software, Inc.* 64,800 533,304 Lexar Media, Inc.* 19,000 331,170 Lionbridge Technologies, 22,600 217,186 Inc.* Macromedia, Inc.* 43,800 781,392 Macrovision Corporation* 32,600 736,434 Magma Design Automation, 19,000 443,460 Inc.* Mantech International 21,000 523,950 Corporation Class A* Manufacturers' Services, 600 3,648 Ltd.* Manugistics Group, Inc.* 1,800 11,250 MatrixOne, Inc.* 67,300 414,568 Mentor Graphics Corporation* 600 8,724 Mercury Computer Systems, 27,200 677,280 Inc.* Methode Electronics, Inc. 2,600 31,798 Class A Micrel, Inc.* 24,100 375,478 Microsemi Corporation* 18,700 459,646 MicroStrategy, Inc. Class A* 4,350 228,288 Mindspeed Technologies, 2,000 13,700 Inc.* MRO Software, Inc.* 200 2,692 MRV Communications, Inc.* 9,400 35,344 MSC.Software Corporation* 1,400 13,230 National Instruments 27,700 1,259,519 Corporation NCR Corporation* 12,500 485,000 Net2Phone, Inc.* 900 6,120 NETIQ Corporation* 4,800 63,600 Netscout Systems, Inc.* 600 4,560 NetScreen Technologies, 19,900 492,525 Inc.* Network Equipment 1,100 12,100 Technologies, Inc.* New Focus, Inc.* 58,500 293,670 Newport Corporation* 2,900 47,937 NU Horizons Electronics 56,950 558,110 Corporation* NYFIX, Inc.* 700 5,565 Omnivision Technologies, 8,000 442,000 Inc.* Oplink Communications, Inc.* 3,500 8,365
SHARES VALUE ----------- ------------- Optical Communication 500 $ 1,850 Products, Inc.* OSI Systems, Inc.* 600 11,526 Palmone, Inc.* 1,475 17,331 Palmsource, Inc.* 495 10,786 Parametric Technology 2,000 7,880 Corporation* Park Electrochemical 1,200 31,788 Corporation Pegasystems, Inc.* 100 862 Pemstar, Inc.* 1,100 3,619 Pericom Semiconductor 1,900 20,254 Corporation* Perot Systems Corporation 2,700 36,396 Class A* Pinnacle Systems, Inc.* 16,100 137,333 Pixelworks, Inc.* 26,600 293,664 Plexus Corporation* 1,400 24,038 Pomeroy IT Solutions, Inc.* 900 13,266 Power Intergrations, Inc.* 5,400 180,684 ProcureNet, Inc.*+ 7,600 0 Quantum Corporation* 7,100 22,152 Radisys Corporation* 1,600 26,976 Radware, Ltd.* 13,300 362,425 Redback Networks, Inc.* 13,800 3,188 REMEC, Inc.* 83,500 702,235 RF Micro Devices, Inc.* 41,300 415,065 Richardson Electronics, Ltd. 600 7,374 Roxio, Inc.* 2,500 11,975 Safeguard Scientifics, Inc.* 165,700 669,428 SafeNet, Inc.* 24,400 750,788 Sanmina-SCI Corporation* 77,100 972,231 SBS Technologies, Inc.* 1,100 16,181 Scientific-Atlanta, Inc. 40,000 1,092,000 Seebeyond Technology 131,000 561,990 Corporation* Semtech Corporation* 34,900 793,277 Serena Software, Inc.* 53,050 973,468 Silicon Graphics, Inc.* 18,400 25,208 Silicon Storage Technology, 2,400 26,400 Inc.* Siliconix, Inc.* 300 13,710 Simpletech, Inc.* 300 1,803 Sipex Corporation* 2,100 16,191 Skyworks Solutions, Inc.* 187,100 1,627,769 SonicWALL, Inc.* 3,800 29,640 SRA International, Inc. 8,800 379,280 Class A* Standard Microsystems 23,400 592,020 Corporation* Stellent, Inc.* 900 8,856 Supertex, Inc.* 23,200 443,120 Support.Com, Inc.* 11,700 153,855 Sybase, Inc.* 38,700 796,446 Sycamore Networks, Inc.* 5,500 28,820 SYKES Enterprises, Inc.* 1,700 14,552 Synplicity, Inc.* 400 3,132
See Notes to Financial Statements. 116
SHARES VALUE ----------- ------------- Sypris Solutions, Inc. 400 $ 6,724 Systems & Computer 3,000 49,050 Technology Corporation* Talx Corporation 200 4,606 Tekelec* 31,400 488,270 Three-Five Systems, Inc.* 700 3,668 TIBCO Software, Inc.* 151,200 1,023,624 Tier Technologies, Inc.* 1,300 10,621 Trident Microsystems, Inc.* 13,800 240,396 Trimble Navigation, Ltd.* 11,100 413,364 Triquint Semiconductor, 4,700 33,229 Inc.* TTM Technologies, Inc.* 21,800 367,984 Tyler Technologies, Inc.* 300 2,889 Ulticom, Inc.* 54,300 523,995 UNOVA, Inc.* 4,200 96,390 Vastera, Inc.* 400 1,600 Verisity, Ltd.* 124,200 1,583,550 Verity, Inc.* 77,200 1,288,468 Verso Technologies, Inc.* 2,900 9,280 Viasat, Inc.* 400 7,656 Virage Logic Corporation* 200 2,034 WatchGuard Technologies, 1,000 5,820 Inc.* White Electronics Designs 100 880 Corporation* Wind River Systems, Inc.* 2,400 21,024 Zhone Technologies, Inc.* 925 4,570 Zoran Corporation* 17,200 299,108 ------------- 56,829,853 ------------- UTILITIES -- 3.5% Allegheny Energy, Inc.* 11,400 145,464 American States Water Co. 1,400 35,000 Aquila, Inc.* 16,600 56,274 Atmos Energy Corporation 4,500 109,350 Avista Corporation 35,500 643,260 Black Hills Corporation 2,900 86,507 California Water Service 1,100 30,140 Group Cascade Natural Gas 1,000 21,090 Corporation Central Vermont Public 1,100 25,850 Service Corporation CH Energy Group, Inc. 1,300 60,970 Chesapeake Utilities 500 13,025 Corporation Cincinnati Bell, Inc.* 68,600 346,430 Citizens Communications Co.* 21,800 270,756 Cleco Corporation 4,000 71,920 CMS Energy Corporation 13,700 116,724 Connecticut Water Service, 400 11,060 Inc. CT Communications, Inc. 1,300 17,550 D & E Communications, Inc. 1,200 17,412 Dobson Communications 76,700 503,919 Corporation*
SHARES VALUE ----------- ------------- El Paso Electric Co.* 4,400 $ 58,740 Empire District Electric Co. 2,000 43,860 Energen Corporation 23,300 955,999 Energy East Corporation 24,800 555,520 EnergySouth, Inc. 400 14,000 General Communication, Inc. 4,000 34,800 Class A* Hickory Tech Corporation 100 1,145 Idacorp, Inc. 3,500 104,720 Laclede Group, Inc. 1,700 48,535 McLeodUSA, Inc. Class A* 5,200 7,696 Middlesex Water Co. 633 12,850 New Jersey Resources 1,800 69,318 Corporation NII Holdings, Inc. Class B* 6,950 518,679 Northeast Utilities 39,000 786,630 Northwest Natural Gas Co. 2,300 70,725 NSTAR 11,400 552,900 NUI Corporation 41,700 672,204 Oneok, Inc. 41,400 914,112 Otter Tail Corporation 1,700 45,441 PNM Resources, Inc. 19,100 536,710 Price Communications 3,600 49,428 Corporation* Primus Telecommunications 60,900 619,962 Group, Inc.* RCN Corporation* 1,700 1,360 SEMCO Energy, Inc. 2,500 12,250 Shenandoah 100 5,126 Telecommunications Co. Sierra Pacific Resources* 10,600 77,804 SJW Corporation 200 17,850 South Jersey Industries, 1,100 44,550 Inc. Southern Union Co.* 32,805 603,612 Southwest Gas Corporation 2,700 60,615 Southwest Water Co. 800 12,840 Southwestern Energy Co.* 38,900 929,710 Spectrasite, Inc.* 15,200 528,200 SureWest Communications 100 4,042 Time Warner Telecom, Inc. 3,600 36,468 Class A* UIL Holdings Corporation 1,100 49,610 Unisource Energy Corporation 24,900 614,034 Westar Energy, Inc. 52,600 1,065,149 Western Wireless Corporation 16,700 306,612 Class A* Wisconsin Energy Corporation 19,900 665,655 ------------- 14,292,162 ------------- TOTAL COMMON STOCK (Cost $314,514,055) 386,580,119 -------------
See Notes to Financial Statements. 117 SMALL CAP EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- ------------- SHORT-TERM INVESTMENTS -- 30.6% AB Funds Trust -- Money 18,420,795 $ 18,420,795 Market Fund (Retirement Class)(inf) Northern Institutional 105,886,727 105,886,727 Liquid Assets Portfolio sec. ------------- TOTAL SHORT-TERM INVESTMENTS 124,307,522 (Cost $124,307,522) ------------- PAR VALUE ----------- ------------- U.S. TREASURY OBLIGATIONS -- 0.5% U.S. Treasury Bills 0.86%, 01/22/04++++ $ 250,000 249,875 0.89%, 01/22/04++++ 1,450,000 1,449,288 0.93%, 01/22/04++++ 130,000 129,936 0.94%, 01/22/04++++ 85,000 84,958 ------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,914,004) 1,914,057 ------------- SHARES ----------- MUTUAL FUNDS -- 0.4% IShares Russell 2000 13,375 $ 1,481,950 IShares Russell 2000 Value 130 20,852 ------------- TOTAL MUTUAL FUNDS (Cost $1,194,263) 1,502,802 ------------- RIGHTS -- 0.0% FINANCIAL SERVICES Leucadia National 700 0 Corporation* (Cost $0) ------------- TOTAL INVESTMENTS -- 126.8% (Cost $441,929,844) 514,304,500 LIABILITIES IN EXCESS OF OTHER ASSETS -- (26.8%) (108,667,279) ------------- NET ASSETS -- 100.0% $ 405,637,221 =============
See Notes to Financial Statements. 118 INTERNATIONAL EQUITY FUND International equity markets produced solid returns in the fourth quarter as investors reacted positively to strong corporate earnings and signs of sustainable economic recovery in Europe and Japan. Currency movements also contributed as the U.S. dollar weakened against most major currencies. Developed international stocks outperformed U.S. stocks during the quarter as the MSCI EAFE(R) Index advanced 17.08%, while its domestic equity counterpart, the S&P 500(R) Index, returned 12.18%. For the year, the MSCI EAFE(R) Index gained 38.59%, while the S&P 500(R) Index increased 28.71%. All sectors within the MSCI EAFE(R) Index posted double-digit gains for the quarter, with the materials sector generating the highest return. Once again, emerging markets outperformed the developed world as the MSCI Emerging Markets Free(R) Index returned 17.78% for the quarter and 55.82% for the year. The fund is primarily comprised of international stocks located in developed countries, and to a much lesser extent, in international stocks located in emerging markets (economies not deemed to be developed).(1) The fund underperformed its benchmark, the MSCI ACWI(R) Free ex-U.S., during the fourth quarter. Overweight exposure and security selection in the information technology sector detracted from benchmark-relative performance. Security selection in the consumer discretionary sector also dampened relative returns. At the sub-adviser level, Delaware delivered the strongest benchmark-relative performance largely due to its security selection in the industrials and financials sectors. Genesis outperformed the MSCI Emerging Markets Free(R) Index primarily as a result of its overweight exposure in the utilities sector and underweight exposure in the information technology sector. - --------------- (1) Foreign securities may involve additional risks, social and political instability, reduced market liquidity and currency volatility. Not Part of the Annual Report 119 INTERNATIONAL EQUITY FUND AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/03 - --------------------------------------------------------------------------------
RETIREMENT INSTITUTIONAL MSCI AC WORLD CLASS* CLASS* RETAIL CLASS* FREE EX-U.S. INDEX** ---------- ------------- ------------- -------------------- One Year 35.81% 36.06% 35.47% 40.83% Since Inception (8/27/01 -- 12/31/03) 5.77% 5.93% 5.16% 5.39%
Past performance is no guarantee of future results, share prices will fluctuate, and you may have a gain or loss when you redeem shares. [LINE GRAPH]
MSCI ALL COUNTRY WORLD FREE EX- RETIREMENT CLASS U.S. INDEX** ---------------- ------------------------------- 8/27/01 10000.00 10000.00 8/31/01 9777.00 9707.00 9/30/01 8731.00 8675.00 10/31/01 9014.00 8918.00 11/30/01 9460.00 9325.00 12/31/01 9539.00 9445.00 1/31/02 9203.00 9039.00 2/28/02 9375.00 9104.00 3/31/02 9891.00 9594.00 4/30/02 9994.00 9651.00 5/31/02 10149.00 9748.00 6/30/02 9728.00 9324.00 7/31/02 8773.00 8414.00 8/31/02 8765.00 8413.00 9/30/02 7939.00 7519.00 10/31/02 8274.00 7922.00 11/30/02 8541.00 8302.00 12/31/02 8400.00 8033.00 1/31/03 8061.00 7750.00 2/28/03 7887.00 7592.00 3/31/03 7687.00 7439.00 4/30/03 8348.00 8148.00 5/31/03 8870.00 8661.00 6/30/03 9148.00 8895.00 7/30/03 9426.00 9131.00 8/31/03 9731.00 9401.00 9/30/03 9913.00 9663.00 10/31/03 10487.00 10288.00 11/30/03 10652.00 10511.00 12/31/03 11408.00 11313.00
The graph compares the results of a $10,000 investment in the Retirement Class of the Fund since August 27, 2001 (commencement of operations), with all dividends and capital gains reinvested, with the Morgan Stanley Capital International All Country World Free ex-U.S. Index. *These returns reflect expense waivers by the Fund's investment advisor. Without these waivers, returns would have been lower. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. **The Morgan Stanley Capital International All Country World Free ex-U.S. Index is a market-capitalization weighted index composed of companies representative of the market structure of developed and emerging market countries in the Americas (excluding the U.S.), Europe/Middle East, and Asia/Pacific Regions. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. Unlike a mutual fund, the performance of an index assumes no taxes, transaction costs, management fees or other expenses. Not Part of the Annual Report 120 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003 PAR VALUE - ----------------- ----------- -------------- FOREIGN CONVERTIBLE BONDS -- 0.0% SWITZERLAND Credit Suisse Group Finance, Ltd. 6.00%, 12/23/05 (S) (Cost $165,694) 241,000 $ 265,212 -------------- SHARES ----------- FOREIGN COMMON STOCK -- 96.8% AUSTRALIA -- 4.4% Alumina, Ltd. 98,500 487,593 Amcor, Ltd. 687,796 4,280,491 Australia and New Zealand Banking Group, Ltd. 67,863 904,002 BHP Billiton, Ltd. 353,311 3,245,000 Brambles Industries, Ltd. 45,100 179,417 Coca-Cola Amatil, Ltd. 83,000 389,601 Coles Myer, Ltd. 822,970 4,687,698 Commonwealth Bank of Australia 94,000 2,085,773 Lend Lease Corporation, Ltd. 474,509 3,593,059 National Australia Bank, Ltd. 221,340 4,994,714 Orica, Ltd. 201,526 2,119,680 QBE Insurance Group, Ltd. 73,327 585,630 Quantas Airways, Ltd. 656,700 1,627,859 Telstra Corporation, Ltd. 1,415,414 5,140,252 Wesfarmers, Ltd. 17,200 343,292 WMC Resources, Ltd.* 98,500 417,829 Woodside Petroleum, Ltd. 696,000 7,761,128 Woolworths, Ltd. 50,500 448,980 -------------- 43,291,998 -------------- BELGIUM -- 1.3% Colruyt NV 56,600 5,454,390 Electrabel SA 6,959 2,187,415 Fortis 62,300 1,252,601 UCB SA 107,900 4,068,026 -------------- 12,962,432 -------------- BRAZIL -- 0.8% Aracruz Celulose SA ADR 5,800 203,232 Banco Bradesco SA ADR 11,000 290,510 Banco Itau Holding Financeira SA ADR 18,587 906,488 Brasil Telecom Participacoes SA ADR 24,000 907,200 Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR 14,800 372,220 Companhia Vale do Rio Doce ADR 25,500 1,313,505 Compania Paranaense de Energia ADR* 15,600 74,412 Gerdau SA ADR 13,000 262,860 Petroleo Brasileiro SA -- Petrobras ADR 54,477 1,592,907
SHARES VALUE ----------- -------------- Petroleo Brasileiro SA -- Petrobras (Preference Shares) ADR 40,000 $ 1,066,400 Tele Norte Leste Participacoes SA ADR 11,000 169,730 Telesp Celular Participacoes SA ADR* 23,000 151,340 Votorantim Celulose ADR 4,000 125,400 -------------- 7,436,204 -------------- CANADA -- 1.6% Abitibi-Consolidated, Inc. 94,400 757,538 Alcan, Inc. 14,500 679,640 BCE, Inc. 37,200 831,944 Bombardier, Inc. Class B 312,100 1,321,097 Great-West Lifeco, Inc. 8,900 313,368 Inco, Ltd.* 16,000 639,505 InterOil Corporation NPV* 9,000 219,385 InterOil Corporation CDI* 90,000 210,212 Manulife Financial Corporation 128,200 4,151,804 National Bank Of Canada 12,300 410,619 Suncor Energy, Inc. 27,400 689,108 Talisman Energy, Inc. 36,000 2,048,149 TELUS Corporation 50,500 945,715 Thomson Corporation (The) 66,200 2,410,558 -------------- 15,628,642 -------------- CHILE -- 0.4% AFP Provida SA ADR 40,000 1,128,400 Banco Santander Chile SA 5,000 118,900 Compania de Telecomunicaciones de Chile SA ADR 10,000 149,500 Distribucion y Servicio SA ADR 25,200 520,632 Embotelladora Andina SA ADR Class A 30,100 316,050 Embotelladora Andina SA ADR Class B 40,000 438,400 Empresa Nacional de Electricidad SA ADR* 4,000 46,800 Enersis SA ADR 17,000 125,120 Lan Chile SA ADR 42,000 735,000 -------------- 3,578,802 -------------- CHINA -- 0.3% Beijing Datang Power Generation Co., Ltd. Class H 176,000 125,818 China Life Insurance Co., Ltd. 298,000 243,740 Jiangsu Expressway Co., Ltd. Class H 1,434,100 761,974 Sinotrans, Ltd. Class H 1,957,000 882,258 Travelsky Technology, Ltd. Class H 677,000 728,135 -------------- 2,741,925 --------------
See Notes to Financial Statements. 121 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- -------------- CROATIA -- 0.1% Pliva DD GDR 61,400 $ 1,013,714 -------------- CZECH REPUBLIC -- 0.1% Cesky Telecom AS GDR 15,500 175,844 Komercni Banka AS 3,429 322,911 -------------- 498,755 -------------- DENMARK -- 0.5% Novo-Nordisk AS Class B 127,100 5,178,176 TDC AS 4,200 151,546 -------------- 5,329,722 -------------- ECUADOR -- 0.0% La Cemento Nacional GDR 26,250 479,063 -------------- EGYPT -- 0.2% MobiNil - Egyptian Mobile Services 57,695 704,412 Orascom Construction Industries 72,933 857,806 -------------- 1,562,218 -------------- ESTONIA -- 0.1% Hansabank, Ltd. 52,000 1,403,633 -------------- FINLAND -- 0.6% Nokia OYJ 201,500 3,484,567 UPM-Kymmene OYJ 133,600 2,547,972 -------------- 6,032,539 -------------- FRANCE -- 9.3% Accor SA 20,000 905,651 Air Liquide SA 7,912 1,397,175 Assurances Generales de France 27,100 1,471,905 Aventis SA 96,500 6,378,153 BNP Paribas SA 58,600 3,689,849 Bouygues SA 113,092 3,954,226 Carrefour SA 114,396 6,279,659 Compagnie de Saint-Gobain 122,200 5,982,066 Essilor International SA Compagnie Generale D'Optique 14,100 729,188 France Telecom SA 123,738 3,536,709 Groupe Danone 8,000 1,305,752 L'Oreal SA 77,063 6,318,233 Lafarge SA 31,680 2,821,150 Pinault-Printemps-Redoute SA 34,998 3,383,699 Renault SA 28,800 1,987,084 Sanofi-Synthelabo SA 148,100 11,152,333 Schneider Electric SA 15,500 1,014,695 Societe BIC SA 14,600 674,753 Societe Generale Class A 81,300 7,178,355 Societe Television Francaise 1 80,000 2,793,138 Thomson 40,970 871,801 Total SA 81,881 15,223,587 Valeo SA 36,307 1,454,020 Vivendi Universal SA 86,200 2,095,199 -------------- 92,598,380 --------------
SHARES VALUE ----------- -------------- GERMANY -- 5.3% Adidas-Salomon AG 16,165 $ 1,841,195 Allianz AG 40,543 5,117,991 BASF AG 48,993 2,754,929 Bayer AG 134,271 3,932,609 Bayerische Hypo-und Vereinsbank AG 118,771 2,747,553 Bayerische Motoren Werke AG 91,853 4,257,818 Continental AG 51,300 1,945,751 DaimlerChrysler AG 35,000 1,633,451 Deutsche Bank AG 16,600 1,375,656 Deutsche Boerse AG 13,188 721,115 E.ON AG 32,600 2,127,553 Epcos AG 3,700 83,539 Infineon Technologies AG 38,900 540,714 Metro AG 51,100 2,252,706 Muenchener Rueckversicherungs AG 9,900 1,200,288 RWE AG 129,160 5,110,683 SAP AG 8,000 1,343,592 SAP AG ADR 700 29,092 Schering AG 22,600 1,144,538 Siemens AG 78,131 6,257,970 ThyssenKrupp AG 25,300 500,064 Volkswagen AG 94,978 5,289,201 -------------- 52,208,008 -------------- GHANA -- 0.2% Ashanti Goldfields Co., Ltd. GDR* 184,100 2,400,664 -------------- GREECE -- 0.3% Commercial Bank of Greece 10,600 266,337 Hellenic Tellecommunications Organization SA 130,000 1,718,466 Piraeus Bank SA 75,000 915,742 -------------- 2,900,545 -------------- HONG KONG -- 3.9% Cheung Kong Holdings, Ltd. 89,000 707,887 China Mobile (Hong Kong), Ltd. 1,476,100 4,534,621 China Resources Power Holdings Co.* 1,212,000 565,910 Citic Pacific, Ltd. 200,000 510,073 CLP Holdings, Ltd. 1,150,000 5,480,705 CNOOC, Ltd. 1,243,500 2,434,592 Hang Lung Properties, Ltd. 423,000 542,126 Hang Seng Bank, Ltd. 37,600 493,998 Hong Kong & China Gas Co., Ltd. 4,850,000 7,402,815 Hongkong Electric Holdings, Ltd. 552,500 2,184,779 Hongkong Land Holdings, Ltd. 283,000 481,100 Hutchison Whampoa, Ltd. 261,000 1,924,655 Jardine Matheson Holdings, Ltd. 263,600 2,398,760
See Notes to Financial Statements. 122
SHARES VALUE ----------- -------------- Johnson Electric Holdings, Ltd. 542,000 $ 691,148 Legend Group, Ltd. 558,000 238,981 Li & Fung, Ltd. 516,000 883,971 Shangri-La Asia, Ltd. 463,000 435,352 Sun Hung Kai Properties, Ltd. 235,485 1,948,827 Swire Pacific, Ltd. Class A 248,500 1,533,200 Wharf Holdings, Ltd. 1,308,000 3,622,289 -------------- 39,015,789 -------------- HUNGARY -- 0.2% Matav Rt. ADR 34,200 639,882 Mol Magyar Olaj-es Gazipari Rt. 8,164 248,561 Mol Magyar Olaj-es Gazipari Rt. GDR 24,681 702,421 OTP Bank Rt. 28,541 368,086 -------------- 1,958,950 -------------- INDIA -- 1.1% Andhra Bank, Ltd. 680,000 801,841 Asian Paints (India) Ltd. 100,000 736,767 Bajaj Auto, Ltd. GDR 11,584 281,491 Bharat Heavy Electricals, Ltd. 22,900 254,949 Bharti Televentures. Ltd.* 343,115 790,387 Canara Bank, Ltd. 62,000 185,355 Dr. Reddy's Laboratories, Ltd. 8,000 250,398 GAIL India, Ltd. GDR 92,700 3,086,909 HCL Technologies, Ltd. 52,782 354,464 HDFC Bank, Ltd. 20,100 161,527 Infosys Technologies, Ltd. 5,100 621,915 Maruti Udyog Ltd.* 29,068 239,743 Punjab National Bank 55,228 292,149 Ranbaxy Laboratories, Ltd. GDR 83,500 2,129,250 Reliance Industries, Ltd. 16,300 204,710 Tata Motors, Ltd. GDR 62,278 617,387 -------------- 11,009,242 -------------- INDONESIA -- 0.5% Bank Rakyat Indonesia* 1,722,000 255,565 PT Astra International, Inc. TBK 163,500 97,061 PT Bank Mandiri Persero TBK 4,186,223 497,029 PT Ramayana Lestari Sentosa TBK 1,718,700 887,663 PT Telekomunikasi Indonesia TBK 2,943,600 2,359,075 PT Unilever Indonesia TBK 3,000,000 1,291,184 -------------- 5,387,577 -------------- IRELAND -- 0.5% Allied Irish Banks PLC 105,000 1,674,067 CRH PLC 128,462 2,636,838 Irish Life & Permanent PLC 59,300 957,417 -------------- 5,268,322 --------------
SHARES VALUE ----------- -------------- ISRAEL -- 0.2% Bank Hapoalim, Ltd. 66,700 $ 163,904 Check Point Software Technologies, Ltd.* 33,200 558,424 Orbotech, Ltd.* 24,000 574,080 Teva Pharmaceutical Industries, Ltd. ADR 14,200 805,282 -------------- 2,101,690 -------------- ITALY -- 2.7% Assicurazioni Generali SpA 14,100 373,486 Banca Intesa SpA 2,487,368 9,726,087 Ente Nazionale Idrocarburi SpA 411,913 7,772,728 Fiat SpA 182,183 1,397,165 Mediaset SpA 444,723 5,284,171 Telecom Italia Mobile SpA 307,800 1,673,332 UniCredito Italiano SpA 80,600 435,126 -------------- 26,662,095 -------------- JAPAN -- 20.7% Advantest Corporation 46,800 3,711,860 Aeon Co., Ltd. 64,000 2,143,884 Aiful Corporation 7,605 556,342 Bridgestone Corporation 169,000 2,272,362 Canon, Inc. 280,400 13,055,855 Chugai Pharmaceutical Co., Ltd. 26,600 382,482 Dai Nippon Printing Co., Ltd. 28,000 393,207 Daiwa House Industry Co., Ltd. 47,000 499,953 Daiwa Securities Group, Inc. 61,000 414,939 Denso Corporation 310,100 6,105,356 Eisai Co., Ltd. 267,100 7,202,752 Fanuc, Ltd. 85,600 5,127,853 Fuji Photo Film Co., Ltd. 154,000 4,971,914 Fujisawa Pharmaceutical Co., Ltd. 140,000 2,984,977 Hirose Electric Co., Ltd. 41,000 4,705,608 Hitachi, Ltd. 506,000 3,050,070 Honda Motor Co., Ltd. 177,100 7,865,969 Hoya Corporation 11,900 1,092,619 Ito-Yokado Co., Ltd. 141,000 4,433,797 Japan Airlines System Corporation 102,000 269,348 Kansai Electric Power Co., Inc. (The) 49,000 858,654 Kao Corporation 230,000 4,678,548 Keyence Corporation 19,700 4,152,496 Matsushita Electric Industrial Co., Ltd. 494,686 6,840,764 Millea Holdings, Inc. 525 6,858,263 Mitsubishi Corporation 86,000 911,598 Mitsubishi Estate Co., Ltd. 650,000 6,162,172 Mitsubishi Heavy Industries, Ltd. 142,000 394,849
See Notes to Financial Statements. 123 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- -------------- Mitsubishi Motors Corporation* 180,000 $ 367,827 Mitsubishi Tokyo Financial Group, Inc. 658 5,132,854 Mitsui Fudosan Co., Ltd. 88,000 794,849 Mitsui Sumitomo Insurance Co., Ltd. 144,000 1,182,420 Murata Manufacturing Co., Ltd. 101,900 5,505,281 NEC Corporation 348,000 2,562,023 NEC Electronics Corporation 500 36,577 Nidec Corporation 7,000 668,191 Nikko Cordial Corporation 570,000 3,175,236 Nikon Corporation 42,000 633,312 Nintendo Co., Ltd. 16,600 1,548,941 Nippon Express Co., Ltd. 376,000 1,775,273 Nippon Steel Corporation 224,000 480,732 Nippon Telegraph & Telephone Corporation 500 2,412,056 Nippon Yusen Kabushiki Kaisha 277,000 1,253,569 Nissan Motor Co., Ltd. 456,800 5,217,162 Nitto Denko Corporation 26,200 1,393,487 Nomura Holdings, Inc. 159,000 2,707,614 NTT DoCoMo, Inc. 1,842 4,176,598 ORIX Corporation 37,500 3,100,214 Pioneer Corporation 28,000 773,351 Ricoh Co., Ltd. 22,000 434,170 Rohm Co., Ltd. 44,710 5,239,877 Sankyo Co. Ltd. 53,000 996,501 Secom Co., Ltd. 70,000 2,612,671 Sekisui House, Ltd. 113,000 1,167,220 Shimamura Co., Ltd. 5,500 373,612 Shin-Etsu Chemical Co., Ltd. 165,900 6,780,274 Shionogi & Co., Ltd. 87,000 1,620,342 SMC Corporation 8,400 1,045,591 Softbank Corp. 4,400 134,665 Sompo Japan Insurance, Inc. 43,900 360,884 Sony Corporation 58,000 2,007,838 Sumitomo Chemical Co., Ltd. 452,000 1,864,178 Suzuki Motor Corporation 105,000 1,553,886 Takeda Chemical Industries, Ltd. 226,400 8,978,258 TDK Corporation 11,100 799,589 Tokyo Electron, Ltd. 35,700 2,711,561 Toray Industries, Inc. 167,000 698,106 Toyota Motor Corporation 189,600 6,404,330 UFJ Holdings, Inc. 343 1,648,269 Uni-Charm Corporation 5,400 265,541 Vodafone Holdings KK 652 1,746,049 West Japan Railway Co. 483 1,897,387 Yahoo Japan Corporation* 70 940,562 Yamanouchi Pharmaceutical Co., Ltd. 168,700 5,241,868 Yamato Transport Co., Ltd. 22,000 259,065 -------------- 204,778,352 --------------
SHARES VALUE ----------- -------------- JORDAN -- 0.0% Arab Bank PLC 850 $ 365,656 -------------- LUXEMBOURG -- 0.1% SES Global 48,900 493,441 -------------- MALAYSIA -- 0.6% Commerce Asset Holdings BHD 347,900 375,366 Gamuda BHD 137,100 229,101 Hong Leong Bank BHD 273,500 374,263 Malayan Banking BHD 144,200 366,192 Malaysian Oxygen BHD 167,000 509,789 Maxis Communications BHD 295,700 587,509 MK Land Holdings BHD 105,000 63,553 OYL Industries BHD 109,000 1,046,974 Public Bank BHD 1,291,250 961,641 Public Bank (Foreign Market) BHD 806,250 657,730 Road Builder M Holdings BHD 166,700 156,172 Transmile Group BHD 420,000 548,211 -------------- 5,876,501 -------------- MEXICO -- 1.3% America Movil SA de CV ADR Series L 78,800 2,154,392 Cemex SA de CV 192,167 1,004,677 Cemex SA de CV ADR 91,714 2,402,907 Coca-Cola Femsa SA de CV ADR* 37,500 796,500 Grupo Financiero Banorte SA de CV Class O 10,000 34,706 Grupo Financiero BBVA Bancomer SA de CV Series B* 1,320,500 1,128,105 Grupo Mexico SA de CV Series B 6,000 15,377 Grupo Televisa SA ADR 24,642 982,230 Kimberly-Clark de Mexico SA de CV Class A 131,400 336,766 Telefonos de Mexico SA de CV ADR Class L 94,600 3,124,639 Wal-Mart de Mexico SA de CV Series C 120,000 320,897 Wal-Mart de Mexico SA de CV Series V 259,698 740,228 -------------- 13,041,424 -------------- NETHERLANDS -- 5.0% ABN AMRO Holding NV 203,226 4,755,099 Aegon NV 248,567 3,677,713 Akzo Nobel NV 41,000 1,582,492 ASML Holding NV* 35,900 711,842 IHC Caland NV 33,700 1,827,825 ING Groep NV 238,747 5,568,153 Koninklijke Numico NV 13,600 375,853 Koninklijke Philips Electronics NV 18,500 540,206
See Notes to Financial Statements. 124
SHARES VALUE ----------- -------------- Reed Elsevier NV 238,274 $ 2,960,392 Royal Dutch Petroleum Co. 270,388 14,256,078 Royal Dutch Petroleum Co. (New York Shares) 12,100 633,919 Royal KPN NV* 278,000 2,146,014 TPG NV 93,600 2,192,422 Unilever NV 58,372 3,817,594 VNU NV 130,342 4,118,399 -------------- 49,164,001 -------------- NEW ZEALAND -- 0.6% Telecom Corporation of New Zealand, Ltd. 1,563,823 5,513,538 -------------- NORWAY -- 0.6% DnB NOR ASA 66,000 440,476 Norsk Hydro ASA 56,400 3,480,069 Norske Skogindustrier ASA 19,100 364,613 Statoil ASA 144,000 1,617,965 -------------- 5,903,123 -------------- PERU -- 0.1% Compania de Minas Buenaventura SA ADR 21,900 619,332 -------------- PHILIPPINES -- 0.1% Bank of the Philippine Islands 347,800 291,295 Philippine Long Distance Telephone Co.* 7,840 136,974 SM Prime Holdings, Inc. 996,000 116,607 -------------- 544,876 -------------- POLAND -- 0.0% Bank Pekao SA 6,789 195,894 Polski Koncern Naftowy Orlen GDR 6,090 81,354 -------------- 277,248 -------------- PORTUGAL -- 0.2% Portugal Telecom SGPS SA 173,067 1,742,022 -------------- RUSSIA -- 0.6% Gazprom ADR 4,635 120,047 LUKOIL ADR 22,594 2,101,242 Mining and Metallurgical Co. Norilsk Nickel ADR 19,600 1,276,940 Mobile Telesystems ADR 20,000 1,656,000 Vimpel-Communications ADR* 2,000 147,000 Wimm-Bill-Dann Foods OJSC ADR* 11,500 195,500 YUKOS ADR 7,757 330,448 -------------- 5,827,177 --------------
SHARES VALUE ----------- -------------- SINGAPORE -- 1.3% DBS Group Holdings, Ltd. 185,000 $ 1,601,307 DBS Group Holdings, Ltd. ADR 144A 124,000 1,073,307 Oversea-Chinese Banking Corporation, Ltd. 346,000 2,465,171 Singapore Airlines, Ltd. 56,000 369,310 Singapore Telecommunications, Ltd. 3,246,800 3,747,117 United Overseas Bank, Ltd. 341,000 2,650,415 Venture Corporation, Ltd. 42,000 494,612 -------------- 12,401,239 -------------- SOUTH AFRICA -- 1.3% ABSA Group, Ltd. 77,300 488,003 Alexander Forbes, Ltd. 400,000 704,120 Anglo American PLC 198,084 4,243,596 AngloGold, Ltd. 5,400 254,014 FirstRand, Ltd. 142,600 190,561 Gold Fields, Ltd. 16,500 236,067 Impala Platinum Holdings, Ltd. 3,770 327,581 Iscor, Ltd. 50,400 217,456 Massmart Holdings, Ltd. 20,200 92,300 MTN Group, Ltd.* 493,400 2,102,956 Nedcor, Ltd. 22,200 206,302 Old Mutual PLC 97,800 163,073 Pick'n Pay Stores, Ltd. 44,100 117,270 Sanlam, Ltd. 300,400 396,033 Sasol, Ltd. 138,900 1,976,854 Standard Bank Group, Ltd. 158,760 931,868 VenFin, Ltd.* 199,900 631,894 -------------- 13,279,948 -------------- SOUTH KOREA -- 2.5% Daewoo Shipbuilding & Marine Engineering Co., Ltd.* 38,630 496,046 Hyundai Mobis 22,290 1,199,151 Hyundai Motor Co., Ltd. 35,450 1,502,497 Kia Motors Corporation 17,490 160,001 Kookmin Bank 72,901 2,731,876 Kookmin Bank ADR 37,179 1,406,853 Korea Electric Power Corporation 52,300 939,337 KT Corporation 27,670 1,035,738 KT Corporation ADR 18,650 355,656 KT Freetel* 24,000 384,725 LG Chem, Ltd. 3,810 175,871 LG Electronics, Inc. 4,470 219,842 POSCO 4,780 653,915 POSCO ADR 5,100 173,247 S-Oil Corporation 37,700 885,942 S1 Corporation 39,280 774,721 Samsung Electronics Co., Ltd. 12,030 4,553,530 Samsung Electronics Co., Ltd. GDR 100 18,800
See Notes to Financial Statements. 125 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS CONTINUED
SHARES VALUE ----------- -------------- Samsung Electronics Co., Ltd. GDR 144A 9,859 $ 1,865,887 Samsung Electronics Co., Ltd. (Non-Voting Shares) GDR 144A 10,109 1,041,443 Samsung Fire & Marine Insurance Co., Ltd. 21,250 1,221,674 Shinsegae Co., Ltd. 6,180 1,504,154 SK Telecom Co., Ltd. 5,030 840,092 SK Telecom Co., Ltd. ADR 33,055 616,476 Tae Young Corporation 10,000 344,104 -------------- 25,101,578 -------------- SPAIN -- 3.3% Acerinox SA 15,439 727,939 Acs, Actividades Cons y Serv* 32,763 1,599,312 Banco Bilbao Vizcaya Argentaria SA 303,112 4,186,524 Banco Santander Central Hispano SA 367,608 4,353,985 Endesa SA 131,800 2,535,255 Iberdrola SA 205,800 4,067,717 Inditex SA 233,400 4,739,833 Repsol YPF SA 28,800 561,615 Telefonica SA 710,100 10,425,787 -------------- 33,197,967 -------------- SWEDEN -- 1.8% Assa Abloy AB Class B 79,374 943,182 Autoliv, Inc. AB 24,291 921,635 Electrolux AB Class B 91,900 2,018,012 ForeningsSparbanken AB 81,600 1,604,714 Hennes & Mauritz AB Class B 144,200 3,426,987 Nordea AB 400,000 2,995,011 Sandvik AB 50,900 1,754,367 Svenska Handelsbanken Class A 24,900 508,707 Volvo AB Class B 121,724 3,721,775 -------------- 17,894,390 -------------- SWITZERLAND -- 3.8% ABB, Ltd. 85,254 432,216 Adecco SA 31,779 2,042,798 Ciba Specialty Chemicals, Inc. 16,700 1,292,250 Compagnie Financiere Richemont AG Class A 102,849 2,469,873 Credit Suisse Group 76,514 2,799,482 Holcim, Ltd. 39,565 1,842,688 Logitech International SA* 31,700 1,371,296 Nestle SA 32,600 8,145,057 Novartis AG 127,267 5,778,081 Roche Holding AG 28,862 2,911,287 Serono SA Class B 594 423,617 STMicroelectronics NV 38,500 1,039,885 Swiss Reinsurance 41,584 2,807,571 Swisscom AG 7,070 2,332,371
SHARES VALUE ----------- -------------- Synthes-Stratec, Inc. 542 $ 536,412 UBS AG 25,504 1,746,666 -------------- 37,971,550 -------------- TAIWAN -- 1.5% Advanced Semiconductor Engineering, Inc.* 185,000 190,177 Asustek Computer, Inc. 194,000 428,571 Cathay Financial Holding Co., Ltd. 193,000 289,926 Cathay Financial Holding Co., Ltd. GDR* 7,024 106,765 China Steel Corporation GDR 144A 52,700 875,489 Chinatrust Financial Holding Co., Ltd. 1,982,580 1,991,340 Compal Electronics, Inc. 862,650 1,181,538 Faraday Technology Corporation 237,500 538,660 First Financial Holding Co., Ltd.* 2,304,000 1,608,389 Fubon Financial Holding Co., Ltd. 347,000 332,180 HON HAI Precision Industry Co., Ltd. 193,000 758,925 MediaTek, Inc. 47,400 445,378 Phoenixtec Power Co., Ltd. 322,605 378,194 Taiwan Semiconductor Manufacturing Co., Ltd.* 2,547,640 4,765,099 United Microelectronics Corporation* 997,984 855,415 Yageo Corporation* 368,000 163,676 Yang Ming Marine Transport Corporation 185,000 183,638 -------------- 15,093,360 -------------- THAILAND -- 0.5% Advanced Info Service Public Co., Ltd. 413,700 882,268 Bangkok Bank Public Co., Ltd.* 205,400 596,151 BEC World Public Co., Ltd. 56,200 320,555 Kasikornbank Public Co., Ltd.* 349,100 616,746 PTT Exploration and Production Public Co., Ltd. 197,900 1,338,562 PTT Public Co., Ltd. 151,400 706,896 Siam Cement Public Co., Ltd. 21,400 149,067 Siam Commercial Bank Public Co., Ltd.* 231,200 315,094 -------------- 4,925,339 -------------- TURKEY -- 0.1% Akbank TAS 56,554,924 295,857 Hurriyet Gazetecilik Ve Matbaacilik AS* 38,897,548 138,425 Migros Turk TAS 48,090,000 687,978
See Notes to Financial Statements. 126
SHARES VALUE ----------- -------------- Tupras-Turkiye Petrol Rafinerileri AS 6,308,296 $ 52,532 Turkiye IS Bankasi Class C* 54,710,068 221,955 -------------- 1,396,747 -------------- UNITED KINGDOM -- 16.2% Antofagasta PLC 148,800 2,810,260 ARM Holdings PLC* 110,000 253,039 AstraZeneca PLC 212,428 10,299,335 Aviva PLC 189,663 1,664,529 BAE Systems PLC 706,034 2,126,531 Barclays PLC 117,200 1,045,360 BG Group PLC 2,323,118 11,925,203 BHP Billiton PLC 204,063 1,781,522 BOC Group PLC 152,300 2,326,990 Boots Group PLC 582,534 7,205,937 BP PLC 810,479 6,572,507 Brambles Industries PLC 638,524 2,326,123 British Airways PLC* 326,782 1,360,104 Cadbury Schweppes PLC 300,000 2,203,236 Centrica PLC 636,500 2,404,208 Compass Group PLC 45,400 308,838 GKN PLC 503,116 2,404,753 GlaxoSmithKline PLC 334,968 7,675,460 GUS PLC 262,761 3,638,416 HBOS PLC 531,261 6,880,779 HSBC Holdings PLC 429,764 6,754,849 Intercontinental Hotels Group PLC 429,474 4,067,089 Johnson Matthey PLC 125,000 2,195,180 Kingfisher PLC 1,263,173 6,297,659 Lloyds TSB Group PLC 954,644 7,656,153 National Grid Transco PLC 135,500 970,872 Next PLC 216,503 4,352,460 Pearson PLC 365,238 4,066,844 Prudential PLC 49,800 421,010 Reckitt Benckiser PLC 181,720 4,111,885 Reed Elsevier PLC 233,348 1,951,841 Rentokil Initial PLC 211,206 718,375 Rio Tinto PLC 143,877 3,974,188 Royal Bank of Scotland Group PLC 96,900 2,855,254 Scottish Power PLC 145,700 970,924 Shell Transport & Trading Co. PLC 854,326 6,354,564 Smith & Nephew PLC 189,633 1,592,976 Smiths Group PLC 151,700 1,795,057 Standard Chartered PLC 99,600 1,644,814
SHARES VALUE ----------- -------------- Tesco PLC 409,200 $ 1,888,102 Trinity Mirror PLC 83,800 846,836 Unilever PLC 295,500 2,754,723 Vodafone Group PLC 5,649,246 14,006,556 Xstrata PLC 110,000 1,240,579 -------------- 160,701,920 -------------- VENEZUELA -- 0.0% Compania Anonima Nacional Telefonos de Venezuela ADR 2,001 30,535 -------------- TOTAL FOREIGN COMMON STOCK (Cost $799,884,877) 959,612,173 -------------- FOREIGN PREFERRED STOCK -- 0.3% BRAZIL -- 0.1% Caemi Mineracao e Metalurgica SA 70,300 30,947 Companhia de Tecidos do Norte de Minas -- Coteminas 4,986,860 377,687 Investimentos Itau SA 317,412 375,173 Telemar Norte Leste SA Class A 2,000,000 39,931 -------------- 823,738 -------------- JAPAN -- 0.2% SMFG Finance, Ltd. 2.25%, 07/11/05 6,000,000 105,113 SMFG Finance, Ltd. 144A 2.25%, 07/11/05 78,000,000 1,366,474 -------------- 1,471,587 -------------- TOTAL FOREIGN PREFERRED STOCK (Cost $1,248,414) 2,295,325 -------------- SHORT-TERM INVESTMENTS -- 11.2% AB Funds Trust -- Money Market Fund (Retirement Class)( 28,019,554 28,019,554 Northern Institutional Liquid Assets Portfolio sec. 83,255,194 83,255,194 -------------- TOTAL SHORT-TERM INVESTMENTS (Cost $111,274,748) 111,274,748 -------------- TOTAL INVESTMENTS -- 108.3% (Cost $912,573,733) 1,073,447,458 LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.3%) (81,959,351) -------------- NET ASSETS -- 100.0% $ 991,488,107 ==============
See Notes to Financial Statements. 127 SCHEDULE OF INVESTMENTS ABBREVIATIONS AND FOOTNOTES INVESTMENT ABBREVIATIONS: ADR -- American Depository Receipt CONV -- Convertible GDR -- Global Depository Receipt IO -- Interest Only (Principal amount shown is notional) PO -- Principal Only REIT -- Real Estate Investment Trust STEP -- Stepped Coupon Bonds (1) STRIP -- Stripped Security TBA -- To be announced. 144A -- Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. INVESTMENT FOOTNOTES: ++++ -- All or a portion of the security was held as collateral for open futures, options and/or swap contracts. @ -- Illiquid. * -- Non-income producing security. # -- Security in default. + -- Security is valued at fair value. sec. -- Security purchased with the cash proceeds from securities loaned. ++ -- Variable rate security (1). (omg) -- Interest rates shown reflect the effective yields as of December 31, 2003. (inf) -- Affiliated fund. FOREIGN BOND FOOTNOTES: (A) -- Par is denominated in Australian Dollars. (C) -- Par is denominated in Canadian Dollars. (E) -- Par is denominated in European Euros. (K) -- Par is denominated in Norwegian Krone. (N) -- Par is denominated in New Zealand Dollars. (R) -- Par is denominated in South African Rand. (S) -- Par is denominated in Swiss Francs. (W) -- Par is denominated in Swedish Kronas. SWAP AGREEMENT FOOTNOTES: (a) -- Counterparty to contract is Goldman Sachs Capital Markets, LP. (b) -- Counterparty to contract is UBS AG. (c) -- Counterparty to contract is Morgan Stanley Capital Services. (d) -- Counterparty to contract is Barclays Capital. (e) -- Counterparty to contract is Lehman Brothers Special Financing, Inc. (f) -- Counterparty to contract is Citibank NA London. (g) -- Counterparty to contract is JPMorgan Chase Bank. (h) -- Counterparty to contract is Merrill Lynch Capital Services, Inc.
(1) With the exception of Interest Only (IO) securities, the interest rates shown reflect the rates currently in effect. 128 (This page intentionally left blank) 129 STATEMENTS OF ASSETS AND LIABILITIES
MONEY LOW-DURATION MEDIUM-DURATION DECEMBER 31, 2003 MARKET FUND BOND FUND BOND FUND ----------------- ------------ -------------- --------------- ASSETS Investments at value (1)(2) $921,287,130 $1,017,904,502 $1,111,888,922 Options purchased at value (3) -- -- -- Cash 294 1,283,464 2,585,060 Cash collateral for futures -- -- 301,150 Foreign currency (4) -- 89,135 4,870,495 Receivables: Dividends and reclaims -- 17,641 82,467 Interest 1,302,095 4,013,168 5,360,485 Interest on swaps -- -- 387,769 Investment securities sold -- -- 11,386,719 Maturities -- 173,524 15,798 Fund shares sold 4,132,485 24,806 184,983 Variation margin -- 43,131 125,985 Securities lending 347 32,240 23,746 Unrealized appreciation on foreign currency exchange contracts -- -- 888,060 Unrealized appreciation on swap agreements -- 90,042 2,475,973 Receivable from administrator -- -- -- Prepaid expenses and other assets 22,211 20,905 21,150 ------------ -------------- -------------- Total Assets 926,744,562 1,023,692,558 1,140,598,762 ------------ -------------- -------------- LIABILITIES Cash overdraft -- -- -- Options written at value (5) -- 506,106 2,570,081 Unrealized depreciation on foreign currency exchange contracts -- 1,070,417 2,032,280 Unrealized depreciation on swap agreements -- 113,766 2,945,016 Collateral held for securities on loan at value 195,700 200,386,436 173,739,800 Payables: Investment securities purchased -- 17,638,687 146,100,231 Fund shares redeemed 1,472,574 60,891 1,176,430 Interest on swaps -- -- 639,532 Variation margin -- 24,125 23,063 Distributions 238,426 -- -- Securities lending 104 9,642 7,073 Excise tax payable -- -- -- Accrued expenses Advisory fee payable 110,685 91,964 83,890 Distribution fee payable 683 1,924 1,914 Other accrued expenses 115,644 225,980 253,330 Service fee payable 140,534 119,555 121,909 Other liabilities -- -- -- ------------ -------------- -------------- Total Liabilities 2,274,350 220,249,493 329,694,549 ------------ -------------- -------------- NET ASSETS $924,470,212 $ 803,443,065 $ 810,904,213 ============ ============== ============== NET ASSETS CONSIST OF: Paid-in-capital $924,479,713 $ 799,124,290 $ 792,265,007 Undistributed net investment income (loss) -- (805,080) (1,114,144) Accumulated net realized gain (loss) on investments, foreign currency transactions and derivative transactions (9,501) 671,003 5,249,119 Net unrealized appreciation (depreciation) on investments, foreign currency translations and derivative transactions -- 4,452,852 14,504,231 ------------ -------------- -------------- NET ASSETS $924,470,212 $ 803,443,065 $ 810,904,213 ============ ============== ============== NET ASSET VALUE: $0.001 par value, unlimited shares authorized Net assets applicable to the Retail Class $ 8,035,084 $ 22,452,421 $ 22,640,056 ------------ -------------- -------------- Retail shares outstanding 8,037,278 2,352,631 2,434,543 ------------ -------------- -------------- Net asset value, offering price and redemption price per Retail share $ 1.00 $ 9.54 $ 9.30 ============ ============== ============== Net assets applicable to the Retirement Class $853,062,034 $ 727,264,623 $ 741,742,849 ------------ -------------- -------------- Retirement shares outstanding 853,034,083 55,929,003 54,617,534 ------------ -------------- -------------- Net asset value, offering price and redemption price per Retirement share $ 1.00 $ 13.00 $ 13.58 ============ ============== ============== Net assets applicable to the Institutional class $ 63,373,094 $ 53,726,021 $ 46,521,308 ------------ -------------- -------------- Institutional shares outstanding 63,373,845 5,649,860 5,033,943 ------------ -------------- -------------- Net asset value, offering price and redemption price per Institutional share $ 1.00 $ 9.51 $ 9.24 ============ ============== ============== - --------------- (1) Investments at cost $921,287,130 $1,012,696,548 $1,095,202,072 ============ ============== ============== (2) Includes securities loaned of: $ 10,440,941 $ 278,262,422 $ 188,293,358 ============ ============== ============== (3) Premiums paid on options purchased -- -- $ 1,412 ============ ============== ============== (4) Foreign currency at cost -- $ 86,119 $ 4,713,968 ============ ============== ============== (5) Premiums received on options written -- $ (595,524) $ (2,778,035) ============ ============== ============== (6) Net of $302,816 accrued foreign capital gains taxes on appreciated securities.
See Notes to Financial Statements. 130
EXTENDED-DURATION EQUITY VALUE GROWTH SMALL CAP INTERNATIONAL BOND FUND INDEX FUND EQUITY FUND EQUITY FUND EQUITY FUND EQUITY FUND ----------------- ------------ -------------- -------------- ------------ -------------- $443,557,662 $452,817,464 $1,372,396,427 $1,426,509,137 $514,304,500 $1,073,447,458 -- -- -- -- -- -- -- -- -- 2 8,000 -- -- -- -- -- -- -- -- -- -- -- -- 1,143,600 6,142 542,402 2,369,713 652,303 209,682 1,283,169 4,437,941 -- -- -- -- 287 -- -- -- -- -- -- 3,750 -- 3,440,772 4,206,595 1,932,946 733,420 -- -- -- -- -- -- 1,753,023 142,035 283,705 64,477 355,122 629,992 -- 26,100 78,750 113,100 -- -- 18,211 3,142 22,182 12,224 19,701 25,759 -- -- -- -- -- 20,247 -- -- -- -- -- -- -- -- -- -- -- 7,501 17,506 16,145 22,867 24,576 15,927 20,110 ------------ ------------ -------------- -------------- ------------ -------------- 449,794,235 453,547,288 1,378,614,416 1,431,582,414 516,845,878 1,077,311,543 ------------ ------------ -------------- -------------- ------------ -------------- -- -- -- -- -- 403 -- -- -- -- -- -- -- -- -- 126,811 -- 895,634 -- -- -- -- -- -- 7,364,318 20,889,981 132,608,734 42,718,010 105,886,727 83,255,194 -- -- 3,273,535 4,439,719 3,408,275 698,213 15,393 28,927 3,224 257,740 1,392,206 6,798 -- -- -- -- -- -- -- -- -- -- 71,500 -- -- -- -- -- -- -- 5,436 920 6,591 3,652 5,674 7,681 -- -- -- -- -- 7,501 93,978 31,569 395,618 464,234 29,732 206,917 2,343 1,431 1,603 1,491 1,823 1,660 137,664 60,778 355,058 496,429 354,183 597,889 66,076 62,398 182,688 204,695 58,537 145,546 17,097 -- -- -- -- -- ------------ ------------ -------------- -------------- ------------ -------------- 7,702,305 21,076,004 136,827,051 48,712,781 111,208,657 85,823,436 ------------ ------------ -------------- -------------- ------------ -------------- $442,091,930 $432,471,284 $1,241,787,365 $1,382,869,633 $405,637,221 $ 991,488,107 ============ ============ ============== ============== ============ ============== $413,747,593 $404,913,048 $1,173,451,527 $1,564,015,099 $346,314,468 $ 950,130,131 810,584 510,613 55,133 -- -- (1,565,570) 2,886,995 (8,629,140) (83,673,622) (327,369,027) (13,524,573) (116,927,567)(6) 24,646,758 35,676,763 151,954,327 146,223,561 72,847,326 159,851,113 ------------ ------------ -------------- -------------- ------------ -------------- $442,091,930 $432,471,284 $1,241,787,365 $1,382,869,633 $405,637,221 $ 991,488,107 ============ ============ ============== ============== ============ ============== $ 27,977,513 $ 17,394,809 $ 19,680,049 $ 18,099,443 $ 22,520,186 $ 20,434,341 ------------ ------------ -------------- -------------- ------------ -------------- 3,032,939 1,904,164 1,987,723 1,992,726 1,972,928 1,865,711 ------------ ------------ -------------- -------------- ------------ -------------- $ 9.22 $ 9.14 $ 9.90 $ 9.08 $ 11.41 $ 10.95 ============ ============ ============== ============== ============ ============== $385,110,204 $382,067,335 $1,152,116,281 $1,285,222,737 $357,702,508 $ 920,664,172 ------------ ------------ -------------- -------------- ------------ -------------- 26,047,558 25,262,231 75,384,728 88,349,910 23,864,370 71,037,081 ------------ ------------ -------------- -------------- ------------ -------------- $ 14.78 $ 15.12 $ 15.28 $ 14.55 $ 14.99 $ 12.96 ============ ============ ============== ============== ============ ============== $ 29,004,213 $ 33,009,140 $ 69,991,035 $ 79,547,453 $ 25,414,527 $ 50,389,594 ------------ ------------ -------------- -------------- ------------ -------------- 3,143,519 3,633,875 7,040,281 8,684,511 2,205,692 4,557,611 ------------ ------------ -------------- -------------- ------------ -------------- $ 9.23 $ 9.08 $ 9.94 $ 9.16 $ 11.52 $ 11.06 ============ ============ ============== ============== ============ ============== $418,942,220 $417,576,886 $1,221,652,776 $1,281,895,529 $441,929,844 $ 912,573,733 ============ ============ ============== ============== ============ ============== $133,234,273 $ 24,818,321 $ 133,585,805 $ 70,392,278 $102,781,263 $ 82,411,268 ============ ============ ============== ============== ============ ============== -- -- -- -- -- -- ============ ============ ============== ============== ============ ============== -- -- -- -- -- 1,129,721 ============ ============ ============== ============== ============ ============== -- -- -- -- -- -- ============ ============ ============== ============== ============ ==============
See Notes to Financial Statements. 131 STATEMENTS OF OPERATIONS
MONEY LOW-DURATION MEDIUM-DURATION FOR THE YEAR ENDED DECEMBER 31, 2003 MARKET FUND BOND FUND BOND FUND - ------------------------------------ ----------- ------------ --------------- INVESTMENT INCOME Dividends $ -- $ 25,696 $ 10,469 Income distributions received from affiliated funds -- 244,483 826,033 Interest 12,063,612 23,519,850 30,670,257 Securities Lending 16,569 243,105 138,273 Less foreign taxes withheld -- (3,645) (7,463) ----------- ------------ ----------- Total Investment Income 12,080,181 24,029,489 31,637,569 ----------- ------------ ----------- EXPENSES Investment advisory fees 1,921,028 3,260,161 3,495,262 Transfer agent fees: Retail shares 23,906 19,950 22,392 Retirement shares 24,209 17,937 17,870 Institutional shares 4,660 4,107 4,163 Custodian fees 24,777 68,531 161,338 Distribution fees -- Retail shares 10,355 22,419 21,526 Shareholders servicing fees: Retail shares 15,529 33,610 32,250 Retirement shares 1,693,164 1,412,914 1,425,312 Accounting and administration fees 354,726 350,111 378,517 Professional fees 47,928 51,048 55,873 Registration fees 16,146 16,934 16,077 Shareholder reporting fees Retail shares 16,896 12,644 17,460 Retirement shares 6,685 (83) (224) Institutional shares 3,168 2,265 2,655 Trustee fees 4,652 3,931 3,925 Line of credit facility fees 7,643 6,435 6,405 Excise tax -- -- -- Other expenses 18,019 20,929 35,213 ----------- ------------ ----------- Total expenses 4,193,491 5,303,843 5,696,014 Expenses waived (22,759) (441,527) (714,302) Fees paid indirectly (7,950) (28,847) (18,975) ----------- ------------ ----------- Net expenses 4,162,782 4,833,469 4,962,737 ----------- ------------ ----------- NET INVESTMENT INCOME (LOSS) 7,917,399 19,196,020 26,674,832 ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investment securities (9,501) 8,597,383 19,868,513 Futures transactions -- 1,331,879 4,196,582 Swap agreements -- 313,324 1,503,111 Option contracts -- 255,110 766,904 Foreign currency transactions -- (263,965) 711,257 ----------- ------------ ----------- Net realized gain (loss) (9,501) 10,233,731 27,046,367 ----------- ------------ ----------- Net change in unrealized appreciation (depreciation) on: Investment securities (net of estimated deferred capital gains taxes of $302,816 for International Equity) -- (8,810,016) (2,454,838) Futures transactions -- (310,431) (266,877) Swap agreements -- (193,956) 1,366 Option contracts -- 89,418 758,918 Foreign currency translations -- (933,632) 333,528 ----------- ------------ ----------- Net change in unrealized appreciation (depreciation) -- (10,158,617) (1,627,903) ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) (9,501) 75,114 25,418,464 ----------- ------------ ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,907,898 $ 19,271,134 $52,093,296 =========== ============ ===========
See Notes to Financial Statements. 132
EXTENDED-DURATION EQUITY VALUE GROWTH SMALL CAP INTERNATIONAL BOND FUND INDEX FUND EQUITY FUND EQUITY FUND EQUITY FUND EQUITY FUND ----------------- ----------- ------------ ------------ ------------ ------------- $ 93,125 $ 6,159,323 $ 25,353,189 $ 9,384,945 $ 2,225,296 $ 21,217,545 85,386 99,302 356,289 479,696 155,103 207,314 27,341,788 8,944 41,835 40,998 14,209 17,652 109,504 25,512 165,563 102,252 145,227 301,409 (66,860) -- (23,954) (37,384) (3,995) (1,840,330) ----------- ----------- ------------ ------------ ------------ ------------ 27,562,943 6,293,081 25,892,922 9,970,507 2,535,840 19,903,590 ----------- ----------- ------------ ------------ ------------ ------------ 2,182,598 605,659 7,250,743 9,266,183 3,269,081 7,786,604 20,528 19,644 18,703 20,864 20,375 15,901 17,552 17,671 17,381 17,751 17,641 17,506 4,071 3,987 4,162 4,128 4,065 4,012 32,783 32,944 99,454 68,229 153,320 600,031 27,264 14,590 15,956 15,004 16,110 15,922 40,867 21,865 23,913 22,487 24,120 23,856 760,631 631,246 1,897,553 2,186,978 510,308 1,438,725 187,062 156,618 432,061 482,499 182,370 380,021 49,764 46,708 46,708 46,708 49,152 51,596 14,883 16,261 14,840 13,327 17,178 15,488 13,930 14,199 13,266 16,832 15,321 5,997 1,735 2,455 (1,785) (785) 2,653 (183) 2,007 2,527 3,316 2,990 3,317 2,517 2,211 1,847 5,262 6,043 1,529 4,233 3,627 2,943 8,517 9,727 2,355 6,347 -- -- -- -- -- 7,501 18,211 31,987 22,695 29,688 21,287 44,182 ----------- ----------- ------------ ------------ ------------ ------------ 3,379,724 1,623,151 9,872,745 12,208,653 4,310,182 10,420,256 (95,841) (183,553) (437,954) (1,146,568) (523,923) (1,270,511) (3,392) (443) (204,849) (197,536) (194,147) (169,799) ----------- ----------- ------------ ------------ ------------ ------------ 3,280,491 1,439,155 9,229,942 10,864,549 3,592,112 8,979,946 ----------- ----------- ------------ ------------ ------------ ------------ 24,282,452 4,853,926 16,662,980 (894,042) (1,056,272) 10,923,644 ----------- ----------- ------------ ------------ ------------ ------------ 22,580,208 (745,965) 121,994 (87,957,167) 30,807,367 (31,992,796) -- 1,725,149 6,524,147 9,406,382 4,072,966 -- -- -- -- -- -- -- -- -- -- -- -- -- (254,257) -- -- -- -- 500,769 ----------- ----------- ------------ ------------ ------------ ------------ 22,325,951 979,184 6,646,141 (78,550,785) 34,880,333 (31,492,027) ----------- ----------- ------------ ------------ ------------ ------------ 1,484,743 86,383,798 268,266,788 390,310,628 83,505,102 282,022,294 -- 558,213 2,012,169 2,549,460 733,217 -- -- -- -- -- -- -- -- -- -- -- -- -- 10,881 -- -- (126,811) -- (1,088,603) ----------- ----------- ------------ ------------ ------------ ------------ 1,495,624 86,942,011 270,278,957 392,733,277 84,238,319 280,933,691 ----------- ----------- ------------ ------------ ------------ ------------ 23,821,575 87,921,195 276,925,098 314,182,492 119,118,652 249,441,664 ----------- ----------- ------------ ------------ ------------ ------------ $48,104,027 $92,775,121 $293,588,078 $313,288,450 $118,062,380 $260,365,308 =========== =========== ============ ============ ============ ============
See Notes to Financial Statements. 133 STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET FUND ---------------------------- FOR THE YEAR FOR THE YEAR ENDED ENDED 12/31/2003 12/31/2002 ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 7,917,399 $ 14,389,410 Net realized gain (loss) on investment securities and futures transactions (9,501) 677 Net change in unrealized appreciation (depreciation) on investment securities, foreign currency translations, and futures contracts -- -- ------------ ------------ Net increase in net assets resulting from operations 7,907,898 14,390,087 ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME Retail shares (62,904) (211,879) Retirement shares (7,530,068) (14,080,267) Institutional shares (324,427) (98,374) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS Retail shares (6) (2,139) Retirement shares (625) (122,219) Institutional shares (46) (709) ------------ ------------ Total dividends and distributions (7,918,076) (14,515,587) ------------ ------------ NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS (3,852,148) (68,734,603) ------------ ------------ Total increase (decrease) in net assets (3,862,326) (68,860,103) ------------ ------------ NET ASSETS: Beginning of the Period 928,332,538 997,192,641 ------------ ------------ End of the Period $924,470,212 $928,332,538 ============ ============
See Notes to Financial Statements. 134
LOW-DURATION BOND FUND MEDIUM-DURATION BOND FUND EXTENDED-DURATION BOND FUND --------------------------- --------------------------- --------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED 12/31/2003 12/31/2002 12/31/2003 12/31/2002 12/31/2003 12/31/2002 ------------ ------------ ------------ ------------ ------------ ------------ $ 19,196,020 $ 28,004,785 $ 26,674,832 $ 37,436,569 $ 24,282,452 $ 25,918,328 10,233,731 10,127,389 27,046,367 28,478,461 22,325,951 6,449,350 (10,158,617) 6,436,331 (1,627,903) 4,121,731 1,495,624 7,183,095 ------------ ------------ ------------ ------------ ------------ ------------ 19,271,134 44,568,505 52,093,296 70,036,761 48,104,027 39,550,773 ------------ ------------ ------------ ------------ ------------ ------------ (753,411) (891,700) (1,202,395) (1,019,885) (2,080,490) (2,004,286) (19,321,186) (28,377,608) (30,152,221) (37,167,512) (19,969,955) (23,749,846) (1,326,256) (300,705) (1,916,722) (413,967) (1,595,527) (539,205) (311,062) (314,466) (676,622) (749,228) (1,897,839) (608,575) (7,418,102) (8,567,498) (15,323,780) (21,292,911) (16,743,684) (6,527,530) (746,547) (95,235) (1,396,423) (282,811) (1,971,125) (159,603) ------------ ------------ ------------ ------------ ------------ ------------ (29,876,564) (38,547,212) (50,668,163) (60,926,314) (44,258,620) (33,589,045) ------------ ------------ ------------ ------------ ------------ ------------ 22,756,445 (30,599,815) 15,046,016 (42,599,829) 5,730,852 13,696,928 ------------ ------------ ------------ ------------ ------------ ------------ 12,151,015 (24,578,522) 16,471,149 (33,489,382) 9,576,259 19,658,656 ------------ ------------ ------------ ------------ ------------ ------------ 791,292,050 815,870,572 794,433,064 827,922,446 432,515,671 412,857,015 ------------ ------------ ------------ ------------ ------------ ------------ $803,443,065 $791,292,050 $810,904,213 $794,433,064 $442,091,930 $432,515,671 ============ ============ ============ ============ ============ ============
See Notes to Financial Statements. 135 STATEMENTS OF CHANGES IN NET ASSETS
EQUITY INDEX FUND ---------------------------- FOR THE YEAR FOR THE YEAR ENDED ENDED 12/31/2003 12/31/2002 ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS OPERATIONS: Net investment income (loss) $ 4,853,926 $ 4,233,513 Net realized gain (loss) on investment securities and futures transactions 979,184 (8,337,123) Net change in unrealized appreciation (depreciation) on investment securities, foreign currency translations, and futures contracts 86,942,011 (86,488,833) ------------ ------------ Net increase (decrease) in net assets resulting from operations 92,775,121 (90,592,443) ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME Retail shares (278,397) (284,510) Retirement shares (3,723,527) (3,810,917) Institutional shares (403,725) (114,879) DISTRIBUTIONS TO SHAREHOLDERS FROM NET CAPITAL GAINS Retail shares -- (51,388) Retirement shares -- (723,900) Institutional shares -- (18,967) RETURN OF CAPITAL Retail shares -- -- Retirement shares -- -- Institutional shares -- -- ------------ ------------ Total dividends and distributions (4,405,649) (5,004,561) ------------ ------------ NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS 31,213,504 6,619,642 ------------ ------------ Total increase (decrease) in net assets 119,582,976 (88,977,362) ------------ ------------ NET ASSETS: Beginning of the Period 312,888,308 401,865,670 ------------ ------------ End of the Period $432,471,284 $312,888,308 ============ ============
See Notes to Financial Statements. 136
VALUE EQUITY FUND GROWTH EQUITY FUND SMALL CAP EQUITY FUND INTERNATIONAL EQUITY FUND ------------------------------- ------------------------------- --------------------------- --------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/2003 12/31/2002 12/31/2003 12/31/2002 12/31/2003 12/31/2002 12/31/2003 12/31/2002 -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ $ 16,662,980 $ 16,612,447 $ (894,042) $ (609,038) $ (1,056,272) $ (584,539) $ 10,923,644 $ 7,653,878 6,646,141 (63,914,069) (78,550,785) (170,669,128) 34,880,333 (38,839,206) (31,492,027) (58,572,782) 270,278,957 (153,063,309) 392,733,277 (221,901,627) 84,238,319 (31,682,156) 280,933,691 (46,113,641) -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ 293,588,078 (200,364,931) 313,288,450 (393,179,793) 118,062,380 (71,105,901) 260,365,308 (97,032,545) -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ (369,825) (335,450) -- -- -- -- (265,273) (149,912) (15,815,795) (15,700,497) -- -- -- -- (11,108,069) (7,393,223) (922,077) (149,517) -- -- -- -- (797,069) (79,869) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (3,045) -- -- -- -- -- (4,136) -- (134,245) -- -- -- -- -- (174,185) -- (1,142) -- -- -- -- -- (1,573) -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ (17,107,697) (16,323,896) -- -- -- -- (12,170,411) (7,802,898) -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ 7,472,571 15,069,203 2,816,736 105,305,231 36,835,939 (94,482) 25,094,925 27,592,506 -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ 283,952,952 (201,619,624) 316,105,186 (287,874,562) 154,898,319 (71,200,383) 273,289,822 (77,242,937) -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ 957,834,413 1,159,454,037 1,066,764,447 1,354,639,009 250,738,902 321,939,285 718,198,285 795,441,222 -------------- -------------- -------------- -------------- ------------ ------------ ------------ ------------ $1,241,787,365 $ 957,834,413 $1,382,869,633 $1,066,764,447 $405,637,221 $250,738,902 $991,488,107 $718,198,285 ============== ============== ============== ============== ============ ============ ============ ============
See Notes to Financial Statements. 137 FINANCIAL HIGHLIGHTS
MONEY MARKET FUND ----------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ---------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------- ------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.01 0.01 0.01 0.01 0.02 0.01 Realized and unrealized gain (loss) on investments -- net -- -- -- -- -- -- ------ ------- ------- -------- -------- -------- Total from investment operations 0.01 0.01 0.01 0.01 0.02 0.01 ------ ------- ------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.01) (0.01) (0.01) (0.01) (0.02) (0.01) Distributions from capital gains --++ --++ -- --++ --++ -- ------ ------- ------- -------- -------- -------- Total dividends and distributions (0.01) (0.01) (0.01) (0.01) (0.02) (0.01) ------ ------- ------- -------- -------- -------- NET ASSET VALUE -- END OF THE PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ======= ======= ======== ======== ======== Total Return (1) 0.57% 1.38% 0.81% 0.85% 1.60% 0.94% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.73% 0.65% 0.75% 0.45% 0.45% 0.44% Expenses -- including expense reduction (2) 0.73% 0.65% 0.75% 0.45% 0.44% 0.44% Expenses -- before waivers and expense reduction (2) 0.91% 0.77% 16.37% 0.45% 0.50% 0.49% Investment income -- net (2) 0.61% 1.35% 1.98% 0.84% 1.58% 2.72% Investment income (loss) -- excluding waivers and expense reduction (2) 0.43% 1.23% (13.64%) 0.84% 1.52% 2.67% Portfolio turnover rate (1) N/A N/A N/A N/A N/A N/A Net Assets -- end of the period (000's) $8,035 $16,538 $ 788 $853,062 $906,302 $996,380 ====== ======= ======= ======== ======== ======== MONEY MARKET FUND ---------------------------------- INSTITUTIONAL CLASS ---------------------------------- FOR THE FOR THE FOR THE YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 ------- ------ ------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.01 0.02 0.01 Realized and unrealized gain (loss) on investments -- net -- -- -- ------- ------ ------- Total from investment operations 0.01 0.02 0.01 ------- ------ ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.01) (0.02) (0.01) Distributions from capital gains --++ --++ -- ------- ------ ------- Total dividends and distributions (0.01) (0.02) (0.01) ------- ------ ------- NET ASSET VALUE -- END OF THE PERIOD $ 1.00 $ 1.00 $ 1.00 ======= ====== ======= Total Return (1) 1.04% 1.80% 0.66% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.27% 0.25% 0.25% Expenses -- including expense reduction (2) 0.27% 0.25% 0.25% Expenses -- before waivers and expense reduction (2) 0.28% 0.55% 90.37% Investment income -- net (2) 0.91% 1.75% 2.60% Investment income (loss) -- excluding waivers and expense reduction (2) 0.90% 1.45% (87.52%) Portfolio turnover rate (1) N/A N/A N/A Net Assets -- end of the period (000's) $63,373 $5,493 $ 25 ======= ====== =======
- --------------- * Commencement of operations. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. + Amount represents less than $0.01 per share. See Notes to Financial Statements. 138
LOW-DURATION BOND FUND ------------------------------------------------------------------------------------------------------------------ RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS ------------------------------------ ------------------------------------ ------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ ---------- -------- ------------ ---------- -------- ------------ $ 9.79 $ 9.86 $ 10.00 $ 13.16 $ 13.06 $ 13.10 $ 9.76 $ 9.85 $ 10.00 ------- ------- ------- -------- -------- -------- ------- ------- ------- 0.21# 0.33# 0.22 0.32# 0.46# 0.21 0.22# 0.37# 0.15 -- 0.22 (0.06) -- 0.27 0.05 0.03 0.19 -- ------- ------- ------- -------- -------- -------- ------- ------- ------- 0.21 0.55 0.16 0.32 0.73 0.26 0.25 0.56 0.15 ------- ------- ------- -------- -------- -------- ------- ------- ------- (0.33) (0.47) (0.22) (0.35) (0.48) (0.22) (0.37) (0.50) (0.22) (0.13) (0.15) (0.08) (0.13) (0.15) (0.08) (0.13) (0.15) (0.08) ------- ------- ------- -------- -------- -------- ------- ------- ------- (0.46) (0.62) (0.30) (0.48) (0.63) (0.30) (0.50) (0.65) (0.30) ------- ------- ------- -------- -------- -------- ------- ------- ------- $ 9.54 $ 9.79 $ 9.86 $ 13.00 $ 13.16 $ 13.06 $ 9.51 $ 9.76 $ 9.85 ======= ======= ======= ======== ======== ======== ======= ======= ======= 2.20% 5.70% 1.54% 2.45% 5.71% 1.96% 2.61% 5.89% 1.54% 0.85% 0.79% 0.85% 0.61% 0.62% 0.61% 0.45% 0.46% 0.45% 0.84% 0.79% 0.85% 0.61% 0.61% 0.61% 0.45% 0.45% 0.45% 0.87% 0.93% 74.57% 0.67% 0.72% 0.72% 0.50% 0.78% 57.60% 2.17% 3.35% 4.18% 2.42% 3.50% 4.47% 2.29% 3.71% 4.73% 2.14% 3.21% (69.54%) 2.36% 3.39% 4.36% 2.24% 3.38% (52.42%) 178.67% 181.96% 79.53% 178.67% 181.96% 79.53% 178.67% 181.96% 79.53% $22,452 $20,985 $ 3,458 $727,265 $763,987 $812,387 $53,726 $ 6,320 $ 25 ======= ======= ======= ======== ======== ======== ======= ======= =======
See Notes to Financial Statements. 139
MEDIUM-DURATION BOND FUND ----------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ---------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.53 $ 9.70 $ 10.00 $ 13.54 $ 13.37 $ 13.60 ------- ------- ------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.29# 0.42# 0.17 0.46# 0.62# 0.22 Realized and unrealized gain (loss) on investments -- net 0.31 0.41 (0.04) 0.43 0.57 (0.02) ------- ------- ------- -------- -------- -------- Total from investment operations 0.60 0.83 0.13 0.89 1.19 0.20 ------- ------- ------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.54) (0.63) (0.23) (0.56) (0.65) (0.23) Distributions from capital gains (0.29) (0.37) (0.20) (0.29) (0.37) (0.20) Return of capital -- -- --++ -- -- --++ ------- ------- ------- -------- -------- -------- Total dividends and distributions (0.83) (1.00) (0.43) (0.85) (1.02) (0.43) ------- ------- ------- -------- -------- -------- NET ASSET VALUE -- END OF THE PERIOD $ 9.30 $ 9.53 $ 9.70 $ 13.58 $ 13.54 $ 13.37 ======= ======= ======= ======== ======== ======== Total Return (1) 6.33% 8.90% 1.30% 6.62% 9.15% 1.49% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.90% 0.90% 0.92% 0.62% 0.63% 0.64% Expenses--including expense reduction (2) 0.90% 0.90% 0.90% 0.62% 0.62% 0.62% Expenses -- before waivers and expense reduction (2) 0.96% 1.03% 58.64% 0.71% 0.77% 0.77% Investment income -- net (2) 3.02% 4.33% 4.48% 3.36% 4.58% 4.61% Investment income (loss) -- excluding waivers and expense reduction (2) 2.96% 4.20% (53.26%) 3.27% 4.43% 4.46% Portfolio turnover rate (1) 457.74% 542.94% 247.20% 457.74% 542.94% 247.20% Net Assets -- end of the period (000's) $22,640 $19,289 $ 123 $741,743 $767,926 $827,774 ======= ======= ======= ======== ======== ======== MEDIUM-DURATION BOND FUND ---------------------------------- INSTITUTIONAL CLASS ---------------------------------- FOR THE FOR THE FOR THE YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 9.47 $ 9.65 $ 10.00 ------- ------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.28# 0.46# 0.16 Realized and unrealized gain (loss) on investments -- net 0.36 0.40 (0.08) ------- ------- -------- Total from investment operations 0.64 0.86 0.08 ------- ------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.58) (0.67) (0.23) Distributions from capital gains (0.29) (0.37) (0.20) Return of capital -- -- --++ ------- ------- -------- Total dividends and distributions (0.87) (1.04) (0.43) ------- ------- -------- NET ASSET VALUE -- END OF THE PERIOD $ 9.24 $ 9.47 $ 9.65 ======= ======= ======== Total Return (1) 6.80% 9.25% 0.89% RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.50% 0.51% 0.52% Expenses--including expense reduction (2) 0.50% 0.50% 0.50% Expenses -- before waivers and expense reduction (2) 0.55% 0.82% 92.28% Investment income -- net (2) 2.95% 4.73% 4.98% Investment income (loss) -- excluding waivers and expense reduction (2) 2.90% 4.41% (86.80%) Portfolio turnover rate (1) 457.74% 542.94% 247.20% Net Assets -- end of the period (000's) $46,521 $ 7,218 $ 25 ======= ======= ========
- --------------- * Commencement of operations. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. ++ Amount represents less than $0.01 per share. See Notes to Financial Statements. 140
EXTENDED-DURATION BOND FUND ------------------------------------------------------------------------------------------------------------ RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS ---------------------------------- ---------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ -------- -------- ------------ -------- -------- ------------ $ 9.63 $ 9.83 $ 10.00 $ 14.62 $ 14.37 $ 14.38 $ 9.64 $ 9.84 $ 10.00 ------- ------- ------- -------- -------- -------- ------- ------ ------- 0.52# 0.62 0.32 0.83# 0.90 0.32 0.54# 0.65 0.24 0.50 0.29 (0.13) 0.77 0.47 0.03 0.51 0.29 (0.03) ------- ------- ------- -------- -------- -------- ------- ------ ------- 1.02 0.91 0.19 1.60 1.37 0.35 1.05 0.94 0.21 ------- ------- ------- -------- -------- -------- ------- ------ ------- (0.76) (0.87) (0.32) (0.77) (0.88) (0.32) (0.79) (0.90) (0.33) (0.67) (0.24) (0.04) (0.67) (0.24) (0.04) (0.67) (0.24) (0.04) -- -- -- -- -- -- -- -- -- ------- ------- ------- -------- -------- -------- ------- ------ ------- (1.43) (1.11) (0.36) (1.44) (1.12) (0.36) (1.46) (1.14) (0.37) ------- ------- ------- -------- -------- -------- ------- ------ ------- $ 9.22 $ 9.63 $ 9.83 $ 14.78 $ 14.62 $ 14.37 $ 9.23 $ 9.64 $ 9.84 ======= ======= ======= ======== ======== ======== ======= ====== ======= 10.95% 9.93% 1.91% 11.19% 10.03% 2.48% 11.32% 10.27% 2.13% 0.93% 0.91% 1.06% 0.73% 0.73% 0.74% 0.59% 0.64% 0.66% 0.93% 0.91% 1.05% 0.73% 0.73% 0.73% 0.59% 0.64% 0.65% 0.94% 1.03% 28.96% 0.75% 0.82% 0.84% 0.60% 0.88% 90.75% 5.25% 6.18% 6.14% 5.46% 6.29% 6.32% 5.49% 6.47% 6.62% 5.24% 6.06% (21.77%) 5.44% 6.20% 6.21% 5.48% 6.23% (83.48%) 121.20% 45.17% 21.95% 121.20% 45.17% 21.95% 121.20% 45.17% 21.95% $27,978 $24,812 $ 8,553 $385,110 $401,198 $404,278 $29,004 $6,506 $ 26 ======= ======= ======= ======== ======== ======== ======= ====== =======
See Notes to Financial Statements. 141
EQUITY INDEX FUND ----------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ---------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 7.26 $ 9.63 $ 10.00 $ 11.93 $ 15.64 $ 16.15 ------- ------- ------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.10# 0.13 0.02 0.18# 0.17 0.05 Realized and unrealized gain (loss) on investments -- net 1.93 (2.31) (0.28) 3.16 (3.69) (0.46) ------- ------- ------- -------- -------- -------- Total from investment operations 2.03 (2.18) (0.26) 3.34 (3.52) (0.41) ------- ------- ------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.15) (0.16) (0.06) (0.15) (0.16) (0.05) Distributions from capital gains -- (0.03) (0.05) -- (0.03) (0.05) Return of capital -- -- -- -- -- -- ------- ------- ------- -------- -------- -------- Total dividends and distributions (0.15) (0.19) (0.11) (0.15) (0.19) (0.10) ------- ------- ------- -------- -------- -------- NET ASSET VALUE -- END OF THE PERIOD $ 9.14 $ 7.26 $ 9.63 $ 15.12 $ 11.93 $ 15.64 ======= ======= ======= ======== ======== ======== Total Return (1) 28.09% (22.71%) (2.65%) 28.03% (22.59%) (2.55%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.45% 0.45% 0.45% 0.40% 0.40% 0.40% Expenses -- including expense reduction (2) 0.45% 0.45% 0.45% 0.40% 0.40% 0.40% Expenses -- before waivers and expense reduction (2) 0.73% 0.81% 28.52% 0.44% 0.51% 0.53% Investment income -- net (2) 1.28% 1.21% 0.95% 1.33% 1.21% 0.98% Investment income (loss) -- excluding waivers and expense reduction (2) 1.00% 0.85% (27.12%) 1.29% 1.10% 0.85% Portfolio turnover rate (1) 1.87% 3.17% 2.81% 1.87% 3.17% 2.81% Net Assets -- end of the period (000's) $17,395 $12,890 $ 367 $382,067 $295,261 $401,471 ======= ======= ======= ======== ======== ======== EQUITY INDEX FUND ---------------------------------- INSTITUTIONAL CLASS ---------------------------------- FOR THE FOR THE FOR THE YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 7.22 $ 9.58 $ 10.00 ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income 0.12# 0.14 0.03 Realized and unrealized gain (loss) on investments -- net 1.91 (2.29) (0.34) ------- ------- ------- Total from investment operations 2.03 (2.15) (0.31) ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.17) (0.18) (0.06) Distributions from capital gains -- (0.03) (0.05) Return of capital -- -- -- ------- ------- ------- Total dividends and distributions (0.17) (0.21) (0.11) ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 9.08 $ 7.22 $ 9.58 ======= ======= ======= Total Return (1) 28.19% (22.57%) (3.14%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.25% 0.25% 0.25% Expenses -- including expense reduction (2) 0.25% 0.25% 0.25% Expenses -- before waivers and expense reduction (2) 0.28% 0.60% 86.25% Investment income -- net (2) 1.46% 1.40% 1.19% Investment income (loss) -- excluding waivers and expense reduction (2) 1.43% 1.05% (84.81%) Portfolio turnover rate (1) 1.87% 3.17% 2.81% Net Assets -- end of the period (000's) $33,009 $ 4,737 $ 28 ======= ======= =======
- --------------- * Commencement of operations. ++ Amount represents less than $0.01 per share. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 142
VALUE EQUITY FUND -------------------------------------------------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS ---------------------------------- ------------------------------------ ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ ---------- -------- ------------ -------- -------- ------------ $ 7.75 $ 9.61 $ 10.00 $ 11.85 $ 14.57 $ 15.21 $ 7.77 $ 9.64 $ 10.00 ------- ------- ------- ---------- -------- ---------- ------- ------- ------- 0.11# 0.15 0.03 0.21# 0.21 0.06 0.14# 0.16 0.06 2.23 (1.82) (0.35) 3.43 (2.73) (0.64) 2.26 (1.80) (0.35) ------- ------- ------- ---------- -------- ---------- ------- ------- ------- 2.34 (1.67) (0.32) 3.64 (2.52) (0.58) 2.40 (1.64) (0.29) ------- ------- ------- ---------- -------- ---------- ------- ------- ------- (0.19) (0.19) (0.07) (0.21) (0.20) (0.06) (0.23) (0.23) (0.07) -- -- -- -- -- -- -- -- -- -- --++ -- -- --++ -- -- --++ -- ------- ------- ------- ---------- -------- ---------- ------- ------- ------- (0.19) (0.19) (0.07) (0.21) (0.20) (0.06) (0.23) (0.23) (0.07) ------- ------- ------- ---------- -------- ---------- ------- ------- ------- $ 9.90 $ 7.75 $ 9.61 $ 15.28 $ 11.85 $ 14.57 $ 9.94 $ 7.77 $ 9.64 ======= ======= ======= ========== ======== ========== ======= ======= ======= 30.46% (17.48%) (3.23%) 30.84% (17.37%) (3.79%) 31.09% (17.22%) (2.88%) 1.15% 1.15% 1.15% 0.90% 0.90% 0.90% 0.76% 0.76% 0.76% 1.13% 1.11% 1.15% 0.88% 0.87% 0.90% 0.75% 0.72% 0.76% 1.20% 1.29% 65.50% 0.94% 0.98% 1.00% 0.78% 1.06% 81.37% 1.33% 1.38% 1.12% 1.59% 1.57% 1.29% 1.62% 1.77% 1.60% 1.26% 1.20% (63.23%) 1.53% 1.46% 1.19% 1.59% 1.43% (79.01%) 53.74% 70.42% 21.09% 53.74% 70.42% 21.09% 53.74% 70.42% 21.09% $19,680 $13,987 $ 168 $1,152,116 $938,583 $1,159,209 $69,991 $ 5,265 $ 77 ======= ======= ======= ========== ======== ========== ======= ======= =======
See Notes to Financial Statements. 143
GROWTH EQUITY FUND ----------------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ------------------------------------ -------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 ---------- -------- ------------ ---------- ---------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 7.03 $ 9.81 $ 10.00 $ 11.23 $ 15.63 $ 15.93 ------- ------- ------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.02) (0.02) --++ (0.01) (0.01) (0.01) Realized and unrealized gain (loss) on investments -- net 2.07 (2.76) (0.19) 3.33 (4.39) (0.29) ------- ------- ------- ---------- ---------- ---------- Total from investment operations 2.05 (2.78) (0.19) 3.32 (4.40) (0.30) ------- ------- ------- ---------- ---------- ---------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -- -- -- -- -- -- Distributions from capital gains -- -- -- -- -- -- ------- ------- ------- ---------- ---------- ---------- Total dividends and distributions -- -- -- -- -- -- ------- ------- ------- ---------- ---------- ---------- NET ASSET VALUE -- END OF THE PERIOD $ 9.08 $ 7.03 $ 9.81 $ 14.55 $ 11.23 $ 15.63 ======= ======= ======= ========== ========== ========== Total Return (1) 29.16% (28.34%) (1.90%) 29.56% (28.15%) (1.88%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 1.17% 1.15% 1.15% 0.92% 0.90% 0.90% Expenses -- including expense reduction (2) 1.15% 1.12% 1.15% 0.90% 0.88% 0.90% Expenses -- before waivers and expense reduction (2) 1.33% 1.36% 47.77% 1.01% 1.02% 1.05% Investment income -- net (2) (0.33%) (0.28%) (0.32%) (0.07%) (0.05%) (0.11%) Investment income (loss) -- excluding waivers and expense reduction (2) (0.51%) (0.52%) (46.94%) (0.18%) (0.19%) (0.26%) Portfolio turnover rate (1) 77.02% 41.41% 8.71% 77.02% 41.41% 8.71% Net Assets -- end of the period (000's) $18,099 $12,503 $ 309 $1,285,223 $1,049,709 $1,354,301 ======= ======= ======= ========== ========== ========== GROWTH EQUITY FUND ------------------------------------ INSTITUTIONAL CLASS ------------------------------------ FOR THE FOR THE FOR THE YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 ---------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 7.07 $ 9.83 $ 10.00 ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (0.01) 0.01 --++ Realized and unrealized gain (loss) on investments -- net 2.10 (2.77) (0.17) ------- ------- ------- Total from investment operations 2.09 (2.76) (0.17) ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -- -- -- Distributions from capital gains -- -- -- ------- ------- ------- Total dividends and distributions -- -- -- ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 9.16 $ 7.07 $ 9.83 ======= ======= ======= Total Return (1) 29.56% (28.08%) (1.70%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.81% 0.78% 0.78% Expenses -- including expense reduction (2) 0.79% 0.75% 0.78% Expenses -- before waivers and expense reduction (2) 0.85% 1.14% 83.19% Investment income -- net (2) (0.03%) 0.09% 0.02% Investment income (loss) -- excluding waivers and expense reduction (2) (0.09%) (0.30%) (82.39%) Portfolio turnover rate (1) 77.02% 41.41% 8.71% Net Assets -- end of the period (000's) $79,547 $ 4,553 $ 29 ======= ======= =======
- --------------- * Commencement of operations. ++ Amount represents less than $0.01 per share. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 144
SMALL CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------ RETAIL CLASS RETIREMENT CLASS INSTITUTIONAL CLASS ---------------------------------- ---------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ -------- -------- ------------ -------- -------- ------------ $ 7.83 $ 10.09 $ 10.00 $ 10.25 $ 13.18 $ 13.07 $ 7.88 $ 10.12 $ 10.00 ------- ------- -------- -------- -------- -------- ------- ------- ------- (0.04) (0.04) --++ (0.04) (0.02) (0.01) (0.03) (0.01) --++ 3.62 (2.22) 0.09 4.78 (2.91) 0.12 3.67 (2.23) 0.12 ------- ------- -------- -------- -------- -------- ------- ------- ------- 3.58 (2.26) 0.09 4.74 (2.93) 0.11 3.64 (2.24) 0.12 ------- ------- -------- -------- -------- -------- ------- ------- ------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------- ------- -------- -------- -------- -------- ------- ------- ------- -- -- -- -- -- -- -- -- -- ------- ------- -------- -------- -------- -------- ------- ------- ------- $ 11.41 $ 7.83 $ 10.09 $ 14.99 $ 10.25 $ 13.18 $ 11.52 $ 7.88 $ 10.12 ======= ======= ======== ======== ======== ======== ======= ======= ======= 45.72% (22.40%) 0.90% 46.24% (22.23%) 0.84% 46.19% (22.13%) 1.20% 1.50% 1.50% 1.50% 1.25% 1.25% 1.25% 1.18% 1.18% 1.18% 1.44% 1.43% 1.50% 1.19% 1.19% 1.25% 1.12% 1.11% 1.18% 1.70% 1.82% 123.38% 1.43% 1.51% 1.52% 1.27% 1.60% 76.30% (0.59%) (0.44%) (0.28%) (0.34%) (0.19%) (0.13%) (0.26%) (0.12%) 0.12% (0.85%) (0.83%) (122.16%) (0.58%) (0.51%) (0.40%) (0.41%) (0.61%) (75.00%) 130.80% 160.46% 91.89% 130.80% 160.46% 91.89% 130.80% 160.46% 91.89% $22,520 $12,878 $ 115 $357,703 $232,992 $321,743 $25,415 $ 4,869 $ 81 ======= ======= ======== ======== ======== ======== ======= ======= =======
See Notes to Financial Statements. 145
INTERNATIONAL EQUITY FUND ----------------------------------------------------------------------- RETAIL CLASS RETIREMENT CLASS ---------------------------------- ---------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR PERIOD YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 12/31/03 12/31/02 12/31/01 -------- -------- ------------ -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 8.19 $ 9.43 $ 10.00 $ 9.66 $ 11.09 $ 11.66 ------- ------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.10# 0.06 (0.01)# 0.15# 0.11 0.01 Realized and unrealized gain (loss) on investments -- net 2.80 (1.21) (0.53) 3.31 (1.43) (0.55) ------- ------- -------- -------- -------- -------- Total from investment operations 2.90 (1.15) (0.54) 3.46 (1.32) (0.54) ------- ------- -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.14) (0.09) (0.03) (0.16) (0.11) (0.03) Distributions from capital gains -- -- -- -- -- -- Return of capital -- --++ -- -- --++ -- ------- ------- -------- -------- -------- -------- Total dividends and distributions (0.14) (0.09) (0.03) (0.16) (0.11) (0.03) ------- ------- -------- -------- -------- -------- ------- ------- -------- -------- -------- -------- NET ASSET VALUE -- END OF THE PERIOD $ 10.95 $ 8.19 $ 9.43 $ 12.96 $ 9.66 $ 11.09 ======= ======= ======== ======== ======== ======== Total Return (1) 35.47% (12.18%) (5.40%) 35.81% (11.94%) (4.61%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 1.36% 1.37% 1.45% 1.15% 1.15% 1.15% Expenses -- including expense reduction (2) 1.34% 1.34% 1.45% 1.13% 1.12% 1.15% Expenses -- before waivers and expense reduction (2) 1.50% 1.64% 256.83% 1.31% 1.35% 1.37% Investment income -- net (2) 1.14% 0.88% (0.32%) 1.39% 1.00% 0.28% Investment income (loss) -- excluding waivers and expense reduction (2) 0.98% 0.58% (255.70%) 1.21% 0.77% 0.06% Portfolio turnover rate (1) 33.24% 30.13% 20.05% 33.24% 30.13% 20.05% Net Assets -- end of the period (000's) $20,434 $14,078 $ 51 $920,664 $698,704 $795,363 ======= ======= ======== ======== ======== ======== INTERNATIONAL EQUITY FUND ---------------------------------- INSTITUTIONAL CLASS ---------------------------------- FOR THE FOR THE FOR THE YEAR YEAR PERIOD ENDED ENDED 08/27/01* TO 12/31/03 12/31/02 12/31/01 -------- -------- ------------ PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE -- BEGINNING OF PERIOD $ 8.26 $ 9.50 $ 10.00 ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.08# 0.11 --++ Realized and unrealized gain (loss) on investments -- net 2.90 (1.22) (0.47) ------- ------- ------- Total from investment operations 2.98 (1.11) (0.47) ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.18) (0.13) (0.03) Distributions from capital gains -- -- -- Return of capital -- --++ -- ------- ------- ------- Total dividends and distributions (0.18) (0.13) (0.03) ------- ------- ------- ------- ------- ------- NET ASSET VALUE -- END OF THE PERIOD $ 11.06 $ 8.26 $ 9.50 ======= ======= ======= Total Return (1) 36.06% (11.72%) (4.69%) RATIOS/SUPPLEMENTAL DATA: Ratios to average net assets: Expenses -- net (2) 0.97% 0.96% 0.96% Expenses -- including expense reduction (2) 0.95% 0.93% 0.96% Expenses -- before waivers and expense reduction (2) 1.14% 1.43% 88.97% Investment income -- net (2) 0.86% 1.29% 0.11% Investment income (loss) -- excluding waivers and expense reduction (2) 0.67% 0.79% (87.90%) Portfolio turnover rate (1) 33.24% 30.13% 20.05% Net Assets -- end of the period (000's) $50,390 $ 5,416 $ 27 ======= ======= =======
- --------------- * Commencement of operations. ++ Amount represents less than $0.01 per share. # Calculated using the average shares outstanding method. (1) Non-annualized. (2) Annualized. See Notes to Financial Statements. 146 NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF THE FUNDS AB Funds Trust (the "Trust") was organized as a Delaware business trust on March 2, 2000. The Trust has established seventeen series (each a "Fund" and together, the "Funds"). Each Fund is a diversified, open-end management investment company and registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The Flexible Income Fund, Growth & Income Fund, Capital Opportunities Fund and Global Equity Fund are each referred to as a "Blended Fund" and together are referred to as the "Blended Funds." The Flexible Income Fund I, Growth & Income Fund I, Capital Opportunities Fund I and Global Equity Fund I are each referred to as an "Institutional Blended Fund" and together are referred to as the "Institutional Blended Funds." The remaining Funds are each referred to as a "Select Fund" and are together referred to as the "Select Funds." The Low-Duration Bond Fund, Medium-Duration Bond Fund and Extended-Duration Bond Fund are together referred to as the "Bond Funds." The Equity Index Fund, Value Equity Fund, Growth Equity Fund, Small Cap Equity Fund, and International Equity Fund are together referred to as the "Equity Funds." The Money Market Fund is referred to as the "Money Market Fund." There are three classes of shares issued by the Trust -- the Retail Class, Retirement Class and Institutional Class. The Blended Funds consist of a Retail Class and Retirement Class. The Institutional Blended Funds consist of an Institutional Class only. The Select Funds consist of a Retail Class, a Retirement Class and an Institutional Class. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee (class specific expense) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Each Fund is a separate mutual fund with its own investment objective, strategies and risks. The Select Funds invest directly in particular types of fixed income obligations, stocks and other investments. The Blended Funds and Institutional Blended Funds primarily invest in a different mix of the Select Funds to meet a specified investment strategy. The Blended Funds and Institutional Blended Funds are commonly referred to as "Fund of Funds". Certain prior year amounts have been adjusted to conform with current year presentation. 2. SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are in conformity with generally accepted accounting principles in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. A. VALUATION OF SECURITIES The Funds (except the Money Market Fund) each value securities traded on national securities exchanges or included in national market systems at the last quoted sale price, or official close price, on the principal exchange on which they were traded, or, in the absence of any sale, or official close price, at the closing bid price. Securities which are primarily traded on foreign exchanges are generally valued at the closing values of such securities on their respective exchanges, except that when an occurrence subsequent to the time when the foreign security is valued is likely to have changed such value, then the fair value of those securities will be determined through procedures established by or under the direction of the Board of Trustees. Non-exchange traded securities for which an over-the-counter quotation is readily available are valued at the last quoted bid price. Debt securities, excluding asset-backed and mortgage-backed securities, are valued at the mean of the last bid and asked prices available. Asset-backed and mortgage-backed securities are valued at the last bid price. Options and warrants for which the primary market is a national securities exchange are valued at the last sale price on the exchange on which they are traded, or, in the absence of any sale, at the closing bid price. Options and warrants not traded on a national securities exchange are valued at 147 the last quoted bid price. Short-term securities maturing in more than 60 days from the valuation date are valued at the mean of the last bid and asked prices; those maturing in 60 days or less are valued at amortized cost. Futures contracts are valued at the closing settlement price on the exchange on which they are primarily traded. Forward foreign exchange contracts are valued based upon closing exchange rates from each respective foreign market. Swap agreements are valued daily based upon the terms specific to each agreement with its counterparty. To the extent available, valuations of portfolio securities are provided by independent pricing services approved by the Board of Trustees. Debt securities are valued on the basis of broker quotations or valuations provided by a pricing service which may use a matrix, formula or other objective method that takes into consideration market indices, matrices, yield curves and other specific adjustments. Certain fixed income securities are valued by the sub-adviser using various methodologies. Securities for which market quotations are not readily available are valued at fair value according to methods established in good faith by the Board of Trustees. The Money Market Fund uses the amortized cost method to determine the value of its portfolio securities, which approximates market value. The Blended Funds and Institutional Blended Funds value their investments in the underlying Select Funds daily at the closing net asset value of each respective Select Fund. B. REPURCHASE AGREEMENTS Each Fund may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at a mutually agreed upon date and price. It is the Fund's policy that repurchase agreements are fully collateralized by U.S. Treasury and Government Agency securities. All collateral is held by the Fund's custodian bank or a bank with which the custodian bank has entered into a subcustodian agreement, or is segregated in the Federal Reserve Book Entry System. In connection with transactions in repurchase agreements, if the seller defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. C. DERIVATIVE FINANCIAL INSTRUMENTS The Funds may engage in various portfolio strategies to seek to increase its return by hedging its portfolio against adverse movements in the equity, debt and currency markets. Losses may arise due to changes in the value of the contract if the counterparty does not perform under the contract. The Funds, in their normal course of business, may enter into contracts that contain a variety of representations and warranties, and which provide general indemnifications. The Funds' exposure may include future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. FINANCIAL FUTURES CONTRACTS -- The Funds (except the Money Market Fund) may purchase or sell financial futures contracts and the options on such futures contracts for the purpose of hedging risk on existing securities, the intended purchase of securities or to gain market exposure on cash balances. Financial futures contracts are contracts for the delivery of securities at a specified future date at an agreed upon price or yield. Upon entering into a contract, the Funds deposit and maintain as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Funds agree to pay to or receive from the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such payments or receipts are known as variation margin and are recorded by the Funds as unrealized gains or losses until the contract is closed or settled. Risks of entering into futures contracts include the possibility that there will be an imperfect price correlation between the futures and the underlying securities. 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 a fund could lose more than the original margin deposit required to initiate a futures transaction. 148 OPTIONS -- The Funds are authorized to write and purchase put and call options. The risk in writing a call option is that the Funds give up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Funds may incur a loss if the market price of the security decreases and the option is exercised. The risk in purchasing an option is that the Funds pay a premium whether or not the option is exercised. The Funds also have the additional risk of being unable to enter into a closing transaction at an acceptable price if a liquid secondary market does not exist. The Funds also may write over-the-counter options where completing the obligation depends upon the credit standing of the other party and this party's ability to perform. Option contracts also involve the risk that they may not work as intended due to unanticipated developments in market conditions or other causes. Options purchased are recorded as an asset and written options are recorded as liabilities to the extent of premiums paid or received. Each Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of the premium received or paid. The Funds may write swaption contracts to manage exposure to fluctuations in interest rates and to enhance portfolio yield. Swaption contracts written by the Funds represent an option that gives the purchaser the right, but not the obligation, to enter into a previously agreed upon swap contract on a future date. If a written call swaption is exercised, the writer will enter a swap and is obligated to pay the fixed rate and receive a floating rate in exchange. If a written put swaption is exercised, the writer will enter a swap and is obligated to pay the floating rate and receive a fixed rate in exchange. Swaptions are marked to market daily based upon quotations from market makers. When a Fund writes a swaption, the premium received is recorded as a liability and is subsequently adjusted to the current market value of the swaption. Entering into a swaption contract involves, to varying degrees, the elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities, associated with both option contracts and swap contracts. The Funds bear the market risk arising from any change in index values or interest rates. FORWARD FOREIGN EXCHANGE CONTRACTS -- Certain Funds may enter into forward foreign currency exchange contracts to hedge against adverse exchange rate fluctuation to the U.S. dollar or between different foreign currencies in connection with either specific security transactions or portfolio positions. Each contract is valued daily and the change in value is recorded as an unrealized gain or loss. When the contract is closed, a realized gain or loss is recorded equal to the difference between the opening value and the closing value of the contract. The Funds 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. FOREIGN CURRENCY OPTIONS AND FUTURES -- The International Equity Fund and the Bond Funds may enter into futures contracts on foreign currencies and related options on transactions as a short or long hedge against possible variations in foreign exchange rates. TBAS -- The Bond Funds may enter into "TBA" (to be announced) purchase commitments to purchase securities for a fixed price at a future date, typically not exceeding 45 days. TBAs 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 each Fund's other assets. Unsettled TBAs are valued at the current market value of the underlying securities, according to the procedures described under "Valuation of Securities" above. 149 SWAP AGREEMENTS -- Each Select Fund may enter into swap agreements. The Equity Funds may enter into equity swap contracts, the Bond Funds may enter into interest rate and credit default swaps, the International Equity and Bond Funds may enter into currency swaps and each Select Fund may enter into total return swaps. Swap agreements are the exchange of one security or asset for another. A swap may be entered into in order to, among other things, change the maturity of a fund's portfolio, to protect a fund's value from changes in interest rates, to expose a fund to a different security or market, or to help a fund achieve a strategy relative to an index or other benchmark. By entering into a swap agreement, a fund is exposed to the risk of unanticipated movements in interest rates or in the value of an underlying security or index, or that the counterparty will not fulfill its obligation under the agreement. Credit default swaps involve the payment of amounts based on a specified rate multiplied by a notional amount as well as upon an event of default. In connection with these agreements, securities may be set aside as collateral by the Fund's custodian. D. FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. E. FEDERAL INCOME TAXES Each Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Each Fund is treated as a separate entity for federal income tax purposes. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Funds. F. DIVIDENDS TO SHAREHOLDERS The Money Market Fund declares a dividend daily and payable monthly equal to its net investment income for that day. The Bond Funds declare and pay dividends from net investment income monthly. The Equity Index Fund, Value Equity Fund and Growth Equity Fund declare and pay dividends from net investment income semi-annually. The Small Cap Equity Fund, International Equity Fund, the Blended Funds and the Institutional Blended Funds declare and pay dividends from net investment income annually. The Funds declare and pay distributions from capital gains, if available, annually. Distributions to shareholders are recorded on the ex-dividend date. G. SECURITY TRANSACTIONS, INCOME AND REALIZED GAINS AND LOSSES Security transactions are accounted for on the date securities are purchased or sold (the trade date). Dividend income is recognized on the ex-dividend date and interest income is accrued daily, including the amortization of market premium and the accretion of market discount. Realized gains and losses from security transactions are identified on an identified cost basis. 150 H. EXPENSES Expenses arising in connection with a Fund are charged directly to that Fund. Expenses common to all Funds of the Trust are generally allocated to each Fund in proportion to their relative net assets. Each class of shares bears its pro-rata portion of expenses attributable to its class, except that each class separately bears expenses related specifically to that class, such as printing, transfer agent, service and distribution fees. 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES A. INVESTMENT ADVISORY FEES Pursuant to a separate investment advisory agreement, SBC Financial Services, Inc. ("SBCFS" or "Investment Advisor") acts as the Investment Advisor to the Funds. As Investment Advisor it supervises the investments of the Funds and for such services is paid a fee. SBCFS and the Trust have entered into sub-advisory agreements with various sub-advisers to manage each Select Fund's investments. Under the general supervision of SBCFS, the sub-advisers make the day-to-day investment decisions for the Select Funds and for such services each sub-adviser receives a fee from the Funds. The advisory fees paid to SBCFS and aggregate sub-advisory fees paid to the sub-advisers, listed at the end of this report, are computed daily based upon the net assets of each Fund. The actual advisory and sub-advisory fees accrued during the period ended December 31, 2003, based upon average daily net assets, were as follows:
FUND ADVISORY FEES SUB-ADVISER FEES - ---- ------------- ---------------- Flexible Income .10% -- Growth & Income .10% -- Capital Opportunities .10% -- Global Equity .10% -- Flexible Income I .10% -- Growth & Income I .10% -- Capital Opportunities I .10% -- Global Equity I .10% -- Money Market .14% .07% Low-Duration Bond .20% .21% Medium-Duration Bond .23% .21% Extended-Duration Bond .27% .22% Equity Index .14% .03% Value Equity .43% .27%
FUND ADVISORY FEES SUB-ADVISER FEES - ---- ------------- ---------------- Growth Equity .48% .29% Small Cap Equity .30% .79% International Equity .47% .51%
For the period ended December 31, 2003, advisory fees and waivers for each Fund were as follows:
GROSS NET ADVISORY ADVISORY FEE WAIVERS FEE ------------ ----------- ------------ Flexible Income $ 273,519 $ (114,343) $ 159,176 Growth & Income 1,054,654 (21,177) 1,033,477 Capital Opportunities 803,747 (55,595) 748,152 Global Equity 687,853 (69,563) 618,290 Flexible Income I 13,907 (34,438) (20,531) Growth & Income I 33,200 (37,020) (3,820) Capital Opportunities I 25,846 (37,372) (11,526) Global Equity I 11,400 (36,813) (25,413) Money Market 1,311,922 (22,759) 1,289,163 Low-Duration Bond 1,593,181 (441,527) 1,151,654 Medium-Duration Bond 1,839,564 (714,302) 1,125,262 Extended-Duration Bond 1,203,470 (95,841) 1,107,629 Equity Index 510,356 (183,553) 326,803 Value Equity 4,511,177 (437,954) 4,073,223 Growth Equity 5,790,679 (1,146,568) 4,644,111 Small Cap Equity 901,742 (523,923) 377,819 International Equity 3,752,543 (1,263,010) 2,489,533
B. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Board of Trustees has adopted Shareholder Service Plans for the Retirement and Retail Class of each Select Fund ("Service Plans") and a separate Plan of Distribution for the Retail Class of each Select Fund and Blended Fund pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan"). Under the Service Plans, the Retail Class and Retirement Class of each Select Fund are authorized to pay fees to parties that provide services for and maintain shareholder accounts. The Retail Class and the Retirement Class of each Select Fund are authorized to pay service fees of 0.15% and 0.19% of average daily net assets, respectively. Under the 12b-1 Plan, the assets of each Select Fund and Blended Fund may be used to compensate the Annuity Board, the Distributor or others for certain expenses relating to the distribution of shares 151 of the Funds to investors. Under the 12b-1 Plan, the maximum amount payable as a percentage of average daily net assets on an annual basis is 0.10% by the Retail Class of each Select Fund and 0.06% by the Retail Class of each Blended Fund. C. EXPENSE LIMITATION SBCFS has agreed, through April 30, 2004, to waive fees and reimburse expenses of the Retail Class, Retirement Class and the Institutional Class of each Fund (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, the annual percentage rate of each class's average daily net assets as follows:
RETAIL RETIREMENT INSTITUTIONAL FUND CLASS CLASS CLASS - ---- ------ ---------- ------------- Flexible Income .35% .13% -- Growth & Income .45% .13% -- Capital Opportunities .55% .13% -- Global Equity .42% .13% -- Flexible Income I -- -- .17% Growth & Income I -- -- .17% Capital Opportunities I -- -- .17% Global Equity I -- -- .17% Money Market .72% .46% .27% Low-Duration Bond .85% .61% .45% Medium-Duration Bond .90% .62% .50% Extended-Duration Bond 1.05% .73% .65% Equity Index .45% .40% .25% Value Equity 1.15% .90% .76% Growth Equity 1.24% .99% .87% Small Cap Equity 1.50% 1.25% 1.18% International Equity 1.35% 1.15% .97%
During the period January 1, 2003 through April 30, 2003, SBCFS agreed to waive fees and reimburse expenses of the Retail Class (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceeded, in the aggregate, the annual percentage rate of each class's average daily net assets for the following Funds:
RETAIL FUND CLASS - ---- ------ Flexible Income .48% Growth & Income .48% Global Equity .48% Money Market .75% International Equity 1.45%
During the period January 1, 2003 through July 15, 2003, SBCFS agreed to waive fees and reimburse expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceeded, in the aggregate, the annual percentage rate of each class's average daily net assets for the following Funds/Class:
EXPENSE FUND RATIO - ---- ------- Capital Opportunities -- Retail Class .48% Money Market -- Institutional Class .25% International Equity -- Institutional Class .96%
During the period January 1, 2003 through October 31, 2003, SBCFS agreed to waive fees and reimburse expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceeded, in the aggregate, the annual percentage rate of each class's average daily net assets for the Growth Equity Fund as follows:
RETAIL RETIREMENT INSTITUTIONAL FUND CLASS CLASS CLASS - ---- ------ ---------- ------------- Growth Equity 1.15% .90% .78%
D. BROKERAGE SERVICE AND OTHER ARRANGEMENTS The Investment Advisor directs the sub-advisers to place security trades with designated brokers who have agreed to pay certain custody, transfer agency or other operating expenses through the use of Brokerage Service Arrangements on behalf of the Equity Funds. The amount of expenses paid through Brokerage Service Arrangements for the period ended December 31, 2003 were as follows:
EXPENSES PAID THROUGH BROKERAGE FUND SERVICE ARRANGEMENTS - ---- -------------------- Value Equity $198,121 Growth Equity 196,500 Small Cap Equity 193,693 International Equity 169,073
In addition, the Funds have entered into arrangements with its custodian whereby interest earned on uninvested cash balances was used to offset a portion of each Fund's 152 expenses. During the period ended December 31, 2003, expenses reduced were as follows:
REDUCTION TO FUND EXPENSES - ---- ------------ Flexible Income $ 1,024 Growth & Income 395 Capital Opportunities 232 Global Equity 249 Flexible Income I 55 Growth & Income I 47 Capital Opportunities I 48 Global Equity I 51 Money Market 7,950 Low-Duration Bond 28,847 Medium-Duration Bond 18,975 Extended-Duration Bond 3,392 Equity Index 443 Value Equity 6,728 Growth Equity 1,036 Small Cap Equity 454 International Equity 726
E. ADMINISTRATOR, TRANSFER AGENT AND DISTRIBUTOR Certain employees of PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of The PNC Financial Services Group, Inc., are officers of the Funds. PFPC serves as Administrator and Transfer agent of the Funds. For its services as Administrator, PFPC is entitled to receive fees, computed daily and paid monthly, based upon the average daily net assets of each Fund. The fees currently range between .008% and .0375% of average net assets, excluding out of pocket expenses. For its services as Transfer Agent, PFPC receives a fee based mainly upon the number of accounts serviced. Certain minimum fees and transaction charges may apply. For the period ended December 31, 2003, PFPC received $3,978,572 in fees and expenses (net of waivers of $98,658) for services rendered under the various agreements described above. PFPC Distributors, Inc. ("PDI"), also an indirect, wholly-owned subsidiary of The PNC Financial Services Group, Inc., serves as the Distributor for the Funds. The Funds do not pay any fees to PDI in its capacity as distributor. 4. SECURITIES LENDING Through an agreement with Northern Trust (the Funds' custodian) the Select Funds may lend portfolio securities to certain brokers, dealers and other financial institutions that pay the Select Funds a negotiated fee. The Select Funds receive cash, letters of credit or U.S. Government securities as collateral against the loaned securities in an amount at least equal to the market value of the loaned securities. The Funds continue to own the loaned securities and the securities remain in the investment portfolio. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. Cash collateral has been invested in a short-term money market fund of Northern Trust. At December 31, 2003, the market values of loaned securities and collateral received were as follows:
MARKET VALUE OF MARKET VALUE OF FUND SECURITIES LOANED COLLATERAL - ---- ----------------- --------------- Money Market $ 10,440,941 $ 10,646,830 Low-Duration Bond 278,262,422 281,449,299 Medium-Duration Bond 188,293,358 191,665,808 Extended-Duration Bond 133,234,273 135,859,041 Equity Index 24,818,321 25,487,050 Value Equity 133,585,805 137,009,843 Growth Equity 70,392,278 72,225,032 Small Cap Equity 102,781,263 106,633,119 International Equity 82,411,268 86,048,255
5. INVESTMENT TRANSACTIONS For the period ended December 31, 2003, the cost of purchases and proceeds from sales and maturities (other 153 than short-term and U.S. Government obligations) aggregated for each Fund are as follows:
SALE AND MATURITY FUND PURCHASES PROCEEDS - ---- ------------ ----------------- Flexible Income $ 12,700,000 $ 41,272,612 Growth & Income 68,250,000 151,085,553 Capital Opportunities 45,250,000 73,615,223 Global Equity 28,000,000 37,844,308 Flexible Income I 28,485,835 830,000 Growth & Income I 65,199,205 650,000 Capital Opportunities I 50,315,222 550,000 Global Equity I 21,644,308 200,000 Low-Duration 165,213,321 285,389,930 Medium-Duration 397,319,678 550,703,208 Extended-Duration 88,238,153 323,794,977 Equity Index 33,110,742 3,799,102 Value Equity 561,146,855 538,762,187 Growth Equity 850,858,533 844,684,983 Small Cap Equity 407,536,059 370,129,109 International Equity 279,163,464 262,113,190
For the period ended December 31, 2003, the cost of purchases and proceeds from sales and maturities of long-term U.S. Government obligations aggregated for each Fund are as follows:
SALE AND MATURITY FUND PURCHASES PROCEEDS - ---- -------------- ----------------- Flexible Income $ 23,827,663 $ 25,437,337 Growth & Income 39,942,613 36,731,457 Capital Opportunities 15,650,152 15,183,375 Flexible Income I 1,674,066 1,377,124 Growth & Income I 3,000,856 2,330,792 Capital Opportunities I 1,222,220 965,048 Low-Duration 966,444,605 938,336,765 Medium-Duration 3,171,897,070 3,218,419,078 Extended-Duration 434,484,701 215,310,694
FUTURES CONTRACTS Investments in securities as of December 31, 2003, included securities that were valued and pledged as collateral to cover initial margin deposits. The market value of this collateral and open futures contracts is as follows:
MARKET VALUE OF OPEN PURCHASE NOTIONAL MARKET NET UNREALIZED GAIN COLLATERAL (SALE) CONTRACTS VALUE ON FUTURES (LOSS) ON FUTURES --------------- ---------------- ---------------- ------------------- FLEXIBLE INCOME FUND March 2004 S&P 500 $ 89,956 2 $ 1,098,625 $ 22,337 ========== GROWTH & INCOME FUND March 2004 S&P 500 $ 714,651 41 11,383,650 $ 453,153 ========== CAPITAL OPPORTUNITIES FUND March 2004 S&P 500 $ 914,551 43 11,938,950 $ 527,791 ========== GLOBAL EQUITY FUND March 2004 S&P 500 $1,259,385 74 20,546,100 $ 703,681 ========== FLEXIBLE INCOME FUND I March 2004 S&P 500 E-Mini $ 9,995 2 111,060 $ 3,732 ========== GROWTH & INCOME FUND I March 2004 S&P 500 E-Mini $ 69,965 11 610,830 $ 18,081 ========== CAPITAL OPPORTUNITIES FUND I March 2004 S&P 500 E-Mini $ 79,961 13 721,890 $ 29,231 ========== GLOBAL EQUITY FUND I March 2004 S&P 500 E-Mini $ 54,973 8 444,240 $ 14,191 ==========
154
MARKET VALUE OF OPEN PURCHASE NOTIONAL MARKET NET UNREALIZED GAIN COLLATERAL (SALE) CONTRACTS VALUE ON FUTURES (LOSS) ON FUTURES --------------- ---------------- ---------------- ------------------- LOW-DURATION BOND FUND December 2004 90-Day Euro $ 19,202 16 $ 3,913,600 $ 35,200 December 2005 90-Day Euro $ 75,631 64 15,414,400 12,000 March 2004 10-Year Euro-Bund $ 21,930 17 2,425,631 23,816 March 2004 10-Year U.S. Treasury Note $ 172,655 41 4,602,891 34,403 March 2004 2-Year U.S. Treasury Note $1,637,156 348 74,488,312 249,326 March 2004 5-Year U.S. Treasury Note $1,085,679 (110) 12,278,750 (110,679) March 2007 90-Day Euro $ 170,118 79 18,815,825 57,275 ---------- $ 301,341 ========== MEDIUM-DURATION BOND FUND December 2004 3-Month EURIBOR $ 11,498 3 $ 920,472 $ 1,517 December 2004 90-Day LIBOR $ 74,531 28 5,966,683 (15,752) June 2004 90-Day LIBOR $ 21,384 8 1,711,927 (9,199) March 2004 10-Year Euro-Bund $ 532,908 299 42,662,563 654,395 March 2004 10-Year U.S. Treasury Note $1,312,938 583 65,450,859 422,181 March 2004 2-Year U.S. Treasury Note $ 153,199 82 17,551,844 65,256 March 2004 5-Year U.S. Treasury Note $ 165,881 (101) 11,274,125 (6,219) March 2004 90-Day LIBOR $ 21,422 8 1,714,970 (9,400) March 2004 U.S. Treasury Bond $ 87,688 67 7,323,938 (32,927) March 2005 90-Day LIBOR $ 74,430 28 5,958,538 (70,752) March 2007 90-Day Euro $ 205,282 69 16,434,075 50,025 September 2004 2005 90-Day LIBOR $ 24,002 9 1,921,487 (15,985) September 2004 90-Day Euro $ 3,923 1 245,613 1,870 ---------- $1,035,010 ========== EQUITY INDEX FUND March 2004 S&P 500 $ 954,531 36 9,995,400 $ 436,185 ========== VALUE EQUITY FUND March 2004 Russell 1000 $ 129,936 2 593,900 $ 20,013 March 2004 S&P 500 $3,808,128 106 29,430,900 1,190,663 ---------- $1,210,676 ========== GROWTH EQUITY FUND March 2004 S&P 500 $3,803,131 156 43,313,400 $1,736,764 ========== SMALL CAP EQUITY FUND March 2004 Russell 1000 $ 941,262 27 7,522,200 $ 182,913 March 2004 S&P 500 $ 972,795 28 7,774,200 289,757 ---------- $ 472,670 ==========
155 FORWARD FOREIGN CURRENCY CONTRACTS As of December 31, 2003, the following Funds have forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. The terms of the open contracts are as follows:
AMOUNT OF FOREIGN AMOUNT OF FOREIGN NET UNREALIZED CURRENCY TO BE CURRENCY TO BE CURRENCY TO BE CURRENCY TO BE APPRECIATION/ FUND/EXPIRATION DATE DELIVERED DELIVERED RECEIVED RECEIVED (DEPRECIATION) - -------------------- ------------------ ----------------- ------------------ ----------------- -------------- LOW-DURATION BOND FUND 1/7/2004 European Euro 178,000 US Dollars 214,503 $ (9,030) 1/7/2004 Swedish Krona 47,059,717 US Dollars 6,092,661 (428,371) 1/8/2004 European Euro 2,453,938 US Dollars 2,846,569 (235,003) 1/8/2004 European Euro 5,280,214 US Dollars 6,283,455 (347,256) 1/12/2004 Canadian Dollars 7,814,580 US Dollars 5,982,522 $ (50,582) 2/10/2004 US Dollars 79,176 European Euro 63,000 (135) ----------- $(1,070,377) =========== MEDIUM-DURATION BOND FUND 1/7/2004 European Euro 679,000 US Dollars 846,026 $ (6,664) 1/7/2004 European Euro 825,000 US Dollars 1,040,178 4,142 1/7/2004 European Euro 986,000 US Dollars 1,188,200 (50,020) 1/7/2004 European Euro 1,258,000 US Dollars 1,560,489 (19,310) 1/7/2004 US Dollars 841,024 European Euro 680,000 12,921 1/7/2004 US Dollars 5,577,043 European Euro 4,613,000 215,970 1/9/2004 European Euro 660,192 US Dollars 782,988 (46,035) 1/23/2004 British Pounds 297,000 US Dollars 512,983 (15,913) 2/10/2004 European Euro 6,004,282 US Dollars 6,938,069 (594,921) 2/10/2004 European Euro 12,983,424 US Dollars 14,989,623 (1,299,417) 2/10/2004 US Dollars 2,658,189 European Euro 2,301,463 229,233 2/10/2004 US Dollars 535,936 European Euro 464,014 46,217 2/10/2004 US Dollars 3,946,069 European Euro 3,416,510 340,295 3/11/2004 South African Rand 6,233,299 US Dollars 957,790 39,282 ----------- $(1,144,220) =========== GROWTH EQUITY 3/17/2004 European Euro 3,693,892 US Dollars 4,567,497 $ (62,395) 3/17/2004 European Euro 3,339,076 US Dollars 4,120,754 (64,416) ----------- $ (126,811) =========== INTERNATIONAL EQUITY 1/20/2004 Japanese Yen 137,983,755 Canadian Dollars 1,688,288 $ 18,124 1/30/2004 British Pounds 7,805,000 US Dollars 13,183,269 (708,109) 3/4/2004 Japanese Yen 77,445,300 US Dollars 670,000 (52,133) 5/12/2004 Swiss Francs 2,244,287 British Pounds 999,193 (49,847) 5/26/2004 Swiss Francs 3,125,749 Japanese Yen 261,562,643 (80,889) ----------- $ (872,854) ===========
156 OPTIONS WRITTEN Transactions in options written for the period ended December 31, 2003, were as follows:
NUMBER OF PREMIUMS LOW-DURATION BOND FUND CONTRACTS RECEIVED - ---------------------- --------- ---------- Options written, 12/31/02 -- $ -- ------ ---------- Options written 9,052 1,251,554 Option expired (3,432) (656,030) Options closed -- -- ------ ---------- Options written, 12/31/03 5,620 $ 595,524 ====== ==========
NUMBER OF PREMIUMS MEDIUM-DURATION BOND FUND CONTRACTS RECEIVED - ------------------------- --------- ---------- Options written, 12/31/02 5,490 $1,553,865 ------ ---------- Options written 15,513 1,790,939 Option expired (9,636) (467,504) Options closed (1,220) (99,265) ------ ---------- Options written, 12/31/03 10,147 $2,778,035 ====== ==========
6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the period ended December 31, 2003 and the year ended December 31, 2002, are as follows:
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- FLEXIBLE INCOME FUND SHARES VALUE SHARES VALUE - -------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 256,101 $ 2,445,310 1,670,545 $ 16,393,393 Retirement Class 2,999,652 38,722,374 3,611,419 46,311,965 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 110,248 1,037,416 107,505 980,449 Retirement Class 800,930 10,412,089 987,456 12,264,206 SHARES REDEEMED: Retail Class (56,429) (541,956) (30,529) (292,173) Retirement Class (5,542,161) (71,606,987) (5,132,185) (66,166,610) --------------- ----------------- --------------- ---------------- Net increase (decrease) (1,431,659) $ (19,531,754) 1,214,211 $ 9,491,230 =============== ================= =============== ================
157
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- GROWTH & INCOME FUND SHARES VALUE SHARES VALUE - -------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 335,318 $ 3,061,096 1,804,916 $ 17,382,391 Retirement Class 9,190,592 118,949,665 10,191,589 126,341,627 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 148,121 1,373,027 165,812 1,385,998 Retirement Class 3,751,332 50,267,852 5,235,297 62,038,270 SHARES REDEEMED: Retail Class (80,573) (707,318) (69,225) (640,608) Retirement Class (15,705,780) (198,857,253) (15,192,703) (189,399,981) --------------- ----------------- --------------- ---------------- Net increase (decrease) (2,360,990) $ (25,912,931) 2,135,686 $ 17,107,697 =============== ================= =============== ================
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- CAPITAL OPPORTUNITIES FUND SHARES VALUE SHARES VALUE - -------------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 250,222 $ 2,262,504 1,164,775 $ 11,131,515 Retirement Class 5,903,866 74,733,730 6,015,900 72,058,224 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 47,212 455,568 58,034 467,756 Retirement Class 1,739,145 23,652,360 2,467,745 27,712,780 SHARES REDEEMED: Retail Class (122,322) (1,106,643) (26,707) (232,493) Retirement Class (8,385,067) (103,428,690) (7,786,137) (92,920,831) --------------- ----------------- --------------- ---------------- Net increase (decrease) (566,944) $ (3,431,171) 1,893,610 $ 18,216,951 =============== ================= =============== ================
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- GLOBAL EQUITY FUND SHARES VALUE SHARES VALUE - ------------------ --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 148,557 $ 1,304,684 1,668,192 $ 15,788,091 Retirement Class 5,255,047 63,303,472 4,934,351 56,608,076 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 11,098 110,871 18,489 142,735 Retirement Class 371,322 5,053,687 601,538 6,310,135 SHARES REDEEMED: Retail Class (37,275) (319,476) (33,843) (271,873) Retirement Class (6,113,995) (70,734,256) (7,942,881) (91,353,777) --------------- ----------------- --------------- ---------------- Net decrease (365,246) $ (1,281,018) (754,154) $ (12,776,613) =============== ================= =============== ================
158
FLEXIBLE INCOME FUND I GROWTH & INCOME FUND I ------------------------------------ ----------------------------------- FOR THE PERIOD 07/01/03 FOR THE PERIOD 07/01/03 (COMMENCEMENT OF OPERATIONS) (COMMENCEMENT OF OPERATIONS) THROUGH 12/31/03 THROUGH 12/31/03 ------------------------------------ ----------------------------------- SHARES VALUE SHARES VALUE --------------- ----------------- --------------- ---------------- SHARES SOLD 2,963,771 $ 29,681,126 6,980,068 $ 70,055,135 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS 34,697 357,383 170,077 1,804,518 SHARES REDEEMED (221,947) (2,259,021) (375,070) (3,911,770) --------------- ----------------- --------------- ---------------- Net increase 2,776,521 $ 27,779,488 6,775,075 $ 67,947,883 =============== ================= =============== ================
CAPITAL OPPORTUNITIES FUND I GLOBAL EQUITY FUND I ------------------------------------ ----------------------------------- FOR THE PERIOD 07/01/03 FOR THE PERIOD 07/01/03 (COMMENCEMENT OF OPERATIONS) (COMMENCEMENT OF OPERATIONS) THROUGH 12/31/03 THROUGH 12/31/03 ------------------------------------ ----------------------------------- SHARES VALUE SHARES VALUE --------------- ----------------- --------------- ---------------- SHARES SOLD 5,287,084 53,184,082 2,324,815 23,434,827 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS 88,095 976,975 18,045 209,318 SHARES REDEEMED (200,958) (2,151,481) (133,051) (1,424,993) --------------- ----------------- --------------- ---------------- Net increase 5,174,221 $ 52,009,576 2,209,809 $ 22,219,152 =============== ================= =============== ================
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- MONEY MARKET FUND SHARES VALUE SHARES VALUE ----------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 3,800,874 $ 3,800,874 18,106,642 $ 18,106,642 Retirement Class 3,475,735,151 3,475,735,152 2,391,998,542 2,391,998,542 Institutional Class 88,426,471 88,426,471 6,411,127 6,411,127 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 62,338 62,338 213,286 213,286 Retirement Class 4,666,721 4,666,721 9,311,070 9,311,070 Institutional Class 310,135 310,135 98,177 98,177 SHARES REDEEMED: Retail Class (12,365,637) (12,365,637) (2,568,089) (2,568,089) Retirement Class (3,533,632,077) (3,533,632,077) (2,491,264,245) (2,491,264,245) Institutional Class (30,856,125) (30,856,125) (1,041,113) (1,041,113) --------------- ----------------- --------------- ---------------- Net decrease (3,852,149) $ (3,852,148) (68,734,603) $ (68,734,603) =============== ================= =============== ================
159
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- LOW-DURATION BOND FUND SHARES VALUE SHARES VALUE ---------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 370,361 $ 3,629,836 1,793,207 $ 17,762,300 Retirement Class 12,488,144 165,022,970 10,218,265 134,402,258 Institutional Class 9,852,397 96,600,779 607,288 6,000,000 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 109,633 1,061,162 122,635 1,206,161 Retirement Class 2,037,432 26,739,288 2,813,339 36,945,105 Institutional Class 215,429 2,072,803 40,373 395,941 SHARES REDEEMED: Retail Class (270,351) (2,642,616) (123,568) (1,220,973) Retirement Class (16,633,651) (220,077,046) (17,206,689) (226,065,358) Institutional Class (5,065,621) (49,650,731) (2,556) (25,249) --------------- ----------------- --------------- ---------------- Net increase (decrease) 3,103,773 $ 22,756,445 (1,737,706) $ (30,599,815) =============== ================= =============== ================
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- MEDIUM-DURATION BOND FUND SHARES VALUE SHARES VALUE ------------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 567,749 $ 5,488,636 1,906,394 $ 18,677,236 Retirement Class 16,034,944 221,272,485 16,093,582 218,282,492 Institutional Class 8,179,822 79,295,587 689,176 6,727,106 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 196,599 1,867,741 183,456 1,767,411 Retirement Class 3,312,192 45,476,001 4,320,283 58,449,894 Institutional Class 351,398 3,313,145 72,704 696,779 SHARES REDEEMED: Retail Class (354,296) (3,428,706) (78,013) (760,212) Retirement Class (21,454,483) (296,969,385) (25,611,700) (346,415,094) Institutional Class (4,259,150) (41,269,488) (2,609) (25,441) --------------- ----------------- --------------- ---------------- Net increase (decrease) 2,574,775 $ 15,046,016 (2,426,727) $ (42,599,829) =============== ================= =============== ================
160
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- EXTENDED-DURATION BOND FUND SHARES VALUE SHARES VALUE --------------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 546,676 $ 5,402,567 1,780,621 $ 17,558,639 Retirement Class 13,108,503 198,325,568 9,912,940 141,473,893 Institutional Class 4,850,745 48,928,974 602,410 6,000,000 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 416,507 3,973,266 272,045 2,612,870 Retirement Class 2,448,979 36,713,639 2,110,905 30,277,376 Institutional Class 375,173 3,566,652 72,741 698,808 SHARES REDEEMED: Retail Class (506,408) (5,012,043) (346,633) (3,336,503) Retirement Class (16,949,095) (258,599,321) (12,725,946) (181,561,981) Institutional Class (2,757,539) (27,568,450) (2,630) (26,174) --------------- ----------------- --------------- ---------------- Net increase 1,533,541 $ 5,730,852 1,676,453 $ 13,696,928 =============== ================= =============== ================
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- EQUITY INDEX FUND SHARES VALUE SHARES VALUE ----------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 186,065 $ 1,502,533 1,723,247 $ 16,231,143 Retirement Class 5,647,274 73,655,508 4,534,401 59,262,983 Institutional Class 4,461,868 36,455,381 638,298 6,000,000 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 32,121 278,529 43,629 335,885 Retirement Class 260,606 3,723,527 359,710 4,534,816 Institutional Class 45,263 403,725 17,473 133,846 SHARES REDEEMED: Retail Class (88,596) (708,958) (30,424) (244,278) Retirement Class (5,386,315) (71,239,038) (5,822,653) (79,608,284) Institutional Class (1,529,027) (12,857,703) (2,887) (26,469) --------------- ----------------- --------------- ---------------- Net increase 3,629,259 $ 31,213,504 1,460,794 $ 6,619,642 =============== ================= =============== ================
161
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- VALUE EQUITY FUND SHARES VALUE SHARES VALUE ----------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 239,944 $ 2,063,770 1,792,054 $ 16,791,746 Retirement Class 8,378,960 110,320,265 5,902,283 76,944,949 Institutional Class 11,711,145 101,805,688 682,607 6,440,400 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 40,211 369,031 40,519 338,252 Retirement Class 1,121,254 15,815,795 1,234,129 15,730,370 Institutional Class 94,136 913,660 17,310 145,231 SHARES REDEEMED: Retail Class (97,837) (831,105) (44,669) (369,131) Retirement Class (13,311,092) (175,057,679) (7,492,522) (100,715,917) Institutional Class (5,442,301) (47,926,854) (30,628) (236,697) --------------- ----------------- --------------- ---------------- Net increase 2,734,420 $ 7,472,571 2,101,083 $ 15,069,203 =============== ================= =============== ================
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- GROWTH EQUITY FUND SHARES VALUE SHARES VALUE ------------------ --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 365,073 $ 2,947,648 1,802,792 $ 17,029,868 Retirement Class 12,352,654 155,965,573 17,230,594 217,156,015 Institutional Class 13,561,260 111,472,774 644,374 6,165,400 SHARES REDEEMED: Retail Class (151,376) (1,217,720) (55,258) (429,932) Retirement Class (17,498,144) (220,165,499) (10,369,145) (134,588,500) Institutional Class (5,521,123) (46,186,040) (2,935) (27,620) --------------- ----------------- --------------- ---------------- Net increase 3,108,344 $ 2,816,736 9,250,422 $ 105,305,231 =============== ================= =============== ================
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- SMALL CAP EQUITY FUND SHARES VALUE SHARES VALUE --------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 462,903 $ 4,701,696 1,677,766 $ 16,348,685 Retirement Class 10,543,219 135,857,768 8,191,337 98,180,698 Institutional Class 3,640,755 35,234,158 639,470 6,285,000 SHARES REDEEMED: Retail Class (135,569) (1,346,215) (43,559) (364,433) Retirement Class (9,413,284) (116,448,337) (9,860,076) (120,314,748) Institutional Class (2,053,288) (21,163,131) (29,239) (229,684) --------------- ----------------- --------------- ---------------- Net increase (decrease) 3,044,736 $ 36,835,939 575,699 $ (94,482) =============== ================= =============== ================
162
FOR THE YEAR ENDED 12/31/03 FOR THE YEAR ENDED 12/31/02 ------------------------------------ ----------------------------------- INTERNATIONAL EQUITY FUND SHARES VALUE SHARES VALUE ------------------------- --------------- ----------------- --------------- ---------------- SHARES SOLD: Retail Class 163,727 $ 1,560,959 1,716,277 $ 15,791,132 Retirement Class 14,644,611 157,879,504 9,250,407 97,896,260 Institutional Class 8,174,211 75,814,682 645,856 6,000,000 SHARES ISSUED IN REINVESTMENT OF DIVIDENDS: Retail Class 24,358 265,255 18,906 154,094 Retirement Class 861,759 11,108,069 787,451 7,567,407 Institutional Class 72,461 797,069 9,920 81,443 SHARES REDEEMED: Retail Class (40,947) (379,887) (21,992) (188,156) Retirement Class (16,770,240) (180,433,081) (9,425,678) (99,683,230) Institutional Class (4,344,837) (41,517,645) (2,881) (26,444) --------------- ----------------- --------------- ---------------- Net increase 2,785,103 $ 25,094,925 2,978,266 $ 27,592,506 =============== ================= =============== ================
7. BANK BORROWINGS The Trust, on behalf of and for the benefit of the Funds, has a credit agreement with Bank of America, N.A., dated October 21, 2003, whereby each Fund is permitted to have bank borrowings for temporary or emergency purposes to fund Shareholder redemptions. The agreement permits borrowings up to $50 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to the Bank prime rate minus two percent or the Wall Street Journal LIBOR One Month Floating Rate plus 0.50%. Each Fund also pays a facility fee equal to its pro rata share of the amount of the credit facility at a rate of 0.12% per annum. Each Fund had no borrowings outstanding during the period ended December 31, 2003. 8. FEDERAL INCOME TAXES Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for futures and options transactions, foreign currency transactions, paydowns, losses deferred due to wash sales, investments in passive foreign investment companies and excise tax regulations. Distributions during the period January 1, 2003, through 163 December 31, 2003 were characterized as follows for tax purposes:
ORDINARY LONG-TERM RETURN OF TOTAL FUND INCOME CAPITAL GAIN CAPITAL DISTRIBUTION - ---- ----------- ------------ --------- ------------ Flexible Income 2003 $ 4,674,701 $ 6,798,990 -- $11,473,691 2002 9,781,693 3,462,350 -- 13,244,043 Growth & Income 2003 29,857,219 21,796,066 -- 51,653,285 2002 37,309,441 26,116,347 -- 63,425,788 Capital Opportunities 2003 15,708,591 8,401,297 -- 24,109,888 2002 18,417,652 9,766,603 -- 28,184,255 Global Equity 2003 5,164,553 -- -- 5,164,553 2002 6,452,783 -- -- 6,452,783 Flexible Income I 2003 357,383 -- -- 357,383 Growth & Income I 2003 1,782,721 21,797 -- 1,804,518 Capital Opportunities I 2003 943,918 33,057 -- 976,975 Global Equity I 2003 194,633 14,685 -- 209,318 Money Market 2003 7,918,076 -- -- 7,918,076 2002 14,515,587 -- -- 14,515,587 Low-Duration Bond 2003 25,512,205 4,364,359 -- 29,876,564 2002 36,617,084 1,930,128 -- 38,547,212 Medium-Duration Bond 2003 43,170,685 7,497,478 -- 50,668,163 2002 55,633,960 5,292,354 -- 60,926,314 Extended-Duration Bond 2003 23,645,972 20,612,648 -- 44,258,620 2002 30,750,822 2,838,223 -- 33,589,045 Equity Index 2003 4,405,649 -- -- 4,405,649 2002 4,604,015 400,546 -- 5,004,561 Value Equity 2003 17,107,697 -- -- 17,107,697 2002 16,185,464 -- 138,432 16,323,896 International Equity 2003 12,170,411 -- -- 12,170,411 2002 7,623,004 -- 179,894 7,802,898
At December 31, 2003, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED UNREALIZED ORDINARY LONG-TERM APPRECIATION FUND INCOME CAPITAL GAIN (DEPRECIATION) - ---- ------------- ------------- -------------- Flexible Income $ 2,174,476 $ 1,693,516 $ 44,392,327 Growth & Income 609,194 11,665,555 157,413,777 Capital Opportunities 384,626 4,173,190 107,307,530 Global Equity 467,766 704,936 93,531,313 Flexible Income I 315,912 148,653 395,695 Growth & Income I 31,498 788,541 3,219,433 Capital Opportunities I 28,523 336,951 5,118,389 Global Equity I 31,120 17,181 3,414,781 Money Market 0 (9,501) 0 Low-Duration Bond (1,119,835) 983,584 4,455,026 Medium-Duration Bond 1,929,110 2,498,799 14,211,297 Extended-Duration Bond 1,508,138 3,467,336 23,368,863 Equity Index 510,613 (6,794,336) 33,841,959 Value Equity 193,281 (69,996,687) 138,139,244 Growth Equity 0 (319,588,772) 138,443,306 Small Cap Equity 0 (10,518,709) 69,841,462 International Equity 1,013,245 (104,894,370) 145,239,101
For federal income tax purposes, capital loss carryovers, and their expiration dates, were as follows as of December 31, 2003:
EXPIRING EXPIRING EXPIRING FUND 12/31/2009 12/31/2010 12/31/2011 TOTAL - ---- ----------- ------------ ------------ ------------ Money Market -- -- $ 9,501 $ 9,501 Equity Index -- $ 6,794,336 -- 6,794,336 Value Equity $17,975,158 52,021,529 -- 69,996,687 Growth Equity 65,899,400 125,035,753 123,296,507 314,231,660 Small Cap Equity -- 10,518,709 -- 10,518,709 International Equity 11,896,098 57,870,668 35,127,604 104,894,370
For federal income tax purposes, post-October loss deferrals, which will reverse in 2004, were as follows as of December 31, 2003:
FUND CAPITAL FX AND PFIC TOTAL - ---- ---------- ----------- ---------- Low-Duration Bond -- $332,238 $ 332,238 Growth Equity $5,357,112 -- 5,357,112 International Equity -- 40,566 40,566
At December 31, 2003, the net unrealized appreciation from investments for those securities having an excess of value over cost and net unrealized depreciation from investments for those securities having an excess of cost over value (based on cost for federal income tax purposes) was as follows:
NET UNREALIZED APPRECIATION/ APPRECIATED DEPRECIATED FUND (DEPRECIATION) SECURITIES SECURITIES - ---- -------------- ------------ ------------ Flexible Income $ 44,392,327 $ 44,930,324 $ (537,997) Growth & Income 157,413,777 163,466,741 (6,052,964) Capital Opportunities 107,307,530 113,427,083 (6,119,553) Global Equity 93,531,313 101,636,558 (8,105,245) Flexible Income I 395,695 1,045,533 (649,838) Growth & Income I 3,219,433 5,106,204 (1,886,771) Capital Opportunities I 5,118,389 5,858,407 (740,018) Global Equity I 3,414,781 3,414,781 0 Money Market 0 0 0 Low-Duration Bond 4,417,236 8,926,581 (4,509,345) Medium-Duration Bond 15,748,862 23,870,439 (8,121,577) Extended-Duration Bond 23,337,546 25,297,605 (1,960,059) Equity Index 33,841,959 92,622,362 (58,780,403) Value Equity 138,139,245 197,306,161 (59,166,916) Growth Equity 138,570,117 170,633,071 (32,062,954) Small Cap Equity 69,841,462 76,082,770 (6,241,308) International Equity 145,386,326 192,390,644 (47,004,318)
164 ]The differences between book basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales and on investments in passive foreign investment companies. At December 31, 2003, the aggregate cost for federal income tax purposes was as follows (excluding foreign currency and derivative related items):
FEDERAL FUND TAX COST - ---- -------------- Flexible Income 229,113,909 Growth & Income 985,150,354 Capital Opportunities 806,237,338 Global Equity 728,063,216 Flexible Income I 28,254,266 Growth & Income I 68,770,177 Capital Opportunities I 52,370,410 Global Equity I 22,267,584 Money Market 921,287,130 Low-Duration Bond 1,013,487,266 Medium-Duration Bond 1,096,140,060 Extended-Duration Bond 420,220,115 Equity Index 418,975,506 Value Equity 1,234,257,182 Growth Equity 1,287,939,020 Small Cap Equity 444,463,038 International Equity 928,061,132
At December 31, 2003, capital contributions, accumulated undistributed net investment income and accumulated net realized gain (loss) from investments have been adjusted for current period permanent book/tax differences which arose principally from differing book/tax treatments of foreign currency transactions. The following amounts were reclassified within the capital accounts:
ACCUMULATED NET REALIZED GAIN (LOSS) ON ACCUMULATED INVESTMENTS AND PAID IN UNDISTRIBUTED CURRENCY FUND CAPITAL INCOME TRANSACTIONS - ---- ----------- ------------- --------------- Flexible Income I $ (4,195) $ 4,195 -- Growth & Income I (4,921) 4,921 -- Capital Opportunities I (4,921) 4,921 -- Global Equity I (4,195) 4,195 -- Low-Duration Bond -- 1,923,472 $(1,923,472) Medium-Duration Bond (256,575) 5,123,746 (4,867,171) Extended-Duration Bond (1,041,513) 512,369 529,144 Equity Index -- 12,468 (12,468) Value Equity 1 125,411 (125,412) Growth Equity (893,724) 894,042 (318) Small Cap Equity (1,001,599) 1,040,616 (39,017) International Equity -- (265,363) 265,363
Net investment income, net realized gain (loss) on investments and net assets were not affected by these reclassifications. At December 31, 2003, the Flexible Income, Flexible Income I, Global Equity I and International Equity Funds were subject to an excise tax, which was reimbursed by the Fund's Administrator. 9. RECLASSIFICATION OF SHORT TERM CAPITAL GAIN DISTRIBUTIONS RECEIVED The Blended Funds have reclassified prior period short-term capital gain distributions received from their investments in the Select Funds from net investment income to net realized gain on investment securities. Prior year net investment income ratios and per share amounts in the financial highlights have also been modified accordingly. These reclassifications had no effect on the Fund's net asset value, either in total or per share, or its total increase (decrease) in net assets from operations during any period. This reclassification decreased net investment income and increased net realized gains for the year ended December 31, 2003 by the following amounts:
FUND AMOUNT - ---- ---------- Flexible Income $ 986,958 Growth & Income 3,857,611 Capital Opportunities 1,488,537 Flexible Income I 138,023 Growth & Income I 343,695 Capital Opportunities I 134,706
165 REPORT OF INDEPENDENT AUDITORS To the Board of Trustees and Shareholders of AB Funds Trust: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Flexible Income Fund, Growth & Income Fund, Capital Opportunities Fund, Global Equity Fund, Flexible Income Fund I, Growth & Income Fund I, Capital Opportunities Fund I, Global Equity Fund I, Money Market Fund, Low-Duration Bond Fund, Medium-Duration Bond Fund, Extended-Duration Bond Fund, Equity Index Fund, Value Equity Fund, Growth Equity Fund, Small Cap Equity Fund and International Equity Fund (constituting AB Funds Trust, hereafter referred to as the "Trust") at December 31, 2003, and the results of each of their operations for the year then ended, and the changes in each of their net assets, and the financial highlights for the periods indicated in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP February 11, 2004 (Except for the reclassifications referred to in Note No. 9 to Financial Statements, for which the date is November 1, 2004) 166 FUND MANAGEMENT (UNAUDITED) Information pertaining to the Trustees and officers of the Trust is set forth below. The statement of additional information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling (800) 262-0511.
- -------------------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND TERM OF OFFICE COMPLEX OTHER TRUSTEESHIPS/ NAME, (DOB), ADDRESS AND AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN DIRECTORSHIPS POSITION(S) WITH TRUST TIME SERVED(1) DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE - ------------------------ -------------- ----------------------- ---------- ------------------- - -------------------------------------------------------------------------------------------------------------------------------- DISINTERESTED TRUSTEES - -------------------------------------------------------------------------------------------------------------------------------- Mr. Michael R. Buster (11/18/57) Since 2002 Executive Pastor, Prestonwood 17 None 3656 Bridle Road Baptist Church, Prosper, TX 75078 1989 - present Trustee - -------------------------------------------------------------------------------------------------------------------------------- Mr. Earl B. Patrick (6/3/44) Since 2000 President and Chief Operating 17 Earl B. Patrick, Inc. -- Jim Stewart Realtors, Inc. Officer, Jim Stewart, President, Director JSR 500 N. Valley Mills Drive Realtors, Inc. d/b/a Coldwell Building Waco, TX 76710 Banker Jim Stewart, Realtors, Partnership -- Managing Trustee 1975 - present. Partner, JSR Land Partnership -- Managing Partner Meadowlake Center -- General Partner, Waco Assn. Of Realtors -- Director, Baylor Foundation -- Director, All Peoples -- Director, Face to Face Ministries, Inc. -- Director - -------------------------------------------------------------------------------------------------------------------------------- Mr. Joseph A. Mack (11/22/39) Since 2002 Director, Office of Public 17 None 3400 Wilmot Ave. Policy, South Carolina Columbia, SC 29205 Baptist Convention, Trustee 1999 - present - -------------------------------------------------------------------------------------------------------------------------------- Mr. James Ray Taylor (10/19/33) Since 2002 Retired 12/31/1994, 17 None 3009 Tanglewood Park West Trustee -- Annuity Board, Fort Worth, Texas 76109 1990 - 2000 Trustee - -------------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES(2) - -------------------------------------------------------------------------------------------------------------------------------- Gerald B. Jones (5/24/32) Since 2000 Owner, Jones Motorcars, Inc. 17 Annuity Board -- Trustee, Jones Motorcars, Inc. 1957 - Present. Bank of Arkansas -- Director, 3535 N. College Avenue 1996 - Present. Fayetteville, AR 72703-5108 Trustee - -------------------------------------------------------------------------------------------------------------------------------- George Tous Van Nijkerk (8/12/39) Since 2000 Administrative Services 17 Annuity Board -- Trustee 2401 Cedar Springs Road Director, Providence Baptist Dallas, Texas 75201-1498 Church, 1991 - Present. Trustee - -------------------------------------------------------------------------------------------------------------------------------- OFFICER(S) WHO ARE NOT TRUSTEES - -------------------------------------------------------------------------------------------------------------------------------- Jeffrey P. Billinger (12/5/46) Since 2000 Executive Officer and N/A N/A 2401 Cedar Springs Road Treasurer, Annuity Board of Dallas, TX 75201-1407 the Southern Baptist Vice President and Treasurer Convention, 1995 - Present. - -------------------------------------------------------------------------------------------------------------------------------- Rodric E. Cummins (6/28/57) Since 2000 Executive Officer and Chief N/A N/A 2401 Cedar Springs Road Investment Officer, Annuity Dallas, TX 75201-1407 Board of the Southern Baptist Vice President and Investment Convention, 1998 - Present. Officer - -------------------------------------------------------------------------------------------------------------------------------- O.S. Hawkins (8/6/47) Since 2000 President and CEO, Annuity N/A N/A 2401 Cedar Springs Road Board of the Southern Baptist Dallas, TX 75201-1407 Convention, 1997 - Present. President - -------------------------------------------------------------------------------------------------------------------------------- John R. Jones (12/6/53) Since 2000 Executive Vice President and N/A N/A 2401 Cedar Springs Road Chief Operating Officer, Dallas, TX 75201-1407 Annuity Board of the Southern Senior Vice President Baptist Convention, 1995 - Present. - --------------------------------------------------------------------------------------------------------------------------------
167 FUND MANAGEMENT (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND TERM OF OFFICE COMPLEX OTHER TRUSTEESHIPS/ NAME, (DOB), ADDRESS AND AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN DIRECTORSHIPS POSITION(S) WITH TRUST TIME SERVED(1) DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE - ------------------------ -------------- ----------------------- ---------- ------------------- Rodney R. Miller (5/23/53) Since 2000 General Counsel, Legal and N/A N/A 2401 Cedar Springs Road Compliance, Annuity Board of Dallas, TX 75201-1407 the Southern Baptist Vice President and Secretary Convention, 1995 - Present.
- -------------------------------------------------------------------------------------------------------------------------------
(1) Each Trustee and officer serves for an indefinite term, until his/her successor is elected. (2) Messrs. Tous Van Nijkerk and Jones serve as trustees and are to be "interested persons" of the Trust as the term is defined in the Investment Company Act of 1940, as amended. 168 INVESTMENT SUB-ADVISERS (Assets under management as of 12/31/03) (Unaudited) AB Funds Trust employs a broad array of proven investment managers for the benefit of their investors. Each manager is distinctive in their investment management process and business approach.
FIRM TOTAL ASSETS FUND SUB-ADVISER ESTABLISHED MANAGED - ---- --------------------------------------------------- ----------- ------------ MONEY MARKET BlackRock Institutional Management Corporation 1988 $ 309 B LOW-DURATION BOND BlackRock Advisors, Inc. 1988 $ 309 B Pacific Investment Management Company LLC ("PIMCO") 1971 $ 373 B Payden & Rygel 1984 $ 50 B MEDIUM-DURATION BOND Goldman Sachs Asset Management 1984 $ 376 B Pacific Investment Management Company LLC ("PIMCO") 1971 $ 373 B Western Asset Management Company 1971 $ 148 B EXTENDED-DURATION BOND Loomis Sayles & Company, L. P. 1927 $ 54 B STW Fixed Income Management Ltd. 1977 $ 9 B EQUITY INDEX Northern Trust Investments, Inc. 1889 $ 420 B VALUE EQUITY Barrow, Hanley Mewhinney & Straus, Inc. 1979 $ 33 B Equinox Capital Management LLC 1989 $ 6 B Northern Trust Investments, Inc. 1889 $ 420 B Numeric Investors L. P. 1989 $ 7 B GROWTH EQUITY RCM Capital Management, LLC 1970 $ 48 B Marsico Capital Management, LLC. 1997 $ 31 B Sands Capital Management, LLC 1992 $ 6 B TCW Investment Management Company 1971 $ 90 B SMALL CAP EQUITY Aronson+Johnson+Ortiz, LP 1984 $ 15 B High Rock Capital LLC 1997 $ 1 B Provident Investment Council, Inc. 1951 $ 6 B TimesSquare Capital Management, Inc. 2000 $ 43 B Northern Trust Investments, Inc 1889 $ 420 B INTERNATIONAL EQUITY Alliance Capital Management, L.P. 1962 $ 485 B Capital Guardian Trust Company 1931 $ 149 B Delaware International Advisers Ltd. 1990 $ 21 B Genesis Asset Managers Limited 1981 $ 7 B Oechsle International Advisors, LLC 1986 $ 14 B Philadelphia International Advisor, LP 1956 $ 4 B Walter Scott & Partners Limited 1983 $ 8 B CUSTODIAN FOR AB FUNDS TRUST ASSETS The Northern Trust Company 1889 $1.8 Tr
You should consider the investment objectives, risks, charges and expenses of each investment fund carefully before investing. To obtain a prospectus with this and other information about AB Funds Trust call 1-800-262-0511, visit www.absbc.org or write to AB Funds Trust, 2401 Cedar Springs, Dallas, TX 75201-1498. Read it carefully before you invest. Shares of AB Funds Trust are distributed by PFPC Distributors, Inc., 760 Moore Road, King of Prussia, PA 19406. 169 [AB FUNDS LOGO] 2401 Cedar Springs Rd., Dallas, TX 75201-1498 1.800.262.0511 - www.absbc.org Funds distributed by PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 Serving Those Who Serve the Lord "...with the integrity of our hearts and the skillfulness of our hands." Psalm 78:72 Rev. 2/04 2233 6754 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (c) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Registrant's Board of Trustees has determined that it does not have an "audit committee financial expert" serving on its Audit Committee. While Registrant believes that each of the members of its Audit Committee has sufficient knowledge of accounting principles and financial statements to serve on the Audit Committee, none has the requisite experience to qualify as an "audit committee financial expert," as such term is defined by the Securities and Exchange Commission. The Board of Trustees intends to seek such a person for election to the Board and its Audit Committee; however, the Registrant and its Board of Trustees cannot specify a date for such election nor even assure that such search and election will be successful. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $211,000 for 2002 and $257,550 for 2003. (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $0 for 2002 and $0 for 2003. (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $36,400 for 2002 and $39,000 for 2003. (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2002 and $0 for 2003. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. Pursuant to its charter, the Audit Committee may choose to delegate the authority to grant pre-approvals to one or more of its members, each acting on behalf of the Audit Committee, provided, that the Audit Committee adopts policies and procedures detailed as to the particular service and designed to safeguard the continued independence of the auditors, consistent with the requirements of the Sarbanes-Oxley Act of 2002 and related SEC regulations, which shall then be used in making such pre-approvals, and further provided, that each delegated pre-approval shall be reported to the Audit Committee during its next regularly scheduled meeting. As of the end of the period covered by this report, the Audit Committee has not adopted such policies and procedures. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) Not applicable. (c) 100% (d) Not applicable. (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was zero percent (0%). (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $0. (h) Not applicable. The Registrant's independent auditors do not currently provide non-audit services to the Registrant's investment adviser or any of its control affiliates that provide ongoing services to the Registrant. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) AB Funds Trust By (Signature and Title)* /s/ John R. Jones ------------------------------------------------------- John R. Jones, President (principal executive officer) Date November 1, 2004 ---------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ John R. Jones ------------------------------------------------------- John R. Jones, President (principal executive officer) Date November 1, 2004 ---------------------------------------------------------------------- By (Signature and Title)* /s/ Jeffrey P. Billinger ------------------------------------------------------- Jeffrey P. Billinger, Vice President and Treasurer (principal financial officer) Date November 1, 2004 ---------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 w68164exv99wcodeeth.txt CODE OF ETHICS EX-99.CODE ETH AB FUNDS TRUST SUPPLEMENTAL CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE The Board of Trustees (the "Board") of AB Funds Trust (the "Trust") has adopted this Supplemental Code of Ethics (this "Code") to apply to the Trust's President and Treasurer, who function as the Trust's principal executive officer and principal financial officer, respectively (the "Covered Officers"), for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Trust; - - compliance with applicable laws and governmental rules and regulations; - the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Trust. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Trust. Certain conflicts of interest arise out of the relationships between Covered Officers and the Trust and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trust because of their status as "affiliated persons" of the Trust. The compliance programs and procedures of the Trust and SBC Financial Services, Inc. (the "Investment Adviser") are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Trust and the Investment Adviser of which the Covered Officers are also officers. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Trust or for the Investment Adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Investment Adviser and the Trust. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trust and the Investment Adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Trust. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trust. * * * * Each Covered Officer must: - not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trust whereby the Covered Officer would benefit personally to the detriment of the Trust; - not cause the Trust to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Trust; and - - not retaliate against any other Covered Officer or any employee or officer of the Trust or their affiliated persons for reports of potential violations that are made in good faith. There are some conflict of interest situations that must be discussed with the Trust's Chief Legal Officer if material. Examples of these include:(1) - [service as a director on the board of any public or private company]; - the receipt of any non-nominal gifts (generally, in excess of $100) from unaffiliated persons or entities that do business or wish to do business with the Trust or the Investment Adviser; - the receipt of any entertainment except customary business lunches, dinners or entertainment (e.g., sporting events) from unaffiliated persons or entities that do business or wish to do business with the Trust or the Investment Adviser; - ------------------ (1) Any activity or relationship that would present a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if a member of the Covered Officer's family engages in such an activity or has such a relationship. - any ownership interest in, or any consulting or employment relationship with, any of the Trust's service providers, other than the Investment Adviser or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Trust; - each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Trust to others, whether within or outside the Trust, including to the Trust's Trustees and auditors, and to governmental regulators and self-regulatory organizations; - - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Trust and the Investment Adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trust files with, or submit to, the SEC and in other public communications made by the Trust; and - - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - - upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code; - - annually thereafter affirm to the Board that he has complied with the requirements of the Code; - report at least annually on the Trust's Trustee and Officer Questionnaire affiliations or other relationships related to conflicts of interest; and - - notify the Chief Legal Officer promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. The Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. The Chief Legal Officer is authorized and encouraged to consult, as appropriate, with the Chairman of the Audit Committee of the Board (the "Committee"), counsel to the Trust and counsel to the Trustees who are not "interested persons" of the Trust, as that term is defined in the Investment Company Act (the "Independent Trustees"). However, any waivers(2) sought will be considered by the Committee. The Trust will follow these procedures in investigating and enforcing this Code: - - the Chief Legal Officer will take all appropriate action to investigate any potential violations reported to him; - - if, after such investigation, the Chief Legal Officer believes that no violation has occurred, the Chief Legal Officer is not required to take any further action; - - any matter that the Chief Legal Officer believes is a violation will be reported to the Committee; - - if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Investment Adviser or its board; or a recommendation to dismiss the Covered Officer; - - the Committee will be responsible for granting waivers, as appropriate; and - - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Trust for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trust, the Investment Adviser, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trust and the Investment Adviser's code of ethics under Rule 17j-1 under the Investment Company Act and the Investment Adviser's more detailed policies and procedures set forth therein are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code must be approved or ratified by a majority vote of the Board, including a majority of the Independent Trustees. VII. CONFIDENTIALITY - ----------------------- (2) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver," which must also be disclosed, as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer" of the registrant. All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Committee, the Trust's counsel or counsel to the Independent Trustees, as appropriate. VIII. INTERNAL USE The Code is intended solely for the internal use by the Trust and does not constitute an admission, by or on behalf of the Trust, as to any fact, circumstance, or legal conclusion. Date: EX-99.CERT 3 w68164exv99wcert.txt CERTIFICATION PURSUANT TO SECTION 302 EX-99.CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, John R. Jones, certify that: 1. I have reviewed this report on Form N-CSR of AB Funds Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [Omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 1, 2004 /s/ John R. Jones ----------------- ------------------------------------ John R. Jones, President (principal executive officer) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Jeffrey P. Billinger, certify that: 1. I have reviewed this report on Form N-CSR of AB Funds Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [Omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 1, 2004 /s/ Jeffrey P. Billinger ----------------- -------------------------------------------------- Jeffrey P. Billinger, Vice President and Treasurer (principal financial officer) EX-99.906CERT 4 w68164exv99w906cert.txt CERTIFICATION PURSUANT TO SECTION 906 EX.99.906 CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT I, John R. Jones, President of AB Funds Trust (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 1, 2004 /s/ John R. Jones ----------------- ------------------------------------ John R. Jones, President (principal executive officer) I, Jeffrey P. Billinger, Vice President and Treasurer of AB Funds Trust (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 1, 2004 /s/ Jeffrey P. Billinger ----------------- Jeffrey P. Billinger, Vice President and Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----