<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (11.9%)
FINANCIAL SERVICES (11.9%)
$ 1,750,000 Blackrock Capital Finance L.P., Series
1997-C1, Class E, Callable, (144A),
8.48% due 10/25/26(s)................. NR/NR $ 1,741,797
1,984,377 Chase Commercial Mortgage Securities
Corp., Subordinated Bond, Series
1997-1, Class E, Callable, 7.37% due
12/19/07(t)........................... NR/BBB- 1,971,432
1,000,000 Chase Commercial Mortgage Securities
Corp., Subordinated Bond, Series
1997-2, Class E, Callable, 6.60% due
12/19/07.............................. NR/BBB- 940,898
800,000 Citibank Credit Card Master Trust,
4.875% due 04/07/07................... Aaa/AAA 439,789
21,903,590 CS First Boston Mortgage Securities
Corp, Remic: IO, CSTR, Series 1997-2,
Class X, Callable, (144A), 1.04% due
06/25/20.............................. NR/AAA 1,019,886
939,978 DLJ Mortgage Acceptance Corp, Series
DRRE-1A, (144A), 8.25% due
07/25/27(t)........................... NR/NR 944,091
2,000,000 First Chicago/Lennar Trust, Series
1997-CHL1, Class D, CSTR, Callable,
(144A), 8.13% due 05/29/08(t)......... NR/NR 1,998,750
1,000,000 Green Tree Financial Corp., Subordinated
Bond, Series 1997-4, Class B1,
Callable, 7.23% due 02/15/29(t)....... Baa1/BBB+ 995,469
511,604 Home Mac Mortgage Securities Corp.,
Series 1985-1, secured by GNMA,
Pre-refunded, 11.375% due 08/01/15.... NR/NR 534,146
1,546,721 Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, CSTR, Series
1995-C2, Class E, Callable, 8.25% due
06/15/21(t)........................... Ba3/NR 1,537,054
2,000,000 Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, Series 1997-C1,
Class F, Callable, 7.12% due
06/18/29(s)........................... NR/BB 1,845,313
2,000,000 Mid-America Finance, Inc., Series
1998-1, Class A, 6.376% due
09/01/05(t)........................... NR/BBB 1,969,063
1,000,000 Morgan Stanley Capital, Inc.,
Subordinated Bond, CSTR, Series
1997-RR, Class D, Callable, (144A),
7.74% due 04/30/39.................... NR/NR 953,750
2,000,000 Morgan Stanley Capital, Inc.,
Subordinated Bond, Series 1997-C1,
Class F, Callable, (144A), 6.85% due
02/15/20(t)........................... Ba2/NR 1,802,500
435,000 Morgan Stanley Capital, Inc.,
Subordinated Bond, Series 1997-HF1,
Class F, Callable, (144A), 6.86% due
02/15/10.............................. NR/NR 396,122
1,570,000 Morgan Stanley Capital, Inc.,
Subordinated Bond, Series 1997-HF1,
Class G, Callable, (144A), 6.86% due
05/15/11(t)........................... NR/NR 1,336,463
1,000,000 Morgan Stanley Capital, Inc.,
Subordinated Bond, Series 1997-XL1,
Class G, Callable, (144A), 7.70% due
10/03/30.............................. Ba3/BB 980,937
1,000,000 Mortgage Capital Funding, Inc.,
Subordinated Bond, Series 1997-MC2,
Class E, Callable, 7.21% due
11/20/27(t)........................... Baa3/NR 978,281
250,000 Niantic Bay Fuel Trust, Secured Notes,
9.02% due 06/05/98.................... NR/NR 248,125
316,202 Salomon Brothers Mortgage Securities V,
Inc., Series 1985-1, secured by GNMA,
Pre-refunded, 12.00% due 04/01/15..... NR/NR 329,146
185,356 Salomon Brothers Mortgage Securities V,
Inc., Series 1985-2, secured by GNMA,
Pre-refunded, 12.00% due 05/01/15..... NR/NR 189,758
904,196 Structured Asset Securities Corp.,
Subordinated Bond, Series 1997-C1,
Class E, Callable, FRB, (144A), 6.56%
due 08/25/00(t)....................... NR/NR 903,913
---------------
24,056,683
---------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS AND ASSET BACKED
SECURITIES (COST $23,632,672)..... 24,056,683
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
CONVERTIBLE BONDS (0.4%)
BANKING (0.3%)
$ 500,000 Banamex S.A., Callable 07/15/00, (144A),
11.00% due 07/15/03................... Ba2/B+ $ 527,500
---------------
RETAIL (0.1%)
150,000 Corporate Express, Inc., Callable
07/01/99, 4.50% due 07/01/00.......... B3/B 136,312
---------------
TOTAL CONVERTIBLE BONDS (COST
$657,180)......................... 663,812
---------------
CORPORATE OBLIGATIONS (32.4%)
AEROSPACE (0.3%)
500,000 Northrop Grumman Corp., Callable
10/15/04, 9.375% due 10/15/24(s)...... Baa3/BBB- 588,865
---------------
APPARELS & TEXTILES (1.4%)
550,000 Fruit of the Loom, Inc., 7.875% due
10/15/99.............................. Ba1/BBB- 556,930
750,000 LD Fashions Holdings Corp., 7.13% due
03/31/05(f)........................... NR/NR 764,932
800,000 Pillowtex Corp., Series B, Callable
12/15/02, 9.00% due 12/15/07.......... B2/B+ 827,000
400,000 WestPoint Stevens, Inc., Callable
12/15/98, 8.75% due 12/15/01(s)....... Ba3/BB- 433,500
200,000 Westpoint Stevens, Inc., Callable
12/15/98, 9.375% due 12/15/05......... B2/BB- 217,500
---------------
2,799,862
---------------
AUTOMOTIVE SUPPLIES (0.5%)
300,000 Exide Corp., Callable 04/15/00, 10.00%
due 04/15/05.......................... B1/NR 315,000
200,000 Hayes Lemmerz International, Inc.,
Callable 07/15/01, 11.00% due
07/15/06.............................. B2/B 226,500
400,000 Hayes Lemmerz International, Inc.,
Series B, Callable 07/15/02, 9.125%
due 07/15/07.......................... B3/B 418,000
---------------
959,500
---------------
BANKING (0.3%)
500,000 Mellon Capital I, Series A, Callable
12/01/06, 7.72% due 12/01/26(s)....... A2/BBB+ 520,060
---------------
BROADCASTING & PUBLISHING (1.9%)
700,000 Capstar Broadcasting Partners, Callable
07/01/02, 9.25% due 07/01/07.......... B2/B- 733,250
200,000 Chancellor Media Corp., Callable
12/15/02, (144A), 8.125% due
12/15/07.............................. Ba3/NR 200,250
400,000 Chancellor Media Corp., Series B,
Callable 06/15/02, 8.75% due
06/15/07.............................. Ba3/B 416,000
700,000 Fox Kids Worldwide, Inc., Callable
11/01/02, (144A), 9.25% due
11/01/07.............................. B1/B 691,250
500,000 Lenfest Communications, Inc., 10.50% due
06/15/06.............................. B2/BB- 570,000
500,000 Lenfest Communications, Inc., (144A),
7.625% due 02/15/08................... Ba3/BB+ 498,750
700,000 TCI Communications Inc., 7.875% due
02/15/26.............................. Ba1/BBB- 761,726
---------------
3,871,226
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
BUSINESS & PUBLIC SERVICES (0.4%)
$ 800,000 Rural/Metro Corp., Callable 03/15/03,
(144A), 7.875% due 03/15/08........... Ba2/BB- $ 798,000
---------------
CHEMICALS (0.4%)
750,000 Cytec Industries, Inc., Callable, 6.50%
due 03/15/03(s)....................... Baa2/BBB 744,660
---------------
COMPUTER SOFTWARE (0.3%)
500,000 PSINet Inc., Callable 02/15/02, (144A),
10.00% due 02/15/05................... B3/B- 513,750
---------------
COMPUTER SYSTEMS (0.3%)
500,000 International Business Machines Corp.,
6.22% due 08/01/27(s)................. A1/A+ 506,725
---------------
DIVERSIFIED MANUFACTURING (0.6%)
700,000 American Standards Companies, Inc.,
7.375% due 04/15/05................... Ba3/BB- 690,375
500,000 K&F Industries, Inc., Series B, Callable
10/15/02, 9.25% due 10/15/07.......... B3/B- 518,750
---------------
1,209,125
---------------
ELECTRIC (0.7%)
600,000 Connecticut Light & Power Co., Series C,
Callable, 7.75% due 06/01/02(s)....... NR/BB+ 610,128
800,000 Texas Utilities Co., 6.25% due
10/01/04(t)........................... Baa1/BBB+ 797,936
---------------
1,408,064
---------------
ELECTRONICS (0.4%)
400,000 Coltec Industries, Inc., Callable,
(144A), 7.50% due 04/15/08............ Ba2/BB 399,000
119,290 LG Electronics Inc./Zenith Electronics
Corp. (Mexican Tranche), 9.09% due
04/02/07(f)........................... NR/NR 108,731
368,707 LG Electronics Inc./Zenith Electronics
Corp. (U.S. Tranche), 9.06% due
04/02/07(f)........................... NR/NR 338,049
---------------
845,780
---------------
ENTERTAINMENT, LEISURE & MEDIA (3.5%)
200,000 CSC Holdings, Inc., 7.875% due
12/15/07(s)........................... Ba2/BB+ 205,096
500,000 CSC Holdings, Inc., Callable 05/15/16,
10.50% due 05/15/16(s)................ B1/BB- 585,625
1,000,000 Falcon Holding Group L.P., Callable
04/15/03, (144A), 8.375% due
04/15/10.............................. B2/B 990,000
500,000 Fox/Liberty Networks LLC, Callable
08/15/02, 8.875% due 08/15/07......... B1/B 511,250
175,000 Jacor Communications Co., Callable
12/15/01, 9.75% due 12/15/06.......... B2/B 190,312
400,000 Jacor Communications Co., Series B,
Callable 06/15/02, 8.75% due
06/15/07.............................. B2/B 417,000
600,000 Lamar Advertising Co., Callable
09/15/02, 8.625% due 09/15/07......... B1/B 609,000
200,000 News America Holdings, Inc., 7.70% due
10/30/25.............................. Baa3/BBB- 208,928
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
$ 1,000,000 News America Holdings, Inc., 7.75% due
01/20/24.............................. Baa3/BBB $ 1,052,820
400,000 Outdoor Systems, Inc., Callable
06/15/02, 8.875% due 06/15/07......... B1/B 414,000
800,000 Premier Parks, Inc., Callable 04/01/03,
10.00% due 04/01/08 (v)............... B3/B- 510,000
500,000 Time Warner Entertainment Co. LP, 8.375%
due 07/15/33.......................... Baa3/BBB- 574,925
500,000 Time Warner, Inc., 7.57% due
02/01/24(s)........................... Ba1/BBB- 527,495
200,000 Time Warner, Inc., 9.15% due 02/01/23... Ba1/BBB- 244,750
---------------
7,041,201
---------------
FINANCIAL SERVICES (3.7%)
250,000 BankBoston Capital Trust II, Series B,
Callable 12/15/06, 7.75% due
12/15/26.............................. A2/BBB 259,690
500,000 Dominion Resources Capital Trust 1,
Callable 12/01/07, (144A), 7.83% due
12/01/27.............................. Baa1/BBB+ 505,065
800,000 FCB/NC Capital Trust 1, Callable
03/01/08, (144A), 8.05% due
03/01/28.............................. Baa3/BB+ 808,680
500,000 First Union Institutional Capital I,
Callable 12/01/06, 8.04% due
12/01/26(s)........................... A1/BBB+ 534,645
500,000 ICI Investments, Series E, MTN, 6.75%
due 08/07/02(s)....................... Baa1/A- 506,595
1,200,000 K N Capital Trust 1, Series B, Callable
04/15/07, 8.56% due 04/15/27.......... baa3/BB+ 1,346,364
500,000 Phillips 66 Capital Trust II, Callable
01/15/07, 8.00% due 01/15/37.......... Baa1/BBB+ 520,280
750,000 Provident Companies, Inc., 7.405% due
03/15/38.............................. A3/BBB 749,460
300,000 Sun Healthcare Group, Inc., 9.375% due
05/01/08.............................. B2/B- 301,500
700,000 Sun World International, Inc., Series B,
Callable 04/15/01, 11.25% due
04/15/04.............................. B2/B 750,750
500,000 Termoemcali Funding Corp., Callable
06/15/07, Sinking Fund, (144A),
10.125% due 12/15/14(t)............... NR/BBB- 511,700
560,000 US West Capital Funding Inc., 7.30% due
01/15/07.............................. Baa1/BBB+ 595,577
---------------
7,390,306
---------------
FOOD, BEVERAGES & TOBACCO (0.6%)
600,000 Nash-Finch Co., Callable 05/01/03,
(144A), 8.50% due 05/01/08............ B1/BB+ 594,000
700,000 Smithfield Foods, Inc., (144A), 7.625%
due 02/15/08.......................... Ba3/BB+ 691,250
---------------
1,285,250
---------------
HEALTH SERVICES (1.4%)
500,000 Genesis Health Ventures, Inc., Callable
06/15/00, 9.75% due 06/15/05.......... B2/B- 522,500
200,000 Genesis Health Ventures, Inc., Callable
10/01/01, 9.25% due 10/01/06.......... B2/B- 206,000
700,000 Mariner Health Group, Inc., Series B,
Callable 04/01/01, 9.50% due
04/01/06.............................. B2/B 731,500
500,000 Pharmerica, Inc., Callable 04/01/03,
(144A), 8.375% due 04/01/08........... B2/B 498,750
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
HEALTH SERVICES (CONTINUED)
$ 495,000 Tenet Healthcare Corp., 8.00% due
01/15/05.............................. Ba1/BB+ $ 507,301
250,000 Tenet Healthcare Corp., Callable
01/15/02, 8.625% due 01/15/07......... Ba3/B+ 259,360
---------------
2,725,411
---------------
MACHINERY (0.2%)
500,000 Ingersoll-Rand Co., 6.391% due
11/15/27.............................. A3/A- 506,205
---------------
MANUFACTURING (0.1%)
200,000 Wheeling-Pittsburgh Corp., Callable
11/15/02, (144A), 9.25% due 11/15/07.. B2/BB- 204,000
---------------
MEDICAL SUPPLIES (0.7%)
1,000,000 Beckman Instruments, Inc., (144A), 7.45%
due 03/04/08.......................... Ba1/BB+ 1,002,180
500,000 Sunrise Medical, Inc., 7.09% due
10/28/04(f)........................... NR/NR 507,220
---------------
1,509,400
---------------
MERCHANDISING (0.3%)
700,000 Tricon Global Restaurants, Callable,
7.45% due 05/15/05.................... Ba1/BB 698,768
---------------
METALS & MINING (0.7%)
600,000 Ryerson Tull, Inc., Callable, 8.50% due
07/15/01.............................. Ba1/BB 624,000
100,000 Ryerson Tull, Inc., Callable, 9.125% due
07/15/06.............................. Ba1/BB 108,000
200,000 WHX Corp., Callable 04/15/02, (144A),
10.50% due 04/15/05................... B3/B 204,000
500,000 Wyman-Gordon Co., Callable 12/15/02,
8.00% due 12/15/07.................... Ba2/BB 506,030
---------------
1,442,030
---------------
NATURAL GAS (0.7%)
300,000 Ferrellgas Partners, L.P., Series B,
Callable 06/15/01, (144A), 9.375% due
06/15/06.............................. B1/B+ 319,875
500,000 Lasmo (USA) Inc., 7.50% due
06/30/06(s)........................... Baa2/BBB 529,620
500,000 Ras Laffan Liquefied Natural Gas,
(144A), 8.294% due 03/15/14........... Baa2/BBB+ 519,070
---------------
1,368,565
---------------
OIL-PRODUCTION (1.2%)
700,000 Lomak Petroleum Inc., Callable 01/15/02,
8.75% due 01/15/07.................... B1/B 714,000
500,000 Nuevo Energy Co., Callable 04/15/01,
9.50% due 04/15/06.................... B1/B+ 528,750
500,000 Ocean Energy, Inc., Series B, Callable
07/15/02, 8.875% due 07/15/07(s)...... B3/BB- 525,000
700,000 Plains Resources Inc., Series B,
Callable 03/15/01, 10.25% due
03/15/06.............................. B2/B 754,250
---------------
2,522,000
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
OIL-SERVICES (0.8%)
$ 500,000 Enterprise Oil PLC, 6.70% due
09/15/07(t)........................... A3/A- $ 503,185
600,000 Newpark Resources, Inc., Series B,
Callable 12/15/02, 8.625% due
12/15/07.............................. B2/B+ 607,500
500,000 Oil Purchase Co., Sinking Fund, (144A),
7.10% due 04/30/02.................... Baa3/BBB 501,250
---------------
1,611,935
---------------
PACKAGING & CONTAINERS (0.6%)
400,000 Riverwood International Corp., Callable
08/01/02, 10.625% due 08/01/07........ NR/B- 422,000
100,000 Stone Container Corp., Callable
02/01/99, 9.875% due 02/01/01......... B2/B 102,875
100,000 Stone Container Corp., Callable
10/01/99, 10.75% due 10/01/02......... B1/B+ 106,500
500,000 Stone Container Corp., Series B,
Callable 12/05/97, 12.25% due
04/01/02.............................. B3/B- 515,625
---------------
1,147,000
---------------
POLLUTION CONTROL (0.3%)
500,000 Allied Waste Industries, Inc., Callable
12/01/01, 0.00% due 06/01/07(s)(v).... NR/NR 366,250
200,000 Allied Waste North America, Inc.,
Callable 12/01/01, 10.25% due
12/01/06.............................. B2/B+ 221,750
---------------
588,000
---------------
RAILROADS (0.4%)
750,000 Union Pacific Corp., 6.625% due
02/01/08.............................. Baa3/BBB 740,880
---------------
REAL ESTATE (1.0%)
1,000,000 Crescent Real Estate Equities Co.,
(144A), 7.125% due 09/15/07(t)........ Baa3/NR 984,980
1,000,000 Weeks Realty LP, Callable, 6.875% due
03/15/06.............................. Baa2/BBB 993,120
---------------
1,978,100
---------------
REAL ESTATE INVESTMENT TRUSTS (1.7%)
1,000,000 CarrAmerica Realty Corp., Callable,
7.375% due 07/01/07................... Baa3/BBB 1,017,660
500,000 Health Care Property Investors, Inc.,
6.50% due 02/15/06.................... Baa1/BBB+ 491,510
1,000,000 Health Care REIT, Inc., Callable, 7.625%
due 03/15/08.......................... Ba1/BBB- 997,690
1,000,000 Price Development Co. LP, 7.29% due
03/11/08(t)........................... Baa2/BBB- 1,004,330
---------------
3,511,190
---------------
RETAIL (1.7%)
488,201 Circuit City Stores, Inc., (144A), 7.96%
due 12/01/18(f)....................... NR/NR 476,313
1,000,000 Corning Consumer Products Co, Callable
05/01/03, (144A), 9.625% due
05/01/08.............................. B3/B 997,130
1,000,000 Fred Meyer, Inc., Callable, 7.45% due
03/01/08(s)........................... Ba2/BB+ 997,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
RETAIL (CONTINUED)
$ 275,000 Nine West Group, Inc. (144A), 8.375% due
08/15/05.............................. Ba2/BB $ 268,812
600,000 Proffitt's, Inc., Series B, 8.125% due
05/15/04.............................. Ba2/BB 615,750
---------------
3,355,505
---------------
TELECOMMUNICATIONS (1.9%)
200,000 Intermedia Communications, Inc., Series
B, Callable 01/15/03, 8.50% due
01/15/08.............................. B2/B 203,500
300,000 Intermedia Communications, Inc., Series
B, Callable 11/01/02, 8.875% due
11/01/07.............................. B2/B 309,750
300,000 ITC Deltacom, Inc., Callable 03/01/03,
(144A), 8.875% due 03/01/08........... B2/B 315,000
500,000 Level 3 Communications, Inc., Callable
05/01/03, (144A), 9.125% due
05/01/08.............................. B3/B 495,000
250,000 McLeodUSA, Inc., Callable 03/15/03,
(144A), 8.375% due 03/15/08........... B2/B+ 253,750
250,000 McLeodUSA, Inc., Callable 07/15/02,
9.25% due 07/15/07.................... B2/B+ 265,625
100,000 NEXTLINK Communications, Inc., Callable
04/15/01, 12.50% due 04/15/06......... B3/B 115,500
500,000 NEXTLINK Communications, Inc., Callable
04/15/03, (144A), 0.00% due
04/15/08(v)........................... B3/NR 313,750
575,000 NTL, Inc., Callable 04/01/03, (144A),
9.75% due 04/01/08.................... B3/B- 364,406
325,000 Qwest Communications International,
Inc., Callable 10/15/02, 0.00% due
10/15/07(v)........................... B2/B+ 231,969
350,000 Qwest Communications International,
Inc., Series B, Callable 04/01/02,
10.875% due 04/01/07.................. B2/B+ 406,875
400,000 RCN Corp., Callable 02/15/03, (144A),
0.00% due 02/15/08(v)................. B3/NR 250,500
250,000 RCN Corp., Callable 10/15/02, 10.00% due
10/15/07.............................. B3/NR 265,000
---------------
3,790,625
---------------
TELEPHONE (0.7%)
800,000 Century Telephone Enterprises, Inc.,
Series F, Callable, 6.30% due
01/15/08(s)........................... Baa1/BBB+ 787,656
650,000 Flag Limited, Callable 01/30/03, (144A),
8.25% due 01/30/08(s)................. Ba3/B+ 663,000
---------------
1,450,656
---------------
TEXTILES (0.9%)
800,000 Collins & Aikman Products Co., Callable
04/15/01, 11.50% due 04/15/06......... B3/B 900,000
800,000 Polymer Group, Inc., Series B, Callable
07/01/02, 9.00% due 07/01/07.......... B2/B 826,000
---------------
1,726,000
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
TRANSPORTATION (0.7%)
$ 500,000 Atlantic Express Transportation Corp.,
Callable 02/01/01, 10.75% due
02/01/04(s)........................... B2/B $ 534,375
500,000 CSX Corp., 6.95% due 05/01/27(s)........ Baa2/BBB 511,650
325,000 Enterprise Rent-a-Car USA Finance Co.,
MTN, (144A), 9.125% due 12/15/04...... Baa2/NR 370,718
---------------
1,416,743
---------------
UTILITIES (1.1%)
1,000,000 Calpine Corp., (144A), 7.875% due
04/01/08(s)........................... Ba2/BB- 995,000
250,000 Great Lake Gas Transmission, 6.73% due
03/25/18(f)........................... NR/NR 248,200
250,000 Great Lake Gas Transmission, Commitment,
6.72% due 03/25/18(f)................. NR/NR 248,010
750,000 Kincaid Generation LLC, Sinking Fund,
(144A), 7.33% due 06/15/20............ Baa3/BBB- 752,550
---------------
2,243,760
---------------
TOTAL CORPORATE OBLIGATIONS (COST
$63,953,684)...................... 65,019,147
---------------
FOREIGN CORPORATE OBLIGATIONS (7.4%)
AUSTRALIA (0.2%)
BANKING
500,000 National Australia Bank Ltd., 6.60% due
12/10/07.............................. A1/AA- 505,080
---------------
CANADA (3.1%)
FINANCIAL SERVICES
750,000 McKesson Finance of Canada, (144A),
6.55% due 11/01/02(s)................. A3/A 755,055
FOOD, BEVERAGES & TOBACCO
400,000 Cott Corp., Callable 07/01/00, 8.50% due
05/01/07.............................. Ba3/B+ 411,000
FOREST PRODUCTS & PAPER
500,000 Canadian Pacific Forest Products Ltd.,
9.25% due 06/15/02.................... Baa3/NR 535,330
OIL PRODUCTION
800,000 Gulf Canada Resources Ltd., 8.25% due
03/15/17.............................. Ba1/BB+ 849,536
TELECOMMUNICATIONS
565,000 Clearnet Communications, Inc., Callable
12/15/00, 0.00% due 12/15/05(v)....... B3/NR 472,481
610,000 Microcell Telecommunications, Inc.,
Series B, Callable 12/01/01, 0.00% due
06/01/06 (v).......................... B3/NR 457,500
700,000 Rogers Cablesystems Ltd., Callable
12/01/02, 10.00% due 12/01/07......... Ba3/BB+ 775,250
250,000 Rogers Cantel, Inc., Callable 10/01/02,
8.30% due 10/01/07.................... Ba3/BB+ 242,813
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
TELEPHONE
$ 600,000 Call-Net Enterprises, Inc., Callable
08/15/02, 0.00% due 08/15/07.......... B1/BB- $ 424,500
TRANSPORT & SERVICES
500,000 Laidlaw, Inc., 6.72% due 10/01/27(s).... Baa3/BBB+ 522,470
700,000 Teekay Shipping Corp., Sinking Fund,
8.32% due 02/01/08.................... Ba2/BB 725,375
---------------
6,171,310
---------------
CHILE (0.1%)
FOREST PRODUCTS & PAPER
270,000 Celulosa Arauco y Constitution SA, 7.00%
due 12/15/07.......................... Baa2/BBB+ 262,861
---------------
GERMANY (0.2%)
TELECOMMUNICATION EQUIPMENT
800,000 Telstra Corp. Ltd., Series EMTN, 5.125%
due 04/30/08.......................... Aa2/AA 440,155
---------------
MEXICO (1.2%)
BANKING
1,250,000 Banco Nacional de Comercio Exterior SNC,
7.25% due 02/02/04.................... Ba2/BB 1,185,625
METALS & MINING
750,000 Industrias Penoles, S.A. de C.V., 8.39%
due 06/25/12(f)....................... NR/NR 759,690
PACKAGING & CONTAINERS
500,000 Copamex Industrias S.A. de C.V., Series
B, Callable 04/30/02, 11.375% due
04/30/04(t)........................... NR/NR 545,000
---------------
2,490,315
---------------
PANAMA (0.3%)
BANKING
500,000 Banco Latinoamericano de Exportaciones,
S.A., (144A), 7.20% due 05/15/02(s)... Baa2/BBB 507,255
---------------
PHILIPPINES (0.2%)
UTILITIES
390,000 Ce Casecnan Water & Energy, Inc.,
Callable, (144A), 11.95% due
11/15/10(s)........................... Ba2/BB 419,652
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
RUSSIA (0.1%)
TELEPHONE
$ 200,000 AO Rostelecom Loan Participation, FRN,
9.094% due 02/15/00(s)(v)............. NR/NR $ 192,500
---------------
SOUTH KOREA (0.7%)
BANKING
295,000 Korea Development Bank, 6.75% due
12/01/05.............................. Ba1/BB+ 257,323
1,300,000 Korea Development Bank, 7.25% due
05/15/06.............................. Ba1/BB+ 1,172,028
---------------
1,429,351
---------------
SWEDEN (0.4%)
TRANSPORT & SERVICES
800,000 Stena AB, Callable 06/15/02, 8.75% due
06/15/07.............................. Ba2/BB- 825,000
---------------
THAILAND (0.3%)
BANKING
750,000 Bangkok Bank Public Co. Ltd., (144A),
7.25% due 09/15/05.................... A3/BBB+ 662,243
---------------
TURKEY (0.2%)
FINANCIAL SERVICES
500,000 Sultan Ltd., 8.75% due 06/11/99(v)...... NR/NR 493,800
---------------
UNITED KINGDOM (0.4%)
TELECOMMUNICATIONS
485,000 Ionica PLC, Callable 5/01/02, 0.00% due
05/01/07(v)........................... NR/NR 223,100
100,000 Ionica PLC, Callable 8/15/01, 13.50% due
08/15/06(s)........................... NR/NR 87,000
WATER
500,000 Anglian Water PLC, Series B, 6.48% due
01/12/13(f)........................... NR/NR 491,580
---------------
801,680
---------------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(COST $15,080,535)................ 15,201,202
---------------
GOVERNMENT OBLIGATIONS (9.3%)
AUSTRALIA (0.7%)
AUD 1,750,000 Government of Australia, Series 302,
9.75% due 03/15/02.................... NR/AAA 1,314,869
---------------
CANADA (0.1%)
CAD 290,000 Government of Canada, 7.00% due
12/01/06.............................. Aa1/AAA 225,274
---------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
28
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
DENMARK (0.3%)
DKK 3,900,000 Kingdom of Denmark, 8.00% due
03/15/06.............................. Aaa/AAA $ 671,012
---------------
FRANCE (3.2%)
GOVERNMENT OF FRANCE
FRF 16,000,000 4.00% due 01/12/00...................... NR/NR 2,651,883
FRF 8,940,000 5.50% due 10/12/01...................... Aaa/NR 1,532,101
FRF 2,480,000 6.00% due 10/25/25...................... Aaa/NR 437,582
FRF 9,750,000 7.50% due 04/25/05...................... Aaa/NR 1,870,039
---------------
6,491,605
---------------
GERMANY (2.9%)
FEDERAL REPUBLIC OF GERMANY
DEM 3,900,000 Series 115, 5.875% due 05/15/00......... Aaa/NR 2,241,334
DEM 2,810,000 Series 93, 6.75% due 04/22/03........... Aaa/NR 1,708,394
DEM 3,209,000 Series 94, 6.25% due 01/04/24........... Aaa/NR 1,949,186
---------------
5,898,914
---------------
JAPAN (1.7%)
GOVERNMENT OF JAPAN
JPY 230,900,000 Series 187, Callable, 3.30% due
06/20/06.............................. Aaa/NR 1,972,252
JPY 188,250,000 Series 200, Callable, 2.00% due
12/20/07.............................. Aaa/NR 1,459,354
---------------
3,431,606
---------------
SWITZERLAND (0.1%)
CHF 372,000 Government of Switzerland, 4.50% due
06/10/07.............................. NR/NR 275,663
---------------
UNITED KINGDOM (0.3%)
GBP 292,000 Treasury Gilt, 8.50% due 12/07/05....... Aaa/NR 564,662
---------------
TOTAL GOVERNMENT OBLIGATIONS (COST
$18,921,443)...................... 18,873,605
---------------
PRIVATE PLACEMENT (2.7%)
REAL ESTATE (2.7%)
920,889 1601 SE 8th Ave., Crystal River,
Florida, Crystal River Mobile Home
Park, Pre-refunded, 8.75% due
11/01/02(f)........................... NR/NR 964,364
499,000 31-33 Mercer Street (Ist Mortgage
Agreement on Cooperative Building in
New York City), 7.49% due
04/01/23(f)........................... NR/NR 520,462
639,231 3512 Oxford Avenue (1st Mortgage
Agreement on Cooperative Building in
Riverdale, New York), 8.45% due
06/01/17(f)........................... NR/NR 710,282
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
29
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
REAL ESTATE (CONTINUED)
$ 639,296 3810 Greystone Avenue (1st Mortgage
Agreement on Cooperative Building in
Riverdale, New York), 8.50% due
06/01/17(f)........................... NR/NR $ 704,946
818,158 421 West 57th Street (1st Mortgage
Agreement on Cooperative Building in
New York City), 8.98% due
07/01/22(f)........................... NR/NR 944,114
1,495,086 Walgreen-Dal, 7.625% due
11/15/13(f)(t)........................ NR/NR 1,563,082
---------------
5,407,250
---------------
TOTAL PRIVATE PLACEMENT (COST
$4,980,643)....................... 5,407,250
---------------
SOVEREIGN BONDS (16.4%)
ARGENTINA (4.5%)
2,192,786 Republic of Argentina - Bocon, Series
PRE1, Callable 06/04/98, 3.06% due
04/01/01(v)........................... Ba3/BBB- 2,124,781
5,044,500 Republic of Argentina Bearer, FRB,
Callable 09/30/98, Sinking Fund,
6.625% due 03/31/05(v)................ Ba3/BB 4,628,329
1,300,000 Republic of Argentina Global Bonds,
9.75% due 09/19/27(s)................. Ba3/BB 1,254,500
1,000,000 Republic of Argentina Global Bonds,
Series BGL5, 11.375% due 01/30/17..... Ba3/BB 1,106,500
---------------
9,114,110
---------------
BRAZIL (4.5%)
1,000,000 Republic of Brazil Bearer DCB, Series L,
Callable 10/15/98, Sinking Fund,
6.688% due 04/15/12(v)................ B1BB- 792,500
1,212,420 Republic of Brazil C Bonds, Callable
10/15/98, Sinking Fund, 8.00% due
04/15/14(v)........................... B1/BB- 1,002,526
271,600 Republic of Brazil EI Bonds, Series L,
Callable 10/15/98, Sinking Fund,
6.625% due 04/15/06(v)................ B1/BB- 242,403
2,230,967 Republic of Brazil MYDFA Trust
Certificates, Series REGS, Sinking
Fund, 6.563% due 09/15/07(s)(v)....... NR/NR 1,952,096
4,250,000 Republic of Brazil NMB-1994L Bearer,
Callable 10/15/98, Sinking Fund,
6.688% due 04/15/09(v)................ B1/BB- 3,580,625
1,000,000 Republic of Brazil, Series 15-U,
Callable 10/15/98, 6.688% due
04/15/09(v)........................... B1/BB- 780,000
1,000,000 Republic of Brazil, Series 30-U, 5.25%
due 04/15/24(v)....................... B1/NR 746,200
---------------
9,096,350
---------------
BULGARIA (0.5%)
550,000 Republic of Bulgaria FLIRB, Series A,
Global Bearer, Callable 07/28/98,
Sinking Fund, 2.25% due 07/28/12(v)... B2/NR 368,500
430,000 Republic of Bulgaria PDI, FRB, Callable
07/28/98, Sinking Fund, 6.563% due
07/28/11(v)........................... B2/NR 339,184
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
30
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
BULGARIA (CONTINUED)
$ 449,000 Republic of Bulgaria, Series B, Callable
07/28/98, 7.063% due 07/28/24(v)...... B2/NR $ 368,719
---------------
1,076,403
---------------
ECUADOR (0.2%)
778,869 Republic of Ecuador Global Bearer PDI
Bonds, Callable 08/28/98, Sinking
Fund, 6.625% due 02/27/15(v).......... B1/NR 498,476
---------------
KOREA (0.6%)
1,320,000 Republic of Korea, 8.875% due
04/15/08.............................. NR/BB+ 1,287,000
---------------
MEXICO (1.3%)
2,250,000 United Mexican States Global Bonds,
11.375% due 09/15/16.................. Ba2/BB 2,641,050
---------------
MOROCCO (0.2%)
550,000 Government of Morroco -- Restructuring &
Consolidation Agreement, Series A,
Sinking Fund, 6.656% due
01/01/09(v)........................... NR/NR 489,500
---------------
PANAMA (0.3%)
700,000 Republic of Panama, 8.25% due
04/22/08.............................. Ba1/BB+ 688,625
---------------
PERU (0.3%)
825,000 Republic of Peru PDI, Sinking Fund,
4.00% due 03/07/17(v)................. NR/NR 561,000
---------------
RUSSIA (2.3%)
500,000 City of Moscow, (144A), 9.50% due
05/31/00(s)........................... Ba3/BB- 488,750
85,000 Ministry of Finance Russia, (144A),
9.25% due 11/27/01.................... Ba3/BB- 83,300
317,000 Ministry of Finance Russia, (144A),
10.00% due 06/26/07................... Ba3/BB- 305,525
1,695,000 Russia IAN, Sinking Fund, 6.719% due
12/15/15(v)........................... NR/NR 1,220,400
3,900,000 Russia Principal Loans, Sinking Fund,
6.719% due 12/15/20(v)................ NR/NR 2,476,500
---------------
4,574,475
---------------
VENEZUELA (1.7%)
1,190,476 Republic of Venezuela DCB, Series DL,
Callable 06/04/98, Sinking Fund,
6.813% due 12/18/07(v)................ Ba2/B+ 1,068,452
428,570 Republic of Venezuela FLIRB, Series A,
Callable 09/30/98, 6.625% due
03/31/07(v)........................... Ba2/B+ 383,056
429,705 Republic of Venezuela FLIRB, Series B,
Callable 09/30/98, Sinking Fund,
6.625% due 03/31/07(v)................ Ba2/B+ 384,070
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
31
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
VENEZUELA (CONTINUED)
$ 1,700,000 Republic of Venezuela Global Bonds,
9.25% due 09/15/27.................... Ba2/B+ $ 1,503,650
---------------
3,339,228
---------------
TOTAL SOVEREIGN BONDS (COST
$32,670,768)...................... 33,366,217
---------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (13.9%)
FEDERAL HOME LOAN MORTGAGE CORP.
6,025,000 Series 194, Class IO, 6.50% due
04/01/28.............................. 1,950,594
6,025,000 Series 194, Class PO, 0.00% due
04/01/28.............................. 4,025,453
---------------
5,976,047
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
1,312,280 6.00% due 03/01/28...................... 1,267,623
2,588,323 6.00% due 04/01/28...................... 2,500,165
3,970,000 Dwarf TBA, 6.50% due 12/01/27........... 3,983,647
JPY 40,000,000 2.125% due 10/09/07..................... 312,382
6,020,000 TBA May, 7.00% due 01/01/99............. 6,130,994
2,000,000 TBA May, 7.50% due 01/01/99............. 2,053,125
---------------
16,247,936
---------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
188,968 7.50% due 06/15/25...................... 194,030
850,056 7.50% due 02/15/27...................... 873,356
251,230 7.50% due 03/15/27...................... 258,071
936,612 7.50% due 05/15/27...................... 962,182
477,593 7.50% due 08/15/27...................... 490,669
908,972 7.50% due 10/15/27...................... 933,915
1,292,721 7.50% due 12/15/27...................... 1,328,257
494,206 7.50% due 02/15/28...................... 507,796
47,212 7.50% due 03/15/28...................... 48,510
---------------
5,596,786
---------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $27,817,962).... 27,820,769
---------------
U.S. TREASURY OBLIGATIONS (1.3%)
U.S. TREASURY NOTES (1.3%)
210,000 5.50% due 02/15/08...................... 207,325
350,000 5.75% due 12/31/98...................... 350,714
80,000 6.00% due 09/30/98...................... 80,211
1,400,000 6.25% due 02/28/02(s)................... 1,427,902
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
32
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- --------------- ---------------------------------------- ------------ ---------------
<C> <S> <C> <C>
U.S. TREASURY NOTES (CONTINUED)
$ 475,000 6.875% due 05/15/06..................... $ 508,682
---------------
2,574,834
---------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $2,587,957)................. 2,574,834
---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ---------------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCKS (0.1%)
REAL ESTATE INVESTMENT TRUSTS (0.1%)
3000 Simon DeBartolo Group, Inc. (cost
$147,750)............................. 147,000
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ---------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (11.2%)
U.S. TREASURY OBLIGATIONS (0.1%)
$ 110,000 U.S. Treasury Bills, 5.235% due 07/23/98(y)........... 108,691
---------------
TIME DEPOSITS (1.2%)
2,500,000 State Street Bank & Trust Co. London, 5.44% due
05/07/98............................................ 2,500,000
---------------
REPURCHASE AGREEMENT (9.9%)
19,954,000 State Street Bank and Trust Co. 5.00% dated 4/30/98
due 5/01/98; proceeds $19,956,771 (collateralized by
$1,065,000, U.S. Treasury Notes, 6.125% due 9/30/00
valued at $1,080,996; $855,000, U.S. Treasury Notes,
6.25% due 6/30/98, valued at $874,317; $3,910,000,
U.S. Treasury Notes, 6.625% due 6/30/01, valued at
$4,095,725; $11,990,000, U.S. Treasury Notes, 7.125%
due 9/30/99, valued at $12,299,822; $1,515,000, U.S.
Treasury Bonds, 8.875% due 8/15/17, valued at
$2,016,870)......................................... 19,954,000
---------------
TOTAL SHORT-TERM INVESTMENTS (COST $22,562,720)... 22,562,691
---------------
TOTAL INVESTMENTS (COST $213,013,314) (107.0%)........ 215,693,210
LIABILITIES IN EXCESS OF OTHER ASSETS (-7.0%)......... (14,069,868)
---------------
NET ASSETS (100.0%)................................... $ 201,623,342
---------------
---------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $213,349,391 for Federal Income Tax
purposes at April 30, 1998, the aggregate gross unrealized appreciation and
depreciation was $3,270,186 and $926,369, respectively, resulting in net
unrealized appreciation of $2,343,817.
(f) Fair valued security. Approximately 4% of the market value of the securities
have been valued at fair value. (See Note 1a)
(s) Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$22,867,735 of the market value has been segregated.
(t) All or a portion of the security has been segregated as collateral for when
issued securities.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
(y) Yield to maturity.
{::} Denominated in USD unless otherwise indicated.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
The Accompanying Notes are an Integral Part of the Financial Statements.
33
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
AUD -- Australian Dollar.
C -- Capitalization.
CAD -- Canadian Dollar.
CHF -- Swiss Franc.
CSTR -- Collateral Strip Rate.
DCB -- Debt Conversion Bonds.
DEM -- German Mark.
DKK -- Danish Krone.
EI -- Eligible Interest.
FLIRB -- Front Loaded Interest Reduction Bonds.
FRB -- Floating Rate Bond.
FRN -- Floating Rate Note.
FRF -- French Franc.
GBP -- British Pound.
IAN -- Interest in Arrears Note.
IO -- Interest Only.
JPY -- Japanese Yen.
MTN -- Medium Term Note.
MYFDA -- Multi-Year Refinancing Agreement.
NMB -- New Money Bond.
NR -- Not Rated.
PDI -- Past due Interest.
PO -- Principal Only.
Pre-refunded -- Bonds for which the issuer of the bond invests the proceeds from
a subsequent bond issuance in treasury securities, whose maturity coincides with
the first call date of the first bond.
REMIC -- Real Estate Mortgage Investment Conduit.
The Accompanying Notes are an Integral Part of the Financial Statements.
34
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $213,013,314 ) $215,693,210
Cash 3,097
Foreign Currency at Value (Cost $705,809 ) 705,180
Receivable for Investments Sold 4,918,891
Interest Receivable 2,540,486
Unrealized Appreciation of Forward Foreign
Currency Contracts 1,046,223
Deferred Organization Expenses 13,726
Prepaid Expenses and Other Assets 1,222
------------
Total Assets 224,922,035
------------
LIABILITIES
Payable for Investments Purchased 22,321,307
Unrealized Depreciation of Forward Foreign
Currency Contracts 779,179
Advisory Fee Payable 73,035
Variation Margin Payable 69,500
Custody Fee Payable 18,134
Organization Expenses Payable 6,700
Administrative Services Fee Payable 4,722
Fund Services Fee Payable 638
Administration Fee Payable 234
Accrued Trustees' Fees and Expenses 16
Accrued Expenses 25,228
------------
Total Liabilities 23,298,693
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $201,623,342
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
35
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income (Net of Foreign Withholding Tax
of $3,688 ) $5,983,814
EXPENSES
Advisory Fee $ 342,898
Custodian Fees and Expenses 77,555
Professional Fees and Expenses 25,191
Administrative Services Fee 22,710
Fund Services Fee 2,326
Amortization of Organization Expense 1,754
Administration Fee 1,147
Trustees' Fees and Expenses 1,074
Miscellaneous 3,955
----------
Total Expenses 478,610
Less: Reimbursement of Expenses (3,339)
----------
NET EXPENSES 475,271
----------
NET INVESTMENT INCOME 5,508,543
NET REALIZED GAIN (LOSS) ON
Investment Transactions 122,944
Futures Contracts (184,099)
Foreign Currency Contracts and Transactions 12,483
----------
Net Realized Loss (48,672)
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 2,443,569
Futures Contracts 133,862
Foreign Currency Contracts and Translations 299,228
----------
Net Change in Unrealized Appreciation 2,876,659
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $8,336,530
----------
----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
36
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MARCH 17, 1997
MONTHS ENDED (COMMENCMENT OF
APRIL 30, 1998 OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1997
--------------- -----------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 5,508,543 $ 3,355,461
Net Realized Gain (Loss) on Investments,
Futures and Foreign Currency Contracts
and Transactions (48,672) 566,692
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign
Currency Contracts and Translations 2,876,659 2,143
--------------- -----------------------
Net Increase in Net Assets Resulting
from Operations 8,336,530 3,924,296
--------------- -----------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS
Contributions 104,344,655 102,199,631
Withdrawals (11,438,745) (5,843,035)
--------------- -----------------------
Net Increase from Investors'
Transactions 92,905,910 96,356,596
--------------- -----------------------
Total Increase in Net Assets 101,242,440 100,280,892
NET ASSETS
Beginning of Period 100,380,902 100,010
--------------- -----------------------
End of Period $ 201,623,342 $100,380,902
--------------- -----------------------
--------------- -----------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 17, 1997
FOR THE (COMMENCEMENT OF
SIX MONTHS ENDED OPERATIONS) THROUGH
APRIL 30, 1998 OCTOBER 31, 1997
(UNAUDITED) (UNAUDITED)
------------------ ----------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.62%(a) 0.65%(a)
Net Investment Income 7.23%(a) 7.09%(a)
Decrease Reflected in Expense Ratio
due to Expense Reimbursement 0.00%(a)(c) 0.15%(a)
Portfolio Turnover 123%(b) 212%(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) Not Annualized.
(c) Less than 0.01%.
The Accompanying Notes are an Integral Part of the Financial Statements.
37
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Global Strategic Income Portfolio (the "portfolio") is one of two subtrusts
(portfolios) comprising Series Portfolio II. Series Portfolio II is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a no-load,
open-end management investment company which was organized as a trust under the
laws of the State of New York on January 9, 1997. The portfolio commenced
operations on March 17, 1997 and received a contribution of certain assets and
liabilities including securities, with a value of $41,072,730 on that date from
the J.P. Morgan Institutional Global Strategic Income Fund (formerly The JPM
Institutional Global Strategic Income Fund) in exchange for a beneficial
interest in the portfolio. The portfolio's investment objective is to provide a
high total return from a portfolio of fixed income securities of foreign and
domestic issuers. The Declaration of Trust permits the trustees to issue an
unlimited number of beneficial interests in the portfolio.
Investments in emerging and international markets may involve certain
considerations and risks not typically associated with investments in the United
States. Future economic and political developments in emerging market and
foreign countries could adversely affect the liquidity or value, or both, of
such securities in which the portfolio is invested. The ability of the issuers
of debt, asset-backed and mortgage securities held by the portfolio to meet
their obligations may be affected by economic and political developments in a
specific industry or region. The value of asset-backed and mortgage securities
can be significantly affected by changes in interest rates or rapid principal
payments including pre-payments.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for each security. The value of such security will be based either
on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures
established by the portfolio's trustees. Such procedures include the use
of independent pricing services, which use prices based upon yields or
prices of securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. All
short-term portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market is closed. If
events materially affecting the value of foreign securities occur between
the time when the
38
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
exchange on which they are traded closes and the time when the portfolio's
net assets are calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general
supervision of the portfolio's trustees.
The portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued
interest, is at least equal to the repurchase price plus accrued interest.
In the event of default of the obligation to repurchase, the portfolio has
the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
d) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations. At April 30, 1998, the portfolio had open forward
foreign currency contracts as follows:
39
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
VALUE 4/30/98 (DEPRECIATION)
----------- ----------- --------------
<S> <C> <C> <C>
PURCHASE CONTRACTS
Australian Dollar 522,875 expiring 6/29/98....... $ 347,895 $ 341,298 $ (6,597)
British Pound 3,456,926 expiring 6/29/98......... 5,710,857 5,763,321 52,464
British Pound 1,682,577 expiring 9/24/98......... 2,802,735 2,795,001 (7,734)
British Pound 234,290 for FRF 2,363,991 expiring
9/24/98......................................... 395,983 389,190 (6,793)
British Pound 47,478 for DEM 142,024 expiring
9/24/98......................................... 79,772 78,867 (905)
Canadian Dollar 3,721,383 expiring 6/29/98....... 2,615,338 2,604,984 (10,354)
Canadian Dollar 985,844 expiring 9/24/98......... 698,685 691,162 (7,523)
Danish Krone 5,281,920 expiring 6/29/98.......... 763,063 774,127 11,064
Danish Krone 1,339,410 expiring 9/24/98.......... 194,852 197,029 2,177
French Franc 64,196,154 expiring 6/29/98......... 10,572,311 10,704,433 132,122
French Franc 17,382,170 expiring 9/24/98......... 2,880,752 2,911,618 30,866
German Mark 12,249,700 expiring 6/29/98.......... 6,758,850 6,849,270 90,420
German Mark 171,183 for GBP 58,512 expiring
6/29/98......................................... 97,549 95,715 (1,834)
German Mark 59,993 for SEK 269,638 expiring
6/29/98......................................... 34,906 33,544 (1,362)
German Mark 8,272,231 expiring 9/24/98........... 4,593,191 4,646,339 53,148
Italian Lira 808,839,938 expiring 6/29/98........ 463,426 456,859 (6,567)
Japanese Yen 717,720,474 expiring 6/29/98........ 5,610,702 5,478,201 (132,501)
Japanese Yen 319,304,275 expiring 9/24/98........ 2,501,572 2,467,994 (33,578)
Mexican Peso 4,574,250 expiring 6/26/98.......... 500,000 523,208 23,208
Mexican Peso 3,220,000 expiring 9/22/98.......... 362,083 372,384 10,301
New Zealand Dollar 779,423 expiring 6/29/98...... 439,088 430,771 (8,317)
New Zealand Dollar 779,423 expiring 9/24/98...... 427,124 428,005 881
Swedish Krona 12,763,831 expiring 6/29/98........ 1,604,000 1,652,318 48,318
Swiss Franc 430,388 expiring 6/29/98............. 293,030 288,991 (4,039)
</TABLE>
40
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
SETTLEMENT VALUE AT APPRECIATION/
VALUE 4/30/98 (DEPRECIATION)
----------- ----------- --------------
<S> <C> <C> <C>
SALES CONTRACTS
Australian Dollar 522,875 expiring 6/29/98....... $ 355,685 $ 341,298 $ 14,387
Australian Dollar 2,017,099 expiring 9/24/98..... 1,355,069 1,319,270 35,799
British Pound 3,329,573 expiring 6/29/98......... 5,413,053 5,551,000 (137,947)
British Pound 2,227,848 expiring 9/24/98......... 3,691,210 3,700,775 (9,565)
Canadian Dollar 3,721,383 expiring 6/29/98....... 2,615,812 2,604,984 10,828
Canadian Dollar 1,290,761expiring 9/24/98........ 913,425 904,935 8,490
Danish Krone 5,281,920 expiring 6/29/98.......... 772,368 774,127 (1,759)
Danish Krone 5,978,730 expiring 9/24/98.......... 866,729 879,477 (12,748)
French Franc 64,196,154 expiring 6/29/98......... 10,643,689 10,704,433 (60,744)
French Franc 55,164,532 expiring 9/24/98......... 9,153,075 9,240,392 (87,317)
German Mark 12,480,876 expiring 6/29/98.......... 6,968,564 6,978,529 (9,965)
German Mark 199,000 expiring 8/5/98.............. 114,086 111,480 2,606
German Mark 106,296 expiring 8/12/98............. 60,000 59,569 431
German Mark 21,243,191 expiring 9/24/98.......... 11,818,945 11,931,857 (112,912)
Italian Lira 808,839,938 expiring 6/29/98........ 463,397 456,859 6,538
Japanese Yen 717,720,504 expiring 6/29/98........ 5,749,053 5,478,202 270,851
Japanese Yen 940,286,113 expiring 9/24/98........ 7,387,099 7,267,739 119,360
Mexican Peso 4,574,250 expiring 6/26/98.......... 523,208 523,208 --
Mexican Peso 3,220,000 expiring 9/22/98.......... 372,383 372,383 --
New Zealand Dollar 779,423 expiring 6/29/98...... 451,042 430,771 20,271
New Zealand Dollar 779,423 expiring 9/24/98...... 436,126 428,005 8,121
Swedish Krona 12,494,193 expiring 6/29/98........ 1,578,397 1,617,413 (39,016)
Swiss Franc 430,388 expiring 6/29/98............. 299,218 288,991 10,227
Swiss Franc 430,388 expiring 9/24/98............. 295,968 291,725 4,243
--------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 267,044
--------------
--------------
</TABLE>
e) Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place will be fixed when
the portfolio enters into the contract. Upon entering into such a
contract, the portfolio is required to pledge to the broker an amount of
cash and/or liquid securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, the portfolio
agrees to receive from, or pay to, the broker an amount of cash equal to
the daily fluctuation in the value of the contract. Such receipts or
payments are known as "variation margin" and are recorded by the portfolio
as unrealized gains or
41
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
losses. When the contract is closed, the 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 when it was closed. The
portfolio invests in futures contracts for the purpose of hedging its
existing portfolio securities, or securities the portfolio intends to
purchase, against fluctuations in value caused by changes in prevailing
market interest rates or securities movements. The use of futures
transactions involves the risk of imperfect correlation of movements in
the price of futures contracts, interest rates and the underlying hedged
assets, and the possible inability of counterparties to meet the terms of
their contracts. At April 30, 1998, the portfolio had open futures
contracts as follows:
SUMMARY OF OPEN CONTRACTS AT APRIL 30, 1998
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Long Bond, expiring June 1998............... 53 $ (54,799) $ 6,426,392
-------------- -------------- ----------------
Totals........................................... 53 $ (54,799) $ 6,426,392
-------------- -------------- ----------------
-------------- -------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS SHORT (DEPRECIATION) OF CONTRACTS
--------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Long Bond, expiring June 1998............... 31 $ 11,810 $ 14,290,451
U.S. Ten Year Note, expiring June 1998........... 127 26,764 3,738,591
--------------- -------------- ----------------
Totals........................................... 158 $ 38,574 $ 18,029,042
--------------- -------------- ----------------
--------------- -------------- ----------------
</TABLE>
f) The portfolio may engage in swap transactions, specifically interest rate,
currency, index and total return swaps. The portfolio will use these
transactions to preserve a return or spread on a particular investment or
portion of its investments, to protect against currency fluctuations, as a
duration management technique, to protect against any increase in the
price of securities the portfolio anticipates purchasing at a later date,
or to gain exposure to certain markets in the most economical way
possible. An interest rate swap is an agreement between two parties to
exchange interest payments on a specified amount ("the notional amount")
for a specified period. If a swap agreement provides for payments in
different currencies, the parties might agree to exchange the notional
amount as well. Risks associated with swap transactions include the
ability of counterparties to meet the terms of their contracts, and the
amount of the portfolio's potential gain or loss on swap transaction is
not subject to any fixed limit.
g) The portfolio may enter into commitments to buy and sell investments to
settle on future dates as part of its normal investment activities. These
commitments are reported at market value in the financial statements.
Credit risk exists on these commitments to the extent of any unrealized
gains on the underlying securities purchased and any unrealized losses on
the underlying securities sold. Market risk exists on these commitments to
the same extent as if the security were owned on a settled basis and gains
and losses are recorded and reported in the same manner. However, during
the commitment period, these investments earn no interest or dividends.
42
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
h) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign witholding taxes at various rates.
i) The portfolio incurred organization expenses in the amount of $17,700.
Morgan Guaranty Trust Company of New York ("Morgan") has paid the
organization expenses of the portfolio. The portfolio has agreed to
reimburse Morgan for these costs which are being deferred and amortized on
a straight-line basis over a period not to exceed five years beginning
with the commencement of operations of the portfolio.
j) Expenses incurred by the Series Portfolio II with respect to any two or
more portfolios in the Series Portfolio are allocated in proportion to the
net assets of each portfolio in the Series Portfolio II, except where
allocations of direct expenses to each portfolio can otherwise be made
fairly. Expenses directly attributable to a portfolio are charged to that
portfolio.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with Morgan. Under the
terms of the agreement, the portfolio pays Morgan at an annual rate of
0.45% of the portfolio's average daily net assets. For the six months
ended April 30, 1998, this fee amounted to $342,898.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement
agent. Under a Co-Administration Agreement between FDI and the portfolio,
FDI provides administrative services necessary for the operations of the
portfolio, furnishes office space and facilities required for conducting
the business of the portfolio and pays the compensation of the officers
affiliated with FDI. The portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000 plus FDI's
out-of-pocket expenses. The amount allocable to the portfolio is based on
the ratio of the portfolio's net assets to the aggregate net assets of the
portfolio and certain other investment companies subject to similar
agreements with FDI. For the six months ended April 30, 1998, the fee for
these services amounted to $1,147.
c) The portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain
aspects of the administration and operation of the portfolio. Under the
Services Agreement, the portfolio has agreed to pay Morgan a fee equal to
its allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certaim other portfolios for which Morgan acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust (formerly
JPM Series Trust) in accordance with the following annual schedule: 0.09%
on the first $7 billion of their aggregate average daily net assets and
0.04% of their aggregate average daily net assets in excess of $7 billion
less the complex-wide fees payable to FDI. The portion of this charge
payable by the portfolio is
43
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1998
- --------------------------------------------------------------------------------
determined by the proportionate share that its net assets bear to the net
assets of the master portfolios, other investors in the master portfolios
for which Morgan provides similar services and J.P. Morgan Series Trust.
For the six months ended April 30, 1998, the fee for these services
amounted to $22,710.
In addition, Morgan has agreed to reimburse the portfolio to the extent
necessary to maintain the total operating expenses of the portfolio at no
more than 0.65% of the average daily net assets of the portfolio through
February 28, 1999. For the six months ended April 30, 1998, Morgan has
agreed to reimburse the portfolio $3,339 for expenses under this
agreement.
d) The portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the portfolio's affairs. The trustees of the
portfolio represent all the existing shareholders of Group. The
portfolio's allocated portion of Group's costs in performing its services
amounted to $2,326 for the six months ended April 30, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds (formerly the JPM Pierpont Funds), the
J.P. Morgan Institutional Funds (formerly The JPM Institutional Funds),
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $500.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $110,592,721 $ 91,928,032
Corporate and Collateralized Mortgage
Obligations..................................... 163,295,270 83,449,845
------------ ------------
$273,887,991 $175,377,877
------------ ------------
------------ ------------
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
44
