<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET BACKED SECURITIES (9.6%)
FINANCIAL SERVICES (9.6%)
$ 1,750,000 Blackrock Capital Finance L.P., Subordinated
Bond, CSTR, Series 1997-C1, Class E, Callable,
8.480% due 10/25/26(s)......................... NR/NR $ 1,488,594
1,984,377 Chase Commercial Mortgage Securities Corp.,
Subordinated Bond, Series 1997-1, Class E,
Callable, 7.370% due 12/19/07(s)............... NR/BBB- 1,850,509
1,000,000 Chase Commercial Mortgage Securities Corp.,
Subordinated Bond, Series 1997-2, Class E,
Callable, 6.600% due 12/19/07(s)............... NR/BBB- 877,305
16,343,940 CS First Boston Mortgage Securities Corp., IO,
CSTR, Series 1997-2, Class X, Callable, (144A),
1.050% due 06/25/20(v)......................... NR/NR 296,234
695,884 DLJ Mortgage Acceptance Corp, Series DRRE-1A,
(144A), 8.250% due 07/25/27.................... NR/NR 709,802
2,000,000 First Chicago/Lennar Trust, CSTR, Series
1997-CHL1, Class D, Callable, (144A), 8.100%
due 05/29/08(s)(v)............................. NR/NR 1,696,250
2,500,000 Green Tree Financial Corp, Subordinated Bond,
Series 1999-2, Class B1, Callable, 8.410% due
12/01/30....................................... NR/BBB+ 2,476,172
160,985 Home Mac Mortgage Securities Corp., Series
1985-1, secured by GNMA, 11.375% due
08/01/15....................................... NR/NR 163,802
1,183,504 Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, CSTR, Series 1995-C2, Class
E, Callable, 7.765% due 06/15/21(s)(v)......... Ba3/NR 1,103,063
2,000,000 Merrill Lynch Mortgage Investors, Inc.,
Subordinated Bond, Series 1997-C1, Class F,
Partially Callable, 7.120% due 06/18/29(s)..... NR/BB 1,471,875
2,000,000 Mid-America Finance, Inc., Sequential Payer,
Series 1998-1, Class A, 6.376% due
09/01/05(s).................................... Baa2/BBB 1,922,188
3,000,000 Morgan Stanley Capital I, Inc., Sequential Payer,
Series 1997-C1, Class A1C, Callable, 7.630% due
02/15/20....................................... Aaa/NR 3,158,320
1,000,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, CSTR, Series 1997-RR, Class D, Callable,
(144A), 7.727% due 04/30/39(s)(v).............. NR/NR 772,344
2,000,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1997-C1, Class F, Callable,
(144A), 6.850% due 02/15/20(s)................. Ba2/NR 1,510,625
435,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1997-HF1, Class F, Partially
Callable, (144A), 6.860% due 02/15/10.......... NR/NR 334,406
1,570,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1997-HF1, Class G, Partially
Callable, (144A), 6.860% due 05/15/11(s)....... NR/NR 1,077,903
1,000,000 Morgan Stanley Capital I, Inc., Subordinated
Bond, Series 1997-XL1, Class G, Partially
Callable, (144A), 7.695% due 10/03/30(s)....... Ba3/BB 814,375
1,000,000 Mortgage Capital Funding, Inc., Subordinated
Bond, Series 1997-MC2, Class E, Partially
Callable, 7.214% due 11/20/27(s)............... Baa3/NR 928,750
1,440,000 Nomura Asset Securities Corp., Sequential Payer,
Series 1998-D6, Class A1B, Partially Callable,
6.590% due 03/17/28............................ Aaa/AAA 1,446,075
1,560,000 Nomura Asset Securities Corp., Sequential Payer,
Series 1998-D6, Class A1C, Partially Callable,
6.690% due 03/17/28............................ Aaa/AAA 1,543,425
134,681 Salomon Brothers Mortgage Securities V, Inc.,
Series 1985-1, secured by GNMA, 12.000% due
04/01/15....................................... NR/NR 136,028
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
$ 82,686 Salomon Brothers Mortgage Securities V, Inc.,
Series 1985-2, secured by GNMA, 12.000% due
05/01/15....................................... NR/NR $ 83,099
663,899 Structured Asset Securities Corp., Subordinated
Bond, Series 1997-C1, Class E, Callable,
(144A), 5.813% due 08/25/00(s)(v).............. NR/NR 661,409
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES (COST
$28,928,766)............................... 26,522,553
-------------
CONVERTIBLE BONDS (0.3%)
RETAIL (0.3%)
850,000 Corporate Express, Inc., Callable 07/01/99,
4.500% due 07/01/00 (cost $785,732)............ B3/B- 757,562
-------------
CORPORATE OBLIGATIONS (30.5%)
AEROSPACE (1.1%)
460,000 Coltec Industries, Inc., Callable, 7.500% due
04/15/08....................................... Ba2/BB 480,700
1,750,000 Northrop-Grumman Corp., Callable 10/15/04, 9.375%
due 10/15/24(s)................................ Baa3/BBB- 1,949,080
500,000 Truserv Corp., 6.850% due 07/01/08(f)(s)......... NR/NR 496,170
-------------
2,925,950
-------------
AGRICULTURE (0.4%)
1,000,000 Scotts Co., Callable 01/15/04, (144A), 8.625% due
01/15/09....................................... B2/B+ 1,035,000
-------------
APPARELS & TEXTILES (1.7%)
800,000 Collins & Aikman Products Co., Callable 04/15/01,
11.500% due 04/15/06........................... B2/B 826,000
375,000 Fruit of the Loom, Inc., Callable, (144A), 8.875%
due 04/15/06................................... Ba1/BB 371,250
800,000 Fruit of the Loom, Inc., Refunding, 6.500% due
11/15/03....................................... Ba1/BB 732,480
1,000,000 Pillowtex Corp., Series B, Callable 12/15/02,
9.000% due 12/15/07............................ B2/B+ 1,012,500
1,100,000 Polymer Group, Inc., Series B, Callable 07/01/02,
9.000% due 07/01/07(s)......................... B2/B 1,127,500
600,000 Westpoint Stevens, Inc., Callable, 7.875% due
06/15/05....................................... Ba3/BB 613,500
-------------
4,683,230
-------------
AUTOMOTIVE SUPPLIES (0.6%)
700,000 Dura Operating Corp., Callable 05/01/04, (144A),
9.000% due 05/01/09............................ B2/B 712,250
400,000 Federal-Mogul Corp., Callable, 7.750% due
07/01/06....................................... Ba2/BB+ 400,768
200,000 Hayes Lemmerz International, Inc., Callable
07/15/01, 11.000% due 07/15/06................. B2/B 221,500
400,000 Hayes Lemmerz International, Inc., Series B,
Callable 07/15/02, 9.125% due 07/15/07......... B2/B 417,000
-------------
1,751,518
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
BANKING (0.6%)
$ 1,000,000 Chase Manhattan Corp., 6.000% due 02/15/09....... A1/A $ 968,600
750,000 First Union Corp., Refunding, 8.125% due
06/24/02(s).................................... A2/A- 797,310
-------------
1,765,910
-------------
BROADCASTING & PUBLISHING (2.3%)
700,000 Capstar Broadcasting Partners, Callable 07/01/02,
9.250% due 07/01/07............................ B2/B- 749,000
500,000 Chancellor Media Corp., Callable, (144A), 8.000%
due 11/01/08................................... Ba2/B+ 515,000
400,000 Chancellor Media Corp., Series B, Callable
06/15/02, 8.750% due 06/15/07.................. B1/B 411,000
1,000,000 Echostar DBS Corp., Callable 02/01/04, (144A),
9.375% due 02/01/09............................ B2/B 1,037,500
600,000 Emmis Communications Corp., Callable 03/15/04,
(144A), 8.125% due 03/15/09.................... B2/B- 601,500
700,000 Fox Family Worldwide, Inc., Callable 11/01/02,
9.250% due 11/01/07............................ B1/B 679,000
200,000 Lenfest Communications, Inc., 7.625% due
02/15/08....................................... Ba2/BB+ 204,500
620,000 Lenfest Communications, Inc., 10.500% due
06/15/06(s).................................... B1/BB- 726,950
1,300,000 TV Guide, Inc., Callable 03/01/04, (144A), 8.125%
due 03/01/09................................... Ba3/B+ 1,326,000
-------------
6,250,450
-------------
CHEMICALS (0.6%)
620,000 Arco Chemical Co., Refunding, 9.800% due
02/01/20....................................... Ba3/BB 609,423
750,000 Cytec Industries, Inc., Callable, 6.500% due
03/15/03(s).................................... Baa2/BBB 730,912
307,692 Lyondell Petrochemical Corp., Tranche D, 7.220%
due 06/30/00 (v)............................... NR/NR 306,538
-------------
1,646,873
-------------
COMMERCIAL SERVICES (0.2%)
600,000 Cendant Corp., Callable, 7.750% due 12/01/03..... Baa1/BBB 618,144
-------------
COMPUTER SOFTWARE (0.2%)
500,000 PSINet, Inc., Series B, Callable 02/15/02,
10.000% due 02/15/05........................... B3/B- 523,750
-------------
DIVERSIFIED MANUFACTURING (0.2%)
500,000 K&F Industries, Inc., Series B, Callable
10/15/02, 9.250% due 10/15/07.................. B3/B- 516,250
-------------
ELECTRIC (0.8%)
400,000 Calpine Corp., 7.625% due 04/15/06............... Ba2/BB 397,436
1,300,000 Calpine Corp., 7.875% due 04/01/08(s)............ Ba2/BB 1,313,000
400,000 CMS Energy Corp., Callable, (144A), 6.750% due
01/15/04....................................... Ba3/BB 392,556
-------------
2,102,992
-------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
ELECTRONICS (0.4%)
$ 355,000 Protection One Alarm Monitoring, Inc., Callable,
7.375% due 08/15/05............................ Ba1/BBB- $ 346,501
700,000 Protection One Alarm Monitoring, Inc., Callable,
(144A), 8.125% due 01/15/09.................... Ba3/BB+ 675,500
-------------
1,022,001
-------------
ENERGY SOURCE (0.2%)
400,000 Cogentrix Energy, Inc., Callable, 8.750% due
10/15/08....................................... Ba1/BB+ 432,000
-------------
ENTERTAINMENT, LEISURE & MEDIA (2.3%)
900,000 Ackerly Group, Inc., Series B, Callable 01/15/04,
9.000% due 01/15/09............................ B2/B 927,000
500,000 CSC Holdings, Inc., Callable 05/15/06, 10.500%
due 05/15/16................................... B1/BB- 602,500
750,000 Destination Film Funding Corp., Callable, (144A),
6.250% due 10/15/03(s)......................... NR/AA- 719,467
500,000 Fox/Liberty Networks LLC, Callable 08/15/02,
8.875% due 08/15/07(s)......................... B1/B 545,625
175,000 Jacor Communications Co., Callable 12/15/01,
9.750% due 12/15/06............................ B2/BB+ 192,937
400,000 Jacor Communications Co., Series B, Callable
06/15/02, 8.750% due 06/15/07.................. B2/BB+ 426,000
700,000 Lamar Advertising Co., Callable 09/15/02, 8.625%
due 09/15/07................................... B1/B 733,250
400,000 Outdoor Systems, Inc., Callable 06/15/02, 8.875%
due 06/15/07................................... B1/B 426,000
400,000 Premier Parks, Inc., Callable 04/01/02, 9.250%
due 04/01/06................................... B3/B- 418,000
1,500,000 Premier Parks, Inc., Callable 04/01/03, 0.000%
due 04/01/08(v)................................ B3/B- 1,065,000
200,000 Time Warner Telecom LLC, Callable 07/15/03,
9.750% due 07/15/08............................ B2/B- 216,000
-------------
6,271,779
-------------
FINANCIAL SERVICES (3.3%)
325,000 Enterprise Rent-a-Car USA Finance Co., MTN,
(144A), 9.125% due 12/15/04.................... Baa2/BBB+ 364,130
750,000 Ford Holdings, Inc., 9.300% due 03/01/30......... A1/A 969,195
600,000 Golden State Holdings Co., Callable, 7.125% due
08/01/05....................................... Ba1/BB+ 588,330
500,000 Health Care Property Investors, Inc., 6.500% due
02/15/06(s).................................... Baa1/BBB+ 461,915
1,000,000 Household Finance Corp., 6.500% due 11/15/08..... A2/A 994,790
750,000 Provident Financing Trust I, 7.405% due
03/15/38(s).................................... A3/BBB- 747,517
2,000,000 Prudential Insurance Co., (144A), 6.375% due
07/23/06....................................... A2/A+ 2,002,200
750,000 Sears Roebuck Acceptance Corp., 6.750% due
09/15/05....................................... A2/A- 770,347
700,000 Sun World International, Inc., Series B, Callable
04/15/01, 11.250% due 04/15/04(s).............. B2/B 739,375
450,000 Termoemcali Funding Corp., Callable 06/15/07,
Sinking Fund, (144A), 10.125% due 12/15/14..... NR/BBB- 337,500
1,000,000 Wells Fargo Co., Series H, MTN, 6.750% due
10/01/06....................................... Aa3/A+ 1,030,520
-------------
9,005,819
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FOOD, BEVERAGES & TOBACCO (1.3%)
$ 1,000,000 Aurora Foods, Inc., Series B, Callable 07/01/03,
8.750% due 07/01/08............................ B1/B+ $ 1,045,000
800,000 J Seagram & Sons, 7.600% due 12/15/28............ Baa3/BBB- 817,920
255,000 Nash Finch Co., Series B, Callable 05/01/03,
8.500% due 05/01/08............................ B2/BB+ 232,050
1,000,000 Smithfield Foods, Inc., 7.625% due 02/15/08...... Ba3/BB+ 972,500
420,000 Tricon Global Restaurants, Callable, 7.450% due
05/15/05....................................... Ba1/BB 428,963
-------------
3,496,433
-------------
HEALTH SERVICES (1.4%)
250,000 Genesis Health Ventures, Inc., Callable 06/15/00,
9.750% due 06/15/05............................ B2/CCC+ 226,250
200,000 Genesis Health Ventures, Inc., Callable 10/01/01,
9.250% due 10/01/06............................ B2/CCC+ 176,000
700,000 Mariner Post-Acute Network, Inc., Series B,
Callable 04/01/01, 9.500% due 04/01/06......... B3/CCC 490,000
750,000 McKesson HBOC, Inc., Callable, 6.400% due
03/01/08....................................... A3/A- 740,317
1,000,000 Rural/Metro Corp., Callable 03/15/03, 7.875% due
03/15/08....................................... Ba3/BB- 935,000
300,000 Tenet Healthcare Corp., 8.000% due 01/15/05...... Ba1/BB+ 300,750
500,000 Tenet Healthcare Corp., Callable 06/01/03,
(144A), 8.125% due 12/01/08.................... Ba3/BB- 490,000
500,000 Triad Hospitals Holdings, Inc., Callable
05/15/04, (144A), 11.000% due 05/15/09......... B3/B- 500,000
-------------
3,858,317
-------------
INFORMATION PROCESSING (0.3%)
700,000 Verio, Inc., Callable 12/01/03, (144A), 11.250%
due 12/01/08................................... B3/B- 787,500
-------------
MANUFACTURING (0.6%)
400,000 Falcon Holding Group L.P., Series B, Callable
04/15/03, 8.375% due 04/15/10.................. B2/B 409,000
1,100,000 Falcon Holding Group L.P., Series B, Callable
04/15/03, 0.000% due 04/15/10(v)............... B2/B 775,500
300,000 Globe Manufacturing Corp., Series B, Callable
08/01/03, 10.000% due 08/01/08................. B2/B- 251,250
200,000 Wheeling-Pittsburgh Corp., Callable 11/15/02,
9.250% due 11/15/07............................ B2/BB- 197,000
-------------
1,632,750
-------------
MEDICAL SUPPLIES (0.7%)
1,600,000 Boston Scientific Corp., 6.625% due
03/15/05(s).................................... Baa3/BBB 1,560,304
500,000 Sunrise Medical, Inc., 7.090% due 10/28/04(f).... NR/NR 485,975
-------------
2,046,279
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
METALS & MINING (0.8%)
$ 153,846 P&L Coal Holdings Corp., 7.875% due
06/04/06(v).................................... NR/NR $ 153,461
400,000 P&L Coal Holdings Corp., Series B, Callable
05/15/03, 9.625% due 05/15/08.................. B2/B 416,000
153,846 P&L Coal Holdings Corp., Tranche 2, 7.625% due
06/04/06(v).................................... NR/NR 153,461
153,846 P&L Coal Holdings Corp., Tranche 3, 8.125% due
06/04/06(v).................................... NR/NR 153,461
600,000 Ryerson Tull, Inc., Callable, 8.500% due
07/15/01....................................... Baa3/BBB 618,000
100,000 Ryerson Tull, Inc., Callable, 9.125% due
07/15/06....................................... Baa3/BBB 106,625
200,000 WHX Corp., Callable 04/15/02, 10.500% due
04/15/05....................................... B3/B 200,000
500,000 Wyman-Gordon Co., Callable 12/15/02, 8.000% due
12/15/07....................................... Ba2/BB 496,250
-------------
2,297,258
-------------
NATURAL GAS (1.0%)
750,000 Ferrellgas Partners, L.P., Series A, 6.990% due
08/01/05(f).................................... NR/NR 728,955
125,000 Ferrellgas Partners, L.P., Series B, Callable
06/15/01, 9.375% due 06/15/06.................. B1/B+ 125,156
700,000 Tesoro Petroleum Corp., Series B, Callable
07/01/03, 9.000% due 07/01/08.................. B1/BB- 701,750
500,000 Vintage Petroleum, Callable 12/15/00, 9.000% due
12/15/05....................................... B1/B+ 506,250
750,000 Williams Companies, Inc., 6.200% due 08/01/02.... Baa2/BBB- 750,607
-------------
2,812,718
-------------
OIL-PRODUCTION (0.9%)
300,000 Nuevo Energy Co., Callable 04/15/01, 9.500% due
04/15/06....................................... B1/B+ 307,125
300,000 Ocean Energy, Inc., Series B, Callable 07/15/02,
8.875% due 07/15/07............................ B1/BB- 306,000
700,000 Plains Resources, Inc., Series B, Callable
03/15/01, 10.250% due 03/15/06................. B2/B- 712,250
300,000 Pogo Producing Co , Series B, Callable 02/15/04,
10.375% due 02/15/09........................... B2/B+ 312,000
1,000,000 Range Resources Corp., Callable 01/15/02, 8.750%
due 01/15/07................................... B2/B 845,000
-------------
2,482,375
-------------
OIL-SERVICES (0.7%)
500,000 Lasmo (USA), Inc., 7.500% due 06/30/06(s)........ Baa2/BBB 508,945
1,000,000 Newpark Resources, Inc., Series B, Callable
12/15/02, 8.625% due 12/15/07.................. B2/B+ 965,000
376,737 Oil Purchase Co., Sinking Fund, (144A), 7.100%
due 10/31/02(s)................................ Baa3/BBB 354,132
-------------
1,828,077
-------------
PACKAGING & CONTAINERS (0.6%)
900,000 Riverwood International Corp., Callable 08/01/02,
10.625% due 08/01/07........................... B3/B- 954,000
500,000 Stone Container Corp., Callable, 12.750% due
04/01/02(v).................................... B3/B- 502,500
100,000 Stone Container Corp., Callable 10/01/99, 10.750%
due 10/01/02................................... B1/B+ 104,500
-------------
1,561,000
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
POLLUTION CONTROL (0.3%)
$ 1,000,000 Allied Waste North America, Inc., Series B,
Callable, 7.625% due 01/01/06.................. Ba3/BB $ 977,500
-------------
REAL ESTATE INVESTMENT TRUSTS (0.3%)
1,000,000 Health Care REIT, Inc., Callable, 7.625% due
03/15/08(s).................................... Ba1/BBB- 937,800
-------------
RETAIL (0.3%)
500,000 Corning Consumer Products Co., Series B, Callable
05/01/03, 9.625% due 05/01/08.................. B3/B 457,500
300,000 Fred Meyer, Inc., Callable, 7.450% due
03/01/08....................................... Ba2/BB+ 314,490
-------------
771,990
-------------
TELECOMMUNICATIONS (4.2%)
600,000 Adelphia Communications, Inc., (144A), 7.750% due
01/15/09....................................... B1/B+ 591,000
750,000 Adelphia Communications, Inc., Series B, 8.125%
due 07/15/03................................... B1/NR 761,250
1,675,000 Bresnan Communications, Callable 02/01/04,
(144A), 0.000% due 02/01/09(v)................. B2/B+ 1,147,375
700,000 Charter Communications Holdings LLC, (144A),
8.250% due 04/01/07............................ B2/B+ 717,500
1,150,000 Charter Communications Holdings LLC, Callable
04/01/04, (144A), 0.000% due 04/01/11(v)....... B2/B+ 757,563
200,000 Intermedia Communications, Inc., Callable
03/01/04, (144A), 9.500% due 03/01/09.......... B2/B 207,500
200,000 Intermedia Communications, Inc., Series B,
Callable 01/15/03, 8.500% due 01/15/08......... B2/B 198,000
300,000 Intermedia Communications, Inc., Series B,
Callable 11/01/02, 8.875% due 11/01/07......... B2/B 301,500
1,000,000 Level 3 Communications, Callable 05/01/03, 9.125%
due 05/01/08................................... B3/B 1,022,500
250,000 McLeodUSA, Inc., Callable 03/15/03, 8.375% due
03/15/08....................................... B2/B+ 249,375
250,000 McLeodUSA, Inc., Callable 07/15/02, 9.250% due
07/15/07....................................... B2/B+ 261,250
325,000 McLeodUSA, Inc., Callable 11/01/03, 9.500% due
11/01/08....................................... B2/B+ 347,750
700,000 Metromedia Fiber Network, Inc., Callable
11/15/03, (144A), 10.000% due 11/15/08......... B2/B 752,500
500,000 NEXTEL Communications, Inc., Callable 02/15/03,
0.000% due 02/15/08(v)......................... B2/B- 375,000
100,000 NEXTLINK Communications, Callable 04/15/01,
12.500% due 04/15/06........................... B3/B 111,000
500,000 NEXTLINK Communications, Callable 04/15/03,
0.000% due 04/15/08(v)......................... B3/NR 322,500
300,000 NEXTLINK Communications, Callable 11/15/03,
(144A), 10.750% due 11/15/08................... B3/B 321,000
800,000 NTL, Inc., Callable 10/01/03, (144A), 11.500% due
10/01/08....................................... B3/B- 900,000
600,000 NTL, Inc., Series A, Callable 04/15/00, 0.000%
due 04/15/05(v)................................ B3/B- 567,000
325,000 Qwest Communications International, Inc.,
Callable 10/15/02, 0.000% due 10/15/07(v)...... Ba1/BB+ 264,966
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
$ 200,000 Qwest Communications International, Inc.,
Callable, (144A), 7.250% due 11/01/08.......... Ba1/BB+ $ 206,338
500,000 Qwest Communications International, Inc.,
Callable, (144A), 7.500% due 11/01/08.......... Ba1/BB+ 524,485
98,000 Qwest Communications International, Inc., Series
B, Callable 04/01/02, 10.875% due 04/01/07..... Ba1/BB+ 112,757
450,000 RCN Corp., Callable 10/15/02, 10.000% due
10/15/07....................................... B3/NR 468,000
400,000 RCN Corp., Series B, Callable 02/15/03, 0.000%
due 02/15/08(v)................................ B3/NR 258,000
-------------
11,746,109
-------------
TELEPHONE (0.9%)
2,000,000 GTE North, Inc., Series H, 5.650% due 11/15/08... A2/AA- 1,911,720
300,000 ITC Deltacom, Inc., Callable 03/01/03, 8.875% due
03/01/08....................................... B2/B 307,500
200,000 ITC Deltacom, Inc., Callable 11/15/03, 9.750% due
11/15/08....................................... B2/B 213,000
-------------
2,432,220
-------------
TRANSPORTATION (0.3%)
750,000 Atlantic Express Transportation Corp., Callable
02/01/01, 10.750% due 02/01/04(s).............. B2/B 770,625
-------------
UTILITIES (1.0%)
750,000 Kincaid Generation LLC, Sinking Fund, (144A),
7.330% due 06/15/20(s)......................... Baa3/BBB- 738,518
345,000 MidAmerican Energy Holdings Co., Callable, 7.520%
due 09/15/08................................... Baa3/BBB- 364,344
1,000,000 Southern Co. Capital Trust I, Callable 02/01/07,
8.190% due 02/01/37............................ A3/BBB+ 1,055,150
750,000 Texas Utilities Co., Callable, Putable, 5.940%
due 10/15/11(v)................................ Baa3/BBB 750,870
-------------
2,908,882
-------------
TOTAL CORPORATE OBLIGATIONS (COST
$84,002,420)............................... 83,899,499
-------------
FOREIGN CORPORATE OBLIGATIONS (6.4%)
AUSTRALIA (0.3%)
BANKING
500,000 National Australia Bank Ltd., 6.600% due
12/10/07....................................... A1/AA- 505,720
-------------
FINANCIAL SERVICES
450,000 St. George Funding Co., Callable 06/30/07,
(144A), 8.485% due 12/31/49(v)................. Baa1/BBB+ 420,750
-------------
926,470
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
BERMUDA (0.4%)
TELEPHONE
$ 1,120,000 Flag Ltd., Callable 01/30/03, 8.250% due
01/30/08(s).................................... Ba3/B+ $ 1,111,600
-------------
CANADA (2.9%)
FOOD, BEVERAGES & TOBACCO
140,000 Cott Corp., Callable 07/01/00, 8.500% due
05/01/07....................................... B1/B+ 126,000
-------------
FOREST PRODUCTS & PAPER
800,000 Tembec Industries, Inc., Callable 06/30/04,
8.625% due 06/30/09............................ Ba3/BB+ 826,000
-------------
OIL PRODUCTION
750,000 Canadian Occidental Petroleum, Callable, 7.400%
due 05/01/28(s)................................ Baa2/BBB 684,383
1,000,000 Gulf Canada Resources Ltd., 8.250% due
03/15/17....................................... Ba1/BB+ 944,000
-------------
TELECOMMUNICATIONS
565,000 Clearnet Communications, Inc., Callable 12/15/00,
0.000% due 12/15/05(v)......................... B3/NR 522,625
500,000 Rogers Cablesystems Ltd., Callable 12/01/02,
10.000% due 12/01/07........................... Ba3/BB+ 562,500
700,000 Worldwide Fiber, Inc., Callable 12/15/03, (144A),
12.500% due 12/15/05........................... B3/B- 747,250
-------------
TELECOMMUNICATION EQUIPMENT
250,000 Rogers Cantel, Inc., Callable 10/01/02, 8.300%
due 10/01/07................................... Ba3/BB+ 263,750
-------------
TELEPHONE
600,000 Call-Net Enterprises, Inc., Callable 08/15/02,
0.000% due 08/15/07(v)......................... B2/BB- 423,000
610,000 Microcell Telecommunications, Inc., Series B,
Callable 12/01/01, 0.000% due 06/01/06(v)...... B3/NR 512,400
-------------
TRANSPORT & SERVICES
500,000 Laidlaw, Inc., Putable, 6.720% due 10/01/27(s)... Baa3/BBB 467,300
700,000 Teekay Shipping Corp., Sinking Fund, 8.320% due
02/01/08(s).................................... Ba2/BB+ 687,750
-------------
WATER
1,000,000 Hydro-Quebec, Series HE, 8.625% due 06/15/29..... A2/A+ 1,224,360
-------------
7,991,318
-------------
COLOMBIA (0.0%)
FINANCIAL SERVICES
40,000 Financiera Energetica Nacional, 9.375% due
06/15/06....................................... NR/BBB- 35,800
60,000 Financiera Energetica Nacional, (144A), 9.375%
due 06/15/06................................... NR/BBB- 53,700
-------------
89,500
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
INDONESIA (0.1%)
DIVERSIFIED MANUFACTURING
$ 100,000 Reliance Industries Ltd., (144A), 10.375% due
06/24/16....................................... Ba2/BB $ 89,111
100,000 Reliance Industries Ltd., (144A), Putable, 8.250%
due 01/15/27................................... Ba2/BB 88,287
-------------
177,398
-------------
MALAYSIA (0.2%)
OIL PRODUCTION
250,000 Petroliam Nasional Berhad, Refunding, (144A),
6.875% due 07/01/03............................ Baa3/BBB- 240,800
275,000 Petroliam Nasional Berhad, (144A), 7.125% due
10/18/06....................................... Baa3/BBB- 260,178
-------------
UTILITIES
100,000 Tenaga Nasional Berhad, (144A), 7.625% due
04/29/07....................................... Baa3/BBB- 95,230
-------------
596,208
-------------
MEXICO (0.4%)
BANKING
100,000 Bancomext Trust Division, (144A), 11.250% due
05/30/06....................................... Ba2/BB 106,380
-------------
BROADCASTING & PUBLISHING
350,000 Grupo Televisa S.A., Callable 05/15/01, 0.000%
due 05/15/08(v)................................ Ba2/BB 295,750
-------------
METALS & MINING
870,000 Industrias Penoles, S.A., 8.390% due
06/25/12(f)(s)................................. NR/NR 789,238
-------------
1,191,368
-------------
NETHERLANDS (0.2%)
RAILROADS
400,000 Hermes Europe Railtel BV, Callable 08/15/02,
11.500% due 08/15/07........................... B3/B 438,000
-------------
PHILIPPINES (0.1%)
UTILITIES
400,000 National Power Corp., 9.625% due 05/15/28........ Ba1/BB+ 375,520
-------------
WATER
50,000 Ce Casecnan Water & Energy, Inc., Series B,
Callable, Sinking Fund, 11.950% due 11/15/10... Ba2/BB+ 44,250
-------------
419,770
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
POLAND (0.2%)
FINANCIAL SERVICES
$ 100,000 TPSA Finance BV, 7.750% due 12/10/08............. Baa3/BBB- $ 99,990
500,000 TPSA Finance BV, (144A), 7.750% due 12/10/08..... Baa3/BBB- 483,940
-------------
583,930
-------------
RUSSIA (0.0%)
TELEPHONE
200,000 AO Rostelecom Loan Participation, 9.094% due
02/15/00(s)(v)................................. NR/NR 70,000
-------------
SOUTH KOREA (0.4%)
BANKING
150,000 Export-Import Bank Korea, 6.500% due 02/10/02.... Baa3/BBB- 146,043
300,000 Export-Import Bank Korea, 7.100% due 03/15/07.... Baa3/BBB- 295,005
200,000 Korea Development Bank, Refunding, 7.900% due
02/01/02....................................... Baa3/BBB- 201,598
-------------
ELECTRONICS
250,000 Samsung Electronics Co., (144A), 7.450% due
10/01/02....................................... Ba1/BB- 242,418
-------------
TELECOMMUNICATIONS
200,000 SK Telecom Co. Ltd., 7.750% due 04/29/04......... Ba1/BBB- 196,318
-------------
1,081,382
-------------
SWEDEN (0.3%)
TRANSPORTATION
800,000 Stena AB, Callable 06/15/02, 8.750% due
06/15/07....................................... Ba2/BB 750,000
-------------
UNITED KINGDOM (0.9%)
ELECTRIC
750,000 United Utilities PLC, Callable, 6.250% due
08/15/05....................................... A2/A 738,503
-------------
TELEPHONE
500,000 Cable & Wireless Communications PLC, Callable,
6.375% due 03/06/03............................ Baa1/A- 501,075
750,000 Orange PLC, Callable 08/01/03, 8.000% due
08/01/08....................................... Ba3/B+ 772,500
-------------
WATER
500,000 Anglian Water PLC, Series B, 6.840% due
01/15/13(f).................................... NR/NR 486,480
-------------
2,498,558
-------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$18,041,572)............................... 17,925,502
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (5.5%)
CANADA (0.4%)
CAD 315,000 Government of Canada, 6.000% due 06/01/08(s)..... Aa1/AAA $ 229,279
1,000,000 Province of Quebec, 5.750% due 02/15/09.......... A2/A+ 966,200
-------------
1,195,479
-------------
DENMARK (0.1%)
DKK 1,550,000 Kingdom of Denmark, 8.000% due 05/15/03(s)....... Aaa/AAA 258,141
-------------
FRANCE (1.9%)
EURO 1,250,000 BTAN, Five-Year French Treasury Note, 3.500% due
07/12/04(s).................................... Aaa/NR 1,340,295
EURO 1,900,000 BTAN, Five-Year French Treasury Note, 4.500% due
07/12/02(s).................................... Aaa/NR 2,101,974
EURO 1,010,857 BTAN, Five-Year French Treasury Note, 4.750% due
03/12/02(s).................................... NR/NR 1,123,447
EURO 579,000 Government of France, 4.000% due 04/25/09(s)..... Aaa/AAA 614,577
-------------
5,180,293
-------------
GERMANY (1.3%)
FEDERAL REPUBLIC OF GERMANY
EURO 1,155,000 Series 99, 3.750% due 01/04/09(s)................ Aaa/NR 1,216,438
EURO 593,098 Series 124, 4.500% due 08/19/02(s)............... Aaa/AAA 658,342
EURO 1,600,000 Series 126, 4.500% due 02/18/03(s)............... Aaa/AAA 1,783,371
-------------
3,658,151
-------------
JAPAN (0.7%)
GOVERNMENT OF JAPAN
JPY 19,000,000 Series 203, 1.800% due 06/20/08(s)............... Aa1/AAA 1,033,163
JPY 99,000,000 Series 210, 1.900% due 03/20/09.................. Aa1/AAA 869,392
-------------
1,902,555
-------------
NETHERLANDS (0.1%)
EURO 263,192 Government of Netherlands, Series 2, 8.250% due
06/15/02(s).................................... Aaa/AAA 321,604
-------------
SUPRANATIONAL OBLIGATIONS (0.3%)
BANKING
1,000,000 Inter-American Development Bank, 5.375% due
11/18/08....................................... Aaa/AAA 955,310
-------------
UNITED KINGDOM (0.7%)
TREASURY GILT
GBP 20,000 6.250% due 11/25/10(s)........................... Aaa/AAA 36,694
GBP 450,000 6.750% due 11/26/04(s)........................... Aaa/AAA 794,464
GBP 310,000 7.250% due 12/07/07(s)........................... Aaa/AAA 585,481
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
TREASURY GILT (CONTINUED)
GBP 230,000 7.500% due 12/07/06(s)........................... Aaa/AAA $ 433,649
1,850,288
-------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST
$15,607,507)............................... 15,321,821
-------------
FOREIGN GOVERNMENT AGENCIES (1.0%)
MEXICO (0.9%)
450,000 Banco Nacional de Comercio Exterior SNC, 7.250%
due 02/02/04................................... Ba2/BB 416,250
750,000 Banco Nacional Obra Serv, 9.625% due
11/15/03(s).................................... Ba2/BB 751,875
650,000 Petroleos Mexicanos, 9.500% due 09/15/27......... Ba2/BB 614,250
600,000 Petroleos Mexicanos, (144A), Tranche 5, MTN,
Putable, 9.375% due 12/02/08................... Ba2/BB 618,000
125,000 Petroleos Mexicanos, Callable 07/15/99, 9.026%
due 07/15/05(v)................................ Ba2/BB 119,688
120,000 Petroleos Mexicanos, Callable 07/15/99, (144A),
9.026% due 07/15/05(v)......................... Ba2/BB 114,900
-------------
2,634,963
-------------
PHILIPPINES (0.1%)
350,000 Bangko Sentral Pilipinas, 8.600% due 06/15/27.... Ba1/BB+ 304,535
-------------
TOTAL FOREIGN GOVERNMENT AGENCIES (COST
$2,756,702)................................ 2,939,498
-------------
PRIVATE PLACEMENT (7.0%)
APPARELS & TEXTILES (0.3%)
750,000 LD Fashion Holdings Corp., 7.130% due
05/01/05(f)(s)................................. NR/NR 751,650
-------------
FINANCIAL SERVICES (0.3%)
746,995 Huntington National Bank Republic, 7.240% due
12/05/20(f).................................... NR/NR 705,111
-------------
NATURAL GAS (0.2%)
500,000 Great Lake Gas Transmission, 6.730% due
03/25/18(f).................................... NR/NR 475,655
-------------
OIL-PRODUCTION (0.2%)
168,101 Amerada Hess Corp. Leveraged Lease, 7.330% due
01/01/14(f).................................... NR/NR 167,617
331,899 Amerada Hess Corp. Leveraged Lease, Series A,
6.140% due 01/01/14(f)......................... NR/NR 306,495
-------------
474,112
-------------
REAL ESTATE (6.0%)
2,976,340 127-129-131 West 96th St. Corp. (1st Mortage
Agreement on Cooperative Building in New York
City), 6.850% due 12/01/18(f).................. NR/NR 2,914,402
1,098,239 14-16 East 17th St. (1st Mortgage Agreement on
Cooperative Building in New York City), 7.000%
due 03/01/21(f)................................ NR/NR 1,080,041
1,577,937 270 Fifth Ave. (1st Mortage Agreement on
Cooperative Building in Brookyln, New York),
6.930% due 09/01/18(f)......................... NR/NR 1,555,120
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
REAL ESTATE (CONTINUED)
$ 491,924 31-33 Mercer Street (1st Mortgage Agreement on
Cooperative Building in New York City), 7.490%
due 04/01/23(f)................................ NR/NR $ 501,275
625,270 3512 Oxford Avenue (1st Mortgage Agreement on
Cooperative Building in Riverdale, New York),
8.450% due 06/01/17(f)......................... NR/NR 684,314
625,414 3810 Greystone Avenue (1st Mortgage Agreement on
Cooperative Building in Riverdale, New York),
8.500% due 06/01/17(f)......................... NR/NR 674,715
808,278 421 West 57th Street (1st Mortgage Agreement on
Cooperative Building in New York City), 8.980%
due 07/01/22(f)................................ NR/NR 905,829
496,057 482 East 9th Street, Kensington Gardens Corp.
(1st Mortgage Agreement on Cooperative Building
in New York City), 6.850% due 12/01/18(f)...... NR/NR 483,650
619,050 86-06/86-42 155th Ave., Dartmouth Cooperative
Corp. (1st Mortgage Agreement on Cooperative
Building in Howard Beach, New York), 7.000% due
01/01/14(f).................................... NR/NR 614,178
1,627,248 PC Bel Clare Estates, 33 Claroma St., St. Joseph
Township, Minnesota, 6.805% due 09/01/18(f).... NR/NR 1,593,905
1,383,144 PC Northstar Terrace, 101 Jupiter Drive, East
Grand Forks, Minnesota, 6.625% due
10/01/18(f)(s)................................. NR/NR 1,310,197
1,642,184 PC Shangri-La, 3526 North Cascacle Ave., Colorado
Springs, Colorado, 6.520% due 10/01/08(f)(s)... NR/NR 1,566,496
1,313,698 PC Three Lakes Estates, 2151 Three Lakes Road,
Albany, Oregon, 6.055% due 10/01/13(f)......... NR/NR 1,202,585
1,447,540 Walgreen-Benderson, 7.625% due 11/15/13(f)....... NR/NR 1,498,175
-------------
16,584,882
-------------
TOTAL PRIVATE PLACEMENT (COST $19,212,422)... 18,991,410
-------------
SOVEREIGN BONDS (16.7%)
ARGENTINA (2.7%)
49,887 Republic of Argentina Bocon, Series Pre-2,
Callable 06/07/99, Sinking Fund, 4.930% due
04/01/01(v).................................... Ba3/NR 48,281
155,000 Republic of Argentina Bonos del Tesoro, Series
BT02, 8.750% due 05/09/02...................... Ba3/NR 148,025
200,000 Republic of Argentina Discount Bonds, Series
L-GL, Callable 11/30/99, 5.855% due 03/31/23... Ba3/BB 150,750
1,375,000 Republic of Argentina Global Bonds, 9.750% due
09/19/27....................................... Ba3/BB 1,200,375
1,160,000 Republic of Argentina Global Bonds, 11.750% due
04/04/09....................................... Ba3/BB 1,197,120
1,300,000 Republic of Argentina Global Bonds, 12.125% due
02/25/19....................................... Ba3/BB 1,355,250
590,000 Republic of Argentina Global Bonds, Series BGL5,
11.375% due 01/30/17........................... Ba3/BB 588,525
400,000 Republic of Argentina Global Bonds, Series XW,
11.000% due 12/04/05........................... Ba3/BB 397,000
300,000 Republic of Argentina Par Bonds, Series L-GP,
Callable 11/30/99, 6.000% due 03/31/23......... Ba3/BB 213,188
2,425,440 Republic of Argentina, Series FRB, Callable
09/30/99, Sinking Fund, 5.855% due
03/31/05(v).................................... Ba3/BB 2,158,642
-------------
7,457,156
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
BRAZIL (2.2%)
$ 3,257,138 Republic of Brazil C Bonds, Series 20 Year,
Callable 10/15/99, Sinking Fund, 8.000% due
04/15/14(v).................................... B2/B+ $ 2,260,454
747,050 Republic of Brazil C Bonds, Series L, Callable
10/15/99, Sinking Fund, 8.000% due
04/15/14(v).................................... B2/B+ 518,453
780,000 Republic of Brazil DCB, Series 18 Year, Callable
10/15/99, Sinking Fund, 5.918% due
04/15/12(v).................................... B2/B+ 492,375
750,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... B2/B+ 600,750
650,000 Republic of Brazil Global Bonds, 11.625% due
04/15/04....................................... B2/B+ 639,275
1,833,500 Republic of Brazil, Series EI-L, Callable
10/15/99, Sinking Fund, 5.855% due
04/15/06(v).................................... B2/B+ 1,463,362
47,500 Republic of Brazil, Series RG, Callable 10/15/99,
Sinking Fund, 5.855% due 04/15/06(v)........... B2/NR 37,911
-------------
6,012,580
-------------
BULGARIA (0.6%)
1,100,000 Republic of Bulgaria Discount Bonds, Series A,
Callable 07/28/99, 5.855% due 07/28/24(v)...... B2/NR 756,250
630,000 Republic of Bulgaria IAB, PDI, Callable 07/28/99,
Sinking Fund, 5.855% due 07/28/11(v)........... B2/NR 426,825
675,000 Republic of Bulgaria IAB, PDI, Series R, Callable
07/28/99, Sinking Fund, 5.855% due
07/28/11(v).................................... B2/NR 457,313
-------------
1,640,388
-------------
COLOMBIA (1.1%)
1,500,000 Republic of Columbia, 7.625% due 02/15/07........ Baa3/BBB- 1,303,125
225,000 Republic of Colombia, 8.625% due 04/01/08........ Baa3/BBB- 204,469
400,000 Republic of Columbia, 9.750% due 04/23/09........ Baa3/BBB- 385,667
875,000 Republic of Colombia, 10.875% due 03/09/04....... Baa3/BBB- 921,302
395,000 Republic of Columbia, Callable 08/13/00, 10.986%
due 08/13/05(v)................................ Baa3/BBB- 377,225
-------------
3,191,788
-------------
COSTA RICA (0.1%)
200,000 Republic of Costa Rica, 8.000% due 05/01/03...... Ba1/BB 192,000
150,000 Republic of Costa Rica, (144A), 9.335% due
05/15/09....................................... Ba1/BB 149,719
-------------
341,719
-------------
CROATIA (0.1%)
250,000 Republic of Croatia, Series A, Callable 07/30/99,
Sinking Fund, 5.855% due 07/31/10(s)(v)........ Baa3/BBB- 194,375
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
MEXICO (4.5%)
$ 250,000 United Mexican States Discount Bonds, Series C,
Callable 11/18/99, 5.855% due 12/31/19(v)...... Ba2/BB $ 215,781
250,000 United Mexican States Discount Bonds, Series D,
Callable 12/06/99, 5.855% due 12/31/19(v)...... Ba2/BB 215,781
975,000 United Mexican States Global Bonds, 9.875% due
01/15/07....................................... Ba2/BB 1,022,775
2,100,000 United Mexican States Global Bonds, 11.375% due
09/15/16....................................... Ba2/BB 2,395,313
4,010,000 United Mexican States Global Bonds, 11.500% due
05/15/26(s).................................... Ba2/BB 4,769,895
1,250,000 United Mexican States Global Bonds, Series E,
MTN, 9.750% due 04/06/05....................... Ba2/BB 1,296,250
2,325,000 United Mexican States Global Bonds, Series XW,
10.375% due 02/17/09........................... NR/NR 2,493,563
-------------
12,409,358
-------------
PANAMA (1.2%)
150,000 Republic of Panama, 7.875% due 02/13/02.......... Ba1/BB+ 146,070
200,000 Republic of Panama Global Bonds, 8.875% due
09/30/27....................................... Ba1/BB+ 188,500
600,000 Republic of Panama Global Bonds, 8.250% due
04/22/08(s).................................... Ba1/BB+ 568,500
125,000 Republic of Panama Global Bonds, Putable, 9.375%
due 04/01/29................................... Ba1/BB+ 128,250
1,090,000 Republic of Panama IRB, Series 18 Year, Sinking
Fund, 4.000% due 07/17/14(v)................... Ba1/BB+ 854,288
2,004,938 Republic of Panama PDI, Series 20 Year, Sinking
Fund, 5.855% due 07/17/16(v)................... Ba1/BB+ 1,566,859
-------------
3,452,467
-------------
PERU (1.0%)
1,125,000 Republic of Peru FLIRB, Series 20 Year, Sinking
Fund, 3.750% due 03/07/17(v)................... NR/BB 692,578
3,100,000 Republic of Peru PDI, Series 20 Year, Sinking
Fund, 4.500% due 03/07/17(v)................... NR/BB 2,088,625
-------------
2,781,203
-------------
PHILIPPINES (1.0%)
1,315,000 Republic of Philippines Global Bonds, 8.875% due
04/15/08....................................... Ba1/BB+ 1,338,013
1,150,000 Republic of Philippines Global Bonds, 9.875% due
01/15/19....................................... Ba1/BB+ 1,179,095
400,000 Republic of Phillipines, Series B, Callable
12/01/99, 6.500% due 12/01/17.................. Ba1/BB+ 354,000
-------------
2,871,108
-------------
POLAND (0.2%)
630,000 Republic of Poland Bearer PDI, Callable 10/27/99,
Sinking Fund, 5.000% due 10/27/14(v)........... Baa3/BBB- 582,750
100,000 Republic of Poland PDI, Callable 10/27/99,
Sinking Fund, 5.000% due 10/27/14(v)........... Baa3/BBB- 92,500
-------------
675,250
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MOODY'S/S&P
AMOUNT{::} SECURITY DESCRIPTION RATING VALUE
- --------------------------- ------------------------------------------------- ------------ -------------
<C> <S> <C> <C>
TURKEY (0.1%)
$ 200,000 Republic of Turkey, 9.875% due 02/23/05.......... B1/B $ 189,000
-------------
URUGUAY (0.1%)
200,000 Republica Orient Uruguay Global Bonds, 7.875% due
11/18/03....................................... Baa3/BBB- 205,000
-------------
VENEZUELA (1.8%)
3,857,130 Republic of Venezuela DCB, Series DL, Callable,
Sinking Fund, 5.918% due 12/18/07(v)........... B2/B+ 3,114,633
2,485,000 Republic of Venezuela Global Bonds, 9.250% due
09/15/27....................................... Ba2/B+ 1,801,625
-------------
4,916,258
-------------
TOTAL SOVEREIGN BONDS (COST $43,208,237)..... 46,337,650
-------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (14.9%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (10.2%)
706,234 7.500% due 05/01/27.............................. 725,874
27,635,000 TBA, May, 6.50% due 03/01/29..................... 27,453,650
-------------
28,179,524
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (4.7%)
11,789,544 7.00% due 10/15/28 - 09/15/29(s)................. 11,962,613
1,000,000 TBA, May, 7.00% due 03/01/29..................... 1,015,000
-------------
12,977,613
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $41,321,143)......................... 41,157,137
-------------
U.S. TREASURY OBLIGATIONS (1.8%)
U.S. TREASURY BONDS (0.2%)
250,000 5.250% due 02/15/29.............................. 234,688
170,000 5.500% due 08/15/28(s)........................... 162,005
220,000 6.750% due 08/15/26(s)........................... 245,265
-------------
641,958
-------------
U.S. TREASURY NOTES (1.6%)
150,000 4.250% due 11/15/03(s)........................... 144,071
3,450,000 6.250% due 02/28/02(s)........................... 3,545,945
710,000 6.625% due 05/15/07(s)........................... 765,025
-------------
4,455,041
-------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$5,171,501)................................ 5,096,999
-------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
- --------------- ------------------------------------------------------------- -------------
<C> <S> <C> <C>
WARRANTS (0.0%)
ARGENTINA (0.0%)
1,150 Republic of Argentina, Expiring 02/25/00..................... $ 34,500
600 Republic of Argentina, Expiring 12/03/99..................... 18,000
-------------
TOTAL WARRANTS (COST $52,803)............................ 52,500
-------------
RIGHTS (0.0%)
MEXICO (0.0%)
384,000 United Mexican States Value Recovery, Series A, Expiring
06/30/03, 0.000% due 06/30/03.............................. 0
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::}
- ---------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (16.8%)
CORPORATE OBLIGATIONS (0.3%)
APPARELS & TEXTILES (0.2%)
$ 375,000 Fruit of the Loom, Inc., Refunding, 7.875% due
10/15/99....................................... 375,832
-------------
CHEMICALS (0.2%)
192,308 Lyondell Petrochemical Corp., Tranche C, 7.220%
due 06/30/99(v)................................ 191,827
-------------
FOREIGN CORPORATE OBLIGATIONS (0.1%)
TURKEY (0.1%)
FINANCIAL SERVICES
600,000 Sultan Ltd., 7.842% due 06/11/99(s)(v)........... 594,000
-------------
1,161,659
-------------
U.S. TREASURY OBLIGATIONS (0.2%)
40,000 Bills, 4.310% due 07/15/99(s)(y)................. 39,646
200,000 Notes, 5.875% due 11/15/99....................... 201,094
200,000 Notes, 6.000% due 06/30/99(s).................... 200,460
-------------
441,200
-------------
EURO TIME DEPOSITS (1.4%)
2,000,000 State Street Bank & Trust Co. London, 4.625% due
05/06/99(s).................................... 2,000,000
2,000,000 State Street Bank & Trust Co. London, 4.700% due
05/04/99(s).................................... 2,000,000
-------------
4,000,000
-------------
</TABLE>
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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
- --------------------------- ------------------------------------------------- -------------
<C> <S> <C>
REPURCHASE AGREEMENT (14.8%)
$ 40,916,000 State Street Bank & Trust Co., 4.00% dated
04/30/99 due 05/30/99, proceeds $40,929,639
(collateralized by $100,000 U.S. Treasury
Bonds, 6.375% due 08/15/27, valued at $108,870,
$3,645,000 U.S. Treasury Notes, 5.500% due
02/29/00, valued at $3,645,000, $800,000 U.S.
Treasury Notes, 5.750% due 04/30/03, valued at
$815,250, $20,455,000 U.S. Treasury Bonds,
12.750% due 11/15/10, valued at $29,608,613,
$2,610,000 U.S. Treasury Notes, 7.500% due
10/31/99, valued at $2,637,731, $4,825,000 U.S.
Treasury Notes, 5.875% due 07/31/99, valued at
$4,879,281).................................... $ 40,916,000
-------------
TOTAL SHORT-TERM INVESTMENTS (COST
$46,522,368)............................... 46,518,859
-------------
TOTAL INVESTMENTS (COST $305,611,173) (110.5%)... 305,520,990
LIABILITIES IN EXCESS OF OTHER ASSETS (-10.5%)... (29,070,755)
-------------
NET ASSETS (100.0%).............................. $ 276,450,235
-------------
-------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $306,037,248 for federal income tax
purposes at April 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $5,457,285 and $5,973,543, respectively, resulting in net
unrealized depreciation of $516,258.
(f) Fair valued security. Approximately 8% 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
when-issued securities and for futures contracts or with broker as initial
margin for futures contracts. $71,540,986 of the market value has been
segregated.
(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.
C -- Capitalization.
CAD -- Canadian Dollar.
CSTR -- Collateral Strip Rate.
DKK -- Danish Krone.
EURO -- Euro.
FLIRB -- Floating Interest Rate Bond
GBP -- British Pound.
IAB -- Interest in Arrears Bond.
IO -- Interest Only.
JPY -- Japanese Yen.
MTN -- Medium Term Note.
NR -- Not Rated.
PDI -- Past Due Interest.
Refunding -- Bonds for which the issuer has issued new bonds and cancelled the
old issue.
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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $264,695,173) $264,604,990
Repurchase Agreements (Cost $40,916,000) 40,916,000
Cash 4,085
Foreign Currency at Value (Cost $883,375) 878,989
Receivable for Investments Sold 7,738,741
Interest Receivable 3,772,470
Variation Margin Receivable 146,841
Unrealized Appreciation of Forward Foreign
Currency Contracts 106,082
Deferred Organization Expenses 14,008
Prepaid Trustees' Fees 334
Prepaid Expenses and Other Assets 1,430
------------
Total Assets 318,183,970
------------
LIABILITIES
Payable for Investments Purchased 41,519,365
Advisory Fee Payable 101,312
Unrealized Depreciation of Forward Foreign
Currency Contracts 43,322
Administrative Services Fee Payable 5,799
Administration Fee Payable 216
Fund Services Fee Payable 111
Accrued Expenses 63,610
------------
Total Liabilities 41,733,735
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $276,450,235
------------
------------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 8,839,017
EXPENSES
Advisory Fee $ 546,207
Custodian Fees and Expenses 108,289
Administrative Services Fee 32,073
Professional Fees and Expenses 25,865
Fund Services Fee 2,562
Amortization of Organization Expense 2,413
Trustees' Fees and Expenses 1,393
Administration Fee 1,186
Miscellaneous 4,871
----------
Total Expenses 724,859
-----------
NET INVESTMENT INCOME 8,114,158
NET REALIZED GAIN (LOSS) ON
Investment Transactions (1,086,074)
Futures Contracts 106,054
Foreign Currency Contracts and Transactions 861,504
----------
Net Realized Loss (118,516)
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 779,687
Futures Contracts 214,930
Foreign Currency Contracts and Translations 2,129,195
----------
Net Change in Unrealized Appreciation 3,123,812
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $11,119,454
-----------
-----------
</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 SIX
MONTHS ENDED
APRIL 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
------------ ----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 8,114,158 $ 12,998,257
Net Realized Loss on Investments, Futures and
Foreign Currency Contracts and Transactions (118,516) (8,737,057)
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures and
Foreign Currency Contracts and Translations 3,123,812 (3,001,152)
------------ ----------------
Net Increase in Net Assets Resulting from
Operations 11,119,454 1,260,048
------------ ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 71,628,356 199,905,113
Withdrawals (40,451,575) (67,392,063)
------------ ----------------
Net Increase from Investors' Transactions 31,176,781 132,513,050
------------ ----------------
Total Increase in Net Assets 42,296,235 133,773,098
NET ASSETS
Beginning of Period 234,154,000 100,380,902
------------ ----------------
End of Period $276,450,235 $ 234,154,000
------------ ----------------
------------ ----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE MARCH 17, 1997
SIX MONTHS ENDED FOR THE FISCAL (COMMENCEMENT OF
APRIL 30, 1999 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- ---------------- -------------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.60%(b) 0.63% 0.65%(b)
Net Investment Income 6.69%(b) 6.59% 7.09%(b)
Expenses without Reimbursement 0.60%(b) 0.63% 0.80%(b)
Portfolio Turnover 142%(a) 368% 212%(a)
</TABLE>
- ------------------------
(a) Not Annualized.
(b) Annualized.
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 ,1999
- --------------------------------------------------------------------------------
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, as a no-load, diversified,
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 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 such 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 ,1999
- --------------------------------------------------------------------------------
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
39
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30 ,1999
- --------------------------------------------------------------------------------
portfolio as unrealized appreciation or depreciation of forward foreign
currency contract translations. At April 30, 1999, the portfolio had open
forward foreign currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 4/30/99 (DEPRECIATION)
- ------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Danish Krone 103,022, expiring 06/23/99.......... $ 14,823 $ 14,720 $ (103)
Euro 2,117,887, expiring 06/23/99................ 2,285,341 2,248,651 (36,690)
Japanese Yen 130,959,927, expiring 05/10/99...... 1,095,954 1,097,172 1,218
Japanese Yen 2,113,362, expiring 06/23/99........ 18,063 17,833 (230)
Swedish Krona 130,031, expiring 06/23/99......... 15,648 15,506 (142)
SETTLEMENT
SALES CONTRACTS VALUE
-----------
Canadian Dollar 287,271, expiring 06/23/99....... 193,318 197,316 (3,998)
Danish Krone 1,915,301, expiring 06/23/99........ 278,464 273,661 4,803
Euro 11,720,985, expiring 06/23/99............... 12,529,306 12,444,668 84,638
German Mark 1,174,238, expiring 06/23/99......... 1,897,810 1,889,622 8,188
Japanese Yen 227,431,686, expiring 06/23/99...... 1,924,122 1,919,131 4,991
Swedish Krona 130,031, expiring 06/23/99......... 15,591 15,506 85
--------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 62,760
--------------
--------------
</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 is 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 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
40
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30 ,1999
- --------------------------------------------------------------------------------
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, 1999,
the portfolio had open futures contracts as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Five Year Note, expiring June 1999.......... 16 $ (15,971) $ 1,794,221
Eurex Ten Year Euro Bund, expiring June 1999..... 5 8,187 602,214
-------------- -------------- ----------------
Totals........................................... 21 $ (7,784) $ 2,396,435
-------------- -------------- ----------------
-------------- -------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ PRINCIPAL AMOUNT
CONTRACTS SHORT (DEPRECIATION) OF CONTRACTS
--------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Long Bond, expiring June 1999............... 51 $ 150,382 $ 6,279,944
U.S. Ten Year Note, expiring June 1999........... 63 28,685 7,253,997
--------------- -------------- ----------------
Totals........................................... 114 $ 179,067 $ 13,533,941
--------------- -------------- ----------------
--------------- -------------- ----------------
</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.
h) The portfolio incurred organization expenses in the amount of $23,505,
which were deferred and are being amortized on a straight-line basis over
a period not to exceed five years beginning with the commencement of
operations of the portfolio.
41
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30 ,1999
- --------------------------------------------------------------------------------
i) Expenses incurred by 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 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.
j) 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.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio's Investment Advisor is J.P. Morgan Investment Management,
Inc. ("JPMIM"), an affiliate of Morgan Guaranty Trust Company of New York
("Morgan") and a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"). Under the terms of the agreement, the portfolio pays
JPMIM at an annual rate of 0.45% of the portfolio's average daily net
assets. For the six months ended April 30, 1999, such fees amounted to
$546,207.
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, 1999, the fee for
these services amounted to $1,186.
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 certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan 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 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, 1999, the fee for
these services amounted to $32,073.
42
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30 ,1999
- --------------------------------------------------------------------------------
In addition, J.P. 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.
For the six months ended April 30, 1999, no reimbursement was necessary
under the 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 $2,562 for the six months ended April 30, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan
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 $550.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended April 30, 1999 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Government and Agency Obligations........... $212,282,752 $214,812,431
Corporate and Collateralized Obligations......... 156,653,793 119,593,000
------------ ------------
$368,936,545 $334,405,431
------------ ------------
------------ ------------
</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.
43
