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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: 811-06136
HOMESTEAD FUNDS, INC.
(Exact name of registrant as specified in charter)
4301 Wilson Boulevard
Arlington, VA 22203
(Address of principal executive office – Zip code)
Kelly Whetstone, Esq.
Homestead Funds, Inc.
4301 Wilson Boulevard
Arlington, VA 22203
(Name and address of agent for service)
Copies to:
Bibb L. Strench, Esq.
Seward & Kissel LLP
901 K Street, NW
Washington, DC 20001
(Name and addresses of agent for service)
Registrant’s telephone number, including area code: (703) 907-5953
Date of fiscal year end: December 31
Date of reporting period: June 30, 2014
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Item 1. Reports to Stockholders.
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4301 WILSON BOULEVARD
ARLINGTON, VA 22203-1860
1-800-258-3030
www.homesteadfunds.com
August 15, 2014
Dear Shareholders:
To the surprise of some market watchers, broad market equity indexes were up about 5% for the first half of the year. This advance comes after double-digit gains in the two prior years. Generally, bonds also posted positive returns, despite nervousness about how and when the Fed will ultimately reverse course and withdraw some of the liquidity support it has been providing since the financial crisis began in 2007.
The fundamental factors supporting investor optimism have been the economy’s continued growth (although at a tepid pace) and the absence of inflationary pressures, which supports a continuation of the Fed’s accommodative monetary policy.
Asset prices are high. The Standard & Poor’s 500 Stock Index is trading at price/earnings multiples above long-term averages. Bond investors also seem to be pricing in a best case scenario: continued improvement in labor and housing markets, continued deleveraging of consumer balance sheets and the Federal Reserve’s ability to gradually unwind its easy monetary policy without shocking the markets.
Homestead Funds investment manager RE Advisers’ approach to investing takes the long view. We apply rigorous research and fundamental analysis to find undervalued stocks and bonds that have the potential to reward investors over time. We are mindful of economic conditions, but our focus is on selecting stocks and creating diversified, long-term portfolios. We are patient in letting our program work, and shareholders need to be patient as well.
Investors should have reasonable, possibly lower, expectations for returns in the short-term as GDP and interest rate scenarios play out. We encourage you to concentrate on your overall risk/return profile and investment time horizon and avoid the temptation to try to jump in and out of asset classes.
Sincerely,
Peter R. Morris
President and Director
Past performance does not guarantee future results.
Investments in fixed-income funds are subject to interest rate, credit and inflation risk. Equity funds, in general, are subject to style risk, the chance that returns on stocks within the style category in which the fund invests will trail returns of stocks representing other styles or the market overall.
The views expressed in this market commentary are those of the individual as of the date noted above and may have changed since that date. The opinions stated may contain forward-looking statements and may discuss the impact of domestic and foreign markets, industry and economic trends and governmental regulations of the funds and their holdings. Such statements are subject to uncertainty, and the impact on the funds might be materially different from what is described here.
RE Investment Corporation, Distributor. 8/14
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Daily Income Fund (HDIXX)
Short-Term Government Securities Fund (HOSGX)
Short-Term Bond Fund (HOSBX)
Stock Index Fund (HSTIX)
Value Fund (HOVLX)
Growth Fund (HNASX)
Small-Company Stock Fund (HSCSX)
International Value Fund (HISIX)
semi-annual report
JUNE 30,
2014
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PERFORMANCE EVALUATION | ||||
2 | ||||
Short-Term Government Securities Fund and Short-Term Bond Fund | 4 | |||
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PORTFOLIO OF INVESTMENTS | ||||
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46 | ||||
48 | ||||
50 | ||||
FINANCIAL HIGHLIGHTS | ||||
52 | ||||
53 | ||||
54 | ||||
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The investment commentaries on the following pages were prepared for each fund by its portfolio manager. The views expressed are those of the portfolio manager of each fund as of June 30, 2014, and may have changed since that date. The opinions stated may contain forward-looking statements and
may discuss the impact of domestic and foreign markets, industry and economic trends and governmental regulations of the funds and their holdings. Such statements are subject to uncertainty, and the impact on the funds might be materially different from what is described here.
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PERFORMANCE EVALUATION
FUND PERFORMANCE
The Daily Income Fund earned an annualized return of 0.01% for the first half of 2014. The seven-day current annualized yield was 0.01% on June 30, 2014, unchanged from the end of 2013. Interest income for the Fund is netted against operating expenses. With interest income at historic lows, RE Advisers continues to waive fees or reimburse expenses to assist the Fund in maintaining a positive yield. As long as the Federal Reserve continues to maintain a federal funds rate close to zero, the Daily Income Fund will continue to earn very little interest income—the only component of return in a money market fund.
MARKET CONDITIONS
For the first half of 2014, the Federal Reserve (the Fed), under the new leadership of Chair Janet Yellen, has continued its policy of maintaining historically low short-term interest rates—a policy initially established in December 2008. Fed policies are designed to accomplish the agency’s dual mandate of fostering maximum employment and price stability. With short-term rates anchored at historic lows—as they have been for some time—money market investors are having to make do with paltry returns.
While the Federal Open Market Committee (FOMC, the Fed’s policy making body) has not revised its target for the federal funds rate—still set at 0.00% to 0.25%—the Committee has continued to reduce, or taper, its purchases of agency mortgage-backed securities and longer term Treasuries, while still reinvesting principal payments and rolling over maturities at auction. The Committee has also indicated that as long as labor market improvements continue and inflation trends back to the Fed’s longer run objective of 2%, the tapering will continue at a measured pace.
Fed policies are based on measures of economic growth and employment. Economic growth, as measured by GDP, unexpectedly fell to an annual rate of 2.9% in the
first quarter, declining from an annual rate of 2.6% in the fourth quarter of 2013. The unemployment rate fell to 6.1% in June, down from 6.7% in December 2013. The most recent inflation numbers, released in June, show inflation running at a 2.1% annual rate. Generally, FOMC members consider the economy to have sufficient strength to continue to improve but note that conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Corporate cash balances remain high, which has reduced the need for issuance of short-term debt of the type in which the Daily Income Fund invests. Limited supply puts further downward pressure on yields.
OUTLOOK
Investors in the Daily Income Fund can anticipate a stable share price but little investment return until economic and labor markets strengthen to the point where the Fed is less accommodative with short-term interest rate policy, allowing rates to rise, and credit demand increases.
In closing, we want to let shareholders know about recent regulatory developments. On July 22, 2014, the Securities and Exchange Commission approved amended rules for money market funds. The Commission’s intent is to make the funds less susceptible to widespread redemptions, which can potentially cause the funds to “break the buck.” Money market funds have historically been managed to maintain a constant $1.00 share price.
Retail funds, like the Daily Income Fund, are less affected by the new regulations than institutional funds, but there are some new rules. RE Advisers is analyzing the new regulations, some of which take effect in two years and others sooner, and we’ll provide more information to shareholders at a later date.
2 | Performance Evaluation |
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Daily Income Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
Daily Income Fund | 0.01% | 0.02% | 1.42% |
The returns quoted in the above table represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment may be worth more or less than its original cost. An investment in the Daily Income Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. While the Daily Income Fund seeks to maintain a constant $1.00 per share price, it is possible to lose money investing in the Fund. The Daily Income Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do no reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
YIELD | ||||||||||
Annualized 7-day current yield quoted 06/30/14 | 0.01% | |||||||||
SECURITY DIVERSIFICATION | on 12/31/13 | on 06/30/14 | ||||||||
(% of total investments) | ||||||||||
Commercial paper | 73.0% | 74.7% | ||||||||
U.S. Government obligations | 17.2% | 16.2% | ||||||||
Corporate bonds | 0.7% | 0.0% | ||||||||
Short-term and other assets | 9.1% | 9.1% | ||||||||
Total | 100.0% | 100.0% | ||||||||
MATURITY | on 12/31/13 | on 06/30/14 | ||||||||
Average Weighted Maturity | 43 days | 45 days |
Performance Evaluation | 3 |
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PERFORMANCE EVALUATION
Short-Term Government Securities and Short-Term Bond Funds
FUND PERFORMANCE
The Short-Term Government Securities Fund returned 0.86% for the first half of 2014 compared to the benchmark’s return of 0.80%. The strongest sector by far was the corporate sector, which benefitted from the flattening of the yield curve as the aircraft financing issues guaranteed by the Export-Import Bank recovered from their very weak performance in 2013. The rest of the Fund’s sectors provided positive performance as well. The Fund’s cash position was the largest relative drag on performance.
The Short-Term Bond Fund returned 1.25% for the first half of 2014 compared to the benchmark’s return of 1.17%. While all of the Fund’s sectors had positive returns, the municipals sector was the standout performer as Detroit’s bankruptcy moved farther into the rear-view mirror and Puerto Rico was able to access the market in March for long-term funds at rates which were much less than initially feared. As with the Short-Term Government Securities Fund, this Fund’s significant cash position was the largest relative drag on performance.
MARKET CONDITIONS
The bond market entered 2014 with the expectation of a further rise in interest rates due to the onset of Federal Reserve (the Fed) tapering, followed by an eventual hike in the federal funds rate. While the front part of the Treasury yield curve saw a very modest rise in rates, longer term Treasuries and the rest of the taxable bond market enjoyed meaningful positive returns. While anticipated Fed action negatively impacted short Treasuries, the rest of the market benefited from a change in investor psychology as the eventual peak of the federal funds rate at the end of the tightening cycle is now assumed to be somewhere under 3.5% as opposed to north of 4.0% as was forecast in December of last year. Further supporting the market were deflationary fears in Europe which culminated in the European Central Bank cutting bank deposit rates to -0.10% in June, continued worries about the Chinese economy (particularly the banking and real estate sectors), a surge in the price of crude oil of nearly $10.00 per barrel due to the Middle Eastern and Ukrainian situations as well as weaker domestic GDP as weather helped destroy growth in the first quarter. Massive world-wide liquidity and rallies in
European bond markets, particularly in the weakest credits such as Greece, Italy and Spain, further supported credit markets in the first half of 2014.
In spite of the large 2.9% decline in first quarter 2014 GDP, the economy still expanded at a 1.5% pace in the year ended March 31, 2014, which modestly exceeded the 1.3% growth rate in the year earlier period. Job gains averaged a respectable 222,000 per month in the first half of 2014, which is an acceleration of the average 201,000 in the first half of 2013. The June 2014 unemployment rate stands at 6.1% versus 6.7% at year-end, while the broader U-6 unemployment rate fell to 12.1% from 13.1% during the same period. The Consumer Price Index (CPI) rose at an annual rate of 2.1% for the 12 months ended May 31, 2014, compared to 1.4% for the year earlier period, while the core CPI (excluding food and energy) rose at a 2.0% annual rate compared to 1.7% for the same time periods.
The ISM Manufacturing Index has averaged 54.0 so far in 2014 as compared to 51.5 for the first six months of 2013. Industrial production through May of 2014 stands at 4.3% higher than one year earlier, which is significantly better than the 2.4% growth in production in the previous time period. U.S. auto sales have averaged a 16.1 million annual rate so far in 2014, stronger than the 15.4 million annual rate in 2013’s first half and well above the 9.0 million financial crisis low of February 2009. Total retail sales for the year ended May 2014 have risen 4.3% as compared to a roughly flat 4.2% in the previous period. Housing starts averaged 950,000 for the 12 months ended May 2014 as compared to 867,000 in the year earlier period, while existing home sales averaged 4.94 million and 4.85 million for the same time periods. The University of Michigan Consumer Conference Sentiment Index averaged 81.9 for the first half of 2014 as compared to 79.2 in 2013’s first half.
The Fed’s policy-setting group, the Federal Open Market Committee (FOMC), continues to maintain its federal funds rate target in a range of 0.00% to 0.25%. At the June FOMC meeting the Fed decided that the Asset Purchase Program (QE3) would end in October assuming that labor markets continue to improve and inflation continues its most recent trend. At her post-June FOMC
4 | Performance Evaluation |
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meeting press briefing, Chairperson Janet Yellen stressed that the FOMC foresees a near-zero federal funds rate for a considerable time after QE3 ends.
OUTLOOK
The FOMC’s forecasts have lowered projected 2014 GDP to 2.20% from the December forecast of 3.00%, due primarily to the 2.9% first quarter decline in GDP. While statistically it would seem quite reasonable to lower the forecast, other indicators discussed earlier in this report are certainly painting a much brighter economic picture. In December, the FOMC’s forecast for year-end unemployment was 6.45%, which has now been lowered to 6.05%, a number the economy has already essentially reached. The Fed’s preferred measure of core inflation—Personal Consumption Expenditures or PCE—which the Fed wants to see move to a 2.0% annual rate, is running at about 1.5%, yet that is slightly above the five-year average increase of 1.4%. It certainly appears to this observer that 1) the economy continues to improve in a fairly steady fashion; 2) inflation, while not a clear and present danger, seems a larger risk than deflation and 3) the FOMC will err on the side of monetary ease as long as possible.
While the “hawks” on the FOMC have certainly become more vocal, the most recent FOMC rate decision was a unanimous 10-0. While the FOMC has worried publicly about investors reaching for yield and taking on excess risk, they are not prepared to act to curb this behavior until absolutely necessary. The Fed’s $4.0 trillion balance sheet and the bond market’s reaction to tapering talk in 2013 makes Fed communication all the more critical, and while talking tough on occasion is necessary, the market doesn’t really expect rate hike action until the second half of 2015. The FOMC’s projections for the fed funds rate in a “normal” economy have dropped to 3.50—4.00% from 4.00—4.50% at the start of 2012, due in part according to Janet Yellen to the economy’s perceived lower growth rate potential.
When the time finally arrives for the Fed to hike short-term rates, the Committee is most certainly going to move slowly and methodically. This is likely due to 1) the size of their balance sheet, 2) the need to employ policy tools such as interest on excess reserve rather than just the Fed funds rate and 3) the fact that they are still fighting the last war (the financial crisis). While one can certainly argue that the economy is still not “normal,” the largest abnormality seems to be the level of short-term interest rates. The Taylor Rule, which forecasts the
proper level of short rates that will both stabilize the economy and maintain long-term growth, is currently estimated at 2.38%. Historically, the Taylor Rule has had a very good track record of forecasting both the direction and magnitude of moves in the fed funds rate, and indeed called for a -2.0% rate in 2009 and 2010, but it is now proving to be a hollow predictor as the Fed still treats the economy with “emergency level” interest rates, even though the emergency was over a long time ago. Perhaps the economy would grow faster with rates at more normal levels as debtors have had all of the benefits with savers being punished relentlessly. The FOMC seems obsessed with the 62.8% labor force participation rate as a reason to keep short rates at 0%. This is a low for the cycle but gives lip service to the idea that 1) the stock market’s very strong advance allows many workers to finally retire and 2) government policies don’t exactly encourage a work ethic. At the margin, a later rather than earlier rate hike seems to be the most likely outcome.
While we have somewhat reduced the level of excess liquidity in both Funds, the absolute level of cash balances is much larger than the historical average. Credit spreads continue to narrow, but the easy money is long gone and, since one is supposed to be paid to take credit risk, the default choice going forward very well may be U.S. Government issues. We expect the Fed will continue to anchor short-term interest rates at 0% for a while longer, but the day of reckoning may be fast approaching. Indeed, some market observers believe the Fed is already behind the curve. The Fed will almost certainly wait too long to hike rates, but the market is betting that they will be slow and methodical regardless and not tighten aggressively, at least as long as FOMC members continue to worry about the lack of a normal recovery and economy.
It is difficult to expect anything radically different in the bond market in the near term. However, it’s been a long eight years since the last fed funds rate hike, and it would be naive to predict smooth sailing ahead. While returns seem likely to remain modest in the near term, we expect volatility to increase markedly as we approach the fed funds lift-off date. We will be looking to take advantage of such volatility should it occur as investment opportunities multiply.
Performance Evaluation | 5 |
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Short-Term Government Securities Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
Short-Term Government Securities Fund | 0.79% | 1.54% | 2.59% | |||||||||
BofA Merrill Lynch 1-5 Year U.S. Treasury Index | 1.16% | 1.92% | 3.19% | |||||||||
SECURITY DIVERSIFICATION | on 12/31/13 | on 06/30/14 | ||||||||||
(% of total investments) | ||||||||||||
Government-guaranteed agencies | 50.6% | 54.60% | ||||||||||
Corporate bonds | 15.3% | 16.9% | ||||||||||
U.S. Treasuries | 6.5% | 10.8% | ||||||||||
Municipal bonds | 5.7% | 5.0% | ||||||||||
Mortgage-backed securities | 3.5% | 3.6% | ||||||||||
Asset-backed securities | 0.5% | 0.4% | ||||||||||
Short-term and other assets | 17.9% | 8.7% | ||||||||||
Total | 100.0% | 100.0% | ||||||||||
MATURITY | on 12/31/13 | on 06/30/14 | ||||||||||
Average Weighted Maturity | 2.94 years | 2.07 years | ||||||||||
PERFORMANCE COMPARISON |
Comparison of the change in value of a $10,000 investment in the Fund and the BofA Merrill Lynch 1-5 Year U.S. Treasury Index made on December 31, 2003.
The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Short-Term Government Securities Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
6 | Performance Evaluation |
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Short-Term Bond Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
Short-Term Bond Fund | 2.01% | 4.31% | 3.98% | |||||||||
BofA Merrill Lynch 1-5 Year Corp./Gov. Index | 2.00% | 2.77% | 3.54% | |||||||||
SECURITY DIVERSIFICATION | on 12/31/13 | on 06/30/14 | ||||||||||
(% of total investments) | ||||||||||||
Municipal bonds | 24.7% | 24.6% | ||||||||||
Corporate bonds | 18.9% | 20.8% | ||||||||||
Asset-backed securities | 16.2% | 20.5% | ||||||||||
Yankee bonds | 13.2% | 8.5% | ||||||||||
U.S. Government obligations | 3.6% | 6.4% | ||||||||||
Mortgage-backed securities | 4.7% | 4.0% | ||||||||||
Short-term and other assets | 18.7% | 15.2% | ||||||||||
Total | 100.0% | 100.0% | ||||||||||
MATURITY | on 12/31/13 | on 06/30/14 | ||||||||||
Average Weighted Maturity | 2.81 years | 2.25 years | ||||||||||
PERFORMANCE COMPARISON |
Comparison of the change in value of a $10,000 investment in the Fund and the BofA Merrill Lynch 1-5 Year Corp./Gov. Index made on December 31, 2003.
The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Short-Term Bond Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
Performance Evaluation | 7 |
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PERFORMANCE EVALUATION
INDEX AND FUND PERFORMANCE
For the six months ended June 30, 2014, the U.S. large cap market metric and the Fund’s benchmark, the Standard & Poor’s (S&P) 500 Index, advanced 7.14%, compared to the Fund’s return of 6.84%. The S&P 500 Index is a market capitalization-weighted index composed of 500 common stocks issued by large-capitalization companies in a wide range of industries. The stocks included in the index collectively represent a substantial portion of all common stocks publicly traded in the United States.
From a sector perspective, utilities (+18.43%) were the strongest performers for the six-month period. Energy stocks also outperformed (+13.13%) amid rising oil prices. The health care sector performed well (+10.59%), as did information technology (+8.94%) and materials (+8.62%). All other sectors advanced, including consumer staples (+5.18%), financials (+5.01%), industrials (+4.00%), telecommunication services (+3.70%) and consumer discretionary (+0.60%).
During the six-month period, as changes were made to the composition of the S&P 500 Index, the Master Portfolio in which the Fund invests purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.
MARKET CONDITIONS
Despite high valuations resulting from last year’s strong rally, investors continued to favor equities in the first half 2014, pushing major indices to record highs during the period. However, not all segments of the market advanced as many of last year’s winners struggled, including many biotechnology and internet-related companies as well as retailers. Broadly speaking, the first half of 2014 brought a swift reversal away from the prevailing momentum stocks of 2013 and a rotation from growth to value stocks. Additionally, market volatility remained well below historic norms, a trend that has continued for several quarters, suggesting that investors have become complacent in an environment where easy monetary conditions and low default rates have served to counteract growing geopolitical risk.
The year got off to a rocky start, however, as heightened risks in emerging markets compelled investors to pull back from risk assets generally. A number of emerging economies struggled with currency weakness, debt problems and uneven growth rates while facing the broader headwind of diminishing global liquidity as the Fed began tapering its stimulus program. Signs of further deceleration in Chinese economic growth were partic-
ularly worrisome. Meanwhile, disappointing corporate earnings reports and softer economic data in the United States also contributed to the sell-off in equities.
U.S. equities were back on the rise in February due in part to positive developments in Washington, D.C. Fiscal uncertainty abated with the extension of the U.S. debt ceiling. Additionally, investors were encouraged by market-friendly comments from the new Fed Chairwoman, Janet Yellen. Although U.S. economic data had weakened, most investors viewed this recent trend as temporary and continued to take on U.S. equity risk given expectations that growth would pick up later in the year.
Market volatility increased in March due to rising tensions between Russia and Ukraine over the disputed region of Crimea. Investors feared the impact of potential international sanctions and the threat of rising oil prices. More evidence of decelerating growth in China added to the air of uncertainty. Yet, markets were resilient as investors turned their focus to improving U.S. economic data, positive corporate earnings surprises and increased merger and acquisition activity. Dovish comments from the Fed also helped push U.S. stocks higher.
Escalating violence in Iraq pushed oil prices sharply higher in June, causing stock prices to fall as investors were reminded of the broader risk that instability in the Middle East and Africa poses to global oil production. However, a steady stream of mergers and acquisitions again took center stage and, against the backdrop of ongoing Fed stimulus, U.S. equities quickly resumed their upward course.
As the global economy continued its slow recovery, improving U.S. data garnered a good deal of investors’ attention during the period. Following a first quarter of disappointing economic reports, better data in the second quarter ultimately confirmed that the recent weakness had been temporary and largely weather-related. In June, revised GDP numbers revealed that the U.S. economy had contracted much more than expected in the first quarter. While this news came as a surprise, it was no longer important as compared to more recent data showing improvements in the labor market and manufacturing. Nonetheless, a low labor participation rate, anemic wage growth and lackluster consumption continued to weigh on U.S. growth. While the global recovery has remained generally on track, mixed economic reports in the first half of the year resulted in the World Bank lowering its 2014 global growth forecast to 2.8% in June from its January forecast of 3.2%.
8 | Performance Evaluation |
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Stock Index Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
Stock Index Fund | 23.96% | 18.19% | 7.16% | |||||||||
Standard & Poor's 500 Stock Index | 24.61% | 18.83% | 7.78% |
INDUSTRY DIVERSIFICATION | % of Total Long-Term Investments at 06/30/14* | % of Total Long-Term Investments at 06/30/14* | ||||||||
Information technology | 18.8% | Industrials | 10.5% | |||||||
Financials | 16.1% | Consumer staples | 9.5% | |||||||
Health care | 13.3% | Materials | 3.5% | |||||||
Consumer discretionary | 11.8% | Utilities | 3.2% | |||||||
Energy | 10.9% | Telecommunication services | 2.4% | |||||||
Total | 100.0% | |||||||||
TOP TEN EQUITY HOLDINGS | % of Total Long-Term Investments at 06/30/14* | % of Total Long-Term Investments at 06/30/14* | ||||||||
Apple, Inc. | 3.2% | Wells Fargo & Co. | 1.5% | |||||||
Exxon Mobil Corp. | 2.5% | Chevron Corp. | 1.4% | |||||||
Microsoft Corp. | 1.8% | Berkshire Hathaway, Inc. (Class B) | 1.3% | |||||||
Johnson & Johnson | 1.7% | JPMorgan Chase & Co. | 1.3% | |||||||
General Electric Co. | 1.5% | Procter & Gamble Co. | 1.2% | |||||||
PERFORMANCE COMPARISON |
Comparison of the change in value of a $10,000 investment in the Fund and the Standard & Poor's 500 Stock Index made on December 31, 2003.
The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Stock Index Fund's average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
*Holdings information is for the S&P 500 Stock Master Portfolio, managed by BlackRock Fund Advisors, the portfolio in which the Stock Index Fund invests all of its investable assets. Please refer to the Appendix for the complete semi-annual report of the S&P 500 Stock Master Portfolio.
Performance Evaluation | 9 |
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PERFORMANCE EVALUATION
FUND PERFORMANCE
The Value Fund increased 8.30% for the first half of 2014 and its benchmark index, the unmanaged S&P 500 Index, increased 7.14%. The Fund’s greater than Index results were due primarily to the performance of its consumer discretionary, information technology and consumer staples sector holdings.
PORTFOLIO REVIEW
The Fund’s positions in the consumer discretionary sector outperformed the sector and the overall Index. The Index’s consumer discretionary sector barely increased during the first half of the year, while the Fund’s consumer discretionary positions increased more than 10%. Dillard’s and Cooper Tire & Rubber Company led this sector’s results.
The Fund’s information technology holdings continued their 2013 rebound from a tough 2012 into the first half of 2014. The Fund held an underweight position in information technology compared with the Index’s information technology sector; however, the Fund’s information technology holdings appreciated more than the Index’s information technology sector and more than the overall Index. Within information technology, Intel, Hewlett-Packard and Cisco Systems were the stocks that made the greatest contributions.
The Fund’s consumer staples results were well above those of the sector and the overall Index. The bulk of the better results were due to the appreciation in the stock of WhiteWave Foods. The company’s array of organic and natural plant-based foods, beverages and dairy products has been welcomed by consumers and more recently embraced by investors. The stock increased almost 40% in the first half of the year.
Results in the Fund’s health care positions detracted from relative results, with Bristol-Myers Squibb and Pfizer being the notable laggards. It is worth noting that
Bristol-Myers Squibb was the best performing and greatest contributor to the Fund in 2013. Cash detracted slightly from results due to the appreciation in the overall market.
OUTLOOK
The general consensus now appears to be that U.S. GDP growth will be a little less than 2% for 2014 and reach 3% in the second half of 2014. The reasons for this emanate from the colder and more severe winter of 2013-2014 that dampened overall economic activity. The economy should recover some deferred activity across the rest of 2014. Manufacturing and capital equipment data appear to be improving and many good initial signs for the second half of 2014 are showing as well. The labor market is improving and housing continues its long grinding recovery.
Recent commentary by the Federal Reserve Board concerning backing away from Quantitative Easing has caused some hesitation in the markets, but has not upset the slow positive sentiment building around the overall economy.
As noted in the 2013 Annual Report commentary, the recent economic environment along with uncertain fiscal policy led management decisions, on the margin, to return a greater portion of capital to shareholders via stock repurchases and dividends. That activity was a rewarding use of cash for companies and their shareholders. While there are no guarantees, it appears 2014 might mark the beginning of a period that will require greater capital deployment. Going forward, an accelerating economy will call for more capital to be deployed in assets and employees as the primary means to generate investment returns.
We continue to search for companies with attractive growth prospects, strong financials and reasonable valuations.
10 | Performance Evaluation |
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Value Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
Value Fund | 24.33% | 18.90% | 8.49% | |||||||||
Standard & Poor’s 500 Stock Index | 24.61% | 18.83% | 7.78% |
INDUSTRY DIVERSIFICATION | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
Health care | 20.1% | Materials | 9.0% | |||||||
Industrials | 16.1% | Consumer discretionary | 6.9% | |||||||
Energy | 15.0% | Consumer staples | 3.9% | |||||||
Information technology | 13.9% | Utilities | 0.5% | |||||||
Financials | 9.5% | Short-term and other assets | 5.1% | |||||||
Total | 100.0% |
TOP TEN EQUITY HOLDINGS | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
Bristol-Myers Squibb Co. | 4.3% | Parker-Hannifin Corp. | 3.4% | |||||||
Dow Chemical Co. (The) | 4.1% | JPMorgan Chase & Co. | 3.3% | |||||||
Intel Corp. | 4.1% | Hewlett-Packard Co. | 3.3% | |||||||
Cisco Systems, Inc. | 3.7% | General Electric Co. | 3.3% | |||||||
Pfizer Inc. | 3.7% | Chevron Corp. | 3.2% | |||||||
PERFORMANCE COMPARISON |
Comparison of the change in value of a $10,000 investment in the Fund and the Standard & Poor’s 500 Stock Index made on December 31, 2003.
The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Value Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
Performance Evaluation | 11 |
Table of Contents
PERFORMANCE EVALUATION
PERFORMANCE
The Homestead Growth Fund posted a modest 3.28% gain for the six-month period ended June 30, 2014, and underperformed the Russell 1000 Growth Index’s 6.31% advance. The Fund’s results were hampered by stock selection. In particular, the information technology, energy and industrials and business services sectors weighed on the portfolio’s relative performance. Overall, sector allocation also detracted. However, an overweight position in the health care sector was beneficial.
PORTFOLIO REVIEW
The portfolio’s information technology stocks underperformed their benchmark peers over the past six months, hindered by Apple and Visa. An underweighted position in Apple was detrimental. The company’s share price rose sharply in anticipation of upcoming product cycles. In addition, investors were receptive to an increased buyback and dividend, as well as a 7-for-1 stock split. The iPhone 6 is expected to come out later this year with a larger screen size that would address a major competitive disadvantage, potentially driving a large upgrade cycle. Visa was hurt by a combination of foreign exchange headwinds and a deceleration in cross-border volumes during the period.
Range Resources negatively affected performance versus the index in the energy sector. The company’s share price increased but lagged the broader sector after Range Resources missed earnings estimates due to lighter oil and natural gas production.
Precision Castparts and Boeing detracted from the portfolio’s performance in the industrials and business services sector. The share price of Precision Castparts declined as the company felt the negative effects of shipment timing issues in its commercial division and continued weakness in its defense division. Boeing’s share price declined in January after the company issued cautious guidance and cash flow estimates, as it can be difficult to accurately time the deliveries of aircraft and related customer payments. Boeing remains one of the portfolio’s largest holdings, as the company has a large backlog of existing orders and continues to add new orders for its more fuel-efficient commercial aircraft.
Health care was a bright spot for the portfolio. Stock selection and an overweighted allocation helped the sector to outperform the benchmark. Notable contrib-
utors included Humana and McKesson. Medicare benefits providers, including Humana, saw their stock prices move sharply higher in February following the release of better-than-expected preliminary Medicare Advantage rates. During the first half of 2014, McKesson benefited from continued strength in generic drug pricing and closed its acquisition of pharmaceutical and health care product manufacturer Celesio, which will expand the company’s global footprint. Domestically, McKesson secured a generic drug distribution agreement with Rite Aid, the third-largest drug retailer in the United States.
OUTLOOK
We seek to invest in large-cap growth companies that, in our view, are well established in their industries and have the potential for above-average earnings growth. We focus on companies with leading market positions, seasoned management, and strong financial fundamentals. Our investment approach reflects our belief that solid company fundamentals (with an emphasis on strong growth in earnings per share or operating cash flow), combined with a positive industry outlook, ultimately will reward investors with strong investment performance.
The U.S. economy should grow modestly over the remainder of 2014, supported by diminished fiscal headwinds, improved labor markets, and healthier consumer finances. We believe the five-year-old bull market has more room to run. A sharp market decline like the one in 2008 is often followed by a sharp, shorter-lived recovery. However, stocks have risen at a relatively moderate pace since 2009, suggesting that the upturn may continue. From a historical perspective, current equity valuations appear reasonable. Market performance should be in line with moderate improvements in corporate earnings growth over the rest of the year. We are looking at companies that we believe can grow earnings at double-digit rates, including companies involved in the convergence of computing to communications; U.S. oil and gas shale exploration and production companies; health care firms addressing unmet clinical needs, particularly in the biotech industry; aerospace manufacturers and suppliers; and nonresidential construction companies, including roads and infrastructure.
12 | Performance Evaluation |
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Growth Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
Growth Fund* | 31.32% | 19.96% | 8.77% | |||||||||
Russell 1000 Growth Index | 26.92% | 19.24% | 8.20% | |||||||||
Standard & Poor’s 500 Stock Index | 24.61% | 18.83% | 7.78% |
INDUSTRY DIVERSIFICATION | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
Consumer discretionary | 25.9% | Energy | 5.0% | |||||||
Information technology | 21.0% | Materials | 3.7% | |||||||
Health care | 19.6% | Consumer staples | 2.7% | |||||||
Industrials | 14.4% | Short-term and other assets | 1.4% | |||||||
Financials | 6.3% | |||||||||
Total | 100.0% |
TOP TEN EQUITY HOLDINGS | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
Amazon.com, Inc. | 4.5% | Google Inc. (Class C) | 2.9% | |||||||
priceline.com, Inc. | 3.3% | Boeing Co. (The) | 2.8% | |||||||
Gilead Sciences, Inc. | 3.2% | McKesson Corp. | 2.7% | |||||||
Google Inc. (Class A) | 3.0% | Danaher Corp. | 2.7% | |||||||
Visa Inc. (Class A) | 3.0% | Pioneer Natural Resources Co. | 2.6% | |||||||
PERFORMANCE COMPARISON |
Comparison of the change in value of a $10,000 investment in the Fund and its benchmark indices made on December 31, 2003.
The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Growth Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
*Performance information for the Growth Fund (formerly the Nasdaq-100 Index Tracking StockSM Fund) reflects its previous investment strategy from inception through December 5, 2008, of matching, as closely as possible, before expenses, the performance of the Nasdaq-100 Stock Index.
Performance Evaluation | 13 |
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PERFORMANCE EVALUATION
FUND PERFORMANCE
Your Fund increased 2.55% in the first half of 2014, trailing its benchmark Index, the Russell 2000, which increased 3.19%.
The Fund’s returns in the financials, consumer discretionary and information technology sectors detracted from results, while the returns in the industrials and consumer staples sectors aided overall results.
PORTFOLIO REVIEW
During the first six months of 2014, some of our bank stocks (financials sector) retreated from levels gained last year. For example, Texas Capital Bancshares declined 13% in the first half after increasing almost 50% in 2013. The bank’s warehouse lending business slowed due to the deceleration in home loan refinancing. However, the commercial lending business—the larger portion of the bank’s overall offering—continues to expand as expected.
Stocks in the consumer discretionary sector showed mixed returns, some appreciated strongly and others faltered. For example, Cooper Tire & Rubber did very well as input costs waned, but gains were offset by poor results in FRED’S and Francesca’s as the retail environment struggled in the first half of 2014. In information technology, Rofin-Sinar Technologies and ManTech International stocks had rough first halves, as laser technology is undergoing competitive change and government budgets are tightened.
The Fund had a large position in the industrials sector that generated a return greater than that of the Index’s industrials position and that of the overall Index. Trucking industry leaders Knight Transportation and Werner Enterprises appreciated in the first half as their market tightened, in part due to weather, but also pricing improved with increased demand as backlog was unwound in the spring. Manitowoc Company and Dycom Industries also contributed to the portfolio’s industrials sector results.
Consumer staples had an evenly weighted position compared to its sector during the first half of 2014. The Fund’s returns in consumer staples exceeded those for
the sector and those of the overall Index. WhiteWave Foods led this sector’s results for the Fund as consumers and investors are responding positively to the company’s offering of organic and natural plant-based foods, beverages, dairy products and milk substitutes.
The exchange traded fund positions were modestly positive, while cash slightly dampened the Fund’s first half return.
OUTLOOK
As 2014 passes the mid-year mark, economic indicators are encouraging, though not all evidence supports an accelerating economy. Recent employment statistics are showing better traction, while housing manufacturing indicators vacillate from month to month with conflicting indications.
The Federal Reserve’s effort to move away from its present easy money policy won’t be perfectly smooth, but thus far, the economy has done a fair job of weathering the gradual unwinding. Uncertain fiscal and regulatory policies remain among the top concerns of business managers and investors. In general though, there has been progress and greater consensus that the economy will reach 3% growth by the end of the year.
Since 2008, on the margin, stockholders have been rewarded as management has returned capital to shareholders in the form of increased dividends and/or share repurchases. It now appears that labor may have been stretched as much as reasonable and that investment in assets and processes that result in greater productivity may become more important in the years ahead. Many of the portfolio’s holdings may benefit as capital is deployed in obtaining greater productivity increases. For example, Westlake Chemical is a beneficiary of the shale gas development with the US and the Canadian market. Westlake receives low-cost natural gas feedstock and produces competitively priced product—including PVC pipe—for domestic and international distribution and sales.
We are always in search of such investment opportunities and appreciate your continued trust and investment.
14 | Performance Evaluation |
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Small-Company Stock Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
Small-Company Stock Fund | 20.96% | 23.91% | 11.90% | |||||||||
Russell 2000 Index | 23.64% | 20.21% | 8.70% |
INDUSTRY DIVERSIFICATION | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
Industrials | 24.7% | Consumer staples | 3.0% | |||||||
Consumer discretionary | 19.3% | Health care | 1.9% | |||||||
Financials | 14.4% | Energy | 1.8% | |||||||
Information technology | 10.7% | Utilities | 0.1% | |||||||
Materials | 9.3% | Short-term and other assets | 14.8% | |||||||
Total | 100.0% |
TOP TEN EQUITY HOLDINGS | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
iShares Core S&P Small-Cap ETF | 4.9% | Knight Transportation, Inc. | 3.1% | |||||||
iShares Russell 2000 Value ETF | 4.9% | Dycom Industries, Inc. | 3.0% | |||||||
Applied Industrial Technologies, Inc. | 3.4% | Cooper Tire & Rubber Co. | 3.0% | |||||||
Werner Enterprises, Inc. | 3.3% | ManTech International Corp. | 2.9% | |||||||
Encore Capital Group, Inc. | 3.2% | Olin Corp. | 2.9% | |||||||
PERFORMANCE COMPARISON |
Comparison of the change in value of a $10,000 investment in the Fund and the Russell 2000 Index made on December 31, 2003.
The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The Small-Company Stock Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
Performance Evaluation | 15 |
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PERFORMANCE EVALUATION
FUND PERFORMANCE
For the six-month period ending June 30, 2014, the Fund returned 3.81% versus the MSCI EAFE Index, which returned 4.78%.
PORTFOLIO REVIEW
International equities continued their upward trend throughout the six-month period. During the first quarter of this year, we observed a continuation of the positive trends of the fourth quarter of last year with our value investment style showing strong outperformance relative to the market overall. Notable outperforming regions were parts of the Middle East and Nordic countries, while the weakest performers were in the Far East and those closely linked to Ukraine. Japan also suffered from profit taking after its strong performance in 2013. While the Fund’s Japanese holdings underperformed the rest of the portfolio, the underweighting of Japan helped our relative performance compared to the benchmark index.
The second quarter of this year, however, proved to be very challenging. The Fund’s exposure to the European financial sector became a significant detractor after having outperformed in the first quarter and last year. This correction was primarily due to macro worries and market fears of rising interest rates that may well prove to be unfounded. The sector still shows significant promise as earnings continue to rebound and normalize after the conclusion of the extended debt crisis that began in 2008. Many companies in this sector are favorably valued with low price-to-book ratios, rising ROEs and increasing dividends. The recovery, as we have witnessed several times already, is very volatile but may offer patient investors above average returns.
The best performing sectors over the six-month period were energy, consumer discretionary and utilities, while financials, consumer staples and health care detracted. Specific stocks that contributed to performance were Encana, Daimler and Iberdrola, while Banco Espirito Santo and Tesco detracted. From a country standpoint, the best performers included Thailand, Germany and Italy, while the UK, Portugal and Netherlands detracted.
We continue to find many undervalued opportunities across the globe, with nine new purchases initiated during the six-month period: Jardine Matheson, Hyundai Motor, Volvo, Incitec Pivot, Banco Santander, Nippon
Yusen, Israel Chemicals, ASML Holdings and KB Financial. We also sold out of five positions: Bridgestone, DMG Mori Seiki, SK Telecom, Vodafone and Encana.
OUTLOOK
In spite of the recent volatility seen by European financials, we remain confident in the long-term outlook for this sector. In most developed regions, investor worries have been inconsistent with some centered on the risk of prolonged deflation and slow growth, and others showing concerns for rising interest rates beginning in the US. These concerns have resulted in market volatility that has stalled but not hindered the longer-term upward trend for equity markets. Equity valuations remain attractive, as seen by the new ideas we have found this quarter and the uptick in mergers and acquisitions globally.
After a strong 2013, Japan has lagged most major markets. There is general investor disappointment on the pace of Abenomics, an economic stimulus plan spearheaded by Prime Minister Shinzo Abe that focused on three components: monetary policy, fiscal policy and growth initiatives. The first two have been successful so far: the yen has weakened since Abe came into power and Japan is showing the first signs of inflation in many years. The third arrow of growth initiatives has somewhat stalled, which helped cause the recent selloff in the equity markets. While we have been underweighted in Japan for much of the year, we have recently begun adding to our positions as there are many catalysts in place for future outperformance.
Emerging markets have shown a strong rebound in the second quarter. Nevertheless, economic concerns in China, along with geopolitical volatility in Russia and the Middle East, remain at the forefront of investor worries. The emergence of ISIS in Iraq and the ensuing civil war is chief among investors’ concerns and has caused oil prices to spike. We continue to monitor these ongoing situations closely. Generally speaking, however, emerging market companies are becoming more attractively valued, and we will be looking to build positions opportunistically and selectively.
Our time-tested and long-term oriented investment process is designed to take advantage of market inefficiencies. We remain optimistic about the portfolio’s positioning and return potential.
16 | Performance Evaluation |
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International Value Fund
AVERAGE ANNUAL TOTAL RETURNS | 1 Year | 5 Year | 10 Year | |||||||||
periods ended 06/30/14 | ||||||||||||
International Value Fund* | 24.25% | 10.09% | 6.75% | |||||||||
MSCI® EAFE® Index | 23.57% | 11.77% | 6.93% |
COUNTRY DIVERSIFICATION | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
Japan | 15.0% | Singapore | 3.7% | |||||||
France | 13.0% | Hong Kong | 3.5% | |||||||
Switzerland | 11.9% | Denmark | 2.0% | |||||||
Britain | 8.7% | Sweden | 2.0% | |||||||
Italy | 7.3% | Portugal | 1.4% | |||||||
Germany | 6.8% | China | 1.0% | |||||||
Netherlands | 6.2% | Brazil | 0.8% | |||||||
Thailand | 4.8% | Israel | 0.7% | |||||||
Spain | 4.8% | Australia | 0.4% | |||||||
Republic of South Korea | 4.0% | Short-term and other assets | 2.0% | |||||||
Total | 100.0% |
TOP TEN EQUITY HOLDINGS | % of Total Investment at 06/30/14 | % of Total Investment at 06/30/14 | ||||||||
AEGON NV | 3.4% | BAE Systems plc | 2.5% | |||||||
Intesa Sanpaolo SpA | 3.1% | Compagnie de Saint-Gobain SA | 2.5% | |||||||
WPP Group plc | 2.8% | MS & AD Insurance Group Holdings, Inc. | 2.4% | |||||||
Daimler AG REG | 2.7% | Sumitomo Mitsui Trust Holdings, Inc. | 2.3% | |||||||
DSM NV | 2.6% | Adecco SA REG | 2.3% | |||||||
PERFORMANCE COMPARISON |
Comparison of the change in value of a $10,000 investment in the Fund and the MSCI® EAFE® Index made on December 31, 2003.
The returns quoted in the above table and chart represent past performance, which is no guarantee of future results. Current performance may be higher or lower than that shown above. Returns and the principal value of your investment will fluctuate such that shares, when redeemed, may be worth more or less than their original cost. The International Value Fund’s average annual total returns are net of any fee waivers and reimbursements. Returns do not reflect taxes that the shareholder may pay on Fund distributions or the redemption of Fund shares.
*The performance information for the International Value Fund (formerly the International Stock Index Fund) reflects its investment experience in the State Street MSCI® EAFE® Index Portfolio from inception through October 16, 2005, and in the Vanguard Developed Markets Index Fund from October 17, 2005 to June 9, 2006. Mercator Asset Management, L.P.’s role as subadvisor began June 12, 2006.
Performance Evaluation | 17 |
Table of Contents
As a shareholder, you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, service fees, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each of the Homestead Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at January 1, 2014 and held through June 30, 2014.
ACTUAL EXPENSES
The first line for each Fund in the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Individual Retirement Arrangements (IRAs) and Educational Savings Accounts (ESAs) are charged a $15.00 annual custodial fee. The charge is automatically deducted from your account in the fourth quarter of each year or, if you close your account, at the time of redemption. A fee is collected for each IRA or ESA, as distinguished by account type (Traditional IRA, Roth IRA, or ESA) and Social Security Number. For example,
if you have both a Traditional IRA and a Roth IRA account, each would be charged a fee. But only one fee would be collected for each account type, regardless of the number of Funds held by each account type. These fees are not included in the example below. If included, the costs shown would be higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each Fund in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect the custodial account fee. Therefore, the hypothetical information in the example is useful in comparing your ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if the custodial account fee was included, your costs would have been higher.
18 | Expense Example |
Table of Contents
Beginning Account Value January 1, 2014 | Ending Account Value June 30, 2014 | Expenses Paid During the Perioda | Annualized Expense Ratio for the Six Month Period Ended June 30, 2014 | |||||||||||||
DAILY INCOME FUND | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,000.05 | $ | 0.43 | 0.09 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,024.61 | $ | 0.44 | 0.09 | % | ||||||||
SHORT-TERM GOVERNMENT SECURITIES FUND | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,008.53 | $ | 3.45 | 0.69 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.55 | $ | 3.48 | 0.69 | % | ||||||||
SHORT-TERM BOND FUND | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,012.57 | $ | 3.67 | 0.74 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.33 | $ | 3.69 | 0.74 | % | ||||||||
STOCK INDEX FUNDb | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,070.27 | $ | 2.78 | 0.54 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.31 | $ | 2.72 | 0.54 | % | ||||||||
VALUE FUND | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,084.75 | $ | 3.13 | 0.61 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.99 | $ | 3.03 | 0.61 | % | ||||||||
GROWTH FUND | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,037.47 | $ | 4.79 | 0.95 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.26 | $ | 4.75 | 0.95 | % | ||||||||
SMALL-COMPANY STOCK FUND | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,027.20 | $ | 4.48 | 0.89 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.55 | $ | 4.47 | 0.89 | % | ||||||||
INTERNATIONAL VALUE FUND | ||||||||||||||||
Actual Return | $ | 1,000.00 | $ | 1,041.09 | $ | 4.80 | 0.95 | % | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.26 | $ | 4.75 | 0.95 | % |
a. | The dollar amounts shown as “Expenses Paid During the Period” are equal to each Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181, then divided by 365. |
b. | The Stock Index Fund is a feeder fund that invests substantially all of its assets in a Master Portfolio. The example reflects the expenses of both the feeder fund and the Master Portfolio. |
Expense Example | 19 |
Table of Contents
Regulatory and Shareholder Matters
PROXY VOTING POLICIES AND PROCEDURES
The policies and procedures used to determine how to vote proxies relating to the Funds’ portfolio securities are available online at homesteadfunds.com and, without charge, upon request by calling 800-258-3030. This information is also available on the Securities and Exchange Commission’s website at sec.gov.
PROXY VOTING RECORD
For the most recent twelve-month period ended June 30, information regarding how proxies relating to portfolio securities were voted on behalf of each of the Funds is available, without charge, upon request by calling 800-258-3030, online at homesteadfunds.com, and on the Securities and Exchange Commission’s website at sec.gov.
QUARTERLY DISCLOSURE OF PORTFOLIO HOLDINGS
The Funds file complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. Portfolio holdings for the second and fourth quarters of each fiscal year are filed as part of the Funds’ semi-annual and annual reports. The Funds’ Form N-Q, semi-annual and annual reports are available on the Commission’s website at sec.gov, and may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. The most recent quarterly portfolio holdings and semi-annual and annual reports also can be accessed on the Funds’ website at homesteadfunds.com.
20 | Regulatory and Shareholder Matters |
Table of Contents
PORTFOLIO OF INVESTMENTS: Daily Income Fund
June 30, 2014 (Unaudited)
COMMERCIAL PAPER | Interest Rate/Yield | Maturity Date | Face Amount | Value | ||||||||||||
(74.7% of portfolio) | ||||||||||||||||
Air Liquide US LLC (a) | 0.11 | % | 08/06/14 | $ | 5,000,000 | $ | 4,999,450 | |||||||||
Air Liquide US LLC (a) | 0.11 | 08/08/14 | 4,750,000 | 4,749,448 | ||||||||||||
American Honda Finance Corp. | 0.10 | 08/06/14 | 3,000,000 | 2,999,700 | ||||||||||||
BMW US Capital LLC (a) | 0.10 | 07/14/14 | 2,500,000 | 2,499,910 | ||||||||||||
BMW US Capital LLC (a) | 0.11 | 08/11/14 | 5,000,000 | 4,999,374 | ||||||||||||
BMW US Capital LLC (a) | 0.12 | 08/14/14 | 2,000,000 | 1,999,707 | ||||||||||||
Chevron Corp. (a) | 0.07 | 07/24/14 | 3,000,000 | 2,999,866 | ||||||||||||
Chevron Corp. (a) | 0.11 | 09/16/14 | 3,000,000 | 2,999,294 | ||||||||||||
Chevron Corp. (a) | 0.10 | 10/10/14 | 3,000,000 | 2,999,158 | ||||||||||||
Coca-Cola Co. (a) | 0.15 | 07/15/14 | 2,000,000 | 1,999,883 | ||||||||||||
Coca-Cola Co. (a) | 0.11 | 07/17/14 | 2,000,000 | 1,999,902 | ||||||||||||
Coca-Cola Co. (a) | 0.10 | 08/04/14 | 2,500,000 | 2,499,764 | ||||||||||||
Coca-Cola Co. (a) | 0.14 | 09/25/14 | 1,250,000 | 1,249,582 | ||||||||||||
Coca-Cola Co. (a) | 0.11 | 10/06/14 | 2,000,000 | 1,999,407 | ||||||||||||
Conocophillips Qatar Funding Ltd. (a) | 0.07 | 07/02/14 | 4,000,000 | 3,999,992 | ||||||||||||
Conocophillips Qatar Funding Ltd. (a) | 0.10 | 07/07/14 | 4,000,000 | 3,999,933 | ||||||||||||
Conocophillips Qatar Funding Ltd. (a) | 0.11 | 08/05/14 | 1,100,000 | 1,099,882 | ||||||||||||
Conocophillips Qatar Funding Ltd. (a) | 0.10 | 08/28/14 | 1,200,000 | 1,199,807 | ||||||||||||
eBay Inc. (a) | 0.10 | 08/12/14 | 5,000,000 | 4,999,417 | ||||||||||||
eBay Inc. (a) | 0.09 | 08/19/14 | 3,000,000 | 2,999,633 | ||||||||||||
General Electric Capital Corp. | 0.08 | 08/06/14 | 2,500,000 | 2,499,800 | ||||||||||||
General Electric Capital Corp. | 0.11 | 09/04/14 | 5,000,000 | 4,999,007 | ||||||||||||
Google Inc. (a) | 0.10 | 08/07/14 | 3,000,000 | 2,999,692 | ||||||||||||
Google Inc. (a) | 0.10 | 10/22/14 | 3,000,000 | 2,999,058 | ||||||||||||
Honeywell International (a) | 0.10 | 09/09/14 | 5,000,000 | 4,999,028 | ||||||||||||
Honeywell International (a) | 0.12 | 10/21/14 | 4,000,000 | 3,998,507 | ||||||||||||
International Business Machines Corp. (a) | 0.09 | 07/28/14 | 4,000,000 | 3,999,730 | ||||||||||||
International Business Machines Corp. (a) | 0.09 | 08/01/14 | 1,000,000 | 999,923 | ||||||||||||
International Business Machines Corp. (a) | 0.10 | 09/17/14 | 4,200,000 | 4,199,090 | ||||||||||||
International Business Machines Corp. (a) | 0.10 | 09/18/14 | 700,000 | 699,846 | ||||||||||||
John Deere Bank SA (a) | 0.07 | 07/10/14 | 4,000,000 | 3,999,930 | ||||||||||||
John Deere Bank SA (a) | 0.08 | 07/11/14 | 2,500,000 | 2,499,944 | ||||||||||||
John Deere Bank SA (a) | 0.09 | 07/18/14 | 3,500,000 | 3,499,851 | ||||||||||||
L’Oreal USA, Inc. (a) | 0.07 | 07/29/14 | 2,000,000 | 1,999,891 | ||||||||||||
L’Oreal USA, Inc. (a) | 0.07 | 08/05/14 | 3,500,000 | 3,499,762 | ||||||||||||
Nestle Capital Corp. (a) | 0.09 | 07/22/14 | 3,000,000 | 2,999,843 | ||||||||||||
Nestle Capital Corp. (a) | 0.14 | 10/02/14 | 1,000,000 | 999,638 | ||||||||||||
PACCAR Financial Corp. | 0.07 | 07/01/14 | 5,000,000 | 5,000,000 | ||||||||||||
PACCAR Financial Corp. | 0.10 | 08/18/14 | 3,000,000 | 2,999,600 | ||||||||||||
PepsiCo, Inc. (a) | 0.06 | 07/08/14 | 1,000,000 | 999,988 | ||||||||||||
PepsiCo, Inc. (a) | 0.07 | 07/30/14 | 3,000,000 | 2,999,831 | ||||||||||||
Procter & Gamble Co. (a) | 0.09 | 09/03/14 | 3,000,000 | 2,999,520 | ||||||||||||
Procter & Gamble Co. (a) | 0.09 | 09/09/14 | 4,000,000 | 3,999,300 | ||||||||||||
Total Capital Canada, Ltd. (a) | 0.06 | 07/01/14 | 2,500,000 | 2,500,000 | ||||||||||||
Total Capital Canada, Ltd. (a) | 0.08 | 08/14/14 | 4,000,000 | 3,999,609 | ||||||||||||
Total Capital Canada, Ltd. (a) | 0.09 | 08/19/14 | 3,000,000 | 2,999,633 | ||||||||||||
Toyota Motor Credit Corp. | 0.13 | 07/08/14 | 3,000,000 | 2,999,924 | ||||||||||||
Unilever NV | 0.09 | 07/07/14 | 2,000,000 | 1,999,970 | ||||||||||||
Unilever NV (a) | 0.10 | 09/08/14 | 5,000,000 | 4,999,042 | ||||||||||||
Walt Disney Co. (The) (a) | 0.08 | 07/15/14 | 5,000,000 | 4,999,844 | ||||||||||||
Wells Fargo & Co. | 0.12 | 08/01/14 | 2,250,000 | 2,249,768 | ||||||||||||
Total Commercial Paper (Cost $156,931,678) | 156,931,678 | |||||||||||||||
U.S. GOVERNMENT OBLIGATIONS | ||||||||||||||||
(16.2% of portfolio) | ||||||||||||||||
U.S. Treasury Note | 0.63 | 07/15/14 | 3,000,000 | 3,000,659 | ||||||||||||
U.S. Treasury Note | 0.13 | 07/31/14 | 6,000,000 | 6,000,294 | ||||||||||||
U.S. Treasury Note | 4.25 | 08/15/14 | 4,000,000 | 4,020,659 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 21 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Daily Income Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate/Yield | Maturity Date | Face Amount | Value | |||||||||||||
(U.S. Government Obligations continued) | ||||||||||||||||
U.S. Treasury Note | 0.50 | % | 08/15/14 | $ | 3,000,000 | $ | 3,001,538 | |||||||||
U.S. Treasury Note | 0.25 | 09/30/14 | 4,000,000 | 4,001,935 | ||||||||||||
U.S. Treasury Note | 0.50 | 10/15/14 | 3,000,000 | 3,003,901 | ||||||||||||
U.S. Treasury Note | 0.25 | 10/31/14 | 5,000,000 | 5,003,382 | ||||||||||||
U.S. Treasury Note | 4.25 | 11/15/14 | 6,000,000 | 6,093,559 | ||||||||||||
Total U.S. Government Obligations (Cost $34,125,927) | 34,125,927 | |||||||||||||||
MONEY MARKET ACCOUNT | Shares | |||||||||||||||
(9.1% of portfolio) | ||||||||||||||||
State Street Institutional Liquid Reserves Fund (Premier Class) | 0.06 | (b) | 19,143,581 | 19,143,581 | ||||||||||||
Total Money Market Account (Cost $19,143,581) | 19,143,581 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES (Cost $210,201,186)—100% | $ | 210,201,186 |
(a) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration normally to qualified institutional buyers. The security has been determined to be liquid under criteria established by the Fund’s Board of Directors. The total of such securities at period-end amounts to $131,183,909 and represents 62.4% of total investments. |
(b) | 7-day yield at June 30, 2014. |
22 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-term Government Securities Fund
June 30, 2014 (Unaudited)
CORPORATE BONDS | Interest Rate | Maturity Date | Face Amount | Value | ||||||||||||
(16.9% of portfolio) | ||||||||||||||||
Ally Bank | 0.95 | % | 09/25/15 | $ | 250,000 | $ | 250,771 | |||||||||
Altitude Investments 17 LLC | 2.68 | 11/08/25 | 963,290 | 960,841 | ||||||||||||
American Express Centurion Bank | 1.40 | 10/06/14 | 250,000 | 250,695 | ||||||||||||
Bank of China NY | 0.95 | 12/31/14 | 250,000 | 250,556 | ||||||||||||
Bank of India NY | 0.60 | 12/31/14 | 250,000 | 250,122 | ||||||||||||
Barclays Bank Delaware | 0.00 | (c) | 05/27/15 | 175,000 | 170,083 | |||||||||||
Ethiopian Leasing (2012) LLC | 2.68 | 07/30/25 | 191,195 | 192,466 | ||||||||||||
Goldman Sachs Bank USA | 1.50 | 11/24/14 | 250,000 | 251,017 | ||||||||||||
Lulwa Ltd. | 1.83 | 03/26/25 | 905,914 | 874,213 | ||||||||||||
Mexican Aircraft Finance IV | 2.54 | 07/13/25 | 473,097 | 473,025 | ||||||||||||
Micron Semiconductor Asia PTE LTD | 1.26 | 01/15/19 | 1,840,000 | 1,839,579 | ||||||||||||
Petroleos Mexicanos | 2.00 | 12/20/22 | 850,000 | 845,337 | ||||||||||||
Safina LTD | 2.00 | 12/30/23 | 1,685,020 | 1,661,090 | ||||||||||||
SallieMae Bank | 1.00 | 07/25/14 | 250,000 | 250,082 | ||||||||||||
Sandalwood 2013 LLC | 2.82 | 02/12/26 | 635,781 | 642,606 | ||||||||||||
Sayarra LTD | 2.77 | 10/29/21 | 35,692 | 36,806 | ||||||||||||
State Bank of India NY | 0.60 | 12/23/14 | 250,000 | 250,124 | ||||||||||||
SunTrust Bank | 0.73 | (a) | 08/29/14 | 250,000 | 246,232 | |||||||||||
Tagua Leasing LLC | 1.90 | 07/12/24 | 867,946 | 848,862 | ||||||||||||
Tagua Leasing LLC | 1.73 | 09/18/24 | 867,594 | 838,133 | ||||||||||||
Union 11 Leasing LLC | 2.41 | 01/23/24 | 833,350 | 837,797 | ||||||||||||
Union 16 Leasing LLC | 1.86 | 01/22/25 | 905,337 | 878,692 | ||||||||||||
VRG Linhas Aéreas SA | 0.85 | 09/27/14 | 126,095 | 126,255 | ||||||||||||
VRG Linhas Aéreas SA | 0.62 | 02/14/16 | 875,000 | 874,909 | ||||||||||||
Wells Fargo Bank | 0.73 | (a) | 04/29/16 | 100,000 | 99,500 | |||||||||||
Total Corporate Bonds (Cost $14,327,547) | 14,199,793 | |||||||||||||||
MORTGAGE BACKED SECURITIES | ||||||||||||||||
(3.6% of portfolio) | ||||||||||||||||
FDIC Structured Sale Guaranteed Notes 2010-S3 (b) | 2.74 | 12/03/20 | 400,500 | 409,533 | ||||||||||||
GNMA #2602 | 6.00 | 06/20/28 | 31,820 | 35,865 | ||||||||||||
GNMA #8004 | 1.63 | (a) | 07/20/22 | 16,438 | 17,037 | |||||||||||
GNMA #8006 | 1.63 | (a) | 07/20/22 | 16,143 | 16,525 | |||||||||||
GNMA #8038 | 1.63 | (a) | 08/20/22 | 9,787 | 10,020 | |||||||||||
GNMA #8040 | 2.00 | (a) | 08/20/22 | 24,496 | 25,657 | |||||||||||
GNMA #8054 | 1.63 | (a) | 10/20/22 | 6,296 | 6,314 | |||||||||||
GNMA #8076 | 1.63 | (a) | 11/20/22 | 9,525 | 9,747 | |||||||||||
GNMA #8102 | 4.00 | (a) | 02/20/16 | 742 | 772 | |||||||||||
GNMA #8103 | 4.00 | (a) | 02/20/16 | 3,952 | 4,102 | |||||||||||
GNMA #8157 | 1.63 | (a) | 03/20/23 | 15,521 | 15,878 | |||||||||||
GNMA #8191 | 1.63 | (a) | 05/20/23 | 29,724 | 30,804 | |||||||||||
GNMA #8215 | 2.00 | (a) | 04/20/17 | 1,275 | 1,320 | |||||||||||
GNMA #8259 | 1.63 | (a) | 08/20/23 | 8,367 | 8,582 | |||||||||||
GNMA #8297 | 4.00 | (a) | 12/20/17 | 5,100 | 5,346 | |||||||||||
GNMA #8332 | 3.50 | (a) | 03/20/18 | 2,864 | 3,004 | |||||||||||
GNMA #8344 | 3.50 | (a) | 04/20/18 | 9,238 | 9,684 | |||||||||||
GNMA #8384 | 1.63 | (a) | 03/20/24 | 4,542 | 4,655 | |||||||||||
GNMA #8393 | 4.00 | (a) | 08/20/18 | 4,214 | 4,409 | |||||||||||
GNMA #8400 | 2.00 | (a) | 08/20/18 | 6,059 | 6,318 | |||||||||||
GNMA #8405 | 4.00 | (a) | 09/20/18 | 5,457 | 5,713 | |||||||||||
GNMA #8423 | 1.63 | (a) | 05/20/24 | 5,495 | 5,700 | |||||||||||
GNMA #8429 | 4.00 | (a) | 11/20/18 | 6,597 | 6,933 | |||||||||||
GNMA #8459 | 1.63 | (a) | 07/20/24 | 8,502 | 8,734 | |||||||||||
GNMA #8499 | 3.00 | (a) | 05/20/19 | 5,473 | 5,491 | |||||||||||
GNMA #8518 | 1.63 | (a) | 10/20/24 | 8,277 | 8,582 | |||||||||||
GNMA #8532 | 2.50 | (a) | 10/20/24 | 11,330 | 11,954 | |||||||||||
GNMA #8591 | 1.63 | (a) | 02/20/25 | 22,744 | 23,713 | |||||||||||
GNMA #8638 | 1.63 | (a) | 06/20/25 | 10,587 | 10,974 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 23 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-term Government Securities Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate | Maturity Date | Face Amount | Value | |||||||||||||
(Mortgage Backed Securities continued) | ||||||||||||||||
GNMA #8648 | 1.63 | %(a) | 07/20/25 | $ | 18,384 | $ | 18,441 | |||||||||
GNMA #8663 | 2.00 | (a) | 07/20/25 | 13,298 | 13,833 | |||||||||||
GNMA #8680 | 3.50 | (a) | 08/20/20 | 8,197 | 8,610 | |||||||||||
GNMA #8687 | 2.50 | (a) | 08/20/25 | 3,522 | 3,616 | |||||||||||
GNMA #8702 | 3.00 | (a) | 10/20/20 | 4,405 | 4,588 | |||||||||||
GNMA #8747 | 1.63 | (a) | 11/20/25 | 8,201 | 8,437 | |||||||||||
GNMA #8807 | 1.63 | (a) | 07/20/21 | 9,225 | 9,560 | |||||||||||
GNMA #8836 | 1.63 | (a) | 09/20/21 | 9,296 | 9,634 | |||||||||||
GNMA #8847 | 1.63 | (a) | 04/20/26 | 11,211 | 11,549 | |||||||||||
GNMA #8869 | 1.63 | (a) | 11/20/21 | 28,630 | 29,263 | |||||||||||
GNMA #8873 | 2.50 | (a) | 11/20/21 | 14,355 | 14,768 | |||||||||||
GNMA #8877 | 1.63 | (a) | 05/20/26 | 2,570 | 2,648 | |||||||||||
GNMA #8883 | 1.63 | (a) | 12/20/21 | 9,999 | 10,217 | |||||||||||
GNMA #8915 | 1.63 | (a) | 02/20/22 | 9,699 | 9,905 | |||||||||||
GNMA #8934 | 1.63 | (a) | 03/20/22 | 17,493 | 17,866 | |||||||||||
GNMA #8978 | 1.63 | (a) | 05/20/22 | 42,055 | 43,034 | |||||||||||
GNMA #80053 | 1.63 | (a) | 03/20/27 | 2,341 | 2,409 | |||||||||||
GNMA #80058 | 1.63 | (a) | 04/20/27 | 2,230 | 2,315 | |||||||||||
GNMA #80185 | 1.63 | (a) | 04/20/28 | 21,411 | 22,111 | |||||||||||
GNMA #80264 | 1.63 | (a) | 03/20/29 | 19,198 | 19,952 | |||||||||||
GNMA #80283 | 1.63 | (a) | 05/20/29 | 14,842 | 15,345 | |||||||||||
GNMA #80300 | 1.63 | (a) | 07/20/29 | 13,724 | 14,193 | |||||||||||
GNMA #80309 | 1.63 | (a) | 08/20/29 | 6,359 | 6,576 | |||||||||||
GNMA #80363 | 1.63 | (a) | 01/20/30 | 46,015 | 47,497 | |||||||||||
GNMA #80426 | 1.63 | (a) | 07/20/30 | 1,927 | 2,003 | |||||||||||
GNMA #80452 | 1.63 | (a) | 09/20/30 | 14,297 | 14,858 | |||||||||||
GNMA #80475 | 1.63 | (a) | 12/20/30 | 16,329 | 16,380 | |||||||||||
GNMA #80577 | 1.63 | (a) | 02/20/32 | 2,933 | 3,033 | |||||||||||
GNMA #80684 | 1.63 | (a) | 04/20/33 | 9,857 | 10,267 | |||||||||||
GNMA #81129 | 2.13 | (a) | 10/20/34 | 208,520 | 209,427 | |||||||||||
GNMA #583189 | 4.50 | 02/20/17 | 16,763 | 17,737 | ||||||||||||
GNMA #607494 | 5.00 | 04/15/19 | 14,066 | 14,996 | ||||||||||||
GNMA #616274 | 5.00 | 02/15/19 | 12,946 | 13,788 | ||||||||||||
GNMA 2001-53 | 5.50 | 10/20/31 | 5,689 | 5,804 | ||||||||||||
GNMA 2001-53 | 0.50 | (a) | 10/20/31 | 1,049 | 1,050 | |||||||||||
GNMA 2002-15 | 5.50 | 11/20/31 | 10,365 | 10,557 | ||||||||||||
GNMA 2002-20 | 4.50 | 03/20/32 | 15,838 | 17,195 | ||||||||||||
GNMA 2003-11 | 4.00 | 10/17/29 | 23,734 | 25,200 | ||||||||||||
GNMA 2003-12 | 4.50 | 02/20/32 | 6,308 | 6,467 | ||||||||||||
GNMA 2003-26 | 0.60 | (a) | 04/16/33 | 6,886 | 6,928 | |||||||||||
GNMA 2003-97 | 4.50 | 03/20/33 | 25,065 | 26,437 | ||||||||||||
GNMA 2004-17 | 4.50 | 12/20/33 | 63,052 | 67,702 | ||||||||||||
GNMA 2004-102 | 5.50 | 04/20/34 | 47,426 | 51,690 | ||||||||||||
GNMA 2010-113 | 2.50 | 02/16/40 | 395,133 | 401,905 | ||||||||||||
GNMA 2013-131 | 0.50 | (a) | 09/16/43 | 441,764 | 441,189 | |||||||||||
GNMA #MA0668 | 2.00 | 12/20/27 | 226,088 | 225,961 | ||||||||||||
NCUA Guaranteed Notes 2010-C1 | 1.60 | 10/29/20 | 421,308 | 423,747 | ||||||||||||
Total Mortgage Backed Securities (Cost $3,003,784) | 3,074,054 | |||||||||||||||
ASSET BACKED SECURITIES | ||||||||||||||||
(0.4% of portfolio) | ||||||||||||||||
Small Business Administration 98-20D | 6.15 | 04/01/18 | 8,197 | 8,622 | ||||||||||||
Small Business Administration 98-20E | 6.30 | 05/01/18 | 9,233 | 9,788 | ||||||||||||
Small Business Administration 98-20H | 6.15 | 08/01/18 | 4,238 | 4,462 | ||||||||||||
Small Business Administration 99-20D | 6.15 | 04/01/19 | 13,387 | 14,293 | ||||||||||||
Small Business Administration 04-20B | 4.72 | 02/01/24 | 41,966 | 44,898 | ||||||||||||
Small Business Administration 04-20C | 4.34 | 03/01/24 | 64,573 | 68,036 | ||||||||||||
Small Business Administration 05-10E | 4.54 | 09/01/15 | 6,503 | 6,604 |
24 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-term Government Securities Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate/Yield | Maturity Date | Face Amount | Value | |||||||||||||
(Assets Backed Securities continued) | ||||||||||||||||
Small Business Administration Pool # 100075 | 3.50 | % | 05/25/19 | $ | 18,440 | $ | 18,848 | |||||||||
Small Business Administration Pool # 502261 | 1.38 | (a) | 10/25/17 | 7,634 | 7,626 | |||||||||||
Small Business Administration Pool # 502684 | 1.25 | (a) | 07/25/19 | 2,093 | 2,119 | |||||||||||
Small Business Administration Pool # 503278 | 0.88 | (a) | 02/25/21 | 18,082 | 18,131 | |||||||||||
Small Business Administration Pool # 503463 | 1.13 | (a) | 09/25/21 | 4,022 | 4,015 | |||||||||||
Small Business Administration Pool # 504305 | 0.88 | (a) | 10/25/23 | 4,221 | 4,201 | |||||||||||
Small Business Investment Companies 02-20K | 5.08 | 11/01/22 | 15,226 | 16,418 | ||||||||||||
Small Business Investment Companies 05-10B | 4.94 | 09/10/15 | 55,671 | 57,617 | ||||||||||||
Small Business Investment Companies 05-P10A | 4.64 | 02/10/15 | 16,795 | 17,115 | ||||||||||||
Small Business Investment Companies 07-10A | 5.38 | 03/10/17 | 14,248 | 15,290 | ||||||||||||
Total Asset Backed Securities (Cost $297,918) | 318,083 | |||||||||||||||
MUNICIPAL BONDS | ||||||||||||||||
(5.0% of portfolio) | ||||||||||||||||
Carmel, Indiana Redevelopment District | 7.80 | 01/15/29 | 500,000 | 569,385 | ||||||||||||
Cook County, Illinois Community Consolidated School District | 0.00 | (c) | 12/01/15 | 1,050,000 | 1,044,540 | |||||||||||
DuPage & Cook County Illinois Community School District | 5.25 | 01/01/26 | 110,000 | 118,199 | ||||||||||||
Hamilton Township, New Jersey Board of Education | 5.53 | 08/15/24 | 700,000 | 703,969 | ||||||||||||
Illinois Housing Development Authority, Illinois | 4.13 | 10/20/16 | 500,000 | 519,375 | ||||||||||||
Jefferson County Colorado | 0.00 | (c) | 03/01/16 | 200,000 | 198,842 | |||||||||||
Rio Rancho, New Mexico New Event Center | 5.00 | 06/01/20 | 1,000,000 | 1,038,790 | ||||||||||||
Total Municipal Bonds (Cost $4,210,531) | 4,193,100 | |||||||||||||||
U. S. GOVERNMENT AND AGENCY OBLIGATIONS | ||||||||||||||||
(65.4% of portfolio) | ||||||||||||||||
Government Trust Certificate (Israel Trust) | 0.00 | (c) | 04/01/15 | 2,750,000 | 2,728,740 | |||||||||||
National Archives Facility Trust | 8.50 | 09/01/19 | 31,125 | 36,916 | ||||||||||||
Overseas Private Investment Corp. | 3.46 | (d) | 07/12/14 | 1,000,000 | 1,154,560 | |||||||||||
Overseas Private Investment Corp. | 1.84 | (d) | 07/12/14 | 1,500,000 | 1,609,928 | |||||||||||
Overseas Private Investment Corp. | 0.61 | (e) | 12/22/15 | 1,500,000 | 1,515,428 | |||||||||||
Overseas Private Investment Corp. | 3.50 | (e) | 05/02/16 | 1,000,000 | 1,184,325 | |||||||||||
Overseas Private Investment Corp. | 3.56 | (d) | 04/23/17 | 3,000,000 | 3,667,052 | |||||||||||
Overseas Private Investment Corp. | 1.50 | (e) | 11/17/17 | 1,000,000 | 1,043,323 | |||||||||||
Overseas Private Investment Corp. | 1.32 | (d) | 02/19/18 | 3,050,000 | 3,051,894 | |||||||||||
Overseas Private Investment Corp. | 1.55 | (e) | 03/15/18 | 3,600,000 | 3,785,101 | |||||||||||
Overseas Private Investment Corp. | 0.68 | (e) | 04/30/18 | 2,000,000 | 2,026,520 | |||||||||||
Overseas Private Investment Corp. | 1.84 | (e) | 06/10/18 | 1,000,000 | 1,084,122 | |||||||||||
Overseas Private Investment Corp. | 5.66 | (e) | 06/10/18 | 900,000 | 1,320,313 | |||||||||||
Overseas Private Investment Corp. | 1.14 | (e) | 06/10/18 | 4,000,000 | 4,116,956 | |||||||||||
Overseas Private Investment Corp. | 0.78 | (e) | 07/07/19 | 1,000,000 | 1,016,378 | |||||||||||
Overseas Private Investment Corp. | 2.53 | (e) | 07/07/19 | 1,000,000 | 1,126,870 | |||||||||||
Overseas Private Investment Corp. | 0.83 | (e) | 11/08/19 | 2,000,000 | 1,989,454 | |||||||||||
Overseas Private Investment Corp. | 1.34 | (e) | 11/20/19 | 2,000,000 | 2,077,086 | |||||||||||
Overseas Private Investment Corp. | 1.50 | (e) | 11/15/20 | 1,000,000 | 979,130 | |||||||||||
Overseas Private Investment Corp. | 3.37 | 05/15/21 | 811,340 | 856,624 | ||||||||||||
Overseas Private Investment Corp. | 2.07 | 05/15/21 | 849,400 | 847,652 | ||||||||||||
Overseas Private Investment Corp. | 2.51 | 05/15/25 | 2,300,000 | 2,295,036 | ||||||||||||
Philippine Power Trust I (b) | 5.40 | 09/26/18 | 267,857 | 287,136 | ||||||||||||
Private Export Funding Corp. | 2.53 | 07/15/16 | 500,000 | 514,738 | ||||||||||||
The Financing Corp. | 0.00 | (c) | 10/06/17 | 500,000 | 479,733 | |||||||||||
The Financing Corp. | 0.00 | (c) | 02/08/18 | 500,000 | 474,999 | |||||||||||
U.S. Department of Housing and Urban Development | 7.91 | 08/01/17 | 37,000 | 37,188 | ||||||||||||
U.S. Department of Housing and Urban Development | 5.77 | 08/01/17 | 800,000 | 800,822 | ||||||||||||
U.S. Department of Housing and Urban Development | 2.91 | 08/01/17 | 1,000,000 | 1,056,553 | ||||||||||||
U.S. Department of Housing and Urban Development | 7.93 | 08/01/18 | 80,000 | 80,082 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 25 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-term Government Securities Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate/Yield | Maturity Date | Face Amount | Value | |||||||||||||
(U. S. Government And Agency Obligations continued) | ||||||||||||||||
U.S. Department of Housing and Urban Development | 5.45 | % | 08/01/19 | $ | 800,000 | $ | 873,883 | |||||||||
U.S. Department of Housing and Urban Development | 6.07 | 08/01/21 | 445,000 | 445,981 | ||||||||||||
U.S. Department of Housing and Urban Development | 6.12 | 08/01/22 | 884,000 | 886,232 | ||||||||||||
U.S. Department of Housing and Urban Development | 5.77 | 08/01/26 | 500,000 | 539,356 | ||||||||||||
United States Treasury Note | 2.38 | 02/28/15 | 1,500,000 | 1,522,734 | ||||||||||||
United States Treasury Note | 1.50 | 06/30/16 | 1,000,000 | 1,020,547 | ||||||||||||
United States Treasury Note | 1.00 | 08/31/16 | 1,000,000 | 1,010,234 | ||||||||||||
United States Treasury Note | 0.75 | 01/15/17 | 500,000 | 500,781 | ||||||||||||
United States Treasury Note | 0.75 | 03/15/17 | 1,000,000 | 999,844 | ||||||||||||
United States Treasury Note | 0.88 | 06/15/17 | 1,000,000 | 1,000,234 | ||||||||||||
United States Treasury Note | 1.88 | 08/31/17 | 1,500,000 | 1,542,304 | ||||||||||||
United States Treasury Note | 1.38 | 09/30/18 | 1,000,000 | 998,594 | ||||||||||||
United States Treasury Note | 1.63 | 04/30/19 | 500,000 | 500,821 | ||||||||||||
Total U.S. Government and Agency Obligations (Cost $54,687,700) |
| 55,086,204 | ||||||||||||||
COMMERCIAL PAPER | ||||||||||||||||
(8.6% of portfolio) | ||||||||||||||||
Ameren Illionois Co. | 0.21 | 07/01/14 | 4,215,000 | 4,215,000 | ||||||||||||
Commonwealth Edison Co. (b) | 0.28 | 07/11/14 | 1,000,000 | 999,922 | ||||||||||||
Emprire District Electric Co. (b) | 0.31 | 07/22/14 | 2,000,000 | 1,999,638 | ||||||||||||
Total Commercial Paper (Cost $7,214,560) | 7,214,560 | |||||||||||||||
MONEY MARKET ACCOUNT | ||||||||||||||||
(0.1% of portfolio) | ||||||||||||||||
State Street Institutional Liquid Reserves Fund (Premier Class) | 0.06 | (f) | 114,594 | 114,594 | ||||||||||||
Total Money Market Account (Cost $114,594) | 114,594 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES (Cost $83,856,634)—100% | $ | 84,200,388 |
(a) | Variable coupon rate as of June 30, 2014. |
(b) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The security has been determined to be liquid under criteria established by the Fund’s Board of Directors. The total of such securities at period-end amounts to $3,696,229 and represents 4.4% of total investments. |
(c) | Zero coupon rate. |
(d) | Interest is paid at maturity. |
(e) | Interest is paid at put date. |
(f) | 7-day yield at June 30, 2014. |
26 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund
June 30, 2014 (Unaudited)
CORPORATE BONDS | Interest Rate | Maturity Date | Face Amount | Value | ||||||||||||
(20.8% of portfolio) | ||||||||||||||||
CONSUMER STAPLES—0.7% | ||||||||||||||||
Beverages | ||||||||||||||||
Pepsico Inc. | 0.70 | % | 02/26/16 | $ | 525,000 | $ | 526,220 | |||||||||
Pepsico Inc. | 0.44 | (a) | 02/26/16 | 525,000 | 525,537 | |||||||||||
Food and Staples Retailing | ||||||||||||||||
Wal-Mart Stores Inc. | 1.95 | 12/15/18 | 1,175,000 | 1,187,141 | ||||||||||||
Personal Products | ||||||||||||||||
Colgate-Palmolive Co. | 0.90 | 05/01/18 | 550,000 | 535,489 | ||||||||||||
Colgate-Palmolive Co. | 1.75 | 03/15/19 | 1,025,000 | 1,022,093 | ||||||||||||
Total Consumer Staples | 3,796,480 | |||||||||||||||
ENERGY—0.8% | ||||||||||||||||
Oil, Gas, & Consumable Fuels | ||||||||||||||||
Chevron Corp. | 0.89 | 06/24/16 | 2,075,000 | 2,088,066 | ||||||||||||
Chevron Corp. | 1.10 | 12/05/17 | 475,000 | 472,731 | ||||||||||||
Chevron Corp. | 1.72 | 06/24/18 | 975,000 | 982,537 | ||||||||||||
Exxon Mobil Corp. | 1.82 | 03/15/19 | 1,050,000 | 1,056,534 | ||||||||||||
Total Energy | 4,599,868 | |||||||||||||||
FINANCIALS—6.3% | ||||||||||||||||
Banks | ||||||||||||||||
Bank of America NA | 0.51 | (a) | 06/15/16 | 2,025,000 | 2,014,476 | |||||||||||
Bank of America NA | 0.53 | (a) | 06/15/17 | 1,550,000 | 1,532,101 | |||||||||||
Credit Suisse New York | 1.23 | (a) | 09/13/16 | 1,980,000 | 1,984,346 | |||||||||||
JP Morgan Chase Bank NA | 0.56 | (a) | 06/13/16 | 12,625,000 | 12,579,866 | |||||||||||
Key Bank NA | 7.41 | 10/15/27 | 1,050,000 | 1,109,436 | ||||||||||||
Landesbank Baden-Wuerttemberg NY | 5.05 | 12/30/15 | 7,650,000 | 8,053,690 | ||||||||||||
Union Bank NA | 5.95 | 05/11/16 | 525,000 | 573,454 | ||||||||||||
WestLB AG, NY | 4.80 | 07/15/15 | 275,000 | 286,816 | ||||||||||||
Capital Markets | ||||||||||||||||
Morgan Stanley | 4.10 | 01/26/15 | 700,000 | 714,448 | ||||||||||||
Vesey Street Investment Trust I | 4.40 | 09/01/16 | 2,275,000 | 2,426,950 | ||||||||||||
Consumer Finance | ||||||||||||||||
General Electric Capital Corp. | 0.38 | (a) | 09/15/14 | 2,350,000 | 2,351,227 | |||||||||||
General Electric Capital Corp. | 1.04 | (a) | 12/20/17 | 1,100,000 | 1,108,041 | |||||||||||
Real Estate Management & Development | ||||||||||||||||
Fishers Lane LLC (b) | 2.03 | 04/05/17 | 750,000 | 749,902 | ||||||||||||
Total Financials | 35,484,753 | |||||||||||||||
HEALTH CARE —1.0% | ||||||||||||||||
Health Care Equipment & Supplies | ||||||||||||||||
Baxter International Inc. | 0.40 | (a) | 12/11/14 | 825,000 | 825,490 | |||||||||||
Baxter International Inc. | 0.95 | 06/01/16 | 825,000 | 828,468 | ||||||||||||
Baxter International Inc. | 1.85 | 01/15/17 | 2,250,000 | 2,295,054 | ||||||||||||
Health Care Providers & Services | ||||||||||||||||
UnitedHealth Group Inc. | 0.85 | 10/15/15 | 550,000 | 552,243 | ||||||||||||
Pharmaceuticals | ||||||||||||||||
Eli Lilly and Co. | 6.57 | 01/01/16 | 1,025,000 | 1,114,485 | ||||||||||||
Total Health Care | 5,615,740 | |||||||||||||||
INDUSTRIALS—2.3% | ||||||||||||||||
Aerospace & Defense | ||||||||||||||||
General Dynamics Corp. | 1.38 | 01/15/15 | 775,000 | 779,635 | ||||||||||||
Rockwell Collins Inc. | 0.58 | (a) | 12/15/16 | 1,175,000 | 1,177,874 | |||||||||||
Industrial Conglomerates | ||||||||||||||||
General Electric Co. | 0.85 | 10/09/15 | 550,000 | 552,700 | ||||||||||||
General Electric Co. | 5.25 | 12/06/17 | 3,900,000 | 4,399,407 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 27 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate | Maturity Date | Face Amount | Value | |||||||||||||
(Corporate Bonds continued) | ||||||||||||||||
Machinery | ||||||||||||||||
Caterpillar Inc. | 1.50 | % | 06/26/17 | $ | 500,000 | $ | 505,599 | |||||||||
Road & Rail | ||||||||||||||||
Burlington Northern & Santa Fe Railway Co. | 4.58 | 01/15/21 | 651,306 | 705,039 | ||||||||||||
Burlington Northern & Santa Fe Railway Co. | 4.83 | 01/15/23 | 107,010 | 117,915 | ||||||||||||
Consolidated Rail Corp. | 6.76 | 05/25/15 | 11,896 | 12,196 | ||||||||||||
CSX Transportation Inc. | 8.38 | 10/15/14 | 187,496 | 191,670 | ||||||||||||
CSX Transportation Inc. | 9.00 | 05/15/15 | 575,000 | 611,904 | ||||||||||||
Skyway Concession Co. LLC (b) | 0.51 | (a) | 06/30/17 | 3,825,000 | 3,614,625 | |||||||||||
Union Pacific Railroad Co. | 6.85 | 01/02/19 | 34,645 | 38,762 | ||||||||||||
Total Industrials | 12,707,326 | |||||||||||||||
INFORMATION TECHNOLOGY —4.6% | ||||||||||||||||
Communications Equipment | ||||||||||||||||
Cisco Systems Inc. | 0.51 | (a) | 03/03/17 | 1,650,000 | 1,656,554 | |||||||||||
Cisco Systems Inc. | 1.10 | 03/03/17 | 600,000 | 601,937 | ||||||||||||
Technology Hardware, Storage & Peripherals | ||||||||||||||||
Intel Corp. | 1.35 | 12/15/17 | 950,000 | 950,096 | ||||||||||||
Apple Inc. | 1.00 | 05/03/18 | 8,150,000 | 7,969,363 | ||||||||||||
Apple Inc. | 1.05 | 05/05/17 | 1,650,000 | 1,651,980 | ||||||||||||
Apple Inc. | 2.10 | 05/06/19 | 2,100,000 | 2,109,788 | ||||||||||||
IT Services | ||||||||||||||||
Dun & Bradstreet Corp. | 2.88 | 11/15/15 | 990,000 | 1,016,981 | ||||||||||||
Hewlett Packard Co. | 1.78 | (a) | 09/19/14 | 3,700,000 | 3,711,307 | |||||||||||
Software | ||||||||||||||||
Microsoft Corp. | 0.88 | 11/15/17 | 250,000 | 248,089 | ||||||||||||
Microsoft Corp. | 1.00 | 05/01/18 | 900,000 | 888,012 | ||||||||||||
Microsoft Corp. | 1.63 | 12/06/18 | 675,000 | 676,639 | ||||||||||||
Oracle Corp. | 0.43 | (a) | 07/07/17 | 4,600,000 | 4,600,000 | |||||||||||
Total Information Technology | 26,080,746 | |||||||||||||||
UTILITIES—3.2% | ||||||||||||||||
Electric Utilities | ||||||||||||||||
Ameren Illinois Co. | 6.20 | 06/15/16 | 5,000,000 | 5,478,160 | ||||||||||||
Connecticut Light & Power Co. | 5.75 | 09/01/17 | 325,000 | 365,579 | ||||||||||||
Duke Energy Indiana Inc. | 0.58 | (a) | 07/11/16 | 1,450,000 | 1,455,265 | |||||||||||
Entergy Louisiana LLC | 1.88 | 12/15/14 | 1,800,000 | 1,813,149 | ||||||||||||
Georgia Power Co. | 0.55 | (a) | 03/15/16 | 850,000 | 849,360 | |||||||||||
Georgia Power Co. | 0.62 | (a) | 08/15/16 | 4,100,000 | 4,101,078 | |||||||||||
Idaho Power Corp. | 6.03 | 07/15/18 | 925,000 | 1,051,606 | ||||||||||||
Southern California Edison Co. | 1.13 | 05/01/17 | 325,000 | 325,433 | ||||||||||||
Gas Utillities | ||||||||||||||||
Questar Corp. | 2.75 | 02/01/16 | 2,825,000 | 2,903,295 | ||||||||||||
Total Utilities | 18,342,925 | |||||||||||||||
TELECOMMUNICATION SERVICES—1.9% | ||||||||||||||||
Diversified Telecommunication Services | ||||||||||||||||
AT&T Inc. | 0.88 | 02/13/15 | 1,350,000 | 1,354,223 | ||||||||||||
AT&T Inc. | 0.80 | 12/01/15 | 675,000 | 676,723 | ||||||||||||
AT&T Inc. | 0.90 | 02/12/16 | 6,425,000 | 6,442,354 | ||||||||||||
Southwestern Bell Telephone Co. | 7.00 | 07/01/15 | 525,000 | 557,871 | ||||||||||||
Wireless Telecommunication Services | ||||||||||||||||
Ameritech Capital Funding Corp. | 6.45 | 01/15/18 | 1,200,000 | 1,363,245 | ||||||||||||
Total Telecommunication Services | 10,394,416 | |||||||||||||||
Total Corporate Bonds (Cost $115,724,264) | 117,022,254 |
28 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
YANKEE BONDS | Interest Rate | Maturity Date | Face Amount | Value | ||||||||||||
(8.5% of portfolio) | ||||||||||||||||
African Development Bank | 6.88 | % | 10/15/15 | $ | 4,825,000 | $ | 5,149,428 | |||||||||
BAA Funding Ltd. (b) | 2.50 | 06/25/17 | 275,000 | 279,480 | ||||||||||||
Canadian National Railway Co. | 7.20 | 01/02/16 | 1,390,229 | 1,506,257 | ||||||||||||
CNOOC Finance (2013) Ltd. | 1.13 | 05/09/16 | 575,000 | 576,227 | ||||||||||||
CNOOC Nexen Finance (2014) ULC | 1.63 | 04/30/17 | 650,000 | 651,572 | ||||||||||||
Commonwealth Bank of Australia (b) | 1.48 | (a) | 03/31/17 | 800,000 | 802,149 | |||||||||||
Compagnie de Financement Foncier | 0.18 | (a) | 03/22/17 | 2,100,000 | 2,052,557 | |||||||||||
Daimler Finance NA LLC (b) | 0.83 | (a) | 01/09/15 | 400,000 | 400,889 | |||||||||||
Daimler Finance NA LLC (b) | 1.25 | 01/11/16 | 1,175,000 | 1,185,173 | ||||||||||||
DEPFA ACS Bank (b) | 4.88 | 10/28/15 | 500,000 | 524,953 | ||||||||||||
Dexia Municipal Agency | 5.25 | 02/16/17 | 1,100,000 | 1,200,056 | ||||||||||||
Diageo Capital plc | 0.63 | 04/29/16 | 1,375,000 | 1,373,919 | ||||||||||||
Eni Coordination Center SA | 4.80 | 08/10/15 | 1,775,000 | 1,843,258 | ||||||||||||
France Telecom | 2.13 | 09/16/15 | 825,000 | 837,651 | ||||||||||||
GlaxoSmithKline Capital Corp. | 0.70 | 03/18/16 | 925,000 | 927,227 | ||||||||||||
Hydro-Quebec | 6.27 | 01/03/26 | 80,000 | 97,909 | ||||||||||||
Hypothekenbank Frankfurt International SA | 0.17 | (a) | 07/12/16 | 930,000 | 884,967 | |||||||||||
Iberdrola Finance Ireland Ltd. (b) | 3.80 | 09/11/14 | 775,000 | 779,689 | ||||||||||||
ING Bank NV (b) | 2.00 | 09/25/15 | 2,625,000 | 2,667,108 | ||||||||||||
International Bank for Reconstruction and Development | 0.00 | (d) | 02/15/15 | 820,000 | 817,511 | |||||||||||
Mitsubishi Corp. | 2.75 | 09/16/15 | 300,000 | 307,233 | ||||||||||||
Norsk Hydro ASA | 9.13 | 07/15/14 | 2,125,000 | 2,131,180 | ||||||||||||
RIO Tinto Finance USA plc | 0.78 | (a) | 06/19/15 | 1,975,000 | 1,981,207 | |||||||||||
Santander US Debt SA Unipersonal (b) | 3.72 | 01/20/15 | 900,000 | 913,284 | ||||||||||||
Sinopec Group Overseas Development (2014) Ltd.(b) | 1.75 | 04/10/17 | 1,075,000 | 1,075,144 | ||||||||||||
Scottish Power Ltd. | 5.38 | 03/15/15 | 4,675,000 | 4,823,852 | ||||||||||||
Statoil ASA | 1.95 | 11/08/18 | 325,000 | 327,730 | ||||||||||||
Total Capital | 3.00 | 06/24/15 | 900,000 | 923,382 | ||||||||||||
Total Capital Canada Ltd. | 0.61 | (a) | 01/15/16 | 1,175,000 | 1,180,420 | |||||||||||
Total Capital International SA | 1.00 | 08/12/16 | 2,000,000 | 2,012,198 | ||||||||||||
TransCanada PipeLines Ltd. | 0.88 | 03/02/15 | 1,000,000 | 1,003,564 | ||||||||||||
TransCanada PipeLines Ltd. | 0.75 | 01/15/16 | 3,575,000 | 3,583,823 | ||||||||||||
Vodafone Group plc | 0.61 | (a) | 02/19/16 | 850,000 | 852,202 | |||||||||||
Volkswagen Group of America Finance LLC (b) | 1.25 | 05/23/17 | 1,650,000 | 1,650,912 | ||||||||||||
Volkswagen International Finance NV (b) | 1.15 | 11/20/15 | 650,000 | 653,498 | ||||||||||||
Total Yankee Bonds (Cost $47,549,229) | 47,977,609 | |||||||||||||||
ASSET BACKED SECURITIES | ||||||||||||||||
(20.5% of portfolio) | ||||||||||||||||
Access Group Inc. 01 | 0.59 | (a) | 05/25/29 | 1,398,016 | 1,328,811 | |||||||||||
Access Group Inc. 04-A | 0.49 | (a) | 04/25/29 | 793,454 | 786,532 | |||||||||||
Access Group Inc. 05-B | 0.46 | (a) | 07/25/22 | 392,929 | 390,255 | |||||||||||
Ally Master Owner Trust 12-1 | 0.95 | (a) | 02/15/17 | 2,175,000 | 2,183,119 | |||||||||||
Ally Master Owner Trust 13-1 | 0.60 | (a) | 02/15/18 | 925,000 | 926,524 | |||||||||||
Ally Master Owner Trust 13-1 | 1.00 | 02/15/18 | 925,000 | 927,797 | ||||||||||||
Ally Master Owner Trust 14-1 | 0.62 | (a) | 01/15/19 | 1,450,000 | 1,451,862 | |||||||||||
Ally Master Owner Trust 14-1 | 1.29 | 01/15/19 | 1,725,000 | 1,727,841 | ||||||||||||
Ally Master Owner Trust 14-2 | 0.52 | (a) | 01/16/18 | 2,325,000 | 2,325,000 | |||||||||||
Ally Master Owner Trust 14-3 | 1.33 | 03/15/19 | 1,500,000 | 1,500,296 | ||||||||||||
American Credit Acceptance Receivable 13-1 (b) | 1.45 | 04/16/18 | 490,272 | 492,169 | ||||||||||||
Axis Equipment Finance Receivables LLC 13-1 (b) | 1.75 | 03/20/17 | 1,058,993 | 1,059,278 | ||||||||||||
Bush Truck Leasing LLC II-A (b) | 5.00 | 09/25/18 | 96,315 | 95,895 | ||||||||||||
Capital Auto Receivables Asset Trust 14-2 | 0.91 | 04/20/17 | 7,600,000 | 7,616,781 | ||||||||||||
CCR Inc. MT-100 Payment Rights Master Trust 12-C (b) | 4.75 | 07/10/22 | 1,750,000 | 1,729,140 | ||||||||||||
CIT Marine Trust 99-A | 6.25 | 11/15/19 | 42,213 | 42,610 | ||||||||||||
Community Reinvestment Revenue Notes 19 (b) | 4.68 | 08/01/35 | 202,445 | 199,789 | ||||||||||||
College Loan Corp Trust 07-2 | 0.48 | (a) | 01/25/24 | 10,870,000 | 10,597,206 | |||||||||||
CPS Auto Trust 11-A (b) | 2.82 | 04/16/18 | 231,865 | 234,223 | ||||||||||||
CPS Auto Trust 11-B (b) | 3.68 | 09/17/18 | 146,449 | 149,725 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 29 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate | Maturity Date | Face Amount | Value | |||||||||||||
(Asset Backed Securities continued) | ||||||||||||||||
CPS Auto Trust 11-C (b) | 4.21 | % | 03/15/19 | $ | 254,228 | $ | 261,393 | |||||||||
CPS Auto Trust 12-A (b) | 2.78 | 06/17/19 | 219,373 | 223,045 | ||||||||||||
CPS Auto Trust 13-A (b) | 1.31 | 06/15/20 | 884,206 | 885,161 | ||||||||||||
CPS Auto Trust 13-B (b) | 1.82 | 09/15/20 | 1,436,340 | 1,442,318 | ||||||||||||
CPS Auto Trust 13-C (b) | 1.64 | 04/16/18 | 2,516,420 | 2,529,470 | ||||||||||||
CPS Auto Trust 13-D (b) | 1.54 | 07/16/18 | 529,409 | 532,036 | ||||||||||||
Credit Acceptance Auto Loan Trust 12-2 (b) | 2.21 | 09/15/20 | 550,000 | 557,238 | ||||||||||||
Edlinc Student Loan Funding Trust 12-A (b) | 3.20 | (a) | 10/01/25 | 5,046,900 | 5,025,198 | |||||||||||
Education Loan Asset Backed Trust 13-1 (b) | 1.15 | (a) | 11/25/33 | 6,962,130 | 6,475,721 | |||||||||||
Element Rail Leasing I LLC 14-1 (b) | 2.30 | 04/19/44 | 3,681,970 | 3,678,950 | ||||||||||||
First Financial Credit Card Master Note Trust II 10-D (b) | 3.72 | 06/17/19 | 840,515 | 841,739 | ||||||||||||
First Investors Auto Owner Trust 12-1A (b) | 1.96 | 11/15/17 | 47,586 | 47,673 | ||||||||||||
Flagship Credit Auto Trust 13-2 (b) | 1.94 | 01/15/19 | 1,483,785 | 1,488,946 | ||||||||||||
Ford Credit Floorplan Master Owner Trust 13-5 | 1.50 | 09/15/18 | 3,325,000 | 3,360,345 | ||||||||||||
Ford Credit Floorplan Master Owner Trust 13-5 | 0.62 | (a) | 09/15/18 | 3,325,000 | 3,332,967 | |||||||||||
Ford Credit Floorplan Master Owner Trust 14-1 | 1.20 | 02/15/19 | 1,750,000 | 1,748,941 | ||||||||||||
Ford Credit Floorplan Master Owner Trust 14-1 | 0.55 | (a) | 02/15/19 | 1,750,000 | 1,750,705 | |||||||||||
FRS I LLC 13-1 (b) | 1.80 | 04/15/43 | 303,258 | 302,061 | ||||||||||||
HLSS Servicer Advance Receivable 13-T5 (b) | 1.98 | 08/15/46 | 1,375,000 | 1,382,150 | ||||||||||||
HLSS Servicer Advance Receivable 13-T7 (b) | 1.98 | 11/15/46 | 1,300,000 | 1,302,470 | ||||||||||||
KeyCorp Student Loan Trust 00-A | 0.55 | (a) | 05/25/29 | 1,171,290 | 1,134,124 | |||||||||||
KeyCorp Student Loan Trust 00-B | 0.54 | (a) | 07/25/29 | 1,183,007 | 996,901 | |||||||||||
KeyCorp Student Loan Trust 04-A | 0.53 | (a) | 10/28/41 | 1,462,406 | 1,448,407 | |||||||||||
KeyCorp Student Loan Trust 04-A | 0.66 | (a) | 01/27/43 | 724,403 | 633,937 | |||||||||||
KeyCorp Student Loan Trust 05-A | 0.63 | (a) | 09/27/40 | 612,091 | 529,290 | |||||||||||
KeyCorp Student Loan Trust 06-A | 0.42 | (a) | 06/27/29 | 2,109,402 | 2,085,023 | |||||||||||
Marriott Vacation Club Owners Trust 08-1A (b) | 7.20 | 05/20/30 | 147,299 | 155,674 | ||||||||||||
National Collegiate Student Loan Trust 04-1 | 0.49 | (a) | 06/25/27 | 1,907,343 | 1,888,270 | |||||||||||
National Collegiate Student Loan Trust 05-3 | 0.39 | (a) | 07/25/28 | 269,878 | 268,367 | |||||||||||
National Collegiate Student Loan Trust 06-1 | 0.34 | (a) | 05/25/26 | 311,665 | 309,328 | |||||||||||
New Residential Advance Receivables Trust 14-T2 (b) | 2.38 | 03/15/47 | 1,500,000 | 1,503,300 | ||||||||||||
Santander Drive Auto Receivables Trust 11-2 | 2.66 | 01/15/16 | 198,964 | 199,152 | ||||||||||||
SLC Student Loan Trust 06-A | 0.53 | (a) | 07/15/36 | 3,275,000 | 3,141,803 | |||||||||||
SLC Student Loan Trust 06-A | 0.68 | (a) | 07/15/36 | 6,250,000 | 5,554,088 | |||||||||||
SLM Student Loan Trust 03-B | 0.63 | (a) | 03/15/22 | 5,525,250 | 5,519,310 | |||||||||||
SLM Student Loan Trust 04-A | 0.43 | (a) | 03/16/20 | 503,164 | 501,211 | |||||||||||
SLM Student Loan Trust 04-B | 0.43 | (a) | 06/15/21 | 759,127 | 752,461 | |||||||||||
SLM Student Loan Trust 04-B | 0.56 | (a) | 03/15/24 | 5,275,000 | 4,935,849 | |||||||||||
SLM Student Loan Trust 05-A | 0.37 | (a) | 12/15/20 | 40,971 | 40,868 | |||||||||||
SLM Student Loan Trust 05-A | 0.43 | (a) | 06/15/23 | 3,550,000 | 3,432,136 | |||||||||||
SLM Student Loan Trust 06-A | 0.37 | (a) | 06/15/22 | 339,366 | 339,024 | |||||||||||
SLM Student Loan Trust 06-A | 0.42 | (a) | 12/15/23 | 2,050,000 | 2,025,462 | |||||||||||
SLM Student Loan Trust 07-A | 0.35 | (a) | 09/15/25 | 2,060,004 | 2,032,417 | |||||||||||
Small Business Administration 02-20K | 5.08 | 11/01/22 | 53,292 | 57,464 | ||||||||||||
Small Business Administration 05-10E | 4.54 | 09/01/15 | 16,259 | 16,510 | ||||||||||||
SNAAC Auto Receivables Trust 13-1 (b) | 1.14 | 07/16/18 | 444,859 | 445,336 | ||||||||||||
World Financial Network Credit Card Trust 13-B | 0.91 | 03/16/20 | 2,075,000 | 2,079,104 | ||||||||||||
Total Asset Backed Securities (Cost $111,686,757) | 114,958,196 | |||||||||||||||
MORTGAGE BACKED SECURITIES | ||||||||||||||||
(4.0% of portfolio) | ||||||||||||||||
Accredited Mortgage Loan Trust 03-1 | 4.33 | (a) | 06/25/33 | 147,264 | 131,533 | |||||||||||
ACE Securities Corp. 06-ASL1 | 0.43 | (a) | 02/25/36 | 451,480 | 173,560 | |||||||||||
ACE Securities Corp. 06-GP1 | 0.41 | (a) | 02/25/31 | 73,796 | 69,583 | |||||||||||
ACE Securities Corp. 06-SL1 | 0.47 | (a) | 09/25/35 | 154,393 | 96,905 | |||||||||||
Adjustable Rate Mortgage Trust 05-10 | 2.70 | (a) | 01/25/36 | 100,168 | 86,009 | |||||||||||
American Business Financial Services 02-1 | 7.01 | 12/15/32 | 76,511 | 69,311 | ||||||||||||
American Home Mortgage Investment Trust 05-01 | 2.32 | (a) | 06/25/45 | 192,174 | 191,583 | |||||||||||
American Home Mortgage Investment Trust 05-03 | 4.97 | 09/25/35 | 27,552 | 27,974 |
30 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate | Maturity Date | Face Amount | Value | |||||||||||||
(Mortgage Backed Securities continued) | ||||||||||||||||
Amresco Residential Securities 98-1 | 7.57 | % | 10/25/27 | $ | 63,110 | $ | 64,826 | |||||||||
Banc of America Alternative Loan Trust Inc. 07-2 | 5.75 | 06/25/37 | 166,545 | 130,864 | ||||||||||||
Banc of America Funding Corp. 04-A | 5.14 | (a) | 09/20/34 | 16,134 | 16,151 | |||||||||||
Banc of America Funding Corp. 05-G | 4.86 | (a) | 10/20/35 | 399,646 | 388,351 | |||||||||||
Banc of America Funding Corp. 07-5 | 6.50 | 07/25/37 | 55,302 | 57,351 | ||||||||||||
Banc of America Mortgage Securities Inc. 02-J | 3.57 | (a) | 09/25/32 | 3,013 | 2,960 | |||||||||||
Banc of America Mortgage Securities Inc. 05-1 | 5.00 | 02/25/20 | 18,213 | 18,781 | ||||||||||||
Banc of America Mortgage Securities Inc. 05-C | 2.68 | (a) | 04/25/35 | 47,296 | 44,010 | |||||||||||
Bayview Financial Acquisition Trust 06-D | 5.93 | 12/28/36 | 4,450,000 | 4,343,774 | ||||||||||||
Bayview Financial Asset Trust 07-SR1A (b) | 0.60 | (a) | 03/25/37 | 227,074 | 196,159 | |||||||||||
Bear Stearns Adjustable Rate Mortgage Trust 04-10 | 2.72 | (a) | 01/25/35 | 324,948 | 325,815 | |||||||||||
Bear Stearns Adjustable Rate Mortgage Trust 05-12 | 5.39 | (a) | 02/25/36 | 54,320 | 51,372 | |||||||||||
Bear Stearns ALT-A Trust 04-11 | 2.74 | (a) | 11/25/34 | 20,686 | 18,093 | |||||||||||
Bear Stearns ALT-A Trust 05-4 | 2.58 | (a) | 05/25/35 | 125,651 | 122,683 | |||||||||||
Bear Stearns ALT-A Trust 05-9 | 4.83 | (a) | 11/25/35 | 64,619 | 50,826 | |||||||||||
Bear Stearns ALT-A Trust 06-6 | 2.69 | (a) | 11/25/36 | 202,147 | 150,616 | |||||||||||
Bear Stearns Asset Backed Securities Trust 03-3 | 0.74 | (a) | 06/25/43 | 64,327 | 63,403 | |||||||||||
Bear Stearns Asset Backed Securities Trust 04-HE5 | 2.03 | (a) | 07/25/34 | 242,622 | 224,048 | |||||||||||
Bear Stearns Structured Products Inc., 00-1 (b) | 7.84 | (a) | 08/28/33 | 3,998 | 3,581 | |||||||||||
CDC Mortgage Capital Trust 02-HE1 | 0.77 | (a) | 01/25/33 | 379,932 | 367,154 | |||||||||||
Chase Mortgage Finance Corp. 05-A1 | 4.89 | (a) | 12/25/35 | 20,901 | 20,545 | |||||||||||
Chaseflex Trust 05-2 | 6.00 | 06/25/35 | 125,566 | 114,149 | ||||||||||||
CITICORP Mortgage Securities, Inc. 07-1 | 5.50 | 01/25/22 | 20,042 | 20,172 | ||||||||||||
CITICORP Mortgage Securities, Inc. 07-1 | 5.89 | (c) | 03/25/37 | 275,451 | 271,210 | |||||||||||
Citigroup Mortgage Loan Trust, Inc. 05-7 | 2.30 | (a) | 09/25/35 | 306,697 | 236,932 | |||||||||||
Cityscape Home Equity Loan Trust 96-2 | 8.10 | 08/25/26 | 76,450 | 76,238 | ||||||||||||
CMO Trust 17 | 7.25 | 04/20/18 | 133 | 137 | ||||||||||||
Conseco Finance Securitizations Corp. 01-2 | 6.60 | 02/01/33 | 166,960 | 173,234 | ||||||||||||
Contimortgage Home Equity Loan Trust 95-2 | 8.10 | 08/15/25 | 29,351 | 28,770 | ||||||||||||
Countrywide Alternative Loan Trust 04-24CB | 6.00 | 11/25/34 | 65,213 | 67,216 | ||||||||||||
Countrywide Alternative Loan Trust 05-11CB | 5.50 | 06/25/35 | 154,812 | 149,280 | ||||||||||||
Countrywide Alternative Loan Trust 05-43 | 5.27 | (a) | 10/25/35 | 45,883 | 38,371 | |||||||||||
Countrywide Asset Backed Certificate 02-S2 | 5.98 | 01/25/17 | 136,741 | 138,515 | ||||||||||||
Countrywide Asset Backed Certificate 02-S4 | 5.37 | (a) | 10/25/17 | 198,389 | 198,333 | |||||||||||
Countrywide Asset Backed Certificate 04-S1 | 5.12 | 02/25/35 | 54,891 | 56,026 | ||||||||||||
Countrywide Asset Backed Certificate 06-S7 | 5.71 | (a) | 11/25/35 | 139,046 | 133,150 | |||||||||||
Countrywide Asset Backed Certificate 07-S1 | 5.69 | 11/25/36 | 118,782 | 114,147 | ||||||||||||
Countrywide Home Loans 03-49 | 2.59 | (a) | 12/19/33 | 36,962 | 37,924 | |||||||||||
Countrywide Home Loans 03-J13 | 5.25 | 01/25/24 | 86,213 | 84,398 | ||||||||||||
Countrywide Home Loans 05-HYB8 | 4.36 | (a) | 12/20/35 | 140,289 | 123,164 | |||||||||||
Countrywide Home Loans 06-HYB5 | 2.51 | (a) | 09/20/36 | 72,532 | 53,438 | |||||||||||
Credit Suisse First Boston Mortgage 03-21 | 4.75 | 08/25/18 | 32,786 | 33,270 | ||||||||||||
Credit Suisse First Boston Mortgage 03-AR24 | 2.57 | (a) | 10/25/33 | 242,847 | 237,604 | |||||||||||
Credit Suisse First Boston Mortgage 03-FFA | 5.94 | (a) | 02/25/33 | 118,489 | 117,262 | |||||||||||
Credit Suisse First Boston Mortgage 04-AR3 | 2.51 | (a) | 04/25/34 | 74,291 | 76,369 | |||||||||||
Credit Suisse First Boston Mortgage 05-10 | 5.25 | 11/25/20 | 85,585 | 86,341 | ||||||||||||
Credit Suisse First Boston Mortgage 06-2 | 5.91 | (a) | 07/25/36 | 1,120,000 | 124,555 | |||||||||||
DLJ Mortgage Acceptance Corp. 91-3 | 1.93 | (a) | 01/25/21 | 12,685 | 12,891 | |||||||||||
Encore Credit Receivables Trust 05-3 | 0.64 | (a) | 10/25/35 | 675,000 | 642,501 | |||||||||||
FHLMC 2419 | 5.50 | 03/15/17 | 2,623 | 2,760 | ||||||||||||
FHLMC 2649 | 4.50 | 07/15/18 | 129,821 | 136,561 | ||||||||||||
FHLMC 780754 | 2.38 | (a) | 08/01/33 | 5,101 | 5,421 | |||||||||||
First Alliance Mortgage Loan Trust 94-1 | 5.85 | 04/25/25 | 17,423 | 17,479 | ||||||||||||
First Alliance Mortgage Loan Trust 94-2 | 7.63 | 07/25/25 | 7,569 | 7,728 | ||||||||||||
First Horizon Mortgage Alternative Mortgage Securities 04-AA3 | 2.20 | (a) | 09/25/34 | 33,752 | 33,227 | |||||||||||
First Horizon Mortgage Pass-Through Trust 05-AR2 | 2.74 | (a) | 05/25/35 | 146,689 | 135,816 | |||||||||||
FNMA 03-38 | 5.00 | 03/25/23 | 18,905 | 19,696 | ||||||||||||
FNMA 03-86 | 4.50 | 09/25/18 | 101,235 | 104,684 | ||||||||||||
FNMA 813842 | 1.84 | (a) | 01/01/35 | 24,613 | 25,932 | |||||||||||
GMAC Mortgage Corp. Loan Trust 06-HE3 | 5.75 | 10/25/36 | 52,330 | 49,772 | ||||||||||||
GMAC Mortgage Corp. Loan Trust 07-HE1 | 5.95 | 08/25/37 | 1,100,000 | 968,745 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 31 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate | Maturity Date | Face Amount | Value | |||||||||||||
(Mortgage Backed Securities continued) | ||||||||||||||||
GNMA 02-15 | 5.50 | % | 11/20/31 | $ | 7,670 | $ | 7,813 | |||||||||
GNMA 03-11 | 4.00 | 10/17/29 | 123,236 | 130,848 | ||||||||||||
GNMA 03-12 | 4.50 | 02/20/32 | 12,616 | 12,933 | ||||||||||||
GNMA 03-26 | 0.60 | (a) | 04/16/33 | 15,495 | 15,588 | |||||||||||
GNMA 04-17 | 4.50 | 12/20/33 | 26,416 | 28,364 | ||||||||||||
GNMA 583189 | 4.50 | 02/20/17 | 10,058 | 10,642 | ||||||||||||
Green Tree Financial Corp. 98-5 | 6.22 | 03/01/30 | 123,273 | 130,945 | ||||||||||||
GS Mortgage Loan Trust 03-10 | 2.36 | (a) | 10/25/33 | 123,456 | 123,899 | |||||||||||
GS Mortgage Loan Trust 05-8F | 5.50 | 10/25/20 | 39,913 | 40,950 | ||||||||||||
GS Mortgage Loan Trust 05-AR3 | 2.61 | (a) | 05/25/35 | 87,247 | 81,066 | |||||||||||
GS Mortgage Loan Trust 05-AR6 | 2.63 | (a) | 09/25/35 | 61,661 | 62,270 | |||||||||||
Home Equity Mortgage Trust 06-1 | 5.80 | (a) | 05/25/36 | 1,138,357 | 961,465 | |||||||||||
Home Savings of America 9 | 3.64 | (a) | 11/25/17 | 62,387 | 63,498 | |||||||||||
Home Savings of America 11 | 4.82 | (a) | 01/25/18 | 65,614 | 66,685 | |||||||||||
Household Home Equity Loan Trust 06-2 | 0.30 | (a) | 03/20/36 | 715,881 | 709,515 | |||||||||||
IMPAC Secured Assets Corp. 03-3 | 4.76 | (a) | 08/25/33 | 160,896 | 166,646 | |||||||||||
Indymac Indx Mortgage Loan Trust 04-AR6 | 2.56 | (a) | 10/25/34 | 11,431 | 11,163 | |||||||||||
Indymac Indx Mortgage Loan Trust 05-AR15 | 4.57 | (a) | 09/25/35 | 42,498 | 37,769 | |||||||||||
Indymac Residential Mortgage-Backed Trust 05-L1 (g) | 0.55 | (a) | 07/25/13 | 207,911 | 71,875 | |||||||||||
JP Morgan Mortgage Trust 05-A2 | 5.02 | (a) | 04/25/35 | 256,939 | 255,941 | |||||||||||
Lehman ABS Manufactured Housing Contract 01-B | 4.35 | 04/15/40 | 73,134 | 74,913 | ||||||||||||
Long Beach Mortgage Loan Trust 05-3 | 0.43 | (a) | 08/25/45 | 6,114 | 6,107 | |||||||||||
Master Adjustable Rate Mortgages Trust 04-13 | 2.64 | (a) | 04/21/34 | 28,165 | 28,499 | |||||||||||
Master Adjustable Rate Mortgages Trust 05-1 | 5.24 | (a) | 01/25/35 | 34,205 | 34,399 | |||||||||||
Master Alternative Loans Trust 03-5 | 6.00 | 08/25/33 | 57,479 | 61,287 | ||||||||||||
Master Asset Backed Securities Trust 07-NCW (b) | 0.45 | (a) | 05/25/37 | 535,777 | 472,045 | |||||||||||
Master Asset Securitization Trust 03-6 | 5.00 | 07/25/18 | 8,762 | 8,983 | ||||||||||||
Master Asset Securitization Trust 07-1 | 6.00 | 10/25/22 | 35,967 | 35,414 | ||||||||||||
Merrill Lynch Mortgage Investors Trust 03-A2 | 1.82 | (a) | 02/25/33 | 43,411 | 42,111 | |||||||||||
Merrill Lynch Mortgage Investors Trust 06-SL1 | 0.51 | (a) | 09/25/36 | 258,929 | 242,711 | |||||||||||
Morgan Stanley Capital Inc. 04-1 | 5.00 | 11/25/18 | 55,208 | 55,793 | ||||||||||||
Morgan Stanley Mortgage Loan Trust 05-5AR | 7.41 | (a) | 09/25/35 | 44,287 | 34,888 | |||||||||||
Morgan Stanley Mortgage Loan Trust 06-1AR | 2.84 | (a) | 02/25/36 | 130,342 | 101,732 | |||||||||||
Morgan Stanley Mortgage Loan Trust 07-10XS | 6.00 | 07/25/47 | 611,578 | 212,837 | ||||||||||||
New Century Home Equity Loan Trust 97-NC5 | 7.20 | (a) | 10/25/28 | 25 | 25 | |||||||||||
Nomura Asset Acceptance Corporation 06-AF2 | 0.25 | (a) | 08/25/36 | 186,971 | 87,592 | |||||||||||
Nomura Asset Acceptance Corporation 07-1 | 5.96 | 03/25/47 | 220,571 | 224,119 | ||||||||||||
Oakwood Mortgage Investors, Inc. 99-D | 7.84 | 11/15/29 | 288,179 | 281,496 | ||||||||||||
Oakwood Mortgage Investors, Inc. 02-A | 0.40 | (a) | 09/15/14 | 146,556 | 125,596 | |||||||||||
Option One Mortgage Loan Trust 07-FXD2 | 5.90 | 03/25/37 | 16,618 | 15,925 | ||||||||||||
Ownit Mortgage Loan Asset Backed Certificate 05-5 | 0.44 | (a) | 10/25/36 | 270,303 | 259,926 | |||||||||||
Prime Mortgage Trust 05-2 | 5.00 | 07/25/20 | 33,138 | 33,454 | ||||||||||||
Residential Accredit Loans, Inc. 02-QS9 | 0.75 | (a) | 07/25/32 | 4,392 | 4,109 | |||||||||||
Residential Accredit Loans, Inc. 05-QS5 | 5.70 | 04/25/35 | 40,126 | 37,890 | ||||||||||||
Residential Accredit Loans, Inc. 06-QS4 | 6.00 | 04/25/36 | 343,578 | 283,275 | ||||||||||||
Residential Asset Mortgage Products Inc. 02-RS5 | 4.75 | 09/25/32 | 149,601 | 150,489 | ||||||||||||
Residential Asset Mortgage Products Inc. 03-RZ3 | 4.62 | 06/25/33 | 99,130 | 95,048 | ||||||||||||
Residential Asset Securitization Trust 04-A3 | 5.25 | 06/25/34 | 47,717 | 49,655 | ||||||||||||
Residential Asset Securitization Trust 05-A14 | 5.50 | 12/25/35 | 163,306 | 135,686 | ||||||||||||
Residential Funding Mortgage Securities 00-HI5 | 7.98 | 12/25/25 | 243,263 | 242,050 | ||||||||||||
Residential Funding Mortgage Securities I 03-S15 | 4.50 | 08/25/18 | 24,529 | 25,034 | ||||||||||||
Residential Funding Mortgage Securities I 05-SA2 | 2.67 | (a) | 06/25/35 | 39,270 | 32,177 | |||||||||||
Residential Funding Mortgage Securities I 06-SA1 | 3.80 | (a) | 02/25/36 | 40,350 | 35,556 | |||||||||||
Ryland Acceptance Corp. 64 E | 3.50 | (a) | 04/01/18 | 20,857 | 20,971 | |||||||||||
SACO I Trust 05-6 | 0.73 | (a) | 09/25/35 | 198,822 | 196,338 | |||||||||||
Salomon Brothers Mortgage Securities 97-LB6 | 6.82 | 12/25/27 | 10 | 10 | ||||||||||||
Structured Adjustable Rate Mortgage Loan Trust 04-3AC | 2.38 | (a) | 03/25/34 | 21,748 | 21,754 | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust 04-4 | 2.38 | (a) | 04/25/34 | 601,222 | 587,679 | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust 04-11 | 2.56 | (a) | 08/25/34 | 40,561 | 40,649 | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust 04-18 | 2.45 | (a) | 12/25/34 | 88,264 | 64,033 | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust 05-11 | 2.45 | (a) | 05/25/35 | 365,514 | 346,037 | |||||||||||
Structured Adjustable Rate Mortgage Loan Trust 06-1 | 2.47 | (a) | 02/25/36 | 32,018 | 28,521 |
32 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate | Maturity Date | Face Amount | Value | |||||||||||||
(Mortgage Backed Securities continued) | ||||||||||||||||
Structured Adjustable Rate Mortgage Loan Trust 06-4 | 4.75 | %(a) | 05/25/36 | $ | 92,280 | $ | 70,387 | |||||||||
Structured Adjustable Rate Mortgage Loan Trust 06-4 | 4.95 | (a) | 05/25/36 | 90,791 | 76,274 | |||||||||||
Structured Asset Mortgage Investments 04-AR5 | 2.17 | (a) | 10/19/34 | 29,486 | 29,295 | |||||||||||
Structured Asset Securities Corp. 98-RF1 (b) | 7.00 | (a) | 04/15/27 | 31,257 | 31,611 | |||||||||||
Structured Asset Securities Corp. 03-37A | 2.49 | (a) | 12/25/33 | 198,553 | 197,182 | |||||||||||
Structured Asset Securities Corp. 04-3 | 5.27 | (a) | 03/25/24 | 142,602 | 149,180 | |||||||||||
Terwin Mortgage Trust 04-5HE | 1.04 | (a) | 06/25/35 | 471,910 | 444,556 | |||||||||||
Vanderbilt Mortgage & Finance 03-A | 0.80 | (a) | 05/07/26 | 125,536 | 122,220 | |||||||||||
Wachovia Mortgage Loan Trust 06-A | 2.66 | (a) | 05/20/36 | 141,451 | 136,977 | |||||||||||
Washington Mutual Mortgage Securities Corp. 04-AR3 | 2.38 | (a) | 06/25/34 | 56,468 | 57,532 | |||||||||||
Washington Mutual Mortgage Securities Corp. 04-AR14 | 2.40 | (a) | 01/25/35 | 98,116 | 98,553 | |||||||||||
Washington Mutual MSC Mortgage Pass-Through | ||||||||||||||||
Certificates 03-MS2 | 5.00 | 03/25/18 | 23,750 | 24,162 | ||||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-B | 2.49 | (a) | 02/25/34 | 16,095 | 16,297 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-E | 2.63 | (a) | 05/25/34 | 23,321 | 23,499 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-EE | 2.56 | (a) | 12/25/34 | 19,582 | 19,900 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-F | 2.18 | (a) | 06/25/34 | 67,385 | 68,773 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-I | 2.63 | (a) | 07/25/34 | 4,421 | 4,476 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-K | 2.62 | (a) | 07/25/34 | 91,495 | 92,727 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-K | 2.79 | (a) | 07/25/34 | 39,170 | 39,577 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-K | 2.79 | (a) | 07/25/34 | 43,576 | 43,986 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 04-R | 2.62 | (a) | 09/25/34 | 52,234 | 53,722 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 05-AR14 | 5.36 | (a) | 08/25/35 | 25,580 | 26,349 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 05-AR15 | 2.62 | (a) | 09/25/35 | 216,241 | 216,719 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 05-AR16 | 5.19 | (a) | 10/25/35 | 47,842 | 47,948 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 06-AR4 | 5.59 | (a) | 04/25/36 | 38,964 | 38,654 | |||||||||||
Wells Fargo Mortgage Backed Securities Trust 06-AR19 | 5.45 | (a) | 12/25/36 | 24,712 | 24,875 | |||||||||||
Total Mortgage Backed Securities (Cost $23,575,090) | 22,443,358 | |||||||||||||||
MUNICIPAL BONDS | ||||||||||||||||
(24.6% of portfolio) | ||||||||||||||||
Alaska Housing Finance Corp. | 2.80 | 12/01/26 | 430,000 | 433,345 | ||||||||||||
Alaska Housing Finance Corp. | 0.95 | (a) | 06/01/43 | 5,150,000 | 5,150,824 | |||||||||||
Alaska Student Loan Corp. | 0.65 | (a) | 08/25/31 | 1,275,538 | 1,270,321 | |||||||||||
Art Institute of Chicago | 1.34 | 03/01/15 | 125,000 | 125,144 | ||||||||||||
Atlantic City NJ | 4.00 | 11/01/16 | 400,000 | 426,012 | ||||||||||||
Austin TX | 1.58 | 09/01/17 | 3,250,000 | 3,284,353 | ||||||||||||
California, State of | 1.05 | 02/01/16 | 925,000 | 931,669 | ||||||||||||
Camden County NJ Improvement Authority | 0.80 | 07/16/14 | 1,750,000 | 1,749,965 | ||||||||||||
Casino Reinvestment Development Authority NJ | 5.14 | 06/01/15 | 300,000 | 302,754 | ||||||||||||
Colorado State Department of Corrections | 2.26 | 09/01/17 | 3,375,000 | 3,470,040 | ||||||||||||
Cuyahoga County Ohio Economic Development | 3.22 | 12/01/14 | 1,725,000 | 1,744,596 | ||||||||||||
Desert Sands California Unified School District | 2.28 | 06/01/19 | 375,000 | 372,694 | ||||||||||||
Downtown Smyrna Development Authority GA | 3.21 | 02/01/15 | 100,000 | 101,544 | ||||||||||||
Energy Northwest, WA | 1.06 | 07/01/15 | 350,000 | 352,433 | ||||||||||||
Energy Northwest, WA | 2.15 | 07/01/18 | 850,000 | 869,516 | ||||||||||||
Florida Hurricane Catastrophe Fund Finance Corp. | 1.30 | 07/01/16 | 1,750,000 | 1,765,330 | ||||||||||||
Illinois Housing Development Authority | 1.14 | 01/01/16 | 305,000 | 304,610 | ||||||||||||
Illinois, State of | 4.51 | 03/01/15 | 1,645,000 | 1,688,593 | ||||||||||||
Illinois, State of Sales Tax Revenue | 1.36 | 06/15/16 | 2,200,000 | 2,222,726 | ||||||||||||
Illinois, State of Sales Tax Revenue | 2.23 | 06/15/19 | 3,625,000 | 3,650,230 | ||||||||||||
Indiana Bond Bank | 1.48 | 01/15/17 | 1,285,000 | 1,293,211 | ||||||||||||
Indiana Bond Bank | 2.08 | 01/15/19 | 300,000 | 300,105 | ||||||||||||
Indianapolis, Indiana Local Public Improvement Bond Bank | 1.19 | 06/01/15 | 325,000 | 325,478 | ||||||||||||
Indianapolis, Indiana Local Public Improvement Bond Bank | 1.58 | 06/01/16 | 600,000 | 598,860 | ||||||||||||
Jackson Tennessee Energy Authority | 1.15 | 04/01/16 | 400,000 | 403,212 | ||||||||||||
Jersey City, NJ | 1.51 | 09/01/16 | 950,000 | 946,865 | ||||||||||||
Jobsohio Beverage System, OH | 1.57 | 01/01/17 | 925,000 | 935,786 | ||||||||||||
Lehigh County Authority PA | 3.44 | 12/01/18 | 3,825,000 | 3,956,198 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 33 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
Interest Rate | Maturity Date | Face Amount | Value | |||||||||||||
(Municipal Bonds continued) | ||||||||||||||||
Massachusetts Housing Finance Agency | 1.17 | % | 12/01/15 | $ | 335,000 | $ | 336,390 | |||||||||
Massachusetts Housing Finance Agency | 1.31 | 06/01/16 | 215,000 | 215,611 | ||||||||||||
Massachusetts Municipal Wholesale Electric Company | 0.16 | (a) | 07/01/14 | 75,000 | 74,996 | |||||||||||
Miami Dade County Florida Educational Facilities Authority | 1.29 | 04/01/15 | 325,000 | 325,007 | ||||||||||||
Monroe County, NY Industrial Development Corp. | 2.60 | 01/15/16 | 265,000 | 265,315 | ||||||||||||
New Jersey Economic Development Authority | 3.61 | 09/01/14 | 650,000 | 653,367 | ||||||||||||
New Jersey Economic Development Authority | 0.00 | (d) | 02/15/16 | 6,675,000 | 6,518,805 | |||||||||||
New Jersey Economic Development Authority | 1.06 | 03/01/16 | 1,400,000 | 1,407,840 | ||||||||||||
New Jersey Economic Development Authority | 0.00 | (d) | 02/15/17 | 950,000 | 903,668 | |||||||||||
New Jersey Economic Development Authority | 0.00 | (d) | 02/15/18 | 1,000,000 | 917,660 | |||||||||||
New Jersey Economic Development Authority | 0.00 | (d) | 02/15/20 | 10,450,000 | 8,771,625 | |||||||||||
New Orleans Louisiana | 2.12 | 09/01/17 | 825,000 | 831,748 | ||||||||||||
New Orleans Louisiana | 2.80 | 09/01/19 | 1,725,000 | 1,738,972 | ||||||||||||
New York City, NY Transitional Finance Authority | 1.80 | 08/01/18 | 1,475,000 | 1,493,895 | ||||||||||||
New York City, NY Transitional Finance Authority | 1.85 | 05/01/19 | 2,025,000 | 2,029,961 | ||||||||||||
New York City, NY Transitional Finance Authority | 2.75 | 11/01/20 | 2,695,000 | 2,765,690 | ||||||||||||
New York City, NY Transitional Finance Authority | 2.85 | 02/01/21 | 2,775,000 | 2,817,263 | ||||||||||||
North Carolina Housing Finance Agency | 4.00 | 01/01/30 | 1,800,000 | 1,834,254 | ||||||||||||
North Carolina State Education Assistance Authority | 0.85 | (a) | 07/25/39 | 1,074,960 | 1,077,669 | |||||||||||
Oakland California Redevelopment Agency | 7.25 | 09/01/15 | 400,000 | 423,252 | ||||||||||||
Oklahoma Student Loan Authority | 0.69 | (a) | 02/25/32 | 1,129,067 | 1,123,964 | |||||||||||
Oregon School Boards Association | 0.00 | (d) | 06/30/15 | 4,050,000 | 4,015,696 | |||||||||||
Pasadena California Pension Obligation | 1.76 | (a) | 05/15/41 | 800,000 | 803,656 | |||||||||||
Pennsylvania Higher Education Assistance Agency (b) | 0.70 | (a) | 05/25/27 | 453,919 | 454,880 | |||||||||||
Philadelphia Pennsylvania Authority for Industrial Development | 0.00 | (d) | 04/15/15 | 4,075,000 | 4,029,441 | |||||||||||
Philadelphia Pennsylvania Authority for Industrial Development | 0.00 | (d) | 04/15/20 | 5,285,000 | 4,290,680 | |||||||||||
Puerto Rico, Commonwealth of | 5.00 | 07/01/14 | 1,275,000 | 1,275,000 | ||||||||||||
Puerto Rico, Commonwealth of | 5.00 | 07/01/15 | 1,325,000 | 1,357,198 | ||||||||||||
Puerto Rico, Commonwealth of | 5.50 | 07/01/16 | 1,250,000 | 1,311,050 | ||||||||||||
Puerto Rico, Commonwealth of | 5.25 | 07/01/18 | 390,000 | 414,937 | ||||||||||||
Puerto Rico Electric Power Authority | 5.00 | 07/01/15 | 375,000 | 383,666 | ||||||||||||
Puerto Rico Highway & Transportation Authority | 5.50 | 07/01/16 | 875,000 | 927,867 | ||||||||||||
Puerto Rico Highway & Transportation Authority | 6.25 | 07/01/21 | 2,400,000 | 2,698,608 | ||||||||||||
Puerto Rico Municipal Finance Agency | 5.00 | 08/01/14 | 1,095,000 | 1,097,376 | ||||||||||||
Puerto Rico Sales Tax Financing Corp. | 5.25 | 08/01/19 | 3,175,000 | 3,166,459 | ||||||||||||
Puerto Rico Sales Tax Financing Corp. | 4.38 | 08/01/20 | 905,000 | 839,252 | ||||||||||||
Puerto Rico Sales Tax Financing Corp. | 3.38 | 08/01/16 | 575,000 | 562,068 | ||||||||||||
San Antonio Texas Airport System | 3.20 | 07/01/14 | 550,000 | 550,000 | ||||||||||||
South Carolina Student Loan Corp. | 0.35 | (a) | 12/01/20 | 770,416 | 755,763 | |||||||||||
Stockton California Pension Obligation | 5.14 | 09/01/17 | 1,420,000 | 1,437,651 | ||||||||||||
Utah Infrastructure Agency | 3.20 | 10/15/16 | 510,000 | 522,546 | ||||||||||||
University of California | 2.85 | 05/15/20 | 540,000 | 555,120 | ||||||||||||
Utility Debt Securitization Authority, NY | 2.04 | 06/15/21 | 250,000 | 255,205 | ||||||||||||
Vermont Student Assistance Corp. | 0.86 | (a) | 07/28/34 | 1,474,060 | 1,475,740 | |||||||||||
Village of Rosemont Illinois | 1.25 | 12/01/14 | 2,200,000 | 2,205,764 | ||||||||||||
Village of Rosemont Illinois | 2.14 | 12/01/16 | 1,375,000 | 1,398,843 | ||||||||||||
Village of Rosemont Illinois | 2.77 | 12/01/18 | 1,375,000 | 1,394,264 | ||||||||||||
Virginia Housing Development Authority | 1.11 | 10/01/16 | 550,000 | 546,414 | ||||||||||||
Washington Economic Development Finance Authority | 2.90 | 10/01/14 | 1,850,000 | 1,855,846 | ||||||||||||
Washington Economic Development Finance Authority | 3.20 | 10/01/15 | 2,350,000 | 2,391,430 | ||||||||||||
Wayne County Michigan | 2.25 | 12/01/14 | 1,200,000 | 1,201,227 | ||||||||||||
Wayne County Michigan | 3.50 | 06/01/15 | 4,600,000 | 4,604,094 | ||||||||||||
Wayne County Michigan | 2.75 | 06/01/15 | 1,725,000 | 1,728,869 | ||||||||||||
Wayne County Michigan | 3.75 | 12/01/15 | 2,000,000 | 1,996,140 | ||||||||||||
Wayne County Michigan | 2.50 | 12/01/15 | 900,000 | 898,623 | ||||||||||||
Wayne County Michigan | 3.25 | 12/01/15 | 5,075,000 | 5,080,481 | ||||||||||||
Wayne County Michigan | 4.25 | 12/01/16 | 1,625,000 | 1,629,712 | ||||||||||||
Wayne County Michigan Building Authority | 6.22 | 12/01/14 | 665,000 | 674,756 | ||||||||||||
Wayne County Michigan Building Authority | 6.82 | 12/01/15 | 730,000 | 754,280 | ||||||||||||
Wayne County Michigan Building Authority | 7.33 | 12/01/16 | 740,000 | 784,548 | ||||||||||||
Total Municipal Bonds (Cost $135,698,487) | 137,828,516 |
34 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Short-Term Bond Fund (continued)
June 30, 2014 (Unaudited)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS | Interest Rate/Yield | Maturity Date | Face Amount | Value | ||||||||||||
(6.4% of portfolio) | ||||||||||||||||
Overseas Private Investment Corp. | 3.50 | %(f) | 05/02/16 | $ | 1,000,000 | $ | 1,172,971 | |||||||||
Overseas Private Investment Corp. | 3.56 | (e) | 04/23/17 | 1,000,000 | 1,222,351 | |||||||||||
Overseas Private Investment Corp. | 1.50 | (f) | 11/17/17 | 1,100,000 | 1,147,655 | |||||||||||
Overseas Private Investment Corp. | 1.55 | (f) | 03/15/18 | 1,120,000 | 1,177,587 | |||||||||||
Overseas Private Investment Corp. | 0.83 | (f) | 11/08/19 | 1,375,000 | 1,367,750 | |||||||||||
Overseas Private Investment Corp. | 1.34 | (f) | 11/20/19 | 1,000,000 | 1,038,543 | |||||||||||
Overseas Private Investment Corp. | 1.50 | (f) | 11/15/20 | 1,075,000 | 1,052,565 | |||||||||||
Tennessee Valley Authority | 0.00 | (d) | 06/15/21 | 595,000 | 494,478 | |||||||||||
U.S. Department of Housing & Urban Development | 6.07 | 08/01/21 | 103,000 | 103,227 | ||||||||||||
U.S. Department of Housing & Urban Development | 6.12 | 08/01/22 | 597,000 | 598,507 | ||||||||||||
U.S. Treasury Notes | 0.75 | 01/15/17 | 6,400,000 | 6,409,997 | ||||||||||||
U.S. Treasury Notes | 0.75 | 03/15/17 | 2,950,000 | 2,949,540 | ||||||||||||
U.S. Treasury Notes | 1.00 | 03/31/17 | 10,000,000 | 10,057,810 | ||||||||||||
U.S. Treasury Notes | 0.88 | 06/15/17 | 2,900,000 | 2,900,678 | ||||||||||||
U.S. Treasury Notes | 1.88 | 08/31/17 | 1,925,000 | 1,979,291 | ||||||||||||
U.S. Treasury Notes | 1.63 | 04/30/19 | 1,975,000 | 1,978,241 | ||||||||||||
Total U.S. Government and Agency Obligations (Cost $35,558,457) |
| 35,651,191 | ||||||||||||||
COMMERCIAL PAPER | ||||||||||||||||
(15.2% of portfolio) | ||||||||||||||||
American Water Capital Corp. (b) | 0.27 | 07/02/14 | 11,218,000 | 11,217,916 | ||||||||||||
Bunge Asset Funding Corp. (b) | 0.28 | 07/01/14 | 27,876,000 | 27,876,000 | ||||||||||||
FMC Corp. (b) | 0.27 | 07/14/14 | 10,999,000 | 10,997,928 | ||||||||||||
Institutional Secured Funding LLC (b) | 0.30 | 08/01/14 | 15,291,000 | 15,287,050 | ||||||||||||
Rockwell Collins Inc. (b) | 0.23 | 07/07/14 | 8,019,000 | 8,018,692 | ||||||||||||
Sinopec Century Bright Capital Investment Ltd. (b) | 0.30 | 07/09/14 | 6,446,000 | 6,445,570 | ||||||||||||
Sinopec Century Bright Capital Investment Ltd. (b) | 0.30 | 07/17/14 | 5,499,000 | 5,498,267 | ||||||||||||
Total Commercial Paper (Cost $85,341,423) | 85,341,423 | |||||||||||||||
MONEY MARKET ACCOUNT | Shares | |||||||||||||||
(Less than 0.1% of portfolio) | ||||||||||||||||
State Street Institutional Liquid Reserves Fund (Premier Class) | 0.06 | (h) | 1,050 | 1,050 | ||||||||||||
Total Money Market Account (Cost $1,050) | 1,050 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES | $ | 561,223,597 |
(a) | Variable coupon rate as of June 30, 2014. |
(b) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. The securities have been determined to be liquid under criteria established by the Fund’s Board of Directors. The total of such securities at period-end amounts to $134,836,603 and represents 24.0% of total investments. |
(c) | Step coupon security, the current rate may be adjusted upwards before maturity date. |
(d) | Zero coupon security, purchased at a discount. |
(e) | Interest is paid at maturity. |
(f) | Interest is paid at put date. |
(g) | Security did not mature on maturity date. While additional principal and interest have been received past the maturity date, the amount and timing of future payments is uncertain. |
(h) | 7-day yield at June 30, 2014. |
plc—Public Limited Company
SA—Sociedad Anónima or Société Anonyme
NV—Naamloze Vennottschap
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 35 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Stock Index Fund
June 30, 2014 (Unaudited)
Cost | Value | |||||||
Investment in S&P 500 Stock Master Portfolio | $ | 50,757,828 | $ | 110,741,286 |
Substantially all the assets of the Stock Index Fund are invested in the S&P 500 Stock Master Portfolio managed by BlackRock Fund Advisors. As of June 30, 2014, the Stock Index Fund’s ownership interest in the S&P 500 Stock Master Portfolio was 1.97%. See the Appendix for the S&P 500 Stock Master Portfolio’s holdings information.
36 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Value Fund
June 30, 2014 (Unaudited)
COMMON STOCKS | Shares | Value | ||||||
(94.9% of portfolio) | ||||||||
CONSUMER DISCRETIONARY—6.9% |
| |||||||
Auto Components | ||||||||
Cooper Tire & Rubber Co. | 440,000 | $ | 13,200,000 | |||||
Distributors | ||||||||
Genuine Parts Co. | 315,400 | 27,692,120 | ||||||
Multiline Retail | ||||||||
Dillard’s, Inc. (Class A) | 182,700 | 21,304,647 | ||||||
Total Consumer Discretionary |
| 62,196,767 | ||||||
CONSUMER STAPLES—3.9% |
| |||||||
Food Products | ||||||||
Dean Foods Co. | 349,449 | 6,146,808 | ||||||
J.M. Smucker Co. (The) | 148,853 | 15,863,264 | ||||||
WhiteWave Foods Co. (The) (Class A) (a) | 400,927 | 12,978,007 | ||||||
Total Consumer Staples |
| 34,988,079 | ||||||
ENERGY—15.0% |
| |||||||
Energy Equipment & Services | ||||||||
Baker Hughes Inc. | 187,000 | 13,922,150 | ||||||
Oil, Gas, & Consumable Fuels | ||||||||
Chevron Corp. | 220,000 | 28,721,000 | ||||||
ConocoPhillips | 317,000 | 27,176,410 | ||||||
Marathon Oil Corp. | 461,000 | 18,403,120 | ||||||
Marathon Petroleum Corp. | 189,000 | 14,755,230 | ||||||
Phillips 66 | 159,500 | 12,828,585 | ||||||
QEP Resources, Inc. | 552,400 | 19,057,800 | ||||||
Total Energy |
| 134,864,295 | ||||||
FINANCIALS—9.5% |
| |||||||
Banks | ||||||||
Bank of America Corp. | 475,200 | 7,303,824 | ||||||
Commerce Bancshares, Inc. | 33,046 | 1,536,639 | ||||||
JPMorgan Chase & Co. | 517,600 | 29,824,112 | ||||||
Wells Fargo & Co. | 221,000 | 11,615,760 | ||||||
Insurance | ||||||||
Allstate Corp. (The) | 369,000 | 21,667,680 | ||||||
Chubb Corp. (The) | 142,000 | 13,088,140 | ||||||
Total Financials |
| 85,036,155 | ||||||
HEALTH CARE—20.1% |
| |||||||
Health Care Equipment & Supplies | ||||||||
Abbott Laboratories | 399,000 | 16,319,100 | ||||||
Covidien plc | 207,600 | 18,721,368 | ||||||
Pharmaceuticals | ||||||||
AbbVie Inc. | 399,000 | 22,519,560 | ||||||
Bristol-Myers Squibb Co. | 794,700 | 38,550,897 | ||||||
GlaxoSmithKline plc ADR | 354,000 | 18,931,920 | ||||||
Hospira, Inc. (a) | 379,400 | 19,489,778 | ||||||
Mallinckrodt plc (a) | 25,950 | 2,076,519 | ||||||
Merck & Co., Inc. | 193,194 | 11,176,273 | ||||||
Pfizer Inc. | 1,107,000 | 32,855,760 | ||||||
Total Health Care |
| 180,641,175 |
Shares | Value | |||||||
INDUSTRIALS—16.1% |
| |||||||
Aerospace & Defense | ||||||||
Honeywell International Inc. | 281,100 | $ | 26,128,245 | |||||
Airlines | ||||||||
Southwest Airlines Co. | 844,100 | 22,672,526 | ||||||
Commercial Services & Supplies | ||||||||
Tyco International Ltd. | 164,850 | 7,517,160 | ||||||
Industrial Conglomerates | ||||||||
General Electric Co. | 1,119,000 | 29,407,320 | ||||||
Machinery | ||||||||
Flowserve Corp. | 285,900 | 21,256,665 | ||||||
Parker-Hannifin Corp. | 246,400 | 30,979,872 | ||||||
Trading Companies & Distributors | ||||||||
Applied Industrial Technologies, Inc. | 130,500 | 6,620,265 | ||||||
Total Industrials |
| 144,582,053 | ||||||
INFORMATION TECHNOLOGY—13.9% |
| |||||||
Communications Equipment | ||||||||
Cisco Systems, Inc. | 1,343,500 | 33,385,975 | ||||||
Electronic Equipment, Instruments & Components | ||||||||
TE Connectivity Ltd. | 262,850 | 16,254,644 | ||||||
IT Services | ||||||||
Leidos Holdings Inc. | 150,750 | 5,779,755 | ||||||
Science Appliations International Corp. | 86,142 | 3,804,031 | ||||||
Semiconductors & Semiconductor Equipment | ||||||||
Intel Corp. | 1,185,000 | 36,616,500 | ||||||
Technology Hardware, Storage & Peripherals | ||||||||
Hewlett-Packard Co. | 876,900 | 29,533,992 | ||||||
Total Information Technology |
| 125,374,897 | ||||||
MATERIALS—9.0% |
| |||||||
Chemicals | ||||||||
Dow Chemical Co. (The) | 711,900 | 36,634,374 | ||||||
Containers & Packaging | ||||||||
Avery Dennison Corp. | 520,000 | 26,650,000 | ||||||
Bemis Co., Inc. | 433,600 | 17,630,176 | ||||||
Total Materials |
| 80,914,550 | ||||||
UTILITIES—0.5% |
| |||||||
Gas Utilities | ||||||||
Questar Corp. | 169,814 | 4,211,387 | ||||||
Total Utilities |
| 4,211,387 | ||||||
Total Common Stocks | 852,809,358 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 37 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Value Fund (continued)
June 30, 2014 (Unaudited)
MONEY MARKET ACCOUNT | Shares | Value | ||||||
(5.1% of portfolio) | ||||||||
State Street Institutional Liquid Reserves Fund (Premier Class), 0.06% (b) | 45,900,362 | $ | 45,900,362 | |||||
Total Money Market Account | 45,900,362 | |||||||
TOTAL INVESTMENTS IN SECURITIES |
| $ | 898,709,720 |
(a) | Non-income producing. |
(b) | 7-day yield at June 30, 2014. |
plc—Public Limited Company
ADR—American Depositary Receipt
38 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Growth Fund
June 30, 2014 (Unaudited)
COMMON STOCKS | Shares | Value | ||||||
(98.6% of portfolio) | ||||||||
CONSUMER DISCRETIONARY—25.9% |
| |||||||
Auto Components | ||||||||
Delphi Automotive plc | 10,300 | $ | 708,022 | |||||
Automobiles | ||||||||
Tesla Motors, Inc. (a) | 1,700 | 408,102 | ||||||
Hotels, Restaurants & Leisure | ||||||||
Chipotle Mexican Grill Inc. (a) | 1,400 | 829,514 | ||||||
Hilton Worldwide Holdings Inc. (a) | 27,413 | 638,723 | ||||||
Las Vegas Sands Corp. | 15,800 | 1,204,276 | ||||||
MGM Resorts International (a) | 30,500 | 805,200 | ||||||
Starbucks Corp. | 18,700 | 1,447,006 | ||||||
Wynn Resorts, Ltd. | 7,700 | 1,598,212 | ||||||
Household Durables | ||||||||
D.R. Horton, Inc. | 42,400 | 1,042,192 | ||||||
Internet & Catalog Retail | ||||||||
Amazon.com, Inc. (a) | 11,600 | 3,767,448 | ||||||
Ctrip.com International Ltd. (a) | 12,300 | 787,692 | ||||||
Netflix, Inc. (a) | 1,300 | 572,780 | ||||||
priceline.com Inc. (a) | 2,330 | 2,802,990 | ||||||
Media | ||||||||
Twenty-First Century Fox, Inc. | �� | 38,700 | 1,360,305 | |||||
Multiline Retail | ||||||||
Dollar Tree, Inc. (a) | 12,600 | 686,196 | ||||||
Specialty Retail | ||||||||
CarMax, Inc. (a) | 9,600 | 499,296 | ||||||
Lowe’s Cos., Inc. | 26,700 | 1,281,333 | ||||||
Tractor Supply Co. | 11,900 | 718,760 | ||||||
Textiles, Apparel & Luxury Goods | ||||||||
Michael Kors Holdings Ltd. (a) | 7,100 | 629,415 | ||||||
Total Consumer Discretionary | 21,787,462 | |||||||
CONSUMER STAPLES—2.7% |
| |||||||
Beverages | ||||||||
PepsiCo, Inc. | 13,900 | 1,241,826 | ||||||
Food & Staples Retailing | ||||||||
Walgreen Co. | 5,500 | 407,715 | ||||||
Personal Products | ||||||||
Estee Lauder Cos., Inc. (The) (Class A) | 8,800 | 653,488 | ||||||
Total Consumer Staples | 2,303,029 | |||||||
ENERGY—5.0% |
| |||||||
Oil, Gas,& Consumable Fuels | ||||||||
EQT Corp. | 3,800 | 406,220 | ||||||
Pioneer Natural Resources Co. | 9,700 | 2,229,157 | ||||||
Range Resources Corp. | 18,002 | 1,565,274 | ||||||
Total Energy | 4,200,651 | |||||||
FINANCIALS—6.3% |
| |||||||
Capital Markets | ||||||||
Morgan Stanley | 43,000 | 1,390,190 | ||||||
State Street Corp. | 13,400 | 901,284 | ||||||
TD Ameritrade Holding Corp. | 41,000 | 1,285,350 | ||||||
Real Estate Investment Trust | ||||||||
Crown Castle International Corp. | 23,100 | 1,715,406 | ||||||
Total Financials | 5,292,230 |
Shares | Value | |||||||
HEALTH CARE—19.6% |
| |||||||
Biotechnology | ||||||||
Alexion Pharmaceuticals Inc. (a) | 8,600 | $ | 1,343,750 | |||||
Biogen Idec Inc. (a) | 6,190 | 1,951,769 | ||||||
Celgene Corp. (a) | 16,300 | 1,399,844 | ||||||
Gilead Sciences, Inc. (a) | 32,400 | 2,686,284 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 900 | 254,223 | ||||||
Vertex Pharmaceuticals, Inc. (a) | 5,300 | 501,804 | ||||||
Health Care Equipment & Supplies | ||||||||
Intuitive Surgical, Inc. (a) | 2,500 | 1,029,500 | ||||||
Health Care Providers & Services | ||||||||
Cardinal Health, Inc. | 9,800 | 671,888 | ||||||
Humana Inc. | 5,800 | 740,776 | ||||||
McKesson Corp. | 12,400 | 2,309,004 | ||||||
Unitedhealth Group Inc. | 11,100 | 907,425 | ||||||
Health Care Technology | ||||||||
athenahealth, Inc. (a) | 1,900 | 237,747 | ||||||
Pharmaceuticals | ||||||||
Allergan, Inc. | 6,400 | 1,083,008 | ||||||
Valeant Pharmaceuticals International, Inc. (a) | 11,200 | 1,412,544 | ||||||
Total Health Care | 16,529,566 | |||||||
INDUSTRIALS—14.4% |
| |||||||
Aerospace & Defense | ||||||||
Boeing Co. (The) | 18,400 | 2,341,032 | ||||||
Precision Castparts Corp. | 8,800 | 2,221,120 | ||||||
United Technologies Corp. | 10,900 | 1,258,405 | ||||||
Airlines | ||||||||
American Airlines Group Inc. (a) | 33,700 | 1,447,752 | ||||||
United Continental Holdings Inc. (a) | 13,100 | 538,017 | ||||||
Air Freight & Logistics | ||||||||
FedEx Corp. | 4,100 | 620,658 | ||||||
Machinery | ||||||||
Colfax Corp. (a) | 2,500 | 186,350 | ||||||
Wabtec Corp. | 9,700 | 801,123 | ||||||
Industrial Conglomerates | ||||||||
Danaher Corp. | 28,600 | 2,251,678 | ||||||
Road & Rail | ||||||||
Kansas City Southern | 4,200 | 451,542 | ||||||
Total Industrials | 12,117,677 | |||||||
INFORMATION TECHNOLOGY—21.0% |
| |||||||
Communications Equipment | ||||||||
Juniper Networks, Inc. (a) | 24,000 | 588,960 | ||||||
Internet Software & Services | ||||||||
Akamai Technologies, Inc. (a) | 9,900 | 604,494 | ||||||
Baidu, Inc. ADR (a) | 5,600 | 1,046,136 | ||||||
Facebook, Inc. (a) | 18,600 | 1,251,594 | ||||||
Google Inc. (Class A) (a) | 4,300 | 2,514,081 | ||||||
Google Inc. (Class C) (a) | 4,200 | 2,416,176 | ||||||
LinkedIn Corp. (a) | 2,800 | 480,116 | ||||||
IT Services | ||||||||
Cognizant Technology Solutions Corp., (Class A) (a) | 9,100 | 445,081 | ||||||
Vantiv, Inc. (Class A) (a) | 16,200 | 544,644 | ||||||
Visa Inc. (Class A) | 11,800 | 2,486,378 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 39 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Growth Fund (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) | ||||||||
Semiconductors & Semiconductor Equipment | ||||||||
ASML Holding NV | 11,200 | $ | 1,044,624 | |||||
Software | ||||||||
NetSuite Inc. (a) | 6,500 | 564,720 | ||||||
Red Hat, Inc. (a) | 16,000 | 884,320 | ||||||
salesforce.com, Inc. (a) | 20,900 | 1,213,872 | ||||||
ServiceNow, Inc. (a) | 11,400 | 706,344 | ||||||
VMware, Inc. (a) | 4,600 | 445,326 | ||||||
Workday, Inc. (a) | 5,000 | 449,300 | ||||||
Total Information Technology | 17,686,166 | |||||||
MATERIALS—3.7% |
| |||||||
Chemicals | ||||||||
Ecolab Inc. | 10,600 | 1,180,204 | ||||||
Sherwin-Williams Co. | 7,350 | 1,520,788 | ||||||
Construction Materials | ||||||||
Vulcan Materials Co. | 7,100 | 452,625 | ||||||
Total Materials | 3,153,617 | |||||||
Total Common Stocks | 83,070,398 |
MONEY MARKET ACCOUNT | Shares | Value | ||||||
(1.4% of portfolio) | ||||||||
State Street Institutional Liquid Reserves Fund (Premier Class), 0.06% (b) | 1,173,433 | $ | 1,173,433 | |||||
Total Money Market Account | 1,173,433 | |||||||
TOTAL INVESTMENTS IN SECURITIES |
| $ | 84,243,831 |
(a) | Non-income producing. |
(b) | 7-day yield at June 30, 2014. |
ADR—American Depositary Receipt
40 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: Small-Company Stock Fund
June 30, 2014 (Unaudited)
COMMON STOCKS | Shares | Value | ||||||
(85.2% of portfolio) | ||||||||
CONSUMER DISCRETIONARY— 19.3% |
| |||||||
Auto Components | ||||||||
Cooper Tire & Rubber Co. | 985,350 | $ | 29,560,500 | |||||
Distributors | ||||||||
Core-Mark Holding Company, Inc. | 250,794 | 11,443,730 | ||||||
Diversified Consumer Services | ||||||||
Matthews International Corp. (Class A) | 428,631 | 17,818,191 | ||||||
Hotels, Restaurants, & Leisure | ||||||||
BJ’s Restuarants, Inc. (a) | 657,427 | 22,950,777 | ||||||
Brinker International, Inc. | 200,000 | 9,730,000 | ||||||
Cracker Barrel Old Country Store, Inc. | 210,209 | 20,930,510 | ||||||
Wendy’s Co. (The) | 2,040,260 | 17,403,418 | ||||||
Multiline Retail | ||||||||
Fred’s, Inc. (Class A) | 1,665,683 | 25,468,293 | ||||||
Nordstrom, Inc. | 90,000 | 6,113,700 | ||||||
Specialty Retail | ||||||||
Francesca’s Holdings Corp. (a) | 1,834,406 | 27,039,144 | ||||||
Sally Beauty Holdings, Inc. (a) | 114,000 | 2,859,120 | ||||||
Total Consumer Discretionary |
| 191,317,383 | ||||||
CONSUMER STAPLES—3.0% |
| |||||||
Food & Staples Retailing | ||||||||
United Natural Foods, Inc. (a) | 159,600 | 10,389,960 | ||||||
Food Products | ||||||||
Dean Foods Co. | 237,500 | 4,177,625 | ||||||
J.M. Smucker Co. (The) | 40,868 | 4,355,303 | ||||||
WhiteWave Foods Co. (The) (Class A) (a) | 347,509 | 11,248,866 | ||||||
Total Consumer Staples |
| 30,171,754 | ||||||
ENERGY—1.8% |
| |||||||
Energy Equipment & Services | ||||||||
Helmerich & Payne, Inc. | 35,000 | 4,063,850 | ||||||
Oil, Gas, & Consumable Fuels | ||||||||
Cimarex Energy Co. | 59,400 | 8,521,524 | ||||||
QEP Resources, Inc. | 26,600 | 917,700 | ||||||
SM Energy Co. | 49,000 | 4,120,900 | ||||||
Total Energy |
| 17,623,974 | ||||||
FINANCIALS—14.4% |
| |||||||
Banks | ||||||||
Cardinal Financial Corp. | 1,048,441 | 19,354,221 | ||||||
Middleburg Financial Corp. | 97,700 | 1,954,000 | ||||||
National Bankshares, Inc. (Virginia) | 409,602 | 12,652,606 | ||||||
National Penn Bancshares, Inc. | 1,580,890 | 16,725,816 | ||||||
Southcoast Financial Corp. (a) | 74,730 | 543,287 | ||||||
Texas Capital Bancshares, Inc. (a) | 483,917 | 26,107,322 | ||||||
UMB Financial Corp. | 343,244 | 21,758,237 | ||||||
Valley National Bancorp | 1,225,799 | 12,147,668 | ||||||
Consumer Finance | ||||||||
Encore Capital Group, Inc. (a) | 696,542 | 31,636,938 | ||||||
Total Financials |
| 142,880,095 |
Shares | Value | |||||||
HEALTH CARE—1.9% |
| |||||||
Health Care Equipment & Supplies | ||||||||
STERIS Corp. | 342,112 | $ | 18,296,150 | |||||
Total Health Care |
| 18,296,150 | ||||||
INDUSTRIALS—24.7% |
| |||||||
Aerospace & Defense | ||||||||
Huntington Ingalls Industries, Inc. | 157,208 | 14,870,305 | ||||||
Triumph Group, Inc. | 136,800 | 9,551,376 | ||||||
Construction & Engineering | ||||||||
Dycom Industries, Inc. (a) | 959,693 | 30,047,988 | ||||||
Orion Marine Group, Inc. (a) | 1,142,343 | 12,371,575 | ||||||
Electrical Equipment | ||||||||
Polypore International, Inc. (a) | 247,826 | 11,828,735 | ||||||
Regal Beloit Corp. | 58,500 | 4,595,760 | ||||||
Industrial Conglomerates | ||||||||
Carlisle Companies Inc. | 125,600 | 10,879,472 | ||||||
Machinery | ||||||||
CLARCOR Inc. | 87,100 | 5,387,135 | ||||||
Flowserve Corp. | 43,500 | 3,234,225 | ||||||
Gorman-Rupp Co. (The) | 547,360 | 19,360,123 | ||||||
Manitowoc Co., Inc. (The) | 759,400 | 24,953,884 | ||||||
Standex International Corp. | 19,500 | 1,452,360 | ||||||
Road & Rail | ||||||||
Knight Transportation, Inc. | 1,282,082 | 30,475,089 | ||||||
Werner Enterprises, Inc. | 1,222,306 | 32,403,332 | ||||||
Trading Companies & Distributors | ||||||||
Applied Industrial Technologies, Inc. | 657,818 | 33,371,107 | ||||||
Total Industrials |
| 244,782,466 | ||||||
INFORMATION TECHNOLOGY—10.7% |
| |||||||
Electronic Equipment, Instruments, & Components | ||||||||
Belden Inc. | 292,585 | 22,868,444 | ||||||
Rofin-Sinar Technologies Inc. (a) | 1,099,248 | 26,425,922 | ||||||
IT Services | ||||||||
Cass Information Systems, Inc. | 102,321 | 5,062,843 | ||||||
Computer Services, Inc. | 474,346 | 16,198,916 | ||||||
ManTech International Corp. | 984,370 | 29,058,602 | ||||||
Technology Hardware, Storage, & Peripherals | ||||||||
Western Digital Corp. | 70,000 | 6,461,000 | ||||||
Total Information Technology |
| 106,075,727 | ||||||
MATERIALS—9.3% |
| |||||||
Chemicals | ||||||||
American Vanguard Corp. | 905,665 | 11,972,891 | ||||||
Olin Corp. | 1,054,965 | 28,399,658 | ||||||
PolyOne Corp. | 514,106 | 21,664,427 | ||||||
Westlake Chemical Corp. | 231,400 | 19,382,064 | ||||||
Containers & Packaging | ||||||||
Myers Industries, Inc. | 505,295 | 10,151,376 | ||||||
Total Materials |
| 91,570,416 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 41 |
Table of Contents
PORTFOLIO OF INVESTMENTS: Small-Company Stock Fund (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||||
(Common Stocks continued) | ||||||||||
UTILITIES—0.1% |
| |||||||||
Gas Utilities | ||||||||||
Questar Corp. | 26,600 | $ | 659,680 | |||||||
Total Utilities | 659,680 | |||||||||
Total Common Stocks | 843,377,645 | |||||||||
EXCHANGE TRADED FUNDS | ||||||||||
(9.8% of portfolio) | ||||||||||
iShares Russell 2000 Value | 472,037 | 48,742,541 | ||||||||
iShares Core S&P Small-Cap | 436,000 | 48,871,240 | ||||||||
Total Exchange Traded Funds | 97,613,781 |
MONEY MARKET ACCOUNT | Shares | Value | ||||||||
(5.0% of portfolio) | ||||||||||
State Street Institutional Liquid Reserves Fund (Premier Class), 0.06% (b) | 49,268,951 | $ | 49,268,951 | |||||||
Total Money Market Account | 49,268,951 | |||||||||
TOTAL INVESTMENTS IN SECURITIES |
| $ | 990,260,377 |
(a) | Non-income producing. |
(b) | 7-day yield at June 30, 2014. |
42 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: International Value Fund
June 30, 2014 (Unaudited)
COMMON STOCKS | Shares | Value | ||||||
(98.0% of portfolio) | ||||||||
AUSTRALIA—0.4% |
| |||||||
Incitec Pivot Ltd. (a) | 366,650 | $ | 1,002,403 | |||||
Total Australia |
| 1,002,403 | ||||||
BRAZIL—0.8% |
| |||||||
Petroleo Brasileiro SA—ADR | 131,642 | 1,925,922 | ||||||
Total Brazil |
| 1,925,922 | ||||||
BRITAIN—8.7% |
| |||||||
BAE Systems plc | 774,264 | 5,734,764 | ||||||
HSBC Holdings plc—ADR | 76,963 | 3,909,720 | ||||||
Tesco plc | 770,800 | 3,746,230 | ||||||
WPP Group plc | 289,565 | 6,310,164 | ||||||
Total Britain |
| 19,700,878 | ||||||
CHINA—1.0% |
| |||||||
Guangzhou Automobile Group Co., Ltd. | 2,072,807 | 2,407,170 | ||||||
Total China |
| 2,407,170 | ||||||
DENMARK—2.0% |
| |||||||
Danske Bank Group | 159,057 | 4,496,301 | ||||||
Total Denmark |
| 4,496,301 | ||||||
FRANCE—13.0% |
| |||||||
AXA SA | 208,121 | 4,972,702 | ||||||
Cap Gemini SA | 60,664 | 4,329,209 | ||||||
Christian Dior SA | 24,617 | 4,901,210 | ||||||
Compagnie de Saint-Gobain SA | 101,491 | 5,726,344 | ||||||
GDF SUEZ SA | 169,156 | 4,660,511 | ||||||
Total SA | 67,999 | 4,919,704 | ||||||
Total France |
| 29,509,680 | ||||||
GERMANY—6.8% |
| |||||||
Daimler AG REG | 66,134 | 6,177,879 | ||||||
Deutsche Böerse AG | 58,270 | 4,517,943 | ||||||
ThyssenKrupp AG (a) | 164,876 | 4,797,322 | ||||||
Total Germany |
| 15,493,144 | ||||||
HONG KONG—3.5% |
| |||||||
Hutchison Whampoa Ltd. | 376,232 | 5,140,706 | ||||||
New World Development Co. Ltd. | 2,393,913 | 2,725,221 | ||||||
Total Hong Kong |
| 7,865,927 | ||||||
ISRAEL—0.7% |
| |||||||
Israel Chemicals, Ltd. | 201,049 | 1,722,598 | ||||||
Total Israel |
| 1,722,598 | ||||||
ITALY—7.3% |
| |||||||
Assicurazioni Generali SpA | 196,988 | 4,314,137 | ||||||
Eni SpA | 185,684 | 5,078,397 | ||||||
Intesa Sanpaolo SpA | 2,312,716 | 7,135,490 | ||||||
Total Italy |
| 16,528,024 |
COMMON STOCKS | Shares | Value | ||||||
JAPAN—15.0% |
| |||||||
Daiwa Securities Group Inc. | 454,063 | $ | 3,934,125 | |||||
LIXIL Group Corp. | 134,523 | 3,640,988 | ||||||
MS & AD Insurance Group Holdings, Inc. | 227,227 | 5,491,813 | ||||||
Nippon Sheet Glass Co. Ltd. (a) | 1,841,106 | 2,602,598 | ||||||
Nippon Yusen Kabushiki Kaisha | 1,336,225 | 3,854,446 | ||||||
Nissan Motor Co., Ltd. | 457,601 | 4,333,231 | ||||||
Sumitomo Corp. | 366,427 | 4,944,254 | ||||||
Sumitomo Mitsui Trust Holdings, Inc. | 1,139,034 | 5,205,948 | ||||||
Total Japan |
| 34,007,403 | ||||||
NETHERLANDS—6.2% |
| |||||||
AEGON NV | 884,385 | 7,714,889 | ||||||
ASML Holding NV | 6,450 | 601,536 | ||||||
DSM NV | 79,749 | 5,803,521 | ||||||
Total Netherlands |
| 14,119,946 | ||||||
PORTUGAL—1.4% |
| |||||||
Banco Espirito Santo SA (a) | 3,823,325 | 3,135,184 | ||||||
Total Portugal |
| 3,135,184 | ||||||
REPUBLIC OF SOUTH KOREA—4.0% |
| |||||||
Hyundai Motor Co. | 19,800 | 4,489,070 | ||||||
KB Financial Group Inc. | 16,650 | 578,619 | ||||||
Posco | 13,804 | 4,124,984 | ||||||
Total Republic of South Korea |
| 9,192,673 | ||||||
SINGAPORE—3.7% |
| |||||||
Jardine Matheson Holdings Ltd. | 76,350 | 4,530,999 | ||||||
Keppel Corp. Ltd. | 440,293 | 3,811,384 | ||||||
Total Singapore |
| 8,342,383 | ||||||
SPAIN—4.8% |
| |||||||
Banco Popular Espanol SA | 230,697 | 1,541,141 | ||||||
Banco Santander SA | 447,217 | 4,673,085 | ||||||
IBERDROLA SA | 610,612 | 4,670,898 | ||||||
Total Spain |
| 10,885,124 | ||||||
SWEDEN—2.0% |
| |||||||
Volvo AB (Class B) | 324,225 | 4,463,482 | ||||||
Total Sweden |
| 4,463,482 | ||||||
SWITZERLAND—11.9% |
| |||||||
Adecco SA REG | 62,803 | 5,168,305 | ||||||
Credit Suisse Group AG | 158,709 | 4,513,598 | ||||||
Givaudan SA REG | 2,426 | 4,041,537 | ||||||
Holcim Ltd. | 51,482 | 4,522,044 | ||||||
Novartis AG REG | 49,866 | 4,515,783 | ||||||
Roche Holding AG | 14,414 | 4,294,749 | ||||||
Total Switzerland |
| 27,056,016 |
The accompanying notes are an integral part of these financial statements. | Portfolio of Investments | 43 |
Table of Contents
PORTFOLIO OF INVESTMENTS: International Value Fund (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) | ||||||||
THAILAND—4.8% |
| |||||||
Bangkok Bank Public Company Ltd. | 404,838 | $ | 2,407,702 | |||||
Krung Thai Bank Public Company, Ltd. | 7,977,561 | 5,136,917 | ||||||
PTT Public Company Ltd. | 344,117 | 3,374,143 | ||||||
Total Thailand |
| 10,918,762 | ||||||
Total Common Stocks | 222,773,020 |
MONEY MARKET ACCOUNT | Shares | Value | ||||||
(2.0% of portfolio) | ||||||||
State Street Institutional Liquid Reserves Fund (Premier Class), 0.06% (b) | 4,452,338 | $ | 4,452,338 | |||||
Total Money Market Account | 4,452,338 | |||||||
TOTAL INVESTMENTS IN SECURITIES |
| $ | 227,225,358 |
(a) | Non-income producing. |
(b) | 7-day yield at June 30, 2014. |
SA—Sociedad Anónima or Société Anonyme
ADR—American Depositary Receipt
plc—Public Limited Company
AG—Aktiengesellschaft
REG—Registered shares
SpA—Società per Azioni
NV—Naamloze Vennottschap
44 | Portfolio of Investments | The accompanying notes are an integral part of these financial statements. |
Table of Contents
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Table of Contents
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2014 (Unaudited)
ASSETS | Daily Income Fund | Short-Term Government Securities Fund | Short-Term Bond Fund | |||||||||
Investments in securities, at value (cost: $210,201,186; $83,856,634 $555,134,757; $50,757,828; $464,537,828; $64,146,645; $707,299,714; $187,359,350) | $ | 210,201,186 | $ | 84,200,388 | $ | 561,223,597 | ||||||
Cash | — | — | 4,966 | |||||||||
Foreign currency (cost $39,476) | — | — | — | |||||||||
Receivables | ||||||||||||
Investment securities sold | — | — | — | |||||||||
Dividends, interest, and tax reclaims | 122,626 | 247,132 | 1,888,564 | |||||||||
Capital shares sold | 38,170 | 2,962 | 279,805 | |||||||||
Due from RE Advisers | 644 | — | — | |||||||||
Prepaid expenses | 30,799 | 16,678 | 61,208 | |||||||||
Total assets | 210,393,425 | 84,467,160 | 563,458,140 | |||||||||
LIABILITIES | ||||||||||||
Payables | ||||||||||||
Investment securities purchased | — | — | 4,600,000 | |||||||||
Accrued expenses | 61,677 | 31,722 | 116,184 | |||||||||
Due to Board Members | 48,788 | 19,480 | 90,324 | |||||||||
Due to RE Advisers | — | 35,054 | 294,034 | |||||||||
Capital shares redeemed | 187,473 | 11,726 | 269,912 | |||||||||
Dividends | 20 | 1,300 | 11,254 | |||||||||
Total liabilities | 297,958 | 99,282 | 5,381,708 | |||||||||
NET ASSETS | $ | 210,095,467 | $ | 84,367,878 | $ | 558,076,432 | ||||||
NET ASSETS CONSIST OF: | ||||||||||||
Unrealized appreciation of investments | $ | — | $ | 343,754 | $ | 6,088,840 | ||||||
Undistributed (over distributed) net investment income | (48,788 | ) | (20,913 | ) | (92,367 | ) | ||||||
Undistributed net realized gain (loss) from investments and futures transactions | — | 5,505 | (413,055 | ) | ||||||||
Paid-in-capital applicable to outstanding shares of 210,144,215 of Daily Income Fund, 16,205,141 of Short-Term Government Securities Fund, 106,203,735 of Short-Term Bond Fund, 7,537,552 of Stock Index Fund, 18,396,622 of Value Fund, 10,315,000 of Growth Fund, 26,206,647 of Small-Company Stock Fund, and 27,122,503 of International Value Fund | 210,144,255 | 84,039,532 | 552,493,014 | |||||||||
NET ASSETS | $ | 210,095,467 | $ | 84,367,878 | $ | 558,076,432 | ||||||
NET ASSET VALUE PER SHARE | $ | 1.00 | $ | 5.21 | $ | 5.25 |
46 | Statements of Assets and Liabilities | The accompanying notes are an integral part of these financial statements. |
Table of Contents
Stock Index Fund | Value Fund | Growth Fund | Small-Company Stock Fund | International Value Fund | ||||||||||||||
$ | 110,741,286 | $ | 898,709,720 | $ | 84,243,831 | $ | 990,260,377 | $ | 227,225,358 | |||||||||
— | — | — | — | 8,850 | ||||||||||||||
— | — | — | — | 39,467 | ||||||||||||||
— | — | 429,391 | — | 2,242,720 | ||||||||||||||
— | 1,376,212 | 19,893 | 368,951 | 790,604 | ||||||||||||||
30,056 | 536,880 | 64,166 | 2,028,271 | 1,128,497 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
16,862 | 70,676 | 17,004 | 112,074 | 26,394 | ||||||||||||||
110,788,204 | 900,693,488 | 84,774,285 | 992,769,673 | 231,461,890 | ||||||||||||||
— | — | 295,118 | 217,789 | 2,354,622 | ||||||||||||||
57,457 | 162,711 | 56,850 | 144,522 | 66,983 | ||||||||||||||
16,888 | 148,599 | 9,061 | 73,324 | 38,323 | ||||||||||||||
26,154 | 379,607 | 51,391 | 650,128 | 149,643 | ||||||||||||||
11,882 | 800,994 | 8,561 | 989,341 | 22,051 | ||||||||||||||
7 | 104,331 | — | — | — | ||||||||||||||
112,388 | 1,596,242 | 420,981 | 2,075,104 | 2,631,622 | ||||||||||||||
$ | 110,675,816 | $ | 899,097,246 | $ | 84,353,304 | $ | 990,694,569 | $ | 228,830,268 | |||||||||
$ | 59,983,458 | $ | 434,171,892 | $ | 20,097,186 | $ | 282,960,663 | $ | 39,879,311 | |||||||||
749,404 | (150,970 | ) | (127,087 | ) | 1,042,881 | 5,410,443 | ||||||||||||
(6,683,950 | ) | (4,114,861 | ) | 5,690,572 | 6,139,519 | (25,354,533 | ) | |||||||||||
56,626,904 | 469,191,185 | 58,692,633 | 700,551,506 | 208,895,047 | ||||||||||||||
$ | 110,675,816 | $ | 899,097,246 | $ | 84,353,304 | $ | 990,694,569 | $ | 228,830,268 | |||||||||
$ | 14.68 | $ | 48.87 | $ | 8.18 | $ | 37.80 | $ | 8.44 |
The accompanying notes are an integral part of these financial statements. | Statements of Assets and Liabilities | 47 |
Table of Contents
For the Year Ended June 30, 2014 (Unaudited)
INVESTMENT INCOME | Daily Income Fund | Short-Term Government Securities Fund | Short-Term Bond Fund | |||||||||
Interest | $ | 99,010 | $ | 691,674 | $ | 5,659,816 | ||||||
Dividends | — | — | — | |||||||||
Allocated from Master Portfolio | ||||||||||||
Income | — | — | — | |||||||||
Expense | — | — | — | |||||||||
Total investment income | 99,010 | 691,674 | 5,659,816 | |||||||||
EXPENSES | ||||||||||||
Management fees | 536,276 | 189,564 | 1,624,559 | |||||||||
Shareholder servicing fees | 71,580 | 34,375 | 97,397 | |||||||||
Custodian and accounting fees | 20,315 | 31,267 | 99,866 | |||||||||
Director and Board meeting expenses | 24,281 | 8,947 | 62,713 | |||||||||
Legal and audit fees | 13,114 | 5,685 | 31,786 | |||||||||
Communication | 11,052 | 5,556 | 19,855 | |||||||||
Registration fees | 16,370 | 9,757 | 24,602 | |||||||||
Insurance | 4,836 | 1,842 | 12,198 | |||||||||
Printing | 3,558 | 1,253 | 4,719 | |||||||||
Other expenses | 4,546 | 3,976 | 15,504 | |||||||||
Administration fees | — | — | — | |||||||||
Total expenses | 705,928 | 292,222 | 1,993,199 | |||||||||
Less fees waived and expenses reimbursed by RE Advisers | (612,884 | ) | — | — | ||||||||
Net expenses | 93,044 | 292,222 | 1,993,199 | |||||||||
NET INVESTMENT INCOME (LOSS) | 5,966 | 399,452 | 3,666,617 | |||||||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||||||
Net realized gain on investments | — | 5,774 | 49,330 | |||||||||
Net change in unrealized appreciation (depreciation) | — | 194,862 | 3,818,719 | |||||||||
NET GAIN ON INVESTMENTS | — | 200,636 | 3,868,049 | |||||||||
NET INCREASE IN NET ASSETS FROM OPERATIONS | $ | 5,966 | $ | 600,088 | $ | 7,534,666 |
(a) | Represents realized and unrealized gain on investments allocated from the Master Portfolio. |
(b) | Includes foreign tax witholding expense of $493,793. |
48 | Statements of Operations | The accompanying notes are an integral part of these financial statements. |
Table of Contents
Stock Index Fund | Value Fund | Growth Fund | Small-Company Stock Fund | International Value Fund | ||||||||||||||
$ | — | $ | 14,988 | $ | 586 | $ | 20,587 | $ | 2,329 | |||||||||
— | 9,105,271 | 252,233 | 5,111,439 | 6,484,095 | (b) | |||||||||||||
1,045,995 | — | — | — | — | ||||||||||||||
(25,991 | ) | — | — | — | — | |||||||||||||
1,020,004 | 9,120,259 | 252,819 | 5,132,026 | 6,486,424 | ||||||||||||||
— | 2,009,454 | 255,146 | 3,493,470 | 824,629 | ||||||||||||||
61,277 | 202,404 | 57,143 | 175,059 | 55,778 | ||||||||||||||
7,534 | 61,487 | 23,645 | 75,792 | 84,237 | ||||||||||||||
9,044 | 86,382 | 8,985 | 104,887 | 23,497 | ||||||||||||||
14,251 | 43,237 | 13,016 | 51,313 | 19,681 | ||||||||||||||
10,181 | 52,078 | 10,656 | 46,013 | 11,515 | ||||||||||||||
11,307 | 17,272 | 13,346 | 43,024 | 11,444 | ||||||||||||||
2,249 | 16,517 | 1,852 | 18,652 | 4,459 | ||||||||||||||
5,109 | 11,285 | 2,305 | 9,992 | 2,638 | ||||||||||||||
4,520 | 14,646 | 2,190 | 14,865 | 4,139 | ||||||||||||||
129,847 | — | — | — | — | ||||||||||||||
255,319 | 2,514,762 | 388,284 | 4,033,067 | 1,042,017 | ||||||||||||||
— | — | (15,680 | ) | — | — | |||||||||||||
255,319 | 2,514,762 | 372,604 | 4,033,067 | 1,042,017 | ||||||||||||||
764,685 | 6,605,497 | (119,785 | ) | 1,098,959 | 5,444,407 | |||||||||||||
780,793 | (a) | 576,550 | 5,025,122 | 6,142,184 | 4,929,243 | |||||||||||||
5,502,211 | (a) | 61,321,383 | (2,267,641 | ) | 17,130,826 | (2,149,838 | ) | |||||||||||
6,283,004 | �� | 61,897,933 | 2,757,481 | 23,273,010 | 2,779,405 | |||||||||||||
$ | 7,047,689 | $ | 68,503,430 | $ | 2,637,696 | $ | 24,371,969 | $ | 8,223,812 |
The accompanying notes are an integral part of these financial statements. | Statements of Operations | 49 |
Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS
Daily Income Fund | ||||||||
INCREASE (DECREASE) IN NET ASSETS | Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 5,966 | $ | 9,547 | ||||
Net realized gain (loss) on investments | — | — | ||||||
Net change in unrealized appreciation (depreciation) | — | — | ||||||
Increase (decrease) in net assets from operations | 5,966 | 9,547 | ||||||
Distributions to Shareholders | ||||||||
Net investment income | (10,644 | ) | (20,433 | ) | ||||
Net realized gain on investments | — | — | ||||||
Total distributions to shareholders | (10,644 | ) | (20,433 | ) | ||||
Capital Share Transactions | ||||||||
Net capital share transactions | (2,207,839 | ) | 3,791,699 | |||||
Redemption fees received | — | — | ||||||
Total increase (decrease) in net assets from capital transactions. | (2,207,839 | ) | 3,791,699 | |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (2,212,517 | ) | 3,780,813 | |||||
NET ASSETS | ||||||||
Beginning of period | 212,307,984 | 208,527,171 | ||||||
End of period | $ | 210,095,467 | $ | 212,307,984 | ||||
Undistributed (over distributed) net investment income | (48,788 | ) | (44,110 | ) | ||||
Value Fund | ||||||||
INCREASE (DECREASE) IN NET ASSETS | Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | ||||||
Operations | ||||||||
Net investment income (loss) | $ | 6,605,497 | $ | 13,329,176 | ||||
Net realized gain (loss) on investments | 576,550 | (2,112,111 | ) | |||||
Net change in unrealized appreciation (depreciation) | 61,321,383 | 202,693,851 | ||||||
Increase (decrease) in net assets from operations | 68,503,430 | 213,910,916 | ||||||
Distributions to Shareholders | ||||||||
Net investment income | (6,623,742 | ) | (13,365,968 | ) | ||||
Net realized gain on investments | — | — | ||||||
Total distributions to shareholders | (6,623,742 | ) | (13,365,968 | ) | ||||
Capital Share Transactions | ||||||||
Net capital share transactions | 20,746,470 | 15,380,716 | ||||||
Redemption fees received | — | 1,579 | ||||||
Total increase (decrease) in net assets from capital transactions. | 20,746,470 | 15,382,295 | ||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 82,626,158 | 215,927,243 | ||||||
NET ASSETS | ||||||||
Beginning of period | 816,471,088 | 600,543,845 | ||||||
End of period | $ | 899,097,246 | $ | 816,471,088 | ||||
Undistributed (over distributed) net investment income | (150,970 | ) | (132,725 | ) |
50 | Statements of Changes in Net Assets | The accompanying notes are an integral part of these financial statements. |
Table of Contents
Short-Term Government Securities Fund | Short-Term Bond Fund | Stock Index Fund | ||||||||||||||||||||
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | |||||||||||||||||
$ | 399,452 | $ | 870,922 | $ | 3,666,617 | $ | 7,686,106 | $ | 764,685 | $ | 1,357,398 | |||||||||||
5,774 | 24,920 | 49,330 | 57,875 | 780,793 | 124,783 | |||||||||||||||||
194,862 | (1,430,414 | ) | 3,818,719 | (702,939 | ) | 5,502,211 | 22,343,451 | |||||||||||||||
600,088 | (534,572 | ) | 7,534,666 | 7,041,042 | 7,047,689 | 23,825,632 | ||||||||||||||||
(401,391 | ) | (876,413 | ) | (3,680,438 | ) | (7,715,742 | ) | (753 | ) | (1,357,830 | ) | |||||||||||
— | (26,503 | ) | — | — | — | — | ||||||||||||||||
(401,391 | ) | (902,916 | ) | (3,680,438 | ) | (7,715,742 | ) | (753 | ) | (1,357,830 | ) | |||||||||||
(1,961,323 | ) | (6,561,748 | ) | 17,919,131 | 110,496,641 | 368,520 | 9,278,733 | |||||||||||||||
— | — | — | — | — | 120 | |||||||||||||||||
(1,961,323 | ) | (6,561,748 | ) | 17,919,131 | 110,496,641 | 368,520 | 9,278,853 | |||||||||||||||
(1,762,626 | ) | (7,999,236 | ) | 21,773,359 | 109,821,941 | 7,415,456 | 31,746,655 | |||||||||||||||
86,130,504 | 94,129,740 | 536,303,073 | 426,481,132 | 103,260,360 | 71,513,705 | |||||||||||||||||
$ | 84,367,878 | $ | 86,130,504 | $ | 558,076,432 | $ | 536,303,073 | $ | 110,675,816 | $ | 103,260,360 | |||||||||||
(20,913 | ) | (18,974 | ) | (92,367 | ) | (78,546 | ) | 749,404 | (14,528 | ) | ||||||||||||
Growth Fund | Small-Company Stock Fund | International Value Fund | ||||||||||||||||||||
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | |||||||||||||||||
$ | (119,785 | ) | $ | (172,363 | ) | $ | 1,098,959 | $ | 2,697,042 | $ | 5,444,407 | $ | 3,723,073 | |||||||||
5,025,122 | 3,654,847 | 6,142,184 | 773,592 | 4,929,243 | (2,309,907 | ) | ||||||||||||||||
(2,267,641 | ) | 16,702,576 | 17,130,826 | 183,232,225 | (2,149,838 | ) | 39,384,440 | |||||||||||||||
2,637,696 | 20,185,060 | 24,371,969 | 186,702,859 | 8,223,812 | 40,797,606 | |||||||||||||||||
— | — | — | (2,726,757 | ) | — | (3,630,196 | ) | |||||||||||||||
— | (2,454,343 | ) | — | (775,696 | ) | — | — | |||||||||||||||
— | (2,454,343 | ) | — | (3,502,453 | ) | — | (3,630,196 | ) | ||||||||||||||
6,688,983 | 15,459,394 | 121,265,182 | 271,474,115 | 5,558,300 | 8,498,531 | |||||||||||||||||
— | 123 | — | 9,942 | — | 147 | |||||||||||||||||
6,688,983 | 15,459,517 | 121,265,182 | 271,484,057 | 5,558,300 | 8,498,678 | |||||||||||||||||
9,326,679 | 33,190,234 | 145,637,151 | 454,684,463 | 13,782,112 | 45,666,088 | |||||||||||||||||
75,026,625 | 41,836,391 | 845,057,418 | 390,372,955 | 215,048,156 | 169,382,068 | |||||||||||||||||
$ | 84,353,304 | $ | 75,026,625 | $ | 990,694,569 | $ | 845,057,418 | $ | 228,830,268 | $ | 215,048,156 | |||||||||||
(127,087 | ) | (7,302 | ) | 1,042,881 | (56,078 | ) | 5,410,443 | (33,964 | ) |
The accompanying notes are an integral part of these financial statements. | Statements of Changes in Net Assets | 51 |
Table of Contents
FINANCIAL HIGHLIGHTS: Daily Income Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment income | — | (a,b,c) | — | (a,b,c) | — | (a,b,c) | — | (a,b,c) | — | (a,b,c) | — | (a,b,c) | ||||||||||||
Net realized and unrealized | — | — | — | — | — | — | ||||||||||||||||||
Total from investment operations | — | — | — | — | — | — | ||||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | — | (b) | — | (b) | — | (b) | — | (b) | — | (b) | — | (b) | ||||||||||||
Net realized gain | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | — | — | — | — | — | — | ||||||||||||||||||
Redemption fee (d) | — | — | — | — | — | — | ||||||||||||||||||
NET ASSET VALUE, END OF PERIOD | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | ||||||||||||||||||
TOTAL RETURN | 0.00 | %(e,f) | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.31 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $210,095 | $212,308 | $208,527 | $195,173 | $187,089 | $191,492 | ||||||||||||||||||
Ratio of gross expenses before | 0.66 | %(g) | 0.66 | % | 0.67 | % | 0.68 | % | 0.69 | % | 0.73 | % | ||||||||||||
Ratio of net investment income to | 0.00 | %(a,c,e,g) | 0.00 | %(a,c) | 0.00 | %(a,c) | 0.01 | %(a,c) | 0.01 | %(a,c) | 0.30 | %(a,c) | ||||||||||||
Ratio of expenses to average net assets | 0.09 | %(a,c,g) | 0.11 | %(a,c) | 0.15 | %(a,c) | 0.14 | %(a,c) | 0.24 | %(a,c) | 0.47 | %(a,c) |
(a) | Excludes excess investment management fees and other expenses voluntarily waived and reimbursed by RE Advisers. |
(b) | Less than $0.01 per share. |
(c) | On January 27, 2009, RE Advisers voluntarily and temporarily reduced the amount of the expense limitation from 0.80% to 0.50%. Additionally, effective August 14, 2009, RE Advisers agreed to further waive fees or reimburse expenses to the extent necessary to assist the Fund in attempting to maintain a positive yield. The temporary waiver continued throughout 2010, 2011, 2012, 2013, and through the date of this report. |
(d) | The Daily Income Fund does not charge a redemption fee. |
(e) | Less than 0.01%. |
(f) | Aggregate total return for the period. |
(g) | Annualized. |
52 | Financial Highlights | The accompanying notes are an integral part of these financial statements. |
Table of Contents
FINANCIAL HIGHLIGHTS: Short-Term Government Securities Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $5.19 | $5.28 | $5.27 | $5.26 | $5.25 | $5.26 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment income | 0.02 | 0.05 | 0.06 | 0.09 | 0.12 | 0.14 | (a) | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.02 | (0.09 | ) | 0.02 | 0.01 | 0.01 | — | (b) | ||||||||||||||||
Total from investment operations | 0.04 | (0.04 | ) | 0.08 | 0.10 | 0.13 | 0.14 | |||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | (0.02 | ) | (0.05 | ) | (0.06 | ) | (0.09 | ) | (0.12 | ) | (0.14 | ) | ||||||||||||
Net realized gain | — | — | (b) | (0.01 | ) | — | (b) | — | (b) | (0.01 | ) | |||||||||||||
Total distributions | (0.02 | ) | (0.05 | ) | (0.07 | ) | (0.09 | ) | (0.12 | ) | (0.15 | ) | ||||||||||||
Redemption fee (c) | — | — | — | — | — | — | ||||||||||||||||||
NET ASSET VALUE, END OF PERIOD | $5.21 | $5.19 | $5.28 | $5.27 | $5.26 | $5.25 | ||||||||||||||||||
TOTAL RETURN | 0.86 | %(d) | (0.72 | )% | 1.50 | % | 2.03 | % | 2.57 | % | 2.85 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $84,368 | $86,131 | $94,130 | $84,559 | $76,137 | $65,682 | ||||||||||||||||||
Ratio of gross expenses before expense limitation to average net assets | 0.69 | %(e) | 0.69 | % | 0.69 | % | 0.71 | % | 0.75 | % | 0.78 | % | ||||||||||||
Ratio of net investment income to average net assets | 0.95 | %(e) | 0.96 | % | 1.19 | % | 1.76 | % | 2.27 | % | 2.73 | %(a) | ||||||||||||
Ratio of expenses to average net assets | 0.69 | %(e) | 0.69 | % | 0.69 | % | 0.71 | % | 0.75 | % | 0.75 | %(a) | ||||||||||||
Portfolio turnover rate | 4 | % | 20 | % | 36 | % | 32 | % | 26 | % | 28 | % |
(a) | Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers. |
(b) | Less than $0.01 per share. |
(c) | The Short-Term Government Securities Fund does not charge a redemption fee. |
(d) | Aggregate total return for the period. |
(e) | Annualized. |
The accompanying notes are an integral part of these financial statements. | Financial Highlights | 53 |
Table of Contents
FINANCIAL HIGHLIGHTS: Short-Term Bond Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $5.22 | $5.22 | $5.12 | $5.19 | $5.13 | $4.72 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment income | 0.04 | 0.08 | 0.13 | 0.17 | 0.23 | 0.33 | (a) | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | — | (b) | 0.10 | (0.07 | ) | 0.06 | 0.42 | ||||||||||||||||
Total from investment operations | 0.07 | 0.08 | 0.23 | 0.10 | 0.29 | 0.75 | ||||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | (0.04 | ) | (0.08 | ) | (0.13 | ) | (0.17 | ) | (0.23 | ) | (0.33 | ) | ||||||||||||
Net realized gain | — | — | — | — | — | (0.01 | ) | |||||||||||||||||
Total distributions | (0.04 | ) | (0.08 | ) | (0.13 | ) | (0.17 | ) | (0.23 | ) | (0.34 | ) | ||||||||||||
Redemption fee (c) | — | — | — | — | — | — | ||||||||||||||||||
NET ASSET VALUE, END OF PERIOD | $5.25 | $5.22 | $5.22 | $5.12 | $5.19 | $5.13 | ||||||||||||||||||
TOTAL RETURN | 1.25 | %(d) | 1.64 | % | 4.58 | % | 1.90 | % | 5.73 | % | 16.38 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $558,076 | $536,303 | $426,481 | $374,557 | $309,006 | $246,420 | ||||||||||||||||||
Ratio of gross expenses before expense limitation to average net assets | 0.74 | %(e) | 0.74 | % | 0.76 | % | 0.77 | % | 0.80 | % | 0.83 | % | ||||||||||||
Ratio of net investment income to average net assets | 1.35 | %(e) | 1.61 | % | 2.53 | % | 3.22 | % | 4.38 | % | 6.62 | %(a) | ||||||||||||
Ratio of expenses to average net assets | 0.74 | %(e) | 0.74 | % | 0.76 | % | 0.77 | % | 0.80 | % | 0.80 | %(a) | ||||||||||||
Portfolio turnover rate | 19 | % | 32 | % | 44 | % | 31 | % | 38 | % | 52 | % |
(a) | Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers. |
(b) | Less than $0.01 per share. |
(c) | The Short-Term Bond Fund does not charge a redemption fee. |
(d) | Aggregate total return for the period. |
(e) | Annualized. |
54 | Financial Highlights | The accompanying notes are an integral part of these financial statements. |
Table of Contents
FINANCIAL HIGHLIGHTS: Stock Index Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $13.74 | $10.57 | $9.32 | $9.31 | $8.24 | $6.64 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment income | 0.10 | 0.18 | 0.18 | 0.14 | 0.12 | 0.11 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.84 | 3.17 | 1.25 | 0.01 | 1.07 | 1.60 | ||||||||||||||||||
Total from investment operations | 0.94 | 3.35 | 1.43 | 0.15 | 1.19 | 1.71 | ||||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | — | (a) | (0.18 | ) | (0.18 | ) | (0.14 | ) | (0.12 | ) | (0.11 | ) | ||||||||||||
Net realized gain | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | — | (0.18 | ) | (0.18 | ) | (0.14 | ) | (0.12 | ) | (0.11 | ) | |||||||||||||
Redemption fee | — | (b) | — | (a) | — | — | (a) | — | (a) | — | (a) | |||||||||||||
NET ASSET VALUE, END OF PERIOD | $14.68 | $13.74 | $10.57 | $9.32 | $9.31 | $8.24 | ||||||||||||||||||
TOTAL RETURN | 6.84 | %(d) | 31.72 | % | 15.30 | % | 1.65 | % | 14.47 | % | 25.83 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $110,676 | $103,260 | $71,514 | $61,844 | $60,624 | $51,847 | ||||||||||||||||||
Ratio of net investment income to average net assets | 1.47 | %(e) | 1.55 | % | 1.74 | % | 1.52 | % | 1.45 | % | 1.66 | % | ||||||||||||
Ratio of expenses to average net assets | 0.54 | %(e) | 0.56 | % | 0.60 | % | 0.61 | % | 0.62 | % | 0.75 | % | ||||||||||||
Portfolio turnover rate (c) | N/A | N/A | N/A | N/A | N/A | N/A |
(a) | Less than $0.01 per share. |
(b) | Effective May 1, 2013, the redemption fee was eliminated. |
(c) | See Appendix for the portfolio turnover of the S&P 500 Stock Master Portfolio. |
(d) | Aggregate total return for the period. |
(e) | Annualized. |
The accompanying notes are an integral part of these financial statements. | Financial Highlights | 55 |
Table of Contents
FINANCIAL HIGHLIGHTS: Value Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $45.46 | $34.09 | $30.71 | $30.70 | $27.52 | $22.03 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment income | 0.36 | 0.76 | 0.71 | 0.50 | 0.38 | 0.40 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.41 | 11.37 | 3.38 | — | (b) | 3.18 | 5.49 | |||||||||||||||||
Total from investment operations | 3.77 | 12.13 | 4.09 | 0.50 | 3.56 | 5.89 | ||||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | (0.36 | ) | (0.76 | ) | (0.71 | ) | (0.49 | ) | (0.38 | ) | (0.40 | ) | ||||||||||||
Net realized gain | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.36 | ) | (0.76 | ) | (0.71 | ) | (0.49 | ) | (0.38 | ) | (0.40 | ) | ||||||||||||
Redemption fee | — | (a) | — | (b) | — | (b) | — | (b) | — | (b) | — | (b) | ||||||||||||
NET ASSET VALUE, END OF PERIOD | $48.87 | $45.46 | $34.09 | $30.71 | $30.70 | $27.52 | ||||||||||||||||||
TOTAL RETURN | 8.30 | %(c) | 35.74 | % | 13.38 | % | 1.60 | % | 13.05 | % | 26.98 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $899,097 | $816,471 | $600,544 | $540,772 | $547,616 | $497,076 | ||||||||||||||||||
Ratio of net investment income to average net assets | 1.59 | %(d) | 1.86 | % | 2.13 | % | 1.59 | % | 1.32 | % | 1.71 | % | ||||||||||||
Ratio of expenses to average net assets | 0.61 | %(d) | 0.64 | % | 0.68 | % | 0.70 | % | 0.73 | % | 0.80 | % | ||||||||||||
Portfolio turnover rate | 1 | % | 2 | % | 2 | % | 6 | % | 4 | % | 3 | % |
(a) | Effective May 1, 2013, the redemption fee was eliminated. |
(b) | Less than $0.01 per share. |
(c) | Aggregate total return for the period. |
(d) | Annualized. |
56 | Financial Highlights | The accompanying notes are an integral part of these financial statements. |
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FINANCIAL HIGHLIGHTS: Growth Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $7.92 | $5.71 | $5.17 | $5.80 | $5.02 | $3.31 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment loss | (0.01 | ) | — | — | (b) | (0.01 | ) | (0.01 | ) | — | (b) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 0.27 | 2.48 | 0.91 | (0.11 | ) | 0.79 | 1.71 | |||||||||||||||||
Total from investment operations | 0.26 | 2.48 | 0.91 | (0.12 | ) | 0.78 | 1.71 | |||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | — | — | — | (b) | — | — | — | |||||||||||||||||
Net realized gain | — | (0.27 | ) | (0.37 | ) | (0.51 | ) | — | — | |||||||||||||||
Total distributions | — | (0.27 | ) | (0.37 | ) | (0.51 | ) | — | — | |||||||||||||||
Redemption fee | — | (a) | — | (b) | — | (b) | — | (b) | — | (b) | — | (b) | ||||||||||||
NET ASSET VALUE, END OF PERIOD | $8.18 | $7.92 | $5.71 | $5.17 | $5.80 | $5.02 | ||||||||||||||||||
TOTAL RETURN | 3.28 | %(c) | 43.40 | % | 17.57 | % | (2.09 | )% | 15.54 | % | 51.66 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $84,353 | $75,027 | $41,836 | $32,434 | $29,051 | $19,059 | ||||||||||||||||||
Ratio of gross expenses before expense limitation to average net assets | 0.99 | % | 1.04 | % | 1.11 | % | 1.14 | % | 1.23 | % | 1.74 | % | ||||||||||||
Ratio of net investment income (loss) to average net assets (d) | (0.31 | )%(e) | (0.32 | )% | 0.00 | % | (0.19 | )% | (0.17 | )% | (0.09 | )% | ||||||||||||
Ratio of expenses to average net assets (d) | 0.95 | %(e) | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | ||||||||||||
Portfolio turnover rate | 25 | % | 39 | % | 51 | % | 67 | % | 67 | % | 66 | % |
(a) | Effective May 1, 2013, the redemption fee was eliminated. |
(b) | Less than $0.01 per share. |
(c) | Aggregate total return for the period. |
(d) | Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers. |
(e) | Annualized. |
The accompanying notes are an integral part of these financial statements. | Financial Highlights | 57 |
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FINANCIAL HIGHLIGHTS: Small-Company Stock Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $36.86 | 27.10 | $22.89 | $22.79 | $17.04 | $11.81 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment income (loss) | 0.04 | 0.12 | 0.22 | 0.03 | 0.03 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.90 | 9.79 | 4.27 | 0.10 | 5.75 | 5.23 | ||||||||||||||||||
Total from investment operations | 0.94 | 9.91 | 4.49 | 0.13 | 5.78 | 5.33 | ||||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | — | (0.12 | ) | (0.22 | ) | (0.03 | ) | (0.03 | ) | (0.10 | ) | |||||||||||||
Net realized gain | — | (0.03 | ) | (0.06 | ) | — | — | — | ||||||||||||||||
Total distributions | — | (0.15 | ) | (0.28 | ) | (0.03 | ) | (0.03 | ) | (0.10 | ) | |||||||||||||
Redemption fee | — | (a) | — | (b) | — | (b) | — | (b) | — | (b) | — | (b) | ||||||||||||
NET ASSET VALUE, END OF PERIOD | $37.80 | $36.86 | $27.10 | $22.89 | $22.79 | $17.04 | ||||||||||||||||||
TOTAL RETURN | 2.55 | %(c) | 36.58 | % | 19.63 | % | 0.58 | % | 33.94 | % | 45.10 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $990,695 | $845,057 | $390,373 | $190,426 | $114,159 | $65,833 | ||||||||||||||||||
Ratio of net investment income (loss) to average net assets | 0.24 | %(d) | 0.44 | % | 1.05 | % | 0.17 | % | 0.20 | % | 0.71 | % | ||||||||||||
Ratio of expenses to average net assets | 0.89 | %(d) | 0.91 | % | 1.00 | % | 1.06 | % | 1.17 | % | 1.23 | % | ||||||||||||
Portfolio turnover rate | 2 | % | 1 | % | 1 | % | 2 | % | 4 | % | 9 | % |
(a) | Effective May 1, 2013, the redemption fee was eliminated. |
(b) | Less than $0.01 per share. |
(c) | Aggregate total return for the period. |
(d) | Annualized. |
58 | Financial Highlights | The accompanying notes are an integral part of these financial statements. |
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FINANCIAL HIGHLIGHTS: International Value Fund
For a Share Outstanding Throughout Each Period
Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $8.13 | $6.70 | $5.96 | $7.57 | $7.27 | $5.90 | ||||||||||||||||||
Income from investment operations | ||||||||||||||||||||||||
Net investment income | 0.20 | 0.14 | 0.16 | 0.16 | (a) | 0.14 | (a) | 0.18 | (a) | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | 1.43 | 0.87 | (1.40 | ) | 0.27 | 1.35 | |||||||||||||||||
Total from investment operations | 0.31 | 1.57 | 1.03 | (1.24 | ) | 0.41 | 1.53 | |||||||||||||||||
Distributions | ||||||||||||||||||||||||
Net investment income | — | (0.14 | ) | (0.16 | ) | (0.27 | )(b) | (0.11 | ) | (0.13 | )(b) | |||||||||||||
Net realized gain | — | — | — | — | — | — | ||||||||||||||||||
Return of Capital | — | — | (0.13 | ) | (0.10 | )(b) | — | (0.03 | )(b) | |||||||||||||||
Total distributions | — | (0.14 | ) | (0.29 | ) | (0.37 | ) | (0.11 | ) | (0.16 | ) | |||||||||||||
Redemption fee | — | (c) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | ||||||||||||
NET ASSET VALUE, END OF PERIOD | $8.44 | $8.13 | $6.70 | $5.96 | $7.57 | $7.27 | ||||||||||||||||||
TOTAL RETURN | 3.81 | %(e) | 23.44 | % | 17.41 | % | (16.55 | )% | 5.73 | % | 25.93 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of year (thousands) | $228,830 | $215,048 | $169,382 | $144,421 | $135,455 | $122,920 | ||||||||||||||||||
Ratio of gross expenses before voluntary expense limitation to average net assets | 0.95 | %(f) | 0.96 | % | 0.99 | % | 1.00 | % | 1.02 | % | 1.06 | % | ||||||||||||
Ratio of net investment income to average net assets | 4.95 | %(f) | 1.95 | % | 2.47 | % | 2.44 | %(a) | 2.08 | %(a) | 2.23 | %(a) | ||||||||||||
Ratio of expenses to average net assets | 0.95 | %(f) | 0.96 | % | 0.99 | % | 0.99 | %(a) | 0.99 | %(a) | 0.99 | %(a) | ||||||||||||
Portfolio turnover rate | 12 | % | 19 | % | 23 | % | 34 | % | 44 | % | 47 | % |
(a) | Excludes excess investment management fees and other expenses in accordance with the Expense Limitation Agreement with RE Advisers. |
(b) | Revised to reflect distributions from return of capital per share which were previously reported as distributions from net investment income per share. Previously reported amounts were distributions from net investment income per share of 0.37 and 0.16 in 2011 and 2009 respectively. These revisions did not impact net assets, total distributions or total return. Refer to Note 2 of the Financial Statements for further details. |
(c) | Effective May 1, 2013, the redemption fee was eliminated. |
(d) | Less than $0.01 per share. |
(e) | Aggregate total return for the period. |
(f) | Annualized. |
The accompanying notes are an integral part of these financial statements. | Financial Highlights | 59 |
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1. ORGANIZATION
Homestead Funds, Inc. (“Homestead Funds”) is a Maryland corporation registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (“the Act”), as an open-end management investment company. Homestead Funds currently consists of eight funds: Daily Income Fund, Short-Term Government Securities Fund, Short-Term Bond Fund, Stock Index Fund, Value Fund, Growth Fund, Small-Company Stock Fund, and International Value Fund (the “Funds”).
Each Fund is a separate investment portfolio with distinct investment objectives, investment programs, policies and restrictions. The investment objectives of the Funds, as well as the nature and risks of the investment activities of each Fund, are set forth more fully in Homestead Funds’ Prospectus and Statement of Additional Information. All of the portfolios except for the Growth Fund are diversified for purposes of the federal securities laws.
The Stock Index Fund seeks to achieve its investment objective by investing substantially all of its investable assets in one or more securities that are designed to track the performance of the S&P 500 Index. At June 30, 2014, the Stock Index Fund was operating as a feeder fund, whereby substantially all of its assets are invested in the S&P 500 Stock Master Portfolio (“Master Portfolio”), an open-end investment company managed by BlackRock Fund Advisors. At June 30, 2014, the Stock Index Fund’s investment constituted 1.97% of the Master Portfolio. The financial statements of the Master Portfolio are contained in the Appendix of this report and should be read in conjunction with the financial statements for the Stock Index Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: Each Fund’s net asset value per share is determined as of the close of the New York Stock Exchange (“NYSE”) (usually 4:00 p.m. ET), each day that the NYSE is open for business. The Funds use independent pricing services approved by the Funds’ Board of Directors (“Board”) to value the investments. In the event a pricing service is unable to provide a price for a particular security or the price is deemed unreliable, the security is priced at fair value by the Funds’ Adviser, as determined in good faith in accordance with policies approved by the Board.
The Board has adopted Portfolio Securities Valuation Policies and Procedures (“Valuation Procedures”) to determine the fair value of securities for which the market prices are not readily available or if the price is deemed unreliable. The Board has delegated the day-to-day responsibility for determining the fair value of securities to the Adviser and the Funds’ sub-advisors. RE Advisers has chartered an internal Valuation Committee to oversee the implementation of the Valuation Procedures, oversee the fair valuation decisions of the sub-advisors, monitor the valuation process, and provide quarterly reports to the Board. The Valuation Committee reports all instances of fair valuation to the Board at each quarterly Board meeting, as applicable.
Generally Accepted Accounting Principles (GAAP) establish a disclosure hierarchy that categorizes the inputs used to value assets and liabilities at measurement date. These inputs are summarized into three broad levels as follows:
Ÿ | Level 1—quoted prices in active markets for identical investments; |
Ÿ | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.); and |
Ÿ | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair valuation of investments). |
The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers in or out of an investment’s assigned level within the hierarchy during the period.
The Funds use the following valuation techniques to value securities by major category as follows:
Registered investment companies are valued at the net asset value determined by the registered investment company after the close of the NYSE. The Funds invest in regulated investment companies that seek to maintain a share price of $1.00 and are categorized as Level 1 in the hierarchy.
Domestic equity securities and exchange traded funds for which market quotations are readily available are valued at the closing price as reported by an independent pricing service from the primary market in which the securities trade and are categorized as Level 1.
Foreign equity securities are valued based on the closing price from the principal market in which such securities are normally traded. An independent pricing service is utilized to fair value foreign equity securities based on the impact of market events between the close of the foreign exchange and the time the net asset value is calculated. Foreign equity securities that are fair valued are categorized as Level 2 in the hierarchy and foreign equity securities not fair valued are categorized as Level 1.
The valuations for fixed income securities, including corporate, government, municipal, mortgage-backed and asset-backed are typically the prices provided by independent third party pricing services, which may use market prices, broker/dealer quotations or a variety of valuation techniques and methodologies, such as benchmark yields, monthly payment information and issuer spreads.
Fixed income securities utilizing these methods are generally categorized as Level 2. Fixed income securities that are valued using only a broker quote are categorized as Level 3, absent corroborating market data to support the valuation.
Fixed income securities and commercial paper held in the Daily Income Fund are valued at amortized cost and are categorized as Level 2 in the hierarchy. Short-term fixed income securities held in portfolios other than the Daily Income Fund and that mature in 60 days or less at time of purchase are valued at amortized cost, unless it is determined that using this method would not reflect the security’s fair value and are categorized as Level 2 in the hierarchy. Under the amortized cost method, discounts and premiums on securities purchased are amortized over the lives of the respective securities.
In the event an independent pricing service is unable to provide a security price, RE Advisers values the fixed income security using a
60 | Notes to Financial Statements |
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matrix, model or other available market information. Pricing methodologies include, but are not limited to: estimates of securities fair values by independent parties, book value or a multiple thereof, multiple of earnings, yield to maturity, ratings, analytical data relating to the security, and the nature and duration of restrictions on disposition of the security. RE Advisers also will consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to: the type of security, issuer’s financial statements, cost at purchase, information regarding recent transactions with respect to the security, the nature and duration of restrictions on disposition of the security, the existence of merger proposals affecting the security, the price of public trading in similar securities of the issuer or comparable companies, news events, analyst reports or government actions, corporate action, and the forces that influence the market in which the security is traded. These securities are generally categorized as Level 2 or Level 3 in the hierarchy, depending on the observability of market inputs.
If a market value cannot be determined for a security using the methodologies described above, or if, in the good faith opinion of the Adviser, the market value does not constitute a readily available market quotation, or if a significant event has occurred that would impact a security’s valuation, the security will be fair valued as determined in good faith by the Adviser based on the Valuation Procedures approved by the Board. Examples of additional considerations for a significant event include: nature and duration of the event and the forces influencing the operation of the financial markets; factors that preceded the event; whether the event is likely to reoccur; and whether the event affects the entire market, region or country. As fair valuation determinations involve a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions.
The Stock Index Fund records its investment in the Master Portfolio at the market value of its proportionate interest in the net assets of the Master Portfolio. The Board of Trustees of the Master Portfolio has adopted valuation policies and procedures. The policies and procedures are discussed in the notes to the Master Portfolio’s financial statements, included in the Appendix of this report.
The following table summarizes each Fund’s investments, based on the inputs used to determine their values on June 30, 2014 (other than Stock Index Fund). The level classifications of the Master Portfolio as of June 30, 2014 are included in the Appendix.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Daily Income Fund | ||||||||||||||||
Commercial Paper | $ | — | $ | 156,931,678 | $ | — | $ | 156,931,678 | ||||||||
U.S. Government Obligations | $ | — | $ | 34,125,927 | $ | — | $ | 34,125,927 | ||||||||
Cash Equivalents | $ | 19,143,581 | $ | — | $ | — | $ | 19,143,581 | ||||||||
$ | 19,143,581 | $ | 191,057,605 | $ | — | $ | 210,201,186 | |||||||||
Short-Term Government Securities Fund | ||||||||||||||||
U.S. Government Obligations | $ | — | $ | 55,086,204 | $ | — | $ | 55,086,204 | ||||||||
Corporate Bonds | $ | — | $ | 14,199,793 | $ | — | $ | 14,199,793 | ||||||||
Commercial Paper | $ | — | $ | 7,214,560 | $ | — | $ | 7,214,560 | ||||||||
Municipal Bonds | $ | — | $ | 4,193,100 | $ | — | $ | 4,193,100 | ||||||||
Mortgage Backed Securities | $ | — | $ | 3,074,054 | $ | — | $ | 3,074,054 | ||||||||
Asset Backed Securities | $ | — | $ | 318,083 | $ | — | $ | 318,083 | ||||||||
Cash Equivalents | $ | 114,594 | $ | — | $ | — | $ | 114,594 | ||||||||
$ | 114,594 | $ | 84,085,794 | $ | — | $ | 84,200,388 |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Short-Term Bond Fund | ||||||||||||||||
Municipal Bonds | $ | — | $ | 137,828,516 | $ | — | $ | 137,828,516 | ||||||||
Corporate Bonds | $ | — | $ | 117,022,254 | $ | — | $ | 117,022,254 | ||||||||
Asset Backed Securities | $ | — | $ | 114,886,321 | $ | 71,875 | $ | 114,958,196 | ||||||||
Commercial Paper | $ | — | $ | 85,341,423 | $ | — | $ | 85,341,423 | ||||||||
Yankee Bonds | $ | — | $ | 47,977,609 | $ | — | $ | 47,977,609 | ||||||||
U.S. Government Obligations | $ | — | $ | 35,651,191 | $ | — | $ | 35,651,191 | ||||||||
Mortgage Backed Securities | $ | — | $ | 22,243,569 | $ | 199,789 | $ | 22,443,358 | ||||||||
Cash Equivalents | $ | 1,050 | $ | — | $ | — | $ | 1,050 | ||||||||
$ | 1,050 | $ | 560,950,883 | $ | 271,664 | $ | 561,223,597 | |||||||||
Value Fund | ||||||||||||||||
Common Stocks | $ | 852,809,358 | $ | — | $ | — | $ | 852,809,358 | ||||||||
Cash Equivalents | $ | 45,900,362 | $ | — | $ | — | $ | 45,900,362 | ||||||||
$ | 898,709,720 | $ | — | $ | — | $ | 898,709,720 | |||||||||
Growth Fund | ||||||||||||||||
Common Stocks | $ | 83,070,398 | $ | — | $ | — | $ | 83,070,398 | ||||||||
Cash Equivalents | $ | 1,173,433 | $ | — | $ | — | $ | 1,173,433 | ||||||||
$ | 84,243,831 | $ | — | $ | — | $ | 84,243,831 | |||||||||
Small-Company Stock Fund | ||||||||||||||||
Common Stocks | $ | 843,377,645 | $ | — | $ | — | $ | 843,377,645 | ||||||||
Exchange Traded Funds | $ | 97,613,781 | $ | — | $ | — | $ | 97,613,781 | ||||||||
Cash Equivalents | $ | 49,268,951 | $ | — | $ | — | $ | 49,268,951 | ||||||||
$ | 990,260,377 | $ | — | $ | — | $ | 990,260,377 | |||||||||
International Value Fund | ||||||||||||||||
Common Stocks | ||||||||||||||||
Foreign Equities | $ | — | $ | 216,937,377 | $ | — | $ | 216,937,377 | ||||||||
American Depository Receipts | $ | 5,835,643 | $ | — | $ | — | $ | 5,835,643 | ||||||||
Cash Equivalents | $ | 4,452,338 | $ | — | $ | — | $ | 4,452,338 | ||||||||
$ | 10,287,981 | $ | 216,937,377 | $ | — | $ | 227,225,358 |
Short Term Bond Fund—Level 3 | | Asset Backed Securities | | | Mortgage Backed Securities | | Total | |||||
Balance as of December 31, 2013 | $ | 2,109,134 | $ | 836,746 | $ | 2,945,880 | ||||||
Purchase at cost | — | — | — | |||||||||
Sales at proceeds | (191,347 | ) | (805,522 | ) | (996,869 | ) | ||||||
Realized gain | 22,826 | — | 22,826 | |||||||||
Change in unrealized appreciation/(depreciation) | (15,016 | ) | 40,651 | 25,635 | ||||||||
Accretion | 3,332 | — | 3,332 | |||||||||
Transfer into Level 3 | — | — | — | |||||||||
Transfer out of Level 3 | (1,729,140 | ) | — | (1,729,140 | ) | |||||||
Balance as of June 30, 2014 | $ | 199,789 | $ | 71,875 | $ | 271,664 |
There was one security transferred from Level 3 to Level 2, as an independent third party pricing service began pricing the security and was able to obtain observable inputs. There were no other transfers between levels. Transfers are reported using values at the end of the reporting period.
At June 30, 2014, the Short-Term Bond Fund held securities with a fair value of $271,664 classified as Level 3 in the fair value hierarchy. Securities with a market value of $71,875 were priced by brokers and observable inputs were not available. Asset-backed securities valued at $199,789 were valued by the Adviser using a discounted cash flow model. The unobservable input is the Adviser’s assumptions applied to the cash flow model to discount for the potential that the principal payment stream of the bond extends beyond the basis points current model’s assumption. The yield spread is modeled at 750 basis points to account for the uncertainty of the potential outcome. A significant or reasonable increase or decrease in the potential that the principal
Notes to Financial Statements | 61 |
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payment stream of the bond varies beyond the current model’s assumption could result in a significant increase or decrease in the fair value measurement.
Foreign currency: The International Value Fund may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contract’s terms. Foreign-denominated assets, including investment securities and liabilities are translated into U.S. dollars at the exchange rate at the end of the period. Purchases and sales of investment securities and income and dividends received are translated into U.S. dollars at the exchange rate in effect on the transaction date. Currency gains and losses and the effects of exchange rate fluctuations on investments are included with the realized and unrealized gain (loss) on investment securities.
Revisions: The tax character of certain distributions from the International Value Fund for the fiscal years 2011 and 2009 was revised to correct the allocation between net investment income, net realized gain on investments, and return of capital for each of the years noted. For 2011 and 2009, distributions from return of capital increased and distributions from net investment income decreased by $2,295,839 and $493,496, respectively. These revisions impact the Financial Highlights. These revisions did not impact net assets, total distributions or total return. Management does not believe these revisions are material to the financial statements for any period.
Distributions to shareholders: Dividends to shareholders are recorded on the ex-dividend date. Income dividends for the Daily Income, Short-Term Government Securities and Short-Term Bond Funds are declared daily and paid monthly. Income dividends for Value Fund are declared and paid semi-annually. Income dividends for the Stock Index, Growth, Small-Company Stock and International Value Funds are declared and paid annually. Capital gains dividends, if any, are declared and paid at the end of each fiscal year, or more frequently, if necessary.
Use of estimates in the preparation of financial statements: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Other: Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount, and expenses are recorded on the accrual basis. Investment transactions are recorded as of the trade date. Realized gains and losses from investment transactions are reported on the identified cost basis.
The Stock Index Fund records a pro rata share of the Master Portfolio’s income, expenses, and realized and unrealized gains and losses in addition to the Fund’s own expenses, which are accrued daily.
In the normal course of business, the Funds enter into contracts that provide general indemnifications. The Funds’ maximum exposure under these arrangements is dependent on claims that may be made against the Funds in the future and therefore cannot be estimated; however, based on experience, the risk of material loss from claims is considered remote.
Management considered events occurring between the date of this report, June 30, 2014, and the date of issuance of this report in determining adjustments to the financial statements or necessary disclosures in this report.
3. FEDERAL INCOME TAX INFORMATION
The Funds intend to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and will distribute all net investment income to its shareholders. Therefore, no provision for Federal income taxes is required.
Management has analyzed the Funds’ tax positions and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to new tax laws, regulations and administrative interpretations.
Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after filing of the tax return but could be longer in certain circumstances.
Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments of the following: futures and options transactions, foreign currency transactions, losses deferred due to wash sales, losses deferred due to post-October losses, passive foreign investment company (“PFIC”) gains and losses, return of capital distributions, partnership investments, deferred Director’s fees and REIT transactions.
At June 30, 2014, the cost of securities for federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value was as follows:
Tax Cost | Tax Unrealized Gain | Tax Unrealized (Loss) | Net Unrealized Gain (Loss) | |||||||||||||
Daily Income Fund | $ | 210,201,186 | $ | — | $ | — | $ | — | ||||||||
Short-Term Government Securities Fund | $ | 83,856,634 | $ | 666,308 | $ | (322,554 | ) | $ | 343,754 | |||||||
Short-Term Bond Fund | $ | 555,134,757 | $ | 9,378,611 | $ | (3,289,771 | ) | $ | 6,088,840 | |||||||
Value Fund | $ | 464,537,828 | $ | 438,477,491 | $ | (4,305,599 | ) | $ | 434,171,892 | |||||||
Growth Fund | $ | 64,265,313 | $ | 20,084,280 | $ | (105,762 | ) | $ | 19,978,518 | |||||||
Small-Company Stock Fund | $ | 707,299,714 | $ | 298,969,759 | $ | (16,009,096 | ) | $ | 282,960,663 | |||||||
International Value Fund | $ | 187,982,554 | $ | 45,497,233 | $ | (6,254,429 | ) | $ | 39,242,804 |
Net unrealized appreciation/(depreciation) of Stock Index Fund in the Master Portfolio consists of an allocated portion of the portfolio’s unrealized appreciation/(depreciation). For information pertaining to the unrealized appreciation/(depreciation) for the Master Portfolio, please refer to the Appendix of this report.
62 | Notes to Financial Statements |
Table of Contents
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term and U.S. Government securities, for the period ended June 30, 2014, were as follows:
Purchases | Proceeds from Sale | |||||||
Short-Term Government Securities Fund | $ | 3,043,880 | $ | 2,859,703 | ||||
Short-Term Bond Fund | $ | 91,333,435 | $ | 72,690,089 | ||||
Value Fund | $ | 19,010,588 | $ | 4,966,333 | ||||
Growth Fund | $ | 26,271,142 | $ | 19,713,178 | ||||
Small-Company Stock Fund | $ | 129,984,044 | $ | 21,402,766 | ||||
International Value Fund | $ | 38,919,842 | $ | 24,793,774 |
Purchases and proceeds from sales of long-term U.S. Government securities, for the period ended June 30, 2014, were as follows:
Purchases | Proceeds from Sale | |||||||
Short-Term Government Securities Fund | $ | 5,802,051 | $ | 109,699 | ||||
Short-Term Bond Fund | $ | 26,208,355 | $ | 10,326,563 |
5. RELATED PARTIES
The investment management agreements between Homestead Funds, with respect to each Fund (other than the Stock Index Fund), and RE Advisers Corporation (“RE Advisers”), an indirect, wholly-owned subsidiary of National Rural Electric Cooperative Association (“NRECA”), provide for an annual investment management fee, that also provides for certain administrative services to the Funds, which is computed daily and paid monthly, based on each Fund’s average daily net assets. The annualized management fee rates for the Funds are 0.50% of average daily net assets for Daily Income Fund; 0.45% of average daily net assets for Short-Term Government Securities Fund; 0.60% of average daily net assets for Short-Term Bond Fund; 0.65% of average daily net assets up to $200 million, 0.50% of average daily net assets up to the next $200 million, 0.40% of average daily net assets in excess of $400 million for Value Fund; 0.65% of average daily net assets up to $250 million and 0.60% of average daily net assets in excess of $250 million for the Growth Fund; 0.85% of average daily net assets up to $200 million and 0.75% of average daily net assets in excess of $200 million for Small-Company Stock Fund; and 0.75% of average daily net assets up to $300 million, 0.65% of average daily net assets up to the next $100 million, 0.55% of average daily net assets up to the next $100 million, and 0.50% of average daily net assets in excess of $500 million for International Value Fund.
T. Rowe Price Associates, Inc. (“T. Rowe”) is the Subadvisor for the Growth Fund and Mercator Asset Management, L.P. (“Mercator”) is the Subadvisor for the International Value Fund. The Subadvisors select, buy, and sell securities under the oversight of RE Advisers and the Board of Directors. RE Advisers pays the Subadvisors from the fees it receives from the Funds.
With respect to the Stock Index Fund, an Administrative Service Agreement with RE Advisers has been contracted, under which RE Advisers provides certain administrative services to the Fund. Pursuant to this agreement, RE Advisers receives a fee of 0.25% of
the Fund’s average daily net assets. In addition, the Stock Index Fund is allocated a management fee from the Master Portfolio, calculated daily at an annual rate of 0.05% of its average daily net assets. This fee includes advisory, custody, and administrative fees provided by the Master Portfolio on behalf of its investors. The financial information for the Master Portfolio is included in the Appendix.
RE Advisers has agreed, as part of the Expense Limitation Agreement entered into with Homestead Funds, with respect to each Fund, to waive its management fee and/or reimburse all Fund operating expenses, excluding certain non-recurring expenses, which in any year exceed 0.80% of the average daily net assets of the Daily Income Fund and Short-Term Bond Fund, 0.75% of the average daily net assets of the Short-Term Government Securities Fund and Stock Index Fund, 1.25% of the average daily net assets of Value Fund, 0.95% of the average daily net assets of Growth Fund, 1.50% of the average daily net assets of Small-Company Stock Fund and 0.99% of the average daily net assets of the International Value Fund.
On August 14, 2009, RE Advisers agreed to waive fees and/or reimburse expenses, if necessary, in order to assist the Daily Income Fund in maintaining a minimum yield. The temporary waiver continued throughout 2010, 2011, 2012, 2013, and through the date of issuance of this report.
Pursuant to the Expense Limitation Agreement, management fees waived for the period ended June 30, 2014, amounted to $536,276 for Daily Income Fund and $15,680 for Growth Fund. Additionally, RE Advisers paid the Daily Income Fund $76,608 during the period, for expense reimbursements.
Through April 30, 2013, the Stock Index, Value, Growth, Small-Company Stock, and International Value Funds each received a 2% redemption fee on shares sold within 30 days of purchase. Effective May 1, 2013, this redemption fee was eliminated. None of the Funds currently assess a redemption fee.
Under a Deferred Compensation Plan (the “Plan”), independent Directors of the Funds may elect to defer receipt of all or a specified portion of their compensation. Deferred amounts are credited with the earnings and losses equal to those made as if the deferred amounts were invested in one or more of the Funds, as designated by each participating Independent Director. Deferred amounts remain in the Fund until distributed in accordance with the Plan.
The Funds’ shares are sold through channels including financial intermediaries that may establish a single, omnibus account with the beneficial owners being individual accounts within the financial intermediary. As of June 30, 2014, there was one such account in the Value Fund accounting for 16% of the outstanding shares and four such accounts in the Small-Company Stock Fund accounting for 28%, 15%, 14% and 12% of the outstanding shares, respectively. Additionally, 72% of the outstanding shares of the International Value Fund are held in a retirement plan account for the benefit of its participants.
Notes to Financial Statements | 63 |
Table of Contents
6. CAPITAL SHARE TRANSACTIONS
As of June 30, 2014, $.01 par value capital shares are authorized for each Fund as follows: 500 million for Daily Income, 200 million for Short-Term Bond Fund, and 100 million for Short-Term Government Securities, Stock Index, Value, Growth, Small-Company Stock, and International Value Funds. For the period ended June 30, 2014 and the year ended December 31, 2013 transactions in capital shares were as follows:
Shares Sold | Shares Issued In Reinvestment of Dividends | Total Shares Issued | Total Shares Redeemed | Net Increase (Decrease) | ||||||||||||||||
Period Ended June 30, 2014 | ||||||||||||||||||||
In Dollars | ||||||||||||||||||||
Daily Income Fund | $ | 64,076,122 | $ | 16,374 | $ | 64,092,496 | $ | (66,300,335 | ) | $ | (2,207,839 | ) | ||||||||
Short-Term Government Securities Fund | $ | 5,447,040 | $ | 392,395 | $ | 5,839,435 | $ | (7,800,758 | ) | $ | (1,961,323 | ) | ||||||||
Short-Term Bond Fund | $ | 72,336,726 | $ | 3,603,647 | $ | 75,940,373 | $ | (58,021,242 | ) | $ | 17,919,131 | |||||||||
Stock Index Fund | $ | 8,329,117 | $ | — | $ | 8,329,117 | $ | (7,960,597 | ) | $ | 368,520 | |||||||||
Value Fund | $ | 61,515,715 | $ | 6,519,410 | $ | 68,035,125 | $ | (47,288,655 | ) | $ | 20,746,470 | |||||||||
Growth Fund | $ | 13,885,086 | $ | — | $ | 13,885,086 | $ | (7,196,103 | ) | $ | 6,688,983 | |||||||||
Small-Company Stock Fund | $ | 214,896,632 | $ | — | $ | 214,896,632 | $ | (93,631,450 | ) | $ | 121,265,182 | |||||||||
International Value Fund | $ | 18,138,787 | $ | — | $ | 18,138,787 | $ | (12,580,487 | ) | $ | 5,558,300 | |||||||||
In Shares | ||||||||||||||||||||
Daily Income Fund | 64,076,122 | 16,374 | 64,092,496 | (66,300,335 | ) | (2,207,839 | ) | |||||||||||||
Short-Term Government Securities Fund | 1,046,568 | 75,364 | 1,121,932 | (1,499,564 | ) | (377,632 | ) | |||||||||||||
Short-Term Bond Fund | 13,799,336 | 686,876 | 14,486,212 | (11,072,488 | ) | 3,413,724 | ||||||||||||||
Stock Index Fund | 601,730 | — | 601,730 | (577,951 | ) | 23,779 | ||||||||||||||
Value Fund | 1,327,834 | 133,403 | 1,461,237 | (1,024,551 | ) | 436,686 | ||||||||||||||
Growth Fund | 1,751,856 | — | 1,751,856 | (907,475 | ) | 844,381 | ||||||||||||||
Small-Company Stock Fund | 5,832,113 | — | 5,832,113 | (2,554,645 | ) | 3,277,468 | ||||||||||||||
International Value Fund | 2,203,318 | — | 2,203,318 | (1,517,162 | ) | 686,156 | ||||||||||||||
Year Ended December 31, 2013 | ||||||||||||||||||||
In Dollars | ||||||||||||||||||||
Daily Income Fund | $ | 129,779,688 | $ | 20,065 | $ | 129,799,753 | $ | (126,008,054 | ) | $ | 3,791,699 | |||||||||
Short-Term Government Securities Fund | $ | 15,840,723 | $ | 877,264 | $ | 16,717,987 | $ | (23,279,735 | ) | $ | (6,561,748 | ) | ||||||||
Short-Term Bond Fund | $ | 193,775,301 | $ | 7,514,262 | $ | 201,289,563 | $ | (90,792,922 | ) | $ | 110,496,641 | |||||||||
Stock Index Fund | $ | 19,752,587 | $ | 1,348,412 | $ | 21,100,999 | $ | (11,822,266 | ) | $ | 9,278,733 | |||||||||
Value Fund | $ | 100,545,390 | $ | 12,563,834 | $ | 113,109,224 | $ | (97,728,508 | ) | $ | 15,380,716 | |||||||||
Growth Fund | $ | 23,925,412 | $ | 2,444,697 | $ | 26,370,109 | $ | (10,910,715 | ) | $ | 15,459,394 | |||||||||
Small-Company Stock Fund | $ | 389,482,681 | $ | 3,186,693 | $ | 392,669,374 | $ | (121,195,259 | ) | $ | 271,474,115 | |||||||||
International Value Fund | $ | 32,016,846 | $ | 3,615,203 | $ | 35,632,049 | $ | (27,133,518 | ) | $ | 8,498,531 | |||||||||
In Shares | ||||||||||||||||||||
Daily Income Fund | 129,779,688 | 20,065 | 129,799,753 | (126,008,054 | ) | 3,791,699 | ||||||||||||||
Short-Term Government Securities Fund | 3,020,796 | 167,566 | 3,188,362 | (4,444,578 | ) | (1,256,216 | ) | |||||||||||||
Short-Term Bond Fund | 37,025,624 | 1,435,827 | 38,461,451 | (17,356,172 | ) | 21,105,279 | ||||||||||||||
Stock Index Fund | 1,617,306 | 98,153 | 1,715,459 | (965,292 | ) | 750,167 | ||||||||||||||
Value Fund | 2,481,032 | 295,235 | 2,776,267 | (2,433,185 | ) | 343,082 | ||||||||||||||
Growth Fund | 3,459,874 | 308,673 | 3,768,547 | (1,630,116 | ) | 2,138,431 | ||||||||||||||
Small-Company Stock Fund | 12,161,540 | 86,458 | 12,247,998 | (3,726,112 | ) | 8,521,886 | ||||||||||||||
International Value Fund | 4,356,777 | 444,676 | 4,801,453 | (3,647,591 | ) | 1,153,862 |
64 | Notes to Financial Statements |
Table of Contents
James F. Perna, Director and Chairman of the Board
Peter R. Morris, Director, President and Chief Executive Officer
Douglas W. Johnson, Director and Chairman of the Audit Committee
Kenneth R. Meyer, Director and Chairman of the Compensation Committee
Anthony M. Marinello, Director
Sheldon C. Petersen, Director
Mark Rose, Director
Peter J. Tonetti, Director
Anthony C. Williams, Director
Cynthia L. Dove, Vice President and Chief Operations Officer
Amy M. DiMauro, Treasurer
Danielle C. Sieverling, Chief Compliance Officer
Kelly B. Whetstone, Secretary
Directors and Officers | 65 |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio
June 30, 2014 (Unaudited)
COMMON STOCKS | Shares | Value | ||||||
(97.9% of net assets) | ||||||||
Aerospace & Defense—2.6% |
| |||||||
The Boeing Co. | 211,878 | $ | 26,957,238 | |||||
General Dynamics Corp. | 102,861 | 11,988,450 | ||||||
Honeywell International, Inc. | 247,310 | 22,987,464 | ||||||
L-3 Communications Holdings, Inc. | 27,230 | 3,288,023 | ||||||
Lockheed Martin Corp. | 84,199 | 13,533,305 | ||||||
Northrop Grumman Corp. | 67,633 | 8,090,936 | ||||||
Precision Castparts Corp. | 45,716 | 11,538,718 | ||||||
Raytheon Co. | 98,772 | 9,111,717 | ||||||
Rockwell Collins, Inc. | 42,786 | 3,343,298 | ||||||
Textron, Inc. | 88,176 | 3,376,259 | ||||||
United Technologies Corp. | 266,346 | 30,749,646 | ||||||
Total Aerospace & Defense | 144,965,054 | |||||||
Air Freight & Logistics—0.7% |
| |||||||
C.H. Robinson Worldwide, Inc. | 46,869 | 2,989,774 | ||||||
Expeditors International of Washington, Inc. | 62,352 | 2,753,464 | ||||||
FedEx Corp. | 87,724 | 13,279,659 | ||||||
United Parcel Service, Inc., Class B | 222,608 | 22,852,937 | ||||||
Total Air Freight & Logistics | 41,875,834 | |||||||
Airlines—0.3% |
| |||||||
Delta Air Lines, Inc. | 267,771 | 10,368,093 | ||||||
Southwest Airlines Co. | 218,521 | 5,869,474 | ||||||
Total Airlines | 16,237,567 | |||||||
Auto Components—0.4% |
| |||||||
BorgWarner, Inc. | 72,194 | 4,706,327 | ||||||
Delphi Automotive PLC | 87,281 | 5,999,696 | ||||||
The Goodyear Tire & Rubber Co. | 87,156 | 2,421,194 | ||||||
Johnson Controls, Inc. | 209,738 | 10,472,218 | ||||||
Total Auto Components | 23,599,435 | |||||||
Automobiles—0.7% | ||||||||
Ford Motor Co. | 1,248,757 | 21,528,571 | ||||||
General Motors Co. | 415,290 | 15,075,027 | ||||||
Harley-Davidson, Inc. | 68,974 | 4,817,834 | ||||||
Total Automobiles | 41,421,432 | |||||||
Banks—5.8% |
| |||||||
Bank of America Corp. | 3,320,971 | 51,043,324 | ||||||
BB&T Corp. | 226,896 | 8,946,509 | ||||||
Citigroup, Inc. | 959,344 | 45,185,102 | ||||||
Comerica, Inc. | 57,439 | 2,881,140 | ||||||
Fifth Third Bancorp | 268,579 | 5,734,162 | ||||||
Huntington Bancshares, Inc. | 261,323 | 2,493,021 | ||||||
JPMorgan Chase & Co. | 1,195,231 | 68,869,210 | ||||||
KeyCorp | 278,914 | 3,996,838 | ||||||
M&T Bank Corp. | 41,522 | 5,150,804 | ||||||
The PNC Financial Services Group, Inc. (b) | 168,677 | 15,020,687 | ||||||
Regions Financial Corp. | 435,581 | 4,625,870 | ||||||
SunTrust Banks, Inc. | 168,342 | 6,743,780 | ||||||
US Bancorp | 573,227 | 24,832,194 | ||||||
Wells Fargo & Co. | 1,513,664 | 79,558,180 | ||||||
Zions Bancorporation | 58,457 | 1,722,728 | ||||||
Total Banks | 326,803,549 |
Shares | Value | |||||||
Beverages—2.1% |
| |||||||
Brown-Forman Corp., Class B | 51,187 | $ | 4,820,280 | |||||
The Coca-Cola Co. | 1,193,695 | 50,564,920 | ||||||
Coca-Cola Enterprises, Inc. | 73,864 | 3,529,222 | ||||||
Constellation Brands, Inc., Class A | 53,297 | 4,697,065 | ||||||
Dr Pepper Snapple Group, Inc. | 62,020 | 3,633,132 | ||||||
Molson Coors Brewing Co., Class B | 50,174 | 3,720,904 | ||||||
Monster Beverage Corp. (a) | 42,733 | 3,035,325 | ||||||
PepsiCo, Inc. | 478,775 | 42,773,758 | ||||||
Total Beverages | 116,774,606 | |||||||
Biotechnology—2.5% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 62,463 | 9,759,844 | ||||||
Amgen, Inc. | 239,070 | 28,298,716 | ||||||
Biogen Idec, Inc. (a) | 74,909 | 23,619,557 | ||||||
Celgene Corp. (a) | 255,294 | 21,924,648 | ||||||
Gilead Sciences, Inc. (a) | 484,974 | 40,209,194 | ||||||
Regeneron Pharmaceuticals, Inc. (a) | 25,168 | 7,109,205 | ||||||
Vertex Pharmaceuticals, Inc. (a) | 74,585 | 7,061,708 | ||||||
Total Biotechnology | 137,982,872 | |||||||
Building Products—0.1% | ||||||||
Allegion PLC | 28,386 | 1,608,919 | ||||||
Masco Corp. | 112,581 | 2,499,298 | ||||||
Total Building Products | 4,108,217 | |||||||
Capital Markets—2.2% | ||||||||
Affiliated Managers Group, Inc. (a) | 17,455 | 3,585,257 | ||||||
Ameriprise Financial, Inc. | 60,008 | 7,200,960 | ||||||
The Bank of New York Mellon Corp. | 360,126 | 13,497,522 | ||||||
BlackRock, Inc. (b) | 39,497 | 12,623,241 | ||||||
The Charles Schwab Corp. | 369,803 | 9,958,795 | ||||||
E*Trade Financial Corp. (a) | 91,087 | 1,936,510 | ||||||
Franklin Resources, Inc. | 126,931 | 7,341,689 | ||||||
The Goldman Sachs Group, Inc. | 131,341 | 21,991,737 | ||||||
Invesco Ltd. | 136,632 | 5,157,858 | ||||||
Legg Mason, Inc. | 32,478 | 1,666,446 | ||||||
Morgan Stanley | 441,997 | 14,289,763 | ||||||
Northern Trust Corp. | 70,131 | 4,503,112 | ||||||
State Street Corp. | 136,038 | 9,149,916 | ||||||
T. Rowe Price Group, Inc. | 82,968 | 7,003,329 | ||||||
Total Capital Markets | 119,906,135 | |||||||
Chemicals—2.5% |
| |||||||
Air Products & Chemicals, Inc. | 67,036 | 8,622,170 | ||||||
Airgas, Inc. | 21,113 | 2,299,417 | ||||||
CF Industries Holdings, Inc. | 16,449 | 3,956,478 | ||||||
The Dow Chemical Co. | 380,266 | 19,568,489 | ||||||
E.I. du Pont de Nemours & Co. | 290,033 | 18,979,760 | ||||||
Eastman Chemical Co. | 47,457 | 4,145,369 | ||||||
Ecolab, Inc. | 85,321 | 9,499,640 | ||||||
FMC Corp. | 42,048 | 2,993,397 | ||||||
International Flavors & Fragrances, Inc. | 25,669 | 2,676,763 | ||||||
LyondellBasell Industries NV, Class A | 131,563 | 12,847,127 | ||||||
Monsanto Co. | 165,534 | 20,648,711 |
66 | Appendix | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) |
| |||||||
The Mosaic Co. | 102,176 | $ | 5,052,603 | |||||
PPG Industries, Inc. | 43,662 | 9,175,569 | ||||||
Praxair, Inc. | 92,508 | 12,288,763 | ||||||
The Sherwin-Williams Co. | 26,752 | 5,535,256 | ||||||
Sigma-Aldrich Corp. | 37,555 | 3,811,082 | ||||||
Total Chemicals | 142,100,594 | |||||||
Commercial Services & Supplies—0.5% |
| |||||||
The ADT Corp. (c) | 55,053 | 1,923,552 | ||||||
Cintas Corp. | 31,878 | 2,025,528 | ||||||
Iron Mountain, Inc. | 53,940 | 1,912,173 | ||||||
Pitney Bowes, Inc. | 64,033 | 1,768,591 | ||||||
Republic Services, Inc. | 84,428 | 3,205,731 | ||||||
Stericycle, Inc. (a) | 26,773 | 3,170,459 | ||||||
Tyco International Ltd. | 145,666 | 6,642,370 | ||||||
Waste Management, Inc. | 136,618 | 6,110,923 | ||||||
Total Commercial Services & Supplies |
| 26,759,327 | ||||||
Communications Equipment—1.7% |
| |||||||
Cisco Systems, Inc. | 1,617,815 | 40,202,703 | ||||||
F5 Networks, Inc. (a) | 23,911 | 2,664,642 | ||||||
Harris Corp. | 33,576 | 2,543,382 | ||||||
Juniper Networks, Inc. (a) | 149,652 | 3,672,460 | ||||||
Motorola Solutions, Inc. | 71,444 | 4,756,027 | ||||||
QUALCOMM, Inc. | 533,037 | 42,216,530 | ||||||
Total Communications Equipment |
| 96,055,744 | ||||||
Construction & Engineering—0.2% |
| |||||||
Fluor Corp. | 50,269 | 3,865,686 | ||||||
Jacobs Engineering Group, Inc. (a) | 41,763 | 2,225,133 | ||||||
Quanta Services, Inc. (a) | 68,790 | 2,378,758 | ||||||
Total Construction & Engineering |
| 8,469,577 | ||||||
Construction Materials—0.0% |
| |||||||
Vulcan Materials Co. | 41,302 | 2,633,003 | ||||||
Total Construction Materials |
| 2,633,003 | ||||||
Consumer Finance—1.0% |
| |||||||
American Express Co. | 287,506 | 27,275,694 | ||||||
Capital One Financial Corp. | 180,504 | 14,909,630 | ||||||
Discover Financial Services | 147,267 | 9,127,609 | ||||||
Navient Corp. | 133,555 | 2,365,259 | ||||||
Total Consumer Finance | 53,678,192 | |||||||
Containers & Packaging—0.2% |
| |||||||
Avery Dennison Corp. | 29,984 | 1,536,680 | ||||||
Ball Corp. | 44,019 | 2,759,111 | ||||||
Bemis Co., Inc. | 31,974 | 1,300,063 | ||||||
MeadWestvaco Corp. | 53,033 | 2,347,240 | ||||||
Owens-Illinois, Inc. (a) | 52,120 | 1,805,437 | ||||||
Sealed Air Corp. | 61,390 | 2,097,696 | ||||||
Total Containers & Packaging |
| 11,846,227 | ||||||
Distributors—0.1% |
| |||||||
Genuine Parts Co. | 48,505 | 4,258,739 | ||||||
Total Distributors | 4,258,739 |
Shares | Value | |||||||
Diversified Consumer Services—0.1% |
| |||||||
H&R Block, Inc. | 86,588 | $ | 2,902,430 | |||||
Graham Holdings Co., Class B | 1,385 | 994,582 | ||||||
Total Diversified Consumer Services |
| 3,897,012 | ||||||
Diversified Financial Services—1.8% |
| |||||||
Berkshire Hathaway, Inc., Class B (a) | 568,607 | 71,962,902 | ||||||
CME Group, Inc. | 99,678 | 7,072,154 | ||||||
IntercontinentalExchange Group, Inc. | 36,346 | 6,865,759 | ||||||
Leucadia National Corp. | 100,085 | 2,624,229 | ||||||
McGraw-Hill Financial, Inc. | 85,958 | 7,137,093 | ||||||
Moody’s Corp. | 59,385 | 5,205,689 | ||||||
The NASDAQ OMX Group, Inc. | 37,180 | 1,435,892 | ||||||
Total Diversified Financial Services |
| 102,303,718 | ||||||
Diversified Telecommunication Services—2.4% |
| |||||||
AT&T, Inc. | 1,639,025 | 57,955,924 | ||||||
CenturyLink, Inc. | 180,901 | 6,548,616 | ||||||
Frontier Communications Corp. | 316,458 | 1,848,115 | ||||||
Verizon Communications, Inc. | 1,307,794 | 63,990,360 | ||||||
Windstream Holdings, Inc. (c) | 190,284 | 1,895,229 | ||||||
Total Diversified Telecommunication Services |
| 132,238,244 | ||||||
Electric Utilities—1.7% |
| |||||||
American Electric Power Co., Inc. | 154,132 | 8,595,942 | ||||||
Duke Energy Corp. | 223,345 | 16,569,966 | ||||||
Edison International | 102,886 | 5,978,705 | ||||||
Entergy Corp. | 56,645 | 4,649,988 | ||||||
Exelon Corp. | 271,179 | 9,892,610 | ||||||
FirstEnergy Corp. | 132,599 | 4,603,837 | ||||||
NextEra Energy, Inc. | 137,726 | 14,114,160 | ||||||
Northeast Utilities | 99,782 | 4,716,695 | ||||||
Pepco Holdings, Inc. | 79,261 | 2,178,092 | ||||||
Pinnacle West Capital Corp. | 34,844 | 2,015,377 | ||||||
PPL Corp. | 199,498 | 7,088,164 | ||||||
The Southern Co. | 281,315 | 12,766,075 | ||||||
Xcel Energy, Inc. | 158,513 | 5,108,874 | ||||||
Total Electric Utilities | 98,278,485 | |||||||
Electrical Equipment—0.6% |
| |||||||
AMETEK, Inc. | 77,461 | 4,049,661 | ||||||
Eaton Corp. PLC | 150,540 | 11,618,677 | ||||||
Emerson Electric Co. | 221,610 | 14,706,040 | ||||||
Rockwell Automation, Inc. | 43,719 | 5,471,870 | ||||||
Total Electrical Equipment | 35,846,248 | |||||||
Electronic Equipment, Instruments & Components—0.4% |
| |||||||
Amphenol Corp., Class A | 49,632 | 4,781,547 | ||||||
Corning, Inc. | 413,207 | 9,069,893 | ||||||
FLIR Systems, Inc. | 44,714 | 1,552,917 | ||||||
Jabil Circuit, Inc. | 58,460 | 1,221,814 | ||||||
TE Connectivity Ltd. | 129,133 | 7,985,585 | ||||||
Total Electronic Equipment, Instruments & Components |
| 24,611,756 |
The accompanying notes are an integral part of these financial statements. | Appendix | 67 |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) |
| |||||||
Energy Equipment & Services—2.1% |
| |||||||
Baker Hughes, Inc. | 137,679 | $ | 10,250,202 | |||||
Cameron International Corp. (a) | 64,497 | 4,367,092 | ||||||
Diamond Offshore Drilling, Inc. | 21,653 | 1,074,638 | ||||||
Ensco PLC, Class A | 73,800 | 4,101,066 | ||||||
FMC Technologies, Inc. (a) | 74,199 | 4,531,333 | ||||||
Halliburton Co. | 266,718 | 18,939,645 | ||||||
Helmerich & Payne, Inc. | 34,149 | 3,965,040 | ||||||
Nabors Industries Ltd. | 82,648 | 2,427,372 | ||||||
National Oilwell Varco, Inc. | 135,491 | 11,157,684 | ||||||
Noble Corp. PLC | 80,277 | 2,694,096 | ||||||
Rowan Cos. PLC, Class A | 39,370 | 1,257,084 | ||||||
Schlumberger Ltd. | 411,238 | 48,505,522 | ||||||
Transocean Ltd. | 107,450 | 4,838,474 | ||||||
Total Energy Equipment & Services |
| 118,109,248 | ||||||
Food & Staples Retailing—2.2% |
| |||||||
Costco Wholesale Corp. | 138,414 | 15,939,756 | ||||||
CVS Caremark Corp. | 369,262 | 27,831,277 | ||||||
The Kroger Co. | 160,939 | 7,955,215 | ||||||
Safeway, Inc. | 72,719 | 2,497,170 | ||||||
Sysco Corp. | 184,600 | 6,913,270 | ||||||
Wal-Mart Stores, Inc. | 509,013 | 38,211,606 | ||||||
Walgreen Co. | 277,268 | 20,553,877 | ||||||
Whole Foods Market, Inc. | 116,103 | 4,485,059 | ||||||
Total Food & Staples Retailing |
| 124,387,230 | ||||||
Food Products—1.6% | ||||||||
Archer-Daniels-Midland Co. | 206,705 | 9,117,758 | ||||||
Campbell Soup Co. | 56,499 | 2,588,219 | ||||||
ConAgra Foods, Inc. | 132,990 | 3,947,143 | ||||||
General Mills, Inc. | 194,077 | 10,196,806 | ||||||
The Hershey Co. | 47,142 | 4,590,217 | ||||||
Hormel Foods Corp. | 42,532 | 2,098,954 | ||||||
The J.M. Smucker Co. | 32,742 | 3,489,315 | ||||||
Kellogg Co. | 80,519 | 5,290,098 | ||||||
Keurig Green Mountain, Inc. | 40,094 | 4,996,113 | ||||||
Kraft Foods Group, Inc. | 187,994 | 11,270,240 | ||||||
McCormick & Co., Inc. | 41,236 | 2,952,085 | ||||||
Mead Johnson Nutrition Co. | 63,820 | 5,946,109 | ||||||
Mondelez International, Inc., Class A | 534,200 | 20,091,262 | ||||||
Tyson Foods, Inc., Class A | 86,914 | 3,262,752 | ||||||
Total Food Products | 89,837,071 | |||||||
Gas Utilities—0.0% |
| |||||||
AGL Resources, Inc. | 37,655 | 2,072,155 | ||||||
Total Gas Utilities | 2,072,155 | |||||||
Health Care Equipment & Supplies—2.1% |
| |||||||
Abbott Laboratories | 474,344 | 19,400,670 | ||||||
Baxter International, Inc. | 171,351 | 12,388,677 | ||||||
Becton Dickinson & Co. | 61,012 | 7,217,720 | ||||||
Boston Scientific Corp. (a) | 417,678 | 5,333,748 | ||||||
C.R. Bard, Inc. | 24,089 | 3,444,968 | ||||||
CareFusion Corp. (a) | 65,513 | 2,905,502 | ||||||
Covidien PLC | 142,385 | 12,840,279 | ||||||
DENTSPLY International, Inc. | 44,794 | 2,120,996 | ||||||
Edwards Lifesciences Corp. (a) | 33,326 | 2,860,704 | ||||||
Intuitive Surgical, Inc. (a) | 12,128 | 4,994,310 |
Shares | Value | |||||||
Medtronic, Inc. | 315,484 | $ | 20,115,260 | |||||
St. Jude Medical, Inc. | 89,754 | 6,215,464 | ||||||
Stryker Corp. | 93,377 | 7,873,549 | ||||||
Varian Medical Systems, Inc. (a) | 32,824 | 2,728,987 | ||||||
Zimmer Holdings, Inc. | 53,007 | 5,505,307 | ||||||
Total Health Care Equipment & Supplies |
| 115,946,141 | ||||||
Health Care Providers & Services—2.0% |
| |||||||
Aetna, Inc. | 112,880 | 9,152,310 | ||||||
AmerisourceBergen Corp. | 71,334 | 5,183,128 | ||||||
Cardinal Health, Inc. | 107,450 | 7,366,772 | ||||||
Cigna Corp. | 84,851 | 7,803,746 | ||||||
DaVita HealthCare Partners, Inc. (a) | 56,140 | 4,060,045 | ||||||
Express Scripts Holding Co. (a) | 244,121 | 16,924,909 | ||||||
Humana, Inc. | 48,879 | 6,242,826 | ||||||
Laboratory Corp. of America Holdings (a) | 26,817 | 2,746,061 | ||||||
McKesson Corp. | 72,816 | 13,559,067 | ||||||
Patterson Cos., Inc. | 25,811 | 1,019,793 | ||||||
Quest Diagnostics, Inc. | 45,622 | 2,677,555 | ||||||
Tenet Healthcare Corp. (a) | 30,831 | 1,447,207 | ||||||
UnitedHealth Group, Inc. | 309,458 | 25,298,192 | ||||||
WellPoint, Inc. | 88,331 | 9,505,299 | ||||||
Total Health Care Providers & Services |
| 112,986,910 | ||||||
Health Care Technology—0.1% |
| |||||||
Cerner Corp. (a) | 93,250 | 4,809,835 | ||||||
Total Health Care Technology |
| 4,809,835 | ||||||
Hotels, Restaurants & Leisure—1.6% |
| |||||||
Carnival Corp. | 138,484 | 5,213,923 | ||||||
Chipotle Mexican Grill, Inc. (a) | 9,816 | 5,816,078 | ||||||
Darden Restaurants, Inc. | 41,666 | 1,927,886 | ||||||
Marriott International, Inc., Class A | 69,357 | 4,445,784 | ||||||
McDonald’s Corp. | 312,145 | 31,445,487 | ||||||
Starbucks Corp. | 237,778 | 18,399,262 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 60,629 | 4,900,036 | ||||||
Wyndham Worldwide Corp. | 40,149 | 3,040,082 | ||||||
Wynn Resorts Ltd. | 25,581 | 5,309,592 | ||||||
Yum! Brands, Inc. | 139,386 | 11,318,143 | ||||||
Total Hotels, Restaurants & Leisure |
| 91,816,273 | ||||||
Household Durables—0.4% |
| |||||||
D.R. Horton, Inc. | 90,379 | 2,221,516 | ||||||
Garmin Ltd. | 38,652 | 2,353,907 | ||||||
Harman International Industries, Inc. | 21,503 | 2,310,067 | ||||||
Leggett & Platt, Inc. | 43,667 | 1,496,904 | ||||||
Lennar Corp., Class A | 55,511 | 2,330,352 | ||||||
Mohawk Industries, Inc. (a) | 19,317 | 2,672,314 | ||||||
Newell Rubbermaid, Inc. | 87,362 | 2,707,348 | ||||||
PulteGroup, Inc. | 107,888 | 2,175,022 | ||||||
Whirlpool Corp. | 24,549 | 3,417,712 | ||||||
Total Household Durables |
| 21,685,142 | ||||||
Household Products—1.8% |
| |||||||
The Clorox Co. | 40,618 | 3,712,485 | ||||||
Colgate-Palmolive Co. | 274,625 | 18,723,933 |
68 | Appendix | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) |
| |||||||
Kimberly-Clark Corp. | 119,001 | $ | 13,235,291 | |||||
The Procter & Gamble Co. | 854,555 | 67,159,477 | ||||||
Total Household Products | 102,831,186 | |||||||
Independent Power & Renewable Electricity Producers—0.1% |
| |||||||
The AES Corp. | 208,423 | 3,240,978 | ||||||
NRG Energy, Inc. | 106,492 | 3,961,502 | ||||||
Total Independent Power & Renewable Electricity Producers |
| 7,202,480 | ||||||
Industrial Conglomerates—2.3% |
| |||||||
3M Co. | 196,301 | 28,118,155 | ||||||
Danaher Corp. | 189,984 | 14,957,440 | ||||||
General Electric Co. | 3,166,820 | 83,224,030 | ||||||
Roper Industries, Inc. | 31,511 | 4,600,921 | ||||||
Total Industrial Conglomerates |
| 130,900,546 | ||||||
Insurance—2.8% |
| |||||||
ACE Ltd. | 106,645 | 11,059,087 | ||||||
Aflac, Inc. | 143,461 | 8,930,447 | ||||||
The Allstate Corp. | 137,072 | 8,048,868 | ||||||
American International Group, Inc. | 456,877 | 24,936,347 | ||||||
Aon PLC | 93,645 | 8,436,478 | ||||||
Assurant, Inc. | 22,672 | 1,486,150 | ||||||
The Chubb Corp. | 77,213 | 7,116,722 | ||||||
Cincinnati Financial Corp. | 46,470 | 2,232,419 | ||||||
Genworth Financial, Inc., Class A (a) | 156,706 | 2,726,684 | ||||||
Hartford Financial Services Group, Inc. | 142,005 | 5,085,199 | ||||||
Lincoln National Corp. | 83,285 | 4,284,180 | ||||||
Loews Corp. | 96,448 | 4,244,676 | ||||||
Marsh & McLennan Cos., Inc. | 173,560 | 8,993,879 | ||||||
MetLife, Inc. | 355,458 | 19,749,247 | ||||||
Principal Financial Group, Inc. | 86,405 | 4,361,724 | ||||||
The Progressive Corp. | 172,177 | 4,366,409 | ||||||
Prudential Financial, Inc. | 145,898 | 12,951,365 | ||||||
Torchmark Corp. | 27,719 | 2,270,740 | ||||||
The Travelers Cos., Inc. | 109,743 | 10,323,524 | ||||||
Unum Group | 81,284 | 2,825,432 | ||||||
XL Group PLC | 85,768 | 2,807,187 | ||||||
Total Insurance | 157,236,764 | |||||||
Internet & Catalog Retail—1.3% |
| |||||||
Amazon.com, Inc. (a) | 117,712 | 38,230,503 | ||||||
Expedia, Inc. | 32,387 | 2,550,800 | ||||||
Netflix, Inc. (a) | 18,932 | 8,341,439 | ||||||
priceline.com, Inc. (a) | 16,559 | 19,920,477 | ||||||
TripAdvisor, Inc. (a) | 35,136 | 3,817,878 | ||||||
Total Internet & Catalog Retail |
| 72,861,097 | ||||||
Internet Software & Services—3.1% |
| |||||||
Akamai Technologies, Inc. (a) | 56,129 | 3,427,237 | ||||||
eBay, Inc. (a) | 360,229 | 18,033,064 | ||||||
Facebook, Inc., Class A (a) | 543,008 | 36,539,008 | ||||||
Google, Inc., Class A (a) | 89,464 | 52,306,917 | ||||||
Google, Inc., Class C (a) | 89,464 | 51,466,850 | ||||||
VeriSign, Inc. (a) | 39,039 | 1,905,494 | ||||||
Yahoo!, Inc. (a) | 295,688 | 10,387,519 | ||||||
Total Internet Software & Services |
| 174,066,089 |
Shares | Value | |||||||
IT Services—3.3% |
| |||||||
Accenture PLC, Class A | 199,938 | $ | 16,162,988 | |||||
Alliance Data Systems Corp. (a) | 17,118 | 4,814,437 | ||||||
Automatic Data Processing, Inc. | 152,246 | 12,070,063 | ||||||
Cognizant Technology Solutions Corp., Class A (a) | 192,146 | 9,397,861 | ||||||
Computer Sciences Corp. | 45,804 | 2,894,813 | ||||||
Fidelity National Information Services, Inc. | 90,904 | 4,976,085 | ||||||
Fiserv, Inc. (a) | 78,722 | 4,748,511 | ||||||
International Business Machines Corp. | 300,480 | 54,468,010 | ||||||
Mastercard, Inc., Class A | 317,341 | 23,315,043 | ||||||
Paychex, Inc. | 102,226 | 4,248,513 | ||||||
Teradata Corp. (a)(c) | 49,822 | 2,002,844 | ||||||
Total System Services, Inc. | 52,439 | 1,647,109 | ||||||
Visa, Inc., Class A | 158,761 | 33,452,530 | ||||||
The Western Union Co. | 170,249 | 2,952,118 | ||||||
Xerox Corp. | 345,054 | 4,292,472 | ||||||
Total IT Services |
| 181,443,397 | ||||||
Leisure Products—0.1% |
| |||||||
Hasbro, Inc. | 36,448 | 1,933,566 | ||||||
Mattel, Inc. | 107,005 | 4,169,985 | ||||||
Total Leisure Products |
| 6,103,551 | ||||||
Life Sciences Tools & Services—0.5% |
| |||||||
Agilent Technologies, Inc. | 105,239 | 6,044,928 | ||||||
PerkinElmer, Inc. | 35,747 | 1,674,390 | ||||||
Thermo Fisher Scientific, Inc. | 125,984 | 14,866,112 | ||||||
Waters Corp. (a) | 26,778 | 2,796,694 | ||||||
Total Life Sciences Tools & Services |
| 25,382,124 | ||||||
Machinery—1.7% |
| |||||||
Caterpillar, Inc. | 197,146 | 21,423,856 | ||||||
Cummins, Inc. | 54,014 | 8,333,820 | ||||||
Deere & Co. | 114,898 | 10,404,014 | ||||||
Dover Corp. | 52,588 | 4,782,879 | ||||||
Flowserve Corp. | 43,387 | 3,225,823 | ||||||
Illinois Tool Works, Inc. | 119,884 | 10,497,043 | ||||||
Ingersoll-Rand PLC | 79,284 | 4,956,043 | ||||||
Joy Global, Inc. (c) | 31,481 | 1,938,600 | ||||||
PACCAR, Inc. | 112,009 | 7,037,526 | ||||||
Pall Corp. | 34,633 | 2,957,312 | ||||||
Parker Hannifin Corp. | 47,032 | 5,913,333 | ||||||
Pentair PLC | 61,500 | 4,435,380 | ||||||
Snap-on, Inc. | 18,389 | 2,179,464 | ||||||
Stanley Black & Decker, Inc. | 49,281 | 4,327,857 | ||||||
Xylem, Inc. | 58,061 | 2,269,024 | ||||||
Total Machinery | 94,681,974 | |||||||
Media—3.5% | ||||||||
Cablevision Systems Corp., New York Group, Class A (c) | 68,342 | 1,206,236 | ||||||
CBS Corp., Class B | 166,923 | 10,372,595 | ||||||
Comcast Corp., Class A | 821,028 | 44,072,783 | ||||||
DIRECTV (a) | 147,984 | 12,580,120 | ||||||
Discovery Communications, Inc., Class A (a) | 68,872 | 5,115,812 | ||||||
Gannett Co., Inc. | 71,481 | 2,238,070 |
The accompanying notes are an integral part of these financial statements. | Appendix | 69 |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) |
| |||||||
The Interpublic Group of Cos., Inc. | 133,825 | $ | 2,610,926 | |||||
News Corp., Class A (a) | 157,236 | 2,820,814 | ||||||
Omnicom Group, Inc. | 81,612 | 5,812,407 | ||||||
Scripps Networks Interactive, Inc., Class A | 33,863 | 2,747,644 | ||||||
Time Warner Cable, Inc. | 87,985 | 12,960,191 | ||||||
Time Warner, Inc. | 278,585 | 19,570,596 | ||||||
Twenty-First Century Fox, Inc., Class A | 604,690 | 21,254,853 | ||||||
Viacom, Inc., Class B | 123,534 | 10,714,104 | ||||||
The Walt Disney Co. | 508,653 | 43,611,908 | ||||||
Total Media | 197,689,059 | |||||||
Metals & Mining—0.5% |
| |||||||
Alcoa, Inc. | 370,188 | 5,512,099 | ||||||
Allegheny Technologies, Inc. | 34,279 | 1,545,983 | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 328,021 | 11,972,766 | ||||||
Newmont Mining Corp. | 157,422 | 4,004,816 | ||||||
Nucor Corp. | 100,566 | 4,952,875 | ||||||
United States Steel Corp. (c) | 45,488 | 1,184,508 | ||||||
Total Metals & Mining | 29,173,047 | |||||||
Multi-Utilities—1.2% |
| |||||||
Ameren Corp. | 76,616 | 3,132,062 | ||||||
CenterPoint Energy, Inc. | 135,701 | 3,465,804 | ||||||
CMS Energy Corp. | 85,094 | 2,650,678 | ||||||
Consolidated Edison, Inc. | 92,491 | 5,340,430 | ||||||
Dominion Resources, Inc. | 183,670 | 13,136,079 | ||||||
DTE Energy Co. | 55,898 | 4,352,777 | ||||||
Integrys Energy Group, Inc. | 25,306 | 1,800,016 | ||||||
NiSource, Inc. | 99,430 | 3,911,576 | ||||||
PG&E Corp. | 146,765 | 7,047,655 | ||||||
Public Service Enterprise Group, Inc. | 159,765 | 6,516,814 | ||||||
SCANA Corp. | 44,708 | 2,405,738 | ||||||
Sempra Energy | 71,998 | 7,538,911 | ||||||
TECO Energy, Inc. | 64,444 | 1,190,925 | ||||||
Wisconsin Energy Corp. (c) | 71,250 | 3,343,050 | ||||||
Total Multi-Utilities | 65,832,515 | |||||||
Multiline Retail—0.6% |
| |||||||
Dollar General Corp. (a) | 95,779 | 5,493,884 | ||||||
Dollar Tree, Inc. (a) | 65,235 | 3,552,698 | ||||||
Family Dollar Stores, Inc. | 30,190 | 1,996,767 | ||||||
Kohl’s Corp. | 61,558 | 3,242,875 | ||||||
Macy’s, Inc. | 113,842 | 6,605,113 | ||||||
Nordstrom, Inc. | 44,408 | 3,016,635 | ||||||
Target Corp. | 200,055 | 11,593,187 | ||||||
Total Multiline Retail | 35,501,159 | |||||||
Oil, Gas & Consumable Fuels—8.5% |
| |||||||
Anadarko Petroleum Corp. | 159,496 | 17,460,027 | ||||||
Apache Corp. | 121,818 | 12,257,327 | ||||||
Cabot Oil & Gas Corp. | 131,808 | 4,499,925 | ||||||
Chesapeake Energy Corp. | 159,887 | 4,969,288 | ||||||
Chevron Corp. | 601,183 | 78,484,441 | ||||||
Cimarex Energy Co. | 27,483 | 3,942,711 | ||||||
ConocoPhillips | 387,713 | 33,238,635 | ||||||
CONSOL Energy, Inc. | 72,598 | 3,344,590 |
Shares | Value | |||||||
Denbury Resources, Inc. | 111,113 | $ | 2,051,146 | |||||
Devon Energy Corp. | 121,083 | 9,613,990 | ||||||
EOG Resources, Inc. | 172,587 | 20,168,517 | ||||||
EQT Corp. | 47,921 | 5,122,755 | ||||||
Exxon Mobil Corp. | 1,356,201 | 136,542,317 | ||||||
Hess Corp. | 83,361 | 8,243,569 | ||||||
Kinder Morgan, Inc. | 210,991 | 7,650,534 | ||||||
Marathon Oil Corp. | 213,532 | 8,524,197 | ||||||
Marathon Petroleum Corp. | 91,162 | 7,117,017 | ||||||
Murphy Oil Corp. | 53,284 | 3,542,320 | ||||||
Newfield Exploration Co. (a) | 43,090 | 1,904,578 | ||||||
Noble Energy, Inc. | 113,449 | 8,787,760 | ||||||
Occidental Petroleum Corp. | 248,111 | 25,463,632 | ||||||
ONEOK, Inc. | 65,641 | 4,468,839 | ||||||
Peabody Energy Corp. | 85,897 | 1,404,416 | ||||||
Phillips 66 | 178,708 | 14,373,484 | ||||||
Pioneer Natural Resources Co. | 45,174 | 10,381,437 | ||||||
QEP Resources, Inc. | 56,855 | 1,961,498 | ||||||
Range Resources Corp. | 53,258 | 4,630,783 | ||||||
Southwestern Energy Co. (a) | 111,494 | 5,071,862 | ||||||
Spectra Energy Corp. | 211,797 | 8,997,137 | ||||||
Tesoro Corp. | 40,856 | 2,397,022 | ||||||
Valero Energy Corp. | 168,515 | 8,442,601 | ||||||
The Williams Cos., Inc. | 233,196 | 13,574,339 | ||||||
Total Oil, Gas & Consumable Fuels |
| 478,632,694 | ||||||
Paper & Forest Products—0.1% |
| |||||||
International Paper Co. | 136,821 | 6,905,356 | ||||||
Total Paper & Forest Products |
| 6,905,356 | ||||||
Personal Products—0.1% |
| |||||||
Avon Products, Inc. | 137,175 | 2,004,127 | ||||||
The Estee Lauder Cos., Inc., Class A | 79,799 | 5,925,874 | ||||||
Total Personal Products |
| 7,930,001 | ||||||
Pharmaceuticals—6.0% |
| |||||||
AbbVie, Inc. | 502,146 | 28,341,120 | ||||||
Actavis PLC (a) | 55,090 | 12,287,825 | ||||||
Allergan, Inc. | 93,969 | 15,901,434 | ||||||
Bristol-Myers Squibb Co. | 523,339 | 25,387,175 | ||||||
Eli Lilly & Co. | 311,100 | 19,341,087 | ||||||
Forest Laboratories, Inc. (a) | 75,752 | 7,499,448 | ||||||
Hospira, Inc. (a) | 52,777 | 2,711,154 | ||||||
Johnson & Johnson | 893,445 | 93,472,216 | ||||||
Merck & Co., Inc. | 922,921 | 53,390,980 | ||||||
Mylan, Inc. (a) | 118,019 | 6,085,060 | ||||||
Perrigo Co. PLC | 42,253 | 6,158,797 | ||||||
Pfizer, Inc. | 2,014,428 | 59,788,223 | ||||||
Zoetis, Inc. | 158,213 | 5,105,534 | ||||||
Total Pharmaceuticals |
| 335,470,053 | ||||||
Professional Services—0.2% |
| |||||||
The Dun & Bradstreet Corp. | 11,699 | 1,289,230 | ||||||
Equifax, Inc. | 38,532 | 2,795,111 | ||||||
Nielsen Holdings NV | 95,722 | 4,633,902 | ||||||
Robert Half International, Inc. | 43,428 | 2,073,253 | ||||||
Total Professional Services |
| 10,791,496 |
70 | Appendix | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) |
| |||||||
Real Estate Investment Trusts (REITs)—2.1% |
| |||||||
American Tower Corp. | 124,975 | $ | 11,245,250 | |||||
Apartment Investment & Management Co., Class A | 46,247 | 1,492,391 | ||||||
AvalonBay Communities, Inc. | 38,473 | 5,470,476 | ||||||
Boston Properties, Inc. | 48,328 | 5,711,403 | ||||||
Crown Castle International Corp. | 105,409 | 7,827,672 | ||||||
Equity Residential | 106,063 | 6,681,969 | ||||||
Essex Property Trust, Inc. | 19,741 | 3,650,308 | ||||||
General Growth Properties, Inc. | 164,645 | 3,879,036 | ||||||
HCP, Inc. | 144,692 | 5,987,355 | ||||||
Health Care REIT, Inc. (c) | 96,459 | 6,045,086 | ||||||
Host Hotels & Resorts, Inc. | 239,028 | 5,261,006 | ||||||
Kimco Realty Corp. | 129,651 | 2,979,380 | ||||||
The Macerich Co. | 44,426 | 2,965,435 | ||||||
Plum Creek Timber Co., Inc. (c) | 55,919 | 2,521,947 | ||||||
Prologis, Inc. | 157,795 | 6,483,797 | ||||||
Public Storage | 45,769 | 7,842,518 | ||||||
Simon Property Group, Inc. | 98,114 | 16,314,396 | ||||||
Ventas, Inc. | 92,518 | 5,930,404 | ||||||
Vornado Realty Trust | 55,040 | 5,874,419 | ||||||
Weyerhaeuser Co. (c) | 184,817 | 6,115,595 | ||||||
Total Real Estate Investment Trusts (REITs) |
| 120,279,843 | ||||||
Real Estate Management & Development—0.1% |
| |||||||
CBRE Group, Inc., Class A (a) | 88,067 | 2,821,667 | ||||||
Total Real Estate Management & Development |
| 2,821,667 | ||||||
Road & Rail—1.0% |
| |||||||
CSX Corp. | 317,172 | 9,772,069 | ||||||
Kansas City Southern | 34,838 | 3,745,433 | ||||||
Norfolk Southern Corp. | 97,785 | 10,074,789 | ||||||
Ryder System, Inc. | 16,788 | 1,478,855 | ||||||
Union Pacific Corp. | 286,028 | 28,531,293 | ||||||
Total Road & Rail |
| 53,602,439 | ||||||
Semiconductors & Semiconductor Equipment—2.3% |
| |||||||
Altera Corp. | 98,954 | 3,439,641 | ||||||
Analog Devices, Inc. | 99,202 | 5,363,852 | ||||||
Applied Materials, Inc. | 384,445 | 8,669,235 | ||||||
Avago Technologies Ltd. | 79,488 | 5,728,700 | ||||||
Broadcom Corp., Class A | 175,499 | 6,514,523 | ||||||
First Solar, Inc. (a) | 22,445 | 1,594,942 | ||||||
Intel Corp. | 1,572,072 | 48,577,025 | ||||||
KLA-Tencor Corp. | 52,370 | 3,804,157 | ||||||
Lam Research Corp. | 51,196 | 3,459,826 | ||||||
Linear Technology Corp. | 74,697 | 3,515,988 | ||||||
Microchip Technology, Inc. | 63,245 | 3,086,988 | ||||||
Micron Technology, Inc. (a) | 338,020 | 11,137,759 | ||||||
NVIDIA Corp. | 176,189 | 3,266,544 | ||||||
Texas Instruments, Inc. | 340,862 | 16,289,795 | ||||||
Xilinx, Inc. | 84,879 | 4,015,625 | ||||||
Total Semiconductors & Semiconductor Equipment |
| 128,464,600 | ||||||
Software—3.4% |
| |||||||
Adobe Systems, Inc. (a) | 146,178 | 10,577,440 | ||||||
Autodesk, Inc. (a) | 71,955 | 4,056,823 | ||||||
CA, Inc. | 100,746 | 2,895,440 |
Shares | Value | |||||||
Citrix Systems, Inc. (a) | 51,762 | $ | 3,237,713 | |||||
Electronic Arts, Inc. (a) | 99,323 | 3,562,716 | ||||||
Intuit, Inc. | 89,648 | 7,219,354 | ||||||
Microsoft Corp. | 2,373,932 | 98,992,964 | ||||||
Oracle Corp. | 1,084,293 | 43,946,395 | ||||||
Red Hat, Inc. (a) | 59,789 | 3,304,538 | ||||||
Salesforce.com, Inc. (a) | 178,386 | 10,360,659 | ||||||
Symantec Corp. | 218,423 | 5,001,887 | ||||||
Total Software |
| 193,155,929 | ||||||
Specialty Retail—1.9% |
| |||||||
AutoNation, Inc. (a) | 20,018 | 1,194,674 | ||||||
AutoZone, Inc. (a) | 10,495 | 5,627,839 | ||||||
Bed Bath & Beyond, Inc. (a) | 64,444 | 3,697,797 | ||||||
Best Buy Co., Inc. | 87,008 | 2,698,118 | ||||||
CarMax, Inc. (a) | 69,636 | 3,621,768 | ||||||
GameStop Corp., Class A | 36,159 | 1,463,355 | ||||||
The Gap, Inc. | 82,139 | 3,414,518 | ||||||
The Home Depot, Inc. | 432,065 | 34,979,982 | ||||||
L Brands, Inc. | 77,439 | 4,542,572 | ||||||
Lowe’s Cos., Inc. | 314,978 | 15,115,794 | ||||||
O’Reilly Automotive, Inc. (a) | 33,507 | 5,046,154 | ||||||
PetSmart, Inc. | 31,346 | 1,874,491 | ||||||
Ross Stores, Inc. | 67,095 | 4,436,992 | ||||||
Staples, Inc. | 204,578 | 2,217,626 | ||||||
Tiffany & Co. | 35,044 | 3,513,161 | ||||||
TJX Cos., Inc. | 221,179 | 11,755,664 | ||||||
Tractor Supply Co. | 43,720 | 2,640,688 | ||||||
Urban Outfitters, Inc. (a) | 32,218 | 1,090,902 | ||||||
Total Specialty Retail |
| 108,932,095 | ||||||
Technology Hardware, Storage & Peripherals—4.2% |
| |||||||
Apple, Inc. | 1,904,219 | 176,959,072 | ||||||
EMC Corp. | 646,536 | 17,029,758 | ||||||
Hewlett-Packard Co. | 591,011 | 19,905,251 | ||||||
NetApp, Inc. | 104,608 | 3,820,284 | ||||||
SanDisk Corp. | 71,436 | 7,460,061 | ||||||
Seagate Technology PLC | 103,145 | 5,860,699 | ||||||
Western Digital Corp. | 66,107 | 6,101,676 | ||||||
Total Technology Hardware, Storage & Peripherals |
| 237,136,801 | ||||||
Textiles, Apparel & Luxury Goods—0.8% |
| |||||||
Coach, Inc. | 86,608 | 2,961,128 | ||||||
Fossil Group, Inc. (a) | 15,019 | 1,569,786 | ||||||
Michael Kors Holdings Ltd. (a) | 56,770 | 5,032,660 | ||||||
NIKE, Inc., Class B | 232,962 | 18,066,203 | ||||||
PVH Corp. | 25,980 | 3,029,268 | ||||||
Ralph Lauren Corp. | 18,500 | 2,972,765 | ||||||
Under Armour, Inc., Class A (a) | 51,143 | 3,042,497 | ||||||
VF Corp. | 108,733 | 6,850,179 | ||||||
Total Textiles, Apparel & Luxury Goods |
| 43,524,486 | ||||||
Thrifts & Mortgage Finance—0.1% |
| |||||||
Hudson City Bancorp, Inc. | 150,515 | 1,479,563 | ||||||
People’s United Financial, Inc. | 98,207 | 1,489,800 | ||||||
Total Thrifts & Mortgage Finance |
| 2,969,363 | ||||||
Tobacco—1.4% |
| |||||||
Altria Group, Inc. | 627,328 | 26,310,136 | ||||||
Lorillard, Inc. | 114,486 | 6,980,211 |
The accompanying notes are an integral part of these financial statements. | Appendix | 71 |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)
June 30, 2014 (Unaudited)
Shares | Value | |||||||
(Common Stocks continued) |
| |||||||
Philip Morris International, Inc. | 496,735 | $ | 41,879,728 | |||||
Reynolds American, Inc. | 98,259 | 5,929,931 | ||||||
Total Tobacco |
| 81,100,006 | ||||||
Trading Companies & Distributors—0.2% |
| |||||||
Fastenal Co. | 86,217 | 4,266,879 | ||||||
W.W. Grainger, Inc. | 19,250 | 4,894,698 | ||||||
Total Trading Companies & Distributors |
| 9,161,577 | ||||||
Total Long-Term Investments |
| 5,500,084,966 | ||||||
SHORT-TERM SECURITIES | ||||||||
(1.9% of net assets) | ||||||||
BlackRock Cash Funds: | ||||||||
Institutional, SL Agency Shares, 0.14% (b)(d)(e) | 99,157,518 | 99,157,518 | ||||||
Prime, SL Agency Shares, 0.11% (b)(d)(e) | 5,874,248 | 5,874,248 | ||||||
Total Short-Term Securities |
| 105,031,766 | ||||||
TOTAL INVESTMENTS BEFORE INVESTMENTS SOLD SHORT |
| 5,605,116,732 |
INVESTMENTS SOLD SHORT | Shares | Value | ||||||
(0.0% of net assets) | ||||||||
Energy Equipment & Services | ||||||||
Seventy Seven Energy, Inc. (f) | (11,420 | ) | $ | (268,941 | ) | |||
Total Investments Sold Short |
| (268,941 | ) | |||||
TOTAL INVESTMENTS, NET OF INVESTMENTS SOLD SHORT |
| 5,604,847,791 | ||||||
OTHER ASSETS LESS LIABILITIES—0.2% |
| 13,100,369 | ||||||
NET ASSETS—100.0% |
| $ | 5,617,948,160 |
* | As of June 30, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows: |
Tax cost | $ | 2,806,680,714 | ||
|
| |||
Gross unrealized appreciation | 2,882,462,642 | |||
Gross unrealized depreciation | (84,026,624 | ) | ||
|
| |||
Net unrealized appreciation | $ | 2,798,436,018 | ||
|
|
(a) | Non-income producing security. |
(b) | Investments in issuers considered to be an affiliate of the Master Portfolio during the period ended June 30, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
Affiliate | Shares Held at December 31, 2013 | Shares Purchased | Shares Sold | Shares Held at June 30, 2014 | Value at June 30, 2014 | Income | Realized Gain | |||||||||||||||||||||
BlackRock Inc. | 40,465 | — | (968 | ) | 39,497 | $ | 12,623,241 | $ | 154,327 | $ | 80,596 | |||||||||||||||||
BlackRock Cash Funds: Institutional, SL Agency Shares | 92,138,359 | 7,019,159 | 1 | — | 99,157,518 | $ | 99,157,518 | $ | 41,578 | $ | — | |||||||||||||||||
BlackRock Cash Funds: Prime, SL Agency Shares | 11,657,294 | — | (5,783,046 | )2 | 5,874,248 | $ | 5,874,248 | $ | 53,775 | $ | — | |||||||||||||||||
The PNC Financial Services Group, Inc. | 169,461 | 2,060 | (2,844 | ) | 168,677 | $ | 15,020,687 | $ | 155,156 | $ | 46,015 |
1 | Represents net shares purchased. |
2 | Represents net shares sold. |
(c) | Security, or a portion of security, is on loan. |
(d) | All or a portion of security was purchased with the cash collateral from loaned securities. |
(e) | Represents the current yield as of report date. |
(f) | In order to track the performance of its benchmark index, the Master Portfolio sold non-index securities that it subsequently received in corporate actions occurring on the opening of market trading on the following business day. |
Ÿ | Financial futures contracts outstanding as of June 30, 2014, were as follows: |
Contracts Purchased | Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation | |||||
1,094 | S&P 500 E-Mini Index | Chicago Mercantile | September 2014 | $106,796,280 | $508,020 |
Ÿ | For Master Portfolio compliance purposes, the Master Portfolio’s sector and industry classifications refer to any one or more of the sector and industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector and industry sub-classifications for reporting ease. |
Ÿ | Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Master Portfolio has the ability to access |
Ÿ | Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
Ÿ | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Master Portfolio’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest
72 | Appendix | The accompanying notes are an integral part of these financial statements. |
Table of Contents
PORTFOLIO OF INVESTMENTS: S&P 500 Stock Master Portfolio (continued)
June 30, 2014 (Unaudited)
priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Master Portfolio’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Master Portfolio’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
The following tables summarize the Master Portfolio’s investments and derivative financial instruments categorized in the disclosure hierarchy as of June 30, 2014:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments: | ||||||||||||||||
Long-Term Investments: | ||||||||||||||||
Common Stocks3 | $ | 5,500,084,966 | — | — | $ | 5,500,084,966 | ||||||||||
Short-Term Securities: | ||||||||||||||||
Money Market Funds | 105,031,766 | — | — | 105,031,766 | ||||||||||||
Assets: | ||||||||||||||||
Investments: | ||||||||||||||||
Investments Sold Short | (268,941 | ) | (268,941 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 5,604,847,791 | — | — | $ | 5,604,847,791 | ||||||||||
|
|
|
|
|
|
|
|
3 | See above Schedule of Investments for values in each industry. |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative Financial Instruments1 | ||||||||||||||||
Assets: | ||||||||||||||||
Equity contracts | $ | 508,020 | $ | — | $ | — | $ | 508,020 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 508,020 | $ | — | $ | — | $ | 508,020 | ||||||||
|
|
|
|
|
|
|
|
1 | Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
The Master Portfolio may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of June 30, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Cash | $ | 3,236 | — | — | $ | 3,236 | ||||||||||
Cash pledged for financial futures contracts | 4,625,000 | — | — | 4,625,000 | ||||||||||||
Liabilities: | ||||||||||||||||
Collateral on securities loaned at value | — | $ | (5,874,248 | ) | — | (5,874,248 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,628,236 | $ | (5,874,248 | ) | — | $ | (1,246,012 | ) | |||||||
|
|
|
|
|
|
|
|
There were no transfers between levels during the six months ended June 30, 2014.
The accompanying notes are an integral part of these financial statements. | Appendix | 73 |
Table of Contents
STATEMENT OF ASSETS AND LIABILITIES: S&P 500 Stock Master Portfolio
June 30, 2014 (Unaudited)
ASSETS | ||||
Investments at value—unaffiliated (including securities loaned of $5,760,021) (cost—$3,039,494,984) | $ | 5,472,441,038 | ||
Investments at value—affiliated (cost—$121,300,506) | 132,675,694 | |||
Cash | 3,236 | |||
Contributions receivable from investors | 12,792,920 | |||
Dividends receivable | 5,828,307 | |||
Cash pledged for financial futures contracts | 4,625,000 | |||
Investments sold receivable | 516,721 | |||
Variation margin receivable on financial futures contracts | 20,186 | |||
Securities lending income receivable—affiliated | 4,889 | |||
Total assets | 5,628,907,991 | |||
LIABILITIES | ||||
Collateral on securities loaned at value | 5,874,248 | |||
Investments purchased payable | 4,562,956 | |||
Investments sold short at value (proceeds—$268,983) | 268,941 | |||
Investment advisory fees payable | 207,635 | |||
Trustees’ fees payable . | 37,000 | |||
Professional fees payable | 9,051 | |||
Total liabilities | 10,959,831 | |||
Net Assets | $ | 5,617,948,160 | ||
NET ASSETS CONSIST OF | ||||
Investors’ capital | 3,173,118,856 | |||
Net unrealized appreciation/depreciation | 2,444,829,304 | |||
NET ASSETS | $ | 5,617,948,160 |
STATEMENT OF OPERATIONS: S&P 500 Stock Master Portfolio
Six Months Ended June 30, 2014 (Unaudited)
INVESTMENT INCOME | ||||
Dividends—unaffiliated | $ | 53,015,324 | ||
Dividends—affiliated | 309,483 | |||
Securities lending—affiliated—net | 53,775 | |||
Income—affiliated | 41,578 | |||
Foreign taxes withheld | (8,551 | ) | ||
Total income | 53,411,609 | |||
EXPENSES | ||||
Investment advisory | 1,326,592 | |||
Trustees | 81,330 | |||
Professional | 21,050 | |||
Total expenses | 1,428,972 | |||
Less fees waived and/or reimbursed by Manager | (123,488 | ) | ||
Total expenses after fees reimbursed | 1,305,484 | |||
NET INVESTMENT INCOME | 52,106,125 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain from: | ||||
Investments—unaffiliated | 28,946,253 | |||
Investments—affiliated | 126,611 | |||
Financial futures contracts | 8,043,017 | |||
Net realized gain | 37,115,881 | |||
Net change in unrealized appreciation/depreciation on: | ||||
Investments | 284,112,598 | |||
Financial futures contracts | (169,340 | ) | ||
Short sales | 42 | |||
Net change in unrealized appreciation/depreciation | 283,943,300 | |||
TOTAL REALIZED AND UNREALIZED GAIN | 321,059,181 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 373,165,306 |
74 | Appendix | The accompanying notes are an integral part of these financial statements. |
Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS: S&P 500 Stock Master Portfolio
INCREASE (DECREASE) IN NET ASSETS | Six Months Ended June 30, 2014 (Unaudited) | Year Ended December 31, 2013 | ||||||
Operations | ||||||||
Net investment income | $ | 52,106,125 | $ | 82,885,589 | ||||
Net realized gain | 37,115,881 | 8,349,909 | ||||||
Net change in unrealized appreciation/depreciation | 283,943,300 | 992,927,582 | ||||||
Net increase in net assets resulting from operations | 373,165,306 | 1,084,163,080 | ||||||
Capital Transactions | ||||||||
Proceeds from contributions | 786,436,602 | 3,187,732,511 | ||||||
Value of withdrawals | (812,783,955 | ) | (718,697,605 | ) | ||||
Net increase (decrease) in net assets derived from capital transactions | (26,347,353 | ) | 2,469,034,906 | |||||
NET ASSETS | ||||||||
TOTAL INCREASE IN NET ASSETS | 346,817,953 | 3,553,197,986 | ||||||
Beginning of period | 5,271,130,207 | 1,717,932,221 | ||||||
End of period | $ | 5,617,948,160 | $ | 5,271,130,207 |
FINANCIAL HIGHLIGHTS: S&P 500 Stock Master Portfolio
Six Months Ended June 30, 2014 (Unaudited) | For Year Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||||
TOTAL INVESTMENT RETURN | 7.10 | %1 | 32.33 | % | 15.98 | % | 2.13 | % | 15.06 | % | 26.63 | % | ||||||||||||
Ratio to Average Net Assets | ||||||||||||||||||||||||
Total expenses | 0.05 | %2 | 0.05 | % | 0.06 | % | 0.06 | % | 0.05 | % | 0.05 | % | ||||||||||||
Total expenses after fees reimbursed | 0.05 | %2 | 0.05 | % | 0.05 | % | 0.05 | % | 0.05 | % | 0.05 | % | ||||||||||||
Net investment income | 1.96 | %2 | 2.08 | % | 2.22 | % | 2.08 | % | 2.01 | % | 2.35 | % | ||||||||||||
SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Net assets, end of period (000) | $5,617,948 | $5,271,130 | $1,717,932 | $2,108,316 | $2,158,717 | $2,049,062 | ||||||||||||||||||
Portfolio turnover | 2 | % | 2 | % | 10 | % | 5 | % | 9 | % | 5 | % |
1 | Aggregate total investment return. |
2 | Annualized |
The accompanying notes are an integral part of these financial statements. | Appendix | 75 |
Table of Contents
NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio
(Unaudited)
1. ORGANIZATION
S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of Master Investment Portfolio (“MIP”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. MIP is organized as a Delaware statutory trust.
The Master Portfolio, together with certain other registered investment companies advised by the Manager or its affiliates, is included in a complex of open-end funds referred to as the Equity-Liquidity Complex.
Reorganization: The Board of Trustees of MIP (the “Board”) and the Board of Master S&P 500 Index Series, a series of Quantitative Master Series LLC (the “Target Master Portfolio”), approved the reorganization of the Target Master Portfolio into the Master Portfolio pursuant to which the Master Portfolio acquired substantially all of the assets and substantially all of the liabilities of the Target Master Portfolio in exchange for beneficial interests of the Master Portfolio (the “Master Reorganization”). The Master Reorganization was approved by the shareholders of each feeder fund that invests its assets in the Target Master Portfolio. The Target Master Portfolio is the surviving entity for tax purposes.
The Target Master Portfolio’s net assets and composition of net assets on April 19, 2013, the valuation date of the reorganization, were as follows:
Net assets | $ | 2,515,780,312 | ||
Investors’ capital | $ | 1,709,840,605 | ||
Net unrealized appreciation | $ | 805,939,707 |
For financial reporting purposes, assets received by the Master Portfolio were recorded at fair value. However, the cost basis of the investments being received from the Target Master Portfolio were carried forward to align ongoing reporting of the Master Portfolio’s realized and unrealized gains and losses for tax purposes.
The net assets of the Master Portfolio before the acquisition were $2,116,282,511. The aggregate net assets of the Master Portfolio immediately after the acquisition amounted to $4,632,062,823. The Target Master Portfolio’s fair value and cost of investments prior to the reorganization were as follows:
Fair Value of Investments | Cost of Investments | |||||||
Target Master Portfolio | $ | 2,451,677,239 | $ | 1,645,737,532 |
The purpose of this transaction was to combine two portfolios managed by BlackRock Fund Advisors (“BFA” or the “Manager”) or its affiliates with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on April 22, 2013.
Assuming the acquisition had been completed on January 1, 2013, the beginning of the fiscal reporting period of the Master Portfolio, the pro forma results of operations for the year ended December 31, 2013 are as follows:
Ÿ | Net investment income: $98,196,994 |
Ÿ | Net realized and change in unrealized gain on investments: $1,618,199,797 |
Ÿ | Net increase in net assets resulting from operations: $1,716,396,791 |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Target Master Portfolio that have been included in the Master Portfolio’s Statement of Operations since April 22, 2013.
Reorganization costs incurred in connection with the reorganization were expensed by the Master Portfolio and reimbursed by BFA.
2. SIGNIFICANT ACCOUNTING POLICIES
The Master Portfolio’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Master Portfolio:
Valuation: US GAAP defines fair value as the price the Master Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Master Portfolio determines the fair values of its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of MIP (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Master Portfolio for all financial instruments.
Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.
In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that the Master Portfolio might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.
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NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio (continued)
(Unaudited)
Segregation and Collateralization: In cases where a Master Portfolio enters into certain investments (e.g., financial futures contracts), that would be “senior securities” for 1940 Act purposes, the Master Portfolio may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Master Portfolio’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Master Portfolio may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Master Portfolio is informed of the ex-dividend dates. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.
Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Master Portfolio’s financial statement disclosures.
Other: Expenses directly related to the Master Portfolio are charged to the Master Portfolio. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.
The Master Portfolio has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.
3. SECURITIES AND OTHER INVESTMENTS
Preferred Stock: The Master Portfolio may invest in preferred stock. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is
junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
Short Sales: The Master Portfolio may enter into short sale transactions in which the Master Portfolio sells a security it does not hold in anticipation of a decline in the market price of that security. When the Master Portfolio makes a short sale, it will borrow the security sold short and deliver the security to the counterparty to which it sold the security short. An amount equal to the proceeds received by the Master Portfolio is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Master Portfolio is required to repay the counterparty any dividends received on the security sold short, which is shown as dividend expense in the Statement of Operations. The Master Portfolio may pay a fee on the assets borrowed from the counterparty, which is shown as stock loan fees in the Statement of Operations. The Master Portfolio maintains a segregated account of securities or deposits cash with the broker-dealer as collateral for the short sales. The Master Portfolio may receive interest on the cash collateral deposited with the broker-dealer. The Master Portfolio is exposed to market risk based on the amount, if any, that the market value of the security increases beyond the market value at which the position was sold. Thus, a short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. The short sale of securities involves the possibility of a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. A gain, limited to the price at which the Master Portfolio sold the security short, or a loss, unlimited as to the dollar amount, will be recognized upon the termination of a short sale if the market price is either less than or greater than the proceeds originally received. There is no assurance the Master Portfolio will be able to close out a short position at a particular time or at an acceptable price.
Securities Lending: The Master Portfolio may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Master Portfolio is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Master Portfolio and any additional required collateral is delivered to the Master Portfolio on the next business day. During the term of the loan, the Master Portfolio earns dividend or interest income on the securities loaned but does not receive interest income on any securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The market value of securities on loan and the value of the related collateral are shown separately in the Statement of Assets and
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NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio (continued)
(Unaudited)
Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. As of June 30, 2014, any securities on loan were collateralized by cash. The cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.
Securities lending transactions are entered into by the Master Portfolio under Master Securities Lending Agreements (each an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Master Portfolio, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Master Portfolio can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
The following table is a summary of the Master Portfolio’s securities lending agreements by counterparty which are subject to offset under an MSLA as of June 30, 2014:
Counterparty | Securities Loaned at Value | Cash Collateral Received1 | Net Amount | |||||||||
Citigroup Global Markets, Inc. | $ | 26,904 | $ | (26,904 | ) | — | ||||||
Goldman Sachs & Co. | 157,850 | (157,850 | ) | — | ||||||||
JPMorgan Clearing Corp. | 3,957,522 | (3,957,522 | ) | — | ||||||||
Morgan Stanley & Co. LLC | 55,039 | (55,039 | ) | — | ||||||||
National Financial Services LLC | 182,854 | (182,854 | ) | — | ||||||||
State Street Bank & Trust Co. | 1,379,852 | (1,379,852 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 5,760,021 | $ | (5,760,021 | ) | — | ||||||
|
|
|
|
|
|
1 | Collateral with a value of $5,874,248 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risk, the Master Portfolio benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Master Portfolio could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.
4. DERIVATIVE FINANCIAL INSTRUMENTS
The Master Portfolio engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Master Portfolio and/or to economically hedge their exposure to certain risks such as equity risk. These contracts may be transacted on an exchange or OTC.
Financial Futures Contracts: The Master Portfolio purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are agreements between the Master Portfolio and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.
Upon entering into a financial futures contract, the Master Portfolio is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Master Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Master Portfolio as unrealized appreciation or depreciation and, if applicable, as a receivable or payable for variation margin in the Statement of Assets and Liabilities.
When the contract is closed, the Master Portfolio 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 at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.
The following is a summary of the Master Portfolio’s derivative financial instruments categorized by risk exposure:
Fair Values of Derivative Financial Instruments as of June 30, 2014 | ||||||
Derivative Assets | ||||||
Statement of Assets and Liabilities Location | Value | |||||
Equity contracts | Net unrealized appreciation/ depreciation2 | $ | 508,020 |
2 | Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The Effect of Derivative Financial Instruments in the Statement of Operations Six Months ended June 30, 2014 | ||||
Net Realized Gain From | ||||
Equity contracts: | ||||
Financial futures contracts | $ | 8,043,035 | ||
Net Change in Unrealized Appreciation/Depreciation on | ||||
Equity contracts: | ||||
Financial futures contracts | $ | (169,340 | ) |
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NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio (continued)
(Unaudited)
For the six months ended June 30, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:
Financial futures contracts: | ||||
Average number of contracts purchased | 810 | |||
Average notional value of contracts purchased | $ | 77,917,630 |
Counterparty Credit Risk: A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
The Master Portfolio’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Master Portfolio. With exchanged traded futures, there is less counterparty credit risk to the Master Portfolio since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Master Portfolio does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Master Portfolio.
5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock.
MIP, on behalf of the Master Portfolio, entered into an Investment Advisory Agreement (the “Investment Advisory Agreement”) with BFA, the Master Portfolio’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory services. BFA is responsible for the management of the Master Portfolio’s investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Master Portfolio. For such services, the Master Portfolio pays BFA a monthly fee based on a percentage of the Master Portfolio’s average daily net assets at an annual rate of 0.05%.
MIP entered into an Administration Agreement with BlackRock Advisors, LLC (“BAL”), which has agreed to provide general administration services (other than investment advice and related portfolio activities). BAL may delegate certain of its administration duties to sub-administrators.
BAL, in consideration thereof, has agreed to bear all of the Master Portfolio’s and MIP’s ordinary operating expenses excluding, generally,
investment advisory fees, distribution fees, brokerage and other expenses related to the execution of portfolio transactions, extraordinary expenses and certain other expenses which are borne by the Master Portfolio.
BAL is not entitled to compensation for providing administration services to the Master Portfolio, for so long as BAL is entitled to compensation for providing administration services to corresponding feeder funds that invest substantially all of their assets in the Master Portfolio, or BAL (or an affiliate) receives investment advisory fees from the Master Portfolio.
The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Master Portfolio pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Master Portfolio’s investment in other affiliated investment companies, if any. This amount is included in fees waived by Manager in the Statement of Operations. For the six months ended June 30, 2014, the amount waived was $21,087.
The fees and expenses of the MIP’s trustees who are not “interested persons” of MIP, as defined in the 1940 Act (“Independent Trustees”), counsel to the Independent Trustees and MIP’s independent registered public accounting firm (together, the “independent expenses”) are paid directly by the Master Portfolio. BFA has contractually agreed to cap the expenses of the Master Portfolio at the rate at which the Master Portfolio pays an advisory fee to BFA by providing an offsetting credit against the investment advisory fees paid by the Master Portfolio in an amount equal to the independent expenses. This contractual waiver is effective through April 30, 2015. The amount of the waiver, if any, is included in fees reimbursed in the Statement of Operations.
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Master Portfolio, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Master Portfolio is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by the Manager or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Master Portfolio bears to an annual rate of 0.04% until December 31, 2014 and 0.05% thereafter (the “collateral investment fees”).
Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Master Portfolio retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BTC may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).
Pursuant to such agreement, the Master Portfolio retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned
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NOTES TO FINANCIAL STATEMENTS: S&P 500 Stock Master Portfolio (continued)
(Unaudited)
across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Master Portfolio, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Master Portfolio retained 65% of securities lending income and paid a fee to BTC equal to 35% of such income. The share of securities lending income earned by the Master Portfolio is shown as securities lending — affiliated — net in the Statement of Operations. For the six months ended June 30, 2014, the Master Portfolio paid BTC $20,187 in total for securities lending agent services and collateral investment fees.
Certain officers and/or trustees of MIP are officers and/or directors of BlackRock or its affiliates.
The Master Portfolio may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers or common trustees. For the six months ended June 30, 2014, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as $32,963,411 and $9,613,682, respectively.
6. PURCHASES AND SALES
Purchases and sales of investments, excluding short-term securities for the six months ended June 30, 2014, were $88,274,249 and $143,312,458, respectively.
7. INCOME TAX INFORMATION
The Master Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Master Portfolio is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Master Portfolio. Therefore, no federal income tax provision is required. It is intended that the Master Portfolio’s assets will be managed so an investor in the Master Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.
The Master Portfolio files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Master Portfolio’s U.S. federal tax returns remains open for each of the four years ended December 31, 2013. The statutes of limitations on the Master Portfolio’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Master Portfolio’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.
8. BANK BORROWINGS
MIP, on behalf of the Master Portfolio, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Master Portfolio may borrow to fund shareholder redemptions. The agreement expires in April 2015. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Master Portfolio, can borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Master Portfolio did not borrow under the credit agreement during the six months ended June 30, 2014.
9. MARKET AND CREDIT RISK
In the normal course of business, the Master Portfolio invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Master Portfolio may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Master Portfolio; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Master Portfolio may be exposed to counterparty credit risk, or the risk that an entity with which the Master Portfolio has unsettled or open transactions may fail to or be unable to perform on its commitments. The Master Portfolio manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Master Portfolio to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Master Portfolio’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Master Portfolio.
10. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Master Portfolio through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.
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S&P 500 Stock Master Portfolio
Disclosure of Investment Advisory Agreement
The Board of Trustees of Master Investment Portfolio (the “Master Fund”) met in person on April 24, 2014 (the “April Meeting”) and May 28-30, 2014 (the “May Meeting”) to consider the approval of the Master Fund’s investment advisory agreement (the “Agreement”) with BlackRock Fund Advisors (the “Manager” or “BlackRock”), the Master Fund’s investment advisor, on behalf of S&P 500 Stock Master Portfolio (the “Master Portfolio”), a series of the Master Fund. BlackRock S&P 500 Stock Fund (the “Portfolio”), a series of BlackRock Funds III (the “Fund”), is a “feeder” fund that invests all of its investable assets in the Master Portfolio. Accordingly, the Board of Trustees of the Fund also considered the approval of the Agreement with respect to the Master Portfolio. For simplicity, (a) the Board of Trustees of the Master Fund and the Board of Trustees of the Fund are referred to herein collectively as the “Board,” and the members are referred to as “Board Members,” and (b) the shareholders of the Portfolio and the interest holders of the Master Portfolio are referred to as “shareholders.”
ACTIVITIES AND COMPOSITION OF THE BOARD
The Board consists of fifteen individuals, thirteen of whom are not “interested persons” of the Master Fund or the Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Master Fund or the Fund, as pertinent, and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).
THE AGREEMENT
Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreement on an annual basis. The Board has four quarterly meetings per year, each extending over two or three days, and a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to the Master Portfolio and the Portfolio by BlackRock, its personnel and its affiliates, including (as applicable) investment management; administrative and shareholder services; oversight of fund service providers; marketing services; risk oversight; compliance and assistance in meeting applicable legal and regulatory requirements.
The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to the Master Portfolio, the Portfolio and their shareholders. Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year and/or since inception periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against their
peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Master Portfolio and/or the Portfolio for services, such as marketing and distribution, call center and fund accounting; (c) the Master Portfolio’s and/or the Portfolio’s operating expenses and how BlackRock allocates expenses to the Master Portfolio and the Portfolio; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Master Portfolio’s and the Portfolio’s investment objective, policies and restrictions, and meeting new regulatory requirements; (e) the Master Fund’s and the Fund’s compliance with its respective Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of the Master Fund’s and/or the Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, exchange-traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable, and the similarities and differences between the services provided to these products as compared to the Master Portfolio and/or the Portfolio; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.
The Board has engaged in an ongoing strategic review with BlackRock of BlackRock’s product pipeline, opportunities to consolidate funds and BlackRock’s commitment to investment performance. BlackRock also furnished information to the Board in response to specific questions. These questions covered issues such as: BlackRock’s profitability, implementation of alternative investment strategies, investment performance, portfolio manager compensation and accountability, portfolio managers’ investments in the funds they manage, supplemental service agreements with third party distribution partners, subadvisory and advisory relationships with other clients (including mutual funds sponsored by third parties) and management fee levels and breakpoints. The Board further considered the importance of: (i) BlackRock’s management organization; (ii) marketing support for the funds; (iii) services provided to the funds by BlackRock affiliates; and (iv) BlackRock’s oversight of relationships with third party service providers.
BOARD CONSIDERATIONS IN APPROVING THE AGREEMENT
The Approval Process: Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreement. The Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on fees and expenses of the Master Portfolio and the Portfolio, as applicable, as compared with a peer group of funds as determined by Lipper (“Expense Peers”) and the investment performance of the Portfolio as compared with a peer group of funds as determined by Lipper1, as well as the gross investment performance of the Portfolio as compared with
1 | Funds are ranked by Lipper in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. |
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S&P 500 Stock Master Portfolio
Disclosure of Investment Advisory Agreement (continued)
its benchmark; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by the Master Portfolio and/or the Portfolio to BlackRock; (g) sales and redemption data regarding the Portfolio’s shares; and (h) if applicable, a comparison of management fees to similar BlackRock open-end funds, as classified by Lipper.
At the April Meeting, the Board reviewed materials relating to its consideration of the Agreement. As a result of the discussions that occurred during the April Meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May Meeting.
At the May Meeting, the Board of the Master Fund, including all the Independent Board Members, approved the continuation of the Agreement between the Manager and the Master Fund with respect to the Master Portfolio for a one-year term ending June 30, 2015. The Board of the Fund, including the Independent Board Members, also considered the continuation of the Agreement with respect to the Master Portfolio and found the Agreement to be satisfactory. In approving the continuation of the Agreement, the Board of the Master Fund considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Master Portfolio, the Portfolio and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Master Portfolio and the Portfolio; (d) the Portfolio’s costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance comparison as previously discussed; (e) economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with the Master Portfolio and the Portfolio; and (g) other factors deemed relevant by the Board Members. The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Portfolio shares and securities lending, services related to the valuation and pricing of portfolio holdings of the Master Portfolio, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Master Portfolio and the Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.
A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Portfolio. Throughout the year, the Board compared the Portfolio’s performance to the performance of a comparable group of mutual
funds and/or the performance of a relevant benchmark, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. The Board also reviewed the materials provided by the Master Portfolio’s portfolio management team discussing the Master Portfolio’s performance and the Master Portfolio’s investment objective, strategies and outlook.
The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and the Master Portfolio’s portfolio management team; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to the Master Portfolio’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.
In addition to advisory services, the Board considered the quality of the administrative and other non-investment advisory services provided to the Master Portfolio and the Portfolio. BlackRock and its affiliates provide the Master Portfolio and the Portfolio with certain administrative, shareholder and other services (in addition to any such services provided to the Master Portfolio and the Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Master Portfolio and the Portfolio. In particular, BlackRock and its affiliates provide the Master Portfolio and the Portfolio with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; (vi) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger or consolidation of certain open-end funds; and (vii) performing other administrative functions necessary for the operation of the Master Portfolio and the Portfolio, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.
B. The Investment Performance of the Master Portfolio, the Portfolio and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Master Portfolio and the Portfolio, as applicable. The Board noted that the Portfolio’s investment results correspond directly to the investment results of the Master Portfolio. In preparation for the April Meeting, the Board worked with its independent legal counsel, BlackRock and Lipper to develop a template for, and was provided with, reports independently prepared by Lipper, which included a comprehensive analysis of the Portfolio’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s
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Disclosure of Investment Advisory Agreement (continued)
rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the Portfolio as compared to other funds in its applicable Lipper category and the gross investment performance of the Portfolio as compared with its benchmark. The Board was provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review its methodology. The Board and its Performance Oversight and Contract Committee regularly review, and meet with Master Portfolio management to discuss, the performance of the Master Portfolio and the Portfolio, as applicable, throughout the year.
The Board noted that for each of the one-, three- and five-year periods reported, the Portfolio’s gross performance (before expenses and fees), as agreed upon by the Board, was within tolerance of its benchmark. BlackRock believes that gross performance relative to the benchmark is an appropriate performance metric for the Portfolio.
C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Master Portfolio and the Portfolio: The Board, including the Independent Board Members, reviewed the Master Portfolio’s contractual advisory fee rate compared with the other funds in the Portfolio’s Lipper category. The contractual advisory fee rate is shown before taking into account any reimbursements or fee waivers. The Board also compared the Portfolio’s total expense ratio, as well as the Master Portfolio’s actual advisory fee rate, to those of other funds in the Portfolio’s Lipper category. The total expense ratio represents a fund’s total net operating expenses, including any 12b-1 or non 12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual advisory fee rate gives effect to any advisory fee reimbursements or waivers that benefit a fund. The Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts.
The Board received and reviewed statements relating to BlackRock’s financial condition. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Master Portfolio and the Portfolio. The Board reviewed BlackRock’s profitability with respect to the Master Portfolio and the Portfolio, as applicable, and other funds the Board currently oversees for the year ended December 31, 2013 compared to available aggregate profitability data provided for the two prior years. The Board reviewed BlackRock’s profitability with respect to certain other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.
The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRock’s overall operating margin, in general, compared
to that of certain other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management and the relative product mix.
In addition, the Board considered the cost of the services provided to the Master Portfolio and the Portfolio by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of the Master Portfolio and the Portfolio and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs to the management of the Master Portfolio and the Portfolio. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreement and to continue to provide the high quality of services that is expected by the Board. The Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk and liability profile in servicing the Master Portfolio and the Portfolio in contrast to what is required of BlackRock with respect to other products with similar investment objectives across the open-end fund, ETF, closed-end fund and institutional account product channels, as applicable.
The Board noted that the Master Portfolio’s contractual advisory fee rate ranked in the first quartile, and that the actual advisory fee rate and the Portfolio’s total expense ratio each ranked in the first quartile, relative to the Portfolio’s Expense Peers. The Board noted that BlackRock proposed, and the Board agreed to, a contractual reduction of the Portfolio’s administration fee effective March 21, 2014, which results in savings to shareholders. The Board further noted that BlackRock and its affiliates have contractually agreed to reimburse or otherwise compensate the Master Portfolio/Portfolio for the fees and expenses of the Independent Board Members, counsel to the Independent Board Members and the Master Portfolio’s/Portfolio’s independent registered public accounting firm.
D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Master Portfolio and the Portfolio increase, as well as the existence of expense caps, as applicable. The Board also considered the extent to which the Master Portfolio and the Portfolio benefit from such economies and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Master Portfolio and the Portfolio to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Master Portfolio. In their consideration, the Board Members took into account the existence of any expense caps and further considered the continuation and/or implementation, as applicable, of such caps.
E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Master Portfolio and the Portfolio, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Master Portfolio and the Portfolio, including for administrative, distribution, securities lending
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S&P 500 Stock Master Portfolio
Disclosure of Investment Advisory Agreement (continued)
and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in ETFs without any offset against the management fees payable by the funds to BlackRock.
In connection with its consideration of the Agreement, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.
The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Portfolio shares if they believe that the Portfolio’s and/or the Master Portfolio’s fees and expenses are too high or if they are dissatisfied with the performance of the Portfolio.
CONCLUSION
The Board of the Master Fund, including all the Independent Board Members, approved the continuation of the Agreement between the Manager and the Master Fund, with respect to the Master Portfolio, for a one-year term ending June 30, 2015. Based upon its evaluation of all of the aforementioned factors in their totality, the Board of the Master Fund, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of the Master Portfolio and its shareholders. The Board of the Fund, including the Independent Board Members, also considered the continuation of the Agreement with respect to the Master Portfolio and found the Agreement to be satisfactory. In arriving at its decision to approve the Agreement, the Board of the Master Fund did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Master Portfolio reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.
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S&P 500 Stock Master Portfolio
Officers and Trustees
Ronald W. Forbes, Co-Chairman of the Board and Trustee
Rodney D. Johnson, Co-Chairman of the Board and Trustee
Paul L. Audet, Trustee
David O. Beim, Trustee
Frank J. Fabozzi, Trustee
Henry Gabbay, Trustee
Dr. Matina S. Horner, Trustee
Herbert I. London, Trustee
Ian A. MacKinnon, Trustee
Cynthia A. Montgomery, Trustee
Joseph P. Platt, Trustee
Robert C. Robb, Jr., Trustee
Toby Rosenblatt, Trustee
Kenneth L. Urish, Trustee
Frederick W. Winter, Trustee
John M. Perlowski, President and Chief Executive Officer
Richard Hoerner, CFA, Vice President
Brendan Kyne, Vice President
Neal Andrews, Chief Financial Officer
Jay Fife, Treasurer
Charles Park, Chief Compliance Officer and Anti-Money Laundering Officer
Benjamin Archibald, Secretary
Effective May 30, 2014, Brian Kindelan resigned as Chief Compliance Officer and Anti-Money Laundering Officer of the Fund and Charles Park became Chief Compliance Officer and Anti-Money Laundering Officer of the Fund. Mr. Park joined BlackRock in 2009 and is the current Chief Compliance Officer of BlackRock’s iShares exchange traded funds.
Appendix | 85 |
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Homestead Funds
4301 Wilson Blvd.
Arlington, VA 22203
800-258-3030
homesteadfunds.com
This report is authorized for distribution to
shareholders and others who have received
a copy of the prospectus.
Distributor: RE Investment Corporation.
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Item 2. Code of Ethics.
Not required in this filing.
Item 3. Audit Committee Financial Expert.
Not required in this filing.
Item 4. Principal Accountant Fees and Services.
Not required in this filing.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) | The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders under Item 1 of this Form N-CSR. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) | Disclosure Controls and Procedures. The registrant’s principal executive officer and principal financial officer concluded that the registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. |
(b) | Internal Control. There were no changes in registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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Item 12. Exhibits.
(a)(1) | Not required with this filing. | |
(a)(2) | A separate certification for the principal executive officer and principal financial officer of the registrant, as required by Rule 30a-2(a) under the Investment Company Act of 1940, is filed herewith. | |
(a)(3) | Not applicable. | |
(b) | A certification by the registrant’s principal executive officer and principal financial officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached hereto. |
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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.
HOMESTEAD FUNDS, INC.
By: | /s/ Peter R. Morris | |||
Peter R. Morris | ||||
President, Chief Executive Officer and Director |
Date: September 5, 2014
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/ Peter R. Morris | |||
Peter R. Morris | ||||
President, Chief Executive Officer and Director |
Date September 5, 2014
By: | /s/ Amy M. DiMauro | |||
Amy M. DiMauro | ||||
Treasurer |
Date: September 5, 2014