-----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, BSw0kbftTsTJpp5FvwngdnX3pUWajSN4qIQdpDW3vBu2qYqMtoSnm7B8DXDyzNCn rPmzeahUPpMcbRS5xaXlnA== 0000950123-07-003355.txt : 20070307 0000950123-07-003355.hdr.sgml : 20070307 20070307172552 ACCESSION NUMBER: 0000950123-07-003355 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070307 DATE AS OF CHANGE: 20070307 EFFECTIVENESS DATE: 20070307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS CENTRAL INDEX KEY: 0001018953 IRS NUMBER: 000000000 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07717 FILM NUMBER: 07678668 BUSINESS ADDRESS: STREET 1: 4 MANHATTANVILLE ROAD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146973507 MAIL ADDRESS: STREET 1: 4 MANHATTANVILLE ROAD CITY: PURCHASE STATE: NY ZIP: 10577 0001018953 S000008660 Short Horizon Strategic Variable Fund C000023623 Short Horizon Strategic Variable Fund 0001018953 S000008661 Intermediate Horizon Strategic Variable Fund C000023624 Intermediate Horizon Strategic Variable Fund 0001018953 S000008662 Intermediate/Long Horizon Strategic Variable Fund C000023625 Intermediate/Long Horizon Strategic Variable Fund N-CSR 1 y28830nvcsr.txt FORM N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811 - 07717 The Diversified Investors Strategic Variable Funds (Exact name of Registrant as specified in charter) Address of Registrant: 4 Manhattanville Road Purchase, NY Name and address of agent for service: Joseph Carusone 4 Manhattanville Road Purchase, NY 10577 Registrant's telephone number, including area code: (914) 697-8586 Date of fiscal year end: December 31, 2006 Date of reporting period: December 31, 2006 ITEM 1. REPORTS TO STOCKHOLDERS. THE DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS DIVERSIFIED INVESTORS VARIABLE FUNDS DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS ANNUAL REPORT December 31, 2006 International Equity | | Special Equity | | Aggressive Equity | | Equity Growth | |-- Intermediate/Long Growth & Income | Horizon | -------------------------- Value & Income | | Balanced |-- Intermediate Horizon | -------------------------- Calvert | | High Yield Bond | |-- Short Horizon Core Bond | -------------------------- | Intermediate Govt. Bond | | High Quality Bond | | Money Market | [DIVERSIFIED INVESTMENT ADVISORS Logo] _________________________________________________ This report is not to be construed as an offering for sale of any contracts participating in the Subaccounts (Series) of the Diversified Investors Variable Funds or the Diversified Investors Strategic Variable Funds, or as a solicitation of an offer to buy contracts unless preceded by or accompanied by a current prospectus which contains complete information about charges and expenses. This is a combined annual report for the subaccounts of the Diversified Investors Variable Funds and the Diversified Investors Strategic Variable Funds. THE DIVERSIFIED INVESTORS VARIABLE FUNDS AND STRATEGIC VARIABLE FUNDS TABLE OF CONTENTS
PAGE ---- DIVERSIFIED INVESTORS VARIABLE FUNDS: An Explanation of Fund Expenses............................. 2 Statements of Assets and Liabilities........................ 4 Statements of Operations.................................... 6 Statements of Changes in Net Assets -- December 31, 2006.... 8 Statements of Changes in Net Assets -- December 31, 2005.... 10 CALVERT SUBACCOUNT: Statement of Assets and Liabilities....................... 12 Statement of Operations................................... 13 Statements of Changes in Net Assets....................... 14 Notes to Financial Statements............................... 15 Report of Independent Registered Public Accounting Firm..... 22 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS: An Explanation of Fund Expenses............................. 23 Statements of Assets and Liabilities........................ 24 Statements of Operations.................................... 25 Statements of Changes in Net Assets -- December 31, 2006.... 26 Statements of Changes in Net Assets -- December 31, 2005.... 27 PORTFOLIOS OF INVESTMENTS: Short Horizon Strategic Variable Fund..................... 28 Intermediate Horizon Strategic Variable Fund.............. 29 Intermediate Long Horizon Strategic Variable Fund......... 30 Portfolio Composition....................................... 31 Notes to Financial Statements............................... 32 Report of Independent Registered Public Accounting Firm..... 38 APPROVAL OF INVESTMENT ADVISORY CONTRACTS................... 39 TRUSTEES INFORMATION........................................ 40 DIVERSIFIED INVESTORS PORTFOLIOS: Management Review........................................... 42 Statements of Assets and Liabilities........................ 52 Statements of Operations.................................... 56 Statements of Changes in Net Assets -- December 31, 2006.... 60 Statements of Changes in Net Assets -- December 31, 2005.... 64 PORTFOLIOS OF INVESTMENTS: Money Market Portfolio.................................... 68 High Quality Bond Portfolio............................... 70 Intermediate Government Bond Portfolio.................... 77 Core Bond Portfolio....................................... 79 Total Return Bond Portfolio............................... 95 High Yield Bond Portfolio................................. 105 Balanced Portfolio........................................ 114 Value & Income Portfolio.................................. 127 Value Portfolio........................................... 130 Growth & Income Portfolio................................. 132 Equity Growth Portfolio................................... 137 Aggressive Equity Portfolio............................... 140 Mid-Cap Value Portfolio................................... 142 Mid-Cap Growth Portfolio.................................. 148 Small-Cap Value Portfolio................................. 150 Special Equity Portfolio.................................. 153 Small-Cap Growth Portfolio................................ 164 International Equity Portfolio............................ 168 Summary of Footnotes and Abbreviations to Portfolios........ 173 Portfolio Composition....................................... 174 Notes to Financial Statements............................... 176 Report of Independent Registered Public Accounting Firm..... 200 Approval of Investment Advisory Contracts................... 201 Trustees Information........................................ 206 CALVERT SOCIAL BALANCED PORTFOLIO ANNUAL REPORT............. I
DIVERSIFIED INVESTORS VARIABLE FUNDS AN EXPLANATION OF FUND EXPENSES (UNAUDITED) As a unitholder in a unit investment trust (a "Trust") invested in a corresponding series of the Diversified Investors Portfolios, you will bear the ongoing costs of managing the corresponding portfolio in which your Trust invests (such as the investment advisor's fee and other expenses). You will also bear the cost of operating the Trust. The first column in the table shown below assumes an investment of $1,000 on July 1, 2006. The second column will show your ending balance (per $1,000) on December 31, 2006. The third column will show how much of your investment (per $1,000) went to the ongoing costs of both your Trust and its corresponding portfolio. The figures in both of these columns are based on the actual total return and the actual expenses incurred for the period July 1, 2006 - December 31, 2006. In order to approximate how much you paid in expenses during the six months, divide your balance by 1,000, and multiply the result by the dollar amount shown under the heading "Expenses Paid During the Period July 1, 2006 - December 31, 2006 (Based on actual returns and expenses)". The fourth and fifth columns will also show your ending balance (per $1,000) on December 31, 2006 and how much of your investment (per $1,000) went to the ongoing costs of both your Trust and its corresponding portfolio, but assumes a total annual return rate of 5% before expenses. Since the 5% is hypothetical, the ending account values and the expenses paid for the period July 1, 2006 - December 31, 2006 will not be the actual values per $1,000 of your investment. This information is presented so you may compare the cost of owning a Diversified Investors Variable Fund against the cost of owning other funds. Other funds should provide this information based on a hypothetical annual return of 5% before expenses in their most recent report in order for you to make a fair comparison.
EXPENSES PAID ENDING ACCOUNT DURING THE PERIOD EXPENSES PAID VALUE JULY 1, 2006 - ENDING ACCOUNT DURING THE PERIOD DECEMBER 31, 2006 DECEMBER 31, 2006 VALUE JULY 1, 2006 - (BASED ON (BASED ON BEGINNING DECEMBER 31, 2006 DECEMBER 31, 2006 HYPOTHETICAL 5% HYPOTHETICAL 5% ACCOUNT (BASED ON ACTUAL (BASED ON ACTUAL ANNUAL RETURNS ANNUAL RETURNS VALUE RETURNS AND RETURNS AND BEFORE ACTUAL BEFORE ACTUAL TRUST NAME JULY 1, 2006 EXPENSES) EXPENSES)(1)(2) EXPENSES) EXPENSES)(1)(2) - ---------- ------------ ----------------- ------------------- ----------------- ------------------- Money Market......... $1,000 $1,019.88 $ 6.96 $1,018.04 $6.95 High Quality Bond.... 1,000 1,025.76 7.50 1,017.53 7.47 Intermediate Gov't Bond............... 1,000 1,032.14 7.60 1,017.45 7.55 Core Bond............ 1,000 1,039.00 7.56 1,017.51 7.48 High Yield Bond...... 1,000 1,065.27 8.73 1,016.48 8.35 Balanced............. 1,000 1,092.48 8.35 1,016.95 8.05 Value & Income....... 1,000 1,135.32 8.38 1,017.08 7.92 Growth & Income...... 1,000 1,098.53 9.09 1,016.27 8.73 Equity Growth........ 1,000 1,067.63 9.00 1,016.23 8.78 Aggressive Equity.... 1,000 1,057.61 9.75 1,015.46 9.55 Special Equity....... 1,000 1,072.21 10.03 1,015.25 9.76 International Equity............. 1,000 1,153.25 10.63 1,015.06 9.94 Calvert(4)........... 1,000 1,078.46 5.70 1,019.45 5.54 ANNUALIZED EXPENSE TRUST NAME RATIO(1)(3) - ---------- ----------- Money Market......... 1.38% High Quality Bond.... 1.48 Intermediate Gov't Bond............... 1.50 Core Bond............ 1.49 High Yield Bond...... 1.70 Balanced............. 1.60 Value & Income....... 1.57 Growth & Income...... 1.74 Equity Growth........ 1.75 Aggressive Equity.... 1.90 Special Equity....... 1.94 International Equity............. 1.98 Calvert(4)........... 1.10
- --------------- (1) These figures reflect the expenses of both the Trust and its corresponding portfolio. (2) Expenses are equal to each Trust's annualized expense ratio multiplied by the average account value over the period, divided by 365, multiplied by 182 (to reflect the one-half year period). (3) Please be aware that the expense ratios shown in this column may not match the expense ratios shown in each Trust's financial highlights, as the expense ratios in the financial highlights reflect the actual expense ratios for the period January 1, 2006 - December 31, 2006. (4) Does not include expenses incurred by the Calvert Social Balanced Portfolio. 2 (This page intentionally left blank) 3 DIVERSIFIED INVESTORS VARIABLE FUNDS STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2006
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT CORE HIGH YIELD MARKET BOND BOND BOND BOND ----------- ----------- ------------ ----------- ---------- ASSETS: Investment in the Portfolios, at value (Notes 1 and 2)........... $38,669,077 $27,379,802 $24,609,637 $62,794,346 $5,933,270 Receivable for units sold......... 313,603 7,177 10,827 32,674 -- ----------- ----------- ----------- ----------- ---------- Total assets...................... 38,982,680 27,386,979 24,620,464 62,827,020 5,933,270 ----------- ----------- ----------- ----------- ---------- LIABILITIES: Payable for units redeemed........ 70,853 39,924 24,085 55,574 30 Accrued mortality and expense risk............................ 34,005 23,965 21,534 55,061 5,154 ----------- ----------- ----------- ----------- ---------- Total liabilities................. 104,858 63,889 45,619 110,635 5,184 ----------- ----------- ----------- ----------- ---------- NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS................. $38,877,822 $27,323,090 $24,574,845 $62,716,385 $5,928,086 =========== =========== =========== =========== ========== ACCUMULATION UNITS................ 1,942,788 1,825,981 1,195,685 1,978,729 315,785 =========== =========== =========== =========== ========== UNIT VALUE........................ $ 20.01 $ 14.96 $ 20.55 $ 31.70 $ 18.77 =========== =========== =========== =========== ==========
See notes to financial statements. 4
VALUE & GROWTH & EQUITY AGGRESSIVE SPECIAL INTERNATIONAL BALANCED INCOME INCOME GROWTH EQUITY EQUITY EQUITY ----------- ------------ ------------ ------------ ----------- ------------ ------------- $83,415,211.. $391,082,990 $140,607,876 $195,820,841 $58,260,269 $128,672,015 $109,716,328 68,900..... 149,975 71,746 61,572 31,846 51,681 77,131 ----------- ------------ ------------ ------------ ----------- ------------ ------------ 83,484,111.. 391,232,965 140,679,622 195,882,413 58,292,115 128,723,696 109,793,459 ----------- ------------ ------------ ------------ ----------- ------------ ------------ 84,988..... 225,247 164,941 193,368 26,038 27,348 20,154 72,902..... 339,287 123,269 172,125 51,815 113,125 94,697 ----------- ------------ ------------ ------------ ----------- ------------ ------------ 157,890.... 564,534 288,210 365,493 77,853 140,473 114,851 ----------- ------------ ------------ ------------ ----------- ------------ ------------ $83,326,221.. $390,668,431 $140,391,412 $195,516,920 $58,214,262 $128,583,223 $109,678,608 =========== ============ ============ ============ =========== ============ ============ 1,998,021.. 6,151,482 4,957,141 3,834,162 3,562,360 3,279,983 4,116,402 =========== ============ ============ ============ =========== ============ ============ $41.70...... $ 63.51 $ 28.32 $ 50.99 $ 16.34 $ 39.20 $ 26.64 =========== ============ ============ ============ =========== ============ ============
5 DIVERSIFIED INVESTORS VARIABLE FUNDS STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT CORE HIGH YIELD MARKET BOND BOND BOND BOND ---------- ---------- ------------ ---------- ---------- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIOS (NOTE 2): Interest income....................... $1,927,559 $1,059,579 $1,205,595 $3,054,247 $380,449 Securities lending income (net)....... -- 728 5,365 4,815 -- Dividend income....................... -- -- -- -- 2,350 Expenses (net of reimbursement)....... (105,753) (91,749) (98,277) (240,676) (26,757) ---------- ---------- ---------- ---------- -------- Net investment income (loss) allocated from Portfolios..................... 1,821,806 968,558 1,112,683 2,818,386 356,042 ---------- ---------- ---------- ---------- -------- EXPENSES (NOTE 4): Mortality and expense risk............ 420,044 264,602 269,465 689,092 49,694 ---------- ---------- ---------- ---------- -------- NET INVESTMENT INCOME (LOSS).......... 1,401,762 703,956 843,218 2,129,294 306,348 ---------- ---------- ---------- ---------- -------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 2): Net realized gains (losses) allocated from Portfolios..................... 136 (104,617) (512,870) (279,407) 45,061 Change in net unrealized appreciation (depreciation) allocated from Portfolios.......................... -- 182,533 233,252 10,014 123,206 ---------- ---------- ---------- ---------- -------- Net realized and unrealized gains (losses) on investments............. 136 77,916 (279,618) (269,393) 168,267 ---------- ---------- ---------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........... $1,401,898 $ 781,872 $ 563,600 $1,859,901 $474,615 ========== ========== ========== ========== ========
See notes to financial statements. 6
VALUE & GROWTH & EQUITY AGGRESSIVE SPECIAL INTERNATIONAL BALANCED INCOME INCOME GROWTH EQUITY EQUITY EQUITY ---------- ----------- ----------- ----------- ---------- ----------- ------------- $1,657,886 $ 354,800 $ 60,428 $ 222,345 $ 28,473 $ 126,824 $ 58,417 13,190 74,707 14,217 41,629 12,743 109,880 59,689 947,031 6,627,307 2,305,519 1,884,040 318,090 1,224,399 2,346,218 (406,161) (1,724,331) (861,879) (1,296,851) (458,044) (1,086,242) (811,624) ---------- ----------- ----------- ----------- ---------- ----------- ----------- 5,332,483 1,518,285 851,163 (98,738) 374,861 1,652,700 2,211,946 ---------- ----------- ----------- ----------- ---------- ----------- ----------- 892,926 3,986,986 1,499,344 2,213,118 629,657 1,411,550 1,029,325 ---------- ----------- ----------- ----------- ---------- ----------- ----------- 1,319,020 1,345,497 18,941 (1,361,955) (728,395) (1,036,689) 623,375 ---------- ----------- ----------- ----------- ---------- ----------- ----------- 26,956,536 10,638,852 12,061,476 4,197,002 14,081,122 10,464,907 3,707,674 36,496,645 3,151,739 (5,263,510) (448,224) (392,530) 10,757,560 3,141,595 ---------- ----------- ----------- ----------- ---------- ----------- ----------- 63,453,181 13,790,591 6,797,966 3,748,778 13,688,592 21,222,467 6,849,269 ---------- ----------- ----------- ----------- ---------- ----------- ----------- 8,168,289 $64,798,678 $13,809,532 $ 5,436,011 $3,020,383 $12,651,903 $21,845,842 $ ========== =========== =========== =========== ========== =========== ===========
7 DIVERSIFIED INVESTORS VARIABLE FUNDS STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2006
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT CORE HIGH YIELD MARKET BOND BOND BOND BOND ------------ ------------ ------------ ------------ ----------- FROM OPERATIONS: Net investment income (loss)...................... $ 1,401,762 $ 703,956 $ 843,218 $ 2,129,294 $ 306,348 Net realized gains (losses) allocated from Portfolios... 136 (104,617) (512,870) (279,407) 45,061 Change in net unrealized appreciation (depreciation) allocated from Portfolios... -- 182,533 233,252 10,014 123,206 ------------ ------------ ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations.................. 1,401,898 781,872 563,600 1,859,901 474,615 ------------ ------------ ----------- ------------ ----------- FROM UNIT TRANSACTIONS (NOTE 5): Units sold.................... 63,065,155 15,433,238 5,544,894 9,610,860 2,147,609 Units redeemed................ (63,026,049) (13,148,988) (7,220,403) (14,572,667) (1,040,873) ------------ ------------ ----------- ------------ ----------- Net increase (decrease) in net assets resulting from unit transactions................ 39,106 2,284,250 (1,675,509) (4,961,807) 1,106,736 ------------ ------------ ----------- ------------ ----------- Total increase (decrease) in net assets.................. 1,441,004 3,066,122 (1,111,909) (3,101,906) 1,581,351 NET ASSETS: Beginning of year............. 37,436,818 24,256,968 25,686,754 65,818,291 4,346,735 ------------ ------------ ----------- ------------ ----------- End of year................... $ 38,877,822 $ 27,323,090 $24,574,845 $ 62,716,385 $ 5,928,086 ============ ============ =========== ============ =========== Units outstanding beginning of year........................ 1,940,304 1,673,643 1,279,147 2,139,744 256,503 Units sold.................... 3,296,081 1,049,182 274,983 310,410 117,968 Units redeemed................ (3,293,597) (896,844) (358,445) (471,425) (58,686) ------------ ------------ ----------- ------------ ----------- Units outstanding end of year........................ 1,942,788 1,825,981 1,195,685 1,978,729 315,785 ============ ============ =========== ============ ===========
See notes to financial statements. 8
VALUE & GROWTH & EQUITY AGGRESSIVE SPECIAL INTERNATIONAL BALANCED INCOME INCOME GROWTH EQUITY EQUITY EQUITY ------------ ------------ ------------ ------------ ------------ ------------ ------------- $ 1,319,020 $ 1,345,497 $ 18,941 $ (1,361,955) $ (728,395) $ (1,036,689) $ 623,375 3,707,674 26,956,536 10,638,852 12,061,476 4,197,002 14,081,122 10,464,907 36,496,645 3,151,739 (5,263,510) (448,224) (392,530) 10,757,560 3,141,595 ------------ ------------ ------------ ------------ ------------ ------------ ------------ 64,798,678 13,809,532 5,436,011 3,020,383 12,651,903 21,845,842 8,168,289 ------------ ------------ ------------ ------------ ------------ ------------ ------------ 9,290,245 39,545,298 17,884,163 17,957,692 11,911,490 22,556,921 28,033,993 (17,165,428) (64,990,387) (29,767,160) (43,119,033) (15,684,911) (30,740,457) (21,021,275) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ) (25,445,089) (11,882,997) (25,161,341) (3,773,421) (8,183,536) 7,012,718 (7,875,183 ------------ ------------ ------------ ------------ ------------ ------------ ------------ 293,106 39,353,589 1,926,535 (19,725,330) (753,038) 4,468,367 28,858,560 83,033,115 351,314,842 138,464,877 215,242,250 58,967,300 124,114,856 80,820,048 ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 83,326,221 $390,668,431 $140,391,412 $195,516,920 $ 58,214,262 $128,583,223 $109,678,608 ============ ============ ============ ============ ============ ============ ============ 2,200,757 6,603,906 5,405,715 4,347,218 3,799,795 3,500,514 3,820,571 237,184 685,962 674,381 365,213 750,698 602,929 1,186,769 (439,920) (1,138,386) (1,122,955) (878,269) (988,133) (823,460) (890,938) ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,998,021 6,151,482 4,957,141 3,834,162 3,562,360 3,279,983 4,116,402 ============ ============ ============ ============ ============ ============ ============
9 DIVERSIFIED INVESTORS VARIABLE FUNDS STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2005
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT CORE MARKET BOND BOND BOND BALANCED ------------ ----------- ------------ ------------ ------------ FROM OPERATIONS: Net investment income (loss)...................... $ 748,656 $ 508,980 $ 624,359 $ 1,795,393 $ 964,180 Net realized gains (losses) allocated from Portfolios... (58) (121,700) (453,457) (317,746) 5,252,552 Change in net unrealized appreciation (depreciation) allocated from Portfolios... -- (190,503) (112,971) (684,883) (2,648,159) ------------ ----------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations.................. 748,598 196,777 57,931 792,764 3,568,573 ------------ ----------- ----------- ------------ ------------ FROM UNIT TRANSACTIONS (NOTE 5): Units sold.................... 45,062,203 5,085,234 5,173,446 13,367,109 10,189,249 Units redeemed................ (48,631,868) (5,440,530) (8,953,380) (10,191,307) (19,302,872) ------------ ----------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions................ (3,569,665) (355,296) (3,779,934) 3,175,802 (9,113,623) ------------ ----------- ----------- ------------ ------------ Total increase (decrease) in net assets.................. (2,821,067) (158,519) (3,722,003) 3,968,566 (5,545,050) NET ASSETS: Beginning of year............. 40,257,885 24,415,487 29,408,757 61,849,725 88,578,165 ------------ ----------- ----------- ------------ ------------ End of year................... $ 37,436,818 $24,256,968 $25,686,754 $ 65,818,291 $ 83,033,115 ============ =========== =========== ============ ============ Units outstanding beginning of year........................ 2,129,128 1,698,725 1,467,906 2,036,065 2,451,834 Units sold.................... 2,361,827 352,726 258,187 437,231 280,468 Units redeemed................ (2,550,651) (377,808) (446,946) (333,552) (531,545) ------------ ----------- ----------- ------------ ------------ Units outstanding end of year........................ 1,940,304 1,673,643 1,279,147 2,139,744 2,200,757 ============ =========== =========== ============ ============
See notes to financial statements. 10
VALUE & GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL INCOME INCOME GROWTH EQUITY EQUITY BOND EQUITY ------------ ------------ ------------ ------------ ------------ ---------- ------------- $ 945,769 $ (196,629) $ (1,612,935) $ (1,169,423) $ (692,049) $ 274,241 $ 697,089 31,008,302 7,331,974 9,361,543 14,231,152 3,875,791 28,143 3,802,936 (12,747,803) 638,669 4,339,209 (2,635,436) 553,656 (205,536) 2,845,069 ------------ ------------ ------------ ------------ ------------ ---------- ------------ 19,206,268 7,774,014 12,087,817 10,426,293 3,737,398 96,848 7,345,094 ------------ ------------ ------------ ------------ ------------ ---------- ------------ 37,212,740 19,225,540 20,115,332 21,327,873 9,886,890 659,762 13,552,575 (52,393,574) (27,281,312) (40,385,678) (24,954,226) (13,995,272) (999,385) (13,866,081) ------------ ------------ ------------ ------------ ------------ ---------- ------------ (15,180,834) (8,055,772) (20,270,346) (3,626,353) (4,108,382) (339,623) (313,506) ------------ ------------ ------------ ------------ ------------ ---------- ------------ 4,025,434 (281,758) (8,182,529) 6,799,940 (370,984) (242,775) 7,031,588 347,289,408 138,746,635 223,424,779 117,314,916 59,338,284 4,589,510 73,788,460 ------------ ------------ ------------ ------------ ------------ ---------- ------------ $351,314,842 $138,464,877 $215,242,250 $124,114,856 $ 58,967,300 $4,346,735 $ 80,820,048 ============ ============ ============ ============ ============ ========== ============ 6,901,393 5,739,439 4,783,781 3,617,451 4,092,218 276,841 3,836,891 730,716 793,773 433,578 644,513 695,062 39,514 703,864 (1,028,203) (1,127,497) (870,141) (761,450) (987,485) (59,852) (720,184) ------------ ------------ ------------ ------------ ------------ ---------- ------------ 6,603,906 5,405,715 4,347,218 3,500,514 3,799,795 256,503 3,820,571 ============ ============ ============ ============ ============ ========== ============
11 DIVERSIFIED INVESTORS VARIABLE FUNDS CALVERT SUBACCOUNT STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2006 ASSETS: Investments, at value (Notes 2 and 6)....................... $42,246,532 Receivable for units sold................................... 28,098 ----------- Total assets................................................ 42,274,630 ----------- LIABILITIES: Payable for units redeemed.................................. 12,925 Payable for securities purchased............................ 15,173 Accrued mortality and expense risk.......................... 37,055 ----------- Total liabilities........................................... 65,153 ----------- NET ASSETS ATTRIBUTABLE TO ANNUITY CONTRACTHOLDERS.......... $42,209,477 =========== ACCUMULATION UNITS.......................................... 1,346,851 =========== UNIT VALUE.................................................. $ 31.34 =========== INVESTMENTS, AT COST........................................ $39,939,482 ===========
See notes to financial statements. 12 DIVERSIFIED INVESTORS VARIABLE FUNDS CALVERT SUBACCOUNT STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006 INVESTMENT INCOME (NOTE 2): Dividend income............................................. $1,672,807 EXPENSES (NOTE 4): Mortality and expense risk.................................. 455,264 ---------- NET INVESTMENT INCOME (LOSS)................................ 1,217,543 ---------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 2): Net realized gains (losses) from securities................. (400,182) Change in net unrealized appreciation (depreciation) on securities................................................ 2,207,136 ---------- Net realized and unrealized gains (losses) on investments... 1,806,954 ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $3,024,497 ==========
See notes to financial statements. 13 DIVERSIFIED INVESTORS VARIABLE FUNDS CALVERT SUBACCOUNT STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, ------------------------- 2006 2005 ----------- ----------- FROM OPERATIONS: Net investment income (loss)................................ $ 1,217,543 $ 298,072 Net realized gains (losses) from securities................. (400,182) (273,588) Change in net unrealized appreciation (depreciation) on securities................................................ 2,207,136 1,788,103 ----------- ----------- Net increase (decrease) in net assets resulting from operations................................................ 3,024,497 1,812,587 ----------- ----------- FROM UNIT TRANSACTIONS (NOTE 5): Units sold.................................................. 5,358,290 6,411,494 Units redeemed.............................................. (8,439,577) (6,302,427) ----------- ----------- Net increase (decrease) in net assets from unit transactions.............................................. (3,081,287) 109,067 ----------- ----------- Total increase (decrease) in net assets..................... (56,790) 1,921,654 NET ASSETS: Beginning of year........................................... 42,266,267 40,344,613 ----------- ----------- End of year................................................. $42,209,477 $42,266,267 =========== =========== Units outstanding beginning of year......................... 1,451,064 1,447,441 Units sold.................................................. 180,528 227,718 Units redeemed.............................................. (284,741) (224,095) ----------- ----------- Units outstanding end of year............................... 1,346,851 1,451,064 =========== ===========
See notes to financial statements. 14 DIVERSIFIED INVESTORS VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND BUSINESS Diversified Investors Variable Funds (individually, a "Subaccount" and collectively, the "DIVF") is a separate investment account established on November 30, 1993, by Transamerica Financial Life Insurance Company, Inc. ("TFLIC"), a wholly-owned subsidiary of AEGON USA, Inc. ("AEGON"), under the laws of the State of New York. AEGON is a financial services holding company whose primary emphasis is life and health insurance and annuity and investment products. AEGON is an indirect, wholly-owned subsidiary of AEGON NV, a corporation based in the Netherlands which is a publicly traded international insurance group. DIVF operates as a unit investment trust under the Investment Company Act of 1940, as amended. DIVF holds assets that are segregated from all of TFLIC's other assets and, at present, is used as an investment vehicle under certain tax-deferred annuity contracts issued by TFLIC to fund retirement plans maintained by certain not-for-profit and other organizations ("Group Plans"). TFLIC is the legal holder of the assets in DIVF. DIVF commenced operations on August 18, 1994. There are currently thirteen Subaccounts within DIVF which are available to contractholders of Group Plans. Twelve of the Subaccounts invest in a corresponding portfolio of Diversified Investors Portfolios (the "Portfolios"). The thirteenth Subaccount is a fund of fund and invests in the Calvert Social Balanced Portfolio, a series of Calvert Variable Series, Inc. ("Calvert"). The financial statements of the Portfolios and Calvert accompany this report. At December 31, 2006, each of the DIVF Subaccounts' investment in the corresponding Portfolios was as follows:
PERCENTAGE INVESTMENT SUBACCOUNT IN PORTFOLIO - ---------- --------------------- Money Market................................................ 4.18 High Quality Bond........................................... 3.35 Intermediate Government Bond................................ 16.33 Core Bond................................................... 3.02 High Yield Bond............................................. 1.18 Balanced.................................................... 21.86 Value & Income.............................................. 11.05 Growth & Income............................................. 12.13 Equity Growth............................................... 7.75 Aggressive Equity........................................... 15.22 Special Equity.............................................. 10.62 International Equity........................................ 5.22
For information regarding each Portfolio's investments, please refer to the Portfolio Composition section of the Portfolios' financial statements or Calvert's investments in the Asset Allocation section of Calvert's financial statements which accompany this report. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by DIVF in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America. 15 DIVERSIFIED INVESTORS VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. INVESTMENTS: The investment by DIVF in the Portfolios reflects DIVF's proportionate interest in the net assets of the Portfolios. Valuation of securities held in each of the Portfolios is discussed in Note 2A of the Portfolios' Notes to Financial Statements which accompanies this report. The Calvert Subaccount is valued at the net asset value per share determined as of the close of business of the New York Stock Exchange (typically, 4:00 P.M. Eastern time) on the valuation date. A description of the portfolio valuation policy for Calvert can be found in Note A of Calvert's Notes to Financial Statements which accompanies this report. B. INVESTMENT INCOME: Each DIVF Subaccount, except the Calvert Subaccount, is allocated its share of income and expenses of its corresponding Portfolio. All of the investment income and expenses and realized and unrealized gains and losses from the security transactions of the corresponding Portfolio are allocated pro rata among the investors and are recorded by the Subaccounts on a daily basis. For the Calvert Subaccount, dividend income is recorded on the ex-dividend date and realized gains and losses from the sale of investments are determined on the basis of identified cost. C. FEDERAL INCOME TAXES: The operations of DIVF form a part of, and are taxed with, the operations of TFLIC. TFLIC does not expect, based upon current tax law, to incur any income tax upon the earnings or realized capital gains attributable to DIVF. Based upon this expectation, no charges are currently being deducted from DIVF for federal income tax purposes. D. OTHER: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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. 3. INVESTMENT TRANSACTIONS Purchases and sales of shares in Calvert were $3,318,231 and $5,183,352 respectively. 4. FEES AND TRANSACTIONS WITH AFFILIATES All Subaccounts, except the Calvert Subaccount, purchase interests in the Portfolios. The net assets of those Subaccounts reflect the investment management fee charged by Diversified Investment Advisors, Inc. ("Diversified") (an affiliate of TFLIC), the investment advisor, which provides investment advice and related services to the Portfolios. Diversified is an indirect, wholly-owned subsidiary of AEGON. TFLIC reserves the right to deduct an annual contract charge from a participant's account to reimburse TFLIC for administrative expenses relating to the maintenance of the group variable annuity contracts. TFLIC has no present intention to impose such a charge but may do so in the future. Any such annual charge will not exceed $50. 16 DIVERSIFIED INVESTORS VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED) Daily charges to DIVF for mortality and expense risks assumed by TFLIC were computed at an annual rate of 1.10%; however, TFLIC reserves the right to charge maximum fees of 1.25% upon written notice. 5. GROUP PLAN ASSUMPTIONS On December 31, 1993, TFLIC entered into an agreement with MONY Life Insurance Company ("MONY") pursuant to which certain contracts issued by MONY to Group Plans may be transferred through assumption reinsurance to TFLIC subject to receipt of any necessary state insurance department approvals and authorizations. The assumption reinsurance of any Group Plan to TFLIC will result in the transfer of the applicable assets out of a corresponding MONY separate account and into DIVF. There were no assets transferred to TFLIC pursuant to this assumption reinsurance agreement for the years ended December 31, 2006 and December 31, 2005. The amounts related to assumptions, if any, would be reflected in the net proceeds from units sold in the Statements of Changes in Net Assets. 6. PORTFOLIO INVESTMENTS Calvert invests in the Calvert Social Balanced Portfolio. At December 31, 2006, it holds 20,811,100 shares with a market value of $42,246,532. 7. LEGAL AND REGULATORY MATTERS Diversified Investors Securities Corp. ("DISC") is the distributor for each of the Subaccounts and a subsidiary of the Series Portfolio's investment advisor, Diversified Investment Advisors, Inc. ("DIA"). On February 18, 2005, DISC was notified by NASD Staff that it had made a preliminary determination to recommend disciplinary action against DISC regarding certain matters. In February 2006, DISC settled an administrative proceeding with the NASD regarding agreements with two customers who were permitted to engage in market timing activity in the Diversified Investors International Equity Fund from July 1, 2003 through October 24, 2003. The settlement also addressed alleged deficiencies in DISC's procedures relating to the retention of e-mail communications. Under the terms of the Letter of Acceptance, Waiver and Consent ("AWC") with the NASD, under which DISC neither admitted nor denied the allegations or findings, DISC consented to the following sanctions: (i) censure; (ii) a fine of $1.3 million; (iii) restitution of approximately $949,011 to the Diversified International Equity Portfolio for losses attributable to the trading described in the AWC; and (iv) agreement to make certifications to the NASD regarding the review and establishment of procedures relating to e-mail retention and to the enforcement of the Funds' policies and procedures relating to market timing. The restitution payment of $949,011 referred to above was made on February 14, 2006. DISC and DIA have also responded to requests for information from various governmental and self-regulatory agencies in connection with investigations related to mutual fund trading activities. DISC and DIA have cooperated fully with each request. Although it is not anticipated that these developments will have an adverse effect on the Subaccounts, there can be no assurance at this time. 8. CONCENTRATIONS AND INDEMNIFICATIONS From time to time, the DIVF may have a concentration of several unitholders holding a significant percentage of units outstanding. Investment activities of these unitholders could have a material impact on DIVF. In the normal course of business, DIVF enter into contracts that contain a variety of representations and warranties which provide general indemnifications. DIVF's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against DIVF that have not yet occurred. However, based on experience, DIVF expects the risk of loss to be remote. 17 DIVERSIFIED INVESTORS VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 9. FINANCIAL HIGHLIGHTS For an accumulation unit outstanding throughout the year:
INCOME (LOSS) FROM INVESTMENT OPERATIONS ---------------------------- NET NET REALIZED TOTAL INCOME UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM BEGINNING INCOME GAINS (LOSSES) INVESTMENT UNIT VALUE, FOR THE YEAR ENDED OF YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS END OF YEAR - ------------------ ------------ ---------- -------------- ------------ ----------- MONEY MARKET 12/31/2006......................... $19.29 $0.72 $ 0.00(c) $ 0.72 $20.01 12/31/2005......................... 18.91 0.38 (0.00)(c) 0.38 19.29 12/31/2004......................... 18.84 0.06 0.01 0.07 18.91 12/31/2003......................... 18.81 0.03 (0.00)(c) 0.03 18.84 12/31/2002......................... 18.67 0.15 (0.01) 0.14 18.81 HIGH QUALITY BOND 12/31/2006......................... 14.49 0.43 0.04 0.47 14.96 12/31/2005......................... 14.37 0.31 (0.19) 0.12 14.49 12/31/2004......................... 14.32 0.27 (0.22) 0.05 14.37 12/31/2003......................... 14.15 0.30 (0.13) 0.17 14.32 12/31/2002......................... 13.47 0.45 0.23 0.68 14.15 INTERMEDIATE GOVERNMENT BOND 12/31/2006......................... 20.08 0.69 (0.22) 0.47 20.55 12/31/2005......................... 20.03 0.46 (0.41) 0.05 20.08 12/31/2004......................... 19.94 0.27 (0.18) 0.09 20.03 12/31/2003......................... 19.84 0.36 (0.26) 0.10 19.94 12/31/2002......................... 18.52 0.54 0.78 1.32 19.84 CORE BOND 12/31/2006......................... 30.76 1.05 (0.11) 0.94 31.70 12/31/2005......................... 30.38 0.88 (0.50) 0.38 30.76 12/31/2004......................... 29.35 0.75 0.28 1.03 30.38 12/31/2003......................... 28.36 0.70 0.29 0.99 29.35 12/31/2002......................... 26.24 1.02 1.10 2.12 28.36 HIGH YIELD BOND 12/31/2006......................... 16.95 1.21 0.61 1.82 18.77 12/31/2005......................... 16.58 1.10 (0.73) 0.37 16.95 12/31/2004......................... 15.17 1.09 0.32 1.41 16.58 12/31/2003......................... 11.99 1.07 2.11 3.18 15.17 12/31/2002......................... 11.87 0.95 (0.83) 0.12 11.99 BALANCED 12/31/2006......................... 37.73 0.63 3.34 3.97 41.70 12/31/2005......................... 36.13 0.42 1.18 1.60 37.73 12/31/2004......................... 33.73 0.38 2.02 2.40 36.13 12/31/2003......................... 28.97 0.33 4.43 4.76 33.73 12/31/2002......................... 32.55 0.47 (4.05) (3.58) 28.97 VALUE & INCOME 12/31/2006......................... 53.20 0.21 10.10 10.31 63.51 12/31/2005......................... 50.32 0.14 2.74 2.88 53.20 12/31/2004......................... 45.06 0.32 4.94 5.26 50.32 12/31/2003......................... 36.00 0.32 8.74 9.06 45.06 12/31/2002......................... 42.95 0.34 (7.29) (6.95) 36.00
18
RATIOS TO AVERAGE NET ASSETS -------------------------------------------------------------------- EXPENSES, EXPENSES, INCLUDING EXPENSES NET NET INVESTMENT INCLUDING OF THE PORTFOLIO INVESTMENT INCOME (LOSS) NET ASSETS, TOTAL EXPENSES OF (NET OF INCOME (NET OF PORTFOLIO END OF YEAR RETURN THE PORTFOLIO REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER(B) ------------ ------ ------------- ------------------ ------------- --------------- ----------- $ 38,877,822 3.73% 1.38% 1.38% 3.67% 3.67% N/A 37,436,818 2.01 1.38 1.22 1.86 2.02 N/A 40,257,885 0.37 1.38 1.11 0.07 0.34 N/A 44,852,848 0.16 1.36 1.22 0.03 0.17 N/A 48,563,760 0.75 1.38 1.20 0.60 0.78 N/A 27,323,090 3.24 1.48 1.48 2.93 2.93 55% 24,256,968 0.84 1.49 1.49 2.15 2.15 58 24,415,487 0.35 1.48 1.48 1.86 1.86 48 25,677,769 1.20 1.48 1.48 2.10 2.10 50 21,846,053 5.05 1.48 1.48 3.27 3.27 54 24,574,845 2.34 1.51 1.50(d) 3.43 3.44 525 25,686,754 0.25 1.50 1.50 2.32 2.32 756 29,408,757 0.45 1.52 1.50(d) 1.35 1.37 554 34,530,489 0.50 1.49 1.49 1.79 1.79 392 43,274,632 7.13 1.49 1.49 2.81 2.81 134 62,716,385 3.06 1.48 1.48 3.40 3.40 487(e) 65,818,291 1.25 1.49 1.49 2.89 2.89 1003(e) 61,849,725 3.51 1.49 1.49 2.52 2.52 885(e) 63,545,946 3.49 1.49 1.49(d) 2.43 2.43 922(e) 54,824,483 8.08 1.49 1.49 3.78 3.78 462 5,928,086 10.74 1.69 1.69 6.78 6.78 93 4,346,735 2.23 1.70 1.70 6.63 6.63 68 4,589,510 9.29 1.70 1.70(d) 6.97 6.97 80 4,091,738 26.52 1.71 1.70(d) 8.02 8.03 136 5,221,809 1.01 1.71 1.70 8.04 8.05 95 83,326,221 10.52 1.63 1.60(d) 1.60 1.63 224(e) 83,033,115 4.43 1.64 1.60(d) 1.11 1.15 367(e) 88,578,165 7.12 1.62 1.60(d) 1.09 1.11 338(e) 89,699,459 16.43 1.61 1.60(d) 1.05 1.06 377(e) 79,573,766 (11.00) 1.62 1.60(d) 1.53 1.55 289 390,668,431 19.38 1.58 1.58 0.37 0.37 31 351,314,842 5.72 1.58 1.58 0.28 0.28 89 347,289,408 11.67 1.58 1.58 0.68 0.68 44 317,902,738 25.17 1.57 1.57 0.82 0.82 70 259,445,696 (16.18) 1.58 1.58 0.86 0.86 31
19 DIVERSIFIED INVESTORS VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 9. FINANCIAL HIGHLIGHTS (CONTINUED) For an accumulation unit outstanding throughout the year:
INCOME (LOSS) FROM INVESTMENT OPERATIONS ---------------------------- NET NET REALIZED TOTAL INCOME UNIT VALUE, INVESTMENT AND UNREALIZED (LOSS) FROM BEGINNING INCOME GAINS (LOSSES) INVESTMENT UNIT VALUE, FOR THE YEAR ENDED OF YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS END OF YEAR - ------------------ ----------- ---------- -------------- ------------ ----------- GROWTH & INCOME 12/31/2006.......................... $25.61 $ 0.00(c) $ 2.71 $ 2.71 $28.32 12/31/2005.......................... 24.17 (0.04) 1.48 1.44 25.61 12/31/2004.......................... 22.06 0.03 2.08 2.11 24.17 12/31/2003.......................... 17.96 (0.02) 4.12 4.10 22.06 12/31/2002.......................... 23.46 (0.07) (5.43) (5.50) 17.96 EQUITY GROWTH 12/31/2006.......................... 49.51 (0.33) 1.81 1.48 50.99 12/31/2005.......................... 46.70 (0.35) 3.16 2.81 49.51 12/31/2004.......................... 43.82 (0.20) 3.08 2.88 46.70 12/31/2003.......................... 35.00 (0.28) 9.10 8.82 43.82 12/31/2002.......................... 46.26 (0.29) (10.97) (11.26) 35.00 AGGRESSIVE EQUITY 12/31/2006.......................... 15.52 (0.20) 1.02 0.82 16.34 12/31/2005.......................... 14.50 (0.18) 1.20 1.02 15.52 12/31/2004.......................... 13.08 (0.21) 1.63 1.42 14.50 12/31/2003.......................... 10.32 (0.20) 2.96 2.76 13.08 12/31/2002.......................... 14.21 (0.20) (3.69) (3.89) 10.32 SPECIAL EQUITY 12/31/2006.......................... 35.46 (0.30) 4.04 3.74 39.20 12/31/2005.......................... 32.43 (0.33) 3.36 3.03 35.46 12/31/2004.......................... 29.11 (0.28) 3.60 3.32 32.43 12/31/2003.......................... 20.44 (0.27) 8.94 8.67 29.11 12/31/2002.......................... 27.32 (0.25) (6.63) (6.88) 20.44 INTERNATIONAL EQUITY 12/31/2006.......................... 21.15 0.16 5.33 5.49 26.64 12/31/2005.......................... 19.23 0.18 1.74 1.92 21.15 12/31/2004.......................... 16.25 0.13 2.85 2.98 19.23 12/31/2003.......................... 12.30 0.00(c) 3.95 3.95 16.25 12/31/2002.......................... 14.97 (0.04) (2.63) (2.67) 12.30 CALVERT 12/31/2006.......................... 29.13 0.87 1.34 2.21 31.34 12/31/2005.......................... 27.87 0.21 1.05 1.26 29.13 12/31/2004.......................... 26.03 0.17 1.67 1.84 27.87 12/31/2003.......................... 22.05 0.20 3.78 3.98 26.03 12/31/2002.......................... 25.38 0.37 (3.70) (3.33) 22.05
- --------------- (a) Calculated based upon average units outstanding. (b) Portfolio turnover of the Portfolio or Calvert. (c) Amount rounds to less than one penny per share. (d) Includes reimbursement of fees at the underlying Portfolio level. (e) Includes the effect of buying and selling TBA securities used in dollar roll transactions at the underlying Portfolio level. Refer to Note 2I of the Portfolio's Notes to Financial Statements, which accompany this report. (f) Ratios exclude expenses incurred by the Calvert Social Balanced Portfolio. 20
RATIOS TO AVERAGE NET ASSETS -------------------------------------------------------------------- EXPENSES, EXPENSES, INCLUDING EXPENSES NET NET INVESTMENT INCLUDING OF THE PORTFOLIO INVESTMENT INCOME (LOSS) NET ASSETS, TOTAL EXPENSES OF (NET OF INCOME (NET OF PORTFOLIO END OF YEAR RETURN THE PORTFOLIO REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER(B) ------------ ------ ------------- ------------------ ------------- --------------- ----------- $140,391,412 10.58% 1.73% 1.73% 0.01% 0.01% 73% 138,464,877 5.96 1.74 1.74 (0.15) (0.15) 79 138,746,635 9.56 1.74 1.74 0.12 0.12 184 130,636,290 22.83 1.73 1.73(d) (0.08) (0.08) 100 100,189,150 (23.44) 1.76 1.75(d) (0.33) (0.32) 115 195,516,920 2.99 1.74 1.74 (0.68) (0.68) 84 215,242,250 6.02 1.75 1.75 (0.77) (0.77) 76 223,424,779 6.57 1.75 1.75 (0.45) (0.45) 129 223,128,369 25.20 1.75 1.70 (0.76) (0.71) 61 165,484,094 (24.34) 1.75 1.60 (0.89) (0.74) 75 58,214,262 5.28 1.91 1.90(d) (1.28) (1.27) 147 58,967,300 7.03 1.91 1.90(d) (1.25) (1.24) 187 59,338,284 10.86 2.06 2.05(d) (1.59) (1.58) 252 55,827,123 26.74 2.11 2.10(d) (1.72) (1.71) 165 42,349,073 (27.38) 2.11 2.10(d) (1.70) (1.69) 87 128,583,223 10.55 1.95 1.95 (0.81) (0.81) 86 124,114,856 9.34 1.95 1.95(d) (1.01) (1.01) 92 117,314,916 11.41 1.94 1.94 (0.95) (0.95) 103 105,781,184 42.42 1.95 1.95(d) (1.13) (1.13) 103 69,607,014 (25.18) 1.95 1.95 (1.06) (1.06) 109 109,678,608 25.96 1.97 1.97(d) 0.67 0.67 81 80,820,048 9.98 1.98 1.98(d) 0.95 0.95 94 73,788,460 18.34 1.97 1.97 0.75 0.75 171 60,723,598 32.11 1.97 1.97(d) 0.03 0.03 23 47,525,206 (17.84) 1.98 1.98 (0.26) (0.26) 25 42,209,477 7.59 1.10(f) 1.10(f) 2.94 2.94 8 42,266,267 4.52 1.10(f) 1.10(f) 0.73 0.73 7 40,344,613 7.07 1.10(f) 1.10(f) 0.65 0.65 8 36,545,466 18.05 2.03 2.03 0.86 0.86 374 30,880,782 (13.12) 2.01 2.01 0.69 0.69 552
21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Transamerica Financial Life Insurance Company, Inc. and the Contractholders of Diversified Investors Variable Funds: In our opinion, the accompanying statements of assets and liabilities 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 the Money Market, High Quality Bond, Intermediate Government Bond, Core Bond, High Yield Bond, Balanced, Value & Income, Growth & Income, Equity Growth, Aggressive Equity, Special Equity, International Equity, and Calvert Subaccounts; (constituting the Diversified Investors Variable Funds, hereafter referred to as the "Funds") at December 31, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with 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 Funds' 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 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, 2006 by correspondence with the transfer agent, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York February 28, 2007 22 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS AN EXPLANATION OF FUND EXPENSES (UNAUDITED) As a unitholder in an open-end management investment company (a "Fund") invested in underlying subaccounts of the Diversified Investors Variable Funds ("DIVF"), a unit investment trust, you will bear the ongoing costs of managing the corresponding subaccounts in which your Fund invests. You will also bear the cost of operating the Fund. The first column in the table shown below assumes an investment of $1,000 on July 1, 2006. The second column will show your ending balance (per $1,000) on December 31, 2006. The third column will show how much of your investment (per $1,000) went to the ongoing costs of both your Fund and its investments in DIVF. The figures in both of these columns are based on the actual total return and the actual expenses incurred for the period July 1, 2006 -- December 31, 2006. In order to approximate how much you paid in expenses during the six months, divide your balance by 1,000, and multiply the result by the dollar amount shown under the heading "Expenses Paid During the Period July 1, 2006 -- December 31, 2006 (Based on actual returns and expenses)". The fourth and fifth columns will also show your ending balance (per $1,000) on December 31, 2006 and how much of your investment (per $1,000) went to the ongoing costs of both your Fund and its investments in DIVF, but assumes a total annual return rate of 5% before expenses. Since the 5% is hypothetical, the ending account values and the expenses paid for the period July 1, 2006 -- December 31, 2006 will not be the actual values per $1,000 of your investment. This information is presented so you may compare the cost of owning a Diversified Investors Strategic Variable Fund against the cost of owning other funds. Other funds should provide this information based on a hypothetical annual return of 5% before expenses in their most recent report in order for you to make a fair comparison.
----------------------------------------------------------- EXPENSES PAID ENDING ACCOUNT DURING THE PERIOD VALUE JULY 1, 2006 -- DECEMBER 31, 2006 DECEMBER 31, 2006 BEGINNING ACCOUNT (BASED ON ACTUAL (BASED ON ACTUAL VALUE RETURNS AND RETURNS AND FUND NAME JULY 1, 2006 EXPENSES) EXPENSES)(1)(2) - --------------------------------------------------------------------------------------- Short Horizon $1,000 $1,043.51 $1.02 - --------------------------------------------------------------------------------------- Intermediate Horizon $1,000 $1,071.25 $1.03 - --------------------------------------------------------------------------------------- Intermediate Long $1,000 $1,084.75 $1.04 Horizon - --------------------------------------------------------------------------------------- ---------------------------------------------------- EXPENSES PAID ENDING ACCOUNT DURING THE PERIOD VALUE JULY 1, 2006 -- DECEMBER 31, 2006 DECEMBER 31, 2006 (BASED ON (BASED ON HYPOTHETICAL 5% HYPOTHETICAL 5% ANNUAL RETURNS ANNUAL RETURNS ANNUALIZED BEFORE ACTUAL BEFORE ACTUAL EXPENSE FUND NAME EXPENSES) EXPENSES)(1)(2) RATIO(1) - ------------------------------------------------------------------------------ Short Horizon $1,023.93 $1.01 0.20% - ------------------------------------------------------------------------------ Intermediate Horizon $1,023.93 $1.01 0.20% - ------------------------------------------------------------------------------ Intermediate Long $1,023.93 $1.01 0.20% Horizon - ------------------------------------------------------------------------------
(1) These figures exclude fees and expenses of the underlying investments in DIVF. (2) Expenses are equal to each Fund's annualized expense ratio multiplied by the average account value over the period, divided by 365, multiplied by 182 (to reflect the one-half year period). 23 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2006
SHORT INTERMEDIATE INTERMEDIATE HORIZON HORIZON LONG HORIZON STRATEGIC STRATEGIC STRATEGIC VARIABLE FUND VARIABLE FUND VARIABLE FUND ------------- ------------- ------------- ASSETS: Investments in affiliates, at value (Notes 1 and 2)...... $10,206,579 $29,960,976 $47,300,976 Receivable for securities sold........................... 60,818 -- -- Receivable for units sold................................ 7,140 46,547 209,299 ----------- ----------- ----------- Total assets............................................. 10,274,537 30,007,523 47,510,275 ----------- ----------- ----------- LIABILITIES: Payable for securities purchased......................... 31,030 41,379 198,638 Payable for units redeemed............................... 36,928 5,168 10,661 Accrued investment advisory fees......................... 1,667 4,769 7,499 ----------- ----------- ----------- Total liabilities........................................ 69,625 51,316 216,798 ----------- ----------- ----------- NET ASSETS............................................... $10,204,912 $29,956,207 $47,293,477 =========== =========== =========== Accumulation units....................................... 654,393 1,717,863 2,548,307 =========== =========== =========== UNIT VALUE............................................... $ 15.59 $ 17.44 $ 18.56 =========== =========== =========== NET ASSETS CONSIST OF: Cost of accumulation units............................... $ 7,850,307 $21,699,647 $34,766,316 Undistributed (accumulated) net realized gains (losses)............................................... 1,396,699 2,760,223 3,269,679 Undistributed (accumulated) net investment income (loss)................................................. (121,959) (369,181) (502,005) Net unrealized appreciation (depreciation) on investments............................................ 1,079,865 5,865,518 9,759,487 ----------- ----------- ----------- NET ASSETS............................................... $10,204,912 $29,956,207 $47,293,477 =========== =========== =========== INVESTMENTS IN AFFILIATES, AT COST....................... $ 9,126,714 $24,095,458 $37,541,489 =========== =========== ===========
See notes to financial statements. 24 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006
SHORT INTERMEDIATE INTERMEDIATE HORIZON HORIZON LONG HORIZON STRATEGIC STRATEGIC STRATEGIC VARIABLE FUND VARIABLE FUND VARIABLE FUND ------------- ------------- ------------- INVESTMENT ADVISORY FEES (NOTE 3)........................ $(21,116) $ (58,249) $ (91,328) -------- ---------- ---------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS IN AFFILIATES (NOTE 2): Net realized gains (losses) on investments in affiliates............................................. 577,976 778,609 1,483,061 Change in net unrealized appreciation (depreciation) on investments in affiliates.............................. (89,554) 1,607,120 3,049,486 -------- ---------- ---------- Net realized and unrealized gains (losses) on investments in affiliates.......................................... 488,422 2,385,729 4,532,547 -------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................. $467,306 $2,327,480 $4,441,219 ======== ========== ==========
See notes to financial statements. 25 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2006
SHORT INTERMEDIATE INTERMEDIATE HORIZON HORIZON LONG HORIZON STRATEGIC STRATEGIC STRATEGIC VARIABLE FUND VARIABLE FUND VARIABLE FUND ------------- ------------- ------------- FROM OPERATIONS: Investment advisory fees.................................... $ (21,116) $ (58,249) $ (91,328) Net realized gains (losses) on investments in affiliates.... 577,976 778,609 1,483,061 Change in net unrealized appreciation (depreciation) on investments in affiliates................................. (89,554) 1,607,120 3,049,486 ----------- ----------- ------------ Net increase (decrease) in net assets resulting from operations................................................ 467,306 2,327,480 4,441,219 ----------- ----------- ------------ FROM UNIT TRANSACTIONS: Units sold.................................................. 3,665,902 7,153,984 9,813,099 Units redeemed.............................................. (5,502,368) (8,806,580) (12,402,021) ----------- ----------- ------------ Net increase (decrease) in net assets resulting from unit transactions.............................................. (1,836,466) (1,652,596) (2,588,922) ----------- ----------- ------------ Total increase (decrease) in net assets..................... (1,369,160) 674,884 1,852,297 NET ASSETS: Beginning of year........................................... 11,574,072 29,281,323 45,441,180 ----------- ----------- ------------ End of year................................................. $10,204,912 $29,956,207 $ 47,293,477 =========== =========== ============ Units outstanding beginning of year......................... 776,216 1,817,622 2,694,280 Units sold.................................................. 242,449 432,083 564,861 Units redeemed.............................................. (364,272) (531,842) (710,834) ----------- ----------- ------------ Units outstanding end of year............................... 654,393 1,717,863 2,548,307 =========== =========== ============
See notes to financial statements. 26 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2005
SHORT INTERMEDIATE INTERMEDIATE HORIZON HORIZON LONG HORIZON STRATEGIC STRATEGIC STRATEGIC VARIABLE FUND VARIABLE FUND VARIABLE FUND ------------- ------------- ------------- FROM OPERATIONS: Investment advisory fees.................................... $ (21,104) $ (56,662) $ (82,965) Net realized gains (losses) on investments in affiliates.... 107,702 11,318 332,033 Change in net unrealized appreciation (depreciation) on investments in affiliates................................. 82,296 1,152,015 1,869,113 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations................................................ 168,894 1,106,671 2,118,181 ----------- ----------- ----------- FROM UNIT TRANSACTIONS: Units sold.................................................. 5,106,113 6,857,218 10,967,621 Units redeemed.............................................. (3,892,234) (7,402,589) (7,767,095) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions.............................................. 1,213,879 (545,371) 3,200,526 ----------- ----------- ----------- Total increase (decrease) in net assets..................... 1,382,773 561,300 5,318,707 NET ASSETS: Beginning of year........................................... 10,191,299 28,720,023 40,122,473 ----------- ----------- ----------- End of year................................................. $11,574,072 $29,281,323 $45,441,180 =========== =========== =========== Units outstanding beginning of year......................... 694,223 1,853,382 2,497,752 Units sold.................................................. 346,649 441,480 680,542 Units redeemed.............................................. (264,656) (477,240) (484,014) ----------- ----------- ----------- Units outstanding end of year............................... 776,216 1,817,622 2,694,280 =========== =========== ===========
See notes to financial statements. 27 SHORT HORIZON STRATEGIC VARIABLE FUND PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE - ------ ----------- INVESTMENTS 175,694 Diversified Investors Variable Funds -- Core Bond........... $ 5,568,686 6,857 Diversified Investors Variable Funds -- Equity Growth....... 349,649 5,508 Diversified Investors Variable Funds -- Growth & Income..... 155,981 169,024 Diversified Investors Variable Funds -- High Quality Bond... 2,529,201 50,848 Diversified Investors Variable Funds -- High Yield Bond..... 954,560 6,501 Diversified Investors Variable Funds -- International Equity.................................................... 173,222 1,275 Diversified Investors Variable Funds -- Money Market........ 25,516 2,249 Diversified Investors Variable Funds -- Special Equity...... 88,156 5,694 Diversified Investors Variable Funds -- Value & Income...... 361,608 ----------- Total Investments -- 100.0% (Cost $9,126,714)............... 10,206,579 Liabilities less other assets -- (0.0%)..................... (1,667) ----------- NET ASSETS -- 100.0%........................................ $10,204,912 =========== The aggregate cost of investments for federal income tax purposes at December 31, 2006 is $9,126,714. The following amount is based on cost for federal income tax purposes: Net unrealized appreciation................................. $ 1,079,865 ===========
See notes to financial statements. 28 INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE - ------ ----------- INVESTMENTS 266,362 Diversified Investors Variable Funds -- Core Bond........... $ 8,442,432 92,831 Diversified Investors Variable Funds -- Equity Growth....... 4,733,749 74,984 Diversified Investors Variable Funds -- Growth & Income..... 2,123,539 282,352 Diversified Investors Variable Funds -- High Quality Bond... 4,224,981 77,028 Diversified Investors Variable Funds -- High Yield Bond..... 1,446,033 89,877 Diversified Investors Variable Funds -- International Equity.................................................... 2,394,714 24,778 Diversified Investors Variable Funds -- Money Market........ 495,850 30,931 Diversified Investors Variable Funds -- Special Equity...... 1,212,549 76,954 Diversified Investors Variable Funds -- Value & Income...... 4,887,129 ----------- Total Investments -- 100.0% (Cost $24,095,458).............. 29,960,976 Liabilities less other assets -- (0.0%)..................... (4,769) ----------- NET ASSETS -- 100.0%........................................ $29,956,207 =========== The aggregate cost of investments for federal income tax purposes at December 31, 2006 is $24,095,458. The following amount is based on cost for federal income tax purposes: Net unrealized appreciation................................. $ 5,865,518 ===========
See notes to financial statements. 29 INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE - ------ ----------- INVESTMENTS 240,925 Diversified Investors Variable Funds -- Core Bond........... $ 7,636,182 203,842 Diversified Investors Variable Funds -- Equity Growth....... 10,394,613 163,941 Diversified Investors Variable Funds -- Growth & Income..... 4,642,795 255,340 Diversified Investors Variable Funds -- High Quality Bond... 3,820,782 69,726 Diversified Investors Variable Funds -- High Yield Bond..... 1,308,956 197,775 Diversified Investors Variable Funds -- International Equity.................................................... 5,269,567 43,902 Diversified Investors Variable Funds -- Money Market........ 878,537 67,178 Diversified Investors Variable Funds -- Special Equity...... 2,633,534 168,736 Diversified Investors Variable Funds -- Value & Income...... 10,716,010 ----------- Total Investments -- 100.0% (Cost $37,541,489).............. 47,300,976 Liabilities less other assets -- (0.0%)..................... (7,499) ----------- NET ASSETS -- 100.0%........................................ $47,293,477 =========== The aggregate cost of investments for federal income tax purposes at December 31, 2006 is $37,541,489. The following amount is based on cost for federal income tax purposes: Net unrealized appreciation................................. $ 9,759,487 ===========
See notes to financial statements. 30 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS PORTFOLIO COMPOSITION DECEMBER 31, 2006 The following charts summarize the portfolio composition of each Fund by asset type. SHORT HORIZON STRATEGIC VARIABLE FUND Money Market Fund........................................... 0.2% Fixed Income Funds.......................................... 88.7 Domestic Equity Funds....................................... 9.4 International Equity Funds.................................. 1.7 Liabilities less other assets............................... (0.0)* ----- 100.0% ===== INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND Money Market Fund........................................... 1.7% Fixed Income Funds.......................................... 47.1 Domestic Equity Funds....................................... 43.2 International Equity Funds.................................. 8.0 Liabilities less other assets............................... (0.0)* ----- 100.0% ===== INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND Money Market Fund........................................... 1.9% Fixed Income Funds.......................................... 27.0 Domestic Equity Funds....................................... 60.0 International Equity Funds.................................. 11.1 Liabilities less other assets............................... (0.0)* ----- 100.0% =====
- --------------- * Amount rounds to less than 0.05%. See notes to financial statements. 31 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION The Diversified Investors Strategic Variable Funds (the "Separate Account"), a separate account of Transamerica Financial Life Insurance Company ("TFLIC"), is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a management investment company. The Separate Account is composed of three different subaccounts that are, in effect, separate investment funds: Short Horizon Strategic Variable Fund ("Short Horizon"), Intermediate Horizon Strategic Variable Fund ( "Intermediate Long Horizon"), and Intermediate Long Horizon Strategic Variable Fund ("Intermediate Long Horizon") (individually, a "Subaccount" and collectively, the "Subaccounts"). The Separate Account established and designated each of the Subaccounts as separate subaccounts on April 15, 1996 and commenced operations on January 2, 1997. Each Subaccount seeks to achieve its investment objective by investing all of its investable assets among certain Diversified Investors Variable Funds ("DIVF"). DIVF is a separate investment account offering thirteen subaccounts, each with a different investment objective. DIVF seeks to achieve its investment objective by investing all of its investable assets in the Series Portfolios. The financial statements of DIVF, which commenced operations on August 18, 1994, accompany this report. DIVF commenced operations August 18, 1994. DIVF operates as a unit investment trust under the 1940 Act. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Separate Account in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America. A. INVESTMENT VALUATION: The value of each Subaccount's investment in a corresponding subaccount of DIVF is valued at the unit value per share determined as of the close of business of the New York Stock Exchange (typically, 4:00 P.M. Eastern time) on the valuation date. B. OPERATING EXPENSES: The Separate Account accounts separately for the assets, liabilities and operations of each Subaccount. Each Subaccount will indirectly bear its share of fees and expenses incurred by DIVF. C. FEDERAL INCOME TAXES: The operations of the Separate Account form a part of, and are taxed with, the operations of TFLIC, a wholly-owned subsidiary of AEGON USA, Inc. ("AEGON"). AEGON is a financial services holding company whose primary emphasis is life and health insurance and annuity and investment products. AEGON is an indirect, wholly-owned subsidiary of AEGON NV, a corporation based in the Netherlands which is a publicly traded international insurance group. TFLIC does not expect, based upon current tax law, to incur any income tax upon the earnings or realized capital gains attributable to the Separate Account. Based upon this expectation, no charges are currently being deducted from the Separate Account for federal income tax purposes. D. OTHER: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of 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. 32 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. FEES AND TRANSACTIONS WITH AFFILIATES The Separate Account has entered into an Investment Advisory Agreement with Diversified Investment Advisors, Inc. (the "Advisor"), an indirect, wholly-owned subsidiary of AEGON under which the Advisor provides general investment advice to each Subaccount. For providing these services and facilities and for bearing the related expenses, the Advisor receives a monthly fee from each Subaccount at an annual rate equal to 0.20% of the average daily net assets of each Subaccount. The Advisor is also advisor to DIVF. In addition, TFLIC deducts a mortality and expense risk charge at an annual rate equivalent to 1.10% of the average daily net assets from DIVF. TFLIC reserves the right to charge maximum fees of 1.25% upon notice. TFLIC bears sales distribution expenses and any other expenses in excess of the mortality and expense risk charge. TFLIC reserves the right to deduct an annual contract charge from a participant's account to reimburse TFLIC for administrative expenses relating to the maintenance of the group variable annuity contracts. TFLIC has no present intention to impose such a charge but may do so in the future. Any such annual charge will not exceed $50. Certain trustees and officers of the Separate Account are also directors, officers or employees of the Advisor or its affiliates. None of the non-independent trustees so affiliated receive compensation for services as trustees of the Separate Account. Similarly, none of the Separate Account's officers receive compensation from the Subaccounts. The independent trustees are also trustees of the affiliated Subaccounts for which they receive fees. 4. PURCHASES AND SALES OF INVESTMENTS The aggregate cost of investments purchased and proceeds from sales for the year ended December 31, 2006 were as follows:
COST OF PROCEEDS PURCHASES FROM SALES ----------- ----------- Short Horizon............................................... $ 9,143,728 $11,001,538 Intermediate Horizon........................................ 16,139,009 17,849,874 Intermediate Long Horizon................................... 28,694,838 31,375,004
5. LEGAL AND REGULATORY MATTERS Diversified Investors Securities Corp. ("DISC") is the distributor for each of the Subaccounts and a subsidiary of the Series Portfolio's investment advisor, Diversified Investment Advisors, Inc. ("DIA"). On February 18, 2005, DISC was notified by NASD Staff that it had made a preliminary determination to recommend disciplinary action against DISC regarding certain matters. In February 2006, DISC settled an administrative proceeding with the NASD regarding agreements with two customers who were permitted to engage in market timing activity in the Diversified Investors International Equity Fund from July 1, 2003 through October 24, 2003. The settlement also addressed alleged deficiencies in DISC's procedures relating to the retention of e-mail communications. Under the terms of the Letter of Acceptance, Waiver and Consent ("AWC") with the NASD, under which DISC neither admitted nor denied the allegations or findings, DISC consented to the following sanctions: (i) censure; (ii) a fine of $1.3 million; (iii) restitution of approximately $949,011 to the Diversified International Equity Fund for losses attributable to the trading described in the AWC; and (iv) agreement to make certifications to the NASD regarding the review and establishment of procedures relating to e-mail retention and to the enforcement of the Funds' policies and procedures relating to market timing. The restitution payment of $949,011 referred to above was made on February 14, 2006. 33 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. LEGAL AND REGULATORY MATTERS (CONTINUED) DISC and DIA have also responded to requests for information from various governmental and self-regulatory agencies in connection with investigations related to mutual fund trading activities. DISC and DIA have cooperated fully with each request. Although it is not anticipated that these developments will have an adverse effect on the Subaccounts, there can be no assurance at this time. 6. CONCENTRATIONS AND INDEMNIFICATIONS From time to time, the Subaccounts may have a concentration of several unitholders holding a significant percentage of units outstanding. Investment activities of these unitholders could have a material impact on the Subaccounts. In the normal course of business, the Subaccounts enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Subaccounts' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Subaccounts that have not yet occurred. However, based on experience, the Subaccounts expect the risk of loss to be remote. 7. PROXY VOTING POLICIES AND PROCEDURES (UNAUDITED) Since each Subaccount invests all its assets among DIVF which, in turn, invests all its assets in a corresponding portfolio of Diversified Investors Portfolios ("Portfolios"), the Subaccounts themselves do not vote on proxies. A description of the proxy voting policies and procedures is included in the Statement of Additional Information, which is available without charge, upon request: (i) by calling 1-800-755-5803; (ii) on the Advisor's website at www.divinvest.com (Click on the icon for Participants, then click on Fund Information, choose Investment Funds, click on a Fund, then click on the Fund Information tab) or (iii) on the SEC's website at www.sec.gov. In addition, the Portfolios are required to file Form N-PX, with its complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. The Portfolios' filing for the twelve months ended June 30, 2006 is available without charge, upon request. 8. QUARTERLY PORTFOLIOS (UNAUDITED) The Subaccounts will file their portfolios of investments for the first and third quarters (March 31 and September 30, respectively) with the SEC by May 30 and November 29, respectively, each year on Form N-Q. The Subaccounts' Form N-Q is available on the SEC's website at www.sec.gov. The Subaccounts' Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. For information on the operation of the SEC's Public Reference Room, call 1-800-SEC-0330. You may also obtain a copy of Form N-Q without charge, upon request, by calling 1-800-755-5803. Form N-Q for the corresponding Portfolios is also available without charge on the SEC website, at the SEC's Public Reference Room, or by calling 1-800-755-5803. 34 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 9. FINANCIAL HIGHLIGHTS For an accumulation unit outstanding throughout the year:
INCOME (LOSS) FROM INVESTMENT OPERATIONS --------------------------- NET TOTAL UNIT NET REALIZED AND INCOME UNIT NET FOR THE VALUE, INVESTMENT UNREALIZED (LOSS) FROM VALUE, ASSETS, YEAR BEGINNING INCOME GAINS (LOSSES) INVESTMENT END OF TOTAL END OF ENDED OF YEAR (LOSS)(A) ON INVESTMENTS OPERATIONS YEAR RETURN YEAR ------- --------- ---------- -------------- ----------- ------ ------ ----------- SHORT HORIZON STRATEGIC VARIABLE FUND 12/31/2006 $14.91 $(0.03) $ 0.71 $ 0.68 $15.59 4.56% $10,204,912 12/31/2005 14.68 (0.03) 0.26 0.23 14.91 1.57 11,574,072 12/31/2004 14.14 (0.03) 0.57 0.54 14.68 3.82 10,191,299 12/31/2003 13.34 (0.03) 0.83 0.80 14.14 6.00 10,505,127 12/31/2002 12.95 (0.03) 0.42 0.39 13.34 3.01 9,085,611 INTERMEDIATE HORIZON STRATEGIC VARIABLE FUND 12/31/2006 16.11 (0.03) 1.36 1.33 17.44 8.26 29,956,207 12/31/2005 15.50 (0.03) 0.64 0.61 16.11 3.94 29,281,323 12/31/2004 14.52 (0.03) 1.01 0.98 15.50 6.75 28,720,023 12/31/2003 12.58 (0.03) 1.97 1.94 14.52 15.42 25,770,371 12/31/2002 13.67 (0.03) (1.06) (1.09) 12.58 (7.97) 20,134,380 INTERMEDIATE LONG HORIZON STRATEGIC VARIABLE FUND 12/31/2006 16.87 (0.03) 1.72 1.69 18.56 10.02 47,293,477 12/31/2005 16.06 (0.03) 0.84 0.81 16.87 5.04 45,441,180 12/31/2004 14.83 (0.03) 1.26 1.23 16.06 8.29 40,122,473 12/31/2003 12.39 (0.03) 2.47 2.44 14.83 19.69 34,716,992 12/31/2002 14.28 (0.03) (1.86) (1.89) 12.39 (13.24) 23,622,845 RATIOS TO AVERAGE NET ASSETS --------------------- NET FOR THE INVESTMENT PORTFOLIO YEAR INCOME TURNOVER ENDED EXPENSES (LOSS) RATE ------- -------- ---------- --------- SHORT HORIZON STRATEG 12/31/2006 0.20% (0.20)% 86% 12/31/2005 0.20 (0.20) 46 12/31/2004 0.20 (0.20) 50 12/31/2003 0.20 (0.20) 109 12/31/2002 0.20 (0.20) 55 INTERMEDIATE HORIZON 12/31/2006 0.20 (0.20) 55 12/31/2005 0.20 (0.20) 29 12/31/2004 0.20 (0.20) 28 12/31/2003 0.20 (0.20) 87 12/31/2002 0.20 (0.20) 53 INTERMEDIATE LONG HOR 12/31/2006 0.20 (0.20) 63 12/31/2005 0.20 (0.20) 25 12/31/2004 0.20 (0.20) 34 12/31/2003 0.20 (0.20) 98 12/31/2002 0.20 (0.20) 49
- --------------- (a) Calculated based upon average units outstanding. 35 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. INVESTMENTS IN AFFILIATES The market value of investments in affiliates (as defined in the 1940 Act, "Affiliated Companies" are those in which the Trust is under common control with an affiliated entity) at December 31, 2006 totaled $10,206,579, $29,960,976 and $47,300,976 for Short Horizon, Intermediate Horizon, and Intermediate Long Horizon, respectively. Affiliates and the gain/(loss) from sales of affiliates are as follows:
BEGINNING UNITS UNITS ENDING PURCHASE SALE GAIN/(LOSS) UNITS PURCHASED SOLD UNITS COST COST ON SALES --------- --------- ------- ------- ----------- ----------- ----------- SHORT HORIZON - ------------- INVESTMENTS: Diversified Investors Variable Funds -- Core Bond................................. 204,779 12,309 41,394 175,694 $ 382,032 $ 1,036,998 $ 235,654 Diversified Investors Variable Funds -- Equity Growth............................. 8,396 854 2,393 6,857 40,830 93,352 24,451 Diversified Investors Variable Funds -- Growth & Income........................... 6,074 846 1,412 5,508 22,579 27,488 9,331 Diversified Investors Variable Funds -- High Quality Bond......................... 200,896 105,230 137,102 169,024 1,533,783 1,881,386 122,701 Diversified Investors Variable Funds -- High Yield Bond........................... 64,043 3,547 16,742 50,848 63,672 198,757 94,389 Diversified Investors Variable Funds -- International Equity...................... 9,375 798 3,672 6,501 18,803 48,141 36,368 Diversified Investors Variable Funds -- Money Market.............................. 1,639 359,122 359,486 1,275 7,030,093 7,036,199 4,446 Diversified Investors Variable Funds -- Special Equity............................ 2,114 730 595 2,249 27,611 13,800 8,287 Diversified Investors Variable Funds -- Value & Income............................ 7,590 417 2,313 5,694 24,325 87,441 42,349 ----------- ----------- ---------- $ 9,143,728 $10,423,562 $ 577,976 =========== =========== ==========
36 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. INVESTMENTS IN AFFILIATES (CONTINUED) Affiliates and the gain/(loss) from sales of affiliates are as follows:
BEGINNING UNITS UNITS ENDING PURCHASE SALE GAIN/(LOSS) UNITS PURCHASED SOLD UNITS COST COST ON SALES --------- --------- ------- ------- ----------- ----------- ----------- INTERMEDIATE HORIZON - -------------------------- INVESTMENTS: Diversified Investors Variable Funds -- Core Bond................................. 283,617 16,413 33,668 266,362 $ 504,171 $ 876,458 $ 169,424 Diversified Investors Variable Funds -- Equity Growth............................. 97,595 5,573 10,337 92,831 278,056 604,987 (88,793) Diversified Investors Variable Funds -- Growth & Income........................... 72,979 9,207 7,202 74,984 245,278 261,093 (69,668) Diversified Investors Variable Funds -- High Quality Bond......................... 278,399 182,154 178,201 282,352 2,659,642 2,375,825 229,697 Diversified Investors Variable Funds -- High Yield Bond........................... 86,378 4,781 14,131 77,028 84,029 172,167 78,183 Diversified Investors Variable Funds -- International Equity...................... 110,088 5,457 25,668 89,877 127,541 545,508 52,246 Diversified Investors Variable Funds -- Money Market.............................. 12,676 594,412 582,310 24,778 11,635,852 11,385,733 12,091 Diversified Investors Variable Funds -- Special Equity............................ 25,142 8,416 2,627 30,931 326,384 50,940 47,111 Diversified Investors Variable Funds -- Value & Income............................ 92,051 4,922 20,019 76,954 278,056 798,554 348,318 ----------- ----------- ---------- $16,139,009 $17,071,265 $ 778,609 =========== =========== ==========
BEGINNING UNITS UNITS ENDING PURCHASE SALE GAIN/(LOSS) UNITS PURCHASED SOLD UNITS COST COST ON SALES --------- --------- ------- ------- ----------- ----------- ----------- INTERMEDIATE LONG HORIZON - -------------------- INVESTMENTS: Diversified Investors Variable Funds -- Core Bond................................. 265,730 19,733 44,538 240,925 $ 609,898 $ 1,149,212 $ 237,015 Diversified Investors Variable Funds -- Equity Growth............................. 208,165 16,540 20,863 203,842 797,938 1,287,198 (253,488) Diversified Investors Variable Funds -- Growth & Income........................... 155,172 26,941 18,172 163,941 714,403 553,339 (65,755) Diversified Investors Variable Funds -- High Quality Bond......................... 272,762 320,123 337,545 255,340 4,710,468 4,719,317 247,485 Diversified Investors Variable Funds -- High Yield Bond........................... 80,130 5,727 16,131 69,726 101,649 190,008 97,345 Diversified Investors Variable Funds -- International Equity...................... 231,422 16,020 49,667 197,775 373,390 774,942 389,592 Diversified Investors Variable Funds -- Money Market.............................. 28,795 1,010,862 995,755 43,902 19,856,944 19,536,264 21,755 Diversified Investors Variable Funds -- Special Equity............................ 52,317 19,018 4,157 67,178 732,210 82,931 71,347 Diversified Investors Variable Funds -- Value & Income............................ 195,045 14,061 40,370 168,736 797,938 1,598,732 737,765 ----------- ----------- ---------- $28,694,838 $29,891,943 $1,483,061 =========== =========== ==========
37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and the Contractholders of Diversified Investors Strategic Variable Funds: In our opinion, the accompanying statements of assets and liabilities, including the portfolios 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 the Short Horizon Strategic Variable Fund, Intermediate Horizon Strategic Variable Fund, and Intermediate Long Horizon Strategic Variable Fund; (constituting the Diversified Investors Strategic Variable Funds, hereafter referred to as the "Funds") at December 31, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with 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 Funds' 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 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, 2006 by correspondence with the transfer agent, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York February 28, 2007 38 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS APPROVAL OF INVESTMENT ADVISORY CONTRACTS DECEMBER 31, 2006 (UNAUDITED) Diversified Investment Advisers, Inc. ("Diversified") manages the assets of each Subaccount pursuant to an Investment Advisory Agreement with Transamerica Financial Life Insurance Company ("TFLIC") with respect to such Subaccount. A discussion of the Managing Members' considerations and determinations with respect to the continuation of existing Investment Advisory Agreements between Diversified and TFLIC is included in the Subaccounts' Semi-Annual Report for such period. 39 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS TRUSTEES INFORMATION (UNAUDITED) Each Strategic Variable Fund is supervised by the Board of Trustees of the Diversified Investors Strategic Variable Funds. The respective Trustees and officers of each Subaccount and their principal occupations during the past five years are set forth below. Their titles may have varied during that period. Unless otherwise indicated, the address of each Trustee and officer of the Subaccounts is c/o Diversified Investment Advisors, Inc., Four Manhattanville Road, Purchase, New York 10577. Additional information about the Diversified Investors Trustees may be found in the Statement of Additional Information, which is available without charge upon request by calling 1-800-755-5801. OFFICERS AND INTERESTED TRUSTEES:
POSITION(S), LENGTH OF PRINCIPAL OCCUPATIONS DURING NAME AND AGE TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD - ------------ ---------------------- ----------------------------------- Elizabeth L. Belanger.................. Assistant Secretary 05/2005 to present -- Vice DOB: January 7, 1972 since 2005 President and Senior Counsel, Diversified Investment Advisors, Inc.; 11/2003 to 05/2005 -- Director of Compliance, Domini Social Investments LLC; 09/1997-10/2003 -- Associate, Bingham McCutchen LLP; 04/2006 to present -- Director, Transamerica Financial Life Insurance Company. Joseph P. Carusone..................... Treasurer since 2001 Vice President and Director, DOB: September 8, 1965 Diversified Investment Advisors, Inc.; 2004 to present -- Director, Transamerica Financial Life Insurance Company; 01/2007 to present -- President, Diversified Investors Securities Corp. Robert F. Colby........................ Secretary since 1993 Senior Vice President and General DOB: November 1, 1955 Counsel, Diversified Investment Advisors, Inc.; Vice President, Diversified Investors Securities Corp.; Vice President, Assistant Secretary, and Director, Transamerica Financial Life Insurance Company, Inc. Suzanne Montemurro..................... Assistant Treasurer Vice President and Director, DOB: August 13, 1964 since 2002 Diversified Investment Advisors, Inc. Mark Mullin............................ President since 2002 Chairman of the Board and Chief DOB: February 16, 1963 Trustee since 1998 Executive Officer, Diversified Investment Advisors, Inc.; 02/2002 to present -- Director, Transamerica Financial Life Insurance Company. Quedel Principal....................... Assistant Secretary Vice President and Senior Counsel, DOB: February 4, 1966 since 2004 Diversified Investment Advisors, Inc.; Director, Diversified Investors Securities Corp. Rick Resnik............................ Chief Compliance Chief Compliance Officer, DOB: January 24, 1967 Officer since 2004 Diversified Investment Advisors, Inc.; Director, Vice President, and Chief Compliance Officer, Diversified Investors Securities Corp.
40 DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS TRUSTEES INFORMATION (CONTINUED) (UNAUDITED) DISINTERESTED TRUSTEES:
POSITION(S), LENGTH OF PRINCIPAL OCCUPATIONS DURING NAME AND AGE TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD - ------------ ---------------------- ----------------------------------- Neal M. Jewell......................... Trustee since 1993 10/2004 to present -- Retired; DOB: February 12, 1935 01/1996 to 10/2004 -- Independent Trustee, EACM Select Managers Equity Fund Mitchell Johnson....................... Trustee since 2006 07/1994 to present -- Private DOB: March 1, 1942 Investor, MAJ Capital Management; 06/1996 to present -- Director, Federal Agriculture Mortgage Corporation; 02/2005 to present -- Trustee, Advisors Inner Circle Funds, Advisors Inner Circle Funds II, and Bishop Street Funds (family of mutual funds); 12/1997 to 02/2004 -- Trustee, Citizens Funds (family of mutual funds) Eugene M. Mannella..................... Trustee since 1993 1/2006 to present -- Consultant DOB: February 1, 1954 (self- employed); 08/1993 to 12/2005 -- President, International Fund Services, Inc. Joyce Galpern Norden................... Trustee since 1993 6/2004 to present -- Retired; DOB: June 1, 1939 09/1996 to 6/2004 -- Vice President, Institutional Advancement, Reconstructionist Rabbinical College Lowell W. Robinson..................... Trustee since 2006 12/2006 to present -- Chief DOB: January 20, 1949 Financial and Chief Administrative Officer, MIVA, Inc. (on-line direct marketing); 2004 to 2006 -- President, LWR Advisors LLC (consulting); 2002 to 2004 -- Special Counsel to the President, Polytechnic University; 2002 to 2004 -- Senior Executive Vice President and Chief Financial Officer, Hotjobs.com; 2004 to present -- Director, Jones Apparel Group; 2004 to present -- Director, International Wire Group, Inc.; 2004 to present -- Director, Independent Wireless One Corp.; 2002 to 2003 -- Director, Edison Schools, Inc. (school management) Patricia L. Sawyer..................... Trustee since 1993, President and Executive Search DOB: July 1, 1950 Chairperson of Audit Consultant, Smith & Sawyer LLC Committee since 2003
41 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW DECEMBER 31, 2006 (UNAUDITED) PLEASE NOTE THAT ANY PERFORMANCE FIGURES DISCUSSED BELOW REPRESENT PAST PERFORMANCE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. VISIT WWW.DIVINVEST.COM FOR PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH-END. THE RETURN PROVIDED FOR A PARTICULAR ISSUER HELD BY A SERIES REPRESENTS THE RETURN FROM THE SECURITY FOR THE ACTUAL PERIOD HELD BY THE SERIES, WHICH MAY BE SHORTER THAN THE TWELVE-MONTH REPORTING PERIOD. MONEY MARKET SERIES In 2006, the Money Market Series returned 4.86%, beating its benchmark, the Citigroup Treasury Bill 3-month Index, which returned 4.76%. The money market sector in general and our portfolio benefited from rising yields on Treasury Bills and Notes which mirrored the Federal Reserve raising the federal funds rate 100 basis points throughout 2006 to 5.25%. Additionally, the Series benefited from strategic duration positioning that took advantage of changes in Federal Reserve Monetary Policy and overall market sentiment throughout the year. From a sector perspective, the positions in corporate commercial paper (specifically extendable commercial notes) and asset-backed commercial paper contributed positively to performance. HIGH QUALITY BOND SERIES The High Quality Bond Series returned 4.38% for the year, outpacing the 3.96% return of the Merrill Lynch 1-3 Year Treasury Index and the 3.97% return of the Morningstar Short Term Bond Universe Median. The Series' yield component was the key driver of total return for 2006, representing about 85% of the total excess return versus the index, while spread tightening made up the remaining 15%. Given the rise in interest rates throughout the year, shorter-duration assets outperformed longer-duration assets. Therefore, securities with less than one-year duration contributed to the total return, while three-year-plus duration exposure detracted from performance. The commercial mortgage-backed sector was the best performer in terms of absolute total return, followed by the asset-backed, residential mortgage-backed, domestic corporate and agency sectors. Compared with a duration-neutral Treasury, the commercial mortgage-backed sector had the best excess returns, followed by the residential mortgage, corporate, asset-backed, and agency sectors. Lower than expected interest rate volatility during the year contributed to favorable performance in the residential mortgage sector. Despite negative headlines, the fixed-rate home equity sector was one of the top performers in the asset-backed segment. The combination of strong demand, a dearth of new issuance in the consumer asset-backed segment and good collateral performance kept spreads in the asset-backed sector at or near record tight levels throughout the year. The financial services sector performed well as a result of strong earnings. INTERMEDIATE GOVERNMENT BOND SERIES The Intermediate Government Bond Series returned 3.48% for the year, trailing the 3.84% return of the Lehman Brothers Intermediate Government Bond Index and the 3.97% return of the Morningstar Short Term Bond Universe Median. In the first half of 2006, the Series underperformed its benchmark due to incorrect yield curve positioning and an overweight in the agency mortgage-backed securities (MBS) sector. In the first quarter, the Series' manager expected the yield curve to flatten, as the Federal Reserve continued to increase 42 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) its short-term federal funds rate. After flattening the first few months of the year, however, the yield curve steepened dramatically due to higher interest rates, which were led by increased inflation. The Series' manager changed the yield curve trade position at a loss during the second quarter, which contributed to the Series underperforming the Index for that quarter. In addition to the Series' yield curve position, the Series' significant overweight in MBS detracted from performance. Agency MBS began 2006 as apparently one of the most attractive bond market sectors. Priced at a significant discount, the sector appeared to have an attractive yield advantage over comparable-maturity Treasury issues. For that reason, the Series' manager overweighted the sector, which paid off handsomely for the first six weeks of the year, but the Series' manager failed to take profits in late February and March, as MBS returns fell. As a result, the Series gave back much of its gains from this sector. Although yield spreads generally widened for most of the first half of 2006, the manager felt rates would likely come down in the second half of the year, and result in tight spreads. The Series' manager therefore expected the spread sectors -- commercial mortgage backed securities (CMBS), asset-backed securities (ABS), MBS and agency bonds -- to outperform Treasuries during the second half of the year. This strategy helped the Series from then on. The Series benefited from overweights in MBS and CMBS. The manager also added to returns with some tactical duration trades driven by their proprietary models. CORE BOND SERIES The Core Bond Series returned 4.17% for the year, trailing the 4.33% return of the Lehman Aggregate Bond Index but outperforming the 3.94% return of the Morningstar Intermediate Term Bond Universe. Interest rates across the yield curve were volatile during the past year. The 10-year Treasury yield ended the year at 4.70%, 31 basis points (0.31%) higher than a year earlier. During this period, however, the 10-year Treasury yield varied from 4.33% in January to a high of 5.25% in June. Over this period, the yield curve flattened, as yields at the shorter end of the curve rose. The spread between 2-year and 10-year Treasury yields was -11 basis points at year end. All component sectors of the Lehman Aggregate Bond Index outperformed duration-adjusted Treasuries during the year. The Series received a boost from its short duration position, its overweight to commercial mortgage-backed securities and its high yield allocation. However, the Series' underweight to corporate bonds and agency securities took away from performance, as both sectors outperformed Treasuries. The managers' mortgage security selection also detracted from performance. TOTAL RETURN BOND SERIES The Total Return Bond Series returned 4.96% for the year, exceeding the 4.33% return of the Lehman Brothers Aggregate Bond Index and the 3.94% return of the Morningstar Intermediate Term Bond Universe Median. Strategies produced mixed but generally positive results for the last quarter of the year. A long duration posture detracted from returns in the first half of the year, as interest rates rose more than expected, but the Series recovered most of those losses as rates declined in the second half. The Series' yield curve exposure was partly centered on the front end of the yield curve, which hurt results as short-term rates moved higher than expected. Overweight exposure to the mortgage-backed sector was a positive, thanks to tighter spreads and low volatility. An underweight to investment grade credits was a modest negative as the sector outperformed, but an overweight to lower-quality credits added to returns as they outperformed. A moderate exposure to Treasury inflation-protected securities hurt performance due to a weaker than expected inflation adjustment and a modest tightening of breakeven spreads. The Series' exposure to high-yield debt was rewarded as yield spreads narrowed, in particular on General Motors and Ford issues. A modest exposure to 43 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) emerging market debt added to returns. Non-dollar bond exposure contributed to returns as the manager's decision to retain some currency exposure benefited from a weak dollar, and the bond market selection was good. HIGH YIELD BOND SERIES The High Yield Bond Series returned 11.99% for the year, surpassing the 11.77% return of the Merrill Lynch High Yield Master II Index and the 9.93% return of the Morningstar High Yield Bond Universe Median. Credit selection was the driving force behind the Series' strong annual performance. Specific credits that contributed to performance were issues from health care company HCA, Inc. and telecommunications firm Adelphia. Underweight positions relative to the benchmark in issues from Ford and General Motors were a slight drag on performance. Bonds from these two companies performed strongly in 2006. Underweighted positions in health care, utilities, energy and technology detracted slightly from performance. However, strong credit selection within these sectors contributed to results. In general, the managers enjoyed good selection within these tough industries. Overweighted industries that contributed to performance versus the benchmark were building materials, gaming, publishing and retailing. The Series' emphasis on B-rated debt contributed to performance, as this credit sector outperformed BB debt. Underweighted ratings sectors also were top performers. BB bonds made up about 12% of the portfolio and returned 12%, while these comprised about 38% of the index and returned 9.6%. The Series' overall short duration positioning versus the benchmark hurt performance slightly. However, bonds with short duration (relative to the benchmark index) comprised about 17% of the portfolio and returned 10.1%. The benchmark had an allocation of only 3.7% to these bonds, which produced returns of 4.7%. BALANCED SERIES The Balanced Series returned 11.74% for the year, beating the 11.12% return of the hybrid benchmark; 60% S&P 500 Index and 40% Lehman Brothers Aggregate Index. The Series also outpaced the 11.12% return of the Morningstar Moderate Allocation Universe Median. Keeping pace with the benchmark was a welcome result in 2006 as it was a difficult year for actively managed funds as few matched the performance of U.S. equity indexes. Regarding the equity portion, returns to the investment themes were positive overall for 2006. Valuation was the biggest contributor to relative performance as inexpensive companies outperformed their more richly valued industry counterparts. Management impact, momentum and profitability also contributed positively to excess returns, albeit less significantly. On the downside, earnings quality detracted from relative returns, while analyst sentiment was essentially flat for the year. Among sectors, stock selection was positive overall for the year. The Series' holdings in the materials and information technology sectors outpaced their peers in the benchmark. Meanwhile, positions in the energy and healthcare sectors lagged their peers in the benchmark for the period. Regarding the fixed income portion, a long duration posture detracted from returns in the first half of the year as interest rates rose more than expected, but the Series recovered most of those losses as rates declined in the second half. A modestly bulleted yield curve exposure centered on the front end of the yield curve suffered as short-term rates moved higher than expected. Overweight exposure to the mortgage-backed sector was a 44 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) positive, thanks to tighter spreads and low volatility. Underweight exposure to investment grade credits was a modest negative as the sector outperformed, but an overweight to lower quality credits added to returns since they outperformed. A moderate exposure to Treasury inflation-protected securities detracted from performance due to a weaker than expected inflation adjustment for the period and a modest tightening of breakeven spreads. An emphasis on high-yield debt was substantially rewarded as spreads narrowed, in particular on General Motors and Ford issues. A modest exposure to emerging market debt added to returns as spreads tightened. Non-dollar bond exposure contributed positively to returns, as the decision to retain some currency exposure benefited from a weak dollar, and the foreign bond markets selected for the portfolio outperformed their domestic counterparts. VALUE & INCOME SERIES The Value & Income Series returned 20.68% for the year, short of the 22.25% return of the Russell 1000 Value Index but surpassing the 18.27% return of the Morningstar Large Value Universe Median. This was a difficult year for actively managed funds as a majority of them underperformed U.S. equity indexes. The main reason the Series trailed its large capitalization value benchmark was sector allocation. The Series had a substantial underweight position in energy stocks, which performed well, and a significant overweight allocation to the information technology sector, which had returns slightly below the overall market. The Series benefited somewhat from its sizeable underweight in financials, as that sector's returns were also a notch below the benchmark average. Stock selection overall was neutral, but that was largely because positive stock selection in the consumer discretionary sector was offset by negative results in health care. Also noteworthy was good stock selection in energy, which more than offset the Series' poor sector selection there. All benchmark sectors had double-digit gains for the year, with telecommunication services stocks leading the way, posting a gain of 39%. The Series' performance in, and allocation to, that sector were very close to the benchmark's. Underexposure to oil giant ExxonMobil Corp. (+39%) was the most significant detractor from the Series' relative performance. Although the stock's return was very solid, thanks to increased oil production and record high oil prices mid-year, the Series lost out relative to the benchmark by being substantially underweighted to Exxon. Drug maker Watson Pharmaceuticals (-20%) increased its revenues, but its profit declined mainly because of lower pricing for generic drugs. Trucking firm Con-way, Inc. (formerly CNF, Inc.) (-21%) saw business revenues and profits decline as the trucking industry was hurt generally by the housing-related economic slowdown. In addition, the firm lost market share in its core less-than-truckload business. Electronics manufacturing services provider Solectron (-12%) experienced a decline in profits due to increased competition and thin profit margins. Personal computer and printer maker Hewlett Packard Co. (+45%) had a good year, enjoying growth in its businesses and a reorganization that left it with a healthier balance sheet. VALUE SERIES The Value Series returned 15.44% for the year, lagging the 22.25% return of the Russell 1000 Value Index and the 18.27% return of the Morningstar Large Value Universe Median. This was a difficult year for actively managed funds as a majority of them underperformed U.S. equity indexes. The main reason the Series trailed its large capitalization value benchmark was stock selection. This was particularly true in the consumer discretionary and financials sectors. In the consumer discretionary sector, the Series completely missed out on the benchmark's 23% gain in this sector, as the Series' sector holdings had a negative return. In financials, the Series trailed the benchmark sector's returns by 6.8%. But this more modest underperformance had a major 45 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) impact, as the Series and benchmark have a high concentration of financial stocks -- a 28.6% weighting in the Series versus 36.6% in the benchmark. In the telecommunications services and energy sectors, substantial underperformance had less of an effect on overall Series returns because of small sector weightings. However, in energy, the Series also was significantly underweighted versus the benchmark, compounding the impact of stock selection. In information technology, a performance gap and an overweighted position in a poor performing sector took away from returns. The Series did have positive results in three sectors -- consumer staples, health care and materials. In consumer staples, good stock selection added to the benefit of overweighting a strong performing sector. In health care, the Series' underweighting of a relatively weak sector in which it had good stock selection helped the Series' performance relative to the index, but didn't do much for absolute returns. Very large positions in two of the worst performing stocks -- CA, Inc. (-19%) and Centex Corp. (-21%) -- had a major negative impact on performance. CA (formerly Computer Associates), which makes IT management software, had a difficult year as it encountered delays in bookings and had to bear the costs of a major restructuring and share buybacks. Shares of homebuilder Centex mirrored the decline of the housing market in 2006. Its net order fell almost 30% from the previous year. St. Joe Co. (-19%), a real estate operating company, was also hurt as the housing market languished. GROWTH & INCOME SERIES The Growth & Income Series returned 11.77% for the year, trailing the 15.79% return of the S&P 500 Index and the 14.31% return of the Morningstar Large Blend Universe Median. This was a tough year for actively managed funds as a majority of them underperformed U.S. equity indexes. Most of the Series' underperformance can be attributed to stock selection, which was most pronounced in the information technology, health care and consumer discretionary sectors. The Series felt this most strongly in the information technology sector, where an overweighted position magnified the impact. The energy sector also took away from relative returns as the Series lagged the benchmark sector there as well, to a lesser extent. The Series made up some ground against the index in the materials and financials sectors. In materials, the Series gained 33%, far surpassing the benchmark sector's 18.6% return. The Series' financial holdings outperformed the benchmark sector by a much more modest 1.1%, contributing to returns on a smaller scale. Flash storage device maker Sandisk Corp. (-32%) suffered from strong price competition and weakening product demand. Stock performance of Qualcomm, Inc. (-11%), which provides software for wireless voice and data communications, was held back by a legal battle with Nokia, its largest customer, over royalty payments. Diversified technology company Corning, Inc. (-5%) saw a decline in its shares as a result of weakness in its fiber optic business late in the year. Shares of oil giant ExxonMobil Corp. (39%) had their best year in a quarter century as the firm increased its oil production and crude oil prices hit an all-time high during the summer. Investment management company, Merrill Lynch & Co. Inc. (+39%), joined other Wall Street investment firms in posting strong revenue growth in 2006. EQUITY GROWTH SERIES The Equity Growth Series gained 4.12% for the year, trailing the 9.07% return of the Russell 1000 Growth Index and the 7.01% return of the Morningstar Large Growth Universe Median. This was a tough year for actively managed funds as a majority of them underperformed U.S. equity indexes. The Series underperformed its large capitalization growth benchmark primarily because of poor stock selection relative to 46 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) the index. This was most pronounced in the health care and information technology sectors, where a double-digit return differential between the Series' holdings and those in the benchmark sector had a major impact on overall return. Each of these sectors took about 3% off the Series' relative return. Also hurting performance to a lesser extent was a combination of poor sector allocation and weak stock selection in the energy and industrials sectors. On the positive side, the Series benefited from positive stock selection in the consumer discretionary and financials sectors. In both of these cases, the impact was heightened by an overweighted position in each sector versus the benchmark. Even stronger relative performance by the Series in the materials and telecommunications services was muted by having very slight exposure to these two sectors. Stock performance of Qualcomm, Inc. (-11%), which provides software for wireless voice and data communications, was held back by a legal battle with Nokia, its largest customer, over royalty payments. UnitedHealth Group, Inc. (-13%), a diversified health care management services company, was hurt by the need to adjust its profits as it corrected improper stock options grants. Flash storage device maker Sandisk Corp. (-32%) suffered from strong price competition and weakening product demand. Diversified technology company Corning, Inc. (-30%) saw a decline in its shares as a result of weakness in its fiber optic business late in the year. On the plus side, investment banking powerhouse Goldman Sachs Group (+57%) recorded strong earnings growth in almost all its businesses. Shares of casino resort owners Wynn Resorts Ltd. (+83%) and Las Vegas Sands Corp. (+79%) almost doubled. AGGRESSIVE EQUITY SERIES The Aggressive Equity Series gained 6.46% for the year, underperforming the 9.07% return of the Russell 1000 Growth Index and the 7.01% return of the Morningstar Large Growth Universe Median. This was a tough year for actively managed funds as a majority of them underperformed U.S. equity indexes. The Series lagged its large capitalization growth benchmark mainly because of weak stock selection relative to the index. Two sectors in particular had an impact -- health care and information technology. In both cases, weak stock selection was compounded to a degree by sector allocation. The impact of being 4.7% off the benchmark information technology sector's 6.9% return was magnified by the Series' large (36%) allocation to the sector. The Series also lost ground to the index in the consumer staples and energy sectors. In consumer staples, poor stock selection was partly countered by positive sector allocation -- the Series had a substantially underweighted position in a sector where its holdings lost 20.6%. In energy, the opposite was true. Very positive stock selection was more than negated by a sizeable underweight to the sector. In several sectors, the Series performed well, which limited the negative impact of the weaker sectors. Strong selection made a big difference in the financials sector, as the Series surpassed the benchmark sector's 17.4% return by 11.3%. This was added to by a slight overweight to financials. The same scenario was true, but to a modest degree, in the consumer discretionary sector. In industrials, solid stock selection (17% versus the benchmark sector's 11.3% return) was partly countered by an underweighted allocation. Integrated circuit manufacturer Silicon Laboratories (-45%) hurt the Series' performance more than any other single holding, as sales of its products to Samsung, its largest customer, declined. Silicon Labs also faced a patent infringement lawsuit from Analog Devices. Online commerce firm eBay (-26%) was punished for missing revenue and earnings targets. Internet portal Yahoo! Inc. (-30%) faced the consequences of not living up to expected advertising revenue. UnitedHealth Group, Inc. (-19%), a diversified health care management services company, was hurt by the need to adjust its profits as it corrected improper stock options grants. 47 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) MID-CAP VALUE SERIES The Mid-Cap Value Series gained 18.33% for the year, trailing the 20.22% return of the Russell Midcap Value Index but outpacing the 15.61% return of the Morningstar Mid Value Universe Median. Although the Series performed well in absolute terms, it lagged its benchmark's stronger gains. The Series was hurt by its sector allocation -- overweighting a few relatively poorer performing sectors, including health care (+9%), consumer discretionary (+15%) and information technology (+10%), and underweighting some top performing sectors, namely consumer staples (+34%), materials (+25%) and telecommunications services (43%). However, good stock selection, particularly in the industrials and information technology sectors, eased the impact of having disappointing sector selection. Stock selection was also strong in the energy sector. In the relatively poor performing health care sector, weak stock selection compounded the Series' overweighted position. Similarly, Series performance lagged the benchmark in the consumer discretionary and consumer staples sectors because of slightly negative stock selection multiplying the impact of poor sector weightings. On the positive side, however, the opposite was true in the industrials and, to a lesser extent, the utilities sectors. In these areas, good stock selection magnified positive sector allocation. In technology, strong stock selection more than made up for the Series' overweighted position in a sector with relatively weak performance. The largest individual detractor from performance was Boston Scientific (-34%), which manufactures and sells a wide range of medical devices. Boston Scientific was hurt by safety concerns related to drug-coated stents, including one of the firm's best-selling products. LSI Logic (-8%), which makes semiconductors and high-performance storage systems, experienced setbacks in consumer electronics as Apple Computer and Sony announced they'd no longer use LSI chips in certain products. Comverse Technology, Inc. (-16%), a telecommunications systems, software and services provider, stumbled after accounting irregularities came to light, compounding fraud involving the company's stock options. MID-CAP GROWTH SERIES The Mid-Cap Growth Series gained 2.17% for the year, lagging the 10.66% return of the Russell Midcap Growth Index and the 8.74% return of the Morningstar Mid Growth Universe Median. Stock selection was the primary reason for the Series' trailing performance for the year; especially in the industrials, consumer discretionary, information technology and telecommunications services sectors. The weak results in these sectors were partially countered by positive performance among holdings in the energy and health care sectors. In addition, the Series lost further ground against the index by underweighting strong performing sectors, including the materials (+31% in the benchmark), financials (+19%) and utilities (+27%) sectors, and by overweighting sub-par sectors, such as health care (+6%) and energy (-1%). However, the Series' performance was helped by significantly overweighting the top performing telecommunications services (+34%) sector. Among individual holdings, Silicon Laboratories (-33%), an integrated circuit manufacturer, had the greatest negative impact on the Series' performance, as sales of its products to Samsung, its largest customer, declined. Silicon Labs also faced a patent infringement lawsuit from Analog Devices. Intermec, Inc. (-31%), a maker of wired and wireless products and services, had a disappointing year, as sales and profits declined. Checkfree Corp. (-14%), an electronic payment processing company, lost ground after announcing an earnings outlook below market expectations. Shares of Celgene (+78%), the maker of the once-banned Thalidomide drug, soared after the Food and Drug Administration approved the drug to treat newly diagnosed multiple myeloma, a common form of blood cancer. Akamai Technologies, Inc. (+99%), whose services support the flow of content through the Internet, 48 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) consistently beat earnings expectations thanks, in part, to the sweeping growth of broadband Internet connection. American Tower Corp. (+38%), which leases antenna space on wireless and broadcast communications towers, performed well as a result of robust demand for its services and despite concern over its stock options granting practices. SMALL-CAP VALUE SERIES The Small-Cap Value Series gained 9.64% for the year, lagging the 23.48% return of the Russell 2000 Value Index and the 16.57% return of the Morningstar Small Value Universe Median. The Series' disappointing results relative to its benchmark were primarily due to stock selection, which was compounded by overweighting certain weaker sectors and being underweighted in some leading sectors. Within the index, the materials (+46%), telecommunications services (+53%), industrials (+29%), consumer staples (+27%) and utilities (+26%) sectors had strong performance. Unfortunately, the Series missed out on the materials sector's results, largely by having a low weighting within the sector, but also because of stock selection within this sector. Stock selection was also the primary reason for meager results within industrials. The Series had no holdings in telecommunication services, the top performing sector. The housing market slowdown weighed on several key holdings. One bright spot was the energy sector, in which the Series had strong returns and overweighted the sector compared to the benchmark. Watsco, Inc. (-20%), a supplier of air conditioning and heating equipment, was hurt indirectly by the decline in the housing market, as it led to a slowdown in sales of the firm's products. Accredited Home Lenders (-45%), a provider of sub-prime residential mortgages, also was adversely affected by the slowdown in housing, as delinquencies and losses rose. Homebuilder, Meritage Homes Corp. (-24%), was another victim of the weak housing market. Matria Healthcare, Inc. (-26%), which manages the treatment of long-term illnesses, saw its share price decline after business deals were delayed in the aftermath of a major acquisition. Digital River, Inc. (+88%), which provides outsourced e-commerce solutions, enjoyed very healthy business growth. Immucor (+88%), which sells products and systems that support blood transfusions, benefited from strong sales growth. Apparel firm Phillips Van Heusen Co. (+56%) enjoyed healthy sales expansion, particularly in its Calvin Klein brand. SPECIAL EQUITY SERIES The Special Equity Series gained 11.77% for the year, trailing the 18.37% return of the Russell 2000 Index but surpassing the 10.34% return of the Morningstar Small Growth Universe Median. This was a tough year for actively managed funds as a majority of them underperformed U.S. equity indexes. The Series underperformed its benchmark primarily because of relatively weak stock selection. Sector allocation also detracted from results, but to a lesser degree. The sectors where relative results hurt performance the most were information technology, industrials, materials, financials and health care. In information technology, the Series fell 4.8% short of the benchmark sector's 13.6% return. This performance shortfall was slightly magnified by the Series' modest overweighting to this sector. In the financial sector, the Series had good absolute returns (15.9%). However, this didn't measure up to the financials sector's 19.4% return in the benchmark. Similarly, the Series' 14.9% return in industrials looked solid enough, but not when compared with the 22.1% return of industrials within the benchmark. The Series' materials holdings had the largest relative underperformance, as their 22.4% gain was roughly half of the benchmark's 41.1% return from this sector. Fortunately, the Series had a modest allocation to materials stocks. Among detracting stocks, Hovnanian Enterprises (-32%), a homebuilder, was brought down by the residential housing market slump. Slower sales were compounded by material price increases. Meritage 49 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) Homes Corp. (-24%), another homebuilder, suffered a similar fate, as slowing demand, higher cancellations and rising inventories created a major challenge. Optimal Group, Inc. (-60%), an electronic payments firm that serves the online gambling industry among others, saw its shares tumble in early October as a result of anti-Internet gambling legislation passed by Congress. Openwave Systems, Inc. (-65%), which provides software for the mobile and wireline communications industries, had its share price decline substantially, reflecting its problems with revenue and earnings shortfalls, and cash flow shortages. On top of these, an investigation into the company's stock options granting practices found irregularities. Polycom, Inc. (+102%) was a major bright spot for the Series on consistently strong financial results. The company provides communications equipment that enables enterprise users to conduct video, voice, data and Web communications. Acuity Brands, Inc. (+66%), which produces lighting equipment and specialty chemical products, posted solid sales and earnings gains partly due to higher selling prices in its branded lighting fixtures business. Nutritional supplement maker NBTY, Inc. (+156%), had a stellar year, as it trimmed costs through strategic store closures, benefited from stabilizing materials costs and had increased product demand, thanks to aging baby boomers, who have an increased appetite for NBTY's supplements. Belden CDT, Inc. (+61%), which makes high-speed electronic cables, performed well as it enjoyed strong global demand and restructured its operations, opening some plants and closing others around the world. SMALL-CAP GROWTH SERIES The Small-Cap Growth Series returned 8.71% for the year, trailing the 13.35% return of the Russell 2000 Growth Index and the 10.34% return of the Morningstar Small Growth Universe Median. The Series' underperformance relative to its benchmark was mainly due to the manager's stock selection, particularly in the information technology sector, as well as sector allocation to a lesser degree. About three-quarters of the Series' performance gap relative to its index came in information technology, where the benchmark sector gained 10.1%, but the Series' holdings only managed a 2.6% return. The impact of this gap was magnified by the large allocation to this sector, both in the Series' portfolio (29%) and in the benchmark (25%). Relative performance was also adversely affected by stock selection in the financials and consumer discretionary sectors. Financials stocks in the benchmark gained 17.4%, while the Series' financial holdings returned just 6.4%. Consumer discretionary stocks in the benchmark gained 11.7% overall, while the Series' holdings in this sector returned 9.2%. The relative performance gap was larger in utilities (-48.5%) and consumer staples (-20.6%), but the impact was muted because these sectors have very small allocations in the Series and its index. On the positive side, the Series enjoyed strong performance in the energy, materials and industrials sectors. The Series' energy holdings doubled the returns of the benchmark sector (+32.8% vs. +16.2%). However, the positive impact was limited by relatively modest allocations to this sector. In industrials, however, a 4.7% outperformance by the Series (+21.6% vs. +16.9%) resulted in a slightly more significant impact. Individual stocks that hurt performance were led by Aspect Medical Systems, Inc. (-45%) a provider of anesthesia monitoring devices. Aspect was sold off by investors in mid-2006, when growth in its revenues and earnings slowed to more sustainable levels and its valuation contracted significantly. Housevalues, Inc. (-38%), an online real estate information service, was affected by the decline in the housing market. Shares of Neoware, Inc. (-47%), a provider of thin client computing solutions, fell after it announced lower than expected sales to existing customers. Escala Group, Inc. (-71%), a global stamp and coin auction house, saw its fortunes tumble with a probe into its operations by Spanish authorities last May and a subsequent SEC investigation. 50 DIVERSIFIED INVESTORS PORTFOLIOS MANAGEMENT REVIEW (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) General Cable Corp. (+122%), a wire and cable manufacturer, experienced healthy growth in its business and recorded strong returns. Priceline.com, Inc. (+95%), an online travel company, enjoyed strong growth in its business amid positive electronic commerce market trends. Shares of New River Pharmaceutical (+109%), a specialty pharmaceutical company, rose sharply when it announced in October that the FDA approved its drug, NRP104, to treat attention-deficit/hyperactivity disorder (ADHD) in children aged 6-12. INTERNATIONAL EQUITY SERIES The International Equity Series gained 27.31% for the year, surpassing the 26.23% return of the MSCI World ex-US Index and the 24.82% return of the Morningstar Foreign Large Blend Universe Median. The year was an outstanding one for international stocks generally, with every country in the benchmark posting gains, and the Series had strong results, outperforming the index because of strong stock selection. Within the index, leading countries included Spain (+50%), Portugal (+48%), Ireland (+48%), Singapore (+47%), Norway (+46%) and Sweden (+45%). The Series scored its biggest country gains against the benchmark in France, Canada, Switzerland and the United Kingdom, with stock selection playing the key role in all cases. The Series' best relative stock selection, on a country basis, occurred in Austria and Hong Kong. Stock selection fell significantly short in Israel, Luxembourg, Singapore and South Korea. The financials and industrials sectors contributed the most to performance on a relative basis, with materials and consumer staples stocks playing a supporting role. In financials, a substantial overweighting in the high performing sector resulted in a strong contribution to absolute and relative returns. The Series' financials stocks gained 34% and just over one-third of the Series was allocated to the sector, almost 5% more than the benchmark. In the industrials sector, the Series gained 47%, almost 22% more than the benchmark index. But the impact of this performance was muted by the Series' underweighted position in industrials. Relative performance was weakest in the consumer discretionary sector, which was the only sector with weak stock selection relative to the index. In the utilities sector, the Series' 49% returns were slightly below the benchmark sector's gains. Although utilities had a slightly negative impact on the Series' relative performance, the sector contributed handsomely to absolute gains. Active currency management played a minor positive role in the Series' performance, making good results even better. 51 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2006
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT MARKET BOND BOND ------------ ------------ ------------ ASSETS: Securities, at value, including investments held as collateral for securities out on loan (Notes 2 and 4).................................................. $776,087,009 $820,061,958 $177,856,976 Repurchase agreements (cost equals market)............ 147,506,245 8,819,366 -- Cash.................................................. -- -- -- Restricted cash....................................... -- -- -- Cash at broker........................................ -- -- -- Foreign currency holdings, at value (cost $42,451,477, $190,725, and $379,672, respectively)....................................... -- -- -- Receivable for securities sold........................ -- -- 2,132,391 Unrealized appreciation on foreign currency forward contracts (Note 10)......................... -- -- -- Unrealized appreciation on open swap contracts........ -- -- -- Variation margin...................................... -- -- -- Interest receivable................................... 2,576,512 5,498,730 1,441,704 Dividends receivable.................................. -- -- -- Foreign tax reclaim receivable........................ -- -- -- Receivable from Advisor............................... -- -- 4,146 Receivable from securities lending (net).............. -- 2,054 1,247 ------------ ------------ ------------ Total assets.......................................... 926,169,766 834,382,108 181,436,464 ------------ ------------ ------------ LIABILITIES: Due to Advisor........................................ -- -- -- Due to Custodian...................................... -- -- 1,226,256 Due to Broker for swap contracts...................... -- -- -- Collateral for securities out on loan................. -- 8,411,400 29,452,986 Payable for securities purchased...................... -- 8,069,478 -- Securities sold short, at value (proceeds $162,196,673)....................................... -- -- -- Written options, at value (premium $601,920, $22,396 and $36,146, respectively)....................................... -- -- -- Unrealized depreciation on open swap contracts........ -- -- -- Unrealized depreciation on foreign currency forward contracts (Note 10)......................... -- -- -- Variation margin...................................... -- -- -- Investment advisory fees.............................. 184,382 231,576 43,365 Accrued expenses...................................... 44,775 46,468 32,689 Contingent liability (Note 6)......................... -- -- -- ------------ ------------ ------------ Total liabilities..................................... 229,157 16,758,922 30,755,296 ------------ ------------ ------------ NET ASSETS............................................ $925,940,609 $817,623,186 $150,681,168 ============ ============ ============ SECURITIES, AT COST................................... $776,087,009 $826,867,778 $177,844,104 ============ ============ ============
See notes to financial statements. 52
TOTAL CORE RETURN HIGH YIELD VALUE & BOND BOND BOND BALANCED INCOME VALUE -------------- ------------ ------------ ------------ -------------- ------------ $2,394,052,362 $149,220,111 $462,350,593 $421,371,197 $3,647,543,518 $112,083,662 20,094,880 25,011,936 25,159,129 15,905,785 74,170,734 9,130,521 3,331 -- -- -- -- -- -- -- -- 140,600 -- -- -- 352,213 -- 459,080 -- -- 186,318 -- 370,032 -- -- 41,003,303 334,720,004 686,771 6,700,000 2,807,120 33,257,440 75,619 40,930 -- 58,946 -- -- 684,559 3,458,124 -- -- -- -- -- 14,537 -- -- -- -- -- 15,159,390 942,514 8,376,189 1,235,368 37,008 3,451 -- -- -- 366,906 4,071,873 99,803 -- -- -- -- 1,160 -- -- 12,754 -- -- -- 5,680 -- -- -- 3,068 16,885 4,718 -------------- ------------ ------------ ------------ -------------- ------------ 2,809,190,490 176,453,547 502,585,911 442,718,102 3,759,098,618 121,403,454 -------------- ------------ ------------ ------------ -------------- ------------ -- -- 1,531 11,529 -- -- 24,892 138 -- -- -- -- 4,300,000 -- -- -- -- -- 958,807 4,274,335 -- 8,381,259 186,521,888 15,388,046 562,280,950 51,398,541 -- 52,363,642 32,218,958 4,675,305 161,260,541 -- -- -- -- -- 19,656 -- 31,140 -- -- 621,654 152,220 -- -- -- -- -- 27,484 -- 38,897 -- -- 1,068,876 -- 40,002 -- 47,918 -- -- 584,169 32,383 218,560 138,076 1,261,807 35,883 116,932 24,581 35,764 56,840 152,239 21,314 -- -- -- -- -- -- -------------- ------------ ------------ ------------ -------------- ------------ 731,369,041 55,817,120 255,855 61,069,301 220,154,892 20,120,548 -------------- ------------ ------------ ------------ -------------- ------------ $2,077,821,449 $120,636,427 $502,330,056 $381,648,801 $3,538,943,726 $101,282,906 ============== ============ ============ ============ ============== ============ $2,411,315,857 $149,309,902 $448,608,719 $385,165,390 $2,983,135,311 $105,737,336 ============== ============ ============ ============ ============== ============
53 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) DECEMBER 31, 2006
GROWTH & EQUITY AGGRESSIVE INCOME GROWTH EQUITY -------------- -------------- ------------ ASSETS: Securities, at value, including investments held as collateral for securities out on loan (Notes 2 and 4)........................................... $1,205,774,643 $2,633,306,100 $428,584,855 Repurchase agreements (cost equals market)......... 23,960,361 22,518,208 -- Cash............................................... -- -- -- Restricted cash.................................... 560,000 -- -- Foreign currency holdings, at value (cost $3,407,804)................................ -- -- -- Receivable for securities sold..................... 14,293,832 48,856,082 5,640,594 Unrealized appreciation on foreign currency forward contracts (Note 10)...................... -- -- -- Interest receivable................................ 13,080 26,052 7,031 Dividends receivable............................... 1,623,692 2,459,711 320,383 Foreign tax reclaim receivable..................... -- 230,517 15,799 Receivable from Advisor............................ -- -- 3,259 Receivable from securities lending (net)........... 33,601 15,339 10,376 -------------- -------------- ------------ Total assets....................................... 1,246,259,209 2,707,412,009 434,582,297 -------------- -------------- ------------ LIABILITIES: Due to Advisor..................................... -- -- -- Due to Custodian................................... 2,341,575 -- 1,066,035 Collateral for securities out on loan.............. 67,965,319 158,227,226 48,209,289 Payable for securities purchased................... 16,302,551 20,892,335 2,370,696 Unrealized depreciation on foreign currency forward contracts (Note 10)...................... -- -- -- Variation margin................................... 11,130 -- -- Investment advisory fees........................... 557,078 1,259,873 238,505 Accrued expenses................................... 61,311 115,119 29,864 Contingent liability (Note 6)...................... -- -- -- -------------- -------------- ------------ Total liabilities.................................. 87,238,964 180,494,553 51,914,389 -------------- -------------- ------------ NET ASSETS......................................... $1,159,020,245 $2,526,917,456 $382,667,908 ============== ============== ============ SECURITIES, AT COST................................ $1,059,990,583 $2,310,397,936 $373,809,334 ============== ============== ============
See notes to financial statements. 54
MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP INTERNATIONAL VALUE GROWTH VALUE EQUITY GROWTH EQUITY -------------- ------------ ------------ -------------- ------------ -------------- $1,037,462,871 $353,559,372 $277,839,453 $1,431,161,493 $167,367,521 $2,206,716,021 16,312,237 6,350,435 33,538 33,160,557 618,612 29,549,256 -- -- -- 257 -- -- -- -- -- -- -- -- -- -- -- -- -- 3,410,666 1,441,900 1,546,225 2,074,821 4,148,139 4,155,481 10,765,445 -- -- -- -- -- 11,580 20,561 8,087 6,192 40,120 2,181 25,648 1,469,952 75,567 335,420 1,171,071 42,961 1,278,936 54 562 -- -- -- 701,355 28,997 -- 8,928 -- -- 1,424 10,692 7,297 14,113 96,490 5,968 33,180 -------------- ------------ ------------ -------------- ------------ -------------- 1,056,747,264 361,547,545 280,312,465 1,469,778,127 172,192,724 2,252,493,511 -------------- ------------ ------------ -------------- ------------ -------------- -- 20 -- 9,503 1,049 -- -- -- 5,426 -- -- -- 118,672,540 49,693,823 42,425,935 245,040,504 14,398,521 149,080,031 527,957 1,729,565 1,360,601 12,276,758 2,571,980 745,568 -- -- -- -- -- 20,237 -- -- -- 7,230 -- -- 498,094 180,623 158,568 785,029 111,007 1,243,098 74,468 34,453 45,217 102,644 107,163 252,104 -- -- -- -- -- -- -------------- ------------ ------------ -------------- ------------ -------------- 119,773,059 51,638,484 43,995,747 258,221,668 17,189,720 151,341,038 -------------- ------------ ------------ -------------- ------------ -------------- $ 936,974,205 $309,909,061 $236,316,718 $1,211,556,459 $155,003,004 $2,101,152,473 ============== ============ ============ ============== ============ ============== $ 938,275,057 $316,444,007 $265,948,032 $1,275,741,323 $152,667,543 $1,701,116,773 ============== ============ ============ ============== ============ ==============
55 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT MARKET BOND BOND ----------- ----------- ------------ INVESTMENT INCOME (NOTE 2): Interest income.......................................... $44,452,023 $35,751,097 $ 9,136,357 Securities lending income (net).......................... -- 24,018 40,281 Dividend income.......................................... -- -- -- Less: foreign withholding taxes.......................... -- -- -- ----------- ----------- ----------- Total income............................................. 44,452,023 35,775,115 9,176,638 ----------- ----------- ----------- EXPENSES (NOTE 2): Investment advisory fees................................. 2,202,129 2,841,710 655,441 Custody fees............................................. 160,517 182,519 71,525 Audit fees............................................... 28,312 30,221 28,458 Legal fees............................................... 5,988 5,666 91 Reports to shareholders.................................. 6,532 7,088 2,156 Other fees............................................... 35,439 28,272 10,403 ----------- ----------- ----------- Total expenses........................................... 2,438,917 3,095,476 768,074 Expenses reimbursed by the Advisor....................... -- -- (19,189) ----------- ----------- ----------- Net expenses............................................. 2,438,917 3,095,476 748,885 ----------- ----------- ----------- NET INVESTMENT INCOME (LOSS)............................. 42,013,106 32,679,639 8,427,753 ----------- ----------- ----------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 2): Net realized gains (losses) on transactions from: Securities............................................. 3,069 (3,537,144) (4,284,109) Swap contracts......................................... -- -- -- Futures................................................ -- -- -- Written options........................................ -- -- -- Foreign currency transactions.......................... -- -- -- Change in net unrealized appreciation (depreciation) on: Securities............................................. -- 5,974,556 1,003,748 Futures................................................ -- -- -- Written options........................................ -- -- -- Short sales............................................ -- -- -- Swap contracts......................................... -- -- -- Foreign currency translations.......................... -- -- -- ----------- ----------- ----------- Net realized and unrealized gains (losses) on investments............................................ 3,069 2,437,412 (3,280,361) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................. $42,016,175 $35,117,051 $ 5,147,392 =========== =========== ===========
See notes to financial statements. 56
TOTAL CORE RETURN HIGH YIELD VALUE & BOND BOND BOND BALANCED INCOME VALUE ------------ ---------- ----------- ----------- ------------ ----------- $100,030,761 $4,274,424 $38,194,970 $ 7,934,822 $ 3,146,286 $ 115,225 155,926 4,540 -- 63,334 659,690 21,987 -- 10,463 241,618 4,527,328 58,839,770 932,577 -- -- -- -- (181,737) (2,556) ------------ ---------- ----------- ----------- ------------ ----------- 100,186,687 4,289,427 38,436,588 12,525,484 62,464,009 1,067,233 ------------ ---------- ----------- ----------- ------------ ----------- 7,179,850 292,277 2,501,348 1,750,841 14,430,364 271,289 567,838 91,537 133,254 158,618 567,328 76,845 36,820 32,463 29,353 30,210 40,597 32,396 14,355 183 6,828 7,740 63,176 577 17,791 714 3,836 79,138 28,511 492 59,413 1,827 15,145 29,435 118,622 1,379 ------------ ---------- ----------- ----------- ------------ ----------- 7,876,067 419,001 2,689,764 2,055,982 15,248,598 382,978 -- (84,971) -- (111,017) -- (85,418) ------------ ---------- ----------- ----------- ------------ ----------- 7,876,067 334,030 2,689,764 1,944,965 15,248,598 297,560 ------------ ---------- ----------- ----------- ------------ ----------- 92,310,620 3,955,397 35,746,824 10,580,519 47,215,411 769,673 ------------ ---------- ----------- ----------- ------------ ----------- (15,300,239) 326,862 4,415,516 17,865,917 237,630,133 3,727,354 (2,724,944) -- -- -- -- -- 8,144,851 15,462 -- (45,252) -- -- 536,040 31,702 -- 60,625 -- -- 264,388 (31,694) (4,253) (117,991) -- -- 181,854 (63,335) 11,570,829 14,431,295 327,033,667 5,766,022 (2,947,122) (15,115) -- 21,196 -- -- (136,174) 2,740 -- 5,006 -- -- 1,503,739 -- -- -- -- -- 3,305,904 -- -- -- -- -- (1,473,081) 6,996 2,243 50,342 -- (33) ------------ ---------- ----------- ----------- ------------ ----------- (8,644,784) 273,618 15,984,335 32,271,138 564,663,800 9,493,343 ------------ ---------- ----------- ----------- ------------ ----------- $ 83,665,836 $4,229,015 $51,731,159 $42,851,657 $611,879,211 $10,263,016 ============ ========== =========== =========== ============ ===========
57 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
GROWTH & EQUITY AGGRESSIVE INCOME GROWTH EQUITY ------------ ------------ ----------- INVESTMENT INCOME (NOTE 2): Interest income........................................ $ 542,281 $ 2,798,683 $ 187,339 Securities lending income (net)........................ 120,308 517,754 83,417 Dividend income........................................ 19,598,532 23,943,252 2,103,310 Less: foreign withholding taxes........................ (57,498) (230,565) (17,764) ------------ ------------ ----------- Total income........................................... 20,203,623 27,029,124 2,356,302 ------------ ------------ ----------- EXPENSES (NOTE 2): Investment advisory fees............................... 6,951,959 15,649,351 2,893,873 Custody fees........................................... 268,010 438,759 101,985 Audit fees............................................. 33,204 37,980 28,001 Legal fees............................................. 7,219 16,014 2,341 Reports to shareholders................................ 11,857 22,109 5,154 Other fees............................................. 48,244 100,337 21,111 ------------ ------------ ----------- Total expenses......................................... 7,320,493 16,264,550 3,052,465 Expenses reimbursed by the Advisor..................... -- -- (46,094) ------------ ------------ ----------- Net expenses........................................... 7,320,493 16,264,550 3,006,371 ------------ ------------ ----------- NET INVESTMENT INCOME (LOSS)........................... 12,883,130 10,764,574 (650,069) ------------ ------------ ----------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 2): Net realized gains (losses) on transactions from: Securities........................................... 90,273,462 151,657,940 27,520,364 Swap contracts....................................... -- -- -- Futures.............................................. 126,420 -- -- Written options...................................... -- -- -- Foreign currency transactions........................ -- 893 -- Change in net unrealized appreciation (depreciation) on: Securities........................................... 26,080,459 (62,370,923) (3,115,975) Futures.............................................. 27,131 -- -- Written options...................................... -- -- -- Short sales.......................................... -- -- -- Swap contracts....................................... -- -- -- Foreign currency translations........................ 87 15 -- ------------ ------------ ----------- Net realized and unrealized gains (losses) on investments.......................................... 116,507,559 89,287,925 24,404,389 ------------ ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................... $129,390,689 $100,052,499 $23,754,320 ============ ============ ===========
See notes to financial statements. 58
MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP INTERNATIONAL VALUE GROWTH VALUE EQUITY GROWTH EQUITY ------------ ------------ ----------- ------------ ----------- ------------- $ 1,398,162 $ 366,784 $ 573,275 $ 1,717,706 $ 166,371 $ 1,175,079 102,487 79,893 70,393 1,062,342 183,022 1,204,108 13,173,618 906,921 2,026,508 11,474,009 575,134 51,564,534 (16,385) (2,585) -- (8,995) (1,752) (4,266,663) ------------ ------------ ----------- ------------ ----------- ------------ 14,657,882 1,351,013 2,670,176 14,245,062 922,775 49,677,058 ------------ ------------ ----------- ------------ ----------- ------------ 5,255,372 2,197,122 1,958,558 10,061,755 1,316,369 14,074,761 212,710 61,001 57,960 406,594 127,801 2,040,711 26,168 24,536 24,354 34,542 24,120 41,733 13,093 6,223 6,844 24,381 13,669 12,887 22,761 2,534 20,403 58,095 71,100 16,282 24,903 10,633 7,760 52,069 16,767 67,707 ------------ ------------ ----------- ------------ ----------- ------------ 5,555,007 2,302,049 2,075,879 10,637,436 1,569,826 16,254,081 (64,153) (13,549) (45,617) -- (208,084) (1,424) ------------ ------------ ----------- ------------ ----------- ------------ 5,490,854 2,288,500 2,030,262 10,637,436 1,361,742 16,252,657 ------------ ------------ ----------- ------------ ----------- ------------ 9,167,028 (937,487) 639,914 3,607,626 (438,967) 33,424,401 ------------ ------------ ----------- ------------ ----------- ------------ 62,499,240 15,761,237 20,567,140 138,381,086 (3,321,892) 212,988,414 -- -- -- -- -- -- -- -- -- 303,934 -- -- -- -- -- -- -- -- 234 -- -- -- -- 617,122 59,305,077 (10,452,049) (1,285,523) (3,739,450) 14,657,485 209,750,250 -- -- -- 103,313 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 6 -- 57,605 ------------ ------------ ----------- ------------ ----------- ------------ 121,804,551 5,309,188 19,281,617 135,048,889 11,335,593 423,413,391 ------------ ------------ ----------- ------------ ----------- ------------ $130,971,579 $ 4,371,701 $19,921,531 $138,656,515 $10,896,626 $456,837,792 ============ ============ =========== ============ =========== ============
59 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2006
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT MARKET BOND BOND --------------- ------------- ------------- FROM OPERATIONS: Net investment income (loss)..................... $ 42,013,106 $ 32,679,639 $ 8,427,753 Net realized gains (losses) on transactions from: Securities..................................... 3,069 (3,537,144) (4,284,109) Swap contracts................................. -- -- -- Futures........................................ -- -- -- Written options................................ -- -- -- Foreign currency transactions.................. -- -- -- Change in net unrealized appreciation (depreciation) on: Securities..................................... -- 5,974,556 1,003,748 Futures........................................ -- -- -- Written options................................ -- -- -- Short sales.................................... -- -- -- Swap contracts................................. -- -- -- Foreign currency translations.................. -- -- -- --------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations................................ 42,016,175 35,117,051 5,147,392 --------------- ------------- ------------- FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions.................................... 3,826,219,117 473,191,503 61,946,831 Withdrawals...................................... (3,708,071,941) (479,084,534) (177,519,578) --------------- ------------- ------------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests...................................... 118,147,176 (5,893,031) (115,572,747) --------------- ------------- ------------- Net increase (decrease) in net assets............ 160,163,351 29,224,020 (110,425,355) NET ASSETS: Beginning of year................................ 765,777,258 788,399,166 261,106,523 --------------- ------------- ------------- End of year...................................... $ 925,940,609 $ 817,623,186 $ 150,681,168 =============== ============= =============
See notes to financial statements. 60
TOTAL CORE RETURN HIGH YIELD VALUE & BOND BOND BOND BALANCED INCOME VALUE -------------- ------------ ------------- ------------- --------------- --------------- $ 92,310,620 $ 3,955,397 $ 35,746,824 $ 10,580,519 $ 47,215,411 $ 769,673 (15,300,239) 326,862 4,415,516 17,865,917 237,630,133 3,727,354 (2,724,944) -- -- -- -- -- 8,144,851 15,462 -- (45,252) -- -- 536,040 31,702 -- 60,625 -- -- 264,388 (31,694) (4,253) (117,991) -- -- 181,854 (63,335) 11,570,829 14,431,295 327,033,667 5,766,022 (2,947,122) (15,115) -- 21,196 -- -- (136,174) 2,740 -- 5,006 -- -- 1,503,739 -- -- -- -- -- 3,305,904 -- -- -- -- -- (1,473,081) 6,996 2,243 50,342 -- (33) -------------- ------------ ------------- ------------- --------------- --------------- 83,665,836 4,229,015 51,731,159 42,851,657 611,879,211 10,263,016 -------------- ------------ ------------- ------------- --------------- --------------- 642,373,668 97,088,124 179,319,765 89,543,901 898,961,139 71,879,254 (701,111,090) (50,753,571) (144,748,123) (161,494,412) (989,956,921) (15,997,876) -------------- ------------ ------------- ------------- --------------- --------------- (58,737,422) 46,334,553 34,571,642 (71,950,511) (90,995,782) 55,881,378 -------------- ------------ ------------- ------------- --------------- --------------- 24,928,414 50,563,568 86,302,801 (29,098,854) 520,883,429 66,144,394 2,052,893,035 70,072,859 416,027,255 410,747,655 3,018,060,297 35,138,512 -------------- ------------ ------------- ------------- --------------- --------------- $2,077,821,449 $120,636,427 $ 502,330,056 $ 381,648,801 $ 3,538,943,726 $ 101,282,906 ============== ============ ============= ============= =============== ===============
61 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
GROWTH & EQUITY AGGRESSIVE INCOME GROWTH EQUITY -------------- -------------- ------------- FROM OPERATIONS: Net investment income (loss)...................... $ 12,883,130 $ 10,764,574 $ (650,069) Net realized gains (losses) on transactions from: Securities...................................... 90,273,462 151,657,940 27,520,364 Swap contracts.................................. -- -- -- Futures......................................... 126,420 -- -- Written options................................. -- -- -- Foreign currency transactions................... -- 893 -- Change in net unrealized appreciation (depreciation) on: Securities...................................... 26,080,459 (62,370,923) (3,115,975) Futures......................................... 27,131 -- -- Written options................................. -- -- -- Short sales..................................... -- -- -- Swap contracts.................................. -- -- -- Foreign currency translations................... 87 15 -- -------------- -------------- ------------- Net increase (decrease) in net assets resulting from operations................................. 129,390,689 100,052,499 23,754,320 -------------- -------------- ------------- FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions..................................... 289,738,820 619,135,082 140,452,458 In-Kind Transfer (Note 2O)........................ -- -- -- Withdrawals....................................... (438,868,133) (779,652,186) (163,667,930) -------------- -------------- ------------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests....................................... (149,129,313) (160,517,104) (23,215,472) -------------- -------------- ------------- Net increase (decrease) in net assets............. (19,738,624) (60,464,605) 538,848 NET ASSETS: Beginning of year................................. 1,178,758,869 2,587,382,061 382,129,060 -------------- -------------- ------------- End of year....................................... $1,159,020,245 $2,526,917,456 $ 382,667,908 ============== ============== =============
See notes to financial statements. 62
MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP INTERNATIONAL VALUE GROWTH VALUE EQUITY GROWTH EQUITY ------------- ------------- ------------ -------------- ------------ -------------- $ 9,167,028 $ (937,487) $ 639,914 $ 3,607,626 $ (438,967) $ 33,424,401 62,499,240 15,761,237 20,567,140 138,381,086 (3,321,892) 212,988,414 -- -- -- -- -- -- -- -- -- 303,934 -- -- -- -- -- -- -- -- 234 -- -- -- -- 617,122 59,305,077 (10,452,049) (1,285,523) (3,739,450) 14,657,485 209,750,250 -- -- -- 103,313 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 6 -- 57,605 ------------- ------------- ------------ -------------- ------------ -------------- 4,371,701 19,921,531 138,656,515 10,896,626 456,837,792 130,971,579 ------------- ------------- ------------ -------------- ------------ -------------- 367,313,600 128,657,239 73,958,616 448,521,133 56,928,632 652,020,924 -- -- -- (80,105,926) -- -- (202,842,512) (106,070,321) (76,312,650) (592,187,172) (45,725,788) (729,492,392) ------------- ------------- ------------ -------------- ------------ -------------- 22,586,918 (2,354,034) (223,771,965) 11,202,844 (77,471,468) 164,471,088 ------------- ------------- ------------ -------------- ------------ -------------- 295,442,667 26,958,619 17,567,497 (85,115,450) 22,099,470 379,366,324 641,531,538 282,950,442 218,749,221 1,296,671,909 132,903,534 1,721,786,149 ------------- ------------- ------------ -------------- ------------ -------------- $ 936,974,205 $ 309,909,061 $236,316,718 $1,211,556,459 $155,003,004 $2,101,152,473 ============= ============= ============ ============== ============ ==============
63 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2005
HIGH INTERMEDIATE MONEY QUALITY GOVERNMENT MARKET BOND BOND --------------- ------------- ------------- FROM OPERATIONS: Net investment income (loss)..................... $ 24,112,234 $ 24,280,048 $ 8,765,600 Net realized gains (losses) on transactions from: Securities..................................... (1,321) (3,873,615) (4,498,062) Futures........................................ -- -- -- Written options................................ -- -- -- Foreign currency transactions.................. -- -- -- Change in net unrealized appreciation (depreciation) on: Securities..................................... -- (5,794,902) (713,722) Futures........................................ -- -- -- Written options................................ -- -- -- Short sales.................................... -- -- -- Foreign currency translations.................. -- -- -- --------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations................................ 24,110,913 14,611,531 3,553,816 --------------- ------------- ------------- FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions.................................. 3,000,861,945 394,658,991 134,271,687 Withdrawals.................................... (3,068,547,985) (311,465,734) (133,221,631) --------------- ------------- ------------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests...................................... (67,686,040) 83,193,257 1,050,056 --------------- ------------- ------------- Net increase (decrease) in net assets............ (43,575,127) 97,804,788 4,603,872 NET ASSETS: Beginning of year................................ 809,352,385 690,594,378 256,502,651 --------------- ------------- ------------- End of year...................................... $ 765,777,258 $ 788,399,166 $ 261,106,523 =============== ============= =============
- --------------- (1) Commencement of Operations, May 6, 2005. See notes to financial statements. 64
TOTAL CORE RETURN VALUE & GROWTH & BOND BOND(1) BALANCED INCOME VALUE(1) INCOME -------------- ----------- ------------ -------------- ----------- -------------- $ 73,863,332 $ 1,586,790 $ 9,237,946 $ 39,423,154 $ 156,224 $ 10,673,040 (6,477,165) (410,160) 25,146,537 256,256,688 262,769 61,012,020 2,212,048 38,572 520,728 -- -- (61,117) 864,930 28,041 104,520 -- -- -- (6,020,058) 112,407 (155,938) -- -- (187) (26,483,597) (26,456) (13,066,904) (101,548,512) 580,304 6,508,944 470,718 13,410 (125,867) -- -- (23,415) 116,440 -- -- -- -- -- (878,427) -- (31,741) -- -- -- 5,644,968 2,388 504,647 -- -- (711) -------------- ----------- ------------ -------------- ----------- -------------- 43,313,189 1,344,992 22,133,928 194,131,330 999,297 78,108,574 -------------- ----------- ------------ -------------- ----------- -------------- 746,674,137 95,063,361 126,239,193 844,155,946 46,721,034 276,213,786 (392,462,176) (26,335,494) (157,352,155) (725,690,301) (12,581,819) (311,511,925) -------------- ----------- ------------ -------------- ----------- -------------- 354,211,961 68,727,867 (31,112,962) 118,465,645 34,139,215 (35,298,139) -------------- ----------- ------------ -------------- ----------- -------------- 397,525,150 70,072,859 (8,979,034) 312,596,975 35,138,512 42,810,435 1,655,367,885 -- 419,726,689 2,705,463,322 -- 1,135,948,434 -------------- ----------- ------------ -------------- ----------- -------------- $2,052,893,035 $70,072,859 $410,747,655 $3,018,060,297 $35,138,512 $1,178,758,869 ============== =========== ============ ============== =========== ==============
65 DIVERSIFIED INVESTORS PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2005
EQUITY MID-CAP MID-CAP GROWTH VALUE GROWTH -------------- ------------- ------------ FROM OPERATIONS: Net investment income (loss)....................... $ 8,012,738 $ 6,538,965 $ (872,544) Net realized gains (losses) on transactions from: Securities....................................... 106,473,301 58,473,413 16,182,706 Futures.......................................... -- -- -- Foreign currency transactions.................... -- -- -- Change in net unrealized appreciation (depreciation) on: Securities....................................... 60,565,829 (13,904,553) 17,077,446 Futures.......................................... -- -- -- Written options.................................. -- -- -- Foreign currency translations.................... (108) -- -- -------------- ------------- ------------ Net increase (decrease) in net assets resulting from operations.................................. 175,051,760 51,107,825 32,387,608 -------------- ------------- ------------ FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions.................................... 722,199,519 288,221,115 101,501,469 Withdrawals...................................... (600,429,165) (112,508,081) (61,039,507) -------------- ------------- ------------ Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests........................................ 121,770,354 175,713,034 40,461,962 -------------- ------------- ------------ Net increase (decrease) in net assets.............. 296,822,114 226,820,859 72,849,570 NET ASSETS: Beginning of year.................................. 2,290,559,947 414,710,679 210,100,872 -------------- ------------- ------------ End of year........................................ $2,587,382,061 $ 641,531,538 $282,950,442 ============== ============= ============
See notes to financial statements. 66
SMALL-CAP SPECIAL SMALL-CAP AGGRESSIVE HIGH YIELD INTERNATIONAL VALUE EQUITY GROWTH EQUITY BOND EQUITY ------------ -------------- ------------ ------------- ------------ -------------- $ 196,879 $ 1,169,845 $ (483,033) $ (523,061) $ 29,366,845 $ 30,549,125 10,466,324 150,782,575 17,043,638 25,848,657 2,376,419 79,654,574 -- 180,475 -- -- -- -- -- (347) -- -- 88,320 (1,029,821) (18,234,057) (26,525,774) (14,455,154) 4,064,836 (18,982,146) 64,809,780 -- (137,225) -- -- -- -- -- -- -- -- -- -- -- 122 -- -- 31 (260,276) ------------ -------------- ------------ ------------- ------------ -------------- (7,570,854) 125,469,671 2,105,451 29,390,432 12,849,469 173,723,382 ------------ -------------- ------------ ------------- ------------ -------------- 95,676,461 417,698,258 55,270,954 136,961,726 141,534,891 506,290,794 (42,092,335) (474,026,762) (32,902,023) (181,949,965) (90,129,641) (359,845,971) ------------ -------------- ------------ ------------- ------------ -------------- 53,584,126 (56,328,504) 22,368,931 (44,988,239) 51,405,250 146,444,823 ------------ -------------- ------------ ------------- ------------ -------------- 46,013,272 69,141,167 24,474,382 (15,597,807) 64,254,719 320,168,205 172,735,949 1,227,530,742 108,429,152 397,726,867 351,772,536 1,401,617,944 ------------ -------------- ------------ ------------- ------------ -------------- $218,749,221 $1,296,671,909 $132,903,534 $ 382,129,060 $416,027,255 $1,721,786,149 ============ ============== ============ ============= ============ ==============
67 MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ COMMERCIAL PAPER -- 44.4% $ 24,200,000 Abbey National NA LLC, 5.24%, 03/19/07............. $ 23,921,992 35,920,000 Bank of America Corp., 5.25%, 01/31/07............. 35,752,373 34,610,000 Barclays US Funding LLC, 5.25%, 02/12/07............. 34,387,919 16,920,000 Chariot Funding LLC -- 144A, 5.33%, 01/16/07............. 16,877,413 17,910,000 Chariot Funding LLC -- 144A, 5.30%, 01/30/07............. 17,828,261 33,420,000 Ciesco LLC -- 144A, 5.26%, 01/26/07............. 33,288,283 37,660,000 Citigroup Funding, Inc., 5.25%, 02/22/07............. 37,363,427 29,860,000 HBOS Treasury Services PLC, 5.22%, 03/09/07............. 29,561,251 21,400,000 ING (US) Funding LLC, 5.24%, 01/16/07............. 21,347,098 36,280,000 JPMorgan Chase & Company, 5.23%, 03/13/07............. 35,895,241 25,687,000 Jupiter Securitization Corp. -- 144A, 5.24%, 03/05/07............. 25,444,204 16,210,000 Old Line Funding Corp. -- 144A, 5.25%, 01/10/07............. 16,183,997 37,150,000 Sheffield Receivables -- 144A, 5.28%, 01/10/07............. 37,090,121 19,360,000 The Bear Stearns Companies, Inc., 5.24%, 02/28/07............. 19,190,923 17,990,000 The Bear Stearns Companies, Inc., 5.25%, 02/28/07............. 17,832,587 8,910,000 Windmill Funding Corp. -- 144A, 5.26%, 01/25/07............. 8,876,152 ------------ TOTAL COMMERCIAL PAPER (Cost $410,841,242)............... 410,841,242 ------------ YANKEE CERTIFICATES OF DEPOSIT -- 15.5% 24,880,000 Bank of Montreal, 5.31%, 01/22/07............. 24,880,000 34,670,000 Calyon NY Branch, 5.34%, 05/04/07............. 34,670,000 21,180,000 Royal Bank of Canada, 5.30%, 04/05/07............. 21,180,000 36,700,000 Societe Generale NY Branch, 5.30%, 02/01/07............. 36,700,000 26,370,000 UBS AG Stamford Branch, 5.31%, 01/05/07............. 26,370,000 ------------ TOTAL YANKEE CERTIFICATES OF DEPOSIT (Cost $143,800,000)............... 143,800,000 ------------ MEDIUM TERM CORPORATE NOTES -- 1.5% 13,660,000 Greenwich Capital Holdings FSG, Variable Rate, 5.29%, 02/13/07(1) (Cost $13,660,000)................ 13,660,000 ------------
PRINCIPAL VALUE --------- ------------ SHORT TERM US GOVERNMENT AGENCY SECURITIES -- 6.5% FEDERAL HOME LOAN BANK -- 2.8% $ 26,210,000 5.41%, 12/28/07............... $ 26,210,000 ------------ FREDDIE MAC -- 3.7% 33,900,000 4.93%, 01/18/07............... 33,811,795 ------------ TOTAL SHORT TERM US GOVERNMENT AGENCY SECURITIES (Cost $60,021,795).......... 60,021,795 ------------ SHORT TERM CORPORATE NOTES -- 15.9% 5,790,000 American Express Bank FSB, Variable Rate, 5.43%, 11/21/07(1).......... 5,795,724 16,900,000 American Express Credit, Series MTNB, Variable Rate, 5.45%, 04/05/07(1).......... 16,900,000 10,440,000 Canadian Imperial Bank of Commerce NY, Variable Rate, 5.33%, 09/21/07(1).......... 10,440,000 34,000,000 Goldman Sachs Group LP -- 144A, Series MTN, Variable Rate, 5.47%, 09/14/07(1).......... 34,036,888 32,730,000 HSBC Finance Corp., Series MTN, Variable Rate, 5.41%, 06/01/07(1).......... 32,741,360 14,000,000 Merrill Lynch & Company, Inc., Series MNT5, Variable Rate, 5.60%, 02/07/07(1).......... 14,000,000 33,850,000 Morgan Stanley, Variable Rate, 5.38%, 02/02/07(1).......... 33,850,000 ------------ TOTAL SHORT TERM CORPORATE NOTES (Cost $147,763,972)... 147,763,972 ------------ TOTAL SECURITIES (Cost $776,087,009)............... 776,087,009 ------------ REPURCHASE AGREEMENTS -- 15.9% 18,000,000 With Barclays Bank Agency Mortgage, dated 12/29/06, 5.30%, due 01/02/07, repurchase proceeds at maturity $18,010,600 (Collateralized by Federal Home Loan Bank, 5.19%, due 06/18/08, with a value of $18,363,335)................ 18,000,000 27,640,000 With Credit Suisse Agency Mortgage, dated 12/29/06, 5.32%, due 01/02/07, repurchase proceeds at maturity $27,656,338 (Collateralized by various Fannie Maes, 4.00%-6.50%, due 07/01/19-12/01/36, with a total value of $28,194,059 and Freddie Mac Gold, 9.00%, due 03/17/08, with a value of $736).................... 27,640,000
See notes to financial statements. 68 MONEY MARKET PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ REPURCHASE AGREEMENTS (CONTINUED) $ 56,245 With Investors Bank & Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $56,275 (Collateralized by Small Business Administration, 8.25%, due 09/25/28, with a value of $59,058)........... $ 56,245 101,810,000 With Warburg Dillon Reed, dated 12/29/06, 5.31%, due 01/02/07, repurchase proceeds at maturity $101,870,068 (Collateralized by various Fannie Maes, 5.50%-6.50%, due 10/01/08-10/01/36, with a total value of $97,290,347 and Freddie Mac Gold, 5.50%, due 06/01/36, with a value of $6,556,116).............. 101,810,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $147,506,245)......... 147,506,245 ------------ Total Investments -- 99.7% (Cost $923,593,254)......... 923,593,254 Other assets less liabilities -- 0.3%......... 2,347,355 ------------ NET ASSETS -- 100.0%.......... $925,940,609 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $923,593,254. - --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 69 HIGH QUALITY BOND PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ US TREASURY SECURITIES -- 2.4% US TREASURY NOTES $10,000,000 4.88%, 05/31/08(8)............. $ 9,998,440 9,500,000 5.00%, 07/31/08(8)............. 9,518,563 ------------ TOTAL US TREASURY SECURITIES (Cost $19,508,234)........... 19,517,003 ------------ US GOVERNMENT AGENCY SECURITIES -- 19.3% ASSET BACKED: MORTGAGE AND HOME EQUITY -- 12.6% 5,400,000 Fannie Mae, Series 2003-32, Class PE, 4.00%, 03/25/26.............. 5,280,536 1,674,851 Fannie Mae, Series 2003-34, Class GT, 4.00%, 01/25/27.............. 1,649,646 1,405,456 Fannie Mae, Series 2003-46, Class PQ, 3.00%, 06/25/19.............. 1,399,333 2,550,000 Fannie Mae, Series 2003-62, Class OD, 3.50%, 04/25/26.............. 2,456,761 1,596,505 Fannie Mae, Series 2003-63, Class GU, 4.00%, 07/25/33.............. 1,571,369 1,044,409 Fannie Mae, Series 2003-67, Class GL, 3.00%, 01/25/25.............. 1,021,243 5,392,013 Fannie Mae, Series 2003-69, Class GJ, 3.50%, 12/25/31.............. 5,121,996 3,819,569 Fannie Mae, Series 2003-92, Class KQ, 3.50%, 06/25/23.............. 3,747,167 1,143,622 Fannie Mae, Series 2004-21, Class QA, 4.00%, 11/25/17.............. 1,136,789 2,974,914 Fannie Mae, Series 2004-70, Class DN, 4.00%, 12/25/29.............. 2,856,360 5,547,799 Fannie Mae, Series 2004-80, Class LG, 4.00%, 10/25/16.............. 5,418,061 6,621,529 Federal Home Loan Bank, Series 00-0582, Class H, 4.75%, 10/25/10.............. 6,577,694 4,657,848 Federal Home Loan Bank, Series 1Y-9009, Class A, 4.06%, 08/25/09.............. 4,531,213 2,415,300 Federal Home Loan Bank, Series 3Q-9009, Class 1, 3.92%, 09/25/09.............. 2,349,109 8,228,486 Freddie Mac, Series 2416, Class PE, 6.00%, 10/15/21.............. 8,320,982 1,216,040 Freddie Mac, Series 2454, Class BG, 6.50%, 08/15/31.............. 1,224,807
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES (CONTINUED) ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 2,236,039 Freddie Mac, Series 2614, Class JA, 3.76%, 03/15/29.............. $ 2,144,523 5,820,982 Freddie Mac, Series 2625, Class JD, 3.25%, 07/15/17.............. 5,487,983 5,202,571 Freddie Mac, Series 2627, Class KP, 2.87%, 12/15/16.............. 4,901,504 5,982,138 Freddie Mac, Series 2630, Class HC, 4.00%, 01/15/17.............. 5,797,149 5,800,000 Freddie Mac, Series 2631, Class CD, 4.00%, 10/15/26.............. 5,630,305 5,980,713 Freddie Mac, Series 2637, Class A, 3.38%, 03/15/18.............. 5,625,746 4,592,442 Freddie Mac, Series 2672, Class HA, 4.00%, 09/15/16.............. 4,444,250 2,483,811 Freddie Mac, Series 2760, Class EA, 4.50%, 04/15/13.............. 2,465,057 2,057,812 Freddie Mac, Series 2782, Class HE, 4.00%, 09/15/17.............. 1,981,826 4,634,447 Freddie Mac, Series 3056, Class AP, 5.50%, 01/15/27.............. 4,646,755 5,650,000 Government National Mortgage Association, Series 2006-67, Class A, 3.95%, 11/16/30.............. 5,508,753 ------------ 103,296,917 ------------ ASSET BACKED: US GOVERNMENT AGENCIES -- 0.6% 5,000,000 Student Loan Marketing Association Student Loan Trust -- 144A, Series 2003-4, Class A5B, 3.39%, 03/15/33.............. 4,836,325 ------------ FANNIE MAE -- 3.0% 7,000,000 3.00%, 03/02/07................ 6,975,177 3,800,000 5.00%, 09/15/08................ 3,797,306 700,586 PL# 254062, 6.00%, 10/01/11.... 706,807 1,670,129 PL# 254754, 4.50%, 05/01/10.... 1,643,368 2,438,903 PL# 254758, 4.50%, 06/01/13.... 2,390,316 1,221,393 PL# 254805, 5.00%, 06/01/13.... 1,211,311 2,350,065 PL# 254807, 5.00%, 07/01/13.... 2,330,664 612,106 PL# 323743, 5.00%, 04/01/14.... 605,717 349,999 PL# 429168, 6.00%, 05/01/13.... 355,576 189,128 PL# 50903, 6.00%, 09/01/08..... 189,625 261,911 PL# 50973, 6.00%, 01/01/09..... 262,600 372,572 PL# 517699, 6.00%, 07/01/14.... 378,454
See notes to financial statements. 70 HIGH QUALITY BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 1,141,735 PL# 545038, 6.00%, 09/01/14.... $ 1,159,637 2,649,752 PL# 555154, 5.50%, 12/01/22.... 2,638,466 134,664 PL# 609771, 6.00%, 09/01/08.... 135,037 ------------ 24,780,061 ------------ FEDERAL HOME LOAN BANK -- 1.5% 7,500,000 4.00%, 04/25/07................ 7,472,820 4,883,950 Series 6T-9009, 3.84%, 11/25/09.............. 4,724,398 ------------ 12,197,218 ------------ FREDDIE MAC -- 0.6% 4,555,000 4.25%, 02/28/07................ 4,548,468 ------------ FREDDIE MAC GOLD -- 0.8% 137,124 PL# E00532, 6.50%, 02/01/13.... 140,270 238,871 PL# E00542, 6.50%, 04/01/13.... 244,374 648,278 PL# E00676, 5.50%, 06/01/14.... 650,797 990,704 PL# E89557, 5.50%, 04/01/17.... 992,698 3,471,186 PL# G40426, 5.50%, 03/01/11.... 3,496,215 808,486 PL# M90802, 4.00%, 03/01/08.... 798,840 ------------ 6,323,194 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.2% 1,840,044 PL# 436708, 5.75%, 12/15/22.... 1,857,248 ------------ TOTAL US GOVERNMENT AGENCY SECURITIES (Cost $160,257,557).......... 157,839,431 ------------ CORPORATE BONDS AND NOTES -- 76.3% BANKS -- 8.7% 5,000,000 American Express Bank FSB, Series BKNT, Floating Rate, 5.41%, 06/22/09(3)........... 5,004,160 4,700,000 American Express Centurion Bank, Series BKNT, 4.38%, 07/30/09.............. 4,618,403 4,330,000 Bank of America Corp., 7.13%, 03/01/09.............. 4,491,002 1,375,000 Bank of America Corp., 7.80%, 02/15/10.............. 1,477,526 6,000,000 Bank of Montreal-Chicago, 7.80%, 04/01/07.............. 6,031,464 4,600,000 Bank of Scotland -- 144A (United Kingdom), 3.50%, 11/30/07.............. 4,525,558 13,100,000 Bank One Corp., 2.63%, 06/30/08.............. 12,601,898 2,650,000 BankBoston NA, Series BKNT, 6.38%, 04/15/08.............. 2,684,636 2,000,000 HBOS Treasury Services PLC -- 144A (United Kingdom), 3.75%, 09/30/08.............. 1,948,422
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 3,025,000 National City Bank, Series BKNT, 4.25%, 01/29/10.............. $ 2,931,192 3,630,000 US Bank NA, Series BKNT, 4.13%, 03/17/08.............. 3,572,675 3,125,000 Wachovia Corp., 5.63%, 12/15/08.............. 3,141,734 7,000,000 Wachovia Corp., Floating Rate, 5.44%, 07/20/07(3)........... 7,006,384 3,000,000 Wells Fargo & Company, 4.20%, 01/15/10.............. 2,924,640 8,500,000 Wells Fargo & Company, Floating Rate, 5.43%, 03/23/10(2)........... 8,513,235 ------------ 71,472,929 ------------ EQUIPMENT RENTAL AND LEASING -- 1.3% 6,675,000 International Lease Finance Corp., 6.38%, 03/15/09.............. 6,822,217 4,000,000 International Lease Finance Corp., 4.75%, 07/01/09.............. 3,953,412 ------------ 10,775,629 ------------ FINANCIAL SERVICES -- 8.7% 2,050,000 Caterpillar Financial Services Corp., Series MTND, 9.50%, 02/06/07.............. 2,054,395 2,900,000 Caterpillar Financial Services Corp., Series MTNF, 3.10%, 05/15/07.............. 2,876,063 5,000,000 Citigroup, Inc., 3.50%, 02/01/08.............. 4,911,305 8,472,000 Citigroup, Inc., 4.63%, 08/03/10.............. 8,327,060 8,155,000 Credit Suisse First Boston USA, Inc., 4.70%, 06/01/09.............. 8,078,017 1,000,000 General Electric Capital Corp., Series MTNA, 8.70%, 03/01/07.............. 1,004,968 2,500,000 General Electric Capital Corp., Series MTNA, 4.00%, 06/15/09.............. 2,435,588 1,500,000 Goldman Sachs Group, Inc., 4.50%, 06/15/10.............. 1,469,264 8,000,000 Goldman Sachs Group, Inc., Series MTNB, Floating Rate, 5.77%, 10/07/11(2)........... 8,092,224 8,060,000 Lehman Brothers Holdings, Inc., 7.00%, 02/01/08.............. 8,198,341 2,750,000 Lehman Brothers Holdings, Inc., Series MTNG, 3.95%, 11/10/09.............. 2,659,954 7,775,000 Merrill Lynch & Company, Inc., Series MTNC, 4.83%, 10/27/08.............. 7,728,622
See notes to financial statements. 71 HIGH QUALITY BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) FINANCIAL SERVICES (CONTINUED) $ 6,000,000 Merrill Lynch & Company, Inc., Series MTNC, 4.13%, 01/15/09.............. $ 5,882,046 2,425,000 Morgan Stanley, 3.63%, 04/01/08.............. 2,376,641 2,354,000 Morgan Stanley, 3.88%, 01/15/09.............. 2,296,612 2,750,000 The Bear Stearns Companies, Inc., 2.88%, 07/02/08.............. 2,657,804 ------------ 71,048,904 ------------ INSURANCE -- 2.5% 10,000,000 MetLife Global Funding I -- 144A, Series MTN, 5.75%, 07/25/11.............. 10,199,770 2,500,000 New York Life Global Funding -- 144A, 3.88%, 01/15/09.............. 2,433,953 5,000,000 New York Life Global Funding -- 144A, Floating Rate, 5.43%, 02/26/07(2)........... 5,001,225 2,785,000 Prudential Financial, Inc., Series MTN, 3.75%, 05/01/08.............. 2,720,034 ------------ 20,354,982 ------------ MACHINERY -- 0.3% 2,000,000 Caterpillar, Inc., 7.25%, 09/15/09.............. 2,101,170 ------------ MANUFACTURING -- 0.6% 4,700,000 Siemens Financiering NV -- 144A (the Netherlands), Floating Rate, 5.42%, 08/14/09(2)........... 4,703,520 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 0.6% 2,525,000 Abbott Laboratories, 3.50%, 02/17/09.............. 2,444,644 2,500,000 Abbott Laboratories, 5.38%, 05/15/09.............. 2,516,215 ------------ 4,960,859 ------------ PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 14.8% 4,500,000 Bay View Auto Trust, Series 2005-LJ1, Class A4, 4.09%, 05/25/12.............. 4,408,001 2,500,000 BMW Vehicle Owner Trust, Series 2006-A, Class A4, 5.07%, 08/25/11.............. 2,494,207 3,000,000 Capital Auto Receivables Asset Trust, Series 2005-1, Class A4, 4.05%, 07/15/09.............. 2,980,921 2,669,033 Capital One Auto Finance Trust, Series 2005-A, Class A3, 4.28%, 07/15/09.............. 2,660,471
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS (CONTINUED) $ 2,000,000 Capital One Auto Finance Trust, Series 2005-BSS, Class A3, 4.08%, 11/15/09.............. $ 1,991,091 1,962,802 Capital One Auto Finance Trust, Series 2005-C, Class A3, 4.61%, 07/15/10.............. 1,955,984 3,500,000 Capital One Prime Auto Receivables Trust, Series 2004-3, Class A4, 3.69%, 06/15/10.............. 3,429,904 3,149,387 Capital One Prime Auto Receivables Trust, Series 2006-1, Class A2, 5.04%, 11/15/08.............. 3,148,785 4,500,000 Carmax Auto Owner Trust, Series 2004-2, Class A4, 3.46%, 09/15/11.............. 4,406,917 3,100,000 Carmax Auto Owner Trust, Series 2005-2, Class A4, 4.34%, 09/15/10.............. 3,051,382 696,082 Chase Manhattan Auto Owner Trust, Series 2004-A, Class CTFS, 2.58%, 09/15/10.............. 681,880 3,500,000 Chase Manhattan Auto Owner Trust, Series 2005-A, Class CTFS, 4.04%, 04/15/11.............. 3,457,069 2,000,000 Chase Manhattan Auto Owner Trust, Series 2006-A, Class A4, 5.36%, 01/15/13.............. 2,012,181 2,500,000 Chase Manhattan Auto Owner Trust, Series 2006-A, Class CTFS, 5.47%, 01/15/13.............. 2,509,377 3,200,000 Chase Manhattan Auto Owner Trust, Series 2006-B, Class A4, 5.11%, 04/15/14.............. 3,207,717 7,500,000 Fifth Third Auto Trust, Series 2004-A, Class A4, 3.70%, 10/20/11.............. 7,401,262 2,250,000 Ford Credit Auto Owner Trust, Series 2005-B, Class B, 4.64%, 04/15/10.............. 2,232,630 1,000,000 Ford Credit Auto Owner Trust, Series 2005-B, Class C, 4.83%, 08/15/10.............. 995,067 2,400,000 Ford Credit Auto Owner Trust, Series 2005-C, Class A3, 4.30%, 08/15/09.............. 2,380,373 3,600,000 Ford Credit Auto Owner Trust, Series 2005-C, Class B, 4.52%, 09/15/10.............. 3,550,900 4,348,597 Ford Credit Auto Owner Trust, Series 2006-A, Class A2A, 5.04%, 09/15/08.............. 4,347,192
See notes to financial statements. 72 HIGH QUALITY BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS (CONTINUED) $ 1,722,067 Franklin Auto Trust, Series 2003-1, Class A4, 2.27%, 05/20/11.............. $ 1,704,086 526,974 Franklin Auto Trust, Series 2004-1, Class A2, 3.57%, 03/16/09.............. 526,072 2,439,591 Harley-Davidson Motorcycle Trust, Series 2004-1, Class A2, 2.53%, 11/15/11.............. 2,381,583 5,000,000 Hertz Vehicle Financing LLC -- 144A, Series 2005-2A, Class A2, 4.93%, 02/25/10.............. 4,973,738 2,000,000 Hertz Vehicle Financing LLC -- 144A, Series 2005-2A, Class A4, 5.01%, 02/25/11.............. 1,993,558 4,500,000 Honda Auto Receivables Owner Trust, Series 2006-1, Class A3, 5.07%, 02/18/10.............. 4,494,931 3,000,000 Hyundai Auto Receivables Trust, Series 2006-B, Class B, 5.19%, 05/15/13.............. 3,001,698 3,500,000 Long Beach Auto Receivables Trust, Series 2005-B, Class A3, 4.41%, 05/15/10.............. 3,476,842 1,686,778 Long Beach Auto Receivables Trust, Series 2006-A, Class A2, 5.36%, 11/15/09.............. 1,687,769 116,828 National City Auto Receivables Trust, Series 2004-A, Class A3, 2.11%, 07/15/08.............. 116,750 4,000,000 Nissan Auto Receivables Owner Trust, Series 2006-B, Class A2, 5.18%, 08/15/08.............. 4,000,398 3,250,000 Onyx Acceptance Owner Trust, Series 2005-A, Class A4, 3.91%, 09/15/11.............. 3,195,028 9,600,000 Susquehanna Auto Lease Trust -- 144A, Series 2005-1, Class A3, 4.43%, 06/16/08.............. 9,539,825 2,000,000 Susquehanna Auto Lease Trust -- 144A, Series 2005-1, Class B, 4.71%, 07/14/08.............. 1,984,700 3,000,000 Susquehanna Auto Lease Trust -- 144A, Series 2005-1, Class C, 5.09%, 11/14/08.............. 2,974,643 3,500,458 WFS Financial Owner Trust, Series 2004-1, Class A4, 2.81%, 08/22/11.............. 3,443,358 4,419,084 World Omni Auto Receivables Trust, Series 2006-A, Class A2, 5.05%, 10/15/08.............. 4,419,369 4,550,000 World Omni Auto Receivables Trust, Series 2006-B, Class A4, 5.12%, 06/15/12.............. 4,556,552 ------------ 121,774,211 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: CREDIT CARDS -- 5.3% $ 8,000,000 Cabela's Master Credit Card Trust -- 144A, Series 2006-3A, Class A1, 5.26%, 10/15/14.............. $ 8,061,250 7,000,000 Capital One Multi-Asset Execution Trust, Series 2006-A6, Class A6, 5.30%, 02/18/14.............. 7,081,435 6,435,000 Citibank Credit Card Issuance Trust, Series 2004-A1, Class A1, 2.55%, 01/20/09.............. 6,429,991 8,000,000 Citibank Credit Card Issuance Trust, Series 2006-A4, Class A4, 5.45%, 05/10/13.............. 8,113,471 1,925,000 Citibank Credit Card Issuance Trust, Series 2006-B2, Class B2, 5.15%, 03/07/11.............. 1,922,633 2,385,000 Discover Card Master Trust I, Series 2002-2, Class A, 5.15%, 10/15/09.............. 2,386,014 1,550,000 Discover Card Master Trust I, Series 2002-2, Class B, 5.45%, 10/15/09.............. 1,550,318 8,000,000 GE Capital Credit Card Master Note Trust, Series 2006-1, Class A, 5.08%, 09/15/12.............. 8,015,258 ------------ 43,560,370 ------------ PRIVATE ASSET BACKED: FINANCIAL SERVICES -- 5.8% 1,388,022 Caterpillar Financial Asset Trust, Series 2004-A, Class A3, 3.13%, 01/26/09.............. 1,377,860 5,000,000 Caterpillar Financial Asset Trust, Series 2005-A, Class A4, 4.10%, 06/25/10.............. 4,928,601 3,000,000 Caterpillar Financial Asset Trust, Series 2006-A, Class B, 5.71%, 06/25/12.............. 3,045,849 2,524,309 Community Program Loan Trust, Series 1987-A, Class A4, 4.50%, 10/01/18.............. 2,485,422 6,398,023 Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A1, 4.79%, 04/10/37.............. 6,341,235 6,821,102 Greenwich Capital Commercial Funding Corp., Series 2006-GG7, Class A1, 5.74%, 12/10/10.............. 6,914,323 1,171,308 Morgan Stanley Capital I, Series 2003-T11, Class A1, 3.26%, 06/13/41.............. 1,144,773 995,125 Morgan Stanley Capital I, Series 2004-T13, Class A1, 2.85%, 09/13/45.............. 967,670 6,435,459 Morgan Stanley Capital I, Series 2005-HQ5, Class A1, 4.52%, 01/14/42.............. 6,352,342
See notes to financial statements. 73 HIGH QUALITY BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: FINANCIAL SERVICES (CONTINUED) $ 2,443,250 Morgan Stanley Capital I, Series 2005-HQ6, Class A1, 4.65%, 08/13/42.............. $ 2,411,621 4,949,613 Morgan Stanley Capital I, Series 2006-HQ10, Class A1, 5.13%, 11/12/41.............. 4,935,414 4,337,648 Morgan Stanley Capital I, Series 2006-IQ11, Class A1, 5.55%, 10/15/42.............. 4,362,077 2,007,165 Public Service New Hampshire Funding LLC, Series 2001-1, Class A2, 5.73%, 11/01/10.............. 2,018,005 ------------ 47,285,192 ------------ PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY -- 13.5% 2,186,048 American General Mortgage Loan Trust, Series 2006-1, Class A1, 5.75%, 12/25/35.............. 2,183,492 880,240 Banc of America Commercial Mortgage, Inc., Series 2002-2, Class A1, 3.37%, 07/11/43.............. 874,943 1,677,118 Banc of America Commercial Mortgage, Inc., Series 2003-2, Class A1, 3.41%, 03/11/41.............. 1,639,246 5,000,000 Banc of America Commercial Mortgage, Inc., Series 2006-4, Class A2, 5.52%, 07/10/46.............. 5,057,559 751,806 Bear Stearns Commercial Mortgage Securities, Inc., Series 1998-C1, Class A1, 6.34%, 06/16/30.............. 753,496 270,068 Bear Stearns Commercial Mortgage Securities, Inc., Series 1999-C1, Class A1, 5.91%, 02/14/31.............. 270,298 789,254 Bear Stearns Commercial Mortgage Securities, Inc., Series 2001-TOP4, Class A1, 5.06%, 11/15/16.............. 785,386 2,038,521 Bear Stearns Commercial Mortgage Securities, Inc., Series 2002-PBW1, Class A1, 3.97%, 11/11/35.............. 1,991,183 1,390,123 Bear Stearns Commercial Mortgage Securities, Inc., Series 2004-PWR5, Class A1, 3.76%, 07/11/42.............. 1,356,970 1,699,296 Bear Stearns Commercial Mortgage Securities, Inc., Series 2005-PWR9, Class A1, 4.50%, 09/11/42.............. 1,672,485
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 3,678,090 Bear Stearns Commercial Mortgage Securities, Inc., Series 2006-T22, Class A1, 5.42%, 04/12/38.............. $ 3,692,181 3,571,688 Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2005-CD1, Class A1, 5.05%, 07/15/44.............. 3,554,980 1,164,835 Commercial Mortgage Pass- Through Certificates, Series 2004-LB2A, Class A1, 2.96%, 03/10/39.............. 1,136,596 4,378,468 Credit Suisse First Boston Mortgage Securities Corp., Series 2001-CP4, Class A2, 5.87%, 12/15/35.............. 4,387,343 1,874,403 Credit Suisse First Boston Mortgage Securities Corp., Series 2003-C3, Class A1, 2.08%, 05/15/38.............. 1,827,328 1,236,744 Credit Suisse First Boston Mortgage Securities Corp., Series 2004-C1, Class A1, 2.25%, 01/15/37.............. 1,219,146 406,607 GE Capital Commercial Mortgage Corp., Series 2001-3, Class A1, 5.56%, 06/10/38.............. 409,347 5,507,915 GE Capital Commercial Mortgage Corp., Series 2002-1A, Class A2, 5.99%, 12/10/35.............. 5,588,595 3,394,725 GE Capital Commercial Mortgage Corp., Series 2002-3A, Class A1, 4.23%, 12/10/37.............. 3,323,502 1,693,528 GE Capital Commercial Mortgage Corp., Series 2004-C3, Class A1, 3.75%, 07/10/39.............. 1,659,234 1,797,290 GE Capital Commercial Mortgage Corp., Series 2005-C1, Class A1, 4.01%, 06/10/48.............. 1,761,698 2,034,795 GMAC Mortgage Corp. Loan Trust, Series 2004-GH1, Class A2, 4.39%, 12/25/25.............. 2,016,001 774,126 Interstar Millennium Trust, Series 2003-3G, Class A2 (Australia), Floating Rate, 5.62%, 09/27/35(2)........... 776,575 1,315,642 Interstar Millennium Trust, Series 2004-2G, Class A (Australia), Floating Rate, 5.56%, 03/14/36(2)........... 1,318,883 715,241 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2002-C2, Class A1, 4.33%, 12/12/34.............. 698,988 3,530,240 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4, Class A1, 4.61%, 10/15/42.............. 3,491,819
See notes to financial statements. 74 HIGH QUALITY BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 1,173,412 LB-UBS Commercial Mortgage Trust, Series 2003-C1, Class A1, 2.72%, 03/15/27.............. $ 1,147,936 1,850,000 LB-UBS Commercial Mortgage Trust, Series 2003-C1, Class A2, 3.32%, 03/15/27.............. 1,807,970 2,095,049 LB-UBS Commercial Mortgage Trust, Series 2003-C3, Class A1, 2.60%, 05/15/27.............. 2,039,198 3,000,000 LB-UBS Commercial Mortgage Trust, Series 2003-C5, Class A2, 3.48%, 07/15/27.............. 2,919,997 1,054,214 LB-UBS Commercial Mortgage Trust, Series 2004-C8, Class A1, 3.94%, 12/15/29.............. 1,037,741 842,632 LB-UBS Commercial Mortgage Trust, Series 2005-C5, Class A1, 4.74%, 09/15/40.............. 834,972 4,243,132 LB-UBS Commercial Mortgage Trust, Series 2005-C7, Class A1, 4.99%, 11/15/30.............. 4,222,613 7,526,944 Nomura Home Equity Loan, Inc., Series 2006-AF1, Class A1, 6.03%, 10/25/36.............. 7,515,184 2,300,000 Permanent Financing PLC, Series 7, Class 2A (United Kingdom), Floating Rate, 5.39%, 09/10/14(2)........... 2,300,585 3,000,000 Popular ABS Mortgage Pass- Through Trust, Series 2005-3, Class AF3, 4.44%, 07/25/35.............. 2,952,675 6,297,034 Structured Adjustable Rate Mortgage Loan, Series 2005-23, Class 1A3, 5.45%, 01/25/36.............. 6,287,379 6,567,682 Structured Adjustable Rate Mortgage Loan, Series 2006-1, Class 5A1, 5.25%, 02/25/36.............. 6,527,169 2,922,893 Wachovia Bank Commercial Mortgage Trust, Series 2003-4, Class A1, 3.00%, 04/15/35.............. 2,858,822 7,810,039 Washington Mutual Mortgage Pass-Through Certificates, WMALT Series 2005-8, Class 1A8, 5.50%, 10/25/35.............. 7,810,438 1,708,639 Wells Fargo Mortgage Backed Securities Trust, Series 2003-11, Class 1A1, 3.50%, 10/25/18.............. 1,680,784 5,139,504 Wells Fargo Mortgage Backed Securities Trust, Series 2005-9, Class 1A1, 4.75%, 10/25/35.............. 5,061,383 ------------ 110,452,120 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: OTHER -- 7.0% $ 5,000,000 ALG Student Loan Trust -- 144A, Series 2006-1A, Class A1, Floating Rate, 5.39%, 10/28/18(2)........... $ 5,003,625 1,089,122 Bear Stearns Asset Backed Securities, Inc., Series 2003-AC3, Class A1, 4.00%, 07/25/33.............. 1,065,959 3,388,368 California Infrastructure PG&E Corp., Series 1997-1, Class A8, 6.48%, 12/26/09.............. 3,415,922 215,883 CIT Equipment Collateral, Series 2004-VT1, Class A3, 2.20%, 03/20/08.............. 215,191 7,170,000 CIT Equipment Collateral, Series 2006-VT1, Class A3, 5.13%, 12/21/09.............. 7,165,463 758,213 CIT RV Trust, Series 1998-A, Class A5, 6.12%, 11/15/13.............. 758,838 1,997,562 CNH Equipment Trust, Series 2004-A, Class A3B, 2.94%, 10/15/08.............. 1,984,182 3,000,000 CNH Equipment Trust, Series 2006-B, Class B, 5.36%, 06/17/13.............. 3,015,311 1,596,462 Connecticut RRB Special Purpose Trust CL&P1, Series 2001-1, Class A3, 5.73%, 03/30/09.............. 1,598,389 1,598,460 Crusade Global Trust, Series 2004-2, Class A1 (Australia), Floating Rate, 5.51%, 11/19/37(2)........... 1,601,015 5,500,000 GE Equipment Midticket LLC, Series 2006-1, Class A2, 5.10%, 05/15/09.............. 5,492,368 3,248,313 Goal Capital Funding Trust, Series 2006-1, Class A1, Floating Rate, 5.37%, 08/25/20(2)........... 3,251,006 3,750,000 Great America Leasing Receivables -- 144A, Series 2006-1, Class A3, 5.34%, 01/15/10.............. 3,754,250 7,000,000 John Deere Owner Trust, Series 2006-A, Class A3, 5.38%, 07/15/10.............. 7,023,424 2,524,929 Marlin Leasing Receivables LLC -- 144A, Series 2005-1A, Class A2, 4.49%, 01/15/08.............. 2,521,509 3,501,000 Marlin Leasing Receivables LLC -- 144A, Series 2006-1A, Class A4, 5.33%, 09/16/13.............. 3,499,906 2,461,375 Nelnet Student Loan Corp., Series 2001-A, Class A1, 5.76%, 07/01/12.............. 2,473,918
See notes to financial statements. 75 HIGH QUALITY BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: OTHER (CONTINUED) $ 801,669 PBG Equipment Trust, Series 1A, Class A, 6.27%, 01/20/12.............. $ 802,665 2,400,000 Providian Gateway Master Trust -- 144A, Series 2004-FA, Class A, 3.65%, 11/15/11.............. 2,365,126 ------------ 57,008,067 ------------ PRIVATE ASSET BACKED: TRANSPORTATION -- 0.9% 2,150,000 E-Trade RV and Marine Trust, Series 2004-1, Class A3, 3.62%, 10/08/18.............. 2,074,189 4,750,879 Railcar Leasing LLC, Series 1, Class A2, 7.13%, 01/15/13.............. 4,942,838 ------------ 7,017,027 ------------ PRIVATE ASSET BACKED: UTILITIES -- 0.2% 1,601,700 PECO Energy Transition Trust, Series 1999-A, Class A6, 6.05%, 03/01/09.............. 1,604,743 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 1.1% 8,575,000 Sprint Capital Corp., 7.63%, 01/30/11.............. 9,189,287 ------------ UTILITIES -- 5.0% 6,725,000 Alabama Power Company, Series G, 5.38%, 10/01/08.............. 6,727,273 5,125,000 Consolidated Edison Company of New York, Inc., 4.70%, 06/15/09.............. 5,068,348 2,900,000 Dominion Resources, Inc., 4.13%, 02/15/08.............. 2,857,474 8,170,000 Exelon Generation Company LLC, 6.95%, 06/15/11.............. 8,615,037 1,625,000 FirstEnergy Corp., Series B, 6.45%, 11/15/11.............. 1,696,328 3,195,000 Northern States Power Company -- Minnesota, 6.88%, 08/01/09.............. 3,309,231 5,200,000 Northern States Power Company -- Wisconsin, 7.64%, 10/01/08.............. 5,385,942 6,664,000 Ohio Edison, 4.00%, 05/01/08.............. 6,541,995 450,000 Xcel Energy, Inc., 3.40%, 07/01/08.............. 436,981 ------------ 40,638,609 ------------ TOTAL CORPORATE BONDS AND NOTES (Cost $628,297,566).......... 623,947,619 ------------
PRINCIPAL VALUE --------- ------------ FOREIGN GOVERNMENT OBLIGATIONS -- 0.5% $ 4,000,000 Province of Ontario (Canada), 5.50%, 10/01/08 (Cost $4,111,482).................. $ 4,024,572 ------------ MUNICIPAL BONDS -- 0.8% TEXAS 6,350,000 Brazos Texas Higher Education Authority, Revenue Bond, Series A-5, 4.91%, 12/01/40 (Cost $6,281,539)............ 6,321,933 ------------ SECURITIES LENDING COLLATERAL -- 1.0% 8,411,400 Securities Lending Collateral Investment (Note 4) (Cost $8,411,400)............ 8,411,400 ------------ TOTAL SECURITIES (Cost $826,867,778).......... 820,061,958 ------------ REPURCHASE AGREEMENTS -- 1.1% 8,819,366 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $8,824,031 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 5.85%, due 03/25/33, with a value of $9,260,334) (Cost $8,819,366)............ 8,819,366 ------------ Total Investments -- 101.4% (Cost $835,687,144).......... 828,881,324 Liabilities less other assets -- (1.4)%............. (11,258,138) ------------ NET ASSETS -- 100.0%........... $817,623,186 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $835,687,144. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation.......... $ 1,255,281 Gross unrealized depreciation.......... (8,061,101) ------------ Net unrealized depreciation............ $ (6,805,820) ============
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 76 INTERMEDIATE GOVERNMENT BOND PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ US TREASURY SECURITIES -- 30.8% US TREASURY NOTES $ 6,640,000 4.00%, 06/15/09(8)............. $ 6,527,691 15,472,000 3.63%, 07/15/09................ 15,068,892 5,844,000 4.88%, 05/31/11(8)............. 5,886,007 5,675,000 4.63%, 10/31/11(8)............. 5,656,159 11,013,000 4.88%, 02/15/12(8)............. 11,117,117 2,144,000 5.13%, 05/15/16(8)............. 2,209,075 ------------ TOTAL US TREASURY SECURITIES (Cost $46,460,908)........... 46,464,941 ------------ US GOVERNMENT AGENCY SECURITIES -- 53.5% FANNIE MAE -- 42.2% 21,670,000 3.88%, 07/15/08................ 21,294,762 20,241,000 6.00%, 05/15/11................ 21,095,777 6,869,000 5.25%, 09/15/16................ 7,006,407 1,377,938 PL# 783602, Variable Rate, 4.88%, 04/01/35(1)........... 1,360,497 2,659,401 PL# 819657, Variable Rate, 4.84%, 03/01/35(1)........... 2,625,208 3,743,434 PL# 820406, 5.00%, 04/01/20.............. 3,681,351 320,060 PL# 821139, 5.00%, 05/01/20.............. 314,752 2,104,944 PL# 833731, 5.00%, 07/01/20.............. 2,070,035 2,562,623 PL# 841029, Variable Rate, 5.09%, 10/01/35(1)........... 2,556,624 1,241,290 PL# 903374, Variable Rate, 5.54%, 10/01/36(1)........... 1,248,316 242,992 PL# 905549, 5.00%, 11/01/21.............. 238,932 ------------ 63,492,661 ------------ FEDERAL HOME LOAN BANK -- 5.7% 5,580,000 4.13%, 04/18/08................ 5,510,947 3,100,000 5.40%, 12/11/08................ 3,090,474 ------------ 8,601,421 ------------ FREDDIE MAC -- 5.6% 454,473 PL# 1G1232, Variable Rate, 5.57%, 10/01/36(1)........... 457,268 3,866,498 PL# 1G1286, Variable Rate, 5.58%, 11/01/36(1)........... 3,890,639 2,964,993 PL# 1G1319, Variable Rate, 5.61%, 11/01/36(1)........... 2,979,771 1,167,766 PL# 1K1226, Variable Rate, 5.26%, 02/01/36(1)........... 1,162,689 ------------ 8,490,367 ------------
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES (CONTINUED) TOTAL US GOVERNMENT AGENCY SECURITIES (Cost $80,502,874)................. $ 80,584,449 ------------ CORPORATE BONDS AND NOTES -- 10.4% PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY $ 1,044,000 Ameriquest Mortgage Securities, Inc., Series 2003-IA1, Class A4, 4.97%, 11/25/33.............. 1,032,491 1,284,000 Banc of America Commercial Mortgage, Inc., Series 2005-6, Class A4, Variable Rate, 5.18%, 09/10/47(1)........... 1,276,667 1,489,000 Citigroup Commercial Mortgage Trust, Series 2004-C2, Class A5, 4.73%, 10/15/41.............. 1,435,351 2,044,000 Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2006-CD2, Class A2, 5.41%, 01/15/46.............. 2,057,420 1,380,000 Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2006-CD2, Class A4, Variable Rate, 5.36%, 01/15/46(1)(8)........ 1,388,853 2,588,000 Commercial Mortgage Pass- Through Certificates, Series 2005-C6, Class A5A, 5.12%, 06/10/44.............. 2,553,199 2,627,000 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP3, Class A4A, 4.94%, 08/15/42.............. 2,555,353 1,241,000 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP9, Class A3, 5.34%, 05/15/47.............. 1,237,151 1,317,000 Merrill Lynch/Countrywide Commercial Mortgage Trust, Series 2006-4, Class A3, 5.17%, 12/12/49.............. 1,298,885 792,000 Renaissance Home Equity Loan Trust, Series 2006-2, Class AF3, 5.80%, 08/25/36.............. 796,458 ------------ TOTAL CORPORATE BONDS AND NOTES (Cost $15,704,564)........... 15,631,828 ------------ SHORT TERM US GOVERNMENT AGENCY SECURITIES -- 3.8% FANNIE MAE -- 2.9% 2,503,000 5.17%, 01/17/07................ 2,496,106 1,849,000 5.13%, 01/22/07................ 1,842,940 ------------ 4,339,046 ------------
See notes to financial statements. 77 INTERMEDIATE GOVERNMENT BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ SHORT TERM US GOVERNMENT AGENCY SECURITIES (CONTINUED) FREDDIE MAC -- 0.9% $ 141,000 Series RB, 5.15%, 01/18/07.............. $ 140,617 1,249,000 Series RB, 5.15%, 02/01/07.............. 1,243,109 ------------ 1,383,726 ------------ TOTAL SHORT TERM US GOVERNMENT AGENCY SECURITIES (Cost $5,722,772)............ 5,722,772 ------------ SECURITIES LENDING COLLATERAL -- 19.5% 29,452,986 Securities Lending Collateral Investment (Note 4) (Cost $29,452,986)........... 29,452,986 ------------ Total Investments -- 118.0% (Cost $177,844,104).......... 177,856,976 Liabilities less other assets -- (18.0)%............ (27,175,808) ------------ NET ASSETS -- 100.0%........... $150,681,168 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $177,870,337. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation............. $318,728 Gross unrealized depreciation............. (332,089) -------- Net unrealized depreciation............... $(13,361) ========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 78 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US TREASURY SECURITIES -- 6.3% US TREASURY BONDS -- 0.3% $ 4,500,000 6.25%, 08/15/23............. $ 5,180,980 390,000 4.50%, 02/15/36(8).......... 370,988 -------------- 5,551,968 -------------- US TREASURY INFLATION INDEX -- 1.7% 10,084,783 2.00%, 07/15/14............. 9,791,306 5,163,864 2.50%, 07/15/16............. 5,204,612 22,308,950 2.00%, 01/15/26............. 20,987,859 -------------- 35,983,777 -------------- US TREASURY NOTES -- 3.3% 44,045,000 4.88%, 08/15/16............. 44,585,256 25,690,000 4.63%, 11/15/16............. 25,529,463 -------------- 70,114,719 -------------- US TREASURY STRIPS -- 1.0% 12,125,000 Zero coupon, 11/15/21....... 5,842,480 38,580,000 Zero coupon, 11/15/27....... 13,988,683 -------------- 19,831,163 -------------- TOTAL US TREASURY SECURITIES (Cost $131,972,814)....... 131,481,627 -------------- US GOVERNMENT AGENCY SECURITIES -- 54.3% ASSET BACKED: MORTGAGE AND HOME EQUITY -- 6.7% 52,887,921 Fannie Mae IO Strips, Series 360, Class 2, 5.00%, 08/01/35........... 12,786,327 24,524,658 Fannie Mae IO Strips, Series 378, Class 4, 5.00%, 11/01/35........... 5,907,742 2,428,778 Fannie Mae, Series 1999-7, Class AB, 6.00%, 03/25/29........... 2,453,246 8,956,387 Fannie Mae, Series 2003-35, Class TE, 5.00%, 05/25/18........... 8,776,391 5,014,015 Fannie Mae, Series 2004-101, Class AR, 5.50%, 01/25/35........... 5,031,834 6,204,838 Fannie Mae, Series 2004-60, Class LB, 5.00%, 04/25/34........... 6,095,740 7,294,548 Fannie Mae, Series 2004-99, Class A0, 5.50%, 01/25/34........... 7,278,202 14,488,082 Fannie Mae, Series 2005-47, Class PA, 5.50%, 09/25/24........... 14,489,692 6,803,850 Fannie Mae, Series 2005-51, Class TA, 5.50%, 12/25/33........... 6,796,720 4,285,196 Fannie Mae, Series 2005-57, Class PA, 5.50%, 05/25/27........... 4,290,645
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 251,416 Fannie Mae, Series 2005-70, Class NA, 5.50%, 08/25/35........... $ 251,739 9,124,887 Fannie Mae, Series 2005-80, Class PB, 5.50%, 04/25/30........... 9,153,255 6,043,824 Freddie Mac, Series 2825, Class VP, 5.50%, 06/15/15........... 6,078,073 4,281,049 Freddie Mac, Series 2877, Class PA, 5.50%, 07/15/33........... 4,290,267 8,549,496 Freddie Mac, Series 2927, Class BA, 5.50%, 10/15/33........... 8,580,283 13,431,634 Freddie Mac, Series 2984, Class NA, 5.50%, 04/15/26........... 13,461,467 6,338,003 Freddie Mac, Series 2996, Class MK, 5.50%, 06/15/35........... 6,361,755 16,075,394 Freddie Mac, Series 3138, Class PA, 5.50%, 02/15/27........... 16,122,744 -------------- 138,206,122 -------------- ASSET BACKED: US GOVERNMENT AGENCIES -- 0.2% 1,971,854 Small Business Administration, Series 2002-P10B, Class I, 5.20%, 08/01/12........... 1,977,634 2,334,847 Small Business Administration, Series 2004-P10A, 4.50%, 02/10/14........... 2,265,693 -------------- 4,243,327 -------------- FANNIE MAE -- 37.8% 25,850,000 2.71%, 01/30/07............. 25,801,066 14,090,000 2.35%, 04/05/07............. 13,990,341 25,000,000 4.38%, 12/17/07............. 24,804,575 14,550,000 7.25%, 01/15/10............. 15,490,206 14,850,000 4.63%, 06/01/10............. 14,689,783 4,100,000 5.25%, 08/01/12............. 4,124,871 10,200,000 4.63%, 05/01/13............. 9,899,753 308,153 PL# 252571, 7.00%, 07/01/29........... 317,786 4,961 PL# 252716, 7.00%, 09/01/29........... 5,116 1,172 PL# 253264, 7.00%, 05/01/30........... 1,207 1,024 PL# 253346, 7.50%, 06/01/30........... 1,066 14,708 PL# 253479, 7.00%, 10/01/30........... 15,149 35,274 PL# 253990, 7.00%, 09/01/16........... 36,276
See notes to financial statements. 79 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 27,105 PL# 254008, 7.00%, 10/01/31........... $ 27,901 377,257 PL# 254346, 6.50%, 06/01/32........... 386,022 323,998 PL# 254406, 6.50%, 08/01/32........... 331,526 15,545 PL# 255032, 5.50%, 12/01/18........... 15,585 210,668 PL# 255950, 6.00%, 09/01/15........... 213,899 632,684 PL# 256137, 6.00%, 02/01/16........... 642,386 699,549 PL# 256335, 6.00%, 07/01/16........... 710,277 936,989 PL# 323842, 5.50%, 07/01/14........... 941,290 51,533 PL# 323967, 7.00%, 10/01/29........... 53,144 2,505,382 PL# 357327, 5.00%, 01/01/18........... 2,471,569 5,056 PL# 492742, 7.00%, 05/01/29........... 5,214 5,001 PL# 503916, 7.50%, 06/01/29........... 5,221 2,218 PL# 508415, 7.00%, 08/01/29........... 2,287 12,444 PL# 515946, 7.00%, 10/01/29........... 12,833 443 PL# 524164, 7.00%, 11/01/29........... 457 114,176 PL# 524657, 7.00%, 01/01/30........... 117,596 24,299 PL# 526053, 7.00%, 12/01/29........... 25,059 519 PL# 527717, 7.50%, 01/01/30........... 542 7,960 PL# 528107, 7.00%, 02/01/30........... 8,209 1,312 PL# 531092, 7.50%, 10/01/29........... 1,370 11,281 PL# 531497, 7.00%, 02/01/30........... 11,619 6,490 PL# 531735, 7.00%, 02/01/30........... 6,684 951 PL# 533841, 7.50%, 12/01/30........... 991 25,355 PL# 535030, 7.00%, 12/01/29........... 26,148 37,886 PL# 535103, 7.00%, 01/01/15........... 38,997 9,652 PL# 535159, 7.00%, 02/01/30........... 9,954 44,591 PL# 535195, 7.00%, 03/01/30........... 45,985
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 14,759 PL# 535277, 7.00%, 04/01/30........... $ 15,220 462,065 PL# 535675, 7.00%, 01/01/16........... 475,312 1,013 PL# 535722, 7.00%, 02/01/31........... 1,043 6,812 PL# 535723, 7.00%, 02/01/31........... 7,016 1,583 PL# 535811, 6.50%, 04/01/31........... 1,621 104,794 PL# 535880, 7.00%, 02/01/31........... 108,013 1,523 PL# 540211, 7.50%, 06/01/30........... 1,586 5,978 PL# 542999, 7.50%, 08/01/30........... 6,227 105,078 PL# 545194, 7.00%, 08/01/31........... 108,160 128,892 PL# 545249, 5.50%, 10/01/16........... 129,302 655,811 PL# 545298, 5.50%, 11/01/16........... 657,899 6,863 PL# 545363, 5.50%, 11/01/16........... 6,885 2,529,706 PL# 545411, 5.50%, 01/01/17........... 2,537,760 32,394 PL# 545477, 7.00%, 03/01/32........... 33,334 255,184 PL# 545759, 6.50%, 07/01/32........... 261,112 995,336 PL# 545760, 6.50%, 07/01/32........... 1,018,461 187,213 PL# 545762, 6.50%, 07/01/32........... 191,563 34,694 PL# 545815, 7.00%, 07/01/32........... 35,712 66,613 PL# 548822, 7.00%, 08/01/30........... 68,609 42,108 PL# 549659, 7.00%, 02/01/16........... 43,304 14,812 PL# 549962, 7.00%, 10/01/30........... 15,256 47,103 PL# 549975, 7.00%, 10/01/30........... 48,514 5,755 PL# 550440, 7.00%, 02/01/16........... 5,918 38 PL# 550544, 7.50%, 09/01/30........... 39 52,915 PL# 554493, 7.00%, 10/01/30........... 54,500 288,057 PL# 555114, 5.50%, 12/01/17........... 288,834 33,781 PL# 555144, 7.00%, 10/01/32........... 34,799
See notes to financial statements. 80 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 446,607 PL# 555254, 6.50%, 01/01/33........... $ 457,357 256,926 PL# 555798, 6.50%, 05/01/33........... 263,110 1,614 PL# 558362, 7.50%, 11/01/30........... 1,681 606 PL# 558519, 7.50%, 11/01/30........... 631 5,894 PL# 559277, 7.00%, 10/01/30........... 6,071 40,977 PL# 559313, 7.00%, 12/01/30........... 42,205 1,281 PL# 559741, 7.50%, 01/01/31........... 1,333 26,145 PL# 560384, 7.00%, 11/01/30........... 26,928 1,453 PL# 560596, 7.50%, 01/01/31........... 1,513 2,854 PL# 561678, 7.50%, 12/01/30........... 2,973 1,496 PL# 564080, 7.50%, 12/01/30........... 1,558 11,005 PL# 564183, 7.00%, 12/01/30........... 11,335 1,738 PL# 564529, 7.50%, 12/01/30........... 1,811 13,765 PL# 566658, 7.00%, 02/01/31........... 14,169 92,463 PL# 572453, 5.50%, 04/01/16........... 92,758 6,429 PL# 575285, 7.50%, 03/01/31........... 6,691 7,155 PL# 579161, 6.50%, 04/01/31........... 7,327 509,090 PL# 580165, 5.50%, 09/01/16........... 510,711 14,348 PL# 580179, 7.00%, 10/01/16........... 14,756 704 PL# 580377, 7.50%, 04/01/31........... 733 57,505 PL# 580515, 5.50%, 04/01/16........... 57,688 9,686 PL# 584811, 7.00%, 05/01/31........... 9,971 136,831 PL# 585248, 7.00%, 06/01/31........... 140,929 227,882 PL# 589120, 5.50%, 11/01/16........... 228,608 1,132 PL# 589405, 7.50%, 06/01/31........... 1,178 10,299 PL# 589893, 7.00%, 06/01/31........... 10,601 4,698 PL# 592129, 7.50%, 06/01/31........... 4,890
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 8,358 PL# 596895, 6.50%, 07/01/31........... $ 8,559 11,790 PL# 598125, 7.00%, 09/01/16........... 12,124 11,173 PL# 602148, 5.50%, 09/01/16........... 11,208 72,252 PL# 604517, 5.50%, 11/01/16........... 72,482 8,605 PL# 606551, 6.50%, 10/01/31........... 8,813 3,086 PL# 606600, 7.00%, 10/01/31........... 3,177 52,931 PL# 607386, 5.50%, 11/01/16........... 53,099 76,460 PL# 607493, 5.50%, 11/01/16........... 76,703 22,477 PL# 610128, 7.00%, 10/01/31........... 23,136 208,812 PL# 610579, 5.50%, 12/01/16........... 209,477 20,192 PL# 611323, 7.00%, 10/01/16........... 20,766 31,309 PL# 612071, 5.50%, 11/01/16........... 31,409 200,511 PL# 614506, 5.50%, 11/01/16........... 201,150 2,025,582 PL# 619054, 5.50%, 02/01/17........... 2,031,048 6,337 PL# 622119, 6.50%, 01/01/32........... 6,489 254,431 PL# 624035, 6.50%, 01/01/32........... 261,031 12,723 PL# 629236, 6.50%, 02/01/32........... 13,018 751,252 PL# 631321, 5.50%, 02/01/17........... 753,279 59,543 PL# 631606, 5.50%, 03/01/17........... 59,703 51,877 PL# 632269, 7.00%, 05/01/32........... 53,398 8,397 PL# 634563, 6.50%, 03/01/32........... 8,592 61,221 PL# 634949, 7.00%, 05/01/32........... 62,996 272,966 PL# 635164, 6.50%, 08/01/32........... 279,308 2,514 PL# 644932, 6.50%, 07/01/32........... 2,572 5,591 PL# 647556, 7.00%, 01/01/30........... 5,766 520,622 PL# 648795, 6.50%, 08/01/32........... 532,718 184,903 PL# 650206, 5.50%, 01/01/18........... 185,402
See notes to financial statements. 81 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 71,219 PL# 650291, 6.50%, 07/01/32........... $ 72,874 36,988 PL# 650891, 6.50%, 07/01/32........... 37,848 263,716 PL# 651649, 6.50%, 08/01/32........... 269,843 1,105,321 PL# 652127, 6.50%, 06/01/32........... 1,131,001 3,511 PL# 663353, 6.50%, 09/01/32........... 3,593 41,270 PL# 664188, 5.50%, 09/01/17........... 41,382 73,920 PL# 664194, 5.50%, 09/01/17........... 74,119 468,004 PL# 670402, 6.50%, 06/01/32........... 478,877 219,503 PL# 675314, 5.50%, 12/01/17........... 220,096 330,499 PL# 676800, 5.50%, 01/01/18........... 331,391 498,693 PL# 679631, 5.50%, 02/01/18........... 499,801 8,932 PL# 681343, 5.50%, 02/01/18........... 8,952 415,138 PL# 683199, 5.50%, 02/01/18........... 416,060 3,546,627 PL# 684231, 5.00%, 01/01/18........... 3,498,761 5,868,984 PL# 687889, 5.50%, 03/01/33........... 5,810,992 908,105 PL# 688521, 5.00%, 03/01/18........... 895,026 940,755 PL# 691189, 6.50%, 09/01/36........... 958,786 925,064 PL# 694200, 4.50%, 05/01/18........... 895,336 5,630 PL# 694372, 6.50%, 11/01/32........... 5,761 319,971 PL# 694380, 5.00%, 03/01/18........... 315,362 87,126 PL# 695925, 5.50%, 05/01/18........... 87,319 1,519,444 PL# 701161, 4.50%, 04/01/18........... 1,469,853 10,972 PL# 701236, 5.50%, 05/01/18........... 10,996 4,964,418 PL# 703443, 5.00%, 05/01/18........... 4,892,917 9,305 PL# 708637, 5.50%, 06/01/18........... 9,325 602,043 PL# 711636, 4.50%, 05/01/18........... 582,394 5,037,919 PL# 711997, 4.50%, 09/01/18........... 4,873,492
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 2,433,472 PL# 720317, 5.00%, 07/01/18........... $ 2,398,424 15,616 PL# 725071, 5.50%, 12/01/18........... 15,651 9,524,033 PL# 725162, 6.00%, 02/01/34........... 9,607,310 19,224,694 PL# 725206, 5.50%, 02/01/34........... 19,034,731 13,484 PL# 725269, 5.50%, 03/01/19........... 13,520 250,223 PL# 725407, 6.50%, 01/01/34........... 256,245 351,958 PL# 725418, 6.50%, 05/01/34........... 360,429 5,494,169 PL# 725519, 5.50%, 05/01/19........... 5,508,998 5,603,021 PL# 725704, 6.00%, 08/01/34........... 5,652,013 13,201,351 PL# 725717, 4.00%, 08/01/19........... 12,445,637 12,272,367 PL# 725946, 5.50%, 11/01/34........... 12,144,633 16,690 PL# 732724, 5.50%, 08/01/18........... 16,727 4,892,630 PL# 735454, 5.50%, 11/01/18........... 4,905,835 29,322,883 PL# 735504, 6.00%, 04/01/35........... 29,599,636 1,319,338 PL# 735611, 5.50%, 03/01/20........... 1,322,899 113,873,722 PL# 735989, 5.50%, 02/01/35........... 112,771,912 180,715 PL# 738632, 5.00%, 11/01/18........... 178,112 11,432 PL# 741355, 5.50%, 10/01/18........... 11,458 5,884,156 PL# 743575, 5.00%, 11/01/18........... 5,799,408 10,923,627 PL# 745140, 5.00%, 11/01/35........... 10,552,819 13,671,814 PL# 745193, 5.50%, 06/01/20........... 13,708,713 25,596,387 PL# 745412, 5.50%, 12/01/35........... 25,329,973 22,950,397 PL# 745832, 6.00%, 04/01/21........... 23,299,145 6,451,709 PL# 745833, 6.00%, 01/01/21........... 6,554,504 603,946 PL# 748257, 4.50%, 10/01/18........... 584,234 6,592 PL# 748655, 6.50%, 09/01/33........... 6,732 2,801 PL# 749118, 5.50%, 11/01/18........... 2,807
See notes to financial statements. 82 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 17,980 PL# 749153, 5.50%, 11/01/18........... $ 18,019 10,529 PL# 753643, 5.50%, 11/01/18........... 10,553 20,066 PL# 755167, 5.50%, 11/01/18........... 20,110 152,209 PL# 757687, 5.50%, 07/01/34........... 150,624 13,898 PL# 759423, 5.50%, 01/01/19........... 13,912 12,025 PL# 761018, 5.50%, 12/01/18........... 12,052 36,510 PL# 761808, 5.50%, 05/01/18........... 36,609 531,674 PL# 766312, 5.50%, 03/01/19........... 532,223 257,243 PL# 768313, 5.50%, 01/01/19........... 257,814 232,291 PL# 781889, 5.50%, 03/01/17........... 233,030 6,666,666 PL# 806549, Variable Rate, 4.57%, 01/01/35(1)........ 6,609,379 1,472,454 PL# 826273, 6.00%, 07/01/20........... 1,492,420 1,835,733 PL# 831361, 5.50%, 03/01/21........... 1,836,039 82,846 PL# 831500, 6.00%, 05/01/16........... 84,117 5,668,160 PL# 831511, 6.00%, 06/01/16........... 5,755,086 935,720 PL# 849239, 5.50%, 01/01/21........... 935,847 9,676,693 PL# 850867, Variable Rate, 5.64%, 01/01/36(1)........ 9,693,921 980,801 PL# 870770, 6.50%, 07/01/36........... 999,600 924,126 PL# 880770, 5.50%, 05/01/21........... 924,280 124,254 PL# 881578, 5.50%, 05/01/21........... 124,275 942,584 PL# 885071, 5.50%, 05/01/21........... 942,741 928,697 PL# 887841, 6.50%, 09/01/36........... 946,497 7,653,886 PL# 891814, 6.50%, 07/01/36........... 7,800,586 2,991,286 PL# 892817, 6.50%, 08/01/36........... 3,048,619 984,058 PL# 892970, 6.50%, 09/01/36........... 1,002,920 997,154 PL# 892975, 6.50%, 09/01/36........... 1,016,266 967,111 PL# 893596, 6.50%, 09/01/36........... 985,647
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 928,594 PL# 893628, 6.50%, 09/01/36........... $ 946,392 955,508 PL# 893833, 6.50%, 10/01/36........... 973,822 997,409 PL# 894979, 6.50%, 09/01/36........... 1,016,526 1,994,893 PL# 894985, 6.50%, 09/01/36........... 2,033,129 991,300 PL# 895303, 6.50%, 09/01/36........... 1,010,300 971,908 PL# 900290, 6.50%, 09/01/36........... 990,536 968,460 PL# 900340, 6.50%, 09/01/36........... 987,022 947,360 PL# 900961, 6.50%, 09/01/36........... 965,518 929,093 PL# 901110, 6.50%, 09/01/36........... 946,900 3,000,000 TBA, 4.50%, 01/01/22........... 2,894,064 40,900,000 TBA, 5.00%, 01/01/22........... 40,209,813 96,400,000 TBA, 5.50%, 01/01/22........... 96,400,001 24,000,000 TBA, 6.00%, 01/01/22........... 24,337,488 23,000,000 TBA, 5.00%, 01/01/37........... 22,209,375 32,000,000 TBA, 5.50%, 01/01/37........... 31,630,016 46,000,000 TBA, 6.00%, 01/01/37........... 46,316,251 7,000,000 TBA, 6.50%, 01/01/37........... 7,133,434 -------------- 784,811,333 -------------- FEDERAL HOME LOAN BANK -- 0.9% 18,840,000 4.00%, 02/01/08............. 18,608,701 -------------- FREDDIE MAC -- 2.8% 16,800,000 4.75%, 06/28/12............. 16,640,131 5,648,266 PL# 1B2853, Variable Rate, 4.29%, 04/01/35(1)........ 5,539,770 11,834,930 PL# 1G1119, Variable Rate, 4.76%, 09/01/35(1)........ 11,600,572 8,775,000 PL# 1G2555, Variable Rate, 6.04%, 11/01/36(1)........ 8,866,182 15,850,000 Series MTN, 5.00%, 12/14/18........... 15,510,794 -------------- 58,157,449 -------------- FREDDIE MAC GOLD -- 4.9% 255,840 PL# A32037, 5.00%, 03/01/35........... 247,021 27,299 PL# A38585, 5.50%, 10/01/35........... 27,011
See notes to financial statements. 83 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FREDDIE MAC GOLD (CONTINUED) $ 427,133 PL# B10307, 4.50%, 10/01/18........... $ 412,791 522,608 PL# B11431, 4.50%, 12/01/18........... 505,061 3,740,099 PL# B11446, 5.00%, 12/01/18........... 3,683,934 51,178 PL# B13285, 4.50%, 04/01/19........... 49,396 725,469 PL# B14218, 4.50%, 05/01/19........... 700,198 1,048,108 PL# B14518, 4.50%, 01/01/20........... 1,011,598 1,620,163 PL# B17118, 4.50%, 11/01/19........... 1,563,727 23,892 PL# B17892, 4.50%, 10/01/19........... 23,090 799,661 PL# B19028, 4.50%, 03/01/20........... 771,061 4,960,677 PL# B19043, 4.50%, 03/01/20........... 4,783,262 24,866 PL# B19177, 4.50%, 05/01/20........... 23,977 979,219 PL# B19187, 4.50%, 04/01/20........... 944,198 194,293 PL# B19188, 4.50%, 05/01/20........... 187,344 208,885 PL# B19272, 4.50%, 05/01/20........... 201,415 539,041 PL# B19621, 5.00%, 07/01/20........... 529,787 1,053,583 PL# C01271, 6.50%, 12/01/31........... 1,078,625 3,208,528 PL# C57150, 6.00%, 05/01/31........... 3,243,016 4,078 PL# C67653, 7.00%, 06/01/32........... 4,194 56,452 PL# C67868, 7.00%, 06/01/32........... 58,053 14,038 PL# C67999, 7.00%, 06/01/32........... 14,436 114,798 PL# C68001, 7.00%, 06/01/32........... 118,052 145,637 PL# C90229, 7.00%, 08/01/18........... 150,947 21,283 PL# E00570, 6.00%, 09/01/13........... 21,602 452,074 PL# E00592, 6.00%, 12/01/13........... 458,937 22,021 PL# E00720, 6.00%, 07/01/14........... 22,358 21,504 PL# E01007, 6.00%, 08/01/16........... 21,825 70,734 PL# E01095, 6.00%, 01/01/17........... 71,782
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FREDDIE MAC GOLD (CONTINUED) $ 440,471 PL# E01490, 5.00%, 11/01/18........... $ 433,921 856,931 PL# E01538, 5.00%, 12/01/18........... 844,082 32,240 PL# E01638, 4.00%, 04/01/19........... 30,395 28,620 PL# E69171, 6.00%, 02/01/13........... 29,059 24,351 PL# E73319, 6.00%, 11/01/13........... 24,724 35,143 PL# E73769, 6.00%, 12/01/13........... 35,681 18,917 PL# E75990, 6.00%, 04/01/14........... 19,196 29,306 PL# E76341, 6.00%, 04/01/14........... 29,748 50,657 PL# E76730, 6.00%, 05/01/14........... 51,421 38,963 PL# E76731, 6.00%, 05/01/14........... 39,551 29,541 PL# E78995, 6.00%, 11/01/14........... 29,987 250,897 PL# E84191, 6.00%, 07/01/16........... 254,602 4,536 PL# E84758, 5.50%, 07/01/16........... 4,547 18,982 PL# E85885, 6.00%, 11/01/16........... 19,262 281,792 PL# E86502, 5.50%, 12/01/16........... 282,515 5,064 PL# E86565, 5.50%, 12/01/16........... 5,077 248,840 PL# E87961, 6.00%, 02/01/17........... 252,515 400,066 PL# E88001, 6.00%, 02/01/17........... 405,896 43,920 PL# E88452, 6.00%, 03/01/17........... 44,560 306,628 PL# E88749, 6.00%, 03/01/17........... 311,156 555,064 PL# E88789, 6.00%, 04/01/17........... 563,153 147,097 PL# E88979, 5.50%, 04/01/17........... 147,393 297,812 PL# E89282, 6.00%, 04/01/17........... 302,152 650,264 PL# E89336, 6.00%, 05/01/17........... 659,740 27,429 PL# E89653, 6.00%, 04/01/17........... 27,834 462,453 PL# E89913, 6.00%, 05/01/17........... 469,192 808,359 PL# E91644, 5.50%, 10/01/17........... 809,985
See notes to financial statements. 84 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) FREDDIE MAC GOLD (CONTINUED) $ 267,269 PL# E91754, 5.50%, 10/01/17........... $ 267,807 359,808 PL# E91774, 5.50%, 10/01/17........... 360,532 173,170 PL# E91968, 5.50%, 10/01/17........... 173,519 344,551 PL# E92113, 5.50%, 10/01/17........... 345,244 24,489 PL# E95352, 4.50%, 04/01/18........... 23,666 52,586 PL# E98821, 4.50%, 09/01/18........... 50,821 1,400,337 PL# G01391, 7.00%, 04/01/32........... 1,441,738 17,393 PL# G11111, 6.00%, 04/01/16........... 17,654 116,918 PL# G11394, 4.50%, 05/01/18........... 112,992 7,292,950 PL# G11618, 4.50%, 05/01/18........... 7,052,909 448,103 PL# G11639, 4.50%, 12/01/19........... 432,494 3,217,074 PL# G11681, 5.00%, 04/01/20........... 3,165,239 9,066,704 PL# G11720, 4.50%, 08/01/20........... 8,750,881 14,037,906 PL# G11769, 5.00%, 10/01/20........... 13,796,910 208,786 PL# G18052, 4.50%, 05/01/20........... 201,319 2,770,409 PL# J00156, 5.00%, 10/01/20........... 2,722,847 665,330 PL# J00726, 5.00%, 12/01/20........... 653,908 3,312,736 PL# M80813, 4.00%, 04/01/10........... 3,238,179 3,000,000 TBA, 5.50%, 01/01/22........... 2,998,125 28,000,000 TBA, 6.00%, 01/01/37........... 28,210,001 -------------- 101,072,827 -------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.9% 122,706 PL# 3173, 6.50%, 12/20/31........... 125,682 1,074 PL# 434615, 7.00%, 11/15/29........... 1,111 187,085 PL# 435071, 7.00%, 03/15/31........... 193,401 23,837 PL# 493966, 7.00%, 06/15/29........... 24,647 64,242 PL# 494742, 7.00%, 04/15/29........... 66,424 1,318 PL# 530260, 7.00%, 02/15/31........... 1,363
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 219,160 PL# 531025, 6.00%, 04/15/32........... $ 222,589 704 PL# 538271, 7.00%, 11/15/31........... 728 84,284 PL# 538312, 6.00%, 02/15/32........... 85,602 121,769 PL# 543989, 7.00%, 03/15/31........... 125,880 797 PL# 547545, 7.00%, 04/15/31........... 824 321,918 PL# 550985, 7.00%, 10/15/31........... 332,785 250 PL# 551549, 7.00%, 07/15/31........... 259 24,177 PL# 552413, 7.00%, 02/15/32........... 24,990 96,968 PL# 554808, 6.00%, 05/15/31........... 98,502 68,498 PL# 555360, 6.00%, 06/15/31........... 69,581 74,846 PL# 555733, 6.00%, 03/15/32........... 76,016 459 PL# 557664, 7.00%, 08/15/31........... 475 55,227 PL# 557678, 7.00%, 08/15/31........... 57,091 3,844 PL# 561050, 7.00%, 05/15/31........... 3,974 639 PL# 561996, 7.00%, 07/15/31........... 660 11,468 PL# 563346, 7.00%, 09/15/31........... 11,855 47,698 PL# 563599, 7.00%, 06/15/32........... 49,302 89,593 PL# 564086, 7.00%, 07/15/31........... 92,617 43,998 PL# 564300, 6.00%, 08/15/31........... 44,694 8,550 PL# 564706, 7.00%, 07/15/31........... 8,839 83,567 PL# 565808, 6.00%, 11/15/31........... 84,888 202,832 PL# 567622, 6.00%, 04/15/32........... 206,005 86,659 PL# 569567, 7.00%, 01/15/32........... 89,573 65,322 PL# 570517, 6.00%, 01/15/32........... 66,344 39,787 PL# 572821, 6.00%, 12/15/31........... 40,416 86,488 PL# 574873, 6.00%, 12/15/31........... 87,856 84,124 PL# 575906, 6.00%, 01/15/32........... 85,440
See notes to financial statements. 85 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- US GOVERNMENT AGENCY SECURITIES (CONTINUED) GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 35,148 PL# 576323, 6.00%, 12/15/31........... $ 35,704 1,291 PL# 579377, 7.00%, 04/15/32........... 1,334 235,703 PL# 581015, 7.00%, 02/15/32........... 243,629 88,391 PL# 581070, 6.00%, 02/15/32........... 89,774 74,772 PL# 582956, 7.00%, 02/15/32........... 77,287 269,332 PL# 587122, 7.00%, 06/15/32........... 278,389 4,998 PL# 587494, 7.00%, 06/15/32........... 5,166 948 PL# 589696, 7.00%, 05/15/32........... 980 42,986 PL# 592030, 6.00%, 02/15/32........... 43,659 17,934 PL# 780802, 6.50%, 05/15/28........... 18,459 30,453 PL# 781113, 7.00%, 11/15/29........... 31,488 183,989 PL# 781148, 6.00%, 07/15/29........... 187,070 94,192 PL# 781276, 6.50%, 04/15/31........... 96,897 27,632 PL# 781287, 7.00%, 05/15/31........... 28,571 43,402 PL# 781324, 7.00%, 07/15/31........... 44,872 237,729 PL# 781328, 7.00%, 09/15/31........... 245,808 179,146 PL# 781330, 6.00%, 09/15/31........... 182,133 48,194 PL# 781496, 6.50%, 09/15/32........... 49,549 63,633 PL# 781548, 7.00%, 11/15/32........... 65,786 36,055 PL# 781584, 7.00%, 05/15/32........... 37,277 6,992,074 PL# 80916, 3.75%, 05/20/34........... 6,873,422 8,000,000 TBA, 6.00%, 01/01/37........... 8,112,495 -------------- 19,130,162 -------------- RESOLUTION FUNDING STRIPS -- 0.1% 1,200,000 Zero coupon, 07/15/18....... 678,732 1,200,000 Zero coupon, 10/15/18....... 669,893 -------------- 1,348,625 -------------- TOTAL US GOVERNMENT AGENCY SECURITIES (Cost $1,129,343,115)..... 1,125,578,546 --------------
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES -- 52.3% AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 0.0% $ 280,000 Daimler Chrysler NA Holding, 4.05%, 06/04/08........... $ 274,111 -------------- BANKS -- 7.5% 85,000 BAC Capital Trust XI, 6.63%, 05/23/36........... 92,040 404,000 Bank of America Corp., 4.50%, 08/01/10........... 395,289 15,675,000 Bank of America Corp., Floating Rate, 5.38%, 03/24/09(2)........ 15,699,735 1,250,000 Bank of Scotland -- 144A (United Kingdom), 3.50%, 11/30/07........... 1,229,771 2,000,000 BankBoston NA, Series BKNT, 6.38%, 03/25/08........... 2,024,352 26,675,000 Barclays Bank PLC New York, Series YCD, Floating Rate, 5.37%, 03/13/09(2)........ 26,700,821 6,250,000 Depfa ACS Bank -- 144A (Ireland), 4.25%, 08/16/10........... 6,081,194 3,850,000 Deutsche Bank AG New York, Series YCD, Variable Rate, 5.34%, 03/15/07(1)........ 3,849,792 2,850,000 HBOS Treasury Services PLC -- 144A (United Kingdom), 3.75%, 09/30/08........... 2,776,501 11,200,000 HSBC Bank USA NA, Series CD, 3.87%, 06/07/07........... 11,129,496 2,600,000 JPMorgan Chase & Company, 5.35%, 03/01/07........... 2,599,579 1,495,000 JPMorgan Chase & Company, 3.63%, 05/01/08........... 1,460,856 2,100,000 JPMorgan Chase & Company, 5.75%, 10/15/08........... 2,111,787 1,100,000 JPMorgan Chase & Company, 7.00%, 11/15/09(4) (6).... 1,152,267 36,375,000 Rabobank Nederland -- 144A, (the Netherlands), Floating Rate, 5.37%, 04/06/09(2)........ 36,407,155 2,990,000 SunTrust Banks, Inc., 3.63%, 10/15/07........... 2,950,236 2,000,000 SunTrust Banks, Inc., 4.00%, 10/15/08........... 1,955,316 1,535,000 SunTrust Banks, Inc., Series CD, 4.42%, 06/15/09........... 1,505,609 2,275,000 Swedish Export Credit (Sweden), 2.88%, 01/26/07........... 2,271,824 2,150,000 The Bank of New York Company, Inc., Series BKNT, 3.80%, 02/01/08........... 2,115,744
See notes to financial statements. 86 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 980,000 UBS Preferred Funding Trust I, Variable Rate, 8.62%, perpetual (1)...... $ 1,083,423 490,000 US Bancorp, Series MTNN, 3.95%, 08/23/07........... 485,785 3,040,000 US Bank NA, 2.40%, 03/12/07........... 3,021,359 4,315,000 US Bank NA, Series BKNT, 4.40%, 08/15/08........... 4,260,726 540,000 Wachovia Bank NA, Series BKNT, 4.38%, 08/15/08........... 532,510 9,125,000 Wachovia Bank NA, Series DPNT, Floating Rate, 5.41%, 03/23/09(2)........ 9,131,816 2,340,000 Wachovia Corp., 6.30%, 04/15/08........... 2,366,896 2,760,000 Wells Fargo & Company, 4.20%, 01/15/10........... 2,690,669 4,090,000 Wells Fargo & Company, 4.63%, 08/09/10........... 4,016,977 4,525,000 Wells Fargo & Company, 4.88%, 01/12/11........... 4,484,108 -------------- 156,583,633 -------------- BROADCAST SERVICES/MEDIA -- 0.9% 320,000 British Sky Broadcasting Group Financing PLC -- 144A (United Kingdom), 6.50%, 10/15/35........... 317,489 5,374,000 Comcast Cable Communications Holdings, 8.38%, 03/15/13........... 6,128,853 1,800,000 Comcast Cable Communications, Inc., 6.75%, 01/30/11........... 1,887,692 965,000 Comcast Corp., 7.05%, 03/15/33........... 1,035,060 465,000 Cox Communications, Inc., 7.75%, 11/01/10........... 500,513 30,000 Echostar DBS Corp., 6.38%, 10/01/11........... 29,888 195,000 Echostar DBS Corp., 7.00%, 10/01/13........... 195,731 200,000 Echostar DBS Corp., 7.13%, 02/01/16........... 201,000 1,070,000 News America Holdings, 7.63%, 11/30/28........... 1,203,216 260,000 News America, Inc., 7.28%, 06/30/28........... 280,595 1,675,000 TCI Communications, Inc., 7.13%, 02/15/28........... 1,792,895 725,000 Time Warner Entertainment, 8.38%, 07/15/33........... 878,832 1,910,000 Time Warner, Inc., 7.57%, 02/01/24........... 2,104,150
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) BROADCAST SERVICES/MEDIA (CONTINUED) $ 2,760,000 Time Warner, Inc., 6.95%, 01/15/28........... $ 2,904,475 -------------- 19,460,389 -------------- CHEMICALS -- 0.1% 590,000 Lyondell Chemical Company, 8.00%, 09/15/14........... 615,075 980,000 Lyondell Chemical Company, 8.25%, 09/15/16........... 1,033,900 -------------- 1,648,975 -------------- COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 0.0% 345,000 Seagate Technology HDD Holdings (Cayman Islands), 6.80%, 10/01/16(8)........ 348,450 -------------- CONSTRUCTION SERVICES AND SUPPLIES -- 0.1% 2,875,000 Belvoir Land LLC -- 144A, 5.40%, 12/15/47........... 2,633,615 -------------- ELECTRONICS -- 0.0% 155,000 L-3 Communications Corp., Series B, 6.38%, 10/15/15........... 154,225 -------------- EQUIPMENT RENTAL AND LEASING -- 0.0% 225,000 United Rentals North America, Inc., 6.50%, 02/15/12........... 223,313 -------------- FINANCIAL SERVICES -- 6.4% 390,000 American Real Estate Partners, LP/American Real Estate Finance Corp., 8.13%, 06/01/12........... 404,625 225,000 American Real Estate Partners, LP/American Real Estate Finance Corp., 7.13%, 02/15/13........... 227,250 9,050,000 Citigroup, Inc., 3.50%, 02/01/08........... 8,889,462 14,330,000 Citigroup, Inc., 3.63%, 02/09/09(4) (6).... 13,913,155 820,000 Citigroup, Inc., 6.20%, 03/15/09........... 836,503 8,000,000 Citigroup, Inc., 4.13%, 02/22/10........... 7,766,000 2,300,000 Citigroup, Inc., 6.13%, 08/25/36........... 2,403,332 8,225,000 Eksportfinans ASA, Series MTN (Norway), 3.38%, 01/15/08........... 8,068,454 2,675,000 Ford Motor Credit Company, 5.80%, 01/12/09........... 2,627,661 14,675,000 General Electric Capital Corp., 5.00%, 11/15/11........... 14,582,958
See notes to financial statements. 87 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) FINANCIAL SERVICES (CONTINUED) $ 2,000,000 General Electric Capital Corp., Series MTNA, 6.50%, 12/10/07........... $ 2,022,392 11,925,000 General Electric Capital Corp., Series MTNA, 4.13%, 09/01/09........... 11,634,054 22,250,000 General Electric Capital Corp., Series MTNA, Variable Rate, 5.42%, 01/15/08(1)........ 22,277,856 2,925,000 HSBC Finance Corp., 6.50%, 11/15/08........... 2,991,348 7,310,000 Morgan Stanley, 5.05%, 01/21/11........... 7,269,071 425,000 Morgan Stanley, 6.75%, 04/15/11........... 449,630 17,410,000 Morgan Stanley, Series MTN, Floating Rate, 5.40%, 03/07/08(2)........ 17,428,610 350,000 Nationwide Building Society -- 144A (United Kingdom), 2.63%, 01/30/07........... 349,326 4,000,000 Nationwide Building Society -- 144A (United Kingdom), 3.50%, 07/31/07........... 3,957,432 355,000 Nationwide Building Society -- 144A (United Kingdom), 4.25%, 02/01/10........... 344,171 1,000,000 The Bear Stearns Companies, Inc., Series MTNB, 4.55%, 06/23/10........... 979,413 2,475,000 TIAA Global Markets -- 144A, 3.88%, 01/22/08........... 2,434,502 1,955,000 USAA Capital Corp., Series MTNB, 4.00%, 12/10/07........... 1,928,983 -------------- 133,786,188 -------------- INSURANCE -- 0.7% 1,775,000 ASIF Global Financial XXIII -- 144A, 3.90%, 10/22/08........... 1,732,327 2,000,000 Berkshire Hathaway Finance Corp., 3.40%, 07/02/07........... 1,982,780 2,850,000 Berkshire Hathaway Finance Corp., 3.38%, 10/15/08........... 2,763,314 2,815,000 Berkshire Hathaway Finance Corp., 4.13%, 01/15/10........... 2,737,776 4,455,000 MetLife, Inc., Variable Rate, 6.40%, 12/15/66(1)........ 4,490,440 1,600,000 New York Life Global Funding -- 144A, 3.88%, 01/15/09........... 1,557,730 -------------- 15,264,367 --------------
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) LEISURE AND RECREATION -- 0.1% $ 400,000 Harrah's Operating Company, Inc., 5.75%, 10/01/17........... $ 335,758 760,000 MGM MIRAGE, 6.00%, 10/01/09........... 761,900 325,000 Mohegan Tribal Gaming Authority, 6.13%, 02/15/13........... 324,188 465,000 TDS Investor Corp. -- 144A, 9.88%, 09/01/14........... 469,650 -------------- 1,891,496 -------------- MACHINERY -- 0.1% 2,150,000 Atlantic Marine, Inc. -- 144A, 5.34%, 12/01/50........... 2,043,726 -------------- MANUFACTURING -- 0.1% 395,000 Briggs & Stratton Corp., 8.88%, 03/15/11........... 429,563 1,575,000 Tyco International Group SA (Luxembourg), 6.38%, 10/15/11........... 1,649,916 -------------- 2,079,479 -------------- MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 0.3% 1,536,000 Triad Hospitals, Inc., 7.00%, 11/15/13........... 1,553,280 3,600,000 WellPoint, Inc., 5.95%, 12/15/34........... 3,553,985 1,295,000 WellPoint, Inc., 5.85%, 01/15/36........... 1,262,335 -------------- 6,369,600 -------------- METALS AND MINING -- 0.1% 85,000 International Steel Group, 6.50%, 04/15/14........... 87,763 1,999,000 Ispat Inland ULC (Canada), 9.75%, 04/01/14........... 2,236,837 -------------- 2,324,600 -------------- OIL, COAL AND GAS -- 0.6% 25,000 ANR Pipeline Company, 9.63%, 11/01/21........... 33,301 10,000 ANR Pipeline Company, 7.38%, 02/15/24........... 11,261 210,000 Chesapeake Energy Corp., 6.38%, 06/15/15........... 208,950 90,000 Chesapeake Energy Corp., 6.25%, 01/15/18........... 87,075 275,000 Chesapeake Energy Corp., 6.88%, 11/15/20........... 271,563 270,000 Colorado Interstate Gas, 6.80%, 11/15/15........... 282,091 230,000 Compton Petroleum Finance Corp. (Canada), 7.63%, 12/01/13........... 223,100
See notes to financial statements. 88 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) OIL, COAL AND GAS (CONTINUED) $ 1,425,000 Consolidated Natural Gas, Series A, 5.00%, 03/01/14........... $ 1,376,435 365,000 El Paso Natural Gas, 8.63%, 01/15/22........... 443,872 15,000 El Paso Natural Gas, 8.38%, 06/15/32........... 18,239 2,600,000 Enterprise Products Operating LP, 4.95%, 06/01/10........... 2,558,071 1,225,000 Enterprise Products Operating LP, Series B, 4.00%, 10/15/07........... 1,210,242 190,000 KCS Energy, Inc., 7.13%, 04/01/12........... 185,725 725,000 Northwest Pipeline Corp., 8.13%, 03/01/10........... 758,531 1,890,000 Sabine Pass LNG, LP -- 144A, 7.50%, 11/30/16........... 1,887,638 200,000 Suncor Energy, Inc. (Canada), 5.95%, 12/01/34........... 201,895 35,000 Targa Resources, Inc. -- 144A, 8.50%, 11/01/13........... 35,438 935,000 Transcontinental Gas Pipe Line Corp., Series B, 8.88%, 07/15/12........... 1,061,225 480,000 Williams Companies, Inc., 7.63%, 07/15/19........... 516,000 225,000 Williams Companies, Inc., 7.75%, 06/15/31........... 237,375 -------------- 11,608,027 -------------- PAPER AND FOREST PRODUCTS -- 0.1% 590,000 Bowater Canada Finance (Canada), 7.95%, 11/15/11........... 581,150 400,000 Catalyst Paper Corp., Series D (Canada), 8.63%, 06/15/11........... 407,000 880,000 Domtar, Inc. (Canada), 7.13%, 08/15/15........... 866,800 -------------- 1,854,950 -------------- PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 0.3% 170,000 Bio-Rad Laboratories, Inc., 7.50%, 08/15/13........... 175,950 530,000 Bio-Rad Laboratories, Inc., 6.13%, 12/15/14........... 515,425 3,075,000 Bristol-Myers Squibb, 5.88%, 11/15/36........... 3,036,414 600,000 Bristol-Myers Squibb, 6.88%, 08/01/97........... 641,845 1,580,000 Wyeth, 6.00%, 02/15/36(8)........ 1,622,924 -------------- 5,992,558 --------------
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) PRINTING AND PUBLISHING -- 0.1% $ 1,070,000 Idearc, Inc. -- 144A, 8.00%, 11/15/16........... $ 1,091,400 -------------- PRIVATE ASSET BACKED: AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 3.5% 13,690,744 Daimler Chrysler Auto Trust, Series 2005-B, Class A3, 4.04%, 09/08/09........... 13,602,924 14,770,000 Daimler Chrysler Auto Trust, Series 2006-B, Class A3, 5.33%, 08/08/10........... 14,809,204 11,364,156 Ford Credit Auto Owner Trust, Series 2005-A, Class A3, 3.48%, 11/15/08........... 11,300,481 9,215,910 Ford Credit Auto Owner Trust, Series 2005-B, Class A3, 4.17%, 01/15/09........... 9,171,764 18,911,000 Nissan Auto Receivables Owner Trust, Series 2006-B, Class A4, 5.22%, 11/15/11........... 18,989,015 5,644,455 Wachovia Auto Owner Trust, Series 2004-A, Class A3, 3.19%, 06/20/08........... 5,627,511 -------------- 73,500,899 -------------- PRIVATE ASSET BACKED: BANKS -- 0.2% 3,983,047 Bank of America Alternative Loan Trust, Series 2004-7, Class 4A1, 5.00%, 08/25/19........... 3,895,918 -------------- PRIVATE ASSET BACKED: CREDIT CARDS -- 3.9% 14,000,000 American Express Credit Account Master Trust, Series 2005-3, Class A, Floating Rate, 5.35%, 01/18/11(3)........ 13,986,287 12,075,000 Chase Issuance Trust, Series 2004-A9, Class A9, 3.22%, 06/15/10........... 11,895,217 14,950,000 Citibank Credit Card Issuance Trust, Series 2004-A1, Class A1, 2.55%, 01/20/09........... 14,938,363 14,850,000 Citibank Credit Card Issuance Trust, Series 2004-A4, Class A4, 3.20%, 08/24/09........... 14,661,055 15,125,000 Citibank Credit Card Issuance Trust, Series 2006-A2, Class A2, 4.85%, 02/10/11........... 15,055,203 11,500,000 MBNA Credit Card Master Note Trust, Series 2003-A6, Class A6, 2.75%, 10/15/10........... 11,137,928 -------------- 81,674,053 --------------
See notes to financial statements. 89 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: FINANCIAL SERVICES -- 2.5% $ 2,805,000 Greenwich Capital Commercial Funding Corp., Series 2004-GG1, Class A4, 4.76%, 06/10/36........... $ 2,769,082 11,200,000 Greenwich Capital Commercial Funding Corp., Series 2005-GG3, Class A3, 4.57%, 08/10/42........... 10,881,518 882,468 Morgan Stanley Capital I, Series 1998-WF1, Class A2, 6.55%, 03/15/30........... 886,448 2,914,103 Morgan Stanley Capital I, Series 1999-FNV1, Class A2, 6.53%, 03/15/31........... 2,963,944 5,930,235 SLM Student Loan Trust, Series 2005-5, Class A1, Floating Rate, 5.38%, 01/25/18(2)........ 5,936,531 14,200,000 SLM Student Loan Trust, Series 2005-6, Class A5B, Floating Rate, 5.39%, 07/27/26(2)........ 14,220,105 14,030,000 Washington Mutual Asset Securities Corp. -- 144A, Series 2005-C1A, Class A2, 5.15%, 05/25/36........... 13,991,555 -------------- 51,649,183 -------------- PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY -- 20.7% 7,195,808 ACE Securities Corp., Series 2006-HE1, Class A2A, Floating Rate, 5.43%, 02/25/36(3)........ 7,201,784 11,960,000 Banc of America Commercial Mortgage, Inc., Series 2000-1, Class A2A, 7.33%, 11/15/31........... 12,515,782 8,849,023 Banc of America Commercial Mortgage, Inc., Series 2001-1, Class A2, 6.50%, 04/15/36........... 9,191,031 16,715,000 Banc of America Commercial Mortgage, Inc., Series 2002-2, Class A3, 5.12%, 07/11/43........... 16,623,571 11,170,000 Banc of America Commercial Mortgage, Inc., Series 2002-PB2, Class A4, 6.19%, 06/11/35........... 11,623,604 625,833 Bear Stearns Commercial Mortgage Securities, Inc., Series 2001, Class A1, 6.08%, 02/15/35........... 633,933 2,545,000 Bear Stearns Commercial Mortgage Securities, Inc., Series 2005-PWR8, Class A4, 4.67%, 06/11/41........... 2,437,970
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 6,246,161 Carrington Mortgage Loan Trust, Series 2006-OPT1, Class A1, Floating Rate, 5.41%, 02/25/36(3)........ $ 6,251,405 3,475,000 Chase Commercial Mortgage Securities Corp., Series 2000-3, Class A2, 7.32%, 10/15/32........... 3,681,327 5,237,351 Commercial Mortgage Acceptance Corp., Series 1998-C2, Class A2, 6.03%, 09/15/30........... 5,260,589 2,482,799 Countrywide Asset-Backed Certificates, Series 2004-13, Class AV4, Floating Rate, 5.64%, 06/25/35(3)........ 2,485,495 1,438,993 Countrywide Asset-Backed Certificates, Series 2005-12, Class 2A1, Floating Rate, 5.46%, 02/25/36(3)........ 1,440,007 2,480,167 Countrywide Asset-Backed Certificates, Series 2005-BC5, Class 3A1, Floating Rate, 5.45%, 01/25/36(3)........ 2,481,981 6,033,845 Countrywide Asset-Backed Certificates, Series 2005-IM3, Class A1, Floating Rate, 5.47%, 03/25/36(3)........ 6,038,484 4,931,406 Countrywide Asset-Backed Certificates, Series 2006-IM1, Class A1, Floating Rate, 5.44%, 04/25/36(3)........ 4,935,246 22,729,657 Credit Suisse First Boston Mortgage Securities Corp., Series 1998-C2, Class A2, 6.30%, 11/11/30........... 23,054,544 14,955,000 Credit Suisse First Boston Mortgage Securities Corp., Series 2002-CKS4, Class A2, 5.18%, 11/15/36........... 14,890,597 13,110,000 Credit Suisse First Boston Mortgage Securities Corp., Series 2003-C3, Class A5, 3.94%, 05/15/38........... 12,183,210 7,998,213 Credit Suisse Mortgage Capital Certificates, Series 2006-3, Class 1A1A, Floating Rate, 5.41%, 04/25/36(3)........ 8,005,537 4,604,922 DLJ Commercial Mortgage Corp., Series 2000-CKP1, Class A1B, 7.18%, 11/10/33........... 4,859,500 10,667,808 Fieldstone Mortgage Investment Corp., Series 2006-1, Class A1, Floating Rate, 5.43%, 05/25/36(3)........ 10,675,831
See notes to financial statements. 90 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 9,743,330 First Franklin Mortgage Loan Asset Backed Certificates, Series 2006-FF4, Class A1, Floating Rate, 5.42%, 03/25/36(3)........ $ 9,751,657 12,570,000 First Union National Bank Commercial Mortgage, Series 2001-C2, Class A2, 6.66%, 01/12/43........... 13,195,776 10,380,000 GE Capital Commercial Mortgage Corp., Series 2002-1A, Class A3, 6.27%, 12/10/35........... 10,851,325 11,875,000 GE Capital Commercial Mortgage Corp., Series 2002-2A, Class A3, 5.35%, 08/11/36........... 11,938,179 6,077,844 GMAC Commercial Mortgage Securities, Inc., Series 1999-C2, Class A2, 6.95%, 09/15/33........... 6,269,233 6,122,415 GMAC Commercial Mortgage Securities, Inc., Series 1999-C3, Class A2, 7.18%, 08/15/36........... 6,344,931 3,175,000 GS Mortgage Securities Corp. II, Series 2005-GG4, Class A4A, 4.75%, 07/10/39........... 3,060,404 11,626,774 Harborview Mortgage Loan Trust, Series 2006-11, Class A1A, Floating Rate, 5.49%, 12/19/36(3)........ 11,638,777 10,490,000 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2001-C1, Class A3, 5.86%, 10/12/35........... 10,744,951 6,650,000 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2001-CIB2, Class A3, 6.43%, 04/15/35........... 6,949,886 9,444,379 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2001-CIBC, Class A3, 6.26%, 03/15/33........... 9,740,834 9,350,000 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2005-CB12, Class A4, 4.90%, 09/12/37........... 9,079,098 10,900,000 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2006-CB17, Class A4, 5.43%, 12/12/43........... 10,962,094 18,955,561 JPMorgan Mortgage Trust, Series 2006-A2, Class 4A1, Floating Rate, 3.88%, 08/25/34(3)........ 18,577,454
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 7,215,725 LB Commercial Conduit Mortgage Trust, Series 1998-C4, Class A1B, 6.21%, 10/15/35........... $ 7,300,149 12,900,000 LB-UBS Commercial Mortgage Trust, Series 2000-C3, Class A2, 7.95%, 05/15/25........... 13,799,521 6,830,000 LB-UBS Commercial Mortgage Trust, Series 2000-C4, Class A2, 7.37%, 08/15/26........... 7,237,225 7,395,000 LB-UBS Commercial Mortgage Trust, Series 2003-C7, Class A3, 4.56%, 09/15/27........... 7,224,713 9,100,000 LB-UBS Commercial Mortgage Trust, Series 2004-C8, Class A4, 4.51%, 12/15/29........... 8,825,815 11,910,000 LB-UBS Commercial Mortgage Trust, Series 2006-C7, Class A3, 5.35%, 11/15/38........... 11,917,145 11,086,750 New Century Home Equity Loan Trust, Series 2006-1, Class A2A, Floating Rate, 5.41%, 05/25/36(3)........ 11,094,802 12,401,789 Popular ABS Mortgage Pass-Through Trust, Series 2006-D, Class A1, Floating Rate, 5.38%, 11/25/36(3)........ 12,408,638 7,866,161 Residential Asset Mortgage Products, Inc., Series 2006-RS2, Class A1, Floating Rate, 5.43%, 03/25/36(3)........ 7,872,632 12,740,189 Residential Asset Securitization Trust, Series 2005-A14, Class A4, 5.50%, 12/25/35........... 12,745,819 9,360,043 Salomon Brothers Mortgage Securities VII, Series 1999-C1, Class A2, Floating Rate, 7.08%, 05/18/32(3)........ 9,594,968 9,099,504 Salomon Brothers Mortgage Securities VII, Series 2001-C2, Class A3, 6.50%, 10/13/11........... 9,547,022 4,602,748 Structured Asset Investment Loan Trust, Series 2006-2, Class A1, Floating Rate, 5.41%, 04/25/36(3)........ 4,605,929 -------------- 429,750,405 --------------
See notes to financial statements. 91 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: OTHER -- 0.7% $ 4,652,304 Structured Asset Securities Corp. -- 144A, Series 2003-AL2, Class A, 3.36%, 01/25/31........... $ 4,268,924 10,463,992 Terra LNR, Ltd. -- 144A, Series 2006-1A, Class A1, Floating Rate (Cayman Islands), 5.48%, 06/15/17(3)........ 10,463,992 -------------- 14,732,916 -------------- PRIVATE ASSET BACKED: UTILITIES -- 0.4% 8,000,000 Peco Energy Transition Trust, Series 2000-A, Class A4, 7.65%, 03/01/10........... 8,496,537 -------------- REAL ESTATE INVESTMENT TRUSTS -- 0.4% 910,000 AvalonBay Communities, Series MTN, 6.63%, 09/15/11........... 956,986 725,000 The Rouse Company, 3.63%, 03/15/09........... 689,811 4,135,000 The Rouse Company, 5.38%, 11/26/13........... 3,863,766 2,200,000 The Rouse Company/TRC Co-issuer, Inc. -- 144A, 6.75%, 05/01/13........... 2,220,354 -------------- 7,730,917 -------------- RETAIL -- 0.1% 430,000 Federated Department Stores, Inc., 6.79%, 07/15/27........... 431,170 395,000 May Department Stores Company, 6.65%, 07/15/24........... 392,365 295,000 May Department Stores Company, 6.70%, 07/15/34........... 291,884 -------------- 1,115,419 -------------- SEMICONDUCTORS -- 0.2% 1,760,000 Freescale Semiconductor -- 144A, 9.13%, 12/15/14(12)....... 1,757,800 700,000 Freescale Semiconductor -- 144A, Floating Rate, 9.24%, 12/15/14(2)........ 697,375 945,000 Momentive Performance Materials -- 144A, 10.13%, 12/01/14.......... 954,450 -------------- 3,409,625 -------------- TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 1.6% 625,000 America Movil SA de CV (Mexico), 6.38%, 03/01/35........... 612,902
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) $ 810,000 Cincinnati Bell, Inc., 7.25%, 07/15/13........... $ 842,400 550,000 Intelsat Bermuda, Ltd. -- 144A (Bermuda), 9.25%, 06/15/16........... 594,000 2,350,000 New England Telephone & Telegraph, 7.88%, 11/15/29........... 2,571,097 970,000 New Jersey Bell Telephone, 7.85%, 11/15/29........... 1,088,397 545,000 PanAmSat Corp. -- 144A, 9.00%, 06/15/16........... 579,744 860,000 Qwest Corp., 7.88%, 09/01/11........... 920,200 675,000 Qwest Corp., Floating Rate, 8.61%, 06/15/13(2)........ 734,063 50,000 Rogers Wireless, Inc. (Canada), 7.25%, 12/15/12........... 53,250 990,000 Rogers Wireless, Inc. (Canada), 7.50%, 03/15/15........... 1,079,100 1,115,000 Sprint Capital Corp., 8.75%, 03/15/32........... 1,345,824 1,725,000 Telecom Italia Capital (Luxembourg), 5.25%, 10/01/15........... 1,614,096 1,105,000 Telecom Italia Capital (Luxembourg), 6.00%, 09/30/34........... 1,005,401 1,825,000 Telecom Italia Capital (Luxembourg), 7.20%, 07/18/36........... 1,912,584 75,000 Telefonica Emisiones SAU (Spain), 6.42%, 06/20/16........... 77,508 2,950,000 Telefonica Emisiones SAU (Spain), 7.05%, 06/20/36........... 3,143,449 850,000 Telefonica Europe BV (the Netherlands), 7.75%, 09/15/10........... 913,671 215,000 Verizon Maryland, Inc., Series B, 5.13%, 06/15/33........... 176,956 1,470,000 Vodafone Group PLC (United Kingdom), 5.00%, 12/16/13........... 1,422,798 500,000 Vodafone Group PLC (United Kingdom), 5.00%, 09/15/15........... 476,783 7,910,000 Vodafone Group PLC (United Kingdom), Floating Rate, 5.45%, 12/28/07(2)........ 7,916,075 890,000 Wind Acquisition Finance SA -- 144A (Luxembourg), 10.75%, 12/01/15.......... 1,016,825 1,375,000 Windstream Corp. -- 144A, 8.13%, 08/01/13........... 1,495,313
See notes to financial statements. 92 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- CORPORATE BONDS AND NOTES (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) $ 945,000 Windstream Corp. -- 144A, 8.63%, 08/01/16........... $ 1,039,500 -------------- 32,631,936 -------------- TRANSPORTATION -- 0.0% 560,000 Overseas Shipholding Group, 7.50%, 02/15/24........... 571,900 -------------- UTILITIES -- 0.6% 346,407 AES Ironwood LLC, 8.86%, 11/30/25........... 390,574 235,000 AES Red Oak LLC, Series B, 9.20%, 11/30/29........... 266,138 2,735,000 Centerpoint Energy, Inc., Series B, 7.25%, 09/01/10........... 2,883,970 299,756 Elwood Energy LLC, 8.16%, 07/05/26........... 314,675 1,000,000 Florida Power & Light, 5.63%, 04/01/34........... 986,867 126,000 Homer City Funding LLC, 8.14%, 10/01/19........... 137,970 83,088 Homer City Funding LLC, 8.73%, 10/01/26........... 95,966 195,000 Midwest Generation LLC, 8.75%, 05/01/34........... 212,550 438,270 Midwest Generation LLC, Series B, 8.56%, 01/02/16........... 483,467 560,000 NRG Energy, Inc., 7.38%, 02/01/16........... 564,200 445,000 Orion Power Holdings, Inc., 12.00%, 05/01/10.......... 507,300 545,000 Reliant Energy, Inc., 6.75%, 12/15/14........... 535,463 5,325,000 TXU Corp., Series O, 4.80%, 11/15/09........... 5,223,499 -------------- 12,602,639 -------------- TOTAL CORPORATE BONDS AND NOTES (Cost $1,100,451,964)..... 1,087,395,449 -------------- FOREIGN GOVERNMENT OBLIGATIONS -- 0.7% 9,700,000 AID-Israel (Israel), 5.50%, 09/18/23........... 10,117,459 2,930,000 Province of Manitoba (Canada), 6.38%, 09/01/15(23)....... 1,996,952 3,365,000 Province of Ontario, Series GMTN (Canada), 6.25%, 06/16/15(23)....... 2,278,778 510,000 United Mexican States (Mexico), Series MTN, 8.30%, 08/15/31........... 653,310
PRINCIPAL VALUE --------- -------------- FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED) $ 260,000 United Mexican States (Mexico), Series MTNA, 7.50%, 04/08/33........... $ 307,450 -------------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $15,154,914)........ 15,353,949 -------------- CONTRACTS PURCHASED PUT OPTIONS -- 0.0% 416 US Treasury Note (10 Year) March Future, Expiring February 2007 @ 106 (Cost $234,759)........... 84,500 -------------- PRINCIPAL SHORT TERM US GOVERNMENT AGENCY SECURITIES -- 1.2% FEDERAL HOME LOAN BANK $ 25,500,000 4.80%, 01/02/07 (Cost $25,489,800)........ 25,489,800 -------------- SHORT TERM CORPORATE NOTES -- 0.4% 7,750,000 AT&T, Inc. -- 144A, 4.21%, 06/05/07 (Cost $7,709,684)......... 7,709,684 -------------- SECURITIES LENDING COLLATERAL -- 0.0% 958,807 Securities Lending Collateral Investment (Note 4) (Cost $958,807)........... 958,807 -------------- TOTAL SECURITIES (Cost $2,411,315,857)..... 2,394,052,362 -------------- REPURCHASE AGREEMENTS -- 1.0% 20,094,880 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $20,105,508 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 4.85%, due 10/01/35, with a value of $21,099,624) (Cost $20,094,880).............. 20,094,880 -------------- Total Investments before Call and Put Options Written and Securities Sold Short -- 116.2% (Cost $2,431,410,737)..... 2,414,147,242 -------------- CONTRACTS CALL OPTIONS WRITTEN -- (0.0)% (34,200,000) Expiring 12/13/07. If exercised the Series pays 4.40%, and receives floating 3 month LIBOR, expiring 12/17/17, European Style (Premium $229,140)........ (144,119) --------------
See notes to financial statements. 93 CORE BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
CONTRACTS VALUE - --------- -------------- PUT OPTIONS WRITTEN -- (0.0)% (34,200,000) Expiring 12/13/07. If exercised the Series pays floating 3 month LIBOR, and receives 5.40%, expiring 12/17/17, European Style (Premium $372,780)........ $ (477,535) -------------- PRINCIPAL - --------- SECURITIES SOLD SHORT -- (7.8)% $(145,500,000) Fannie Mae, TBA, 5.50%, 01/11/07........... (143,817,729) (1,900,000) Fannie Mae, TBA, 5.00%, 01/17/07........... (1,867,937) (3,000,000) Freddie Mac Gold, TBA, 6.00%, 01/11/07........... (3,022,500) (6,500,000) Freddie Mac Gold, TBA, 4.50%, 01/17/07........... (6,264,375) (6,400,000) Freddie Mac Gold, TBA, 5.00%, 01/17/07........... (6,288,000) -------------- TOTAL SECURITIES SOLD SHORT (Proceeds $162,196,673)... (161,260,541) -------------- Total Investments net of Call and Put Options Written and Securities Sold Short -- 108.4% (Cost $2,268,612,144)..... 2,252,265,047 Liabilities less other assets -- (8.4)%.......... (174,443,598) -------------- NET ASSETS -- 100.0%........ $2,077,821,449 ==============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $2,268,726,644. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation.......... $ 9,326,419 Gross unrealized depreciation.......... (25,788,016) ------------ Net unrealized depreciation............ $(16,461,597) ============
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 94 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ US TREASURY SECURITIES -- 15.4% US TREASURY BONDS -- 2.9% $ 200,000 8.00%, 11/15/21................ $ 265,188 1,910,000 6.00%, 02/15/26................ 2,166,806 550,000 6.13%, 11/15/27(8)............. 638,301 512,000 4.50%, 02/15/36(8)............. 487,041 ------------ 3,557,336 ------------ US TREASURY INFLATION INDEX -- 4.1% 255,787 0.88%, 04/15/10................ 242,578 1,179,987 2.38%, 04/15/11................ 1,175,655 454,686 1.63%, 01/15/15................ 428,116 134,944 1.88%, 07/15/15................ 129,362 213,629 2.00%, 01/15/16................ 206,336 2,449,461 2.50%, 07/15/16................ 2,468,789 192,805 2.38%, 01/15/25................ 192,015 81,382 2.00%, 01/15/26................ 76,563 ------------ 4,919,414 ------------ US TREASURY NOTES -- 7.9% 2,880,000 3.38%, 02/15/08................ 2,830,614 3,340,000 3.75%, 05/15/08................ 3,289,903 810,000 4.50%, 02/15/09................ 805,349 2,000,000 4.88%, 08/15/09................ 2,006,642 220,000 4.50%, 02/28/11(8)............. 218,445 20,000 4.63%, 10/31/11(8)............. 19,934 240,000 4.50%, 11/15/15(8)............. 236,381 100,000 4.63%, 11/15/16(8)............. 99,375 ------------ 9,506,643 ------------ US TREASURY STRIPS -- 0.5% 1,495,000 Zero coupon, 11/15/24.......... 622,805 ------------ TOTAL US TREASURY SECURITIES (Cost $18,731,994)........... 18,606,198 ------------ US GOVERNMENT AGENCY SECURITIES -- 53.2% FANNIE MAE -- 30.9% 230,000 5.00%, 09/15/08................ 229,837 60,000 5.40%, 04/13/09................ 60,020 483,340 PL# 735809, Variable Rate, 4.48%, 08/01/35(1)........... 479,979 35,590 PL# 759626, 6.00%, 02/01/34.............. 35,911 43,343 PL# 795774, 6.00%, 10/01/34.............. 43,681 188,983 PL# 796050, 6.00%, 08/01/34.............. 190,458 1,481,170 PL# 796278, 6.00%, 12/01/34.............. 1,492,734 57,271 PL# 801516, Variable Rate, 4.73%, 08/01/34(1)........... 56,934
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 634,351 PL# 809169, 6.00%, 01/01/35.............. $ 639,303 119,054 PL# 810896, Variable Rate, 4.85%, 01/01/35(1)........... 118,435 24,055 PL# 820426, 6.00%, 03/01/35.............. 24,231 494,667 PL# 893681, 6.00%, 10/01/36.............. 498,171 893,334 PL# 893923, 6.00%, 10/01/36.............. 899,662 1,195,957 PL# 894005, 6.00%, 10/01/36.............. 1,204,428 1,500,000 TBA, 5.00%, 01/01/22.............. 1,474,688 3,100,000 TBA, 5.50%, 01/01/22.............. 3,100,000 100,000 TBA, 6.00%, 01/01/22.............. 101,406 14,670,000 TBA, 5.00%, 01/01/37.............. 14,165,718 1,100,000 TBA, 5.50%, 01/01/37.............. 1,087,282 6,000,000 TBA, 6.00%, 01/01/37.............. 6,041,250 4,460,000 TBA, 6.50%, 01/01/37.............. 4,545,017 1,000,000 TBA, 5.00%, 02/01/37.............. 965,625 ------------ 37,454,770 ------------ FEDERAL AGRICULTURAL MORTGAGE CORP. -- 0.1% 80,000 4.25%, 07/29/08................ 79,008 ------------ FEDERAL HOME LOAN BANK -- 1.1% 100,000 5.10%, 09/19/08................ 100,097 260,000 5.40%, 01/02/09................ 259,733 60,000 4.75%, 12/16/16................ 58,860 680,000 5.50%, 07/15/36................ 712,186 140,000 Series VB15, 5.00%, 12/21/15.............. 139,950 ------------ 1,270,826 ------------ FREDDIE MAC -- 1.2% 430,000 4.38%, 11/16/07................ 426,936 720,000 4.75%, 01/18/11................ 715,877 131,412 PL# 1B2694, Variable Rate, 4.35%, 12/01/34(1)........... 129,296 160,000 Series MTN, 5.55%, 12/11/08.............. 159,971 ------------ 1,432,080 ------------
See notes to financial statements. 95 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES (CONTINUED) FREDDIE MAC GOLD -- 1.3% $ 300,000 TBA, 5.00%, 01/01/22.............. $ 294,750 1,300,000 TBA, 5.00%, 01/01/37.............. 1,254,500 ------------ 1,549,250 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 18.2% 706,899 PL# 605617, 5.00%, 07/15/34.............. 688,176 1,527,547 PL# 612902, 5.00%, 07/15/33.............. 1,487,908 639,457 PL# 636084, 5.00%, 01/15/35.............. 622,165 1,903,038 PL# 644631, 5.00%, 09/15/35.............. 1,851,575 120,000 TBA, 5.00%, 01/01/37.............. 116,700 1,500,000 TBA, 5.50%, 01/01/37.............. 1,492,968 13,450,000 TBA, 6.00%, 01/01/37.............. 13,639,134 2,000,000 TBA, 6.50%, 01/01/37.............. 2,051,876 ------------ 21,950,502 ------------ TENNESSEE VALLEY AUTHORITY -- 0.4% 440,000 5.98%, 04/01/36................ 489,995 ------------ TOTAL US GOVERNMENT AGENCY SECURITIES (Cost $64,546,970)................. 64,226,431 ------------ CORPORATE BONDS AND NOTES -- 48.0% ADVERTISING -- 0.1% 90,000 Lamar Media Corp., Series B, 6.63%, 08/15/15.............. 89,663 ------------ AEROSPACE AND DEFENSE -- 0.0% 45,000 DRS Technologies, Inc., 6.63%, 02/01/16.............. 45,563 ------------ AUTOMOBILE: RENTAL -- 0.0% 15,000 Hertz Corp. -- 144A, 8.88%, 01/01/14.............. 15,788 ------------ AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 1.6% 60,000 Daimler Chrysler NA Holding, 4.05%, 06/04/08.............. 58,738 250,000 Daimler Chrysler NA Holding, 5.88%, 03/15/11.............. 251,172 950,000 Ford Motor Company, 7.45%, 07/16/31(8)........... 750,500 840,000 General Motors Corp., 8.25%, 07/15/23(8)........... 785,400 60,000 Visteon Corp., 8.25%, 08/01/10.............. 58,800 ------------ 1,904,610 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) BANKS -- 2.8% $ 360,000 Bank of America Corp., 5.38%, 08/15/11(8)........... $ 362,856 160,000 Glitnir Banki HF -- 144A (Iceland), 6.33%, 07/28/11.............. 164,452 130,000 Glitnir Banki HF -- 144A (Iceland), Variable Rate, 6.69%, 06/15/16(1)........... 134,336 200,000 Kaupthing Bank -- 144A (Iceland), 7.13%, 05/19/16.............. 212,500 280,000 Kaupthing Bank -- 144A (Iceland), Floating Rate, 6.06%, 04/12/11(2)........... 282,269 280,000 Landisbanki Islands HF -- 144A (Iceland), 6.10%, 08/25/11.............. 284,953 100,000 Mitsubishi UFJ Financial Group Capital Financial I, Ltd. (Cayman Islands), Variable Rate, 6.35%, perpetual(1).......... 101,669 10,000 Rabobank Capital Funding Trust II -- 144A, Variable Rate, 5.26%, perpetual(1).......... 9,794 20,000 Rabobank Capital Funding Trust III -- 144A, Variable Rate, 5.25%, perpetual(1).......... 19,319 230,000 Resona Preferred Global Securities -- 144A (Cayman Islands), Variable Rate, 7.19%, perpetual(1).......... 240,369 300,000 Shinsei Financial, Ltd. -- 144A (Cayman Islands), Variable Rate, 6.42%, perpetual(1).......... 300,177 90,000 Wachovia Capital Trust III, Variable Rate, 5.80%, perpetual(1).......... 90,827 620,000 Wachovia Corp., 5.25%, 08/01/14.............. 613,392 445,000 Wells Fargo & Company, 5.30%, 08/26/11.............. 447,230 100,000 Wells Fargo Capital X, 5.95%, 12/15/36.............. 98,347 ------------ 3,362,490 ------------
See notes to financial statements. 96 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) BROADCAST SERVICES/MEDIA -- 1.8% $ 10,000 Clear Channel Communications, Inc., 4.63%, 01/15/08.............. $ 9,907 20,000 Clear Channel Communications, Inc., 6.25%, 03/15/11.............. 19,454 90,000 Clear Channel Communications, Inc., 5.50%, 09/15/14.............. 76,034 50,000 Clear Channel Communications, Inc., 4.90%, 05/15/15.............. 39,934 80,000 Comcast Cable Communications, 8.88%, 05/01/17.............. 96,514 630,000 Comcast Corp., 6.50%, 01/15/15.............. 657,438 210,000 Comcast Corp., 5.88%, 02/15/18.............. 208,163 80,000 Cox Communications, Inc., 3.88%, 10/01/08.............. 77,865 85,000 Echostar DBS Corp., 7.00%, 10/01/13.............. 85,319 40,000 Echostar DBS Corp., 7.13%, 02/01/16.............. 40,200 40,000 Kabel Deutschland GMBH (Germany), 10.63%, 07/01/14............. 44,550 100,000 Liberty Media Corp., 7.88%, 07/15/09.............. 104,782 120,000 News America, Inc., 6.20%, 12/15/34.............. 116,202 40,000 Quebecor Media, Inc. (Canada), 7.75%, 03/15/16.............. 41,050 60,000 Rogers Cable, Inc. (Canada), 6.75%, 03/15/15.............. 62,120 20,000 Sinclair Broadcast Group, 8.00%, 03/15/12.............. 20,750 50,000 Time Warner Entertainment, 8.38%, 07/15/33.............. 60,609 210,000 Time Warner, Inc., 6.88%, 05/01/12.............. 222,164 50,000 Time Warner, Inc., 7.70%, 05/01/32.............. 56,582 80,000 Viacom, Inc., 5.75%, 04/30/11.............. 80,117 ------------ 2,119,754 ------------ CHEMICALS -- 0.1% 30,000 Georgia Gulf Corp. -- 144A, 9.50%, 10/15/14.............. 29,400 30,000 Lyondell Chemical Company, 8.00%, 09/15/14.............. 31,275
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) CHEMICALS (CONTINUED) $ 15,000 Lyondell Chemical Company, 8.25%, 09/15/16.............. $ 15,825 44,000 Westlake Chemical Corp., 6.63%, 01/15/16.............. 42,790 ------------ 119,290 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 0.0% 10,000 Electronic Data Systems, 7.13%, 10/15/09.............. 10,432 40,000 Sungard Data Systems, Inc., 10.25%, 08/15/15(8).......... 42,900 ------------ 53,332 ------------ CONSTRUCTION SERVICES AND SUPPLIES -- 0.1% 30,000 Beazer Homes USA, Inc., 8.63%, 05/15/11.............. 31,050 40,000 Jacuzzi Brands, Inc., 9.63%, 07/01/10.............. 42,700 ------------ 73,750 ------------ CONSUMER GOODS AND SERVICES -- 0.3% 380,000 Altria Group, Inc., 7.00%, 11/04/13.............. 413,440 ------------ CONTAINERS AND PACKAGING -- 0.0% 40,000 Graham Packaging Company, 9.88%, 10/15/14(8)........... 40,600 ------------ ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 0.3% 320,000 Waste Management, Inc., 6.38%, 11/15/12.............. 335,521 ------------ EQUIPMENT RENTAL AND LEASING -- 0.2% 210,000 International Lease Finance Corp. E-Capital Trust II -- 144A, Variable Rate, 6.25%, 12/21/65(1)........... 213,693 ------------ FINANCIAL SERVICES -- 5.9% 90,000 Aiful Corp. -- 144A (Japan), 5.00%, 08/10/10.............. 87,407 500,000 Citigroup, Inc., 5.10%, 09/29/11.............. 498,401 80,000 Countrywide Financial Corp., Series MTN, Floating Rate, 5.50%, 01/05/09(2)........... 80,027 340,000 Countrywide Financial Corp., Series MTNA, 4.50%, 06/15/10.............. 331,734 100,000 Countrywide Financial Corp., Series MTNB, Floating Rate, 5.47%, 06/18/08(2)........... 100,026 120,000 Countrywide Home Loans, Series MTNB, Floating Rate, 5.53%, 02/27/08(2)........... 120,150 50,000 Credit Suisse USA, Inc., 5.50%, 08/16/11.............. 50,596
See notes to financial statements. 97 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) FINANCIAL SERVICES (CONTINUED) $ 1,465,000 Ford Motor Credit Company, 5.80%, 01/12/09.............. $ 1,439,073 120,000 Ford Motor Credit Company, 7.38%, 10/28/09.............. 120,331 90,000 General Electric Capital Corp., Series MTNA, 4.25%, 01/15/08.............. 89,203 280,000 General Electric Capital Corp., Series MTNA, 4.13%, 09/01/09.............. 273,169 120,000 General Motors Acceptance Corp., 6.13%, 08/28/07.............. 120,042 800,000 General Motors Acceptance Corp., 5.85%, 01/14/09.............. 797,345 30,000 General Motors Acceptance Corp., Series GM, 6.31%, 11/30/07.............. 29,819 60,000 General Motors Acceptance Corp., Series MTN, 4.38%, 12/10/07.............. 59,178 40,000 GMAC LLC, 5.13%, 05/09/08.............. 39,585 600,000 GMAC LLC, Series MTN, Floating Rate, 6.27%, 01/16/07(2)........... 600,002 250,000 HSBC Finance Corp., 4.63%, 01/15/08.............. 248,389 650,000 JPMorgan Chase & Company, 5.13%, 09/15/14.............. 640,160 260,000 JPMorgan Chase & Company, 5.15%, 10/01/15.............. 255,584 380,000 Lehman Brothers E-Capital Trust I, Floating Rate, 6.16%, 08/19/65(2)........... 383,834 130,000 Lehman Brothers Holdings, Inc., 4.00%, 01/22/08.............. 128,241 80,000 Lehman Brothers Holdings, Inc., 4.50%, 07/26/10.............. 78,039 30,000 Morgan Stanley, 3.63%, 04/01/08.............. 29,402 320,000 Morgan Stanley, Series MTN, 5.63%, 01/09/12.............. 325,626 90,000 Morgan Stanley, Series MTNF, Floating Rate, 5.82%, 10/18/16(2)........... 90,669 190,000 The Goldman Sachs Group, Inc., 4.50%, 06/15/10.............. 186,107 50,000 The Goldman Sachs Group, Inc., 5.00%, 01/15/11.............. 49,625 ------------ 7,251,764 ------------ FOOD AND BEVERAGE -- 0.1% 60,000 Kraft Foods, Inc., 5.63%, 11/01/11.............. 60,701 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) FUNERAL SERVICES -- 0.0% $ 50,000 Service Corp. International, 7.63%, 10/01/18.............. $ 53,250 ------------ INSURANCE -- 0.0% 20,000 ASIF Global Financing XIX -- 144A, 4.90%, 01/17/13.............. 19,529 ------------ LEISURE AND RECREATION -- 0.4% 35,000 AMC Entertainment, Inc., 11.00%, 02/01/16............. 39,463 15,000 Boyd Gaming Corp., 6.75%, 04/15/14.............. 15,038 40,000 Boyd Gaming Corp., 7.13%, 02/01/16.............. 40,000 60,000 Inn of The Mountain Gods, 12.00%, 11/15/10............. 65,100 60,000 Mandalay Resort Group, 9.50%, 08/01/08.............. 63,300 130,000 MGM MIRAGE, 7.63%, 01/15/17.............. 130,974 30,000 River Rock Entertainment Authority, 9.75%, 11/01/11.............. 31,950 90,000 Station Casinos, Inc., 7.75%, 08/15/16.............. 91,125 ------------ 476,950 ------------ MANUFACTURING -- 0.5% 120,000 Tyco International Group SA (Luxembourg), 6.38%, 10/15/11.............. 125,708 440,000 Tyco International Group SA (Luxembourg), 6.00%, 11/15/13.............. 455,894 ------------ 581,602 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 0.5% 75,000 DaVita, Inc., 7.25%, 03/15/15.............. 76,875 6,000 HCA, Inc., 6.30%, 10/01/12.............. 5,505 70,000 HCA, Inc., 6.25%, 02/15/13.............. 62,125 110,000 HCA, Inc., 6.75%, 07/15/13.............. 99,000 34,000 HCA, Inc., 6.50%, 02/15/16(8)........... 28,815 10,000 HCA, Inc. -- 144A, 9.13%, 11/15/14.............. 10,713 100,000 HCA, Inc. -- 144A, 9.25%, 11/15/16.............. 107,375
See notes to financial statements. 98 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES (CONTINUED) $ 70,000 HCA, Inc. -- 144A, 9.63%, 11/15/16.............. $ 75,425 125,000 Tenet Healthcare Corp., 9.88%, 07/01/14.............. 127,812 ------------ 593,645 ------------ METALS AND MINING -- 0.2% 230,000 Vale Overseas, Ltd. (Cayman Islands), 6.88%, 11/21/36.............. 237,049 ------------ OFFICE EQUIPMENT, SUPPLIES, AND SERVICES -- 0.0% 40,000 Xerox Corp., 6.75%, 02/01/17.............. 42,000 ------------ OIL, COAL AND GAS -- 3.9% 210,000 Amerada Hess Corp., 7.30%, 08/15/31.............. 235,076 15,000 AmeriGas Partners LP/AmeriGas Eagle Finance Corp., 7.13%, 05/20/16.............. 15,075 200,000 Anadarko Finance Company, Series B, 7.50%, 05/01/31.............. 227,598 180,000 Anadarko Petroleum Corp., 5.95%, 09/15/16.............. 180,706 320,000 Anadarko Petroleum Corp., 6.45%, 09/15/36.............. 324,431 130,000 Apache Finance Canada (Canada), 4.38%, 05/15/15.............. 119,840 55,000 Chesapeake Energy Corp., 6.38%, 06/15/15.............. 54,725 150,000 ChevronTexaco Capital Company (Canada), 3.50%, 09/17/07.............. 148,265 390,000 Conoco, Inc., 6.95%, 04/15/29.............. 444,317 170,000 Devon Energy Corp., 7.95%, 04/15/32.............. 207,583 50,000 El Paso Corp., Series MTN, 7.80%, 08/01/31.............. 54,875 130,000 El Paso Corp., Series MTN, 7.75%, 01/15/32.............. 143,000 110,000 El Paso Natural Gas, 8.38%, 06/15/32.............. 133,753 90,000 Kerr-McGee Corp., 6.95%, 07/01/24.............. 96,098 330,000 Kerr-McGee Corp., 7.88%, 09/15/31.............. 394,857 30,000 Kinder Morgan Energy Partners, LP, 6.30%, 02/01/09.............. 30,413
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) OIL, COAL AND GAS (CONTINUED) $ 120,000 Kinder Morgan Energy Partners, LP, 6.75%, 03/15/11.............. $ 124,972 70,000 Opti Canada, Inc. (Canada) -- 144A, 8.25%, 12/15/14.............. 72,275 45,000 Peabody Energy Corp., Series B, 6.88%, 03/15/13.............. 46,350 120,000 Pemex Project Funding Master Trust, 7.38%, 12/15/14.............. 132,420 40,000 Pemex Project Funding Master Trust, 6.63%, 06/15/35.............. 40,970 180,000 Petrobas International Finance Company (Cayman Islands), 6.13%, 10/06/16.............. 182,700 70,000 Pogo Producing Company, 6.88%, 10/01/17.............. 67,200 25,000 Semgroup LP -- 144A, 8.75%, 11/15/15.............. 25,250 65,000 Suburban Propane Partners, 6.88%, 12/15/13.............. 64,025 270,000 TNK-BP Finance SA -- 144A (Luxembourg), 7.50%, 07/18/16.............. 287,888 20,000 Vintage Petroleum, 8.25%, 05/01/12.............. 20,991 50,000 Western Oil Sands, Inc. (Canada), 8.38%, 05/01/12.............. 55,750 80,000 Williams Companies, Inc., 8.75%, 03/15/32.............. 90,800 370,000 Williams Companies, Inc., Series A, 7.50%, 01/15/31.............. 385,725 270,000 XTO Energy, Inc., 7.50%, 04/15/12.............. 293,664 ------------ 4,701,592 ------------ PAPER AND FOREST PRODUCTS -- 0.4% 410,000 Weyerhaeuser Company, 6.75%, 03/15/12.............. 430,463 ------------ PRINTING AND PUBLISHING -- 0.1% 50,000 Idearc, Inc. -- 144A, 8.00%, 11/15/16.............. 51,000 40,000 Reader's Digest Association, Inc., 6.50%, 03/01/11.............. 41,300 ------------ 92,300 ------------
See notes to financial statements. 99 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: BANKS -- 1.0% $ 384,318 Washington Mutual Bank, Series 2005-AR13, Class A1A1, Floating Rate, 5.64%, 10/25/45(3)........... $ 385,075 447,444 Washington Mutual Bank, Series 2005-AR15, Class A1A2, Floating Rate, 5.63%, 11/25/45(3)........... 449,452 314,248 Washington Mutual Bank, Series 2005-AR8, Class 2A1A, Floating Rate, 5.64%, 07/25/45(3)........... 315,503 ------------ 1,150,030 ------------ PRIVATE ASSET BACKED: FINANCIAL SERVICES -- 1.8% 368,729 Lehman XS Trust, Series 2005-5N, Class 1A1, Floating Rate, 5.65%, 11/25/35(3)........... 369,981 265,428 Lehman XS Trust, Series 2005-7N, Class 1A1B, Floating Rate, 5.65%, 12/25/35(3)........... 266,667 755,293 Lehman XS Trust, Series 2006-GP4, Class 3A1A, Floating Rate, 5.42%, 08/25/46(3)........... 755,179 140,000 Morgan Stanley Capital I, Series 2005-HQ6, Class A4A, 4.99%, 08/13/42.............. 136,866 630,000 Morgan Stanley Capital I, Series 2006-IQ12, Class A4, 5.33%, 12/15/43.............. 628,652 ------------ 2,157,345 ------------ PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY -- 22.0% 374,531 Accredited Mortgage Loan Trust, Series 2005-3, Class A1, Floating Rate, 5.59%, 09/25/35(3)........... 375,096 160,446 Adjustable Rate Mortgage Trust, Series 2004-2, Class 7A2, Floating Rate, 5.77%, 02/25/35(3)........... 160,775 154,883 Adjustable Rate Mortgage Trust, Series 2004-5, Class 7A2, Floating Rate, 5.73%, 04/25/35(3)........... 155,113 438,350 American Home Mortgage Investment Trust, Series 2005-4, Class 1A1, Floating Rate, 5.64%, 11/25/45(3)........... 440,396 400,000 Banc of America Commercial Mortgage, Inc., Series 2005-3, Class A4, 4.67%, 07/10/43.............. 382,786 670,476 Banc of America Mortgage Securities, Series 2005-A, Class 2A1, 4.46%, 02/25/35.............. 655,248
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 686,623 Bear Stearns Alt-A Trust, Series 2004-11, Class 2A2, Floating Rate, 4.95%, 11/25/34(3)........... $ 698,932 1,200,000 Bear Stearns Mortgage Funding Trust, Series 2006-AR5, Class 1A1, Floating Rate, 5.51%, 05/25/36(3)(14)....... 1,199,940 51,252 Chevy Chase Mortgage Funding Corp. -- 144A, Series 2003-2A, Class A1, Floating Rate, 5.73%, 05/25/34(3)........... 51,288 425,709 Countrywide Alternative Loan Trust, Series 2005-36, Class 3A1, Floating Rate, 4.96%, 08/25/35(3)........... 422,116 1,162,956 Countrywide Alternative Loan Trust, Series 2005-38, Class A3, Floating Rate, 5.67%, 09/25/35(3)........... 1,167,761 281,401 Countrywide Alternative Loan Trust, Series 2005-44, Class 1A1, Floating Rate, 5.68%, 10/25/35(3)........... 282,046 487,378 Countrywide Alternative Loan Trust, Series 2005-59, Class 1A1, Floating Rate, 5.65%, 11/20/35(3)........... 489,296 453,977 Countrywide Alternative Loan Trust, Series 2005-J12, Class 2A1, Floating Rate, 5.62%, 08/25/35(3)........... 455,153 1,359,996 Countrywide Alternative Loan Trust, Series 2006-OA2, Class A5, Floating Rate, 5.58%, 05/20/46(3)........... 1,362,342 632,450 Countrywide Alternative Loan Trust, Series 2006-OA6, Class 1A1A, Floating Rate, 5.56%, 07/25/46(3)........... 631,713 224,530 Countrywide Asset-Backed Certificates, Series 2005-11, Class AF1, Floating Rate, 5.53%, 02/25/36(3)........... 224,733 130,000 Countrywide Asset-Backed Certificates, Series 2005-4, Class AF3, 4.46%, 10/25/35.............. 128,636 855,078 Countrywide Home Equity Loan Trust -- 144A, Series 2006-RES, Class 4Q1B, Floating Rate, 5.65%, 12/15/33(3)........... 856,681 286,355 Countrywide Home Equity Loan Trust, Series 2005-G, Class 2A, Floating Rate, 5.58%, 12/15/35(3)........... 286,847
See notes to financial statements. 100 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 447,227 Countrywide Home Loans -- 144A, Series 2005-R3, Class AF, Floating Rate, 5.72%, 09/25/35(3)........... $ 449,936 300,078 Countrywide Home Loans, Series 2004-23, Class A, Floating Rate, 7.41%, 11/25/34(3)........... 305,877 809,603 Countrywide Home Loans, Series 2005-3, Class 1A2, Floating Rate, 5.64%, 04/25/35(3)........... 812,682 593,441 Credit Suisse Mortgage Capital Certificates -- 144A, Series 2006-CF2, Class A1, Floating Rate, 5.58%, 05/25/36(3)........... 593,412 141,785 First Franklin Mortgage Loan Asset Backed Certificates, Series 2004-FF10, Class A2, Floating Rate, 5.75%, 12/25/32(3)........... 142,100 210,000 GE Capital Commercial Mortgage Corp., Series 2005-C4, Class A4, Floating Rate, 5.33%, 11/10/45(3)........... 211,059 351,797 GMAC Mortgage Corp. Loan Trust, Series 2003-AR2, Class 1A1, Floating Rate, 5.53%, 12/19/33(3)........... 357,763 357,247 GMAC Mortgage Corp. Loan Trust, Series 2005-AR1, Class 3A, Floating Rate, 4.67%, 03/18/35(3)........... 352,706 766,132 Greenpoint Mortgage Funding Trust, Series 2006-AR4, Class A1A, Floating Rate, 5.45%, 09/25/46(3)........... 766,270 200,000 GS Mortgage Securities Corp. II, Series 2005-GG4, Class AABA, 4.68%, 07/10/39.............. 194,355 144,807 Impac CMB Trust, Series 2003-10, Class 1A1, Floating Rate, 6.05%, 10/25/33(3)........... 144,956 1,149,852 Impac CMB Trust, Series 2004-2, Class A1, Floating Rate, 5.87%, 04/25/34(3)........... 1,150,745 236,346 Impac CMB Trust, Series 2004-6, Class 1A1, Floating Rate, 5.75%, 10/25/34(3)........... 237,438 124,351 IndyMac Index Mortgage Loan Trust, Series 2005-AR15, Class A2, 5.10%, 09/25/35.............. 120,776 296,000 IXIS Real Estate Capital Trust, Series 2006-HE1, Class A1, Floating Rate, 5.44%, 03/25/36(3)........... 296,202
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 361,313 JPMorgan Mortgage Trust, Series 2004-A3, Class 1A1, Floating Rate, 4.30%, 07/25/34(3)........... $ 358,692 100,000 LB-UBS Commercial Mortgage Trust, Series 2005-C3, Class A5, 4.74%, 07/15/30.............. 96,194 100,000 LB-UBS Commercial Mortgage Trust, Series 2005-C3, Class AAB, 4.66%, 07/15/30.............. 97,122 200,000 LB-UBS Commercial Mortgage Trust, Series 2005-C5, Class A4, 4.95%, 09/15/40.............. 195,187 500,000 Merrill Lynch Mortgage Investors, Inc., Series 2005-A4, Class 2A2, 4.46%, 07/25/35.............. 486,992 400,000 Merrill Lynch Mortgage Investors, Inc., Series 2005-A5, Class A3, 4.44%, 06/25/35.............. 393,048 220,000 Merrill Lynch Mortgage Trust, Series 2006-C1, Class A4, Floating Rate, 5.66%, 05/12/39(3)........... 226,533 294,753 MLCC Mortgage Investors, Inc., Series 2003-F, Class A1, Floating Rate, 5.67%, 10/25/28(3)........... 294,777 584,707 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 1A1, 5.50%, 05/25/35.............. 580,677 289,902 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 1A2, 6.00%, 05/25/35.............. 291,691 1,273,130 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 2A1, 5.50%, 05/25/35.............. 1,261,978 1,078,026 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 2A2, 6.00%, 05/25/35.............. 1,074,986 1,200,000 Residential Accredited Loans, Inc., Series 2006-Q10, Class A1, Floating Rate, 5.51%, 01/25/37(3)........... 1,199,880 355,103 Structured Adjustable Rate Mortgage Loan, Series 2005-15, Class 1A1, 5.06%, 07/25/35.............. 352,297 228,395 Structured Asset Mortgage Investments, Inc., Series 2003-AR4, Class A1, Floating Rate, 5.70%, 01/19/34(3)........... 228,952 646,107 Structured Asset Mortgage Investments, Inc., Series 2006-AR6, Class 1A3, Floating Rate, 5.51%, 12/25/35(3)........... 647,755
See notes to financial statements. 101 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 753,964 Thornburg Mortgage Securities Trust, Series 2005-4, Class A4, Floating Rate, 5.55%, 12/25/35(3)........... $ 753,731 949,391 Thornburg Mortgage Securities Trust, Series 2006-1, Class A3, Floating Rate, 5.52%, 01/25/36(3)........... 948,673 582,167 Zuni Mortgage Loan Trust, Series 2006-0A1, Class A1, Floating Rate, 5.45%, 08/25/36(3)........... 581,806 ------------ 26,634,146 ------------ PRIVATE ASSET BACKED: OTHER -- 0.6% 700,000 SLM Student Loan Trust, Series 2006-5, Class A2, Floating Rate, 5.37%, 07/25/17(2)........... 700,425 ------------ REAL ESTATE DEVELOPMENT AND SERVICES -- 0.1% 35,000 Forest City Enterprises, Inc., 7.63%, 06/01/15.............. 35,875 30,000 Forest City Enterprises, Inc., 6.50%, 02/01/17.............. 29,550 ------------ 65,425 ------------ REAL ESTATE INVESTMENT TRUSTS -- 0.1% 40,000 Host Marriott LP, Series Q, 6.75%, 06/01/16.............. 40,250 10,000 Ventas Realty LP/Ventas Capital Corp., 9.00%, 05/01/12.............. 11,350 30,000 Ventas Realty LP/Ventas Capital Corp., 6.50%, 06/01/16.............. 30,900 ------------ 82,500 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.0% 10,000 Cie Generale de Geophysique (France), 7.50%, 05/15/15.............. 10,100 ------------ SEMICONDUCTORS -- 0.0% 15,000 NXP BV/NXP Funding LLC (the Netherlands) -- 144A, 7.88%, 10/15/14(8)........... 15,581 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 1.6% 90,000 AT&T, Inc., 5.10%, 09/15/14.............. 87,522 10,000 Bellsouth Corp., 4.75%, 11/15/12.............. 9,662 55,000 Cincinnati Bell, Inc., 7.00%, 02/15/15.............. 55,344
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) $ 185,000 Deutsche Telecom International Finance BV (the Netherlands), 5.75%, 03/23/16.............. $ 182,604 40,000 Intelsat Bermuda, Ltd. -- 144A (Bermuda), 9.25%, 06/15/16.............. 43,200 55,000 Intelsat, Ltd. (Bermuda), 7.63%, 04/15/12.............. 51,563 100,000 Koninklijke KPN NV (the Netherlands), 8.00%, 10/01/10.............. 107,986 115,000 Koninklijke KPN NV (the Netherlands), 8.38%, 10/01/30.............. 132,127 300,000 Nextel Communications, Inc., Series E, 6.88%, 10/31/13.............. 303,406 190,000 Qwest Communications International, Inc., Floating Rate, 8.87%, 02/15/09(2)........... 193,325 150,000 Sprint Capital Corp., 8.38%, 03/15/12.............. 166,884 40,000 Sprint Capital Corp., 8.75%, 03/15/32.............. 48,281 280,000 Sprint Nextel Corp., 6.00%, 12/01/16.............. 273,396 190,000 Telecom Italia Capital (Luxembourg), 5.25%, 10/01/15.............. 177,785 40,000 Verizon Global Funding Corp., 7.38%, 09/01/12.............. 43,784 20,000 Windstream Corp. -- 144A, 8.63%, 08/01/16.............. 22,000 ------------ 1,898,869 ------------ TRANSPORTATION -- 0.3% 40,000 Gulfmark Offshore, Inc., 7.75%, 07/15/14.............. 41,000 70,000 Horizon Lines LLC, 9.00%, 11/01/12.............. 73,850 90,000 OMI Corp. (Marshall Islands), 7.63%, 12/01/13.............. 92,475 130,000 Teekay Shipping Corp. (Marshall Islands), 8.88%, 07/15/11.............. 140,238 50,000 Union Pacific Corp., 5.38%, 05/01/14.............. 49,717 ------------ 397,280 ------------ UTILITIES -- 1.2% 85,000 AES Corp., 7.75%, 03/01/14.............. 90,100 30,000 Dominion Resources, Inc., 4.75%, 12/15/10.............. 29,336 100,000 Dominion Resources, Inc., 5.70%, 09/17/12(8)........... 101,255
See notes to financial statements. 102 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) UTILITIES (CONTINUED) $ 190,000 Exelon Corp., 5.63%, 06/15/35.............. $ 179,586 70,000 FirstEnergy Corp., Series B, 6.45%, 11/15/11.............. 73,073 440,000 FirstEnergy Corp., Series C, 7.38%, 11/15/31.............. 502,611 30,000 NRG Energy, Inc., 7.25%, 02/01/14.............. 30,300 30,000 NRG Energy, Inc., 7.38%, 02/01/16.............. 30,225 20,000 Oncor Electric Delivery Company, 6.38%, 01/15/15.............. 20,648 180,000 Pacific Gas & Electric Company, 6.05%, 03/01/34.............. 182,149 90,000 TXU Corp., Series P, 5.55%, 11/15/14.............. 85,891 100,000 TXU Corp., Series R, 6.55%, 11/15/34.............. 94,023 ------------ 1,419,197 ------------ TOTAL CORPORATE BONDS AND NOTES (Cost $57,647,313)........... 57,859,237 ------------ SHARES ------ CONVERTIBLE PREFERRED STOCKS -- 0.2% AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS 9,300 General Motors Corp., Series A, 4.50% (Cost $217,415)........ 235,104 ------------ PRINCIPAL --------- CONVERTIBLE BONDS -- 0.1% AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS $ 80,000 Ford Motor Company, 4.25%, 12/15/36 (Cost $80,000)..................... 85,900 ------------ MUNICIPAL BONDS -- 0.6% VIRGINIA 729,916 Virginia State Housing Development Authority, Series C, Revenue Bond, 6.00%, 06/25/34 (Cost $717,919).................... 729,937 ------------ FOREIGN GOVERNMENT OBLIGATIONS -- 2.4% 320,000 Bundesrepublic Deutschland (Germany), Series 04, 3.75%, 01/04/15(19).......... 416,559 10,000 Federal Republic of Brazil (Brazil), 8.88%, 04/15/24.............. 12,485 35,000 Federal Republic of Brazil (Brazil), 10.13%, 05/15/27............. 49,263
PRINCIPAL VALUE --------- ------------ FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED) $ 286,000 Federal Republic of Brazil (Brazil), 11.00%, 08/17/40(8).......... $ 379,308 59,648 Government of Canada Real Return Bonds (Canada), 4.00%, 12/01/31(17).......... 74,218 25,000 Republic of Colombia (Colombia), 11.75%, 02/25/20............. 36,438 100,000 Republic of Colombia (Colombia), Series MTN, 7.38%, 09/18/37.............. 107,600 94,000 Republic of Panama (Panama), 7.13%, 01/29/26.............. 101,990 1,060,000 Russian Federation (Russia) -- 144A, 5.00%, 03/31/30.............. 1,199,200 8,000 United Mexican States (Mexico), 5.63%, 01/15/17.............. 8,028 90,000 United Mexican States (Mexico), Series MTN, 8.30%, 08/15/31.............. 115,290 332,000 United Mexican States (Mexico), Series MTNA, 7.50%, 04/08/33.............. 392,590 ------------ TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $2,783,956).................. 2,892,969 ------------ SHORT TERM US GOVERNMENT AGENCY SECURITIES -- 0.3% FEDERAL HOME LOAN BANK 310,000 Series 633, 4.80%, 02/15/07 (Cost $310,000).................... 310,000 ------------ SECURITIES LENDING COLLATERAL -- 3.5% 4,274,335 Securities Lending Collateral Investment (Note 4) (Cost $4,274,335)............ 4,274,335 ------------ TOTAL SECURITIES (Cost $149,309,902)................ 149,220,111 ------------ REPURCHASE AGREEMENTS -- 20.7% 25,011,936 Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $25,025,164 (Collateralized by Freddie Mac Adjustable Rate Mortgage, 5.85%, due 10/01/36 with a value of $24,921,304 and Government National Mortgage Association Adjustable Rate Mortgage, 5.38%, due 03/20/24, with a value of $1,341,228) (Cost $25,011,936)........... 25,011,936 ------------ Total Investments before Call and Put Options Written -- 144.4% (Cost $174,321,838)................ 174,232,047 ------------
See notes to financial statements. 103 TOTAL RETURN BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
CONTRACTS VALUE --------- ------------ CALL OPTIONS WRITTEN -- (0.0)% (25) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 110.......... $ (1,953) (1) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 111.......... (31) ------------ TOTAL CALL OPTIONS WRITTEN (Premium $6,964)............. (1,984) ------------ PUT OPTIONS WRITTEN -- (0.0)% (25) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 106.......... (5,078) (26) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 107.......... (12,594) ------------ TOTAL PUT OPTIONS WRITTEN (Premium $15,432)............ (17,672) ------------ Total Investments net of Call and Put Options Written -- 144.4% (Cost $174,299,442)................ 174,212,391 Liabilities less other assets -- (44.4)%............ (53,575,964) ------------ NET ASSETS -- 100.0%........... $120,636,427 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $174,320,904. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation............ $ 776,631 Gross unrealized depreciation............ (885,144) --------- Net unrealized depreciation.............. $(108,513) =========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 104 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES -- 85.3% ADVERTISING -- 1.7% $ 3,745,000 Advanstar Communications, Inc., 10.75%, 08/15/10............. $ 4,049,281 470,000 Affinion Group, Inc., 10.13%, 10/15/13............. 500,550 945,000 Affinion Group, Inc., 11.50%, 10/15/15............. 1,004,063 645,000 Lamar Media Corp., Series B, 6.63%, 08/15/15.............. 642,581 1,305,000 RH Donnelley Corp., 6.88%, 01/15/13.............. 1,257,694 660,000 RH Donnelley Corp., Series A-1, 6.88%, 01/15/13.............. 636,075 720,000 RH Donnelley Corp., Series A-2, 6.88%, 01/15/13.............. 693,900 ------------ 8,784,144 ------------ AEROSPACE AND DEFENSE -- 0.5% 575,000 Argo-Tech Corp., 9.25%, 06/01/11.............. 623,875 415,000 Armor Holdings, Inc., 8.25%, 08/15/13.............. 433,675 450,000 CPI Holdco, Inc., Floating Rate, 11.30%, 02/01/15(11)......... 464,625 980,000 DRS Technologies, Inc., 7.63%, 02/01/18.............. 1,014,300 ------------ 2,536,475 ------------ AGRICULTURAL EQUIPMENT -- 1.2% 3,035,000 Case New Holland, Inc., 9.25%, 08/01/11.............. 3,228,481 2,780,000 Case New Holland, Inc., 7.13%, 03/01/14.............. 2,835,600 ------------ 6,064,081 ------------ AGRICULTURE -- 0.3% 675,000 The Mosaic Company -- 144A, 7.38%, 12/01/14.............. 696,094 675,000 The Mosaic Company -- 144A, 7.63%, 12/01/16.............. 702,844 ------------ 1,398,938 ------------ AIRLINES -- 0.2% 610,374 Continental Airlines, Inc., Series 2001-1, 7.03%, 06/15/11.............. 608,466 500,000 Delta Air Lines, Inc., 7.90%, 12/15/09(9)........... 337,500 ------------ 945,966 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) APPAREL: MANUFACTURING AND RETAIL -- 4.2% $ 2,135,000 Hanesbrands, Inc. -- 144A, Floating Rate, 8.74%, 12/15/14(11).......... $ 2,183,038 4,035,000 Levi Strauss & Company, 12.25%, 12/15/12............. 4,509,112 690,000 Levi Strauss & Company, 9.75%, 01/15/15.............. 746,925 2,110,000 Levi Strauss & Company, 8.88%, 04/01/16.............. 2,215,500 2,940,000 Levi Strauss & Company, Floating Rate, 10.12%, 04/01/12(2).......... 3,031,875 2,695,000 Oxford Industries, Inc., 8.88%, 06/01/11.............. 2,796,063 2,920,000 Perry Ellis International, Inc., Series B, 8.88%, 09/15/13.............. 2,934,600 1,830,000 Phillips Van-Heusen Corp., 7.25%, 02/15/11.............. 1,875,750 685,000 Phillips Van-Heusen Corp., 8.13%, 05/01/13.............. 722,675 ------------ 21,015,538 ------------ AUTOMOBILE: RENTAL -- 0.6% 2,545,000 Hertz Corp. -- 144A, 8.88%, 01/01/14.............. 2,678,612 475,000 Rental Service Corp. -- 144A, 9.50%, 12/01/14.............. 492,813 ------------ 3,171,425 ------------ AUTOMOBILE: RETAIL -- 0.1% 660,000 AutoNation, Inc., Floating Rate, 7.37%, 04/15/13(2)........... 666,600 ------------ AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 1.5% 2,610,000 Collins & Aikman Products Company, Series B, 9.75%, 02/15/10.............. 2,681,774 395,000 Commercial Vehicle Group, 8.00%, 07/01/13.............. 388,088 1,000,000 Tenneco Automotive, Inc., 8.63%, 11/15/14.............. 1,025,000 2,195,000 Tenneco Automotive, Inc., Series B, 10.25%, 07/15/13............. 2,414,500 775,000 Titan International, Inc. -- 144A, 8.00%, 01/15/12.............. 783,719 354,000 TRW Automotive, Inc., 11.00%, 02/15/13............. 389,843 ------------ 7,682,924 ------------
See notes to financial statements. 105 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) BROADCAST SERVICES/MEDIA -- 6.0% $ 620,000 Adelphia Communications, 10.25%, 11/01/06(9)(13)...... $ 565,750 840,000 Adelphia Communications, 10.25%, 06/15/11(9).......... 802,200 305,000 Adelphia Communications, Series B, 9.25%, 10/01/02(9)(13)....... 279,075 2,075,000 Cablevision Systems Corp., Class B, Floating Rate, 9.87%, 04/01/09(11).......... 2,199,500 1,530,000 CCH I LLC/CCH I Capital Corp., 11.00%, 10/01/15............. 1,577,813 5,970,000 CCO Holdings LLC/Capital Corp., 8.75%, 11/15/13.............. 6,231,187 980,000 CSC Holdings, Inc., 7.25%, 07/15/08.............. 993,475 105,000 CSC Holdings, Inc., Series B, 8.13%, 07/15/09.............. 109,331 635,000 CSC Holdings, Inc., Series B, 8.13%, 08/15/09.............. 661,194 135,000 CSC Holdings, Inc., Series B, 7.63%, 04/01/11.............. 138,206 4,700,000 Insight Communications Company, Inc., 12.25%, 02/15/11............. 4,934,999 1,235,000 Kabel Deutschland GMBH (Germany), 10.63%, 07/01/14............. 1,375,481 715,000 LBI Media, Inc., 10.13%, 07/15/12............. 762,369 570,000 LBI Media, Inc., zero coupon, 10/15/13(7)..... 493,763 1,215,000 Mediacom Broadband LLC/ Mediacom Broadband Corp. -- 144A, 8.50%, 10/15/15.............. 1,236,263 1,880,000 Rainbow National Services LLC -- 144A, 8.75%, 09/01/12.............. 1,985,750 2,670,000 Rainbow National Services LLC -- 144A, 10.38%, 09/01/14............. 2,980,387 2,885,000 Sirius Satellite Radio, Inc., 9.63%, 08/01/13.............. 2,852,544 185,000 XM Satellite Radio, Inc., 9.75%, 05/01/14.............. 185,925 ------------ 30,365,212 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) CHEMICALS -- 3.2% $ 1,381,000 Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp. -- Series B, zero coupon, 10/01/14(7)..... $ 1,194,565 1,210,000 Equistar Chemical/Funding, 10.63%, 05/01/11............. 1,294,700 1,086,000 Huntsman LLC, 11.63%, 10/15/10............. 1,191,885 1,160,000 Ineos Group Holdings PLC -- 144A (United Kingdom), 8.50%, 02/15/16.............. 1,113,600 320,000 Lyondell Chemical Company, 11.13%, 07/15/12............. 345,600 1,301,000 Lyondell Chemical Company, 10.50%, 06/01/13............. 1,437,605 1,865,000 Lyondell Chemical Company, 8.00%, 09/15/14.............. 1,944,263 930,000 Lyondell Chemical Company, 8.25%, 09/15/16.............. 981,150 830,000 Nova Chemicals Corp. (Canada), Floating Rate, 8.50%, 11/15/13(11).......... 834,150 2,900,000 OM Group, Inc., 9.25%, 12/15/11.............. 3,048,625 1,375,000 Reichhold Industries, Inc. -- 144A, 9.00%, 08/15/14.............. 1,354,375 1,148,000 Rockwood Specialties Corp., 10.63%, 05/15/11............. 1,228,360 ------------ 15,968,878 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 1.9% 475,000 Activant Solutions, Inc. -- 144A, 9.50%, 05/01/16.............. 444,125 1,800,000 Interface, Inc., 10.38%, 02/01/10............. 1,998,000 170,000 Interface, Inc., 9.50%, 02/01/14.............. 179,350 1,125,000 Sungard Data Systems, Inc., 9.13%, 08/15/13.............. 1,186,875 840,000 Sungard Data Systems, Inc., Floating Rate, 9.97%, 08/15/13(11).......... 876,750 4,325,000 UGS Corp., 10.00%, 06/01/12............. 4,735,875 ------------ 9,420,975 ------------ CONSTRUCTION SERVICES AND SUPPLIES -- 2.2% 1,775,000 Dayton Superior Corp., 10.75%, 09/15/08............. 1,863,750 775,000 ESCO Corp. -- 144A, 8.63%, 12/15/13.............. 800,188
See notes to financial statements. 106 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) CONSTRUCTION SERVICES AND SUPPLIES (CONTINUED) $ 775,000 ESCO Corp. -- 144A, Floating Rate, 9.24%, 12/15/13(2)........... $ 790,500 1,306,000 Goodman Global Holdings, Series B, Floating Rate, 8.36%, 06/15/12(11).......... 1,328,855 650,000 Interline Brands, Inc., 8.13%, 06/15/14.............. 671,125 3,660,000 Nortek, Inc., 8.50%, 09/01/14.............. 3,605,099 1,555,000 Panolam Industries International -- 144A, 10.75%, 10/01/13............. 1,644,413 330,000 Stanley-Martin Communities LLC, 9.75%, 08/15/15.............. 262,350 ------------ 10,966,280 ------------ CONSUMER GOODS AND SERVICES -- 0.3% 815,000 Amscan Holdings, Inc., 8.75%, 05/01/14.............. 797,681 755,000 Steinway Musical Instruments -- 144A, 7.00%, 03/01/14.............. 741,788 ------------ 1,539,469 ------------ CONTAINERS AND PACKAGING -- 1.1% 745,000 BPC Holding Corp./Berry Plastic Corp. -- 144A, 8.88%, 09/15/14.............. 759,900 555,000 BPC Holding Corp./Berry Plastic Corp. -- 144A, Floating Rate, 9.24%, 09/15/14(2)........... 564,713 1,055,000 Intertape Polymer US, Inc., 8.50%, 08/01/14.............. 957,413 400,000 Jefferson Smurfit Corp., 7.50%, 06/01/13.............. 378,000 990,206 Pliant Corp., 11.85%, 06/15/09(14)......... 1,080,625 2,015,000 Stone Container Finance Company of Canada (Canada), 7.38%, 07/15/14.............. 1,884,024 ------------ 5,624,675 ------------ DISTRIBUTION -- 0.2% 916,000 Jafra Cosmetics International, 10.75%, 05/15/11............. 983,555 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) EDUCATION -- 1.0% $ 1,700,000 Education Management LLC -- 144A, 8.75%, 06/01/14.............. $ 1,768,000 2,335,000 Education Management LLC -- 144A, 10.25%, 06/01/16............. 2,480,938 740,000 Knowledge Learning Center -- 144A, 7.75%, 02/01/15.............. 712,250 ------------ 4,961,188 ------------ ELECTRONICS -- 0.1% 550,000 Muzak LLC, 10.00%, 02/15/09............. 528,688 ------------ ENERGY SERVICES -- 0.3% 1,360,000 Verasun Energy Corp., 9.88%, 12/15/12.............. 1,448,400 ------------ ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 1.4% 1,160,000 Aleris International, Inc. -- 144A, 9.00%, 12/15/14.............. 1,171,600 2,560,000 Aleris International, Inc. -- 144A, 10.00%, 12/15/16............. 2,579,200 1,150,000 Allied Waste North America, Inc., 7.25%, 03/15/15.............. 1,157,188 1,800,000 Waste Services, Inc., 9.50%, 04/15/14.............. 1,885,500 ------------ 6,793,488 ------------ EQUIPMENT RENTAL AND LEASING -- 0.1% 365,000 United Rentals North America, Inc., 7.75%, 11/15/13.............. 368,194 ------------ FINANCIAL SERVICES -- 5.1% 1,335,000 BCP US Crystal Holdings Corp., 9.63%, 06/15/14.............. 1,481,850 1,765,000 Ford Motor Credit Company, 6.63%, 06/16/08.............. 1,764,396 3,090,000 Ford Motor Credit Company, 7.38%, 10/28/09.............. 3,098,522 1,465,000 Ford Motor Credit Company, 7.88%, 06/15/10.............. 1,478,267 100,000 Ford Motor Credit Company, 9.88%, 08/10/11.............. 107,051 5,220,000 Ford Motor Credit Company, Floating Rate, 8.37%, 11/02/07(2)........... 5,302,184 2,400,000 Ford Motor Credit Company, Floating Rate, 8.11%, 01/13/12(2)........... 2,381,124 470,000 General Motors Acceptance Corp., 5.85%, 01/14/09.............. 468,440
See notes to financial statements. 107 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) FINANCIAL SERVICES (CONTINUED) $ 170,000 General Motors Acceptance Corp., 7.00%, 02/01/12.............. $ 175,572 5,375,000 General Motors Acceptance Corp., 8.00%, 11/01/31.............. 6,188,780 935,000 GMAC LLC, 5.13%, 05/09/08.............. 925,300 2,380,000 Residential Capital Corp. -- 144A, Floating Rate, 7.20%, 04/17/09(2)........... 2,393,147 ------------ 25,764,633 ------------ FOOD AND BEVERAGE -- 2.6% 3,725,000 ASG Consolidated LLC/ASG Finance, Inc., zero coupon, 11/01/11(7)..... 3,333,875 2,475,000 Dean Foods Company, 7.00%, 06/01/16.............. 2,512,125 2,350,000 Dole Foods Company, 8.63%, 05/01/09.............. 2,347,063 1,415,000 Pierre Foods, Inc., 9.88%, 07/15/12.............. 1,464,525 3,240,000 Pinnacle Foods Holding Corp., 8.25%, 12/01/13.............. 3,333,150 ------------ 12,990,738 ------------ FUNERAL SERVICES -- 0.2% 1,090,000 Service Corp. International, 7.00%, 06/15/17.............. 1,109,075 ------------ INSURANCE -- 0.5% 2,615,000 Multiplan, Inc. -- 144A, 10.38%, 04/15/16............. 2,615,000 ------------ LEISURE AND RECREATION -- 10.7% 2,365,000 AMC Entertainment, Inc., 9.88%, 02/01/12.............. 2,495,075 820,000 AMC Entertainment, Inc., 11.00%, 02/01/16............. 924,550 270,000 AMC Entertainment, Inc., Floating Rate, 9.62%, 08/15/10(2)........... 280,463 1,225,000 Buffalo Thunder Development Authority -- 144A, 9.38%, 12/15/14.............. 1,249,500 1,105,000 CCM Merger, Inc. -- 144A, 8.00%, 08/01/13.............. 1,085,663 1,200,000 Chukchansi Economic Development Authority -- 144A, Floating Rate, 8.88%, 11/15/12(11).......... 1,239,000 181,058 Eldorado Casino Shreveport, 10.00%, 08/01/12............. 172,910
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) LEISURE AND RECREATION (CONTINUED) $ 2,240,000 Galaxy Entertainment Finance -- 144A (Hong Kong), 9.88%, 12/15/12.............. $ 2,410,800 1,000,000 Galaxy Entertainment Finance -- 144A (Hong Kong), Floating Rate, 10.35%, 12/15/10(11)......... 1,065,000 3,025,000 GreekTown Holdings -- 144A, 10.75%, 12/01/13............. 3,176,249 1,042,004 HRP Myrtle Beach Holdings/CA -- 144A, 14.50%, 04/01/14(12)......... 1,099,314 945,000 HRP Myrtle Beach Operations/CA -- 144A, 12.50%, 04/01/13............. 948,544 1,730,000 HRP Myrtle Beach Operations/CA -- 144A, Floating Rate, 10.12%, 04/01/12(11)......... 1,738,650 1,955,000 Inn of The Mountain Gods, 12.00%, 11/15/10............. 2,121,175 1,410,000 Las Vegas Sands Corp., 6.38%, 02/15/15.............. 1,372,988 890,000 Majestic Holdco LLC -- 144A, zero coupon, 10/15/11(7)..... 600,750 3,245,000 Marquee Holdings, Inc., zero coupon, 08/15/14(7)..... 2,737,969 1,500,000 MGM MIRAGE, 6.63%, 07/15/15.............. 1,436,250 460,000 Mohegan Tribal Gaming Authority, 8.00%, 04/01/12.............. 481,275 2,275,000 OED Corp./Diamond JO, 8.75%, 04/15/12.............. 2,263,625 1,330,000 San Pasqual Casino -- 144A, 8.00%, 09/15/13.............. 1,373,225 455,000 Station Casinos, Inc., 6.00%, 04/01/12.............. 433,956 250,000 Station Casinos, Inc., 7.75%, 08/15/16.............. 253,125 695,000 The Majestic Star Casino LLC, 9.50%, 10/15/10.............. 733,225 905,000 The Majestic Star Casino LLC/ Majestic Star Casino Capital Corp. II, 9.75%, 01/15/11.............. 900,475 7,865,000 Trump Entertainment Resorts, Inc., 8.50%, 06/01/15.............. 7,864,999 1,550,000 Tunica-Biloxi Gaming Authority -- 144A, 9.00%, 11/15/15.............. 1,612,000 375,000 Turning Stone Resort Casino -- 144A, 9.13%, 09/15/14.............. 385,313
See notes to financial statements. 108 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) LEISURE AND RECREATION (CONTINUED) $ 2,915,000 Universal City Development Partners, Ltd., 11.75%, 04/01/10............. $ 3,137,268 3,340,000 Universal City Florida, Floating Rate, 10.12%, 05/01/10(2).......... 3,465,249 1,897,000 Waterford Gaming LLC -- 144A, 8.63%, 09/15/12.............. 2,015,563 2,585,000 Wynn Las Vegas LLC/Capital Corp., 6.63%, 12/01/14.............. 2,581,769 ------------ 53,655,917 ------------ MACHINERY -- 1.1% 2,075,000 Allis Chalmers Energy, Inc. -- 144A, 9.00%, 01/15/14.............. 2,095,750 1,010,000 Altra Industrial Motion, 9.00%, 12/01/11.............. 1,035,250 830,000 Chart Industries, Inc. -- 144A, 9.13%, 10/15/15.............. 879,800 905,000 Stewart & Stevenson LLC -- 144A, 10.00%, 07/15/14............. 954,775 305,000 The Manitowoc Company, Inc., 10.50%, 08/01/12............. 329,019 ------------ 5,294,594 ------------ MANUFACTURING -- 0.7% 2,105,000 Amsted Industries, Inc. -- 144A, 10.25%, 10/15/11............. 2,262,875 675,000 Bombardier, Inc. -- 144A (Canada), 8.00%, 11/15/14.............. 695,250 10,000 Koppers, Inc., 9.88%, 10/15/13.............. 10,925 380,000 Nutro Products, Inc. -- 144A, Floating Rate, 9.40%, 10/15/13(11).......... 395,200 720,000 Venture Holdings Trust, Series B, 9.50%, 07/01/05(9)(13)....... 3,600 ------------ 3,367,850 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 5.0% 1,485,000 Accellent, Inc., 10.50%, 12/01/13............. 1,548,113 2,235,000 AMR Holding Company/Emcare Holding Company, 10.00%, 02/15/15............. 2,430,562 1,035,000 CDRV Investors, Inc., zero coupon, 01/01/15(7)..... 807,300 270,000 Concentra Operating Corp., 9.50%, 08/15/10.............. 284,850
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES (CONTINUED) $ 220,000 Concentra Operating Corp., 9.13%, 06/01/12.............. $ 232,100 205,000 HCA, Inc., 8.75%, 09/01/10.............. 214,225 3,165,000 HCA, Inc. -- 144A, 9.25%, 11/15/16.............. 3,398,418 1,440,000 HCA, Inc. -- 144A, 9.63%, 11/15/16.............. 1,551,600 870,000 Inverness Medical Innovations, 8.75%, 02/15/12.............. 909,150 910,000 National Mentor Holdings -- 144A, 11.25%, 07/01/14............. 971,425 1,170,000 Norcross Safety Products LLC -- Series B, 9.88%, 08/15/11.............. 1,251,900 985,000 Res-Care, Inc., 7.75%, 10/15/13.............. 1,014,550 2,192,207 Safety Products Holdings, Series B, 11.75%, 01/01/12(12)(14)..... 2,367,583 945,000 Triad Hospitals, Inc., 7.00%, 05/15/12.............. 966,263 1,115,000 Triad Hospitals, Inc., 7.00%, 11/15/13.............. 1,127,544 575,000 US Oncology Holdings, Inc., Floating Rate, 10.68%, 03/15/15(11)......... 593,688 1,570,000 US Oncology, Inc., 9.00%, 08/15/12.............. 1,664,200 1,775,000 US Oncology, Inc., 10.75%, 08/15/14............. 1,970,250 1,985,000 VWR International, Inc., 8.00%, 04/15/14.............. 2,054,475 ------------ 25,358,196 ------------ METALS AND MINING -- 2.0% 645,000 AK Steel Corp., 7.88%, 02/15/09.............. 648,225 1,405,000 FMG Finance Property, Ltd. -- 144A (Australia), 10.63%, 09/01/16............. 1,513,888 870,000 FMG Finance Property, Ltd. -- 144A (Australia), Floating Rate, 9.37%, 09/01/11(2)........... 872,175 1,349,000 Ispat Inland ULC (Canada), 9.75%, 04/01/14.............. 1,509,501 1,063,000 Mueller Group, Inc., 10.00%, 05/01/12............. 1,161,328 831,000 Mueller Holdings NA, Inc., zero coupon, 04/15/14(7)..... 752,055
See notes to financial statements. 109 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) METALS AND MINING (CONTINUED) $ 1,580,000 Novelis, Inc. -- 144A (Canada), 8.25%, 02/15/15.............. $ 1,536,550 2,050,000 RathGibson, Inc., 11.25%, 02/15/14............. 2,183,249 ------------ 10,176,971 ------------ OIL, COAL AND GAS -- 4.9% 415,000 Alpha Natural Resources, 10.00%, 06/01/12............. 452,350 490,000 Clayton William Energy, 7.75%, 08/01/13.............. 454,475 320,000 Copano Energy LLC, 8.13%, 03/01/16.............. 332,800 1,895,000 Dynegy Holdings, Inc., 8.38%, 05/01/16.............. 1,999,225 1,550,000 Dynegy Holdings, Inc., 7.63%, 10/15/26.............. 1,511,250 740,000 El Paso Corp., 9.63%, 05/15/12.............. 843,600 160,000 El Paso Production Holding Company, 7.75%, 06/01/13.............. 168,200 685,000 Encore Acquisition Corp., 7.25%, 12/01/17.............. 666,163 695,000 Giant Industries, Inc., 8.00%, 05/15/14.............. 754,944 1,305,000 Inergy LP/Inergy Finance Corp., 6.88%, 12/15/14.............. 1,288,688 135,000 Inergy LP/Inergy Finance Corp., 8.25%, 03/01/16.............. 142,425 380,000 Northwest Pipeline Corp., 8.13%, 03/01/10.............. 397,575 1,055,000 Ocean Rig Norway AS -- 144A (Norway), 8.38%, 07/01/13.............. 1,128,850 1,930,000 Opti Canada, Inc. (Canada) -- 144A, 8.25%, 12/15/14.............. 1,992,725 525,000 Parker Drilling Company, 9.63%, 10/01/13.............. 578,156 175,000 Petrobras International Finance (Cayman Islands), 7.75%, 09/15/14.............. 195,563 4,215,000 Petrohawk Energy Corp., 9.13%, 07/15/13.............. 4,446,824 1,015,000 Quicksilver Resources, Inc., 7.13%, 04/01/16.............. 997,238 440,000 Ram Energy, Inc., 11.50%, 02/15/08............. 456,500 480,000 Regency Energy Partners -- 144A, 8.38%, 12/15/13.............. 483,600
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) OIL, COAL AND GAS (CONTINUED) $ 2,535,000 Semgroup LP -- 144A, 8.75%, 11/15/15.............. $ 2,560,349 290,000 SESI LLC, 6.88%, 06/01/14.............. 290,000 2,360,000 United Refining Company, 10.50%, 08/15/12............. 2,489,800 ------------ 24,631,300 ------------ PAPER AND FOREST PRODUCTS -- 1.9% 740,000 Domtar, Inc. (Canada), 7.13%, 08/01/15.............. 728,900 115,000 Georgia-Pacific Corp., 9.50%, 12/01/11.............. 126,500 3,590,000 MDP Acquisitions PLC (Ireland), 9.63%, 10/01/12.............. 3,823,350 3,910,000 NewPage Corp., 10.00%, 05/01/12............. 4,144,600 665,000 NewPage Corp., Floating Rate, 11.62%, 05/01/12(2).......... 721,525 ------------ 9,544,875 ------------ PRINTING AND PUBLISHING -- 2.1% 3,300,000 American Media Operations, Inc., Series B, 10.25%, 05/01/09............. 3,205,125 2,281,634 CanWest Media, Inc. (Canada), 8.00%, 09/15/12.............. 2,392,864 410,000 CBD Media LLC/CBD Finance, Inc., 8.63%, 06/01/11.............. 422,300 1,241,000 Dex Media West Finance Company, Series B, 9.88%, 08/15/13.............. 1,358,895 1,145,000 Idearc, Inc. -- 144A, 8.00%, 11/15/16.............. 1,167,900 475,000 MediaNews Group, Inc., 6.88%, 10/01/13.............. 432,250 290,000 Medimedia USA, Inc. -- 144A, 11.38%, 11/15/14............. 305,225 1,000,000 Primedia, Inc., Floating Rate, 10.75%, 05/15/10(2).......... 1,045,000 ------------ 10,329,559 ------------ REAL ESTATE DEVELOPMENT AND SERVICES -- 0.2% 915,000 HydroChem Industrial Services, Inc. -- 144A, 9.25%, 02/15/13.............. 924,150 ------------ REAL ESTATE INVESTMENT TRUSTS -- 0.2% 950,000 Host Hotels & Resorts LP -- 144A, 6.88%, 11/01/14.............. 966,625 ------------
See notes to financial statements. 110 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) RETAIL -- 7.1% $ 1,125,000 Bon-Ton Department Stores, Inc., 10.25%, 03/15/14............. $ 1,155,938 480,000 General Nutrition Centers, Inc., 8.50%, 12/01/10.............. 495,600 515,000 General Nutrition Centers, Inc., 8.63%, 01/15/11.............. 544,613 2,415,000 GNC Parent Corp. -- 144A, Floating Rate, 12.14%, 12/01/11(11)......... 2,427,075 4,540,000 GSC Holdings Corp., 8.00%, 10/01/12.............. 4,766,999 4,090,000 GSC Holdings Corp., Floating Rate, 9.25%, 10/01/11(2)........... 4,263,824 480,000 Linens 'n Things, Inc., Floating Rate, 11.00%, 01/15/14(2).......... 468,000 3,055,000 Michaels Stores, Inc. -- 144A, 10.00%, 11/01/14............. 3,192,475 1,150,000 Michaels Stores, Inc. -- 144A, 11.38%, 11/01/16............. 1,204,625 3,175,000 Neiman Marcus Group, Inc., 9.00%, 10/15/15.............. 3,480,594 525,000 Neiman Marcus Group, Inc., 10.38%, 10/15/15............. 586,688 2,910,000 Rite Aid Corp., 8.13%, 05/01/10.............. 2,986,388 4,885,000 Rite Aid Corp. -- 144A, 6.13%, 12/15/08.............. 4,842,255 1,920,000 Sally Holdings LLC -- 144A, 9.25%, 11/15/14.............. 1,965,600 2,900,000 Sally Holdings LLC -- 144A, 10.50%, 11/15/16............. 2,972,500 480,000 Toys "R" Us, Inc., 7.38%, 10/15/18.............. 391,200 ------------ 35,744,374 ------------ RETAIL: RESTAURANTS -- 1.0% 1,140,000 Buffets, Inc. -- 144A, 12.50%, 11/01/14............. 1,154,250 1,720,000 El Pollo Loco, Inc., 11.75%, 11/15/13............. 1,874,800 1,740,000 NPC International, Inc., Series WI, 9.50%, 05/01/14.............. 1,792,200 ------------ 4,821,250 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) RUBBER PRODUCTS -- 0.3% $ 675,000 The Goodyear Tire & Rubber Company -- 144A, 8.63%, 12/01/11.............. $ 700,313 960,000 The Goodyear Tire & Rubber Company -- 144A, Floating Rate, 9.14%, 12/01/09(11).......... 968,400 ------------ 1,668,713 ------------ SEMICONDUCTORS -- 0.5% 635,000 Avago Technologies Finance Pte., Ltd. -- 144A (Singapore), 10.13%, 12/01/13............. 681,038 1,155,000 Freescale Semiconductor -- 144A, 8.88%, 12/15/14.............. 1,156,443 480,000 Freescale Semiconductor -- 144A, 9.13%, 12/15/14(12).......... 479,400 ------------ 2,316,881 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 7.0% 1,460,000 Centennial Cellular/Communications, 10.13%, 06/15/13............. 1,580,450 2,025,000 Digicel, Ltd. -- 144A (Bermuda), 9.25%, 09/01/12.............. 2,171,813 755,000 General Cable Corp., 9.50%, 11/15/10.............. 804,075 3,600,000 Intelsat Bermuda, Ltd. -- 144A (Bermuda), 9.25%, 06/15/16.............. 3,887,999 5,000,000 Intelsat Bermuda, Ltd. (Bermuda), 5.25%, 11/01/08.............. 4,887,499 2,520,000 Intelsat Subsidiary Holding Company, Ltd. (Bermuda), Floating Rate, 10.48%, 01/15/12(11)......... 2,554,650 1,000,000 IWO Holdings, Inc., 14.00%, 01/15/11(9)(14)...... -- 185,000 IWO Holdings, Inc., Floating Rate, 9.12%, 01/15/12(2)........... 189,625 1,210,000 Level 3 Financing, Inc. -- 144A, 9.25%, 11/01/14.............. 1,240,250 1,790,000 NTL Cable PLC (United Kingdom), 8.75%, 04/15/14.............. 1,881,738 460,000 Qwest Capital Funding, Inc., 7.00%, 08/03/09.............. 470,350 290,000 Qwest Communications International, Series B, 7.50%, 11/01/08.............. 295,800 1,745,000 Qwest Communications International, Series B, 7.50%, 02/15/14.............. 1,806,075 515,000 Qwest Corp., 8.88%, 03/15/12.............. 576,156
See notes to financial statements. 111 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) $ 470,000 Qwest Corp., 7.63%, 06/15/15.............. $ 505,250 110,000 Qwest Corp., 7.20%, 11/10/26.............. 111,375 2,430,000 Qwest Corp., Floating Rate, 8.61%, 06/15/13(2)........... 2,642,625 140,000 Rogers Wireless, Inc. (Canada), 8.00%, 12/15/12.............. 150,150 1,065,000 Rogers Wireless, Inc. (Canada), Floating Rate, 8.49%, 12/15/10(2)........... 1,088,963 450,000 Telemig Celular Participacoes SA/Amazonia Cel -- 144A (Brazil), 8.75%, 01/20/09.............. 471,375 1,590,000 Ubiquitel Operating Company, 9.88%, 03/01/11.............. 1,725,150 2,650,000 West Corp. -- 144A, 9.50%, 10/15/14.............. 2,663,250 1,360,000 Windstream Corp. -- 144A, 8.13%, 08/01/13.............. 1,479,000 1,870,000 Windstream Corp. -- 144A, 8.63%, 08/01/16.............. 2,057,000 ------------ 35,240,618 ------------ TRANSPORTATION -- 1.8% 497,000 H-Lines Finance Holding, zero coupon, 04/01/13(7)..... 464,695 1,277,000 Horizon Lines LLC, 9.00%, 11/01/12.............. 1,347,235 705,000 Kansas City Southern, 9.50%, 10/01/08.............. 740,250 1,200,000 Kansas City Southern de Mexico, S de RL de CV -- 144A (Mexico), 7.63%, 12/01/13.............. 1,203,000 2,230,000 Sabre Holdings Corp., 7.35%, 08/01/11.............. 2,157,443 2,325,000 TFM, SA de CV (Mexico), 9.38%, 05/01/12.............. 2,493,562 610,000 TFM, SA de CV (Mexico), 12.50%, 06/15/12............. 661,850 ------------ 9,068,035 ------------ UTILITIES -- 2.3% 400,000 AES Corp. -- 144A, 8.75%, 05/15/13.............. 430,500 310,000 AES Corp. -- 144A, 9.00%, 05/15/15.............. 334,800 466,190 AES Eastern Energy, Series 99-A, 9.00%, 01/02/17.............. 522,424
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) UTILITIES (CONTINUED) $ 2,750,000 Mission Energy Holding Company, 13.50%, 07/15/08............. $ 3,045,625 660,000 NRG Energy, Inc., 7.25%, 02/01/14.............. 666,600 995,000 NRG Energy, Inc., 7.38%, 02/01/16.............. 1,002,463 2,400,000 NRG Energy, Inc., 7.38%, 01/15/17.............. 2,412,000 2,015,000 Orion Power Holdings, Inc., 12.00%, 05/01/10............. 2,297,100 820,000 Reliant Energy, Inc., 9.25%, 07/15/10.............. 865,100 ------------ 11,576,612 ------------ TOTAL CORPORATE BONDS AND NOTES (Cost $416,257,617).......... 428,401,059 ------------ LOAN PARTICIPATIONS -- 4.9% 2,010,000 BLB Worldwide Holdings, 9.70%, 06/30/12.............. 2,040,150 4,180,000 HCA, Inc., 8.09%, 11/01/13.............. 4,231,146 3,260,000 Hit Entertainment, Inc., Tranche LN227528, 10.86%, 02/05/13............. 3,301,770 2,100,000 Houghton Mifflin, Inc., 11.07%, 12/21/07............. 2,113,125 1,400,000 M Holdings, 8.65%, 12/13/08.............. 1,400,000 7,000,000 Nielsen Finance LLC, 8.13%, 08/09/13.............. 7,057,359 420,000 Ply Gem Industries, 11.12%, 10/31/11............. 423,806 1,040,000 Rental Services Corp., 8.87%, 11/21/13.............. 1,050,888 2,780,000 Sand Ridge Energy/Riata Energy, Inc., 11.00%, 11/21/07............. 2,807,800 ------------ TOTAL LOAN PARTICIPATIONS (Cost $24,166,828)................. 24,426,044 ------------ SHARES ------ COMMON STOCKS -- 0.4% LEISURE AND RECREATION -- 0.4% 970 HRP -- Class B*(14)............ 10 1,100 Shreveport Gaming Holdings, Inc.*(14).................... 19,635 104,876 Trump Entertainment Resorts, Inc.*........................ 1,912,937 ------------ 1,932,582 ------------
See notes to financial statements. 112 HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) UTILITIES -- 0.0% 550,000 Mirant Corp. (Escrow Certificates)*............... $ 8,124 1,220,000 Mirant Corp. (Escrow Certificates)*............... 15,250 ------------ 23,374 ------------ TOTAL COMMON STOCKS (Cost $1,393,596).................. 1,955,956 ------------ CONVERTIBLE PREFERRED STOCKS -- 0.9% OIL, COAL AND GAS -- 0.5% 5,273 Chesapeake Energy Corp. -- 144A, 5.00%........................ 537,846 21,865 Chesapeake Energy Corp., 4.50%........................ 2,101,227 ------------ 2,639,073 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 0.4% 38,375 Crown Castle International Corp., 6.25%........................ 2,105,828 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $4,427,021)..... 4,744,901 ------------ WARRANTS -- 0.1% 1,125 American Tower Corp., Expires 08/01/08*............ 592,108 1,000 IPCS, Inc. -- 144A, Expires 07/15/10*(14)(27).... -- 1,000 IWO Holdings, Inc., Expires 01/15/11*(14)(27).... -- 250 Ubiquitel, Inc. -- 144A, Expires 04/15/10*(14)(27).... -- ------------ TOTAL WARRANTS (Cost $75,402)..................... 592,108 ------------ PRINCIPAL --------- CONVERTIBLE BONDS -- 0.4% AEROSPACE AND DEFENSE -- 0.2% $ 1,305,000 L-3 Communications Corp. -- 144A, 3.00%, 08/01/35.............. 1,376,775 ------------
PRINCIPAL VALUE --------- ------------ CONVERTIBLE BONDS (CONTINUED) BROADCAST SERVICES/MEDIA -- 0.2% $ 1,000,000 XM Satellite Radio Holdings, Inc., 1.75%, 12/01/09.............. $ 853,750 ------------ TOTAL CONVERTIBLE BONDS (Cost $2,288,255).................. 2,230,525 ------------ TOTAL SECURITIES (Cost $448,608,719)................ 462,350,593 ------------ REPURCHASE AGREEMENTS -- 5.0% 25,159,129 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $25,172,435 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 5.85%, due 12/25/33, with a value of $25,578,992 and Small Business Administration, 8.63%, due 10/25/15, with a value of $838,093) (Cost $25,159,129)................. 25,159,129 ------------ Total Investments -- 97.0% (Cost $473,767,848).......... 487,509,722 Other assets less liabilities -- 3.0%.......... 14,820,334 ------------ NET ASSETS -- 100.0%........... $502,330,056 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $473,804,079. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation........... $15,712,800 Gross unrealized depreciation........... (2,007,157) ----------- Net unrealized appreciation............. $13,705,643 ===========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 113 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS -- 60.4% AEROSPACE AND DEFENSE -- 1.9% 21,450 Lockheed Martin Corp. ......... $ 1,974,901 26,471 Northrop Grumman Corp. ........ 1,792,087 33,650 Raytheon Company............... 1,776,720 20,200 The Boeing Company............. 1,794,568 ------------ 7,338,276 ------------ AGRICULTURE -- 0.5% 36,600 Monsanto Company............... 1,922,598 ------------ APPAREL: MANUFACTURING AND RETAIL -- 0.1% 7,800 American Eagle Outfitters, Inc. ........................ 243,438 ------------ AUTOMOBILE: RETAIL -- 0.4% 66,700 AutoNation, Inc.*(8)........... 1,422,044 ------------ AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 0.2% 12,400 Autoliv, Inc. (Sweden) ........ 747,720 ------------ BANKS -- 3.9% 83,312 Bank of America Corp. ......... 4,448,027 16,500 Hudson City Bancorp, Inc. ..... 229,020 11,000 UnionBanCal Corp. ............. 673,750 69,682 US Bancorp..................... 2,521,792 58,645 Wachovia Corp. ................ 3,339,833 98,600 Wells Fargo & Company.......... 3,506,216 ------------ 14,718,638 ------------ BROADCAST SERVICES/MEDIA -- 3.3% 57,650 CBS Corp. -- Class B........... 1,797,527 6,500 Clear Channel Communications, Inc. ........................ 231,010 51,200 Comcast Corp. -- Class A*...... 2,167,296 6,130 Liberty Media Holding Corp. -- Capital -- Series A*......... 600,617 22,500 The DIRECTV Group, Inc.*....... 561,150 26,700 The McGraw-Hill Companies, Inc. ........................ 1,816,134 77,500 The Walt Disney Company........ 2,655,925 135,190 Time Warner, Inc. ............. 2,944,439 ------------ 12,774,098 ------------ BUSINESS SERVICES AND SUPPLIES -- 1.2% 8,500 CSG Systems International, Inc.*........................ 227,205 63,500 First Data Corp. .............. 1,620,520 18,100 Manpower, Inc. ................ 1,356,233 20,700 Moody's Corp. ................. 1,429,542 ------------ 4,633,500 ------------ CHEMICALS -- 0.3% 17,200 Ashland, Inc. ................. 1,189,896 ------------
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 4.7% 30,200 Cadence Design Systems, Inc.*........................ $ 540,882 28,800 Computer Sciences Corp.*....... 1,537,056 16,500 Electronic Data Systems Corp. ....................... 454,575 83,587 Hewlett-Packard Company........ 3,442,948 13,250 International Business Machines Corp. ....................... 1,287,238 33,600 Intuit, Inc.*.................. 1,025,136 20,600 Lexmark International, Inc. -- Class A*..................... 1,507,920 154,450 Microsoft Corp. ............... 4,611,876 88,000 Oracle Corp.*.................. 1,508,320 306,800 Sun Microsystems, Inc.*........ 1,662,856 21,100 Western Digital Corp.*......... 431,706 ------------ 18,010,513 ------------ CONSUMER GOODS AND SERVICES -- 2.9% 38,350 Altria Group, Inc. ............ 3,291,197 17,600 American Greetings Corp. -- Class A...................... 420,112 30,450 Colgate-Palmolive Company...... 1,986,558 36,298 Procter & Gamble Company....... 2,332,872 9,200 Reynolds American, Inc. ....... 602,324 21,100 The Estee Lauder Companies, Inc. -- Class A.............. 861,302 3,000 United Parcel Service, Inc. -- Class B...................... 224,940 25,300 UST, Inc. ..................... 1,472,460 ------------ 11,191,765 ------------ DISTRIBUTION -- 0.1% 7,400 Tech Data Corp.*............... 280,238 ------------ DIVERSIFIED OPERATIONS AND SERVICES -- 2.0% 204,300 General Electric Company....... 7,602,003 ------------ ELECTRONICS -- 0.7% 45,700 Emerson Electric Company....... 2,013,999 23,300 Synopsys, Inc.*................ 622,809 ------------ 2,636,808 ------------ FINANCIAL SERVICES -- 5.0% 6,700 American Express Company....... 406,489 6,920 Ameriprise Financial, Inc. .... 377,140 83,599 Citigroup, Inc. ............... 4,656,463 44,800 Countrywide Financial Corp. ... 1,901,760 22,100 Janus Capital Group, Inc. ..... 477,139 91,100 JPMorgan Chase & Company....... 4,400,130 31,200 Merrill Lynch & Company, Inc. ........................ 2,904,720 36,100 Morgan Stanley................. 2,939,623
See notes to financial statements. 114 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) FINANCIAL SERVICES (CONTINUED) 7,100 T Rowe Price Group, Inc. ...... $ 310,767 12,350 Washington Mutual, Inc. ....... 561,802 ------------ 18,936,033 ------------ FOOD AND BEVERAGE -- 1.6% 50,950 Archer-Daniels-Midland Company...................... 1,628,362 27,100 General Mills, Inc. ........... 1,560,960 10,800 PepsiCo, Inc. ................. 675,540 23,050 The Coca-Cola Company.......... 1,112,163 68,000 Tyson Foods, Inc. -- Class A(8)......................... 1,118,600 ------------ 6,095,625 ------------ INSURANCE -- 3.7% 16,100 Ambac Financial Group, Inc. ... 1,434,027 28,103 American International Group, Inc. ........................ 2,013,861 10,600 CIGNA Corp. ................... 1,394,642 46,700 Genworth Financial, Inc. -- Class A...................... 1,597,607 5,900 Loews Corp. ................... 244,673 21,502 MBIA, Inc. .................... 1,570,936 30,200 MetLife, Inc. ................. 1,782,102 12,100 Principal Financial Group, Inc. ........................ 710,270 14,600 Radian Group, Inc. ............ 787,086 31,500 The St. Paul Travelers Companies, Inc. ............. 1,691,235 28,400 WR Berkley Corp. .............. 980,084 ------------ 14,206,523 ------------ INTERNET SERVICES -- 2.2% 160,450 Cisco Systems, Inc.*........... 4,385,099 5,200 Google, Inc. -- Class A*....... 2,394,496 8,000 IAC/InterActive Corp.*(8)...... 297,280 65,800 Symantec Corp.*................ 1,371,930 ------------ 8,448,805 ------------ LEISURE AND RECREATION -- 0.8% 19,800 Carnival Corp. (Panama)(8)..... 971,190 4,900 Choice Hotels International, Inc. ........................ 206,290 35,700 Marriott International, Inc. -- Class A...................... 1,703,604 ------------ 2,881,084 ------------ MACHINERY -- 0.2% 13,900 Terex Corp.*................... 897,662 ------------ MANUFACTURING -- 0.5% 13,000 SPX Corp. ..................... 795,080 30,700 Tyco International, Ltd. (Bermuda).................... 933,280 ------------ 1,728,360 ------------
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 2.6% 24,000 Humana, Inc.*.................. $ 1,327,440 73,350 Johnson & Johnson.............. 4,842,567 30,800 McKesson Corp. ................ 1,561,560 37,550 Medtronic, Inc. ............... 2,009,301 ------------ 9,740,868 ------------ METALS AND MINING -- 0.6% 4,300 Newmont Mining Corp. .......... 194,145 26,800 Nucor Corp. ................... 1,464,888 12,300 Southern Copper Corp.(8)....... 662,847 ------------ 2,321,880 ------------ OIL, COAL AND GAS -- 6.0% 10,400 Anadarko Petroleum Corp. ...... 452,608 24,914 Apache Corp. .................. 1,657,030 21,000 ChevronTexaco Corp. ........... 1,544,130 40,262 ConocoPhillips................. 2,896,851 27,350 Devon Energy Corp. ............ 1,834,638 123,750 Exxon Mobil Corp. ............. 9,482,962 21,400 Marathon Oil Corp. ............ 1,979,500 41,200 Schlumberger, Ltd. (Netherlands Antilles).................... 2,602,192 14,700 XTO Energy, Inc. .............. 691,635 ------------ 23,141,546 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 4.3% 34,700 Abbott Laboratories............ 1,690,237 33,900 AmerisourceBergen Corp. ....... 1,524,144 37,834 Amgen, Inc.*................... 2,584,441 16,600 Biogen Idec, Inc.*............. 816,554 6,200 Celgene Corp.*................. 356,686 12,000 Forest Laboratories, Inc.*..... 607,200 37,400 King Pharmaceuticals, Inc.*.... 595,408 71,200 Merck & Company, Inc. ......... 3,104,320 183,260 Pfizer, Inc. .................. 4,746,434 9,700 Wyeth.......................... 493,924 ------------ 16,519,348 ------------ REAL ESTATE INVESTMENT TRUSTS -- 0.7% 11,400 Equity Office Properties Trust........................ 549,138 4,700 New Century Financial Corp.(8)..................... 148,473 25,900 ProLogis....................... 1,573,943 5,000 Public Storage, Inc. .......... 487,500 ------------ 2,759,054 ------------ RETAIL -- 1.5% 49,400 Circuit City Stores, Inc. ..... 937,612 14,800 Costco Wholesale Corp. ........ 782,476 40,500 Dillard's, Inc. -- Class A(8)......................... 1,416,284
See notes to financial statements. 115 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) RETAIL (CONTINUED) 36,000 Office Depot, Inc.*............ $ 1,374,120 5,872 The Home Depot, Inc. .......... 235,820 18,570 Wal-Mart Stores, Inc. ......... 857,563 ------------ 5,603,875 ------------ RETAIL: RESTAURANTS -- 0.8% 33,750 Darden Restaurants, Inc. ...... 1,355,738 32,100 Starbucks Corp.*............... 1,136,982 7,800 YUM! Brands, Inc. ............. 458,640 ------------ 2,951,360 ------------ RETAIL: SUPERMARKETS -- 0.4% 47,700 Safeway, Inc.(8)............... 1,648,512 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.3% 34,800 Applera Corp.-Applied Biosystems Group............. 1,276,812 ------------ SEMICONDUCTORS -- 1.2% 102,300 Atmel Corp.*................... 618,915 36,050 Intel Corp. ................... 730,013 94,800 Micron Technology, Inc.*....... 1,323,408 61,550 Texas Instruments, Inc. ....... 1,772,640 ------------ 4,444,976 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 3.3% 4,000 ALLTEL Corp. .................. 241,920 108,500 AT&T, Inc. .................... 3,878,874 34,600 BellSouth Corp. ............... 1,630,006 34,250 CenturyTel, Inc. .............. 1,495,355 10,907 Embarq Corp. .................. 573,272 103,350 Motorola, Inc. ................ 2,124,876 18,500 Polycom, Inc.*................. 571,835 54,650 Sprint Nextel Corp. ........... 1,032,339 29,100 UTStarcom, Inc.*(8)............ 254,625 16,200 Verizon Communications, Inc. ........................ 603,288 ------------ 12,406,390 ------------ TRANSPORTATION -- 0.7% 6,800 Burlington Northern Santa Fe Corp. ....................... 501,908 45,900 CSX Corp. ..................... 1,580,337 5,750 Norfolk Southern Corp. ........ 289,168 3,400 Union Pacific Corp. ........... 312,868 ------------ 2,684,281 ------------ UTILITIES -- 1.8% 6,600 American Electric Power Company, Inc. ............... 281,028 31,600 Duke Energy Corp. ............. 1,049,436 1,090 Dynegy, Inc. -- Class A*....... 7,892 17,400 Edison International........... 791,352
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) UTILITIES (CONTINUED) 9,250 Entergy Corp. ................. $ 853,960 6,200 FirstEnergy Corp. ............. 373,302 35,350 PG&E Corp. .................... 1,673,116 31,700 TXU Corp. ..................... 1,718,456 ------------ 6,748,542 ------------ TOTAL COMMON STOCKS (Cost $194,279,459).......... 230,153,071 ------------ CONVERTIBLE PREFERRED STOCKS -- 0.1% AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS 20,200 General Motors Corp., Series A, 4.50% (Cost $472,230)........ 510,656 ------------ WARRANTS -- 0.0% 789 Raytheon Company, Expires 06/16/11* (Cost $0).................... 14,139 ------------ PRINCIPAL --------- US TREASURY SECURITIES -- 3.5% US TREASURY BONDS -- 1.2% $ 500,000 8.00%, 11/15/21................ 662,969 2,730,000 6.00%, 02/15/26................ 3,097,059 748,000 4.50%, 02/15/36(8)............. 711,536 ------------ 4,471,564 ------------ US TREASURY INFLATION INDEX -- 1.7% 319,734 0.88%, 04/15/10................ 303,223 1,932,737 2.38%, 04/15/11................ 1,925,642 919,947 1.63%, 01/15/15................ 866,188 259,508 1.88%, 07/15/15................ 248,772 437,430 2.00%, 01/15/16................ 422,497 1,949,571 2.50%, 07/15/16................ 1,964,954 310,631 2.38%, 01/15/25................ 309,357 183,110 2.00%, 01/15/26................ 172,267 270,202 3.88%, 04/15/29................ 340,349 ------------ 6,553,249 ------------ US TREASURY NOTES -- 0.2% 265,000 3.38%, 02/15/08................ 260,456 380,000 4.50%, 02/28/11(8)............. 377,313 40,000 4.63%, 10/31/11(8)............. 39,867 230,000 4.63%, 11/15/16(8)............. 228,563 ------------ 906,199 ------------ US TREASURY STRIPS -- 0.4% 3,270,000 Zero coupon, 11/15/24.......... 1,362,256 ------------ TOTAL US TREASURY SECURITIES (Cost $13,345,058)........... 13,293,268 ------------
See notes to financial statements. 116 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES -- 20.9% ASSET BACKED: MORTGAGE AND HOME EQUITY -- 0.7% $ 600,000 Fannie Mae Grantor Trust, Series 2001-T2, Class B, 6.02%, 11/25/10.............. $ 619,989 234,099 Fannie Mae, Series 1999-7, Class AB, 6.00%, 03/25/29.............. 236,457 760,000 Fannie Mae, Series 2003-35, Class TE, 5.00%, 05/25/18.............. 744,727 474,938 Fannie Mae, Series 2004-60, Class LB, 5.00%, 04/25/34.............. 466,588 601,018 Fannie Mae, Series 2004-99, Class A0, 5.50%, 01/25/34.............. 599,671 ------------ 2,667,432 ------------ FANNIE MAE -- 10.9% 350,000 5.00%, 09/15/08................ 349,752 70,000 5.40%, 04/13/09................ 70,023 138,943 PL# 535675, 7.00%, 01/01/16.............. 142,926 956 PL# 549906, 7.50%, 09/01/30.............. 996 2,771 PL# 552549, 7.50%, 09/01/30.............. 2,886 591 PL# 558384, 7.50%, 01/01/31.............. 615 2,489 PL# 568677, 7.50%, 01/01/31.............. 2,592 893 PL# 572762, 7.50%, 03/01/31.............. 930 15,952 PL# 582178, 7.50%, 06/01/31.............. 16,602 13,238 PL# 594316, 6.50%, 07/01/31.............. 13,556 2,555 PL# 602859, 6.50%, 10/01/31.............. 2,616 14,707 PL# 614924, 7.00%, 12/01/16.............. 15,125 1,173,826 PL# 735809, Variable Rate, 4.47%, 08/01/35(1)........... 1,165,663 86,187 PL# 745000, 6.00%, 10/01/35.............. 86,816 57,966 PL# 779545, 6.00%, 06/01/34.............. 58,419 44,855 PL# 785183, 6.00%, 07/01/34.............. 45,205 354,182 PL# 787311, 6.00%, 06/01/34.............. 356,947 2,711,027 PL# 790915, 6.00%, 09/01/34.............. 2,732,193 1,777,081 PL# 792113, 6.00%, 09/01/34.............. 1,790,955 60,751 PL# 793193, 5.50%, 07/01/19.............. 60,814
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES (CONTINUED) FANNIE MAE (CONTINUED) $ 370,976 PL# 793693, 6.00%, 08/01/34.............. $ 373,872 114,542 PL# 801516, Variable Rate, 4.73%, 08/01/34(1)........... 113,868 476,216 PL# 810896, Variable Rate, 4.85%, 01/01/35(1)........... 473,741 1,070,149 PL# 835136, 6.00%, 09/01/35.............. 1,077,963 1,378,567 PL# 844183, 6.00%, 11/01/35.............. 1,388,633 791,467 PL# 893681, 6.00%, 10/01/36.............. 797,073 1,588,150 PL# 893923, 6.00%, 10/01/36.............. 1,599,399 1,893,598 PL# 894005, 6.00%, 10/01/36.............. 1,907,011 1,100,000 TBA, 5.00%, 01/01/22.............. 1,081,438 2,200,000 TBA, 5.50%, 01/01/22.............. 2,200,000 200,000 TBA, 6.00%, 01/01/22.............. 202,812 13,530,000 TBA, 5.00%, 01/01/37.............. 13,064,907 1,000,000 TBA, 5.50%, 01/01/37.............. 988,438 5,640,000 TBA, 6.50%, 01/01/37.............. 5,747,510 4,000,000 TBA, 5.00%, 02/01/37.............. 3,862,500 ------------ 41,794,796 ------------ FEDERAL AGRICULTURAL MORTGAGE CORP. -- 0.1% 220,000 4.25%, 07/29/08................ 217,272 ------------ FEDERAL HOME LOAN BANK -- 0.7% 200,000 5.10%, 09/19/08................ 200,194 300,000 5.40%, 01/02/09................ 299,692 90,000 4.75%, 12/16/16................ 88,289 1,790,000 5.50%, 07/15/36................ 1,874,728 210,000 Series VB15, 5.00%, 12/21/15.............. 209,925 ------------ 2,672,828 ------------ FREDDIE MAC -- 0.8% 1,060,000 4.38%, 11/16/07................ 1,052,446 1,460,000 4.75%, 01/18/11................ 1,451,639 430,000 5.63%, 11/23/35................ 415,767 210,000 Series MTN, 5.55%, 12/11/08.............. 209,962 ------------ 3,129,814 ------------
See notes to financial statements. 117 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ US GOVERNMENT AGENCY SECURITIES (CONTINUED) FREDDIE MAC GOLD -- 0.5% $ 900,000 TBA, 5.00%, 01/01/22.............. $ 884,250 1,000,000 TBA, 5.00%, 01/01/37.............. 965,000 ------------ 1,849,250 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 6.9% 3,391 PL# 461836, 7.00%, 01/15/28.............. 3,505 1,519 PL# 596647, 7.00%, 09/15/32.............. 1,571 231,979 PL# 604404, 5.00%, 06/15/33.............. 225,959 684,289 PL# 604845, 5.00%, 12/15/33.............. 666,532 850,215 PL# 608280, 5.00%, 09/15/33.............. 828,153 835,892 PL# 615892, 5.00%, 08/15/33.............. 814,202 889,279 PL# 616832, 5.00%, 01/15/35.............. 865,230 796,688 PL# 620521, 5.00%, 08/15/33.............. 776,015 833,781 PL# 637934, 5.00%, 01/15/35.............. 811,233 886,941 PL# 639093, 5.00%, 01/15/35.............. 862,955 484,444 PL# 639865, 5.00%, 06/15/35.............. 471,344 111,081 PL# 781881, 5.00%, 03/15/35.............. 108,120 510,000 TBA, 5.00%, 01/01/37.............. 495,975 1,000,000 TBA, 5.50%, 01/01/37.............. 995,312 18,450,000 TBA, 6.00%, 01/01/37.............. 18,709,444 ------------ 26,635,550 ------------ RESOLUTION FUNDING STRIPS -- 0.1% 250,000 Zero coupon, 07/15/18.......... 141,403 250,000 Zero coupon, 10/15/18.......... 139,561 ------------ 280,964 ------------ TENNESSEE VALLEY AUTHORITY -- 0.2% 630,000 5.98%, 04/01/36................ 701,584 ------------ TOTAL US GOVERNMENT AGENCY SECURITIES (Cost $80,298,247)........... 79,949,490 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES -- 21.1% ADVERTISING -- 0.0% $ 40,000 Lamar Media Corp., 7.25%, 01/01/13.............. $ 40,950 60,000 Lamar Media Corp., Series B, 6.63%, 08/15/15.............. 59,775 ------------ 100,725 ------------ AEROSPACE AND DEFENSE -- 0.0% 25,000 DRS Technologies, Inc., 6.63%, 02/01/16.............. 25,313 ------------ AUTOMOBILE: RENTAL -- 0.0% 35,000 Hertz Corp. -- 144A, 8.88%, 01/01/14.............. 36,838 ------------ AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 0.5% 45,000 Daimler Chrysler NA Holding, 4.05%, 06/04/08.............. 44,054 300,000 Daimler Chrysler NA Holding, 5.88%, 03/15/11.............. 301,406 580,000 Ford Motor Company, 7.45%, 07/16/31(8)........... 458,200 970,000 General Motors Corp., 8.25%, 07/15/23(8)........... 906,950 50,000 Visteon Corp., 8.25%, 08/01/10.............. 49,000 ------------ 1,759,610 ------------ BANKS -- 1.2% 450,000 Bank of America Corp., 5.38%, 08/15/11(8)........... 453,569 325,000 Deutsche Bank AG New York, Series YCD, Variable Rate, 5.34%, 03/15/07(1)........... 324,982 270,000 First Union National Bank, Series BKNT, 5.80%, 12/01/08.............. 272,946 160,000 Glitnir Banki HF -- 144A (Iceland), 6.33%, 07/28/11.............. 164,452 380,000 Glitnir Banki HF -- 144A (Iceland), Variable Rate, 6.69%, 06/15/16(1)........... 392,676 130,000 Kaupthing Bank -- 144A (Iceland), 7.13%, 05/19/16.............. 138,125 600,000 Kaupthing Bank -- 144A (Iceland), Floating Rate, 6.06%, 04/12/11(2)........... 604,863 510,000 Landisbanki Islands HF -- 144A (Iceland), 6.10%, 08/25/11.............. 519,021 20,000 Rabobank Capital Funding Trust II -- 144A, Variable Rate, 5.26%, perpetual(1).......... 19,587
See notes to financial statements. 118 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 40,000 Rabobank Capital Funding Trust III -- 144A, Variable Rate, 5.25%, perpetual (1)......... $ 38,639 235,000 Resona Preferred Global Securities -- 144A (Cayman Islands), Variable Rate, 7.19%, perpetual(1).......... 245,594 300,000 Shinsei Financial, Ltd. -- 144A (Cayman Islands), Variable Rate, 6.42%, perpetual(1).......... 300,177 215,000 SunTrust Banks, Inc., Series CD, 4.42%, 06/15/09.............. 210,883 220,000 Wachovia Capital Trust III, Variable Rate, 5.80%, perpetual(1).......... 222,020 540,000 Wachovia Corp., 5.25%, 08/01/14.............. 534,246 175,000 Wells Fargo & Company, 5.30%, 08/26/11.............. 175,877 100,000 Wells Fargo Capital X, 5.95%, 12/15/36.............. 98,347 ------------ 4,716,004 ------------ BROADCAST SERVICES/MEDIA -- 0.6% 20,000 Clear Channel Communications, Inc., 4.63%, 01/15/08.............. 19,814 100,000 Clear Channel Communications, Inc., 4.25%, 05/15/09.............. 96,905 170,000 Clear Channel Communications, Inc., 5.50%, 09/15/14.............. 143,620 60,000 Clear Channel Communications, Inc., 4.90%, 05/15/15.............. 47,921 150,000 Comcast Cable Communications, 8.88%, 05/01/17.............. 180,964 240,000 Comcast Corp., 6.50%, 01/15/15.............. 250,452 20,000 Comcast Corp., 5.88%, 02/15/18.............. 19,825 180,000 Cox Communications, Inc., 3.88%, 10/01/08.............. 175,197 40,000 CSC Holdings, Inc., 7.88%, 02/15/18.............. 40,100 15,000 CSC Holdings, Inc., 7.63%, 07/15/18.............. 14,681 10,000 CSC Holdings, Inc., Series B, 7.63%, 04/01/11.............. 10,238 70,000 DIRECTV Holdings LLC/ DIRECTV Financing Company, Inc., 8.38%, 03/15/13.............. 73,150
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) BROADCAST SERVICES/MEDIA (CONTINUED) $ 30,000 Echostar DBS Corp., 7.00%, 10/01/13.............. $ 30,113 90,000 Echostar DBS Corp., 7.13%, 02/01/16.............. 90,450 75,000 Kabel Deutschland GMBH (Germany), 10.63%, 07/01/14............. 83,531 280,000 Liberty Media Corp., 7.88%, 07/15/09.............. 293,391 10,000 Liberty Media Corp., 5.70%, 05/15/13.............. 9,471 35,000 News America, Inc., 6.20%, 12/15/34.............. 33,892 30,000 Quebecor Media, Inc. (Canada), 7.75%, 03/15/16.............. 30,788 10,000 Rogers Cable, Inc. (Canada), 5.50%, 03/15/14.............. 9,612 35,000 Rogers Cable, Inc. (Canada), 6.75%, 03/15/15.............. 36,237 10,000 Sinclair Broadcast Group, 8.00%, 03/15/12.............. 10,375 80,000 Time Warner Entertainment, 8.38%, 07/15/33.............. 96,975 350,000 Time Warner, Inc., 6.88%, 05/01/12.............. 370,273 75,000 Time Warner, Inc., 7.70%, 05/01/32.............. 84,873 130,000 Viacom, Inc., 5.75%, 04/30/11.............. 130,189 ------------ 2,383,037 ------------ CHEMICALS -- 0.0% 30,000 Georgia Gulf Corp. -- 144A, 9.50%, 10/15/14.............. 29,400 30,000 Lyondell Chemical Company, 8.00%, 09/15/14.............. 31,275 15,000 Lyondell Chemical Company, 8.25%, 09/15/16.............. 15,825 6,000 Rhodia SA (France), 10.25%, 06/01/10............. 6,870 27,000 Westlake Chemical Corp., 6.63%, 01/15/16.............. 26,258 ------------ 109,628 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 0.0% 20,000 Electronic Data Systems, 7.13%, 10/15/09.............. 20,863 40,000 Sungard Data Systems, Inc., 9.13%, 08/15/13.............. 42,200 ------------ 63,063 ------------ CONSTRUCTION SERVICES AND SUPPLIES -- 0.0% 65,000 K Hovnanian Enterprises, Inc., 6.25%, 01/15/15.............. 62,075 ------------
See notes to financial statements. 119 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) CONSUMER GOODS AND SERVICES -- 0.1% $ 400,000 Altria Group, Inc., 7.00%, 11/04/13.............. $ 435,200 ------------ ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 0.1% 160,000 Waste Management, Inc., 6.50%, 11/15/08.............. 163,078 270,000 Waste Management, Inc., 6.38%, 11/15/12.............. 283,095 ------------ 446,173 ------------ EQUIPMENT RENTAL AND LEASING -- 0.1% 250,000 International Lease Finance Corp. E-Capital Trust II -- 144A, Variable Rate, 6.25%, 12/21/65(1)........... 254,397 ------------ FINANCIAL SERVICES -- 3.2% 200,000 Aiful Corp. -- 144A (Japan), 5.00%, 08/10/10.............. 194,237 560,000 Citigroup, Inc., 5.10%, 09/29/11.............. 558,209 760,000 Countrywide Financial Corp., Series MTNA, 4.50%, 06/15/10.............. 741,524 120,000 Countrywide Financial Corp., Series MTNB, Floating Rate, 5.47%, 06/18/08(2)........... 120,031 100,000 Countrywide Financial Corp., Series MTNB, Floating Rate, 5.50%, 01/05/09(2)........... 100,034 280,000 Countrywide Home Loans, Series MTNB, Floating Rate, 5.53%, 02/27/08(2)........... 280,350 100,000 Credit Suisse USA, Inc., 5.50%, 08/16/11.............. 101,192 10,000 E*TRADE Financial Corp., 7.38%, 09/15/13.............. 10,450 2,645,000 Ford Motor Credit Company, 5.80%, 01/12/09.............. 2,598,190 220,000 Ford Motor Credit Company, 7.38%, 10/28/09.............. 220,607 129,000 Ford Motor Credit Company -- 144A, Floating Rate, 10.61%, 06/15/11(2).......... 137,843 210,000 General Electric Capital Corp., Series MTNA, 4.25%, 01/15/08.............. 208,141 300,000 General Electric Capital Corp., Series MTNA, 4.13%, 09/01/09.............. 292,681 800,000 General Motors Acceptance Corp., 6.13%, 08/28/07.............. 800,282 1,130,000 General Motors Acceptance Corp., 5.85%, 01/14/09.............. 1,126,249 110,000 General Motors Acceptance Corp., Series GM, 6.31%, 11/30/07.............. 109,336
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) FINANCIAL SERVICES (CONTINUED) $ 120,000 General Motors Acceptance Corp., Series MTN, 4.38%, 12/10/07.............. $ 118,356 160,000 General Motors Acceptance Corp., Series MTN, Floating Rate, 6.52%, 09/23/08(2)........... 160,991 80,000 GMAC LLC, 5.13%, 05/09/08.............. 79,170 560,000 HSBC Finance Corp., 4.63%, 01/15/08.............. 556,391 490,000 JPMorgan Chase & Company, 5.13%, 09/15/14.............. 482,582 290,000 JPMorgan Chase & Company, 5.15%, 10/01/15.............. 285,075 810,000 Lehman Brothers E-Capital Trust I, Floating Rate, 6.16%, 08/19/65(2)........... 818,172 290,000 Lehman Brothers Holdings, Inc., 4.00%, 01/22/08.............. 286,077 180,000 Lehman Brothers Holdings, Inc., 4.50%, 07/26/10.............. 175,587 170,000 Mitsubishi UFJ Financial Group Capital Financial I, Ltd. (Cayman Islands), Variable Rate, 6.35%, perpetual(1).......... 172,838 70,000 Morgan Stanley, 3.63%, 04/01/08.............. 68,604 260,000 Morgan Stanley, Series MTN, 5.63%, 01/09/12.............. 264,571 100,000 Morgan Stanley, Series MTNF, Floating Rate, 5.82%, 10/18/16(2)........... 100,744 520,000 Sigma Finance, Inc. -- 144A, Series MTN1, Variable Rate, 8.50%, 08/11/16(1)........... 519,371 170,000 The Goldman Sachs Group, Inc., 4.50%, 06/15/10.............. 166,517 120,000 The Goldman Sachs Group, Inc., 5.00%, 01/15/11.............. 119,100 ------------ 11,973,502 ------------ FOOD AND BEVERAGE -- 0.0% 130,000 Kraft Foods, Inc., 5.63%, 11/01/11.............. 131,519 ------------ FUNERAL SERVICES -- 0.0% 10,000 Service Corp. International, 7.00%, 06/15/17.............. 10,175 40,000 Service Corp. International, 7.63%, 10/01/18.............. 42,600 ------------ 52,775 ------------ INSURANCE -- 0.0% 40,000 ASIF Global Financing XIX -- 144A, 4.90%, 01/17/13.............. 39,058 ------------
See notes to financial statements. 120 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) LEISURE AND RECREATION -- 0.1% $ 20,000 AMC Entertainment, Inc., 11.00%, 02/01/16(8).......... $ 22,550 25,000 Boyd Gaming Corp., 6.75%, 04/15/14.............. 25,063 80,000 Boyd Gaming Corp., 7.13%, 02/01/16.............. 79,999 30,000 Inn of The Mountain Gods, 12.00%, 11/15/10............. 32,550 25,000 MGM MIRAGE, 6.00%, 10/01/09.............. 25,063 50,000 MGM MIRAGE, 8.50%, 09/15/10.............. 53,750 15,000 MGM MIRAGE, 6.63%, 07/15/15.............. 14,363 55,000 MGM MIRAGE, 7.63%, 01/15/17.............. 55,413 15,000 Mohegan Tribal Gaming Authority, 6.13%, 02/15/13.............. 14,963 90,000 Station Casinos, Inc., 7.75%, 08/15/16.............. 91,124 10,000 Station Casinos, Inc. -- 144A, 6.88%, 03/01/16.............. 9,025 ------------ 423,863 ------------ MANUFACTURING -- 0.2% 270,000 Tyco International Group SA (Luxembourg), 6.38%, 10/15/11.............. 282,843 530,000 Tyco International Group SA (Luxembourg), 6.00%, 11/15/13.............. 549,145 ------------ 831,988 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 0.2% 30,000 DaVita, Inc., 7.25%, 03/15/15.............. 30,750 10,000 Fresenius Medical Care Capital Trust II, 7.88%, 02/01/08.............. 10,175 11,000 HCA, Inc., 6.30%, 10/01/12.............. 10,093 130,000 HCA, Inc., 6.25%, 02/15/13.............. 115,375 160,000 HCA, Inc., 6.75%, 07/15/13.............. 144,000 40,000 HCA, Inc., 5.75%, 03/15/14.............. 33,300 66,000 HCA, Inc., 6.50%, 02/15/16(8)........... 55,935 20,000 HCA, Inc. -- 144A, 9.13%, 11/15/14.............. 21,425 160,000 HCA, Inc. -- 144A, 9.25%, 11/15/16.............. 171,800 100,000 HCA, Inc. -- 144A, 9.63%, 11/15/16.............. 107,750
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES (CONTINUED) $ 60,000 Tenet Healthcare Corp., 6.38%, 12/01/11.............. $ 55,200 30,000 Tenet Healthcare Corp., 6.50%, 06/01/12.............. 27,300 ------------ 783,103 ------------ METALS AND MINING -- 0.1% 350,000 Vale Overseas, Ltd. (Cayman Islands), 6.88%, 11/21/36.............. 360,726 ------------ OFFICE EQUIPMENT, SUPPLIES, AND SERVICES -- 0.0% 50,000 Xerox Corp., 6.75%, 02/01/17.............. 52,500 ------------ OIL, COAL AND GAS -- 2.0% 250,000 Amerada Hess Corp., 7.30%, 08/15/31.............. 279,853 30,000 AmeriGas Partners LP/AmeriGas Eagle Finance Corp., 7.13%, 05/20/16.............. 30,150 210,000 Anadarko Finance Company, Series B, 7.50%, 05/01/31.............. 238,978 150,000 Anadarko Petroleum Corp., 5.95%, 09/15/16.............. 150,588 40,000 Anadarko Petroleum Corp., 6.45%, 09/15/36.............. 40,554 290,000 Apache Finance Canada (Canada), 4.38%, 05/15/15.............. 267,336 45,000 Chesapeake Energy Corp., 7.75%, 01/15/15.............. 47,081 5,000 Chesapeake Energy Corp., 6.38%, 06/15/15.............. 4,975 20,000 Chesapeake Energy Corp., 6.25%, 01/15/18.............. 19,350 340,000 ChevronTexaco Capital Company (Canada), 3.50%, 09/17/07.............. 336,068 390,000 Conoco, Inc., 6.95%, 04/15/29.............. 444,317 40,000 Devon Energy Corp., 7.95%, 04/15/32.............. 48,843 200,000 El Paso Corp., Series MTN, 7.80%, 08/01/31.............. 219,500 130,000 El Paso Corp., Series MTN, 7.75%, 01/15/32.............. 143,000 330,000 El Paso Natural Gas, 8.38%, 06/15/32.............. 401,260 500,000 El Paso Performance-Link -- 144A, 7.75%, 07/15/11.............. 531,250 450,000 Gaz Capital SA/Gazprom OAO -- 144A (Luxembourg), 6.21%, 11/22/16.............. 454,275 80,000 Kerr-McGee Corp., 6.95%, 07/01/24.............. 85,420
See notes to financial statements. 121 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) OIL, COAL AND GAS (CONTINUED) $ 920,000 Kerr-McGee Corp., 7.88%, 09/15/31.............. $ 1,100,815 50,000 Kinder Morgan Energy Partners, LP, 6.30%, 02/01/09.............. 50,688 240,000 Kinder Morgan Energy Partners, LP, 6.75%, 03/15/11.............. 249,943 55,000 Opti Canada, Inc. (Canada) -- 144A, 8.25%, 12/15/14.............. 56,788 40,000 Peabody Energy Corp., Series B, 6.88%, 03/15/13.............. 41,200 310,000 Pemex Project Funding Master Trust, 7.38%, 12/15/14.............. 342,085 290,000 Petrobas International Finance Company (Cayman Islands), 6.13%, 10/06/16.............. 294,350 45,000 Pogo Producing Company, 6.88%, 10/01/17.............. 43,200 30,000 Pride International, Inc., 7.38%, 07/15/14.............. 31,125 25,000 Semgroup LP -- 144A, 8.75%, 11/15/15.............. 25,250 95,000 Suburban Propane Partners, 6.88%, 12/15/13.............. 93,575 310,000 TNK-BP Finance SA -- 144A (Luxembourg), 7.50%, 07/18/16.............. 330,538 80,000 Western Oil Sands, Inc. (Canada), 8.38%, 05/01/12.............. 89,200 20,000 Williams Companies, Inc., 7.75%, 06/15/31.............. 21,100 510,000 Williams Companies, Inc., Series A, 7.50%, 01/15/31.............. 531,675 190,000 XTO Energy, Inc., 7.50%, 04/15/12.............. 206,653 ------------ 7,250,983 ------------ PAPER AND FOREST PRODUCTS -- 0.0% 110,000 Weyerhaeuser Company, 6.75%, 03/15/12.............. 115,490 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 0.0% 40,000 AmerisourceBergen Corp., 5.88%, 09/15/15.............. 39,311 ------------ PRINTING AND PUBLISHING -- 0.0% 45,000 Idearc, Inc. -- 144A, 8.00%, 11/15/16.............. 45,900 20,000 Reader's Digest Association, Inc., 6.50%, 03/01/11.............. 20,650 ------------ 66,550 ------------
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: BANKS -- 0.9% $ 580,049 Washington Mutual Bank, Series 2005-AR1, Class A1A, Floating Rate, 5.67%, 01/25/45(3)........... $ 582,621 896,742 Washington Mutual Bank, Series 2005-AR13, Class A1A1, Floating Rate, 5.64%, 10/25/45(3)........... 898,508 960,795 Washington Mutual Bank, Series 2005-AR13, Class A1B3, Floating Rate, 5.71%, 10/25/45(3)........... 966,163 1,044,035 Washington Mutual Bank, Series 2005-AR15, Class A1A2, Floating Rate, 5.63%, 11/25/45(3)........... 1,048,722 ------------ 3,496,014 ------------ PRIVATE ASSET BACKED: FINANCIAL SERVICES -- 0.8% 860,367 Lehman XS Trust, Series 2005-5N, Class 1A1, Floating Rate, 5.65%, 11/25/35(3)........... 863,289 579,115 Lehman XS Trust, Series 2005-7N, Class 1A1B, Floating Rate, 5.65%, 12/25/35(3)........... 581,818 1,138,605 Lehman XS Trust, Series 2006-GP4, Class 3A1A, Floating Rate, 5.42%, 08/25/46(3)........... 1,138,432 300,000 Morgan Stanley Capital I, Series 2005-HQ6, Class A4A, 4.99%, 08/13/42.............. 293,284 ------------ 2,876,823 ------------ PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY -- 9.4% 936,327 Accredited Mortgage Loan Trust, Series 2005-3, Class A1, Floating Rate, 5.59%, 09/25/35(3)........... 937,739 401,114 Adjustable Rate Mortgage Trust, Series 2004-2, Class 7A2, Floating Rate, 5.77%, 02/25/35(3)........... 401,939 387,206 Adjustable Rate Mortgage Trust, Series 2004-5, Class 7A2, Floating Rate, 5.73%, 04/25/35(3)........... 387,782 280,000 Banc of America Commercial Mortgage, Inc., Series 2005-5, Class A4, 5.12%, 09/10/15.............. 275,948 1,481,283 Banc of America Mortgage Securities, Series 2005-A, Class 2A1, 4.46%, 02/25/35.............. 1,447,640
See notes to financial statements. 122 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 196,050 Chevy Chase Mortgage Funding Corp -- 144A, Series 2003-3A, Class A1, Floating Rate, 5.70%, 07/25/34(3)........... $ 196,148 425,709 Countrywide Alternative Loan Trust, Series 2005-36, Class 3A1, Floating Rate, 4.96%, 08/25/35(3)........... 422,116 1,133,677 Countrywide Alternative Loan Trust, Series 2005-56, Class 4A1, Floating Rate, 5.63%, 11/25/35(3)........... 1,137,644 1,218,445 Countrywide Alternative Loan Trust, Series 2005-59, Class 1A1, Floating Rate, 5.65%, 11/20/35(3)........... 1,223,239 583,778 Countrywide Asset-Backed Certificates, Series 2005-11, Class AF1, Floating Rate, 5.53%, 02/25/36(3)........... 584,306 390,000 Countrywide Asset-Backed Certificates, Series 2005-4, Class AF3, 4.46%, 10/25/35.............. 385,909 668,161 Countrywide Home Equity Loan Trust, Series 2005-G, Class 2A, Floating Rate, 5.58%, 12/15/35(3)........... 669,309 1,043,530 Countrywide Home Loans -- 144A, Series 2005-R3, Class AF, Floating Rate, 5.72%, 09/25/35(3)........... 1,049,850 330,832 First Franklin Mortgage Loan Asset Backed Certificates, Series 2004-FF10, Class A2, Floating Rate, 5.75%, 12/25/32(3)........... 331,568 889,441 GMAC Commercial Mortgage Securities, Inc., Series 1999-C2, Class A2, 6.95%, 09/15/33.............. 917,449 1,071,741 GMAC Mortgage Corp. Loan Trust, Series 2005-AR1, Class 3A, Floating Rate, 4.67%, 03/18/35(3)........... 1,058,118 1,500,000 GMAC Mortgage Corp. Loan Trust, Series 2006-HE1, Class A, Floating Rate, 5.56%, 11/25/36(3)........... 1,501,542 1,956,387 GSAMP Trust -- 144A, Series 2006-SD2, Class A1, Floating Rate, 5.46%, 05/25/46(3)........... 1,956,309 362,016 Impac CMB Trust, Series 2003-10, Class 1A1, Floating Rate, 6.05%, 10/25/33(3)........... 362,391 447,994 Impac CMB Trust, Series 2004-2, Class A1, Floating Rate, 5.87%, 04/25/34(3)........... 448,342
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 551,475 Impac CMB Trust, Series 2004-6, Class 1A1, Floating Rate, 5.75%, 10/25/34(3)........... $ 554,023 240,929 IndyMac Index Mortgage Loan Trust, Series 2005-AR15, Class A2, 5.10%, 09/25/35.............. 234,004 1,080,000 JPMorgan Chase Commercial Mortgage Securities Corp., Series 2005-CB12, Class A4, 4.90%, 09/12/37.............. 1,048,709 903,282 JPMorgan Mortgage Trust, Series 2004-A3, Class 1A1, Floating Rate, 4.30%, 07/25/34(3)........... 896,729 870,000 LB-UBS Commercial Mortgage Trust, Series 2005-C1, Class A3, 4.55%, 02/15/30.............. 844,150 1,098,000 Merrill Lynch Mortgage Investors, Inc., Series 2005-A4, Class 2A2, 4.46%, 07/25/35.............. 1,069,434 1,300,000 Merrill Lynch Mortgage Investors, Inc., Series 2005-A5, Class A3, 4.44%, 06/25/35.............. 1,277,407 500,000 Merrill Lynch Mortgage Trust, Series 2006-C1, Class A4, Floating Rate, 5.66%, 05/12/39(3)........... 514,847 401,935 MLCC Mortgage Investors, Inc., Series 2003-F, Class A1, Floating Rate, 5.67%, 10/25/28(3)........... 401,969 464,792 Opteum Mortgage Acceptance Corp., Series 2005-4, Class 1A1A, Floating Rate, 5.52%, 11/25/35(3)........... 465,231 974,511 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 1A1, 5.50%, 05/25/35.............. 967,796 483,169 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 1A2, 6.00%, 05/25/35.............. 486,151 1,958,662 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 2A1, 5.50%, 05/25/35.............. 1,941,504 1,764,042 Prime Mortgage Trust -- 144A, Series 2006-DR1, Class 2A2, 6.00%, 05/25/35.............. 1,759,068 2,150,267 Residential Accredit Loans, Inc., Series 2005-Q03, Class A1, Floating Rate, 5.75%, 10/25/45(3)........... 2,157,825 1,065,308 Structured Adjustable Rate Mortgage Loan, Series 2005-15, Class 1A1, 5.06%, 07/25/35.............. 1,056,891
See notes to financial statements. 123 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) PRIVATE ASSET BACKED: MORTGAGE AND HOME EQUITY (CONTINUED) $ 539,842 Structured Asset Mortgage Investments, Inc., Series 2003-AR4, Class A1, Floating Rate, 5.70%, 01/19/34(3)........... $ 541,158 2,278,539 Thornburg Mortgage Securities Trust, Series 2006-1, Class A3, Floating Rate, 5.52%, 01/25/36(3)........... 2,276,814 1,247,501 Zuni Mortgage Loan Trust, Series 2006-0A1, Class A1, Floating Rate, 5.45%, 08/25/36(3)........... 1,246,727 ------------ 35,435,725 ------------ REAL ESTATE INVESTMENT TRUSTS -- 0.0% 50,000 Host Marriott LP, Series Q, 6.75%, 06/01/16.............. 50,313 50,000 Ventas Realty LP/Ventas Capital Corp., 6.75%, 06/01/10.............. 51,750 40,000 Ventas Realty LP/Ventas Capital Corp., 7.13%, 06/01/15.............. 42,200 ------------ 144,263 ------------ RETAIL -- 0.0% 20,000 JC Penney & Company, Inc., 7.40%, 04/01/37.............. 21,871 ------------ RETAIL: SUPERMARKETS -- 0.0% 100,000 Delhaize America, Inc., 9.00%, 04/15/31.............. 119,231 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.0% 25,000 Cie Generale de Geophysique (France), 7.50%, 05/15/15.............. 25,250 ------------ SEMICONDUCTORS -- 0.0% 40,000 MagnaChip Semiconductor, Ltd., Floating Rate, 8.61%, 12/15/11(2)........... 34,600 15,000 NXP BV/NXP Funding LLC (the Netherlands) -- 144A, 7.88%, 10/15/14.............. 15,581 ------------ 50,181 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 0.8% 190,000 AT&T, Inc., 5.10%, 09/15/14.............. 184,769 55,000 Cincinnati Bell, Inc., 7.00%, 02/15/15.............. 55,344 15,000 Citizens Communications Company, 9.25%, 05/15/11.............. 16,669
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) $ 10,000 Citizens Communications Company, 9.00%, 08/15/31.............. $ 10,900 180,000 Deutsche Telecom International Finance BV (the Netherlands), 5.75%, 03/23/16.............. 177,668 45,000 Intelsat Bermuda, Ltd. -- 144A (Bermuda), 9.25%, 06/15/16.............. 48,600 220,000 Koninklijke KPN NV (the Netherlands), 8.38%, 10/01/30.............. 252,764 10,000 Nextel Communications, Inc., Series D, 7.38%, 08/01/15.............. 10,264 580,000 Nextel Communications, Inc., Series E, 6.88%, 10/31/13.............. 586,586 60,000 Nextel Communications, Inc., Series F, 5.95%, 03/15/14.............. 58,513 780,000 Qwest Communications International, Inc., Floating Rate, 8.87%, 02/15/09(2)........... 793,650 105,000 Qwest Corp., 7.88%, 09/01/11.............. 112,350 40,000 Rogers Wireless, Inc. (Canada), 6.38%, 03/01/14.............. 40,700 270,000 Sprint Capital Corp., 8.38%, 03/15/12.............. 300,392 60,000 Sprint Capital Corp., 8.75%, 03/15/32.............. 72,421 240,000 Sprint Nextel Corp., 6.00%, 12/01/16.............. 234,340 200,000 Telecom Italia Capital (Luxembourg), 5.25%, 10/01/15.............. 187,142 50,000 Verizon Global Funding Corp., 7.38%, 09/01/12.............. 54,730 10,000 Verizon New York, Inc., Series A, 6.88%, 04/01/12.............. 10,379 25,000 Windstream Corp. -- 144A, 8.63%, 08/01/16.............. 27,500 ------------ 3,235,681 ------------ TRANSPORTATION -- 0.1% 85,000 OMI Corp. (Marshall Islands), 7.63%, 12/01/13.............. 87,338 20,000 Teekay Shipping Corp. (Marshall Islands), 8.88%, 07/15/11.............. 21,575 110,000 Union Pacific Corp., 5.38%, 05/01/14.............. 109,377 ------------ 218,290 ------------
See notes to financial statements. 124 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) UTILITIES -- 0.7% $ 760,000 AES Corp., 7.75%, 03/01/14.............. $ 805,599 70,000 Dominion Resources, Inc., 4.75%, 12/15/10.............. 68,452 220,000 Dominion Resources, Inc., 5.70%, 09/17/12(8)........... 222,762 40,000 Exelon Corp., 5.63%, 06/15/35.............. 37,808 160,000 FirstEnergy Corp., Series B, 6.45%, 11/15/11.............. 167,023 470,000 FirstEnergy Corp., Series C, 7.38%, 11/15/31.............. 536,880 50,000 Midwest Generation LLC, 8.75%, 05/01/34.............. 54,500 37,566 Midwest Generation LLC, Series B, 8.56%, 01/02/16.............. 41,440 80,000 NRG Energy, Inc., 7.25%, 02/01/14.............. 80,800 40,000 Oncor Electric Delivery Company, 6.38%, 01/15/15.............. 41,296 130,000 Pacific Gas & Electric Company, 6.05%, 03/01/34.............. 131,552 210,000 TXU Corp., Series P, 5.55%, 11/15/14.............. 200,412 160,000 TXU Corp., Series R, 6.55%, 11/15/34.............. 150,436 ------------ 2,538,960 ------------ TOTAL CORPORATE BONDS AND NOTES (Cost $80,323,666)........... 80,675,720 ------------ CONVERTIBLE BONDS -- 0.0% AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS 100,000 Ford Motor Company, 4.25%, 12/15/36 (Cost $100,000).............. 107,375 ------------ MUNICIPAL BONDS -- 0.4% VIRGINIA 1,565,361 Virginia State Housing Development Authority, Series C, Revenue Bond, 6.00%, 06/25/34 (Cost $1,539,633)............ 1,565,408 ------------ FOREIGN GOVERNMENT OBLIGATIONS -- 1.3% 450,000 AID-Israel (Israel), 5.50%, 04/26/24.............. 468,755 510,000 Bundesrepublic Deutschland (Germany), Series 04, 3.75%, 01/04/15(19).......... 663,890
PRINCIPAL VALUE --------- ------------ FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED) $ 97,000 Federal Republic of Brazil (Brazil), 10.13%, 05/15/27............. $ 136,528 342,000 Federal Republic of Brazil (Brazil), 11.00%, 08/17/40(8).......... 453,578 59,648 Government of Canada Real Return Bonds (Canada), 4.00%, 12/01/31(17).......... 74,218 230,000 Republic of Colombia (Colombia), Series MTN, 7.38%, 09/18/37.............. 247,480 206,000 Republic of Panama (Panama), 7.13%, 01/29/26.............. 223,510 1,510,000 Russian Federation (Russia) -- 144A, 5.00%, 03/31/30.............. 1,708,295 16,000 United Mexican States (Mexico), 5.63%, 01/15/17.............. 16,056 270,000 United Mexican States (Mexico), Series MTN, 8.30%, 08/15/31.............. 345,870 414,000 United Mexican States (Mexico), Series MTNA, 7.50%, 04/08/33.............. 489,555 ------------ TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $4,532,762)............ 4,827,735 ------------ SHORT TERM US GOVERNMENT AGENCY SECURITIES -- 0.2% FEDERAL HOME LOAN BANK 710,000 Series 633, 4.80%, 02/15/07 (Cost $710,000).............. 710,000 ------------ SHORT TERM US TREASURY SECURITY -- 0.3% US TREASURY BILL 1,185,000 4.87%, 01/11/07 (Cost $1,183,076)............ 1,183,076 ------------ SECURITIES LENDING COLLATERAL -- 2.2% 8,381,259 Securities Lending Collateral Investment (Note 4) (Cost $8,381,259)............ 8,381,259 ------------ TOTAL SECURITIES (Cost $385,165,390).......... 421,371,197 ------------
See notes to financial statements. 125 BALANCED PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ REPURCHASE AGREEMENTS -- 4.2% $15,905,785 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $15,914,197 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 5.85%, due 01/25/33, with a value of $16,304,160 and Government National Mortgage Association, 6.38%, due 07/20/34, with a value of $396,914) (Cost $15,905,785)................. $ 15,905,785 ------------ Total Investments before Call and Put Options Written -- 114.6% (Cost $401,071,175).......... 437,276,982 ------------ CONTRACTS --------- CALL OPTIONS WRITTEN -- (0.0)% (41) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 110.......... (3,203) (1) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 111.......... (31) ------------ TOTAL CALL OPTIONS WRITTEN (Premium $11,337)............ (3,234) ------------ PUT OPTIONS WRITTEN -- (0.0)% (42) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 106.......... (8,531)
CONTRACTS VALUE --------- ------------ PUT OPTIONS WRITTEN (CONTINUED) (40) US Treasury Note (10 Year) March Future, Expiring February 2007 @ 107.......... $ (19,375) ------------ TOTAL PUT OPTIONS WRITTEN (Premium $24,809)............ (27,906) ------------ Total Investments net of Call and Put Options Written -- 114.6% (Cost $401,035,029).......... 437,245,842 Liabilities less other assets -- (14.6)%............ (55,597,041) ------------ NET ASSETS -- 100.0%........... $381,648,801 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $401,859,928. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation........... $38,596,924 Gross unrealized depreciation........... (3,211,010) ----------- Net unrealized appreciation............. $35,385,914] ===========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 126 VALUE & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS -- 97.8% ADVERTISING -- 0.7% 2,014,400 The Interpublic Group of Companies, Inc.*(8)....... $ 24,656,256 -------------- AEROSPACE AND DEFENSE -- 1.3% 300,000 Northrop Grumman Corp. ..... 20,310,000 274,000 The Boeing Company.......... 24,342,160 -------------- 44,652,160 -------------- APPAREL: MANUFACTURING AND RETAIL -- 0.3% 320,000 Limited Brands, Inc. ....... 9,260,800 -------------- AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 0.9% 104,000 BorgWarner, Inc. ........... 6,138,080 146,600 DaimlerChrysler AG (Germany)(8).............. 9,002,706 360,800 General Motors Corp.(8)..... 11,083,776 45,000 Toyota Motor Corp. (ADR) (Japan)................... 6,043,950 -------------- 32,268,512 -------------- BANKS -- 3.8% 1,126,082 Bank of America Corp. ...... 60,121,518 587,200 National City Corp.(8)...... 21,468,032 215,800 SunTrust Banks, Inc. ....... 18,224,310 420,000 Wachovia Corp. ............. 23,919,000 265,600 Wells Fargo & Company....... 9,444,736 -------------- 133,177,596 -------------- BROADCAST SERVICES/MEDIA -- 5.6% 813,500 CBS Corp. -- Class B........ 25,364,930 1,031,900 Clear Channel Communications, Inc. ..... 36,673,726 700,365 Comcast Corp. -- Class A*... 29,646,450 645,000 Comcast Corp. -- Special Class A*.................. 27,012,600 165,000 The Walt Disney Company..... 5,654,550 3,470,200 Time Warner, Inc. .......... 75,580,956 -------------- 199,933,212 -------------- BUSINESS SERVICES AND SUPPLIES -- 0.1% 125,000 Accenture, Ltd. -- Class A (Bermuda)................. 4,616,250 -------------- CHEMICALS -- 0.5% 200,000 EI du Pont de Nemours and Company................... 9,742,000 200,000 The Dow Chemical Company.... 7,988,000 -------------- 17,730,000 -------------- COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 6.2% 1,744,800 Electronic Data Systems Corp. .................... 48,069,240 959,900 Hewlett-Packard Company..... 39,538,281
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) COMPUTER EQUIPMENT, SOFTWARE AND SERVICES (CONTINUED) 686,200 International Business Machines Corp. ........... $ 66,664,330 680,000 Microsoft Corp. ............ 20,304,800 8,067,700 Sun Microsystems, Inc.*..... 43,726,934 -------------- 218,303,585 -------------- CONSUMER GOODS AND SERVICES -- 4.9% 525,000 Altria Group, Inc. ......... 45,055,500 1,079,200 Avon Products, Inc. ........ 35,656,768 524,900 Kimberly-Clark Corp. ....... 35,666,955 428,000 Procter & Gamble Company.... 27,507,560 115,000 The Black & Decker Corp. ... 9,196,550 320,000 The Clorox Company.......... 20,528,000 -------------- 173,611,333 -------------- CONTAINERS AND PACKAGING -- 0.2% 440,000 Owens-Illinois, Inc.*....... 8,118,000 -------------- DIVERSIFIED OPERATIONS AND SERVICES -- 2.1% 1,880,800 General Electric Company.... 69,984,568 44,600 Textron, Inc. .............. 4,182,142 -------------- 74,166,710 -------------- ELECTRONICS -- 2.6% 125,116 Arrow Electronics, Inc.*.... 3,947,410 1,121,400 Flextronics International, Ltd. (Singapore)*......... 12,873,672 1,939,177 Sanmina-SCI Corp.*.......... 6,690,161 9,744,905 Solectron Corp.*............ 31,378,594 866,900 Sony Corp. (ADR) (Japan).... 37,129,327 -------------- 92,019,164 -------------- ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 0.5% 504,200 Waste Management, Inc. ..... 18,539,434 -------------- FINANCIAL SERVICES -- 13.8% 410,600 American Express Company.... 24,911,102 345,800 Capital One Financial Corp. .................... 26,564,356 1,632,500 Citigroup, Inc. ............ 90,930,250 96,600 Countrywide Financial Corp. .................... 4,100,670 1,286,300 Fannie Mae.................. 76,393,357 399,900 Freddie Mac................. 27,153,210 2,521,640 JPMorgan Chase & Company.... 121,795,212 1,085,800 Merrill Lynch & Company, Inc. ..................... 101,087,980 84,000 The Goldman Sachs Group, Inc. ..................... 16,745,400 -------------- 489,681,537 -------------- FOOD AND BEVERAGE -- 2.9% 265,000 Kellogg Company............. 13,265,900 1,239,500 Kraft Foods, Inc. -- Class A(8)...................... 44,250,150
See notes to financial statements. 127 VALUE & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) FOOD AND BEVERAGE (CONTINUED) 3,000 Molson Coors Brewing Company -- Class B........ $ 229,320 255,000 PepsiCo, Inc. .............. 15,950,250 1,093,305 Sara Lee Corp. ............. 18,618,984 190,000 The Coca-Cola Company....... 9,167,500 -------------- 101,482,104 -------------- INSURANCE -- 9.2% 623,600 Aetna, Inc. ................ 26,927,048 1,185,100 American International Group, Inc. .............. 84,924,266 550,000 Genworth Financial, Inc. -- Class A................... 18,815,500 109,400 MBIA, Inc. ................. 7,992,764 450,200 MetLife, Inc.(8)............ 26,566,302 61,566 PartnerRE, Ltd. (Bermuda)(8).............. 4,373,033 170,000 RenaissanceRe Holdings, Ltd. (Bermuda)................. 10,200,000 986,900 The Chubb Corp. ............ 52,216,879 145,000 The Hartford Financial Services Group, Inc. ..... 13,529,950 1,168,338 The St. Paul Travelers Companies, Inc. .......... 62,728,067 238,000 XL Capital, Ltd. -- Class A (Cayman Islands).......... 17,140,760 -------------- 325,414,569 -------------- INTERNET SERVICES -- 0.4% 500,000 Cisco Systems, Inc.*........ 13,665,000 -------------- MANUFACTURING -- 2.4% 48,000 Cooper Industries, Ltd. -- Class A (Bermuda)......... 4,340,640 140,000 Eaton Corp. ................ 10,519,600 758,600 Honeywell International, Inc. ..................... 34,319,064 592,950 Smurfit-Stone Container Corp.*.................... 6,261,552 147,700 SPX Corp. .................. 9,033,332 725,500 Tyco International, Ltd. (Bermuda)................. 22,055,200 -------------- 86,529,388 -------------- MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 2.0% 1,184,100 Boston Scientific Corp.*.... 20,342,838 371,000 Medco Health Solutions, Inc.*..................... 19,826,240 4,310,000 Tenet Healthcare Corp.*(8)................. 30,040,700 -------------- 70,209,778 -------------- METALS AND MINING -- 1.0% 390,000 Mittal Steel Company NV -- Class A (the Netherlands)(8)........... 16,450,200 280,200 United States Steel Corp. .................... 20,493,828 -------------- 36,944,028 --------------
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) OIL, COAL AND GAS -- 9.2% 275,000 BP PLC (ADR) (United Kingdom).................. $ 18,452,500 1,259,500 ChevronTexaco Corp. ........ 92,611,035 1,242,602 ConocoPhillips.............. 89,405,214 1,354,800 Exxon Mobil Corp. .......... 103,818,324 78,000 Occidental Petroleum Corp. .................... 3,808,740 234,600 Total SA (ADR) (France)..... 16,872,432 -------------- 324,968,245 -------------- PAPER AND FOREST PRODUCTS -- 1.0% 1,180,700 MeadWestvaco Corp. ......... 35,491,842 -------------- PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 5.8% 385,800 AmerisourceBergen Corp. .... 17,345,568 503,800 Merck & Company, Inc. ...... 21,965,680 2,509,100 Millennium Pharmaceuticals, Inc.*(8).................. 27,349,190 3,140,300 Pfizer, Inc. ............... 81,333,770 891,800 Watson Pharmaceuticals, Inc.*..................... 23,213,554 646,600 Wyeth....................... 32,924,872 -------------- 204,132,634 -------------- PRINTING AND PUBLISHING -- 0.3% 34,382 Idearc, Inc.*(8)............ 985,044 500,000 The Reader's Digest Association, Inc. ........ 8,350,000 -------------- 9,335,044 -------------- RETAIL -- 1.6% 454,662 Federated Department Stores, Inc. ..................... 17,336,262 922,600 Office Depot, Inc.*......... 35,215,642 92,000 Target Corp. ............... 5,248,600 -------------- 57,800,504 -------------- RETAIL: RESTAURANTS -- 0.9% 705,000 McDonald's Corp. ........... 31,252,650 -------------- RETAIL: SUPERMARKETS -- 1.3% 819,925 Safeway, Inc. .............. 28,336,608 779,350 The Kroger Company.......... 17,979,605 -------------- 46,316,213 -------------- SEMICONDUCTORS -- 1.7% 2,131,600 Intel Corp. ................ 43,164,900 659,900 Intersil Corp. -- Class A... 15,784,808 -------------- 58,949,708 -------------- TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 7.8% 2,514,046 Alcatel-Lucent (ADR) (France).................. 35,749,734 2,424,900 AT&T, Inc.(8)............... 86,690,176
See notes to financial statements. 128 VALUE & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) 109,400 BellSouth Corp. ............ $ 5,153,834 214,500 Crown Castle International Corp.*.................... 6,928,350 1,529,200 Nokia Oyj (ADR)............. 31,073,344 6,631,800 Qwest Communications International, Inc.*(8)... 55,508,166 1,178,800 Sprint Nextel Corp. ........ 22,267,532 887,652 Verizon Communications, Inc. ..................... 33,056,160 -------------- 276,427,296 -------------- TOYS -- 0.9% 1,417,100 Mattel, Inc. ............... 32,111,486 -------------- TRANSPORTATION -- 2.8% 386,200 Con-way, Inc. .............. 17,008,248 2,105,200 CSX Corp. .................. 72,482,036 191,380 Norfolk Southern Corp. ..... 9,624,500 -------------- 99,114,784 -------------- UTILITIES -- 3.1% 310,000 Allegheny Energy, Inc.*..... 14,232,100 1,060,180 American Electric Power Company, Inc. ............ 45,142,464 224,800 Constellation Energy Group..................... 15,481,976 225,000 Entergy Corp. .............. 20,772,000 305,800 Wisconsin Energy Corp. ..... 14,513,268 -------------- 110,141,808 -------------- TOTAL COMMON STOCKS (Cost $2,796,613,423)..... 3,461,021,630 -------------- PRINCIPAL VALUE --------- -------------- SECURITIES LENDING COLLATERAL -- 5.3% $186,521,888 Securities Lending Collateral Investment (Note 4) (Cost $186,521,888)............. $ 186,521,888 -------------- TOTAL SECURITIES (Cost $2,983,135,311)..... 3,647,543,518 -------------- REPURCHASE AGREEMENTS -- 2.1% 74,170,734 With Investors Bank & Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $74,209,962 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 4.28%, due 03/01/34, with a value of $9,353,891, Freddie Mac Adjustable Rate Mortgage, 5.65%, due 08/15/36, with a value of $66,197,101 and Small Business Administration, 8.88%, due 07/25/16, with a value of $2,328,279) (Cost $74,170,734)........ 74,170,734 -------------- Total Investments -- 105.2% (Cost $3,057,306,045)..... 3,721,714,252 Liabilities less other assets -- (5.2)%.......... (182,770,526) -------------- NET ASSETS -- 100.0%........ $3,538,943,726 ==============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $3,065,846,281. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation.......... $720,698,403 Gross unrealized depreciation.......... (64,830,432) ------------ Net unrealized appreciation............ $655,867,971 ============
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 129 VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS -- 95.5% ADVERTISING -- 3.8% 28,200 RH Donnelley Corp. ............ $ 1,768,986 167,800 The Interpublic Group of Companies, Inc.*(8).......... 2,053,872 ------------ 3,822,858 ------------ AEROSPACE AND DEFENSE -- 4.0% 11,000 Lockheed Martin Corp. ......... 1,012,770 44,700 Northrop Grumman Corp. ........ 3,026,190 ------------ 4,038,960 ------------ AGRICULTURE -- 0.6% 30,400 The Mosaic Company*............ 649,344 ------------ AUTOMOBILE: RENTAL -- 0.2% 11,510 Avis Budget Group, Inc. ....... 249,652 ------------ AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 1.0% 12,700 Magna International, Inc. -- Class A (Canada)(8).......... 1,022,985 ------------ BANKS -- 3.7% 33,155 Bank of America Corp. ......... 1,770,145 17,100 Comerica, Inc. ................ 1,003,428 13,200 KeyCorp........................ 501,996 8,300 UnionBanCal Corp. ............. 508,375 ------------ 3,783,944 ------------ BUSINESS SERVICES AND SUPPLIES -- 0.4% 15,300 First Data Corp. .............. 390,456 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 14.5% 31,000 BMC Software, Inc.*............ 998,200 221,866 CA, Inc. ...................... 5,025,265 182,000 Electronic Data Systems Corp. ....................... 5,014,100 118,800 Microsoft Corp. ............... 3,547,368 ------------ 14,584,933 ------------ CONSTRUCTION SERVICES AND SUPPLIES -- 6.0% 72,900 Centex Corp.(8)................ 4,102,083 61,100 Pulte Homes, Inc. ............. 2,023,632 ------------ 6,125,715 ------------ CONSUMER GOODS AND SERVICES -- 3.0% 11,900 Altria Group, Inc. ............ 1,021,258 72,960 Unilever PLC (ADR) (United Kingdom)..................... 2,029,747 ------------ 3,051,005 ------------ ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 1.5% 41,500 Waste Management, Inc. ........ 1,525,955 ------------
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) FINANCIAL SERVICES -- 8.3% 46,800 Freddie Mac.................... $ 3,177,720 72,800 JPMorgan Chase & Company....... 3,516,240 5,900 Prudential Financial, Inc. .... 506,574 27,500 Washington Mutual, Inc. ....... 1,250,975 ------------ 8,451,509 ------------ INSURANCE -- 13.5% 9,300 Assurant, Inc. ................ 513,825 50,600 Conseco, Inc.*................. 1,010,988 88,300 Genworth Financial, Inc. -- Class A...................... 3,020,743 42,800 MetLife, Inc. ................. 2,525,628 5,400 The Hartford Financial Services Group, Inc. ................. 503,874 65,700 The St. Paul Travelers Companies, Inc. ............. 3,527,433 77,100 UnumProvident Corp. ........... 1,602,138 14,100 XL Capital, Ltd. -- Class A (Cayman Islands)............. 1,015,482 ------------ 13,720,111 ------------ LEISURE AND RECREATION -- 2.3% 15,700 Harrah's Entertainment, Inc. ........................ 1,298,704 30,820 Wyndham Worldwide Corp.*....... 986,856 ------------ 2,285,560 ------------ MANUFACTURING -- 6.2% 39,100 Flowserve Corp.*............... 1,973,377 140,000 Tyco International, Ltd. (Bermuda).................... 4,256,000 ------------ 6,229,377 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 1.1% 156,400 Tenet Healthcare Corp.*(8)..... 1,090,108 ------------ METALS AND MINING -- 3.3% 110,300 Alcoa, Inc. ................... 3,310,103 ------------ OIL, COAL AND GAS -- 1.5% 24,600 Petro-Canada (Canada).......... 1,009,584 8,100 Sunoco, Inc. .................. 505,116 ------------ 1,514,700 ------------ PAPER AND FOREST PRODUCTS -- 1.2% 17,900 Weyerhaeuser Company........... 1,264,635 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 2.0% 85,200 Schering-Plough Corp. ......... 2,014,128 ------------
See notes to financial statements. 130 VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) REAL ESTATE DEVELOPMENT AND SERVICES -- 3.0% 49,925 Realogy Corp.*................. $ 1,513,726 29,100 The St. Joe Company(8)......... 1,558,887 ------------ 3,072,613 ------------ RETAIL -- 4.6% 77,200 The Home Depot, Inc.(8)........ 3,100,352 33,100 Wal-Mart Stores, Inc. ......... 1,528,558 ------------ 4,628,910 ------------ RETAIL: RESTAURANTS -- 1.5% 11,500 McDonald's Corp. .............. 509,795 17,200 YUM! Brands, Inc. ............. 1,011,360 ------------ 1,521,155 ------------ RETAIL: SUPERMARKETS -- 1.5% 43,300 Safeway, Inc.(8)............... 1,496,448 ------------ UTILITIES -- 6.8% 69,800 Exelon Corp. .................. 4,319,922 46,500 FPL Group, Inc.(8)............. 2,530,530 ------------ 6,850,452 ------------ TOTAL COMMON STOCKS (Cost $90,349,290)........... 96,695,616 ------------ PRINCIPAL --------- SECURITIES LENDING COLLATERAL -- 15.2% $15,388,046 Securities Lending Collateral Investment (Note 4) (Cost $15,388,046)........... 15,388,046 ------------ TOTAL SECURITIES (Cost $105,737,336).......... 112,083,662 ------------
PRINCIPAL VALUE --------- ------------ REPURCHASE AGREEMENTS -- 9.0% $ 9,130,521 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $9,135,350 (Collateralized by Small Business Administration, 8.07%, due 07/25/29, with a value of $9,587,047) (Cost $9,130,521).................. $ 9,130,521 ------------ Total Investments -- 119.7% (Cost $114,867,857).......... 121,214,183 Liabilities less other assets -- (19.7)%............ (19,931,277) ------------ NET ASSETS -- 100.0%........... $101,282,906 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $115,182,318. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation............ $6,708,491 Gross unrealized depreciation............ (676,626) ---------- Net unrealized appreciation.............. $6,031,865 ==========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 131 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS -- 98.1% AEROSPACE AND DEFENSE -- 3.0% 61,800 Goodrich Corp. .............. $ 2,814,990 75,500 Lockheed Martin Corp. ....... 6,951,285 125,200 Northrop Grumman Corp. ...... 8,476,040 125,400 Raytheon Company............. 6,621,120 90,200 The Boeing Company........... 8,013,368 33,000 United Technologies Corp. ... 2,063,160 -------------- 34,939,963 -------------- AGRICULTURE -- 0.3% 65,800 Monsanto Company............. 3,456,474 -------------- AIRLINES -- 0.3% 69,700 US Airways Group, Inc.*(8)... 3,753,345 -------------- APPAREL: MANUFACTURING AND RETAIL -- 1.1% 57,000 American Eagle Outfitters, Inc. ...................... 1,778,970 31,400 Jones Apparel Group, Inc. ... 1,049,702 176,600 The Gap, Inc. ............... 3,443,700 265,500 Urban Outfitters, Inc.*(8)... 6,114,465 -------------- 12,386,837 -------------- AUTOMOBILE: RETAIL -- 0.2% 108,000 AutoNation, Inc.*............ 2,302,560 -------------- AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 0.4% 79,000 Autoliv, Inc. (Sweden)....... 4,763,700 -------------- BANKS -- 6.2% 174,000 Bank of America Corp. ....... 9,289,860 65,200 Comerica, Inc. .............. 3,825,936 92,200 Commerce Bancorp, Inc. -- New Jersey(8).................. 3,251,894 12,400 Credicorp, Ltd. (Bermuda).... 507,656 70,700 IndyMac Bancorp, Inc.(8)..... 3,192,812 115,000 KeyCorp...................... 4,373,450 145,700 National City Corp.(8)....... 5,326,792 37,400 Regions Financial Corp. ..... 1,398,760 44,300 SunTrust Banks, Inc. ........ 3,741,135 15,200 UnionBanCal Corp. ........... 931,000 285,600 US Bancorp................... 10,335,864 185,385 Wachovia Corp. .............. 10,557,676 421,000 Wells Fargo & Company........ 14,970,760 -------------- 71,703,595 --------------
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) BROADCAST SERVICES/MEDIA -- 4.3% 100,282 CBS Corp. -- Class B......... $ 3,126,793 56,100 Clear Channel Communications, Inc. ...................... 1,993,794 58,600 Comcast Corp. -- Class A*(8)...................... 2,480,538 17,205 Liberty Media Corp. - Capital -- Series A*......................... 1,685,746 21,100 News Corp. -- Class B........ 469,686 33,100 Rogers Communications, Inc. -- Class B (Canada)(8)................ 1,972,760 120,100 Shaw Communications, Inc. -- Class B (Canada)(8)........ 3,808,371 179,100 The DIRECTV Group, Inc.*..... 4,466,754 39,800 The McGraw-Hill Companies, Inc. ........... 2,707,196 133,100 The Walt Disney Company...... 4,561,337 846,700 Time Warner, Inc. ........... 18,441,126 94,100 Viacom, Inc. -- Class B*..... 3,860,923 -------------- 49,575,024 -------------- BUSINESS SERVICES AND SUPPLIES -- 1.1% 22,100 Dun & Bradstreet Corp.*...... 1,829,659 201,500 First Data Corp. ............ 5,142,280 23,700 Moody's Corp. ............... 1,636,722 95,200 Paychex, Inc. ............... 3,764,208 -------------- 12,372,869 -------------- CHEMICALS -- 0.6% 26,800 Ashland, Inc. ............... 1,854,024 46,400 EI du Pont de Nemours and Company.................... 2,260,144 102,400 Methanex Corp. (Canada)...... 2,802,688 -------------- 6,916,856 -------------- COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 8.0% 42,100 Apple Computer, Inc.*........ 3,571,764 107,700 Cadence Design Systems, Inc.*...................... 1,928,907 49,200 Computer Sciences Corp.*..... 2,625,804 243,900 Electronic Arts, Inc.*....... 12,282,804 20,500 Electronic Data Systems Corp. ..................... 564,775 338,200 Hewlett-Packard Company...... 13,930,458 91,700 Ingram Micro, Inc. -- Class A*......................... 1,871,597 22,400 International Business Machines Corp. ............ 2,176,160 66,600 Intuit, Inc.*................ 2,031,966 64,600 Lexmark International, Inc. -- Class A*........... 4,728,720
See notes to financial statements. 132 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) COMPUTER EQUIPMENT, SOFTWARE AND SERVICES (CONTINUED) 24,900 Mentor Graphics Corp.*....... $ 448,947 1,192,500 Microsoft Corp. ............. 35,608,050 87,900 Oracle Corp.*................ 1,506,606 188,300 SanDisk Corp.*............... 8,102,549 340,200 Sun Microsystems, Inc.*...... 1,843,884 -------------- 93,222,991 -------------- CONSUMER GOODS AND SERVICES -- 4.6% 152,700 Altria Group, Inc. .......... 13,104,714 21,700 American Greetings Corp. -- Class A.................... 517,979 51,200 Colgate-Palmolive Company.... 3,340,288 24,900 FedEx Corp. ................. 2,704,638 6,300 Loews Corp.-Carolina Group... 407,736 82,300 NBTY, Inc.*.................. 3,421,211 179,405 Procter & Gamble Company..... 11,530,359 104,200 Reynolds American, Inc. ..... 6,821,974 29,900 The Clorox Company........... 1,918,085 73,000 The Estee Lauder Companies, Inc. -- Class A(8)......... 2,979,860 58,800 United Parcel Service, Inc. -- Class B............ 4,408,824 30,800 UST, Inc. ................... 1,792,560 -------------- 52,948,228 -------------- CONTAINERS AND PACKAGING -- 0.4% 7,700 Greif, Inc. -- Class A....... 911,680 89,600 Pactiv Corp.*................ 3,197,824 -------------- 4,109,504 -------------- DISTRIBUTION -- 0.0% 7,500 CDW Corp. ................... 527,400 -------------- DIVERSIFIED OPERATIONS AND SERVICES -- 2.2% 599,200 General Electric Company..... 22,296,232 34,400 Textron, Inc. ............... 3,225,688 -------------- 25,521,920 -------------- EDUCATION -- 0.1% 12,700 ITT Educational Services, Inc.*...................... 842,899 -------------- ELECTRONICS -- 0.6% 87,900 Avnet, Inc.*................. 2,244,087 77,800 Emerson Electric Company..... 3,428,646 39,500 Synopsys, Inc.*.............. 1,055,835 -------------- 6,728,568 --------------
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 0.0% 9,400 Republic Services, Inc. ..... $ 382,298 -------------- FINANCIAL SERVICES -- 10.5% 156,900 American Express Company..... 9,519,123 77,300 AmeriCredit Corp.*(8)........ 1,945,641 50,100 Ameriprise Financial, Inc. ...................... 2,730,450 478,300 Citigroup, Inc. ............. 26,641,309 190,000 Countrywide Financial Corp. ..................... 8,065,500 20,400 Janus Capital Group, Inc. ... 440,436 440,300 JPMorgan Chase & Company..... 21,266,490 95,400 Lehman Brothers Holdings, Inc. ...................... 7,452,648 154,600 Merrill Lynch & Company, Inc. ...................... 14,393,260 177,000 Morgan Stanley............... 14,413,110 10,831 T Rowe Price Group, Inc. .... 474,073 68,100 The First Marblehead Corp.(8)................... 3,721,665 26,400 The Goldman Sachs Group, Inc. ...................... 5,262,840 79,000 Washington Mutual, Inc. ..... 3,593,710 156,000 Western Union Company........ 3,497,520 -------------- 123,417,775 -------------- FOOD AND BEVERAGE -- 2.7% 86,200 Archer-Daniels-Midland Company.................... 2,754,952 158,900 ConAgra Foods, Inc. ......... 4,290,300 54,800 General Mills, Inc. ......... 3,156,480 47,000 HJ Heinz Company............. 2,115,470 65,700 Kraft Foods, Inc. -- Class A(8)....................... 2,345,490 163,800 PepsiCo, Inc. ............... 10,245,690 125,100 The Coca-Cola Company........ 6,036,075 54,400 Tyson Foods, Inc. -- Class A(8)....................... 894,880 -------------- 31,839,337 -------------- INSURANCE -- 4.7% 56,000 Aetna, Inc. ................. 2,418,080 28,700 Ambac Financial Group, Inc. ...................... 2,556,309 47,700 American International Group, Inc. ...................... 3,418,182 39,800 Assurant, Inc. .............. 2,198,950 14,300 Axis Capital Holdings, Ltd. (Bermuda).................. 477,191 21,600 CIGNA Corp. ................. 2,841,912 78,000 Genworth Financial, Inc. -- Class A.................... 2,668,380 50,400 Hanover Insurance Group, Inc. ...................... 2,459,520 165,100 Loews Corp. ................. 6,846,697 38,052 MBIA, Inc. .................. 2,780,079
See notes to financial statements. 133 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) INSURANCE (CONTINUED) 35,400 MGIC Investment Corp. ....... $ 2,213,916 13,400 Nationwide Financial Services, Inc. -- Class A.......................... 726,280 66,800 Odyssey Re Holdings Corp. ... 2,491,640 26,100 Principal Financial Group, Inc. ...................... 1,532,070 122,114 Radian Group, Inc. .......... 6,583,166 40,100 The Allstate Corp. .......... 2,610,911 17,700 The Chubb Corp. ............. 936,507 130,800 The PMI Group, Inc.(8)....... 6,169,836 15,400 The St. Paul Travelers Companies, Inc. ........... 826,826 5,900 Unitrin, Inc. ............... 295,649 54,000 WR Berkley Corp. ............ 1,863,540 -------------- 54,915,641 -------------- INTERNET SERVICES -- 2.9% 530,200 Cisco Systems, Inc.*......... 14,490,366 94,800 eBay, Inc.*.................. 2,850,636 32,038 Google, Inc. -- Class A*..... 14,752,858 25,700 IAC/InterActive Corp.*(8).... 955,012 -------------- 33,048,872 -------------- LEISURE AND RECREATION -- 0.9% 50,500 Carnival Corp. (Panama)(8)... 2,477,025 14,400 Choice Hotels International, Inc. ...................... 606,240 112,700 Starwood Hotels & Resorts Worldwide, Inc. ........... 7,043,750 -------------- 10,127,015 -------------- MACHINERY -- 0.4% 33,400 Caterpillar, Inc. ........... 2,048,422 31,400 Deere & Company.............. 2,985,198 -------------- 5,033,620 -------------- MANUFACTURING -- 1.4% 54,200 3M Company................... 4,223,806 27,700 Furniture Brands International, Inc.(8)..... 449,571 90,100 Honeywell International, Inc. ...................... 4,076,124 35,200 Parker Hannifin Corp. ....... 2,706,176 10,600 SPX Corp. ................... 648,296 69,500 The Timken Company........... 2,028,010 55,800 Tyco International, Ltd. (Bermuda).................. 1,696,320 -------------- 15,828,303 --------------
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 4.5% 24,400 Becton, Dickinson and Company.................... $ 1,711,660 83,000 Cardinal Health, Inc. ....... 5,347,690 9,600 Dade Behring Holdings, Inc. ...................... 382,176 39,800 Humana, Inc.*................ 2,201,338 241,000 Johnson & Johnson............ 15,910,820 5,400 Laboratory Corp. of America Holdings*.................. 396,738 110,700 McKesson Corp. .............. 5,612,490 142,200 Medco Health Solutions, Inc.*...................... 7,599,168 17,900 Medtronic, Inc. ............. 957,829 227,400 St Jude Medical, Inc.*....... 8,313,744 8,100 Universal Health Services, Inc. -- Class B............ 448,983 39,200 WellPoint, Inc.*............. 3,084,648 -------------- 51,967,284 -------------- METALS AND MINING -- 1.2% 130,200 Alcoa, Inc. ................. 3,907,302 7,100 Newmont Mining Corp. ........ 320,565 82,800 Nucor Corp. ................. 4,525,848 21,100 Phelps Dodge Corp. .......... 2,526,092 79,400 Steel Dynamics, Inc. ........ 2,576,530 -------------- 13,856,337 -------------- OIL, COAL AND GAS -- 9.2% 42,800 Apache Corp. ................ 2,846,628 45,700 Baker Hughes, Inc. .......... 3,411,962 41,900 Cameron International Corp.*..................... 2,222,795 156,900 ChevronTexaco Corp. ......... 11,536,857 182,486 ConocoPhillips............... 13,129,868 46,400 Devon Energy Corp. .......... 3,112,512 44,500 EnCana Corp. (Canada)........ 2,044,775 5,700 EOG Resources, Inc. ......... 355,965 578,600 Exxon Mobil Corp. ........... 44,338,118 70,200 Holly Corp. ................. 3,608,280 101,000 Marathon Oil Corp. .......... 9,342,500 51,400 Petro-Canada (Canada)........ 2,109,456 119,900 Schlumberger, Ltd. (Netherlands Antilles)..... 7,572,884 44,000 Smith International, Inc. ... 1,807,080 -------------- 107,439,680 -------------- PAPER AND FOREST PRODUCTS -- 0.1% 25,500 International Paper Company.................... 869,550 --------------
See notes to financial statements. 134 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 7.3% 82,900 Abbott Laboratories.......... $ 4,038,059 33,700 Allergan, Inc. .............. 4,035,238 135,800 AmerisourceBergen Corp. ..... 6,105,568 132,000 Amgen, Inc.*................. 9,016,920 116,800 Biogen Idec, Inc.*........... 5,745,392 86,800 Celgene Corp.*............... 4,993,604 39,800 Eli Lilly and Company........ 2,073,580 30,100 Forest Laboratories, Inc.*... 1,523,060 68,400 Genentech, Inc.*............. 5,549,292 56,300 Gilead Sciences, Inc.*....... 3,655,559 162,100 Merck & Company, Inc. ....... 7,067,560 34,000 Millennium Pharmaceuticals, Inc.*(8)................... 370,600 884,300 Pfizer, Inc. ................ 22,903,370 82,400 Schering-Plough Corp. ....... 1,947,936 30,600 Sepracor, Inc.*.............. 1,884,348 68,700 Wyeth........................ 3,498,204 -------------- 84,408,290 -------------- REAL ESTATE DEVELOPMENT AND SERVICES -- 0.5% 39,600 Brookfield Asset Management, Inc. -- Class A (Canada)... 1,907,928 40,600 Jones Lang LaSalle, Inc.(8).................... 3,742,102 -------------- 5,650,030 -------------- REAL ESTATE INVESTMENT TRUSTS -- 0.4% 41,600 Equity Office Properties Trust...................... 2,003,872 11,800 Kimco Realty Corp. .......... 530,410 32,200 New Century Financial Corp.(8)................... 1,017,198 6,600 ProLogis..................... 401,082 3,000 SL Green Realty Corp. ....... 398,340 -------------- 4,350,902 -------------- RETAIL -- 3.8% 68,700 Advance Auto Parts, Inc. .... 2,442,972 68,700 Big Lots, Inc.*.............. 1,574,604 81,303 Circuit City Stores, Inc. ... 1,543,131 51,900 Costco Wholesale Corp. ...... 2,743,953 53,100 Dillard's, Inc. -- Class A(8)....................... 1,856,907 143,600 Dollar General Corp. ........ 2,306,216 34,200 JC Penney Company, Inc. ..... 2,645,712 38,300 Kohl's Corp.*................ 2,620,869 70,400 Lowe's Companies, Inc. ...... 2,192,960 63,600 Office Depot, Inc.*.......... 2,427,612
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) RETAIL (CONTINUED) 21,600 Sears Holdings Corp.*(8)..... $ 3,627,288 232,200 Staples, Inc. ............... 6,199,740 10,100 The Home Depot, Inc.(8)...... 405,616 88,300 Walgreen Company............. 4,052,087 161,500 Wal-Mart Stores, Inc. ....... 7,458,070 -------------- 44,097,737 -------------- RETAIL: RESTAURANTS -- 0.5% 56,800 Darden Restaurants, Inc. .... 2,281,656 10,600 McDonald's Corp. ............ 469,898 69,600 Starbucks Corp.*............. 2,465,232 -------------- 5,216,786 -------------- RETAIL: SUPERMARKETS -- 1.0% 159,300 Safeway, Inc.(8)............. 5,505,408 242,100 The Kroger Company........... 5,585,247 -------------- 11,090,655 -------------- SEMICONDUCTORS -- 2.5% 357,000 Atmel Corp.*................. 2,159,850 130,900 Broadcom Corp. -- Class A*... 4,229,379 71,700 Intel Corp. ................. 1,451,925 183,500 Micron Technology, Inc.*..... 2,561,660 274,800 National Semiconductor Corp. ..................... 6,237,960 430,400 Texas Instruments, Inc. ..... 12,395,520 -------------- 29,036,294 -------------- TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 5.7% 20,900 Anixter International, Inc.*...................... 1,134,870 150,500 AT&T, Inc.(8)................ 5,380,375 229,300 BellSouth Corp. ............. 10,802,323 133,300 CenturyTel, Inc. ............ 5,819,878 378,700 Corning, Inc.*............... 7,085,477 12,205 Embarq Corp. ................ 641,495 81,199 JDS Uniphase Corp.*.......... 1,352,775 387,500 Level 3 Communications, Inc.*(8)................... 2,170,000 175,300 Motorola, Inc. .............. 3,604,168 343,500 QUALCOMM, Inc. .............. 12,980,865 91,800 Sprint Nextel Corp. ......... 1,734,102 25,900 Telephone and Data Systems, Inc. ...................... 1,407,147
See notes to financial statements. 135 GROWTH & INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) 11,000 Telephone and Data Systems, Inc. -- Special Common Shares..................... $ 545,600 62,700 UTStarcom, Inc.*(8).......... 548,625 297,000 Verizon Communications, Inc. ...................... 11,060,280 -------------- 66,267,980 -------------- TOYS -- 0.3% 141,600 Hasbro, Inc. ................ 3,858,600 -------------- TRANSPORTATION -- 1.2% 5,600 Burlington Northern Santa Fe Corp. ..................... 413,336 76,400 CSX Corp. ................... 2,630,452 104,200 Norfolk Southern Corp. ...... 5,240,218 13,700 Overseas Shipholding Group, Inc. ...................... 771,310 53,700 Union Pacific Corp. ......... 4,941,474 -------------- 13,996,790 -------------- UTILITIES -- 3.0% 19,000 AGL Resources, Inc. ......... 739,290 22,000 Alliant Energy Corp. ........ 830,940 94,400 American Electric Power Company, Inc. ............. 4,019,552 8,400 DTE Energy Company(8)........ 406,644 54,800 Duke Energy Corp. ........... 1,819,908 126,600 Edison International......... 5,757,768 38,700 Energen Corp. ............... 1,816,578 58,300 Entergy Corp. ............... 5,382,256 44,000 FirstEnergy Corp. ........... 2,649,240 114,500 PG&E Corp. .................. 5,419,285 38,200 Pinnacle West Capital Corp. ..................... 1,934,448 78,600 TXU Corp. ................... 4,260,906 -------------- 35,036,815 -------------- TOTAL COMMON STOCKS (Cost $992,025,264)........ 1,137,809,324 -------------- PRINCIPAL VALUE --------- -------------- SECURITIES LENDING COLLATERAL -- 5.9% $67,965,319 Securities Lending Collateral Investment (Note 4) (Cost $67,965,319)......... $ 67,965,319 -------------- TOTAL SECURITIES (Cost $1,059,990,583)...... 1,205,774,643 -------------- REPURCHASE AGREEMENTS -- 2.1% 23,960,361 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $23,973,033 (Collateralized by Freddie Mac Adjustable Rate Mortgage, 5.70%, due 05/15/36, with a value of $23,036,034 and Small Business Administration, 8.13%, due 01/25/27, with a value of $2,122,345) (Cost $23,960,361)......... 23,960,361 -------------- Total Investments -- 106.1% (Cost $1,083,950,944)...... 1,229,735,004 Liabilities less other assets -- (6.1)%........... (70,714,759) -------------- NET ASSETS -- 100.0%......... $1,159,020,245 ==============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $1,089,902,981. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation.......... $156,191,994 Gross unrealized depreciation.......... (16,359,971) ------------ Net unrealized appreciation............ $139,832,023 ============
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 136 EQUITY GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS -- 97.9% AEROSPACE AND DEFENSE -- 4.0% 322,244 General Dynamics Corp. ..... $ 23,958,841 251,022 Goodrich Corp. ............. 11,434,052 339,056 Lockheed Martin Corp. ...... 31,216,886 188,275 The Boeing Company.......... 16,726,351 266,480 United Technologies Corp. .................... 16,660,330 -------------- 99,996,460 -------------- AGRICULTURE -- 1.4% 672,994 Monsanto Company............ 35,352,375 -------------- AIRLINES -- 0.6% 283,064 US Airways Group, Inc.*(8).................. 15,242,996 -------------- APPAREL: MANUFACTURING AND RETAIL -- 1.5% 716,820 The Gap, Inc. .............. 13,977,990 1,078,020 Urban Outfitters, Inc.*(8).................. 24,826,801 -------------- 38,804,791 -------------- AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 2.1% 395,751 Toyota Motor Corp. (ADR) (Japan)................... 53,153,317 -------------- BANKS -- 4.4% 400,665 Commerce Bancorp, Inc. -- New Jersey(8)............. 14,131,455 60,410,000 Industrial and Commercial Bank of China -- Class H (China)................... 37,512,092 514,743 UBS AG (Switzerland)........ 31,054,445 808,290 Wells Fargo & Company....... 28,742,792 -------------- 111,440,784 -------------- BROADCAST SERVICES/MEDIA -- 3.2% 1,085,562 Comcast Corp. -- Class A*... 45,951,839 887,000 Time Warner, Inc. .......... 19,318,860 389,097 Viacom, Inc. -- Class B*.... 15,964,650 -------------- 81,235,349 -------------- BUSINESS SERVICES AND SUPPLIES -- 1.0% 368,150 First Data Corp. ........... 9,395,188 386,270 Paychex, Inc. .............. 15,273,116 -------------- 24,668,304 -------------- CHEMICALS -- 0.4% 188,244 EI du Pont de Nemours and Company................... 9,169,365 -------------- COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 8.3% 171,508 Apple Computer, Inc.*....... 14,550,739
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) COMPUTER EQUIPMENT, SOFTWARE AND SERVICES (CONTINUED) 990,147 Electronic Arts, Inc.*...... $ 49,863,803 523,013 Hewlett-Packard Company..... 21,542,905 3,113,090 Microsoft Corp. ............ 92,956,868 764,215 SanDisk Corp.*(8)........... 32,884,171 -------------- 211,798,486 -------------- CONSTRUCTION SERVICES AND SUPPLIES -- 0.7% 319,198 Lennar Corp. -- Class A..... 16,745,127 -------------- CONSUMER GOODS AND SERVICES -- 7.3% 401,630 Altria Group, Inc. ......... 34,467,887 453,428 FedEx Corp. ................ 49,251,349 1,190,971 Procter & Gamble Company.... 76,543,706 121,300 The Clorox Company.......... 7,781,395 217,545 United Parcel Service, Inc. -- Class B........... 16,311,524 -------------- 184,355,861 -------------- DIVERSIFIED OPERATIONS AND SERVICES -- 2.5% 1,350,497 General Electric Company.... 50,251,993 139,510 Textron, Inc. .............. 13,081,853 -------------- 63,333,846 -------------- FINANCIAL SERVICES -- 7.8% 545,280 American Express Company.... 33,082,138 343,825 Citigroup, Inc. ............ 19,151,053 442,391 Lehman Brothers Holdings, Inc. ..................... 34,559,584 199,405 Merrill Lynch & Company, Inc. ..................... 18,564,606 207,790 Morgan Stanley.............. 16,920,340 307,874 The Goldman Sachs Group, Inc. ..................... 61,374,681 633,205 Western Union Company....... 14,196,456 -------------- 197,848,858 -------------- FOOD AND BEVERAGE -- 3.4% 1,033,580 PepsiCo, Inc. .............. 64,650,429 447,715 The Coca-Cola Company....... 21,602,249 -------------- 86,252,678 -------------- INSURANCE -- 1.2% 144,440 MGIC Investment Corp. ...... 9,033,278 187,299 Radian Group, Inc. ......... 10,097,289 219,305 The PMI Group, Inc.(8)...... 10,344,617 -------------- 29,475,184 -------------- INTERNET SERVICES -- 4.8% 2,369,066 Cisco Systems, Inc.*........ 64,746,574
See notes to financial statements. 137 EQUITY GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) INTERNET SERVICES (CONTINUED) 384,883 eBay, Inc.*................. $ 11,573,432 96,873 Google, Inc. -- Class A*.... 44,608,079 -------------- 120,928,085 -------------- LEISURE AND RECREATION -- 6.0% 142,558 Four Seasons Hotels, Inc. (Canada)(8)............... 11,688,330 439,066 Las Vegas Sands Corp.*...... 39,287,625 645,163 MGM MIRAGE*................. 37,000,098 457,475 Starwood Hotels & Resorts Worldwide, Inc. .......... 28,592,188 377,502 Wynn Resorts, Ltd.(8)....... 35,428,563 -------------- 151,996,804 -------------- MANUFACTURING -- 0.4% 132,490 3M Company.................. 10,324,946 -------------- MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 7.7% 472,500 Johnson & Johnson........... 31,194,450 577,330 Medco Health Solutions, Inc.*..................... 30,852,515 923,271 St Jude Medical, Inc.*...... 33,754,788 1,585,327 UnitedHealth Group, Inc. ... 85,179,619 158,950 WellPoint, Inc.*............ 12,507,776 -------------- 193,489,148 -------------- METALS AND MINING -- 0.4% 308,235 Alcoa, Inc. ................ 9,250,132 -------------- OIL, COAL AND GAS -- 2.7% 185,515 Baker Hughes, Inc. ......... 13,850,550 170,180 Cameron International Corp.*.................... 9,028,049 608,062 Schlumberger, Ltd. (Netherlands Antilles).... 38,405,196 178,518 Smith International, Inc. ..................... 7,331,734 -------------- 68,615,529 -------------- PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 9.0% 249,592 Abbott Laboratories......... 12,157,626 136,720 Allergan, Inc. ............. 16,370,853 264,139 Amgen, Inc.*................ 18,043,335 361,240 Biogen Idec, Inc.*.......... 17,769,396 192,445 Celgene Corp.*.............. 11,071,361 161,816 Eli Lilly and Company....... 8,430,614 1,003,498 Genentech, Inc.*............ 81,413,792 267,137 Genzyme Corp.*.............. 16,450,296
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) PHARMACEUTICALS/RESEARCH AND DEVELOPMENT (CONTINUED) 231,768 Gilead Sciences, Inc.*...... $ 15,048,696 168,765 Merck & Company, Inc. ...... 7,358,154 334,755 Schering-Plough Corp. ...... 7,913,608 125,876 Sepracor, Inc.*............. 7,751,444 175,730 Wyeth....................... 8,948,172 -------------- 228,727,347 -------------- RETAIL -- 6.4% 278,882 Advance Auto Parts, Inc. ... 9,917,044 582,978 Dollar General Corp. ....... 9,362,627 1,355,533 Lowe's Companies, Inc. ..... 42,224,852 87,895 Sears Holdings Corp.*(8).... 14,760,207 942,770 Staples, Inc. .............. 25,171,959 325,412 Target Corp. ............... 18,564,755 358,395 Walgreen Company............ 16,446,747 528,605 Wal-Mart Stores, Inc. ...... 24,410,979 -------------- 160,859,170 -------------- RETAIL: RESTAURANTS -- 0.9% 674,442 Starbucks Corp.*............ 23,888,736 -------------- SEMICONDUCTORS -- 3.1% 531,320 Broadcom Corp. -- Class A*........................ 17,166,949 1,115,700 National Semiconductor Corp. .................... 25,326,390 1,241,170 Texas Instruments, Inc. .... 35,745,696 -------------- 78,239,035 -------------- TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 3.8% 1,578,698 Corning, Inc.*.............. 29,537,440 329,500 JDS Uniphase Corp.*(8)...... 5,489,470 1,573,100 Level 3 Communications, Inc.*(8).................. 8,809,360 1,394,595 QUALCOMM, Inc. ............. 52,701,745 -------------- 96,538,015 -------------- TRANSPORTATION -- 2.9% 468,154 Burlington Northern Santa Fe Corp. .................... 34,554,447 421,579 Union Pacific Corp. ........ 38,793,699 -------------- 73,348,146 -------------- TOTAL COMMON STOCKS (Cost $2,152,170,710)..... 2,475,078,874 --------------
See notes to financial statements. 138 EQUITY GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- -------------- SECURITIES LENDING COLLATERAL -- 6.3% $158,227,226 Securities Lending Collateral Investment (Note 4) (Cost $158,227,226)....... $ 158,227,226 -------------- TOTAL SECURITIES (Cost $2,310,397,936)..... 2,633,306,100 -------------- REPURCHASE AGREEMENTS -- 0.9% 22,518,208 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $22,530,118 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 4.18%, due 07/01/33, with a value of $14,769,866 and Small Business Administration, 8.12%, due 07/25/29, with a value of $8,874,253) (Cost $22,518,208)........ 22,518,208 -------------- Total Investments -- 105.1% (Cost $2,332,916,144)..... 2,655,824,308 Liabilities less other assets -- (5.1)%.......... (128,906,852) -------------- NET ASSETS -- 100.0%........ $2,526,917,456 ==============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $2,341,238,670. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation.......... $356,402,147 Gross unrealized depreciation.......... (41,816,509) ------------ Net unrealized appreciation............ $314,585,638 ============
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 139 AGGRESSIVE EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS -- 99.4% ADVERTISING -- 1.4% 83,220 Focus Media Holding, Ltd. (ADR) (China)*..................... $ 5,524,976 ------------ AGRICULTURE -- 2.3% 27,490 Bunge, Ltd. (Bermuda).......... 1,993,300 132,140 Monsanto Company............... 6,941,314 ------------ 8,934,614 ------------ AIRLINES -- 1.2% 88,670 US Airways Group, Inc.*(8)..... 4,774,880 ------------ APPAREL: MANUFACTURING AND RETAIL -- 2.9% 124,220 Coach, Inc.*................... 5,336,491 46,470 Polo Ralph Lauren Corp. ....... 3,608,860 45,970 Under Armour, Inc. -- Class A*(8)........................ 2,319,187 ------------ 11,264,538 ------------ BANKS -- 1.4% 91,220 UBS AG (Switzerland)........... 5,503,303 ------------ BROADCAST SERVICES/MEDIA -- 2.6% 137,700 Comcast Corp. -- Class A*...... 5,828,841 198,720 News Corp. -- Class A.......... 4,268,506 ------------ 10,097,347 ------------ BUSINESS SERVICES AND SUPPLIES -- 3.7% 325,800 ABB, Ltd. (ADR) (Switzerland).. 5,857,884 60,640 Global Payments, Inc. ......... 2,807,632 121,000 Monster Worldwide, Inc.*....... 5,643,440 ------------ 14,308,956 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 11.3% 99,610 Apple Computer, Inc.*.......... 8,450,911 213,000 Dell, Inc.*.................... 5,344,170 88,560 Electronic Arts, Inc.*......... 4,459,882 90,700 Network Appliance, Inc.*....... 3,562,696 228,000 Qimonda AG (ADR) (Germany)*.... 3,992,280 191,410 Salesforce.com, Inc.*(8)....... 6,976,894 95,230 SanDisk Corp.*................. 4,097,747 1,121,700 Sun Microsystems, Inc.*........ 6,079,614 ------------ 42,964,194 ------------ CONSUMER GOODS AND SERVICES -- 1.2% 73,490 Nutri/System, Inc.*(8)......... 4,658,531 ------------ DIVERSIFIED OPERATIONS AND SERVICES -- 4.6% 477,100 General Electric Company....... 17,752,891 ------------
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) ELECTRONICS -- 1.0% 38,100 Harman International Industries, Inc. ............ $ 3,806,571 ------------ ENERGY SERVICES -- 1.2% 120,300 SunPower Corp. -- Class A*(8)........................ 4,471,551 ------------ FINANCIAL SERVICES -- 7.8% 14,300 Chicago Mercantile Exchange Holdings, Inc.(8)............ 7,289,425 17,600 IntercontinentalExchange, Inc.*........................ 1,899,040 165,800 Nasdaq Stock Market, Inc.*(8)..................... 5,104,982 370,540 The Charles Schwab Corp. ...... 7,166,244 41,510 The Goldman Sachs Group, Inc. ........................ 8,275,018 ------------ 29,734,709 ------------ FOOD AND BEVERAGE -- 1.2% 145,930 Archer-Daniels-Midland Company...................... 4,663,923 ------------ INTERNET SERVICES -- 10.8% 101,000 Akamai Technologies, Inc.*(8)..................... 5,365,120 568,490 Cisco Systems, Inc.*........... 15,536,831 63,600 F5 Networks, Inc.*............. 4,719,756 33,400 Google, Inc. -- Class A*....... 15,380,032 ------------ 41,001,739 ------------ LEISURE AND RECREATION -- 3.7% 140,200 International Game Technology................... 6,477,240 85,170 Las Vegas Sands Corp.*......... 7,621,012 ------------ 14,098,252 ------------ MACHINERY -- 1.4% 55,700 Deere & Company................ 5,295,399 ------------ MANUFACTURING -- 2.9% 68,200 Precision Castparts Corp.(8)... 5,338,696 112,100 Roper Industries, Inc. ........ 5,631,904 ------------ 10,970,600 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 4.2% 161,300 Baxter International, Inc. .... 7,482,707 71,100 Covance, Inc.*................. 4,188,501 45,200 Intuitive Surgical, Inc.*(8)... 4,334,680 ------------ 16,005,888 ------------ METALS AND MINING -- 1.1% 107,800 Cameco Corp. (Canada)(8)....... 4,360,510 ------------
See notes to financial statements. 140 AGGRESSIVE EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) OIL, COAL AND GAS -- 2.8% 108,300 Cameron International Corp.*... $ 5,745,315 106,600 XTO Energy, Inc. .............. 5,015,530 ------------ 10,760,845 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 8.5% 43,670 Allergan, Inc. ................ 5,229,046 98,012 Celgene Corp.*................. 5,638,630 151,250 Gilead Sciences, Inc.*......... 9,820,663 58,150 Roche Holding AG (ADR) (Switzerland)................ 5,233,500 105,100 Shire PLC (ADR) (United Kingdom)............. 6,490,976 ------------ 32,412,815 ------------ REAL ESTATE DEVELOPMENT AND SERVICES -- 1.7% 191,950 CB Richard Ellis Group, Inc. -- Class A*..................... 6,372,740 ------------ RETAIL: RESTAURANTS -- 1.3% 140,210 Starbucks Corp.*............... 4,966,238 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 2.6% 94,600 Applera Corp.-Applied Biosystems Group............. 3,470,874 142,110 Thermo Fisher Scientific, Inc.*........................ 6,436,162 ------------ 9,907,036 ------------ SEMICONDUCTORS -- 7.3% 181,310 Broadcom Corp. -- Class A*..... 5,858,126 166,680 KLA-Tencor Corp. .............. 8,292,330 188,300 NVIDIA Corp.*.................. 6,968,983 231,900 Texas Instruments, Inc. ....... 6,678,720 ------------ 27,798,159 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 6.3% 164,270 Crown Castle International Corp.*....................... 5,305,921 216,286 JDS Uniphase Corp.*(8)......... 3,603,325
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) 83,490 NII Holdings, Inc.*............ $ 5,380,095 246,000 Nokia Oyj (ADR) (Finland)...... 4,998,720 37,500 Research In Motion, Ltd. (Canada)*.................... 4,791,750 ------------ 24,079,811 ------------ TRANSPORTATION -- 1.0% 95,000 CH Robinson Worldwide, Inc.(8)...................... 3,884,550 ------------ TOTAL COMMON STOCKS (Cost $325,600,045).......... 380,375,566 ------------ PRINCIPAL SECURITIES LENDING COLLATERAL -- 12.6% $48,209,289 Securities Lending Collateral Investment (Note 4) (Cost $48,209,289)........... 48,209,289 ------------ Total Investments -- 112.0% (Cost $373,809,334).......... 428,584,855 Liabilities less other assets -- (12.0)%............ (45,916,947) ------------ NET ASSETS -- 100.0%........... $382,667,908 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $374,726,801. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation........... $58,374,996 Gross unrealized depreciation........... (4,516,942) ----------- Net unrealized appreciation............. $53,858,054 ===========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 141 MID-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS -- 97.9% ADVERTISING -- 0.2% 20,393 RH Donnelley Corp............. $ 1,279,253 66,062 The Interpublic Group of Companies, Inc.*(8)......... 808,599 ------------ 2,087,852 ------------ AEROSPACE AND DEFENSE -- 1.6% 333,768 Goodrich Corp. ............... 15,203,132 ------------ AGRICULTURAL EQUIPMENT -- 0.4% 123,905 AGCO Corp.*................... 3,833,621 ------------ AGRICULTURE -- 0.1% 2,479 Monsanto Company.............. 130,222 20,416 The Mosaic Company*........... 436,086 ------------ 566,308 ------------ AIRLINES -- 0.4% 35,700 Alaska Air Group, Inc.*....... 1,410,149 16,212 AMR Corp.*.................... 490,089 14,142 Continental Airlines, Inc. -- Class B*(8)................. 583,358 121,900 ExpressJet Holdings, Inc.*.... 987,390 1,967 UAL Corp.*.................... 86,548 9,639 US Airways Group, Inc.*(8).... 519,060 ------------ 4,076,594 ------------ APPAREL: MANUFACTURING AND RETAIL -- 1.4% 74,500 Foot Locker, Inc. ............ 1,633,785 114,000 Jones Apparel Group, Inc. .... 3,811,020 46,400 Kellwood Company(8)........... 1,508,928 29,767 Liz Claiborne, Inc. .......... 1,293,674 60,100 The Cato Corp. -- Class A..... 1,376,891 43,374 VF Corp. ..................... 3,560,138 ------------ 13,184,436 ------------ AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 2.7% 97,600 ArvinMeritor, Inc. ........... 1,779,248 52,900 Autoliv, Inc.(Sweden)......... 3,189,870 115,766 Ford Motor Company(8)......... 869,403 263,958 Genuine Parts Company......... 12,519,527 5,089 Johnson Controls, Inc.(8)..... 437,247 53,100 Navistar International Corp.*...................... 1,775,133 91,400 Oshkosh Truck Corp. .......... 4,425,588 ------------ 24,996,016 ------------ BANKS -- 8.6% 94,507 Comerica, Inc. ............... 5,545,671
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 21,300 Downey Financial Corp.(8)..... $ 1,545,954 389,600 Hudson City Bancorp, Inc. .... 5,407,648 201,566 Huntington Bancshares, Inc. ....................... 4,787,193 125,100 KeyCorp....................... 4,757,553 221,200 Marshall & Ilsley Corp.(8).... 10,641,932 277,800 Mellon Financial Corp.(8)..... 11,709,269 84,200 People's Bank................. 3,757,004 145,100 PNC Financial Services Group, Inc. ....................... 10,743,204 92,402 Regions Financial Corp. ...... 3,455,835 129,100 State Street Corp. ........... 8,706,504 132,300 UnionBanCal Corp. ............ 8,103,375 35,800 United Bankshares, Inc. ...... 1,383,670 ------------ 80,544,812 ------------ BROADCAST SERVICES/MEDIA -- 0.4% 86,800 Tribune Company(8)............ 2,671,704 166,400 Westwood One, Inc. ........... 1,174,784 ------------ 3,846,488 ------------ BUSINESS SERVICES AND SUPPLIES -- 4.1% 169,800 Convergys Corp.*.............. 4,037,844 6,639 Diebold, Inc.(8).............. 309,377 102,270 Dun & Bradstreet Corp.*....... 8,466,933 393,400 First Data Corp. ............. 10,039,568 8,975 Fluor Corp.(8)................ 732,809 48,800 John H Harland Company........ 2,449,760 156,200 Manpower, Inc. ............... 11,704,066 7,622 Ritchie Brothers Auctioneers, Inc. (Canada)............... 408,082 ------------ 38,148,439 ------------ CHEMICALS -- 3.8% 8,114 Cabot Corp. .................. 353,527 46,950 Eastman Chemical Company...... 2,784,605 29,600 FMC Corp. .................... 2,265,880 11,806 Imperial Chemical Industries PLC (ADR) (United Kingdom).................... 418,287 146,500 PolyOne Corp.*................ 1,098,750 85,251 PPG Industries, Inc. ......... 5,473,967 173,200 Rohm and Haas Company(8)...... 8,853,983 92,600 Sensient Technologies Corp. ...................... 2,277,960 57,100 Spartech Corp. ............... 1,497,162 144,000 Syngenta AG (ADR) (Switzerland)............... 5,348,160
See notes to financial statements. 142 MID-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) CHEMICALS (CONTINUED) 67,007 The Lubrizol Corp. ........... $ 3,359,061 63,400 The Valspar Corp. ............ 1,752,376 2,036 Tronox, Inc. -- Class B....... 32,148 ------------ 35,515,866 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 4.1% 39,735 BMC Software, Inc.*........... 1,279,467 225,749 Computer Sciences Corp.*(8)... 12,048,224 52,652 Electronic Data Systems Corp. ...................... 1,450,563 70,900 Lexmark International, Inc. -- Class A*.................... 5,189,880 391,600 NCR Corp.*.................... 16,744,816 76,600 Western Digital Corp.*........ 1,567,236 ------------ 38,280,186 ------------ CONSTRUCTION SERVICES AND SUPPLIES -- 2.1% 261,550 American Standard Companies, Inc. ....................... 11,992,068 34,700 Beazer Homes USA, Inc.(8)..... 1,631,247 18,449 Chicago Bridge & Iron Company NV (the Netherlands)........ 504,396 5,214 Insituform Technologies, Inc. -- Class A*............ 134,834 28,500 KB Home(8).................... 1,461,480 118,600 Masco Corp.(8)................ 3,542,582 11,068 USG Corp.*(8)................. 606,526 ------------ 19,873,133 ------------ CONSUMER GOODS AND SERVICES -- 2.0% 55,900 Blyth, Inc. .................. 1,159,925 90,906 Eastman Kodak Company(8)...... 2,345,375 66,800 Fortune Brands, Inc.(8)....... 5,704,053 30,306 Loews Corp.-Carolina Group.... 1,961,404 3,970 Mohawk Industries, Inc.*(8)... 297,194 46,900 Newell Rubbermaid, Inc. ...... 1,357,755 11,684 Reynolds American, Inc.(8).... 764,951 23,100 The Black & Decker Corp. ..... 1,847,307 63,800 Tupperware Corp. ............. 1,442,518 27,061 Whirlpool Corp. .............. 2,246,604 ------------ 19,127,086 ------------ CONTAINERS AND PACKAGING -- 2.1% 355,100 Ball Corp. ................... 15,482,360 59,900 Owens-Illinois, Inc.*......... 1,105,155
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) CONTAINERS AND PACKAGING (CONTINUED) 77,700 Sonoco Products Company....... $ 2,957,262 ------------ 19,544,777 ------------ DIVERSIFIED OPERATIONS AND SERVICES -- 1.8% 36,600 LandAmerica Financial Group, Inc.(8)..................... 2,309,826 150,684 Textron, Inc. ................ 14,129,639 ------------ 16,439,465 ------------ EDUCATION -- 0.4% 99,600 Apollo Group, Inc. -- Class A*.......................... 3,881,412 ------------ ELECTRONICS -- 1.2% 118,400 Amphenol Corp. -- Class A(8)........................ 7,350,272 335,200 Sanmina-SCI Corp.*............ 1,156,440 476,138 Solectron Corp.*.............. 1,533,164 99,500 Vishay Intertechnology, Inc.*....................... 1,347,230 ------------ 11,387,106 ------------ ENERGY SERVICES -- 0.2% 16,234 Ballard Power Systems, Inc. (Canada)*(8)................ 92,371 3,039 Energy Conversion Devices, Inc.*(8).................... 103,265 8,484 FuelCell Energy, Inc.*(8)..... 54,807 36,655 McDermott International, Inc. (Panama)*................... 1,864,274 11,191 Plug Power, Inc.*............. 43,533 ------------ 2,158,250 ------------ EQUIPMENT RENTAL AND LEASING -- 0.2% 60,300 United Rentals North America, Inc.*(8).................... 1,533,429 ------------ FINANCIAL SERVICES -- 3.9% 36,400 Advanta Corp. -- Class B...... 1,588,132 25,200 AG Edwards, Inc. ............. 1,594,908 80,700 AmeriCredit Corp.*(8)......... 2,031,219 163,200 Ameriprise Financial, Inc. ... 8,894,400 350,700 Amvescap PLC (ADR) (United Kingdom)............ 8,644,755 23,924 Amvescap PLC (United Kingdom)............ 279,185 70,000 CIT Group, Inc. .............. 3,903,900 363,600 E*TRADE Financial Corp.*...... 8,151,912 80,500 Friedman, Billings, Ramsey Group, Inc. -- Class A(8)... 644,000 54,800 H&R Block, Inc.(8)............ 1,262,592 ------------ 36,995,003 ------------
See notes to financial statements. 143 MID-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) FOOD AND BEVERAGE -- 2.0% 10,575 Archer-Daniels-Midland Company..................... $ 337,977 173,623 Del Monte Foods Company....... 1,915,062 141,400 McCormick & Company, Inc. .... 5,452,384 14,635 Reddy Ice Holdings, Inc. ..... 377,876 177,700 Sysco Corp. .................. 6,532,251 53,200 The Pepsi Bottling Group, Inc. ....................... 1,644,412 131,488 Tyson Foods, Inc. -- Class A(8)........................ 2,162,978 ------------ 18,422,940 ------------ INSURANCE -- 7.6% 39,164 Ace, Ltd. (Cayman Islands).... 2,372,163 2,035 Ambac Financial Group, Inc. ....................... 181,257 327,036 Aon Corp. .................... 11,557,453 27,061 Axis Capital Holdings, Ltd. (Bermuda)................... 903,026 14,800 CIGNA Corp. .................. 1,947,236 64,680 Cincinnati Financial Corp. ... 2,930,651 10,944 Conseco, Inc.*................ 218,661 30,137 Everest Re Group, Ltd. (Bermuda)................... 2,956,741 70,100 Horace Mann Educators Corp. ...................... 1,416,020 46,133 Lincoln National Corp. ....... 3,063,231 41,675 Loews Corp. .................. 1,728,262 196,470 MBIA, Inc. ................... 14,354,099 56,300 MGIC Investment Corp.(8)...... 3,521,002 92,000 Nationwide Financial Services, Inc. -- Class A............. 4,986,400 28,626 PartnerRE, Ltd. (Bermuda)(8)................ 2,033,305 25,100 Principal Financial Group, Inc.(8)..................... 1,473,370 71,500 Radian Group, Inc. ........... 3,854,565 78,200 SAFECO Corp. ................. 4,891,410 12,175 Torchmark Corp. .............. 776,278 30,100 Unitrin, Inc. ................ 1,508,311 19,065 Willis Group Holdings, Ltd. (Bermuda)................... 757,071 46,215 XL Capital, Ltd. -- Class A (Cayman Islands)............ 3,328,404 ------------ 70,758,916 ------------ INTERNET SERVICES -- 0.1% 22,509 McAfee, Inc.*................. 638,805 ------------ LEISURE AND RECREATION -- 0.4% 31,859 Hilton Hotels Corp. .......... 1,111,879 49,083 Regal Entertainment Group -- Class A(8).................. 1,046,450
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) LEISURE AND RECREATION (CONTINUED) 30,014 Royal Caribbean Cruises, Ltd. (Liberia)................... $ 1,241,979 ------------ 3,400,308 ------------ MACHINERY -- 0.3% 11,191 Dover Corp. .................. 548,583 13,036 Rockwell Automation, Inc. .... 796,238 8,975 Terex Corp.*.................. 579,606 7,746 The Manitowoc Company, Inc. ....................... 460,345 ------------ 2,384,772 ------------ MANUFACTURING -- 4.0% 137,100 Carlisle Companies, Inc. ..... 10,762,349 7,871 Cooper Industries, Ltd. -- Class A (Bermuda)... 711,775 32,900 Crane Company................. 1,205,456 16,112 Eaton Corp. .................. 1,210,656 42,200 EnPro Industries, Inc.*....... 1,401,462 70,600 Furniture Brands International, Inc.(8)...... 1,145,838 158,840 Ingersoll-Rand Company, Ltd. -- Class A (Bermuda)... 6,215,409 86,300 Leggett & Platt, Inc. ........ 2,062,570 115,600 Precision Castparts Corp. .... 9,049,168 28,800 SPX Corp. .................... 1,761,408 83,400 Tredegar Corp. ............... 1,885,674 ------------ 37,411,765 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 4.3% 163,101 Boston Scientific Corp.*...... 2,802,075 114,000 CR Bard, Inc.(8).............. 9,458,581 136,100 Dade Behring Holdings, Inc. ....................... 5,418,141 25,092 Health Management Associates, Inc. -- Class A............. 529,692 15,005 Health Net, Inc.*............. 730,143 18,407 Humana, Inc.*................. 1,018,091 60,700 Invacare Corp. ............... 1,490,185 31,400 Kindred Healthcare, Inc.*..... 792,850 5,089 McKesson Corp. ............... 258,012 208,470 Omnicare, Inc.(8)............. 8,053,196 156,900 Quest Diagnostics, Inc. ...... 8,315,700 23,000 Universal Health Services, Inc. -- Class B............. 1,274,890 ------------ 40,141,556 ------------
See notes to financial statements. 144 MID-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) METALS AND MINING -- 0.7% 10,575 Freeport-McMoRan Copper & Gold, Inc. -- Class B(8).... $ 589,345 67,862 Nucor Corp. .................. 3,709,337 6,207 Phelps Dodge Corp. ........... 743,102 20,700 United States Steel Corp. .... 1,513,998 ------------ 6,555,782 ------------ OFFICE EQUIPMENT, SUPPLIES, AND SERVICES -- 0.3% 145,100 IKON Office Solutions, Inc. ....................... 2,375,287 7,009 Pitney Bowes, Inc. ........... 323,746 1,132 Xerox Corp.*.................. 19,187 ------------ 2,718,220 ------------ OIL, COAL AND GAS -- 9.3% 22,646 BJ Services Company........... 663,981 17,260 Cameron International Corp.*...................... 915,643 67,990 El Paso Corp. ................ 1,038,887 27,175 Enbridge, Inc. (Canada)(8).... 934,820 216,933 ENSCO International, Inc. .... 10,859,666 177,300 Equitable Resources, Inc. .... 7,402,275 21,171 GlobalSantaFe Corp. (Cayman Islands).................... 1,244,431 54,994 Hess Corp. ................... 2,726,053 54,599 Marathon Oil Corp.(8)......... 5,050,408 14,263 Nabors Industries, Ltd. (Bermuda)*.................. 424,752 57,100 National Fuel Gas Company..... 2,200,634 5,400 National-Oilwell Varco, Inc.*....................... 330,372 17,580 Newfield Exploration Company*.................... 807,801 189,500 ONEOK, Inc. .................. 8,171,240 167,500 Patterson-UTI Energy, Inc. ... 3,891,025 24,850 Pioneer Natural Resources Company..................... 986,297 263,684 Questar Corp. ................ 21,898,955 12,570 Smith International, Inc.(8)..................... 516,250 42,307 Southwestern Energy Company*(8)................. 1,482,860 4,693 Suncor Energy, Inc. (Canada).................... 370,325 63,166 Sunoco, Inc. ................. 3,939,032 33,000 Swift Energy Company*......... 1,478,730 379,500 The Williams Companies, Inc. ....................... 9,912,540 13,370 Weatherford International, Ltd. (Bermuda)*............. 558,732 ------------ 87,805,709 ------------ PAPER AND FOREST PRODUCTS -- 0.3% 13,406 Bowater, Inc.(8).............. 301,635
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) PAPER AND FOREST PRODUCTS (CONTINUED) 65,639 MeadWestvaco Corp. ........... $ 1,973,109 6,516 Temple-Inland, Inc. .......... 299,931 ------------ 2,574,675 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 2.9% 14,267 AmerisourceBergen Corp. ...... 641,444 6,639 Hospira, Inc.*................ 222,938 192,700 King Pharmaceuticals, Inc.*... 3,067,784 197,900 Millipore Corp.*(8)........... 13,180,139 36,534 Mylan Laboratories, Inc. ..... 729,219 103,100 Novo Nordisk A/S (ADR) (Denmark)................... 8,622,253 9,222 Watson Pharmaceuticals, Inc.*....................... 240,049 ------------ 26,703,826 ------------ PRINTING AND PUBLISHING -- 0.5% 80,000 Gannett Company, Inc. ........ 4,836,800 ------------ REAL ESTATE DEVELOPMENT AND SERVICES -- 0.9% 181,750 Brookfield Asset Management, Inc. -- Class A (Canada)(8)................. 8,756,715 ------------ REAL ESTATE INVESTMENT TRUSTS -- 2.3% 56,100 American Home Mortgage Investment Corp.(8)......... 1,970,232 210,000 Anthracite Capital, Inc. ..... 2,673,300 3,039 Boston Properties, Inc. ...... 340,003 24,724 Crescent Real Estate Equities Company..................... 488,299 60,000 Entertainment Properties Trust....................... 3,506,400 21,894 Equity Residential............ 1,111,121 84,700 Hospitality Properties Trust....................... 4,025,791 114,600 HRPT Properties Trust......... 1,415,310 113,900 Innkeepers USA Trust.......... 1,765,450 27,700 PS Business Parks, Inc. ...... 1,958,667 38,998 RAIT Investment Trust......... 1,344,651 22,634 Rayonier, Inc. ............... 929,126 ------------ 21,528,350 ------------ RETAIL -- 1.9% 61,000 Borders Group, Inc.(8)........ 1,363,350 445,400 Dollar Tree Stores, Inc.*..... 13,406,540 31,245 Family Dollar Stores, Inc. ... 916,416 25,339 Federated Department Stores, Inc. ....................... 966,176 20,000 JC Penney Company, Inc.(8).... 1,547,200 ------------ 18,199,682 ------------
See notes to financial statements. 145 MID-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) RETAIL: RESTAURANTS -- 1.2% 84,500 Ruby Tuesday, Inc.(8)......... $ 2,318,680 151,700 YUM! Brands, Inc. ............ 8,919,960 ------------ 11,238,640 ------------ RETAIL: SUPERMARKETS -- 0.2% 45,500 SUPERVALU, Inc. .............. 1,626,625 ------------ RUBBER PRODUCTS -- 0.2% 94,600 The Goodyear Tire & Rubber Company*(8)................. 1,985,654 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.9% 365,600 PerkinElmer, Inc. ............ 8,127,288 ------------ SEMICONDUCTORS -- 2.2% 37,273 Intersil Corp. -- Class A(8)........................ 891,570 1,172,200 LSI Logic Corp.*(8)........... 10,549,800 16,481 Microchip Technology, Inc. ... 538,929 51,176 National Semiconductor Corp. ...................... 1,161,695 49,200 Novellus Systems, Inc.*(8).... 1,693,464 290,000 STMicroelectronics NV (the Netherlands)(8)........ 5,336,000 ------------ 20,171,458 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 0.9% 114,514 CenturyTel, Inc. ............. 4,999,681 40,595 Citizens Communications Company..................... 583,350 4,467 Embarq Corp. ................. 234,786 95,221 Qwest Communications International, Inc.*(8)..... 797,000 91,405 Tellabs, Inc.*................ 937,815 67,539 Windstream Corp. ............. 960,405 ------------ 8,513,037 ------------ TOOLS -- 0.1% 19,926 The Stanley Works............. 1,002,079 ------------ TOYS -- 0.6% 15,866 Hasbro, Inc. ................. 432,349 222,600 Mattel, Inc. ................. 5,044,116 ------------ 5,476,465 ------------ TRANSPORTATION -- 1.2% 31,300 Arkansas Best Corp. .......... 1,126,800 116,712 CSX Corp. .................... 4,018,394 73,700 Sabre Holdings Corp. -- Class A........................... 2,350,293 57,200 Swift Transportation Company, Inc.*....................... 1,502,644
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) TRANSPORTATION (CONTINUED) 57,500 YRC Worldwide, Inc.*(8)....... $ 2,169,475 ------------ 11,167,606 ------------ UTILITIES -- 10.9% 70,400 AGL Resources, Inc. .......... 2,739,264 87,700 Allegheny Energy, Inc.*....... 4,026,307 73,100 Alliant Energy Corp. ......... 2,760,987 153,379 American Electric Power Company, Inc. .............. 6,530,878 686,705 CMS Energy Corp.*(8).......... 11,467,974 17,587 Consolidated Edison, Inc. .... 845,407 133,453 Constellation Energy Group.... 9,190,908 24,109 DPL, Inc. .................... 669,748 71,774 DTE Energy Company(8)......... 3,474,579 29,276 Edison International.......... 1,331,472 42,193 Energy East Corp. ............ 1,046,386 140,200 FPL Group, Inc.(8)............ 7,629,684 21,033 MDU Resources Group, Inc. .... 539,286 15,374 Mirant Corp.*................. 485,357 186,961 NiSource, Inc.(8)............. 4,505,760 27,900 OGE Energy Corp. ............. 1,116,000 242,800 PG&E Corp. ................... 11,491,724 125,445 Pinnacle West Capital Corp. ...................... 6,352,535 325,237 PPL Corp. .................... 11,656,494 24,800 Progress Energy, Inc. ........ 1,217,184 135,900 Puget Energy, Inc. ........... 3,446,424 28,661 Reliant Energy, Inc.*......... 407,273 13,158 SCANA Corp. .................. 534,478 16,358 Sempra Energy(8).............. 915,557 244,868 TECO Energy, Inc.(8).......... 4,219,076 200,588 Xcel Energy, Inc.(8).......... 4,625,559 ------------ 103,226,301 ------------ TOTAL COMMON STOCKS (Cost $817,402,104)......... 916,597,385 ------------ PRINCIPAL --------- CONVERTIBLE BONDS -- 0.0% TELECOMMUNICATIONS EQUIPMENT AND SERVICES $ 251,000 Qwest Communications International, Inc., 3.50%, 11/15/25 (Cost $401,223)............. 393,756 ------------
See notes to financial statements. 146 MID-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
PRINCIPAL VALUE --------- ------------ SHORT TERM COMMERCIAL PAPER -- 0.2% $ 1,800,000 Ebury Financial, Ltd. (Cayman Islands), 5.40%, 01/02/07 (Cost $1,799,190)........... $ 1,799,190 ------------ SECURITIES LENDING COLLATERAL -- 12.7% 118,672,540 Securities Lending Collateral Investment (Note 4) (Cost $118,672,540)......... 118,672,540 ------------ TOTAL SECURITIES (Cost $938,275,057)......... 1,037,462,871 ------------ REPURCHASE AGREEMENTS -- 1.7% 16,312,237 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $16,320,864 (Collateralized by various Fannie Mae Adjustable Rate Mortgages, 4.65%-5.85%, due 03/25/33-07/01/34 with a total value of $14,238,224, and Small Business Administration, 8.13%, due 01/25/24 with a value of $2,889,625) (Cost $16,312,237).......... 16,312,237 ------------ Total Investments -- 112.5% (Cost $954,587,294)......... 1,053,775,108 Liabilities less other assets -- (12.5)%........... (116,800,903) ------------ NET ASSETS -- 100.0%.......... $936,974,205 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $956,340,133. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation.......... $108,267,335 Gross unrealized depreciation.......... (10,832,360) ------------ Net unrealized appreciation............ $ 97,434,975 ============
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 147 MID-CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS -- 98.1% ADVERTISING -- 2.5% 120,000 Lamar Advertising Company -- Class A*..................... $ 7,846,800 ------------ AGRICULTURE -- 1.2% 168,000 The Mosaic Company*............ 3,588,480 ------------ AIRLINES -- 1.9% 408,000 JetBlue Airways Corp.*(8)...... 5,793,600 ------------ APPAREL: MANUFACTURING AND RETAIL -- 2.5% 76,000 Coach, Inc.*................... 3,264,960 71,416 The Children's Place Retail Stores, Inc.*(8)............. 4,536,344 ------------ 7,801,304 ------------ BUSINESS SERVICES AND SUPPLIES -- 6.2% 124,000 Fiserv, Inc.*.................. 6,500,080 56,245 Fluor Corp.(8)................. 4,592,404 68,000 Global Payments, Inc. ......... 3,148,400 66,340 Manpower, Inc. ................ 4,970,856 ------------ 19,211,740 ------------ CHEMICALS -- 2.2% 94,000 Albemarle Corp. ............... 6,749,200 ------------ COMMERCIAL SERVICES -- 1.0% 50,000 Alliance Data Systems Corp.*... 3,123,500 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 7.8% 298,000 Activision, Inc.*(8)........... 5,137,520 70,000 Cognizant Technology Solutions Corp. -- Class A*............ 5,401,200 155,961 FactSet Research Systems, Inc. ........................ 8,808,677 120,000 Network Appliance, Inc.*....... 4,713,600 ------------ 24,060,997 ------------ CONSTRUCTION SERVICES AND SUPPLIES -- 1.5% 167,000 Chicago Bridge & Iron Company NV (the Netherlands)......... 4,565,780 ------------ CONSUMER GOODS AND SERVICES -- 3.9% 77,000 Energizer Holdings, Inc.*...... 5,466,230 161,620 Herbalife, Ltd. (Cayman Islands)*.................... 6,490,659 ------------ 11,956,889 ------------ CORRECTIONAL FACILITIES -- 1.9% 133,000 Corrections Corp. of America*..................... 6,015,590 ------------ ENERGY SERVICES -- 2.0% 123,800 McDermott International, Inc. (Panama)*.................... 6,296,468 ------------
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) FINANCIAL SERVICES -- 6.0% 240,000 Amvescap PLC (ADR) (United Kingdom)..................... $ 5,916,000 146,255 Lazard, Ltd. -- Class A (Bermuda)(8)................. 6,923,712 132,470 T Rowe Price Group, Inc. ...... 5,798,212 ------------ 18,637,924 ------------ INTERNET SERVICES -- 6.9% 98,185 Akamai Technologies, Inc.(8)... 5,215,587 120,000 Digital River, Inc.*........... 6,694,800 59,000 Equinix, Inc.*(8).............. 4,461,580 67,000 F5 Networks, Inc.*............. 4,972,070 ------------ 21,344,037 ------------ LEISURE AND RECREATION -- 2.6% 230,015 Hilton Hotels Corp. ........... 8,027,524 ------------ MANUFACTURING -- 4.3% 79,000 Precision Castparts Corp. ..... 6,184,120 141,368 Roper Industries, Inc. ........ 7,102,328 ------------ 13,286,448 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 7.1% 38,000 CR Bard, Inc. ................. 3,152,860 108,280 Hologic, Inc.*(8).............. 5,119,478 37,000 Intuitive Surgical, Inc.*(8)... 3,548,300 63,000 ResMed, Inc.*(8)............... 3,100,860 221,445 VCA Antech, Inc.*.............. 7,128,315 ------------ 22,049,813 ------------ OIL, COAL AND GAS -- 5.5% 129,075 Cameron International Corp.*... 6,847,429 127,000 Newfield Exploration Company*..................... 5,835,650 127,715 Southwestern Energy Company*(8).................. 4,476,411 ------------ 17,159,490 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 5.5% 159,255 Celgene Corp.*................. 9,161,940 126,000 Shire PLC (ADR) (United Kingdom)............. 7,781,760 ------------ 16,943,700 ------------ REAL ESTATE DEVELOPMENT AND SERVICES -- 1.9% 176,715 CB Richard Ellis Group, Inc. -- Class A*..................... 5,866,938 ------------ RETAIL -- 3.9% 114,862 GameStop Corp. -- Class A*(8)........................ 6,330,045
See notes to financial statements. 148 MID-CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) RETAIL (CONTINUED) 207,000 The TJX Companies, Inc. ....... $ 5,895,360 ------------ 12,225,405 ------------ RETAIL: SUPERMARKETS -- 1.0% 93,000 Safeway, Inc. ................. 3,214,080 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 7.9% 232,000 Applera Corp. -- Applied Biosystems Group............. 8,512,080 40,000 Mettler-Toledo International, Inc.*........................ 3,154,000 139,000 Thermo Fisher Scientific, Inc.*........................ 6,295,310 130,000 Trimble Navigation, Ltd.*...... 6,594,900 ------------ 24,556,290 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 9.2% 213,921 American Tower Corp. -- Class A*........................... 7,974,975 182,320 Crown Castle International Corp.*....................... 5,888,936 74,742 Harris Corp. .................. 3,427,668 96,000 NeuStar, Inc. -- Class A*...... 3,114,240 121,415 NII Holdings, Inc.*............ 7,823,983 ------------ 28,229,802 ------------ TOYS -- 1.7% 195,000 Hasbro, Inc. .................. 5,313,750 ------------ TOTAL COMMON STOCKS (Cost $266,750,184).......... 303,865,549 ------------ PRINCIPAL --------- SECURITIES LENDING COLLATERAL -- 16.0% $49,693,823 Securities Lending Collateral Investment (Note 4) (Cost $49,693,823)........... 49,693,823 ------------ TOTAL SECURITIES (Cost $316,444,007).......... 353,559,372 ------------
PRINCIPAL VALUE --------- ------------ REPURCHASE AGREEMENTS -- 2.0% $ 6,350,435 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $6,353,794 (Collateralized by Small Business Administration, 9.13%, due 03/25/15, with a value of $6,667,957) (Cost $6,350,435).................. $ 6,350,435 ------------ Total Investments -- 116.1% (Cost $322,794,442).......... 359,909,807 Liabilities less other assets -- (16.1)%............ (50,000,746) ------------ NET ASSETS -- 100.0%........... $309,909,061 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $322,807,910. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation........... $38,690,012 Gross unrealized depreciation........... (1,588,115) ----------- Net unrealized appreciation............. $37,101,897 ===========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 149 SMALL-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS -- 99.6% AEROSPACE AND DEFENSE -- 2.4% 49,154 Moog, Inc. -- Class A*......... $ 1,877,191 72,700 United Industrial Corp. ....... 3,689,525 ------------ 5,566,716 ------------ APPAREL: MANUFACTURING AND RETAIL -- 2.7% 103,600 K-Swiss, Inc. -- Class A....... 3,184,664 38,772 Phillips-Van Heusen Corp. ..... 1,945,191 102,614 Stein Mart, Inc. .............. 1,360,662 ------------ 6,490,517 ------------ AUTOMOBILE: RETAIL -- 1.3% 102,300 Sonic Automotive, Inc. ........ 2,970,792 ------------ AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 4.6% 44,300 BorgWarner, Inc. .............. 2,614,586 67,400 Oshkosh Truck Corp. ........... 3,263,508 224,499 Spartan Motors, Inc. .......... 3,407,895 51,300 Winnebago Industries, Inc.(8)...................... 1,688,283 ------------ 10,974,272 ------------ BANKS -- 10.7% 71,400 BankUnited Financial Corp. -- Class A...................... 1,996,344 203,200 Brookline Bancorp, Inc. ....... 2,676,144 105,500 Citizens Banking Corp. -- Michigan(8).................. 2,795,750 128,300 Corus Bankshares, Inc.(8)...... 2,959,881 209,800 First Commonwealth Financial Corp.(8)..................... 2,817,614 85,300 Franklin Bank Corp. -- Houston, Texas*....................... 1,752,062 70,173 Oriental Financial Group, Inc. -- Puerto Rico(8)....... 908,740 40,600 Pacific Capital Bancorp........ 1,363,348 44,400 PFF Bancorp, Inc. ............. 1,532,244 21,300 Sterling Financial Corp. -- Spokane...................... 720,153 118,500 Washington Federal, Inc. ...... 2,788,305 88,400 Whitney Holding Corp. ......... 2,883,608 ------------ 25,194,193 ------------ BROADCAST SERVICES/MEDIA -- 1.1% 206,400 Journal Communications, Inc. -- Class A...................... 2,602,704 ------------ BUSINESS SERVICES AND SUPPLIES -- 0.5% 29,300 Administaff, Inc.(8)........... 1,253,161 ------------ COLLECTIBLES -- 0.7% 50,300 Sotheby's...................... 1,560,306 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 3.2% 55,500 Checkpoint Systems, Inc.*...... 1,121,100 181,654 Digi International, Inc.*...... 2,505,009
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) COMPUTER EQUIPMENT, SOFTWARE AND SERVICES (CONTINUED) 76,400 MTS Systems Corp. ............. $ 2,950,568 64,800 Smith Micro Software, Inc.*.... 919,512 ------------ 7,496,189 ------------ CONSTRUCTION SERVICES AND SUPPLIES -- 3.8% 60,100 Granite Construction, Inc. .... 3,024,232 40,700 Hovnanian Enterprises, Inc. -- Class A*(8).................. 1,379,730 26,500 Meritage Homes Corp.*.......... 1,264,580 46,200 Standard Pacific Corp.(8)...... 1,237,698 46,900 Universal Forest Products, Inc. ........................ 2,186,478 ------------ 9,092,718 ------------ CONSUMER GOODS AND SERVICES -- 0.4% 16,900 The Scotts Miracle-Gro Company -- Class A........... 872,885 ------------ DISTRIBUTION -- 1.0% 51,353 Watsco, Inc. .................. 2,421,807 ------------ DIVERSIFIED OPERATIONS AND SERVICES -- 0.8% 40,300 ESCO Technologies, Inc.*....... 1,831,232 ------------ EDUCATION -- 0.8% 51,062 School Specialty, Inc.*(8)..... 1,914,314 ------------ ELECTRONICS -- 1.5% 49,900 Benchmark Electronics, Inc.*... 1,215,564 147,500 Sonic Solutions*(8)............ 2,404,250 ------------ 3,619,814 ------------ ENGINEERING -- 0.5% 29,100 URS Corp.*..................... 1,246,935 ------------ EQUIPMENT RENTAL AND LEASING -- 0.7% 59,700 Aaron Rents, Inc. ............. 1,718,166 ------------ FINANCIAL SERVICES -- 3.4% 27,170 Accredited Home Lenders Holding Company*(8).................. 741,198 52,000 Asset Acceptance Capital Corp.*....................... 874,640 140,176 Calamos Asset Management, Inc. -- Class A.............. 3,760,922 39,600 Eaton Vance Corp. ............. 1,307,196 41,893 Raymond James Financial, Inc. ........................ 1,269,777 ------------ 7,953,733 ------------ FOOD AND BEVERAGE -- 1.0% 66,300 United Natural Foods, Inc.*(8)..................... 2,381,496 ------------ FUNERAL SERVICES -- 1.3% 293,800 Service Corp. International.... 3,011,450 ------------ INSURANCE -- 5.4% 72,850 American Physicians Capital, Inc.*........................ 2,916,914 77,419 Delphi Financial Group, Inc. -- Class A...................... 3,132,373
See notes to financial statements. 150 SMALL-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) INSURANCE (CONTINUED) 20,900 Philadelphia Consolidated Holding Corp.*............... $ 931,304 12,900 Protective Life Corp. ......... 612,750 43,700 State Auto Financial Corp. .... 1,517,701 90,600 The Commerce Group, Inc. ...... 2,695,350 29,000 United Fire & Casualty Company...................... 1,022,250 ------------ 12,828,642 ------------ INTERNET SERVICES -- 1.0% 25,000 Digital River, Inc.*........... 1,394,750 60,200 eCollege.com, Inc.*(8)......... 942,130 ------------ 2,336,880 ------------ LEISURE AND RECREATION -- 2.0% 101,492 The Marcus Corp. .............. 2,596,165 58,800 WMS Industries, Inc.*.......... 2,049,768 ------------ 4,645,933 ------------ MACHINERY -- 2.4% 112,200 Applied Industrial Technologies, Inc. .......... 2,951,982 51,200 Bucyrus International, Inc. -- Class A...................... 2,650,112 ------------ 5,602,094 ------------ MANUFACTURING -- 2.5% 76,636 CIRCOR International, Inc. .... 2,819,438 60,900 FLIR Systems, Inc.*(8)......... 1,938,447 63,800 Hexcel Corp.*(8)............... 1,110,758 ------------ 5,868,643 ------------ MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 11.3% 41,100 AMERIGROUP Corp.*.............. 1,475,079 45,800 Centene Corp.*................. 1,125,306 16,600 Covance, Inc.*................. 977,906 40,900 Healthways, Inc.*(8)........... 1,951,339 88,700 Immucor, Inc.*................. 2,592,701 73,300 Magellan Health Services, Inc.*........................ 3,168,026 74,700 Matria Healthcare, Inc.*(8).... 2,146,131 75,800 Owens & Minor, Inc.(8)......... 2,370,266 75,700 Sunrise Senior Living, Inc.*... 2,325,504 120,500 Syneron Medical, Ltd. (Israel)*(8)................. 3,269,165 53,150 United Surgical Partners International, Inc.*......... 1,506,803 78,200 West Pharmaceutical Services, Inc. ........................ 4,006,186 ------------ 26,914,412 ------------ OFFICE EQUIPMENT, SUPPLIES, AND SERVICES -- 1.3% 141,800 Global Imaging Systems, Inc.*........................ 3,112,510 ------------
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) OIL, COAL AND GAS -- 10.9% 32,200 Cabot Oil & Gas Corp. ......... $ 1,952,930 79,900 Frontier Oil Corp. ............ 2,296,326 44,039 Headwaters, Inc.*(8)........... 1,055,174 53,100 Holly Corp. ................... 2,729,340 78,900 National Fuel Gas Company(8)... 3,040,806 37,500 Oceaneering International, Inc.*........................ 1,488,750 22,800 ONEOK, Inc. ................... 983,136 41,100 Penn Virginia Corp. ........... 2,878,644 36,300 Swift Energy Company*.......... 1,626,603 25,000 The Houston Exploration Company*..................... 1,294,500 57,000 Tidewater, Inc. ............... 2,756,520 81,100 World Fuel Services Corp. ..... 3,605,706 ------------ 25,708,435 ------------ PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 4.2% 141,445 Exponent, Inc.*................ 2,639,363 145,127 Mannatech, Inc.(8)............. 2,137,721 149,990 Perrigo Company................ 2,594,827 71,900 PRA International*............. 1,816,913 53,500 Salix Pharmaceuticals, Ltd.*... 651,095 66,900 VaxGen, Inc.*.................. 127,110 ------------ 9,967,029 ------------ REAL ESTATE INVESTMENT TRUSTS -- 5.3% 80,395 Getty Realty Corp.(8).......... 2,484,206 57,600 Healthcare Realty Trust, Inc. ........................ 2,277,504 109,700 National Retail Properties, Inc.(8)...................... 2,517,615 63,100 Rayonier, Inc. ................ 2,590,255 47,900 Sovran Self Storage, Inc. ..... 2,743,712 ------------ 12,613,292 ------------ RETAIL -- 2.8% 216,000 EZCORP, Inc. -- Class A*....... 3,510,000 20,200 Guitar Center, Inc.*........... 918,292 44,800 The Pantry, Inc.*(8)........... 2,098,432 ------------ 6,526,724 ------------ RETAIL: RESTAURANTS -- 1.0% 30,250 Brinker International, Inc. ... 912,340 57,400 Sonic Corp.*................... 1,374,730 ------------ 2,287,070 ------------ RETAIL: SUPERMARKETS -- 0.9% 54,109 Weis Markets, Inc. ............ 2,170,312 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.7% 31,200 Itron, Inc.*................... 1,617,408 ------------
See notes to financial statements. 151 SMALL-CAP VALUE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) SEMICONDUCTORS -- 1.0% 173,700 OmniVision Technologies, Inc.*(8)..................... $ 2,371,005 ------------ TOOLS -- 0.4% 21,200 Snap-on, Inc. ................. 1,009,968 ------------ TRANSPORTATION -- 1.3% 82,768 Arkansas Best Corp. ........... 2,979,648 ------------ UTILITIES -- 2.8% 76,900 American States Water Company.. 2,969,878 31,800 PNM Resources, Inc. ........... 988,980 64,500 UIL Holdings Corp. ............ 2,721,255 ------------ 6,680,113 ------------ TOTAL COMMON STOCKS (Cost $223,522,097).......... 235,413,518 ------------ PRINCIPAL --------- SECURITIES LENDING COLLATERAL -- 18.0% $42,425,935 Securities Lending Collateral Investment (Note 4) (Cost $42,425,935)........... 42,425,935 ------------ TOTAL SECURITIES (Cost $265,948,032).......... 277,839,453 ------------ REPURCHASE AGREEMENTS -- 0.0% 33,538 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $33,555 (Collateralized by Small Business Administration, 8.13%, due 04/25/27, with a value of $35,214) (Cost $33,538)..................... 33,538 ------------ Total Investments -- 117.6% (Cost $265,981,570).......... 277,872,991 Liabilities less other assets -- (17.6)%............ (41,556,273) ------------ NET ASSETS -- 100.0%........... $236,316,718 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $266,403,112. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation........... $19,367,277 Gross unrealized depreciation........... (7,897,398) ----------- Net unrealized appreciation............. $11,469,879 ===========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 152 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS -- 97.9% ADVERTISING -- 0.3% 112,100 Catalina Marketing Corp. ... $ 3,082,750 -------------- AEROSPACE AND DEFENSE -- 0.8% 121,820 BE Aerospace, Inc.*......... 3,128,338 34,180 HEICO Corp.(8).............. 1,327,209 7,200 Innovative Solutions and Support, Inc.*(8)......... 122,616 3,300 K&F Industries Holdings, Inc.*..................... 74,943 84,950 Moog, Inc. -- Class A*...... 3,244,241 90,100 Orbital Sciences Corp.*..... 1,661,444 11,000 Teledyne Technologies, Inc.*..................... 441,430 4,500 United Industrial Corp. .... 228,375 -------------- 10,228,596 -------------- AGRICULTURAL EQUIPMENT -- 0.0% 7,900 Lindsay Corp. .............. 257,935 -------------- AIRLINES -- 0.7% 238,950 AirTran Holdings, Inc.*(8).................. 2,805,273 14,900 Alaska Air Group, Inc.*..... 588,550 90,800 Continental Airlines, Inc. -- Class B*(8)....... 3,745,500 220,400 ExpressJet Holdings, Inc.*..................... 1,785,240 6,600 Republic Airways Holdings, Inc.*..................... 110,748 -------------- 9,035,311 -------------- APPAREL: MANUFACTURING AND RETAIL -- 4.9% 122,210 Cache, Inc.*................ 3,084,580 67,710 Carter's, Inc.*............. 1,726,605 45,900 Charlotte Russe Holding, Inc.*..................... 1,411,425 2,150 Columbia Sportswear Company................... 119,755 129,200 Crocs, Inc.*(8)............. 5,581,440 59,700 Deckers Outdoor Corp.*(8)... 3,579,015 6,800 Guess?, Inc.*............... 431,324 128,420 Iconix Brand Group, Inc.*... 2,490,064 87,753 Jos A Bank Clothiers, Inc.*(8).................. 2,575,551 94,500 Kellwood Company(8)......... 3,073,140 43,000 Mothers Work, Inc.*......... 1,693,770 109,800 Payless ShoeSource, Inc.*... 3,603,636 105,550 Phillips-Van Heusen Corp. .................... 5,295,444 407,250 Quiksilver, Inc.*(8)........ 6,414,187 9,400 Skechers USA, Inc. -- Class A*........................ 313,114 160,500 Stage Stores, Inc. ......... 4,877,595 111,900 Stein Mart, Inc. ........... 1,483,794 8,700 Steven Madden, Ltd. ........ 305,283 131,200 The Cato Corp. -- Class A... 3,005,792 7,000 The Dress Barn, Inc.*....... 163,310
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) APPAREL: MANUFACTURING AND RETAIL (CONTINUED) 54,700 The Gymboree Corp.*......... $ 2,087,352 61,900 The Talbots, Inc. .......... 1,491,790 157,100 The Wet Seal, Inc. -- Class A*........................ 1,047,857 41,600 Urban Outfitters, Inc.*(8).................. 958,048 85,700 Wolverine World Wide, Inc. ..................... 2,444,164 -------------- 59,258,035 -------------- AUTOMOBILE: RENTAL -- 0.0% 30,200 Hertz Global Holdings, Inc.*..................... 525,178 -------------- AUTOMOBILE: RETAIL -- 0.1% 29,100 Group 1 Automotive, Inc. ... 1,505,052 -------------- AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 0.6% 10,900 Accuride Corp.*............. 122,734 65,800 Aftermarket Technology Corp.*.................... 1,400,224 6,300 Commercial Vehicle Group, Inc.*..................... 137,340 120,010 Midas, Inc.*................ 2,760,230 56,850 Modine Manufacturing Company................... 1,422,956 25,000 Standard Motor Products, Inc. ..................... 374,500 43,400 Winnebago Industries, Inc.(8)................... 1,428,294 -------------- 7,646,278 -------------- BANKS -- 6.1% 10,310 1st Source Corp. ........... 331,260 78,000 AMCORE Financial, Inc. ..... 2,548,260 12,800 Ameris Bancorp.............. 360,704 1,400 Anchor BanCorp Wisconsin, Inc. ..................... 40,348 1,545 Arrow Financial Corp. ...... 38,270 141,200 Astoria Financial Corp. .... 4,258,591 17,900 BancFirst Corp. ............ 966,600 16,800 BancorpSouth, Inc. ......... 450,576 2,900 Bank Mutual Corp. .......... 35,119 12,875 Bank of Granite Corp. ...... 244,239 3,300 BankFinancial Corp. ........ 58,773 55,273 BankUnited Financial Corp. -- Class A.......... 1,545,433 7,000 Cadence Financial Corp. .... 151,690 7,100 Camden National Corp. ...... 327,452 1,800 Capital Corp of the West.... 57,762 5,200 Center Financial Corp. ..... 124,644 9,200 Chittenden Corp. ........... 282,348 6,300 Citizens Banking Corp. -- Michigan(8)............... 166,950 1,400 Citizens First Bancorp, Inc. ..................... 43,036
See notes to financial statements. 153 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 25,500 City Bank -- Lynwood, Washington................ $ 912,900 19,400 City Holding Company........ 793,266 2,900 Coastal Financial Corp. .... 48,575 18,100 Columbia Banking System, Inc. ..................... 635,672 2,200 Community Bancorp*.......... 66,418 13,500 Community Bank System, Inc. ..................... 310,500 10,300 Community Trust Bancorp, Inc. ..................... 427,759 81,900 Corus Bankshares, Inc.(8)... 1,889,433 27,800 Dime Community Bancshares... 389,478 65,700 East West Bancorp, Inc. .... 2,327,094 3,400 Financial Institutions, Inc. ..................... 78,370 12,500 First Charter Corp. ........ 307,500 5,100 First Citizens Bancshares, Inc. -- Class A........... 1,033,464 1,500 First Community Bancshares, Inc. ..................... 59,340 68,300 First Financial Bancorp(8)................ 1,134,463 19,200 First Financial Bankshares, Inc. ..................... 803,712 2,200 First Financial Corp. ...... 77,990 12,400 First Financial Holdings, Inc. ..................... 485,832 27,900 First Indiana Corp. ........ 707,544 63,750 First Midwest Bancorp, Inc. ..................... 2,465,850 2,900 First Place Financial Corp. .................... 68,121 1,200 First Regional Bancorp*..... 40,908 4,100 First State Bancorp......... 101,475 39,700 Flagstar Bancorp, Inc. ..... 589,148 127,100 Fremont General Corp.(8).... 2,060,291 38,699 Frontier Financial Corp.(8).................. 1,131,172 4,000 Great Southern Bancorp, Inc.(8)................... 118,040 39,700 Greater Bay Bancorp......... 1,045,301 38,400 Hancock Holding Company..... 2,029,056 14,075 Horizon Financial Corp. .... 338,645 12,200 Independent Bank Corp. -- Massachusetts............. 439,566 5,775 Independent Bank Corp. -- Michigan.................. 146,050 13,800 Integra Bank Corp. ......... 379,776 81,000 International Bancshares Corp. .................... 2,503,710 9,500 ITLA Capital Corp. ......... 550,145 7,000 Kearny Financial Corp. ..... 112,420 20,200 KNBT Bancorp, Inc. ......... 337,946 8,800 Lakeland Financial Corp. ... 224,664 1,650 Macatawa Bank Corp. ........ 35,079 2,400 MAF Bancorp, Inc. .......... 107,256
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 2,730 MainSource Financial Group, Inc. ..................... $ 46,246 57,350 MB Financial, Inc. ......... 2,156,934 2,400 Nara Bancorp, Inc. ......... 50,208 3,399 National Penn Bancshares, Inc. ..................... 68,830 3,000 NBT Bancorp, Inc. .......... 76,530 145,050 NewAlliance Bancshares, Inc. ..................... 2,378,820 13,200 OceanFirst Financial Corp. .................... 302,676 6,600 Old National Bancorp........ 124,872 12,600 Old Second Bancorp, Inc. ... 369,180 43,500 Oriental Financial Group, Inc. -- Puerto Rico(8).... 563,325 90,700 Pacific Capital Bancorp..... 3,045,705 1,400 Park National Corp. ........ 138,600 3,400 Partners Trust Financial Group, Inc. .............. 39,576 3,400 People's Bancorp, Inc. ..... 100,980 42,600 PFF Bancorp, Inc. .......... 1,470,126 1,500 Preferred Bank -- Los Angeles, California....... 90,135 33,080 PrivateBancorp, Inc.(8)..... 1,377,120 4,400 Provident Bankshares Corp. .................... 156,640 1,400 Provident Financial Holdings, Inc. ........... 42,686 26,200 S&T Bancorp, Inc. .......... 908,354 5,000 Sandy Spring Bancorp, Inc. ..................... 190,900 15,800 Santander BanCorp -- Puerto Rico(8)................... 282,030 3,700 SCBT Financial Corp. ....... 154,401 13,700 Signature Bank*............. 424,426 7,400 Simmons First National Corp. -- Class A.......... 233,470 4,900 Smithtown Bancorp, Inc. .... 132,888 6,450 Sterling Bancshares, Inc. -- Texas..................... 83,979 7,500 Sterling Financial Corp. -- Pennsylvania.............. 177,525 96,750 Sterling Financial Corp. -- Spokane................... 3,271,117 9,500 Suffolk Bancorp............. 362,235 76,500 SVB Financial Group*........ 3,566,429 11,800 SY Bancorp, Inc. ........... 330,400 7,100 Taylor Capital Group, Inc. ..................... 259,931 36,300 TierOne Corp. .............. 1,147,443 10,400 TrustCo Bank Corp. NY....... 115,648 43,300 Trustmark Corp. ............ 1,416,343 2,500 Univest Corp. of Pennsylvania.............. 76,200
See notes to financial statements. 154 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 12,450 Union Bankshares Corp. ..... $ 380,846 39,000 United Bankshares, Inc. .... 1,507,350 24,200 United Community Financial Corp. .................... 296,208 11,100 USB Holding Company, Inc. ..................... 267,510 13,000 Washington Trust Bancorp, Inc. ..................... 362,570 1,900 Wauwatosa Holdings, Inc.*... 33,858 9,400 WesBanco, Inc. ............. 315,182 3,000 West Bancorp................ 53,340 11,300 West Coast Bancorp.......... 391,432 45,050 Westamerica Bancorp......... 2,280,882 6,700 Western Alliance Bancorp*... 232,959 20,450 Wintrust Financial Corp. ... 982,009 15,700 WSFS Financial Corp. ....... 1,050,801 -------------- 73,233,839 -------------- BROADCAST SERVICES/MEDIA -- 0.6% 2,900 4Kids Entertainment, Inc.*..................... 52,838 83,300 Citadel Broadcasting Company................... 829,668 69,150 CKX, Inc.*(8)............... 811,130 71,300 Cumulus Media, Inc. -- Class A*........................ 740,807 46,400 Entercom Communications Corp. .................... 1,307,552 12,200 Gray Television, Inc. ...... 89,426 107,900 Martha Stewart Living Omnimedia, Inc. -- Class A(8)...................... 2,363,010 95,700 Sinclair Broadcast Group, Inc. -- Class A........... 1,004,850 15,400 Westwood One, Inc. ......... 108,724 -------------- 7,308,005 -------------- BUSINESS SERVICES AND SUPPLIES -- 3.7% 48,400 Acxiom Corp. ............... 1,241,460 49,350 Administaff, Inc.(8)........ 2,110,700 17,400 Ambassadors Group, Inc. .... 528,090 114,978 Barrett Business Services, Inc. ..................... 2,692,785 136,000 CSG Systems International, Inc.*..................... 3,635,280 16,800 Diamond Management & Technology Consultants, Inc. ..................... 208,992 38,200 First Consulting Group, Inc.*..................... 525,632 156,370 FirstService Corp. (Canada)*................. 3,612,147 22,400 Forrester Research, Inc.*... 607,264 94,700 Global Payments, Inc. ...... 4,384,609 14,700 Heidrick & Struggles International, Inc.*...... 622,692
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) BUSINESS SERVICES AND SUPPLIES (CONTINUED) 10,500 Huron Consulting Group, Inc.*..................... $ 476,070 63,500 John H Harland Company(8)... 3,187,700 101,000 LightBridge, Inc.*.......... 1,367,540 66,450 MAXIMUS, Inc. .............. 2,045,331 98,400 MoneyGram International, Inc.(8)................... 3,085,824 65,930 Portfolio Recovery Associates, Inc.*(8)...... 3,078,272 106,500 Spherion Corp.*............. 791,295 136,400 Symyx Technologies, Inc.*... 2,944,876 80,100 TeleTech Holdings, Inc.*.... 1,912,788 10,700 The Corporate Executive Board Company(8).......... 938,390 93,800 UniFirst Corp. ............. 3,602,858 22,500 Vertrue, Inc.*.............. 864,225 -------------- 44,464,820 -------------- CHEMICALS -- 1.5% 76,900 Compass Minerals International, Inc. ...... 2,426,964 92,700 HB Fuller Company........... 2,393,514 25,100 Innospec, Inc. ............. 1,168,405 77,300 OM Group, Inc.*............. 3,500,144 30,300 Pioneer Companies, Inc.*.... 868,398 75,000 PolyOne Corp.*.............. 562,500 67,200 Spartech Corp. ............. 1,761,984 121,100 Tetra Tech, Inc.*........... 2,190,699 51,600 The Valspar Corp. .......... 1,426,224 80,500 US BioEnergy Corp.*......... 1,368,500 30,800 Westlake Chemical Corp.(8).................. 966,504 -------------- 18,633,836 -------------- COMMERCIAL SERVICES -- 0.5% 9,800 Central Parking Corp.(8).... 176,400 7,800 Coinmach Service Corp. -- Class A................... 92,820 13,300 DynCorp International, Inc. -- Class A*.......... 211,071 130,880 HMS Holdings Corp.*......... 1,982,832 3,700 ICT Group, Inc.*............ 116,883 26,400 Jackson Hewitt Tax Service, Inc. ..................... 896,808 7,500 Standard Parking Corp.*..... 288,075 63,670 Steiner Leisure, Ltd. (Bahama Islands)*......... 2,896,985 -------------- 6,661,874 --------------
See notes to financial statements. 155 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 5.9% 162,920 Advent Software, Inc.*(8)... $ 5,749,447 105,900 Agilysys, Inc. ............. 1,772,766 76,100 Altiris, Inc.*.............. 1,931,418 64,230 American Reprographics Company*.................. 2,139,501 18,800 Ansoft Corp.*............... 522,640 22,600 Aspen Technology, Inc.*(8).................. 249,052 27,600 Avocent Corp.*(8)........... 934,260 27,500 Black Box Corp. ............ 1,154,725 8,200 Blackbaud, Inc. ............ 213,200 239,300 Brocade Communications Systems, Inc.*............ 1,964,653 117,050 Checkpoint Systems, Inc.*... 2,364,410 12,800 COMSYS IT Partners, Inc.*... 258,688 164,740 Concur Technologies, Inc.*(8).................. 2,642,430 155,080 Cray, Inc.*................. 1,842,350 15,000 Digi International, Inc.*... 206,850 61,100 Digimarc Corp.*............. 538,902 90,700 Electronics For Imaging, Inc.*..................... 2,410,806 12,950 FactSet Research Systems, Inc. ..................... 731,416 9,800 IHS, Inc. -- Class A*....... 386,904 66,900 Imation Corp. .............. 3,106,167 5,700 Infocrossing, Inc.*(8)...... 92,910 6,300 Interactive Intelligence, Inc.*..................... 141,246 7,100 Isilon Systems, Inc. ....... 195,960 46,200 Jack Henry & Associates, Inc. ..................... 988,680 6,800 JDA Software Group, Inc.*... 93,636 89,600 Keane, Inc.*................ 1,067,136 30,577 L-1 Identity Solutions, Inc.*(8).................. 462,630 43,900 Manhattan Associates, Inc.*..................... 1,320,512 82,300 Mentor Graphics Corp.*...... 1,483,869 30,800 MicroStrategy, Inc. -- Class A*(8)..................... 3,511,508 45,800 MTS Systems Corp. .......... 1,768,796 357,900 Red Hat, Inc.*(8)........... 8,231,699 3,700 SPSS, Inc.*................. 111,259 139,500 Sybase, Inc.*............... 3,445,650 123,800 Sykes Enterprises, Inc.*.... 2,183,832 49,000 Synaptics, Inc.*............ 1,454,810 46,200 Systems Xcellence, Inc. (Canada)*................. 931,854 135,000 THQ, Inc.*(8)............... 4,390,200 26,600 Transaction Systems Architects, Inc. -- Class A*........................ 866,362 10,600 Tyler Technologies, Inc.*... 149,036 22,800 Western Digital Corp.*...... 466,488
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) COMPUTER EQUIPMENT, SOFTWARE AND SERVICES (CONTINUED) 420,800 Wind River Systems, Inc.*(8).................. $ 4,313,200 76,400 Xyratex, Ltd. (Bermuda)*.... 1,648,712 -------------- 70,440,570 -------------- CONSTRUCTION SERVICES AND SUPPLIES -- 2.4% 22,000 BlueLinx Holdings, Inc. .... 228,800 2,200 Brookfield Homes Corp.(8)... 82,610 38,000 Eagle Materials, Inc. ...... 1,642,740 27,200 Granite Construction, Inc. ..................... 1,368,704 88,150 Hovnanian Enterprises, Inc. -- Class A*(8)....... 2,988,285 81,200 Matrix Service Company*..... 1,307,320 101,000 Meritage Homes Corp.*....... 4,819,720 90,650 Simpson Manufacturing Company, Inc.(8).......... 2,869,073 130,400 Standard Pacific Corp.(8)... 3,493,416 93,510 Team, Inc.*................. 3,256,953 56,825 Technical Olympic USA, Inc. ..................... 577,910 9,000 The Ryland Group, Inc.(8)... 491,580 104,550 Trex Company, Inc.*(8)...... 2,393,150 24,600 Washington Group International, Inc.*...... 1,470,834 106,650 WCI Communities, Inc.*(8)... 2,045,547 -------------- 29,036,642 -------------- CONSUMER GOODS AND SERVICES -- 3.1% 6,200 Blyth, Inc. ................ 128,650 57,400 Central Garden & Pet Company*.................. 2,779,308 27,100 Chattem, Inc.*(8)........... 1,357,168 15,600 FTD Group, Inc.*............ 279,084 129,050 Helen Of Troy, Ltd. (Bermuda)*................ 3,130,753 45,150 Herbalife, Ltd. (Cayman Islands)*................. 1,813,224 83,100 NBTY, Inc.*................. 3,454,467 65,500 Nutri/System, Inc.*(8)...... 4,152,045 137,300 Playtex Products, Inc.*..... 1,975,747 19,700 Prestige Brands Holdings, Inc.*..................... 256,494 145,040 Rollins, Inc. .............. 3,206,834 203,450 Tempur-Pedic International, Inc.*(8).................. 4,162,587 69,300 The Scotts Miracle-Gro Company -- Class A........ 3,579,345 123,950 The Yankee Candle Company, Inc. ..................... 4,249,006
See notes to financial statements. 156 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) CONSUMER GOODS AND SERVICES (CONTINUED) 76,199 Vector Group, Ltd.(8)....... $ 1,352,532 1,900 WD-40 Company............... 66,253 30,250 Weight Watchers International, Inc. ...... 1,589,033 -------------- 37,532,530 -------------- CONTAINERS AND PACKAGING -- 0.0% 3,300 Greif, Inc. -- Class A...... 390,720 -------------- DISTRIBUTION -- 1.0% 60,570 Central European Distribution Corp.*....... 1,798,929 17,600 Houston Wire & Cable Company*(8)............... 367,840 61,450 United Stationers, Inc.*.... 2,869,101 108,750 Universal Corp. ............ 5,329,837 46,800 Watsco, Inc. ............... 2,207,088 -------------- 12,572,795 -------------- DIVERSIFIED OPERATIONS AND SERVICES -- 0.4% 30,600 Compass Diversified Trust... 524,790 66,700 LandAmerica Financial Group, Inc.(8)................... 4,209,437 14,800 Resource America, Inc. -- Class A................... 390,720 -------------- 5,124,947 -------------- EDUCATION -- 0.2% 58,700 School Specialty, Inc.*(8).................. 2,200,663 3,800 Strayer Education, Inc. .... 402,990 -------------- 2,603,653 -------------- ELECTRONICS -- 2.8% 110,899 Belden CDT, Inc. ........... 4,335,041 107,800 Benchmark Electronics, Inc.*..................... 2,626,008 493,150 Flextronics International, Ltd. (Singapore)*......... 5,661,361 40,050 Harman International Industries, Inc. ......... 4,001,396 2,900 Littelfuse, Inc.*........... 92,452 128,300 Micrel, Inc.*............... 1,383,074 198,800 Nam Tai Electronics, Inc. (British Virgin Islands).................. 3,019,772 39,100 Park Electrochemical Corp. .................... 1,002,915 597,950 Sanmina-SCI Corp.*.......... 2,062,928 563,100 Solectron Corp.*............ 1,813,182 58,650 Sonic Solutions*(8)......... 955,995 111,780 SRS Labs, Inc.*............. 1,209,460 138,450 Synopsys, Inc.*............. 3,700,769
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) ELECTRONICS (CONTINUED) 22,700 Technitrol, Inc. ........... $ 542,303 143,800 TTM Technologies, Inc.*..... 1,629,254 -------------- 34,035,910 -------------- ENERGY SERVICES -- 0.3% 27,850 Energy Conversion Devices, Inc.*(8).................. 946,343 53,300 SunPower Corp. -- Class A*(8)..................... 1,981,161 38,000 VeraSun Energy Corp.*(8).... 750,500 -------------- 3,678,004 -------------- ENGINEERING -- 0.3% 10,700 EMCOR Group, Inc.*.......... 608,295 72,750 URS Corp.*.................. 3,117,338 -------------- 3,725,633 -------------- ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 0.5% 261,800 Allied Waste Industries, Inc.*..................... 3,217,522 60,400 Metal Management, Inc. ..... 2,286,140 -------------- 5,503,662 -------------- EQUIPMENT RENTAL AND LEASING -- 0.4% 75,300 Aaron Rents, Inc.(8) ....... 2,167,134 103,500 Rent-A-Center, Inc.*........ 3,054,285 -------------- 5,221,419 -------------- FINANCIAL SERVICES -- 5.3% 46,750 Accredited Home Lenders Holding Company*(8)....... 1,275,340 18,950 Affiliated Managers Group, Inc.*(8).................. 1,992,214 219,100 Asset Acceptance Capital Corp.*.................... 3,685,262 96,900 ASTA Funding, Inc.(8)....... 2,949,636 87,483 Calamos Asset Management, Inc. -- Class A........... 2,347,169 292,550 E*TRADE Financial Corp.*.... 6,558,971 129,850 Eaton Vance Corp. .......... 4,286,349 31,600 Federal Agricultural Mortgage Corp. -- Class C......................... 857,308 8,800 Federated Investors, Inc. -- Class B................... 297,264 12,300 Financial Federal Corp. .... 361,743 1,400 GAMCO Investors, Inc. -- Class A................... 53,844 79,590 Greenhill & Company, Inc.(8)................... 5,873,741 21,940 International Securities Exchange Holdings, Inc.(8)................... 1,026,573
See notes to financial statements. 157 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) FINANCIAL SERVICES (CONTINUED) 91,620 Investment Technology Group, Inc.*..................... $ 3,928,666 268,300 Jefferies Group, Inc. ...... 7,195,805 253,300 Knight Capital Group, Inc. -- Class A*.......... 4,855,760 19,500 Morningstar, Inc.*.......... 878,475 92,970 NewStar Financial, Inc.*.... 1,715,297 18,150 Nuveen Investments -- Class A......................... 941,622 100,900 Ocwen Financial Corp.*...... 1,600,274 53,010 optionsXpress Holdings, Inc. ..................... 1,202,797 148,050 Raymond James Financial, Inc. ..................... 4,487,395 19,500 Susquehanna Bancshares, Inc. ..................... 524,160 17,050 The Student Loan Corp. ..... 3,534,465 119,750 TradeStation Group, Inc.*... 1,646,563 1,400 US Global Investors, Inc. -- Class A*(8)............... 94,150 41,100 W Holding Company, Inc. -- Puerto Rico(8)............ 244,956 -------------- 64,415,799 -------------- FOOD AND BEVERAGE -- 0.6% 38,900 Boston Beer Company, Inc. -- Class A*.................. 1,399,622 1,500 Coca-Cola Bottling Company................... 102,645 1,900 Farmer Brothers Company..... 40,565 108,900 Lance, Inc. ................ 2,186,712 36,400 Nash Finch Company(8)....... 993,720 5,400 Ralcorp Holdings, Inc.*..... 274,806 7,400 Reddy Ice Holdings, Inc. ... 191,068 235,940 SunOpta, Inc. (Canada)*(8).............. 2,076,272 -------------- 7,265,410 -------------- INSURANCE -- 4.2% 26,800 American Physicians Capital, Inc.*..................... 1,073,072 211,454 Amerisafe, Inc.*............ 3,269,079 216,110 AmTrust Financial Services, Inc.(8)................... 1,847,741 208,000 Assured Guaranty, Ltd. (Bermuda)................. 5,532,800 156,925 Delphi Financial Group, Inc. -- Class A........... 6,349,185 1,400 EMC Insurance Group, Inc. ..................... 47,768 3,800 FBL Financial Group, Inc. -- Class A................... 148,504 95,570 First Mercury Financial Corp.*.................... 2,247,806 4,800 FPIC Insurance Group, Inc.*(8).................. 187,056
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) INSURANCE (CONTINUED) 5,700 Horace Mann Educators Corp. .................... $ 115,140 32,600 Infinity Property & Casualty Corp. .................... 1,577,514 41,400 IPC Holdings, Ltd. (Bermuda)................. 1,302,030 1,800 James River Group, Inc.*.... 58,176 450 National Western Life Insurance Company -- Class A......................... 103,563 8,900 Ohio Casualty Corp. ........ 265,309 35,700 OneBeacon Insurance Group, Ltd. (Bermuda)*........... 999,600 127,608 Philadelphia Consolidated Holding Corp.*............ 5,686,212 108,350 Platinum Underwriters Holdings, Ltd. (Bermuda)................. 3,352,349 25,900 Presidential Life Corp. .... 568,505 54,450 Protective Life Corp. ...... 2,586,375 47,200 Safety Insurance Group, Inc. ..................... 2,393,512 110,290 Security Capital Assurance, Ltd. (Bermuda)............ 3,069,371 90,100 State Auto Financial Corp. .................... 3,129,173 53,400 United Fire & Casualty Company................... 1,882,350 133,900 Universal American Financial Corp.*.................... 2,495,896 6,700 Zenith National Insurance Corp. .................... 314,297 -------------- 50,602,383 -------------- INTERNET SERVICES -- 3.5% 165,550 aQuantive, Inc.*............ 4,082,462 88,750 CheckFree Corp.*(8)......... 3,564,200 301,530 CNET Networks, Inc.*(8)..... 2,740,908 16,670 Ctrip.com International, Ltd. (ADR) (Cayman Islands)(8)............... 1,041,542 66,960 DealerTrack Holdings, Inc.*..................... 1,969,963 4,000 Digital River, Inc.*........ 223,160 200,600 EarthLink, Inc.*............ 1,424,260 21,514 Equinix, Inc.*(8)........... 1,626,889 198,400 eResearch Technology, Inc.*(8).................. 1,335,232 116,740 j2 Global Communications, Inc.*(8).................. 3,181,165 166,659 Marchex, Inc. -- Class B*(8)..................... 2,229,897 407,500 Move, Inc.*................. 2,245,325 263,180 Online Resources Corp.*..... 2,687,068 108,200 Perficient, Inc.*........... 1,775,562 45,200 Priceline.com, Inc.*(8)..... 1,971,172 94,570 RADVision, Ltd. (Israel)*... 1,898,966
See notes to financial statements. 158 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) INTERNET SERVICES (CONTINUED) 129,000 RealNetworks, Inc.*......... $ 1,411,260 221,800 SonicWALL, Inc.*............ 1,867,556 8,400 TheStreet.com, Inc. ........ 74,760 191,200 United Online, Inc.(8)...... 2,539,136 64,140 WebEx Communications, Inc.*(8).................. 2,237,845 -------------- 42,128,328 -------------- LEISURE AND RECREATION -- 1.7% 298,460 Century Casinos, Inc.*...... 3,330,814 121,200 Dover Downs Gaming & Entertainment, Inc. ...... 1,620,444 11,800 Interstate Hotels & Resorts, Inc.*..................... 88,028 53,710 Life Time Fitness, Inc.*.... 2,605,472 107,300 Live Nation, Inc.*.......... 2,403,520 69,700 Monarch Casino & Resort, Inc.*..................... 1,664,436 44,650 Pinnacle Entertainment, Inc.*..................... 1,479,701 132,920 Scientific Games Corp. -- Class A*.................. 4,018,171 100,630 The9, Ltd. (ADR) (Cayman Islands)*(8).............. 3,242,299 -------------- 20,452,885 -------------- MACHINERY -- 1.5% 10,500 Applied Industrial Technologies, Inc. ....... 276,255 115,025 Bucyrus International, Inc. -- Class A(8)........ 5,953,694 3,800 Chart Industries, Inc.*..... 61,598 11,700 Columbus McKinnon Corp.*.... 245,934 233,204 Flow International Corp.*(8)................. 2,569,908 28,900 Intevac, Inc.*.............. 749,955 104,850 Joy Global, Inc. ........... 5,068,449 11,500 Middleby Corp.*(8).......... 1,203,705 6,000 Nordson Corp. .............. 298,980 29,290 Regal-Beloit Corp. ......... 1,538,018 -------------- 17,966,496 -------------- MANUFACTURING -- 4.2% 97,950 Acuity Brands, Inc. ........ 5,097,318 4,600 AEP Industries, Inc.*....... 245,226 81,300 Albany International Corp. -- Class A(8)....... 2,675,583 12,300 American Woodmark Corp.(8).. 514,755 58,800 AO Smith Corp. ............. 2,208,528 52,450 AptarGroup, Inc. ........... 3,096,648 1,400 AZZ, Inc.*.................. 71,680
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) MANUFACTURING (CONTINUED) 79,500 Carlisle Companies, Inc. ... $ 6,240,750 52,900 Ceradyne, Inc.*(8).......... 2,988,850 7,800 CIRCOR International, Inc. ..................... 286,962 5,200 Coherent, Inc.*............. 164,164 137,650 Deswell Industries, Inc. (Hong Kong)............... 1,569,210 5,200 EnPro Industries, Inc.*..... 172,692 152,950 FLIR Systems, Inc.*(8)...... 4,868,399 44,000 Freightcar America, Inc.(8)................... 2,439,800 47,600 Harsco Corp. ............... 3,622,360 200,000 Hexcel Corp.*(8)............ 3,482,000 24,700 Kaydon Corp. ............... 981,578 10,100 LSI Industries, Inc. ....... 200,485 98,900 Matthews International Corp. -- Class A.......... 3,891,715 56,000 PW Eagle, Inc.(8)........... 1,932,000 1,900 RBC Bearings, Inc.*......... 54,454 18,700 Rofin-Sinar Technologies, Inc.*..................... 1,130,602 108,700 The Timken Company.......... 3,171,866 -------------- 51,107,625 -------------- MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 7.9% 182,930 American Medical Systems Holdings, Inc.*........... 3,387,864 201,000 AMERIGROUP Corp.*........... 7,213,889 176,100 AMN Healthcare Services, Inc.*..................... 4,849,794 133,700 AmSurg Corp.*(8)............ 3,075,100 152,326 AngioDynamics, Inc.*........ 3,273,486 89,200 Apria Healthcare Group, Inc.*..................... 2,377,180 43,210 ArthroCare Corp.*(8)........ 1,724,943 28,300 Bruker BioSciences Corp.*... 212,533 195,500 Centene Corp.*.............. 4,803,435 7,000 Conceptus, Inc.*............ 149,030 87,600 Covance, Inc.*.............. 5,160,515 84,210 Cutera, Inc.*............... 2,273,670 15,700 DJO, Inc.*.................. 672,274 359,450 Five Star Quality Care, Inc.*(8).................. 4,007,868 54,200 Haemonetics Corp.*.......... 2,440,084 147,200 Healthspring, Inc.*......... 2,995,520 75,850 Healthways, Inc.*(8)........ 3,618,804 50,200 ICON PLC (ADR) (Ireland)*... 1,892,540 17,700 ICU Medical, Inc.*.......... 720,036 8,600 inVentiv Health, Inc.*...... 304,010 35,250 Kyphon, Inc.*(8)............ 1,424,100
See notes to financial statements. 159 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES (CONTINUED) 275,250 LeMaitre Vascular, Inc.*.... $ 1,651,500 23,600 Lincare Holdings, Inc.*..... 940,224 61,800 Luminex Corp.*.............. 784,860 29,600 Magellan Health Services, Inc.*..................... 1,279,312 5,800 MedCath Corp.*.............. 158,688 8,100 Meridian Bioscience, Inc. ..................... 198,693 133,950 Micrus Endovascular Corp.*.................... 2,555,766 25,800 Molina Healthcare, Inc.*.... 838,758 36,100 Nighthawk Radiology Holdings, Inc.*(8)........ 920,550 228,653 NovaMed, Inc.*.............. 1,730,903 80,630 NuVasive, Inc.*............. 1,862,553 441,910 Orthovita, Inc.*............ 1,604,133 82,371 PolyMedica Corp.(8)......... 3,328,612 28,500 PSS World Medical, Inc.*(8).................. 556,605 49,080 ResMed, Inc.*(8)............ 2,415,718 48,600 STERIS Corp. ............... 1,223,262 94,200 Sunrise Senior Living, Inc.*..................... 2,893,824 37,900 Techne Corp.*............... 2,101,555 7,800 The Advisory Board Company*.................. 417,612 71,550 The Cooper Companies, Inc. ..................... 3,183,975 283,570 The Spectranetics Corp.*.... 3,201,505 10,300 Universal Health Services, Inc. -- Class B........... 570,929 52,350 Vital Images, Inc.*......... 1,821,780 14,210 Vital Signs, Inc. .......... 709,363 16,000 Zoll Medical Corp.*......... 931,840 -------------- 94,459,195 -------------- METALS AND MINING -- 1.5% 110,100 AK Steel Holding Corp.*..... 1,860,690 75,900 Chaparral Steel Company..... 3,360,093 80,800 Mueller Industries, Inc. ... 2,561,360 258,050 Novelis, Inc. (Canada)...... 7,186,693 110,100 Steel Dynamics, Inc. ....... 3,572,745 -------------- 18,541,581 -------------- OFFICE EQUIPMENT, SUPPLIES, AND SERVICES -- 0.7% 80,800 Acco Brands Corp.*.......... 2,138,776 53,850 Herman Miller, Inc. ........ 1,957,986 73,800 IKON Office Solutions, Inc. ..................... 1,208,106 158,850 Knoll, Inc. ................ 3,494,700 -------------- 8,799,568 --------------
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) OIL, COAL AND GAS -- 5.7% 109,400 Aegean Marine Petroleum Network, Inc. (Marshall Islands)*................. $ 1,794,160 45,100 Alon USA Energy, Inc. ...... 1,186,581 2,900 Basic Energy Services, Inc.*..................... 71,485 135,850 Cabot Oil & Gas Corp.(8).... 8,239,302 135,600 Cal Dive International, Inc.*..................... 1,701,780 11,860 Core Laboratories NV (the Netherlands)*(8).......... 960,660 66,840 Dril-Quip, Inc.*............ 2,617,454 198,750 Encore Acquisition Company*(8)............... 4,875,338 16,900 EXCO Resources, Inc.*....... 285,779 27,300 FMC Technologies, Inc.*..... 1,682,499 22,300 Global Industries, Ltd.*.... 290,792 67,400 Grant Prideco, Inc.*........ 2,680,498 218,500 Grey Wolf, Inc.*............ 1,498,910 13,200 Harvest Natural Resources, Inc.*..................... 140,316 113,700 Headwaters, Inc.*(8)........ 2,724,252 39,000 Helix Energy Solutions Group, Inc.*(8)........... 1,223,430 4,800 MarkWest Hydrocarbon, Inc. ..................... 233,040 121,054 Oceaneering International, Inc.*..................... 4,805,844 99,060 Oil States International, Inc.*..................... 3,192,704 75,500 ONEOK, Inc. ................ 3,255,560 8,750 Patterson-UTI Energy, Inc. ..................... 203,263 7,800 Penn Virginia Corp. ........ 546,312 73,700 Range Resources Corp. ...... 2,023,802 17,400 Southwest Gas Corp. ........ 667,638 73,200 St Mary Land & Exploration Company(8)................ 2,696,688 95,180 Superior Energy Services, Inc.*..................... 3,110,482 134,100 Swift Energy Company*....... 6,009,020 75,600 TETRA Technologies, Inc.*... 1,933,848 57,400 The Houston Exploration Company*.................. 2,972,172 16,400 The Meridian Resource Corp.*.................... 50,676 107,400 Whiting Petroleum Corp.*(8)................. 5,004,840 -------------- 68,679,125 -------------- PAPER AND FOREST PRODUCTS -- 0.1% 23,100 Buckeye Technologies, Inc.*..................... 276,738 37,500 Rock-Tenn Company -- Class A......................... 1,016,625 -------------- 1,293,363 --------------
See notes to financial statements. 160 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 4.3% 143,000 Affymetrix, Inc.*(8)........ $ 3,297,580 119,400 Albany Molecular Research, Inc.*..................... 1,260,864 241,200 Alkermes, Inc.*............. 3,224,844 87,200 Bradley Pharmaceuticals, Inc.*(8).................. 1,794,576 12,600 Caraco Pharmaceutical Laboratories, Ltd.*....... 176,400 123,050 Cephalon, Inc.*(8).......... 8,663,950 228,000 Cubist Pharmaceuticals, Inc.*..................... 4,129,080 93,550 Dendreon Corp.*(8).......... 390,104 169,950 DepoMed, Inc.*(8)........... 586,328 22,400 Digene Corp.*............... 1,073,408 268,200 Enzon Pharmaceuticals, Inc.*..................... 2,282,382 47,000 Geron Corp.*(8)............. 412,660 39,800 Human Genome Sciences, Inc.*(8).................. 495,112 43,240 K-V Pharmaceutical Company -- Class A*....... 1,028,247 11,800 LifeCell Corp.*............. 284,852 9,500 Ligand Pharmaceuticals, Inc. -- Class B*.......... 104,025 448,300 Medarex, Inc.*(8)........... 6,630,357 20,462 Metabasis Therapeutics, Inc.*..................... 153,874 36,500 New River Pharmaceuticals, Inc.*(8).................. 1,996,915 61,900 Noven Pharmaceuticals, Inc.*..................... 1,575,355 34,000 Pain Therapeutics, Inc.*(8).................. 302,600 187,672 Pharmaceutical Product Development, Inc. ........ 6,046,792 62,200 Regeneron Pharmaceuticals, Inc.*..................... 1,248,354 57,100 Savient Pharmaceuticals, Inc.*..................... 640,091 69,600 Sciele Pharma, Inc.*(8)..... 1,670,400 182,400 Solexa, Inc.*............... 2,398,560 30,100 Trimeris, Inc.*(8).......... 382,571 -------------- 52,250,281 -------------- PRINTING AND PUBLISHING -- 0.4% 199,000 Bowne & Company, Inc. ...... 3,172,060 900 Consolidated Graphics, Inc.*..................... 53,163 106,650 Valassis Communications, Inc.*(8).................. 1,546,425 -------------- 4,771,648 -------------- REAL ESTATE INVESTMENT TRUSTS -- 5.5% 161,350 Acadia Realty Trust......... 4,036,977 2,400 Agree Realty Corp. ......... 82,488
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) REAL ESTATE INVESTMENT TRUSTS (CONTINUED) 31,800 Associated Estates Realty Corp. .................... $ 436,932 4,500 BNP Residential Properties, Inc. ..................... 108,675 61,800 CapitalSource, Inc.(8)...... 1,687,758 52,050 Cousins Properties, Inc. ... 1,835,804 58,300 DiamondRock Hospitality Company................... 1,049,983 120,300 Equity Inns, Inc. .......... 1,919,988 180,300 FelCor Lodging Trust, Inc. ..................... 3,937,752 62,200 Franklin Street Properties Corp. .................... 1,309,310 21,100 Getty Realty Corp. ......... 651,990 49,800 Gramercy Capital Corp. ..... 1,538,322 30,900 Highwoods Properties, Inc. ..................... 1,259,484 26,600 Home Properties, Inc. ...... 1,576,582 68,700 Innkeepers USA Trust........ 1,064,850 18,600 Investors Real Estate Trust..................... 190,836 118,400 KKR Financial Corp. ........ 3,171,936 69,200 LTC Properties, Inc. ....... 1,889,852 64,450 Maguire Properties, Inc. ... 2,578,000 42,600 Mid-America Apartment Communities, Inc. ........ 2,438,424 9,900 Mission West Properties, Inc. ..................... 129,690 81,200 National Retail Properties, Inc.(8)................... 1,863,540 105,100 NorthStar Realty Finance Corp. .................... 1,741,507 156,700 OMEGA Healthcare Investors, Inc. ..................... 2,776,724 36,600 Pennsylvania Real Estate Investment Trust.......... 1,441,308 73,450 PS Business Parks, Inc. .... 5,193,649 57,700 RAIT Investment Trust....... 1,989,496 126,150 Realty Income Corp.(8)...... 3,494,355 6,300 Resource Capital Corp. ..... 106,785 22,700 Saul Centers, Inc. ......... 1,252,813 36,700 SL Green Realty Corp. ...... 4,873,026 40,700 Sovran Self Storage, Inc. ..................... 2,331,296 6,300 Tanger Factory Outlet Centers, Inc. ............ 246,204 24,400 Taubman Centers, Inc. ...... 1,240,984 171,750 U-Store-It Trust............ 3,529,462 34,500 Washington Real Estate Investment Trust.......... 1,380,000 -------------- 66,356,782 -------------- REGISTERED INVESTMENT COMPANIES -- 0.3% 181,400 Ares Capital Corp.(8)....... 3,466,554
See notes to financial statements. 161 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) REGISTERED INVESTMENT COMPANIES (CONTINUED) 22,100 MCG Capital Corp. .......... $ 449,072 -------------- 3,915,626 -------------- RETAIL -- 1.3% 183,600 Big Lots, Inc.*(8).......... 4,208,112 11,400 Books-A-Million, Inc. ...... 258,552 176,750 Casey's General Stores, Inc. ..................... 4,162,463 155,650 Circuit City Stores, Inc. ..................... 2,954,237 130,200 EZCORP, Inc. -- Class A*.... 2,115,750 50,900 Longs Drug Stores Corp. .... 2,157,142 -------------- 15,856,256 -------------- RETAIL: RESTAURANTS -- 1.8% 10,000 Bob Evans Farms, Inc. ...... 342,200 100,950 Brinker International, Inc. ..................... 3,044,652 48,900 CEC Entertainment, Inc.*.... 1,968,225 74,400 Domino's Pizza, Inc. ....... 2,083,200 10,200 IHOP Corp. ................. 537,540 33,400 Jack in the Box, Inc.*...... 2,038,736 16,850 Panera Bread Company -- Class A*(8)............... 942,084 91,100 Papa John's International, Inc.*..................... 2,642,811 21,800 PF Chang's China Bistro, Inc.*(8).................. 836,684 85,800 RARE Hospitality International, Inc.*...... 2,825,394 171,025 Sonic Corp.*................ 4,096,048 -------------- 21,357,574 -------------- RETAIL: SUPERMARKETS -- 0.0% 21,900 Spartan Stores, Inc. ....... 458,367 -------------- SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 0.9% 98,770 Cymer, Inc.*................ 4,340,942 51,700 FEI Company*................ 1,363,329 10,472 Itron, Inc.*................ 542,868 6,800 Molecular Devices Corp.*.... 143,276 66,800 Varian, Inc.*............... 2,991,972 31,200 Woodward Governor Company... 1,238,952 -------------- 10,621,339 -------------- SEMICONDUCTORS -- 2.6% 6,200 Actel Corp.*................ 112,592 271,550 Altera Corp.*............... 5,344,104 310,550 Brooks Automation, Inc.*.... 4,471,920 101,400 Cree, Inc.*(8).............. 1,756,248 11,800 Diodes, Inc.*............... 418,664 104,100 Emulex Corp.*............... 2,030,991
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) SEMICONDUCTORS (CONTINUED) 7,100 Hittite Microwave Corp.*.... $ 229,472 640,200 Lattice Semiconductor Corp.*.................... 4,148,496 14,600 MKS Instruments, Inc.*...... 329,668 7,150 Novellus Systems, Inc.*(8).................. 246,103 211,000 Pixelworks, Inc.*........... 483,190 255,010 Silicon Image, Inc.*........ 3,243,727 137,330 Silicon Motion Technology Corp. (ADR) (Taiwan)*..... 2,179,427 371,950 Skyworks Solutions, Inc.*... 2,633,406 21,150 Teradyne, Inc.*(8).......... 316,404 75,200 Varian Semiconductor Equipment Associates, Inc.*..................... 3,423,104 -------------- 31,367,516 -------------- TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 3.4% 37,000 Anaren, Inc.*............... 657,120 95,760 Atheros Communications*(8)........ 2,041,603 57,300 Atlantic Tele-Network, Inc. ..................... 1,678,890 213,850 Avaya, Inc.*................ 2,989,623 25,100 Cbeyond, Inc.*(8)........... 767,809 96,600 Cincinnati Bell, Inc.*...... 441,462 19,200 CommScope, Inc.*(8)......... 585,216 21,500 Consolidated Communications Holdings, Inc. ........... 449,350 82,400 CT Communications, Inc. .... 1,888,608 146,000 Ditech Networks, Inc.*...... 1,010,320 79,100 Dobson Communications Corp. -- Class A*......... 688,961 109,200 FairPoint Communications, Inc. ..................... 2,069,340 15,000 General Communication, Inc. -- Class A*.......... 235,950 82,300 InterDigital Communications Corp.*(8)................. 2,761,165 30,100 Iowa Telecommunications Services, Inc. ........... 593,271 17,900 North Pittsburgh Systems, Inc. ..................... 432,106 96,260 Occam Networks, Inc.*....... 1,588,290 91,650 Oplink Communications, Inc.*..................... 1,884,324 351,250 Polycom, Inc.*.............. 10,857,137 650,400 RF Micro Devices, Inc.*..... 4,416,216 18,100 SBA Communications Corp. -- Class A*.................. 497,750 4,000 Shenandoah Telecommunications Company................... 188,040 25,000 Syniverse Holdings, Inc.*... 374,750
See notes to financial statements. 162 SPECIAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ -------------- COMMON STOCKS (CONTINUED) TELECOMMUNICATIONS EQUIPMENT AND SERVICES (CONTINUED) 114,720 Time Warner Telecom, Inc. -- Class A*(8)............... $ 2,286,370 13,100 USA Mobility, Inc. ......... 293,047 -------------- 41,676,718 -------------- TOOLS -- 0.3% 68,300 Snap-on, Inc. .............. 3,253,812 -------------- TOYS -- 0.3% 124,200 Marvel Entertainment, Inc.*(8).................. 3,342,222 -------------- TRANSPORTATION -- 0.8% 12,600 American Commercial Lines, Inc.*..................... 825,426 86,520 American Railcar Industries, Inc. ..................... 2,945,141 5,100 Atlas Air Worldwide Holdings, Inc.*........... 226,950 103,400 Genesee & Wyoming, Inc. -- Class A*.................. 2,713,216 18,400 GulfMark Offshore, Inc.*.... 688,344 2,900 Saia, Inc.*................. 67,309 93,900 Vitran Corp., Inc. -- Class A (Canada)*............... 1,631,043 -------------- 9,097,429 -------------- UTILITIES -- 2.0% 45,750 Atmos Energy Corp. ......... 1,459,883 55,700 Avista Corp. ............... 1,409,767 75,300 Black Hills Corp. .......... 2,781,582 3,400 Central Vermont Public Service Corp. ............ 80,070 5,800 El Paso Electric Company*... 141,346 2,400 Middlesex Water Company..... 44,952 32,750 New Jersey Resources Corp. .................... 1,590,995 91,200 Nicor, Inc.(8).............. 4,268,160 205,050 PNM Resources, Inc. ........ 6,377,055 61,200 Unisource Energy Corp. ..... 2,235,636 65,400 Westar Energy, Inc. ........ 1,697,784 47,450 WGL Holdings, Inc. ......... 1,545,921 -------------- 23,633,151 -------------- TOTAL COMMON STOCKS (Cost $1,029,958,303)..... 1,185,378,473 --------------
PRINCIPAL VALUE --------- -------------- SHORT TERM US TREASURY SECURITY -- 0.1% US TREASURY BILL $ 750,000 4.79%, 03/15/07(5) (Cost $742,516)........... $ 742,516 -------------- SECURITIES LENDING COLLATERAL -- 20.2% 245,040,504 Securities Lending Collateral Investment (Note 4) (Cost $245,040,504)....... 245,040,504 -------------- TOTAL SECURITIES (Cost $1,275,741,323)..... 1,431,161,493 -------------- REPURCHASE AGREEMENTS -- 2.7% 33,160,557 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $33,178,095 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 4.73%, due 08/01/35, with a value of $20,378,623, Freddie Mac Adjustable Rate Mortgage, 5.53%, due 04/01/36, with a value of $446,252 and various Small Business Administrations, 8.13%-8.88%, due 04/25/16-09/25/28, with a total value of $13,993,709) (Cost $33,160,557).............. 33,160,557 -------------- Total Investments -- 120.9% (Cost $1,308,901,880)..... 1,464,322,050 Liabilities less other assets -- (20.9)%......... (252,765,591) -------------- NET ASSETS -- 100.0%........ $1,211,556,459 ==============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $1,313,994,328. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation.......... $186,991,184 Gross unrealized depreciation.......... (36,663,462) ------------ Net unrealized appreciation............ $150,327,722 ============
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 163 SMALL-CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS -- 98.7% ADVERTISING -- 0.6% 100,400 24/7 Real Media, Inc.*...................................... $ 908,620 ------------ AEROSPACE AND DEFENSE -- 1.8% 44,900 K&F Industries Holdings, Inc.*.............................. 1,019,679 21,120 Moog, Inc. -- Class A*...................................... 806,573 22,700 Teledyne Technologies, Inc.*................................ 910,951 ------------ 2,737,203 ------------ AIRLINES -- 1.2% 22,700 Alaska Air Group, Inc.*..................................... 896,650 36,400 SkyWest, Inc. .............................................. 928,564 ------------ 1,825,214 ------------ APPAREL: MANUFACTURING AND RETAIL -- 3.3% 20,200 Carter's, Inc.*............................................. 515,100 38,800 Maidenform Brands, Inc.*.................................... 703,056 20,200 Phillips-Van Heusen Corp. .................................. 1,013,434 7,062 Shoe Carnival, Inc.*........................................ 223,159 12,600 Skechers USA, Inc. -- Class A*.............................. 419,706 32,293 The Dress Barn, Inc.*....................................... 753,396 8,200 The Men's Wearhouse, Inc. .................................. 313,732 77,500 The Wet Seal, Inc. -- Class A*.............................. 516,925 24,400 Wolverine World Wide, Inc. ................................. 695,888 ------------ 5,154,396 ------------ AUTOMOBILE: RETAIL -- 1.9% 29,500 Asbury Automotive Group, Inc. .............................. 695,020 32,000 Copart, Inc.*............................................... 960,000 18,600 Group 1 Automotive, Inc. ................................... 961,992 11,300 Sonic Automotive, Inc. ..................................... 328,152 ------------ 2,945,164 ------------ BANKS -- 3.7% 24,320 1st Source Corp. ........................................... 781,402 59,000 First BanCorp -- Puerto Rico................................ 562,270 2,771 First Citizens Bancshares, Inc. -- Class A.................. 561,515 12,300 Greene County Bancshares, Inc. ............................. 488,679 34,400 Hanmi Financial Corp. ...................................... 775,032 23,300 Prosperity Bancshares, Inc. ................................ 804,083 26,500 Sun Bancorp, Inc. -- New Jersey*............................ 558,355 21,000 Umpqua Holdings Corp. ...................................... 618,030 17,200 United Community Banks, Inc. -- Georgia..................... 555,904 ------------ 5,705,270 ------------ BROADCAST SERVICES/MEDIA -- 0.5% 43,300 Cox Radio, Inc. -- Class A*................................. 705,790 ------------ BUSINESS SERVICES AND SUPPLIES -- 1.9% 16,100 CRA International, Inc.*.................................... 843,640 22,100 CSG Systems International, Inc.*............................ 590,733
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) BUSINESS SERVICES AND SUPPLIES (CONTINUED) 31,000 FTI Consulting, Inc.*....................................... $ 864,590 53,012 The Standard Register Company............................... 636,144 ------------ 2,935,107 ------------ CHEMICALS -- 1.8% 4,300 Albemarle Corp. ............................................ 308,740 32,700 HB Fuller Company........................................... 844,314 39,600 Sensient Technologies Corp. ................................ 974,160 24,100 Spartech Corp. ............................................. 631,902 ------------ 2,759,116 ------------ COLLECTIBLES -- 0.4% 19,900 Sotheby's................................................... 617,298 ------------ COMMERCIAL SERVICES -- 1.3% 130,400 CBIZ, Inc.*................................................. 908,888 25,400 Steiner Leisure, Ltd. (Bahama Islands)*..................... 1,155,700 ------------ 2,064,588 ------------ COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 12.2% 95,976 Actuate Corp.*.............................................. 570,097 31,300 Altiris, Inc.*.............................................. 794,394 21,200 ANSYS, Inc.*................................................ 921,988 65,132 Aspen Technology, Inc.*..................................... 717,755 28,400 Avocent Corp.*.............................................. 961,340 28,087 Blackbaud, Inc. ............................................ 730,262 57,736 Captaris, Inc.*............................................. 448,609 29,600 COMSYS IT Partners, Inc.*................................... 598,216 63,600 Digi International, Inc.*................................... 877,044 59,800 Epicor Software Corp.*...................................... 807,898 20,800 Hyperion Solutions Corp.*................................... 747,552 48,100 Insight Enterprises, Inc.*.................................. 907,647 72,000 Interwoven, Inc.*........................................... 1,056,240 13,000 Komag, Inc.*................................................ 492,440 18,900 Kronos, Inc.*............................................... 694,386 13,300 Manhattan Associates, Inc.*................................. 400,064 57,400 Mentor Graphics Corp.*...................................... 1,034,922 69,100 Nuance Communications, Inc.*(8)............................. 791,886 60,200 Omnicell, Inc.*............................................. 1,121,525 15,300 Open Text Corp. ............................................ 310,590 40,700 OPNET Technologies, Inc.*................................... 588,115 52,500 Quest Software, Inc.*....................................... 769,125 81,000 Radiant Systems, Inc.*...................................... 845,640 23,786 The Ultimate Software Group, Inc.*.......................... 553,262 24,800 THQ, Inc.*(8)............................................... 806,496 27,400 Xyratex, Ltd. (Bermuda)*.................................... 591,292 ------------ 19,138,785 ------------
See notes to financial statements. 164 SMALL-CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) CONSTRUCTION SERVICES AND SUPPLIES -- 0.9% 32,800 Interline Brands, Inc.*..................................... $ 737,016 10,700 NCI Building Systems, Inc.*................................. 553,725 2,206 The Genlyte Group, Inc.*.................................... 172,311 ------------ 1,463,052 ------------ CONSUMER GOODS AND SERVICES -- 2.1% 31,300 Fossil, Inc.*............................................... 706,754 27,000 Jarden Corp.*(8)............................................ 939,330 11,300 NBTY, Inc.*................................................. 469,741 70,100 Prestige Brands Holdings, Inc.*............................. 912,702 13,200 Select Comfort Corp.*(8).................................... 229,548 ------------ 3,258,075 ------------ CORRECTIONAL FACILITIES -- 0.4% 13,450 Corrections Corp. of America*............................... 608,344 ------------ DISTRIBUTION -- 0.9% 86,900 Bell Microproducts, Inc.*................................... 612,645 16,500 United Stationers, Inc.*.................................... 770,385 ------------ 1,383,030 ------------ ELECTRONICS -- 2.3% 81,318 Aeroflex, Inc.*............................................. 953,047 60,330 CTS Corp. .................................................. 947,181 82,900 Methode Electronics, Inc. .................................. 897,807 32,300 Technitrol, Inc. ........................................... 771,647 ------------ 3,569,682 ------------ ENERGY SERVICES -- 0.5% 52,600 EnerSys*.................................................... 841,600 ------------ ENVIRONMENTAL WASTE MANAGEMENT AND RECYCLING SERVICES -- 0.4% 16,400 Metal Management, Inc. ..................................... 620,740 ------------ EQUIPMENT RENTAL AND LEASING -- 0.4% 19,100 Aaron Rents, Inc. .......................................... 549,698 ------------ FINANCIAL SERVICES -- 0.6% 36,200 Interactive Data Corp. ..................................... 870,248 ------------ FOOD AND BEVERAGE -- 1.8% 32,800 M&F Worldwide Corp.*........................................ 828,528 16,600 Ralcorp Holdings, Inc.*..................................... 844,774 36,500 Sanderson Farms, Inc.(8).................................... 1,105,585 ------------ 2,778,887 ------------ INSURANCE -- 6.9% 19,200 Delphi Financial Group, Inc. -- Class A..................... 776,832 15,300 FBL Financial Group, Inc. -- Class A........................ 597,924 18,400 FPIC Insurance Group, Inc.*................................. 717,048 26,500 Harleysville Group, Inc. ................................... 922,730 24,900 Infinity Property & Casualty Corp. ......................... 1,204,911
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) INSURANCE (CONTINUED) 26,200 IPC Holdings, Ltd. (Bermuda)................................ $ 823,990 21,300 Ohio Casualty Corp. ........................................ 634,953 15,000 ProAssurance Corp.*......................................... 748,800 17,800 Safety Insurance Group, Inc. ............................... 902,638 12,575 Selective Insurance Group, Inc. ............................ 720,422 24,400 The Commerce Group, Inc. ................................... 725,900 17,400 Triad Guaranty, Inc.*(8).................................... 954,738 19,800 Zenith National Insurance Corp. ............................ 928,818 ------------ 10,659,704 ------------ INTERNET SERVICES -- 4.9% 50,059 Harris Interactive, Inc.*................................... 252,297 58,247 LivePerson, Inc.*........................................... 304,632 38,500 NETGEAR, Inc.*.............................................. 1,010,625 45,900 Packeteer, Inc.*............................................ 624,240 24,100 Priceline.com, Inc.*(8)..................................... 1,051,001 47,600 RADVision, Ltd. (Israel)*................................... 955,808 106,400 SonicWALL, Inc.*............................................ 895,888 75,300 TIBCO Software, Inc.*....................................... 710,832 52,600 Vignette Corp.*............................................. 897,882 24,600 WebEx Communications, Inc.*(8).............................. 858,294 ------------ 7,561,499 ------------ LEISURE AND RECREATION -- 0.9% 26,900 Ameristar Casinos, Inc. .................................... 826,906 42,800 Dover Downs Gaming & Entertainment, Inc. ................... 572,236 ------------ 1,399,142 ------------ MACHINERY -- 2.5% 38,400 Columbus McKinnon Corp.*.................................... 807,168 59,200 Flow International Corp.*(8)................................ 652,384 18,700 Gardner Denver, Inc.*....................................... 697,697 18,700 Regal-Beloit Corp. ......................................... 981,937 27,518 Tennant Company............................................. 798,022 ------------ 3,937,208 ------------ MANUFACTURING -- 4.2% 10,000 Ameron International Corp. ................................. 763,700 15,700 AptarGroup, Inc. ........................................... 926,928 39,060 Barnes Group, Inc. ......................................... 849,555 24,900 EnPro Industries, Inc.*..................................... 826,929 26,700 FLIR Systems, Inc.*(8)...................................... 849,861 19,800 Matthews International Corp. -- Class A..................... 779,130 46,700 Mueller Water Products, Inc. -- Class A..................... 694,429 26,400 RBC Bearings, Inc.*......................................... 756,624 ------------ 6,447,156 ------------
See notes to financial statements. 165 SMALL-CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 8.7% 31,300 Allscripts Healthcare Solutions, Inc.*(8)................... $ 844,787 17,066 Amedisys, Inc.*(8).......................................... 560,959 34,600 Aspect Medical Systems, Inc.*............................... 650,826 52,793 Bruker BioSciences Corp.*................................... 396,475 32,500 Cross Country Healthcare, Inc.*............................. 709,150 3,158 Emergency Medical Services LP -- Class A*................... 66,255 54,400 Five Star Quality Care, Inc.*(8)............................ 606,560 15,210 Genesis HealthCare Corp.*................................... 718,368 29,100 Healthcare Services Group, Inc. ............................ 842,736 28,400 Hologic, Inc.*.............................................. 1,342,752 19,500 Illumina, Inc.*(8).......................................... 766,545 23,100 inVentiv Health, Inc.*...................................... 816,585 21,200 LHC Group, Inc.*............................................ 604,412 14,900 LifePoint Hospitals, Inc.*.................................. 502,130 26,800 Matria Healthcare, Inc.*(8)................................. 769,964 72,800 Natus Medical, Inc.*........................................ 1,209,208 60,494 Phase Forward, Inc.*........................................ 906,200 62,243 Third Wave Technologies*.................................... 299,389 17,700 West Pharmaceutical Services, Inc........................... 906,771 ------------ 13,520,072 ------------ METALS AND MINING -- 2.2% 28,200 Brush Engineered Materials, Inc.*........................... 952,314 9,000 Carpenter Technology Corp. ................................. 922,680 17,600 Chaparral Steel Company..................................... 779,152 113,100 Northgate Minerals Corp. (Canada)*.......................... 393,588 31,600 Stillwater Mining Company*.................................. 394,684 ------------ 3,442,418 ------------ OFFICE EQUIPMENT, SUPPLIES, AND SERVICES -- 0.5% 28,600 Ennis, Inc. ................................................ 699,556 ------------ OIL, COAL AND GAS -- 4.4% 20,100 Alon USA Energy, Inc. ...................................... 528,831 25,900 Bill Barrett Corp.*(8)...................................... 704,739 23,200 Comstock Resources, Inc.*................................... 720,592 5,400 Core Laboratories NV (the Netherlands)*..................... 437,400 25,700 Headwaters, Inc.*........................................... 615,772 95,100 Parker Drilling Company*.................................... 776,967 58,200 PetroQuest Energy, Inc.*.................................... 741,468 18,300 Superior Energy Services, Inc.*............................. 598,044 13,000 Swift Energy Company*....................................... 582,530 17,900 TETRA Technologies, Inc.*................................... 457,882 13,490 World Fuel Services Corp. .................................. 599,765 ------------ 6,763,990 ------------ PAPER AND FOREST PRODUCTS -- 0.5% 64,400 Buckeye Technologies, Inc.*................................. 771,512 ------------
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 6.8% 87,900 Albany Molecular Research, Inc.*............................ $ 928,224 66,300 Arena Pharmaceuticals, Inc.*(8)............................. 855,933 26,681 Bradley Pharmaceuticals, Inc.*(8)........................... 549,095 69,200 Dynavax Technologies Corp.*(8).............................. 635,256 18,900 New River Pharmaceuticals, Inc.*(8)......................... 1,034,019 16,000 PAREXEL International Corp.*................................ 463,520 59,200 PDL BioPharma, Inc.*........................................ 1,192,288 43,100 Pharmanet Development Group, Inc.*.......................... 951,217 33,400 Pharmion Corp.*............................................. 859,716 47,900 Sciele Pharma, Inc.*........................................ 1,149,600 17,500 United Therapeutics Corp.*.................................. 951,475 64,800 ViroPharma, Inc.*........................................... 948,672 ------------ 10,519,015 ------------ PRINTING AND PUBLISHING -- 0.5% 12,251 Consolidated Graphics, Inc.*................................ 723,667 ------------ REAL ESTATE INVESTMENT TRUSTS -- 0.3% 21,800 Extra Space Storage, Inc. .................................. 398,068 ------------ RETAIL -- 0.6% 22,700 Longs Drug Stores Corp. .................................... 962,026 ------------ RETAIL: RESTAURANTS -- 1.0% 16,300 Bob Evans Farms, Inc. ...................................... 557,786 10,900 Jack in the Box, Inc.*...................................... 665,336 12,086 RARE Hospitality International, Inc.*....................... 397,992 ------------ 1,621,114 ------------ RETAIL: SUPERMARKETS -- 0.9% 21,400 Ingles Markets, Inc. -- Class A............................. 637,506 37,600 Spartan Stores, Inc. ....................................... 786,968 ------------ 1,424,474 ------------ SCIENTIFIC AND TECHNICAL INSTRUMENTS -- 1.4% 46,990 Input/Output, Inc.*(8)...................................... 640,474 41,100 Newport Corp.*.............................................. 861,045 14,400 Trimble Navigation, Ltd.*................................... 730,512 ------------ 2,232,031 ------------ SECURITY SERVICES -- 0.7% 39,000 Macrovision Corp.*.......................................... 1,102,140 ------------ SEMICONDUCTORS -- 4.6% 66,300 ANADIGICS, Inc.*(8)......................................... 587,418 50,000 Brooks Automation, Inc.*.................................... 720,000 28,700 Emulex Corp.*............................................... 559,937 45,300 Kopin Corp.*................................................ 161,721 70,836 MIPS Technologies, Inc.*.................................... 587,939 57,360 O2Micro International, Ltd. (ADR) (Cayman Islands)*......... 490,428 52,200 Photronics, Inc.*........................................... 852,948 70,200 Silicon Image, Inc.*........................................ 892,944
See notes to financial statements. 166 SMALL-CAP GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE ------ ------------ COMMON STOCKS (CONTINUED) SEMICONDUCTORS (CONTINUED) 24,900 Standard Microsystems Corp.*................................ $ 696,702 23,900 Tessera Technologies, Inc.*................................. 964,126 146,000 TriQuint Semiconductor, Inc.*............................... 657,000 ------------ 7,171,163 ------------ TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 3.5% 24,400 ADTRAN, Inc. ............................................... 553,880 25,418 General Cable Corp.*........................................ 1,111,021 25,200 General Communication, Inc. -- Class A*..................... 396,396 28,900 NICE Systems, Ltd. (ADR) (Israel)*.......................... 889,542 41,600 Oplink Communications, Inc.*................................ 855,296 53,268 Radyne Corp.*............................................... 572,098 70,400 Sirenza Microdevices, Inc.*(8).............................. 553,344 40,177 Tollgrade Communications, Inc*.............................. 424,671 ------------ 5,356,248 ------------ TRANSPORTATION -- 1.8% 10,100 GulfMark Offshore, Inc.*.................................... 377,841 16,500 Hornbeck Offshore Services, Inc.*........................... 589,050 33,700 Hub Group, Inc. -- Class A*................................. 928,435 31,800 Kansas City Southern*....................................... 921,564 ------------ 2,816,890 ------------ TOTAL COMMON STOCKS (Cost $138,269,022)..................... 152,969,000 ------------ PRINCIPAL VALUE --------- ------------ SECURITIES LENDING COLLATERAL -- 9.3% $14,398,521 Securities Lending Collateral Investment (Note 4) (Cost $14,398,521).............................................. $ 14,398,521 ------------ TOTAL SECURITIES (Cost $152,667,543)....................................... 167,367,521 ------------ REPURCHASE AGREEMENTS -- 0.4% 618,612 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $618,939 (Collateralized by Small Business Administration, 8.63%, due 05/25/14, with a value of $649,543) (Cost $618,612)... 618,612 ------------ Total Investments -- 108.4% (Cost $153,286,155)....................................... 167,986,133 Liabilities less other assets -- (8.4)%..................... (12,983,129) ------------ NET ASSETS -- 100.0%........................................ $155,003,004 ============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $153,819,825. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation........... $16,485,664 Gross unrealized depreciation........... (2,319,356) ----------- Net unrealized appreciation............. $14,166,308 ===========
- --------------- See summary of footnotes and abbreviations to portfolios. See notes to financial statements. 167 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2006
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS -- 97.9% AEROSPACE AND DEFENSE -- 0.1% 176,662 Rolls-Royce Group PLC....................................... $ 1,548,786 BRI 1,227 Safran SA................................................... 28,474 FRA -------------- 1,577,260 -------------- AGRICULTURE -- 1.1% 11,951,000 Chaoda Modern Agriculture (Holdings), Ltd. ................. 7,697,634 CAY 51,600 Potash Corp. of Saskatchewan, Inc.(8)....................... 7,403,568 CDA 47,803 Syngenta AG................................................. 8,893,673 SWI -------------- 23,994,875 -------------- AIRLINES -- 1.3% 3,537,400 Qantas Airways, Ltd. ....................................... 14,575,528 AUS 148,500 Ryanair Holdings PLC (ADR)*(8).............................. 12,102,750 IRE 103,500 Singapore Airlines, Ltd. ................................... 1,180,929 SIN -------------- 27,859,207 -------------- APPAREL: MANUFACTURING AND RETAIL -- 0.3% 288,800 Benetton Group SpA.......................................... 5,512,592 ITA -------------- AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS -- 6.8% 127,500 Alpine Electronics, Inc. ................................... 1,902,777 JPN 648,000 Calsonic Kansei Corp. ...................................... 3,789,824 JPN 244,600 DaimlerChrysler AG.......................................... 15,110,982 GER 1,702,000 Fuji Heavy Industries, Ltd.(8).............................. 8,738,473 JPN 10,200 Georg Fischer AG............................................ 6,608,863 SWI 1,726,700 GKN PLC..................................................... 9,398,843 BRI 351,600 Honda Motor Company, Ltd. .................................. 13,886,139 JPN 1,442,800 Nissan Motor Company, Ltd. ................................. 17,373,492 JPN 329,100 Suzuki Motor Corp.(8)....................................... 9,291,845 JPN 695,900 Toyota Motor Corp. ......................................... 46,547,322 JPN 104,788 Valeo SA*................................................... 4,361,400 FRA 51,600 Volkswagen AG(8)............................................ 5,850,361 GER -------------- 142,860,321 -------------- BANKS -- 18.1% 369,060 ABN AMRO Holding NV......................................... 11,862,776 NET 279,900 Banco Bilbao Vizcaya Argentaria SA.......................... 6,739,352 SPA 927,600 Banco Comercial Portugues SA -- Class R................................... 3,428,539 POR
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 1,009,800 Banco Santander Central Hispano SA.......................... $ 18,848,429 SPA 2,469,900 Barclays PLC................................................ 35,303,269 BRI 312,600 BNP Paribas SA.............................................. 34,105,327 FRA 266,800 Canadian Imperial Bank of Commerce(8)....................... 22,489,765 CDA 427,900 Commonwealth Bank of Australia.............................. 16,712,507 AUS 357,700 Credit Suisse Group......................................... 25,025,790 SWI 169,200 Danske Bank A/S............................................. 7,518,269 DEN 19,400 Deutsche Bank AG............................................ 2,595,213 GER 83,901 Dexia....................................................... 2,298,135 BEL 250,800 DNB NOR ASA................................................. 3,559,758 NOR 139,529 Erste Bank der oesterreichischen Sparkassen AG.............. 10,701,163 AST 89,200 ForeningsSparbanken AB...................................... 3,237,856 SWE 367,000 Fortis...................................................... 15,657,694 BEL 1,107,700 HBOS PLC.................................................... 24,551,683 BRI 253,800 Laurentian Bank of Canada(8)................................ 6,583,587 CDA 2,574,600 Lloyds TSB Group PLC........................................ 28,809,697 BRI 614 Mitsubishi UFJ Financial Group, Inc. ....................... 7,584,387 JPN 231,600 National Bank of Canada(8).................................. 13,075,971 CDA 1,472,300 Nordea Bank AB.............................................. 22,688,984 SWE 462,300 SanPaolo IMI SpA............................................ 10,740,560 ITA 153,700 Societe Generale............................................ 26,091,871 FRA 97,236 Standard Chartered PLC...................................... 2,840,590 BRI 377 Sumitomo Mitsui Financial Group, Inc. ...................... 3,864,880 JPN 225,061 UBS AG...................................................... 13,677,281 SWI -------------- 380,593,333 -------------- BROADCAST SERVICES/MEDIA -- 0.7% 334,200 Rogers Communications, Inc. -- Class B...................... 9,944,466 CDA 143,800 Vivendi Universal SA........................................ 5,620,665 FRA -------------- 15,565,131 -------------- BUSINESS SERVICES AND SUPPLIES -- 0.3% 1,220,000 Marubeni Corp. ............................................. 6,192,009 JPN -------------- CHEMICALS -- 1.9% 45,100 Akzo Nobel NV............................................... 2,751,078 NET 6,140 Arkema*..................................................... 315,532 FRA
See notes to financial statements. 168 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) CHEMICALS (CONTINUED) 56,300 Ciba Specialty Chemicals AG................................. $ 3,744,863 SWI 264,800 Methanex Corp.(8)........................................... 7,243,596 CDA 1,102,800 Mitsubishi Chemical Holdings Corp. ......................... 6,950,128 JPN 171,800 Nova Chemicals Corp.(8)..................................... 4,787,978 CDA 597,500 Sumitomo Bakelite Company, Ltd.(8).......................... 4,127,095 JPN 136,949 Symrise AG*................................................. 3,525,201 GER 56,279 Wacker Chemie AG*........................................... 7,323,616 GER -------------- 40,769,087 -------------- COMPUTER EQUIPMENT, SOFTWARE AND SERVICES -- 1.5% 1,137,600 CGI Group, Inc.*............................................ 7,930,959 CDA 771,656 Logitech International SA*.................................. 22,259,917 SWI 66,900 Open Text Corp.*............................................ 1,372,249 CDA -------------- 31,563,125 -------------- CONSTRUCTION SERVICES AND SUPPLIES -- 2.1% 353,700 Barratt Developments PLC.................................... 8,552,926 BRI 8,800 Cementos Portland Valderrivas SA............................ 1,150,028 SPA 15,600 Ciments Francais SA......................................... 2,996,249 FRA 139,900 Compagnie de Saint-Gobain................................... 11,754,563 FRA 644,700 George Wimpey PLC........................................... 7,050,072 BRI 367,700 Hanson PLC.................................................. 5,547,266 BRI 43,500 Lafarge SA.................................................. 6,471,479 FRA 91,000 Maeda Road Construction Company, Ltd. ...................... 659,913 JPN -------------- 44,182,496 -------------- CONSUMER GOODS AND SERVICES -- 2.8% 302,100 Electrolux AB -- Series B(8)................................ 6,045,574 SWE 129,600 Husqvarna AB -- Class B*.................................... 2,025,606 SWE 3,769 Japan Tobacco, Inc. ........................................ 18,210,790 JPN 273,641 Reckitt Benckiser PLC....................................... 12,505,317 BRI 191,119 Swatch Group AG............................................. 8,548,203 SWI 621,600 Swedish Match AB............................................ 11,622,171 SWE -------------- 58,957,661 -------------- DIVERSIFIED OPERATIONS AND SERVICES -- 1.3% 189,300 BASF AG..................................................... 18,454,042 GER 376,899 Brambles, Ltd.*............................................. 3,816,992 AUS 334,000 Sumitomo Corp. ............................................. 4,998,563 JPN -------------- 27,269,597 --------------
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) ELECTRONICS -- 2.5% 2,020,800 Hon Hai Precision Industry Company, Ltd. ................... $ 14,418,782 TWN 209,000 Hosiden Corp. .............................................. 2,251,485 JPN 512,175 Koninklijke (Royal) Philips Electronics NV.................. 19,316,080 NET 11,571 Samsung Electronics Company, Ltd. .......................... 7,626,906 KOR 226,000 Sharp Corp. ................................................ 3,893,114 JPN 810,100 Toshiba Tec Corp. .......................................... 4,172,861 JPN -------------- 51,679,228 -------------- ENERGY SERVICES -- 0.8% 686,298 ABB, Ltd. .................................................. 12,306,616 SWI 90,100 Vestas Wind Systems A/S*.................................... 3,808,132 DEN -------------- 16,114,748 -------------- ENGINEERING -- 0.3% 241,113 SNC-Lavalin Group, Inc. .................................... 6,506,733 CDA -------------- FINANCIAL SERVICES -- 6.2% 535,600 Alliance & Leicester PLC.................................... 11,934,261 BRI 983,100 Bradford & Bingley PLC...................................... 9,051,888 BRI 711,000 Daiwa Securities Group, Inc................................. 7,976,009 JPN 98,579 Deutsche Boerse AG.......................................... 18,142,614 GER 226,900 Hitachi Capital Corp. ...................................... 4,328,079 JPN 319,800 Irish Life & Permanent PLC.................................. 8,822,977 IRE 52,351 KBC GROEP NV................................................ 6,419,942 BEL 1,339,569 Man Group PLC............................................... 13,711,085 BRI 51,800 Muenchener Rueckversicherungs-Gesellschaft AG............... 8,917,936 GER 1,053,200 Nomura Holdings, Inc. ...................................... 19,868,358 JPN 26,200 Orix Corp. ................................................. 7,584,471 JPN 132,700 Promise Company, Ltd. ...................................... 4,125,793 JPN 38,300 Sanyo Shinpan Finance Company, Ltd. ........................ 954,241 JPN 119,100 Sun Life Financial, Inc.(8)................................. 5,037,098 CDA 98,300 Takefuji Corp. ............................................. 3,890,534 JPN -------------- 130,765,286 -------------- FOOD AND BEVERAGE -- 2.4% 585,700 Asahi Breweries, Ltd. ...................................... 9,375,728 JPN 73,300 Fomento Economico Mexicano SA de CV (ADR)................... 8,485,208 MEX
See notes to financial statements. 169 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) FOOD AND BEVERAGE (CONTINUED) 29,350 Nestle SA................................................... $ 10,429,668 SWI 1,537,300 Northern Foods PLC.......................................... 3,454,013 BRI 224,207 Royal Numico NV............................................. 12,060,551 NET 389,900 Tate & Lyle PLC............................................. 5,866,915 BRI -------------- 49,672,083 -------------- INSURANCE -- 5.9% 119,761 Admiral Group PLC........................................... 2,577,068 BRI 48,746 Allianz SE.................................................. 9,958,366 GER 874,200 Aviva PLC................................................... 14,070,039 BRI 91,100 CNP Assurances.............................................. 10,173,705 FRA 1,939,300 Friends Provident PLC....................................... 8,239,814 BRI 516,000 ING Groep NV................................................ 22,879,687 NET 1,003,300 Milano Assicurazioni SpA.................................... 8,178,208 ITA 1,472,000 Old Mutual PLC.............................................. 5,022,192 BRI 1,467,700 Promina Group, Ltd. ........................................ 8,017,021 AUS 5,458,900 Royal & Sun Alliance Insurance Group PLC.................... 16,300,002 BRI 94,700 Swiss Re.................................................... 8,051,637 SWI 36,300 Zurich Financial Services AG................................ 9,771,358 SWI -------------- 123,239,097 -------------- INTERNET SERVICES -- 0.9% 26,200 Baidu.com, Inc. (ADR)*(8)................................... 2,953,264 CAY 70,381 Iliad SA(8)................................................. 6,113,244 FRA 20,263 Rakuten, Inc.*.............................................. 9,449,993 JPN -------------- 18,516,501 -------------- LEISURE AND RECREATION -- 1.1% 321,941 Aristocrat Leisure, Ltd. ................................... 4,040,574 AUS 2,583,287 EMI Group PLC............................................... 13,403,901 BRI 255,300 TUI AG(8)................................................... 5,102,313 GER -------------- 22,546,788 -------------- MACHINERY -- 1.2% 191,600 Komatsu, Ltd. .............................................. 3,888,190 JPN 122,800 MAN AG...................................................... 11,097,512 GER 103,500 Mori Seiki Company, Ltd.(8)................................. 2,317,781 JPN 15,900 Rieter Holding AG........................................... 8,318,629 SWI -------------- 25,622,112 -------------- MANUFACTURING -- 1.0% 82,432 Alstom*..................................................... 11,175,234 FRA 704,000 Kurabo Industries, Ltd. .................................... 1,827,957 JPN
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) MANUFACTURING (CONTINUED) 655,000 Nippon Paint Company, Ltd................................... $ 3,434,478 JPN 1,155,936 Tomkins PLC................................................. 5,562,116 BRI -------------- 21,999,785 -------------- MEDICAL EQUIPMENT, SUPPLIES, AND SERVICES -- 0.7% 34,320 Essilor International SA CIE Generale D'Optique............. 3,690,020 FRA 36,810 Nobel Biocare Holding AG.................................... 10,882,891 SWI -------------- 14,572,911 -------------- METALS AND MINING -- 6.3% 93,400 Alcan, Inc. ................................................ 4,547,659 CDA 1,257,100 BlueScope Steel, Ltd. ...................................... 8,553,556 AUS 196,900 Cameco Corp.(8)............................................. 7,964,605 CDA 285,100 Companhia Vale do Rio Doce (ADR)............................ 8,478,874 BRA 218,100 JFE Holdings, Inc. ......................................... 11,234,427 JPN 37,300 Norddeutsche Affinerie AG................................... 1,046,305 GER 331,500 Rautaruukki Oyj............................................. 13,193,537 FIN 76,700 Russel Metals, Inc. ........................................ 1,756,112 CDA 99,475 Salzgitter AG............................................... 13,006,451 GER 308,300 Sims Group, Ltd. ........................................... 4,920,671 AUS 341,100 ThyssenKrupp AG(8).......................................... 16,070,102 GER 72,660 Vallourec SA................................................ 21,130,037 FRA 165,600 voestalpine AG.............................................. 9,349,534 AST 203,469 Xstrata PLC................................................. 10,159,004 BRI -------------- 131,410,874 -------------- OFFICE EQUIPMENT, SUPPLIES, AND SERVICES -- 0.5% 95,000 Brother Industries, Ltd. ................................... 1,286,038 JPN 315,000 Ricoh Company, Ltd. ........................................ 6,432,083 JPN 3,314,500 TPV Technology, Ltd. ....................................... 2,096,517 HNG -------------- 9,814,638 -------------- OIL, COAL AND GAS -- 7.0% 1,176,600 BP PLC...................................................... 13,073,967 BRI 988,200 Cosmo Oil Company, Ltd.(8).................................. 4,019,065 JPN 635,400 Eni SpA..................................................... 21,371,599 ITA 2,063,000 Nippon Oil Corp. ........................................... 13,798,983 JPN 227,500 Norsk Hydro ASA............................................. 7,060,118 NOR 173,100 Oao Gazprom (ADR)........................................... 8,045,688 SUR 1,754,000 Osaka Gas Company, Ltd. .................................... 6,529,322 JPN 287,000 Repsol YPF SA............................................... 9,925,984 SPA 1,290,100 Royal Dutch Shell PLC -- Class B............................ 45,215,684 BRI
See notes to financial statements. 170 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) OIL, COAL AND GAS (CONTINUED) 64,900 Showa Shell Sekiyu KK....................................... $ 726,413 JPN 245,600 Total SA.................................................... 17,717,764 FRA -------------- 147,484,587 -------------- PAPER AND FOREST PRODUCTS -- 0.5% 379,000 Hokuetsu Paper Mills, Ltd.(8)............................... 2,140,145 JPN 301,800 Norbord, Inc. .............................................. 2,305,911 CDA 1,263,000 Oji Paper Company, Ltd. .................................... 6,707,416 JPN -------------- 11,153,472 -------------- PHARMACEUTICALS/RESEARCH AND DEVELOPMENT -- 2.2% 338,900 Biovail Corp.(8)............................................ 7,149,115 CDA 131,200 Daiichi Sanyko Company, Ltd. ............................... 4,101,206 JPN 216,100 Eisai Company, Ltd. ........................................ 11,875,921 JPN 528,100 Elan Corp. PLC (ADR)*(8).................................... 7,789,475 IRE 173,800 GlaxoSmithKline PLC......................................... 4,573,637 BRI 476,000 Tanabe Seiyaku Company, Ltd. ............................... 6,219,739 JPN 56,725 UCB SA(8)................................................... 3,890,007 BEL -------------- 45,599,100 -------------- PRINTING AND PUBLISHING -- 0.5% 505,300 Quebecor World, Inc. ....................................... 5,849,633 CDA 439,000 Toppan Printing Company, Ltd. .............................. 4,847,242 JPN -------------- 10,696,875 -------------- REAL ESTATE DEVELOPMENT AND SERVICES -- 2.0% 249,443 British Land Company PLC.................................... 8,371,337 BRI 7,094,000 Shun Tak Holdings, Ltd. .................................... 10,853,091 HNG 356,000 Sumitomo Realty & Development Company, Ltd. ................ 11,427,419 JPN 49,441 Unibail..................................................... 12,080,476 FRA -------------- 42,732,323 -------------- RETAIL -- 2.7% 853,725 Boots Group PLC............................................. 13,999,595 BRI 1,884,058 Carphone Warehouse PLC...................................... 11,583,415 BRI 1,918,071 Debenhams PLC............................................... 7,126,219 BRI 1,912,500 Dixons Group PLC............................................ 7,171,053 BRI 590,900 JJB Sports PLC.............................................. 2,721,801 BRI
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) RETAIL (CONTINUED) 1,791,719 Kesa Electricals PLC........................................ $ 11,901,520 BRI 10,300 Valora Holding AG........................................... 2,829,647 SWI -------------- 57,333,250 -------------- RETAIL: RESTAURANTS -- 0.1% 112,200 Plenus Company, Ltd. ....................................... 2,324,045 JPN -------------- RETAIL: SUPERMARKETS -- 1.1% 2,931,020 Tesco PLC................................................... 23,214,001 BRI -------------- SEMICONDUCTORS -- 1.5% 3,372,061 ARM Holdings PLC............................................ 8,302,638 BRI 444,657 ASML Holding NV*............................................ 11,058,505 NET 222,700 Elpida Memory, Inc.*........................................ 12,238,629 JPN -------------- 31,599,772 -------------- TELECOMMUNICATIONS EQUIPMENT AND SERVICES -- 5.7% 329,600 America Movil SA de CV -- Series L (ADR).................... 14,904,512 MEX 3,064,800 BT Group PLC................................................ 18,092,648 BRI 277,800 Deutsche Telekom AG......................................... 5,075,265 GER 159,600 Elcoteq Network Corp. -- Class A............................ 2,060,450 FIN 1,765,000 MobileOne, Ltd. ............................................ 2,474,165 SIN 2,600 Nippon Telegraph and Telephone Corp. ....................... 12,802,823 JPN 373,400 Nokia Oyj (ADR)............................................. 7,587,488 FIN 8,407 NTT DoCoMo, Inc. ........................................... 13,281,089 JPN 187,500 Research In Motion, Ltd.*................................... 23,958,751 CDA 20,800 Swisscom AG................................................. 7,873,615 SWI 270,300 Telenor ASA................................................. 5,082,864 NOR 1,646,500 Vodafone Group PLC.......................................... 4,561,744 BRI 395,600 VTech Holdings, Ltd. ....................................... 2,441,253 BER -------------- 120,196,667 -------------- TOYS -- 1.0% 78,300 Nintendo Company, Ltd. ..................................... 20,330,826 JPN -------------- TRANSPORTATION -- 0.8% 2,535,000 Neptune Orient Lines, Ltd................................... 3,454,377 SIN 1,367,100 Orient Overseas International, Ltd. ........................ 8,700,031 BER 286,731 Toll Holdings, Ltd. ........................................ 4,135,069 AUS -------------- 16,289,477 -------------- UTILITIES -- 4.7% 95,900 ATCO, Ltd. -- Class I....................................... 4,138,959 CDA 118,900 Chubu Electric Power Company, Inc. ......................... 3,556,859 JPN 349,857 Endesa SA................................................... 16,547,323 SPA
See notes to financial statements. 171 INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2006
SHARES VALUE COUNTRY ------ -------------- ------- COMMON STOCKS (CONTINUED) UTILITIES (CONTINUED) 1,130,300 Energias de Portugal SA..................................... $ 5,729,482 POR 314,200 Hokkaido Electric Power Company, Inc........................ 8,026,285 JPN 248,000 Kyushu Electric Power Company, Inc. ........................ 6,543,591 JPN 709,312 Scottish Power PLC.......................................... 10,388,470 BRI 222,700 Shikoku Electric Power Company, Inc.(8)..................... 5,305,277 JPN 604,300 The Kansai Electric Power Company, Inc...................... 16,300,181 JPN 295,595 Veolia Environment.......................................... 22,787,690 FRA -------------- 99,324,117 -------------- TOTAL COMMON STOCKS (Cost $1,552,036,742)................... 2,057,635,990 -------------- RIGHTS -- 0.0% AUTOMOBILES/MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT AND REPAIRS 390,900 TI Automotive, Ltd. -- Class A*(14)(27) (Cost $0)........... -- BRI -------------- PRINCIPAL --------- SECURITIES LENDING COLLATERAL -- 7.1% $149,080,031 Securities Lending Collateral Investment (Note 4) (Cost $149,080,031)............................................. 149,080,031 USA -------------- TOTAL SECURITIES (Cost $1,701,116,773)...................... 2,206,716,021 -------------- REPURCHASE AGREEMENTS -- 1.4% 29,549,256 With Investors Bank and Trust, dated 12/29/06, 4.76%, due 01/02/07, repurchase proceeds at maturity $29,564,884 (Collateralized by Fannie Mae Adjustable Rate Mortgage, 4.40%, due 02/01/34, with a value of $12,628,519 and Freddie Mac Adjustable Rate Mortgage, 5.95%, due 12/15/32, with a value of $18,398,200) (Cost $29,549,256)........... 29,549,256 USA -------------- Total Investments -- 106.4% (Cost $1,730,666,029)........... 2,236,265,277 Liabilities less other assets -- (6.4)%..................... (135,112,804) -------------- NET ASSETS -- 100.0%........................................ $2,101,152,473 ==============
The aggregate cost of securities for federal income tax purposes at December 31, 2006 is $1,746,694,307. The following amounts are based on cost for federal income tax purposes: Gross unrealized appreciation......... $517,975,058 Gross unrealized depreciation......... (28,404,088) ------------ Net unrealized appreciation........... $489,570,970 ============
- --------------- See summary of footnotes and abbreviations to portfolios.
PERCENT OF TOTAL COUNTRY COMPOSITION INVESTMENTS AT VALUE - ------------------- -------------------- Australia (AUS)...................... 2.90% Austria (AST)........................ 0.90 Belgium (BEL)........................ 1.26 Bermuda (BER)........................ 0.59 Brazil (BRA)......................... 0.38 Canada (CDA)......................... 6.71 Cayman Islands (CAY)................. 0.48 Denmark (DEN)........................ 0.51 Finland (FIN)........................ 1.02 France (FRA)......................... 8.79 Germany (GER)........................ 6.32 Hong Kong (HNG)...................... 0.49 Ireland (IRE)........................ 1.28 Italy (ITA).......................... 2.05 Japan (JPN).......................... 19.47 Mexico (MEX)......................... 1.05 Norway (NOR)......................... 0.70 Portugal (POR)....................... 0.41 Russia (SUR)......................... 0.36 Singapore (SIN)...................... 0.32 South Korea (KOR).................... 0.34 Spain (SPA).......................... 2.38 Sweden (SWE)......................... 2.04 Switzerland (SWI).................... 7.57 Taiwan (TWN)......................... 0.64 The Netherlands (NET)................ 3.57 United Kingdom (BRI)................. 19.48 United States (USA).................. 7.99 ------ TOTAL PERCENTAGE..................... 100.00% ======
See notes to financial statements. 172 DIVERSIFIED INVESTORS PORTFOLIOS PORTFOLIOS OF INVESTMENTS SUMMARY OF FOOTNOTES AND ABBREVIATIONS TO PORTFOLIOS DECEMBER 31, 2006 Footnotes: * Non-income producing security. 144A All or a portion of this security is a 144A or private placement security and can only be sold to qualified institutional buyers. Unless otherwise indicated, these securities have been determined to be liquid under procedures established by the Board of Trustees. 1) Variable rate security. The rate shown was in effect at December 31, 2006. 2) Quarterly reset provision. The rate shown was in effect at December 31, 2006. 3) Monthly reset provision. The rate shown was in effect at December 31, 2006. 4) Security is segregated as collateral for written options. 5) Security is segregated as initial margin for futures contracts. 6) Security is segregated as collateral for swap contracts. 7) Represents a zero coupon bond which will convert to an interest bearing security at a later date. 8) All or part of this security is on loan. 9) Bond is in default. 10) Variable rate security. Interest rate is based on the credit rating of the issuer. The rate shown was in effect at December 31, 2006. 11) Floating rate security. The interest rate is subject to change semi-annually based on the London Interbank Offered Rate ("LIBOR"). The rate shown was in effect at December 31, 2006. 12) PIK ("Payment-In-Kind") bond. These bonds pay interest in the form of additional bonds. 13) Security was in bankruptcy reorganization at the time of maturity. Recovery will be determined at the conclusion of the bankruptcy. 14) Fair valued at December 31, 2006. Following are the market values (as determined by fair valuation) and the corresponding percentage of Portfolio assets of all fair valued securities at December 31, 2006.
SERIES MARKET VALUE PERCENTAGE ------ ------------ ---------- Total Return Bond $1,199,940 0.69% High Yield Bond 3,467,853 0.71
15) Principal amount for this security is denominated in Australian Dollars. 16) Principal amount for this security is denominated in British Pounds. 17) Principal amount for this security is denominated in Canadian Dollars. 18) Principal amount for this security is denominated in Danish Krone. 19) Principal amount for this security is denominated in Euros. 20) Principal amount for this security is denominated in Hong Kong Dollars. 21) Principal amount for this security is denominated in Japanese Yen. 22) Principal amount for this security is denominated in Mexican Pesos. 23) Principal amount for this security is denominated in New Zealand Dollars. 24) Principal amount for this security is denominated in Swedish Krona. 25) Principal amount for this security is denominated in Swiss Francs. 26) Principal amount for this security is denominated in Taiwan Dollars. 27) Illiquid security. Refer to Note 2M. Abbreviations: ADR American Depository Receipt. FDR Foreign Depository Receipt. GDR Global Depository Receipt. IO Interest Only represents the right to receive the monthly interest payment on an underlying pool of mortgage loans. The face amount shown represents the par value on the underlying pool. The yields on these securities generally exceed yields on other mortgage-backed securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped. These securities are subject to accelerated principal paydowns as a result of prepayment or refinancing of the underlying pool of mortgage instruments. As a result, interest income may be reduced considerably. TBA To be announced. Securities are purchased on a forward commitment basis with approximate principal amount and general stated maturity date. The actual principal amount and maturity date will be determined upon settlement when the specific mortgage pools are assigned. - --------------- - Securities issued by companies registered outside the United States are denoted with their domestic country in parenthesis. - Fixed income securities designated as "perpetual" are securities that make (or are scheduled to make) a steady payment of interest. They do not have a maturity date, and the interest payments are indefinite. - Footnotes and abbreviations may or may not appear in each portfolio of investments. See notes to financial statements. 173 DIVERSIFIED INVESTORS PORTFOLIOS PORTFOLIO COMPOSITION DECEMBER 31, 2006 The following charts summarize the portfolio composition of each Series by asset type. MONEY MARKET SERIES Commercial Paper................................ 44.4% Repurchase Agreements/Cash Equivalents.......... 15.9 Short Term Corporate Notes...................... 15.9 Yankee Certificates of Deposit.................. 15.5 Short Term US Government Agency Securities...... 6.5 Medium Term Corporate Notes..................... 1.5 Other assets less liabilities................... 0.3 ----- 100.0% ===== HIGH QUALITY BOND SERIES Corporate Bonds and Notes....................... 76.3% US Government Agency Securities................. 19.3 US Treasury Securities.......................... 2.4 Repurchase Agreements/Cash Equivalents.......... 1.1 Securities Lending Collateral................... 1.0 Municipal Bonds................................. 0.8 Foreign Government Obligations.................. 0.5 Liabilities less other assets................... (1.4) ----- 100.0% ===== INTERMEDIATE GOVERNMENT BOND SERIES US Government Agency Securities................. 53.5% US Treasury Securities.......................... 30.8 Securities Lending Collateral................... 19.5 Corporate Bonds and Notes....................... 10.4 Short Term US Government Agency Securities...... 3.8 Liabilities less other assets................... (18.0) ----- 100.0% ===== CORE BOND SERIES US Government Agency Securities................. 54.3% Corporate Bonds and Notes....................... 52.3 US Treasury Securities.......................... 6.3 Short Term US Government Agency Securities...... 1.2 Repurchase Agreements/Cash Equivalents.......... 1.0 Foreign Government Obligations.................. 0.7 Short Term Corporate Notes...................... 0.4 Securities Lending Collateral................... 0.0* Purchased Put Options........................... 0.0* Call Options Written............................ (0.0)* Put Options Written............................. (0.0)* Securities Sold Short........................... (7.8) Liabilities less other assets................... (8.4) ----- 100.0% ===== TOTAL RETURN BOND SERIES US Government Agency Securities................. 53.2% Corporate Bonds and Notes....................... 48.0 Repurchase Agreement/Cash Equivalents........... 20.7 US Treasury Securities.......................... 15.4 Securities Lending Collateral................... 3.5 Foreign Government Obligations.................. 2.4 Municipal Bonds................................. 0.6 Short Term US Government Agency Securities...... 0.3 Convertible Preferred Stocks.................... 0.2 Convertible Bonds............................... 0.1 Call Options Written............................ (0.0)* Put Options Written............................. (0.0)* Liabilities less other assets................... (44.4) ----- 100.0% ===== HIGH YIELD BOND SERIES Corporate Bonds and Notes....................... 85.3% Repurchase Agreements/Cash Equivalents.......... 5.0 Loan Participations............................. 4.9 Convertible Preferred Stocks.................... 0.9 Common Stocks................................... 0.4 Convertible Bonds............................... 0.4 Warrants........................................ 0.1 Other assets less liabilities................... 3.0 ----- 100.0% ===== BALANCED SERIES Common Stocks................................... 60.4% Corporate Bonds and Notes....................... 21.1 US Government Agency Securities................. 20.9 Repurchase Agreements/Cash Equivalents.......... 4.2 US Treasury Securities.......................... 3.5 Securities Lending Collateral................... 2.2 Foreign Government Obligations.................. 1.3 Municipal Bonds................................. 0.4 Short Term US Treasury Securities............... 0.3 Short Term US Government Agency Securities...... 0.2 Convertible Preferred Stock..................... 0.1 Convertible Bonds............................... 0.0* Warrants........................................ 0.0* Call Options Written............................ (0.0)* Put Options Written............................. (0.0)* Liabilities less other assets................... (14.6) ----- 100.0% =====
See notes to financial statements. 174 DIVERSIFIED INVESTORS PORTFOLIOS PORTFOLIO COMPOSITION (CONTINUED) DECEMBER 31, 2006 The following charts summarize the portfolio composition of each Series by asset type. VALUE & INCOME SERIES Common Stocks................................... 97.8% Securities Lending Collateral................... 5.3 Repurchase Agreements/Cash Equivalents.......... 2.1 Liabilities less other assets................... (5.2) ----- 100.0% ===== VALUE SERIES Common Stocks................................... 95.5% Securities Lending Collateral................... 15.2 Repurchase Agreements/Cash Equivalents.......... 9.0 Liabilities less other assets................... (19.7) ----- 100.0% ===== GROWTH & INCOME SERIES Common Stocks................................... 98.1% Securities Lending Collateral................... 5.9 Repurchase Agreements/Cash Equivalents.......... 2.1 Liabilities less other assets................... (6.1) ----- 100.0% ===== EQUITY GROWTH SERIES Common Stocks................................... 97.9% Securities Lending Collateral................... 6.3 Repurchase Agreements/Cash Equivalents.......... 0.9 Liabilities less other assets................... (5.1) ----- 100.0% ===== AGGRESSIVE EQUITY SERIES Common Stocks................................... 99.4% Securities Lending Collateral................... 12.6 Liabilities less other assets................... (12.0) ----- 100.0% ===== MID-CAP VALUE SERIES Common Stocks................................... 97.9% Securities Lending Collateral................... 12.7 Repurchase Agreements/Cash Equivalents.......... 1.7 Short Term Commercial Paper..................... 0.2 Convertible Bonds............................... 0.0* Liabilities less other assets................... (12.5) ----- 100.0% ===== MID-CAP GROWTH SERIES Common Stock.................................... 98.1% Securities Lending Collateral................... 16.0 Repurchase Agreements/Cash Equivalents.......... 2.0 Liabilities less other assets................... (16.1) ----- 100.0% ===== SMALL-CAP VALUE SERIES Common Stocks................................... 99.6% Securities Lending Collateral................... 18.0 Repurchase Agreements/Cash Equivalents.......... 0.0* Liabilities less other assets................... (17.6) ----- 100.0% ===== SPECIAL EQUITY SERIES Common Stocks................................... 97.9% Securities Lending Collateral................... 20.2 Repurchase Agreements/Cash Equivalents.......... 2.7 Short Term US Treasury Securities............... 0.1 Liabilities less other assets................... (20.9) ----- 100.0% ===== SMALL-CAP GROWTH SERIES Common Stocks................................... 98.7% Securities Lending Collateral................... 9.3 Repurchase Agreements/Cash Equivalents.......... 0.4 Liabilities less other assets................... (8.4) ----- 100.0% ===== INTERNATIONAL EQUITY SERIES Common Stocks................................... 97.9% Securities Lending Collateral................... 7.1 Repurchase Agreements/Cash Equivalents.......... 1.4 Rights.......................................... 0.0* Liabilities less other assets................... (6.4) ----- 100.0% =====
- --------------- * Amount rounds to less than 0.05%. See notes to financial statements. 175 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND BUSINESS Diversified Investors Portfolios (the "Series Portfolio"), a series trust organized on September 1, 1993, under the laws of the State of New York, is composed of eighteen different series that are, in effect, separate investment funds: the Money Market Portfolio, the High Quality Bond Portfolio, the Intermediate Government Bond Portfolio, the Core Bond Portfolio, the Total Return Bond Portfolio, the High Yield Bond Portfolio, the Balanced Portfolio, the Value & Income Portfolio, the Value Portfolio, the Growth & Income Portfolio, the Equity Growth Portfolio, the Aggressive Equity Portfolio, the Mid-Cap Value Portfolio, the Mid-Cap Growth Portfolio, the Small-Cap Value Portfolio, the Special Equity Portfolio, the Small-Cap Growth Portfolio, and the International Equity Portfolio (each a "Series"). The Declaration of Trust permits the Board of Trustees to issue an unlimited number of beneficial interests in each Series. Investors in a Series (e.g., investment companies, insurance company separate accounts and common and commingled trust funds) will each be liable for all obligations of that Series (and of no other Series). The investment objectives of each Series are as follows: Money Market -- The Series' goal is to provide liquidity and as high a level of income as is consistent with the preservation of capital. High Quality Bond -- The Series' goal is to provide a high risk-adjusted return while focusing on the preservation of capital. Intermediate Government Bond -- The Series' goal is to provide as high a level of current income as is consistent with the preservation of capital. Core Bond -- The Series' goal is to achieve maximum total return. Total Return Bond -- The Series' goal is to maximize long-term total return. High Yield Bond -- The Series' goal is to provide a high level of current income. Balanced -- The Series' goal is to provide a high total investment return through investment in a broadly diversified portfolio of stocks, bonds and money market instruments. Value & Income -- The Series' goal is to provide a high level of current income through investment in a broadly diversified portfolio of common stocks with relatively high current yield. Capital appreciation is a secondary goal. Value -- The Series' goal is to provide capital appreciation. Dividend income is a secondary goal. Growth & Income -- The Series' goal is to provide capital appreciation and current income. Equity Growth -- The Series' goal is to provide a high level of capital appreciation through investment in a diversified portfolio of common stocks with a potential for above-average growth in earnings. Current income is a secondary goal. Aggressive Equity -- The Series' goal is to provide a high level of capital appreciation primarily through investing in a diversified portfolio of common stocks. Mid-Cap Value -- The Series' goal is to provide a high total investment return through investments primarily in a diversified portfolio of common stocks. Mid-Cap Growth -- The Series' goal is to provide a high total investment return through investments primarily in a diversified portfolio of common stocks. Small-Cap Value -- The Series' goal is to provide a high total investment return through investments primarily in a diversified portfolio of common stocks. 176 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND BUSINESS (CONTINUED) Special Equity -- The Series' goal is to provide a high level of capital appreciation through investment in a diversified portfolio of common stocks of small to medium size companies. Small-Cap Growth -- The Series' goal is to provide a high total investment return through investments primarily in a diversified portfolio of common stocks. International Equity -- The Series' goal is to provide a high level of long-term capital appreciation through investment in a diversified portfolio of securities of foreign issuers. 2. SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION: Short-term securities having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. The amortized cost of a security is determined by valuing it at original cost and thereafter amortizing any discount or premium at a constant rate until maturity. Equity securities are valued at the last sale price on the exchange on which they are primarily traded or at the last quoted bid price for securities in which there were no sales during the day or for unlisted securities. Portfolio securities listed on the NASDAQ National Market and NASDAQ Small Cap Market for which reliable market quotations are available are valued at the official closing price or, if there is no official closing price on that day at the last sale price. Bonds are valued at the mean of the last available bid and asked prices by an independent pricing service. Futures and option contracts that are traded on commodities or securities exchanges are normally valued at the last settlement price on the exchange on which they are traded. When valuations are not readily available, securities will be valued at their fair value as determined by the Board of Trustees. Unlisted securities are valued at the last sales price provided by an independent pricing agent or the principal market maker. Trading in securities on most foreign exchanges and over-the counter markets is normally completed before the close of the domestic market and may also take place on days when the domestic market is closed. Events or circumstances affecting the values of portfolio securities that occur between the closing of their principal markets and the time the net asset value is determined may be reflected in the calculation of net asset value when the investment advisor deems that the particular event or circumstance would materially affect its asset value. In accordance with procedures adopted by the Board of Trustees, the International Equity Series applies fair value pricing on a daily basis for all non-US and non-Canadian equity securities held in its portfolio by utilizing the quotations of an independent pricing service, unless the Series' investment advisor determines that use of another valuation methodology is appropriate. The pricing service uses statistical analyses and quantitative models to adjust local market prices using factors such as subsequent movement and changes in the prices of indices, securities and exchange rates in other markets, in determining fair value each day. B. REPURCHASE AGREEMENTS: Each Series, along with other affiliated entities of the investment advisor, may enter into repurchase agreements with financial institutions deemed to be creditworthy by the Series' investment advisor, subject to the seller's agreement to repurchase and the Series agreement to resell such securities at a mutually agreed upon price. Securities purchased subject to repurchase agreements are segregated at the custodian and, pursuant to the terms of the repurchase agreements, must have an aggregate market value greater than or equal to 102% for domestic securities and 105% for international securities of the repurchase price at all times. If the value of the underlying securities falls below the value of the repurchase price, the Series will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met or the seller defaults on its repurchase obligation, the Series maintains the right to sell the underlying securities at market value and may claim any resulting loss against the seller. However, in the event of default or bankruptcy by the seller, realization and/or retention of the collateral may be subject to legal proceedings. 177 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. FOREIGN CURRENCY TRANSLATION: The accounting records of each Series are maintained in US dollars. The market values of foreign securities, currency holdings and other assets and liabilities denominated in a foreign currency are translated to US dollars based on the prevailing exchange rates each business day. Income, expenses, purchases, and sales of investment securities denominated in foreign currencies are translated at prevailing exchange rates when accrued or incurred. Each Series does not isolate realized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gains or losses on securities. Net realized gains and losses on foreign currency transactions represent net foreign exchange gains and losses on disposition of foreign currencies and foreign currency forward and spot contracts, and the difference between the amount of investment income receivable and foreign withholding taxes payable recorded on each Series' books and the US dollar equivalent of amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities (other than investments in securities) and foreign currency forward and spot contracts, resulting from changes in the prevailing exchange rates. D. FOREIGN CURRENCY FORWARD, SPOT, AND CROSS CURRENCY CONTRACTS: Each Series, with the exception of the Money Market Series, may enter into foreign currency forward contracts, spot, and cross currency contracts in connection with settling planned purchases or sales of securities or to hedge the currency exposure associated with those series that participate in such contracts. A foreign currency forward contract is an agreement between two parties to buy and sell a currency at a set price on a future date. A spot contract is also an agreement to buy and sell a currency, but will settle within a week or less from the date it is entered into. The market value of a foreign currency forward, spot, or cross currency contract fluctuates with changes in forward currency exchange rates. Foreign currency forward, spot, and cross currency contracts are marked to market daily and the change in value is recorded by the Series as an unrealized foreign exchange gain or loss. When a foreign currency forward, spot, or cross currency contract is extinguished, through delivery or by entering into another offsetting foreign currency forward, spot, or cross currency contract, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Series' Statement of Assets and Liabilities and Statement of Operations. In addition, the Series could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if the value of the currency changes unfavorably to the US dollar. As of December 31, 2006, the Core Bond Series, Total Return Bond Series, Balanced Series, and International Equity Series each had outstanding foreign currency forward contracts as listed in Note 10. E. WRITTEN OPTIONS: Each Series, with the exception of the Money Market Series, may write or purchase options for the purpose of either hedging its exposure to the market fluctuations of the portfolio, or an individual security position. When a Series writes an option, an amount equal to the premium received by the Series is recorded as an asset and corresponding liability. The amount of the liability is adjusted daily to reflect the current market value of the written option and the change is recorded in a corresponding unrealized gain or loss account. These options are settled for cash and subject the Series to unknown risk of loss. The Series, however, are not subject to credit risk on written options, as the counterparty has already performed its obligation by paying the premium at the inception of the contract. When a written option expires on its stipulated expiration date, or when a closing 178 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) transaction is entered into, the related liability is extinguished and the Series realizes a gain or loss contingent on whether the cost of the closing transaction exceeds the premium received when the option was written. Transactions in options written for the year ended December 31, 2006:
CORE BOND TOTAL RETURN BOND BALANCED ---------------------- -------------------- -------------------- NUMBER OF NUMBER OF NUMBER OF CONTRACTS PREMIUMS CONTRACTS PREMIUMS CONTRACTS PREMIUMS ---------- --------- --------- -------- --------- -------- Written call options outstanding at December 31, 2005........... 172 $ 98,503 -- $ -- -- $ -- Call options written............. 34,200,364 405,683 268 69,361 427 107,397 Call options terminated in closing purchase transactions................... (536) (275,046) (242) (62,397) (385) (96,060) Call options expired............. -- -- -- -- -- -- ---------- --------- ---- -------- ---- -------- Written call options outstanding at December 31, 2006........... 34,200,000 $ 229,140 26 $ 6,964 42 $ 11,337 ========== ========= ==== ======== ==== ======== Written put options outstanding at December 31, 2005........... 172 $ 87,812 -- $ -- -- $ -- Put options written.............. 34,200,570 609,700 195 53,322 402 106,866 Put options terminated in closing purchase transactions.......... (742) (324,732) (144) (37,890) (320) (82,057) Put options expired.............. -- -- -- -- -- -- ---------- --------- ---- -------- ---- -------- Written put options outstanding at December 31, 2006........... 34,200,000 $ 372,780 51 $ 15,432 82 $ 24,809 ========== ========= ==== ======== ==== ========
F. FUTURES CONTRACTS: Each Series, with the exception of the Money Market Series, may enter into futures contracts for the purpose of hedging its existing portfolio securities, or securities that the Series intends to purchase, against fluctuations in market value caused by changes in prevailing market or interest rates. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the daily market value of the contract. Variation margin payments are received or made by each Series each day, depending upon the daily fluctuations in the market value of the underlying instrument. Each Series recognizes an unrealized gain or loss equal to the daily variation margin. When the contract is closed, the Series records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the basis in the contract. Should market conditions move unexpectedly, the Series may not achieve the anticipated benefits of the futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates, and the underlying hedged assets. These contracts may involve market risk in excess of the unrealized gains or losses reflected in the Series' Statement of Assets and Liabilities. Use of long futures contracts subjects the Series to risk of loss in excess of amounts shown on the Statement of Assets and Liabilities up to the notional value of the futures contracts. Use of short futures contracts subjects the Series to unlimited risk of loss. The Series may enter into futures contracts on exchanges or boards of trade. In that case, the exchange or board of trade acts as the counterparty to each futures transaction; therefore, the Series' credit risk is limited to failure of the exchange or board of trade. 179 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Open futures contracts as of December 31, 2006:
VALUE AS OF NET UNREALIZED NUMBER OF EXPIRATION DECEMBER 31, APPRECIATION/ SERIES CONTRACTS DESCRIPTION DATE 2006 (DEPRECIATION) - ------ ----------- ----------------------------------- -------------- ------------ -------------- Core Bond............ 1,716 Long US Long Bond Future March 2007 $191,226,750 $(5,122,600) 1,278 Long US Treasury Notes 10 Year Future March 2007 137,345,063 (1,080,024) 812 Short 90 Day Euro Future June 2007 192,383,100 822,265 1,071 Short 90 Day Euro Future September 2007 254,134,913 652,341 4,181 Short US Treasury Note 5 Year Future March 2007 439,266,313 2,326,393 -------------- $(2,401,625) ============== Total Return Bond.... 57 Long 90 Day LIBOR Future September 2007 $ 6,733,838 $ (5,170) 45 Long Euro Bund Future March 2007 5,221,350 (51,219) 35 Long US Treasury Note 2 Year Future March 2007 7,141,094 (18,988) 120 Long US Treasury Note 5 Year Future March 2007 12,607,500 (46,983) 9 Short US Long Bond Future March 2007 1,002,938 15,916 149 Short US Treasury Note 10 Year Future (a) March 2007 16,012,844 104,739 -------------- $ (1,705) ============== Balanced............. 72 Long 90 Day LIBOR Future September 2007 $ 8,505,900 $ (6,546) 57 Long Euro Bund Future March 2007 6,613,710 (64,872) 8 Long S&P 500 Future March 2007 571,400 1,184 68 Long US Treasury Note 2 Year Future March 2007 13,874,125 (36,684) 96 Long US Treasury Note 5 Year Future March 2007 10,086,000 (35,402) 17 Short US Long Bond Future March 2007 1,894,438 30,142 193 Short US Treasury Note 10 Year Future (a) March 2007 20,741,469 132,949 -------------- $ 20,771 ============== Growth & Income...... 42 Long S&P 500 Future March 2007 $ 2,999,850 $ 8,196 ============== Special Equity....... 2 Long Russell 2000 Future March 2007 $ 794,900 $ 6,023 ==============
(a) Segregated as collateral for put options written as shown on each respective Series Portfolio of Investments. The Core Bond Series and Special Equity Series have segregated securities as collateral for their respective open futures contracts. The segregated securities are identified within each Series' portfolio of investments. The Total Return Bond Series has segregated $352,213 of cash, the Balanced Series has segregated $459,080 of cash and has restricted cash of $140,600 as collateral for their respective open future contracts. The Growth & Income Series has restricted cash of $560,000 as collateral for open futures contracts. G. SWAPS The Series, with the exception of the Money Market Series, may engage in various swap transactions, including interest rate, currency exchange rate, equity index and total return swaps, for hedging purposes, or as alternatives to direct investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in value of swaps, including accruals of periodic amounts of interest to be paid or received on swaps, is reported as unrealized gains or losses in the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of the swap agreements. Swap agreements are stated at fair value. Notional principal amounts are 180 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. Outstanding swap agreements as of December 31, 2006: INTEREST RATE SWAPS CORE BOND
NOTIONAL PAYMENTS MADE BY PAYMENTS RECEIVED TERMINATION AMOUNT VALUE SWAP COUNTERPARTY THE SERIES BY THE SERIES DATE (USD) (USD) - ----------------- ---------------- ----------------- ----------- ------------ ---------- Citigroup Global Markets............... 3 month LIBOR 5.18% semi-annual 09/18/10 $100,000,000 $1,566,000 Citigroup Global Markets............... 3 month LIBOR 5.16% semi-annual 11/07/10 66,900,000 131,124 Citigroup Global Markets............... 3 month LIBOR 4.95% semi-annual 12/12/11 23,600,000 (152,220) Wachovia Securities..... 3 month LIBOR 5.20% semi-annual 09/07/11 100,000,000 1,761,000 ---------- $3,305,904 ==========
H. SHORT SALES: Each Series, with the exception of the Money Market Series, may sell securities short. A short sale is a transaction in which a Series sells securities it does not own, but has borrowed, in anticipation of a decline in the market price of the securities. The Series is obligated to replace the borrowed securities at the market price at the time of replacement. The Series' obligation to replace the securities borrowed in connection with a short sale will be fully secured by collateral deposited with the custodian. In addition, the Series will consider the short sale to be a borrowing by the Series that is subject to the asset coverage requirements of the Investment Company Act of 1940, as amended. Short sales by the Series involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security because losses from short sales may be unlimited, whereas losses from purchases can not exceed the total amount invested. I. DOLLAR ROLLS: Each Series, with the exception of the Money Market Series, may enter into dollar rolls (principally using TBA's) in which the Series sells mortgage-backed securities for delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at an agreed-upon price on a fixed date. The Series account for such dollar rolls as purchases and sales and receive compensation as consideration for entering into the commitment to repurchase. The Series maintains liquid securities having a value not less than the repurchase price (including accrued interest) for such dollar rolls. The market value of the securities that the Series is required to purchase may decline below the agreed upon repurchase price of those securities. J. FEDERAL INCOME TAXES: It is the Series' policy to comply with the applicable provisions of the Internal Revenue Code. Therefore, no federal income tax provision is required. Each Series may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Each Series will accrue such taxes and recoveries as applicable, based upon their current interpretation of tax rules and regulations that exist in the markets in which they invest. 181 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are accounted for on a trade date basis (the date the order to buy or sell is executed). Dividend income less foreign taxes withheld, if any, is recorded on the ex-dividend date. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts on investments. Realized gains and losses from securities transactions are recorded on the identified cost basis. Purchases of TBA, when-issued or delayed delivery securities may be settled a month or more after the trade date. Interest income is not accrued until settlement date. All of the net investment income and realized and unrealized gains and losses from security transactions are determined on each valuation day and allocated pro rata among the investors in a Series at the time of such determination. L. OPERATING EXPENSES: The Series Portfolio accounts separately for the assets, liabilities and operations of each Series. Expenses directly attributable to a Series are charged to that Series, while expenses attributable to all Series are allocated among all Series based on their relative net assets, or another methodology that is appropriate based on the circumstances. M. RESTRICTED AND ILLIQUID SECURITIES: Each Series is permitted to invest in securities that are subject to legal or contractual restrictions on resale or are illiquid. Restricted securities generally may be resold in transactions exempt from registration. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult. N. OTHER: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of 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. O. IN-KIND REDEMPTION During the fiscal year ended December 31, 2006, the Special Equity Series delivered securities (redemption in-kind) in exchange for the redemption of units. The source of the redemption in-kind was three contractholders who were invested in an insurance company separate account established by MONY Life Insurance Company ("Separate Account"). The Separate Account invested all its assets in the Special Equity Series. Collectively, the value of the contractholders' accounts represented 5.91% of the Special Equity Series at the time of the redemption. The financial statements of the Separate Account are not included in these financial statements. Cash and securities were transferred as detailed below:
TOTAL VALUE OF CASH DATE AND SECURITIES TRANSFERRED GAIN ON TRANSFER - ---- -------------------------- ---------------- March 7, 2006 $80,105,926 $14,871,899
P. RECENT ACCOUNTING PRONOUNCEMENTS: In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an Interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Series, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including 182 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is effective June 30, 2007, and is to be applied to all open tax years as of the date of effectiveness. Management has recently begun to evaluate the application of the Interpretation to the Series, and is not in a position at this time to estimate the significance of its impact, if any, on the Series' financial statements. In September 2006, Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Series' financial statement disclosures. 3. FEES AND TRANSACTIONS WITH AFFILIATES Transamerica Financial Life Insurance Company, Inc. ("TFLIC"), a wholly-owned subsidiary of AEGON USA, Inc. ("AEGON"), is an affiliate of Diversified Investment Advisors, Inc. (the "Advisor"). The Advisor is an indirect, wholly-owned subsidiary of AEGON, a financial services holding company whose primary emphasis is life and health insurance and annuity and investment products. AEGON is an indirect, wholly-owned subsidiary of AEGON NV, a corporation based in the Netherlands which is a publicly traded international insurance group. TFLIC has sub-accounts which invest in the corresponding Series as follows:
TFLIC SUB-ACCOUNT INVESTMENT IN SERIES - ----------------- -------------------- Money Market................................................ 7.15% High Quality Bond........................................... 9.67 Intermediate Government Bond................................ 26.60 Core Bond................................................... 7.91 High Yield Bond............................................. 6.24 Balanced.................................................... 30.12 Value & Income.............................................. 19.68 Growth & Income............................................. 21.98 Equity Growth............................................... 15.58 Aggressive Equity........................................... 22.71 Mid-Cap Value............................................... 3.76 Mid-Cap Growth.............................................. 0.25 Small-Cap Value............................................. 0.09 Special Equity.............................................. 24.55 Small-Cap Growth............................................ 0.02 International Equity........................................ 11.91
The Advisor manages the assets of each Series of the Series Portfolio pursuant to an Investment Advisory Agreement with the Series Portfolio. Subject to such further policies as the Board of Trustees may determine, the Advisor provides general investment advice to each Series. For its services, the Advisor receives from each Series fees, accrued daily and payable monthly, at an annual rate equal to the percentages specified in the table below of the corresponding Series' average daily net assets. The Advisor is currently waiving a portion of its investment advisory fees for certain Series. For each Series, the Advisor has entered into Investment Subadvisory Agreements with the subadvisors listed in the table below (each a "Subadvisor", collectively the "Subadvisors"). It is the responsibility of each Subadvisor to make the day-to-day investment decisions of the Series and to place the purchase and sales orders for securities transactions of such Series, subject in all cases to the general supervision of the Advisor. Payment of fees to the Subadvisors is the responsibility of the Advisor, and is not an additional expense of a Series. 183 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED) For its services, the Advisor receives a fee from each Series, and the Subadvisors receive a fee from the Advisor, at an annual rate equal to the percentages specified in the table below of the portion of the corresponding Series' average daily net assets which they subadvise.
ADVISOR SUBADVISOR SERIES SERIES SUBADVISOR FEE (%) FEE (%) - ------ ------------------------------------------ ------- ---------- Money Market..................... GE Asset Management, Inc. 0.25 0.05 High Quality Bond................ Merganser Capital Management, LP 0.35 (2) Intermediate Government Bond..... Allegiance Investment Management, LLC 0.35(1) (3) Core Bond........................ BlackRock Financial Management, Inc. 0.35 (4) Total Return Bond................ (5) 0.35(1) (6) High Yield Bond.................. Eaton Vance Management 0.55 (7) Balanced......................... (8) 0.45(1) (9) Value & Income................... (10) 0.45 (11) Value............................ Hotchkis and Wiley Capital Management, LLC 0.50(1) (12) Growth & Income.................. (13) 0.60 (14) Equity Growth.................... (15) 0.62 (16) Aggressive Equity................ Turner Investment Partners, Inc. 0.77(1) (17) Mid-Cap Value.................... (18) 0.67(1) (19) Mid-Cap Growth................... Columbus Circle Investors 0.72(1) (20) Small-Cap Value.................. (21) 0.82(1) (22) Special Equity................... (23) 0.80 (24) Small-Cap Growth................. Perimeter Capital Management 0.87(1) (25) International Equity............. (26) 0.75(1) (27)
- --------------- (1) The Advisor is currently voluntarily waiving a portion of its fee. (2) 0.20% on the first $100,000,000 in average daily net assets, 0.15% on the next $100,000,000 in average daily net assets, 0.10% on the next $100,000,000 in average daily net assets and 0.05% on all average daily net assets in excess of $300,000,000. (3) Allegiance Investment Management, LLC received 0.35% on the first $20,000,000 in average daily net assets, 0.25% on the next $30,000,000 in average daily net assets, 0.20% on the next $50,000,000 in average daily net assets and 0.05% on all average daily net assets in excess of $100,000,000. Effective January 22, 2006 the Intermediate Government Bond Series terminated Stephens Capital Management as subadvisor. For the period January 1, 2006 to January 22, 2006, Stephens Capital Management received 0.10% on all average daily net assets. (4) 0.12% on the first $1,000,000,000 in average daily net assets and 0.05% on all average daily net assets in excess of $1,000,000,000. (5) The Total Return Bond Series has two subadvisors: Western Asset Management Company and Western Asset Management Company, Ltd. which manages fixed income and foreign fixed income securities, respectively. Net assets are aggregated between Total Return Bond and Balanced. (6) Western Asset Management Company and Western Asset Management Company, Ltd. received 0.30% on the first $100,000,000 in average daily net assets and 0.15% on all average daily net assets in excess of $100,000,000. (7) 0.35% on the first $20,000,000 in average daily net assets, 0.25% on the next $20,000,000 in average daily net assets, 0.20% on the next $85,000,000 in average daily net assets and 0.15% on all average daily net assets in excess of $125,000,000. 184 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED) (8) The Balanced Series has three subadvisors: Goldman Sachs Asset Management, LP, Western Asset Management Company and Western Asset Management Company, Ltd. which manage equity, fixed income and foreign fixed income securities, respectively. (9) Goldman Sachs Asset Management, LP received 0.14% on the first $500,000,000 in combined average daily net assets of the Balanced Series and the Growth & Income Series, 0.12% on the next $1,000,000,000 in combined average daily net assets and 0.10% on all combined average daily net assets in excess of $1,500,000,000. Western Asset Management Company and Western Asset Management Company, Ltd. received 0.30% on the first $100,000,000 in average daily net assets and 0.15% on all average daily net assets in excess of $100,000,000. Net assets are aggregated between Total Return Bond and Balanced. (10) The Value & Income Series has two subadvisors: TCW Investment Management Company and AllianceBernstein LP. During the year ended December 31, 2006, the Value & Income Series executed $81,397,109 of purchase transactions and $72,199,335 of sales transactions through Sanford C. Bernstein & Company, LLC, an affiliate of Alliance Capital Management, LP. Commissions paid for such transactions amounted to $160,776. (11) TCW Investment Management Company received 0.70% on the first $25,000,000 in average daily net assets, 0.50% on the next $75,000,000 in average daily net assets, 0.30% on the next $400,000,000 in average daily net assets and 0.10% on all average daily net assets in excess of $500,000,000. AllianceBernstein LP received 0.27% on the first $300,000,000 in average daily net assets, 0.16% on the next $700,000,000 in average daily net assets and 0.13% on all average daily net assets in excess of $1,000,000,000. (12) 0.75% on the first $15,000,000 in average daily net assets, 0.50% on the next $35,000,000 in average daily net assets, 0.35% on the next $100,000,000 in average daily net assets and 0.25% on all average daily net assets in excess of $150,000,000. (13) The Growth & Income Series has three subadvisors: Ark Asset Management, Inc., Goldman Sachs Asset Management, LP and Aronson + Johnson + Ortiz, LP. During the year ended December 31, 2006, the Growth & Income Series executed $68,514,233 of purchase transactions and $75,200,134 of sales transactions through Goldman Sachs & Company, an affiliate of Goldman Sachs Asset Management, LP. Commissions paid for such transactions amounted to $56,801. The Growth & Income Series also executed $17,924,470 of purchase transactions and $10,429,805 of sales transactions through Goldman Sachs Execution and Clearing LP, an affiliate of Goldman Sachs Asset Management, LP. Commissions paid for such transactions amounted to $24,326. (14) Ark Asset Management, Inc. received 0.20% on the first $750,000,000 in combined average daily net assets of the Growth & Income Series and the Equity Growth Series, 0.18% on the next $250,000,000 in combined average daily net assets and 0.15% on all combined average daily net assets in excess of $1,000,000,000. Goldman Sachs Asset Management, LP received 0.14% on the first $500,000,000 in combined average daily net assets of the Balanced Series and the Growth & Income Series, 0.12% on the next $1,000,000,000 in combined average daily net assets and 0.10% on all combined average daily net assets in excess of $1,500,000,000. Aronson + Johnson + Ortiz, LP received 0.30% on the first $250,000,000 in average daily net assets, 0.20% on the next $250,000,000 in average daily net assets and 0.15% on all average daily net assets in excess of $500,000,000. If assets are less than $100,000,000, then Aronson + Johnson + Ortiz, LP will receive 0.55% on the first $50,000,000 in average daily net assets and 0.35% on all average daily net assets in excess of $50,000,000. (15) The Equity Growth Series has two subadvisors: Ark Asset Management, Inc. and Marsico Capital Management, LLC. 185 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED) During the year ended December 31, 2006, the Equity Growth Series executed $12,515,974 of purchase transactions and $34,543,830 of sales transactions through Bank of America Securities, LLC, an affiliate of Marsico Capital Management, LLC. Commissions paid for such transactions amounted to $53,044. (16) Ark Asset Management, Inc. received 0.20% on the first $750,000,000 in combined average daily net assets of the Growth & Income Series and the Equity Growth Series, 0.18% on the next $250,000,000 in combined average daily net assets and 0.15% on all combined average daily net assets in excess of $1,000,000,000. Marsico Capital Management, LLC received 0.30% on the first $1,000,000,000 in average daily net assets and 0.25% on all average daily net assets in excess of $1,000,000,000. If assets are greater than $2,000,000,000, then Marsico Capital Management, LLC will receive 0.27% on all average daily net assets. (17) 0.35% on the first $100,000,000 in average daily net assets, 0.30% on the next $200,000,000 in average daily net assets, 0.25% on the next $200,000,000 in average daily net assets and 0.20% on all average daily net assets in excess of $500,000,000. (18) The Mid-Cap Value Series has three subadvisors: LSV Asset Management, Cramer, Rosenthal, McGlynn, LLC, and RiverSource Investments, LLC. (19) Cramer Rosenthal McGlynn, LLC received 0.70% on the first $25,000,000 in average daily net assets, 0.40% on the next $25,000,000 in average daily net assets, 0.35% on the next $50,000,000 in average daily net assets, 0.25% on the next $200,000,000 in average daily net assets and 0.20% on all average daily net assets in excess of $300,000,000. LSV Asset Management received 0.50% on the first $100,000,000 in average daily net assets, 0.40% on the next $100,000,000 in average daily net assets, 0.35% on the next $600,000,000 in average daily net assets, and 0.33% on all average daily net assets in excess of $800,000,000. In determining the basis point fee applicable to the Series, the combined average daily net assets of the Series and the portion of the International Equity Series managed by LSV Asset Management were applied to the fee schedule. For the period October 2, 2006 to December 31, 2006, RiverSource Investments, LLC received 0.425% on the first $250,000,000 in average daily net assets, 0.40% on the next $250,000,000 in average daily net assets, and 0.375% on all average daily net assets in excess of $500,000,000. (20) 0.40% on the first $135,000,000 in average daily net assets and 0.35% on all average daily net assets in excess of $135,000,000. (21) The Small-Cap Value Series has two subadvisors: EARNEST Partners, LLC and Mesirow Financial Investment Management, Inc. (22) EARNEST Partners, LLC received 0.50% on all average daily net assets. For the period October 2, 2006 to December 31, 2006, Mesirow Financial Investment Management, Inc. received 0.75% on the first $50,000,000 of average daily net assets and 0.45% on all average daily net assets in excess of $50,000,000. (23) The Special Equity Series has five subadvisors: EARNEST Partners, LLC, Wellington Management Company, LLP, RS Investment Management Co., LLC, Mazama Capital Management, LLC, and INVESCO Institutional (NA), Inc. ("INVESCO"). (24) Wellington Management Company, LLP received 0.45% on the first $200,000,000 of average daily net assets and 0.375% on average daily net assets in excess of $200,000,000. EARNEST Partners, LLC received 0.50% of average daily net assets. RS Investment Management, Co. LLC received 0.50% on the first $100,000,000 in average daily net assets and 0.40% on all average daily net assets in excess of $100,000,000. For the portion of the portfolio invested in accordance with a small-cap core strategy, INVESCO received 0.55% on the first $100,000,000 in average daily net assets, 0.45% on the next $100,000,000 in average daily net assets, 0.30% on the next $100,000,000 in average daily net assets and 0.20% on all average daily net assets in excess of $300,000,000. For the period May 23, 2006 to December 31, 2006, for the portion of the portfolio invested in accordance with a small-cap value 186 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED) strategy, INVESCO received 0.41% on the first $100,000,000 in average daily net assets, 0.34% on the next $100,000,000 in average daily net assets, 0.22% on the next $100,000,000 and 0.20% on all average daily net assets in excess of $300,000,000. Mazama Capital Management, LLC received 0.55% of average daily net assets. (25) Perimeter Capital Management received 0.80% on the first $10,000,000 in average daily net assets, 0.64% on the next $40,000,000 in average daily net assets, and 0.48% on all average daily net assets in excess of $50,000,000. Effective July 24, 2006 the Small-Cap Growth Series terminated Trusco Capital Management, Inc. as subadvisor. For the period January 1, 2006 to July 24, 2006, Trusco Capital Management, Inc. received the same fee schedule listed above. (26) The International Equity Series has two subadvisors: LSV Asset Management and Wellington Management Company, LLP. (27) LSV Asset Management received 0.45% on the first $100,000,000 in average daily net assets, 0.40% on the next $100,000,000 in average daily net assets, 0.37% on the next $400,000,000 in average daily net assets, 0.35% on the next $200,000,000 in average daily net assets and 0.33% on all average daily net assets in excess of $800,000,000. Wellington Management Company, LLP received 0.375% on the first $400,000,000 in average daily net assets, 0.35% on the next $600,000,000 in average daily net assets and 0.325% on all average daily net assets in excess of $1,000,000,000. For the year ended December 31, 2006, the Advisor has voluntarily undertaken to waive fees to the extent the expenses of a Series exceed the following expense caps (as a proportion of average daily net assets):
SERIES EXPENSE CAP - ------ ---------------------- Money Market................................................ 30 basis points (b.p.) High Quality Bond........................................... 40 b.p. Intermediate Government Bond................................ 40 b.p. Core Bond................................................... 40 b.p. Total Return Bond........................................... 40 b.p. High Yield Bond............................................. 60 b.p. Balanced.................................................... 50 b.p. Value & Income.............................................. 50 b.p. Value....................................................... 55 b.p. Growth & Income............................................. 65 b.p. Equity Growth............................................... 65 b.p. Aggressive Equity........................................... 80 b.p. Mid-Cap Value............................................... 70 b.p. Mid-Cap Growth.............................................. 75 b.p. Small-Cap Value............................................. 85 b.p. Special Equity.............................................. 85 b.p. Small-Cap Growth............................................ 90 b.p. International Equity........................................ 90 b.p.
Certain trustees and officers of the Series Portfolio and of the funds that invest in the Series Portfolio are also directors, officers or employees of the Advisor or its affiliates. None of the non-independent trustees so affiliated receive compensation for services as trustees of the Series Portfolio or the funds that invest in the Series Portfolio. Similarly, none of the Series Portfolio officers receive compensation from the Series Portfolio. Aggregate remuneration earned by non-affiliated trustees of the Series Portfolio from the Series Portfolio for the year ended December 31, 2006 amounted to $249,276. 187 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. SECURITIES LENDING Each Series may lend its securities to certain member firms of the New York Stock Exchange. The loans are collateralized at all times with cash or securities with a market value at least 102% for domestic securities and 105% for international securities of the market value of the securities on loan. Any deficiencies or excess of collateral must be delivered or transferred by the member firms no later than the close of business on the next business day. As with other extensions of credit, the Series may bear the risk of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. During the term of the loan, a Series receives payments from borrowers equivalent to the dividends, interest, and any other distributions that would have been earned on securities lent while simultaneously seeking to earn income on the investment of cash collateral in accordance with investment guidelines contained in the Securities Lending Agreement. For loans secured by cash, each Series retains the interest on cash collateral investments but is required to pay the borrower a rebate for the use of the cash collateral. For loans secured by collateral other than cash, the borrower pays a securities loan fee to the lending agent. Any compensation (net of related expenses) received by a Series for lending its securities, as described above, is reported on its respective Statement of Operations. This includes interest income on short term investments purchased with cash collateral received. At December 31, 2006, the Series loaned securities having market values as follows:
CASH COLLATERAL SERIES MARKET VALUE RECEIVED - ------ ------------ --------------- High Quality Bond........................................... $ 8,245,280 $ 8,411,400 Intermediate Government Bond................................ 28,660,668 29,452,986 Core Bond................................................... 937,548 958,807 Total Return Bond........................................... 4,175,549 4,274,335 Balanced.................................................... 8,147,993 8,381,259 Value & Income.............................................. 178,352,319 186,521,888 Value....................................................... 14,752,499 15,388,046 Growth & Income............................................. 65,940,916 67,965,319 Equity Growth............................................... 153,603,563 158,227,226 Aggressive Equity........................................... 46,847,850 48,209,289 Mid-Cap Value............................................... 114,577,775 118,672,540 Mid-Cap Growth.............................................. 48,290,937 49,693,823 Small-Cap Value............................................. 40,731,141 42,425,935 Special Equity.............................................. 236,102,650 245,040,504 Small-Cap Growth............................................ 13,716,685 14,398,521 International Equity........................................ 142,317,183 149,080,031
188 (This page intentionally left blank) 189 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. SECURITIES LENDING (CONTINUED) Each Series has invested the cash collateral received from securities loaned in the following short term securities:
HIGH INTERMEDIATE QUALITY GOVERNMENT CORE TOTAL RETURN VALUE & BOND BOND BOND BOND BALANCED INCOME VALUE ---------- ------------ -------- ------------ ---------- ------------ ----------- Abbey National PLC, Time Deposit, 5.28%, 01/05/07.................. $ 364,379 $ 1,275,892 $ 41,534 $ 185,163 $ 363,074 $ 8,080,064 $ 666,606 Bank of America, Floating Rate Note, 5.31%(1), 03/08/07......... 364,379 1,275,892 41,534 185,163 363,074 8,080,064 666,606 Bank of America, Floating Rate Note, 5.31%(1), 07/10/07......... 437,256 1,531,072 49,842 222,195 435,688 9,696,077 799,926 Bank of Nova Scotia, Time Deposit, 5.29%, 01/30/07.................. 109,314 382,768 12,461 55,549 108,922 2,424,019 199,981 Bank of Nova Scotia, Time Deposit, 5.30%, 02/27/07.................. 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Bank of the West (The), Time Deposit, 5.29%, 01/17/07......... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Barclays, Time Deposit, 5.30%, 01/02/07......................... 291,503 1,020,715 33,228 148,130 290,459 6,464,052 533,284 Barclays, Time Deposit, 5.32%, 02/13/07......................... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Calyon, Time Deposit, 5.30%, 02/05/07......................... 109,314 382,768 12,461 55,549 108,922 2,424,019 199,981 Canadian Imperial Bank of Commerce, Time Deposit, 5.31%, 01/29/07......................... 291,503 1,020,715 33,228 148,130 290,459 6,464,052 533,284 Citigroup, Time Deposit, 5.31%, 03/05/07......................... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Citigroup, Time Deposit, 5.31%, 03/16/07......................... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Commonwealth Bank of Australia, Commercial Paper, 5.29%, 01/08/07......................... 361,499 1,265,807 41,207 183,699 360,204 8,016,192 661,335 Credit Suisse First Boston Corp., Time Deposit, 5.30%, 01/05/07.... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Credit Suisse First Boston Corp., Time Deposit, 5.30%, 01/12/07.... 218,627 765,536 24,921 111,099 217,844 4,848,038 399,963 Dexia Group, Time Deposit, 5.29%, 01/16/07......................... 145,752 510,357 16,614 74,065 145,229 3,232,026 266,643 First Tennessee National Corp., Time Deposit, 5.29%, 01/18/07.... 335,229 1,173,821 38,212 170,350 334,027 7,433,659 613,276 Fortis Bank, Time Deposit, 5.30%, 01/02/07......................... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Fortis Bank, Time Deposit, 5.32%, 01/03/07......................... 109,314 382,768 12,461 55,549 108,922 2,424,019 199,981 HBOS Halifax Bank of Scotland, Time Deposit, 5.30%, 01/08/07.... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 HBOS Halifax Bank of Scotland, Time Deposit, 5.30%, 01/25/07.... 109,314 382,768 12,461 55,549 108,922 2,424,019 199,981 HBOS Halifax Bank of Scotland, Time Deposit, 5.31%, 03/14/07.... 291,503 1,020,715 33,228 148,130 290,459 6,464,052 533,284 Lloyds TSB Bank, Time Deposit, 5.30%, 02/26/07.................. 218,627 765,536 24,921 111,099 217,844 4,848,038 399,963 Merrimac Cash Fund-Premium Class, 5.11%, 01/02/07.................. 240,490 842,090 27,413 122,207 239,629 5,332,843 439,959 Rabobank Nederland, Time Deposit, 5.25%, 01/02/07.................. 145,752 510,357 16,614 74,065 145,229 3,232,026 266,643 Rabobank Nederland, Time Deposit, 5.30%, 03/05/07.................. 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Royal Bank of Canada, Time Deposit, 5.31%, 02/14/07......... 291,503 1,020,715 33,228 148,130 290,459 6,464,052 533,284 Royal Bank of Canada, Time Deposit, 5.31%, 02/15/07......... 364,379 1,275,892 41,534 185,163 363,074 8,080,064 666,606 Royal Bank of Scotland, Time Deposit, 5.28%, 01/11/07......... 182,189 637,947 20,768 92,581 181,536 4,040,032 333,302 Royal Bank of Scotland, Time Deposit, 5.31%, 01/11/07......... 218,627 765,536 24,921 111,099 217,844 4,848,038 399,963 Royal Bank of Scotland, Time Deposit, 5.29%, 01/16/07......... 109,314 382,768 12,461 55,549 108,922 2,424,019 199,981 Royal Bank of Scotland, Time Deposit, 5.29%, 02/09/07......... 109,314 382,768 12,461 55,549 108,922 2,424,019 199,981 Societe Generale, Time Deposit, 5.31%, 01/02/07.................. 327,941 1,148,304 37,382 166,646 326,767 7,272,057 599,944 Societe Generale, Time Deposit, 5.27%, 01/19/07.................. 291,503 1,020,715 33,228 148,130 290,459 6,464,052 533,284 Svenska Handlesbanken, Time Deposit, 5.25%, 01/02/07......... 4,414 15,456 502 2,243 4,399 97,879 8,075 UBS AG, Time Deposit, 5.29%, 01/02/07......................... 145,752 510,357 16,614 74,065 145,229 3,232,026 266,643 UBS AG, Time Deposit, 5.30%, 01/04/07......................... 437,256 1,531,071 49,842 222,195 435,688 9,696,077 799,926 UBS AG, Time Deposit, 5.30%, 01/05/07......................... 145,752 510,357 16,614 74,065 145,229 3,232,026 266,643 ---------- ----------- -------- ---------- ---------- ------------ ----------- $8,411,400 $29,452,986 $958,807 $4,274,335 $8,381,259 $186,521,888 $15,388,046 ========== =========== ======== ========== ========== ============ ===========
Information pertaining to the investment of the cash collateral is shown on each Series' Portfolio of Investments. - --------------- (1) Variable Rate Security. The rate shown was in effect at December 31, 2006. 190
GROWTH & EQUITY AGGRESSIVE MID-CAP MID-CAP SMALL-CAP SPECIAL SMALL-CAP INCOME GROWTH EQUITY VALUE GROWTH VALUE EQUITY GROWTH ----------- ------------ ----------- ------------ ----------- ----------- ------------ ----------- $ 2,944,235 $ 6,854,349 $ 2,088,410 $ 5,140,853 $ 2,152,719 $ 1,837,878 $ 10,615,072 $ 623,739 2,944,235 6,854,349 2,088,410 5,140,853 2,152,719 1,837,878 10,615,072 623,739 3,533,081 8,225,219 2,506,092 6,169,024 2,583,262 2,205,452 12,738,085 748,487 883,270 2,056,304 626,523 1,542,256 645,816 551,363 3,184,521 187,122 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 2,355,387 5,483,479 1,670,728 4,112,683 1,722,175 1,470,301 8,492,056 498,991 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 883,270 2,056,304 626,523 1,542,256 645,816 551,363 3,184,521 187,122 2,355,387 5,483,479 1,670,728 4,112,683 1,722,175 1,470,301 8,492,056 498,991 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 2,920,960 6,800,166 2,071,901 5,100,215 2,135,702 1,823,349 10,531,158 618,808 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 1,766,541 4,112,610 1,253,046 3,084,512 1,291,632 1,102,726 6,369,042 374,243 1,177,694 2,741,740 835,364 2,056,342 861,088 735,152 4,246,029 249,496 2,708,696 6,306,001 1,921,337 4,729,585 1,980,502 1,690,847 9,765,865 573,840 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 883,270 2,056,304 626,523 1,542,256 645,816 551,363 3,184,521 187,122 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 883,270 2,056,304 626,523 1,542,256 645,816 551,363 3,184,521 187,122 2,355,387 5,483,479 1,670,728 4,112,683 1,722,175 1,470,301 8,492,056 498,991 1,766,541 4,112,610 1,253,046 3,084,512 1,291,632 1,102,726 6,369,042 374,243 1,943,195 4,523,870 1,378,351 3,392,964 1,420,795 1,212,999 7,005,946 411,668 1,177,694 2,741,740 835,363 2,056,342 861,088 735,152 4,246,029 249,497 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 2,355,387 5,483,479 1,670,728 4,112,683 1,722,175 1,470,301 8,492,056 498,991 2,944,235 6,854,349 2,088,410 5,140,853 2,152,719 1,837,878 10,615,072 623,739 1,472,117 3,427,175 1,044,205 2,570,427 1,076,360 918,938 5,307,535 311,869 1,766,541 4,112,610 1,253,046 3,084,512 1,291,632 1,102,726 6,369,042 374,243 883,270 2,056,304 626,523 1,542,256 645,816 551,363 3,184,521 187,122 883,270 2,056,304 626,523 1,542,256 645,816 551,363 3,184,521 187,122 2,649,811 6,168,914 1,879,569 4,626,768 1,937,447 1,654,089 9,553,563 561,365 2,355,387 5,483,479 1,670,728 4,112,683 1,722,175 1,470,301 8,492,056 498,991 35,666 83,031 25,298 62,276 26,077 22,264 128,588 7,556 1,177,694 2,741,740 835,363 2,056,342 861,088 735,152 4,246,029 249,497 3,533,081 8,225,219 2,506,092 6,169,024 2,583,262 2,205,452 12,738,085 748,487 1,177,694 2,741,740 835,363 2,056,342 861,088 735,152 4,246,029 249,497 ----------- ------------ ----------- ------------ ----------- ----------- ------------ ----------- $67,965,319 $158,227,226 $48,209,289 $118,672,540 $49,693,823 $42,425,935 $245,040,504 $14,398,521 =========== ============ =========== ============ =========== =========== ============ =========== INTERNATIONAL EQUITY ------------- $ 6,458,095 6,458,095 7,749,715 1,937,428 3,229,048 3,229,048 5,166,476 3,229,048 1,937,428 5,166,477 3,229,048 3,229,048 6,407,044 3,229,048 3,874,858 2,583,240 5,941,448 3,229,048 1,937,428 3,229,048 1,937,428 5,166,477 3,874,858 4,262,343 2,583,240 3,229,048 5,166,476 6,458,095 3,229,048 3,874,858 1,937,428 1,937,428 5,812,286 5,166,476 78,231 2,583,240 7,749,715 2,583,240 ------------ $149,080,031 ============
191 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. PURCHASES AND SALES OF INVESTMENTS The aggregate cost of investments purchased and proceeds from sales or maturities (excluding short-term securities) for the year ended December 31, 2006 were as follows:
COST OF PROCEEDS SERIES PURCHASES FROM SALES - ------ --------------- --------------- High Quality Bond................... US Government Obligations $ 89,809,478 $ 97,753,605 Other 409,631,851 341,214,599 Intermediate Government Bond........ US Government Obligations 855,678,815 891,486,813 Other 27,388,864 51,570,747 Core Bond........................... US Government Obligations 10,620,693,671 10,768,427,933 Other 706,662,057 460,979,391 Total Return Bond................... US Government Obligations 471,566,859 434,922,870 Other 43,858,510 15,779,633 High Yield Bond..................... Other 395,886,276 399,943,292 Balanced............................ US Government Obligations 800,452,734 790,750,198 Other 140,335,248 201,117,890 Value & Income...................... Other 982,039,339 1,034,280,364 Value............................... Other 92,660,391 39,617,703 Growth & Income..................... Other 838,188,264 988,115,002 Equity Growth....................... Other 2,076,008,340 2,249,025,763 Aggressive Equity................... Other 550,985,741 574,925,341 Mid-Cap Value....................... Other 784,847,234 605,054,203 Mid-Cap Growth...................... Other 471,868,733 449,598,988 Small-Cap Value..................... Other 245,248,093 238,432,009 Special Equity...................... Other 1,060,582,599 1,283,915,589 Small-Cap Growth.................... Other 269,771,031 256,014,697 International Equity................ Other 1,508,957,814 1,551,967,256
6. LEGAL AND REGULATORY MATTERS On December 12, 2003, the Series Portfolio received a copy of a complaint (the "Complaint") filed in the United States Bankruptcy Court for the Southern District of New York styled Enron Corp. v. J. P. Morgan Securities, Inc. et al. The Complaint names as defendants the Intermediate Government Bond Portfolio and the Value & Income Portfolio (the "Subject Portfolios") and alleges that Enron Corp. ("Enron") transferred to the defendants, including the Subject Portfolios, over $1 billion in the aggregate for the purpose of prepaying certain commercial paper issued by Enron (the "Notes") and held by the defendants prior to the filing by Enron for bankruptcy protection under Chapter 11 of Title 11 of the Bankruptcy Code (the "Bankruptcy Code"). The Complaint seeks to hold the defendants, including the Subject Portfolios, liable for these transfers as preferential transfers or as fraudulent transfers under the Bankruptcy Code. Although the Complaint does not specify the amount of each transfer in dispute, it appears that the sale by the Intermediate Government Bond Portfolio of approximately $2.4 million of the Notes on or about October 30, 2001 and the sale by the Value & Income Portfolio of approximately $10.3 million of the Notes on or about October 30, 2001 are in dispute. The Complaint seeks to require the Subject Portfolios to repay to Enron the full amounts of these transfers, in which event the Subject Portfolios would be granted unsecured claims against the Enron bankruptcy estate in the amounts of the repayments. The Subject Portfolios moved to dismiss all counts of the Complaint, contending, among other things, that section 546 (e) of the Bankruptcy Code provides a complete defense. The Bankruptcy Court denied the motion on July 1, 2005. Accordingly, the Subject Portfolios filed an answer to the Complaint on July 29, 2005. Discovery is underway. Depositions began in September 2006 and are scheduled to conclude in October 2007. The Subject Portfolios and their counsel have reviewed the 192 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. LEGAL AND REGULATORY MATTERS (CONTINUED) Subject Portfolios' records concerning the factual background of the allegations in the Complaint, and have considered remaining potential defenses to the allegations in the Complaint. Because discovery is still ongoing, the Subject Portfolios are unable to predict whether Enron will prevail, in whole or in part, in its claims against the Subject Portfolios, and therefore have not recorded a liability in the financial statements for any potential loss period. Diversified Investors Securities Corp. ("DISC") is the distributor for each of the Series and a subsidiary of the Series Portfolio's investment advisor, Diversified Investment Advisor, Inc. ("DIA"). On February 18, 2005, DISC was notified by NASD Staff that it had made a preliminary determination to recommend disciplinary action against DISC regarding certain matters. In February 2006, DISC settled an administrative proceeding with the NASD regarding agreements with two customers who were permitted to engage in market timing activity in the Diversified Investors International Equity Fund from July 1, 2003 through October 24, 2003. the settlement also addressed alleged deficiencies in DISC's procedures relating to the retention of e-mail communications. Under the terms of the Letter of Acceptance, Waiver and Consent ("AWC") with the NASD, under which DISC neither admitted nor denied the allegations or findings, DISC consented to the following sanctions: (i) censure; (ii) a fine of $1.3 million; (iii) restitution of approximately $949,011 to the Diversified International Equity Portfolio for losses attributable to the trading described in the AWC; and (iv) agreement to make certifications to the NASD regarding the review and establishment of procedures relating to e-mail retention and to the enforcement of the Funds' policies and procedures relating to market timing. The restitution payment of $949,011 referred to above was made on February 14, 2006. DISC and DIA have also responded to requests for information from various governmental and self-regulatory agencies in connection with investigations related to mutual fund trading activities. DISC and DIA have cooperated fully with each request. Although it is not anticipated that these developments will have an adverse effect on the Series Portfolio, there can be no assurance at this time. 7. PROXY VOTING POLICIES AND PROCEDURES (UNAUDITED) A description of the Series Portfolio's proxy voting policies and procedures is included in the Statement of Additional Information ("SAI"), which is available without charge, upon request: (i) by calling 1-800-755-5803; (ii) on the Series Portfolio's website at www.divinvest.com (Click on the icon for Participants, then click on Fund Information, choose Investment Funds, click on a Fund, then click on the Fund Information tab) or (iii) on the SEC's website at www.sec.gov. In addition, the Series Portfolio is required to file Form N-PX, with its complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. The Series Portfolio's filing for the twelve months ended June 30, 2006, will available without charge, upon request. 8. QUARTERLY PORTFOLIOS (UNAUDITED) The Series Portfolio will file its portfolios of investments for the first and third quarters (March 31 and September 30, respectively) with the SEC by May 30 and November 29, respectively, each year on Form N-Q. The Series Portfolio's Form N-Q is available on the SEC's website at www.sec.gov. The Series Portfolio's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. For information on the operation of the SEC's Public Reference Room, call 1-800-SEC-0330. You may also obtain a copy of Form N-Q without charge, upon request, by calling 1-800-755-5803. 193 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 9. CONCENTRATIONS AND INDEMNIFICATIONS Some Series may have elements of risk not typically associated with investments in the United States of America due to concentrated investments in a limited number of countries or regions, which may vary throughout the year. Such concentrations may subject the Series to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices more volatile than those of comparable US securities. As of December 31, 2006, the Aggressive Equity Series and Mid-Cap Growth Series invested approximately 11.38% and 10.55%, respectively, of its portfolio in issuers outside the United States. As of December 31, 2006, substantially all of the International Equity Series' net assets consist of securities of issuers that are denominated in foreign currencies. Changes in currency exchange rates will affect the value of, and investment income from, such securities. As of December 31, 2006, the International Equity Series invested approximately 19.47% and 19.48%, respectively, of its portfolio in issuers in Japan and United Kingdom, respectively. The ability of the issuers of debt, asset-backed and mortgage-backed securities to meet their obligations may be affected by the economic and political developments in a specific industry or region. The value of asset-backed and mortgage-backed securities can be significantly affected by changes in interest rates or rapid principal payments including prepayments. Credit risk is measured by the loss a Series would record if its counter-parties failed to perform pursuant to the terms of their obligations to the Series. Since certain Series enters into various types of debt obligations including private placements, swaps, forward currency contracts, spot contracts, forward commitments and over-the-counter options, credit exposure exists with counterparties. In the normal course of business, the Series Portfolio enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Series Portfolio's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Series Portfolio that have not yet occurred. However, based on experience, the Series Portfolio expects the risk of loss to be remote. 10. FOREIGN CURRENCY FORWARD, SPOT AND CROSS CURRENCY CONTRACTS At December 31, 2006, the Core Bond Series, Total Return Bond Series, Balanced Series, and International Equity Series had entered into foreign currency forward, spot and cross currency contracts which contractually obligate each portfolio to deliver/receive currency at specified future dates. The open contracts were as follows:
NET UNREALIZED FOREIGN IN EXCHANGE SETTLEMENT VALUE APPRECIATION/ CURRENCY FOR DATE AT 12/31/06 (DEPRECIATION) ----------- ----------- ---------- ----------- -------------- CORE BOND PURCHASE CONTRACTS: Euro.......................... 15,710,000 $20,150,573 01/10/07 $20,744,751 $ 594,178 New Zealand Dollar............ 5,812,792 4,003,561 01/10/07 4,093,942 90,381 ----------- TOTAL......................... $ 684,559 =========== SALE CONTRACTS: Euro.......................... 15,710,000 $20,212,800 01/10/07 $20,744,751 $ (531,951) New Zealand Dollar............ 11,358,753 7,463,030 01/10/07 7,999,955 (536,925) ----------- TOTAL......................... $(1,068,876) ===========
194 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. FOREIGN CURRENCY FORWARD, SPOT AND CROSS CURRENCY CONTRACTS (CONTINUED)
NET UNREALIZED FOREIGN IN EXCHANGE SETTLEMENT VALUE APPRECIATION/ CURRENCY FOR DATE AT 12/31/06 (DEPRECIATION) ----------- ----------- ---------- ----------- -------------- TOTAL RETURN BOND PURCHASE CONTRACTS: Canadian Dollar............... 153,287 $ 136,014 02/07/07 $ 131,586 $ (4,428) Euro.......................... 770,000 990,389 02/07/07 1,018,093 27,704 Japanese Yen.................. 110,028,000 933,049 02/07/07 928,672 (4,377) ----------- TOTAL......................... $ 18,899 =========== SALE CONTRACTS: Canadian Dollar............... 445,069 $ 395,285 02/07/07 $ 382,059 $ 13,226 Euro.......................... 302,634 381,464 02/07/07 400,143 (18,679) ----------- TOTAL......................... $ (5,453) =========== BALANCED PURCHASE CONTRACTS: Euro.......................... 1,200,000 $ 1,543,464 02/07/07 $ 1,586,639 $ 43,175 Japanese Yen.................. 179,574,000 1,522,807 02/07/07 1,515,663 (7,144) ----------- TOTAL......................... $ 36,031 =========== SALE CONTRACTS: Canadian Dollar............... 530,717 $ 471,353 02/07/07 $ 455,582 $ 15,771 Euro.......................... 514,478 648,490 02/07/07 680,243 (31,753) ----------- TOTAL......................... $ (15,982) =========== INTERNATIONAL EQUITY PURCHASE CONTRACTS: Australian Dollar............. 3,922 $ 3,089 01/03/07 $ 3,095 $ 6 Euro.......................... 21,617 28,528 01/04/07 28,536 8 Japanese Yen.................. 1,131,540 9,502 01/04/07 9,508 6 Japanese Yen.................. 15,127,670 127,129 01/09/07 127,186 57 ----------- $ 77 =========== SALE CONTRACTS: Australian Dollar............. 313,159 $ 247,079 01/03/07 $ 247,192 $ (113) Euro.......................... 1,556,527 2,043,610 01/02/07 2,054,693 (11,083) Euro.......................... 1,608,058 2,116,462 01/03/07 2,122,717 (6,255) Great British Pounds.......... 445,060 870,551 01/02/07 871,428 (877) Great British Pounds.......... 585,033 1,148,887 01/03/07 1,145,494 3,393 Great British Pounds.......... 460,993 902,353 01/04/07 902,631 (278) Hong Kong Dollars............. 4,036,068 519,322 01/02/07 518,888 434 Japanese Yen.................. 316,962,299 2,671,113 01/05/07 2,663,437 7,676 ----------- TOTAL......................... $ (7,103) ===========
NET UNREALIZED PURCHASE SALE APPRECIATION/ SETTLEMENT DATE CURRENT VALUE CURRENT VALUE (DEPRECIATION) --------------- ------------- ------------- -------------- FOREIGN CROSS CURRENCY CONTRACTS: PURCHASE/SALE Japanese Yen/Swiss Franc................... 01/05/07 $498,486 $500,117 $(1,631) =======
195 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. FINANCIAL HIGHLIGHTS
RATIOS TO AVERAGE NET ASSETS --------------------------------------------------------- NET NET INVESTMENT FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS, YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER YEAR RETURN ------- -------- --------------- ---------- --------------- --------- -------------- ------ MONEY MARKET 12/31/2006 0.28% 0.28% 4.77% 4.77% N/A $ 925,940,609 4.86% 12/31/2005 0.28 0.28 2.97 2.97 N/A 765,777,258 3.00 12/31/2004 0.28 0.28 1.17 1.17 N/A 809,352,385 1.17 12/31/2003 0.28 0.28 1.11 1.11 N/A 799,572,598 1.11 12/31/2002 0.28 0.28 1.70 1.70 N/A 864,772,946 1.72 HIGH QUALITY BOND 12/31/2006 0.38 0.38 4.03 4.03 55% 817,623,186 4.38 12/31/2005 0.39 0.39 3.25 3.25 58 788,399,166 1.95 12/31/2004 0.38 0.38 2.96 2.96 48 690,594,378 1.48 12/31/2003 0.38 0.38 3.19 3.19 50 622,748,334 2.34 12/31/2002 0.38 0.38 4.36 4.36 54 439,015,018 6.21 INTERMEDIATE GOVERNMENT BOND 12/31/2006 0.41 0.40 4.49 4.50 525 150,681,168 3.48 12/31/2005 0.40 0.40 3.45 3.45 756 261,106,523 1.34 12/31/2004 0.42 0.40 2.46 2.48 554 256,502,651 1.59 12/31/2003 0.38 0.38 2.91 2.91 392 265,519,988 1.60 12/31/2002 0.39 0.39 3.93 3.93 134 358,005,390 8.31 CORE BOND 12/31/2006 0.38 0.38 4.50 4.50 487(a) 2,077,821,449 4.17 12/31/2005 0.39 0.39 3.99 3.99 1,003(a) 2,052,893,035 2.38 12/31/2004 0.39 0.39 3.62 3.62 885(a) 1,655,367,885 4.65 12/31/2003 0.39 0.39 3.52 3.52 922(a) 1,468,787,007 4.64 12/31/2002 0.39 0.39 4.85 4.85 462 999,624,604 9.24 TOTAL RETURN BOND 12/31/2006 0.50 0.40 4.64 4.74 470(a) 120,636,427 4.96 12/31/2005(1) 0.55* 0.40* 3.93* 4.08* 327(a) 70,072,859 2.35
196 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. FINANCIAL HIGHLIGHTS (CONTINUED)
RATIOS TO AVERAGE NET ASSETS --------------------------------------------------------- NET NET INVESTMENT FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS, YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER YEAR RETURN ------- -------- --------------- ---------- --------------- --------- -------------- ------ HIGH YIELD BOND 12/31/2006 0.59% 0.59% 7.86% 7.86% 93% $ 502,330,056 11.99% 12/31/2005 0.60 0.60 7.74 7.74 68 416,027,255 3.34 12/31/2004 0.60 0.60 8.06 8.06 80 351,772,536 10.32 12/31/2003 0.61 0.60 9.07 9.08 136 282,700,774 27.91 12/31/2002 0.61 0.60 9.15 9.16 95 208,085,535 2.19 BALANCED 12/31/2006 0.53 0.50 2.69 2.72 224(a) 381,648,801 11.74 12/31/2005 0.54 0.50 2.21 2.25 367(a) 410,747,655 5.59 12/31/2004 0.52 0.50 2.19 2.21 338(a) 419,726,689 8.31 12/31/2003 0.51 0.50 2.15 2.16 377(a) 434,085,832 17.69 12/31/2002 0.52 0.50 2.63 2.65 289 375,745,612 (10.01) VALUE & INCOME 12/31/2006 0.48 0.48 1.47 1.47 31 3,538,943,726 20.68 12/31/2005 0.48 0.48 1.38 1.38 89 3,018,060,297 6.88 12/31/2004 0.48 0.48 1.79 1.79 44 2,705,463,322 12.91 12/31/2003 0.47 0.47 1.91 1.91 70 2,198,085,735 26.52 12/31/2002 0.48 0.48 1.97 1.97 31 1,553,159,805 (15.25) VALUE 12/31/2006 0.71 0.55 1.26 1.42 74 101,282,906 15.44 12/31/2005(1) 1.18* 0.55* 1.15* 1.78* 21 35,138,512 9.47 GROWTH & INCOME 12/31/2006 0.63 0.63 1.11 1.11 73 1,159,020,245 11.77 12/31/2005 0.64 0.64 0.96 0.96 79 1,178,758,869 7.12 12/31/2004 0.64 0.64 1.22 1.22 184 1,135,948,434 10.79 12/31/2003 0.63 0.63 1.02 1.02 100 1,063,389,332 24.16 12/31/2002 0.66 0.65 0.77 0.78 115 799,621,503 (22.57)
197 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. FINANCIAL HIGHLIGHTS (CONTINUED)
RATIOS TO AVERAGE NET ASSETS --------------------------------------------------------- NET NET INVESTMENT FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS, YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER YEAR RETURN ------- -------- --------------- ---------- --------------- --------- -------------- ------ EQUITY GROWTH 12/31/2006 0.64% 0.64% 0.43% 0.43% 84% $2,526,917,456 4.12% 12/31/2005 0.65 0.65 0.34 0.34 76 2,587,382,061 7.18 12/31/2004 0.65 0.65 0.68 0.68 129 2,290,559,947 7.75 12/31/2003 0.65 0.65 0.34 0.34 61 1,975,636,700 26.48 12/31/2002 0.65 0.65 0.22 0.22 75 1,146,889,083 (23.60) AGGRESSIVE EQUITY 12/31/2006 0.81 0.80 (0.18) (0.17) 147 382,667,908 6.46 12/31/2005 0.81 0.80 (0.15) (0.14) 187 382,129,060 8.20 12/31/2004 0.95 0.94 (0.49) (0.48) 252 397,726,867 12.14 12/31/2003 1.01 1.00 (0.61) (0.60) 165 371,333,010 28.12 12/31/2002 1.01 1.00 (0.60) (0.59) 87 312,299,599 (26.56) MID-CAP VALUE 12/31/2006 0.71 0.70 1.16 1.17 80 936,974,205 18.33 12/31/2005 0.72 0.70 1.26 1.28 112 641,531,538 9.77 12/31/2004 0.71 0.70 0.78 0.79 147 414,710,679 25.47 12/31/2003 0.75 0.70 0.51 0.56 156 216,193,119 41.63 12/31/2002 1.02 0.70 0.20 0.52 156 47,629,380 (15.09) MID-CAP GROWTH 12/31/2006 0.75 0.75 (0.31) (0.31) 151 309,909,061 2.17 12/31/2005 0.76 0.75 (0.39) (0.38) 142 282,950,442 13.42 12/31/2004 0.79 0.75 (0.33) (0.29) 223 210,100,872 15.38 12/31/2003 0.81 0.75 (0.37) (0.31) 100 165,747,874 26.91 12/31/2002 0.96 0.75 (0.62) (0.41) 138 44,270,757 (25.29)
198 DIVERSIFIED INVESTORS PORTFOLIOS NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. FINANCIAL HIGHLIGHTS (CONTINUED)
RATIOS TO AVERAGE NET ASSETS --------------------------------------------------------- NET NET INVESTMENT FOR THE NET EXPENSES INVESTMENT INCOME (LOSS) NET ASSETS, YEAR NET (NET OF INCOME (NET OF PORTFOLIO END OF TOTAL ENDED EXPENSES REIMBURSEMENTS) (LOSS) REIMBURSEMENTS) TURNOVER YEAR RETURN ------- -------- --------------- ---------- --------------- --------- -------------- ------ SMALL-CAP VALUE 12/31/2006 0.87% 0.85% 0.25% 0.27% 105% $ 236,316,718 9.64% 12/31/2005 0.88 0.85 0.07 0.10 143 218,749,221 (4.70) 12/31/2004 0.89 0.85 0.27 0.31 42 172,735,949 21.75 12/31/2003 0.94 0.85 1.19 1.28 40 100,887,458 41.10 12/31/2002(2) 1.39* 0.85* (0.17)* 0.37* 26 17,920,226 (21.90) SPECIAL EQUITY 12/31/2006 0.85 0.85 0.29 0.29 86 1,211,556,459 11.77 12/31/2005 0.85 0.85 0.09 0.09 92 1,296,671,909 10.53 12/31/2004 0.84 0.84 0.15 0.15 103 1,227,530,742 12.63 12/31/2003 0.85 0.85 (0.02) (0.02) 103 1,270,601,125 43.96 12/31/2002 0.84 0.84 0.05 0.05 109 1,005,958,858 (24.33) SMALL-CAP GROWTH 12/31/2006 1.04 0.90 (0.43) (0.29) 173 155,003,004 8.71 12/31/2005 0.98 0.90 (0.49) (0.41) 183 132,903,534 0.55 12/31/2004 0.97 0.90 (0.58) (0.51) 84 108,429,152 11.94 12/31/2003 1.02 0.90 (0.29) (0.17) 81 83,589,643 39.31 12/31/2002(2) 1.48* 0.90* (1.03)* (0.45)* 68 16,521,455 (15.98) INTERNATIONAL EQUITY 12/31/2006 0.87 0.87 1.78 1.78 81 2,101,152,473 27.31 12/31/2005 0.88 0.88 2.03 2.03 94 1,721,786,149 11.20 12/31/2004 0.87 0.87 1.85 1.85 171 1,401,617,944 19.66 12/31/2003 0.86 0.86 1.11 1.11 23 1,049,033,896 33.52 12/31/2002 0.87 0.87 0.83 0.83 25 656,888,348 (16.90)
- --------------- (a) Portfolio turnover calculation includes effect of buying and selling TBA securities used in dollar roll transactions. Refer to Note 2I. * Annualized. (1) Commencement of Operations, May 6, 2005. (2) Commencement of Operations, April 15, 2002. 199 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Owners of Beneficial Interests of the Diversified Investors Portfolios: In our opinion, the accompanying statements of assets and liabilities, including the portfolios 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 the Money Market Portfolio, High Quality Bond Portfolio, Intermediate Government Bond Portfolio, Core Bond Portfolio, Total Return Bond Portfolio, High Yield Bond Portfolio, Balanced Portfolio, Value & Income Portfolio, Value Portfolio, Growth & Income Portfolio, Equity Growth Portfolio, Aggressive Equity Portfolio, Mid-Cap Value Portfolio, Mid-Cap Growth Portfolio, Small-Cap Value Portfolio, Special Equity Portfolio, Small-Cap Growth Portfolio and International Equity Portfolio (constituting the Diversified Investors Portfolios, hereafter referred to as the "Portfolios") at December 31, 2006, the results of each of their operations, the changes in each of their net assets, and the financial highlights for the periods presented, 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 Portfolios' 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York February 27, 2007 200 DIVERSIFIED INVESTORS PORTFOLIOS APPROVAL OF INVESTMENT ADVISORY CONTRACTS DECEMBER 31, 2006 (UNAUDITED) Diversified Investment Advisors, Inc. ("Diversified") manages the assets of each series of Diversified Investors Portfolios (each, a "Portfolio") pursuant to an Investment Advisory Agreement (the "Diversified Advisory Agreement") with Diversified Investors Portfolios. For each Portfolio, Diversified has entered into an Investment Subadvisory Agreement (each, a "Subadvisory Agreement") with one or more Subadvisers. A discussion of the Board's considerations and determinations with respect to the continuation of existing Diversified Advisory Agreements and Subadvisory Agreements and the approval of new Subadvisory Agreements during the six-month period ended June 30, 2006 is included in the Funds' Semi-Annual Report for such period. Additionally, five new Subadvisory Agreements were approved during the six-month period ended December 31, 2006. CORE BOND PORTFOLIO. BlackRock Advisors, Inc. ("BlackRock Advisors"), a Delaware corporation, became subadviser for the Core Bond Portfolio on December 3, 2001. On September 29, 2006, BlackRock, Inc. ("BlackRock"), the owner of 100% of the beneficial interest in the Core Bond Portfolio's subadviser at that time, BlackRock Advisors, acquired Merrill Lynch Investment Managers ("MLIM") in exchange for giving Merrill Lynch & Co., Inc. ("Merrill Lynch") a 49.8% interest in the combined company. This transaction constituted an "assignment" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"), which resulted in the termination of the subadvisory agreement with BlackRock Advisors (the "Original BlackRock Subadvisory Agreement"). As part of the transaction, BlackRock Advisors transferred a number of its sub-advisory agreements to BlackRock Financial Management, Inc. ("BlackRock Financial Management"), including the Original BlackRock Subadvisory Agreement. The Board met on August 22, 2006, prior to the close of the transaction, and approved a new subadvisory agreement with BlackRock Financial Management (the "New BlackRock Subadvisory Agreement"), which took effect upon the closing of the transaction. At the meeting, the Board of Trustees received presentations from Diversified and representatives of BlackRock Financial Management. Discussed below are some of the material factors considered by the Board. The Board considered information with respect to BlackRock Financial Management, the rationale, structure and results of the proposed transaction between BlackRock and MLIM and whether the New BlackRock Subadvisory Agreement was in the best interests of the Core Bond Portfolio and its holders of beneficial interests. The Board noted that the combination of BlackRock and MLIM is expected to achieve scale in multiple products and markets, and result in a combined company with assets of approximately $1 trillion. The Board considered BlackRock's investment philosophy of emphasizing relative value, with value added primarily through sector and sub-sector rotation and security selection and portfolio duration controlled within a narrow band. The Board also considered the competitive performance of BlackRock against its benchmark and noted that the proposed transaction between BlackRock and MLIM is anticipated to result in the incorporation of each side's strengths. The Board considered that the Portfolio's portfolio management team was not expected to change as a result of the proposed transaction. The Board also noted that, other than the effective and termination dates and the identity of the BlackRock-affiliated subadviser, the New BlackRock Subadvisory Agreement was identical to the Original BlackRock Subadvisory Agreement, which the Board had recently approved. In their deliberations, the Board also considered information that had been received by the Board in connection with the Board's most recent approval of the Original BlackRock Subadvisory Agreement, in addition to information provided in connection with the Board's evaluation of the terms and conditions of the New BlackRock Subadvisory Agreement. 201 DIVERSIFIED INVESTORS PORTFOLIOS APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) Based upon its review and the representations made to it, the Board, including all of the Trustees who are not "interested persons" (as defined in the 1940 Act) of any party to the New Subadvisory Agreement (the "Independent Trustees"), concluded that (a) the terms of the New BlackRock Subadvisory Agreement are reasonable, fair and in the best interests of the Core Bond Portfolio and its holders of beneficial interests, and (b) the fee provided in the New BlackRock Subadvisory Agreement is fair and reasonable in light of the usual and customary charges made for services of the same nature and quality. Accordingly, after consideration of the above factors, and such other factors and information as it deemed relevant, the Board, including all of the Independent Trustees, approved the New BlackRock Subadvisory Agreement with BlackRock Financial Management. MID-CAP VALUE PORTFOLIO. At a meeting held on August 22, 2006, the Board of Trustees approved the appointment of RiverSource Investments, LLC ("RiverSource") as an additional subadviser to the Mid-Cap Value Portfolio. The Board of Trustees approved an Investment Subadvisory Agreement between Diversified and RiverSource (the "RiverSource Subadvisory Agreement"), following presentations by Diversified and representatives of RiverSource. Discussed below are some of the material factors considered by the Board. The Board considered the imminent capacity restraints of the Mid-Cap Value Portfolio's current subadvisers, and the resulting need to hire a third subadviser for the Portfolio. The Board noted that Diversified had identified and interviewed several advisers in an effort to locate a subadviser with an investment strategy that would complement the current subadvisers in the management of the Mid-Cap Value Portfolio, with sufficient capacity and with a demonstrable disciplined sub-style. The Board considered information with respect to RiverSource and whether the RiverSource Subadvisory Agreement was in the best interests of the Mid-Cap Value Portfolio and its holders of beneficial interests. As part of their deliberations, the Board took into account the nature and quality of the anticipated services to be provided by RiverSource and reviewed and discussed information regarding RiverSource's fees and composite performance, as compared to funds with similar investment objectives and the Russell Mid-Cap Value Index. The Board considered RiverSource's investment philosophy, which emphasizes a disciplined contrarian process with longer time horizons and a focus on opportunistic deep value. The Board also reviewed the major components of RiverSource's investment model, which employs a thematic top-down and bottom-up approach by industry, focusing on growth features of stocks. In evaluating RiverSource's ability to provide services to the Mid-Cap Value Portfolio, the Board also considered information as to RiverSource's business organization, financial resources, personnel, philosophy and other matters. The Board reviewed the qualifications, backgrounds and responsibilities of the senior personnel of RiverSource and the portfolio management team that would be primarily responsible for the day-to-day management of the Mid-Cap Value Portfolio. The Board received and considered information regarding the nature, extent and quality of services expected to be provided to the Mid-Cap Value Portfolio by RiverSource under the RiverSource Subadvisory Agreement and also considered the financial resources available to RiverSource. The Board reviewed and considered the subadvisory fee that would be payable by Diversified to RiverSource in light of the nature, extent and quality of the management services expected to be provided by RiverSource and the subadvisory fee paid to subadvisers of funds with similar mandates. The Board noted that Diversified, and not the Mid-Cap Value Portfolio, will pay the subadvisory fee to RiverSource. The Board recognized that RiverSource may realize economies of scale as the assets of the Mid-Cap Value Portfolio and the portion of the Portfolio allocated to RiverSource by Diversified grow. The Board noted that the terms and conditions of the RiverSource Subadvisory Agreement were substantially similar to the subadvisory agreement with LSV Asset Management and Cramer Rosenthal McGlynn, LLC, the Mid-Cap Value Portfolio's other subadvisers. Based upon its review and the representations made to it, the Board, including all of the Independent Trustees, concluded that (a) the terms of the RiverSource Subadvisory Agreement are reasonable, fair and in the best 202 DIVERSIFIED INVESTORS PORTFOLIOS APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) interests of the Mid-Cap Value Portfolio and its holders of beneficial interests, and (b) the fee provided in the RiverSource Subadvisory Agreement is fair and reasonable in light of the usual and customary charges made for services of the same nature and quality. Accordingly, after consideration of the above factors, and such other factors and information as it deemed relevant, the Board, including all of the Independent Trustees, approved the RiverSource Subadvisory Agreement. SMALL-CAP VALUE PORTFOLIO. At a meeting held on August 22, 2006, the Board of Trustees approved the appointment of Mesirow Financial Investment Management, Inc. ("Mesirow") as an additional subadviser to the Small-Cap Value Portfolio. The Board of Trustees approved an Investment Subadvisory Agreement between Diversified and Mesirow (the "Mesirow Subadvisory Agreement"), following presentations by Diversified and representatives of Mesirow. Discussed below are some of the material factors considered by the Board. The Board considered the capacity restraints of the Small-Cap Value Portfolio's current subadviser, and the resulting need to hire a second subadviser for the Portfolio. Diversified reviewed with the Board its search process and criteria. The Board considered information with respect to Mesirow and whether the Mesirow Subadvisory Agreement was in the best interests of the Small-Cap Value Portfolio and its holders of beneficial interests. As part of their deliberations, the Board took into account the nature and quality of the anticipated services to be provided by Mesirow and reviewed and discussed information regarding Mesirow's fees and the performance of Mesirow funds with similar investment objectives as the Portfolio as compared to the Russell 2000 Value Index, the Russell Index and the Small-Cap Value Portfolio. The Board considered Mesirow's investment philosophy that a diversified portfolio of undervalued securities should outperform the market over time as well as preserve principal in a difficult market environment. The Board reviewed Mesirow's investment strategy, which employs a three stage process comprising of the identification of undervalued companies based on historical capital markets research, detailed analysis of company financial statements and operations and portfolio selection, trading and monitoring. The Board also reviewed the major components of Mesirow's investment model, which utilizes a fundamental bottom-up approach to investing, with stronger emphasis on dividend yield. In evaluating Mesirow's ability to provide services to the Portfolio, the Trustees also considered information as to Mesirow's financial resources, portfolio holdings, institutional client list, personnel, financial sector allocations, compliance program and other matters. Based upon its review and the representations made to it, the Board, including all of the Independent Trustees, concluded that (a) the terms of the Mesirow Subadvisory Agreement are reasonable, fair and in the best interests of the Small-Cap Value Portfolio and its holders of beneficial interests, and (b) the fee provided in the Mesirow Subadvisory Agreement is fair and reasonable in light of the usual and customary charges made for services of the same nature and quality. Accordingly, after consideration of the above factors, and such other factors and information as it deemed relevant, the Board, including all of the Independent Trustees, approved the Mesirow Subadvisory Agreement. SPECIAL EQUITY PORTFOLIO. RS Investment Management, L.P., a California limited partnership, became a subadviser to the Special Equity Portfolio on March 26, 1999. On August 31, 2006, Guardian Investor Services LLC, a wholly owned subsidiary of The Guardian Life Insurance Company of America, acquired a majority interest in RS Investment Management Co. LLC ("RS"), the general partner of, and owner of 99.9% of the beneficial interest in the Special Equity Portfolio's subadviser at that time, RS Investment Management, L.P. This transaction constituted an "assignment" within the meaning of the 1940 Act, which resulted in the termination of the original subadvisory agreement with RS Investment Management, L.P. (the "Original RS Subadvisory Agreement"). In connection with the transaction, RS undertook a reorganization in which all investment advisory activities, including the activities of RS Investment Management, L.P., were consolidated under RS. This transaction did not result in a change in the composition of the RS portfolio 203 DIVERSIFIED INVESTORS PORTFOLIOS APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) management teams or investment professional compensation and did not materially impact the business or investment strategy of RS. The Board met on July 26, 2006, prior to the close of the transaction, and approved a new subadvisory agreement with RS (the "New RS Subadvisory Agreement"), which took effect upon the closing of the transaction. At the meeting, the Board of Trustees received presentations from Diversified and representatives of RS. Discussed below are some of the material factors considered by the Board. The Trustees considered information with respect to RS, the performance results of the Special Equity Portfolio, the rationale, structure and results of the acquisition and whether the New RS Subadvisory Agreement was in the best interests of the Special Equity Portfolio and its holders of beneficial interests. The Trustees considered that all portfolio managers of RS, who were employed by RS prior to the acquisition, were to enter into five-year employment agreements in connection with the acquisition. The Trustees noted that, after the acquisition, RS portfolio management teams and investment professional compensation was expected to remain unchanged and no material impact on the business or investment strategy of RS was expected. The Trustees noted that RS would retain operational and investment management autonomy after the acquisition. The Trustees also noted that, other than the effective and termination dates, the New RS Subadvisory Agreement was identical to the Original RS Subadvisory Agreement, which the Trustees had recently approved. Based upon its review and the representations made to it, the Board of Trustees, including all of the Independent Trustees, concluded that (a) the terms of the New RS Subadvisory Agreement are reasonable, fair and in the best interests of the Special Equity Portfolio and its holders of beneficial interests, and (b) the fee provided in the New RS Subadvisory Agreement is fair and reasonable in light of the usual and customary charges made for services of the same nature and quality. Accordingly, after consideration of the above factors, and such other factors and information as it deemed relevant, the Board of Trustees, including all of the Independent Trustees, approved the New RS Subadvisory Agreement. SMALL-CAP GROWTH PORTFOLIO. At a meeting held on July 20, 2006, the Board of Trustees considered the termination of Trusco Capital Management, Inc. ("Trusco") as the subadviser to the Small-Cap Growth Portfolio and the appointment of Perimeter Capital Partners, LLC ("Perimeter") as interim subadviser to the Portfolio. The Trustees reviewed the Small-Cap Growth Portfolio's performance and considered the ability of Trusco to continue to effectively manage the Portfolio. The Board noted the performance of the Small-Cap Growth Portfolio and based on Diversified's recommendation, the Board authorized Diversified to terminate the Subadvisory Agreement with Trusco (the "Trusco Subadvisory Agreement"). Accordingly, effective July 24, 2006, Diversified terminated the Trusco Subadvisory Agreement. At Diversified's recommendation, the Small-Cap Growth Portfolio entered into an interim Subadvisory Agreement with Perimeter, whereby Perimeter became interim subadviser of the Small-Cap Growth Portfolio effective July 24, 2006 for a period no longer than 150 days in reliance on Rule 15a-4 under the Investment Company Act of 1940. At a meeting held on November 28, 2006, the Board of Trustees considered the appointment of Perimeter under a standard contractual term, and approved an Investment Subadvisory Agreement between Perimeter and Diversified with respect to the Small-Cap Growth Portfolio (the "Perimeter Subadvisory Agreement"), following presentations by Diversified and representatives of Perimeter. The Perimeter Subadvisory Agreement shall remain in force for an initial term of two years, unless otherwise terminated in accordance with the terms of the Agreement. Discussed below are some of the material factors considered by the Board. The Board considered Perimeter's performance as interim subadviser of the Small-Cap Growth Portfolio since July 24, 2006. The Board considered information with respect to Perimeter and whether the Perimeter Subadvisory Agreement was in the best interests of the Small-Cap Growth Portfolio and its holders of 204 DIVERSIFIED INVESTORS PORTFOLIOS APPROVAL OF INVESTMENT ADVISORY CONTRACTS (CONTINUED) DECEMBER 31, 2006 (UNAUDITED) beneficial interests. As part of their deliberations, the Board took into account the nature and quality of the services currently provided and to be provided by Perimeter. The Board considered the performance of the Small-Cap Growth Portfolio while Perimeter was interim subadviser as compared to the Portfolio's benchmark, the Russell 2000 Growth Index. The Board considered Perimeter's investment philosophy, the foundation of which is a bottom-up approach to fundamental research and analysis. The Board noted Perimeter's investment process in which fundamental research is obtained, organized and prioritized and a research team then assesses the results of the fundamental research in the context of competitive positioning, industry/business cycle analyses, peer comparison, valuation analysis and viability of a company's business model. The Board reviewed Perimeter's investment strategy, which is earnings-growth focused, uses diversification to control risk, employs sell discipline as a critical link to successful stock selection and looks for style specific results. In evaluating Perimeter's ability to provide services to the Small-Cap Growth Portfolio, the Trustees also considered information as to Perimeter's financial resources, portfolio holdings, investment advisory fees, personnel, compliance policies and procedures and other matters. The Board reviewed the qualifications, backgrounds and responsibilities of the senior personnel of Perimeter and the portfolio management team that would be primarily responsible for the day-to-day management of the Small-Cap Growth Portfolio. The Board received and considered information regarding the nature, extent and quality of services expected to be provided to the Small-Cap Growth Portfolio by Perimeter under the Perimeter Subadvisory Agreement. The Board reviewed and considered the subadvisory fee that would be payable by Diversified to Perimeter in light of the nature, extent and quality of the management services expected to be provided by Perimeter and the subadvisory fee paid to subadvisers of funds with similar mandates. The Board noted that Diversified, and not the Small-Cap Growth Portfolio, will pay the subadvisory fee to Perimeter. The Board recognized that Perimeter may realize economies of scale as the assets of the Small-Cap Growth Portfolio and the portion of the Portfolio allocated to Perimeter by Diversified grow. The Board noted that the terms and conditions of the Perimeter Subadvisory Agreement were substantially similar to the Trusco Subadvisory Agreement. Based upon its review and the representations made to it, the Board, including all of the Independent Trustees, concluded that (a) the terms of the Perimeter Subadvisory Agreement are reasonable, fair and in the best interests of the Small-Cap Growth Portfolio and its holders of beneficial interests, and (b) the fee provided in the Perimeter Subadvisory Agreement is fair and reasonable in light of the usual and customary charges made for services of the same nature and quality. Accordingly, after consideration of the above factors, and such other factors and information as it deemed relevant, the Board, including all of the Independent Trustees, approved the Perimeter Subadvisory Agreement. * * * * * No single factor reviewed by the Board was identified as the principal factor in determining whether to approve a New Subadvisory Agreement, and each Board member attributed different weight to the various factors. The Independent Trustees discussed the proposed approval of each New Subadvisory Agreement in private sessions with their independent legal counsel at which no representatives of Diversified or the applicable subadviser were present. 205 DIVERSIFIED INVESTORS PORTFOLIOS TRUSTEES INFORMATION (UNAUDITED) Each portfolio is supervised by the Board of Trustees of Diversified Investors Portfolios. The respective Trustees and officers of each Series and their principal occupations during the past five years are set forth below. Their titles may have varied during that period. Unless otherwise indicated, the address of each Trustee and officer of Diversified Investors Portfolios is c/o Diversified Investment Advisors, Inc., Four Manhattanville Road, Purchase, New York 10577. Additional information about Diversified Investors Portfolios' Trustees may be found in Diversified Investors Portfolios' Statement of Additional Information, which is available without charge upon request by calling 1-800-755-5801. OFFICERS AND INTERESTED TRUSTEES:
POSITION(S), LENGTH OF PRINCIPAL OCCUPATIONS DURING NAME AND AGE TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD - ------------ ---------------------- ----------------------------------- Elizabeth L. Belanger.................. Assistant Secretary 05/2005 to present -- Vice DOB: January 7, 1972 since 2005 President and Senior Counsel, Diversified Investment Advisors, Inc.; 11/2003 to 05/2005 -- Director of Compliance, Domini Social Investments LLC; 09/1997-10/2003 -- Associate, Bingham McCutchen LLP; 04/2006 to present -- Director, Transamerica Financial Life Insurance Company. Joseph P. Carusone..................... Treasurer since 2001 Vice President and Director, DOB: September 8, 1965 Diversified Investment Advisors, Inc.; 2004 to present -- Director, Transamerica Financial Life Insurance Company; 01/2007 to present -- President, Diversified Investors Securities Corp. Robert F. Colby........................ Secretary since 1993 Senior Vice President and General DOB: November 1, 1955 Counsel, Diversified Investment Advisors, Inc.; Vice President, Diversified Investors Securities Corp.; Vice President, Assistant Secretary, and Director, Transamerica Financial Life Insurance Company, Inc. Suzanne Montemurro..................... Assistant Treasurer Vice President and Director, DOB: August 13, 1964 since 2002 Diversified Investment Advisors, Inc. Mark Mullin............................ President since 2002 Chairman of the Board and Chief DOB: February 16, 1963 Trustee since 1998 Executive Officer, Diversified Investment Advisors, Inc.; 02/2002 to present -- Director, Transamerica Financial Life Insurance Company. Quedel Principal....................... Assistant Secretary Vice President and Senior Counsel, DOB: February 4, 1966 since 2004 Diversified Investment Advisors, Inc.; Director, Diversified Investors Securities Corp. Rick Resnik............................ Chief Compliance Chief Compliance Officer, DOB: January 24, 1967 Officer since 2004 Diversified Investment Advisors, Inc.; Director, Vice President, and Chief Compliance Officer, Diversified Investors Securities Corp.
206 DIVERSIFIED INVESTORS PORTFOLIOS TRUSTEES INFORMATION (CONTINUED) (UNAUDITED) DISINTERESTED TRUSTEES:
POSITION(S), LENGTH OF PRINCIPAL OCCUPATIONS DURING NAME AND AGE TIME SERVED PAST 5 YEARS, DIRECTORSHIPS HELD - ------------ ---------------------- ----------------------------------- Neal M. Jewell......................... Trustee since 1993 10/2004 to present -- Retired; DOB: February 12, 1935 01/1996 to 10/2004 -- Independent Trustee, EACM Select Managers Equity Fund Mitchell Johnson....................... Trustee since 2006 07/1994 to present -- Private DOB: March 1, 1942 Investor, MAJ Capital Management; 06/1996 to present -- Director, Federal Agriculture Mortgage Corporation; 02/2005 to present -- Trustee, Advisors Inner Circle Funds, Advisors Inner Circle Funds II, and Bishop Street Funds (family of mutual funds); 12/1997 to 02/2004 -- Trustee, Citizens Funds (family of mutual funds) Eugene M. Mannella..................... Trustee since 1993 1/2006 to present -- Consultant DOB: February 1, 1954 (self- employed); 08/1993 to 12/2005 -- President, International Fund Services, Inc. Joyce Galpern Norden................... Trustee since 1993 6/2004 to present -- Retired; DOB: June 1, 1939 09/1996 to 6/2004 -- Vice President, Institutional Advancement, Reconstructionist Rabbinical College Lowell W. Robinson..................... Trustee since 2006 12/2006 to present -- Chief DOB: January 20, 1949 Financial and Chief Administrative Officer, MIVA, Inc. (on-line direct marketing); 2004 to 2006 -- President, LWR Advisors LLC (consulting); 2002 to 2004 -- Special Counsel to the President, Polytechnic University; 2002 to 2004 -- Senior Executive Vice President and Chief Financial Officer, Hotjobs.com; 2004 to present -- Director, Jones Apparel Group; 2004 to present -- Director, International Wire Group, Inc.; 2004 to present -- Director, Independent Wireless One Corp.; 2002 to 2003 -- Director, Edison Schools, Inc. (school management) Patricia L. Sawyer..................... Trustee since 1993, President and Executive Search DOB: July 1, 1950 Chairperson of Audit Consultant, Smith & Sawyer LLC Committee since 2003
207 TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, INC. 4 Manhattanville Road, Purchase, New York 10577 (914) 697-8000 DISTRIBUTOR: Diversified Investors Securities Corp. (DISC) 4 Manhattanville Road, Purchase, New York 10577 914-697-8000 2873 (2/07) ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, Registrant had adopted a code of ethics (the "Code") that applies to the Registrant's principal executive officer ("PEO"), principal financial officer ("PFO"), and Assistant Treasurer ("AT"). There were no amendments to the Code during the period covered by the report. A copy of the Code of Ethics is attached as an exhibit to this Form N-CSR. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO, PFO, or AT, during the period covered by this report. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees has determined that the Registrant has one audit committee financial expert serving on its audit committee. The audit committee financial expert is Eugene M. Mannella, who is an independent trustee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) AUDIT FEES. - The aggregate fees billed for professional services rendered by PricewaterhouseCoopers ("PWC") for the audit of the Registrant's financial statements and services that are normally provided by the accountant in connection with statutory and regulatory filings for 2006 and 2005 were $15,000 and $14,400, respectively. (b) AUDIT RELATED FEES. - No such fees were billed by PWC for 2006 or 2005. (c) TAX FEES. - No such fees were billed by PWC for 2006 or 2005. (d) ALL OTHER FEES - The aggregate non-audit fees billed by PWC for services rendered were $32,756 and $0 in 2006 and 2005, respectively. The fees rendered were in connection with a profitability study approved by the Audit Committee related to the investment advisory contract renewal process. The fees were paid by the Registrant's advisor, Diversified Investment Advisors. (e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICY. The Audit Committee is required to pre-approve audit and non-audit services performed for the Funds by the independent accountant in order to assure that the provision of such services does not impair the accountant's independence. The Audit Committee also is required to pre-approve non-audit services performed by the Funds' independent accountant for the Funds investment adviser, and certain of the adviser's affiliates that provide ongoing services to the Funds, if the services to be provided by the accountant relate directly to the operations and financial reporting of the Funds. The pre-approval of these services also is intended to assure that the provision of the services does not impair the accountant's independence. Unless a type of service to be provided by the independent accountant has received pre-approval, it will require separate pre-approval by the Audit Committee. Also, any proposed services exceeding pre-approved cost levels will require separate pre-approval by the Audit Committee. When considering services for pre-approval the Audit committee will take into account such matters as it deems appropriate or advisable, including applicable rules regarding auditor independence. The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. Requests or applications to provide services that require separate approval by the Audit Committee will be submitted to the Audit Committee by both the independent accountant and the Funds' treasurer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. Management will promptly report to the Chair of the Audit Committee any violation of this Policy which it becomes aware. (e) (2) 100% of services described in paragraphs (b) through (d) were approved by the Audit Committee. (f) Not applicable. (g) The aggregate non-audit fees billed to the Registrant's investment advisor, Diversified Investment Advisors ("DIA") for 2006 and 2005, were $269,000 and $254,000, respectively. The fees rendered were in connection with the examination of DIA's record-keeping operations (SAS-70), and in connection with the review of DIA's Transfer Agent's internal control structure. All such fees were incurred by and paid for by DIA. (h) PWC provided non-audit services to DIA in 2006 and 2005 that were not required to be pre-approved by the Registrant's audit committee because the services were not directly related to the operation of the Registrant's funds. The Board of Trustees will consider PWC's independence and will consider whether the provision of these non-audit services to DIA is compatible with maintaining PWC's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Included in Item 1. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 11. CONTROLS AND PROCEDURES. (a) The Registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the Registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) The Registrant's principal executive officer and principal financial officer are aware of no changes in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal six-month period that has materially affected, or is likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) (1) Code of Ethics, attached. (a) (2) Separate certifications by the Registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (a) (3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached. 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. Diversified Investors Strategic Variable Funds By /s/ Mark Mullin ---------------------------------- Mark Mullin Principal Executive Officer Date March 2, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Mark Mullin ---------------------------------- Mark Mullin Principal Executive Officer Date March 2, 2007 By /s/ Joseph Carusone ---------------------------------- Joseph Carusone Principal Financial Officer Date March 2, 2007 EX-99.CODE ETH 2 y28830exv99wcodeeth.txt EX-99.CODE ETH: CODE OF ETHICS CODE OF ETHICS FOR THE OPERATION OF THE DIVERSIFIED INVESTORS FUNDS GROUP, THE DIVERSIFIED INVESTORS FUNDS GROUP II, DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS, AND DIVERSIFIED INVESTORS PORTFOLIOS (THE "FUNDS") ADOPTED JOINTLY BY THE FUNDS, DIVERSIFIED INVESTMENT ADVISORS, INC. AND DIVERSIFIED INVESTORS SECURITIES CORP. The Diversified Investors Funds Group, The Diversified Investors Funds Group II, The Diversified Investors Strategic Variable Funds and Diversified Investors Portfolios (collectively, the "Funds"), Diversified Investment Advisors, Inc. (the "Advisor") and Diversified Investors Securities Corp. (the "Distributor") have determined to adopt this revised Code of Ethics (the "Code") as of August 23, 2005, to specify and prohibit certain types of personal securities transactions deemed to create a conflict of interest and to establish reporting requirements and preventive procedures pursuant to the provisions of Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act") and Rule 204A-1 under the Investment Advisers Act of 1940 (the "Advisers Act"). I. RULES APPLICABLE TO CERTAIN PERSONNEL A. Definitions 1. An "Access Person" means: (i) any Advisory Person (as defined below) of the Funds or the Advisor; or (ii) any director, officer or general partner of the Distributor who, in the ordinary course of business, makes, participates in or obtains information regarding the purchase or sale of a Security (as defined below) by a Fund for which the Distributor acts, or whose functions or duties in the ordinary course of business relate to the making of any recommendation to a Fund regarding the purchase or sale of Securities. All of a Fund's directors, trustees, officers and general partners are presumed to be Access Persons of the Fund. 2. An "Advisory Person" means (1) any director, trustee, officer, or employee of any of the Funds or the Advisor (or any company in a control relationship to any of the Funds or the Advisor) who, in connection with his or her regular functions or duties, makes, 1 participates in or obtains information regarding the purchase or sale of securities by any of the Funds or whose functions relate to the making of any recommendations with respect to such purchases or sales; (2) any natural person in a control relationship with any Fund or the Advisor who obtains information concerning recommendations regarding the purchase or sale of Securities by any Client; and (3) any Supervised Person of the Advisor (A) who is involved in making securities recommendations to Clients, or (B) has access to such recommendations that are nonpublic, access to nonpublic information regarding a Client's purchase or sale of securities, or access to nonpublic information regarding the portfolio holdings of an Affiliated Fund. 3. "Affiliated Fund" means the Funds and any investment company registered under the 1940 Act whose investment adviser or principal underwriter Controls (as defined below) the Advisor, is Controlled by the Advisor, or is under common Control with the Advisor. 4. "Automatic Investment Plan" means a program in which regular purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An Automatic Investment Plan includes a dividend reinvestment plan. 5. "Beneficial Ownership" shall be interpreted subject to the provisions of Rule 16a-1(a) (exclusive of paragraph (1) of such Rule) under the Securities Exchange Act of 1934. 6. "Client" means any investment advisory client of the Advisor, including any Fund. 7. "Control" shall have the same meaning as set forth in Section 2(a)(9) of the 1940 Act. 8. "Disinterested Trustee" means a Trustee of the Funds (or, in the case of Diversified Investors Strategic Variable Funds, a member of the Managing Board) who is not an "interested person" within the meaning of Section 2(a)(19) of the 1940 Act. 9. "Non-Advisory Employees" shall mean employees of the Advisor who: (a) have no involvement, either directly or indirectly, in the Advisor's investment advisory activities; (b) have no access to nonpublic information about Advisor's investment advisory activities, (c) are involved solely in Advisor's retirement plan services business, and (d) 2 are not otherwise Access Persons of the Funds or the Advisor under the Code. 10. "Portfolio Manager" means any officer or employee of any of the Funds or the Advisor (or any company in a control relationship to any of the Funds or the Advisor) who decides, or participates in deciding, which securities will be purchased or sold on behalf of a Client. 11. "Purchase or sale of a security" includes, among other things, the writing of an option to purchase or sell a Security (as defined below) or the purchase or sale of a future or index on a Security or option thereon. 12. "Security" shall have the meaning as set forth in Section 2(a)(36) of the 1940 Act (in effect, all securities), except that it shall not include direct obligations of the Government of the United States, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (meaning instruments having a maturity at issuance of less than 366 days and that are rated in one of the two highest rating categories by a nationally recognized statistical rating organization), including repurchase agreements, and shares of U.S. registered open-end investment companies other than the Affiliated Funds. 13. A security is "being considered for purchase or sale" when a recommendation to purchase or sell the security has been made and communicated and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. 14. "Subadvisor" shall mean any investment advisor that the Advisor contracts with to provide day-to-day investment advisory services to any Fund or a portfolio thereof. 15. "Supervised Person" means any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of the Advisor, or other person who provides investment advice on behalf of the Advisor and is subject to the supervision and control of the Advisor, provided that Supervised Persons shall not include Non-Advisory Employees. B. Avoiding Conflicts of Interest No Access Person or Supervised Person shall enter into or engage in a security transaction or business activity or relationship which may result in 3 any financial or other conflict of interest between such person and a Client and each such person shall at all times and in all matters endeavor to place the interests of Clients before his or her personal interests. C. Statement of General Principles on Personal Investment Activities Personal investment activities engaged in by an Access Person or Supervised Person shall be subject to the following general principles: 1. as set forth in section I.B. above, no personal investment activities shall conflict with the duty to place the interests of Clients before any personal interests; 2. all personal investment activities shall be conducted consistent with the requirements and standards set forth in this Code of Ethics in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust; and 3. no such person shall, directly or indirectly, otherwise take inappropriate advantage of his or her positions with the Advisor, the Distributor or the Funds. D. Prohibited Personal Investment Activities 1. No Access Person shall purchase or sell, directly or indirectly, any Security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which he or she knows or should have known at the time of such purchase or sale: a. is being considered for purchase or sale by any Client; or b. is being purchased or sold by any Client. Without limiting the generality of the foregoing, no Portfolio Manager may purchase or sell any Security within seven (7) calendar days before and after any Client that he or she manages trades in that security. 2. No Advisory Person of the Advisor shall acquire any securities in an initial public offering. 3. No Advisory Person of the Advisor shall acquire any securities in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to section 4(2) of that 4 Act without prior written approval by a designated review officer of the Funds or the Advisor (the "Review Officer"). Prior to granting any such approval, the Review Officer shall take into account, among other factors, whether the investment opportunity represented by such private placement should be reserved for Clients and whether the opportunity is being offered to such Advisory Person by the virtue of his or her position with the Advisor, the Distributor, or a Fund. Any Advisory Person granted permission to invest in a private placement must promptly disclose such investment if he or she is subsequently involved in consideration of an investment in the same or an affiliated issuer by a Client and the decision with respect to such investment shall be subject to an independent review by Advisory Persons of the Funds or the Advisor with no personal interest in such issuer. 4. No Advisory Person of the Advisor shall purchase and sell, or sell and purchase, the same (or equivalent) securities within sixty (60) calendar days without the prior written approval of a Review Officer. Prior to granting any such approval, the Review Officer shall determine that no abuses exist and the equities of the situation strongly support an exemption. 5. No Advisory Person of the Advisor or any of the Funds shall accept any gift or other thing of more then de minimis value from any person or entity that does business with or on behalf of any Client (or with respect to an Advisory Person of the Funds, with or on behalf of any of the Funds). 6. No Advisory Person of the Advisor shall serve on the governing board of any publicly traded companies without the prior written approval of the Review Officer. Prior to granting any such approval, the Review Officer shall determine that such board service is consistent with the interests of Clients and shall ensure that appropriate "Chinese Wall" or other procedures are in place to isolate such Advisory Person from persons making investment decisions as to securities of any such company. E. Exempted Transactions The restrictions of Sections I.D.1 and I.D.4 above shall not apply to: 1. Purchases or sales effected in any account over which such person has no direct or indirect influence or control; 2. purchases or sales which are nonvolitional on the part of the person or the Clients; 5 3. purchases which are part of an Automatic Investment Plan; 4. purchases effected upon the exercise of rights issued by an issuer prorata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; and 5. purchases and sales which receive prior approval in writing by the Review Officer (a) as only remotely potentially harmful to any Client because they would be very unlikely to affect a highly institutional market or because they clearly are not economically related to the securities to be purchased or sold or held by any Clients or (b) as not representing any danger of the abuses prescribed by Rule 17j-1 and Rule 204A-1, but only if in each case the prospective purchaser has identified to the Review Officer all factors of which he or she is aware which are potentially relevant to a conflicts of interest analysis, including the existence of any substantial economic relationship between his or her transactions and securities held or to be held by any Clients. F. Compliance with Law All Access Persons and Supervised Persons shall comply with all applicable federal securities laws. II. REPORTING A. Quarterly Requirements for all Access Persons Except Disinterested Trustees 1. Each Access Person, other than the Disinterested Trustees subject to Section II.B.1 below, shall file with the Review Officer quarterly reports containing the information required in Section II.A.2 of this Code with respect to securities brokerage accounts established during the preceding quarter and all transactions during the preceding quarter in any securities in which such person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership. When no transactions subject to these reporting requirements have been effected during a quarter, an Access Person shall file a report representing that no such transactions were effected. 2. Every Report shall be made no later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: 6 (i) with respect to each transaction during the quarter - a. the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, the interest rate and maturity date, the number of shares and the principal amount of each Security involved; b. the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); c. the price at which the transaction was effected; d. the name of the broker, dealer or bank with or through whom the transaction was effected; and e. the date that the Report is submitted. (ii) with respect to each account established by the Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person - a. the name of the broker, dealer or bank with whom the Access Person established the account; b. the date the account was established; and c. the date that the Report is submitted. 3. Any report may contain a statement that it shall not be construed as an admission by the person making the report that he or she has any direct or indirect beneficial ownership in the security to which the report relates. 4. The Review Officer may require that an Access Person request any broker-dealer with which he or she maintains a securities account to send duplicate copies of statements and confirmations to the Review Officer. 5. No Access Person need include in any transaction report information with respect to purchases that are part of an Automatic Investment Plan. 7 B. Quarterly Requirements for Disinterested Trustees 1. Every Disinterested Trustee who is an Access Person solely by reason of being a member of the Board of a Fund shall file with the Review Officer a report containing the information required in the above Section II.A of this Code of Ethics with respect to transactions in any securities in which such person has, or by reason or such transactions acquires, any direct or indirect beneficial ownership, except exempted transactions listed under Section I.E.1, if such Disinterested Trustee, at the time of that transaction, knew or should have known, in the ordinary course of pursuing his or her official duties as a Trustee, that during the 15-day period immediately preceding or after the transaction by the Disinterested Trustee: a. such security was being purchased or sold by any of the Funds; or b. such security was being considered for purchase or sale by any of the Funds. 2. Notwithstanding the preceding sentence, any Disinterested Trustee may, at his or her option, report the information described in Section II.A.2 with respect to any one or more transactions and may include a statement that the report shall not be construed as an admission that the person knew or should have known of portfolio transactions by the Funds in such securities. C. Annual Reporting of Securities Holdings 1. All Access Persons and Supervised Persons shall be provided with a copy of this Code of Ethics and any amendments thereto and shall provide a written acknowledgment that he or she has read and understood the Code and recognizes that he or she is subject thereto. All Access Persons and Supervised Persons shall provide an annual report certifying that (i) he or she has read and understood this Code of Ethics and recognizes that he or she is subject thereto and (ii) he or she has complied with the requirements of this Code of Ethics and has disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of this Code of Ethics. 2. Each Access Person, other than the Disinterested Trustees, shall file with the Review Officer, not later than February 14 of each year, the following information (which information must be current as of the immediately preceding December 31): 8 a. The title and type of Security, and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Security in which the Access Person had any direct or indirect beneficial ownership; b. the name of any broker, dealer or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and c. the date on which the report is submitted by the Access Person. D. Initial Reporting of Securities Holdings Each Access Person who becomes an Access Person, other than the Disinterested Trustees, shall file with the Review Officer, not later than 10 days after the person becomes an Access Person, the following information current as of a date no more than 45 days prior to the date the person becomes an Access Person: 1. the title and type of Security, and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each security in which the Access Person had any direct or indirect beneficial ownership; 2. the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person; and 3. the date the report is submitted by the Access Person. E. Exception from Reporting No Access Person shall be required to report transactions pursuant to the foregoing Sections II.A-II.D effected for, and securities held in, any account over which such Access Person has no direct or indirect influence or control, except that such Access Person (other than a Disinterested Trustee) must file a written certification stating that he or she has no direct or indirect influence or control over the account in question. 9 F. Annual Reports to Governing Boards The Secretary of the Funds, and an authorized officer of the Advisor, each Subadvisor and the Distributor shall cause to be prepared and delivered annually to each of the Boards of the Funds a report: 1. summarizing existing procedures concerning personal investing and reviewing any changes effected in such procedures during the year; 2. identifying any issues arising under their respective Codes of Ethics since the last report to the governing Boards, including, without limitation, information about material violations and any sanctions or remedial actions during the past year; 3. identifying any recommended changes in existing restrictions or procedures based upon the Funds' experience under this Code of Ethics, evolving industry practice or developments in applicable laws or regulations; and 4. certifying that the Funds, Advisor, Subadvisor or Distributor, as the case may be, has adopted procedures reasonably necessary to prevent such entity's Access Persons from violating the applicable Code of Ethics, Rule 17j-1 and, in the case of an Advisor or Subadvisor, Rule 204A-1. III. REVIEW AND APPROVAL OF CODES OF ETHICS AND COORDINATION WITH THE SUBADVISORS A. General Any amendment of the terms of this Code of Ethics shall be effective with respect to a Fund upon the approval of the terms of the Amendment by the governing board of such Fund. Any amendment of the terms of this Code of Ethics shall be effective with respect to the Advisor or Distributor upon approval of an authorized party of such entity. All material amendments to this Code of Ethics with respect to the Advisor or Distributor will be submitted to the governing Boards of the Funds for review and approval in accordance with Rule 17j-1. In accordance with certain contractual arrangements, the Funds, the Advisor and the Distributor share certain directors, trustees, officers and employees, including personnel responsible for compliance with this Code of Ethics. Accordingly, reports or reviews required under this Code of Ethics by virtue of an individual's affiliation with two or more of the Advisor, the Distributor or the Funds will be made jointly to the extent possible to avoid unnecessary duplication of procedures. 10 B. Subadvisors' Codes of Ethics Each Subadvisor shall adopt, and deliver to the Funds a copy of, a Code of Ethics pursuant to Rule 17j-1 of the 1940 Act and Rule 204A-1 of the Advisers Act which seeks to ensure that all individuals who are Access Persons of any of the Funds by virtue of their affiliation with a Subadvisor comply with the terms of this Code of Ethics by providing procedures and restrictions substantially equivalent to those set forth herein, except to the extent variations therein are expressly approved by the governing Boards of the Funds. Accordingly, requirements for reports, reviews and other procedures set forth herein shall be satisfied for individuals who are Access Persons of the Funds by virtue of their affiliation with a Subadvisor by equivalent procedures effected by such Subadvisor. Each Subadvisor shall present its Code of Ethics and all material amendments thereto to the governing Boards of the Funds for review and approval in accordance with Rule 17j-1. The Boards must approve each material amendment to each Subadvisor's Code of Ethics no later than six months after the adoption of the amendment. Each Subadvisor shall submit, quarterly, a certification to the Funds which states: 1. The Code of Ethics of the Subadvisor in the form delivered to the Funds remains in full force and effect and satisfies the requirements of Section 17(j) of the 1940 Act, Rule 17j-1 thereunder and Rule 204A-1 under the Advisers Act; and 2. no material violations of the Code of Ethics of the Subadvisor relating to Access Persons of any of the Funds occurred during the period since delivery of the last certification (if any material violations have occurred, the certification shall include all relevant details). IV. REVIEW The Review Officer shall review all of the reports furnished under Section II hereof to determine whether a violation of this Code of Ethics has occurred. In reviewing transactions, the Review Officer shall take into account the exemptions allowed under Section I.E. Before making a determination that a violation has been committed, the Review Officer shall give such person an opportunity to supply additional information regarding the transaction in question. 11 V. SANCTIONS A. Sanctions for Violations by Supervised Persons and Access Persons Other than Disinterested Trustees If the Review Officer determines that a violation of this Code has occurred, he or she shall so advise the appropriate governing Board and that Board may impose such sanctions as it deems appropriate, including, inter alia, a letter of censure or suspension or termination of the employment of the violator. Without limiting the generality of the foregoing, any financial profits realized by an individual through prohibited personal investment activities described in Section I.D. may be required to be disgorged. All material violations of the Code and any sanctions imposed as a result thereto shall be reported to the appropriate governing Board. B. Sanctions for Violations by Disinterested Trustees If the Review Officer determines that any Disinterested Trustee has violated this Code, he or she shall so advise the President of the affected Fund, as appropriate, and also a committee consisting of the Disinterested Trustees (other than the person whose transaction is at issue) and shall provide the committee with the report, the record of pertinent actual or contemplated portfolio transactions, and any additional information supplied by such person. The committee, at its option, shall either impose such sanctions as it deems appropriate or refer the matter to the full Board, which shall impose such sanctions as it deems appropriate. VI. MISCELLANEOUS A. Access Persons The Review Officer will identify all Access Persons who are under a duty to make reports under this Code and will inform such persons of such duty, except that persons who are Access Persons by virtue of their affiliation with a Subadvisor shall be identified and informed by an appropriate officer of that Subadvisor. Any failure by the Review Officer to notify any person of his or her duties under this Code shall not relieve such person of his or her obligations hereunder. B. Records The Fund, the Advisor, and the Distributor shall maintain records as set forth below in an easily accessible place at its principal place of business, which records may be maintained in micrographic or electronic form under the conditions described in Rule 31a-2(f) under the 1940 Act and, if applicable, 12 Rule 204-2(g) under the Advisers Act, and shall be available for examination by representatives of the Securities and Exchange Commission ("SEC"): 1. a copy of this Code and any other code which is, or at any time within the past five years has been, in effect; 2. a record of any violation of this Code and of any action taken as a result of such violation shall be preserved for a period of not less than five years following the end of the fiscal year during which the last entry was made on such record; 3. a record of all written certifications as required by Section II.C.1 of this Code for each person who is currently, or within the past five years was, an Access Person or Supervised Person; 4. a copy of each report made by an Access Person pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made; 5. a list of all persons who are, or within the past five years have been, Access Persons; 6. a copy of each report furnished pursuant to Section II.F of this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made; and 7. a record of any decision, and the reasons supporting the decision, to approve the acquisition by any Access Person or Advisory Person of any security under I.D.3 (private placements), I.D.4 (securities held less than 60 days), or I.E.5 (non-abusive transactions) shall be preserved for a period of not less than five years from the end of the fiscal year in which the approval is granted. 13 C. Reporting of Violations All Access Persons and Supervised Persons must promptly report any violations of this Code of Ethics to the Chief Compliance Officer of the Fund, Advisor, Subadvisor, or Distributor, as appropriate. D. Confidentiality All reports of securities transactions and any other information filed pursuant to this Code shall be treated as confidential, except that the same may be disclosed to the Boards of the Funds, to any regulatory or self-regulatory authority or agency upon its request or as required by law or court or administrative order. E. Interpretation of Provisions The governing Boards of the Funds may from time to time adopt such interpretations of this Code as they deem appropriate. 14 EX-99.CERT 3 y28830exv99wcert.txt EX-99.CERT: CERTIFICATIONS FORM N-CSR CERTIFICATION I, Joseph Carusone, certify that: 1. I have reviewed this report on Form N-CSR of Diversified Investors Strategic Variable Funds. 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 officers 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers 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: March 2, 2007 /s/ Joseph Carusone ---------------------------------------- Joseph Carusone Principal Financial Officer FORM N-CSR CERTIFICATION I, Mark Mullin, certify that: 1. I have reviewed this report on Form N-CSR of Diversified Investors Strategic Variable Funds. 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 officers 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers 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: March 2, 2007 /s/ Mark Mullin ---------------------------------------- Mark Mullin President & CEO EX-99.906CERT 4 y28830exv99w906cert.txt EX-99.906CERT: CERTIFICATIONS CERTIFICATION UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002 Name of Issuer: Diversified Investors Strategic Variable Funds In connection with the Report on Form N-CSR for the above named issuer, the undersigned hereby certifies, to the best of his knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Issuer. Date: March 2, 2007 /s/ Mark Mullin ---------------------------------------- Mark Mullin Principal Executive Officer Date: March 2, 2007 /s/ Joseph Carusone ---------------------------------------- Joseph Carusone Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----